UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANIES
Investment Company Act file number 811-06367
Gabelli Equity Series Funds, Inc.
(Exact name of registrant as specified in charter)
One Corporate Center
Rye, New York 10580-1422
Rye, New York 10580-1422
(Address of principal executive offices) (Zip code)
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
(Name and address of agent for service)
registrant’s telephone number, including area code: 1-800-422-3554
Date of fiscal year end: September 30
Date of reporting period: September 30, 2009
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
The Report to Shareholders is attached herewith.
The Gabelli Small Cap Growth Fund
Annual Report (a)
September 30, 2009
September 30, 2009
To Our Shareholders,
The Gabelli Small Cap Growth Fund’s (the “Fund”) (Class AAA) total return was (1.7)% for the year ended September 30, 2009, compared with (9.6)% for the Russell 2000 Index and 12.6% for the Value Line Composite Index.
Enclosed are the investment portfolio and financial statements as of September 30, 2009.
Comparative Results
Average Annual Returns through September 30, 2009 (a)(b)
Since | ||||||||||||||||||||||||||||||||
Year to | Inception | |||||||||||||||||||||||||||||||
Quarter | Date | 1 Year | 3 Year | 5 Year | 10 Year | 15 Year | (10/22/91) | |||||||||||||||||||||||||
Gabelli Small Cap Growth Fund Class AAA | 16.99 | % | 25.82 | % | (1.70 | )% | 1.03 | % | 6.25 | % | 9.08 | % | 10.76 | % | 12.55 | % | ||||||||||||||||
Russell 2000 Index | 19.28 | 22.43 | (9.55 | ) | (4.57 | ) | 2.41 | 4.88 | 7.33 | 8.45 | ||||||||||||||||||||||
Value Line Composite Index | 25.36 | 76.31 | 12.62 | 1.68 | 6.40 | 8.38 | 10.77 | 11.27 | ||||||||||||||||||||||||
Class A | 16.99 | 25.76 | (1.63 | ) | 1.03 | 6.24 | 9.08 | 10.77 | 12.55 | |||||||||||||||||||||||
10.26 | (c) | 18.53 | (c) | (7.28 | )(c) | (0.95 | )(c) | 4.99 | (c) | 8.43 | (c) | 10.33 | (c) | 12.18 | (c) | |||||||||||||||||
Class B | 16.79 | 25.12 | (2.43 | ) | 0.27 | 5.46 | 8.61 | 10.45 | 12.29 | |||||||||||||||||||||||
11.79 | (d) | 20.12 | (d) | (7.31 | )(d) | (0.73 | )(d) | 5.13 | (d) | 8.61 | 10.45 | 12.29 | ||||||||||||||||||||
Class C | 16.79 | 25.12 | (2.40 | ) | 0.28 | 5.46 | 8.61 | 10.46 | 12.29 | |||||||||||||||||||||||
15.79 | (e) | 24.12 | (e) | (3.37 | )(e) | 0.28 | 5.46 | 8.61 | 10.46 | 12.29 | ||||||||||||||||||||||
Class I | 17.06 | 26.04 | (1.43 | ) | 1.15 | 6.32 | 9.12 | 10.80 | 12.58 |
In the current prospectus, the expense ratios for Class AAA, A, B, C, and I Shares are 1.45%, 1.45%, 2.20%, 2.20%, and 1.20%, respectively. Class AAA and I Shares do not have a sales charge. The maximum sales charge for Class A, B, and C Shares is 5.75%, 5.00%, and 1.00%, respectively. See page 15 for the expense ratios for the year ended September 30, 2009.
(a) | The Fund’s fiscal year ends September 30. | |
(b) | Returns represent past performance and do not guarantee future results. Total returns and average annual returns reflect changes in share price and reinvestment of distributions and are net of expenses. 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. Performance returns for periods of less than one year are not annualized. Current performance may be lower or higher than the performance data presented. Visit www.gabelli.com for performance information as of the most recent month end. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The prospectus contains more information about this and other matters and should be read carefully before investing. | |
The Class AAA Share net asset values (“NAVs”) per share are used to calculate performance for the periods prior to the issuance of Class A Shares, Class B Shares, and Class C Shares on December 31, 2003 and Class I Shares on January 11, 2008. The actual performance for the Class B Shares and Class C Shares would have been lower and Class I Shares would have been higher due to the differences in expenses associated with these classes of shares. Investing in small capitalization securities involves special risks because these securities may trade less frequently and experience more abrupt price movements than large capitalization securities. The Russell 2000 Index of small U.S. companies and the Value Line Composite Index (composed of equally weighted positions in every stock covered in the Value Line Investment Survey) are unmanaged indicators of stock market performance. Dividends are considered reinvested. You cannot invest directly in an index. | ||
(c) | Includes the effect of the maximum 5.75% sales charge at the beginning of the period. | |
(d) | Performance results include the deferred sales charges for the Class B Shares upon redemption at the end of the quarter, year to date, one year, three year, and five year periods of 5%, 5%, 5%, 3%, and 2%, respectively, of the Fund’s NAV per share at the time of purchase or sale, whichever is lower. Class B Shares are not available for new purchases. | |
(e) | Performance results include the deferred sales charges for the Class C Shares upon redemption at the end of the quarter, year to date, and one year periods of 1% of the Fund’s NAV per share at the time of purchase or sale, whichever is lower. |
We have separated the portfolio manager’s commentary from the financial statements and investment portfolio due to corporate governance regulations stipulated by the Sarbanes-Oxley Act of 2002. We have done this to ensure that the content of the portfolio manager’s commentary is unrestricted. The financial statements and investment portfolio are mailed separately from the commentary. Both the commentary and the financial statements, including the portfolio of investments, will be available on our website at www.gabelli.com/funds.
Performance Discussion
For the twelve months ended September 30, 2009, the Fund’s Class AAA Shares declined 1.7%, versus a decrease of 9.6% in the Russell 2000 Index.
Stocks around the world rose during the third calendar quarter as expectations for an economic recovery improved. After coming to a virtual halt in September 2008, economic activity appears to have stabilized. Unprecedented globally coordinated fiscal and monetary stimulus programs have rekindled an appetite for risk and investment. Corporate profits, cushioned in the second calendar quarter by aggressive cost cutting, should benefit from signs of real increases in demand.
Among some of the better performing stocks for the fiscal year ended September 30, 2009 were: the Fund’s largest holding, O’Reilly Automotive Inc. (1.4% of net assets as of September 30, 2009), Flowserve Corp. (1.3%), Waddell & Reed Financial Inc. (0.9%), and Greif Inc. (0.8%).
Some of our weaker performing stocks during the year were: Ingles Markets Inc. (0.6%), Zep Inc. (0.6%),and The Gorman-Rupp Co. (0.6%).
We believe that a reinvigorated mergers and acquisitions market would support our Private Market Value (“PMV”) with a Catalyst® investment approach. First and foremost, we select stocks based on their fundamentals. We seek an adequate margin of safety and one or more catalysts that can surface the intrinsic value of a security. To the extent that a takeover provides that catalyst, it adds an extra element of return to the portfolio.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI SMALL CAP GROWTH FUND CLASS AAA,
THE RUSSELL 2000 INDEX, AND THE S&P 500 INDEX
THE GABELLI SMALL CAP GROWTH FUND CLASS AAA,
THE RUSSELL 2000 INDEX, AND THE S&P 500 INDEX
![(LINE GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-09-068072/p16279p1627901.gif)
2
The Gabelli Small Cap Growth Fund | ||
Disclosure of Fund Expenses (Unaudited) | ||
For the Six Month Period from April 1, 2009 through September 30, 2009 | Expense Table |
We believe it is important for you to understand the impact of fees and expenses regarding your investment. All mutual funds have operating expenses. As a shareholder of a fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of a fund. When a fund’s expenses are expressed as a percentage of its average net assets, this figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your Fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The Expense Table below illustrates your Fund’s costs in two ways:
Actual Fund Return: This section provides information about actual account values and actual expenses. You may use this section to help you to estimate the actual expenses that you paid over the period after any fee waivers and expense reimbursements. The “Ending Account Value” shown is derived from the Fund’s actual return during the past six months, and the “Expenses Paid During Period” shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your Fund under the heading “Expenses Paid During Period” to estimate the expenses you paid during this period.
Hypothetical 5% Return: This section provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio. It assumes a hypothetical annualized return of 5% before expenses during the period shown. In this case – because the hypothetical return used is not the Fund’s actual return – the results do not apply to your investment and you cannot use the hypothetical account value and expense to estimate the actual ending account balance or expenses you paid for the period. This example is useful in making comparisons of the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads), redemption fees, or exchange fees, if any, which are described in the Prospectus. If these costs were applied to your account, your costs would be higher. Therefore, the 5% hypothetical return is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. The “Annualized Expense Ratio” represents the actual expenses for the last six months and may be different from the expense ratio in the Financial Highlights which is for the year ended September 30, 2009.
Beginning | Ending | Annualized | Expenses | |||||||||||||
Account Value | Account Value | Expense | Paid During | |||||||||||||
04/01/09 | 09/30/09 | Ratio | Period* | |||||||||||||
The Gabelli Small Cap Growth Fund | ||||||||||||||||
Actual Fund Return | ||||||||||||||||
Class AAA | $1,000.00 | $ | 1,410.80 | 1.45 | % | $ | 8.76 | |||||||||
Class A | $1,000.00 | $ | 1,410.00 | 1.45 | % | $ | 8.76 | |||||||||
Class B | $1,000.00 | $ | 1,405.10 | 2.19 | % | $ | 13.20 | |||||||||
Class C | $1,000.00 | $ | 1,405.10 | 2.20 | % | $ | 13.26 | |||||||||
Class I | $1,000.00 | $ | 1,412.70 | 1.21 | % | $ | 7.32 | |||||||||
Hypothetical 5% Return | ||||||||||||||||
Class AAA | $1,000.00 | $ | 1,017.80 | 1.45 | % | $ | 7.33 | |||||||||
Class A | $1,000.00 | $ | 1,017.80 | 1.45 | % | $ | 7.33 | |||||||||
Class B | $1,000.00 | $ | 1,014.09 | 2.19 | % | $ | 11.06 | |||||||||
Class C | $1,000.00 | $ | 1,014.04 | 2.20 | % | $ | 11.11 | |||||||||
Class I | $1,000.00 | $ | 1,019.00 | 1.21 | % | $ | 6.12 |
* | Expenses are equal to the Fund’s annualized expense ratio for the last six months multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365. |
3
Summary of Portfolio Holdings (Unaudited)
The following table presents portfolio holdings as a percent of net assets as of September 30, 2009:
The Gabelli Small Cap Growth Fund
U.S. Government Obligations | 17.4 | % | ||
Equipment and Supplies | 9.5 | % | ||
Health Care | 6.9 | % | ||
Diversified Industrial | 6.4 | % | ||
Food and Beverage | 6.3 | % | ||
Energy and Utilities | 5.9 | % | ||
Financial Services | 4.9 | % | ||
Automotive: Parts and Accessories | 4.3 | % | ||
Business Services | 4.1 | % | ||
Specialty Chemicals | 4.0 | % | ||
Retail | 3.8 | % | ||
Aviation: Parts and Services | 2.9 | % | ||
Hotels and Gaming | 2.4 | % | ||
Electronics | 1.9 | % | ||
Computer Software and Services | 1.9 | % | ||
Consumer Products | 1.8 | % | ||
Telecommunications | 1.6 | % | ||
Cable | 1.5 | % | ||
Wireless Communications | 1.4 | % | ||
Entertainment | 1.3 | % | ||
Publishing | 1.2 | % | ||
Real Estate | 1.2 | % | ||
Machinery | 0.9 | % | ||
Communications Equipment | 0.9 | % | ||
Consumer Services | 0.7 | % | ||
Environmental Services | 0.7 | % | ||
Closed-End Funds | 0.6 | % | ||
Educational Services | 0.6 | % | ||
Transportation | 0.5 | % | ||
Manufactured Housing and Recreational Vehicles | 0.5 | % | ||
Aerospace | 0.5 | % | ||
Metals and Mining | 0.5 | % | ||
Broadcasting | 0.5 | % | ||
Automotive | 0.1 | % | ||
Home Furnishings | 0.1 | % | ||
Building and Construction | 0.1 | % | ||
Paper and Forest Products | 0.1 | % | ||
Closed-End Business Development Company | 0.1 | % | ||
Agriculture | 0.0 | % | ||
Other Assets and Liabilities (Net) | 0.0 | % | ||
100.0 | % | |||
The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (the “SEC”) for the first and third quarters of each fiscal year on Form N-Q, the last of which was filed for the quarter ended June 30, 2009. Shareholders may obtain this information at www.gabelli.com or by calling the Fund at 800-GABELLI (800-422-3554). The Fund’s Form N-Q is available on the SEC’s website at www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Proxy Voting
The Fund files Form N-PX with its complete proxy voting record for the twelve months ended June 30th, no later than August 31st of each year. A description of the Fund’s proxy voting policies, procedures, and how the Fund voted proxies relating to portfolio securities is available without charge, upon request, by (i) calling 800-GABELLI (800-422-3554); (ii) writing to The Gabelli Funds at One Corporate Center, Rye, NY 10580-1422; or (iii) visiting the SEC’s website at www.sec.gov.
4
The Gabelli Small Cap Growth Fund
Schedule of Investments — September 30, 2009
Schedule of Investments — September 30, 2009
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS — 82.5% | ||||||||||||
Aerospace — 0.5% | ||||||||||||
239,000 | Herley Industries Inc.† | $ | 3,628,919 | $ | 3,118,950 | |||||||
88,000 | Rockwell Automation Inc. | 2,225,119 | 3,748,800 | |||||||||
5,854,038 | 6,867,750 | |||||||||||
Agriculture — 0.0% | ||||||||||||
11,000 | Cadiz Inc.† | 82,094 | 128,700 | |||||||||
3,500 | The Mosaic Co. | 74,541 | 168,245 | |||||||||
156,635 | 296,945 | |||||||||||
Automotive — 0.1% | ||||||||||||
55,000 | Navistar International Corp.† | 1,393,962 | 2,058,100 | |||||||||
Automotive: Parts and Accessories — 4.2% | ||||||||||||
1,000 | BERU AG | 106,336 | 111,201 | |||||||||
155,000 | BorgWarner Inc. | 1,761,849 | 4,690,300 | |||||||||
72,022 | China Automotive Systems Inc.† | 350,864 | 669,084 | |||||||||
750,000 | Dana Holding Corp.† | 4,067,233 | 5,107,500 | |||||||||
330,000 | Midas Inc.† | 4,727,265 | 3,102,000 | |||||||||
360,000 | Modine Manufacturing Co. | 5,128,768 | 3,337,200 | |||||||||
15,000 | Monro Muffler Brake Inc. | 152,114 | 476,850 | |||||||||
530,000 | O’Reilly Automotive Inc.† | 13,950,014 | 19,154,200 | |||||||||
10,000 | Puradyn Filter Technologies Inc.† | 5,190 | 2,990 | |||||||||
140,000 | SORL Auto Parts Inc.† | 751,204 | 721,000 | |||||||||
80,375 | Spartan Motors Inc. | 388,580 | 413,127 | |||||||||
328,000 | Standard Motor Products Inc. | 3,676,634 | 4,985,600 | |||||||||
155,000 | Strattec Security Corp. | 3,154,979 | 2,210,300 | |||||||||
188,000 | Superior Industries International Inc. | 2,958,682 | 2,669,600 | |||||||||
450,000 | Tenneco Inc.† | 4,118,380 | 5,868,000 | |||||||||
310,000 | The Pep Boys - Manny, Moe & Jack | 3,668,176 | 3,028,700 | |||||||||
27,000 | Thor Industries Inc. | 250,194 | 835,650 | |||||||||
46,000 | Wonder Auto Technology Inc.† | 299,248 | 552,000 | |||||||||
49,515,710 | 57,935,302 | |||||||||||
Aviation: Parts and Services — 2.9% | ||||||||||||
25,000 | AAR Corp.† | 302,990 | 548,500 | |||||||||
10,000 | Astronics Corp.† | 39,192 | 94,000 | |||||||||
2,500 | Astronics Corp., Cl. B† | 9,798 | 22,525 | |||||||||
14,000 | Barnes Group Inc. | 119,438 | 239,260 | |||||||||
2,300,000 | BBA Aviation plc | 5,525,737 | 5,818,737 | |||||||||
255,000 | Curtiss-Wright Corp. | 6,286,763 | 8,703,150 | |||||||||
7,500 | Ducommun Inc. | 80,125 | 141,825 | |||||||||
30,000 | Embraer-Empresa Brasileira de Aeronautica SA, ADR† | 508,773 | 688,200 | |||||||||
22,000 | Gamesa Corporacion Tecnologica SA | 134,728 | 492,888 | |||||||||
620,000 | GenCorp Inc.† | 4,046,580 | 3,323,200 | |||||||||
665,800 | Kaman Corp. | 9,883,870 | 14,634,284 | |||||||||
90,000 | Moog Inc., Cl. A† | 732,784 | 2,655,000 | |||||||||
16,100 | Moog Inc., Cl. B† | 464,818 | 475,755 | |||||||||
85,000 | Woodward Governor Co. | 1,094,465 | 2,062,100 | |||||||||
29,230,061 | 39,899,424 | |||||||||||
Broadcasting — 0.5% | ||||||||||||
225,000 | Acme Communications Inc.† | 1,026,516 | 123,750 | |||||||||
110,000 | Beasley Broadcast Group Inc., Cl. A† | 733,350 | 405,900 | |||||||||
2,000 | Cogeco Inc. | 39,014 | 47,616 | |||||||||
300,000 | Crown Media Holdings Inc., Cl. A† | 1,804,766 | 468,000 | |||||||||
3,333 | CTN Media Group Inc.† (a) | 16,800 | 3 | |||||||||
2,433 | Granite Broadcasting Corp.† (a) | 822,771 | 0 | |||||||||
235,000 | Gray Television Inc.† | 1,106,068 | 545,200 | |||||||||
22,000 | Gray Television Inc., Cl. A† | 106,475 | 51,040 | |||||||||
120,000 | Ideation Acquisition Corp.† | 953,800 | 1,142,400 | |||||||||
61,400 | Liberty Media Corp. - Capital, Cl. A† | 1,202,649 | 1,284,488 | |||||||||
510,000 | Salem Communications Corp., Cl. A† | 2,152,327 | 1,152,600 | |||||||||
220,000 | Sinclair Broadcast Group Inc., Cl. A | 1,940,480 | 787,600 | |||||||||
450,000 | Sirius XM Radio Inc.† | 230,878 | 285,750 | |||||||||
150,000 | Young Broadcasting Inc., Cl. A† | 80,015 | 1,500 | |||||||||
12,215,909 | 6,295,847 | |||||||||||
Building and Construction — 0.1% | ||||||||||||
23,000 | Huttig Building Products Inc.† | 85,087 | 18,860 | |||||||||
28,000 | Insituform Technologies Inc., Cl. A† | 517,070 | 535,920 | |||||||||
40,000 | Layne Christensen Co.† | 1,103,472 | 1,282,000 | |||||||||
1,000 | Universal Forest Products Inc. | 12,125 | 39,460 | |||||||||
1,717,754 | 1,876,240 | |||||||||||
Business Services — 4.1% | ||||||||||||
44,000 | AboveNet Inc.† | 1,781,986 | 2,145,440 | |||||||||
33,000 | ACCO Brands Corp.† | 329,387 | 238,260 | |||||||||
410,000 | AMICAS Inc.† | 1,323,855 | 1,476,000 | |||||||||
104,000 | Ascent Media Corp., Cl. A† | 2,576,422 | 2,662,400 | |||||||||
445,000 | BPW Acquisition Corp.† | 4,399,929 | 4,356,550 | |||||||||
230,000 | Cenveo Inc.† | 1,492,588 | 1,591,600 | |||||||||
170,100 | Clear Channel Outdoor Holdings Inc., Cl. A† | 1,231,893 | 1,190,700 | |||||||||
345,000 | Diebold Inc. | 12,008,229 | 11,360,850 | |||||||||
440,000 | Edgewater Technology Inc.† | 2,381,405 | 1,293,600 | |||||||||
360,000 | Furmanite Corp.† | 1,390,213 | 1,551,600 | |||||||||
119,931 | GP Strategies Corp.† | 992,735 | 898,283 | |||||||||
35,589 | GSE Systems Inc.† | 138,667 | 221,363 |
See accompanying notes to financial statements.
5
The Gabelli Small Cap Growth Fund
Schedule of Investments (Continued) — September 30, 2009
Schedule of Investments (Continued) — September 30, 2009
Shares/ | Market | |||||||||||
Units | Cost | Value | ||||||||||
COMMON STOCKS (Continued) | ||||||||||||
Business Services (Continued) | ||||||||||||
60,000 | Interactive Data Corp. | $ | 534,171 | $ | 1,572,600 | |||||||
445,000 | Intermec Inc.† | 8,238,182 | 6,274,500 | |||||||||
25,000 | Lamar Advertising Co., Cl. A† | 176,135 | 686,000 | |||||||||
14,000 | Landauer Inc. | 290,749 | 769,720 | |||||||||
4,000 | MDC Partners Inc., Cl. A† | 12,360 | 29,760 | |||||||||
60,000 | R. H. Donnelley Corp.† | 27,197 | 3,060 | |||||||||
65,000 | Sohgo Security Services Co. Ltd. | 829,111 | 771,180 | |||||||||
12,500 | SP Acquisition Holdings Inc.† | 125,000 | 121,937 | |||||||||
97,502 | Stamps.com Inc.† | 811,539 | 901,894 | |||||||||
6,000 | StarTek Inc.† | 82,087 | 52,080 | |||||||||
22,000 | The Brink’s Co. | 479,752 | 592,020 | |||||||||
1,700,000 | The Interpublic Group of Companies Inc.† | 12,196,153 | 12,784,000 | |||||||||
172,000 | Trans-Lux Corp.† (b) | 1,134,183 | 217,580 | |||||||||
36,050 | TransAct Technologies Inc.† | 181,017 | 191,065 | |||||||||
60,000 | United Rentals Inc.† | 380,572 | 618,000 | |||||||||
140,000 | ValueClick Inc.† | 2,534,579 | 1,846,600 | |||||||||
58,080,096 | 56,418,642 | |||||||||||
Cable — 1.5% | ||||||||||||
230,000 | Adelphia Communications Corp., Cl. A† (a) | 29,650 | 0 | |||||||||
230,000 | Adelphia Communications Corp., Cl. A, Escrow† (a) | 0 | 0 | |||||||||
230,000 | Adelphia Recovery Trust† | 0 | 690 | |||||||||
497,000 | Cablevision Systems Corp., Cl. A | 121,520 | 11,803,750 | |||||||||
5,000 | EchoStar Corp., Cl. A† | 90,025 | 92,300 | |||||||||
9,329 | Liberty Global Inc., Cl. A† | 249,972 | 210,555 | |||||||||
9,329 | Liberty Global Inc., Cl. C† | 240,169 | 209,529 | |||||||||
470,000 | LIN TV Corp., Cl. A† | 3,365,343 | 2,223,100 | |||||||||
33,000 | Outdoor Channel Holdings Inc.† | 271,136 | 215,820 | |||||||||
230,000 | The DIRECTV Group Inc.† | 5,684,534 | 6,343,400 | |||||||||
10,052,349 | 21,099,144 | |||||||||||
Closed-End Business Development Company — 0.1% | ||||||||||||
85,000 | MVC Capital Inc. | 953,786 | 746,300 | |||||||||
Closed-End Funds — 0.6% | ||||||||||||
428,072 | KKR Private Equity Investors LP† | 2,418,221 | 4,002,473 | |||||||||
98,000 | The Central Europe and Russia Fund Inc. | 2,838,336 | 3,185,000 | |||||||||
38,225 | The European Equity Fund Inc. | 395,416 | 265,282 | |||||||||
54,000 | The New Germany Fund Inc. | 635,491 | 646,920 | |||||||||
11,000 | The Spain Fund Inc. | 103,029 | 78,650 | |||||||||
6,390,493 | 8,178,325 | |||||||||||
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
Communications Equipment — 0.9% | ||||||||||||
160,000 | Communications Systems Inc. | $ | 1,147,120 | $ | 1,868,800 | |||||||
510,000 | Sycamore Networks Inc.† | 1,669,330 | 1,540,200 | |||||||||
275,000 | Thomas & Betts Corp.† | 5,127,066 | 8,272,000 | |||||||||
7,943,516 | 11,681,000 | |||||||||||
Computer Software and Services — 1.9% | ||||||||||||
40,000 | Emulex Corp.† | 374,492 | 411,600 | |||||||||
95,000 | FalconStor Software Inc.† | 677,557 | 472,150 | |||||||||
150,058 | Global Sources Ltd.† | 1,432,283 | 1,030,898 | |||||||||
50,000 | Mentor Graphics Corp.† | 646,258 | 465,500 | |||||||||
20,187 | MKS Instruments Inc.† | 367,981 | 389,407 | |||||||||
450,000 | NCR Corp.† | 5,112,245 | 6,219,000 | |||||||||
15,000 | OpenTV Corp., Cl. A† | 73,809 | 20,700 | |||||||||
230,000 | SPSS Inc.† | 11,478,157 | 11,488,500 | |||||||||
800,000 | StorageNetworks Inc., Escrow† (a) | 0 | 24,000 | |||||||||
295,000 | Tyler Technologies Inc.† | 1,164,997 | 5,041,550 | |||||||||
21,327,779 | 25,563,305 | |||||||||||
Consumer Products — 1.8% | ||||||||||||
100,000 | 1-800-FLOWERS.COM Inc., Cl. A† | 773,839 | 345,000 | |||||||||
14,750 | Adams Golf Inc.† | 110,074 | 47,938 | |||||||||
55,150 | Alberto-Culver Co. | 1,326,356 | 1,526,552 | |||||||||
33,500 | Chofu Seisakusho Co. Ltd. | 484,644 | 709,820 | |||||||||
30,000 | Church & Dwight Co. Inc. | 303,670 | 1,702,200 | |||||||||
599,900 | Coachmen Industries Inc.† | 1,451,886 | 809,865 | |||||||||
600,000 | Eastman Kodak Co. | 3,347,542 | 2,868,000 | |||||||||
20,000 | Escada AG† | 80,645 | 21,365 | |||||||||
2,000 | Harley-Davidson Inc. | 4,713 | 46,000 | |||||||||
340,000 | Marine Products Corp. | 444,606 | 1,880,200 | |||||||||
27,500 | National Presto Industries Inc. | 849,878 | 2,379,025 | |||||||||
365,000 | Sally Beauty Holdings Inc.† | 2,323,889 | 2,595,150 | |||||||||
750,000 | Schiff Nutrition International Inc. | 2,148,754 | 3,907,500 | |||||||||
3,070 | Steven Madden Ltd.† | 37,266 | 113,007 | |||||||||
60,000 | Stewart Enterprises Inc., Cl. A | 343,634 | 313,800 | |||||||||
100,000 | Swedish Match AB | 1,904,234 | 2,008,219 | |||||||||
87,425 | Syratech Corp.† | 17,426 | 2,583 | |||||||||
16,000 | The Scotts Miracle-Gro Co., Cl. A | 320,814 | 687,200 | |||||||||
22,000 | WD-40 Co. | 606,916 | 624,800 | |||||||||
68,000 | Wolverine World Wide Inc. | 661,926 | 1,689,120 | |||||||||
17,542,712 | 24,277,344 | |||||||||||
Consumer Services — 0.7% | ||||||||||||
45,500 | Bowlin Travel Centers Inc.† | 44,912 | 43,225 | |||||||||
30,000 | Brink’s Home Security Holdings Inc.† | 549,842 | 923,700 | |||||||||
2,750 | Collectors Universe Inc.† | 8,720 | 15,455 | |||||||||
20,000 | IAC/InterActiveCorp.† | 221,743 | 403,800 |
See accompanying notes to financial statements.
6
The Gabelli Small Cap Growth Fund
Schedule of Investments (Continued) — September 30, 2009
Schedule of Investments (Continued) — September 30, 2009
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS (Continued) | ||||||||||||
Consumer Services (Continued) | ||||||||||||
180,000 | Martha Stewart Living Omnimedia Inc., Cl. A† | $ | 1,341,301 | $ | 1,126,800 | |||||||
400,500 | Rollins Inc. | 2,284,661 | 7,549,425 | |||||||||
4,451,179 | 10,062,405 | |||||||||||
Diversified Industrial — 6.4% | ||||||||||||
15,000 | A.O. Smith Corp., Cl. A | 336,569 | 571,500 | |||||||||
29,000 | Acuity Brands Inc. | 278,896 | 934,090 | |||||||||
25,000 | Albany International Corp., Cl. A | 504,312 | 485,000 | |||||||||
140,000 | Ampco-Pittsburgh Corp. | 1,971,929 | 3,722,600 | |||||||||
6,000 | Anixter International Inc.† | 57,120 | 240,660 | |||||||||
398,000 | Baldor Electric Co. | 9,735,906 | 10,881,320 | |||||||||
60,000 | Brush Engineered Materials Inc.† | 1,139,293 | 1,467,600 | |||||||||
300,000 | Crane Co. | 5,578,382 | 7,743,000 | |||||||||
100,000 | Delta plc | 212,289 | 286,870 | |||||||||
3,000 | ESCO Technologies Inc.† | 49,914 | 118,200 | |||||||||
18,640 | Foster Wheeler AG† | 36,171 | 594,802 | |||||||||
14,000 | Gardner Denver Inc.† | 157,253 | 488,320 | |||||||||
160,000 | Greif Inc., Cl. A | 1,763,054 | 8,808,000 | |||||||||
41,500 | Greif Inc., Cl. B | 1,466,270 | 2,165,055 | |||||||||
820,000 | Griffon Corp.† | 9,313,056 | 8,257,400 | |||||||||
148,000 | Hawk Corp., Cl. A† | 2,244,836 | 2,030,560 | |||||||||
50,000 | Jardine Strategic Holdings Ltd. | 793,484 | 848,000 | |||||||||
415,000 | Katy Industries Inc.† | 912,818 | 581,000 | |||||||||
71,000 | Lindsay Corp. | 1,508,356 | 2,795,980 | |||||||||
500,000 | Magnetek Inc.† | 2,035,184 | 780,000 | |||||||||
32,000 | Matthews International Corp., Cl. A | 748,294 | 1,132,160 | |||||||||
285,000 | Myers Industries Inc. | 2,611,746 | 3,069,450 | |||||||||
192,297 | National Patent Development Corp.† | 477,397 | 303,829 | |||||||||
379,703 | National Patent Development Corp.† (c) | 699,400 | 599,931 | |||||||||
130,000 | Oil-Dri Corp. of America | 1,326,973 | 1,885,000 | |||||||||
20,000 | Olin Corp. | 310,145 | 348,800 | |||||||||
245,000 | Park-Ohio Holdings Corp.† | 1,485,571 | 2,136,400 | |||||||||
88,000 | Precision Castparts Corp. | 1,768,194 | 8,964,560 | |||||||||
32,000 | Roper Industries Inc. | 620,029 | 1,631,360 | |||||||||
33,000 | Sonoco Products Co. | 911,855 | 908,820 | |||||||||
50,000 | Stamford Industrial Group Inc.† | 160,470 | 3,050 | |||||||||
72,000 | Standex International Corp. | 1,396,727 | 1,427,760 | |||||||||
202,006 | Tech/Ops Sevcon Inc. | 1,253,705 | 694,901 | |||||||||
387,000 | Textron Inc. | 2,408,058 | 7,345,260 | |||||||||
195,000 | Tredegar Corp. | 2,908,161 | 2,827,500 | |||||||||
200,000 | WHX Corp.† | 2,260,912 | 384,000 | |||||||||
61,442,729 | 87,462,738 | |||||||||||
Educational Services — 0.6% | ||||||||||||
55,000 | Career Education Corp.† | 1,030,517 | 1,340,900 | |||||||||
140,000 | Corinthian Colleges Inc.† | 1,095,854 | 2,598,400 | |||||||||
200,000 | Universal Technical Institute Inc.† | 3,527,227 | 3,940,000 | |||||||||
5,653,598 | 7,879,300 | |||||||||||
Electronics — 1.9% | ||||||||||||
52,000 | Badger Meter Inc. | 1,251,878 | 2,011,880 | |||||||||
182,075 | Bel Fuse Inc., Cl. A | 4,569,480 | 3,370,208 | |||||||||
610,000 | California Micro Devices Corp.† | 2,628,286 | 1,964,200 | |||||||||
380,000 | CTS Corp. | 3,686,287 | 3,534,000 | |||||||||
73,000 | Cypress Semiconductor Corp.† | 354,472 | 754,090 | |||||||||
30,000 | Greatbatch Inc.† | 553,549 | 674,100 | |||||||||
20,000 | IMAX Corp.† | 158,565 | 188,200 | |||||||||
360,000 | KEMET Corp.† | 1,428,570 | 550,800 | |||||||||
90,000 | Methode Electronics Inc. | 768,649 | 780,300 | |||||||||
295,000 | Park Electrochemical Corp. | 6,912,788 | 7,271,750 | |||||||||
185,000 | Stoneridge Inc.† | 1,526,218 | 1,309,800 | |||||||||
350,000 | Trident Microsystems Inc.† | 1,469,567 | 906,500 | |||||||||
260,000 | Zoran Corp.† | 2,580,598 | 2,995,200 | |||||||||
26,900 | Zygo Corp.† | 146,804 | 182,382 | |||||||||
28,035,711 | 26,493,410 | |||||||||||
Energy and Utilities — 5.9% | ||||||||||||
20,000 | A123 Systems Inc.† | 270,000 | 426,400 | |||||||||
275,000 | Black Hills Corp. | 6,890,939 | 6,921,750 | |||||||||
125,000 | Callon Petroleum Co.† | 996,416 | 228,750 | |||||||||
22,000 | Central Vermont Public Service Corp. | 408,469 | 424,600 | |||||||||
50,000 | CH Energy Group Inc. | 1,980,950 | 2,215,500 | |||||||||
50,000 | CMS Energy Corp. | 273,275 | 670,000 | |||||||||
23,000 | Connecticut Water Service Inc. | 464,832 | 514,970 | |||||||||
7,000 | Consolidated Water Co. Ltd. | 131,548 | 114,310 | |||||||||
150,000 | Covanta Holding Corp.† | 644,530 | 2,550,000 | |||||||||
395,300 | El Paso Electric Co.† | 5,641,207 | 6,984,951 | |||||||||
20,000 | Ener1 Inc.† | 139,473 | 138,400 | |||||||||
20,000 | Energy Recovery Inc.† | 123,117 | 116,400 | |||||||||
25,000 | Environmental Power Corp.† | 102,512 | 10,750 | |||||||||
150,000 | Florida Public Utilities Co. | 1,438,616 | 1,822,500 | |||||||||
220,000 | Great Plains Energy Inc. | 4,699,894 | 3,949,000 | |||||||||
30,000 | Key Energy Services Inc.† . | 259,204 | 261,000 | |||||||||
20,000 | Maine & Maritimes Corp. | 726,673 | 719,000 | |||||||||
45,000 | Middlesex Water Co. | 773,022 | 678,600 | |||||||||
10,000 | Nicor Inc. | 221,002 | 365,900 | |||||||||
33,000 | Oceaneering International Inc.† | 1,043,012 | 1,872,750 | |||||||||
5,000 | Otter Tail Corp. | 123,496 | 119,650 | |||||||||
155,000 | Pennichuck Corp. | 3,580,082 | 3,372,800 | |||||||||
1,180,000 | PNM Resources Inc. | 12,880,621 | 13,782,400 | |||||||||
130,000 | Rowan Companies Inc. | 2,743,649 | 2,999,100 |
See accompanying notes to financial statements.
7
The Gabelli Small Cap Growth Fund
Schedule of Investments (Continued) — September 30, 2009
Schedule of Investments (Continued) — September 30, 2009
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS (Continued) | ||||||||||||
Energy and Utilities (Continued) | ||||||||||||
1,080,000 | RPC Inc. | $ | 2,001,193 | $ | 11,318,400 | |||||||
118,200 | SJW Corp. | 2,116,939 | 2,700,870 | |||||||||
300,000 | Southern Union Co. | 5,117,716 | 6,237,000 | |||||||||
160,000 | Southwest Gas Corp. | 3,242,972 | 4,092,800 | |||||||||
45,000 | Tesoro Corp. | 455,817 | 674,100 | |||||||||
38,500 | The York Water Co. | 539,000 | 533,610 | |||||||||
25,000 | Union Drilling Inc.† | 198,390 | 191,000 | |||||||||
10,000 | Vestas Wind Systems A/S† | 89,988 | 722,914 | |||||||||
200,000 | Westar Energy Inc. | 3,538,764 | 3,902,000 | |||||||||
63,857,318 | 81,632,175 | |||||||||||
Entertainment — 1.3% | ||||||||||||
225,000 | Aruze Corp.† | 3,622,167 | 3,682,114 | |||||||||
82,000 | Carmike Cinemas Inc.† | 667,341 | 829,020 | |||||||||
6,048 | Chestnut Hill Ventures† (a) | 164,590 | 203,984 | |||||||||
52,000 | Discovery Communications Inc., Cl. A† | 826,160 | 1,502,280 | |||||||||
35,000 | Discovery Communications Inc., Cl. C† | 508,241 | 911,050 | |||||||||
290,000 | Dover Motorsports Inc. | 1,288,215 | 435,000 | |||||||||
180,000 | Fisher Communications Inc.† | 7,424,227 | 3,272,400 | |||||||||
16,000 | International Speedway Corp., Cl. A | 515,479 | 441,120 | |||||||||
3,500 | International Speedway Corp., Cl. B | 70,020 | 99,663 | |||||||||
60,000 | Rovi Corp.† | 854,601 | 2,016,000 | |||||||||
320,000 | Take-Two Interactive Software Inc.† | 6,305,128 | 3,587,200 | |||||||||
70,000 | Triple Crown Media Inc.† | 148,002 | 525 | |||||||||
60,000 | World Wrestling Entertainment Inc., Cl. A | 681,642 | 840,600 | |||||||||
85,057 | WPT Enterprises Inc.† | 134,331 | 83,356 | |||||||||
23,210,144 | 17,904,312 | |||||||||||
Environmental Services — 0.7% | ||||||||||||
2,500 | Renegy Holdings Inc.† | 898 | 3,375 | |||||||||
360,000 | Republic Services Inc. | 4,605,576 | 9,565,200 | |||||||||
4,606,474 | 9,568,575 | |||||||||||
Equipment and Supplies — 9.5% | ||||||||||||
247,000 | AMETEK Inc. | 990,231 | 8,622,770 | |||||||||
800 | AZZ Inc.† | 25,908 | 32,136 | |||||||||
485,000 | Baldwin Technology Co. Inc., Cl. A† | 1,469,141 | 897,250 | |||||||||
26,000 | Belden Inc. | 297,690 | 600,600 | |||||||||
8,000 | C&D Technologies Inc.† | 60,565 | 17,200 | |||||||||
50,000 | Capstone Turbine Corp.† | 103,400 | 66,000 | |||||||||
370,000 | CIRCOR International Inc. | 8,366,031 | 10,456,200 | |||||||||
360,000 | CLARCOR Inc. | 2,220,613 | 11,289,600 | |||||||||
300,000 | Core Molding Technologies Inc.† | 561,360 | 987,000 | |||||||||
170,000 | Crown Holdings Inc.† | 687,034 | 4,624,000 | |||||||||
2,000 | Danaher Corp. | 34,106 | 134,640 | |||||||||
90,000 | Donaldson Co. Inc. | 1,558,860 | 3,116,700 | |||||||||
90,000 | Entegris Inc.† | 708,040 | 445,500 | |||||||||
40,000 | Fedders Corp.† (a) | 10,068 | 0 | |||||||||
174,000 | Flowserve Corp. | 5,335,035 | 17,145,960 | |||||||||
160,000 | Franklin Electric Co. Inc. | 1,496,658 | 4,587,200 | |||||||||
200,000 | Gerber Scientific Inc.† | 1,623,389 | 1,196,000 | |||||||||
124,000 | Graco Inc. | 1,750,304 | 3,455,880 | |||||||||
990,000 | GrafTech International Ltd.† | 11,888,846 | 14,553,000 | |||||||||
100,000 | IDEX Corp. | 765,938 | 2,795,000 | |||||||||
200,757 | Interpump Group SpA† | 881,320 | 1,286,019 | |||||||||
2,800 | Itron Inc.† | 169,932 | 179,592 | |||||||||
4,000 | Jarden Corp. | 11,351 | 112,280 | |||||||||
9,500 | K-Tron International Inc.† | 124,799 | 904,495 | |||||||||
125,500 | L.S. Starrett Co., Cl. A | 1,649,651 | 1,305,200 | |||||||||
40,000 | Littelfuse Inc.† | 758,367 | 1,049,600 | |||||||||
120,000 | Lufkin Industries Inc. | 1,638,827 | 6,381,600 | |||||||||
55,000 | Maezawa Kyuso Industries Co. Ltd. | 359,609 | 894,558 | |||||||||
80,000 | Met-Pro Corp. | 672,026 | 775,200 | |||||||||
25,000 | Mueller Industries Inc. | 759,252 | 596,750 | |||||||||
12,000 | Plantronics Inc. | 275,609 | 321,720 | |||||||||
2,000 | Regal-Beloit Corp. | 59,351 | 91,420 | |||||||||
130,000 | Robbins & Myers Inc. | 1,826,625 | 3,052,400 | |||||||||
130,000 | SL Industries Inc.† | 1,480,467 | 1,040,000 | |||||||||
5,000 | Teleflex Inc. | 76,167 | 241,550 | |||||||||
300,000 | Tennant Co. | 6,044,139 | 8,718,000 | |||||||||
335,000 | The Gorman-Rupp Co. | 6,492,366 | 8,344,850 | |||||||||
100,000 | The Greenbrier Cos. Inc. | 1,197,670 | 1,171,000 | |||||||||
100,000 | The Manitowoc Co. Inc. | 666,995 | 947,000 | |||||||||
24,000 | The Middleby Corp.† | 819,631 | 1,320,240 | |||||||||
8,000 | Valmont Industries Inc. | 176,298 | 681,440 | |||||||||
70,000 | Vicor Corp.† | 769,269 | 540,400 | |||||||||
7,875 | Watsco Inc., Cl. B | 23,627 | 428,203 | |||||||||
153,000 | Watts Water Technologies Inc., Cl. A | 3,377,189 | 4,628,250 | |||||||||
70,263,754 | 130,034,403 | |||||||||||
Financial Services — 4.9% | ||||||||||||
10,204 | Alleghany Corp.† | 1,758,131 | 2,643,346 | |||||||||
25,287 | Argo Group International Holdings Ltd.† | 844,293 | 851,666 | |||||||||
400,000 | Artio Global Investors Inc.† | 10,400,000 | 10,460,000 | |||||||||
85,000 | Bank of Florida Corp.† | 1,062,428 | 201,450 | |||||||||
6,000 | BCB Holdings Ltd.† | 23,159 | 11,400 | |||||||||
4,122 | BCB Holdings Ltd., London† | 0 | 8,070 | |||||||||
115,000 | BKF Capital Group Inc.† | 813,874 | 124,200 | |||||||||
475,000 | CNA Surety Corp.† | 5,647,870 | 7,695,000 | |||||||||
22,000 | Crazy Woman Creek Bancorp Inc. | 343,564 | 323,950 | |||||||||
150,000 | Discover Financial Services | 2,610,856 | 2,434,500 |
See accompanying notes to financial statements.
8
The Gabelli Small Cap Growth Fund
Schedule of Investments (Continued) — September 30, 2009
Schedule of Investments (Continued) — September 30, 2009
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS (Continued) | ||||||||||||
Financial Services (Continued) | ||||||||||||
24,000 | Duff & Phelps Corp., Cl. A | $ | 388,930 | $ | 459,840 | |||||||
43,500 | Epoch Holding Corp. | 119,308 | 380,625 | |||||||||
8,145 | Fidelity Southern Corp.† | 53,150 | 25,820 | |||||||||
200,100 | Flushing Financial Corp. | 3,172,625 | 2,281,140 | |||||||||
340,000 | Janus Capital Group Inc. | 2,509,781 | 4,821,200 | |||||||||
20,000 | JPMorgan Chase & Co. | 529,472 | 876,400 | |||||||||
12,000 | KBW Inc.† | 323,794 | 386,640 | |||||||||
50,000 | LaBranche & Co. Inc.† | 463,862 | 170,000 | |||||||||
150,000 | Legg Mason Inc. | 2,845,573 | 4,654,500 | |||||||||
3,000 | Leucadia National Corp.† | 24,354 | 74,160 | |||||||||
16,000 | Morningstar Inc.† | 713,218 | 776,960 | |||||||||
285,000 | Nara Bancorp Inc. | 3,333,317 | 1,980,750 | |||||||||
3,000 | NetBank Inc.† (a) | 6,056 | 15 | |||||||||
150,000 | NewAlliance Bancshares Inc. | 2,090,474 | 1,605,000 | |||||||||
235,000 | Och-Ziff Capital Management Group LLC, Cl. A | 1,738,730 | 2,859,950 | |||||||||
11,000 | PrivateBancorp Inc. | 321,408 | 269,060 | |||||||||
20,000 | Seacoast Banking Corp. of Florida | 165,017 | 50,400 | |||||||||
200,000 | Sterling Bancorp | 3,163,359 | 1,444,000 | |||||||||
260,000 | SWS Group Inc. | 4,391,743 | 3,744,000 | |||||||||
10,000 | T. Rowe Price Group Inc. | 270,786 | 457,000 | |||||||||
11,033 | Tree.com Inc.† | 78,880 | 83,299 | |||||||||
4,800 | Value Line Inc. | 194,670 | 148,176 | |||||||||
450,000 | Waddell & Reed Financial Inc., Cl. A | 9,026,154 | 12,802,500 | |||||||||
138,000 | Wilmington Trust Corp. | 4,062,481 | 1,959,600 | |||||||||
63,491,317 | 67,064,617 | |||||||||||
Food and Beverage — 6.3% | ||||||||||||
50,000 | American Dairy Inc.† | 1,455,293 | 1,416,500 | |||||||||
50,000 | Boston Beer Co. Inc., Cl. A† | 928,742 | 1,854,000 | |||||||||
38,000 | Brown-Forman Corp., Cl. A | 1,110,712 | 1,940,660 | |||||||||
6,250 | Brown-Forman Corp., Cl. B | 174,281 | 301,375 | |||||||||
210,000 | Bull-Dog Sauce Co. Ltd. | 575,985 | 470,228 | |||||||||
730,000 | CoolBrands International Inc.† | 530,951 | 565,918 | |||||||||
350,000 | Corn Products International Inc. | 7,868,246 | 9,982,000 | |||||||||
335,000 | Davide Campari — Milano SpA | 3,211,791 | 3,005,078 | |||||||||
235,000 | Dean Foods Co.† | 4,583,149 | 4,180,650 | |||||||||
150,000 | Del Monte Foods Co. | 1,420,751 | 1,737,000 | |||||||||
85,000 | Denny’s Corp.† | 132,580 | 226,100 | |||||||||
1,000 | Diamond Foods Inc. | 20,567 | 31,720 | |||||||||
325,000 | Dr. Pepper Snapple Group Inc.† | 6,564,509 | 9,343,750 | |||||||||
1,600,000 | Dynasty Fine Wines Group Ltd. | 458,568 | 342,707 | |||||||||
25,000 | Farmer Brothers Co. | 389,323 | 517,500 | |||||||||
300,000 | Flowers Foods Inc. | 1,755,612 | 7,887,000 | |||||||||
500 | Genesee Corp., Cl. A† (a) | 0 | 0 | |||||||||
21,500 | Genesee Corp., Cl. B† (a) | 15,393 | 0 | |||||||||
630,000 | Grupo Continental SAB de CV | 951,926 | 1,260,280 | |||||||||
160,000 | ITO EN Ltd. | 3,301,726 | 2,962,402 | |||||||||
25,000 | J & J Snack Foods Corp. | 577,813 | 1,079,750 | |||||||||
651,000 | Kikkoman Corp. | 6,383,149 | 8,108,038 | |||||||||
180,000 | Lifeway Foods Inc.† | 1,764,579 | 1,978,200 | |||||||||
3,000 | MEIJI Holdings Co. Ltd.† | 117,526 | 128,001 | |||||||||
70,000 | MGP Ingredients Inc.† | 331,262 | 305,200 | |||||||||
300,000 | Morinaga Milk Industry Co. Ltd. | 1,174,783 | 1,497,243 | |||||||||
80,000 | NISSIN FOODS HOLDINGS CO. LTD. | 2,736,111 | 3,074,695 | |||||||||
4,000 | Omni Nutraceuticals Inc.† (a) | 13,563 | 0 | |||||||||
100,000 | PepsiAmericas Inc. | 2,282,264 | 2,856,000 | |||||||||
50,000 | Ralcorp Holdings Inc.† | 892,806 | 2,923,500 | |||||||||
162,000 | Rock Field Co. Ltd. | 2,539,700 | 2,290,180 | |||||||||
70,200 | Smart Balance Inc.† | 628,920 | 431,028 | |||||||||
10,000 | The Hain Celestial Group Inc.† | 184,774 | 191,700 | |||||||||
66,000 | The J.M. Smucker Co. | 1,599,230 | 3,498,660 | |||||||||
225,500 | Tootsie Roll Industries Inc. | 5,047,016 | 5,362,390 | |||||||||
4,000 | Vina Concha Y Toro SA, ADR | 118,504 | 166,600 | |||||||||
1,000,000 | Vitasoy International Holdings Ltd. | 574,056 | 602,577 | |||||||||
4,000 | Willamette Valley Vineyards Inc.† | 15,875 | 16,600 | |||||||||
140,000 | YAKULT HONSHA Co. Ltd. | 3,474,574 | 3,735,309 | |||||||||
65,906,610 | 86,270,539 | |||||||||||
Health Care — 6.9% | ||||||||||||
70,000 | Align Technology Inc.† | 535,982 | 995,400 | |||||||||
100,000 | Allergan Inc. | 1,964,408 | 5,676,000 | |||||||||
150,000 | AngioDynamics Inc.† | 2,404,394 | 2,067,000 | |||||||||
8,000 | Anika Therapeutics Inc.† | 76,123 | 52,000 | |||||||||
325,000 | Animal Health International Inc.† | 2,748,991 | 689,000 | |||||||||
130,000 | ArthroCare Corp.† | 2,545,596 | 2,650,700 | |||||||||
7,000 | Bio-Rad Laboratories Inc., Cl. A† | 276,948 | 643,160 | |||||||||
60,000 | BioLase Technology Inc.† | 107,545 | 135,600 | |||||||||
20,000 | Bruker Corp.† | 174,056 | 213,400 | |||||||||
190,000 | Cepheid Inc.† | 2,054,719 | 2,511,800 | |||||||||
155,000 | Chemed Corp. | 3,340,846 | 6,802,950 | |||||||||
66,000 | CONMED Corp.† | 1,714,345 | 1,265,220 | |||||||||
35,000 | Continucare Corp.† | 84,321 | 105,700 | |||||||||
241,000 | Crucell NV, ADR† | 4,677,692 | 5,516,490 | |||||||||
330,000 | Cutera Inc.† | 4,721,691 | 2,854,500 | |||||||||
12,000 | Cynosure Inc., Cl. A† | 93,211 | 139,800 | |||||||||
120,000 | Del Global Technologies Corp.† | 350,477 | 57,600 | |||||||||
100,000 | DexCom Inc.† | 1,036,753 | 793,000 | |||||||||
145,000 | Exactech Inc.† | 2,128,527 | 2,282,300 | |||||||||
42,000 | Henry Schein Inc.† | 739,631 | 2,306,220 | |||||||||
40,000 | Heska Corp.† | 35,706 | 17,600 | |||||||||
44,000 | ICU Medical Inc.† | 1,107,634 | 1,621,840 |
See accompanying notes to financial statements.
9
The Gabelli Small Cap Growth Fund
Schedule of Investments (Continued) — September 30, 2009
Schedule of Investments (Continued) — September 30, 2009
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS (Continued) | ||||||||||||
Health Care (Continued) | ||||||||||||
33,000 | IMS Health Inc. | $ | 664,862 | $ | 506,550 | |||||||
4,000 | Invacare Corp. | 92,551 | 89,120 | |||||||||
30,000 | Inverness Medical Innovations Inc.† | 554,733 | 1,161,900 | |||||||||
50,000 | Kinetic Concepts Inc.† | 1,273,917 | 1,849,000 | |||||||||
42,000 | Life Technologies Corp.† | 1,070,187 | 1,955,100 | |||||||||
50,000 | MDS Inc.† | 369,635 | 409,500 | |||||||||
90,000 | Micrus Endovascular Corp.† | 1,224,430 | 1,165,500 | |||||||||
40,000 | MWI Veterinary Supply Inc.† | 972,736 | 1,598,000 | |||||||||
18,000 | Nabi Biopharmaceuticals† | 117,875 | 64,620 | |||||||||
4,000 | Nobel Biocare Holding AG | 61,643 | 132,394 | |||||||||
265,000 | Odyssey HealthCare Inc.† | 2,902,218 | 3,312,500 | |||||||||
95,000 | Opko Health Inc.† | 252,168 | 216,600 | |||||||||
105,000 | Orthofix International NV† | 2,088,416 | 3,085,950 | |||||||||
20,000 | OTIX Global Inc.† | 19,187 | 19,000 | |||||||||
30,000 | Owens & Minor Inc. | 606,216 | 1,357,500 | |||||||||
265,000 | Pain Therapeutics Inc.† | 2,223,565 | 1,340,900 | |||||||||
300,000 | Palomar Medical Technologies Inc.† | 4,901,124 | 4,863,000 | |||||||||
155,000 | Penwest Pharmaceuticals Co.† | 1,224,222 | 323,950 | |||||||||
30,000 | PSS World Medical Inc.† | 367,273 | 654,900 | |||||||||
270,000 | Quidel Corp.† | 2,442,264 | 4,382,100 | |||||||||
122,000 | RTI Biologics Inc.† | 1,186,732 | 530,700 | |||||||||
1,250,000 | Sorin SpA† | 3,218,730 | 2,103,576 | |||||||||
1,450,000 | SSL International plc | 11,788,834 | 14,830,916 | |||||||||
2,300 | Straumann Holding AG | 206,988 | 595,363 | |||||||||
4,000 | Stryker Corp. | 156,026 | 181,720 | |||||||||
14,000 | Syneron Medical Ltd.† | 116,750 | 159,740 | |||||||||
48,000 | United-Guardian Inc. | 435,056 | 451,680 | |||||||||
120,000 | Varian Inc.† | 6,145,316 | 6,127,200 | |||||||||
80,000 | Vascular Solutions Inc.† | 619,673 | 661,600 | |||||||||
30,000 | Wright Medical Group Inc.† | 476,436 | 535,800 | |||||||||
10,000 | Young Innovations Inc. | 237,253 | 263,100 | |||||||||
20,000 | Zymogenetics Inc.† | 192,516 | 120,800 | |||||||||
81,129,128 | 94,447,559 | |||||||||||
Home Furnishings — 0.1% | ||||||||||||
10,000 | Bassett Furniture Industries Inc. | 124,029 | 42,800 | |||||||||
50,000 | Bed Bath & Beyond Inc.† | 1,232,179 | 1,877,000 | |||||||||
1,356,208 | 1,919,800 | |||||||||||
Hotels and Gaming — 2.4% | ||||||||||||
150,000 | Boyd Gaming Corp.† | 849,669 | 1,639,500 | |||||||||
92,000 | Canterbury Park Holding Corp.† | 969,649 | 650,900 | |||||||||
93,000 | Churchill Downs Inc. | 3,135,317 | 3,580,500 | |||||||||
125,000 | Dover Downs Gaming & Entertainment Inc. | 786,541 | 712,500 | |||||||||
240,000 | Gaylord Entertainment Co.† | 5,636,708 | 4,824,000 | |||||||||
36,000 | Home Inns & Hotels Management Inc., ADR† | 757,336 | 1,074,600 | |||||||||
140,000 | Lakes Entertainment Inc.† | 717,933 | 470,400 | |||||||||
200,000 | Las Vegas Sands Corp.† | 1,381,919 | 3,368,000 | |||||||||
800,000 | Mandarin Oriental International Ltd. | 853,996 | 1,064,000 | |||||||||
160,000 | Orient-Express Hotels Ltd., Cl. A | 3,016,606 | 1,841,600 | |||||||||
118,000 | Penn National Gaming Inc.† | 1,546,593 | 3,263,880 | |||||||||
295,000 | Pinnacle Entertainment Inc.† | 2,215,116 | 3,006,050 | |||||||||
162,500 | Sonesta International Hotels Corp., Cl. A | 3,490,995 | 2,031,250 | |||||||||
2,000,000 | The Hongkong & Shanghai Hotels Ltd. | 1,786,952 | 2,590,951 | |||||||||
72,000 | The Marcus Corp. | 1,092,963 | 920,880 | |||||||||
25,000 | Wynn Resorts Ltd.† | 312,098 | 1,772,250 | |||||||||
29,000 | Youbet.com Inc.† | 64,391 | 60,900 | |||||||||
28,614,782 | 32,872,161 | |||||||||||
Machinery — 0.9% | ||||||||||||
465,000 | CNH Global NV† | 6,426,371 | 7,942,200 | |||||||||
3,000 | Nordson Corp. | 107,171 | 168,270 | |||||||||
138,000 | Zebra Technologies Corp., Cl. A† | 3,088,658 | 3,578,340 | |||||||||
9,622,200 | 11,688,810 | |||||||||||
Manufactured Housing and Recreational Vehicles — 0.5% | ||||||||||||
74,000 | Cavco Industries Inc.† | 1,528,179 | 2,627,000 | |||||||||
240,000 | Champion Enterprises Inc.† | 283,889 | 110,400 | |||||||||
17,000 | Drew Industries Inc.† | 296,303 | 368,730 | |||||||||
22,000 | Nobility Homes Inc. | 367,735 | 199,760 | |||||||||
160,000 | Skyline Corp. | 4,932,802 | 3,609,600 | |||||||||
7,408,908 | 6,915,490 | |||||||||||
Metals and Mining — 0.5% | ||||||||||||
52,003 | Barrick Gold Corp. | 1,522,648 | 1,970,914 | |||||||||
10,000 | Inmet Mining Corp. | 325,911 | 560,034 | |||||||||
22,000 | Ivanhoe Mines Ltd.† | 125,570 | 281,380 | |||||||||
140,000 | Kinross Gold Corp. | 962,642 | 3,038,000 | |||||||||
2,000 | Northwest Pipe Co.† | 55,888 | 67,060 | |||||||||
52,100 | Stillwater Mining Co.† | 477,514 | 350,112 | |||||||||
36,000 | Uranium Resources Inc.† | 193,921 | 41,400 | |||||||||
15,000 | Yamana Gold Inc. | 50,671 | 160,650 | |||||||||
3,714,765 | 6,469,550 | |||||||||||
Paper and Forest Products — 0.1% | ||||||||||||
17,000 | Schweitzer-Mauduit International Inc. | 382,402 | 924,120 | |||||||||
40,000 | Wausau Paper Corp. | 428,382 | 400,000 | |||||||||
810,784 | 1,324,120 | |||||||||||
See accompanying notes to financial statements.
10
The Gabelli Small Cap Growth Fund
Schedule of Investments (Continued) — September 30, 2009
Schedule of Investments (Continued) — September 30, 2009
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS (Continued) | ||||||||||||
Publishing — 1.2% | ||||||||||||
60,000 | Belo Corp., Cl. A | $ | 116,307 | $ | 324,600 | |||||||
300,000 | Il Sole 24 Ore | 1,429,146 | 1,047,032 | |||||||||
275,237 | Independent News & Media plc† | 380,109 | 80,554 | |||||||||
12,000 | John Wiley & Sons Inc., Cl. B | 46,500 | 412,920 | |||||||||
785,000 | Journal Communications Inc., Cl. A | 4,628,470 | 2,888,800 | |||||||||
605,000 | Media General Inc., Cl. A | 3,443,394 | 5,172,750 | |||||||||
30,000 | Meredith Corp. | 539,417 | 898,200 | |||||||||
260,000 | News Corp., Cl. A | 765,310 | 3,117,400 | |||||||||
180,000 | PRIMEDIA Inc. | 971,643 | 453,600 | |||||||||
350,000 | The E.W. Scripps Co., Cl. A† | 2,214,388 | 2,625,000 | |||||||||
14,534,684 | 17,020,856 | |||||||||||
Real Estate — 1.2% | ||||||||||||
15,150 | Capital Properties Inc., Cl. A | 366,997 | 113,322 | |||||||||
15,000 | Capital Properties Inc., Cl. B† (a) | 0 | 112,200 | |||||||||
33,000 | Cohen & Steers Inc. | 603,981 | 792,000 | |||||||||
182,000 | Griffin Land & Nurseries Inc. | 2,583,366 | 5,824,000 | |||||||||
10,000 | Gyrodyne Co. of America Inc.† | 158,987 | 419,900 | |||||||||
107,000 | Morguard Corp. | 1,362,690 | 2,978,191 | |||||||||
200,000 | The St. Joe Co.† | 5,212,714 | 5,824,000 | |||||||||
10,288,735 | 16,063,613 | |||||||||||
Retail — 3.8% | ||||||||||||
30,000 | 99 Cents Only Stores† | 411,411 | 403,500 | |||||||||
144,000 | Aaron’s Inc., Cl. A | 521,690 | 2,938,320 | |||||||||
70,000 | AutoNation Inc.† | 402,094 | 1,265,600 | |||||||||
50,000 | Big 5 Sporting Goods Corp. | 834,144 | 755,000 | |||||||||
124,000 | Casey’s General Stores Inc. | 3,209,711 | 3,891,120 | |||||||||
690,000 | Coldwater Creek Inc.† | 3,133,211 | 5,658,000 | |||||||||
36,000 | Copart Inc.† | 1,074,963 | 1,195,560 | |||||||||
8,000 | HSN Inc.† | 61,333 | 130,240 | |||||||||
520,000 | Ingles Markets Inc., Cl. A | 8,667,736 | 8,231,600 | |||||||||
160,000 | Macy’s Inc. | 2,116,345 | 2,926,400 | |||||||||
36,000 | Movado Group Inc. | 500,300 | 523,080 | |||||||||
112,000 | Nathan’s Famous Inc.† | 1,489,024 | 1,655,360 | |||||||||
25,000 | Pier 1 Imports Inc.† | 144,715 | 96,750 | |||||||||
200,000 | Rush Enterprises Inc., Cl. B† | 2,352,018 | 2,178,000 | |||||||||
300,000 | The Bon-Ton Stores Inc. | 2,203,439 | 2,184,000 | |||||||||
48,000 | The Cheesecake Factory Inc.† | 683,216 | 888,960 | |||||||||
280,000 | The Great Atlantic & Pacific Tea Co. Inc.† | 3,164,375 | 2,494,800 | |||||||||
348,000 | The Steak n Shake Co.† | 4,052,747 | 4,095,960 | |||||||||
105,000 | Tractor Supply Co.† | 3,910,276 | 5,084,100 | |||||||||
23,700 | Village Super Market Inc., Cl. A | 552,379 | 698,439 | |||||||||
45,000 | Weis Markets Inc. | 1,354,385 | 1,437,750 | |||||||||
168,000 | Wendy’s/Arby’s Group Inc., Cl. A | 1,364,690 | 794,640 | |||||||||
150,000 | Winn-Dixie Stores Inc.† | 2,236,267 | 1,968,000 | |||||||||
44,440,469 | 51,495,179 | |||||||||||
Specialty Chemicals — 4.0% | ||||||||||||
58,000 | A. Schulman Inc. | 1,175,761 | 1,155,940 | |||||||||
19,000 | Airgas Inc. | 121,732 | 919,030 | |||||||||
82,000 | Albemarle Corp. | 1,201,828 | 2,837,200 | |||||||||
35,000 | Arch Chemicals Inc. | 766,922 | 1,049,650 | |||||||||
74,000 | Ashland Inc. | 1,198,871 | 3,198,280 | |||||||||
40,000 | Chemtura Corp.† | 1,120 | 37,200 | |||||||||
11,000 | Cytec Industries Inc. | 296,699 | 357,170 | |||||||||
710,000 | Ferro Corp. | 7,174,435 | 6,319,000 | |||||||||
275,000 | H.B. Fuller Co. | 2,910,527 | 5,747,500 | |||||||||
128,000 | Hawkins Inc. | 1,867,485 | 2,990,080 | |||||||||
950,000 | Huntsman Corp. | 5,191,927 | 8,654,500 | |||||||||
85,000 | Material Sciences Corp.† | 503,549 | 165,750 | |||||||||
365,000 | Omnova Solutions Inc.† | 1,014,391 | 2,365,200 | |||||||||
60,000 | Penford Corp. | 687,437 | 430,200 | |||||||||
13,000 | Quaker Chemical Corp. | 214,482 | 285,090 | |||||||||
100,000 | Rockwood Holdings Inc.† | 1,966,878 | 2,057,000 | |||||||||
260,000 | Sensient Technologies Corp. | 5,254,578 | 7,220,200 | |||||||||
540,000 | Zep Inc. | 7,204,649 | 8,775,000 | |||||||||
38,753,271 | 54,563,990 | |||||||||||
Telecommunications — 1.6% | ||||||||||||
30,000 | Atlantic Tele-Network Inc. | 461,782 | 1,602,600 | |||||||||
900,000 | Cincinnati Bell Inc.† | 2,974,257 | 3,150,000 | |||||||||
6,795 | Community Service Communications Inc.† | 0 | 10,702 | |||||||||
42,000 | D&E Communications Inc. | 455,150 | 482,580 | |||||||||
130,000 | Fastweb† | 3,388,246 | 3,652,540 | |||||||||
110,000 | HickoryTech Corp. | 949,514 | 940,500 | |||||||||
110,000 | New Ulm Telecom Inc. | 1,095,065 | 605,000 | |||||||||
118,000 | Rogers Communications Inc., Cl. B | 569,865 | 3,327,600 | |||||||||
63,000 | Shenandoah Telecommunications Co. | 373,895 | 1,130,850 | |||||||||
1,500,000 | Sprint Nextel Corp.† | 4,096,476 | 5,925,000 | |||||||||
37,584 | Verizon Communications Inc. | 900,747 | 1,137,668 | |||||||||
24,000 | Windstream Corp. | 25,072 | 243,120 | |||||||||
53,000 | Winstar Communications Inc.† (a) | 133 | 53 | |||||||||
15,290,202 | 22,208,213 | |||||||||||
Transportation — 0.5% | ||||||||||||
220,000 | GATX Corp. | 6,501,231 | 6,149,000 | |||||||||
20,000 | Grupo TMM SA, Cl. A, ADR† | 509,195 | 78,200 | |||||||||
2,000 | Irish Continental Group plc† | 14,688 | 34,330 | |||||||||
100,000 | Providence and Worcester Railroad Co. | 1,481,088 | 1,028,000 | |||||||||
8,506,202 | 7,289,530 | |||||||||||
See accompanying notes to financial statements.
11
The Gabelli Small Cap Growth Fund
Schedule of Investments (Continued) — September 30, 2009
Schedule of Investments (Continued) — September 30, 2009
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS (Continued) | ||||||||||||
Wireless Communications — 1.4% | ||||||||||||
550,000 | Centennial Communications Corp.† | $ | 4,125,795 | $ | 4,389,000 | |||||||
72,000 | Price Communications Corp., Escrow† (a) | 0 | 0 | |||||||||
830,000 | Vimpel-Communications, ADR† | 2,507,032 | 15,521,000 | |||||||||
6,632,827 | 19,910,000 | |||||||||||
TOTAL COMMON STOCKS | 884,396,799 | 1,131,755,013 | ||||||||||
PREFERRED STOCKS — 0.1% | ||||||||||||
Automotive: Parts and Accessories — 0.1% | ||||||||||||
30,000 | Jungheinrich AG Pfd | 616,201 | 603,196 | |||||||||
Broadcasting — 0.0% | ||||||||||||
1,103 | PTV Inc., 10.000% Pfd., Ser. A | 0 | 88 | |||||||||
Business Services — 0.0% | ||||||||||||
24,317 | Interep National Radio Sales Inc., 4.000% Cv. Pfd., Ser. A (a)(c)(d)† | 2,163,146 | 0 | |||||||||
TOTAL PREFERRED STOCKS | 2,779,347 | 603,284 | ||||||||||
WARRANTS — 0.0% | ||||||||||||
Automotive: Parts and Accessories — 0.0% | ||||||||||||
1,213 | Exide Technologies, expire 05/05/11† (a) | 2,247 | 243 | |||||||||
4,531 | Federal-Mogul Corp., expire 12/27/14† | 87,687 | 1,246 | |||||||||
89,934 | 1,489 | |||||||||||
Broadcasting — 0.0% | ||||||||||||
6,082 | Granite Broadcasting Corp., Ser. A, expire 06/04/12†(a) | 0 | 1 | |||||||||
3,430 | Granite Broadcasting Corp., Ser. B, expire 06/04/12†(a) | 0 | 34 | |||||||||
0 | 35 | |||||||||||
Business Services — 0.0% | ||||||||||||
445,000 | BPW Acquisition Corp., expire 02/26/14† | 44,444 | 215,825 | |||||||||
Telecommunications — 0.0% | ||||||||||||
86 | Virgin Media Inc., Ser. A, expire 01/10/11† | 124 | 5 | |||||||||
TOTAL WARRANTS | 134,502 | 217,354 | ||||||||||
Principal | Market | |||||||||||
Amount | Cost | Value | ||||||||||
CORPORATE BONDS — 0.0% | ||||||||||||
Computer Software and Services — 0.0% | ||||||||||||
$ | 300,000 | Exodus Communications Inc., Sub. Deb., 5.250%, 02/15/10† (a) | $ | 1,185 | $ | 1,185 | ||||||
U.S. Government Obligations — 17.4% | ||||||||||||
239,236,000 | U.S. Treasury Bills, 0.066% to 0.340%††, 10/15/09 to 03/25/10 | 239,155,791 | 239,180,310 | |||||||||
TOTAL INVESTMENTS — 100.0% | $ | 1,126,467,624 | 1,371,757,146 | |||||||||
Other Assets and Liabilities (Net) — 0.0% | 348,074 | |||||||||||
NET ASSETS — 100.0% | $ | 1,372,105,220 | ||||||||||
(a) | Security fair valued under procedures established by the Board of Directors. The procedures may include reviewing available financial information about the company and reviewing valuation of comparable securities and other factors on a regular basis. At September 30, 2009, the market value of fair valued securities amounted to $341,718 or 0.02% of net assets. | |
(b) | Security considered an affiliated holding because the Fund owns at least 5% of its outstanding shares. | |
(c) | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At September 30, 2009, the market value of Rule 144A securities amounted to $599,931 or 0.04% of net assets. | |
(d) | Illiquid security. | |
† | Non-income producing security. | |
†† | Represents annualized yield at date of purchase. | |
ADR | American Depositary Receipt |
See accompanying notes to financial statements.
12
The Gabelli Small Cap Growth Fund
Statement of Assets and Liabilities
September 30, 2009
September 30, 2009
Assets: | ||||
Investments, at value (cost $1,125,333,441) | $ | 1,371,539,566 | ||
Investments in affiliates, at value 1,134,183) | 217,580 | |||
Foreign currency, at value (cost $13,373) | 13,422 | |||
Cash | 1,544 | |||
Receivable for investments sold | 215,781 | |||
Receivable for Fund shares sold | 6,254,836 | |||
Dividends and interest receivable | 977,303 | |||
Prepaid expenses | 56,596 | |||
Total Assets | 1,379,276,628 | |||
Liabilities: | ||||
Payable for investments purchased | 4,119,262 | |||
Payable for Fund shares redeemed | 1,041,962 | |||
Payable for investment advisory fees | 1,085,460 | |||
Payable for distribution fees | 278,988 | |||
Payable for accounting fees | 7,500 | |||
Other accrued expenses | 638,236 | |||
Total Liabilities | 7,171,408 | |||
Net Assets applicable to 53,231,476 shares outstanding | $ | 1,372,105,220 | ||
Net Assets Consist of: | ||||
Paid-in capital, each class at $0.001 par value | $ | 1,165,982,266 | ||
Undistributed net investment income | 26,769 | |||
Accumulated net realized loss on investments, futures contracts, and foreign currency transactions | (39,192,327 | ) | ||
Net unrealized appreciation on investments | 245,289,522 | |||
Net unrealized depreciation on foreign currency translations | (1,010 | ) | ||
Net Assets | $ | 1,372,105,220 | ||
Shares of Capital Stock | ||||
Class AAA: | ||||
Net Asset Value, offering, and redemption price per share ($1,167,113,937 ÷ 45,220,442 shares outstanding;150,000,000 shares authorized) | $ | 25.81 | ||
Class A: | ||||
Net Asset Value and redemption price per share ($62,547,781 ÷ 2,423,274 shares outstanding; 50,000,000 shares authorized) | $ | 25.81 | ||
Maximum offering price per share (NAV ÷0.9425, based on maximum sales charge of 5.75% of the offering price) | $ | 27.38 | ||
Class B: | ||||
Net Asset Value and offering price per share ($56,646 ÷ 2,308 shares outstanding; 50,000,000 shares authorized) | $ | 24.54 | (a) | |
Class C: | ||||
Net Asset Value and offering price per share ($42,973,871 ÷ 1,751,145 shares outstanding; 50,000,000 shares authorized) | $ | 24.54 | (a) | |
Class I: | ||||
Net Asset Value, offering, and redemption price per share $99,412,985 ÷ 3,834,307 shares outstanding; 50,000,000 shares authorized) | $ | 25.93 | ||
(a) | Redemption price varies based on the length of time held. |
Statement of Operations
For the Year Ended September 30, 2009
For the Year Ended September 30, 2009
Investment Income: | ||||
Dividends (net of foreign taxes of $93,991) | $ | 12,451,516 | ||
Interest | 443,921 | |||
Total Investment Income | 12,895,437 | |||
Expenses: | ||||
Investment advisory fees | 9,375,651 | |||
Distribution fees – Class AAA | 2,085,016 | |||
Distribution fees – Class A | 74,917 | |||
Distribution fees – Class B | 485 | |||
Distribution fees – Class C | 245,293 | |||
Shareholder services fees | 1,225,595 | |||
Shareholder communications expenses | 347,414 | |||
Custodian fees | 177,425 | |||
Registration expenses | 109,488 | |||
Legal and audit fees | 62,000 | |||
Accounting fees | 45,000 | |||
Directors’ fees | 39,506 | |||
Interest expense | 12 | |||
Miscellaneous expenses | 92,099 | |||
Total Expenses | 13,879,901 | |||
Less: | ||||
Advisory fee reduction on unsupervised assets | (50,252 | ) | ||
Custodian fee credits | (1,028 | ) | ||
Total Reductions and Credits | (51,280 | ) | ||
Net Expenses | 13,828,621 | |||
Net Investment Loss | (933,184 | ) | ||
Net Realized and Unrealized Gain/(Loss) on Investments, Futures Contracts, and Foreign Currency: | ||||
Net realized loss on investments – unaffiliated | (35,633,390 | ) | ||
Net realized loss on investments – affiliated | (1,105,245 | ) | ||
Capital gain distributions from investment companies | 14,790 | |||
Net realized gain on futures contracts | 705,845 | |||
Net realized gain on foreign currency transactions | 20,647 | |||
Net realized loss on investments, futures contracts, and foreign currency transactions | (35,997,353 | ) | ||
Net change in unrealized appreciation/depreciation on: | ||||
investments | 64,760,475 | |||
foreign currency translations | (967 | ) | ||
Net change in unrealized appreciation/depreciation on investments and foreign currency translations | 64,759,508 | |||
Net Realized and Unrealized Gain on Investments, Futures Contracts, and Foreign Currency | 28,762,155 | |||
Net Increase in Net Assets Resulting from Operations | $ | 27,828,971 | ||
See accompanying notes to financial statements.
13
The Gabelli Small Cap Growth Fund
Statement of Changes in Net Assets
Year Ended | Year Ended | |||||||
September 30, 2009 | September 30, 2008 | |||||||
Operations: | ||||||||
Net investment loss | $ | (933,184 | ) | $ | (203,598 | ) | ||
Net realized gain/(loss) on investments, futures contracts, and foreign currency transactions | (35,997,353 | ) | 55,964,780 | |||||
Net change in unrealized appreciation/depreciation on investments and foreign currency translations | 64,759,508 | (214,885,884 | ) | |||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | 27,828,971 | (159,124,702 | ) | |||||
Distributions to Shareholders: | ||||||||
Net realized gain | ||||||||
Class AAA | (51,110,267 | ) | (46,323,563 | ) | ||||
Class A | (1,394,609 | ) | (797,001 | ) | ||||
Class B | (3,267 | ) | (5,830 | ) | ||||
Class C | (1,316,687 | ) | (551,222 | ) | ||||
Class I | (528,505 | ) | — | |||||
Total Distributions to Shareholders | (54,353,335 | ) | (47,677,616 | ) | ||||
Capital Share Transactions: | ||||||||
Class AAA | 220,096,064 | 192,040,034 | ||||||
Class A | 33,274,548 | 15,316,709 | ||||||
Class B | 666 | (43,504 | ) | |||||
Class C | 18,892,727 | 16,624,141 | ||||||
Class I | 77,436,236 | 3,853,655 | ||||||
Net Increase in Net Assets from Capital Share Transactions | 349,700,241 | 227,791,035 | ||||||
Redemption Fees | 11,022 | 6,835 | ||||||
Net Increase in Net Assets | 323,186,899 | 20,995,552 | ||||||
Net Assets: | ||||||||
Beginning of period | 1,048,918,321 | 1,027,922,769 | ||||||
End of period (including undistributed net investment income of $26,769 and $0, respectively) | $ | 1,372,105,220 | $ | 1,048,918,321 | ||||
See accompanying notes to financial statements.
14
The Gabelli Small Cap Growth Fund
Financial Highlights
Financial Highlights
Selected data for a share of capital stock outstanding throughout each period:
Ratios to Average Net Assets/ | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Income from Investment Operations | Distributions | Supplemental Data | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Asset | Net | Realized and | Total | Net | Net Asset | Net Assets | Net | Operating | ||||||||||||||||||||||||||||||||||||||||||||
Period | Value, | Investment | Unrealized | from | Realized | Value, | End of | Investment | Expenses | Portfolio | ||||||||||||||||||||||||||||||||||||||||||
Ended | Beginning | Income | Gain (Loss) on | Investment | Gain on | Total | Redemption | End of | Total | Period | Income | Before | Turnover | |||||||||||||||||||||||||||||||||||||||
September 30 | of Period | (Loss)(a)(b) | Investments | Operations | Investments | Distributions | Fees(a) | Period | Return† | (in 000’s) | (Loss)(b) | Reductions(c) | Rate†† | |||||||||||||||||||||||||||||||||||||||
Class AAA | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | $ | 28.20 | $ | (0.02 | ) | $ | (0.92 | ) | $ | (0.94 | ) | $ | (1.45 | ) | $ | (1.45 | ) | $ | 0.00 | (d) | $ | 25.81 | (1.70 | )% | $ | 1,167,114 | (0.09 | )% | 1.48 | % | 25 | % | ||||||||||||||||||||
2008 | 34.37 | (0.00 | )(d) | (4.62 | ) | (4.62 | ) | (1.55 | ) | (1.55 | ) | 0.00 | (d) | 28.20 | (13.98 | ) | 995,613 | (0.01 | ) | 1.43 | 26 | |||||||||||||||||||||||||||||||
2007 | 30.41 | (0.01 | ) | 6.42 | 6.41 | (2.45 | ) | (2.45 | ) | 0.00 | (d) | 34.37 | 21.95 | 1,002,577 | (0.04 | ) | 1.42 | 15 | ||||||||||||||||||||||||||||||||||
2006 | 29.97 | (0.03 | ) | 2.53 | 2.50 | (2.06 | ) | (2.06 | ) | 0.00 | (d) | 30.41 | 8.88 | 727,521 | (0.09 | ) | 1.44 | 6 | ||||||||||||||||||||||||||||||||||
2005 | 25.88 | (0.01 | ) | 5.25 | 5.24 | (1.15 | ) | (1.15 | ) | 0.00 | (d) | 29.97 | 20.58 | 732,965 | (0.03 | ) | 1.44 | 6 | ||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | $ | 28.18 | $ | (0.03 | ) | $ | (0.89 | ) | $ | (0.92 | ) | $ | (1.45 | ) | $ | (1.45 | ) | $ | 0.00 | (d) | $ | 25.81 | (1.63 | )% | $ | 62,548 | (0.12 | )% | 1.48 | % | 25 | % | ||||||||||||||||||||
2008 | 34.37 | (0.01 | ) | (4.63 | ) | (4.64 | ) | (1.55 | ) | (1.55 | ) | 0.00 | (d) | 28.18 | (14.04 | ) | 26,604 | (0.02 | ) | 1.43 | 26 | |||||||||||||||||||||||||||||||
2007 | 30.41 | 0.06 | 6.35 | 6.41 | (2.45 | ) | (2.45 | ) | 0.00 | (d) | 34.37 | 21.95 | 15,485 | 0.19 | 1.42 | 15 | ||||||||||||||||||||||||||||||||||||
2006 | 29.98 | (0.02 | ) | 2.51 | 2.49 | (2.06 | ) | (2.06 | ) | 0.00 | (d) | 30.41 | 8.84 | 2,199 | (0.08 | ) | 1.44 | 6 | ||||||||||||||||||||||||||||||||||
2005 | 25.89 | (0.01 | ) | 5.25 | 5.24 | (1.15 | ) | (1.15 | ) | 0.00 | (d) | 29.98 | 20.57 | 1,515 | (0.03 | ) | 1.48 | 6 | ||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | $ | 27.10 | $ | (0.17 | ) | $ | (0.94 | ) | $ | (1.11 | ) | $ | (1.45 | ) | $ | (1.45 | ) | $ | 0.00 | (d) | $ | 24.54 | (2.43 | )% | $ | 56 | (0.83 | )% | 2.23 | % | 25 | % | ||||||||||||||||||||
2008 | 33.32 | (0.23 | ) | (4.44 | ) | (4.67 | ) | (1.55 | ) | (1.55 | ) | 0.00 | (d) | 27.10 | (14.60 | ) | 61 | (0.77 | ) | 2.18 | 26 | |||||||||||||||||||||||||||||||
2007 | 29.77 | (0.26 | ) | 6.26 | 6.00 | (2.45 | ) | (2.45 | ) | 0.00 | (d) | 33.32 | 20.99 | 126 | (0.81 | ) | 2.17 | 15 | ||||||||||||||||||||||||||||||||||
2006 | 29.58 | (0.25 | ) | 2.50 | 2.25 | (2.06 | ) | (2.06 | ) | 0.00 | (d) | 29.77 | 8.11 | 113 | (0.85 | ) | 2.19 | 6 | ||||||||||||||||||||||||||||||||||
2005 | 25.74 | (0.22 | ) | 5.21 | 4.99 | (1.15 | ) | (1.15 | ) | 0.00 | (d) | 29.58 | 19.69 | 138 | (0.79 | ) | 2.20 | 6 | ||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | $ | 27.09 | $ | (0.18 | ) | $ | (0.92 | ) | $ | (1.10 | ) | $ | (1.45 | ) | $ | (1.45 | ) | $ | 0.00 | (d) | $ | 24.54 | (2.40 | )% | $ | 42,974 | (0.85 | )% | 2.23 | % | 25 | % | ||||||||||||||||||||
2008 | 33.32 | (0.22 | ) | (4.46 | ) | (4.68 | ) | (1.55 | ) | (1.55 | ) | 0.00 | (d) | 27.09 | (14.63 | ) | 23,062 | (0.75 | ) | 2.18 | 26 | |||||||||||||||||||||||||||||||
2007 | 29.76 | (0.22 | ) | 6.23 | 6.01 | (2.45 | ) | (2.45 | ) | 0.00 | (d) | 33.32 | 21.03 | 9,735 | (0.69 | ) | 2.17 | 15 | ||||||||||||||||||||||||||||||||||
2006 | 29.58 | (0.24 | ) | 2.48 | 2.24 | (2.06 | ) | (2.06 | ) | 0.00 | (d) | 29.76 | 8.08 | 2,650 | (0.83 | ) | 2.19 | 6 | ||||||||||||||||||||||||||||||||||
2005 | 25.74 | (0.23 | ) | 5.22 | 4.99 | (1.15 | ) | (1.15 | ) | 0.00 | (d) | 29.58 | 19.69 | 1,499 | (0.80 | ) | 2.23 | 6 | ||||||||||||||||||||||||||||||||||
Class I | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | $ | 28.25 | $ | 0.02 | $ | (0.89 | ) | $ | (0.87 | ) | $ | (1.45 | ) | $ | (1.45 | ) | $ | 0.00 | (d) | $ | 25.93 | (1.43 | )% | $ | 99,413 | 0.11 | % | 1.23 | % | 25 | % | |||||||||||||||||||||
2008(e) | 30.06 | 0.05 | (1.86 | ) | (1.81 | ) | — | — | 0.00 | (d) | 28.25 | (6.02 | ) | 3,578 | 0.22 | (f) | 1.18 | (f) | 26 |
† | 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 distributions and does not reflect applicable sales charges. Total return for a period of less than one year is not annualized. | |
†† | Effective in 2008, a change in accounting policy was adopted with regard to the calculation of the portfolio turnover rate to include cash proceeds due to mergers. Had this policy been adopted retroactively, the portfolio turnover rate for the year ended September 30, 2007 would have been 21%. The portfolio turnover rate for the years ended September 2006 and 2005 would have been as shown. | |
(a) | Per share amounts have been calculated using the average shares outstanding method. | |
(b) | Due to capital share activity throughout the period, net investment income per share and the ratio to average net assets are not necessarily correlated among the different classes of shares. | |
(c) | Before reduction of custodian fee credits and advisory fee reduction on unsupervised assets for the year ended September 30, 2009. | |
(d) | Amount represents less than $0.005 per share. | |
(e) | From the commencement of offering Class I Shares on January 11, 2008 through September 30, 2008. | |
(f) | Annualized. |
See accompanying notes to financial statements.
15
The Gabelli Small Cap Growth Fund
Notes to Financial Statements
Notes to Financial Statements
1. Organization. The Gabelli Small Cap Growth Fund (the “Fund”) is a series of Gabelli Equity Series Funds, Inc. (the “Corporation”), which 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 three 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 United States (“U.S.”) 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 or traded in the U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a market’s official closing price 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. If no bid or asked prices are quoted on such day, the security is valued at the most recently available price or, if the Board of Directors (the “Board”) so determines, by such other method as the Board shall determine in good faith to reflect its fair market value. 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”).
Portfolio securities primarily traded on a foreign market are generally valued at the preceding closing values of such securities on the relevant market, but may be fair valued pursuant to procedures established by the Board if market conditions change significantly after the close of the foreign market but prior to the close of business on the day the securities are being valued. Debt instruments with remaining maturities of sixty days or less that are not credit impaired are valued at amortized cost, unless the Board determines such amount does not reflect the securities’ fair value, in which case these securities will be fair valued as determined by the Board. Debt instruments having a maturity greater than sixty days for which market quotations are readily available are valued at the average of the latest bid and asked prices. If there were no asked prices quoted on such day, the security is valued using the closing bid price. Futures contracts are valued at the closing settlement price of the exchange or board of trade on which the applicable contract is traded.
Securities and assets for which market quotations are not readily available are fair valued as determined by the Board. Fair valuation methodologies and procedures may include, but are not limited to: analysis and review of available financial and non-financial information about the company; comparisons with the valuation and changes in valuation of similar securities, including a comparison of foreign securities with the equivalent U.S. dollar value ADR securities at the close of the U.S. exchange; and evaluation of any other information that could be indicative of the value of the security.
16
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
The inputs and valuation techniques used to measure fair value of the Fund’s investments are summarized into three levels as described in the hierarchy below:
• | Level 1 – quoted prices in active markets for identical securities; | ||
• | Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.); and | ||
• | Level 3 – significant unobservable inputs (including the Fund’s determinations as to the fair value of investments). |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of the Fund’s investments by inputs used to value the Fund’s investments as of September 30, 2009 is as follows:
Valuation Inputs | ||||||||||||||||
Level 1 | Level 2 Other Significant | Level 3 Significant | Total Market Value | |||||||||||||
Quoted Prices | Observable Inputs | Unobservable Inputs | at 9/30/09 | |||||||||||||
INVESTMENTS IN SECURITIES: | ||||||||||||||||
ASSETS (Market Value): | ||||||||||||||||
Common Stocks | ||||||||||||||||
Broadcasting | $ | 6,295,844 | — | $ | 3 | $ | 6,295,847 | |||||||||
Cable | 21,099,144 | — | 0 | 21,099,144 | ||||||||||||
Computer Software and Services | 25,539,305 | — | 24,000 | 25,563,305 | ||||||||||||
Entertainment | 17,700,328 | — | 203,984 | 17,904,312 | ||||||||||||
Equipment and Supplies | 130,034,403 | — | 0 | 130,034,403 | ||||||||||||
Financial Services | 67,064,602 | — | 15 | 67,064,617 | ||||||||||||
Food and Beverage | 86,270,539 | — | 0 | 86,270,539 | ||||||||||||
Telecommunications | 22,208,160 | — | 53 | 22,208,213 | ||||||||||||
Wireless Communications | 19,910,000 | — | 0 | 19,910,000 | ||||||||||||
Other Industries (a) | 735,404,633 | — | — | 735,404,633 | ||||||||||||
Total Common Stocks | 1,131,526,958 | — | 228,055 | 1,131,755,013 | ||||||||||||
Preferred Stocks | ||||||||||||||||
Business Services | — | — | 0 | 0 | ||||||||||||
Other Industries (a) | 603,284 | — | — | 603,284 | ||||||||||||
Total Preferred Stocks | 603,284 | — | 0 | 603,284 | ||||||||||||
Warrants | ||||||||||||||||
Automotive: Parts and Accessories | 1,246 | — | 243 | 1,489 | ||||||||||||
Broadcasting | — | — | 35 | 35 | ||||||||||||
Other Industries (a) | 215,830 | — | — | 215,830 | ||||||||||||
Total Warrants | 217,076 | — | 278 | 217,354 | ||||||||||||
Corporate Bonds | — | $ | 1,185 | — | 1,185 | |||||||||||
U.S. Government Obligations | — | 239,180,310 | — | 239,180,310 | ||||||||||||
TOTAL INVESTMENTS IN SECURITIES | $ | 1,132,347,318 | $ | 239,181,495 | $ | 228,333 | $ | 1,371,757,146 | ||||||||
(a) | Security and industry classifications for these categories are detailed in the Schedule of Investments. |
17
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:
Net change | ||||||||||||||||||||||||||||||||
in unrealized | ||||||||||||||||||||||||||||||||
appreciation/ | ||||||||||||||||||||||||||||||||
depreciation | ||||||||||||||||||||||||||||||||
Change in | during the | |||||||||||||||||||||||||||||||
Balance | Accrued | Realized | unrealized | Net | Transfers in | Balance | period on Level 3 | |||||||||||||||||||||||||
as of | discounts/ | gain/ | appreciation/ | purchases/ | and/or out | as of | investments held | |||||||||||||||||||||||||
9/30/08 | (premiums) | (loss) | depreciation† | (sales) | of Level 3 | 9/30/09 | at 9/30/09† | |||||||||||||||||||||||||
INVESTMENTS IN SECURITIES: | ||||||||||||||||||||||||||||||||
ASSETS (Market Value): | ||||||||||||||||||||||||||||||||
Common Stocks | ||||||||||||||||||||||||||||||||
Broadcasting | $ | 3 | $ | — | $ | — | $ | (17,031 | ) | $ | — | $ | 17,031 | $ | 3 | $ | (17,031 | ) | ||||||||||||||
Cable | 0 | — | — | — | — | — | 0 | — | ||||||||||||||||||||||||
Computer Software and Services | 24,000 | — | — | — | — | — | 24,000 | — | ||||||||||||||||||||||||
Entertainment | 170,239 | — | — | 33,745 | — | — | 203,984 | 33,745 | ||||||||||||||||||||||||
Equipment and Supplies | 0 | — | — | — | — | — | 0 | — | ||||||||||||||||||||||||
Financial Services | 15 | — | — | — | — | — | 15 | — | ||||||||||||||||||||||||
Food and Beverage | 0 | — | — | (5 | ) | — | 5 | 0 | (5 | ) | ||||||||||||||||||||||
Real Estate | 390 | — | (53,129 | ) | 53,139 | (400 | ) | — | — | — | ||||||||||||||||||||||
Telecommunications | 53 | — | — | — | — | — | 53 | — | ||||||||||||||||||||||||
Wireless Communications | 0 | — | — | — | — | — | 0 | — | ||||||||||||||||||||||||
Total Common Stocks | 194,700 | — | (53,129 | ) | 69,848 | (400 | ) | 17,036 | 228,055 | 16,709 | ||||||||||||||||||||||
Preferred Stocks | ||||||||||||||||||||||||||||||||
Business Services | 0 | — | — | — | — | — | 0 | — | ||||||||||||||||||||||||
Rights | ||||||||||||||||||||||||||||||||
Automotive: Parts and Accessories | 0 | — | 0 | — | 0 | — | — | — | ||||||||||||||||||||||||
Warrants | ||||||||||||||||||||||||||||||||
Automotive: Parts and Accessories | — | — | — | (1,334 | ) | — | 1,577 | 243 | (1,334 | ) | ||||||||||||||||||||||
Broadcasting | — | — | — | (1,492 | ) | — | 1,527 | 35 | (1,492 | ) | ||||||||||||||||||||||
Health Care | 0 | — | 0 | 24,809 | (24,809 | ) | — | — | — | |||||||||||||||||||||||
Total Warrants | 0 | — | 0 | 21,983 | (24,809 | ) | 3,104 | 278 | (2,826 | ) | ||||||||||||||||||||||
Corporate Bonds | 0 | — | 0 | 0 | 0 | 0 | — | |||||||||||||||||||||||||
TOTAL INVESTMENTS IN SECURITIES | $ | 194,700 | $ | — | $ | (53,129 | ) | $ | 91,831 | $ | (25,209 | ) | $ | 20,140 | $ | 228,333 | $ | 13,883 | ||||||||||||||
† | Net change in unrealized appreciation/depreciation on investments is included in the related amounts in the Statement of Operations. |
Derivative Financial Instruments.
The Fund may engage in various portfolio investment strategies by investing in a number of derivative financial instruments for the purposes of increasing the income of the Fund, hedging against changes in the value of its portfolio securities and in the value of securities it intends to purchase, or hedging against a specific transaction with respect to either the currency in which the transaction is denominated or another currency. Investing in certain derivative financial instruments, including participation in the options, futures, or swap markets, entails certain execution, liquidity, hedging, tax, and securities, interest, credit, or currency market risks. Losses may arise if the Adviser’s prediction of movements in the direction of the securities, foreign currency, and interest rate markets is inaccurate. Losses may also arise if the counterparty does not perform its duties under a contract, or that, in the event of default, the Fund may be delayed in or prevented from obtaining payments or other contractual remedies owed to it under derivative contracts. The creditworthiness of the counterparties is closely monitored in order to minimize these risks. Participation in derivative transactions involves investment risks, transaction costs, and potential losses to which the Fund would not be subject absent the use of these
18
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
strategies. The consequences of these risks, transaction costs, and losses may have a negative impact on the Fund’s ability to pay distributions.
Swap Agreements. The Fund may enter into equity and contract for difference swap transactions for the purpose of increasing the income of the Fund. The use of swaps is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio security transactions. In a swap, a set of future cash flows is exchanged between two counterparties. One of these cash flow streams will typically be based on a reference interest rate combined with the performance of a notional value of shares of a stock. The other will be based on the performance of the shares of a stock. Depending on the general state of short-term interest rates and the returns on the Fund’s portfolio securities at the time a swap transaction reaches its scheduled termination date, there is a risk that the Fund will not be able to obtain a replacement transaction or that the terms of the replacement will not be as favorable as on the expiring transaction.
Unrealized gains related to swaps are reported as an asset and unrealized losses are reported as a liability in the Statement of Assets and Liabilities. The change in value of swaps, including the accrual of periodic amounts of interest to be paid or received on swaps, is reported as unrealized gain or loss in the Statement of Operations. A realized gain or loss is recorded upon payment or receipt of a periodic payment or termination of swap agreements. At September 30, 2009, there were no open swap agreements.
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 fluctuations in the value of the contract, which are included in unrealized appreciation/depreciation on futures contracts. The Fund recognizes a realized gain or loss when the contract is closed.
There are several risks in connection with the use of futures contracts as a hedging instrument. 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. At September 30, 2009 there were no open futures contracts.
Forward Foreign Exchange Contracts. The Fund may engage in forward foreign exchange contracts for the purpose of 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 foreign currency translations. 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
19
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. At September 30, 2009, there were no open forward foreign exchange contracts.
Repurchase Agreements. The Fund may enter into repurchase agreements with primary government securities dealers recognized by the Federal Reserve Board, with member banks of the Federal Reserve System, or with other brokers or dealers that meet credit guidelines established by the Adviser and reviewed by the Board. 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. It is the policy of the Fund to always receive and maintain securities as collateral whose market value, including accrued interest, is at least equal to 102% of the dollar amount invested by the Fund in each agreement. The Fund will make payment for such securities only upon physical delivery or upon evidence of book entry transfer of the collateral to the account of the custodian. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to maintain the adequacy of the collateral. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. At September 30, 2009, there were no open repurchase agreements.
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Foreign currencies, investments, and other assets and liabilities are translated into U.S. dollars at the current exchange rates. 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 that 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 translations. 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.
Foreign Securities. The Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation of currencies, the ability to repatriate funds, less complete financial information about companies, and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. issuers.
Foreign Taxes. The Fund may be subject to foreign taxes on income, gains on investments, or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
Restricted and Illiquid Securities. The Fund may invest up to 15% of its net assets in securities for which the markets are illiquid. Illiquid securities include securities the disposition of which is subject to substantial legal
20
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
or contractual restrictions. The sale of illiquid securities often requires more time and results in higher brokerage charges or dealer discounts and other selling expenses than does the sale of securities eligible for trading on national securities exchanges or in the over-the-counter markets. Restricted securities may sell at a price lower than similar securities that are not subject to restrictions on resale. Securities freely saleable among qualified institutional investors under special rules adopted by the SEC may be treated as liquid if they satisfy liquidity standards established by the Board. The continued liquidity of such securities is not as well assured as that of publicly traded securities, and accordingly the Board will monitor their liquidity.
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 on the accrual basis. Premiums and discounts on debt securities are amortized using the effective yield to maturity method. Dividend income is recorded on the ex-dividend date except for certain dividends which are recorded as soon as the Fund is informed of the dividend.
Determination of Net Asset Value and Calculation of Expenses. Certain administrative expenses are common to, and allocated among, various affiliated funds. Such allocations are made on the basis of each fund’s average net assets or other criteria directly affecting the expenses as determined by the Adviser pursuant to procedures established by the Board.
In calculating the NAV per share of each class, investment income, realized and unrealized gains and losses, redemption fees, and expenses other than class specific expenses are allocated daily to each class of shares based upon the proportion of net assets of each class at the beginning of each day. Distribution expenses are borne solely by the class incurring the expense.
Custodian Fee Credits and Interest Expense. When cash balances are maintained in the custody account, the Fund receives credits which are used to offset custodian fees. The gross expenses paid under the custody arrangement are included in custodian fees in the Statement of Operations with the corresponding expense offset, if any, shown as “custodian fee credits.” When cash balances are overdrawn, the Fund is charged an overdraft fee equal to 2.00% above the federal funds rate on outstanding balances. This amount, if any, would be included in “interest expense” in the Statement of Operations.
Distributions to Shareholders. Distributions to shareholders are recorded on the ex-dividend date. Distributions to shareholders are based on income and capital gains as determined in accordance with federal income tax regulations, which may differ from income and capital gains as determined under U.S. generally accepted accounting principles. These differences are primarily due to differing treatments of income and gains on various investment securities and foreign currency transactions held by the Fund, timing differences, net operating losses, and differing characterizations of distributions made by the Fund. Distributions from net investment income include net realized gains on foreign currency transactions. These book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent, adjustments are made to the appropriate capital accounts in the period when the differences arise. These reclassifications have no impact on the NAV of the Fund. For the year ended September 30, 2009, reclassifications were made to decrease accumulated net investment loss by $967,156 and increase accumulated net realized loss on investments, future contracts, and foreign currency transactions by $20,640, with an off-setting adjustment to additional paid-in capital.
21
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
The tax character of distributions paid during the years ended September 30, 2009 and 2008 was as follows:
Year Ended | Year Ended | |||||||
September 30, 2009 | September 30, 2008 | |||||||
Distributions paid from: | ||||||||
Ordinary income (inclusive of short-term capital gains) | $ | 3,735,472 | $ | 2,004,512 | ||||
Net long-term capital gains | 50,617,863 | 45,673,104 | ||||||
Total distributions paid | $ | 54,353,335 | $ | 47,677,616 | ||||
Provision for Income Taxes. The Fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). It is the policy of the Fund to comply with the requirements of the Code applicable to regulated investment companies and to distribute substantially all of its net investment company taxable income and net capital gains. Therefore, no provision for federal income taxes is required.
As of September 30, 2009, the components of accumulated earnings/losses on a tax basis were as follows:
Accumulated capital loss carryforwards | $ | (1,435,829 | ) | |
Net unrealized appreciation on investments | 240,516,727 | |||
Post-October capital loss deferral | (32,957,944 | ) | ||
Total | $ | 206,122,954 | ||
At September 30, 2009, the Fund had net capital loss carryforwards for federal income tax purposes of $1,435,829, which is available to reduce future required distributions of net capital gains to shareholders through 2017.
Under the current tax law, capital losses related to securities and foreign currency realized after October 31 and prior to the Fund’s fiscal year end may be treated as occurring on the first day of the following year. For the year ended September 30, 2009, the Fund deferred capital losses of $32,957,944.
At September 30, 2009, the difference between book and tax basis unrealized appreciation is primarily due to deferral of losses on wash sales for tax purposes and basis adjustments for investments in partnerships.
The following summarizes the tax cost of investments and the related unrealized appreciation/depreciation at September 30, 2009:
Gross | Gross | |||||||||||||||
Unrealized | Unrealized | Net Unrealized | ||||||||||||||
Cost | Appreciation | Depreciation | Appreciation | |||||||||||||
Investments | $ | 1,131,239,409 | $ | 328,197,623 | $ | (87,679,886 | ) | $ | 240,517,737 |
Management has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax years (current and prior three tax years) and has concluded that no provision for federal income tax is required in the Fund’s financial statements. The Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
22
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
3. Investment Advisory Agreement and Other Transactions. The Fund has 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 its 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 Corporation who are affiliated persons of the Adviser.
The Corporation pays each Director who is not considered an affiliated person an annual retainer of $9,000 plus $1,000 for each Board meeting attended. Each Director is reimbursed by the Corporation for any out of pocket expenses incurred in attending meetings. All Board committee members receive $500 per meeting attended and the Chairman of the Audit Committee and the Lead Director each receive an annual fee of $1,000. A Director may receive a single meeting fee, allocated among the participating funds, for participation in certain meetings held on behalf of multiple funds. Directors who are directors or employees of the Adviser or an affiliated company receive no compensation or expense reimbursement from the Corporation.
4. Distribution Plan. The Fund’s Board has adopted a distribution plan (the “Plan”) for each class of shares, except for Class I Shares, pursuant to Rule 12b-1 under the 1940 Act. Gabelli & Company, Inc. (“Gabelli & Company”), an affiliate of the Adviser, serves as distributor of the Fund. Under the Class AAA, Class A, Class B, and Class C Share Plans, payments are authorized to Gabelli & Company at annual rates of 0.25%, 0.25%, 1.00%, and 1.00%, respectively, of the average daily net assets of those classes, the annual limitations under each Plan. Such payments are accrued daily and paid monthly.
5. Portfolio Securities. Purchases and sales of securities for the year ended September 30, 2009, other than short-term securities and U.S. Government obligations, aggregated $330,830,034 and $169,998,309, respectively.
Sales of U.S. Government obligations for the year ended September 30, 2009, other than short-term obligations, aggregated $42,608,883.
6. Transactions with Affiliates. During the year ended September 30, 2009, the Fund paid brokerage commissions on security trades of $634,250 to Gabelli & Company. Additionally, Gabelli & Company informed the Fund that it retained $61,598 from investors representing commissions (sales charges and underwriting fees) on sales and redemptions of Fund shares.
The cost of calculating the Fund’s NAV per share is a Fund expense pursuant to the Advisory Agreement between the Fund and the Adviser. During the year ended September 30, 2009, the Fund paid or accrued $45,000 to the Adviser in connection with the cost of computing the Fund’s NAV.
7. Line of Credit. The Fund participates in an unsecured line of credit of up to $75,000,000 under which it may borrow up to 10% of its net assets from the custodian for temporary borrowing purposes. Borrowings under this arrangement bear interest at the higher of the sum of the overnight LIBOR plus 100 basis points or the sum of the federal funds rate plus 100 basis points at the time of borrowing. This amount, if any, would be included in “interest expense” in the Statement of Operations. During the year ended September 30, 2009, there were no borrowings under the line of credit.
23
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
8. Capital Stock. The Fund offers five classes of shares – Class AAA Shares, Class A Shares, Class B Shares, Class C Shares, and Class I Shares. Class AAA Shares are offered without a sales charge only to investors who acquire them directly from Gabelli & Company, or through selected broker/dealers, or the transfer agent. Class I Shares are offered to foundations, endowments, institutions, and employee benefit plans without a sales charge. Class A Shares are subject to a maximum front-end sales charge of 5.75%. Class B Shares are subject to a contingent deferred sales charge (“CDSC”) upon redemption within six years of purchase and automatically convert to Class A Shares approximately eight years after the original purchase. The applicable CDSC is equal to a declining percentage of the lesser of the NAV per share at the date of the original purchase or at the date of redemption, based on the length of time held. Class C Shares are subject to a 1.00% CDSC for one year after purchase. Class B Shares are available only through exchange of Class B Shares of other funds distributed by Gabelli & Company. Class I Shares were first issued on January 11, 2008.
The Fund imposes a redemption fee of 2.00% on all classes of shares that are redeemed or exchanged on or before the seventh day after the date of a purchase. The redemption fee is deducted from the proceeds otherwise payable to the redeeming shareholders and is retained by the Fund. The redemption fees retained by the Fund during the years ended September 30, 2009 and 2008, amounted to $11,022 and $6,835, respectively.
The redemption fee does not apply to redemptions of shares where (i) the shares were purchased through automatic reinvestment of distributions, (ii) the redemption was initiated by the Fund, (iii) the shares were purchased through programs that collect the redemption fee at the program level and remit them to the Fund, or (iv) the shares were purchased through programs that the Adviser determines to have appropriate anti-short-term trading policies in place or as to which the Adviser has received assurances that look-through redemption fee procedures or effective anti-short-term trading policies and procedures are in place.
24
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
Transactions in shares of capital stock were as follows:
Year Ended | Year Ended | |||||||||||||||
September 30, 2009 | September 30, 2008 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class AAA | Class AAA | |||||||||||||||
Shares sold | 19,334,347 | $ | 418,412,502 | 11,404,075 | $ | 352,403,697 | ||||||||||
Shares issued upon reinvestment of distributions | 2,463,528 | 48,435,071 | 1,383,508 | 44,189,239 | ||||||||||||
Shares redeemed | (11,881,439 | ) | (246,751,509 | ) | (6,655,573 | ) | (204,552,902 | ) | ||||||||
Net increase | 9,916,436 | $ | 220,096,064 | 6,132,010 | $ | 192,040,034 | ||||||||||
Class A | Class A | |||||||||||||||
Shares sold | 1,836,925 | $ | 40,930,042 | 653,236 | $ | 20,020,323 | ||||||||||
Shares issued upon reinvestment of distributions | 65,874 | 1,300,725 | 23,669 | 756,001 | ||||||||||||
Shares redeemed | (423,637 | ) | (8,956,219 | ) | (183,365 | ) | (5,459,615 | ) | ||||||||
Net increase | 1,479,162 | $ | 33,274,548 | 493,540 | $ | 15,316,709 | ||||||||||
Class B | Class B | |||||||||||||||
Shares issued upon reinvestment of distributions | 173 | $ | 3,267 | 189 | $ | 5,832 | ||||||||||
Shares redeemed | (112 | ) | (2,601 | ) | (1,716 | ) | (49,336 | ) | ||||||||
Net increase/(decrease) | 61 | $ | 666 | (1,527 | ) | $ | (43,504 | ) | ||||||||
Class C | Class C | |||||||||||||||
Shares sold | 1,057,172 | $ | 22,091,220 | 616,058 | $ | 18,243,833 | ||||||||||
Shares issued upon reinvestment of distributions | 67,280 | 1,267,666 | 17,152 | 529,496 | ||||||||||||
Shares redeemed | (224,541 | ) | (4,466,159 | ) | (74,196 | ) | (2,149,188 | ) | ||||||||
Net increase | 899,911 | $ | 18,892,727 | 559,014 | $ | 16,624,141 | ||||||||||
Class I | Class I* | |||||||||||||||
Shares sold | 4,010,805 | $ | 83,835,007 | 142,672 | $ | 4,323,018 | ||||||||||
Shares issued upon reinvestment of distributions | 11,437 | 239,324 | — | — | ||||||||||||
Shares redeemed | (314,594 | ) | (6,638,095 | ) | (16,013 | ) | (469,363 | ) | ||||||||
Net increase | 3,707,648 | $ | 77,436,236 | 126,659 | $ | 3,853,655 | ||||||||||
* | From the commencement of offering Class I Shares on January 11, 2008. |
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 year ended September 30, 2009 is set forth below.
Net Change | Percent | |||||||||||||||||||||||||||||||
in Unrealized | Value at | Owned | ||||||||||||||||||||||||||||||
Beginning | Shares/Par | Shares/Par | Ending | Appreciation/ | Realized | September 30, | of Shares | |||||||||||||||||||||||||
Shares/Par | Purchased | Sold | Shares/Par | Depreciation | Loss | 2009 | Outstanding | |||||||||||||||||||||||||
Earl Scheib Inc. | 240,900 | — | (240,900 | ) | — | $ | (49,385 | ) | $ | (993,436 | ) | — | 0.00 | % | ||||||||||||||||||
Trans-Lux Corp. | 165,000 | 22,000 | (15,000 | ) | 172,000 | (245,742 | ) | (111,809 | ) | $ | 217,580 | 8.51 |
25
The Gabelli Small Cap Growth Fund
Notes to Financials Statements (Continued)
Notes to Financials Statements (Continued)
10. Indemnifications. The Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
11. Other Matters. On April 24, 2008, the Adviser entered into an administrative settlement with the SEC to resolve the SEC’s inquiry regarding prior frequent trading activity in shares of the GAMCO Global Growth Fund (the “Global Growth Fund”) by one investor who was banned from the Global Growth Fund in August 2002. In the settlement, the SEC found that the Adviser had violated Section 206(2) of the Investment Advisers Act, Section 17(d) of the 1940 Act, and Rule 17d-1 thereunder, and had aided and abetted and caused violations of Section 12(d)(1)(B)(i) of the 1940 Act. Under the terms of the settlement, the Adviser, while neither admitting nor denying the SEC’s findings and allegations, agreed, among other things, to pay the previously reserved total of $16 million (including a $5 million penalty), of which at least $11 million will be distributed to shareholders of the Global Growth Fund in accordance with a plan developed by an independent distribution consultant and approved by the independent directors of the Global Growth Fund and the staff of the SEC, and to cease and desist from future violations of the above referenced federal securities laws. The settlement will not have a material adverse impact on the Adviser or its ability to fulfill its obligations under the Advisory Agreement. On the same day, the SEC filed a civil action against the Executive Vice President and Chief Operating Officer of the Adviser, alleging violations of certain federal securities laws arising from the same matter. The officer is also an officer of the Global Growth Fund and other funds in the Gabelli/GAMCO fund complex including the Fund. The officer denies the allegations and is continuing in his positions with the Adviser and the funds. The Adviser currently expects that any resolution of the action against the officer will not have a material adverse impact on the Fund or the Adviser or its ability to fulfill its obligations under the Advisory Agreement.
12. Subsequent Events. Management has evaluated the impact of all subsequent events on the Fund through November 24, 2009, the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements.
26
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
The Gabelli Small Cap Growth Fund
The Gabelli Small Cap Growth Fund
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of The Gabelli Small Cap Growth Fund (the “Fund”), a series of Gabelli Equity Series Funds, Inc., as of September 30, 2009, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2009, by correspondence with the Fund’s custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Gabelli Small Cap Growth Fund, a series of Gabelli Equity Series Funds, Inc., at September 30, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
![(ERNST & YOUNG LLP)](https://capedge.com/proxy/N-CSR/0000950123-09-068072/p16279p1627902.gif)
Philadelphia, Pennsylvania
November 24, 2009
November 24, 2009
27
The Gabelli Small Cap Growth Fund
Additional Fund Information (Unaudited)
Additional Fund Information (Unaudited)
The business and affairs of the Fund are managed under the direction of the Corporation’s Board of Directors. Information pertaining to the Directors and officers of the Corporation is set forth below. The Corporation’s Statement of Additional Information includes additional information about the Corporation’s Directors and is available, without charge, upon request, by calling 800-GABELLI (800-422-3554) or by writing to The Gabelli Small Cap Growth Fund at One Corporate Center, Rye, NY 10580-1422.
Name, Position(s) | Term of Office | Number of Funds | ||||||||
Address1 | and Length of | in Fund Complex | Principal Occupation(s) | Other Directorships | ||||||
and Age | Time Served2 | Overseen by Director | During Past Five Years | Held by Director3 | ||||||
INTERESTED DIRECTORS4: | ||||||||||
Mario J. Gabelli Director and Chief Investment Officer Age: 67 | Since 1991 | 26 | Chairman and Chief Executive Officer of GAMCO Investors, Inc. and Chief Investment Officer-Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management Inc.; Director/Trustee or Chief Investment Officer of other registered investment companies in the Gabelli/GAMCO Funds complex; Chairman and Chief Executive Officer of GGCP, Inc. | Director of Morgan Group Holdings, Inc. (holding company); Chairman of the Board of LICT Corp. (multimedia and communication services company); Director of CIBL, Inc. (broadcasting and wireless communications) | ||||||
John D. Gabelli Director Age: 65 | Since 1991 | 10 | Senior Vice President of Gabelli & Company, Inc. | — | ||||||
INDEPENDENT DIRECTORS5: | ||||||||||
Anthony J. Colavita Director Age: 73 | Since 1991 | 36 | President of the law firm of Anthony J. Colavita, P.C. | — | ||||||
Vincent D. Enright Director Age: 65 | Since 1991 | 16 | Former Senior Vice President and Chief Financial Officer of KeySpan Corporation (public utility) (1994-1998) | Director of Echo Therapeutics, Inc. (therapeutics and diagnostics) | ||||||
Robert J. Morrissey Director Age: 70 | Since 1991 | 6 | Partner in the law firm of Morrissey, Hawkins & Lynch | — | ||||||
Anthony R. Pustorino Director Age: 84 | Since 1991 | 13 | Certified Public Accountant; Professor Emeritus, Pace University | Director of The LGL Group, Inc. (diversified manufacturing) | ||||||
Anthonie C. van Ekris Director Age: 75 | Since 1991 | 20 | Chairman of BALMAC International, Inc. (commodities and futures trading) | — | ||||||
Salvatore J. Zizza Director Age: 63 | Since 2001 | 28 | Chairman of Zizza & Company, Ltd. (consulting) | Director of Hollis-Eden Pharmaceuticals (biotechnology); Director of Trans-Lux Corporation (business services) |
28
The Gabelli Small Cap Growth Fund
Additional Fund Information (Continued) (Unaudited)
Additional Fund Information (Continued) (Unaudited)
Name, Position(s) | Term of Office | |||
Address1 | and Length of | Principal Occupation(s) | ||
and Age | Time Served2 | During Past Five Years | ||
OFFICERS: | ||||
Bruce N. Alpert President and Secretary Age: 57 | Since 1991 | Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC since 1988 and an officer of all of the registered investment companies in the Gabelli/GAMCO Funds complex; President of Teton Advisors, Inc. 1998 through 2008; Chairman of Teton Advisors, Inc. since 2008; Senior Vice President of GAMCO Investors, Inc. since 2008 | ||
Agnes Mullady Treasurer Age: 51 | Since 2006 | Senior Vice President of GAMCO Investors, Inc. since 2009, Vice President of Gabelli Funds, LLC since 2007; Officer of all of the registered investment companies in the Gabelli/GAMCO Funds complex; Senior Vice President of U.S. Trust Company, N.A. and Treasurer and Chief Financial Officer of Excelsior Funds from 2004 through 2005; Chief Financial Officer of AMIC Distribution Partners from 2002 through 2004 | ||
Peter D. Goldstein Chief Compliance Officer Age: 56 | Since 2004 | Director of Regulatory Affairs at GAMCO Investors, Inc. since 2004; Chief Compliance Officer of all of the registered investment companies in the Gabelli/GAMCO Funds complex |
1 | Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise noted. | |
2 | Each Director will hold office for an indefinite term until the earliest of (i) the next meeting of shareholders, if any, called for the purpose of considering the election or re-election of such Director and until the election and qualification of his or her successor, if any, elected at such meeting, or (ii) the date a Director resigns or retires, or a Director is removed by the Board of Directors or shareholders, in accordance with the Corporation’s By-Laws and Articles of Incorporation. Each officer will hold office for an indefinite term until the date he or she resigns or retires or until his or her successor is elected and qualified. | |
3 | This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934 (i.e. public companies) or other investment companies registered under the 1940 Act. | |
4 | “Interested person” of the Fund as defined in the Investment Company Act of 1940. Messrs. Gabelli are each considered an “interested person” because of their affiliation with Gabelli Funds, LLC which acts as the Fund’s investment adviser. Mario J. Gabelli and John D. Gabelli are brothers. | |
5 | Directors who are not interested persons are considered “Independent” Directors. |
2009 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the year ended September 30, 2009, the Fund paid to shareholders ordinary income distributions (comprised of short-term capital gains) totaling $0.07 per share for all classes, and long-term capital gains totaling $50,617,863 on November 26, 2008 and September 28, 2009. The distributions of long-term capital gains have been designated as a capital gain dividend by the Fund’s Board of Directors. For the year ended September 30, 2009, 100% of the ordinary income distribution qualifies for the dividends received deduction available to corporations. The Fund designates 100% of the ordinary income distribution as qualified dividend income pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Fund designates 100% of the ordinary income distribution as qualified short-term gain, pursuant to the American Jobs Creation Act of 2004.
All designations are based on financial information available as of the date of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code and the regulations thereunder.
29
Gabelli/GAMCO Funds and Your Personal Privacy
Who are we?
The Gabelli/GAMCO Funds are investment companies registered with the Securities and Exchange Commission under the Investment Company Act of 1940. We are managed by Gabelli Funds, LLC or Teton Advisors, Inc., which are affiliated with GAMCO Investors, Inc. GAMCO Investors, Inc. is a publicly held company that has subsidiaries that provide investment advisory or brokerage services for a variety of clients. Teton Advisors, Inc. is a publicly held company that provides investment advisory services to the GAMCO Westwood Funds.
What kind of non-public information do we collect about you if you become a shareholder?
If you apply to open an account directly with us, you will be giving us some non-public information about yourself. The non-public information we collect about you is:
• | Information you give us on your application form. This could include your name, address, telephone number, social security number, bank account number, and other information. | |
• | Information about your transactions with us, any transactions with our affiliates, and transactions with the entities we hire to provide services to you. This would include information about the shares that you buy or redeem. If we hire someone else to provide services—like a transfer agent—we will also have information about the transactions that you conduct through them. |
What information do we disclose and to whom do we disclose it?
We do not disclose any non-public personal information about our customers or former customers to anyone other than our affiliates, our service providers who need to know such information, and as otherwise permitted by law. If you want to find out what the law permits, you can read the privacy rules adopted by the Securities and Exchange Commission. They are in volume 17 of the Code of Federal Regulations, Part 248. The Commission often posts information about its regulations on its website, www.sec.gov.
What do we do to protect your personal information?
We restrict access to non-public personal information about you to the people who need to know that information in order to provide services to you or the Fund and to ensure that we are complying with the laws governing the securities business. We maintain physical, electronic, and procedural safeguards to keep your personal information confidential.
GABELLI FAMILY OF FUNDS
VALUE
Gabelli Asset Fund
Seeks to invest primarily in a diversified portfolio of common stocks selling at significant discounts to their private market value. The Fund’s primary objective is growth of capital. (Multiclass)
Portfolio Manager: Mario J. Gabelli, CFA
Gabelli Blue Chip Value Fund
Seeks long term growth of capital through investment primarily in the common stocks of established companies which are temporarily out of favor. The fund’s objective is to identify a catalyst or sequence of events that will return the company to a higher value. (Multiclass)
Portfolio Manager: Barbara Marcin, CFA
GAMCO Westwood Equity Fund
Seeks to invest primarily in the common stock of well seasoned companies that have recently reported positive earnings surprises and are trading below Westwood’s proprietary growth rate estimates. The Fund’s primary objective is capital appreciation. (Multiclass)
Portfolio Manager: Susan M. Byrne
FOCUSED VALUE
Gabelli Value Fund
Seeks to invest in securities of companies believed to be undervalued. The Fund’s primary objective is long-term capital appreciation. (Multiclass)
Portfolio Manager: Mario J. Gabelli, CFA
SMALL CAP VALUE
Gabelli Small Cap Fund
Seeks to invest primarily in common stock of smaller companies (market capitalizations at the time of investment of $2 billion or less) believed to have rapid revenue and earnings growth potential. The Fund’s primary objective is capital appreciation. (Multiclass)
Portfolio Manager: Mario J. Gabelli, CFA
GAMCO Westwood SmallCap Equity Fund
Seeks to invest primarily in smaller capitalization equity securities – market caps of $2.5 billion or less. The Fund’s primary objective is long-term capital appreciation. (Multiclass)
Portfolio Manager: Nicholas F. Galluccio
Gabelli Woodland Small Cap Value Fund
Seeks to invest primarily in the common stocks of smaller companies (market capitalizations generally less than $3.0 billion) believed to be undervalued with shareholder oriented management teams that are employing strategies to grow the company’s value. The Fund’s primary objective is capital appreciation. (Multiclass)
Portfolio Manager: Elizabeth M. Lilly, CFA
GROWTH
GAMCO Growth Fund
Seeks to invest primarily in large cap stocks believed to have favorable, yet undervalued, prospects for earnings growth. The Fund’s primary objective is capital appreciation. (Multiclass)
Portfolio Manager: Howard F. Ward, CFA
GAMCO International Growth Fund
Seeks to invest in the equity securities of foreign issuers with long-term capital appreciation potential. The Fund offers investors global diversification. (Multiclass)
Portfolio Manager: Caesar Bryan
AGGRESSIVE GROWTH
GAMCO Global Growth Fund
Seeks capital appreciation through a disciplined investment program focusing on the globalization and interactivity of the world’s marketplace. The Fund invests in companies at the forefront of accelerated growth. The Fund’s primary objective is capital appreciation. (Multiclass)
Team Managed
MICRO-CAP
GAMCO Westwood Mighty MitesSM Fund
Seeks to invest in micro-cap companies that have market capitalizations of $300 million or less. The Fund’s primary objective is long-term capital appreciation. (Multiclass)
Team Managed
EQUITY INCOME
Gabelli Equity Income Fund
Seeks to invest primarily in equity securities with above average market yields. The Fund pays monthly dividends and seeks a high level of total return with an emphasis on income. (Multiclass)
Portfolio Manager: Mario J. Gabelli, CFA
GAMCO Westwood Balanced Fund
Seeks to invest in a balanced and diversified portfolio of stocks and bonds. The Fund’s primary objective is both capital appreciation and current income. (Multiclass)
Co-Portfolio Managers: Susan M. Byrne
Mark Freeman, CFA
Mark Freeman, CFA
GAMCO Westwood Income Fund
Seeks to provide a high level of current income as well as long-term capital appreciation by investing in income producing equity and fixed income securities. (Multiclass)
Portfolio Manager: Barbara Marcin, CFA
SPECIALTY EQUITY
GAMCO Global Convertible Securities Fund
Seeks to invest principally in bonds and preferred stocks which are convertible into common stock of foreign and domestic companies. The Fund’s primary objective is total return through a combination of current income and capital appreciation. (Multiclass)
Team Managed
GAMCO Global Opportunity Fund
Seeks to invest in common stock of companies which have rapid growth in revenues and earnings and potential for above average capital appreciation or are undervalued. The Fund’s primary objective is capital appreciation. (Multiclass)
Team Managed
Gabelli SRI Green Fund
Seeks to invest in common and preferred stocks meeting guidelines for social responsibility (avoiding defense contractors and manufacturers of alcohol, abortifacients, gaming, and tobacco products) and sustainability (companies engaged in climate change, energy security and independence, natural resource shortages,organic living,and urbanization). The Fund’s primary objective is capital appreciation. (Multiclass)
Co-Portfolio Managers: Christopher C. Desmarais
John M. Segrich, CFA
SECTOR
GAMCO Global Telecommunications Fund
Seeks to invest in telecommunications companies throughout the world – targeting undervalued companies with strong earnings and cash flow dynamics. The Fund’s primary objective is capital appreciation. (Multiclass)
Team Managed
GAMCO Gold Fund
Seeks to invest in a global portfolio of equity securities of gold mining and related companies. The Fund’s objective is long-term capital appreciation. Investment in gold stocks is considered speculative and is affected by a variety of worldwide economic, financial, and political factors. (Multiclass)
Portfolio Manager: Caesar Bryan
Gabelli Utilities Fund
Seeks to provide a high level of total return through a combination of capital appreciation and current income. (Multiclass)
Team Managed
MERGER AND ARBITRAGE
Gabelli ABC Fund
Seeks to invest in securities with attractive opportunities for appreciation or investment income. The Fund’s primary objective is total return in various market conditions without excessive risk of capital loss.
(No-load)
(No-load)
Portfolio Manager: Mario J. Gabelli, CFA
Gabelli Enterprise Mergers and Acquisitions Fund
Seeks to invest in securities believed to be likely acquisition targets within 12–18 months or in arbitrage transactions of publicly announced mergers or other corporate reorganizations. The Fund’s primary objective is capital appreciation. (Multiclass)
Portfolio Manager: Mario J. Gabelli, CFA
CONTRARIAN
GAMCO Mathers Fund
Seeks long-term capital appreciation in various market conditions without excessive risk of capital loss.
(No-load)
(No-load)
Portfolio Manager: Henry Van der Eb, CFA
Comstock Capital Value Fund
Seeks capital appreciation and current income. The Fund may use either long or short positions to achieve its objective. (Multiclass)
Portfolio Manager: Martin Weiner, CFA
FIXED INCOME
GAMCO Westwood Intermediate Bond Fund
Seeks to invest in a diversified portfolio of bonds with various maturities. The Fund’s primary objective is total return. (Multiclass)
Portfolio Manager: Mark Freeman, CFA
CASH MANAGEMENT-MONEY MARKET
Gabelli U.S. Treasury Money Market Fund
Seeks to invest exclusively in short-term U.S. Treasury securities. The Fund’s primary objective is to provide high current income consistent with the preservation of principal and liquidity. (No-load)
Co-Portfolio Managers: Judith A. Raneri
Ronald S. Eaker
Ronald S. Eaker
An investment in the above Money Market Fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
The Funds may invest in foreign securities which involve risks not ordinarily associated with investments in domestic issues, including currency fluctuation, economic, and political risks.
To receive a prospectus, call 800-GABELLI (422-3554). Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund
before investing. The prospectus contains more information about this and other matters and should be read carefully before investing.
before investing. The prospectus contains more information about this and other matters and should be read carefully before investing.
Gabelli Equity Series Funds, Inc.
The Gabelli Small Cap Growth Fund
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
fax: 914-921-5118
website: www.gabelli.com
e-mail: info@gabelli.com
Net Asset Value per share available daily by calling
800-GABELLI after 7:00 P.M.
The Gabelli Small Cap Growth Fund
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
fax: 914-921-5118
website: www.gabelli.com
e-mail: info@gabelli.com
Net Asset Value per share available daily by calling
800-GABELLI after 7:00 P.M.
Board of Directors
Mario J. Gabelli, CFA | Robert J. Morrissey | |
Chairman and Chief | Attorney-at-Law | |
Executive Officer | Morrissey, Hawkins & Lynch | |
GAMCO Investors, Inc. | ||
Anthony J. Colavita | Anthony R. Pustorino | |
President | Certified Public Accountant, | |
Anthony J. Colavita, P.C. | Professor Emeritus | |
Pace University | ||
Vincent D. Enright | Anthonie C. van Ekris | |
Former Senior Vice President | Chairman | |
and Chief Financial Officer | BALMAC International, Inc. | |
KeySpan Corp. | ||
John D. Gabelli | Salvatore J. Zizza | |
Senior Vice President | Chairman | |
Gabelli & Company, Inc. | Zizza & Co., Ltd. | |
Officers | ||
Bruce N. Alpert | Agnes Mullady | |
President and Secretary | Treasurer | |
Peter D. Goldstein | ||
Chief Compliance Officer |
Distributor
Gabelli & Company, Inc.
Gabelli & Company, Inc.
Custodian, Transfer Agent, and Dividend Agent
State Street Bank and Trust Company
State Street Bank and Trust Company
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom LLP
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.
GAB443Q309SR
![(CASH FLOW)](https://capedge.com/proxy/N-CSR/0000950123-09-068072/p16279p1627903.gif)
The Gabelli Small Cap Growth Fund
ANNUAL REPORT
SEPTEMBER 30, 2009
SEPTEMBER 30, 2009
The Gabelli Equity Income Fund
Annual Report (a)
September 30, 2009
September 30, 2009
To Our Shareholders,
The Gabelli Equity Income Fund’s (the “Fund”) (Class AAA) total return was (2.3%) for the year ended September 30, 2009, compared with (6.9)% for the Standard & Poor’s (“S&P”) 500 Index.
Enclosed are the investment portfolio and financial statements as of September 30, 2009.
Comparative Results
Average Annual Returns through September 30, 2009 (a)(b)
Since | ||||||||||||||||||||||||||||||||
Year to | Inception | |||||||||||||||||||||||||||||||
Quarter | Date | 1 Year | 3 Year | 5 Year | 10 Year | 15 Year | (1/2/92) | |||||||||||||||||||||||||
Gabelli Equity Income Fund | ||||||||||||||||||||||||||||||||
Class AAA | 17.24 | % | 23.44 | % | (2.34 | )% | (2.20 | )% | 3.86 | % | 5.34 | % | 9.44 | % | 9.61 | % | ||||||||||||||||
S&P 500 Index | 15.59 | 19.27 | (6.91 | ) | (5.43 | ) | 1.01 | (0.15 | ) | 7.62 | 7.50 | |||||||||||||||||||||
Lipper Equity Income Fund Average | 14.92 | 16.20 | (6.42 | ) | (5.12 | ) | 1.76 | 2.67 | 7.12 | 7.58 | ||||||||||||||||||||||
Class A | 17.30 | 23.43 | (2.34 | ) | (2.19 | ) | 3.85 | 5.34 | 9.44 | 9.61 | ||||||||||||||||||||||
10.55 | (c) | 16.33 | (c) | (7.96 | )(c) | (4.10 | )(c) | 2.63 | (c) | 4.71 | (c) | 9.00 | (c) | 9.24 | (c) | |||||||||||||||||
Class B | 17.10 | 22.76 | (3.07 | ) | (2.93 | ) | 3.10 | 4.89 | 9.13 | 9.35 | ||||||||||||||||||||||
12.10 | (d) | 17.76 | (d) | (7.91 | )(d) | (3.91 | )(d) | 2.74 | (d) | 4.89 | 9.13 | 9.35 | ||||||||||||||||||||
Class C | 17.03 | 22.78 | (3.07 | ) | (2.93 | ) | 3.09 | 4.90 | 9.13 | 9.35 | ||||||||||||||||||||||
16.03 | (e) | 21.78 | (e) | (4.04 | )(e) | (2.93 | ) | 3.09 | 4.90 | 9.13 | 9.35 | |||||||||||||||||||||
Class I | 17.29 | 22.43 | (2.05 | ) | (2.03 | ) | 3.96 | 5.40 | 9.48 | 9.65 |
In the current prospectus, the expense ratios for Class AAA, A, B, C, and I Shares are 1.43%, 1.43%, 2.18%, 2.18%, and 1.18%, respectively. Class AAA and I Shares do not have a sales charge. The maximum sales charge for Class A, B, and C Shares is 5.75%, 5.00%, and 1.00%, respectively. See page 13 for the expense ratios for the year ended September 30, 2009.
(a) | The Fund’s fiscal year ends September 30. | |
(b) | Returns represent past performance and do not guarantee future results. Total returns and average annual returns reflect changes in share price and reinvestment of distributions and are net of expenses. 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. Performance returns for periods of less than one year are not annualized. Current performance may be lower or higher than the performance data presented. Visit www.gabelli.com for performance information as of the most recent month end. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The prospectus contains more information about this and other matters and should be read carefully before investing. | |
The Class AAA Share net asset values (“NAVs”) per share are used to calculate performance for the periods prior to the issuance of Class A Shares, Class B Shares, and Class C Shares on December 31, 2003 and Class I Shares on January 11, 2008. The actual performance for the Class B Shares and Class C Shares would have been lower and Class I Shares would have been higher due to the differences in expenses associated with these classes of shares. The S&P 500 Index is an unmanaged indicator of stock market performance, while the Lipper Equity Income Fund Average reflects the average performance of mutual funds classified in this particular category. Dividends are considered reinvested. You cannot invest directly in an index. | ||
(c) | Performance results include the effect of the maximum 5.75% sales charge at the beginning of the period. | |
(d) | Performance results include the deferred sales charges for the Class B Shares upon redemption at the end of the quarter, year to date, one year, three year, and five year periods of 5%, 5%, 5%, 3%, and 2%, respectively, of the Fund’s NAV per share at the time of purchase or sale, whichever is lower. Class B Shares are not available for new purchases. | |
(e) | Performance results include the deferred sales charges for the Class C Shares upon redemption at the end of the quarter, year to date, and one year periods of 1% of the Fund’s NAV per share at the time of purchase or sale, whichever is lower. |
We have separated the portfolio manager’s commentary from the financial statements and investment portfolio due to corporate governance regulations stipulated by the Sarbanes-Oxley Act of 2002. We have done this to ensure that the content of the portfolio manager’s commentary is unrestricted. The financial statements and investment portfolio are mailed separately from the commentary. Both the commentary and the financial statements, including the portfolio of investments, will be available on our website at www.gabelli.com/funds.
Performance Discussion
For the twelve months ended September 30, 2009, the Fund’s Class AAA Shares declined 2.3%, versus declines of 6.9% and 6.4% for the S&P 500 Index and Lipper Equity Income Fund Average, respectively.
Stocks around the world rose during the third calendar quarter as expectations for an economic recovery improved. After coming to a virtual halt in September 2008, economic activity appears to have stabilized. Unprecedented globally coordinated fiscal and monetary stimulus programs have rekindled an appetite for risk and investment. Corporate profits, cushioned in the second calendar quarter by aggressive cost cutting, should benefit from signs of real increases in demand.
Swedish Match (2.3% of net assets as of September 30, 2009), the Fund’s largest holding, was one of the best performing stocks for the fiscal year ended September 30, 2009. Swedish Match produces tobacco products including snuff, chewing tobacco, cigars, and pipe tobacco. The company’s products are sold in more than 150 countries. Swedish Match has been benefiting from the growth of the smokeless tobacco market in both Scandinavia and the U.S. as public smoking bans and health concerns are driving consumers to seek alternative tobacco products to cigarettes. Another top performing stock was American Express Co. (0.8%). American Express operates its eponymous premiere branded payment network and lends to its largely affluent customer base. American Express ended June 2009 with over 88 million cards in force and $63 million in loans, while its customers charged nearly $300 billion on their credit cards during the first half of 2009. The company’s strong consumer brand has allowed American Express to enter the deposit gathering market as an alternate source of funding.
Wells Fargo & Co (1.2%) and AT&T Inc. (0.9%) were two of the weaker performing stocks during the year.
We believe that a reinvigorated mergers and acquisitions market would support our Private Market Value (“PMV”) with a Catalyst® investment approach. First and foremost, we select stocks based on their fundamentals. We seek an adequate margin of safety and one or more catalysts that can surface the intrinsic value of a security. To the extent that a takeover provides that catalyst, it adds an extra element of return to the portfolio.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI EQUITY INCOME FUND CLASS AAA,
THE LIPPER EQUITY INCOME FUND AVERAGE, AND THE S&P 500 INDEX
THE GABELLI EQUITY INCOME FUND CLASS AAA,
THE LIPPER EQUITY INCOME FUND AVERAGE, AND THE S&P 500 INDEX
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2
The Gabelli Equity Income Fund
Disclosure of Fund Expenses (Unaudited)
For the Six Month Period from April 1, 2009 through September 30, 2009 | Expense Table |
We believe it is important for you to understand the impact of fees and expenses regarding your investment. All mutual funds have operating expenses. As a shareholder of a fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of a fund. When a fund’s expenses are expressed as a percentage of its average net assets, this figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your Fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The Expense Table below illustrates your Fund’s costs in two ways:
Actual Fund Return: This section provides information about actual account values and actual expenses. You may use this section to help you to estimate the actual expenses that you paid over the period after any fee waivers and expense reimbursements. The “Ending Account Value” shown is derived from the Fund’s actual return during the past six months, and the “Expenses Paid During Period” shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your Fund under the heading “Expenses Paid During Period” to estimate the expenses you paid during this period.
Hypothetical 5% Return: This section provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio. It assumes a hypothetical annualized return of 5% before expenses during the period shown. In this case – because the hypothetical return used is not the Fund’s actual return – the results do not apply to your investment and you cannot use the hypothetical account value and expense to estimate the actual ending account balance or expenses you paid for the period. This example is useful in making comparisons of the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads), redemption fees, or exchange fees, if any, which are described in the Prospectus. If these costs were applied to your account, your costs would be higher. Therefore, the 5% hypothetical return is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. The “Annualized Expense Ratio” represents the actual expenses for the last six months and may be different from the expense ratio in the Financial Highlights which is for the year ended September 30, 2009.
Beginning | Ending | Annualized | Expenses | |||||||||||||
Account Value | Account Value | Expense | Paid During | |||||||||||||
04/01/09 | 09/30/09 | Ratio | Period* | |||||||||||||
The Gabelli Equity Income Fund | ||||||||||||||||
Actual Fund Return | ||||||||||||||||
Class AAA | $ | 1,000.00 | $ | 1,378.70 | 1.47 | % | $ | 8.77 | ||||||||
Class A | $ | 1,000.00 | $ | 1,378.00 | 1.48 | % | $ | 8.82 | ||||||||
Class B | $ | 1,000.00 | $ | 1,373.10 | 2.21 | % | $ | 13.15 | ||||||||
Class C | $ | 1,000.00 | $ | 1,373.40 | 2.22 | % | $ | 13.21 | ||||||||
Class I | $ | 1,000.00 | $ | 1,379.30 | 1.23 | % | $ | 7.34 | ||||||||
Hypothetical 5% Return | ||||||||||||||||
Class AAA | $ | 1,000.00 | $ | 1,017.70 | 1.47 | % | $ | 7.44 | ||||||||
Class A | $ | 1,000.00 | $ | 1,017.65 | 1.48 | % | $ | 7.49 | ||||||||
Class B | $ | 1,000.00 | $ | 1,013.99 | 2.21 | % | $ | 11.16 | ||||||||
Class C | $ | 1,000.00 | $ | 1,013.94 | 2.22 | % | $ | 11.21 | ||||||||
Class I | $ | 1,000.00 | $ | 1,018.90 | 1.23 | % | $ | 6.23 |
* | Expenses are equal to the Fund’s annualized expense ratio for the last six months multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365. |
3
Summary of Portfolio Holdings (Unaudited)
The following table presents portfolio holdings as a percent of net assets as of September 30, 2009:
The Gabelli Equity Income Fund
Financial Services | 12.1 | % | ||
Food and Beverage | 11.8 | % | ||
Health Care | 10.4 | % | ||
Consumer Products | 6.9 | % | ||
Energy and Utilities: Oil | 6.6 | % | ||
Retail | 6.3 | % | ||
Telecommunications | 5.2 | % | ||
Diversified Industrial | 3.5 | % | ||
Aerospace | 3.3 | % | ||
Energy and Utilities: Integrated | 3.2 | % | ||
U.S. Government Obligations | 3.1 | % | ||
Computer Hardware | 2.1 | % | ||
Metals and Mining | 2.1 | % | ||
Electronics | 1.8 | % | ||
Equipment and Supplies | 1.8 | % | ||
Energy and Utilities: Services | 1.8 | % | ||
Entertainment | 1.6 | % | ||
Computer Software and Services | 1.6 | % | ||
Automotive: Parts and Accessories | 1.6 | % | ||
Hotels and Gaming | 1.6 | % | ||
Specialty Chemicals | 1.5 | % | ||
Energy and Utilities: Natural Gas | 1.4 | % | ||
Energy and Utilities: Electric | 1.4 | % | ||
Agriculture | 1.2 | % | ||
Machinery | 1.2 | % | ||
Cable and Satellite | 0.8 | % | ||
Communications Equipment | 0.8 | % | ||
Business Services | 0.7 | % | ||
Environmental Services | 0.4 | % | ||
Wireless Communications | 0.4 | % | ||
Broadcasting | 0.3 | % | ||
Transportation | 0.3 | % | ||
Aviation: Parts and Services | 0.3 | % | ||
Publishing | 0.2 | % | ||
Exchange Traded Funds | 0.2 | % | ||
Consumer Services | 0.1 | % | ||
Automotive | 0.1 | % | ||
Energy and Utilities: Water | 0.0 | % | ||
Real Estate | 0.0 | % | ||
Manufactured Housing | 0.0 | % | ||
Other Assets and Liabilities (Net) | 0.3 | % | ||
100.0 | % | |||
The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (the “SEC”) for the first and third quarters of each fiscal year on Form N-Q, the last of which was filed for the quarter ended June 30, 2009. Shareholders may obtain this information at www.gabelli.com or by calling the Fund at 800-GABELLI (800-422-3554). The Fund’s Form N-Q is available on the SEC’s website at www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Proxy Voting
The Fund files Form N-PX with its complete proxy voting record for the twelve months ended June 30th, no later than August 31st of each year. A description of the Fund’s proxy voting policies, procedures, and how the Fund voted proxies relating to portfolio securities is available without charge, upon request, by (i) calling 800-GABELLI (800-422-3554); (ii) writing to The Gabelli Funds at One Corporate Center, Rye, NY 10580-1422; or (iii) visiting the SEC’s website at www.sec.gov.
4
The Gabelli Equity Income Fund
Schedule of Investments — September 30, 2009
Schedule of Investments — September 30, 2009
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS — 95.7% | ||||||||||||
Aerospace — 3.3% | ||||||||||||
2,000 | Lockheed Martin Corp. | $ | 47,350 | $ | 156,160 | |||||||
2,000 | Northrop Grumman Corp. | 84,925 | 103,500 | |||||||||
10,000 | Raytheon Co. | 279,250 | 479,700 | |||||||||
370,000 | Rockwell Automation Inc. | 18,481,776 | 15,762,000 | |||||||||
2,000 | Rockwell Collins Inc. | 15,844 | 101,600 | |||||||||
1,310,000 | Rolls-Royce Group plc† | 9,212,564 | 9,856,614 | |||||||||
215,000 | The Boeing Co. | 12,586,264 | 11,642,250 | |||||||||
40,707,973 | 38,101,824 | |||||||||||
Agriculture — 1.2% | ||||||||||||
100,000 | Archer-Daniels-Midland Co. | 2,873,352 | 2,922,000 | |||||||||
138,000 | Monsanto Co. | 1,827,430 | 10,681,200 | |||||||||
12,000 | The Mosaic Co. | 186,246 | 576,840 | |||||||||
4,887,028 | 14,180,040 | |||||||||||
Automotive — 0.1% | ||||||||||||
20,000 | Navistar International Corp.† | 583,430 | 748,400 | |||||||||
Automotive: Parts and Accessories — 1.5% | ||||||||||||
3,000 | BERU AG | 319,888 | 333,602 | |||||||||
250,000 | Genuine Parts Co. | 8,986,399 | 9,515,000 | |||||||||
6,000 | Johnson Controls Inc. | 50,425 | 153,360 | |||||||||
60,000 | Modine Manufacturing Co. | 618,883 | 556,200 | |||||||||
140,000 | O’Reilly Automotive Inc.† | 3,972,441 | 5,059,600 | |||||||||
135,000 | The Pep Boys - Manny, Moe & Jack | 1,562,365 | 1,318,950 | |||||||||
15,510,401 | 16,936,712 | |||||||||||
Aviation: Parts and Services — 0.3% | ||||||||||||
53,200 | Curtiss-Wright Corp. | 578,882 | 1,815,716 | |||||||||
40,000 | GenCorp Inc.† | 321,556 | 214,400 | |||||||||
5,000 | Precision Castparts Corp. | 421,987 | 509,350 | |||||||||
21,000 | United Technologies Corp. | 609,942 | 1,279,530 | |||||||||
1,932,367 | 3,818,996 | |||||||||||
Broadcasting — 0.2% | ||||||||||||
190,000 | CBS Corp., Cl. A, Voting | 3,868,612 | 2,291,400 | |||||||||
30,000 | CBS Corp., Cl. B, Non-Voting | 283,175 | 361,500 | |||||||||
132 | Granite Broadcasting Corp.† (a) | 10,795 | 0 | |||||||||
4,162,582 | 2,652,900 | |||||||||||
Business Services — 0.7% | ||||||||||||
5,000 | Automatic Data Processing Inc. | 151,707 | 196,500 | |||||||||
165,000 | Diebold Inc. | 6,080,375 | 5,433,450 | |||||||||
4,000 | Landauer Inc. | 134,546 | 219,920 | |||||||||
10,000 | MasterCard Inc., Cl. A | 743,059 | 2,021,500 | |||||||||
7,109,687 | 7,871,370 | |||||||||||
Cable and Satellite — 0.8% | ||||||||||||
155,000 | Cablevision Systems Corp., Cl. A | 2,670,033 | 3,681,250 | |||||||||
140,000 | DISH Network Corp., Cl. A† | 2,888,127 | 2,696,400 | |||||||||
16,000 | EchoStar Corp., Cl. A† . | 478,840 | 295,360 | |||||||||
55,000 | Scripps Networks Interactive Inc., Cl. A | 2,303,601 | 2,032,250 | |||||||||
30,000 | The DIRECTV Group Inc.† | 780,987 | 827,400 | |||||||||
9,121,588 | 9,532,660 | |||||||||||
Communications Equipment — 0.7% | ||||||||||||
250,000 | Corning Inc. | 3,735,647 | 3,827,500 | |||||||||
100,000 | Motorola Inc. | 830,109 | 859,000 | |||||||||
120,000 | Thomas & Betts Corp.† | 3,448,817 | 3,609,600 | |||||||||
8,014,573 | 8,296,100 | |||||||||||
Computer Hardware — 2.1% | ||||||||||||
173,000 | International Business Machines Corp. | 13,935,130 | 20,692,530 | |||||||||
420,000 | Xerox Corp. | 4,970,407 | 3,250,800 | |||||||||
18,905,537 | 23,943,330 | |||||||||||
Computer Software and Services — 1.6% | ||||||||||||
90,000 | Metavante Technologies Inc.† | 1,995,115 | 3,103,200 | |||||||||
285,000 | Microsoft Corp. | 7,847,805 | 7,378,650 | |||||||||
150,000 | Perot Systems Corp., Cl. A† | 4,441,515 | 4,455,000 | |||||||||
30,000 | Sun Microsystems Inc.† | 278,850 | 272,700 | |||||||||
165,000 | Yahoo! Inc.† | 5,013,933 | 2,938,650 | |||||||||
19,577,218 | 18,148,200 | |||||||||||
Consumer Products — 6.9% | ||||||||||||
50,000 | Altria Group Inc. | 643,359 | 890,500 | |||||||||
150,000 | Avon Products Inc. | 4,382,495 | 5,094,000 | |||||||||
15,000 | Clorox Co. | 823,581 | 882,300 | |||||||||
10,000 | Compagnie Financiere Richemont SA, Cl. A | 268,687 | 282,544 | |||||||||
770,000 | Eastman Kodak Co. | 8,055,537 | 3,680,600 | |||||||||
63,000 | Energizer Holdings Inc.† | 2,834,133 | 4,179,420 | |||||||||
126,000 | Fortune Brands Inc. | 6,162,739 | 5,415,480 | |||||||||
5,000 | Hanesbrands Inc.† | 108,950 | 107,000 | |||||||||
34,000 | Harman International Industries Inc. | 1,171,806 | 1,151,920 | |||||||||
162,000 | Kimberly-Clark Corp. | 10,670,886 | 9,554,760 | |||||||||
7,000 | National Presto Industries Inc. | 206,562 | 605,570 | |||||||||
10,000 | Pactiv Corp.† | 161,895 | 260,500 | |||||||||
50,000 | Philip Morris International Inc. | 1,501,172 | 2,437,000 | |||||||||
100,000 | Reckitt Benckiser Group plc | 3,154,703 | 4,887,170 | |||||||||
1,300,000 | Swedish Match AB | 17,012,653 | 26,106,852 | |||||||||
200,000 | The Procter & Gamble Co. | 11,513,349 | 11,584,000 | |||||||||
78,000 | Unilever NV — NY Shares, ADR | 1,542,066 | 2,251,080 | |||||||||
70,214,573 | 79,370,696 | |||||||||||
Consumer Services — 0.1% | ||||||||||||
67,500 | Rollins Inc. | 386,886 | 1,272,375 | |||||||||
See accompanying notes to financial statements.
5
The Gabelli Equity Income Fund
Schedule of Investments (Continued) — September 30, 2009
Schedule of Investments (Continued) — September 30, 2009
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS (Continued) | ||||||||||||
Diversified Industrial — 3.5% | ||||||||||||
5,000 | 3M Co. | $ | 213,645 | $ | 369,000 | |||||||
5,000 | Acuity Brands Inc. | 54,182 | 161,050 | |||||||||
4,000 | Alstom SA | 357,274 | 291,911 | |||||||||
65,000 | Baldor Electric Co. | 2,002,927 | 1,777,100 | |||||||||
105,000 | Cooper Industries plc, Cl. A | 2,960,552 | 3,944,850 | |||||||||
98,000 | Crane Co. | 3,370,338 | 2,529,380 | |||||||||
785,000 | General Electric Co. | 18,041,343 | 12,889,700 | |||||||||
200,000 | Honeywell International Inc. | 5,938,206 | 7,430,000 | |||||||||
27,000 | ITT Corp. | 1,326,176 | 1,408,050 | |||||||||
418,003 | National Patent Development Corp.† (b) | 1,030,058 | 660,445 | |||||||||
120,000 | Textron Inc. | 763,372 | 2,277,600 | |||||||||
6,000 | Trinity Industries Inc. | 82,100 | 103,140 | |||||||||
180,000 | Tyco International Ltd. | 7,130,751 | 6,206,400 | |||||||||
50,000 | WHX Corp.† | 663,230 | 96,000 | |||||||||
43,934,154 | 40,144,626 | |||||||||||
Electronics — 1.8% | ||||||||||||
600,000 | Intel Corp. | 12,298,251 | 11,742,000 | |||||||||
340,000 | LSI Corp.† | 3,105,578 | 1,866,600 | |||||||||
190,000 | Texas Instruments Inc. | 4,127,219 | 4,501,100 | |||||||||
5,000 | Thermo Fisher Scientific Inc.† | 127,325 | 218,350 | |||||||||
130,250 | Tyco Electronics Ltd. | 4,305,304 | 2,901,970 | |||||||||
23,963,677 | 21,230,020 | |||||||||||
Energy and Utilities: Electric — 1.4% | ||||||||||||
30,000 | American Electric Power Co. Inc. | 932,060 | 929,700 | |||||||||
14,000 | DTE Energy Co. | 606,560 | 491,960 | |||||||||
85,000 | El Paso Electric Co.† | 670,852 | 1,501,950 | |||||||||
80,000 | FPL Group Inc. | 3,608,192 | 4,418,400 | |||||||||
99,784 | Great Plains Energy Inc. | 2,475,161 | 1,791,123 | |||||||||
60,000 | Korea Electric Power Corp., ADR† | 977,409 | 914,400 | |||||||||
56,087 | Mirant Corp.† | 936,815 | 921,509 | |||||||||
1,200,000 | Mirant Corp., Escrow† (a) | 0 | 0 | |||||||||
150,000 | Northeast Utilities | 3,148,300 | 3,561,000 | |||||||||
80,000 | The AES Corp.† | 268,400 | 1,185,600 | |||||||||
13,333 | UIL Holdings Corp. | 293,785 | 351,858 | |||||||||
13,917,534 | 16,067,500 | |||||||||||
Energy and Utilities: Integrated — 3.2% | ||||||||||||
42,000 | Allegheny Energy Inc. | 404,378 | 1,113,840 | |||||||||
44,000 | BP plc, ADR | 1,030,211 | 2,342,120 | |||||||||
46,000 | CH Energy Group Inc. | 1,881,549 | 2,038,260 | |||||||||
80,000 | Constellation Energy Group Inc. | 2,406,564 | 2,589,600 | |||||||||
63,000 | Dominion Resources Inc. | 2,578,128 | 2,173,500 | |||||||||
110,000 | DPL Inc. | 2,894,840 | 2,871,000 | |||||||||
200,000 | Duke Energy Corp. | 2,462,844 | 3,148,000 | |||||||||
400,000 | El Paso Corp. | 4,614,299 | 4,128,000 | |||||||||
29,000 | ENI SpA | 304,221 | 724,830 | |||||||||
6,269 | Iberdrola SA, ADR | 312,667 | 245,369 | |||||||||
25,000 | Integrys Energy Group Inc. | 1,192,522 | 897,250 | |||||||||
80,000 | NSTAR | 1,282,183 | 2,545,600 | |||||||||
75,000 | OGE Energy Corp. | 2,043,450 | 2,481,000 | |||||||||
100,000 | PNM Resources Inc. | 1,042,460 | 1,168,000 | |||||||||
75,000 | Progress Energy Inc. | 3,196,534 | 2,929,500 | |||||||||
15,000 | Progress Energy Inc., CVO† | 7,800 | 3,450 | |||||||||
7,200 | Public Service Enterprise Group Inc. | 156,820 | 226,368 | |||||||||
32,000 | Suncor Energy Inc., New York | 837,559 | 1,105,920 | |||||||||
19,000 | Suncor Energy Inc., Toronto | 856,903 | 663,709 | |||||||||
55,000 | TECO Energy Inc. | 740,886 | 774,400 | |||||||||
140,000 | Westar Energy Inc. | 2,333,669 | 2,731,400 | |||||||||
32,580,487 | 36,901,116 | |||||||||||
Energy and Utilities: Natural Gas — 1.4% | ||||||||||||
15,000 | AGL Resources Inc. | 284,165 | 529,050 | |||||||||
30,000 | Atmos Energy Corp. | 769,372 | 845,400 | |||||||||
90,000 | National Fuel Gas Co. | 3,387,861 | 4,122,900 | |||||||||
75,000 | ONEOK Inc. | 1,699,141 | 2,746,500 | |||||||||
24,000 | Piedmont Natural Gas Co. Inc. | 394,017 | 574,560 | |||||||||
110,000 | Southern Union Co. | 2,047,400 | 2,286,900 | |||||||||
65,000 | Southwest Gas Corp. | 1,365,198 | 1,662,700 | |||||||||
200,000 | Spectra Energy Corp. | 4,249,072 | 3,788,000 | |||||||||
14,196,226 | 16,556,010 | |||||||||||
Energy and Utilities: Oil — 6.6% | ||||||||||||
150,000 | Anadarko Petroleum Corp. | 7,790,230 | 9,409,500 | |||||||||
38,000 | Canadian Oil Sands Trust | 1,117,252 | 1,091,393 | |||||||||
190,000 | Chevron Corp. | 8,702,369 | 13,381,700 | |||||||||
185,000 | ConocoPhillips | 5,343,273 | 8,354,600 | |||||||||
20,000 | Denbury Resources Inc.† | 340,653 | 302,600 | |||||||||
49,000 | Devon Energy Corp. | 2,021,181 | 3,299,170 | |||||||||
149,000 | Exxon Mobil Corp. | 4,735,083 | 10,222,890 | |||||||||
35,000 | Marathon Oil Corp. | 1,477,598 | 1,116,500 | |||||||||
30,000 | Nexen Inc. | 924,468 | 682,016 | |||||||||
2,000 | Niko Resources Ltd. | 114,911 | 156,447 | |||||||||
94,000 | Occidental Petroleum Corp. | 3,654,851 | 7,369,600 | |||||||||
12,000 | PetroChina Co. Ltd., ADR | 856,611 | 1,365,000 | |||||||||
130,000 | Petroleo Brasileiro SA, ADR | 5,454,520 | 5,967,000 | |||||||||
33,000 | Repsol YPF SA, ADR | 689,095 | 896,280 | |||||||||
120,000 | Royal Dutch Shell plc, Cl. A, ADR | 5,536,435 | 6,862,800 | |||||||||
25,000 | StatoilHydro ASA, ADR | 327,939 | 563,500 | |||||||||
17,518 | Total SA, ADR | 290,564 | 1,038,117 | |||||||||
36,000 | Transocean Ltd.† | 2,816,538 | 3,079,080 | |||||||||
160,000 | UTS Energy Corp.† | 804,039 | 258,534 | |||||||||
40,000 | WesternZagros Resources Ltd.† | 147,109 | 80,699 | |||||||||
53,144,719 | 75,497,426 | |||||||||||
See accompanying notes to financial statements.
6
The Gabelli Equity Income Fund
Schedule of Investments (Continued) — September 30, 2009
Schedule of Investments (Continued) — September 30, 2009
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS (Continued) | ||||||||||||
Energy and Utilities: Services — 1.8% | ||||||||||||
30,000 | ABB Ltd., ADR | $ | 351,824 | $ | 601,200 | |||||||
52,000 | Cameron International Corp.† | 746,014 | 1,966,640 | |||||||||
38,178 | GDF Suez, Strips | 0 | 56 | |||||||||
375,000 | Halliburton Co. | 11,177,922 | 10,170,000 | |||||||||
40,000 | Oceaneering International Inc.† | 1,762,700 | 2,270,000 | |||||||||
40,000 | Schlumberger Ltd. | 1,275,020 | 2,384,000 | |||||||||
175,000 | Weatherford International Ltd.† | 3,803,877 | 3,627,750 | |||||||||
19,117,357 | 21,019,646 | |||||||||||
Energy and Utilities: Water — 0.0% | ||||||||||||
30,000 | Aqua America Inc. | 329,550 | 529,200 | |||||||||
Entertainment — 1.6% | ||||||||||||
65,000 | Grupo Televisa SA, ADR | 1,584,157 | 1,208,350 | |||||||||
40,000 | Rank Group plc† | 89,100 | 57,054 | |||||||||
110,000 | Time Warner Inc. | 3,492,176 | 3,165,800 | |||||||||
290,000 | Viacom Inc., Cl. A† | 11,563,851 | 8,540,500 | |||||||||
185,000 | Vivendi | 6,697,039 | 5,724,399 | |||||||||
23,426,323 | 18,696,103 | |||||||||||
Environmental Services — 0.4% | ||||||||||||
145,000 | Waste Management Inc. | 4,749,875 | 4,323,900 | |||||||||
Equipment and Supplies — 1.8% | ||||||||||||
12,000 | A.O. Smith Corp. | 253,184 | 457,200 | |||||||||
11,000 | Danaher Corp. | 791,231 | 740,520 | |||||||||
112,000 | Flowserve Corp. | 4,898,085 | 11,036,480 | |||||||||
6,000 | Ingersoll-Rand plc | 120,853 | 184,020 | |||||||||
1,500 | Minerals Technologies Inc. | 37,938 | 71,340 | |||||||||
40,000 | Mueller Industries Inc. | 1,650,585 | 954,800 | |||||||||
12,000 | Parker Hannifin Corp. | 459,607 | 622,080 | |||||||||
115,000 | Tenaris SA, ADR | 4,820,468 | 4,096,300 | |||||||||
970,000 | Tomkins plc | 4,715,456 | 2,923,704 | |||||||||
17,747,407 | 21,086,444 | |||||||||||
Exchange Traded Funds — 0.2% | ||||||||||||
300,000 | Proshares Ultra Financials | 1,822,601 | 1,770,000 | |||||||||
Financial Services — 12.1% | ||||||||||||
6,324 | Alleghany Corp.† | 1,015,192 | 1,638,232 | |||||||||
270,000 | American Express Co. | 10,875,047 | 9,153,000 | |||||||||
23,990 | Argo Group International Holdings Ltd.† | 741,793 | 807,983 | |||||||||
25,500 | Banco Popular Espanol SA | 185,939 | 255,612 | |||||||||
2,000 | Banco Santander Chile, ADR | 29,250 | 115,080 | |||||||||
160,000 | Banco Santander SA, ADR | 1,233,058 | 2,584,000 | |||||||||
440,000 | Bank of America Corp. | 5,590,199 | 7,444,800 | |||||||||
11,025 | BNP Paribas | 439,576 | 880,890 | |||||||||
400,000 | Citigroup Inc. | 2,176,760 | 1,936,000 | |||||||||
50,000 | Commerzbank AG, ADR† | 896,273 | 635,000 | |||||||||
50,000 | Deutsche Bank AG | 2,453,861 | 3,838,500 | |||||||||
105,000 | Discover Financial Services | 1,820,893 | 1,704,150 | |||||||||
200,300 | Federal National Mortgage Association† | 192,571 | 304,456 | |||||||||
15,000 | Federated Investors Inc., Cl. B | 377,721 | 395,550 | |||||||||
29,583 | Fidelity Southern Corp.† | 284,947 | 93,778 | |||||||||
200,000 | H&R Block Inc. | 4,455,381 | 3,676,000 | |||||||||
30,000 | Huntington Bancshares Inc. | 391,484 | 141,300 | |||||||||
120,000 | Janus Capital Group Inc. | 1,869,046 | 1,701,600 | |||||||||
240,199 | JPMorgan Chase & Co. | 8,328,850 | 10,525,520 | |||||||||
410,000 | Legg Mason Inc. | 11,623,922 | 12,722,300 | |||||||||
31,000 | Leucadia National Corp.† | 381,995 | 766,320 | |||||||||
110,000 | Loews Corp. | 5,083,079 | 3,767,500 | |||||||||
115,000 | M&T Bank Corp. | 8,201,329 | 7,166,800 | |||||||||
415,000 | Marsh & McLennan Companies Inc. | 12,608,047 | 10,262,950 | |||||||||
10,000 | Moody’s Corp. | 171,766 | 204,600 | |||||||||
160,000 | Morgan Stanley | 4,978,572 | 4,940,800 | |||||||||
6,000 | Northern Trust Corp. | 60,300 | 348,960 | |||||||||
70,000 | NYSE Euronext | 1,612,128 | 2,022,300 | |||||||||
12,000 | Och-Ziff Capital Management Group LLC, Cl. A | 74,969 | 146,040 | |||||||||
50,000 | PNC Financial Services Group Inc. | 2,084,482 | 2,429,500 | |||||||||
500 | Raiffeisen International Bank Holding AG | 28,874 | 32,604 | |||||||||
958 | Reinet Investments SCA† | 188,972 | 13,458 | |||||||||
6,000 | Royal Bank of Canada | 286,580 | 321,420 | |||||||||
170,000 | SLM Corp.† | 3,488,420 | 1,482,400 | |||||||||
196,000 | Sterling Bancorp | 2,986,706 | 1,415,120 | |||||||||
12,000 | SunTrust Banks Inc. | 251,737 | 270,600 | |||||||||
50,000 | T. Rowe Price Group Inc. | 1,388,039 | 2,285,000 | |||||||||
100,000 | TD Ameritrade Holding Corp.† | 1,808,242 | 1,962,000 | |||||||||
2,000 | The Allstate Corp. | 61,340 | 61,240 | |||||||||
475,509 | The Bank of New York Mellon Corp. | 13,909,266 | 13,785,006 | |||||||||
5,000 | The Charles Schwab Corp. | 77,500 | 95,750 | |||||||||
2,000 | The Dun & Bradstreet Corp. | 20,476 | 150,640 | |||||||||
9,000 | The Goldman Sachs Group Inc. | 1,174,866 | 1,659,150 | |||||||||
6,000 | The Student Loan Corp. | 374,071 | 278,400 | |||||||||
36,000 | The Travelers Companies Inc. | 1,428,424 | 1,772,280 | |||||||||
40,000 | Unitrin Inc. | 1,156,156 | 779,600 | |||||||||
180,000 | Waddell & Reed Financial Inc., Cl. A | 4,042,072 | 5,121,000 | |||||||||
488,000 | Wells Fargo & Co. | 14,853,234 | 13,751,840 | |||||||||
112,000 | Wilmington Trust Corp. | 3,223,303 | 1,590,400 | |||||||||
140,986,708 | 139,437,429 | |||||||||||
See accompanying notes to financial statements.
7
The Gabelli Equity Income Fund
Schedule of Investments (Continued) — September 30, 2009
Schedule of Investments (Continued) — September 30, 2009
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS (Continued) | ||||||||||||
Food and Beverage — 11.8% | ||||||||||||
30,000 | Anheuser-Busch InBev NV | $ | 496,266 | $ | 1,369,922 | |||||||
64,000 | Brown-Forman Corp., Cl. A | 2,899,384 | 3,268,480 | |||||||||
13,500 | Brown-Forman Corp., Cl. B | 825,919 | 650,970 | |||||||||
160,000 | Cadbury plc, ADR | 6,152,305 | 8,193,600 | |||||||||
147,000 | Campbell Soup Co. | 4,322,766 | 4,795,140 | |||||||||
40,000 | Coca-Cola Amatil Ltd., ADR | 246,845 | 696,000 | |||||||||
10,000 | Coca-Cola Femsa SAB de CV, ADR | 263,508 | 481,000 | |||||||||
200,000 | Constellation Brands Inc., Cl. A† | 2,611,207 | 3,030,000 | |||||||||
16,000 | Corn Products International Inc. | 197,588 | 456,320 | |||||||||
136,389 | Danone | 6,897,164 | 8,218,946 | |||||||||
300,000 | Dean Foods Co.† | 5,867,852 | 5,337,000 | |||||||||
70,000 | Del Monte Foods Co. | 713,701 | 810,600 | |||||||||
62,000 | Diageo plc, ADR | 2,742,932 | 3,812,380 | |||||||||
110,000 | Dr. Pepper Snapple Group Inc.† | 2,330,589 | 3,162,500 | |||||||||
147,000 | Fomento Economico Mexicano SAB de CV, ADR | 3,393,837 | 5,593,350 | |||||||||
110,000 | General Mills Inc. | 5,457,146 | 7,081,800 | |||||||||
800,000 | Grupo Bimbo SAB de CV, Cl. A | 2,557,333 | 4,455,509 | |||||||||
122,000 | H.J. Heinz Co. | 4,325,482 | 4,849,500 | |||||||||
115,000 | Heineken NV | 5,111,847 | 5,301,854 | |||||||||
200,000 | ITO EN Ltd. | 4,311,208 | 3,703,002 | |||||||||
20,000 | ITO EN Ltd., Preference | 463,675 | 217,679 | |||||||||
3,000 | Kellogg Co. | 92,580 | 147,690 | |||||||||
420,000 | Kraft Foods Inc., Cl. A | 12,824,994 | 11,033,400 | |||||||||
100,000 | Nestlé SA | 2,083,075 | 4,261,314 | |||||||||
105,000 | NISSIN FOODS HOLDINGS CO. LTD. | 3,438,629 | 4,035,537 | |||||||||
300,000 | Parmalat SpA | 833,450 | 829,285 | |||||||||
100,000 | PepsiAmericas Inc. | 2,166,151 | 2,856,000 | |||||||||
32,949 | Pernod-Ricard SA | 2,560,649 | 2,616,691 | |||||||||
39,000 | Remy Cointreau SA | 2,216,779 | 1,631,373 | |||||||||
50,000 | Sapporo Holdings Ltd. | 510,013 | 255,111 | |||||||||
375,000 | The Coca-Cola Co. | 17,259,052 | 20,137,500 | |||||||||
75,000 | The Hershey Co. | 3,190,083 | 2,914,500 | |||||||||
57,268 | Tootsie Roll Industries Inc. | 1,398,580 | 1,361,833 | |||||||||
380,000 | Tyson Foods Inc., Cl. A | 5,785,335 | 4,799,400 | |||||||||
7,000 | Wimm-Bill-Dann Foods OJSC, ADR† | 249,970 | 500,570 | |||||||||
135,000 | YAKULT HONSHA Co. Ltd. | 3,659,573 | 3,601,905 | |||||||||
120,457,467 | 136,467,661 | |||||||||||
Health Care — 10.4% | ||||||||||||
30,000 | Abbott Laboratories | 1,257,909 | 1,484,100 | |||||||||
23,000 | Aetna Inc. | 812,404 | 640,090 | |||||||||
120,000 | Baxter International Inc. | 4,604,601 | 6,841,200 | |||||||||
100,000 | Becton, Dickinson and Co. | 6,601,932 | 6,975,000 | |||||||||
350,000 | Boston Scientific Corp.† | 4,611,187 | 3,706,500 | |||||||||
72,000 | Bristol-Myers Squibb Co. | 1,764,132 | 1,621,440 | |||||||||
280,000 | Covidien plc | 10,538,875 | 12,112,800 | |||||||||
135,000 | Eli Lilly & Co. | 7,570,019 | 4,459,050 | |||||||||
11,276 | GlaxoSmithKline plc, ADR | 515,984 | 445,515 | |||||||||
22,000 | Henry Schein Inc.† | 566,365 | 1,208,020 | |||||||||
100,000 | Hospira Inc.† | 3,605,739 | 4,460,000 | |||||||||
290,000 | Johnson & Johnson | 18,343,692 | 17,658,100 | |||||||||
10,000 | Laboratory Corp. of America Holdings† | 696,819 | 657,000 | |||||||||
6,000 | Mead Johnson Nutrition Co., Cl. A | 149,840 | 270,660 | |||||||||
25,000 | Medco Health Solutions Inc.† | 639,612 | 1,382,750 | |||||||||
90,000 | Merck & Co. Inc. | 2,710,521 | 2,846,700 | |||||||||
5,000 | Nobel Biocare Holding AG | 139,480 | 165,493 | |||||||||
145,000 | Novartis AG, ADR | 7,919,877 | 7,305,100 | |||||||||
30,000 | Patterson Companies Inc.† | 1,080,112 | 817,500 | |||||||||
600,000 | Pfizer Inc. | 14,266,365 | 9,930,000 | |||||||||
160,000 | Schering-Plough Corp. | 3,040,963 | 4,520,000 | |||||||||
94,600 | Sepracor Inc.† | 2,158,299 | 2,166,340 | |||||||||
62,000 | St. Jude Medical Inc.† | 2,704,603 | 2,418,620 | |||||||||
740,000 | Tenet Healthcare Corp.† | 5,107,489 | 4,351,200 | |||||||||
275,000 | UnitedHealth Group Inc. | 11,953,831 | 6,886,000 | |||||||||
18,000 | William Demant Holding A/S† | 880,509 | 1,337,514 | |||||||||
220,000 | Wyeth | 9,475,421 | 10,687,600 | |||||||||
44,000 | Zimmer Holdings Inc.† | 2,690,494 | 2,351,800 | |||||||||
126,407,074 | 119,706,092 | |||||||||||
Hotels and Gaming — 1.6% | ||||||||||||
125,000 | International Game Technology | 2,928,329 | 2,685,000 | |||||||||
529,411 | Ladbrokes plc | 7,677,932 | 1,585,559 | |||||||||
300,000 | Las Vegas Sands Corp.† | 1,669,152 | 5,052,000 | |||||||||
400,000 | MGM Mirage† | 5,566,209 | 4,816,000 | |||||||||
80,000 | Starwood Hotels & Resorts Worldwide Inc. | 1,673,543 | 2,642,400 | |||||||||
15,000 | Wynn Resorts Ltd.† | 579,315 | 1,063,350 | |||||||||
20,094,480 | 17,844,309 | |||||||||||
Machinery — 1.2% | ||||||||||||
6,000 | Caterpillar Inc. | 35,181 | 307,980 | |||||||||
320,400 | Deere & Co. | 15,974,668 | 13,751,568 | |||||||||
9,009 | Mueller Water Products Inc., Cl. A | 116,730 | 49,369 | |||||||||
16,126,579 | 14,108,917 | |||||||||||
Manufactured Housing — 0.0% | ||||||||||||
180,000 | Champion Enterprises Inc.† | 956,988 | 82,800 | |||||||||
See accompanying notes to financial statements.
8
The Gabelli Equity Income Fund
Schedule of Investments (Continued) — September 30, 2009
Schedule of Investments (Continued) — September 30, 2009
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS (Continued) | ||||||||||||
Metals and Mining — 2.1% | ||||||||||||
355,000 | Alcoa Inc. | $ | 8,046,761 | $ | 4,657,600 | |||||||
9,000 | Carpenter Technology Corp. | 301,239 | 210,510 | |||||||||
128,000 | Freeport-McMoRan Copper & Gold Inc. | 3,196,653 | 8,782,080 | |||||||||
190,000 | Newmont Mining Corp. | 7,722,899 | 8,363,800 | |||||||||
45,000 | Peabody Energy Corp. | 1,713,246 | 1,674,900 | |||||||||
6,615 | Teck Resources Ltd., Cl. B† | 533,053 | 182,265 | |||||||||
21,513,851 | 23,871,155 | |||||||||||
Publishing — 0.2% | ||||||||||||
5,000 | Idearc Inc.† | 268 | 125 | |||||||||
6,016 | News Corp., Cl. B | 70,881 | 84,164 | |||||||||
30,000 | PagesJaunes Groupe | 832,318 | 389,004 | |||||||||
35,000 | The McGraw-Hill Companies Inc. | 1,280,632 | 879,900 | |||||||||
10,000 | The New York Times Co., Cl. A | 227,194 | 81,200 | |||||||||
800 | The Washington Post Co., Cl. B | 465,710 | 374,464 | |||||||||
3,000 | Value Line Inc. | 113,776 | 92,610 | |||||||||
2,990,779 | 1,901,467 | |||||||||||
Real Estate — 0.0% | ||||||||||||
7,100 | Griffin Land & Nurseries Inc. | 140,192 | 227,200 | |||||||||
Retail — 5.9% | ||||||||||||
18,000 | Copart Inc.† | 535,865 | 597,780 | |||||||||
220,000 | Costco Wholesale Corp. | 11,379,094 | 12,421,200 | |||||||||
350,000 | CVS Caremark Corp. | 12,913,611 | 12,509,000 | |||||||||
76,600 | Ingles Markets Inc., Cl. A | 1,497,403 | 1,212,578 | |||||||||
420,000 | Macy’s Inc. | 6,726,835 | 7,681,800 | |||||||||
170,000 | Safeway Inc. | 3,593,397 | 3,352,400 | |||||||||
500 | Sears Holdings Corp.† | 40,733 | 32,655 | |||||||||
90,000 | SUPERVALU Inc. | 2,638,035 | 1,355,400 | |||||||||
240,000 | The Great Atlantic & Pacific Tea Co. Inc.† | 4,314,004 | 2,138,400 | |||||||||
85,000 | The Home Depot Inc. | 2,457,561 | 2,264,400 | |||||||||
65,000 | Tractor Supply Co.† | 2,355,113 | 3,147,300 | |||||||||
234,000 | Wal-Mart Stores Inc. | 11,089,209 | 11,487,060 | |||||||||
160,000 | Walgreen Co. | 5,432,876 | 5,995,200 | |||||||||
10,000 | Weis Markets Inc. | 300,480 | 319,500 | |||||||||
100,000 | Whole Foods Market Inc.† | 3,392,986 | 3,049,000 | |||||||||
68,667,202 | 67,563,673 | |||||||||||
Specialty Chemicals — 1.4% | ||||||||||||
44,000 | Albemarle Corp. | 576,219 | 1,522,400 | |||||||||
40,000 | Ashland Inc. | 1,537,678 | 1,728,800 | |||||||||
80,000 | E. I. du Pont de Nemours and Co. | 3,611,647 | 2,571,200 | |||||||||
240,000 | Ferro Corp. | 2,594,320 | 2,136,000 | |||||||||
2,000 | FMC Corp. | 64,790 | 112,500 | |||||||||
20,000 | H.B. Fuller Co. | 413,172 | 418,000 | |||||||||
Shares/ | Market | |||||||||||
Units | Cost | Value | ||||||||||
72,000 | International Flavors & Fragrances Inc. | $ | 3,395,843 | $ | 2,730,960 | |||||||
3,500 | NewMarket Corp. | 13,508 | 325,640 | |||||||||
100,000 | Omnova Solutions Inc.† | 667,863 | 648,000 | |||||||||
5,000 | Quaker Chemical Corp. | 90,412 | 109,650 | |||||||||
40,000 | Sensient Technologies Corp. | 822,757 | 1,110,800 | |||||||||
90,000 | The Dow Chemical Co. | 3,802,200 | 2,346,300 | |||||||||
4,000 | Zep Inc. | 17,026 | 65,000 | |||||||||
17,607,435 | 15,825,250 | |||||||||||
Telecommunications — 5.1% | ||||||||||||
365,000 | AT&T Inc. | 9,749,736 | 9,858,650 | |||||||||
485,000 | BCE Inc. | 10,893,314 | 11,964,950 | |||||||||
42,000 | Belgacom SA | 1,442,581 | 1,636,092 | |||||||||
4,495 | Bell Aliant Regional Communications Income Fund (a)(b) | 117,429 | 117,223 | |||||||||
50,000 | BT Group plc | 204,914 | 103,880 | |||||||||
30,000 | BT Group plc, ADR | 1,006,938 | 624,300 | |||||||||
140,000 | Cable & Wireless plc | 273,765 | 321,070 | |||||||||
30,000 | CenturyTel Inc. | 961,032 | 1,008,000 | |||||||||
350,000 | Cincinnati Bell Inc.† | 1,886,496 | 1,225,000 | |||||||||
360,000 | Deutsche Telekom AG, ADR | 6,193,929 | 4,917,600 | |||||||||
15,000 | France Telecom SA, ADR | 436,434 | 403,800 | |||||||||
120,000 | Qwest Communications International Inc. | 478,800 | 457,200 | |||||||||
1,900,000 | Sprint Nextel Corp.† | 9,190,438 | 7,505,000 | |||||||||
8,195 | Telefonica SA, ADR | 80,699 | 679,447 | |||||||||
300,000 | Telekom Austria AG | 4,658,392 | 5,408,569 | |||||||||
144,500 | Telephone & Data Systems Inc. | 5,307,372 | 4,480,945 | |||||||||
12,000 | TELUS Corp. | 185,454 | 387,129 | |||||||||
18,000 | TELUS Corp., Non-Voting | 874,021 | 559,620 | |||||||||
230,000 | Verizon Communications Inc. | 8,393,337 | 6,962,100 | |||||||||
62,335,081 | 58,620,575 | |||||||||||
Transportation — 0.3% | ||||||||||||
8,000 | Burlington Northern Santa Fe Corp. | 643,443 | 638,640 | |||||||||
115,000 | GATX Corp. | 4,379,544 | 3,214,250 | |||||||||
5,022,987 | 3,852,890 | |||||||||||
Wireless Communications — 0.4% | ||||||||||||
2,400 | NTT DoCoMo Inc. | 3,485,733 | 3,834,011 | |||||||||
14,000 | Turkcell Iletisim Hizmetleri A/S, ADR | 223,798 | 250,180 | |||||||||
3,709,531 | 4,084,191 | |||||||||||
TOTAL COMMON STOCKS | 1,057,060,107 | 1,102,289,203 | ||||||||||
See accompanying notes to financial statements.
9
The Gabelli Equity Income Fund
Schedule of Investments (Continued) — September 30, 2009
Schedule of Investments (Continued) — September 30, 2009
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
CONVERTIBLE PREFERRED STOCKS — 0.2% | ||||||||||||
Communications Equipment — 0.1% | ||||||||||||
1,100 | Lucent Technologies Capital Trust I, | |||||||||||
7.750% Cv. Pfd. | $ | 759,000 | $ | 841,500 | ||||||||
Energy and Utilities: Integrated — 0.0% | ||||||||||||
300 | El Paso Corp., | |||||||||||
4.990% Cv. Pfd. (b) | 293,192 | 279,255 | ||||||||||
Entertainment — 0.0% | ||||||||||||
3,000 | Metromedia International Group Inc., | |||||||||||
7.250% Cv. Pfd.† | 5,310 | 60,000 | ||||||||||
Telecommunications — 0.1% | ||||||||||||
33,000 | Cincinnati Bell Inc., | |||||||||||
6.750% Cv. Pfd., Ser. B | 918,893 | 1,138,500 | ||||||||||
TOTAL CONVERTIBLE PREFERRED STOCKS | 1,976,395 | 2,319,255 | ||||||||||
RIGHTS — 0.0% | ||||||||||||
Financial Services — 0.0% | ||||||||||||
11,025 | BNP Paribas, | |||||||||||
expire 10/13/09† | 0 | 23,878 | ||||||||||
WARRANTS — 0.0% | ||||||||||||
Broadcasting — 0.0% | ||||||||||||
330 | Granite Broadcasting Corp., | |||||||||||
Ser. A, expire 06/04/12† (a) | 0 | 0 | ||||||||||
330 | Granite Broadcasting Corp., | |||||||||||
Ser. B, expire 06/04/12†(a) | 0 | 3 | ||||||||||
TOTAL WARRANTS | 0 | 3 | ||||||||||
Principal | ||||||||||||
Amount | ||||||||||||
CORPORATE BONDS — 0.7% | ||||||||||||
Automotive: Parts and Accessories — 0.1% | ||||||||||||
$ | 800,000 | Standard Motor Products Inc., | ||||||||||
Sub. Deb. Cv., 15.000%, 04/15/11 (a) | 769,102 | 924,000 | ||||||||||
Broadcasting — 0.1% | ||||||||||||
350,000 | Sinclair Broadcast Group Inc., | |||||||||||
Cv. (STEP), 4.875%, 07/15/18 | 338,769 | 304,500 | ||||||||||
2,200,000 | Sinclair Broadcast Group Inc., | |||||||||||
Sub. Deb. Cv., 6.000%, 09/15/12 | 1,954,310 | 1,355,750 | ||||||||||
200,000 | Young Broadcasting Inc., | |||||||||||
Sub. Deb., 10.000%, 03/01/11† | 154,752 | 250 | ||||||||||
2,447,831 | 1,660,500 | |||||||||||
Computer Hardware — 0.0% | ||||||||||||
500,000 | SanDisk Corp., Cv., | |||||||||||
1.000%, 05/15/13 | 256,624 | 391,250 | ||||||||||
Energy and Utilities: Electric — 0.0% | ||||||||||||
100,000 | Texas Competitive Electric | |||||||||||
Holdings Co. LLC, | ||||||||||||
Ser. B (STEP), 10.250%, 11/01/15 | 64,269 | 72,500 | ||||||||||
Financial Services — 0.0% | ||||||||||||
300,000 | M-Systems Finance NV, Cv., | |||||||||||
1.000%, 03/15/35 | 255,351 | 297,000 | ||||||||||
Retail — 0.4% | ||||||||||||
4,400,000 | The Great Atlantic & | |||||||||||
Pacific Tea Co. Inc., Cv., 5.125%, 06/15/11 | 4,293,126 | 4,213,000 | ||||||||||
Specialty Chemicals — 0.1% | ||||||||||||
950,000 | Ferro Corp., Cv., | |||||||||||
6.500%, 08/15/13 | 494,340 | 845,500 | ||||||||||
TOTAL CORPORATE BONDS | 8,580,643 | 8,403,750 | ||||||||||
U.S. GOVERNMENT OBLIGATIONS — 3.1% | ||||||||||||
35,248,000 | U.S. Treasury Bills, | |||||||||||
0.066% to 0.289%††, 10/01/09 to 02/11/10 | 35,240,280 | 35,242,196 | ||||||||||
TOTAL INVESTMENTS — 99.7% | $ | 1,102,857,425 | 1,148,278,285 | |||||||||
Other Assets and Liabilities (Net) — 0.3% | 3,332,725 | |||||||||||
NET ASSETS — 100.0% | $ | 1,151,611,010 | ||||||||||
(a) | Security fair valued under procedures established by the Board of Directors. The procedures may include reviewing available financial information about the company and reviewing the valuation of comparable securities and other factors on a regular basis. At September 30, 2009, the market value of fair valued securities amounted to $1,041,226 or 0.09% of net assets. | |
(b) | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At September 30, 2009, the market value of Rule 144A securities amounted to $1,056,923 or 0.09% of net assets. | |
† | Non-income producing security. | |
†† | Represents annualized yield at date of purchase. | |
ADR | American Depositary Receipt | |
CVO | Contingent Value Obligation | |
STEP | Step coupon bond. The rate disclosed is that in effect at September 30, 2009. |
See accompanying notes to financial statements.
10
The Gabelli Equity Income Fund
Statement of Assets and Liabilities
September 30, 2009
September 30, 2009
Assets: | ||||
Investments, at value (cost $1,102,857,425) | $ | 1,148,278,285 | ||
Foreign currency, at value (cost $21,453) | 21,066 | |||
Cash | 1,082 | |||
Receivable for Fund shares sold | 4,052,501 | |||
Unrealized appreciation on swap contracts | 13,164 | |||
Dividends and interest receivable | 2,185,241 | |||
Prepaid expenses | 42,643 | |||
Total Assets | 1,154,593,982 | |||
Liabilities: | ||||
Payable for Fund shares redeemed | 1,206,120 | |||
Payable for investment advisory fees | 922,165 | |||
Payable for distribution fees | 242,524 | |||
Payable for accounting fees | 7,500 | |||
Payable for shareholder services fees | 334,420 | |||
Payable for shareholder communications expense | 157,068 | |||
Unrealized depreciation on swap contracts | 4,612 | |||
Other accrued expenses | 108,563 | |||
Total Liabilities | 2,982,972 | |||
Net Assets applicable to 67,266,871 shares outstanding | $ | 1,151,611,010 | ||
Net Assets Consist of: | ||||
Paid-in capital, each class at $0.001 par value | $ | 1,197,618,273 | ||
Accumulated distributions in excess of net investment income | (42,080 | ) | ||
Accumulated net realized loss on investments, swap contracts, and foreign currency transactions | (91,398,293 | ) | ||
Net unrealized appreciation on investments | 45,420,860 | |||
Net unrealized appreciation on swap contracts | 8,552 | |||
Net unrealized appreciation on foreign currency translations | 3,698 | |||
Net Assets | $ | 1,151,611,010 | ||
Shares of Capital Stock | ||||
Class AAA: | ||||
Net Asset Value, offering, and redemption price per share ($1,088,654,911 ÷ 63,526,810 shares outstanding; 150,000,000 shares authorized) | $ | 17.14 | ||
Class A: | ||||
Net Asset Value and redemption price per share ($31,104,116 ÷ 1,820,301 shares outstanding; 50,000,000 shares authorized) | $ | 17.09 | ||
Maximum offering price per share (NAV ÷ 0.9425, based on maximum sales charge of 5.75% of the offering price) | $ | 18.13 | ||
Class B: | ||||
Net Asset Value and offering price per share ($114,350 ÷ 6,987 shares outstanding; 50,000,000 shares authorized) | $ | 16.37 | (a) | |
Class C: | ||||
Net Asset Value and offering price per share ($22,918,741 ÷ 1,400,935 shares outstanding; 50,000,000 shares authorized) | $ | 16.36 | (a) | |
Class I: | ||||
Net Asset Value, offering, and redemption price per share ($8,818,892 ÷ 511,838 shares outstanding; 50,000,000 shares authorized) | $ | 17.23 | ||
(a) | Redemption price varies based on the length of time held. |
Statement of Operations
For the Year Ended September 30, 2009
For the Year Ended September 30, 2009
Investment Income: | ||||
Dividends (net of foreign taxes of $860,785) | $ | 26,276,075 | ||
Interest | 960,160 | |||
Total Investment Income | 27,236,235 | |||
Expenses: | ||||
Investment advisory fees | 9,195,276 | |||
Distribution fees — Class AAA | 2,184,527 | |||
Distribution fees — Class A | 56,512 | |||
Distribution fees — Class B | 1,673 | |||
Distribution fees — Class C | 172,202 | |||
Shareholder services fees | 1,362,608 | |||
Shareholder communications expenses | 395,117 | |||
Custodian fees | 164,113 | |||
Registration expenses | 85,150 | |||
Legal and audit fees | 64,467 | |||
Accounting fees | 45,000 | |||
Directors’ fees | 41,456 | |||
Interest expense | 17,032 | |||
Miscellaneous expenses | 99,775 | |||
Total Expenses | 13,884,908 | |||
Less: | ||||
Custodian fee credits | (1,083 | ) | ||
Net Expenses | 13,883,825 | |||
Net Investment Income | 13,352,410 | |||
Net Realized and Unrealized Gain/(Loss) on Investments, Swap Contracts, and Foreign Currency: | ||||
Net realized loss on investments | (73,664,410 | ) | ||
Net realized gain on swap contracts | 17,153 | |||
Net realized loss on foreign currency transactions | (41,057 | ) | ||
Net realized loss on investments, swap contracts, and foreign currency transactions | (73,688,314 | ) | ||
Net change in unrealized appreciation/ depreciation on: | ||||
investments | 19,462,815 | |||
swap contracts | 39,429 | |||
foreign currency translations | 9,562 | |||
Net change in unrealized appreciation/ depreciation on investments, swap contracts, and foreign currency translations | 19,511,806 | |||
Net Realized and Unrealized Gain/(Loss) on Investments, Swap Contracts, and Foreign Currency | (54,176,508 | ) | ||
Net Decrease in Net Assets Resulting from Operations | $ | (40,824,098 | ) | |
See accompanying notes to financial statements
11
The Gabelli Equity Income Fund
Statement of Changes in Net Assets
Year Ended | Year Ended | |||||||
September 30, 2009 | September 30, 2008 | |||||||
Operations: | ||||||||
Net investment income | $ | 13,352,410 | $ | 10,824,552 | ||||
Net realized loss on investments, swap contracts, and foreign currency transactions | (73,688,314 | ) | (9,197,201 | ) | ||||
Net change in unrealized appreciation/depreciation on investments, swap contracts, and foreign currency translations | 19,511,806 | (265,173,842 | ) | |||||
Net Decrease in Net Assets Resulting from Operations | (40,824,098 | ) | (263,546,491 | ) | ||||
Distributions to Shareholders: | ||||||||
Net investment income | ||||||||
Class AAA | (12,708,696 | ) | (10,546,445 | ) | ||||
Class A | (332,367 | ) | (176,682 | ) | ||||
Class B | (2,539 | ) | (2,809 | ) | ||||
Class C | (263,177 | ) | (173,060 | ) | ||||
Class I | (93,966 | ) | (5,950 | ) | ||||
(13,400,745 | ) | (10,904,946 | ) | |||||
Net realized gain | ||||||||
Class AAA | — | (21,351,419 | ) | |||||
Class A | — | (316,681 | ) | |||||
Class B | — | (6,167 | ) | |||||
Class C | — | (328,750 | ) | |||||
— | (22,003,017 | ) | ||||||
Return of capital | ||||||||
Class AAA | (9,214,213 | ) | (9,231,544 | ) | ||||
Class A | (240,977 | ) | (154,376 | ) | ||||
Class B | (1,841 | ) | (2,462 | ) | ||||
Class C | (190,811 | ) | (151,338 | ) | ||||
Class I | (68,128 | ) | (5,126 | ) | ||||
(9,715,970 | ) | (9,544,846 | ) | |||||
Total Distributions to Shareholders | (23,116,715 | ) | (42,452,809 | ) | ||||
Capital Share Transactions: | ||||||||
Class AAA | 18,397,736 | 239,884,656 | ||||||
Class A | 8,036,701 | 12,798,114 | ||||||
Class B | (110,470 | ) | (12,254 | ) | ||||
Class C | 4,589,115 | 6,182,277 | ||||||
Class I | 6,354,700 | 1,135,297 | ||||||
Net Increase in Net Assets from Capital Share Transactions | 37,267,782 | 259,988,090 | ||||||
Redemption Fees | 1,178 | 7,092 | ||||||
Net Decrease in Net Assets | (26,671,853 | ) | (46,004,118 | ) | ||||
Net Assets: | ||||||||
Beginning of period | 1,178,282,863 | 1,224,286,981 | ||||||
End of period (including undistributed net investment income of $0 and $68,657, respectively) | $ | 1,151,611,010 | $ | 1,178,282,863 | ||||
See accompanying notes to financial statements.
12
The Gabelli Equity Income Fund
Financial Highlights
Financial Highlights
Selected data for a share of capital stock outstanding throughout each period:
Income | Ratios to Average Net Assets/ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
from Investment Operations | Distributions | Supplemental Data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Asset | Realized and | Total | Net | Net Asset | Net Assets | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Period | Value, | Net | Unrealized | from | Net | Realized | Return | Value, | End of | Net | Portfolio | |||||||||||||||||||||||||||||||||||||||||||||||||
Ended | Beginning | Investment | Gain (Loss) on | Investment | Investment | Gain on | of | Total | Redemption | End of | Total | Period | Investment | Operating | Turnover | |||||||||||||||||||||||||||||||||||||||||||||
September 30 | of Period | Income(a) | Investments | Operations | Income | Investments | Capital | Distributions | Fees(a) | Period | Return† | (in 000’s) | Income | Expenses(b) | Rate†† | |||||||||||||||||||||||||||||||||||||||||||||
Class AAA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | $ | 18.00 | $ | 0.21 | $ | (0.71 | ) | $ | (0.50 | ) | $ | (0.21 | ) | — | $ | (0.15 | ) | $ | (0.36 | ) | $ | 0.00 | (c) | $ | 17.14 | (2.34 | )% | $ | 1,088,655 | 1.46 | % | 1.50 | % | 17 | % | |||||||||||||||||||||||||
2008 | 22.98 | 0.18 | (4.43 | ) | (4.25 | ) | (0.17 | ) | $ | (0.40 | ) | (0.16 | ) | (0.73 | ) | 0.00 | (c) | 18.00 | (18.95 | ) | 1,135,543 | 0.87 | 1.43 | 22 | ||||||||||||||||||||||||||||||||||||
2007 | 20.23 | 0.22 | 3.37 | 3.59 | (0.39 | ) | (0.45 | ) | — | (0.84 | ) | 0.00 | (c) | 22.98 | 18.19 | 1,191,351 | 1.01 | 1.43 | 12 | |||||||||||||||||||||||||||||||||||||||||
2006 | 18.72 | 0.38 | 1.68 | 2.06 | (0.36 | ) | (0.19 | ) | — | (0.55 | ) | 0.00 | (c) | 20.23 | 11.25 | 794,375 | 1.98 | 1.46 | 14 | |||||||||||||||||||||||||||||||||||||||||
2005 | 16.73 | 0.24 | 2.41 | 2.65 | (0.24 | ) | (0.42 | ) | — | (0.66 | ) | 0.00 | (c) | 18.72 | 16.09 | 580,081 | 1.33 | 1.46 | 11 | |||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | $ | 17.95 | $ | 0.21 | $ | (0.71 | ) | $ | (0.50 | ) | $ | (0.21 | ) | — | $ | (0.15 | ) | $ | (0.36 | ) | $ | 0.00 | (c) | $ | 17.09 | (2.34 | )% | $ | 31,104 | 1.46 | % | 1.50 | % | 17 | % | |||||||||||||||||||||||||
2008 | 22.91 | 0.18 | (4.41 | ) | (4.23 | ) | (0.17 | ) | $ | (0.40 | ) | (0.16 | ) | (0.73 | ) | 0.00 | (c) | 17.95 | (18.92 | ) | 22,979 | 0.88 | 1.43 | 22 | ||||||||||||||||||||||||||||||||||||
2007 | 20.17 | 0.22 | 3.36 | 3.58 | (0.39 | ) | (0.45 | ) | — | (0.84 | ) | 0.00 | (c) | 22.91 | 18.20 | 15,313 | 1.00 | 1.43 | 12 | |||||||||||||||||||||||||||||||||||||||||
2006 | 18.66 | 0.39 | 1.67 | 2.06 | (0.36 | ) | (0.19 | ) | — | (0.55 | ) | 0.00 | (c) | 20.17 | 11.29 | 8,379 | 2.02 | 1.46 | 14 | |||||||||||||||||||||||||||||||||||||||||
2005 | 16.72 | 0.20 | 2.43 | 2.63 | (0.27 | ) | (0.42 | ) | — | (0.69 | ) | 0.00 | (c) | 18.66 | 15.99 | 3,644 | 1.08 | 1.50 | 11 | |||||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | $ | 17.34 | $ | 0.10 | $ | (0.71 | ) | $ | (0.61 | ) | $ | (0.21 | ) | — | $ | (0.15 | ) | $ | (0.36 | ) | $ | 0.00 | (c) | $ | 16.37 | (3.07 | )% | $ | 114 | 0.73 | % | 2.25 | % | 17 | % | |||||||||||||||||||||||||
2008 | 22.32 | 0.02 | (4.27 | ) | (4.25 | ) | (0.17 | ) | $ | (0.40 | ) | (0.16 | ) | (0.73 | ) | 0.00 | (c) | 17.34 | (19.54 | ) | 252 | 0.12 | 2.18 | 22 | ||||||||||||||||||||||||||||||||||||
2007 | 19.82 | 0.06 | 3.28 | 3.34 | (0.39 | ) | (0.45 | ) | — | (0.84 | ) | 0.00 | (c) | 22.32 | 17.28 | 344 | 0.29 | 2.18 | 12 | |||||||||||||||||||||||||||||||||||||||||
2006 | 18.48 | 0.36 | 1.53 | 1.89 | (0.36 | ) | (0.19 | ) | — | (0.55 | ) | 0.00 | (c) | 19.82 | 10.46 | 352 | 1.91 | 2.21 | 14 | |||||||||||||||||||||||||||||||||||||||||
2005 | 16.62 | 0.04 | 2.46 | 2.50 | (0.22 | ) | (0.42 | ) | — | (0.64 | ) | 0.00 | (c) | 18.48 | 15.28 | 32 | 0.20 | 2.22 | 11 | |||||||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | $ | 17.33 | $ | 0.10 | $ | (0.71 | ) | $ | (0.61 | ) | $ | (0.21 | ) | — | $ | (0.15 | ) | $ | (0.36 | ) | $ | 0.00 | (c) | $ | 16.36 | (3.07 | )% | $ | 22,919 | 0.70 | % | 2.25 | % | 17 | % | |||||||||||||||||||||||||
2008 | 22.31 | 0.03 | (4.28 | ) | (4.25 | ) | (0.17 | ) | $ | (0.40 | ) | (0.16 | ) | (0.73 | ) | 0.00 | (c) | 17.33 | (19.55 | ) | 18,547 | 0.13 | 2.18 | 22 | ||||||||||||||||||||||||||||||||||||
2007 | 19.81 | 0.05 | 3.29 | 3.34 | (0.39 | ) | (0.45 | ) | — | (0.84 | ) | 0.00 | (c) | 22.31 | 17.29 | 17,279 | 0.24 | 2.18 | 12 | |||||||||||||||||||||||||||||||||||||||||
2006 | 18.47 | 0.24 | 1.65 | 1.89 | (0.36 | ) | (0.19 | ) | — | (0.55 | ) | 0.00 | (c) | 19.81 | 10.46 | 8,044 | 1.26 | 2.21 | 14 | |||||||||||||||||||||||||||||||||||||||||
2005 | 16.64 | 0.07 | 2.43 | 2.50 | (0.25 | ) | (0.42 | ) | — | (0.67 | ) | 0.00 | (c) | 18.47 | 15.24 | 3,374 | 0.37 | 2.24 | 11 | |||||||||||||||||||||||||||||||||||||||||
Class I | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | $ | 18.04 | $ | 0.25 | $ | (0.70 | ) | $ | (0.45 | ) | $ | (0.21 | ) | — | $ | (0.15 | ) | $ | (0.36 | ) | $ | 0.00 | (c) | $ | 17.23 | (2.05 | )% | $ | 8,819 | 1.71 | % | 1.25 | % | 17 | % | |||||||||||||||||||||||||
2008(d) | 21.42 | 0.19 | (3.30 | ) | (3.11 | ) | (0.14 | ) | — | (0.13 | ) | (0.27 | ) | 0.00 | (c) | 18.04 | (14.65 | ) | 962 | 1.31 | (e) | 1.18 | (e) | 22 |
† | 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 distributions and does not reflect applicable sales charges. Total return for a period of less than one year is not annualized. | |
†† | Effective in 2008, a change in accounting policy was adopted with regard to the calculation of the portfolio turnover rate to include cash proceeds due to mergers. Had this policy been adopted retroactively, the portfolio turnover rate for the years ended September 30, 2007, 2006, and 2005 would have been 20%, 34%, and 26%, respectively. | |
(a) | Per share amounts have been calculated using the average shares outstanding method. | |
(b) | The ratios do not include a reduction of expenses for custodian fee credits on cash balances maintained with the custodian. Including such custodian fee credits, the expense ratios for the year ended September 30, 2006 would have been 1.45%, 1.45%, 2.20%, and 2.20% for Class AAA, Class A, Class B, and Class C, respectively. For the years ended September 30, 2009, 2008, 2007, and 2005, the effect of the custodian fee credits was minimal. | |
(c) | Amount represents less than $0.005 per share. | |
(d) | From the commencement of offering Class I Shares on January 11, 2008 through September 30, 2008. | |
(e) | Annualized. |
See accompanying notes to financial statements.
13
The Gabelli Equity Income Fund
Notes to Financial Statements
Notes to Financial Statements
1. Organization. The Gabelli Equity Income Fund (the “Fund”) is a series of Gabelli Equity Series Funds, Inc. (the “Corporation”), which 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 three separately managed portfolios (collectively, the “Portfolios”) of the Corporation. The Fund’s primary objective is to seek a high level of total return with an emphasis on income. The Fund commenced investment operations on January 2, 1992.
2. Significant Accounting Policies. The preparation of financial statements in accordance with United States (“U.S.”) 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 or traded in the U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a market’s official closing price 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. If no bid or asked prices are quoted on such day, the security is valued at the most recently available price or, if the Board of Directors (the “Board”) so determines, by such other method as the Board shall determine in good faith to reflect its fair market value. 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”).
Portfolio securities primarily traded on a foreign market are generally valued at the preceding closing values of such securities on the relevant market, but may be fair valued pursuant to procedures established by the Board if market conditions change significantly after the close of the foreign market but prior to the close of business on the day the securities are being valued. Debt instruments with remaining maturities of sixty days or less that are not credit impaired are valued at amortized cost, unless the Board determines such amount does not reflect the securities’ fair value, in which case these securities will be fair valued as determined by the Board. Debt instruments having a maturity greater than sixty days for which market quotations are readily available are valued at the average of the latest bid and asked prices. If there were no asked prices quoted on such day, the security is valued using the closing bid price. Futures contracts are valued at the closing settlement price of the exchange or board of trade on which the applicable contract is traded.
Securities and assets for which market quotations are not readily available are fair valued as determined by the Board. Fair valuation methodologies and procedures may include, but are not limited to: analysis and review of available financial and non-financial information about the company; comparisons with the valuation and changes in valuation of similar securities, including a comparison of foreign securities with the equivalent U.S. dollar value ADR securities at the close of the U.S. exchange; and evaluation of any other information that could be indicative of the value of the security.
14
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
The inputs and valuation techniques used to measure fair value of the Fund’s investments are summarized into three levels as described in the hierarchy below:
• | Level 1 – quoted prices in active markets for identical securities; | ||
• | Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.); and | ||
• | Level 3 – significant unobservable inputs (including the Fund’s determinations as to the fair value of investments). |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of the Fund’s investments and other financial instruments by inputs used to value the Fund’s investments as of September 30, 2009 is as follows:
Valuation Inputs | ||||||||||||||||
Level 1 | Level 2 Other Significant | Level 3 Significant | Total Market Value | |||||||||||||
Quoted Prices | Observable Inputs | Unobservable Inputs | at 9/30/09 | |||||||||||||
INVESTMENTS IN SECURITIES: | ||||||||||||||||
ASSETS (Market Value): | ||||||||||||||||
Common Stocks | ||||||||||||||||
Broadcasting | $ | 2,652,900 | — | $ | 0 | $ | 2,652,900 | |||||||||
Energy and Utilities: Electric | 16,067,500 | — | 0 | 16,067,500 | ||||||||||||
Other Industries (a) | 1,083,568,803 | — | — | 1,083,568,803 | ||||||||||||
Total Common Stocks | 1,102,289,203 | 1,102,289,203 | ||||||||||||||
Convertible Preferred Stocks (a) | 2,319,255 | — | — | 2,319,255 | ||||||||||||
Rights (a) | 23,878 | — | — | 23,878 | ||||||||||||
Warrants (a) | — | — | 3 | 3 | ||||||||||||
Corporate Bonds | — | $ | 8,403,750 | — | 8,403,750 | |||||||||||
U.S. Government Obligations | — | 35,242,196 | — | 35,242,196 | ||||||||||||
TOTAL INVESTMENTS IN SECURITIES | $ | 1,104,632,336 | $ | 43,645,946 | $ | 3 | $ | 1,148,278,285 | ||||||||
OTHER FINANCIAL INSTRUMENTS: | ||||||||||||||||
ASSETS (Unrealized Appreciation): * | ||||||||||||||||
Contract for Difference Swap Agreement | $ | — | $ | 13,164 | $ | — | $ | 13,164 | ||||||||
OTHER FINANCIAL INSTRUMENTS: | ||||||||||||||||
LIABILITIES (Unrealized Depreciation): * | ||||||||||||||||
Contract for Difference Swap Agreement | — | (4,612 | ) | — | (4,612 | ) | ||||||||||
TOTAL OTHER FINANCIAL INSTRUMENTS | $ | — | $ | 8,552 | $ | — | $ | 8,552 | ||||||||
(a) | Security and industry classifications for these categories are detailed in the Schedule of Investments. | |
* | Other financial instruments are derivative instruments not reflected in the Schedule of Investments, such as futures, forwards, and swaps, which are valued at the unrealized appreciation/depreciation of the investment. |
15
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:
Net change | ||||||||||||||||||||||||||||||||
in unrealized | ||||||||||||||||||||||||||||||||
appreciation/ | ||||||||||||||||||||||||||||||||
depreciation | ||||||||||||||||||||||||||||||||
Change in | during the | |||||||||||||||||||||||||||||||
Balance | Accrued | Realized | unrealized | Net | Transfers in | Balance | period on Level 3 | |||||||||||||||||||||||||
as of | discounts/ | gain/ | appreciation/ | purchases/ | and/or out | as of | investments held | |||||||||||||||||||||||||
9/30/08 | (premiums) | (loss) | depreciation† | (sales) | of Level 3 | 9/30/09 | at 9/30/09† | |||||||||||||||||||||||||
INVESTMENTS IN SECURITIES: | ||||||||||||||||||||||||||||||||
ASSETS (Market Value): | ||||||||||||||||||||||||||||||||
Common Stocks | ||||||||||||||||||||||||||||||||
Broadcasting | $ | — | $ | — | $ | — | $ | (924 | ) | $ | — | $ | 924 | $ | 0 | $ | (924 | ) | ||||||||||||||
Energy and Utilities: Electric | 0 | — | — | — | — | — | 0 | — | ||||||||||||||||||||||||
Energy and Utilities: Integrated | 4,950 | — | — | — | — | (4,950 | ) | — | — | |||||||||||||||||||||||
Total Common Stocks | 4,950 | — | — | (924 | ) | — | (4,026 | ) | 0 | (924 | ) | |||||||||||||||||||||
Corporate Bonds | 0 | — | 0 | 97,499 | (97,499 | ) | — | — | — | |||||||||||||||||||||||
Warrants | ||||||||||||||||||||||||||||||||
Broadcasting | — | — | — | (116 | ) | — | 119 | 3 | (116 | ) | ||||||||||||||||||||||
Total Warrants | — | — | — | (116 | ) | — | 119 | 3 | (116 | ) | ||||||||||||||||||||||
TOTAL INVESTMENTS IN SECURITIES | $ | 4,950 | $ | — | $ | 0 | $ | 96,459 | $ | (97,499 | ) | $ | (3,907 | ) | $ | 3 | $ | (1,040 | ) | |||||||||||||
† | Net change in unrealized appreciation/depreciation on investments is included in the related amounts in the Statement of Operations. |
Derivative Financial Instruments.
The Fund may engage in various portfolio investment strategies by investing in a number of derivative financial instruments for the purposes of increasing the income of the Fund, hedging against changes in the value of its portfolio securities and in the value of securities it intends to purchase, or hedging against a specific transaction with respect to either the currency in which the transaction is denominated or another currency. Investing in certain derivative financial instruments, including participation in the options, futures, or swap markets, entails certain execution, liquidity, hedging, tax, and securities, interest, credit, or currency market risks. Losses may arise if the Adviser’s prediction of movements in the direction of the securities, foreign currency, and interest rate markets is inaccurate. Losses may also arise if the counterparty does not perform its duties under a contract, or that, in the event of default, the Fund may be delayed in or prevented from obtaining payments or other contractual remedies owed to it under derivative contracts. The creditworthiness of the counterparties is closely monitored in order to minimize these risks. Participation in derivative transactions involves investment risks, transaction costs, and potential losses to which the Fund would not be subject absent the use of these strategies. The consequences of these risks, transaction costs, and losses may have a negative impact on the Fund’s ability to pay distributions.
Current notional amounts are an indicator of the volume of the Fund’s derivative activities during the period.
Swap Agreements. The Fund may enter into equity and contract for difference swap transactions for the purpose of increasing the income of the Fund. The use of swaps is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio security transactions. In a swap, a set of future cash flows is exchanged between two counterparties. One of these cash flow streams will typically be based on a reference interest rate combined with the performance of a notional value of shares of a stock. The other will be based on the performance of the shares of a stock. Depending on the general state of
16
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
short-term interest rates and the returns on the Fund’s portfolio securities at the time a swap transaction reaches its scheduled termination date, there is a risk that the Fund will not be able to obtain a replacement transaction or that the terms of the replacement will not be as favorable as on the expiring transaction.
Unrealized gains related to swaps are reported as an asset and unrealized losses are reported as a liability in the Statement of Assets and Liabilities. The change in value of swaps, including the accrual of periodic amounts of interest to be paid or received on swaps, is reported as unrealized gain or loss in the Statement of Operations. A realized gain or loss is recorded upon payment or receipt of a periodic payment or termination of swap agreements.
The Fund has entered into equity contract for difference swap agreements with The Goldman Sachs Group, Inc. Details of the swaps at September 30, 2009 are as follows:
Net Unrealized | ||||||||||
Notional | Equity Security | Interest Rate/ | Termination | Appreciation/ | ||||||
Amount | Received | Equity Security Paid | Date | Depreciation | ||||||
Market Value | One month LIBOR plus 90 bps plus | |||||||||
Appreciation on: | Market Value Depreciation on: | |||||||||
$186,431 (140,000 Shares) | Rank Group plc | Rank Group plc | 6/25/10 | $ | 13,164 | |||||
155,015 (20,000 Shares) | Rolls-Royce Group plc | Rolls-Royce Group plc | 6/25/10 | (4,612 | ) | |||||
$ | 8,552 | |||||||||
The value of equity contract for difference swap contracts held as of September 30, 2009 with equity risk exposure can be found on the Statement of Assets and Liabilities under Assets, Unrealized Appreciation on Swap Contracts and Liabilities, Unrealized Depreciation on Swap Contracts.
The effect of equity contract for difference swap contracts with equity risk exposure for the year ended September 30, 2009 can be found on the Statement of Operations.
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 fluctuations in the value of the contract, which are included in unrealized appreciation/depreciation on futures contracts. The Fund recognizes a realized gain or loss when the contract is closed.
There are several risks in connection with the use of futures contracts as a hedging instrument. 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. At September 30, 2009, there were no open futures contracts.
Forward Foreign Exchange Contracts. The Fund may engage in forward foreign exchange contracts for the purpose of 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 foreign currency translations. When the contract is closed, the Fund
17
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
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. At September 30, 2009, there were no open forward foreign exchange contracts.
Securities Sold Short. The Fund may enter into short sale transactions. Short selling involves selling securities that may or may not be owned and, at times, borrowing the same securities for delivery to the purchaser, with an obligation to replace such borrowed securities at a later date. The proceeds received from short sales are recorded as liabilities and the Fund records an unrealized gain or loss to the extent of the difference between the proceeds received and the value of an open short position on the day of determination. The Fund records a realized gain or loss when the short position is closed out. By entering into a short sale, the Fund bears the market risk of an unfavorable change in the price of the security sold short. Dividends on short sales are recorded as an expense by the Fund on the ex-dividend date and interest expense is recorded on the accrual basis. The Fund did not hold any short positions as of September 30, 2009.
Repurchase Agreements. The Fund may enter into repurchase agreements with primary government securities dealers recognized by the Federal Reserve Board, with member banks of the Federal Reserve System, or with other brokers or dealers that meet credit guidelines established by the Adviser and reviewed by the Board. 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. It is the policy of the Fund to always receive and maintain securities as collateral whose market value, including accrued interest, is at least equal to 102% of the dollar amount invested by the Fund in each agreement. The Fund will make payment for such securities only upon physical delivery or upon evidence of book entry transfer of the collateral to the account of the custodian. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to maintain the adequacy of the collateral. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. At September 30, 2009, there were no open repurchase agreements.
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Foreign currencies, investments, and other assets and liabilities are translated into U.S. dollars at the current exchange rates. 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 that 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 translations. 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
18
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
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.
Foreign Securities. The Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation of currencies, the ability to repatriate funds, less complete financial information about companies, and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. issuers.
Foreign Taxes. The Fund may be subject to foreign taxes on income, gains on investments, or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
Restricted and Illiquid Securities. The Fund may invest up to 15% of its net assets in securities for which the markets are illiquid. Illiquid securities include securities the disposition of which is subject to substantial legal or contractual restrictions. The sale of illiquid securities often requires more time and results in higher brokerage charges or dealer discounts and other selling expenses than does the sale of securities eligible for trading on national securities exchanges or in the over-the-counter markets. Restricted securities may sell at a price lower than similar securities that are not subject to restrictions on resale. Securities freely saleable among qualified institutional investors under special rules adopted by the SEC may be treated as liquid if they satisfy liquidity standards established by the Board. The continued liquidity of such securities is not as well assured as that of publicly traded securities, and accordingly the Board will monitor their liquidity.
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 on the accrual basis. Premiums and discounts on debt securities are amortized using the effective yield to maturity method. Dividend income is recorded on the ex-dividend date except for certain dividends which are recorded as soon as the Fund is informed of the dividend.
Determination of Net Asset Value and Calculation of Expenses. Certain administrative expenses are common to, and allocated among, various affiliated funds. Such allocations are made on the basis of each fund’s average net assets or other criteria directly affecting the expenses as determined by the Adviser pursuant to procedures established by the Board.
In calculating the NAV per share of each class, investment income, realized and unrealized gains and losses, redemption fees, and expenses other than class specific expenses are allocated daily to each class of shares based upon the proportion of net assets of each class at the beginning of each day. Distribution expenses are borne solely by the class incurring the expense.
Custodian Fee Credits and Interest Expense. When cash balances are maintained in the custody account, the Fund receives credits which are used to offset custodian fees. The gross expenses paid under the custody arrangement are included in custodian fees in the Statement of Operations with the corresponding expense offset, if any, shown as “custodian fee credits.” When cash balances are overdrawn, the Fund is charged an overdraft fee equal to 2.00% above the federal funds rate on outstanding balances. This amount, if any, would be included in “interest expense” in the Statement of Operations.
19
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
Distributions to Shareholders. Distributions to shareholders are recorded on the ex-dividend date. Distributions to shareholders are based on income and capital gains as determined in accordance with federal income tax regulations, which may differ from income and capital gains as determined under U.S. generally accepted accounting principles. These differences are primarily due to differing treatments of income and gains on various investment securities and foreign currency transactions held by the Fund, timing differences, and differing characterizations of distributions made by the Fund. Distributions from net investment income include net realized gains on foreign currency transactions. These book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent, adjustments are made to the appropriate capital accounts in the period when the differences arise. These reclassifications have no impact on the NAV of the Fund. For the year ended September 30, 2009, reclassifications were made to decrease accumulated distributions in excess of net investment income by $62,402 and decrease accumulated net realized loss on investments, swap contracts, and foreign currency transactions by $59,252, with an offsetting adjustment to additional paid-in capital.
The tax character of distributions paid during the years ended September 30, 2009 and September 30, 2008 was as follows:
Year Ended | Year Ended | |||||||
September 30, 2009 | September 30, 2008 | |||||||
Distributions paid from: | ||||||||
Ordinary income (inclusive of short-term capital gains) | $ | 13,400,745 | $ | 11,894,382 | ||||
Net long-term capital gains | — | 21,013,581 | ||||||
Return of capital | 9,715,970 | 9,544,846 | ||||||
Total distributions paid | $ | 23,116,715 | $ | 42,452,809 | ||||
The Fund has a fixed distribution policy. Under the policy, the Fund declares and pays monthly distributions from net investment income and capital gains. The actual source of the distribution is determined after the end of the calendar year. To the extent such distributions are made from current earnings and profits, they are considered ordinary income or long-term capital gains. The Fund’s current distribution policy may restrict the Fund’s ability to pay out all of its net realized long-term capital gains as a Capital Gain Dividend. The Fund continues to evaluate its distribution policy in light of ongoing economic and market conditions and may change the amount of the monthly distributions in the future. The Fund currently intends to pay $0.03 per share on a monthly basis.
Provision for Income Taxes. The Fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). It is the policy of the Fund to comply with the requirements of the Code applicable to regulated investment companies and to distribute substantially all of its net investment company taxable income and net capital gains. Therefore, no provision for federal income taxes is required.
As of September 30, 2009, the components of accumulated earnings/losses on a tax basis were as follows:
Accumulated capital loss carryforwards | $ | (1,899,612 | ) | |
Net unrealized appreciation on investments | 29,202,493 | |||
Post-October loss deferral | (73,295,321 | ) | ||
Other temporary differences* | (14,823 | ) | ||
Total | $ | (46,007,263 | ) | |
* | Other temporary differences are primarily due to prior year dividend adjustments, mark to market adjustments on swaps, and basis adjustments to hybrid income. |
20
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
At September 30, 2009, the Fund had a net capital loss carryforward for federal income tax purposes of $1,899,612 which is available to reduce future required distributions of net capital gains to shareholders through 2017.
Under the current tax law, capital losses related to securities and foreign currency realized after October 31 and prior to the Fund’s year end may be treated as occurring on the first day of the following year. For the year ended September 30, 2009, the Fund deferred capital losses of $73,254,481 and currency losses of $40,840.
At September 30, 2009, the difference between book and tax basis unrealized appreciation is primarily due to deferral of losses on wash sales for tax purposes and basis adjustments on investments in partnerships and investments in securities.
The following summarizes the tax cost of investments and the related unrealized appreciation/depreciation at September 30, 2009:
Gross | Gross | |||||||||||||||
Unrealized | Unrealized | Net Unrealized | ||||||||||||||
Cost | Appreciation | Depreciation | Appreciation | |||||||||||||
Investments | $ | 1,119,088,042 | $ | 158,987,946 | $ | (129,797,703 | ) | $ | 29,190,243 | |||||||
Swap contracts | — | 13,164 | (4,612 | ) | 8,552 | |||||||||||
$ | 1,119,088,042 | $ | 159,001,110 | $ | (129,802,315 | ) | $ | 29,198,795 | ||||||||
Management has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax years (current and prior three tax years) and has concluded that no provision for federal income tax is required in the Fund’s financial statements. The Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
3. Investment Advisory Agreement and Other Transactions. The Fund has 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 its 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 affiliated persons of the Adviser.
The Corporation pays each Director who is not considered an affiliated person an annual retainer of $9,000 plus $1,000 for each Board meeting attended. Each Director is reimbursed by the Corporation for any out of pocket expenses incurred in attending meetings. All Board committee members receive $500 per meeting attended and the Chairman of the Audit Committee and the Lead Director each receive an annual fee of $1,000. A Director may receive a single meeting fee, allocated among the participating funds, for participation in certain meetings held on behalf of multiple funds. Directors who are directors or employees of the Adviser or an affiliated company receive no compensation or expense reimbursement from the Corporation.
4. Distribution Plan. The Fund’s Board has adopted a distribution plan (the “Plan”) for each class of shares, except for Class I Shares, pursuant to Rule 12b-1 under the 1940 Act. Gabelli & Company, Inc. (“Gabelli & Company”), an affiliate of the Adviser, serves as distributor of the Fund. Under the Class AAA, Class A, Class B, and Class C Share Plans, payments are authorized to Gabelli & Company at annual rates of 0.25%, 0.25%, 1.00%, and 1.00%, respectively, of the average daily net assets of those classes, the annual limitations under each Plan. Such payments are accrued daily and paid monthly.
21
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
5. Portfolio Securities. Purchases and sales of securities for the year ended September 30, 2009, other than short-term securities and U.S. Government obligations, aggregated $162,374,183 and $169,214,540, respectively.
Sales of U.S. Government obligations for the year ended September 30, 2009, other than short-term obligations, aggregated $6,242,883.
6. Transactions with Affiliates. During the year ended September 30, 2009, the Fund paid brokerage commissions on security trades of $377,283 to Gabelli & Company. Additionally, Gabelli & Company informed the Fund that it retained $29,136 from investors representing commissions (sales charges and underwriting fees) on sales and redemptions of Fund shares.
The cost of calculating the Fund’s NAV per share is a Fund expense pursuant to the Advisory Agreement between the Fund and the Adviser. During the year ended September 30, 2009, the Fund paid or accrued $45,000 to the Adviser in connection with the cost of computing the Fund’s NAV.
7. Line of Credit. The Fund participates in an unsecured line of credit of up to $75,000,000 under which it may borrow up to 10% of its net assets from the custodian for temporary borrowing purposes. Borrowings under this arrangement bear interest at the higher of the sum of the overnight LIBOR plus 100 basis points or the sum of the federal funds rate plus 100 basis points at the time of borrowing. This amount, if any, would be included in “interest expense” in the Statement of Operations. At September 30, 2009, there were no borrowings outstanding under the line of credit.
The average daily amount of borrowings outstanding under the line of credit during the year ended September 30, 2009 was $1,566,170 with a weighted average interest rate of 1.08%. The maximum amount borrowed at any time during the year ended September 30, 2009 was $16,544,000.
8. Capital Stock. The Fund offers five classes of shares – Class AAA Shares, Class A Shares, Class B Shares, Class C Shares, and Class I Shares. Class AAA Shares are offered without a sales charge only to investors who acquire them directly from Gabelli & Company, or through selected broker/dealers, or the transfer agent. Class I Shares are offered to foundations, endowments, institutions, and employee benefit plans without a sales charge. Class A Shares are subject to a maximum front-end sales charge of 5.75%. Class B Shares are subject to a contingent deferred sales charge (“CDSC”) upon redemption within six years of purchase and automatically convert to Class A Shares approximately eight years after the original purchase. The applicable CDSC is equal to a declining percentage of the lesser of the NAV per share at the date of the original purchase or at the date of redemption, based on the length of time held. Class C Shares are subject to a 1.00% CDSC for one year after purchase. Class B Shares are available only through exchange of Class B Shares of other funds distributed by Gabelli & Company. Class I Shares were first issued on January 11, 2008.
The Fund imposes a redemption fee of 2.00% on all classes of shares that are redeemed or exchanged on or before the seventh day after the date of a purchase. The redemption fee is deducted from the proceeds otherwise payable to the redeeming shareholders and is retained by the Fund. The redemption fees retained by the Fund during the years ended September 30, 2009 and 2008, amounted to $1,178 and $7,092, respectively.
22
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
The redemption fee does not apply to redemptions of shares where (i) the shares were purchased through automatic reinvestment of distributions, (ii) the redemption was initiated by the Fund, (iii) the shares were purchased through programs that collect the redemption fee at the program level and remit them to the Fund, or (iv) the shares were purchased through programs that the Adviser determines to have appropriate anti-short-term trading policies in place or as to which the Adviser has received assurances that look-through redemption fee procedures or effective anti-short-term trading policies and procedures are in place.
Transactions in shares of capital stock were as follows:
Year Ended | Year Ended | ||||||||||||||||
September 30, 2009 | September 30, 2008 | ||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||
Class AAA | Class AAA | ||||||||||||||||
Shares sold | 20,754,130 | $ | 302,088,224 | 24,093,784 | $ | 504,580,779 | |||||||||||
Shares issued upon reinvestment of distributions | 1,423,010 | 20,241,888 | 1,797,042 | 38,520,431 | |||||||||||||
Shares redeemed | (21,736,561 | ) | (303,932,376 | ) | (14,644,330 | ) | (303,216,554 | ) | |||||||||
Net increase | 440,579 | $ | 18,397,736 | 11,246,496 | $ | 239,884,656 | |||||||||||
Class A | Class A | ||||||||||||||||
Shares sold | 1,152,325 | $ | 16,776,961 | 798,290 | $ | 16,578,039 | |||||||||||
Shares issued upon reinvestment of distributions | 36,073 | 513,106 | 25,861 | 548,965 | |||||||||||||
Shares redeemed | (648,443 | ) | (9,253,366 | ) | (212,203 | ) | (4,328,890 | ) | |||||||||
Net increase | 539,955 | $ | 8,036,701 | 611,948 | $ | 12,798,114 | |||||||||||
Class B | Class B | ||||||||||||||||
Shares sold | 1,088 | $ | 13,188 | 9,738 | $ | 196,093 | |||||||||||
Shares issued upon reinvestment of distributions | 316 | 4,257 | 543 | 11,320 | |||||||||||||
Shares redeemed | (8,965 | ) | (127,915 | ) | (11,132 | ) | (219,667 | ) | |||||||||
Net decrease | (7,561 | ) | $ | (110,470 | ) | (851 | ) | $ | (12,254 | ) | |||||||
Class C | Class C | ||||||||||||||||
Shares sold | 757,678 | $ | 10,228,605 | 472,038 | $ | 9,589,680 | |||||||||||
Shares issued upon reinvestment of distributions | 29,522 | 402,548 | 29,534 | 611,310 | |||||||||||||
Shares redeemed | (456,330 | ) | (6,042,038 | ) | (205,866 | ) | (4,018,713 | ) | |||||||||
Net increase | 330,870 | $ | 4,589,115 | 295,706 | $ | 6,182,277 | |||||||||||
Class I | Class I* | ||||||||||||||||
Shares sold | 675,326 | $ | 9,395,435 | 54,128 | $ | 1,152,550 | |||||||||||
Shares issued upon reinvestment of distributions | 5,494 | 84,446 | 550 | 11,076 | |||||||||||||
Shares redeemed | (222,311 | ) | (3,125,181 | ) | (1,349 | ) | (28,329 | ) | |||||||||
Net increase | 458,509 | $ | 6,354,700 | 53,329 | $ | 1,135,297 | |||||||||||
* | From the commencement of offering Class I Shares on January 11, 2008. |
9. Indemnifications. The Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
23
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
10. Other Matters. On April 24, 2008, the Adviser entered into an administrative settlement with the SEC to resolve the SEC’s inquiry regarding prior frequent trading activity in shares of the GAMCO Global Growth Fund (the “Global Growth Fund”) by one investor who was banned from the Global Growth Fund in August 2002. In the settlement, the SEC found that the Adviser had violated Section 206(2) of the Investment Advisers Act, Section 17(d) of the 1940 Act, and Rule 17d-1 thereunder, and had aided and abetted and caused violations of Section 12(d)(1)(B)(i) of the 1940 Act. Under the terms of the settlement, the Adviser, while neither admitting nor denying the SEC’s findings and allegations, agreed, among other things, to pay the previously reserved total of $16 million (including a $5 million penalty), of which at least $11 million will be distributed to shareholders of the Global Growth Fund in accordance with a plan developed by an independent distribution consultant and approved by the independent directors of the Global Growth Fund and the staff of the SEC, and to cease and desist from future violations of the above referenced federal securities laws. The settlement will not have a material adverse impact on the Adviser or its ability to fulfill its obligations under the Advisory Agreement. On the same day, the SEC filed a civil action against the Executive Vice President and Chief Operating Officer of the Adviser, alleging violations of certain federal securities laws arising from the same matter. The officer is also an officer of the Global Growth Fund and other funds in the Gabelli/GAMCO fund complex including the Fund. The officer denies the allegations and is continuing in his positions with the Adviser and the funds. The Adviser currently expects that any resolution of the action against the officer will not have a material adverse impact on the Fund or the Adviser or its ability to fulfill its obligations under the Advisory Agreement.
11. Subsequent Events. Management has evaluated the impact of all subsequent events on the Fund through November 24, 2009, the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements.
24
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
The Gabelli Equity Income Fund
The Gabelli Equity Income Fund
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of The Gabelli Equity Income Fund (the “Fund”), a series of Gabelli Equity Series Funds, Inc., as of September 30, 2009, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2009, by correspondence with the Fund’s custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Gabelli Equity Income Fund, a series of Gabelli Equity Series Funds, Inc., at September 30, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
Philadelphia, Pennsylvania November 24, 2009 | ![]() |
25
The Gabelli Equity Income Fund
Additional Fund Information (Unaudited)
Additional Fund Information (Unaudited)
The business and affairs of the Fund are managed under the direction of the Corporation’s Board of Directors. Information pertaining to the Directors and officers of the Corporation is set forth below. The Corporation’s Statement of Additional Information includes additional information about the Corporation’s Directors and is available, without charge, upon request, by calling 800-GABELLI (800-422-3554) or by writing to The Gabelli Equity Income Fund at One Corporate Center, Rye, NY 10580-1422.
Name, Position(s) | Term of Office | Number of Funds | ||||||||
Address1 | and Length of | in Fund Complex | Principal Occupation(s) | Other Directorships | ||||||
and Age | Time Served2 | Overseen by Director | During Past Five Years | Held by Director3 | ||||||
INTERESTED DIRECTORS4: | ||||||||||
Mario J. Gabelli Director and Chief Investment Officer Age: 67 | Since 1991 | 26 | Chairman and Chief Executive Officer of GAMCO Investors, Inc. and Chief Investment Officer—Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management Inc.; Director/Trustee or Chief Investment Officer of other registered investment companies in the Gabelli/GAMCO Funds complex; Chairman and Chief Executive Officer of GGCP, Inc. | Director of Morgan Group Holdings, Inc. (holding company); Chairman of the Board of LICT Corp. (multimedia and communication services company); Director of CIBL, Inc. (broadcasting and wireless communications) | ||||||
John D. Gabelli Director Age: 65 | Since 1991 | 10 | Senior Vice President of Gabelli & Company, Inc. | — | ||||||
INDEPENDENT DIRECTORS5: | ||||||||||
Anthony J. Colavita Director Age: 73 | Since 1991 | 36 | President of the law firm of Anthony J. Colavita, P.C. | — | ||||||
Vincent D. Enright Director Age: 65 | Since 1991 | 16 | Former Senior Vice President and Chief Financial Officer of KeySpan Corporation (public utility) (1994-1998) | Director of Echo Therapeutics, Inc. (therapeutics and diagnostics) | ||||||
Robert J. Morrissey Director Age: 70 | Since 1991 | 6 | Partner in the law firm of Morrissey, Hawkins & Lynch | — | ||||||
Anthony R. Pustorino Director Age: 84 | Since 1991 | 13 | Certified Public Accountant; Professor Emeritus, Pace University | Director of The LGL Group, Inc. (diversified manufacturing) | ||||||
Anthonie C. van Ekris Director Age: 75 | Since 1991 | 20 | Chairman of BALMAC International, Inc. (commodities and futures trading) | — | ||||||
Salvatore J. Zizza Director Age: 63 | Since 2001 | 28 | Chairman of Zizza & Company, Ltd. (consulting) | Director of Hollis-Eden Pharmaceuticals (biotechnology); Director of Trans-Lux Corporation (business services) |
26
The Gabelli Equity Income Fund
Additional Fund Information (Unaudited) (Continued)
Name, Position(s) | Term of Office | |||
Address1 | and Length of | Principal Occupation(s) | ||
and Age | Time Served2 | During Past Five Years | ||
OFFICERS: | ||||
Bruce N. Alpert President and Secretary Age: 57 | Since 1991 | Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC since 1988 and an officer of all of the registered investment companies in the Gabelli/GAMCO Funds complex; President of Teton Advisors, Inc. 1998 through 2008; Chairman of Teton Advisors, Inc. since 2008; Senior Vice President of GAMCO Investors, Inc. since 2008 | ||
Agnes Mullady Treasurer Age: 51 | Since 2006 | Senior Vice President of GAMCO Investors, Inc. since 2009, Vice President of Gabelli Funds, LLC since 2007; Officer of all of the registered investment companies in the Gabelli/GAMCO Funds complex; Senior Vice President of U.S. Trust Company, N.A. and Treasurer and Chief Financial Officer of Excelsior Funds from 2004 through 2005; Chief Financial Officer of AMIC Distribution Partners from 2002 through 2004 | ||
Peter D. Goldstein Chief Compliance Officer Age: 56 | Since 2004 | Director of Regulatory Affairs at GAMCO Investors, Inc. since 2004; Chief Compliance Officer of all of the registered investment companies in the Gabelli/GAMCO Funds complex |
1 | Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise noted. | |
2 | Each Director will hold office for an indefinite term until the earliest of (i) the next meeting of shareholders, if any, called for the purpose of considering the election or re-election of such Director and until the election and qualification of his or her successor, if any, elected at such meeting, or (ii) the date a Director resigns or retires, or a Director is removed by the Board of Directors or shareholders, in accordance with the Corporation’s By-Laws and Articles of Incorporation. Each officer will hold office for an indefinite term until the date he or she resigns or retires or until his or her successor is elected and qualified. | |
3 | This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934 (i.e., public companies) or other investment companies registered under the 1940 Act. | |
4 | “Interested person” of the Fund as defined in the Investment Company Act of 1940. Messrs. Gabelli are each considered an “interested person” because of their affiliation with Gabelli Funds, LLC which acts as the Fund’s investment adviser. Mario J. Gabelli and John D. Gabelli are brothers. | |
5 | Directors who are not interested persons are considered “Independent” Directors. |
2009 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the year ended September 30, 2009, the Fund paid to shareholders ordinary income distributions (comprised of net investment income) totaling $0.21, $0.21, $0.21, $0.21, and $0.21 per share for Class AAA, Class A, Class B, Class C, and Class I, respectively. For the year ended September 30, 2009, 100% of the ordinary income distribution qualifies for the dividends received deduction available to corporations. The Fund designates 100% of the ordinary income distribution (excluding return of capital distributions) as qualified dividend income pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Fund designates 3.41% of the ordinary income distribution as qualified interest income pursuant to the American Jobs Creation Act of 2004.
U.S. Government Income:
The percentage of the ordinary income distribution paid by the Fund during the year ended September 30, 2009 which was derived from U.S. Treasury securities was 0.10%. Such income is exempt from state and local tax in all states. However, many states, including New York and California, allow a tax exemption for a portion of the income earned only if a mutual fund has invested at least 50% of its assets at the end of each quarter of the Fund’s fiscal year in U.S. Government securities. The Gabelli Equity Income Fund did not meet this strict requirement in 2009. Due to the diversity in state and local tax law, it is recommended that you consult your personal tax adviser as to the applicability of the information provided to your specific situation.
All designations are based on financial information available as of the date of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code and the regulations thereunder.
27
Gabelli Equity Series Funds, Inc.
The Gabelli Equity Income Fund
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
fax: 914-921-5118
website: www.gabelli.com
e-mail: info@gabelli.com
Net Asset Value per share available daily by calling
800-GABELLI after 7:00 P.M.
The Gabelli Equity Income Fund
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
fax: 914-921-5118
website: www.gabelli.com
e-mail: info@gabelli.com
Net Asset Value per share available daily by calling
800-GABELLI after 7:00 P.M.
Board of Directors
Mario J. Gabelli, CFA | Robert J. Morrissey | |
Chairman and Chief | Attorney-at-Law | |
Executive Officer | Morrissey, Hawkins & Lynch | |
GAMCO Investors, Inc. | ||
Anthony J. Colavita | Anthony R. Pustorino | |
President | Certified Public Accountant, | |
Anthony J. Colavita, P.C. | Professor Emeritus | |
Pace University | ||
Vincent D. Enright | Anthonie C. van Ekris | |
Former Senior Vice President | Chairman | |
and Chief Financial Officer | BALMAC International, Inc. | |
KeySpan Corp. | ||
John D. Gabelli | Salvatore J. Zizza | |
Senior Vice President | Chairman | |
Gabelli & Company, Inc. | Zizza & Co., Ltd. |
Officers
Bruce N. Alpert | Agnes Mullady | |
President and Secretary | Treasurer | |
Peter D. Goldstein | ||
Chief Compliance Officer |
Distributor
Gabelli & Company, Inc.
Gabelli & Company, Inc.
Custodian, Transfer Agent, and Dividend Agent
State Street Bank and Trust Company
State Street Bank and Trust Company
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom LLP
Skadden, Arps, Slate, Meagher & Flom LLP
This report is submitted for the general information of the shareholders of The Gabelli Equity Income Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus.
GAB444Q309SR
![(IMAGE)](https://capedge.com/proxy/N-CSR/0000950123-09-068072/p16279p1627903.gif)
The Gabelli Equity Income Fund
ANNUAL REPORT
SEPTEMBER 30, 2009
SEPTEMBER 30, 2009
The Gabelli Woodland Small Cap Value Fund
Annual Report (a)
September 30, 2009
September 30, 2009
To Our Shareholders,
The Gabelli Woodland Small Cap Value Fund’s (the “Fund”) (Class AAA) total return was (9.0)% for the year ended September 30, 2009, compared with (9.6)% for the Russell 2000 Index and 12.6% for the Value Line Composite Index.
Enclosed are the investment portfolio and financial statements as of September 30, 2009.
Comparative Results
Average Annual Returns through September 30, 2009 (a)(b)
Since | ||||||||||||||||||||||||
Year to | Inception | |||||||||||||||||||||||
Quarter | Date | 1 Year | 3 Year | 5 Year | (12/31/02) | |||||||||||||||||||
Gabelli Woodland Small Cap Value Fund Class AAA | 16.18 | % | 26.00 | % | (8.99 | )% | (1.57 | )% | 2.77 | % | 5.88 | % | ||||||||||||
Russell 2000 Index | 19.28 | 22.43 | (9.55 | ) | (4.57 | ) | 2.41 | 8.37 | ||||||||||||||||
S&P 500 Index | 15.59 | 19.27 | (6.91 | ) | (5.43 | ) | 1.01 | 4.82 | ||||||||||||||||
Value Line Composite Index | 25.36 | 76.31 | 12.62 | 1.68 | 6.40 | 11.45 | ||||||||||||||||||
Class A | 16.20 | 25.95 | (9.04 | ) | (1.52 | ) | 2.82 | 5.92 | ||||||||||||||||
9.52 | (c) | 18.71 | (c) | (14.41 | )(c) | (3.50 | )(c) | 1.58 | (c) | 4.97 | (c) | |||||||||||||
Class B | 15.99 | 25.36 | (9.56 | ) | (2.36 | ) | 1.97 | 5.50 | ||||||||||||||||
10.99 | (d) | 20.36 | (d) | (14.08 | )(d) | (3.35 | )(d) | 1.60 | (d) | 5.39 | ||||||||||||||
Class C | 15.91 | 25.30 | (9.61 | ) | (2.28 | ) | 2.05 | 5.17 | ||||||||||||||||
14.91 | (e) | 24.30 | (e) | (10.52 | )(e) | (2.28 | ) | 2.05 | 5.17 | |||||||||||||||
Class I | 16.11 | 26.27 | (8.76 | ) | (1.45 | ) | 2.85 | 5.94 |
In the current prospectus, the gross expense ratios for Class AAA, A, B, C, and I Shares are 2.52%, 2.52%, 3.27%, 3.27%, and 2.27%, respectively. The net expense ratios after contractual reimbursements by Gabelli Funds, LLC (the “Adviser”) in place through January 31, 2011 are 2.01%, 2.01%, 2.76%, 2.76%, and 1.76% respectively. Class AAA and I Shares do not have a sales charge. The maximum sales charge for Class A, B, and C Shares is 5.75%, 5.00%, and 1.00%, respectively. Class AAA and Class I Shares do not have a sales charge. See page 9 for the expense ratios for the year ended September 30, 2009.
(a) | The Fund’s fiscal year ends September 30. | |
(b) | Returns represent past performance and do not guarantee future results. Total returns and average annual returns reflect changes in share price and reinvestment of distributions and are net of expenses. 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. Performance returns for periods of less than one year are not annualized. Current performance may be lower or higher than the performance data presented. Visit www.gabelli.com for performance information as of the most recent month end. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The prospectus contains more information about this and other matters and should be read carefully before investing. | |
The Class AAA Shares net asset values (“NAVs”) per share are used to calculate performance for the periods prior to the issuance of Class I Shares on January 11, 2008. The actual performance of Class I Shares would have been higher due to lower expenses associated with this class of shares. 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. The Russell 2000 Index of small U.S. companies, the S&P 500 Index of the largest U.S. companies, and the Value Line Composite Index (comprised of equally weighted positions in every stock covered in the Value Line Investment Survey) are unmanaged indicators of stock market performance. Dividends are considered reinvested. You cannot invest directly in an index. | ||
(c) | Includes the effect of the maximum 5.75% sales charge at the beginning of the period. | |
(d) | Performance results include the deferred sales charges for the Class B Shares upon redemption at the end of the quarter, year to date, one year, three year, five year and since inception periods of 5%, 5%, 5%, 3% and 2%, respectively, of the Fund’s NAV per share at the time of purchase or sale, whichever is lower. Class B Shares are not available for new purchases. | |
(e) | Performance results include the deferred sales charges for the Class C Shares upon redemption at the end of the quarter, year to date, and one year periods of 1% of the Fund’s NAV per share at the time of purchase or sale, whichever is lower. |
Performance Discussion
The Fund’s Class AAA Shares fell 9.0% for the fiscal year ended September 30, 2009 versus the Russell 2000, which declined 9.6%.
Overall, we think it is safe to say that the financial panic is over, given the scale of government guarantees and as reflected in the recovery of the stock market. The recovery has been fueled by the bailout of the financial system and the extraordinary fiscal and monetary policies.
During the past year, we had several investments that added to our overall performance. Four of the more significant contributors were Tier Technologies Inc. (3.7% of net assets as of September 30, 2009), Discovery Communications Inc. (3.5%), Bway Holding Co. (2.1%), and Gaylord Entertainment Co. (1.9%).
Our weaker performing stocks during the year were SurModics Inc. (1.8%), Immucor Inc. (1.3%), and Midas (0.9%).
The portfolio continues to be constructed with a fundamental bottom up investment approach. Therefore, we do not have a Fund that will mirror the performance of the Russell 2000. What we do own is a collection of good businesses that generate free cash flow that the portfolio manager believes are operated by honest and talented management teams, and are disciplined in their capital allocation decisions.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GABELLI
WOODLAND SMALL CAP VALUE FUND CLASS AAA AND THE RUSSELL 2000 INDEX
WOODLAND SMALL CAP VALUE FUND CLASS AAA AND THE RUSSELL 2000 INDEX
![(LINE CHART)](https://capedge.com/proxy/N-CSR/0000950123-09-068072/p16279p1627903a.gif)
We have separated the portfolio manager’s commentary from the financial statements and investment portfolio due to corporate governance regulations stipulated by the Sarbanes-Oxley Act of 2002. We have done this to ensure that the content of the portfolio manager’s commentary is unrestricted. The financial statements and investment portfolio are mailed separately from the commentary. Both the commentary and the financial statements, including the portfolio of investments, will be available on our website at www.gabelli.com/funds.
2
The Gabelli Woodland Small Cap Value Fund
Disclosure of Fund Expenses (Unaudited)
Disclosure of Fund Expenses (Unaudited)
For the Six Month Period from April 1, 2009 through September 30, 2009 | Expense Table |
We believe it is important for you to understand the impact of fees and expenses regarding your investment. All mutual funds have operating expenses. As a shareholder of a fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of a fund. When a fund’s expenses are expressed as a percentage of its average net assets, this figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your Fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The Expense Table below illustrates your Fund’s costs in two ways:
Actual Fund Return: This section provides information about actual account values and actual expenses. You may use this section to help you to estimate the actual expenses that you paid over the period after any fee waivers and expense reimbursements. The “Ending Account Value” shown is derived from the Fund’s actual return during the past six months, and the “Expenses Paid During Period” shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your Fund under the heading “Expenses Paid During Period” to estimate the expenses you paid during this period.
Hypothetical 5% Return: This section provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio. It assumes a hypothetical annualized return of 5% before expenses during the period shown. In this case – because the hypothetical return used is not the Fund’s actual return – the results do not apply to your investment and you cannot use the hypothetical account value and expense to estimate the actual ending account balance or expenses you paid for the period. This example is useful in making comparisons of the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads), redemption fees, or exchange fees, if any, which are described in the Prospectus. If these costs were applied to your account, your costs would be higher. Therefore, the 5% hypothetical return is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. The “Annualized Expense Ratio” represents the actual expenses for the last six months and may be different from the expense ratio in the Financial Highlights which is for the year ended September 30, 2009.
Beginning | Ending | Annualized | Expenses | |||||||||||||
Account Value | Account Value | Expense | Paid During | |||||||||||||
04/01/09 | 09/30/09 | Ratio | Period* | |||||||||||||
The Gabelli Woodland Small Cap Value Fund | ||||||||||||||||
Actual Fund Return | ||||||||||||||||
Class AAA | $ | 1,000.00 | $ | 1,471.10 | 2.01 | % | $ | 12.45 | ||||||||
Class A | $ | 1,000.00 | $ | 1,468.60 | 2.01 | % | $ | 12.44 | ||||||||
Class B | $ | 1,000.00 | $ | 1,464.20 | 2.76 | % | $ | 17.05 | ||||||||
Class C | $ | 1,000.00 | $ | 1,465.50 | 2.75 | % | $ | 17.00 | ||||||||
Class I | $ | 1,000.00 | $ | 1,471.20 | 1.76 | % | $ | 10.90 | ||||||||
Hypothetical 5% Return | ||||||||||||||||
Class AAA | $ | 1,000.00 | $ | 1,014.99 | 2.01 | % | $ | 10.15 | ||||||||
Class A | $ | 1,000.00 | $ | 1,014.99 | 2.01 | % | $ | 10.15 | ||||||||
Class B | $ | 1,000.00 | $ | 1,011.23 | 2.76 | % | $ | 13.92 | ||||||||
Class C | $ | 1,000.00 | $ | 1,011.28 | 2.75 | % | $ | 13.87 | ||||||||
Class I | $ | 1,000.00 | $ | 1,016.24 | 1.76 | % | $ | 8.90 |
* | Expenses are equal to the Fund’s annualized expense ratio for the last six months multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365. |
3
Summary of Portfolio Holdings (Unaudited)
The following table presents portfolio holdings as a percent of net assets as of September 30, 2009:
The Gabelli Woodland Small Cap Value Fund
Computer Software and Services | 18.4 | % | ||
Diversified Industrial | 12.2 | % | ||
Health Care | 10.2 | % | ||
Business Services | 8.0 | % | ||
Equipment and Supplies | 5.9 | % | ||
Aerospace | 5.6 | % | ||
Entertainment | 4.6 | % | ||
Machinery | 4.5 | % | ||
Energy and Utilities | 4.3 | % | ||
Consumer Products | 4.1 | % | ||
Publishing | 3.4 | % | ||
Financial Services | 3.0 | % | ||
U. S. Government Obligations | 2.6 | % | ||
Food and Beverage | 2.5 | % | ||
Consumer Services | 2.1 | % | ||
Automotive: Parts and Accessories | 2.0 | % | ||
Hotels and Gaming | 1.9 | % | ||
Retail | 1.9 | % | ||
Specialty Chemicals | 1.2 | % | ||
Telecommunications | 1.1 | % | ||
Transportation | 0.9 | % | ||
Restaurants | 0.8 | % | ||
Other Assets and Liabilities(Net) | (1.2 | )% | ||
100.0 | % | |||
The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (the “SEC”) for the first and third quarters of each fiscal year on Form N-Q, the last of which was filed for the quarter ended June 30, 2009. Shareholders may obtain this information at www.gabelli.com or by calling the Fund at 800-GABELLI (800-422-3554). The Fund’s Form N-Q is available on the SEC’s website at www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Proxy Voting
The Fund files Form N-PX with its complete proxy voting record for the twelve months ended June 30th, no later than August 31st of each year. A description of the Fund’s proxy voting policies, procedures, and how the Fund voted proxies relating to portfolio securities is available without charge, upon request, by (i) calling 800-GABELLI (800-422-3554); (ii) writing to The Gabelli Funds at One Corporate Center, Rye, NY 10580-1422; or (iii) visiting the SEC’s website at www.sec.gov.
4
The Gabelli Woodland Small Cap Value Fund
Schedule of Investments — September 30, 2009
Schedule of Investments — September 30, 2009
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS — 98.6% | ||||||||||||
Aerospace — 5.6% | ||||||||||||
8,600 | Herley Industries Inc.† | $ | 126,722 | $ | 112,230 | |||||||
5,020 | Kaman Corp. | 132,222 | 110,340 | |||||||||
5,200 | Spirit Aerosystems Holdings Inc., Cl. A† | 77,364 | 93,912 | |||||||||
336,308 | 316,482 | |||||||||||
Automotive: Parts and Accessories — 2.0% | ||||||||||||
3,400 | ATC Technology Corp.† | 55,960 | 67,184 | |||||||||
5,290 | Midas Inc.† | 99,924 | 49,726 | |||||||||
155,884 | 116,910 | |||||||||||
Business Services — 8.0% | ||||||||||||
1,358 | Ascent Media Corp., Cl. A† | 35,464 | 34,765 | |||||||||
4,890 | Deluxe Corp. | 77,745 | 83,619 | |||||||||
8,150 | Edgewater Technology Inc.† | 58,199 | 23,961 | |||||||||
4,000 | Intermec Inc.† | 98,702 | 56,400 | |||||||||
4,000 | Liquidity Services Inc.† | 24,777 | 41,280 | |||||||||
8,800 | PRG-Schultz International Inc.† | 41,304 | 49,280 | |||||||||
8,333 | Safeguard Scientifics Inc.† | 58,673 | 91,413 | |||||||||
2,820 | The Brink’s Co. | 72,916 | 75,886 | |||||||||
467,780 | 456,604 | |||||||||||
Computer Software and Services — 18.4% | ||||||||||||
9,000 | Dynamics Research Corp.† | 73,406 | 117,180 | |||||||||
3,900 | Fair Isaac Corp. | 58,346 | 83,811 | |||||||||
18,410 | Lawson Software Inc.† | 138,033 | 114,878 | |||||||||
2,000 | MICROS Systems Inc.† | 41,540 | 60,380 | |||||||||
4,340 | MTS Systems Corp. | 152,438 | 126,771 | |||||||||
15,000 | PLATO Learning Inc.† | 62,099 | 64,800 | |||||||||
5,500 | Stratasys Inc.† | 63,000 | 94,380 | |||||||||
25,000 | Tier Technologies Inc., Cl. B† | 236,604 | 212,000 | |||||||||
14,800 | TransAct Technologies Inc.† | 67,877 | 78,440 | |||||||||
5,400 | Versant Corp.† | 79,458 | 96,660 | |||||||||
972,801 | 1,049,300 | |||||||||||
Consumer Products — 4.1% | ||||||||||||
4,270 | Alberto-Culver Co. | 92,836 | 118,194 | |||||||||
12,500 | Alliance One International Inc.† | 55,931 | 56,000 | |||||||||
1,085 | Church & Dwight Co. Inc. | 32,590 | 61,563 | |||||||||
181,357 | 235,757 | |||||||||||
Consumer Services — 2.1% | ||||||||||||
3,820 | Brink’s Home Security Holdings Inc.† | 66,630 | 117,618 | |||||||||
Diversified Industrial — 12.2% | ||||||||||||
6,500 | Bway Holding Co.† | 67,677 | 120,315 | |||||||||
23,000 | Digital Ally Inc.† | 61,469 | 57,270 | |||||||||
1,500 | FormFactor Inc.† | 31,575 | 35,880 | |||||||||
1,500 | Graham Corp. | 12,398 | 23,325 | |||||||||
5,957 | Griffon Corp.† | 51,420 | 59,987 | |||||||||
3,100 | L.B. Foster Co., Cl. A† | 93,587 | 94,798 | |||||||||
4,800 | OSI Systems Inc.† | 76,114 | 87,792 | |||||||||
2,000 | Raven Industries Inc. | 39,770 | 53,460 | |||||||||
3,790 | Texas Industries Inc. | 154,741 | 159,142 | |||||||||
588,751 | 691,969 | |||||||||||
Energy and Utilities — 4.3% | ||||||||||||
25,000 | Juhl Wind Inc.† | 55,425 | 49,500 | |||||||||
6,240 | Mariner Energy Inc.† | 99,318 | 88,483 | |||||||||
3,170 | PICO Holdings Inc.† | 106,168 | 105,719 | |||||||||
260,911 | 243,702 | |||||||||||
Entertainment — 4.6% | ||||||||||||
3,585 | Discovery Communications Inc., Cl. A† | 57,543 | 103,571 | |||||||||
3,585 | Discovery Communications Inc., Cl. C† | 40,172 | 93,317 | |||||||||
6,300 | Pinnacle Entertainment Inc.† | 36,539 | 64,197 | |||||||||
134,254 | 261,085 | |||||||||||
Equipment and Supplies — 5.9% | ||||||||||||
3,700 | Actuant Corp., Cl. A | 58,445 | 59,422 | |||||||||
13,000 | Gerber Scientific Inc.† | 46,627 | 77,740 | |||||||||
1,930 | Powell Industries Inc.† | 38,791 | 74,093 | |||||||||
3,150 | The Toro Co. | 86,818 | 125,276 | |||||||||
230,681 | 336,531 | |||||||||||
Financial Services — 3.0% | ||||||||||||
1,430 | HMN Financial Inc.† | 50,067 | 5,363 | |||||||||
7,700 | NewAlliance Bancshares Inc. | 112,214 | 82,390 | |||||||||
3,600 | TCF Financial Corp. | 53,227 | 46,944 | |||||||||
1,204 | Willis Group Holdings Ltd. | 34,764 | 33,977 | |||||||||
250,272 | 168,674 | |||||||||||
Food and Beverage — 2.5% | ||||||||||||
5,500 | Constellation Brands Inc., Cl. A† | 70,562 | 83,325 | |||||||||
1,100 | The J.M. Smucker Co. | 52,808 | 58,311 | |||||||||
123,370 | 141,636 | |||||||||||
Health Care — 10.2% | ||||||||||||
12,200 | AtriCure, Inc.† | 53,195 | 57,584 | |||||||||
1,100 | Chemed Corp. | 43,216 | 48,279 | |||||||||
13,900 | Home Diagnostics Inc.† | 101,891 | 93,964 | |||||||||
53,500 | Hooper Holmes Inc.† | 56,853 | 51,895 | |||||||||
4,100 | Immucor Inc.† | 75,134 | 72,570 | |||||||||
8,140 | Rochester Medical Corp.† | 97,824 | 98,005 | |||||||||
4,116 | SurModics Inc.† | 122,478 | 101,253 | |||||||||
1,480 | West Pharmaceutical Services Inc. | 60,856 | 60,103 | |||||||||
611,447 | 583,653 | |||||||||||
See accompanying notes to financial statements.
5
The Gabelli Woodland Small Cap Value Fund
Schedule of Investments (Continued) — September 30, 2009
Schedule of Investments (Continued) — September 30, 2009
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS (Continued) | ||||||||||||
Hotels and Gaming — 1.9% | ||||||||||||
5,370 | Gaylord Entertainment Co.† | $ | 40,893 | $ | 107,937 | |||||||
Machinery — 4.5% | ||||||||||||
6,764 | Key Technology Inc.† | 80,211 | 72,713 | |||||||||
3,500 | Robbins & Myers Inc. | 69,482 | 82,180 | |||||||||
1,200 | Valmont Industries Inc. | 66,661 | 102,216 | |||||||||
216,354 | 257,109 | |||||||||||
Publishing — 3.4% | ||||||||||||
7,900 | Dolan Media Co.† | 105,439 | 94,721 | |||||||||
4,000 | Scholastic Corp. | 47,550 | 97,360 | |||||||||
152,989 | 192,081 | |||||||||||
Restaurants — 0.8% | ||||||||||||
8,000 | Famous Dave’s of America Inc.† | 49,700 | 46,800 | |||||||||
Retail — 1.9% | ||||||||||||
1,800 | J. Crew Group Inc.† | 21,936 | 64,476 | |||||||||
2,500 | Shutterfly Inc.† | 24,237 | 41,575 | |||||||||
46,173 | 106,051 | |||||||||||
Specialty Chemicals — 1.2% | ||||||||||||
1,260 | FMC Corp. | 48,289 | 70,875 | |||||||||
Telecommunications — 1.1% | ||||||||||||
7,400 | HickoryTech Corp. | 56,094 | 63,270 | |||||||||
Transportation — 0.9% | ||||||||||||
1,700 | Bristow Group Inc.† | 45,028 | 50,473 | |||||||||
TOTAL COMMON STOCKS | 5,035,966 | 5,614,517 | ||||||||||
Principal | ||||||||||||
Amount | ||||||||||||
U.S. GOVERNMENT OBLIGATIONS — 2.6% | ||||||||||||
$ | 150,000 | U.S. Treasury Bills, 0.167% to 0.177%††, 10/15/09 | 149,990 | 149,990 | ||||||||
TOTAL INVESTMENTS — 101.2% | $ | 5,185,956 | 5,764,507 | |||||||||
Other Assets and Liabilities (Net) — (1.2)% | (71,156 | ) | ||||||||||
NET ASSETS — 100.0% | $ | 5,693,351 | ||||||||||
† | Non-income producing security. | |
†† | Represents annualized yield at date of purchase. |
See accompanying notes to financial statements.
6
The Gabelli Woodland Small Cap Value Fund
Statement of Assets and Liabilities
September 30, 2009
September 30, 2009
Assets: | ||||
Investments, at value (cost $5,185,956) | $ | 5,764,507 | ||
Cash | 11,160 | |||
Receivable for Fund shares sold | 984 | |||
Dividends and interest receivable | 1,612 | |||
Prepaid expenses | 16,187 | |||
Total Assets | 5,794,450 | |||
Liabilities: | ||||
Payable for investments purchased | 58,445 | |||
Payable for investment advisory fees | 3,354 | |||
Payable for distribution fees. | 1,220 | |||
Payable for legal and audit fees | 24,541 | |||
Payable for shareholder communications expenses | 8,165 | |||
Other accrued expenses | 5,374 | |||
Total Liabilities | 101,099 | |||
Net Assets applicable to 721,806 shares outstanding | $ | 5,693,351 | ||
Net Assets Consist of: | ||||
Paid-in capital, each class at $0.001 par value | $ | 6,619,176 | ||
Accumulated net realized loss on investments | (1,504,376 | ) | ||
Net unrealized appreciation on investments | 578,551 | |||
Net Assets | $ | 5,693,351 | ||
Shares of Capital Stock | ||||
Class AAA: | ||||
Net Asset Value, offering, and redemption price per share ($5,461,984 ÷ 691,623 shares outstanding; 100,000,000 shares authorized) | $ | 7.90 | ||
Class A: | ||||
Net Asset Value and redemption price per share ($50,187 ÷ 6,304 shares outstanding; 50,000,000 shares authorized) | $ | 7.96 | ||
Maximum offering price per share (NAV ÷ 0.9425, based on maximum sales charge of 5.75% of the offering price) | $ | 8.45 | ||
Class B: | ||||
Net Asset Value and offering price per share ($143.41 ÷ 18.49 shares outstanding; 50,000,000 shares authorized) | $ | 7.76 | (a) | |
Class C: | ||||
Net Asset Value and offering price per share ($121,694 ÷ 16,380 shares outstanding; 50,000,000 shares authorized) | $ | 7.43 | (a) | |
Class I: | ||||
Net Asset Value, offering, and redemption price per share ($59,343 ÷ 7,480 shares outstanding; 50,000,000 shares authorized) | $ | 7.93 | ||
(a) | Redemption price varies based on the length of time held. |
Statement of Operations
For the Year Ended September 30, 2009
For the Year Ended September 30, 2009
Investment Income: | ||||
Dividends | $ | 46,211 | ||
Interest | 305 | |||
Total Investment Income | 46,516 | |||
Expenses: | ||||
Investment advisory fees | 47,803 | |||
Distribution fees – Class AAA | 11,439 | |||
Distribution fees – Class A | 95 | |||
Distribution fees – Class B | 1 | |||
Distribution fees – Class C | 1,099 | |||
Registration expenses | 30,924 | |||
Shareholder communications expenses | 19,915 | |||
Legal and audit fees | 19,831 | |||
Shareholder services fees | 12,548 | |||
Custodian fees | 9,146 | |||
Interest expense | 484 | |||
Directors’ fees | 225 | |||
Miscellaneous expenses | 6,759 | |||
Total Expenses | 160,269 | |||
Less: | ||||
Fees waived and expenses reimbursed by Adviser (See Note 3) | (63,496 | ) | ||
Net Expenses | 96,773 | |||
Net Investment Loss | (50,257 | ) | ||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||
Net realized loss on investments | (1,491,355 | ) | ||
Net change in unrealized appreciation/ depreciation on investments | 509,146 | |||
Net Realized and Unrealized Gain/(Loss) on Investments | (982,209 | ) | ||
Net Decrease in Net Assets Resulting from Operations | $ | (1,032,466 | ) | |
See accompanying notes to financial statements.
7
The Gabelli Woodland Small Cap Value Fund
Statement of Changes in Net Assets
Year Ended | Year Ended | |||||||
September 30, 2009 | September 30, 2008 | |||||||
Operations: | ||||||||
Net investment loss | $ | (50,257 | ) | $ | (65,989 | ) | ||
Net realized gain/(loss) on investments | (1,491,355 | ) | 369,935 | |||||
Net change in unrealized appreciation/depreciation on investments | 509,146 | (1,505,525 | ) | |||||
Net Decrease in Net Assets Resulting from Operations | (1,032,466 | ) | (1,201,579 | ) | ||||
Distributions to Shareholders: | ||||||||
Net realized gain | ||||||||
Class AAA | (301,983 | ) | (1,262,098 | ) | ||||
Class A | (2,225 | ) | (9,144 | ) | ||||
Class B | (7 | ) | (26 | ) | ||||
Class C | (6,124 | ) | (43,337 | ) | ||||
Class I | (3,246 | ) | — | |||||
Total Distributions to Shareholders | (313,585 | ) | (1,314,605 | ) | ||||
Capital Share Transactions: | ||||||||
Class AAA | (556,713 | ) | 703,505 | |||||
Class A | 5,845 | 3,296 | ||||||
Class B | 7 | 27 | ||||||
Class C | (2,199 | ) | (69,071 | ) | ||||
Class I | (3,163 | ) | 73,953 | |||||
Net Increase/(Decrease) in Net Assets from Capital Share Transactions | (556,223 | ) | 711,710 | |||||
Redemption Fees | 7 | 1 | ||||||
Net Decrease in Net Assets | (1,902,267 | ) | (1,804,473 | ) | ||||
Net Assets: | ||||||||
Beginning of period | 7,595,618 | 9,400,091 | ||||||
End of period (including undistributed net investment income of $0 and $0, respectively) | $ | 5,693,351 | $ | 7,595,618 | ||||
See accompanying notes to financial statements.
8
The Gabelli Woodland Small Cap Value Fund
Financial Highlights
Financial Highlights
Selected data for a share of capital stock outstanding throughout each period:
Income from | Ratios to Average Net Assets/ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Operations | Distributions | Supplemental Data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | Expenses | Expenses | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Asset | Net | Realized and | Total | Net | Net Asset | Net Assets | Net | Net of | Before | |||||||||||||||||||||||||||||||||||||||||||||||||||
Period | Value, | Investment | Unrealized | from | Net | Realized | Value, | End of | Investment | Waivers/ | Waivers/ | Portfolio | ||||||||||||||||||||||||||||||||||||||||||||||||
Ended | Beginning | Income | Gain (Loss) on | Investment | Investment | Gain on | Total | Redemption | End of | Total | Period | Income | Reimburse- | Reimburse- | Turnover | |||||||||||||||||||||||||||||||||||||||||||||
September 30 | of Period | (Loss)(a)(b) | Investments | Operations | Income | Investments | Distributions | Fees(a) | Period | Return† | (in 000’s) | (Loss)(b) | ments(c) | ments(d) | Rate†† | |||||||||||||||||||||||||||||||||||||||||||||
Class AAA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | $ | 9.30 | $ | (0.07 | ) | $ | (0.92 | ) | $ | (0.99 | ) | — | $ | (0.41 | ) | $ | (0.41 | ) | $ | 0.00 | (e) | $ | 7.90 | (8.99 | )% | $ | 5,462 | (1.04 | )% | 2.01 | %(f) | 3.34 | % | 62 | % | |||||||||||||||||||||||||
2008 | 12.61 | (0.08 | ) | (1.43 | ) | (1.51 | ) | — | (1.80 | ) | (1.80 | ) | 0.00 | (e) | 9.30 | (13.20 | ) | 7,327 | (0.80 | ) | 2.01 | (f) | 2.52 | 58 | ||||||||||||||||||||||||||||||||||||
2007 | 13.35 | 0.05 | 2.44 | 2.49 | $ | (0.06 | ) | (3.17 | ) | (3.23 | ) | 0.00 | (e) | 12.61 | 20.71 | 9,040 | 0.38 | 2.01 | (f) | 2.33 | 51 | |||||||||||||||||||||||||||||||||||||||
2006 | 14.64 | (0.12 | ) | 0.07 | (0.05 | ) | — | (1.24 | ) | (1.24 | ) | 0.00 | (e) | 13.35 | (0.35 | ) | 9,137 | (0.84 | ) | 2.01 | (f) | 2.31 | 59 | |||||||||||||||||||||||||||||||||||||
2005 | 12.79 | (0.11 | ) | 2.69 | 2.58 | — | (0.73 | ) | (0.73 | ) | 0.00 | (e) | 14.64 | 20.67 | 11,839 | (0.78 | ) | 2.01 | 2.99 | 35 | ||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | $ | 9.37 | $ | (0.07 | ) | $ | (0.93 | ) | $ | (1.00 | ) | — | $ | (0.41 | ) | $ | (0.41 | ) | $ | 0.00 | (e) | $ | 7.96 | (9.04 | )% | $ | 50 | (1.06 | )% | 2.01 | %(f) | 3.34 | % | 62 | % | |||||||||||||||||||||||||
2008 | 12.69 | (0.08 | ) | (1.44 | ) | (1.52 | ) | — | (1.80 | ) | (1.80 | ) | 0.00 | (e) | 9.37 | (13.19 | ) | 51 | (0.80 | ) | 2.01 | (f) | 2.52 | 58 | ||||||||||||||||||||||||||||||||||||
2007 | 13.36 | 0.13 | 2.39 | 2.52 | $ | (0.02 | ) | (3.17 | ) | (3.19 | ) | 0.00 | (e) | 12.69 | 20.94 | 65 | 1.00 | 2.01 | (f) | 2.33 | 51 | |||||||||||||||||||||||||||||||||||||||
2006 | 14.65 | (0.12 | ) | 0.07 | (0.05 | ) | — | (1.24 | ) | (1.24 | ) | 0.00 | (e) | 13.36 | (0.36 | ) | 100 | (0.83 | ) | 2.01 | (f) | 2.31 | 59 | |||||||||||||||||||||||||||||||||||||
2005 | 12.79 | (0.09 | ) | 2.68 | 2.59 | — | (0.73 | ) | (0.73 | ) | 0.00 | (e) | 14.65 | 20.76 | 108 | (0.68 | ) | 2.01 | 3.17 | 35 | ||||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | $ | 9.20 | $ | (0.12 | ) | $ | (0.91 | ) | $ | (1.03 | ) | — | $ | (0.41 | ) | $ | (0.41 | ) | — | $ | 7.76 | (9.56 | )% | $ | 0.1 | (1.80 | )% | 2.76 | %(f) | 4.09 | % | 62 | % | |||||||||||||||||||||||||||
2008 | 12.60 | (0.16 | ) | (1.44 | ) | (1.60 | ) | — | (1.80 | ) | (1.80 | ) | — | 9.20 | (14.04 | ) | 0.1 | (1.68 | ) | 2.76 | (f) | 3.27 | 58 | |||||||||||||||||||||||||||||||||||||
2007 | 13.37 | (0.09 | ) | 2.49 | 2.40 | — | (3.17 | ) | (3.17 | ) | $ | 0.00 | (e) | 12.60 | 19.73 | 0.1 | (0.68 | ) | 2.76 | (f) | 3.07 | 51 | ||||||||||||||||||||||||||||||||||||||
2006 | 14.77 | (0.25 | ) | 0.09 | (0.16 | ) | — | (1.24 | ) | (1.24 | ) | 0.00 | (e) | 13.37 | (1.19 | ) | 0.1 | (1.77 | ) | 2.76 | (f) | 3.06 | 59 | |||||||||||||||||||||||||||||||||||||
2005 | 12.98 | (0.21 | ) | 2.73 | 2.52 | — | (0.73 | ) | (0.73 | ) | 0.00 | (e) | 14.77 | 19.86 | 0.1 | (1.50 | ) | 2.75 | 3.87 | 35 | ||||||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | $ | 8.84 | $ | (0.11 | ) | $ | (0.89 | ) | $ | (1.00 | ) | — | $ | (0.41 | ) | $ | (0.41 | ) | $ | 0.00 | (e) | $ | 7.43 | (9.61 | )% | $ | 122 | (1.78 | )% | 2.76 | %(f) | 4.09 | % | 62 | % | |||||||||||||||||||||||||
2008 | 12.16 | (0.15 | ) | (1.37 | ) | (1.52 | ) | — | (1.80 | ) | (1.80 | ) | 0.00 | (e) | 8.84 | (13.86 | ) | 146 | (1.58 | ) | 2.76 | (f) | 3.27 | 58 | ||||||||||||||||||||||||||||||||||||
2007 | 13.00 | (0.03 | ) | 2.36 | 2.33 | — | (3.17 | ) | (3.17 | ) | 0.00 | (e) | 12.16 | 19.84 | 295 | (0.26 | ) | 2.76 | (f) | 3.08 | 51 | |||||||||||||||||||||||||||||||||||||||
2006 | 14.39 | (0.21 | ) | 0.06 | (0.15 | ) | — | (1.24 | ) | (1.24 | ) | 0.00 | (e) | 13.00 | (1.11 | ) | 425 | (1.58 | ) | 2.76 | (f) | 3.06 | 59 | |||||||||||||||||||||||||||||||||||||
2005 | 12.66 | (0.20 | ) | 2.66 | 2.46 | — | (0.73 | ) | (0.73 | ) | 0.00 | (e) | 14.39 | 19.91 | 189 | (1.46 | ) | 2.76 | 3.87 | 35 | ||||||||||||||||||||||||||||||||||||||||
Class I | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | $ | 9.31 | $ | (0.05 | ) | $ | (0.92 | ) | $ | (0.97 | ) | — | $ | (0.41 | ) | $ | (0.41 | ) | $ | 0.00 | (e) | $ | 7.93 | (8.76 | )% | $ | 59 | (0.79 | )% | 1.76 | %(f) | 3.09 | % | 62 | % | |||||||||||||||||||||||||
2008(g) | 9.41 | (0.03 | ) | (0.07 | ) | (0.10 | ) | — | — | — | 0.00 | (e) | 9.31 | (1.06 | ) | 72 | (0.44 | )(h) | 1.76 | (f)(h) | 2.27 | (h) | 58 |
† | 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 distributions and does not reflect applicable sales charges. Total return for a period of less than one year is not annualized. | |
†† | Effective in 2008, a change in accounting policy was adopted with regard to the calculation of the portfolio turnover rate to include cash proceeds due to mergers. Had this policy been adopted retroactively, the portfolio turnover rate for the years ended September 30, 2007, 2006, and 2005 would have been as shown. | |
(a) | Per share amounts have been calculated using the average shares outstanding method. | |
(b) | Due to capital share activity throughout the year, net investment income per share and the ratio to average net assets are not necessarily correlated among the different classes of shares. | |
(c) | The ratios do not include a reduction of expenses for custodian fee credits on cash balances maintained with the custodian. Including such custodian fee credits, the expense ratios for the year ended September 30, 2005 would have been 2.00% (Class AAA), 2.00% (Class A), 2.75% (Class B), and 2.75% (Class C), respectively. For the years ended September 30, 2008, 2007, and 2006, the effect of the custodian fee credits was minimal. For the year ended September 30, 2009, there were no custodian fee credits. | |
(d) | During the period, expenses were voluntarily reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratio would have been as shown. | |
(e) | Amount represents less than $0.005 per share. | |
(f) | The Fund incurred interest expense during the years ended September 30, 2009, 2008, 2007, and 2006. If interest expense had not been incurred, the ratios of operating expenses to average net assets would have been 2.00%, 2.00%, 2.00%, and 2.00% (Class AAA and Class A), 2.75%, 2.75%, 2.75%, and 2.75% (Class B and Class C), and 1.75% and 1.75% (Class I), respectively. | |
(g) | From the commencement of offering Class I Shares on January 11, 2008 through September 30, 2008. | |
(h) | Annualized. |
See accompanying notes to financial statements.
9
The Gabelli Woodland Small Cap Value Fund
Notes to Financial Statements
Notes to Financial Statements
1. Organization. The Gabelli Woodland Small Cap Value Fund (the “Fund”) is a series of Gabelli Equity Series Funds, Inc. (the “Corporation”), which was organized on July 25, 1991 as a Maryland corporation. The Fund is a non-diversified open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and one of three separately managed portfolios (collectively, the “Portfolios”) of the Corporation. The Fund’s primary objective is capital appreciation. The Fund’s Adviser currently characterizes small capitalization companies for the Fund as those with a total market value at the time of investment not greater than that of the largest company in the Russell 2000 Index or $3.0 billion, whichever is greater. The Fund commenced investment operations on December 31, 2002.
2. Significant Accounting Policies. The preparation of financial statements in accordance with United States (“U.S.”) 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 or traded in the U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a market’s official closing price 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. If no bid or asked prices are quoted on such day, the security is valued at the most recently available price or, if the Board of Directors (the “Board”) so determines, by such other method as the Board shall determine in good faith to reflect its fair market value. 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 the Adviser.
Portfolio securities primarily traded on a foreign market are generally valued at the preceding closing values of such securities on the relevant market, but may be fair valued pursuant to procedures established by the Board if market conditions change significantly after the close of the foreign market but prior to the close of business on the day the securities are being valued. Debt instruments with remaining maturities of sixty days or less that are not credit impaired are valued at amortized cost, unless the Board determines such amount does not reflect the securities’ fair value, in which case these securities will be fair valued as determined by the Board. Debt instruments having a maturity greater than sixty days for which market quotations are readily available are valued at the average of the latest bid and asked prices. If there were no asked prices quoted on such day, the security is valued using the closing bid price. Futures contracts are valued at the closing settlement price of the exchange or board of trade on which the applicable contract is traded.
Securities and assets for which market quotations are not readily available are fair valued as determined by the Board. Fair valuation methodologies and procedures may include, but are not limited to: analysis and review of available financial and non-financial information about the company; comparisons with the valuation and changes in valuation of similar securities, including a comparison of foreign securities with the equivalent U.S. dollar value American Depositary Receipt securities at the close of the U.S. exchange; and evaluation of any other information that could be indicative of the value of the security.
10
The Gabelli Woodland Small Cap Value Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
The inputs and valuation techniques used to measure fair value of the Fund’s investments are summarized into three levels as described in the hierarchy below:
• | Level 1 – quoted prices in active markets for identical securities; | ||
• | Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.); and | ||
• | Level 3 – significant unobservable inputs (including the Fund’s determinations as to the fair value of investments). |
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of the Fund’s investments by inputs used to value the Fund’s investments as of September 30, 2009 is as follows:
Investments in | ||||
Securities | ||||
(Market Value) | ||||
Valuation Inputs | Assets | |||
Level 1 – Quoted Prices* | $ | 5,614,517 | ||
Level 2 – Other Significant Observable Inputs** | 149,990 | |||
Total | $ | 5,764,507 | ||
* | The industry classifications are detailed in the Schedule of Investments. | |
** | The Level 2 securities represent U.S. Government Obligations as detailed in the Schedule of Investments. |
There were no Level 3 investments held at September 30, 2008 or September 30, 2009.
Repurchase Agreements. The Fund may enter into repurchase agreements with primary government securities dealers recognized by the Federal Reserve Board, with member banks of the Federal Reserve System, or with other brokers or dealers that meet credit guidelines established by the Adviser and reviewed by the Board. 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. It is the policy of the Fund to always receive and maintain securities as collateral whose market value, including accrued interest, is at least equal to 102% of the dollar amount invested by the Fund in each agreement. The Fund will make payment for such securities only upon physical delivery or upon evidence of book entry transfer of the collateral to the account of the custodian. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to maintain the adequacy of the collateral. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. At September 30, 2009, there were no open repurchase agreements.
Foreign Securities. The Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation of currencies, the ability to repatriate funds, less complete financial information about companies, and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. issuers.
11
The Gabelli Woodland Small Cap Value Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
Foreign Taxes. The Fund may be subject to foreign taxes on income, gains on investments, or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
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 on the accrual basis. Premiums and discounts on debt securities are amortized using the effective yield to maturity method. Dividend income is recorded on the ex-dividend date except for certain dividends which are recorded as soon as the Fund is informed of the dividend.
Determination of Net Asset Value and Calculation of Expenses. Certain administrative expenses are common to, and allocated among, various affiliated funds. Such allocations are made on the basis of each fund’s average net assets or other criteria directly affecting the expenses as determined by the Adviser pursuant to procedures established by the Board.
In calculating the NAV per share of each class, investment income, realized and unrealized gains and losses, redemption fees, and expenses other than class specific expenses are allocated daily to each class of shares based upon the proportion of net assets of each class at the beginning of each day. Distribution expenses are borne solely by the class incurring the expense.
Custodian Fee Credits and Interest Expense. When cash balances are maintained in the custody account, the Fund receives credits which are used to offset custodian fees. The gross expenses paid under the custody arrangement are included in custodian fees in the Statement of Operations with the corresponding expense offset, if any, shown as “custodian fee credits.” When cash balances are overdrawn, the Fund is charged an overdraft fee equal to 2.00% above the federal funds rate on outstanding balances. This amount, if any, would be included in “interest expense” in the Statement of Operations.
Distributions to Shareholders. Distributions to shareholders are recorded on the ex-dividend date. Distributions to shareholders are based on income and capital gains as determined in accordance with federal income tax regulations, which may differ from income and capital gains as determined under U.S. 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 characterizations of distributions made by the Fund. These book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent, adjustments are made to the appropriate capital accounts in the period when the differences arise. These reclassifications have no impact on the NAV of the Fund. For the year ended September 30, 2009, reclassifications were made to decrease accumulated net investment loss by $50,257, with an offsetting adjustment to additional paid-in capital.
The tax character of distributions paid during the years ended September 30, 2009 and September 30, 2008 was as follows:
Year Ended | Year Ended | |||||||
September 30, 2009 | September 30, 2008 | |||||||
Distributions paid from: | ||||||||
Ordinary income (inclusive of short-term capital gains) | — | $ | 28,446 | |||||
Net long-term capital gains | $ | 313,533 | 1,286,159 | |||||
Return of capital | 52 | — | ||||||
Total distributions paid | $ | 313,585 | $ | 1,314,605 | ||||
12
The Gabelli Woodland Small Cap Value Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
Provision for Income Taxes. The Fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). It is the policy of the Fund to comply with the requirements of the Code applicable to regulated investment companies and to distribute substantially all of its net investment company taxable income and net capital gains. Therefore, no provision for federal income taxes is required.
As of September 30, 2009, the components of accumulated earnings/losses on a tax basis were as follows:
Accumulated capital loss carryforward | $ | (279,715 | ) | |
Net unrealized appreciation on investments | 565,325 | |||
Post-October capital loss deferral | (1,211,435 | ) | ||
Total | $ | (925,825 | ) | |
At September 30, 2009, the Fund had a net capital loss carryforward for federal income tax purposes of $279,715, which is available to reduce future required distributions of net capital gains to shareholders through 2017.
Under the current tax law, capital losses related to securities and foreign currency realized after October 31 and prior to the Fund’s fiscal year end may be treated as occurring on the first day of the following year. For the year ended September 30, 2009, the Fund deferred capital losses of $1,211,435.
At September 30, 2009, the difference between book and tax basis unrealized appreciation is primarily due to deferral of losses on wash sales for tax purposes.
The following summarizes the tax cost of investments and the related unrealized appreciation/depreciation at September 30, 2009:
Gross | Gross | |||||||||||||||
Unrealized | Unrealized | Net Unrealized | ||||||||||||||
Cost | Appreciation | Depreciation | Appreciation | |||||||||||||
Investments | $ | 5,199,182 | $ | 977,337 | $ | (412,012 | ) | $ | 565,325 |
Management has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax years (current and prior three tax years) and has concluded that no provision for federal income tax is required in the Fund’s financial statements. The Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
3. Investment Advisory Agreement and Other Transactions. The Fund has 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 its 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 affiliated persons of the Adviser.
The Adviser has contractually agreed to waive its fees and reimburse expenses of the Fund to the extent necessary to maintain the annualized total operating expenses (exclusive of brokerage fees, interest, taxes, and extraordinary expenses) at 2.00%, 2.00%, 2.75%, 2.75%, and 1.75% of the value of the Fund’s average daily net assets for Class AAA, Class A, Class B, Class C, and Class I Shares, respectively, through January 31, 2011.
13
The Gabelli Woodland Small Cap Value Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
For the year ended September 30, 2009, the Adviser reimbursed the Fund in the amount of $63,496. The Fund is obliged to repay the Adviser for a period of two years following the year in which the Adviser reimbursed the Fund only to the extent that the operating expenses of the Fund fall below the applicable expense limitations. At September 30, 2009, the cumulative amount which the Fund may repay the Adviser is $104,647.
The Corporation pays each Director who is not considered an affiliated person an annual retainer of $9,000 plus $1,000 for each Board meeting attended. Each Director is reimbursed by the Corporation for any out of pocket expenses incurred in attending meetings. All Board committee members receive $500 per meeting attended and the Chairman of the Audit Committee and the Lead Director each receive an annual fee of $1,000. A Director may receive a single meeting fee, allocated among the participating funds, for participation in certain meetings held on behalf of multiple funds. Directors who are directors or employees of the Adviser or an affiliated company receive no compensation or expense reimbursement from the Corporation.
4. Distribution Plan. The Fund’s Board has adopted a distribution plan (the “Plan”) for each class of shares, except for Class I Shares, pursuant to Rule 12b-1 under the 1940 Act. Gabelli & Company, Inc. (“Gabelli & Company”), an affiliate of the Adviser, serves as distributor of the Fund. Under the Class AAA, Class A, Class B, and Class C Share Plans, payments are authorized to Gabelli & Company at annual rates of 0.25%, 0.25%, 1.00%, and 1.00%, respectively, of the average daily net assets of those classes, the annual limitations under each Plan. Such payments are accrued daily and paid monthly.
5. Portfolio Securities. Purchases and sales of securities for the year ended September 30, 2009, other than short-term securities and U.S. Government obligations, aggregated $3,004,717 and $3,825,784, respectively.
6. Line of Credit. The Fund participates in an unsecured line of credit of up to $75,000,000 under which it may borrow up to 10% of its net assets from the custodian for temporary borrowing purposes. Borrowings under this arrangement bear interest at the higher of the sum of the overnight LIBOR plus 100 basis points or the sum of the federal funds rate plus 100 basis points at the time of borrowing. This amount, if any, would be included in “interest expense” in the Statement of Operations. At September 30, 2009, there were no borrowings outstanding under the line of credit.
The average daily amount of borrowings outstanding under the line of credit during the year ended September 30, 2009 was $5,767 with a weighted average interest rate of 0.97%. The maximum amount borrowed at any time during the year ended September 30, 2009 was $247,000.
7. Capital Stock. The Fund offers five classes of shares – Class AAA Shares, Class A Shares, Class B Shares, Class C Shares, and Class I Shares. Class AAA Shares are offered without a sales charge only to investors who acquire them directly from Gabelli & Company, or through selected broker/dealers, or the transfer agent. Class I Shares are offered to foundations, endowments, institutions, and employee benefit plans without a sales charge. Class A Shares are subject to a maximum front-end sales charge of 5.75%. Class B Shares are subject to a contingent deferred sales charge (“CDSC”) upon redemption within six years of purchase and automatically convert to Class A Shares approximately eight years after the original purchase. The applicable CDSC is equal to a declining percentage of the lesser of the NAV per share at the date of the original purchase or at the date of redemption, based on the length of time held. Class C Shares are subject to a 1.00% CDSC for one year after purchase. Class B Shares are available only through exchange of Class B Shares of other funds distributed by Gabelli & Company. Class I Shares were first issued on January 11, 2008.
14
The Gabelli Woodland Small Cap Value Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
The Fund imposes a redemption fee of 2.00% on all classes of shares that are redeemed or exchanged on or before the seventh day after the date of a purchase. The redemption fee is deducted from the proceeds otherwise payable to the redeeming shareholders and is retained by the Fund. The redemption fees retained by the Fund during the years ended September 30, 2009 and 2008, amounted to $7 and $1, respectively.
The redemption fee does not apply to redemptions of shares where (i) the shares were purchased through automatic reinvestment of distributions, (ii) the redemption was initiated by the Fund, (iii) the shares were purchased through programs that collect the redemption fee at the program level and remit them to the Fund, or (iv) the shares were purchased through programs that the Adviser determines to have appropriate anti-short-term trading policies in place or as to which the Adviser has received assurances that look-through redemption fee procedures or effective anti-short-term trading policies and procedures are in place.
Transactions in shares of capital stock were as follows:
Year Ended | Year Ended | |||||||||||||||
September 30, 2009 | September 30, 2008 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class AAA | Class AAA | |||||||||||||||
Shares sold | 157,059 | $ | 959,441 | 66,401 | $ | 658,099 | ||||||||||
Shares issued upon reinvestment of distributions | 50,701 | 290,012 | 124,080 | 1,259,410 | ||||||||||||
Shares redeemed | (304,082 | ) | (1,806,166 | ) | (119,232 | ) | (1,214,004 | ) | ||||||||
Net increase/(decrease) | (96,322 | ) | $ | (556,713 | ) | 71,249 | $ | 703,505 | ||||||||
Class A | Class A | |||||||||||||||
Shares sold | 463 | $ | 3,620 | 343 | $ | 3,299 | ||||||||||
Shares issued upon reinvestment of distributions | 386 | 2,225 | 895 | 9,144 | ||||||||||||
Shares redeemed | — | — | (874 | ) | (9,147 | ) | ||||||||||
Net increase | 849 | $ | 5,845 | 364 | $ | 3,296 | ||||||||||
Class B | Class B | |||||||||||||||
Shares issued upon reinvestment of distributions | 2 | $ | 7 | 2 | $ | 27 | ||||||||||
Net increase | 2 | $ | 7 | 2 | $ | 27 | ||||||||||
Class C | Class C | |||||||||||||||
Shares sold | 9,388 | $ | 50,275 | 282 | $ | 3,502 | ||||||||||
Shares issued upon reinvestment of distributions | 1,132 | 6,124 | 4,463 | 43,337 | ||||||||||||
Shares redeemed | (10,624 | ) | (58,598 | ) | (12,531 | ) | (115,910 | ) | ||||||||
Net decrease | (104 | ) | $ | (2,199 | ) | (7,786 | ) | $ | (69,071 | ) | ||||||
Class I | Class I* | |||||||||||||||
Shares sold | 4,217 | $ | 27,230 | 8,531 | $ | 81,394 | ||||||||||
Shares issued upon reinvestment of distributions | 567 | 3,246 | — | — | ||||||||||||
Shares redeemed | (5,044 | ) | (33,639 | ) | (791 | ) | (7,441 | ) | ||||||||
Net increase/(decrease) | (260 | ) | $ | (3,163 | ) | 7,740 | $ | 73,953 | ||||||||
* | From the commencement of offering Class I Shares on January 11, 2008. |
15
The Gabelli Woodland Small Cap Value Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
8. Indemnifications. The Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
9. Other Matters. On April 24, 2008, the Adviser entered into an administrative settlement with the SEC to resolve the SEC’s inquiry regarding prior frequent trading activity in shares of the GAMCO Global Growth Fund (the “Global Growth Fund”) by one investor who was banned from the Global Growth Fund in August 2002. In the settlement, the SEC found that the Adviser had violated Section 206(2) of the Investment Advisers Act, Section 17(d) of the 1940 Act, and Rule 17d-1 thereunder, and had aided and abetted and caused violations of Section 12(d)(1)(B)(i) of the 1940 Act. Under the terms of the settlement, the Adviser, while neither admitting nor denying the SEC’s findings and allegations, agreed, among other things, to pay the previously reserved total of $16 million (including a $5 million penalty), of which at least $11 million will be distributed to shareholders of the Global Growth Fund in accordance with a plan developed by an independent distribution consultant and approved by the independent directors of the Global Growth Fund and the staff of the SEC, and to cease and desist from future violations of the above referenced federal securities laws. The settlement will not have a material adverse impact on the Adviser or its ability to fulfill its obligations under the Advisory Agreement. On the same day, the SEC filed a civil action against the Executive Vice President and Chief Operating Officer of the Adviser, alleging violations of certain federal securities laws arising from the same matter including the Fund. The officer is also an officer of the Global Growth Fund and other funds in the Gabelli/GAMCO fund complex. The officer denies the allegations and is continuing in his positions with the Adviser and the funds. The Adviser currently expects that any resolution of the action against the officer will not have a material adverse impact on the Fund or the Adviser or its ability to fulfill its obligations under the Advisory Agreement.
10. Subsequent Events. Management has evaluated the impact of all subsequent events on the Fund through November 24, 2009, the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements.
16
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
The Gabelli Woodland Small Cap Value Fund
The Gabelli Woodland Small Cap Value Fund
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of The Gabelli Woodland Small Cap Value Fund (the “Fund”), a series of Gabelli Equity Series Funds, Inc., as of September 30, 2009, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of September 30, 2009, by correspondence with the Fund’s custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Gabelli Woodland Small Cap Value Fund, a series of Gabelli Equity Series Funds, Inc., at September 30, 2009, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.
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Philadelphia, Pennsylvania
November 24, 2009
November 24, 2009
17
The Gabelli Woodland Small Cap Value Fund
Additional Fund Information (Unaudited)
Additional Fund Information (Unaudited)
The business and affairs of the Fund are managed under the direction of the Corporation’s Board of Directors. Information pertaining to the Directors and officers of the Corporation is set forth below. The Corporation’s Statement of Additional Information includes additional information about the Corporation’s Directors and is available, without charge, upon request, by calling 800-GABELLI (800-422-3554) or by writing to The Gabelli Woodland Small Cap Value Fund at One Corporate Center, Rye, NY 10580-1422.
Name, Position(s) | Term of Office | Number of Funds | ||||||||
Address1 | and Length of | in Fund Complex | Principal Occupation(s) | Other Directorships | ||||||
and Age | Time Served2 | Overseen by Director | During Past Five Years | Held by Director3 | ||||||
INTERESTED DIRECTORS4: | ||||||||||
Mario J. Gabelli Director and Chief Investment Officer Age: 67 | Since 1991 | 26 | Chairman and Chief Executive Officer of GAMCO Investors, Inc. and Chief Investment Officer—Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management Inc.; Director/Trustee or Chief Investment Officer of other registered investment companies in the Gabelli/GAMCO Funds complex; Chairman and Chief Executive Officer of GGCP, Inc. | Director of Morgan Group Holdings, Inc. (holding company); Chairman of the Board of LICT Corp. (multimedia and communication services company); Director of CIBL, Inc. (broadcasting and wireless communications) | ||||||
John D. Gabelli Director Age: 65 | Since 1991 | 10 | Senior Vice President of Gabelli & Company, Inc. | — | ||||||
INDEPENDENT DIRECTORS5: | ||||||||||
Anthony J. Colavita Director Age: 73 | Since 1991 | 36 | President of the law firm of Anthony J. Colavita, P.C. | — | ||||||
Vincent D. Enright Director Age: 65 | Since 1991 | 16 | Former Senior Vice President and Chief Financial Officer of KeySpan Corporation (public utility) (1994—1998) | Director of Echo Therapeutics, Inc. (therapeutics and diagnostics) | ||||||
Robert J. Morrissey Director Age: 70 | Since 1991 | 6 | Partner in the law firm of Morrissey, Hawkins & Lynch | — | ||||||
Anthony R. Pustorino Director Age: 84 | Since 1991 | 13 | Certified Public Accountant; Professor Emeritus, Pace University | Director of The LGL Group, Inc. (diversified manufacturing) | ||||||
Anthonie C. van Ekris Director Age: 75 | Since 1991 | 20 | Chairman of BALMAC International, Inc. (commodities and futures trading) | — | ||||||
Salvatore J. Zizza Director Age: 63 | Since 2001 | 28 | Chairman of Zizza & Company, Ltd. (consulting) | Director of Hollis-Eden Pharmaceuticals (biotechnology); Director of Trans-Lux Corporation (business services) |
The Gabelli Woodland Small Cap Value Fund
Additional Fund Information (Unaudited) (Continued)
Additional Fund Information (Unaudited) (Continued)
Name, Position(s) | Term of Office | |||
Address1 | and Length of | Principal Occupation(s) | ||
and Age | Time Served2 | During Past Five Years | ||
OFFICERS: | ||||
Bruce N. Alpert President and Secretary Age: 57 | Since 1991 | Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC since 1988 and an officer of all of the registered investment companies in the Gabelli/GAMCO Funds complex; President of Teton Advisors, Inc. 1998 through 2008; Chairman of Teton Advisors, Inc. since 2008; Senior Vice President of GAMCO Investors, Inc. since 2008 | ||
Agnes Mullady Treasurer Age: 51 | Since 2006 | Senior Vice President of GAMCO Investors, Inc. since 2009, Vice President of Gabelli Funds, LLC since 2007; Officer of all of the registered investment companies in the Gabelli/GAMCO Funds complex; Senior Vice President of U.S. Trust Company, N.A. and Treasurer and Chief Financial Officer of Excelsior Funds from 2004 through 2005; Chief Financial Officer of AMIC Distribution Partners from 2002 through 2004 | ||
Peter D. Goldstein Chief Compliance Officer Age: 56 | Since 2004 | Director of Regulatory Affairs at GAMCO Investors, Inc. since 2004; Chief Compliance Officer of all of the registered investment companies in the Gabelli/GAMCO Funds complex |
1 | Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise noted. | |
2 | Each Director will hold office for an indefinite term until the earliest of (i) the next meeting of shareholders, if any, called for the purpose of considering the election or re-election of such Director and until the election and qualification of his or her successor, if any, elected at such meeting, or (ii) the date a Director resigns or retires, or a Director is removed by the Board of Directors or shareholders, in accordance with the Corporation’s By-Laws and Articles of Incorporation. Each officer will hold office for an indefinite term until the date he or she resigns or retires or until his or her successor is elected and qualified. | |
3 | This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934 (i.e. public companies) or other investment companies registered under the 1940 Act. | |
4 | “Interested person” of the Fund as defined in the Investment Company Act of 1940. Messrs. Gabelli are each considered an “interested person” because of their affiliation with Gabelli Funds, LLC which acts as the Fund’s investment adviser. Mario J. Gabelli and John D. Gabelli are brothers. | |
5 | Directors who are not interested persons are considered “Independent” Directors. |
2009 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the year ended September 30, 2009, the Fund paid to shareholders long-term capital gains totaling $0.41 for all classes on November 26, 2008. The distributions of long-term capital gains have been designated as a capital gain dividend by the Fund’s Board of Directors.
All designations are based on financial information available as of the date of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code and the regulations thereunder.
Gabelli Equity Series Funds, Inc.
The Gabelli Woodland Small Cap Value Fund
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
fax: 914-921-5118
website: www.gabelli.com
e-mail: info@gabelli.com
Net Asset Value per share available daily by calling
800-GABELLI after 7:00 P.M.
The Gabelli Woodland Small Cap Value Fund
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
fax: 914-921-5118
website: www.gabelli.com
e-mail: info@gabelli.com
Net Asset Value per share available daily by calling
800-GABELLI after 7:00 P.M.
Board of Directors
Mario J. Gabelli, CFA | Robert J. Morrissey | |
Chairman and Chief | Attorney-at-Law | |
Executive Officer | Morrissey, Hawkins & Lynch | |
GAMCO Investors, Inc. | ||
Anthony J. Colavita | Anthony R. Pustorino | |
President | Certified Public Accountant, | |
Anthony J. Colavita, P.C. | Professor Emeritus | |
Pace University | ||
Vincent D. Enright | Anthonie C. van Ekris | |
Former Senior Vice President | Chairman | |
and Chief Financial Officer | BALMAC International, Inc. | |
KeySpan Corp. | ||
John D. Gabelli | Salvatore J. Zizza | |
Senior Vice President | Chairman | |
Gabelli & Company, Inc. | Zizza & Co., Ltd. |
Officers and Portfolio Manager
Elizabeth M. Lilly, CFA | Bruce N. Alpert | |
Portfolio Manager | President and Secretary | |
Peter D. Goldstein | Agnes Mullady | |
Chief Compliance Officer | Treasurer |
Distributor
Gabelli & Company, Inc.
Gabelli & Company, Inc.
Custodian, Transfer Agent, and Dividend Agent
State Street Bank and Trust Company
State Street Bank and Trust Company
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom LLP
Skadden, Arps, Slate, Meagher & Flom LLP
This report is submitted for the general information of the shareholders of The Gabelli Woodland Small Cap Value Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus.
GAB840Q309SR
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The Gabelli Woodland Small Cap Value Fund
ANNUAL REPORT
SEPTEMBER 30, 2009
SEPTEMBER 30, 2009
Item 2. Code of Ethics.
(a) | The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. | ||
(c) | There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. | ||
(d) | The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item’s instructions. |
Item 3. Audit Committee Financial Expert.
As of the end of the period covered by the report, the registrant’s board of directors has determined that Anthony R. Pustorino is qualified to serve as an audit committee financial expert serving on its audit committee and that he is “independent.”
Item 4. Principal Accountant Fees and Services.
Audit Fees
(a) | The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $109,300 in 2008 and $103,850 in 2009. |
Audit-Related Fees
(b) | The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item are $0 in 2008 and $0 in 2009. |
Tax Fees
(c) | The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning are $12,900 in 2008 and $12,900 in 2009. Tax fees represent tax compliance services provided in connection with the review of the Registrant’s tax returns. |
All Other Fees
(d) | The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $0 in 2008 and $0 in 2009. | ||
(e)(1) | Disclose the audit committee’s pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. | ||
Pre-Approval Policies and Procedures. The Audit Committee (“Committee”) of the registrant is responsible for pre-approving (i) all audit and permissible non-audit services to be provided by the independent registered public accounting firm to the registrant and (ii) all permissible non-audit services to be provided by the independent registered public accounting firm to the Adviser, Gabelli Funds, LLC, and any affiliate of Gabelli Funds, LLC (“Gabelli”) that provides services to the registrant (a “Covered Services Provider”) if the independent registered public accounting firm’s engagement related directly to the operations and financial reporting of the registrant. The Committee may delegate its responsibility to pre-approve any such audit and permissible non-audit services to the Chairperson of the Committee, and the Chairperson must report to the Committee, at its next regularly scheduled meeting after the Chairperson’s pre-approval of such services, his or her decision(s). The Committee may also establish detailed pre-approval policies and procedures for pre-approval of such services in accordance with applicable laws, including the delegation of some or all of the Committee’s pre-approval responsibilities to the other persons (other than Gabelli or the registrant’s officers). Pre-approval by the Committee of any permissible non-audit services is not required so long as: (i) the permissible non-audit services were not recognized by the registrant at the time of the engagement to be non-audit services; and (ii) such services are promptly brought to the attention of the Committee and approved by the Committee or Chairperson prior to the completion of the audit. | |||
(e)(2) | The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows: |
(b) N/A
(c) 100%
(d) N/A
(f) | The percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was zero percent (0%). |
(g) | The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant was $63,800 in 2008 and $12,900 in 2009. | ||
(h) | The registrant’s audit committee of the board of directors has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence. |
Item 5. Audit Committee of Listed registrants.
Not applicable.
Item 6. Investments.
(a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. | |
(b) | Not applicable. |
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. Controls and Procedures.
(a) | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). | ||
(b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. Exhibits.
(a)(1) | Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. | ||
(a)(2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. | ||
(a)(3) | Not applicable. | ||
(b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes- Oxley Act of 2002 are attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) Gabelli Equity Series Funds, Inc.
By (Signature and Title)* | /s/ Bruce N. Alpert |
Date 11/30/09
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* | /s/ Bruce N. Alpert |
Date 11/30/09
By (Signature and Title)* | /s/ Agnes Mullady |
Date 11/30/09
* | Print the name and title of each signing officer under his or her signature. |