[PHOTO OMITTED]
The
Gabelli
Small Cap
Growth
Fund
ANNUAL REPORT
SEPTEMBER 30, 1998
<PAGE>
The Gabelli Small Cap Growth Fund
Annual Report
September 30, 1998(a)
To Our Shareholders,
In the third quarter of 1998, small cap stocks hit the skids, with the
Russell 2000 Index plunging 20.2%. Large cap stocks also declined as
international economic distress, a slowing U.S. economy and our front page
political crisis converged to create "a perfect storm" in the equity markets.
With a decline in the third quarter and a modest retreat year-to-date
1998, we are not pleased with the Fund's performance during what has been a
major bear market for small cap stocks. We note that the average small cap stock
with a market capitalization of $250 million or lower is off nearly 50% from 52
week highs. Our stock picking discipline has helped preserve assets in these
troubled times. We believe it can be equally effective when the small cap stock
market recovers.
Investment Performance
For the quarter ended September 30, 1998, The Gabelli Small Cap Growth
Fund's (the "Fund") net asset value declined 20.3%. The Value Line Composite and
Russell 2000 Index declined 17.2% and 20.2%, respectively, over the same period.
Each index is an unmanaged indicator of stock market performance. Over the
trailing twelve month period, the Fund declined 13.5%. The Value Line Composite
and Russell 2000 declined 11.4% and 19.0%, respectively, over the same twelve
month period.
For the five year period ended September 30, 1998, the Fund's return
averaged 11.3% annually versus average annual returns of 12.4% and 9.1% for the
Value Line Composite and Russell 2000, respectively. Since inception on March 3,
1986 through September 30, 1998, the Fund has a total return of 193.6%, which
equates to an average annual return of 16.8%.
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(a) The Fund's fiscal year ends September 30.
<PAGE>
INVESTMENT RESULTS (a)(c)
<TABLE>
<CAPTION>
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Calendar Quarter
-----------------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
<S> <C> <C> <C> <C> <C>
1998: Net Asset Value ............. $23.93 $23.59 $18.81 -- --
Total Return ................ 10.9% (1.4)% (20.3)% -- --
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1997: Net Asset Value ............. $19.11 $22.23 $25.42 $21.58 $21.58
Total Return ................ 3.1% 16.3% 14.7% (0.8)% 36.5%
- --------------------------------------------------------------------------------------------------
1996: Net Asset Value ............. $19.65 $20.68 $20.02 $18.53 $18.53
Total Return ................ 6.2% 5.2% (3.2)% 3.4% 11.9%
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1995: Net Asset Value ............. $17.03 $17.88 $19.34 $18.50 $18.50
Total Return ................ 7.4% 5.0% 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)%
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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%
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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%(b) 22.9%(b)
- --------------------------------------------------------------------------------------------------
</TABLE>
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Average Annual Returns September 30, 1998 (a)
1 Year ............................ (13.5)%
5 Year ............................ 11.3%
Life of Fund (b) .................. 16.8%
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Dividend History
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Payment (ex) Date Rate Per Share Reinvestment Price
- ----------------- ------------- ------------------
December 29, 1997 $3.590 $21.29
September 30, 1997 $0.070 $25.42
December 27, 1996 $2.160 $18.46
December 29, 1995 $1.340 $18.50
December 30, 1994 $1.030 $15.85
December 31, 1993 $0.420 $17.38
December 31, 1992 $0.185 $14.50
December 31, 1991 $0.080 $12.21
(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) From commencement of operations on October 22, 1991. (c) The
Fund's fiscal year ends September 30. Note: Investing in small capitalization
securities involves special challenges because these securities may trade less
frequently and experience more abrupt price movements than large capitalization
securities.
- --------------------------------------------------------------------------------
2
<PAGE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI SMALL CAP GROWTH FUND, THE RUSSELL 2000 INDEX
AND THE S&P 500 INDEX
[THE FOLLOWING TABLE WAS DEPICTED AS A LINE CHART IN THE PRINTED MATERIAL.]
Gabelli Small
Cap Growth Fund Russell 2000 Index S&P 500 Index
10/22/91 $10,000 $10,000 $10,000
9/30/92 13,410 11,184 11,021
9/30/93 17,229 14,897 12,464
9/30/94 18,004 15,374 12,925
9/30/95 21,513 18,971 16,777
9/30/96 23,874 21,397 20,183
9/30/97 33,949 28,499 28,337
9/30/98 29,366 23,084 30,916
* Past Performance is not predictive of future performance.
What We Do
We view the small capitalization stock market as a research driven stock
picker's paradise. Unlike the large cap market, where most companies are closely
followed by dozens of Wall Street analysts, the small cap market is largely
unclaimed territory. Our analysts put on their hiking shoes, strap on their
backpacks and hit the trails looking for little companies Wall Street does not
know or care about. They are seeking a particular type of company, which we
would describe generally as a dominant market share, niche franchise in a
growing and/or consolidating industry.
[GRAPHIC OMITTED]
Our analysts are guided by specific investment principles that include:
experienced management, healthy balance sheets and rising free cash flow and
earnings. They also live by certain value parameters--their goal is to find
great companies trading at reasonable valuations relative to "real world"
economic worth. These are the kind of companies we can feel comfortable owning
long term, rather than trading like so many small cap investors are prone to do.
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<PAGE>
COMMENTARY
Saplings Versus the Mighty Oaks
Why have small cap stocks underperformed large cap stocks so dramatically
this year and particularly during the recent broad market decline? Valuations do
not explain it. At the beginning of the year, small cap stocks were already
fundamentally cheap relative to large cap stocks. After materially lagging large
caps in the first half of 1998, small caps headed into the third quarter even
cheaper on a relative basis. Earnings prospects also fail to explain small caps'
poor relative performance. Because small companies generally serve the domestic
market, their earnings should be less vulnerable than large multi-nationals with
much greater exposure to weak foreign markets. Nevertheless, small cap stocks
retreated faster and farther than large caps in the third quarter's broad market
rout.
We think investors abandoned small cap saplings and clung to large cap
oaks because the latter seemed to offer better shelter in the market storm. This
has worked thus far. However, with the potential for some of these top heavy
oaks to be uprooted by earnings disappointments, it may not be the safest tactic
going forward. We have cleaved to small trees deeply rooted in value. They have
been bent, but not broken in the market storm. We believe they will survive,
grow and bear fruit in the years ahead.
When will small cap stocks begin reasserting themselves? Small cap stocks
have underperformed large cap stocks for the last five years and in 1998, the
gap has widened considerably. Through the first three quarters of 1998, the
Russell 2000 was down 16.2% compared to a modest 6.0% gain for the Standard &
Poor's ("S&P") 500. The last time we saw this kind of negative performance
differential between small cap and large cap stock performance was in 1990.
Small cap stocks went on to substantially outperform large caps over the next
three years. In September, small cap stocks demonstrated a degree of relative
strength versus large caps, declining less on big down days and gaining more on
up days. It is too early to call this a reversal in trend. However, we believe
small cap stocks may be poised for an extended period of outperformance relative
to the more richly valued large cap sector.
Through the Looking Glass
What do investors see as they peer through the looking glass? Like Alice
after she has eaten the mushroom, is the market still shrinking or ready to
grow? Should savvy investors be heading through the keyhole or smiling like the
Cheshire cat? What do we see happening in the stock market Wonderland?
Equity valuations pivot on the outlook for earnings and on the multiple
accorded those earnings. The earnings picture has been muddied by global
economic turmoil. However, we continue to believe that on a longer term secular
basis, U.S. corporations should grow earnings at high single digit rates. In
light of this favorable long term secular earnings forecast and the positive
outlook for inflation and interest rates, we believe at current prices, most
stocks are now quite reasonably valued. So, going forward, we believe the
outlook for equity owners is favorable.
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The Four M's
In the third quarter of 1998, consumers and investors focused on the Four
M's:
Market
McGwire
Monica
Meriwether
M as in Market
The sharp crack in U.S. equities during the third quarter raises several
questions. Will the economy be impacted either through a reduction in consumer
spending or a cutback in corporate expenditures? Since the U.S. economy has been
the engine of global growth, will a slowdown accentuate a global spiral?
Our answer to the first is, yes, lower spending by consumers and
corporations will cause an economic and profit slowdown. However, we believe the
odds favor just that, a slowdown, not a recession. The Russell 2000 Index, Wall
Street jargon for the average U.S. company, has already discounted a recession.
Should we avoid one, stocks will likely recover sharply.
Our answer to the second question is also yes. U.S. economic weakness will
have a negative impact on the rest of the world. But, we see some very positive
signs as well. The Japanese are finally addressing their economic problems.
Stimulation in Japan should buttress overall economic activity, particularly in
Southeast Asia. The same applies to Euroland (the new name for the countries
participating in European Monetary Union), where economic cooperation is
supporting economic growth prospects. Moreover, part of the global economic
disequilibrium we have been experiencing stems from the strong dollar. With the
dollar weakening against the mark and the yen, some global economic balance
should be restored.
McGwire
Mark McGwire and Sammy Sosa's heroics put baseball back on the front
pages. In places other than New York, Boston, Los Angeles and San Francisco,
most people were more captivated by the historic home run record chase than what
was occurring in the economy and the stock market. Will they continue to focus
on the day-to-day elements that impact their lives and their own individual
economic expectations? Job security, low inflation, low interest rates
(resulting in much lower mortgage payments) and the prospects of reduced taxes
should make most people feel relatively good.
5
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Monica
The histrionics associated with the President's current predicament have
also taken center stage. Will the U.S. be in a position to provide moral
leadership on such issues as nuclear armaments? (Most of us now understand
Kashmir is not a sweater). Will President Clinton be able to energize the new
Congress and focus on critical economic issues in a timely fashion? Will Robert
Rubin and Alan Greenspan resign if Clinton is not in power?
We have long maintained the view that a great democracy like ours has many
flaws. But, the underpinnings of our system, being rooted in personal freedom
and ownership of capital, will survive flaws and sometimes even flourish in the
absence of credible leadership.
Meriwether
We, like virtually everyone in the financial community, were surprised by
the extent of leverage that an organization could accomplish and the extent of
damage that leverage could have on the financial system. A shutdown in lending,
so vital to both domestic and global growth, is occurring. We have a liquidity
crisis, but one different than past "credit crunches". When asked how to become
a millionaire, Warren Buffett quipped, "Start with $1 billion and buy an
airline." We now offer our version, "Start with $1 billion and give it to a
hedge fund manager who focuses on emerging market debt with leverage."
While the first chapter is still being written on the Long Term Capital
Management debacle, we will wait for the smoke to clear, the floor boards to be
lifted and the foundation inspected before commenting further. However, we
believe global cooperation will help curtail the damage.
Winners and Losers
A review of our top 20 list this quarter reveals the usual eclectic mix of
companies including: a cable provider (Cablevision Systems), a cloth cutting
equipment manufacturer (Gerber Scientific), an auto parts maker (Standard Motor
Products) and a mining company (Stillwater Mining). Our small utilities holdings
like Fall River Gas, Orange & Rockland and Florida Public Utilities held up
relatively well in the sharp market decline.
Our losers came from a broad spectrum of industries as well. We were hurt
in financial services (Pioneer Group), billboards (Bowlin Outdoor Advertising),
home construction (Oakwood Homes) and retailers (Neiman Marcus Group and Sports
Authority). We witnessed many fine little companies with excellent track records
and good future earnings prospects get washed away in a wave of largely
indiscriminate selling in the small cap sector.
Deals--Fewer Entrees, More Appetizers
More conservative bank lending policies, the decline in the value of stock
as a deal currency and a soft market for secondary issues underwritten to
finance large acquisitions may combine to reduce the number of big deals in the
quarters ahead. However, even in these uncertain times, companies still have
6
<PAGE>
a strong appetite for growth through acquisition and there are a tremendous
number of "bite size" business bargains in the small cap sector. Hungry
corporate acquirers who for the time being, may not be able to afford expensive
entrees, can satisfy their appetites by ordering up three or four mouthwatering
appetizers. Our portfolio menu of fundamentally inexpensive small business
delicacies should be increasingly popular in the year ahead.
Let's Talk Stocks
The following are stock specifics on selected holdings of our Fund.
Favorable earnings prospects do not necessarily translate into higher stock
prices, but they do express a positive trend which we believe will develop over
time.
Ackerley Group Inc. (AK - $19.75 - NYSE), a Seattle-based multimedia and
entertainment company, is comprised of three operating segments which contain a
total of 21 independent media and entertainment operations. The Out-of-Home
segment operates the sixth largest outdoor advertising company in the nation.
The Broadcasting segment owns, or operates under management agreements, ten
television stations in California, New York, Washington and Colorado, as well as
four radio stations in the Seattle-Tacoma market. The Sports and Entertainment
segment includes the NBA's Pacific Division Champion Seattle Supersonics. The
company has signed an agreement to purchase WOKR, the ABC affiliate in
Rochester, New York for $125 million. WOKR joins three other television stations
owned or operated by the Ackerley Group in central New York, WIXT in Syracuse,
WUTR in Utica and WIVT in Binghamton.
CLARCOR Inc. (CLC - $15.375 - NYSE) is a U.S.-based manufacturer and distributor
of engine/mobile and industrial/environmental filtration products and consumer
packaging products. Filtration products include air, fuel and hydraulic filters
for heavy duty trucks, buses, cars and boats, as well as air and anti-microbial
filters for factories, hospitals and clean rooms. CLARCOR is a leading producer
of custom-decorated metal and plastic containers widely used by consumer
products companies. Substantial cost savings and productivity improvements are
expected through the end of the decade. The company has a history of bringing
acquisitions profitably into the fold and is entering into strategic alliances
in European and other markets.
CTS Corp. (CTS - $29.50 - NYSE) is primarily a diversified manufacturer of
electronic components for the automotive, computer equipment and communications
equipment markets. A year ago, CTS acquired Dynamics Corp. of America, which had
owned 44% of CTS's outstanding shares. The union increased the liquidity of CTS
stock, which has since been split 3-for-1, as well as enhancing its earnings
prospects. As a step in the assimilation of Dynamics' and CTS's focus on its
core electronic components and assembly business, Dynamics' Waring Products
division is being sold.
Greif Bros. Corp. (GBCOA - $33.00 - Nasdaq), with a corporate history spanning
120 years, operates in two industry segments: industrial shipping containers and
containerboard and related products. Operations in the industrial shipping
containers segment involve the production and sale of fibre, steel and plastic
drums, multiwall bags, cooperage, dunnage and pallets. Operations in the
containerboard segment involve the production and sale of containerboard, both
virgin and recycled, and related
7
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corrugated products. The company has conducted an in-depth review of its
timberlands, one of its strategic assets, and is now analyzing its saw timber
and pulpwood assets as well as developing a program of land management. Greif
Bros. has purchased the entire industrial container group of Sonoco Products
Co., with combined annual net sales of nearly $210 million, for approximately
$225 million in cash. The properties acquired include twelve fibre drum plants
and five plastic drum plants.
Kaman Corp. (KAMNA - $17.125 - Nasdaq) was founded in 1945 as a pioneer in the
helicopter industry. Aircraft manufacturing remains at the core of the business.
Kaman services both commercial and government markets with helicopters and
aircraft components. The company also produces specialized, high-value niche
market products and services which tend to be technological leaders in their
markets. Kaman is a major, national distributor of original equipment, repair
and replacement products and value-added services to nearly every sector of
North American industry. The company also manufactures and distributes musical
instruments (Ovation guitars) and accessories to independent retailers.
Liberty Corp. (LC - $41.5625 - NYSE), headquartered in Greenville, S.C., is a
holding company with operations in broadcasting and insurance. Liberty's Cosmos
Broadcasting owns and operates nine network affiliated television stations in
the Southeast and Midwest. Six stations are affiliated with NBC, two with ABC
and one with CBS. These stations serve more than four million households. In
August, Cosmos agreed to acquire CBS-affiliated KGBT-TV in Harlingen, Texas for
approximately $42 million. Also in August, the company closed on its purchase of
NBC affiliate WALB-TV in Albany, Georgia. The purchase of the ABC affiliate in
Wilmington, NC is expected to be completed by year end. Liberty Life is a
regional insurer, with North Carolina, South Carolina and Louisiana accounting
for more than 50% of its premium volume. The insurance segment specializes in
providing agency (home service) and mortgage protection, life and health
insurance. Former affiliate Pierce National Life Insurance Co. was sold to
Fortis Inc. in April for $180 million. In March, Liberty Corp. repurchased 2.4
million shares in a tender offer at $52 per share.
Pittway Corp. (PRY - $24.875 - NYSE) has completed the tax-free spin-off of
Penton Media. The spin-off distribution consisted of one share of Penton common
stock for each share of Pittway stock outstanding. This action leaves Pittway
with its core business; manufacturing and distributing burglar and commercial
fire alarm equipment. Its ADI distribution unit is the largest supplier of alarm
system components in the U.S. Pittway is also involved in real estate and other
promising ventures, including a 34% interest in Cylink, a leading manufacturer
of encryption equipment, and a 4.2% interest in U.S. Satellite Broadcasting, a
direct-to-the-home (DTH) satellite broadcast company whose subscriber base is
growing rapidly.
Thomas Industries Inc. (TII - $21.4375 - NYSE), headquartered in Louisville,
Kentucky, is the recognized leader in the design and manufacture of
high-quality, precision-engineered fractional horsepower compressors and vacuum
pumps for use in global OEM applications, as well as pneumatic construction
equipment, leakage detection systems and laboratory equipment. The company sells
annually over one million units into more than 60 countries. Thomas Industries
also owns a 32% interest in the recently
8
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created Genlyte Thomas Group, estimated to be the third largest lighting fixture
manufacturer in North America. Thomas has operations in the U.S., Mexico, South
America, Europe and Asia.
United Television Inc. (UTVI - $106.75 - Nasdaq), headquartered in Beverly
Hills, California, is a television broadcasting group which owns and operates
the six stations (one ABC, one NBC and four UPN affiliates) that comprise
Chris-Craft's (CCN - $44.1875 -NYSE) television division. In January, UTVI
purchased WHSW in Baltimore for $80 million. The station began broadcasting as
WUTB, a UPN affiliate, immediately following completion of the acquisition. The
$60 million purchase of WRBW, a UPN affiliate in Orlando (the country's 22nd
largest and fastest growing television market over the past decade), is pending
FCC approval. UTVI stations cover approximately eight percent of the U.S.
population. UTVI is 58.9%-owned by BHC Communications (BHC - $117.00 -AMEX).
Strong advertising demand, prospects for favorable regulatory changes in the
industry and corporate cost control enhance EBITDA (Earnings before interest,
taxes, depreciation and amortization) prospects.
USA Networks Inc. (USAI - $19.4375 - Nasdaq), through its subsidiaries, engages
in diversified media and electronic commerce businesses that include: electronic
retailing, ticketing operations and television broadcasting. Chairman and CEO
Barry Diller has brought together under one umbrella: the USA Network, the
Sci-Fi Channel, USA Networks Studios, USA Broadcasting, The Home Shopping
Network and the Ticketmaster Group. The plan is to integrate these assets,
leveraging programming, production capabilities and electronic commerce across
this strong distribution platform.
Minimum Initial Investment - $1,000
The Fund's 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 Small Cap Growth Fund 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 Funds, Inc., the
Gabelli Mutual Funds, IRAs, 401(k)s, quarterly reports, closing prices and other
current news. You can send us e-mail at [email protected].
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<PAGE>
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 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
We are pleased to have materially outperformed our Russell 2000 benchmark
during this particularly difficult period for small cap stocks. Although we
cannot be certain the small cap sector has bottomed, small caps are remarkably
cheap relative to large cap equities and to historical fundamental yardsticks as
well. We believe we are entering a period in which indiscriminate selling will
give way to an appreciation of the merits of selected small companies.
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
business day for further information.
Sincerely,
/s/ Mario J. Gabelli
Mario J. Gabelli, CFA
Portfolio Manager and
Chief Investment Officer
October 30, 1998
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Top Ten Holdings
September 30, 1998
Liberty Corp. Thomas Industries Inc.
United Television Inc. CTS Corp.
USA Networks Inc. Grief Bros. Corp.
Kaman Corp. Pittway Corp.
CLARCOR Inc. Ackerley Group Inc.
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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.
10
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The Gabelli Small Cap Growth Fund
Portfolio of Investments -- September 30, 1998
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS - 97.6%
Agriculture - 0.0%
5,000 Cadiz Inc.+ .................. $ 56,340 $ 41,875
353 Delta & Pine Land Co. ........ 1,271 15,532
10,000 Erly Industries Inc.+ ........ 65,690 3,750
--------------- ---------------
123,301 61,157
--------------- ---------------
Automotive: Parts and Accessories - 6.4%
100,000 Acktion Co.+ ................. 1,273,171 914,009
1,000 Borg-Warner Automotive
Inc. ...................... 44,969 37,063
75,000 GenCorp Inc. ................. 1,135,566 1,443,750
8,500 Lund International Holdings
Inc.+ ..................... 103,980 55,250
20,000 Meritor Automotive Inc. ...... 475,125 301,250
110,000 Modine Manufacturing Co. ..... 3,146,149 3,190,000
5,250 Monro Muffler Brake Inc.+ .... 52,860 49,875
46,000 Ragan (Brad) Inc.+ ........... 1,168,123 1,759,500
50,000 Redlaw Industries Inc.+ ...... 164,909 15,625
1,000 SPX Corp.+ ................... 16,550 41,313
133,000 Standard Motor Products
Inc. ...................... 2,057,294 3,241,875
10,000 Strattec Security Corp.+ ..... 244,013 265,000
10,000 Superior Industries
International Inc. ........ 247,157 228,750
113,000 TransPro Inc. ................ 1,207,455 565,000
190,000 UAP Inc., Cl. A .............. 2,159,362 2,240,795
183,000 Wynn's International Inc. .... 978,390 3,419,812
--------------- ---------------
14,475,073 17,768,867
--------------- ---------------
Aviation: Parts and Services - 5.4%
15,000 AAR Corp. .................... 198,875 294,375
47,000 Banner Aerospace Inc.+ ....... 499,399 376,000
4,000 Barnes Group Inc. ............ 109,825 115,000
21,000 Coltec Industries Inc.+ ...... 321,425 317,625
56,000 Curtiss-Wright Corp. ......... 1,008,638 2,222,500
7,500 Ducommun Inc.+ ............... 80,125 150,000
105,000 Fairchild Corp., Cl. A+ ...... 2,242,714 1,483,125
26,500 Hi-Shear Industries Inc.+ .... 58,141 71,219
43,000 Hudson General Corp. ......... 745,445 2,171,500
320,000 Kaman Corp., Cl. A ........... 5,797,564 5,479,999
80,000 Moog Inc., Cl. A+ ............ 1,630,172 2,315,000
--------------- ---------------
12,692,323 14,996,343
--------------- ---------------
Broadcasting - 7.4%
200,000 Ackerley Group Inc. .......... 2,885,163 3,949,999
1,000 Clear Channel
Communications Inc.+ ...... 4,640 47,500
16,000 Granite Broadcasting Corp.+ .. 175,580 102,000
20,000 Gray Communications
Systems Inc. .............. 442,525 566,250
32,000 Gray Communications
Systems Inc., Cl. B ....... 633,932 796,000
167,000 Liberty Corp. ................ 5,392,917 6,940,937
20,000 NTN Communications
Inc.+ ..................... 83,312 13,750
110,600 Paxson Communications
Corp.+ .................... 1,004,955 1,016,138
3,000 Pegasus Communications
Corp.+ .................... 31,245 47,813
39,062 Price Communications
Corp.+ .................... 79,224 305,172
1,000 Scandinavian Broadcast
System SA+ ................ 13,500 21,250
60,500 United Television Inc. ....... 1,432,828 6,458,374
5,000 Young Broadcasting Inc.,
Cl. A+ .................... 133,683 170,000
--------------- ---------------
12,313,504 20,435,183
--------------- ---------------
Building and Construction - 2.5%
102,000 CalMat Co. ................... 1,866,563 1,765,875
14,000 Florida Rock Industries Inc. . 207,082 346,500
14,000 Morgan Products Ltd.+ ........ 118,738 36,750
130,000 Nortek Inc.+ ................. 1,551,275 3,542,500
10,000 Oakwood Homes Corp. .......... 114,281 131,250
75,000 Republic Group Inc. .......... 427,064 998,438
--------------- ---------------
4,285,003 6,821,313
--------------- ---------------
Business Services - 2.7%
15,000 Amway Asia Pacific Ltd. ...... 321,375 145,313
21,641 Amway Japan Ltd., ADR ........ 281,220 85,211
33,000 Berlitz International Inc.+ .. 506,219 870,375
22,000 Borg-Warner Security
Corp.+ .................... 270,725 308,000
50,000 Data Broadcasting Corp.+ ..... 249,688 234,375
6,000 Data Transmission Network
Corp.+ .................... 30,550 180,000
26,428 EnviroSource Inc.+ ........... 484,162 214,728
2,000 Gartner Group Inc.+ .......... 62,470 41,750
13,000 Hach Co. ..................... 133,028 146,250
20,000 Hach Co., Cl. A .............. 197,187 182,500
25,000 Industrial Distribution
Group Inc.+ ............... 403,206 157,813
10,000 Landauer Inc. ................ 163,888 255,000
4,000 Marquee Group Inc.+ .......... 21,388 11,500
98,500 Nashua Corp.+ ................ 2,251,934 1,452,874
120,000 Paxar Corp.+ ................. 1,437,619 1,065,000
15,000 Pittston Brink's Group ....... 421,959 525,000
20,000 Princeton Video Image Inc.+ .. 133,250 82,500
44,000 R. H. Donnelley Corp. ........ 606,324 544,500
72,000 Trans-Lux Corp. (b) .......... 609,486 639,000
8,000 Wackenhut Corp., Cl. A ....... 118,092 184,500
6,187 Wackenhut Corp., Cl. B ....... 52,368 116,780
--------------- ---------------
8,756,138 7,442,969
--------------- ---------------
See accompanying notes to financial statements.
11
<PAGE>
The Gabelli Small Cap Growth Fund
Portfolio of Investments (Continued) -- September 30, 1998
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (Continued)
Cable - 1.3%
24,250 Cable Michigan Inc.+ ......... $ 400,330 $ 842,688
47,200 Cablevision Systems Corp.,
Cl. A+ .................... 613,737 2,038,450
2,000 Century Communications
Corp., Cl. A+ ............. 14,040 47,750
10,000 People's Choice TV Corp.+ .... 23,585 4,688
78,000 United International
Holdings Inc., Cl. A+ ..... 1,103,684 755,625
--------------- ---------------
2,155,376 3,689,201
--------------- ---------------
Communications Equipment - 0.2%
74,200 Allen Telecom Inc.+ .......... 1,086,116 496,213
--------------- ---------------
Computer Software and Services - 0.2%
1,000 @Home Corp., Ser. A+ ......... 20,750 47,876
2,000 Anacomp Inc.+ ................ 33,830 26,250
90,000 Bull Run Corp.+ .............. 315,512 337,500
262 CBT Group plc, ADR+ .......... 12,675 3,537
16,000 Checkfree Holdings Corp.+ .... 312,686 158,000
4,000 Cylink Corp.+ ................ 32,143 18,000
1,000 Electronics For Imaging
Inc.+ ..................... 15,540 21,125
200 Learning Tree International
Inc.+ ..................... 4,075 2,563
200 Macromedia Inc.+ ............. 2,371 3,250
200 New Horizons Worldwide
Inc.+ ..................... 3,175 3,325
1,000 Noise Cancellation
Technologies Inc.+ ........ 625 531
93 Platinum Technology Co.+ ..... 2,074 1,674
2,000 Powerhouse Technologies
Inc.+ ..................... 21,750 17,750
1,000 Registry Magic Inc.+ ......... 7,250 6,000
1,500 Volt Information Sciences
Inc.+ ..................... 7,875 29,906
--------------- ---------------
792,331 677,287
--------------- ---------------
Consumer Products - 4.8%
3,000 Action Performance
Companies Inc.+ ........... 86,846 81,000
10,000 Adams Golf Inc.+ ............. 82,620 41,250
10,000 American Safety Razor Co.+ ... 119,287 97,500
238,000 Carter-Wallace Inc. .......... 3,461,002 3,733,625
61,000 Church & Dwight Co. Inc. ..... 1,271,800 1,791,875
12,000 Coachmen Industries Inc. ..... 80,758 238,500
32,000 First Brands Corp. ........... 435,725 698,000
8,000 French Fragrances Inc.+ ...... 78,490 58,000
133,500 General Cigar Holdings Inc.,
Cl. B+ (a) ................ 1,076,798 859,406
100,000 General Housewares Corp. ..... 1,320,001 850,000
82,000 Genlyte Group Inc.+ .......... 323,765 1,681,000
2,000 Harley-Davidson Inc. ......... 9,425 58,750
117,000 Hartmarx Corp.+ .............. 747,201 767,813
10,000 Madden (Steven) Ltd.+ ........ 86,785 63,125
25,000 National Presto Industries
Inc. ...................... 1,047,061 937,500
12,000 Nature's Sunshine Products
Inc. ...................... 264,927 192,000
4,000 Nu-Kote Holding Inc., Cl. A+ . 1,125 875
2,000 Playtex Products Inc.+ ....... 14,600 28,125
5,000 Scotts Co., Cl. A+ ........... 77,779 153,125
15,000 Skyline Corp. ................ 271,425 435,000
14,000 Stewart Enterprises Inc.,
Cl. A ..................... 65,467 234,500
41,000 Weider Nutrition
International Inc. ........ 399,249 238,313
--------------- ---------------
11,322,136 13,239,282
--------------- ---------------
Consumer Services - 1.6%
10,000 Bowlin Outdoor Advertising
& Travel Centers Inc.+ .... 42,625 50,000
12,000 Department 56 Inc.+ .......... 274,776 324,000
90,000 Loewen Group Inc. ............ 2,252,529 1,327,500
25,000 Response USA Inc.+ ........... 160,580 125,000
150,000 Rollins Inc. ................. 3,006,377 2,662,500
7,000 Travel Services International
Inc.+ ..................... 230,865 94,938
--------------- ---------------
5,967,752 4,583,938
--------------- ---------------
Country and Closed End Funds - 1.5%
45,000 Central European Equity
Fund Inc. ................. 608,109 495,000
80,000 Emerging Germany Fund
Inc. ...................... 629,750 970,000
45,000 France Growth Fund Inc. ...... 476,793 528,750
35,000 Germany Fund Inc. ............ 395,061 507,500
44,000 Italy Fund Inc. .............. 394,348 506,000
65,000 New Germany Fund Inc. ........ 764,184 922,188
11,000 Spain Fund Inc. .............. 103,029 166,375
--------------- ---------------
3,371,274 4,095,813
--------------- ---------------
Diversified Industrial - 7.3%
96,500 Ampco-Pittsburgh Corp. ....... 928,756 1,411,313
8,000 Anixter International Inc.+ .. 76,160 124,500
10,000 Antofagasta Holdings plc ..... 68,648 28,890
75,000 Crane Co. .................... 879,121 1,762,500
3,000 Flanders Corp.+ .............. 25,955 12,000
37,500 Gardner Denver Machinery
Corp.+ .................... 210,363 529,688
16,000 GATX Corp. ................... 647,353 529,000
36,000 Katy Industries Inc. ......... 487,881 591,750
450,000 Lamson & Sessions Co.+ ....... 2,581,336 2,053,124
67,800 Lawter International Inc. .... 703,584 491,550
75,000 Lindsay Manufacturing Co. .... 725,857 1,115,625
See accompanying notes to financial statements.
12
<PAGE>
The Gabelli Small Cap Growth Fund
Portfolio of Investments (Continued) -- September 30, 1998
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (Continued)
Diversified Industrial (Continued)
16,000 Myers Industries Inc. ........ $ 342,375 $ 368,000
610,400 Noel Group Inc.+ ............. 629,048 801,150
35,000 Oil-Dri Corporation of
America ................... 478,925 448,438
105,000 Park-Ohio Holdings Corp.+ .... 1,498,575 1,430,625
21,000 Standex International Corp. .. 630,519 501,375
205,000 Thomas Industries Inc. ....... 1,830,138 4,394,687
480,000 Tyler Corp.+ ................. 1,999,204 3,659,999
--------------- ---------------
14,743,798 20,254,214
--------------- ---------------
Education - 0.0%
20,000 Whitman Education Group
Inc.+ ..................... 103,768 67,500
--------------- ---------------
Energy - 4.1%
15,000 AGL Resources Inc. ........... 279,701 290,625
6,000 Basin Exploration Inc.+ ...... 93,115 99,375
21,000 Central Hudson Gas &
Electric Corp. ............ 919,887 879,374
15,000 Eastern Enterprises .......... 598,562 631,875
5,000 Fall River Gas Co. ........... 77,138 77,188
17,400 Florida Public Utilities Co. . 262,258 265,350
16,000 Forcenergy Inc.+ ............. 274,676 93,000
1,425,000 GEO International
Corp. (a)(b)+ ............. 74,145 0
2,000 Global Industries Ltd.+ ...... 20,875 23,125
750 Halter Marine Group Inc.+ .... 7,617 8,531
130,000 Kaneb Services Inc.+ ......... 436,625 650,000
9,880 Ocean Energy Inc.+ ........... 224,238 129,675
50,000 Orange & Rockland Utilities
Inc. ...................... 2,689,806 2,743,749
2,000 Oryx Energy Co.+ ............. 48,975 25,875
2,000 Petsec Energy Ltd., ADR+ ..... 29,830 11,688
2,000 Plains Resources Inc.+ ....... 35,100 33,750
285,000 RPC Inc. ..................... 1,096,856 2,529,374
105,000 Southwest Gas Corp. .......... 1,783,471 2,145,938
15,000 Tesoro Petroleum Corp.+ ...... 209,500 195,938
5,000 TransMontaigne Oil Co.+ ...... 71,188 69,375
6,000 Union Pacific Resources
Group Inc. ................ 123,300 73,875
4,000 Vastar Resources Inc. ........ 145,513 180,000
15,000 Wicor Inc. ................... 345,520 358,125
--------------- ---------------
9,847,896 11,515,805
--------------- ---------------
Entertainment - 5.0%
115,000 Ascent Entertainment Group
Inc.+ ..................... 1,378,463 920,000
8,000 Dover Downs Entertainment
Inc. ...................... 118,388 101,000
40,000 Fisher Companies Inc. ........ 2,599,019 2,730,000
85,000 Florida Panthers Holdings
Inc.+ ..................... 1,410,388 919,063
48,000 GC Companies Inc.+ ........... 2,392,811 1,854,000
1,500 Groupe AB SA, ADR+ ........... 10,950 5,906
3,000 International Speedway
Corp. ..................... 54,000 89,250
4,000 Loews Cineplex
Entertainment Corp.+ ...... 58,663 34,500
2,000 Metromedia International
Group Inc.+ ............... 22,000 7,750
180,000 Spelling Entertainment
Group Inc.+ ............... 1,517,183 1,271,250
3,500 TCI Music Inc.+ .............. 15,671 14,875
150,000 Topps Co. Inc.+ .............. 614,903 421,875
290,000 USA Networks Inc.+ ........... 4,231,128 5,636,874
--------------- ---------------
14,423,567 14,006,343
--------------- ---------------
Equipment and Supplies - 14.4%
70,000 AFC Cable Systems Inc.+ ...... 1,029,788 1,662,500
17,000 Alltrista Corp.+ ............. 322,342 344,250
145,000 AMETEK Inc. .................. 1,658,857 2,501,250
12,000 Amphenol Corp., Cl. A+ ....... 431,225 418,500
320,000 Baldwin Technology Co. Inc.,
Cl. A+ .................... 1,529,708 1,760,000
4,000 Belden Inc. .................. 60,575 53,750
5,000 Berg Electronics Corp.+ ...... 172,750 173,125
4,000 Bway Corp.+ .................. 66,250 50,750
295,500 CLARCOR Inc. ................. 3,535,494 4,543,312
1,000 Commercial Intertech Corp. ... 11,675 18,438
138,000 CTS Corp. .................... 576,723 4,070,999
40,000 Cuno Inc.+ ................... 597,213 670,000
49,500 Daniel Industries Inc. ....... 795,026 677,531
23,000 Elsag Bailey Process
Automation NV+ ............ 390,471 484,438
233,100 Fedders Corp. ................ 1,394,673 1,194,637
65,000 Flowserve Corp. .............. 1,545,716 1,316,250
40,000 General Magnaplate Corp. ..... 83,763 167,500
70,000 Gerber Scientific Inc. ....... 955,212 1,890,000
20,000 Global Industrial
Technologies Inc.+ ........ 272,788 140,000
150,000 Hussmann International Inc. .. 2,060,929 2,128,124
34,650 Johnston Industries Inc.+ .... 268,295 110,447
10,000 K-Tron International Inc.+ ... 74,933 176,250
110,000 Kollmorgen Corp. ............. 1,248,182 1,718,750
10,000 Littelfuse Inc.+ ............. 68,313 198,750
22,000 Lufkin Industries Inc. ....... 389,520 572,000
24,000 Mark IV Industries Inc. ...... 475,837 349,500
30,000 Material Sciences Corp.+ ..... 324,494 262,500
14,000 Met-Pro Corp. ................ 194,819 157,500
160,000 Pittway Corp. ................ 1,508,150 3,979,999
3,500 Plantronics Inc.+ ............ 26,943 168,656
13,000 Raytech Corp.+ ............... 71,338 42,250
See accompanying notes to financial statements.
13
<PAGE>
The Gabelli Small Cap Growth Fund
Portfolio of Investments (Continued) -- September 30, 1998
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (Continued)
Equipment and Supplies (Continued)
37,000 Sequa Corp., Cl. A+ .......... $ 1,284,715 $ 2,083,563
12,000 Sequa Corp., Cl. B+ .......... 778,446 874,875
10,800 SL Industries Inc. ........... 155,953 110,700
9,000 Smith (A.O.) Corp., Cl. A .... 249,550 175,500
75,000 SPS Technologies Inc.+ ....... 2,314,482 3,492,188
5,000 Teleflex Inc. ................ 76,167 175,000
15,000 Tennant Co. .................. 392,120 559,688
30,000 U.S. Filter Corp.+ ........... 350,024 480,000
5,000 Valmont Industries Inc. ...... 40,625 61,250
7,875 Watsco Inc., Cl. B ........... 23,627 119,848
--------------- ---------------
27,807,711 40,134,568
--------------- ---------------
Financial Services - 3.1%
68,000 Berliner Bank
Aktiengesellschaft ........ 1,408,705 1,163,607
45,000 Danielson Holding Corp.+ ..... 165,200 196,875
1,000 Federal Agricultural
Mortgage Corp., Cl. C+ .... 24,000 34,750
6,000 Gryphon Holdings Inc.+ ....... 78,000 84,000
18,000 Hibernia Corp. ............... 140,063 259,875
4,000 Landamerica Financial
Group ..................... 58,015 205,000
7,959 Metris Companies Inc. ........ 226,749 371,078
110,000 Midland Co. .................. 1,575,674 2,495,625
500 Net.B@nk Inc.+ ............... 6,000 9,500
230,000 Pioneer Group Inc. ........... 4,366,497 3,795,000
--------------- ---------------
8,048,903 8,615,310
--------------- ---------------
Food and Beverage - 4.6%
12,000 Advantica Restaurant Group
Inc.+ ..................... 124,643 57,000
34,863 Buenos Aires Embotelladora
SA+ (a) ................... 0 0
236,000 Celestial Seasonings Inc.+ ... 2,698,971 3,569,500
7,500 Cheesecake Factory Inc.+ ..... 82,004 116,250
190,000 Chock Full o'Nuts Corp.+ ..... 1,254,071 1,187,500
205,000 Eskimo Pie Corp. (b) ......... 3,155,335 1,742,500
1,000 Farmer Brothers Co. .......... 133,895 215,000
19,000 Genesee Corp., Cl. B ......... 761,192 501,125
10,000 International Multifoods
Corp. ..................... 199,921 164,375
10,000 Irwin Naturals/4Health Inc.+ . 57,905 50,000
12,000 J & J Snack Foods Corp.+ ..... 121,707 222,000
8,000 Midwest Grain Products
Inc.+ ..................... 144,621 86,000
1,000 Northland Cranberries Inc.,
Cl. A ..................... 7,625 10,063
130,000 Pepsi-Cola Puerto Rico
Bottling Co.+ ............. 760,178 780,000
25,000 Ralcorp Holdings Inc.+ ....... 341,259 350,000
5,000 Sylvan Food Holdings Inc.+ ... 49,669 66,875
30,736 Tootsie Roll Industries Inc. . 556,726 1,083,444
50,000 Twinlab Corp.+ ............... 1,038,650 1,281,250
22,000 Vlasic Foods International
Inc.+ ..................... 475,681 411,125
50,000 Whitman Corp. ................ 771,375 796,875
--------------- ---------------
12,735,428 12,690,882
--------------- ---------------
Health Care - 0.7%
30,000 HealthPlan Services Corp. .... 351,282 322,500
140,000 IVAX Corp.+ .................. 1,392,207 1,225,000
48,000 Penwest Pharmaceuticals
Co.+ ...................... 327,279 294,000
6,000 U.S. Physical Therapy Inc.+ .. 37,500 55,500
--------------- ---------------
2,108,268 1,897,000
--------------- ---------------
Home Furnishings - 1.0%
8,000 Bassett Furniture Industries
Inc. ...................... 188,438 234,000
2,000 Bed Bath & Beyond Inc.+ ...... 11,125 46,750
17,000 Foamex International Inc. .... 147,810 247,563
30,000 La-Z-Boy Chair Co. ........... 218,125 588,750
50,000 Mikasa Inc. .................. 698,044 559,375
70,000 Oneida Ltd. .................. 732,977 1,190,000
--------------- ---------------
1,996,519 2,866,438
--------------- ---------------
Hotels and Gaming - 3.0%
406,000 Aztar Corp.+ ................. 2,663,169 1,573,250
15,000 Boyd Gaming Corp.+ ........... 132,500 54,375
20,000 Churchill Downs Inc. ......... 416,463 610,000
60,000 Extended Stay America Inc.+ .. 685,812 480,000
65,000 Gaylord Entertainment Co. .... 2,006,962 1,937,812
100,000 Grand Casinos Inc.+ .......... 1,473,508 793,750
140,000 Jackpot Enterprises Inc.+ .... 1,615,369 1,391,250
5,000 Jurys Hotel Group plc ........ 27,762 35,121
52,000 Mirage Resorts Inc.+ ......... 267,539 871,000
20,000 Penn National Gaming Inc.+ ... 204,260 160,000
104,100 Trump Hotels & Casino
Resorts Inc.+ ............. 1,011,419 383,869
--------------- ---------------
10,504,763 8,290,427
--------------- ---------------
Metals and Mining - 0.6%
199,000 Echo Bay Mines Ltd.+ ......... 817,959 472,625
245,000 Pegasus Gold Inc.+ ........... 200,685 13,475
10,000 Prime Resources Group Inc. ... 60,154 85,504
190,000 Royal Oak Mines Inc.+ ........ 322,487 130,625
22,000 Stillwater Mining Co.+ ....... 452,400 694,375
5,000 Toreador Royalty Corp.+ ...... 19,063 11,875
80,000 TVX Gold Inc.+ ............... 383,000 215,000
--------------- ---------------
2,255,748 1,623,479
--------------- ---------------
Paper and Forest Products - 1.5%
123,000 Grief Bros. Corp. ............ 2,331,134 4,059,000
--------------- ---------------
See accompanying notes to financial statements.
14
<PAGE>
The Gabelli Small Cap Growth Fund
Portfolio of Investments (Continued) -- September 30, 1998
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (Continued)
Publishing - 4.8%
10,000 CMP Media Inc., Cl. A+ ....... $ 187,322 $ 107,500
121,278 Independent Newspapers
Ltd. ...................... 380,260 428,658
2,000 Lee Enterprises Inc. ......... 61,038 51,875
40,000 McClatchy Newspapers Inc.,
Cl. A ..................... 943,061 1,200,000
55,000 Media General Inc., Cl. A .... 959,916 2,131,250
33,000 Meredith Corp. ............... 493,448 1,056,000
160,000 Penton Media Inc. ............ 1,638,213 2,180,000
44,000 Pulitzer Publishing Co. ...... 1,347,666 3,481,499
190,000 Thomas Nelson Inc. ........... 2,142,632 2,422,500
3,000 Wiley (John) & Sons Inc.,
Cl. B ..................... 46,500 183,938
--------------- ---------------
8,200,056 13,243,220
--------------- ---------------
Pumps and Valves - 2.5%
58,000 Franklin Electric Co. ........ 1,776,185 3,668,500
17,775 Gorman-Rupp Co. .............. 276,467 279,956
15,000 Graco Inc. ................... 391,573 348,750
70,000 IDEX Corp. ................... 628,347 1,859,375
10,000 Robbins & Myers Inc. ......... 98,665 211,875
30,000 Roper Industries Inc. ........ 195,000 521,250
--------------- ---------------
3,366,237 6,889,706
--------------- ---------------
Real Estate - 1.2%
150,000 Catellus Development
Corp.+ .................... 1,756,210 1,950,000
117,000 Griffin Land & Nurseries
Inc.+ ..................... 1,458,089 1,294,313
5,000 Gyrodyne Company of
America Inc.+ ............. 93,563 85,000
--------------- ---------------
3,307,862 3,329,313
--------------- ---------------
Retail - 4.3%
60,000 Aaron Rents Inc. ............. 461,298 900,000
46,000 Aaron Rents Inc., Cl. A ...... 211,041 566,375
110,000 Burlington Coat Factory
Warehouse Corp. ........... 1,178,563 1,622,500
24,000 Coldwater Creek Inc.+ ........ 490,941 456,000
38,000 Crown Books Corp.+ ........... 135,267 11,875
25,000 Fingerhut Companies Inc. ..... 141,171 275,000
105,000 Ingles Markets Inc., Cl. A ... 1,341,625 1,233,750
195,000 Lillian Vernon Corp. ......... 3,150,585 2,644,687
33,500 Mott's Holdings Inc.+ (a) .... 214,069 201,000
55,000 N2K Inc.+ .................... 1,218,102 395,313
95,000 Neiman Marcus Group Inc.+ .... 1,272,266 2,054,375
182,500 Scheib (Earl) Inc.+ .......... 1,260,895 980,938
73,000 Sports Authority Inc.+ ....... 727,557 556,625
--------------- ---------------
11,803,380 11,898,438
--------------- ---------------
Satellite - 1.0%
38,000 COMSAT Corp. ................. 1,226,514 1,339,500
30,000 TCI Satellite Entertainment+ . 161,750 86,250
100,000 United Video Satellite Group
Inc., Cl. A+ .............. 1,449,063 1,481,250
--------------- ---------------
2,837,327 2,907,000
--------------- ---------------
Specialty Chemicals - 0.7%
25,000 Airgas Inc.+ ................. 372,500 303,125
1,000 CFC International Inc.+ ...... 12,125 10,000
60,000 Ferro Corp. .................. 1,018,602 1,192,500
600 MacDermid Inc. ............... 2,200 18,150
32,000 Penford Corp. ................ 281,839 480,000
--------------- ---------------
1,687,266 2,003,775
--------------- ---------------
Telecommunications - 2.2%
18,000 Aliant Communications Inc. ... 231,438 445,500
23,000 ARC International Corp.+ ..... 125,555 41,688
9,200 Atlantic Tele-Network Inc.+ .. 92,644 75,900
2,000 BHI Corp.+ ................... 30,250 52,000
81,053 Citizens Utilities Co., Cl. A+ 776,912 658,559
35,833 Commonwealth Telephone
Enterprises Inc.+ ......... 625,200 857,752
20,000 Commonwealth Telephone
Enterprises Inc., Cl. B+ .. 140,936 525,000
100,000 Communications Systems
Inc. ...................... 556,543 1,150,000
117,000 GST Telecommunications
Inc.+ ..................... 1,590,221 731,250
100,000 RCN Corp.+ ................... 589,317 1,300,000
20,000 Rogers Communications
Inc., Cl. B+ .............. 121,938 111,250
10,000 Viatel Inc.+ ................. 83,750 106,250
--------------- ---------------
4,964,704 6,055,149
--------------- ---------------
Transportation - 0.1%
2,000 Irish Continential Group plc . 18,258 24,809
5,000 Marine Transport Corp.+ ...... 21,517 10,938
50,000 OMI Corp.+ ................... 313,120 203,124
27,000 Trans World Airlines Inc.+ ... 340,413 153,563
--------------- ---------------
693,308 392,434
--------------- ---------------
Utilities - 0.2%
38,000 United Water Resources
Inc. ...................... 700,845 646,000
--------------- ---------------
Wireless Communications - 1.2%
70,000 Aerial Communications
Inc.+ ..................... 574,713 258,125
4,000 Associated Group Inc.,
Cl. A+ .................... 50,750 132,000
25,000 Cellular Communications of
Puerto Rico Inc.+ ......... 242,410 290,625
See accompanying notes to financial statements.
15
<PAGE>
The Gabelli Small Cap Growth Fund
Portfolio of Investments (Continued) -- September 30, 1998
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (Continued)
Wireless Communications (Continued)
64,000 Centennial Cellular Corp.,
Cl. A+ .................... $ 1,267,961 $ 2,048,000
25,000 Corecomm Ltd.+ ............... 190,465 271,875
12,000 Teligent Inc., Cl. A+ ........ 258,000 330,000
7,000 Western Wireless Corp.,
Cl. A+ .................... 93,125 125,125
--------------- ---------------
2,677,424 3,455,750
--------------- ---------------
TOTAL COMMON STOCKS 224,486,239 271,149,317
--------------- ---------------
RIGHTS - 0.0%
Telecommunications - 0.0%
10,166 Commonwealth Telephone
Enterprises Inc.+ ......... 0 29,227
--------------- ---------------
Principal
Amount
------
CONVERTIBLE CORPORATE BONDS - 0.0%
Equipment and Supplies - 0.0%
$ 500 MacNeal-Schwendler Corp.
Sub. Deb. Cv.
7.88%, 08/18/04 ............... 518 472
--------------- ---------------
U.S. GOVERNMENT OBLIGATIONS - 1.3%
3,511,000 U.S. Treasury Bills,
4.20% to 5.13% ++,
due 10/01/98 to 12/31/98 3,483,530 3,483,530
--------------- ---------------
TOTAL
INVESTMENTS - 98.9% $ 227,970,287 274,662,546
===============
Other Assets and
Liabilities (Net) - 1.1% 3,157,234
---------------
NET ASSETS - 100.0%
(14,772,860 shares outstanding) $ 277,819,780
===============
NET ASSET VALUE,
Offering and Redemption
Price Per Share ............... $18.81
======
Settlement Net Unrealized
Date Depreciation
---- ------------
FORWARD FOREIGN EXCHANGE CONTRACTS
58,196(c) Deliver German Marks
in exchange for
USD 34,744 .................... 10/02/98 $ (76)
For Federal tax purposes:
Aggregate cost .................. $ 228,926,157
===============
Gross unrealized
appreciation .................. $ 71,089,403
Gross unrealized
depreciation .................. (25,353,014)
---------------
Net unrealized appreciation ..... $ 45,736,389
===============
- ----------
(a) Security fair valued as determined by the Board of Directors.
(b) Security considered an affiliated holding because the Fund owns at least
5% of the outstanding shares. (See Note 9.)
(c) Principal amount denoted in German Marks.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR -- American Depositary Receipt.
See accompanying notes to financial statements.
16
<PAGE>
The Gabelli Small Cap Growth Fund
Statement of Assets and Liabilities
September 30, 1998
================================================================================
Assets:
Investments, at value (Cost $227,970,287) ............ $ 274,662,546
Cash and foreign currency, at value
(Cost $108,692) .................................... 112,828
Dividends and interest receivable .................... 215,028
Receivable for investments sold ...................... 3,541,574
Receivable for capital shares sold ................... 106,962
-----------------
Total Assets ....................................... 278,638,938
-----------------
Liabilities:
Payable for investments purchased .................... 309,222
Payable for capital shares redeemed .................. 1,847
Payable for investment advisory fees ................. 230,863
Payable for distribution fees ........................ 57,714
Other accrued expenses ............................... 219,512
-----------------
Total Liabilities ................................. 819,158
-----------------
Net Assets applicable to 14,772,860
shares outstanding ............................. $ 277,819,780
=================
Net Assets consist of:
Capital stock, at par value .......................... $ 14,773
Additional paid-in capital ........................... 224,196,795
Undistributed net investment income .................. 76
Accumulated net realized gain on investments
and foreign currency transactions ................. 6,911,144
Net unrealized appreciation on investments
and foreign currency transactions ................. 46,696,992
-----------------
Total Net Assets .................................. $ 277,819,780
=================
Net Asset Value, offering and redemption
price per share ($277,819,780 / 14,772,860
shares outstanding; 1,000,000,000 shares
authorized of $0.001 par value) ................ $18.81
======
Statement of Operations
For the Year Ended September 30, 1998
================================================================================
Investment Income:
Dividends (net of foreign taxes of $14,662) .......... $ 2,731,598
Interest ............................................. 1,464,846
-----------------
Total Investment Income ........................... 4,196,444
-----------------
Expenses:
Investment advisory fees ............................. 3,223,995
Distribution fees .................................... 805,996
Shareholder services fees ............................ 364,359
Custodian fees ....................................... 55,070
Legal and audit fees ................................. 52,287
Registration fees .................................... 47,296
Directors' fees ...................................... 43,280
Shareholder report expenses .......................... 36,666
Miscellaneous expenses ............................... 19,311
-----------------
Total Expenses .................................... 4,648,260
-----------------
Net Investment Loss ............................... (451,816)
-----------------
Net Realized and Unrealized Gain (Loss)
on Investments:
Net realized gain on investments
and foreign currency transactions ................. 9,718,910
Net realized loss on investments
in securities of affiliated issuers ............... (81,024)
Net change in unrealized appreciation
on investments and foreign currency
transactions ...................................... (54,116,321)
-----------------
Net realized and unrealized loss on
investments and foreign currency
transactions ...................................... (44,478,435)
-----------------
Net decrease in net assets resulting
from operations ...................................... $ (44,930,251)
=================
Statement of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
Operations:
Net investment loss .............................................. $ (451,816) $ (820,062)
Net realized gain on investments and foreign currency transactions 9,637,886 39,776,849
Net change in unrealized appreciation on investments
and foreign currency transactions .............................. (54,116,321) 44,387,266
------------- -------------
Net increase (decrease) in net assets resulting from operations (44,930,251) 83,344,053
------------- -------------
Distributions to shareholders:
Net realized gain on investments ................................. (40,993,996) (23,504,667)
------------- -------------
Total distributions to shareholders ............................ (40,993,996) (23,504,667)
------------- -------------
Capital share transactions:
Net increase in net assets from capital share transactions ....... 67,225,287 13,440,151
------------- -------------
Net increase (decrease) in net assets .......................... (18,698,960) 73,279,537
Net Assets:
Beginning of period .............................................. 296,518,740 223,239,203
------------- -------------
End of period .................................................... $ 277,819,780 $ 296,518,740
============= =============
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
The Gabelli Small Cap Growth Fund
Notes to Financial Statements
================================================================================
1. Description. The Gabelli Small Cap Growth Fund (the "Fund"), a series of
Gabelli Equity Series Funds, Inc. (the "Corporation"), was organized on July 25,
1991 as a Maryland corporation. The Fund is a diversified, open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), and one of two separately managed portfolios
(collectively, the "Portfolios") of the Corporation. The Fund's primary
objective is capital appreciation. The Fund commenced investment operations on
October 22, 1991.
2. Significant Accounting Policies. The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Security Valuation. Portfolio securities listed or traded on a nationally
recognized securities exchange, quoted by the National Association of Securities
Dealers Automated Quotations, Inc. ("Nasdaq") or traded on foreign exchanges are
valued at the last sale price on that exchange as of the close of business on
the day the securities are being valued (if there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day). All other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest average of the bid and asked prices. Portfolio securities traded on more
than one national securities exchange or market are valued according to the
broadest and most representative market, as determined by Gabelli Funds, Inc.
(the "Adviser"). Securities and assets for which market quotations are not
readily available are valued at their fair value as determined in good faith
under procedures established by and under the general supervision of the Board
of Directors. Short term debt securities with remaining maturities of 60 days or
less are valued at amortized cost, unless the Directors determine such does not
reflect the securities' fair value, in which case these securities will be
valued at their fair value as determined by the Directors. 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.
Repurchase Agreements. The Fund may enter into repurchase agreements with
primary government securities dealers recognized by the Federal Reserve Bank of
New York, with member banks of the Federal Reserve System or with other brokers
or dealers that meet credit guidelines established by the Directors. Under the
terms of a typical repurchase agreement, the Fund takes possession of an
underlying debt obligation subject to an obligation of the seller to repurchase,
and the Fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Fund's holding period. The Fund will always
receive and maintain securities as collateral whose market value, including
accrued interest, will be at least equal to 100% of the dollar amount invested
by the Fund in each agreement. The Fund will make payment for such securities
only upon physical delivery or upon evidence of book entry transfer of the
collateral to the account of the custodian. To the extent that any repurchase
transaction exceeds one business
18
<PAGE>
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
================================================================================
day, the value of the collateral is marked-to-market on a daily basis to
maintain the adequacy of the collateral. If the seller defaults and the value of
the collateral declines or if bankruptcy proceedings are commenced with respect
to the seller of the security, realization of the collateral by the Fund may be
delayed or limited.
Futures Contracts. The Fund may engage in futures contracts for the purpose of
hedging against changes in the value of its portfolio securities and in the
value of securities it intends to purchase. Upon entering into a futures
contract, the Fund is required to deposit with the broker an amount of cash or
cash equivalents equal to a certain percentage of the contract amount. This is
known as the "initial margin". Subsequent payments ("variation margin") are made
or received by the Fund each day, depending on the daily fluctuation of the
value of the contract. The daily changes in the contract are included in
unrealized gains or losses. The Fund recognizes a realized gain or loss when the
contract is closed. At September 30, 1998, there were no open futures contracts.
There are several risks in connection with the use of futures contracts as a
hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in value of the hedged investments. In addition, there is the risk that
the Fund may not be able to enter into a closing transaction because of an
illiquid secondary market.
Forward Foreign Exchange Contracts. The Fund may engage in forward foreign
exchange contracts for hedging a specific transaction with respect to either the
currency in which the transaction is denominated or another currency as deemed
appropriate by the Adviser. Forward foreign exchange contracts are valued at the
forward rate and are marked-to-market daily. The change in market value is
included in unrealized appreciation/depreciation on investments. When the
contract is closed, the Fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed.
The use of forward foreign exchange contracts does not eliminate fluctuations in
the underlying prices of the Fund's portfolio securities, but it does establish
a rate of exchange that can be achieved in the future. Although forward foreign
exchange contracts limit the risk of loss due to a decline in the value of the
hedged currency, they also limit any potential gain that might result should the
value of the currency increase. In addition, the Fund could be exposed to risks
if the counterparties to the contracts are unable to meet the terms of their
contracts.
Foreign Currency Translation. The books and records of the Fund are maintained
in United States (U.S.) dollars. Foreign currencies, investments and other
assets and liabilities are translated into U.S. dollars at the exchange rates
prevailing at the end of the period, and purchases and sales of investment
securities, income and expenses are translated at the exchange rate prevailing
on the respective dates of such transactions. Unrealized gains and losses, which
result from changes in foreign exchange rates and/or changes in market prices of
securities, have been included in unrealized appreciation/depreciation on
investments. Net realized foreign currency gains and losses resulting from
changes in exchange rates include foreign currency gains and losses between
trade date and settlement date on investment securities transactions, foreign
currency
19
<PAGE>
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
================================================================================
transactions and the difference between the amounts of interest and dividends
recorded on the books of the Fund and the amounts actually received. The portion
of foreign currency gains and losses related to fluctuation in exchange rates
between the initial trade date and subsequent sale trade date is included in
realized gain/(loss) on investments.
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.
Expenses. Certain administrative expenses are common to, and allocated among,
the Portfolios. Such allocations are made on the basis of each Portfolio's
average net assets or other criteria directly affecting the expenses as
determined by the Adviser.
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders are recorded on the ex-dividend date. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund, timing differences and
differing characterization of distributions made by the Fund.
For the year ended September 30, 1998, reclassifications were made to increase
undistributed net investment income for $456,879 and decrease accumulated net
realized gain on investments and foreign currency transactions for $291,449 with
an offsetting adjustment to additional paid-in-capital.
Provision for Income Taxes. The Fund has qualified and intends to continue to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. As a result, a Federal income tax provision is
not required.
Dividends and interest from non-U.S. sources received by the Fund are generally
subject to non-U.S. withholding taxes at rates ranging up to 30%. Such
withholding taxes may be reduced or eliminated under the terms of applicable
U.S. income tax treaties, and the Fund intends to undertake any procedural steps
required to claim the benefits of such treaties.
3. Investment Advisory Agreement. The Fund has entered into an investment
advisory agreement (the "Advisory Agreement") with the Adviser which provides
that the Fund will pay the Adviser a fee, computed daily and paid monthly, at
the annual rate of 1.00% of the value of the Fund's average daily net assets. In
accordance with the Advisory Agreement, the Adviser provides a continuous
investment program for the Fund's portfolio, oversees the administration of all
aspects of the Fund's business and affairs and pays the compensation of all
Officers and Directors of the Fund who are its affiliates.
20
<PAGE>
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
================================================================================
4. Distribution Plan. The Fund's Board of Directors has adopted a distribution
plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. For the year ended
September 30, 1998, the Fund incurred distribution costs payable to Gabelli &
Company, Inc., an indirect wholly-owned subsidiary of the Adviser, of $805,996,
or 0.25% of average daily net assets, the annual limitation under the Plan. Such
payments are accrued daily and paid monthly.
5. Portfolio Securities. Purchases and sales of securities for the year ended
September 30, 1998, other than short term securities, aggregated $122,071,726
and $57,838,232, respectively.
6. Transactions with Affiliates. During the year ended September 30, 1998, the
Fund paid brokerage commissions of $148,784 to Gabelli & Company, Inc. and its
affiliates.
7. Bank Loan. The Fund has access to an unsecured line of credit from the
custodian for temporary borrowing purposes. Borrowings under this arrangement
bear interest at 0.75% above the Federal Funds rate on outstanding balances.
There were no borrowings outstanding at September 30, 1998.
8. Capital Stock Transactions. Transactions in shares of capital stock were as
follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
September 30, 1998 September 30, 1997
-------------------------------- --------------------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold ................................ 17,952,500 $ 420,895,401 6,081,693 $ 133,408,500
Shares issued upon reinvestment of dividends 1,837,926 39,129,545 1,221,473 22,767,034
Shares redeemed ............................ (16,683,061) (392,799,659) (6,786,508) (142,735,383)
------------- ------------- ------------- -------------
Net increase ............................. 3,107,365 $ 67,225,287 516,658 $ 13,440,151
============= ============= ============= =============
</TABLE>
9. Transactions in Securities of Affiliated Issuers. The 1940 Act defines
affiliated issuers as those in which the Fund's holdings of an issuer represent
5% or more of the outstanding voting securities of the issuer. A summary of the
Fund's transactions in the securities of these issuers during the year ended
September 30, 1998, is set forth below:
<TABLE>
<CAPTION>
Percent
Value at Owned
Beginning Shares Ending Realized Dividend September of Shares
Shares Sold Shares Gain (Loss) Income 30, 1998 Outstanding
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Eskimo Pie Corp. ..... 220,000 (15,000) 205,000 $ (146,280) $ 44,000 $ 1,742,500 5.93%
Trans-Lux Corp. ...... 85,000 (13,000) 72,000 65,256 10,815 639,000 7.25%
GEO International Corp 1,425,000 -- 1,425,000 -- -- -- 7.15%
----------- ----------- -----------
$ (81,024) $ 54,815 $ 2,381,500
=========== =========== ===========
</TABLE>
21
<PAGE>
The Gabelli Small Cap Growth Fund
Financial Highlights
================================================================================
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Year Ended September 30,
============================================================================
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period ......... $ 25.42 $ 20.02 $ 19.34 $ 17.24 $ 16.90
----------- ----------- ----------- ----------- -----------
Net investment (loss) ........................ (0.03) (0.07) (0.09) (0.04) (0.05)
Net realized and unrealized gain (loss)
on investments ............................. (2.99) 7.70 2.11 3.17 0.81
----------- ----------- ----------- ----------- -----------
Total from investment operations ............. (3.02) 7.63 2.02 3.13 0.76
----------- ----------- ----------- ----------- -----------
Distributions to shareholders:
Net realized gain on investments ............. (3.59) (2.23) (1.34) (1.03) (0.42)
----------- ----------- ----------- ----------- -----------
Total distributions .......................... (3.59) (2.23) (1.34) (1.03) (0.42)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............... $ 18.81 $ 25.42 $ 20.02 $ 19.34 $ 17.24
=========== =========== =========== =========== ===========
Total return + ............................... (13.5)% 42.2% 11.0% 19.5% 4.5%
=========== =========== =========== =========== ===========
Ratios to average net assets and supplemental data:
Net assets, end of period (in 000's) ......... $ 277,820 $ 296,519 $ 223,239 $ 231,156 $ 205,699
Ratio of net investment (loss)
to average net assets ...................... (0.14)% (0.36)% (0.42)% (0.24)% (0.28)%
Ratio of operating expenses
to average net assets ...................... 1.44% 1.62%(a) 1.58% 1.54% 1.54%
Portfolio turnover rate ...................... 20% 14% 11% 17% 19%
</TABLE>
- ----------
+ 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.
(a) The Fund incurred interest expense during the year ended September 30,
1997. If interest expense had not been incurred, the ratio of operating
expenses to average net assets would have been 1.52%.
See accompanying notes to financial statements.
22
<PAGE>
The Gabelli Small Cap Growth Fund
Report of Ernst & Young LLP, Independent Auditors
================================================================================
Shareholders and Board of Directors
The Gabelli Small Cap Growth Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of The Gabelli Small Cap Growth Fund (a series of
Gabelli Equity Series Funds, Inc.) as of September 30, 1998, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated therein. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of September 30, 1998 by correspondence with the custodian
and others. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Gabelli Small Cap Growth Fund at September 30, 1998, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the indicated periods, in conformity with generally accepted accounting
principles.
/s/ Ernest & Young LLP
New York, New York
November 10, 1998
- --------------------------------------------------------------------------------
1998 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the fiscal year ended September 30, 1998, the Fund paid to shareholders, on
December 29, 1997, an ordinary income dividend (comprised of short term capital
gains) totaling $0.048 per share and long term capital gains totaling $3.542 per
share. For the fiscal year ended September 30, 1998, 100% of the ordinary income
dividend qualifies for the dividend received deduction available to
corporations.
- --------------------------------------------------------------------------------
23
<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 Robert J. Morrissey
Chairman and Chief Attorney-at-Law
Investment Officer Morrissey & Hawkins
Gabelli Funds, Inc.
Felix J. Christiana Karl Otto Pohl
Former Senior Vice President Former President
Dollar Dry Dock Savings Bank Deutsche Bundesbank
Anthony J. Colavita Anthony R. Pustorino
Attorney-at-Law Certified Public Accountant
Anthony J. Colavita, P.C. Professor, Pace University
Vincent D. Enright Anthonie C. van Ekris
Former Senior Vice President Managing Director
and Chief Financial Officer BALMAC International, Inc.
KeySpan Energy Corp.
John D. Gabelli
Vice President
Gabelli & Company, Inc.
Officers
Mario J. Gabelli, CFA Bruce N. Alpert
President and Chief Vice President and Treasurer
Investment Officer
James E. McKee
Secretary
Distributor
Gabelli & Company, Inc.
Custodian, Transfer Agent and Dividend Agent
State Street Bank and Trust Company
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom LLP
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
