April 18, 2007

To Our Shareholders

On July 16th, I will retire as president and chief executive  officer of Capital
Southwest  Corporation.  Thereafter,  I will serve as chairman of the board in a
non-executive  capacity.  I will still have an office at Capital  Southwest  and
will still be involved in our investment  activities,  but will devote less time
to the company's business.

My successor is Gary L. Martin,  who joined Capital Southwest in 1972, is a vice
president of our company and has been a director since 1988.  Since 1979, he has
been president of The Whitmore  Manufacturing  Company in Rockwall,  Texas (near
Dallas), a very profitable industrial lubricants company wholly-owned by Capital
Southwest.  Gary Martin's  combination  of investment  and operating  experience
equips him to be an  effective  leader of Capital  Southwest.  I am confident he
will be  instrumental  in sustaining  our growth and  maintaining an appropriate
balance between our long-term holdings and our continuing new investments.

Over 45 years have passed since I joined  Capital  Southwest  Corporation  as an
investment  analyst on April 1, 1962, and 27 years have passed since I was named
president  in 1980.  I am indeed  fortunate to have devoted most of my career to
this fascinating business. I have made many mistakes,  but I have always managed
this company for the benefit of our long-term shareholders.  The extent to which
our  shareholders  (including me) have been rewarded is detailed in the attached
press release.

As I approach  retirement,  I commend all of the  officers,  directors and staff
members of Capital  Southwest  Corporation  and its portfolio  companies,  whose
dedicated service during the past half century has built our company's excellent
record  and  well-deserved  reputation.  It is a fitting  tribute  that  Capital
Southwest  was recently  included in  Forbes.com's  List of  America's  100 Most
Trustworthy Companies.


                                    Sincerely,

                                    /s/  William R. Thomas
                                    ----------------------
                                    Name: William R. Thomas
                                    Title: President and Chief Executive Officer