THE GABELLI SMALL CAP GROWTH FUND
FIRST QUARTER REPORT
DECEMBER 31, 1999(A)
TO OUR SHAREHOLDERS,
Small cap stocks rallied in the fourth quarter of 1999 and the Russell
2000 Index closed the year at a record high. However, this year's market advance
had little breadth. Technology stocks, and particularly Internet related
companies, were big winners, while most other industry groups languished.
Despite the Fund's limited commitments to technology and Internet stocks, it
closed the year with competitive returns relative to the Russell 2000 benchmark.
INVESTMENT PERFORMANCE
For the quarter ended December 31, 1999, The Gabelli Small Cap Growth
Fund's (the "Fund") total return was 9.88%. The Value Line Composite and Russell
2000 Indices had returns of 6.67% and 18.44%, respectively, over the same
period. Each index is an unmanaged indicator of stock market performance. The
Fund was up 14.22% for 1999. The Value Line Composite and Russell 2000 Indices
rose 10.56% and 21.26%, respectively, over the same twelve-month period.
For the five-year period ended December 31, 1999, the Fund's total return
averaged 16.90% annually versus average annual total returns of 17.78% and
16.69% for the Value Line Composite and Russell 2000 Indices, respectively.
Since inception on October 22, 1991 through December 31, 1999, the Fund had a
cumulative total return of 284.65%, which equates to an average annual total
return of 17.86%.
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
[Graphic of pyramid omitted--text as follows]
EPS
PMV
MANAGEMENT
CASH FLOW
RESEARCH
[End of Pyramid text]
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(a) The Fund's fiscal year ends September 30.
<PAGE>
INVESTMENT RESULTS (a)(c)
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<TABLE>
<CAPTION>
Calendar Quarter
-------------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
<S> <C> <C> <C> <C> <C>
1999: Net Asset Value ...................... $19.59 $22.94 $21.84 $21.43 $21.43
Total Return ......................... (6.8)% 17.1% (4.8)% 9.9% 14.2%
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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%
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1997: Net Asset Value ...................... $19.11 $22.23 $25.42 $21.58 $21.58
Total Return ......................... 3.1% 16.3% 14.7% (0.8)% 36.5%
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1996: Net Asset Value ...................... $19.65 $20.68 $20.02 $18.53 $18.53
Total Return ......................... 6.2% 5.2% (3.2)% 3.4% 11.9%
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1995: Net Asset Value ...................... $17.03 $17.88 $19.34 $18.50 $18.50
Total Return ......................... 7.4% 5.0% 8.2% 2.6% 25.2%
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1994: Net Asset Value ...................... $16.76 $16.33 $17.24 $15.85 $15.85
Total Return ......................... (3.6)% (2.6)% 5.6% (2.1)% (2.9)%
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1993: Net Asset Value ...................... $15.46 $15.74 $16.90 $17.38 $17.38
Total Return ......................... 6.6% 1.8% 7.4% 5.3% 22.8%
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1992: Net Asset Value ...................... $13.42 $13.41 $13.10 $14.50 $14.50
Total Return ......................... 9.9% (0.1)% (2.3)% 12.1% 20.3%
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1991: Net Asset Value ...................... __ __ __ $12.21 $12.21
Total Return ......................... __ __ __ 22.9%(b) 22.9%(b)
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</TABLE>
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Average Annual Returns - December 31, 1999 (a)
- ----------------------------------------------
1 Year .......................... 14.22%
5 Year .......................... 16.90%
Life of Fund (b) ................ 17.86%
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Dividend History
- -------------------------------------------------------
Payment (ex) Date Rate Per Share Reinvestment Price
- ----------------- -------------- ------------------
December 20, 1999 $2.462 $20.55
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.
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would describe generally as having a dominant market share, niche franchise in a
growing and/or consolidating industry.
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 kinds of companies we can feel comfortable owning
long term, rather than trading like so many small cap investors are prone to do.
COMMENTARY
The following excerpts were selected from comments made by Mario J.
Gabelli, our Chief Investment Officer, that appeared in the December 31, 1999
edition of OUTSTANDING INVESTOR DIGEST:
"FIRST, A QUICK OVERVIEW ON THE MARKET... THE ECONOMY LOOKS TERRIFIC. THE
WORLD IS REFLATING. JAPAN IS GOING TO DO QUITE WELL. EUROLAND, WHICH IS THE NAME
THAT WE USE FOR MAINLAND EUROPE, IS TERRIFIC. WE THINK EARNINGS FOR THE S&P THIS
YEAR AND NEXT WILL BE UP BY DOUBLE DIGITS, PARTICULARLY AS NON-U.S. EARNINGS ARE
TRANSLATED INTO U.S. DOLLARS WITH THE BENEFIT OF THAT STRONGER ECONOMY.
THE RUSSELL 2000, HOWEVER, COULD BE UP SUBSTANTIALLY MORE THAN THAT. WE
DON'T PUT OUR [OWN] NUMBERS TOGETHER, BUT WE USE A MERRILL LYNCH TYPE NUMBER,
AND WE'RE LOOKING AT 20% [PER YEAR] FOR BOTH YEARS. SO WE THINK THAT'S A GOOD
ECONOMIC BACKDROP...
WE'RE REALLY BOTTOM-UP STOCK PICKERS. WE HAVE A STRONG FOCUS AND INTENSITY
[ON] RESEARCH. WE READ 10-QS, 10-KS AND VISIT COMPANIES...
THE INVESTMENT PROCESS THAT WE FOLLOW IS FAIRLY SIMPLE. ANALYSTS ARE
ASSIGNED TO FOLLOW INDUSTRIES ON A COMPANY BASIS. FOR EXAMPLE, IF YOU WANT TO
KNOW ABOUT BROADCASTING, WE KNOW IT. WE THINK SHORT TERM, THERE'S A GREAT
OPPORTUNITY IN THE BROADCASTERS. BILL KENNARD AT THE FEDERAL COMMUNICATIONS
COMMISSION SOUNDED A GONG IN AUGUST WHEN HE SAID EVERY TV STATION OPERATOR IN
THE COUNTRY CAN NOW OWN TWO TV STATIONS. SO WE'RE BUYING GRANITE IN THE
PORTFOLIO, THE [UNITED TELEVISIONS] THAT WE OWN IN THE PORTFOLIO, WILL
ANNOUNCE... WHO THEY'RE GOING TO PARTNER WITH...
IDEALLY, WE LIKE DOMESTIC, CASH-GENERATING COMPANIES. BUT WITH THE BERLIN
WALL HAVING GONE DOWN ALMOST 10 YEARS AGO, WE HAVE A GREAT OPPORTUNITY GLOBALLY
TO EARN A RETURN WHEREVER A COMPANY EXISTS.
FOR EXAMPLE, MTV, WHEN IT FIRST WENT PUBLIC HAD LESS THAN 20 MILLION
VIEWERS. TODAY, THERE [ARE] CLOSE TO 400 MILLION PEOPLE WHO CAN WATCH MTV AT ANY
POINT IN TIME. AND WE LIKE THAT. WE LIKE TO FIND GROWING COMPANIES THAT CAN
LEVERAGE THEIR BUSINESS ON A GLOBAL BASIS.
TAKE A SIMPLE THING LIKE TEA: CELESTIAL [SEASONINGS] IS AN IMPORTANT PART
OF OUR PORTFOLIO. IT DOMINATES THE MARKET FOR GREEN TEA. TEA IS GOOD FOR YOU...
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WE LOOK FOR STOCKS THAT [CAN APPRECIATE] 50% IN TWO YEARS. AND WE LOOK FOR
A CATALYST, SOMETHING THAT'S CHANGING, [THAT WILL UNLOCK THE VALUE]... [WE HAVE]
THE... ABILITY TO SHIFT THINGS AROUND, [BETWEEN] VALUE/GROWTH, LONG/SHORT,
INTERNET/STEEL, ETC. SO HOW AND WHERE DOES A GRAHAM & DODD INVESTOR IN AN
INTERNET WORLD FIND NET-NETS? HOW DO YOU MAKE MONEY BY FINDING COMPANIES THAT
ARE CLEARLY GOING TO DRIVE THE WORLD?
ALL OF US - EVERY SINGLE ONE OF US - ARE EXTRAORDINARILY BLESSED TO BE
HERE IN THIS INTERNET WORLD. IF I'D BEEN HERE IN 1454, I BET I'D HAVE SAID THE
SAME THING ABOUT GUTENBERG AND THE PRINTING PRESS: "YOU MEAN TO TELL ME WE CAN
PUT THE MONKS OUT OF WORK AND HAVE BOOKS FOR ALL OF US TO READ?! THAT'S
FABULOUS!" WELL, THE INTERNET'S DOING ALL OF THAT.
THE ANALYSTS IN OUR FIRM ARE TOLD: "GATHER THE DATA, ARRAY THE DATA,
PROJECT THE DATA AND COME UP WITH ECONOMIC CONCLUSIONS." WELL, THE INTERNET
ALLOWS YOU TO GATHER THE DATA MORE EFFICIENTLY. IT'S A WONDERFUL TOOL. BUT FOR
ALL OF US, IT'S CHANGING [VERY RAPIDLY]. AND HOW DO WE GENERATE [A RETURN]?...
YOU'VE ALL ASKED THAT QUESTION OF GROWTH VERSUS VALUE. AND WE HAVE A CHART
THAT SHOWS HOW VALUE HAS PERFORMED RELATIVE TO THE BENCHMARK OVER THE LAST 21
YEARS SINCE WE FOUNDED THE FIRM. IN 1976, WHY DID VALUE DO SO WELL? IT WASN'T
COMPLICATED. WHEN YOU HAVE NO CONVICTION THAT YOU CAN PROJECT THE FUTURE, WHAT'S
IN HAND IS WORTH A LOT MORE. YOU HAVE VARIOUS CYCLES IN WHICH VALUE FUNCTIONS.
TODAY, WE'RE DOWN AT THE BOTTOM OF THE CHART. WHY? BECAUSE WE BELIEVE WE CAN
PROJECT FAR INTO THE FUTURE. SO IT'S NOT A COMPLICATED WORLD WE LIVE IN. AND
THAT MAKES GROWTH EVEN MORE ATTRACTIVE, THE MORE CONFIDENCE AND CONVICTION YOU
HAVE THAT THINGS MAINTAIN THEMSELVES...
WHILE WE EXPECT A BUMPIER EXPERIENCE IN MANAGING A SMALL GROWTH COMPANY
PORTFOLIO VERSUS A LARGE-CAP PORTFOLIO, WE BELIEVE IN THE LONG RUN, IT WILL BE
WORTH IT.
RUSSELL 2000'S EARNINGS WILL MATERIALLY EXCEED THE S&P'S...THE EARNINGS OF
THE RUSSELL 2000 WILL BE UP 20%-25% PER YEAR FOR THE NEXT TWO YEARS. AND THE
S&P'S [ARE EXPECTED TO BE] UP IN THE LOW DOUBLE DIGITS, 10%, 11%, 12%. SO THE
CONCLUSION IS THAT A POWERFUL, POWERFUL TAILWIND OF VERY GOOD EARNINGS IS ON THE
WAY...
THE RUSSELL 2000 HAS BETTER EARNINGS AND LOWER VALUATIONS. AND, THEREFORE,
IT'S JUST READY TO EXPLODE IN TERMS OF UPSIDE. THERE WERE 7,000 TRANSACTIONS
LAST YEAR IN THE U.S. AND WHILE YOU TALK ABOUT WARNER LAMBERT, AND WHILE IT'S
FUN TO TALK ABOUT CBS AND VIACOM, 7,000 TRANSACTIONS TOOK PLACE, AND MOST OF
THEM [WERE UNDER] $200 MILLION. SO IT REALLY [HAS] BEEN THE SMALLER COMPANIES...
THERE ARE A LOT OF STRUCTURAL REASONS WHY PEOPLE TEND NOT TO LOOK FOR THE
IGNORED, EVEN THOUGH THEY'RE HIGH GROWTH. FOR EXAMPLE, IF I'M WORKING AT A
SELL-SIDE BROKERAGE FIRM, HOW DO I MAKE $2 MILLION A YEAR? I DON'T MAKE IT BY
BUYING AND RECOMMENDING SMALL-CAP STOCKS. I DO IT BECAUSE I'M ON THE ALL-STAR
TEAM, OR I DO INVESTMENT BANKING. AND I DO THAT BY BUYING AND FOCUSING ON LARGER
COMPANIES.
AND UNLESS THERE'S A ROAD SHOW TODAY... THERE'S AN OLD EXPRESSION ON WALL
STREET, "EITHER NET IT OR FORGET IT." TODAY, IT'S A LITTLE DIFFERENT, IT'S
IPO'S. SO NOBODY'S OUT THERE TALKING ABOUT THE SMALLER CAPS...
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<PAGE>
WHEN THE BERLIN WALL CAME DOWN, THE BUSINESS MODEL OF MOST COMPANIES
BECAME GLOBAL. COCA- COLA, MTV (VIACOM), BOEING, EVERYBODY COULD GO GLOBAL. AND
THEREFORE, SCALE AND SIZE BECOME IMPORTANT IN A GLOBAL MARKETPLACE, AND YOU CAN
CAPTURE, AT THE MARGIN, THESE GREATER GROWTH OPPORTUNITIES. SO WE COULD MAKE A
COMPELLING CASE THAT FROM AN EARNINGS AND MARKET DYNAMICS POINT OF VIEW, SCALE
IS IMPORTANT ON A GLOBAL BASIS AND SIZE IS IMPORTANT AND, THEREFORE, THAT'S AN
ADVANTAGE.
BUT WE KNOW THAT WHEN YOU DO THE RESEARCH AND FIND GREAT COMPANIES THAT
CAN GROW AT THE RATES THAT WE'RE FINDING THEM [SELLING AT] 10, 11, 12 TIMES
EARNINGS, IT'S OKAY. WE'RE EXPECTING TO CREATE WEALTH FOR THE SHAREHOLDERS THAT
BUY THE SMALL-CAP STOCKS. WE'RE EXPECTING TO DO IT AGAINST OUR BENCHMARK. AND
WE'RE EXPECTING TO DO IT EXTRAORDINARILY WELL WITH LESS RISK...
HOW MANY OF YOU WOULD BE UNHAPPY EARNING A RETURN OF 20% A YEAR? WHAT HAS
THE STOCK MARKET DONE FOR THE LAST 60 YEARS? WE ALL KNOW WHAT IT'S DONE FOR THE
LAST FOUR. SO THAT'S THE WAY WE THINK ABOUT IT, OWNING BUSINESSES. WE'RE NOT
BUYING SOYBEANS OR COMMODITIES, WE'RE NOT BUYING STOCKS THAT REPRESENT TRADING
PIECES OF PAPER...
SOMEONE ASKED WHY, IN AN INTERNET WORLD, DOES THE PORTFOLIO START
INCLUDING SOME GAS, ELECTRIC AND WATER COMPANIES? ISN'T THAT ABOUT AS DULL AS
YOU CAN FIND?
WELL, WE DECIDED ABOUT TWO OR THREE YEARS AGO THAT THERE'S A MAJOR
STRUCTURAL CHANGE TAKING PLACE. AND GOING BACK TO THE MODEL OF RISK/REWARD, WE
STARTED BUYING ALL THE WATER COMPANIES. WHY? BECAUSE OF CONSOLIDATION. WE
STARTED BUYING GAS COMPANIES BECAUSE OF THE CONSOLIDATION THAT WAS LED BY
EASTERN ENTERPRISES OUT OF BOSTON WHERE THERE WERE ABOUT SEVEN OR EIGHT GAS
COMPANIES, AND THEY BOUGHT THREE OR FOUR.
THEN WE STARTED BUYING THE [ELECTRIC COMPANIES], IN PART, BECAUSE OF THE
COMBINATION OF THE DEREGULATION IN THAT INDUSTRY, WHEN MANUFACTURING WAS
UNCOUPLED FROM DISTRIBUTION AND UNCOUPLED FROM THE RETAIL SIDE. SO WE'VE BEEN
REWARDED BY OUR PATIENCE BECAUSE IN THE LAST THREE MONTHS ALONE, THERE HAVE BEEN
24 TRANSACTIONS . . .
EVEN WARREN BUFFETT WENT OUT AND JUST BOUGHT A COMPANY IN IOWA. AND WHAT
HE SEES IS AN ABILITY TO PUT BILLIONS OF DOLLARS TO WORK AT LOW RISK. BASICALLY,
THE CEO SAID, "HEY, I'M GOING TO DO A WHOLE BUNCH OF DEALS." JUST THIS WEEK
ALONE, YOU SAW THREE OR FOUR OF THEM. SO WE ARE INTO "TAKE OUT POWER".
SO THAT'S WHY THOSE ARE CREEPING INTO OUR PORTFOLIO, NOT BECAUSE WE'RE
BEING CONSERVATIVE, BUT BECAUSE WE'RE BEING EXTRAORDINARILY AGGRESSIVE WITH LOW
RISK...
SO [I'VE SEEN] THESE EBBS AND FLOWS IN MY BRIEF INVESTMENT HORIZON OF 35
YEARS. RIGHT NOW, EVERYONE IS EXTRAORDINARILY OPTIMISTIC, AND DESERVEDLY SO.
HOWEVER, AS [WE] POINTED OUT, WHAT PRICE DO YOU WANT TO PAY FOR THAT OPTIMISM?"
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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.
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1999 COMPLETED DEALS
<TABLE>
<CAPTION>
NUMBER AVERAGE COST CLOSING
FUND HOLDING OF SHARES (a) PER SHARE (b) PRICE (c) CLOSING DATE %RETURN (d)
------------ -------------- ------------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
AFC Cable Systems Inc. 40,000 $20.54 $42.69 11/22/99 107.82%
General Housewares Corp. 55,000 13.07 28.63 10/21/99 119.02%
Chock Full O'Nuts Corp. 56,000 8.43 11.38 10/18/99 35.01%
COMSAT Corp. 35,000 32.67 45.50 09/18/99 9.80%
Cellular Comm. of Puerto Rico 24,000 8.98 29.50 08/25/99 228.02%
Hach Co. 13,000 10.23 17.75 07/15/99 73.46%
Hach Co., Cl. A 20,000 9.86 17.25 07/15/99 74.96%
Lawter International Inc. 200,000 11.39 12.25 06/01/99 6.99%
Whitman Corp. 48,000 15.43 17.94 05/20/99 16.29%
American Safety Razor Co. 14,900 11.94 14.20 04/23/99 2.21%
US Physical Therapy Inc. 6,000 6.25 9.75 04/20/99 56.00%
Hudson General Corp. 41,000 15.71 76.00 03/19/99 382.97%
Pulitzer Publishing Co. 42,000 30.51 81.19 03/19/99 116.11%
Fingerhut Companies Inc. 40,000 12.24 25.00 03/17/99 104.25%
First Brands Corp. 15,000 12.93 38.56 01/28/99 198.22%
Gryphon Holdings 20,000 16.88 19.00 01/15/99 12.56%
CalMat Co. 130,000 21.51 31.00 01/01/99 44.12%
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</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.
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THIS YEAR'S SCORECARD
As is usually the case, this year's biggest winners come from an eclectic
group of industries including wireless communications (Rural Cellular Corp.,
VoiceStream Wireless and Aerial Communications), publishing (TV Guide and Penton
Media), broadcasting (Ackerley Group and Sinclair Broadcast Group), candy and
trading cards (Topps Company), ice cream (Ben & Jerry's Homemade) and auto
painting (Earl Scheib).
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Our losers come from equally disparate industry groups including: golf
equipment (Adams Golf), retailing (Burlington Coat Factory), auto parts
(GenCorp), gold mining (TVX Gold) and energy (Tesoro Petroleum Corp.)
Even in unusually narrow markets such as this year's technology dominated
advance, there are opportunities for research driven stock pickers to excel. Our
high stock picking batting average in a market in which most of the scoring came
from technology stock home runs helped us generate very competitive returns.
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.
AZTAR CORP. (AZR - $10.875 - NYSE) has been in the gaming business for more than
20 years. The company owns and operates three casino hotels: Tropicana Casino
and Resort in Atlantic City; Tropicana Resort and Casino in Las Vegas; and
Ramada Express Hotel and Casino in Laughlin, Nevada. Aztar also operates
riverboats in Caruthersville, Missouri and Evansville, Indiana.
CARTER-WALLACE INC. (CAR - $17.9375 - NYSE) manufactures and sells a diversified
line of consumer health care products including toiletries, pharmaceuticals,
diagnostic specialties, proprietary drugs and pet supplies. Such recognized
brand names as Arrid deodorant, Nair hair remover and Pearl Drops toothpaste are
Carter-Wallace products. Astelin, in its second year on the market, remains the
only prescription antihistamine nasal spray in the U.S. The company also sells
certain products exclusively in international markets.
CLARCOR INC. (CLC - $18.00 - NYSE) manufactures and distributes engine/mobile
and industrial/environmental filtration products as well as consumer packaging
products. CLARCOR markets a full line of oil, air, fuel, coolant and hydraulic
fluid filters that are used in a wide variety of applications including engines
and industrial equipment. The company markets commercial and industrial air
filters and systems, electrostatic contamination control equipment, and
electrostatic high precision spraying equipment. The air filters and systems
remove contaminants from recirculated indoor air and from processed air that is
exhausted outdoors. Metal, plastic, and paper containers, combination
metal/plastic containers, and plastic closures manufactured by the company are
used in packaging a wide variety of dry and paste form products, such as food
specialties, beverages and juices, cosmetics and toiletries, drugs and
pharmaceuticals and chemical specialties.
DEXTER CORP. (DEX - $39.75 - NYSE), located in Windsor Locks, Connecticut, is a
specialty materials company principally serving the worldwide aerospace,
electronics, food packaging and medical markets, with products based on
proprietary technologies. Through 75% ownership of Life Technologies, Inc.
Dexter's life sciences segment focuses on the development and manufacture of
precise, reproducible biological and biochemical products for life sciences
research and commercial applications within the medical market. The non-wovens
segment focuses on the proprietary formulation and manufacture of
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long-fiber, wet-formed products, primarily for use in the food packaging,
medical and hygiene markets. The specialty polymers segment includes product
offerings based on polymer technology for the formulation and processing of
specialty adhesives, coatings and encapsulants primarily for use in the
aerospace and electronics markets,
LIBERTY CORP. (LC - $42.1875 - 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.
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 February 1999, Liberty hired an investment banker
and began a strategic review which may result in a spinoff.
OAK TECHNOLOGY INC. (OAKT - $9.4375 - NASDAQ) designs, develops and markets high
performance integrated semiconductors, software and platform solutions to
original equipment manufacturers ("OEMs") worldwide that serve the optical
storage, consumer electronics and digital imaging equipment markets. The
company's products consist primarily of integrated circuits and supporting
software and firmware, all designed to store and distribute digital content. The
company contracts with independent foundries to manufacture all its products.
Currently, the company's three target markets include optical storage, consumer
electronics and digital imaging equipment.
PITTWAY CORP. (PRY - $45.0625 - NYSE) has completed the tax-free spin-off of
Penton Media (PME - $24.00 - NYSE). Each Pittway shareholder received one share
of Penton common stock for each share of Pittway stock held. This action leaves
Pittway with its core business of manufacturing and distributing burglar and
commercial fire alarm equipment. Pittway's ADI distribution unit is the largest
supplier of alarm system components in the U.S. Pittway is also involved in real
estate and other promising ventures, including a 34% interest in Cylink, a
leading manufacturer of encryption equipment. Honeywell (HON - $57.6875 - NYSE)
has begun a tender offer to acquire Pittway's 43 million shares for $45.50 per
share.
STANDARD MOTOR PRODUCTS INC. (SMP - $16.125 - NYSE), headquartered in Long
Island City, New York, supplies functional replacement parts for the engine
management, electrical and climate control systems of cars, trucks and buses.
The company services all makes and models, both new and old cars, imported and
domestic. SMP has two primary divisions - engine management and temperature
control - and believes it is the number one supplier to the North American
aftermarket in cash of these lines.
TV GUIDE INC. (TVGIA - $43.00 - NASDAQ), formerly United Video Satellite Group,
publishes TV Guide, the best-selling weekly magazine in the U.S. The company's
other operations include the TV Guide Channel (an on-screen programming guide
formerly called the Prevue Channel) and 40% of Superstar/Netlink Group, which
sends programming from such providers as CNN, ESPN, and HBO to home satellite
dishes. Other services include SpaceCom (satellite transmission services for
radio programming,
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<PAGE>
paging, and news services) and UVTV (distribution of superstations, such as
Chicago's WGN, to cable television systems). News Corp. and AT&T's Liberty Media
Group each hold about 49% of TV Guide's voting power and 44% of its equity.
UNITED TELEVISION INC. (UTVI - $137.6875 - 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 - $72.125 - NYSE) television division. 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), closed on July 7, 1999.
UTVI stations cover approximately nine percent of the U.S. population. UTVI is
58%-owned by BHC Communications (BHC - $160.00 - AMEX). United Television is a
beneficiary of the recent FCC ruling allowing television duopoly, or ownership
of two stations in a market.
USA NETWORKS INC. (USAI - $55.25 - NASDAQ), through its subsidiaries, engages in
diversified media and electronic commerce businesses that include: electronic
retailing, ticketing operations and television broadcasting. Chairman and CEO
Barry Diller has brought together under one umbrella: the USA Network, the
Sci-Fi Channel, USA Networks Studios, USA Broadcasting, The Home Shopping
Network and the Ticketmaster Group. The plan is to integrate these assets,
leveraging programming, production capabilities and electronic commerce across
this strong distribution platform.
MINIMUM INITIAL INVESTMENT - $1,000
The Fund's minimum initial investment for both regular and retirement
accounts is $1,000. There are no subsequent investment minimums. No initial
minimum is required for those establishing an Automatic Investment Plan.
Additionally, The Gabelli Small Cap Growth Fund and other Gabelli Funds are
available through the no-transaction fee programs at many major discount
brokerage firms.
INTERNET
You can now visit us on the Internet. Our home page at
http://www.gabelli.com contains information about Gabelli Asset Management Inc.,
the Gabelli Mutual Funds, IRAs, 401(k)s, quarterly reports, closing prices and
other current news. You can send us e-mail at [email protected].
SHAREHOLDER MEETING
We are pleased to report that the shareholders of The Gabelli Small Cap
Growth Fund overwhelmingly approved the proposal to create additional classes of
shares for the Fund. The creation of new classes of shares provides the Fund
with distribution alternatives that address the needs of various types of
investors. The offering of new classes of shares should also enhance the
potential for the Fund to attract additional investors in a manner that could
provide added benefits for all shareholders of the Fund. The existing class of
shares have been redesignated as Class AAA shares. Presently, no introduction
date has been established for the new classes of shares. The offering of new
classes of shares will not diminish the ability of current shareholders to
purchase and redeem Class AAA shares at net asset value.
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IN CONCLUSION
A very narrow small cap market dominated by technology stocks challenged
our investment prowess in 1999. As is evidenced by the Fund's competitive
returns versus the Russell 2000 benchmark, we did a good job finding winners in
a broad range of industries. We believe a small percentage of stocks in a few
sectors of the small cap market are grossly overvalued. However, the balance of
the market still offers a wealth of reasonably priced long term investment
opportunities that we can take advantage of in the years ahead.
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/ signature
MARIO J. GABELLI, CFA
Portfolio Manager and
Chief Investment Officer
January 31, 2000
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
DECEMBER 31, 1999
-----------------
TV Guide Inc. UnitedGlobalCom Inc.
Pittway Corp. Oak Technology Inc.
USA Networks Inc. Aztar Corp.
Liberty Corp. Carter-Wallace Inc.
United Television Inc. CLARCOR 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.
10
<PAGE>
THE GABELLI SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ------
COMMON STOCKS -- 96.1%
AGRICULTURE -- 0.0%
7,500 Cadiz Inc. ........................... $ 71,250
5,000 Sylvan Inc ........................... 42,500
------------
113,750
------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 4.4%
100,000 Acktion Co.+ ......................... 900,589
5,000 Borg-Warner Automotive Inc. .......... 202,500
170,000 GenCorp Inc. ......................... 1,678,750
8,000 Lund International Holdings Inc.+ .... 47,000
20,000 Meritor Automotive Inc. .............. 387,500
10,000 Midas Inc. ........................... 218,750
125,000 Modine Manufacturing Co. ............. 3,125,000
5,250 Monro Muffler Brake Inc.+ ............ 39,375
190,000 Scheib (Earl) Inc.+ .................. 558,125
151,000 Standard Motor Products Inc. ......... 2,434,875
17,000 Strattec Security Corp.+ ............. 550,375
48,000 Superior Industries International Inc. 1,287,000
125,000 TransPro Inc. ........................ 804,687
190,000 Wynn's International Inc. ............ 2,683,750
------------
14,918,276
------------
AVIATION: PARTS AND SERVICES -- 3.0%
15,000 AAR Corp. ............................ 269,063
40,000 Aviall Inc.+ ......................... 327,500
10,000 Barnes Group Inc. .................... 163,125
56,000 Curtiss-Wright Corp. ................. 2,065,000
7,500 Ducommun Inc. ........................ 81,562
120,000 Fairchild Corp., Cl. A+ .............. 1,087,500
26,500 Hi-Shear Industries Inc. ............. 61,281
300,000 Kaman Corp., Cl. A ................... 3,862,500
80,000 Moog Inc., Cl. A+ .................... 2,160,000
------------
10,077,531
------------
BROADCASTING -- 8.0%
195,000 Ackerley Group Inc. .................. 3,534,375
230,000 Granite Broadcasting Corp.+ .......... 2,328,750
35,000 Gray Communications Systems Inc. ..... 619,062
50,000 Gray Communications Systems Inc., Cl. B 675,000
54,500 Hearst-Argyle Television Inc.+ ....... 1,451,062
167,000 Liberty Corp. ........................ 7,045,312
110,000 Paxson Communications Corp.+ ......... 1,313,125
65,000 Price Communications Corp.+ .......... 1,807,812
35,000 Salem Communications Corp., Cl. A+ ... 791,875
1,000 Sinclair Broadcast Group Inc.+ ....... 12,203
2,000 Spanish Broadcasting System Inc.+ .... 80,500
50,000 United Television Inc. ............... 6,884,375
MARKET
SHARES VALUE
------ ------
1,500 Wink Communications Inc.+ ............ $ 90,094
9,000 Young Broadcasting Inc., Cl. A+ ...... 459,000
------------
27,092,545
------------
BUILDING AND CONSTRUCTION -- 1.3%
15,000 Florida Rock Industries Inc. ......... 516,562
14,444 Huttig Building Products Inc.+ ....... 71,319
94,000 Nortek Inc.+ ......................... 2,632,000
75,000 Republic Group Inc. .................. 1,134,375
2,000 Universal Forest Products Inc. ....... 29,500
------------
4,383,756
------------
BUSINESS SERVICES -- 2.0%
69,000 Berlitz International Inc.+ .......... 1,185,937
40,000 Burns International Services Corp. ... 432,500
610,400 Career Blazers Inc. .................. 396,760
6,000 Carlisle Holdings Ltd.+ .............. 72,000
1,000 Circle.com+ .......................... 12,312
20,000 Data Broadcasting Corp.+ ............. 165,000
3,000 Data Transmission Network Corp.+ ..... 51,750
40,000 Donnelley (R.H.) Corp. ............... 755,000
27,000 Industrial Distribution Group Inc.+ .. 87,750
10,000 Landauer Inc. ........................ 218,750
5,000 MDC Communications Corp., Cl. A+ ..... 41,875
38,500 Nashua Corp.+ ........................ 288,750
109,500 National Processing Inc.+ ............ 971,812
105,000 Paxar Corp.+ ......................... 885,937
15,000 Pittson Brink's Group ................ 330,000
13,000 Princeton Video Image Inc.+ .......... 104,000
10,000 PubliCard Inc.+ ...................... 65,625
87,000 Trans-Lux Corp. (b) .................. 614,437
8,000 Wackenhut Corp., Cl. A ............... 119,500
6,187 Wackenhut Corp., Cl. B ............... 63,803
------------
6,863,498
------------
CABLE -- 2.3%
18,000 Cablevision Systems Corp., Cl. A ..... 1,359,000
90,000 UnitedGlobalCom Inc., Cl. A+ ......... 6,356,250
------------
7,715,250
------------
CLOSED-END FUNDS -- 1.9%
127,000 Baker Fentress & Co. ................. 1,793,875
45,000 Central European Equity Fund Inc. .... 649,687
78,000 Dresdner RCM Europe Fund Inc. ........ 1,234,740
45,000 France Growth Fund Inc. .............. 689,062
32,000 Germany Fund Inc. .................... 484,000
40,000 Italy Fund Inc. ...................... 680,000
65,000 New Germany Fund Inc. ................ 796,250
11,000 Spain Fund Inc. ...................... 153,313
------------
6,480,927
------------
11
<PAGE>
THE GABELLI SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
COMMUNICATIONS EQUIPMENT -- 0.4%
110,000 Allen Telecom Inc.+ .................. $ 1,271,875
------------
COMPUTER SOFTWARE AND SERVICES-- 2.3%
1,000 @Home Corp., Ser. A+ ................. 42,875
3,000 Anacomp Inc. ......................... 54,562
92,500 Bull Run Corp.+ ...................... 543,437
5,000 CDNow Inc.+ .......................... 49,375
2,000 CheckFree Holdings Corp.+ ............ 209,000
3,000 Cylink Corp. ......................... 40,500
25,000 Internet.com Corp.+ .................. 1,306,250
200 Macromedia Inc.+ ..................... 14,625
70,000 Phoenix Technologies Ltd.+ ........... 1,106,875
30,000 QuadraMed Corp.+ ..................... 261,562
10,000 Titan Corp.+ ......................... 471,250
440,000 Tyler Technologies Inc. .............. 2,420,000
105,000 Xionics Document Technologies Inc.+ .. 1,095,937
------------
7,616,248
------------
CONSUMER PRODUCTS -- 3.9%
3,000 Action Performance Companies Inc.+ ... 34,500
20,000 Adams Golf Inc.+ ..................... 32,500
25,000 Ashworth Inc.+ ....................... 103,125
260,000 Carter-Wallace Inc. .................. 4,663,750
45,000 Church & Dwight Co. Inc. ............. 1,200,937
12,000 Coachmen Industries Inc. ............. 181,500
3,000 Department 56 Inc.+ .................. 67,875
8,000 French Fragrances Inc.+ .............. 51,500
95,000 General Cigar Holdings Inc.+ ......... 789,687
133,500 General Cigar Holdings Inc., Cl. B+ (a) 1,109,719
60,000 Genlyte Group Inc.+ .................. 1,282,500
2,000 Harley-Davidson Inc. ................. 128,125
120,000 Hartmarx Corp.+ ...................... 487,500
10,000 Madden (Steven) Ltd. ................. 190,625
27,200 National Presto Industries Inc. ...... 965,600
14,000 Nature's Sunshine Products Inc. ...... 112,000
3,000 Scotts Co., Cl. A+ ................... 120,750
8,000 Skyline Corp. ........................ 188,000
14,000 Stewart Enterprises Inc., Cl. A ...... 66,500
1,500 TiVo Inc.+ ........................... 50,625
120,000 Weider Nutrition International Inc. .. 442,500
70,000 Wolverine World Wide Inc. ............ 765,625
------------
13,035,443
------------
CONSUMER SERVICES -- 0.9%
20,000 Bowlin Outdoor Advertising &
Travel Centers Inc.+ ................ 107,500
1,000 Collectors Universe Inc. ............. 6,250
40,000 Loewen Group Inc. .................... 17,500
1,000 Martha Stewart Living Inc., Cl. A+ ... 24,000
MARKET
SHARES VALUE
------ ------
5,000 Ogden Corp ........................... $ 59,687
10,000 Response USA Inc.+ ................... 10,312
162,000 Rollins Inc. ......................... 2,430,000
30,000 Travel Services International Inc.+ .. 273,750
------------
2,928,999
------------
DIVERSIFIED INDUSTRIAL -- 5.3%
99,500 Ampco-Pittsburgh Corp. ............... 1,007,438
8,000 Anixter International Inc.+ .......... 165,000
65,000 Crane Co. ............................ 1,291,875
61,000 Gardner Denver Machinery Corp.+ ...... 1,017,937
15,000 GATX Corp. ........................... 506,250
70,000 GenTek Inc. .......................... 730,625
36,000 Katy Industries Inc. ................. 312,750
455,000 Lamson & Sessions Co.+ ............... 2,218,125
75,000 Lindsay Manufacturing Co. ............ 1,368,750
60,000 MagneTek Inc. ........................ 461,250
20,000 Myers Industries Inc. ................ 315,000
610,400 Noel Group Inc.+ ..................... 404,390
40,000 Oil-Dri Corporation of America ....... 575,000
130,000 Park-Ohio Holdings Corp.+ ............ 1,283,750
20,000 Standex International Corp. .......... 418,750
190,000 Thomas Industries Inc. ............... 3,883,125
40,000 Tyco International Ltd. .............. 1,555,000
60,000 WHX Corp.+ ........................... 540,000
------------
18,055,015
------------
EDUCATIONAL SERVICES-- 0.0%
22,000 Whitman Education Group Inc.+ ........ 60,500
------------
ELECTRONICS -- 2.5%
640,000 Oak Technology Inc.+ ................. 6,040,000
60,000 Watkins-Johnson Co. .................. 2,400,000
------------
8,440,000
------------
ENERGY AND UTILITIES -- 4.5%
35,000 AGL Resources Inc. ................... 595,000
44,600 Aquarion Co. ......................... 1,650,200
6,000 Basin Exploration Inc.+ .............. 105,750
3,000 Birmingham Utilities Inc. ............ 71,063
20,000 CH Energy Group Inc. ................. 660,000
2,000 Connecticut Water Service Inc. ....... 64,000
25,000 Eastern Enterprises .................. 1,435,937
25,000 E'Town Corp. ......................... 1,556,250
5,000 Fall River Gas Co. ................... 106,250
42,000 Florida Public Utilities Co. ......... 714,000
130,000 Kaneb Services Inc.+ ................. 568,750
15,000 Petroleum Geo-Services ASA+ .......... 267,187
300,000 RPC Inc. ............................. 1,725,000
6,000 SJW Corp ............................. 721,500
110,000 Southwest Gas Corp. .................. 2,530,000
12
<PAGE>
THE GABELLI SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
ENERGY AND UTILITIES (CONTINUED)
15,000 Tesoro Petroleum Corp. ............... $ 173,438
5,000 TransMontaigne Oil Co. ............... 35,000
49,000 United Water Resources Inc. .......... 1,675,188
45,000 Waterlink Inc. ....................... 112,500
15,000 WICOR Inc. ........................... 437,813
------------
15,204,826
------------
ENTERTAINMENT -- 6.8%
105,000 Ascent Entertainment Group Inc.+ ..... 1,332,188
15,000 Dover Downs Entertainment Inc.+ ...... 281,250
45,000 Fisher Companies Inc. ................ 2,778,750
40,000 GC Companies Inc.+ ................... 1,035,000
2,500 International Speedway Corp. ......... 125,000
10,000 Liberty Digital Inc.+ ................ 742,500
4,000 Loews Cineplex Entertainment Corp.+ .. 23,500
3,000 Metromedia International Group Inc.+ . 14,250
45,000 Topps Co. Inc.+ ...................... 466,875
210,000 TV Guide Inc., Cl. A+ ................ 9,030,000
130,000 USA Networks Inc.+ ................... 7,182,500
1,000 World Wrestling Federation
Entertainment Inc.+ ................. 17,250
------------
23,029,063
------------
EQUIPMENT AND SUPPLIES -- 15.4%
14,000 Alltrista Corp.+ ..................... 309,750
145,000 AMETEK Inc. .......................... 2,764,063
20,500 Amphenol Corp., Cl. A+ ............... 1,364,531
320,000 Baldwin Technology Co. Inc., Cl. A+ .. 680,000
55,000 Belden Inc. .......................... 1,155,000
4,000 Bway Corp.+ .......................... 24,500
17,000 C&D Technologies Inc. ................ 722,500
80,000 CIRCOR International Inc.+ ........... 825,000
259,000 CLARCOR Inc. ......................... 4,662,000
5,000 Commercial Intertech Corp. ........... 63,750
60,000 Core Materials Corp. ................. 138,750
25,000 CTS Corp. ............................ 1,884,375
82,000 Cuno Inc.+ ........................... 1,697,656
9,000 Danaher Corp. ........................ 434,250
257,600 Fedders Corp. ........................ 1,416,800
102,000 Flowserve Corp. ...................... 1,734,000
54,800 Franklin Electric Co. ................ 3,846,275
40,000 General Magnaplate Corp. ............. 117,500
70,000 Gerber Scientific Inc. ............... 1,535,625
17,775 Gorman-Rupp Co. ...................... 311,063
17,000 Graco Inc. ........................... 609,875
145,000 Hussmann International Inc. .......... 2,184,063
47,000 IDEX Corp. ........................... 1,427,625
32,000 Johnston Industries Inc. ............. 54,000
113,000 Kollmorgen Corp. ..................... 1,391,313
MARKET
SHARES VALUE
------ ------
10,000 K-Tron International Inc.+ ........... $ 135,000
10,000 Littelfuse Inc.+ ..................... 242,656
22,000 Lufkin Industries Inc. ............... 330,000
100,000 Mark IV Industries Inc. .............. 1,768,750
22,000 Met-Pro Corp. ........................ 220,000
160,000 Pittway Corp. ........................ 7,210,000
2,000 Plantronics Inc.+ .................... 143,125
26,000 Raytech Corp.+ ....................... 87,750
10,000 Robbins & Myers Inc. ................. 226,250
29,000 Roper Industries Inc. ................ 1,096,563
3,500 Sames Corp. .......................... 54,031
40,000 Sequa Corp., Cl. A+ .................. 2,157,500
13,500 Sequa Corp., Cl. B+ .................. 810,000
56,000 SL Industries Inc. ................... 651,000
1,000 Smith (A.O.) Corp. ................... 21,875
9,000 Smith (A.O.) Corp., Cl. A ............ 191,250
74,000 SPS Technologies Inc.+ ............... 2,363,375
5,000 Teleflex Inc. ........................ 156,563
15,000 Tennant Co. .......................... 491,250
5,000 Valmont Industries Inc. .............. 80,313
7,875 Watsco Inc., Cl. B ................... 91,301
145,000 Watts Industries Inc., Cl. A ......... 2,138,750
------------
52,021,566
------------
FINANCIAL SERVICES-- 2.6%
30,000 Argonaut Group Inc. .................. 596,250
68,000 Berliner Bank Aktiengesellschaft ..... 1,130,135
45,000 Danielson Holding Corp.+ ............. 258,750
3,000 Federal Agricultural Mortgage Corp., Cl. C+ 60,563
45,000 Gainsco Inc. ......................... 241,875
18,000 Hibernia Corp., Cl. A ................ 191,250
3,000 LandAmerica Financial Group .......... 55,125
15,000 Metris Companies Inc. ................ 535,313
103,500 Midland Co. .......................... 2,147,625
1,500 Net.B@nk Inc.+ ....................... 27,750
230,000 Pioneer Group Inc.+ .................. 3,622,500
------------
8,867,136
------------
FOOD AND BEVERAGE -- 2.9%
12,000 Advantica Restaurant Group Inc.+ ..... 21,000
20,000 Ben & Jerry's Homemade Inc., Cl. A+ .. 497,500
34,863 Buenos Aires Embotelladora SA (a) .... 0
216,000 Celestial Seasonings Inc.+ ........... 4,019,625
6,000 Cheesecake Factory Inc.+ ............. 210,000
1,500 Farmer Brothers Co. .................. 238,500
20,000 Genesse Corp., Cl. B ................. 426,250
10,000 International Multifoods Corp. ....... 132,500
15,000 J & J Snack Foods Corp.+ ............. 307,500
8,000 Midwest Grain Products Inc. .......... 59,000
13
<PAGE>
THE GABELLI SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
FOOD AND BEVERAGE (CONTINUED)
2,000 Mondavi (Robert) Corp.+ .............. $ 69,500
1,000 Northland Cranberries Inc., Cl. A .... 6,000
2,000 Omni Nutraceuticals Inc .............. 2,250
130,000 PepsiAmericas Inc.+ .................. 487,500
40,000 Ralcorp Holdings Inc.+ ............... 797,500
31,658 Tootsie Roll Industries Inc. ......... 1,042,735
100,000 Twinlab Corp.+ ....................... 793,750
48,000 Whitman Corp. ........................ 645,000
------------
9,756,110
------------
HEALTH CARE -- 2.6%
95,000 Inamed Corp.+ ........................ 4,168,125
120,000 IVAX Corp.+ .......................... 3,090,000
17,000 Life Technologies Inc. ............... 724,625
48,000 Penwest Pharmaceuticals Co. .......... 732,000
3,620 U.S. Physical Therapy Inc.+ .......... 30,770
20,000 Women First HealthCare Inc.+ ......... 105,000
------------
8,850,520
------------
HOME FURNISHINGS -- 0.8%
7,000 Bassett Furniture Industries Inc. .... 112,000
2,000 Bed Bath & Beyond Inc.+ .............. 69,500
17,000 Foamex International Inc. ............ 141,313
30,000 La-Z-Boy Chair Co. ................... 504,375
50,000 Mikasa Inc. .......................... 503,125
70,000 Oneida Ltd. .......................... 1,522,500
------------
2,852,813
------------
HOTELS AND GAMING -- 4.2%
440,000 Aztar Corp.+ ......................... 4,785,000
115,000 Boca Resorts Inc., Cl. A+ ............ 1,121,250
15,000 Boyd Gaming Corp.+ ................... 87,188
20,000 Churchill Downs Inc. ................. 451,250
55,000 Extended Stay America Inc.+ .......... 419,375
94,000 Gaylord Entertainment Co. ............ 2,814,125
135,000 Jackpot Enterprises Inc.+ ............ 1,122,188
5,000 Jurys Hotel Group plc ................ 37,016
30,000 Lakes Gaming Inc.+ ................... 238,125
80,000 Mirage Resorts Inc.+ ................. 1,225,000
95,000 Park Place Entertainment Corp.+ ...... 1,187,500
25,000 Penn National Gaming Inc.+ ........... 225,000
2,000 Station Casinos Inc.+ ................ 44,875
90,000 Trump Hotels & Casino Resorts Inc.+ .. 303,750
------------
14,061,642
------------
METALS AND MINING -- 0.5%
250,000 Echo Bay Mines Ltd.+ ................. 296,875
190,000 Royal Oak Mines Inc.+ ................ 7,897
28,000 Stillwater Mining Co.+ ............... 892,500
MARKET
SHARES VALUE
------ ------
5,000 Toreador Royalty Corp.+ .............. $ 21,875
545,000 TVX Gold Inc.+ ....................... 442,813
------------
1,661,960
------------
PAPER AND FOREST PRODUCTS -- 1.2%
133,000 Greif Bros. Corp., Cl. A ............. 3,956,750
------------
PUBLISHING -- 4.4%
121,278 Independent News & Media plc ......... 795,244
2,000 Lee Enterprises Inc. ................. 63,875
40,000 McClatchy Newspapers Inc., Cl. A ..... 1,730,000
60,000 Media General Inc., Cl. A ............ 3,120,000
23,000 Meredith Corp. ....................... 958,813
185,000 Penton Media Inc. .................... 4,440,000
45,000 Pulitzer Inc. ........................ 1,814,063
200,000 Thomas Nelson Inc. ................... 1,850,000
12,000 Wiley (John) & Sons Inc., Cl. B ...... 199,500
------------
14,971,495
------------
REAL ESTATE -- 1.0%
150,000 Catellus Development Corp.+ .......... 1,921,875
118,000 Griffin Land & Nurseries Inc.+ ....... 1,357,000
9,000 Gyrodyne Company of America Inc.+ .... 183,656
------------
3,462,531
------------
RETAIL -- 3.2%
60,000 Aaron Rents Inc. ..................... 1,065,000
46,000 Aaron Rents Inc., Cl. A .............. 839,500
5,000 Borders Group Inc.+ .................. 80,313
105,000 Burlington Coat Factory Warehouse Corp. 1,456,875
25,000 Coldwater Creek Inc.+ ................ 512,500
8,000 Gerald Stevens Inc.+ ................. 67,000
120,000 Ingles Markets Inc., Cl. A ........... 1,335,000
210,000 Lillian Vernon Corp. ................. 2,336,250
95,000 Neiman Marcus Group Inc.+ ............ 2,654,063
120,000 Sports Authority Inc.+ ............... 240,000
2,000 Weis Markets Inc. .................... 87,000
------------
10,673,501
------------
SATELLITE -- 0.4%
5,000 Pegasus Communications Corp.+ ........ 488,750
60,000 TCI Satellite Entertainment .......... 960,000
------------
1,448,750
------------
SPECIALTY CHEMICALS -- 2.2%
31,000 Airgas Inc. .......................... 294,500
30,000 Bush Boake Allen Inc.+ ............... 736,875
38,000 Dexter Corp. ......................... 1,510,500
105,000 Ferro Corp. .......................... 2,310,000
70,000 General Chemical Group Inc. .......... 161,875
600 MacDermid Inc. ....................... 24,638
14
<PAGE>
THE GABELLI SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
SPECIALTY CHEMICALS (CONTINUED)
115,000 Material Sciences Corp.+ ............. $ 1,171,563
68,000 Omnova Solutions Inc. ................ 527,000
32,000 Penford Corp ......................... 552,000
11,000 Sybron Chemicals Inc.+ ............... 129,250
------------
7,418,201
------------
TELECOMMUNICATIONS -- 2.8%
23,000 ARC International Corp. .............. 17,250
9,200 Atlantic Tele-Network Inc. ........... 84,525
81,660 Citizens Utilities Co., Cl. B ........ 1,158,551
47,300 Commonwealth Telephone Enterprises Inc.+ 2,500,988
20,000 Commonwealth Telephone
Enterprises Inc., Cl. B+ ............ 1,265,000
100,000 Communications Systems Inc. .......... 1,300,000
65,000 GST Telecommunications Inc.+ ......... 589,063
10,000 RCN Corp.+ ........................... 485,000
40,000 Rogers Communications Inc., Cl. B, ADR+ 990,000
20,000 Viatel Inc.+ ......................... 1,072,500
------------
9,462,877
------------
TRANSPORTATION -- 0.0%
2,000 Irish Continental Group plc .......... 20,498
50,000 OMI Corp. ............................ 103,125
------------
123,623
------------
WIRELESS COMMUNICATIONS -- 2.4%
50,000 Aerial Communications Inc.+ .......... 3,043,750
8,000 Associated Group Inc., Cl. A+ ........ 730,000
1,000 Centennial Cellular Corp., Cl. A+ .... 82,875
40,000 CommNet Cellular Inc.+ ............... 1,285,000
33,000 Corecomm Ltd.+ ....................... 1,959,375
2,000 Rural Cellular Corp., Cl. A+ ......... 181,000
8,000 Teligent Inc., Cl. A ................. 494,000
100 Tritel Inc., Cl. A+ .................. 3,169
1,000 VoiceStream Wireless Corp., Cl. A+ ... 142,313
1,000 Western Wireless Corp., Cl. A+ ....... 66,750
------------
7,988,232
------------
TOTAL COMMON STOCKS .................. 324,865,209
------------
MARKET
SHARES VALUE
------ ------
PREFERRED STOCKS -- 0.4%
DIVERSIFIED INDUSTRIAL -- 0.4%
5,000 WHX Corp.,
6.50% Cv. Pfd., Ser. A .............. $ 162,187
47,000 WHX Corp.,
$3.75 Cv. Pfd., Ser. B .............. 1,213,188
------------
TOTAL PREFERRED STOCKS ............... 1,375,375
------------
PRINCIPAL
AMOUNT
------
CONVERTIBLE BONDS -- 0.0%
COMPUTER SOFTWARE AND SERVICES -- 0.0%
$ 500 MSC.Software Corp.
Sub. Deb. Cv.
7.88%, 08/18/04 ..................... 435
------------
U.S. GOVERNMENT OBLIGATIONS -- 3.6%
12,422,000 U.S. Treasury Bills,
5.08% to 5.49%++,
due 01/13/00 to 03/23/00 ............ 12,309,815
------------
TOTAL
INVESTMENTS -- 100.1%
(Cost $247,670,096) ................ 338,550,834
OTHER ASSETS AND
LIABILITIES (NET) -- (0.1)% ........ (362,366)
------------
NET ASSETS -- 100.0%
(15,781,727 shares outstanding) .... $338,188,468
============
NET ASSET VALUE,
OFFERING AND REDEMPTION
PRICE PER SHARE .................... $21.43
======
- ------------------------
(a) Security fair valued under procedures established by the Board of
Directors.
(b) Security considered an affiliated holding because the Fund owns at least
5% of the outstanding shares.
+ Non-income producing security.
++ Represents annualized yield at the date of purchase.
ADR - American Depositary Receipt.
15
<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
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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.
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GAB443Q499SR
[PHOTO OF MARIO GABELLI OMITTED]
THE
GABELLI
SMALL CAP
GROWTH
FUND
FIRST QUARTER REPORT
DECEMBER 31, 1999
