UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 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, 2006 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: 814-61 CAPITAL SOUTHWEST CORPORATION (Exact name of registrant as specified in its charter) Texas 75-1072796 (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) 12900 Preston Road, Suite 700, Dallas, Texas 75230 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (972) 233-8242 Securities registered pursuant to section 12(b) of the Act: None Securities registered pursuant to section 12(g) of the Act: Common Stock, $1.00 par value Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No X --- --- Indicate by check mark if the registrant is not required to file reports pursuant to Sectin 13 or Section 15(d) of the Act. Yes No X --- --- 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check One): Large accelerated filer Accelerated filer X Non-accelerated filer --- --- -- Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No X --- --- The aggregate market value of the voting stock held by non-affiliates of the registrant as of September 30, 2005 was $166,318,187, based on the last sale price of such stock as quoted by Nasdaq on such date (officers, directors and 5% shareholders are considered affiliates for purposes of this calculation). The number of shares of common stock outstanding as of May 15, 2006 was 3,860,251. <TABLE> <CAPTION> Documents Incorzporated by Reference Part of Form 10-K ------------------------------------ ----------------- <C> <C> (1) Annual Report to Shareholders for the Year Ended Parts I and II; and March 31, 2006 Part IV, Item 15(a)(1) and (2) (2) Proxy Statement for Annual Meeting of Shareholders Part III to be held July 17, 2006 </TABLE>
TABLE OF CONTENTS Page ---- PART I Item 1. Business......................................................1 Item 1A. Risk Factors..................................................1 Item 1B. Unresolved Staff Comments.....................................4 Item 2. Properties....................................................4 Item 3. Legal Proceedings.............................................4 Item 4. Submission of Matters to a Vote of Security Holders...........4 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities..........4 Item 6. Selected Financial Data.......................................4 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................4 Item 7A. Quantitative and Qualitative Disclosures About Market Risk....4 Item 8. Financial Statements and Supplementary Data...................5 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure...................................6 Item 9A. Controls and Procedures.......................................6 Item 9B. Other Information.............................................6 PART III Item 10. Directors and Executive Officers of the Registrant............6 Item 11. Executive Compensation........................................7 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters................7 Item 13. Certain Relationships and Related Transactions................8 Item 14. Principal Accountant Fees and Services........................8 PART IV Item 15. Exhibits and Financial Statement Schedules....................8 Signatures ...................................................................9
PART I Item 1. Business We were organized as a Texas corporation on April 19, 1961. Until September 1969, we operated as a licensee under the Small Business Investment Act of 1958. At that time, we transferred to our wholly-owned subsidiary, Capital Southwest Venture Corporation ("CSVC"), certain assets and our license as a small business investment company ("SBIC"). CSVC is a closed-end, non-diversified investment company of the management type registered under the Investment Company Act of 1940 (the "1940 Act"). Prior to March 30, 1988, we were registered as a closed-end, non-diversified investment company under the 1940 Act. On that date, we elected to become a business development company subject to the provisions of the 1940 Act, as amended by the Small Business Incentive Act of 1980. Because we wholly own CSVC, the portfolios of both entities are referred to collectively as "our", "we" and "us". We are a venture capital investment company whose objective is to achieve capital appreciation through long-term investments in businesses believed to have favorable growth potential. Our investment interests are focused on expansion financings, management buyouts, recapitalizations, industry consolidations and early-stage financings in a broad range of industry segments. The portfolio is a composite of companies in which we have major interests as well as a number of developing companies and marketable securities of established publicly-owned companies. We make available significant managerial assistance to the companies in which we invest and believe that providing material assistance to such investee companies is critical to their business development activities. The twelve largest investments we own had a combined cost of $36,296,096 and a value of $494,505,176, representing 89.8% of the value of our consolidated investment portfolio at March 31, 2006. For a narrative description of the twelve largest investments, see "Twelve Largest Investments - March 31, 2006" on pages 9 through 11 of our Annual Report to Shareholders for the Year Ended March 31, 2006 (our "2006 Annual Report") which is herein incorporated by reference. Certain of the information presented on the twelve largest investments has been obtained from the respective companies and, in certain cases, from public filings of such companies. The financial information presented on each of the respective companies is from such companies' audited financial statements. We compete for attractive investment opportunities with venture capital partnerships and corporations, venture capital affiliates of industrial and financial companies, SBICs and wealthy individuals. The number of persons employed by us at March 31, 2006 was seven. Our internet website address is www.capitalsouthwest.com. You can review the filings we have made with the U.S. Securities and Exchange Commission, free of charge by linking directly from our website to NASDAQ, a database that links to EDGAR, the Electronic Data Gathering, Analysis, and Retrieval System of the SEC. You should be able to access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. The charters adopted by the committees of our board of directors are also available on our website. Item 1A. Risk Factors You should carefully consider the risks described below and all other information contained in this annual report on Form 10-K, including our consolidated financial statements and the related notes thereto before making a decision to purchase our common stock. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties not presently known to us, or not presently deemed material by us, may also impair our operations and performance. If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected. If that happens, the trading price of our common stock could decline, and you may lose all or part of your investment. 1
There is uncertainty regarding the value of our investments in restricted securities. Our net asset value is based on the values assigned to the various investments in our portfolio, determined in good faith by our board of directors. Because of the inherent uncertainty of the valuation of portfolio securities which do not have readily ascertainable market values, our fair value determinations may differ materially from the values which would be applicable to unrestricted securities having a public market. The lack of liquidity of our restricted securities may adversely affect our business. Our portfolio contains many securities which are subject to restrictions on sale because they were acquired from issuers in "private placement" transactions or because we are deemed to be an affiliate of the issuer. Unless an exemption from the registration requirements of the Securities Act of 1933 is available, we will not be able to sell these securities publicly without the expense and time required to register the securities under applicable federal and state securities laws. In addition, contractual or practical limitations may restrict our ability to liquidate our securities in portfolio companies, because we may own a relatively large percentage of the issuer's outstanding securities. Sales may also be limited by unfavorable market conditions. The illiquidity of our investments may preclude or delay the disposition of such securities, which may make it difficult for us to obtain cash equal to the value at which we record our investments. There is limited publicly available information regarding the companies in which we invest. Many of the securities in our portfolio are issued by privately held companies. There is generally little or no publicly available information about such companies, and we must rely on the diligence of our management to obtain the information necessary for our decision to invest. There can be no assurance that such diligence efforts will uncover all material information necessary to make fully informed investment decisions. Certain of our portfolio companies are highly leveraged. Many of our portfolio companies have incurred substantial indebtedness in relation to their overall capital base. Such indebtedness often has a term that will require the balance of the loan to be refinanced when it matures. If portfolio companies cannot generate adequate cash flow to meet the principal and interest payments on their indebtedness, the value of our investments could be reduced or eliminated through foreclosure on the portfolio company's assets or by the portfolio company's reorganization or bankruptcy. Fluctuations may occur in our quarterly results. Our quarterly operating results may fluctuate materially due to a number of factors including, among others, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our portfolio companies' markets, the ability to find and close suitable investments, and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." We may not continue to qualify for pass-through tax treatment. We may not qualify for conduit tax treatment as a Regulated Investment Company ("RIC") if we are unable to comply with the requirements of Subchapter M of the Internal Revenue Code. If we fail to satisfy such requirements and cease to qualify for conduit tax treatment, we will be subject to federal taxes on our net investment income. The loss of this pass-through tax treatment could have a material adverse effect on the total return, if any, obtainable from an investment in our common stock. Historically, we have distributed net investment income semi-annually. Our current intention is to continue these distributions of ordinary income to 2
our stockholders. Also, historically, we have retained net realized capital gains, paid the resulting tax at the corporate level and retained the after-tax gains to supplement our equity capital and support continuing additions to our portfolio. Our shareholders then report such capital gains on their tax returns, receive credit for the tax we paid and are deemed to have reinvested the amount of the retained after-tax gain. We cannot assure you that we will achieve investment results or maintain a RIC tax status that will allow any specified level of cash distributions or our shareholders' current tax treatment of realized and retained capital gains. Our financial condition and results of operations will depend on our ability to effectively manage any future growth. Sustaining growth depends on our ability to identify, evaluate, finance, and invest in companies that meet our investment criteria. Accomplishing such results on a cost-effective basis is a function of our marketing capabilities and skillful management of the investment process. Failure to achieve future growth could have a material adverse effect on our business, financial condition, and results of operations. We are dependent upon management for our future success. Selection, structuring and closing our investments depends upon the diligence and skill of our management, which is responsible for identifying, evaluating, negotiating, monitoring and disposing of our investments. Our management's capabilities may significantly impact our results of operations. If we lose any member of our management team and he/she cannot be promptly replaced with an equally capable team member, our results of operations could be significantly impacted. We operate in a highly competitive market for investment opportunities. We compete with a number of private equity funds, other investment entities and individuals for investment opportunities. Some of these competitors are substantially larger and have greater financial resources, and some are subject to different and frequently less stringent regulation. As a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time and there can be no assurance that we will be able to identify and make investments that satisfy our objectives. Changes in laws or regulations governing our operations or our failure to comply with those laws or regulations may adversely affect our business. We and our portfolio companies are subject to regulation by laws at the local, state and federal level. These laws and regulations, as well as their interpretation, may be changed from time to time. Accordingly, any changes in these laws and regulations or failure to comply with them could have a material adverse effect on our business. Certain of these laws and regulations pertain specifically to business development companies such as ours. Failure to deploy new capital may reduce our return on equity. If we fail to invest our capital effectively, our return on equity may be decreased, which could reduce the price of the shares of our common stock. Investment in shares of our common stock should not be considered a complete investment program. Our stock is intended for investors seeking long-term capital appreciation. Our investments in portfolio securities generally require many years to reach maturity, and such investments generally are illiquid. An investment in our shares should not be considered a complete investment program. Each prospective purchaser should take into account his or her investment objectives as well as his or her other investments when considering the purchase of our shares. 3
Our common stock often trades at a discount from net asset value. Our common stock is listed on The Nasdaq Stock Market ("NASDAQ"). Stockholders desiring liquidity may sell their shares on NASDAQ at current market value, which has often been below net asset value. Shares of closed-end investment companies frequently trade at discounts from net asset value, which is a risk separate and distinct from the risk that a fund's performance will cause its net asset value to decrease. The market price of our common stock may fluctuate significantly. The market price and marketability of shares of our common stock may from time to time be significantly affected by numerous factors, including our investment results, market conditions, and other influences and events over which we have no control and that may not be directly related to us. Item 1B. Unresolved Staff Comments We have no unresolved staff comments to report pursuant to Item 1B. Item 2. Properties We maintain our offices at 12900 Preston Road, Suite 700, Dallas, Texas, 75230, where we rent approximately 3,700 square feet of office space pursuant to a lease agreement expiring in February 2008. We believe that our offices are adequate to meet our current and expected future needs. Item 3. Legal Proceedings We have no material pending legal proceedings to which we are a party or to which any of our property is subject. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the quarter ended March 31, 2006. PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Information set forth under the captions "Shareholder Information - Shareholders, Market Prices and Dividends" on page 38 of our 2006 Annual Report is herein incorporated by reference. Item 6. Selected Financial Data "Selected Consolidated Financial Data" on page 37 of our 2006 Annual Report is herein incorporated by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Pages 34 through 36 of our 2006 Annual Report are herein incorporated by reference. Item 7A. Quantitative and Qualitative Disclosures About Market Risk We are subject to financial market risks, including changes in marketable equity security prices. We do not use derivative financial instruments to mitigate any of these risks. Our investment performance is a function of our portfolio companies' profitability, which may be affected by economic cycles, competitive forces, foreign currency fluctuations and production costs including labor rates, raw 4
<TABLE> <CAPTION> material prices and certain basic commodity prices. Most of the companies in our investment portfolio do not hedge their exposure to raw material and commodity price fluctuations. However, the portfolio company with the greatest exposure to foreign currency fluctuations generally hedges its exposure. All of these factors may have an adverse effect on the value of our investments and on our net asset value. Our investment in portfolio securities includes fixed-rate debt securities which totaled $10,335,871 at March 31, 2006, equivalent to 1.9% of the value of our total investments. Generally, these debt securities are below investment grade and have relatively high fixed rates of interest, therefore; minor changes in market yields of publicly-traded debt securities have little or no effect on the values of debt securities in our portfolio and no effect on interest income. Our investments in debt securities are generally held to maturity and their fair values are determined on the basis of the terms of the debt security and the financial condition of the issuer. A portion of our investment portfolio consists of debt and equity securities of private companies. We anticipate little or no effect on the values of these investments from modest changes in public market equity valuations. Should significant changes in market valuations of comparable publicly-owned companies occur, there may be a corresponding effect on valuations of private companies, which would affect the value and the amount and timing of proceeds eventually realized from these investments. A portion of our investment portfolio also consists of restricted common stocks of publicly-owned companies. The fair values of these restricted securities are influenced by the nature of applicable resale restrictions, the underlying earnings and financial condition of the issuers of such restricted securities and the market valuations of comparable publicly-owned companies. A portion of our investment portfolio also consists of unrestricted, freely marketable common stocks of publicly-owned companies. These freely marketable investments, which are valued at the public market price, are directly exposed to equity price risks, in that a change in an issuer's public market equity price would result in an identical change in the value of our investment in such security. Item 8. Financial Statements and Supplementary Data Pages 12 through 33 of our 2006 Annual Report are herein incorporated by reference. See also Item 15 of this Form 10-K - "Exhibits and Financial Statement Schedules". Selected Quarterly Financial Data (Unaudited) --------------------------------- The following presents a summary of the unaudited quarterly consolidated financial information for the years ended March 31, 2006 and 2005. First Second Third Fourth Quarter Quarter Quarter Quarter Total ------- ------- ------- ------- ------- (In thousands, except per share amounts) <S> <C> <C> <C> <C> <C> 2006 - ---- Net investment income $ 574 $ 666 $ 893 $ 256 $ 2,389 Net realized gain on investments 3,409 3,772 4,132 1,803 13,116 Net increase in unrealized appreciation of investments 2,692 17,436 9,755 46,521 80,685 Net increase in net assets from operations 6,675 21,874 14,780 48,580 96,190 Net increase in net assets from operations per share 1.73 5.67 3.83 12.58 24.92 2005 - ---- Net investment income $ 489 $ 443 $ 1,366 $ 108 $ 2,406 Net realized gain (loss) on investments (1,556) (2,470) (3,422) 1,382 (6,066) Net increase (decrease) in unrealized appreciation of investments (2,392) (2,547) 15,025 7,799 17,885 Net increase (decrease) in net assets from operations (3,459) (4,574) 12,969 9,289 14,225 Net increase (decrease) in net assets from operations per share (0.90) (1.18) 3.36 2.41 3.69 </TABLE> 5
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures As of March 31, 2006, an evaluation was performed under the supervision and with the participation of our management, including the President and Chairman of the Board and Secretary-Treasurer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934). Based on that evaluation, the President and Chairman of the Board and Secretary-Treasurer concluded that our disclosure controls and procedures are effective to ensure that the information required to be disclosed is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and is accumulated and communicated to management, including the President and Chairman of the Board and Secretary-Treasurer, as appropriate, to allow timely decisions regarding such required disclosure. During the fiscal quarter ended March 31, 2006, there were no changes to the internal control over financial reporting that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting. Item 9B. Other Information None. PART III Item 10. Directors and Executive Officers of the Registrant The section of our 2006 Proxy Statement captioned "Nominees for Director" under "Proposal 1. Election of Directors" identifies members of our board of directors and nominees, and is incorporated in this Item 10 by reference. The names and ages of our executive officers as of June 1, 2006, together with certain biographical information, are as follows: William M. Ashbaugh, age 51, has served as Senior Vice President since 2005 and Vice President since 2001. He previously served as Managing Director in the corporate finance departments of Hoak Breedlove Wesneski & Co. from 1998 to 2001, Principal Financial Securities from 1997 to 1998 and Southwest Securities from 1995 to 1997. Susan K. Hodgson, age 44, has served as Secretary-Treasurer since 2001 and was Controller from 1994 to 2001. Gary L. Martin, age 59, has been a director since July 1988 and has served as Vice President since 1984. He previously served as Vice President from 1978 to 1980. Since 1980, Mr. Martin has served as President of The Whitmore Manufacturing Company, a wholly-owned portfolio company. Jeffrey G. Peterson, age 32, has served as Vice President since 2005 and was an Investment Associate since 2001. He previously held positions with the investment banking division of Scott & Stringfellow, Inc. and the corporate lending division of Bank One. William R. Thomas, age 77, has served as Chairman of the Board of Directors since 1982 and President since 1980. In addition, he has been a director since 1972 and was previously Senior Vice President from 1969 to 1980. 6
<TABLE> <CAPTION> One of our executive officers, Patrick F. Hamner, Senior Vice President, resigned on May 18, 2006. The sections of our 2006 Proxy Statement captioned "Meetings and Committees of the Board of Directors - Audit Committee" under "Proposal 1. Election of Directors" and "Report of the Audit Committee" identifies members of our audit committee of our board of directors and our audit committee financial expert, and are incorporated in this Item 10 by reference. The section of our 2006 Proxy Statement captioned "Section 16(a) Beneficial Ownership Reporting Compliance" is incorporated in this Item 10 by reference. Code of Ethics We have adopted a code of ethics that applies to all our directors, officers and employees. We have made the Code of Conduct and Ethics available on our website at www.capitalsouthwest.com. Item 11. Executive Compensation The information in the section of our 2006 Proxy Statement captioned "Executive Compensation" is incorporated in this Item 11 by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters The information in the sections of our 2006 Proxy Statement captioned "Stock Ownership of Certain Beneficial Owners" and "Executive Compensation" are incorporated in this Item 12 by reference. The table below sets forth certain information as of March 31, 2006 regarding the shares of our common stock available for grant or granted under stock option plans that (i) were approved by our stockholders, and (ii) were not approved by our stockholders. Equity Compensation Plan Information Number of Securities Number of Securities Remaining Available For To Be Issued Upon Weighted-Average Exercise Future Issuance Under Equity Exercise of Price Of Outstanding Compensation Plans Outstanding Options, Options, (excluding securities reflected Plan Category Warrants And Rights Warrants And Rights in column (a)) - ------------- -------------------- ------------------- -------------- (a) (b) (c) --- --- --- <S> <C> <C> <C> Equity 45,300 $68.411 91,500 compensation plans approved by security holders(1) Equity - - - compensation plans not approved by security holders -------- -------- -------- Total 45,300 $68.411 91,500 </TABLE> - ------------------ (1) Includes the 1999 Stock Option Plan. For a description of this plan, please refer to Footnote 5 contained in our consolidated financial statements. 7
Item 13. Certain Relationships and Related Transactions There were no relationships or transactions within the meaning of this item during the fiscal year ended March 31, 2006 or proposed for the fiscal year ending March 31, 2007. Item 14. Principal Accountant Fees and Services The information in the sections of our 2006 Proxy Statement captioned "Proposal 2: Ratification of Appointment of Independent Auditors" and "Audit and Other Fees" are incorporated in this Item 14 by reference. PART IV Item 15. Exhibits and Financial Statement Schedules (a)(1) The following information included in pages 12 through 33 of our 2006 Annual Report are herein incorporated by reference: (A) Portfolio of Investments - March 31, 2006 Consolidated Statements of Financial Condition - March 31, 2006 and 2005 Consolidated Statements of Operations - Years Ended March 31, 2006, 2005 and 2004 Consolidated Statements of Changes in Net Assets - Years Ended March 31, 2006, 2005 and 2004 Consolidated Statements of Cash Flows - Years Ended March 31, 2006, 2005 and 2004 (B) Notes to Consolidated Financial Statements (C) Notes to Portfolio of Investments (D) Selected Per Share Data and Ratios (E) Management's Report on Internal Control over Financial Reporting (F) Reports of Independent Registered Public Accounting Firms (G) Portfolio Changes During the Year (a)(2) All schedules are omitted because they are not applicable or not required, or the information is otherwise supplied. (a)(3) See the Exhibit Index. 8
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CAPITAL SOUTHWEST CORPORATION By: /s/ William R. Thomas ---------------------------- William R. Thomas, President and Chairman of the Board Date: May 26, 2006 Pursuant to the requirements of the Securities 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 date indicated. Signature Title Date --------- ----- ---- /s/ William R. Thomas - ----------------------------- President and Chairman May 26, 2006 William R. Thomas of the Board and Director (chief executive officer) /s/ Gary L. Martin - ----------------------------- Director May 26, 2006 Gary L. Martin /s/ Graeme W. Henderson - ----------------------------- Director May 26, 2006 Graeme W. Henderson /s/ Samuel B. Ligon - ----------------------------- Director May 26, 2006 Samuel B. Ligon /s/ John H. Wilson - ----------------------------- Director May 26, 2006 John H. Wilson /s/ Susan K. Hodgson - ----------------------------- Secretary-Treasurer May 26, 2006 Susan K. Hodgson (chief financial/accounting officer) 9
EXHIBIT INDEX The following exhibits are filed with this report or are incorporated herein by reference to a prior filing, in accordance with Rule 12b-32 under the Securities Exchange Act of 1934. Asterisk denotes exhibits filed with this report. Double asterick denotes exhibits furnished with this report. Exhibit No. Description ----------- ----------- 3.1(a) Articles of Incorporation and Articles of Amendment to Articles of Incorporation, dated June 25, 1969 (filed as Exhibit 1(a) and 1(b) to Amendment No. 3 to Form N-2 for the fiscal year ended March 31, 1979). 3.1(b) Articles of Amendment to Articles of Incorporation, dated July 20, 1987 (filed as an exhibit to Form N-SAR for the six month period ended September 30, 1987). 3.2 By-Laws of the Company, as amended (filed as Exhibit 2 to Amendment No. 11 to Form N-2 for the fiscal year ended March 31, 1987). 4.1 Specimen of Common Stock certificate (filed as Exhibit 4.1 to Form 10-K for the fiscal year ended March 31, 2002). 10.1 The RectorSeal Corporation and Jet-Lube, Inc. Employee Stock Ownership Plan as revised and restated effective April 1, 1998 (filed as Exhibit 10.1 to Form 10-K for the fiscal year ended March 31, 2002). 10.2 Amendment No. 1 to The RectorSeal Corporation and Jet-Lube, Inc. Employee Stock Ownership Plan as revised and restated effective April 1, 1998 (filed as Exhibit 10.2 to Form 10-K for the fiscal year ended March 31, 2002). 10.3 Amendment No. 2 to The RectorSeal Corporation and Jet-Lube, Inc. Employee Stock Ownership Plan as revised and restated effective April 1, 1998 (filed as Exhibit 10.3 to Form 10-K for the fiscal year ended March 31, 2003). 10.4 Amendment No. 3 to The RectorSeal Corporation and Jet-Lube, Inc. Employee Stock Ownership Plan as revised and restated effective April 1, 1998 (filed as Exhibit 10.4 to Form 10-K for the fiscal year ended March 31, 2005). 10.5 Retirement Plan for Employees of Capital Southwest Corporation and Its Affiliates as amended and restated effective April 1, 1989 (filed as Exhibit 10.3 to Form 10-K for the fiscal year ended March 31, 1995). 10.6 Amendments One and Two to Retirement Plan for Employees of Capital Southwest Corporation and Its Affiliates as amended and restated effective April 1, 1989 (filed as Exhibit 10.4 to Form 10-K for the fiscal year ended March 31, 1998). 10.7 Amendment Three to Retirement Plan for Employees of Capital Southwest Corporation and Its Affiliates as amended and restated effective April 1, 1989 (filed as Exhibit 10.5 to Form 10-K for the fiscal year ended March 31, 2002). 10.8 Amendment Four to Retirement Plan for Employees of Capital Southwest Corporation and Its Affiliates as amended and restated effective April 1, 1989 (filed as Exhibit 10.7 to Form 10-K for the fiscal year ended March 31, 2003).
10.9 Amendment Five to Retirement Plan for Employees of Capital Southwest Corporation and Its Affiliates as amended and restated effective April 1, 1989 (filed as Exhibit 10.8 to Form 10-K for the fiscal year ended March 31, 2003). 10.10 Amendment Six to Retirement Plan for Employees of Capital Southwest Corporation and Its Affiliates as amended and restated effective April 1, 1989 (filed as Exhibit 10.9 to Form 10-K for the fiscal year ended March 31, 2003). 10.11 Amendment Seven to Retirement Plan for Employees of Capital Southwest Corporation and Its Affiliates as amended and restated effective April 1, 1989 (filed as Exhibit 10.11 to Form 10-K for the fiscal year ended March 31, 2005). 10.12 Amendment Eight to Retirement Plan for Employees of Capital Southwest Corporation and Its Affiliates as amended and restated effective April 1, 1989 (filed as Exhibit 10.12 to Form 10-K for the fiscal year ended March 31, 2005). 10.13 Amendment Nine to Retirement Plan for Employees of Capital Southwest Corporation and Its Affiliates as amended and restated effective April 1, 1989 (filed as Exhibit 10.13 to Form 10-K for the fiscal year ended March 31, 2005). 10.14 Capital Southwest Corporation and Its Affiliates Restoration of Retirement Income Plan for certain highly-compensated superseded plan participants effective April 1, 1993 (filed as Exhibit 10.4 to Form 10-K for the fiscal year ended March 31, 1995). 10.15 Amendment One to Capital Southwest Corporation and Its Affiliates Restoration of Retirement Income Plan for certain highly-compensated superceded plan participants effective April 1, 1993 (filed as Exhibit 10.6 to Form 10-K for the fiscal year ended March 31, 1998). 10.16 Capital Southwest Corporation Retirement Income Restoration Plan as amended and restated effective April 1, 1989 (filed as Exhibit 10.5 to Form 10-K for the fiscal year ended March 31, 1995). 10.17 Form of Indemnification Agreement which has been established with all directors and executive officers of the Company (filed as Exhibit 10.9 to Form 8-K dated February 10, 1994). 10.18 Capital Southwest Corporation 1999 Stock Option Plan (filed as Exhibit 10.10 to Form 10-K for the fiscal year ended March 31, 2000). 10.19 Severance Pay Agreement with William M. Ashbaugh (filed as Exhibit 10.1 to Form 8-K dated July 18, 2005). 10.20 Severance Pay Agreement with Patrick F. Hamner (filed as Exhibit 10.2 to Form 8-K dated July 18, 2005). 10.21 Severance Pay Agreement with Susan K. Hodgson (filed as Exhibit 10.3 to Form 8-K dated July 18, 2005). 10.22 Severance Pay Agreement with Jeffrey G. Peterson (filed as Exhibit 10.4 to Form 8-K dated July 18, 2005).
13.1 * Annual Report to Shareholders for the fiscal year ended March 31, 2006. 21.1 * List of subsidiaries of the Company. 23.1 * Consent of Independent Registered Public Accounting Firm - Grant Thornton LLP. 23.2 * Consent of Independent Registered Public Accounting Firm - Ernst & Young LLP. 31.1 * Certification of President and Chairman of the Board required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), filed herewith. 31.2 * Certification of Secretary-Treasurer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act, filed herewith. 32.1 ** Certification of President and Chairman of the Board 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, furnished herewith. 32.2 ** Certification of Secretary-Treasurer 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, furnished herewith.