The
GABELLI
Westwood
Funds
EQUITY FUND
BALANCED FUND
INTERMEDIATE BOND FUND
SMALLCAP EQUITY FUND
REALTY FUND
MIGHTY MITES(SM) FUND
ANNUAL REPORT
SEPTEMBER 30, 1998
<PAGE>
The Gabelli Westwood Funds
==========================
Annual Report
September 30, 1998
***** Equity Fund SmallCap Equity Fund
**** Balanced Fund Realty Fund
*** Intermediate Bond Fund Mighty Mites(SM) Fund
Morningstar rated the Equity Fund 5 stars overall and for the three and
five year periods and 4 stars for the ten year period ended 9/30/98.
Morningstar rated the Balanced Fund 4 stars overall and for the three and
five year periods ended 9/30/98. The Equity and Balanced Funds were rated
among 2678, 1584 and 713 domestic equity funds overall and for the three,
five and ten year periods ended 9/30/98, respectively. Morningstar rated
the Intermediate Bond Fund 3 stars overall and for the five year period
and 4 stars for the three year period ended 9/30/98. The Bond Fund was
rated among 1491 and 940 taxable bond funds overall and for the three and
five year periods ended 9/30/98, respectively.
To Our Shareholders,
We are pleased to provide the September 30, 1998 annual report for The
Gabelli Westwood Funds (the "Funds"), including the Equity Fund, Balanced Fund,
Intermediate Bond Fund, SmallCap Equity Fund, Realty Fund and Mighty Mites(SM)
Fund.
Economic Commentary
The previous twelve months have been a period of great uncertainty for
investors. The financial crisis impacting Southeast Asia's economy has been a
primary factor creating havoc for the markets both in the U.S. and abroad. As
you may recall from our earlier letters, we began focusing on the "Asian Flu" in
June 1997 and reacted by divesting from securities that could potentially have
negative effects on the Funds. The portfolios have been defensively postured
through additions in the energy, utility and food-related sectors. Our strategy,
which is designed to preserve principal in down periods, did not begin to show
positive signs until mid-July when the market suffered one of its largest point
drops in history. Until then, investor preference was limited to the largest,
and by many measures, most expensive companies. We feel that investments in this
arena represent more risk than we believe is prudent. The Gabelli Westwood Funds
have demonstrated a strong long term record which links together both favorable
and less favorable investing environments. We believe our efforts to remain
focused on the well-established investment approach will continue to serve
investors who have a long-term objective of capital appreciation.
- --------------------------------------------------------------------------------
Past performance is no guarantee of future results. Total returns and average
annual returns reflect changes in share price and reinvestment of dividends and
are net of expenses. The net asset value of the Fund is reduced on the
ex-dividend (payment) date by the amount of the dividend paid. Investment
returns and the principal value of an investment will fluctuate. When shares are
redeemed they may be worth more or less than their original cost. Morningstar
proprietary ratings reflect historical risk adjusted performance as of September
30, 1998 and are subject to change every month. Morningstar ratings are
calculated from the Funds' three, five and ten year average annual returns in
excess of 90-day T-bill returns with appropriate fee adjustments and a risk
factor that reflects fund performance below 90-day T-bill returns. The top 10%
of the funds in an investment category receive five stars, the next 22.5%
receive 4 stars, the next 35% receive three stars, the next 22.5% receive two
stars and the bottom 10% receive one star.
<PAGE>
Equity Fund
For the fiscal year ending September 30, 1998, the ***** rated Equity Fund
Retail Class' total return was (1.4)% and the Service Class' total return was
(1.8)%. The Standard & Poor's ("S&P") 500 Index rose 9.1% while the Lipper
Analytical Services Capital Appreciation Fund Average declined 8.1% over the
same twelve month period. Each index is an unmanaged indicator of investment
performance.
[The following tables are depicted as line graphs in the printed material]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
EQUITY FUND RETAIL CLASS AND THE S&P 500 INDEX
------------------------------------------------
Average Annual Total Return*
------------------------------------------------
One Year 5 Year 10 Year Life of Fund
------------------------------------------------
(1.4)% 19.1% 15.4% 14.5%
------------------------------------------------
Westwood Equity Fund
(Retail Class) S&P 500 Index
1/2/87 10000 10000
9/87 13165 13599
9/88 11779 11893
9/89 15322 15785
9/90 13699 14305
9/91 16396 18766
9/92 17078 20841
9/93 20508 23553
9/94 22383 24421
9/95 28169 31684
9/96 35740 38116
9/97 49893 53515
9/98 49194 58383
* Past performance is not predictive of future results.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
EQUITY FUND SERVICE CLASS AND THE S&P 500 INDEX
------------------------------------
Average Annual Total Return*
------------------------------------
One Year 3 Year Life of Fund
------------------------------------
(5.7)% 20.0% 16.8%
------------------------------------
Westwood Equity Fund
(Service Class) S&P 500 Index
1/28/94 9600 10000
9/94 9514 9896
9/95 11944 12839
9/96 15090 15445
9/97 21020 21685
9/98 20642 23658
* Past performance is not predictive of future results.
2
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For the ten year period ended September 30, 1998, the Retail Class' return
averaged 15.4% annually versus average annual returns of 17.3% and 13.4% for the
S&P 500 and Lipper Capital Appreciation Fund Average, respectively. Since their
respective inception dates of January 2, 1987 and January 28, 1994 through
September 30, 1998, the Retail Class had a total return of 391.9% and the
Service Class had a total return of 115.1%, which equate to average annual
returns of 14.5% and 17.8%, respectively.
Over the previous twelve months, decisions to reduce the volatility (beta)
in the portfolio have proved successful, particularly during the more volatile
trading sessions. The exposure in the technology, utilities, consumer cyclical
and health care sectors, which were among the market's best performing groups,
also helped the Fund. The Fund's long term performance record continues to be
recognized by many financial publications including Louis Rukeyser's Mutual Fund
Newsletter, Fortune and Business Week.
Balanced Fund
For the fiscal year ending September 30, 1998, the **** rated Balanced
Fund Retail Class' total return was 2.8% and the Service Class' total return was
2.6%. A blended composite of 60% of the Standard & Poor's ("S&P") 500 and 40% of
the Lehman Brothers Government/Corporate Bond ("LBG/C") and the Lipper
Analytical Services Balanced Fund Average had returns of 10.6% and 3.3%,
respectively, over the same twelve month period. Each index is an unmanaged
indicator of investment performance.
For the five year period ended September 30, 1998, the Retail Class'
return averaged 15.1% annually and the Service Class' return averaged 14.7%
versus average annual returns of 14.8% and 11.7% for the blended composite of
60% of the S&P 500 and 40% of the LBG/C Index and the Lipper Balanced Fund
Average, respectively. Since their respective inception dates of October 1, 1991
and April 6, 1993 through September 30, 1998, the Retail Class had a total
return of 154.6% and the Service Class had a total return of 112.7%, which
equate to average annual returns of 14.3% and 14.7%, respectively.
[The following table is depicted as a line graph in the printed material]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
BALANCED FUND RETAIL CLASS AND A COMPOSITE OF 60% -- THE S&P 500 INDEX
AND 40% -- THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX
------------------------------------
Average Annual Total Return*
------------------------------------
One Year 5 Year Life of Fund
------------------------------------
2.8% 15.1% 14.3%
------------------------------------
60% S&P 500 and
Westwood 40% Lehman Bros.
Balanced Fund Gov't./Corp.
(Retail Class) Bond Index
10/1/91 10000 10000
9/92 10797 11207
9/93 12621 12603
9/94 13291 12670
9/95 16203 15658
9/96 19300 17850
9/97 24762 22866
9/98 25455 25290
* Past performance is not predictive of future results.
3
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[The following table is depicted as a line graph in the printed material]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
BALANCED FUND SERVICE CLASS AND A COMPOSITE OF 60% -- THE S&P 500 INDEX
AND 40% -- THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX
------------------------------------
Average Annual Total Return*
------------------------------------
One Year 5 Year Life of Fund
------------------------------------
(1.5)% 13.8% 13.9%
------------------------------------
60% S&P 500 and
Westwood 40% Lehman Bros.
Balanced Fund Gov't./Corp.
(Service Class) Bond Index
4/6/93 9600 10000
9/93 9809 10443
9/94 10751 10499
9/95 13081 12975
9/96 15550 14792
9/97 19904 18949
9/98 20422 20958
* Past performance is not predictive of future results.
The Balanced Fund is designed to give an investor exposure to equities but
reduce overall risk through investment in short to intermediate fixed income
securities. Strategies for the Equity and Intermediate Bond Funds which are
discussed in this letter, also apply to their respective components in the
Balanced Fund.
Over the past year, the Balanced Fund achieved continued prominence as a
top performing balanced fund from many well-known financial publications such as
Smart Money, USA Today and Your Money.
Intermediate Bond Fund
For the fiscal year ending September 30, 1998, the Intermediate Bond
Fund's total return was 10.2%. The Lehman Brothers Government/Corporate Bond
("LBG/C") Index and the Lipper Analytical Services Intermediate Investment Grade
Debt Fund Average had returns of 12.8% and 9.8%, respectively, over the same
twelve month period. Each index is an unmanaged indicator of investment
performance.
For the five year period ended September 30, 1998, the Fund's return
averaged 6.1% versus average annual returns of 7.2% and 6.3% for the LBG/C Index
and the Lipper Intermediate Investment Grade Debt Fund Average, respectively.
Since inception on October 1, 1991 through September 30, 1998, the Fund had a
total return of 66.1%, which equates to an average annual return of 7.5%.
The strong returns for fixed income have been driven by a flight to
quality by most investors who are seeking a safe haven from the volatility in
the equity markets. An overweighting in corporate bonds has contributed to
performance over this period as well as a continued commitment to the
asset-backed sector.
4
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[The following tables are depicted as line graphs in the printed material]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE INTERMEDIATE BOND FUND AND
THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX
------------------------------------
Average Annual Total Return*
------------------------------------
One Year 5 Year Life of Fund
------------------------------------
10.2% 6.1% 7.5%
------------------------------------
Westwood
Intermediate Lehman Bros.
Bond Fund Gov't./Corp.
(Retail Class) Bond Index
10/1/91 10000 10000
9/92 11186 11323
9/93 12331 12620
9/94 11658 12098
9/95 12956 13834
9/96 13540 14467
9/97 15084 15856
9/98 16623 17886
* Past performance is not predictive of future results.
SmallCap Equity Fund
For the fiscal year ending September 30, 1998, the SmallCap Equity Fund's
total return was (17.7)%. The Russell 2000 Index and the Lipper Analytical
Services Small Cap Fund Average declined 19.0% and 20.6%, respectively, over the
same twelve month period. Each index is an unmanaged indicator of investment
performance. Since inception on April 15, 1997 through September 30, 1998, the
Fund had a total return of 19.2%, which equates to an average annual return of
12.8%.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE SMALLCAP EQUITY FUND AND THE RUSSELL 2000 INDEX
----------------------------
Average Annual Total Return*
----------------------------
One Year Life of Fund
----------------------------
(17.7)% 12.8%
----------------------------
Westwood SmallCap
Equity Fund
(Retail Class) Russell 2000 Index
4/15/97 10000 10000
9/30/97 14480 13410
9/30/98 11917 10862
* Past performance is not predictive of future results.
5
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The small cap equity asset class has been a source of great volatility for
market participants. The disappointing overall performance is attributed to a
very weak market environment for small capitalization stocks over the last six
months. Small cap stocks began to weaken in the second quarter of 1998, and the
decline continued into the third quarter as investor preference for liquidity,
earnings visibility and short duration investments contributed to the downturn.
The SmallCap Equity Fund has performed well on a relative basis despite market
sentiment.
Over this period, the effects of the volatile market have been reduced
through investments in utilities, financial services and consumer staples. The
top performing holdings in the Fund during the period include MiniMed and
TranSwitch, which have performed well due to strong fundamentals, and Berg
Electronics, which benefited from being a takeover candidate.
Realty Fund
For the fiscal year ending September 30, 1998 and since inception on
September 30, 1997, the Realty Fund's total return was (10.5)%. The National
Association of REITs ("NAREIT") and the Lipper Analytical Services Real Estate
Fund Average declined 13.6% and 15.9%, respectively, over the same twelve month
period. Each index is an unmanaged indicator of investment performance.
Real Estate Investment Trusts ("REITs") have been a source of strong
performance over the previous two years, earning returns well above their
historic norms. During the most recent nine months, this trend has turned more
negative in tone. We believe that REITs' performance over this period has been
driven by a perception that the fundamentals supporting REITs have deteriorated.
Despite the fears in the marketplace, we believe the fundamentals supporting
this sector remain relatively strong (i.e. compelling supply/demand
fundamentals, low inflation and positive economic growth).
[The following table is depicted as a line graph in the printed material]
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE REALTY FUND, THE RUSSELL 2000 INDEX AND THE
NATIONAL ASSOCIATION OF REITS ALL REIT INDEX
----------------------------
Average Annual Total Return*
----------------------------
One Year Life of Fund
----------------------------
(10.5)% (10.5)%
----------------------------
Realty Fund Rusell 2000 NAREIT All
(Retail Class) Index REIT Index
9/30/97 10000 10000 10000
9/30/98 8950 8100 8540
* Past performance is not predictive of future results.
6
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Overall, we continue to find REITS as an attractive investment because
they offer (1) an avenue to diversify an investor's overall investment plan and
(2) REITs offer attractive yields with an additional opportunity for capital
appreciation.
Mighty Mites(SM) Fund
The micro cap stock universe (companies with market capitalizations of
$300 million or less) offers great opportunity for research driven stock
pickers. Since most companies of this size are not followed by Wall Street
analysts, micro cap stocks tend to be less efficiently priced than other market
sectors. We believe a research intensive program to identify small companies
with big futures can generate attractive long term returns.
The Mighty Mites Fund was launched on May 11, 1998 to invest in micro cap
companies believed to have above average sales and earnings growth potential
and/or are trading at a deep discount to our appraisal of their "real world"
economic value. The Fund's four portfolio managers, Mario J. Gabelli, Marc J.
Gabelli, Laura S. Linehan and Walter K. Walsh, look for companies in a wide
variety of industry groups that have niche products and services and are
flexible enough to grow rapidly and adapt quickly to changing market conditions.
They favor companies where talented managements are also significant
shareholders and, therefore, are motivated to create and surface value.
Since inception on May 11, 1998 through September 30, 1998, the Mighty
Mites Fund's net asset value declined 3.0%. The Russell 2000 Index and the
Lipper Analytical Services Micro Cap Fund Average declined 24.3% and 23.9%,
respectively, over the same period. Each index is an unmanaged indicator of
investment performance.
In the third quarter of 1998, micro cap stocks continued to slide as
investors abandoned small companies in favor of the blue chips perceived to
offer more protection in the stock market storm. We have been investing the
Fund's assets cautiously as we uncover what we believe to be exceptional micro
cap companies trading at very attractive prices. Our large cash position,
(approximately 50% at the close of the quarter) has helped us preserve assets
and our purchasing power in what we view as a great "half price" sale on high
quality micro cap merchandise. We will continue to shop carefully and prudently
for small companies we believe offer exceptional long term value.
The mutual fund industry is often guilty of developing and aggressively
marketing new fund offerings in industry groups and market sectors that have
generated the most attractive returns in recent years. In the process, fund
companies effectively encourage their constituents to "buy at the top." At
Gabelli Westwood, we believe in creating and introducing new funds in those
industries and market sectors that have the best future prospects while offering
the highest level of value. We believe the timing of our introduction of the
Mighty Mites Fund was opportune.
Micro cap stocks have not performed particularly well in recent years. We
believe this is a function of investor psychology (the strong bias toward owning
large household name companies), not a reflection of economic reality or
fundamental investment value. Small, innovative companies are the engines of
change and growth in the American economy. Yet, they are largely being ignored
or shunned by the
7
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investment public. This is helping us to identify great small companies selling
at great prices. We believe over the long term, investors will recognize and
acknowledge the outstanding values we are slowly accumulating today. We look
forward to reporting to you on our progress in the quarters ahead.
Capital Market Outlook
Our capital market outlook continues to be an important tool for assessing
the risk/reward relationship for the varying asset classes for which we invest.
The Capital Markets Model enables our team to have the courage to invest in
opportunities in the face of market volatility. We believe the most likely
scenario for the next 12 months will be one of "muddling through," which can be
characterized as slower growth with a low level of inflation but ticking up from
the previous levels we have experienced over the past few years. We believe the
market has been discounting an alternative scenario of coincident downturn and
is characterized by a worldwide recession. Even though we do not believe this
will play out, the implications (should we be wrong) could mean additional
downside risk of five percent from the market's September levels. Although we
believe the "muddle through" will be the most likely scenario, we do not expect
it to emerge for a period of three to four months. At this point, we would
expect a market characterized by periods of volatility by investors in the
marketplace.
Minimum Initial Investment - $1,000
The Funds' minimum initial investment for both regular and retirement
accounts is $1,000. There are no subsequent investment minimums. No initial
minimum is required for those establishing an Automatic Investment Plan.
Additionally, the Gabelli Westwood Funds and other Gabelli Funds are available
through the no-transaction fee programs at many major discount brokerage firms.
The Roth IRA
The Taxpayer Relief Act of 1997 included new tax incentives and more
opportunities to save for retirement and other major expenditures. The Roth IRA
is just one of these new opportunities now available at Gabelli Funds. Our
investor representatives are available at 1-800-GABELLI (1-800-422-3554) to
speak with you about establishing a new Roth IRA and to discuss your investment
choices. Ask our representatives about the advantage of converting to a Roth IRA
before 1999.
Internet
You can now visit us on the Internet. Our home page at
http://www.gabelli.com contains information about Gabelli Advisers, Inc., the
Gabelli Westwood Mutual Funds, IRAs, 401(k)s, quarterly reports, closing prices
and other current news. You can send us e-mail at [email protected].
Westwood Management recently established its website that we encourage you
to visit as well as to share your comments at www.westwoodgroup.com. We
appreciate your confidence in our investing capabilities and our team will
continue to work hard to meet your investment objectives.
Shareholders will soon be able to receive quarterly reports from Gabelli
Funds via e-mail. We anticipate that this service will be available in early
1999. If you are interested in receiving your
8
<PAGE>
quarterly report via e-mail, please send an e-mail to [email protected]
with your name and address and we will provide you with the appropriate forms.
Our investor representatives are available at 1-800-GABELLI (1-800-422-3554) to
assist you as well.
In Conclusion
The Funds' daily net asset value is available in the financial press and
each evening after 6:00 PM (Eastern Time) by calling 1-800-GABELLI
(1-800-422-3554) or 1-800-WESTWOOD (1-800-937-8966). Please call us during the
business day for further information.
We thank you for your loyalty and as always, pledge our best efforts on
your behalf.
Sincerely,
/s/ Susan M. Byrne
Susan M. Byrne
President and Chief Investment Officer
October 30, 1998
- --------------------------------------------------------------------------------
Nasdaq Symbols Table
- --------------------------------------------------------------------------------
Gabelli Westwood Fund Nasdaq Symbol
--------------------- -------------
Equity - Retail WESWX
Balanced - Retail WEBAX
Intermediate Bond WEIBX
SmallCap Equity WESCX
Realty WESRX
Mighty Mites(SM) WEMMX (pending)
Equity - Service WEECX
Balanced - Service WEBCX
9
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The Gabelli Westwood Equity Fund
Portfolio of Investments -- September 30, 1998
- --------------------------------------------------------------------------------
Shares Cost Value
------ ---- -----
COMMON STOCKS - 92.1%
Aerospace - 1.7%
30,794 Lockheed Martin Corp. .................. $ 2,844,322 $ 3,104,420
------------ ------------
Automotive - 4.0%
114,400 Chrysler Corp. ......................... 5,158,635 5,476,900
37,600 Lear Corp.+ ............................ 1,394,524 1,645,000
------------ ------------
6,553,159 7,121,900
------------ ------------
Broadcasting - 1.3%
71,400 Chancellor Media Corp.+ ................ 2,177,185 2,382,975
------------ ------------
Communications Equipment - 2.4%
61,300 Lucent Technologies Inc. ............... 2,797,819 4,233,531
------------ ------------
Computer Equipment - 2.9%
40,700 International Business
Machines Corp. ....................... 3,732,820 5,209,600
------------ ------------
Computer Software and Services - 4.9%
75,500 HBO & Co. .............................. 2,199,405 2,180,063
60,877 Sterling Commerce Inc.+ ................ 1,900,309 2,107,866
158,800 Sterling Software Inc.+ ................ 2,937,476 4,376,925
------------ ------------
7,037,190 8,664,854
------------ ------------
Diversified Industrial - 1.9%
46,400 Aluminum Company of America ............ 3,206,274 3,294,400
------------ ------------
Energy - 18.7%
130,000 Enron Oil & Gas Co. .................... 2,393,170 2,275,000
127,200 Florida Progress Corp. ................. 4,945,820 5,509,350
74,500 Halliburton Co. ........................ 2,320,824 2,127,906
185,300 Houston Industries Inc. ................ 4,443,569 5,767,462
33,900 Mobil Corp. ............................ 2,454,448 2,574,281
72,000 Noble Affiliates Inc. .................. 2,343,859 2,295,000
137,300 Pennzoil Co. ........................... 6,986,104 4,814,081
166,900 PG&E Corp. ............................. 5,088,651 5,330,369
42,300 Texaco Inc. ............................ 2,340,815 2,651,681
------------ ------------
33,317,260 33,345,130
------------ ------------
Entertainment - 1.9%
38,500 Time Warner Inc. ....................... 2,515,760 3,371,156
------------ ------------
Equipment and Supplies - 0.8%
45,100 Deere & Co. ............................ 1,835,641 1,364,275
------------ ------------
Financial Services - 5.4%
112,330 ABN Amro Holding NV, ADR ............... 2,244,271 1,895,569
27,900 Citicorp ............................... 2,807,323 2,592,956
100,500 First Union Corp. ...................... 5,153,274 5,144,344
------------ ------------
10,204,868 9,632,869
------------ ------------
Food and Beverage - 6.9%
98,500 Anheuser Busch Companies Inc. .......... 4,196,522 5,319,000
106,100 Campbell Soup Co. ...................... 5,103,779 5,324,894
122,300 International Home Foods Inc.+ ......... 2,944,970 1,651,050
------------ ------------
12,245,271 12,294,944
------------ ------------
Health Care - 5.7%
73,400 Genzyme Corp.
(General Division)+ ................. 1,913,606 2,651,575
41,500 Lilly (Eli) & Co. ...................... 2,630,797 3,249,969
76,500 SmithKline Beecham plc, ADR ............ 3,898,623 4,188,375
------------ ------------
8,443,026 10,089,919
------------ ------------
Hotels - 2.6%
192,700 Marriott International Inc., Cl. A ..... 5,517,782 4,600,713
------------ ------------
Insurance - 6.6%
46,600 American General Corp. ................. 3,054,304 2,976,575
69,200 CIGNA Corp. ............................ 3,873,311 4,575,850
72,800 Conseco Inc. ........................... 3,100,478 2,224,950
49,000 Equitable Companies Inc. ............... $ 2,371,508 $ 2,027,375
------------ ------------
12,399,601 11,804,750
------------ ------------
Real Estate Investment Trusts - 5.2%
79,700 Crescent Real Estate Equities Co. ...... 2,237,688 2,012,425
33,500 Equity Residential Properties Trust .... 1,498,944 1,413,281
39,800 Kimco Realty Corp. ..................... 1,539,959 1,512,400
50,800 Simon Property Group Inc. .............. 1,534,766 1,511,300
44,800 Starwood Hotels & Resorts .............. 2,417,617 1,366,400
41,200 Vornado Realty Trust ................... 1,787,918 1,364,750
------------ ------------
11,016,892 9,180,556
------------ ------------
Retail - 8.4%
103,300 AnnTaylor Stores Corp.+ ................ 2,106,390 2,098,281
109,000 CVS Corp. .............................. 3,223,602 4,775,563
105,000 Jones Apparel Group Inc.+ .............. 2,503,981 2,408,438
121,800 Safeway Inc.+ .......................... 5,013,531 5,648,475
------------ ------------
12,847,504 14,930,757
------------ ------------
Telecommunications - 10.8%
92,700 Bell Atlantic Corp. .................... 3,340,249 4,490,156
78,600 GTE Corp. .............................. 3,530,127 4,323,000
93,300 MCI WorldCom Inc. ...................... 3,422,060 4,560,038
130,500 SBC Communications Inc. ................ 4,031,282 5,799,094
------------ ------------
14,323,718 19,172,288
------------ ------------
TOTAL COMMON STOCKS .................... 153,016,092 163,799,037
------------ ------------
PREFERRED STOCKS - 0.9%
Energy - 0.9%
22,000 Houston Industries Inc.,
7.00%, Cv. Pfd. ...................... 1,014,545 1,678,875
------------ ------------
Principal
Amount
------
CORPORATE BONDS - 2.1%
Real Estate Investment Trusts - 2.1%
$3,750,000 Crescent Real Estate
6.625%, 09/15/02 ..................... 3,703,321 3,673,425
------------ ------------
U.S. GOVERNMENT OBLIGATIONS - 4.2%
U.S. Treasury Bills - 3.4%
6,000,000 U.S. Treasury Bills,
4.91%, due 11/19/98 ++ ............... 1,986,634 1,986,634
4.79%, due 12/10/98 ++ ............... 3,961,947 3,961,947
------------ ------------
5,948,581 5,948,581
------------ ------------
U.S. Treasury Notes - 0.8%
1,463,036 TIPS, 3.625%, 04/15/28 ................. 1,454,462 1,459,379
------------ ------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS .......................... 7,403,043 7,407,960
------------ ------------
TOTAL INVESTMENTS - 99.3% .............. $165,137,001 176,559,297
============
Other Assets and Liabilities (Net) - 0.7% 1,299,950
------------
NET ASSETS - 100.0%
(19,793,474 shares outstanding) ...... $177,859,247
============
For Federal tax purposes:
Aggregate cost ....................... $165,242,914
============
Gross unrealized appreciation ........ $ 20,389,324
Gross unrealized depreciation ........ (9,072,941)
------------
Net unrealized appreciation .......... $ 11,316,383
============
- ----------
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
Cv. - Convertible
ADR - American Depositary Receipt.
TIPS - Treasury Inflation Protection Security.
See accompanying notes to financial statements.
10
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The Gabelli Westwood Balanced Fund
Portfolio of Investments -- September 30, 1998
- --------------------------------------------------------------------------------
Shares Cost Value
------ ---- -----
COMMON STOCKS - 57.6%
Aerospace - 1.3%
18,227 Lockheed Martin Corp. .................. $ 1,475,986 $ 1,837,509
------------ ------------
Automotive - 2.6%
60,600 Chrysler Corp. ......................... 2,687,567 2,901,225
19,200 Lear Corp.+ ............................ 713,882 840,000
------------ ------------
3,401,449 3,741,225
------------ ------------
Broadcasting - 0.9%
37,000 Chancellor Media Corp.+ ................ 1,157,144 1,234,875
------------ ------------
Communications Equipment - 1.6%
32,400 Lucent Technologies Inc. ............... 1,575,419 2,237,625
------------ ------------
Computer Equipment - 1.9%
21,100 International Business
Machines Corp. ....................... 1,949,495 2,700,800
------------ ------------
Computer Software and Services - 3.3%
42,700 HBO & Co. .............................. 1,258,087 1,232,963
30,318 Sterling Commerce Inc.+ ................ 928,528 1,049,761
89,300 Sterling Software Inc.+ ................ 1,701,794 2,461,331
------------ ------------
3,888,409 4,744,055
------------ ------------
Diversified Industrial - 1.3%
26,300 Aluminum Company of America ............ 1,726,598 1,867,300
------------ ------------
Energy - 11.4%
66,500 Enron Oil & Gas Co. .................... 1,224,199 1,163,750
56,200 Florida Progress Corp. ................. 2,117,987 2,434,162
38,200 Halliburton Co. ........................ 1,190,006 1,091,087
84,500 Houston Industries Inc. ................ 1,975,729 2,630,063
17,100 Mobil Corp. ............................ 1,217,689 1,298,531
36,800 Noble Affiliates Inc. .................. 1,197,972 1,173,000
67,100 Pennzoil Co. ........................... 3,415,483 2,352,694
89,000 PG&E Corp. ............................. 2,702,384 2,842,438
20,800 Texaco Inc. ............................ 1,111,802 1,303,900
------------ ------------
16,153,251 16,289,625
------------ ------------
Entertainment - 1.2%
19,300 Time Warner Inc. ....................... 1,184,323 1,689,956
------------ ------------
Equipment and Supplies - 0.5%
25,500 Deere & Co. ............................ 1,014,904 771,375
------------ ------------
Financial Services - 3.2%
61,133 ABN Amro Holding NV, ADR ............... 1,239,243 1,031,619
12,100 Citicorp ............................... 1,217,513 1,124,544
45,800 First Union Corp. ...................... 2,361,470 2,344,388
------------ ------------
4,818,226 4,500,551
------------ ------------
Food and Beverage - 4.1%
46,000 Anheuser Busch Companies Inc. .......... 1,945,314 2,484,000
48,400 Campbell Soup Co. ...................... 2,280,238 2,429,075
66,900 International Home Foods Inc.+ ......... 1,654,502 903,150
------------ ------------
5,880,054 5,816,225
------------ ------------
Health Care - 3.5%
40,600 Genzyme Corp. (General Division)+ ..... 1,068,212 1,466,675
19,300 Lilly (Eli) & Co. ...................... 1,222,672 1,511,431
37,800 SmithKline Beecham plc, ADR ............ 1,927,071 2,069,550
------------ ------------
4,217,955 5,047,656
------------ ------------
Hotels - 1.6%
98,200 Marriott International Inc., Cl. A ..... 2,869,781 2,344,525
------------ ------------
Insurance - 4.3%
23,700 American General Corp. ................. 1,553,369 1,513,838
37,200 CIGNA Corp. ............................ 1,851,493 2,459,850
37,000 Conseco Inc. ........................... $ 1,625,498 $ 1,130,812
25,000 Equitable Companies Inc. ............... 1,209,583 1,034,375
------------ ------------
6,239,943 6,138,875
------------ ------------
Real Estate Investment Trusts - 3.3%
38,000 Crescent Real Estate Equities Co. ...... 999,283 959,500
16,500 Equity Residential Properties Trust .... 738,286 696,094
20,400 Kimco Realty Corp. ..................... 790,614 775,200
26,500 Simon Property Group Inc. .............. 800,625 788,375
25,500 Starwood Hotels & Resorts .............. 1,367,511 777,750
22,900 Vornado Realty Trust ................... 866,398 758,562
------------ ------------
5,562,717 4,755,481
------------ ------------
Retail - 5.3%
57,900 AnnTaylor Stores Corp.+ ................ 1,183,355 1,176,094
60,600 CVS Corp. .............................. 1,742,894 2,655,038
53,400 Jones Apparel Group Inc.+ .............. 1,277,618 1,224,863
55,500 Safeway Inc.+ .......................... 2,239,857 2,573,812
------------ ------------
6,443,724 7,629,807
------------ ------------
Telecommunications - 6.3%
39,000 Bell Atlantic Corp. .................... 1,342,913 1,889,063
32,800 GTE Corp. .............................. 1,443,241 1,804,000
51,800 MCI WorldCom Inc. ...................... 1,879,381 2,531,725
63,000 SBC Communications Inc. ................ 1,910,206 2,799,562
------------ ------------
6,575,741 9,024,350
------------ ------------
TOTAL COMMON STOCKS .................... 76,135,119 82,371,815
------------ ------------
PREFERRED STOCKS - 0.8%
Energy - 0.8%
14,500 Houston Industries Inc.,
7.00%, Cv. Pfd. ...................... 775,855 1,106,531
------------ ------------
Principal
Amount
------
ASSET BACKED SECURITIES- 5.2%
$ 700,000 Contimortgage Home Equity
Loan Trust 97-3 Cl. A7,
7.28%, 05/15/24 ...................... 699,605 719,278
77,524 EQCC Home Equity 96-1 Cl. A2,
5.82%, 09/15/09 ...................... 75,682 77,859
11,100 EQCC Home Equity Loan Trust
93-3 Cl. A, 5.15%, 09/15/08 .......... 11,090 11,042
1,500,000 Ford Motor Credit Auto Loan
Master Trust 95-1 Cl. A,
6.50%, 08/15/02 ...................... 1,515,318 1,541,363
20,263 GMAC Grantor Trust 95-A Cl. A,
7.15%, 03/15/00 ...................... 20,262 20,295
495,125 GMAC Grantor Trust 97-A Cl. A,
6.50%, 04/15/02 ...................... 496,776 500,272
476,065 GNMA POOL 344946,
7.00%, 06/15/23 ...................... 484,550 493,218
175,557 Green Tree Financial Corp. 96-3 Cl. A2,
6.45%, 05/15/27 ...................... 175,557 176,565
715,364 Green Tree Home Improvement Loan Trust
96-F Cl. HIA2, 6.40%, 11/15/27 ....... 716,615 719,717
1,000,000 GS Mortgage Securities Corp. 98-GLII
Cl. A2, 6.56%, 04/13/31 .............. 1,009,968 1,066,410
See accompanying notes to financial statements.
11
<PAGE>
The Gabelli Westwood Balanced Fund
Portfolio of Investments (Continued) -- September 30, 1998
- --------------------------------------------------------------------------------
Principal
Amount Cost Value
------ ---- -----
ASSET BACKED SECURITIES(Continued)
$1,000,000 GS Mortgage Securities Corp. II
97-GL Cl. A2D, 6.94%, 07/13/30 ....... $ 1,013,712 $ 1,088,010
1,000,000 Premier AutoTrust 1998-1A4,
5.70%, 10/06/02 ...................... 999,910 1,014,490
------------ ------------
TOTAL ASSET BACKED SECURITIES .......... 7,219,045 7,428,519
------------ ------------
CORPORATE BONDS - 12.6%
Automotive Finance - 0.2%
330,000 GMAC, 8.00%, 10/01/99 .................. 333,404 338,184
------------ ------------
Business Services - 1.7%
1,545,000 USA Waste Services, 7.00%, 10/01/04 .... 1,559,634 1,650,693
750,000 WMX Technologies Inc.,
8.25%, 11/15/99 ...................... 766,288 775,060
------------ ------------
2,325,922 2,425,753
------------ ------------
Computer Equipment - 1.6%
1,300,000 Dell Computer Corp., 6.55%, 04/15/08 ... 1,298,048 1,300,714
990,000 Lexmark International Inc.,
6.75%, 05/15/08 ...................... 980,353 1,020,255
------------ ------------
2,278,401 2,320,969
------------ ------------
Diversified Industrial - 1.0%
1,355,000 Tyco International Group,
6.38%, 06/15/05 ...................... 1,349,655 1,421,124
------------ ------------
Financial Services - 1.8%
250,000 Amresco Inc., 9.88%, 03/15/05 .......... 250,000 201,250
1,800,000 Green Tree Financial Corp.,
6.42%, 05/15/29 ...................... 1,802,148 1,856,467
500,000 GS Escrow Corp., 7.13%, 08/01/05 (a) ... 498,147 498,315
------------ ------------
2,550,295 2,556,032
------------ ------------
Health Care - 0.9%
1,285,000 Health Care Property Investors Inc.,
6.50%, 02/15/06 ...................... 1,252,611 1,306,550
------------ ------------
Insurance - 0.5%
640,000 CIGNA Corp., 8.25%, 01/01/07 ........... 672,139 725,056
------------ ------------
Manufacturing - 0.2%
250,000 Mark IV Industries Inc.,
7.50%, 09/01/07 ...................... 248,343 246,540
------------ ------------
Real Estate Investment Trusts - 1.3%
1,350,000 Crescent Real Estate Equities Co.,
6.63%, 09/15/02 ...................... 1,340,311 1,322,433
450,000 Kimco Realty, 7.46%, 05/29/07 .......... 450,000 494,471
------------ ------------
1,790,311 1,816,904
------------ ------------
Retail - 2.5%
1,625,000 Neiman Marcus Group Inc.,
6.65%, 06/01/08 ...................... 1,623,035 1,673,656
1,720,000 Staples Inc., 7.13%, 08/15/07 .......... 1,746,754 1,843,272
------------ ------------
3,369,789 3,516,928
------------ ------------
Transportation - 0.9%
$1,205,000 Norfolk Southern, 6.95%, 05/01/02 ...... $ 1,236,386 $ 1,273,950
------------ ------------
TOTAL CORPORATE BONDS .................. 17,407,256 17,947,990
------------ ------------
U.S. GOVERNMENT AGENCY OBLIGATIONS - 1.6%
Federal Home Loan Mortgage Corp. - 0.3%
425,000 Discount Note, 10/02/98 ................ 424,936 424,939
------------ ------------
Federal National Mortgage
Association - 1.3%
600,000 FNMA, 5.25%, 01/15/03 ................. 592,751 614,225
36,825 FNMA 95-W4 Cl. A3, 7.20%, 07/25/25 ..... 36,897 36,774
1,242,281 FNMA POOL 344830, 6.00%, 05/01/11 ...... 1,227,931 1,256,256
------------ ------------
1,857,579 1,907,255
------------ ------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS .......................... 2,282,515 2,332,194
------------ ------------
U.S. GOVERNMENT OBLIGATIONS - 20.3%
U.S. Treasury Bills - 1.3%
1,800,000 U.S. Treasury Bills, 4.97% ++,
due 11/19/98 ......................... 1,787,970 1,787,970
------------ ------------
U.S. Treasury Notes - 19.0%
1,059,439 TIPS, 3.63%, due 04/15/28 .............. 1,053,231 1,056,792
24,865,000 U.S. Treasury Notes,
7.00%, due 04/15/99 .................. 1,952,617 1,964,857
5.88% to 7.75%, due 11/15/99
to 02/15/07 .......................... 23,414,894 24,144,876
------------ ------------
26,420,742 27,166,525
------------ ------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS .......................... 28,208,712 28,954,495
------------ ------------
TOTAL INVESTMENTS - 98.1% .............. $132,028,502 140,141,544
============
Other Assets and Liabilities
(Net) - 1.9% ......................... 2,665,076
------------
NET ASSETS - 100.0%
(13,005,432 shares outstanding) ...... $142,806,620
============
For Federal tax purposes:
Aggregate cost ....................... $132,247,835
============
Gross unrealized appreciation ........ $ 12,649,055
Gross unrealized depreciation ........ (4,755,346)
------------
Net unrealized appreciation .......... $ 7,893,709
============
- ------------
(a) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At
September 30, 1998, the market value of Rule 144A Securities amounted to
$498,315 or 0.3% of net assets.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
Cv. - Convertible
ADR - American Depositary Receipt.
TIPS - Treasury Inflation Protection Security.
See accompanying notes to financial statements.
12
<PAGE>
The Gabelli Westwood Intermediate Bond Fund
Portfolio of Investments -- September 30, 1998
- --------------------------------------------------------------------------------
Principal
Amount Cost Value
------ ---- -----
ASSET BACKED SECURITIES - 11.5%
$ 275,000 Contimortgage Home Equity
Loan Trust 97-3 Cl. A7,
7.28%, 05/15/24 ...................... $ 274,844 $ 282,573
33,299 EQCC Home Equity Loan Trust
93-3 Cl. A, 5.15%, 09/15/08 .......... 33,272 33,126
100,000 Ford Motor Credit Auto Loan
Master Trust 95-1 Cl. A,
6.50%, 08/15/02 ...................... 99,839 102,758
13,509 GMAC Grantor Trust 95-A Cl. A,
7.15%, 03/15/00 ...................... 13,508 13,530
84,637 GMAC Grantor Trust 97-A Cl. A,
6.50%, 04/15/02 ...................... 84,832 85,517
58,519 Green Tree Financial Corp. 96-3
Cl. A2, 6.45%, 05/15/27 .............. 58,519 58,855
80,708 Green Tree Home Improvement
Loan Trust 96-F Cl. HIA2,
6.40%, 11/15/27 ...................... 80,849 81,199
200,000 GS Mortgage Securities Corp. II
97-GL Cl. A2D,
6.94%, 07/13/30 ...................... 202,742 217,602
------------ ------------
TOTAL ASSET BACKED
SECURITIES ........................... 848,405 875,160
------------ ------------
CORPORATE BONDS - 29.6%
Building and Construction - 0.6%
50,000 Kevco Inc., 10.38%, 12/01/07 ........... 50,000 47,250
------------ ------------
Business Services - 5.5%
150,000 USA Waste Services,
7.00%, 10/01/04 ...................... 149,732 160,262
250,000 WMX Technologies Inc.,
8.25%, 11/15/99 ...................... 255,429 258,353
------------ ------------
405,161 418,615
------------ ------------
Computer Software and Services - 0.6%
50,000 Flag Ltd., 8.25%, 01/30/08 ............. 50,000 47,750
------------ ------------
Diversified Industrial - 3.9%
50,000 ATC Group Services Inc.,
12.00%, 01/15/08 ..................... 50,000 37,500
50,000 Graham Packaging,
8.75%, 01/15/08 ...................... 50,000 48,250
200,000 Tyco International Group,
6.38%, 06/15/05 ...................... 207,468 209,760
------------ ------------
307,468 295,510
------------ ------------
Energy - 0.3%
50,000 Forman Petroleum Corp.,
13.50%, 06/01/04 (a) ................. 50,683 25,000
------------ ------------
Financial Services - 2.0%
150,000 GS Escrow Corp., 7.13%, 08/01/05 (b) ... 149,444 149,495
------------ ------------
Health Care - 2.0%
150,000 Health Care Property Investors Inc.,
6.50%, 02/15/06 ...................... 148,964 152,516
------------ ------------
Insurance - 4.2%
100,000 CIGNA Corp., 8.25%, 01/01/07 ........... 105,022 113,290
200,000 Conseco Finance Trust III Inc.,
8.80%, 04/01/27 ...................... 203,417 209,191
------------ ------------
308,439 322,481
------------ ------------
Manufacturing - 0.7%
50,000 Mark IV Industries Inc.,
7.50%, 09/01/07 ...................... 49,669 49,308
------------ ------------
Real Estate Investment Trusts - 1.9%
$ 150,000 Crescent Real Estate 6.63%, 09/15/02 ... $ 149,592 $ 146,937
------------ ------------
Retail - 5.7%
160,000 Neiman Marcus Group Inc.,
6.65%, 06/01/08 ...................... 159,807 164,790
250,000 Staples Inc., 7.13%, 08/15/07 .......... 249,511 267,917
------------ ------------
409,318 432,707
------------ ------------
Specialty Chemicals - 0.7%
50,000 du Pont de Nemours (E.I.)
and Co., 9.15%, 04/15/00 ............. 51,626 53,066
------------ ------------
Telecommunications - 1.5%
50,000 RCN Corp., 10.00%, 10/15/07 ............ 50,000 46,625
65,000 Rogers Communications Inc.,
8.88%, 07/15/07 ...................... 64,898 64,350
------------ ------------
114,898 110,975
------------ ------------
TOTAL CORPORATE BONDS .................. 2,245,262 2,251,610
------------ ------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS - 2.7%
171,536 FNMA, POOL 344800, 6.00%, 05/01/11 ..... 169,555 173,466
35,409 FNMA 95-W4 Class A3, 7.20%, 07/25/25 ... 35,477 35,360
------------ ------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS .......................... 205,032 208,826
------------ ------------
U.S. GOVERNMENT OBLIGATIONS - 54.1%
U.S. Treasury Bonds - 9.3%
575,000 U.S. Treasury Bonds, 6.38% to 8.75%,
05/15/17 to 08/15/27 ................. 605,169 709,750
------------ ------------
U.S. Treasury Notes - 44.8%
3,200,000 U.S. Treasury Notes,
4.75%, due 10/31/98 ................. 314,820 315,099
5.00%, due 02/15/99 ................. 225,129 225,352
7.00%, due 04/15/99 ................. 201,359 202,563
5.75% to 7.75%,
due 11/30/99 to 07/15/06 ............. 2,576,812 2,672,831
------------ ------------
3,318,120 3,415,845
------------ ------------
TOTAL U.S. GOVERNMENT OBLIGATIONS ...... 3,923,289 4,125,595
------------ ------------
Shares
------
WARRANTS - 0.0%
Energy - 0.0%
50 Forman Petroleum Corp.,
06/01/04 ............................. 1 1
------------ ------------
TOTAL INVESTMENTS - 97.9% .............. $ 7,221,989 7,461,192
============
Other Assets and Liabilities (Net) - 2.1% 156,736
------------
NET ASSETS - 100.0%
(709,439 shares outstanding) ......... $ 7,617,928
============
For Federal tax purposes:
Aggregate cost ....................... $ 7,221,989
============
Gross unrealized appreciation ........ $ 291,338
Gross unrealized depreciation ........ (52,135)
------------
Net unrealized appreciation .......... $ 239,203
============
- ----------
(a) Security fair valued as determined by the Board of Trustees.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At
September 30, 1998, the market value of Rule 144A securities amounted to
$149,495 or 2.0% of net assets.
See accompanying notes to financial statements.
13
<PAGE>
The Gabelli Westwood SmallCap Equity Fund
Portfolio of Investments -- September 30, 1998
- --------------------------------------------------------------------------------
Shares Cost Value
------ ---- -----
COMMON STOCKS - 97.1%
Automotive: Parts and Accessories - 2.3%
10,200 Dura Automotive Systems Inc.+ .......... $ 301,118 $ 263,925
------------ ------------
Broadcasting - 0.8%
11,000 Cumulus Media Inc.+ .................... 150,119 89,375
------------ ------------
Business Services - 8.3%
3,800 Abacus Direct Corp. + ................. 170,621 193,800
8,400 Daisytek International Corp.+ .......... 202,784 189,000
7,800 International Telecommunication
Data Systems Inc. .................... 192,277 226,200
6,300 Profit Recovery Group
International Inc.+ ................. 207,077 196,875
8,800 Whittman-Hart Inc.+ .................... 178,771 161,700
------------ ------------
951,530 967,575
------------ ------------
Communications Equipment - 4.5%
14,700 Anicom Inc.+ ........................... 178,216 99,225
8,000 Dycom Industries Inc.+ ................. 269,792 249,000
8,800 World Access Inc.+ ..................... 278,377 178,200
------------ ------------
726,385 526,425
------------ ------------
Computer Software and Services - 8.9%
2,450 Engineering Animation Inc.+ ............ 103,082 116,988
10,200 Fundtech Ltd.+ ......................... 159,294 109,650
6,100 Genesys Telecommunications
Laboratories Inc. + ................. 187,634 113,231
2,300 Henry (Jack) & Associates .............. 94,576 109,825
4,400 HNC Software Inc.+ ..................... 143,679 178,749
9,100 Infinium Software Inc.+ ................ 134,740 85,313
5,800 Infoseek Corp. + ....................... 173,498 142,824
1,800 Kronos Inc. + .......................... 66,675 66,600
3,100 New Era of Networks Inc. + ............. 130,388 126,325
------------ ------------
1,193,566 1,049,505
------------ ------------
Consumer Products - 1.2%
6,600 Movado Group Inc. ...................... 137,523 138,600
------------ ------------
Consumer Services - 1.0%
6,600 Preview Travel Inc.+ ................... 184,267 120,450
------------ ------------
Education - 1.1%
4,700 Strayer Education Inc. ................. 154,916 122,788
------------ ------------
Electronics - 1.5%
11,500 TranSwitch Corp.+ ...................... 147,001 171,781
------------ ------------
Energy - 6.2%
18,400 AGL Resources Inc. ..................... 382,398 356,500
16,500 Newfield Exploration Co.+ .............. 389,734 371,250
------------ ------------
772,132 727,750
------------ ------------
Entertainment - 4.8%
21,200 Cinar Films Inc.+ ...................... 399,790 380,275
9,200 Imax Corp.+ ............................ 226,867 184,000
------------ ------------
626,657 564,275
------------ ------------
Equipment and Supplies - 1.8%
10,400 Comfort Systems USA Inc.+ .............. 206,925 209,300
------------ ------------
Financial Services - 3.6%
10,085 Downey Financial Corp. ................. 296,300 240,149
9,800 Staten Island Bancorp Inc. ............. 199,022 176,400
------------ ------------
495,322 416,549
------------ ------------
Food and Beverage - 4.9%
9,400 American Italian Pasta Co., Cl. A+ ..... 314,226 246,750
16,000 CEC Entertainment Inc.+ ................ 378,302 324,000
------------ ------------
692,528 570,750
------------ ------------
Health Care - 10.4%
6,266 Bindley Western Industries Inc. ........ $ 140,593 $ 206,777
7,200 IDEC Pharmaceuticals Corp.+ ............ 250,952 171,000
5,500 MedQuist Inc. + ........................ 165,720 173,937
10,300 Monarch Dental Corp.+ ................. 149,912 135,831
6,100 NCS Healthcare Inc., Cl. A + ........... 166,093 107,513
4,200 Province Healthcare Co. + .............. 131,925 143,063
8,600 Sunrise Assisted Living Inc.+ .......... 265,637 295,087
------------ ------------
1,270,832 1,233,208
------------ ------------
Home Furnishings - 3.2%
7,300 Furniture Brands International Inc.+ .. 197,475 142,350
8,000 Pillowtex Corp. ........................ 267,993 235,000
------------ ------------
465,468 377,350
------------ ------------
Insurance - 2.1%
7,700 ESG Re Ltd. ............................ 190,244 116,463
5,000 Triad Guaranty Inc.+ ................... 158,371 127,500
------------ ------------
348,615 243,963
------------ ------------
Manufacturing - 2.5%
7,950 Hardinge Inc. .......................... 182,543 174,900
5,600 Mettler-Toledo International Inc.+ ..... 114,423 120,400
------------ ------------
296,966 295,300
------------ ------------
Medical Equipment and Supplies - 7.1%
5,200 Closure Medical Corp. + ................ 117,000 109,200
6,000 MiniMed Inc.+ .......................... 251,578 396,000
5,700 Osteotech Inc. + ....................... 135,075 151,050
4,300 Xomed Surgical Products Inc. + ......... 146,648 176,838
------------ ------------
650,301 833,088
------------ ------------
Real Estate Investment Trusts - 5.3%
6,600 Bedford Property Investors Inc. ........ 119,710 118,800
9,600 U.S. Restaurant Properties Inc. ........ 258,324 244,200
3,700 Urban Shopping Centers Inc. ............ 119,935 121,638
10,500 Western Investment Real Estate Trust ... 156,535 134,531
------------ ------------
654,504 619,169
------------ ------------
Retail - 7.4%
15,300 AnnTaylor Stores Corp.+ ................ 347,061 310,781
4,600 Cost Plus Inc. + ....................... 141,013 122,475
18,000 Musicland Stores Corp. + ............... 242,381 222,750
5,000 Whole Foods Market Inc.+ ............... 192,747 210,625
------------ ------------
923,202 866,631
------------ ------------
Steel - 3.1%
21,800 AK Steel Holding Corp. ................. 428,102 358,338
------------ ------------
Transportation - 5.1%
10,000 Alaska Airgroup Inc.+ ................. 408,716 340,625
10,700 MotivePower Industries Inc.+ ........... 279,358 250,113
------------ ------------
688,074 590,738
------------ ------------
TOTAL COMMON STOCKS .................... 12,466,053 11,356,833
------------ ------------
TOTAL INVESTMENTS - 97.1% .............. $ 12,466,053 11,356,833
============
Other Assets and Liabilities (Net) - 2.9% 336,696
------------
NET ASSETS - 100.0%
(1,046,077 shares outstanding) ....... $ 11,693,529
============
For Federal tax purposes:
Aggregate cost ....................... $ 12,554,971
============
Gross unrealized appreciation ........ $ 480,694
Gross unrealized depreciation ........ (1,678,832)
------------
Net unrealized depreciation .......... $ (1,198,138)
============
- ----------
+ Non-income producing security.
See accompanying notes to financial statements.
14
<PAGE>
Gabelli Westwood Realty Fund
Portfolio of Investments -- September 30, 1998
- --------------------------------------------------------------------------------
Shares Cost Value
------ ---- -----
COMMON STOCKS - 95.8%
Real Estate Investment Trusts - 95.8%
1,600 Amresco Capital Trust .................. $ 22,600 $ 15,500
1,000 Apartment Investment &
Management Co., Cl. A ................ 36,586 37,750
2,200 Archstone Communities Trust ............ 50,869 44,825
1,200 Arden Realty Inc. ...................... 33,831 26,775
1,200 Avalon Bay Communities Inc. ............ 47,342 40,875
1,200 Bedford Property Investors Inc. ........ 23,351 21,600
1,100 Boston Properties Inc. ................. 36,485 31,350
400 Brandywine Realty Trust ................ 9,525 7,650
700 BRE Properties Inc. Cl. A .............. 19,436 17,588
2,000 Burnham Pacific Properties Inc. ........ 27,819 27,875
300 Camden Property Trust .................. 8,456 8,381
2,700 Catellus Development Corp.+ ............ 50,197 35,100
1,000 Colonial Properties Trust .............. 29,763 28,313
2,600 Crescent Real Estate Equities Co. ...... 91,994 65,649
2,000 Developers Diversified Realty Corp. .... 40,131 36,500
1,600 Duke Realty Investments Inc. ........... 38,161 37,100
3,084 Equity Office Properties Trust ......... 95,932 75,557
1,300 Equity Residential Properties
Trust SBI ............................ 68,016 54,843
1,000 FelCor Lodging Trust Inc. .............. 37,429 24,313
1,300 First Industrial Realty Trust Inc. ..... 45,063 33,150
1,000 General Growth Properties Inc. ......... 37,037 35,625
1,300 Health Care REIT Inc. .................. 35,458 34,613
1,000 Highwoods Properties Inc. .............. 35,008 27,750
2,500 Innkeepers USA Trust ................... 37,429 29,688
200 Irvine Apartment Communities Inc. ...... 6,332 5,375
1,250 JDN Realty Corp. ....................... 27,159 28,750
1,000 Kimco Realty Corp. ..................... 34,755 38,000
1,200 Liberty Property Trust ................. 28,716 28,575
1,000 LTC Properties Inc. .................... 19,660 17,438
700 Macerich Co. ........................... 19,812 18,813
1,400 Manufactured Home Communities Inc. ..... 37,001 35,613
1,800 Meridian Industrial Trust Inc. ......... 44,606 39,825
1,525 MeriStar Hospitality Corp. + ........... $ 49,007 $ 26,020
254 MeriStar Hotels & Resorts Inc. + ....... 721 699
1,600 Mills Corp. ............................ 41,439 37,200
1,440 New Plan Excel Realty Trust ............ 33,988 33,570
800 Newhall Land & Farming Co. ............. 20,399 18,700
3,200 Patriot American Hospitality Inc. ...... 88,542 40,800
900 Post Properties Inc. ................... 35,353 34,706
1,700 ProLogis Trust ......................... 41,414 38,463
2,200 Public Storage Inc. .................... 66,956 58,987
1,500 Rouse Co. .............................. 49,659 40,406
2,100 Simon Property Group Inc. .............. 68,377 62,474
1,800 SL Green Realty Corp. .................. 47,142 37,800
1,700 Starwood Hotels & Resorts .............. 83,917 51,850
500 Storage USA Inc. ....................... 20,022 17,313
1,300 TriNet Corporate Realty Trust Inc. ..... 49,233 42,413
1,900 U.S. Restaurant Properties Inc. ........ 51,489 48,331
1,700 Vornado Realty Trust ................... 74,052 56,312
1,200 Walden Residential Properties Inc. ..... 30,454 27,600
600 Weeks Corp. ............................ 18,817 17,925
900 Weingarten Realty Investors ............ 37,441 36,900
------------ ------------
TOTAL COMMON STOCKS .................... 2,084,381 1,739,228
------------ ------------
TOTAL INVESTMENTS - 95.8% .............. $ 2,084,381 1,739,228
============
Other Assets and
Liabilities (Net) - 4.2% ............. 75,504
------------
NET ASSETS - 100.0%
(215,231 shares outstanding) ......... $ 1,814,732
============
For Federal tax purposes:
Aggregate cost ....................... $ 2,094,797
============
Gross unrealized appreciation ........ $ 6,056
Gross unrealized depreciation ........ (361,625)
------------
Net unrealized depreciation .......... $ (355,569)
============
- ----------
+ Non-income producing security.
See accompanying notes to financial statements.
15
<PAGE>
The Gabelli Westwood Mighty Mites(SM) Fund
Portfolio of Investments -- September 30, 1998
- --------------------------------------------------------------------------------
Shares Cost Value
------ ---- -----
COMMON STOCKS - 51.1%
Aviation: Parts and Services - 3.4%
2,200 Hudson General Corp. ................... $ 112,135 $ 111,100
3,000 Kaman Corp., Cl. A ..................... 53,134 51,375
------------ ------------
165,269 162,475
------------ ------------
Broadcasting - 0.7%
5,000 Granite Broadcasting Corp. + ........... 44,805 31,875
------------ ------------
Business Services - 2.1%
1,500 Hach Co. ............................... 15,770 16,875
2,000 Headway Corporate Resources Inc. + ..... 12,375 10,000
5,000 Nashua Corp. + ......................... 75,261 73,750
------------ ------------
103,406 100,625
------------ ------------
Cable - 2.0%
9,000 Mercom Inc. + .......................... 101,610 97,875
------------ ------------
Communications Equipment - 0.6%
1,000 Preformed Line Products Co. ............ 31,950 29,750
------------ ------------
Computer Software and Services - 1.4%
3,000 LCS Industries Inc. .................... 43,552 39,750
15,000 Oak Technology Inc. + ................. 51,813 30,000
------------ ------------
95,365 69,750
------------ ------------
Consumer Products - 1.1%
2,000 Adams Golf Inc.+ ....................... 23,313 8,250
500 Baldwin Piano & Organ Co. + ............ 6,500 5,813
1,000 National Presto Industries Inc. ........ 39,456 37,500
------------ ------------
69,269 51,563
------------ ------------
Consumer Services - 0.8%
8,000 Bowlin Outdoor Advertising &
Travel Centers Inc. + ................. 58,400 40,000
------------ ------------
Diversified Industrial - 3.6%
1,000 Matthews International Corp., Cl. A .... 25,750 25,000
29,000 Publicker Industries Inc. + ............ 48,314 97,875
1,200 Vallen Corp. + ......................... 23,925 23,400
2,300 WHX Corp. + ............................ 29,446 29,613
------------ ------------
127,435 175,888
------------ ------------
Energy - 5.8%
2,000 Delta Natural Gas Co. Inc. ............. 35,575 33,875
2,000 Fall River Gas Co. ..................... 29,850 30,875
3,700 Florida Public Utilities Co. ........... 52,569 56,424
5,000 Home-Stake Oil & Gas Co. ............... 30,656 26,875
2,000 Madison Gas & Electric Co. ............. 45,463 46,000
2,500 Providence Energy Corp. ................ 50,562 48,750
1,700 Unitil Corp. ........................... 38,848 38,888
------------ ------------
283,523 281,687
------------ ------------
Entertainment - 2.8%
2,000 Fisher Companies Inc ................... 136,870 136,500
------------ ------------
Equipment and Supplies - 4.0%
4,000 Daniel Industries Inc. ................. 66,200 54,750
3,000 Eastern Co. ............................ 76,418 65,999
7,000 Raytech Corp. + ........................ 37,431 22,750
5,000 SL Industries Inc. ..................... 63,525 51,250
------------ ------------
243,574 194,749
------------ ------------
Financial Services - 6.4%
2,000 Crazy Woman Creek Bancorp Inc. ......... 35,125 25,750
3,000 Doral Financial Corp. .................. 55,039 47,999
500 Independence Federal Savings Bank ...... 8,125 7,500
2,000 Klamath First Bancorp Inc. ............. $ 38,613 $ 34,750
1,000 Merrill Merchants Bancshares Inc. ...... 12,750 13,531
2,000 NMBT Corp. ............................. 40,650 37,500
1,500 Northeast Bancorp ...................... 22,450 14,813
1,200 Reliance Bancorp Inc. .................. 33,450 33,900
1,000 Roslyn Bancorp Inc. .................... 16,263 16,130
2,200 State Bancorp Inc. ..................... 45,475 39,600
2,000 Sun Bancorp Inc. + ..................... 47,249 39,500
------------ ------------
355,189 310,973
------------ ------------
Food and Beverage - 2.5%
3,800 Broughton Foods Co. .................... 64,687 69,350
1,000 Horizon Organic Holding Corp. + ........ 11,000 15,250
500 Kahiki Supper Club Inc. + .............. 2,625 1,000
1,000 Maui Land & Pineapple Inc. + ........... 14,013 9,375
4,000 Nutraceutical International Corp. + .... 39,938 28,250
------------ ------------
132,263 123,225
------------ ------------
Medical Equipment and Supplies - 0.3%
4,000 BioSource International Inc. + ......... 13,000 12,500
------------ ------------
Publishing - 0.8%
2,500 CMP Media Inc., Cl. A + ................ 31,955 26,875
6,000 Individual Investor Group Inc. + ....... 21,290 10,125
------------ ------------
53,245 37,000
------------ ------------
Real Estate - 1.1%
3,000 Gyrodyne Company of America Inc. + ..... 55,563 51,000
------------ ------------
Retail - 2.8%
2,000 Marsh Supermarkets Inc. ................ 34,188 29,500
5,000 Scheib (Earl) Inc. + ................... 31,125 26,875
2,000 Schultz Sav-O Stores Inc. .............. 30,500 31,500
2,200 Village Super Market Inc., Cl. A + ..... 38,000 48,125
------------ ------------
133,813 136,000
------------ ------------
Specialty Chemicals - 2.0%
9,000 Material Sciences Corp. + .............. 100,688 78,750
1,200 Sybron Chemicals Inc. + ................ 33,710 18,150
------------ ------------
134,398 96,900
------------ ------------
Telecommunications - 1.3%
2,000 CoreComm Ltd. + ........................ 21,770 21,750
3,000 Startec Global Communications Corp. + .. 28,713 20,625
2,000 Viatel Inc. + .......................... 27,281 21,250
------------ ------------
77,764 63,625
------------ ------------
Textiles - 0.6%
20,000 Carlyle Industries Inc.+ ............... 20,350 10,625
3,000 Lakeland Industries Inc. + ............. 30,712 20,250
------------ ------------
51,062 30,875
------------ ------------
Transportation - 0.4%
5,000 Air Methods Corp. + .................... 23,516 18,750
------------ ------------
Wireless Communications - 0.5%
2,000 Cellular Communications of
Puerto Rico Inc. + ................... 27,707 23,250
------------ ------------
Miscellaneous Securities - 4.1% ........ 212,666 195,026
------------ ------------
TOTAL COMMON STOCKS .................... 2,731,662 2,471,861
------------ ------------
See accompanying notes to financial statements.
16
<PAGE>
The Gabelli Westwood Mighty Mites(SM) Fund
Portfolio of Investments (Continued) -- September 30, 1998
- --------------------------------------------------------------------------------
Principal
Amount Cost Value
------ ---- -----
U.S. GOVERNMENT OBLIGATIONS - 49.6%
$2,411,000 U.S. Treasury Bills,
4.98%, due 10/15/98 ++ ............... $ 1,005,068 $ 1,005,068
4.95%, due 10/22/98 ++ ............... 972,185 972,185
4.36%, due 12/24/98 ++ ............... 296,934 296,934
4.43%, due 12/31/98 ++ ............... 127,630 127,630
------------ ------------
2,401,817 2,401,817
------------ ------------
TOTAL INVESTMENTS - 100.7% ............. $ 5,133,479 4,873,678
============
Other Assets and
Liabilities (Net) - (0.7)% ........... (35,291)
------------
NET ASSETS - 100.0%
(498,593 shares outstanding) ......... $ 4,838,387
============
For Federal tax purposes:
Aggregate cost .................................. $ 5,133,479
============
Gross unrealized appreciation ................... $ 77,559
Gross unrealized depreciation ................... (337,360)
------------
Net unrealized depreciation ..................... $ (259,801)
============
- ----------
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
The Gabelli Westwood Funds
1998 Tax Notice to Shareholders (Unaudited)
- --------------------------------------------------------------------------------
U.S. Government Income:
The percentage of the ordinary income dividend paid by the Equity Fund, Balanced
Fund, Intermediate Bond Fund, SmallCap Equity Fund, Realty Fund and Mighty Mites
Fund (collectively, the "Funds") during fiscal 1998 which was derived from U.S.
Treasury securities was 14.3%, 36.9%, 37.7%, 0.0%, 0.0% and 0.0%, respectively.
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 Funds did not meet this strict requirement in 1998. Due to the
diversity in state and local tax law, it is recommended that you consult your
personal tax advisor for the applicability of the information provided as to
your specific situation.
The Gabelli Westwood Equity Fund
46.82% of the ordinary income dividend qualifies for the dividend received
deduction available to corporations. The Fund paid to shareholders, on December
22, 1997, a long-term capital gain totaling $0.18 per share.
The Gabelli Westwood Balanced Fund
33.08% of the ordinary income dividend qualifies for the dividend received
deduction available to corporations. The Fund paid to shareholders, on December
22, 1997, a long-term capital gain totaling $0.29 per share.
The Gabelli Westwood Intermediate Bond Fund
None of the ordinary income dividend qualifies for the dividend received
deduction available to corporations.
The Gabelli Westwood SmallCap Equity Fund
1.70% of the ordinary income dividend qualifies for the dividend received
deduction available to corporations.
The Gabelli Westwood Realty Fund
None of the ordinary income dividend qualifies for the dividend received
deduction available to corporations.
- --------------------------------------------------------------------------------
17
<PAGE>
The Gabelli Westwood Funds
Statement of Assets and Liabilities
September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Mighty
Equity Balanced Intermediate SmallCap Realty Mites(SM)
Fund Fund Bond Fund Equity Fund Fund Fund
------------ ------------ ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investments, at value
(Cost $165,137,001, $132,028,502,
$7,221,989, $12,466,053, $2,084,381
and $5,133,479, respectively) .......... $176,559,297 $140,141,544 $ 7,461,192 $ 11,356,833 $ 1,739,228 $ 4,873,678
Cash ...................................... 4,068,244 3,401,467 103,679 411,858 72,661 10,645
Dividends and interest receivable ......... 274,840 942,961 114,058 1,617 10,546 1,490
Receivable for Fund shares sold ........... 161,128 125,408 -- -- -- --
Receivable for investments sold ........... 1,745,795 1,418,182 92,434 181,611 -- 34,924
Receivable from advisor ................... -- -- 15,259 -- 4,776 18,249
Deferred organizational expenses .......... -- -- -- 8,839 7,069 43,807
Prepaid expenses and other assets ......... -- -- -- 2,516 1,767 3,409
------------ ------------ ----------- ------------ ----------- -----------
Total Assets ........................... 182,809,304 146,029,562 7,786,622 11,963,274 1,836,047 4,986,202
------------ ------------ ----------- ------------ ----------- -----------
Liabilities:
Dividends payable ......................... -- -- 32,255 -- -- --
Payable for Fund shares redeemed .......... 19,012 9,520 -- -- -- --
Payable for investments purchased ......... 4,657,338 3,020,548 105,899 232,359 -- 123,441
Payable for investment advisory fees ...... 145,965 87,814 -- 10,785 -- --
Payable for distribution fees ............. 37,000 32,295 1,657 2,417 361 947
Other accrued expenses .................... 90,742 72,765 28,883 24,184 20,954 23,427
------------ ------------ ----------- ------------ ----------- -----------
Total Liabilities ...................... 4,950,057 3,222,942 168,694 269,745 21,315 147,815
------------ ------------ ----------- ------------ ----------- -----------
Net Assets ............................. $177,859,247 $142,806,620 $ 7,617,928 $ 11,693,529 $ 1,814,732 $ 4,838,387
============ ============ =========== ============ =========== ===========
Net Assets consist of:
Shares of beneficial interest, at par value $ 19,793 $ 13,005 $ 709 $ 1,046 $ 215 $ 499
Additional paid-in capital ................ 161,745,400 133,919,659 7,737,802 12,927,757 2,191,748 5,071,908
Accumulated (distributions in excess of)
net investment income .................. 941,080 105,135 51 5,729 11,473 24,826
Accumulated (distributions in excess of)
net realized gain on investments ....... 3,730,678 655,779 (359,837) (131,783) (43,551) 955
Net unrealized appreciation
(depreciation) on investments .......... 11,422,296 8,113,042 239,203 (1,109,220) (345,153) (259,801)
------------ ------------ ----------- ------------ ----------- -----------
Total Net Assets ....................... $177,859,247 $142,806,620 $ 7,617,928 $ 11,693,529 $ 1,814,732 $ 4,838,387
============ ============ =========== ============ =========== ===========
Shares of Beneficial Interest:
Retail Class:
Shares of beneficial interest
outstanding ($0.001 par value) ........ 19,518,254 11,674,171 709,439 1,046,077 215,231 498,593
============ ============ =========== ============ =========== ===========
Net Asset Value, offering and redemption
price per share ........................ $ 8.99 $ 10.98 $ 10.74 $ 11.18 $ 8.43 $ 9.70
============ ============ =========== ============ =========== ===========
Service Class:
Shares of beneficial interest
outstanding ($0.001 par value) ........ 275,220 1,331,261
============ ============
Net Asset Value and redemption
price per share ........................ $ 8.97 $ 10.96
============ ============
Maximum sales charge ...................... 4.00% 4.00%
============ ============
Maximum offering price per share
(NAV/0.96, based on maximum
sales charge of 4.00% of the
offering price at September 30, 1998) .. $ 9.34 $ 11.42
============ ============
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
The Gabelli Westwood Funds
Statement of Operations
For the Year Ended September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Mighty
Equity Balanced Intermediate SmallCap Realty Mites(SM)
Fund Fund Bond Fund Equity Fund Fund Fund(a)
------------ ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Dividends ............................. $ 3,180,647 $ 1,392,018 $ 1,358 $ 90,681 $ 110,404 $ 6,450
Interest .............................. 704,084 2,933,342 418,445 -- -- 38,856
----------- ----------- ----------- ----------- ----------- -----------
Total Investment Income ............ 3,884,731 4,325,360 419,803 90,681 110,404 45,306
----------- ----------- ----------- ----------- ----------- -----------
Expenses:
Investment advisory fees .............. 1,759,265 905,501 39,002 119,031 20,515 12,543
Distribution fees-- Retail Class ...... 432,956 260,511 16,251 29,758 5,128 3,136
Distribution fees-- Service Class ..... 13,716 82,646 -- -- -- --
Legal and audit fees .................. 51,392 48,783 45,924 24,627 16,062 15,732
Custodian fees ........................ 42,396 41,395 8,089 34,973 15,377 2,905
Shareholder services fees ............. 214,594 98,153 9,848 15,112 5,063 3,154
Registration fees ..................... 71,542 52,640 13,365 17,769 12,479 14,563
Shareholder report expenses ........... 41,020 31,271 2,007 1,796 546 477
Organizational expenses ............... -- -- -- 2,516 1,767 3,671
Miscellaneous expenses ................ 5,877 -- 1,083 5,834 4,266 412
----------- ----------- ----------- ----------- ----------- -----------
Total Expenses ..................... 2,632,758 1,520,900 135,569 251,416 81,203 56,593
----------- ----------- ----------- ----------- ----------- -----------
Less:
Expense reimbursements ............. -- -- (65,358) (46,468) (46,272) (30,816)
Custodian fee credits .............. (32,535) (31,735) (5,207) (26,052) (4,160) (643)
----------- ----------- ----------- ----------- ----------- -----------
Total Net Expenses ................. 2,600,223 1,489,165 65,004 178,896 30,771 25,134
----------- ----------- ----------- ----------- ----------- -----------
Net Investment Income (Loss) ............. 1,284,508 2,836,195 354,799 (88,215) 79,633 20,172
----------- ----------- ----------- ----------- ----------- -----------
Net Realized and Unrealized Gain (Loss)
on Investments:
Net realized gain (loss) on investment
transactions ....................... 4,550,079 1,192,217 128,342 3,145 (3,949) 955
Net change in unrealized appreciation
(depreciation) on investments ...... (9,210,035) (2,657,020) 160,804 (2,467,027) (345,153) (259,801)
----------- ----------- ----------- ----------- ----------- -----------
Net realized and unrealized gain (loss)
on investments ..................... (4,659,956) (1,464,803) 289,146 (2,463,882) (349,102) (258,846)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations ............. $(3,375,448) $ 1,371,392 $ 643,945 $(2,552,097) $ (269,469) $ (238,674)
=========== =========== =========== =========== =========== ===========
</TABLE>
(a) From commencement of operations on May 11, 1998.
See accompanying notes to financial statements.
19
<PAGE>
The Gabelli Westwood Funds
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Equity Fund Balanced Fund
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Operations:
Net investment income ...................... $ 1,284,508 $ 770,853 $ 2,836,195 $ 1,425,662
Net realized gain on investment transactions 4,550,079 5,123,310 1,192,217 4,225,571
Net change in unrealized appreciation
on investments .......................... (9,210,035) 17,743,737 (2,657,020) 8,428,586
------------- ------------- ------------- ------------
Net increase (decrease) in net assets
resulting from operations ............... (3,375,448) 23,637,900 1,371,392 14,079,819
------------- ------------- ------------- ------------
Distributions to shareholders from:
Net investment income
Retail Class ............................ (1,016,825) (298,531) (2,450,244) (1,102,900)
Service Class ........................... (9,795) (10,884) (321,577) (271,666)
------------- ------------- ------------- ------------
(1,026,620) (309,415) (2,771,821) (1,374,566)
------------- ------------- ------------- ------------
Net realized gain on investment transactions
Retail Class ............................ (5,772,109) (3,698,285) (3,804,112) (1,720,932)
Service Class ........................... (63,562) (148,096) (795,071) (687,890)
------------- ------------- ------------- ------------
(5,835,671) (3,846,381) (4,599,183) (2,408,822)
------------- ------------- ------------- ------------
Total distributions to shareholders ..... (6,862,291) (4,155,796) (7,371,004) (3,783,388)
------------- ------------- ------------- ------------
Shares of beneficial interest transactions:
Proceeds from shares issued
Retail Class ............................ 121,352,169 92,918,827 86,594,633 42,596,591
Service Class ........................... 2,561,265 1,867,426 5,665,274 3,254,037
------------- ------------- ------------- ------------
123,913,434 94,786,253 92,259,907 45,850,628
------------- ------------- ------------- ------------
Proceeds from reinvestment of dividends
Retail Class ............................ 6,623,726 3,960,522 6,031,341 2,681,092
Service Class ........................... 72,059 158,980 990,631 857,303
------------- ------------- ------------- ------------
6,695,785 4,119,502 7,021,972 3,538,395
------------- ------------- ------------- ------------
Costs of shares redeemed
Retail Class ............................ (71,156,328) (16,427,813) (26,091,459) (9,471,412)
Service Class ........................... (3,390,442) (488,462) (5,862,232) (3,109,777)
------------- ------------- ------------- ------------
(74,546,770) (16,916,275) (31,953,691) (12,581,189)
------------- ------------- ------------- ------------
Net increase in net assets from shares
of beneficial interest transactions ... 56,062,449 81,989,480 67,328,188 36,807,834
------------- ------------- ------------- ------------
Net increase in net assets .............. 45,824,710 101,471,584 61,328,576 47,104,265
Net Assets:
Beginning of period ........................ 132,034,537 30,562,953 81,478,044 34,373,779
------------- ------------- ------------- ------------
End of period .............................. $ 177,859,247 $ 132,034,537 $ 142,806,620 $ 81,478,044
============= ============= ============= ============
</TABLE>
See accompanying notes to financial statements.
20
<PAGE>
The Gabelli Westwood Funds
Statement of Changes in Net Assets (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Mighty
Intermediate Bond Fund SmallCap Equity Fund Realty Fund Mites(SM) Fund
For the For the For the For the For the For the
Year Ended Year Ended Year Ended Period Ended Year Ended Period Ended
September 30, September 30, September 30, September 30, September 30, September 30,
1998 1997 1998 1997 (a) 1998 (b) 1998 (c)
----------- ----------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss) ........... $ 354,799 $ 369,596 $ (88,215) $ 47,186 $ 79,633 $ 20,172
Net realized gain (loss) on investment
transactions ........................ 128,342 107,861 3,145 344,055 (3,949) 955
Net change in unrealized appreciation
(depreciation) on investments ....... 160,804 116,971 (2,467,027) 1,357,807 (345,153) (259,801)
----------- ----------- ------------ ------------ ----------- -----------
Net increase (decrease) in net assets
resulting from operations ......... 643,945 594,428 (2,552,097) 1,749,048 (269,469) (238,674)
----------- ----------- ------------ ------------ ----------- -----------
Distributions to shareholders from:
Net investment income .................. (354,799) (370,062) -- -- (69,760) --
In excess of net investment income ..... -- -- (55,075) -- -- --
Net realized gain on investment
transactions ........................ -- -- (347,200) -- -- --
In excess of net realized gain on
investment transactions ............. -- -- (133,930) -- (39,769) --
----------- ----------- ------------ ------------ ----------- -----------
Total distributions to shareholders.. (354,799) (370,062) (536,205) -- (109,529) --
----------- ----------- ------------ ------------ ----------- -----------
Shares of beneficial interest transactions:
Proceeds from shares issued ............ 3,406,081 1,191,667 22,466,630 10,675,477 3,991,590 6,596,508
Proceeds from reinvestment of dividends 237,998 258,261 530,206 -- 96,235 --
Cost of shares redeemed ................ (2,227,131) (1,258,153) (16,760,984) (3,878,546) (1,894,095) (1,519,447)
----------- ----------- ------------ ------------ ----------- -----------
Net increase in net assets from
shares of beneficial interest
transactions ...................... 1,416,948 191,775 6,235,852 6,796,931 2,193,730 5,077,061
----------- ----------- ------------ ------------ ----------- -----------
Net increase in net assets .......... 1,706,094 416,141 3,147,550 8,545,979 1,814,732 4,838,387
Net Assets:
Beginning of period .................... 5,911,834 5,495,693 8,545,979 -- -- --
----------- ----------- ------------ ------------ ----------- -----------
End of period .......................... $ 7,617,928 $ 5,911,834 $ 11,693,529 $ 8,545,979 $ 1,814,732 $ 4,838,387
=========== =========== ============ ============ =========== ===========
</TABLE>
(a) From commencement of operations on April 15, 1997.
(b) From commencement of operations on September 30, 1997.
(c) From commencement of operations on May 11, 1998.
See accompanying notes to financial statements.
21
<PAGE>
The Gabelli Westwood Funds
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Description. The Gabelli Westwood Funds (the "Trust") are registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as a
diversified, open-end management investment company and currently consists of
six active separate investment portfolios: Equity Fund, Balanced Fund,
Intermediate Bond Fund, SmallCap Equity Fund, Realty Fund (commencement of
operations on September 30, 1997) and Mighty Mites Fund (commencement of
operations on May 11, 1998) (collectively, the "Funds"), each with two classes
of shares known as the Retail Class (formerly the "Institutional Class") and the
Service Class, with the exception of the SmallCap Equity Fund, Realty Fund and
Mighty Mites Fund. Effective November 8, 1994, all shares in the Service Class
of the Intermediate Bond Fund were redeemed. No such shares were outstanding at
September 30, 1998, although such shares are available for sale. Each class of
shares outstanding bears the same voting, dividend, liquidation and other rights
and conditions, except that the expense incurred in the distribution and
marketing of such shares are different for each class. The Gabelli Westwood Cash
Management Fund has not commenced operations.
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 the significant accounting policies followed by
the Funds in the preparation of their 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 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 Trustees. Short
term debt securities with remaining maturities of 60 days or less are valued at
amortized cost, unless the Trustees 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 Trustees. 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.
22
<PAGE>
The Gabelli Westwood Funds
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
Accounting for Real Estate Investment Trusts. The Funds own shares of real
estate investment trusts ("REITS") which report information on the source of
their distributions annually. Distributions received from REITS during the year,
which are known to be a return of capital, are recorded as a reduction to the
cost of the individual REIT.
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 as earned.
Dividend income is recorded on the ex-dividend date.
Dividends and Distributions to Shareholders. Dividends from net investment
income are declared and paid annually for the Equity Fund, SmallCap Equity Fund
and Mighty Mites Fund, and quarterly for the Balanced Fund and Realty Fund. The
Intermediate Bond Fund declares dividends daily and pays those dividends
monthly. Distributions of net realized gain on investments are normally declared
and paid at least annually by each Fund. 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 Funds, timing differences and
differing characterization of distributions made by the Funds.
For the year ended September 30, 1998, the following reclassifications were made
to increase (decrease) such accounts with offsetting adjustments to additional
paid-in-capital:
Accumulated Accumulated
Undistributed Net Realized Gain
Investment Income (Loss) on Investments
------------------------ --------------
Balanced Fund $ (5,434) $5,889
SmallCap Equity Fund 101,833 2,147
Realty Fund 1,600 167
Mighty Mites Fund 4,654 --
Provision for Income Taxes. The Funds have qualified and intend to continue to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. By so qualifying, the Funds will not be
subject to federal income taxes to the extent that they distribute all of their
taxable income for the fiscal year.
Determination of Net Asset Value and Calculation of Expenses. Expenses directly
attributable to a Fund are charged to that Fund. Other expenses are allocated
proportionately among each Fund within the Trust in relation to the net assets
of each Fund or on another reasonable basis. In calculating net asset value per
share of each class, investment income, realized and unrealized gains and losses
and expenses other than class
23
<PAGE>
The Gabelli Westwood Funds
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
specific expenses, are allocated daily to each class of shares based upon the
proportion of net assets of each class at the beginning of each day.
Distribution expenses are solely borne by the class incurring the expense.
Concentration of Credit Risk. Considering the Realty Fund invests a substantial
portion of its assets in REITS, it may be more affected by economic developments
in the real estate industry than would a general equity fund.
3. Investment Advisory Agreements. On July 27, 1994, Westwood Management Corp.
("Westwood") entered into an agreement with Gabelli Funds, Inc. to form a new
limited liability company, Teton Advisers LLC ("Teton"). On October 6, 1994,
Teton entered a sub-advisory agreement with Westwood (the "Sub-Adviser"). The
terms of the sub-advisory agreement state that Westwood would continue to manage
the assets of the Funds. Teton became the investment adviser to the Funds and is
responsible for overseeing Westwood's activities. On November 7, 1997, the
members of Teton approved a change in name to Gabelli Advisers LLC.
Additionally, on November 18, 1997, the Board of Trustees approved a change in
name of The Westwood Funds to The Gabelli Westwood Funds to reflect the more
closely aligned relationship with the Gabelli family of funds. As of March 2,
1998, Gabelli Advisers LLC converted to a "C" corporation and is now known as
Gabelli Advisers, Inc. (the "Adviser").
The Funds have entered into an investment advisory agreement (the "Advisory
Agreement") with the Adviser which provides that the Funds will pay the Adviser
a fee, computed daily and paid monthly, at the annual rate of 1.00% for the
Equity Fund, SmallCap Equity Fund, Realty Fund and Mighty Mites Fund, 0.75% for
the Balanced Fund, 0.60% for the Intermediate Bond Fund of each Fund's average
daily net assets. For the year ended September 30, 1998, the Adviser was
entitled to fees of $1,759,265; $119,031; $20,515; $12,543; $905,501 and $39,002
for the Equity, SmallCap Equity, Realty, Mighty Mites, Balanced and Intermediate
Bond Funds, respectively. For the same period, the Adviser has voluntarily
agreed to reimburse the Intermediate Bond Fund, SmallCap Equity Fund, Realty
Fund and Mighty Mites Fund in the event annual expenses of such Funds exceed
certain prescribed limits. For the year ended September 30, 1998, the Adviser
reimbursed expenses in the amount of $65,358; $46,468; $46,272 and $30,816,
respectively.
The Funds, with the exception of the Mighty Mites Fund, have also entered into a
sub-advisory agreement with the Sub-Adviser whereby the Adviser pays the
Sub-Adviser the greater of $150,000 per year on an aggregate basis for the Funds
or a fee of 35% of net revenues to the Adviser from the Funds. For the year
ended September 30, 1998, the Adviser paid to the Sub-Adviser fees of $433,058;
$29,564; $5,081; $205,540 and $7,893 for the Equity, SmallCap Equity, Realty,
Balanced and Intermediate Bond Funds, respectively.
4. Distribution Plan. The Funds have adopted a distribution plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act. Gabelli & Company, Inc. ("Gabelli &
Company"), an indirect wholly-owned subsidiary of Gabelli Funds, Inc., serves as
distributor of the Funds. The Plan authorizes payment by the Funds to Gabelli &
Company in connection with the distribution of its Retail Class shares at an
annual rate of 0.25% of the average daily net assets of the Retail Class shares
each fiscal year. Such payments are accrued daily and paid
24
<PAGE>
The Gabelli Westwood Funds
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
monthly. For the year ended September 30, 1998, the Funds incurred distribution
expenses in the amounts of $432,956; $260,511; $16,251; $29,758; $5,128 and
$3,136 for the Retail Class of the Equity, Balanced, Intermediate Bond, SmallCap
Equity, Realty and Mighty Mites Funds, respectively.
Under the Plan for the Service Class, each Fund authorizes payment to Gabelli &
Company in connection with the distribution of its Service Class shares at an
annual rate of 0.50% of the average daily net assets of the Service Class shares
of the Equity and Balanced Funds each fiscal year. Such payments are accrued
daily and paid monthly. For the year ended September 30, 1998, the Funds
incurred distribution expenses in the amounts of $13,716 for the Equity Fund and
$82,646 for the Balanced Fund, respectively.
5. Organizational Expenses. The organizational expenses of the Funds are being
amortized on a straight-line basis over a period of 60 months from the
commencement of the respective Funds' investment operations.
6. Portfolio Securities. Purchases and sales of securities for the year ended
September 30, 1998, other than short term securities, are as follows:
Purchases Sales
--------- -----
Equity Fund .......... $172,090,318 $127,946,557
Balanced Fund ........ 149,969,696 89,651,012
Intermediate Bond Fund 15,622,483 14,125,701
SmallCap Equity Fund . 27,258,042 21,741,233
Realty Fund .......... 4,843,973 2,754,274
Mighty Mites Fund .... 2,956,305 225,382
7. Shares of Beneficial Interest. Transactions in shares of beneficial interest
were as follows:
<TABLE>
<CAPTION>
Equity Fund Balanced Fund
----------- -------------
Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Retail Class
Shares sold ..................................... 12,764,712 11,047,947 7,583,810 4,088,896
Shares issued upon reinvestment of dividends .... 742,570 531,614 549,677 269,893
Shares redeemed ................................. (7,434,151) (1,955,697) (2,292,678) (910,694)
----------- ----------- ---------- ----------
Net increase in Retail Class shares ........... 6,073,131 9,623,864 5,840,809 3,448,095
=========== =========== ========== ==========
Service Class
Shares sold ..................................... 272,855 222,950 499,396 312,801
Shares issued upon reinvestment of dividends .... 8,078 21,311 90,852 85,955
Shares redeemed ................................. (354,511) (54,301) (519,210) (296,196)
----------- ----------- ---------- ----------
Net increase (decrease) in Service Class shares (73,578) 189,960 71,038 102,560
=========== =========== ========== ==========
</TABLE>
25
<PAGE>
The Gabelli Westwood Funds
Notes to Financial Statements (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Intermediate Bond Fund SmallCap Equity Fund
-------------------------- --------------------------
Year Ended Year Ended Year Ended Period Ended
September 30, September 30, September 30, September 30,
1998 1997 1998 1997 (a)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Retail Class
Shares sold ................................ 323,824 117,171 1,575,803 882,585
Shares issued upon reinvestment of dividends 22,670 25,519 42,932 --
Shares redeemed ............................ (211,584) (124,506) (1,162,861) (292,382)
----------- ----------- ----------- -----------
Net increase in Retail Class shares ...... 134,910 18,184 455,874 590,203
=========== =========== =========== ===========
</TABLE>
Mighty Mites(SM)
Realty Fund Fund
----------- ---------------
Year Ended Period Ended
September 30, September 30,
1998 (b) 1998 (c)
-------- --------
Retail Class
Shares sold ................................... 401,821 649,926
Shares issued upon reinvestment of dividends .. 10,176 --
Shares redeemed ............................... (196,766) (151,333)
-------- --------
Net increase in Retail Class shares ......... 215,231 498,593
======== ========
(a) From commencement of operations on April 15, 1997.
(b) From commencement of operations on September 30, 1997.
(c) From commencement of operations on May 11, 1998.
8. Federal Income Tax Information. The Intermediate Bond Fund has a capital loss
carryforward for Federal income tax purposes of $359,838 available through
September 2003. This loss carryforward is available to reduce future
distributions of net capital gains to shareholders.
Under current tax law, capital losses realized after October 31 may be deferred
and treated as occurring on the first day of the following fiscal year. The
SmallCap Equity Fund and Realty Fund incurred losses of $42,864 and $33,134,
respectively, after October 31, 1997. Such losses will be treated, for tax
purposes, as arising on October 1, 1998.
26
<PAGE>
The Gabelli Westwood Funds
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------------------------
1998 1997
------------------------ ---------------------------
Retail Service Retail Service
Equity Fund Class Class Class Class
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period ................. $9.57 $9.57 $7.68 $7.69
----------- --------- ----------- ---------
Net investment income ................................ 0.07 0.08 0.07 0.06
Net realized and unrealized gain (loss) on investments (0.22) (0.25) 2.72 2.71
----------- --------- ----------- ---------
Total from investment operations ..................... (0.15) (0.17) 2.79 2.77
----------- --------- ----------- ---------
Distributions to shareholders:
Net investment income ................................ (0.06) (0.06) (0.07) (0.06)
Net realized gain on investments ..................... (0.37) (0.37) (0.83) (0.83)
----------- --------- ----------- ---------
Total distributions .................................. (0.43) (0.43) (0.90) (0.89)
----------- --------- ----------- ---------
Net asset value, end of period ....................... $8.99 $8.97 $9.57 $9.57
=========== ========= =========== =========
Total return (a) ..................................... (1.4)% (1.8)% 39.6% 39.3%
Ratios to average net assets and supplemental data:
Net assets, end of period (in 000's) ................. $175,391 $2,468 $128,697 $3,338
Ratio of net investment income to average net assets . 0.73% 0.46% 1.11% 0.85%
Expenses net of waivers/reimbursements (b) ........... 1.47% 1.72% 1.53% 1.78%
Expenses before waivers/reimbursements ............... 1.47% 1.72% 1.59%(d) 1.84%(d)
Portfolio turnover rate .............................. 77% 77% 61% 61%
<CAPTION>
Year Ended September 30,
-----------------------------------------------------------
1996 1995
-------------------------- --------------------------
Retail Service Retail Service
Equity Fund Class Class Class Class
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period ................. $6.59 $6.57 $5.50 $5.48
---------- --------- ---------- ---------
Net investment income ................................ 0.08 0.06 0.04 0.04
Net realized and unrealized gain (loss) on investments 1.59 1.58 1.31 1.29
---------- --------- ---------- ---------
Total from investment operations ..................... 1.67 1.64 1.35 1.33
---------- --------- ---------- ---------
Distributions to shareholders:
Net investment income ................................ (0.06) -- (0.06) (0.04)
Net realized gain on investments ..................... (0.52) (0.52) (0.20) (0.20)
---------- --------- ---------- ---------
Total distributions .................................. (0.58) (0.52) (0.26) (0.24)
---------- --------- ---------- ---------
Net asset value, end of period ....................... $7.68 $7.69 $6.59 $6.57
========== ========= ========== =========
Total return (a) ..................................... 26.9% 26.3% 25.9% 25.5%
Ratios to average net assets and supplemental data:
Net assets, end of period (in 000's) ................. $29,342 $1,221 $14,903 $68
Ratio of net investment income to average net assets . 1.16% 0.92% 0.77% 0.64%
Expenses net of waivers/reimbursements (b) ........... 1.50% 1.74% 1.61% 1.85%
Expenses before waivers/reimbursements ............... 1.95%(d) 2.19%(d) 2.29%(d) 2.63%(d)
Portfolio turnover rate .............................. 106% 106% 107% 107%
<CAPTION>
Year Ended September 30,
----------------------------
1994
----------------------------
Retail Service
Equity Fund Class Class(c)
--------- ---------
<S> <C> <C>
Operating performance:
Net asset value, beginning of period ................. $9.91 $5.53
--------- ---------
Net investment income ................................ 0.10 0.06
Net realized and unrealized gain (loss) on investments 0.64 (0.11)
--------- ---------
Total from investment operations ..................... 0.74 (0.05)
--------- ---------
Distributions to shareholders:
Net investment income ................................ (0.07) --
Net realized gain on investments ..................... (5.08) --
--------- ---------
Total distributions .................................. (5.15) --
--------- ---------
Net asset value, end of period ....................... $5.50 $5.48
========= =========
Total return (a) ..................................... 9.1% (0.9)%
Ratios to average net assets and supplemental data:
Net assets, end of period (in 000's) ................. $8,637 $254
Ratio of net investment income to average net assets . 1.63% 1.64%(e)
Expenses net of waivers/reimbursements (b) ........... 0.71% 1.04%(e)
Expenses before waivers/reimbursements ............... 1.94%(d) 2.29%(d)(e)
Portfolio turnover rate .............................. 137% 137%
=====================================================================================================================
<CAPTION>
Year Ended September 30,
--------------------------------------------------------
1998 1997
------------------------- ---------------------------
Retail Service Retail Service
Balanced Fund Class Class Class Class
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period .................... $11.49 $11.46 $9.71 $9.69
----------- ---------- ---------- ----------
Net investment income ................................... 0.26 0.26 0.25 0.24
Net realized and unrealized gain (loss) on investments .. 0.05 0.02 2.36 2.33
----------- ---------- ---------- ----------
Total from investment operations ........................ 0.31 0.28 2.61 2.57
----------- ---------- ---------- ----------
Distributions to shareholders:
Net investment income ................................... (0.26) (0.22) (0.25) (0.22)
Net realized gain on investments ........................ (0.56) (0.56) (0.58) (0.58)
----------- ---------- ---------- ----------
Total distributions ..................................... (0.82) (0.78) (0.83) (0.80)
----------- ---------- ---------- ----------
Net asset value, end of period .......................... $10.98 $10.96 $11.49 $11.46
=========== ========== ========== ==========
Total return (a) ........................................ 2.8% 2.6% 28.3% 28.0%
Ratios to average net assets and supplemental data:
Net assets, end of period (in 000's) .................... $128,222 $14,585 $67,034 $14,444
Ratio of net investment income to average net assets .... 2.37% 2.16% 2.60% 2.37%
Expenses net of waivers/reimbursements (f) .............. 1.20% 1.45% 1.28% 1.53%
Expenses before waivers/reimbursements .................. 1.20% 1.45% 1.36%(d) 1.61%(d)
Portfolio turnover rate ................................. 77% 77% 110% 110%
<CAPTION>
Year Ended September 30,
-----------------------------------------------------------
1996 1995
--------------------------- -------------------------
Retail Service Retail Service
Balanced Fund Class Class Class Class
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period .................... $8.47 $8.45 $7.12 $7.10
---------- ---------- --------- ---------
Net investment income ................................... 0.22 0.20 0.19 0.17
Net realized and unrealized gain (loss) on investments .. 1.37 1.37 1.35 1.35
---------- ---------- --------- ---------
Total from investment operations ........................ 1.59 1.57 1.54 1.52
---------- ---------- --------- ---------
Distributions to shareholders:
Net investment income ................................... (0.22) (0.20) (0.19) (0.17)
Net realized gain on investments ........................ (0.13) (0.13) -- --
---------- ---------- --------- ---------
Total distributions ..................................... (0.35) (0.33) (0.19) (0.17)
---------- ---------- --------- ---------
Net asset value, end of period .......................... $9.71 $9.69 $8.47 $8.45
========== ========== ========= =========
Total return (a) ........................................ 19.1% 18.9% 22.0% 21.7%
Ratios to average net assets and supplemental data:
Net assets, end of period (in 000's) .................... $23,158 $11,216 $6,912 $7,212
Ratio of net investment income to average net assets .... 2.62% 2.34% 2.47% 2.26%
Expenses net of waivers/reimbursements (f) .............. 1.32% 1.57% 1.35% 1.62%
Expenses before waivers/reimbursements .................. 1.71%(d) 1.96%(d) 1.86%(d) 2.24%(d)
Portfolio turnover rate ................................. 111% 111% 133% 133%
<CAPTION>
Year Ended September 30,
--------------------------
1994
--------------------------
Retail Service
Balanced Fund Class Class
--------- ----------
<S> <C> <C>
Operating performance:
Net asset value, beginning of period .................... $10.89 $10.88
--------- ----------
Net investment income ................................... 0.12 0.15
Net realized and unrealized gain (loss) on investments .. 0.42 0.36
--------- ----------
Total from investment operations ........................ 0.54 0.51
--------- ----------
Distributions to shareholders:
Net investment income ................................... (0.13) (0.11)
Net realized gain on investments ........................ (4.18) (4.18)
--------- ----------
Total distributions ..................................... (4.31) (4.29)
--------- ----------
Net asset value, end of period .......................... $7.12 $7.10
========= ==========
Total return (a) ........................................ 5.3% 4.7%
Ratios to average net assets and supplemental data:
Net assets, end of period (in 000's) .................... $3,081 $10,810
Ratio of net investment income to average net assets .... 1.55% 2.15%
Expenses net of waivers/reimbursements (f) .............. 1.68% 1.17%
Expenses before waivers/reimbursements .................. 2.36%(d) 2.11%(d)
Portfolio turnover rate ................................. 168% 168%
=====================================================================================================================
</TABLE>
(a) 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 and does not reflect any
applicable sales charges.
(b) The ratios do not include a reduction of expenses for custodian fee
credits on cash balances maintained with the custodian. Including such
custodian fee credits, the expense ratios would be 1.45% (Retail Class)
and 1.70% (Service Class) for 1998, and 1.50% (Retail Class) and 1.75%
(Service Class) for the prior years.
(c) Prior to January 28, 1994, no shares of the Service Class were issued.
(d) During the period, certain fees were voluntarily reduced and/or
reimbursed. If such fee reductions and/or reimbursements had not occurred,
the ratio would have been as shown.
(e) Annualized.
(f) The ratios do not include a reduction of expenses for custodian fee
credits on cash balances maintained with the custodian. Including such
custodian fee credits, the expense ratios would be 1.17% (Retail Class)
and 1.42% (Service Class) for 1998, and 1.25% (Retail Class) and 1.50%
(Service Class) for the prior years.
See accompanying notes to financial statements.
27
<PAGE>
The Gabelli Westwood Funds
Financial Highlights (Continued)
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
year:
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ --------------- ----------------
Retail Service Retail Service
Intermediate Bond Fund Retail Class Class Class(d) Class Class(e)
----------------------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period .................. $10.29 $9.88 $9.98 $9.48 $9.48 $10.73 $10.51
------ ------ ------ ------ ----- ------ ------
Net investment income ................................. 0.57 0.68 0.51 0.52 0.05 0.48 0.41
Net realized and unrealized gain (loss)
on investments ...................................... 0.45 0.41 (0.10) 0.50 (0.14) (1.04) (1.03)
------ ------ ------ ------ ----- ------ ------
Total from investment operations ...................... 1.02 1.09 0.41 1.02 (0.09) (0.56) (0.62)
------ ------ ------ ------ ----- ------ ------
Distributions to shareholders:
Net investment income ................................. (0.57) (0.68) (0.51) (0.52) (0.05) (0.48) (0.41)
Net realized gain on investments ...................... -- -- -- -- -- (0.21) --
------ ------ ------ ------ ----- ------ ------
Total distributions ................................... (0.57) (0.68) (0.51) (0.52) (0.05) (0.69) (0.41)
------ ------ ------ ------ ----- ------ ------
Net asset value, end of period ........................ $10.74 $10.29 $9.88 $9.98 $9.34 $9.48 $9.48
====== ====== ====== ====== ===== ====== ======
Total return(a) ....................................... 10.2% 11.4% 4.5% 11.1% (1.0)% (5.5)% (6.8)%
Ratios to average net assets and supplemental data:
Net assets, end of period (in 000's) .................. $7,618 $5,912 $5,496 $4,729 $0 $7,339 $76
Ratio of net investment income to average net assets .. 5.45%(b) 6.71% 5.43% 5.38% 4.85% 4.86% 6.05%(f)
Expenses net of waivers/reimbursements(b) ............. 1.08%(b) 1.11% 1.09% 1.17% 1.45% 0.92% 1.34%(f)
Expenses before waivers/reimbursements(c) ............. 2.08%(b) 1.70% 2.46% 2.47% 4.07% 1.75% 2.37%(f)
Portfolio turnover rate ............................... 232% 628% 309% 165% 70% 203% 203%
===============================================================================================================================
</TABLE>
(a) 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.
(b) The ratios do not include a reduction of expenses for custodian fee
credits on cash balances maintained with the custodian. Including such
custodian fee credits, the expense ratio would be 1.00% for each period.
(c) During the period, certain fees were voluntarily reduced and/or
reimbursed. If such fee reductions and/or reimbursements had not occurred,
the ratio would have been as shown.
(d) On November 8, 1994, all shares of the Service Class were redeemed and
there have been no further shares issued in this class since that date.
Accordingly, the NAV per share represents the net asset value on November
8, 1994.
(e) Prior to January 28, 1994, no shares of the Service Class were issued.
(f) Annualized.
See accompanying notes to financial statements.
28
<PAGE>
The Gabelli Westwood Funds
Financial Highlights
Selected data for a share outstanding throughout each period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SmallCap Equity Fund Realty Fund Mighty Mites(SM) Fund
Year Ended Period Ended Year Ended Period Ended
September 30, 1998 September 30, 1997 September 30, 1998 September 30, 1998
------------------ ------------------ ------------------ ------------------
Operating performance: Retail Class Retail Class (d) Retail Class (f) Retail Class (g)
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period ............ $14.48 $10.00 $10.00 $10.00
------- ------ ------ ------
Net investment income (loss) .................... (0.09) 0.08 0.37 0.04
Net realized and unrealized gain (loss) on
investments ................................... (2.39) 4.40 (1.37) (0.34)
------- ------ ------ ------
Total from investment operations ................ (2.48) 4.48 (1.00) (0.30)
------- ------ ------ ------
Distributions to shareholders:
Net investment income ........................... -- -- (0.33) --
In excess of net investment income .............. (0.08) -- -- --
Net realized gain on investments ................ (0.60) -- -- --
In excess of net realized gain on investments ... (0.14) -- (0.24) --
------- ------ ------ ------
Total distributions ............................. (0.82) -- (0.57) --
------- ------ ------ ------
Net asset value, end of period .................. $11.18 $14.48 $8.43 $9.70
======= ====== ====== ======
Total return (a) ................................ (17.7)% 44.8% (10.5)% (3.0)%
Ratios to average net assets and supplemental data:
Net assets, end of period (in 000's) ............ $11,694 $8,546 $1,815 $4,838
Ratio of net investment income to average net
assets......................................... (0.74)% 1.89%(e) 3.87% 1.60%(e)
Expenses net of waivers/reimbursements (b) ...... 1.72% 1.89%(e) 1.70% 2.05%(e)
Expenses before waivers/reimbursements (c) ...... 2.11% 2.45%(e) 3.95% 4.50%(e)
Portfolio turnover rate ......................... 200% 146% 142% 18%
====================================================================================================================================
</TABLE>
(a) 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.
(b) The ratios do not include a reduction of expenses for custodian fee
credits on cash balances maintained with the custodian. Including such
custodian fee credits, the expense ratio would be 1.50% for SmallCap
Equity and Realty Funds and 2.00% for Mighty Mites Fund.
(c) During the period, certain fees were voluntarily reduced and/or
reimbursed. If such fee reductions and/or reimbursements had not occurred,
the ratio would have been as shown.
(d) Period from April 15, 1997 (inception date of fund) to September 30, 1997.
(e) Annualized.
(f) Period from September 30, 1997 (inception date of fund) to September 30,
1998.
(g) Period from May 11, 1998 (inception date of fund) to September 30, 1998.
See accompanying notes to financial statements.
29
<PAGE>
The Gabelli Westwood Funds
Report of Independent Accountants
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To the Trustees and Shareholders of
The Gabelli Westwood Funds
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Gabelli Westwood Equity Fund,
The Gabelli Westwood Balanced Fund, The Gabelli Westwood Intermediate Bond Fund,
The Gabelli Westwood SmallCap Equity Fund, The Gabelli Westwood Realty Fund, and
The Gabelli Westwood Mighty Mites Fund (constituting The Gabelli Westwood Funds,
hereafter referred to as the "Fund") at September 30, 1998, the results of each
of their operations, and the changes in each of their net assets, and the
financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at September 30, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
November 11, 1998
30
<PAGE>
The GABELLI Westwood Funds
==========================
Equity Fund
Balanced Fund
Intermediate Bond Fund
SmallCap Equity Fund
Realty Fund
Mighty Mites(SM) Fund
(Unaudited)
Gabelli Westwood Funds -- Retail Class Shares
---------------------------------------------
Average Annual Returns -- September 30, 1998 (a)
Calendar Life of Inception
Third Quarter 1 Year 5 Year Fund Date
-----------------------------------------------------
Equity.............. (9.0)% (1.4)% 19.1% 14.5% 01/02/87
Balanced............ (4.7) 2.8 15.1 14.3 10/01/91
Intermediate Bond... 2.9 10.2 6.1 7.5 10/01/91
SmallCap Equity..... (18.8) (17.7) -- 12.8 04/15/97
Realty.............. (10.3) (10.5) -- (10.5) 09/30/97
Mighty Mites(SM) ... (5.1) -- -- (3.0)(c) 05/11/98
Gabelli Westwood Funds -- Service Class Shares
----------------------------------------------
Average Annual Returns -- September 30, 1998 (a)(b)
Calendar Life of Inception
Third Quarter 1 Year 5 Year Fund Date
-----------------------------------------------------
Equity.............. (9.1)% (5.7)% -- 16.8% 01/28/94
Balanced............ (4.7) (1.5) 13.8% 13.9 04/06/93
(a) Total returns and average annual returns reflect changes in share price
and reinvestment of dividends and are net of expenses. The net asset value
of the Fund is reduced on the ex-dividend (payment) date by the amount of
the dividend paid. Of course, returns represent past performance and do
not guarantee future results. Investment returns and the principal value
of an investment will fluctuate. When shares are redeemed they may be
worth more or less than their original cost.
(b) Includes the effect of the maximum 4.0% sales charge at the beginning of
the period.
(c) Represents cumulative total return for period of less than one year and is
not annualized.
<PAGE>
The GABELLI Westwood Funds
==========================
One Corporate Center
Rye, NY 10580
General and Account Information:
1-800 GABELLI (422-3554)
Fax: 1-914-921-5118
http://www.gabelli.com
email: [email protected]
Board of Trustees
SUSAN M. BYRNE JAMES P. CONN
President and Chief Chief Investment Officer
Investment Officer Financial Security Assurance
Holdings Ltd.
KARL OTTO POHL WERNER J. ROEDER, MD
Former President Director of Surgery
Deutsche Bundesbank Lawrence Hospital
ANTHONY J. COLAVITA
Attorney-at-Law
Anthony J. Colavita, P.C.
Officers
SUSAN M. BYRNE BRUCE N. ALPERT
President and Chief Vice President and
Investment Officer Treasurer
LYNDA J. CALKIN, CFA PATRICIA R. FRAZE
Vice President Vice President
JAMES E. McKEE
Secretary
Investment Adviser
Gabelli Advisers, Inc.
Investment Sub-Adviser
Westwood Management Corporation
Distributor
Gabelli & Company, Inc.
Custodian
The Bank of New York
Legal Counsel
Battle Fowler LLP
Independent Accountants
PricewaterhouseCoopers LLP
- --------------------------------------------------------------------------------
This report is for the information of the shareholders of The Gabelli Westwood
Funds. It is not authorized for distribution to prospective investors unless
preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
