CAPITAL SOUTHWEST CORP 10-K

Item 8. Financial Statements and Supplementary Data Index to Financial Statements Page Report of Independent Registered Public Accounting Firm 68 Consolidated Statements of Assets and Liabilities as of March 31, 2022 and 2021 70 Consolidated Statements of Operations for Years Ended March 31, 2022, 2021 and 2020 71 Consolidated Statements of Changes in Net Assets for Years Ended March 31, 2022, 2021 and 2020 72 Consolidated Statements of Cash Flows for Years Ended March 31, 2022, 2021 and 2020 73 Consolidated Schedules of Investments as of March 31, 2022 and 2021 74 Notes to Consolidated Financial Statements 97 67 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Capital Southwest Corporation and Subsidiaries Opinion on the Financial Statements We have audited the accompanying consolidated statements of assets and liabilities of Capital Southwest Corporation and Subsidiaries (the Company), including the consolidated schedules of investments, as of March 31, 2022 and 2021, the related consolidated statements of operations, changes in net assets, and cash flows for each of the three years in the period ended March 31, 2022, and the related notes to the consolidated financial statements, and the Schedule of Investments in and Advances to Affiliates of the Company listed in Schedule 12-14 for the year ended March 31, 2022 (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2022 and 2021, and the results of their operations, changes in net assets, and cash flows for each of the three years in the period ended March 31, 2022, in conformity with accounting principles generally accepted in the United States of America, and in our opinion, the related Schedule of Investments in and Advances to Affiliates, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of investments owned as of March 31, 2022 and 2021, by correspondence with the custodians and/or brokers or the underlying investee. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Evaluation of the fair value of investments using significant unobservable inputs and assumptions At March 31, 2022, the fair value of the Company’s investments categorized as Level 3 investments within the fair value hierarchy (Level 3 investments) totaled $936.614 million. Management determines, and the Board of Directors approves, the fair value of the Company’s Level 3 investments by applying the methodologies outlined in Notes 2 and 4 to the financial statements. We identified the evaluation of the fair value of investments using significant unobservable inputs and assumptions as a critical audit matter. Auditing the fair value of the Company’s Level 3 investments is complex, as the unobservable inputs and assumptions used by the Company are highly judgmental and could have a significant effect on the fair value 68 Table of Contents measurements of such investments. Changes in these techniques, inputs and assumptions could have a significant impact on the fair value of investments. The primary procedures we performed to address this critical audit matter included the following, among others: • We obtained an understanding of the relevant controls related to the Company’s process to determine fair value of its Level 3 investments, including controls over the Company’s methods and selection of significant unobservable inputs. • We evaluated the appropriateness of the Company’s valuation methodologies used for Level 3 investments, such as the discounted cash flow or enterprise value, and management’s asset coverage analysis. We also tested whether assumptions used by management, including revenue or EBITDA multiples and discounts rates, were reasonable by comparing these inputs to market information obtained from external sources. • Valuation specialists, with specialized skill and knowledge, were involved in our testing. • We evaluated the reasonableness of any significant changes in valuation methodologies from the prior year-end. • We evaluated the Company’s historical ability to estimate fair value by comparing the transaction price of available transactions occurring subsequent to the prior period valuation date against the fair value estimate determined by the Company in the prior period. • We evaluated subsequent events and other available information and considered whether they corroborated or contradicted the Company’s year-end valuations. • We tested broker quotes using third party quotes, if available. /s/ RSM US LLP We have served as the Company's auditor since 2017. Chicago, Illinois May 24, 2022 69 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (In thousands except share and per share data) March 31, March 31, 2022 2021 Assets Investments at fair value: Non-control/Non-affiliate investments (Cost: $721,392 and $540,556, respectively) $ 747,132 $ 546,028 Affiliate investments (Cost: $140,911 and $90,201, respectively) 131,879 85,246 Control investments (Cost: $76,000 and $72,800, respectively) 57,603 57,158 Total investments (Cost: $938,303 and $703,557, respectively) 936,614 688,432 Cash and cash equivalents 11,431 31,613 Receivables: Dividends and interest 12,106 10,533 Escrow 1,344 1,150 Other 2,238 171 Income tax receivable 158 155 Debt issuance costs (net of accumulated amortization of $4,573 and $3,582, respectively) 4,038 2,246 Other assets 6,028 1,284 Total assets $ 973,957 $ 735,584 Liabilities SBA Debentures (Par value: $40,000 and $0, respectively) $ 38,352 $ — October 2024 Notes (Par value: $0 and $125,000, respectively) — 122,879 January 2026 Notes (Par value: $140,000 and $140,000, respectively) 138,714 138,425 October 2026 Notes (Par value: $150,000 and $0, respectively) 146,522 — Credit facility 205,000 120,000 Other liabilities 14,808 11,655 Accrued restoration plan liability 2,707 2,979 Income tax payable 1,240 50 Deferred income taxes 5,747 3,345 Total liabilities $ 553,090 $ 399,333 Commitments and contingencies (Note 11) Net Assets Common stock, $0.25 par value: authorized, 40,000,000 shares; issued, 27,298,032 shares at March 31, 2022 and 23,344,836 shares at March 31, 2021 $ 6,825 $ 5,836 Additional paid-in capital 448,235 356,447 Total distributable earnings (10,256) (2,095) Treasury stock - at cost, 2,339,512 shares (23,937) (23,937) Total net assets 420,867 336,251 Total liabilities and net assets $ 973,957 $ 735,584 Net asset value per share (24,958,520 shares outstanding at March 31, 2022 and 21,005,324 shares outstanding at March 31, 2021) $ 16.86 $ 16.01 The accompanying Notes are an integral part of these Consolidated Financial Statements. 70 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except share and per share data) Years Ended March 31, 2022 2021 2020 Investment income: Interest income: Non-control/Non-affiliate investments $ 58,136 $ 42,880 $ 36,843 Affiliate investments 7,122 6,126 7,708 Control investments — — 265 Payment-in-kind interest income: Non-control/Non-affiliate investments 2,051 4,268 1,251 Affiliate investments 1,160 3,018 851 Control investments — — — Dividend income: Non-control/Non-affiliate investments 1,654 1,752 166 Affiliate investments 28 33 141 Control investments 6,720 6,609 12,136 Fee income: Non-control/Non-affiliate investments 4,833 3,233 1,090 Affiliate investments 494 122 143 Control investments — — 1,359 Other income 17 21 86 Total investment income 82,215 68,062 62,039 Operating expenses: Compensation 8,838 7,756 7,310 Share-based compensation 3,585 2,944 2,853 Interest 19,924 17,941 15,836 Professional fees 2,489 2,193 2,029 General and administrative 4,077 3,115 3,717 Total operating expenses 38,913 33,949 31,745 Income before taxes 43,302 34,113 30,294 Federal income, excise and other taxes 181 637 1,380 Deferred taxes 434 1,805 682 Total income tax provision (benefit) 615 2,442 2,062 Net investment income $ 42,687 $ 31,671 $ 28,232 Realized gain (loss) Non-control/Non-affiliate investments $ 7,136 $ (6,908) $ 1,335 Affiliate investments 140 (1,628) 57 Control investments — — 44,300 Taxes on deemed distribution of long-term capital gains — — (3,461) Income tax provision (1,442) — — Total net realized gain (loss) on investments, net of tax 5,834 (8,536) 42,231 Net unrealized appreciation (depreciation) on investments Non-control/Non-affiliate investments 20,940 21,218 (14,250) Affiliate investments (4,750) (2,825) (4,320) Control investments (2,755) 12,598 (73,561) Income tax (provision) benefit (1,968) (2,236) (683) Total net unrealized appreciation (depreciation) on investments, net of tax 11,467 28,755 (92,814) Net realized and unrealized gains (losses) on investments 17,301 20,219 (50,583) Realized loss on extinguishment of debt (17,087) (1,007) — Realized loss on disposal of fixed assets (86) — — Net increase (decrease) in net assets from operations $ 42,815 $ 50,883 $ (22,351) Pre-tax net investment income per share - basic and diluted $ 1.90 $ 1.79 $ 1.68 Net investment income per share - basic and diluted $ 1.87 $ 1.66 $ 1.57 Net increase (decrease) in net assets from operations - basic and diluted $ 1.87 $ 2.67 $ (1.24) Weighted average shares outstanding – basic and diluted 22,839,835 19,060,131 17,999,836 The accompanying Notes are an integral part of these Consolidated Financial Statements. 71 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (In thousands) Years Ended March 31, 2022 2021 2020 Operations: Net investment income $ 42,687 $ 31,671 $ 28,232 Net realized gain (loss) on investments 5,834 (8,536) 45,692 Taxes on deemed distribution of long-term capital gains — — (3,461) Net unrealized appreciation (depreciation) on investments, net of tax 11,467 28,755 (92,814) Realized loss on extinguishment of debt (17,087) (1,007) — Realized loss on disposal of fixed assets (86) — — Net increase (decrease) in net assets from operations 42,815 50,883 (22,351) Dividends to shareholders (58,624) (39,945) (50,343) Capital share transactions: Change in restoration plan liability 141 (7) (91) Issuance of common stock 98,107 50,393 25,819 Share-based compensation expense 3,585 2,944 2,853 Common stock withheld for payroll taxes upon vesting of restricted stock (1,408) (239) (419) Repurchase of common stock — — (9,209) Increase (decrease) in net assets 84,616 64,029 (53,741) Net assets, beginning of year 336,251 272,222 325,963 Net assets, end of year $ 420,867 $ 336,251 $ 272,222 The accompanying Notes are an integral part of these Consolidated Financial Statements. 72 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Years Ended March 31, 2022 2021 2020 Cash flows from operating activities Net increase (decrease) in net assets from operations $ 42,815 $ 50,883 $ (22,351) Adjustments to reconcile net increase (decrease) in net assets from operations to net cash used in operating activities: Purchases and originations of investments (499,218) (219,349) (196,606) Proceeds from sales and repayments of debt investments in portfolio companies 259,158 97,589 67,794 Proceeds from sales and return of capital of equity investments in portfolio companies 11,881 17,841 55,960 Payment of accreted original issue discounts 3,692 1,228 788 Payment of accrued payment-in-kind interest 3,485 — — Depreciation and amortization 2,230 1,967 2,405 Net pension benefit (132) (110) (82) Realized (gain) loss on investments before income tax (6,617) 8,549 (46,084) Realized loss on extinguishment of debt 17,103 1,007 — Realized loss on disposal of fixed assets 86 — — Taxes payable on deemed distribution of long-term capital gains — — 3,461 Net unrealized (appreciation) depreciation on investments (13,435) (30,991) 92,131 Accretion of discounts on investments (3,005) (2,347) (1,938) Payment-in-kind interest and dividends (4,190) (7,880) (2,079) Stock option and restricted awards expense 3,585 2,944 2,853 Deferred income taxes 2,402 3,784 1,368 Changes in other assets and liabilities: Increase in dividend and interest receivable (1,539) (144) (1,137) (Increase) decrease in escrow receivables (159) 493 111 (Increase) decrease in tax receivable (4) (8) 36 (Increase) decrease in other receivables (2,067) (119) 910 (Increase) decrease in other assets (3,090) 95 (644) Increase (decrease) in other liabilities 3,153 6,779 (543) Increase (decrease) in payable for unsettled transaction — — (1,158) Increase (decrease) in taxes payable 1,191 (463) (3142) Net cash used in operating activities (182,675) (68,252) (47,947) Cash flows from investing activities Acquisition of fixed assets (1,995) — — Net cash used in investing activities (1,995) — — Cash flows from financing activities Proceeds from common stock offering 98,141 50,410 26,084 Equity offering costs paid — — (105) Borrowings under credit facility 315,000 182,000 132,000 Repayments of credit facility (230,000) (216,000) (119,000) Debt issuance costs paid (3,865) (540) (742) Proceeds from issuance of SBA Debentures 39,026 — — Proceeds from issuance of October 2024 Notes — 49,000 73,500 Proceeds from issuance of January 2026 Notes — 138,571 — Proceeds from issuance of October 2026 Notes 146,414 — — Redemption of December 2022 Notes — (77,136) — Redemption of October 2024 Notes (125,000) — — Payment for debt extinguishment costs (15,196) — — Dividends to shareholders (58,624) (39,945) (50,343) Common stock withheld for payroll taxes upon vesting of restricted stock (1,408) (239) (418) Repurchase of common stock — — (9,209) Net cash provided by financing activities 164,488 86,121 51,767 Net increase in cash and cash equivalents (20,182) 17,869 3,820 Cash and cash equivalents at beginning of year 31,613 13,744 9,924 Cash and cash equivalents at end of year $ 11,431 $ 31,613 $ 13,744 Supplemental cash flow disclosures: Cash paid for income taxes $ 461 $ 1,464 $ 4,524 Cash paid for interest 18,404 11,738 13,944 The accompanying Notes are an integral part of these Consolidated Financial Statements. 73 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS March 31, 2022 Portfolio Company 1,18 Type of Investment 2 Industry Current Interest Rate 3 Acquisition Date 14 Maturity Principal Cost 12,17 Fair Value 4 Non-control/Non-affiliate Investments 5 AAC NEW HOLDCO INC. First Lien Healthcare services 10.00%, 8.00% PIK 12/11/2020 6/25/2025 $ 8,653 $ 8,653 $ 8,350 374,543 shares common stock — 12/11/2020 — — 1,785 1,785 Warrants (Expiration - December 11, 2025) — 12/11/2020 — — 2,198 2,198 12,636 12,333 ACCELERATION PARTNERS, LLC 8,13 First Lien Media, marketing & entertainment L+8.17% (Floor 1.00%)/Q, Current Coupon 9.17% 12/1/2020 12/1/2025 11,875 11,600 11,875 1,000 Preferred Units 9 — 12/1/2020 — — 1,000 1,153 1,000 Class A Common Units 9 — 12/1/2020 — — — — 12,600 13,028 ACE GATHERING, INC. Second Lien 15 Energy services (midstream) L+8.50% (Floor 2.00%)/Q, Current Coupon 10.50% 12/13/2018 12/13/2023 7,948 7,881 7,765 ALLIANCE SPORTS GROUP, L.P. Unsecured convertible note Consumer products & retail 6.00% PIK 7/15/2020 9/30/2024 173 173 495 3.88% preferred membership interest — 8/1/2017 — — 2,500 3,681 2,673 4,176 AMERICAN NUTS OPERATIONS LLC 13 First Lien - Term Loan A Food, agriculture and beverage SOFR+6.75% (Floor 1.00%)/Q, Current Coupon 7.75% 3/11/2022 4/10/2026 12,450 12,388 12,450 First Lien - Term Loan B SOFR+8.75% (Floor 1.00%)/Q, Current Coupon 9.75% 3/11/2022 4/10/2026 12,450 12,388 12,450 3,000,000 units of Class A common stock 9 — 4/10/2018 — — 3,000 4,195 27,776 29,095 AMERICAN TELECONFERENCING SERVICES, LTD. (DBA PREMIERE GLOBAL SERVICES, INC.) Revolving Loan 10,16 Telecommunications P+5.50%/Q, Current Coupon 9.00% 9/17/2021 6/30/2022 899 890 49 First Lien 16 P+5.50%/Q, Current Coupon 9.00% 9/21/2016 6/8/2023 4,899 4,858 269 5,748 318 AMWARE FULFILLMENT LLC First Lien Distribution L+9.00% (Floor 1.00%)/M, Current Coupon 10.00% 7/29/2016 4/15/2022 16,376 16,375 16,376 74 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS March 31, 2022 Portfolio Company 1,18 Type of Investment 2 Industry Current Interest Rate 3 Acquisition Date 14 Maturity Principal Cost 12,17 Fair Value 4 ARBORWORKS, LLC Revolving Loan 10 Environmental services L+7.00% (Floor 1.00%) 11/17/2021 11/9/2026 — (56) — First Lien L+7.00% (Floor 1.00%)/Q, Current Coupon 8.00% 11/17/2021 11/9/2026 12,903 12,660 12,657 100 Class A Units — 11/17/2021 — — 100 100 12,704 12,757 ASC ORTHO MANAGEMENT COMPANY, LLC 13 2,156 Common Units 9 Healthcare services — 8/31/2018 — — 801 584 ATS OPERATING, LLC 13 Revolving Loan 10 Consumer products & retail SOFR+6.50% (Floor 1.00%)/Q, Current Coupon 7.50% 1/18/2022 1/18/2027 1,000 952 952 First Lien - Term Loan A SOFR+5.50% (Floor 1.00%)/Q, Current Coupon 6.50% 1/18/2022 1/18/2027 9,250 9,071 9,071 First Lien - Term Loan B SOFR+7.50% (Floor 1.00%)/Q, Current Coupon 8.50% 1/18/2022 1/18/2027 9,250 9,071 9,071 1,000,000 Preferred units 9 — 1/18/2022 — — 1,000 1,000 20,094 20,094 BINSWANGER HOLDING CORP. First Lien Distribution L+8.50% (Floor 1.00%)/M, Current Coupon 9.50% 3/9/2017 3/10/2023 10,121 10,105 10,121 900,000 shares of common stock — 3/9/2017 — — 900 924 11,005 11,045 BLASCHAK ANTHRACITE CORPORATION (FKA BLASCHAK COAL CORP.) Second Lien- Term Loan 15 Commodities & mining L+11.00%, 3.00% PIK (Floor 1.00%)/Q, Current Coupon 15.00% 7/30/2018 7/30/2023 9,064 9,005 8,793 Second Lien- Term Loan B 15 L+11.00%, 3.00% PIK (Floor 1.00%)/Q, Current Coupon 15.00% 3/30/2020 7/30/2023 2,149 2,130 2,084 11,135 10,877 BROAD SKY NETWORKS LLC (DBA EPIC IO TECHNOLOGIES) 1,131,579 Series A Preferred units Telecommunications — 12/11/2020 — — 1,132 1,420 CADMIUM, LLC Revolving Loan 10 Software & IT services L+7.00% (Floor 1.00%)/Q, Current Coupon 8.00% 1/7/2022 12/22/2026 308 302 302 First Lien L+7.00% (Floor 1.00%)/Q, Current Coupon 8.00% 1/7/2022 12/22/2026 7,385 7,313 7,314 7,615 7,616 CALIFORNIA PIZZA KITCHEN, INC. 48,423 shares of common stock Restaurants — 11/23/2020 — — 1,317 2,090 75 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS March 31, 2022 Portfolio Company 1,18 Type of Investment 2 Industry Current Interest Rate 3 Acquisition Date 14 Maturity Principal Cost 12,17 Fair Value 4 CAMIN CARGO CONTROL, INC. First Lien Energy services (midstream) L+6.50% (Floor 1.00%)/Q, Current Coupon 7.50% 6/2/2021 6/4/2026 5,752 5,702 5,700 CITYVET, INC. 13 Delayed Draw Term Loan 10 Healthcare services L+6.50% (Floor 1.00%)/Q, Current Coupon 7.50% 3/5/2021 3/5/2026 13,000 12,656 13,247 271,739 Class A units 9 — 3/5/2021 — — 500 1,757 13,156 15,004 CRAFTY APES, LLC 8 First Lien Media, marketing & entertainment L+6.21% (Floor 1.00%)/Q, Current Coupon 7.21% 6/9/2021 11/1/2024 10,000 9,921 10,000 DUNN PAPER, INC. Second Lien Paper & forest products L+9.25% (Floor 1.00%)/M, Current Coupon 10.25% 9/28/2016 8/26/2023 3,000 2,984 2,208 EVEREST TRANSPORTATION SYSTEMS, LLC First Lien Transportation & logistics L+8.00% (Floor 1.00%)/M, Current Coupon 9.00% 11/9/2021 8/26/2026 8,938 8,853 8,848 FAST SANDWICH, LLC Revolving Loan 10 Restaurants L+9.00% (Floor 1.00%) 5/24/2018 5/23/2023 — (22) — First Lien L+9.00% (Floor 1.00%)/Q,Current Coupon 10.00% 5/24/2018 5/23/2023 3,277 3,262 3,277 3,240 3,277 FLIP ELECTRONICS, LLC 13 First Lien Technology products & components SOFR+7.50% (Floor 1.00%)/M, Current Coupon 8.50% 1/4/2021 1/2/2026 17,755 17,443 17,755 Delayed Draw Term Loan 10 SOFR+7.50% (Floor 1.00%) 3/24/2022 1/2/2026 — (56) — 2,000,000 Common Units 9,11 — 1/4/2021 — — 2,000 6,373 19,387 24,128 FOOD PHARMA SUBSIDIARY HOLDINGS, LLC 13 First Lien Food, agriculture & beverage L+6.50% (Floor 1.00%)/M, Current Coupon 7.50% 6/1/2021 6/1/2026 5,000 4,914 5,000 Delayed Draw Term Loan 10 L+6.50% (Floor 1.00%)/M, Current Coupon 7.50% 6/1/2021 6/1/2026 2,030 1,971 2,030 75,000 Class A Units 9 — 6/1/2021 — — 750 750 7,635 7,780 76 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS March 31, 2022 Portfolio Company 1,18 Type of Investment 2 Industry Current Interest Rate 3 Acquisition Date 14 Maturity Principal Cost 12,17 Fair Value 4 GS OPERATING, LLC Revolving Loan 10 Distribution SOFR+6.00%(Floor 0.75%)/M, Current Coupon 6.75% 1/3/2022 1/3/2028 183 150 187 First Lien SOFR+6.00%(Floor 0.75%)/M, Current Coupon 6.75% 1/3/2022 1/3/2028 8,534 8,367 8,704 Delayed Draw Term Loan 10 SOFR+6.00%(Floor 0.75%)/M, Current Coupon 6.75% 1/3/2022 1/3/2028 2,516 2,406 2,566 10,923 11,457 HYBRID APPAREL, LLC Second Lien 15 Consumer products & retail L+8.25% (Floor 1.00%)/Q, Current Coupon 9.25% 6/30/2021 6/30/2026 15,750 15,473 15,246 INFOLINKS MEDIA BUYCO, LLC 13 First Lien Media, marketing & entertainment L+6.00% (Floor 1.00%)/M, Current Coupon 7.01% 11/1/2021 10/30/2026 7,731 7,587 7,615 Delayed Draw Term Loan 10 L+6.00% (Floor 1.00%) 11/1/2021 10/30/2026 — (21) — 1.68% LP interest 9,10 — 10/29/2021 — — 588 588 8,154 8,203 ISI ENTERPRISES, LLC Revolving Loan 10 Software & IT services L+7.00% (Floor 1.00%)/Q, Current Coupon 8.00% 10/1/2021 10/1/2026 800 764 800 First Lien L+7.00% (Floor 1.00%)/Q, Current Coupon 8.00% 10/1/2021 10/1/2026 5,000 4,908 5,000 1,000,000 Series A Preferred units — 10/1/2021 — — 1,000 1,000 6,672 6,800 JVMC HOLDINGS CORP. First Lien Financial services L+7.00% (Floor 1.00%)/M, Current Coupon 8.00% 2/28/2019 2/28/2024 6,589 6,558 6,589 KLEIN HERSH, LLC Revolving Loan 10 Business services L+7.00% (Floor 0.75%) 11/13/2020 11/13/2025 — (13) — First Lien L+7.00% (Floor 0.75%)/Q, Current Coupon 7.85% 11/13/2020 11/13/2025 23,821 23,415 24,298 23,402 24,298 KMS, LLC First Lien 15 Distribution L+7.25% (Floor 1.00%)/Q, Current Coupon 8.25% 10/4/2021 10/2/2026 15,920 15,773 15,920 Delayed Draw Term Loan 10 L+7.25% (Floor 1.00%) 10/4/2021 10/2/2026 — (41) — 15,732 15,920 77 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS March 31, 2022 Portfolio Company 1,18 Type of Investment 2 Industry Current Interest Rate 3 Acquisition Date 14 Maturity Principal Cost 12,17 Fair Value 4 LASH OPCO, LLC Revolving Loan 10 Consumer products & retail L+7.00% (Floor 1.00%) 12/29/2021 9/18/2025 — (10) — First Lien L+7.00% (Floor 1.00%)/M, Current Coupon 8.01% 12/29/2021 3/18/2026 6,484 6,345 6,341 Delayed Draw Term Loan 10 L+7.00% (Floor 1.00%)/M, Current Coupon 8.01% 12/29/2021 3/18/2026 4,154 4,034 4,063 10,369 10,404 LGM PHARMA, LLC 13 First Lien Healthcare products L+8.50% (Floor 1.00%), 2.00% PIK/Q, Current Coupon 11.50% 11/15/2017 11/15/2023 11,422 11,346 10,851 Delayed Draw Term Loan L+10.00% (Floor 1.00%), 2.00% PIK/Q, Current Coupon 13.00% 7/24/2020 11/15/2023 2,488 2,463 2,388 Unsecured convertible note 9 25.00% PIK 12/21/2021 12/31/2024 88 88 88 142,278.89 units of Class A common stock 9 — 11/15/2017 — — 1,600 376 15,497 13,703 LLFLEX, LLC First Lien 15 Containers & packaging L+9.00% (Floor 1.00%)/Q, Current Coupon 10.00% 8/16/2021 8/14/2026 10,945 10,723 10,671 MAKO STEEL LP Revolving Loan 10 Business services L+7.25% (Floor (0.75%)/Q, Current Coupon 8.23% 3/15/2021 3/13/2026 943 913 910 First Lien L+7.25% (Floor (0.75%)/Q, Current Coupon 8.38% 3/15/2021 3/13/2026 8,032 7,900 7,751 8,813 8,661 MERCURY ACQUISITION 2021, LLC (DBA TELE-TOWN HALL) 13 First Lien Telecommunications L+8.00% (Floor 1.00%)/Q, Current Coupon 9.00% 12/6/2021 12/7/2026 12,469 12,232 12,232 Second Lien L+11.00% (Floor 1.00%)/Q, Current Coupon 12.00% 12/6/2021 12/7/2026 3,292 3,229 3,229 2,089,599 Series A units 9 — 12/6/2021 — — — 1,536 15,461 16,997 78 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS March 31, 2022 Portfolio Company 1,18 Type of Investment 2 Industry Current Interest Rate 3 Acquisition Date 14 Maturity Principal Cost 12,17 Fair Value 4 MUENSTER MILLING COMPANY, LLC Revolving Loan 10 Food, agriculture & beverage L+7.25% (Floor 1.00%) 8/10/2021 8/10/2026 — (87) — First Lien L+7.25% (Floor 1.00%)/Q, Current Coupon 8.25% 8/10/2021 8/10/2026 12,000 11,785 12,000 Delayed Draw Term Loan 10 L+7.25% (Floor 1.00%) 8/10/2021 8/10/2026 — (52) — 11,646 12,000 NATIONAL CREDIT CARE, LLC 13 First Lien - Term Loan A Consumer services L+6.50% (Floor 1.00%)/Q, Current Coupon 7.50% 12/23/2021 12/23/2026 11,250 11,035 11,171 First Lien - Term Loan B L+7.50% (Floor 1.00%)/Q, Current Coupon 8.50% 12/23/2021 12/23/2026 11,250 11,035 11,171 191,049.33 Class A-3 Preferred units 9 — 3/17/2022 — — 2,000 2,000 24,070 24,342 NEUROPSYCHIATRIC HOSPITALS, LLC Revolving Loan 10 Healthcare services L+8.00% (Floor 1.00%)/Q, Current Coupon 9.00% 5/14/2021 5/14/2026 4,400 4,317 4,299 First Lien L+8.00% (Floor 1.00%)/Q, Current Coupon 9.00% 5/14/2021 5/14/2026 14,913 14,657 14,569 Delayed Draw Term Loan 10 L+8.00% (Floor 1.00%) 5/14/2021 5/14/2026 — (82) — 18,892 18,868 NINJATRADER, INC. 13 Revolving Loan 10 Financial services L+6.25% (Floor 1.00%) 12/18/2019 12/18/2024 — (4) — First Lien L+6.25% (Floor 1.00%)/Q, Current Coupon 7.25% 12/18/2019 12/18/2024 23,150 22,719 23,150 Delayed Draw Term Loan 10 L+6.25% (Floor 1.00%) 12/31/2020 12/18/2024 — (45) — 2,000,000 Preferred Units 9,11 — 12/18/2019 — — 2,000 9,566 24,670 32,716 NWN PARENT HOLDINGS, LLC Revolving Loan 10 Software & IT services L+6.50% (Floor 1.00%)/Q, Current Coupon 7.50% 5/7/2021 5/7/2026 420 390 412 First Lien L+6.50% (Floor 1.00%)/Q, Current Coupon 7.50% 5/7/2021 5/7/2026 13,066 12,844 12,818 13,234 13,230 RESEARCH NOW GROUP, INC. Second Lien Business services L+9.50% (Floor 1.00%)/M, Current Coupon 10.50% 12/8/2017 12/20/2025 10,500 10,066 10,217 79 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS March 31, 2022 Portfolio Company 1,18 Type of Investment 2 Industry Current Interest Rate 3 Acquisition Date 14 Maturity Principal Cost 12,17 Fair Value 4 ROOF OPCO, LLC Revolving Loan 10 Consumer services L+6.00% (Floor 1.00%) 8/27/2021 8/27/2026 — (53) — First Lien L+6.00% (Floor 1.00%)/Q, Current Coupon 7.00% 8/27/2021 8/27/2026 11,000 10,802 10,791 Delayed Draw Term Loan 10 L+6.00% (Floor 1.00%)/Q, Current Coupon 7.00% 8/27/2021 8/27/2026 7,578 7,394 7,578 18,143 18,369 RTIC SUBSIDIARY HOLDINGS, LLC Revolving Loan Consumer products & retail L+7.75% (Floor 1.25%)/Q, Current Coupon 9.00% 9/1/2020 9/1/2025 1,370 1,357 1,370 First Lien L+7.75% (Floor 1.25%)/Q, Current Coupon 9.00% 9/1/2020 9/1/2025 6,933 6,870 6,933 8,227 8,303 SCRIP, INC. 8 First Lien Healthcare products L+9.43% (Floor 2.00%)/M, Current Coupon 11.43% 3/21/2019 3/21/2024 16,750 16,521 16,750 100 shares of common stock — 3/21/2019 — — 1,000 1,601 17,521 18,351 SHEARWATER RESEARCH, INC. 9 Revolving Loan 10 Consumer products & retail L+6.25% (Floor 1.00%) 4/30/2021 4/30/2026 — (40) — First Lien L+6.25% (Floor 1.00%)/Q, Current Coupon 7.25% 4/30/2021 4/30/2026 13,794 13,561 13,545 Delayed Draw Term Loan 10 L+6.25% (Floor 1.00%) 4/30/2021 4/30/2026 — (27) — 1,200,000 Class A Preferred Units — 4/30/2021 — — 978 979 40,000 Class A Common Units — 4/30/2021 — — 33 33 14,505 14,557 SIB HOLDINGS, LLC 13 Revolving Loan 10 Business services L+6.00% (Floor 1.00%)/M, Current Coupon 7.00% 10/29/2021 10/29/2026 47 37 46 First Lien L+6.00% (Floor 1.00%)/M, Current Coupon 7.00% 10/29/2021 10/29/2026 7,427 7,324 7,323 Delayed Draw Term Loan 10 L+6.00% (Floor 1.00%) 10/29/2021 10/29/2026 — (9) — 238,095.24 Common Units 9 — 10/29/2021 — — 500 500 7,852 7,869 80 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS March 31, 2022 Portfolio Company 1,18 Type of Investment 2 Industry Current Interest Rate 3 Acquisition Date 14 Maturity Principal Cost 12,17 Fair Value 4 SOUTH COAST TERMINALS, LLC Revolving Loan 10 Specialty chemicals L+6.25% (Floor 1.00%) 12/13/2021 12/11/2026 — (36) — First Lien L+6.25% (Floor 1.00%)/M, Current Coupon 7.25% 12/13/2021 12/11/2026 18,019 17,676 17,749 17,640 17,749 SPOTLIGHT AR, LLC 13 Revolving Loan 10 Business services L+7.00% (Floor 1.00%) 12/8/2021 6/8/2026 — (37) — First Lien L+7.00% (Floor 1.00%)/Q, Current Coupon 8.00% 12/8/2021 6/8/2026 7,500 7,359 7,358 750 Common Units 9 — 12/8/2021 — — 750 750 8,072 8,108 STUDENT RESOURCE CENTER LLC 13 Revolving Loan 10 Education L+8.00% (Floor 1.00%) 6/25/2021 6/25/2026 — (23) — First Lien L+8.00% (Floor 1.00%)/Q, Current Coupon 9.01% 6/25/2021 6/25/2026 18,823 18,489 18,597 2,000 Preferred Units 9 — 6/25/2021 — — 2,000 1,819 20,466 20,416 SYSTEC CORPORATION (DBA INSPIRE AUTOMATION) Revolving Loan 10 Business services L+7.50% (Floor 1.00%)/Q, Current Coupon 8.50% 8/13/2021 8/13/2025 850 816 833 First Lien L+7.50% (Floor 1.00%)/Q, Current Coupon 8.50% 8/13/2021 8/13/2025 9,000 8,844 8,820 Delayed Draw Term Loan 10 L+7.50% (Floor 1.00%) 8/13/2021 8/13/2025 — (25) — 9,635 9,653 THE PRODUCTO GROUP, LLC 13 First Lien Industrial products L+9.00% (Floor 1.00%)/Q, Current Coupon 10.00% 12/31/2021 12/31/2026 12,644 12,401 12,391 1,500,000 Class A units 9 — 12/31/2021 — — 1,500 1,500 13,901 13,891 TRAFERA, LLC (FKA TRINITY 3, LLC) 13 First Lien 15 Technology products & components L+7.75% (Floor 1.00%)/Q, Current Coupon 8.75% 9/30/2020 9/30/2025 9,875 9,764 9,835 Unsecured convertible note 9 10.00% PIK 2/7/2022 3/31/2026 84 84 84 896.43 Class A units 9,11 — 11/15/2019 — — 1,205 3,000 11,053 12,919 USA DEBUSK, LLC First Lien Industrial services L+5.75% (Floor 1.00%)/M, Current Coupon 6.75% 2/25/2020 9/8/2026 11,614 11,451 11,614 VISTAR MEDIA INC. 171,617 shares of Series A preferred stock Media, marketing & entertainment — 4/3/2019 — — 1,874 9,273 81 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS March 31, 2022 Portfolio Company 1,18 Type of Investment 2 Industry Current Interest Rate 3 Acquisition Date 14 Maturity Principal Cost 12,17 Fair Value 4 VTX HOLDINGS, INC. (DBA VERTEX ONE) 1,597,707 Series A Preferred units Software & IT services — 7/23/2019 — — 1,598 2,082 WALL STREET PREP, INC. Revolving Loan 10 Education L+7.00% (Floor 1.00%) 7/19/2021 7/20/2026 — (17) — First Lien L+7.00% (Floor 1.00%)/Q, Current Coupon 8.00% 7/19/2021 7/20/2026 10,863 10,670 10,656 1,000,000 Class A-1 Preferred Shares — 7/19/2021 — — 1,000 1,000 11,653 11,656 WELL-FOAM, INC. Revolving Loan 10 Energy services (upstream) L+8.50 (Floor 1.00%) 9/9/2021 9/9/2026 — (83) — First Lien L+8.50 (Floor 1.00%)/Q, Current Coupon 9.50% 9/9/2021 9/9/2026 17,910 17,583 17,910 17,500 17,910 WINTER SERVICES OPERATIONS, LLC Revolving Loan 10 Business services L+7.00% (Floor 1.00%)/Q, Current Coupon 8.00% 11/19/2021 11/19/2026 2,444 2,362 2,386 First Lien L+7.00% (Floor 1.00%)/Q, Current Coupon 8.00% 11/19/2021 11/19/2026 20,000 19,624 19,520 Delayed Draw Term Loan 10 L+7.00% (Floor 1.00%) 11/19/2021 11/19/2026 — (41) — 21,945 21,906 ZENFOLIO INC. Revolving Loan 10 Business services L+9.00% (Floor 1.00%)/Q, Current Coupon 10.00% 7/17/2017 7/17/2023 1,000 996 995 First Lien L+9.00% (Floor 1.00%)/Q, Current Coupon 10.00% 7/17/2017 7/17/2023 18,915 18,785 18,820 19,781 19,815 ZIPS CAR WASH, LLC Delayed Draw Term Loan - A Consumer services L+7.25% (Floor 1.00%)/Q, Current Coupon 8.25% 2/11/2022 3/1/2024 16,000 15,691 15,691 Delayed Draw Term Loan - B 10 L+7.25% (Floor 1.00%)/Q, Current Coupon 8.26% 2/11/2022 3/1/2024 199 159 159 15,850 15,850 Total Non-control/Non-affiliate Investments (177.5% of net assets at fair value) $ 721,392 $ 747,132 82 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS March 31, 2022 Portfolio Company 1,18 Type of Investment 2 Industry Current Interest Rate 3 Acquisition Date 14 Maturity Principal Cost 12,17 Fair Value 4 Affiliate Investments 6 AIR CONDITIONING SPECIALIST, INC. 13 Revolving Loan 10 Consumer services L+7.25% (Floor 1.00%) 11/9/2021 11/9/2026 $ — $ (18) $ — First Lien L+7.25% (Floor 1.00%)/Q, Current Coupon 8.25% 11/9/2021 11/9/2026 12,778 12,535 12,535 623,693.55 Preferred Units 9 — 11/9/2021 — — 624 634 13,141 13,169 CATBIRD NYC, LLC 13 Revolving Loan 10 Consumer products & retail L+7.00% (Floor 1.00%) 10/15/2021 10/15/2026 — (73) — First Lien L+7.00% (Floor 1.00%)/Q, Current Coupon 8.00% 10/15/2021 10/15/2026 15,900 15,606 15,884 1,000,000 Class A units 9 — 10/15/2021 — — 1,000 1,221 500,000 Class B units 9,10 — 10/15/2021 — — 500 572 17,033 17,677 CENTRAL MEDICAL SUPPLY LLC 13 Revolving Loan 10 Healthcare services L+9.00% (Floor 1.75%)/Q, Current Coupon 10.75% 5/22/2020 5/22/2025 300 281 290 First Lien L+9.00% (Floor 1.75%)/Q, Current Coupon 10.75% 5/22/2020 5/22/2025 7,500 7,398 7,260 Delayed Draw Capex Term Loan 10 L+9.00% (Floor 1.75%)/Q, Current Coupon 10.75% 5/22/2020 5/22/2025 100 81 97 1,380,500 Preferred Units 9 — 5/22/2020 — — 976 641 8,736 8,288 CHANDLER SIGNS, LLC 13 1,500,000 units of Class A-1 common stock 9 Business services — 1/4/2016 — — 1,500 924 DELPHI BEHAVIORAL HEALTH GROUP, LLC First Lien Healthcare services L+9.50% PIK (Floor 1.00%)/Q, Current Coupon 10.50% 4/8/2020 4/7/2023 1,541 1,541 1,402 First Lien L+9.00% PIK (Floor 1.00%)/Q, Current Coupon 10.00% 4/8/2020 4/7/2023 1,732 1,732 1,472 Protective Advance L+11.50% PIK (Floor 1.00%)/Q, Current Coupon 12.50% 8/31/2021 4/7/2023 526 526 526 1,681.04 Common Units — 4/8/2020 — — 3,615 2,460 7,414 5,860 83 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS March 31, 2022 Portfolio Company 1,18 Type of Investment 2 Industry Current Interest Rate 3 Acquisition Date 14 Maturity Principal Cost 12,17 Fair Value 4 DYNAMIC COMMUNITIES, LLC 13 Revolving Loan 10 Business services L+8.50% (Floor 1.00%) 7/17/2018 7/17/2023 — (1) — First Lien L+8.50% (Floor 1.00%)/Q, Current Coupon 9.51% 7/17/2018 7/17/2023 11,221 11,147 10,323 Senior subordinated debt 25% PIK 12/4/2020 1/16/2024 650 650 650 2,000,000 Preferred Units 9 — 7/17/2018 — — 2,000 1,274 13,796 12,247 GRAMMATECH, INC. Revolving Loan 10 Software & IT services L+9.50% (Floor 2.00%) 11/1/2019 11/1/2024 — (22) — First Lien L+9.50% (Floor 2.00%)/Q, Current Coupon 11.50% 11/1/2019 11/1/2024 11,500 11,384 9,775 1,000 Class A units — 11/1/2019 — — — 1,000 674 56.259 Class A-1 units — 1/10/2022 — — 56 38 12,418 10,487 ITA HOLDINGS GROUP, LLC 13 Revolving Loan 10 Transportation & logistics L+9.00% (Floor 1.00%)/Q, Current Coupon 10.00% 2/14/2018 2/14/2023 750 733 750 First Lien - Term Loan L+8.00% (Floor 1.00%)/Q, Current Coupon 9.00% 2/14/2018 2/14/2023 10,071 10,041 10,041 First Lien - Term B Loan L+11.00% (Floor 1.00%)/Q, Current Coupon 12.00% 6/5/2018 2/14/2023 5,036 5,010 5,061 First Lien - PIK Note A 10.00% PIK 3/29/2019 2/14/2023 2,959 2,721 2,959 First Lien - PIK Note B 10.00% PIK 3/29/2019 2/14/2023 117 117 117 Warrants (Expiration - March 29, 2029) 9 — 3/29/2019 — — 538 3,199 9.25% Class A Membership Interest 9,11 — 2/14/2018 — — 1,500 3,063 20,660 25,190 LIGHTING RETROFIT INTERNATIONAL, LLC (DBA ENVOCORE) 13 Revolving Loan 10 Environmental services 7.50% 12/31/2021 12/31/2025 — — — First Lien 7.50% 12/31/2021 12/31/2025 5,195 5,195 4,780 Second Lien 16 10.00% PIK 12/31/2021 12/31/2026 5,208 5,208 3,104 208,333.3333 Series A Preferred units 9 — 12/31/2021 — — — — 203,124.9999 Common units 9 — 12/31/2021 — — — — 10,403 7,884 84 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS March 31, 2022 Portfolio Company 1,18 Type of Investment 2 Industry Current Interest Rate 3 Acquisition Date 14 Maturity Principal Cost 12,17 Fair Value 4 ROSELAND MANAGEMENT, LLC Revolving Loan 10 Healthcare services L+7.00% (Floor 2.00%)/Q, Current Coupon 9.00% 11/9/2018 11/9/2023 575 564 575 First Lien L+7.00% (Floor 2.00%)/Q, Current Coupon 9.00% 11/9/2018 11/9/2023 14,125 14,021 14,125 16,084 Class A Units — 11/9/2018 — — 1,517 1,905 16,102 16,605 SIMR, LLC First Lien 16 Healthcare services L+10.00%, 7.00% PIK (Floor 2.00%)/M, Current Coupon 19.00% 9/7/2018 9/7/2023 13,235 13,101 10,588 9,374,510.2 Class B Common Units — 9/7/2018 — — 6,107 — 904,903.31 Class W Units — 2/4/2021 — — — — 19,208 10,588 SONOBI, INC. 13 500,000 Class A Common Units 9 Media, marketing, & entertainment — 9/17/2020 — — 500 2,960 Total Affiliate Investments (31.3% of net assets at fair value) $ 140,911 $ 131,879 Control Investments 7 I-45 SLF LLC 9,10,11 80% LLC equity interest Multi-sector holdings — 10/20/2015 — — $ 76,000 $ 57,603 Total Control Investments (13.7% of net assets at fair value) $ 76,000 $ 57,603 TOTAL INVESTMENTS (222.5% of net assets at fair value) $ 938,303 $ 936,614 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 and the investments of SBIC I (as defined below), unless otherwise noted, are pledged as collateral for the Company’s senior secured credit facility or in support of the SBA-guaranteed debentures to be issued by Capital Southwest SBIC I, LP, our wholly-owned subsidiary that operates as a small business investment company ("SBIC I"), respectively. 3 The majority of investments bear interest at a rate that may be determined by reference to London Interbank Offered Rate (“LIBOR” or “L”), Secured Overnight Financing Rate ("SOFR") or Prime (“P”) and reset daily (D), monthly (M), quarterly (Q), or semiannually (S). For each investment, the Company has provided the spread over LIBOR, SOFR or Prime and the current contractual interest rate in effect at March 31, 2022. Certain investments are subject to an 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 readily 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. 85 Table of Contents 5 Non-Control/Non-Affiliate investments are generally defined by the Investment Company Act of 1940, as amended (the “1940 Act”), as investments that are neither control investments nor affiliate investments. At March 31, 2022, approximately 79.8% 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 177.5%. 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, 2022, approximately 14.1% of the Company’s investment assets were affiliate investments. The fair value of these investments as a percent of net assets is 31.3%. 7 Control investments are generally defined by the 1940 Act as investments in which more than 25% of the voting securities are owned. At March 31, 2022, approximately 6.2% of the Company’s investment assets were control investments. The fair value of these investments as a percent of net assets is 13.7%. 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, 2022, approximately 12.8% of the Company's assets are non-qualifying assets. 10 The investment has an unfunded commitment as of March 31, 2022. Refer to Note 11 - Commitments and Contingencies for further discussion. 11 Income producing through dividends or distributions. 12 As of March 31, 2022, the cumulative gross unrealized appreciation for U.S. federal income tax purposes is approximately $67.8 million; cumulative gross unrealized depreciation for federal income tax purposes is $61.7 million. Cumulative net unrealized appreciation is $6.1 million, based on a tax cost of $852.4 million. 13 Investment is held through a wholly-owned taxable subsidiary. 14 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 March 31, 2022 represented 222.5% of the Company's net assets or 96.2% 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 March 31, 2022, meaning the Company has ceased to recognize interest income on the investment. 17 Represents amortized cost. Negative cost in this column represents the original issue discount of certain undrawn revolvers and delayed draw term loans. 18 Equity ownership may be held in shares or units of a company that is either wholly owned by the portfolio company or under common control by the same parent company to the portfolio company. A brief description of the portfolio company in which we made an investment that represents greater than 5% of our total assets as of March 31, 2022 is included in Note 16. Significant Subsidiaries. The accompanying Notes are an integral part of these Consolidated Financial Statements. 86 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS March 31, 2021 Current Type of Interest Acquisition Fair Portfolio Company 1 Investment 2 Industry Rate 3 Date 14 Maturity Principal Cost Value 4 Non-control/Non-affiliate Investments 5 AAC NEW HOLDCO INC. First Lien Healthcare services 10.00%, 8.00% PIK 12/11/2020 6/25/2025 $ 7,981 $ 7,981 $ 7,941 374,543 shares common stock — 12/11/2020 — — 1,785 1,785 Warrants (Expiration - December 11, 2025) — 12/11/2020 — — 2,198 2,198 11,964 11,924 ACCELERATION PARTNERS, LLC 8,13 First Lien Media, marketing & entertainment L+8.21% (Floor 1.00%)/Q, Current Coupon 9.21% 12/1/2020 12/1/2025 8,750 8,500 8,750 Delayed Draw Term Loan 10 L+8.21% (Floor 1.00%)/Q, Current Coupon 9.21% 12/1/2020 12/1/2025 2,965 2,889 2,965 1,000 Preferred Units 9 — 12/1/2020 — — 1,000 1,000 1,000 Class A Common Units 9 — 12/1/2020 — — — — 12,389 12,715 ACE GATHERING, INC. Second Lien 15 Energy services (midstream) L+10.50% (Floor 2.00%)/Q, Current Coupon 12.50% 12/13/2018 12/13/2023 9,438 9,319 8,975 ADAMS PUBLISHING GROUP, LLC First Lien Media, marketing & entertainment L+7.00% (Floor 1.75%)/Q, Current Coupon 8.75% 7/2/2018 7/2/2023 9,920 9,795 9,920 ALLIANCE SPORTS GROUP, L.P. Senior subordinated debt Consumer products & retail 14.00% PIK 8/1/2017 2/1/2023 11,134 11,043 10,989 Unsecured convertible note 6.00% PIK 7/15/2020 9/30/2024 173 173 173 3.88% preferred membership interest — 8/1/2017 — — 2,500 2,500 13,716 13,662 ALLOVER MEDIA, LLC Revolving Loan 10 Media, marketing & entertainment L+8.50% (Floor 1.00%) 3/10/2021 3/10/2026 — (39) — First Lien L+8.50% (Floor 1.00%)/Q, Current Coupon 9.50% 3/10/2021 3/10/2026 13,000 12,742 12,742 12,703 12,742 87 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS March 31, 2021 Current Type of Interest Acquisition Fair Portfolio Company 1 Investment 2 Industry Rate 3 Date 14 Maturity Principal Cost Value 4 AMERICAN NUTS OPERATIONS LLC 13 First Lien - Term Loan Food, agriculture and beverage L+8.00% (Floor 1.00%)/Q, Current Coupon 9.00% 4/10/2018 4/10/2023 17,019 16,856 17,019 First Lien - Term Loan C 10 L+8.00% (Floor 1.00%)/Q, Current Coupon 9.00% 12/21/2018 4/10/2023 1,804 1,785 1,804 3,000,000 units of Class A common stock 9 — 4/10/2018 — — 3,000 2,752 21,641 21,575 AMERICAN TELECONFERENCING SERVICES, LTD. (DBA PREMIERE GLOBAL SERVICES, INC.) First Lien Telecommunications L+6.50% (Floor 1.00%)/Q, Current Coupon 7.50% 9/21/2016 6/8/2023 5,915 5,865 3,141 Second Lien 0.5%, L+9.00% PIK (Floor 1.00%)/Q, Current Coupon 10.50% 11/3/2016 6/6/2024 2,341 2,317 55 8,182 3,196 AMWARE FULFILLMENT LLC First Lien Distribution L+9.00% (Floor 1.00%)/M, Current Coupon 10.00% 7/29/2016 12/31/2021 17,407 17,315 17,407 ASC ORTHO MANAGEMENT COMPANY, LLC 13 Revolving Loan Healthcare services L+7.50% (Floor 1.00%)/Q, Current Coupon 8.50% 8/31/2018 8/31/2023 1,500 1,485 1,410 First Lien L+7.50% (Floor 1.00%)/Q, Current Coupon 8.50% 8/31/2018 8/31/2023 8,854 8,756 8,322 Second Lien 13.25% PIK 8/31/2018 12/1/2023 4,237 4,191 3,822 2,042 Common Units 9 — 8/31/2018 — — 750 356 15,182 13,910 BINSWANGER HOLDING CORP. First Lien Distribution L+8.50% (Floor 1.00%)/M, Current Coupon 9.50% 3/9/2017 3/9/2022 10,942 10,890 10,942 900,000 shares of common stock — 3/9/2017 — — 900 924 11,790 11,866 BLASCHAK COAL CORP. Second Lien Term Loan 15 Commodities & mining L+13.00%, 1.00% PIK (Floor 1.00%)/Q, Current Coupon 15.00% 7/30/2018 7/30/2023 8,712 8,617 8,233 Second Lien- Term Loan B 15 L+13.00%, 1.00% PIK (Floor 1.00%)/Q, Current Coupon 15.00% 3/30/2020 7/30/2023 2,016 1,986 1,905 10,603 10,138 88 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS March 31, 2021 Current Type of Interest Acquisition Fair Portfolio Company 1 Investment 2 Industry Rate 3 Date 14 Maturity Principal Cost Value 4 BROAD SKY NETWORKS LLC 13 Revolving Loan 10 Telecommunications L+7.50% (Floor 1.00%)/Q, Current Coupon 8.50% 12/11/2020 12/11/2025 500 453 496 First Lien L+7.50% (Floor 1.00%)/Q, Current Coupon 8.50% 12/11/2020 12/11/2025 15,000 14,715 14,880 1,000,000 Series A Preferred units 9 — 12/11/2020 — — 1,000 1,000 16,168 16,376 CALIFORNIA PIZZA KITCHEN, INC. First Lien Restaurants L+10.00% (Floor 1.50%)/Q, Current Coupon 11.50% 11/23/2020 11/23/2024 669 652 668 First Lien Rolled Up 1.00%, L+11.00% PIK (Floor 1.50%)/Q, Current Coupon 13.50% 11/23/2020 11/23/2024 741 739 737 Second Lien 1.00%, L+12.50% PIK (Floor 1.50%)/Q, Current Coupon 15.00% 11/23/2020 5/23/2025 814 814 796 48,423 shares of common stock — 11/23/2020 — — 1,317 1,317 3,522 3,518 CAPITAL PAWN HOLDINGS, LLC First Lien Consumer products & retail L+7.25% (Floor 1.00%)/Q, Current Coupon 8.25% 12/21/2017 7/8/2023 8,854 8,840 8,854 CHEMISTRY RX HOLDINGS, LLC First Lien Specialty chemicals L+7.00% (Floor 1.00%)/Q, Current Coupon 8.00% 3/15/2021 3/13/2026 8,000 7,841 7,841 CITYVET, INC. 13 Delayed Draw Term Loan 10 Healthcare services L+7.50% (Floor 1.00%)/Q, Current Coupon 8.50% 3/5/2021 3/5/2026 3,250 3,053 3,053 271,739 Class A units 9 — 3/5/2021 — — 500 500 3,553 3,553 CLICKBOOTH.COM, LLC Revolving Loan 10 Media, marketing & entertainment L+8.50% (Floor 1.00%) 12/5/2017 1/31/2025 — (5) — First Lien L+8.50% (Floor 1.00%)/Q, Current Coupon 9.50% 12/5/2017 1/31/2025 18,525 18,308 18,525 18,303 18,525 DANFORTH ADVISORS, LLC 13 875 Class A equity units 9 Business services — 9/28/2018 — — 875 2,855 DRIVEN, INC. First Lien Business services L+8.00% (Floor 2.00%)/Q, Current Coupon 10.00% 6/28/2019 6/28/2024 5,820 5,737 5,878 89 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS March 31, 2021 Current Type of Interest Acquisition Fair Portfolio Company 1 Investment 2 Industry Rate 3 Date 14 Maturity Principal Cost Value 4 DUNN PAPER, INC. Second Lien Paper & forest products L+8.75% (Floor 1.00%)/M, Current Coupon 9.75% 9/28/2016 8/26/2023 3,000 2,974 3,000 ELECTRONIC TRANSACTION CONSULTANTS LLC 13 Revolving Loan 10 Software & IT services L+7.50% (Floor 1.00%) 7/24/2020 7/24/2025 — (56) — First Lien L+7.50% (Floor 1.00%)/Q, Current Coupon 8.50% 7/24/2020 7/24/2025 10,000 9,845 9,840 1,000 Class A units 9 — 7/24/2020 — — 1,000 1,000 10,789 10,840 ESCP DTFS, INC. First Lien - Term Loan A Industrial services L+6.50% (Floor 1.75%)/Q, Current Coupon 8.25% 1/31/2020 1/31/2025 5,350 5,269 4,986 First Lien - Term Loan B L+8.50% (Floor 1.75%)/Q, Current Coupon 10.25% 1/31/2020 1/31/2025 5,350 5,270 4,986 Delayed Draw Term Loan B1 L+6.50% (Floor 1.75%)/Q, Current Coupon 8.25% 1/31/2020 1/31/2025 500 491 466 Delayed Draw Term Loan B2 L+8.50% (Floor 1.75%)/Q, Current Coupon 10.25% 1/31/2020 1/31/2025 500 491 466 11,521 10,904 FAST SANDWICH, LLC Revolving Loan 10 Restaurants L+9.00% (Floor 1.00%) 5/24/2018 5/23/2023 — (32) — First Lien L+9.00% (Floor 1.00%)/Q,Current Coupon 10.00% 5/24/2018 5/23/2023 3,359 3,332 3,023 3,300 3,023 FLIP ELECTRONICS, LLC 8,13 First Lien Technology products & components L+8.05% (Floor 1.00%)/M, Current Coupon 9.05% 1/4/2021 1/2/2026 15,500 15,177 15,252 2,000,000 Common Units 9 — 1/4/2021 — — 2,000 2,285 17,177 17,537 GS OPERATING, LLC First Lien Distribution L+6.50%(Floor 1.50%)/M, Current Coupon 8.00% 3/6/2020 2/24/2025 7,920 7,791 7,920 IAN, EVAN, & ALEXANDER CORPORATION (DBA EVERWATCH) Revolving Loan 10 Aerospace & defense L+8.50% (Floor 1.00%) 7/31/2020 7/31/2025 — (34) — First Lien L+8.50% (Floor 1.00%)/Q, Current Coupon 9.50% 7/31/2020 7/31/2025 9,668 9,493 9,668 9,459 9,668 90 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS March 31, 2021 Current Type of Interest Acquisition Fair Portfolio Company 1 Investment 2 Industry Rate 3 Date 14 Maturity Principal Cost Value 4 ICS DISTRIBUTION, LLC 8 First Lien Industrial services L+8.48% (Floor 2.00%)/Q, Current Coupon 10.48% 10/31/2019 10/31/2024 20,500 20,121 20,275 JVMC HOLDINGS CORP. First Lien Financial services L+7.75% (Floor 1.00%)/M, Current Coupon 8.75% 2/28/2019 2/28/2024 7,047 7,000 6,850 KLEIN HERSH, LLC Revolving Loan 10 Business services L+8.00% (Floor 0.75%) 11/13/2020 11/13/2025 — (17) — First Lien L+8.00% (Floor 0.75%)/S, Current Coupon 8.75% 11/13/2020 11/13/2025 14,813 14,534 14,813 14,517 14,813 KMS, LLC 17 First Lien 15 Distribution L+6.00% (Floor 1.00%)/Q, Current Coupon 7.00% 1/5/2021 11/23/2025 16,000 15,923 15,968 LANDPOINT HOLDCO, INC. First Lien Business services L+11.00%(Floor 1.00%)/Q, Current Coupon 12.00% 12/30/2019 12/30/2024 18,840 18,540 17,239 LGM PHARMA, LLC 13 First Lien Healthcare products L+8.50% (Floor 1.00%)/M, Current Coupon 9.50% 11/15/2017 11/15/2023 11,424 11,315 11,424 Delayed Draw Term Loan L+10.00% (Floor 1.00%)/Q, Current Coupon 11.00% 7/24/2020 11/15/2023 2,488 2,448 2,487 142,278.89 units of Class A common stock 9 — 11/15/2017 — — 1,600 2,309 15,363 16,220 LIGHTING RETROFIT INTERNATIONAL, LLC (DBA ENVOCORE) First Lien Environmental services 7.50%, L+1.50% PIK (Floor 2.00%)/Q, Current Coupon 11.00% 6/30/2017 6/30/2022 14,027 13,984 12,021 25,603 shares of Series C preferred stock 8/13/2018 — — 25 — 396,825 shares of Series B preferred stock — 6/30/2017 — — 500 — 14,509 12,021 MAKO STEEL LP Revolving Loan 10 Business services L+7.25% (Floor (0.75%)/Q, Current Coupon 8.00% 03/15/2021 03/13/2026 660 623 647 First Lien L+7.25% (Floor (0.75%)/Q, Current Coupon 8.00% 03/15/2021 03/13/2026 8,113 7,952 7,952 8,575 8,599 91 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS March 31, 2021 Current Type of Interest Acquisition Fair Portfolio Company 1 Investment 2 Industry Rate 3 Date 14 Maturity Principal Cost Value 4 NINJATRADER, INC. 13 Revolving Loan 10 Financial services L+6.75% (Floor 1.50%) 12/18/2019 12/18/2024 — (6) — First Lien L+6.75% (Floor 1.50%)/Q, Current Coupon 8.25% 12/18/2019 12/18/2024 19,250 18,784 19,250 Delayed Draw Term Loan 10 L+6.75% (Floor 1.50%)/Q 12/31/2020 12/18/2024 — (36) — 2,000,000 Preferred Units 9 — 12/18/2019 — — 2,000 6,223 20,742 25,473 RESEARCH NOW GROUP, INC. Second Lien Business services L+9.50% (Floor 1.00%)/M, Current Coupon 10.50% 12/8/2017 12/20/2025 10,500 9,980 10,132 ROSELAND MANAGEMENT, LLC Revolving Loan 10 Healthcare services L+7.00% (Floor 2.00%)/Q, Current Coupon 9.00% 11/9/2018 11/9/2023 500 482 500 First Lien L+7.00% (Floor 2.00%)/Q, Current Coupon 9.00% 11/9/2018 11/9/2023 14,270 14,108 14,270 13,811 Class A Units — 11/9/2018 — — 1,381 1,720 15,971 16,490 RTIC SUBSIDIARY HOLDINGS, LLC Revolving Loan 10 Consumer products & retail L+7.75% (Floor 1.25%)/Q, Current Coupon 9.00% 9/1/2020 9/1/2025 329 317 329 First Lien L+7.75% (Floor 1.25%)/Q, Current Coupon 9.00% 9/1/2020 9/1/2025 7,135 7,054 7,135 7,371 7,464 SCRIP, INC. 8 First Lien Healthcare products L+9.68% (Floor 2.00%)/M, Current Coupon 11.68% 3/21/2019 3/21/2024 16,750 16,422 16,750 100 shares of common stock — 3/21/2019 — — 1,000 967 17,422 17,717 TAX ADVISORS GROUP, LLC 13 143.3 Class A units 9 Financial services — 6/23/2017 — — 541 1,539 TRAFERA, LLC (FKA TRINITY 3, LLC) 13 First Lien 15 Technology products & components L+7.00% (Floor 1.00%)/Q, Current Coupon 8.00% 9/30/2020 9/30/2025 9,975 9,838 9,975 896.43 Class A units 9 — 11/15/2019 — — 1,205 3,204 11,043 13,179 USA DEBUSK, LLC First Lien Industrial services L+5.75% (Floor 1.00%)/M, Current Coupon 6.75% 2/25/2020 10/22/2024 7,900 7,782 7,892 92 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS March 31, 2021 Current Type of Interest Acquisition Fair Portfolio Company 1 Investment 2 Industry Rate 3 Date 14 Maturity Principal Cost Value 4 VISTAR MEDIA INC. First Lien Media, marketing & entertainment L+7.50%, 2.50% PIK (Floor 2.00%)/M, Current Coupon 12.00% 2/17/2017 4/3/2023 11,481 10,920 11,481 171,617 shares of Series A preferred stock — 4/3/2019 — — 1,874 3,904 Warrants (Expiration - April 3, 2029) — 4/3/2019 — — 620 1,853 13,414 17,238 VTX HOLDINGS, INC. 8 First Lien Software & IT services L+9.00% (Floor 2.00%)/Q, Current Coupon 11.00% 7/23/2019 7/23/2024 21,575 21,181 21,575 1,397,707 Series A Preferred units — 7/23/2019 — — 1,398 1,654 22,579 23,229 ZENFOLIO INC. Revolving Loan Business services L+9.00% (Floor 1.00%)/Q, Current Coupon 10.00% 7/17/2017 7/17/2023 2,000 1,992 1,820 First Lien L+9.00% (Floor 1.00%)/Q, Current Coupon 10.00% 7/17/2017 7/17/2023 14,888 14,722 13,548 16,714 15,368 Total Non-control/Non-affiliate Investments $ 540,556 $ 546,028 Affiliate Investments 6 CENTRAL MEDICAL SUPPLY LLC 13 Revolving Loan 10 Healthcare services L+9.00% (Floor 1.75%)/Q, Current Coupon 10.75% 5/22/2020 5/22/2025 $ 300 $ 275 $ 276 First Lien L+9.00% (Floor 1.75%)/Q, Current Coupon 10.75% 5/22/2020 5/22/2025 7,500 7,371 6,908 Delayed Draw Capex Term Loan 10 L+9.00% (Floor 1.75%)/Q, Current Coupon 10.75% 5/22/2020 5/22/2025 100 75 92 875,000 Preferred Units 9 — 5/22/2020 — — 875 641 8,596 7,917 CHANDLER SIGNS, LLC 13 1,500,000 units of Class A-1 common stock 9 Business services — 1/4/2016 — — 1,500 1,343 93 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS March 31, 2021 Current Type of Interest Acquisition Fair Portfolio Company 1 Investment 2 Industry Rate 3 Date 14 Maturity Principal Cost Value 4 DELPHI BEHAVIORAL HEALTH GROUP, LLC First Lien Healthcare services L+9.50% (Floor 1.00%)/M, Current Coupon 10.50% 4/8/2020 4/7/2023 1,414 1,414 1,398 First Lien L+7.50% (Floor 1.00%)/M, Current Coupon 8.50% 4/8/2020 4/7/2023 1,580 1,580 1,500 1,681.04 Common Units — 4/8/2020 — — 3,615 3,615 6,609 6,513 DYNAMIC COMMUNITIES, LLC 13 Revolving Loan 10 Business services L+3.75%, 7.75% PIK (Floor 1.00%) 7/17/2018 7/17/2023 — (2) — First Lien L+3.75%, 7.75% PIK (Floor 1.00%)/Q, Current Coupon 12.50% 7/17/2018 7/17/2023 11,061 10,950 9,966 Senior subordinated debt 25% PIK 12/4/2020 1/16/2024 372 372 372 2,000,000 Preferred Units 9 — 7/17/2018 — — 2,000 1,274 13,320 11,612 GRAMMATECH, INC. Revolving Loan 10 Software & IT services L+7.50% (Floor 2.00%) 11/1/2019 11/1/2024 — (31) — First Lien L+7.50% (Floor 2.00%)/Q, Current Coupon 9.50% 11/1/2019 11/1/2024 11,500 11,346 11,420 1,000 Class A units — 11/1/2019 — — 1,000 1,208 12,315 12,628 ITA HOLDINGS GROUP, LLC 13 Revolving Loan 10 Transportation & logistics L+9.00% (Floor 1.00%) 2/14/2018 2/14/2023 — (23) — First Lien - Term Loan L+7.00% (Floor 1.00%)/Q, Current Coupon 8.00% 2/14/2018 2/14/2023 10,071 9,996 10,061 First Lien - Term B Loan L+10.00% (Floor 1.00%)/Q, Current Coupon 11.00% 6/5/2018 2/14/2023 5,036 4,984 5,101 First Lien - PIK Note A 10.00% PIK 3/29/2019 2/14/2023 2,678 2,282 2,630 First Lien - PIK Note B 10.00% PIK 3/29/2019 2/14/2023 106 106 103 Warrants (Expiration - March 29, 2029) 9 — 3/29/2019 — — 538 2,968 9.25% Class A Membership Interest 9 — 2/14/2018 — — 1,500 2,532 19,383 23,395 94 Table of Contents CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS March 31, 2021 Current Type of Interest Acquisition Fair Portfolio Company 1 Investment 2 Industry Rate 3 Date 14 Maturity Principal Cost Value 4 SIMR, LLC First Lien Healthcare services L+17.00% PIK (Floor 2.00%)/M, Current Coupon 19.00% 9/7/2018 9/7/2023 13,661 13,527 12,103 9,374,510.2 Class B Common Units — 9/7/2018 — — 6,107 — 19,634 12,103 SONOBI, INC. 13 First Lien Media, marketing, & entertainment L+8.00% (Floor 1.00%)/Q, Current Coupon 9.00% 9/17/2020 9/16/2025 8,500 8,344 8,500 500,000 Class A Common Units 9 — 9/17/2020 — — 500 1,235 8,844 9,735 Total Affiliate Investments $ 90,201 $ 85,246 Control Investments 7 I-45 SLF LLC 9,11 80% LLC equity interest Multi-sector holdings — 10/20/2015 — — $ 72,800 $ 57,158 Total Control Investments $ 72,800 $ 57,158 TOTAL INVESTMENTS 12 $ 703,557 $ 688,432 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 pledged as collateral for the Company’s senior secured credit facility. 3 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 March 31, 2021. Certain investments are subject to a LIBOR or Prime interest rate flo or. Certain investments, as noted, accrue payment-in-kind ("PIK") interest. 4 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 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, as amended (the “1940 Act”), as investments that are neither control investments nor affiliate investments. At March 31, 2021, approximately 79.3% 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 162.4%. 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 March 31, 2021, approximately 12.4% of the Company’s investment assets were affiliate investments. The fair value of these investments as a percent of net assets is 25.3%. 95 Table of Contents 7 Control investments are generally defined by the 1940 Act as investments in which more than 25% of the voting securities are owned. At March 31, 2021, approximately 8.3% of the Company’s investment assets were control investments. The fair value of these investments as a percent of net assets is 17.0%. 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, 2021, approximately 12.6% of the Company's assets are non-qualifying assets. 10 The investment has an unfunded commitment as of March 31, 2021. Refer to Note 11 - Commitments and Contingencies for further discussion. 11 Income producing through dividends or distributions. 12 As of March 31, 2021, the cumulative gross unrealized appreciation for federal income tax purposes is approximately $40.2 million; cumulative gross unrealized depreciation for federal income tax purposes is $27.3 million. Cumulative net unrealized appreciation is $12.9 million, based on a tax cost of $700.9 million. 13 Our investments in Acceleration Partners preferred and common units, American Nuts Operations LLC Class A common stock, ASC Ortho Management Company, LLC common units, Broad Sky Networks LLC Series A Preferred units, CityVet, Inc. Class A units, Danforth Advisors, LLC common units, Electronic Transaction Consultants LLC Class A units, Flip Electronics, LLC common units, LGM Pharma, LLC Class A common stock, NinjaTrader, LLC preferred units, Tax Advisors Group, LLC Class A units, Trafera, LLC Class A units, Central Medical Supply LLC Preferred units, Chandler Signs, LP Class A-1 common stock, Dynamic Communities, LLC Preferred units, ITA Holdings Group, LLC membership interest and Sonobi, Inc. Class A common units are held through a wholly-owned taxable subsidiary of the Company. 14 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 March 31, 2021 represented 204.7% of the Company's net assets or 93.6% 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 Represents amortized cost. Negative cost in this column represents the original issue discount of certain undrawn revolvers and delayed draw term loans. 17 The investment is structured as a first lien first out term loan. A brief description of the portfolio company in which we made an investment that represents greater than 5% of our total assets as of March 31, 2021 is included in Note 16. Significant Subsidiaries. The accompanying Notes are an integral part of these Consolidated Financial Statements. 96 Table of Contents Notes to Consolidated Financial Statements 1. ORGANIZATION AND BASIS OF PRESENTATION References in this Annual Report on Form 10-K 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 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”) under the 1940 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. CSWC 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 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. Our core business is to target senior debt investments and equity investments in lower middle market (“LMM”) companies. We also opportunistically target first and second lien loans in upper middle market (“UMM”) companies. Our target LMM companies typically have annual earnings before interest, taxes, depreciation and amortization (“EBITDA”) generally between $3.0 million and $20.0 million, and our LMM investments generally range in size from $5.0 million to $35.0 million. Our UMM investments generally include first and second lien loans in companies with EBITDA generally greater than $20.0 million and typically range in size from $5.0 million to $20.0 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. On April 20, 2021, our wholly owned subsidiary, Capital Southwest SBIC I, LP (“SBIC I”) received a license from the U.S. Small Business Administration (the “SBA”) to operate as an SBIC under Section 301(c) of the Small Business Investment Act of 1958, as amended. SBIC I has an investment strategy substantially similar to ours and makes similar types of investments in accordance with SBA regulations. SBIC I and its general partner are consolidated for U.S. GAAP reporting purposes, and the portfolio investments held by it are included in the consolidated financial statements. Capital Southwest Management Corporation (“CSMC”), a wholly-owned subsidiary of CSWC, was the management company for CSWC. Effective December 31, 2020, CSMC merged with and into CSWC, with CSWC continuing as the surviving entity in the merger. Prior to December 31, 2020, CSMC generally incurred 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 (the “Administrative Expenses”). After December 31, 2020, the Administrative Expenses will be directly incurred by CSWC. The Company continues to be internally managed and the merger has no impact on the day-to-day operations of the business. 97 Table of Contents 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 the Taxable Subsidiary. Prior to the merger of CSMC into CSWC that became effective December 31, 2020, we consolidated the results of CSWC's wholly owned management company. 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 total assets in qualifying assets. As of March 31, 2022, the Company has 87.2% 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 for RIC tax treatment for U.S. federal income tax purposes, we must, among other things meet the following 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. (3) Diversify our holdings in accordance with two Diversification 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 Requirements"). 98 Table of Contents The two Diversification Requirements must be satisfied quarterly. If a RIC satisfies the Diversification Requirements for one quarter, and then, due solely to fluctuations in market value, fails to meet one of the Diversification Requirements in the next quarter, it retains RIC tax treatment. A RIC that fails to meet the Diversification Requirements as a result of a nonqualified acquisition may be subject to excess taxes unless the nonqualified acquisition is disposed of and the Diversification Requirements are satisfied within 30 days of the close of the quarter in which the Diversification Requirements are failed. This quarter we satisfied all RIC requirements and have 8.0% 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 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 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 March 31, 2022 and 2021, cash balances totaling $10.2 million and $30.4 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 consolidate the results of CSWC’s wholly-owned Taxable Subsidiary and SBIC I. Prior to the merger of CSMC into CSWC, we consolidated the results of 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. 99 Table of Contents 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 March 31, 2022, we had three investments on non-accrual status, which represent approximately 1.5% of our total investment portfolio's fair value and approximately 2.6% of its cost. As of March 31, 2021, we did not have any investments 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 year ended March 31, 2022, approximately 3.7% of 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 year ended March 31, 2021, approximately 3.5% of 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 provisions. The PIK interest, computed at the contractual rate specified in each loan agreement, is added to the principal balance of the loan, rather than being paid to the Company in cash, and is recorded as interest income. Thus, the actual collection of PIK interest may be deferred until the time of debt principal repayment. PIK interest, which is a non-cash source of income, is included in the Company’s taxable income and therefore affects the amount the Company is required to distribute to shareholders 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 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 income is deemed to be collectible. The Company writes off any accrued and uncollected PIK interest when it is determined that the PIK interest is no longer collectible. As of March 31, 2022 and 2021, we have not written off any accrued and uncollected PIK interest from prior periods. For the year ended March 31, 2022, we had two investments for which we stopped accruing PIK interest. For the year ended March 31, 2021, we did not have any investments for which we stopped accruing PIK interest. For the years ended March 31, 2022 and 2021, approximately 3.9% and 10.7%, respectively, of CSWC’s total investment income was attributable to non-cash PIK interest income. Fee Income Fee income, generally collected in advance, includes fees for administration and valuation services rendered by the Company. These fees are typically charged annually and are amortized into income over the year. The Company recognizes nonrecurring fees, including prepayment penalties, waiver fees and amendment fees, as fee income when earned. In addition, the Company may also be entitled to an exit fee that is amortized into income over the life of the loan. Loan exit fees to be paid at the termination of the loan are accreted into fee income over the contractual life of the loan. Warrants In connection with the Company's debt investments, the Company will sometimes receive warrants or other equity-related securities from the borrower. The Company determines the cost basis of warrants based upon their respective fair values on the date of receipt in proportion to the total fair value of the debt and warrants received. Any resulting difference between the face amount of the debt and its recorded fair value resulting from the assignment of value to the warrants is treated as original issue discount (“OID”), and accreted into interest income using the effective interest method over the term of the debt investment. Debt Issuance Costs Debt issuance costs include commitment fees and other costs related to CSWC’s senior secured credit facility, its unsecured notes (as discussed further in Note 5) and the debentures guaranteed by the SBA (the "SBA Debentures"). 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 unsecured notes and the SBA Debentures are a direct deduction from the related debt liability and amortized into interest expense over the term of the January 2026 Notes (as defined below), the October 2026 Notes (as defined below) and the SBA Debentures. Deferred Offering Costs Deferred offering costs include registration expenses related to shelf registration statements and expenses related to the launch of the "at-the-market" ("ATM") program through which we can sell, from time to time, 100 Table of Contents shares of our common stock (the "Equity ATM Program"). These expenses consist primarily of SEC registration fees, legal fees and accounting fees incurred related thereto. These expenses are included in 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 there are any deferred offering costs remaining at the expiration of the shelf registration statement, these deferred costs are charged to expense. Realized Losses on Extinguishment of Debt Upon the repayment of debt obligations that are deemed to be extinguishments, the difference between the principal amount due at maturity adjusted for any unamortized debt issuance costs is recognized as a loss (i.e., the unamortized debt issuance costs and any "make-whole" premium payment (as discussed in Note 5)) are recognized as a loss upon extinguishment of the underlying debt obligation). 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 10.5 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 qualify annually, to be treated for U.S. federal income tax purposes as a RIC under Subsection M of the Code. 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 former wholly-owned subsidiary of CSWC, was not a RIC and was required to pay taxes at the corporate rate of 21%. Effective December 31, 2020, CSMC merged with and into CSWC and, as a result, the calendar year ended December 31, 2020 was the last year in which the Company incurred a tax provision or benefit related to CSMC. For tax purposes, CSMC had elected to be treated as a taxable entity, and therefore CSMC was not consolidated for tax purposes and was taxed at normal corporate tax rates based on taxable income and, as a result of its activities, may generate an income tax provision 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 provision, or benefit, if any, and the related tax assets and liabilities, are reflected in our consolidated financial statements. The Taxable Subsidiary, a wholly-owned subsidiary of CSWC, is not a RIC and is required to pay taxes at the corporate rate of 21%. For tax purposes, the Taxable Subsidiary 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 taxable income and, as a result of its activities, 101 Table of Contents may generate an income tax provision or benefit. The taxable income, or loss, of 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 provision, 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 provision. No interest or penalties expense was recorded during the years ended March 31, 2022, 2021 and 2020. 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 share-based compensation using the fair value method, as prescribed by ASC Topic 718, Compensation – Stock Compensation. Accordingly, we recognize share-based compensation cost on a straight-line basis for all share-based payments awards granted to employees. 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. 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. The right to grant restricted stock awards under the 2010 Plan terminated on July 18, 2021, ten years after the date that the 2010 Restricted Stock Award Plan (the “2010 Plan”) was approved by the Company’s shareholders pursuant to its terms. In connection with the termination of the 2010 Plan, the Company’s Board of Directors and shareholders approved the Capital Southwest Corporation 2021 Employee Restricted Stock Award Plan (the "2021 Employee Plan") as part of the compensation package for its employees, the terms of which are, in all material respects, identical to the 2010 Plan. On July 19, 2021, we received an exemptive order that supersedes the prior exemptive order relating to the 2010 Plan (the “Order”) to permit the Company to (i) issue restricted stock as part of the compensation package for its employees in the 2021 Employee Plan, and (ii) withhold shares of the Company’s common stock or purchase shares of the Company’s common stock from the participants to satisfy tax withholding obligations relating to the vesting of restricted stock pursuant to the 2021 Employee Plan. In addition, the Company's Board of Directors approved the Capital Southwest Corporation 2021 Non-Employee Director Restricted Stock Plan (the "Non-Employee Director Plan") as part of the compensation package for non-employee directors of the Board of Directors. In connection therewith, on May 16, 2022, we received an exemptive order that supersedes the Order (the "Superseding Order") and will cover both employees and non-employee directors of the Board of Directors. The Non-Employee Director Plan will become effective upon shareholder approval at our 2022 annual meeting of shareholders. 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 March 2020, the FASB issued ASU 2020-04, "Reference rate reform (Topic 848)—Facilitation of the effects of reference rate reform on financial reporting." The amendments in this update provide optional expedients and exceptions for applying U.S. GAAP to certain contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform and became effective upon issuance for all entities. The Company has agreements that have LIBOR as a reference rate with certain portfolio companies and certain lenders. Many of these agreements include language for choosing an alternative successor rate when LIBOR reference is no longer considered to be appropriate. With respect to other agreements, the Company intends to work with its portfolio companies and lenders to modify agreements to choose an alternative successor rate. Contract modifications are required to be evaluated in determining whether the modifications result in the establishment of new contracts or the 102 Table of Contents continuation of existing contracts. The standard is effective as of March 12, 2020 through December 31, 2022. The expedients and exceptions provided by the amendments do not apply to contract modifications and hedging relationships entered into or evaluated after December 31, 2022, except for hedging transactions as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company did not utilize the optional expedients and exceptions provided by ASU 2020-04 during the year ended March 31, 2022. In November 2020, the SEC issued a final rule that modernized and simplifies Management's Discussion and Analysis and certain financial disclosure requirements in Regulation S-K (the “Amendments”). Specifically, the Amendments: (i) eliminate Item 301 of Regulation S-K (Selected Financial Data); (ii) simplify Item 302 of Regulation S-K (Supplementary Financial Information); and (iii) amend certain aspects of Item 303 of Regulation S-K (Management's Discussion and Analysis of Financial Condition and Results of Operations). The Amendments became effective on February 10, 2021 and compliance will be required for the registrants' fiscal year ending on or after August 9, 2021. Early adoption of the Amendments is permitted on an item-by-item basis after the effective date; however, a registrant must fully comply with each adopted item in its entirety. The Company adopted the Amendments for the year ended March 31, 2022 and there were no material changes to the consolidated financial statement or its disclosures. 103 Table of Contents 3. INVESTMENTS The following tables show the composition of the investment portfolio, at cost and fair value (with corresponding percentage of total portfolio investments), as of March 31, 2022 and 2021: Percentage of Percentage of Fair Total Portfolio Percentage of Total Portfolio Value at Fair Value Net Assets Cost at Cost (dollars in thousands) March 31, 2022: First lien loans 1 $ 739,872 79.0 % 175.8 % $ 745,290 79.4 % Second lien loans 2 52,645 5.6 12.5 55,976 6.0 Subordinated debt 1,317 0.1 0.3 994 0.1 Preferred equity 44,663 4.8 10.6 25,544 2.7 Common equity & warrants 40,514 4.3 9.6 34,499 3.7 I-45 SLF LLC 3 57,603 6.2 13.7 76,000 8.1 $ 936,614 100.0 % 222.5 % $ 938,303 100.0 % March 31, 2021: First lien loans 1 $ 524,161 76.1 % 155.9 % $ 530,366 75.4 % Second lien loans 2 36,919 5.4 11.0 40,198 5.7 Subordinated debt 11,534 1.7 3.4 11,588 1.6 Preferred equity 22,608 3.3 6.7 15,378 2.2 Common equity & warrants 36,052 5.2 10.7 33,227 4.7 I-45 SLF LLC 3 57,158 8.3 17.0 72,800 10.4 $ 688,432 100.0 % 204.7 % $ 703,557 100.0 % 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 March 31, 2022 and 2021, the fair value of the first lien last out loans are $38.6 million and $85.6 million, respectively. 2 Included in first lien loans and 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 March 31, 2022 and 2021, the fair value of the split lien term loans included in first lien loans is $36.4 million and $25.9 million, respectively. As of March 31, 2022 and 2021, the fair value of the split lien term loans included in second lien loans is $33.9 million and $19.1 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 16 for further discussion. 104 Table of Contents The following tables show the composition of the investment portfolio by industry, at cost and fair value (with corresponding percentage of total portfolio investments), as of March 31, 2022 and 2021: Percentage of Percentage of Total Portfolio Percentage of Total Portfolio Fair Value at Fair Value Net Assets Cost at Cost (dollars in thousands) March 31, 2022: Business Services $ 123,697 13.2 % 29.4 % $ 124,860 13.3 % Consumer Products & Retail 90,457 9.7 21.5 88,375 9.4 Healthcare Services 88,131 9.4 21.0 96,946 10.3 Consumer Services 71,730 7.7 17.0 71,203 7.6 I-45 SLF LLC 1 57,603 6.2 13.7 76,000 8.1 Distribution 54,798 5.9 13.0 54,035 5.8 Food, Agriculture & Beverage 48,876 5.2 11.6 47,057 5.0 Media, Marketing & Entertainment 43,463 4.6 10.3 33,049 3.5 Financial Services 39,305 4.2 9.3 31,229 3.3 Technology Products & Components 37,047 4.0 8.8 30,440 3.3 Transportation & Logistics 34,038 3.6 8.1 29,513 3.1 Software & IT Services 33,414 3.6 7.9 34,866 3.7 Education 32,072 3.4 7.6 32,119 3.4 Healthcare Products 32,054 3.4 7.6 33,018 3.5 Environmental Services 20,641 2.2 4.9 23,108 2.5 Telecommunications 18,736 2.0 4.5 22,341 2.4 Energy Services (Upstream) 17,910 1.9 4.3 17,500 1.9 Specialty Chemicals 17,749 1.9 4.2 17,640 1.9 Industrial Products 13,891 1.5 3.3 13,901 1.5 Energy Services (Midstream) 13,465 1.4 3.2 13,582 1.5 Industrial Services 11,614 1.2 2.8 11,451 1.2 Commodities & Mining 10,877 1.2 2.6 11,135 1.2 Containers & Packaging 10,671 1.1 2.5 10,723 1.1 Aerospace & Defense 6,800 0.7 1.6 6,672 0.7 Restaurants 5,367 0.6 1.3 4,556 0.5 Paper & Forest Products 2,208 0.2 0.5 2,984 0.3 $ 936,614 100.0 % 222.5 % $ 938,303 100.0 % 105 Table of Contents Percentage of Percentage of Total Portfolio Percentage of Total Portfolio Fair Value at Fair Value Net Assets Cost at Cost (dollars in thousands) March 31, 2021: Business Services $ 87,839 12.8 % 26.1 % $ 89,758 12.8 % Media, Marketing, & Entertainment 80,876 11.7 24.1 75,447 10.7 Healthcare Services 72,411 10.5 21.5 81,509 11.6 I-45 SLF LLC 1 57,158 8.3 17.0 72,800 10.3 Distribution 53,160 7.7 15.8 52,819 7.5 Software & IT Services 46,696 6.8 13.9 45,683 6.5 Industrial Services 39,071 5.7 11.6 39,424 5.6 Healthcare Products 33,937 4.9 10.1 32,785 4.7 Financial Services 33,861 4.9 10.1 28,283 4.0 Technology Products & Components 30,716 4.5 9.1 28,220 4.0 Consumer Products & Retail 29,980 4.4 8.9 29,927 4.2 Transportation & Logistics 23,395 3.4 7.0 19,383 2.8 Food, Agriculture & Beverage 21,575 3.1 6.4 21,641 3.1 Telecommunications 19,572 2.8 5.8 24,350 3.5 Environmental Services 12,021 1.7 3.6 14,510 2.1 Commodities & Mining 10,138 1.5 3.0 10,603 1.5 Aerospace & Defense 9,668 1.4 2.9 9,459 1.3 Energy Services (Midstream) 8,975 1.3 2.7 9,319 1.3 Specialty Chemicals 7,841 1.1 2.3 7,841 1.1 Restaurants 6,542 1.1 1.9 6,822 1.0 Paper & Forest Products 3,000 0.4 0.9 2,974 0.4 $ 688,432 100.0 % 204.7 % $ 703,557 100.0 % 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 16 for further discussion. 106 Table of Contents The following tables summarize the composition of the investment portfolio by geographic region of the United States, at cost and fair value (with corresponding percentage of total portfolio investments), as of March 31, 2022 and 2021: Percentage of Percentage of Total Portfolio Percentage of Total Portfolio Fair Value at Fair Value Net Assets Cost at Cost (dollars in thousands) March 31, 2022: Northeast $ 225,578 24.1 % 53.6 % $ 221,780 23.6 % Southwest 206,057 22.0 49.0 204,443 21.8 West 163,924 17.5 38.9 153,292 16.3 Southeast 136,588 14.6 32.5 138,929 14.9 Midwest 132,308 14.1 31.4 129,354 13.8 I-45 SLF LLC 1 57,603 6.1 13.7 76,000 8.1 International 14,556 1.6 3.4 14,505 1.5 $ 936,614 100.0 % 222.5 % $ 938,303 100.0 % March 31, 2021: Southwest $ 196,956 28.6 % 58.6 % $ 200,091 28.4 % Northeast 153,761 22.3 45.7 150,595 21.4 Southeast 120,168 17.5 35.7 125,317 17.8 West 90,910 13.2 27.0 87,363 12.5 Midwest 69,479 10.1 20.7 67,391 9.6 I-45 SLF LLC 1 57,158 8.3 17.0 72,800 10.3 $ 688,432 100.0 % 204.7 % $ 703,557 100.0 % 1 I-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 16 for further discussion. 107 Table of Contents 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 quarterly review of each investment by our executive officers and investment team. Valuations of each portfolio security are prepared quarterly by the finance department using updated financial and other operational information collected by the investment team. Each investment valuation is then subject to review by the executive officers and investment team. 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 then subsequently to the 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. Rule 2a-5 under the 1940 Act was recently adopted by the SEC and establishes requirements for determining fair value in good faith for purposes of the 1940 Act. We intend to comply with the new rule's requirements on or before the compliance date on September 8, 2022. 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 March 31, 2022 and 2021, 100% of the CSWC investment portfolio consisted of privately held debt and equity instruments for which inputs falling within the categories of Level 1 and Level 2 are generally not readily available. Therefore, CSWC determines the fair value of its investments (excluding investments for which fair value is measured at net asset value ("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. 108 Table of Contents 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 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 109 Table of Contents 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. 110 Table of Contents The following fair value hierarchy tables set forth our investment portfolio by level as of March 31, 2022 and 2021 (in thousands): Fair Value Measurements at March 31, 2022 Using Quoted Prices in Significant Active Markets Other Significant for Identical Observable Unobservable Assets Inputs Inputs Asset Category Total (Level 1) (Level 2) (Level 3) First lien loans $ 739,872 — — $ 739,872 Second lien loans 52,645 — — 52,645 Subordinated debt 1,317 — — 1,317 Preferred equity 44,663 — — 44,663 Common equity & warrants 40,514 — — 40,514 Investments measured at net asset value 1 57,603 — — — Total Investments $ 936,614 — — $ 879,011 Fair Value Measurements at March 31, 2021 Using Quoted Prices in Significant Active Markets Other Significant for Identical Observable Unobservable Assets Inputs Inputs Asset Category 2 Total (Level 1) (Level 2) (Level 3) First lien loans $ 524,161 — — $ 524,161 Second lien loans 36,919 — — 36,919 Subordinated debt 11,534 — — 11,534 Preferred equity 22,608 — — 22,608 Common equity & warrants 36,052 — — 36,052 Investments measured at net asset value 1 57,158 — — — Total Investments $ 688,432 — — $ 631,274 1 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 March 31, 2022 and 2021, 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 March 31, 2022 and 2021. Significant Level 3 Inputs were weighted by the relative fair value of the investments. The tables are not intended to be all inclusive, but instead capture the significant unobservable inputs relevant to our determination of fair value. 111 Table of Contents Fair Value at Significant Valuation March 31, 2022 Unobservable Weighted Type Technique (in thousands) Inputs Range Average First lien loans Income Approach $ 645,034 Discount Rate 7.3% - 30.6% 10.7% Third Party Broker Quote 5.5 - 96.5 93.2 Market Approach 94,838 Cost 80.2 - 99.0 98.1 Exit Value 100.0 - 102.0 101.8 Second lien loans Income Approach 49,541 Discount Rate 10.3% - 37.8% 15.4% Third Party Broker Quote 97.3 - 97.3 97.3 Enterprise Value Waterfall Approach 3,104 EBITDA Multiple 8.3x - 8.3x 8.3x Discount Rate 22.1% - 22.1% 22.1% Subordinated debt Income Approach 650 Discount Rate 27.4% - 27.4% 27.4% Market Approach 172 Cost 100.0 - 100.0 100 Enterprise Value Waterfall Approach 495 EBITDA Multiple 8.1x - 8.1x 8.1x Discount Rate 20.5% - 20.5% 20.5% Preferred equity Enterprise Value Waterfall Approach 41,563 EBITDA Multiple 6.9x - 18.8x 10.6x Discount Rate 12.5% - 40.8% 17.8% Market Approach 3,100 Cost 100.0 - 100.0 100 Common equity & warrants Enterprise Value Waterfall Approach 36,667 EBITDA Multiple 4.2x - 11.4x 8.5x Discount Rate 10.1% - 32.2% 18.1% Market Approach 1,757 Exit Value 351.4 - 351.4 351.4 Income Approach 2,090 Third Party Broker Quote 158.7 - 158.7 158.7 Total Level 3 Investments $ 879,011 Fair Value at Significant Valuation March 31, 2021 Unobservable Weighted Type Technique (in thousands) Inputs Range Average First lien loans Income Approach $ 465,712 Discount Rate 6.3% - 28.8% 10.9% Third Party Broker Quote 53.1 - 99.9 87.9 Market Approach 58,449 Cost 93.9 - 98.0 97.6 Exit Value 100.0 - 101.0 100.2 Second lien loans Income Approach 36,864 Discount Rate 9.9% - 17.6% 14.4% Third Party Broker Quote 96.5 - 97.8 96.6 Market Approach 55 Exit Value 2.4 2.4 Subordinated debt Income Approach 11,534 Discount Rate 6.2% - 29.3% 13.4% Preferred equity Enterprise Value Waterfall Approach 22,608 EBITDA Multiple 6.9x - 10.8x 8.9x Discount Rate 12.7% - 22.4% 19.3% Common equity & warrants Enterprise Value Waterfall Approach 34,013 EBITDA Multiple 5.6x - 11.5x 8.1x Discount Rate 12.9% - 29.8% 20.0% Market Approach 2,039 Cost 100.0 100.0 Exit Value 284.4 284.4 Total Level 3 Investments $ 631,274 112 Table of Contents 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. During the years ended March 31, 2022 and 2021, 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 years ended March 31, 2022 and 2021 (in thousands): Fair Value March 31, 2021 Realized & Unrealized Gains (Losses) Purchases of Investments 1 Repayments PIK Interest Capitalized Divestitures Conversion of Security Fair Value March 31, 2022 YTD Unrealized Appreciation (Depreciation) on Investments held at period end First lien loans $ 524,161 $ 719 $ 464,758 $ (247,538) $ 2,455 $ — $ (4,683) $ 739,872 $ (960) Second lien loans 36,919 (2,325) 18,902 (7,223) 1,217 (53) 5,208 52,645 (2,699) Subordinated debt 11,534 422 364 (11,521) 518 — — 1,317 322 Preferred equity 22,608 11,889 10,691 — — — (525) 44,663 11,363 Common equity & warrants 36,052 12,035 4,308 — — (11,881) — 40,514 7,401 Total Investments $ 631,274 $ 22,740 $ 499,023 $ (266,282) $ 4,190 $ (11,934) $ — $ 879,011 $ 15,427 Fair Value March 31, 2020 Realized & Unrealized Gains (Losses) Purchases of Investments 1 Repayments PIK Interest Capitalized Divestitures Conversion of Security from Debt to Equity Fair Value March 31, 2021 YTD Unrealized Appreciation (Depreciation) on Investments held at period end First lien loans $ 427,447 $ (308) $ 199,362 $ (98,567) $ 5,919 $ — $ (9,692) $ 524,161 $ (2,525) Second lien loans 37,139 (1,839) 192 (250) 899 — 778 36,919 (1,839) Subordinated debt 9,747 179 546 — 1,062 — — 11,534 179 Preferred equity 16,624 9,730 3,915 — — (7,661) — 22,608 5,169 Common equity & warrants 22,355 2,082 4,881 — — (2,180) 8,914 36,052 1,658 Financial instruments — — — — — — — — — Total Investments $ 513,312 $ 9,844 $ 208,896 $ (98,817) $ 7,880 $ (9,841) $ — $ 631,274 $ 2,642 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 150% after such borrowing. The Board of Directors also approved a resolution that limits the Company’s issuance of senior securities such that the asset coverage ratio, taking into account any such issuance, would not be less than 166%, which became effective April 25, 2019. On August 11, 113 Table of Contents 2021, we received an exemptive order from the SEC to permit us to exclude the senior securities issued by SBIC I or any future SBIC subsidiary of the Company from the definition of senior securities in the asset coverage requirement applicable to the Company under the 1940 Act. As of March 31, 2022, the Company’s asset coverage was 193%. The Company had the following borrowings outstanding as of March 31, 2022 and 2021 (amounts in thousands): March 31, 2022 Outstanding Balance Unamortized Debt Issuance Costs and Debt Discount/Premium Recorded Value SBA Debentures $ 40,000 $ (1,648) $ 38,352 Credit Facility 205,000 — 205,000 January 2026 Notes 140,000 (1,286) 138,714 October 2026 Notes 150,000 (3,478) 146,522 $ 535,000 $ (6,412) $ 528,588 March 31, 2021 Credit Facility $ 120,000 $ — $ 120,000 October 2024 Notes 125,000 (2,121) 122,879 January 2026 Notes 140,000 (1,575) 138,425 $ 385,000 $ (3,696) $ 381,304 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. The Credit Facility contains an accordion feature that allows CSWC to increase the total commitments under the Credit Facility up to $400 million from new and existing lenders on the same terms and conditions as the existing commitments. On August 9, 2021, CSWC entered into the Second Amended and Restated Senior Secured Revolving Credit Agreement (the "Credit Agreement"). Prior to the Credit Agreement, (1) borrowings under the Credit Facility accrued interest on a per annum basis at a rate equal to the applicable LIBOR rate plus 2.50% with no LIBOR floor, and (2) the total borrowing capacity was $340 million with commitments from a diversified group of eleven lenders. The Credit Agreement (1) decreased the total borrowing capacity under the Credit Facility to $335 million with commitments from a diversified group of ten lenders, (2) reduced the interest rate on borrowings to LIBOR plus 2.15% with no LIBOR floor and removed conditions related thereto as previously set forth in the Amended and Restated Senior Secured Revolving Credit Agreement, and (3) extended the end of the Credit Facility's revolver period from December 21, 2022 to August 9, 2025 and extended the final maturity from December 21, 2023 to August 9, 2026. The Credit Agreement also modified certain covenants in the Credit Facility, including, among other things, to increase the minimum obligors’ net worth test from $180 million to $200 million. CSWC pays unused commitment fees of 0.50% to 1.00% per annum, based on utilization, on the unused lender commitments under the Credit Facility. The Credit Facility 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 senior coverage ratio of 2 to 1, (4) maintaining a minimum shareholders’ equity, (5) maintaining a minimum consolidated net worth, (6) maintaining a regulatory asset coverage of not less than 150%, (7) maintaining an interest coverage ratio of at least 2.25 to 1.0, and (8) 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. 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. 114 Table of Contents 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 subsidiary. As of March 31, 2022, substantially all of the Company’s assets were pledged as collateral for the Credit Facility, except for assets held in SBIC I. At March 31, 2022, CSWC had $205.0 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 $6.2 million, $6.8 million and $8.3 million respectively, for the years ended March 31, 2022, 2021 and 2020. The weighted average interest rate on the Credit Facility was 2.50% and 3.05%, respectively, for the years ended March 31, 2022 and 2021. Average borrowings for the years ended March 31, 2022 and 2021 were $173.5 million and $166.0 million, respectively. As of March 31, 2022 and 2021, 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 bore interest at a rate of 5.95% per year. On June 11, 2018, the Company entered into an 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 Company issued an additional $19.6 million in aggregate principal amount of the December 2022 Notes under this agreement. All issuances of December 2022 Notes ranked equally in right of payment and form a single series of notes. On September 29, 2020, the Company redeemed $20,000,000 in aggregate principal of the $77,136,175 in aggregate principal amount of issued and outstanding December 2022 Notes. On December 10, 2020, the Company redeemed $20,000,000 in aggregate principal of the $57,136,175 in aggregate principal amount of issued and outstanding December 2022 Notes. On January 21, 2021, the Company redeemed the remaining $37,136,175 in aggregate principal amount of issued and outstanding December 2022 Notes. The December 2022 Notes were redeemed at 100% of their principal amount, plus the accrued and unpaid interest thereon, through, but excluding each of the redemption dates. Accordingly, the Company recognized a realized loss on extinguishment of debt, equal to the write-off of the related unamortized debt issuance costs, of $1.0 million during the year ended March 31, 2021. The Company recognized interest expense related to the December 2022 Notes, including amortization of deferred issuance costs, of $3.5 million and $5.3 million for the years ended March 31, 2021 and 2020, respectively. Average borrowings for the years ended March 31, 2021 and 2020 were $53.8 million and $77.1 million, respectively. The December 2022 Notes had a weighted average effective yield of 5.93%. 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”). In October 2019, the Company issued an additional $10.0 million in aggregate principal amount of the October 2024 Notes (the "Additional October 2024 Notes"). In August 2020, the Company issued an additional $50.0 million in aggregate principal amount of the October 2024 Notes (the "New Notes" together with the Existing October 2024 Notes and the Additional October 2024 Notes, the "October 2024 Notes"). The Additional October 2024 Notes and the New Notes were treated as a single series with the Existing October 2024 Notes under the indenture and had the same terms as the Existing October 2024 Notes. The maturity date of the October 2024 Notes was October 1, 2024 and were redeemable 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 bore interest at a rate of 5.375% per year. On September 24, 2021, the Company redeemed $125,000,000 in aggregate principal amount of the issued and outstanding October 2024 Notes. The October 2024 Notes were redeemed at 100% of their principal amount, plus (i) the accrued and unpaid interest thereon, through, but excluding the redemption date, and (ii) a "make-whole" premium. Accordingly, the Company recognized a realized loss on extinguishment of debt, equal to the write-off of the related unamortized debt issuance costs of $1.8 million and the "make-whole" premium of $15.2 million during the three months ended September 30, 2021. The Company recognized interest expense related to the October 2024 Notes, including amortization of deferred issuance costs, of $3.6 million, $6.3 million and $2.2 million, respectively, for the years ended March 31, 2022, 2021 and 2020. From April 1, 2021 through September 24, 2021 (the redemption date of the October 2024 Notes), average borrowings were 115 Table of Contents $125.0 million. For the year ended March 31, 2021, average borrowings were $106.1 million. The October 2024 Notes had a weighted average effective yield of 5.375%. January 2026 Notes In December 2020, the Company issued $75.0 million in aggregate principal amount of 4.50% Notes due 2026 (the "Existing January 2026 Notes"). The Existing January 2026 Notes were issued at par. In February 2021, the Company issued an additional $65.0 million in aggregate principal amount of the January 2026 Notes (the "Additional January 2026 Notes" together with the Existing January 2026 Notes, the "January 2026 Notes"). The Additional January 2026 Notes were issued at a price of 102.11% of the aggregate principal amount of the Additional January 2026 Notes, resulting in a yield-to-maturity of approximately 4.0% at issuance. The Additional January 2026 Notes are treated as a single series with the Existing January 2026 Notes under the indenture and had the same terms as the Existing January 2026 Notes. The January 2026 Notes mature on January 31, 2026 and may be redeemed in whole or in part at any time prior to October 31, 2025, at par plus a "make-whole" premium, and thereafter at par. The January 2026 Notes bear interest at a rate of 4.50% per year, payable semi-annually on January 31 and July 31 of each year. The January 2026 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 or structurally subordinated to all of our existing and future secured indebtedness, including borrowings under our Credit Facility and the SBA Debentures. As of March 31, 2022, the carrying amount of the January 2026 Notes was $138.7 million on an aggregate principal amount of $140.0 million at a weighted average effective yield of 4.46%. As of March 31, 2022, the fair value of the January 2026 Notes was $129.2 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 January 2026 Notes, including amortization of deferred issuance costs, of $6.7 million and $1.2 million, respectively, for the years ended March 31, 2022 and 2021. For the year ended March 31, 2022, average borrowings were $140.0 million. Since the issuance of the January 2026 Notes on December 29, 2020 through March 31, 2021, average borrowings were $99.5 million. The indenture governing the January 2026 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, to comply with Section 18(a)(1)(B) as modified by Section 61(a)(2) of the 1940 Act, or any successor provisions, after giving effect to any exemptive relief granted to the Company by the SEC and subject to certain other exceptions, and to provide financial information to the holders of the January 2026 Notes and the trustee under the indenture if the Company is no longer subject to the reporting requirements under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These covenants are subject to important limitations and exceptions that are described in the indenture and the third supplemental indenture relating to the January 2026 Notes. In addition, holders of the January 2026 Notes can require the Company to repurchase some or all of the January 2026 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 third supplemental indenture relating to the January 2026 Notes. October 2026 Notes In August 2021, the Company issued $100.0 million in aggregate principal amount of 3.375% Notes due 2026 (the "Existing October 2026 Notes"). The Existing October 2026 Notes were issued at a price of 99.418% of the aggregate principal amount of the Existing October 2026 Notes, resulting in a yield-to-maturity of 3.5%. In November 2021, the Company issued an additional $50.0 million in aggregate principal amount of the October 2026 Notes (the "Additional October 2026 Notes" together with the Existing October 2026 Notes, the "October 2026 Notes"). The Additional October 2026 Notes were issued at a price of 99.993% of the aggregate principal amount, resulting in a yield-to-maturity of approximately 3.375% at issuance. The Additional October 2026 Notes are treated as a single series with the Existing October 2026 Notes under the indenture and had the same terms as the Existing October 2026 Notes. The October 2026 Notes mature on October 1, 2026 and may be redeemed in whole or in part at any time prior to July 1, 2026, at par plus a "make-whole" premium, and thereafter at par. The October 2026 Notes bear interest at a rate of 3.375% per year, payable semi-annually in arrears on April 1 and October 1 of each year. The October 2026 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 or structurally subordinated to all of our existing and future secured indebtedness, including borrowings under our Credit Facility and the SBA Debentures. 116 Table of Contents As of March 31, 2022, the carrying amount of the October 2026 Notes was $146.5 million on an aggregate principal amount of $150.0 million at a weighted average effective yield of 3.5%. As of March 31, 2022, the fair value of the October 2026 Notes was $139.1 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 2026 Notes, including amortization of deferred issuance costs, of $3.1 million for the year ended March 31, 2022. Since the issuance of the October 2026 Notes on August 27, 2021 through March 31, 2022, average borrowings were $132.9 million. The indenture governing the October 2026 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, to comply with Section 18(a)(1)(B) as modified by Section 61(a)(2) of the 1940 Act, or any successor provisions, after giving effect to any exemptive relief granted to the Company by the SEC and subject to certain other exceptions, and to provide financial information to the holders of the October 2026 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 fourth supplemental indenture relating to the October 2026 Notes. In addition, holders of the October 2026 Notes can require the Company to repurchase some or all of the October 2026 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 fourth supplemental indenture relating to the October 2026 Notes. SBA Debentures On April 20, 2021, SBIC I received a license from the SBA to operate as an SBIC under Section 301(c) of the Small Business Investment Act of 1958, as amended. The license allows SBIC I to obtain leverage by issuing SBA Debentures, subject to the issuance of a leverage commitment by the SBA. SBA Debentures are loans issued to an SBIC which have interest payable semi-annually and a ten-year maturity. The interest rate is fixed shortly after issuance at a market-driven spread over U.S. Treasury Notes with ten-year maturities. Interest on SBA Debentures is payable semi-annually on March 1 and September 1. Current statutes and regulations permit SBIC I to borrow up to $175 million in SBA Debentures with at least $87.5 million in regulatory capital (as defined in the SBA regulations). On May 25, 2021, SBIC I received a leverage commitment from the SBA in the amount of $40.0 million to be issued on or prior to September 30, 2025. On January 28, 2022, SBIC I received an additional leverage commitment in the amount of $40.0 million to be issued on or prior to September 30, 2026. As of March 31, 2022, SBIC I had regulatory capital of $40.0 million and approved and unused SBA Debenture commitments of $40.0 million. The SBA may limit the amount that may be drawn each year under these commitments, and each issuance of leverage is conditioned on the Company’s full compliance, as determined by the SBA, with the terms and conditions set forth in the SBA regulations. As of March 31, 2022, the carrying amount of SBA Debentures was $38.4 million on an aggregate principal amount of $40.0 million. As of March 31, 2022, the fair value of the SBA Debentures was $38.6 million. The fair value of the SBA Debentures is estimated by discounting the remaining payments using current market rates for similar instruments and considering such factors as the legal maturity date and the ability of market participants to prepay the SBA Debentures, which are Level 3 inputs under ASC Topic 820. The Company recognized interest expense and related fees related to SBA Debentures of $0.3 million for the year ended March 31, 2022. The weighted average interest rate on the SBA Debentures was 1.30% for the year ended March 31, 2022. For the year ended March 31, 2022, average borrowings were $17.0 million. As of March 31, 2022, the Company's issued and outstanding SBA Debentures mature as follows: Pooling Date Maturity Date Fixed Interest Rate March 31, 2022 9/22/21 9/1/2031 1.575 % $ 15,000,000 3/23/22 3/1/2032 3.209 % 25,000,000 $ 40,000,000 (1) The SBA has two scheduled pooling dates for SBA Debentures (in March and in September). Certain SBA Debentures funded during the reporting periods may not be pooled until the subsequent pooling date. 117 Table of Contents Contractual Payment Obligations A summary of the Company's contractual payment obligations for the repayment of outstanding indebtedness at March 31, 2022 is as follows: Years Ending March 31, 2023 2024 2025 2026 2027 Thereafter Total SBA Debentures $ — $ — $ — $ — $ — $ 40,000 $ 40,000 Credit Facility — — — — 205,000 — 205,000 January 2026 Notes — — — 140,000 — — 140,000 October 2026 Notes — — — — 150,000 — 150,000 Total $ — $ — $ — $ 140,000 $ 355,000 $ 40,000 $ 535,000 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 long-term capital gains that is distributed to its shareholders, including “deemed distributions” as discussed below. As part of maintaining RIC tax treatment, undistributed taxable income, 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 extended due date of the U.S. federal income tax return for the applicable fiscal year or (2) the fifteenth day of the ninth month following the close of the year in which such taxable income was generated. For the tax years ended December 31, 2021, 2020 and 2019, CSWC qualified for RIC tax treatment. We intend to meet the applicable qualifications to be taxed as a RIC in future periods. However, CSWC’s ability to meet certain portfolio diversification requirements of RICs in future years may not be controllable by CSWC. We have distributed or intend to distribute sufficient dividends to eliminate taxable income for our completed tax years. If we fail to satisfy the 90% distribution requirement or otherwise fail to qualify as a RIC in any tax year, we would be subject to tax in that year on all of our taxable income, regardless of whether we made any distributions to our shareholders. During the quarter ended March 31, 2022, CSWC declared a quarterly dividend in the amount of $11.8 million, or $0.48 per share. Our distributions for the tax years ended December 31, 2021 and 2020 were as follows: Payment Date Cash Dividend Tax Year Ended December 31, 2021 March 31, 2021 1 $ 0.52 June 30, 2021 1 0.53 September 30, 2021 1 0.54 December 31, 2021 2 0.97 $ 2.56 Tax Year Ended December 31, 2020 March 31, 2020 1 $ 0.51 June 30, 2020 1 0.51 September 30, 2020 1 0.51 December 31, 2020 1 0.51 $ 2.04 118 Table of Contents Tax Year Ended December 31, 2019 March 31, 2019 1 $ 0.48 June 30, 2019 1 0.49 September 30, 2019 1 0.50 December 31, 2019 3 1.25 $ 2.72 1 On each of these dates, the cash dividend paid included a supplemental dividend of $0.10 per share. 2 On December 31, 2021, CSWC paid a regular dividend of $0.47 per share and a supplemental dividend of $0.50 per share. 3 On December 31, 2019, CSWC paid a regular dividend of $0.40 per share, a supplemental dividend of $0.10 per share and a special dividend of $0.75 per share. Book and tax basis differences relating to shareholder dividends and distributions and other permanent book and tax differences are typically reclassified among the CSWC’s capital accounts. In addition, the character of income and gains to be distributed is determined in accordance with income tax regulations that may differ from GAAP; accordingly, for the fiscal years ended March 31, 2022 and 2021, CSWC reclassified for book purposes amounts arising from permanent book/tax differences related to the tax treatment of return of capital, distributions from wholly-owned subsidiaries and/or deemed distributions, tax treatment of investments upon disposition, and non-deductible expenses, as follows (amounts in thousands): Year ended Year ended March 31, 2022 March 31, 2021 Additional capital $ (7,648) $ (3,981) Total distributable earnings $ 7,648 $ 3,981 The determination of the tax attributes of CSWC’s distributions is made after tax year end, based upon its taxable income for the full tax year and distributions paid for the full tax year. Therefore, the determination of tax attributes made on an interim basis for fiscal year end may not be representative of the actual tax attributes determined at tax year end. For tax purposes, the 2021 dividends totaled $2.56 per share and were comprised entirely of ordinary income. In addition, 87.40% of each of the ordinary distributions represent interest-related dividends. 87.40% of total distributions represent the portion of CSWC’s dividends received by non-U.S. residents and foreign corporation shareholders that are generally exempt from U.S. withholding tax. For tax purposes, the 2020 dividends totaled $2.04 per share and were comprised entirely of ordinary income. Included in ordinary income per share is approximately $0.167 per share of qualified dividend income. In addition, 91.74% of each of the ordinary distributions represent interest-related dividends and 8.26% of the ordinary distribution paid on March 31, 2020 represents short-term capital gains dividends. 93.80% of total distributions represent the portion of CSWC’s dividends received by non-U.S. residents and foreign corporation shareholders that are generally exempt from U.S. withholding tax. Of the qualified dividends of $3.0 million, 8.0% are eligible for the dividends received deduction. Ordinary dividend distributions from a RIC do not qualify for the 20% maximum tax rate (plus a 3.8% Medicare surtax, if applicable) 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 tax character of distributions paid for the tax years ended December 31, 2021 and 2020 was as follows (amounts in thousands): Twelve Months Ended December 31, 2021 2020 Ordinary income $ 56,633 $ 37,517 Distributions of long term capital gains — — Distributions on tax basis 1 $ 56,633 $ 37,517 1 Includes only those distributions which reduce estimated taxable income. 119 Table of Contents As of March 31, 2022, CSWC estimates that it has cumulative undistributed taxable income of approximately $11.8 million, or $0.47 per share, that will be carried forward toward distributions to be paid in future periods. We intend to meet the applicable qualifications to be taxed as a RIC in future periods. The following reconciles net increase (decrease) in net assets resulting from operations to estimated RIC distributable income for the years ended March 31, 2022, 2021 and 2020: Years ended March 31, 2022 2021 2020 Reconciliation of RIC Distributable Income 1 Net increase (decrease) in net assets resulting from operations $ 42,815 $ 50,883 $ (22,351) Net change in unrealized (appreciation) depreciation on investments (11,467) (28,755) 92,814 Income/gain (expense/loss) recognized for tax on pass-through entities 3,753 (11,000) 177 Realized gain (loss) recognized for tax 152 2,206 (2,302) Capital loss carryover 2 (878) 17,924 — Net operating income - wholly-owned subsidiaries (10,757) (378) (587) Income on wholly-owned subsidiaries 4,000 — — Non-deductible tax expense 65 1,066 4,572 Loss on extinguishment of debt 12,268 — — Non-deductible compensation 3,679 — — Compensation-related book/tax differences 36 — — Interest on non-accrual loans 4,171 — — Other book tax differences 1,530 870 (304) Estimated distributable income before deductions for distributions $ 49,367 $ 32,816 $ 72,019 Distributions 3 : Ordinary $ 57,518 $ 38,917 $ 23,540 Capital gains — — 25,703 Deemed distributions — — 16,483 Distributions payable 3 — — — Estimated annual RIC undistributed taxable income $ (8,151) $ (6,101) $ 6,293 1 The calculation of distributable income for each period is an estimate and will not be finally determined until the Company files its tax return each year. Final distributable income may be different than this estimate. 2 At March 31, 2022, the Company had long term capital loss carryforwards of $17.3 million to offset future capital gains. These capital loss carryforwards are not subject to expiration. 3 Includes only those distributions which reduce estimated distributable income. As of March 31, 2022, 2021 and 2020, the components of estimated RIC accumulated earnings on a tax basis were as follows (amounts in thousands): Years ended March 31, Components of RIC Accumulated Earnings on a Tax Basis 1 2022 2021 2020 Undistributed ordinary income - tax basis $ 12,682 $ 21,083 $ 25,766 Undistributed net realized (loss) gain (17,252) (17,924) 749 Unrealized (depreciation) appreciation on investments (20,126) (766) (47,487) Other temporary differences — (663) — Components of distributable earnings at year-end $ (24,696) $ 1,730 $ (20,972) 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 long-term capital gains by designating them as a “deemed distribution” to its shareholders and paying a federal tax on the long-term capital gains for the benefit of its shareholders. Shareholders then 120 Table of Contents 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. For the tax years ended December 31, 2021 and 2020, there were no long-term capital gains and therefore had no deemed distributions to our shareholders or federal taxes incurred related to such items. For the tax year ended December 31, 2019, we had net long-term capital gains of $42.2 million, of which $25.7 million was distributed to shareholders as capital gains dividends. We elected to retain net long-term capital gains of $16.5 million and designate the retained amount as a "deemed distribution" to our shareholders. As a result, we incurred federal taxes on the retained amount on behalf of our shareholders in the amount of $3.5 million for the tax year ended December 31, 2019. In addition, the Taxable Subsidiary 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 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 and resultant tax advantages. The Taxable Subsidiary is not consolidated for U.S. federal income tax purposes and may generate an income tax provision as a result of their ownership of the portfolio companies. This income tax provision, or benefit, and the related tax assets and liabilities, if any, are reflected in our Consolidated Statement of Operations. As of March 31, 2022, the cost of investments held at the RIC for U.S. federal income tax purposes was $826.5 million, with such investments having gross unrealized appreciation of $39.7 million and gross unrealized depreciation of $59.8 million, resulting in net unrealized depreciation of $20.1 million. As of March 31, 2022, the cost of investments held at the Taxable Subsidiary for U.S. federal income tax purposes was $25.9 million, with such investments having gross unrealized appreciation of $28.1 million and gross unrealized depreciation of $1.9 million, resulting in net unrealized appreciation of $26.2 million. On a consolidated basis, the total investment portfolio has net unrealized appreciation of $6.1 million for U.S. federal income tax purposes. CSMC, a former wholly-owned subsidiary of CSWC, was not a RIC, and was required to pay taxes at the current corporate rate. Effective December 31, 2020, CSMC merged with and into CSWC, which is not subject to corporate federal income taxes. For tax purposes, CSMC had elected to be treated as a taxable entity, and therefore was not consolidated for tax purposes and was taxed at normal corporate tax rates based on its taxable income and, as a result of its activities, may generate an income tax provision or benefit. The Taxable Subsidiary is not a RIC and is required to pay taxes at the current corporate rate. For tax purposes, the Taxable Subsidiary 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 an income tax provision or benefit. The taxable income, or loss, of CSMC and the Taxable Subsidiary may differ from book income, or loss, due to temporary book and tax timing differences and permanent differences. This income tax provision, or benefit, if any, and the related tax assets and liabilities, are reflected in our consolidated financial statements. CSMC recorded deferred taxes related to the changes in the restoration plan and bonus accruals on a quarterly basis. The Taxable Subsidiary records valuation adjustments related to its investments on a quarterly basis. Deferred taxes related to the unrealized gain/loss on investments 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. As of March 31, 2022 and 2021, the Taxable Subsidiary had a deferred tax liability of $5.7 million and $3.3 million, respectively. 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. 121 Table of Contents The following table sets forth the significant components of the deferred tax assets and liabilities as of March 31, 2022 and 2021 (amounts in thousands): Years ended 2022 2021 Deferred tax asset: Net operating loss carryforwards $ — $ 224 Interest 185 173 Total deferred tax asset 185 397 Deferred tax liabilities: Net unrealized appreciation on investments (4,899) (2,931) Net basis differences in portfolio investments (1,033) (811) Total deferred tax liabilities (5,932) (3,742) Total net deferred tax (liabilities) assets $ (5,747) $ (3,345) The income tax provision, 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 year ended March 31, 2022, we recognized a total net income tax provision of $0.6 million, principally consisting of a $0.1 million accrual for U.S. federal excise tax and a $0.5 million tax provision relating to the Taxable Subsidiary. For the year ended March 31, 2021, we recognized total net income tax provision of $2.4 million, principally consisting of a $0.6 million accrual for U.S. federal excise tax and a provision for U.S. federal income taxes relating to CSMC of $1.8 million (all of which is related to the write off of the deferred tax asset at CSMC). 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, 2018 through 2020. The following table sets forth the significant components of the income tax provision as of March 31, 2022, 2021 and 2020 (amounts in thousands): Years ended March 31, Components of Income Tax Provision 2022 2021 2020 Statutory federal income tax $ — $ — $ 270 162(m) limitation — 122 1,488 Excise tax 65 637 1,110 Write-off of deferred tax asset — 1,837 — Tax related to Taxable Subsidiary 550 50 315 Stock compensation benefits — (207) (1,129) Other — 3 8 Total income tax provision $ 615 $ 2,442 $ 2,062 7. SHAREHOLDERS’ EQUITY The right to grant restricted stock awards under the Capital Southwest Corporation Restricted Stock Award Plan (the "2010 Plan") terminated on July 18, 2021, ten years after the date that the 2010 Plan was approved by the Company’s shareholders pursuant to its terms. In connection with the termination of the 2010 Plan, the Company’s Board of Directors and shareholders approved the Capital Southwest Corporation 2021 Employee Restricted Stock Award Plan (the "2021 Employee Plan") as part of the compensation package for its employees, the terms of which are, in all material respects, identical to the 2010 Plan. On July 19, 2021, we received an exemptive order that supersedes the prior exemptive order relating to the 2010 Plan (the “Order”) to permit the Company to (i) issue restricted stock as part of the compensation package for its employees in the 2021 Employee Plan, and (ii) withhold shares of the Company’s common stock or purchase shares of the Company’s common stock from the participants to satisfy tax withholding obligations relating to the vesting of restricted stock pursuant to the 2021 Employee Plan. 122 Table of Contents In addition, the Company's Board of Directors approved the Capital Southwest Corporation 2021 Non-Employee Director Restricted Stock Plan (the "Non-Employee Director Plan") as part of the compensation package for non-employee directors of the Board of Directors. In connection therewith, on May 16, 2022, we received an exemptive order that supersedes the Order (the "Superseding Order") and will cover both employees and non-employee directors of the Board of Directors. The Non-Employee Director Plan will become effective upon shareholder approval at our 2022 annual meeting of shareholders. The following table summarizes certain information relating to shares repurchased in connection with the vesting of restricted stock awards: Year Ended March 31, 2022 2021 Number of shares repurchased 52,124 15,309 Aggregate cost of shares repurchased (in thousands) $ 1,408 $ 239 Weighted average price per share $ 27.01 $ 15.62 On March 4, 2019, the Company established an "at-the-market" offering (the "Equity ATM Program"), pursuant to which the Company may offer and sell, from time to time through sales agents, shares of its common stock having an aggregate offering price of up to $50,000,000. On February 4, 2020, the Company (i) increased the maximum amount of shares of its common stock to be sold through the Equity ATM Program to $100,000,000 from $50,000,000 and (ii) added two additional sales agents to the Equity ATM Program. On May 26, 2021, the Company (i) increased the maximum amount of shares of its common stock to be sold through the Equity ATM Program to $250,000,000 from $100,000,000 and (ii) reduced the commission paid to the sales agents for the Equity ATM Program to 1.5% from 2.0% of the gross sales price of shares of the Company's common stock sold through the sales agents pursuant to the Equity ATM Program on and after May 26, 2021. During the year ended March 31, 2022, the Company sold 3,872,031 shares of its common stock under the Equity ATM Program at a weighted-average price of $25.73 per share, raising $99.6 million of gross proceeds. Net proceeds were $98.1 million, after deducting commissions to the sales agents on shares sold. During the year ended March 31, 2021, the Company sold 2,810,541 shares of its common stock under the Equity ATM Program at a weighted-average price of $18.30 per share, raising $51.4 million of gross proceeds. Net proceeds were $50.4 million, after deducting commissions to the sales agents on shares sold. Of these proceeds, $1.7 million remained receivable and is included in Other Receivables in the Consolidated Statement of Assets and Liabilities as of March 31, 2022. The cash proceeds were received subsequent to year end on April 1 and April 4, 2022. Cumulative to date, the Company has sold 8,177,660 shares of its common stock under the Equity ATM Program at a weighted-average price of $22.44, raising $183.5 million of gross proceeds. Net proceeds were $180.3 million after commissions to the sales agents on shares sold. As of March 31, 2022, the Company has $66.5 million available under the Equity ATM Program. 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 shares of common stock in the open market at certain thresholds below its NAV per share, in accordance with guidelines specified in Rules 10b5-1(c)(1)(i)(B) and 10b-18 under the Exchange Act. On March 1, 2016, the Company entered into a share repurchase agreement, which became effective immediately and terminated on March 26, 2020 upon the Company's purchase of the aggregate gross dollar amount (inclusive of commission fees) of its common stock under the share repurchase program meeting the threshold set forth in the share repurchase agreement. On July 28, 2021, the Company's Board of Directors approved a share repurchase program authorizing the Company to repurchase up to $20 million of its outstanding shares of common stock in the open market at certain thresholds below its NAV per share, in accordance with guidelines specified in Rules 10b5-1(c)(1)(i)(B) and 10b-18 under the Exchange Act. On August 31, 2021, the Company entered into a share repurchase agreement, which became effective immediately, and the Company will cease purchasing its common stock under the share repurchase program upon the earlier of, among other things: (1) the date on which the aggregate purchase price for all shares equals $20 million including, without limitation, all applicable fees, costs and expenses; or (2) upon written notice by the Company to the broker that the share repurchase agreement is terminated. During both the years ended March 31, 2022 and 2021, the Company did not repurchase any shares under the share repurchase agreement. 123 Table of Contents 8. EMPLOYEE STOCK BASED COMPENSATION PLANS Stock Awards Under the 2010 Plan and the 2021 Employee Plan, a restricted stock award is an award of shares of our common stock, which 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-year period from the grant date and are expensed over the vesting period starting on the grant date. The right to grant restricted stock awards under the 2010 Plan terminated on July 18, 2021, ten years after the date that the 2010 Plan was approved by the Company’s shareholders pursuant to its terms. In connection with the termination of the 2010 Plan, the Company’s Board of Directors and shareholders approved the 2021 Employee Plan as part of the compensation package for its employees, the terms of which are, in all material respects, identical to the 2010 Plan. The 2021 Employee Plan makes available for issuance 1,200,000 shares of common stock. As of March 31, 2022, there are 1,200,000 shares of common stock available for issuance under the 2021 Employee Plan. 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. For the fiscal years ended March 31, 2022, 2021, and 2020, we recognized total share based compensation expense of $3.6 million, $2.9 million and $2.9 million, respectively, related to the restricted stock issued to our employees and officers. During the three months ended June 30, 2021, the Company modified restricted stock awards to accelerate vesting of the unvested awards as of the separation date for one employee. The Company accounted for this as a modification of awards and recognized incremental compensation cost of $0.6 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. 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 March 31, 2022, the total remaining unrecognized compensation expense related to non-vested restricted stock awards was $6.5 million, which will be amortized over the weighted-average vesting period of approximately 2.4 years. As of March 31, 2022, there are no restricted stock awards outstanding under the 2021 Employee Plan. The following table summarizes the restricted stock awards outstanding under the 2010 Plan as of March 31, 2022: Restricted Stock Awards Number of Shares Weighted Average Fair Value per Share at Grant Date Weighted Average Remaining Vesting Term (in Years) Unvested at March 31, 2020 359,586 $ 18.64 2.4 Granted 239,574 15.18 — Vested (141,804) 17.61 — Forfeited (27,580) 18.63 — Unvested at March 31, 2021 429,776 $ 17.05 2.5 Granted 172,945 27.60 — Vested (167,072) 17.71 — Forfeited (39,656) 16.07 — Unvested at March 31, 2022 395,993 $ 21.48 2.4 124 Table of Contents 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 each of the years ended March 31, 2022, 2021 and 2020, we made matching contributions of approximately $0.2 million. 10. RETIREMENT PLANS Until the Share Distribution, CSWC sponsored a qualified defined benefit pension plan that covered its employees and employees of certain of its controlled affiliates. In connection with the Share Distribution, we entered into an Employee Matters Agreement with CSWI on September 8, 2015, which was amended and restated on September 14, 2015. Under the Employee Matters Agreement, CSWC and CSMC withdrew as participating employers in the qualified defined benefit pension plan and CSWI became the Sponsoring Employer of the Qualified Retirement Plan and assumed all the liabilities, assets and future funding obligations for providing benefits for the covered Participants in the Qualified Retirement Plan. Additionally, CSWC sponsors an unfunded Retirement Restoration Plan, which is a nonqualified plan that provides for the payment, upon retirement, of the difference between the maximum annual payment permissible under the qualified retirement plan pursuant to federal limitations and the amount which would otherwise have been payable under the qualified plan. The Company retained all liabilities associated with benefits accrued under the Retirement Restoration Plan on behalf of individuals who remain employees of the Company or CSMC following September 30, 2015 or who terminated employment prior to September 30, 2015 with vested benefits under the Retirement Restoration Plan. Unvested accrued benefits under the Retirement Restoration Plan were forfeited as of September 30, 2015. The Retirement Restoration Plan is a frozen plan under which no new service cost is being accrued by plan participants. The following tables set forth the Retirement Restoration Plan’s net pension benefit and benefit obligation amounts at March 31, 2022, 2021 and 2020, as well as amounts recognized in our Consolidated Statements of Assets and Liabilities at March 31, 2022 and 2021 (amounts in thousands): Years ended March 31, 2022 2021 2020 Net pension cost Interest cost on projected benefit obligation $ 79 $ 96 $ 111 Net amortization 37 35 31 Net pension cost from restoration plan $ 116 $ 131 $ 142 Years ended March 31, 2022 2021 2020 Change in benefit obligation Benefit obligation at beginning of year $ 2,979 $ 3,082 $ 3,073 Interest cost 79 96 111 Actuarial loss (104) 42 122 Benefits paid (247) (241) (224) Benefit obligation at end of year $ 2,707 $ 2,979 $ 3,082 Years ended March 31, 2022 2021 Amounts recognized in our Consolidated Statements of Assets and Liabilities Projected benefit obligation $ (2,707) $ (2,979) Net actuarial loss recognized as a component of equity 957 1,098 Total $ (1,750) $ (1,881) Accumulated benefit obligation $ (2,707) $ (2,979) Table of Contents The corridor approach is used to amortize the actuarial gains or losses based on 10% of the projected benefit obligation. The following assumptions were used in estimating the actuarial present value of the projected benefit obligations: Years ended March 31, 2022 2021 2020 Discount rate 3.50 % 2.75 % 3.25 % The following assumptions were used in estimating the net periodic (income)/expense: Years ended March 31, 2022 2021 2020 Discount rate 2.75 % 3.25 % 3.75 % Following are the expected benefit payments for the next five years and in the aggregate for the years 2028-2032 (amounts in thousands): 2023 2024 2025 2026 2027 2028-2032 Restoration Plan $ 245 $ 240 $ 234 $ 229 $ 222 $ 991 11. 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. Because commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. Additionally, our commitment to fund delayed draw term loans is generally triggered upon the satisfaction of certain pre-negotiated terms and conditions, such as meeting certain financial performance hurdles or financial covenants, which may limit a borrower's ability to draw on such delayed draw term loans. March 31, March 31, 2022 2021 Portfolio Company (amounts in thousands) Revolving Loans Air Conditioning Specialist, Inc. $ 1,000 $ — AllOver Media, LLC — 2,000 American Teleconferencing Services, Ltd. (DBA Premiere Global Services, Inc.) 117 — ArborWorks, LLC 3,000 — ATS Operating, LLC 1,500 — Broad Sky Networks LLC — 2,000 Cadmium, LLC 308 — Catbird NYC, LLC 4,000 — Central Medical Supply LLC 1,200 1,200 Clickbooth.com, LLC — 1,086 Dynamic Communities, LLC 500 500 Electronic Transaction Consultants LLC — 3,704 Fast Sandwich, LLC 3,100 3,100 GrammaTech, Inc. 2,500 2,500 GS Operating, LLC 1,540 — Ian, Evan, & Alexander Corporation (DBA EverWatch) — 2,000 ISI Enterprises, LLC 1,200 — ITA Holdings Group, LLC 1,250 2,000 Klein Hersh, LLC 938 938 126 Table of Contents Lash OpCo, LLC 481 — Lighting Retrofit International, LLC (DBA Envocore) 2,083 — Mako Steel LP 943 1,226 Muenster Milling Company, LLC 5,000 — NeuroPsychiatric Hospitals, LLC 600 — NinjaTrader, LLC 2,500 1,500 NWN Parent Holdings, LLC 1,380 — Roof OpCo, LLC 3,056 — Roseland Management, LLC 1,425 1,500 RTIC Subsidiary Holdings LLC — 767 Shearwater Research, Inc. 2,446 — SIB Holdings, LLC 655 — South Coast Terminals LLC 1,935 — Spotlight AR, LLC 2,000 — Student Resource Center LLC 1,333 — Systec Corporation (DBA Inspire Automation) 1,150 — Wall Street Prep, Inc. 1,000 — Well-Foam, Inc. 4,500 — Winter Services Operations, LLC 2,000 — Zenfolio Inc. 1,000 — Total Revolving Loans 57,640 26,021 Delayed Draw Term Loans Acceleration Partners, LLC — 216 Central Medical Supply LLC 1,400 1,400 CityVet Inc. 7,000 6,750 Flip Electronics, LLC 2,818 — Food Pharma Subsidiary Holdings, LLC 5,470 — GS Operating, LLC 3,205 — Infolinks Media Buyco, LLC 2,250 — KMS, LLC 4,571 — Lash OpCo, LLC 2,846 — Muenster Milling Company, LLC 6,000 — NeuroPsychiatric Hospitals, LLC 10,000 — NinjaTrader, LLC 4,692 2,655 Roof OpCo, LLC 4,644 — Shearwater Research, Inc. 3,262 — SIB Holdings, LLC 1,871 — Systec Corporation (DBA Inspire Automation) 3,000 — Winter Services Operations, LLC 4,444 — Zips Car Wash, LLC - B 3,801 — Total Delayed Draw Term Loans 71,274 11,021 Other American Nuts Operations LLC — 384 Catbird NYC, LLC 125 — Infolinks Media Buyco, LLC 412 — I-45 SLF LLC 4,800 8,000 Total Other 5,337 8,384 Total unused commitments to extend financing $ 134,251 $ 45,426 127 Table of Contents As of March 31, 2022, total revolving and delayed draw loan commitments included commitments to issue letters of credit through a financial intermediary on behalf of certain portfolio companies. As of March 31, 2022 and 2021, the Company had $4.0 million and $3.5 million, respectively, 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, $0.3 million expire in August 2022, $0.4 million expire in February 2023, $0.2 million expire in April 2023, and $3.1 million expire in May 2023. As of March 31, 2022 and 2021, 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. 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 had a previous operating lease for its office space. The lease commenced October 1, 2014 and expired February 28, 2022. In March 2021, the Company executed an agreement to lease new office space. The Company identified this as an operating lease. The lease commenced on February 1, 2022 and expires September 30, 2032. ASC 842 indicates that a right-of-use asset and lease liability should be recorded based on the effective date. As such, CSWC recorded a right-of-use asset, which is included in other assets on the Consolidated Statements of Assets and Liabilities, and a lease liability, which is included in other liabilities on the Consolidated Statements of Assets and Liabilities, as of February 1, 2022. The Company has recorded lease expense on a straight-line basis. Total lease expense incurred for the three years ended March 31, 2022, 2021 and 2020 was $0.3 million, $0.2 million and $0.2 million, respectively. As of March 31, 2022 and 2021, the asset related to the operating lease was $1.8 million and $0.2 million, respectively, and the lease liability was $2.7 million and $0.2 million, respectively. As of March 31, 2022, the remaining lease term was 10.5 years and the discount rate was 3.11%. The following table shows future minimum payments under the Company's operating lease as of March 31, 2022 (in thousands): Year ending March 31, Rent Commitment 2023 $ 167 2024 406 2025 416 2026 426 2027 437 Thereafter 2,578 Total $ 4,430 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. We have no currently pending material legal proceedings to which we are part or to which any of our assets is subject. 128 Table of Contents 12. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) The following presents a summary of the unaudited quarterly consolidated financial information for the years ended March 31, 2022 and 2021 (in thousands except per share amounts): First Second Third Fourth 2022 Quarter Quarter Quarter Quarter Total Net investment income $ 9,043 $ 9,726 $ 11,899 $ 12,019 $ 42,687 Net realized (loss) gain on investments, net of tax (952) 3,496 2,715 575 5,834 Net change in unrealized appreciation (depreciation) on investments, net of tax 7,051 (691) (2,054) 7,161 11,467 Realized loss on extinguishment of debt — (17,087) — — (17,087) Realized loss on disposal of fixed assets — — — (86) (86) Net increase (decrease) in net assets from operations 15,142 (4,556) 12,560 19,669 42,815 Pre-tax net investment income per share 0.45 0.45 0.51 0.50 1.90 Net investment income per share 0.43 0.43 0.51 0.50 1.87 Net increase (decrease) in net assets from operations per share 0.71 (0.20) 0.54 0.81 1.86 First Second Third Fourth 2021 Quarter Quarter Quarter Quarter Total Net investment income $ 6,819 $ 8,319 $ 8,517 $ 8,016 $ 31,671 Net realized (loss) gain on investments (5,547) (1,279) (127) (1,583) (8,536) Net change in unrealized appreciation on investments, net of tax 7,605 9,636 7,271 4,243 28,755 Realized loss on extinguishment of debt — (286) (262) (459) (1,007) Net increase in net assets from operations 8,877 16,390 15,399 10,217 50,883 Pre-tax net investment income per share 0.40 0.44 0.52 0.44 1.79 Net investment income per share 0.38 0.45 0.45 0.39 1.66 Net increase (decrease) in net assets from operations per share 0.49 0.88 0.80 0.50 2.67 13. 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 the years ended March 31, 2022 and 2021, we did not receive any management fees from our portfolio companies. During the year ended March 31, 2020, we received management and other fees from certain of our portfolio companies totaling $0.2 million, which were recognized as fees and other income on the Consolidated Statements of Operations. During the year ended March 31, 2020, we received a transaction fee of $1.2 million in connection with the sale of Media Recovery, Inc. Additionally, as of March 31, 2022 and 2021, we had dividends receivable from I-45 SLF LLC of $1.9 million and $1.5 million, respectively, which were included in dividends and interest receivables on the Consolidated Statements of Assets and Liabilities. 14. SUBSEQUENT EVENTS On April 27, 2022, the Board of Directors declared a quarterly dividend of $0.48 per share and a special dividend of $0.15 per share for the quarter ended June 30, 2022. The record date for the dividend is June 15, 2022. The payment date for the dividend is June 30, 2022. On May 11, 2022, CSWC entered into Amendment No. 2 (the "Amendment") to the Credit Agreement. The Amendment changed the benchmark interest rate from LIBOR to Term SOFR. In addition, on May 11, 2022, CSWC entered 129 Table of Contents into an Incremental Commitment Agreement, pursuant to which the total commitments under the Credit Agreement increased from $335 million to $380 million. 130 Table of Contents 15. SELECTED PER SHARE DATA AND RATIOS The following presents a summary of the selected per share data for the years ended March 31, 2018 through 2022 (in thousands except per share amounts): Years Ended March 31, Per Share Data: 2022 2021 2020 2019 2018 2017 Investment income 1 $ 3.60 $ 3.57 $ 3.45 $ 3.10 $ 2.18 $ 1.48 Operating expenses 1 (1.70) (1.78) (1.76) (1.62) (1.16) (0.87) Income taxes 1 (0.03) (0.13) (0.12) (0.06) (0.01) (0.11) Net investment income 1 1.87 1.66 1.57 1.42 1.01 0.50 Net realized gain (loss), net of tax 1 0.26 (0.45) 2.35 1.24 0.10 0.50 Net change in unrealized appreciation (depreciation) on investments, net of tax 1 0.50 1.51 (5.16) (0.68) 1.34 0.49 Realized loss on extinguishment of debt 1 (0.75) (0.05) — — — — Total increase (decrease) from investment operations 1.88 2.67 (1.24) 1.98 2.45 1.49 Dividends to shareholders (2.52) (2.05) (2.75) (2.27) (0.99) (0.79) Spin-off Compensation Plan distribution, net of tax — — — — (0.03) (0.08) Exercise of employee stock options 2 — — — (0.12) 0.01 (0.09) Issuance of restricted stock 3 (0.10) (0.16) (0.06) (0.23) (0.18) (0.15) Accretive (dilutive) effect of share issuances and repurchases 1.45 0.30 0.45 0.06 (0.04) — Share based compensation expense 0.14 0.14 0.16 0.13 0.11 0.08 Common stock withheld for payroll taxes upon vesting of restricted stock (0.03) — — (0.01) (0.01) — Repurchase of common stock — — 0.15 — — — Net change in pension plan funded status 0.01 — (0.01) (0.01) (0.05) — Other 4 0.02 (0.02) (0.19) 0.01 0.01 — Increase (decrease) in net asset value 0.85 0.88 (3.49) (0.46) 1.28 0.46 Net asset value Beginning of year 16.01 15.13 18.62 19.08 17.80 17.34 End of year $ 16.86 $ 16.01 $ 15.13 $ 18.62 $ 19.08 $ 17.80 Ratios and Supplemental Data Ratio of operating expenses to average net assets 10.31 % 11.51 % 9.87 % 8.61 % 6.35 % 4.95 % Ratio of net investment income to average net assets 11.31 % 10.74 % 8.77 % 7.53 % 5.51 % 2.83 % Portfolio turnover rate 33.91 % 18.81 % 22.76 % 23.38 % 25.42 % 23.57 % Total investment return 5 18.10 % 118.56 % (37.52) % 38.34 % 6.61 % 27.88 % Total return based on change in NAV 6 21.05 % 19.37 % (3.97) % 9.49 % 12.75 % 7.21 % Per share market value at end of year $ 23.73 $ 22.16 $ 11.42 $ 21.04 $ 17.02 $ 16.91 Weighted-average basic shares outstanding 22,840 19,060 18,000 16,074 16,074 15,825 Weighted-average fully diluted shares outstanding 22,840 19,060 18,000 16,139 16,139 15,877 Common shares outstanding at end of year 24,959 21,005 17,998 17,503 16,162 16,011 131 Table of Contents 1 Based on weighted-average basic shares outstanding for the period. 2 Net decrease is due to the exercise of employee stock options at prices less than beginning of period net asset value. 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. The balance increases with the increase in variability of shares outstanding throughout the year due to share issuance and repurchase activity. 5 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. 6 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. 132 Table of Contents 16. SIGNIFICANT SUBSIDIARIES I-45 SLF LLC In September 2015, we entered into a limited liability company agreement with Main Street Capital Corporation ("Main Street") to form I-45 SLF LLC (the "Initial I-45 LLC Agreement"). 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. On April 30, 2020, pursuant to the terms of the Initial I-45 LLC Agreement, each of CSWC and Main Street made an additional equity capital commitment of $12.8 million and $3.2 million, respectively, which resulted in a total equity capital commitment to I-45 SLF LLC of $80.8 million and $20.2 million, respectively. On March 11, 2021, the Company and Main Street entered into the Second Amended and Restated Limited Liability Company Operating Agreement (the "Amendment"), which increased the current profits interest that is allocated to the Company on a pro rata basis from (a) 75.6% to (b) an amount equal to: (i) 76.26250% as of the date of the Amendment through the quarter ended March 31, 2021; (ii) 76.9250% for quarter ended June 30, 2021; (iii) 77.58750% for the quarter ended September 30, 2021; and (iv) 78.250% for the quarter ended December 31, 2021 and periods thereafter. On March 25, 2021, I-45 SLF LLC declared a return of capital dividend to its members in the amount of $10.0 million. As of March 31, 2022, total funded equity capital totaled $95.0 million, consisting of $76.0 million from CSWC and $19.0 million from Main Street. CSWC owns 80% of I-45 SLF LLC and has a current profits interest of 78.25%, while Main Street owns 20% and has a current profits interest of 21.75%. 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. As of March 31, 2022 and 2021, I-45 SLF LLC had total assets of $189.1 million and $177.8 million, respectively. I-45 SLF LLC had approximately $176.7 million and $164.4 million of credit investments at fair value as of March 31, 2022 and 2021, respectively. The portfolio companies in I-45 SLF LLC are in industries similar to those in which CSWC may invest directly. As of March 31, 2021, approximately $13.1 million of the credit investments were unsettled trades. For the years ended March 31, 2022 and 2021, I-45 SLF LLC declared total dividends of $8.6 million and $18.7 million, $10 million of which was the return of capital dividend described above, respectively. 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. The I-45 credit 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 and to reduce the interest rate on borrowings to LIBOR plus 2.4% per annum. In November 2019, the I-45 credit facility was amended to extend the maturity to November 2024 and to reduce the interest rate on borrowings to LIBOR plus 2.25% per annum. On April 30, 2020, the I-45 credit facility was amended to permanently reduce the facility amount through a prepayment of $15.0 million and to change the minimum utilization requirements. In March 2021, the I-45 credit facility was amended to extend the maturity to March 25, 2026 and to reduce the interest rate on borrowings to LIBOR plus 2.15%. Under the I-45 credit facility, $114.5 million has been drawn as of March 31, 2022. 133 Table of Contents At March 31, 2022, our investment in I-45 SLF LLC did not exceed the 10% threshold in at least one of the tests under Rule 4-08(g) and did not exceed the 20% threshold in at least one of the tests under Rule 3-09 of Regulation S-X. However, at March 31, 2021, our investment in I-45 SLF LLC exceeded the 10% and 20% thresholds in at least one of the tests under Rule 3-09 of Regulation S-X. Accordingly, we have included as an exhibit to our Annual Report on Form 10-K for the fiscal year ended March 31, 2022 the financial statements of I-45 SLF LLC. Below is certain summarized financial information for I-45 SLF LLC as of March 31, 2022 and 2021 and for the years ended March 31, 2022, 2021 and 2020 (amounts in thousands): March 31, 2022 March 31, 2021 Selected Balance Sheet Information: Investments, at fair value (cost $187,714 and $170,791) $ 176,704 $ 164,351 Cash and cash equivalents 9,949 10,419 Due from broker 123 152 Deferred financing costs 1,518 2,301 Interest receivable 850 553 Total assets $ 189,144 $ 177,776 Senior credit facility payable $ 114,500 $ 91,000 Payable for unsettled transactions — 13,072 Other liabilities 2,596 2,131 Total liabilities $ 117,096 $ 106,203 Members’ equity 72,048 71,573 Total liabilities and net assets $ 189,144 $ 177,776 Years Ended March 31, 2022 2021 2020 Selected Statement of Operations Information: Total revenues $ 12,804 $ 13,930 $ 20,300 Total expenses (4,166) (4,565) (8,045) Net investment income 8,638 9,365 12,255 Net unrealized (depreciation) appreciation (4,569) 30,467 (32,394) Net realized gains (losses) 1,047 (15,313) 603 Net increase (decrease) in members’ equity resulting from operations $ 5,116 $ 24,519 $ (19,536) 134 Table of Contents Below is a listing of the individual loans in I-45 SLF LLC’s portfolio as of March 31, 2022 and 2021: I-45 SLF LLC Loan Portfolio as of March 31, 2022 Portfolio Company Industry Investment Type Maturity Date Current Interest Rate 1 Principal Cost 2 Fair Value 3 AAC New Holdco Inc. Healthcare services First Lien 6/25/2025 10.00%, 8.00% PIK $ 1,899 $ 1,899 $ 1,833 304,075 shares common stock — — — 1,449 1,449 Warrants (Expiration - December 11, 2025) — — — 482 482 ADS Tactical, Inc. Aerospace & defense First Lien 3/19/2026 L+5.75% (Floor 1.00%) 6,394 6,283 6,133 American Teleconferencing Services, Ltd. 4 Telecommunications Revolving Loan 6/30/2022 P+5.50% 1,027 1,021 64 First Lien 6/8/2023 P+5.50% 5,598 5,566 308 ATX Networks (Toronto) Corporation Technology products & components First Lien 9/1/2026 L+7.50%, (Floor 1.00%) 2,617 2,610 2,499 Senior Subordinated Debt 9/1/2028 10.00% PIK 1,081 1,081 729 196 Class A units — — — — — Burning Glass Intermediate Holding Company, Inc. Software & IT services Revolving Loan 5 6/10/2028 L+5.00% (Floor 1.00%) 74 67 67 First Lien 6/10/2028 L+5.00% (Floor 1.00%) 3,189 3,140 3,189 Corel, Inc. Software & IT services First Lien 7/2/2026 L+5.00% 6,803 6,650 6,805 Emerald Technologies (U.S.) Acquisitionco, Inc. Technology products & components First Lien 12/29/2027 SOFR +6.25% (Floor 1.00%) 3,125 3,063 3,078 Evergreen AcqCo 1 LP Consumer products & retail First Lien 4/26/2028 L+5.50% (Floor 0.75%) 4,179 4,142 4,158 Evergreen North America Acquisitions, LLC Industrial services First Lien 8/13/2026 L+6.75% (Floor 1.00%) 6,740 6,623 6,740 Geo Parent Corporation Building & infrastructure products First Lien 12/19/2025 L+5.25% 6,840 6,809 6,806 GS Operating, LLC Distribution First Lien 1/3/2028 SOFR +6.00% (Floor 0.75%) 4,988 4,891 4,988 Infogain Corporation Software & IT services First Lien 7/28/2028 L+5.75% (Floor 1.00%) 4,784 4,719 4,769 InfoGroup Inc. Software & IT services First Lien 4/3/2023 L+5.00% (Floor 1.00%) 2,850 2,845 2,704 Integro Parent Inc. Business services First Lien 10/28/2022 L+5.75% (Floor 1.00%) 3,217 3,209 3,043 Intermedia Holdings, Inc. Software & IT services First Lien 7/21/2025 L+6.00% (Floor 1.00%) 5,677 5,659 5,638 135 Table of Contents Portfolio Company Industry Investment Type Maturity Date Current Interest Rate 1 Principal Cost 2 Fair Value 3 Inventus Power, Inc. Technology products & components First Lien 3/29/2024 SOFR +5.00% (Floor 1.00%) 6,930 6,884 6,791 INW Manufacturing, LLC Food, agriculture, & beverage First Lien 3/25/2027 L+5.75% (Floor 0.75%) 2,925 2,867 2,867 Isagenix International, LLC Consumer products & retail First Lien 6/14/2025 L+5.75% (Floor 1.00%) 1,685 1,677 1,088 KORE Wireless Group Inc. Telecommunications First Lien 12/20/2024 L+5.50% 4,658 4,639 4,640 Lab Logistics, LLC Healthcare services First Lien 9/25/2023 L+7.25% (Floor 1.00%) 6,242 6,213 6,242 Lash OpCo, LLC Consumer products & retail First Lien 3/18/2026 L+7.00% (Floor 1.00%) 4,988 4,881 4,878 Delayed Draw Term Loan 6 3/18/2026 L+7.00% (Floor 1.00%) 1,187 1,152 1,161 Lift Brands, Inc. Consumer services Tranche A 6/29/2025 L+7.50% (Floor 1.00%) 2,502 2,502 2,252 Tranche B 6/29/2025 9.50% PIK 583 583 437 Tranche C 6/29/2025 — 565 564 423 1,051 shares common stock — — — 749 749 Lightbox Intermediate, L.P. Software & IT services First Lien 5/9/2026 L+5.00% 4,948 4,914 4,874 LOGIX Holdings Company, LLC Telecommunications First Lien 12/23/2024 L+5.75% (Floor 1.00%) 5,826 5,807 5,491 Mills Fleet Farm Group LLC Consumer products & retail First Lien 10/24/2024 L+6.25% (Floor 1.00%) 4,623 4,584 4,623 National Credit Care, LLC Consumer services First Lien - Term Loan A 12/23/2026 L+6.50% (Floor 1.00%) 2,500 2,453 2,483 First Lien - Term Loan B 12/23/2026 L+7.50% (Floor 1.00%) 2,500 2,453 2,483 NBG Acquisition, Inc. Wholesale First Lien 4/26/2024 L+5.50% (Floor 1.00%) 2,663 2,647 1,807 NinjaTrader, Inc. Financial services First Lien 12/18/2024 L+6.25% (Floor 1.00%) 5,000 4,908 5,000 NorthStar Group Services, Inc. Environmental services First Lien 11/9/2026 L+5.50% (Floor 1.00%) 2,961 2,948 2,950 Research Now Group, Inc. Business services First Lien 12/20/2024 L+5.50% (Floor 1.00%) 4,936 4,936 4,861 Retail Services WIS Corporation Business services First Lien 5/20/2025 L+7.75% (Floor 1.00%) 2,959 2,912 2,914 SIB Holdings, LLC Business services First Lien 10/29/2026 L+6.00% (Floor 1.00%) 3,000 2,945 2,958 Stellant Midco, LLC Aerospace & defense First Lien 10/2/2028 L+5.50% (Floor 0.75%) 2,289 2,267 2,254 Tacala, LLC Consumer products & retail Second Lien 2/7/2028 L+7.50% (Floor 0.75%) 5,000 4,991 4,944 136 Table of Contents Portfolio Company Industry Investment Type Maturity Date Current Interest Rate 1 Principal Cost 2 Fair Value 3 TEAM Services Group, LLC Healthcare services First Lien 12/20/2027 L+5.00% (Floor 1.00%) 6,687 6,644 6,637 TestEquity, LLC Capital equipment First Lien 4/28/2022 L+6.25% (Floor 1.00%) 3,805 3,804 3,805 First Lien - Term Loan B 4/28/2022 L+6.25% (Floor 1.00%) 942 942 942 UniTek Global Services, Inc. Telecommunications First Lien 8/20/2024 L+5.50%, 2.00% PIK (Floor 1.00%) 2,814 2,802 2,627 U.S. TelePacific Corp. Telecommunications First Lien 5/1/2026 L+1.00%, 7.25% PIK (Floor 1.00%) 5,239 5,239 3,714 Veregy Consolidated, Inc. Environmental services First Lien 11/3/2027 L+6.00% (Floor 1.00%) 1,975 1,970 1,936 Vida Capital, Inc. Financial services First Lien 10/1/2026 L+6.00% 3,565 3,531 3,283 Wahoo Fitness Acquisition, LLC Consumer products & retail First Lien 8/14/2028 L+5.75% (Floor 1.00%) 4,969 4,833 4,869 YS Garments, LLC Consumer products & retail First Lien 8/9/2024 L+5.50% (Floor 1.00%) 4,282 4,265 4,239 Total Investments $ 187,714 $ 176,704 1 Represents the interest rate as of March 31, 2022. 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”), Secured Overnight Financing Rate ("SOFR") or Prime (“Prime”) which reset daily, monthly, quarterly, or semiannually. For each, the Company has provided the spread over LIBOR, SOFR or Prime in effect at March 31, 2022. Certain investments are subject to an interest rate floor. Certain investments, as noted, accrue payment-in-kind ("PIK") interest. 2 Represents amortized cost. 3 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. 4 Investment is on non-accrual status as of March 31, 2022, meaning the Company has ceased to recognize interest income on the investment. 5 The investment has approximately $0.3 million in an unfunded revolving loan commitment as of March 31, 2022. 6 The investment has approximately $0.8 million in an unfunded delayed draw term loan commitment as of March 31, 2022. 137 Table of Contents I-45 SLF LLC Loan Portfolio as of March 31, 2021 Portfolio Company Industry Investment Type Maturity Date Current Interest Rate 1 Principal Cost 2 Fair Value 3 AAC New Holdco Inc. Healthcare services First Lien 6/25/2025 10.00%, 8.00% PIK $ 1,752 $ 1,752 $ 1,743 304,075 shares common stock — — — 1,449 1,449 Warrants (Expiration - December 11, 2025) — — — 482 482 ADS Tactical Aerospace & defense First Lien 3/19/2026 L+5.75% (Floor 1.00%) 6,731 6,596 6,697 American Teleconferencing Services, Ltd. Telecommunications First Lien 6/8/2023 L+6.50% (Floor 1.00%) 6,759 6,698 3,590 ATX Canada Acquisitionco Inc. Technology products & components First Lien 12/31/2023 L+6.25%, 1.50% PIK (Floor 1.00%) 4,464 4,462 4,084 California Pizza Kitchen, Inc. Restaurants First Lien 11/23/2024 L+10.00% (Floor 1.50%) 937 913 936 First Lien Rolled Up 11/23/2024 1.00%, L+11.00% PIK (Floor 1.50%) 1,039 1,035 1,033 Second Lien 5/23/2025 1.00%, L+12.50% PIK (Floor 1.50%) 1,141 1,141 1,115 67,841 shares common stock — — — 1,845 1,845 Corel Inc. Software & IT services First Lien 7/2/2026 L+5.00% 7,030 6,834 7,008 Geo Parent Corporation Building & infrastructure products First Lien 12/19/2025 L+5.25% 4,900 4,867 4,888 Go Wireless Holdings, Inc. Consumer products & retail First Lien 12/22/2024 L+6.50% (Floor 1.00%) 6,848 6,816 6,839 Hunter Defense Technologies, Inc. Aerospace & defense First Lien 3/29/2023 L+6.00% (Floor 1.00%) 6,122 6,049 6,091 InfoGroup Inc. Software & IT services First Lien 4/3/2023 L+5.00% (Floor 1.00%) 2,880 2,870 2,741 Integro Parent Inc. Business services First Lien 10/28/2022 L+5.75% (Floor 1.00%) 3,253 3,226 3,201 Intermedia Holdings, Inc. Software & IT services First Lien 7/21/2025 L+6.00% (Floor 1.00%) 5,735 5,712 5,748 Inventus Power, Inc. Technology products & components First Lien 3/29/2024 L+5.00% (Floor 1.00%) 7,000 6,930 6,930 Isagenix International, LLC Consumer products & retail First Lien 6/14/2025 L+5.75% (Floor 1.00%) 1,823 1,812 1,376 KORE Wireless Group Inc. Telecommunications First Lien 12/20/2024 L+5.50% 4,706 4,680 4,700 138 Table of Contents Portfolio Company Industry Investment Type Maturity Date Current Interest Rate 1 Principal Cost 2 Fair Value 3 Lab Logistics, LLC Healthcare services First Lien 9/25/2023 L+7.25% (Floor 1.00%) 6,305 6,255 6,305 Lift Brands, Inc. Consumer services Tranche A 6/29/2025 L+7.50% (Floor 1.00%) 2,521 2,521 2,370 Tranche B 6/29/2025 9.50% PIK 531 531 424 Tranche C 6/29/2025 — 565 565 452 1,051 shares common stock — — — 749 749 Lightbox Intermediate, L.P. Software & IT services First Lien 5/9/2026 L+5.00% 3,453 3,418 3,419 LOGIX Holdings Company, LLC Telecommunications First Lien 12/23/2024 L+5.75% (Floor 1.00%) 5,890 5,863 5,683 Lulu's Fashion Lounge, LLC Consumer products & retail First Lien 8/26/2022 L+7.00%, 2.50% PIK (Floor 1.00%) 3,686 3,633 3,152 Mills Fleet Farm Group LLC Consumer products & retail First Lien 10/24/2024 L+6.00% (Floor 1.00%) 4,625 4,570 4,533 NBG Acquisition, Inc. Wholesale First Lien 4/26/2024 L+5.50% (Floor 1.00%) 2,738 2,714 2,468 Novetta Solutions, LLC Software & IT services First Lien 10/17/2022 L+5.00% (Floor 1.00%) 4,845 4,795 4,836 PaySimple, Inc. Software & IT services Delayed Draw Term Loan 8/23/2025 L+5.50% 1,369 1,346 1,365 First Lien 8/23/2025 L+5.50% 4,220 4,174 4,209 Pet Supermarket, Inc. Consumer products & retail First Lien 7/5/2022 L+5.50% (Floor 1.00%) 4,760 4,750 4,641 PT Network, LLC Healthcare products First Lien 11/30/2023 L+5.50%, 2.00% PIK (Floor 1.00%) 4,465 4,465 4,465 Research Now Group, Inc. Business services First Lien 12/20/2025 L+5.50% (Floor 1.00%) 4,987 4,987 4,950 Signify Health, LLC Healthcare services First Lien 12/23/2024 L+4.50% (Floor 1.00%) 5,044 5,017 5,064 Tacala, LLC Consumer products & retail Second Lien 2/7/2028 L+7.50% (Floor 0.75%) 5,000 4,989 5,002 TestEquity, LLC Capital equipment First Lien 4/28/2022 L+6.25% (Floor 1.00%) 3,816 3,808 3,358 First Lien - Term Loan B 4/28/2022 L+6.25% (Floor 1.00%) 949 947 835 TGP Holdings III LLC Durable consumer goods Second Lien 9/25/2025 L+8.50% (Floor 1.00%) 2,500 2,479 2,483 Time Manufacturing Acquisition Capital equipment First Lien 2/3/2023 L+5.00% (Floor 1.00%) 5,802 5,785 5,824 UniTek Global Services, Inc. Telecommunications First Lien 8/20/2024 L+5.50%, 1.00% PIK (Floor 1.00%) 2,736 2,721 2,480 139 Table of Contents Portfolio Company Industry Investment Type Maturity Date Current Interest Rate 1 Principal Cost 2 Fair Value 3 U.S. TelePacific Corp. Telecommunications First Lien 5/2/2023 L+5.50% (Floor 1.00%) 5,200 5,172 4,829 Vida Capital, Inc. Financial services First Lien 10/1/2026 L+6.00% 3,805 3,760 3,672 YS Garments, LLC Consumer products & retail First Lien 8/9/2024 L+6.00% (Floor 1.00%) 4,634 4,608 4,287 Total Investments $ 170,791 $ 164,351 1 Represents the interest rate as of March 31, 2021. 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 (“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, 2021. Certain investments are subject to a LIBOR or Prime interest rate floor. 2 Represents amortized cost. 3 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. 140 Table of Contents SCHEDULE 12-14 Schedule of Investments in and Advances to Affiliates (In thousands) Portfolio Company Type of Investment (1) March 31, 2022 Principal Amount - Debt Investments Amount of Interest or Dividends Credited in Income (2) Fair Value at March 31, 2021 Gross Additions (3) Gross Reductions (4) Amount of Realized Gain/(Loss) (5) Amount of Unrealized Gain/(Loss) Fair Value at March 31, 2022 Control Investments I-45 SLF LLC 80% LLC equity interest $ — $ 6,720 $ 57,158 $ 3,200 $ — $ — $ (2,755) $ 57,603 Total Control Investments $ — $ 6,720 $ 57,158 $ 3,200 $ — $ — $ (2,755) $ 57,603 Affiliate Investments Air Conditioning Specialist, Inc. Revolving Loan $ — $ 3 $ — $ (18) $ — $ — $ 18 $ — First Lien 12,778 359 — 12,558 (22) — (1) 12,535 623,693.55 Preferred Units — — — 624 — — 10 634 Catbird NYC, LLC Revolving Loan — 17 — (73) — — 73 — First Lien 15,900 635 — 15,706 (100) — 278 15,884 1,000,000 Class A Units — — — 1,000 — — 221 1,221 500,000 Class B Units — — — 500 — — 72 572 Central Medical Supply LLC Revolving loan 300 45 276 6 — — 8 290 First lien 7,500 844 6,908 27 — — 325 7,260 Delayed Draw Term Loan 100 24 92 6 — — (1) 97 1,380,500 Preferred Units — — 641 101 — — (101) 641 Chandler Signs, LLC 1,500,000 units of Class A-1 common stock — — 1,343 — — — (419) 924 Delphi Behavioral Health Group, LLC First lien 1,541 164 1,398 127 — — (123) 1,402 First lien 1,732 164 1,500 151 — — (179) 1,472 Protective Advance 526 13 — 526 — — — 526 1,681.04 Common Units — — 3,615 — — — (1,155) 2,460 Dynamic Communities, LLC Revolving loan — 4 — 1 — — (1) — First lien 11,221 1,297 9,966 477 (280) — 160 10,323 Senior subordinated debt 650 129 372 278 — — — 650 141 Table of Contents Portfolio Company Type of Investment (1) March 31, 2022 Principal Amount - Debt Investments Amount of Interest or Dividends Credited in Income (2) Fair Value at March 31, 2021 Gross Additions (3) Gross Reductions (4) Amount of Realized Gain/(Loss) (5) Amount of Unrealized Gain/(Loss) Fair Value at March 31, 2022 2,000,000 Preferred units — — 1,274 — — — — 1,274 GrammaTech, Inc. Revolving loan — 21 — 9 — — (9) — First lien 11,500 1,320 11,420 37 — — (1,682) 9,775 1,000 Class A Units — — 1,208 56 — — (552) 712 ITA Holdings Group, LLC Revolving loan 750 23 — 757 — — (7) 750 First lien - Term Loan 10,071 889 10,061 44 — — (64) 10,041 First lien - Term B Loan 5,036 600 5,101 26 — — (66) 5,061 First Lien - PIK Note A 2,959 447 2,630 439 — — (110) 2,959 First Lien - PIK Note B 117 10 103 13 — — 1 117 Warrants — — 2,968 — — — 231 3,199 9.25% Class A membership interest — 28 2,532 — — — 531 3,063 Lighting Retrofit International, LLC (DBA Envocore) Revolving Loan — 6 — 456 (456) — — — First Lien 5,195 99 — 5,208 (12) — (416) 4,780 Second Lien 5,208 — — 5,208 — — (2,104) 3,104 208,333.3333 Series A Preferred units — — — — — — — — 203,124.9999 Common units — — — — — — — — Roseland Management, LLC Revolving loan 575 48 — 1,178 (600) — (3) 575 First lien 14,125 673 — 14,227 (73) — (29) 14,125 16,084 Class A Units — — — 2,041 — — (136) 1,905 SIMR, LLC First lien 13,235 3 12,103 224 (649) — (1,090) 10,588 9,374,510.2 Class B Common units — — — — — — — — 904,903.31 Class W units — — — — — — — — Sonobi, Inc. First lien — 445 8,500 15 (8,500) 140 (155) — 500,000 Class A Common Units — — 1,235 — — — 1,725 2,960 Total Affiliate Investments $ 121,019 $ 8,310 $ 85,246 $ 61,935 $ (10,692) $ 140 $ (4,750) $ 131,879 Total Control & Affiliate Investments $ 121,019 $ 15,030 $ 142,404 $ 65,135 $ (10,692) $ 140 $ (7,505) $ 189,482 142 Table of Contents This schedule should be read in conjunction with our Consolidated Financial Statements, including the Consolidated Schedules of Investments and Notes to Consolidated Financial Statements. (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 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. 143 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.