[PHOTO OMITTED]
The
Gabelli
Small
Cap
Growth
Fund
SEMI-ANNUAL REPORT
MARCH 31, 1999
<PAGE>
The Gabelli Small Cap Growth Fund
Semi-Annual Report
March 31, 1999(a)
To Our Shareholders,
In the first quarter of 1999, the small cap stock rally fizzled as
investors once again returned their attention to the large cap market favorites.
While the large cap market averages moved to record highs, the Russell 2000
Index retreated to a 5.4% decline for the quarter.
Investment Performance
For the first quarter ended March 31, 1999, The Gabelli Small Cap Growth
Fund's (the "Fund") net asset value declined 6.8%. The Value Line Composite and
Russell 2000 Indices declined 3.7% and 5.4%, respectively, over the same period.
Each index is an unmanaged indicator of stock market performance. The Fund
declined 15.9% over the trailing twelve-month period. The Value Line Composite
and Russell 2000 declined 8.7% and 16.3%, respectively, over the same
twelve-month period.
For the five-year period ended March 31, 1999, the Fund's total return
averaged 12.4% annually versus average annual total returns of 14.9% and 11.2%
for the Value Line Composite and Russell 2000, respectively. Since inception on
October 22, 1991 through March 31, 1999, the Fund had a cumulative total return
of 214.0%, which equates to an average annual total return of 16.6%.
What We Do
We view the small capitalization stock market as a research driven stock
picker's paradise. Unlike the large cap market, where most companies are closely
followed by dozens of Wall Street analysts, the small cap market is largely
unclaimed territory. Our analysts put on their hiking shoes, strap on their
backpacks and hit the trails looking for little companies Wall Street does not
know or care about. They are seeking a particular type of company, which we
would describe generally as a dominant market share, niche franchise in a
growing and/or consolidating industry.
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
(a) The Fund's fiscal year ends September 30.
<PAGE>
INVESTMENT RESULTS (a)(c)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Calendar Quarter
-------------------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
<S> <C> <C> <C> <C> <C> <C>
1999: Net Asset Value .............. $ 19.59 -- -- -- --
Total Return.................. (6.8)% -- -- -- --
- ----------------------------------------------------------------------------------------------------------
1998: Net Asset Value .............. $ 23.93 $ 23.59 $ 18.81 $ 21.01 $ 21.01
Total Return.................. 10.9% (1.4)% (20.3)% 14.7% 0.0%
- ----------------------------------------------------------------------------------------------------------
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 - March 31, 1999 (a)
-------------------------------------------
1 Year ............................................................. (15.9)%
5 Year ............................................................. 12.4%
Life of Fund (b) ................................................... 16.6%
- --------------------------------------------------------------------------------
Dividend History
- --------------------------------------------------------------------------------
Payment (ex) Date Rate Per Share Reinvestment Price
- ----------------- -------------- ------------------
December 21, 1998 $0.534 $19.80
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 investment operations on October 22,
1991. (c) The Fund's fiscal year ends September 30. Note: Investing in small
capitalization securities involves special challenges because these securities
may trade less frequently and experience more abrupt price movements than large
capitalization securities.
2
<PAGE>
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
What Bull Market?
With the exception of the strong, but short-lived rally in the fourth
quarter of 1998, small cap stocks have been trapped in a bear market for nearly
a year. This has not been a tame circus bear, but rather an angry grizzly that
has driven the average small cap stock (those with market capitalizations of $2
billion and lower) down more than 30% from their highs. The average micro cap
stock (those with market capitalizations of $250 million and lower) has been
clawed even worse, down nearly 50% from their highs.
Why don't investors like small caps? Because they are too busy loving the
large cap market darlings that have provided such strong returns in recent
years. History and investment logic tell us that buying what has gone up simply
because it has gone up, and selling what has gone down simply because it has
gone down, is a recipe for long term investment failure. A much more logical
approach would be to buy cheap and sell dear. With the Standard & Poor's ("S&P")
500 trading at approximately 30 times trailing earnings and the Russell 2000
trading at about half that price/earnings multiple, it should not be difficult
to figure out where the best opportunities can be found.
Buyers of businesses know where the best bargains are. Larger companies
have been using their richly valued equity currencies to take advantage of
depressed small cap stock pricing. These types of deals are easy to legitimize.
If your stock is trading at 30 times earnings, you can pay a 100% premium for a
smaller company trading at 10 times earnings and the transaction will still be
additive to earnings. This is before factoring in any potential cost savings
from combining the two companies' operations. This accounting magic should
result in accelerating takeover activity in the small cap sector in the year
ahead.
3
<PAGE>
A History of Small Cap versus Large Cap
- --------------------------------------------------------------------------------
A Century of Investing
Compounded Annual Rates of Return
Large Small Long Term Treasury Inflation
Stocks Stocks Gov't. Bonds Bills (CPI-U)
------ ------ ------------ ----- -------
90's 17.9% 13.6% 11.0% 5.0% 3.0%
80's 17.5 15.8 12.6 8.9 5.1
70's 5.9 11.5 5.5 6.3 7.4
60's 7.8 15.5 1.4 3.9 2.5
50's 19.4 16.9 (0.1) 1.9 2.2
40's 9.2 20.7 3.2 0.4 5.4
30's 0.0 1.4 4.9 0.6 (2.0)
1926-1998 11.2% 12.4% 5.3% 3.8% 3.1%
Source: Ibbotson Associates.
- --------------------------------------------------------------------------------
Large cap outperformance in the 1990s is partially justified by the
globalization of the economy and better earnings growth. Large companies with
global reach have been very profitable, as many foreign economies are growing
faster than our own over much of the decade. This has helped the S&P 500 grow
earnings by 14.9% annually from 1992-1998, compared to average annual earnings
growth of 9.7% for the Russell 2000. However, with the U.S. economy still
vibrant while much of the rest of the world stagnates, small cap earnings are
projected to be much stronger compared to large caps over the next several
years. Major brokerage firms are projecting Russell 2000 earnings growth of
17.3% in 1999 and 28.4% in the year 2000 versus the S&P 500's 7.0% in 1999 and
8.2% in 2000. Based on superior earnings potential and significantly lower
valuations, small caps would appear to be a much better bet than large caps.
However, there are other factors that have contributed significantly to
large cap outperformance in the 1990s, and fundamentals be damned, may continue
to bolster large caps going forward. S&P 500 indexing has more than doubled in
the defined benefit and defined contribution pension fund arena--$1.2 trillion
at the end of 1998, up from $553 billion at the beginning of 1994. In the mutual
fund industry, S&P 500 index funds now have 8.1% of total equity fund assets
versus just 1.6% in 1989. Indexing is a self-fulfilling prophecy--the more money
that goes towards indexing, the better the performance of the index. The
increasing popularity of momentum investing has had a similarly positive impact
on large cap stocks. More investors have been buying stocks simply because they
have price momentum. Since large caps have been going up the fastest, like the
proverbial snowball rolling down the hill, they attract even more money. A surge
in foreign investment in U.S. stocks also benefits large cap stocks--the
household name companies with which foreign investors are most familiar. Foreign
investment in U.S. stocks has gone from minimal or negative in the early 1990s
to $64 billion in 1997 and $42 billion in 1998, with the lion's share going into
the large multinationals of the S&P 500. Finally, there is a research bias
toward large cap stocks. Why? Because large brokerage firms can not make
comparable profits peddling small cap stocks.
4
<PAGE>
Will better earnings growth and much more reasonable valuations lead to an
extended period of outperformance by small cap stocks or will flow of funds
dynamics keep large caps on top? As investors guided by fundamental value, we
clearly favor the former scenario and suspect that small cap stocks will begin
attracting more investment attention in the year ahead.
A component of our investment methodology is to identify industry and
sector trends and themes ahead of the curve and position ourselves to take
advantage of these developments. Industry consolidation is one such trend. As we
have discussed in previous letters, the continued high level of activity in
mergers and acquisitions contributed significantly to the solid performance of
the Small Cap Growth Fund. The accompanying table illustrates how deal activity
surfaced value in a small sample of the portfolio holdings.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
First Quarter 1999 Completed Deals
Number Average Cost Closing
Fund Holding of Shares(a) Per Share(b) Price(c) Closing Date %Return(d)
- ------------ ------------ ------------ -------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Hudson General Corp. 41,000 $15.71 $76.00 3/19/99 383.89%
Pulitzer Publishing Co. 42,000 30.51 81.19 3/19/99 166.13
Fingerhut Companies Inc. 40,000 12.24 25.00 3/17/99 104.33
First Brands Corp. 15,000 12.93 38.56 1/28/99 198.36
Gryphon Holdings Inc. 20,000 16.88 19.00 1/15/99 12.57
CalMat Co. 130,000 21.51 31.00 1/01/99 44.15
- --------------------------------------------------------------------------------------------------
</TABLE>
(a) Number of shares held by the Fund on the final day of trading for the
issuer.
(b) Average purchase price of issuer's shares held by the Fund on the final
day of trading for the issuer.
(c) Closing price on the final day of trading for the issuer or the tender
price on the closing date of the tender offer.
(d) Represents average estimated return based on average cost per share and
closing price per share.
Note: See the Portfolio of Investments for a complete listing of holdings.
- --------------------------------------------------------------------------------
Going forward, we expect accelerating deal activity from large companies
using high price/earnings multiple stock as currency to buy smaller companies
with much lower P/Es. This is accounting magic. If your stock is trading at 30
times earnings, you can pay a 100% premium for a smaller company trading at 10
times earnings and the transaction will still be accretive to earnings. This is
before factoring in any potential cost savings from combining the two companies'
operations. This price/earnings multiple arbitrage will be a deal too good for
many savvy business buyers to pass up.
Ups and Downs
Takeover activity continued to provide an updraft for the portfolio during
the first quarter. Aeroquip-Vickers was absorbed by Eaton Corp.; Century
Communications was wired to Adelphia; Hudson General took wing with Lufthansa;
and Southwest Gas found two new flames in Oneok and Southern Union. Cable
television holdings United International Holdings and Cablevision Systems posted
strong gains on
5
<PAGE>
the back of rising transaction values within the industry. @Home Corp., the
Internet services company formed by a consortium of leading cable operators,
delivered solid returns. Additionally, Harley-Davidson shifted into a higher
gear, Mirage Resorts was a winner and Bull Run Corp. lived up to its name.
Portfolio downers came in the form of aerospace component manufacturers
AMETEK and SPS Technologies, auto parts manufacturers GenCorp and Barnes Group,
and capital goods companies Gerber Scientific and Hussmann International.
Burlington Coat Factory failed to keep the portfolio warm and cemetery and
funeral home owner/operator Loewen Group buried more investors than customers
this quarter.
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.
Carter-Wallace Inc. (CAR - $18.125 - NYSE) manufactures and sells consumer
health care products including toiletries, pharmaceuticals, diagnostic
specialties, proprietary drugs and pet products. Such recognized brand names as
Arrid deodorant, Nair hair remover and Pearl Drops toothpaste are Carter-Wallace
products. Asteline, a recently introduced nasal spray for allergies, is expected
to be profitable in the fiscal year ending March 1999.
Celestial Seasonings Inc. (CTEA - $21.625 - Nasdaq), based in Boulder, Colorado,
developed and popularized the herb tea category in the U.S. as a flavorful,
non-caffeinated alternative to other hot beverages. With over 40 tea varieties
under the Celestial Seasonings brand, CTEA is the largest manufacturer of herb
teas with an estimated 50% market share. The company is expected to maintain its
dominant position in the herb tea market. Celestial Seasonings is positioned to
leverage its excellent brand name into dietary herbal supplements and green tea.
Liberty Corp. (LC - $52.4375 - NYSE), headquartered in Greenville, S.C., is a
holding company with operations in broadcasting and insurance. Liberty's Cosmos
Broadcasting owns and operates eleven network affiliated television stations in
the Southeast and Midwest. Six stations are affiliated with NBC, three with ABC
and two with CBS. These stations serve more than four million households. Last
August, Cosmos agreed to acquire CBS-affiliated KGBT-TV in Harlingen, Texas for
approximately $42 million. Also in August, the company closed on its purchase of
NBC affiliate WALB-TV in Albany, Georgia. The purchase of WWAY, the ABC
affiliate in Wilmington, NC, for $34 million was completed at year end. Liberty
Life is a regional insurer, with North Carolina, South Carolina and Louisiana
accounting for more than 50% of its premium volume. The insurance segment
specializes in providing agency (home service) and mortgage protection, life and
health insurance. Former affiliate Pierce National Life Insurance Co. was sold
to Fortis Inc. for $180 million. In March 1998, Liberty Corp. repurchased 2.4
million shares in a tender offer at $52 per share.
6
<PAGE>
Penton Media Inc. (PME - $22.50 - NYSE), spun-off from Pittway Corp. in
mid-1998, is a diversified business media company. Penton is a publisher of
authoritative trade magazines, producer of important trade show/conference
events, provider of electronic media and communication tools, a source for
reliable direct mail lists and research services and creators of custom
publications. Considered a primary business resource, Penton Media provides
marketing and media solutions in an important cross section of industries:
design/engineering, electronics, food/hospitality, government/compliance,
Internet/IT, leisure, management, manufacturing, mechanical systems and
construction and supply chain aviation.
USA Networks Inc. (USAI - $35.8125 - Nasdaq), through its subsidiaries, engages
in diversified media and electronic commerce businesses that include: electronic
retailing, ticketing operations and television broadcasting. Chairman and CEO
Barry Diller has brought together under one umbrella: the USA Network, the
Sci-Fi Channel, USA Networks Studios, USA Broadcasting, The Home Shopping
Network and the Ticketmaster Group. The plan is to integrate these assets,
leveraging programming, production capabilities and electronic commerce across
this strong distribution platform.
United Television Inc. (UTVI - $104.00 - Nasdaq), headquartered in Beverly
Hills, California, is a television broadcasting group which owns and operates
seven of the stations (one ABC, one NBC and five UPN affiliates) that comprise
Chris-Craft's (CCN - $45.625 - NYSE) television division. In January 1998, UTVI
purchased WHSW in Baltimore for $80 million. The station began broadcasting as
WUTB, a UPN affiliate, immediately following completion of the acquisition. The
$60 million purchase of WRBW, a UPN affiliate in Orlando (the country's 22nd
largest and the fastest growing television market over the past decade), is
pending FCC approval. UTVI stations cover approximately eight percent of the
U.S. population. UTVI is 59%-owned by BHC Communications (BHC - $122.75 - AMEX).
Strong advertising demand, prospects for favorable regulatory changes in the
industry and corporate cost control enhance EBITDA prospects.
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.
Proposal to Shareholders
The Fund's Board of Directors has asked shareholders to consider a
proposal to amend the Fund's Articles of Incorporation to permit the Fund to
offer additional classes of shares. We believe that this proposal would benefit
the shareholders, and we urge you to give the proposal your careful
consideration.
For existing shareholders we intend to remain a no-load fund. At the same
time, mutual fund distributors are increasingly employing a variety of different
types and combinations of sales charge
7
<PAGE>
arrangements for different classes of shares that are targeted to the needs of
particular types of investors. Your Board of Directors believes that the Fund
should be able to provide the distribution alternatives and investment
flexibility provided by other similarly situated funds that offer multiple
classes of shares. We believe that approval of the proposal to permit the Fund
to offer additional classes of shares will enhance the potential for the Fund to
attract additional investors in a manner that could provide additional benefits
for all investors in the Fund. Again, to repeat, approval of this proposal will
not diminish the ability of existing and future shareholders to purchase and
redeem shares at net asset value.
In Conclusion
Strong gains in the fourth quarter of 1998 only temporarily brightened
what has been a bleak picture for small cap stock investors. Based on almost any
fundamental yardstick, small cap stocks now appear to be attractively priced on
their own merits, and real bargains compared to wildly popular and luxuriously
priced large cap growth stocks. Corporate bargain hunters are out in force
taking advantage of discounts on high quality, small cap merchandise. We believe
the investment public will eventually follow suit.
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
April 30, 1999 Chief Investment Officer
------------------------------------------------------------
Top Ten Holdings
March 31, 1999
--------------
Liberty Corp. CLARCOR Inc.
USA Networks Inc. Pittway Corp.
United Television Inc. Kaman Corp.
Celestial Seasonings Inc. TV Guide Inc.
Carter-Wallace Inc. Penton Media Inc.
------------------------------------------------------------
NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period stated in this report. The manager's views
are subject to change at any time based on market and other conditions.
8
<PAGE>
The Gabelli Small Cap Growth Fund
Portfolio of Investments -- March 31, 1999 (Unaudited)
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS - 102.0%
Agriculture - 0.0%
6,500 Cadiz Inc.+....................... $ 66,934 $ 52,000
10,000 Erly Industries Inc.+............. 65,690 500
------------ ------------
132,624 52,500
------------ ------------
Automotive: Parts and Accessories - 5.5%
100,000 Acktion Co.+...................... 1,273,170 809,762
1,396 Borg-Warner Automotive Inc........ 62,403 66,746
78,000 GenCorp Inc....................... 1,190,091 1,404,000
10,000 Lund International
Holdings Inc.+................. 114,730 63,750
20,000 Meritor Automotive Inc............ 475,125 310,000
125,000 Modine Manufacturing Co........... 3,625,955 3,507,812
5,250 Monro Muffler Brake Inc.+......... 52,860 37,406
45,000 Redlaw Industries Inc.+........... 145,909 26,719
1,000 SPX Corp.+........................ 16,550 50,438
151,000 Standard Motor Products Inc....... 2,457,169 3,123,813
17,000 Strattec Security Corp.+.......... 427,208 478,125
46,600 Superior Industries
International Inc.............. 1,257,079 1,083,450
122,000 TransPro Inc...................... 1,249,967 526,125
190,000 Wynn's International Inc.......... 1,146,645 3,313,124
------------ ------------
13,494,861 14,801,270
------------ ------------
Aviation: Parts and Services - 4.2%
15,000 AAR Corp.......................... 198,875 267,188
50,000 Banner Aerospace Inc.+............ 527,674 368,750
6,000 Barnes Group Inc.................. 155,363 112,500
50,000 Coltec Industries Inc.+........... 764,953 909,375
56,000 Curtiss-Wright Corp............... 1,008,638 1,739,500
7,500 Ducommun Inc.+.................... 80,125 70,313
113,000 Fairchild Corp., Cl. A+........... 2,357,459 1,151,188
26,500 Hi-Shear Industries Inc.+......... 58,141 67,906
320,000 Kaman Corp., Cl. A................ 5,797,564 4,100,000
80,000 Moog Inc., Cl. A+................. 1,630,172 2,439,999
------------ ------------
12,578,964 11,226,719
------------ ------------
Broadcasting - 8.3%
200,000 Ackerley Group Inc................ 2,885,163 3,387,500
20,000 Granite Broadcasting Corp.+....... 203,080 132,500
32,000 Gray Communications
Systems Inc.................... 479,000 532,000
48,000 Gray Communications
Systems Inc., Cl. B............ 633,932 642,000
67,000 Hearst-Argyle Television Inc.+.... 619,234 1,649,881
167,000 Liberty Corp...................... 5,392,916 8,757,062
100,000 Paxson Communications
Corp.+......................... 896,475 856,250
48,000 Price Communications Corp.+....... 77,628 534,000
53,800 United Television Inc............. 1,306,462 5,595,200
8,000 Young Broadcasting Inc., Cl. A+... 237,848 365,000
------------ ------------
12,731,738 22,451,393
------------ ------------
Building and Construction - 1.9%
16,000 Florida Rock Industries Inc....... 261,157 546,000
14,000 Morgan Products Ltd.+............. 118,738 49,875
130,000 Nortek Inc.+...................... 1,551,275 3,217,500
8,000 Oakwood Homes Corp................ 89,148 112,500
75,000 Republic Group Inc................ 427,064 1,129,688
------------ ------------
2,447,382 5,055,563
------------ ------------
Business Services - 2.5%
24,000 Amway Asia Pacific Ltd............ 413,669 178,500
30,641 Amway Japan Ltd., ADR............. 333,358 134,054
40,000 Berlitz International Inc.+....... 711,207 905,000
22,000 Borg-Warner Security Corp.+....... 270,725 368,500
12,000 Data Broadcasting Corp.+.......... 49,283 166,500
3,000 Data Transmission Network
Corp.+......................... 15,000 71,625
2,000 Gartner Group Inc.+............... 47,138 45,125
13,000 Hach Co........................... 133,028 147,875
20,000 Hach Co., Cl. A................... 197,187 165,000
33,000 Industrial Distribution
Group Inc.+.................... 420,057 173,250
10,000 Landauer Inc...................... 163,888 241,250
5,000 MDC Communications Corp.,
Cl. A+......................... 53,950 45,000
100,000 Nashua Corp.+..................... 2,016,019 1,150,000
110,000 Paxar Corp.+...................... 1,288,411 818,125
15,000 Pittston Brink's Group............ 421,959 352,500
18,000 Princeton Video Image Inc.+....... 119,250 95,625
10,000 PubliCard Inc.+................... 120,400 92,500
40,000 R. H. Donnelley Corp.............. 547,664 617,500
87,000 Trans-Lux Corp. (b)............... 734,323 750,375
8,000 Wackenhut Corp., Cl. A............ 118,092 178,000
6,187 Wackenhut Corp., Cl. B............ 52,368 105,179
------------ ------------
8,226,976 6,801,483
------------ ------------
Cable - 1.4%
22,000 Cablevision Systems Corp.,
Cl. A+......................... 286,064 1,630,750
48,000 United International
Holdings Inc., Cl. A+.......... 710,777 2,088,000
------------ ------------
996,841 3,718,750
------------ ------------
Communications Equipment - 0.2%
90,000 Allen Telecom Inc.+............... 994,556 545,625
------------ ------------
Computer Software and Services - 0.8%
500 @Home Corp., Ser. A+.............. 10,375 78,750
3,000 Anacomp Inc.+..................... 47,205 48,188
92,500 Bull Run Corp.+................... 323,638 404,688
17,920 CDnow Inc.+....................... 432,558 288,960
12,000 Checkfree Holdings Corp.+......... 157,533 510,750
3,000 Cylink Corp.+..................... 13,728 12,000
200 Macromedia Inc.+.................. 2,371 9,063
75,000 Phoenix Technologies Ltd.+........ 543,985 637,499
2,000 Powerhouse Technologies Inc.+..... 21,750 34,375
2,000 Wang Laboratories Inc.+........... 54,080 39,250
------------ ------------
1,607,223 2,063,523
------------ ------------
See accompanying notes to financial statements.
9
<PAGE>
The Gabelli Small Cap Growth Fund
Portfolio of Investments (Continued) -- March 31, 1999 (Unaudited)
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (Continued)
Consumer Products - 5.4%
3,000 Action Performance
Companies Inc.+................ $ 86,846 $ 90,375
10,000 Adams Golf Inc.+.................. 63,058 42,500
14,900 American Safety Razor Co.+........ 177,858 206,738
250,000 Carter-Wallace Inc................ 3,681,740 4,531,249
40,000 Church & Dwight Co. Inc........... 817,000 1,629,999
12,000 Coachmen Industries Inc........... 80,758 246,000
5,000 Department 56 Inc.+............... 112,067 152,188
8,000 French Fragrances Inc.+........... 78,490 46,000
68,000 General Cigar Holdings Inc.+...... 669,857 633,250
133,500 General Cigar Holdings Inc.,
Cl. B+ (a)..................... 1,076,798 1,243,219
100,000 General Housewares Corp........... 1,320,001 1,037,500
63,500 Genlyte Group Inc.+............... 242,745 1,016,000
2,000 Harley-Davidson Inc............... 9,425 115,000
120,000 Hartmarx Corp.+................... 759,538 585,000
10,000 Madden (Steven) Ltd.+............. 86,785 84,375
25,000 National Presto Industries Inc.... 1,047,061 885,938
14,000 Nature's Sunshine
Products Inc................... 292,927 154,000
4,000 Scotts Co., Cl. A+................ 61,903 149,500
10,000 Skyline Corp...................... 178,881 277,500
14,000 Stewart Enterprises Inc., Cl. A... 65,467 224,875
110,000 Weider Nutrition
International Inc.............. 753,386 522,500
74,000 Wolverine World Wide Inc.......... 882,796 703,000
------------ ------------
12,545,387 14,576,706
------------ ------------
Consumer Services - 1.2%
15,000 Bowlin Outdoor Advertising &
Travel Centers Inc.+........... 70,375 105,000
100,000 Loewen Group Inc.................. 625,051 181,250
18,000 Response USA Inc.+................ 115,080 36,563
162,000 Rollins Inc....................... 3,206,884 2,723,625
16,000 Travel Services International
Inc.+.......................... 421,450 168,000
------------ ------------
4,438,840 3,214,438
------------ ------------
Country and Closed End Funds - 1.5%
45,000 Central European Equity Fund Inc.. 608,109 542,813
78,000 Dresdner RCM Europe Fund Inc...... 611,900 936,000
45,000 France Growth Fund Inc............ 476,793 610,312
32,000 Germany Fund Inc.................. 358,820 408,000
40,000 Italy Fund Inc.................... 354,460 602,500
65,000 New Germany Fund Inc.............. 764,184 775,937
11,000 Spain Fund Inc.................... 103,029 156,063
------------ ------------
3,277,295 4,031,625
------------ ------------
Diversified Industrial - 6.6%
99,500 Ampco-Pittsburgh Corp............. 966,406 982,563
8,000 Anixter International Inc.+....... 76,160 95,500
60,000 Crane Co.......................... 692,694 1,451,250
37,500 Gardner Denver Machinery
Corp.+......................... 210,363 595,313
15,000 GATX Corp......................... 605,000 494,063
36,000 Katy Industries Inc............... 487,881 468,000
450,000 Lamson & Sessions Co.+............ 2,581,337 2,221,874
70,000 Lawter International Inc.......... 715,357 490,000
75,000 Lindsay Manufacturing Co.......... 725,857 1,490,625
16,000 Myers Industries Inc.............. 342,375 344,000
610,400 Noel Group Inc.+.................. 629,048 686,700
40,000 Oil-Dri Corporation of America.... 553,600 582,500
110,000 Park-Ohio Holdings Corp.+......... 1,570,449 1,540,000
22,000 Standex International Corp........ 656,944 481,250
190,000 Thomas Industries Inc............. 1,683,550 3,562,499
450,000 Tyler Corp.+...................... 1,848,030 1,968,750
50,000 WHX Corp.+........................ 607,470 393,750
------------ ------------
14,952,521 17,848,637
------------ ------------
Education - 0.0%
22,000 Whitman Education Group Inc.+..... 109,868 82,500
------------ ------------
Electronics - 0.9%
600,000 Oak Technology Inc.+.............. 2,198,117 1,837,500
22,000 Watkins-Johnson Co................ 438,038 497,750
------------ ------------
2,636,155 2,335,250
------------ ------------
Energy and Utilities - 5.0%
26,000 AGL Resources Inc................. 507,465 456,625
6,000 Basin Exploration Inc.+........... 93,115 83,250
20,000 Central Hudson Gas & Electric
Corp........................... 867,400 716,250
81,660 Citizens Utilities Co., Cl. A+.... 776,900 632,865
15,000 Eastern Enterprises............... 598,563 545,625
5,000 Fall River Gas Co................. 77,138 88,438
41,000 Florida Public Utilities Co....... 639,050 604,750
10,000 Forcenergy Inc.+.................. 128,063 6,250
1,425,000 GEO International Corp.(a)(b)+.... 74,145 0
130,000 Kaneb Services Inc.+.............. 436,625 528,125
60,000 Orange & Rockland Utilities Inc... 3,244,681 3,446,250
15,000 Petroleum Geo-Services ASA+....... 239,369 228,750
300,000 RPC Inc........................... 1,200,731 1,931,250
110,000 Southwest Gas Corp................ 1,915,595 3,025,000
15,000 Tesoro Petroleum Corp.+........... 209,500 165,000
5,000 TransMontaigne Oil Co.+........... 71,188 60,625
38,500 United Water Resources Inc........ 710,745 798,875
15,000 Wicor Inc......................... 345,521 303,750
------------ ------------
12,135,794 13,621,678
------------ ------------
Entertainment - 7.9%
105,000 Ascent Entertainment Group
Inc.+.......................... 1,254,088 1,148,438
15,000 Dover Downs Entertainment
Inc............................ 201,863 232,500
43,000 Fisher Companies Inc.............. 2,794,559 2,494,000
100,000 Florida Panthers Holdings Inc.+... 1,511,409 775,000
48,000 GC Companies Inc.+................ 2,392,811 1,509,000
3,000 International Speedway Corp....... 54,000 158,250
4,000 Loews Cineplex Entertainment
Corp.+......................... 58,663 39,750
3,000 Metromedia International
Group Inc.+.................... 26,925 14,625
326 SFX Entertainment Inc.+........... 21,388 21,047
175,000 Spelling Entertainment
Group Inc.+.................... 1,465,933 1,531,250
See accompanying notes to financial statements.
10
<PAGE>
The Gabelli Small Cap Growth Fund
Portfolio of Investments (Continued) -- March 31, 1999 (Unaudited)
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (Continued)
Entertainment (Continued)
10,000 TCI Music Inc.+................... $ 43,671 $ 51,250
160,000 Topps Co. Inc.+................... 655,337 700,000
107,500 TV Guide Inc.+.................... 1,595,313 3,964,063
240,000 USA Networks Inc.+................ 3,378,583 8,594,999
------------ ------------
15,454,543 21,234,172
------------ ------------
Environmental Services - 0.0%
40,428 EnviroSource Inc.+................ 553,567 101,070
------------ ------------
Equipment and Supplies - 14.5%
30,000 Aeroquip-Vickers Inc.............. 825,681 1,719,375
42,000 AFC Cable Systems Inc.+........... 837,638 1,249,500
17,000 Alltrista Corp.+.................. 322,342 344,250
145,000 AMETEK Inc........................ 1,658,857 2,646,250
20,500 Amphenol Corp., Cl. A+............ 693,791 784,125
320,000 Baldwin Technology Co. Inc.,
Cl. A+......................... 1,529,709 920,000
15,000 Belden Inc........................ 215,250 255,938
1,000 Binks Sames Corp.+................ 18,975 18,500
4,000 Bway Corp.+....................... 66,250 52,750
20,000 C&D Technologies Inc.............. 503,782 497,500
259,900 CLARCOR Inc....................... 3,002,381 4,434,543
3,000 Commercial Intertech Corp......... 39,463 33,375
40,000 Core Materials Corp.+............. 136,081 120,000
43,000 CTS Corp.......................... 189,882 2,125,813
55,000 Cuno Inc.+........................ 827,163 770,000
52,000 Daniel Industries Inc............. 807,901 793,000
257,600 Fedders Corp...................... 1,536,998 1,304,100
100,000 Flowserve Corp.................... 2,095,767 1,556,250
40,000 General Magnaplate Corp........... 83,763 185,000
70,000 Gerber Scientific Inc............. 955,212 1,413,125
40,000 Global Industrial Technologies
Inc.+.......................... 473,563 420,000
145,000 Hussmann International Inc........ 1,990,677 2,129,688
34,650 Johnston Industries Inc.+......... 268,295 73,631
10,000 K-Tron International Inc.+........ 74,933 180,000
113,000 Kollmorgen Corp................... 1,299,382 1,412,500
10,000 Littelfuse Inc.+.................. 68,313 183,750
22,000 Lufkin Industries Inc............. 389,520 364,375
24,000 Mark IV Industries Inc............ 475,837 313,500
120,000 Material Sciences Corp.+.......... 1,161,183 765,000
19,000 Met-Pro Corp...................... 261,194 209,000
160,000 Pittway Corp...................... 1,508,150 4,199,999
2,000 Plantronics Inc.+................. 15,396 125,125
26,000 Raytech Corp.+.................... 116,337 73,938
40,000 Sequa Corp., Cl. A+............... 1,477,615 2,010,000
12,500 Sequa Corp., Cl. B+............... 813,752 846,875
44,000 SL Industries Inc................. 586,563 517,000
1,000 Smith (A.O.) Corp................. 16,550 19,000
9,000 Smith (A.O.) Corp., Cl. A......... 249,550 175,500
74,000 SPS Technologies Inc.+............ 2,273,457 2,904,499
5,000 Teleflex Inc...................... 76,167 170,313
15,000 Tennant Co........................ 392,120 513,750
15,000 U.S. Filter Corp.+................ 170,439 459,375
5,000 Valmont Industries Inc............ 40,625 69,375
7,875 Watsco Inc., Cl. B................ 23,627 110,250
------------ ------------
30,570,131 39,469,837
------------ ------------
Financial Services - 3.4%
30,000 Argonaut Group Inc................ 737,000 770,625
20,000 BA Merchant Services Inc.+........ 402,250 407,500
68,000 Berliner Bank Aktiengesellschaft.. 1,408,705 1,009,411
45,000 Danielson Holding Corp.+.......... 165,200 129,375
1,000 Federal Agricultural Mortgage
Corp., Cl. C+.................. 24,000 52,625
39,000 Gainsco Inc....................... 256,038 190,125
18,000 Hibernia Corp..................... 140,063 236,250
3,000 Landamerica Financial Group....... 41,015 87,000
7,958 Metris Companies Inc.............. 226,698 321,304
105,000 Midland Co........................ 1,493,012 2,533,125
500 Net.B@nk Inc.+.................... 6,000 34,000
226,000 Pioneer Group Inc................. 4,225,248 3,347,625
6,000 Southwest Securities Group Inc.... 135,144 169,500
------------ ------------
9,260,373 9,288,465
------------ ------------
Food and Beverage - 4.6%
12,000 Advantica Restaurant
Group Inc.+.................... 124,643 60,000
34,863 Buenos Aires Embotelladora
SA+ (a)........................ 0 0
218,000 Celestial Seasonings Inc.+........ 2,489,395 4,714,249
6,000 Cheesecake Factory Inc.+.......... 65,061 142,500
186,100 Chock Full o'Nuts Corp.+.......... 1,217,979 1,023,550
115,000 Eskimo Pie Corp................... 1,627,892 819,375
1,000 Farmer Brothers Co................ 133,895 203,000
20,000 Genesee Corp., Cl. B.............. 785,817 450,000
10,000 International Multifoods Corp..... 199,921 233,125
4,000 Irwin Naturals/4Health Inc.+...... 23,058 13,750
15,000 J & J Snack Foods Corp.+.......... 187,457 301,875
8,000 Midwest Grain Products Inc.+...... 144,621 80,000
1,000 Mondavi (Robert) Corp.+........... 34,250 35,750
1,000 Northland Cranberries Inc., Cl. A. 7,625 7,250
130,000 Pepsi-Cola Puerto Rico Bottling
Co.+........................... 760,178 780,000
40,000 Ralcorp Holdings Inc.+............ 575,759 760,000
5,000 Sylvan Food Holdings Inc.+........ 49,669 50,313
31,658 Tootsie Roll Industries Inc....... 556,726 1,458,250
55,000 Twinlab Corp.+.................... 1,110,149 515,625
48,000 Whitman Corp...................... 740,400 825,000
------------ ------------
10,834,495 12,473,612
------------ ------------
Health Care - 0.9%
12,000 Inamed Corp.+..................... 169,750 159,000
140,000 IVAX Corp.+....................... 1,392,207 1,653,750
1,000 Life Technologies Inc............. 35,665 38,563
48,000 Penwest Pharmaceuticals Co.+...... 327,279 492,000
6,000 U.S. Physical Therapy Inc.+....... 37,500 46,500
------------ ------------
1,962,401 2,389,813
------------ ------------
Home Furnishings - 0.9%
7,000 Bassett Furniture Industries Inc.. 164,478 154,875
2,000 Bed Bath & Beyond Inc.+........... 11,125 73,000
17,000 Foamex International Inc.......... 147,810 95,625
30,000 La-Z-Boy Chair Co................. 218,125 570,000
50,000 Mikasa Inc........................ 698,044 368,750
70,000 Oneida Ltd........................ 732,977 1,190,000
------------ ------------
1,972,559 2,452,250
------------ ------------
See accompanying notes to financial statements.
11
<PAGE>
The Gabelli Small Cap Growth Fund
Portfolio of Investments (Continued) -- March 31, 1999 (Unaudited)
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (Continued)
Hotels and Gaming - 3.4%
410,000 Aztar Corp.+...................... $ 2,675,870 $ 1,973,125
15,000 Boyd Gaming Corp.+................ 132,500 63,750
20,000 Churchill Downs Inc............... 416,463 560,000
60,000 Extended Stay America Inc.+....... 685,812 611,250
85,000 Gaylord Entertainment Co.......... 2,601,413 2,061,250
140,000 Jackpot Enterprises Inc.+......... 1,615,369 1,085,000
5,000 Jurys Hotel Group plc............. 27,762 43,723
30,000 Lakes Gaming Inc.+................ 433,680 245,625
52,000 Mirage Resorts Inc.+.............. 267,539 1,105,000
110,000 Park Place Entertainment Corp.+... 1,093,493 831,875
22,000 Penn National Gaming Inc.+........ 218,260 152,625
10,000 Station Casinos Inc.+............. 66,750 127,500
110,000 Trump Hotels & Casino
Resorts Inc.+.................. 1,044,851 440,000
------------ ------------
11,279,762 9,300,723
------------ ------------
Metals and Mining - 0.4%
199,000 Echo Bay Mines Ltd.+.............. 817,958 335,813
245,000 Pegasus Gold Inc.+................ 200,685 4,900
190,000 Royal Oak Mines Inc.+............. 322,487 17,583
28,000 Stillwater Mining Co.+............ 379,317 738,500
5,000 Toreador Royalty Corp.+........... 19,063 14,375
80,000 TVX Gold Inc.+.................... 383,000 100,000
------------ ------------
2,122,510 1,211,171
------------ ------------
Paper and Forest Products - 1.0%
123,000 Greif Bros. Corp.................. 2,331,134 2,706,000
------------ ------------
Publishing - 5.0%
15,000 CMP Media Inc., Cl. A+............ 320,777 461,250
121,278 Independent Newspapers Ltd........ 380,260 549,905
2,000 Lee Enterprises Inc............... 61,038 58,000
40,000 McClatchy Newspapers Inc.,
Cl. A.......................... 943,061 1,342,500
52,000 Media General Inc., Cl. A......... 907,415 2,430,999
23,000 Meredith Corp..................... 329,933 723,063
175,000 Penton Media Inc.................. 1,904,125 3,937,500
42,000 Pulitzer Inc.+.................... 643,998 1,698,375
195,000 Thomas Nelson Inc................. 2,208,632 1,950,000
6,000 Wiley (John) & Sons Inc.,
Cl. B.......................... 46,500 245,625
------------ ------------
7,745,739 13,397,217
------------ ------------
Pumps and Valves - 2.7%
58,000 Franklin Electric Co.............. 1,791,872 3,770,000
17,775 Gorman-Rupp Co.................... 276,467 277,734
17,000 Graco Inc......................... 433,361 375,063
70,000 IDEX Corp......................... 628,347 1,649,375
10,000 Robbins & Myers Inc............... 98,665 172,500
30,000 Roper Industries Inc.............. 195,000 716,250
22,000 Watts Industries Inc.............. 331,136 298,375
------------ ------------
3,754,848 7,259,297
------------ ------------
Real Estate - 1.2%
150,000 Catellus Development Corp.+....... 1,756,210 2,006,250
118,000 Griffin Land & Nurseries Inc.+.... 1,471,129 1,091,500
9,000 Gyrodyne Company of America
Inc.+.......................... 154,268 128,250
------------ ------------
3,381,607 3,226,000
------------ ------------
Retail - 4.1%
60,000 Aaron Rents Inc................... 461,298 937,500
46,000 Aaron Rents Inc., Cl. A........... 211,041 534,750
10,000 Borders Group Inc.+............... 196,188 140,625
110,000 Burlington Coat Factory
Warehouse Corp................. 1,178,563 1,292,500
25,000 Coldwater Creek Inc.+............. 488,166 287,500
105,000 Ingles Markets Inc., Cl. A........ 1,341,625 1,207,500
210,000 Lillian Vernon Corp............... 3,383,835 2,520,000
2,500 Midas Inc......................... 68,219 83,438
33,500 Mott's Holdings Inc.+ (a)......... 214,069 201,000
95,000 Neiman Marcus Group Inc.+......... 1,272,266 2,149,375
190,000 Scheib (Earl) Inc.+............... 1,301,170 950,000
100,000 Sports Authority Inc.+............ 869,281 731,250
------------ ------------
10,985,721 11,035,438
------------ ------------
Satellite - 0.5%
38,000 COMSAT Corp....................... 1,226,514 1,099,625
5,000 Pegasus Communications
Corp.+......................... 81,245 140,000
40,000 TCI Satellite Entertainment+...... 174,875 26,250
------------ ------------
1,482,634 1,265,875
------------ ------------
Specialty Chemicals - 2.0%
31,000 Airgas Inc.+...................... 425,887 259,625
13,000 Bush Boake Allen Inc.+............ 415,537 357,500
40,000 Dexter Corp....................... 1,214,456 1,260,000
75,000 Ferro Corp........................ 1,354,574 1,856,250
70,000 General Chemical Group Inc........ 1,080,470 918,750
600 MacDermid Inc..................... 2,200 20,363
32,000 Penford Corp...................... 281,839 476,000
11,000 Sybron Chemicals Inc.+............ 180,613 144,375
------------ ------------
4,955,576 5,292,863
------------ ------------
Telecommunications - 2.4%
23,000 ARC International Corp.+.......... 125,555 34,500
9,200 Atlantic Tele-Network Inc......... 92,644 82,800
2,000 BHI Corp.+........................ 30,250 56,000
47,300 Commonwealth Telephone
Enterprises Inc.+.............. 875,751 1,741,231
20,000 Commonwealth Telephone
Enterprises Inc., Cl. B+....... 140,936 720,000
100,000 Communications Systems Inc........ 556,544 950,000
115,000 GST Telecommunications Inc.+...... 1,466,806 1,257,813
10,000 RCN Corp.+........................ 43,315 335,625
40,000 Rogers Communications Inc.,
Cl. B+......................... 315,878 725,000
20,000 Viatel Inc.+...................... 247,945 570,000
------------ ------------
3,895,624 6,472,969
------------ ------------
See accompanying notes to financial statements.
12
<PAGE>
The Gabelli Small Cap Growth Fund
Portfolio of Investments (Continued) -- March 31, 1999 (Unaudited)
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (Continued)
Transportation - 0.0%
2,000 Irish Continential Group plc...... $ 18,258 $ 17,705
50,000 OMI Corp.+........................ 313,120 100,000
------------ ------------
331,378 117,705
------------ ------------
Wireless Communications - 1.7%
70,000 Aerial Communications Inc.+....... 574,712 542,500
8,000 Associated Group Inc., Cl. A+..... 208,545 396,500
24,000 Cellular Communications of
Puerto Rico Inc.+.............. 215,610 648,000
1,000 Centennial Cellular Corp.+........ 11,042 47,250
35,000 CommNet Cellular Inc.+............ 387,362 562,188
23,000 Corecomm Ltd.+.................... 162,305 845,250
10,000 Rural Cellular Corp., Cl. A+...... 130,504 132,500
8,000 Teligent Inc., Cl. A+............. 172,000 333,000
28,000 Western Wireless Corp., Cl. A+.... 496,350 1,015,000
------------ ------------
2,358,430 4,522,188
------------ ------------
TOTAL COMMON STOCKS............... 228,540,057 275,644,325
------------ ------------
Principal
Amount
------
CORPORATE BONDS - 0.0%
Equipment and Supplies - 0.0%
$500 MacNeal-Schwendler Corp.,
Sub. Deb. Cv.
7.88%, 08/18/04................. 517 460
------------ ------------
TOTAL
INVESTMENTS - 102.0%........... $228,540,574 275,644,785
============
Other Assets and
Liabilities (Net) - (2.0)%...... (5,455,305)
------------
NET ASSETS - 100.0%
(13,789,524 shares outstanding) $270,189,480
============
NET ASSET VALUE,
Offering and Redemption
Price Per Share................. $ 19.59
============
- ----------
For Federal tax purposes:
Aggregate cost.................... $228,540,574
============
Gross unrealized appreciation..... $ 76,959,825
Gross unrealized depreciation..... (29,855,614)
------------
Net unrealized appreciation ..... $ 47,104,211
============
(a) Security fair valued as determined by the Board of Directors.
(b) Security considered an affiliated holding because the Fund owns at least
5% of the outstanding shares (See Note 9.).
+ Non-income producing security.
ADR - American Depositary Receipt.
See accompanying notes to financial statements.
13
<PAGE>
The Gabelli Small Cap Growth Fund
Statement of Assets and Liabilities
March 31, 1999 (Unaudited)
================================================================================
Assets:
Investments, at value (Cost $228,540,574) .............. $ 275,644,785
Cash and foreign currency, at value
(Cost $25,510) ....................................... 25,822
Dividends and interest receivable ...................... 330,109
Receivable for investments sold ........................ 1,312,462
Receivable for capital shares issued ................... 50,248
-------------
Total Assets ......................................... 277,363,426
-------------
Liabilities:
Payable for investments purchased ...................... 18,975
Payable for capital shares redeemed .................... 264,508
Payable for investment advisory fees ................... 237,722
Payable for distribution fees .......................... 59,428
Payable to custodian ................................... 6,390,000
Other accrued expenses ................................. 203,313
-------------
Total Liabilities .................................... 7,173,946
-------------
Net Assets applicable to 13,789,524
shares outstanding ................................ $ 270,189,480
=============
Net Assets consist of:
Capital stock, at par value ............................ $ 13,790
Additional paid-in capital ............................. 203,191,204
Undistributed net investment loss ...................... (320,279)
Accumulated net realized gain on investments
and foreign currency transactions .................... 20,200,242
Net unrealized appreciation on investments,
futures contracts and foreign currency
transactions ......................................... 47,104,523
-------------
Total Net Assets ....................................... $ 270,189,480
=============
Net Asset Value, offering and redemption
price per share ($270,189,480 / 13,789,524
shares outstanding; 1,000,000,000 shares
authorized of $0.001 par value) ...................... $ 19.59
=============
Statement of Operations
For the Six Months Ended March 31, 1999 (Unaudited)
================================================================================
Investment Income:
Dividends (net of foreign taxes of $2,746) ............. $ 1,850,754
Interest ............................................... 144,440
-------------
Total Investment Income .............................. 1,995,194
-------------
Expenses:
Investment advisory fees ............................... 1,481,378
Distribution fees ...................................... 370,343
Shareholder services fees .............................. 206,918
Interest expense ....................................... 64,401
Custodian fees ......................................... 42,930
Shareholder report expenses ............................ 39,931
Legal and audit fees ................................... 23,826
Registration fees ...................................... 19,065
Directors' fees ........................................ 18,677
Miscellaneous expenses ................................. 48,080
-------------
Total Expenses ....................................... 2,315,549
-------------
Net Investment Loss .................................. (320,355)
-------------
Net Realized and Unrealized Gain
on Investments:
Net realized gain on investments,
and foreign currency transactions .................... 21,295,936
Net change in unrealized appreciation on
investments and foreign currency transactions ........ 407,531
-------------
Net realized and unrealized gain on
investments and foreign currency
transactions ......................................... 21,703,467
-------------
Net increase in net assets resulting
from operations ........................................ $ 21,383,112
=============
Statement of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Six Months Ended Year Ended
March 31, 1999 September 30,
(Unaudited) 1998
---------------- -------------
<S> <C> <C>
Operations:
Net investment loss ................................................. $ (320,355) $ (451,816)
Net realized gain on investments and foreign currency transactions .. 21,295,936 9,637,886
Net change in unrealized appreciation (depreciation) on investments
and foreign currency transactions ................................. 407,531 (54,116,321)
------------- -------------
Net increase (decrease) in net assets resulting from operations ..... 21,383,112 (44,930,251)
------------- -------------
Distributions to shareholders:
Net realized gain on investments .................................... (8,006,838) (40,993,996)
------------- -------------
Total distributions to shareholders ................................. (8,006,838) (40,993,996)
------------- -------------
Capital share transactions:
Net increase (decrease) in net assets from capital share transactions (21,006,574) 67,255,287
------------- -------------
Net increase (decrease) in net assets ............................... (7,630,300) (18,698,960)
Net Assets:
Beginning of period ................................................. 277,819,780 296,518,740
------------- -------------
End of period ....................................................... $ 270,189,480 $ 277,819,780
============= =============
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Unaudited)
================================================================================
1. Description. The Gabelli Small Cap Growth Fund (the "Fund"), a series of
Gabelli Equity Series Funds, Inc. (the "Corporation"), was organized on July 25,
1991 as a Maryland corporation. The Fund is a diversified, open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), and one of two separately managed portfolios
(collectively, the "Portfolios") of the Corporation. The Fund's primary
objective is capital appreciation. The Fund commenced investment operations on
October 22, 1991.
2. Significant Accounting Policies. The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Security Valuation. Portfolio securities listed or traded on a nationally
recognized securities exchange, quoted by the National Association of Securities
Dealers Automated Quotations, Inc. ("Nasdaq") or traded on foreign exchanges are
valued at the last sale price on that exchange as of the close of business on
the day the securities are being valued (if there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day, except for open short positions, which are
valued at the last asked price). All other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest average of the bid and asked prices. Portfolio securities traded on more
than one national securities exchange or market are valued according to the
broadest and most representative market, as determined by Gabelli Funds, LLC
(the "Adviser"). Securities and assets for which market quotations are not
readily available are valued at their fair value as determined in good faith
under procedures established by and under the general supervision of the Board
of Directors. Short term debt securities with remaining maturities of 60 days or
less are valued at amortized cost, unless the Directors determine such does not
reflect the securities' fair value, in which case these securities will be
valued at their fair value as determined by the Directors. Debt instruments
having a greater maturity are valued at the highest bid price obtained from a
dealer maintaining an active market in those securities. Options are valued at
the last sale price on the exchange on which they are listed. If no sales of
such options have taken place that day, they will be valued at the mean between
their closing bid and asked prices.
Repurchase Agreements. The Fund may enter into repurchase agreements with
primary government securities dealers recognized by the Federal Reserve Bank of
New York, with member banks of the Federal Reserve System or with other brokers
or dealers that meet credit guidelines established by the Directors. Under the
terms of a typical repurchase agreement, the Fund takes possession of an
underlying debt obligation subject to an obligation of the seller to repurchase,
and the Fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Fund's holding period. The Fund will always
receive and maintain securities as collateral whose market value, including
accrued interest, will be at least equal to 100% of the dollar amount invested
by the Fund in each agreement. The Fund will make payment for such securities
only upon physical delivery or upon evidence of book entry transfer of the
collateral to the account of the custodian. To the extent that any repurchase
transaction exceeds one business 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
15
<PAGE>
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued) (Unaudited)
================================================================================
and the value of the collateral declines or if bankruptcy proceedings are
commenced with respect to the seller of the security, realization of the
collateral by the Fund may be delayed or limited.
Futures Contracts. The Fund may engage in futures contracts for the purpose of
hedging against changes in the value of its portfolio securities and in the
value of securities it intends to purchase. Upon entering into a futures
contract, the Fund is required to deposit with the broker an amount of cash or
cash equivalents equal to a certain percentage of the contract amount. This is
known as the "initial margin". Subsequent payments ("variation margin") are made
or received by the Fund each day, depending on the daily fluctuation of the
value of the contract. The daily changes in the contract are included in
unrealized gains or losses. The Fund recognizes a realized gain or loss when the
contract is closed. At March 31, 1999, there were no open futures contracts.
There are several risks in connection with the use of futures contracts as a
hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in value of the hedged investments. In addition, there is the risk that
the Fund may not be able to enter into a closing transaction because of an
illiquid secondary market.
Forward Foreign Exchange Contracts. The Fund may engage in forward foreign
exchange contracts for hedging a specific transaction with respect to either the
currency in which the transaction is denominated or another currency as deemed
appropriate by the Adviser. Forward foreign exchange contracts are valued at the
forward rate and are marked-to-market daily. The change in market value is
included in unrealized appreciation/depreciation on investments and foreign
currency transactions. When the contract is closed, the Fund records a realized
gain or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed.
The use of forward foreign exchange contracts does not eliminate fluctuations in
the underlying prices of the Fund's portfolio securities, but it does establish
a rate of exchange that can be achieved in the future. Although forward foreign
exchange contracts limit the risk of loss due to a decline in the value of the
hedged currency, they also limit any potential gain that might result should the
value of the currency increase. In addition, the Fund could be exposed to risks
if the counterparties to the contracts are unable to meet the terms of their
contracts.
Foreign Currency Translation. The books and records of the Fund are maintained
in United States (U.S.) dollars. Foreign currencies, investments and other
assets and liabilities are translated into U.S. dollars at the exchange rates
prevailing at the end of the period, and purchases and sales of investment
securities, income and expenses are translated at the exchange rate prevailing
on the respective dates of such transactions. Unrealized gains and losses, which
result from changes in foreign exchange rates and/or changes in market prices of
securities, have been included in unrealized appreciation/depreciation on
investments and foreign currency transactions. Net realized foreign currency
gains and losses resulting from changes in exchange rates include foreign
currency gains and losses between trade date and settlement date on investment
securities transactions, foreign currency transactions and the difference
between the amounts of interest and dividends recorded on the books of the Fund
and the amounts actually received. The portion of foreign currency gains and
losses related to fluctuation in exchange rates between the initial trade date
and subsequent sale trade date is included in realized gain/(loss) on
investments.
16
<PAGE>
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued) (Unaudited)
================================================================================
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.
Expenses. Certain administrative expenses are common to, and allocated among,
the Portfolios. Such allocations are made on the basis of each Portfolio's
average net assets or other criteria directly affecting the expenses as
determined by the Adviser.
Provision for Income Taxes. The Fund has qualified and intends to continue to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. As a result, a Federal income tax provision is
not required.
Dividends and interest from non-U.S. sources received by the Fund are generally
subject to non-U.S. withholding taxes at rates ranging up to 30%. Such
withholding taxes may be reduced or eliminated under the terms of applicable
U.S. income tax treaties, and the Fund intends to undertake any procedural steps
required to claim the benefits of such treaties.
3. Investment Advisory Agreement. The Fund has entered into an investment
advisory agreement (the "Advisory Agreement") with the Adviser which provides
that the Fund will pay the Adviser a fee, computed daily and paid monthly, at
the annual rate of 1.00% of the value of the Fund's average daily net assets. In
accordance with the Advisory Agreement, the Adviser provides a continuous
investment program for the Fund's portfolio, oversees the administration of all
aspects of the Fund's business and affairs and pays the compensation of all
Officers and Directors of the Fund who are its affiliates.
4. Distribution Plan. The Fund's Board of Directors has adopted a distribution
plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. For the six months
ended March 31, 1999, the Fund incurred distribution costs payable to Gabelli &
Company, Inc., an affiliate of the Adviser, of $370,343, or 0.25% of average
daily net assets, the annual limitation under the Plan. Such payments are
accrued daily and paid monthly.
5. Portfolio Securities. Purchases and sales of securities for the six months
ended March 31, 1999, other than short term securities, aggregated $33,373,585
and $50,357,022, respectively.
6. Transactions with Affiliates. During the six months ended March 31, 1999, the
Fund paid brokerage commissions of $35,105 to Gabelli & Company, Inc. and its
affiliates.
7. Bank Loan. The Fund has access to an unsecured line of credit from the
custodian for temporary borrowing purposes. Borrowings under this arrangement
bear interest at 0.75% above the Federal Funds rate on outstanding balances.
There were no borrowings outstanding at March 31, 1999.
17
<PAGE>
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued) (Unaudited)
================================================================================
The average daily amount of borrowings outstanding during the six months ended
March 31, 1999, was $2,313,389, with a related weighted average interest rate of
5.57%. The maximum amount borrowed at any time during the six months ended March
31, 1999 was $11,290,000.
8. Capital Stock Transactions. Transactions in shares of capital stock were as
follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
March 31, 1999 September 30, 1998
---------------------- -----------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold ................................ 3,032,851 $ 59,681,839 17,952,500 $ 420,895,401
Shares issued upon reinvestment of dividends 386,786 7,658,226 1,837,926 39,129,545
Shares redeemed ............................ (4,402,973) (88,346,639) (16,683,061) (392,799,659)
----------- ------------- ------------- -------------
Net increase ............................. (983,336) $ (21,006,574) 3,107,365 $ 67,225,287
=========== ============= ============= =============
</TABLE>
9. Transactions in Securities of Affiliated Issuers. The 1940 Act defines
affiliated issuers as those in which the Fund's holdings of an issuer represent
5% or more of the outstanding voting securities of the issuer. A summary of the
Fund's transactions in the securities of these issuers during the six months
ended March 31, 1999, is set forth below:
<TABLE>
<CAPTION>
Percent
Shares Value at Owned
Beginning Purchased Ending Realized Dividend March 31, of Shares
Shares (Sold) Shares Gain Income 1999 Outstanding
--------- --------- ------ -------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Trans-Lux Corp. 72,000 15,000 87,000 -- 5,425 750,375 8.73%
GEO International Corp. 1,425,000 -- 1,425,000 -- -- -- 7.15%
-------- ---------
$ 5,425 $ 750,375
======== =========
</TABLE>
10. Subsequent Event. On February 9, 1999, the Adviser reorganized its
operations and corporate structure by transferring a portion of its assets and
liabilities to a successor adviser, Gabelli Funds, LLC, which is wholly owned by
Gabelli Asset Mangement Inc., a newly formed publicly traded company that is 80%
owned by the former Adviser. Counsel to the former Adviser has concluded that
the ownership change does not constitute an assignment as defined by the 1940
Act.
18
<PAGE>
The Gabelli Small Cap Growth Fund
Financial Highlights
================================================================================
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Six Months Ended Year Ended September 30,
March 31, 1999 --------------------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994
---------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period .......... $ 18.81 $ 25.42 $ 20.02 $ 19.34 $ 17.24 $ 16.90
-------- -------- -------- -------- -------- --------
Net investment loss ........................... (0.02) (0.03) (0.07) (0.09) (0.04) (0.05)
Net realized and unrealized gain (loss)
on investments .............................. 1.33 (2.99) 7.70 2.11 3.17 0.81
-------- -------- -------- -------- -------- --------
Total from investment operations .............. 1.31 (3.02) 7.63 2.02 3.13 0.76
-------- -------- -------- -------- -------- --------
Distributions to shareholders:
Net realized gain on investments .............. (0.53) (3.59) (2.23) (1.34) (1.03) (0.42)
-------- -------- -------- -------- -------- --------
Total distributions ........................... (0.53) (3.59) (2.23) (1.34) (1.03) (0.42)
-------- -------- -------- -------- -------- --------
Net asset value, end of period ................ $ 19.59 $ 18.81 $ 25.42 $ 20.02 $ 19.34 $ 17.24
======== ======== ======== ======== ======== ========
Total return+ ................................. 7.0% (13.5)% 42.2% 11.0% 19.5% 4.5%
======== ======== ======== ======== ======== ========
Ratios to average net assets and supplemental data:
Net assets, end of period (in 000's) .......... $270,189 $277,820 $296,519 $223,239 $231,156 $205,699
Ratio of net investment loss
to average net assets ....................... (0.22)%(a) (0.14)% (0.36)% (0.42)% (0.24)% (0.28)%
Ratio of operating expenses
to average net assets (b) ................... 1.56%(a) 1.44% 1.62% 1.58% 1.54% 1.54%
Portfolio turnover rate ....................... 11% 20% 14% 11% 17% 19%
</TABLE>
- ----------
+ Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the
period including reinvestment of dividends.
(a) Annualized.
(b) The Fund incurred interest expense during the periods ended March 31, 1999
and September 30, 1997. If the interest had not been incured, the ratios
of operating expenses to average net assets for both periods would have
been 1.52%.
See accompanying notes to financial statements.
19
<PAGE>
Gabelli Equity Series Funds, Inc.
The Gabelli Small Cap Growth Fund
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
fax: 1-914-921-5118
http://www.gabelli.com
e-mail: [email protected]
(Net Asset Value may be obtained daily by calling
1-800-GABELLI after 6:00 P.M.)
Board of Directors
Mario J. Gabelli, CFA Robert J. Morrissey
Chairman and Chief Attorney-at-Law
Investment Officer Morrissey, Hawkins & Lynch
Gabelli Asset Management Inc.
Felix J. Christiana Karl Otto Pohl
Former Senior Vice President Former President
Dollar Dry Dock Savings Bank Deutsche Bundesbank
Anthony J. Colavita Anthony R. Pustorino
Attorney-at-Law Certified Public Accountant
Anthony J. Colavita, P.C. Professor, Pace University
Vincent D. Enright Anthonie C. van Ekris
Former Senior Vice President Managing Director
and Chief Financial Officer BALMAC International, Inc.
KeySpan Energy Corp.
John D. Gabelli
Senior Vice President
Gabelli & Company, Inc.
Officers
Mario J. Gabelli, CFA Bruce N. Alpert
President and Chief Vice President and Treasurer
Investment Officer
James E. McKee
Secretary
Distributor
Gabelli & Company, Inc.
Custodian, Transfer Agent and Dividend Agent
State Street Bank and Trust Company
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom LLP
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of The
Gabelli Small Cap Growth Fund. It is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
