-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AH8pPW1L/p9BBVTm/ysbj44ebTyYk/31Wu78h8nIMvJ9hTaaqofj07CCCuTQQ9da P8heNpD/eMzk1fG6YTnazg== 0000935069-09-000692.txt : 20090309 0000935069-09-000692.hdr.sgml : 20090309 20090309135809 ACCESSION NUMBER: 0000935069-09-000692 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20081231 FILED AS OF DATE: 20090309 DATE AS OF CHANGE: 20090309 EFFECTIVENESS DATE: 20090309 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GABELLI CAPITAL SERIES FUNDS INC CENTRAL INDEX KEY: 0000901246 IRS NUMBER: 133761834 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-07644 FILM NUMBER: 09665616 BUSINESS ADDRESS: STREET 1: ONE CORPORATE CENTER CITY: RYE STATE: NY ZIP: 10580 BUSINESS PHONE: 8004223554 MAIL ADDRESS: STREET 1: ONE CORPORATE CENTER CITY: RYE STATE: NY ZIP: 10580 FORMER COMPANY: FORMER CONFORMED NAME: WCC CAPITAL GROWTH FUND INC DATE OF NAME CHANGE: 19930714 0000901246 S000001060 GABELLI CAPITAL ASSET FUND C000002849 CLASS AAA N-CSR 1 capasset_ncsr1208.txt GABELLI CAPITAL ASSET FUND 12-31-08 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 Gabelli Capital Series Funds, Inc. (Exact name of registrant as specified in charter) One Corporate Center Rye, New York 10580-1422 (Address of principal executive offices) (Zip code) Bruce N. Alpert Gabelli Funds, LLC One Corporate Center Rye, New York 10580-1422 (Name and address of agent for service) registrant's telephone number, including area code: 1-800-422-3554 Date of fiscal year end: December 31 Date of reporting period: December 31, 2008 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. ANNUAL REPORT GABELLI CAPITAL ASSET FUND TO CONTRACTOWNERS (PHOTO OF MARIO GABELLI) 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 DECEMBER 31, 2008: $108,862,763 AN UPDATE FROM FUND MANAGEMENT In 2008, the Gabelli Capital Asset Fund (the "Fund") posted a decline of (40.43)% versus (36.99)% for the S&P 500 Index. The collapse in economic activity in the fourth quarter was extraordinary and weighed heavily on our performance for the quarter, and hence the year, as the fourth quarter was the worst quarter for stocks in many years. This was such a miserable year, with the Dow's decline of 31.9%, its worst showing since 1931, and the S&P 500's decline of 37.0%, its poorest performance since 1937. All ten industry sectors in the S&P 500 posted declines, which might be a first. The three best performing sectors were consumer staples, down 15%, health care, down 23%, and utilities, with a decline of 29%. Cereal maker General Mills (0.3% of net assets as of December 31, 2008) and trash collector Waste Management (1.8%) were major positive contributors to performance. Griffin Land & Nurseries (1.7%), the real estate and landscape nursery operator, was also up for the year and outperformed. The Fund benefited from mergers and acquisitions, albeit muted, during the year. Holdings of Wm. Wrigley Jr. Co. and Rohm and Haas (0.7%) were the subjects of strategic buyouts during the year. Several of the Fund's long-time media holdings were negatively impacted by the severe downturn in advertising with News Corp. (0.2%) Viacom (1.8%), Liberty Media (0.1%), and CBS Corp. (0.4%) among the biggest detractors from performance. One of the Fund's largest financial holdings, American Express (1.5%) suffered from its exposure to strained consumers and more costly funding, despite its premium positioning. THE VIEWS EXPRESSED ABOVE ARE THOSE OF THE FUND'S PORTFOLIO MANAGER AS OF DECEMBER 31, 2008 AND ARE SUBJECT TO CHANGE WITHOUT NOTICE. THEY DO NOT NECESSARILY REPRESENT THE VIEWS OF GABELLI FUNDS. THE VIEWS EXPRESSED HEREIN ARE BASED ON CURRENT MARKET CONDITIONS AND ARE NOT INTENDED TO PREDICT OR GUARANTEE THE FUTURE PERFORMANCE OF ANY FUND, ANY INDIVIDUAL SECURITY, ANY MARKET OR MARKET SEGMENT. THE COMPOSITION OF EACH FUND'S PORTFOLIO IS SUBJECT TO CHANGE. NO RECOMMENDATION IS MADE WITH RESPECT TO ANY SECURITY DISCUSSED HEREIN. ABOUT INFORMATION IN THIS REPORT: - - 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. - - 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. GABELLI CAPITAL ASSET FUND 1 ANNUAL REPORT GABELLI CAPITAL ASSET FUND TO CONTRACTOWNERS TOP TEN HOLDINGS (AS OF 12/31/2008) (UNAUDITED)
PERCENTAGE OF COMPANY TOTAL NET ASSETS - ------- ---------------- Diageo plc, ADR 2.5% Honeywell International Inc. 2.5% The Coca-Cola Co. 2.2% Cablevision Systems Corp., Cl. A 2.2% Pfizer Inc. 2.1% Newmont Mining Corp. 1.9% Allegheny Energy Inc. 1.9% Waste Management Inc. 1.8% Viacom Inc., Cl. A 1.8% Griffin Land & Nurseries Inc. 1.7%
SECTOR WEIGHTINGS (PERCENTAGE OF TOTAL NET ASSETS AS OF 12/31/2008) (UNAUDITED) (PIE CHART) Aviation: Parts And Services 3.6% Other 34.4% Food And Beverage 13.5% Energy And Utilities 10.4% Financial Services 6.3% Diversified Industrial 7.0% Entertainment 6.9% Retail 4.0% Equipment And Supplies 5.3% Health Care 4.3% Cable And Satellite 4.3%
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED 12/31/2008)
1 5 10 SINCE INCEPTION YR YRS YRS 5/1/1995 ------- ------ ------ --------------- Gabelli Capital Asset Fund (40.43)% (1.35)% 3.47% 7.52% S&P 500 Index (36.99)% (2.19)% (1.38)% 6.06%
ABOUT INFORMATION IN THIS REPORT: 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. 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. 2 GABELLI CAPITAL ASSET FUND ANNUAL REPORT GABELLI CAPITAL ASSET FUND TO CONTRACTOWNERS GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (UNAUDITED) To give you a comparison, this chart shows you the performance of a hypothetical $10,000 investment made in the Fund and in the S&P 500 Index. Index returns do not include the fees and expenses of the Fund, but do include the reinvestment of dividends. (PERFORMANCE GRAPH)
Gabelli Capital Asset Fund S&P 500 Index ----------- ------------- 5/1/1995 10000 10000 12/31/1995 10835 12176 12/31/1996 12029 14970 12/31/1997 17152 19963 12/31/1998 19161 25672 12/31/1999 22956 31071 12/31/2000 24233 28244 12/31/2001 24853 24889 12/31/2002 21297 19391 12/31/2003 28848 24950 12/31/2004 33332 27662 12/31/2005 34008 29020 12/31/2006 41466 33600 12/31/2007 45252 35444 12/31/2008 26957 22333
Past performance is not predictive of future results. The S&P 500 Index is an unmanaged indicator of stock market performance. 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 September 30, 2008. 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. GABELLI CAPITAL ASSET FUND 3 ANNUAL REPORT GABELLI CAPITAL ASSET FUND TO CONTRACTOWNERS DISCLOSURE OF FUND EXPENSES (UNAUDITED) For the Six Month Period from July 1, 2008 through December 31, 2008 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. The "Annualized Expense Ratio" represents the actual expenses for the last six months and may be different from the expense ratio in the Financial Highlights which is for the year ended December 31, 2008.
BEGINNING ENDING ANNUALIZED EXPENSES ACCOUNT VALUE ACCOUNT VALUE EXPENSE PAID DURING JULY 1, 2008 DECEMBER 31, 2008 RATIO PERIOD* ------------- ----------------- ---------- ----------- GABELLI CAPITAL ASSET FUND ACTUAL FUND RETURN $1,000.00 $ 698.70 1.17% $5.00 HYPOTHETICAL 5% RETURN $1,000.00 $1,019.25 1.17% $5.94
* 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 366. 4 GABELLI CAPITAL ASSET FUND Gabelli Capital Asset Fund SCHEDULE OF INVESTMENTS December 31, 2008 COMMON STOCKS -- 100.1%
MARKET SHARES COST VALUE - ------ ------------ ------------ AEROSPACE -- 1.3% 4,500 HEICO Corp. $ 107,359 $ 174,735 44,000 Herley Industries Inc.+ 744,877 540,320 150,000 Rolls-Royce Group plc+ 1,273,743 723,549 8,580,000 Rolls-Royce Group plc, Cl. C+ 13,378 12,336 ------------ ------------ 2,139,357 1,450,940 ------------ ------------ AGRICULTURE -- 1.3% 50,000 Archer-Daniels-Midland Co. 1,324,216 1,441,500 500 The Mosaic Co. 10,688 17,300 ------------ ------------ 1,334,904 1,458,800 ------------ ------------ AUTOMOTIVE -- 0.6% 60,000 General Motors Corp. 1,046,859 192,000 20,000 Navistar International Corp.+ 504,789 427,600 ------------ ------------ 1,551,648 619,600 ------------ ------------ AUTOMOTIVE: PARTS AND ACCESSORIES -- 2.0% 1,000 BERU AG 106,336 102,863 10,000 BorgWarner Inc. 198,525 217,700 32,000 CLARCOR Inc. 295,800 1,061,760 85,000 Earl Scheib Inc.+ 483,196 52,700 30,000 Midas Inc.+ 555,276 314,700 12,000 Modine Manufacturing Co. 247,615 58,440 20,000 Proliance International Inc.+ 93,443 7,200 100,000 Standard Motor Products Inc. 921,909 346,000 ------------ ------------ 2,902,100 2,161,363 ------------ ------------ AVIATION: PARTS AND SERVICES -- 3.6% 34,000 Curtiss-Wright Corp. 491,261 1,135,260 80,000 GenCorp Inc.+ 747,293 294,400 50,000 Kaman Corp. 623,073 906,500 26,000 Precision Castparts Corp. 800,795 1,546,480 115,000 The Fairchild Corp., Cl. A+ 424,824 34,500 ------------ ------------ 3,087,246 3,917,140 ------------ ------------ BROADCASTING -- 2.0% 50,000 CBS Corp., Cl. A 985,124 412,000 10,000 Cogeco Inc. 195,072 201,701 54,000 Fisher Communications Inc. 2,673,403 1,114,560 115,000 Gray Television Inc. 832,255 46,000 18,000 Liberty Media Corp. - Capital, Cl. A+ 150,773 84,780 70,000 LIN TV Corp., Cl. A+ 627,707 76,300 80,000 Sinclair Broadcast Group Inc., Cl. A 672,744 248,000 ------------ ------------ 6,137,078 2,183,341 ------------ ------------ BUSINESS SERVICES -- 2.1% 2,500 Ascent Media Corp., Cl. A+ 43,340 54,600 40,000 Diebold Inc. 1,500,622 1,123,600 55,000 Intermec Inc.+ 1,046,429 730,400 75,000 Nashua Corp.+ 623,470 393,750 ------------ ------------ 3,213,861 2,302,350 ------------ ------------ CABLE AND SATELLITE -- 4.3% 5,000 Adelphia Communications Corp., Cl. A+ (a) 5,250 0 5,000 Adelphia Communications Corp., Cl. A, Escrow+ (a) 0 0 5,000 Adelphia Recovery Trust+ 0 2 140,000 Cablevision Systems Corp., Cl. A 913,899 2,357,600
MARKET SHARES COST VALUE - ------ ------------ ------------ 10,000 DISH Network Corp., Cl. A+ $ 241,539 $ 110,900 2,000 EchoStar Corp., Cl. A+ 53,021 29,740 25,000 Liberty Global Inc., Cl. A+ 363,484 398,000 9,315 Liberty Global Inc., Cl. C+ 155,984 141,402 5,000 Scripps Networks Interactive Inc., Cl. A 212,424 110,000 65,000 The DIRECTV Group Inc.+ 1,540,273 1,489,150 ------------ ------------ 3,485,874 4,636,794 ------------ ------------ COMMUNICATIONS EQUIPMENT -- 1.7% 78,000 Corning Inc. 505,460 743,340 43,000 Nortel Networks Corp., New York+ 141,799 11,180 44,000 Thomas & Betts Corp.+ 1,047,018 1,056,880 ------------ ------------ 1,694,277 1,811,400 ------------ ------------ COMPUTER SOFTWARE AND SERVICES -- 1.4% 125,000 Furmanite Corp.+ 434,644 673,750 4,000 NCR Corp.+ 108,982 56,560 64,000 Yahoo! Inc.+ 1,995,758 780,800 ------------ ------------ 2,539,384 1,511,110 ------------ ------------ CONSUMER PRODUCTS -- 1.5% 15,000 Pactiv Corp.+ 152,305 373,200 14,000 Procter & Gamble Co. 892,133 865,480 7,000 Revlon Inc., Cl. A+ 184,193 46,690 65,000 Schiff Nutrition International Inc.+ 178,934 388,050 ------------ ------------ 1,407,565 1,673,420 ------------ ------------ CONSUMER SERVICES -- 1.5% 5,000 Liberty Media Corp. - Interactive, Cl. A+ 93,974 15,600 88,000 Rollins Inc. 453,101 1,591,040 ------------ ------------ 547,075 1,606,640 ------------ ------------ DIVERSIFIED INDUSTRIAL -- 7.0% 29,000 Ampco-Pittsburgh Corp. 469,223 629,300 70,000 Baldor Electric Co. 2,306,374 1,249,500 25,000 Cooper Industries Ltd., Cl. A 814,394 730,750 30,000 Crane Co. 605,650 517,200 4,000 Greif Inc., Cl. A 46,099 133,720 82,000 Honeywell International Inc. 2,497,596 2,692,060 24,000 ITT Corp. 1,081,200 1,103,760 23,000 Katy Industries Inc.+ 62,153 26,450 65,000 Myers Industries Inc. 693,228 520,000 ------------ ------------ 8,575,917 7,602,740 ------------ ------------ ELECTRONICS -- 1.6% 30,000 Cypress Semiconductor Corp.+ 130,598 134,100 20,000 Intel Corp. 416,200 293,200 30,000 LSI Corp.+ 154,117 98,700 75,000 Texas Instruments Inc. 1,772,274 1,164,000 ------------ ------------ 2,473,189 1,690,000 ------------ ------------ ENERGY AND UTILITIES -- 10.4% 60,000 Allegheny Energy Inc. 601,525 2,031,600 13,000 Cameron International Corp.+ 187,927 266,500 9,000 Chevron Corp. 562,320 665,730 22,000 ConocoPhillips 615,765 1,139,600 10,000 Devon Energy Corp. 322,357 657,100 38,000 DPL Inc. 1,032,670 867,920 90,000 El Paso Corp. 807,999 704,700
See accompanying notes to financial statements. 5 Gabelli Capital Asset Fund SCHEDULE OF INVESTMENTS (CONTINUED) December 31, 2008
MARKET SHARES COST VALUE - ------ ------------ ------------ ENERGY AND UTILITIES (CONTINUED) 27,000 El Paso Electric Co.+ $ 242,555 $ 488,430 16,000 Exxon Mobil Corp. 589,965 1,277,280 6,500 Florida Public Utilities Co. 51,350 68,315 15,408 Great Plains Energy Inc. 399,375 297,837 20,000 Mirant Corp., Escrow+ (a) 0 0 27,000 NSTAR 642,662 985,230 17,000 Progress Energy Inc., CVO+ (a) 7,800 5,610 15,000 Royal Dutch Shell plc, Cl. A, ADR 937,915 794,100 75,000 RPC Inc. 715,212 732,000 9,000 Southwest Gas Corp. 253,261 226,980 3,291 Sunpower Corp., Cl. B+ 187,651 100,178 ------------ ------------ 8,158,309 11,309,110 ------------ ------------ ENTERTAINMENT -- 6.9% 25,000 Discovery Communications Inc., Cl. A+ 229,703 354,000 25,000 Discovery Communications Inc., Cl. C+ 160,359 334,750 100,000 Grupo Televisa SA, ADR 1,404,653 1,494,000 72,000 Liberty Media Corp. - Entertainment, Cl. A+ 791,557 1,258,560 140,000 Time Warner Inc. 2,239,377 1,408,400 95,000 Viacom Inc., Cl. A+ 3,980,097 1,911,400 25,000 Vivendi 833,081 808,486 ------------ ------------ 9,638,827 7,569,596 ------------ ------------ ENVIRONMENTAL SERVICES -- 1.8% 60,000 Waste Management Inc. 2,096,890 1,988,400 ------------ ------------ EQUIPMENT AND SUPPLIES -- 5.3% 32,000 AMETEK Inc. 218,856 966,720 38,000 Baldwin Technology Co. Inc., Cl. A+ 52,525 60,800 16,000 Belden Inc. 244,993 334,080 40,000 Capstone Turbine Corp.+ 70,880 33,600 15,000 CIRCOR International Inc. 496,757 412,500 120,000 CTS Corp. 1,040,515 661,200 12,000 Flowserve Corp. 294,857 618,000 14,500 Franklin Electric Co. Inc. 144,478 407,595 40,000 GrafTech International Ltd.+ 352,242 332,800 40,000 IDEX Corp. 753,182 966,000 46,000 L.S. Starrett Co., Cl. A 677,849 740,600 1,000 Robbins & Myers Inc. 20,783 16,170 13,000 The Eastern Co. 119,954 111,800 6,000 Watts Water Technologies Inc., Cl. A 82,477 149,820 ------------ ------------ 4,570,348 5,811,685 ------------ ------------ FINANCIAL SERVICES -- 6.3% 90,000 American Express Co. 2,813,015 1,669,500 12,000 Argo Group International Holdings Ltd.+ 339,230 407,040 20,000 BKF Capital Group Inc. 102,267 16,000 68,000 Citigroup Inc. 2,216,727 456,280 12,000 Deutsche Bank AG 691,279 488,280 150,000 Epoch Holding Corp. 362,726 1,138,500 6,350 JPMorgan Chase & Co. 263,889 200,215 40,000 Marsh & McLennan Companies Inc. 1,190,259 970,800
MARKET SHARES COST VALUE - ------ ------------ ------------ 20,151 The Bank of New York Mellon Corp. $ 664,517 $ 570,878 30,000 Wells Fargo & Co. 900,652 884,400 ------------ ------------ 9,544,561 6,801,893 ------------ ------------ FOOD AND BEVERAGE -- 13.5% 28,000 Brown-Forman Corp., Cl. A 716,621 1,417,360 6,250 Brown-Forman Corp., Cl. B 193,489 321,812 37,000 Cadbury plc, ADR 2,149,249 1,319,790 15,000 Corn Products International Inc. 286,480 432,750 48,000 Diageo plc, ADR 1,921,883 2,723,520 20,000 Dr. Pepper Snapple Group Inc.+ 568,746 325,000 20,000 Fomento Economico Mexicano SAB de CV, ADR 673,389 602,600 5,000 General Mills Inc. 247,450 303,750 140,000 Groupe Danone, ADR 1,505,770 1,691,200 5,000 H.J. Heinz Co. 157,866 188,000 90,000 PepsiAmericas Inc. 1,656,875 1,832,400 54,000 The Coca-Cola Co. 2,344,478 2,444,580 8,000 The Hershey Co. 299,455 277,920 32,001 Tootsie Roll Industries Inc. 564,005 819,546 ------------ ------------ 13,285,756 14,700,228 ------------ ------------ HEALTH CARE -- 4.3% 110,000 Advanced Medical Optics Inc.+ 2,296,096 727,100 95,000 Boston Scientific Corp.+ 1,317,435 735,300 1,000 DENTSPLY International Inc. 21,925 28,240 6,000 Henry Schein Inc.+ 190,312 220,140 6,000 Laboratory Corp. of America Holdings+ 425,913 386,460 4,000 Life Technologies Corp.+ 69,870 93,240 10,000 Patterson Companies Inc.+ 293,978 187,500 130,000 Pfizer Inc. 3,442,329 2,302,300 ------------ ------------ 8,057,858 4,680,280 ------------ ------------ HOTELS AND GAMING -- 2.1% 40,000 Boyd Gaming Corp. 596,065 189,200 16,000 Canterbury Park Holding Corp. 201,300 94,560 19,800 Churchill Downs Inc. 797,510 800,316 2,000 Dover Downs Gaming & Entertainment Inc. 12,605 6,360 70,000 Dover Motorsports Inc. 446,303 91,000 14,000 Gaylord Entertainment Co.+ 394,352 151,760 14,000 International Game Technology 365,678 166,460 50,000 Las Vegas Sands Corp.+ 820,709 296,500 35,000 MGM Mirage+ 1,614,162 481,600 ------------ ------------ 5,248,684 2,277,756 ------------ ------------ MACHINERY -- 1.1% 50,000 CNH Global NV 951,228 780,000 12,000 Deere & Co. 365,420 459,840 ------------ ------------ 1,316,648 1,239,840 ------------ ------------ MANUFACTURED HOUSING AND RECREATIONAL VEHICLES -- 0.2% 4,000 Cavco Industries Inc.+ 113,920 107,560 50,000 Champion Enterprises Inc.+ 428,275 28,000 4,000 Skyline Corp. 144,238 79,960 ------------ ------------ 686,433 215,520 ------------ ------------
See accompanying notes to financial statements. 6 Gabelli Capital Asset Fund SCHEDULE OF INVESTMENTS (CONTINUED) December 31, 2008
MARKET SHARES COST VALUE - ------ ------------ ------------ METALS AND MINING -- 2.2% 15,000 Freeport-McMoRan Copper & Gold Inc. $ 636,573 $ 366,600 50,000 Newmont Mining Corp. 2,089,093 2,035,000 ------------ ------------ 2,725,666 2,401,600 ------------ ------------ PUBLISHING -- 0.5% 80,000 Journal Communications Inc., Cl. A 773,811 196,000 40,000 Media General Inc., Cl. A 67,400 70,000 7,000 Meredith Corp. 150,900 119,840 20,000 News Corp., Cl. A 284,866 181,800 10,000 The E.W. Scripps Co., Cl. A 72,850 22,100 ------------ ------------ 1,349,827 589,740 ------------ ------------ REAL ESTATE -- 1.7% 50,000 Griffin Land & Nurseries Inc. 753,028 1,843,000 ------------ ------------ RETAIL -- 4.0% 32,000 Aaron Rents Inc., Cl. A 266,360 702,400 50,000 CVS Caremark Corp. 1,838,475 1,437,000 10,000 Ingles Markets Inc., Cl. A 125,475 175,900 15,000 Safeway Inc. 307,433 356,550 10,000 The Great Atlantic & Pacific Tea Co. Inc.+ 109,631 62,700 64,000 Walgreen Co. 2,359,758 1,578,880 ------------ ------------ 5,007,132 4,313,430 ------------ ------------ SPECIALTY CHEMICALS -- 3.5% 70,000 Ferro Corp. 1,446,718 493,500 45,000 Hawkins Inc. 627,063 688,050 22,000 International Flavors & Fragrances Inc. 1,051,207 653,840 130,000 Omnova Solutions Inc.+ 838,833 84,500 5,000 Quaker Chemical Corp. 87,063 82,250 13,000 Rohm and Haas Co. 677,644 803,270 40,000 Sensient Technologies Corp. 843,930 955,200 ------------ ------------ 5,572,458 3,760,610 ------------ ------------ TELECOMMUNICATIONS -- 2.5% 220,000 Cincinnati Bell Inc.+ 1,085,157 424,600 17,000 Nortel Networks Corp., Toronto+ 724,875 4,407 80,000 Qwest Communications International Inc. 423,450 291,200 12,000 Rogers Communications Inc., Cl. B 164,214 360,960 160,000 Sprint Nextel Corp.+ 2,159,237 292,800 30,000 Telephone & Data Systems Inc. 1,107,385 952,500 8,000 Telephone & Data Systems Inc., Special 239,516 224,800 5,000 Verizon Communications Inc. 166,104 169,500 ------------ ------------ 6,069,938 2,720,767 ------------ ------------ TRANSPORTATION -- 0.4% 15,000 GATX Corp. 602,933 464,550 ------------ ------------ WIRELESS COMMUNICATIONS -- 1.5% 30,000 Price Communications Corp., Escrow+ (a) 0 0 38,000 United States Cellular Corp.+ 1,446,637 1,643,120 ------------ ------------ 1,446,637 1,643,120 ------------ ------------ TOTAL COMMON STOCKS 127,221,408 108,956,763 ------------ ------------
MARKET SHARES COST VALUE - ------ ------------ ------------ WARRANTS -- 0.0% ENERGY AND UTILITIES -- 0.0% 1,000 Mirant Corp., Ser. A, expire 01/03/11+ $ 2,199 $ 3,500 ------------ ------------ TOTAL INVESTMENTS -- 100.1% $127,223,607 108,960,263 OTHER ASSETS AND LIABILITIES (NET) -- (0.1)% (97,500) ------------ NET ASSETS -- 100.0% $108,862,763 ------------
(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 December 31, 2008, the market value of fair valued securities amounted to $5,610 or 0.01% of net assets. + Non-income producing security. ADR - American Depositary Receipt CVO - Contingent Value Obligation See accompanying notes to financial statements. 7 Gabelli Capital Asset Fund STATEMENT OF ASSETS AND LIABILITIES December 31, 2008 ASSETS: Investments, at value (cost $127,223,607) $108,960,263 Foreign currency, at value (cost $20) 18 Cash 793 Receivable for investments sold 67,245 Receivable for Fund shares sold 284,675 Dividends receivable 160,989 Prepaid expense 5,492 ------------ TOTAL ASSETS 109,479,475 ------------ LIABILITIES: Payable for investments purchased 67,400 Payable for Fund shares redeemed 224,460 Payable for investment management fees 88,308 Payable for accounting fees 7,501 Payable for legal and audit fees 52,754 Line of credit payable 150,000 Other accrued expenses 26,289 ------------ TOTAL LIABILITIES 616,712 ------------ NET ASSETS applicable to 10,014,447 shares outstanding $108,862,763 ============ NET ASSETS CONSIST OF: Paid-in capital, at $0.001 par value $132,452,129 Accumulated net realized loss on investments and foreign currency transactions (5,326,020) Net unrealized depreciation on investments (18,263,344) Net unrealized depreciation on foreign currency translations (2) ------------ NET ASSETS $108,862,763 ============ NET ASSET VALUE, offering, and redemption price per share ($108,862,763 / 10,014,447 shares outstanding; 500,000,000 shares authorized) $10.87 ============
STATEMENT OF OPERATIONS For the Year Ended December 31, 2008 INVESTMENT INCOME: Dividends (net of foreign taxes of $40,562) $ 3,248,720 Interest 8,101 ------------ TOTAL INVESTMENT INCOME 3,256,821 ------------ EXPENSES: Management fees 1,701,400 Legal and audit fees 69,683 Accounting fees 45,000 Custodian fees 36,657 Directors' fees 23,343 Shareholder communications expenses 20,558 Shareholder services fees 18,443 Interest expense 18,186 Miscellaneous expenses 31,069 ------------ TOTAL EXPENSES 1,964,339 Less: Custodian fee credits (236) ------------ NET EXPENSES 1,964,103 ------------ NET INVESTMENT INCOME 1,292,718 ------------ NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FOREIGN CURRENCY: Net realized loss on investments (923,685) Net realized loss on foreign currency transactions (320) ------------ Net realized loss on investments and foreign currency transactions (924,005) ------------ Net change in unrealized appreciation/ (depreciation) on investments (83,762,977) Net change in unrealized appreciation/ (depreciation) on foreign currency translations (248) ------------ Net change in unrealized appreciation/ (depreciation) on investments and foreign currency translations (83,763,225) ------------ NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FOREIGN CURRENCY (84,687,230) ------------ NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(83,394,512) ============
See accompanying notes to financial statements. 8 Gabelli Capital Asset Fund STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED DECEMBER 31, 2008 DECEMBER 31, 2007 ----------------- ----------------- OPERATIONS: Net investment income $ 1,292,718 $ 1,094,241 Net realized gain/(loss) on investments and foreign currency transactions (924,005) 18,478,201 Net change in unrealized appreciation/(depreciation) on investments and foreign currency translations (83,763,225) 1,794,539 ------------- ------------ NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (83,394,512) 21,366,981 ------------- ------------ DISTRIBUTIONS TO SHAREHOLDERS: Net investment income (1,292,835) (1,085,270) Net realized gain (989,215) (17,236,080) Return of capital -- (43,265) ------------- ------------ TOTAL DISTRIBUTIONS TO SHAREHOLDERS (2,282,050) (18,364,615) ------------- ------------ CAPITAL SHARE TRANSACTIONS: Net decrease in net assets from capital share transactions (34,404,626) (8,472,068) ------------- ------------ NET DECREASE IN NET ASSETS (120,081,188) (5,469,702) NET ASSETS: Beginning of period 228,943,951 234,413,653 ------------- ------------ End of period (including undistributed net investment income of $0 and $0, respectively) $ 108,862,763 $228,943,951 ============= ============
See accompanying notes to financial statements. 9 Gabelli Capital Asset Fund FINANCIAL HIGHLIGHTS SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT THE PERIODS INDICATED:
YEAR ENDED DECEMBER 31, ---------------------------------------------------------- 2008 2007 2006 2005 2004 -------- -------- -------- -------- -------- OPERATING PERFORMANCE: Net asset value, beginning of period $ 18.66 $ 18.58 $ 17.40 $ 18.28 $ 16.44 -------- -------- -------- -------- -------- Net investment income 0.12 0.10 0.06 0.05 0.06 Net realized and unrealized gain/(loss) on investments (7.68) 1.61 3.77 0.33 2.50 -------- -------- -------- -------- -------- Total from investment operations (7.56) 1.71 3.83 0.38 2.56 -------- -------- -------- -------- -------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income (0.13) (0.10) (0.06) (0.05) (0.06) Net realized gain on investments (0.10) (1.53) (2.59) (1.21) (0.66) Return of capital -- (0.00)(c) (0.00)(c) -- -- -------- -------- -------- -------- -------- Total distributions (0.23) (1.63) (2.65) (1.26) (0.72) -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 10.87 $ 18.66 $ 18.58 $ 17.40 $ 18.28 -------- -------- -------- -------- -------- TOTAL RETURN + (40.4)% 9.1% 21.9% 2.0% 15.5% ======== ======== ======== ======== ======== RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $108,863 $228,944 $234,414 $219,127 $240,035 Ratio of net investment income to average net assets 0.76% 0.45% 0.28% 0.26% 0.34% Ratio of operating expenses to average net assets 1.15%(a) 1.10% 1.10%(b) 1.10% 1.10% Portfolio turnover rate ++ 11% 24% 40% 25% 27%
+ 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. ++ Effective in 2008, a change in accounting policy was adopted with regard to the calculation of the portfolio turnover rate to include cash proceeds due to mergers. Had this policy been adopted retroactively, the portfolio turnover rate for the years ended December 31, 2007, 2005, and 2004 would have been 33%, 28%, and 37%, respectively. The portfolio turnover rate for the year ended 2006 would have been as shown. (a) The Fund incurred interest expense during the year ended December 31, 2008. If interest expense had not been incurred, the ratios of operating expenses to average net assets would have been 1.14%. (b) The ratio does 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 year ended December 31, 2006 would have been 1.09%. For the years ended December 31, 2008 and 2007, the effect of the custodian fee credits was minimal. (c) Amount represents less than $0.005 per share. See accompanying notes to financial statements. 10 Gabelli Capital Asset Fund NOTES TO FINANCIAL STATEMENTS December 31, 2008 1. ORGANIZATION The Gabelli Capital Asset 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 with the valuation and changes in valuation of similar securities, including a comparison of foreign securities with 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. Statement of Financial Accounting Standard No. 157, "Fair Value Measurements" ("SFAS 157") clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value, and requires additional disclosures about the use of fair value measurements. The three levels of the fair value hierarchy under SFAS 157 are described below: - Level 1 - quoted prices in active markets for identical securities; - Level 2 - other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.); and - Level 3 - significant unobservable inputs (including the Fund's determinations as to the fair value of investments). The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of the Fund's investments, by inputs used to value the Fund's investments as of December 31, 2008 is, as follows:
INVESTMENTS IN SECURITIES (MARKET VALUE) VALUATION INPUTS ASSETS - ---------------- -------------- Level 1 - Quoted Prices $108,942,317 Level 2 - Other Significant Observable Inputs 12,336 Level 3 - Significant Unobservable Inputs 5,610 ------------ TOTAL $108,960,263 ============
11 Gabelli Capital Asset Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) December 31, 2008 The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:
INVESTMENTS IN SECURITIES (MARKET VALUE) -------------- BALANCE AS OF 12/31/07 $ 5,610 Accrued discounts/(premiums) -- Realized gain/(loss) (144,933) Change in unrealized appreciation/(depreciation)+ 144,935 Net purchases/(sales) 0 Transfers in and/or out of Level 3 (2) --------- BALANCE AS OF 12/31/08 $ 5,610 ========= Net change in unrealized appreciation/(depreciation) during the period on Level 3 investments held at 12/31/08+ $ 0 ---------
- ---------- + Net change in unrealized appreciation/(depreciation) is included in the related amounts on investments in the Statement of Operations. In March 2008, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standard No.161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS 161") that is effective for fiscal years beginning after November 15, 2008. SFAS 161 is intended to improve financial reporting for derivative instruments by requiring enhanced disclosure that enables investors to understand how and why an entity uses derivatives, how derivatives are accounted for, and how derivative instruments affect an entity's results of operations and financial position. Management is currently evaluating the implications of SFAS 161 on the Fund's financial statement disclosures. 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 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 included in "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 12 Gabelli Capital Asset Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) December 31, 2008 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") per share of the Fund. For the year ended December 31, 2008, reclassifications were made to decrease accumulated distributions in excess of net investment income by $117 and to increase accumulated net realized loss on investments and foreign currency transactions by $117. The tax character of distributions paid during the years ended December 31, 2008 and December 31, 2007 was as follows:
YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 2008 2007 ------------ ------------ DISTRIBUTIONS PAID FROM: Ordinary income $1,292,398 $ 2,625,614 Net long-term capital gains 989,652 15,695,736 Return of capital -- 43,265 ---------- ----------- Total distributions paid $2,282,050 $18,364,615 ========== ===========
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. At December 31, 2008, the difference between book basis and tax basis unrealized depreciation was primarily due to deferral of losses from wash sales for tax purposes. As of December 31, 2008, the components of accumulated earnings/losses on a tax basis were as follows: Undistributed long-term gains $ 153,814 Net unrealized depreciation on investments and foreign currency translations (23,743,180) ------------ Total $(23,589,366) ============
The following summarizes the tax cost of investments and the related unrealized appreciation/depreciation at December 31, 2008:
GROSS GROSS NET UNREALIZED UNREALIZED UNREALIZED COST APPRECIATION DEPRECIATION DEPRECIATION ------------ ------------ ------------ ------------ Investments $132,703,443 $18,982,519 $(42,725,699) $(23,743,180)
FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48") provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the "more-likely-than-not" threshold are recorded as a tax benefit or expense in the current year. In accordance with FIN 48, management has analyzed the Fund's tax positions taken on the federal and state income tax returns for all open tax years (the current and prior three tax years) and has concluded that no provision for income tax is required in the Fund's financial statements. Management's determination regarding FIN 48 may be subject to review and adjustment at a later date based on factors including, but not limited to, an ongoing analysis of tax laws, regulations, and interpretations thereof. 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 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 PNC Global Investment Servicing (U.S.) Inc. (formerly 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 who 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 and the Chairman of the Audit Committee and the Lead Director each receives an annual fee of $1,000. 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 during 2008, other than short-term securities and U.S. Government obligations aggregated $17,824,133 and $52,690,885, respectively. Purchases and proceeds from the sales of U.S. Government obligations during 2008, other than short-term obligations, aggregated $338,455 and $337,931, respectively. 13 Gabelli Capital Asset Fund NOTES TO FINANCIAL STATEMENTS (CONTINUED) December 31, 2008 5. TRANSACTIONS WITH AFFILIATES During 2008, the Fund paid brokerage commissions on security trades of $84,235 to Gabelli & Company, Inc. The cost of calculating the Fund's NAV per share is a Fund expense pursuant to the Investment Advisory Agreement between the Fund and the Adviser. During 2008, the Fund paid or accrued $45,000 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 $4,081 for the year ended December 31, 2008, which is included in miscellaneous expenses in the Statement of Operations. 6. LINE OF CREDIT The Fund participates in an unsecured line of credit of up to $75,000,000 from which it may borrow up to 10% of its net assets from the custodian for temporary borrowing purposes. Borrowings under this arrangement bear interest at 0.75% above the federal funds rate on outstanding balances. This amount, if any, would be included in "interest expense" in the Statement of Operations. At December 31, 2008, borrowings outstanding under the line of credit amounted to $150,000. The average daily amount of borrowings outstanding under the line of credit in 2008 was $500,134 with a weighted average interest rate of 3.60%. The maximum amount borrowed at any time during 2008 was $7,121,000. 7. CAPITAL STOCK TRANSACTIONS Transactions in shares of capital stock were as follows:
Year Ended Year Ended Year Ended Year Ended December 31, 2008 December 31, 2007 December 31, 2008 December 31, 2007 ----------------- ----------------- ----------------- ----------------- Shares Amount ------------------------------------- ------------------------------------- Shares sold 319,154 803,368 $ 4,959,818 $ 16,086,710 Shares issued upon reinvestment of distributions 221,344 979,446 2,282,050 18,364,615 Shares redeemed (2,798,278) (2,124,404) (41,646,494) (42,923,393) ---------- ---------- ------------ ------------ NET DECREASE (2,257,780) (341,590) $(34,404,626) $ (8,472,068) ========== ========== ============ ============
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 On April 24, 2008, the Adviser entered into an administrative settlement with the SEC to resolve the SEC's inquiry regarding prior frequent trading activity in shares of the GAMCO Global Growth Fund (the "Global Growth Fund") by one investor who was banned from the Global Growth Fund in August 2002. In the settlement, the SEC found that the Adviser had violated Section 206(2) of the Investment Advisers Act, Section 17(d) of the 1940 Act, and Rule 17d-1 thereunder and had aided and abetted and caused violations of Section 12(d)(1)(B)(i) of the 1940 Act. Under the terms of the settlement, the Adviser, while neither admitting nor denying the SEC's findings and allegations, agreed, among other things, to pay the previously reserved total of $16 million (including a $5 million penalty), of which at least $11 million will be distributed to shareholders of the Global Growth Fund in accordance with a plan to be developed by an independent distribution consultant and approved by the independent directors of the Global Growth Fund and the staff of the SEC and to cease and desist from future violations of the above referenced federal securities laws. The settlement is not expected to impact the Fund and will not have a material adverse impact on the Adviser or its ability to fulfill its obligations under the Advisory Agreement. On the same day, the SEC filed a civil action against the Executive Vice President and Chief Operating Officer of the Adviser, alleging violations of certain federal securities laws arising from the same matter. The officer is also an officer of the Global Growth Fund and other funds in the Gabelli/GAMCO fund complex including the Fund. The officer denies the allegations and is continuing in his positions with the Adviser and the funds. The Adviser currently expects that any resolution of the action against the officer will not have a material adverse impact on the Adviser or its ability to fulfill its obligations under the Advisory Agreement. In a separate matter, on January 12, 2009, the SEC issued an administrative action approving a final settlement of a previously disclosed matter with the Adviser involving compliance with Section 19(a) of the Investment Company Act of 1940 and Rule 19a-1 thereunder by two closed-end funds. These provisions require registered investment companies when making a distribution in the nature of a dividend from sources other than net investment income to contemporaneously provide written statements to shareholders, which adequately disclose the source or sources of such distribution. While the two funds sent annual statements and provided other materials containing this information, the shareholders did not receive the notices required by Rule 19a-1 with any of the distributions that were made for 2002 and 2003. The Adviser believes that the funds have been in compliance with Section 19(a) and Rule 19a-1 since the beginning of 2004. As part of the settlement, in which the Adviser neither admits nor denies the findings by the SEC, the Adviser agreed to pay a civil monetary penalty of $450,000 and to cease and desist from causing violations of Section 19(a) and Rule 19a-1. In connection with the settlement, the SEC noted the remedial actions previously undertaken by the Adviser. 14 Gabelli Capital Series Fund, Inc. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF GABELLI CAPITAL SERIES FUNDS, INC. We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Gabelli Capital Asset Fund (the "Fund"), a series of Gabelli Capital Series Funds, Inc., as of December 31, 2008, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2008, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Gabelli Capital Asset Fund, a series of Gabelli Capital Series Funds, Inc., at December 31, 2008, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. (Ernst & Young LLP) Philadelphia, Pennsylvania February 24, 2009 15 Gabelli Capital Asset Fund ADDITIONAL INFORMATION (UNAUDITED) The business and affairs of the Fund are managed under the direction of the Company's Board of Directors. Information pertaining to the Directors and Officers of the Fund is set forth below. The Fund's Statement of Additional Information includes additional information about the Fund's Directors and Officers and is available without charge, upon request, by writing to Gabelli Capital Series Funds, Inc. at One Corporate Center, Rye, NY 10580-1422.
NUMBER OF TERM OF FUNDS IN OFFICE AND FUND COMPLEX NAME, POSITION(S) LENGTH OF TIME OVERSEEN BY PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS ADDRESS(1) AND AGE SERVED(2) DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR(4) - ----------------------- -------------- ------------ -------------------------------------------- ------------------------- INTERESTED DIRECTORS(3) Mario J. Gabelli Since 1995 26 Chairman and Chief Executive Officer of Director of Morgan Group Director and Chief GAMCO Investors, Inc. and Chief Investment Holdings, Inc. (holding Investment Officer Officer - Value Portfolios of Gabelli Funds, company); Chairman of the Age: 66 LLC and GAMCO Asset Management Inc.; Board of LICT Corp. Director/Trustee or Chief Investment Officer (multimedia and of other registered investment companies in communication services the Gabelli/GAMCO Funds complex; company) Chairman and Chief Executive Officer of GGCP, Inc. Arthur V. Ferrara Since 1995 8 Former Chairman of the Board and Chief -- Director Executive Officer of The Guardian Life Age: 78 Insurance Company of America (1993-1995) INDEPENDENT DIRECTORS Anthony J. Colavita Since 1995 36 Partner in the law firm of -- Director Anthony J. Colavita, P.C. Age: 73 Anthony R. Pustorino Since 1995 13 Certified Public Accountant; Professor Director of The LGL Director Emeritus, Pace University Group, Inc. (diversified Age: 83 manufacturing) Werner J. Roeder, MD Since 1995 22 Medical Director of Lawrence Hospital and -- Director practicing private physician Age: 68 Anthonie C. van Ekris Since 1995 20 Chairman of BALMAC International, Inc. -- Director (commodities and futures trading) Age: 74
16 Gabelli Capital Asset Fund ADDITIONAL INFORMATION (UNAUDITED) (CONTINUED)
TERM OF OFFICE AND NAME, POSITION(S) LENGTH OF TIME PRINCIPAL OCCUPATION(S) ADDRESS(1) AND AGE SERVED(2) DURING PAST FIVE YEARS - ------------------------ -------------- ---------------------------------------------------------------------------------------- OFFICERS Bruce N. Alpert Since 1995 Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC and an President and Secretary officer of all of the registered investment companies in the Gabelli/GAMCO Funds Age: 57 complex. Director and President of Teton Advisors, Inc. (formerly Gabelli Advisers, Inc.) since 1998 Agnes Mullady Since 2006 Vice President of Gabelli Funds, LLC since 2007; Officer of all of the registered Treasurer investment companies in the Gabelli/GAMCO Funds complex; Senior Vice President of Age:50 U.S. Trust Company, N.A. and Treasurer and Chief Financial Officer of Excelsior Funds from 2004 through 2005; Chief Financial Officer of AMIC Distribution Partners from 2002 through 2004 Peter D. Goldstein Since 2004 Director of Regulatory Affairs at GAMCO Investors, Inc. since 2004; Chief Compliance Chief Compliance Officer Officer of all of the registered investment companies in the Gabelli/GAMCO Funds Age: 55 complex; Vice President of Goldman Sachs Asset Management from 2000 through 2004
1. Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise noted. 2. Each Director will hold office for an indefinite term until the earliest of (i) the next meeting of shareholders, if any, called for the purpose of considering the election or re-election of such Director and until the election and qualification of his or her successor, if any, elected at such meeting, or (ii) the date a Director resigns or retires, or a Director is removed by the Board of Directors or shareholders, in accordance with the Fund's By-Laws and Articles of Incorporation. Each officer will hold office for an indefinite term until the date he or she resigns or retires or until his or her successor is elected and qualified. 3. "Interested person" of the Fund as defined in the 1940 Act. Mr. Gabelli is considered an "interested person" because of his affiliation with Gabelli Funds, LLC which acts as the Fund's investment adviser. Mr. Ferrara is considered an interested person because of his affiliation with The Guardian Life Insurance Company of America, which is the parent company of the Fund's Manager. 4. This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934, as amended (i.e. public companies) or other investment companies registered under the 1940 Act. Gabelli Capital Asset Fund 2008 TAX NOTICE TO SHAREHOLDERS (UNAUDITED) For the year ended December 31, 2008, the Fund paid to shareholders ordinary income distributions (comprised of net investment income) totaling $0.132 per share and long-term capital gains totaling $989,652. The distributions of long-term capital gains have been designated as capital gain dividend by the Fund's Board of Directors. For the year ended December 31, 2008, 100% of the ordinary income distribution qualifies for the dividends received deduction available to corporations. The Fund designates 100% of the ordinary income distribution as qualified dividend income pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Fund designates 0.50% of the ordinary income distribution as qualified interest income, pursuant to the American Jobs Creation Act of 2004. U.S. GOVERNMENT INCOME The percentage of the ordinary income distribution paid by the Fund during 2008 which was derived from U.S. Treasury securities was 0.25%. Such income is exempt from state and local tax in all states. However, many states, including New York and California, allow a tax exemption for a portion of the income earned only if a mutual fund has invested at least 50% of its assets at the end of each quarter of the Fund's fiscal year in U.S. Government securities. The Gabelli Capital Asset Fund did not meet this strict requirement in 2008. Due to the diversity in state and local tax law, it is recommended that you consult your personal tax adviser as to the applicability of the information provided to your specific situation. All designations are based on financial information available as of the date of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code and the regulations thereunder. 17 ITEM 2. CODE OF ETHICS. (a) The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (c) There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. (d) The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item's instructions. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. As of the end of the period covered by the report, the registrant's Board of Directors has determined that Anthony R. Pustorino is qualified to serve as an audit committee financial expert serving on its audit committee and that he is "independent," as defined by Item 3 of Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. AUDIT FEES (a) The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $41,500 for 2007 and $41,500 for 2008. AUDIT-RELATED FEES (b) The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item are $0 for 2007 and $0 for 2008. TAX FEES (c) The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning are $4,100 for 2007 and $4,300 for 2008. Tax fees represent tax compliance services provided in connection with the review of the Registrant's tax returns. ALL OTHER FEES (d) The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $0 for 2007 and $0 for 2008. (e)(1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. Pre-Approval Policies and Procedures. The Audit Committee ("Committee") of the registrant is responsible for pre-approving (i) all audit and permissible non-audit services to be provided by the independent registered public accounting firm to the registrant and (ii) all permissible non-audit services to be provided by the independent registered public accounting firm to the Adviser, Gabelli Funds, LLC, and any affiliate of Gabelli Funds, LLC ("Gabelli") that provides services to the registrant (a "Covered Services Provider") if the independent registered public accounting firm's engagement related directly to the operations and financial reporting of the registrant. The Committee may delegate its responsibility to pre-approve any such audit and permissible non-audit services to the Chairperson of the Committee, and the Chairperson must report to the Committee, at its next regularly scheduled meeting after the Chairperson's pre-approval of such services, his or her decision(s). The Committee may also establish detailed pre-approval policies and procedures for pre-approval of such services in accordance with applicable laws, including the delegation of some or all of the Committee's pre-approval responsibilities to the other persons (other than Gabelli or the registrant's officers). Pre-approval by the Committee of any permissible non-audit services is not required so long as: (i) the permissible non-audit services were not recognized by the registrant at the time of the engagement to be non-audit services; and (ii) such services are promptly brought to the attention of the Committee and approved by the Committee or Chairperson prior to the completion of the audit. (e)(2) The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows: (b) Not applicable (c) 100% (d) Not applicable (f) The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was zero percent (0%). (g) The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant was $69,100 for 2007 and $4,300 for 2008. (h) The registrant's audit committee of the board of directors has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. INVESTMENTS. (a) 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. (b) Not applicable. 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) Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. (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 3/6/09 ---------------------------------------------------------------------------- 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 3/6/09 ---------------------------------------------------------------------------- By (Signature and Title)* /s/ Agnes Mullady ------------------------------------------------------- Agnes Mullady, Principal Financial Officer and Treasurer Date 3/6/09 ---------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature. EX-99.CODE ETH 2 codeethics.txt CODE OF ETHICS EX-99.CODE ETH GAMCO INVESTORS, INC. AND AFFILIATES - -------------------------------------------------------------------------------- JOINT CODE OF ETHICS FOR CHIEF EXECUTIVE AND SENIOR FINANCIAL OFFICERS OF THE GABELLI FUNDS - -------------------------------------------------------------------------------- Each affiliated registered investment company (each a "Company") is committed to conducting business in accordance with applicable laws, rules and regulations and the highest standards of business ethics, and to full and accurate disclosure -- financial and otherwise -- in compliance with applicable law. This Code of Ethics, applicable to each Company's Chief Executive Officer, President, Chief Financial Officer and Treasurer (or persons performing similar functions) (together, "Senior Officers"), sets forth policies to guide you in the performance of your duties. As a Senior Officer, you must comply with applicable law. You also have a responsibility to conduct yourself in an honest and ethical manner. You have leadership responsibilities that include creating a culture of high ethical standards and a commitment to compliance, maintaining a work environment that encourages the internal reporting of compliance concerns and promptly addressing compliance concerns. This Code of Ethics recognizes that the Senior Officers are subject to certain conflicts of interest inherent in the operation of investment companies, because the Senior Officers currently or may in the future serve as Senior Officers of each of the Companies, as officers or employees of the investment advisor to the Companies or service providers thereof (the "Advisor") and/or affiliates of the Advisor (the "Advisory Group") and as officers or trustees/directors of other registered investment companies and unregistered investment funds advised by the Advisory Group. This Code of Ethics also recognizes that certain laws and regulations applicable to, and certain policies and procedures adopted by, the Companies or the Advisory Group govern your conduct in connection with many of the conflict of interest situations that arise in connection with the operations of the Companies, including: o the Investment Company Act of 1940, and the rules and regulation promulgated thereunder by the Securities and Exchange Commission (the "1940 Act"); o the Investment Advisers Act of 1940, and the rules and regulations promulgated thereunder by the Securities and Exchange Commission (the "Advisers Act"); o the Code of Ethics adopted by each Company pursuant to Rule 17j-1(c) under the 1940 Act (collectively, the "Trust's 1940 Act Code of Ethics"); 1 o one or more codes of ethics adopted by the Advisory Group that have been reviewed and approved by those trustees/directors (the "Directors") of each Company that are not "interested persons" of such Company (the "Independent Directors") within the meaning of the 1940 Act (the "Advisory Group's 1940 Act Code of Ethics" and, together with such Company's 1940 Act Code of Ethics, the "1940 Act Codes of Ethics"); o the policies and procedures adopted by each Company to address conflict of interest situations, such as procedures under Rule 10f-3, Rule 17a-7 and Rule 17e-1 under the 1940 Act (collectively, the "Conflict Policies"); and o the Advisory Group's policies and procedures to address, among other things, conflict of interest situations and related matters (collectively, the "Advisory Policies"). The provisions of the 1940 Act, the Advisers Act, the 1940 Act Codes of Ethics, the Conflict Policies and the Advisory Policies are referred to herein collectively as the "Additional Conflict Rules". This Code of Ethics is different from, and is intended to supplement, the Additional Conflict Rules. Accordingly, a violation of the Additional Conflict Rules by a Senior Officer is hereby deemed not to be a violation of this Code of Ethics, unless and until the Directors shall determine that any such violation of the Additional Conflict Rules is also a violation of this Code of Ethics. SENIOR OFFICERS SHOULD ACT HONESTLY AND CANDIDLY Each Senior Officer has a responsibility to each Company to act with integrity. Integrity requires, among other things, being honest and candid. Deceit and subordination of principle are inconsistent with integrity. Each Senior Officer must: o act with integrity, including being honest and candid while still maintaining the confidentiality of information where required by law or the Additional Conflict Rules; o comply with the laws, rules and regulations that govern the conduct of each Company's operations and report any suspected violations thereof in accordance with the section below entitled "Compliance With Code Of Ethics"; and o adhere to a high standard of business ethics. 2 CONFLICTS OF INTEREST A conflict of interest for the purpose of this Code of Ethics occurs when your private interests interfere in any way, or even appear to interfere, with the interests of a Company. Senior Officers are expected to use objective and unbiased standards when making decisions that affect each Company, keeping in mind that Senior Officers are subject to certain inherent conflicts of interest because Senior Officers of a Company also are or may be officers of other Companies and/or the Advisory Group (as a result of which it is incumbent upon you to be familiar with and to seek to comply with the Additional Conflict Rules). You are required to conduct the business of each Company in an honest and ethical manner, including the ethical handling of actual or apparent conflicts of interest between personal and business relationships. When making any investment, accepting any position or benefits, participating in any transaction or business arrangement or otherwise acting in a manner that creates or appears to create a conflict of interest with respect to each Company where you are receiving a personal benefit, you should act in accordance with the letter and spirit of this Code of Ethics. If you are in doubt as to the application or interpretation of this Code of Ethics to you as a Senior Officer of a Company, you should make full disclosure of all relevant facts and circumstances to the Chief Compliance Officer of the Advisory Group (the "CCO") and obtain the approval of the CCO prior to taking action. Some conflict of interest situations that should always be approved by the CCO, if material, include the following: o the receipt of any entertainment or non-nominal gift by the Senior Officer, or a member of his or her family, from any company with which a Company has current or prospective business dealings (other than the Advisory Group), unless such entertainment or gift is business related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; o any ownership interest in, or any consulting or employment relationship with, of any of the Companies' service providers, other than the Advisory Group; or o a direct or indirect financial interest in commissions, transaction charges or spreads paid by a Company for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Senior Officer's employment by the Advisory Group, such as compensation or equity ownership. 3 DISCLOSURES It is the policy of each Company to make full, fair, accurate, timely and understandable disclosure in compliance with all applicable laws and regulations in all reports and documents that such Company files with, or submits to, the Securities and Exchange Commission or a national securities exchange and in all other public communications made by such Company. As a Senior Officer, you are required to promote compliance with this policy and to abide by such Company's standards, policies and procedures designed to promote compliance with this policy. Each Senior Officer must: o familiarize himself or herself with the disclosure requirements applicable to each Company as well as the business and financial operations of each Company; and o not knowingly misrepresent, or cause others to misrepresent, facts about any Company to others, including to the Directors, such Company's independent auditors, such Company's counsel, any counsel to the Independent Directors, governmental regulators or self-regulatory organizations. COMPLIANCE WITH CODE OF ETHICS If you know of or suspect a violation of this Code of Ethics or other laws, regulations, policies or procedures applicable to the Trust, you must report that information on a timely basis to the CCO or report it anonymously by following the "whistle blower" policies adopted by the Advisory Group from time to time. NO ONE WILL BE SUBJECT TO RETALIATION BECAUSE OF A GOOD FAITH REPORT OF A SUSPECTED VIOLATION. Each Company will follow these procedures in investigating and enforcing this Code of Ethics, and in reporting on this Code of Ethics: o the CCO will take all appropriate action to investigate any actual or potential violations reported to him or her; o violations and potential violations will be reported to the Board of Directors of each affected Company after such investigation; o if the Board of Directors determines that a violation has occurred, it will take all appropriate disciplinary or preventive action; and o appropriate disciplinary or preventive action may include a letter of censure, suspension, dismissal or, in the event of criminal or other serious violations of law, notification of the Securities and Exchange Commission or other appropriate law enforcement authorities. 4 WAIVERS OF CODE OF ETHICS Except as otherwise provided in this Code of Ethics, the CCO is responsible for applying this Code of Ethics to specific situations in which questions are presented to the CCO and has the authority to interpret this Code of Ethics in any particular situation. The CCO shall take all action he or she considers appropriate to investigate any actual or potential violations reported under this Code of Ethics. The CCO is authorized to consult, as appropriate, with the chair of the Governance Committee and with counsel to the affected Company, the Advisory Group or the Independent Directors, and is encouraged to do so. The Board of Directors, the affected Company is responsible for granting waivers of this Code of Ethics, as appropriate. Any changes to or waivers of this Code of Ethics will, to the extent required, be disclosed on Form N-CSR, or otherwise, as provided by Securities and Exchange Commission rules. RECORDKEEPING Each Company will maintain and preserve for a period of not less than six (6) years from the date an action is taken, the first two (2) years in an easily accessible place, a copy of the information or materials supplied to the Boards of Directors pursuant to this Code of Ethics: o that provided the basis for any amendment or waiver to this Code of Ethics; and o relating to any violation of this Code of Ethics and sanctions imposed for such violation, together with a written record of the approval or action taken by the relevant Board of Directors. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code of Ethics shall be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code of Ethics, such matters shall not be disclosed to anyone other than the Independent Trustees and their counsel, the Companies and their counsel, the Advisory Group and its counsel and any other advisors, consultants or counsel retained by the Directors, the Independent Directors or any committee of Directors. AMENDMENTS This Code of Ethics may not be amended as to any Company except in written form, which is specifically approved by a majority vote of the affected Company's Directors, including a majority of its Independent Directors. 5 NO RIGHTS CREATED This Code of Ethics is a statement of certain fundamental principles, policies and procedures that govern each of the Senior Officers in the conduct of the Companies' business. It is not intended to and does not create any rights in any employee, investor, supplier, competitor, shareholder or any other person or entity. 6 ACKNOWLEDGMENT FORM I have received and read the Joint Code of Ethics for Chief Executive and Senior Financial Officers, and I understand its contents. I agree to comply fully with the standards contained in the Code of Ethics and the Company's related policies and procedures. I understand that I have an obligation to report any suspected violations of the Code of Ethics on a timely basis to the Chief Compliance Officer or report it anonymously by following the "whistle blower" policies adopted by the Advisory Group from time to time. -------------------------- Printed Name -------------------------- Signature -------------------------- Date EX-99.CERT 3 exh302.txt EXHIBIT TO SECTION 302 OF SOA CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT I, Bruce N. Alpert, certify that: 1. I have reviewed this report on Form N-CSR of Gabelli Capital Series Funds, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the 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; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: 3/6/09 /s/ Bruce N. Alpert -------------------- --------------------------------------------- Bruce N. Alpert, Principal Executive Officer CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT I, Agnes Mullady, certify that: 1. I have reviewed this report on Form N-CSR of Gabelli Capital Series Funds, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the 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; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: 3/6/09 /s/ Agnes Mullady -------------------- --------------------------------------------- Agnes Mullady, Principal Financial Officer and Treasurer EX-99.906CERT 4 exh906.txt EXHIBIT TO SECTION 906 OF SOA CERTIFICATION PURSUANT TO RULE 30A-2(B) UNDER THE 1940 ACT AND SECTION 906 OF THE SARBANES-OXLEY ACT I, Bruce N. Alpert, Principal Executive Officer of Gabelli Capital Series Funds, Inc. (the "Registrant"), certify that: 1. The Form N-CSR of the Registrant (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: 3/6/09 /s/ Bruce N. Alpert -------------------- --------------------------------------------- Bruce N. Alpert, Principal Executive Officer I, Agnes Mullady, Principal Financial Officer and Treasurer of Gabelli Capital Series Funds, Inc. (the "Registrant"), certify that: 1. The Form N-CSR of the Registrant (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: 3/6/09 /s/ Agnes Mullady -------------------- -------------------------------------------- Agnes Mullady, Principal Financial Officer and Treasurer -----END PRIVACY-ENHANCED MESSAGE-----