<PAGE>
- ---------------
Gabelli Capital
Asset Fund
- ---------------
5
- ---------------
- --------------------------------------------------------------------------------
Gabelli Capital Asset Fund
- ---------------------------------
SCHEDULE OF INVESTMENTS
June 30, 1997 (Unaudited)
- -------------------------
COMMON STOCKS -- 92.0%
- -------------------------
Shares Value
- --------------------------------------------------------------------------------
Aerospace - 0.6%
8,000 Boeing Co. $ 424,500
-----------
Automotive: Parts and Accessories - 3.6%
5,000 Brad Ragan, Inc.+ 118,125
3,000 Federal-Mogul Corporation 105,000
40,000 GenCorp Inc. 925,000
23,000 Handy & Harman 399,625
10,000 TransPro Inc. 86,875
30,000 Wynn's International, Inc. 851,250
-----------
2,485,875
-----------
Aviation: Parts and Services - 4.0%
13,000 AAR Corp. 420,062
40,000 Coltec Industries Inc.+ 780,000
5,000 Curtiss-Wright Corporation 291,250
7,500 Hi-Shear Industries Inc. 18,281
27,000 Hudson General Corporation 1,026,000
7,000 Moog, Inc., Class A+ 220,500
-----------
2,756,093
-----------
Broadcasting - 8.7%
65,000 Ackerley Communications Inc. 706,875
23,442 Chris-Craft Industries, Inc. 1,131,077
5,000 Gray Communications Systems, Inc. 112,187
50,000 Gray Communications Systems, Inc.,
Class B 1,043,750
30,000 Grupo Televisa S.A., GDR + 911,250
10,000 LIN Television Corporation+ 441,250
16,000 United Television, Inc. 1,584,000
-----------
5,930,389
-----------
Cable - 12.7%
22,000 BET Holdings, Inc., Class A + 720,500
48,000 Cablevision Systems Corporation,
Class A+ 2,568,000
75,000 International Family Entertainment,
Inc., Class B+ 2,578,125
95,000 Tele-Communications, Inc./Liberty
Media Group, Class A+ 2,256,250
29,000 Tele-Communications International,
Inc., Class A+ 447,687
15,000 United International Holdings, Inc.,
Class A+ 155,625
-----------
8,726,187
-----------
Consumer Products - 4.1%
6,500 Culbro Corporation+ 904,718
10,000 Fortune Brands, Inc. 373,125
30,000 Gallaher Group plc+ 553,125
25,000 General Housewares Corp. 246,875
18,000 National Presto Industries Inc. 725,625
-----------
2,803,468
-----------
Consumer Services - 3.3%
40,000 HSN, Inc.+ 1,250,000
50,000 Rollins, Inc. 1,006,250
-----------
2,256,250
-----------
Diversified Industrial - 4.2%
7,500 Crane Co. 313,594
16,000 GATX Corporation 924,000
4,000 Honeywell, Inc. 303,500
10,000 ITT Industries Inc. 257,500
45,000 Katy Industries, Inc. 669,375
10,000 Thomas Industries Inc. 287,500
50,000 Tyler Corporation+ 103,125
-----------
2,858,594
-----------
Energy - 1.3%
5,000 Eastern Enterprises 174,063
90,000 Kaneb Services, Inc.+ 331,875
5,000 Pennzoil Company 383,750
-----------
889,688
-----------
Entertainment - 8.6%
14,664 Ascent Entertainment Group Inc.+ 133,809
70,000 Gaylord Entertainment Company,
Class A 1,614,375
30,000 GC Companies, Inc.+ 1,380,000
25,000 Time Warner Inc. 1,206,250
41,000 Viacom Inc., Class A+ 1,206,938
12,000 Viacom Inc., Class B+ 360,000
-----------
5,901,372
-----------
Equipment and Supplies - 10.7%
10,000 Aeroquip-Vickers Inc. 472,500
20,000 AMETEK, Inc. 470,000
16,200 Ampco-Pittsburgh Corporation 237,937
6,000 CTS Corporation 413,625
12,500 Franklin Electric Company, Inc. 621,875
See notes to financial statements.
- --------------------------------------------------------------------------------
56
<PAGE>
---------------
Gabelli Capital
Asset Fund
---------------
5
---------------
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
40,000 General Instrument Corporation+ $1,000,000
8,000 Ingersoll Rand Co. 494,000
33,000 Navistar International Corporation+ 569,250
14,200 Pittway Corporation 710,000
28,000 Sequa Corporation, Class A+ 1,578,500
10,000 SPS Technologies, Inc.+ 710,000
-----------
7,277,687
-----------
Financial Services - 1.7%
22,600 Midland Company 1,130,000
-----------
Food and Beverage - 6.4%
50,000 Archer-Daniels-Midland Company 1,175,000
37,000 Celestial Seasonings, Inc.+ 925,000
27,000 Quaker Oats Company 1,211,625
5,000 Seagram Company Ltd. 201,250
7,786 Tootsie Roll Industries, Inc. 346,477
20,000 Whitman Corporation 506,250
-----------
4,365,602
-----------
Health Care - 2.2%
20,000 Carter-Wallace, Inc. 357,500
60,000 IVAX Corp.+ 671,250
5,000 Rhone-Poulenc Rorer, Inc. 454,375
-----------
1,483,125
-----------
Hotels/Casinos - 4.6%
35,000 Aztar Corporation+ 247,188
30,000 ITT Corporation, New+ 1,831,875
80,000 Jackpot Enterprises Inc. 910,000
17,000 Trump Hotels & Casino Resorts, Inc.+ 182,750
-----------
3,171,813
-----------
Publishing - 7.4%
20,000 Golden Books Family Entertainment,
Inc.+ 250,000
15,000 Harcourt General, Inc. 714,375
15,000 Lee Enterprises, Incorporated 395,625
5,000 McGraw-Hill Companies, Inc. 294,063
25,000 Media General, Inc., Class A 1,000,000
28,000 Meredith Corporation 812,000
14,666 Pulitzer Publishing Company 777,298
60,000 Thomas Nelson Inc. 832,500
-----------
5,075,861
-----------
Retail - 4.3%
50,000 Bruno's, Inc.+ 575,000
5,000 Delchamps, Inc. 160,000
35,000 Giant Food Inc., Class A 1,141,875
40,000 Neiman Marcus Group, Inc.+ 1,050,000
-----------
2,926,875
-----------
Specialty Chemical - 0.8%
14,000 Ferro Corporation 518,875
-----------
Wireless Communications - 2.8%
32,000 Centennial Cellular Corp., Class A+ 508,000
30,000 COMSAT Corporation, Series 1 714,375
12,000 Rogers Cantel Mobile Communications,
Inc., Class B+ 227,250
15,000 Telephone and Data Systems, Inc. 569,062
-----------
2,018,687
-----------
TOTAL COMMON STOCKS
(Cost $51,382,890) 63,000,941
-----------
- -----------------------------
U.S. TREASURY BILLS - 9.1%
- -----------------------------
Principal
Amount Value
- --------------------------------------------------------------------------------
$ 6,235,000 4.30% to 5.10%++ due 07/10/1997
08/21/1997 $ 6,205,051
-----------
TOTAL U.S. TREASURY BILLS
(Cost $6,205,051) 6,205,051
-----------
TOTAL INVESTMENTS - 101.1%
(Cost $57,587,941) (a) 69,205,992
-----------
OTHER ASSETS AND LIABILITIES
(Net) --(1.1)% (726,301)
-----------
- --------------------------------------------------------------------------------
NET ASSETS-- 100.0% $68,479,691
===========
- --------------------------------------------------------------------------------
(a) Aggregate cost for Federal tax purposes was $57,608,884. Net unrealized
appreciation for Federal tax purposes was $11,597,108 (gross unrealized
appreciation was $12,213,508 and gross unrealized depreciation was
$616,400).
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
GDR -- Global Depositary Receipt
See notes to financial statements.
- --------------------------------------------------------------------------------
57
<PAGE>
- ---------------
Gabelli Capital
Asset Fund
- ---------------
5
- ---------------
- --------------------------------------------------------------------------------
Gabelli Capital Asset Fund
- ---------------------------------
STATEMENT OF ASSETS
AND LIABILITIES
June 30, 1997 (Unaudited)
Assets:
Investments, at value
(Cost $57,587,941) $69,205,992
Cash 29,085
Receivables for investments sold 1,959,097
Unamortized organization costs 56,659
Dividends receivable 25,732
-----------
Total Assets 71,276,565
-----------
Liabilities:
Payable for investments purchased 2,569,531
Organization costs payable 99,905
Management fee payable 53,293
Accrued Directors' fees 11,675
Accrued expenses and other payables 62,470
-----------
Total Liabilities 2,796,874
-----------
Net assets applicable to 4,886,306 shares of
common stock outstanding $68,479,691
===========
NET ASSETS consist of:
Shares of common stock at par value $ 4,886
Additional paid-in capital 54,020,234
Undistributed net investment income 5,809
Accumulated net realized
gain on investments 2,830,711
Net unrealized appreciation of investments 11,618,051
-----------
Total Net Assets $68,479,691
===========
Net Asset Value, offering and redemption
price per share ($68,479,691 / 4,886,306
shares outstanding; 500,000,000 shares
authorized of $0.001 par value) $ 14.01
===========
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997
(Unaudited)
Investment Income:
Dividend income (net of foreign
withholding taxes of $248) $ 292,742
Interest income 72,197
-----------
Total Investment Income 364,939
-----------
Expenses:
Management fee 276,471
Legal and audit fees 22,680
Directors' fees 17,403
Custodian fees 15,124
Amortization of organization costs 9,918
Shareholder services fees 8,689
Other 5,857
-----------
Total expenses 356,142
-----------
Net Investment Income 8,797
-----------
Net Realized and Unrealized Gain on
Investments:
Net realized gain on investments sold 2,851,654
Change in net unrealized appreciation of
investments during the year 8,508,852
-----------
Net realized and unrealized gain on investments 11,360,506
-----------
Net increase in net assets resulting from
operations $11,369,303
===========
See notes to financial statements.
- --------------------------------------------------------------------------------
58
<PAGE>
---------------
Gabelli Capital
Asset Fund
---------------
5
---------------
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
June 30, 1997 (Unaudited)
Six Months
Ended Year
6/30/97 Ended
(Unaudited) 12/31/96
----------- ------------
Net investment income $ 8,797 $ 92,133
Net realized gain on investments 2,851,654 1,411,324
Net change in unrealized appreciation of investments 8,508,852 2,258,045
----------- ------------
Net increase in net assets resulting from operations 11,369,303 3,761,502
Distribution to shareholders from:
Net investment income -- (95,723)
Net realized gain on investments -- (1,416,212)
Net increase in net assets from Fund share
transactions 5,648,857 22,848,022
----------- ------------
Net increase in net assets 17,018,160 25,097,589
NET ASSETS:
Beginning of period 51,461,531 26,363,942
----------- ------------
End of period (including undistributed
(distributions in excess of) net
investment income of $5,809 and ($2,988),
respectively) $68,479,691 $ 51,461,531
=========== ============
See notes to financial statements.
- --------------------------------------------------------------------------------
59
<PAGE>
- ---------------
Gabelli Capital
Asset Fund
- ---------------
5
- ---------------
- --------------------------------------------------------------------------------
Gabelli Capital Asset Fund
- ---------------------------------
FINANCIAL HIGHLIGHTS
Per share amounts for a Fund share outstanding throughout each period.
<TABLE>
<CAPTION>
Six Months
Ended Year Period
6/30/97 Ended Ended
(Unaudited) 12/31/96 12/31/95*
------------ ------------ ------------
<S> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 11.55 $ 10.70 $ 10.00
------------ ------------ ------------
Net investment income -- 0.02 0.03(a)
Net realized and unrealized gain on investments 2.46 1.16 0.80
------------ ------------ ------------
Total from investment operations 2.46 1.18 0.83
------------ ------------ ------------
Distributions to shareholders from:
Net investment income -- (0.02) (0.03)
Net realized gains -- (0.31) (0.09)
Distributions in excess of net realized gains -- -- (0.01)
------------ ------------ ------------
Total Distributions -- (0.33) (0.13)
------------ ------------ ------------
Net asset value, end of period $ 14.01 $ 11.55 $ 10.70
============ ============ ============
Total return** 21.3% 11.0% 8.4%
============ ============ ============
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000's) $ 68,480 $ 51,462 $ 26,364
Ratio of net investment income to average
net assets 0.03%+ 0.21% 0.75%+
Ratio of operating expenses to average
net assets 1.29%+ 1.31% 1.78%+(b)
Portfolio turnover rate 37.7% 53.2% 81.4%
Average commission rate (per share of security) $ 0.0502 $ 0.0496 N/A
</TABLE>
- ----------
* The Fund commenced operations on May 1, 1995.
** 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 dividends. Total return for the period of
less than one year is not annualized.
+ Annualized.
(a) Net investment income before expenses assumed by the Manager and Adviser
was $0.03.
(b) Operating expense ratio before expenses assumed by the Manager and Adviser
was 1.92%.
See notes to financial statements.
- --------------------------------------------------------------------------------
60
<PAGE>
---------------
Gabelli Capital
Asset Fund
---------------
5
---------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (Unaudited)
- ---------------------------------------
1 -- Significant Accounting Policies
- ---------------------------------------
Gabelli Capital Asset Fund (the "Fund"), a series of Gabelli Capital Series
Funds, Inc. (the "Company"), 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"), whose primary objective is growth of capital. 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. The Fund commenced operations on May 1, 1995. On April 26,
1995, the Fund sold a total of 10,000 shares of common stock to Guardian
Insurance & Annuity Company, Inc. and proceeds to the Fund amounted to $100,000.
The preparation of financial statements in accordance with 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 which are traded only on a nationally recognized
securities exchange or are quoted on Nasdaq are valued at the last sale price as
of the close of business on the day the securities are being valued or, lacking
any sales, at the mean between closing bid and asked prices; if there were no
asked prices quoted on that day, the security is valued at the closing bid
price. Other portfolio securities for which over-the-counter market quotations
are readily available are valued at the mean of the current bid and asked price;
if there were no asked prices quoted on that day, the security is valued at the
closing bid price. Portfolio securities which are traded on more than one
exchange or market are valued according to the broadest and most representative
market, as determined by Gabelli Funds, Inc. (the "Adviser"). Securities and
assets for which market quotations are not readily available are valued at fair
value, as determined in good faith by or under the direction of the Board of
Directors of the Company. Short-term investments that mature in more than 60
days are valued at the highest bid price obtained from a dealer maintaining an
active market in the security or on the basis of prices obtained from a pricing
service approved as reliable by the Board of Directors. Short-term investments
that mature in 60 days or less are valued at amortized cost, unless the Board of
Directors determines that such valuation does not constitute fair value. All
other investment assets, including restricted and not readily marketable
securities, are valued by the Fund under procedures established by and under the
general supervision and responsibility of the Fund's Board of Directors designed
to reflect in good faith the fair value of such securities.
Repurchase Agreements.
The Fund may engage in repurchase agreement transactions. Under the terms of
a typical repurchase agreement, the Fund takes possession of an underlying debt
obligation subject to an obligation of the seller to repurchase, and the Fund to
resell, the obligation at an agreed-upon price and time, thereby determining the
yield during the Fund's holding period. This arrangement results in a fixed rate
of return that is not subject to market fluctuations during the Fund's holding
period. The value of the collateral is at least equal at all times to the total
amount of the repurchase obligations, including interest. In the event of
counterparty default, the Fund has the right to use the col-
- --------------------------------------------------------------------------------
61
<PAGE>
- ---------------
Gabelli Capital
Asset Fund
- ---------------
5
- ---------------
- --------------------------------------------------------------------------------
Gabelli Capital Asset Fund
- ---------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (Unaudited) (Continued)
lateral to offset losses incurred. There is potential loss to the Fund in the
event the Fund is delayed or prevented from exercising its rights to dispose of
the collateral securities, including the risk of a possible decline in the value
of the underlying securities during the period while the Fund seeks to assert
its rights. The Adviser, acting under the supervision of the Board of Directors,
reviews the value of the collateral and the creditworthiness of those banks and
dealers with which the Fund enters into repurchase agreements to evaluate
potential risks.
Securities Transactions and Investment Income.
Securities transactions are accounted for on the trade date with realized
gain or loss on investments determined using specific identification as the cost
method. Interest income (including amortization of premium and accretion of
discount) is recorded as earned. Dividend income is recorded on the ex-dividend
date.
Dividends and Distributions to Shareholders.
Dividends and distributions to shareholders are recorded on the ex-dividend
date. Income dividends and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments of income and gains on various investment securities held by the
Fund, timing differences and differing characterization of distributions made by
the Fund.
Provision for Income Taxes.
The Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended. As a result, a Federal income tax provision is not required.
Deferred Organization Expenses.
A total of $100,000 was incurred in connection with the organization of the
Fund. These costs were advanced by the Guardian Insurance & Annuity Company Inc.
and will be reimbursed by the Fund. These costs were deferred and are being
amortized on a straight-line basis over a period of 60 months from the date the
Fund commenced investment operations.
- --------------------------------------------
2. -- 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 percent of the value of the
Fund's average daily net assets. Pursuant to an Investment Advisory Agreement
among the Fund, the Manager and the Adviser, the Adviser, under the supervision
of the Company's Board of Directors and the Manager, manages the Fund's assets
in accordance with the Fund's investment objectives and policies, makes
investment decisions for the Fund, places purchase and sale orders on behalf of
the Fund, provides investment research and provides facilities and personnel
required for the Fund's administrative needs. The Adviser may delegate its
administrative role and currently has done so to First Data Investor Services
Group, 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 Fund 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
percent of the value of the Fund's average daily net assets.
- --------------------------------------------------------------------------------
62
<PAGE>
---------------
Gabelli Capital
Asset Fund
---------------
5
---------------
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 1997 (Unaudited) (Continued)
- ------------------------------
3. -- Portfolio Securities
- ------------------------------
Cost of purchases and proceeds from sales of investment securities for the
six months ended June 30, 1997, excluding U.S. government and short-term
investments, aggregated $20,296,281 and $21,492,974, respectively.
- -------------------------------------
4. -- Transactions with Affiliates
- -------------------------------------
During the six months ended June 30, 1997, the Fund paid brokerage
commissions of $39,834 to Gabelli & Company, Inc. and its affiliates.
- -------------------------------
5. -- Shares of Common Stock
- -------------------------------
Common stock transactions were as follows:
Six Months Ended Year Ended
6/30/97 12/31/96
----------- -----------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
Shares Sold 1,036,733 $ 12,994,736 2,913,475 $ 33,336,923
Shares issued upon
reinvestment of dividends -- -- 131,244 1,511,935
Shares Redeemed (606,314) (7,345,879) (1,052,170) (12,000,836)
---------- ------------ ---------- ------------
Net increase 430,419 $ 5,648,857 1,992,549 $ 22,848,022
========== ============ ========== ============
- --------------------------------------------------------------------------------
63
