April 30, 2010
Mr. Sonny Oh
United States Securities and Exchange Commission
Division of Investment Management
100 F Street, N.E.
Washington, DC 20549
Re: Gabelli Capital Asset Fund (the "Fund"), a series of Gabelli Capital
Series Funds, Inc. (the "Company")
Post-Effective Amendment No. 18 on Form N-1A
(Securities Act File No. 33-61254/Investment Company Act
File No. 811- 07644)
Dear Mr. Oh:
This letter responds to Staff comments communicated by telephone on
April 12, 2010, with respect to the Post-Effective Amendment No. 18 ("PEA No.
18") to the Registration Statement on Form N-1A of the Company that was filed
with the Securities and Exchange Commission (the "SEC") on February 26, 2010
(accession number 0000950123-10-017801).
The Company's responses to the Staff comments are reflected below. The
Company has restated the substance of the Staff comments for ease of reference.
COMMENT #1-GENERAL: You requested that the Fund add the necessary
legend disclosure if the Fund intends to utilize a summary prospectus.
RESPONSE #1: A summary prospectus will not be utilized at this
time and therefore the legend has not been added.
COMMENT #2-FACING PAGE: You requested that the Fund disclose the date
of the proposed public offering and the title of the securities being
registered to the facing page of Form N-1A.
RESPONSE #2: The Company has added the requested disclosure.
COMMENT #3(A)-FRONT AND BACK COVER PAGES: You requested that the Fund
disclose the classes of shares of the Fund on the front cover page, if
applicable.
RESPONSE #3(A): The Fund does not have different classes of
shares and therefore no additional disclosure is necessary.
COMMENT #3(B)-BACK COVER PAGE: You requested that the Fund disclose on
the back cover the specific internet address where shareholders can
obtain free copies of the Fund's annual/semi-annual reports and
Statement of Additional Information (`SAI").
RESPONSE #3(B): The Company has added the following website to
the back cover page as the internet address where shareholders
can obtain free copies of the Fund's annual/semi-annual
reports and SAI: www.gabelli.com/CapitalAssetFund.
COMMENT #3(C)-BACK COVER PAGE: You requested that the Fund disclose
additional information regarding the Public Reference Section of the
SEC pursuant to Item 1(b)(3) of Form N-1A.
RESPONSE #3(C): The Company has added the following after the
first bullet on the Back Cover page: "For information on the
operation of the Public Reference Section call 202-551-8090."
COMMENT #4-FEES AND EXPENSES OF THE FUND: You requested that a
shareholder fees table be added to the prospectus.
RESPONSE #4: The Company has added the following Shareholder
Fees table:
SHAREHOLDER FEES (fees paid directly from your investment):
There are no Shareholder Fees.
COMMENT #5(A)-PORTFOLIO TURNOVER: You requested that the Fund delete
the third sentence of the Portfolio Turnover section.
RESPONSE #5(A): The Company has deleted the third sentence of
the Portfolio Turnover section.
COMMENT #5(B)-PORTFOLIO TURNOVER: You requested that if the Portfolio
Turnover is greater than 100%, to add risk disclosure regarding "Active
Trading Risk".
RESPONSE #5(B): The Portfolio Turnover rate during the Fund's
most recent fiscal year was 12.06% of the average value of its
portfolio, and therefore no additional risk disclosure was
added.
COMMENT #6(A)-PRINCIPAL INVESTMENT STRATEGIES: You requested that the
language in the summary section of the prospectus under "Principal
Investment Strategies" be a summary that is based on and corresponds to
the disclosure in the statutory section of the prospectus.
RESPONSE #6(A): The Company has replaced the first sentence of
the first paragraph under "Principal Investment Strategies"
with the following sentence:
The Fund invests primarily in equity securities (common stock,
preferred stock, and securities that may be converted at a
later time into common stock) of companies that are selling in
the public market at a significant discount to their "private
market value."
The Company has deleted the first three sentences of the
second paragraph under "Principal Investment Strategies".
The Company does not consider defensive investments to be a
principal investment technique and has intentionally left
defensive investment disclosure out of the summary section.
The Company will continue to have "Defensive Investments"
disclosure under the "Additional Information About the Fund's
Investment Objective, Investment Strategies and Related Risks"
section.
COMMENT #6(B)-PRINCIPAL INVESTMENT STRATEGIES: You requested that
language in the statutory section of the prospectus include a fuller
description of the investment objectives, investment strategies and
related risks.
RESPONSE #6(B): The Company has added the following paragraph
after the first paragraph of the "Additional Information About
the Fund's Investment Objective, Investment Strategies and
Related Risks" section:
The Fund's assets will be invested primarily in a broad range
of readily marketable equity securities of: common stock,
preferred stock, and securities that may be converted at a
later time into common stock, that are selling in the public
market at a significant discount to their "private market
value". Private market value is the value that the Fund's
Adviser believes informed investors would be willing to pay
for a company. The Adviser considers factors such as price,
earnings expectations, earnings and price histories, balance
sheet characteristics, and perceived management skills. The
Adviser also considers changes in economic and political
outlooks as well as individual corporate developments. The
Adviser will sell any Fund investments that lose their
perceived value when compared to other investment
alternatives.
The Company has deleted the first three sentences of the
former second paragraph under the "Additional Information
About the Fund's Investment Objective, Investment Strategies
and Related Risks" section.
The Company has replaced the "Foreign Securities" technique
under "Additional Information About the Fund's Investment
Objective, Investment Strategies and Related Risks" section
with the following disclosure:
o FOREIGN SECURITIES. The Fund may invest up to 25% of its
total assets in the securities (common stock, preferred stock,
and securities that may be converted at a later time into
common stock) of non-U.S. issuers.
COMMENT #6(C)-PRINCIPAL INVESTMENT STRATEGIES: You requested that the
Fund add fuller disclosure about "Interest Rate Risk" and "Credit Risk"
to the statutory section of the prospectus.
RESPONSE #6(C): The Company has, as requested, added
disclosure concerning interest rate and credit risk. The
revised risk disclosure entitled "Interest Rate Risk and
Credit Risk" is as follows:
o INTEREST RATE RISK AND CREDIT RISK. Investments in preferred
stock and securities convertible into or exchangeable for
common or preferred stock involve interest rate risk and
credit risk. When interest rates decline, the value of such
securities generally rises. Conversely, when interest rates
rise, the value of such securities generally declines. The
magnitude of the decline will be greater for longer-term debt
securities than shorter-term debt securities. It is also
possible that the issuer of a security will not be able to
make interest and principal payments when due. Changes in an
issuer's credit rating or the market's perception of an
issuer's credit worthiness may also affect the value of the
Fund's investment in that issuer.
COMMENT #7(A)-PRINCIPAL RISKS: You requested that the summary of
Principal Risks be a summary that is based on and corresponds to the
additional information about the Principal Risks in the statutory
section of the prospectus and that it include fuller disclose regarding
the Principal Risks of the Fund.
RESPONSE #7(A): The Company respectfully submits that, in
accordance with Form N-1A, the current descriptions of the
principal risks are adequate and that no additional risk
information other than that discussed in this letter is
necessary. In addition, the applicable disclosure is uniformly
consistent in the open-end Funds in the Gabelli Fund Complex.
COMMENT #7(B)-PRINCIPAL RISKS: You requested that the Fund add
"Pre-Payment Risk" as another risk related to convertible and preferred
securities, if applicable.
RESPONSE #7(B): The Company has inserted the following bullet
point to the "Principal Risks" section and the "Additional
Information About the Fund's Investment Objectives, Investment
Strategies and Related Risks" section:
O PRE-PAYMENT RISK. The Fund may experience losses when an
issuer exercises its right to pay principal on an obligation
held by the Fund (such as a convertible security) earlier than
expected. This may happen during a period of declining
interest rates. Under these circumstances, the Fund may be
unable to recoup all of its initial investment and will suffer
from having to invest in lower yielding securities. The loss
of higher yielding securities and the reinvestment at lower
interest rates can reduce the Fund's income, total return, and
share price.
COMMENT #7(C)-PRINCIPAL RISKS: You have asked the Fund to confirm that
derivatives are not part of a principal investment strategy of the
Fund.
RESPONSE #7(C): The Company confirms that the Fund does not
use derivatives as part of its principal investment strategy.
COMMENT #8-PERFORMANCE: You requested that the Fund include a
parenthetical phrase after the comparative index in the Average Annual
Total Return table to disclose that the Index does not include fees,
expenses or taxes, if applicable.
RESPONSE #8: The Company has added the following parenthetical
after the S&P 500 Index in the Average Annual Total Returns
table: "(reflects no deduction for fees, expenses or taxes)"
COMMENT #9-MANAGEMENT: You requested that the Fund only disclose the
information required by Item 5(a) and 5(b) of Form N-1A.
RESPONSE #9: The Company has deleted the language referring to
the portfolio manager's employment with affiliates of the
Fund.
COMMENT #10(A)-TAX INFORMATION: You requested that the Fund revise the
Tax Information section to reflect the specific tax information for
purchasers of the Fund and make the disclosure specific to contract
owners.
RESPONSE #10(A): The following disclosure has been added to
the summary and statutory sections of the prospectus:
Distributions made by the Fund to an insurance company
separate account, and exchanges and redemptions of Fund shares
made by a separate account, ordinarily do not cause the
corresponding contract owners to recognize income or gain for
federal income tax purposes.
COMMENT #10(B)-FINANCIAL INTERMEDIARIES: You have requested that the
Fund include disclosure regarding Financial Intermediary Compensation
in Item 8 of Form N-1A.
RESPONSE #10(B): The Company has intentionally omitted the
required disclosure because the Fund does not compensate
financial intermediaries.
COMMENT #11-RISKS: You requested that the Fund add appropriate
sub-captions to the disclosure required by Item 9 of Form N-1A.
RESPONSE #11: The Company has added the sub-captions for
"Investment Objectives" and "Implementation of Investment
Objectives" in the Item 9 disclosure.
COMMENT #12-MANAGEMENT OF THE FUND: You requested that the Fund update
the Regulatory Matters paragraph under Management of the Fund, if
applicable.
RESPONSE #12: The Company has verified that the "Regulatory
Matters" paragraph is up to date and therefore no additional
disclosure is required.
COMMENT #13-PRICING OF FUND SHARES: You requested that the Fund
disclose the effects of fair value pricing pursuant to Item 11(a)(1) of
Form N-1A, and describe how fair value pricing may cause the Net Asset
Value ("NAV") to differ substantially from the NAV using closing prices
of an exchange.
RESPONSE #13: The Company has added the following disclosure
under "Pricing of Fund Shares":
Fair value represents a good faith approximation of the value
of a security. The fair value of one or more securities may
not, in retrospect, be the price
at which those assets could have been sold during the period
in which the particular fair values were used in determining
the Fund's NAV. Investors who purchase or redeem Fund shares
on days when the Fund is holding fair-valued securities may
receive a greater or lesser number of shares, or higher or
lower redemption proceeds, that they would have received if
the Fund had not fair-valued the securities.
COMMENT #14-PURCHASE AND REDEMPTION OF SHARES: You requested that that
the Fund clarify whether restrictions placed on transfer activity that
are reasonably believed to prevent harm to contract owners are uniform
or discretionary, and if discretionary to add risk disclosure.
RESPONSE #14: The restrictions placed on transfer activity
that The Guardian Life Insurance Company of America reasonably
believes will prevent harm to other contract owners are
uniform, and therefore we have not included additional
disclosure.
COMMENT #15(A)-PORTFOLIO HOLDINGS INFORMATION: You requested that the
Fund disclose whether there are any restrictions placed on the use of
information about portfolio securities, including any requirements that
the information be kept confidential, and in particular whether third
parties that receive portfolio holdings information have a duty not to
trade based on this information, and any procedures to monitor the use
of this information.
RESPONSE #15(A): The Company has added language concerning the
duty of third parties to keep information confidential to
clarify that a third party is prohibited from sharing
non-public information and from trading upon non-public
information.
COMMENT #15(B)-PORTFOLIO HOLDINGS INFORMATION: You requested that the
Fund disclose the identity of any third party that receives portfolio
holding information from the Fund pursuant to any ongoing arrangement.
RESPONSE #15(B): The identity of third party service providers
is disclosed in the SAI under the "Portfolio Holdings
Information" section, and therefore no additional disclosure
was added.
COMMENT #16-MANAGEMENT OF THE FUND: You requested that the Fund update
Item 17 to conform to the new Form N-1A requirements as of May 1, 2010.
RESPONSE #16: This required disclosure has been added to the
SAI.
COMMENT #17-PROXY VOTING POLICIES: You have requested that the Fund
attach or describe the proxy voting guidelines in detail.
RESPONSE #17: The proxy voting policies and procedures are
attached as an exhibit to the 485(b) filing.
COMMENT #18-PART C: You requested that the Fund renumber Part C to
conform to Form N-1A.
RESPONSE #18: The Company has reviewed Part C and determined
that the numbers conform with Form N-1A.
The Company hereby represents that, with respect to the filing of the PEA No. 18
made by the Company with the SEC and reviewed by the Staff, it acknowledges
that:
1. the Company is responsible for the adequacy and accuracy of
the applicable disclosure in the filing;
2. Staff comments or changes to disclosure in response to Staff
comments in the filing reviewed by the Staff do not foreclose
the SEC from taking any action with respect to the filing; and
3. the Company may not assert Staff comments as a defense in any
proceeding initiated by the SEC or any person under federal
securities laws of the United States.
Should you have any questions regarding the foregoing, please do not
hesitate to contact Helen A. Robichaud at PNC Global Investment
Servicing, Inc., the Fund's Sub-Administrator, at 671-338-4595.
Very truly yours,
/s/ Bruce N. Alpert
-------------------
Bruce N. Alpert
President
cc: Helen A. Robichaud Arlene Lonergan
PNC Global Investment PNC Global Investment
Servicing, Inc. Servicing, Inc.
Peter D. Goldstein Rose F. DiMartino
Gabelli Funds, LLC Willkie Farr & Gallagher LLP
David Joire
Willkie Farr & Gallagher LLP