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<SEC-DOCUMENT>0001010549-02-000361.txt : 20020610
<SEC-HEADER>0001010549-02-000361.hdr.sgml : 20020610
<ACCEPTANCE-DATETIME>20020607115114
ACCESSION NUMBER:		0001010549-02-000361
CONFORMED SUBMISSION TYPE:	DEF 14A
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20020715
FILED AS OF DATE:		20020607

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CAPITAL SOUTHWEST CORP
		CENTRAL INDEX KEY:			0000017313
		IRS NUMBER:				751072796
		STATE OF INCORPORATION:			TX
		FISCAL YEAR END:			0331

	FILING VALUES:
		FORM TYPE:		DEF 14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	811-01056
		FILM NUMBER:		02673200

	BUSINESS ADDRESS:	
		STREET 1:		12900 PRESTON RD STE 700
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75230
		BUSINESS PHONE:		9722338242

	MAIL ADDRESS:	
		STREET 1:		12900 PRESTON RD
		STREET 2:		SUITE 700
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75230
</SEC-HEADER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>capialswdef14a071502.txt
<TEXT>

                            SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

Filed by Registrant                        [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:

[ ]      Preliminary Proxy Statement
[ ]      Confidential,  for Use of the  Commission  Only (as  permitted  by Rule
         14a-6(e)(2))
[X]      Definitive Proxy Statement
[ ]      Definitive Additional Materials
[ ]      Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12

                          Capital Southwest Corporation
     -----------------------------------------------------------------------
                (Name of Registrant as Specified In Its Charter)
     -----------------------------------------------------------------------
     (Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X]      No fee required.
[ ]      Fee  computed on table below per  Exchange  Act Rules  14-a6(i)(4)  and
         0-11.

         1)       Title  of  each  class  of  securities  to  which  transaction
                  applies:

                  --------------------------------------------------------------
         2)       Aggregate number of securities to which transaction applies:

                  --------------------------------------------------------------
         3)       Per  unit  price  or other  underlying  value  of  transaction
                  computed  pursuant  to  Exchange  Act Rule 0-11 (set forth the
                  amount on which the filing fee is calculated  and state how it
                  was determined):

                  --------------------------------------------------------------

         4)       Proposed maximum aggregate value of transaction:

                  --------------------------------------------------------------
         5)       Total fee paid:

                  --------------------------------------------------------------

[ ]      Fee paid previously with preliminary materials.

[ ]      Check box if any part of the fee is offset as provided by Exchange  Act
         Rule  0-11(a)(2)  and identify the filing for which the  offsetting fee
         was paid  previously.  Identify  the  previous  filing by  registration
         statement number, or the Form or Schedule and the date of its filing.

         1)       Amount Previously Paid:

                  --------------------------------------------------------------
         2)       Form, Schedule or Registration Statement No.:

                  --------------------------------------------------------------
         3)       Filing Party:

                  --------------------------------------------------------------
         4)       Date Filed:

                  --------------------------------------------------------------

<PAGE>

                                                                    June 4, 2002



To the Shareholders of Capital Southwest Corporation:

         The Annual Meeting of Shareholders  of our Corporation  will be held on
Monday, July 15, 2002, at 10:00 a.m. in the North Dallas Bank Tower Meeting Room
(First Floor), 12900 Preston Road, Dallas, Texas.

         A  Notice  of  the  Annual  Meeting,  a  Proxy  and a  Proxy  Statement
containing information about matters to be acted upon are enclosed. In addition,
the Capital Southwest  Corporation Annual Report for the fiscal year ended March
31, 2002 is enclosed to provide  information  regarding the  performance  of the
Corporation  during the past year.  Holders of Common Stock are entitled to vote
on the basis of one vote for each share held. If you attend the Annual  Meeting,
you retain the right to vote in person  even  though you  previously  mailed the
enclosed Proxy.

         It is important that your shares be represented at the meeting  whether
or not you are personally in attendance.  Please review the Proxy  Statement and
sign,  date and return the enclosed Proxy at your earliest  convenience.  I look
forward to meeting  with you and,  together  with our  directors  and  officers,
discussing the Corporation's business. I hope you will be present.

                                             Very truly yours,

                                              /s/ William R. Thomas
                                             -----------------------------------
                                             William R. Thomas
                                             President and Chairman of the Board


<PAGE>

                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                            TO BE HELD JULY 15, 2002

To the Shareholders of Capital Southwest Corporation:

NOTICE IS HEREBY GIVEN that the Annual  Meeting of the  Shareholders  of Capital
Southwest Corporation, a Texas corporation (the "Corporation"),  will be held on
Monday,  July 15, 2002,  at 10:00 a.m.,  Dallas time, in the Meeting Room (First
Floor) of the North Dallas Bank Tower,  12900 Preston Road,  Dallas,  Texas, for
the following purposes:

1.       To elect  five  directors  to serve  until the next  Annual  Meeting of
         Shareholders or until their respective  successors shall be elected and
         qualified.

2.       To ratify the  appointment of KPMG LLP as independent  auditors for the
         Corporation.

3.       To transact such other business as may properly come before the meeting
         and any adjournment thereof.

Only  holders  of  Common  Stock of the  Corporation  of  record at the close of
business  on June 3, 2002 will be  entitled  to notice  of,  and to vote at, the
meeting and any adjournment thereof.


If you do not expect to attend in person, please sign, date and return the proxy
at your earliest  convenience in the enclosed  envelope.  No postage is required
for  mailing  in the  United  States.  A prompt  return  of your  proxy  will be
appreciated as it will save the expense of further mailings.

                                              By Order of the Board of Directors
                                              SUSAN K. HODGSON
                                              Secretary
Dallas, Texas
June 4, 2002

<PAGE>

                                 PROXY STATEMENT

                       FOR ANNUAL MEETING OF SHAREHOLDERS

                            TO BE HELD JULY 15, 2002

         This Proxy Statement is furnished in connection  with the  solicitation
by the Board of Directors of Capital Southwest Corporation,  a Texas corporation
(the  "Corporation"),   of  proxies  to  be  voted  at  the  Annual  Meeting  of
Shareholders to be held on July 15, 2002 or any adjournment thereof. The date on
which this Proxy  Statement  and the enclosed form of proxy are first being sent
or given to shareholders of the Corporation is on or about June 4, 2002.

                             PURPOSES OF THE MEETING

         The Annual Meeting of the  Shareholders  is to be held for the purposes
of (1) electing five persons to serve as directors of the Corporation  until the
next Annual Meeting of Shareholders,  or until their respective successors shall
be elected  and  qualified  (see  ELECTION  OF  DIRECTORS);  (2)  ratifying  the
appointment  by the Board of Directors of KPMG LLP as  independent  auditors for
the Corporation (see APPROVAL OF APPOINTMENT OF INDEPENDENT  AUDITORS);  and (3)
transacting  such other  business as may properly come before the meeting or any
adjournment thereof.

         To be elected a director,  each nominee must receive the favorable vote
of the holders of a majority of the shares of Common Stock  entitled to vote and
represented at the Annual  Meeting.  In order to ratify the  appointment of KPMG
LLP as independent  auditors for the  Corporation  for the year ending March 31,
2003, the ratification proposal must receive the favorable vote of a majority of
the  shares of Common  Stock  entitled  to vote and  represented  at the  Annual
Meeting.

         The Board of Directors  unanimously  recommends  that the  shareholders
vote FOR the  election  as  directors  of the persons  named  under  ELECTION OF
DIRECTORS and FOR the ratification of the appointment of KPMG LLP as independent
auditors.

                              VOTING AT THE MEETING

         The record date for holders of Common Stock  entitled to notice of, and
to vote at, the Annual Meeting of  Shareholders is the close of business on June
3, 2002, at which time the  Corporation  had outstanding and entitled to vote at
the meeting 3,829,051 shares of Common Stock.

                                       1

<PAGE>

         The  presence,  in person or by proxy,  of the holders of a majority of
the  shares of Common  Stock  outstanding  and  entitled  to vote at the  Annual
Meeting is  necessary  to  constitute a quorum.  In deciding  all  questions,  a
shareholder shall be entitled to one vote, in person or by proxy, for each share
of Common  Stock held in his name at the close of business  on the record  date.
Shareholders who are present,  in person or by proxy, but abstain from voting on
any item will be counted as present at the  meeting,  but not voting on any such
item. Similarly, nominees (such as broker-dealers) who are present, in person or
by proxy,  but abstain or refrain  from  voting on any item,  will be counted as
present at the meeting, but not voting on any such item.

         Each  proxy  delivered  to  the  Corporation,  unless  the  shareholder
otherwise specifies therein,  will be voted FOR the election as directors of the
persons named under ELECTION OF DIRECTORS  (PROPOSAL 1) and FOR the ratification
of the appointment by the Board of Directors of KPMG LLP as independent auditors
(PROPOSAL 2). In each case where the shareholder has appropriately specified how
the proxy is to be voted, it will be voted in accordance with his specification.
As to any other matter or business  which may be brought  before the meeting,  a
vote may be cast  pursuant  to the  accompanying  proxy in  accordance  with the
judgment of the person or persons  voting the same,  but neither  management nor
the Board of  Directors  of the  Corporation  knows of any such other  matter or
business.  Any shareholder has the power to revoke his proxy at any time insofar
as it is  then  not  exercised  by  giving  notice  of such  revocation,  either
personally  or in  writing,  to  the  Secretary  of  the  Corporation  or by the
execution and delivery to the Corporation of a new proxy dated subsequent to the
original proxy.

                  STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

         The following table sets forth certain  information with respect to the
beneficial ownership of Common Stock of the Corporation as of May 1, 2002 by (1)
each person, so far as is known to the management of the Corporation, who is the
beneficial  owner (as that term is defined in the rules and  regulations  of the
Securities and Exchange  Commission) of more than 5% of the  outstanding  Common
Stock, (2) each executive officer listed in the Summary  Compensation Table, (3)
each director of the Corporation,  and (4) all directors and executive  officers
of the Corporation as a group.  Unless otherwise  indicated  below,  each of the
persons named in the table has sole voting and investment  power with respect to
the shares indicated to be beneficially owned.

         Name and Address                       Shares Owned            Percent
         of Beneficial Owner                    Beneficially            of Class
         -------------------                    ------------            --------

         William R. Thomas
         12900 Preston Rd., Suite 700
         Dallas, Texas 75230...................    961,063  (1)(2)(3)     25.1%

                                       2

<PAGE>

         Name and Address                       Shares Owned            Percent
         of Beneficial Owner                    Beneficially            of Class
         -------------------                    ------------            --------

         EQSF Advisers, Inc.
         767 Third Avenue
         New York, New York 10017..............    422,836        (4)      11.0

         Artisan Partners Limited Partnership
         1000 North Water Street #1770
         Milwaukee, Wisconsin  53202...........    330,903        (5)       8.6

         First Manhattan Company
         437 Madison Avenue

         New York, New York  10022.............    217,671        (6)       5.7

         Gary L. Martin........................    230,777     (2)(3)       6.0

         Patrick F. Hamner.....................    129,708     (2)(3)       3.4

         Graeme W. Henderson...................      4,700        (7)       0.1

         James M. Nolan........................      4,000                  0.1

         John H. Wilson........................      1,000                  -

         All directors and executive officers

         as a group (7 persons)................  1,119,454        (8)     29.0

         (1) Mr.  Thomas has sole voting and  investment  power with  respect to
611,332  shares,  which  include  75,620  shares  owned by his two  children and
206,525 shares owned by Thomas Heritage Partners,  Ltd., in which Mr. Thomas has
a 50.7% limited  partnership  interest.  Mr. Thomas holds a majority interest in
and is President  and sole  manager of Thomas  Heritage  Company,  LLC, the sole
general partner of Thomas Heritage Partners, Ltd.

         (2) Mr.  Thomas is a trustee of certain  trusts  pursuant  to  employee
stock  ownership  plans for employees of the  Corporation  and its  wholly-owned
portfolio  companies  owning 256,787  shares,  with the power as trustee to vote
such shares. Mr. Thomas also participates in the power to direct the trustees in
the voting of 88,144  shares  owned by a trust  pursuant  to a pension  plan for
employees of the Corporation and certain wholly-owned portfolio companies of the
Corporation. Accordingly, Mr. Thomas has shared voting and investment power with
respect to the 344,931 shares, representing 9.0% of the outstanding Common Stock
of the  Corporation,  owned by the  aforementioned  trusts.  Under the rules and
regulations of the Securities and Exchange  Commission,  Mr. Thomas is deemed to
be the beneficial owner of such 344,931 shares, which are included in the shares
beneficially owned by Mr. Thomas.


                                       3
<PAGE>

         Mr.  Martin  serves  as  trustee,  with  Mr.  Thomas,  of  two  of  the
aforementioned trusts owning 36,364 and 88,144 shares.  Accordingly,  Mr. Martin
has shared voting and investment power with respect to the 124,508 shares. Under
the rules and regulations of the Securities and Exchange Commission,  Mr. Martin
is deemed to be the beneficial owner of such 124,508 shares,  which are included
in the shares beneficially owned by Mr. Martin.

         Of the shares owned by a trust pursuant to the aforementioned  employee
stock  ownership  plans,  4,034 were allocated to Mr. Martin,  all of which were
vested.

         Mr. Hamner, with Messrs.  Thomas and Martin,  participates in the power
to direct  the  trustees  in the  voting of  88,144  shares  owned by one of the
aforementioned  trusts.  Under the rules and  regulations  of the Securities and
Exchange  Commission,  Mr. Hamner is deemed to be the  beneficial  owner of such
88,144  shares,  which are  included  in the  shares  beneficially  owned by Mr.
Hamner.

         (3) Includes  16,500,  14,000 and 4,800 shares  subject to  immediately
exercisable   stock  options  held  by  Messrs.   Hamner,   Martin  and  Thomas,
respectively.

         (4) As  reported  to the  Corporation  by  EQSF  Advisers,  Inc.,  that
corporation or M. J. Whitman Advisers, Inc. or Martin J. Whitman,  individually,
had shared  voting and  dispositive  power with  respect to none of such shares,
sole voting power with respect to 411,311 shares and sole dispositive power with
respect to 422,836  shares by reasons of advisory and other  relationships  with
the persons who own the shares.  EQSF  Advisers,  Inc., M. J. Whitman  Advisers,
Inc.  and Martin J.  Whitman  beneficially  own  133,111,  265,481  and  24,244,
respectively, of such shares.

         (5)  As  reported  to  the  Corporation  by  Artisan  Partners  Limited
Partnership  ("Artisan  Partners"),   that  partnership  or  Artisan  Investment
Corporation  ("Artisan  Corp.") or Andrew A. Ziegler,  individually,  or Carlene
Murphy Ziegler, individually, had sole voting and dispositive power with respect
to none of such shares and shared voting and  dispositive  power with respect to
330,903 shares by reasons of advisory and other  relationships  with the persons
who own the shares. Artisan Partners is an investment adviser;  Artisan Corp. is
the General Partner of Artisan Partners; and Mr. Ziegler and Ms. Ziegler are the
principal stockholders of Artisan Corp.

         (6) As  reported  to the  Corporation  by  First  Manhattan  Co.,  that
partnership had sole voting and dispositive  power with respect to 2,000 shares,
shared voting power with respect to 205,146 shares and shared  dispositive power
with respect to 215,671  shares by reasons of advisory  and other  relationships
with the persons who own the shares.

         (7) Includes 1,500 shares held by a retirement trust for the benefit of
Mr. Henderson.

         (8)  Includes  (a) the  shares  owned  by the  partnership  and  trusts
referred to in Notes (1) and (2),  respectively,  to the above table, (b) 36,100
shares  subject  to  immediately  exercisable  stock  options  (including  those
referred  to in  Note  (3) to the  above  table),  (c)  1,500  shares  held in a
retirement trust for the benefit of Mr. Henderson and (d) 75,620 shares owned by
immediate family members of Mr. Thomas.


                                       4
<PAGE>

                       ELECTION OF DIRECTORS (PROPOSAL 1)

         Five directors are proposed to be elected at the meeting to serve until
the next Annual Meeting of  Shareholders  or until their  respective  successors
shall be elected and qualified.  The persons named in the  accompanying  form of
proxy intend to vote such proxy for the election of the nominees  named below as
directors  of the  Corporation  to  serve  until  the  next  Annual  Meeting  of
Shareholders  or  until  their  respective   successors  shall  be  elected  and
qualified,  unless  otherwise  properly  indicated on such proxy. If any nominee
shall become  unavailable for any reason,  the persons named in the accompanying
form of proxy  are  expected  to  consult  with the  Board of  Directors  of the
Corporation in voting the shares represented by them at the Annual Meeting.  The
Board of  Directors  has no  reason  to  doubt  the  availability  of any of the
nominees  and no reason to believe  that any of the  nominees  will be unable or
unwilling to serve the entire term for which election is sought.

         The names of the nominees,  along with certain  information  concerning
them, are set forth below.

GRAEME W. HENDERSON

         Mr.  Henderson,  age 68, has been a director of the  Corporation  since
1976 and previously  served as a director of the Corporation  from 1962 to 1964.
Mr.  Henderson has been  self-employed  as a private investor and consultant for
more than five years.  He served as a director  of  Starwood  Hotels and Resorts
Worldwide, Inc. from 1986 to February 1999.

*GARY L. MARTIN

         Mr. Martin,  age 55, has been a director of the Corporation  since July
1988 and has served as Vice  President of the  Corporation  since July 1984.  He
previously  served as Vice President of the Corporation from 1978 to 1980. Since
1980, Mr. Martin has served as President of The Whitmore  Manufacturing Company,
a wholly-owned portfolio company of the Corporation.

JAMES M. NOLAN

         Mr. Nolan,  age 68, has been a director of the  Corporation  since July
1980.  He has been  self-employed  as a private  investor and  consultant to the
telecommunications  industry  since  1978  and  served  as  a  director  of  DSC
Communications Corporation from 1981 to 1996.

*WILLIAM R. THOMAS

         Mr. Thomas, age 73, has served as Chairman of the Board of Directors of
the Corporation  since July 1982 and President of the Corporation since 1980. In
addition,  he has  been a  director  of  the  Corporation  since  1972  and  was
previously  Senior Vice  President  of the  Corporation  from 1969 to 1980.  Mr.


                                       5
<PAGE>

Thomas also serves as a director  of Alamo Group Inc.,  Encore Wire  Corporation
and Palm Harbor Homes, Inc.

JOHN H. WILSON

         Mr. Wilson,  age 59, has been a director of the Corporation  since July
1988.  He has been  President  of U. S. Equity  Corporation,  a venture  capital
investment firm, since 1983 and was President of Whitehall Corporation from 1995
to 1998.  Mr.  Wilson also serves as a director of Encore Wire  Corporation  and
Palm Harbor Homes, Inc.

*        Messrs.  Martin  and Thomas are  "interested  persons"  as that term is
         defined in Section 2(a)(19) of the Investment Company Act of 1940.

                MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

         The Board of  Directors of the  Corporation  has  established  an Audit
Committee and a  Compensation  Committee to assist the Board in carrying out its
duties.  The Audit  Committee  monitors  the  Company's  financial  reports  and
accounting  practices to  ascertain  that they are within  acceptable  limits of
sound practice; reviews audit reports submitted by the Corporation's independent
auditors;  makes  recommendations  to  the  Board  of  Directors  regarding  the
engagement  of the  independent  auditors  for  audit  and  non-audit  services;
evaluates the  independence  of the auditors;  and reviews with the  independent
auditors  the fee,  scope  and  timing  of audit  and  non-audit  services.  The
Compensation Committee  periodically reviews the compensation,  employee benefit
plans and other fringe  benefits  paid to or provided for officers and directors
of the  Corporation  and approves the annual salaries and bonuses of officers of
the Corporation. The Corporation does not have a Nominating Committee.

         Messrs.  Graeme W.  Henderson,  James M.  Nolan and John H.  Wilson are
presently  members  of both the Audit and  Compensation  Committees.  During the
fiscal year of the Corporation  ended March 31, 2002,  five meetings  (including
one telephone  meeting) of the Board of Directors  were held.  In addition,  two
meetings (including one telephone meeting) of the Compensation Committee and two
meetings of the Audit  Committee  were held.  Each of the directors  attended at
least 75% of the  aggregate  of (1) the total number of meetings of the Board of
Directors and (2) the total number of meetings  held by all  committees on which
he served.

                          REPORT OF THE AUDIT COMMITTEE

         The Audit Committee  consists of the three  independent  members of the
Corporation's Board of Directors.  The duties and  responsibilities of the Audit
Committee  are set  forth in the  Audit  Committee  Charter,  which the Board of
Directors adopted on April 17, 2000 and reviews on an annual basis.

         The Audit  Committee  has  discharged  its duties and  responsibilities
pursuant to the Audit Committee Charter and has:


                                       6
<PAGE>

o        Reviewed and discussed the audited  consolidated  financial  statements
         for the fiscal year ended March 31, 2002 with the  management  and with
         the independent auditors;

o        Discussed  with the  independent  auditors  the matters  required to be
         discussed by SAS 61 (Codification of Statements on Auditing Standards);
         and,

o        Received and discussed  the written  disclosures  from the  independent
         auditors  required by  Independence  Standards  Board  Statement  No. 1
         (Independence Discussions with Audit Committee).

         Based  on  such  review  and   discussions   with  management  and  the
independent  auditors,  the Audit Committee recommends to the Board of Directors
that the audited  consolidated  financial  statements  be included in the Annual
Report on Form 10-K for the fiscal  year ended March 31,  2002,  for filing with
the Securities and Exchange Commission.

                                        Audit Committee
                                        Graeme W. Henderson, Chairman
                                        James M. Nolan
                                        John H. Wilson

                      REPORT OF THE COMPENSATION COMMITTEE

         The goals of the  Corporation's  compensation  program  are to attract,
retain and motivate  competent  executive  officers who have the  experience and
ability to  contribute  materially to the success of the  Corporation's  venture
capital and business  development  activities.  The individual judgments made by
the  Compensation  Committee  are  subjective  and  are  based  largely  on  the
Committee's  perception  of  each  executive's  contribution  to both  the  past
performance and the long-term growth potential of the Corporation. The principal
elements of compensation for executive  officers are base salary,  discretionary
bonus  payments,   stock  options  granted  under  the  Stock  Option  Plan  and
contributions pursuant to the Employee Stock Ownership Plan.

         Base salaries were determined by the Committee in July 2001 for each of
the  executive  officers  on an  individual  basis,  taking  into  consideration
individual contributions to the Corporation's performance, length of tenure with
the  Corporation,  compensation  levels for  comparable  positions  and internal
equities  among  positions.  In addition  to base  salaries,  certain  executive
officers  received  bonus  payments  in March  2002,  the  amounts of which were
determined by the Committee on a discretionary  basis, taking into consideration
individual  performance,  with  particular  emphasis  on  contributions  to  the
Corporation's achievement of long-term investment objectives.

         In  July  2001,  the  Committee  established  the  base  salary  of the
Corporation's chief executive officer, William R. Thomas, at $250,000 per annum,
a continuation of the level established in July 1993. The compensation level for
Mr. Thomas was determined on the basis of the factors cited above,  all of which


                                       7
<PAGE>

are  applicable  to him as well as  other  executive  officers.  Other  relevant
factors  considered by the Committee were the Corporation's  performance and Mr.
Thomas'  role  in  defining  and  accomplishing   the  Corporation's   long-term
investment objectives and administering its investment management activities. At
Mr. Thomas' request, he was not awarded a year-end bonus in March 2002.

         An  additional  equity  incentive  is  provided  by  the  Corporation's
Employee Stock Ownership Plan, to which the Corporation contributed 5.0% of each
participating  employee's  covered  compensation for the fiscal year ended March
31, 2002, a decrease from the 7.5% of covered  compensation  contributed  in the
previous fiscal year.

                                        Compensation Committee
                                        James M. Nolan, Chairman
                                        Graeme W. Henderson
                                        John H. Wilson


                COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

Compensation of Directors

         In addition to reimbursement of travel expenses for attendance at board
meetings,  a director  who is not an  employee  of the  Corporation  receives an
annual  fee of $16,000  for  service  as a  director  and $6,000 for  service as
chairman of a committee of the Board of Directors.  In addition,  a director who
is not an  employee  of the  Corporation  receives  $1,000  for each  directors'
meeting  (excluding  telephone  meetings)  and $500 for each  committee  meeting
attended,  subject to a maximum of $6,000 per year in  aggregate  meeting  fees.
Directors' meetings are normally held on a quarterly basis.

Compensation Committee Interlocks and Insider Participation

         None of the Corporation's  executive officers served as a member of the
Compensation  Committee  of the Board of Directors or as a director of any other
entity,  one of whose executive  officers served as a member of the Compensation
Committee of the Corporation's Board of Directors.

Summary Compensation Table

         The  following  table  sets forth  summary  information  regarding  the
compensation  (excluding  retirement  benefits)  earned by or paid to William R.
Thomas,  President and Chairman of the Board;  Gary L. Martin,  Vice  President;
Patrick F. Hamner, Vice President;  and William M. Ashbaugh, Vice President, all
of whom are officers of the Corporation whose total  compensation  earned during
the fiscal year ended March 31, 2002 exceeded $100,000.


                                       8
<PAGE>
<TABLE>
<CAPTION>

                                                     Annual Compensation
                                         ----------------------------------------
      Name and               Fiscal                                 Other Annual      All Other
Principal Position            Year        Salary         Bonus    Compensation(1)  Compensation(2)
- ------------------           ------      --------      --------   ---------------  ---------------
<S>                           <C>        <C>           <C>            <C>             <C>
William R. Thomas             2002       $250,000      $ 10,417       $  8,500        $   --
     Chairman of the          2001        250,000        10,417         12,750            --
     Board and President      2000        250,000        10,417         16,000            --

Gary L. Martin                2002        178,800        17,077           --              --
     Vice President           2001        172,500        16,683           --              --
                              2000        169,500        22,380           --             3,200

Patrick F. Hamner             2002        172,500        37,500           --             8,500
     Vice President           2001        145,000        42,250           --            12,750
                              2000        126,252        50,417          2,027          13,973

William M. Ashbaugh           2002         96,410        14,222           --              --
     Vice President           2001           --            --             --              --
                              2000           --            --             --              --
</TABLE>


- ------------------
(1)      Amounts accrued for each executive officer in lieu of a contribution to
         his account in an employee  stock  ownership  plan for employees of the
         Corporation  and  one  of its  wholly-owned  portfolio  companies  (the
         "ESOP").

(2)      Amounts contributed to the ESOP accounts of each executive officer.

         The  aggregate  amount  of  perquisites  and  other  personal  benefits
provided to Messrs. Thomas, Martin, Hamner and Ashbaugh was less than 10% of the
total of annual salary and bonus of such officers.

         In accordance with the Corporation's  established  policy, its officers
and employees are required to remit to the Corporation all compensation received
for serving as a director of any portfolio company of the Corporation.

Additional Compensation Information

         The following table sets forth additional compensation  information for
the  fiscal  year  ended  March  31,  2002  for each of the  three  highest-paid
executive  officers whose  compensation  exceeded $60,000 (William R. Thomas and
Gary L. Martin,  both of whom are directors of the  Corporation,  and Patrick F.
Hamner) and for all other  directors  (Graeme W.  Henderson,  James M. Nolan and
John H. Wilson), none of whom are employees of the Corporation.


                                       9
<PAGE>
<TABLE>
<CAPTION>

                                                    Pension or Retirement
                                   Aggregate         Benefits Accrued as         Estimated Annual
                               Compensation from    Part of Corporation's          Benefits Upon
Name and Position               the Corporation            Expenses                  Retirement
- -----------------              -----------------    ---------------------        ----------------
<S>                            <C>                  <C>                          <C>
William R. Thomas (1)              $268,917                  (3)                        (4)
     Director, Chairman
     and President

Gary L. Martin (1)                  195,877                  (3)                        (4)
     Director and Vice
     President

Patrick F. Hamner (1)               218,500                  (3)                        (4)
     Vice President

Graeme W. Henderson (2)              28,000                 None                       None
     Director

James M. Nolan (2)                   26,000                 None                       None
     Director

John H. Wilson (2)                   22,000                 None                       None
     Director

</TABLE>

(1)      See  Option  Exercises  and  Fiscal  Year End  Values  for  information
         regarding  stock  options  exercised  during  or held at the end of the
         fiscal year ended March 31, 2002. See Retirement  Plans for information
         on the Corporation's  Retirement Plan and Retirement  Restoration Plan.
         See  Stock  Ownership  Plan  for a  description  of  the  Corporation's
         Employee  Stock  Ownership  Plan and  Summary  Compensation  Table  for
         amounts contributed to each officer's ESOP account.

(2)      Directors who are not employees of the  Corporation  are compensated as
         described under  Compensation of Directors and are not  participants in
         the Corporation's Retirement Plan or Employee Stock Ownership Plan.

(3)      As  described  in Note 8 to the  Corporation's  Consolidated  Financial
         Statements,  the Retirement Plan was overfunded and therefore generated
         a benefit  for the year  ended  March 31,  2002.  After  deducting  the
         expense of the unfunded Retirement  Restoration Plan, the Corporation's
         net benefit  attributable to both plans was $504,536 for the year ended
         March 31,  2002.  The  Corporation's  net benefit is not  allocated  to
         individual plan participants.

(4)      Individual  retirement benefits are based on formulas relating benefits
         to  average  final  compensation  and years of  credited  service.  See
         Retirement  Plans  which  includes  both a table  of  estimated  annual
         retirement  benefits  and a  description  of  the  retirement  benefits
         currently payable to Mr. Thomas.


                                       10
<PAGE>
<TABLE>
<CAPTION>

Option Grants in Last Fiscal Year

                         Number of                                        Potential Realizable Value
                        Securities     % of Total                         at Assumed Annual Rates of
                        Underlying   Options Granted                       Stock Price Appreciation
                          Options     to Employees     Exercise   Expiration  for Option Term (2)
Name                    Granted (1)  in Fiscal Year   Price ($/Sh)   Date      5% (3)     10% (4)
- ----                    -----------  --------------   ------------   ----      ------     -------
<S>                       <C>            <C>             <C>         <C>       <C>        <C>
Patrick F. Hamner         10,000         22.7%           $65.00      7/16/11   $408,782  $1,035,933

William M. Ashbaugh       15,000         34.1%            65.70      8/27/11    619,776   1,570,633
</TABLE>


(1)      Mr.   Hamner's   options  become   exercisable  in  five  equal  annual
         installments  beginning July 16, 2002 and Mr. Ashbaugh's options become
         exercisable in ten equal annual installments beginning August 27, 2002.

(2)      The values  shown are based on the  indicated  assumed  annual rates of
         appreciation  compounded  annually over the term of the option.  Actual
         gains  realized,  if any, on stock  option  exercises  and common stock
         holdings are  dependent on the future  performance  of the common stock
         and overall  stock market  conditions.  There can be no assurance  that
         values shown in this table will be achieved.

(3)      Represents an assumed market price per share of common stock of $105.88
         at July 16, 2011 and $107.02 at August 27, 2011.

(4)      Represents an assumed market price per share of common stock of $168.59
         at July 16, 2011 and $170.41 at August 27, 2011.

Option Exercises and Fiscal Year End Values

         The  following  table  discloses,  for the  named  executive  officers,
information  regarding stock options  exercised  during,  or held at the end of,
fiscal 2002.


                                       11
<PAGE>
<TABLE>
<CAPTION>

                                                    Number of Securities          Value of Unexercised
                       Shares                      Underlying Unexercised         In-the-Money Options
                     Acquired on     Value           Options at 3/31/02               at 3/31/02 (2)
Name                Exercise (#) Realized (1)  Exercisable(#)  Unexercisable(#)  Exercisable Unexercisable
- ----                ------------ ------------  --------------  ----------------  ----------- -------------
<S>                 <C>          <C>           <C>             <C>              <C>              <C>
William R. Thomas       -            -            4,800            1,200            $   -       $  -

Gary L. Martin          -            -           14,000              -              $463,750    $  -

Patrick F. Hamner       -            -           16,500           17,500             463,750       -

William M. Ashbaugh     -            -             -              15,000                -          -
</TABLE>

- ----------------
(1)      Value  realized is  calculated  as the fair market value on the date of
         exercise  net  of  the  option  exercise  price,  but  before  any  tax
         liabilities or transaction costs.

(2)      Value of unexercised  options is calculated as the closing market price
         on March 28, 2002 ($68.75) net of the option exercise price, but before
         any tax liabilities or transaction costs.

Retirement Plans

         The  foregoing  Summary   Compensation   Table  does  not  include  any
contribution,  payment or accrual under a qualified non-contributory  retirement
plan (the  "Retirement  Plan")  maintained by the Corporation and certain of its
wholly-owned portfolio companies as such amounts cannot readily be separately or
individually  calculated.  Messrs.  Hamner, Martin and Thomas participate in the
Retirement Plan. An eligible employee or his survivor will be entitled under the
Retirement  Plan to  receive,  upon  retirement,  death or  disability,  monthly
payments based upon formulas  relating  benefits to salary and years of credited
service,  which is generally  determined by averaging the five consecutive years
of highest  compensation  prior to retirement.  Salaries and bonuses  (excluding
other annual compensation)  reported in the foregoing Summary Compensation Table
are  substantially  identical to  compensation  covered by the  Retirement  Plan
("Covered Compensation").

         The  following  table sets forth,  for  purposes of  illustration,  the
estimated  annual  retirement  benefit  payable under the  Retirement  Plan as a
straight  life annuity upon  retirement  to  participants  of specified  Covered
Compensation  and years of credited  service who are fully vested (five years of
service).   Messrs.  Hamner,  Martin  and  Thomas  had  20,  29  and  40  years,
respectively,  of  credited  service  under  the  plan  as of May 1,  2002.  All
calculations assume retirement in 2002 at age 65 (normal retirement age).


                                       12
<PAGE>

     Total Covered                       Estimated Annual Benefits
     Compensation                          Based on Service of:
                           15 Years   20 Years   25 Years   30 Years   35 Years
                           --------   --------   --------   --------   --------
     $125,000............. $ 31,779   $ 42,372   $ 52,965   $ 63,558   $ 74,151
      150,000.............   38,904     51,872     64,840     77,808     90,776
      175,000.............   46,029     61,372     76,715     92,058    107,401
      200,000.............   53,154     70,872     88,590    106,308    124,026
      225,000............    60,279     80,372    100,465    120,558    140,651
      250,000............    67,404     89,872    112,340    134,808    157,276
      300,000............    81,654    108,872    136,090    163,308    190,526
      350,000.............   95,904    127,872    159,840    191,808    223,776
      400,000.............  110,154    146,872    183,590    220,308    257,026

         Certain of the  amounts  in the above  table are  subject to  reduction
because  applicable  federal  regulations  limit the  amount of annual  benefits
payable to certain  higher-paid  participants  under a tax-qualified  retirement
plan such as the  Retirement  Plan. The extent of such  reductions  will vary in
individual  cases  according  to  circumstances  existing  at the  time  pension
payments commence. Consequently, the Corporation and certain of its wholly-owned
portfolio  companies  have adopted an unfunded  benefit  equalization  plan (the
"Retirement  Restoration  Plan") to compensate  employees of the Corporation and
chief executive officers of certain of the Corporation's  wholly-owned portfolio
companies for the loss of retirement  benefits  resulting from such limitations.
This Retirement  Restoration Plan provides for the payment, upon retirement,  of
the  difference  between  the  maximum  annual  payment  permissible  under  the
Retirement  Plan  pursuant  to federal  limitations  and the amount  which would
otherwise have been payable.

         Mr. Thomas is entitled to a substantially  increased annual  retirement
benefit as a result of his service  beyond the normal  retirement  age and to an
additional annual  retirement  benefit as a result of his credited service prior
to April 1972 under a retirement benefit formula of the Corporation's Retirement
Plan which was modified for credited service subsequent to April 1972.  Although
Mr. Thomas is a full-time employee of the Corporation,  Section 401(a)(9) of the
Internal  Revenue  Code  required  that he begin  receiving  monthly  retirement
benefit  payments on April 1, 2000 because of his age and ownership of more than
5% of the  Corporation's  common stock.  Retirement  benefits  payable (for life
only) to Mr. Thomas under the Retirement  Plan and Retirement  Restoration  Plan
total $440,342 per annum.

Stock Ownership Plan

         The Corporation maintains an employee stock ownership plan ("ESOP") for
employees of the Corporation and one of its wholly-owned  portfolio companies in
which Mr. Hamner participates.  The Whitmore  Manufacturing Company maintains an
employee  stock   ownership  plan  for  its  employees,   in  which  Mr.  Martin
participates.  Employees  who have  completed one year of credited  service,  as
defined in the plan, are eligible to participate in the ESOP.  Contributions  to
the ESOP are  discretionary,  within limits  established by the Internal Revenue


                                       13
<PAGE>

Code. Funds  contributed to the trust  established under the ESOP are applied by
the trustees to the purchase, in the open market at prevailing market prices, of
Common Stock of the  Corporation.  A participant's  interest in contributions to
the ESOP fully  vests  after five years of  credited  service,  and such  vested
interest  is  distributed  to  a  participant  at  retirement,  death  or  total
disability,  or after a one year break in service  resulting from termination of
employment for any other reason. See Note (2) to the table under STOCK OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS.

          COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT

         Section  16(a) of the  Securities  Exchange  Act of 1934,  as  amended,
requires  officers and directors of the Corporation and persons who beneficially
own more than ten percent of the  Corporation's  common stock to file reports of
securities  ownership  and changes in such  ownership  with the  Securities  and
Exchange  Commission  (the  "SEC").  Officers,  directors  and greater  than ten
percent  beneficial  owners also are required by rules promulgated by the SEC to
furnish the Corporation  with copies of all Section 16(a) forms they file. Based
solely upon a review of the copies of such forms  furnished to the  Corporation,
or written representations that no Form 5 filings were required, the Corporation
believes  that each of its  officers,  directors  and  greater  than ten percent
beneficial owners complied with all Section 16(a) filing requirements applicable
to them during the year ended March 31, 2002.

                              AUDIT AND OTHER FEES

         The aggregate fees for professional  services  rendered by KPMG LLP for
the audit of the Corporation's annual consolidated  financial statements for the
year ended March 31, 2002, and the reviews of the financial  statements included
in the quarterly  Reports on Forms 10-Q for the year ended March 31, 2002,  were
$40,500. Non-audit fees of $3,900 for the year ended March 31, 2002 consisted of
tax services.  The Audit Committee has considered  whether the provision by KPMG
LLP  of  non-audit   services  are  compatible  with   maintaining   KPMG  LLP's
independence.


                                       14
<PAGE>
<TABLE>
<CAPTION>

                                PERFORMANCE GRAPH

         The  following  graph  compares  the  Corporation's   cumulative  total
stockholder  return during the last five years (based on the market price of the
common  stock and  assuming  reinvestment  of all  dividends  and tax credits on
retained  long-term  capital  gains) with the Total  Return Index for the Nasdaq
Stock  Market  (U.S.  Companies)  and with the Total  Return  Index  for  Nasdaq
Financial  Stocks,  both of which  indices have been  prepared by the Center for
Research in Security Prices at the University of Chicago.



                Comparison of Five Year Cumulative Total Returns


        Nasdaq Total Return (U.S.)     Nasdaq Financial Stocks    Capital Southwest Corporation
<S>               <C>                         <C>                           <C>
1997              100.000                     100.000                       100.000
1998              151.573                     155.678                       142.215
1999              204.794                     140.283                       111.250
2000              380.907                     132.946                       85.640
2001              152.338                     147.034                       102.813
2002              153.408                     183.007                       109.777

</TABLE>



                                       15
<PAGE>

          APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS (PROPOSAL 2)

         The  Board  of  Directors  has  appointed  the  firm  of  KPMG  LLP  as
independent  auditors  for the fiscal year  ending  March 31,  2003,  subject to
ratification by the shareholders. A representative of KPMG LLP is expected to be
present at the Annual Meeting with an opportunity to make a statement,  and will
be available to respond to appropriate questions.

         In order to approve the appointment of KPMG LLP as independent auditors
for the  Corporation  for the year ending  March 31,  2003,  the  proposal  must
receive  the  favorable  vote of a majority  of the shares  entitled to vote and
represented at the Annual Meeting.

                  SHAREHOLDER PROPOSALS FOR 2003 ANNUAL MEETING

         Any  shareholder  proposal  to be  considered  by the  Corporation  for
inclusion in the proxy material for the 2003 Annual Meeting of Shareholders must
be received by the Secretary of the Corporation,  12900 Preston Road, Suite 700,
Dallas,  Texas  75230,  no later than  February 3, 2003.  Mere  submission  of a
proposal  for  consideration  does not  guarantee  its  inclusion  in the  proxy
material or presentation at the meeting.  All shareholder  proposals are subject
to the rules under the federal securities laws.

                       EXPENSES OF SOLICITATION OF PROXIES

         In  addition  to the use of the  mails,  proxies  may be  solicited  by
personal  interview and telephone by directors,  officers and other employees of
the Corporation, who will not receive additional compensation for such services.
The Corporation will also request  brokerage  houses,  nominees,  custodians and
fiduciaries to forward  soliciting  materials to the beneficial  owners of stock
held of record by them and will reimburse such persons for forwarding materials.
The cost of soliciting proxies will be borne by the Corporation.

                                  ANNUAL REPORT


         The Annual Report to Shareholders  covering the fiscal year ended March
31, 2002 accompanies this proxy statement, but is not deemed a part of the proxy
soliciting material.

         A copy of the  fiscal  2002 Form  10-K  report  to the  Securities  and
Exchange  Commission will be mailed to shareholders  without charge upon written
request to Susan K. Hodgson,  Secretary,  Capital Southwest  Corporation,  12900
Preston Road, Suite 700, Dallas, Texas 75230.



                                       16
<PAGE>

                                                                      Appendix A

                          Capital Southwest Corporation

            PROXY FOR ANNUAL MEETING OF SHAREHOLDERS -- JULY 15, 2002

                    THIS PROXY IS SOLICITED ON BEHALF OF THE
                     BOARD OF DIRECTORS OF THE CORPORATION.

         The  undersigned  (1)  acknowledges  receipt  of the  Notice  of Annual
Meeting of Shareholders of Capital Southwest  Corporation,  a Texas corporation,
(the  "Corporation") to be held on Monday,  July 15, 2002, at 10:00 a.m., Dallas
time,  in the  Meeting  Room (1st floor) of the North  Dallas Bank Tower,  12900
Preston Road,  Dallas,  Texas, and the Proxy Statement in connection  therewith;
and (2) appoints James M. Nolan,  William R. Thomas and John H. Wilson, and each
of them, his proxies with full power of substitution, for and in the name, place
and stead of the  undersigned,  to vote upon and act with  respect to all of the
shares  of  Common  Stock  of  the  Corporation  standing  in  the  name  of the
undersigned,  or with respect to which the  undersigned  is entitled to vote and
act at the meeting and at any adjournment  thereof,  and the undersigned directs
that this proxy be voted:

                          IMPORTANT: SIGN ON OTHER SIDE

     FOR all nominees        WITHHOLD AUTHORITY
      listed at right            to vote for
     (except as marked           all nominees
    to the contrary below)     listed at right     Nominees: Graeme W. Henderson
                                                             Gary L. Martin
1.  Election of                                              James M. Nolan
    Directors     ____               ___                     William R. Thomas
                                                             John H. Wilson

(INSTRUCTION:  To withhold authority to vote
for  any  individual  nominee,   write  that
nominee's name in the space provided below.)

____________________________________________

                                                        FOR    AGAINST   ABSTAIN

          2.   Proposal to ratify the  appointment
               of KPMG LLP as independent auditors
               for the Corporation.                    ______   ______   _______


          3.   In the  discretion  of the proxies,  on any other matter that may
               properly come before the meeting or, subject to the conditions in
               the Proxy Statement, any adjournment thereof.

               This proxy  when  properly  executed  will be voted in the manner
          directed.  Unless otherwise  marked,  this proxy will be voted for the
          election of the persons  named at the left hereof and for the proposal
          described in (2) above.

               If more than one of the proxies  named herein shall be present in
          person or by substitute at the meeting or at any adjournment  thereof,
          the majority of the proxies so present and voting, either in person or
          by substitute, shall exercise all of the powers hereby given.

               The  undersigned  hereby revokes any proxy or proxies  heretofore
          given to vote  upon or act  with  respect  to such  stock  and  hereby
          ratifies and confirms all that the proxies, their substitutes,  or any
          of them, may lawfully do by virtue hereof.

          PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY IN THE ENCLOSED
          ENVELOPE. NO POSTAGE IS REQUIRED.


________________________  ________________________  ____________________
Signature of Shareholder  Signature of Shareholder  Title, if applicable

                                                    Date: ________________, 2002

NOTE:  Please date this proxy and sign your name  exactly as it appears  hereon.
       Where there is more than one owner,  each should sign. When signing as an
       attorney,  administrator,  executor, guardian or trustee, please add your
       title as such. If executed by a  corporation,  the proxy should be signed
       by a duly authorized officer. EACH JOINT TENANT SHOULD SIGN.



</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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