According to the Company’s FORM 10-Q For The Quarterly Period Ended September 30, 2003, by order dated March 31, 2003, the court granted the Company and named officers' motions to dismiss and entered an order dismissing the amended complaint and denying the plaintiffs' request to further amend their complaint. In early November 2003, the plaintiff's opportunity to appeal this dismissal to the Fifth Circuit Court of Appeals passed.

As reported by the same SEC filing, during 1998, twenty-four purported class action lawsuits were filed against Capstead and certain of its officers alleging, among other things, that the defendants violated federal securities laws by publicly issuing false and misleading statements and omitting disclosure of material adverse information regarding the Company's business. After these actions were consolidated and the court appointed a lead plaintiff group, an amended complaint was filed in October 2000. The amended complaint claims that as a result of alleged improper actions, the market prices of the Company's equity securities were artificially inflated during the period between April 17, 1997 and June 26, 1998 and seeks monetary damages in an undetermined amount. In February 2001, the Company and named officers responded to this amended complaint with motions to dismiss all allegations against the Company and the named officers.

The original lawsuit commenced alleging defendants with materially inflated the market price of Capstead's stock during the period April 17, 1997 through June 25, 1998. Defendants did so by misrepresenting the strength and diversification of Capstead's portfolio, falsely representing to the market that the Company had positioned itself to generate strong earnings in virtually any interest rate environment. In addition, the complaint charges that defendants issued false financial statements that overstated Capstead's earnings and assets by failing to take necessary write downs to the portfolio. Finally, on June 26, 1998, Capstead could no longer conceal its huge problems. Capstead announced that it would write down the value of its mortgage servicing assets and sell its interest-only securities at an enormous loss, resulting in losses of about $255 million in the second quarter of 1998. These losses were greater than all the net income the Company reported during the entire 14-month class period from April 1997 to June 1998. Upon disclosure of the truth, the price of Capstead's stock fell immediately to as low as $8 11/16, 68 percent lower than the Class Period high of $27 13/16, on huge volume. The complaint charges that, at the same time defendants were artificially inflating the market, insiders exchanged certain Capstead securities for cash, resulting in more than $10.6 million in proceeds to the insiders.