UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2018~~2019

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ……………..to ……………..

Commission File Number: 814-00061

CAPITAL SOUTHWEST CORPORATION

(Exact name of registrant as specified in its charter)



Texas		75-1072796
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



5400 Lyndon B Johnson Freeway, Suite 1300, Dallas, Texas		75240
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (214) 238-5700



Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.25 par value per share	CSWC	The Nasdaq Global Select Market
5.95% Notes due 2022	CSWCL	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	¨	Accelerated filer	ýx	Non-accelerated filer	¨	Smaller reporting company	¨	Emerging growth company	¨
~~(Do not check if a smaller reporting company)~~

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

~~17,043,194~~17,927,329 shares of Common Stock, $0.25 value per share, as of November ~~5, 2018.~~1, 2019.

TABLE OF CONTENTS



		Page
PART I	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements	3
	Consolidated Statements of Assets and Liabilities as of September 30, ~~2018~~2019 (Unaudited) and March 31, ~~2018~~2019	3
	Consolidated Statements of Operations (Unaudited) for the three and six months ended September 30, ~~2018~~2019 and ~~2017~~2018	4
	Consolidated Statements of Changes in Net Assets (Unaudited) for the six months ended September 30, ~~2018~~2019 and ~~2017~~2018	5
	Consolidated Statements of Cash Flows (Unaudited) for the six months ended September 30, ~~2018~~2019 and ~~2017~~2018	6
	Consolidated Schedule of Investments as of September 30, ~~2018~~2019 (Unaudited) and March 31, ~~2018~~2019	7
	Notes to Consolidated Financial Statements (Unaudited)	2122
	Consolidated Schedule of Investments in and Advances to Affiliates (Unaudited) for the six months ended September 30, ~~2018~~2019	6261
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	6563
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	8178
Item 4.	Controls and Procedures	8280

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	8381
Item1A.	Risk Factors	8381
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	8381
Item 3.	Defaults Upon Senior Securities	8381
Item 4.	Mine Safety Disclosures	8381
Item 5.	Other Information	8381
Item 6.	Exhibits	8482

Signatures		8583

PART I – FINANCIAL INFORMATION


Item 1.	Consolidated Financial Statements

													CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES	CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES	(In thousands, except shares and per share data)

	September 30,			March 31,			September 30,			March 31,
	2018			2018			2019			2019
	(Unaudited)						(Unaudited)
Assets
Investments at fair value:
Non-control/Non-affiliate investments (Cost: $287,656 and $200,981, respectively)	$	294,065		$	199,949
Affiliate investments (Cost: $66,038 and $51,648, respectively)	65,018			53,198
Control investments (Cost: $91,425 and $82,768, respectively)	132,518			139,948
Total investments (Cost: $445,119 and $335,397, respectively)	491,601			393,095
Non-control/Non-affiliate investments (Cost: $343,790 and $305,596, respectively)							$	339,357		$	304,663
Affiliate investments (Cost: $80,948 and $79,277, respectively)							83,602			80,905
Control investments (Cost: $73,415 and $93,182, respectively)							115,917			138,503
Total investments (Cost: $498,153 and $478,055, respectively)							538,876			524,071
Cash and cash equivalents	10,193			7,907			30,019			9,924
Receivables:
Dividends and interest	8,307			5,219			8,563			9,252
Escrow	—			119			418			370
Other	509			447			758			1,244
Income tax receivable	109			109			154			183
Deferred tax asset	2,060			2,050			1,628			1,807
Debt issuance costs (net of accumulated amortization of $1,440 and $1,041, respectively)	2,476			2,575
Debt issuance costs (net of accumulated amortization of $2,191 and $1,814, respectively)							3,209			3,364
Other assets	1,252			5,969			1,408			1,628
Total assets	$	516,507		$	417,490		$	585,033		$	551,843

Liabilities
Notes (Par value: $75,676 and $57,500, respectively)	$	73,407		$	55,305
December 2022 Notes (Par value: $77,136 and $77,136, respectively)							$	75,564		$	75,099
October 2024 Notes (Par value: $65,000 and $0, respectively)							63,585			—
Credit facility	127,000			40,000			108,000			141,000
Other liabilities	5,363			6,245			5,791			6,708
Dividends payable	—			4,525
Accrued restoration plan liability	2,889			2,937			3,023			3,073
Deferred income taxes	—			190
Deferred tax liability							971			—
Total liabilities	208,659			109,202			256,934			225,880

Commitments and contingencies (Note 11)
Commitments and contingencies (Note 10)

Net Assets
Common stock, $0.25 par value: authorized, 25,000,000 shares; issued, 18,682,706 shares at September 30, 2018 and 18,501,298 shares at March 31, 2018	4,671			4,625
Common stock, $0.25 par value: authorized, 40,000,000 shares; issued, 20,266,841 shares at September 30, 2019 and 19,842,528 shares at March 31, 2019							5,067			4,961
Additional paid-in capital	263,680			260,713			291,387			281,205
Net investment income in excess of (less than) distributions	(5,383		)	6,147
Accumulated undistributed net realized gain	22,143			3,231
Unrealized appreciation of investments, net of income taxes	46,674			57,509
Total distributable earnings							55,582			63,734
Treasury stock - at cost, 2,339,512 shares	(23,937		)	(23,937		)	(23,937		)	(23,937		)
Total net assets	307,848			308,288			328,099			325,963
Total liabilities and net assets	$	516,507		$	417,490		$	585,033		$	551,843
Net asset value per share (16,343,194 shares outstanding at September 30, 2018 and 16,161,786 shares outstanding at March 31, 2018)	$	18.84		$	19.08
Net asset value per share (17,927,329 shares outstanding at September 30, 2019 and 17,503,016 shares outstanding at March 31, 2019)							$	18.30		$	18.62

~~The accompanying Notes are an integral part of these Consolidated Financial Statements.~~

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except shares and per share data)

Three Months Ended Six Months Ended
September 30, September 30,
2018 2017 2018 2017
Investment income:
Interest income:
Non-control/Non-affiliate investments $ 7,049
$ 5,136
$ 13,081
$ 9,438
Affiliate investments 1,799
141
3,251
281
Control investments 384
—
543
—
Dividend income:
Non-control/Non-affiliate investments 2
30
25
60
Affiliate investments 44
—
82
—
Control investments 3,112
3,058
6,126
6,103
Interest income from cash and cash equivalents 5
5
9
12
Fees and other income 200
139
585
339
Total investment income 12,595
8,509
23,702
16,233
Operating expenses:
Compensation 1,963
1,606
3,873
3,244
Spin-off compensation plan —
173
—
345
Share-based compensation 482
384
957
752
Interest 3,109
911
5,482
1,649
Professional fees 407
481
895
960
Net pension expense 39
41
79
81
General and administrative 793
842
1,618
1,551
Total operating expenses 6,793
4,438
12,904
8,582
Income before taxes 5,802
4,071
10,798
7,651
Income tax (benefit) expense 256
134
635
278
Net investment income $ 5,546
$ 3,937
$ 10,163
$ 7,373

Realized gain
Non-control/Non-affiliate investments $ 17
$ 210
$ 217
$ 834
Affiliate investments 77
—
77
—
Control investments —
—
18,619
—
Total net realized gain on investments before income tax 94
210
18,913
834

Change in unrealized appreciation of investments
Non-control/Non-affiliate investments 1,877
(1,747 ) 6,409
(4,166 )
Affiliate investments (868 ) (322 ) (1,539 ) (654 )
Control investments (124 ) 6,445
(16,087 ) 10,495
Income tax (provision) benefit 63
120
382
205
Total net change in unrealized appreciation of investments, net of tax 948
4,496
(10,835 ) 5,880

Net realized and unrealized gains on investments $ 1,042
$ 4,706
$ 8,078
$ 6,714

Net increase in net assets from operations $ 6,588
$ 8,643
$ 18,241
$ 14,087

Pre-tax net investment income per share - basic and diluted $ 0.36
$ 0.25
$ 0.67
$ 0.48
Net investment income per share – basic and diluted $ 0.34
$ 0.25
$ 0.63
$ 0.46
Net increase in net assets from operations – basic and diluted $ 0.40
$ 0.54
$ 1.12
$ 0.88
Weighted average shares outstanding – basic 16,318,737
16,010,231
16,249,892
16,009,968
Weighted average shares outstanding – diluted 16,323,477
16,077,837
16,254,365
16,075,193

The accompanying Notes are an integral part of these Consolidated Financial Statements.

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
(In thousands)

Six Months Ended
September 30,
2018 2017
Operations:
Net investment income $ 10,163
$ 7,373
Net realized gain on investments 18,913
834
Net change in unrealized appreciation of investments, net of tax (10,835 ) 5,879
Net increase in net assets from operations 18,241
14,086
Dividends to shareholders (21,694 ) (7,193 )
Spin-Off Compensation Plan, net of tax of $ - and $117, respectively —
(227 )
Capital share transactions:
Change in pension plan funded status 23
24
Exercise of employee stock options 2,033
—
Share-based compensation expense 957
752
(Decrease) increase in net assets (440 ) 7,442
Net assets, beginning of period 308,288
285,072
Net assets, end of period $ 307,848
$ 292,514



CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except shares and per share data)

	Three Months Ended						Six Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Investment income:
Interest income:
Non-control/Non-affiliate investments	$	9,236		$	7,049		$	18,267		$	13,081
Affiliate investments	2,001			1,799			4,051			3,251
Control investments	—			384			265			543
Dividend income:
Non-control/Non-affiliate investments	68			2			155			25
Affiliate investments	—			44			19			82
Control investments	3,519			3,112			7,432			6,126
Interest income from cash and cash equivalents	12			5			28			9
Fees and other income	382			200			800			585
Total investment income	15,218			12,595			31,017			23,702
Operating expenses:
Compensation	1,708			1,963			3,729			3,873
Share-based compensation	685			482			1,522			957
Interest	3,716			3,109			7,522			5,482
Professional fees	462			407			1,088			895
Net pension expense	35			39			71			79
General and administrative	1,231			793			2,020			1,618
Total operating expenses	7,837			6,793			15,952			12,904
Income before taxes	7,381			5,802			15,065			10,798
Income tax expense	566			256			890			635
Net investment income	$	6,815		$	5,546		$	14,175		$	10,163

Realized gain
Non-control/Non-affiliate investments	$	267		$	17		$	1,316		$	217
Affiliate investments	16			77			17			77
Control investments	—			—			167			18,619
Total net realized gain on investments before income tax	283			94			1,500			18,913

Net unrealized (depreciation) appreciation on investments
Non-control/Non-affiliate investments	(809		)	1,877			(3,781		)	6,409
Affiliate investments	(181		)	(868		)	1,025			(1,539		)
Control investments	(2,904		)	(124		)	(2,819		)	(16,087		)
Income tax (provision) benefit	(475		)	63			(658		)	382
Total net unrealized (depreciation) appreciation on investments, net of tax	(4,369		)	948			(6,233		)	(10,835		)

Net realized and unrealized (losses) gains on investments	$	(4,086	)	$	1,042		$	(4,733	)	$	8,078

Net increase in net assets from operations	$	2,729		$	6,588		$	9,442		$	18,241

Pre-tax net investment income per share - basic and diluted	$	0.42		$	0.36		$	0.85		$	0.67
Net investment income per share – basic and diluted	$	0.38		$	0.34		$	0.80		$	0.63
Net increase in net assets from operations – basic and diluted	$	0.15		$	0.40		$	0.53		$	1.12
Weighted average shares outstanding – basic	17,770,011			16,318,737			17,653,607			16,249,892
Weighted average shares outstanding – diluted	17,770,011			16,323,477			17,653,607			16,254,365

The accompanying Notes are an integral part of these Consolidated Financial Statements.



CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
(In thousands)

	2019			2018

Net assets, March 31	$	325,963		$	308,288
Operations:
Net investment income	7,360			4,617
Net realized gain on investments	1,217			18,819
Net unrealized depreciation on investments, net of tax	(1,864		)	(11,783		)
Net increase in net assets from operations	6,713			11,653
Dividends to shareholders ($0.49 and $0.89 per share, respectively)	(8,629		)	(14,503		)
Capital share transactions:
Change in restoration plan liability	7			11
Issuance of common stock	3,972			—
Exercise of employee stock options	—			1,457
Share-based compensation expense	837			475
Common stock withheld for payroll taxes upon vesting of restricted stock	(49		)	—
Increase (decrease) in net assets	2,851			(907		)
Net assets, June 30	$	328,814		$	307,381
Operations:
Net investment income	6,815			5,546
Net realized gain on investments	283			94
Net unrealized (depreciation) appreciation on investments, net of tax	(4,369		)	948
Net increase in net assets from operations	2,729			6,588
Dividends to shareholders ($0.50 and $0.44 per share, respectively)	(8,964		)	(7,191		)
Capital share transactions:
Change in pension plan funded status	8			12
Issuance of common stock	4,827			—
Exercise of employee stock options	—			576
Share-based compensation expense	685			482
(Decrease) increase in net assets	(715		)	467
Net assets, September 30	$	328,099		$	307,848

The accompanying Notes are an integral part of these Consolidated Financial Statements.

													CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES	CONSOLIDATED STATEMENTS OF CASH FLOWS	(Unaudited)	(In thousands)

	Six Months Ended						Six Months Ended
	September 30,						September 30,
	2018			2017			2019			2018
Cash flows from operating activities
Net increase in net assets from operations	$	18,241		$	14,086		$	9,442		$	18,241
Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities:
Purchases and originations of investments	(167,697		)	(69,170		)	(64,725		)	(167,697		)
Proceeds from sales and repayments of debt investments in portfolio companies	52,638			40,390			39,964			52,638
Proceeds from sales and return of capital of equity investments in portfolio companies	24,884			15			7,271			24,884
Payment of accreted original issue discounts	306			819			570			306
Depreciation and amortization	708			368			1,249			708
Net pension benefit	(26		)	(24		)	(34		)	(26		)
Realized gain on investments before income tax	(18,913		)	(834		)	(1,500		)	(18,913		)
Net change in unrealized appreciation of investments	11,217			(5,675		)
Net unrealized depreciation (appreciation) on investments							5,575			11,217
Accretion of discounts on investments	(687		)	(383		)	(968		)	(687		)
Payment-in-kind interest and dividends	(136		)	(142		)	(889		)	(136		)
Stock option and restricted awards expense	957			752			1,522			957
Deferred income taxes	(201		)	(182		)	1,149			(201		)
Changes in other assets and liabilities:
Increase in dividend and interest receivable	(3,088		)	(572		)
(Increase) decrease in other receivables	(62		)	166
Decrease in other assets	4,669			3,029
Decrease (increase) in dividend and interest receivable							928			(3,088		)
Increase in escrow receivables							(48		)	—
Decrease in tax receivable							28			4,669
Decrease (increase) in other receivables							486			(62		)
(Increase) decrease in other assets							(478		)	443
Increase in taxes payable	443			—			413			—
(Decrease) increase in other liabilities	(1,324		)	8,002
Decrease in other liabilities							(231		)	(1,324		)
Decrease in payable for unsettled transaction							(1,158		)	—
Net cash used in operating activities	(78,071		)	(9,355		)	(1,434		)	(78,071		)
Cash flows from financing activities
Proceeds from common stock offering							8,937			—
Equity offering costs paid							(106		)	—
Borrowings under credit facility	117,000			31,000			47,000			117,000
Repayments of credit facility	(30,000		)	—			(80,000		)	(30,000		)
Debt issuance costs paid	(539		)	(155		)	(360		)	(539		)
Proceeds from notes	18,081			—			63,700			18,081
Dividends to shareholders	(26,219		)	(10,547		)	(17,593		)	(26,219		)
Proceeds from exercise of employee stock options	2,034			—			—			2,034
Common stock withheld for payroll taxes upon vesting of restricted stock							(49		)	—
Net cash provided by financing activities	80,357			20,298			21,529			80,357
Net increase in cash and cash equivalents	2,286			10,943			20,095			2,286
Cash and cash equivalents at beginning of period	7,907			22,386			9,924			7,907
Cash and cash equivalents at end of period	$	10,193		$	33,329		$	30,019		$	10,193
Supplemental cash flow disclosures:
Cash paid for income taxes	$	11		$	255		$	—		$	11
Cash paid for interest	4,553			1,236			6,090			4,553
Supplemental disclosure of noncash financing activities:
Dividend declared, not yet paid	$	—		$	3,838
Spin-off Compensation Plan distribution accrued, not yet paid	—			344

The accompanying Notes are an integral part of these Consolidated Financial Statements.

																								CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES	CONSOLIDATED SCHEDULE OF INVESTMENTS	(Unaudited)
September 30, 2018
September 30, 2019												September 30, 2019

Portfolio Company¹	Type of Investment^{2, 15}	Industry	Current Interest Rate³	Maturity	Principal		Cost			Fair Value⁴			Type of Investment²	Industry	Current Interest Rate³	Acquisition Date¹⁴	Maturity	Principal		Cost		Fair Value⁴
Non-control/Non-affiliate Investments⁵
AAC HOLDINGS, INC.	First Lien	Healthcare services	L+6.75% (Floor 1.00%)/Q, Current Coupon 9.09%	6/30/2023	$	9,203,125	$	9,011,322		$	9,341,172		First Lien¹⁶	Healthcare services	L+6.75% (Floor 1.00%)/Q, 4.00% PIK, Current Coupon 13.33%	6/28/2017	6/30/2023	$	9,079	$	8,916	$	6,809
													First Lien - Priming Facility		L+11.00% (Floor 1.00%)/Q, Current Coupon 13.29%	3/21/2019	3/31/2020	1,170		1,164		1,170
																				10,080		7,979
ACE GATHERING, INC.													Second Lien¹⁵	Energy services (midstream)	L+8.50% (Floor 2.00%)/Q, Current Coupon 10.60%	12/13/2018	12/13/2023	9,813		9,639		9,724
ADAMS PUBLISHING GROUP, LLC	First Lien	Media, marketing & entertainment	L+7.50% (Floor 1.00%)/Q, Current Coupon 9.84%	7/2/2023	14,625,000		14,341,499			14,341,499			First Lien	Media, marketing & entertainment	L+7.50% (Floor 1.00%)/Q, Current Coupon 9.78%	7/2/2018	7/2/2023	11,386		11,195		11,193
	Delayed Draw Term Loan¹⁰		L+7.50% (Floor 1.00%)	7/2/2023	—		(32,890		)	—			Delayed Draw Term Loan¹⁰		L+7.50% (Floor 1.00%)/Q, Current Coupon 9.61%	7/2/2018	7/2/2023	361		335		355
							14,308,609			14,341,499										11,530		11,548
AG KINGS HOLDINGS INC.⁸	First Lien	Food, agriculture & beverage	L+10.02% (Floor 1.00%)/M, Current Coupon 12.34%	8/8/2021	9,307,692		9,187,528			8,981,923
AG KINGS HOLDINGS INC.^8,16													First Lien	Food, agriculture & beverage	L+10.02% (Floor 1.00%)/M, Current Coupon 12.69%	8/4/2016	8/8/2021	9,308		9,194		6,958
ALLIANCE SPORTS GROUP, L.P.	Senior subordinated debt	Consumer products & retail	11.00%	2/1/2023	10,100,000		9,930,869			9,898,000			Senior subordinated debt	Consumer products & retail	11.00%	8/1/2017	2/1/2023	10,100		9,963		9,666
	3.88% membership interest		—	—	—		2,500,000			2,500,000			3.88% preferred membership interest		—	8/1/2017	—	—		2,500		2,500
							12,430,869			12,398,000										12,463		12,166
AMERICAN TELECONFERENCING SERVICES, LTD.	First Lien	Telecommunications	L+6.50% (Floor 1.00%)/Q, Current Coupon 8.84%	12/8/2021	6,200,508		6,080,114			6,002,866
AMERICAN NUTS OPERATIONS LLC¹³													First Lien - Term Loan	Food, agriculture and beverage	L+9.50% (Floor 1.00%)/Q, Current Coupon 11.82%	4/10/2018	4/10/2023	17,281		17,018		16,340
	Second Lien		L+9.50% (Floor 1.00%)/Q, Current Coupon 11.83%	6/6/2022	2,005,714		1,947,264			1,895,400			First Lien - Term Loan C¹⁰		L+9.50% (Floor 1.00%)/Q, Current Coupon 11.82%	12/21/2018	4/10/2023	1,804		1,778		1,705
							8,027,378			7,898,266			3,000,000 units of Class A common stock⁹		—	4/10/2018	—	—		3,000		733
AMWARE FULFILLMENT LLC	First Lien	Distribution	L+9.50% (Floor 1.00%)/M, Current Coupon 11.90%	5/21/2019	13,115,555		13,007,029			12,735,204
																				21,796		18,778

																			CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES	CONSOLIDATED SCHEDULE OF INVESTMENTS	(Unaudited)
September 30, 2018
September 30, 2019									September 30, 2019

Portfolio Company¹	Type of Investment^{2, 15}	Industry	Current Interest Rate³	Maturity	Principal	Cost		Fair Value⁴		Type of Investment²	Industry	Current Interest Rate³	Acquisition Date¹⁴	Maturity	Principal	Cost		Fair Value⁴
AMERICAN TELECONFERENCING SERVICES, LTD. (DBA PREMIERE GLOBAL SERVICES, INC.)										First Lien	Telecommunications	L+6.50% (Floor 1.00%)/Q, Current Coupon 8.69%	9/21/2016	12/8/2021	5,934	5,854		3,744
										Second Lien		L+9.50% (Floor 1.00%)/Q, Current Coupon 11.84%	11/3/2016	6/6/2022	2,006	1,961		532
																7,815		4,276
AMWARE FULFILLMENT LLC										First Lien	Distribution	L+9.50% (Floor 1.00%)/M, Current Coupon 11.59%	7/29/2016	12/31/2020	12,390	12,325		12,297
ASC ORTHO MANAGEMENT COMPANY, LLC¹³	First Lien	Healthcare services	L+7.50% (Floor 1.00%)/Q, Current Coupon 9.81%	8/31/2023	9,319,688	9,135,947		9,135,947		Revolving Loan¹⁰	Healthcare services	L+7.50% (Floor 1.00%)	8/31/2018	8/31/2023	—	(23	)	—
	Second Lien		13.25% PIK	12/1/2023	3,106,563	3,029,772		3,029,772		First Lien		L+7.50% (Floor 1.00%)/Q, Current Coupon 9.82%	8/31/2018	8/31/2023	9,145	8,994		8,939
	Revolving Loan¹⁰		L+7.50% (Floor 1.00%)	8/31/2023	—	(29,491	)	—		Second Lien		13.25% PIK	8/31/2018	12/1/2023	3,468	3,402		3,382
	2,042 Common Units⁹		—	—	—	750,000		750,000		2,042 Common Units⁹		—	8/31/2018	—	—	750		569
						12,886,228		12,915,719								13,123		12,890
BINSWANGER HOLDING CORP.	First Lien	Distribution	L+8.00% (Floor 1.00%)/M, Current Coupon 10.32%	3/9/2022	12,315,528	12,133,312		12,315,528		First Lien	Distribution	L+8.50% (Floor 1.00%)/M, Current Coupon 10.63%	3/9/2017	3/9/2022	11,770	11,640		11,446
	900,000 shares of common stock		—	—	—	900,000		1,013,000		900,000 shares of common stock		—	3/9/2017	—	—	900		786
						13,033,312		13,328,528								12,540		12,232
BLASCHAK COAL CORP.	Second Lien	Commodities & mining	L+10.00%/Q, 1.00% PIK, Current Coupon 13.34%	7/30/2023	8,500,000	8,334,248		8,334,248		Second Lien¹⁵	Commodities & mining	L+10.00%/Q, 1.00% PIK, Current Coupon 13.32%	7/30/2018	7/30/2023	8,580	8,439		8,314
CALIFORNIA PIZZA KITCHEN, INC.	First Lien	Restaurants	L+6.00% (Floor 1.00%)/M, Current Coupon 8.39%	8/23/2022	4,900,000	4,865,437		4,777,500		First Lien	Restaurants	L+6.00% (Floor 1.00%)/M, Current Coupon 8.53%	8/19/2016	8/23/2022	4,850	4,823		4,350
CAPITAL PAWN HOLDINGS, LLC	First Lien	Consumer products & retail	L+9.50%/Q, Current Coupon 10.84%	7/8/2020	11,922,365	11,735,439		11,731,607		First Lien	Consumer products & retail	L+9.50%/Q, Current Coupon 11.82%	12/21/2017	7/8/2020	11,448	11,365		11,368
CLICKBOOTH.COM, LLC	First Lien	Media, marketing & entertainment	L+8.50% (Floor 1.00%)/Q, Current Coupon 10.84%	12/5/2022	17,171,875	16,871,309		17,180,461
	Revolving Loan¹⁰		L+8.50% (Floor 1.00%)	12/5/2022	—	(16,714	)	—
						16,854,595		17,180,461

																			CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES	CONSOLIDATED SCHEDULE OF INVESTMENTS	(Unaudited)
September 30, 2018
September 30, 2019									September 30, 2019

Portfolio Company¹	Type of Investment^{2, 15}	Industry	Current Interest Rate³	Maturity	Principal	Cost		Fair Value⁴		Type of Investment²	Industry	Current Interest Rate³	Acquisition Date¹⁴	Maturity	Principal	Cost		Fair Value⁴
CLICKBOOTH.COM, LLC										Revolving Loan¹⁰	Media, marketing & entertainment	L+8.50% (Floor 1.00%)	12/5/2017	12/5/2022	—	(13	)	—
										First Lien		L+8.50% (Floor 1.00%)/Q, Current Coupon 10.82%	12/5/2017	12/5/2022	15,642	15,421		15,955
																15,408		15,955
DANFORTH ADVISORS, LLC¹³	First Lien	Business services	L+7.25% (Floor 2.00%)/Q, Current Coupon 9.63%	9/28/2023	7,250,000	7,105,185		7,105,185		Revolving Loan¹⁰	Business services	L+7.25% (Floor 2.00%)	9/28/2018	9/28/2023	—	(16	)	—
	Revolving Loan¹⁰		L+7.25% (Floor 2.00%)	9/28/2023	—	(19,967	)	—		First Lien		L+7.25% (Floor 2.00%)/Q, Current Coupon 9.57%	9/28/2018	9/28/2023	7,250	7,129		7,250
	875 Class A equity units⁹		—	—	—	875,000		875,000		875 Class A equity units⁹		—	9/28/2018	—	—	875		1,274
						7,960,218		7,980,185								7,988		8,524
DEEPWATER CORROSION SERVICES, INC.	127,004 shares of Series A convertible preferred stock	Energy services (upstream)	—	—	—	8,000,000		9,804,000
DELPHI INTERMEDIATE HEALTHCO, LLC	First Lien	Healthcare services	L+7.50% (Floor 1.00%)/Q, Current Coupon 9.84%	10/3/2022	7,312,500	7,250,211		7,166,250		First Lien	Healthcare services	L+7.50% (Floor 1.00%)/Q, Current Coupon 9.70%	11/3/2017	10/3/2022	10,527	10,455		9,538
DIGITAL RIVER, INC.										First Lien	Software & IT services	L+6.00% (Floor 1.00%)/Q, Current Coupon 8.12%	1/25/2016	2/12/2021	12,662	12,656		12,662
DRIVEN, INC.										First Lien	Business services	L+8.00% (Floor 2.00%)/Q, Current Coupon 10.31%	6/28/2019	6/28/2024	12,000	11,770		11,772
DUNN PAPER, INC.										Second Lien	Paper & forest products	L+8.75% (Floor 1.00%)/M, Current Coupon 10.79%	9/28/2016	8/25/2023	3,000	2,961		2,952
ENVIRONMENTAL PEST SERVICE MANAGEMENT COMPANY, LLC										First Lien	Consumer services	L+7.00%/Q, Current Coupon 9.32%	6/22/2018	6/22/2023	15,373	15,160		15,373
	First Lien		L+7.50 (Floor 1.00%)/Q, Current Coupon 9.81%	10/3/2022	4,937,500	4,891,917		4,838,750		Delayed Draw Term Loan¹⁰		L+7.00%/Q, Current Coupon 9.32%	6/22/2018	6/22/2023	6,143	6,041		6,143
						12,142,128		12,005,000								21,201		21,516
DIGITAL RIVER, INC.	First Lien	Software & IT services	L+6.25% (Floor 1.00%)/Q, Current Coupon 8.59%	2/12/2021	6,285,444	6,275,486		6,285,443
DUNN PAPER, INC.	Second Lien	Paper & forest products	L+8.75% (Floor 1.00%)/M, Current Coupon 10.99%	8/26/2023	3,000,000	2,953,204		3,033,750
ELITE SEM, INC.⁸	First Lien	Media, marketing & entertainment	L+8.50% (Floor 1.00%)/M, Current Coupon 10.82%	2/1/2022	14,000,000	13,687,120		14,063,000
FAST SANDWICH, LLC										Revolving Loan¹⁰	Restaurants	L+9.00% (Floor 1.00%)	5/24/2018	—	—	(50	)	—
	1,443 Preferred units; 1,443 Class A Common units		12% PIK	—	—	1,951,397		2,713,000		First Lien		L+9.00% (Floor 1.00%)/Q, Current Coupon 11.32%	5/24/2018	5/23/2023	3,197	3,154		3,133
						15,638,517		16,776,000								3,104		3,133

																		CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES	CONSOLIDATED SCHEDULE OF INVESTMENTS	(Unaudited)
September 30, 2018
September 30, 2019									September 30, 2019

Portfolio Company¹	Type of Investment^{2, 15}	Industry	Current Interest Rate³	Maturity	Principal	Cost		Fair Value⁴		Type of Investment²	Industry	Current Interest Rate³	Acquisition Date¹⁴	Maturity	Principal	Cost	Fair Value⁴
ENVIRONMENTAL PEST SERVICE MANAGEMENT COMPANY, LLC	First Lien	Consumer services	L+7.25%/Q, Current Coupon 9.59%	6/22/2023	16,250,000	15,978,320		16,071,250
IENERGIZER LIMITED⁹										First Lien	Business services	L+6.00% (Floor 1.00%)/M, Current Coupon 8.06%	4/17/2019	4/17/2024	13,500	13,374	13,500
JVMC HOLDINGS CORP.										First Lien	Financial services	L+6.50% (Floor 1.00%)/M, Current Coupon 8.54%	2/28/2019	2/28/2024	8,640	8,562	8,640
LGM PHARMA, LLC¹³										First Lien	Healthcare products	L+8.50% (Floor 1.00%)/M, Current Coupon 10.60%	11/15/2017	11/15/2022	11,601	11,438	11,426
	Delayed Draw Term Loan¹⁰		L+7.25%/Q, Current Coupon 9.58%	6/22/2023	303,000	234,594		299,667		110,000 units of Class A common stock⁹		—	11/15/2017	—	—	1,100	821
						16,212,914		16,370,917								12,538	12,247
FAST SANDWICH, LLC	First Lien	Restaurants	L+9.00% (Floor 1.00%)/Q, Current Coupon 11.34%	5/23/2023	3,279,375	3,227,673		3,230,184
	Revolving Loan¹⁰		L+9.00% (Floor 1.00%)	—	—	(64,154	)	—
						3,163,519		3,230,184
GAUGE AMERICAN NUTS OPERATIONS LLC¹³	First Lien	Food, agriculture and beverage	L+8.50% (Floor 1.00%)/Q, Current Coupon 10.84%	4/10/2023	17,456,250	17,132,911		17,132,911
LIGHTING RETROFIT INTERNATIONAL, LLC (DBA ENVOCORE)										First Lien	Environmental services	L+10.25% (Floor 1.00%)/Q, Current Coupon 12.35%	6/30/2017	6/30/2022	13,271	13,181	12,813
	First Lien - Term Loan B		L+8.50% (Floor 1.00%)/Q, Current Coupon 10.84%	10/10/2018	656,250	655,593		655,593		25,603 shares of Series C preferred stock		—	8/13/2018	—	—	26	29
	Delayed Draw Term Loan¹⁰		L+8.50% (Floor 1.00%)	4/10/2023	—	(8,906	)	—		396,825 shares of Series B preferred stock		—	6/30/2017	—	—	500	306
	3,000,000 units of Class A common stock⁹		—	—	—	3,000,000		2,701,000								13,707	13,148
						20,779,598		20,489,504
LGM PHARMA, LLC¹³	First Lien	Healthcare products	L+8.50% (Floor 1.00%)/M, Current Coupon 10.60%	11/15/2022	9,925,000	9,754,800		9,925,000
RESEARCH NOW GROUP, INC.										Second Lien	Business services	L+9.50% (Floor 1.00%)/M, Current Coupon 11.75%	12/8/2017	12/20/2025	10,500	9,870	10,384
SCRIP INC.⁸										First Lien	Healthcare products	L+9.95% (Floor 2.00%)/M, Current Coupon 11.96%	3/21/2019	3/21/2024	16,750	16,290	16,415
	Delayed Draw Term Loan¹⁰		L+8.50% (Floor 1.00%)/M, Current Coupon 10.60%	11/15/2022	1,793,500	1,770,433		1,793,500		100 shares of common stock		—	3/21/2019	—	—	1,000	1,000
	110,000 units of Class A common stock⁹		—	—	—	1,100,000		1,100,000								17,290	17,415
TAX ADVISORS GROUP, LLC¹³										143.3 Class A units⁹	Financial services	—	6/23/2017	—	—	541	1,053
TINUITI INC.										1,114 Preferred Units	Media, marketing & entertainment	12.00% PIK	2/1/2017	—	—	1,130	2,944
						12,625,233		12,818,500		1,443 Common Units		—	2/1/2017	—	—	277	1,056
																1,407	4,000

																							CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES	CONSOLIDATED SCHEDULE OF INVESTMENTS	(Unaudited)
September 30, 2018
September 30, 2019										September 30, 2019

Portfolio Company¹	Type of Investment^{2, 15}	Industry	Current Interest Rate³	Maturity	Principal	Cost		Fair Value⁴			Type of Investment²	Industry	Current Interest Rate³	Acquisition Date¹⁴	Maturity	Principal		Cost			Fair Value⁴
LIGHTING RETROFIT INTERNATIONAL, LLC	First Lien	Environmental services	L+9.25% (Floor 1.00%)/Q, Current Coupon 11.65%	6/30/2022	14,250,000	14,127,358		13,950,750
	396,825 shares of Series B preferred stock; 25,603 shares of Series C preferred stock		—	—	—	525,603		511,000
						14,652,961		14,461,750
RESEARCH NOW GROUP, INC.	Second Lien	Business services	L+9.50% (Floor 1.00%)/M, Current Coupon 11.74%	12/20/2025	10,500,000	9,807,434		10,198,125
RESTAURANT TECHNOLOGIES, INC.	Second Lien	Business services	L+8.75% (Floor 1.00%)/Q, Current Coupon 10.83%	11/23/2023	3,500,000	3,457,943		3,535,000
JVMC HOLDINGS CORP. ¹⁴	First Lien	Financial services	L+8.02% (Floor 1.00%)/M, Current Coupon 10.26%	5/5/2022	7,031,250	6,977,130		7,101,563
TAX ADVISORS GROUP, LLC¹³	Senior subordinated debt	Financial services	10.00% / 2.00% PIK	12/23/2022	4,600,000	4,524,784		4,600,000
	143.3 Class A units⁹		—	—	—	541,176		645,000
						5,065,960		5,245,000
VISTAR MEDIA INC.	First Lien	Media, marketing & entertainment	L+10.00% (Floor 1.00%)/M, Current Coupon 12.40%	2/16/2022	7,975,000	7,375,591		8,054,750			First Lien	Media, marketing & entertainment	L+8.00% (Floor 1.00%)/M, Current Coupon 10.09%	2/17/2017	4/3/2023	13,908		12,803			13,908
	Warrants (Expiration - February 17, 2027)		—	—	—	886,000		2,711,000			171,617 shares of Series A preferred stock		—	4/3/2019	—	—		1,874			3,698
						8,261,591		10,765,750			Warrants (Expiration - April 3, 2029)		—	4/3/2019	—	—		620			1,648
																		15,297			19,254
VTX HOLDINGS, INC.⁸											First Lien	Software & IT services	L+8.95% (Floor 2.00%)/Q, Current Coupon 11.23%	7/23/2019	7/23/2024	20,075		19,529			19,784
											1,000,000 Series A Preferred Units		—	7/23/2019	—	—		1,000			1,000
																		20,529			20,784

Total Non-control/Non-affiliate Investments						$	287,655,830	$	294,064,798									$	343,790		$	339,357

Affiliate Investments⁶
CHANDLER SIGNS, LLC¹³	Senior subordinated debt	Business services	12.00% / 1.00% PIK	7/4/2021	4,534,240	$	4,480,993	$	4,384,610		Senior subordinated debt	Business services	12.00%	1/4/2016	7/4/2021	$	4,569	$	4,532		$	4,569
	1,500,000 units of Class A-1 common stock⁹		—	—	—	1,500,000		1,495,000			1,500,000 units of Class A-1 common stock⁹		—	1/4/2016	—	—		1,500			2,714
						5,980,993		5,879,610										6,032			7,283
DYNAMIC COMMUNITIES, LLC¹³											Revolving Loan¹⁰	Business services	L+8.00% (Floor 1.00%)	7/17/2018	7/17/2023	—		(4		)	—
											First Lien		L+8.00% (Floor 1.00%)/M, Current Coupon 10.04%	7/17/2018	7/17/2023	10,920		10,744			10,833
											2,000,000 Preferred Units⁹		—	7/17/2018	—	—		2,000			2,849
																		12,740			13,682

																			CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES	CONSOLIDATED SCHEDULE OF INVESTMENTS	(Unaudited)
September 30, 2018
September 30, 2019									September 30, 2019

Portfolio Company¹	Type of Investment^{2, 15}	Industry	Current Interest Rate³	Maturity	Principal	Cost		Fair Value⁴		Type of Investment²	Industry	Current Interest Rate³	Acquisition Date¹⁴	Maturity	Principal	Cost		Fair Value⁴
DYNAMIC COMMUNITIES, LLC¹³	First Lien	Business services	L+8.00% (Floor 1.00%)/M, Current Coupon 10.39%	7/17/2023	11,200,000	10,983,905		10,983,905
	Revolving Loan¹⁰		L+8.00% (Floor 1.00%)	7/17/2023	—	(4,792	)	—
	2,000,000 Preferred Units⁹		—	—	—	2,000,000		2,000,000
						12,979,113		12,983,905
ITA HOLDINGS GROUP, LLC¹³	First Lien	Transportation & logistics	L+9.00% (Floor 1.00%)/Q, Current Coupon 11.34%	2/14/2023	9,381,250	9,211,448		9,005,950		Revolving Loan¹⁰	Transportation & logistics	L+9.00% (Floor 1.00%)/Q, Current Coupon 11.26%	2/14/2018	2/14/2023	1,719	1,684		1,723
	First Lien - Term Loan B		L+9.00% (Floor 1.00%)/Q, Current Coupon 11.34%	2/14/2023	1,987,500	1,949,810		1,908,050		First Lien - Term Loan		L+8.00% (Floor 1.00%)/Q, Current Coupon 10.32%	2/14/2018	2/14/2023	8,483	8,373		8,483
	Revolving Loan^10.		L+9.00% (Floor 1.00%)/Q, Current Coupon 11.33%	2/14/2023	763,500	728,516		732,960		First Lien - Term B Loan		L+11.00% (Floor 1.00%)/Q, Current Coupon 13.32%	6/5/2018	2/14/2023	4,242	4,173		4,373
	Delayed Draw Term Loan		L+9.00% (Floor 1.00%)/Q, Current Coupon 11.34%	2/14/2023	1,490,625	1,462,520		1,431,000		First Lien - PIK Note A		10.00% PIK	3/29/2019	2/14/2023	2,308	1,787		2,178
	9.25% Class A Membership Interest⁹		—	—	—	1,500,000		1,058,000		First Lien - PIK Note B		10.00% PIK	3/29/2019	2/14/2023	91	91		86
						14,852,294		14,135,960		Warrants (Expiration - March 29, 2029)⁹		—	3/29/2019	—	—	538		2,909
										9.25% Class A Membership Interest⁹		—	2/14/2018	—	—	1,500		2,245
																18,146		21,997
ROSELAND MANAGEMENT, LLC										Revolving Loan¹⁰	Healthcare services	L+7.00% (Floor 2.00%)	11/9/2018	11/9/2023	—	(28	)	—
										First Lien		L+7.00% (Floor 2.00%)/Q, Current Coupon 9.32%	11/9/2018	11/9/2023	10,421	10,265		10,421
										10,000 Class A Units		—	11/9/2018	—	—	1,000		1,789
																11,237		12,210
SIMR, LLC	First Lien	Healthcare services	L+9.00% (Floor 2.00%)/M, Current Coupon 11.33%	9/7/2023	11,688,000	11,456,963		11,456,963		First Lien	Healthcare services	L+9.00% (Floor 2.00%)/M, Current Coupon 11.13%	9/7/2018	9/7/2023	11,207	11,019		10,545
	5,724,000 Class B Common Units		—	—	—	5,724,000		5,724,000		5,724,000 Class B Common Units		—	9/7/2018	—	—	5,724		3,322
						17,180,963		17,180,963								16,743		13,867

																							CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES	CONSOLIDATED SCHEDULE OF INVESTMENTS	(Unaudited)
September 30, 2018
September 30, 2019											September 30, 2019

Portfolio Company¹	Type of Investment^{2, 15}	Industry	Current Interest Rate³	Maturity	Principal	Cost			Fair Value⁴			Type of Investment²	Industry	Current Interest Rate³	Acquisition Date¹⁴	Maturity	Principal	Cost			Fair Value⁴
ZENFOLIO INC.	First Lien	Business services	L+9.00% (Floor 1.00%)/Q, Current Coupon 11.34%	7/17/2022	13,365,000	13,159,872			13,244,715			Revolving Loan¹⁰	Business services	L+9.00% (Floor 1.00%)	7/17/2017	7/17/2022	—	(11		)	—
	Revolving Loan¹⁰		L+9.00% (Floor 1.00%)	7/17/2022	—	(15,170		)	—			First Lien		L+9.00% (Floor 1.00%)/Q, Current Coupon 11.32%	7/17/2017	7/17/2022	14,406	14,161			14,017
	190 shares of common stock		—	—	—	1,900,000			1,593,000			190 shares of common stock		—	7/17/2017	—	—	1,900			546
						15,044,702			14,837,715									16,050			14,563

Total Affiliate Investments						$	66,038,065		$	65,018,153								$	80,948		$	83,602

Control Investments⁷
I-45 SLF LLC^{9, 10, 11}	80% LLC equity interest	Multi-sector holdings	—	—	—	$	64,800,000		$	66,326,146
I-45 SLF LLC^9,11												80% LLC equity interest	Multi-sector holdings	—	10/20/2015	—	—	$	68,000		$	61,909
MEDIA RECOVERY, INC.¹¹	800,000 shares of Series A convertible preferred stock	Industrial products	—	—	—	800,000			6,622,641			800,000 shares of Series A convertible preferred stock	Industrial products	—	11/4/1997	—	—	800			7,979
	4,000,002 shares of common stock		—	—	—	4,615,000			38,204,359
						5,415,000			44,827,000
PRISM SPECTRUM HOLDINGS, LLC¹³	First Lien	Environmental services	L+9.50% (Floor 2.25%)/M, Current Coupon 11.82%	2/6/2023	13,461,480	13,206,168			13,340,327
	Revolving Loan¹⁰		L+9.50% (Floor 2.25%)/M, Current Coupon 11.82%	2/6/2023	1,500,000	1,465,641			1,486,500			4,000,002 shares of common stock		—	11/4/1997	—	—	4,615			46,029
	96,498.32 Class A units⁹		—	—	—	6,538,522			6,538,522									5,415			54,008
						21,210,331			21,365,349
Total Control Investments						$	91,425,331		$	132,518,495								$	73,415		$	115,917

TOTAL INVESTMENTS¹²						$	445,119,226		$	491,601,446								$	498,153		$	538,876


¹	All debt investments are income-producing, unless otherwise noted. Equity investments are non-income producing, unless otherwise noted.


²	All of the Company’s investments, unless otherwise noted, are ~~encumbered~~pledged as ~~security~~collateral for the Company’s senior secured credit facility.

The majority of investments bear interest at a rate that may be determined by reference to London Interbank Offered Rate (“LIBOR” or “L”) or Prime (“P”) and reset daily (D), monthly (M), quarterly (Q), or semiannually (S). For each the Company has provided the spread over LIBOR or Prime and the current contractual interest rate in effect at September 30, ~~2018.~~2019. Certain investments are subject to a LIBOR or Prime interest rate floor. Certain investments, as noted, accrue payment-in-kind ("PIK") interest.

⁴

The Company's investment portfolio is comprised entirely of debt and equity securities of privately held companies for which quoted prices falling within the categories of Level 1 and Level 2 inputs are not available. Therefore, the Company values all of its portfolio investments at fair value, as determined in good faith by the Board of Directors, using significant unobservable Level 3 inputs. Refer to Note 4 for further discussion.

⁵

Non-Control/Non-Affiliate investments are generally defined by the Investment Company Act of 1940 (the “1940 Act”) as investments that are neither control investments nor affiliate investments. At September 30, ~~2018,~~2019, approximately ~~59.8%~~63.0% of the Company’s investment assets were non-control/non-affiliate investments. The fair value of these investments as a percent of net assets is ~~95.5%~~103.4%.

⁶

Affiliate investments are generally defined by the 1940 Act as investments in which between 5% and 25% of the voting securities are owned and the investments are not classified as control investments. At September 30, ~~2018,~~2019, approximately ~~13.2%~~15.5% of the Company’s investment assets were affiliate investments. The fair value of these investments as a percent of net assets is ~~21.1%~~25.5%.


⁷	Control investments are generally defined by the 1940 Act as investments in which more than 25% of the voting securities are owned. At September 30, ~~2018,~~2019, approximately ~~27.0%~~21.5% of the Company’s investment assets were control investments. The fair value of these investments as a percent of net assets is ~~43.0%~~35.3%.


⁸	The investment is structured as a first lien last out term loan.


⁹	Indicates assets that are considered "non-qualifying ~~assets”~~assets" under section 55(a) of the 1940 Act. Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets. As of September 30, ~~2018,~~2019, approximately ~~17.0%~~15.6% of the Company's ~~investment~~ assets are non-qualifying assets.


¹⁰	The investment has an unfunded commitment as of September 30, ~~2018.~~2019. Refer to Note 1110 - Commitments and Contingencies for further discussion.


¹¹	Income producing through dividends or distributions.


¹²	As of September 30, ~~2018,~~2019, the cumulative gross unrealized appreciation for U.S. federal income tax purposes is approximately ~~$49.0~~$66.7 million; cumulative gross unrealized depreciation for federal income tax purposes is ~~$2.7~~$23.8 million. Cumulative net unrealized appreciation is ~~$46.2~~$43.0 million, based on a tax cost of ~~$445.4~~$495.9 million.

¹³

ASC Ortho Management Company, LLC common units, Danforth Advisors, LLC common units, ~~Gauge~~ American Nuts Operations LLC Class A common stock, LGM Pharma, LLC Class A common stock, Tax Advisors Group, LLC Class A units, Chandler Signs, LP Class A-1 common stock, Dynamic Communities, LLC Preferred units, and ITA Holdings Group, LLC membership interest ~~and Prism Spectrum Holdings LLC Class A units~~ are held through a wholly-owned taxable subsidiary.


¹⁴	~~The investment is structured as a first lien first out term loan.~~

¹⁵

The Company generally acquires its investments in private transactions exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"). These investments, which as of September 30, 2019 represented 164.2% of the Company's net assets or 92.1% of the Company's total assets, are generally subject to certain limitations on resale, and may be deemed "restricted securities" under the Securities Act.


¹⁵	The investment is structured as a split lien term loan, which provides the Company with a first lien priority on certain assets of the obligor and a second lien priority on different assets of the obligor.


¹⁶	Investment is on non-accrual status as of September 30, 2019, meaning the Company has ceased to recognize interest income on the investment.

The accompanying Notes are an integral part of these Consolidated Financial Statements.

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
March 31, 2018

Portfolio Company¹

Type of Investment²
Industry
Current Interest Rate³
Maturity Principal Cost
Fair Value⁴
Non-control/Non-affiliate Investments⁵

AAC HOLDINGS, INC. First Lien Healthcare services L+6.75% (Floor 1.00%), Current Coupon 8.52% 6/30/2023 $ 9,321,875
$ 9,110,902
$ 9,485,008
AG KINGS HOLDINGS INC.⁸
First Lien Food, agriculture & beverage L+9.40% (Floor 1.00%), Current Coupon 11.21% 8/8/2021 9,650,000
9,507,562
9,437,700
ALLIANCE SPORTS GROUP, L.P. Senior subordinated debt Consumer products & retail 11.00% 2/1/2023 10,100,000
9,916,216
9,807,100
2.65% membership interest — — —
2,500,000
1,996,000
12,416,216
11,803,100
AMERICAN TELECONFERENCING SERVICES, LTD. First Lien Telecommunications L+6.50% (Floor 1.00%), Current Coupon 8.29% 12/8/2021 6,378,173
6,238,734
6,376,578
Second Lien L+9.50% (Floor 1.00%), Current Coupon 11.20% 6/6/2022 2,005,714
1,941,047
1,918,806
8,179,781
8,295,384
AMWARE FULFILLMENT LLC¹⁷
First Lien Distribution L+12.00% (Floor 1.00%), Current Coupon 14.02% 5/21/2019 13,478,333
13,284,488
12,939,200
BINSWANGER HOLDING CORP. First Lien Distribution L+8.00% (Floor 1.00%), Current Coupon 10.02% 3/9/2022 13,036,418
12,817,614
12,899,536
900,000 shares of common stock — — —
900,000
874,000
13,717,614
13,773,536
CALIFORNIA PIZZA KITCHEN, INC. First Lien Restaurants L+6.00% (Floor 1.00%), Current Coupon 7.88% 8/23/2022 4,925,000
4,886,550
4,836,350
CAPITAL PAWN HOLDINGS, LLC First Lien Consumer products & retail L+9.50%,
Current Coupon 11.19% 7/8/2020 12,922,365
12,669,652
12,767,297



CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
(Unaudited)
March 31, 2019

Portfolio Company¹	Type of Investment^{2, 14}	Industry	Current Interest Rate³	Maturity	Principal		Cost			Fair Value⁴
Non-control/Non-affiliate Investments⁵
AAC HOLDINGS, INC.	First Lien	Healthcare services	L+6.75% (Floor 1.00%)/Q, 4.00% PIK, Current Coupon 13.49%	6/30/2023	$	9,084	$	8,912		$	8,403
	First Lien		L+11.00% (Floor 1.00%)/M	3/31/2020	1,170		1,158			1,182
							10,070			9,585
ACE GATHERING, INC.	Second Lien¹⁵	Energy services (midstream)	L+8.50% (Floor 2.00%)/Q, Current Coupon 11.09%	12/13/2023	9,938		9,747			9,783
ADAMS PUBLISHING GROUP, LLC	First Lien	Media, marketing & entertainment	L+7.50% (Floor 1.00%)/Q, Current Coupon 10.30%	7/2/2023	13,566		13,320			13,308
	Delayed Draw Term Loan¹⁰		L+7.50% (Floor 1.00%)	7/2/2023	—		(29		)	—
							13,291			13,308
AG KINGS HOLDINGS INC.^8,16	First Lien	Food, agriculture & beverage	L+10.02% (Floor 1.00%)/M, Current Coupon 12.69%	8/8/2021	9,308		9,194			8,330
ALLIANCE SPORTS GROUP, L.P.	Senior subordinated debt	Consumer products & retail	11.00%	2/1/2023	10,100		9,946			9,807
	3.88% preferred membership interest		—	—	—		2,500			2,500
							12,446			12,307
AMERICAN NUTS OPERATIONS LLC¹³	First Lien - Term Loan	Food, agriculture and beverage	L+9.50% (Floor 1.00%)/Q, Current Coupon 12.30%	4/10/2023	17,369		17,075			16,822
	First Lien - Term Loan C¹⁰		L+9.50% (Floor 1.00%)/Q, Current Coupon 12.30%	4/10/2023	1,750		1,723			1,695
	3,000,000 units of Class A common stock⁹		—	—	—		3,000			1,505
							21,798			20,022
AMERICAN TELECONFERENCING SERVICES, LTD. (DBA PREMIERE GLOBAL SERVICES, INC.)	First Lien	Telecommunications	L+6.50% (Floor 1.00%)/Q, Current Coupon 9.24%	12/8/2021	6,023		5,922			3,953
	Second Lien		L+9.50% (Floor 1.00%)/Q, Current Coupon 12.30%	6/6/2022	2,006		1,954			1,103
							7,876			5,056

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
March 31, 2018

Portfolio Company¹

Type of Investment²
Industry
Current Interest Rate³
Maturity Principal Cost
Fair Value⁴
CLICKBOOTH.COM, LLC First Lien Media, marketing & entertainment L+8.50% (Floor 1.00%), Current Coupon 10.19% 12/5/2022 17,390,625
17,059,608
17,442,797

Revolving Loan¹⁵
L+8.50% (Floor 1.00%) 12/5/2022 —
(18,719 ) —
17,040,889
17,442,797
DEEPWATER CORROSION SERVICES, INC. 127,004 shares of Series A convertible preferred stock Energy services (upstream) — — —
8,000,000
4,629,000
DELPHI INTERMEDIATE HEALTHCO, LLC First Lien Healthcare services L+7.50% (Floor 1.00%), Current Coupon 9.27% 10/3/2022 7,406,250
7,336,879
7,265,531
DIGITAL RIVER, INC. First Lien Software & IT services L+6.50% (Floor 1.00%), Current Coupon 8.61% 2/12/2021 6,285,443
6,273,415
6,285,443
DUNN PAPER, INC. Second Lien Paper & forest products L+8.75% (Floor 1.00%), Current Coupon 10.63% 8/26/2023 3,000,000
2,949,611
3,000,000
LGM PHARMA, LLC¹³
First Lien Healthcare products L+8.50% (Floor 1.00%), Current Coupon 10.17% 11/15/2022 9,975,000
9,787,481
9,955,050

Delayed Draw Term Loan¹⁸
L+8.50% (Floor 1.00%), Current Coupon 10.29% 11/15/2022 1,300,000
1,274,815
1,297,400

110,000 units of Class A common stock⁹
— — —
1,100,000
1,100,000
12,162,296
12,352,450
LIGHTING RETROFIT INTERNATIONAL, LLC First Lien Environmental services L+9.25% (Floor 1.00%), Current Coupon 10.94% 6/30/2022 14,625,000
14,487,144
14,361,750
396,825 shares of Series B preferred stock — — —
500,000
376,000
14,987,144
14,737,750
PRE-PAID LEGAL SERVICES, INC. Second Lien Consumer services L+9.00% (Floor 1.25%), Current Coupon 10.88% 7/1/2020 5,000,000
4,967,603
5,000,000
RESEARCH NOW GROUP, INC. Second Lien Business services L+9.50% (Floor 1.00%), Current Coupon 11.28% 12/20/2025 10,500,000
9,778,956
9,817,500



CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
(Unaudited)
March 31, 2019

Portfolio Company¹	Type of Investment^{2, 14}	Industry	Current Interest Rate³	Maturity	Principal	Cost		Fair Value⁴
AMWARE FULFILLMENT LLC	First Lien	Distribution	L+9.50% (Floor 1.00%)/M, Current Coupon 12.10%	12/31/2020	12,753	12,666		12,651
ASC ORTHO MANAGEMENT COMPANY, LLC¹³	Revolving Loan¹⁰	Healthcare services	L+7.50% (Floor 1.00%)	8/31/2023	—	(27	)	—
	First Lien		L+7.50% (Floor 1.00%)/Q, Current Coupon 10.30%	8/31/2023	9,261	9,094		9,095
	Second Lien		13.25% PIK	12/1/2023	3,250	3,178		3,178
	2,042 Common Units⁹		—	—	—	750		750
						12,995		13,023
BINSWANGER HOLDING CORP.	First Lien	Distribution	L+8.00% (Floor 1.00%)/M, Current Coupon 10.60%	3/9/2022	12,150	11,992		12,016
	900,000 shares of common stock		—	—	—	900		1,013
						12,892		13,029
BLASCHAK COAL CORP.	Second Lien¹⁵	Commodities & mining	L+10.00%/Q, 1.00% PIK, Current Coupon 13.81%	7/30/2023	8,537	8,383		8,511
CALIFORNIA PIZZA KITCHEN, INC.	First Lien	Restaurants	L+6.00% (Floor 1.00%)/M, Current Coupon 8.50%	8/23/2022	4,875	4,844		4,723
CAPITAL PAWN HOLDINGS, LLC	First Lien	Consumer products & retail	L+9.50%/Q, Current Coupon 12.30%	7/8/2020	11,448	11,315		11,310
CLICKBOOTH.COM, LLC	Revolving Loan¹⁰	Media, marketing & entertainment	L+8.50% (Floor 1.00%)	12/5/2022	—	(15	)	—
	First Lien		L+8.50% (Floor 1.00%)/Q, Current Coupon 11.31%	12/5/2022	16,953	16,684		17,292
						16,669		17,292
DANFORTH ADVISORS, LLC¹³	Revolving Loan¹⁰	Business services	L+7.25% (Floor 2.00%)	9/28/2023	—	(18	)	—
	First Lien		L+7.25% (Floor 2.00%)/Q, Current Coupon 10.05%	9/28/2023	7,250	7,117		7,145
	875 Class A equity units⁹		—	—	—	875		875
						7,974		8,020

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
March 31, 2018

Portfolio Company¹

Type of Investment²
Industry
Current Interest Rate³
Maturity Principal Cost
Fair Value⁴
RESTAURANT TECHNOLOGIES, INC. Second Lien Business services L+8.75% (Floor 1.00%), Current Coupon 10.69% 11/23/2023 3,500,000
3,454,894
3,493,000
JVMC HOLDINGS CORP. ¹⁴
First Lien Financial services L+8.02% (Floor 1.00%), Current Coupon 9.90% 5/5/2022 7,218,750
7,156,878
7,215,141
TAX ADVISORS GROUP, LLC¹³
Senior subordinated debt Financial services 10.00% / 2.00% PIK 12/23/2022 4,600,000
4,517,884
4,600,000

143.3 Class A units⁹
— — —
541,176
886,000
5,059,060
5,486,000
VISTAR MEDIA INC. First Lien Media, marketing & entertainment L+10.00% (Floor 1.00%), Current Coupon 12.02% 2/16/2022 8,112,500
7,434,072
8,193,625
Warrants (Expiration - February 17, 2027) — — —
886,000
1,682,000
8,320,072
9,875,625
WASTEWATER SPECIALTIES, LLC
First Lien¹⁶
Industrial services L+12.25% (Floor 1.00%), Current Coupon 13.90% 4/18/2022 9,863,582
9,720,600
10,011,536

Total Non-control/Non-affiliate Investments $ 200,981,062
$ 199,949,348
Affiliate Investments⁶

CHANDLER SIGNS, LLC¹³
Senior subordinated debt Business services 12.00% / 1.00% PIK 7/4/2021 4,511,259
$ 4,450,704
$ 4,375,922

1,500,000 units of Class A-1 common stock⁹
— — —
1,500,000
1,934,000
5,950,704
6,309,922
ELITE SEM, INC.⁸
First Lien Media, marketing & entertainment L+9.90% (Floor 1.00%), Current Coupon 12.10% 2/1/2022 17,500,000
17,103,533
17,500,000
1,089 Preferred units 12% PIK — —
1,235,651
1,879,000
18,339,184
19,379,000



CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
(Unaudited)
March 31, 2019

Portfolio Company¹	Type of Investment^{2, 14}	Industry	Current Interest Rate³	Maturity	Principal	Cost		Fair Value⁴
DELPHI INTERMEDIATE HEALTHCO, LLC	First Lien	Healthcare services	L+7.50% (Floor 1.00%)/Q, Current Coupon 10.23%	10/3/2022	11,400	11,310		11,023
DIGITAL RIVER, INC.	First Lien	Software & IT services	L+6.00% (Floor 1.00%)/Q, Current Coupon 8.60%	2/12/2021	6,285	6,277		6,128
DUNN PAPER, INC.	Second Lien	Paper & forest products	L+8.75% (Floor 1.00%)/M, Current Coupon 11.25%	8/25/2023	3,000	2,957		2,883
ELITE SEM, INC.⁸	First Lien	Media, marketing & entertainment	L+8.40% (Floor 1.00%)/M, Current Coupon 11.00%	2/1/2022	14,000	13,717		14,000
	1,443 Investment Units (Preferred)		12.00% PIK	—	—	2,068		4,457
						15,785		18,457
ENVIRONMENTAL PEST SERVICE MANAGEMENT COMPANY, LLC	First Lien	Consumer services	L+7.25%/Q, Current Coupon 10.06%	6/22/2023	16,169	15,921		16,169
	Delayed Draw Term Loan¹⁰		L+7.25%/Q, Current Coupon 10.06%	6/22/2023	6,461	6,353		6,461
						22,274		22,630
FAST SANDWICH, LLC	Revolving Loan¹⁰	Restaurants	L+9.00% (Floor 1.00%)	—	—	(57	)	—
	First Lien		L+9.00% (Floor 1.00%)/Q, Current Coupon 11.80%	5/23/2023	3,238	3,191		3,190
						3,134		3,190
JVMC HOLDINGS CORP.	First Lien	Financial services	L+6.50% (Floor 1.00%)/M, Current Coupon 9.00%	2/28/2024	9,152	9,062		9,062
	Delayed Draw Term Loan¹⁰		L+6.50% (Floor 1.00%)	2/28/2024	—	(7	)	—
						9,055		9,062
LGM PHARMA, LLC¹³	First Lien	Healthcare products	L+8.50% (Floor 1.00%)/M, Current Coupon 10.99%	11/15/2022	9,875	9,723		10,073
	Delayed Draw Term Loan		L+8.50% (Floor 1.00%)/M, Current Coupon 10.99%	11/15/2022	1,785	1,753		1,820
	110,000 units of Class A common stock⁹		—	—	—	1,100		821



CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
(Unaudited)
March 31, 2019

Portfolio Company¹	Type of Investment^{2, 14}	Industry	Current Interest Rate³	Maturity	Principal		Cost			Fair Value⁴
							12,576			12,714
LIGHTING RETROFIT INTERNATIONAL, LLC (DBA ENVOCORE)	First Lien	Environmental services	L+9.25% (Floor 1.00%)/Q, Current Coupon 11.84%	6/30/2022	13,688		13,580			12,606
	25,603 shares of Series C preferred stock		—	—	—		26			28
	396,825 shares of Series B preferred stock		—	—	—		500			307
							14,106			12,941
RESEARCH NOW GROUP, INC.	Second Lien	Business services	L+9.50% (Floor 1.00%)/M, Current Coupon 12.00%	12/20/2025	10,500		9,838			10,437
SCRIP INC.⁸	First Lien	Healthcare products	L+10.00% (Floor 2.00%)/M, Current Coupon 12.49%	3/21/2024	16,750		16,250			16,250
	100 shares of common stock		—	—	—		1,000			1,000
							17,250			17,250
TAX ADVISORS GROUP, LLC¹³	143.3 Class A units⁹	Financial services	—	—	—		541			645
VISTAR MEDIA INC.	First Lien	Media, marketing & entertainment	L+10.00% (Floor 1.00%)/M, Current Coupon 12.60%	2/16/2022	7,975		7,447			7,975
	Warrants (Expiration - February 17, 2027)		—	—	—		886			2,378
							8,333			10,353

Total Non-control/Non-affiliate Investments							$	305,596		$	304,663
Affiliate Investments⁶
CHANDLER SIGNS, LLC¹³	Senior subordinated debt	Business services	12.00% / 1.00% PIK	7/4/2021	$	4,557	$	4,512		$	4,480
	1,500,000 units of Class A-1 common stock⁹		—	—	—		1,500			1,937
							6,012			6,417
DYNAMIC COMMUNITIES, LLC¹³	Revolving Loan¹⁰	Business services	L+8.00% (Floor 1.00%)	7/17/2023	—		(4		)	—
	First Lien		L+8.00% (Floor 1.00%)/M, Current Coupon 10.59%	7/17/2023	11,060		10,863			10,972
	2,000,000 Preferred Units⁹		—	—	—		2,000			2,849



CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
(Unaudited)
March 31, 2019

Portfolio Company¹	Type of Investment^{2, 14}	Industry	Current Interest Rate³	Maturity	Principal	Cost		Fair Value⁴
						12,859		13,821
ITA HOLDINGS GROUP, LLC¹³	Revolving Loan¹⁰	Transportation & logistics	L+9.00% (Floor 1.00%)/Q, 1.00% PIK, Current Coupon 12.60%	2/14/2023	2,000	1,960		2,000
	First Lien - Term Loan		L+8.00% (Floor 1.00%)/Q, 1.00% PIK, Current Coupon 11.60%	2/14/2023	7,659	7,533		7,475
	First Lien - Term B Loan		L+11.00% (Floor 1.00%)/Q, 1.00% PIK, Current Coupon 14.60%	2/14/2023	3,830	3,762		3,829
	First Lien - PIK Note A		10.00% PIK	2/14/2023	2,250	1,692		2,005
	First Lien - PIK Note B		10.00% PIK	2/14/2023	89	89		79
	Warrants (Expiration - March 29, 2029)⁹		—	—	—	538		1,557
	9.25% Class A Membership Interest⁹		—	—	—	1,500		923
						17,074		17,868
ROSELAND MANAGEMENT, LLC	Revolving Loan¹⁰	Healthcare services	L+7.00% (Floor 2.00%)	11/9/2023	—	(32	)	—
	First Lien		L+7.00% (Floor 2.00%)/Q, Current Coupon 9.80%	11/9/2023	10,474	10,302		10,474
	10,000 Class A Units		—	—	—	1,000		1,487
						11,270		11,961
SIMR, LLC	First Lien	Healthcare services	L+9.00% (Floor 2.00%)/M, Current Coupon 11.62%	9/7/2023	11,542	11,332		11,403
	5,724,000 Class B Common Units		—	—	—	5,724		5,724
						17,056		17,127
ZENFOLIO INC.	Revolving Loan¹⁰	Business services	L+9.00% (Floor 1.00%)	7/17/2022	—	(13	)	—
	First Lien		L+9.00% (Floor 1.00%)/Q, Current Coupon 11.60%	7/17/2022	13,298	13,119		13,165
	190 shares of common stock		—	—	—	1,900		546
						15,006		13,711



CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
(Unaudited)
March 31, 2019

Portfolio Company¹	Type of Investment^{2, 14}	Industry	Current Interest Rate³	Maturity	Principal	Cost		Fair Value⁴

Total Affiliate Investments						$	79,277	$	80,905

Control Investments⁷
I-45 SLF LLC^9,11	80% LLC equity interest	Multi-sector holdings	—	—	—	$	68,000	$	65,743
MEDIA RECOVERY, INC.¹¹	800,000 shares of Series A convertible preferred stock	Industrial products	—	—	—	800		7,795
	4,000,002 shares of common stock		—	—	—	4,615		44,965
						5,415		52,760
PRISM SPECTRUM HOLDINGS, LLC¹³	First Lien	Environmental services	L+9.50% (Floor 2.25%)/M, Current Coupon 12.12%	2/6/2023	13,461	13,229		13,461
	96,498.32 Class A units⁹		—	—	—	6,538		6,539
						19,767		20,000

Total Control Investments						93,182		138,503

TOTAL INVESTMENTS¹²						$	478,055	$	524,071


¹	All debt investments are income-producing, unless otherwise noted. Equity investments and warrants are non-income producing, unless otherwise noted.


²	All of the Company’s investments, unless otherwise noted, are encumbered as security for the Company’s senior secured credit facility.

The majority of investments bear interest at a rate that may be determined by reference to London Interbank Offered Rate (“LIBOR” or “L”) or Prime (“P”) and reset daily (D), monthly (M), quarterly (Q), or ~~semiannually.~~semiannually (S). For each the Company has provided the spread over LIBOR or Prime and the current contractual interest rate in effect at March 31, ~~2018.~~2019. Certain investments are subject to a LIBOR or Prime interest rate floor. Certain investments, as noted, accrue payment-in-kind ("PIK") interest.

⁴

~~Investments~~The Company's investment portfolio is comprised entirely of privately held debt and equity securities for which quoted prices falling within the categories of Level 1 and Level 2 inputs are ~~carried~~not available. Therefore, the Company values all of its portfolio investments at fair value, ~~in accordance with the Investment Company Act of 1940 (the “1940 Act”) and Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 820,~~ ~~Fair Value Measurements and Disclosures. We determine~~as determined in good faith ~~the fair value of our Investment portfolio pursuant to a valuation policy in accordance with ASC 820 and a valuation process approved~~ by ~~our~~the Board of ~~Directors. See~~Directors, using significant unobservable Level 3 inputs. Refer to Note 4 ~~to the consolidated financial statements.~~

for further discussion.

⁵

Non-Control/Non-Affiliate investments are generally defined by the Investment Company Act of 1940 ~~Act~~(the “1940 Act”) as investments that are neither control investments nor affiliate investments. At March 31, ~~2018,~~2019, approximately ~~50.9%~~58.2% of the Company’s investment assets were non-control/non-affiliate investments. The fair value of these investments as a percent of net assets is ~~64.9%~~93.5%.

⁶

Affiliate investments are generally defined by the 1940 Act as investments in which between 5% and 25% of the voting securities are owned and the investments are not classified as control investments. At March 31, ~~2018,~~2019, approximately ~~13.5%~~15.4% of the Company’s investment assets were affiliate investments. The fair value of these investments as a percent of net assets is ~~17.3%~~24.8%.

⁷

Control investments are generally defined by the 1940 Act as investments in which more than 25% of the voting securities are ~~owned or maintains greater than 50% of the board representation.~~owned. At March 31, ~~2018,~~2019, approximately ~~35.6%~~26.4% of the Company’s investment assets were control investments. The fair value of these investments as a percent of net assets is ~~45.4%~~42.5%.


⁸	The investment is structured as a first lien last out term loan.


⁹	Indicates assets that are considered "non-qualifying assets” under section 55(a) of the 1940 Act. Qualifying assets must represent at least 70% of total assets at the time of acquisition of any additional non-qualifying assets. As of March 31, ~~2018,~~2019, approximately ~~18.0%~~16.1% of the Company's investment assets are non-qualifying assets.


¹⁰	The investment has ~~approximately $3.2 million~~an unfunded commitment as of March 31, ~~2018.~~2019. Refer to Note 12 - Commitments and Contingencies for further discussion.


¹¹	Income producing through dividends or distributions.


¹²	As of March 31, ~~2018,~~2019, the cumulative gross unrealized appreciation for federal income tax purposes is approximately ~~$62.4~~$56.6 million; cumulative gross unrealized depreciation for federal income tax purposes is ~~$4.9~~$11.6 million. Cumulative net unrealized appreciation is ~~$57.5~~$45.0 million, based on a tax cost of ~~$335.6~~$477.8 million.

¹³

~~ITA Holdings Group,~~ASC Ortho Management Company, LLC ~~membership interest,~~common units, Danforth Advisors, LLC common units, American Nuts Operations LLC Class A common stock, LGM Pharma, LLC Class A common stock, ~~Prism Spectrum Holdings LLC Class A units,~~ Tax Advisors Group, LLC Class A units, ~~and~~ Chandler Signs, LP Class A-1 common stock, Dynamic Communities, LLC Preferred units, ITA Holdings Group, LLC membership interest, and Prism Spectrum Holdings LLC Class A units are held through a wholly-owned taxable subsidiary.


¹⁴	The ~~investment is structured~~Company generally acquires its investments in private transactions exempt from registration under the Securities Act of 1933, as ~~a first lien first out term loan.~~amended (the "Securities Act"). These investments are generally subject to certain limitations on resale, and may be deemed "restricted securities" under the Securities Act.


¹⁵	The investment ~~has approximately $2.0 million unfunded commitment~~is structured as a split lien term loan, which provides the Company with a first lien priority on certain assets of ~~March 31, 2018.~~the obligor and a second lien priority on different assets of the obligor.


¹⁶	AsInvestment was on non-accrual status as of March 31, ~~2018,~~2019, meaning the ~~investment is paying default~~Company has ceased to recognize interest ~~at a rate of 3.0% per annum.~~


¹⁷	~~As of~~ ~~March 31, 2018~~,income on the ~~investment is paying default interest at a rate of 2.5% per annum.~~


¹⁸	~~The investment has approximately $0.9 million unfunded commitment as of~~ ~~March 31, 2018~~.


¹⁹	~~The investment has approximately $2.0 million unfunded commitment as of~~ ~~March 31, 2018~~.


²⁰	~~The investment has approximately $1.5 million unfunded commitment as of~~ ~~March 31, 2018~~. investment.

The accompanying Notes are an integral part of these Consolidated Financial Statements.

Notes to Consolidated Financial Statements


1.	ORGANIZATION AND BASIS OF PRESENTATION

References in this Quarterly Report on Form 10-Q to “we,” “our,” “us,” “CSWC,” or the “Company” refer to Capital Southwest Corporation, unless the context requires otherwise.

Organization

Capital Southwest Corporation is an internally managed investment company that specializes in providing customized financing to middle market companies in a broad range of ~~industry~~investment segments located primarily in the United States. Our common stock currently trades on The Nasdaq Global Select Market under the ticker symbol “CSWC.”

CSWC was organized as a Texas corporation on April 19, 1961. On March 30, 1988, CSWC elected to be regulated as a business development company (“BDC”) ~~subject to the provisions of~~under the 1940 ~~Act, as amended by the Small Business Incentive Act of 1980.~~Act. In order to comply with the 1940 Act requirements for a BDC, we must, among other things, generally invest at least 70% of our assets in eligible portfolio companies and limit the amount of leverage we incur.

We have elected, and intend to qualify annually, to be treated as a regulated investment company (“RIC”) under Subchapter M of the U.S. Internal Revenue Code of 1986, as amended (the “Code”). As such, we generally will not have to pay corporate-level U.S. federal income tax on any ordinary income or capital gains that we distribute to our shareholders as dividends. To continue to maintain our RIC treatment, we must meet specified source-of-income and asset diversification requirements and distribute annually at least 90% of our net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year distributions into the next year and pay a 4% U.S. federal excise tax on such income. Any such carryover taxable income must be distributed through a dividend declared prior to filing the final tax return related to the year that generated such taxable income.

Capital Southwest Management Corporation (“CSMC”), a wholly-owned subsidiary of CSWC, is the management company for CSWC. CSMC generally incurs all normal operating and administrative expenses, including, but not limited to, salaries and related benefits, rent, equipment and other administrative costs required for its day-to-day operations.

CSWC also has a direct wholly-owned subsidiary that has been elected to be a taxable entity (the “Taxable Subsidiary”). The primary purpose of the Taxable Subsidiary is to permit CSWC to hold certain interests in portfolio companies that are organized as limited liability companies, or LLCs (or other forms of pass-through entities) and still allow us to satisfy the RIC tax requirement that at least 90% of our gross income for U.S. federal income tax purposes must consist of qualifying investment income. The Taxable Subsidiary is taxed at normal corporate tax rates based on its taxable income.

We focus on investing in companies with histories of generating revenues and positive cash flow, established market positions and proven management teams with strong operating discipline. We target senior debt, subordinated debt and equity investments in lower middle market (“LMM”) companies, as well as first and second lien syndicated loans in upper middle market (“UMM”) companies. Our target LMM companies typically have annual earnings before interest, taxes, depreciation and amortization (“EBITDA”) between $3.0 million and $15.0 million, and our LMM investments generally range in size from $5.0 million to $25.0 million. Our UMM investments generally include syndicated first and second lien loans in companies with EBITDA generally greater than $50.0 million and typically range in size from $5.0 million to $15.0 million. We make available significant managerial assistance to the companies in which we invest as we believe that providing managerial assistance to an investee company is critical to its business development activities.

Basis of Presentation

The consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“U.S. GAAP”). We meet the definition of an investment company and follow the accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 – Financial Services – Investment Companies (“ASC 946”). Under rules and regulations applicable to investment companies, we are generally precluded from consolidating any entity other than another investment

company, subject to certain exceptions. One of the exceptions to this general principle occurs if the investment company has an investment in an operating company that provides services to the investment company. Accordingly, the consolidated financial statements include CSMC, our management company, and the Taxable Subsidiary.

The consolidated financial statements are presented in conformity with U.S. GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual consolidated financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of our management, the unaudited consolidated financial results included herein contain all adjustments, consisting solely of normal recurring accruals, considered necessary for the fair presentation of consolidated financial statements for the interim periods included herein. The results of operations for the three and six months ended September 30, ~~2018~~2019 are not necessarily indicative of the operating results to be expected for the full fiscal year. Also, the unaudited consolidated financial statements and notes should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal years ended March 31, ~~2018~~2019 and ~~2017.~~2018. Consolidated financial statements prepared on a U.S. GAAP basis require management to make estimates and assumptions that affect the amounts and disclosures reported in the consolidated financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.

Portfolio Investment Classification

We classify our investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, “Control Investments” are generally defined as investments in which we own more than 25% of the voting securities; “Affiliate Investments” are generally defined as investments in which we own between 5% and 25% of the voting securities, and the investments are not classified as “Control Investments”; and “Non-Control/Non-Affiliate Investments” are generally defined as investments that are neither “Control Investments” nor “Affiliate Investments.”

Under the 1940 Act, a BDC must meet certain requirements, including investing at least 70% of our assets in qualifying assets. As of September 30, ~~2018,~~2019, the Company has ~~83.7%~~84.4% of our assets in qualifying assets. The principal categories of qualifying assets relevant to our business are:

(1)Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the Securities and Exchange Commission ("SEC").

(2)Securities of any eligible portfolio company that we control.

(3)Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements.

(4)Securities of an eligible portfolio company purchased from any person in a private transaction if there is no readily available market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company.

(5)Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities.

(6)Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment.

Additionally, in order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things meet the following ~~tests:~~requirements:

(1) Continue to maintain our election as a BDC under the 1940 Act at all times during each taxable year.

(2) Derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to certain securities, loans, gains from the sale of stock or other securities, net income from certain "qualified publicly traded partnerships," or other income derived with respect to our business of investing in such stock or ~~securities (the "90% Income Test").~~securities.

(3) Diversify our holdings in accordance with two Diversification ~~Tests:~~Requirements: (a) Diversify our holdings such that at the end of each quarter of the taxable year at least 50% of the value of our assets consists of cash, cash equivalents, U.S. Government securities, securities of other RICs, and such other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and (b) Diversify our holdings such that no more than 25% of the value of our assets is invested in the securities, other than U.S. government securities or securities of other RICs, (i) of one issuer, (ii) of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses or (iii) of certain "qualified publicly traded partnerships" (collectively, the "Diversification ~~Tests"~~Requirements").

The two Diversification ~~Tests~~Requirements must be satisfied quarterly. If a RIC satisfies the ~~tests~~Diversification Requirements for one quarter, and then, due solely to fluctuations in market value, fails to meet one of the ~~tests~~Diversification Requirements in the next quarter, it retains RIC ~~status.~~tax treatment. A RIC that fails to meet the Diversification ~~Tests~~Requirements as a result of a nonqualified acquisition may be subject to excess taxes unless the nonqualified acquisition is disposed of and the ~~tests~~Diversification Requirements are satisfied within 30 days of the close of the quarter in which the ~~tests~~Diversification Requirements are failed.

For the quarter ended September 30, ~~2018,~~2019, we satisfied all RIC ~~tests~~requirements and have ~~17.3%~~12.0% in nonqualified assets according to measurement criteria established in Section 851(d) of the Code.


2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies followed in the preparation of the consolidated financial statements of CSWC.

Fair Value Measurements We account for substantially all of our financial instruments at fair value in accordance with ASC Topic 820 – Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework used to measure fair value and requires disclosures for fair value measurements, including the categorization of financial instruments into a three-level hierarchy based on the transparency of valuation inputs. ASC 820 requires disclosure of the fair value of financial instruments for which it is practical to estimate such value. We believe that the carrying amounts of our financial instruments such as cash, receivables and payables approximate the fair value of these items due to the short maturity of these instruments. This is considered a Level 1 valuation technique. The carrying value of our credit facility approximates fair value (Level 3 input). See Note 4 below for further discussion regarding the fair value measurements and hierarchy.

Investments Investments are stated at fair value and are reviewed and approved by our Board of Directors as described in the Notes to the Consolidated Schedule of Investments and Notes 3 and 4 below. Investments are recorded on a trade date basis.

Net Realized Gains or Losses and Net ~~Change in~~ Unrealized Appreciation or Depreciation Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption of an investment or a financial instrument and the cost basis of the investment or financial instrument, without regard to unrealized appreciation or depreciation previously recognized, and includes investments written-off during the period net of recoveries and realized gains or losses from in-kind redemptions. Net ~~change in~~ unrealized appreciation or depreciation reflects the net change in the fair value of the investment portfolio and financial instruments and the reclassification of any prior period unrealized appreciation or depreciation on exited investments and financial instruments to realized gains or losses.

Cash and Cash Equivalents Cash and cash equivalents, which consist of cash and highly liquid investments with an original maturity of three months or less at the date of purchase, are carried at cost, which approximates fair value. Cash may be held in a money market fund from time to time, which is a Level 1 security. Cash and cash equivalents includes deposits at financial institutions. We deposit our cash balances in financial institutions and, at times, such balances may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. At September 30, ~~2018~~2019 and March 31, ~~2018,~~

2019, cash balances totaling ~~$9.1~~$28.9 million and ~~$6.8~~$8.8 million, respectively, exceeded FDIC insurance limits, subjecting us to

risk related to the uninsured balance. All of our cash deposits are held at large established high credit quality financial institutions and management believes that the risk of loss associated with any uninsured balances is remote.

Segment Information We operate and manage our business in a singular segment. As an investment company, we invest in portfolio companies in various industries and geographic areas as discussed in Note 3.

Consolidation As permitted under Regulation S-X and ASC 946, we generally do not consolidate our investment in a portfolio company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to CSWC. Accordingly, we consolidated the results of CSWC’s wholly-owned Taxable Subsidiary and CSWC’s wholly-owned management company, CSMC. All intercompany balances have been eliminated upon consolidation.

Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. We have identified investment valuation and revenue recognition as our most critical accounting estimates.

Interest and Dividend Income Interest and dividend income is recorded on an accrual basis to the extent amounts are expected to be collected. Dividend income is recognized on the date dividends are declared by the portfolio company or at the point an obligation exists for the portfolio company to make a distribution. Discounts/premiums received to par on loans purchased are capitalized and accreted or amortized into income over the life of the loan using the effective interest method. In accordance with our valuation policy, accrued interest and dividend income is evaluated quarterly for collectability. When we do not expect the debtor to be able to service all of its debt or other obligations, we will generally establish a reserve against interest income receivable, thereby placing the loan or debt security on non-accrual status, and cease to recognize interest income on that loan or debt security until the borrower has demonstrated the ability and intent to pay contractual amounts due. If a loan or debt security’s status significantly improves regarding its ability to service debt or other obligations, it will be restored to accrual basis. As of September 30, ~~2018 and March 31, 2018,~~2019, we ~~did not have any~~had two investments on non-accrual ~~status or past due its contractual payment obligation.~~status. As of March 31, 2019, we had one investment on non-accrual status.

To maintain RIC tax treatment, non-cash sources of income such as accretion of interest income may need to be paid out to shareholders in the form of distributions, even though CSWC may not have collected the interest income. For the three and six months ended September 30, ~~2018,~~2019, approximately ~~3.0%~~3.3% and ~~2.9%~~3.1%, respectively, of ~~CSWC’s~~CSWC's total investment income was attributable to non-cash interest income for the accretion of discounts associated with debt investments, net of any premium reduction. For the three and six months ended September 30, ~~2017, approximately 2.3%~~2018, 3.0%, and ~~2.4%,~~2.9% respectively, of ~~CSWC's~~CSWC’s total investment income was attributable to non-cash interest income for the accretion of discounts associated with debt investments, net of any premium reduction.

Payment-in-Kind Interest The Company currently holds, and expects to hold in the future, some investments in its portfolio that contain payment-in-kind (“PIK”) interest and dividend provisions. The PIK interest and dividends, computed at the contractual rate specified in each loan agreement, are added to the principal balance of the loan, rather than being paid to the Company in cash, and are recorded as interest and dividend income. Thus, the actual collection of PIK interest and dividends may be deferred until the time of debt principal repayment or disposition of the equity investment. PIK interest and dividends, which are non-cash sources of income, are included in the Company’s taxable income and therefore affect the amount the Company is required to distribute to stockholders to maintain its qualification as a RIC for U.S. federal income tax purposes, even though the Company has not yet collected the cash. Generally, when current cash interest and/or principal payments on a loan become past due, or if the Company otherwise does not expect the borrower to be able to service its debt and other obligations, the Company will place the investment on non-accrual status and will generally cease recognizing PIK interest and dividend income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest and dividend income is deemed to be collectible. The Company writes off any accrued and uncollected PIK interest and dividends when it is determined that the PIK interest and dividends are no longer collectible. As of September 30, ~~2018~~2019 and March 31, ~~2018,~~2019, we ~~did not have any investments on non-accrual status and~~ have not written off any accrued and uncollected PIK interest and ~~dividends.~~dividends from prior periods. For the three months ended September 30, 2019, we had one investment for which we stopped accruing PIK interest. For the three and six months ended September 30, 2019, approximately 1.3% and 2.0% respectively, of CSWC’s total investment income was attributable

to non-cash PIK interest and dividend income. For both the three and six months ended September 30, 2018, approximately 0.7% of CSWC’s ~~total investment income was attributable to non-cash PIK interest and dividend income. For the three and six months ended September 30,~~

~~2017, approximately 0.8% and 0.9%, respectively, of CSWC's~~ total investment income was attributable to non-cash PIK interest and dividend income.

Debt Issuance Costs Debt issuance costs include commitment fees and other costs related to CSWC’s senior secured credit facility and its notes (as discussed further in Note 5). The costs in connection with the credit facility have been capitalized and are amortized into interest expense over the term of the credit facility. The costs in connection with the notes are a direct deduction from the related debt liability and amortized into interest expense over the term of the ~~notes.~~December 2022 Notes and October 2024 Notes (as defined below).

Deferred Offering Costs Deferred equity offering costs include registration expenses related to shelf filings, including expenses related to the launch of the "at-the-market" program (the "Equity ATM Program"). These expenses consist primarily of SEC registration fees, legal fees and accounting fees incurred. These expenses are included in prepaid expenses and other assets on the Consolidated Statements of Assets and Liabilities. Upon the completion of an equity offering or a debt offering, the deferred expenses are charged to additional paid-in capital or debt issuance costs, respectively. If no offering is completed prior to the expiration of the registration statement, the deferred costs are charged to expense.

Leases The Company is obligated under an operating lease pursuant to which it is leasing an office facility from a third party with a remaining term of approximately two years. The operating lease is included as an operating lease right-of-use ("ROU") asset and operating lease liability in the accompanying Consolidated Statements of Assets and Liabilities. The Company does not have any financing leases.

The ROU asset represents the Company’s right to use an underlying asset for the lease term and the operating lease liability represents the Company’s obligation to make lease payments arising from such lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the remaining lease term. The Company’s leases do not provide an implicit discount rate, and as such the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of the remaining lease payments. Lease expense is recognized on a straight-line basis over the remaining lease term.

Federal Income Taxes CSWC has elected and intends to comply with the requirements of the Code necessary to qualify as a RIC. By meeting these requirements, we will not be subject to corporate federal income taxes on ordinary income or capital gains timely distributed to shareholders. In order to qualify as a RIC, the company is required to timely distribute to its shareholders at least 90% of investment company taxable income, as defined by the Code, each year. Investment company taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses. Investment company taxable income generally excludes net unrealized appreciation or depreciation, as investment gains and losses are not included in investment company taxable income until they are realized.

Depending on the level of taxable income or capital gains earned in a tax year, we may choose to carry forward taxable income or capital gains in excess of current year distributions into the next year and pay a 4% U.S. federal excise tax on such income. Any such carryover taxable income or capital gains must be distributed through a dividend declared on or prior to the later of (1) the filing of the U.S. federal income tax return for the applicable fiscal year and (2) the fifteenth day of the ninth month following the close of the year in which such taxable income was generated.

In lieu of distributing our net capital gains for a year, we may decide to retain some or all of our net capital gains. We will be required to pay a 21% corporate-level federal income tax on any such retained net capital gains. We may elect to treat such retained capital gain as a deemed distribution to shareholders. Under such circumstances, shareholders will be required to include their share of such retained capital gain in income, but will receive a credit for the amount of corporate-level U.S. federal income tax paid with respect to their shares. As an investment company that qualifies as a RIC, federal income taxes payable on security gains that we elect to retain are accrued only on the last day of our tax year, December 31. Any net capital gains actually distributed to shareholders and properly reported by us as capital gain dividends are generally taxable to the shareholders as long-term capital gains. See Note 6 for further discussion.

CSMC, a wholly-owned subsidiary of CSWC, and the Taxable Subsidiary are not RICs and are required to pay taxes at the corporate rate of 21% as of September 30, ~~2018.~~2019. For tax purposes, CSMC and the Taxable Subsidiary have elected to be treated as taxable entities, and therefore are not consolidated for tax purposes and are taxed at normal corporate

tax rates based on taxable income and, as a result of their activities, may generate income tax expense or benefit. The taxable income, or loss, of each of CSMC and the Taxable Subsidiary may differ from its book income, or loss, due to temporary book and tax timing differences and permanent differences. This income tax expense, or benefit, if any, and the related tax assets and liabilities, are reflected in our consolidated financial statements.

Management evaluates tax positions taken or expected to be taken in the course of preparing the Company’s consolidated financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions with respect to tax at the CSWC level not deemed to meet the “more-likely-than-not” threshold would be recorded as an expense in the current year. Management’s conclusions regarding tax positions will be subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof. The Company has concluded that it does not have any uncertain tax positions that meet the recognition of measurement criteria of ASC 740, Income Taxes, ("ASC 740") for the current period. Also, we account for interest and, if applicable, penalties for any uncertain tax positions as a component of income tax expense. No interest or penalties expense was recorded during the three and six months ended September 30, ~~2018~~2019 and ~~2017.~~2018.

Deferred Taxes Deferred tax assets and liabilities are recorded for losses or income at our taxable subsidiaries using statutory tax rates. A valuation allowance is provided against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized. ASC 740 requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation was enacted. See Note 6 for further discussion.

Stock-Based Compensation We account for our stock-based compensation using the fair value method, as prescribed by ASC Topic 718, Compensation – Stock Compensation. Accordingly, we recognize stock-based compensation cost on a straight-line basis for all share-based payments awards granted to employees. The fair value of stock options are determined on the date of grant using the Black-Scholes pricing model and are expensed over the requisite service period of the related stock options. For restricted stock awards, we measure the grant date fair value based upon the market price of our common stock on the date of the grant. For restricted stock awards, we amortize this fair value to share-based compensation expense over the vesting term. We recognize forfeitures as they occur. We issue new shares upon the exercise of stock options. The unvested shares of restricted stock awarded pursuant to CSWC’s equity compensation plans are participating securities and are included in the basic and diluted earnings per share calculation. On October 26, 2010, we received an exemptive order from the SEC permitting us to issue restricted stock to our executive officers and certain key employees (the “Original Order”). On August 22, 2017, we received an exemptive order that supersedes the Original Order (the “Exemptive Order”) and, in addition to the relief granted under the Original Order, allows us to withhold shares to satisfy tax withholding obligations related to the vesting of restricted stock granted pursuant to the 2010 Restricted Stock Award Plan (the “2010 Plan”) and to pay the exercise price of options to purchase shares of our common stock granted pursuant to the 2009 Stock Incentive Plan (the “2009 Plan”).

At the three and six months ended September 30, 2019, there was no adjustment made for the dilutive effect of stock-based awards. At the three and six months ended September 30, 2018, weighted-average basic shares were adjusted for the dilutive effect of stock-based awards of 4,739 and 4,473, respectively. At the three and six months ended September 30, 2017, weighted-average basic shares were adjusted for the dilutive effect of stock-based awards of 67,606 and 65,225, respectively. For individual cash incentive awards, the option value of the individual cash incentive awards is calculated based on the changes in net asset value (“NAV”) of our Company. In connection with the Share Distribution, we entered into an Employee Matters Agreement (the “Employee Matters Agreement”) with CSW Industrials, Inc. (“CSWI”). Under the Employee Matters Agreement, the value of individual cash incentive awards was determined based upon the NAV of CSWC as of June 30, 2015. See Note 9 for further discussion.

Shareholder Distributions Distributions to common shareholders are recorded on the ex-dividend date. The amount of distributions, if any, is determined by the Board of Directors each quarter and is generally based upon the earnings estimated by management. Net realized capital gains, if any, are generally distributed, although the Company may decide to retain such capital gains for investment.

Presentation Presentation of certain amounts in the Consolidated Financial Statements for the prior year comparative consolidated financial statements is updated to conform to the current period presentation.

Recently Issued or Adopted Accounting Standards In February 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. The standard requires the use of a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply. In July 2018, the FASB issued ASU 2018-10, Codification Improvements

to Topic 842, Leases, which affects narrow aspects of the guidance issued in the amendments in ASU 2016-02. The new guidance is effective for annual periods beginning after December 15, 2018, and interim periods therein. ~~Early application is permitted. While we continue~~CSWC adopted ASU 2016-02 effective April 1, 2019. Under ASC 842, Leases, ("ASC 842"), CSWC evaluates leases to ~~assess~~determine if the ~~effect of adoption, we~~leases are considered financing or operating leases. The Company currently ~~believe the single change relates to the recognition of a new right-of-use asset and lease liability on our consolidated balance sheet for our office space operating lease. We currently have~~has one operating lease for office space for which the Company has recorded a right-of-use asset and dolease liability for the operating lease obligation. Non-lease components (maintenance, property tax, insurance and parking) are not ~~expect~~included in the lease cost. The lease expense is presented as a ~~significant change in our leasing activity between now and adoption.~~

significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. Additionally, the guidance requires improved disclosures as to the nature, amount, timing and uncertainty of revenue that is recognized. In May 2016, the FASB issued ASU No. 2016-12, ~~Revenue from Contracts with Customers (Topic 606)—Narrow-Scope Improvements and Practical Expedients~~. This ASU clarified guidance on assessing collectability, presenting sales tax, measuring noncash consideration, and certain transition matters. The new guidance is effective for the annual reporting period beginning after December 15, 2017, including interim periods within that reporting period. The Company adopted ASU 2014-09 effective April 1, 2018 and determined that its material financial contracts are excluded from the scope of ASU 2014-09. As a result of the scope exception for financial contracts, the Company's management has determined that there were no material changes to the recognition timing and classification of revenues and expenses; additionally, the adoption of ASU 2014-09 did not have a significant impact on pretax income or on the consolidated financial statement disclosures.

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Statement of Cash Flows (Topic 230),~~ which is intended to reduce the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance is effective for annual periods beginning after December 15, 2017, and interim periods therein. The Company adopted ASU 2016-15 effective April 1, 2018 and the adoption did not have a material impact on the Company's consolidated financial statements.lease.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which changes the fair value measurement disclosure requirements of ASC 820. The key provisions include new, eliminated and modified disclosure requirements. The new guidance is effective for fiscal years beginning after December 15, 2019, including interim periods therein. Early application is permitted. CSWC is currently evaluating the impact the adoption of this new accounting standard will have on its consolidated financial statements, but the impact of the adoption is not expected to be material.

In ~~August 2018,~~March 2019, the SEC issued ~~the~~ Final Rule Release No. ~~33-10532,~~33-10618, ~~Disclosure Update~~FAST Act Modernization and Simplification of Regulation S-K, ~~amending~~which amends certain SEC disclosure ~~requirements that were redundant, duplicative, overlapping, outdated or superseded.~~requirements. The amendments are intended to ~~facilitate the~~simplify certain disclosure requirements, improve readability and navigability of disclosure documents, and discourage repetition and disclosure of ~~information to investors and simplify compliance. This final rule is~~immaterial information. The amendments are effective for all filings submitted on ~~November 5, 2018.~~or after May 2, 2019. The Company ~~is currently evaluating~~adopted the ~~impact of adopting~~requisite amendments effective May 2, 2019. As it pertains to the Company for this ~~SEC Release~~Quarterly Report on ~~its~~Form 10-Q, there were no significant changes to the Company’s consolidated financial ~~statements.~~position or disclosures.

3. INVESTMENTS

The following table shows the composition of the investment portfolio, at fair value and cost (with corresponding percentage of total portfolio investments) as of September 30, ~~2018~~2019 and March 31, ~~2018:~~2019:


			Percentage of		Percentage of				Percentage of				Percentage of		Percentage of				Percentage of
	Fair Value		Total Portfolio		Net Assets		Cost		Total Portfolio		Fair Value		Total Portfolio		Net Assets		Cost		Total Portfolio
	(dollars in millions)										(dollars in thousands)
September 30, 2018:
September 30, 2019:
First lien loans¹	$	287,808	58.5	%	93.5	%	$	286,246	64.3	%	$	337,646	62.7	%	102.9	%	$	343,715	69.0	%
Second lien loans	30,026		6.1		9.8		29,529		6.6
Second lien loans²											35,288		6.5		10.7		36,273		7.3
Subordinated debt	18,883		3.8		6.1		18,937		4.3		14,234		2.6		4.3		14,495		2.9
Preferred equity	24,150		4.9		7.8		15,777		3.5		21,305		4.0		6.5		9,829		2.0
Common equity & warrants	64,408		13.2		20.9		29,830		6.7		68,494		12.7		20.9		25,841		5.2
I-45 SLF LLC²	66,326		13.5		21.5		64,800		14.6
I-45 SLF LLC³											61,909		11.5		18.9		68,000		13.6
	$	491,601	100.0	%	159.6	%	$	445,119	100.0	%	$	538,876	100.0	%	164.2	%	$	498,153	100.0	%

March 31, 2018:
First lien loans	$	197,110	50.1	%	63.9	%	$	194,820	58.1	%
Second lien loans	23,229		5.9		7.5		23,092		6.9
March 31, 2019:
First lien loans¹											$	317,544	60.6	%	97.4	%	$	319,278	66.8	%
Second lien loans²											35,896		6.8		11.0		36,057		7.5
Subordinated debt	18,783		4.8		6.1		18,885		5.6		14,287		2.7		4.4		14,458		3.0
Preferred equity	36,545		9.3		11.9		16,666		5.0		17,936		3.4		5.5		7,894		1.7
Common equity & warrants	50,315		12.8		16.3		17,134		5.1		72,665		14.0		22.3		32,368		6.8
I-45 SLF LLC²	67,113		17.1		21.8		64,800		19.3
I-45 SLF LLC³											65,743		12.5		20.1		68,000		14.2
	$	393,095	100.0	%	127.5	%	$	335,397	100.0	%	$	524,071	100.0	%	160.7	%	$	478,055	100.0	%


¹	Included in first lien loans are loans structured as first lien last out loans. These loans may in certain cases be subordinated in payment priority to other senior secured lenders. As of September 30, 2019 and March 31, 2019, the fair value of the first lien last out loans are $43.2 million and $38.6 million, respectively.


²	Included in second lien loans are loans structured as split lien term loans. These loans provide the Company with a first lien priority on certain assets of the obligor and a second lien priority on different assets of the obligor. As of September 30, 2019 and March 31, 2019, the fair value of the split lien term loans are $18.0 million and $18.3 million, respectively.


³	I-45 SLF LLC is a joint venture between CSWC and Main Street Capital Corporation. This entity primarily invests in syndicated senior secured loans to the UMM. The portfolio companies held by I-45 SLF LLC represent a diverse set of industry classifications, which are similar to those in which CSWC invests directly. See Note 13 for further discussion.

¹Included in first lien loans are loans structured as first lien last out loans. These loans may in certain cases be subordinated in payment priority to other senior secured lenders. As of September 30, 2018 and March 31, 2018, the fair value of the first lien last out loans are $23.0 million and $26.9 million, respectively.

²I-45 SLF LLC is a joint venture between CSWC and Main Street Capital. This entity primarily invests in syndicated senior secured loans to the UMM. The portfolio companies held by I-45 SLF LLC represent a diverse set of industry classifications, which are similar to those in which CSWC invests directly. See Note 15 for further discussion.

The following tables show the composition of the investment portfolio by industry, at fair value and cost (with corresponding percentage of total portfolio investments) as of September 30, ~~2018~~2019 and March 31, ~~2018:~~2019:


			Percentage of		Percentage of				Percentage of				Percentage of		Percentage of				Percentage of
	Fair Value		Total Portfolio		Net Assets		Cost		Total Portfolio		Fair Value		Total Portfolio		Net Assets		Cost		Total Portfolio
	(dollars in millions)										(dollars in thousands)
September 30, 2018:
September 30, 2019:
Business Services											$	79,708	14.8	%	24.3	%	$	77,824	15.6	%
I-45 SLF LLC¹	$	66,326	13.5	%	21.5	%	$	64,800	14.6	%	61,909		11.5		18.9		68,000		13.6
Media, Marketing, & Entertainment	59,064		12.0		19.2		55,063		12.4
Business Services	55,415		11.3		18.0		55,231		12.4
Healthcare Services	51,443		10.5		16.7		51,221		11.5		56,485		10.5		17.2		61,637		12.4
Industrial Products	44,827		9.1		14.6		5,415		1.2		54,008		10.0		16.5		5,415		1.1
Environmental Services	35,827		7.3		11.6		35,863		8.1
Media, Marking & Entertainment											50,758		9.4		15.5		43,643		8.7
Software & IT Services											33,446		6.2		10.2		33,184		6.7
Healthcare Products											29,662		5.5		9.0		29,827		6.0
Food, Agriculture & Beverage	29,471		6.0		9.5		29,967		6.7		25,735		4.8		7.8		30,991		6.2
Distribution	26,064		5.3		8.5		26,040		5.9		24,529		4.6		7.4		24,865		5.0
Consumer Products and Retail	24,130		4.9		7.8		24,166		5.4		23,533		4.4		7.2		23,828		4.8
Transportation & Logistics											21,997		4.1		6.7		18,146		3.6
Consumer Services	16,371		3.3		5.3		16,213		3.6		21,516		4.0		6.6		21,201		4.3
Transportation & Logistics	14,136		2.9		4.6		14,852		3.3
Healthcare Products	12,818		2.6		4.2		12,625		2.8
Environmental Services											13,148		2.4		4.0		13,707		2.8
Energy Services (Midstream)											9,724		1.8		3.0		9,639		1.9
Financial Services	12,346		2.5		4.0		12,043		2.7		9,693		1.8		2.9		9,103		1.8
Energy Services (Upstream)	9,804		2.0		3.2		8,000		1.8
Commodities & Mining	8,334		1.7		2.7		8,334		1.9		8,314		1.5		2.5		8,439		1.7
Restaurants	8,008		1.6		2.6		8,029		1.8		7,483		1.4		2.3		7,928		1.6
Telecommunications	7,898		1.6		2.6		8,028		1.8		4,276		0.8		1.3		7,815		1.6
Software & IT Services	6,285		1.3		2.0		6,276		1.4
Paper & Forest Products	3,034		0.6		1.0		2,953		0.7		2,952		0.5		0.9		2,961		0.6
	$	491,601	100.0	%	159.6	%	$	445,119	100.0	%	$	538,876	100.0	%	164.2	%	$	498,153	100.0	%


			Percentage of		Percentage of				Percentage of				Percentage of		Percentage of				Percentage of
	Fair Value		Total Portfolio		Net Assets		Cost		Total Portfolio		Fair Value		Total Portfolio		Net Assets		Cost		Total Portfolio
	(dollars in millions)										(dollars in thousands)
March 31, 2018:
March 31, 2019:
I-45 SLF LLC¹	$	67,113	17.1	%	21.8	%	$	64,800	19.3	%	$	65,743	12.5	%	20.2	%	$	68,000	14.2	%
Healthcare Services											62,719		12.0		19.2		62,701		13.1
Media, Marketing, & Entertainment	46,697		11.9		15.1		43,700		13.0		59,410		11.3		18.2		54,079		11.3
Industrial Products	43,122		11.0		14.0		5,415		1.6		52,760		10.1		16.2		5,415		1.1
Business Services	34,846		8.9		11.3		34,268		10.2		52,405		10.0		16.1		51,688		10.8
Energy Services (Upstream)	27,919		7.1		9.1		14,130		4.2
Environmental Services											32,941		6.3		10.1		33,873		7.1
Healthcare Products											29,964		5.7		9.2		29,826		6.2
Food, Agriculture & Beverage											28,352		5.4		8.7		30,991		6.5
Distribution	26,713		6.8		8.7		27,002		8.1		25,680		4.9		7.9		25,558		5.4
Consumer Products and Retail	24,570		6.2		7.9		25,086		7.5		23,618		4.5		7.2		23,762		5.0
Environmental Services	21,160		5.4		6.9		21,410		6.4
Healthcare Services	16,751		4.3		5.4		16,448		4.9
Consumer Services											22,630		4.3		6.9		22,274		4.7
Transportation & Logistics											17,869		3.4		5.5		17,074		3.6
Energy Services (Midstream)											9,783		1.9		3.0		9,747		2.0
Financial Services	12,701		3.2		4.1		12,216		3.6		9,707		1.8		3.0		9,596		2.0
Healthcare Products	12,353		3.1		4.0		12,162		3.6
Transportation & Logistics	12,284		3.1		4.0		12,275		3.7
Industrial Services	10,012		2.5		3.2		9,721		2.9
Food, Agriculture & Beverage	9,438		2.4		3.1		9,507		2.8
Commodities & Mining											8,511		1.6		2.6		8,383		1.8
Restaurants											7,912		1.5		2.4		7,978		1.7
Software & IT Services											6,128		1.2		1.9		6,277		1.3
Telecommunications	8,295		2.1		2.7		8,180		2.4		5,056		1.0		1.5		7,876		1.6
Software & IT Services	6,285		1.6		2.0		6,273		1.9
Consumer Services	5,000		1.3		1.6		4,968		1.5
Restaurants	4,836		1.2		1.6		4,886		1.5
Paper & Forest Products	3,000		0.8		1.0		2,950		0.9		2,883		0.6		0.9		2,957		0.6
	$	393,095	100.0	%	127.5	%	$	335,397	100.0	%	$	524,071	100.0	%	160.7	%	$	478,055	100.0	%

¹I-45 SLF LLC is a joint venture between CSWC and Main Street Capital. This entity primarily invests in syndicated senior secured loans to the UMM. The portfolio companies in I-45 SLF LLC include multi-sector holdings, which are similar to those in which CSWC invests directly. See Note 15 for further discussion.


¹	I-45 SLF LLC is a joint venture between CSWC and Main Street Capital Corporation. This entity primarily invests in syndicated senior secured loans to the UMM. The portfolio companies in I-45 SLF LLC represent a diverse set of industry classifications, which are similar to those in which CSWC invests directly. See Note 13 for further discussion.

The following tables summarize the composition of the investment portfolio by geographic region of the United States, at fair value and cost (with corresponding percentage of total portfolio investments), as of September 30, ~~2018~~2019 and March 31, ~~2018:~~2019:


			Percentage of		Percentage of				Percentage of				Percentage of		Percentage of				Percentage of
	Fair Value		Total Portfolio		Net Assets		Cost		Total Portfolio		Fair Value		Total Portfolio		Net Assets		Cost		Total Portfolio
	(dollars in millions)										(dollars in thousands)
September 30, 2018:
September 30, 2019:
Southwest											$	163,477	30.3	%	49.8	%	$	110,614	22.2	%
Southeast											111,794		20.7		34.1		116,890		23.5
Northeast	$	128,741	26.2	%	41.8	%	$	125,065	28.1	%	108,655		20.2		33.1		104,993		21.1
I-45 SLF LLC¹											61,909		11.5		18.9		68,000		13.6
Midwest											41,850		7.8		12.7		41,612		8.3
West											37,691		7.0		11.5		42,670		8.6
International											13,500		2.5		4.1		13,374		2.7
											$	538,876	100.0	%	164.2	%	$	498,153	100.0	%

March 31, 2019:
Southwest	119,668		24.3		38.9		78,734		17.7		$	139,306	26.6	%	42.7	%	$	89,399	18.7	%
Northeast											125,657		24.0		38.5		122,404		25.6
Southeast	116,609		23.7		37.9		115,956		26.0		119,280		22.8		36.6		120,889		25.3
I-45 SLF LLC¹	66,326		13.5		21.5		64,800		14.6		65,743		12.5		20.2		68,000		14.2
West	43,640		8.9		14.1		44,148		9.9		38,455		7.3		11.8		41,647		8.7
Midwest	16,617		3.4		5.4		16,416		3.7		35,630		6.8		10.9		35,716		7.5
	$	491,601	100.0	%	159.6	%	$	445,119	100.0	%	$	524,071	100.0	%	160.7	%	$	478,055	100.0	%

March 31, 2018:
Southwest	$	131,753	33.5	%	42.7	%	$	79,713	23.8	%
Southeast	84,969		21.6		27.6		84,290		25.1
Northeast	72,205		18.4		23.4		69,739		20.8
I-45 SLF LLC¹	67,113		17.1		21.8		64,800		19.3
West	23,554		6.0		7.6		23,425		7.0
Midwest	13,501		3.4		4.4		13,430		4.0
	$	393,095	100.0	%	127.5	%	$	335,397	100.0	%

¹I-45 SLF LLC is a joint venture between CSWC and Main Street Capital. This entity primarily invests in syndicated senior secured loans to the UMM. The portfolio companies held by I-45 SLF LLC represent a diverse set of industry classifications, which are similar to those in which CSWC invests directly. See Note 15 for further discussion.


¹	I-45 SLF LLC is a joint venture between CSWC and Main Street Capital Corporation. This entity primarily invests in syndicated senior secured loans to the UMM. The portfolio companies held by I-45 SLF LLC represent a diverse set of industry classifications, which are similar to those in which CSWC invests directly. See Note 13 for further discussion.


4.	FAIR VALUE MEASUREMENTS

Investment Valuation Process

The valuation process is led by the finance department in conjunction with the investment team. The process includes a monthly review of each investment by our executive officers and investment teams. Recommended valuations of each portfolio security are prepared quarterly by the finance department using updated financial and other operational information collected by the investment teams. Each investment valuation is then subject to review by the executive officers and investment teams. In conjunction with the internal valuation process, we have also engaged multiple independent consulting firms specializing in financial due diligence, valuation, and business advisory services to provide third-party valuation reviews of certain investments. The third-party valuation firms provide a range of values for selected investments, which is presented to CSWC’s executive officers and Board of Directors.

CSWC also uses a standard internal investment rating system in connection with its investment oversight, portfolio management, and investment valuation procedures for its debt portfolio. This system takes into account both quantitative and qualitative factors of the portfolio company and the investments held therein.

There is no single standard for determining fair value in good faith, as fair value depends upon the specific circumstances of each individual investment. While management believes our valuation methodologies are appropriate and consistent with market participants, the recorded fair values of our investments may differ significantly from fair values that would have been used had an active market for the securities existed. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned. The Board of Directors has the ultimate responsibility for reviewing and approving, in good faith, the fair value of CSWC’s investments in accordance with the 1940 Act.

Fair Value Hierarchy

CSWC has established and documented processes for determining the fair values of portfolio company investments on a recurring basis in accordance with the 1940 Act and ASC 820. As required by ASC 820, when the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore, unrealized appreciation and depreciation related to such investments categorized within the Level 3 tables below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3). CSWC conducts reviews of fair value hierarchy classifications on a quarterly basis. We also use judgment and consider factors specific to the investment in determining the significance of an input to a fair value measurement.

The three levels of valuation inputs established by ASC 820 are as follows:

Level 1: Investments whose values are based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2: Investments whose values are based on quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3: Investments whose values are based on unobservable inputs that are significant to the overall fair value measurement.

As of September 30, ~~2018~~2019 and March 31, ~~2018,~~2019, 100% of the CSWC investment portfolio consisted of debt and equity instruments of privately held companies for which inputs falling within the categories of Level 1 and Level 2 are generally not available. Therefore, CSWC determines the fair value of its investments (excluding investments for which fair value is measured at NAV) in good faith using Level 3 inputs, pursuant to a valuation policy and process that is established by the management of CSWC, with assistance from multiple third-party valuation advisors, which is subsequently approved by our Board of Directors.

Investment Valuation Inputs

ASC 820 defines fair value in terms of the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date excluding transaction costs. Under ASC 820, the fair value measurement also assumes that the transaction to sell an asset occurs in the principal market for the asset or, in the absence of a principal market, the most advantageous market for the asset. The principal market is the market in which the reporting entity would sell or transfer the asset with the greatest volume and level of activity for the asset. In determining the principal market for an asset or liability under ASC 820, it is assumed that the reporting entity has access to the market as of the measurement date.

The Level 3 inputs to CSWC’s valuation process reflect our best estimate of the assumptions that would be used by market participants in pricing the investment in a transaction in the principal or most advantageous market for the asset.

The fair value determination of each portfolio investment categorized as Level 3 required one or more of the following unobservable inputs:

Financial information obtained from each portfolio company, including unaudited statements of operations and balance sheets for the most recent period available as compared to budgeted numbers;

Current and projected financial condition of the portfolio company;

Current and projected ability of the portfolio company to service its debt obligations;

Type and amount of collateral, if any, underlying the investment;

Current financial ratios (e.g., fixed charge coverage ratio, interest coverage ratio and net debt/EBITDA ratio) applicable to the investment;

Current liquidity of the investment and related financial ratios (e.g., current ratio and quick ratio);

Indicative dealer quotations from brokers, banks, and other market participants;

Market yields on other securities of similar risk;

Pending debt or capital restructuring of the portfolio company;

Projected operating results of the portfolio company;

Current information regarding any offers to purchase the investment;

Current ability of the portfolio company to raise any additional financing as needed;

Changes in the economic environment which may have a material impact on the operating results of the portfolio company;

Internal occurrences that may have an impact (both positive and negative) on the operating performance of the portfolio company;

Qualitative assessment of key management;

Contractual rights, obligations or restrictions associated with the investment; and

Other factors deemed relevant.

CSWC uses several different valuation approaches depending on the security type including the Market Approach, the Income Approach, the Enterprise Value Waterfall Approach, and the NAV Valuation Method.

Market Approach

Market Approach is a qualitative and quantitative analysis of the aforementioned unobservable inputs. It is a combination of the Enterprise Value Waterfall Approach and Income Approach as described in detail below. For debt investments recently originated (within a quarterly reporting period) or where the value has not departed significantly from its cost, we generally rely on our cost basis or recent transaction price to determine the fair value, unless a material event has occurred since origination.

Income Approach

In valuing debt securities, CSWC typically uses an Income Approach model, which considers some or all of the factors listed above. Under the Income Approach, CSWC develops an expectation of the yield that a hypothetical market participant would require when purchasing each debt investment (the “Required Market Yield”). The Required Market Yield is calculated in a two-step process. First, using quarterly market data we estimate the current market yield of similar debt securities. Next, based on the factors described above, we modify the current market yield for each security to produce a

unique Required Market Yield for each of our investments. The resulting Required Market Yield is the significant Level 3 input to the Income Approach model. If, with respect to an investment, the unobservable inputs have not fluctuated significantly from the date the investment was made or have not fluctuated significantly from CSWC’s expectations on the date the investment was made, and there have been no significant fluctuations in the market pricing for such investments, we may conclude that the Required Market Yield for that investment is equal to the stated rate on the investment. In instances where CSWC determines that the Required Market Yield is different from the stated rate on the investment, we discount the contractual cash flows on the debt instrument using the Required Market Yield in order to estimate the fair value of the debt security.

In addition, under the Income Approach, CSWC also determines the appropriateness of the use of third-party broker quotes, if any, as a significant Level 3 input in determining fair value. In determining the appropriateness of the use of third-party broker quotes, CSWC evaluates the level of actual transactions used by the broker to develop the quote, whether the quote was an indicative price or binding offer, the depth and consistency of broker quotes, the source of the broker quotes, and the correlation of changes in broker quotes with underlying performance of the portfolio company and other market indices. To the extent sufficient observable inputs are available to determine fair value, CSWC may use third-party broker quotes or other independent pricing to determine the fair value of certain debt investments.

Fair value measurements using the Income Approach model can be sensitive to significant changes in one or more of the inputs. A significant increase (decrease) in the Required Market Yield for a particular debt security may result in a lower (higher) fair value for that security. A significant increase (decrease) in a third-party broker quote for a particular debt security may result in a higher (lower) value for that security.

Enterprise Value Waterfall Approach

In valuing equity securities (including warrants), CSWC estimates fair value using an Enterprise Value Waterfall valuation model. CSWC estimates the enterprise value of a portfolio company and then allocates the enterprise value to the portfolio company’s securities in order of their relative liquidation preference. In addition, CSWC assumes that any outstanding debt or other securities that are senior to CSWC’s equity securities are required to be repaid at par. Additionally, we may estimate the fair value of non-performing debt securities using the Enterprise Value Waterfall approach as needed.

To estimate the enterprise value of the portfolio company, CSWC uses a weighted valuation model based on public comparable companies, observable transactions and discounted cash flow analyses. A main input into the valuation model is a measure of the portfolio company’s financial performance, which generally is either earnings before interest, taxes, depreciation and amortization, as adjusted (“Adjusted EBITDA”) or revenues. In addition, we consider other factors, including but not limited to (1) offers from third parties to purchase the portfolio company and (2) the implied value of recent investments in the equity securities of the portfolio company. For certain non-performing assets, we may utilize the liquidation or collateral value of the portfolio company's assets in our estimation of its enterprise value.

The significant Level 3 inputs to the Enterprise Value Waterfall model are (1) an appropriate multiple derived from the comparable public companies and transactions, (2) discount rate assumptions used in the discounted cash flow model and (3) a measure of the portfolio company’s financial performance, which generally is either Adjusted EBITDA or revenues. Inputs can be based on historical operating results, projections of future operating results or a combination thereof. The operating results of a portfolio company may be unaudited, projected or pro forma financial information and may require adjustments for certain non-recurring items. CSWC also may consult with the portfolio company’s senior management to obtain updates on the portfolio company’s performance, including information such as industry trends, new product development, loss of customers and other operational issues. Fair value measurements using the Enterprise Value Waterfall model can be sensitive to significant changes in one or more of the inputs. A significant increase (decrease) in either the multiple, Adjusted EBITDA or revenues for a particular equity security would result in a higher (lower) fair value for that security.

NAV Valuation Method

Under the NAV valuation method, for an investment in an investment fund that does not have a readily determinable fair value, CSWC measures the fair value of the investment predominately based on the NAV of the investment fund as of the measurement date. However, in determining the fair value of the investment, we may consider whether adjustments to the NAV are necessary in certain circumstances, based on the analysis of any restrictions on redemption of our investment as of the measurement date, recent actual sales or redemptions of interests in the investment fund, expected future cash flows available to equity holders, or other uncertainties surrounding CSWC’s ability to realize the full NAV of its interests in the investment fund.

The following fair value hierarchy tables set forth our investment portfolio by level as of September 30, ~~2018~~2019 and March 31, ~~2018~~2019 (in thousands):


			Fair Value Measurements								Fair Value Measurements
			at September 30, 2018 Using								at September 30, 2019 Using
			Quoted Prices in		Significant						Quoted Prices in		Significant
			Active Markets		Other		Significant				Active Markets		Other		Significant
			for Identical		Observable		Unobservable				for Identical		Observable		Unobservable
			Assets		Inputs		Inputs				Assets		Inputs		Inputs
Asset Category	Total		(Level 1)		(Level 2)		(Level 3)		Total		(Level 1)		(Level 2)		(Level 3)
First lien loans	$	287,808	$	—	$	—	$	287,808	$	337,646	$	—	$	—	$	337,646
Second lien loans	30,026		—		—		30,026		35,288		—		—		35,288
Subordinated debt	18,883		—		—		18,883		14,234		—		—		14,234
Preferred equity	24,150		—		—		24,150		21,305		—		—		21,305
Common equity & warrants	64,408		—		—		64,408		68,494		—		—		68,494
Investments measured at net asset value¹	66,326		—		—		—		61,909		—		—		—
Total Investments	$	491,601	$	—	$	—	$	425,275	$	538,876	$	—	$	—	$	476,967



			Fair Value Measurements								Fair Value Measurements
			at March 31, 2018 Using								at March 31, 2019 Using
			Quoted Prices in		Significant						Quoted Prices in		Significant
			Active Markets		Other		Significant				Active Markets		Other		Significant
			for Identical		Observable		Unobservable				for Identical		Observable		Unobservable
			Assets		Inputs		Inputs				Assets		Inputs		Inputs
Asset Category	Total		(Level 1)		(Level 2)		(Level 3)		Total		(Level 1)		(Level 2)		(Level 3)
First lien loans	$	197,110	$	—	$	—	$	197,110	$	317,544	$	—	$	—	$	317,544
Second lien loans	23,229		—		—		23,229		35,896		—		—		35,896
Subordinated debt	18,783		—		—		18,783		14,287		—		—		14,287
Preferred equity	36,545		—		—		36,545		17,936		—		—		17,936
Common equity & warrants	50,315		—		—		50,315		72,665		—		—		72,665
Investments measured at net asset value¹	67,113		—		—		—		65,743		—		—		—
Total Investments	$	393,095	$	—	$	—	$	325,982	$	524,071	$	—	$	—	$	458,328

Certain investments that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in Consolidated Statements of Assets and Liabilities. For the investment valued at net asset value per share at September 30, ~~2018~~2019 and March 31, ~~2018,~~2019, the redemption restrictions dictate that we cannot withdraw our membership interest without unanimous approval. We are permitted to sell or transfer our membership interest and must deliver written notice of such transfer to the other member no later than 60 business days prior to the sale or transfer.

The tables below present the Valuation Techniques and Significant Level 3 Inputs (ranges and weighted averages) used in the valuation of CSWC’s debt and equity securities at September 30, ~~2018~~2019 and March 31, ~~2018.~~2019. The tables are not intended to be all inclusive, but instead capture the significant unobservable inputs relevant to our determination of fair value.


		Fair Value at		Significant				Fair Value at		Significant
	Valuation	September 30, 2018		Unobservable		Weighted	Valuation	September 30, 2019		Unobservable		Weighted
Type	Technique	(in millions)		Inputs	Range	Average	Technique	(in thousands)		Inputs	Range	Average

First lien loans	Income Approach	$	234,784	Discount Rate	9.5% - 15.6%	12.2%	Income Approach	$	321,691	Discount Rate	6.6% - 34.5%	11.9%
				Third Party Broker Quote	96.8 - 101.5	99.4				Third Party Broker Quote	63.1 - 89.7	77.4
	Market Approach	53,024		Cost	98.0 - 98.1	98.0	Market Approach	15,955		Exit Value	102.0	102.0
Second lien loans	Income Approach	15,127		Discount Rate	12.1%	12.1%	Income Approach	35,288		Discount Rate	11.0% - 14.5%	12.5%
				Third Party Broker Quote	94.5 - 101.1	97.6				Third Party Broker Quote	26.5	26.5
	Market Approach	14,899		Exit Value	101.0	101.0
				Cost	97.5 - 98.1	97.9
Subordinated debt	Income Approach	18,883		Discount Rate	12.3% - 15.7%	13.1%	Income Approach	14,234		Discount Rate	12.8% - 13.4%	13.2%
Preferred equity	Enterprise Value Waterfall Approach	22,150		EBITDA Multiple	5.1x - 9.3x	7.1x	Enterprise Value Waterfall Approach	20,305		EBITDA Multiple	8.0x - 10.7x	9.5x
				Discount Rate	15.0% - 32.0%	24.5%				Discount Rate	13.6% - 20.3%	15.6%
	Market Approach	2,000		Cost	100.0	100.0	Market Approach	1,000		Cost
Common equity & warrants	Enterprise Value Waterfall Approach	57,059		EBITDA Multiple	3.6x - 11.3x	8.0x	Enterprise Value Waterfall Approach	68,494		EBITDA Multiple	6.0x - 11.1x	8.7x
				Discount Rate	11.9% - 21.6%	19%				Discount Rate	13.3% - 20.3%	14.8%
	Market Approach	7,349		Cost	100.0	100.0
Total Level 3 Investments		$	425,275					$	476,967


		Fair Value at		Significant				Fair Value at		Significant
	Valuation	March 31, 2018		Unobservable		Weighted	Valuation	March 31, 2019		Unobservable		Weighted
Type	Technique	(in millions)		Inputs	Range	Average	Technique	(in thousands)		Inputs	Range	Average

First lien loans	Income Approach	$	181,595	Discount Rate	9.5% - 17.0%	12.8%	Income Approach	$	248,404	Discount Rate	9.6% - 20.5%	12.1%
				Third Party Broker Quote	98.2 - 101.8	100.3				Third Party Broker Quote	65.6 - 97.5	90.1
	Market Approach	15,515		Cost	98.0 - 98.1	98.0	Market Approach	69,140		Cost	97.0 - 99.0	97.7
										Exit Value	100.0 - 102.0	101.4
Second lien loans	Income Approach	18,229		Discount Rate	11.6% - 11.6%	11.6%	Income Approach	35,896		Discount Rate	11.5% - 41.9%	13.9%
				Third Party Broker Quote	93.5 - 100.0	96.0
	Market Approach	5,000		Exit Value	100.0	100.0				Third Party Broker Quote	55	55.0
Subordinated debt	Income Approach	18,783		Discount Rate	12.4% - 13.8%	12.9%	Income Approach	14,287		Discount Rate	12.6% - 15.0%	13.4%
Preferred equity	Enterprise Value Waterfall Approach	36,545		EBITDA Multiple	5.1x - 9.3x	6.9x	Enterprise Value Waterfall Approach	17,936		EBITDA Multiple	7.7x - 10.2x	9.5x
				Discount Rate	15.0% - 32.1%	20.2%				Discount Rate	15.5% - 19.3%	17.8%
Common equity & warrants	Enterprise Value Waterfall Approach	47,123		EBITDA Multiple	6.0x - 8.4x	8.1x	Enterprise Value Waterfall Approach	71,665		EBITDA Multiple	4.6x - 10.7x	8.8x
				Discount Rate	15.7% - 21.6%	20.6%				Discount Rate	13.9% - 21.0%	18.4%
	Market Approach	3,192		Cost	100.0	100.0	Market Approach	1,000		Cost	100.0	100.0
Total Level 3 Investments		$	325,982					$	458,328

Changes in Fair Value Levels

We monitor the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model based valuation techniques may require the transfer of financial instruments from one fair value level to another. We recognize the transfer of financial instruments between levels at the end of each quarterly reporting period. During the three and six months ended September 30, ~~2018~~2019 and ~~2017,~~2018, we had no transfers between levels.

The following tables provide a summary of changes in the fair value of investments measured using Level 3 inputs during the six months ended September 30, 2019 and 2018 ~~and 2017~~ (in ~~millions)~~thousands):


																		Unrealized Appreciation
			Realized &															(Depreciation)
	Fair Value		Unrealized			Purchases of					PIK Interest					Fair Value at		on Investments
	3/31/2018		Gains (Losses)			Investments¹		Repayments			Earned		Divestitures			09/30/2018		held at period end			Fair Value 3/31/2019		Realized & Unrealized Gains (Losses)			Purchases of Investments¹		Repayments			PIK Interest Capitalized		Divestitures			Conversion/Reclassification of Security			Fair Value 9/30/2019		YTD Unrealized Appreciation (Depreciation) on Investments held at period end
First lien loans	$	197,110	$	(454	)	$	139,096	$	(19,140	)	$	—	$	(28,804	)	$	287,808	$	(437	)	$	317,544	$	(3,765	)	$	63,969	$	(40,409	)	$	307	$	—		$	—		$	337,646	$	(3,819	)
Second lien loans	23,229		391			11,406		(5,000		)	—		—			30,026		392			35,896		(823		)	79		(125		)	261		—			—			35,288		(824		)
Subordinated debt	18,783		47			30		—			23		—			18,883		48			14,287		(90		)	25		—			12		—			—			14,234		(89		)
Preferred equity	38,541		7,606			2,657		—			113		(24,767		)	24,150		6,158			17,936		1,433			1,000		—			71		(732		)	1,597			21,305		1,434
Common equity & warrants	48,319		893			15,196		—			—		—			64,408		893			72,665		3,345			620		—			—		(6,539		)	(1,597		)	68,494		3,848
Total Investments	$	325,982	$	8,483		$	168,385	$	(24,140	)	$	136	$	(53,571	)	$	425,275	$	7,054		$	458,328	$	100		$	65,693	$	(40,534	)	$	651	$	(7,271	)	$	—		$	476,967	$	550

																					Fair Value 3/31/2018		Realized & Unrealized Gains (Losses)			Purchases of Investments¹		Repayments			PIK Interest Earned		Divestitures			Conversion/Reclassification of Security			Fair Value 9/30/2018		YTD Unrealized Appreciation (Depreciation) on Investments held at period end
																		Unrealized Appreciation
			Realized &															(Depreciation)
	Fair Value		Unrealized			Purchases of					PIK Interest					Fair Value at		on Investments
	3/31/2017		Gains (Losses)			Investments¹		Repayments			Earned		Divestitures			09/30/2017		held at period end
First lien loans	$	107,817	$	612		$	45,626	$	(17,930	)	$	—	$	—		$	136,125	$	380		$	197,110	$	(454	)	$	139,096	$	(19,140	)	$	—	$	(28,804	)	$	—		$	287,808	$	(437	)
Second lien loans	47,176		293			55		(15,179		)	—		—			32,345		132			23,229		391			11,406		(5,000		)	—		—			—			30,026		392
Subordinated debt	12,453		62			14,431		(8,100		)	—		—			18,846		(52		)	18,783		47			30		—			23		—			—			18,883		48
Preferred equity	18,323		3,441			500		—			82		—			22,346		3,926			38,541		7,606			2,657		—			113		(24,767		)	—			24,150		6,158
Common equity & warrants	37,716		2,095			4,941		—			60		(15		)	44,797		1,595			48,319		893			15,196		—			—		—			—			64,408		893
Total Investments	$	223,485	$	6,503		$	65,553	$	(41,209	)	$	142	$	(15	)	$	254,459	$	5,981		$	325,982	$	8,483		$	168,385	$	(24,140	)	$	136	$	(53,571	)	$	—		$	425,275	$	7,054


¹	Includes purchases of new investments, as well as discount accretion on existing investments.


5.	BORROWINGS

In accordance with the 1940 Act, with certain limitations, effective April 25 2019, the Company is only allowed to borrow amounts such that its asset coverage (i.e., the ratio of assets less liabilities not represented by senior securities to senior securities such as borrowings), calculated pursuant to the 1940 Act, is at least ~~200% (or, pursuant to the 1940 Act,~~ 150% ~~if certain requirements are met as described in our Annual Report on Form 10-K in the Business Section under “Regulation as a Business Development Company-Senior Securities”)~~ after such borrowing. On April 25, 2018, the Board of Directors unanimously approved the application of the recently modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act. As a result, the minimum asset coverage ratio applicable to the Company will be decreased from 200% to 150%, effective April 25, 2019. The Board of Directors also approved a resolution which limits the Company’s issuance of senior securities such that the asset coverage ratio, taking into account any such issuance, would not be less than 166%, which became effective April 25, 2019. As of September 30, ~~2018,~~2019, the Company’s asset coverage was ~~252%~~231%.

The Company had the following borrowings outstanding as of September 30, ~~2018~~2019 and March 31, ~~2018~~2019 (amounts in thousands):


	September 30, 2018			March 31, 2018			September 30, 2019			March 31, 2019
Credit Facility	$	127,000		$	40,000		$	108,000		$	141,000

December 2022 Notes	75,676			57,500			77,136			77,136
Less: Unamortized debt issuance costs and debt discount	(2,269		)	(2,195		)	(1,572		)	(2,037		)
Total Notes	73,407			55,305
Total December 2022 Notes							75,564			75,099

October 2024 Notes							65,000			—
Less: Unamortized debt issuance costs and debt discount							(1,415		)	—
Total October 2024 Notes							63,585			—

Total Borrowings	$	200,407		$	95,305		$	247,149		$	216,099

Credit Facility

In August 2016, CSWC entered into a senior secured credit facility (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Facility”) to provide additional liquidity to support its investment and operational activities, which included total commitments of $100 million. The Credit Facility contained an accordion feature that allowed CSWC to increase the total commitments under the ~~facility~~Credit Facility up to $150 million from new and existing lenders on the same terms and conditions as the existing commitments. In August 2017, we increased our total commitments by $15 million through adding an additional lender using the accordion feature.

On November 16, 2017, CSWC entered into Amendment No. 1 (the “Amendment”) to its Credit Facility. Prior to the Amendment, borrowings under the Credit Facility accrued interest on a per annum basis at a rate equal to the applicable LIBOR rate plus 3.25% with no LIBOR floor. CSWC paid unused commitment fees of 0.50% to 1.50% per annum, based on utilization, on the unused lender commitments under the Credit Facility. The Amendment (1) increased the total borrowing capacity under the Credit Facility to $180 million, with commitments from a diversified group of eight lenders, (2) increased the Credit Facility’s accordion feature that allows for an increase in total commitments of up to $250 million under the Credit Facility from new and existing lenders on the same terms and conditions as the existing commitments, (3) reduced the interest rate on borrowings from LIBOR plus 3.25% down to LIBOR plus 3.00%, with a further step-down to LIBOR plus 2.75% at the time the Company’s net worth exceeds $325 million, (4) reduced unused commitment fees from a utilization-based grid of 0.50% to 1.5% down to a range of 0.50% to 1.0% per annum, and (5) extended the Credit Facility’s revolving period that ended on August 30, 2019 through November 16, 2020. Additionally, the final maturity of the Credit Facility was extended from August 30, 2020 to November 16, 2021. On April 16, 2018 and May 11, 2018, CSWC entered into Incremental Assumption Agreements, which increased the total commitments under the Credit Facility by $20 million and $10 million, respectively. The increases were executed in accordance with the accordion feature of the Credit Facility, increasing total commitments from $180 million to $210 million.

as the existing commitments, (3) reduced the interest rate on borrowings from LIBOR plus 3.00% to LIBOR plus 2.50%, subject to certain conditions as outlined in the Credit Agreement, (4) reduced the minimum asset coverage with respect to senior securities representing indebtedness from 200% to 150% after the date on which such minimum asset coverage is permitted to be reduced by the Company under applicable law, and (5) extended the Credit Facility's revolving period from November 16, 2020 to December 21, 2022 and the final maturity was extended from November 16, 2021 to December 21, 2023.

The Credit Agreement modified certain covenants in the Credit Facility, including: (1) to provide for a minimum senior coverage ratio of 2-to-1 (in addition to the asset coverage ratio noted below), (2) to increase the minimum obligors’ net worth test from $160 million to $180 million, (3) to reduce the minimum consolidated interest coverage ratio from 2.50-to-1 to 2.25-to-1 as of the last day of any fiscal quarter, and (4) to provide for the fact that the Company will not declare or pay a dividend or distribution in cash or other property unless immediately prior to and after giving effect thereto the Company's asset coverage ratio exceeds 150% (and certain other conditions are satisfied). The Credit Facility also contains certain affirmative and negative covenants, including but not limited to: (1) certain reporting requirements, (2) maintaining RIC and BDC status, (3) maintaining a minimum shareholders’ equity, (4) maintaining a minimum consolidated net worth, ~~(5) maintaining an asset coverage of not less than 200%, (6) maintaining a consolidated interest coverage ratio of at least 2.5 to 1.0,~~ and ~~(7)~~(5) at any time the outstanding advances exceed 90% of the borrowing base, maintaining a minimum liquidity of not less than 10% of the covered debt amount.

On May 23, 2019, CSWC entered into an Incremental Assumption Agreement, which increased the total commitments under the Credit Facility by $25 million. The increase was executed under the accordion feature of the Credit Facility and increased total commitments from $270 million to $295 million.

The Credit Facility also contains customary events of default, including, without limitation, nonpayment, misrepresentation of representations and warranties in a material respect, breach of covenant, bankruptcy, and change of control, with customary cure and notice provisions. If the Company defaults on its obligations under the Credit Facility, the lenders may have the right to foreclose upon and sell, or otherwise transfer, the collateral subject to their security interests. There are no changes to the covenants or the events of default in the Credit Facility as a result of the Amendment.

The Credit Facility is secured by (1) substantially all of the present and future property and assets of the Company and the guarantors and (2) 100% of the equity interests in the Company’s wholly-owned subsidiaries. As of September 30, ~~2018,~~2019, substantially all of the Company’s assets were pledged as collateral for the Credit Facility.

At September 30, ~~2018,~~2019, CSWC had ~~$127.0~~$108.0 million in borrowings outstanding under the Credit Facility. CSWC recognized interest expense related to the Credit Facility, including unused commitment fees and amortization of deferred loan costs of ~~$1.8~~$2.3 million and ~~$3.2~~$4.6 million, respectively, for the three and six months ended September 30, ~~2018.~~2019. For the three and six months ended September 30, ~~2017,~~2018, CSWC recognized interest expense of ~~$0.9~~$1.8 million and ~~$1.6~~$3.2 million, respectively. The weighted average interest rate on the Credit Facility was ~~5.42%~~5.00% and ~~5.31%~~5.08%, respectively, for the three and six months ended September 30, ~~2018.~~2019. For the three and six months ended September 30, ~~2017,~~2018, the weighted average interest rate on the Credit Facility was ~~4.76%~~5.42% and ~~4.65%~~5.31%, respectively. Average borrowings for the three and six months ended September 30, ~~2018~~2019 were ~~$102.5~~$156.3 million and ~~$80.9~~$151.9 million, respectively. For the three and six months ended September 30, ~~2017,~~2018, average borrowings were ~~$49.7~~$102.5 million and ~~$37.4~~$80.9 million, respectively. As of September 30, ~~2018,~~2019, CSWC was in compliance with all financial covenants under the Credit Facility.

December 2022 Notes

In December 2017, the Company issued $57.5 million in aggregate principal amount, including the underwriters’ full exercise of their option to purchase additional principal amounts to cover over-allotments, of 5.95% Notes due 2022 (the “December 2022 Notes”). The December 2022 Notes mature on December 15, 2022 and may be redeemed in whole or in part at any time, or from time to time, at the Company’s option on or after December 15, 2019. The December 2022 Notes bear interest at a rate of 5.95% per year, payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning on March 15, 2018. The December 2022 Notes are an unsecured obligation, rank pari passu with our other outstanding and future unsecured unsubordinated indebtedness and are effectively subordinated to all of our existing and future secured indebtedness, including borrowings under our Credit Facility.

On June 11, 2018, the Company entered into an "At-The-Market" ("ATM") debt distribution agreement, pursuant to which it may offer for sale, from time to time, up to $50 million in aggregate principal amount of December 2022 Notes through B. Riley FBR, Inc., acting as its sales agent (the “2022 Notes Agent”). Sales of the December 2022 Notes may be made in negotiated transactions or transactions that are deemed to be "at the market offerings" as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made directly on The Nasdaq Global Select Market, or similar securities exchanges or sales made through a market maker other than on an exchange at prices related to prevailing market prices or at negotiated prices.

The 2022 Notes Agent receives a commission from the Company equal to up to 2% of the gross sales of any December 2022 Notes sold through the 2022 Notes Agent under the debt distribution agreement. The 2022 Notes Agent is not required to sell any specific principal amount of December 2022 Notes, but will use its commercially reasonable efforts consistent with its sales and trading practices to sell the December 2022 Notes. The December 2022 Notes trade “flat,” which means that purchasers in the secondary market will not pay, and sellers will not receive, any accrued and unpaid interest on the December 2022 Notes that is not reflected in the trading price.

During the six months ended September 30, ~~2018,~~2019, the Company ~~sold 727,063~~did not sell any December 2022 Notes. The Company has no current intention of issuing additional December 2022 Notes for an aggregate principal amount of approximately $18.2 million at a weighted average effective yield of 5.86%. As of September 30, 2018, an aggregate principal amount of approximately $31.8 million remains available for issuance and sale under ~~the~~this ATM debt distribution agreement. Therefore, during the three months ended June 30, 2019, the Company amortized $0.2 million of the remaining debt issuance costs associated with the ATM debt distribution agreement, which is included in interest expense in the Consolidated Statement of Operations.

All issuances of December 2022 Notes rank equally in right of payment and form a single series of notes.

As of September 30, ~~2018,~~2019, the carrying amount of the December 2022 Notes was ~~$73.4~~$75.6 million on an aggregate principal amount of ~~$75.7~~$77.1 million at a weighted average effective yield of 5.93%. As of September 30, ~~2018,~~2019, the fair value of the December 2022 Notes was ~~$77.0~~$80.5 million. The fair value is based on the closing price of the security on The Nasdaq Global Select Market, which is a Level 1 input under ASC 820. The Company recognized interest expense related to the December 2022 Notes, including amortization of deferred issuance costs of ~~$1.2~~$1.3 million and ~~$2.2~~$2.8 million, respectively, for the three and six months ended September 30, ~~2018. Average borrowings for~~2019. For the three and six months ended September 30, 2018, the Company recognized interest expense of $1.2 million and $2.2 million, respectively. Average borrowings for both the three and six months ended September 30, 2019 were $77.1 million. For the three and six months ended September 30, 2018, average borrowings were $68.6 ~~million~~ and $63.2 million, respectively.

The indenture governing the December 2022 Notes contains certain covenants including but not limited to (i) a requirement that the Company comply with the asset coverage requirement of Section 61 of the 1940 Act or any successor provisions thereto, after giving effect to any exemptive relief granted to the Company by the SEC, (ii) a requirement, subject to limited exception, that the Company will not declare any cash dividend, or declare any other cash distribution, upon a class of its capital stock, or purchase any such capital stock, unless, in every such case, at the time of the declaration of any such dividend or distribution, or at the time of any such purchase, the Company has the minimum asset coverage required pursuant to Section 61 of the 1940 Act, or any successor provision thereto, after deducting the amount of such dividend, distribution or purchase price, as the case may be, giving effect to any exemptive relief granted to the Company by the SEC and (iii) a requirement to provide financial information to the holders of the December 2022 Notes and the trustee under the indenture if the Company should no longer be subject to the reporting requirements under the Securities Exchange Act of 1934, as amended, (the "Exchange Act"). The indenture and supplement relating to the December 2022 Notes also provides for customary events of default. As of September 30, ~~2018,~~2019, the Company was in compliance with all covenants of the December 2022 Notes.

October 2024 Notes

to July 1, 2024, at par plus a “make-whole” premium, and thereafter at par. The October 2024 Notes bear interest at a rate of 5.375% per year, payable semi-annually on April 1 and October 1 of each year, beginning on April 1, 2020. The October 2024 Notes are the direct unsecured obligations of the Company and rank pari passu with our other outstanding and future unsecured unsubordinated indebtedness and are effectively subordinated to all of our existing and future secured indebtedness, including borrowings under our Credit Facility.

As of September 30, 2019, the carrying amount of the October 2024 Notes was $63.6 million on an aggregate principal amount of $65.0 million at a weighted average effective yield of 5.375%. As of September 30, 2019, the fair value of the October 2024 Notes was $65.2 million. This is a Level 3 fair value measurement under ASC 820 based on a valuation model using a discounted cash flow analysis. The Company recognized interest expense related to the October 2024 Notes, including amortization of deferred issuance costs, of $0.1 million for both the three and six months ended September 30, 2019. Since the issuance of the October 2024 Notes, average borrowings were $65.0 million.

The indenture governing the October 2024 Notes contains certain covenants, including certain covenants requiring the Company to comply with Section 18(a)(1)(A) as modified by Section 61(a)(2) of the 1940 Act, or any successor provisions, whether or not the Company continues to be subject to such provisions of the 1940 Act, but giving effect, in either case, to any exemptive relief granted to the Company by the SEC, and to provide financial information to the holders of the October 2024 Notes and the trustee under the indenture if the Company is no longer subject to the reporting requirements under the Exchange Act. These covenants are subject to important limitations and exceptions that are described in the indenture and the second supplemental indenture relating to the October 2024 Notes.

In addition, holders of the Notes can require the Company to repurchase some or all of the October 2024 Notes at a purchase price equal to 100% of their principal amount, plus accrued and unpaid interest to, but not including, the repurchase date upon the occurrence of a “Change of Control Repurchase Event,” as defined in the second supplemental indenture relating to the October 2024 Notes.


6.	INCOME TAXES

We have elected to be treated as a RIC under Subchapter M of the Code and have a tax year end of December 31. In order to qualify as a RIC, we must annually distribute at least 90% of our investment company taxable income, as defined by the Code, to our shareholders in a timely manner. Investment company income generally includes net short-term capital gains but excludes net long-term capital gains. A RIC is not subject to federal income tax on the portion of its ordinary income and capital gains that is distributed to its shareholders, including “deemed distributions” as discussed below. As part of maintaining RIC ~~status,~~tax treatment, undistributed taxable income and capital gain, which is subject to a 4% non-deductible U.S. federal excise tax, pertaining to a given fiscal year may be distributed up to 12 months subsequent to the end of that fiscal year, provided such dividends are declared on or prior to the later of (1) the filing of the U.S. federal income tax return for the applicable fiscal year and (2) the fifteenth day of the ninth month following the close of the year in which such taxable income was generated. We intend to distribute to our stockholders, after consideration and application of our ability under the Code to carry forward certain excess undistributed taxable income from one tax year into the next tax year, substantially all of our taxable income.

As of September 30, ~~2018,~~2019, CSWC qualified to be taxed as a RIC. We intend to meet the applicable qualifications to be taxed as a RIC in future periods. However, the Company’s ability to meet certain portfolio diversification requirements of RICs in future years may not be controllable by the Company.

The determination of the tax attributes for CSWC’s distributions is made annually, based upon its taxable income for the full year and distributions paid for the full year. Therefore, any determination made on an interim basis is forward-looking based on currently available facts, rules and assumptions and may not be representative of the actual tax attributes of distributions for a full year.

During the quarter ended March 31, ~~2018,~~2019, CSWC declared total dividends of $8.4 million, or $0.48 per share ($0.38 per share in regular dividends and $0.10 in ~~the amount of $4.5 million, or $0.28 per share.~~supplemental dividends). During the quarter ended June 30, ~~2018,~~2019, CSWC declared total dividends of ~~$14.5~~$8.6 million, or ~~$0.89~~$0.49 per share ~~which consisted of~~($0.39 per share in regular dividends and $0.10 in ~~the amount of $4.7 million, or $0.29 per share, and~~ supplemental ~~dividends in the amount of $9.8 million, or $0.60 per share.~~dividends). During the quarter ended September 30, ~~2018,~~2019, CSWC declared total dividends of ~~$7.2~~$9.0 million, or ~~$0.44~~$0.50 per share ~~which consisted of~~($0.40 per share in regular dividends and $0.10 in ~~the amount of $5.6 million, or $0.34 per share, and~~ supplemental ~~dividends in the amount of $1.6 million, or $0.10 per share.~~dividends).

Ordinary dividend distributions from a RIC do not qualify for the 20% maximum tax rate on dividend income from domestic corporations and qualified foreign corporations, except to the extent that the RIC received the income in the

form of qualifying dividends from domestic corporations and qualified foreign corporations. The tax attributes for distributions will generally include both ordinary income and capital gains, but may also include qualified dividends or return of capital.

The following reconciles net increase in net assets resulting from operations to estimated RIC taxable income for the six months ended September 30, ~~2018~~2019 and ~~2017:~~2018:


	Six Months Ended September 30,					Six Months Ended September 30,
Reconciliation of RIC Taxable Income¹	2018		2017			2019			2018
Net increase in net assets from operations	$	18,241	$	14,087		$	9,442		$	18,241
Net change in unrealized appreciation on investments	10,835		(5,880		)
Net unrealized depreciation (appreciation) on investments						6,233			10,835
Income/gain (expense/loss) recognized for tax on pass-through entities	125		1,852			121			125
Loss recognized for tax on dispositions	434		—
Net operating loss - management company and taxable subsidiary	33		468
(Gain) loss recognized for tax on dispositions						(930		)	434
Net operating (income) loss - management company and taxable subsidiary						395			33
Non-deductible tax expense	393		(31		)	317			393
Other book/tax differences						230			—
Estimated taxable income before deductions for distributions	$	30,061	$	10,496		$	15,808		$	30,061


¹	The calculation of taxable income for each period is an estimate and will not be finally determined until the Company files its tax return each year. Final taxable income may be different than this estimate.

A RIC may elect to retain all or a portion of its net capital gains by designating them as a “deemed distribution” to its shareholders and paying a federal tax on the net capital gains for the benefit of its shareholders. Shareholders then report their share of the retained capital gains on their income tax returns as if it had been received and report a tax credit for tax paid on their behalf by the RIC. Shareholders then add the amount of the “deemed distribution” net of such tax to the basis of their shares. As a result of the tax reform legislation enacted on December 22, 2017 (the "Tax Reform"), the federal tax rate for deemed distributions is 21% as of January 1, 2018. For the tax ~~year~~years ended December 31, 2018 and 2017, we distributed all long-term capital gains and therefore had no deemed distributions to our shareholders or federal taxes incurred related to such items. "Deemed distributions" are generally reclassified from accumulated net realized gains into additional capital after our tax year ends each December 31.

CSMC, a wholly-owned subsidiary of CSWC, is not a RIC and is required to pay taxes at the current corporate rate. For tax purposes, CSMC has elected to be treated as a taxable entity, and therefore is not consolidated for tax purposes and is taxed at normal corporate tax rates based on its taxable income and, as a result of its activities, may generate income tax expense or benefit. The taxable income, or loss, of CSMC may differ from its book income, or loss, due to temporary book and tax timing differences and permanent differences. This income tax expense, or benefit, if any, and the related tax assets and liabilities, are reflected in our consolidated financial statements. CSMC records individual cash incentive award and bonus accruals on a quarterly basis. Deferred taxes related to the changes in the restoration plan, individual cash incentive award and bonus accruals are also recorded on a quarterly basis. A valuation allowance is provided against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized. Establishing a valuation allowance of a deferred tax asset requires management to make estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecasted cash flows from CSMC’s operations. As of ~~both~~ September 30, ~~2018~~2019 and March 31, ~~2018,~~2019, CSMC had a deferred tax asset of approximately ~~$2.1 million.~~$1.6 million and $1.8 million, respectively. As of September 30, ~~2018,~~2019, we believe that we will be able to utilize all ~~$2.1~~$1.6 million of our deferred tax assets. We will continue to assess our ability to realize our existing deferred tax assets.

Based on our assessment of our unrecognized tax benefits, management believes that all benefits will be realized and they do not contain any uncertain tax positions. ~~As a result of the Tax Reform, the corporate tax rate of CSMC is 21% as of January 1, 2018.~~

In addition, we have a wholly-owned taxable subsidiary, or the Taxable Subsidiary, which holds a portion of one or more of our portfolio investments that are listed on the Consolidated Schedule of Investments. The Taxable Subsidiary is consolidated for financial reporting purposes in accordance with U.S. GAAP, so that our consolidated financial statements reflect our investments in the portfolio companies owned by the Taxable Subsidiary. The purpose of the Taxable Subsidiary

is to permit us to hold certain interests in portfolio companies that are organized as limited liability companies, or LLCs (or other forms of pass-through entities) and still satisfy the RIC tax requirement that at least 90% of our gross income for U.S. federal income tax purposes must consist of qualifying investment income. Absent the Taxable Subsidiary, a proportionate amount of any gross income of a partnership or LLC (or other pass-through entity) portfolio investment would flow through directly to us. To the extent that our income did not consist of investment income, it could jeopardize our ability to qualify as a RIC and therefore cause us to incur significant amounts of corporate-level U.S. federal income taxes. Where interests in LLCs (or other pass-through entities) are owned by the Taxable Subsidiary, however, the income from those interests is taxed to the Taxable Subsidiary and does not flow through to us, thereby helping us preserve our RIC ~~status~~tax treatment and resultant tax advantages. The Taxable Subsidiary is not consolidated for U.S. federal income tax purposes and may generate income tax expense as a result of their ownership of the portfolio companies. The income tax expense, or benefit, and the related tax assets and liabilities, if any, are reflected in our Statement of Operations. ~~As a result of the Tax Reform, the corporate tax rate of the Taxable Subsidiary is 21% as of January 1, 2018.~~

The income tax expense, or benefit, and the related tax assets and liabilities, generated by CSWC, CSMC and the Taxable Subsidiary, if any, are reflected in CSWC’s consolidated financial statements. For the three months ended September 30, 2019, we recognized net income tax expense of $0.6 million, principally consisting of an expense for current U.S. federal income taxes of $0.2 million, a $0.1 million accrual for U.S. federal excise tax on our estimated undistributed taxable income and $0.3 million relating to our Taxable Subsidiary. For the six months ended September 30, 2019, we recognized net income tax expense of $0.9 million, principally consisting of an expense for current U.S. federal income taxes of $0.3 million, a $0.3 million accrual for U.S. federal excise tax on our estimated undistributed taxable income and $0.3 million relating to our Taxable Subsidiary. For the three months ended September 30, 2018, we recognized a net income tax expense of $0.3 million, principally consisting of a ~~provision~~benefit for current U.S. federal income taxes of $0.1 million and a $0.2 million accrual for U.S. federal excise tax on our estimated undistributed taxable income. For the six months ended September 30, 2018, we recognized net income tax expense of $0.6 million, principally consisting of a provision for current U.S. federal income taxes of $0.2 million and a $0.4 million accrual for excise tax on our estimated undistributed taxable income. For the three months ended September 30, 2017, we recognized a net income tax expense of $0.1 million, principally consisting of a provision for current U.S. federal income taxes of $0.1 million, a $0.1 million accrual for excise tax on our estimated undistributed taxable income, and a $0.1 million benefit relating to the Taxable Subsidiary. For the six months ended September 30, 2017, we recognized a net income tax expense of $0.3 million, principally consisting of a provision for current U.S. federal income taxes of $0.3 million.

Regarding the Tax Reform, the Company has completed all accounting and there are no items reported as provisional amounts. However, changes in interpretations, assumptions, and guidance regarding the new tax legislation, as well as the potential for technical corrections to the Tax Reform, could have a material impact on the Company's effective tax rate in future periods. Finally, given the significant complexity of the Tax Reform, current guidance from the U.S. Treasury about implementing the Tax Act and any related guidance from the SEC or the FASB may change, which may require us to refine the Company's estimates in the future.

Although we believe our tax returns are correct, the final determination of tax examinations could be different from what was reported on the returns. In our opinion, we have made adequate tax provisions for years subject to examination. Generally, we are currently open to audit under the statute of limitations by the Internal Revenue Service as well as state taxing authorities for the years ended December 31, 2014 through December 31, 2017.


7.	SHAREHOLDERS' EQUITY

~~There were no sales of the Company’s equity securities for the six months ended September 30, 2018 and 2017.~~

On October 26, 2010, we received an exemptive order from the SEC permitting us to issue restricted stock to our executive officers and certain key employees, or the Original Order. On August 22, 2017, we received the Exemptive Order that supersedes the Original Order and in addition to the relief granted under the Original Order, allows us to withhold shares to satisfy tax withholding obligations related to the vesting of restricted stock granted pursuant to the 2010 Restricted Stock Award Plan, or the 2010 Plan, and to pay the exercise price of options to purchase shares of our common stock granted pursuant to the 2009 Stock Incentive Plan, or the 2009 Plan. During ~~both~~the three months ended September 30, 2019, the Company did not repurchase any shares in connection with the vesting of restricted stock awards. During the six months ended September 30, ~~2018~~2019, the Company repurchased 2,258 shares at an aggregate cost of $49.4 thousand and ~~2017,~~a weighted average price per share of $21.87 in connection with the vesting of restricted stock awards. During the three and six months ended September 30, 2018, the Company did not repurchase any shares in connection with the vesting of restricted stock awards.

During the year ended March 31, 2019, the Company completed an offering of 700,000 shares of the Company's common stock at a net price of $18.90 per share. The Company issued 100,000 shares of its common stock to certain institutional investors in a direct registered offering and 600,000 shares of its common stock in a "best efforts" underwritten offering. The total net proceeds of the offerings, before expenses, was approximately $13.2 million.

On March 4, 2019, the Company entered into separate equity distribution agreements with certain sales agents through which it may offer to sell, from time to time, shares of its common stock having an aggregate offering price of up to $50,000,000 (the "Equity ATM Program"). During the three months ended September 30, 2019, the Company sold 231,272 shares of its common stock under the Equity ATM Program at a weighted-average price of $21.62 per share, raising $5.0 million of gross proceeds. Net proceeds were $4.9 million after commissions to the sales agents on shares sold. During the six months ended September 30, 2019, the Company sold 426,821 shares of its common stock under the Equity ATM Program at a weighted-average price of $21.64 per share, raising $9.2 million of gross proceeds. Net proceeds were $9.1 million after commissions to the sales agents on shares sold. Cumulative to date, the Company has sold 690,477 shares of its common stock under the Equity ATM Program at a weighted-average price of $21.57, raising $14.9 million of gross proceeds.

On August 1, 2019, after receiving the requisite shareholder approval, the Company filed an amendment to its Amended and Restated Articles of Incorporation to increase the amount of authorized shares of common stock from 25,000,000 to 40,000,000.

Share Repurchase Program

In January 2016, the Company’s Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $10 million of its outstanding common stock in the open market at certain thresholds below its NAV per share, in accordance with guidelines specified in Rules 10b5-1(c)(1)(i)(B) and 10b-18 under the Exchange Act. On March 1, 2016, the Company entered into a share repurchase agreement, which became effective immediately and shall terminate on the earliest of: (1) the date on which a total of $10 million worth of common shares have been purchased under the ~~plan;~~share repurchase program; (2) the date on which the terms set forth in the purchase instructions have been met; or (3) the date that is one trading day after the date on which insider notifies broker in writing that this share repurchase agreement shall terminate.

During both the six months ended September 30, ~~2018~~2019 and ~~2017,~~2018, the Company did not repurchase any shares of the ~~Company’s~~Company's common stock under the share repurchase program. As of September 30, ~~2018,~~2019, the Company has approximately ~~$9.4~~$9.2 million available for additional repurchases under the share repurchase program.


8.	~~SPIN-OFF COMPENSATION PLAN~~

On August 28, 2014, CSWC's Board of Directors adopted a compensation plan (the “Spin-off Compensation Plan”) consisting of grants of nonqualified stock options, restricted stock and cash incentive awards to certain officers of the Company at the time. The Spin-off Compensation Plan was intended to align the compensation of the Company’s key officers with the Company’s strategic objective of increasing the market value of the Company’s shares through a transformative transaction for the benefit of the Company’s shareholders. Under the Spin-off Compensation Plan, Joseph B. Armes, former Chief Executive Officer of the Company, Kelly Tacke, former Chief Financial Officer of the Company, and Bowen S. Diehl, former Chief Investment Officer and current Chief Executive Officer of the Company, were collectively as a group eligible to receive an amount equal to six percent of the aggregate appreciation in the Company’s share price from August 28, 2014 (using a base price of $36.16 per share) to the date 90 days after the completion of a transformative transaction (the “Trigger Event Date”). The first plan component consisted of nonqualified options awarded to purchase an aggregate of 259,000 shares of common stock at an exercise price of $36.60 per share. The second plan component consisted of an aggregate of 127,000 shares of restricted stock, which have voting rights but do not have cash dividend rights. See Note 9 for further discussion on the first two components of the Spin-off Compensation Plan. The final plan component consisted of cash incentive payments awarded to each participant in an amount equal to the excess of each awardee’s allocable portion of the total payment amount over the aggregate value as of the Trigger Event Date of the awardee’s restricted common stock and nonqualified options awarded under the plan.

On September 8, 2015, the Board designated the Share Distribution as a transformative transaction for purposes of the Spin-off Compensation Plan and amended the award agreements granted under the plan to provide for accelerated vesting of the awards held by a participant in the event of a termination of that participant’s service effected by the participant for good reason, by the employer without cause, or as a result of the disability or death of the participant. On September 30, 2015, we completed the Share Distribution.

Effective immediately with the Share Distribution, both Joseph B. Armes and Kelly Tacke became employees of CSWI and Bowen Diehl, our President and Chief Executive Officer, continued to be an employee of our Company. The Company entered into the Employee Matters Agreement with CSWI . Under the Employee Matters Agreement, we retained the cash incentive awards granted under the Spin-off Compensation Plan, and all liabilities with respect to the cash incentive

awards remained liabilities of CSWC. The equity based awards vesting terms were as follows: (1) one-third on December 29, 2015; (2) one-third on December 29, 2016; and (3) one-third on December 29, 2017, subject to accelerated vesting as described above.

The total value accretion was six percent of the aggregate appreciation in the Company’s share price from $36.16 to the combined volume-weighted average prices of both CSWC and CSWI stock as of December 29, 2015. The cash component of the Spin-off Compensation Plan was the difference between the total value accretion and the aggregate value of the awardee’s restricted common stock and non-qualified option awards under the Spin-off Compensation Plan. The total cash liabilities for three participants under the plan totaled $6.1 million. The final payment of $1.4 million was fully vested on December 29, 2017, and was subsequently paid out in January 2018. As of September 30, 2018, there is no remaining unrecognized expense related to the Spin-off Compensation Plan.

During the three and six months ended September 30, 2018, we did not recognize any expense related to the Spin-off Compensation Plan. During the three and six months ended September 30, 2017, we recognized the cash component of spin-off compensation expense of $0.2 million and $0.3 million, respectively, which represented the cash component of spin-off compensation for our current employee. During the three and six months ended September 30, 2017, we also recorded $0.2 million and $0.3 million, respectively, directly to additional capital for the cash component of the spin-off compensation related to one of the two employees who transferred to CSWI.


9.	EMPLOYEE STOCK BASED COMPENSATION PLANS

Stock Awards

Pursuant to the Capital Southwest Corporation 2010 Plan, our Board of Directors originally reserved 188,000 shares of restricted stock for issuance to certain of our employees. At our annual shareholder meetings in August 2015 and August 2018, our shareholders approved an increase of an additional 450,000 and 850,000 shares, respectively, to our 2010 Plan. A restricted stock award is an award of shares of our common stock, which generally have full voting and dividend rights but are restricted with regard to sale or transfer. Restricted stock awards are independent of stock grants and are generally subject to forfeiture if employment terminates prior to these restrictions lapsing. Unless otherwise specified in the award agreement, these shares vest in equal annual installments over a four- to five-year period from the grant date and are expensed over the vesting period starting on the grant date.

On August 28, 2014, our Board of Directors amended the 2010 Plan, as permitted pursuant to Section 14 of the 2010 Plan (the “First Amendment to the 2010 Plan”). The First Amendment to the 2010 Plan provides that an award agreement may allow an award to remain outstanding after a spin-off or change in control of one or more wholly-owned subsidiaries of the Company. In addition, on August 28, 2014, the Board of Directors granted 127,000 shares of restricted stock under the Spin-off Compensation Plan. On August 10, 2015, the Second Amendment to the 2010 Plan increased the number of shares of Company common stock available for issuance by 450,000 shares.

On September 30, 2015, we completed the Share Distribution. Each holder of an outstanding Capital Southwest Restricted Stock Award immediately prior to the Share Distribution received, as of the effective date of the Share Distribution, a CSWI Restricted Stock Award for the number of CSWI Shares the holder would have received if the outstanding Capital Southwest Restricted Stock Award was comprised of fully vested Capital Southwest Shares as of the effective date.

The vesting terms for restricted stock awards previously granted under the Spin-off Compensation Plan are as follows: (1) one-third on December 29, 2015; (2) one-third on December 29, 2016; and (3) one-third on December 29, 2017, subject to accelerated vesting as described above. As of September 30, 2018, there is no remaining unrecognized expense related to the Spin-off Compensation Plan.

On August 22, 2017, we received the Exemptive Order from the SEC that supersedes the Original Order and, in addition to the relief granted under the Original Order, allows the Company to withhold shares to satisfy tax withholding obligations related to the vesting of restricted stock granted pursuant to the 2010 Plan. The Third Amendment to the 2010 Plan, which became effective on August 22, 2017, reflects amendments relating to the Exemptive Order.

On August 2, 2018, the Fourth Amendment to the 2010 Plan increased the number of shares of Company common stock available for issuance by 850,000 shares. The Fourth Amendment also includes revisions regarding change in control provisions, minimum vesting periods, incorporation of a clawback policy and other technical revisions.

The following table summarizes the restricted stock available for issuance for the six months ended September 30, ~~2018:~~2019:



Restricted stock available for issuance as of March 31, ~~2018~~2019	~~9,777~~657,627
Additional restricted stock approved under the plan	~~850,000~~—
Restricted stock granted during the ~~six~~three months ended ~~September~~June 30, ~~2018~~2019	—(3,000	)
Restricted stock forfeited during the ~~six~~three months ended ~~September~~June 30, ~~2018~~2019	~~2,250~~3,250
Restricted stock available for issuance as of September 30, ~~2018~~2019	~~862,027~~657,877

We expense the cost of the restricted stock awards, which is determined to equal the fair value of the restricted stock award at the date of grant on a straight-line basis over the requisite service period. For these purposes, the fair value of the restricted stock award is determined based upon the closing price of our common stock on the date of the grant. Due to the Share Distribution, the Company evaluated (1) the value of the CSWC stock awards prior to the Share Distribution and (2) the combined value of CSWC and CSWI stock awards following the Share Distribution and recorded additional incremental stock based compensation expenses.

For the three months ended September 30, ~~2018~~2019 and ~~2017,~~2018, we recognized total share based compensation expense of ~~$0.4~~$0.7 million and $0.4 million, respectively, related to the restricted stock issued to our employees and officers. For the six months ended September 30, ~~2018~~2019 and ~~2017,~~2018, we recognized total share based compensation expense of ~~$0.9~~$1.5 million and ~~$0.7~~$0.9 million, respectively, related to the restricted stock issued to our employees and officers.

During the three months ended June 30, 2019, the Company modified restricted stock awards to accelerate vesting of the unvested awards as of the retirement date for one employee. The Company accounted for this as a modification of awards and recognized incremental compensation cost of $0.2 million. The incremental compensation cost is measured as the excess of the fair value of the modified award over the fair value of the original award immediately before its terms were modified and recognized as compensation cost on the date of modification for vested awards.

As of September 30, ~~2018,~~2019, the total remaining unrecognized compensation expense related to non-vested restricted stock awards was ~~$4.2~~$5.3 million, which will be amortized over the weighted-average vesting period of approximately ~~2.4~~2.3 years. ~~Subsequent to the Share Distribution, the compensation expense related to non-vested awards held by employees who are now employed by CSWI is recorded by CSWI.~~

The following table summarizes the restricted stock outstanding as of September 30, ~~2018:~~2019:


			Weighted Average		Weighted Average			Weighted Average		Weighted Average
			Fair Value Per		Remaining Vesting			Fair Value Per		Remaining Vesting
Restricted Stock Awards	Number of Shares		Share at grant date		Term (in Years)	Number of Shares		Share at grant date		Term (in Years)
Unvested at March 31, 2018	372,163		$	15.82	2.9
Unvested at March 31, 2019						454,027		$	17.33	2.8
Granted	—		—		—	3,000		21.58		3.7
Vested	(6,375	)	19.28		—	(14,125	)	15.59		1.6
Forfeited	(2,250	)	15.60		—	(3,250	)	18.22		—
Unvested at September 30, 2018	363,538		$	15.77	2.4
Unvested at September 30, 2019						439,652		$	17.41	2.3

Stock Options

On July 20, 2009, shareholders approved the 2009 Plan, which provides for the granting of stock options to employees and officers and authorizes the issuance of common stock upon exercise of stock options for up to 560,000 shares. All options are granted at or above market price, generally expire up to 10 years from the date of grant and are generally exercisable on or after the first anniversary of the date of grant in five annual installments.

On August 28, 2014, our Board of Directors amended the 2009 Plan, as permitted pursuant to Section 18 of the 2009 Plan (the “First Amendment to the 2009 Plan”). The First Amendment to the 2009 Plan provides that an award agreement may allow an award to remain outstanding after a spin-off or change in control of one or more wholly-owned subsidiaries

of the Company. In addition, on August 28, 2014, options to purchase 259,000 shares at $36.60 per share were granted under the 2009 Plan, as amended. On September 8, 2015, the Board designated the Share Distribution as a transformative transaction for purposes of the 2009 Plan and amended the award agreements granted under the 2009 Plan to provide for accelerated vesting of the awards held by a participant in the event of a termination of that participant’s service effected by the participant for good reason, by the employer without cause, or as a result of the disability or death of the participant. A third of these options were vested on each of December 29, 2015, December 29, 2016 and December 29, 2017, respectively, subject to accelerated vesting as described above.

At September 30, 2015, in connection with the Share Distribution, we entered into the Employee Matters Agreement, which provided that each option to acquire CSWC common stock that was outstanding immediately prior to September 30, 2015, would be converted into both an option to acquire post-Share Distribution CSWC common stock and an option to acquire CSWI common stock and would be subject to substantially the same terms and conditions (including with respect to vesting and expiration) after the Share Distribution. Certain adjustments, using volumetric weighted-average prices for the 10-day period immediately prior to and immediately following the distribution, were made to the exercise price and number of shares of CSWC subject to such awards, with the intention of preserving the economic value of the awards immediately prior to the distribution for all CSWC employees. We compared the fair market value of our stock options on the day of the Share Distribution with the combined fair value of our stock options and CSWI stock options the day after the completion of the Share Distribution. The distribution-related adjustments did not have an impact on compensation expense for the three and six months ended September 30, 2018 and 2017.

On August 22, 2017, we received the Exemptive Order from the SEC that supersedes the Original Order and, in addition to the relief granted under the Original Order, allows us to withhold shares of our common stock to satisfy the exercise of options to purchase shares of our common stock granted pursuant to the 2009 Plan.

At September 30, ~~2018,~~2019, there are no options to acquire ~~11,950~~ shares of common stock outstanding. The ~~Compensation Committee does not intend to grant additional options under~~2009 Plan terminated on July 20, 2019, the tenth anniversary of the date that the 2009 Plan ~~or request shareholders’ approval of additional stock options to be added under~~was approved by the ~~2009 Plan.~~Company's shareholders.

The following table summarizes activity in the 2009 Plan as of September 30, ~~2018, including adjustments in connection with the Share Distribution:~~2019:

Weighted
Average Aggregate
Exercise Intrinsic
Number of Shares Price Value
2009 Plan
Balance at March 31, 2017 206,364
$ 11.12

Granted —
—

Exercised (10,756 ) 11.66
$ 58,081
Canceled/Forfeited —
—

Balance at March 31, 2018 195,608
11.09

Granted —
—

Exercised (183,658 ) 11.07
$ 1,448,707
Canceled/Forfeited —
—

Balance at September 30, 2018 11,950
$ 11.33

Weighted Average Aggregate
Remaining Contractual Intrinsic
September 30, 2018 Term Value
Outstanding 5.1 years $ 91,418
Exercisable 4.8 years $ 43,737



			Weighted
			Average		Aggregate
			Exercise		Intrinsic
	Number of Shares		Price		Value
2009 Plan
Balance at March 31, 2018	195,608		$	11.09
Granted	—		—
Exercised	(195,608	)	11.09		$	1,563,905
Canceled/Forfeited	—		—
Balance at March 31, 2019	—		—
Granted	—		—
Exercised	—		—
Canceled/Forfeited	—		—
Balance at September 30, 2019	—		$	—

We recognize compensation cost using the straight-line method for all share-based payments. The fair value of stock options are determined on the date of grant using the Black-Scholes pricing model and are expensed over the requisite service period of the related stock options. Accordingly, for the three and six months ended September 30, 2019, there was no expense recognized and for the three and six months ended September 30, 2018, ~~and 2017,~~ we recognized stock option compensation expense of $10.5 thousand and ~~$48.0 thousand, respectively related to the stock options held by our employees and officers. For the six months ended September 30, 2018 and 2017, we recognized stock option compensation expense of~~ $21.1 thousand, ~~and $0.1 million,~~ respectively, related to the stock options held by our employees and officers. As of September 30, ~~2018, the total~~2019, there is no remaining unrecognized compensation cost related to non-vested stock ~~options was $17.6 thousand, which will be amortized over the weighted-average vesting period of approximately 0.5 years.~~options.

At September 30, ~~2018, the range of exercise prices was $11.00 to $11.66 and the weighted-average~~2019, there are no remaining ~~contractual term of outstanding~~ options ~~was 5.1 years. The total number of shares of common stock exercisable under the 2009 Plan at September 30, 2018 was 5,975 shares with a weighted-average exercise price of $11.66.~~outstanding. During the quarter ended September 30, 2018, 5,975 options became exercisable and 50,000 options were exercised with an average exercise price of $11.53. ~~During the quarter ended September 30, 2017, 5,975 options became exercisable and no options were exercised.~~

~~Individual Incentive Awards~~

On January 16, 2012, our Board of Directors approved the issuance of 104,000 individual cash incentive awards with a baseline for measuring increases in NAV per share of $36.74 (NAV at December 31, 2011) to provide deferred compensation to certain key employees. Under the individual cash incentive award agreements, awards vest on the fifth anniversary of the award date. Upon exercise of an individual cash incentive award, the Company pays the recipient a cash payment in an amount equal to the NAV per share minus the baseline NAV per share, adjusted for capital gain dividends declared.

In connection with the Share Distribution, we entered into the Employee Matters Agreement with CSWI. Under the Employee Matters Agreement, the individual cash incentive award agreements were amended to provide that the value of each individual cash incentive award was determined based upon the NAV of CSWC as of June 30, 2015. The remaining terms of each individual cash incentive award agreement, including the vesting and payment terms, will remain unchanged. After the effective date of the Share Distribution, CSWC retains all liabilities associated with all individual cash incentive awards granted by CSWC.

There are currently 24,000 individual cash incentive awards outstanding as of September 30, 2018 and the liability for individual cash incentive awards was $0.1 million at September 30, 2018. During the six months ended September 30, 2018, payments in the amount of $0.2 million were paid to vested employees. As of September 30, 2018, there is no remaining unrecognized compensation expense related to individual cash incentive awards.

~~There were no individual cash incentive awards granted during the six months ended September 30, 2018.~~

Weighted
Average
Weighted Remaining
Number of Average Grant Vesting Term
Individual Cash Incentive Awards Shares Price Per Share (in Years)
Unvested at March 31, 2018 48,000
$ 47.03
0.6
Granted —
—
—
Vested (24,000 ) 43.80
—
Forfeited or expired —
—
—
Unvested at September 30, 2018 24,000
$ 50.25
0.5


~~10.~~9.	OTHER EMPLOYEE COMPENSATION

We established a 401(k) plan (“401K Plan”) effective October 1, 2015. All full-time employees are eligible to participate in the 401K Plan. The 401K Plan permits employees to defer a portion of their total annual compensation up to the Internal Revenue Service annual maximum based on age and eligibility. We made contributions to the 401K Plan of up to 4.5% of the Internal Revenue Service’s annual maximum eligible compensation, all of which is fully vested immediately. During the three months ended September 30, ~~2018~~2019 and ~~2017,~~2018, we made matching contributions of approximately ~~$25.2~~ $28.8

thousand and ~~$25.7~~$25.2 thousand, respectively. During the six months ended September 30, ~~2018~~2019 and ~~2017,~~2018, we made matching contributions of approximately ~~$87.8~~$91.2 thousand and ~~$78.3~~$87.8 thousand, respectively.


~~11.~~10.	COMMITMENTS AND CONTINGENCIES

Commitments

In the normal course of business, the Company is a party to financial instruments with off-balance sheet risk, consisting primarily of unused commitments to extend financing to the Company’s portfolio companies. Since commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements.

The balances of unused commitments to extend financing as of September 30, ~~2018~~2019 and March 31, ~~2018~~2019 were as follows (amounts in thousands):


		September 30,		March 31,			September 30,		March 31,
Portfolio Company	Investment Type	2018		2018		Investment Type	2019		2019
I-45 SLF LLC	Equity Investment	$	3,200	$	3,200
Adams Publishing Group, LLC	Delayed Draw Term Loan	1,731		—		Delayed Draw Term Loan	$	1,338	$	1,731
American Nuts Operations LLC						Term Loan C	384		438
ASC Ortho Management Company, LLC	Revolving Loan	1,500		—		Revolving Loan	1,500		1,500
Clickbooth.com, LLC	Revolving Loan	2,000		2,000		Revolving Loan	2,000		2,000
Danforth Advisors, LLC	Revolving Loan	1,000		—		Revolving Loan	1,000		1,000
Dynamic Communities, LLC	Revolving Loan	500		—		Revolving Loan	500		500
Environmental Pest Service Management Company, LLC	Delayed Draw Term Loan	6,697		—		Delayed Draw Term Loan	525		525
Fast Sandwich, LLC	Revolving Loan	4,150		—		Revolving Loan	4,150		4,150
Gauge American Nuts Operations LLC	Delayed Draw Term Loan	1,969		—
ITA Holdings Group, LLC	Revolving Loan	1,237		2,000		Revolving Loan	1,281		1,000
LGM Pharma, LLC	Delayed Draw Term Loan	400		900
Prism Spectrum Holdings LLC	Revolving Loan	500		1,500
JVMC Holdings Corp.						Delayed Draw Term Loan	—		848
Roseland Management, LLC						Revolving Loan	2,000		2,000
Zenfolio Inc.	Revolving Loan	2,000		2,000		Revolving Loan	2,000		2,000
Total unused commitments to extend financing		$	26,884	$	11,600		$	16,678	$	17,692

~~Included within the~~As of September 30, 2019, total revolving and delayed draw loan commitments ~~as of~~ ~~September 30, 2018~~ ~~were~~included commitments to issue letters of credit through a financial intermediary on behalf of certain portfolio companies. As of September 30, ~~2018~~2019, the Company had ~~$3.3~~$3.4 million in letters of credit issued and outstanding under these commitments on behalf of portfolio companies. For all of these letters of credit issued and outstanding, the Company would be required to make payments to third parties if the portfolio companies were to default on their related payment obligations. Of these letters of credit, ~~$3.3~~$3.4 million expire in May ~~2019.~~2020. As of September 30, ~~2018~~2019, none of the letters of credit issued and outstanding were recorded as a liability on the Company's balance sheet as such letters of credit are considered in the valuation of the investments in the portfolio company.

~~Contingencies~~Effective April 1, 2019, ASC 842 required that a lessee to evaluate its leases to determine whether they should be classified as operating or financing leases. The Company identified one operating lease for its office space. The lease commenced on October 1, 2014 and expires February 28, 2022.

As CSWC classified this lease as an operating lease prior to implementation, ASC 842 indicates that a right-of-use asset and lease liability should be recorded based on the effective date. CSWC adopted ASC 842 effective April 1, 2019 and recorded a right-of-use asset and a lease liability as of that date. After this date, the Company has recorded lease expense on a straight-line basis, consistent with the accounting treatment for lease expense prior to the adoption of ASC 842.

Total lease expense incurred for both the three and six months ended September 30, 2019 and 2018 was $58 thousand and $0.1 million, respectively. As of September 30, 2019, the asset related to the operating lease was $0.5 million

and the lease liability was $0.6 million. As of September 30, 2019, the remaining lease term was 2.4 years and the discount rate was 4.59%.

The following table shows future minimum payments under the Company's operating lease as of September 30, 2019 (in thousands):



Year ending March 31,	Rent Commitment
2020	$	131
2021	266
2022	248
2023	—
2024	—
Thereafter	—
Total	$	645

Contingencies

We may, from time to time, be involved in litigation arising out of our operations in the normal course of business or otherwise. Furthermore, third parties may try to seek to impose liability on us in connection with the activities of our portfolio companies. To our knowledge, we have no currently pending material legal proceedings to which we are party or to which any of our assets are subject.

~~12.~~11. RELATED PARTY TRANSACTIONS

As a BDC, we are obligated under the 1940 Act to make available to our portfolio companies significant managerial assistance. “Making available significant managerial assistance” refers to any arrangement whereby we provide significant guidance and counsel concerning the management, operations, or business objectives and policies of a portfolio company. We are also deemed to be providing managerial assistance to all portfolio companies that we control, either by ourselves or in conjunction with others. The nature and extent of significant managerial assistance provided by us will vary according to the particular needs of each portfolio company.

During both the three months ended September 30, ~~2018~~2019 and ~~2017,~~2018, we received management and other fees from certain of our portfolio companies totaling $0.1 million, which were recognized as Fees and other income on the Consolidated Statements of Operations. During ~~both~~ the six months ended September 30, ~~2018~~2019 and ~~2017,~~2018, we received management and other fees from certain of our portfolio companies totaling $0.1 million and $0.2 million, respectively, which were recognized as Fees and other income on the Consolidated Statement of Operations. Additionally, as of both September 30, ~~2018~~2019 and March 31, ~~2018,~~2019, we had dividends receivable from I-45 SLF LLC of ~~$2.3~~$2.5 million, ~~and $2.2 million, respectively,~~ which were included in dividends and interest receivables on the Consolidated Statements of Assets and Liabilities.


~~13.~~	~~SUBSEQUENT EVENTS~~

~~On October 4, 2018,~~During the three months ended September 30, 2019, the Company ~~issued an aggregate of 700,000 shares~~purchased a $6.4 million investment from I-45 SLF LLC. The Company purchased such first lien term loan at a price consistent with the fair market value of the ~~Company's common stock~~loan at ~~a net price of $18.90 per share. Of~~ the 700,000 shares sold, 100,000 shares were sold to certain institutional investors in a direct registered offering and 600,000 shares were sold in a "best efforts" underwritten offering. The total net proceedstime of the ~~offerings, before expenses, was approximately $13.2 million.~~sale.


~~14.~~12.	SUMMARY OF PER SHARE INFORMATION

The following presents a summary of per share data for the three and six months ended September 30, ~~2018~~2019 and ~~2017~~2018 (share amounts presented in thousands).


	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						September 30,						September 30,
Per Share Data:	2018			2017			2018			2017			2019			2018			2019			2018
Investment income¹	$	0.77		$	0.53		$	1.46		$	1.01		$	0.86		$	0.77		$	1.76		$	1.46
Operating expenses¹	(0.41		)	(0.27		)	(0.79		)	(0.53		)	(0.44		)	(0.41		)	(0.91		)	(0.79		)
Income taxes¹	(0.02		)	(0.01		)	(0.04		)	(0.02		)	(0.04		)	(0.02		)	(0.05		)	(0.04		)
Net investment income¹	0.34			0.25			0.63			0.46			0.38			0.34			0.80			0.63
Net realized gain¹	—			0.01			1.16			0.05			0.02			—			0.08			1.16
Net change in unrealized appreciation of investments, net of tax¹	0.06			0.28			(0.67		)	0.37
Net unrealized (depreciation) appreciation on investments, net of tax¹													(0.25		)	0.06			(0.35		)	(0.67		)
Total increase from investment operations	0.40			0.54			1.12			0.88			0.15			0.40			0.53			1.12
Accretive effect of share issuances and repurchases													0.03			—			0.06			—
Dividends to shareholders	(0.44		)	(0.24		)	(1.33		)	(0.45		)	(0.50		)	(0.44		)	(0.99		)	(1.33		)
Spin-off Compensation Plan distribution, net of tax	—			(0.01		)	—			(0.02		)
Exercise of employee stock options²	(0.04		)	—			(0.12		)	—			—			(0.04		)	—			(0.12		)
Forfeiture (issuance) of restricted stock³	—			(0.01		)	—			(0.01		)
Share based compensation expense	0.03			0.03			0.06			0.05			0.04			0.03			0.09			0.06
Other⁴	0.02			(0.01		)	0.03			0.01
(Decrease) increase in net asset value	(0.03		)	0.30			(0.24		)	0.46
Other³													—			0.02			(0.01		)	0.03
Decrease in net asset value													(0.28		)	(0.03		)	(0.32		)	(0.24		)
Net asset value
Beginning of period	18.87			17.96			19.08			17.80			18.58			18.87			18.62			19.08
End of period	$	18.84		$	18.26		$	18.84		$	18.26		$	18.30		$	18.84		$	18.30		$	18.84

Ratios and Supplemental Data
Ratio of operating expenses to average net assets⁵	2.21		%	1.53		%	4.19		%	2.98		%
Ratio of net investment income to average net assets⁵	1.80		%	1.36		%	3.30		%	2.56		%
Ratio of operating expenses to average net assets⁴													2.39		%	2.21		%	4.87		%	4.19		%
Ratio of net investment income to average net assets⁴													2.07		%	1.80		%	4.33		%	3.30		%
Portfolio turnover	2.45		%	5.34		%	17.94		%	13.44		%	3.92		%	2.45		%	8.88		%	17.94		%
Total investment return^5,6	7.23		%	8.02		%	19.58		%	4.04		%
Total return based on change in NAV^5,7	2.17		%	3.01		%	5.71		%	5.11		%
Total investment return^4,5													6.44		%	7.23		%	8.41		%	19.58		%
Total return based on change in NAV^4,6													1.18		%	2.17		%	3.60		%	5.71		%

Per share market value at the end of the period	$	18.98		$	17.13		$	18.98		$	17.13		$	21.80		$	18.98		$	21.80		$	18.98
Weighted-average common shares outstanding	16,319			16,010			16,250			16,010			17,770			16,319			17,654			16,250
Weighted-average fully diluted shares outstanding	16,323			16,078			16,254			16,075			17,770			16,323			17,654			16,254
Common shares outstanding at end of period	16,343			16,019			16,343			16,019			17,927			16,343			17,927			16,343


¹	Based on weighted average of common shares outstanding for the period.


²	Net decrease is due to the exercise of employee stock options at prices less than beginning of period NAV.


³	~~Reflects impact of the different share amounts as a result of issuance or forfeiture of restricted stock during the period.~~


⁴	Includes the impact of the different share amounts as a result of calculating certain per share data based on the weighted-average basic shares outstanding during the period and certain per share data based on the shares outstanding as of a period ~~end.~~end or transaction date.


⁵⁴	Not annualized.


⁶⁵	Total investment return based on purchase of stock at the current market price on the first day and a sale at the current market price on the last day of each period reported on the table and assumes reinvestment of dividends at prices obtained by CSWC’s dividend reinvestment plan during the period. The return does not reflect any sales load that may be paid by an investor.


⁷⁶	Total return based on change in NAV was calculated using the sum of ending NAV plus dividends to shareholders and other non-operating changes during the period, as divided by the beginning NAV, and has not been annualized.


~~15.~~13.	SIGNIFICANT SUBSIDIARIES

Media Recovery, Inc.

Media Recovery, Inc., dba SpotSee Holdings, through its subsidiary, ShockWatch, provides solutions that currently enable over 3,000 customers and some 200 partners in 62 countries to detect mishandling that causes product damage and spoilage during transport and storage. The ShockWatch product portfolio includes impact, tilt, temperature, vibration, and humidity detection systems and is widely used in the energy, transportation, aerospace, defense, food, pharmaceutical, medical device, consumer goods and manufacturing sectors.

At September 30, ~~2018,~~2019, the value of Media Recovery, Inc. represented ~~8.7%~~9.2% of our total assets. Below is certain selected key financial data from its Balance Sheet at September 30, ~~2018~~2019 and March 31, ~~2018~~2019 and Income Statement for the three and six months ended September 30, ~~2018~~2019 and ~~2017~~2018 (amounts in thousands).


	September 30, 2018		March 31, 2018		September 30, 2019		March 31, 2019
Current Assets	$	8,544	$	8,391	$	7,989	$	8,489
Non-Current Assets	23,772		24,727		23,425		23,527
Current Liabilities	3,311		2,559		3,214		3,089
Non-Current Liabilities	2,299		2,228		1,560		1,627


	Three months ended				Six months ended				Three months ended				Six months ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017		September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018
Revenue	$	5,488	$	6,247	$	11,139	$	11,242	$	5,865	$	5,488	$	11,989	$	11,139
Income (loss) from continuing operations	400		628		(32)		920		649		400		1,593		(32)
Net income	400		628		(32)		920		649		400		1,593		(32)

I-45 SLF LLC

In September 2015, we entered into an LLC agreement with Main Street Capital Corporation to form I-45 SLF LLC. I-45 SLF LLC began investing in UMM syndicated senior secured loans during the quarter ended December 31, 2015. The initial equity capital commitment to I-45 SLF LLC totaled $85.0 million, consisting of $68.0 million from CSWC and $17.0 million from Main Street ~~Capital. Approximately $81.0 million~~Capital Corporation, all of which was funded as of September 30, ~~2018, relating to these commitments, of which $64.8 million was from CSWC. As of September 30, 2018, CSWC has unfunded equity commitments outstanding of $3.2 million.~~2019. CSWC owns 80% of I-45 SLF LLC and has a profits interest of 75.6%, while Main Street Capital Corporation owns 20% and has a profits interest of 24.4%. I-45 SLF LLC's Board of Managers makes all investment and operational decisions for the fund, and consists of equal representation from CSWC and Main Street ~~Capital.~~Capital Corporation.

As of September 30, ~~2018~~2019 and March 31, ~~2018,~~2019, I-45 SLF LLC had total assets of ~~$238.2~~$223.9 million and ~~$233.4~~$246.5 million, respectively. I-45 SLF LLC had approximately ~~$229.7~~$214.8 million and ~~$220.8~~$237.5 million of credit investments at fair value as of September 30, ~~2018~~2019 and March 31, ~~2018,~~2019, respectively. The portfolio companies in I-45 SLF LLC are in industries similar to those in which CSWC may invest directly. As of September 30, ~~2018,~~2019, approximately ~~$4.9~~$2.0 million of the credit investments were unsettled trades. During the three months ended September 30, ~~2018,~~2019, I-45 SLF declared a total dividend of ~~$3.1~~$3.3 million of which ~~$2.3~~$2.5 million was paid to CSWC in October ~~2018.~~2019.

Additionally, I-45 SLF LLC closed on a $75.0 million 5-year senior secured credit facility (the “I-45 credit facility”) in November 2015. This facility includes an accordion feature which will allow I-45 SLF LLC to achieve leverage of approximately 2x debt-to-equity. Borrowings under the I-45 credit facility are secured by all of the assets of I-45 SLF LLC and bear interest at a rate equal to LIBOR plus 2.5% per annum. During the year ended March 31, 2017, I-45 SLF LLC increased debt commitments outstanding by an additional $90.0 million by adding three additional lenders to the syndicate, bringing total debt commitments to $165.0 million. In July 2017, the I-45 credit facility was amended to extend the maturity to July 2022. Additionally, the amendment reduced the interest rate on borrowings to LIBOR plus 2.4% per annum. Under the I-45 credit facility, ~~$147.0~~$141.0 million has been drawn as of September 30, ~~2018.~~

2019.

Below is a summary of I-45 SLF LLC’s portfolio, followed by a listing of the individual loans in I-45 SLF LLC’s portfolio as of September 30, ~~2018~~2019 and March 31, ~~2018:~~2019 (in thousands):

I-45 SLF LLC Loan Portfolio as of September 30, ~~2018~~2019

Current

Investment

Maturity

Interest

Investment

Maturity

Interest

Portfolio Company

Industry

Type

Date

Rate¹

Principal

Cost

Fair Value²

Industry

Type

Date

Rate¹

Principal

Cost

Fair Value²

AAC Holdings, Inc.

Healthcare services

First Lien

6/30/2023

L+ 6.75%
(Floor 1.00%)

7,471,638

7,333,817

7,583,712

Healthcare services

First Lien

6/30/2023

L+ 6.75%
(Floor 1.00%), 4.00% PIK

7,301

7,196

5,476

First Lien - Priming Facility

3/31/2020

L+11.00%
(Floor 1.00%)

950

945

950

ADS Tactical, Inc.

Aerospace & defense

First Lien

7/26/2023

L+6.25%

(Floor 1.00%)

4,974

4,951

Allen Media, LLC

Media, marketing & entertainment

First Lien

8/30/2023

L+6.50%
(Floor 1.00%)

5,714,286

5,549,563

5,564,286

Media, marketing & entertainment

First Lien

8/30/2023

L+6.50%
(Floor 1.00%)

5,497

5,370

5,318

American Scaffold Holdings, Inc.

Aerospace & defense

First Lien

3/31/2022

L+6.50%
(Floor 1.00%)

2,700,000

2,675,570

2,686,500

American Teleconferencing Services, Ltd.

Telecommunications

First Lien

12/8/2021

L+6.50%
(Floor 1.00%)

7,084,379

6,791,611

6,858,565

Telecommunications

First Lien

12/8/2021

L+6.50%
(Floor 1.00%)

6,780

6,588

4,278

Ansira Holdings, Inc.³

Business services

First Lien

12/20/2022

L+5.75%
(Floor 1.00%)

4,172,530

4,145,215

4,162,099

Delayed Draw

12/20/2022

L+5.75%
(Floor 1.00%)

63,247

61,450

63,089

ATI Investment Sub, Inc.

Technology products & components

First Lien

6/22/2021

L+7.25%
(Floor 1.00%)

2,811,907

2,773,669

2,777,883

Technology products & components

First Lien

6/22/2021

L+7.25%
(Floor 1.00%)

1,568

1,551

1,500

ATX Canada Acquisitionco Inc.

Technology products & components

First Lien

6/11/2021

L+6.00%
(Floor 1.00%)

4,727,880

4,698,986

4,491,486

Technology products & components

First Lien

6/11/2021

L+6.00%
(Floor 1.00%)

4,594

4,576

4,341

BW NHHC Holdco Inc.

Healthcare

First Lien

5/15/2025

L+5.00%

2,992,500

2,949,871

2,949,498

California Pizza Kitchen, Inc.

Restaurants

First Lien

8/23/2022

L+6.00%
(Floor 1.00%)

6,864,912

6,833,023

6,693,289

Restaurants

First Lien

8/23/2022

L+6.00%
(Floor 1.00%)

6,795

6,771

6,094

Chloe Ox Parent, LLC (Censeo Health)

Healthcare services

First Lien

10/23/2024

L+4.50%
(Floor 1.00%)

5,174,000

5,127,493

5,193,402

CMN.com, LLC

Consumer services

First Lien

11/3/2021

L+6.00%
(Floor 1.00%)

8,494,168

8,413,223

8,494,168

Digital River, Inc.

Software & IT services

First Lien

2/12/2021

L+6.25%
(Floor 1.00%)

8,002,967

7,996,484

8,002,967

Signify Health, LLC

Healthcare services

First Lien

12/23/2024

L+4.50%
(Floor 1.00%)

5,122

5,083

5,116

Corel Inc.

Software & IT services

First Lien

7/2/2026

L+5.00%

5,000

4,750

4,856

Geo Parent Corporation

Building & infrastructure products

First Lien

12/19/2025

L+5.50%

4,975

4,931

4,963

Go Wireless Holdings, Inc.

Retail

First Lien

12/22/2024

L+6.50%
(Floor 1.00%)

6,737,500

6,677,109

6,602,750

Consumer products & retail

First Lien

12/22/2024

L+6.50%
(Floor 1.00%)

6,388

6,339

6,212

The Hoover Group, Inc.

Energy services (Midstream)

First Lien

1/28/2021

L+7.25%
(Floor 1.00%)

1,615,001

1,567,235

1,598,851

Energy services (Midstream)

First Lien

1/28/2021

L+7.25%
(Floor 1.00%)

6,403

6,321

6,019

Hunter Defense Technologies, Inc.

Aerospace & defense

First Lien

3/29/2023

L+7.00%
(Floor 1.00%)

6,418,750

6,299,706

6,354,563

Aerospace & defense

First Lien

3/29/2023

L+7.00%
(Floor 1.00%)

5,966

5,873

5,966

iEnergizer Limited

Business services

First Lien

5/1/2019

L+6.00%
(Floor 1.25%)

8,401,366

8,341,591

8,411,868

Imagine! Print Solutions, LLC

Media, marketing & entertainment

Second Lien

6/21/2023

L+8.75%
(Floor 1.00%)

3,000

2,972

1,568

InfoGroup Inc.

Software & IT services

First Lien

4/3/2023

L+5.00%
(Floor 1.50%)

2,925

2,908

2,877

Integro Parent Inc.

Business services

First Lien

10/31/2022

L+5.75%
(Floor 1.00%)

4,814

4,735

4,682

Current

Investment

Maturity

Interest

Investment

Maturity

Interest

Portfolio Company

Industry

Type

Date

Rate¹

Principal

Cost

Fair Value²

Industry

Type

Date

Rate¹

Principal

Cost

Fair Value²

Imagine! Print Solutions, LLC

Media, marketing & entertainment

Second Lien

6/21/2023

L+8.75%
(Floor 1.00%)

3,000,000

2,964,347

2,602,500

InfoGroup Inc.

Software & IT services

First Lien

4/3/2023

L+5.00%
(Floor 1.50%)

2,955,000

2,932,650

2,952,547

Integro Parent Inc.

Business services

First Lien

10/31/2022

L+5.75%
(Floor 1.00%)

4,863,924

4,757,672

4,876,083

Intermedia Holdings, Inc.

Software & IT services

First Lien

7/21/2025

L+6.00%
(Floor 1.00%)

3,857,142

3,819,317

3,875,232

Software & IT services

First Lien

7/21/2025

L+6.00%
(Floor 1.00%)

5,823

5,791

5,833

Isagenix International, LLC

Healthcare products

First Lien

6/14/2025

L+5.75%
(Floor 1.00%)

2,116,072

2,095,775

2,121,362

Healthcare products

First Lien

6/14/2025

L+5.75%
(Floor 1.00%)

2,008

1,992

1,551

JAB Wireless, Inc.

Telecommunications

First Lien

5/2/2023

L+8.00%
(Floor 1.00%)

7,960,000

7,886,922

Telecommunications

First Lien

5/2/2023

L+8.00%
(Floor 1.00%)

7,900

7,843

7,900

KORE Wireless Group Inc.

Telecommunications

First Lien

12/20/2024

L+5.50%

4,303

4,271

4,276

Lab Logistics, LLC³

Healthcare services

First Lien

9/25/2023

L+6.50
(Floor 1.00%)

1,603

1,588

Delayed Draw Term Loan

9/25/2023

L+6.50

(Floor 1.00%)

3,829

3,789

3,794

Lift Brands, Inc.

Consumer services

First Lien

4/16/2023

L+7.00%
(Floor 1.00%)

4,975,000

4,916,383

Consumer services

First Lien

4/16/2023

L+7.00%
(Floor 1.00%)

4,925

4,880

4,590

Lightbox Intermediate, L.P.

Software & IT services

First Lien

5/9/2026

L+5.00%

2,993

2,950

2,963

LOGIX Holdings Company, LLC

Telecommunications

First Lien

12/22/2024

L+5.75%
(Floor 1.00%)

4,505,068

4,465,000

4,538,856

Telecommunications

First Lien

12/23/2024

L+5.75%
(Floor 1.00%)

5,985

5,945

5,985

LSF9 Atlantis Holdings, LLC

Telecommunications

First Lien

5/1/2023

L+6.00%
(Floor 1.00%)

6,781,250

6,729,089

6,569,336

Telecommunications

First Lien

5/1/2023

L+6.00%
(Floor 1.00%)

6,606

6,567

6,170

Lulu's Fashion Lounge, LLC

Consumer products & retail

First Lien

8/28/2022

L+7.00%
(Floor 1.00%)

4,204,545

4,097,902

4,288,636

Consumer products & retail

First Lien

8/26/2022

L+7.00%
(Floor 1.00%)

3,864

3,782

3,786

Mills Fleet Farm Group LLC

Consumer products & retail

First Lien

10/24/2024

L+6.25%

(Floor 1.00%)

4,963

4,879

4,863

NBG Acquisition, Inc.

Wholesale

First Lien

4/26/2024

L+5.50%
(Floor 1.00%)

2,925,000

2,878,440

2,954,250

Wholesale

First Lien

4/26/2024

L+5.50%
(Floor 1.00%)

2,850

2,813

2,561

New Era Technology, Inc.⁴

Software & IT services

First Lien

6/22/2023

L+6.50%
(Floor 1.00%)

3,281,767

3,219,386

3,248,949

Delayed Draw

6/22/2023

L+6.50%
(Floor 1.00%)

—

(5,113

)

—

New Media Holdings II LLC

Media, marketing & entertainment

First Lien

7/14/2022

L+6.25%
(Floor 1.00%)

7,275

7,268

7,297

Nomad Buyer, Inc.

Healthcare services

First Lien

8/1/2025

L+5.00%

3,000,000

2,822,699

2,895,000

Healthcare services

First Lien

8/1/2025

L+5.00%

2,970

2,820

2,963

New Media Holdings II LLC

Media, marketing & entertainment

First Lien

7/14/2022

L+6.25%
(Floor 1.00%)

8,778,152

8,760,477

8,857,725

Novetta Solutions, LLC

Software & IT services

First Lien

10/17/2022

L+5.00%
(Floor 1.00%)

4,921

4,822

4,831

PaySimple, Inc.⁴

Software & IT services

First Lien

8/23/2025

L+5.50%

3,150

3,088

3,103

Peraton Corp. (fka MHVC Acquisition Corp.)

Aerospace & defense

First Lien

4/29/2024

L+5.25%
(Floor 1.00%)

6,426,904

6,399,718

6,402,803

Aerospace & defense

First Lien

4/29/2024

L+5.25%
(Floor 1.00%)

6,362

6,340

6,314

Pet Supermarket, Inc.

Consumer products & retail

First Lien

7/5/2022

L+5.50%
(Floor 1.00%)

4,879,807

4,849,144

4,806,610

Consumer products & retail

First Lien

7/5/2022

L+5.50%
(Floor 1.00%)

4,835

4,813

4,738

PT Network, LLC⁵

Healthcare products

First Lien

11/30/2021

L+6.50%
(Floor 1.00%)

4,369,332

4,369,334

Delayed Draw

11/30/2021

L+6.50%
(Floor 1.00%)

—

PT Network, LLC

Healthcare services

First Lien

11/30/2021

L+5.50%,
(Floor 1.00%), 2.00% PIK

4,373

4,285

Current

Investment

Maturity

Interest

Investment

Maturity

Interest

Portfolio Company

Industry

Type

Date

Rate¹

Principal

Cost

Fair Value²

Industry

Type

Date

Rate¹

Principal

Cost

Fair Value²

Solaray, LLC⁶

Consumer services

First Lien

9/8/2023

L+6.50%
(Floor 1.00%)

6,276,264

6,235,507

6,276,264

Delayed Draw

9/8/2023

L+6.50%
(Floor 1.00%)

2,082,862

2,068,369

2,080,256

Tacala, LLC

Consumer products & retail

Second Lien

1/30/2026

L+7.00%

3,000,000

2,986,041

3,051,570

Consumer products & retail

Second Lien

1/30/2026

L+7.00%

5,500

5,486

5,482

Teleguam Holdings , LLC

Telecommunications

Second Lien

4/12/2024

L+8.50%
(Floor 1.00%)

2,000,000

1,966,682

2,015,000

Telecommunications

Second Lien

7/25/2024

L+8.50%
(Floor 1.00%)

2,000

1,972

2,013

Terra Millennium Corporation

Industrial products

First Lien

10/31/2022

L+6.25%
(Floor 1.00%)

7,676,019

7,622,068

7,733,589

Industrial products

First Lien

10/31/2022

L+6.75%
(Floor 1.00%)

6,975

6,936

6,914

TestEquity, LLC

Capital equipment

First Lien

4/28/2022

L+5.50%
(Floor 1.00%)

4,848,516

4,813,354

4,785,485

Capital equipment

First Lien

4/28/2022

L+5.50%
(Floor 1.00%)

4,799

4,774

4,641

TGP Holdings III LLC

Durable consumer goods

Second Lien

9/25/2025

L+8.50%
(Floor 1.00%)

2,500,000

2,467,160

2,484,375

Durable consumer goods

Second Lien

9/25/2025

L+8.50%
(Floor 1.00%)

2,500

2,472

2,350

Time Manufacturing Acquisition

Capital equipment

First Lien

2/3/2023

L+5.00%
(Floor 1.00%)

4,922,531

4,887,835

4,910,225

Capital equipment

First Lien

2/3/2023

L+5.00%
(Floor 1.00%)

4,873

4,846

4,891

Turning Point Brands, Inc.

Consumer products & retail

Second Lien

5/7/2024

L+7.00%
(Floor 1.00%)

3,000,000

2,971,805

3,060,000

UniTek Global Services, Inc.⁷

Telecommunications

First Lien

8/27/2023

L+5.50% (Floor 1.00%)

2,500,000

2,475,342

Delayed Draw

8/27/2023

L+5.50% (Floor 1.00%)

—

(2,466

)

—

UniTek Global Services, Inc.

Telecommunications

First Lien

8/26/2024

L+5.50% (Floor 1.00%)

2,972

2,949

2,972

U.S. TelePacific Corp.

Telecommunications

First Lien

5/2/2023

L+5.00%
(Floor 1.00%)

6,844,420

6,769,235

6,750,309

Telecommunications

First Lien

5/2/2023

L+5.00%
(Floor 1.00%)

5,200

5,151

5,073

VIP Cinema Holdings, Inc.

Hotel, gaming & leisure

First Lien

3/1/2023

L+6.00%
(Floor 1.00%)

4,625,000

4,607,932

4,656,797

Hotel, gaming & leisure

First Lien

3/1/2023

L+6.00%
(Floor 1.00%)

4,375

4,362

3,445

Wireless Vision Holdings, LLC⁸

Telecommunications

First Lien

9/29/2022

L+8.50%
(Floor 1.00%)

7,959,799

7,830,103

Wireless Vision Holdings, LLC⁵

Telecommunications

First Lien

9/29/2022

L+8.50%
(Floor 1.00%)

7,572

7,480

7,572

YS Garments, LLC

Retail

First Lien

8/9/2024

L+6.00%
(Floor 1.00%)

5,000,000

4,950,818

4,950,000

Consumer products & retail

First Lien

8/9/2024

L+6.00%
(Floor 1.00%)

4,875

4,835

4,851

Total Investments

228,844,541

229,710,819

223,737

214,762

Represents the interest rate as of September 30, ~~2018.~~2019. All interest rates are payable in cash, unless otherwise noted. The majority of investments bear interest at a rate that may be determined by reference to London Interbank Offered Rate (“LIBOR” or “L”) or Prime (“P”) which reset daily, monthly, quarterly, or semiannually. For each the Company has provided the spread over LIBOR or Prime in effect at September 30, ~~2018.~~2019. Certain investments are subject to a LIBOR or Prime interest rate floor.


²	Represents the fair value determined utilizing a similar process as the Company in accordance with ASC 820. However, the determination of such fair value is determined by the Board of Managers of I-45 SLF LLC. It is not included in the Company’s Board of Directors’ valuation process described elsewhere herein.


³	~~The investment has approximately $0.2 million in an unfunded delayed draw commitment as of September 30, 2018.~~


⁴	~~The investment has approximately $0.3 million in an unfunded delayed draw commitment as of September 30, 2018.~~


⁵	~~The investment has approximately $2.1 million in an unfunded delayed draw commitment as of September 30, 2018.~~


⁶	~~The investment has approximately $0.6 million in an unfunded delayed draw commitment as of September 30, 2018.~~


⁷	The investment has approximately $0.5 million in an unfunded delayed draw commitment as of September 30, ~~2018.~~2019.


⁸⁴	The investment has approximately $1.0 million in an unfunded delayed draw commitment as of September 30, 2019.


⁵	The investment is structured as a first lien last out term ~~loan.~~loan and may earn interest in addition to the stated rate.

I-45 SLF LLC Loan Portfolio as of March 31, ~~2018~~2019

Current

Investment

Maturity

Interest

Investment

Maturity

Interest

Portfolio Company

Industry

Type

Date

Rate¹

Principal

Cost

Fair Value²

Industry

Type

Date

Rate¹

Principal

Cost

Fair Value²

AAC Holdings, Inc.

Healthcare services

First Lien

6/30/2023

L+ 6.75%
(Floor 1.00%)

7,568,046

7,413,688

7,700,487

Healthcare services

First Lien

6/30/2023

L+ 6.75%
(Floor 1.00%),
4.00% PIK

7,375

7,253

6,822

First Lien

3/31/2020

L+11.00%
(Floor 1.00%)

950

940

959

Allen Media, LLC

Media, marketing & entertainment

First Lien

8/30/2023

L+6.50%
(Floor 1.00%)

5,643

5,496

5,481

American Scaffold Holdings, Inc.

Aerospace & defense

First Lien

3/31/2022

L+6.50%
(Floor 1.00%)

2,775,000

2,746,293

2,761,125

Aerospace & defense

First Lien

3/31/2022

L+6.50%
(Floor 1.00%)

2,625

2,605

2,612

American Teleconferencing Services, Ltd.

Telecommunications

First Lien

12/8/2021

L+6.50%
(Floor 1.00%)

7,287,370

6,938,866

7,285,548

Telecommunications

First Lien

12/8/2021

L+6.50%
(Floor 1.00%)

6,881

6,641

4,516

Ansira Holdings, Inc.³

Business services

First Lien

12/20/2022

L+6.50%
(Floor 1.00%)

3,878,182

3,847,470

3,868,486

Delayed Draw

12/20/2022

L+6.50%
(Floor 1.00%)

315,316

310,799

314,527

ATI Investment Sub, Inc.

Technology products & components

First Lien

6/22/2021

L+7.25%
(Floor 1.00%)

3,557,227

3,503,722

3,552,781

Technology products & components

First Lien

6/22/2021

L+7.25%
(Floor 1.00%)

1,818

1,795

1,691

ATX Canada Acquisitionco Inc.

Technology products & components

First Lien

6/11/2021

L+6.00%
(Floor 1.00%)

4,836,742

4,801,504

4,498,170

Technology products & components

First Lien

6/11/2021

L+6.00%
(Floor 1.00%)

4,689

4,666

4,454

Beaver-Visitec International Holdings, Inc.

Healthcare products

First Lien

8/21/2023

L+5.00%
(Floor 1.00%)

4,925,000

4,886,584

4,949,625

California Pizza Kitchen, Inc.

Restaurants

First Lien

8/23/2022

L+6.00%
(Floor 1.00%)

6,899,937

6,863,761

6,775,739

Restaurants

First Lien

8/23/2022

L+6.00%
(Floor 1.00%)

6,830

6,802

6,616

Chloe Ox Parent, LLC (Censeo Health)

Healthcare services

First Lien

12/31/2024

L+5.00%
(Floor 1.00%)

5,200,000

5,149,500

5,265,000

Healthcare services

First Lien

12/23/2024

L+4.50%
(Floor 1.00%)

5,148

5,105

5,148

CMN.com, LLC

Consumer services

First Lien

11/3/2021

L+6.00%
(Floor 1.00%)

8,742,126

8,645,306

8,742,126

Consumer services

First Lien

11/3/2021

L+6.00%
(Floor 1.00%)

9,431

9,347

9,431

Digital River, Inc.

Software & IT services

First Lien

2/12/2021

L+6.50%
(Floor 1.00%)

8,002,967

7,995,112

8,002,967

Software & IT services

First Lien

2/12/2021

L+6.50%
(Floor 1.00%)

8,003

7,998

7,803

Geo Parent Corporation

Building & infrastructure products

First Lien

12/19/2025

L+5.50%

5,000

4,952

4,988

Go Wireless Holdings, Inc.

Retail

First Lien

12/31/2024

L+6.50%
(Floor 1.00%)

6,912,500

6,845,573

6,903,859

Consumer products & retail

First Lien

12/31/2024

L+6.50%
(Floor 1.00%)

6,563

6,508

6,439

Highline Aftermarket Acquisition, LLC

Automobile

First Lien

3/17/2024

L+4.25%
(Floor 1.00%)

2,856,595

2,844,340

2,860,166

Hunter Defense Technologies, Inc.

Aerospace & defense

First Lien

3/29/2023

L+7.00%
(Floor 1.00%)

6,500,000

6,370,152

Aerospace & defense

First Lien

3/29/2023

L+7.00%
(Floor 1.00%)

6,256

6,149

6,256

iEnergizer Limited

Business services

First Lien

5/1/2019

L+6.00%
(Floor 1.25%)

6,550,375

6,421,048

6,558,563

Business services

First Lien

5/1/2019

L+6.00%
(Floor 1.25%)

7,307

7,300

7,307

Imagine! Print Solutions, LLC

Media, marketing & entertainment

Second Lien

6/21/2023

L+8.75%
(Floor 1.00%)

3,000,000

2,960,563

2,760,000

Media, marketing & entertainment

Second Lien

6/21/2023

L+8.75%
(Floor 1.00%)

3,000

2,968

2,700

InfoGroup Inc.

Software & IT services

First Lien

4/3/2023

L+5.00%
(Floor 1.50%)

2,970,000

2,945,028

2,957,021

Software & IT services

First Lien

4/3/2023

L+5.00%
(Floor 1.50%)

2,940

2,920

2,892

Integro Parent Inc.

Business services

First Lien

10/31/2022

L+5.75%
(Floor 1.00%)

4,888,924

4,768,810

4,888,924

Business services

First Lien

10/28/2022

L+5.75%
(Floor 1.00%)

4,839

4,746

4,839

Current
Investment Maturity Interest
Portfolio Company Industry Type Date
Rate¹
Principal Cost
Fair Value²
iPayment Holdings, Inc. Financial services First Lien 4/11/2023 L+5.00%
(Floor 1.50%) 4,987,500
4,987,500
5,049,844
KeyPoint Government Solutions, Inc. Business services First Lien 4/18/2024 L+6.00%
(Floor 1.00%) 4,750,000
4,708,981
4,750,000
LOGIX Holdings Company, LLC Telecommunications First Lien 12/22/2024 L+5.75%
(Floor 1.00%) 4,528,716
4,484,992
4,551,360
LSF9 Atlantis Holdings, LLC Telecommunications First Lien 5/1/2023 L+6.00%
(Floor 1.00%) 6,868,750
6,810,137
6,854,429
Lulu's Fashion Lounge, LLC Consumer products & retail First Lien 8/23/2022 L+7.00%
(Floor 1.00%) 4,374,999
4,254,636
4,506,249
NBG Acquisition, Inc. Wholesale First Lien 4/26/2024 L+5.50%
(Floor 1.00%) 2,962,500
2,911,071
2,973,609
New Media Holdings II LLC Media, marketing & entertainment First Lien 7/14/2022 L+6.25%
(Floor 1.00%) 8,822,598
8,799,522
8,880,518
Peraton Corp. (fka MHVC Acquisition Corp.) Aerospace & defense First Lien 4/29/2024 L+5.25%
(Floor 1.00%) 4,960,013
4,938,405
5,022,013
Pet Supermarket, Inc. Consumer products & retail First Lien 7/5/2022 L+5.50%
(Floor 1.00%) 4,925,000
4,889,928
4,900,375
Polycom, Inc. Telecommunications First Lien 9/27/2023 L+5.25%
(Floor 1.00%) 5,234,833
5,234,833
5,287,182
Prepaid Legal Services, Inc. Consumer services First Lien 7/1/2019 L+5.25%
(Floor 1.25%) 3,860,938
3,859,187
3,860,938
Second Lien 7/1/2020 L+9.00%
(Floor 1.25%) 405,000
398,614
405,000
PT Network, LLC⁴
Healthcare products First Lien 11/30/2021 L+6.50%
(Floor 1.00%) 4,425,133
4,425,133
4,425,133
Redwood Ahead Acquisition, LLC Business services First Lien 11/2/2020 L+ 6.50% 2,811,484
2,767,547
2,829,056
Solaray, LLC⁵
Consumer services First Lien 9/8/2023 L+6.50%
(Floor 1.00%) 6,308,205
6,263,089
6,308,205
Delayed Draw 9/8/2023 L+6.50%
(Floor 1.00%) 1,784,890
1,768,866
1,784,890
Tacala, LLC Consumer products & retail Second Lien 1/31/2026 L+7.00% 3,000,000
2,985,089
3,063,765
Teleguam Holdings , LLC Telecommunications Second Lien 4/12/2024 L+8.50%
(Floor 1.00%) 2,000,000
1,963,812
2,015,000
Terra Millennium Corporation Industrial products First Lien 10/31/2022 L+6.25%
(Floor 1.00%) 7,776,019
7,715,978
7,834,339
TestEquity, LLC Capital equipment First Lien 4/28/2022 L+5.50%
(Floor 1.00%) 4,952,674
4,911,727
4,952,674

Current

Investment

Maturity

Interest

Portfolio Company

Industry

Type

Date

Rate¹

Principal

Cost

Fair Value²

Intermedia Holdings, Inc.

Software & IT services

First Lien

7/21/2025

L+6.00%
(Floor 1.00%)

3,847

3,813

3,857

Isagenix International, LLC

Healthcare products

First Lien

6/16/2025

L+5.75%
(Floor 1.00%)

2,063

2,044

1,851

JAB Wireless, Inc.

Telecommunications

First Lien

5/2/2023

L+8.00%
(Floor 1.00%)

7,920

7,855

7,920

KORE Wireless Group Inc.

Telecommunications

First Lien

12/20/2024

L+5.50%

3,325

3,293

3,308

Lift Brands, Inc.

Consumer services

First Lien

4/16/2023

L+7.00%
(Floor 1.00%)

4,950

4,898

4,742

LOGIX Holdings Company, LLC

Telecommunications

First Lien

12/23/2024

L+5.75%
(Floor 1.00%)

6,017

5,973

6,062

LSF9 Atlantis Holdings, LLC

Telecommunications

First Lien

5/1/2023

L+6.00%
(Floor 1.00%)

6,694

6,648

6,246

Lulu's Fashion Lounge, LLC

Consumer products & retail

First Lien

8/26/2022

L+7.00%
(Floor 1.00%)

4,034

3,940

3,913

Mills Fleet Farm Group LLC

Consumer products & retail

First Lien

10/24/2024

L+6.25%
(Floor 1.00%)

4,988

4,895

4,988

NBG Acquisition, Inc.

Wholesale

First Lien

4/26/2024

L+5.50%
(Floor 1.00%)

2,888

2,846

2,844

New Era Technology, Inc.³

Software & IT services

First Lien

6/22/2023

L+6.50%
(Floor 1.00%)

4,407

4,336

4,349

Delayed Draw Term Loan

6/22/2023

L+6.50%
(Floor 1.00%)

221

222

218

New Media Holdings II LLC

Media, marketing & entertainment

First Lien

7/14/2022

L+6.25%
(Floor 1.00%)

9,312

9,298

9,277

Nomad Buyer, Inc.

Healthcare services

First Lien

8/1/2025

L+5.00%

2,985

2,821

2,907

Novetta Solutions, LLC

Software & IT services

First Lien

10/17/2022

L+5.00%
(Floor 1.00%)

4,947

4,830

4,857

Peraton Corp. (fka MHVC Acquisition Corp.)

Aerospace & defense

First Lien

4/29/2024

L+5.25%
(Floor 1.00%)

6,394

6,370

6,171

Pet Supermarket, Inc.

Consumer products & retail

First Lien

7/5/2022

L+5.50%
(Floor 1.00%)

4,860

4,833

4,763

PT Network, LLC

Healthcare services

First Lien

11/30/2021

L+5.50%
(Floor 1.00%)

4,369

4,125

STL Parent Corp. (American Railcar)

Transportation & logistics

First Lien

12/5/2022

L+7.00%

3,975

3,846

3,856

Current

Investment

Maturity

Interest

Investment

Maturity

Interest

Portfolio Company

Industry

Type

Date

Rate¹

Principal

Cost

Fair Value²

Industry

Type

Date

Rate¹

Principal

Cost

Fair Value²

TGP Holdings III LLC⁶

Durable consumer goods

First Lien

9/25/2024

L+5.00%
(Floor 1.00%)

1,720,169

1,701,604

1,736,296

Second Lien

9/25/2025

L+8.50%
(Floor 1.00%)

2,500,000

2,464,804

2,537,500

Tacala, LLC

Consumer products & retail

Second Lien

1/30/2026

L+7.00%

3,000

2,987

2,995

Teleguam Holdings , LLC

Telecommunications

Second Lien

7/25/2024

L+8.50%
(Floor 1.00%)

2,000

1,970

2,013

Terra Millennium Corporation

Industrial products

First Lien

10/31/2022

L+6.75%
(Floor 1.00%)

7,526

7,478

7,488

TestEquity, LLC

Capital equipment

First Lien

4/28/2022

L+5.50%
(Floor 1.00%)

4,804

4,774

4,766

TGP Holdings III LLC

Durable consumer goods

Second Lien

9/25/2025

L+8.50%
(Floor 1.00%)

2,500

2,470

2,400

The Hoover Group, Inc.

Energy services (midstream)

First Lien

1/28/2021

L+7.25%
(Floor 1.00%)

6,437

6,336

6,243

Time Manufacturing Acquisition

Capital equipment

First Lien

2/3/2023

L+5.00%
(Floor 1.00%)

4,947,519

4,908,622

4,935,150

Capital equipment

First Lien

2/3/2023

L+5.00%
(Floor 1.00%)

4,910

4,879

4,928

Turning Point Brands, Inc.

Consumer products & retail

Second Lien

3/7/2024

L+7.00%
(Floor 1.00%)

3,000,000

2,970,120

3,060,000

Consumer products & retail

Second Lien

3/7/2024

L+7.00%

3,000

2,973

3,030

UniTek Global Services, Inc.

Telecommunications

First Lien

1/13/2019

L+8.50%
(Floor 1.00%)

4,584,809

Telecommunications

First Lien

8/20/2024

L+5.50%
(Floor 1.00%)

2,985

2,960

2,958

US Joiner Holding Company (IMECO and RAACI)

Transportation & logistics

First Lien

4/16/2020

L+6.00%
(Floor 1.00%)

4,459,182

4,425,102

4,436,886

U.S. TelePacific Corp.

Telecommunications

First Lien

5/2/2023

L+5.00%
(Floor 1.00%)

7,643,991

7,550,843

7,441,425

Telecommunications

First Lien

5/2/2023

L+5.00%
(Floor 1.00%)

6,844

6,777

6,661

VIP Cinema Holdings, Inc.

Hotel, gaming & leisure

First Lien

3/1/2023

L+6.00%
(Floor 1.00%)

4,750,000

4,730,480

4,804,934

Hotel, gaming & leisure

First Lien

3/1/2023

L+6.00%
(Floor 1.00%)

4,500

4,485

4,208

Wireless Vision Holdings, LLC⁴

Telecommunications

First Lien

9/29/2022

L+8.50%
(Floor 1.00%),
1.00% PIK

7,865

7,753

7,779

YS Garments, LLC

Consumer products & retail

First Lien

8/9/2024

L+6.00%
(Floor 1.00%)

4,938

4,893

4,870

Total Investments

218,673,550

220,806,845

242,061

237,547

Represents the interest rate as of March 31, ~~2018.~~2019. All interest rates are payable in cash, unless otherwise noted. The majority of investments bear interest at a rate that may be determined by reference to London Interbank Offered Rate (“LIBOR” or “L”) or Prime (“P”Prime”) which reset daily, monthly, quarterly, or semiannually. For each the Company has provided the spread over LIBOR or Prime in effect at March 31, ~~2018.~~2019. Certain investments are subject to a LIBOR or Prime interest rate floor.


²	Represents the fair value determined utilizing a similar process as the Company in accordance with ASC 820. However, the determination of such fair value is determined by the Board of Managers of the Joint Venture. It is not included in the Company’s Board of Directors’ valuation process described elsewhere herein.


³	The investment has approximately $0.3 million in an unfunded delayed draw commitment as of March 31, ~~2018~~. 2019.


⁴	The investment ~~has approximately $2.1 million~~is structured as a first lien last out term loan and may earn interest in ~~an unfunded delayed draw commitment as of~~ ~~March 31, 2018~~.


⁵	~~The investment has approximately $0.9 million in an unfunded delayed draw commitment as of~~ ~~March 31, 2018~~.


⁶	~~The investment has approximately $0.3 million in an unfunded delayed draw commitment as of~~ ~~March 31, 2018~~. addition to the stated rate.

Below is certain summarized financial information for I-45 SLF LLC as of September 30, ~~2018~~2019 and March 31, ~~2018~~2019 and for the three and six months ended September 30, ~~2018~~2019 and ~~September 30, 2017~~2018 (amounts in thousands):


	September 30, 2018		March 31, 2018		September 30, 2019		March 31, 2019
Selected Balance Sheet Information:
Investments, at fair value (cost $228,845 and $218,674)	$	229,711	$	220,807
Investments, at fair value (cost $223,737 and $242,061)					$	214,762	$	237,547
Cash and cash equivalents	5,665		9,317		6,944		6,406
Due from broker	—		330		—		—
Deferred financing costs and other assets	1,862		2,111		1,367		1,615
Interest receivable	978		813		857		979
Total assets	$	238,216	$	233,378	$	223,930	$	246,547

Senior credit facility payable	$	147,000	$	143,000	$	141,000	$	160,000
Payable for unsettled transactions	4,930		3,213		1,995		940
Other liabilities	3,281		3,119		3,484		3,606
Total liabilities	$	155,211	$	149,332	$	146,479	$	164,546
Members’ equity	83,005		84,046		77,451		82,001
Total liabilities and members' equity	$	238,216	$	233,378	$	223,930	$	246,547


	Three Months Ended				Six Months Ended				Three Months Ended					Six Months Ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017		September 30, 2019			September 30, 2018		September 30, 2019		September 30, 2018
Selected Statement of Operations Information:
Total revenues	$	5,150	$	4,349	$	10,021	$	8,300	$	5,284		$	5,150	$	10,926	$	10,021
Total expenses	(2,069)		(1,643)		(4,130)		(3,195)		(2,082)			(2,069)		(4,322)		(4,130)
Net investment income	3,081		2,706		5,891		5,105		3,202			3,081		6,604		5,891
Net unrealized appreciation	(433)		(281)		(1,267)		(60)
Net unrealized depreciation									(3,491)			(433)		(4,462)		(1267)
Net realized gains	74		324		271		938		236			74		361		271
Net increase in members’ equity resulting from operations	$	2,722	$	2,749	$	4,895	$	5,983	$	(53	)	$	2,722	$	2,503	$	4,895


14.	SUBSEQUENT EVENTS

On October 23, 2019, the Company's Board of Directors declared a total dividend of $0.50 per share, comprised of a regular dividend of $0.40 and a supplemental dividend of $0.10, for the quarter ended December 31, 2019. The record date for the dividend is December 20, 2019. The payment date for the dividend is December 31, 2019.

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES

Consolidated Schedule of Investments in and Advances to Affiliates (Unaudited)

Six Months Ended September 30, ~~2018~~2019

(amounts in thousands)


Portfolio Company	Type of Investment (1)	Amount of Interest or Dividends Credited in Income (2)		Fair Value at March 31, 2018		Amount of Realized Gain/(Loss)		Amount of Unrealized Gain/(Loss)			Gross Additions (3)		Gross Reductions (4)			Fair Value at September 30, 2018		Type of Investment (1)	Amount of Interest or Dividends Credited in Income (2)		Fair Value at March 31, 2019		Gross Additions (3)		Gross Reductions (4)			Amount of Realized Gain/(Loss) (5)		Amount of Unrealized Gain/(Loss)			Fair Value at September 30, 2019
Control Investments
I-45 SLF LLC	80% LLC equity interest	$	4,488	$	67,113	$	—	$	(787	)	$	—	$	—		$	66,326	80% LLC equity interest	$	5,332	$	65,743	$	—	$	—		$	—	$	(3,834	)	$	61,909

Prism Spectrum Holdings, LLC	First lien	471		4,241		—		134			8,965		—			13,340		First Lien	265		13,461		7		(13,461		)	226		(233		)	—
	Revolving loan	72		490		—		21			1,475		(500		)	1,486		96,498.32 Class A units	—		6,539		—		(6,539		)	—		—			—
	96,498.32 Class A units	—		1,692		—					4,847		—			6,539

Media Recovery, Inc.	800,000 shares Series A Convertible Preferred Stock, convertible into 800,000 shares common stock	238		6,371		—		252			—		—			6,623		800,000 shares of Series A convertible preferred stock	350		7,795		—		—			—		184			7,979
	4,000,002 shares common stock	1,371		36,751		—		1,453			—		—			38,204		4,000,002 shares of common stock	1,750		44,965		—		—			—		1,064			46,029

TitanLiner, Inc.	1,189,609 shares Series B convertible preferred stock (6% PIK)	29		11,362		6,913		(8,436		)	29		(9,868		)	—
Total Control Investments																			$	7,697	$	138,503	$	7	$	(20,000	)	$	226	$	(2,819	)	$	115,917
	339,277 shares Series A convertible preferred stock	—		11,928		11,706		(8,724		)	—		(14,910		)	—
Total Control Investments		$	6,669	$	139,948	$	18,619	$	(16,087	)	$	15,316	$	(25,278	)	$	132,518
Affiliate Investments
Chandler Signs, LLC																		Senior subordinated debt (12.00% cash)	$	299	$	4,480	$	20	$	—		$	—	$	69		$	4,569
																		1,500,000 units of Class A-1 common stock	8		1,937		—		—			—		777			2,714

Dynamic Communities, LLC																		Revolving Loan	2		—		—		—			—		—			—
																		First Lien	591		10,972		20		(140		)	—		(19		)	10,833
																		2,000,000 Preferred units	11		2,849		—		—			—		—			2,849

ITA Holdings Group, LLC																		Revolving Loan	145		2,000		1,206		(1,481		)	—		(2		)	1,723
																		First Lien - Term Loan	480		7,475		1,496		(666		)	10		168			8,483
																		First Lien - Term B Loan	289		3,829		738		(333		)	6		133			4,373
																		First Lien - PIK Note A	153		2,005		95		—			—		78			2,178
																		First Lien - PIK Note B	4		79		3		—			—		4			86
																		Warrants	—		1,557		—		—			—		1,352			2,909


Portfolio Company	Type of Investment (1)	Amount of Interest or Dividends Credited in Income (2)		Fair Value at March 31, 2018		Amount of Realized Gain/(Loss)		Amount of Unrealized Gain/(Loss)			Gross Additions (3)			Gross Reductions (4)			Fair Value at September 30, 2018		Type of Investment (1)	Amount of Interest or Dividends Credited in Income (2)		Fair Value at March 31, 2019		Gross Additions (3)		Gross Reductions (4)			Amount of Realized Gain/(Loss) (5)		Amount of Unrealized Gain/(Loss)				Fair Value at September 30, 2019
Affiliate Investments
Chandler Signs, LLC	Senior subordinated debt (12.00% cash)	$	302	$	4,376	$	—	$	(22	)	$	30		$	—		$	4,384
	1,500,000 units of Class A-1 common stock	—		1,934		—		(439		)	—			—			1,495		9.25% Class A membership interest	—		923		—		—			—		1,322				2,245

Dynamic Communities, LLC	First lien	252		—		—		—			10,984			—			10,984
	Revolving loan	1		—		—		5			(5		)	—			—
	2,000,000 Preferred units	—		—		—		—			2,000			—			2,000

Elite SEM, Inc.	First lien	1,083		17,500		77		79			2,446			(20,102		)	—
	1,443 Preferred units; 1,443 Class A Common units	82		1,879		—		(87		)	716			(2,508		)	—

ITA Holdings Group, LLC	First lien	555		9,314		—		(206		)	16			(118		)	9,006
	First lien - Term Loan B	60		—		—		(42		)	1,963			(13		)	1,908
	Revolving loan	18		—		—		(5		)	988			(250		)	733
Roseland Management, LLC																			Revolving Loan	9		—		4		—			—		(4		)		—
	Delayed draw term loan	85		1,470		—		(32		)	2			(9		)	1,431		First Lien	517		10,474		15		(52		)	—		(16		)		10,421
	9.25% Class A membership interest	—		1,500		—		(442		)	—			—			1,058		10,000 Class A Units	—		1,487		—		—			—		302				1,789

SIMR, LLC	First lien	91		—		—		—			11,457			—			11,457		First Lien	676		11,403		21		(335		)	1		(545		)		10,545
	5,724,000 Class B Common units	—		—		—		—			5,724			—			5,724		5,724,000 Class B Common Units	—		5,724		—		—			—		(2,402		)	��	3,322

Zenfolio Inc.	First lien	796		13,325		—		(39		)	27			(68		)	13,245		Revolving Loan	7		—		2		—			—		(2		)		—
	Revolving loan	8		—		—		(2		)	2			—			—		First Lien	879		13,165		1,042		—			—		(190		)		14,017
	190 shares of common stock	—		1,900		—		(307		)	—			—			1,593		190 shares of common stock	—		546		—		—			—		—				546

Total Affiliate Investments		$	3,333	$	53,198	$	77	$	(1,539	)	$	36,350		$	(23,068	)	$	65,018		$	4,070	$	80,905	$	4,662	$	(3,007	)	$	17	$	1,025			$	83,602
Total Control & Affiliate Investments		$	10,002	$	193,146	$	18,696	$	(17,626	)	$	51,666		$	(48,346	)	$	197,536		$	11,767	$	219,408	$	4,669	$	(23,007	)	$	243	$	(1,794	)		$	199,519


(1)	The principal amount and ownership detail as shown in the Consolidated Schedules of Investments.


(2)	Represents the total amount of interest or dividends credited to income for the portion of the year an investment was included in the Control or Affiliate categories, respectively.


(3)	Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments, accrued PIK interest, and accretion of OID. Gross additions also include movement of an existing portfolio company into this category and out of a different category.


(4)	Gross reductions include decreases in the cost basis of investments resulting from principal repayments or sales and the exchange of one or more existing securities for one or more new securities. Gross reductions also include movement of an existing portfolio company out of this category and into a different category.


(5)	The schedule does not reflect realized gains or losses on escrow receivables for investments which were previously exited and were not held during the period presented. Gains and losses on escrow receivables are classified in the Consolidated Statements of Operations according to the control classification at the time the investment was exited.


Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto ~~included~~appearing elsewhere in ~~our Annual~~this Quarterly Report on Form ~~10-K for the fiscal year ended March 31, 2018 as filed with the SEC on June 5, 2018, (the “Form 10-K”).~~10-Q.

The information contained herein may contain “forward-looking statements” based on our current expectations, assumptions and estimates about us and our industry. These forward-looking statements involve risks and uncertainties. Words such as “may,” “predict,” “will,” “continue,” “likely,” “would,” “could,” “should,” “expect,” “anticipate,” “potential,” “estimate,” “indicate,” “seek,” “believe,” “target,” “intend,” “plan,” or “project” and other similar expressions identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements that are subject to risks, uncertainties and assumptions. Our actual results could differ materially from those we express in the forward-looking statements as a result of several factors more fully described in “Risk Factors” and elsewhere in our Form 10-K for the fiscal year ended March 31, ~~2018~~2019 and in this Form 10-Q. The forward-looking statements made in this Form 10-Q relate only to events as of the date on which the statements are made. You should read the following discussion in conjunction with the consolidated financial statements and related footnotes and other financial information included in our Form 10-K for the fiscal year ended March 31, ~~2018.~~2019. We undertake no obligation to update publicly any forward-looking statements for any reason, whether as a result of new information, future events or otherwise, except as required by law.

OVERVIEW

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

We seek to fill the financing gap for LMM companies, which, historically, have had more limited access to financing from commercial banks and other traditional sources. The underserved nature of the LMM creates the opportunity for us to meet the financing needs of LMM companies while also negotiating favorable transaction terms and equity participations. Our ability to invest across a LMM company’s capital structure, from secured loans to equity securities, allows us to offer portfolio companies a comprehensive suite of financing options. Providing customized financing solutions is important to LMM companies. We generally seek to partner directly with financial sponsors, entrepreneurs, management teams and business owners in making our investments. Our LMM debt investments typically include senior loans with a first lien on the assets of the portfolio company, as well as subordinated debt which may either be secured or unsecured subordinated loans. Our LMM debt investments typically have a term of between five and seven years from the original investment date. We also often seek to invest in the equity securities of our LMM portfolio companies.

Our investments in UMM companies primarily consist of direct investments in or secondary purchases of interest bearing debt securities in privately held companies that are generally larger in size than the LMM companies included in our portfolio. Our UMM debt investments are generally secured by either a first or second priority lien on the assets of the

portfolio company and typically have an expected duration of between three and seven years from the original investment date.

Because we are internally managed, we do not pay any external investment advisory fees, but instead directly incur the operating costs associated with employing investment and portfolio management professionals. We believe that our internally managed structure provides us with a beneficial operating expense structure when compared to other publicly traded and privately held investment firms which are externally managed, and our internally managed structure allows us the opportunity to leverage our non-interest operating expenses as we grow our investment portfolio. For the six months ended September 30, ~~2018~~2019 and ~~2017,~~2018, the ratio of our annualized second quarter operating expenses, excluding interest expense, as a percentage of our quarterly average total assets was ~~3.05%~~2.87% and ~~4.03%~~3.05%, respectively.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

The preparation of our consolidated financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses for the periods covered by the consolidated financial statements. We have identified investment valuation and revenue recognition as our most critical accounting estimates. On an on-going basis, we evaluate our estimates, including those related to the matters below. These estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions or conditions. A discussion of our critical accounting policies follows.

Valuation of Investments

The most significant determination inherent in the preparation of our consolidated financial statements is the valuation of our investment portfolio and the related amounts of unrealized appreciation and depreciation. As of September 30, ~~2018~~2019 and March 31, ~~2018,~~2019, our investment portfolio at fair value represented approximately ~~95.2%~~92.1% and ~~94.2%~~95.0%, respectively, of our total assets. We are required to report our investments at fair value. We follow the provisions of Accounting Standards Codification, or ASC 820, Fair Value Measurements and Disclosures ("ASC 820"). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements. ASC 820 requires us to assume that the portfolio investment is to be sold in the principal market to independent market participants, which may be a hypothetical market. See Note 4 — “Fair Value Measurements” in the notes to consolidated financial statements for a detailed discussion of our investment portfolio valuation process and procedures.

Due to the inherent uncertainty in the valuation process, our determination of fair value for our investment portfolio may differ materially from the values that would have been determined had a ready market for the securities actually existed. In addition, changes in the market environment, portfolio company performance, and other events may occur over the lives of the investments that may cause the gains or losses ultimately realized on these investments to be materially different than the valuations currently assigned. We determine fair value of each individual investment and record changes in fair value as unrealized appreciation or depreciation.

Our Board of Directors is responsible for determining, in good faith, the fair value of our investments and our valuation procedures, consistent with the 1940 Act requirements. Our Board of Directors believes that our investment portfolio as of September 30, ~~2018~~2019 and March 31, ~~2018~~2019 reflects the fair value as of those dates based on the markets in which we operate and other conditions in existence on those reporting dates.

Revenue Recognition

Interest and Dividend Income

Interest and dividend income is recorded on an accrual basis to the extent amounts are expected to be collected. Dividend income is recognized on the date dividends are declared by the portfolio company or at the point an obligation exists for the portfolio company to make a distribution. Discounts/premiums received to par on loans purchased are capitalized and accreted or amortized into income over the life of the loan using the effective interest method. In accordance

with our valuation policy, accrued interest and dividend income is evaluated quarterly for collectability. When we do not expect the debtor to be able to service all of its debt or other obligations, we will generally establish a reserve against interest

income receivable, thereby placing the loan or debt security on non-accrual status, and cease to recognize interest income on that loan or debt security until the borrower has demonstrated the ability and intent to pay contractual amounts due. If a loan or debt security’s status significantly improves regarding its ability to service debt or other obligations, it will be restored to accrual basis. As of September 30, ~~2018,~~2019, we ~~did not have any~~had two investments on non-accrual status, ~~or past due~~which comprised of approximately 2.6% of our total investment portfolio's fair value and approximately 3.6% of its ~~contractual payment obligation.~~cost. As of March 31, 2019, we had one investment on non-accrual status, which comprised of approximately 1.6% of our total investment portfolio's fair value and approximately 1.9% of its cost.

Recently Issued Accounting Standards

In February 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. The standard requires the use of a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, which affects narrow aspects of the guidance issued in the amendments in ASU 2016-02. The new guidance is effective for annual periods beginning after December 15, 2018, and interim periods therein. ~~Early application is permitted. While we continue~~CSWC adopted ASU 2016-02 effective April 1, 2019. Under ASC 842, CSWC evaluates leases to ~~assess~~determine if the ~~effect of adoption, we~~leases are considered financing or operating leases. The Company currently ~~believe the single change relates to the recognition of a new right-of-use asset and lease liability on our consolidated balance sheet for our office space operating lease. We currently have~~has one operating lease for office space for which the Company has recorded a right-of-use asset and dolease liability for the operating lease obligation. Non-lease components (maintenance, property tax, insurance and parking) are not ~~expect~~included in the lease cost. The lease expense is presented as a ~~significant change in our leasing activity between now and adoption.~~

~~In May 2014,~~single lease cost that is amortized on a straight-line basis over the ~~FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606). ASU 2014-09 supersedes the revenue recognition requirements under SAC Topic 605,~~ ~~Revenue Recognition, and~~ ~~most industry-specific guidance throughout the Industry Topics~~life of the ASC. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Under the new guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The new guidance will significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. Additionally, the guidance requires improved disclosures as to the nature, amount, timing and uncertainty of revenue that is recognized. In May 2016, the FASB issued ASU No. 2016-12, ~~Revenue from Contracts with Customers (Topic 606)—Narrow-Scope Improvements and Practical Expedients~~. This ASU clarified guidance on assessing collectability, presenting sales tax, measuring noncash consideration, and certain transition matters. The new guidance is effective for the annual reporting period beginning after December 15, 2017, including interim periods within that reporting period. The Company adopted ASU 2014-09 effective April 1, 2018 and determined that its material financial contracts are excluded from the scope of ASU 2014-09. As a result of the scope exception for financial contracts, the Company's management has determined that there were no material changes to the recognition timing and classification of revenues and expenses; additionally, the adoption of ASU 2014-09 did not have a significant impact on pretax income or on the consolidated financial statement disclosures.

In March 2019, the SEC issued Final Rule Release No. 33-10618, FAST Act Modernization and Simplification of Regulation S-K, which amends certain SEC disclosure requirements. The amendments are intended to simplify certain disclosure requirements, improve readability and navigability of disclosure documents, and discourage repetition and disclosure of immaterial information. The amendments are effective for all filings submitted on or after May 2, 2019. The Company adopted the requisite amendments effective May 2, 2019. As it pertains to the Company for this Form 10-Q, there were no significant changes to the Company’s consolidated financial position or disclosures.

INVESTMENT PORTFOLIO COMPOSITION

Our LMM investments consist of secured debt, subordinated debt, equity warrants and direct equity investments in privately held, LMM companies based in the United States. Our LMM portfolio companies generally have annual EBITDA between $3.0 million and $15.0 million, and our LMM investments typically range in size from $5.0 million to $25.0 million. The LMM debt investments are typically secured by either a first or second priority lien on the assets of the portfolio company, generally bear interest at floating rates, and generally have a term of between five and seven years from the original investment date.

Our UMM investments consist of direct investments in or secondary purchases of interest-bearing debt securities in privately held companies based in the United States that are generally larger in size than the LMM companies included in our portfolio with EBITDA generally greater than $50.0 million. Our UMM investments typically range in size from $5.0 million to $15.0 million. Our UMM debt investments are generally secured by ether a first or second priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date.

The total value of our investment portfolio was ~~$491.6~~$538.9 million as of September 30, ~~2018,~~2019, as compared to ~~$393.1~~$524.1 million as of March 31, ~~2018.~~2019. As of September 30, ~~2018,~~2019, we had investments in 3639 portfolio companies with an aggregate cost of ~~$445.1~~$498.2 million. As of March 31, ~~2018,~~2019, we had investments in 3037 portfolio companies with an aggregate cost of ~~$335.4~~$478.1 million.

As of September 30, ~~2018~~2019 and March 31, ~~2018,~~2019, approximately ~~$314.8~~$367.3 million, or ~~93.5%~~94.9%, and ~~$220.3~~$348.2 million, or ~~92.1%~~94.7%, respectively, of our debt investment portfolio (at fair value) bore interest at floating rates, of which ~~88.4%~~88.8% and ~~94.2%~~87.8%, respectively, were subject to contractual minimum interest rates. As of September 30, ~~2018~~2019 and March 31, ~~2018,~~2019, approximately ~~$21.9~~$19.9 million, or ~~6.5%~~5.1%, and ~~$18.8~~$19.5 million, or ~~7.9%~~5.3%, respectively, of our debt investment portfolio (at fair value) bore interest at fixed rates.

The following tables provide a summary of our investments in LMM and UMM companies as of September 30, ~~2018~~2019 and March 31, ~~2018~~2019 (excluding our investment in I-45 SLF LLC):


	As of September 30, 2018						As of September 30, 2019
	LMM (a)			UMM			LMM (a)			UMM
	(dollars in thousands)						(dollars in thousands)
Number of portfolio companies	24			11			27			11
Fair value	$	337,776		$	87,499		$	384,180		$	92,787
Cost	$	293,306		$	87,013		$	328,833		$	101,320
% of portfolio at cost - debt	84.5		%	100.0		%	89.2		%	100.0		%
% of portfolio at cost - equity	15.5		%	0.0		%	10.8		%	0.0		%
% of debt investments at cost secured by first lien	74.1		%	79.1		%	78.2		%	85.4		%
Weighted average annual effective yield ~~(c)~~(b)	11.9		%	10.8		%	12.0		%	8.4		%
Weighted average EBITDA (c)	$	8,996		$	66,743		$	8,230		$	68,785
Weighted average leverage through CSWC security (c)(d)	3.4x			3.8x
Weighted average leverage through CSWC security (d)							3.5x			3.7x


(a)	At September 30, ~~2018,~~2019, we had equity ownership in approximately ~~75.0%~~70.4% of our LMM investments.

(b)

The weighted-average annual effective yields were computed using the effective interest rates during the quarter for all debt investments at cost as of September 30, ~~2018,~~2019, including accretion of original issue discount but excluding fees payable upon repayment of the debt ~~instruments and any debt investments on non-accrual status.~~instruments. As of September 30, ~~2018,~~2019, there were notwo investments on non-accrual status. Weighted-average annual effective yield is not a return to shareholders and is higher than what an investor in shares in our common stock will realize on its investment because it does not reflect our expenses or any sales load paid by an investor.


(c)	Weighted average ~~metrics are~~EBITDA metric is calculated using investment cost basis weighting. For the quarter ended September 30, 2019, one portfolio company is excluded from this calculation due to a reported debt to adjusted EBITDA ratio that was not meaningful.

(d)

Includes CSWC debt investments only. Calculated as the amount of each portfolio company’s debt (including CSWC’s position and debt senior or pari passu to CSWC’s position, but excluding debt subordinated to CSWC’s position) in the capital structure divided by each portfolio company’s adjusted EBITDA. Weighted average leverage is calculated using investment cost basis weighting. Management uses this metric as a guide to evaluate relative risk of its position in each portfolio debt investment. For the quarter ended September 30, 2019, one portfolio company is excluded from this calculation due to a reported debt to adjusted EBITDA ratio that was not meaningful.


	As of March 31, 2018						As of March 31, 2019
	LMM (a)			UMM			LMM (a)			UMM
	(dollars in thousands)						(dollars in thousands)
Number of portfolio companies	19			10			26			10
Fair value	$	259,116		$	66,866		$	377,792		$	80,536
Cost	$	204,331		$	66,266		$	325,343		$	84,712
% of portfolio at cost - debt	83.5		%	100.0		%	87.5		%	100.0		%
% of portfolio at cost - equity	16.5		%	—			12.5		%	—
% of debt investments at cost secured by first lien	74.2		%	65.2		%	76.6		%	82.6		%
Weighted average annual effective yield ~~(c)~~(b)	11.9		%	10.2		%	12.2		%	9.7		%
Weighted average EBITDA (c)	$	8,600		$	86,200		$	9,200		$	66,531
Weighted average leverage through CSWC security (c)(d)	3.3x			4.3x
Weighted average leverage through CSWC security (d)							3.3x			4.8x


(a)	At March 31, ~~2018,~~2019, we had equity ownership in approximately ~~73.7%~~73.1% of our LMM investments.

(b)

The weighted-average annual effective yields were computed using the effective interest rates during the quarter for all debt investments at cost as of March 31, ~~2018,~~2019, including accretion of original issue discount but excluding fees payable upon repayment of the debt ~~instruments and any debt investments on non-accrual status.~~instruments. As of March 31, ~~2018,~~2019, there ~~were no investments~~was one investment on non-accrual status. Weighted-average annual effective yield is not a return to shareholders and is higher than what an investor in shares in our common stock will realize on its investment because it does not reflect our expenses or any sales load paid by an investor.


(c)	Weighted average ~~metrics are~~EBITDA metric is calculated using investment cost basis weighting. For the quarter ended September 30, 2019, one portfolio company is excluded from this calculation due to a reported debt to adjusted EBITDA ratio that was not meaningful.

(d)

~~As of September 30, 2018 and March 31, 2018, our investment portfolio consisted of the following investments:~~

Percentage of Percentage of
Fair Value Total Portfolio Cost Total Portfolio

September 30, 2018:
First lien loans¹
$ 287,808
58.5 % $ 286,246
64.3 %
Second lien loans 30,026
6.1
29,529
6.6
Subordinated debt 18,883
3.8
18,937
4.3
Preferred equity 24,150
4.9
15,777
3.5
Common equity & warrants 64,408
13.2
29,830
6.7
I-45 SLF LLC²
66,326
13.5
64,800
14.6
$ 491,601
100.0 % $ 445,119
100.0 %

March 31, 2018:
First lien loans $ 197,110
50.1 % $ 194,820
58.1 %
Second lien loans 23,229
5.9
23,092
6.9
Subordinated debt 18,783
4.8
18,885
5.6
Preferred equity 36,545
9.3
16,666
5.0
Common equity & warrants 50,315
12.8
17,134
5.1
I-45 SLF LLC²
67,113
17.1
64,800
19.3
$ 393,095
100.0 % $ 335,397
100.0 %


¹	Included in first lien loans are loans structured as first lien last out loans. These loans may in certain cases be subordinated in payment priority to other senior secured lenders. As of September 30, 2018 and March 31, 2018, the fair value of the first lien last out loans are $23.0 million and $26.9 million, respectively.

I-45 SLF LLC is a joint venture between CSWC and Main Street Capital. This entity primarily invests in syndicated senior secured loans in the UMM. The portfolio companies held by I-45 SLF LLC represent a diverse set of industry classifications, which are similar to those in which CSWC invests directly. We own 80.0% of I-45 SLF LLC and have a profits interest of 75.6%, while Main Street Capital owns 20.0% and has a profits interest of 24.4%. I-45 SLF LLC’s Board of Managers makes all investment and operational decisions for the fund, and consists of equal representation from our Company and Main Street Capital. The Company does not guarantee or otherwise obligate itself to make payments on debts owed by I-45 SLF LLC.

Portfolio Asset Quality

We utilize an internally developed investment rating system to rate the performance and monitor the expected level of returns for each debt investment in our portfolio. The investment rating system takes into account both quantitative and qualitative factors of the portfolio company and the investments held therein, including each investment's expected level of returns and the collectability of our debt investments, comparisons to competitors and other industry participants and the portfolio company's future outlook. The ratings are not intended to reflect the performance or expected level of returns of our equity investments.

Investment Rating 1 represents the least amount of risk in our portfolio. The investment is performing materially above underwriting expectations and the trends and risk factors are generally favorable.

Investment Rating 2 indicates the investment is performing as expected at the time of underwriting and the trends and risk factors are generally favorable to neutral.

Investment Rating 3 involves an investment performing below underwriting expectations and the trends and risk factors are generally neutral to negative. The portfolio company or investment may be out of compliance with

financial covenants and interest payments may be impaired, however principal payments are generally not past due.

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

The following table shows the distribution of our debt portfolio investments on the 1 to 4 investment rating scale at fair value as of September 30, ~~2018~~2019 and March 31, ~~2018:~~2019:


	As of September 30, 2018
	Debt
	Investments at		Percentage of		As of September 30, 2019
Investment Rating	Fair Value		Debt Portfolio		Debt Investments at Fair Value		Percentage of Debt Portfolio
	(dollars in thousands)				(dollars in thousands)
1	$	8,055	2.4	%	$	51,379	13.3	%
2	315,584		93.7		308,208		79.6
3	13,078		3.9		20,623		5.3
4	—		—		6,958		1.8
Total	$	336,717	100.0	%	$	387,168	100.0	%


	As of March 31, 2018
	Debt
	Investments at		Percentage of		As of March 31, 2019
Investment Rating	Fair Value		Debt Portfolio		Debt Investments at Fair Value		Percentage of Debt Portfolio
	(dollars in thousands)				(dollars in thousands)
1	$	8,194	3.4	%	$	61,897	16.8	%
2	217,989		91.2		284,041		77.3
3	12,939		5.4		21,789		5.9
4	—		—		—		—
Total	$	239,122	100.0	%	$	367,727	100.0	%

Interest and dividend income is recorded on an accrual basis to the extent amounts are expected to be collected. When we do not expect the debtor to be able to service all of its debt or other obligations, we will generally establish a reserve against interest income receivable, thereby placing the loan or debt security on non-accrual status, and cease to recognize interest income on that loan or debt security until the borrower has demonstrated the ability and intent to pay contractual amounts due.

As of September 30, ~~2018 and March 31, 2018,~~2019, we ~~did not have any~~had two debt investments on non-accrual ~~status.~~status, which comprised of approximately 2.6% of our total investment portfolio's fair value and approximately 3.6% of its cost. As of March 31, 2019, we had one investment on non-accrual status, which comprised of approximately 1.6% of our total investment portfolio's fair value and approximately 1.9% of its cost.

Investment Activity

During the six months ended September 30, 2019, we made new debt investments in three portfolio companies totaling $46.1 million, follow-on debt investments in five portfolio companies totaling $17.0 million, and an equity investment in one existing and one new portfolio company totaling $1.6 million. We received contractual principal repayments totaling approximately $13.6 million and full prepayments of approximately $27.5 million from two portfolio companies. In addition, we received proceeds from sales of investments totaling $7.3 million.

During the six months ended September 30, 2018, we made new debt investments in nine portfolio companies totaling $128.3 million, follow-on debt investments in six portfolio companies totaling $21.5 million, and equity investments in three existing and five new portfolio company totaling $17.9 million. We received contractual principal repayments totaling approximately $5.8 million and full prepayments of approximately $18.3 million from three portfolio companies. In addition, we received proceeds from sales and return of capital of investments totaling $53.6 million and recognized realized gains on those sales totaling $18.7 million.

During the six months ended September 30, 2017, we made new debt investments in six portfolio companies totaling $55.2 million, follow-on debt investments in one portfolio company totaling $4.6 million, and equity investments in one existing and three new portfolio company totaling $5.4 million. We also funded $4.0 million on our existing equity commitment to I-45 SLF LLC. We received contractual principal repayments totaling approximately $5.6 million and full prepayments of approximately $35.6 million from seven portfolio companies.

Total portfolio investment activity for the six months ended September 30, ~~2018~~2019 and ~~2017~~2018 was as follows (dollars in thousands):


									Preferred &
	First Lien			Second Lien			Subordinated		Common			I-45 SLF,
Six months ended September 30, 2018	Loans			Loans			Debt		Equity			LLC			Total
Six months ended September 30, 2019																		First Lien Loans			Second Lien Loans			Subordinated Debt			Preferred & Common Equity			I-45 SLF, LLC			Total
Fair value, beginning of period	$	197,110		$	23,229		$	18,783	$	86,860		$	67,113		$	393,095		$	317,544		$	35,896		$	14,287		$	90,601		$	65,743		$	524,071
New investments	138,485			11,359			—		17,853			—			167,697			63,105			—			—			1,620			—			64,725
Proceeds from sales of investments	(28,805		)	—			—		(24,767		)	—			(53,572		)	—			—			—			(7,271		)	—			(7,271		)
Principal repayments received	(19,138		)	(5,000		)	—		—			—			(24,138		)	(40,409		)	(125		)	—			—			—			(40,534		)
PIK interest earned	—			—			23		113			—			136			307			261			12			71			—			651
Accretion of loan discounts	610			47			30		—			—			687			864			79			25			—			—			968
Realized gain	274			31			—		18,608			—			18,913			570			—			—			988			—			1,558
Unrealized gain (loss)	(728		)	360			47		(10,109		)	(787		)	(11,217		)	(4,335		)	(823		)	(90		)	3,790			(3,834		)	(5,292		)
Fair value, end of period	$	287,808		$	30,026		$	18,883	$	88,558		$	66,326		$	491,601		$	337,646		$	35,288		$	14,234		$	89,799		$	61,909		$	538,876
Weighted average yield on debt investments at end of period															11.61		%																11.02		%
Weighted average yield on total investments at end of period															11.02		%																11.10		%


										Preferred &
	First Lien			Second Lien			Subordinated			Common			I-45 SLF,
Six months ended September 30, 2017	Loans			Loans			Debt			Equity			LLC		Total
Six months ended September 30, 2018																		First Lien Loans			Second Lien Loans			Subordinated Debt		Preferred & Common Equity			I-45 SLF, LLC			Total
Fair value, beginning of period	$	107,817		$	47,176		$	12,453		$	56,039		$	63,395	$	286,880		$	197,110		$	23,229		$	18,783	$	86,860		$	67,113		$	393,095
New investments	45,323			—			14,406			5,441			4,000		69,170			138,485			11,359			—		17,853			—			167,697
Proceeds from sales of investments	—			—			—			(15		)	—		(15		)	(28,805		)	—			—		(24,767		)	—			(53,572		)
Principal repayments received	(17,930		)	(15,179		)	(8,100		)	—			—		(41,209		)	(19,138		)	(5,000		)	—		—			—			(24,138		)
PIK interest earned	—			—			—			142			—		142			—			—			23		113			—			136
Accretion of loan discounts	304			54			25			—			—		383			610			47			30		—			—			687
Realized gain	465			241			114			14			—		834			274			31			—		18,608			—			18,913
Unrealized gain (loss)	146			53			(52		)	5,522			6		5,675			(728		)	360			47		(10,109		)	(787		)	(11,217		)
Fair value, end of period	$	136,125		$	32,345		$	18,846		$	67,143		$	67,401	$	321,860		$	287,808		$	30,026		$	18,883	$	88,558		$	66,326		$	491,601
Weighted average yield on debt investments at end of period															10.71		%															11.61		%
Weighted average yield on total investments at end of period															10.65		%															11.02		%

RESULTS OF OPERATIONS

The composite measure of our financial performance in the Consolidated Statements of Operations is captioned “Net increase in net assets from operations” and consists of three elements. The first is “Net investment income,” which is the difference between income from interest, dividends and fees and our combined operating and interest expenses, net of applicable income taxes. The second element is “Net realized gain on investments before income tax,” which is the difference between the proceeds received from the disposition of portfolio securities and their stated cost. The third element is the “Net ~~change in~~ unrealized (depreciation) appreciation ofon investments, net of tax,” which is the net change in the market or fair value of our investment portfolio, compared with stated cost. It should be noted that the “Net realized gain on investments before income tax” and “Net ~~change in~~ unrealized (depreciation) appreciation ofon investments, net of tax” are directly related in that when an appreciated portfolio security is sold to realize a gain, a corresponding decrease in net unrealized appreciation occurs by transferring the gain associated with the transaction from being “unrealized” to being “realized.” Conversely, when a loss is realized on a depreciated portfolio security, an increase in net unrealized appreciation occurs.

Comparison of three months ended September 30, ~~2018~~2019 and September 30, ~~2017~~2018


	Three Months Ended											Three Months Ended
	September 30,						Net Change					September 30,						Net Change
	2018			2017			Amount			%		2019			2018			Amount			%
	(in thousands)											(in thousands)
Total investment income	$	12,595		$	8,509		$	4,086		48.0	%	$	15,218		$	12,595		$	2,623		20.8	%
Interest expense	(3,109		)	(911		)	(2,198		)	241.3	%	(3,716		)	(3,109		)	(607		)	19.5	%
Other operating expenses	(3,684		)	(3,527		)	(157		)	4.5	%	(4,121		)	(3,684		)	(437		)	11.9	%
Income before taxes	5,802			4,071			1,731			42.5	%	7,381			5,802			1,579			27.2	%
Income tax expense	256			134			122			91.0	%	566			256			310			121.1	%
Net investment income	5,546			3,937			1,609			40.9	%	6,815			5,546			1,269			22.9	%
Net realized gain on investments before income tax	94			210			(116		)	(55.2	)%	283			94			189			201.1	%
Net change in unrealized appreciation on investments, net of tax	948			4,496			(3,548		)	(78.9	)%
Net unrealized (depreciation) appreciation on investments, net of tax												(4,369		)	948			(5,317		)	(560.9	)%
Net increase in net assets from operations	$	6,588		$	8,643		$	(2,055	)	(23.8	)%	$	2,729		$	6,588		$	(3,859	)	(58.6	)%

Investment Income

Total investment income consisted of interest income, management fees, dividend income and other income for each applicable period. For the three months ended September 30, ~~2018, Capital Southwest~~2019, we reported investment income of ~~$12.6~~$15.2 million, a ~~$4.1~~$2.6 million, or ~~48.0%~~20.8%, increase as compared to the three months ended September 30, ~~2017.~~2018. The increase was primarily due to a ~~$4.0~~$2.0 million, or ~~74.9%~~21.7%, increase in interest income from our debt investments, ~~due to~~which was a ~~59.1%~~result of a 17.9% increase in the cost basis of our debt investments from ~~$279.8~~$334.7 million to ~~$445.1~~$394.5 million ~~year over year in addition to an increase in the weighted average yield on debt investments from 10.71% to 11.61%~~ year over year.

Operating Expenses

Due to the nature of our business, the majority of our operating expenses are related to interest and fees on our borrowings, employee compensation (including both cash and share-based compensation) and general and administrative expenses.

Interest and Fees on our Borrowings

For the three months ended September 30, ~~2018,~~2019, our total interest expense was ~~$3.1~~$3.7 million, an increase of ~~$2.2~~$0.6 million as compared to the total interest expense of ~~$0.9~~$3.1 million for the three months ended September 30, ~~2017.~~2018. The increase was primarily attributable to an increase of ~~$52.8~~$53.8 million in average borrowings on our Credit Facility and an increase of $8.5 million in average borrowings related to the December 2022 Notes outstanding during the three months ended September 30, ~~2018~~2019 as compared to the three months ended September 30, ~~2017, as well as~~ 2018. This increase was offset by a decrease in

the ~~issuance of $75.7 million of~~weighted average interest rate on our Credit Facility from 5.42% to 5.00% during the ~~December 2022 Notes.~~three months ended September 30, 2018 and during the three months ended September 30, 2019, respectively.

Salaries, General and Administrative Expenses

For the three months ended September 30, ~~2018,~~2019, our total employee compensation expense (including both cash and share-based compensation) ~~was~~remained flat at $2.4 million, ~~an increase of $0.2 million, or 13.0%,~~ as compared to the total employee compensation expense of ~~$2.2 million~~ for the three months ended September 30, ~~2017. The increase was primarily due to an increase in headcount.~~2018. For the three months ended September 30, ~~2018,~~2019, our total general and administrative expense was ~~$1.2~~$1.7 million, ~~a decrease~~an increase of ~~$0.2~~$0.5 million or ~~9.2%~~39.5%, as compared to the total general and administrative expense of ~~$1.4~~$1.2 million for the three months ended September 30, ~~2017.~~2018. The ~~decrease~~increase was primarily due to ~~a decrease in employee recruitment expenses.~~the write off of deferred offering costs of approximately $0.5 million related to our previous registration statement on Form N-2 during the quarter ended September 30, 2019.

Net Investment Income

For the three months ended September 30, ~~2018,~~2019, income before taxes increased by ~~$1.7~~$1.6 million, or ~~42.5%~~27.2%. Net investment income increased from the prior year period by ~~$1.6~~$1.3 million, or ~~40.9%~~22.9%, to ~~$5.5~~$6.8 million as a result of a ~~$4.1~~$2.6 million increase in total investment income, offset by a ~~$0.1~~$0.3 million increase in income tax expense and a ~~$2.2~~$0.6 million increase in interest expense.

Increase in Net Assets from Operations

During the three months ended September 30, 2019, we recognized realized gains totaling $0.3 million, which consisted of gains on the full repayment of one non-control/non-affiliate investment and partial repayments on two non-control/non-affiliate investments and one affiliate investment.

In addition, during the three months ended September 30, 2019, we recorded net unrealized depreciation on investments totaling $4.4 million, consisting primarily of net unrealized depreciation on our current portfolio of $3.6 million, the reversal of $0.3 million of net unrealized appreciation recognized in prior periods due to realized gains noted above, and net unrealized depreciation related to deferred tax associated with the Taxable Subsidiary of $0.5 million. Net unrealized depreciation on our current portfolio included unrealized gains on Vistar Media Inc. of $1.7 million, ITA Holdings Group, LLC of $1.7 million and Chandler Signs, LLC of $0.6 million, offset by unrealized losses on I-45 SLF LLC of $2.9 million, SIMR, LLC of $2.5 million and AAC Holdings, Inc. of $1.4 million. These unrealized gains and losses were due to changes in fair value based on the overall EBITDA performance and cash flows of each investment.

During the three months ended September 30, 2018, we recognized realized gains totaling $0.1 million, which consisted of gains on the full ~~repayments~~repayment of one non-control/non-affiliate investments and the sale of one affiliate investment.

In addition, during the three months ended September 30, 2018, we recorded a net ~~change in~~ unrealized ~~appreciation of~~depreciation on investments totaling $0.9 million, consisting ~~primarily~~ of net unrealized appreciation on our current portfolio of $0.9 million. Net unrealized appreciation on our current portfolio included unrealized gains on Vistar Media Inc. of $0.6 million, Deepwater Corrosion Services of $0.5 million and Alliance Sports Group, L.P. of $0.5 million, offset by unrealized losses on ITA Holdings Group, LLC of $0.7 million. These unrealized gains and losses were due to changes in fair value based on the overall EBITDA performance and cash flows of each investment.

~~During the three months ended September 30, 2017, we recognized realized gains totaling $0.2 million, which consisted of net gains on the full repayment of three non-control/non-affiliate investment.~~

In addition, during the three months ended September 30, 2017, we recorded a net change in unrealized appreciation of investments totaling $4.5 million, consisting of net unrealized appreciation on our current portfolio of $4.5 million, the reversal of $0.1 million of net unrealized appreciation recognized in prior periods due to realized gains noted above, and net unrealized appreciation related to deferred tax associated with the Taxable Subsidiary of $0.1 million. Net unrealized appreciation on our current portfolio included unrealized gains on Media Recovery, Inc. of $4.1 million and TitanLiner, Inc. of $2.4 million, partially offset by unrealized losses on Deepwater Corrosion Services of $1.2 million. These unrealized gains and losses were due to changes in fair value based on the overall EBITDA performance and cash flows of each investment.

Comparison of six months ended September 30, ~~2018~~2019 and September 30, ~~2017~~2018


	Six Months Ended											Six Months Ended
	September 30,						Net Change					September 30,						Net Change
	2018			2017			Amount			%		2019			2018			Amount			%
	(in thousands)											(in thousands)
Total investment income	$	23,702		$	16,233		$	7,469		46.0	%	$	31,017		$	23,702		$	7,315		30.9	%
Interest expense	(5,482		)	(1,649		)	(3,833		)	232.4	%	(7,522		)	(5,482		)	(2,040		)	37.2	%
Other operating expenses	(7,422		)	(6,933		)	(489		)	7.1	%	(8,430		)	(7,422		)	(1,008		)	13.6	%
Income before taxes	10,798			7,651			3,147			41.1	%	15,065			10,798			4,267			39.5	%
Income tax (benefit) expense	635			278			357			128.4	%
Income tax expense												890			635			255			40.2	%
Net investment income	10,163			7,373			2,790			37.8	%	14,175			10,163			4,012			39.5	%
Net realized gain on investments before income tax	18,913			834			18,079			2,167.7	%	1,500			18,913			(17,413		)	(92.1	)%
Net change in unrealized appreciation on investments, net of tax	(10,835		)	5,880			(16,715		)	(284.3	)%
Net unrealized (depreciation) appreciation on investments, net of tax												(6,233		)	(10,835		)	4,602			(42.5	)%
Net increase in net assets from operations	$	18,241		$	14,087		$	4,154		29.5	%	$	9,442		$	18,241		$	(8,799	)	(48.2	)%

Investment Income

Total investment income consisted of interest income, management fees, dividend income and other income for each applicable period. For the six months ended September 30, ~~2018, Capital Southwest~~2019, we reported investment income of ~~$23.7~~$31.0 million, a ~~$7.5~~$7.3 million, or ~~46.0%~~30.9%, increase as compared to the six months ended September 30, ~~2017.~~2018. The increase was primarily due to a ~~$7.2~~$5.7 million, or ~~73.6%~~33.8%, increase in interest income from our debt investments, ~~due to~~which resulted from a ~~59.1%~~17.9% increase in the cost basis of our debt investments from ~~$279.8~~$334.7 million to ~~$445.1~~$394.5 million ~~year over year in addition to an increase in the weighted average yield on debt investments from 10.71% to 11.61%~~ year over year.

Operating Expenses

Interest and Fees on our Borrowings

For the six months ended September 30, ~~2018,~~2019, our total interest expense was ~~$5.5~~$7.5 million, an increase of ~~$3.8~~$2.0 million as compared to the total interest expense of ~~$1.6~~$5.5 million for the six months ended September 30, ~~2017.~~2018. The increase was primarily attributable to an increase of ~~$43.5~~$71.0 million in average borrowings on our Credit Facility and an increase of $13.9 million in average borrowings related to the December 2022 Notes outstanding during the six months ended September 30, ~~2018~~2019 as compared to the six months ended September 30, ~~2017, as well as~~2018. The increase also included the ~~issuance~~amortization of ~~$75.7~~$0.2 million of the ~~December 2022 Notes.~~remaining debt issuance costs associated with the ATM debt distribution agreement. This increase was offset by a decrease in the weighted average interest rate on our Credit Facility from 5.31% to 5.08% during the six months ended September 30, 2018 and during the six months ended September 30, 2019, respectively.

Salaries, General and Administrative Expenses

For the six months ended September 30, ~~2018,~~2019, our total employee compensation expense (including both cash and share-based compensation) was ~~$4.8~~$5.3 million, an increase of $0.5 million or ~~11.3%~~8.7%, as compared to the total employee compensation expense of ~~$4.3~~$4.8 million for the six months ended September 30, ~~2017.~~2018. The increase was primarily due to the incremental compensation costs related to the restricted stock award modification and an increase in headcount. For the six months ended September 30, ~~2018,~~2019, our total general and administrative expense ~~remained flat at $2.6~~was $3.2 million, an increase of $0.6 million or 22.6%, as compared to the total general and administrative expense of $2.6 million for the six months ended September 30, ~~2017.~~2018. The increase was primarily due to the write off of deferred offering costs of approximately $0.5 million related to our previous registration statement on Form N-2 during the quarter ended September 30, 2019.

Net Investment Income

For the six months ended September 30, ~~2018,~~2019, income before taxes increased by ~~$3.1~~$4.3 million, or ~~41.1%~~39.5%. Net investment income increased from the prior year period by ~~$2.8~~$4.0 million, or ~~37.8%~~39.5%, to ~~$10.2~~$14.2 million as a result of a ~~$7.5~~

$7.3 million increase in total investment income, offset by a ~~$0.4~~$0.3 million increase in income tax expense and a ~~$3.8~~$2.0 million increase in interest expense.

Increase in Net Assets from Operations

During the six months ended September 30, 2019, we recognized realized gains totaling $1.5 million, which consisted of gains on the full repayment of one non-control/non-affiliate and one control investment and partial repayments on nine non-control/non-affiliate investments and two affiliate investments.

In addition, during the six months ended September 30, 2019, we recorded net unrealized depreciation on investments totaling $6.2 million, consisting primarily of net unrealized depreciation on our current portfolio of $3.6 million, the reversal of $2.0 million of net unrealized appreciation recognized in prior periods due to realized gains noted above, and net unrealized depreciation related to deferred tax associated with the Taxable Subsidiary of $0.6 million. Net unrealized depreciation on our current portfolio included unrealized gains on ITA Holdings Group, LLC of $3.1 million, Vistar Media Inc. of $3.4 million and Media Recovery, Inc. of $1.2 million, offset by unrealized losses on I-45 SLF LLC of $3.8 million, SIMR, LLC of $2.9 million and AAC Holdings, Inc. of $1.6 million. These unrealized gains and losses were due to changes in fair value based on the overall EBITDA performance and cash flows of each investment.

During the six months ended September 30, 2018, we recognized realized gains totaling $18.9 million, which consisted of gains on the partial repayments of four non-control/non-affiliate investments, full repayments of three non-control/non-affiliate investments and the sale of one control and one affiliate investment.

In addition, during the six months ended September 30, 2018, we recorded a net ~~change in~~ unrealized ~~appreciation of~~depreciation on investments totaling $10.8 million, consisting of net unrealized appreciation on our current portfolio of $6.3 million, the reversal of $17.5 million of net unrealized appreciation recognized in prior periods due to realized gains noted above, and net unrealized appreciation related to deferred tax associated with the Taxable Subsidiary of $0.4 million. Net unrealized appreciation on our current portfolio included unrealized gains on Deepwater Corrosion Services, Inc. of $5.2 million and Media Recovery, Inc. of $1.7 million, offset by unrealized losses on ITA Holdings Group, LLC of $0.7 million. These unrealized gains and losses were due to changes in fair value based on the overall EBITDA performance and cash flows of each investment.

During the six months ended September 30, 2017, we recognized realized gains totaling $0.8 million, which consisted of net gains on the partial repayments of two non-control/non-affiliate investments, full repayment on seven non-control/non-affiliate investment, and the sale of one non-control/non-affiliate equity investment.

In addition, during the six months ended September 30, 2017, we recorded a net change in unrealized appreciation of investments totaling $5.9 million, consisting of net unrealized appreciation on our current portfolio of $6.0 million, the reversal of $0.3 million of net unrealized appreciation recognized in prior periods due to realized gains noted above, and net unrealized appreciation related to deferred tax associated with the Taxable Subsidiary of $0.2 million. Net unrealized appreciation on our current portfolio included unrealized gains on TitanLiner, Inc. of $8.5 million, Media Recovery, Inc. of $2.0 million and Vistar Media Inc. of $1.4 million, partially offset by unrealized losses on Deepwater Corrosion Services of $5.3 million. These unrealized gains and losses were due to changes in fair value based on the overall EBITDA performance and cash flows of each investments.

FINANCIAL LIQUIDITY AND CAPITAL RESOURCES

Management believes that the Company’s cash and cash equivalents, cash available from investments, and commitments under the Credit Facility are adequate to meet its needs for the next twelve months.

Cash Flows

For the six months ended September 30, 2019, we experienced a net increase in cash and cash equivalents in the amount of $20.1 million. During that period, our operating activities used $1.4 million in cash, consisting primarily of new portfolio investments of $64.7 million, partially offset by $40.0 million from sales and repayments received from debt investments in portfolio companies and $7.3 million from sales and return of capital of equity investments in portfolio companies. In addition, our financing activities increased cash by $21.5 million, consisting primarily of proceeds from the October 2024 Notes of $63.7 million, as well as the Equity ATM Program of $8.9 million, partially offset by net repayments on our Credit Facility of $33.0 million and cash dividends paid in the amount of $17.6 million. At September 30, 2019, the Company had cash and cash equivalents of approximately $30.0 million.

For the six months ended September 30, 2018, we experienced a net increase in cash and cash equivalents in the amount of $2.3 million. During that period, our operating activities used $78.1 million in cash, consisting primarily of new portfolio investments of $167.7 million, partially offset by $52.6 million ~~from~~of sales and repayments received from debt investments in portfolio companies and $24.9 million from sales and return of capital of equity investments in portfolio companies. In addition, our financing activities increased cash by $80.4 million, consisting primarily of proceeds from net borrowings under the Credit Facility of $87.0 million and proceeds from the December 2022 Notes of $18.1 million, partially offset by cash dividends paid in the amount of $26.2 million. At September 30, 2018, the Company had cash and cash equivalents of approximately $10.2 million.

For the six months ended September 30, 2017, we experienced a net increase in cash and cash equivalents in the amount of $10.9 million. During that period, our operating activities used $9.4 million in cash, consisting primarily of new portfolio investments of $69.2 million, partially offset by $40.4 million of sales and repayments received from debt investments in portfolio companies. In addition, our financing activities increased cash by $20.3 million, consisting primarily of proceeds from net borrowings under the Credit Facility of $31.0 million, partially offset by cash dividends paid in the amount of $10.5 million. At September 30, 2017, the Company had cash and cash equivalents of approximately $33.3 million.

Financing Transactions

In accordance with the 1940 Act, with certain limitations, effective April 25, 2019, the Company is only allowed to borrow amounts such that its asset coverage (i.e., the ratio of assets less liabilities not represented by senior securities to senior securities such as borrowings), calculated pursuant to the 1940 Act, is at least ~~200% (or, pursuant to the 1940 Act,~~ 150% ~~if certain requirements are met as described in our Annual Report on Form 10-K in the Business Section under “Regulation as a Business Development Company-Senior Securities”)~~ after such borrowing. On April 25, 2018, the Board of Directors unanimously approved the application of the recently modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act. As a result, the minimum asset coverage ratio applicable to the Company will be decreased from 200% to 150%, effective April 25, 2019. The Board of Directors also approved a resolution which limits the Company’s issuance of senior securities such that the asset coverage ratio, taking into account any such issuance, would not be less than 166%, which became effective April 25, 2019. As of September 30, ~~2018,~~2019, the Company’s asset coverage was ~~252%~~231%.

Credit Facility

On December 21, 2018, CSWC entered into the Amended and Restated Senior Secured Revolving Credit Agreement (the "Credit Agreement"), and a related Amended and Restated Guarantee, Pledge and Security Agreement, to amend and restate its Credit Facility. The Credit Agreement (1) increased the total commitments by $60 million from $210 million to an aggregate total of $270 million, provided by a diversified group of nine lenders, (2) increased the Credit Facility's accordion feature to $350 million under the Credit Facility from new and existing lenders on the same terms and conditions as the existing commitments, (3) reduced the interest rate on borrowings from LIBOR plus 3.00% to LIBOR plus 2.50%, subject to certain conditions as outlined in the Credit Agreement, (4) reduced the minimum asset coverage with respect to senior securities representing indebtedness from 200% to 150% after the date on which such minimum asset coverage is permitted to be reduced by the Company under applicable law, and (5) extended the Credit Facility's revolving period from November 16, 2020 to December 21, 2022 and the final maturity was extended from November 16, 2021 to December 21, 2023.

On May 23, 2019, CSWC entered into an Incremental Assumption Agreement, which increased the total commitments under the Credit Facility, by $25 million. The increase was executed under the accordion feature of the Credit Facility and increased total commitments from $270 million to $295 million.

December 2022 Notes

All issuances of December 2022 Notes rank equally in right of payment and form a single series of notes.

As of September 30, ~~2018,~~2019, the carrying amount of the December 2022 Notes was ~~$73.4~~$75.6 million on an aggregate principal amount of ~~$75.7~~$77.1 million at a weighted average effective yield of 5.93%. As of September 30, ~~2018,~~2019, the fair value of the December 2022 Notes was ~~$77.0~~$80.5 million. The fair value is based on the closing price of the security on The Nasdaq Global Select Market, which is a Level 1 input under ASC 820. The Company recognized interest expense related to the December 2022 Notes, including amortization of deferred issuance costs of ~~$1.2~~$1.3 million and ~~$2.2~~$2.8 million, respectively, for the three and six months ended September 30, ~~2018.~~2019. For the three and six months ended September 30, 2018, the Company recognized interest expense of $1.2 million and $2.2 million, respectively. Average borrowings for both the three and six months ended September 30, 2019 were $77.1 million. For the three and six months ended September 30, 2018, average borrowings were $68.6 and $63.2 million, respectively.

of its capital stock, or purchase any such capital stock, unless, in every such case, at the time of the declaration of any such dividend or distribution, or at the time of any such purchase, the Company has the minimum asset coverage required pursuant to Section 61 of the 1940 Act, or any successor provision thereto, after deducting the amount of such dividend, distribution or purchase price, as the case may be, giving effect to any exemptive relief granted to the Company by the SEC and (iii) a requirement to provide financial information to the holders of the December 2022 Notes and the trustee under the indenture if the Company should no longer be subject to the reporting requirements under the Securities Exchange ~~Act.~~Act of 1934, as amended, (the "Exchange Act"). The indenture and supplement relating to the December 2022 Notes also provides for customary events of default. As of September 30, ~~2018,~~2019, the Company was in compliance with all covenants of the December 2022 Notes.

October 2024 Notes

In September 2019, the Company issued $65.0 million in aggregate principal amount of 5.375% Notes due 2024 (the “Existing October 2024 Notes”). Subsequent to quarter end, on October 8, 2019, the Company issued an additional $10.0 million in aggregate principal amount of the October 2024 Notes (the "Additional October 2024 Notes" together with the Existing October 2024 Notes, the "October 2024 Notes"). The Additional October 2024 Notes are being treated as a single series with the Existing October 2024 Notes under the indenture and have the same terms as the Existing October 2024 Notes. The October 2024 Notes mature on October 1, 2024 and may be redeemed in whole or in part at any time prior to July 1, 2024, at par plus a “make-whole” premium, and thereafter at par. The October 2024 Notes bear interest at a rate of 5.375% per year, payable semi-annually on April 1 and October 1 of each year, beginning on April 1, 2020. The October 2024 Notes are the direct unsecured obligations of the Company and rank pari passu with our other outstanding and future unsecured unsubordinated indebtedness and are effectively subordinated to all of our existing and future secured indebtedness, including borrowings under our Credit Facility.

of the October 2024 Notes was $65.2 million. This is a Level 3 fair value measurement under ASC 820 based on a valuation model using a discounted cash flow analysis. The Company recognized interest expense related to the October 2024 Notes, including amortization of deferred issuance costs, of $0.1 million for both the three and six months ended September 30, 2019. Average borrowings for the three and six months ended September 30, 2019 were $2.8 million and $1.4 million, respectively.

Equity Capital Activities

In January 2016, our board of directors approved a share repurchase program authorizing us to repurchase up to $10 million in the aggregate of our outstanding common stock in the open market at certain thresholds below our net asset value per share, in accordance with Rules 10b-18 under the Exchange Act. During the six months ended September 30, ~~2018, we~~2019, the Company did not repurchase any shares of the Company's common stock under the ~~stock~~share repurchase program. Cumulative to date, we have repurchased a total of ~~35,911~~46,363 shares of our common stock in the open market under the stock repurchase program, at an average price of ~~$16.37,~~$16.67, including commissions paid, leaving approximately ~~$9.4~~$9.2 million available for additional repurchases under the program.

On March 4, 2019, the Company entered into separate equity distribution agreements with certain sales agents pursuant to which we may offer and sell, from time to time, shares of our common stock having an aggregate offering price of up to $50,000,000 (the "Equity ATM Program"). During the three months ended September 30, 2019, the Company sold 231,272 shares of its common stock under the Equity ATM Program at a weighted-average price of $21.62 per share, raising $5.0 million of gross proceeds. Net proceeds were $4.9 million after commissions to the sales agents on shares sold. During the six months ended September 30, 2019, the Company sold 426,821 shares of its common stock under the Equity ATM Program at a weighted-average price of $21.64 per share, raising $9.2 million of gross proceeds. Net proceeds were $9.1 million after commissions to the sales agents on shares sold. Cumulative to date, the Company has sold 690,477 shares of its common stock under the Equity ATM Program at a weighted-average price of $21.57, raising $14.9 million of gross proceeds.

We anticipate that we will continue to fund our investment activities through existing cash and cash equivalents, cash flows generated through our ongoing operating activities, utilization of available borrowings under our Credit Facility and future issuances of debt and equity on terms we believe are favorable to the Company and our shareholders. Our primary uses of funds will be investments in portfolio companies and operating expenses.

In order to satisfy the Internal Revenue Code requirements applicable to a RIC, we intend to distribute to our stockholders, after consideration and application of our ability under the Internal Revenue Code to carry forward certain excess undistributed taxable income from one tax year into the next tax year, substantially all of our taxable income.

CONTRACTUAL OBLIGATIONS

As shown below, we had the following contractual obligations as of September 30, ~~2018.~~2019.


	Payments Due By Period										Payments Due By Period
	(In thousands)										(in thousands)
	Total		Less than		1-3 Years		3-5 Years		More Than		Total		Less than		1-3 Years				3-5 Years		More Than
Contractual Obligations			1 Year						5 Years		Total		1 Year					5 Years
Operating lease obligations	$	897	$	252	$	645	$	—	$	—	$	645	$	261	1-3 Years		$	384	3-5 Years		$	—	$	—
Credit Facility (1)	148,807		6,963		141,844		—		—		131,130		5,490		10,950				114,690		—
December 2022 Notes (2)	95,101		4,613		9,239		81,249		—		92,078		4,666		9,307				78,105		—
October 2024 Notes (2)											82,770		1,815		7,085				7,094		66,776
	$	244,805	$	11,828	$	151,728	$	81,249	$	—	$	306,623	$	12,232	$	27,726			$	199,889	$	66,776


(1)	Amounts include interest payments calculated at an average rate of ~~5.42%~~5.00% of outstanding credit facility borrowings, which were ~~$127.0~~$108.0 million as of September 30, ~~2018.~~2019.


(2)	Includes interest payments.

OFF-BALANCE SHEET ARRANGEMENTS

We may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. These instruments may include commitments to extend credit and fund equity capital and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized in the balance sheet.

At September 30, ~~2018~~2019 and March 31, ~~2018,~~2019, we had a total of approximately ~~$26.9~~$16.7 million and ~~$11.6~~$17.7 million, respectively, in currently unfunded commitments (as discussed in Note 1110 to the Consolidated Financial Statements). Included within the total unfunded commitments as of September 30, ~~2018~~2019 were commitments to issue letters of credit through a financial intermediary on behalf of certain portfolio companies. As of September 30, ~~2018~~2019, we had ~~$3.3~~$3.4 million in letters of credit issued and outstanding under these commitments on behalf of the portfolio companies. For the letters of credit issued and outstanding, we would be required to make payments to third parties if the portfolio companies were to default on their related payment obligations. Of these letters of credit, ~~$3.3~~$3.4 million expire in May ~~2019.~~2020. As of September 30, ~~2018,~~2019, none of the letters of credit issued and outstanding were recorded as a liability on the Company's balance sheet as such letters of credit are considered in the valuation of the investments in the portfolio company.

The Company believes its assets will provide adequate coverage to satisfy these commitments. As of September 30, ~~2018,~~2019, the Company had cash and cash equivalents of ~~$10.2~~$30.0 million and ~~$83.0~~$183.6 million in available borrowings under the Credit Facility.

~~RECENT DEVELOPMENTS~~

On October 4, 2018, the Company issued an aggregate of 700,000 shares of the Company's common stock at a net price of $18.90 per share. Of the 700,000 shares sold, 100,000 shares were sold to certain institutional investors in a direct registered offering and 600,000 shares were sold in a "best efforts" underwritten offering. The total net proceeds of the offerings, before expenses, was approximately $13.2 million.


Item 3.	Quantitative and Qualitative Disclosures about Market Risk

We are subject to market risk. Market risk includes risk that arise from changes in interest rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. The prices of securities held by us may decline in response to certain events, including those directly involving the companies in which we invest; conditions affecting the general economy; overall market changes; legislative reform; local, regional, national or global political, social or economic instability; and interest rate fluctuations.

Interest Rate Risk

We are subject to interest rate risk. Interest rate risk is defined as the sensitivity of our current and future earnings to interest rate volatility, variability of spread relationships, the difference in re-pricing internals between our assets and

liabilities and the effect that interest rates may have on our cash flows. Changes in the general level of interest rates can affect our net interest income, which is the difference between the interest income earned on interest earning assets and our interest expense incurred in connection with our interest-bearing liabilities. Changes in interest rates can also affect, among other things, our ability to acquire and originate loans and securities and the value of our investment portfolio. Our net investment income is affected by fluctuations in various interest rates including LIBOR and prime rates. However, the interest rates on our December 2022 and October 2024 Notes are fixed for the life of such debt. Our risk management systems and procedures are designed to identify and analyze our risk, to set appropriate policies and limits and to continually monitor these risks. We regularly measure exposure to interest rate risk and determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates. As of September 30, ~~2018,~~2019, we were not a party to any hedging arrangements.

As of September 30, ~~2018,~~2019, approximately ~~93.5%~~94.9% of our debt investment portfolio (at fair value) bore interest at floating rates, ~~88.4%~~88.8% of which were subject to contractual minimum interest rates. A hypothetical 100 basis point increase in interest rates could increase our net investment income by a maximum of ~~$2.6~~$3.2 million, or ~~$0.16~~$0.18 per share, on an annual basis. A hypothetical 100 basis point decrease in interest rates could decrease our net investment income by a maximum of $2.4 million, or ~~$0.15~~$0.13 per share, on an annual basis. Our Credit Facility bears interest on a per annum basis equal to the applicable LIBOR rate plus ~~3.00%, with a step-down to LIBOR plus 2.75% at the time the Company’s net worth exceeds $325 million.~~2.50%. We pay unused commitment fees of 0.50% to 1.00% per annum, based on utilization.

Although we believe that the foregoing analysis is indicative of our sensitivity to interest rate changes, it does not adjust for potential changes in the credit market, credit quality, size and composition of the assets in our portfolio. It also does not adjust for other business developments, including future borrowings that could affect the net increase in net assets resulting from operations, or net income. It also does not assume any repayments from borrowers. Accordingly, no assurances can be given that actual results would not differ materially from the statement above.

Because we currently borrow, and plan to borrow in the future, money to make investments, our net investment income is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest the funds borrowed. Accordingly, there can be no assurance that a significant change in interest rates will not have a material adverse effect on our net investment income. In periods of rising interest rates, our cost of funds would increase, which could reduce our net investment income if there is not a corresponding increase in interest income generated by our investment portfolio.


Item 4.	Controls and Procedures

As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of our management, including the President and Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 of the Securities Exchange Act of 1934). Based upon this evaluation, management, including our President and Chief Executive Officer and our Chief Financial Officer, concluded that our current disclosure controls and procedures are effective as of September 30, ~~2018~~2019.

During the three months ended September 30, ~~2018,~~2019, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

PART II. – OTHER INFORMATION


Item 1.	Legal Proceedings

We may, from time to time, be involved in litigation arising out of our operations in the normal course of business or otherwise. Furthermore, third parties may try to seek to impose liability on us in connection with the activities of our portfolio companies. We have no currently pending material legal proceedings to which we are party or to which any of our assets is subject.


Item 1A.	Risk Factors

Investing in our common stock involves a number of significant risks. There have been no material changes to the risk factors as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2018~~2019 that we filed with the SEC on June ~~5, 2018.~~

4, 2019.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.

Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

On January 25, 2016, ~~we announced that~~ our Board of Directors ~~authorized~~approved a share repurchase program authorizing us to repurchase ~~an indeterminate number of shares of our common stock at an aggregate market value of~~ up to $10 ~~million. The~~million of our outstanding common stock in the open market at certain thresholds below our net asset value per share, in accordance with guidelines specified in Rules 10b5-1(c)(1)(i)(B) and 10b-18 under the Securities Exchange Act of 1934. On March 1, 2016, we entered into a share repurchase ~~program will be~~agreement, which became effective immediately and shall terminate on the earliest of: (1) the date on which a total of $10 million worth of common shares have been purchased under the share repurchase program; (2) the date on which the terms set forth in ~~effect until~~ the ~~approved dollar amount has~~purchase instructions have been ~~used to~~met; or (3) the date that is one trading day after the date on which insider notifies broker in writing that this share repurchase ~~shares or the Board amends or discontinues the program at any time.~~agreement shall terminate. During the six months ended September 30, ~~2018,~~2019, the Company did not repurchase any shares ~~of the Company’s common stock~~ under the share repurchase program. As of September 30, ~~2018,~~2019, the Company has approximately ~~$9.4~~$9.2 million available for additional repurchases under the share repurchase program.


Item 3.	Defaults Upon Senior Securities.

None.


Item 4.	Mine Safety Disclosures.

None.


Item 5.	Other Information.

None.

Item 6. Exhibits



Exhibit No.		Description
31.1*		Certification of President and Chief Executive Officer required by Rule 13a-14(a) of the Exchange Act.
31.2*		Certification of Chief Financial Officer required by Rule 13a-14(a) of the Exchange Act.
32.1*^		Certification of President and Chief Executive Officer required by Rule 13a-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code.
32.2*^		Certification of Chief Financial Officer required by Rule 13a-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code.

* Filed herewith.

The certifications, attached as ~~Exhibit~~Exhibits 32.1 and 32.2 accompany this Quarterly Report pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, ~~and~~ shall not be deemed “filed” by the registrant for purposes of Section 18 of the Exchange Act, and are not to be incorporated by reference into any of the registrant’s filings under the Securities Act or the Exchange Act, whether made before or after the date of this Quarterly Report, irrespective of any general incorporation language contained in any such filing.

SIGNATURES

Pursuant to the requirements the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	CAPITAL SOUTHWEST CORPORATION

November ~~7, 2018~~5, 2019	By:	/s/ Bowen S. Diehl
Date		Bowen S. Diehl
		President and Chief Executive Officer

November ~~7, 2018~~5, 2019	By:	/s/ Michael S. Sarner
Date		Michael S. Sarner
		Chief Financial Officer, Secretary and Treasurer

8583



	Weighted Average	Aggregate
	Remaining Contractual	Intrinsic
September 30, 2018	Term	Value
Outstanding	5.1 years	$	91,418
Exercisable	4.8 years	$	43,737