Capital Southwest: President/Chairman Bill Thomas' Final Letter to Shareholders

The Capital Southwest (CSWC) annual report for the year ended March 31, 2007 is out and, as I suggested last year, President/Chairman Bill Thomas' letter to shareholders is a great read.

Maybe even a must read.

Thomas will be stepping down from his current duties in July, after serving Capital Southwest in various roles since 1962. He will remain as Chairman in a non-executive capacity, keep an office in Capital Southwest's headquarters, and still be the company's largest shareholder (owning 16% of the stock).

Capital Southwest is a publicly-traded venture capital investment company. I kick myself because I don't own it -- even though there have been a couple of excellent buying opportunities over the years.

Thomas reports that his firm did only one deal during the year. He writes, "As in 2005, too much venture capital was chasing too few attractive opportunities in 2006." He adds that Capital Southwest made proposals for several ventures, but were outbid by funds "willing to pay significantly higher prices and accept more risk."

At the end of his letter, Thomas rails about CEO pay and globalization. I think he has a point on CEO pay, and wish CEOs were generally paid for performance.

And on globalization, I'm basically libertarian so I favor free trade. But I worry that many "free trade agreements" are really managed trade deals loaded down with regulations or who knows what.

Bill Thomas' latest letter, like all of them, is a treat. Gary Martin, who has served Capital Southwest and its holdings in various positions since 1972, will take over running the company on a daily basis.