[PHOTO OMMITED]
The
Gabelli
Small Cap
Growth
Fund
SEMI-ANNUAL REPORT
MARCH 31, 1998
<PAGE>
The Gabelli Small Cap Growth Fund
One Corporate Center
Rye, New York 10580-1434
Semi-Annual Report
March 31, 1998(a)
To Our Shareholders,
Driven primarily by a strong rebound in the technology sector, small cap
stocks as represented by the Russell 2000 Index closed the first quarter of 1998
near record levels. As evidenced by the Dow Jones Industrial Average's (DJIA)
and the Standard & Poor's (S&P) 500's lead over smaller capitalization indices,
big continued to be most beautiful. However, small cap stocks delivered
excellent absolute returns.
Investment Performance
For the quarter ended March 31, 1998, The Gabelli Small Cap Growth Fund's
total return was a solid 10.9%. The Value Line Composite and Russell 2000 Index
had returns of 11.6% and 10.1%, respectively, over the same period. Each index
is an unmanaged indicator of stock market performance. The Fund was up 46.7%
over the trailing twelve month period. The Value Line Composite and Russell 2000
rose 43.0% and 42.0%, respectively, over the same twelve month period.
For the five year period ended March 31, 1998, the Fund's return averaged
18.8% annually, versus average annual returns of 18.8% and 17.7% for the Value
Line Composite and Russell 2000, respectively. Since inception on October 22,
1991 through March 31, 1998, the Fund has a total return of 273.5%, which
equates to an average annual return of 22.7%.
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(a) The Fund's fiscal year ends September 30, 1998.
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<TABLE>
<CAPTION>
INVESTMENT RESULTS (a)(c)
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Calendar Quarter
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<S> <C> <C> <C> <C> <C>
1st 2nd 3rd 4th Year
1998: Net Asset Value............. $23.93 -- -- -- --
Total Return................ 10.9% -- -- -- --
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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%
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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%
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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%
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1991: Net Asset Value............. -- -- -- $12.21 $12.21
Total Return................ -- -- -- 22.9%(b) 22.9%(b)
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</TABLE>
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Average Annual Returns - March 31, 1998 (a)
- -------------------------------------------
1 Year..................... 46.7%
5 Year..................... 18.8%
Life of Fund (b)........... 22.7%
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Dividend History
- -------------------------------------------------------
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, 1998.
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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.
[Valuation Approach 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.
Commentary
Davids Versus Goliaths
Over the last three years, small cap stocks have materially trailed their
large cap counterparts. Although small cap investment returns have been
attractive, big has been absolutely beautiful. Will the Goliaths of the stock
market continue to dominate? Large cap stocks have been buoyed by S&P 500 index
fund investing, so called "value added" big cap growth stock investors (who have
been largely mimicking the S&P 500) and the money pouring in from overseas
(foreign investors tend to feel more comfortable owning the household names).
This may continue. However, we would argue that as a result of their popularity,
the valuations of many large cap growth stocks are defying fundamental gravity.
The mega-cap market darlings - admittedly, in most cases, absolutely terrific
companies - are trading at 50+ times earnings and three to four times their mid
to high teens annual earnings growth rates. These are the kind of P/Es
traditionally associated with smaller companies with much higher earnings growth
rates. Although perceived by the public to be "riskier" than the large cap stock
market, we believe the small cap stock arena now offers significantly better
value and a wealth of opportunity for stock pickers.
3
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What's Up
Occasionally, we will have industry groups that dominate our performance
list. In the first quarter of 1998, it was small group television and radio
broadcasters, which benefited both from strong earnings trends and the rapid
consolidation in the broadcasting industry. More often, our winners (and our
losers for that matter) are an eclectic group of companies from a wide range of
industries. This quarter, among our top performers are a perfume company (French
Fragrances Inc.), a small British hotel chain (Jurys Hotel Group), a gaming
company (Trump Hotels & Casino Resorts), an upscale retailer (Neiman Marcus
Group) and a hockey team (Florida Panthers Holdings), all of which advanced more
than 25%. This is a direct reflection of our research driven, stock specific
investment approach.
Cashing Out
The reduction of the long term capital gains tax rate from 28% to 20% is a
boon for all long term investors. It is particularly beneficial for managers of
successful small businesses, who often own big blocks of their companies'
shares. Should they decide to cash out by accepting an offer from an acquirer,
they now get to keep almost a third more of the proceeds after tax. We think in
the next several years, this will motivate many more small company managements
to accept premium bids from larger companies in their respective industries. Our
focus on dominant market share niche franchises trading at reasonable
relationships to economic value should position the Fund directly in the path of
this powerful trend.
Quips on Management
Our Chief Investment Officer, Mario J. Gabelli, was recently interviewed
by a leading investor relations consulting firm to discuss how we, as securities
analysts, evaluate corporate managements. We would like to share with you
excerpts from this interview . . .
"Ideally, we like to own great companies with great management. Our second
choice is great companies with mediocre management. Occasionally, we will take a
chance on mediocre companies with talented new management that we believe can
dramatically improve the business. Our rational is simple - we believe a
princess who kisses a frog is more likely to turn into a frog than the frog is
to turn into a prince.
We don't feel we ask too much from corporate managements. We want them to
have vision as to how the world is changing and a sensible plan to position
their companies to take advantage of change rather than be overwhelmed by it. We
want them to be focused on competitive issues in their industry and be proactive
rather than reactive in meeting challenges from their competitors. We expect
CEOs and CFOs, who in our opinion, should be joined at the hip, to know their
companies intimately. If I or
4
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another one of our analysts spots something unusual in an annual report or 10-K,
I expect management to be able to explain it. We want management to be honest
with us. We always ask them to detail their company's strengths and weaknesses.
When we hear a lot about the former and virtually nothing about the latter, we
tend to be a little suspicious. Finally, and most importantly, we expect them to
serve the interest of their companies' real owners - the shareholders.
Managements that build a wall around themselves and their companies' values are
betraying shareholders.
We are not for or against corporate managements. We are for shareholders -
our clients. We don't encourage managements to run their companies to maximize
short term returns and sacrifice long term value. In fact, we respect managers
that are willing to suffer through a few bad quarters for the greater long term
good of their companies. Unlike many Wall Street research teams, we don't ask
management to assess the value of their companies or to forecast future cash
flows and earnings. That's our job. We ask only that they do their jobs--build
the value of their businesses in a manner that benefits long term shareholders."
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.
BET Holdings Inc. (BTV - $61.125 - NYSE) is a media and entertainment company
that primarily targets black consumers, a market that was estimated to have
spent over $450 billion in 1997. BTV's core business is Black Entertainment
Television (BET), an advertiser-supported cable television programming service.
Of the 70 million cable households in the U.S., BET reaches over 51 million. BET
on Jazz: The Cable Jazz Channel produced nearly 150 hours of original jazz
programming in 1997. Action Pay-Per-View's subscriber base has grown to over
nine million as the service expands beyond a traditional urban audience. The
company is leveraging its brand identity into markets including pay-per-view
movies, direct merchandising and magazine publishing. The $48 per share offer
from a group led by founder Robert Johnson to take BTV private has been
increased to $63 per share.
Celestial Seasonings Inc. (CTEA - $41.00 - Nasdaq), based in Boulder, CO,
developed and popularized the herb tea category in the U.S. as a flavorful,
non-caffeinated alternative to other hot beverages. With over 40 tea varieties
under the Celestial Seasonings brand, CTEA is the largest manufacturer of herb
teas with an estimated 50% market share. The company is expected to maintain its
dominant position in the herb tea market. Celestial Seasonings is positioned to
leverage its excellent brand name into dietary herbal supplements, the market
for which is growing 25% annually.
5
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CLARCOR Inc. (CLC - $33.25 - NYSE) manufactures and markets mobile and
environmental filtration products and consumer packaging products. Filtration
products include air, fuel and hydraulic filters for heavy duty trucks, buses,
cars and boats and 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 and further gains are anticipated
through the end of the decade as the company continues its history of bringing
acquisitions profitably into the fold. The company has been building a cash
reserve to be used to expand into European markets via joint ventures.
CTS Corp. (CTS - $33.9375 - NYSE) is primarily a diversified manufacturer of
electronic components for the automotive, computer equipment and communications
equipment markets. Last October, 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 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 - $38.75 - 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 corrugated products. The company has conducted
an in-depth review of its timberlands, one of its strategic assets, and is
analyzing its saw timber and pulpwood assets and developing a program of land
management. Greif Bros. recently 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.
Handy & Harman (HNH - $35.1875 - NYSE) accepted a sweetened offer from WHX Corp.
(WHX - $16.3125 - NYSE) for $645 million in cash and assumed debt, helping WHX
cut its pension liability. WHX, which sweetened its offer after an earlier $30
per share bid was rejected, commenced a cash tender offer for Handy & Harman at
$35.25 per share. WHX already owns nearly 14% of the New York-based precious
metals and auto parts maker and will assume roughly $190 million of debt in the
purchase. The agreement is the third recent attempt by WHX to buy a company.
Cutting its $178 million pension liability would make the ninth largest U.S.
steelmaker a stronger candidate for a takeover or spin-off. The tender offer is
expected to be completed during the second quarter.
6
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Liberty Corp. (LC - $51.00 - NYSE) is a holding company with operations in
broadcasting and insurance. Cosmos Broadcasting owns and operates eight network
affiliated television stations in the Southeast and Mid-west. Five stations are
affiliated with NBC, two with ABC and one with CBS. These stations serve more
than four million households. Liberty Life is a regional insurer, with North
Carolina and South Carolina accounting for more than 50% of its premium volume.
The insurance segment specializes in providing agency (home service), pre-need
and mortgage protection life and health insurance.
Neiman Marcus Group Inc. (NMG - $41.0625 - NYSE) operates 30 high-fashion Neiman
Marcus stores nationally and two Bergdorf Goodman stores in New York City. Total
selling space approximates 4.6 million square feet. NMG's NM Direct is a
state-of-the-art direct marketing operation. Harcourt General (H - $55.375 -
NYSE) is the company's major shareholder, holding 53% of the outstanding common
equity. Neiman Marcus is positioned to be an important participant in the trend
to higher-scale consumer spending.
The Pioneer Group Inc. (PIOG - $31.25 - Nasdaq), based in Boston, is engaged in
two main businesses: natural resource development projects, including gold
mining, and financial services. The company owns 90% of the Teberebie gold mine,
which is Ghana's second largest mine. The mine produces approximately 265,000
ounces on an annual basis at a cash production cost of roughly $230 per ounce.
Reserves at the mine are extensive and should support further mine expansions.
The company is exploring for gold in Ghana and Russia and has extensive timber
operations in eastern Russia. Pioneer also operates a successful mutual fund
business in the U.S. with over $20 billion under management. The company has
also invested in financial services businesses outside the U.S., primarily in
Russia, Poland and the Czech Republic.
Pittway Corp. (PRY - $70.00 - NYSE; PRY'A - $72.00 - NYSE) has two core
businesses: manufacturing and distributing burglar and commercial fire alarm
equipment and publishing trade magazines and directories. Its ADI distribution
unit is the largest supplier of alarm system components in the U.S. Penton
Publishing, which the company plans to spin-off to shareholders in the second
quarter of 1998, publishes 33 national business and trade magazines. Pittway is
also involved in real estate and other promising ventures, including a 34%
interest in Cylink (Pittway owns 8.6 million shares), a leading manufacturer of
encryption equipment, and a 4.2% interest in U.S. Satellite Broadcasting
(Pittway owns 3.8 million shares), a direct-to-the-home (DTH) satellite
broadcast company whose subscriber base is growing rapidly.
United Television Inc. (UTVI - $108.375 - Nasdaq) is a television broadcasting
company which owns and operates five television stations: one ABC, one NBC and
three UPN affiliates. UTVI has purchased WHSW in Baltimore for $80 million. The
purchase of WRBW, a UPN affiliate in Orlando, for
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approximately $60 million is pending. UTVI stations will cover approximately
eight percent of the U.S. population. UTVI is a 59%-owned subsidiary of BHC
Communications (BHC - $141.125 - ASE). Strong advertising demand, prospects for
favorable regulatory changes in the industry and corporate cost controls will
increase EBITDA growth going forward. Our 1998 PMV is estimated at $140 per
share, $34 of which is cash. UTVI's PMV is expected to reach $163 by the year
2000.
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.
Gabelli U.S. Treasury Money Market Fund
Shareholders of any of the Gabelli Funds may invest in The Gabelli U.S.
Treasury Money Market Fund with an initial investment of $3,000 or more. The
Fund provides checkwriting and exchange privileges. The Fund's expenses are
capped at 0.30% of average net assets, making it one of the most attractive U.S.
Treasury-only money market funds. With dividends that are exempt from state and
local income taxes in all states, the Fund is an excellent vehicle in which to
store idle cash. An investment in The Gabelli U.S. Treasury Money Market Fund is
neither insured nor guaranteed by the U.S. Government. There can be no assurance
that the Fund will maintain a stable $1 per share net asset value. Call us at
1-800-GABELLI (1-800-422-3554) for a prospectus which gives a more complete
description of the Fund, including management fees and expenses. Read the
prospectus carefully before you invest or send money.
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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In Conclusion
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.
The Gabelli Small Cap Growth Fund has enjoyed another solid quarter in
another year in which we will strive to achieve our long term goal of generating
a real rate of return in excess of ten percent. We are concerned about equity
valuations, but believe the greatest excesses are in the large cap growth
market. With the possibility of bloated large cap growth stocks staggering under
their current weighty valuations, we believe we will see better relative
performance from small cap stocks going forward. Lower long term capital gains
tax rates should accelerate deal activity in the small cap market and continue
to provide a tailwind for our portfolio. We thank you for your loyalty and as
always, pledge our best efforts on your behalf.
Sincerely,
/s/ Mario J. Gabelli
Mario J. Gabelli, CFA
Portfolio Manager and
Chief Investment Officer
April 30, 1998
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Top Ten Holdings
March 31, 1998
BET Holdings Inc. Celestial Seasonings Inc.
United Television Inc. CTS Corp.
CLARCOR Inc. Grief Bros. Corp.
Liberty Corp. Thomas Industries Inc.
Pittway Corp. Pioneer 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.
9
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The Gabelli Small Cap Growth Fund
Portfolio of Investments -- March 31, 1998 (Unaudited)
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS -- 92.5%
Agriculture -- 0.0%
353 Delta & Pine Land Co. ............. $ 1,271 $ 18,356
12,000 Erly Industries Inc.+ ............. 79,905 68,250
------------ -----------
81,176 86,606
------------ -----------
Automotive: Parts and Accessories -- 6.8%
100,000 Acktion Co.+ ...................... 1,273,170 1,167,263
75,000 GenCorp Inc. ...................... 1,135,566 2,306,250
120,000 Handy & Harman .................... 3,388,004 4,222,499
4,000 Lund International Holdings
Inc.+ ........................... 51,880 54,000
20,000 Meritor Automotive Inc. ........... 475,125 531,250
100,000 Modine Manufacturing Co. .......... 2,802,463 3,474,999
5,000 Monro Muffler Brake Inc.+ ......... 52,860 83,125
46,000 Ragan (Brad) Inc.+ ................ 1,168,123 1,725,000
58,000 Redlaw Industries Inc.+ ........... 198,346 41,688
1,000 SPX Corp.+ ........................ 16,550 76,313
115,000 Standard Motor Products Inc. ...... 1,662,393 2,206,563
10,000 Strattec Security Corp.+ .......... 244,013 273,281
6,500 Superior Industries
International Inc. .............. 158,670 215,719
115,000 TransPro Inc. ..................... 1,231,867 905,625
165,000 UAP Inc., Cl. A ................... 1,824,324 2,088,417
183,000 Wynn's International Inc. ......... 978,390 4,163,249
------------ -----------
16,661,744 23,535,241
------------ -----------
Aviation: Parts and Services -- 3.4%
15,000 AAR Corp. ......................... 198,875 408,750
46,000 Banner Aerospace Inc.+ ............ 486,612 537,625
2,500 Barnes Group Inc. ................. 63,250 83,281
60,000 Curtiss-Wright Corp. .............. 1,097,363 2,325,000
5,000 Ducommun Inc.+ .................... 80,125 146,250
120,000 Fairchild Corp., Cl. A+ ........... 2,616,479 2,587,500
26,500 Hi-Shear Industries Inc.+ ......... 58,141 74,531
43,000 Hudson General Corp. .............. 745,445 2,031,750
20,000 Kaman Corp., Cl. A ................ 364,688 367,500
75,000 Moog Inc., Cl. A+ ................. 1,485,048 3,159,376
------------ -----------
7,196,026 11,721,563
------------ -----------
Broadcasting -- 5.3%
85,000 Ackerley Group Inc. ............... 545,975 1,737,188
1,000 Clear Channel
Communications Inc.+ ............ 6,960 98,000
12,000 Granite Broadcasting Corp.+ ....... 145,375 138,750
18,000 Gray Communications
Systems Inc...................... 379,050 522,000
32,000 Gray Communications
Systems Inc., Cl. B ............. 633,932 928,000
128,000 Liberty Corp. ..................... 3,382,262 6,527,999
20,000 NTN Communications Inc.+ .......... 83,312 15,000
110,600 Paxson Communications
Corp.+ .......................... 1,004,955 1,230,425
3,000 Pegasus Communications
Corp.+ .......................... 31,245 69,000
12,500 Price Communications Corp.+ ....... 79,225 200,000
1,000 Scandinavian Broadcast
System SA+ ...................... 13,500 33,000
62,500 United Television Inc. ............ 1,487,668 6,773,437
3,000 Young Broadcasting Inc., Cl. A+ ... 71,170 150,000
------------ -----------
7,864,629 18,422,799
------------ -----------
Bulding and Construction -- 2.4%
100,000 CalMat Co. ........................ 1,812,338 2,762,500
14,000 Florida Rock Industries Inc. ...... 207,082 399,875
14,000 Morgan Products Ltd.+ ............. 118,738 77,000
100,000 Nortek Inc.+ ...................... 606,275 3,200,000
10,000 Oakwood Homes Corp. ............... 114,281 366,250
77,000 Republic Group Inc. ............... 441,019 1,568,875
------------ -----------
3,299,733 8,374,500
------------ -----------
Business Services -- 1.9%
12,000 Amway Asia Pacific Ltd. ........... 280,725 194,250
24,641 Amway Japan Ltd., ADR ............. 418,058 198,668
31,000 Berlitz International Inc.+ ....... 450,963 838,938
22,000 Borg-Warner Security Corp.+ ....... 270,725 433,125
50,000 Data Broadcasting Corp.+ .......... 249,688 287,500
6,000 Data Transmission Network
Corp.+ .......................... 30,550 207,000
500 Gartner Group Inc.+ ............... 19,070 18,688
10,000 Hach Co. .......................... 102,758 92,500
10,000 Hach Co., Cl. A ................... 95,312 83,750
18,000 Industrial Distribution Group
Inc.+ ........................... 324,981 336,375
10,000 Landauer Inc. ..................... 163,888 270,000
83,000 Nashua Corp.+ ..................... 2,029,013 1,208,687
39,000 Paxar Corp.+ ...................... 567,507 553,313
15,000 Pittston Brink's Group ............ 421,959 571,875
20,000 Princeton Video Image Inc.+ ....... 140,000 162,500
72,000 Trans-Lux Corp. ................... 609,486 980,999
8,000 Wackenhut Corp., Cl. A ............ 118,092 191,000
6,187 Wackenhut Corp., Cl. B ............ 52,368 131,087
------------ -----------
6,345,143 6,760,255
------------ -----------
Cable -- 1.4%
17,250 Cable Michigan Inc.+ .............. 139,253 439,875
44,000 Cablevision Systems Corp.,
Cl. A+ .......................... 1,302,082 2,893,000
2,000 Century Communications
Corp., Cl. A+ ................... 14,040 25,625
15,000 People's Choice TV Corp.+ ......... 93,888 15,000
80,000 United International Holdings
Inc., Cl. A+ .................... 1,139,265 1,340,000
------------ -----------
2,688,528 4,713,500
------------ -----------
Commucications Equipment -- 0.2%
50,000 Allen Telecom Inc.+ ............... 853,738 787,500
------------ -----------
See accompanying notes to financial statements.
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The Gabelli Small Cap Growth Fund
Portfolio of Investments (Continued) -- March 31, 1998 (Unaudited)
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (Continued)
Computer Software and Services -- 0.2%
1,000 @Home Corp., Series A+ ............ $ 20,750 $ 33,813
2,000 Anacomp Inc.+ ..................... 33,830 30,500
90,000 Bull Run Corp.+ ................... 315,513 371,250
200 CBT Group plc, ADR+ ............... 10,025 10,350
10,000 Checkfree Holdings Corp.+ ......... 238,959 221,250
2,000 Cylink Corp.+ ..................... 21,790 28,875
1,000 Electronics For Imaging Inc.+ ..... 15,540 26,000
200 ForeFront Group Inc.+ ............. 2,650 3,075
200 Macromedia Inc.+ .................. 2,371 2,975
1,000 Noise Cancellation
Technologies Inc.+ .............. 625 906
1,000 Powerhouse Technologies
Inc.+ ........................... 11,750 14,250
1,500 Volt Information Sciences
Inc.+ ........................... 7,875 83,625
------------ -----------
681,678 826,869
------------ -----------
Consumer Products -- 4.5%
3,000 Action Performance
Companies Inc.+ ................. 86,846 105,563
170,474 Carlyle Industries Inc.+ .......... 595,921 234,402
200,300 Carter-Wallace Inc. ............... 2,778,572 3,642,955
61,000 Church & Dwight Co. Inc. .......... 1,271,800 1,845,250
12,000 Coachmen Industries Inc. .......... 80,758 324,000
38,000 First Brands Corp. ................ 517,525 947,625
8,000 French Fragrances Inc.+ ........... 78,490 136,000
133,500 General Cigar Holdings Inc.+ ...... 1,076,798 2,044,219
100,000 General Housewares Corp. .......... 1,320,001 1,106,250
85,000 Genlyte Group Inc.+ ............... 337,078 1,636,250
2,000 Harley-Davidson Inc. .............. 9,425 66,000
120,000 Hartmarx Corp.+ ................... 768,726 997,500
22,000 National Presto
Industries Inc. ................. 921,692 947,375
15,000 Nature's Sunshine Products
Inc. ............................ 352,909 402,188
5,000 Nu-Kote Holding Inc., Cl. A+ ...... 9,525 1,094
2,000 Playtex Products Inc.+ ............ 14,600 29,500
5,000 Scotts Co., Cl. A+ ................ 77,779 173,125
15,000 Skyline Corp. ..................... 271,425 457,500
6,000 Steven Madden Ltd.+ ............... 44,125 52,875
7,000 Stewart Enterprises Inc., Cl. A ... 65,467 389,375
13,000 Weider Nutrition International
Inc. ............................ 182,775 201,500
------------ -----------
10,862,237 15,740,546
------------ -----------
Consumer Services -- 2.5%
20,000 Department 56 Inc.+ ............... 467,490 760,000
100,000 Loewen Group Inc. ................. 2,722,350 2,525,000
32,000 Response USA Inc.+ ................ 206,080 186,000
50,000 Rollins Inc. ...................... 1,012,950 1,043,750
135,000 Ticketmaster Group Inc.+ .......... 2,783,734 4,066,875
------------ -----------
7,192,604 8,581,625
------------ -----------
Country and Closed End Funds -- 1.5%
45,000 Central European Equity
Fund Inc. ....................... 608,109 885,938
80,000 Emerging Germany Fund Inc. ........ 629,750 1,055,000
45,000 France Growth Fund Inc. ........... 476,793 599,063
35,000 Germany Fund Inc. ................. 395,061 564,375
44,000 Italy Fund Inc. ................... 394,348 676,500
65,000 New Germany Fund Inc. ............. 764,184 1,088,749
11,000 Spain Fund Inc. ................... 103,029 208,313
------------ -----------
3,371,274 5,077,938
------------ -----------
Diversified Industrial -- 7.3%
95,000 Ampco-Pittsburgh Corp. ............ 906,931 1,757,500
8,000 Anixter International Inc.+ ....... 76,160 147,500
10,000 Antofagasta Holdings plc .......... 68,648 54,257
50,000 Crane Co. ......................... 879,121 2,650,000
3,000 Flanders Corp.+ ................... 25,955 16,688
37,500 Gardner Denver Machinery
Corp.+ .......................... 210,363 1,110,938
5,000 GATX Corp. ........................ 401,172 390,000
35,000 Katy Industries Inc. .............. 472,206 665,000
450,000 Lamson & Sessions Co.+ ............ 2,581,337 2,981,250
52,000 Lindsay Manufacturing Co. ......... 756,010 2,369,250
610,400 Noel Group Inc. ................... 1,465,296 1,602,300
35,000 Oil-Dri Corporation of
America ......................... 478,925 560,000
90,000 Park-Ohio Industries Inc.+ ........ 1,209,825 1,743,750
20,000 Standex International Corp. ....... 608,812 612,500
201,000 Thomas Industries Inc. ............ 1,729,438 4,472,249
540,000 Tyler Corp.+ ...................... 2,301,886 4,184,999
------------ -----------
14,172,085 25,318,181
------------ -----------
Education -- 0.0%
200 Computer Learning Centers
Inc.+ ........................... 3,783 3,350
200 Learning Tree International
Inc.+ ........................... 4,075 4,425
200 Mastering Inc.+ ................... 2,083 2,250
200 New Horizon Worldwide Inc.+ ....... 3,175 2,625
200 Wave Technologies
International Inc.+ ............. 1,425 1,350
20,000 Whitman Education Group
Inc.+ ........................... 103,768 113,750
------------ -----------
118,309 127,750
------------ -----------
Energy -- 2.3%
5,000 Basin Exploration Inc.+ ........... 83,263 103,125
4,000 Fall River Gas Co. ................ 62,413 64,750
6,000 Forcenergy Inc.+ .................. 146,613 159,000
1,425,000 GEO International Corp.+ (b) ...... 74,145 0
750 Halter Marine Group Inc.+ ......... 7,617 11,906
130,000 Kaneb Services Inc.+ .............. 436,625 715,000
9,880 Ocean Energy Inc.+ ................ 224,238 232,798
2,000 Oryx Energy Co.+ .................. 48,975 52,000
2,000 Petsec Energy Ltd., ADR+ .......... 29,830 37,500
See accompanying notes to financial statements.
11
<PAGE>
The Gabelli Small Cap Growth Fund
Portfolio of Investments (Continued) -- March 31, 1998 (Unaudited)
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (Continued)
Energy (Continued)
2,000 Plains Resources Inc.+ ............ $ 35,100 $ 34,000
285,000 RPC Inc. .......................... 1,096,856 3,491,250
105,000 Southwest Gas Corp. ............... 1,783,471 2,191,875
15,000 Tesoro Petroleum Corp.+ ........... 209,500 268,125
5,000 TransMontaigne Oil Co.+ ........... 71,188 70,000
3,000 Union Pacific Resources
Group Inc. ...................... 73,463 71,625
4,000 Vastar Resources Inc. ............. 145,513 173,750
5,000 Wicor Inc. ........................ 228,271 241,875
------------ -----------
4,757,081 7,918,579
------------ -----------
Entertainment -- 6.2%
115,000 Ascent Entertainment Group
Inc.+ ........................... 1,378,463 1,185,938
150,000 BET Holdings Inc., Cl. A+ ......... 2,561,337 9,168,749
10,000 Cineplex Odeon Corp.+ ............. 20,888 16,875
1,000 Dover Downs Entertainment
Inc. ............................ 29,300 29,500
20,000 Fisher Companies Inc. ............. 1,181,971 1,280,000
110,000 Florida Panthers Holdings Inc.+ ... 1,882,632 2,447,500
28,000 GC Companies Inc.+ ................ 1,415,793 1,464,750
1,500 Groupe AB SA, ADR+ ................ 10,950 9,375
3,000 International Speedway Corp. ...... 54,000 91,875
2,000 Metromedia International
Group Inc.+ ..................... 22,000 30,375
170,000 Spelling Entertainment Group
Inc.+ ........................... 1,422,870 1,530,000
100,000 Topps Co. Inc.+ ................... 456,154 256,250
144,000 USA Networks Inc.+ ................ 1,575,662 3,924,000
------------ -----------
12,012,020 21,435,187
------------ -----------
Equipment and Supplies -- 14.1%
50,000 AFC Cable Systems Inc.+ ........... 393,436 1,943,750
17,000 Alltrista Corp.+ .................. 322,342 476,000
145,000 AMETEK Inc. ....................... 1,658,858 4,340,938
5,000 Amphenol Corp., Cl. A + ........... 139,625 288,438
320,000 Baldwin Technology Co. Inc.,
Cl. A+ .......................... 1,529,709 1,760,000
1,000 Belden Inc. ....................... 15,425 41,875
4,000 Bway Corp.+ ....................... 66,250 103,500
200,000 CLARCOR Inc. ...................... 3,591,527 6,649,999
1,000 Commercial Intertech Corp. ........ 11,675 23,875
142,000 CTS Corp. ......................... 593,011 4,819,124
17,000 Culligan Water Technologies
Inc+ ............................ 374,355 1,012,563
38,000 Cuno Inc.+ ........................ 566,713 836,000
45,300 Daniel Industries ................. 748,654 908,831
30,000 Elsag Bailey Process
Automation NV+ .................. 517,982 573,750
220,000 EnviroSource Inc.+ ................ 655,758 508,750
200,000 Fedders Corp.+ .................... 1,184,531 1,150,000
35,000 Flowserve Corp. ................... 689,998 1,141,875
40,000 General Magnaplate Corp. .......... 83,763 305,000
70,000 Gerber Scientific Inc. ............ 955,212 1,824,375
15,000 Global Industrial Technologies
Inc.+ ........................... 192,850 247,500
150,000 Hussmann International Inc. ....... 2,060,928 2,812,500
34,650 Johnston Industries Inc. .......... 268,295 203,569
10,000 K-Tron International Inc.+ ........ 74,933 171,250
77,500 Kollmorgen Corp. .................. 648,644 1,685,625
10,000 Littelfuse Inc.+ .................. 68,313 260,000
22,000 Lufkin Industries Inc. ............ 389,520 715,000
10,000 Mark IV Industries Inc. ........... 210,512 227,500
5,000 Met-Pro Corp. ..................... 70,900 77,813
82,000 Pittway Corp. ..................... 2,051,874 5,739,999
4,000 Plantronics Inc.+ ................. 30,792 163,750
52,500 Portec Inc. ....................... 695,975 817,031
11,000 Raytech Corp.+ .................... 61,050 56,375
37,000 Sequa Corp., Cl. A+ ............... 1,284,715 2,735,688
10,000 Sequa Corp., Cl. B+ ............... 608,846 788,750
6,000 Smith (A.O.) Corp., Cl. A ......... 249,550 267,000
52,000 SPS Technologies Inc.+ ............ 1,155,576 2,804,750
5,000 Teleflex Inc. ..................... 76,167 210,000
12,000 Tennant Co. ....................... 260,625 493,500
5,000 Valmont Industries Inc. ........... 40,625 121,250
5,250 Watsco Inc., Cl. B ................ 23,627 139,453
------------ -----------
24,623,141 49,446,946
------------ -----------
Financial Services -- 2.9%
70,000 Berliner Bank Aktiengesellschaft .. 1,452,996 1,731,702
45,000 Danielson Holding Corp.+ .......... 165,200 337,500
1,000 Federal Agricultural Mortgage
Corp., Cl. C+ ................... 24,000 56,750
6,000 Gryphon Holdings Inc.+ ............ 78,000 107,250
18,000 Hibernia Corp. .................... 140,063 370,125
4,000 Landamerica Financial Group ....... 58,015 181,000
37,500 Midland Co. ....................... 1,617,388 2,960,156
500 Net.B@nk Inc.+ .................... 6,000 12,375
140,000 Pioneer Group Inc. ................ 1,994,748 4,375,000
------------ -----------
5,536,410 10,131,858
------------ -----------
Food and Beverage -- 5.0%
10,000 4Health Inc.+ ..................... 57,905 46,250
8,000 Advantica Restaurant Group
Inc.+ ........................... 87,813 75,000
118,000 Celestial Seasonings Inc.+ ........ 2,698,971 4,837,999
5,000 Cheesecake Factory Inc.+ .......... 82,004 166,563
190,000 Chock Full o'Nuts Corp.+ .......... 1,254,071 1,472,500
220,000 Eskimo Pie Corp. .................. 3,429,362 2,970,000
1,000 Farmer Brothers Co. ............... 133,895 185,000
18,000 Genesee Corp., Cl. B .............. 727,317 720,000
40,000 Grist Mill Co.+ ................... 504,273 587,500
10,000 International Multifoods Corp. .... 199,921 299,375
12,000 J & J Snack Foods Corp.+ .......... 121,707 234,750
8,000 Midwest Grain Products Inc.+ ...... 144,621 108,000
1,000 Northland Cranberries Inc.,
Cl. A ........................... 7,625 15,750
See accompanying notes to financial statements.
12
<PAGE>
The Gabelli Small Cap Growth Fund
Portfolio of Investments (Continued) -- March 31, 1998 (Unaudited)
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (Continued)
Food and Beverage (Continued)
110,000 Pepsi-Cola Puerto Rico
Bottling Co.+ ................... $ 609,340 $ 825,000
40,000 Pete's Brewing Co.+ ............... 177,838 167,500
25,000 Ralcorp Holdings Inc.+ ............ 341,259 518,750
5,000 Sylvan Food Holdings Inc.+ ........ 49,669 73,125
15,369 Tootsie Roll Industries Inc. ...... 556,749 1,101,739
50,000 Twinlab Corp.+ .................... 1,016,831 2,025,000
6,000 Vlasic Foods International Inc.+ .. 154,244 153,375
50,000 Whitman Corp. ..................... 771,375 987,500
------------ -----------
13,126,790 17,570,676
------------ -----------
Health Care -- 0.5%
35,000 HealthPlan Services Corp. ......... 422,969 920,938
100,000 IVAX Corp.+ ....................... 1,020,236 875,000
6,000 U.S. Physical Therapy Inc.+ ....... 37,500 70,125
------------ -----------
1,480,705 1,866,063
------------ -----------
Home Furnishings -- 1.1%
8,000 Bassett Furniture Industries
Inc. ............................ 188,438 245,500
1,000 Bed Bath & Beyond Inc.+ ........... 11,125 46,188
17,000 Foamex International Inc. ......... 147,810 298,563
10,000 La-Z-Boy Chair Co. ................ 218,125 499,375
50,000 Mikasa Inc. ....................... 698,044 675,000
70,000 Oneida Ltd. ....................... 732,976 2,134,999
------------ -----------
1,996,518 3,899,625
------------ -----------
Hotels and Gaming -- 3.0%
420,000 Aztar Corp.+ ...................... 2,756,915 3,622,500
10,000 Boyd Gaming Corp.+ ................ 100,375 71,875
10,000 Churchill Downs Inc. .............. 416,463 570,000
55,000 Extended Stay America Inc.+ ....... 636,187 807,813
25,000 Gaylord Entertainment Co. ......... 745,938 893,750
140,000 Jackpot Enterprises Inc.+ ......... 1,615,369 1,820,000
5,000 Jurys Hotel Group plc ............. 27,762 34,989
52,000 Mirage Resorts Inc.+ .............. 267,539 1,264,250
12,000 Penn National Gaming Inc.+ ........ 152,069 132,750
150,000 Trump Hotels & Casino
Resorts Inc.+ ................... 1,519,891 1,378,125
------------ -----------
8,238,508 10,596,052
------------ -----------
Metals and Mining -- 0.5%
150,000 Echo Bay Mines Ltd.+ .............. 730,759 346,875
300,000 Pegasus Gold Inc.+ ................ 462,880 132,899
10,000 Prime Resources Group Inc. ........ 60,154 79,107
270,000 Royal Oak Mines Inc.+ ............. 671,786 320,625
22,000 Stillwater Mining Co.+ ............ 452,400 556,875
5,000 Toreador Royalty Corp.+ ........... 19,063 18,125
80,000 TVX Gold Inc.+ .................... 383,000 260,000
------------ -----------
2,780,042 1,714,506
------------ -----------
Paper and Forest Products -- 1.4%
123,000 Grief Bros. Corp.+ ............... 2,331,134 4,766,250
------------ -----------
Publishing -- 3.7%
10,000 CMP Media Inc., Cl. A+ ........... 187,322 251,250
45,000 Golden Books Family
Entertainment Inc.+ ............ 482,079 517,500
121,278 Independent Newspapers Ltd. ...... 380,260 733,334
2,000 Lee Enterprises Inc. ............. 61,038 67,125
34,900 McClatchy Newspapers Inc.,
Cl. A .......................... 796,895 1,040,456
55,000 Media General Inc., Cl. A ........ 959,916 2,705,313
33,000 Meredith Corp. ................... 493,448 1,390,125
44,000 Pulitzer Publishing Co. .......... 1,347,666 3,514,500
190,000 Thomas Nelson Inc. ............... 2,151,650 2,612,500
3,000 Wiley (John) & Sons Inc.,
Cl. B .......................... 46,500 164,625
------------ -----------
6,906,774 12,996,728
------------ -----------
Pumps and Valves -- 2.4%
58,000 Franklin Electric Co. ............ 1,776,184 3,973,000
17,775 Gorman-Rupp Co. .................. 276,467 346,613
12,000 Graco Inc. ....................... 296,198 363,750
70,000 IDEX Corp. ....................... 628,347 2,546,250
10,000 Robbins & Myers Inc. ............. 98,665 381,250
30,000 Roper Industries Inc. ............ 195,000 890,625
------------ -----------
3,270,861 8,501,488
------------ -----------
Real Estate -- 1.3%
140,000 Catellus Development Corp.+ ...... 1,626,231 2,598,750
115,000 Griffin Land & Nurseries Inc.+ ... 1,427,534 1,725,000
4,000 Gyrodyne Company of
America Inc.+ .................. 74,313 74,000
------------ -----------
3,128,078 4,397,750
------------ -----------
Retail -- 4.9%
45,000 Aaron Rents Inc. ................. 159,423 1,094,063
43,000 Aaron Rents Inc., Cl. A .......... 143,203 964,813
265,000 Bruno's Inc.+ .................... 2,668,555 447,188
110,000 Burlington Coat Factory
Warehouse Corp. ................ 1,178,563 1,911,250
2,000 Coldwater Creek Inc.+ ............ 55,000 48,500
8,000 Crown Books Corp.+ ............... 105,267 54,500
25,000 Fingerhut Companies Inc. ......... 367,919 648,438
105,000 Ingles Markets Inc., Cl. A ....... 1,341,625 1,417,500
130,000 Lillian Vernon Corp. ............. 1,995,899 2,266,874
33,500 Mott's Holdings Inc.+ (b) ........ 214,069 201,000
71,000 N2K Inc.+ ........................ 1,674,434 2,121,125
103,000 Neiman Marcus Group Inc.+ ........ 1,384,666 4,229,437
182,000 Scheib (Earl) Inc.+ .............. 1,258,370 1,569,750
------------ -----------
12,546,993 16,974,438
------------ -----------
See accompanying notes to financial statements.
13
<PAGE>
The Gabelli Small Cap Growth Fund
Portfolio of Investments (Continued) -- March 31, 1998 (Unaudited)
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (Continued)
Satellite -- 1.0%
35,000 COMSAT Corp. ..................... $ 1,100,927 $ 1,205,313
10,000 TCI Satellite Entertainment
Inc.+ .......................... 62,500 71,250
50,000 United Video Satellite Group
Inc., Cl. A+ ................... 1,449,063 2,125,000
------------ ------------
2,612,490 3,401,563
------------ ------------
Specialty Chemicals -- 0.8%
25,000 Airgas Inc.+ ...................... 372,500 431,250
1,000 CFC International Inc.+ ........... 12,125 11,000
45,000 Ferro Corp. ....................... 714,102 1,321,875
600 MacDermid Inc. .................... 2,200 17,250
32,000 Penford Corp. ..................... 609,118 1,112,000
------------ ------------
1,710,045 2,893,375
------------ ------------
Telecommunications -- 1.9%
18,000 Aliant Communications Inc. ........ 231,438 612,000
20,000 ARC International Corp.+ .......... 116,030 110,000
9,200 Atlantic Tele-Network Inc.+ ....... 92,644 101,200
2,000 BHI Corp. ......................... 30,250 71,000
70,450 Citizens Utilities Co., Cl. A+ .... 679,224 744,128
15,833 Commonwealth Telephone
Enterprises Inc.+ ............... 150,425 445,303
20,000 Commonwealth Telephone
Enterprises Inc., Cl. B + ....... 140,936 552,500
100,000 Communications Systems Inc. ....... 556,544 1,706,250
23,000 Emerging Communications Inc.+ ..... 163,266 161,000
135,000 GST Telecommunications Inc.+ ...... 1,896,370 2,033,438
10,000 Rogers Communications Inc.,
Cl. B+ .......................... 57,063 58,125
------------ ------------
4,114,190 6,594,944
------------ ------------
Transportation -- 0.2%
2,000 Irish Continential Group plc ...... 18,258 35,193
50,000 OMI Corp.+ ........................ 334,638 450,000
25,000 Trans World Airlines Inc.+ ........ 332,813 307,813
4,000 WorldCorp Inc.+ ................... 19,575 3,750
------------ ------------
705,284 796,756
------------ ------------
Utilities -- 0.1%
24,000 United Water Resources Inc. ....... 444,338 433,500
------------ ------------
Wireless Communications -- 1.8%
70,000 Aerial Communications Inc.+ ....... 574,713 542,500
4,000 Associated Group Inc., Cl. A+ ..... 50,750 154,000
57,000 Centennial Cellular Corp., Cl. A+ . 865,371 1,498,031
20,000 Corecomm Inc.+ .................... 324,750 333,125
57,000 Rogers Cantel Mobile
Communications Inc.+ ............ 689,471 2,857,125
18,000 Teligent Inc., Cl. A+ ............. 418,250 553,500
7,000 Western Wireless Corp., Cl. A+ .... 93,125 161,000
------------ ------------
3,016,430 6,099,281
------------ ------------
TOTAL COMMON STOCKS $196,726,736 $322,510,438
------------ ------------
CONVERTIBLE CORPORATE BONDS -- 0.3%
Entertainment -- 0.1%
$200,000 Savoy Pictures Entertainment Inc.
Sub. Deb. Cv.
7.00%, 07/01/03 ................. 165,771 196,750
------------ ------------
Equipment and Supplies -- 0.2%
650,000 Intermagnetics General Corp.
Sub. Deb. Cv.
5.75%, 09/15/03 (a) ............. 649,649 633,750
200,000 Kushner-Locke Co.
Sub. Deb. Cv.
8.00%, 12/15/00 (b) ............. 200,000 120,000
500 MacNeal-Schwendler Corp.
Sub. Deb. Cv.
7.875%, 08/18/04 ................ 522 513
------------ ------------
850,171 754,263
------------ ------------
TOTAL CONVERTIBLE
CORPORATE BONDS 1,015,942 951,013
------------ ------------
U.S. GOVERNMENT OBLIGATIONS -- 6.7%
23,333,300 U.S. Treasury Bills, 4.98% to
5.43%, due 04/16/98
to 05/28/98 ++ .................. 23,252,252 23,252,252
------------ ------------
TOTAL INVESTMENTS -- 99.5%
$220,994,930 346,713,703
------------ ------------
Other Assets and
Liabilities (Net) -- 0.5% 1,743,532
------------
NET ASSETS -- 100.0%
(14,562,244 shares outstanding) $348,457,235
============
NET ASSET VALUE, Offering
and Redemption Price
Per Share ....................... $ 23.93
============
- ---------
(a) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold intransactions exempt
from registration, normally to qualified institutional buyers. At March
31, 1998, the market value of Rule 144A securities amounted to $633,750 or
0.2% of net assets.
(b) Security fair valued as determined by the Board of Directors.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR -- American Depositary Receipt
See accompanying notes to financial statements.
14
<PAGE>
The Gabelli Small Cap Growth Fund
Statement of Assets and Liabilities
March 31, 1998 (Unaudited)
================================================================================
Assets:
Investments, at value (Cost $220,994,930) ................ $346,713,703
Foreign currency, at value (Cost $57,886) ................ 53,823
Receivable for investments sold .......................... 2,276,372
Receivable for capital shares issued ..................... 443,053
Dividends and interest receivable ........................ 207,014
------------
Total Assets ........................................... 349,693,965
------------
Liabilities:
Payable for investment advisory fees ..................... 285,478
Payable for distribution fees ............................ 84,275
Payable for investments purchased ........................ 713,799
Payable for capital shares redeemed ...................... 7,683
Other accrued expenses ................................... 145,495
------------
Total Liabilities ...................................... 1,236,730
------------
Net Assets applicable to 14,562,244
shares outstanding ................................... $348,457,235
============
Net Assets consist of:
Capital stock, at par value .............................. $ 14,562
Additional paid-in capital ............................... 218,976,230
Undistributed net investment income ...................... 2,107
Accumulated net realized gain on
investments, futures contracts and
foreign currency transactions .......................... 3,749,627
Net unrealized appreciation on investments,
futures contracts and foreign currency
transactions ........................................... 125,714,709
------------
Total Net Assets ....................................... $348,457,235
============
Net Asset Value, offering and
redemption price per share
($348,457,235 / 14,562,244 shares
outstanding; 1,000,000,000 shares
authorized of $0.001 par value) ...................... $ 23.93
============
Statement of Operations
For the Six Months Ended March 31, 1998
(Unaudited)
================================================================================
Investment Income:
Dividends (net of foreign taxes of $2,875) ............... $ 1,271,685
Interest ................................................. 854,816
------------
Total Investment Income ................................ 2,126,501
------------
Expenses:
Investment advisory fees ................................. 1,512,891
Distribution fees ........................................ 378,204
Shareholder services fees ................................ 173,764
Custodian fees ........................................... 16,280
Shareholder report expenses .............................. 11,919
Legal and audit fees ..................................... 8,932
Registration fees ........................................ 6,864
Miscellaneous expenses ................................... 10,623
------------
Total Expenses ......................................... 2,119,407
------------
Net Investment Income .................................. 7,094
------------
Net Realized and Unrealized Gain on Investments:
Net realized gain on investments,
futures contracts and foreign currency
transactions ........................................... 6,184,920
Net change in unrealized appreciation on
investments, futures contracts and
foreign currency transactions .......................... 24,901,396
------------
Net realized and unrealized gain on
investments, futures contracts and
foreign currency transactions ........................ 31,086,316
------------
Net increase in net assets resulting
from operations .......................................... $ 31,093,410
============
Statement of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Six Months Ended Year Ended
March 31, 1998 September 30,
(Unaudited) 1997
--------------- --------------
<S> <C> <C>
Operations:
Net investment income ........................................... $ 7,094 $ (820,062)
Net realized gain on investments,
futures contracts and foreign currency transactions ........... 6,184,920 39,776,849
Net change in unrealized appreciation on investments,
futures contracts and foreign currency transactions ............ 24,901,396 44,387,266
------------ ------------
Net increase in net assets resulting from operations .......... 31,093,410 83,344,053
------------ ------------
Distributions to shareholders:
Net realized gain on investment transactions .................... (40,993,996) (23,504,667)
Capital share transactions:
Net increase in net assets from capital share transactions ...... 61,839,081 13,440,151
------------ ------------
Net increase in net assets .................................... 51,938,495 73,279,537
Net Assets:
Beginning of period ............................................. 296,518,470 223,239,203
------------ ------------
End of period ................................................... $348,457,235 $296,518,740
============ ============
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Unaudited)
================================================================================
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 "Act"), and one of two separately managed portfolios of the
Corporation, whose primary objective is capital appreciation. The Fund commenced
operation 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 (if there were no sales that day,
the security is valued at the average of the closing bid and asked prices). 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.
When market quotations are not readily available, portfolio securities are
valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Corporation's 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. 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
government securities dealers recognized by the Federal Reserve Board, 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 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
16
<PAGE>
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued) (Unaudited)
================================================================================
of the contract. The daily changes in the contract are recorded as unrealized
gains or losses. The Fund recognizes a realized gain or loss when the contract
is closed. At March 31, 1998, there were no open futures contracts.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars as follows:
(i) market value of investment securities and other assets and
liabilities are recorded at the exchange rate on the valuation date.
(ii) purchases and sales of investment securities, income and expenses
are recorded at the exchange rate prevailing on the respective date
of such transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or 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.
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 treatment of income and gains
on various investments securities held by the Fund, timing differences and
differing characterization of distributions made by the fund.
For the year ended September 30, 1997, reclassifications were made to increase
undistributed net investment income for $815,075 and realized loss on
investments for $804,483 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. If the value of more than 50%
of the Fund's total assets at the close of any taxable year consists of stocks
or securities of non-U.S. corporations, the Fund is permitted and may elect to
treat any non-U.S. taxes paid by it as paid by its shareholders.
17
<PAGE>
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Unaudited)
================================================================================
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.
4. Distribution Plan. The Fund's Board of Directors has adopted a distribution
plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940. For the six months ended March 31, 1998 the Fund incurred distribution
costs payable to Gabelli & Company, Inc., an indirect wholly-owned subsidiary of
the Adviser, of $378,204, or 0.25% of average net assets, the annual limitation
under the Plan.
5. Portfolio Securities. Purchases and sales of securities for the six months
ended March 31, 1998, other than short term securities, aggregated $75,153,021
and $29,997,035, respectively.
6. Transactions with Affiliates. During the six months ended March 31, 1998, the
Fund paid brokerage commissions of $63,416 to Gabelli & Company, Inc. and its
affiliates.
7. Capital Stock Transactions. Transactions in shares of capital stock were as
follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
March 31, 1998 September 30, 1997
---------------- ----------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold ........................................ 8,160,116 $191,026,852 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 .................................... (7,101,293) (168,317,316) (6,786,508) (142,735,383)
---------- ------------ ---------- -------------
Net increase ..................................... 2,896,749 61,839,081 (516,658) $ (13,440,151)
========== ============ ========== =============
</TABLE>
8. Transactions in Securities of Affiliated Issuers. The Investment Company Act
of 1940 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 six months ended March 31, 1998 is set forth below:
<TABLE>
<CAPTION>
Percent
Shares Value at Owned
Beginning Purchased Ending Realized Dividend March 31, of Shares
Shares (Sold) Shares Gain Income 1998 Outstanding
--------- --------- ------- -------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Eskimo Pie Corp. 220,000 -- 220,000 $ -- $ 22,000 $2,970,000 6.36%
Trans-Lux Corp. 85,000 (13,000) 72,000 65,256 5,775 980,999 7.27%
GEO International Corp. 1,425,000 -- 1,425,000 -- -- -- 7.15%
------- -------- ----------
$65,256 $ 27,775 $3,950,999
======= ======== ==========
</TABLE>
18
<PAGE>
The Gabelli Small Cap Growth Fund
Financial Highlights
================================================================================
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Six Months Ended Year Ended September 30,
March 31, 1998 ---------------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993
---------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period ....... $ 25.42 $ 20.02 $ 19.34 $ 17.24 $ 16.90 $ 13.10
-------- -------- -------- -------- -------- --------
Net investment income (loss) ............... -- (0.07) (0.09) (0.04) (0.05) 0.01
Net realized and unrealized gain on
investments ................................... 2.10 7.70 2.11 3.17 0.81 3.98
-------- -------- -------- -------- -------- --------
Total from investment operations ........... 2.10 7.63 2.02 3.13 0.76 3.99
-------- -------- -------- -------- -------- --------
Distributions to shareholders:
Net investment income -- -- -- -- -- (0.03)
Net realized gains ......................... (3.59) (2.23) (1.34) (1.03) (0.42) (0.16)
-------- -------- -------- -------- -------- --------
Total distributions ........................ (3.59) (2.23) (1.34) (1.03) (0.42) (0.19)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ............. $ 23.93 $ 25.42 $ 20.02 $ 19.34 $ 17.24 $ 16.90
======== ======== ======== ======== ======== ========
Total return (a) ........................... 10.0% 42.2% 11.0% 19.5% 4.5% 30.7%
======== ======== ======== ======== ======== ========
Ratios to average net assets / supplemental data:
Net assets, end of period (in 000's) ....... $348,457 $296,519 $223,239 $231,156 $205,699 $204,617
Ratio of net investment income (loss) to
average net assets ....................... 0.00%(b)(d) (0.36)% (0.42)% (0.24)% (0.28)% 0.03%
Ratio of operating expenses to
average net assets ....................... 1.40%(b) 1.62% 1.58% 1.54% 1.54% 1.64%
Portfolio turnover rate .................... 11% 14% 11% 17% 19% 14%
Average commission rate per share (c) ...... $ 0.0458 $ 0.0500 $ 0.0490 -- -- --
</TABLE>
- ----------
(a) Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the
period including reinvestment of dividends. Total return for the period of
less than one year is not annualized.
(b) Annualized.
(c) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate paid per share for
purchases and sales of investment securities.
(d) Amount represents less than $0.005 per share.
See accompanying notes to financial statements.
19
<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
Chairman and Chief
Investment Officer
Gabelli Funds, Inc.
Felix J. Christiana
Former Senior Vice President
Dollar Dry Dock Savings Bank
Anthony J. Colavita
Attorney-at-Law
Anthony J. Colavita, P.C.
Vincent D. Enright
Senior Vice President and
Chief Financial Officer
KeySpan Energy Corp.
John D. Gabelli
Vice President
Gabelli & Company, Inc.
Robert J. Morrissey
Attorney-at-Law
Morrissey & Hawkins
Karl Otto Pohl
Former President
Deutsche Bundesbank
Anthony R. Pustorino
Certified Public Accountant
Professor, Pace University
Anthonie C. van Ekris
Managing Director
BALMAC International, Inc.
Officers
Mario J. Gabelli, CFA
President and Chief
Investment Officer
Bruce N. Alpert
Vice President and Treasurer
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.
- --------------------------------------------------------------------------------
