[PHOTO OMITTED]
The
Gabelli
Small Cap
Growth
Fund
THIRD QUARTER REPORT
JUNE 30, 1998
<PAGE>
The Gabelli Small Cap Growth Fund
One Corporate Center
Rye, New York 10580-1434
Third Quarter Report
June 30, 1998(a)
* * * *
Morningstar rated The Gabelli Small Cap Growth Fund 4 stars overall and for
the three and five year periods ended 6/30/98 among 2545 and 1462
domestic equity funds, respectively.
To Our Shareholders,
In the second quarter of 1998, the U.S. stock market indices stalled as
news from Asia continued to unsettle investors. The small cap market was
actually weaker than the indices would indicate, with the majority of stocks
declining and many small cap stocks in full retreat. Our selective stock picking
helped sustain The Gabelli Small Cap Growth Fund in this difficult period for
small cap stocks and we are pleased to have nearly doubled the widely used
benchmark for small cap stocks, the Russell 2000 Index, with a year-to-date
return of 9.3% versus the 4.9% return of the Russell 2000.
Investment Performance
For the quarter ended June 30, 1998, The Gabelli Small Cap Growth Fund's
(the "Fund") net asset value declined 1.4%. The Value Line Composite and Russell
2000 Index declined by 3.0% and 4.7%, respectively, over the same period. Each
index is an unmanaged indicator of stock market performance. The Fund was up
24.4% over the trailing twelve month period. The Value Line Composite and
Russell 2000 rose 20.6% and 16.5%, respectively, over the same twelve month
period.
For the five year period ended June 30, 1998, the Fund's return averaged
18.1% annually, versus average annual returns of 17.9% and 16.1% for the Value
Line Composite and Russell 2000, respectively. Since inception on October 22,
1991 through June 30, 1998, the Fund had a total return of 268.2%, which equates
to an average annual return of 21.5%.
- --------------------------------------------------------------------------------
Past performance is no guarantee of future results. Morningstar proprietary
ratings reflect historical risk adjusted performance as of June 30, 1998 and are
subject to change every month. Morningstar ratings are calculated from a Fund's
three, five and ten year average annual returns in excess of 90-day T-bill
returns with appropriate fee adjustments and a risk factor that reflects fund
performance below 90-day T-Bill returns. The top 10% of the funds in an
investment category receive five stars and the next 22.5% receive four stars.
(a) The Fund's fiscal year ends September 30.
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT RESULTS (a)(c)
- ------------------------------------------------------------------------------------------------
Calendar Quarter
----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1st 2nd 3rd 4th Year
1998: Net Asset Value............. $23.93 $23.59 -- -- --
Total Return................ 10.9% (1.4%) -- -- --
- ------------------------------------------------------------------------------------------------
1997: Net Asset Value............. $19.11 $22.23 $25.42 $21.58 $21.58
Total Return................ 3.1% 16.3% 14.7% (0.8)% 36.5%
- ------------------------------------------------------------------------------------------------
1996: Net Asset Value............. $19.65 $20.68 $20.02 $18.53 $18.53
Total Return................ 6.2% 5.2% (3.2)% 3.4% 11.9%
- ------------------------------------------------------------------------------------------------
1995: Net Asset Value............. $17.03 $17.88 $19.34 $18.50 $18.50
Total Return................ 7.4% 5.0% 8.2% 2.6% 25.2%
- ------------------------------------------------------------------------------------------------
1994: Net Asset Value............. $16.76 $16.33 $17.24 $15.85 $15.85
Total Return................ (3.6)% (2.6)% 5.6% (2.1)% (2.9)%
- -------------------------------------------------------------------------------------------------
1993: Net Asset Value............. $15.46 $15.74 $16.90 $17.38 $17.38
Total Return................ 6.6% 1.8% 7.4% 5.3% 22.8%
- -------------------------------------------------------------------------------------------------
1992: Net Asset Value............. $13.42 $13.41 $13.10 $14.50 $14.50
Total Return................ 9.9% (0.1)% (2.3)% 12.1% 20.3%
- -------------------------------------------------------------------------------------------------
1991: Net Asset Value............. -- -- -- $12.21 $12.21
Total Return................ -- -- -- 22.9%(b) 22.9%(b)
- --------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------------------------------
Average Annual Returns - June 30, 1998 (a)
1 Year ............................24.4%
5 Year.............................18.1%
Life of Fund (b)...................21.5%
- ----------------------------------------------
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.
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2
<PAGE>
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
Beating Up the Little Guys
While investors worry about a substantial correction or even a bear market
for the Dow Jones Industrial Average (DJIA) and Standard & Poor's (S&P) 500,
small cap stocks are already experiencing one. Although as of the end of second
quarter 1998, the Russell 2000 is up modestly, approximately 60% of all Nasdaq
listed stocks are off 20% or more from their 52 week highs. What is wrong with
small cap stocks? In our opinion, nothing. In fact, we believe that small
companies operating primarily in the domestic market are far less vulnerable to
Asian economic problems than the large multinationals. This has not prevented
investors from abandoning small cap stocks to chase large cap stock returns. Is
this likely to change in the foreseeable future? We do not know and in a sense,
do not care. We are patient value investors who count on Mr. Market's mood
swings to allow us to buy quality companies at discount prices. The fact that
Mr. Market, perhaps fueled by the migration of assets into S&P index funds, is
mindlessly lavishing attention on large companies and ignoring more
fundamentally attractive smaller ones, makes it easier for us to pick up small
cap stock bargains.
Deal Activity Surfaces Value
One component of our investment methodology is to identify industry and
sector trends and themes ahead of the curve and position ourselves to benefit
from these developments. Industry consolidation is one such trend. As we have
discussed in previous letters, the continued strong merger and acquisition
activity is providing a tailwind to the excellent performance of the Fund this
year. The accompanying tables illustrate how deal activity surfaced value in a
small sample of the portfolio holdings.
3
<PAGE>
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1998 Completed Deals
Fund Holding Closing Date % Return(a)
------------ ------------ -----------
Ticketmaster Group Inc. 6/24 24.6%
Culligan Water Technologies Inc. 6/16 11.2
Handy & Harman 4/06 2.2
Percentage Changes through June 30, 1998 for Announced Deals
Second Year-to-Date
Current Fund Holdings Quarter Return(b) Return(b)
--------------------- ----------------- ---------
Cable Michigan Inc. 52.9% 70.5%
Pete's Brewing Co. 45.5 50.0
Pulitzer Publishing Co. 11.7 42.1
BET Holdings Inc. 3.0 15.2
Ragan (Brad) Inc. 6.3 3.8
- --------------------------------------------------------------------------------
(a) Represents changes in share price and dividends paid from December 31,
1997 through the closing date.
(b) Represents changes in share price and dividends paid from the beginning of
the period through June 30, 1998.
Note: See the Portfolio of Investments for a complete listing of holdings.
- --------------------------------------------------------------------------------
Some Big Winners ... and Losers
A review of our top 20 list this quarter reveals the usual eclectic mix of
companies. We made good money in cable television (Cable Michigan), beer (Pete's
Brewing Co.), nutraceuticals (Celestial Seasonings) and industrial equipment
(Elsag Bailey).
In the losers category, gambling company Aztar crapped out, Amway Japan
and Amway Asia Pacific were turned away at the door, agricultural pump company
Valmont Industries went dry as investors focused on the negative implications of
Asian economic weakness on the American farmer and Golden Books Family
Entertainment unfolded as a very grim fairy tale.
Too Much of a Good Thing?
Investors' cool response to several big bank mergers (Norwest/Wells Fargo
and Citicorp/Travelers) and the government's new found sensitivity to the
further consolidation of American industry has led some market observers to
proclaim the end of what we have termed the third great wave of takeovers.
Upon his widely rumored demise, Mark Twain said, "The reports of my death
are greatly exaggerated". We echo these sentiments in regard to the premature
obituary for deals. We believe the "urge to merge" will remain strong in many
industry groups and that much of the action will be in smaller companies. Unlike
potential large cap targets in industries such as banking and drugs, small
companies have become cheaper making them even more attractive targets at a time
when lower long term capital gains tax rates have made it more profitable for
owner/managers to cash in the chips.
As to government meddling? We doubt the government will focus on small cap
deals. There are generally no antitrust implications or extensive job losses
that attract political attention.
4
<PAGE>
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 - $62.9375 - 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.
Liberty Corp. (LC - $50.3125 - NYSE) is a holding company with operations in
broadcasting and insurance. Liberty's Cosmos Broadcasting owns and operates
eight network affiliated television stations in the Southeast and Midwest. Five
stations are affiliated with NBC, two with ABC and one with CBS. These stations
serve more than four million households. Liberty Corp. is also purchasing an NBC
affiliate in Albany, GA and an ABC affiliate in Wilmington, NC. Liberty Life is
a regional insurer, with North Carolina, South Carolina and Louisiana accounting
for more than 50% of its premium volume. The insurance segment specializes in
providing agency (home service) and mortgage protection, life and health
insurance. In March, Liberty Corp. repurchased 2.4 million shares in a tender
offer at $52 per share.
Thomas Industries Inc. (TII - $24.4375 - NYSE) manufactures residential,
commercial and industrial lighting products, compressors and vacuum pumps.
Revenues and earnings, which have increased impressively in recent years, are
expected to continue to make significant gains through the year 2000. This
progress will be aided by Thomas Industries' joint venture being formed with
Genlyte Group, a manufacturer of lighting fixtures and controls. Both companies
will contribute substantially all of their lighting assets and liabilities to
the joint venture in which Thomas will own a 52% interest.
Tyler Corp. (TYL - $10.3125 - NYSE) is implementing a new corporate strategy and
now provides technology, software, data warehousing and electronic document
management systems, information management and, through Forest City Auto Parts,
retail automotive parts services. In the last quarter of 1997, Tyler entered
into agreements to acquire three companies that are leaders in providing
services to county and city governments: Business Resources Corp., The Software
Group Inc. and Interactive Computer Design Inc. These acquisitions were
completed in February.
USA Networks Inc. (USAI - $25.125 - Nasdaq) is a diversified entertainment and
electronic commerce company. Chairman and CEO Barry Diller has brought together
the following assets under one umbrella: the USA Network, the Sci-Fi Channel,
USA Networks Studios, USA Broadcasting, Home Shopping Network and Ticketmaster.
Plans are to integrate these assets, leveraging programming, production
capabilities and electronic commerce across its strong distribution platform.
5
<PAGE>
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.
In Conclusion
This past quarter, big continued to be beautiful on Wall Street. Over the
short term, money always follows returns. So, it is understandable that fast
money has abandoned small cap stocks to chase large cap returns. Rather than
bemoaning this trend, seasoned investors are licking their lips over the
excellent values presented in the small cap arena.
We are quite proud of the Fund's performance in what has been a very
difficult small cap market and we expect to continue following our value
oriented stock specific discipline.
The Fund's daily net asset value is available in the financial press and
each evening after 6:00 PM (Eastern Time) by calling 1-800-GABELLI
(1-800-422-3554). The Fund's Nasdaq symbol is GABSX. Please call us during the
business day for further information.
Sincerely,
/s/ Mario J. Gabelli
Mario J. Gabelli, CFA
Portfolio Manager and
Chief Investment Officer
August 1, 1998
- --------------------------------------------------------------------------------
Top Ten Holdings
June 30, 1998
BET Holdings Inc. CLARCOR Inc.
Liberty Corp. Celestial Seasonings Inc.
USA Networks Tyler Corp.
United Television Inc. Thomas Industries
Pittway Corp. Grief Bros. Corp.
- --------------------------------------------------------------------------------
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.
6
<PAGE>
The Gabelli Small Cap Growth Fund
Portfolio of Investments -- June 30, 1998 (Unaudited)
==================================================================
Market
Shares Value
------ -----
COMMON STOCKS -- 92.8%
Agriculture -- 0.0%
2,000 Cadiz Land Co.+....................... $ 23,125
353 Delta & Pine Land Co.................. 15,709
12,000 Erly Industries Inc.+................. 34,500
-----------
73,334
-----------
Automotive: Parts and Accessories -- 5.2%
100,000 Acktion Co.+.......................... 1,088,034
1,000 Borg-Warner Automotive Inc............ 48,063
75,000 GenCorp Inc........................... 1,893,750
7,500 Lund International Holdings Inc.+..... 85,313
20,000 Meritor Automotive Inc................ 480,000
100,000 Modine Manufacturing Co............... 3,462,499
5,250 Monro Muffler Brake Inc.+............. 82,688
46,000 Ragan (Brad) Inc.+.................... 1,805,500
58,000 Redlaw Industries Inc.+............... 39,875
1,000 SPX Corp.+............................ 64,375
118,000 Standard Motor Products Inc........... 2,625,500
10,000 Strattec Security Corp.+.............. 301,250
6,500 Superior Industries International Inc. 183,219
115,000 TransPro Inc.......................... 855,313
190,000 UAP Inc., Cl. A....................... 2,261,071
183,000 Wynn's International Inc.............. 3,522,749
-----------
18,799,199
-----------
Aviation: Parts and Services -- 4.3%
15,000 AAR Corp.............................. 443,438
46,000 Banner Aerospace Inc.+................ 592,250
4,000 Barnes Group Inc...................... 108,250
60,000 Curtiss-Wright Corp................... 2,351,250
7,500 Ducommun Inc.+........................ 150,000
120,000 Fairchild Corp., Cl. A+............... 2,422,500
26,500 Hi-Shear Industries Inc.+............. 71,219
43,000 Hudson General Corp................... 2,176,875
224,500 Kaman Corp., Cl. A.................... 4,272,515
75,000 Moog Inc., Cl. A+..................... 2,864,062
-----------
15,452,359
-----------
Broadcasting -- 6.4%
200,000 Ackerley Group Inc.................... 4,200,000
1,000 Clear Channel Communications Inc.+.... 109,125
12,000 Granite Broadcasting Corp.+........... 142,500
19,000 Gray Communications Systems Inc....... 615,125
32,000 Gray Communications Systems Inc., Cl. B 988,000
165,000 Liberty Corp.......................... 8,301,562
20,000 NTN Communications Inc.+.............. 20,000
110,600 Paxson Communications Corp.+.......... 1,341,025
3,000 Pegasus Communications Corp.+......... 63,000
19,531 Price Communications Corp.+........... 299,068
1,000 Scandinavian Broadcast System SA+..... 30,188
60,500 United Television Inc................. 6,927,250
3,000 Young Broadcasting Inc., Cl. A+....... 195,000
-----------
23,231,843
-----------
Building and Construction -- 2.4%
102,000 CalMat Co............................. 2,244,000
14,000 Florida Rock Industries Inc........... 408,625
14,000 Morgan Products Ltd.+................. 63,875
130,000 Nortek Inc.+.......................... 3,997,500
10,000 Oakwood Homes Corp.................... 300,000
77,000 Republic Group Inc.................... 1,617,000
-----------
8,631,000
-----------
Business Services -- 2.1%
13,000 Amway Asia Pacific Ltd................ 169,813
26,641 Amway Japan Ltd., ADR................. 144,860
31,000 Berlitz International Inc.+........... 837,000
22,000 Borg-Warner Security Corp.+........... 497,750
50,000 Data Broadcasting Corp.+.............. 318,750
6,000 Data Transmission Network Corp.+...... 240,000
33,429 EnviroSource Inc.+.................... 585,000
1,500 Gartner Group Inc.+................... 52,500
10,000 Hach Co............................... 124,063
10,000 Hach Co., Cl. A....................... 108,750
18,000 Industrial Distribution Group Inc.+... 279,000
10,000 Landauer Inc.......................... 298,750
83,000 Nashua Corp.+......................... 1,296,874
60,000 Paxar Corp.+.......................... 690,000
15,000 Pittston Brink's Group................ 553,125
20,000 Princeton Video Image Inc.+........... 92,500
72,000 Trans-Lux Corp........................ 877,500
8,000 Wackenhut Corp., Cl. A................ 181,000
6,187 Wackenhut Corp., Cl. B................ 133,021
-----------
7,480,256
-----------
Cable -- 1.1%
17,250 Cable Michigan Inc.+.................. 672,750
25,000 Cablevision Systems Corp., Cl. A+..... 2,087,500
2,000 Century Communications Corp., Cl. A+.. 37,500
10,000 People's Choice TV Corp.+............. 12,500
80,000 United International Holdings
Inc., Cl. A+ ......................... 1,280,000
-----------
4,090,250
-----------
Communications Equipment -- 0.2%
60,000 Allen Telecom Inc.+................... 697,500
-----------
Computer Software and Services -- 0.3%
1,000 @Home Corp., Ser. A+.................. 47,313
2,000 Anacomp Inc.+......................... 47,250
90,000 Bull Run Corp.+....................... 438,749
262 CBT Group plc, ADR+................... 14,017
10,000 Checkfree Holdings Corp.+............. 294,374
2,000 Cylink Corp.+......................... 24,000
1,000 Electronics For Imaging Inc.+......... 21,125
200 Macromedia Inc.+...................... 3,738
1,000 Noise Cancellation Technologies Inc.+. 688
93 Platinum Technology Co................ 2,656
1,000 Powerhouse Technologies Inc.+......... 9,813
7
<PAGE>
The Gabelli Small Cap Growth Fund
Portfolio of Investments (Continued) -- June 30, 1998 (Unaudited)
===================================================================
Market
Shares Value
------ -----
COMMON STOCKS (Continued)
Computer Software and Services (Continued)
1,000 Registry Magic Inc.+.................. $ 7,875
1,500 Volt Information Sciences Inc.+....... 40,688
-----------
952,286
-----------
Consumer Products -- 4.4%
3,000 Action Performance Companies Inc.+.... 96,563
5,000 American Safety Razor Co.+............ 73,125
170,474 Carlyle Industries Inc.+.............. 213,093
205,000 Carter-Wallace Inc.................... 3,702,812
61,000 Church & Dwight Co. Inc............... 1,974,874
12,000 Coachmen Industries Inc............... 313,500
38,000 First Brands Corp..................... 973,750
8,000 French Fragrances Inc.+............... 125,000
133,500 General Cigar Holdings Inc.,
Cl. B+ (a) ........................... 1,318,313
100,000 General Housewares Corp............... 1,006,250
85,000 Genlyte Group Inc.+................... 2,252,499
2,000 Harley-Davidson Inc................... 77,500
120,000 Hartmarx Corp.+ ..................... 907,500
25,000 National Presto Industries Inc........ 973,438
15,000 Nature's Sunshine Products Inc........ 338,438
4,000 Nu-Kote Holding Inc., Cl. A+.......... 1,625
2,000 Playtex Products Inc.+................ 31,875
5,000 Scotts Co., Cl. A+.................... 186,250
15,000 Skyline Corp.......................... 489,375
10,000 Steven Madden Ltd.+................... 115,625
14,000 Stewart Enterprises Inc., Cl. A....... 372,750
20,500 Weider Nutrition International Inc.... 348,500
-----------
15,892,655
-----------
Consumer Services -- 1.7%
20,000 Department 56 Inc.+................... 710,000
110,000 Loewen Group Inc...................... 2,970,000
32,000 Response USA Inc.+.................... 214,000
105,000 Rollins Inc........................... 2,152,500
3,000 Travel Services International Inc.+... 98,625
-----------
6,145,125
-----------
Country and Closed End Funds -- 1.5%
45,000 Central European Equity Fund Inc...... 725,625
80,000 Emerging Germany Fund Inc............. 1,224,999
45,000 France Growth Fund Inc................ 677,813
35,000 Germany Fund Inc...................... 654,063
44,000 Italy Fund Inc........................ 594,000
65,000 New Germany Fund Inc.................. 1,210,625
11,000 Spain Fund Inc........................ 207,625
-----------
5,294,750
-----------
Diversified Industrial -- 7.4%
95,000 Ampco-Pittsburgh Corp................. 1,460,625
8,000 Anixter International Inc.+........... 152,500
10,000 Antofagasta Holdings plc.............. 42,130
50,000 Crane Co.............................. 2,428,125
3,000 Flanders Corp.+....................... 14,625
37,500 Gardner Denver Machinery Corp.+....... 1,035,938
16,000 GATX Corp............................. 702,000
35,000 Katy Industries Inc................... 638,750
450,000 Lamson & Sessions Co.+................ 2,784,375
55,000 Lawter International Inc.............. 598,125
78,000 Lindsay Manufacturing Co.............. 2,115,750
11,000 Myers Industries Inc.................. 264,000
610,400 Noel Group Inc.+...................... 1,526,000
35,000 Oil-Dri Corporation of America........ 505,313
105,000 Park-Ohio Holdings Corp.+............. 1,942,500
20,000 Standex International Corp............ 592,500
205,000 Thomas Industries Inc................. 5,009,687
497,000 Tyler Corp.+.......................... 5,125,312
-----------
26,938,255
-----------
Education -- 0.0%
200 Computer Learning Centers Inc.+....... 4,975
200 Learning Tree International Inc.+..... 4,025
200 New Horizon Worldwide Inc.+........... 3,900
200 Wave Technologies International Inc.+. 1,113
20,000 Whitman Education Group Inc.+......... 92,500
-----------
106,513
-----------
Energy -- 2.7%
5,000 Basin Exploration Inc.+............... 88,125
3,000 Central Hudson Gas & Electric Corp.... 137,625
4,000 Fall River Gas Co..................... 58,000
6,000 Forcenergy Inc.+...................... 106,875
1,425,000 GEO International Corp.+ (a).......... 0
750 Halter Marine Group Inc.+............. 11,297
130,000 Kaneb Services Inc.+.................. 706,875
9,880 Ocean Energy Inc.+.................... 193,278
25,000 Orange & Rockland Utilities Inc....... 1,342,188
2,000 Oryx Energy Co.+...................... 44,250
2,000 Petsec Energy Ltd., ADR+.............. 32,375
2,000 Plains Resources Inc.+................ 35,875
285,000 RPC Inc............................... 3,562,499
105,000 Southwest Gas Corp.................... 2,565,937
15,000 Tesoro Petroleum Corp.+............... 238,125
5,000 TransMontaigne Oil Co.+............... 74,375
5,000 Union Pacific Resources Group Inc..... 87,813
4,000 Vastar Resources Inc.................. 174,750
12,000 Wicor Inc............................. 277,500
-----------
9,737,762
-----------
Entertainment -- 7.4%
115,000 Ascent Entertainment Group Inc.+...... 1,279,375
150,000 BET Holdings Inc., Cl. A+............. 9,440,624
3,000 Dover Downs Entertainment Inc......... 93,000
31,100 Fisher Companies Inc.................. 2,223,650
100,000 Florida Panthers Holdings Inc.+....... 1,968,750
8
<PAGE>
The Gabelli Small Cap Growth Fund
Portfolio of Investments (Continued) -- June 30, 1998 (Unaudited)
===================================================================
Market
Shares Value
------ -----
COMMON STOCKS (Continued)
Entertainment (Continued)
44,000 GC Companies Inc.+.................... $ 2,282,500
1,500 Groupe AB SA, ADR+.................... 8,438
3,000 International Speedway Corp........... 87,000
2,000 Loews Cineplex Entertainment Corp.+... 25,625
2,000 Metromedia International Group Inc.+.. 23,875
173,000 Spelling Entertainment Group Inc.+.... 1,621,875
110,000 Topps Co. Inc.+....................... 340,313
295,000 USA Networks Inc.+.................... 7,411,875
-----------
26,806,900
-----------
Equipment and Supplies -- 13.6%
64,000 AFC Cable Systems Inc.+............... 2,272,000
17,000 Alltrista Corp.+...................... 434,563
145,000 AMETEK Inc............................ 4,250,312
10,000 Amphenol Corp., Cl. A+................ 390,000
320,000 Baldwin Technology Co. Inc., Cl. A+... 1,880,000
1,000 Belden Inc............................ 30,625
4,000 Bway Corp.+........................... 86,000
295,500 CLARCOR Inc........................... 6,205,499
1,000 Commercial Intertech Corp............. 18,125
138,000 CTS Corp.............................. 4,071,000
38,000 Cuno Inc.+............................ 821,750
45,300 Daniel Industries Inc................. 860,700
30,000 Elsag Bailey Process Automation NV+... 721,875
225,000 Fedders Corp.......................... 1,504,688
60,000 Flowserve Corp........................ 1,477,500
40,000 General Magnaplate Corp............... 201,875
70,000 Gerber Scientific Inc................. 1,592,500
20,000 Global Industrial Technologies Inc.+.. 287,500
150,000 Hussmann International Inc............ 2,784,375
34,650 Johnston Industries Inc.+............. 160,256
10,000 K-Tron International Inc.+............ 186,250
105,000 Kollmorgen Corp....................... 2,106,563
10,000 Littelfuse Inc.+...................... 252,500
22,000 Lufkin Industries Inc................. 726,000
20,000 Mark IV Industries Inc................ 432,500
3,000 Material Sciences Corp.+.............. 34,875
5,000 Met-Pro Corp.......................... 74,688
82,000 Pittway Corp.......................... 6,252,499
4,000 Plantronics Inc.+..................... 206,000
11,000 Raytech Corp.+........................ 55,000
37,000 Sequa Corp., Cl. A+................... 2,469,750
12,000 Sequa Corp., Cl. B+................... 948,000
3,800 SL Industries Inc..................... 57,000
6,000 Smith (A.O.) Corp., Cl. A............. 306,375
54,000 SPS Technologies Inc.+................ 3,159,000
5,000 Teleflex Inc.......................... 190,000
15,000 Tennant Co............................ 663,750
30,000 U.S. Filter Corp.+.................... 841,875
5,000 Valmont Industries Inc................ 99,844
5,250 Watsco Inc., Cl. B.................... 184,406
-----------
49,298,018
-----------
Financial Services -- 2.4%
70,000 Berliner Bank Aktiengesellschaft...... 1,465,900
45,000 Danielson Holding Corp.+.............. 331,875
1,000 Federal Agricultural Mortgage
Corp., Cl. C+....................... 56,875
6,000 Gryphon Holdings Inc.+................ 99,000
18,000 Hibernia Corp......................... 363,375
4,000 Landamerica Financial Group........... 229,000
111,000 Midland Co............................ 2,539,125
500 Net.B@nk Inc.+........................ 14,750
140,000 Pioneer Group Inc..................... 3,683,750
-----------
8,783,650
-----------
Food and Beverage -- 5.0%
10,000 4Health Inc.+......................... 70,625
10,000 Advantica Restaurant Group Inc.+...... 97,500
34,864 Buenos Aires Embotelladora SA+........ 0
118,000 Celestial Seasonings Inc.+............ 5,840,999
7,500 Cheesecake Factory Inc.+.............. 169,688
190,000 Chock Full o'Nuts Corp.+.............. 1,294,375
220,000 Eskimo Pie Corp....................... 2,777,500
1,000 Farmer Brothers Co.................... 239,000
19,000 Genesee Corp., Cl. B.................. 627,000
10,000 International Multifoods Corp......... 275,000
12,000 J & J Snack Foods Corp.+.............. 250,500
8,000 Midwest Grain Products Inc.+.......... 116,000
1,000 Northland Cranberries Inc., Cl. A..... 15,438
130,000 Pepsi-Cola Puerto Rico Bottling Co.+.. 975,000
40,000 Pete's Brewing Co.+................... 243,750
25,000 Ralcorp Holdings Inc.+................ 471,875
5,000 Sylvan Food Holdings Inc.+............ 78,750
15,368 Tootsie Roll Industries Inc........... 1,179,494
48,000 Twinlab Corp.+........................ 2,097,000
15,000 Vlasic Foods International Inc.+...... 301,875
50,000 Whitman Corp.......................... 1,146,875
-----------
18,268,244
-----------
Health Care -- 0.5%
35,000 HealthPlan Services Corp.............. 612,500
135,500 IVAX Corp.+........................... 1,253,375
6,000 U.S. Physical Therapy Inc.+........... 74,250
-----------
1,940,125
-----------
Home Furnishings -- 1.5%
8,000 Bassett Furniture Industries Inc...... 225,500
1,000 Bed Bath & Beyond Inc.+............... 51,813
17,000 Foamex International Inc. ............ 296,438
10,000 La-Z-Boy Chair Co..................... 565,000
50,000 Mikasa Inc............................ 637,500
9
<PAGE>
The Gabelli Small Cap Growth Fund
Portfolio of Investments (Continued) -- June 30, 1998 (Unaudited)
===================================================================
Market
Shares Value
------ -----
COMMON STOCKS (Continued)
Home Furnishings (Continued)
70,000 Oneida Ltd............................ $ 2,143,749
30,000 Triangle Pacific Corp.+............... 1,650,000
-----------
5,570,000
-----------
Hotels and Gaming -- 2.9%
426,000 Aztar Corp.+.......................... 2,902,125
14,000 Boyd Gaming Corp.+.................... 80,500
20,000 Churchill Downs Inc................... 830,000
55,000 Extended Stay America Inc.+........... 618,750
35,000 Gaylord Entertainment Co.............. 1,128,750
56,000 Grand Casinos Inc.+................... 952,000
140,000 Jackpot Enterprises Inc.+............. 1,758,750
5,000 Jurys Hotel Group plc................. 35,917
52,000 Mirage Resorts Inc.+.................. 1,108,250
12,000 Penn National Gaming Inc.+............ 90,750
150,000 Trump Hotels & Casino Resorts Inc.+... 1,059,375
-----------
10,565,167
-----------
Metals and Mining -- 0.4%
150,000 Echo Bay Mines Ltd.+.................. 337,500
300,000 Pegasus Gold Inc.+.................... 72,000
10,000 Prime Resources Group Inc............. 70,042
270,000 Royal Oak Mines Inc.+................. 236,250
22,000 Stillwater Mining Co.+................ 596,750
5,000 Toreador Royalty Corp.+............... 15,625
80,000 TVX Gold Inc.+........................ 245,000
-----------
1,573,167
-----------
Paper and Forest Products -- 1.3%
123,000 Grief Bros. Corp...................... 4,597,125
-----------
Publishing -- 3.7%
10,000 CMP Media Inc., Cl. A+................ 175,000
45,000 Golden Books Family
Entertainment Inc.+................. 172,969
121,278 Independent Newspapers Ltd.+.......... 651,276
2,000 Lee Enterprises Inc................... 61,250
40,000 McClatchy Newspapers Inc., Cl. A...... 1,385,000
55,000 Media General Inc., Cl. A............. 2,681,250
33,000 Meredith Corp......................... 1,548,938
44,000 Pulitzer Publishing Co................ 3,927,000
190,000 Thomas Nelson Inc..................... 2,541,250
3,000 Wiley (John) & Sons Inc., Cl. B....... 185,250
-----------
13,329,183
-----------
Pumps and Valves -- 2.3%
58,000 Franklin Electric Co.................. 3,944,000
17,775 Gorman-Rupp Co........................ 322,172
15,000 Graco Inc............................. 523,125
70,000 IDEX Corp............................. 2,415,000
10,000 Robbins & Myers Inc................... 290,625
30,000 Roper Industries Inc.................. 783,750
-----------
8,278,672
-----------
Real Estate -- 1.3%
140,000 Catellus Development Corp.+........... 2,476,250
117,000 Griffin Land & Nurseries Inc.+........ 2,047,500
4,500 Gyrodyne Company of America Inc.+..... 90,000
-----------
4,613,750
-----------
Retail -- 5.0%
60,000 Aaron Rents Inc....................... 1,200,000
46,000 Aaron Rents Inc., Cl. A............... 833,750
260,000 Bruno's Inc.+......................... 273,000
110,000 Burlington Coat Factory
Warehouse Corp...................... 2,475,000
20,000 Coldwater Creek Inc.+................. 550,000
38,000 Crown Books Corp.+.................... 33,250
25,000 Fingerhut Companies Inc............... 825,000
105,000 Ingles Markets Inc., Cl. A............ 1,522,500
192,500 Lillian Vernon Corp................... 3,200,313
33,500 Mott's Holdings Inc.+ (a)............. 201,000
65,000 N2K Inc.+............................. 1,275,625
95,000 Neiman Marcus Group Inc.+............. 4,126,562
182,000 Scheib (Earl) Inc.+................... 1,410,500
-----------
17,926,500
-----------
Satellite -- 0.9%
38,000 COMSAT Corp........................... 1,075,875
10,000 TCI Satellite Entertainment Inc.,
Cl. A+ ............................. 58,750
50,000 United Video Satellite Group Inc.,
Cl. A+ ............................. 1,981,250
-----------
3,115,875
-----------
Speciality Chemicals -- 1.0%
25,000 Airgas Inc.+.......................... 359,375
1,000 CFC International Inc.+............... 11,063
45,000 Ferro Corp............................ 1,139,063
600 MacDermid Inc......................... 16,950
32,000 Penford Corp.......................... 968,000
38,000 Sybron Chemicals Inc.+................ 1,215,999
-----------
3,710,450
-----------
Telecommunications -- 1.7%
18,000 Aliant Communications Inc............. 493,875
20,000 ARC International Corp.+.............. 82,500
9,200 Atlantic Tele-Network Inc.+........... 114,425
2,000 BHI Corp.............................. 79,000
70,450 Citizens Utilities Co., Cl. A+........ 678,081
15,833 Commonwealth Telephone
Enterprises Inc.+................... 417,595
20,000 Commonwealth Telephone
Enterprises Inc., Cl. B+............ 525,000
10
<PAGE>
The Gabelli Small Cap Growth Fund
Portfolio of Investments (Continued) -- June 30, 1998 (Unaudited)
===================================================================
Market
Shares Value
------ -----
COMMON STOCKS (Continued)
Telecommunications (Continued)
100,000 Communications Systems Inc............ $ 1,600,000
23,000 Emerging Communications Inc.+......... 196,938
130,000 GST Telecommunications Inc.+.......... 1,876,875
10,000 Rogers Communications Inc., Cl. B+.... 90,000
10,000 Viatel Inc.+.......................... 170,000
-----------
6,324,289
-----------
Transportation -- 0.2%
2,000 Irish Continential Group plc.......... 32,779
5,000 Marine Transport Corp.+............... 20,313
50,000 OMI Corp.+............................ 449,999
30,000 Trans World Airlines Inc.+............ 311,250
4,000 WorldCorp Inc.+....................... 1,250
-----------
815,591
-----------
Utilities -- 0.2%
33,000 United Water Resources Inc............ 594,000
-----------
Wireless Communications -- 1.8%
70,000 Aerial Communications Inc.+........... 437,500
4,000 Associated Group Inc., Cl. A+......... 164,000
64,000 Centennial Cellular Corp., Cl. A+..... 2,387,999
25,000 Corecomm Inc.+........................ 656,250
109,000 Rogers Cantel Mobile
Communications Inc.+................ 2,111,875
15,000 Teligent Inc., Cl. A+................. 441,563
7,000 Western Wireless Corp., Cl. A+........ 139,563
-----------
6,338,750
-----------
TOTAL COMMON STOCKS................... 335,972,543
-----------
Principal Market
Amount Value
------ -----
CONVERTIBLE CORPORATE BONDS -- 0.0%
Equipment and Supplies -- 0.0%
$ 500 MacNeal-Schwendler Corp. Sub. Deb. Cv.
7.875%, 08/18/04.................... $ 502
-----------
U.S. GOVERNMENT OBLIGATIONS -- 8.0%
29,275,000 U.S. Treasury Bills, 4.81% to 5.43%,
due 08/06/98 to 09/17/98 ++........ 29,028,977
-----------
TOTAL INVESTMENTS -- 100.8%
(Cost $246,723,798).................. 365,002,022
Other Assets and
Liabilities (Net) -- (0.8)%.......... (2,869,166)
-----------
NET ASSETS -- 100.0%
(15,353,271 shares outstanding)...... $362,132,856
============
NET ASSET VALUE,
Offering and Redemption
Price Per Share...................... $23.59
======
- ----------
(a) 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.
11
<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 John D. Gabelli
Chairman and Chief Vice President
Investment Officer Gabelli & Company, Inc.
Gabelli Funds, Inc. Robert J. Morrissey
Attorney-at-Law
Felix J. Christiana Morrissey & Hawkins
Former Senior Vice President
Dollar Dry Dock Savings Bank Karl Otto Pohl
Former President
Anthony J. Colavita Deutsche Bundesbank
Attorney-at-Law
Anthony J. Colavita, P.C. Anthony R. Pustorino
Certified Public Accountant
Vincent D. Enright Professor, Pace University
Former Senior Vice President
and Chief Financial Officer Anthonie C. van Ekris
KeySpan Energy Corp. Managing Director
BALMAC International, Inc.
Officers
Mario J. Gabelli, CFA Bruce N. Alpert
President and Chief Vice President and Treasurer
Investment Officer
James E. McKee
Secretary
Distributor
Gabelli & Company, Inc.
Custodian, Transfer Agent and Dividend Agent
State Street Bank and Trust Company
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom LLP
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of The
Gabelli Small Cap Growth Fund. It is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
