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Gabelli Capital Asset Fund
--------------------------
[Photo of Mario J. Gabelli, C.F.A., Portfolio Manager]
Objective: Growth of capital. Current income is a secondary objective
Portfolio: Primarily common and preferred stocks and other securities
representing the right to acquire common stocks
Inception: May 1, 1995
Net Assets at June 30, 2000: $164,432,720
Q: How did the Fund perform for the first six months of 2000?
A: For the six months ended June 30, 2000, the Gabelli Capital Asset Fund's (the
"Fund") total return was 3.15%.(1) The Standard & Poor's 500 Index(2) ("S&P
500") and Russell 2000 Index(3) had returns of -0.42% and 3.04%, respectively,
over the same period. Each index is an unmanaged indicator of stock market
performance.
For the five-year period ended June 30, 2000, the Fund's total return
averaged 18.35% annually, versus average annual total returns of 23.80% and
14.27% for the S&P 500 and Russell 2000 Indices, respectively.
Q: What factors affected the Fund's performance for the first six months of
2000?
A: At the end of the first quarter of 2000, long-dormant value stocks were
finally attracting attention. The sharp technology stock correction, which began
in the second week of March, revived the antiquated notion that the severely
depressed stocks of high quality companies in out-of-favor industry groups might
be an attractive alternative to the richly priced growth stocks. This
all-but-forgotten concept gained credence as technology stocks continued to
plummet in April. However, investors quickly lost interest in the merits of
value investing when technology stocks began rebounding in late May. By the end
of the second quarter, all eyes were once again focused on technology stocks,
leaving the rest of the market adrift. The Dow Jones Industrial Average(4)
("DJIA") and Standard & Poor's 500 Index materially outperformed the NASDAQ
Composite Index(5) during the second quarter, but momentum had clearly shifted
back to technology stocks at its close.
It has been a dull market for everything but technology stocks these past
six months. After a breathtaking nosedive that temporarily frightened investors
into more reasonably priced market sectors, technology stocks are once again
soaring as the first half of the year draws to a close and attracting almost all
of investors' attention and resources. The rest of the market remains
earthbound.
Our health care industry investments performed well, and food stocks,
which we highlighted as appetizing values in a previous report, also nourished
returns. Meanwhile, after a long run of superior performance, stocks in the
telecommunications and media sectors had become somewhat extended and were due
for a breather. We believe they are still long-term bargains and expect both
earnings growth trends and ongoing consolidation to help them regain momentum.
The Interactive Age is still in its infancy. Going forward, quality distribution
(wired and wireless telecommunications systems, cable television and broadcast
networks) and information and
================================================================================
"The takeover of companies within the portfolio, announced plans for the
potential sale of others, and investors' focus on other potential industry group
targets helped propel the Fund to a modest outperformance of the market
averages."
================================================================================
entertainment content (publishers and film and television production companies)
will be among the world's most prized assets.
Value honey is attracting bees. The takeover of companies within the
portfolio, announced plans for the
--------------------------------------------------------------------------------
(1) 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 the variable annuity contracts or
variable life insurance policies which provide for investment in the Fund
will be lower to reflect separate account and contract/policy charges.
Past performance is not a guarantee of future results. Investment return
and principal value will fluctuate so that the value of an investment,
when redeemed, may be worth more or less than the original cost.
(2) The S&P 500 Index is an unmanaged index of 500 large-cap U.S. stocks that
is generally considered to be representative of U.S. stock market
activity. The S&P 500 Index is not available for direct investment and its
returns do not reflect the fees and expenses that have been deducted from
the Fund.
(3) The Russell 2000 Index is generally considered to be representative of
small-capitalization issues in the U.S. stock market. The Russell 2000
Index is not available for direct investment, and its returns do not
reflect expenses that are deducted from the Fund.
(4) The Dow Jones Industrial Average (DJIA) is an unmanaged index of 30
industrial stocks listed on the New York Stock Exchange that is generally
considered to be representative of U.S. stock market activity.
(5) The NASDAQ Composite Index is a broad-based capitalization-weighted index
of all NASDAQ National Market stocks. The Index is not available for
direct investment.
--------------------------------------------------------------------------------
1
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potential sale of others, and investors' focus on other potential industry group
targets helped propel the Fund to a modest outperformance of the market
averages. We believe merger and acquisition activity will continue to provide a
performance tailwind for the Fund even in what may continue to be a lackluster
market for value stocks.
Q: What is your outlook for the remainder of the year?
A: The labor market remains tight, and the threat of wage-driven inflation is
quite real. Despite six Federal Reserve interest rate hikes over the last
eighteen months, the economy is still growing at a pace that troubles the
monetary authorities and may lead to even higher short- and long-term interest
rates. Although we would assign it a low probability, there is the danger that
the Federal Reserve will overplay its hand and send the economy into a tailspin.
This is also an election year. While the campaign has been a relatively quiet
one, the rhetoric is sure to heat up as we approach November. Political
posturing on economic issues, principally how to squander the growing budget
surplus, may rattle the financial markets. Finally, while there are large
pockets of very attractive fundamental values in the equity markets, stocks are
still rather richly priced relative to historic norms.
Of less widespread concern is the soaring balance of the trade deficit.
Thus far, the world has been happy to finance this deficit by buying U.S. stocks
and bonds. This has worked out well for all concerned. However, if we see
inflation continue to trend higher and the U.S. financial markets continue to
sputter, international investors may seek opportunities elsewhere. Reduced
global demand for U.S. financial assets may have a greater impact on stocks and
bonds than the aforementioned economic, political, and market issues. All
investment esoterics aside, stocks and bonds go up when the buyers are more
motivated than the sellers. If the international demand dries up, the very
favorable supply/demand dynamics that the U.S. financial markets have enjoyed
over the last decade may be disrupted.
That is the dark side. The bright side is that we are finally seeing
evidence of economic deceleration. Housing starts and home sales are down
substantially, and with the exception of oil, commodity prices have stabilized.
The most recently released employment numbers were relatively benign, and there
are indications that consumer confidence has been dented. For the time being,
the Federal Reserve has spared us an additional rate hike. We just may be
returning to a "Goldilocks" economy--not too hot, not too cool, but just
right--that will help propel stocks higher. Ideally, we will see a much broader
market advance in which quality companies in a wider range of industries
participate.
Cyclical stocks have received little tribute for better than expected
earnings. In fact, we believe that significantly lower earnings are already
baked into valuations. So, any pleasant surprises should generate enthusiasm.
Other industry groups such as food and drug stocks have suffered more from
investor indifference than any present or potential earnings dislocations. These
industry groups are logical depositories of money that may flow out of tech
stocks. Media stocks, which stalled in 2000 after exceptionally strong
performance in 1998-99, may also regain some momentum as consolidation in the
industry accelerates. In the last year, we have seen AOL combine with Time
Warner, Viacom acquire CBS, and the recently announced Vivendi, Canal Plus,
Seagram merger. We think there are many more deals, big and small, on the
horizon as content and distribution are linked to improve media companies'
competitive positions on the world stage. Telecommunications stocks have also
taken a well-deserved rest this year. However, the three forces driving the
industry--technology, deregulation, and consolidation--remain firmly in place.
--------------------------------------------------------------------------------
Top Ten Holdings as of June 30, 2000
--------------------------------------------------------------------------------
1. Telephone & Data Systems, Inc. 3.88%
--------------------------------------------------------------------------------
2. Liberty Media Group, CL. A 3.82%
--------------------------------------------------------------------------------
3. Viacom Inc., CL. A 3.60%
--------------------------------------------------------------------------------
4. Cablevision Systems Corp., CL. A 2.79%
--------------------------------------------------------------------------------
5. Chris-Craft Industries Inc. 2.68%
--------------------------------------------------------------------------------
6. Citizens Communications Co. 2.40%
--------------------------------------------------------------------------------
7. Media General Inc., CL. A 2.35%
--------------------------------------------------------------------------------
8. Shared Medical Systems Corp. 1.85%
--------------------------------------------------------------------------------
9. Carter-Wallace Inc. 1.83%
--------------------------------------------------------------------------------
10. El Paso Electric Co. 1.83%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Gabelli Capital Asset Fund Profile
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS(1)
FOR PERIOD ENDED JUNE 30, 2000
================================================================================
1 Year ........................................................... 8.63%
3 Years .......................................................... 17.51%
5 Years .......................................................... 18.35%
Since Inception (5/1/95)............................................18.13%
--------------------------------------------------------------------------------
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2
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Gabelli Capital Asset Fund
--------------------------
SCHEDULE OF INVESTMENTS
June 30, 2000 (Unaudited)
-----------------------
COMMON STOCKS -- 100.5%
-----------------------
Market
Shares Cost Value
--------------------------------------------------------------------------------
Agriculture -- 0.5%
85,000 Archer-Daniels-Midland Co. 1,411,949 834,062
--------------------------------------------------------------------------------
Automotive -- 0.5%
13,282 General Motors Corp. 885,755 771,186
--------------------------------------------------------------------------------
Automotive: Parts and Accessories -- 4.1%
50,000 Dana Corp. 1,732,048 1,059,375
100,000 GenCorp Inc. 890,885 800,000
68,000 Modine Manufacturing Co. 2,300,741 1,836,000
40,000 Scheib (Earl) Inc.+ 278,875 128,750
60,000 Standard Motor Products Inc. 1,329,363 510,000
20,000 Superior Industries
International Inc. 509,781 515,000
50,000 Tenneco Automotive Inc. 439,819 262,500
40,000 TransPro Inc. 274,101 202,500
60,000 Wynn's International Inc. 719,079 1,361,250
---------- ----------
8,474,692 6,675,375
--------------------------------------------------------------------------------
Aviation: Parts and Services -- 1.6%
18,000 AAR Corp. 250,688 216,000
52,000 Barnes Group Inc. 1,225,215 848,250
16,000 Curtiss-Wright Corp. 470,869 595,000
30,000 Fairchild Corp., Cl. A+ 354,724 146,250
7,500 Hi-Shear Industries Inc. 21,717 19,219
40,000 Kaman Corp., Cl. A 499,781 427,500
17,000 Moog Inc., Cl. A+ 446,825 448,375
---------- ----------
3,269,819 2,700,594
--------------------------------------------------------------------------------
Broadcasting -- 7.2%
68,000 Ackerley Group Inc. 588,667 799,000
4,000 BHC Communications Inc., Cl. A 595,200 608,000
67,100 Chris-Craft Industries Inc.+ 3,059,418 4,432,794
65,000 Granite Broadcasting Corp.+ 696,878 479,375
20,000 Gray Communications
Systems Inc. 350,675 196,250
80,000 Gray Communications
Systems Inc., Cl. B 1,015,412 780,000
12,000 Hearst-Argyle Television Inc.+ 251,729 234,000
45,000 Liberty Corp. 2,200,252 1,890,000
19,000 United Television Inc. 1,676,374 2,446,250
---------- ----------
10,434,605 11,865,669
--------------------------------------------------------------------------------
Building and Construction -- 0.6%
52,000 Nortek Inc.+ 1,385,030 1,027,000
---------- ----------
Business Services -- 1.2%
15,000 Cendant Corp.+ 239,812 210,000
25,000 Nashua Corp.+ 341,104 206,250
15,000 Primark Corp. 561,375 558,750
17,000 Verio Inc.+ 990,187 943,234
---------- ----------
2,132,478 1,918,234
--------------------------------------------------------------------------------
Cable -- 3.2%
68,000 Cablevision Systems Corp.,
Cl. A+ 569,094 4,615,500
14,000 UnitedGlobalCom Inc., Cl. A+ 393,903 654,500
---------- ----------
962,997 5,270,000
--------------------------------------------------------------------------------
Computer Software and Services -- 0.4%
55,000 Genuity Inc.+ 577,525 503,594
4,000 Global Sources Ltd.+ 265,401 101,500
---------- ----------
842,926 605,094
--------------------------------------------------------------------------------
Consumer Products -- 2.9%
150,000 Carter-Wallace Inc. 2,578,085 3,018,750
42,000 Gallaher Group plc, ADR 902,524 900,375
30,000 National Presto Industries Inc. 1,117,685 922,500
---------- ----------
4,598,294 4,841,625
--------------------------------------------------------------------------------
Consumer Services -- 1.8%
200,000 Rollins Inc. 3,862,912 2,975,000
--------------------------------------------------------------------------------
Diversified Industrial -- 2.0%
40,000 Ampco-Pittsburgh Corp. 639,125 445,000
40,000 GATX Corp. 1,147,578 1,360,000
67,000 Katy Industries Inc. 946,550 787,250
33,000 Myers Industries Inc. 450,164 354,750
47,000 WHX Corp.+ 477,081 258,500
---------- ----------
3,660,498 3,205,500
--------------------------------------------------------------------------------
Energy and Utilities -- 5.8%
7,000 E'Town Corp. 461,163 465,062
32,000 Eastern Enterprises 1,261,850 2,016,000
269,800 El Paso Electric Co.+ 2,430,955 3,018,387
4,000 EnergyNorth Inc. 234,450 237,000
15,000 Florida Progress Corp. 704,701 703,125
5,000 Florida Public Utilities Co. 79,000 78,125
100,000 Kaneb Services Inc.+ 348,125 400,000
22,000 Southwest Gas Corp. 565,746 385,000
40,000 United Water Resources Inc. 1,344,500 1,395,000
10,000 Vastar Resources Inc. 819,875 821,250
---------- ----------
8,250,365 9,518,949
--------------------------------------------------------------------------------
Entertainment -- 12.7%
25,000 Fisher Companies Inc. 1,695,292 1,912,500
45,000 GC Companies Inc.+ 1,530,893 1,006,875
260,000 Liberty Media Group, Cl. A+ 762,816 6,305,000
30,000 Seagram Co. 1,713,605 1,740,000
12,000 Time Warner Inc. 521,410 912,000
22,000 TV Guide Inc., Cl. A+ 577,543 753,500
105,000 USA Networks Inc.+ 727,129 2,270,625
87,000 Viacom Inc., Cl. A+ 1,445,407 5,948,625
---------- ----------
8,974,095 20,849,125
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
3
<PAGE>
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Market
Shares Cost Value
--------------------------------------------------------------------------------
Environmental Services -- 0.6%
60,000 EnviroSource Inc.+ 170,797 28,125
50,000 Waste Management Inc. 910,601 950,000
---------- ----------
1,081,398 978,125
--------------------------------------------------------------------------------
Equipment and Supplies -- 9.5%
50,000 AMETEK Inc. 937,874 875,000
35,000 Belden Inc. 658,062 896,875
25,000 CIRCOR International Inc.+ 269,028 204,687
38,000 CLARCOR Inc. 723,141 755,250
1,000 CTS Corp. 7,481 45,000
20,000 Cuno Inc.+ 383,875 462,500
12,000 Eastern Co. 203,575 157,500
135,500 Fedders Corp. 820,369 787,594
85,000 Flowserve Corp. 1,712,486 1,280,312
11,000 Franklin Electric Co. 361,576 745,250
35,000 IDEX Corp. 1,012,095 1,104,687
85,000 Mark IV Industries Inc. 1,621,708 1,774,375
65,000 Navistar International Corp.+ 2,068,395 2,019,063
30,000 Sequa Corp., Cl. A+ 1,048,824 1,145,625
49,000 SPS Technologies Inc.+ 2,084,176 2,012,063
70,000 UCAR International Inc.+ 1,262,496 914,375
40,000 Watts Industries Inc., Cl. A 557,285 505,000
---------- ----------
15,732,446 15,685,156
--------------------------------------------------------------------------------
Financial Services -- 4.9%
5,000 Advest Group Inc. 101,450 104,688
50,000 Allstate Corp. 1,235,322 1,112,500
68,000 Argonaut Group Inc. 2,021,414 1,164,500
45,000 Block (H&R) Inc. 1,715,666 1,456,875
30,000 First Union Corp. 907,996 744,375
44,500 Midland Co. 667,271 1,090,250
30,000 Pioneer Group Inc.+ 506,867 1,271,250
20,000 ReliaStar Financial Corp. 1,028,656 1,048,750
---------- ----------
8,184,642 7,993,188
--------------------------------------------------------------------------------
Food and Beverage -- 6.3%
25,000 Brown-Forman Corp., Cl. A 1,307,636 1,318,750
70,000 Corn Products International Inc. 2,046,746 1,855,000
15,000 Diageo plc, ADR 529,570 533,437
30,000 General Mills Inc. 1,006,315 1,147,500
30,000 Heinz (H.J.) Co. 1,411,102 1,312,500
40,000 Kellogg Co. 1,319,187 1,190,000
40,000 PepsiAmericas Inc.+ 141,200 120,000
23,339 Tootsie Roll Industries Inc. 400,129 816,865
35,000 Twinlab Corp.+ 386,176 223,125
150,000 Whitman Corp. 2,122,733 1,856,250
---------- ----------
10,670,794 10,373,427
--------------------------------------------------------------------------------
Health Care -- 2.7%
5,000 IVAX Corp.+ 29,839 207,500
42,000 Shared Medical Systems Corp. 3,038,780 3,063,375
30,000 Wesley Jessen VisionCare Inc.+ 1,113,939 1,126,875
---------- ----------
4,182,558 4,397,750
--------------------------------------------------------------------------------
Hotels and Gaming -- 4.4%
140,000 Aztar Corp.+ 999,359 2,170,000
15,000 Boca Resorts Inc., Cl. A+ 143,875 148,125
100,000 Gaylord Entertainment Co. 2,735,008 2,150,000
130,000 Hilton Hotels Corp. 1,585,697 1,218,750
115,000 Jackpot Enterprises Inc. 1,255,026 1,451,875
25,000 Trump Hotels & Casino
Resorts Inc.+ 167,500 70,313
---------- ----------
6,886,465 7,209,063
--------------------------------------------------------------------------------
Paper and Forest Products -- 1.0%
200,000 Pactiv Corp.+ 2,561,028 1,575,000
--------------------------------------------------------------------------------
Publishing -- 7.3%
34,000 Harcourt General Inc. 1,368,736 1,848,750
26,000 Lee Enterprises Inc. 640,556 606,125
25,000 McClatchy Newspapers Inc.,
Cl. A 721,881 828,125
80,000 Media General Inc., Cl. A 3,451,859 3,885,000
13,000 Meredith Corp. 267,779 438,750
40,000 Penton Media Inc. 605,042 1,400,000
12,000 PRIMEDIA Inc.+ 172,679 273,000
20,000 Pulitzer Inc. 596,916 843,750
32,000 Reader's Digest Association Inc.,
Cl. B 821,338 1,170,000
90,000 Thomas Nelson Inc. 1,053,318 770,625
---------- ----------
9,700,104 12,064,125
--------------------------------------------------------------------------------
Real Estate -- 1.4%
130,000 Catellus Development Corp.+ 2,089,775 1,950,000
35,000 Griffin Land & Nurseries Inc.+ 493,263 430,938
---------- ----------
2,583,038 2,380,938
--------------------------------------------------------------------------------
Retail -- 2.1%
5,000 Aaron Rents Inc. 100,625 62,813
10,000 Aaron Rents Inc., Cl. A 199,750 156,250
10,000 Albertson's Inc. 245,150 332,500
15,000 Hannaford Bros. Co. 1,080,229 1,078,125
40,000 Lillian Vernon Corp. 631,288 420,000
53,000 Neiman Marcus Group
Inc., Cl. B+ 1,409,652 1,470,750
---------- ----------
3,666,694 3,520,438
--------------------------------------------------------------------------------
See accompanying notes to financial statements.
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4
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Gabelli Capital Asset Fund
--------------------------
SCHEDULE OF INVESTMENTS
June 30, 2000 (Unaudited) (Continued)
Market
Shares Cost Value
--------------------------------------------------------------------------------
Satellite -- 1.6%
50,000 COMSAT Corp. 1,283,602 1,234,375
15,999 General Motors Corp., Cl. H+ 1,525,812 1,403,912
----------- -------------
2,809,414 2,638,287
--------------------------------------------------------------------------------
Specialty Chemicals -- 4.3%
46,000 Bush Boake Allen Inc.+ 1,236,347 2,012,500
20,000 Dexter Corp. 798,938 960,000
40,000 Ferro Corp. 795,700 840,000
15,000 Material Sciences Corp.+ 163,956 150,000
85,000 McWhorter Technologies Inc.+ 1,667,063 1,652,188
65,000 Omnova Solutions Inc. 514,634 406,250
51,000 Sybron Chemicals Inc.+ 1,345,580 1,115,625
----------- -------------
6,522,218 7,136,563
--------------------------------------------------------------------------------
Telecommunications -- 4.5%
28,000 AT&T Canada Inc., Cl. B+ 881,938 929,250
33,250 AT&T Corp. 1,128,422 1,051,531
25,000 CenturyTel Inc. 680,105 718,750
230,000 Citizens Communications Co. 2,508,459 3,967,500
13,000 Rogers Communications
Inc., Cl. B, ADR+ 228,650 370,500
12,000 Viatel Inc.+ 371,518 342,750
----------- -------------
5,799,092 7,380,281
--------------------------------------------------------------------------------
Wireless Communications -- 5.4%
35,000 Rogers Cantel Mobile
Communications Inc., Cl. B+ 388,800 1,176,875
64,000 Telephone & Data Systems Inc. 2,644,953 6,416,000
20,000 United States Cellular Corp.+ 1,290,748 1,260,000
----------- -------------
4,324,501 8,852,875
--------------------------------------------------------------------------------
Total Investments -- 100.5% 143,850,807 165,242,629
===========
Other Assets and
Liabilities (Net) -- (0.5)% (809,909)
--------------------------------------------------------------------------------
Net Assets -- 100.0% $ 164,432,720
--------------------------------------------------------------------------------
For Federal tax purposes:
Aggregate cost $ 143,850,807
=============
Gross unrealized appreciation $ 36,530,180
Gross unrealized depreciation (15,138,358)
-------------
Net unrealized appreciation $ 21,391,822
=============
+ Non-income producing security.
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
5
<PAGE>
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000 (Unaudited)
Assets:
Investments, at value (Cost $143,850,807) $165,242,629
Dividends receivable 128,449
Receivable for investments sold 2,538,142
Other assets 3
------------
Total Assets 167,909,223
------------
Liabilities:
Payable to custodian 1,866,421
Payable for investments purchased 1,407,147
Payable for investment advisory fees 137,681
Other accrued expenses 65,254
------------
Total Liabilities 3,476,503
------------
Net Assets applicable to 9,121,202 shares
outstanding $164,432,720
============
Net Assets consist of:
Capital stock, at par value $ 9,121
Additional paid-in capital 121,588,473
Accumulated net investment income 144,342
Accumulated net realized gain on investments 21,298,962
Net unrealized appreciation on investments 21,391,822
------------
Total Net Assets $164,432,720
============
Net Asset Value, offering and redemption
price per share ($164,432,720 / 9,121,202
shares outstanding; 500,000,000 shares
authorized of $0.001 par value) $18.03
======
STATEMENT OF OPERATIONS
Six Months Ended
June 30, 2000 (Unaudited)
Investment Income:
Dividends $ 976,508
Interest 73,638
------------
Total Investment Income 1,050,146
------------
Expenses:
Management fees 824,755
Custodian fees 22,940
Legal and audit fees 20,350
Directors' fees 12,010
Organizational expenses 6,575
Shareholder services fees 2,397
Interest expense 14,810
Miscellaneous expenses 1,967
------------
Total Expenses 905,804
------------
Net Investment Income 144,342
------------
Net Realized and Unrealized Gain on
Investments:
Net realized gain on investments 21,536,348
Net change in unrealized depreciation
on investments (16,953,497)
------------
Net Realized and Unrealized Gain
on Investments 4,582,851
------------
Net Increase in Net Assets Resulting
from Operations $ 4,727,193
============
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
6
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Gabelli Capital Asset Fund
--------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31,
(unaudited) 1999
------------- -------------
<S> <C> <C>
Operations:
Net investment income $ 144,342 $ 208,390
Net realized gain on investments 21,536,348 17,364,582
Net change in unrealized appreciation (depreciation) on investments (16,953,497) 12,026,657
------------- -------------
Net increase in net assets resulting from operations 4,727,193 29,599,629
------------- -------------
Distributions to shareholders:
Net investment income -- (208,945)
Net realized gain on investments -- (16,915,440)
In excess of net realized gain on investments -- --
------------- -------------
Total distributions to shareholders -- (17,124,385)
------------- -------------
Capital share transactions:
Net increase (decrease) in net assets from capital share transactions (16,380,631) 8,249,947
------------- -------------
Net increase (decrease) in net assets (11,653,438) 20,725,191
Net Assets:
Beginning of period 176,086,158 155,360,967
------------- -------------
End of period $ 164,432,720 $ 176,086,158
============= =============
</TABLE>
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
7
<PAGE>
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NOTES TO FINANCIAL STATEMENTS
June 30, 2000 (Unaudited)
---------------
1. Organization
---------------
The 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"). The Fund's primary objective is growth of capital. 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").
----------------------------------
2. Significant Accounting Policies
----------------------------------
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 listed or traded on a nationally recognized
securities exchange, quoted by the National Association of Securities Dealers
Automated Quotations, Inc. ("Nasdaq") or traded on foreign exchanges are valued
at the last sale price on that exchange 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). All other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest average of the bid and asked prices. 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"). Securities and assets for which market quotations are not
readily available are valued at their fair value as determined in good faith
under procedures established by and under the general supervision of the Board
of Directors. Short term debt securities with remaining maturities of 60 days or
less are valued at amortized cost, unless the Directors determine such does not
reflect the securities' fair value, in which case these securities will be
valued at their fair value as determined by the Directors. Short term debt
instruments having a greater maturity are valued at the highest bid price
obtained from a dealer maintaining an active market in those securities. Options
are valued at the last sale price on the exchange on which they are listed. If
no sales of such options have taken place that day, they will be valued at the
mean between their closing bid and asked prices.
Securities Transactions and Investment Income
Securities transactions are accounted for on the trade date with realized
gain or loss on the sale of investments determined by using the identified 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 distributions 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.
Organizational Expenses.
A total of $100,000 in expenses was incurred in connection with the
organization of the Fund. These costs
--------------------------------------------------------------------------------
8
<PAGE>
--------------------------------------------------------------------------------
Gabelli Capital Asset Fund
--------------------------
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 (Unaudited) (Continued)
were advanced by Guardian and will be reimbursed by the Fund. These
organizational 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.
-------------------------------------
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 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 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.
-----------------------
4. Portfolio Securities
-----------------------
Purchases and proceeds from the sales of securities for the six months
ended June 30, 2000, other than short term securities, aggregated $57,001,418
and $70,498,433, respectively.
-------------------------------
5. Transactions with Affiliates
-------------------------------
During the six months ended June 30, 2000, the Fund paid brokerage
commissions of $91,652 to Gabelli & Company, Inc. and its affiliates.
------------------
6. Line of Credit.
------------------
The Fund has access to an unsecured line of credit up to $25,000,000 from
the custodian for temporary borrowing purposes. Borrowings under this
arrangement bear interest at 0.75% above the Federal Funds rate on outstanding
balances. There were $1,870,000 of borrowings outstanding at June 30, 2000.
The average daily amount of borrowings outstanding within the six months
ended June 30, 2000 was $235,917, with a related weighted average interest rate
of 6.83%. The maximum amount borrowed at any time during the six months ended
June 30, 2000 was $4,793,000.
-----------------------------
7. Capital Stock Transactions
-----------------------------
Transactions in shares of capital stock were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
---------------- -----------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold 659,949 $ 11,463,506 2,216,370 $ 39,308,449
Shares issued upon
reinvestment of dividends -- -- 1,002,599 17,124,386
Shares redeemed (1,610,925) (27,844,137) (2,738,935) (48,182,888)
------------ ------------ ------------ ------------
Net increase/(decrease) 950,976 $(16,380,631) 480,034 $ 8,249,947
------------ ------------ ------------ ------------
</TABLE>
--------------------------------------------------------------------------------
9
<PAGE>
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout the periods
indicated:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31,
June 30, 2000 -----------------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995+
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Performance:
Net asset value, beginning of period .............. $ 17.48 $ 16.20 $ 15.31 $ 11.55 $ 10.70 $ 10.00
-------- -------- -------- -------- ------- -------
Net investment
income .......................................... 0.02 0.02 0.03 0.02 0.02 0.03(a)
Net realized and
unrealized gain on investments ................ 0.53 3.15 1.74 4.88 1.16 (0.80)
-------- -------- -------- -------- ------- -------
Total from investment
operations ...................................... 0.55 3.17 1.77 4.90 1.18 (0.83)
-------- -------- -------- -------- ------- -------
Distributions to Shareholders:
Net investment income ........................... -- (0.02) (0.03) (0.02) (0.02) (0.03)
Net realized gain on investments ................ -- (1.87) (0.78) (1.12) (0.31) (0.09)
In excess of net realized gain on investments ... -- -- (0.07) (0.00)(b) -- (0.01)
-------- -------- -------- -------- ------- -------
Total distributions ............................. -- (1.89) (0.88) (1.14) (0.33) (0.13)
-------- -------- -------- -------- ------- -------
Net asset value, end of
period ........................................ $ 18.03 $ 17.48 $ 16.20 $ 15.31 $ 11.55 $ 10.70
-------- -------- -------- -------- ------- -------
Total return++ .................................... 3.1% 19.8% 11.7% 42.6% 11.0% 8.4%
-------- -------- -------- -------- ------- -------
Ratios to average net assets and supplemental data:
Net assets, end of period
(000's omitted) ................................. $164,433 $176,086 $155,361 $105,350 $51,462 $26,364
Ratio of net investment
income to average net assets .................... 0.17%(c) 0.13% 0.19% 0.17% 0.21% 0.75%(c)
Ratio of operating expenses to
average net assets (d) (e) ...................... 1.10%(c) 1.08% 1.12% 1.17% 1.31% 1.78%(c)
Portfolio turnover
rate .......................................... 35% 54% 43% 65% 53% 81%
</TABLE>
+ From commencement of 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 in not annualized.
(a) Net investment income before expenses assumed by the Manager and Adviser
was $0.03.
(b) Amount represents less than $0.005 per share.
(c) Annualized.
(d) The ratio of operating expenses to average net assets before reimbursement
of expenses assumed by the Manager and Adviser would have been 1.92% for
the period ended December 31, 1995.
(e) The Fund incurred interest expense during the six months ended June 30,
2000. If interest expense had not been incurred, the ratio of operating
expenses to average net assets would have been 1.08%.
See notes to financial statements.
--------------------------------------------------------------------------------
10
