[PHOTO]
The
Gabelli
Equity
Income
Fund
SEMI-ANNUAL REPORT
MARCH 31, 1998
<PAGE>
The Gabelli Equity Income Fund
One Corporate Center
Rye, New York 10580-1434
Semi-Annual Report
March 31, 1998(a)
To Our Shareholders,
After a brief retreat in early January, stocks regained their momentum and
indices across the market capitalization spectrum closed the quarter at or near
record highs. The favorable economic backdrop for stocks - low inflation, low
interest rates and solid corporate earnings growth - continued to buoy the
market. However, the greatest driving force for the stock market continues to be
liquidity. Deals, restructurings and share repurchase programs proved to be
powerful factors underneath the market's strength. With the relatively
uninspiring returns available from traditional alternatives to owning stocks,
cash continued to flow into U.S. equity investments.
Investment Performance
For the quarter ended March 31, 1998, The Gabelli Equity Income Fund's net
asset value increased 10.1% to $17.70 after adjusting for the $0.05 per share
dividend paid on March 27, 1998. The Lipper Analytical Services Equity Income
Fund Average and Standard & Poor's (S&P) 500 Index had returns of 10.2% and
13.9%, respectively, over the same period. Each index is an unmanaged indicator
of investment performance. The Fund was up 39.1% over the trailing twelve month
period. The Lipper Equity Income Fund Average and S&P 500 rose 38.0% and 48.0%,
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 18.2% and 22.4% for the Lipper
Equity Income Fund Average and S&P 500, respectively. Since inception on January
2, 1992 through March 31, 1998, the Fund has a total return of 178.6%, which
equates to an average annual return of 17.8%. The Dividend History chart details
each dividend paid by the Fund since inception.
- --------------------------------------------------------------------------------
(a) The Fund's fiscal year ends September 30, 1998.
<PAGE>
INVESTMENT RESULTS (a)(c)
- --------------------------------------------------------------------------------
Calendar Quarter
----------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
1998: Net Asset Value .... $17.70 -- -- -- --
Total Return ....... 10.1% --
- --------------------------------------------------------------------------------
1997: Net Asset Value .... $14.27 $16.03 $17.39 $16.12 $16.12
Total Return ....... 1.2% 12.7% 8.8% 3.0% 27.9%
- --------------------------------------------------------------------------------
1996: Net Asset Value .... $13.47 $13.54 $13.81 $14.16 $14.16
Total Return ....... 5.5% 1.0% 2.5% 8.0% 17.9%
- --------------------------------------------------------------------------------
1995: Net Asset Value .... $11.56 $11.99 $12.65 $12.84 $12.84
Total Return ....... 8.5% 4.3% 6.1% 6.9% 28.3%
- --------------------------------------------------------------------------------
1994: Net Asset Value .... $11.26 $11.08 $11.54 $10.72 $10.72
Total Return ....... (2.2)% (0.8)% 4.9% (0.7)% 1.1%
- --------------------------------------------------------------------------------
1993: Net Asset Value .... $11.35 $11.72 $12.15 $11.57 $11.57
Total Return ....... 7.4% 3.8% 4.2% 1.5% 17.9%
- --------------------------------------------------------------------------------
1992: Net Asset Value .... $10.19 $10.36 $10.40 $10.64 $10.64
Total Return ....... 2.4%(b) 2.3% 1.1% 3.7% 9.8%(b)
- --------------------------------------------------------------------------------
- -------------------------------------------------
Average Annual Returns - March 31, 1998 (a)
1 Year....................... 39.1%
5 Year....................... 18.8%
Life of Fund (b)............. 17.8%
- -------------------------------------------------
(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 January 2, 1992. (c) The
Fund's fiscal year ends September 30, 1998.
- --------------------------------------------------------------------------------
What We Do
The success of momentum investing in recent years and investors' desire
for instant gratification have combined to make value investing appear dull. At
the risk of being dull, we will once again describe the "boring" value approach
that has seen us through both good and bad markets over the last six years at
The Gabelli Equity Income Fund and for over 20 years at The Gabelli Asset
Management Company. In past reports, we have tried to articulate our investment
philosophy and methodology. The accompanying graphic further illustrates the
interplay among the four components of our valuation approach.
[Valuation Approach GRAPHIC OMITTED]
Our focus is on free cash flow; earnings before interest, taxes,
depreciation and amortization (EBITDA) minus the capital expenditures necessary
to grow the business. We believe free cash flow is the best barometer of a
business' value. Rising free cash flow often foreshadows net earnings
improvement. We also look at earnings per share trends. Unlike Wall Street's
ubiquitous earnings
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momentum players, we do not try to forecast earnings with accounting precision
and then trade stocks based on quarterly expectations and realities. We simply
try to position ourselves in front of long term earnings uptrends. In addition,
we analyze on and off balance sheet assets and liabilities such as plant and
equipment, inventories, receivables, and legal, environmental and health care
issues. We want to know everything and anything that will add to or detract from
our private market value (PMV) estimates. Finally, we look for a catalyst;
something happening in the company's industry or indigenous to the company
itself that will surface value. In the case of the independent telephone stocks,
the catalyst is a regulatory change. In the agricultural equipment business, it
is the increasing worldwide demand for American food and feed crops. In other
instances, it may be a change in management, sale or spin-off of a division or
the development of a profitable new business.
Once we identify stocks that qualify as fundamental and conceptual
bargains, we then become patient investors. This has been a proven long term
method for preserving and enhancing wealth in the U.S. equities market. At the
margin, our new investments are focused on businesses that are well-managed and
will benefit from sustainable long term economic dynamics. These include macro
trends, such as the globalization of the market in filmed entertainment and
telecommunications, and micro trends, such as an increased focus on productivity
enhancing goods and services.
- ---------------------------------------------
Dividend History
- ---------------------------------------------
Rate Reinvestment
Payment (ex) Date Per Share Price
----------------- --------- -----
March 27, 1998 $0.05 $17.70
- ---------------------------------------------
December 29, 1997 $1.78 $15.94
September 30, 1997 $0.05 $17.39
June 30, 1997 $0.05 $16.03
March 31, 1997 $0.06 $14.27
- ---------------------------------------------
December 27, 1996 $0.76 $14.28
September 30, 1996 $0.07 $13.81
June 28, 1996 $0.06 $13.54
March 31, 1996 $0.07 $13.47
- ---------------------------------------------
December 29, 1995 $0.68 $12.84
September 29,1995 $0.07 $12.65
June 30, 1995 $0.07 $11.99
March 31, 1995 $0.07 $11.56
- ---------------------------------------------
December 30, 1994 $0.74 $10.72
September 30, 1994 $0.08 $11.54
June 30, 1994 $0.09 $11.08
March 31, 1994 $0.06 $11.26
- ---------------------------------------------
December 31, 1993 $0.76 $11.57
September 30, 1993 $0.06 $12.15
June 30, 1993 $0.06 $11.72
March 31, 1993 $0.08 $11.35
- ---------------------------------------------
December 31, 1992 $0.15 $10.64
September 30, 1992 $0.07 $10.40
June 30, 1992 $0.06 $10.36
March 31, 1992 $0.05 $10.19
- ---------------------------------------------
COMMENTARY
It Just Keeps Going, Going and Going!
Despite being targeted by evil forces such as the Asian economic meltdown,
high profile earnings disappointments in the technology sector and
off-the-historical chart valuations, the stock market, like the "Energizer
Bunny", just keeps going, going and going. We clearly underestimated the
market's potential. The bad news is that based on almost any valuation
benchmark, stocks are currently in historically unprecedented territory and the
margin of safety is razor thin.
Granted, it would be hard to imagine a better economic scenario for
stocks. Economists are pegging inflation at 2.0% or lower and interest rates are
low. Despite selected earnings dislocations
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resulting from Asian economic weakness, domestic corporate profits, on the
whole, are meeting consensus expectations and Wall Street economists are
predicting even better earnings growth in 1999. On the supply and demand front -
remember that stocks go up in the short run when there are more buyers than
sellers - continued strong merger and acquisition activity and substantial share
repurchase programs are shrinking supply at a time when demand for stocks keeps
rising. Put it all together, and it is understandable that stocks are advancing.
Bear Watch
Today, the two questions confronting equity investors are: What could
happen to disrupt this ideal economic environment for stocks? And, even if the
economic news continues to be good, isn't it already more than fully reflected
in stock prices? In our last report to you, we shared a laundry list of our
investment anxieties, which included problems in Asia spilling into Latin
American currencies and economies, wage inflation not matched by productivity
gains, oil prices rising significantly from today's low levels, a prospective
crisis in confidence if Treasury Secretary Rubin leaves and the possibility that
Federal Reserve Board Chairman Greenspan may step down at the end of his current
term, and last, but not least, high equity valuations and a low margin of
safety.
We have many of the same worries today and our concern over equity
valuations has been heightened by the market's sharp rise in the first quarter.
As we have stated many times in the past, we believe valuations do matter and
that ultimately stocks will trade at rational relationships to their economic
value. We have to question whether even the best companies in this "best of all
possible worlds" for stocks should trade at 50+ times earnings and three to four
times annual earnings growth rates. We are sure value investors share this
concern. However, money continues to flow into arguably the most overvalued
sector of the market - the mega-cap growth stocks. It is somewhat of a reverse
panic. Investors are afraid not to own these stocks. Mr. Market remains at work.
It is increasingly difficult for us to find bargains in this environment.
One would think professional investors (ie: mutual fund managers) would be
exhibiting more restraint. Unfortunately, with mutual fund investors
increasingly focused on short term performance, portfolio managers holding cash
in a rising market have the life expectancy of fast dogs that chase cars. Many
are holding their noses, closing their eyes, crossing their fingers and making
investments that are difficult to justify on a fundamental basis. They may
continue to be rewarded for throwing in the valuation towel. But, at some point,
they and their shareholders will receive a painful reminder that the market will
not suffer fools indefinitely.
Ringing Up Profits
Seven of the Fund's ten best performing stocks this quarter were in the
telecommunications industry (BC Telecom, Southern New England
Telecommunications, Sprint, British Telecom, Telefonica de Espana, France
Telecom and Cable & Wireless). Other telephone holdings, including SBC
Communications, BCE Inc. and Telecom Italia, outperformed the market averages.
The telecommunications group's exceptional performance this quarter may be
partly explained by WorldCom and British Telecom's battle over MCI and to a
lesser extent, SBC Communications' bid for Southern New England
Telecommunications, which helped raise the valuation standards in the industry.
However, there are more powerful long term trends that we believe will continue
to fuel selected telephone stocks.
4
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You will note that our list of winners has a distinct international
flavor. There are three factors that make international telephone stocks
intriguing. To compete on the global economic stage, a modern telecommunications
system is essential. So, those companies operating in less developed countries
and regions (most notably, Cable & Wireless, which is the majority owner of Hong
Kong Telecommunications, and Telefonica de Espana, which owns significant chunks
of Latin American telephone companies in addition to its domestic operations in
Spain) have exceptional growth potential. The second factor is privatization.
Formerly government-owned telephone companies in Europe and Latin America are
passing into the hands of profit oriented investors and are being run more
efficiently by private sector managements. Finally, international boundaries are
crumbling and companies are jockeying for global market share. This means
continued consolidation throughout the industry and an increased number of joint
venture partnerships that will surface value for shareholders.
Running on Empty
Our energy holdings ran out of gas during the first quarter. El Nino's warm
winter weather pattern, a drawdown in Southeast Asian inventories and increased
production from OPEC sent oil prices plummeting to five year lows. However, we
point out that: El Nino weather systems have generally been followed by colder
than normal winters; Southeast Asian energy inventories will be built up as
these economies recover; and while it is always difficult to predict what OPEC
will do, one would think they would try to reach some compromise on production
quotas that will boost prices. Our conclusion is that oil prices and energy
stocks will rebound in the year ahead. As for the longer term, the world is
still consuming far more oil than it is finding. Until this changes, the long
term trend for oil prices and energy stocks should be up.
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 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.
5
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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.
American Express Co. (AXP - $91.8125 - NYSE) is a global travel, financial and
network services provider. Founded in 1850, the company operates in 160
countries around the world. Best known for its "green" charge card and its
travel-related services, American Express also offers financial planning,
brokerage services, mutual funds, insurance and other investment products.
Harvey Golub, Chairman and CEO, has refocused AXP on its core charge card and
investment management businesses. The company has significantly expanded the
range of merchants who welcome its cards. As evidenced by an increase in per
share earnings exceeding 16% in 1997, we believe that American Express has been
repositioned to enjoy double digit earnings growth over the balance of this
decade.
BCE Inc. (BCE - $41.75 - NYSE), the holding company for Bell Canada, is Canada's
largest telecommunications company. BCE has controlling interests in Northern
Telecom (NT - $64.625 - NYSE) and BCEMobile Communications (BCX - $29.85 - TSE).
There are substantial values in BCE. For example, "behind" each share of BCE
there are 0.4 shares of Northern Telecom. This NT interest, marked to market, is
worth over $25 per BCE share. The company is a possible candidate for break-up.
In the interim, the Canadian Radio and Television Commission is providing a more
attractive operating environment in which BCE is becoming more competitive.
Chevron Corp. (CHV - $80.3125 - NYSE) is the third largest U.S. natural gas
producer and is one of the nation's largest crude oil refiners and marketers of
petroleum products. Chevron is the largest supplier of California's mandated
reformulated gasolines. Worldwide net production was more than 1.5 million
barrels a day of oil and equivalent gas. Through its 50% interest in Caltex
Petroleum, Chevron benefits from increasing energy consumption in Southeast
Asia. The company plans to spend nearly $4 billion on worldwide exploration and
production in 1998. Development projects include Kazakstan (building a pipeline
linking the giant Tengiz oil field to the Black Sea ports) and the North Sea.
The quarterly dividend was increased in January from 58 cents to 61 cents per
share.
Eastern Enterprises (EFU - $43.00 - NYSE) owns and operates Boston Gas Company,
New England's largest distributor of natural gas, serving 530,000 residential,
commercial and industrial customers. The company also owns and operates Midland
Enterprises, the leading U.S. dry-cargo, inland waterways barge operator with a
fleet of 2,300 barges and 87 tug boats. Headquartered in Cincinnati, Midland
provides low-cost marine transportation to many of the country's major
industrial and agricultural regions. Our interest in Eastern Enterprises stems
from management's direction under Woody Ives. In December 1997, Eastern sold its
50% interest in AllEnergy. The company's strong balance sheet affords the
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opportunity to make attractive strategic commitments, such as the agreement to
acquire Essex County Gas for $80 million. The dividend, increased to an annual
rate of $1.64 per share, provides an attractive 3.75% yield for this cash rich
company.
Exxon Corp. (XON - $67.625 - NYSE), with an equity market value of $180 billion,
is the world's largest, publicly owned integrated oil company. The company
produced 1.6 million barrels of crude oil and 6.3 billion cubic feet of natural
gas per day in 1997. Roughly one-half of Exxon's production comes from overseas
reserves. Major, promising oil and gas exploration projects in West Africa, the
Caspian Sea, Russia, the Gulf of Mexico and South America are being pursued.
Profitability, in a period of fluctuating energy prices, has been sustained by
management's success in holding costs essentially flat since 1990. Dividends
have been paid since 1882 and have been increased annually since 1983.
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 Equity Income Fund and other Gabelli Funds are
available through the no-transaction fee programs at many major discount
brokerage firms.
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 GABEX. Please call us during the
business day for further information.
The strong performance of our telecommunications holdings helped propel
the Gabelli Equity Income Fund to 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
our yield orientation and positioning in groups and individual securities
trading at more reasonable relationships to economic value will work to the
Fund's benefit should the stock market lose momentum. We thank you for your
loyalty and as always, pledge our best efforts on your behalf.
Sincerely,
/s/ Mario J. Gabelli /s/ James Foung
Mario J. Gabelli, CFA James Foung, CFA
Portfolio Manager and Associate Portfolio Manager
Chief Investment Officer
April 30, 1998
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The Gabelli Equity Income Fund
Portfolio of Investments -- March 31, 1998 (Unaudited)
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS -- 84.8%
Aerospace -- 1.3%
18,000 Boeing Co. ........................... $ 694,444 $ 938,250
1,000 Raytheon Co., Cl. A .................. 27,785 56,875
2,000 Rockwell International Corp. ......... 50,431 114,750
---------- ----------
772,660 1,109,875
---------- ----------
Agriculture -- 0.9%
15,000 Monsanto Co. ......................... 636,003 780,000
---------- ----------
Automotive -- 1.3%
4,500 Ford Motor Co. ....................... 106,050 291,656
12,000 General Motors Corp. ................. 423,560 809,250
---------- ----------
529,610 1,100,906
---------- ----------
Automotive: Parts and Accessories -- 1.6%
2,500 Dana Corp. ........................... 65,938 145,469
20,000 GenCorp Inc. ......................... 327,212 615,000
14,000 Genuine Parts Co. .................... 333,496 533,750
4,666 Meritor Automotive Inc. .............. 98,185 123,941
---------- ----------
824,831 1,418,160
---------- ----------
Aviation: Parts and Services -- 1.6%
10,000 Barnes Group Inc. .................... 166,500 333,125
19,000 Curtiss-Wright Corp. ................. 279,092 736,250
4,000 United Technologies .................. 226,617 369,250
---------- ----------
672,209 1,438,625
---------- ----------
Business Services -- 1.4%
2,000 Cognizant Corp. ...................... 67,510 114,750
2,000 Computer Sciences Corp.+ ............. 103,484 110,000
4,000 Dun & Bradstreet Corp. ............... 93,161 136,750
1,000 Imation Corp.+ ....................... 16,753 18,500
8,000 International Business
Machines Corp. ..................... 204,078 831,000
2,000 Landauer Inc. ........................ 35,944 54,000
---------- ----------
520,930 1,265,000
---------- ----------
Communications Equipment -- 0.1%
1,000 Motorola Inc. ........................ 27,263 60,625
---------- ----------
Consumer Products -- 6.6%
18,000 Eastman Kodak Co. .................... 1,085,048 1,167,750
10,000 Fortune Brands Inc. .................. 277,452 398,750
40,000 Gallaher Group plc, ADR .............. 679,371 865,000
5,000 General Cigar Holdings Inc.+ ......... 44,132 76,563
12,000 General Electric Co. ................. 287,467 1,034,250
4,000 Gillette Co. ......................... 96,850 474,750
16,000 National Presto Industries Inc. ...... 669,027 689,000
25,000 Philip Morris Companies Inc. ......... 976,429 1,042,188
---------- ----------
4,115,776 5,748,251
---------- ----------
Consumer Services -- 0.4%
15,000 Rollins Inc. ......................... 308,938 313,125
---------- ----------
Diversified Industrial -- 4.4%
17,137 GATX Corp. ........................... 998,952 1,336,686
7,500 Honeywell Inc. ....................... 323,296 620,156
8,000 Minnesota Mining &
Manufacturing Co. .................. 603,650 729,500
15,000 Tenneco Inc. ......................... 600,862 640,313
21,000 Thomas Industries Inc. ............... 157,975 467,250
1,000 Trinity Industries Inc. .............. 26,570 54,875
---------- ----------
2,711,305 3,848,780
---------- ----------
Energy: Electric -- 2.0%
8,000 Central & South West Corp. ........... 217,400 214,000
1,000 FPL Group Inc. ....................... 28,613 64,250
95,000 Niagara Mohawk
Power Corp.+ ......................... 1,010,838 1,235,000
8,000 PacifiCorp ........................... 158,700 197,000
---------- ----------
1,415,551 1,710,250
---------- ----------
Energy: Natural Gas -- 11.1%
30,000 Bay State Gas Co. .................... 858,690 1,130,625
4,500 Berkshire Gas Co. .................... 79,060 109,125
50,000 Colonial Gas Co. ..................... 1,183,188 1,434,375
34,000 Commonwealth
Energy System ........................ 761,900 1,355,750
53,000 Eastern Enterprises .................. 1,493,050 2,279,000
58,000 ENI SpA .............................. 304,221 395,179
3,000 Essex County Gas Co. ................. 86,520 138,375
10,000 Fall River Gas Co. ................... 160,250 161,875
3,000 KeySpan Energy Corp. ................. 74,900 108,938
4,000 Peoples Energy Corp. ................. 138,275 145,500
70,000 Southwest Gas Corp. .................. 1,128,400 1,461,250
20,500 Wicor Inc. ........................... 914,533 991,688
---------- ----------
7,182,987 9,711,680
---------- ----------
Energy: Oil -- 13.8%
13,000 Atlantic Richfield Co. ............... 703,893 1,022,125
22,500 British Petroluem Co. plc, ADR ....... 494,156 1,936,406
15,000 Burlington Resources Inc. ............ 628,715 719,063
28,000 Chevron Corp. ........................ 918,500 2,248,750
5,000 Elf Aquitaine SA ..................... 233,000 323,750
45,000 Exxon Corp. .......................... 1,368,325 3,043,125
18,000 Halliburton Co. ...................... 378,023 903,375
10,000 Pennzoil Co. ......................... 488,500 646,250
21,000 Texaco Inc. .......................... 641,025 1,265,250
---------- ----------
5,854,137 12,108,094
---------- ----------
Entertainment -- 0.5%
2,000 PolyGram NV, ADR ..................... 58,725 92,750
4,000 USA Networks Inc. .................... 53,340 109,000
4,000 Viacom Inc., Cl. A+ .................. 123,940 212,500
---------- ----------
236,005 414,250
---------- ----------
See accompanying notes to financial statements.
8
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The Gabelli Equity Income Fund
Portfolio of Investments (Continued) -- March 31, 1998 (Unaudited)
================================================================================
Market
Shares Cost Value
------ ---- -----
Equipment and Supplies -- 4.8%
15,000 Aeroquip-Vickers Inc. ................ $ 454,968 $ 867,188
4,800 Caterpillar Inc. ..................... 56,973 264,300
2,000 Cooper Industries Inc. ............... 84,754 118,875
25,000 Deere & Co. .......................... 347,127 1,548,438
10,000 EG&G Inc. ............................ 175,863 290,625
8,000 Ingersoll Rand Co. ................... 203,204 383,500
1,500 Minerals Technologies Inc. ........... 37,938 75,563
14,000 Smith (A.O.) Corp., Cl. B ............ 468,825 626,500
1,000 Union Carbide Corp. .................. 16,675 50,125
---------- ----------
1,846,327 4,225,114
---------- ----------
Financial Services -- 13.0%
27,000 American Express Co. ................. 580,558 2,478,938
29,000 Banco Santander SA, ADR .............. 433,884 1,433,688
10,000 BankAmerica Co. ...................... 211,500 826,250
3,000 Bankers Trust Co. .................... 258,275 360,938
27,000 Commerzbank AG, ADR .................. 554,661 981,281
2,000 CoreStates Financial Corp. ........... 147,154 179,500
19,000 Deutsche Bank AG, ADR ................ 955,700 1,448,750
2,000 Fidelity National Corp.+ ............. 22,958 26,500
4,000 Mellon Bank Corp. .................... 229,741 254,000
9,000 Morgan (J.P.) & Co. Inc. ............. 559,163 1,208,813
3,000 Municipal Mortgage &
Equity LLC ........................... 60,488 65,250
3,000 Northern Trust Co. ................... 60,300 224,250
1,000 Pioneer Group Inc. ................... 30,124 31,250
12,000 SunTrust Banks Inc. .................. 251,737 904,500
2,200 Transamerica Corp. ................... 111,528 256,300
4,000 U.S. Trust Corp. ..................... 47,394 263,000
5,000 Wachovia Corp. ....................... 404,975 424,063
---------- ----------
4,920,140 11,367,271
---------- ----------
Food and Beverage -- 1.4%
2,000 Bestfoods Inc. ....................... 192,316 233,750
5,000 Coca-Cola Amatil Ltd., ADR ........... 79,698 78,906
2,000 Corn Products
International Inc.+ .................. 62,484 71,750
5,000 Heinz (H.J.) Co. ..................... 236,188 291,875
10,000 Kellogg Co. .......................... 308,160 431,250
2,000 Quaker Oats Co. ...................... 69,725 114,500
---------- ----------
948,571 1,222,031
---------- ----------
Health Care -- 1.4%
1,000 Glaxo Wellcome plc, ADR .............. 54,024 54,125
7,000 Johnson & Johnson .................... 136,367 513,188
10,000 Pharmacia & Upjohn Inc. .............. 290,500 437,500
3,000 SmithKline
Beecham plc, ADR ..................... 184,980 187,688
---------- ----------
665,871 1,192,501
---------- ----------
Metals and Mining -- 0.3%
15,000 Freeport-McMoRan
Copper & Gold Inc., Cl. B ............ 280,267 299,063
---------- ----------
Publishing -- 3.0%
12,000 Dow Jones & Co. Inc. ................. 550,870 635,250
3,000 Harcourt General Inc. ................ 136,775 166,125
3,000 McGraw-Hill Companies Inc. ........... 178,192 228,188
40,000 Reader's Digest
Association Inc., Cl. A .............. 939,944 1,092,500
20,000 Reader's Digest
Association Inc., Cl. B .............. 472,269 537,500
---------- ----------
2,278,050 2,659,563
---------- ----------
Real Estate -- 0.0%
2,500 Griffin Land & Nurseries Inc.+ ....... 11,716 37,500
---------- ----------
Retail -- 0.4%
5,000 Giant Food Inc., Cl. A ............... 168,375 193,125
2,000 Sears, Roebuck & Co. ................. 51,242 114,875
---------- ----------
219,617 308,000
---------- ----------
Satellite -- 0.6%
15,000 COMSAT Corp. ......................... 291,042 516,563
---------- ----------
Specialty Chemicals -- 2.0%
2,000 E.I. du Pont de Nemours
and Co. .............................. 65,500 136,000
7,500 Ferro Corp. .......................... 138,500 220,313
10,000 Grace (W.R.) & Co. ................... 517,655 836,875
12,000 Hoechst AG, ADR ...................... 460,144 471,000
2,500 IMC Global Inc. ...................... 53,592 95,156
---------- ----------
1,235,391 1,759,344
---------- ----------
Telecommunications -- 10.5%
5,000 Alltel Corp. ......................... 120,500 218,438
2,000 AT&T Corp. ........................... 123,975 131,250
18,000 BC Telecom Inc. ...................... 317,456 697,405
50,000 BCE Inc. ............................. 845,709 2,087,500
2,304 Bell Atlantic Corp. .................. 117,619 236,160
1,500 British Telecommunications
plc, ADR ............................. 84,309 164,063
10,000 Cable & Wireless plc, ADR ............ 217,366 377,500
40,660 Citizens Utilities Co., Cl. B+ ....... 428,256 429,468
7,000 Deutsche Telekom AG, ADR ............. 149,708 154,000
1,000 France Telecom SA, ADR+ .............. 34,488 53,250
24,000 GTE Corp. ............................ 811,200 1,437,000
10,000 Hong Kong
Telecommunications Ltd., ADR ......... 139,671 209,375
2,000 SBC Communications Inc. .............. 37,775 87,250
27,000 Southern New England
Telecommunications Corp. ............. 949,251 1,952,438
3,500 Telecom Italia SpA, ADR .............. 108,779 278,031
4,000 Telefonica de Espana, ADR ............ 173,262 529,000
2,000 US WEST Communications
Group ................................ 49,678 109,500
---------- ----------
4,709,002 9,151,628
---------- ----------
See accompanying notes to financial statements.
9
<PAGE>
The Gabelli Equity Income Fund
Portfolio of Investments (Continued) -- March 31, 1998 (Unaudited)
================================================================================
Market
Shares Cost Value
------ ---- -----
Utilities -- 0.4%
19,000 United Water Resources Inc. ............ $ 349,388 $ 343,188
----------- -----------
TOTAL COMMON STOCKS .................... 43,563,587 74,109,387
----------- -----------
CONVERTIBLE PREFERRED STOCKS -- 2.9%
Broadcasting -- 0.2%
3,000 Granite Broadcasting
Corp. $1.938 Cv. Pfd. ................ 165,917 170,625
----------- -----------
Entertainment -- 0.0%
500 Metromedia International
Group Inc. Cv. Pfd. .................. 25,000 29,563
----------- -----------
Equipment and Supplies -- 0.5%
4,000 Sequa Corp. $5.00 Cv. Pfd. ............. 273,150 410,000
----------- -----------
Metals and Mining -- 0.1%
5,000 Freeport-McMoRan Copper &
Gold Inc. 7.00% Cv. Pfd. ............. 106,500 114,063
----------- -----------
Publishing -- 0.1%
2,000 Golden Books Financial
Trust Cv. Pfd. ....................... 100,000 109,250
----------- -----------
Telecommunications -- 2.0%
22,000 Sprint Corp. $2.6301 Cv. Pfd. .......... 817,628 1,410,750
4,000 US WEST Communications
Group Cv. Pfd. ....................... 206,033 286,000
----------- -----------
1,023,661 1,696,750
----------- -----------
TOTAL CONVERTIBLE
PREFERRED STOCKS ....................... 1,694,228 2,530,251
----------- -----------
PREFERRED STOCKS -- 0.6%
Telecommunications -- 0.6%
11,500 Citizens Utilities Co. Pfd. ............ 548,346 563,500
----------- -----------
Principal
Amount
------
CONVERTIBLE CORPORATE BONDS -- 2.9%
Business Services -- 0.1%
$100,000 BBN Corp. Sub. Deb. Cv.
6.00%, 04/01/12 ...................... 97,023 96,625
----------- -----------
Consumer Products -- 0.7%
700,000 Fieldcrest Cannon Inc. Sub.
Deb. Cv. 6.00%, 03/15/12 ............. 544,275 635,250
----------- -----------
Energy -- 0.2%
100,000 Pennzoil Co. Sub. Deb. Cv.
6.50%, 01/15/03 ...................... 100,000 196,750
----------- -----------
Entertainment -- 0.2%
150,000 Savoy Pictures Entertainment
Inc. Sub. Deb. Cv. 7.00%,
07/01/03 ............................. 132,654 147,563
----------- -----------
Principal Market
Amount Cost Value
------ ---- -----
Equipment and Supplies -- 0.5%
$398,000 Kollmorgen Corp. Sub. Deb.
Cv. 8.75%, 05/01/09 .................. $ 347,721 $ 413,920
----------- -----------
Hotels and Gaming -- 0.1%
50,000 Hilton Hotels Corp. Sub. Deb.
Cv. 5.00%, 05/15/06 .................. 50,000 55,000
----------- -----------
Publishing -- 0.9%
100,000 News America Holdings Inc.
Sub. Deb. Cv. Zero Cpn.,
03/31/02 ............................. 73,784 114,924
700,000 Thomas Nelson Inc.
Sub. Deb. Cv. 5.75%,
11/30/99 (a) ......................... 689,945 697,375
----------- -----------
763,729 812,299
----------- -----------
Transportation -- 0.2%
200,000 Greyhound Lines Inc. Sub.
Deb. Cv. 8.50%, 03/31/07 ............. 93,867 205,000
----------- -----------
TOTAL CONVERTIBLE
CORPORATE BONDS ........................ 2,129,269 2,562,407
----------- -----------
U.S. GOVERNMENT OBLIGATIONS -- 7.9%
6,942,000 U.S. Treasury Bills,
4.98% to 5.43%, due
04/16/98 to 05/28/98 ++ .............. 6,920,355 6,920,355
----------- -----------
TOTAL INVESTMENTS -- 99.1%
$54,855,785 86,685,900
-----------
Other Assets and
Liabilities (Net)-- 0.9% ............. 828,863
-----------
NET ASSETS -- 100.0%
(4,943,277 shares outstanding) ....... $87,514,763
===========
NET ASSET VALUE, Offering
and Redemption Price
Per Share ............................ $ 17.70
===========
FORWARD FOREIGN EXCHANGE CONTRACTS
Expiration Net Unrealized
Date Depreciation
---- ------------
1,500,000 (b) Sold Hong Kong Dollars
in exchange for
USD 190,815.................... 08/26/98 $(1,634)
(a) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At March
31, 1998, the market value of Rule 144A securities amounted to $697,375 or
0.8% of net assets.
(b) Principal amount denoted in Hong Kong Dollars.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR -- American Depositary Receipt
See accompanying notes to financial statements.
10
<PAGE>
The Gabelli Equity Income Fund
Statement of Assets and Liabilities
March 31, 1998
(Unaudited)
================================================================================
Assets:
Investments, at value (Cost $54,855,785) ................. $86,685,900
Cash ..................................................... 23,056
Foreign currency, at value (Cost $9,359) ................. 8,868
Receivable for investments sold .......................... 682,428
Dividends and interest receivable ........................ 213,950
Receivable for capital shares issued ..................... 76,515
-----------
Total Assets ........................................... 87,690,717
-----------
Liabilities:
Payable for investment advisory fees ..................... 72,037
Payable for distribution fees ............................ 19,111
Other accrued expenses ................................... 84,806
-----------
Total Liabilities ...................................... 175,954
-----------
Net Assets applicable to 4,943,277
shares outstanding ................................... $87,514,763
===========
Net Assets consist of:
Capital stock, at par value .............................. $ 4,943
Additional paid-in capital ............................... 53,757,012
Undistributed net investment income ...................... 6,133
Accumulated net realized gain on
investments, futures contracts and
foreign currency transactions ............................... 1,918,811
Net unrealized appreciation on investments,
futures contracts and foreign currency
transactions ........................................... 31,827,864
-----------
Total Net Assets ....................................... $87,514,763
===========
Net Asset Value, offering and redemption
price per share ($87,514,763 / 4,943,277
shares outstanding; 1,000,000,000 shares
authorized of $0.001 par value) ...................... $ 17.70
===========
Statement of Operations
For the Six Months Ended March 31, 1998 (Unaudited)
================================================================================
Investment Income:
Dividends ................................................. $ 900,371
Interest .................................................. 286,833
-----------
Total Investment Income ................................. 1,187,204
-----------
Expenses:
Investment advisory fees .................................. 386,991
Distribution fees ......................................... 96,748
Shareholder services fees ................................. 75,804
Shareholder report expenses ............................... 23,767
Legal and audit fees ...................................... 18,375
Custodian fees ............................................ 14,393
Registration fees ......................................... 7,799
Miscellaneous expenses .................................... 15,514
-----------
Total Expenses .......................................... 639,391
-----------
Net Investment Income ................................... 547,813
-----------
Net Realized and Unrealized Gain on Investments:
Net realized gain on investments,
futures contracts and foreign currency
transactions ............................................ 2,349,445
Net change in unrealized appreciation
on investments, futures contracts and
foreign currency transactions ........................... 7,381,987
-----------
Net realized and unrealized gain on
investments, futures contracts
and foreign currency transactions ...................... 9,731,432
-----------
Net increase in net assets resulting from
operations ................................................. $10,279,245
===========
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 ....................................................................... $ 547,813 $ 912,876
Net realized gain on investments, futures contracts and foreign currency transactions ....... 2,349,445 7,289,794
Net change in unrealized appreciation on investments, futures contracts and
foreign currency transactions ............................................................. 7,381,987 10,713,542
------------ ------------
Net increase in net assets resulting from operations ...................................... 10,279,245 18,916,212
------------ ------------
Distributions to shareholders:
Net investment income ....................................................................... (718,121) (912,876)
In excess of net investment income .......................................................... -- (6,607)
Net realized gain on investment transactions ................................................ (7,160,971) (2,841,998)
------------ ------------
Total distributions to shareholders ....................................................... (7,879,092) (3,761,481)
------------ ------------
Capital Share Transactions:
Net increase in net assets from capital share transactions .................................. 11,384,394 1,569,224
------------ ------------
Net increase in net assets ................................................................ 13,784,547 16,723,955
Net Assets:
Beginning of period ......................................................................... 73,730,216 57,006,261
------------ ------------
End of period ............................................................................... $ 87,514,763 $ 73,730,216
============ ============
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
The Gabelli Equity Income Fund
Notes to Financial Statements (Unaudited)
================================================================================
1. Description. The Gabelli Equity Income 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 to seek a high level of total return
with an emphasis on income. The Fund commenced operations on January 2, 1992.
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 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.
12
<PAGE>
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued) (Unaudited)
================================================================================
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 currency contracts are valued at the
forward rate and are marked-to-market daily. The change in market value is
recorded by the Fund as an unrealized gain or loss. 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 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 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, 1997, reclassifications were made to increase
undistributed net investment income for $210,404 and realized loss on
investments for $294,555 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.
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.
13
<PAGE>
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued) (Unaudited)
================================================================================
4. Distribution Plan. The Fundis 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 $96,748, 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 $20,078,459
and $17,223,737, respectively.
6. Transactions with Affiliates. During the six months ended March 31, 1998, the
Fund paid brokerage commissions of $12,705 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 ................................. 636,731 $10,695,808 920,283 $13,914,893
Shares issued upon reinvestment of dividends 463,685 7,413,879 243,710 3,536,567
Shares redeemed ............................. (396,348) (6,725,293) (1,052,497) (15,882,236)
-------- ----------- ---------- -----------
Net increase ................................ 704,068 $11,384,394 111,496 $ 1,569,224
======== =========== =========== ===========
</TABLE>
14
<PAGE>
The Gabelli Equity Income 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>
Operating performance:
Net asset value, beginning of period .......... $ 17.39 $ 13.81 $ 12.65 $ 11.54 $ 12.15 $ 10.40
------- ------- ------- ------- ------- -------
Net investment income ......................... 0.12 0.22 0.28 0.29 0.30 0.29
Net realized and unrealized gain on
investments ................................. 2.02 4.28 1.76 1.77 0.08 1.81
------- ------- ------- ------- ------- -------
Total from investment operations .............. 2.14 4.50 2.04 2.06 0.38 2.10
------- ------- ------- ------- ------- -------
Distributions to shareholders:
Net investment income ......................... (0.16) (0.22) (0.28) (0.29) (0.31) (0.29)
In excess of net investment income ............ -- -- (0.01) -- -- --
Net realized gains ............................ (1.67) (0.70) (0.59) (0.66) (0.68) (0.06)
------- ------- ------- ------- ------- -------
Total distributions ........................... (1.83) (0.92) (0.88) (0.95) (0.99) (0.35)
------- ------- ------- ------- ------- -------
Net asset value, end of period ................ $ 17.70 $ 17.39 $ 13.81 $ 12.65 $ 11.54 $ 12.15
======= ======= ======= ======= ======= =======
Total return (a) .............................. 13.5% 34.0% 16.7% 19.2% 3.3% 20.5%
======= ======= ======= ======= ======= =======
Ratios to average net assets / supplemental data:
Net assets, end of period (in 000s) ........... $87,515 $73,730 $57,006 $54,806 $50,191 $54,585
Ratio of net investment income to average
net assets .................................. 1.41%(b) 1.42% 1.99% 2.50% 2.58% 2.62%
Ratio of operating expenses to average
net assets .................................. 1.65%(b) 1.78% 1.93% 1.83% 1.81% 1.78%
Portfolio turnover rate ....................... 24% 43% 20% 30% 20% 76%
Average commission rate per share (c) ......... $0.0443 $0.0464 $0.0480 -- -- --
</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.
- --------------------------------------------------------------------------------
Top Ten Holdings
March 31, 1998
Exxon Corp. Southern New England Telecom.
American Express Co. British Petroleum Co. plc
Eastern Enterprises Deere & Co.
Chevron Corp. Southwest Gas Corp.
BCE Inc. Deutsche Bank AG
- --------------------------------------------------------------------------------
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.
15
<PAGE>
Gabelli Equity Series Funds, Inc.
The Gabelli Equity Income 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.
Karl Otto Pohl
Felix J. Christiana Former President
Former Senior Vice President Deutsche Bundesbank
Dollar Dry Dock Savings Bank
Anthony R. Pustorino
Anthony J. Colavita Certified Public Accountant
Attorney-at-Law Professor, Pace University
Anthony J. Colavita, P.C.
Anthonie C. van Ekris
Vincent D. Enright Managing Director
Senior Vice President and BALMAC International, Inc.
Chief Financial Officer
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 Equity Income Fund. It is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
