<PAGE>
Gabelli Equity Series Funds, Inc.
THE GABELLI SMALL CAP GROWTH FUND
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
Fax: 1-914-921-5118
HTTP://WWW.GABELLI.COM
E-MAIL: [email protected]
(Net Asset Value may be obtained daily by calling
1-800-GABELLI after 6:00 P.M.)
BOARD OF DIRECTORS
Mario J. Gabelli, CFA Felix J. Christiana
Chairman and Chief Former Senior
Investment Officer Vice President
Gabelli Funds, Inc. Dollar Dry Dock Savings Bank
Anthony J. Colavita Vincent D. Enright
Attorney-at-Law Senior Vice President and
Anthony J. Colavita, P.C. Chief Financial Officer
The Brooklyn Union Gas Company
John D. Gabelli
Vice President Robert J. Morrissey
Gabelli & Company, Inc. Attorney-at-Law
Morrissey & Hawkins
Karl Otto Pohl
Former President Anthonie C. van Ekris
Deutsche Bundesbank Managing Director
BALMAC International, Inc.
Anthony R. Pustorino
Certified Public Accountant
Professor, Pace University
OFFICERS
Mario J. Gabelli, CFA James E. McKee
President and Secretary
Chief Investment Officer
Bruce N. Alpert
Vice President and Treasurer
DISTRIBUTOR
Gabelli & Company, Inc.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT
State Street Bank and Trust Company
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of
The Gabelli Small Cap Growth Fund. It is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
[PHOTO]
THE
GABELLI
SMALL CAP
GROWTH
FUND
THIRD QUARTER REPORT
JUNE 30, 1996
<PAGE>
THE GABELLI SMALL CAP GROWTH FUND
One Corporate Center
Rye, New York 10580-1434
THIRD QUARTER REPORT
JUNE 30, 1996(a)
TO OUR SHAREHOLDERS:
Rebounding from the inventory contraction of the previous two quarters,
the malaise of a snowy winter and political stalemate in Washington, the
economy surged ahead. Domestic profits will likely benefit despite earnings
from continental European sources being hobbled by a weaker economic
backdrop and a stronger dollar. This stronger than expected economy
re-awakened long dormant inflationary fears and a slumping bond market
sounded a cautionary note for stocks. Still, buoyed by favorable flow of
funds -- investment in equity mutual funds remained near record levels --
the Dow Jones Industrial Average and Standard & Poors' 500 forged ahead.
INVESTMENT RESULTS (b)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Calendar Quarter
-----------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
<S> <S> <C> <C> <C> <C> <C>
1996: Net Asset Value $19.65 $20.68 --- --- ---
Total Return 6.2% 5.2% --- --- ---
- -------------------------------------------------------------------------------
1995: Net Asset Value $17.03 $17.88 $19.34 $18.50 $18.50
Total Return 7.4% 7.4% 8.2% 2.6% 25.2%
- -------------------------------------------------------------------------------
1994: Net Asset Value $16.76 $16.33 $17.24 $15.85 $15.85
Total Return (3.6)% (2.6)% 5.6% (2.1)% (2.9)%
- -------------------------------------------------------------------------------
1993: Net Asset Value $15.46 $15.74 $16.90 $17.38 $17.38
Total Return 6.6% 1.8% 7.4% 5.3% 22.8%
- -------------------------------------------------------------------------------
1992: Net Asset Value $13.42 $13.41 $13.10 $14.50 $14.50
Total Return 9.9% (0.1)% (2.3)% 12.1% 20.3%
- -------------------------------------------------------------------------------
1991: Net Asset Value --- --- --- $12.21 $12.21
Total Return --- --- --- 22.9%(c) 22.9%(c)
- -------------------------------------------------------------------------------
Average Annual Returns - June 30, 1996 (b)
1 Year 20.4%
18.5% (d)
3 Year 15.4%
13.6% (d)
Life of Fund (c) 21.2%
20.0% (d)
Dividend History
- ---------------------------------------------------------
Payment (ex) Date Rate Per Share Reinvestment Price
- ----------------- -------------- ------------------
December 29, 1995 $1.340 $18.50
December 30, 1994 $1.030 $15.58
December 31, 1993 $0.420 $17.38
December 31, 1992 $1.185 $14.50
December 31, 1991 $0.080 $12.21
<FN>
(a) The Fund's fiscal year ends September 30, 1996. (b) Average annual and
total 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, total
return represents past performance and does 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. (c) From commencement of operations on October 22, 1991. (d) Adjusted
for the maximum 4.5% sales charge.
</FN>
</TABLE>
<PAGE>
INVESTMENT PERFORMANCE
During the second quarter ended June 30, 1996, The Gabelli Small Cap Growth
Fund's net asset value increased 5.2% to $20.68 per share. This compares
favorably to gains of 2.7% and 4.0% for the Value Line Composite and Russell
2000 Index, respectively. Each index is an unmanaged index of stock market
performance. Year to date, the Fund is up 11.8%. For the 12 months ended
June 30, 1996, the Fund gained 24.0% versus 13.9% for the Value Line
Composite and 23.9% for the Russell 2000 Index.
The Small Cap Growth Fund's total return from inception on October 22, 1991
through June 30, 1996 was 146.6%, which reflects an average annual total
return of 21.2% assuming reinvestment of all dividends and distributions.
As of June 30, 1996, the Fund's shareholders numbered 22,081 and net assets
were $237.9 million.
WHAT WE DO
[GRAPHIC]
We do what is described as bottom-up research: we read annual reports; we
visit the competition; we talk to customers; we go belly to belly with
management. We structure our portfolio by picking stocks.
In past reports, we have tried to articulate our investment philosophy and
methodology. The following graphic further illustrates the interplay among
the four components of our valuation approach.
Our focus is on free cash flow; earnings before interest, taxes, depreciation
and amortization (EBITDA) minus the capital expenditures necessary to grow the
business. We believe free cash flow is the best barometer of a business'
value. Rising free cash flow often foreshadows net earnings improvement.
We also look at earnings per share trends. Unlike Wall Street's ubiquitous
earnings momentum players, we do not try to forecast earnings with accounting
precision and then trade stocks based on quarterly expectations and realities.
We simply try to position ourselves in front of long-term earnings uptrends.
In addition, we analyze on and off balance sheet assets and liabilities such
as plant and equipment, inventories, receivables, and legal, environmental
and health care issues. We want to know everything and anything that will
add to or detract from our private market value (PMV) estimates. Finally,
we look for a catalyst; something happening in the company's industry or
indigenous to the company itself that will surface value. In the case of
the independent telephone stocks,the catalyst is a regulatory change. In the
agricultural equipment business,it is the increasing worldwide demand for
American food and feed crops. In other instances, it may be a change in
management, sale or spin-off of a division or the development of a
profitable new business.
Once we identify stocks that qualify as fundamental and conceptual bargains,
we then become patient investors. This has been a proven long-term method
for preserving and enhancing wealth in the U.S. equities market. At the
margin, our new investments are focused on businesses that are well managed
and will benefit from sustainable long-term economic dynamics. These include
macro trends, such as globalization of the market in filmed entertainment and
telecommunications, and micro trends, such as increased focus on productivity
enhancing goods and services.
<PAGE>
COMMENTARY
THE ECONOMY AND THE STOCK MARKET
There is an old saying that, "If you laid all the world's economists end to
end, they wouldn't reach a conclusion". To that, we would add, ". . . and
if they did, it would most likely be the wrong one." To wit, let's take a
short trip down memory lane to the beginning of this year. Following a
sluggish fourth quarter in 1995 (0.5% GDP growth), the consensus expected
only a modest pickup in economic activity in the first half of 1996.
Inflation was declared dead and it would be just a matter of time before
the Federal Reserve would jump-start the economy by dropping short-term
interest rates. Long rates would follow and we would see a vibrant bond
market that would help sustain the bull market in stocks. Some well-known
mutual fund managers, and one particularly visible, now former, mutual fund
manager, placed big bets on this economic scenario.
What actually happened? The economy started the year strong with 2.3% GDP
growth in the first quarter and gained momentum -- the second quarter is
projected to come in at a 3.5 to 4.0% growth rate. Employment surged with a
series of not so good Fridays for the stock market (employment statistics are
released on the first Friday of every month). Grain prices soared with
"beans in the teens" as the rallying cry in the commodities pits. Higher
oil and gasoline prices made headlines before backing off in early summer.
Lo and behold, inflation was not dead! Bonds dropped and the Fed started
hinting that their next move was more likely up than down. Buoyed by strong
cash inflow into equity mutual funds, the stock market posted good gains.
However, an increasingly choppy market indicated that investors were finally
looking down as well as up.
What have we learned from this? Despite being more right than wrong in our
own economic/market projections (we did forecast inflationary pressure and
higher long-term interest rates, but we also expressed limited expectations
for what has proved to be a fairly vibrant stock market), we were once again
reminded that our long held and articulated belief that focusing on the
fundamental value of individual stocks is, over the long term, a safer and
vastly more reliable way to generate consistent returns.
This is not to say that we don't have opinions on the economy and financial
markets. We do and will continue to share them with you. For example, we
have long opined that President Clinton was not likely to make the same
mistake in an election year that the then incumbent President Bush made in
1992. He'll want a strong economy through the election. While domestic
GDP growth is likely to ebb in the second half from the unsustainable pace
of the second quarter as higher interest rates begin impacting economic
activity and the somewhat overextended American consumer tightens the purse
strings, economic growth should be good through the rest of the year.
Corporate earnings will be decent -- up around 10% for the year. It is
inflation, interest rates and the flow of funds that will call the tune for
the stock and bond markets over the next several quarters.
On the inflation front, we echo our comments from our year-end 1995 letter
to you. Inflation is peeking out of the coffin to which it was consigned
by the majority of Wall Street economists. What are the inflationary
gremlins? Oil is a wild card. The bombing of an American military base
in Saudi Arabia may represent an escalation of terrorism in the Mid-East.
Political instability in the region, along with
<PAGE>
increasing worldwide demand for oil, could translate into higher prices.
Wholesale food inflation is another wild card. With corn at $5.50 per
bushel, soybeans at around $8.50, and wheat above $5.00, it is just a matter
of time before we see higher prices at the supermarket. Retail food
inflation has been moderated in the first half as declining meat prices have
partially compensated for higher grain prices -- cattle and hog farmers
slaughter herds rather than continue to fatten them up with more expensive
grain. We will see higher beef and pork prices next year. Finally and most
importantly, we may see upward pressure on wages as outsourcing, downsizing,
globalization of labor and technology inputs run their course. Strong
employment and a potential showdown between General Motors and the United Auto
Workers may prove disquieting. The recent confirmation of Federal Reserve
Chairman Greenspan to another term should pave the way for an early Fed
response to these stirrings of inflation, even if the action is prior to the
election. Long rates are up more than 100 basis points this year.
Long bonds are already down 3% on a total return basis and nearly double
that in price alone. In addition, we expect both candidates to talk
about tax cuts - which could spark more jitters for the long bond. If,
as we anticipate, inflation does hit the 3.5% level in the second half,
equity investors may have cause to pause. In other words, if bonds keep
sneezing, sooner or later stocks will catch a cold.
Market observers may respond to this note of caution by saying investors
no longer care about the economy, inflation, interest rates or valuations.
Flow of funds is the only thing that matters. The stock market will move
relentlessly higher until all the baby boomers who are pouring money into
equity funds reach retirement age. Other observers point out that the aging
of populations around the world and the explosive growth in private pension
plans in industrial countries such as Japan, Germany, France, Italy and
England point to strong demand for global equities and, ultimately, for U.S.
equities. We do not discount the favorable influence these demographics have
on the flow of funds and on the equities market. We do think valuations matter
and competition to stocks in the form of higher bond yields could easily
disrupt this comfortable scenario.
In previous letters, we shared with you our observations that deals
(takeovers) will dominate the investment landscape. In this report,
we want to highlight other themes.
PLACE YOUR BETS
Gaming stocks were among the Fund's best performers in the first half of
1996. We are betting they will continue to do well as gaming industry
consolidation gains momentum. Anti-gaming forces in state and city
governments have successfully contained the geographical spread of gaming.
Disappointing results from riverboat casinos in New Orleans and further up
the Mississippi have refocused the industry's attention on the traditional
gambling meccas of Atlantic City and Las Vegas. The game now becomes
increasing market share in these gambling havens via building new
hotel/casinos or acquiring the weaker operators. Mirage Resorts, Inc.
(MIR - $54.00 - NYSE) favors the former, with two new properties planned
for Atlantic City, while its new Bellagio nears completion in Las Vegas.
With a healthy balance sheet and plenty of cash, the new ITT Corporation
(ITT - $66.25 - NYSE) will either follow Hilton Hotels Corporation
(HLT - $112.50 - NYSE) and will look for complementary properties in Las
Vegas and Atlantic City, or will spend some money to build more of their own.
With its strong balance sheet and excellent casino operating record, Hilton
will expand and improve the Bally's franchise. The UK's Ladbroke Group plc
(LADGY - $2.77 - NASDAQ), owner and operator of
<PAGE>
hotels under the Hilton brand outside the U.S., could be new Hilton CEO Stephen
Bollenbach's next target. The end result is that there will be larger, better
managed and more profitable gaming companies within the next several years.
LET'S TALK STOCKS
The following are stock specifics on selected holdings of our Fund's
investments. Favorable EBITDA prospects do not necessarily translate into
higher stock prices, but they do express a positive trend which we believe
will develop over time.
Aztar Corporation (AZR - $11.50 - NYSE) operates three casino hotels -
TropWorld in Atlantic City, New Jersey, Tropicana in Las Vegas and Ramada
Express in Laughlin, Nevada. The company has been selected by the cities
of Caruthersville, Missouri, Evansville, Indiana, and Newport News, Virginia,
to construct and operate riverboat casinos. In Caruthersville, temporary
facilities have been opened. Aztar has received authorization by the U.S.
Army Corps of Engineers to begin construction of docking bays for the
company's operations to be licensed in the Evansville market. Construction
of a riverboat casino will begin in Newport News if the state of Virginia
passes a gaming law in 1996 and Aztar is approved for a gaming license.
As Aztar expands its gaming activities, its PMV is expected to rise above
$15 per share. Aztar's shareholders may become beneficiaries of the
consolidation currently underway in the gaming industry.
BET Holdings, Inc. (BTV - $26.375 - NYSE) is the only publicly-traded media
company that primarily targets black consumers. Its core business is Black
Entertainment Television, Inc. (BET), an advertiser-supported, cable television
programming service. BET serves over 42 million cable households. The
company is leveraging its brand identity into other markets including
pay-per-view movies, direct merchandising and magazine publishing.
CLARCOR Inc. (CLC - $24.75 - NYSE) manufactures air and liquid filters for the
transportation, construction, mining and farm industries. CLC is also a leading
producer of custom-decorated metal and plastic containers widely used by
consumer products companies such as Johnson & Johnson, General Foods, McCormick
and Nestle. In fiscal 1995, sales and earnings increased only about 7%,
reflecting temporary operating problems at two units. More substantial gains
are anticipated for 1996 and on through the end of the decade.
Dynamics Corporation of America (DYA - $26.625 - NYSE) is an under-followed
company with a significant position in CTS Corporation (CTS - $47.00 - NYSE).
DYA owns 2.4 million shares or 44% of CTS. At the current market price,
DYA's investment in CTS equates to over $112 million which approximates the
total market value of DYA. Therefore, investors in DYA are getting an
investment in CTS and the remainder of DYA's businesses "for free". Both
DYA and CTS are strong cash generators and are virtually free of long-term
debt.
International Family Entertainment, Inc. (FAM - $18.50 - NYSE) is a
Virginia-based entertainment company with production and distribution
operations around the world. With such key assets as The Family Channel,
MTM and Cable Health Club, FAM is a leading provider of cable programming
oriented toward families. The Family Channel is performing exceptionally
well, and MTM has been re-energized. While the company posts strong
operating margins in its core businesses, it is currently funding losses
in
<PAGE>
its start-up businesses. Improved performance in these new units
provides operating leverage and increased opportunity for capital appreciation.
Lamson & Sessions Co. (LMS - $11.875 - NYSE) is a leading domestic producer
of thermoplastic electrical conduit and accessories for the construction and
industrial markets. The company's other operation is producing thermoplastic
sewer pipe and fittings. Its money-losing aerospace fasteners division has
been sold. Management is endeavoring to strategically focus its operations
on improved margins and more sustained earnings growth.
Liberty Corporation (LC - $31.75 - NYSE) is a holding company for Liberty
Life Insurance Company and Cosmos Broadcasting Corporation. Liberty Life
is a regional insurer, with North Carolina and South Carolina accounting
for more than 50% of its premium volume. Cosmos Broadcasting operates
eight television stations.
Neiman Marcus Group, Inc. (NMG - $27.00 - NYSE) operates 27 high-fashion
Neiman Marcus stores and two Bergdorf Goodman stores in New York City.
NMG has an extensive mail order business. Harcourt General has a
controlling, 65% voting interest in NMG. Escaping the year-end malaise
in domestic retailing, Neiman Marcus is positioned to be an important
participant in the trend to higher-scale, consumer spending. We see
earnings increasing to $2.00 per share in the next few years.
United Television, Inc. (UTVI - $98.00 - NASDAQ) is a television
broadcasting company which owns and operates five television stations:
one ABC, one NBC and three UPN affiliates. Its stations cover
approximately 6% of the U.S. population. UTVI is a 57%-owned subsidiary
of BHC Communications. Strong advertising demand, prospects for favorable
regulatory changes in the industry and corporate cost controls will magnify
EBITDA growth going forward. Our 1996 PMV is estimated at $120 per share,
$23 of which is cash. UTVI's PMV is expected to approach $200 by the year
2000.
NO LOAD - EFFECTIVE AUGUST 12, 1996
Effective August 12, 1996, the Fund will no longer impose a front-end sales
charge. All purchases made after August 12, 1996 will not be subject to a
sales charge. The minimum initial investment for all accounts is $1,000.
Additionally, we invite shareholders to start an automatic investment plan
whereby no initial minimum is required.
INTERNET
You can now visit us on the Internet. Our home page at
http://www.gabelli.com contains information about Gabelli Funds, Inc.,
the Gabelli Mutual Funds, quarterly reports, closing prices, IRAs, 401(k)s
and other current news. You can also send us E-mail at [email protected].
IN CONCLUSION
At the beginning of 1996, we forecast that higher than expected inflation
and rising long-term interest rates would restrain stock returns. Our
economic forecast has proved remarkably accurate. Thus far, the market has
largely ignored these economic signs and marched steadily forward. Whether
it
<PAGE>
will continue to do so in the second half is questionable.
As always, we are focusing on the individual stocks in the Fund's portfolio.
By concentrating on niche industry groups and individual companies that can
do well independent of prevailing economic and broad market trends, we
believe we are well positioned to prosper, even in a less generous market
environment. Our investment philosophy is simple and straightforward:
buying good businesses cheap will generate consistently superior returns.
The Fund's 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). The Fund's NASDAQ symbol is GABSX. Please call us during
the day for further information.
We thank you for your confidence in our investing abilities and wish you a
productive and financially rewarding 1996.
Sincerely,
MARIO J. GABELLI, CFA
President and
Chief Investment Officer
August 1, 1996
TOP TEN HOLDINGS
JUNE 30, 1996
United Television, Inc. Int'l Family Entertainment, Inc.
Neiman Marcus Group, Inc. AMETEK, Inc.
Liberty Corporation Aztar Corporation
CLARCOR Inc. Dynamics Corp. of America
Lamson & Sessions Company BET Holdings, Inc.
NOTE: The views expressed in this report reflect those of the portfolio
manager only through the end of the period of this report as stated on
the cover. The manager's views are subject to change at any time
based on market and other conditions.
<PAGE>
<TABLE>
THE GABELLI SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS - JUNE 30, 1996 (UNAUDITED)
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<CAPTION>
Shares Cost Value Shares Cost Value
- ------ ---- ----- ------ ---- -----
<C> <S> <C> <C> <C> <S> <C> <C>
COMMON STOCKS-98.84% COMMON STOCKS (CONTINUED)
AGRICULTURE - 0.00%
199 Delta and Pine Land Company* $ 1,277 $ 8,407 35,000 Medusa Corporation $687,102 $1,085,000
-------- ------- 15,000 Morgan Products Ltd.* 128,663 95,625
AUTOMOTIVE: PARTS AND ACCESSORIES - 6.00% 125,000 Nortek, Inc.* 740,362 1,453,125
15,000 APS Holding Corporation Cl. A* 232,600 330,000 15,000 Oakwood Homes Corporation 167,562 309,375
100,000 GenCorp Inc. 1,546,161 1,512,500 100,000 Republic Gypsum Company 616,925 1,425,000
60,400 Handy & Harman 800,295 1,026,800 --------- ---------
5,430,864 7,413,125
1,000 Harley Davidson, Inc. 9,425 41,125 --------- ---------
2,000 Lund International Holdings Inc. 25,000 27,000 BUSINESS SERVICES - 1.93%
50,000 Modine Manufacturing Company 831,146 1,325,00 5,000 Amway Asia Pacific Ltd.* 145,750 151,250
24,150 Monro Muffler Brake, Inc.* 264,417 443,756 15,000 Amway Japan Limited
80,000 Redlaw Industries Inc.* 261,003 130,000 Spons. ADR 329,613 373,125
13,000 SPX Corporation 226,888 318,500 25,000 BBN Corporation 798,579 543,750
110,000 Standard Motor Products, Inc. 1,544,175 1,966,250 32,000 Berlitz International, Inc.* 470,487 680,000
90,000 Stant Corporation 1,031,315 1,035,000 15,000 Borg-Warner Security
2,000 Strattec Security Corporation 22,500 35,500 Corporation* 157,250 146,250
1,800 Superior Industries 10,000 Landauer, Inc. 163,888 211,250
International Inc. 24,923 47,700 82,500 Nashua Corporation 2,038,693 1,051,875
130,000 TransPro Inc. 1,326,062 893,750 105,052 Trans-Lux Corporation 863,809 1,444,465
165,000 UAP Inc. Cl. A 1,824,324 1,902,217 --------- ----------
114,000 Wynn's International, Inc. 1,204,530 3,220,500 4,968,069 4,601,965
---------- ---------- CABLE - 6.32% --------- ----------
11,174,764 14,255,598 150,000 BET Holdings, Inc. 2,561,337 3,956,250
---------- ---------- 110,250 Citicasters Inc.* 1,372,733 3,445,313
3,000 Falcon Cable Systems Company 29,775 26,813
AVIATION: PARTS AND ACCESSORIES - 2.96% 120,00 Home Shopping Network, Inc.* 990,655 1,440,000
10,000 AAR Corporation 198,875 203,750 262,500 International Family
30,000 Curtiss-Wright Corporation 1,097,363 1,620,000 Entertainment, Inc.* 2,849,765 4,856,250
26,500 Hi-Shear Industries Inc.* 164,141 162,313 25,000 Jones Intercable Investors L.P. 267,256 325,000
40,000 Hudson General Corporation 607,300 1,415,000
80,000 Moog, Inc. Cl. A 1,567,693 1,960,000 11,774 People's Choice TV Corporation 169,656 214,875
200,000 UNC Incorporated * 1,288,889 1,675,000 55,000 United International
--------- ---------- Holdings, Inc. Cl. A* 732,527 756,250
4,924,261 17,036,063 ---------- ----------
--------- ---------- 8,995,704 15,045,251
BROADCASTING - 5.96% ---------- ----------
35,000 Ackerley Communications, Inc. 299,725 953,750 COMMERCIAL SERVICES - O.17%
2,000 Clear Channel 10,000 Barefoot, Inc. 109,375 110,000
Communications, Inc.* 27,840 164,750 7,000 Wackenhut Corporation Cl. A 64,811 172,375
11,500 Gray Communications 6,187 Wackenhut Corporation Cl. B 52,368 113,686
Systems Inc.* 222,850 263,063 ---------- ----------
172,000 Liberty Corporation 4,465,516 5,461,000 226,554 396,061
2,500 Price Communications ---------- ----------
Corporation* 8,600 20,156 COMPUTER SOFTWARE AND SERVICES - 0.68%
2,000 Scandinavian Broadcasting 4,500 America Online, Inc.* 48,348 196,875
System SA* 27,300 49,000 1,200 Netcom On-Line Communication
8,000 Silver King Service, Inc. 37,448 32,400
Communications, Inc. 248,890 240,000 200 Netscape Communications Corp. 10,875 12,450
70,000 United Television, Inc. 1,779,330 6,860,000 1,000 Noise Cancellation
--------- ---------- Technologies, Inc. 625 719
7,230,051 14,165,469 117,000 Triad Systems Corporation* 504,563 745,875
--------- ---------- 14,000 Volt Information Sciences, Inc.*112,763 623,000
BUILDING AND CONSTRUCTION - 3.11% ---------- ---------
100,000 CalMat Co. 1,817,338 1,812,500 714,622 1,611,319
50,000 Catellus Development ---------- ---------
Corporation 428,043 456,250
30,000 Florida Rock Industries Inc. 844,869 776,250
<PAGE>
THE GABELLI SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) - JUNE 30, 1996 (UNAUDITED)
- ---------------------------------------------------------------------------
<CAPTION>
Shares Cost Value Shares Cost Value
- ------ ---- ----- ------ ---- -----
COMMON STOCKS (CONTINUED) COMMON STOCKS (CONTINUED)
CONSUMER PRODUCTS - 5.91% <C> <S> <C> <C>
<C> <S> <C> <C> 74,700 Kollmorgen Corporation $ 571,448 $ 375,000
89,000 Carter-Wallace, Inc. $1,036,627 $1,301,625 10,000 Littlefuse, Inc.* 125,313 375,000
80,000 Church & Dwight Co., Inc. 1,743,659 1,670,000 83,850 Pittway Corporation 2,127,906 3,689,400
22,000 Coachmen Industries Inc. 264,663 770,000 --------- ----------
8,628,240 15,903,175
40,500 Culbro Corporation* 1,346,043 2,414,813 --------- ----------
ENERGY - 2.15%
45,000 First Brands Corporation 612,200 1,215,000 1,425,000 GEO International Corporation* 74,145 1
27,000 Fleetwood Enterprises, Inc. 456,863 837,000 120,000 Kaneb Services Inc.* 337,375 390,000
98,000 General Housewares 22,000 Lufkin Industries, Inc. 389,520 451,000
Corporation 1,309,289 1,212,750 225,000 RPC Inc. * 1,668,737 2,587,500
165,000 Genlyte Group Incorporated* 622,882 1,278,750 105,000 Southwest Gas Corporation 1,783,470 1,680,000
102,500 Kerr Group, Inc.* 748,848 448,438 --------- ---------
4,253,247 5,108,501
6,000 Mafco Consolidated Group Inc.* 126,944 149,250 --------- ---------
ENTERTAINMENT - 1.30%
3,000 Nu-Kote Holding Inc. Cl. A.* 26,883 49,875 8,000 Churchill Downs Incorporated 342,863 288,000
20,000 Playtex Products Inc.* 146,000 187,500 10,000 Cineplex Odeon Corporation * 20,888 20,000
82,000 Scotts Company Cl. A * 1,445,536 1,435,000 1,000 Fisher Companies Inc. 85,550 87,500
30,000 Skyline Corporation 517,738 750,000 200 International Speedway
11,250 Stewart Enterprises Inc. Cl. A 101,800 351,563 Corporation 54,000 59,000
---------- ----------
10,505,975 14,071,564 110,000 Jackpot Enterprises, Inc. 1,277,538 1,402,500
---------- ----------
COUNTRY/CLOSED END FUNDS - 1.73% 2,000 Metromedia International
66,498 Central European Equity Group Inc. 22,000 24,500
Fund Inc. 890,508 1,188,652 100,000 Savoy Pictures Entertainment,
80,000 Emerging Germany Fund Inc. 629,750 590,000 Inc.* 597,585 537,500
45,000 France Growth Fund, Inc. 476,793 461,250 50,000 Spelling Entertainment Inc. 383,874 381,250
37,469 Germany Fund, Inc. 424,280 440,261 55,000 Topps Company, Inc.* 331,431 309,375
44,000 Italy Fund Inc. 394,348 390,500 --------- ---------
3,093,729 3,085,125
73,025 New Germany Fund Inc. 849,304 921,941 --------- ---------
ENVIRONMENTAL CONTROL - 0.38%
12,700 Spain Fund Inc. 118,435 125,413 130,000 EnviroSource, Inc.* 442,370 455,000
--------- ---------
3,783,418 4,118,017 15,000 U.S. Waste Services, Inc.* 184,179 444,375
--------- --------- ------- -------
DIVERSIFIED INDUSTRIAL - 8.95% 626,549 899,375
65,000 Ampco-Pittsburgh Corporation 472,437 755,625 ------- -------
FINANCIAL SERVICES - 3.02%
10,000 Anixter International Inc. 95,200 148,750 7,000 Berliner Bank
19,000 Gardner Denver Machinery Aktiengesellschaft 1,452,996 1,489,166
Corporation 316,370 501,125 50,000 Danielson Holding Corporation 185,138 334,375
20,000 Katy Industries 223,537 300,000 22,500 Gryphon Holdings Inc.* 292,500 337,500
450,000 Lamson & Sessions Co.* 2,550,031 5,343,750 18,000 Hibernia Corporation 140,063 195,750
90,000 Lindsay Manufacturing 4,000 Lawyers Title Insurance
Company * 1,904,443 3,622,500 Corporation 58,015 72,000
340,000 Noel Group, Inc.* 1,770,948 2,932,500 40,000 Midland Company 1,717,750 1,680,000
31,600 Oil-Dri Corporation of America 425,780 470,050 115,000 Pioneer Group, Inc. 1,269,630 3,076,250
65,000 Park-Ohio Industries, Inc.* 756,925 1,259,375 --------- ---------
5,116,092 7,185,041
27,000 Standex International --------- ---------
FOOD AND BEVERAGE -- 6.15%
Corporation 850,225 769,500 10,000 Brau und Brunnen 1,990,844 1,037,426
127,000 Thomas Industries, Inc. 1,391,750 2,428,875 250,000 Bruno's, Inc. 2,682,996 3,468,750
25,000 Trinity Industries, Inc. 672,010 850,000 34,000 Celestial Seasonings, Inc.* 597,350 697,000
695,000 Tyler Corporation * 3,225,417 1,911,250 6,250 Cheesecake Factory
----------- ---------
14,655,073 21,293,300 Incorporated* 103,555 171,875
----------- ---------
ELECTRICAL EQUIPMENT AND SUPPLIES - 6.68% 72,100 Chock Full o'Nuts Corporation* 556,764 351,488
222,000 AMETEK, Inc. 3,235,456 4,828,500 36,000 Delchamps, Inc. 775,423 873,000
1,000 Belden Inc. 15,425 30,000 15,000 Earthgrains Co. 460,125 491,250
40,100 CTS Corporation 933,067 1,884,700 181,900 Eskimo Pie Corporation(a) 2,977,462 3,228,725
150,000 Dynamics Corporation of 1,000 Farmer Brothers Company 133,895 138,000
America 1,619,625 3,993,750
<PAGE>
THE GABELLI SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) - JUNE 30, 1996 (UNAUDITED)
- ---------------------------------------------------------------------------
Shares Cost Value Shares Cost Value
- ------ ---- ----- ------ ---- -----
<CAPTION>
<C> <S> <C> <C> <C> <S> <C> <C>
COMMON STOCKS (CONTINUED) COMMON STOCKS (CONTINUED)
17,500 Genesee Corporation Cl. B $ 704,817 $ 805,000 20,000 General Magnaplate
10,000 Grist Mill Company * 73,023 63,750 Corporation $ 83,763 $ 133,750
30,000 Ingles Markets, 50,000 Gerber Scientific, Inc. 602,337 806,250
Incorporated Cl. A 219,075 352,500 20,000 Global Industrial
12,000 International Multifoods Technologies, Inc. 254,600 320,000
Corporation 242,875 219,000 120,000 Greif Bros. Corporation
12,000 J & J Snack Foods Corp.* 121,707 138,000 Class A 2,230,764 3,765,000
8,000 Midwest Grain Products, Inc. 158,761 104,000 34,650 Johnston Industries, Inc. 268,295 298,856
1,000 Northland Cranberries, Inc. Cl. A 15,250 30,000 14,000 K-Tron International, Inc.* 120,533 119,000
10,000 Ralcorp Holdings, Inc.* 154,250 206,250 21,000 Mark IV Industries, Inc. 299,911 475,125
95,000 Rykoff-Sexton, Inc. 1,398,651 1,365,625 5,000 Plantronics, Inc.* 76,787 183,750
52,000 Sylvan Foods Holdings, Inc.* 474,785 695,500 29,000 Sequa Corporation Cl. A * 940,377 1,250,625
5,545 Tootsie Roll Industries, Inc. 203,750 197,541 3,000 Sequa Corporation Cl. B* 93,017 150,000
---------- ----------
14,045,358 14,634,680 17,500 SPS Technologies, Inc.* 448,826 1,233,750
---------- ----------
HOME FURNISHINGS -- 2.37% 15,000 Teleflex Incorporated 453,413 716,250
8,000 Bassett Furniture Industries 14,000 Tennant Company 304,175 364,000
Incorporated 188,438 214,000 38,000 Valmont Industries, Inc. 602,075 1,292,000
4,000 Bed Bath & Beyond Inc.* 44,500 107,000 5,250 Watsco, Inc. Cl. B 23,627 106,313
20,000 Department 56 Inc. 468,500 452,500 ---------- ----------
18,237,207 26,425,059
30,000 Foamex International Inc.* 258,200 367,500 ---------- ----------
METALS AND MINING - 1.59%
10,000 La-Z-Boy Chair Company 218,125 301,250 10,000 Barrick Gold Corporation 257,938 271,250
10,000 National Presto Industries, Inc. 447,833 380,000 135,000 Echo Bay Mines Ltd. 1,464,512 1,451,250
83,000 Oneida Ltd. 1,272,612 1,556,250 100,000 Pegasus Gold Inc.* 1,651,066 1,225,000
100,000 Syratech Corporation * 1,774,858 2,250,000 200,000 Royal Oak Mines Inc.* 957,283 737,500
--------- ---------
4,673,066 5,628,500 15,000 TVX Gold, Inc. 135,750 108,750
--------- --------- ---------- ---------
HOSPITAL SUPPLIES AND SERVICES -- 0.03% 4,466,549 3,793,750
1,000 Professional Sports Care ---------- ---------
PUBLISHING - 3.56%
Management, Inc.* 5,375 7,500 50,000 Golden Books Family
7,500 U.S. Physical Therapy Inc.* 46,875 73,125 Entertainment, Inc. 578,387 600,000
--------- ---------
52,250 80,625 101,278 Independent Newspapers plc 294,184 468,758
--------- ---------
HOTELS/CASINOS -- 2.92% 20,000 Independent Newspapers plc Rights 0 6,384
395,000 Aztar Corporation* 2,544,968 4,542,500 15,000 McClatchy Newspapers, Inc.Cl.A 287,838 414,375
4,000 Boyd Gaming Corp. 56,450 60,000 88,000 Media General, Inc. Cl. A 1,572,919 3,278,000
35,000 Mirage Resorts, Incorporated * 357,753 1,890,000 20,000 Meredith Corporation 593,862 835,000
10,000 National Lodging Corp.* 126,258 160,000 10,000 Providence Journal Company 150,000 153,750
20,000 Station Casinos, Inc. * 271,470 287,500 34,000 Pulitzer Publishing Company 1,386,371 2,014,500
--------- ---------
3,356,899 6,940,000 29,000 Wiley (John) & Sons, Inc. Cl.B 371,125 862,750
--------- --------- --------- ---------
INDUSTRIAL EQUIPMENT AND SUPPLIES -- 11.11% 5,084,686 8,479,767
65,000 AFC Cable Systems, Inc.* 657,933 1,072,500 --------- ---------
26,000 Alltrista Corporation 497,722 617,515 PUMPS AND VALVES - 4.70%
15,000 Amphenol Corporation Cl. A * 196,200 345,000 30,000 AptarGroup, Inc. 504,635 907,500
50,000 AMTROL Inc. 775,522 1,200,000 32,750 Duriron Company, Inc. 573,302 786,000
320,000 Baldwin Technology 69,000 Franklin Electric Company 2,073,422 2,415,000
Company, Inc. Cl. A 1,534,459 1,120,000 17,775 Gorman-Rupp Company 276,467 235,519
40,000 Brad Ragan, Inc.* 1,013,337 1,230,000 90,000 Goulds Pumps, Incorporated 2,172,983 2,306,250
55,000 Brenco, Incorporated 491,718 886,875 6,000 Graco Inc. 83,113 121,500
5,000 BW/IP Inc. 75,000 95,000 55,000 IDEX Corporation 680,167 2,090,000
216,000 CLARCOR Inc. 3,651,390 5,346,000 27,500 Robbins & Myers, Inc. 481,904 1,223,750
45,000 Crane Company 1,187,013 1,845,000 22,500 Roper Industries, Inc. 288,750 1,096,875
140,000 Eljer Industries, Inc.* 1,354,413 1,452,500 --------- ----------
7,134,743 11,182,394
--------- ----------
<PAGE>
THE GABELLI SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) - JUNE 30, 1996 (UNAUDITED)
- ---------------------------------------------------------------------------
<CAPTION>
Principal
Shares Cost Value Amount Cost Value
- ------ ---- ----- --------- ---- -----
<C> <S> <C> <C> <C> <S> <C> <C>
CONVERTIBLE CORPORATE BONDS - 0.86%
AUTOMOTIVE: PARTS AND ACCESSORIES - 0.15%
COMMON STOCKS (CONTINUED)
325,000 GenCorp Inc. Sub. Deb. Cv.
8.00%, 08/01/02 $ 323,373 $ 350,188
RETAIL - 5.04%
44,700 Aaron Rents Inc. Cl. A $ 147,449 $ 687,262 --------- ---------
ENTERTAINMENT - 0.12%
60,700 Aaron Rents Inc. 202,222 766,338 150,000 All American Communications,
67,001 Belding Heminway Inc. Sub. Deb. Cv.
Company, Inc.* 499,204 125,627 6.50%, 10/01/03(b) 143,494 134,250
50,000 Burlington Coat Factory 200,000 Savoy Pictures Entertainment,
Warehouse Corporation * 589,663 525,000 Inc. Sub. Deb. Cv.
7,000 Crown Books Corporation * 98,017 94,500 7.00% 07/01/03 158,266 158,000
80,500 Earl Scheib, Inc.* 445,795 598,718 -------- -------
301,760 292,250
25,000 Fingerhut Companies, Inc. 367,919 390,625 -------- -------
INDUSTRIAL EQUIPMENT AND SUPPLIES - 0.47%
153,750 General Host Corporation* 1,024,249 422,813 650,000 Intermagnetics General
85,000 Hartmarx Corporation* 523,438 531,250 Corporation Sub. Deb. Cv.
70,000 Lillian Vernon Corporation 1,073,016 892,500 5.75%, 09/15/03 (b) 649,561 763,750
33,500 Mott's Holdings, Inc.* 214,069 201,000 250,000 Kushner Locke Company Sub.
250,000 Neiman Marcus Group, Inc.* 3,563,006 6,750,000 Deb. Cv. 8.00%, 12/15/2000 (c) 250,000 328,300
--------- ----------
8,748,047 11,985,633 500 MacNeal-Schwendler Corporation
--------- ----------
SPECIALTY CHEMICALS - 0.86% Sub. Deb. Cv. 7.875%, 08/18/04 545 440
30,000 Ferro Corporation 714,101 795,000 ------- ---------
900,106 1,092,490
10,000 MacDermid, Incorporated 308,383 700,000 ------- ---------
RETAIL - 0.13%
30,200 Penwest Ltd. 576,802 543,600 400,000 General Host Corporation
--------- ---------
1,599,286 2,038,600 Sub. Deb. Cv. 8.00%,
--------- ---------
TELECOMMUNICATIONS - 2.20% 02/15/02 381,937 320,000
1,000 Arch Communications Group Inc.* 14,425 18,625 ------- ---------
TOTAL CONVERTIBLE
27,000 Atlantic Tele-Network Inc.* 305,245 648,000 CORPORATE BONDS 1,907,176 2,054,928
2,000 BHI Corporation 30,250 29,250 --------- ---------
TOTAL INVESTMENTS
100,000 Communications Systems, Inc. 556,533 1,375,000 - 99.69% $168,622,420 237,212,038
42,000 C-TEC Corporation * 957,200 1,249,500 ------------
30,000 C-TEC Corporation Cl.B * 495,027 881,250 Cash and Other Assets in ------------
10,000 Data Transmission excess of Liabilities- 0.31% 730,199
Network Corporation* 142,363 640,000 -------
NET ASSETS - 100.00%
18,000 Lincoln Telecommunications (11,509,531 shares outstanding) $237,942,237
Company 231,438 294,750 ------------
Net Asset Value And Redemption ------------
16,000 NTN Communications Inc.* 114,150 94,000 Price Per Share $20.67
--------- ---------
2,846,631 5,230,375 ------
--------- --------- MAXIMUM PUBLIC OFFERING ------
TRANSPORTATION - 0.19% PRICE PER SHARE
50,000 OMI Corporation 334,638 431,250 ($20.67 / .955 Based on a maximum sales
4,000 WorldCorp, Inc. 19,575 27,000 charge of 4.5%) $21.64
------- ------- ------
354,213 458,250 ------
------- ------- For Federal income tax purposes:
WIRELESS COMMUNICATIONS - 0.87% Aggregate cost $168,622,420
50,000 American Paging, Inc.* 392,914 371,871 ------------
------------
Gross unrealized appreciation $76,751,964
2,000 Associated Group Inc., Cl. A 50,750 60,500 Gross unrealized depreciation (8,162,346)
17,000 Cellular Communications of ------------
Puerto Rico, Inc.* 291,750 552,500 Net unrealized appreciation $68,589,618
------------
<FN> ------------
*Non-income producing security.
62,000 Centennial Cellular ADR-American Depositary Receipts
Corporation * 1,012,201 1,046,250 (a) Considered an affiliated issuer because the Fund owns at
least 5% of the outstanding voting securities.
4,000 Rural Cellular Corp. CL. A. 40,205 51,000 (b) Security exempt from registration under Rule 144A of the
----------- ----------- Securities Act of 1933. These securities may be resold in
1,787,820 2,082,121 transactions exempt from registration, normally to qualified
----------- ----------- institutional buyers. At June 30,1996,Rule 144A securities
TOTAL COMMON STOCKS 166,715,244 235,157,110 amounted to 898,000 or 0.4% of net assets.
----------- ----------- (c) Security fair valued as determined by the Board of
Directors.
</FN>
</TABLE>
