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 endedJune 30, 2018

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

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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such filings). Yes No

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

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

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

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

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

16,293,194 shares of Common Stock, $0.25 value per share, as of August 3, 2018.

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements	3
	Consolidated Statements of Assets and Liabilities as of June 30, 2018 (Unaudited) and March 31, 2018	3
	Consolidated Statements of Operations (Unaudited) for the three months ended June 30, 2018 and 2017	4
	Consolidated Statements of Changes in Net Assets (Unaudited) for the three months ended June 30, 2018 and 2017	5
	Consolidated Statements of Cash Flows (Unaudited) for the three months ended June 30, 2018 and 2017	6
	Consolidated Schedule of Investments as of June 30, 2018 (Unaudited) and March 31, 2018	7
	Notes to Consolidated Financial Statements (Unaudited)	20
	Consolidated Schedule of Investments in and Advances to Affiliates (Unaudited) for the three months ended June 30, 2018	60
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	62
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	76
Item 4.	Controls and Procedures	77
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	78
Item1A.	Risk Factors	78
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	79
Item 6.	Exhibits	80
Signatures		81

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(In thousands, except shares and per share data)
	June 30,			March 31,
	2018			2018
	(Unaudited)
Assets
Investments at fair value:
Non-control/Non-affiliate investments (Cost: $232,460 and $200,981, respectively)	$	235,961		$	199,949
Affiliate investments (Cost: $56,410 and $51,648, respectively)	57,289			53,198
Control investments (Cost: $76,864 and $82,768, respectively)	118,080			139,948
Total investments (Cost: $365,734 and $335,397, respectively)	411,330			393,095
Cash and cash equivalents	12,532			7,907
Receivables:
Dividends and interest	5,671			5,219
Escrow	203			119
Other	558			447
Income tax receivable	109			109
Deferred tax asset	2,116			2,050
Debt issuance costs (net of accumulated amortization of $862 and $366, respectively)	2,676			2,575
Other assets	15,731			5,969
Total assets	$	450,926		$	417,490
Liabilities
Notes (Par value: $58,886 and $57,500, respectively)	$	56,646		$	55,305
Credit facility	65,000			40,000
Other liabilities	4,483			6,245
Dividends payable	14,503			4,525
Accrued restoration plan liability	2,913			2,937
Deferred income taxes	—			190
Total liabilities	143,545			109,202
Commitments and contingencies (Note 11)
Net Assets
Common stock, $0.25 par value: authorized, 25,000,000 shares; issued, 18,632,706 shares at June 30, 2018 and 18,501,298 shares at March 31, 2018	4,658			4,625
Additional paid-in capital	262,623			260,713
Net investment income in excess of (less than) distributions	(2,157		)	6,147
Accumulated undistributed net realized gain	20,469			3,231
Unrealized appreciation of investments, net of income taxes	45,725			57,509
Treasury stock - at cost, 2,339,512 shares	(23,937		)	(23,937		)
Total net assets	307,381			308,288
Total liabilities and net assets	$	450,926		$	417,490
Net asset value per share (16,293,194 shares outstanding at June 30, 2018 and 16,161,786 shares outstanding at March 31, 2018)	$	18.87		$	19.08

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

3

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except shares and per share data)
	Three Months Ended
	June 30,
	2018			2017
Investment income:
Interest income:
Non-control/Non-affiliate investments	$	6,032		$	4,332
Affiliate investments	1,452			140
Control investments	159			41
Dividend income:
Non-control/Non-affiliate investments	23			—
Affiliate investments	38			—
Control investments	3,014			3,004
Interest income from cash and cash equivalents	4			7
Fees and other income	385			200
Total investment income	11,107			7,724
Operating expenses:
Compensation	1,910			1,638
Spin-off compensation plan	—			172
Share-based compensation	475			368
Interest	2,373			738
Professional fees	488			479
Net pension expense	40			40
General and administrative	825			709
Total operating expenses	6,111			4,144
Income before taxes	4,996			3,580
Income tax (benefit) expense	379			144
Net investment income	$	4,617		$	3,436
Realized gain
Non-control/Non-affiliate investments	$	200		$	624
Affiliate investments	—			—
Control investments	18,619			—
Total net realized gain on investments before income tax	18,819			624
Change in unrealized appreciation of investments
Non-control/Non-affiliate investments	4,532			(2,419		)
Affiliate investments	(671		)	(332		)
Control investments	(15,963		)	4,050
Income tax (provision) benefit	319			85
Total net change in unrealized appreciation of investments, net of tax	(11,783		)	1,384
Net realized and unrealized gains on investments	$	7,036		$	2,008
Net increase in net assets from operations	$	11,653		$	5,444
Pre-tax net investment income per share - basic and diluted	$	0.31		$	0.22
Net investment income per share – basic and diluted	$	0.29		$	0.21
Net increase in net assets from operations – basic and diluted	$	0.72		$	0.34
Weighted average shares outstanding – basic	16,180,291			16,009,703
Weighted average shares outstanding – diluted	16,201,443			16,072,463

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

4

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
(In thousands)
	Three Months Ended
	June 30,
	2018			2017
Operations:
Net investment income	$	4,617		$	3,436
Net realized gain on investments	18,819			624
Net change in unrealized appreciation of investments, net of tax	(11,783		)	1,384
Net increase in net assets from operations	11,653			5,444
Dividends to shareholders	(14,503		)	(3,355		)
Spin-Off Compensation Plan, net of tax of $ - and $59, respectively	—			(114		)
Capital share transactions:
Change in pension plan funded status	11			12
Exercise of employee stock options	1,457			—
Share-based compensation expense	475			368
(Decrease) increase in net assets	(907		)	2,355
Net assets, beginning of period	308,288			285,072
Net assets, end of period	$	307,381		$	287,427

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

5

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
	Three Months Ended
	June 30,
	2018			2017
Cash flows from operating activities
Net increase in net assets from operations	$	11,653		$	5,444
Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities:
Purchases and originations of investments	(77,864		)	(41,662		)
Proceeds from sales and repayments of debt investments in portfolio companies	41,757			23,515
Proceeds from sales and return of capital of equity investments in portfolio companies	24,885			15
Payment of accreted original issue discounts	212			609
Depreciation and amortization	344			181
Net pension benefit	(12		)	(12		)
Realized gain on investments before income tax	(18,819		)	(624		)
Net change in unrealized appreciation of investments	12,102			(1,299		)
Accretion of discounts on investments	(312		)	(183		)
Payment-in-kind interest and dividends	(79		)	(73		)
Stock option and restricted awards expense	475			368
Deferred income taxes	50			(155		)
Changes in other assets and liabilities:
Increase in dividend and interest receivable	(452		)	(281		)
Decrease in escrow receivables	(203		)	—
Decrease in other receivables	(112		)	220
Decrease (increase) in other assets	(9,785		)	3,957
Increase in other liabilities	(2,067		)	(2,119		)
Decrease in payable for unsettled transaction	—			9,263
Net cash used in operating activities	(18,227		)	(2,836		)
Cash flows from financing activities
Borrowings under credit facility	55,000			—
Repayments of credit facility	(30,000		)	—
Debt issuance costs paid	(459		)	—
Proceeds from notes	1,379			—
Dividends to shareholders	(4,525		)	(7,191		)
Proceeds from exercise of employee stock options	1,422			—
Spin-off Compensation Plan distribution	35			—
Net cash provided by (used in) financing activities	22,852			(7,191		)
Net increase (decrease) in cash and cash equivalents	4,625			(10,027		)
Cash and cash equivalents at beginning of period	7,907			22,386
Cash and cash equivalents at end of period	$	12,532		$	12,359
Supplemental cash flow disclosures:
Cash paid for income taxes	$	11		$	214
Cash paid for interest	1,990			611
Supplemental disclosure of noncash financing activities:
Dividend declared, not yet paid	14,503			3,355
Spin-off Compensation Plan distribution accrued, not yet paid	—			172

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

6

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
(Unaudited)
June 30, 2018
Portfolio Company1	Type of Investment2	Industry	Current Interest Rate3	Maturity	Principal		Cost		Fair Value4
Non-control/Non-affiliate Investments5
AAC HOLDINGS, INC.	First Lien	Healthcare services	L+6.75% (Floor 1.00%), Current Coupon 9.11%	6/30/2023	$	9,262,500	$	9,060,954	$	9,401,438
AG KINGS HOLDINGS INC.8	First Lien	Food, agriculture & beverage	L+9.42% (Floor 1.00%), Current Coupon 11.78%	8/8/2021	9,366,667		9,236,751		9,038,833
ALLIANCE SPORTS GROUP, L.P.	Senior subordinated debt	Consumer products & retail	11.00%	2/1/2023	10,100,000		9,923,399		9,908,100
	2.65% membership interest		—	—	—		2,500,000		1,996,000
							12,423,399		11,904,100
AMERICAN TELECONFERENCING SERVICES, LTD.	First Lien	Telecommunications	L+6.50% (Floor 1.00%), Current Coupon 8.86%	12/8/2021	6,289,340		6,159,290		6,112,452
	Second Lien		L+9.50% (Floor 1.00%), Current Coupon 11.84%	6/6/2022	2,005,714		1,944,094		1,900,414
							8,103,384		8,012,866
AMWARE FULFILLMENT LLC15	First Lien	Distribution	L+12.00% (Floor 1.00%), Current Coupon 14.34%	5/21/2019	13,296,944		13,145,356		12,765,067
BINSWANGER HOLDING CORP.	First Lien	Distribution	L+8.00% (Floor 1.00%), Current Coupon 10.32%	3/9/2022	12,398,351		12,204,051		12,280,567
	900,000 shares of common stock		—	—	—		900,000		874,000
							13,104,051		13,154,567
CALIFORNIA PIZZA KITCHEN, INC.	First Lien	Restaurants	L+6.00% (Floor 1.00%), Current Coupon 8.10%	8/23/2022	4,912,500		4,875,968		4,821,619
CAPITAL PAWN HOLDINGS, LLC	First Lien	Consumer products & retail	L+9.50%, Current Coupon 11.81%	7/8/2020	11,922,365		11,711,936		11,755,452

7

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
(Unaudited)
June 30, 2018
Portfolio Company1	Type of Investment2	Industry	Current Interest Rate3	Maturity	Principal	Cost		Fair Value4
CLICKBOOTH.COM, LLC	First Lien	Media, marketing & entertainment	L+8.50% (Floor 1.00%), Current Coupon 10.82%	12/5/2022	17,281,250	16,965,249		17,203,484
	Revolving Loan10		L+8.50% (Floor 1.00%)	12/5/2022	—	(17,722	)	—
						16,947,527		17,203,484
DEEPWATER CORROSION SERVICES, INC.	127,004 shares of Series A convertible preferred stock	Energy services (upstream)	—	—	—	8,000,000		9,316,000
DELPHI INTERMEDIATE HEALTHCO, LLC	First Lien	Healthcare services	L+7.50% (Floor 1.00%), Current Coupon 9.86%	10/3/2022	7,359,375	7,293,501		7,263,703
	First Lien		L+7.50 (Floor 1.00%), Current Coupon 9.83%	10/3/2022	4,968,750	4,920,581		4,904,156
						12,214,082		12,167,859
DIGITAL RIVER, INC.	First Lien	Software & IT services	L+6.00% (Floor 1.00%), Current Coupon 8.34%	2/12/2021	6,285,444	6,274,316		6,277,587
DUNN PAPER, INC.	Second Lien	Paper & forest products	L+8.75% (Floor 1.00%), Current Coupon 10.84%	8/26/2023	3,000,000	2,951,375		2,974,500
ENVIRONMENTAL PEST SERVICE MANAGEMENT COMPANY, LLC	First Lien	Consumer services	L+7.25%, Current Coupon 9.59%	6/22/2023	16,250,000	15,966,754		15,966,754
	Delayed Draw Term Loan10		L+7.25%	—	—	(69,655	)	—
						15,897,099		15,966,754
FAST SANDWICH, LLC	First Lien	Restaurants	L+9.00% (Floor 1.00%), Current Coupon 11.33%	5/23/2023	3,300,000	3,246,010		3,246,010
	Revolving Loan10		L+9.00% (Floor 1.00%)	—	—	(67,636	)	—
						3,178,374		3,246,010

8

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
(Unaudited)
June 30, 2018
Portfolio Company1	Type of Investment2	Industry	Current Interest Rate3	Maturity	Principal	Cost		Fair Value4
GAUGE AMERICAN NUTS OPERATIONS LLC13	First Lien	Food, agriculture and beverage	L+8.00% (Floor 1.00%), Current Coupon 10.33%	4/10/2023	17,500,000	17,162,415		17,162,415
	First Lien - Term Loan B		L+8.00% (Floor 1.00%), Current Coupon 10.33%	10/10/2018	656,250	648,900		648,900
	Delayed Draw Term Loan10		L+8.00% (Floor 1.00%)	4/10/2023	—	(9,402	)	0
	Revolving Loan		L+8.00% (Floor 1.00%), Current Coupon 10.33%	4/10/2023	3,500,000	3,483,286		3,483,286
	3,000,000 units of Class A common stock9		—	—	—	3,000,000		3,000,000
						24,285,199		24,294,601
LGM PHARMA, LLC13	First Lien	Healthcare products	L+8.50% (Floor 1.00%), Current Coupon 10.50%	11/15/2022	9,950,000	9,770,998		9,890,300
	Delayed Draw Term Loan10		L+8.50% (Floor 1.00%), Current Coupon 10.51%	11/15/2022	1,796,750	1,766,653		1,785,970
	110,000 units of Class A common stock9		—	—	—	1,100,000		1,100,000
						12,637,651		12,776,270
LIGHTING RETROFIT INTERNATIONAL, LLC	First Lien	Environmental services	L+9.25% (Floor 1.00%), Current Coupon 11.56%	6/30/2022	14,437,500	14,307,179		14,278,688
	396,825 shares of Series B preferred stock		—	—	—	500,000		511,000
						14,807,179		14,789,688
RESEARCH NOW GROUP, INC.	Second Lien	Business services	L+9.50% (Floor 1.00%), Current Coupon 11.82%	12/20/2025	10,500,000	9,792,890		10,080,000
RESTAURANT TECHNOLOGIES, INC.	Second Lien	Business services	L+8.75% (Floor 1.00%), Current Coupon 11.07%	11/23/2023	3,500,000	3,456,390		3,482,500

9

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
(Unaudited)
June 30, 2018
Portfolio Company1	Type of Investment2	Industry	Current Interest Rate3	Maturity	Principal	Cost		Fair Value4
JVMC HOLDINGS CORP. 14	First Lien	Financial services	L+8.02% (Floor 1.00%), Current Coupon 10.11%	5/5/2022	7,125,000	7,066,937		7,125,000
TAX ADVISORS GROUP, LLC13	Senior subordinated debt	Financial services	10.00% / 2.00% PIK	12/23/2022	4,600,000	4,521,270		4,600,000
	143.3 Class A units9		—	—	—	541,176		645,000
						5,062,446		5,245,000
VISTAR MEDIA INC.	First Lien	Media, marketing & entertainment	L+10.00% (Floor 1.00%), Current Coupon 12.32%	2/16/2022	7,975,000	7,341,113		8,134,500
	Warrants (Expiration - February 17, 2027)		—	—	—	886,000		2,027,000
						8,227,113		10,161,500
Total Non-control/Non-affiliate Investments						$	232,460,377	$	235,960,695
Affiliate Investments6
CHANDLER SIGNS, LLC13	Senior subordinated debt	Business services	12.00% / 1.00% PIK	7/4/2021	4,522,672	$	4,465,563	$	4,314,629
	1,500,000 units of Class A-1 common stock9		—	—	—	1,500,000		1,293,000
						5,965,563		5,607,629
ELITE SEM, INC.8	First Lien	Media, marketing & entertainment	L+8.42% (Floor 1.00%), Current Coupon 10.76%	2/1/2022	20,000,000	19,524,654		20,000,000
	1,173 Preferred units; 1,173 Class A Common units		12% PIK	—	—	1,385,253		1,941,000
						20,909,907		21,941,000

10

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
(Unaudited)
June 30, 2018
Portfolio Company1	Type of Investment2	Industry	Current Interest Rate3	Maturity	Principal	Cost			Fair Value4
ITA HOLDINGS GROUP, LLC13	First Lien	Transportation & logistics	L+8.50% (Floor 1.00%, Current Coupon 10.81%)	2/14/2023	9,440,625	9,262,607			9,265,973
	First Lien - Term Loan B		L+8.50% (Floor 1.00%, Current Coupon 10.82%)	2/14/2023	2,000,000	1,960,507			1,963,000
	Revolving Loan10.		L+8.50% (Floor 1.00%, Current Coupon 8.50%)	2/14/2023	313,500	276,501			307,700
	Delayed Draw Term Loan		L+8.50% (Floor 1.00%, Current Coupon 10.81%)	2/14/2023	1,500,000	1,471,135			1,472,250
	9.25% Class A Membership Interest9		—	—	—	1,500,000			1,500,000
						14,470,750			14,508,923
ZENFOLIO INC.	First Lien	Business services	L+9.00% (Floor 1.00%), Current Coupon 11.31%	7/17/2022	13,398,750	13,180,154			13,331,756
	Revolving Loan10		L+9.00% (Floor 1.00%)	7/17/2022	—	(16,177		)	—
	190 shares of common stock		—	—	—	1,900,000			1,900,000
						15,063,977			15,231,756
Total Affiliate Investments						$	56,410,197		$	57,289,308
Control Investments7
I-45 SLF LLC9, 10, 11	80% LLC equity interest	Multi-sector holdings	—	—	—	$	64,800,000		$	66,575,453
MEDIA RECOVERY, INC.11	800,000 shares of Series A convertible preferred stock	Industrial products	—	—	—	800,000			6,622,641
	4,000,002 shares of common stock		—	—	—	4,615,000			38,204,359
						5,415,000			44,827,000

11

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
(Unaudited)
June 30, 2018
Portfolio Company1	Type of Investment2	Industry	Current Interest Rate3	Maturity	Principal	Cost		Fair Value4
PRISM SPECTRUM HOLDINGS, LLC13	First Lien	Environmental services	L+9.50% (Floor 2.25%), Current Coupon 11.82%	2/6/2023	4,325,177	4,243,753		4,249,486
	Revolving Loan22		L+9.50% (Floor 2.25%), Current Coupon 11.82%	2/6/2023	750,000	713,156		736,875
	57.25 Class A units9		—	—	—	1,691,674		1,691,674
						6,648,583		6,678,035
Total Control Investments						$	76,863,583	$	118,080,488
TOTAL INVESTMENTS12						$	365,734,157	$	411,330,491

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

²  All of the Company’s investments, unless otherwise noted, are encumbered as security 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, monthly, quarterly, or semiannually. For each the Company has provided the spread over LIBOR or Prime and the current contractual interest rate in effect at June 30, 2018. Certain investments are subject to a LIBOR or Prime interest rate floor. Certain investments, as noted, accrue payment-in-kind ("PIK") interest.

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

⁵  Non-Control/Non-Affiliate investments are generally defined by the Investment Company Act of 1940 (the “1940 Act”) as investments that are neither control investments nor affiliate investments. At June 30, 2018, approximately 57.4% 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 76.8%.

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 June 30, 2018, approximately 13.9% of the Company’s investment assets were affiliate investments. The fair value of these investments as a percent of net assets is 18.6%.

⁷  Control investments are generally defined by the 1940 Act as investments in which more than 25% of the voting securities are owned or maintains greater than 50% of the board representation. At June 30, 2018, approximately 28.7% of the Company’s investment assets were control investments. The fair value of these investments as a percent of net assets is 38.4%.

12

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 June 30, 2018, approximately 17.0% of the Company's investment assets are non-qualifying assets.

¹⁰  The investment has an unfunded commitment as of June 30, 2018. Refer to Note 11 - Commitments and Contingencies for further discussion.

¹¹  Income producing through dividends or distributions.

¹²  As of June 30, 2018, the cumulative gross unrealized appreciation for federal income tax purposes is approximately $47.3 million; cumulative gross unrealized depreciation for federal income tax purposes is $1.9 million. Cumulative net unrealized appreciation is $45.4 million, based on a tax cost of $366.0 million.

¹³  Gauge American Nuts Operations LLC Class A common stock, ITA Holdings Group, LLC membership interest, LGM Pharma, LLC Class A common stock, Prism Spectrum Holdings LLC Class A units, Tax Advisors Group, LLC Class A units and Chandler Signs, LP Class A-1 common stock are held through a wholly-owned taxable subsidiary.

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

¹⁵  As of June 30, 2018, the investment is paying default interest at a rate of 2.5% per annum.

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

13

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
March 31, 2018
Portfolio Company1	Type of Investment2	Industry	Current Interest Rate3	Maturity	Principal		Cost		Fair Value4
Non-control/Non-affiliate Investments5
AAC HOLDINGS, INC.	First Lien	Healthcare services	L+6.75% (Floor 1.00%), Current Coupon 8.52%	6/30/2023	$	9,321,875	$	9,110,902	$	9,485,008
AG KINGS HOLDINGS INC.8	First Lien	Food, agriculture & beverage	L+9.40% (Floor 1.00%), Current Coupon 11.21%	8/8/2021	9,650,000		9,507,562		9,437,700
ALLIANCE SPORTS GROUP, L.P.	Senior subordinated debt	Consumer products & retail	11.00%	2/1/2023	10,100,000		9,916,216		9,807,100
	2.65% membership interest		—	—	—		2,500,000		1,996,000
							12,416,216		11,803,100
AMERICAN TELECONFERENCING SERVICES, LTD.	First Lien	Telecommunications	L+6.50% (Floor 1.00%), Current Coupon 8.29%	12/8/2021	6,378,173		6,238,734		6,376,578
	Second Lien		L+9.50% (Floor 1.00%), Current Coupon 11.20%	6/6/2022	2,005,714		1,941,047		1,918,806
							8,179,781		8,295,384
AMWARE FULFILLMENT LLC17	First Lien	Distribution	L+12.00% (Floor 1.00%), Current Coupon 14.02%	5/21/2019	13,478,333		13,284,488		12,939,200
BINSWANGER HOLDING CORP.	First Lien	Distribution	L+8.00% (Floor 1.00%), Current Coupon 10.02%	3/9/2022	13,036,418		12,817,614		12,899,536
	900,000 shares of common stock		—	—	—		900,000		874,000
							13,717,614		13,773,536
CALIFORNIA PIZZA KITCHEN, INC.	First Lien	Restaurants	L+6.00% (Floor 1.00%), Current Coupon 7.88%	8/23/2022	4,925,000		4,886,550		4,836,350
CAPITAL PAWN HOLDINGS, LLC	First Lien	Consumer products & retail	L+9.50%, Current Coupon 11.19%	7/8/2020	12,922,365		12,669,652		12,767,297

14

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
March 31, 2018
Portfolio Company1	Type of Investment2	Industry	Current Interest Rate3	Maturity	Principal	Cost		Fair Value4
CLICKBOOTH.COM, LLC	First Lien	Media, marketing & entertainment	L+8.50% (Floor 1.00%), Current Coupon 10.19%	12/5/2022	17,390,625	17,059,608		17,442,797
	Revolving Loan15		L+8.50% (Floor 1.00%)	12/5/2022	—	(18,719	)	—
						17,040,889		17,442,797
DEEPWATER CORROSION SERVICES, INC.	127,004 shares of Series A convertible preferred stock	Energy services (upstream)	—	—	—	8,000,000		4,629,000
DELPHI INTERMEDIATE HEALTHCO, LLC	First Lien	Healthcare services	L+7.50% (Floor 1.00%), Current Coupon 9.27%	10/3/2022	7,406,250	7,336,879		7,265,531
DIGITAL RIVER, INC.	First Lien	Software & IT services	L+6.50% (Floor 1.00%), Current Coupon 8.61%	2/12/2021	6,285,443	6,273,415		6,285,443
DUNN PAPER, INC.	Second Lien	Paper & forest products	L+8.75% (Floor 1.00%), Current Coupon 10.63%	8/26/2023	3,000,000	2,949,611		3,000,000
LGM PHARMA, LLC13	First Lien	Healthcare products	L+8.50% (Floor 1.00%), Current Coupon 10.17%	11/15/2022	9,975,000	9,787,481		9,955,050
	Delayed Draw Term Loan18		L+8.50% (Floor 1.00%), Current Coupon 10.29%	11/15/2022	1,300,000	1,274,815		1,297,400
	110,000 units of Class A common stock9		—	—	—	1,100,000		1,100,000
						12,162,296		12,352,450
LIGHTING RETROFIT INTERNATIONAL, LLC	First Lien	Environmental services	L+9.25% (Floor 1.00%), Current Coupon 10.94%	6/30/2022	14,625,000	14,487,144		14,361,750
	396,825 shares of Series B preferred stock		—	—	—	500,000		376,000
						14,987,144		14,737,750
PRE-PAID LEGAL SERVICES, INC.	Second Lien	Consumer services	L+9.00% (Floor 1.25%), Current Coupon 10.88%	7/1/2020	5,000,000	4,967,603		5,000,000
RESEARCH NOW GROUP, INC.	Second Lien	Business services	L+9.50% (Floor 1.00%), Current Coupon 11.28%	12/20/2025	10,500,000	9,778,956		9,817,500

15

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
March 31, 2018
Portfolio Company1	Type of Investment2	Industry	Current Interest Rate3	Maturity	Principal	Cost		Fair Value4
RESTAURANT TECHNOLOGIES, INC.	Second Lien	Business services	L+8.75% (Floor 1.00%), Current Coupon 10.69%	11/23/2023	3,500,000	3,454,894		3,493,000
JVMC HOLDINGS CORP. 14	First Lien	Financial services	L+8.02% (Floor 1.00%), Current Coupon 9.90%	5/5/2022	7,218,750	7,156,878		7,215,141
TAX ADVISORS GROUP, LLC13	Senior subordinated debt	Financial services	10.00% / 2.00% PIK	12/23/2022	4,600,000	4,517,884		4,600,000
	143.3 Class A units9		—	—	—	541,176		886,000
						5,059,060		5,486,000
VISTAR MEDIA INC.	First Lien	Media, marketing & entertainment	L+10.00% (Floor 1.00%), Current Coupon 12.02%	2/16/2022	8,112,500	7,434,072		8,193,625
	Warrants (Expiration - February 17, 2027)		—	—	—	886,000		1,682,000
						8,320,072		9,875,625
WASTEWATER SPECIALTIES, LLC	First Lien16	Industrial services	L+12.25% (Floor 1.00%), Current Coupon 13.90%	4/18/2022	9,863,582	9,720,600		10,011,536
Total Non-control/Non-affiliate Investments						$	200,981,062	$	199,949,348
Affiliate Investments6
CHANDLER SIGNS, LLC13	Senior subordinated debt	Business services	12.00% / 1.00% PIK	7/4/2021	4,511,259	$	4,450,704	$	4,375,922
	1,500,000 units of Class A-1 common stock9		—	—	—	1,500,000		1,934,000
						5,950,704		6,309,922
ELITE SEM, INC.8	First Lien	Media, marketing & entertainment	L+9.90% (Floor 1.00%), Current Coupon 12.10%	2/1/2022	17,500,000	17,103,533		17,500,000
	1,089 Preferred units		12% PIK	—	—	1,235,651		1,879,000
						18,339,184		19,379,000

16

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
March 31, 2018
Portfolio Company1	Type of Investment2	Industry	Current Interest Rate3	Maturity	Principal	Cost			Fair Value4
ITA HOLDINGS GROUP, LLC13	First Lien	Transportation & logistics	L+8.50% (Floor 1.00%, Current Coupon 10.32%)	2/14/2023	9,500,000	9,313,995			9,313,995
	Revolving Loan19		L+8.50% (Floor 1.00%)	2/14/2023	—	(9,748		)	—
	Delayed Draw Term Loan		L+8.50% (Floor 1.00%, Current Coupon 10.32%)	2/14/2023	1,500,000	1,470,378			1,470,378
	9.25% Class A Membership Interest9		—	—	—	1,500,000			1,500,000
						12,274,625			12,284,373
ZENFOLIO INC.	First Lien	Business services	L+9.00% (Floor 1.00%), Current Coupon 10.69%	7/17/2022	13,432,500	13,200,549			13,325,040
	Revolving Loan15		L+9.00% (Floor 1.00%)	7/17/2022	—	(17,174		)	—
	190 shares of common stock		—	—	—	1,900,000			1,900,000
						15,083,375			15,225,040
Total Affiliate Investments						$	51,647,888		$	53,198,335
Control Investments7
I-45 SLF LLC9, 10, 11	80% LLC equity interest	Multi-sector holdings	—	—	—	$	64,800,000		$	67,113,368
MEDIA RECOVERY, INC.11	800,000 shares of Series A convertible preferred stock	Industrial products	—	—	—	800,000			6,370,748
	4,000,002 shares of common stock		—	—	—	4,615,000			36,751,252
						5,415,000			43,122,000

17

CAPITAL SOUTHWEST CORPORATION AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
March 31, 2018
Portfolio Company1	Type of Investment2	Industry	Current Interest Rate3	Maturity	Principal	Cost	Fair Value4
PRISM SPECTRUM HOLDINGS, LLC13	First Lien	Environmental services	L+9.50% (Floor 2.25%), Current Coupon 11.75%	2/6/2023	4,325,177	4,240,522	4,240,522
	Revolving Loan20		L+9.50% (Floor 2.25%), Current Coupon 11.75%	2/6/2023	500,000	490,290	490,290
	57.25 Class A units9		—	—	—	1,691,674	1,691,674