<DOCUMENT>
<TYPE>40-17F2
<SEQUENCE>1
<FILENAME>capital4017f2011204.txt
<TEXT>

                        Report of Independent Accountants


To the Board of Directors of
Capital Southwest Corporation and Subsidiary:


We have examined management's assertion, included in the accompanying Management
Statement Regarding Compliance With Certain Provisions of the Investment Company
Act of 1940, that Capital  Southwest  Corporation and subsidiary (the "Company")
complied with the  requirements  of subsections  (b) and (c) of rule 17f-2 under
the  Investment  Company  Act of  1940  (the  "Act")  as of  January  12,  2004.
Management is responsible for the Company's  compliance with those requirements.
Our responsibility is to express an opinion on management's  assertion about the
Company's compliance based on our examination.

Our  examination  was  conducted  in  accordance  with   attestation   standards
established  by the  American  Institute of Certified  Public  Accountants  and,
accordingly,  included examining,  on a test basis, evidence about the Company's
compliance with those  requirements  and performing such other  procedures as we
considered  necessary in the  circumstances.  Included among our procedures were
the  following  tests  performed  as of January 12,  2004,  and with  respect to
agreement of security  purchases  and sales,  for the period from  September 30,
2003 (the date of our last examination) through January 12, 2004:

o        Count and inspection of all securities located in the vault of Bank One
         Safeguarding  Department  in Oklahoma  City,  Oklahoma,  without  prior
         notice to management,

o        Review draft of CashWorks,  Inc.  Convertible  Subordinated  Promissory
         Note and support for funding of the note on December  24,  2003,  which
         were  located  on  the  premises  of  the  Company  on  the  day of our
         inspection, without prior notice to management,

o        Confirmation  of all securities  held by book entry form in the name of
         the Company by Smith Barney in Dallas, Texas, and

o        Reconciliation  of all such  securities to the books and records of the
         Company and the Custodian.

o        Agreement of one security  purchase and no security sales or maturities
         since our last  report from the books and records of the Company to the
         funding agreements and the Company's bank statements.

<PAGE>

We believe that our examination provides a reasonable basis for our opinion. Our
examination does not provide a legal  determination on the Company's  compliance
with specified requirements.

In our opinion,  management's  assertion that Capital Southwest  Corporation and
subsidiary  complied with the  requirements  of subsections  (b) and (c) of rule
17f-2 of the Investment Company Act of 1940 as of January 12, 2004, with respect
to  securities  reflected  in the  investment  account of the  Company is fairly
stated, in all material respects.

This report is intended solely for the information and use of management and the
Board of Directors  of Capital  Southwest  Corporation  and  subsidiary  and the
Securities  and Exchange  Commission and is not intended to be and should not be
used by anyone other than these specified parties.


                                           /s/  Ernst & Young LLP


Dallas, Texas
January 16, 2004

<PAGE>

                    Management Statement Regarding Compliance
          With Certain Provisions of the Investment Company Act of 1940


We, as members of management of Capital  Southwest  Corporation  and  subsidiary
(the  "Company"),  are  responsible  for  complying  with  the  requirements  of
subsections  (b) and (c) of rule 17f-2,  "Custody of  Investments  by Registered
Management Investment  Companies," of the Investment Company Act of 1940. We are
also responsible for establishing and maintaining  effective  internal  controls
over compliance with those requirements.  We have performed an evaluation of the
Company's  compliance  with the  requirements of subsections (b) and (c) of rule
17f-2 as of January 12, 2004,  and from  September 30, 2003 through  January 12,
2004.

Based on this evaluation,  we assert that the Company was in compliance with the
requirements of subsections (b) and (c) of rule 17f-2 of the Investment  Company
Act of 1940 as of as of January 12, 2004,  and from  September  30, 2003 through
January 12, 2004, with respect to securities reflected in the investment account
of the Company.




                                                   Capital Southwest Corporation
                                                   -----------------------------
                                                   [Name of Company]


                                                   /s/ Susan K. Hodgson
                                                   -----------------------------
                                                   [Name]


                                                   Secretary-Treasurer
                                                   -----------------------------
                                                   [Title]


                                                   January 16, 2004
                                                   -----------------------------
                                                   [Date]






</TEXT>
</DOCUMENT>
