UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2020 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ……………..to …………….. Commission File Number: 814-00061 CAPITAL SOUTHWEST CORPORATION (Exact name of registrant as specified in its charter) Texas 75-10727 ...

Capital Southwest Corp. (NASDAQ:CSWC) Q2 2021 Earnings Conference Call November 2, 2020 11:00 AM ET Company Participants Chris Rehberger - Vice President, Finance Bowen Diehl - Chief Executive Officer Michael Sarner - Chief Financial Officer Conference Call Participants Michael Smith - B. Riley Mickey Schleien - Ladenburg Thalmann Kyle Joseph - Jefferies Bryce Rowe - National Securities Robert Dodd - Raymond James Chris McCampbell - HilltopSecurities David Miyazaki - Confluence Investment Kevin Fulton - JMP ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ……………..to …………….. Commission File Number: 814-00061 CAPITAL SOUTHWEST CORPORATION (Exact name of registrant as specified in its charter) | --- | --- | ...

Capital Southwest (NASDAQ:CSWC) Q1 2021 Earnings Conference Call August 4, 2020 11:00 AM ET Company Participants Chris Rehberger - Vice President Bowen Diehl - Chief Executive Officer Michael Sarner - Chief Financial Officer Conference Call Participants Kyle Joseph - Jefferies Tim Hayes - F.B. Riley Bryce Rowe - National Securities Robert Dodd - Raymond James Greg Mason - Ares Management Operator Thank you for joining today's Capital Southwest First Quarter Fiscal Year 2021 Earnings Call. Participating on t ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ……………..to …………….. Commission File Number: 814-00061 | --- | --- | |--------------------------------------------------------------------------------|------- ...

[PART I](index=5&type=section&id=PART%20I) [Item 1. Business](index=5&type=section&id=Item%201.%20Business) CSWC is an internally managed BDC and RIC providing debt and equity financing for U.S. middle-market companies - CSWC is an internally managed BDC and RIC, focusing on debt and equity financing for U.S. middle-market companies[17](index=17&type=chunk)[18](index=18&type=chunk)[27](index=27&type=chunk) - The company's investment strategy targets Lower Middle Market (LMM) companies with EBITDA between **$3.0 million** and **$15.0 million**, and Upper Middle Market (UMM) companies with EBITDA greater than **$50.0 million**[28](index=28&type=chunk)[339](index=339&type=chunk) - As an internally managed firm, CSWC does not pay external advisory fees, which it considers a structural advantage for managing operating expenses[33](index=33&type=chunk) - CSWC must comply with BDC regulations, including maintaining an asset coverage ratio of at least **150%** (with a board-imposed floor of **166%**) and investing at least **70%** of assets in qualifying U.S. companies[17](index=17&type=chunk)[79](index=79&type=chunk)[91](index=91&type=chunk) - To maintain its RIC status for tax purposes, the company must distribute at least **90%** of its annual taxable income to shareholders[18](index=18&type=chunk)[76](index=76&type=chunk) [Item 1A. Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from business operations, illiquid investments, market disruptions, and interest rate fluctuations - The company's financial performance is dependent on its ability to effectively manage capital, and unrealized losses on its portfolio could indicate future realized losses, reducing income available for distributions[139](index=139&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk) - All company assets are pledged as collateral under its secured Credit Facility. A default could lead to foreclosure and forced sale of assets at distressed prices[146](index=146&type=chunk)[147](index=147&type=chunk) - The use of leverage magnifies both potential gains and losses. The asset coverage requirement was reduced from **200%** to **150%** effective April 25, 2019, which could increase investment risk[154](index=154&type=chunk)[204](index=204&type=chunk) - Economic uncertainty and market disruptions, such as the COVID-19 pandemic, can adversely affect the company's portfolio valuations, funding costs, and access to capital markets[178](index=178&type=chunk)[179](index=179&type=chunk)[186](index=186&type=chunk) - The company's investments are primarily in illiquid, privately held companies, which involves risks such as dependence on key management, limited financial resources, and lack of publicly available information[235](index=235&type=chunk)[239](index=239&type=chunk) - The company faces significant interest rate risk, particularly with the planned cessation of LIBOR after 2021, as approximately **96.8%** of its debt portfolio was indexed to LIBOR as of March 31, 2020[253](index=253&type=chunk)[256](index=256&type=chunk) - The December 2022 and October 2024 Notes are unsecured and effectively subordinated to the company's secured debt, including the Credit Facility, offering limited protection to noteholders[269](index=269&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk) [Item 1B. Unresolved Staff Comments](index=40&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments from the SEC - None[296](index=296&type=chunk) [Item 2. Properties](index=40&type=section&id=Item%202.%20Properties) The company leases approximately 9,261 square feet of office space in Dallas, Texas, with no owned real estate - The company leases its principal executive offices at 5400 Lyndon B. Johnson Freeway, Suite 1300, Dallas, Texas 75240[297](index=297&type=chunk) [Item 3. Legal Proceedings](index=40&type=section&id=Item%203.%20Legal%20Proceedings) The company and its subsidiaries are not party to any material pending legal proceedings - The company is not currently a party to any material legal proceedings[298](index=298&type=chunk) [Item 4. Mine Safety Disclosures](index=41&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[300](index=300&type=chunk) [PART II](index=42&type=section&id=PART%20II) [Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities](index=42&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Shareholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section details senior securities, common stock market performance, dividend history, and share repurchase activities | Senior Security | Outstanding (in thousands) as of Mar 31, 2020 | Asset Coverage per Unit | |---|---|---| | Credit Facility | $154,000 | 1.89 | | December 2022 Notes | $77,136 | 1.89 | | October 2024 Notes | $75,000 | 1.89 | | Fiscal Year 2020 | Q4 | Q3 | Q2 | Q1 | |---|---|---|---|---| | NAV per Share | $15.13 | $16.74 | $18.30 | $18.58 | | High Price | $21.71 | $22.56 | $22.90 | $22.49 | | Low Price | $7.39 | $20.60 | $20.57 | $20.86 | | Fiscal Year | Total Dividends per Share | |---|---| | 2020 | $2.75 | | 2019 | $2.27 | | 2018 | $0.99 | - The company has a share repurchase program authorizing up to **$10 million** in buybacks. In March 2020, the company repurchased **794,180 shares** at an average price of **$11.57**[323](index=323&type=chunk)[326](index=326&type=chunk) [Item 6. Selected Financial Data](index=48&type=section&id=Item%206.%20Selected%20Financial%20Data) Selected financial data for the five years ended March 31, 2020, indicates growth in investment income and assets, with a net decrease in net assets from operations in fiscal year 2020 | (in thousands, except per share data) | 2020 | 2019 | 2018 | |---|---|---|---|\n| **Total investment income (in thousands)** | $62,039 | $51,881 | $35,126 | | **Net investment income (in thousands)** | $28,232 | $23,710 | $16,233 | | **Net increase (decrease) in net assets from operations (in thousands)** | ($22,351) | $33,058 | $39,307 | | **Net asset value per common share** | $15.13 | $18.62 | $19.08 | | **Total dividends declared per common share** | $2.75 | $2.27 | $0.99 | | **Total assets (in thousands)** | $584,959 | $551,843 | $417,490 | | **Total liabilities (in thousands)** | $312,737 | $225,880 | $109,202 | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=49&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal year 2020 saw 19.6% growth in total investment income, but a net decrease in net assets from operations due to unrealized depreciation, with liquidity maintained | (in thousands) | Year ended Mar 31, 2020 | Year ended Mar 31, 2019 | % Change | |---|---|---|---|\n| Total investment income (in thousands) | $62,039 | $51,881 | 19.6% | | Net investment income (in thousands) | $28,232 | $23,710 | 19.1% | | Net realized gain on investments (in thousands) | $42,231 | $20,854 | 102.5% | | Net unrealized (depreciation) (in thousands) | ($92,814) | ($11,506) | 706.7% | | Net (decrease) in net assets (in thousands) | ($22,351) | $33,058 | (167.6)% | - The investment portfolio grew to **$553.1 million** at fair value as of March 31, 2020, up from **$524.1 million** a year prior. The portfolio consisted of investments in **46 companies**[360](index=360&type=chunk) - As of March 31, 2020, **96.8%** of the debt portfolio bore interest at floating rates. The weighted average yield on debt investments was **10.50%**[361](index=361&type=chunk)[335](index=335&type=chunk) - Due to the COVID-19 pandemic's impact, the percentage of debt investments rated 3 or 4 (indicating underperformance or substantial risk) increased from **5.9%** of the portfolio at fair value in 2019 to **15.5%** in 2020[371](index=371&type=chunk)[372](index=372&type=chunk)[373](index=373&type=chunk) - The company increased its Credit Facility commitments to **$325 million** and had **$154.0 million** outstanding as of March 31, 2020. It also issued **$75.0 million** of **5.375%** Notes due 2024[408](index=408&type=chunk)[411](index=411&type=chunk)[420](index=420&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=64&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate fluctuations, affecting earnings and portfolio value, with 96.8% of its debt portfolio at floating rates - The company's primary market risk is interest rate risk, which affects its earnings, cash flows, and portfolio value[440](index=440&type=chunk)[441](index=441&type=chunk) - As of March 31, 2020, **96.8%** of the debt investment portfolio at fair value bore floating interest rates, with **97.6%** of those subject to contractual minimum interest rates[442](index=442&type=chunk) - A hypothetical **100 basis point** increase in interest rates could increase annual net investment income by up to **$2.8 million** (**$0.15 per share**), while a **100 basis point** decrease could increase it by up to **$0.4 million** (**$0.02 per share**)[442](index=442&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=66&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for fiscal year 2020, reflecting a decrease in total net assets and a net decrease in net assets from operations | (in thousands) | March 31, 2020 | March 31, 2019 | |---|---|---|\n| Total Investments (at fair value, in thousands) | $553,072 | $524,071 | | Total Assets (in thousands) | $584,959 | $551,843 | | Total Liabilities (in thousands) | $312,737 | $225,880 | | Total Net Assets (in thousands) | $272,222 | $325,963 | | (in thousands) | Year Ended Mar 31, 2020 | Year Ended Mar 31, 2019 | |---|---|---|\n| Total Investment Income (in thousands) | $62,039 | $51,881 | | Total Operating Expenses (in thousands) | $31,745 | $27,123 | | Net Investment Income (in thousands) | $28,232 | $23,710 | | Net (Decrease) Increase in Net Assets from Operations (in thousands) | ($22,351) | $33,058 | [Notes to Consolidated Financial Statements](index=92&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, investment valuation, borrowings, income tax, and shareholder equity, providing comprehensive financial context - As of March 31, 2020, **100%** of the investment portfolio was valued using significant unobservable (Level 3) inputs, as quoted prices are not available for its privately held securities[649](index=649&type=chunk) - The company's borrowings as of March 31, 2020, consisted of **$154.0 million** under its Credit Facility, **$77.1 million** in December 2022 Notes, and **$75.0 million** in October 2024 Notes[676](index=676&type=chunk) - For the tax year ended December 31, 2019, the company elected to retain **$16.5 million** of net long-term capital gains and designated it as a 'deemed distribution' to shareholders, incurring **$3.5 million** in federal taxes on their behalf[716](index=716&type=chunk)[717](index=717&type=chunk) - The company had approximately **$15.2 million** in unfunded commitments to its portfolio companies as of March 31, 2020[432](index=432&type=chunk)[763](index=763&type=chunk) [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=137&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes or disagreements with its accountants on accounting and financial disclosure - None[813](index=813&type=chunk) [Item 9A. Controls and Procedures](index=137&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of March 31, 2020, with no material changes - Management concluded that disclosure controls and procedures were effective as of March 31, 2020[815](index=815&type=chunk) - Management concluded that internal control over financial reporting was effective as of March 31, 2020[816](index=816&type=chunk) [Item 9B. Other Information](index=138&type=section&id=Item%209B.%20Other%20Information) This section details estimated shareholder transaction and annual expenses, with total annual expenses for fiscal year 2020 at 15.24% of net assets | Annual Expenses (as a % of net assets for FY ended Mar 31, 2020) | Percentage | |---|---| | Operating expenses | 5.15% | | Interest payments on borrowed funds | 6.72% | | Income tax expense | 0.60% | | Acquired fund fees and expenses | 2.77% | | **Total annual expenses** | **15.24%** | [PART III](index=139&type=section&id=PART%20III) [Item 10. Directors, Executive Officers and Corporate Governance](index=139&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information for this item is incorporated by reference from the company's 2020 definitive proxy statement - Information is incorporated by reference from the definitive proxy statement[826](index=826&type=chunk) [Item 11. Executive Compensation](index=139&type=section&id=Item%2011.%20Executive%20Compensation) Information for this item is incorporated by reference from the company's 2020 definitive proxy statement - Information is incorporated by reference from the definitive proxy statement[827](index=827&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters](index=139&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Shareholder%20Matters) Information for this item is incorporated by reference from the company's 2020 definitive proxy statement - Information is incorporated by reference from the definitive proxy statement[828](index=828&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=139&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information for this item is incorporated by reference from the company's 2020 definitive proxy statement - Information is incorporated by reference from the definitive proxy statement[829](index=829&type=chunk) [Item 14. Principal Accountant Fees and Services](index=139&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information for this item is incorporated by reference from the company's 2020 definitive proxy statement - Information is incorporated by reference from the definitive proxy statement[830](index=830&type=chunk) [PART IV](index=140&type=section&id=PART%20IV) [Item 15. Exhibits, Financial Statement Schedules](index=140&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all documents filed as part of the Annual Report, including financial statements, schedules, and various exhibits - This item contains the index of financial statements, schedules, and exhibits filed with the Form 10-K[834](index=834&type=chunk) [Item 16. Form 10-K Summary](index=147&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company indicates that there is no Form 10-K summary - None[843](index=843&type=chunk)

PART I FINANCIAL INFORMATION [Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) The consolidated financial statements present Capital Southwest Corporation's financial position, results of operations, changes in net assets, and cash flows for the periods ended December 31, 2019 [Consolidated Statements of Assets and Liabilities](index=3&type=section&id=Consolidated%20Statements%20of%20Assets%20and%20Liabilities) As of December 31, 2019, total assets increased to $599.3 million, while total net assets decreased to $311.9 million, leading to a decline in NAV per share Consolidated Assets and Liabilities (in thousands) | Metric | Dec 31, 2019 | Mar 31, 2019 | | :--- | :--- | :--- | | **Total Investments (Fair Value)** | $558,552 | $524,071 | | **Total Assets** | $599,348 | $551,843 | | **Total Liabilities** | $287,492 | $225,880 | | **Total Net Assets** | $311,856 | $325,963 | | **Net Asset Value (NAV) per Share** | $16.74 | $18.62 | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) For the three months ended December 31, 2019, the company reported a net decrease in net assets from operations of $6.8 million, primarily due to significant unrealized depreciation on investments Key Operational Results (in thousands, except per share data) | Metric | Three Months Ended Dec 31, 2019 | Three Months Ended Dec 31, 2018 | Nine Months Ended Dec 31, 2019 | Nine Months Ended Dec 31, 2018 | | :--- | :--- | :--- | :--- | :--- | | **Total Investment Income** | $15,984 | $13,871 | $47,001 | $37,572 | | **Net Investment Income (NII)** | $7,114 | $6,675 | $21,289 | $16,837 | | **Net Realized Gain on Investments** | $40,818 | $1,883 | $42,318 | $20,796 | | **Net Unrealized (Depreciation) Appreciation** | $(54,765) | $(4,238) | $(60,998) | $(15,073) | | **Net (Decrease) Increase in Net Assets** | $(6,833) | $4,320 | $2,609 | $22,560 | | **NII per Share** | $0.39 | $0.39 | $1.20 | $1.02 | | **Net (Decrease) Increase in Net Assets per Share** | $(0.38) | $0.25 | $0.15 | $1.36 | [Consolidated Statements of Changes in Net Assets](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) For the nine months ended December 31, 2019, net assets decreased by $14.1 million to $311.9 million, primarily due to dividends exceeding operational increases - Net assets decreased from **$326.0 million** at March 31, 2019 to **$311.9 million** at December 31, 2019[19](index=19&type=chunk) - Key changes during the nine months ended Dec 31, 2019 include a net increase from operations of **$2.6 million**, dividends to shareholders of **$40.8 million**, and proceeds from issuance of common stock of **$22.3 million**[19](index=19&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended December 31, 2019, net cash increased by $13.0 million, with financing activities providing significant inflows that offset cash used in operations Net Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended Dec 31, 2019 | Nine Months Ended Dec 31, 2018 | | :--- | :--- | :--- | | **Net Cash Used in Operating Activities** | $(24,174) | $(77,560) | | **Net Cash Provided by Financing Activities** | $37,216 | $80,427 | | **Net Increase in Cash** | $13,042 | $2,867 | | **Cash at End of Period** | $22,966 | $10,774 | [Consolidated Schedule of Investments](index=11&type=section&id=Consolidated%20Schedule%20of%20Investments) As of December 31, 2019, the total investment portfolio had a fair value of $558.6 million, diversified across non-control/non-affiliate, affiliate, and control investments Investment Portfolio Summary as of Dec 31, 2019 (in thousands) | Investment Category | Cost | Fair Value | | :--- | :--- | :--- | | Non-control/Non-affiliate Investments | $415,222 | $409,388 | | Affiliate Investments | $89,481 | $90,870 | | Control Investments | $68,000 | $58,294 | | **Total Investments** | **$572,703** | **$558,552** | - The total fair value of investments increased to **$558.6 million** as of December 31, 2019, from **$524.1 million** as of March 31, 2019[12](index=12&type=chunk)[45](index=45&type=chunk) [Notes to Consolidated Financial Statements](index=29&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of the company's accounting policies, investment strategy, fair value measurements, borrowings, tax status, equity programs, and joint venture specifics [Note 1: Organization and Basis of Presentation](index=29&type=section&id=Note%201.%20ORGANIZATION%20AND%20BASIS%20OF%20PRESENTATION) Capital Southwest Corporation is an internally managed BDC and RIC specializing in financing for U.S. middle-market companies - CSWC is an internally managed BDC and has elected to be treated as a RIC for tax purposes[109](index=109&type=chunk)[110](index=110&type=chunk) - The company targets investments in Lower Middle Market (LMM) companies with EBITDA between **$3.0 million** and **$15.0 million**, and Upper Middle Market (UMM) companies with EBITDA greater than **$50.0 million**[113](index=113&type=chunk) [Note 3: Investments](index=36&type=section&id=Note%203.%20INVESTMENTS) As of December 31, 2019, the investment portfolio's fair value was $558.6 million, with first lien loans comprising the largest portion and diversification across industries and geographies Portfolio Composition by Investment Type (Dec 31, 2019) | Investment Type | Fair Value | % of Total Portfolio | | :--- | :--- | :--- | | First lien loans | $410,908 | 73.6% | | Second lien loans | $35,572 | 6.4% | | Subordinated debt | $9,615 | 1.7% | | Preferred equity | $17,361 | 3.1% | | Common equity & warrants | $25,285 | 4.5% | | I-45 SLF LLC | $58,294 | 10.4% | | **Total** | **$558,552** | **100.0%** | - The top three industry concentrations by fair value as of Dec 31, 2019 were Business Services (**16.5%**), I-45 SLF LLC (**10.4%**), and Healthcare Services (**9.6%**)[166](index=166&type=chunk) [Note 4: Fair Value Measurements](index=39&type=section&id=Note%204.%20Fair%20Value%20Measurements) The company's investment portfolio is entirely valued using Level 3 inputs, with valuation processes overseen by the Board and assisted by third-party firms - **100%** of the investment portfolio consisted of debt and equity instruments of privately held companies, valued using significant unobservable Level 3 inputs[179](index=179&type=chunk) - Valuation techniques include the Market Approach, Income Approach (using discount rates from **8.0% to 41.9%**), and Enterprise Value Waterfall Approach (using EBITDA multiples from **6.2x to 11.3x**)[184](index=184&type=chunk)[199](index=199&type=chunk) - For the nine months ended Dec 31, 2019, the fair value of Level 3 investments changed from **$458.3 million** to **$500.3 million**, with key drivers being **$155.8 million** in purchases, **$51.7 million** in repayments, and a net realized/unrealized loss of **$6.7 million**[203](index=203&type=chunk) [Note 5: Borrowings](index=47&type=section&id=Note%205.%20Borrowings) As of December 31, 2019, total borrowings were $273.1 million, with the company maintaining a strong asset coverage ratio of 213% Outstanding Borrowings as of Dec 31, 2019 (in thousands) | Borrowing Instrument | Amount Outstanding | | :--- | :--- | | Credit Facility | $124,000 | | December 2022 Notes (5.95%) | $75,688 | | October 2024 Notes (5.375%) | $73,393 | | **Total Borrowings** | **$273,081** | - The company's asset coverage ratio was **213%** as of December 31, 2019, exceeding the minimum requirement of **150%**[207](index=207&type=chunk) - In September/October 2019, the company issued a total of **$75.0 million** in aggregate principal amount of 5.375% Notes due 2024[227](index=227&type=chunk) [Note 6: Income Taxes](index=50&type=section&id=Note%206.%20Income%20Taxes) The company operates as a RIC, distributing most of its taxable income to avoid corporate-level federal income tax, and elected to retain certain capital gains - For the tax year ended Dec 31, 2019, CSWC elected to retain **$16.5 million** in net long-term capital gains and paid **$3.5 million** in federal taxes on behalf of shareholders as a "deemed distribution"[244](index=244&type=chunk) - Total dividends paid for the 2019 tax year were **$2.72 per share**, comprised of approximately **$1.303** in ordinary income and **$1.417** in long-term capital gains[238](index=238&type=chunk) - As of Dec 31, 2019, the company had a net deferred tax asset of **$1.3 million** and a net deferred tax liability of **$1.1 million**, resulting in a net deferred tax asset of **$0.2 million**[247](index=247&type=chunk) [Note 7: Shareholders' Equity](index=54&type=section&id=Note%207.%20Shareholders%27%20Equity) During the nine months ended December 31, 2019, the company raised $22.5 million through its Equity ATM Program and increased authorized common stock, while no shares were repurchased - During the nine months ended Dec 31, 2019, the company sold **1,049,932 shares** under its Equity ATM Program, raising **$22.5 million** in net proceeds at a weighted-average price of **$21.90 per share**[256](index=256&type=chunk) - As of Dec 31, 2019, approximately **$9.2 million** remained available for repurchases under the company's share repurchase program[262](index=262&type=chunk) - On August 1, 2019, authorized shares of common stock were increased from **25,000,000** to **40,000,000**[257](index=257&type=chunk) [Note 10: Commitments and Contingencies](index=58&type=section&id=Note%2010.%20Commitments%20and%20Contingencies) As of December 31, 2019, the company had $20.4 million in unused financing commitments and an operating lease for its office space - Unused commitments to extend financing to portfolio companies totaled **$20.4 million** as of December 31, 2019[286](index=286&type=chunk) - The company has an operating lease for office space with total remaining commitments of **$580,000** through its expiration in 2022[290](index=290&type=chunk) [Note 13: Significant Subsidiaries](index=61&type=section&id=Note%2013.%20Significant%20Subsidiaries) The company sold Media Recovery, Inc. and its joint venture, I-45 SLF LLC, held $215.0 million in total assets as of December 31, 2019 - The company sold its investment in control subsidiary Media Recovery, Inc. on November 25, 2019[301](index=301&type=chunk) I-45 SLF LLC Financial Summary (in thousands) | Metric | Dec 31, 2019 | Mar 31, 2019 | | :--- | :--- | :--- | | Investments, at fair value | $206,208 | $237,547 | | Total Assets | $214,997 | $246,547 | | Senior credit facility payable | $139,000 | $160,000 | | Members' equity | $72,943 | $82,001 | [Note 14: Subsequent Events](index=71&type=section&id=Note%2014.%20Subsequent%20Events) On January 22, 2020, the Board of Directors declared a total dividend of $0.51 per share for the quarter ending March 31, 2020 - A total dividend of **$0.51 per share** (comprising a **$0.41** regular and **$0.10** supplemental dividend) was declared on January 22, 2020, for the quarter ending March 31, 2020[333](index=333&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=74&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's performance, highlighting increased investment income offset by significant unrealized depreciation, while maintaining strong liquidity and actively managing capital structure [Investment Portfolio Composition](index=76&type=section&id=Investment%20Portfolio%20Composition) As of December 31, 2019, the $558.6 million investment portfolio was diversified across LMM and UMM companies, with a high proportion of floating-rate debt LMM vs. UMM Portfolio Breakdown (Dec 31, 2019) | Metric | LMM | UMM | | :--- | :--- | :--- | | Number of portfolio companies | 32 | 11 | | Fair value (in thousands) | $413,503 | $86,755 | | Weighted average annual effective yield | 11.6% | 7.4% | | Weighted average leverage through CSWC security | 3.6x | 4.6x | - As of Dec 31, 2019, **96.6%** of the debt investment portfolio at fair value bore interest at floating rates[366](index=366&type=chunk) [Portfolio Asset Quality](index=78&type=section&id=Portfolio%20Asset%20Quality) As of December 31, 2019, 95.1% of the debt portfolio was rated 1 or 2, indicating performance at or above expectations, with a small portion on non-accrual status Debt Portfolio Quality by Fair Value (Dec 31, 2019) | Investment Rating | Debt Investments at Fair Value (thousands) | % of Debt Portfolio | | :--- | :--- | :--- | | 1 (Least Risk) | $49,123 | 10.8% | | 2 (Expected Performance) | $384,464 | 84.3% | | 3 (Below Expectations) | $16,560 | 3.6% | | 4 (Materially Below) | $5,948 | 1.3% | | **Total** | **$456,095** | **100.0%** | - As of December 31, 2019, three debt investments were on non-accrual status, representing **3.3%** of the total investment portfolio's fair value[380](index=380&type=chunk) [Results of Operations](index=81&type=section&id=Results%20of%20Operations) For the nine months ended Dec 31, 2019, total investment income and net investment income increased significantly, but net assets were negatively impacted by substantial unrealized depreciation Comparison of Nine Months Ended Dec 31, 2019 and 2018 (in thousands) | Metric | 2019 | 2018 | Change % | | :--- | :--- | :--- | :--- | | Total investment income | $47,001 | $37,572 | 25.1% | | Net investment income | $21,289 | $16,837 | 26.4% | | Net realized gain on investments | $42,318 | $20,796 | 103.5% | | Net unrealized (depreciation) | $(60,998) | $(15,073) | 304.7% | | **Net increase in net assets** | **$2,609** | **$22,560** | **(88.4)%** | - The significant increase in net unrealized depreciation was mainly due to the reversal of **$49.3 million** in prior period appreciation on realized investments and fair value markdowns on certain portfolio companies, including the I-45 SLF joint venture[411](index=411&type=chunk) [Financial Liquidity and Capital Resources](index=84&type=section&id=Financial%20Liquidity%20and%20Capital%20Resources) The company maintained strong liquidity with $23.0 million in cash and $167.6 million available on its credit facility, supported by new notes issuance and equity offerings - As of Dec 31, 2019, the company had **$23.0 million** in cash and cash equivalents and **$167.6 million** in available borrowings under its Credit Facility[417](index=417&type=chunk)[456](index=456&type=chunk) - Key financing activities in the nine months to Dec 31, 2019 included issuing **$73.5 million** of October 2024 Notes and raising **$22.5 million** net from the Equity ATM Program[415](index=415&type=chunk)[445](index=445&type=chunk) - The company paid **$40.9 million** in cash dividends during the nine months ended Dec 31, 2019[417](index=417&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=89&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate fluctuations, with its floating-rate debt portfolio providing a natural hedge against rising rates - The company's primary market risk exposure is to interest rate fluctuations[457](index=457&type=chunk)[458](index=458&type=chunk) - As of Dec 31, 2019, **96.6%** of the debt portfolio at fair value had floating interest rates, with **90.7%** of those having contractual rate floors[460](index=460&type=chunk) - A hypothetical **100 basis point** increase in interest rates could increase annual net investment income by a maximum of **$3.5 million** (**$0.19/share**), while a **100 basis point** decrease could lower it by a maximum of **$1.9 million** (**$0.11/share**)[460](index=460&type=chunk) [Controls and Procedures](index=91&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2019, with no material changes to internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of December 31, 2019[464](index=464&type=chunk) - No material changes were made to internal control over financial reporting during the three months ended December 31, 2019[465](index=465&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=92&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no currently pending material legal proceedings - The company has no pending material legal proceedings[469](index=469&type=chunk) [Risk Factors](index=92&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended March 31, 2019 - No material changes to risk factors were reported since the Annual Report on Form 10-K for the fiscal year ended March 31, 2019[470](index=470&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=92&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no sales of unregistered securities and no share repurchases during the period, with $9.2 million remaining available for future repurchases - The company did not repurchase any shares under its share repurchase program during the nine months ended December 31, 2019[473](index=473&type=chunk) - As of December 31, 2019, approximately **$9.2 million** was available for additional repurchases under the share repurchase program[473](index=473&type=chunk) [Defaults Upon Senior Securities](index=92&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) None reported - None[475](index=475&type=chunk) [Mine Safety Disclosures](index=92&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) None reported - None[477](index=477&type=chunk) [Other Information](index=92&type=section&id=Item%205.%20Other%20Information) None reported - None[479](index=479&type=chunk) [Exhibits](index=93&type=section&id=Item%206.%20Exhibits) The report lists the exhibits filed, including certifications from the President and Chief Executive Officer and the Chief Financial Officer - Exhibits filed include CEO and CFO certifications pursuant to Rule 13a-14(a), Rule 13a-14(b), and Section 1350 of the U.S. Code[481](index=481&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ……………..to …………….. Commission File Number: 814-00061 | --- | --- | |----------------------------------------------------------------------------------- ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ……………..to …………….. Commission File Number: 814-00061 | --- | --- | |---------------------------------------------------------------------------------------- ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2019 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to | --- | --- | |---------------------------------------- ...