UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-07644
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Gabelli Capital Series Funds, Inc.
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(Exact name of registrant as specified in charter)
One Corporate Center
Rye, New York 10580-1422
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(Address of principal executive offices) (Zip code)
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
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(Name and address of agent for service)
registrant's telephone number, including area code: 1-800-422-3554
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Date of fiscal year end: December 31
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Date of reporting period: June 30, 2007
--------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
[ ] GABELLI CAPITAL ASSET FUND SEMIANNUAL REPORT
TO CONTRACTOWNERS
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[PHOTO OMITTED]
MARIO GABELLI, CFA,
PORTFOLIO MANAGER
OBJECTIVE:
Growth of capital. Current income is a secondary objective
PORTFOLIO:
At least 80% common stocks and securities convertible into common stocks
INCEPTION DATE:
May 1, 1995
NET ASSETS AT
JUNE 30, 2007:
$251,213,831
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TOP TEN HOLDINGS (AS OF 6/30/2007)
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PERCENTAGE OF
COMPANY TOTAL NET ASSETS
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American Express Co. 2.19%
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Cablevision Systems Corp. 2.16%
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Honeywell International Inc. 1.95%
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The Coca-Cola Co. 1.87%
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Clear Channel Communications Inc. 1.81%
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Diageo Plc, ADR 1.72%
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Baldor Electric Co. 1.63%
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General Mills Inc. 1.63%
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Thomas & Betts Corp. 1.62%
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Time Warner Inc. 1.51%
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SECTOR WEIGHTINGS (PERCENTAGE OF TOTAL NET ASSETS AS OF 6/30/2007)
[PIE CHART OMITTED] PLOT POINTS FOLLOW:
Food And Beverage 11.6%
Diversified Industrial 7.4%
Energy And Utilities 7.1%
Aviation: Parts And Services 4.7%
Financial Services 6.9%
Broadcasting 6.4%
Entertainment 4.6%
Equipment And Supplies 4.5%
Telecommunications 3.6%
Hotels And Gaming 3.4%
Other 39.8%
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED 6/30/2007)
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1 5 10 SINCE INCEPTION
QUARTER YTD YR YRS YRS 5/1/1995
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Gabelli Capital Asset Fund 7.66% 11.95% 25.47% 15.47% 12.27% 13.45%
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S&P 500 Index 6.27% 6.96% 20.57% 10.70% 7.13% 11.09%
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ABOUT INFORMATION IN THIS REPORT:
o ALL PERFORMANCE DATA QUOTED IS HISTORICAL AND THE RESULTS REPRESENT PAST
PERFORMANCE AND NEITHER GUARANTEE NOR PREDICT FUTURE INVESTMENT RESULTS. To
obtain performance data current to the most recent month (availability within
seven business days of the most recent month end), please call us at (800)
221-3253 or visit our website at WWW.GUARDIANINVESTOR.COM. Current performance
may be higher or lower than the performance quoted here. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than the original cost.
o It is important to consider carefully the Fund's investment objectives, risks,
fees, and expenses before investing. All funds involve some risk, including
possible loss of the principal amount invested.
o The S&P 500 Index is an index of 500 primarily large cap U.S. stocks, which is
generally considered to be representative of U.S. stock market activity. Index
returns are provided for comparative purposes. Please note that the index is
unmanaged and not available for direct investment and its returns do not
reflect the fees and expenses that have been deducted from the Fund.
o Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. The actual total
returns for owners of variable annuity contracts or variable life insurance
policies that provide for investment in the Fund will be lower to reflect
separate account and contract/policy charges. The return figures shown do not
reflect the deduction of taxes that a contractowner may pay on distributions
or redemption of units.
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GABELLI CAPITAL ASSET FUND 1
[ ] GABELLI CAPITAL ASSET FUND SEMIANNUAL REPORT
TO CONTRACTOWNERS
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DISCLOSURE OF FUND EXPENSES (UNAUDITED)
For the Six Month Period from January 1, 2007 through June 30, 2007
EXPENSE TABLE
We believe it is important for you to understand the impact of fees and expenses
regarding your investment. All mutual funds have operating expenses. As a
shareholder of a fund, you incur ongoing costs, which include costs for
portfolio management, administrative services, and shareholder reports (like
this one), among others. Operating expenses, which are deducted from a fund's
gross income, directly reduce the investment return of a fund. When a fund's
expenses are expressed as a percentage of its average net assets, this figure is
known as the expense ratio. The following examples are intended to help you
understand the ongoing costs (in dollars) of investing in your Fund and to
compare these costs with those of other mutual funds. The examples are based on
an investment of $1,000 made at the beginning of the period shown and held for
the entire period.
The Expense Table below illustrates your Fund's costs in two ways:
ACTUAL FUND RETURN: This section provides information about actual account
values and actual expenses. You may use this section to help you to estimate the
actual expenses that you paid over the period after any fee waivers and expense
reimbursements. The "Ending Account Value" shown is derived from the Fund's
ACTUAL return during the past six months, and the "Expenses Paid During Period"
shows the dollar amount that would have been paid by an investor who started
with $1,000 in the Fund. You may use this information, together with the amount
you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your Fund under the heading "Expenses Paid During Period" to estimate
the expenses you paid during this period.
HYPOTHETICAL 5% RETURN: This section provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio. It assumes a hypothetical annualized return of 5% before expenses during
the period shown. In this case - because the hypothetical return used is NOT the
Fund's actual return - the results do not apply to your investment and you
cannot use the hypothetical account value and expense to estimate the actual
ending account balance or expenses you paid for the period. This example is
useful in making comparisons of the ongoing costs of investing in the Fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as sales
charges (loads), redemption fees, or exchange fees, if any, which would be
described in the Prospectus. If these costs were applied to your account, your
costs would be higher. Therefore, the 5% hypothetical return is useful in
comparing ongoing costs only, and will not help you determine the relative total
costs of owning different funds.
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BEGINNING ENDING ANNUALIZED EXPENSES
ACCOUNT VALUE ACCOUNT VALUE EXPENSE PAID DURING
JANUARY 1, 2007 JUNE 30, 2007 RATIO PERIOD*
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GABELLI CAPITAL ASSET FUND
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ACTUAL FUND RETURN $1,000.00 $1,119.50 1.09% $5.70
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HYPOTHETICAL 5% RETURN $1,000.00 $1,019.28 1.09% $5.43
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* Expenses are equal to the Fund's annualized expense ratio for the last six
months multiplied by the average account value over the period, multiplied by
the number of days in the most recent fiscal half-year, then divided by 365.
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2 GABELLI CAPITAL ASSET FUND
[ ] GABELLI CAPITAL ASSET FUND SEMIANNUAL REPORT
TO CONTRACTOWNERS
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The Fund files a complete schedule of portfolio holdings with the Securities and
Exchange Commission (the "SEC") for the first and third quarters of each fiscal
year on Form N-Q, the last of which was filed for the quarter ended March 31,
2007. Shareholders may obtain this information at www.gabelli.com or by calling
the Fund at 800-GABELLI (800-422-3554). The Fund's Form N-Q is available on the
SEC's website at www.sec.gov and may also be reviewed and copied at the SEC's
Public Reference Room in Washington, DC. Information on the operation of the
Public Reference Room may be obtained by calling 1-800-SEC-0330.
PROXY VOTING
The Fund files Form N-PX with its complete proxy voting record for the 12 months
ended June 30th, no later than August 31st of each year. A description of the
Fund's proxy voting policies, procedures, and how the Fund voted proxies
relating to portfolio securities is available without charge, upon request, by
(i) calling 800-GABELLI (800-422-3554); (ii) writing to The Gabelli Funds at One
Corporate Center, Rye, NY 10580-1422; or (iii) visiting the SEC's website at
www.sec.gov.
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GABELLI CAPITAL ASSET FUND 3
[ ] GABELLI CAPITAL ASSET FUND
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SCHEDULE OF INVESTMENTS
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June 30, 2007 (Unaudited)
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COMMON STOCKS -- 96.0%
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MARKET
SHARES COST VALUE
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AEROSPACE -- 1.0%
6,000 HEICO Corp. $ 144,955 $ 252,480
35,000 Herley Industries Inc.+ 616,408 572,950
150,000 Rolls-Royce Group plc+ 1,273,743 1,622,053
5,920,000 Rolls-Royce Group plc, Cl. B 11,599 12,126
------------ ------------
2,046,705 2,459,609
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AGRICULTURE -- 0.9%
45,000 Archer-Daniels-Midland Co. 590,521 1,489,050
20,000 The Mosaic Co.+ 366,525 780,400
------------ ------------
957,046 2,269,450
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AUTOMOTIVE -- 1.3%
55,000 General Motors Corp. 1,614,743 2,079,000
18,000 Navistar International Corp.+ 373,715 1,188,000
------------ ------------
1,988,458 3,267,000
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AUTOMOTIVE: PARTS AND ACCESSORIES -- 1.6%
5,000 BorgWarner Inc. 198,525 430,200
42,000 CLARCOR Inc. 393,050 1,572,060
90,000 Dana Corp.+ 251,631 181,800
85,000 Earl Scheib Inc.+ 483,196 314,500
20,000 Midas Inc.+ 402,432 453,400
15,000 Modine Manufacturing Co. 363,510 339,000
36,000 Proliance International Inc.+ 197,995 111,600
35,000 Standard Motor Products Inc. 421,303 526,050
------------ ------------
2,711,642 3,928,610
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AVIATION: PARTS AND SERVICES -- 4.7%
38,000 Curtiss-Wright Corp. 545,113 1,771,180
6,000 EDO Corp. 152,016 197,220
70,000 GenCorp Inc.+ 714,297 914,900
55,000 Kaman Corp. 698,386 1,715,450
28,000 Precision Castparts Corp. 613,141 3,398,080
28,000 Sequa Corp., Cl. A+ 990,661 3,136,000
2,000 Sequa Corp., Cl. B+ 226,080 226,370
170,000 The Fairchild Corp., Cl. A+ 898,870 377,400
------------ ------------
4,838,564 11,736,600
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BROADCASTING -- 6.4%
45,000 CBS Corp., Cl. A 918,326 1,499,850
120,000 Clear Channel
Communications Inc. 4,546,541 4,538,400
10,000 Cogeco Inc. 195,072 373,715
58,000 Fisher Communications Inc.+ 3,131,023 2,945,820
210,000 Gray Television Inc. 1,891,630 1,946,700
18,000 Liberty Media Corp. -
Capital, Cl. A+ 942,330 2,118,240
70,000 Lin TV Corp., Cl. A+ 1,042,005 1,316,700
80,000 Sinclair Broadcast
Group Inc., Cl. A 672,744 1,137,600
20,000 Young Broadcasting Inc.,
Cl. A+ 105,350 73,800
------------ ------------
13,445,021 15,950,825
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BUSINESS SERVICES -- 1.6%
20,000 aQuantive Inc.+ 1,273,590 1,276,000
20,000 First Data Corp. 652,200 653,400
55,000 Intermec Inc.+ 1,008,568 1,392,050
75,000 Nashua Corp.+ 623,470 809,250
------------ ------------
3,557,828 4,130,700
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CABLE AND SATELLITE -- 2.9%
5,000 Adelphia Communications
Corp., Cl. A+ 5,250 100
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MARKET
SHARES COST VALUE
- --------------------------------------------------------------------------------
5,000 Adelphia Communications
Corp., Cl. A Escrow+ $ 0 $ 0
5,000 Adelphia Recovery Trust+ 0 0
150,000 Cablevision Systems
Corp., Cl. A+ 783,510 5,428,500
10,000 EchoStar Communications
Corp., Cl. A+ 294,560 433,700
25,000 Liberty Global Inc., Cl. A+ 363,484 1,026,000
9,315 Liberty Global Inc., Cl. C+ 155,984 366,080
5,000 The DIRECTV Group Inc.+ 80,250 115,550
------------ ------------
1,683,038 7,369,930
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COMMUNICATIONS EQUIPMENT -- 3.1%
80,000 Corning Inc.+ 519,700 2,044,000
53,000 Nortel Networks Corp.,
New York+ 1,347,187 1,274,650
17,000 Nortel Networks Corp.,
Toronto+ 724,875 409,819
70,000 Thomas & Betts Corp.+ 1,543,218 4,060,000
------------ ------------
4,134,980 7,788,469
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COMPUTER SOFTWARE AND SERVICES -- 1.5%
138,000 Furmanite Corp.+ 474,159 1,068,120
95,000 Yahoo! Inc.+ 3,010,270 2,577,350
------------ ------------
3,484,429 3,645,470
- --------------------------------------------------------------------------------
CONSUMER PRODUCTS -- 1.9%
10,000 Avon Products Inc. 273,243 367,500
10,000 Clorox Co. 557,423 621,000
4,000 Colgate-Palmolive Co. 237,960 259,400
4,000 Fortune Brands Inc. 322,795 329,480
1,000 National Presto Industries Inc. 27,490 62,340
15,000 Pactiv Corp.+ 152,305 478,350
35,000 Procter & Gamble Co. 1,969,070 2,141,650
100,000 Revlon Inc., Cl. A+ 262,803 137,000
65,000 Schiff Nutrition
International Inc.+ 178,934 425,750
------------ ------------
3,982,023 4,822,470
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CONSUMER SERVICES -- 0.7%
20,000 Liberty Media Corp. -
Interactive, Cl. A+ 377,352 446,600
60,000 Rollins Inc. 463,435 1,366,200
------------ ------------
840,787 1,812,800
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DIVERSIFIED INDUSTRIAL -- 7.4%
40,000 Ampco-Pittsburgh Corp. 640,525 1,603,600
83,000 Baldor Electric Co. 2,655,882 4,090,240
20,000 Cooper Industries Ltd., Cl. A 729,981 1,141,800
30,000 Crane Co. 623,766 1,363,500
26,000 Greif Inc., Cl. A 326,895 1,549,860
87,000 Honeywell International Inc. 2,710,298 4,896,360
28,000 ITT Corp. 1,233,131 1,911,840
20,000 Katy Industries Inc.+ 57,723 26,000
90,000 Myers Industries Inc. 902,449 1,989,900
------------ ------------
9,880,650 18,573,100
- --------------------------------------------------------------------------------
ELECTRONICS -- 1.9%
15,000 Cypress Semiconductor
Corp.+ 312,790 349,350
60,000 Intel Corp. 1,228,332 1,425,600
30,000 LSI Corp.+ 154,117 225,300
75,000 Texas Instruments Inc. 1,772,274 2,822,250
------------ ------------
3,467,513 4,822,500
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4 See accompanying notes to financial statements.
[ ] GABELLI CAPITAL ASSET FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
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June 30, 2007 (Unaudited)
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
- --------------------------------------------------------------------------------
ENERGY AND UTILITIES -- 7.1%
68,000 Allegheny Energy Inc.+ $ 667,644 $ 3,518,320
300,000 Aquila Inc.+ 1,131,441 1,227,000
9,000 Cameron International
Corp.+ 260,717 643,230
10,000 Chevron Corp. 624,800 842,400
30,000 ConocoPhillips 860,026 2,355,000
10,000 Devon Energy Corp. 322,357 782,900
38,000 DPL Inc. 1,032,670 1,076,920
90,000 El Paso Corp. 807,999 1,550,700
27,000 El Paso Electric Co.+ 242,555 663,120
18,000 Exxon Mobil Corp. 654,381 1,509,840
6,699 Florida Public Utilities Co. 52,922 82,398
20,000 Mirant Corp. Escrow+ (a) 0 0
2,000 Niko Resources Ltd. 109,377 182,117
5,000 Northeast Utilities 90,850 141,800
27,000 NSTAR 642,663 876,150
17,000 Progress Energy Inc., CVO+ 7,800 6,120
15,000 Royal Dutch Shell plc,
Cl. A, ADR 937,915 1,218,000
67,500 RPC Inc. 597,913 1,150,200
3,000 Southwest Gas Corp. 71,147 101,430
------------ ------------
9,115,177 17,927,645
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ENTERTAINMENT -- 4.6%
15,000 Canterbury Park
Holding Corp. 194,588 194,550
50,000 Discovery Holding Co.,
Cl. A+ 433,402 1,149,500
70,000 Dover Motorsports Inc. 446,303 424,200
170,000 Gemstar-TV Guide
International Inc.+ 782,100 836,400
88,000 Grupo Televisa SA, ADR 790,131 2,429,680
50,000 The Topps Co. Inc. 457,078 525,500
180,000 Time Warner Inc. 2,796,449 3,787,200
20,000 Triple Crown Media Inc.+ 184,942 186,400
30,000 Viacom Inc., Cl. A+ 1,107,747 1,248,000
18,000 Vivendi 529,900 777,397
------------ ------------
7,722,640 11,558,827
- -------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES -- 1.6%
60,000 Allied Waste Industries Inc.+ 601,145 807,600
80,000 Waste Management Inc. 2,709,895 3,124,000
------------ ------------
3,311,040 3,931,600
- -------------------------------------------------------------------------------
EQUIPMENT AND SUPPLIES -- 4.5%
33,000 AMETEK Inc. 225,394 1,309,440
38,000 Baldwin Technology Co. Inc.,
Cl. A+ 52,525 229,140
17,000 Belden Inc. 257,098 940,950
40,000 Capstone Turbine Corp.+ 70,880 43,200
16,800 CIRCOR International Inc. 395,819 679,224
110,000 CTS Corp. 1,013,089 1,392,600
50,000 Fedders Corp.+ 212,806 11,500
25,000 Flowserve Corp. 341,316 1,790,000
15,000 Franklin Electric Co. Inc. 148,665 707,700
40,000 GrafTech International Ltd.+ 352,242 673,600
25,500 IDEX Corp. 289,470 982,770
50,000 L.S. Starrett Co., Cl. A 747,924 916,000
15,000 Robbins & Myers Inc. 374,328 796,950
14,000 The Eastern Co. 129,462 406,840
10,000 Watts Water
Technologies Inc., Cl. A 133,177 374,700
------------ ------------
4,744,195 11,254,614
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MARKET
SHARES COST VALUE
- -------------------------------------------------------------------------------
FINANCIAL SERVICES -- 6.9%
90,000 American Express Co. $ 2,813,015 $ 5,506,200
10,000 American International
Group Inc. 674,830 700,300
18,000 Ameriprise Financial Inc. 716,337 1,144,260
25,000 Argonaut Group Inc. 509,445 780,250
20,000 BKF Capital Group Inc.+ 102,267 46,200
50,000 Citigroup Inc. 2,515,085 2,564,500
12,000 Deutsche Bank AG 720,360 1,736,880
154,300 Epoch Holding Corp.+ 412,391 2,066,077
35,000 Marsh & McLennan
Companies Inc. 1,060,061 1,080,800
10,000 Nuveen Investments Inc.,
Cl. A 633,003 621,500
15,000 The Bank of
New York Co. Inc. 481,615 621,600
10,000 The Midland Co. 81,237 469,400
------------ ------------
10,719,646 17,337,967
- -------------------------------------------------------------------------------
FOOD AND BEVERAGE -- 11.6%
5,000 Anheuser-Busch
Companies Inc. 243,348 260,800
25,000 Brown-Forman Corp., Cl. A 773,956 1,896,750
50,000 Cadbury Schweppes plc,
ADR 2,639,637 2,715,000
2,000 Campbell Soup Co. 45,393 77,620
10,000 Coca-Cola Enterprises Inc. 195,696 240,000
3,000 Coca-Cola Femsa
SAB de CV, ADR 83,953 132,840
4,000 Corn Products
International Inc. 63,231 181,800
52,000 Diageo plc, ADR 2,063,627 4,332,120
15,000 Fomento Economico Mexicano
SAB de CV, ADR 488,312 589,800
70,000 General Mills Inc. 3,322,849 4,089,400
176,000 Groupe Danone, ADR 1,880,786 2,861,760
15,000 H.J. Heinz Co. 449,931 712,050
15,000 Kraft Foods Inc., Cl. A 469,806 528,750
95,000 PepsiAmericas Inc. 1,724,843 2,333,200
14,000 PepsiCo Inc. 858,645 907,900
90,000 The Coca-Cola Co. 4,103,662 4,707,900
30,900 Tootsie Roll Industries Inc. 550,476 856,239
23,000 Wm. Wrigley Jr. Co. 1,051,878 1,272,130
5,750 Wm. Wrigley Jr. Co., Cl. B 279,613 316,250
------------ ------------
21,289,642 29,012,309
- -------------------------------------------------------------------------------
HEALTH CARE -- 2.9%
44,000 Advanced Medical
Optics Inc.+ 1,712,670 1,534,720
7,000 Alpharma Inc., Cl. A 166,872 182,070
20,000 Biomet Inc. 909,812 914,400
5,000 DENTSPLY International Inc. 109,500 191,300
10,000 Henry Schein Inc.+ 290,333 534,300
2,000 Invitrogen Corp.+ 69,870 147,500
500 Laboratory Corp. of
America Holdings+ 39,480 39,130
3,000 Patterson Companies Inc.+ 89,238 111,810
140,000 Pfizer Inc. 3,953,723 3,579,800
60,000 TL Administration Corp.+ 144,933 0
------------ ------------
7,486,431 7,235,030
- -------------------------------------------------------------------------------
HOTELS AND GAMING -- 3.4%
8,000 Boyd Gaming Corp. 396,471 393,520
18,000 Churchill Downs Inc. 747,971 942,840
2,000 Dover Downs Gaming &
Entertainment Inc. 12,605 30,020
- -------------------------------------------------------------------------------
See accompanying notes to financial statements. 5
[ ] GABELLI CAPITAL ASSET FUND
- -------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
- -------------------------------------------------------------------------------
June 30, 2007 (Unaudited)
- -------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
- -------------------------------------------------------------------------------
HOTELS AND GAMING -- (CONTINUED)
18,000 Gaylord Entertainment Co.+ $ 465,545 $ 965,520
5,000 Harrah's Entertainment Inc. 377,868 426,300
50,000 Hilton Hotels Corp. 855,558 1,673,500
12,000 International Game
Technology 326,747 476,400
14,000 Las Vegas Sands Corp.+ 795,610 1,069,460
30,000 MGM Mirage+ 863,345 2,474,400
5,000 Pinnacle Entertainment Inc.+ 160,000 140,750
------------ ------------
5,001,720 8,592,710
- -------------------------------------------------------------------------------
MACHINERY -- 1.4%
55,000 CNH Global NV 1,075,301 2,809,950
6,000 Deere & Co. 365,420 724,440
------------ ------------
1,440,721 3,534,390
- -------------------------------------------------------------------------------
MANUFACTURED HOUSING AND RECREATIONAL VEHICLES -- 0.6%
3,000 Cavco Industries Inc.+ 80,988 112,560
120,000 Champion Enterprises Inc.+ 1,193,708 1,179,600
10,000 Skyline Corp. 384,022 300,100
------------ ------------
1,658,718 1,592,260
- -------------------------------------------------------------------------------
METALS AND MINING -- 1.0%
4,000 Alcoa Inc. 115,191 162,120
5,000 IPSCO Inc. 791,681 794,400
40,000 Newmont Mining Corp. 1,680,693 1,562,400
2,000 Peabody Energy Corp. 70,704 96,760
------------ ------------
2,658,269 2,615,680
- -------------------------------------------------------------------------------
PUBLISHING -- 2.5%
18,000 Dow Jones & Co. Inc. 717,129 1,034,100
45,000 Journal Communications Inc.,
Cl. A 568,041 585,450
6,000 Lee Enterprises Inc. 170,932 125,160
21,535 McClatchy Co., Cl. A 697,215 545,051
8,000 Media General Inc., Cl. A 371,604 266,160
8,000 Meredith Corp. 171,362 492,800
30,000 News Corp., Cl. A 427,299 636,300
290,000 PRIMEDIA Inc.+ 829,451 826,500
16,000 The E.W. Scripps Co., Cl. A 667,408 731,040
15,000 The New York Times Co.,
Cl. A 515,129 381,000
25,373 Tribune Co. 763,670 745,966
------------ ------------
5,899,240 6,369,527
- -------------------------------------------------------------------------------
REAL ESTATE -- 0.7%
49,600 Griffin Land & Nurseries Inc.+ 739,126 1,790,560
- -------------------------------------------------------------------------------
RETAIL -- 1.5%
32,000 Aaron Rents Inc., Cl. A 266,360 835,200
5,000 CSK Auto Corp.+ 78,337 92,000
42,000 CVS Caremark Corp. 1,586,807 1,530,900
10,000 Ingles Markets Inc., Cl. A 125,475 344,500
15,000 Safeway Inc. 307,433 510,450
10,000 The Home Depot Inc. 368,748 393,500
------------ ------------
2,733,160 3,706,550
- -------------------------------------------------------------------------------
SPECIALTY CHEMICALS -- 2.9%
80,900 Ferro Corp. 1,623,426 2,016,837
50,000 Hawkins Inc. 681,993 772,500
30,000 Hercules Inc.+ 295,816 589,500
2,000 Huntsman Corp. 48,520 48,620
24,000 International Flavors &
Fragrances Inc. 1,143,877 1,251,360
130,000 Omnova Solutions Inc.+ 838,833 786,500
5,000 Quaker Chemical Corp. 87,062 118,000
67,000 Sensient Technologies Corp. 1,315,943 1,701,130
------------ ------------
6,035,470 7,284,447
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 3.6%
30,000 Alltel Corp. $ 1,793,635 $ 2,026,500
230,000 Cincinnati Bell Inc.+ 1,163,898 1,329,400
105,000 Qwest Communications
International Inc.+ 450,842 1,018,500
20,000 Rogers Communications Inc.,
Cl. B 268,416 849,800
150,000 Sprint Nextel Corp. 2,259,749 3,106,500
8,000 Telephone & Data
Systems Inc. 320,900 500,560
5,000 Telephone & Data
Systems Inc., Special 100,476 287,750
------------ ------------
6,357,916 9,119,010
- -------------------------------------------------------------------------------
TRANSPORTATION -- 0.6%
30,000 GATX Corp. 1,357,822 1,477,500
- -------------------------------------------------------------------------------
WIRELESS COMMUNICATIONS -- 1.7%
30,000 Price Communications Corp. 498,422 666,900
40,000 United States Cellular Corp.+ 1,505,544 3,624,000
------------ ------------
2,003,966 4,290,900
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS 157,293,583 241,209,059
- -------------------------------------------------------------------------------
WARRANTS -- 0.0%
- -------------------------------------------------------------------------------
ENERGY AND UTILITIES -- 0.0%
1,000 Mirant Corp., Ser. A,
expire 01/03/11+ 2,199 23,020
- -------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS -- 4.0%
- -------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
- -------------------------------------------------------------------------------
$10,066,000 U.S. Treasury Bills,
4.599% to 4.992%++,
07/05/07 to 09/27/07 9,992,715 9,993,504
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $167,288,497 251,225,583
OTHER ASSETS AND LIABILITIES (NET) -- 0.0% (11,752)
- -------------------------------------------------------------------------------
NET ASSETS -- 100.0% $251,213,831
- -------------------------------------------------------------------------------
(a) Security fair valued under procedures established by the Board of Directors.
The procedures may include reviewing available financial information about
the company and reviewing valuation of comparable securities and other
factors on a regular basis. At June 30, 2007, the market value of fair
valued securities amounted to $0 or 0.00% of total net assets.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR - American Depository Receipt
CVO - Contingent Value Obligation
- --------------------------------------------------------------------------------
6 See accompanying notes to financial statements.
[ ] GABELLI CAPITAL ASSET FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
June 30, 2007 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (cost $167,288,497) $251,225,583
Cash 987
Receivable for investments sold 121,233
Receivable for Fund shares sold 13,889
Dividends receivable 239,118
Prepaid expense 4,734
------------
TOTAL ASSETS 251,605,544
------------
LIABILITIES:
Payable for investments purchased 88,638
Payable for Fund shares redeemed 53,409
Payable for investment management fees 200,638
Payable for legal and audit fees 33,105
Payable for accounting fees 3,626
Other accrued expenses 12,297
------------
TOTAL LIABILITIES 391,713
------------
NET ASSETS applicable to 12,077,034
shares outstanding $251,213,831
============
NET ASSETS CONSIST OF:
Paid-in capital, at $0.001 par value $164,707,731
Accumulated net investment income 646,233
Accumulated net realized gain on investments
and foreign currency transactions 1,922,474
Net unrealized appreciation on investments 83,937,086
Net unrealized appreciation on foreign
currency translations 307
------------
NET ASSETS $251,213,831
============
NET ASSET VALUE, offering and redemption price
per share ($251,213,831 / 12,077,034 shares
outstanding; 500,000,000 shares authorized) $20.80
======
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
JUNE 30, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends (net of foreign taxes of $25,750) $ 1,686,759
Interest 266,293
-----------
TOTAL INVESTMENT INCOME 1,953,052
-----------
EXPENSES:
Management fees 1,202,535
Legal and audit fees 30,075
Custodian fees 22,888
Accounting fees 22,375
Directors' fees 10,859
Shareholder services fees 5,383
Miscellaneous expenses 18,931
-----------
TOTAL EXPENSES 1,313,046
Less: Custodian fee credits (6,227)
-----------
NET EXPENSES 1,306,819
-----------
NET INVESTMENT INCOME 646,233
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCY:
Net realized gain on investments 6,586,384
Net realized loss on foreign
currency transactions (135)
-----------
Net realized gain on investments and
foreign currency transactions 6,586,249
-----------
Net change in unrealized appreciation/
depreciation on investments 20,231,888
Net change in unrealized appreciation/
depreciation on foreign currency
translations 165
-----------
Net change in unrealized appreciation/
depreciation on investments and
foreign currency translations 20,232,053
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY 26,818,302
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $27,464,535
===========
- --------------------------------------------------------------------------------
See accompanying notes to financial statements. 7
[ ] Gabelli Capital Asset Fund
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2007 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2006
---------------- -------------------
OPERATIONS:
Net investment income $ 646,233 $ 632,601
Net realized gain on investments and foreign currency transactions 6,586,249 28,591,124
Net change in unrealized appreciation/depreciation on investments
and foreign currency translations 20,232,053 15,321,310
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 27,464,535 44,545,035
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income -- (632,604)
Net realized gain on investments -- (28,686,990)
Return of capital -- (24,731)
------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS -- (29,344,325)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net increase (decrease) in net assets from capital share transactions (10,664,357) 86,062
------------ ------------
NET INCREASE IN NET ASSETS 16,800,178 15,286,772
NET ASSETS:
Beginning of period 234,413,653 219,126,881
------------ ------------
End of period (including undistributed net investment income of
$646,233 and $0, respectively) $251,213,831 $234,413,653
============ ============
- --------------------------------------------------------------------------------
8 See accompanying notes to financial statements.
[ ] Gabelli Capital Asset Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
June 30, 2007 (Unaudited)
1. ORGANIZATION
The Gabelli Capital Asset Fund (the "Fund") is a series of Gabelli Capital
Series Funds, Inc. (the "Company"), which was organized on April 8, 1993 as a
Maryland corporation. The Company is a diversified open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Fund's primary objective is growth of capital.
Current income is a secondary objective. The Fund commenced investment
operations on May 1, 1995. Shares of the Fund are available to the public only
through the purchase of certain variable annuity and variable life insurance
contracts issued by The Guardian Insurance & Annuity Company, Inc. ("Guardian")
and other selected insurance companies.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with United States
("U.S.") generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
SECURITY VALUATION
Portfolio securities listed or traded on a nationally recognized securities
exchange or traded in the U.S. over-the-counter market for which market
quotations are readily available are valued at the last quoted sale price or a
market's official closing price as of the close of business on the day the
securities are being valued. If there were no sales that day, the security is
valued at the average of the closing bid and asked prices or, if there were no
asked prices quoted on that day, then the security is valued at the closing bid
price on that day. If no bid or asked prices are quoted on such day, the
security is valued at the most recently available price or, if the Board of
Directors (the "Board") so determines, by such other method as the Board shall
determine in good faith to reflect its fair market value. Portfolio securities
traded on more than one national securities exchange or market are valued
according to the broadest and most representative market, as determined by
Gabelli Funds, LLC (the "Adviser").
Portfolio securities primarily traded on a foreign market are generally
valued at the preceding closing values of such securities on the relevant
market, but may be fair valued pursuant to procedures established by the Board
if market conditions change significantly after the close of the foreign market
but prior to the close of business on the day the securities are being valued.
Debt instruments with remaining maturities of 60 days or less that are not
credit impaired are valued at amortized cost, unless the Board determines such
amount does not reflect the securities' fair value, in which case these
securities will be fair valued as determined by the Board. Debt instruments
having a maturity greater than 60 days for which market quotations are readily
available are valued at the average of the latest bid and asked prices. If there
were no asked prices quoted on such day, the security is valued using the
closing bid price. Futures contracts are valued at the closing settlement price
of the exchange or board of trade on which the applicable contract is traded.
Securities and assets for which market quotations are not readily available
are fair valued as determined by the Board. Fair valuation methodologies and
procedures may include, but are not limited to: analysis and review of available
financial and non-financial information about the company; comparisons to the
valuation and changes in valuation of similar securities, including a comparison
of foreign securities to the equivalent U.S. dollar value ADR securities at the
close of the U.S. exchange; and evaluation of any other information that could
be indicative of the value of the security.
In September 2006, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") 157, Fair Value
Measurements, which clarifies the definition of fair value and requires
companies to expand their disclosure about the use of fair value to measure
assets and liabilities in interim and annual periods subsequent to initial
recognition. Adoption of SFAS 157 requires the use of the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. At this time,
management is in the process of reviewing the requirements of SFAS 157 against
its current valuation policies to determine future applicability.
FOREIGN CURRENCY TRANSLATIONS
The books and records of the Fund are maintained in U.S. dollars. Foreign
currencies, investments, and other assets and liabilities are translated into
U.S. dollars at the current exchange rates. Purchases and sales of investment
securities, income, and expenses are translated at the
- --------------------------------------------------------------------------------
9
[ ] Gabelli Capital Asset Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
June 30, 2007 (Unaudited)
exchange rate prevailing on the respective dates of such transactions.
Unrealized gains and losses that result from changes in foreign exchange rates
and/or changes in market prices of securities have been included in unrealized
appreciation/depreciation on investments and foreign currency translations. Net
realized foreign currency gains and losses resulting from changes in exchange
rates include foreign currency gains and losses between trade date and
settlement date on investment securities transactions, foreign currency
transactions, and the difference between the amounts of interest and dividends
recorded on the books of the Fund and the amounts actually received. The portion
of foreign currency gains and losses related to fluctuation in exchange rates
between the initial trade date and subsequent sale trade date is included in
realized gain/(loss) on investments.
FOREIGN SECURITIES
The Fund may directly purchase securities of foreign issuers. Investing in
securities of foreign issuers involves special risks not typically associated
with investing in securities of U.S. issuers. The risks include possible
revaluation of currencies, the ability to repatriate funds, less complete
financial information about companies, and possible future adverse political and
economic developments. Moreover, securities of many foreign issuers and their
markets may be less liquid and their prices more volatile than those of
securities of comparable U.S. issuers.
FOREIGN TAXES
The Fund may be subject to foreign taxes on income, gains on investments,
or currency repatriation, a portion of which may be recoverable. The Fund will
accrue such taxes and recoveries as applicable, based upon its current
interpretation of tax rules and regulations that exist in the markets in which
it invests.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are accounted for on the trade date with realized
gain or loss on investments determined by using the identified cost method.
Interest income (including amortization of premium and accretion of discount) is
recorded on the accrual basis. Premiums and discounts on debt securities are
amortized using the effective yield to maturity method. Dividend income is
recorded on the ex-dividend date except for certain dividends which are recorded
as soon as the Fund is informed of the dividend.
EXPENSES
Certain administrative expenses are common to, and allocated among, various
affiliated funds. Such allocations are made on the basis of each Fund's average
net assets or other criteria directly affecting the expenses as determined by
the Adviser pursuant to procedures established by the Board.
CUSTODIAN FEE CREDITS AND INTEREST EXPENSE
When cash balances are maintained in the custody account, the Fund receives
credits which are used to offset custodian fees. The gross expenses paid under
the custody arrangement are included in custodian fees in the Statement of
Operations with the corresponding expense offset, if any, shown as "custodian
fee credits". When cash balances are overdrawn, the Fund is charged an overdraft
fee equal to 2.00% above the Federal Funds rate on outstanding balances. This
amount, if any, would be shown as "interest expense" in the Statement of
Operations.
DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date.
Distributions to shareholders are based on income and capital gains as
determined in accordance with federal income tax regulations, which may differ
from income and capital gains as determined under U.S. generally accepted
accounting principles. These differences are primarily due to differing
treatments of income and gains on various investment securities and foreign
currency transactions held by the Fund, timing differences, and differing
characterizations of distributions made by the Fund. Distributions from net
investment income include net realized gains on foreign currency transactions.
These book/tax differences are either temporary or permanent in nature. To the
extent these differences are permanent, adjustments are made to the appropriate
capital accounts in the period when the differences arise. These
reclassifications have no impact on the net asset value ("NAV") of the Fund.
The tax character of distributions paid during the fiscal year ended
December 31, 2006 was as follows:
Distributions paid from:
Ordinary income
(inclusive of short-term capital gains) $ 1,652,200
Net long-term capital gains 27,667,394
Non-taxable return of capital 24,731
-----------
Total distributions paid $29,344,325
===========
- --------------------------------------------------------------------------------
10
[ ] Gabelli Capital Asset Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
June 30, 2007 (Unaudited)
PROVISION FOR INCOME TAXES
The Fund intends to continue to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). It is the policy of the Fund to comply with the requirements of the
Code applicable to regulated investment companies and to distribute
substantially all of its net investment company taxable income and net capital
gains. Therefore, no provision for federal income taxes is required.
The following summarizes the tax cost of investments and the related
unrealized appreciation/(depreciation) at June 30, 2007:
GROSS GROSS
UNREALIZED UNREALIZED NET UNREALIZED
COST APPRECIATION DEPRECIATION APPRECIATION
---- ------------ ------------ ------------
Investments $170,867,330 $87,882,128 $(7,523,875) $80,358,253
In July 2006, the FASB issued Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109" ("the
Interpretation"). The Interpretation established for all entities, including
pass-through entities such as the Fund, a minimum threshold for financial
statement recognition of the benefit of positions taken in filing tax returns
(including whether an entity is taxable in a particular jurisdiction), and
required certain expanded tax disclosures. The Interpretation was implemented by
the Fund on June 29, 2007, and applied to all open tax years as of the effective
date. Management has evaluated the application of the Interpretation to the
Fund, and the adoption of the Interpretation had no impact on the amounts
reported in the financial statements.
3. AGREEMENTS WITH AFFILIATED PARTIES
Pursuant to a management agreement (the "Management Agreement"), the Fund
will pay Guardian Investor Services Corporation (the "Manager") a fee, computed
daily and paid monthly, at the annual rate of 1.00% of the value of its average
daily net assets. Pursuant to an Investment Advisory Agreement among the Fund,
the Manager, and the Adviser, the Adviser, under the supervision of the
Company's Board of Directors and the Manager, manages the Fund's assets in
accordance with the Fund's investment objectives and policies, makes investment
decisions for the Fund, places purchase and sale orders on behalf of the Fund,
provides investment research, and provides facilities and personnel required for
the Fund's administrative needs. The Adviser may delegate its administrative
role and currently has done so to PFPC Inc., the Fund's sub-administrator (the
"Sub-Administrator"). The Adviser will supervise the performance of
administrative and professional services provided by others and pays the
compensation of the Sub-Administrator and all officers and Directors of the
Company who are its affiliates. As compensation for its services and the related
expenses borne by the Adviser, the Manager pays the Adviser a fee, computed
daily and paid monthly, at the annual rate of 0.75% of the value of the Fund's
average daily net assets.
The Fund pays each Director that is not considered to be an affiliated
person an annual retainer of $3,000 plus $500 for each Board meeting attended
and they are reimbursed for any out of pocket expenses incurred in attending
meetings. All Board committee members receive $500 per meeting attended.
Directors who are directors or employees of the Adviser or an affiliated company
receive no compensation or expense reimbursement from the Fund.
4. PORTFOLIO SECURITIES
Purchases and proceeds from the sales of securities for the six months
ended June 30, 2007, other than short-term securities, aggregated $45,542,412
and $24,664,602, respectively.
5. TRANSACTIONS WITH AFFILIATES
During the six months ended June 30, 2007, the Fund paid brokerage
commissions of $46,405 to Gabelli & Company, Inc.
The cost of calculating the Fund's NAV per share is a Fund expense pursuant
to the Investment Advisory Agreement. During the six months ended June 30, 2007,
the Fund paid or accrued $22,375 to the Adviser in connection with the cost of
computing the Fund's NAV.
The Fund is assuming its portion of the allocated cost of the Gabelli
Funds' Chief Compliance Officer in the amount of $2,628 for the six months ended
June 30, 2007, which is included in miscellaneous expenses in the Statement of
Operations.
6. LINE OF CREDIT
Effective June 20, 2007, the Fund participates in an unsecured line of
credit of up to $75,000,000, and may borrow up to 10% of its net assets from the
custodian for temporary borrowing purposes. Prior to June 20, 2007, the line of
credit was $25,000,000. Borrowings under this arrangement bear interest at 0.75%
above the Federal Funds rate on outstanding balances. This amount, if any, would
be shown as "interest expense" in the Statement of Operations. During the six
months ended June 30, 2007, there were no borrowings under the line of credit.
- --------------------------------------------------------------------------------
11
[ ] Gabelli Capital Asset Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
June 30, 2007 (Unaudited)
7. CAPITAL STOCK TRANSACTIONS
Transactions in shares of capital stock were as follows:
Six Months Ended Six Months Ended
June 30, 2007 Year Ended June 30, 2007 Year Ended
(Unaudited) December 31, 2006 (Unaudited) December 31, 2006
- ------------------------------------------------------------------------------------------------------------
Shares Amount
- ------------------------------------------------------------------------------------------------------------
Shares sold 484,118 710,099 $ 9,452,213 $ 13,570,627
Shares issued upon
reinvestment of distributions -- 1,568,376 -- 29,344,326
Shares redeemed (1,020,901) (2,260,473) (20,116,570) (42,828,891)
- ------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) (536,783) 18,002 $(10,664,357) $ 86,062
- ------------------------------------------------------------------------------------------------------------
8. INDEMNIFICATIONS
The Fund enters into contracts that contain a variety of indemnifications.
The Fund's maximum exposure under these arrangements is unknown. However, the
Fund has not had prior claims or losses pursuant to these contracts and expects
the risk of loss to be remote.
9. OTHER MATTERS
The Adviser and/or affiliates received subpoenas from the Attorney General
of the State of New York and the SEC requesting information on mutual fund share
trading practices involving certain funds managed by the Adviser. GAMCO
Investors, Inc. ("GAMCO"), the Adviser's parent company, responded to these
requests for documents and testimony. In June 2006, GAMCO began discussions with
the SEC regarding a possible resolution of their inquiry. In February 2007, the
Adviser made an offer of settlement to the staff of the SEC for communication to
the Commission for its consideration to resolve this matter. This offer of
settlement is subject to agreement regarding the specific language of the SEC's
administrative order and other settlement documents. On a separate matter, in
September 2005, the Adviser was informed by the staff of the SEC that the staff
may recommend to the Commission that an administrative remedy and a monetary
penalty be sought from the Adviser in connection with the actions of two of
seven closed-end funds managed by the Adviser relating to Section 19(a) and Rule
19a-1 of the 1940 Act. These provisions require registered investment companies
to provide written statements to shareholders when a dividend is made from a
source other than net investment income. While the two closed-end funds sent
annual statements and provided other materials containing this information, the
funds did not send written statements to shareholders with each distribution in
2002 and 2003. The Adviser believes that all of the funds are now in compliance.
The Adviser believes that these matters would have no effect on the Fund or any
material adverse effect on the Adviser or its ability to manage the Fund.
- --------------------------------------------------------------------------------
12
[ ] Gabelli Capital Asset Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIODS
INDICATED:
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2007 ----------------------------------------------------------------
(UNAUDITED) 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------------------------------
OPERATING PERFORMANCE:
Net asset value, beginning of period $18.58 $17.40 $18.28 $16.44 $12.16 $14.23
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income 0.05 0.06 0.05 0.06 0.02 0.03
Net realized and unrealized gain (loss)
on investments 2.17 3.77 0.33 2.50 4.29 (2.07)
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.22 3.83 0.38 2.56 4.31 (2.04)
- ----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income -- (0.06) (0.05) (0.06) (0.02) (0.03)
Net realized gain on investments -- (2.59) (1.21) (0.66) (0.01) (0.00)(a)
Return of capital -- (0.00)(a) -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Total distributions -- (2.65) (1.26) (0.72) (0.03) (0.03)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $20.80 $18.58 $17.40 $18.28 $16.44 $12.16
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN + 12.0% 21.9% 2.0% 15.5% 35.5% (14.3)%
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $251,214 $234,414 $219,127 $240,035 $214,480 $158,831
Ratio of net investment income to
average net assets 0.54%(b) 0.28% 0.26% 0.34% 0.13% 0.20%
Ratio of operating expenses to
average net assets 1.09%(b)(c) 1.10%(c) 1.10% 1.10% 1.11% 1.12%
Portfolio turnover rate 11% 40% 25% 27% 39% 19%
- ----------------------------------------------------------------------------------------------------------------------------
+ Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the period
including reinvestment of distributions. Total return for a period of less
than one year is not annualized.
(a) Amount represents less than $0.005 per share.
(b) Annualized.
(c) The ratios do not include a reduction of expenses for custodian fee credits
on cash balances maintained with the custodian. Including such custodian
fee credits, the expense ratio for the six months ended June 30, 2007 and
the fiscal year ended December 31, 2006 would have been 1.08% and 1.09%,
respectively.
- --------------------------------------------------------------------------------
See accompanying notes to financial statements. 13
[ ] Gabelli Capital Asset Fund
- --------------------------------------------------------------------------------
BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT MANAGEMENT AND INVESTMENT
ADVISORY AGREEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Section 15(c) of the Investment Company Act of 1940, as amended (the "1940
Act"), contemplates that the Board of Directors (the "Board") of Gabelli Capital
Asset Fund (the "Fund"), the only series of Gabelli Capital Series Funds, Inc.
(the "Company"), including a majority of the Directors who have no direct or
indirect interest in the investment management agreement or the investment
advisory agreement and are not "interested persons" of the Company, as defined
in the 1940 Act (the "Independent Directors"), are required to annually review
and re-approve the terms of the Fund's existing investment management agreement
and investment advisory agreement and approve any newly proposed terms therein.
In this regard, the Board reviewed and re-approved, during the most recent six
month period covered by this report, the Investment Management Agreement (the
"Management Agreement") with Guardian Investor Services LLC (the "Manager") and
the Investment Advisory Agreement (the "Advisory Agreement") with Gabelli Funds,
LLC (the "Adviser") for the Fund.
More specifically, at a meeting held on February 22, 2007, the Independent
Directors, meeting in executive session, reviewed the written and oral
information that had been made available, and considered the factors and reached
the conclusions described below relating to the selection of the Manager and the
Adviser and the re-approval of the Management and Advisory Agreements.
1. NATURE, EXTENT, AND QUALITY OF SERVICES. The Independent Board Members
considered the nature, quality and extent of administrative and shareholder
services performed by the Adviser, including portfolio management, supervision
of Fund operations and compliance and regulatory filings and disclosures to
shareholders, general oversight of other service providers, coordination of Fund
marketing initiatives, review of Fund legal issues, assisting the Independent
Board Members in their capacity as directors, and other services. The
Independent Board Members concluded that the services are extensive in nature
and that the Adviser consistently delivered a high level of service.
2. INVESTMENT PERFORMANCE OF THE FUND AND ADVISER. The Independent Board Members
considered investment performance for the Fund over various periods of time as
compared to the performance of such Fund's Lipper, Inc. peer group, and
concluded that the Adviser was delivering satisfactory performance results over
the long term consistent with the long-term investment strategies being pursued
by the Fund.
3. COSTS OF SERVICES AND PROFITS REALIZED BY THE ADVISER.
(A) COSTS OF SERVICES TO FUND: FEES AND EXPENSES. The Independent Board Members
considered the Fund's management fee rate and expense ratio relative to industry
averages for the Fund's peer group category and the advisory fees charged by the
Adviser and its affiliates to other fund and non-fund clients. The Independent
Board Members noted that the mix of services under the Agreement are much more
extensive than those under the advisory agreements for non-fund clients.
(B) PROFITABILITY AND COSTS OF SERVICES TO ADVISER. The Independent Board
Members considered the Adviser's overall profitability and costs, and pro forma
estimates of the Adviser's profitability and costs attributable to the Fund (i)
as part of the Gabelli fund complex and (ii) assuming the Fund constituted the
Adviser's only investment company under its management. The Independent Board
Members also considered whether the amount of profit is a fair entrepreneurial
profit for the management of the Fund, and noted that the Adviser has
substantially increased its resources devoted to Fund matters in response to
recently enacted regulatory requirements and new or enhanced Fund policies and
procedures. The Independent Board Members concluded that the Adviser's
profitability was at an acceptable level, particularly in light of the high
quality of the services being provided to the Fund.
4. EXTENT OF ECONOMIES OF SCALE AS FUND GROWS. The Independent Board Members
considered whether there have been economies of scale with respect to the
management of the Fund and whether the Fund has appropriately benefited from any
economies of scale. The Independent Board Members noted that economies of scale
may develop for certain funds as their assets increase and their fund level
expenses decline as a percentage of assets, but that fund level economies of
scale may not necessarily result in Adviser level economies of scale.
5. WHETHER FEE LEVELS REFLECT ECONOMIES OF SCALE. The Independent Board Members
also considered whether the management fee rate is reasonable in relation to the
asset size of the Fund and any economies of scale that may exist and concluded
that it currently was reasonable.
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14
[ ] Gabelli Capital Asset Fund
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BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT MANAGEMENT AND INVESTMENT
ADVISORY AGREEMENTS (UNAUDITED)(CONTINUED)
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6. OTHER RELEVANT CONSIDERATIONS.
(A) ADVISER PERSONNEL AND METHODS. The Independent Board Members considered the
size, education and experience of the Adviser's staff, the Adviser's fundamental
research capabilities and the Adviser's approach to recruiting, training, and
retaining portfolio managers and other research and management personnel, and
concluded that in each of these areas the Adviser was structured in such a way
to support the high level of services being provided to the Fund.
(B) OTHER BENEFITS TO THE ADVISER. The Independent Board Members also considered
the character and amount of other incidental benefits received by the Manager
and the Adviser and its affiliates from its association with the Fund. The
Independent Board Members concluded that potential "fall-out" benefits that the
Manager or the Adviser and its affiliates may receive, such as greater name
recognition or increased ability to obtain research services, appear to be
reasonable, and may in some cases benefit the Fund.
CONCLUSIONS. In considering the Management Agreement and Investment Advisory
Agreement, the Independent Board Members did not identify any factor as
all-important or all-controlling and instead considered these factors
collectively in light of the Fund's surrounding circumstances. Based on this
review, it was the judgment of the Independent Board Members that shareholders
had received satisfactory absolute and relative performance at reasonable fees
and, therefore, re-approval of the Agreements was in the best interests of the
Fund and its shareholders. As a part of its decision making process, the
Independent Board Members noted that the Manager and the Adviser have managed
the Fund since its inception, and the Independent Board Members believe that a
long-term relationship with a capable, conscientious adviser is in the best
interests of the Fund. The Independent Board Members considered, generally, that
shareholders invested in the Fund knowing that the Manager and the Adviser
managed the Fund and knowing its investment management fee schedule. As such,
the Independent Board Members considered, in particular, whether the Manager and
the Adviser managed the Fund in accordance with its investment objectives and
policies as disclosed to shareholders. The Independent Board Members concluded
that the Fund was managed by the Manager and the Adviser consistent with its
investment objectives and policies.
Upon conclusion of their review and discussion, the Independent Directors
unanimously agreed to recommend the continuation of the Investment Management
Agreement and the Investment Advisory Agreement for the Fund.
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15
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule of Investments in securities of unaffiliated issuers as of the close of
the reporting period is included as part of the report to shareholders filed
under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's Board of Directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these
controls and procedures required by Rule 30a-3(b) under the 1940 Act
(17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the
Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act
(17 CFR 270.30a-3(d)) that occurred during the registrant's second
fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act
and Section 906 of the Sarbanes-Oxley Act of 2002 are attached
hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) Gabelli Capital Series Funds, Inc.
--------------------------------------------------------------
By (Signature and Title)* /s/ Bruce N. Alpert
---------------------------------------------------
Bruce N. Alpert, Principal Executive Officer
Date August 24, 2007
------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Bruce N. Alpert
----------------------------------------------------
Bruce N. Alpert, Principal Executive Officer
Date August 24, 2007
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By (Signature and Title)* /s/ Agnes Mullady
----------------------------------------------------
Agnes Mullady, Principal Financial Officer &
Treasurer
Date August 24, 2007
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* Print the name and title of each signing officer under his or her signature.