|   | xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934 |
|--------|--------------------------------------------------------------------------------------------------|

|   | o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|--------------------------------------------------------------------------------------------|

|                          Texas                    |                                           75-1072796 |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (State or other jurisdiction of  incorporation                 or organization) | (I.R.S. EmployerIdentification No.)                                                                                                                                                                                                                               |
|                                                                                                                                                                      |                                                                                                                                                                                                                                                              |
| 12900 Preston Road, Suite 700, Dallas, Texas                                                                                                                              |  75230                                                                                                                                                                                                                                                       |
| (Address of principal executive offices)                                                                                                                                  | (Zip Code)                                                                                                                                                                                                                                                        |

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| PART I           |     |                                                                      |
|------------------|----------|---------------------------------------------------------------------------|
|             | Item 1.  | Business                                                                  | 1 |
|             | Item 1A. | Risk Factors                                                              | 11 |
|             | Item 1B. | Unresolved Staff Comments                                                 | 19 |
|             | Item 2.  | Properties                                                                | 19 |
|             | Item 3.  | Legal Proceedings                                                         | 19 |
|             | Item 4.  | Reserved                                                                  | 19 |
|             |     |                                                                      |   |
| PART II          |     |                                                                      |
|             | Item 5.  | Market for Registrant's Common Equity, Related Stockholder Matters        |   |
|             |     | and Issuer Purchases of Equity Securities                                 | 19 |
|             | Item 6.  | Selected Financial Data                                                   | 21 |
|             | Item 7.  | Management's Discussion and Analysis of Financial Condition and Results   |   |
|             |     | of Operations                                                             | 22 |
|             | Item 7A. | Quantitative and Qualitative Disclosures About Market Risk                | 27 |
|             | Item 8.  | Financial Statements and Supplementary Data                               | 28 |
|             | Item 9.  | Changes in and Disagreements With Accountants on Accounting and           |   |
|             |     | Financial Disclosure                                                      | 68 |
|             | Item 9A. | Controls and Procedures                                                   | 69 |
|             | Item 9B. | Other Information                                                         | 69 |
|             |     |                                                                      |   |
| PART III         |     |                                                                      |
|             | Item 10. | Directors, Executive Officers and Corporate Governance                    | 70 |
|             | Item 11. | Executive Compensation                                                    | 70 |
|             | Item 12. | Security Ownership of Certain Beneficial Owners and Management and        |   |
|             |     | Related Stockholder Matters                                               | 70 |
|             | Item 13. | Certain Relationships and Related Transactions, and Director Independence | 71 |
|             | Item 14. | Principal Accountant Fees and Services                                    | 71 |
|             |     |                                                                      |   |
| PART IV          |     |                                                                      |
|             | Item 15. | Exhibits and Financial Statement Schedules                                | 72 |
|             |     |                                                                      |   |
| Signatures  |     | 74                                                                        |

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|                                                                                                                                                                                                                                                                                                                                                                                       |   | Cost   |                                         |   | Value  |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------------------------------------------|--------|--------|--------|
| The RectorSeal Corporation                                                               |   |   | $       52,600 |   |   |   | $144,700,000 |   |
| Encore Wire Corporation                                                                  |   |   | 5,800,000                                    |   |   |   | 81,735,000 |   |
| Alamo Group Inc.                                                                         |   |   | 2,190,937                                    |   |   |   | 62,266,600 |   |
| The Whitmore Manufacturing Company                                                                                                                                                                                                                                                                                                                                                         |   |   | 1,600,000                                    |   |   |   | 55,600,000 |   |
| Heelys, Inc.                                                                             |   |   | 102,490                                      |   |   |   | 19,193,659 |   |
| Media Recovery, Inc.                                                                     |   |   | 5,415,000                                    |   |   |   | 18,100,000 |   |
| Hologic, Inc.                                                                            |   |   | 220,000                                      |   |   |   | 14,042,276 |   |
| All Components, Inc.                                                                     |   |   | 2,150,000                                    |   |   |   | 13,499,940 |   |
| Texas Capital Bancshares, Inc.                                                           |   |   | 3,550,006                                    |   |   |   | 12,711,470 |   |
| Extreme International, Inc.                                                              |   |   | 3,325,875                                    |   |   |   | 11,603,000 |   |
| Cinatra Clean Technologies, Inc.                                                                                                                                                                                                                                                                                                                                                           |   |   | 10,124,714                                   |   |   |   | 10,124,714 |   |
| Trax Holdings, Inc.                                                                      |   |   | 5,000,000                                    |   |   |   | 5,758,030 |   |
|                                                                                                                                                                                                                                                                                                                                                                                       |   |   | $39,531,622                                  |   |   |   | $449,334,689 |   |

| ·   | Excellent Management:  Management teams with a proven record of achievement, exceptional ability, unyielding determination and unquestionable integrity.  We believe management teams with these attributes are more likely to manage the companies in a manner that protects our debt investment and enhances the value of our equity investment. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Investment Size:  $5 million to $15 million of equity capital.  We occasionally partner with other investors to engage in larger transactions. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Established Companies with Positive Cash Flow:  We generally seek to invest in established companies with sound historical financial performance.  We typically focus on companies that have historically generated near positive EBITDA (earnings before interest, taxes, depreciation and amortization) to $10 million of EBITDA. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Industry:  We primarily focus on companies having competitive advantages in their respective markets and/or operating in industries with barriers to entry, which may help protect their market position.  Overall, our portfolio is spread over many diverse industries. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | Location: We focus on companies located in the United States, and we are most focused on the Southwest, Southeast, Midwest and Mountain Regions. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Quality referral from a reputable source:  Excellent management is the cornerstone of our investment philosophy; therefore, it is helpful if mutually-known parties reach out to us on behalf of prospective investments.  Accomplished managers generally have prior investors or directors willing to speak on their behalf. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Provide long-term, patient capital for sustained growth.  Our public ownership structure eliminates the pressure to exit our investments in the five to seven year timeframe typical of most venture capital and private equity partnerships.  A third of our active investments have been held continuously for over 20 years. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Leave control with current owners.  We find that the best recipe for success is a committed management team with significant ownership.  Over half of our active portfolio companies are minority holdings.  When operating control and ownership control remain with the management team, they have the flexibility to execute plans that serve customers, employees and shareholders well for the long term. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Have a time-tested business model.  Many investment firms are first or second time funds – in other words, relatively unproven managers with unproven models.  In contrast, we have partnered with over 160 companies to achieve superior returns for owners, management teams and investors for half a century. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Always have funds to invest.  Our significant capital base enables us to fund businesses today and in the future, should the need arise.  Since we take our responsibility as partners seriously, we have provided follow-on financing for a number of our portfolio companies, often years after our initial investment. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Deal Generation/Origination:  Deal generation and origination is maximized through long-standing and extensive relationships with industry contacts, brokers, commercial and investment bankers, entrepreneurs, service providers such as lawyers and accountants, as well as current and former portfolio companies and investors. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Screening:  Once it is determined that a potential investment has met our investment criteria, we will perform preliminary due diligence or screening.  It is during this stage that we will take into consideration potential investment structures and price terms, as well as regulatory compliance.  Upon successful screening of the proposed investment, the investment team makes a recommendation to move forward.  We then issue a non-binding term sheet. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | Term Sheet:  The non-binding term sheet will include the key economic terms based upon our analysis performed during the screening process as well as a proposed timeline and our qualitative expectation for the transaction.  Upon execution of the term sheet, we begin our formal due diligence process. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Due Diligence:  Due diligence is performed by the leader of the designated investment team and certain external resources who together perform due diligence to understand the relationships among the prospective portfolio company’s business plan, operations, and financial performance.  Additionally, we may include site visits with management and key personnel; detailed review of historical and projected financial statements; interviews with key customers and suppliers; detailed evaluation of company management, including background checks; review of material contracts; in-depth industry, market and strategy analysis; and review by legal, environmental or other consultants, if needed.  In certain cases, we may decide not to make an investment based on the results of due diligence. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Document and Close:  Upon completion of a satisfactory due diligence review, the investment team presents its findings, in writing, to our Board of Directors for approval.  If any adjustments to the investment terms or structures are proposed by the Board of Directors, such changes are made and applicable analysis is updated.  Upon Board approval for the investment, we will re-confirm regulatory company compliance, process and finalize all required legal documents, and fund the investment. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Post-Investment:  We continuously monitor the status and progress of our portfolio companies.  We offer managerial assistance to our portfolio companies, giving them access to our investment experience, direct industry expertise and contacts.  The same investment team lead that was involved in the investment process will continue involvement in the portfolio company post-investment.  This provides for continuity of knowledge and allows the investment team to maintain a strong business relationship with key management of our portfolio companies for post-investment assistance and monitoring purposes.  As part of the monitoring process, the investment team leader will analyze monthly/quarterly/annual financial statements versus the previous periods, review financial projections, meet with management, attend board meetings, and review all compliance certificates and covenants.  While we maintain limited involvement in the ordinary course of operations of our portfolio companies, we maintain a higher level of involvement in non-ordinary course financings, potential acquisitions and other strategic activities. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Exit Strategies:  While our approach is primarily focused on providing long-term patient capital for sustained growth, we assist our portfolio companies in developing and planning exit opportunities, including any sale or merger of our portfolio companies, at the appropriate time.  We assist in the structure, timing, execution and transition of the exit strategy. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | Our quarterly valuation process begins with each portfolio company or investment being initially valued by the investment team leader responsible for the portfolio investment; and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Preliminary valuation conclusions will then be reviewed and discussed with the investment team; and |
|--------------------|-----------------------------------------------------------------------------------------------------|

| ·   | Our Board of Directors will assess the valuations and will ultimately approve the fair value of each investment in our portfolio, in good faith. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | Generally, to be eligible to elect BDC status, a company must primarily engage in the business of furnishing capital and making significant managerial assistance available to companies that do not have ready access through conventional financial channels.  Such companies that satisfy certain additional criteria are termed to be "eligible portfolio companies."  In general, in order to qualify as a BDC, a company must: (i) be a domestic company; (ii) have registered a class of its securities pursuant to Section 12 of the Securities Exchange Act of 1934; (iii) operate for the purpose of investing in the securities of certain types of portfolio companies, including early stage or emerging companies and businesses suffering or just recovering from financial distress (see following paragraph); (iv) make available significant managerial assistance to such portfolio companies; and (v) file a proper notice of election with the SEC. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | An eligible portfolio company generally is a domestic company that is not an investment company or a company excluded from investment company status pursuant to exclusions for certain types of financial companies (such as brokerage firms, banks, insurance companies and investment banking firms) and that: (i) does not have a class of securities listed on a national securities exchange; (ii) does have a class of equity securities listed on a national securities exchange with a market capitalization of less than $250 million; or (iii) is controlled by the BDC itself or together with others (control under the 1940 Act is presumed to exist where a person owns at least 25% of the outstanding voting securities of the portfolio company) and has a representative on the Board of Directors of such company. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect the BDC.  Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to us or our shareholders arising from willful malfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | We are required to adopt and implement written policies and procedures reasonably designed to prevent violation of the federal securities laws, review these policies and procedures annually for their adequacy and the effectiveness of their implementation, and to designate a chief compliance officer to be responsible for administering these policies and procedures. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | pursuant to Rule 13a-14 of the Exchange Act, our Chief Executive Officer and Chief Financial Officer are required to certify the accuracy of the financial statements contained in our periodic reports; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | pursuant to Item 307 of Regulation S-K, our periodic reports are required to disclose our conclusions about the effectiveness of our disclosure controls and procedures; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | pursuant to Rule 13a-15 of the Exchange Act, our management is required to prepare a report regarding its assessment of our internal control over financial reporting, and our independent registered public accounting firm separately audits our internal control over financial reporting; and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | pursuant to Item 308 of Regulation S-K and Rule 13a-15 of the Exchange Act, our periodic reports must disclose whether there were significant changes in our internal control over financial reporting or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | The annual distribution requirement for a RIC will be satisfied if we distribute to our stockholders on an annual basis at least 90% of our net ordinary income and realized short-term capital gains in excess of realized net long-term capital losses, if any.  Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year distributions into the next year and pay a 4% excise tax on such income. Any such carryover taxable income must be distributed through a dividend declared prior to filing the final tax return related to the year which generated such taxable income. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The source of income requirement will be satisfied if we obtain 90% of our income for each year from distributions, interest, gains from the sale of stock or securities or similar sources. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The asset diversification requirement will be satisfied if we meet certain asset diversification requirements at the end of each quarter of our taxable year.  To satisfy this requirement, at least 50% of the value of our assets must consist of cash, cash equivalents, U.S Government securities, securities of other RIC’s, and other acceptable securities; no more that 25% of the value of our assets can be invested in the securities, other than U.S Government securities or securities of other RIC’s, of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses or of certain “qualified publicly traded partnerships.” |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | may have limited financial resources and may be unable to meet their obligations under their debt instruments that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees from subsidiaries or affiliates of our portfolio companies that we may have obtained in connection with our investment, as well as a corresponding decrease in the value of the equity components of our investments; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | may have shorter operating histories, narrower product lines, smaller market shares and/or significant customer concentrations than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | are more likely to depend  on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation, termination, or significant under-performance of one or more of these persons could have a material adverse impact on our portfolio company and in turn, on us; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | may have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position; and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | may have less publicly available information about their businesses, operations and financial condition.  We are required to rely on the ability of our management team and investment professionals to obtain adequate information to evaluate the potential returns from investing in these companies.  If we are unable to uncover all material information about these companies, we may not make a fully informed investment decision and may lose all or part of our investment. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | our investment results; |
|--------------------|-------------------------|

| ·   | market conditions; |
|--------------------|--------------------|

| ·   | departure of our key personnel; |
|--------------------|---------------------------------|

| ·   | changes in regulatory policies, accounting pronouncements or tax guidelines, particularly with respect to RICs, BDCs or SBICs; and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------|

| ·   | other influences and events over which we have no control and that may not be directly related to us. |
|--------------------|-------------------------------------------------------------------------------------------------------|

| Quarter Ended                                                                                                                                                                                            |   | High   |    |   | Low    |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| March 31, 2011                                |   |   | $104.81 |   |   |   | $ 89.14 |   |
| December 31, 2010                                                                                                                                                                                        |   |   | 111.01  |   |   |   | 90.47 |   |
| September 30, 2010                                                                                                                                                                                       |   |   | 93.50   |   |   |   | 86.25 |   |
| June 30, 2010                                 |   |   | 96.61   |   |   |   | 84.26 |   |
|                                                                                                                                                                                                     |   |   |    |   |   |   |   |   |
| March 31, 2010                                |   |   | $ 96.04 |   |   |   | $ 78.51 |   |
| December 31, 2009                                                                                                                                                                                        |   |   | 79.95   |   |   |   | 71.72 |   |
| September 30, 2009                                                                                                                                                                                       |   |   | 82.90   |   |   |   | 69.60 |   |
| June 30, 2009                                 |   |   | 84.21   |   |   |   | 67.60 |   |

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| Payment Date                                                                                                                                                                                           |   | Cash Dividend |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|
| May 29, 2009                                |   | 0.40          |
| November 30, 2009                                                                                                                                                                                      |   | 0.40          |
| May 28, 2010                                |   | 0.40          |
| November 30, 2010                                                                                                                                                                                      |   | 0.40          |
| May 31, 2011                                |   | 0.40          |

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| Financial Position(as of March 31)                                      |   | 2011   |                            |   | 2010   |   |                      | 2009   |   |   | 2008                        |   |   | 2007   |                            |
|-------------------------------------------------------------------------|--------|--------|---------------------------------|--------|--------|--------|---------------------------|--------|--------|--------|-----------------------------|--------|--------|--------|---------------------------------|
| Investments at cost                                                     |   |   | $   98,355            |   |   |   | $100,023                  |   |   |   | $   89,339        |   |   |   | $   81,027            |   |   |   | $  71,642 |   |
| Unrealized appreciation                                                 |   |   | 390,918                         |   |   |   | 377,920                   |   |   |   | 307,296                     |   |   |   | 466,544                         |   |   |   | 609,513 |   |
| Investments at market or fair value                                     |   |   | 489,273                         |   |   |   | 477,943                   |   |   |   | 396,635                     |   |   |   | 547,571                         |   |   |   | 681,155 |   |
| Total assets                                                            |   |   | 543,214                         |   |   |   | 491,175                   |   |   |   | 417,543                     |   |   |   | 586,685                         |   |   |   | 729,507 |   |
| Net assets                                                              |   |   | 539,233                         |   |   |   | 486,926                   |   |   |   | 415,263                     |   |   |   | 583,700                         |   |   |   | 725,732 |   |
| Shares outstanding                                                      |   |   | 3,753                           |   |   |   | 3,741                     |   |   |   | 3,741                       |   |   |   | 3,889                           |   |   |   | 3,886 |   |
|                                                                    |   |   |                            |   |   |   |                      |   |   |   |                        |   |   |   |                            |   |   |   |   |   |
|                                                                    |   |   |                            |   |   |   |                      |   |   |   |                        |   |   |   |                            |   |   |   |   |   |
| Changes in Net Assets(years ended March 31)                             |   |   |                            |   |   |   |                      |   |   |   |                        |   |   |   |                            |   |   |   |   |   |
| Net investment income                                                   |   |   | $     1,804 |   |   |   | $    2,091 |   |   |   |   $   10,183 |   |   |   | $     3,715 |   |   |   | $    4,233 |   |
| Net realized gain  on investments                             |   |   | 38,885                          |   |   |   | 826                       |   |   |   | 10,756                      |   |   |   | 240                             |   |   |   | 14,966 |   |
| Net increase (decrease) in unrealized appreciation before distributions |   |   | 12,999                          |   |   |   | 70,624                    |   |   |   | (159,246                    | )      |   |   | (142,969                        | ) |   |   | 147,682 |   |
| Increase (decrease) in net assets from operations before distributions  |   |   | 53,688                          |   |   |   | 73,541                    |   |   |   | (138,307                    | )      |   |   | (139,014                        | ) |   |   | 166,881 |   |
| Cash dividends paid                                                     |   |   | (2,994                          | )      |   |   | (2,993                    | )      |   |   | (12,257                     | )      |   |   | (2,333                          | ) |   |   | (2,323 | ) |
| Employee stock options exercised                                        |   |   | 745                             |   |   |   | –                   |   |   |   | –                     |   |   |   | 231                             |   |   |   | 1,795 |   |
| Stock option expense                                                    |   |   | 957                             |   |   |   | 675                       |   |   |   | 503                         |   |   |   | 263                             |   |   |   | 169 |   |
| Change in pension plan funded status                                    |   |   | (88                             | )      |   |   | 440                       |   |   |   | (1,473                      | )      |   |   | (1,178                          | ) |   |   | – |   |
| Treasury stock                                                          |   |   | –                         |   |   |   | –                   |   |   |   | (16,903                     | )      |   |   | –                         |   |   |   | – |   |
| Adjustment to initially apply ASC 715, net of tax                       |   |   | –                         |   |   |   | –                   |   |   |   | –                     |   |   |   | –                         |   |   |   | 1,173 |   |
| Increase (decrease) in net assets                                       |   |   | $   52,308            |   |   |   | $  71,663            |   |   |   | $(168,437                   | )      |   |   | $(142,031                       | ) |   |   | $167,695 |   |
|                                                                    |   |   |                            |   |   |   |                      |   |   |   |                        |   |   |   |                            |   |   |   |   |   |
|                                                                    |   |   |                            |   |   |   |                      |   |   |   |                        |   |   |   |                            |   |   |   |   |   |
| Per share data(as of March 31)                                          |   |   |                            |   |   |   |                      |   |   |   |                        |   |   |   |                            |   |   |   |   |   |
| Net assets                                                              |   |   | $143.68                         |   |   |   | $130.14                   |   |   |   | $110.98                     |   |   |   | $150.09                         |   |   |   | $186.75 |   |
| Closing market price                                                    |   |   | 91.53                           |   |   |   | 90.88                     |   |   |   | 76.39                       |   |   |   | 123.72                          |   |   |   | 153.67 |   |
| Cash dividends paid                                                     |   |   | .80                             |   |   |   | .80                       |   |   |   | 3.26                        |   |   |   | .60                             |   |   |   | .60 |   |

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|                                                                                                                                                                                                                                                                                                                       |   | Years Ended March 31 |                  |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------|-----------------------|
|                                                                                                                                                                                                                                                                                                                       |   | 2011                 |                  |   | 2010 |   |   | 2009 |   |
| Alamo Group, Inc.                                                          |   |                 | $   679,272 |   |   |   | $   679,272 |   |   |   | $     679,272 |   |
| Balco, Inc.                                                                |   |                 | 1,817,503             |   |   |   | – |   |   |   | – |   |
| Dennis Tool Company                                                        |   |                 | –               |   |   |   | 33,333 |   |   |   | 49,499 |   |
| Encore Wire Corporation                                                    |   |                 | 326,940               |   |   |   | 326,940 |   |   |   | 326,940 |   |
| Heelys, Inc.                                                               |   |                 | –               |   |   |   | – |   |   |   | 9,317,310 |   |
| Kimberly-Clark Corporation                                                 |   |                 | –               |   |   |   | – |   |   |   | 89,529 |   |
| The RectorSeal Corporation                                                                                                                                                                                                                                                                                                 |   |                 | 2,021,829             |   |   |   | 2,117,870 |   |   |   | 720,000 |   |
| TCI Holdings, Inc.                                                         |   |                 | 81,270                |   |   |   | 81,270 |   |   |   | 81,270 |   |
| The Whitmore Manufacturing Company                                                                                                                                                                                                                                                                                         |   |                 | 505,457               |   |   |   | 529,467 |   |   |   | 180,000 |   |
| Other                                                                      |   |                 | –               |   |   |   | 20,528 |   |   |   | 89,558 |   |
|                                                                                                                                                                                                                                                                                                                       |   |                 | $5,432,271            |   |   |   | $3,788,680 |   |   |   | $11,533,878 |   |

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|                               |   | Years Ended March 31 |        |
|------------------------------------|--------|----------------------|-------------|
|                               |   | 2011                 |        |   | 2010 |   |   | 2009 |   |
| Alamo Group, Inc.                  |   |                 | $19,812,100 |   |   |   | $19,812,100 |   |   |   | $(22,642,400 | ) |
| All Components, Inc.               |   |                 | 5,223,290   |   |   |   | 9,276,649 |   |   |   | (9,600,000 | ) |
| Encore Wire Corporation            |   |                 | 14,303,625  |   |   |   | 2,043,375 |   |   |   | 14,303,625 |   |
| Heelys, Inc.                       |   |                 | (652,211    | ) |   |   | 5,869,905 |   |   |   | (20,963,948 | ) |
| The Whitmore Manufacturing Company |   |                 | 8,100,000   |   |   |   | 11,500,000 |   |   |   | (2,000,000 | ) |
| Media Recovery, Inc.               |   |                 | 4,700,000   |   |   |   | (1,400,000 | ) |   |   | (22,700,000 | ) |
| Palm Harbor Homes, Inc.            |   |                 | (6,833,953  | ) |   |   | (2,984,947 | ) |   |   | (21,601,583 | ) |
| The RectorSeal Corporation         |   |                 | 24,500,000  |   |   |   | 13,000,000 |   |   |   | (37,000,000 | ) |

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|                        |   | Payments Due By Period (In thousands) |   |
|-----------------------------|--------|---------------------------------------|--------|
| Contractual Obligations     |   | Total                                 |   |   | 1 Year |   |   | 2-3 Years |   |   | More Than 3 Years |   |
| Operating lease obligations |   |                                  | $216   |   |   |   | $104 |   |   |   | $112 |   |   |   | $− |   |

----

|                                                                                                                                                                                                                                                                                            |   | Amount |                              |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------------------------------|
| Ballast Point Ventures II, L.P.                                                                                                                                                                                                                                                                 |   |   | $     525,000 |   |
| BankCap Partners Fund I, L.P.                                                                                                                                                                                                                                                                   |   |   | 248,433                           |   |
| CapStar Holdings Corporation*.                                                                                                                                                                                                                                                                  |   |   | 3,703,619                         |   |
| Cinatra Clean Technologies, Inc.                                                                                                                                                                                                                                                                |   |   | 3,408,415                         |   |
| CMI Holding Company, Inc.                                                                                                                                                                                                                                                                       |   |   | 2,263,251                         |   |
| Discovery Alliance, LLC                                             |   |   | 150,000                           |   |
| iMemories, Inc.                                                     |   |   | 1,000,000                         |   |
| Phi Health, Inc**.                                                  |   |   | 5,752,339                         |   |
| VIA Holdings, Inc.                                                  |   |   | 85,767                            |   |
|                                                                                                                                                                                                                                                                                            |   |   | $17,136,824                       |   |

|                                                                                                                                                                                                                                                                                        |   | Cost   |        |   | Amount Received |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|-----------------|--------|
| CMI Holding Company, Inc.**                                                                                                                                                                                                                                                                 |   |   | $9,776,598  |   |            |   | $  2,913,251 |   |
| Lifemark Group*                                                 |   |   | 4,510,400   |   |            |   | 74,250,829 |   |
| Other holdings                                                  |   |   | −     |   |            |   | 585,501 |   |
|                                                                                                                                                                                                                                                                                        |   |   | $14,286,998 |   |            |   | $77,749,581 |   |
| Repayments Received                                             |   |   |        |   |            |   | $  4,518,761 |   |

----

----

|                                                                                           | Page |
|------------------------------------------------------------------------------------------------|------|
| Reports of Independent Registered Public Accounting Firm                                       | 29   |
| Consolidated Statements of Assets and Liabilities as of March 31, 2011 and 2010                | 31   |
| Consolidated Statements of Operations for Years Ended March 31, 2011, 2010 and 2009            | 32   |
| Consolidated Statements of Changes in Net Assets for Years Ended March 31, 2011, 2010 and 2009 | 33   |
| Consolidated Statements of Cash Flows for Years Ended March 31, 2011, 2010 and 2009            | 34   |
| Consolidated Schedules of Investments as of March 31, 2011 and 2010                            | 35   |
| Notes to Consolidated Financial Statements                                                     | 46   |

----

----

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | Years Ended March 31 |           |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------|----------------|
| Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | 2011                 |           |   | 2010 |   |
| Investments at market or fair value                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |                 |           |   |   |   |
| Companies more than 25% owned(Cost: March 31, 2011 - $25,521 ,March 31, 2010 - $26,178)                                                                        |   |                 | $310,181       |   |   |   | $330,147 |   |
| Companies 5% to 25% owned(Cost: March 31, 2011 - $14,049,March 31, 2010 - $21,562)                                                                             |   |                 | 83,335         |   |   |   | 73,589 |   |
| Companies less than 5% owned(Cost: March 31, 2011 - $58,784,March 31, 2010 - $52,283)                                                                          |   |                 | 95,757         |   |   |   | 74,207 |   |
| Total investments(Cost: March 31, 2011 - $98,354,March 31, 2010 - $100,023)                                                                                    |   |                 | 489,273        |   |   |   | 477,943 |   |
| Cash and cash equivalents                                                                                              |   |                 | 45,498         |   |   |   | 4,094 |   |
| Receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                 |           |   |   |   |   |   |
| Dividends and interest                                                                                                                          |   |                 | 523            |   |   |   | 1,013 |   |
| Affiliates                                                                                                                                      |   |                 | 340            |   |   |   | 865 |   |
| Pension assets                                                                                                         |   |                 | 7,398          |   |   |   | 7,069 |   |
| Other assets                                                                                                           |   |                 | 181            |   |   |   | 191 |   |
| Total assets                                                                                                                                    |   |                 | $543,214       |   |   |   | $491,175 |   |
| Liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                 |           |   |   |   |   |   |
| Other liabilities                                                                                                      |   |                 | $574           |   |   |   | $1,070 |   |
| Pension liability                                                                                                      |   |                 | 1,257          |   |   |   | 1,083 |   |
| Deferred income taxes                                                                                                  |   |                 | 2,150          |   |   |   | 2,096 |   |
| Total liabilities                                                                                                                               |   |                 | 3,981          |   |   |   | 4,249 |   |
| Net Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                 |           |   |   |   |   |   |
| Common stock, $1 par value: authorized, 5,000,000 shares;      issued, 4,337,916 shares at March 31, 2011 and 4,326,516      at March 31, 2010                                                                                                                                                                                                                                                                                                                             |   |                 | 4,338          |   |   |   | 4,327 |   |
| Additional capital                                                                                                     |   |                 | 173,905        |   |   |   | 126,555 |   |
| Undistributed net investment income                                                                                    |   |                 | 872            |   |   |   | 2,061 |   |
| Undistributed net realized loss                                                                                        |   |                 | (6,863         | ) |   |   | – |   |
| Unrealized appreciation of investments                                                                                 |   |                 | 390,918        |   |   |   | 377,920 |   |
| Treasury stock - at cost on 584,878 shares                                                                             |   |                 | (23,937        | ) |   |   | (23,937 | ) |
| Total net assets                                                                                                       |   |                 | 539,233        |   |   |   | 486,926 |   |
| Total liabilities and net assets                                                                                       |   |                 | $543,214       |   |   |   | $491,175 |   |
| Net asset value per share(on the 3,753,038shares outstanding at March 31, 2011 and on the 3,741,638 shares outstanding at March 31, 2010)                                                                                                                                                                                                                                                                                                                                                                          |   |                 | $  143.68 |   |   |   | $  130.14 |   |

----

|                                                             |   | Years Ended March 31 |          |
|------------------------------------------------------------------|--------|----------------------|---------------|
|                                                             |   | 2011                 |          |   | 2010 |   |   | 2009 |   |
| Investment income:                                               |   |                 |          |   |   |   |   |   |   |
| Interest                                                         |   |                 | $  1,364 |   |   |   | $  1,045 |   |   |   | $     1,375 |   |
| Dividends                                                        |   |                 | 5,432         |   |   |   | 3,789 |   |   |   | 11,534 |   |
| Management and directors’ fees                             |   |                 | 772           |   |   |   | 1,275 |   |   |   | 1,076 |   |
|                                                             |   |                 | 7,568         |   |   |   | 6,109 |   |   |   | 13,985 |   |
| Operating expenses:                                              |   |                 |          |   |   |   |   |   |   |   |   |   |
| Salaries                                                         |   |                 | 3,089         |   |   |   | 2,164 |   |   |   | 2,294 |   |
| Stock option expense                                             |   |                 | 957           |   |   |   | 675 |   |   |   | 504 |   |
| Net pension benefit                                              |   |                 | (291          | ) |   |   | (369 | ) |   |   | (253 | ) |
| Professional fees                                                |   |                 | 819           |   |   |   | 551 |   |   |   | 689 |   |
| Other operating expenses                                         |   |                 | 1,064         |   |   |   | 882 |   |   |   | 431 |   |
|                                                             |   |                 | 5,638         |   |   |   | 3, 903 |   |   |   | 3,665 |   |
| Income before income taxes                                       |   |                 | 1,930         |   |   |   | 2,206 |   |   |   | 10,320 |   |
| Income tax expense                                               |   |                 | 126           |   |   |   | 115 |   |   |   | 136 |   |
|                                                             |   |                 |          |   |   |   |   |   |   |   |   |   |
| Net investment income                                            |   |                 | $  1,804 |   |   |   | $  2,091 |   |   |   | $   10,184 |   |
|                                                             |   |                 |          |   |   |   |   |   |   |   |   |   |
| Proceeds from disposition of investments                         |   |                 | 77,750        |   |   |   | 5,191 |   |   |   | 20,698 |   |
| Cost of investments sold                                         |   |                 | 14,287        |   |   |   | 3,550 |   |   |   | 4,719 |   |
| Realized gain on investments before income tax         |   |                 | 63,463        |   |   |   | 1,641 |   |   |   | 15,979 |   |
| Income tax expense                                               |   |                 | 24,578        |   |   |   | 815 |   |   |   | 5,223 |   |
| Net realized gain on investments                                 |   |                 | 38,885        |   |   |   | 826 |   |   |   | 10,756 |   |
|                                                             |   |                 |          |   |   |   |   |   |   |   |   |   |
| Net increase(decrease) in unrealized appreciation of investments |   |                 | 12,999        |   |   |   | 70,624 |   |   |   | (159,247 | ) |
|                                                             |   |                 |          |   |   |   |   |   |   |   |   |   |
| Net realized and unrealized gain on investments                  |   |                 | $51,884       |   |   |   | $71,450 |   |   |   | $(148,491 | ) |
|                                                             |   |                 |          |   |   |   |   |   |   |   |   |   |
| Increase (decrease) in net assets from operations                |   |                 | $53,688       |   |   |   | $73,541 |   |   |   | $(138,307 | ) |

----

|                                                              |   | Years Ended March 31 |                      |
|-------------------------------------------------------------------|--------|----------------------|---------------------------|
|                                                              |   | 2011                 |                      |   | 2010 |   |   | 2009 |   |
| Operations:                                                       |   |                 |                      |   |   |   |   |   |   |
| Net investment income                                             |   |                 | $    1,804 |   |   |   | $    2,091 |   |   |   | $  10,184 |   |
| Net realized gain on investments                                  |   |                 | 38,885                    |   |   |   | 826 |   |   |   | 10,756 |   |
| Net increase (decrease) in unrealized appreciation of investments |   |                 | 12,999                    |   |   |   | 70,624 |   |   |   | (159,247 | ) |
| Increase (Decrease) in net assets from operations                 |   |                 | 53,688                    |   |   |   | 73,541 |   |   |   | (138,307 | ) |
| Distributions from:                                               |   |                 |                      |   |   |   |   |   |   |   |   |   |
| Undistributed net investment income                               |   |                 | (2,994                    | ) |   |   | (2,993 | ) |   |   | (12,257 | ) |
| Net realized gains deemed distributed to shareholders             |   |                 | (45,748                   | ) |   |   | (868 | ) |   |   | (8,647 | ) |
| Capital share transactions:                                       |   |                 |                      |   |   |   |   |   |   |   |   |   |
| Allocated increase in share value for deemed distribution         |   |                 | 45,748                    |   |   |   | 868 |   |   |   | 8,647 |   |
| Change in pension plan funded status                              |   |                 | (89                       | ) |   |   | 440 |   |   |   | (1,473 | ) |
| Exercise of employee stock options                                |   |                 | 745                       |   |   |   | – |   |   |   | – |   |
| Stock option expense                                              |   |                 | 957                       |   |   |   | 675 |   |   |   | 503 |   |
| Treasury stock                                                    |   |                 | –                   |   |   |   | – |   |   |   | (16,903 | ) |
| Increase (decrease) in net assets                                 |   |                 | 52,307                    |   |   |   | 71,663 |   |   |   | (168,437 | ) |
| Net assets, beginning of period                                   |   |                 | 486,926                   |   |   |   | 415,263 |   |   |   | 583,700 |   |
| Net assets, end of period                                         |   |                 | $539,233                  |   |   |   | $486,926 |   |   |   | $415,263 |   |

----

|                                                                                                                                          |   | Years Ended March 31 |                                                      |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------|-----------------------------------------------------------|
|                                                                                                                                          |   | 2011                 |                                                      |   | 2010 |   |   | 2009 |   |
| Cash flows from operating activities                                                                                                          |   |                 |                                                      |   |   |   |   |   |   |
| Increase (decrease) in net assets from operations                                                                                             |   |                 | $53,688                                                   |   |   |   | $73,541 |   |   |   | $(138,307 | ) |
| Adjustments to reconcile increase (decrease)  in net assets from operations to net cash provided by (used in) operating activities: |   |                 |                                                      |   |   |   |   |   |   |   |   |   |
| Net proceeds from disposition of investments                                                                                                  |   |                 | 71,133                                                    |   |   |   | 5,191 |   |   |   | 20,697 |   |
| Proceeds from repayment of loans                                                                                                              |   |                 | 4,519                                                     |   |   |   | 3,000 |   |   |   | – |   |
| Purchases of securities                                                                                                                       |   |                 | (10,520                                                   | ) |   |   | (17,234 | ) |   |   | (13,030 | ) |
| Depreciation and amortization                                                                                                                 |   |                 | 27                                                        |   |   |   | 33 |   |   |   | 40 |   |
| Net pension benefit                                                                                                                           |   |                 | (291                                                      | ) |   |   | (369 | ) |   |   | (253 | ) |
| Realized (gain) loss on investments before income tax                                                                                         |   |                 | (63,463                                                   | ) |   |   | (1,640 | ) |   |   | (15,979 | ) |
| Taxes payable on behalf of shareholders on deemed distribution                                                                                |   |                 | 24,577                                                    |   |   |   | 815 |   |   |   | 5,223 |   |
| Net (increase) decrease in unrealized appreciation of investments                                                                             |   |                 | (12,999                                                   | ) |   |   | (70,624 | ) |   |   | 159,247 |   |
| Stock option expense                                                                                                                          |   |                 | 957                                                       |   |   |   | 675 |   |   |   | 504 |   |
| Decrease (increase) in dividend and interest receivable                                                                                       |   |                 | 490                                                       |   |   |   | (514 | ) |   |   | (364 | ) |
| (Increase) decrease in receivables from affiliates                                                                                            |   |                 | 525                                                       |   |   |   | (617 | ) |   |   | 5 |   |
| (Increase) in other assets                                                                                                                    |   |                 | (18                                                       | ) |   |   | (26 | ) |   |   | (33 | ) |
| Increase (decrease) in other liabilities                                                                                                      |   |                 | (496                                                      | ) |   |   | 819 |   |   |   | (62 | ) |
| Increase in deferred income taxes                                                                                                             |   |                 | 102                                                       |   |   |   | 130 |   |   |   | 89 |   |
| Net cash provided by (used in) operating activities                                                                                           |   |                 | 68,231                                                    |   |   |   | (6,820 | ) |   |   | 17,777 |   |
| Cash flows from financing activities                                                                                                          |   |                 |                                                      |   |   |   |   |   |   |   |   |   |
| Distributions from undistributed net investment income                                                                                        |   |                 | (2,994                                                    | ) |   |   | (2,993 | ) |   |   | (12,257 | ) |
| Proceeds from exercise of employee stock options                                                                                              |   |                 | 745                                                       |   |   |   | – |   |   |   | – |   |
| Purchase of treasury stock                                                                                                                    |   |                 | –                                                   |   |   |   | – |   |   |   | (16,903 | ) |
| Payment of federal income tax for deemed capital gains distribution                                                                           |   |                 | (24,577                                                   | ) |   |   | (815 | ) |   |   | (5,223 | ) |
| Net cash used in financing activities                                                                                                         |   |                 | (26,826                                                   | ) |   |   | (3,808 | ) |   |   | (34,383 | ) |
| Net increase (decrease) in cash and cash equivalents                                                                                          |   |                 | 41,405                                                    |   |   |   | (10,628 | ) |   |   | (16,606 | ) |
| Cash and cash equivalents at beginning of period                                                                                              |   |                 | 4,094                                                     |   |   |   | 14,722 |   |   |   | 31,328 |   |
| Cash and cash equivalents at end of period                                                                                                    |   |                 | $45,499                                                   |   |   |   | $  4,094 |   |   |   | $   14,722 |   |
| Supplemental disclosure of cash flow information:                                                                                             |   |                 |                                                      |   |   |   |   |   |   |
| Income taxes                                                                                                                                  |   |                 | $         – |   |   |   | $         – |   |   |   | $            4 |   |

| a.   | In June 2010, the Company transferred $3,703,619 in certain tracts of Real Estate from Lifemark Group to their newly formed CapStar Holdings Corporation, wholly-owned by the Company. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | In January 2011, CMI Holding Company completed a friendly foreclosure that allowed the conversion of CMI Holding Company notes in the amount $2,913,521 to preferred stock to their newly formed Phi Health, Inc. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Total Investments |   |   | $  6,617 |   |   |   | $         – |   |   |   | $            – |   |
|-------------------|--------|--------|---------------|--------|--------|--------|-----------------------------------------------------------|--------|--------|--------|-----------------------------------------------------------------------------|--------|

----

| Company                                                                                                                                                                                                | Equity (a)                                                                                                                                                                                                                                                    | Investment (b)                                                                                                                                             | Cost                             | Value (c)          |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------|--------------------|
| ¥†ALAMO GROUP INC.Seguin, TexasTractor-mounted mowing and mobile excavation equipment for governmental, industrial and agricultural markets; street-sweeping equipment for municipalities.  | 22.0%                                                                                                                                                                                                                                                         | 2,830,300 shares common stock (acquired 4-1-73 thru 5-25-07)                                                                                               | $    2,190,937    | $  62,266,600 |
|                                                                                                                                                                                                   |                                                                                                                                                                                                                                                          |                                                                                                                                                       |                             |               |
| ALL COMPONENTS, INC.Pflugerville, TexasElectronics contract manufacturing; distribution and production of memory and other components for computer manufacturers, retailers and value-added resellers. | 80.4%                                                                                                                                                                                                                                                         | 8.25% subordinate note, $2,000,000 principal due 2012 (acquired 6-27-07)                                                                              | 2,000,000                        | 2,000,000          |
|                                                                                                                                                                                                   | 150,000 shares Series A Convertible Preferred Stock; convertible into 600,000 shares of common stock at $0.25 per share (acquired 9-16-94) Warrant to purchase 350,000 shares of common stock at $11.00 per share, expiring 2017 (acquired 6-27-07) | 150,000   –                                                                                                                                | 8,431,388    3,068,552 |
|                                                                                                                                                                                                   |                                                                                                                                                                                                                                                          |                                                                                                                                                       | 2,150,000                        | 13,499,940         |
|                                                                                                                                                                                                   |                                                                                                                                                                                                                                                          |                                                                                                                                                       |                             |               |
| ATLANTIC CAPITAL BANCSHARES, INCAtlanta, GeorgiaHolding company of Atlantic Capital Bank, a full service commercial bank.                                                                              | 1.9%                                                                                                                                                                                                                                                          | 300,000 shares common stock (acquired 4-10-07)                                                                                                             | 3,000,000                        | 2,257,000          |
|                                                                                                                                                                                                   |                                                                                                                                                                                                                                                          |                                                                                                                                                       |                             |               |
| ¥BALCO, INC.Wichita, KansasSpecialty architectural products used in the construction and remodeling of commercial and institutional buildings.                                                    | 90.9%                                                                                                                                                                                                                                                         | 445,000 shares common stock and 60,920 shares Class B non-voting common stock (acquired 10-25-83 and 5-30-02)                                              | 624,920                          | 5,200,000          |
|                                                                                                                                                                                                   |                                                                                                                                                                                                                                                          |                                                                                                                                                       |                             |               |
| *BOXX TECHNOLOGIES, INC.Austin, TexasWorkstations for computer graphic imaging and design.                                                                                                             | 14.9%                                                                                                                                                                                                                                                         | 3,125,354 shares Series B Convertible Preferred Stock, convertible into 3,125,354 shares of common stock at $0.50 per share (acquired 8-20-99 thru 8-8-01) | 1,500,000                        | 2                  |
|                                                                                                                                                                                                   |                                                                                                                                                                                                                                                          |                                                                                                                                                       |                             |               |
| CINATRA CLEAN TECHNOLOGIES, INC.Houston, TexasCleans above ground oil storage tanks with a patented, automated system.                                                                                 | 68.8%                                                                                                                                                                                                                                                         | 12% subordinated secured promissory note, due 2012 (acquired 5-19-10 thru 10-20-10)                                                                   | 890,604                          | 890,604            |
|                                                                                                                                                                                                   | 10% subordinated secured promissory note, due 2013 (acquired 7-14-08 thru 4-28-10)                                                                                                                                                                            | 6,200,700                                                                                                                                                  | 6,200,700                        |
|                                                                                                                                                                                                   |                                                                                                                                                                                                                                                          |                                                                                                                                                       |                             |               |
|                                                                                                                                                                                                   |                                                                                                                                                                                                                                                          | 3,033,410 shares Series A Convertible Preferred Stock, convertible into 3,033,410 shares common stock at $1.00 per share (acquired 7-14-08 thru 11-18-10)  | 3,033,410                        | 3,033,410          |
|                                                                                                                                                                                                   |                                                                                                                                                                                                                                                          |                                                                                                                                                       | 10,124,714                       | 10,124,714         |

----

| Company | Equity (a) | Investment (b) | Cost | Value (c) |
|---------|------------|----------------|------|-----------|

| *†ENCORE WIRE CORPORATIONMcKinney, TexasElectric wire and cable for residential, commercial  and industrial construction use.                                                                                                                       | 16.9%                                                                                                                                                  | 4,086,750 shares common stock (acquired 7-16-92 thru 10-7-98)                                                                               | 5,800,000 | 81,735,000 |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|-----------|------------|
|                                                                                                                                                                                                                                                           |                                                                                                                                                   |                                                                                                                                        |      |       |
| EXTREME INTERNATIONAL, INC.    Sugar Land, Texas    Owns Bill Young Productions, Texas Video and     Post, and Extreme and television commercials and    coporate communications videos. | 53.6%                                                                                                                                                  | 13,035 shares Series A Common Stock (acquired 9-26-08 and 12-18-08)                                                                    | 325,875   | 815,000    |
|                                                                                                                                                                                                                                                           | 39,359.18 shares Series C Convertible Preferred Stock, convertible into 157,437.72 shares of common stock at $25.00 per share (acquired 9-30-03)  | 2,625,000                                                                                                                                   | 9,850,000 |
|                                                                                                                                                                                                                                                           |                                                                                                                                                   | 3,750 shares 8% Series A Convertible Preferred Stock, convertible into 15,000 shares of common stock at $25.00 per share (acquired 9-30-03) | 375,000   | 938,000    |
|                                                                                                                                                                                                                                                           |                                                                                                                                                   |                                                                                                                                        | 3,325,875 | 11,603,000 |
|                                                                                                                                                                                                                                                           |                                                                                                                                                   |                                                                                                                                        |      |       |
| ¥†HEELYS, INC.Carrollton, TexasHeelys stealth skate shoes, equipment and apparel sold through sporting goods chains, department stores and footwear retailers.                                                                                      | 31.6%                                                                                                                                                  | 9,317,310  shares common stock (acquired 5-26-00)                                                                                 | 102,490   | 19,193,659 |
|                                                                                                                                                                                                                                                           |                                                                                                                                                   |                                                                                                                                        |      |       |
| †HOLOGIC, INC.Bedford, MassachusettsMedical instruments including bone densitometers, mammography devices and digital radiography systems.                                                                                                               | < 1%                                                                                                                                                | ‡632,820 shares common stock (acquired 8-27-99)                                                                                       | 220,000   | 14,042,276 |
|                                                                                                                                                                                                                                                           |                                                                                                                                                   |                                                                                                                                        |      |       |
| iMEMORIES, INC.Scottsdale, ArizonaEnables online video and photo sharing and DVD creation for home movies recorded in analog and  new digital format.                                                                                                     | 27.2%                                                                                                                                                  | 10% convertible promissory note, due 2012 (acquired 9-13-10)                                                                           | 1,000,000 | 1,000,000  |
|                                                                                                                                                                                                                                                           | 17,391,304 shares Series B Convertible Preferred Stock, convertible into 17,391,304 shares of common stock at $0.23 per share (acquired 7-10-09)  | 4,000,000                                                                                                                                   | 4,000,000 |
|                                                                                                                                                                                                                                                           |                                                                                                                                                   | Warrant to purchase 968,750 shares of common stock at $0.12 per share, expiring 2020 (acquired 9-13-10)                                     | –   | –    |
|                                                                                                                                                                                                                                                           |                                                                                                                                                   |                                                                                                                                        | 5,000,000 | 5,000,000  |

----

| Company | Equity (a) | Investment (b) | Cost | Value (c) |
|---------|------------|----------------|------|-----------|

| KBI BIOPHARMA, INC.Durham, North CarolinaProvides fully-integrated, outsourced drug development and bio-manufacturing services.                                                                                                       | 17.1%       | 7,142,857 shares Series B-2 Convertible Preferred Stock, convertible into 10,204,082 shares of common stock at $0.49 per share (acquired 9-08-09)                                                | 5,000,000                                      | 4,200,000                                    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------|----------------------------------------------|
|                                                                                                                                                                                                                                  |        |                                                                                                                                                                                             |                                           |                                         |
| ¥MEDIA RECOVERY, INC.Dallas, TexasComputer datacenter and office automation supplies and accessories; impact, tilt monitoring and temperature sensing devices to detect mishandling shipments; dunnage for protecting shipments. | 97.5%  | 800,000 shares Series A Convertible Preferred Stock, convertible into 800,000 shares of common stock at $1.00 per share (acquired 11-4-97) 4,000,002 shares common stock (acquired 11-4-97) | 800,000    4,615,000  | 3,000,000    15,100,000  |
|                                                                                                                                                                                                                                  |        |                                                                                                                                                                                             |   5,415,000                               | 18,100,000                                   |
|                                                                                                                                                                                                                                  |        |                                                                                                                                                                                             |                                           |                                         |
| *PALLETONE, INC.Bartow, FloridaManufacturer of wooden pallets and pressure-treated lumber.                                                                                                                                            | 8.4%        | 12.3% senior subordinated notes, $2,000,000 principal due 2015 (acquired  9-25-06)  150,000 shares common stock (acquired 10-18-01)                                          | 1,553,150   150,000                  | 1,600,000   2                      |
|                                                                                                                                                                                                                                  |        |                                                                                                                                                                                             |                                           |                                         |
|                                                                                                                                                                                                                                  |        | Warrant to purchase 15,294 shares of common stock at $1.00 per share, expiring 2011 (acquired 2-17-06)                                                                                           | 45,746                                         | –                                      |
|                                                                                                                                                                                                                                  |        |                                                                                                                                                                                             | 1,748,896                                      | 1,600,002                                    |
|                                                                                                                                                                                                                                  |        |                                                                                                                                                                                             |                                           |                                         |
| ¥†PALM HARBOR HOMES, INC.Dallas, TexasIntegrated manufacturing, retailing, financing and insuring of manufactured housing and modular homes.                                                                               | 30.4%       | 7,855,121 shares common stock (acquired 1-3-85 thru 7-31-95) Warrant to purchase 286,625 shares of common stock at $3.14 per share, expiring 2019 (acquired 4-24-09)                        | 10,931,955 –                        | 2 –                               |
|                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                  |        |                                                                                                                                                                                             | 10,931,955                                     | 2                                            |
|                                                                                                                                                                                                                                  |        |                                                                                                                                                                                             |                                           |                                         |
| PHI HEALTH, INC.Richardson, TexasDevelops and sells cardiac MRI systems and software.                                                                                                                                                 | 67.0%       | 1,559,111 shares Series A-1 Convertible Preferred Stock convertible into 1,559,111 shares of common stock at $0.0015 per share (acquired 1-27-11)                                           | 2,339                                          | 2,339                                        |
|                                                                                                                                                                                                                                  |        | 555,556 shares Series B-1 Convertible Preferred Stock convertible into 555,556 shares common stock at $2.25 per share (acquired 1-27-11)                                                         | 1,250,000                                      | 1,250,000                                    |
|                                                                                                                                                                                                                                  |        |                                                                                                                                                                                             |                                           |                                         |
|                                                                                                                                                                                                                                  |        | 4,500,000 Shares Series C-1 Convertible Preferred Stock convertible into 4,500,000 shares common stock at $0.20 per share (acquired 1-7-11 and 1-27-11)                                          | 4,500,000                                      | 4,500,000                                    |
|                                                                                                                                                                                                                                  |        |                                                                                                                                                                                             | 5,752,339                                      | 5,752,339                                    |

----

| Company | Equity (a) | Investment (b) | Cost | Value (c) |
|---------|------------|----------------|------|-----------|

| ¥THE RECTORSEAL CORPORATIONHouston, TexasSpecialty chemicals for plumbing, HVAC, electrical, construction, industrial, oil field and automotive applications; smoke containment systems for building fires; also owns 20% of The Whitmore Manufacturing Company. | 100.0%  | 27,907 shares common stock (acquired 1-5-73 and 3-31-73)                                                                                                                            | 52,600    | 144,700,000 |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------|-------------|
|                                                                                                                                                                                                                                                                  |    |                                                                                                                                                                                |      |        |
| TCI HOLDINGS, INC.Denver, ColoradoCable television systems and microwave relay systems.                                                                                                                                                                               | – | 21 shares 12% Series C Cumulative Compounding Preferred Stock (acquired 1-30-90)                                                                                                    | –   | 840,778     |
|                                                                                                                                                                                                                                                                  |    |                                                                                                                                                                                |      |        |
| †TEXAS CAPITAL BANCSHARES, INC.Dallas, TexasRegional bank holding company with banking operations in six Texas cities.                                                                                                                                          | 1.6%    | ‡489,656 shares common stock (acquired 5-1-00)                                                                                                                                | 3,550,006 | 12,711,470  |
|                                                                                                                                                                                                                                                                  |    |                                                                                                                                                                                |      |        |
| TRAX HOLDINGS, INC.Scottsdale, ArizonaProvides a comprehensive set of solutions to improve the transportation validation, accounting, payment and information management process.                                                                                     | 30.7%   | 1,061,279 shares Series A Convertible Preferred Stock, convertible into 1,077,203 common stock at $4.64 per share (acquired 12-8-08 and 2-17-09)                               | 5,000,000 | 5,758,030   |
|                                                                                                                                                                                                                                                                  |    |                                                                                                                                                                                |      |        |
| VIA HOLDINGS, INC.Sparks, NevadaDesigner, manufacturer and distributor of high-quality office seating.                                                                                                                                                                | 28.1%   | 12,686 shares common stock (acquired 3-4-11 and 3-25-11)                                                                                                                       | 4,926,290 | 4           |
|                                                                                                                                                                                                                                                                  |    |                                                                                                                                                                                |      |        |
| *WELLOGIX, INC.Houston, TexasDeveloper and supporter of software used by the oil and gas industry.                                                                                                                                                                    | 19.2%   | 4,788,371 shares Series A-1 Convertible Participating Preferred Stock, convertible into 4,788,371 shares of common stock at $1.0441 per share (acquired 8-19-05 thru 6-15-08)  | 5,000,000 | 2           |
|                                                                                                                                                                                                                                                                  |    |                                                                                                                                                                                |      |        |
| ¥THE WHITMORE MANUFACTURING COMPANYRockwall, TexasSpecialized surface mining, railroad and industrial lubricants; coatings for automobiles and primary metals; fluid contamination control devices.                                                         | 80.0%   | 80 shares common stock (acquired 8-31-79)                                                                                                                                           | 1,600,000 | 55,600,000  |

----

| Company | Equity (a) | Investment (b) | Cost | Value (c) |
|---------|------------|----------------|------|-----------|

| MISCELLANEOUS     | – | Ballast Point Ventures II, L.P.2.2% limited partnership interest (acquired 8-4-08 thru 6-18-10)           | 1,200,000          | 1,200,000    |
|-------------------|---------|----------------------------------------------------------------------------------------------------------------|--------------------|--------------|
|              | – | BankCap Partners Fund I, L.P.5.5% limited partnership interest (acquired 7-14-06 thru 12-13-10)           | 5,762,270          | 5,101,727    |
|              | – | CapitalSouth Partners Fund III, L.P.1.9% limited partnership interest (acquired 1-22-08 and 2-12-09)      | 831,256            | 790,000      |
|              | 100.0%  | ¥CapStar Holdings Corporation500 shares common stock (acquired 6-10-10)                              | 3,703,619          | 4,380,481    |
|              | – | Diamond State Ventures, L.P.1.4% limited partnership Interest (acquired 10-12-99 thru 8-26-05)            | 76,000             | 177,996      |
|              | – | ¥Discovery Alliance, LLC90.0% limited liability company (acquired  9-12-08 thru 5-14-10)   | 900,000            | 574,488      |
|              | – | Essex Capital Corporation10% unsecured promissory note due 8-19-10 (acquired 8-16-09)                     | –            | 1,000,000    |
|              | – | First Capital Group of Texas III, L.P.3.0% limited partnership interest (acquired 12-26-00 thru 8-12-05)  | 778,894            | 407,731      |
|              | 100%    | ¥Humac Company1,041,000 shares common stock (acquired 1-31-75 and 12-31-75)                          | –            | 166,000      |
|              | – | STARTech Seed Fund I12.1% limited partnership interest (acquired 4-17-98 thru 1-5-00)                     | 178,066            | 52,606       |
|              | – | STARTech Seed Fund II3.2% limited partnership interest (acquired 4-28-00 thru 2-23-05)                    | 843,891            | 317,392      |
|              | – | Sterling Group Partners I, L.P.1.6% limited partnership interest (acquired 4-20-01 thru 1-24-05)               |  1,064,042    | 919,417      |
| TOTAL INVESTMENTS |    |                                                                                                           | $  98,354,060 | $489,272,655 |

----

| Company                                                                                                                                                                                                     | Equity (a)                                                                                                                                             | Investment (b)                                                                                                                                             | Cost                          | Value (c)          |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------|--------------------|
| ¥†ALAMO GROUP INC.Seguin, TexasTractor-mounted mowing and mobile excavation equipment for governmental, industrial and agricultural markets; street-sweeping equipment for municipalities.       | 22.0%                                                                                                                                                  | 2,830,300 shares common stock (acquired 4-1-73 thru 5-25-07)                                                                                               | $    2,190,937 | $  42,454,500 |
|                                                                                                                                                                                                        |                                                                                                                                                   |                                                                                                                                                       |                          |               |
| ALL COMPONENTS, INC.Pflugerville, TexasElectronics contract manufacturing; distribution and production of memory and other components for computer manufacturers, retailers and value-added resellers.      | 80.4%                                                                                                                                                  | 8.25% subordinate note, $6,000,000 principal due 2012 (acquired 6-27-07)                                                                              | 6,000,000                     | 6,454,925          |
|                                                                                                                                                                                                        | 150,000 shares Series A Convertible Preferred Stock; convertible into 600,000 shares of common stock at $0.25 per share (acquired 9-16-94)        | 150,000                                                                                                                                                    | 5,821,725                     |
|                                                                                                                                                                                                        |                                                                                                                                                   | Warrant to purchase 350,000 shares of common stock at $11.00 per share, expiring 2017 (acquired 6-27-07)                                                   | –                       | –            |
|                                                                                                                                                                                                        |                                                                                                                                                   |                                                                                                                                                       | 6,150,000                     | 12,276,650         |
|                                                                                                                                                                                                        |                                                                                                                                                   |                                                                                                                                                       |                          |               |
| ATLANTIC CAPITAL BANCSHARES, INCAtlanta, GeorgiaHolding company of Atlantic Capital Bank, a full service commercial bank.                                                                                   | 1.9%                                                                                                                                                   | 300,000 shares common stock (acquired 4-10-07)                                                                                                             | 3,000,000                     | 3,150,000          |
|                                                                                                                                                                                                        |                                                                                                                                                   |                                                                                                                                                       |                          |               |
| ¥BALCO, INC.Wichita, KansasSpecialty architectural products used in the construction and remodeling of commercial and institutional buildings.                                                         | 90.9%                                                                                                                                                  | 445,000 shares common stock and 60,920 shares Class B non-voting common stock (acquired 10-25-83 and 5-30-02)                                              | 624,920                       | 8,000,000          |
|                                                                                                                                                                                                        |                                                                                                                                                   |                                                                                                                                                       |                          |               |
| *BOXX TECHNOLOGIES, INC.Austin, TexasWorkstations for computer graphic imaging and design.                                                                                                                  | 15.2%                                                                                                                                                  | 3,125,354 shares Series B Convertible Preferred Stock, convertible into 3,125,354 shares of common stock at $0.50 per share (acquired 8-20-99 thru 8-8-01) | 1,500,000                     | 2                  |
|                                                                                                                                                                                                        |                                                                                                                                                   |                                                                                                                                                       |                          |               |
| *CMI HOLDING COMPANY, INC.Richardson, TexasOwns Chase Medical, which develops and sells devices used in cardiac surgery to relieve congestive heart failure; develops and supports cardiac imaging systems. | 22.4%                                                                                                                                                  | 10% convertible promissory note, due  2013 (acquired 2-23-10)                                                                               | 650,000                       | 1,300,000          |
|                                                                                                                                                                                                        | 1,631,516 shares Series C-1 Convertible Preferred Stock, convertible into 1,631,516 shares of common stock at $2.15 per share (acquired 7-10-09)  | 2,863,347                                                                                                                                                  | 2,857,759                     |

----

| Company | Equity (a) | Investment (b) | Cost | Value (c) |
|---------|------------|----------------|------|-----------|

|   |   | 2,327,658 shares Series A Convertible Preferred Stock, convertible into 2,327,658 shares of common stock at $1.72 per share (acquired 8-21-02 and 6-4-03)  | 4,000,000 | 2         |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------|-----------|
|   |   | Warrants to purchase 109,012 shares of common stock at $1.72 per share, expiring 2012 (acquired 4-7-04)                                                    | –   | –   |
|   |   | Warrants to purchase 636,151 shares of Series A-1 Convertible Preferred Stock at $1.72 per share, expiring 2017 and 2019 (acquired 7-2-07 and 6-9-09)      | –   | –   |
|   |   | Warrant to purchase 90,698 shares of Series D or D-1 Convertible Preferred Stock at $1.72 per share, expiring 2017 (acquired 2-23-10)                           | –   | –   |
|   |   |                                                                                                                                                            | 7,513,347 | 4,157,761 |
| CINATRA CLEAN TECHNOLOGIES, INC.Houston, TexasCleans above ground oil storage tanks with a patented, automated system.                                                     | 59.2%                                                                                                                                                          | 10% subordinated secured promissory note, due 2013 (acquired 7-14-08 thru 3-23-10)                                                     | 6,000,300 | 3,815,235  |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|-----------|------------|
|                                                                                                                                                                       | 1,128,649 shares Series A Convertible Preferred Stock, convertible into 1,128,649 shares common stock at $1.00 per share (acquired 7-14-08 and 11-19-10)  | 1,128,649                                                                                                                                   | 1,128,649 |
|                                                                                                                                                                       |                                                                                                                                                           |                                                                                                                                        | 7,128,949 | 4,943,884  |
|                                                                                                                                                                       |                                                                                                                                                           |                                                                                                                                        |      |       |
| *†ENCORE WIRE CORPORATIONMcKinney, TexasElectric wire and cable for residential, commercial and industrial construction use.                                         | 17.3%                                                                                                                                                          | 4,086,750 shares common stock (acquired 7-16-92 thru 10-7-98)                                                                               | 5,800,000 | 67,431,375 |
|                                                                                                                                                                       |                                                                                                                                                           |                                                                                                                                        |      |       |
| EXTREME INTERNATIONAL, INC.Sugar Land, TexasOwns Bill Young Productions, Texas Video and Post, and Extreme and television commercials and corporate communications videos. | 53.6%                                                                                                                                                          | 13,035 shares Series A Common Stock (acquired 9-26-08 and 12-18-08)                                                                    | 325,875   | 600,000    |
|                                                                                                                                                                       | 39,359.18 shares Series C Convertible Preferred Stock, convertible into 157,437.72 shares of common stock at $25.00 per share (acquired 9-30-03)          | 2,625,000                                                                                                                                   | 7,236,000 |
|                                                                                                                                                                       |                                                                                                                                                           | 3,750 shares 8% Series A Convertible Preferred Stock, convertible into 15,000 shares of common stock at $25.00 per share (acquired 9-30-03) | 375,000   | 689,000    |
|                                                                                                                                                                       |                                                                                                                                                           |                                                                                                                                        | 3,325,875 | 8,525,000  |

----

| Company | Equity (a) | Investment (b) | Cost | Value (c) |
|---------|------------|----------------|------|-----------|

| ¥†HEELYS, INC.Carrollton, TexasHeelys stealth skate shoes, equipment and apparel sold through sporting goods chains, department stores and footwear retailers.                                                             | 31.1%                                            | 9,317,310  shares common stock (acquired 5-26-00)                                                                                            | 102,490    | 19,845,870 |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|
|                                                                                                                                                                                                                                  |                                             |                                                                                                                                                   |       |       |
| †HOLOGIC, INC.Bedford, MassachusettsMedical instruments including bone densitometers, mammography devices and digital radiography systems.                                                                                      | < 1%                                          | ‡632,820 shares common stock (acquired 8-27-99)                                                                                                  | 220,000    | 11,726,155 |
|                                                                                                                                                                                                                                  |                                             |                                                                                                                                                   |       |       |
| iMEMORIES, INC.Scottsdale, ArizonaEnables online video and photo sharing and DVD creation for home movies recorded in analog and new digital format.                                                                                  | 26.2%                                            | 17,391,304 shares Series B Convertible Preferred Stock, convertible into 17,391,304 shares of common stock at $0.23 per share (acquired 7-10-09)  | 4,000,000  | 4,000,000  |
|                                                                                                                                                                                                                                  |                                             |                                                                                                                                                   |       |       |
| KBI BIOPHARMA, INC.Durham, North CarolinaProvides fully-integrated, outsourced drug development and bio-manufacturing services.                                                                                                       | 14.8%                                            | 7,142,857 shares Series B-2 Convertible Preferred Stock, convertible into 7,142,857 shares of common stock at $0.70 per share (acquired 9-08-09)       | 5,000,000  | 5,000,000  |
|                                                                                                                                                                                                                                  |                                             |                                                                                                                                                   |       |       |
| ¥LIFEMARK GROUPHayward, CaliforniaCemeteries, mausoleums and mortuaries located in northern California.                                                                                                                          | 100.0%                                           | 1,449,026 shares common stock (acquired 7-16-69)                                                                                                       | 4,510,400  | 71,000,000 |
|                                                                                                                                                                                                                                  |                                             |                                                                                                                                                   |       |       |
| ¥MEDIA RECOVERY, INC.Dallas, TexasComputer datacenter and office automation supplies and accessories; impact, tilt monitoring and temperature sensing devices to detect mishandling shipments; dunnage for protecting shipments. | 97.5%                                            | 800,000 shares Series A Convertible Preferred Stock, convertible into 800,000 shares of common stock at $1.00 per share (acquired 11-4-97)        | 800,000    | 2,200,000  |
|                                                                                                                                                                                                                                  | 4,000,002 shares common stock (acquired 11-4-97) | 4,615,000                                                                                                                                              | 11,200,000 |
|                                                                                                                                                                                                                                  |                                             |                                                                                                                                                   | 5,415,000  | 13,400,000 |
|                                                                                                                                                                                                                                  |                                             |                                                                                                                                                   |       |       |
| *PALLETONE, INC.Bartow, FloridaManufacturer of wooden pallets and pressure-treated lumber.                                                                                                                                            | 8.4%                                             | 12.3% senior subordinated notes, $2,000,000 principal due 2012 (acquired  9-25-06)                                                           | 1,553,150  | 2,000,000  |
|                                                                                                                                                                                                                                  |                                             | 150,000 shares common stock (acquired 10-18-01)                                                                                                   | 150,000    | 2          |
|                                                                                                                                                                                                                                  |                                             | Warrant to purchase 15,294 shares of common stock at $1.00 per share, expiring 2011 (acquired 2-17-06)                                                 | 45,746     | –    |
|                                                                                                                                                                                                                                  |                                             |                                                                                                                                                   | 1,748,896  | 2,000,002  |

----

| Company | Equity (a) | Investment (b) | Cost | Value (c) |
|---------|------------|----------------|------|-----------|

| ¥†PALM HARBOR HOMES, INC.Dallas, TexasIntegrated manufacturing, retailing, financing and insuring of manufactured housing and modular homes.                                                                                                               | 30.5%                                                     | 7,855,121 shares common stock (acquired 1-3-85 thru 7-31-95) Warrant to purchase 286,625 shares of common stock at $3.14 per share, expiring 2019 (acquired 4-24-09)           | 10,931,955 – | 6,833,955 – |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------|------------------------|
|                                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                  |                                                      |                                                                                                                                                                                | 10,931,955              | 6,833,955              |
|                                                                                                                                                                                                                                                                  |                                                      |                                                                                                                                                                                |                    |                   |
| ¥THE RECTORSEAL CORPORATIONHouston, TexasSpecialty chemicals for plumbing, HVAC, electrical, construction, industrial, oil field and automotive applications; smoke containment systems for building fires; also owns 20% of The Whitmore Manufacturing Company. | 100.0%                                                    | 27,907 shares common stock (acquired 1-5-73 and 3-31-73)                                                                                                                            | 52,600                  | 120,200,000            |
|                                                                                                                                                                                                                                                                  |                                                      |                                                                                                                                                                                |                    |                   |
| TCI HOLDINGS, INC.Denver, ColoradoCable television systems and microwave relay systems.                                                                                                                                                                               | –                                                   | 21 shares 12% Series C Cumulative Compounding Preferred Stock (acquired 1-30-90)                                                                                                    | –                 | 677,250                |
|                                                                                                                                                                                                                                                                  |                                                      |                                                                                                                                                                                |                    |                   |
| †TEXAS CAPITAL BANCSHARES, INC.Dallas, TexasRegional bank holding company with banking operations in six Texas cities.                                                                                                                                          | –                                                   | ‡489,656 shares common stock (acquired 5-1-00)                                                                                                                                | 3,550,006               | 9,288,774              |
|                                                                                                                                                                                                                                                                  |                                                      |                                                                                                                                                                                |                    |                   |
| TRAX HOLDINGS, INC.Scottsdale, ArizonaProvides a comprehensive set of solutions to improve the transportation validation, accounting, payment and information management process.                                                                                     | 31.1%                                                     | 1,061,279 shares Series A Convertible Preferred Stock, convertible into 1,061,279 common stock at $4.71 per share (acquired 12-8-08 and 2-17-09)                               | 5,000,000               | 5,687,669              |
|                                                                                                                                                                                                                                                                  |                                                      |                                                                                                                                                                                |                    |                   |
| VIA HOLDINGS, INC.Sparks, NevadaDesigner, manufacturer and distributor of high-quality office seating.                                                                                                                                                                | 28.1%                                                     | 9,118 shares Series B Preferred Stock (acquired 9-19-05)                                                                                                                       | 4,559,000               | 2                      |
|                                                                                                                                                                                                                                                                  | 1,118 shares Series C Preferred Stock (acquired 11-01-07) | 281,523                                                                                                                                                                             | 2                       |
|                                                                                                                                                                                                                                                                  |                                                      |                                                                                                                                                                                | 4,840,523               | 4                      |
|                                                                                                                                                                                                                                                                  |                                                      |                                                                                                                                                                                |                    |                   |
| *WELLOGIX, INC.Houston, TexasDeveloper and supporter of software used by the oil and gas industry.                                                                                                                                                                    | 19.6%                                                     | 4,788,371 shares Series A-1 Convertible Participating Preferred Stock, convertible into 4,788,371 shares of common stock at $1.0441 per share (acquired 8-19-05 thru 6-15-08)  | 5,000,000               | 2                      |

----

| Company | Equity (a) | Investment (b) | Cost | Value (c) |
|---------|------------|----------------|------|-----------|

| ¥THE WHITMORE MANUFACTURING COMPANYRockwall, TexasSpecialized surface mining, railroad and industrial lubricants; coatings for automobiles and primary metals; fluid contamination control devices. | 80.0%   | 80 shares common stock (acquired 8-31-79)                                                                      | 1,600,000 | 47,500,000 |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|----------------------------------------------------------------------------------------------------------------|-----------|------------|
|                                                                                                                                                                                                     |    |                                                                                                           |      |       |
| MISCELLANEOUS                                                                                                                                                                                            | – | Ballast Point Ventures II, L.P.2.6% limited partnership interest (acquired 8-4-08 thru 4-23-09)           | 675,000   | 675,000    |
|                                                                                                                                                                                                     | – | BankCap Partners Fund I, L.P.6.0% limited partnership interest (acquired 7-14-06 thru 6-18-09)            | 5,513,837 | 5,179,842  |
|                                                                                                                                                                                                     | – | CapitalSouth Partners Fund III, L.P.2.0% limited partnership interest (acquired 1-22-08 and 2-12-09)      | 831,256   | 831,256    |
|                                                                                                                                                                                                     | – | Diamond State Ventures, L.P.1.8% limited partnership Interest (acquired 10-12-99 thru 8-26-05)            | 76,000    | 188,852    |
|                                                                                                                                                                                                     | – | ¥Discovery Alliance, LLC90.0% limited liability company (acquired  9-12-08 thru 6-1-09)    | 750,000   | 750,000    |
|                                                                                                                                                                                                     | – | Essex Capital Corporation10% unsecured promissory note due 8-19-10 (acquired 8-16-09)                     | –   | 1,000,000  |
|                                                                                                                                                                                                     | – | First Capital Group of Texas III, L.P.3.0% limited partnership interest (acquired 12-26-00 thru 8-12-05)  | 778,895   | 451,208    |
|                                                                                                                                                                                                     | 100%    | ¥Humac Company1,041,000 shares common stock (acquired 1-31-75 and 12-31-75)                          | –   | 163,000    |
|                                                                                                                                                                                                     | – | STARTech Seed Fund I12.1% limited partnership interest (acquired 4-17-98 thru 1-5-00)                     | 178,066   | 1          |

----

| Company           | Equity (a) | Investment (b)                                                                                         | Cost         | Value (c)    |
|-------------------|------------|--------------------------------------------------------------------------------------------------------|--------------|--------------|
|              | –    | STARTech Seed Fund II3.2% limited partnership interest (acquired 4-28-00 thru 2-23-05)            | 950,000      | 1            |
|              | –    | Sterling Group Partners I, L.P.1.6% limited partnership interest (acquired 4-20-01 thru 1-24-05)  | 1,064,042    | 607,044      |
| TOTAL INVESTMENTS |       |                                                                                                   | $100,022,994 | $477,943,057 |

----

----

----

----

----

----

| ·   | Level 1:  Investments whose values are based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.  We use Level 1 inputs for publicly traded unrestricted securities.  Such investments are valued at the closing price for listed securities and at the lower of the closing bid price or the closing sale price for over-the-counter (NASDAQ) securities on the valuation date. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Level 2: Investments whose values are based on observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.  These inputs may include quoted prices for the identical instrument in non-active markets, quoted prices for similar instruments in active markets and similar data.  We did not value any of our investments using Level 2 inputs as of March 31, 2011 and 2010. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Level 3: Investments whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.  These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the investment.  We use Level 3 inputs for measuring the fair value of substantially all of our investments.  See “Notes to Consolidated Schedule of Investments” (c) on page 46 for the investment policy used to determine the fair value of these investments. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Financial information obtained from each portfolio company, included unaudited statements of operations and balance sheets for the most recent period available as compared to budget numbers; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Audited financial information is obtained from each portfolio company, annually; |
|--------------------|----------------------------------------------------------------------------------|

| ·   | Current and projected financial condition of the portfolio company; |
|--------------------|---------------------------------------------------------------------|

| ·   | Current and projected ability of each portfolio company to service its debt obligations; |
|--------------------|------------------------------------------------------------------------------------------|

| ·   | Current liquidity of the investment; |
|--------------------|--------------------------------------|

| ·   | Projected operating results of the portfolio company; |
|--------------------|-------------------------------------------------------|

| ·   | Current information regarding any offers to purchase the investment; |
|--------------------|----------------------------------------------------------------------|

| ·   | Current ability of the portfolio company to raise any additional financing, as needed; |
|--------------------|----------------------------------------------------------------------------------------|

| ·   | Changes in the economic environment which may have a material impact on the operating results of the portfolio company; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------|

| ·   | Internal occurrences that may have an impact (both positive and negative) on the operating performance of the portfolio company; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------|

| ·   | Qualitative assessment of key management; and |
|--------------------|-----------------------------------------------|

| ·   | Other factors deemed relevant. |
|--------------------|--------------------------------|

----

|                  |   |   |         |   | Fair Value Measurementsat 3/31/11 Using                       |   |
|-----------------------|--------|--------|--------------|--------|---------------------------------------------------------------|--------|
| Asset Category        |   | Total  |         |   | Quoted Prices in Active Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |
| Debt                  |   |   | $  12.7 |   |                                                          |   | $     − |   |   |   | $   − |   |   |   | $  12.7 |   |
| Partnership Interests |   |   | 9.5          |   |                                                          |   | − |   |   |   | − |   |   |   | 9.5 |   |
| Preferred Equity      |   |   | 45.8         |   |                                                          |   | − |   |   |   | − |   |   |   | 45.8 |   |
| Common Equity         |   |   | 421.3        |   |                                                          |   | 26.8 |   |   |   | − |   |   |   | 394.5 |   |
| Total Investments     |   |   | $489.3       |   |                                                          |   | $26.8 |   |   |   | $   − |   |   |   | $462.5 |   |

|                  |   |   |         |   | Fair Value Measurementsat 3/31/10 Using                       |   |
|-----------------------|--------|--------|--------------|--------|---------------------------------------------------------------|--------|
| Asset Category        |   | Total  |         |   | Quoted Prices in Active Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |
| Debt                  |   |   | $  14.6 |   |                                                          |   | $     − |   |   |   | $   − |   |   |   | $  14.6 |   |
| Partnership Interests |   |   | 8.6          |   |                                                          |   | − |   |   |   | − |   |   |   | 8.6 |   |
| Preferred Equity      |   |   | 35.3         |   |                                                          |   | − |   |   |   | − |   |   |   | 35.3 |   |
| Common Equity         |   |   | 419.4        |   |                                                          |   | 21.0 |   |   |   | − |   |   |   | 398.4 |   |
| Total Investments     |   |   | $477.9       |   |                                                          |   | $21.0 |   |   |   | $   − |   |   |   | $456.9 |   |

----

|                 |   | Fair Value 3/31/10 |         |   | Net Unrealized Appreciation (Depreciation) |   |        | Net Changes from Unrealized to Realized |   |   | NewInvest-ments   |   |   | Divesti-tures |        |   | Conversion of Security from Debt to Equity |   |         | Fair Value 3/31/11 |   |
|----------------------|--------|--------------------|--------------|--------|--------------------------------------------|--------|-------------|-----------------------------------------|--------|--------|-------------------|--------|--------|---------------|-------------|--------|--------------------------------------------|--------|--------------|--------------------|--------|
| Debt                 |   |               | $  14.6 |   |                                       |   | $  0.1 |                                    |   |   | $   0.9 |   |   |          | $  4.2 |   |                                       |   | $  (4.2 | )                  |   |   | $(2.9 | ) |   |   | $  12.7 |   |
| Partnership Interest |   |               | 8.6          |   |                                       |   | −     |                                    |   |   | −           |   |   |          | 0.9         |   |                                       |   | −      |               |   |   | − |   |   |   | 9.5 |   |
| Preferred Equity     |   |               | 35.3         |   |                                       |   | 2.9         |                                    |   |   | 6.9               |   |   |          | 4.7         |   |                                       |   | (6.9         | )                  |   |   | 2.9 |   |   |   | 45.8 |   |
| Common Equity        |   |               | 398.4        |   |                                       |   | 63.4        |                                    |   |   | (66.5             | )      |   |          | 3.7         |   |                                       |   | (4.5         | )                  |   |   | − |   |   |   | 394.5 |   |
| Total Investments    |   |               | $456.9       |   |                                       |   | $66.4       |                                    |   |   | $(58.7            | )      |   |          | $13.5       |   |                                       |   | $(15.6       | )                  |   |   | $    − |   |   |   | $462.5 |   |

|                 |   | Fair Value 3/31/09 |                    |   | Net Unrealized Appreciation (Depreciation) |   |        | Net Changes from Unrealized to Realized |   |   | NewInvest-ments                         |   |   | Divesti-tures |        |   | Conversion of Security from Debt to Equity |   |                                    | Fair Value 3/31/10 |   |
|----------------------|--------|--------------------|-------------------------|--------|--------------------------------------------|--------|-------------|-----------------------------------------|--------|--------|-----------------------------------------|--------|--------|---------------|-------------|--------|--------------------------------------------|--------|-----------------------------------------|--------------------|--------|
| Debt                 |   |               | $    8.3 |   |                                       |   | $  4.9 |                                    |   |   | $      − |   |   |          | $  2.7 |   |                                       |   | $      − |               |   |   | $(1.3 | ) |   |   | $  14.6 |   |
| Partnership Interest |   |               | 6.8                     |   |                                       |   | (0.2        | )                                       |   |   | −                                 |   |   |          | 2.1         |   |                                       |   | −                                 |               |   |   | − |   |   |   | 8.6 |   |
| Preferred Equity     |   |               | 16.4                    |   |                                       |   | 9.4         |                                    |   |   | −                                 |   |   |          | 8.2         |   |                                       |   | −                                 |               |   |   | 1.3 |   |   |   | 35.3 |   |
| Common Equity        |   |               | 351.4                   |   |                                       |   | 49.3        |                                    |   |   | −                                 |   |   |          | (2.3        | )      |                                       |   | −                                 |               |   |   | − |   |   |   | 398.4 |   |
| Total Investments    |   |               | $382.9                  |   |                                       |   | $63.4       |                                    |   |   | $      − |   |   |          | $10.7       |   |                                       |   | $      − |               |   |   | $    − |   |   |   | $456.9 |   |

----

| ·   | For the tax year ended December 31, 2010, we had net long-term capital gains of $70,221,589 for tax purposes and $70,325,930 for book purposes, which we elected to retain and treat as deemed distributions to our shareholders.  During the quarter ended December 31, 2010 we recorded a $4,217,985 reduction in the gain on sale of Lifemark Group, Inc.  This reduction was the result of a net asset adjustment calculated in accordance with the Stock Purchase Agreement signed on June 10, 2010. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | In order to make the election to retain capital gains, we incurred federal taxes on behalf of our shareholders in the amount of $24,577,557 for the tax year ended December 31, 2010.  For the tax year ended December 31, 2009, we had net long-term capital gains of $2,327,150 for tax purposes and $1,682,616 for book purposes, which we elected to retain and treat as deemed distributions to our shareholders.  In order to make the election to retain capital gains, we incurred federal taxes on behalf of our shareholders in the amount of $814,502 for the tax year ended December 31, 2009. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                                                                                                                                                                                                                                                                                                     |   | For the Tax Year Ended December 31 |        |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|-------------|
| Net Realized Gains on Transactions In Investment Securities of                                                                                                                                                                                                                                                                           |   |                               | 2010        |   |   | 2009 |   |
| Control Investments                                                       |   |                               | $70,294,097 |   |   |   | $              − |   |
| Affiliated Investments                                                    |   |                               | −     |   |   |   | 206,522 |   |
| Non-Control/Non-Affiliated Investments                                                                                                                                                                                                                                                                                                   |   |                               | 31,833      |   |   |   | 1,433,472 |   |
| Net realized gain on investments before taxes                                                                                                                                                                                                                                                                                            |   |                               | $70,325,930 |   |   |   | $1,639,994 |   |
| Income tax expense                                                        |   |                               | 24,577,557  |   |   |   | 814,503 |   |
| Net realized gains on investments                                                                                                                                                                                                                                                                                                        |   |                               | $45,748,373 |   |   |   | $   825,491 |   |
| Net realized gains on investment (for tax purposes)                                                                                                                                                                                                                                                                                      |   |                               | $45,873,477 |   |   |   | $2,327,150 |   |

----

|             |   |                        |   |   | Black-Scholes Pricing Model Assumptions |   |   |                    |   |
|------------------|--------|-----------------------------|--------|--------|-----------------------------------------|--------|--------|-------------------------|--------|
| Date of Issuance |   | Weighted Average Fair Value |   |   | Expected Dividend Yield                 |   |   | Risk-Free Interest Rate |   |   | Expected Volatility |   |   | Expected Life (in years) |   |
| 2009 Plan        |   |                        |   |   |                                    |   |   |                    |   |   |   |   |   |   |   |
| July 19, 2010    |   |                        | $28.59 |   |                                    |   | 0.91%  |                    |   |   | 1.73% |   |   |   | 37.5% |   |   |   | 5 |   |
| March 22, 2010   |   |                        | $32.56 |   |                                    |   | 0.84%  |                    |   |   | 2.43% |   |   |   | 37.8% |   |   |   | 5 |   |
| October 19, 2009 |   |                        | $25.36 |   |                                    |   | 1.04%  |                    |   |   | 2.36% |   |   |   | 37.6% |   |   |   | 5 |   |
|             |   |                        |   |   |                                    |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |
| 1999 Plan        |   |                        |   |   |                                    |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |
| July 30, 2008    |   |                        | $29.93 |   |                                    |   | 0.62%  |                    |   |   | 3.36% |   |   |   | 20.2% |   |   |   | 5 |   |
| July 21, 2008    |   |                        | $27.35 |   |                                    |   | 0.67%  |                    |   |   | 3.41% |   |   |   | 20.2% |   |   |   | 5 |   |
| July 16, 2007    |   |                        | $41.78 |   |                                    |   | 0.39%  |                    |   |   | 4.95% |   |   |   | 19.9% |   |   |   | 5 |   |
| July 17, 2006    |   |                        | $33.05 |   |                                    |   | 0.61%  |                    |   |   | 5.04% |   |   |   | 21.2% |   |   |   | 7 |   |
| May 15, 2006     |   |                        | $31.28 |   |                                    |   | 0.64%  |                    |   |   | 5.08% |   |   |   | 21.1% |   |   |   | 7 |   |

----

|                               |   | Number of Shares |    |   | Weighted Average Exercise Price |   |
|------------------------------------|--------|------------------|---------|--------|---------------------------------|--------|
| 2009 Plan                          |   |             |    |   |                            |   |
| Balance at March 31,2009           |   |             | – |   |                            |   | $         – |   |
| Granted                            |   |             | 58,750  |   |                            |   | 83.23 |   |
| Exercised                          |   |             | – |   |                            |   | – |   |
| Canceled                           |   |             | – |   |                            |   | – |   |
| Balance at March 31, 2010          |   |             | 58,750  |   |                            |   | $83.23 |   |
| Granted                            |   |             | 15,000  |   |                            |   | 88.20 |   |
| Exercised                          |   |             | (11,400 | )      |                            |   | 65.37 |   |
| Canceled                           |   |             | – |   |                            |   | – |   |
| Balance at March 31, 2011          |   |             | 62,350  |   |                            |   | $  84.24 |   |
|                               |   |             |    |   |                            |   |   |   |
| 1999 Plan                          |   |             |    |   |                            |   |   |   |
| Balance at March 31,2008           |   |             | 70,400  |   |                            |   | $110.00 |   |
| Granted                            |   |             | 37,500  |   |                            |   | 123.72 |   |
| Exercised                          |   |             | – |   |                            |   | – |   |
| Canceled                           |   |             | – |   |                            |   | – |   |
| Balance at March 31, 2009          |   |             | 107,900 |   |                            |   | $114.78 |   |
| Granted                            |   |             | – |   |                            |   | – |   |
| Exercised                          |   |             | – |   |                            |   | – |   |
| Canceled                           |   |             | – |   |                            |   | – |   |
| Balance at March 31, 2010          |   |             | 107,900 |   |                            |   | $114.78 |   |
| Granted                            |   |             | – |   |                            |   | – |   |
| Exercised                          |   |             | – |   |                            |   | – |   |
| Canceled                           |   |             | – |   |                            |   | – |   |
| Balance at March 31, 2011          |   |             | 107,900 |   |                            |   | $114.78 |   |
| Combined Balance at March 31, 2010 |   |             | 170,250 |   |                            |   | $104.85 |   |

| March 31, 2011                                                                                                                                                                                              | Weighted Average Aggregate Intrinsic Remaining Contractual Term |   | Value  |       |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------|--------|--------|------------|
| Outstanding                                 | 3.4 years                                                       |   |   | $5,082,464 |   |
| Exercisable                                 | 3.0 years                                                       |   |   | $1,830,781 |   |

----

|                                                                                                                                                                                                                                                                                                                                                                      |   | Years Ended March 31 |                        |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------|-----------------------------|
|                                                                                                                                                                                                                                                                                                                                                                      |   | 2011                 |                        |   | 2010 |   |   | 2009 |   |
| Net pension benefit                                                                                                                                                                                                                                                                                                                                                       |   |                 |                        |   |   |   |   |   |   |
| Service cost-benefits earned during the year                                                                                                                                                                                                                                                                                                                              |   |                 | $    161,047 |   |   |   | $     116,746 |   |   |   | $       67,340 |   |
| Interest cost on projected benefit obligation                                                                                                                                                                                                                                                                                                                             |   |                 | 231,332                     |   |   |   | 191,936 |   |   |   | 290,310 |   |
| Expected return on assets                                                         |   |                 | (771,025                    | ) |   |   | (735,366 | ) |   |   | (732,837 | ) |
| Net amortization                                                                  |   |                 | 9,377                       |   |   |   | 9,006 |   |   |   | 3,725 |   |
| Net pension benefit from qualified plan                                                                                                                                                                                                                                                                                                                                   |   |                 | $   (369,269      | ) |   |   |   $    (417,678 | ) |   |   | $    (371,462 | ) |

|                                                                                                                                                                                                                                                                                                                                                                              |   | Years Ended March 31 |                    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------|-------------------------|
|                                                                                                                                                                                                                                                                                                                                                                              |   | 2011                 |                    |   | 2010 |   |   | 2009 |   |
| Change in benefit obligation                                                                                                                                                                                                                                                                                                                                                      |   |                 |                    |   |   |   |   |   |   |
| Benefit obligation at beginning of year                                                                                                                                                                                                                                                                                                                                           |   |                 | $  3,450,443       |   |   |   | $  2,914,813 |   |   |   | $  3,699,285 |   |
| Service cost                                                                              |   |                 | 161,047                 |   |   |   | 116,746 |   |   |   | 67,340 |   |
| Interest cost                                                                             |   |                 | 231,332                 |   |   |   | 191,936 |   |   |   | 290,310 |   |
| Actuarial gain (loss)                                                                     |   |                 | 437,959                 |   |   |   | 295,379 |   |   |   | (916,874 | ) |
| Benefits paid                                                                             |   |                 | (67,432                 | ) |   |   | (68,131 | ) |   |   | (259,810 | ) |
| Plan change                                                                               |   |                 | –                 |   |   |   | – |   |   |   | 34,262 |   |
| Benefit obligation at end of year                                                         |   |                 |  $  4,213,349 |   |   |   | $  3,450,743 |   |   |   | $  2,914,513 |   |

|                                                                                                                                                                                                                                                                                                                                                                   |   | Years Ended March 31 |        |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------|-------------|
|                                                                                                                                                                                                                                                                                                                                                                   |   | 2011                 |        |   | 2010 |   |   | 2009 |   |
| Change in plan assets                                                                                                                                                                                                                                                                                                                                                  |   |                 |        |   |   |   |   |   |   |
| Fair value of plan assets at beginning of year                                                                                                                                                                                                                                                                                                                         |   |                 | $10,519,400 |   |   |   | $  8,383,373 |   |   |   | $11,120,337 |   |
| Actual return on plan assets                                                        |   |                 | 1,159,026   |   |   |   | 2,204,158 |   |   |   | (2,477,154 | ) |
| Benefits paid                                                                       |   |                 | (67,432     | ) |   |   | (68,131 | ) |   |   | (259,810 | ) |
| Fair value of plan assets at end of year                                                                                                                                                                                                                                                                                                                               |   |                 | $11,610,994 |   |   |   | $10,519,400 |   |   |   | $  8,383,373 |   |

----

|                                                                                                                    |   | Years Ended March 31 |              |
|-------------------------------------------------------------------------------------------------------------------------|--------|----------------------|-------------------|
|                                                                                                                    |   | 2011                 |              |   | 2010 |   |
| Funded status and amounts recognized in our consolidated statements of assets and liabilities                           |   |                 |              |   |   |   |
| Actuarial present value of benefit obligations: Accumulated benefit obligation                                          |   |                 | $ (3,859,769      | ) |   |   | $(3,076,629 | ) |
| Projected benefit obligation for service rendered to date                                                               |   |                 | $ (4,213,349      | ) |   |   | $(3,450,443 | ) |
| Plan assets at fair value*                                                                                              |   |                 | 11,610,994        |   |   |   | 10,519,400 |   |
| Funded status                                                                                                           |   |                 | 7,397,645         |   |   |   | 7,068,957 |   |
| Unrecognized net  loss from past experience different from that assumed and effects of changes in assumptions |   |                 | 1,378,706         |   |   |   | 1,328,748 |   |
| Unrecognized prior service costs                                                                                        |   |                 | 141,333           |   |   |   | 150,710 |   |
| ASC 715 adjustment                                                                                                      |   |                 | (1,520,039        | ) |   |   | (1,479,458 | ) |
| Prepaid pension cost included in pension assets                                                                         |   |                 | $  7,397,645 |   |   |   | $ 7,068,957 |   |

|                                                                                                                                                                                                                                                                                                                                                             |   | Years Ended March 31 |    |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                             |   | 2011                 |    |   | 2010 |   |   | 2009 |   |
| Net pension benefit                                                                                                                                                                                                                                                                                                                                              |   |                 |    |   |   |   |   |   |   |
| Service cost-benefits earned during the year                                                                                                                                                                                                                                                                                                                     |   |                 | $33,216 |   |   |   | $26,847 |   |   |   | $  10,986 |   |
| Interest cost on projected benefit obligation                                                                                                                                                                                                                                                                                                                    |   |                 | 69,248  |   |   |   | 60,334 |   |   |   | 104,777 |   |
| Net amortization                                                         |   |                 | (24,507 | ) |   |   | (38,605 | ) |   |   | 2,470 |   |
| Net pension benefit from qualified plan                                                                                                                                                                                                                                                                                                                          |   |                 | $77,957 |   |   |   | $48,576 |   |   |   | $118,233 |   |

|                                                                                                                                                                                                                                                                                                                                                                              |   | Years Ended March 31 |       |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------|------------|
|                                                                                                                                                                                                                                                                                                                                                                              |   | 2011                 |       |   | 2010 |   |   | 2009 |   |
| Change in benefit obligation                                                                                                                                                                                                                                                                                                                                                      |   |                 |       |   |   |   |   |   |   |
| Benefit obligation at beginning of year                                                                                                                                                                                                                                                                                                                                           |   |                 | $1,082,941 |   |   |   | $   934,428 |   |   |   | $942,122 |   |
| Service cost                                                                              |   |                 | 33,216     |   |   |   | 26,847 |   |   |   | 10,986 |   |
| Interest cost                                                                             |   |                 | 69,248     |   |   |   | 60,334 |   |   |   | 104,777 |   |
| Actuarial gain (loss)                                                                     |   |                 | 132,940    |   |   |   | 61,332 |   |   |   | (74,613 | ) |
| Other adjustments                                                                         |   |                 | (61,450    | ) |   |   | – |   |   |   | – |   |
| Benefits paid                                                                             |   |                 | –    |   |   |   | – |   |   |   | (68,934 | ) |
| Plan change                                                                               |   |                 | –    |   |   |   | – |   |   |   | 20,089 |   |
| Benefit obligation at end of year                                                         |   |                 | $1,256,895 |   |   |   | $1,082,941 |   |   |   | $934,427 |   |

|                                                                                                                |   | Years Ended March 31 |        |
|---------------------------------------------------------------------------------------------------------------------|--------|----------------------|-------------|
|                                                                                                                |   | 2011                 |        |   | 2010 |   |
| Amounts recognized in our consolidated statements of assets and liabilities                                         |   |                 |        |   |   |   |
| Projected benefit obligation                                                                                        |   |                 | $(1,256,895 | ) |   |   | $(1,082,941 | ) |
| Unrecognized net (gain) loss from past experience different from that assumed and effects of changes in assumptions |   |                 | (205,722    | ) |   |   | (347,741 | ) |
| Unrecognized prior service costs                                                                                    |   |                 | (146,226    | ) |   |   | (171,034 | ) |
| ASC 715 adjustment                                                                                                  |   |                 | 351,948     |   |   |   | 518,775 |   |
| Accrued pension cost included in pension liabilities                                                                |   |                 | $(1,256,895 | ) |   |   | $(1,082,941 | ) |

----

|                                                                                                                                                                                                                                                                                                                                                          |   | Years Ended March 31 |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                          |   | 2011                 |   |   | 2010 |   |   | 2009 |   |
|                                                                                                                                                                                                                                                                                                                                                          |   |                 |   |   |   |   |   |   |   |   |   |   |
| Discount rate                                                         |   |                 | 6.00%  |   |   |   | 6.00% |   |   |   | 6.50% |   |
| Rate of compensation increases                                                                                                                                                                                                                                                                                                                                |   |                 | 5.00%  |   |   |   | 5.00% |   |   |   | 5.00% |   |

|                                                                                                                                                                                                                                                                                                                                                                           |   | Years Ended March 31 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                           |   | 2011                 |   |   | 2010 |   |   | 2009 |   |
|                                                                                                                                                                                                                                                                                                                                                                           |   |                 |   |   |   |   |   |   |   |   |   |   |
| Discount rate                                                                          |   |                 | 6.00%  |   |   |   | 6.50% |   |   |   | 6.25% |   |
| Expected return on plan assets                                                         |   |                 | 6.50%  |   |   |   | 6.50% |   |   |   | 6.50% |   |
| Rate of compensation increases                                                                                                                                                                                                                                                                                                                                                 |   |                 | 5.00%  |   |   |   | 5.00% |   |   |   | 5.00% |   |

| (In thousands)                                                                                                                                                                                             |   |     2012 |       |   |     2013 |   |       |     2014 |   |   |     2015 |   |   |     2016 |       |   |   | 2017-2021 |       |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|------------|--------|-------------------------|--------|------------|-------------------------|--------|--------|-------------------------|--------|--------|-------------------------|------------|--------|--------|-----------|------------|
| Qualified Plan                                  |   |                    | $212       |   |                    |   | $204       |                    |   |   | $272                    |   |   |                    | $263       |   |   |      | $260       |   |   |   | $1,536 |   |
| Restoration Plan                                |   |                    |   $98 |   |                    |   |   $97 |                    |   |   |   $96              |   |   |                    |   $94 |   |   |      |   $92 |   |   |   |    $477 |   |

----

|                      |   | Percentage of Plan Assets atMarch 31 |             |
|---------------------------|--------|--------------------------------------|------------------|
| Asset Category            |   | 2011                                 |             |   | 2010 |   |
| Equity securities         |   |                                 | 77.2             | %  |   |   |   | 74.2 | %  |   |
| Fixed income securities   |   |                                 | 16.8             | % |   |   |   | 16.5 | %  |   |
| Cash and cash equivalents |   |                                 |    6.0 | %  |   |   |   | 9.3 | %  |   |
|                      |   |                                 | 100.0            | %  |   |   |   | 100.0 | %  |   |

|                                                                                                                                                                                                                                          |   |   |   |   |                                                         | Fair Value Measurements at Reporting Date Using |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------------------------------------------------------------|-------------------------------------------------|--------|
| Asset Category                                                                                                                                                                                                                                |   | Total  |   |   | Quoted Prices in Active Markets for Identical Assets Level I |                                            |   | Significant Other Observable Inputs Level 2 |   |   | Significant Observable Inputs Level 3 |   |
| Equity securities (a)                                     |   |   | $30.8  |   |                                                         |                                            |   | $25.0 |   |   |   |   | $  5.8 |   |   |   |   | $– |   |
| Fixed income securities (b)                                                                                                                                                                                                                   |   |   | 6.7    |   |                                                         |                                            |   | – |   |   |   |   | 6.7 |   |   |   |   | – |   |
| Cash and cash equivalents                                                                                                                                                                                                                     |   |   | 2.4    |   |                                                         |                                            |   | 2.4 |   |   |   |   | – |   |   |   |   | – |   |
| Total                                                     |   |   | $39.9  |   |                                                         |                                            |   | $27.4 |   |   |   |   | $12.5 |   |   |   |   | $– |   |

|                                                                                                                                                                                                                                          |   |   |   |   |                                                         | Fair Value Measurements at Reporting Date Using |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------------------------------------------------------------|-------------------------------------------------|--------|
| Asset Category                                                                                                                                                                                                                                |   | Total  |   |   | Quoted Prices in Active Markets for Identical Assets Level I |                                            |   | Significant Other Observable Inputs Level 2 |   |   | Significant Observable Inputs Level 3 |   |
| Equity securities (a)                                     |   |   | $27.2  |   |                                                         |                                            |   | $22.2 |   |   |   |   | $  5.0 |   |   |   |   | $– |   |
| Fixed income securities (b)                                                                                                                                                                                                                   |   |   | 6.0    |   |                                                         |                                            |   | – |   |   |   |   | 6.0 |   |   |   |   | – |   |
| Cash and cash equivalents                                                                                                                                                                                                                     |   |   | 3.4    |   |                                                         |                                            |   | 3.4 |   |   |   |   | – |   |   |   |   | – |   |
| Total                                                     |   |   | $36.6  |   |                                                         |                                            |   | $25.6 |   |   |   |   | $11.0 |   |   |   |   | $– |   |

| (a)   | This category includes investment in equity securities of large, medium and small companies and equity investments in foreign companies.  Mutual funds included in this category are valued using the net asset value per unit as of the valuation date.  These investments include shares of our common stock.  At March 31, 2011 and 2010, Capital Southwest Corporation common stock represented 20.2% and 21.9%, respectively, of the plan assets. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b)   |  This category includes investments in investment grade fixed income instruments, primarily U.S. government obligations. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------|

----

|                                           |   | Investment Income |                                                                                    |   | Realized Gain (Loss) on Investments |   |
|------------------------------------------------|--------|-------------------|-----------------------------------------------------------------------------------------|--------|------------------------------------------|--------|
| Year EndedMarch 31, 2011                       |   | Interest          |                                                                                    |   | Dividends                                |   |   | Other Income |   |   | Before Income Taxes |   |
| Companies more than 25% owned                  |   |              | $              − |   |                                     |   | $5,024,061 |   |   |   | $671,867 |   |   |   | $70,294,097 |   |
| Companies 5% to 25% owned                      |   |              | −                                                                                 |   |                                     |   | 326,940 |   |   |   | 13,000 |   |   |   | (6,863,347 | ) |
| Companies less than 25% owned                  |   |              | 1,304,496                                                                               |   |                                     |   | 81,270 |   |   |   | − |   |   |   | 31,833 |   |
| Other sources, including temporary investments |   |              | 59,642                                                                                  |   |                                     |   | − |   |   |   | 86,871 |   |   |   | − |   |
|                                           |   |              | $1,364,138                                                                              |   |                                     |   | $5,432,271 |   |   |   | $771,738 |   |   |   | $63,462,583 |   |

|                                           |   | Investment Income |       |   | Realized Gain (Loss) on Investments |   |
|------------------------------------------------|--------|-------------------|------------|--------|-------------------------------------|--------|
| Year EndedMarch 31, 2010                       |   | Interest          |       |   | Dividends                           |   |   | Other Income |   |   | Before Income Taxes |   |
| Companies more than 25% owned                  |   |              | $14,473    |   |                                |   | $3,359,942 |   |   |   | $1,055,900 |   |   |   | $1,433,472 |   |
| Companies 5% to 25% owned                      |   |              | 1,500      |   |                                |   | 326,940 |   |   |   | 13,000 |   |   |   | − |   |
| Companies less than 25% owned                  |   |              | 1,009,276  |   |                                |   | 101,798 |   |   |   | 206,522 |   |   |   | 206,522 |   |
| Other sources, including temporary investments |   |              | 19,618     |   |                                |   | − |   |   |   | 337 |   |   |   | − |   |
|                                           |   |              | $1,044,867 |   |                                |   | $3,788,680 |   |   |   | $1,275,759 |   |   |   | $1,639,994 |   |

|                                           |   | Investment Income |       |   | Realized Gain (Loss) on Investments |   |
|------------------------------------------------|--------|-------------------|------------|--------|-------------------------------------|--------|
| Year EndedMarch 31, 2009                       |   | Interest          |       |   | Dividends                           |   |   | Other Income |   |   | Before Income Taxes |   |
| Companies more than 25% owned                  |   |              | $−   |   |                                |   | $10,946,581 |   |   |   | $1,055,000 |   |   |   | $                − |   |
| Companies 5% to 25% owned                      |   |              | 249,417    |   |                                |   | 326,940 |   |   |   | 20,750 |   |   |   | − |   |
| Companies less than 25% owned                  |   |              | 743,937    |   |                                |   | 260,357 |   |   |   | 9 |   |   |   | 15,979,266 |   |
| Other sources, including temporary investments |   |              | 381,861    |   |                                |   | − |   |   |   | 280 |   |   |   | − |   |
|                                           |   |              | $1,375,215 |   |                                |   | $11,533,878 |   |   |   | $1,076,039 |   |   |   | $15,979,266 |   |

----

| 2011                                                   |   | FirstQuarter |                |   | SecondQuarter |   |                                     | ThirdQuarter |   |   | FourthQuarter |   |   | Total  |    |
|--------------------------------------------------------|--------|--------------|---------------------|--------|---------------|--------|------------------------------------------|--------------|--------|--------|---------------|--------|--------|--------|---------|
| Net investment income                                  |   |         | $   1,962 |   |          |   | $       81 |         |   |   | $  1,227 |   |   |   | $(1,466 | ) |   |   | $  1,804 |   |
| Net realized gain (loss) on investments                |   |         | 74,015              |   |          |   | 530                                      |         |   |   | (28,797       | )      |   |   | (6,863  | ) |   |   | 38,885 |   |
| Net increase in unrealized appreciation of investments |   |         | (65,742             | )      |          |   | 23,360                                   |         |   |   | 21,837        |   |   |   | 33,544  |   |   |   | 12,999 |   |
| Net increase in net assets from operations             |   |         | 10,235              |   |          |   | 23,971                                   |         |   |   | (5,732        | )      |   |   | 25,214  |   |   |   | 53,688 |   |
| Net increase in net operations per share               |   |         | 2.73                |   |          |   | 6.41                                     |         |   |   | (1.53         | )      |   |   | 6.72    |   |   |   | 14.33 |   |

| 2010                                                   |   | FirstQuarter |                                |   | SecondQuarter |   |                          | ThirdQuarter |   |   | FourthQuarter |   |   | Total  |               |
|--------------------------------------------------------|--------|--------------|-------------------------------------|--------|---------------|--------|-------------------------------|--------------|--------|--------|---------------|--------|--------|--------|--------------------|
| Net investment income                                  |   |         | $      444 |   |          |   | $     362 |         |   |   | $  1,915 |   |   |   | $   (630 | ) |   |   | $  2,091 |   |
| Net realized gain (loss) on investments                |   |         | −                             |   |          |   | 1,846                         |         |   |   | (1,021        | )      |   |   | −            |   |   |   | 826 |   |
| Net increase in unrealized appreciation of investments |   |         | 10,249                              |   |          |   | 27,013                        |         |   |   | 3,158         |   |   |   | 30,204             |   |   |   | 70,624 |   |
| Net increase in net assets from operations             |   |         | 10,694                              |   |          |   | 29,221                        |         |   |   | 4,051         |   |   |   | 29,575             |   |   |   | 73,541 |   |
| Net increase in net operations per share               |   |         | 2.86                                |   |          |   | 7.81                          |         |   |   | 1.08          |   |   |   | 7.90               |   |   |   | 19.65 |   |

----

|                                                                                                                                                                                                                                                  |   | Years Ended March 31 |                     |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------|--------------------------|
| Per Share Data                                                                                                                                                                                                                                        |   | 2011                 |                     |   | 2010 |   |   | 2009 |   |   | 2008 |   |   | 2007 |   |
| Investment income                                                                                                                                                                                                                                     |   |                 | $    2.01 |   |   |   | $    1.63 |   |   |   | $    3.74 |   |   |   | $    1.75 |   |   |   | $    1.79 |   |
| Operating expenses                                                                                                                                                                                                                                    |   |                 | (1.50                    | ) |   |   | (1.04 | ) |   |   | (.98 | ) |   |   | (.76 | ) |   |   | (.57 | ) |
| Interest expense                                                                                                                                                                                                                                      |   |                 | –                  |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | (.12 | ) |
| Income taxes                                                                                                                                                                                                                                          |   |                 | (.03                     | ) |   |   | (.03 | ) |   |   | (.04 | ) |   |   | (.03 | ) |   |   | (.01 | ) |
| Net investment income                                                                                                                                                                                                                                 |   |                 | .48                      |   |   |   | .56 |   |   |   | 2.72 |   |   |   | .96 |   |   |   | 1.09 |   |
| Distributions from undistributed net investment income                                                                                                                                                                                                |   |                 | (.80                     | ) |   |   | (.80 | ) |   |   | (3.28 | ) |   |   | (.60 | ) |   |   | (.60 | ) |
|                                                                                                                                                                                                                                                  |   |                 |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net realized gain  net of tax                                                                                                                                                                                                               |   |                 | 10.36                    |   |   |   | .22 |   |   |   | 2.87 |   |   |   | .06 |   |   |   | 3.85 |   |
| Net increase (decrease) in unrealized appreciation of investments                                                                                                                                                                                     |   |                 | 3.46                     |   |   |   | 18.88 |   |   |   | (42.56 | ) |   |   | (36.76 | ) |   |   | 38.00 |   |
| Exercise of employee stock options**                                                                                                                                                                                                                  |   |                 | (.20                     | ) |   |   | – |   |   |   | – |   |   |   | (.09 | ) |   |   | (.49 | ) |
| Stock option expense                                                                                                                                                                                                                                  |   |                 | .26                      |   |   |   | .18 |   |   |   | .13 |   |   |   | .07 |   |   |   | .04 |   |
| Net change in pension plan funded status                                                                                                                                                                                                              |   |                 | (.02                     | ) |   |   | .12 |   |   |   | (.39 | ) |   |   | (.30 | ) |   |   | – |   |
| Treasury stock*                                                                                                                                                                                                                                       |   |                 | –                  |   |   |   | – |   |   |   | 1.40 |   |   |   | – |   |   |   | – |   |
| Adjustment to initially apply ASC 715, net of tax                                                                                                                                                                                                     |   |                 | –                  |   |   |   | – |   |   |   | – |   |   |   | – |   |   |   | .30 |   |
|                                                                                                                                                                                                                                                  |   |                 |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Increase (decrease) in net asset value                                                                                                                                                                                                                |   |                 | 13.54                    |   |   |   | 19.16 |   |   |   | (39.11 | ) |   |   | (36.66 | ) |   |   | 42.19 |   |
| Net asset value                                                                                                                                                                                                                                       |   |                 |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Beginning of year                                       |   |                 | 130.14                   |   |   |   | 110.98 |   |   |   | 150.09 |   |   |   | 186.75 |   |   |   | 144.56 |   |
| End of year                                             |   |                 | $143.68                  |   |   |   | $130.14 |   |   |   | $110.98 |   |   |   | $150.09 |   |   |   | $186.75 |   |
|                                                                                                                                                                                                                                                  |   |                 |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                  |   |                 |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratios and Supplemental Data                                                                                                                                                                                                                          |   |                 |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio of operating expenses to average net assets                                                                                                                                                                                                     |   |                 | 1.10                     | % |   |   | .87 | % |   |   | .71 | % |   |   | .46 | % |   |   | .36 | % |
| Ratio of net investment income to average net assets                                                                                                                                                                                                  |   |                 | .35                      | % |   |   | .47 | % |   |   | 1.96 | % |   |   | .58 | % |   |   | .68 | % |
| Portfolio turnover rate                                                                                                                                                                                                                               |   |                 | 2.78                     | % |   |   | 1.16 | % |   |   | 2.51 | % |   |   | .22 | % |   |   | .13 | % |
| Net asset total return                                                                                                                                                                                                                                |   |                 | 18.40                    | % |   |   | 18.50 | % |   |   | (22.56 | )% |   |   | (19.27 | )% |   |   | 29.85 | % |
|                                                                                                                                                                                                                                                  |   |                 |                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares outstanding at end of period (000s) omitted                                                                                                                                                                                                    |   |                 | 3,753                    |   |   |   | 3,741 |   |   |   | 3,741 |   |   |   | 3,889 |   |   |   | 3,886 |   |

----

| Portfolio Company / Type of Investment (1)                                                                                                         |   | Amount of Interest, Fees or Dividends Credited in Income (2) |   | Fair Value at March 31, 2010 |   | Gross Additions (3) |   | Gross Reductions (4) |   | Fair Value at March 31, 2011 |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|--------|------------------------------|--------|--------------------------|--------|----------------------|--------|------------------------------|
| Control Investments                                                                                                                                |   |                                                         |   |                         |   |                     |   |                 |   |                         |
| The RectorSeal Corporation27,907 shares common stock                                                                                               |   | $2,382                                                       |   | $120,200                     |   | $24,500                  |   | −              |   | $144,700                     |
| Lifemark Group1,449,026 shares of common stock                                                                                                     |   | 125                                                          |   | 71,000                       |   |  −            |   | 71,000               |   | −                      |
| The Whitmore Manufacturing Company80 shares common stock                                                                                           |   | 625                                                          |   | 47,500                       |   | 8,100                    |   | −              |   | 55,600                       |
| Alamo Group, Inc.2,830,300 shares common stock                                                                                                     |   | 727                                                          |   | 42,454                       |   | 19,813                   |   |   −       |   | 62,267                       |
| Heelys, Inc.9,317,310 shares common stock                                                                                                          |   | −                                                      |   | 19,846                       |   |   −           |   | 652                  |   | 19,194                       |
| Media Recovery, Inc.800,000 shares Series A Convertible Preferred Stock, convertible into 800,000 shares common stock4,000,002 shares common stock |   | − −                                         |   | 2,200 11,200            |   | 800 3,900           |   | − − |   | 3,000 15,100            |
| Palm Harbor Homes, Inc. 7,855,121 shares of common stock                                                                                           |   | 14                                                           |   | 6,834                        |   |   −           |   | 6,834                |   | −                      |
| Balco, Inc.445,000 shares common stock; 60,920 shares Class B non-voting common                                                                    |   | 1,818                                                        |   | 8,000                        |   |   −           |   | 2,800                |   | 5,200                        |
| CapStar Holdings Corporation500 shares common stock                                                                                                |   | −                                                      |   | −                      |   | 4,380                    |   | −              |   | 4,380                        |
| Discovery Alliance, LLC90.0% limited liability company                                                                                             |   | −                                                      |   | 750                          |   | 150                      |   | 326                  |   | 574                          |
| Humac Company1,041,000 shares of common stock                                                                                                      |   | 5                                                            |   | 163                          |   | 3                        |   | −              |   | 166                          |
| Total Control Investments                                                                                                                          |   | $5,696                                                       |   | $330,147                     |   | $61,646                  |   | $81,612              |   | $310,181                     |

----

| Portfolio Company / Type of Investment (1)                                                                                    |   | Amount of Interest, Fees or Dividends Credited in Income (2) |   | Fair Value at March 31, 2010 |   | Gross Additions (3) |   | Gross Reductions (4) |   | Fair Value at March 31, 2011 |
|-------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|--------|------------------------------|--------|--------------------------|--------|----------------------|--------|------------------------------|
| Affiliated  Investments                                                                                             |   |                                                         |   |                         |   |                     |   |                 |   |                         |
| Encore Wire Corporation4,086,750 shares of common stock                                                                       |   | $340                                                         |   | $67,431                      |   | $14,304                  |   |  −        |   | $81,735                      |
| CMI Holding Company, Inc.10% Convertible Promissory Note, due 2009                                                            |   | −                                                      |   | −                      |   | −                  |   | −              |   | −                      |
| 10% Convertible Promissory Note, due 2013                                                                                     |   | −                                                      |   | 1,300                        |   | 2,263                    |   | 3,563                |   | −                      |
| 1,631,516 shares Series C-1 Convertible Preferred Stock, convertible into1,631,516 shares of common stock at $2.15 per share  |   | −                                                      |   | 2,858                        |   | −                  |   | 2,858                |   | −                      |
| 2,327,658 shares Series C-1 Convertible Preferred Stock, convertible into 2,327,658 shares of common stock at $1.72 per share |   | −                                                      |   | −                      |   | −                  |   | −              |   | −                      |
| Warrants to purchase 109,012 shares of common stock at $1,72 per share, expiring 2012                                         |   | −                                                      |   | −                      |   | −                  |   | −              |   | −                      |
| Warrants to purchase 636,151 shares of Series A-1 Convertible Preferred Stock at $1,72 per share, expiring 2017 and 2019      |   | −                                                      |   | −                      |   | −                  |   | −              |   | −                      |
| Warrants to purchase 90,698 shares of Series D or D-1 Convertible Preferred Stock at $1.72 per share, expiring 2017           |   | −                                                      |   | −                      |   | −                  |   | −              |   | −                      |
| PalletOne, Inc.                                                                                                               |   |                                                         |   |                         |   |                     |   |                 |   |                         |
| 12.3% Senior Subordinated Notes, $2,000,000 due 2012                                                                          |   | −                                                      |   | 2,000                        |   | −                  |   | 400                  |   | 1,600                        |
| 150,000 shares of common stock                                                                                                |   | −                                                      |   | −                      |   | −                  |   | −              |   | −                      |
| Warrant to purchase 15,294 shares of common stock at $1,00 per share, expiring 2011                                           |   | −                                                      |   | −                      |   | −                  |   | −              |   | −                      |

----

| Portfolio Company / Type of Investment (1)                                                                                                         |   | Amount of Interest, Fees or Dividends Credited in Income (2) |   | Fair Value at March 31, 2010 |   | Gross Additions (3) |   | Gross Reductions (4) |   | Fair Value at March 31, 2011 |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|--------|------------------------------|--------|---------------------|--------|----------------------|--------|------------------------------|
| Boxx Technologies, Inc.3,125,354 shares Series B Convertible Preferred Stock, convertible into 3,125,354 shares of common stock at $0.50 per share |   | −                                                      |   | −                      |   | −             |   | −              |   | −                      |
| Wellogix, Inc. 4,788,371 shares Series A-1 Convertible Preferred Stock, convertible into 4,788,371 shares of common stock at $1.0441 per share     |   | −                                                      |   | −                      |   | −             |   | −              |   | −                      |
| Total Affiliated Investments                                                                                                                       |   | $340                                                         |   | $73,589                      |   | $16,567             |   | 6,821                |   | $83,335                      |
| Total Control & Affiliated Investments                                                                                                         |   | $6,036                                                       |   | $403,736                     |   | $78,213             |   | $88,433              |   | $393,517                     |

----

----

| Plan Category                                                 |   | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights |   | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights |   | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans |
|---------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------|
| Equity compensation plans approved by security holders (1)    |   | 170,250                                                                                     |   | $104.85                                                                          |   | 66,250                                                                                       |
|                                                          |   |                                                                                        |   |                                                                             |   |                                                                                         |
| Equity compensation plans not approvedby security holders (2) |   | −                                                                                     |   | −                                                                          |   | −                                                                                      |
| Total                                                         |   | 170,250                                                                                     |   | $104.85                                                                          |   | 66,250                                                                                       |

----

| 1)   | Includes the 1999 Stock Option Plan and the 2009 Stock Incentive Plan.  For a description of both plans, please refer to Footnote 5 contained in our consolidated financial statements. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2)   | We have no equity compensation plans that were not approved by security holders. |
|----------------|----------------------------------------------------------------------------------|

----

| 1.        | Consolidated Financial Statements                                                                         |   |
|----------------|----------------------------------------------------------------------------------------------------------------|--------|
|           |                                                                                                           | Page   |
|           | Reports of Independent Registered Public Accounting Firm                                                       | 29     |
|           | Consolidated Statements of Assets and Liabilities as of March 31, 2011 and 2010                                | 31     |
|           | Consolidated Statements of Operations for Years Ended March 31, 2011, 2010 and 2009                            | 32     |
|           | Consolidated Statements of Changes in Net Assets for Years Ended March 31, 2011, 2010 and 2009                 | 33     |
|           | Consolidated Statements of Cash Flows for Years Ended March 31, 2011, 2010 and 2009                            | 34     |
|           | Consolidated Schedules of Investments as of March 31, 2011 and 2010                                            | 35     |
|           | Notes to Consolidated Financial Statements                                                                     | 36     |
|           |                                                                                                           |   |
| 2.   | Schedule of Investments In and Advances To Affiliates Reports of Independent Registered Public Accounting Firm |   |
|           |                                                                                                           |   |
| 3.        | Exhibits                                                                                                  |   |

|   | 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 3.2 to Form 10-K for the fiscal year ended March 31, 2007).                                                                                                         |
|   | 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, 2007 (filed as Exhibit 10.1 to form 10-K for the fiscal year ended March 31, 2007).               |
|   | 10.2        | Retirement Plan for Employees of Capital Southwest Corporation and Its Affiliates as amended and restated effective April 1, 2006 (filed as Exhibit 10.2 to form 10-K for the fiscal year ended March 31, 2007).         |
|   | 10.3        | Capital Southwest Corporation and Its Affiliates Restoration of Retirement Income Plan as amended and restated effective January 1, 2008 (filed as Exhibit 10.3 to form 10-K for the fiscal year ended March 31, 2009).  |

----

|   | Exhibit No. | Description                                                                                                                                                                                                                              |
|--------|-------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |        |                                                                                                                                                                                                                                     |
|   | 10.6        | 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).                                                  |
|   | 10.7        | Capital Southwest Corporation 1999 Stock Option Plan (filed as Exhibit 10.10 to Form 10-K for the fiscal year ended March 31, 2000).                                                                                                |
|   | 10.8        | Severance Pay Agreement with William M. Ashbaugh (filed as Exhibit 10.1 to Form 8-K dated July 18, 2005).                                                                                                                           |
|   | 10.10       | Severance Pay Agreement with Jeffrey G. Peterson (filed as Exhibit 10.4 to Form 8-K dated July 18, 2005).                                                                                                                           |
|   | 10.11       | Amendment One to Retirement Plan for Employees of Capital Southwest Corporation and its Affiliates as amended and restated effective April 1, 2006 (filed as Exhibit 10.11 to form 10-K for the fiscal year ended March 31, 2008).  |
|   | 10.12 *     | Amendment Two to Retirement Plan for Employees of Capital Southwest Corporation and its Affiliates as amended and restated effective April 1, 2006.                                                                                 |
|   | 10.13 *     | Amendment Three to Retirement Plan for Employees of Capital Southwest Corporation and its Affiliates as amended and restated effective April 1, 2006.                                                                               |
|   | 10.14 *     | Amendment Four to Retirement Plan for Employees of Capital Southwest Corporation and its Affiliates as amended and restated effective April 1, 2006.                                                                                |
|   | 13.1 *      | Selected Consolidated Financial Data.                                                                                                                                                                                               |
|   | 21.1 *      | List of subsidiaries of the Company.                                                                                                                                                                                                |
|   | 23.1 *      | Consent of Independent Registered Public Accounting Firm – Grant Thornton LLP.                                                                                                                                                |
|   | 31.1 *      | Certification of Chairman of the Board and President 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 Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act, filed herewith.                                                                                                          |
|   | 32.1 **     | 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, furnished herewith.                     |
|   | 32.2 **     | 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, furnished herewith.                                 |

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|   | CAPITAL SOUTHWEST CORPORATION |
|--------|-------------------------------|
|   | By:                           | /s/ Gary L. Martin |
|   |                          | Gary L. MartinChairman of the Board and President |

| Signature                     | Title                                | Date          |
|-------------------------------|--------------------------------------|---------------|
|  /s/ Gary L. Martin      | Chairman of the Board and President  | June 10, 2011 |
| Gary L. Martin                | (chief executive officer)            |          |
|  /s/ Donald W. Burton    | Director                             | June 10, 2011 |
| Donald W. Burton              |                                 |          |
|  /s/ Graeme W. Henderson | Director                             | June 10, 2011 |
| Graeme W. Henderson           |                                 |          |
|  /s/ Samuel B. Ligon     | Director                             | June 10, 2011 |
| Samuel B. Ligon               |                                 |          |
|  /s/ Gary L. Martin      | Director                             | June 10, 2011 |
| Gary L. Martin                |                                 |          |
|  /s/ John H. Wilson      | Director                             | June 10, 2011 |
| John H. Wilson                |                                 |          |
|  /s/ Tracy L. Morris     | Chief Financial Officer              | June 10, 2011 |
| Tracy L. Morris               | (chief financial/accounting officer) |          |

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| Exhibit Number | Description                                                                                            |
|----------------|--------------------------------------------------------------------------------------------------------|
|           |                                                                                                   |
| 21.1           | List of Subsidiaries                                                                              |
| 23.1           | Consent of Grant Thornton LLP, independent registered public accounting firm                      |
| 31.1           | Rule 13a-15(e) and 15d-15(e) an 13a-15(f) and 15d-15(f) Certification of Chief Executive Officer  |
| 31.2           | Rule 13a-15(e) and 15d-15(e) an 13a-15(f) and 15d-15(f) Certification of Chief Financial Officer  |
| 32.1           | Section 13(a) or 15(d) Certification of Chief Executive Officer                                   |
| 32.2           | Section 13(a) or 15(d) Certification of Chief Financial Officer                                        |

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