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Item 9A. Controls and Procedures

2021-05-26 compared with 2020-06-02 · 35 added, 19 removed, 215 unchanged (20% of the section changed)

9 unchanged sentences

Based on our evaluation under the framework in the 2013 Internal Control — Integrated Framework, management concluded that our internal control over financial reporting was effective as of March 31, 2021.

RSM US, LLP, our independent registered public accounting firm, has audited the effectiveness of the Company’s internal control over financial reporting as of March 31, 2020, as stated in its report which is included in Item 8 of Part II of this Annual Report.

Changes in Internal Control over Financial Reporting

29 unchanged sentences

As a result, we do not pay investment advisory fees, but instead we pay the operating costs associated with employing investment management professionals including, without limitation, compensation expenses related to salaries, discretionary bonuses and restricted stock grants.

Interest payments on borrowed funds represents our estimated annual interest payments based on actual interest rate terms under our Credit Facility, our anticipated drawdowns from our Credit Facility, the 5.95% Notes due 2022 (the "December 2022 Notes") and the 5.375% Notes due 2024 (the “October 2024 Notes”).

As of March 31, 2020, we had $154.0 million outstanding under our Credit Facility, $77.1 million in aggregate principal of our December 2022 Notes outstanding and $75.0 million in aggregate principal of our October 2024 Notes outstanding.

(5) Interest payments on borrowed funds represents our estimated annual interest payments based on actual interest rate terms under our Credit Facility, our anticipated drawdowns from our Credit Facility, the 5.375% Notes due 2024 (the “October 2024 Notes”) and the 4.50% Notes due 2026 (the "January 2026 Notes").

As of March 31, 2021, we had $120.0 million outstanding under our Credit Facility, $125.0 million in aggregate principal of our October 2024 Notes outstanding and $140.0 million in aggregate principal of our January 2026 Notes outstanding.

Any future issuances of debt securities will be made at the discretion of management and our board of directors after evaluating the investment opportunities and economic situation of the Company and the market as a whole.

4 unchanged sentences

Income tax expense represents the estimated annual income tax expense of CSWC and its consolidated subsidiaries based actual income tax expense for the year ended March 31, 2021.

Effective December 31, 2020, Capital Southwest Management Corporation, a wholly owned subsidiary of and management company for CSWC ("CSMC"), merged with and into CSWC, with CSWC continuing as the surviving entity of the merger.

As a result of the foregoing, the calendar year ended December 31, 2020 is the last year in which CSWC will incur tax expense or benefit relating to CSMC.

As such, the deferred tax asset of $1.8 million was written off for the fiscal year ended March 31, 2021 and we recognized a U.S.

federal income tax expense relating thereto.

(7) Acquired fund fees and expenses represent the estimated indirect expense incurred due to our investment in the I-45 Senior Loan Fund based upon the actual amount incurred for the fiscal year ended March 31, 2021.

1 unchanged sentence

In calculating the following expense amounts, we have assumed we would have no additional leverage and that our annual operating expenses would remain at the levels set forth in the table above.

1 Year 3 Years 5 Years 10 Years

You would pay the following expenses on a $1,000 investment, assuming 5.0% annual return $ 124 $ 346 $ 536 $ 900

1 unchanged sentence

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

In addition, while the example

assumes reinvestment of all dividends at NAV, participants in our DRIP will receive a number of shares of our common stock, determined by dividing the total dollar amount of the dividend payable to a participant by the average purchase price of all shares of common stock purchased by the administrator of the DRIP in the event that shares are purchased in the open market to satisfy the share requirements of the DRIP, which may be at, above or below NAV.

In addition, while the example assumes reinvestment of all dividends at NAV, participants in our DRIP will receive a number of shares of our common stock, determined by dividing the total dollar amount of the dividend payable to a participant by the average purchase price of all shares of common stock purchased by the administrator of the DRIP in the event that shares are purchased in the open market to satisfy the share requirements of the DRIP, which may be at, above or below NAV.

See "Business - Dividend Reinvestment Plan” included in Item I of Part I of this Annual Report on Form 10-K for additional information regarding our DRIP.

12 unchanged sentences

Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Assets and Liabilities as of March 31, 2021 and 2020

22 unchanged sentences

333-220385) filed on October 23, 2017).

First Supplemental Indenture, dated December 15, 2017, between the Company and U.S.

Bank National Association, Trustee (incorporated by reference to Exhibit (d)(4) to Registration Statement on Form N-2 (Reg.

333-220385) filed on December 15, 2017).

Form of 5.95% Notes due 2022 (incorporated by reference Exhibit (d)(5) to Registration Statement on Form N-2 (Reg.

333-220385) filed on December 15, 2017).

Second Supplemental Indenture, dated as of September 27, 2019, relating to the 5.375% Notes due 2024, by and between the Company and U.S.

3 unchanged sentences

814-00061) filed on September 27, 2019) .

Third Supplemental Indenture, dated as of December 29, 2020, relating to the 4.50% Notes due 2026, by and between the Company and U.S.

Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed on December 29, 2020).

Form of Global Note with respect to the 4.50% Notes due 2026 (Incorporated by reference to Exhibit 4.2 to Current Report on Form 8-K filed on December 29, 2020).

Dividend Reinvestment Plan (incorporated by reference Exhibit (e) to Registration Statement on Form N-2 (Reg.

333-220385) filed on September 8, 2017).

Description of Capital Southwest Corporation's Securities Registered pursuant to Section 12 of the Securities Exchange Act of 1934*

Description of Capital Southwest Corporation's Securities Registered pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.8 to Form 10-K (File No.

814-00061) filed on June 2, 2021).

Capital Southwest Corporation and Its Affiliates 2009 Restoration of Retirement Income Plan as amended and restated effective January 1, 2008 (incorporated by reference to Exhibit 10.3 to Form 10-K (File No.

47 unchanged sentences

814-00061) filed on November 9, 2015).

I-45 SLF LLC Agreement dated September 9, 2015 (incorporated by reference to Exhibit 10.14 to Form 10-Q (File No.

Limited Liability Company Operating Agreement of I-45 SLF LLC, dated September 9, 2015 (incorporated by reference to Exhibit 10.14 to Form 10-Q (File No.

814-00061) filed on November 9, 2015).

Second Amended and Restated Limited Liability Company Operating Agreement of I-45 SLF LLC, dated March 11, 2021 (incorporated by reference to Exhibit 1.1 to Form 8-K (File No.

814-00061) filed March 12, 2021).

Guarantee, Pledge and Security Agreement dated August 30, 2016, among the Company, the subsidiary guarantors thereto, ING Capital LLC, and each financing agent and designated indebtedness holder thereto (incorporated by reference to Exhibit 10.2 to Form 8-K (File No.

7 unchanged sentences

814-00061) filed on December 21, 2018).

Amendment No.

1 to the Amended and Restated Senior Secured Revolving Credit Agreement, dated as of December 10, 2020, by and among Capital Southwest Corporation, as Borrower, the lenders from time to time party thereto and ING Capital LLC, as Administrative Agent, and Texas Capital Bank, N.A., as Documentation Agent (incorporated by reference to Exhibit 10.1 to Form 8-K (File No.

814-00061) filed on December 10, 2020).

Incremental Assumption Agreement, dated August 18, 2017, among the Company, ING Capital LLC and LegacyTexas Bank (incorporated by reference to Exhibit 10.2 to Form 10-Q (File No.

12 unchanged sentences

814-00061) filed on March 19, 2020).

Incremental Commitment Agreement, dated as of December 10, 2020, by and among Capital Southwest Corporation, ING Capital LLC, and Texas Capital Bank (incorporated by reference to Exhibit 10.2 to Form 8-K (File No.

814-00061) filed on December 10, 2020).

Master Reimbursement Agreement, dated as of May 9, 2018, by and between Capital Southwest Corporation, as Borrower, and ING Capital LLC, as Issuer (incorporated by reference to Exhibit 10.40 to Form 10-K (File No.

21 unchanged sentences

Consent of Independent Auditor – RSM US LLP (relating to I-45 SLF LLC).

Certification of Chairman of the Board and President required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.

Certification of President and Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.

Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.

Certification of Chairman of the Board and President required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code.

Certification of President and Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code.

Certification of Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code.

15 unchanged sentences

Pursuant to the requirement of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Chairman of the Board

Signature Title Date

Brooks Chairman of the Board May 26, 2021

/s/ Christine S.

Battist Director May 26, 2021

Furst Director May 26, 2021

Duane Morgan Director May 26, 2021

/s/ Ramona Rogers-Windsor Director May 26, 2021

Ramona Rogers-Windsor

/s/ William R.

President and Chief Executive Officer

Thomas Director May 26, 2021

Diehl President and Chief Executive Officer May 26, 2021

/s/ Michael S.

Chief Financial Officer

(Chief Financial/Accounting Officer)

Sarner Chief Financial Officer May 26, 2021

Sarner (Chief Financial/Accounting Officer)

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures