UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
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
(Address of principal executive offices) (Zip code)
Bruce N. Alpert
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, 2013
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 — September 30, 2013
Morningstar® rated The Gabelli Small Cap Growth Fund Class AAA Shares 5 stars overall, 3 stars for the three year period, and 5 stars for the five and ten year periods ended September 30, 2013 among 598, 598, 532, and 329 Small Blend funds, respectively. Morningstar RatingTM is based on risk-adjusted returns. |
Mario J. Gabelli, CFA Portfolio Manager |
To Our Shareholders,
For the year ended September 30, 2013, the net asset value (“NAV”) per Class AAA Share of The Gabelli Small Cap Growth Fund increased 31.8% compared with an increase of 30.1% for the Russell 2000 Index. See page 2 for additional performance information.
Enclosed are the schedule of investments and financial statements as of September 30, 2013.
Performance Discussion
In the last quarter of 2012, stock prices rallied despite headwinds of anemic economic growth, high joblessness, recession in the eurozone, and worries over U.S. public finances and the fiscal cliff. Strong cumulative equity returns since 2009 in both global (up more than 70%) and domestic indices (up 120%, including dividend reinvestment) had not deterred continual and massive redemptions from domestic equity mutual funds. Because of this, equity valuations remained at a healthy discount to average historical price-to-earnings (P/E) multiples.
During the second quarter of 2013, signs of modest improvement in the United States economy contrasted with renewed volatility in Europe, economic deceleration in China and Latin America, and political unrest in the Middle East. However, Federal Reserve Chairman Ben Bernanke took center stage late in June to remind the world that interest rates would not remain low forever but in doing so likened a reduction in the Federal Reserve’s round three of Quantitative Easing bond buying program to letting the “foot off the accelerator” versus “tapping the brakes.”
The third quarter was marked with events that have become all too familiar over the last few years: the Fed continued its program of quantitative easing, the economy improved (albeit slowly), tensions flared in the Middle East, Washington seemed to be at an impasse, and of course, markets rose substantially, with the S&P up about 5% for the quarter. At the end of the quarter, the attention turned to events in Washington. While markets shrugged off the federal government shutdown that started on October 1, the potential of the United States bumping up against the Federal debt ceiling was beginning to look more possible.
Among the better performing stocks for the fiscal year were: O’Reilly Automotive Inc. (1.7% of net assets as of September 30, 2013), a manufacturer of car parts; Schiff Nutrition International, Inc., a manufacturer of nutritional supplements that was sold prior to year end; and Brembo SpA (0.7%), a manufacturer of automotive brake systems. Our weaker performing stocks during the year were Cincinnati Bell Inc. (0.2%), a telephone company; J.C. Penney Co. Inc. (0.2%), a chain of American mid-range department stores; and Orthofix International NV (0%), a diversified global medical device company focused on the spine and orthopedic markets.
We appreciate your loyalty and support.
Comparative Results
Average Annual Returns through September 30, 2013 (a)(b) (Unaudited) | Since | |||||||
Inception | ||||||||
1 Year | 5 Year | 10 Year | (10/22/91) | |||||
Class AAA (GABSX) | 31.82% | 13.02% | 11.91% | 13.36% | ||||
Russell 2000 Index | 30.06 | 11.15 | 9.64 | 9.90 | ||||
Class A (GCASX) | 31.80 | 13.04 | 11.91 | 13.36 | ||||
With sales charge (c) | 24.22 | 11.70 | 11.25 | 13.05 | ||||
Class C (GCCSX) | 30.80 | 12.19 | 11.11 | 12.98 | ||||
With contingent deferred sales charge (d) | 29.80 | 12.19 | 11.11 | 12.98 | ||||
Class I (GACIX) | 32.14 | 13.31 | 12.08 | 13.43 |
In the current prospectuses dated January 28, 2013, the expense ratios for Class AAA, A, C, and I Shares are 1.41%, 1.41%, 2.16%, and 1.16%, respectively. See page 16 for the expense ratios for the year ended September 30, 2013. Class AAA and Class I Shares have no sales charge. The maximum sales charge for Class A and C Shares is 5.75% and 1.00%, respectively.
(a) | Returns represent past performance and do not guarantee future results. Total returns and average annual returns reflect changes in share price, 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. 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. The Fund imposes a 2% redemption fee on shares sold or exchanged within seven days after the date of purchase. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The prospectus contains information about these and other matters and should be read carefully before investing. To obtain a prospectus please visit our website at www.gabelli.com. The Class AAA Share NAVs are used to calculate performance for the periods prior to the issuance of Class A Shares and Class C Shares on December 31, 2003, and the Class I Shares on January 11, 2008. The actual performance of the Class A Shares and Class C Shares would have been lower due to the additional fees and expenses associated with these classes of shares. The actual performance of the Class I Shares would have been higher due to lower expenses related to this class 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 is an unmanaged indicator which measures the performance of the small-cap segment of the U.S. equity market. Dividends are considered reinvested. You cannot invest directly in an index. |
(b) | The Fund’s fiscal year ends September 30. |
(c) | Performance results include the effect of the maximum 5.75% sales charge at the beginning of the period. |
(d) | Assuming payment of the 1% maximum contingent deferred sales charge imposed on redemptions made within one year of purchase. |
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI SMALL CAP GROWTH FUND CLASS AAA AND THE RUSSELL 2000 INDEX (Unaudited)
* | Past performance is not predictive of future results. The performance tables and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
2
The Gabelli Small Cap Growth Fund
Disclosure of Fund Expenses (Unaudited)
For the Six Month Period from April 1, 2013 through September 30, 2013 | 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, 2013.
Beginning 04/01/13 | Ending Account Value 09/30/13 | Annualized Expense Ratio | Expenses Paid During Period* | |||||
The Gabelli Small Cap Growth Fund | ||||||||
Actual Fund Return | ||||||||
Class AAA | $1,000.00 | $1,115.10 | 1.39% | $ 7.37 | ||||
Class A | $1,000.00 | $1,114.90 | 1.39% | $ 7.37 | ||||
Class C | $1,000.00 | $1,110.70 | 2.14% | $11.32 | ||||
Class I | $1,000.00 | $1,116.50 | 1.14% | $ 6.05 | ||||
Hypothetical 5% Return | ||||||||
Class AAA | $1,000.00 | $1,018.10 | 1.39% | $ 7.03 | ||||
Class A | $1,000.00 | $1,018.10 | 1.39% | $ 7.03 | ||||
Class C | $1,000.00 | $1,014.34 | 2.14% | $10.81 | ||||
Class I | $1,000.00 | $1,019.35 | 1.14% | $ 5.77 |
* | 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 (183 days), 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, 2013:
The Gabelli Small Cap Growth Fund
U.S. Government Obligations | 15.5% | |||
Equipment and Supplies | 8.2% | |||
Food and Beverage | 6.9% | |||
Automotive: Parts and Accessories | 6.5% | |||
Diversified Industrial | 6.0% | |||
Retail | 5.8% | |||
Energy and Utilities | 5.2% | |||
Health Care | 4.7% | |||
Business Services | 4.4% | |||
Financial Services | 4.2% | |||
Specialty Chemicals | 3.9% | |||
Aviation: Parts and Services | 3.5% | |||
Building and Construction | 3.1% | |||
Hotels and Gaming | 2.7% | |||
Computer Software and Services | 2.4% | |||
Electronics | 1.5% | |||
Entertainment | 1.4% | |||
Publishing | 1.4% | |||
Broadcasting | 1.4% | |||
Consumer Products | 1.3% | |||
Cable | 1.3% | |||
Machinery | 1.2% |
Real Estate | 1.2% | |||
Consumer Services | 1.2% | |||
Telecommunications | 1.2% | |||
Automotive | 0.9% | |||
Transportation | 0.8% | |||
Metals and Mining | 0.5% | |||
Environmental Services | 0.4% | |||
Home Furnishings | 0.3% | |||
Manufactured Housing and Recreational Vehicles | 0.3% | |||
Wireless Communications | 0.2% | |||
Educational Services | 0.2% | |||
Closed-End Funds | 0.2% | |||
Paper and Forest Products | 0.1% | |||
Communications Equipment | 0.1% | |||
Closed-End Business Development Company | 0.0% | |||
Aerospace | 0.0% | |||
Agriculture | 0.0% | |||
Other Assets and Liabilities (Net) | (0.1)% | |||
|
| |||
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. 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 800-SEC-0330.
Proxy Voting
The Fund files Form N-PX with its complete proxy voting record for the twelve months ended June 30, no later than August 31 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, 2013
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS — 84.4% |
| |||||||||||
Aerospace — 0.0% |
| |||||||||||
25,000 | Embraer SA, ADR | $ | 430,623 | $ | 811,750 | |||||||
15,000 | Exelis Inc. | 135,825 | 235,650 | |||||||||
12,500 | Innovative Solutions & Support Inc. | 47,898 | 99,500 | |||||||||
|
|
|
| |||||||||
614,346 | 1,146,900 | |||||||||||
|
|
|
| |||||||||
Agriculture — 0.0% |
| |||||||||||
329,975 | Black Earth Farming Ltd., SDR† | 680,485 | 354,276 | |||||||||
12,000 | Cadiz Inc.† | 93,950 | 61,320 | |||||||||
177,700 | Ceres Inc.† | 1,529,062 | 264,773 | |||||||||
3,000 | The Mosaic Co. | 63,893 | 129,060 | |||||||||
|
|
|
| |||||||||
2,367,390 | 809,429 | |||||||||||
|
|
|
| |||||||||
Automotive — 0.9% |
| |||||||||||
735,080 | Navistar International Corp.† | 20,952,170 | 26,815,718 | |||||||||
12,000 | PACCAR Inc. | 471,506 | 667,920 | |||||||||
|
|
|
| |||||||||
21,423,676 | 27,483,638 | |||||||||||
|
|
|
| |||||||||
Automotive: Parts and Accessories — 6.4% |
| |||||||||||
129,500 | BorgWarner Inc. | 1,436,796 | 13,130,005 | |||||||||
890,000 | Brembo SpA | 10,373,886 | 23,189,751 | |||||||||
90,022 | China Automotive Systems Inc.† | 463,870 | 672,464 | |||||||||
1,000,015 | Dana Holding Corp. | 7,045,474 | 22,840,343 | |||||||||
1,026,138 | Federal-Mogul Corp.† | 13,122,909 | 17,228,857 | |||||||||
684,000 | Modine Manufacturing Co.† | 8,515,290 | 10,006,920 | |||||||||
22,500 | Monro Muffler Brake Inc. | 152,114 | 1,046,025 | |||||||||
435,000 | O’Reilly Automotive Inc.† | 11,834,366 | 55,501,650 | |||||||||
100,000 | Penske Automotive Group Inc. | 1,476,842 | 4,273,000 | |||||||||
36,000 | Puradyn Filter Technologies Inc.† | 10,247 | 6,480 | |||||||||
195,000 | SORL Auto Parts Inc.† | 1,145,902 | 725,400 | |||||||||
80,375 | Spartan Motors Inc. | 388,580 | 487,876 | |||||||||
231,000 | Standard Motor Products Inc. | 1,913,710 | 7,428,960 | |||||||||
207,000 | Strattec Security Corp.(a) | 4,399,791 | 7,938,450 | |||||||||
400,000 | Superior Industries International Inc. | 6,650,124 | 7,132,000 | |||||||||
510,000 | Tenneco Inc.† | 5,099,490 | 25,755,000 | |||||||||
532,061 | The Pep Boys - Manny, Moe & Jack† | 5,756,097 | 6,634,801 | |||||||||
27,000 | Thor Industries Inc. | 250,194 | 1,567,080 | |||||||||
70,000 | Wonder Auto Technology Inc.† | 262,540 | 31,500 | |||||||||
|
|
|
| |||||||||
80,298,222 | 205,596,562 | |||||||||||
|
|
|
| |||||||||
Aviation: Parts and Services — 3.5% |
| |||||||||||
25,000 | AAR Corp. | 302,990 | 683,250 | |||||||||
10,000 | Astronics Corp.† | 31,028 | 497,100 | |||||||||
5,812 | Astronics Corp., Cl. B† | 17,960 | 289,844 |
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
100 | B/E Aerospace Inc.† | $ | 6,935 | $ | 7,382 | |||||||
2,500 | Barnes Group Inc. | 68,820 | 87,300 | |||||||||
5,000,000 | BBA Aviation plc | 13,331,465 | 24,688,362 | |||||||||
520,000 | Curtiss-Wright Corp. | 14,888,024 | 24,419,200 | |||||||||
44,000 | Ducommun Inc.† | 868,225 | 1,261,920 | |||||||||
1,225,095 | GenCorp Inc.† | 7,763,715 | 19,638,273 | |||||||||
833,877 | Kaman Corp. | 15,096,028 | 31,570,583 | |||||||||
85,000 | Moog Inc., Cl. A† | 703,065 | 4,986,950 | |||||||||
16,100 | Moog Inc., Cl. B† | 464,818 | 940,562 | |||||||||
68,000 | Woodward Inc. | 1,052,020 | 2,776,440 | |||||||||
|
|
|
| |||||||||
54,595,093 | 111,847,166 | |||||||||||
|
|
|
| |||||||||
Broadcasting — 1.4% |
| |||||||||||
520,836 | ACME Communications Inc. | 532,873 | 36,459 | |||||||||
230,853 | Beasley Broadcast Group Inc., Cl. A | 1,324,247 | 2,006,113 | |||||||||
23,300 | Cogeco Inc. | 592,837 | 1,040,532 | |||||||||
400,000 | Crown Media Holdings Inc., Cl. A† | 1,489,737 | 1,232,000 | |||||||||
310,000 | Gray Television Inc.† | 935,016 | 2,433,500 | |||||||||
43,000 | Gray Television Inc., Cl. A† | 89,142 | 311,535 | |||||||||
87,000 | Liberty Media Corp., Cl. A† | 1,575,433 | 12,802,050 | |||||||||
455,000 | LIN Media LLC, Cl. A† | 7,052,500 | 9,231,950 | |||||||||
110,000 | Pandora Media Inc.† | 1,419,811 | 2,764,300 | |||||||||
550,354 | Salem Communications Corp., Cl. A | 2,192,559 | 4,556,931 | |||||||||
175,000 | Sinclair Broadcast Group Inc., Cl. A | 1,392,064 | 5,866,000 | |||||||||
450,000 | Sirius XM Radio Inc. | 219,282 | 1,741,500 | |||||||||
|
|
|
| |||||||||
18,815,501 | 44,022,870 | |||||||||||
|
|
|
| |||||||||
Building and Construction — 3.1% |
| |||||||||||
65,000 | Beazer Homes USA Inc.† | 1,210,794 | 1,170,000 | |||||||||
295,000 | D.R. Horton Inc. | 3,487,621 | 5,731,850 | |||||||||
750,000 | Hovnanian Enterprises Inc., Cl. A† | 1,928,866 | 3,922,500 | |||||||||
200,000 | KB Home | 2,123,861 | 3,604,000 | |||||||||
428,000 | Layne Christensen Co.† | 10,771,182 | 8,542,880 | |||||||||
114,000 | Lennar Corp., Cl. A | 1,631,993 | 4,035,600 | |||||||||
320,009 | Lennar Corp., Cl. B | 7,605,393 | 9,168,258 | |||||||||
600,000 | Louisiana-Pacific Corp.† | 5,071,723 | 10,554,000 | |||||||||
170,000 | MDC Holdings Inc. | 4,403,790 | 5,101,700 | |||||||||
155,000 | Meritage Homes Corp.† | 3,454,885 | 6,657,250 | |||||||||
12,500 | Nortek Inc.† | 459,613 | 858,875 | |||||||||
2,800 | NVR Inc.† | 1,980,556 | 2,573,732 | |||||||||
345,000 | PulteGroup Inc. | 2,447,273 | 5,692,500 | |||||||||
200,000 | Standard Pacific Corp.† | 771,232 | 1,582,000 | |||||||||
143,015 | Texas Industries Inc.† | 4,697,629 | 9,483,325 | |||||||||
255,000 | The Ryland Group Inc. | 4,167,256 | 10,337,700 | |||||||||
380,000 | Toll Brothers Inc.† | 7,446,446 | 12,323,400 | |||||||||
|
|
|
| |||||||||
63,660,113 | 101,339,570 | |||||||||||
|
|
|
|
See accompanying notes to financial statements.
5
The Gabelli Small Cap Growth Fund
Schedule of Investments (Continued) — September 30, 2013
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS (Continued) |
| |||||||||||
Business Services — 4.4% |
| |||||||||||
40,000 | ACCO Brands Corp.† | $ | 383,433 | $ | 265,600 | |||||||
115,000 | Ascent Capital Group Inc., Cl. A† | 2,922,487 | 9,271,300 | |||||||||
510,006 | Clear Channel Outdoor Holdings Inc., Cl. A† | 2,194,944 | 4,182,049 | |||||||||
388,100 | Diebold Inc. | 12,838,029 | 11,394,616 | |||||||||
550,000 | Edgewater Technology Inc.†(a) | 2,709,394 | 2,898,500 | |||||||||
380,000 | Furmanite Corp.† | 1,479,692 | 3,762,000 | |||||||||
110,000 | GP Strategies Corp.† | 915,343 | 2,884,200 | |||||||||
35,589 | GSE Systems Inc.† | 138,667 | 55,875 | |||||||||
355,000 | Internap Network Services Corp.† | 2,430,077 | 2,467,250 | |||||||||
22,000 | Lamar Advertising Co., Cl. A† | 196,856 | 1,034,660 | |||||||||
16,500 | Landauer Inc. | 425,722 | 845,625 | |||||||||
1,135,000 | Live Nation Entertainment Inc.† | 11,614,286 | 21,054,250 | |||||||||
275,000 | Loomis AB, Cl. B | 2,925,762 | 6,054,818 | |||||||||
196,000 | Macquarie Infrastructure Co. LLC | 2,829,518 | 10,493,840 | |||||||||
97,000 | McGrath RentCorp | 2,605,346 | 3,462,900 | |||||||||
125,000 | ModusLink Global Solutions Inc.† | 486,103 | 342,500 | |||||||||
10,000 | Sealed Air Corp. | 220,480 | 271,900 | |||||||||
120,000 | Sohgo Security Services Co. Ltd. | 1,459,559 | 2,396,460 | |||||||||
147,500 | Stamps.com Inc.† | 1,187,965 | 6,774,675 | |||||||||
560,000 | Swisher Hygiene Inc.† | 385,126 | 353,381 | |||||||||
405,007 | The Brink’s Co. | 10,028,164 | 11,461,698 | |||||||||
1,910,000 | The Interpublic Group of Companies Inc. | 13,286,999 | 32,813,800 | |||||||||
20,000 | Tiger Media Inc.† | 93,821 | 25,600 | |||||||||
33,050 | TransAct Technologies Inc. | 168,459 | 432,625 | |||||||||
10,072,500 | Trans-Lux Corp.†(a) | 3,956,179 | 2,518,125 | |||||||||
60,000 | United Rentals Inc.† | 380,572 | 3,497,400 | |||||||||
84,000 | ValueClick Inc.† | 1,083,047 | 1,751,400 | |||||||||
|
|
|
| |||||||||
79,346,030 | 142,767,047 | |||||||||||
|
|
|
| |||||||||
Cable — 1.3% |
| |||||||||||
176,000 | AMC Networks Inc., Cl. A† | 2,124,059 | 12,052,480 | |||||||||
538,968 | Cablevision Systems Corp., Cl. A | 688,308 | 9,076,221 | |||||||||
10,000 | Cogeco Cable Inc. | 340,851 | 470,268 | |||||||||
232,000 | DIRECTV† | 5,764,499 | 13,862,000 | |||||||||
50,000 | DISH Network Corp., Cl. A | 968,420 | 2,250,500 | |||||||||
36,000 | EchoStar Corp., Cl. A† | 708,109 | 1,581,840 | |||||||||
8,800 | Liberty Global plc, Cl. A† | 211,413 | 698,280 | |||||||||
8,800 | Liberty Global plc, Cl. C† | 203,123 | 663,784 | |||||||||
|
|
|
| |||||||||
11,008,782 | 40,655,373 | |||||||||||
|
|
|
|
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
Closed-End Business Development Company — 0.0% |
| |||||||||||
115,000 | MVC Capital Inc. | $ | 1,305,912 | $ | 1,501,900 | |||||||
|
|
|
| |||||||||
Closed-End Funds — 0.2% |
| |||||||||||
105,067 | The Central Europe, Russia, and Turkey Fund Inc. | 3,145,276 | 3,406,272 | |||||||||
34,905 | The European Equity Fund Inc. | 353,307 | 281,509 | |||||||||
57,977 | The New Germany Fund Inc. | 698,895 | 1,193,746 | |||||||||
|
|
|
| |||||||||
4,197,478 | 4,881,527 | |||||||||||
|
|
|
| |||||||||
Communications Equipment — 0.1% |
| |||||||||||
150,071 | Communications Systems Inc. | 1,117,201 | 1,697,303 | |||||||||
500 | IPG Photonics Corp. | 31,282 | 28,155 | |||||||||
295,000 | Sycamore Networks Inc. | 498,478 | 141,600 | |||||||||
|
|
|
| |||||||||
1,646,961 | 1,867,058 | |||||||||||
|
|
|
| |||||||||
Computer Software and Services — 2.4% |
| |||||||||||
310,000 | Activision Blizzard Inc. | 4,655,450 | 5,167,700 | |||||||||
320,000 | EarthLink Inc. | 2,438,884 | 1,584,000 | |||||||||
125,000 | Electronic Arts Inc.† | 2,391,504 | 3,193,750 | |||||||||
135,000 | Emulex Corp.† | 1,313,413 | 1,047,600 | |||||||||
440,000 | FalconStor Software Inc.† | 1,726,908 | 580,800 | |||||||||
1,000 | FireEye Inc.† | 20,000 | 41,530 | |||||||||
460,020 | Global Sources Ltd.† | 3,474,121 | 3,413,348 | |||||||||
60,077 | Guidance Software Inc.† | 541,417 | 544,898 | |||||||||
40,000 | InterXion Holding NV† | 630,985 | 889,600 | |||||||||
60,000 | Mentor Graphics Corp. | 720,436 | 1,402,200 | |||||||||
22,000 | Mercury Systems Inc.† | 410,105 | 219,780 | |||||||||
20,187 | MKS Instruments Inc. | 367,981 | 536,772 | |||||||||
440,000 | NCR Corp.† | 4,746,089 | 17,428,400 | |||||||||
65,000 | Quantum Corp.† | 204,798 | 89,700 | |||||||||
100,000 | Rockwell Automation Inc. | 2,731,906 | 10,694,000 | |||||||||
54,000 | Stratasys Ltd.† | 4,104,000 | 5,468,040 | |||||||||
299,500 | Tyler Technologies Inc.† | 1,333,221 | 26,197,265 | |||||||||
|
|
|
| |||||||||
31,811,218 | 78,499,383 | |||||||||||
|
|
|
| |||||||||
Consumer Products — 1.3% |
| |||||||||||
270,000 | 1-800-FLOWERS.COM Inc., Cl. A† | 1,228,113 | 1,331,100 | |||||||||
55,000 | Brunswick Corp. | 967,690 | 2,195,050 | |||||||||
33,500 | Chofu Seisakusho Co. Ltd. | 484,644 | 766,143 | |||||||||
58,500 | Church & Dwight Co. Inc. | 295,249 | 3,512,925 | |||||||||
12,000 | Elizabeth Arden Inc.† | 419,418 | 443,040 | |||||||||
2,000 | Harley-Davidson Inc. | 4,713 | 128,480 | |||||||||
25,012 | Harman International Industries Inc. | 1,083,712 | 1,656,545 | |||||||||
400,004 | Marine Products Corp. | 799,378 | 3,632,036 | |||||||||
10,000 | National Presto Industries Inc. | 300,897 | 704,100 | |||||||||
445,000 | Sally Beauty Holdings Inc.† | 2,951,051 | 11,641,200 | |||||||||
200,000 | Samick Musical Instruments Co. Ltd.† | 259,514 | 348,012 |
See accompanying notes to financial statements.
6
The Gabelli Small Cap Growth Fund
Schedule of Investments (Continued) — September 30, 2013
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS (Continued) |
| |||||||||||
Consumer Products (Continued) |
| |||||||||||
6,500 | Steven Madden Ltd.† | $ | 36,466 | $ | 349,895 | |||||||
235,000 | Stewart Enterprises Inc., Cl. A | 1,311,459 | 3,087,900 | |||||||||
150,000 | Swedish Match AB | 2,992,162 | 5,293,541 | |||||||||
87,425 | Syratech Corp.† | 17,426 | 262 | |||||||||
24,000 | The Scotts Miracle-Gro Co., Cl. A | 710,286 | 1,320,720 | |||||||||
22,000 | WD-40 Co. | 606,916 | 1,427,800 | |||||||||
55,000 | Wolverine World Wide Inc. | 567,192 | 3,202,650 | |||||||||
|
|
|
| |||||||||
15,036,286 | 41,041,399 | |||||||||||
|
|
|
| |||||||||
Consumer Services — 1.2% |
| |||||||||||
52,000 | Bowlin Travel Centers Inc.† | 52,442 | 71,500 | |||||||||
2,750 | Collectors Universe Inc. | 4,650 | 40,370 | |||||||||
20,000 | IAC/InterActiveCorp. | 221,743 | 1,093,400 | |||||||||
265,017 | KAR Auction Services Inc. | 3,573,437 | 7,476,130 | |||||||||
100,000 | Liberty Interactive Corp., Cl. A† | 1,749,861 | 2,347,000 | |||||||||
18,726 | Liberty Ventures, Cl. A† | 795,942 | 1,651,071 | |||||||||
180,000 | Martha Stewart Living Omnimedia Inc., Cl. A† | 952,155 | 414,000 | |||||||||
600,000 | Rollins Inc. | 2,281,581 | 15,906,000 | |||||||||
70,000 | The ADT Corp. | 1,686,019 | 2,846,200 | |||||||||
460,000 | TiVo Inc.† | 4,876,896 | 5,722,400 | |||||||||
|
|
|
| |||||||||
16,194,726 | 37,568,071 | |||||||||||
|
|
|
| |||||||||
Diversified Industrial — 6.0% |
| |||||||||||
29,000 | Acuity Brands Inc. | 363,546 | 2,668,580 | |||||||||
30,000 | Aegion Corp.† | 561,304 | 711,900 | |||||||||
114,000 | Albany International Corp., Cl. A | 2,415,759 | 4,089,180 | |||||||||
204,000 | Ampco-Pittsburgh Corp. | 3,534,267 | 3,655,680 | |||||||||
6,000 | Anixter International Inc.† | 57,120 | 525,960 | |||||||||
3,000 | Columbus McKinnon Corp.† | 40,570 | 72,090 | |||||||||
397,000 | Crane Co. | 9,316,447 | 24,482,990 | |||||||||
3,000 | ESCO Technologies Inc. | 49,914 | 99,690 | |||||||||
17,000 | Foster Wheeler AG† | 32,976 | 447,780 | |||||||||
74,000 | Greif Inc., Cl. A | 757,714 | 3,628,220 | |||||||||
117,970 | Greif Inc., Cl. B | 5,709,954 | 6,281,903 | |||||||||
1,204,000 | Griffon Corp. | 13,203,675 | 15,098,160 | |||||||||
375,000 | Handy & Harman Ltd.† | 2,652,544 | 8,951,250 | |||||||||
15,000 | Haynes International Inc. | 738,665 | 679,950 | |||||||||
190,000 | Jardine Strategic Holdings Ltd. | 3,487,637 | 6,431,500 | |||||||||
400,000 | Katy Industries Inc.†(a) | 616,568 | 282,180 | |||||||||
87,500 | Kaydon Corp. | 2,922,621 | 3,108,000 | |||||||||
30,000 | Key Technology Inc.† | 483,654 | 416,700 | |||||||||
1,000 | L.B. Foster Co., Cl. A | 17,608 | 45,740 | |||||||||
40,000 | Lawson Products Inc.† | 532,135 | 412,400 | |||||||||
97,000 | Lincoln Electric Holdings Inc. | 2,614,310 | 6,462,140 | |||||||||
72,000 | Lindsay Corp. | 1,620,267 | 5,876,640 |
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
40,083 | Lydall Inc.† | $ | 447,165 | $ | 688,225 | |||||||
81,000 | Magnetek Inc.† | 1,773,803 | 1,434,510 | |||||||||
32,000 | Matthews International Corp., Cl. A | 748,294 | 1,218,560 | |||||||||
473,273 | Myers Industries Inc. | 4,629,255 | 9,517,520 | |||||||||
138,000 | Oil-Dri Corp. of America | 1,510,309 | 4,656,120 | |||||||||
124,000 | Olin Corp. | 2,407,153 | 2,860,680 | |||||||||
304,000 | Park-Ohio Holdings Corp.† | 2,675,513 | 11,679,680 | |||||||||
19,000 | Pentair Ltd. | 727,134 | 1,233,860 | |||||||||
87,000 | Precision Castparts Corp. | 1,759,715 | 19,769,880 | |||||||||
62,000 | Raven Industries Inc. | 1,623,285 | 2,028,020 | |||||||||
32,000 | Roper Industries Inc. | 620,029 | 4,251,840 | |||||||||
260,033 | Sevcon Inc.†(a) | 1,552,527 | 1,261,160 | |||||||||
96,000 | Sonoco Products Co. | 2,940,089 | 3,738,240 | |||||||||
115,500 | Standex International Corp. | 2,765,273 | 6,860,700 | |||||||||
387,000 | Textron Inc. | 2,408,058 | 10,685,070 | |||||||||
390,023 | Tredegar Corp. | 6,611,601 | 10,140,598 | |||||||||
85,000 | Trinity Industries Inc. | 2,575,111 | 3,854,750 | |||||||||
147,000 | Tyco International Ltd. | 2,752,473 | 5,142,060 | |||||||||
|
|
|
| |||||||||
92,256,042 | 195,450,106 | |||||||||||
|
|
|
| |||||||||
Educational Services — 0.2% |
| |||||||||||
60,000 | Career Education Corp.† | 484,149 | 165,600 | |||||||||
400,000 | Corinthian Colleges Inc.† | 2,167,339 | 876,000 | |||||||||
417,000 | Universal Technical Institute Inc. | 7,178,807 | 5,058,210 | |||||||||
|
|
|
| |||||||||
9,830,295 | 6,099,810 | |||||||||||
|
|
|
| |||||||||
Electronics — 1.5% |
| |||||||||||
98,000 | Badger Meter Inc. | 2,797,399 | 4,557,000 | |||||||||
252,048 | Bel Fuse Inc., Cl. A(a) | 5,966,028 | 4,365,471 | |||||||||
20,000 | CSR plc, ADR | 293,600 | 658,600 | |||||||||
560,000 | CTS Corp. | 5,365,883 | 8,831,200 | |||||||||
375,000 | Cypress Semiconductor Corp. | 3,283,342 | 3,502,500 | |||||||||
40,000 | Daktronics Inc. | 362,126 | 447,600 | |||||||||
110,000 | Gentex Corp. | 2,666,319 | 2,814,900 | |||||||||
114,000 | Greatbatch Inc.† | 2,887,842 | 3,879,420 | |||||||||
20,000 | IMAX Corp.† | 158,565 | 604,800 | |||||||||
70,000 | KEMET Corp.† | 307,782 | 292,600 | |||||||||
110,000 | Methode Electronics Inc. | 951,012 | 3,080,000 | |||||||||
20,000 | MOCON Inc. | 290,913 | 273,600 | |||||||||
310,000 | Park Electrochemical Corp. | 7,329,771 | 8,881,500 | |||||||||
12,000 | Pulse Electronics Corp.† | 546,998 | 46,800 | |||||||||
118,000 | Rofin-Sinar Technologies Inc.† | 2,796,014 | 2,856,780 | |||||||||
185,000 | Stoneridge Inc.† | 1,506,975 | 1,999,850 | |||||||||
109,000 | Zygo Corp.† | 1,013,646 | 1,741,820 | |||||||||
|
|
|
| |||||||||
38,524,215 | 48,834,441 | |||||||||||
|
|
|
| |||||||||
Energy and Utilities — 5.2% |
| |||||||||||
5,000 | Atlas Resource Partners LP | 95,819 | 104,700 | |||||||||
371,500 | Black Hills Corp. | 9,503,775 | 18,522,990 |
See accompanying notes to financial statements.
7
The Gabelli Small Cap Growth Fund
Schedule of Investments (Continued) — September 30, 2013
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS (Continued) |
| |||||||||||
Energy and Utilities (Continued) |
| |||||||||||
70,000 | Black Ridge Oil and Gas Inc.† | $ | 0 | $ | 56,000 | |||||||
100,000 | Callon Petroleum Co.† | 621,608 | 547,000 | |||||||||
35,000 | Chesapeake Utilities Corp. | 933,995 | 1,837,150 | |||||||||
8,000 | Clean Energy Fuels Corp.† | 121,214 | 102,240 | |||||||||
42,000 | CMS Energy Corp. | 221,307 | 1,105,440 | |||||||||
23,000 | Connecticut Water Service Inc. | 464,832 | 739,680 | |||||||||
6,000 | Consolidated Water Co. Ltd. | 80,818 | 89,820 | |||||||||
155,000 | Covanta Holding Corp. | 538,638 | 3,313,900 | |||||||||
13,000 | Dawson Geophysical Co.† | 365,597 | 422,110 | |||||||||
408,089 | El Paso Electric Co. | 5,933,161 | 13,630,173 | |||||||||
70,000 | Energy Recovery Inc.† | 301,631 | 507,500 | |||||||||
20,000 | Gamesa Corporacion Tecnologica SA† | 117,491 | 174,437 | |||||||||
190,000 | Great Plains Energy Inc. | 3,922,294 | 4,218,000 | |||||||||
98,000 | Hawaiian Electric Industries Inc. | 2,495,312 | 2,459,800 | |||||||||
70,000 | Key Energy Services Inc.† | 597,194 | 510,300 | |||||||||
45,000 | Middlesex Water Co. | 773,022 | 962,550 | |||||||||
65,000 | National Fuel Gas Co. | 3,483,943 | 4,469,400 | |||||||||
200,000 | North Atlantic Drilling Ltd. | 1,937,412 | 1,912,443 | |||||||||
100,000 | NorthWestern Corp. | 2,966,899 | 4,492,000 | |||||||||
80,000 | Oceaneering International Inc. | 1,366,984 | 6,499,200 | |||||||||
229,000 | Otter Tail Corp. | 5,094,778 | 6,320,400 | |||||||||
12,000 | Patterson-UTI Energy Inc. | 241,902 | 256,560 | |||||||||
1,190,000 | PNM Resources Inc. | 12,941,338 | 26,929,700 | |||||||||
132,000 | Rowan Companies plc, Cl. A† | 4,649,603 | 4,847,040 | |||||||||
2,370,129 | RPC Inc. | 3,583,935 | 36,665,896 | |||||||||
146,000 | SJW Corp. | 2,799,413 | 4,090,920 | |||||||||
185,000 | Southwest Gas Corp. | 4,313,295 | 9,250,000 | |||||||||
330,000 | SunEdison Inc.† | 1,355,447 | 2,630,100 | |||||||||
45,000 | Tesoro Corp. | 455,817 | 1,979,100 | |||||||||
37,063 | The Laclede Group Inc. | 1,431,334 | 1,667,835 | |||||||||
46,000 | The York Water Co. | 647,831 | 923,220 | |||||||||
15,000 | Vestas Wind Systems A/S† | 142,183 | 378,462 | |||||||||
220,000 | Westar Energy Inc. | 4,036,837 | 6,743,000 | |||||||||
|
|
|
| |||||||||
78,536,659 | 169,359,066 | |||||||||||
|
|
|
| |||||||||
Entertainment — 1.4% |
| |||||||||||
90,000 | Carmike Cinemas Inc.† | 605,943 | 1,987,200 | |||||||||
30,000 | Discovery Communications Inc., Cl. A† | 409,648 | 2,532,600 | |||||||||
30,000 | Discovery Communications Inc., Cl. C† | 418,237 | 2,343,600 | |||||||||
347,850 | Dover Motorsports Inc. | 1,386,473 | 838,318 | |||||||||
32,000 | International Speedway Corp., Cl. A | 962,891 | 1,033,600 | |||||||||
6,200 | International Speedway Corp., Cl. B | 148,415 | 210,800 | |||||||||
7,000 | Rovi Corp.† | 99,660 | 134,190 |
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
90,000 | Starz, Cl. A† | $ | 221,728 | $ | 2,531,700 | |||||||
360,000 | Take-Two Interactive Software Inc.† | 5,193,550 | 6,537,600 | |||||||||
270,000 | The Madison Square Garden Co., Cl. A† | 3,541,603 | 15,678,900 | |||||||||
260,000 | Twenty-First Century Fox Inc., Cl. A | 673,473 | 8,710,000 | |||||||||
180,000 | Universal Entertainment Corp. | 2,597,230 | 3,829,086 | |||||||||
22,000 | World Wrestling Entertainment Inc., Cl. A | 201,106 | 223,740 | |||||||||
|
|
|
| |||||||||
16,459,957 | 46,591,334 | |||||||||||
|
|
|
| |||||||||
Environmental Services — 0.4% |
| |||||||||||
18,248 | Ceco Environmental Corp. | 240,403 | 256,932 | |||||||||
400,000 | Republic Services Inc. | 5,798,456 | 13,344,000 | |||||||||
|
|
|
| |||||||||
6,038,859 | 13,600,932 | |||||||||||
|
|
|
| |||||||||
Equipment and Supplies — 8.2% |
| |||||||||||
44,000 | A.O. Smith Corp. | 328,585 | 1,988,800 | |||||||||
539,000 | AMETEK Inc. | 1,018,107 | 24,804,780 | |||||||||
40,000 | AZZ Inc. | 1,262,250 | 1,674,400 | |||||||||
18,000 | Belden Inc. | 208,890 | 1,152,900 | |||||||||
52,000 | Capstone Turbine Corp.† | 99,800 | 61,360 | |||||||||
548,000 | CIRCOR International Inc. | 15,249,641 | 34,074,640 | |||||||||
221,000 | CLARCOR Inc. | 1,338,826 | 12,272,130 | |||||||||
330,000 | Core Molding Technologies Inc.† | 654,777 | 3,161,400 | |||||||||
167,000 | Crown Holdings Inc.† | 674,926 | 7,060,760 | |||||||||
4,000 | Danaher Corp. | 34,106 | 277,280 | |||||||||
180,000 | Donaldson Co. Inc. | 1,558,860 | 6,863,400 | |||||||||
220,000 | Entegris Inc.† | 1,259,906 | 2,233,000 | |||||||||
750,000 | Federal Signal Corp.† | 4,742,153 | 9,652,500 | |||||||||
288,000 | Flowserve Corp. | 2,418,287 | 17,968,320 | |||||||||
310,000 | Franklin Electric Co. Inc. | 1,429,429 | 12,214,000 | |||||||||
222,000 | Gerber Scientific Inc., Escrow† | 0 | 2,220 | |||||||||
190,042 | Graco Inc. | 4,662,131 | 14,074,511 | |||||||||
1,117,000 | GrafTech International Ltd.† | 13,389,798 | 9,438,650 | |||||||||
100,000 | IDEX Corp. | 765,938 | 6,525,000 | |||||||||
520,000 | Interpump Group SpA | 3,101,642 | 5,652,480 | |||||||||
52,000 | Itron Inc.† | 2,232,271 | 2,227,160 | |||||||||
10,500 | Jarden Corp.† | 115,037 | 508,200 | |||||||||
40,000 | Littelfuse Inc. | 758,367 | 3,128,800 | |||||||||
55,000 | Maezawa Kyuso Industries Co. Ltd. | 359,609 | 709,497 | |||||||||
6,000 | Mine Safety Appliances Co. | 179,592 | 309,660 | |||||||||
30,000 | Minerals Technologies Inc. | 1,102,042 | 1,481,100 | |||||||||
140,002 | Mueller Industries Inc. | 6,098,272 | 7,793,911 | |||||||||
240,000 | Mueller Water Products Inc., Cl. A | 1,447,179 | 1,917,600 | |||||||||
10,000 | Plantronics Inc. | 262,977 | 460,500 | |||||||||
2,000 | Regal-Beloit Corp. | 59,351 | 135,860 |
See accompanying notes to financial statements.
8
The Gabelli Small Cap Growth Fund
Schedule of Investments (Continued) — September 30, 2013
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS (Continued) |
| |||||||||||
Equipment and Supplies (Continued) |
| |||||||||||
93,032 | SL Industries Inc. | $ | 1,274,561 | $ | 2,274,632 | |||||||
5,000 | Teleflex Inc. | 76,167 | 411,400 | |||||||||
300,000 | Tennant Co. | 6,160,189 | 18,600,000 | |||||||||
665,000 | The Gorman-Rupp Co. | 13,671,070 | 26,679,800 | |||||||||
180,000 | The Greenbrier Companies Inc.† | 2,723,774 | 4,451,400 | |||||||||
262,052 | The L.S. Starrett Co., Cl. A | 3,263,481 | 2,882,572 | |||||||||
100,000 | The Manitowoc Co. Inc. | 666,995 | 1,958,000 | |||||||||
25,200 | The Middleby Corp.† | 1,126,121 | 5,264,532 | |||||||||
24,400 | The Toro Co. | 859,601 | 1,326,140 | |||||||||
8,000 | Valmont Industries Inc. | 176,298 | 1,111,280 | |||||||||
135,005 | Vicor Corp.† | 1,214,760 | 1,104,341 | |||||||||
7,875 | Watsco Inc., Cl. B | 23,627 | 745,290 | |||||||||
155,000 | Watts Water Technologies Inc., Cl. A | 3,553,514 | 8,737,350 | |||||||||
|
|
|
| |||||||||
101,602,907 | 265,371,556 | |||||||||||
|
|
|
| |||||||||
Financial Services — 4.2% |
| |||||||||||
10,500 | Alleghany Corp.† | 1,739,381 | 4,301,325 | |||||||||
24,200 | Argo Group International Holdings Ltd. | 724,275 | 1,037,696 | |||||||||
305,000 | BBCN Bancorp Inc. | 3,424,494 | 4,196,800 | |||||||||
10,121 | BCB Holdings Ltd.† | 21,770 | 2,663 | |||||||||
118,000 | BKF Capital Group Inc.† | 495,818 | 132,750 | |||||||||
30,000 | Blackhawk Network Holdings Inc.† | 737,444 | 720,900 | |||||||||
35,000 | Calamos Asset Management Inc., Cl. A | 395,264 | 349,650 | |||||||||
12,500 | Capitol Federal Financial Inc. | 125,000 | 155,375 | |||||||||
22,000 | Crazy Woman Creek Bancorp Inc.† | 343,564 | 243,650 | |||||||||
183,000 | Energy Transfer Equity LP | 2,827,780 | 12,037,740 | |||||||||
9,162 | Fidelity Southern Corp. | 53,096 | 140,545 | |||||||||
280,000 | First Niagara Financial Group Inc. | 3,647,333 | 2,903,600 | |||||||||
65,000 | FirstMerit Corp. | 1,077,300 | 1,411,150 | |||||||||
291,000 | Flushing Financial Corp. | 4,635,436 | 5,368,950 | |||||||||
170,100 | Fortress Investment Group LLC, Cl. A | 892,762 | 1,350,594 | |||||||||
1,083,300 | GAM Holding AG | 13,708,995 | 19,585,288 | |||||||||
53,000 | Hudson Valley Holding Corp. | 1,022,300 | 995,340 | |||||||||
1,071,000 | Janus Capital Group Inc. | 10,549,099 | 9,114,210 | |||||||||
750,072 | KKR & Co. LP | 5,438,228 | 15,436,482 | |||||||||
180,000 | Legg Mason Inc. | 4,080,240 | 6,019,200 | |||||||||
21,000 | M&T Bank Corp. | 1,813,109 | 2,350,320 | |||||||||
2,000 | Manning & Napier Inc. | 26,519 | 33,360 | |||||||||
60,024 | Medallion Financial Corp. | 463,920 | 893,157 | |||||||||
250,000 | Och-Ziff Capital Management Group LLC, Cl. A | 1,997,164 | 2,747,500 | |||||||||
165,000 | Oritani Financial Corp. | 1,685,540 | 2,715,900 | |||||||||
32,000 | PrivateBancorp Inc. | 541,949 | 684,800 |
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
199,000 | Steel Excel Inc.† | $ | 5,322,428 | $ | 5,842,640 | |||||||
275,000 | Sterling Bancorp | 3,903,038 | 3,775,750 | |||||||||
30,000 | Stifel Financial Corp.† | 1,235,264 | 1,236,600 | |||||||||
427,020 | SWS Group Inc.† | 4,499,056 | 2,382,772 | |||||||||
10,000 | T. Rowe Price Group Inc. | 270,786 | 719,300 | |||||||||
150,000 | The Charles Schwab Corp. | 2,404,087 | 3,171,000 | |||||||||
10,000 | Universal American Corp. | 89,364 | 76,200 | |||||||||
4,500 | Value Line Inc. | 107,462 | 39,735 | |||||||||
410,000 | Waddell & Reed Financial Inc., Cl. A | 7,656,587 | 21,106,800 | |||||||||
10,121 | Waterloo Investment Holdings Ltd.† | 1,390 | 655 | |||||||||
572,600 | Wright Investors’ Service Holdings Inc.† | 1,177,668 | 1,216,775 | |||||||||
|
|
|
| |||||||||
89,134,910 | 134,497,172 | |||||||||||
|
|
|
| |||||||||
Food and Beverage — 6.9% |
| |||||||||||
400 | Annie’s Inc.† | 7,600 | 19,640 | |||||||||
580,000 | Arca Continental SAB de CV | 1,141,603 | 3,611,291 | |||||||||
585,000 | Boulder Brands Inc.† | 3,809,777 | 9,383,400 | |||||||||
57,150 | Brown-Forman Corp., Cl. A | 1,115,861 | 3,782,187 | |||||||||
7,500 | Brown-Forman Corp., Cl. B | 144,052 | 510,975 | |||||||||
220,000 | Bull-Dog Sauce Co. Ltd. | 479,963 | 396,154 | |||||||||
5,100,000 | China Tontine Wines Group Ltd.† | 989,232 | 213,708 | |||||||||
115,010 | Crimson Wine Group Ltd.† | 1,041,866 | 1,098,345 | |||||||||
1,100,000 | Davide Campari - Milano SpA | 6,022,895 | 9,538,949 | |||||||||
155,000 | Dean Foods Co.† | 2,263,978 | 2,991,500 | |||||||||
365,400 | Denny’s Corp.† | 1,008,852 | 2,236,248 | |||||||||
270,000 | Diamond Foods Inc.† | 5,635,173 | 6,366,600 | |||||||||
326,000 | Dr Pepper Snapple Group Inc. | 6,664,752 | 14,611,320 | |||||||||
3,500,000 | Dynasty Fine Wines Group Ltd.† | 1,246,520 | 649,828 | |||||||||
55,000 | Farmer Brothers Co.† | 711,242 | 828,300 | |||||||||
510,000 | Flowers Foods Inc. | 1,250,571 | 10,934,400 | |||||||||
33,000 | Green Mountain Coffee Roasters Inc.† | 910,942 | 2,485,890 | |||||||||
206,000 | Ingredion Inc. | 4,411,472 | 13,631,020 | |||||||||
160,000 | ITO EN Ltd. | 3,301,726 | 3,631,517 | |||||||||
23,500 | J & J Snack Foods Corp. | 531,096 | 1,896,920 | |||||||||
1,325,000 | Kikkoman Corp. | 14,057,979 | 24,196,297 | |||||||||
245,000 | Lifeway Foods Inc. | 2,476,636 | 3,309,950 | |||||||||
3,000 | MEIJI Holdings Co. Ltd. | 117,526 | 163,894 | |||||||||
70,000 | MGP Ingredients Inc. | 331,262 | 366,800 | |||||||||
450,000 | Morinaga Milk Industry Co. Ltd. | 1,808,850 | 1,419,197 | |||||||||
85,000 | NISSIN FOODS HOLDINGS CO. LTD. | 2,907,986 | 3,484,918 | |||||||||
30,000 | Nutrisystem Inc. | 382,707 | 431,400 | |||||||||
4,000,000 | Parmalat SpA | 11,428,716 | 13,398,631 | |||||||||
45,000 | Post Holdings Inc.† | 1,001,788 | 1,816,650 |
See accompanying notes to financial statements.
9
The Gabelli Small Cap Growth Fund
Schedule of Investments (Continued) — September 30, 2013
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS (Continued) |
| |||||||||||
Food and Beverage (Continued) |
| |||||||||||
162,000 | Rock Field Co. Ltd. | $ | 2,539,700 | $ | 3,203,907 | |||||||
585,636 | Snyders-Lance Inc. | 12,198,552 | 16,895,599 | |||||||||
42,600 | The Boston Beer Co. Inc., Cl. A† | 818,946 | 10,403,346 | |||||||||
228,000 | The Hain Celestial Group Inc.† | 3,984,418 | 17,583,360 | |||||||||
66,000 | The J.M. Smucker Co. | 1,599,230 | 6,932,640 | |||||||||
700,000 | Tingyi (Cayman Islands) Holding Corp. | 1,792,917 | 1,854,717 | |||||||||
306,000 | Tootsie Roll Industries Inc. | 6,235,019 | 9,430,920 | |||||||||
90,000 | United Natural Foods Inc.† | 2,545,822 | 6,049,800 | |||||||||
7,000 | Vina Concha Y Toro SA, ADR | 240,329 | 257,600 | |||||||||
1,200,000 | Vitasoy International Holdings Ltd. | 739,370 | 1,514,718 | |||||||||
185,773 | WhiteWave Foods Co., Cl. A† | 2,438,410 | 3,709,887 | |||||||||
20,000 | Willamette Valley Vineyards Inc.† | 73,225 | 108,200 | |||||||||
153,000 | Yakult Honsha Co. Ltd. | 3,829,281 | 7,650,389 | |||||||||
|
|
|
| |||||||||
116,237,842 | 223,001,012 | |||||||||||
|
|
|
| |||||||||
Health Care — 4.6% |
| |||||||||||
30,000 | Alere Inc.† | 554,733 | 917,100 | |||||||||
37,000 | Align Technology Inc.† | 289,663 | 1,780,440 | |||||||||
100,000 | Allergan Inc. | 1,964,408 | 9,045,000 | |||||||||
110,000 | AngioDynamics Inc.† | 1,391,149 | 1,452,000 | |||||||||
8,000 | Anika Therapeutics Inc.† | 76,123 | 191,680 | |||||||||
160,000 | ArthroCare Corp.† | 3,219,138 | 5,692,800 | |||||||||
45,225 | Biolase Inc.† | 47,357 | 86,380 | |||||||||
12,099 | Bio-Rad Laboratories Inc., Cl. A† | 838,694 | 1,422,358 | |||||||||
88,000 | Bio-Reference Laboratories Inc.† | 1,917,610 | 2,629,440 | |||||||||
18,000 | Bruker Corp.† | 164,974 | 371,700 | |||||||||
219,006 | Cantel Medical Corp. | 2,541,859 | 6,975,341 | |||||||||
222,000 | Cepheid Inc.† | 3,001,918 | 8,666,880 | |||||||||
184,000 | Chemed Corp. | 4,974,482 | 13,156,000 | |||||||||
65,000 | CONMED Corp. | 1,684,549 | 2,209,350 | |||||||||
376,000 | Cutera Inc.† | 3,995,949 | 3,346,400 | |||||||||
15,000 | Cynosure Inc., Cl. A† | 353,951 | 342,150 | |||||||||
96,000 | DexCom Inc.† | 962,427 | 2,710,080 | |||||||||
28,000 | DGT Holdings Corp.† | 330,269 | 352,800 | |||||||||
210,024 | Exactech Inc.† | 3,283,169 | 4,231,984 | |||||||||
522,000 | Gentiva Health Services Inc.† | 6,506,583 | 6,284,880 | |||||||||
43,000 | Henry Schein Inc.† | 844,050 | 4,459,100 | |||||||||
7,000 | Heska Corp. | 66,328 | 41,930 | |||||||||
44,000 | ICU Medical Inc.† | 1,989,124 | 2,988,920 | |||||||||
100,000 | Lexicon Pharmaceuticals Inc.† | 195,732 | 237,000 | |||||||||
42,000 | Life Technologies Corp.† | 1,070,187 | 3,142,860 | |||||||||
191,000 | MAKO Surgical Corp.† | 4,297,393 | 5,636,410 | |||||||||
29,000 | Meridian Bioscience Inc. | 547,819 | 685,850 |
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
39,500 | MWI Veterinary Supply Inc.† | $ | 957,165 | $ | 5,899,720 | |||||||
8,000 | Neogen Corp.† | 195,096 | 485,760 | |||||||||
50,000 | Nordion Inc.† | 369,385 | 431,500 | |||||||||
60,000 | NuVasive Inc.† | 1,298,364 | 1,469,400 | |||||||||
105,000 | Opko Health Inc.† | 284,862 | 925,050 | |||||||||
70,000 | Orthofix International NV† | 1,141,374 | 1,460,200 | |||||||||
55,000 | Owens & Minor Inc. | 945,161 | 1,902,450 | |||||||||
265,000 | Pain Therapeutics Inc. | 1,131,663 | 720,800 | |||||||||
15,000 | Patterson Companies Inc. | 506,907 | 603,000 | |||||||||
636,000 | Quidel Corp.† | 7,144,104 | 18,062,400 | |||||||||
10,000 | Rhoen Klinikum AG | 199,650 | 256,974 | |||||||||
224,000 | Rochester Medical Corp.† | 2,574,265 | 4,471,040 | |||||||||
210,000 | RTI Surgical Inc.† | 1,057,768 | 785,400 | |||||||||
950,000 | Sorin SpA† | 2,406,255 | 2,570,416 | |||||||||
54,084 | STERIS Corp. | 1,726,476 | 2,323,449 | |||||||||
2,300 | Straumann Holding AG | 206,988 | 417,858 | |||||||||
3,000 | Stryker Corp. | 142,188 | 202,770 | |||||||||
14,000 | Syneron Medical Ltd.† | 116,750 | 120,680 | |||||||||
6,500 | Techne Corp. | 445,248 | 520,390 | |||||||||
34,500 | The Cooper Companies Inc. | 1,323,598 | 4,474,305 | |||||||||
46,500 | United-Guardian Inc. | 421,054 | 1,179,240 | |||||||||
75,000 | Vascular Solutions Inc.† | 573,743 | 1,260,000 | |||||||||
390,000 | Wright Medical Group Inc.† | 6,239,716 | 10,171,200 | |||||||||
|
|
|
| |||||||||
78,517,418 | 149,770,835 | |||||||||||
|
|
|
| |||||||||
Home Furnishings — 0.3% |
| |||||||||||
145,000 | Bassett Furniture Industries Inc. | 1,287,183 | 2,347,550 | |||||||||
42,500 | Bed Bath & Beyond Inc.† | 1,113,189 | 3,287,800 | |||||||||
78,802 | Blyth Inc. | 1,538,231 | 1,089,832 | |||||||||
160,000 | La-Z-Boy Inc. | 2,880,101 | 3,633,600 | |||||||||
|
|
|
| |||||||||
6,818,704 | 10,358,782 | |||||||||||
|
|
|
| |||||||||
Hotels and Gaming — 2.7% |
| |||||||||||
389,538 | Boyd Gaming Corp.† | 2,937,358 | 5,511,963 | |||||||||
110,000 | Canterbury Park Holding Corp. | 1,120,504 | 1,251,250 | |||||||||
228,637 | Churchill Downs Inc. | 9,342,329 | 19,781,673 | |||||||||
135,000 | Dover Downs Gaming & Entertainment Inc. | 802,305 | 183,600 | |||||||||
500,000 | Genting Singapore plc. | 514,712 | 571,918 | |||||||||
18,000 | Home Inns & Hotels Management Inc., ADR† | 343,247 | 597,600 | |||||||||
87,000 | Lakes Entertainment Inc.† | 388,784 | 360,180 | |||||||||
174,000 | Las Vegas Sands Corp. | 1,035,304 | 11,557,080 | |||||||||
2,000,000 | Mandarin Oriental International Ltd. | 2,854,177 | 3,240,000 | |||||||||
100,000 | Morgans Hotel Group Co.† | 719,616 | 769,000 | |||||||||
148,000 | Orient-Express Hotels Ltd., Cl. A† | 1,759,901 | 1,921,040 | |||||||||
75,000 | Penn National Gaming Inc.† | 1,122,844 | 4,152,000 | |||||||||
400,000 | Pinnacle Entertainment Inc.† | 3,285,549 | 10,020,000 |
See accompanying notes to financial statements.
10
The Gabelli Small Cap Growth Fund
Schedule of Investments (Continued) — September 30, 2013
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS (Continued) |
| |||||||||||
Hotels and Gaming (Continued) |
| |||||||||||
460,494 | Ryman Hospitality Properties Inc. | $ | 11,727,682 | $ | 15,891,648 | |||||||
2,600,000 | The Hongkong & Shanghai Hotels Ltd. | 2,690,035 | 3,928,880 | |||||||||
346,591 | The Marcus Corp. | 4,334,335 | 5,035,967 | |||||||||
24,000 | Wynn Resorts Ltd. | 199,481 | 3,792,240 | |||||||||
|
|
|
| |||||||||
45,178,163 | 88,566,039 | |||||||||||
|
|
|
| |||||||||
Machinery — 1.2% |
| |||||||||||
185,059 | Astec Industries Inc. | 6,210,110 | 6,654,722 | |||||||||
1,680,492 | CNH Industrial NV† | 5,637,413 | 21,006,150 | |||||||||
23,000 | Global Power Equipment Group Inc. | 478,427 | 462,530 | |||||||||
69,000 | Kennametal Inc. | 2,010,829 | 3,146,400 | |||||||||
6,000 | Nordson Corp. | 107,171 | 441,780 | |||||||||
136,000 | Twin Disc Inc. | 3,079,957 | 3,553,680 | |||||||||
110,000 | Zebra Technologies Corp., Cl. A† | 2,213,349 | 5,008,300 | |||||||||
|
|
|
| |||||||||
19,737,256 | 40,273,562 | |||||||||||
|
|
|
| |||||||||
Manufactured Housing and Recreational Vehicles — 0.3% |
| |||||||||||
82,000 | Cavco Industries Inc.† | 1,886,364 | 4,669,900 | |||||||||
15,000 | Drew Industries Inc. | 255,948 | 683,100 | |||||||||
42,000 | Nobility Homes Inc.† | 500,123 | 388,500 | |||||||||
10,000 | Polaris Industries Inc. | 539,231 | 1,291,800 | |||||||||
208,861 | Skyline Corp.† | 4,126,036 | 1,038,039 | |||||||||
58,000 | Winnebago Industries Inc.† | 685,542 | 1,505,680 | |||||||||
|
|
|
| |||||||||
7,993,244 | 9,577,019 | |||||||||||
|
|
|
| |||||||||
Metals and Mining — 0.5% |
| |||||||||||
52,003 | Barrick Gold Corp. | 1,522,648 | 968,296 | |||||||||
245,000 | Century Aluminum Co.† | 2,967,388 | 1,972,250 | |||||||||
16,200 | First Quantum Minerals Ltd. | 309,773 | 301,651 | |||||||||
45,000 | Ivanhoe Mines Ltd.† | 117,783 | 96,986 | |||||||||
140,000 | Kinross Gold Corp. | 962,642 | 707,000 | |||||||||
200,000 | Lynas Corp Ltd.† | 184,524 | 74,632 | |||||||||
348,000 | Materion Corp. | 7,896,679 | 11,156,880 | |||||||||
85,000 | Molycorp Inc.† | 1,471,018 | 557,600 | |||||||||
52,100 | Stillwater Mining Co.† | 477,514 | 573,621 | |||||||||
125,000 | Turquoise Hill Resources Ltd.† | 1,554,856 | 552,500 | |||||||||
15,000 | Yamana Gold Inc. | 50,671 | 156,000 | |||||||||
|
|
|
| |||||||||
17,515,496 | 17,117,416 | |||||||||||
|
|
|
| |||||||||
Paper and Forest Products — 0.1% |
| |||||||||||
18,000 | Schweitzer-Mauduit International Inc. | 396,901 | 1,089,540 | |||||||||
223,500 | Wausau Paper Corp. | 2,114,331 | 2,903,265 | |||||||||
|
|
|
| |||||||||
2,511,232 | 3,992,805 | |||||||||||
|
|
|
| |||||||||
Publishing — 1.4% |
| |||||||||||
65,000 | Belo Corp., Cl. A | 157,232 | 890,500 |
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
80,000 | Cambium Learning Group Inc.† | $ | 261,134 | $ | 123,200 | |||||||
980,000 | Il Sole 24 Ore SpA† | 1,563,750 | 723,883 | |||||||||
12,000 | John Wiley & Sons Inc., Cl. B | 46,500 | 573,120 | |||||||||
1,095,000 | Journal Communications Inc., Cl. A† | 5,475,453 | 9,362,250 | |||||||||
1,620,000 | Media General Inc., Cl. A†(a) | 8,191,413 | 23,101,200 | |||||||||
45,000 | Meredith Corp. | 1,246,283 | 2,142,900 | |||||||||
65,000 | News Corp., Cl. A† | 91,837 | 1,043,900 | |||||||||
405,000 | The E.W. Scripps Co., Cl. A† | 2,634,168 | 7,431,750 | |||||||||
|
|
|
| |||||||||
19,667,770 | 45,392,703 | |||||||||||
|
|
|
| |||||||||
Real Estate — 1.2% |
| |||||||||||
36,320 | Capital Properties Inc., Cl. A | 419,855 | 309,628 | |||||||||
156,000 | Cohen & Steers Inc. | 3,685,154 | 5,508,360 | |||||||||
203,850 | Griffin Land & Nurseries Inc. | 3,172,580 | 6,543,585 | |||||||||
8,400 | Gyrodyne Co. of America Inc. | 181,040 | 629,160 | |||||||||
105,000 | Morguard Corp. | 1,338,795 | 11,364,934 | |||||||||
75,091 | Tejon Ranch Co.† | 2,149,986 | 2,315,806 | |||||||||
590,000 | The St. Joe Co.† | 11,365,338 | 11,575,800 | |||||||||
|
|
|
| |||||||||
22,312,748 | 38,247,273 | |||||||||||
|
|
|
| |||||||||
Retail — 5.8% |
| |||||||||||
270,000 | Aaron’s Inc.† | 1,631,612 | 7,479,000 | |||||||||
200,000 | AutoNation Inc.† | 3,399,442 | 10,434,000 | |||||||||
56,000 | Barnes & Noble Inc.† | 744,895 | 724,640 | |||||||||
18,000 | Best Buy Co. Inc. | 439,636 | 675,000 | |||||||||
170,000 | Big 5 Sporting Goods Corp. | 2,285,759 | 2,733,600 | |||||||||
28,283 | Biglari Holdings Inc.† | 7,349,199 | 11,671,546 | |||||||||
349,000 | Casey’s General Stores Inc. | 12,714,657 | 25,651,500 | |||||||||
75,000 | Coldwater Creek Inc.† | 709,364 | 129,000 | |||||||||
82,000 | Copart Inc.† | 1,407,742 | 2,606,780 | |||||||||
1,000 | Cracker Barrel Old Country Store Inc. | 59,645 | 103,240 | |||||||||
90,000 | CST Brands Inc. | 2,903,500 | 2,682,000 | |||||||||
124,000 | Dominion Diamond Corp.† | 1,806,407 | 1,511,560 | |||||||||
2,500 | Dunkin’ Brands Group Inc. | 47,500 | 113,150 | |||||||||
2,000 | GNC Holdings Inc., Cl. A | 82,712 | 109,260 | |||||||||
108,000 | HSN Inc. | 3,197,489 | 5,790,960 | |||||||||
662,551 | Ingles Markets Inc., Cl. A | 10,922,963 | 19,035,090 | |||||||||
625,000 | J.C. Penney Co. Inc.† | 8,618,262 | 5,512,500 | |||||||||
380,000 | Krispy Kreme Doughnuts Inc.† | 2,420,097 | 7,349,200 | |||||||||
180,000 | Macy’s Inc. | 2,590,692 | 7,788,600 | |||||||||
58,000 | Movado Group Inc. | 756,058 | 2,537,500 | |||||||||
70,000 | Murphy USA Inc.† | 2,688,347 | 2,827,300 | |||||||||
155,000 | Nathan’s Famous Inc.† | 2,258,524 | 8,180,900 | |||||||||
13,000 | Outerwall Inc.† | 717,980 | 649,870 | |||||||||
500,000 | Pier 1 Imports Inc. | 5,471,047 | 9,760,000 | |||||||||
45,000 | Regis Corp. | 897,844 | 660,600 | |||||||||
300,000 | Rush Enterprises Inc., Cl. B† | 3,438,009 | 6,831,000 | |||||||||
3,000 | Sprouts Farmers Market Inc.† | 54,000 | 133,170 |
See accompanying notes to financial statements.
11
The Gabelli Small Cap Growth Fund
Schedule of Investments (Continued) — September 30, 2013
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS (Continued) |
| |||||||||||
Retail (Continued) |
| |||||||||||
350,000 | The Bon-Ton Stores Inc. | $ | 2,656,422 | $ | 3,692,500 | |||||||
380,000 | The Cheesecake Factory Inc. | 10,341,163 | 16,701,000 | |||||||||
165,000 | The Wendy’s Co. | 1,329,631 | 1,399,200 | |||||||||
256,000 | Tractor Supply Co. | 2,329,721 | 17,195,520 | |||||||||
36,000 | Village Super Market Inc., Cl. A | 899,231 | 1,368,720 | |||||||||
2,500 | Vitamin Shoppe, Inc.† | 122,210 | 109,375 | |||||||||
56,000 | Weis Markets Inc. | 1,772,705 | 2,740,640 | |||||||||
300 | Winmark Corp. | 21,919 | 22,113 | |||||||||
|
|
|
| |||||||||
99,086,384 | 186,910,034 | |||||||||||
|
|
|
| |||||||||
Specialty Chemicals — 3.9% |
| |||||||||||
52,000 | A. Schulman Inc. | 1,103,761 | 1,531,920 | |||||||||
19,000 | Airgas Inc. | 547,423 | 2,014,950 | |||||||||
80,000 | Albemarle Corp. | 1,244,700 | 5,035,200 | |||||||||
69,000 | Ashland Inc. | 1,115,171 | 6,381,120 | |||||||||
345,000 | Chemtura Corp.† | 5,243,175 | 7,931,550 | |||||||||
12,000 | Cytec Industries Inc. | 358,846 | 976,320 | |||||||||
2,270,100 | Ferro Corp.† | 15,076,816 | 20,680,611 | |||||||||
314,000 | H.B. Fuller Co. | 4,142,113 | 14,189,660 | |||||||||
9,000 | Hawkins Inc. | 135,158 | 339,660 | |||||||||
1,236,000 | Huntsman Corp. | 9,286,502 | 25,473,960 | |||||||||
80,000 | Material Sciences Corp.† | 465,412 | 750,400 | |||||||||
25,000 | NewMarket Corp. | 2,623,877 | 7,197,750 | |||||||||
300,000 | OMNOVA Solutions Inc.† | 574,864 | 2,565,000 | |||||||||
70,000 | Penford Corp.† | 758,592 | 1,002,400 | |||||||||
13,000 | Quaker Chemical Corp. | 214,482 | 949,650 | |||||||||
100,000 | Rockwood Holdings Inc. | 1,867,175 | 6,690,000 | |||||||||
255,000 | Sensient Technologies Corp. | 5,194,615 | 12,211,950 | |||||||||
600,000 | Zep Inc. | 8,328,433 | 9,756,000 | |||||||||
|
|
|
| |||||||||
58,281,115 | 125,678,101 | |||||||||||
|
|
|
| |||||||||
Telecommunications — 1.2% |
| |||||||||||
53,000 | Atlantic Tele-Network Inc. | 1,320,085 | 2,762,890 | |||||||||
2,000,000 | Cincinnati Bell Inc.† | 6,463,021 | 5,440,000 | |||||||||
6,795 | Community Service Communications Inc. | 0 | 4,131 | |||||||||
110,000 | HickoryTech Corp. | 949,514 | 1,251,800 | |||||||||
6,000 | IDT Corp., Cl. B | 57,867 | 106,500 | |||||||||
211,525 | Ixia† | 3,418,952 | 3,314,597 | |||||||||
33,000 | Loral Space & Communications Inc. | 1,276,558 | 2,235,090 | |||||||||
129,000 | New ULM Telecom Inc. | 1,212,089 | 835,275 | |||||||||
10,000 | Primus Telecommunications Group Inc. | 122,384 | 33,900 | |||||||||
115,000 | Rogers Communications Inc., Cl. B | 555,319 | 4,946,150 | |||||||||
116,005 | Shenandoah Telecommunications Co. | 982,995 | 2,795,721 | |||||||||
392,616 | Sprint Corp.† | 2,226,133 | 2,438,145 |
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
3,000 | Straight Path Communications Inc., Cl. B† | $ | 10,212 | $ | 15,780 | |||||||
37,584 | Verizon Communications Inc. | 846,702 | 1,753,669 | |||||||||
815,000 | VimpelCom Ltd., ADR | 2,480,014 | 9,576,250 | |||||||||
|
|
|
| |||||||||
21,921,845 | 37,509,898 | |||||||||||
|
|
|
| |||||||||
Transportation — 0.8% |
| |||||||||||
474,726 | GATX Corp. | 14,438,439 | 22,558,980 | |||||||||
2,000 | (b) | Irish Continental Group plc | 14,688 | 67,913 | ||||||||
200 | Navigator Holdings Ltd.† | 6,460 | 10,350 | |||||||||
133,000 | Providence and Worcester Railroad Co. | 1,888,133 | 2,682,610 | |||||||||
|
|
|
| |||||||||
16,347,720 | 25,319,853 | |||||||||||
|
|
|
| |||||||||
Wireless Communications — 0.2% |
| |||||||||||
2,000,000 | Cable & Wireless Communications plc | 1,191,254 | 1,283,147 | |||||||||
200,000 | Leap Wireless International Inc.† | 3,225,545 | 3,158,000 | |||||||||
26,000 | Millicom International Cellular SA, SDR | 1,996,576 | 2,295,891 | |||||||||
|
|
|
| |||||||||
6,413,375 | 6,737,038 | |||||||||||
|
|
|
| |||||||||
TOTAL COMMON STOCKS | 1,373,245,890 | 2,729,284,680 | ||||||||||
|
|
|
| |||||||||
PREFERRED STOCKS — 0.1% |
| |||||||||||
Automotive: Parts and Accessories — 0.1% |
| |||||||||||
48,000 | Jungheinrich AG | 990,268 | 2,803,647 | |||||||||
|
|
|
| |||||||||
RIGHTS — 0.1% |
| |||||||||||
Health Care — 0.1% |
| |||||||||||
850,000 | Sanofi, CVR, expire 12/31/20† | 1,751,817 | 1,717,000 | |||||||||
|
|
|
| |||||||||
WARRANTS — 0.0% |
| |||||||||||
Automotive: Parts and Accessories — 0.0% |
| |||||||||||
4,531 | Federal-Mogul Corp., expire 12/27/14† | 87,687 | 95 | |||||||||
|
|
|
| |||||||||
Real Estate — 0.0% |
| |||||||||||
11,091 | Tejon Ranch Co., expire 08/31/16† | 66,495 | 30,611 | |||||||||
|
|
|
| |||||||||
TOTAL WARRANTS | 154,182 | 30,706 | ||||||||||
|
|
|
| |||||||||
Principal | ||||||||||||
Amount | ||||||||||||
CORPORATE BONDS — 0.0% |
| |||||||||||
Real Estate — 0.0% |
| |||||||||||
$ | 65,376 | Capital Properties Inc., 5.000%, 12/31/22 | 65,376 | 65,376 | ||||||||
|
|
|
|
See accompanying notes to financial statements.
12
The Gabelli Small Cap Growth Fund
Schedule of Investments (Continued) — September 30, 2013
Principal | Market | |||||||||||
Amount | Cost | Value | ||||||||||
U.S. GOVERNMENT OBLIGATIONS — 15.5% |
| |||||||||||
$502,294,000 | U.S. Treasury Bills, | |||||||||||
0.005% to 0.100%††, | ||||||||||||
10/03/13 to 04/03/14 | $ | 502,228,518 | $ | 502,275,644 | ||||||||
|
|
|
| |||||||||
TOTAL INVESTMENTS — 100.1% | $ | 1,878,436,051 | 3,236,177,053 | |||||||||
|
| |||||||||||
Other Assets and Liabilities (Net) — (0.1)% |
| (4,234,363 | ) | |||||||||
|
| |||||||||||
NET ASSETS — 100.0% |
| $ | 3,231,942,690 | |||||||||
|
|
(a) | Security considered an affiliated holding because the Fund owns at least 5% of its outstanding shares. |
(b) | Denoted in units. |
† | Non-income producing security. |
†† | Represents annualized yield at date of purchase. |
ADR | American Depositary Receipt |
CVR | Contingent Value Right |
SDR | Swedish Depositary Receipt |
See accompanying notes to financial statements.
13
The Gabelli Small Cap Growth Fund
Statement of Assets and Liabilities
September 30, 2013
Assets: | ||||
Investments, at value (cost $1,851,044,151) | $3,193,811,967 | |||
Investments in affiliates, at value | 42,365,086 | |||
Cash | 4,805,065 | |||
Receivable for Fund shares sold | 7,522,474 | |||
Receivable for investments sold | 549,164 | |||
Dividends and interest receivable | 1,890,384 | |||
Prepaid expenses | 71,265 | |||
| ||||
Total Assets | 3,251,015,405 | |||
| ||||
Liabilities: | ||||
Payable for investments purchased | 11,544,340 | |||
Payable for Fund shares redeemed | 3,663,639 | |||
Payable for investment advisory fees | 2,582,292 | |||
Payable for distribution fees | 644,639 | |||
Payable for accounting fees | 3,750 | |||
Other accrued expenses | 634,055 | |||
| ||||
Total Liabilities | 19,072,715 | |||
| ||||
Net Assets | $3,231,942,690 | |||
| ||||
Net Assets Consist of: | ||||
Paid-in capital | $1,794,763,831 | |||
Net investment loss | (6,177,961) | |||
Accumulated net realized gain on investments, futures contracts, and foreign currency transactions | 85,614,174 | |||
Net unrealized appreciation on investments | 1,357,741,002 | |||
Net unrealized appreciation on foreign currency translations | 1,644 | |||
| ||||
Net Assets | $3,231,942,690 | |||
| ||||
Shares of Capital Stock, each at $0.001 par value: |
Class AAA: | ||||
Net Asset Value, offering, and redemption price per share ($2,171,212,722 ÷ 47,390,193 shares outstanding; 150,000,000 shares authorized) | $45.82 | |||
|
| |||
Class A: | ||||
Net Asset Value and redemption price per share ($305,616,820 ÷ 6,673,055 shares outstanding; 50,000,000 shares authorized) | $45.80 | |||
|
| |||
Maximum offering price per share (NAV ÷ 0.9425, based on maximum sales charge of 5.75% of the offering price) | $48.59 | |||
|
| |||
Class C: | ||||
Net Asset Value and offering price per share ($186,540,387 ÷ 4,396,243 shares outstanding; 50,000,000 shares authorized) | $42.43 | (a) | ||
|
| |||
Class I: | ||||
Net Asset Value, offering, and redemption price per share ($568,572,761 ÷ 12,283,754 shares outstanding; 50,000,000 shares authorized) | $46.29 | |||
|
|
Statement of Operations
For the Year Ended September 30, 2013
Investment Income: | ||||
Dividends - unaffiliated (net of foreign withholding taxes of $1,102,674) | $ | 48,295,732 | ||
Dividends - affiliated | 142,557 | |||
Interest | 165,634 | |||
|
| |||
Total Investment Income | 48,603,923 | |||
|
| |||
Expenses: | ||||
Investment advisory fees | 25,964,243 | |||
Distribution fees - Class AAA | 4,509,992 | |||
Distribution fees - Class A | 559,500 | |||
Distribution fees - Class C | 1,348,668 | |||
Shareholder services fees | 2,448,729 | |||
Shareholder communication expenses | 512,523 | |||
Custodian fees | 298,108 | |||
Registration expenses | 114,370 | |||
Legal and audit fees | 98,181 | |||
Directors’ fees | 95,599 | |||
Accounting fees | 45,000 | |||
Interest expense | 9,915 | |||
Miscellaneous expenses | 135,260 | |||
|
| |||
Total Expenses | 36,140,088 | |||
|
| |||
Less: | ||||
Advisory fee reduction on unsupervised | (79,382 | ) | ||
Custodian fee credits | (361 | ) | ||
|
| |||
Total Reductions and Credits | (79,743 | ) | ||
|
| |||
Net Expenses | 36,060,345 | |||
|
| |||
Net Investment Income | 12,543,578 | |||
|
| |||
Net Realized and Unrealized Gain/(Loss) on Investments, Futures Contracts, and Foreign Currency: | ||||
Net realized gain on investments - unaffiliated | 107,357,679 | |||
Net realized loss on investments - affiliated | (174,237 | ) | ||
Net realized gain on futures contracts | 86,310 | |||
Net realized loss on foreign currency transactions | (30,031 | ) | ||
|
| |||
Net realized gain on investments, futures contracts, and foreign currency transactions | 107,239,721 | |||
|
| |||
Net change in unrealized appreciation/depreciation: | ||||
on investments | 587,702,980 | |||
on foreign currency translations | 1,732 | |||
|
| |||
Net change in unrealized appreciation/depreciation on investments and foreign currency translations | 587,704,712 | |||
|
| |||
Net Realized and Unrealized Gain/(Loss) on Investments, Futures Contracts, and Foreign Currency | 694,944,433 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 707,488,011 | ||
|
|
(a) | Redemption price varies based on the length of time held. |
See accompanying notes to financial statements.
14
The Gabelli Small Cap Growth Fund
Statement of Changes in Net Assets
Year Ended September 30, 2013 | Year Ended September 30, 2012 | |||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ | 12,543,578 | $ | (1,675,321 | ) | |||||
Net realized gain on investments, futures contracts, and foreign currency transactions | 107,239,721 | 38,768,816 | ||||||||
Net change in unrealized appreciation on investments and foreign currency translations | 587,704,712 | 443,952,656 | ||||||||
|
|
|
| |||||||
Net Increase in Net Assets Resulting from Operations | 707,488,011 | 481,046,151 | ||||||||
|
|
|
| |||||||
Distributions to Shareholders: | ||||||||||
Net investment income | ||||||||||
Class AAA | (10,780,896 | ) | — | |||||||
Class A | (1,263,153 | ) | — | |||||||
Class I | (4,204,003 | ) | — | |||||||
|
|
|
| |||||||
(16,248,052 | ) | — | ||||||||
|
|
|
| |||||||
Net realized gain | ||||||||||
Class AAA | (35,142,355 | ) | (39,324,963 | ) | ||||||
Class A | (3,923,350 | ) | (3,747,019 | ) | ||||||
Class B* | — | (466 | ) | |||||||
Class C | (2,560,469 | ) | (2,264,720 | ) | ||||||
Class I | (7,900,812 | ) | (3,844,897 | ) | ||||||
|
|
|
| |||||||
(49,526,986 | ) | (49,182,065 | ) | |||||||
|
|
|
| |||||||
Total Distributions to Shareholders | (65,775,038 | ) | (49,182,065 | ) | ||||||
|
|
|
| |||||||
Capital Share Transactions: | ||||||||||
Class AAA | 189,362,947 | (346,040,497 | ) | |||||||
Class A | 80,344,935 | (8,551,679 | ) | |||||||
Class B* | — | (19,608 | ) | |||||||
Class C | 51,376,747 | 2,774,402 | ||||||||
Class I | 116,738,688 | 142,406,478 | ||||||||
|
|
|
| |||||||
Net Increase/(Decrease) in Net Assets from Capital Share Transactions | 437,823,317 | (209,430,904 | ) | |||||||
|
|
|
| |||||||
Redemption Fees | 23,251 | 720 | ||||||||
|
|
|
| |||||||
Net Increase in Net Assets | 1,079,559,541 | 222,433,902 | ||||||||
Net Assets: | ||||||||||
Beginning of year | 2,152,383,149 | 1,929,949,247 | ||||||||
|
|
|
| |||||||
End of year (including undistributed net investment income of $0 and $0, respectively) | $ | 3,231,942,690 | $ | 2,152,383,149 | ||||||
|
|
|
|
* | Class B Shares were liquidated on July 3, 2012. |
See accompanying notes to financial statements.
15
The Gabelli Small Cap Growth Fund
Financial Highlights
Selected data for a share of capital stock outstanding throughout each year:
Income (Loss) from Investment Operations | Distributions | Ratio to Average Net Assets/ Supplemental Data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended September 30 | Net Asset Value, Beginning of Period | Net Investment Income (Loss) (a)(b) | Net Realized and Unrealized Gain (Loss) on Investments | Total from Investment Operations | Net Investments Income | Net Realized Gain on Investments | Total Distributions | Redemption Fees (b)(c) | Net Asset Value, End of Period | Total Return † | Net Assets End of Period (in 000’s) | Net Investment Income (Loss) (a) | Operating Expenses (d) | Portfolio Turnover Rate | ||||||||||||||||||||||||||||||||||||||||||
Class AAA |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 35.84 | $ | 0.20 | $ | 10.87 | $ | 11.07 | $ | (0.25 | ) | $ | (0.84 | ) | $ | (1.09 | ) | $ | 0.00 | $ | 45.82 | 31.82% | $ | 2,171,213 | 0.50% | 1.39% | 5% | |||||||||||||||||||||||||||||
2012 | 29.16 | (0.03 | ) | 7.46 | 7.43 | — | (0.75 | ) | (0.75 | ) | 0.00 | 35.84 | 25.98 | 1,535,477 | (0.09) | 1.41 | 7 | |||||||||||||||||||||||||||||||||||||||
2011 | 29.97 | (0.10 | ) | (0.71 | ) | (0.81 | ) | — | — | — | 0.00 | 29.16 | (2.70) | 1,539,100 | (0.30) | 1.42 | 14 | |||||||||||||||||||||||||||||||||||||||
2010 | 25.81 | (0.06 | ) | 4.22 | 4.16 | — | — | — | 0.00 | 29.97 | 16.12 | 1,435,780 | (0.23) | 1.44 | 14 | |||||||||||||||||||||||||||||||||||||||||
2009 | 28.20 | (0.02 | ) | (0.92 | ) | (0.94 | ) | — | (1.45 | ) | (1.45 | ) | 0.00 | 25.81 | (1.70) | 1,167,114 | (0.09) | 1.48 | 25 | |||||||||||||||||||||||||||||||||||||
Class A |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 35.84 | $ | 0.17 | $ | 10.89 | $ | 11.06 | $ | (0.26 | ) | $ | (0.84 | ) | $ | (1.10 | ) | $ | 0.00 | $ | 45.80 | 31.80% | $ | 305,617 | 0.43% | 1.39% | 5% | |||||||||||||||||||||||||||||
2012 | 29.15 | (0.03 | ) | 7.47 | 7.44 | — | (0.75 | ) | (0.75 | ) | 0.00 | 35.84 | 26.02 | 169,823 | (0.08) | 1.41 | 7 | |||||||||||||||||||||||||||||||||||||||
2011 | 29.96 | (0.10 | ) | (0.71 | ) | (0.81 | ) | — | — | — | 0.00 | 29.15 | (2.70) | 145,049 | (0.31) | 1.42 | 14 | |||||||||||||||||||||||||||||||||||||||
2010 | 25.81 | (0.06 | ) | 4.21 | 4.15 | — | — | — | 0.00 | 29.96 | 16.08 | 115,265 | (0.22) | 1.44 | 14 | |||||||||||||||||||||||||||||||||||||||||
2009 | 28.18 | (0.03 | ) | (0.89 | ) | (0.92 | ) | — | (1.45 | ) | (1.45 | ) | 0.00 | 25.81 | (1.63) | 62,548 | (0.12) | 1.48 | 25 | |||||||||||||||||||||||||||||||||||||
Class C |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 33.27 | $ | (0.12 | ) | $ | 10.12 | $ | 10.00 | — | $ | (0.84 | ) | $ | (0.84 | ) | $ | 0.00 | $ | 42.43 | 30.80% | $ | 186,540 | (0.32)% | 2.14% | 5% | ||||||||||||||||||||||||||||||
2012 | 27.31 | (0.26 | ) | 6.97 | 6.71 | — | (0.75 | ) | (0.75 | ) | 0.00 | 33.27 | 25.08 | 102,214 | (0.83) | 2.16 | 7 | |||||||||||||||||||||||||||||||||||||||
2011 | 28.28 | (0.34 | ) | (0.63 | ) | (0.97 | ) | — | — | — | 0.00 | 27.31 | (3.43) | 81,289 | (1.05) | 2.17 | 14 | |||||||||||||||||||||||||||||||||||||||
2010 | 24.54 | (0.25 | ) | 3.99 | 3.74 | — | — | — | 0.00 | 28.28 | 15.24 | 64,830 | (0.98) | 2.19 | 14 | |||||||||||||||||||||||||||||||||||||||||
2009 | 27.09 | (0.18 | ) | (0.92 | ) | (1.10 | ) | — | (1.45 | ) | (1.45 | ) | 0.00 | 24.54 | (2.40) | 42,974 | (0.85) | 2.23 | 25 | |||||||||||||||||||||||||||||||||||||
Class I |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 36.29 | $ | 0.29 | $ | 10.99 | $ | 11.28 | $ | (0.44 | ) | $ | (0.84 | ) | $ | (1.28 | ) | $ | 0.00 | $ | 46.29 | 32.14% | $ | 568,573 | 0.71% | 1.14% | 5% | |||||||||||||||||||||||||||||
2012 | 29.44 | 0.08 | 7.52 | 7.60 | — | (0.75 | ) | (0.75 | ) | 0.00 | 36.29 | 26.31 | 344,869 | 0.24 | 1.16 | 7 | ||||||||||||||||||||||||||||||||||||||||
2011 | 30.18 | (0.02 | ) | (0.72 | ) | (0.74 | ) | — | — | — | 0.00 | 29.44 | (2.45) | 164,494 | (0.05) | 1.17 | 14 | |||||||||||||||||||||||||||||||||||||||
2010 | 25.93 | 0.01 | 4.24 | 4.25 | — | — | — | 0.00 | 30.18 | 16.39 | 135,112 | 0.02 | 1.19 | 14 | ||||||||||||||||||||||||||||||||||||||||||
2009 | 28.25 | 0.02 | (0.89 | ) | (0.87 | ) | — | (1.45 | ) | (1.45 | ) | 0.00 | 25.93 | (1.43) | 99,413 | 0.11 | 1.23 | 25 |
† | 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. |
(a) | Due to capital share activity throughout the period, net investment income (loss) per share and the ratio to average net assets are not necessarily correlated among the different classes of shares. |
(b) | Per share amounts have been calculated using the average shares outstanding method. |
(c) | Amount represents less than $0.005 per share. |
(d) | The ratios do not include a reduction of advisory fee on unsupervised assets for the years ended September 30, 2013, 2012, 2011, 2010, and 2009. Including such advisory fee reduction on unsupervised assets, the ratios of operating expenses to average net assets would have been 1.39%, 1.40%, 1.41%, 1.42%, and 1.47% (Class AAA and Class A), 2.14%, 2.15%, 2.16%, 2.17%, and 2.22% (Class C), and 1.14%, 1.15%, 1.16%, 1.17%, and 1.22% (Class I), respectively. |
See accompanying notes to financial statements.
16
The Gabelli Small Cap Growth Fund
Notes to Financial Statements
1. Organization. The Gabelli Small Cap Growth Fund, a series of the Gabelli Equity Series Funds, Inc. (the “Corporation”), was incorporated on July 25, 1991 in Maryland. 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 of the Corporation. The Fund seeks to provide a high level of capital appreciation. Gabelli Funds, LLC (the “Adviser”) currently characterizes small capitalization companies for the Fund as those with total common stock market values of $3 billion or less at the time of investment. The Fund commenced investment operations on October 22, 1991.
2. Significant Accounting Policies. The Fund’s financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), which may require the use of management estimates and assumptions. 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. U.S. government obligations with maturities greater than sixty days are normally valued using a model that incorporates market observable data such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued principally using dealer quotations. 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.
17
The Gabelli Small Cap Growth Fund
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). |
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input both individually and in the aggregate that is significant to the fair value measurement. 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 in securities by inputs used to value the Fund’s investments as of September 30, 2013 is as follows:
Valuation Inputs | ||||||||||||||||
Level 1 Quoted Prices | Level 2 Other Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total Market Value at 9/30/13 | |||||||||||||
INVESTMENTS IN SECURITIES: | ||||||||||||||||
ASSETS (Market Value): | ||||||||||||||||
Common Stocks: | ||||||||||||||||
Automotive: Parts and Accessories | $ 205,565,062 | — | $ 31,500 | $ 205,596,562 | ||||||||||||
Consumer Products | 41,041,137 | $ 262 | — | 41,041,399 | ||||||||||||
Equipment and Supplies | 265,369,336 | — | 2,220 | 265,371,556 | ||||||||||||
Financial Services | 134,496,517 | — | 655 | 134,497,172 | ||||||||||||
Transportation | 25,309,503 | — | 10,350 | 25,319,853 | ||||||||||||
Other Industries (a) | 2,057,458,138 | — | — | 2,057,458,138 | ||||||||||||
Total Common Stocks | 2,729,239,693 | 262 | 44,725 | 2,729,284,680 | ||||||||||||
Preferred Stocks (a) | 2,803,647 | — | — | 2,803,647 | ||||||||||||
Rights (a) | 1,717,000 | — | — | 1,717,000 | ||||||||||||
Warrants (a) | 30,706 | — | — | 30,706 | ||||||||||||
Corporate Bonds (a) | — | — | 65,376 | 65,376 | ||||||||||||
U.S. Government Obligations | — | 502,275,644 | — | 502,275,644 | ||||||||||||
TOTAL INVESTMENTS IN SECURITIES – ASSETS | $2,733,791,046 | $502,275,906 | $110,101 | $3,236,177,053 |
(a) | Please refer to the Schedule of Investments for the industry classifications of these portfolio holdings. |
The Fund did not have transfers between Level 1 and Level 2 during the year ended September 30, 2013. The Fund’s policy is to recognize transfers among Levels as of the beginning of the reporting period.
Additional Information to Evaluate Qualitative Information.
General. The Fund uses recognized industry pricing services – approved by the Board and unaffiliated with the Adviser – to value most of its securities, and uses broker quotes provided by market makers of securities not valued by these and other recognized pricing sources. Several different pricing feeds are received to value domestic equity securities, international equity securities, preferred equity securities, and fixed income securities. The data within these feeds is ultimately sourced from major stock exchanges and trading systems where these securities trade. The prices supplied by external sources are checked by obtaining quotations or actual transaction prices from market participants. If a price obtained from the pricing source is deemed unreliable, prices will be sought from another pricing service or from a broker/dealer that trades that security or similar securities.
18
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
Fair Valuation. Fair valued securities may be common and preferred equities, warrants, options, rights, and fixed income obligations. Where appropriate, Level 3 securities are those for which market quotations are not available, such as securities not traded for several days, or for which current bids are not available, or which are restricted as to transfer. Among the factors to be considered to fair value a security are recent prices of comparable securities that are publicly traded, reliable prices of securities not publicly traded, the use of valuation models, current analyst reports, valuing the income or cash flow of the issuer, or cost if the preceding factors do not apply. A significant change in the unobservable inputs could result in a lower or higher value in such Level 3 securities. The circumstances of Level 3 securities are frequently monitored to determine if fair valuation measures continue to apply.
The Adviser reports quarterly to the Board the results of the application of fair valuation policies and procedures. These include back testing the prices realized in subsequent trades of these fair valued securities to fair values previously recognized.
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.
The Fund’s derivative contracts held at September 30, 2013, if any, are not accounted for as hedging instruments under GAAP and are disclosed in the Schedule of Investments together with the related counterparty.
Accounting Standards Update (“ASU”) No. 2011-11 “Disclosures about Offsetting Assets and Liabilities.” ASU 2011-11 requires a fund to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of assets and liabilities and instruments and transactions subject to an agreement similar to a master netting arrangement. The scope of ASU 2011-11 includes derivatives and sale and repurchase agreements. The purpose of ASU 2011-11 is to facilitate comparison of financial statements prepared on the basis of GAAP and on the basis of International Financial Reporting Standards. ASU 2011-11 is effective for financial statements whose fiscal year begins after December 31, 2012. Management is currently evaluating the impact of the additional disclosure requirements on the Fund’s financial statements.
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
19
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
(“variation margin”) are made or received by the Fund each day, depending on the daily fluctuations in the value of the contract, and 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 held 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.
The Fund held futures contracts on November 19, 2012, with a notional amount for the day of approximately $9,937,280. At September 30, 2013, the Fund held no investments in futures contracts.
For the year ended September 30, 2013, the effect of futures contracts with equity risk exposure can be found in the Statement of Operations under Net Realized and Unrealized Gain/(Loss) on Investments, Futures Contracts, and Foreign Currency, Net realized gain on futures contracts.
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 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 purchase 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 inability 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 Securities. The Fund may invest up to 15% of its net assets in securities for which the markets are restricted. Restricted securities include securities whose disposition is subject to substantial legal or contractual restrictions. The sale of restricted 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
20
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
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. At September 30, 2013, the Fund held no restricted securities.
Securities Transactions and Investment Income. Securities transactions are accounted for on the trade date with realized gain/( 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 from foreign securities that are recorded as soon after the ex-dividend date as the Fund becomes aware of such dividends.
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 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 GAAP. 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 for federal income tax purposes 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. Permanent differences were primarily due to recharacterization of distributions, adjustments on sale of securities no longer deemed passive foreign investment companies, and tax treatment of currency gains and losses. These reclassifications have no impact on the NAV of the Fund. For the year ended September 30, 2013, reclassifications were made to increase net investment loss by $564,813 and increase accumulated net realized gain on investments, futures contracts, and foreign currency transactions by $541,230, with an offsetting adjustment to paid-in capital.
21
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
The tax character of distributions paid during the years ended September 30, 2013 and September 30, 2012 was as follows:
Year Ended September 30, 2013 | Year Ended September 30, 2012 | |||||||||
Distributions paid from: | ||||||||||
Ordinary income (inclusive of short term capital gains) | $ | 20,400,015 | $ | 482,624 | ||||||
Net long term capital gains | 45,375,023 | 48,699,441 | ||||||||
|
|
|
| |||||||
Total distributions paid | $ | 65,775,038 | $ | 49,182,065 | ||||||
|
|
|
|
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.
At September 30, 2013, the components of accumulated earnings/losses on a tax basis were as follows:
Undistributed long term capital gains | $ | 98,092,715 | ||
Net unrealized appreciation on investments | 1,344,115,731 | |||
Other temporary differences* | (5,029,587 | ) | ||
|
| |||
Total | $ | 1,437,178,859 | ||
|
|
* | Other temporary differences are primarily due to adjustments on qualified late year loss deferral. |
At September 30, 2013, the temporary difference between book basis and tax basis net unrealized appreciation on investments was primarily due to deferral of losses from wash sales for tax purposes, mark-to-market adjustments on investments in passive foreign investment companies, and basis adjustments on investments in partnerships.
Under the Regulated Investment Company Modernization Act of 2010, the Fund is permitted to carry forward for an unlimited period capital losses incurred. As a result of the rule, post-enactment capital losses that are carried forward will retain their character as either short term or long term capital losses rather than being considered all short term as under previous law.
The following summarizes the tax cost of investments and the related net unrealized appreciation at September 30, 2013:
Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation | |||||||||||||
Investments | $ | 1,892,062,966 | $ | 1,404,993,945 | $ | (60,879,858 | ) | $ | 1,344,114,087 |
The Fund is required to evaluate tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Income tax and related interest and penalties would be recognized by the Fund as tax expense in the Statement of Operations if the tax positions were deemed not to meet the more-likely-than-not threshold. For the year ended September 30, 2013, the Fund did not incur any income tax, interest, or penalties. As of September 30, 2013, the Adviser has reviewed all open tax years and concluded that there was no impact
22
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
to the Fund’s net assets or results of operations. Tax years ended September 30, 2010 through September 30, 2013 remain subject to examination by the Internal Revenue Service and state taxing authorities. On an ongoing basis, the Adviser will monitor the Fund’s tax positions to determine if adjustments to this conclusion are necessary.
3. Investment Advisory Agreement and Other Transactions. The Fund has entered into an investment advisory agreement (the “Advisory Agreement”) with the Adviser which provides that the Fund will pay the Adviser a fee, computed daily and paid monthly, at the annual rate of 1.00% of the value of 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.
There was a reduction in the advisory fee paid to the Adviser relating to certain portfolio holdings, i.e., unsupervised assets of the Fund with respect to which the Adviser transferred dispositive and voting control to the Fund’s Proxy Voting Committee. During the year ended September 30, 2013, the Fund’s Proxy Voting Committee exercised control and discretion over all rights to vote or consent with respect to such securities, and the Adviser reduced its fee with respect to such securities by $79,382.
The Corporation pays each Director who is not considered an affiliated person an annual retainer of $18,000 plus $2,000 for each Board meeting attended, and they are reimbursed for any out of pocket expenses incurred in attending meetings. All Board committee members receive $1,000 per meeting attended. The Chairman of the Audit Committee receives a $3,000 annual fee, and the Lead Director receives an annual fee of $2,000. A Director may receive a single meeting fee, allocated among the participating funds, for attending 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. Under the Class AAA, Class A, and Class C Share Plans, payments are authorized to G.distributors, LLC (the “Distributor”) an affiliate of the Fund, at annual rates of 0.25%, 0.25%, 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 during the year ended September 30, 2013, other than short term securities and U.S. Government obligations, aggregated $123,303,572 and $205,046,156, respectively.
6. Transactions with Affiliates. During the year ended September 30, 2013, the Fund paid brokerage commissions on security trades of $164,578 to G.research, Inc. (formerly Gabelli & Company, Inc.), an affiliate of the Adviser. Additionally, the Distributor retained a total of $177,808 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. During the year ended September 30, 2013, the Fund paid or accrued $45,000 to the Adviser in connection with the cost of computing the Fund’s NAV.
23
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
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 rate 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, 2013, 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, 2013 was $624,126 with a weighted average interest rate of 1.17%. The maximum amount borrowed at anytime during the year ended September 30, 2013 was $10,880,000.
8. Capital Stock. The Fund offers four classes of shares – Class AAA Shares, Class A 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 the Distributor, through selected broker/dealers, or the transfer agent. Class I Shares are offered without a sales charge, directly through the Distributor or brokers that have entered into selling agreements specifically with respect to Class I Shares. Class A Shares are subject to a maximum front-end sales charge of 5.75%. Class C Shares are subject to a 1.00% contingent deferred sales charge for one year after purchase.
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 as an increase in paid-in capital. The redemption fees retained by the Fund during the years ended September 30, 2013 and September 30, 2012 amounted to $23,251 and $720, respectively.
24
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
Transactions in shares of capital stock were as follows:
Year Ended September 30, 2013 | Year Ended September 30, 2012 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class AAA | ||||||||||||||||
Shares sold | 10,638,978 | $ | 437,443,572 | 5,785,146 | $ | 191,861,703 | ||||||||||
Shares issued upon reinvestment of distributions | 1,254,465 | 44,134,991 | 1,248,605 | 37,703,778 | ||||||||||||
Shares redeemed | (7,340,873 | ) | (292,215,616 | ) | (16,982,088 | ) | (575,605,978 | ) | ||||||||
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| |||||||||
Net increase/(decrease) | 4,552,570 | $ | 189,362,947 | (9,948,337 | ) | $ | (346,040,497 | ) | ||||||||
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| |||||||||
Class A | ||||||||||||||||
Shares sold | 2,905,363 | $ | 119,839,617 | 1,400,637 | $ | 46,632,112 | ||||||||||
Shares issued upon reinvestment of distributions | 135,636 | 4,771,381 | 113,467 | 3,426,712 | ||||||||||||
Shares redeemed | (1,106,239 | ) | (44,266,063 | ) | (1,751,203 | ) | (58,610,503 | ) | ||||||||
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|
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|
| |||||||||
Net increase/(decrease) | 1,934,760 | $ | 80,344,935 | (237,099 | ) | $ | (8,551,679 | ) | ||||||||
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| |||||||||
Class B* | ||||||||||||||||
Shares issued upon reinvestment of distributions | — | — | 15 | $ | 423 | |||||||||||
Shares redeemed | — | — | (632 | ) | (20,031 | ) | ||||||||||
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| |||||||||
Net decrease | — | — | (617 | ) | $ | (19,608 | ) | |||||||||
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Class C | ||||||||||||||||
Shares sold | 1,775,583 | $ | 68,170,846 | 651,027 | $ | 20,360,308 | ||||||||||
Shares issued upon reinvestment of distributions | 72,080 | 2,351,244 | 73,277 | 2,064,384 | ||||||||||||
Shares redeemed | (523,722 | ) | (19,145,343 | ) | (628,287 | ) | (19,650,290 | ) | ||||||||
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| |||||||||
Net increase | 1,323,941 | $ | 51,376,747 | 96,017 | $ | 2,774,402 | ||||||||||
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Class I | ||||||||||||||||
Shares sold | 4,595,673 | $ | 191,534,069 | 7,951,014 | $ | 278,868,415 | ||||||||||
Shares issued upon reinvestment of distributions | 292,940 | 10,434,347 | 100,679 | 3,092,474 | ||||||||||||
Shares redeemed | (2,107,103 | ) | (85,229,728 | ) | (4,137,119 | ) | (139,554,411 | ) | ||||||||
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|
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| |||||||||
Net increase | 2,781,510 | $ | 116,738,688 | 3,914,574 | $ | 142,406,478 | ||||||||||
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* | Class B Shares were fully redeemed and closed on July 3, 2012. |
25
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
9. Transactions in Securities of Affiliated Issuers. The 1940 Act defines affiliated issuers as those in which a 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, 2013 is set forth below:
Beginning Shares | Shares Purchased | Shares Sold | Ending Shares | Dividend Income | Realized Gain/ | Value at September 30, | Percent Owned of Shares Outstanding | |||||||||||||||||||||||
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| |||||||||||||||||||||||||||||
Bel Fuse Inc., Cl. A | 248,000 | 5,048 | (1,000 | ) | 252,048 | $ | 59,487 | $ | (17,073 | ) | $ | 4,365,471 | 11.59% | |||||||||||||||||
Edgewater Technology Inc. | 550,000 | — | — | 550,000 | — | — | 2,898,500 | 5.08% | ||||||||||||||||||||||
Katy Industries Inc. | 400,000 | — | — | 400,000 | — | — | 282,180 | 5.03% | ||||||||||||||||||||||
Strattec Security Corp. | 201,000 | 6,000 | — | 207,000 | 83,070 | — | 7,938,450 | 6.03% | ||||||||||||||||||||||
Sevcon Inc. | 255,833 | 4,200 | — | 260,033 | — | — | 1,261,160 | 7.49% | ||||||||||||||||||||||
Ingles Markets Inc., Cl. A* | 662,051 | 500 | — | 662,551 | — | — | — | |||||||||||||||||||||||
Media General Inc., Cl. A | 1,610,800 | 9,200 | — | 1,620,000 | — | — | 23,101,200 | 5.92% | ||||||||||||||||||||||
Trans-Lux Corp.** | 95,300 | 10,012,200 | (35,000 | ) | 10,072,500 | — | (74,343 | ) | 2,518,125 | 38.86% | ||||||||||||||||||||
Trans-Lux Pfd., Ser. A** | 200,000 | — | (200,000 | ) | — | — | — | — | ||||||||||||||||||||||
Trans-Lux Ser. A, Warrants,expired 04/19/13 | 2,000,000 | — | (2,000,000 | ) | — | — | (82,821 | ) | — | |||||||||||||||||||||
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| |||||||||||||||||||||||||
Total | $ | 142,557 | $ | (174,237 | ) | $ | 42,365,086 | |||||||||||||||||||||||
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* | Security is no longer considered affiliated at September 30, 2013. |
** | 200,000 shares of Trans-Lux Pfd., Ser. A were closed and converted into 10,000,000 shares of Trans-Lux Corp. common stock. |
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. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.
11. Other Matters. On April 24, 2008, the Adviser entered into a settlement with the SEC to resolve an inquiry regarding prior frequent trading 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. Under the terms of the settlement, the Adviser, without admitting or denying the SEC’s findings and allegations, paid $16 million (which included a $5 million civil monetary penalty). On the same day, the SEC filed a civil action in the U.S. District Court for the Southern District of New York 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, who also is an officer of the Global Growth Fund and other funds in the Gabelli/GAMCO complex, including this Fund, denies the allegations and is continuing in his positions with the Adviser and the funds. The settlement by the Adviser did not have, and the resolution of the action against the officer is not expected to have, a material adverse impact on the Adviser or its ability to fulfill its obligations under the Advisory Agreement.
12. Subsequent Events. Management has evaluated the impact on the Fund of all subsequent events occurring through 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
The Gabelli Small Cap Growth Fund
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
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, 2013, 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 five years in the period then ended. 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, 2013, 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, 2013, 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 five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York
November 25, 2013
27
The Gabelli Small Cap Growth Fund
Additional Fund Information (Unaudited)
The business and affairs of the Corporation 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) Address1 and Age | Term of Office and Length of Time Served2 | Number of Funds in Fund Complex | Principal Occupation(s) During Past Five Years | Other Directorships Held by Director4 | ||||
INTERESTED DIRECTORS3 : | ||||||||
Mario J. Gabelli, CFA Director and Chief Investment Officer Age: 71 | Since 1991 | 27 | Chairman, Chief Executive Officer, Chief Investment Officer–Value Portfolios 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; Chief Executive Officer of GGCP, Inc. | Director of Morgan Group Holdings, Inc. (holding company); Chairman of the Board and Chief Executive Officer of LICT Corp. (multimedia and communication services); Director of CIBL, Inc. (broadcasting and wireless communications); Director of ICTC Group, Inc. (communications); Director of RLJ Acquisition Inc. (blank check company) (2011-2012) | ||||
John D. Gabelli Director Age: 69 | Since 1991 | 10 | Senior Vice President of G.research, Inc. | — | ||||
INDEPENDENT DIRECTORS5 : | ||||||||
Anthony J. Colavita Director Age: 77 | Since 1991 | 35 | President of the law firm of Anthony J. Colavita, P.C. | — | ||||
Vincent D. Enright Director Age: 69 | Since 1991 | 17 | Former Senior Vice President and Chief Financial Officer of KeySpan Corporation (public utility) (1994-1998) | Director of Echo Therapeutics, Inc. (therapeutics and diagnostics); Director of LGL Group, Inc. (diversified manufacturing) | ||||
Robert J. Morrissey Director Age: 74 | Since 1991 | 6 | Partner in the law firm of Morrissey, Hawkins & Lynch | — | ||||
Kuni Nakamura Director Age: 45 | Since 2009 | 13 | President of Advanced Polymer, Inc. (chemical wholesale company) | — | ||||
Anthony R. Pustorino Director Age: 88 | Since 1991 | 13 | Certified Public Accountant; Professor Emeritus, Pace University | Director of LGL Group, Inc. (diversified manufacturing) (2002-2010) | ||||
Anthonie C. van Ekris Director Age: 79 | Since 1991 | 20 | Chairman of BALMAC International, Inc. (commodities and futures trading) | — | ||||
Salvatore J. Zizza Director Age: 67 | Since 2001 | 29 | Chairman (since 1978) of Zizza & Associates Corp. (financial consulting); Chairman (since 2005) of Metropolitan Paper Recycling, Inc. (recycling); Chairman (since 1999) of Harbor BioSciences, Inc. (biotechnology) | Director and Vice Chairman of Trans-Lux Corporation (business services); Director and Chairman of Harbor Diversified, Inc. (pharmaceutical); Chairman of Bion Environmental Technologies (technology); Director, Chairman, and CEO of General Employment Enterprises (staffing services) (2009-2012) |
28
The Gabelli Small Cap Growth Fund
Additional Fund Information (Continued) (Unaudited)
Name, Position(s) Address1 and Age | Term of Office and Length of Time Served2 | Principal Occupation(s) During Past Five Years | ||
OFFICERS: | ||||
Bruce N. Alpert President, Secretary, and Acting Chief Compliance Officer Age: 61 | Since 1991 Since November 2011 | Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC since 1988; Officer of all of the registered investment companies in the Gabelli/GAMCO Funds Complex; Director of Teton Advisors, Inc. 1998-2012; Chairman of Teton Advisors, Inc. 2008-2010; President of Teton Advisors, Inc. 1998-2008; Senior Vice President of GAMCO Investors, Inc. since 2008 | ||
Agnes Mullady Treasurer Age: 55 | Since 2006 | President and Chief Operating Officer of the Open-End Fund Division of Gabelli Funds, LLC since September 2010; 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 |
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 Fund’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 | “Interested person” of the Fund as defined in the 1940 Act. 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. |
4 | This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934, as amended, i.e., public companies, or other investment companies registered under the 1940 Act. |
5 | Directors who are not interested persons are considered “Independent” Directors. |
2013 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the year ended September 30, 2013, the Fund paid to shareholders, ordinary income distributions (inclusive of short term capital gains) totaling $0.325, $0.335, $0.070, and $0.509 per share for Class AAA, Class A, Class C, and Class I, respectively, and long term capital gains totaling $45,375,023, or the maximum allowable. The distribution of long term capital gains has been designated as a capital gain dividend by the Fund’s Board of Directors. For the year ended September 30, 2013, 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 0.34% of the ordinary income distribution as qualified interest income pursuant to the Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010. The Fund designates 100% of the ordinary income distribution as qualified short term gain 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, 2013 which was derived from U.S. Treasury securities was 0.19%. 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 Fund did not meet this strict requirement in 2013. 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.
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, which is 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.
What kind of non-public information do we collect about you if you become a fund 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.
THE GABELLI SMALL CAP GROWTH FUND
One Corporate Center
Rye, NY 10580-1422
Portfolio Manager Biography
Mario J. Gabelli, CFA, is Chairman and Chief Executive Officer of GAMCO Investors, Inc. that he founded in 1977 and Chief Investment Officer – Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management Inc. Mr. Gabelli is a summa cum laude graduate of Fordham University and holds an MBA degree from Columbia Business School and Honorary Doctorates from Fordham University and Roger Williams University.
Morningstar Rating™ is based on risk-adjusted returns. The Overall Morningstar Rating is derived from a weighted average of the performance figures associated with a fund’s three, five, and ten year (if applicable) Morningstar Rating metrics. For funds with at least a three year history, a Morningstar Rating is based on a risk-adjusted return measure (including the effects of sales charges, loads, and redemption fees) placing more emphasis on downward variations and rewarding consistent performance. That accounts for variations in a fund’s monthly performance. The top 10% of funds in each category receive 5 stars, the next 22.5% 4 stars, the next 35% 3 stars, the next 22.5% 2 stars, and the bottom 10% 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.) Morningstar Rating is for the AAA Share class only; other classes may have different performance characteristics. Ratings reflect relative performance. Results for certain periods were negative. © 2013 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
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.
Gabelli Equity Series Funds, Inc.
THE GABELLI SMALL CAP GROWTH FUND
One Corporate Center
Rye, New York 10580-1422
t 800-GABELLI (800-422-3554)
f 914-921-5118
e info@gabelli.com
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 Chairman and Chief Executive Officer, GAMCO Investors, Inc.
Anthony J. Colavita President, Anthony J. Colavita, P.C.
Vincent D. Enright Former Senior Vice President and Chief Financial Officer, KeySpan Corp.
John D. Gabelli Senior Vice President, G.research, Inc.
Robert J. Morrissey Partner, Morrissey, Hawkins & Lynch
Kuni Nakamura President, Advanced Polymer, Inc.
Anthony R. Pustorino Certified Public Accountant, Professor Emeritus, Pace University | Anthonie C. van Ekris Chairman, BALMAC International, Inc.
Salvatore J. Zizza Chairman, Zizza & Associates Corp.
OFFICERS
Bruce N. Alpert President, Secretary, and Acting Chief Compliance Officer
Agnes Mullady Treasurer
DISTRIBUTOR
G.distributors, LLC
CUSTODIAN, TRANSFER AGENT, AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP |
This report is submitted for the general information of the shareholders of The Gabelli Small Cap Growth Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus.
Overall Morningstar Rating TM«««««
Morningstar® rated The Gabelli Small Cap Growth Fund Class AAA Shares 5 stars overall, 3 stars for the three year period, and 5 stars for the five and ten year periods ended September 30, 2013 among 598, 598, 532, and 329 Small Blend funds, respectively. Morningstar Rating TM is based on risk-adjusted returns.
GAB443Q313AR
The Gabelli Equity Income Fund | ![]() | |||
Annual Report — September 30, 2013 | ||||
| ||||
Morningstar® rated The Gabelli Equity Income Fund Class AAA Shares 4 stars overall, 3 stars for the three year period, 4 stars for the five year period, and 5 stars for the ten year period ended September 30, 2013 among 1,372, 1,372, 1,233, and 779 Large Blend funds, respectively. Morningstar RatingTM is based on risk-adjusted returns. |
To Our Shareholders,
For the year ended September 30, 2013, the net asset value (“NAV”) per Class AAA Share of The Gabelli Equity Income Fund increased 21.4% compared with an increase of 19.3% for the Standard & Poor’s (“S&P”) 500 Index. See page 2 for additional performance information.
Enclosed are the schedule of investments and financial statements as of September 30, 2013.
Performance Discussion
Global equity markets generally rose, despite the weak global economy. Investors were encouraged by the continued commitment of central banks in the United States, Europe, and Japan to extremely low interest rates and asset price support. In September, the Federal Reserve backed off from earlier talks of tapering down its own third easing program (“QE3”), consisting of $85 billion of monthly asset purchases with newly created money, and designed to help maintain very low interest rates and to boost the stock and housing markets. This turnabout indicated that in the view of the Federal Reserve, the United States is stuck in a continuing period of weak growth. At the same time, the Fed again lowered its estimates of growth for the next few quarters, trimming about a quarter of a percent from its June forecast, now to predicting overall 2.2% in 2013.
Our stock selection process is based on the investment principles of Graham and Dodd, the first investors to articulate the fundamentals of value investing. Their work provided the framework for value investing, and our firm contributed to this framework with the discipline of Private Market Value with a Catalyst. This proprietary research and valuation method identifies firms whose shares are selling at a discount to intrinsic value, with an identifiable path to realizing, or surfacing, that private market value. We define private market value as the price an informed acquirer would pay for an entire enterprise. The catalyst comprises identifiable events or circumstances that might reasonably result in the narrowing of the difference between the public market price of the stock and our estimate of the private market value. This realization of value can take place gradually or suddenly, with company specific changes such as management changes or restructurings, sale of assets or of the business as a whole, industry changes such as changes in regulation, or changes in competition.
Some of the countries outside the U.S. that the Fund has equity positions in are the United Kingdom, Switzerland, Sweden, Canada, France, Ireland, Mexico, and Japan.
Among the better performing stocks for the fiscal year were: The Boeing Co. (0.9% of net assets as of September 30, 2013), an aerospace company and one of two manufacturers of large commercial aircraft; Genuine Parts Co. (1.6%), a service organization engaged in the distribution of automotive replacement parts, industrial replacement parts, office products, and electrical/electronic materials; and Rockwell Automation Inc. (1.2%), a provider of industrial automation power, control, and information solutions. Some of our weaker performing stocks during the year were Newmont Mining Corp. (0.4%), a multinational gold producer; International Business Machines Corp (1.3%), an IT giant operating in multiple business segments; and J.C. Penny Co. Inc. (0.1%), a retailer operating over 1,000 department stores.
We appreciate your loyalty and support in these volatile markets.
Comparative Results
Average Annual Returns through September 30, 2013 (a)(b) (Unaudited) | Since | |||||||||||||||||||||
Inception | ||||||||||||||||||||||
1 Year | 5 Year | 10 Year | (01/02/92) | |||||||||||||||||||
Class AAA (GABEX) | 21.38 | % | 10.48 | % | 9.08 | % | 10.40 | % | ||||||||||||||
S&P 500 Index | 19.34 | 10.02 | 7.57 | 8.79 | (e) | |||||||||||||||||
Nasdaq Composite Index | 22.83 | 13.82 | 8.92 | 8.93 | (e) | |||||||||||||||||
Lipper Equity Income Fund Average | 18.88 | 9.17 | 7.53 | 8.22 | ||||||||||||||||||
Class A (GCAEX) | 21.36 | 10.48 | 9.07 | 10.39 | ||||||||||||||||||
With sales charge (c) | 14.38 | 9.18 | 8.43 | 10.09 | ||||||||||||||||||
Class C (GCCEX) | 20.50 | 9.67 | 8.30 | 10.03 | ||||||||||||||||||
With contingent deferred sales charge (d) | 19.50 | 9.67 | 8.30 | 10.03 | ||||||||||||||||||
Class I (GCIEX) | 21.67 | 10.77 | 9.25 | 10.47 |
In the current prospectuses dated January 28, 2013, the expense ratios for Class AAA, A, C, and I Shares are 1.40%, 1.40%, 2.15%, and 1.15%, respectively. See page 13 for the expense ratios for the year ended September 30, 2013. Class AAA and Class I Shares do not have a sales charge. The maximum sales charge for Class A and C Shares is 5.75% and 1.00%, respectively.
(a) | Returns represent past performance and do not guarantee future results. Total returns and average annual returns reflect changes in share price, 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. 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. The Fund imposes a 2% redemption fee on shares sold or exchanged within seven days after the date of purchase. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The prospectus contains information about these and other matters and should be read carefully before investing. To obtain a prospectus please visit www.gabelli.com. The Class AAA Share NAVs are used to calculate performance for the periods prior to the issuance of Class A Shares and Class C Shares on December 31, 2003 and Class I Shares on January 11, 2008. The actual performance of the Class A Shares and Class C Shares would have been lower due to the additional fees and expenses associated with these classes of shares. The actual performance of the Class I Shares would have been higher due to lower expenses related to this class of shares. The S&P 500 Index is a market capitalization weighted index of 500 large capitalization stocks commonly used to represent the U.S. equity market. The Nasdaq Composite Index is an unmanaged indicator of stock market performance. The Lipper Equity Income Fund Average includes the 30 largest equity funds in this category tracked by Lipper, Inc. Dividends are considered reinvested, except for the Nasdaq Composite Index. You cannot invest directly in an index. |
(b) | The Fund’s fiscal year ends September 30. |
(c) | Performance results include the effect of the maximum 5.75% sales charge at the beginning of the period. |
(d) | Assuming payment of the 1% maximum contingent deferred sales charge imposed on redemptions made within one year of purchase. |
(e) | S&P 500 Index and Nasdaq Composite Index since inception performance is as of December 31, 1991. |
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI EQUITY INCOME FUND CLASS AAA SHARES AND S&P 500 INDEX (Unaudited)
* | Past performance is not predictive of future results. The performance tables and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
2
The Gabelli Equity Income Fund
Disclosure of Fund Expenses (Unaudited)
For the Six Month Period from April 1, 2013 through September 30, 2013 | 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, 2013.
Beginning Account Value 04/01/13 | Ending Account Value 09/30/13 | Annualized Expense Ratio | Expenses Paid During Period* | |||||
The Gabelli Equity Income Fund | ||||||||
Actual Fund Return | ||||||||
Class AAA | $1,000.00 | $1,067.70 | 1.38% | $ 7.15 | ||||
Class A | $1,000.00 | $1,067.50 | 1.38% | $ 7.15 | ||||
Class C | $1,000.00 | $1,063.70 | 2.13% | $11.02 | ||||
Class I | $1,000.00 | $1,069.00 | 1.13% | $ 5.86 | ||||
Hypothetical 5% Return | ||||||||
Class AAA | $1,000.00 | $1,018.15 | 1.38% | $ 6.98 | ||||
Class A | $1,000.00 | $1,018.15 | 1.38% | $ 6.98 | ||||
Class C | $1,000.00 | $1,014.39 | 2.13% | $10.76 | ||||
Class I | $1,000.00 | $1,019.40 | 1.13% | $ 5.72 |
* | 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 (183 days), 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, 2013:
The Gabelli Equity Income Fund
Financial Services | 14.1% | |||
Health Care | 12.6% | |||
Food and Beverage | 11.8% | |||
Retail | 7.3% | |||
Diversified Industrial | 4.1% | |||
Consumer Products | 4.1% | |||
Energy and Utilities: Oil | 4.0% | |||
Aerospace | 3.4% | |||
Energy and Utilities: Integrated | 3.2% | |||
Telecommunications | 3.2% | |||
Automotive: Parts and Accessories | 2.6% | |||
Energy and Utilities: Services | 2.3% | |||
U.S. Government Obligations | 2.2% | |||
Energy and Utilities: Natural Gas | 2.0% | |||
Specialty Chemicals | 1.9% | |||
Entertainment | 1.9% | |||
Automotive | 1.6% | |||
Computer Hardware | 1.6% | |||
Metals and Mining | 1.4% | |||
Electronics | 1.4% | |||
Computer Software and Services | 1.4% | |||
Equipment and Supplies | 1.2% |
Machinery | 1.2% | |||
Wireless Communications | 1.1% | |||
Hotels and Gaming | 1.1% | |||
Broadcasting | 0.9% | |||
Energy and Utilities: Electric | 0.8% | |||
Agriculture | 0.8% | |||
Cable and Satellite | 0.7% | |||
Business Services | 0.7% | |||
Real Estate Investment Trusts | 0.7% | |||
Communications Equipment | 0.5% | |||
Building and Construction | 0.4% | |||
Environmental Services | 0.3% | |||
Transportation | 0.3% | |||
Aviation: Parts and Services | 0.3% | |||
Consumer Services | 0.3% | |||
Energy and Utilities: Water | 0.3% | |||
Paper and Forest Products | 0.1% | |||
Real Estate | 0.0% | |||
Publishing | 0.0% | |||
Other Assets and Liabilities (Net) | 0.2% | |||
|
| |||
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. 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 800-SEC-0330.
Proxy Voting
The Fund files Form N-PX with its complete proxy voting record for the twelve months ended June 30, no later than August 31 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, 2013
Shares | Cost | Market Value | ||||||||||
COMMON STOCKS — 97.1% |
| |||||||||||
Aerospace — 3.4% |
| |||||||||||
88,000 | Exelis Inc. | $ | 1,060,962 | $ | 1,382,480 | |||||||
2,000 | Lockheed Martin Corp. | 47,350 | 255,100 | |||||||||
10,000 | Raytheon Co. | 279,200 | 770,700 | |||||||||
295,000 | Rockwell Automation Inc. | 13,456,833 | 31,547,300 | |||||||||
2,000 | Rockwell Collins Inc. | 15,844 | 135,720 | |||||||||
1,625,000 | Rolls-Royce Holdings plc | 12,119,318 | 29,253,686 | |||||||||
205,500 | The Boeing Co. | 11,795,574 | 24,146,250 | |||||||||
|
|
|
| |||||||||
38,775,081 | 87,491,236 | |||||||||||
|
|
|
| |||||||||
Agriculture — 0.8% |
| |||||||||||
120,000 | Archer Daniels Midland Co. | 3,433,231 | 4,420,800 | |||||||||
150,000 | Monsanto Co. | 2,423,783 | 15,655,500 | |||||||||
12,000 | The Mosaic Co. | 186,246 | 516,240 | |||||||||
|
|
|
| |||||||||
6,043,260 | 20,592,540 | |||||||||||
|
|
|
| |||||||||
Automotive — 1.6% |
| |||||||||||
1,060,000 | Ford Motor Co. | 14,340,007 | 17,882,200 | |||||||||
135,000 | General Motors Co.† | 3,945,532 | 4,855,950 | |||||||||
460,000 | Navistar International Corp.† | 11,765,098 | 16,780,800 | |||||||||
31,000 | PACCAR Inc. | 1,399,566 | 1,725,460 | |||||||||
|
|
|
| |||||||||
31,450,203 | 41,244,410 | |||||||||||
|
|
|
| |||||||||
Automotive: Parts and Accessories — 2.6% |
| |||||||||||
8,000 | BorgWarner Inc. | 490,649 | 811,120 | |||||||||
100,000 | Dana Holding Corp. | 1,496,853 | 2,284,000 | |||||||||
50,007 | Federal-Mogul Corp.† | 463,002 | 839,623 | |||||||||
507,000 | Genuine Parts Co. | 22,687,907 | 41,011,230 | |||||||||
6,000 | Johnson Controls Inc. | 50,425 | 249,000 | |||||||||
50,000 | Modine Manufacturing Co.† | 465,332 | 731,500 | |||||||||
133,000 | O’Reilly Automotive Inc.† | 3,881,341 | 16,969,470 | |||||||||
50,000 | Tenneco Inc.† | 763,094 | 2,525,000 | |||||||||
150,000 | The Pep Boys—Manny, Moe & Jack† | 1,664,729 | 1,870,500 | |||||||||
|
|
|
| |||||||||
31,963,332 | 67,291,443 | |||||||||||
|
|
|
| |||||||||
Aviation: Parts and Services — 0.3% |
| |||||||||||
60,000 | Curtiss-Wright Corp. | 926,093 | 2,817,600 | |||||||||
74,000 | GenCorp Inc.† | 442,031 | 1,186,220 | |||||||||
3,000 | Precision Castparts Corp. | 283,757 | 681,720 | |||||||||
28,000 | United Technologies Corp. | 1,339,140 | 3,018,960 | |||||||||
|
|
|
| |||||||||
2,991,021 | 7,704,500 | |||||||||||
|
|
|
| |||||||||
Broadcasting — 0.9% |
| |||||||||||
310,000 | CBS Corp., Cl. A, Voting | 6,173,196 | 17,152,300 | |||||||||
90,000 | CBS Corp., Cl. B, Non-Voting | 2,029,610 | 4,964,400 | |||||||||
|
|
|
| |||||||||
8,202,806 | 22,116,700 | |||||||||||
|
|
|
| |||||||||
Building and Construction — 0.4% |
| |||||||||||
245,000 | Fortune Brands Home & Security Inc. | 2,712,564 | 10,199,350 | |||||||||
|
|
|
|
Shares | Cost | Market | ||||||||||
Business Services — 0.7% |
| |||||||||||
37,000 | Automatic Data Processing Inc. | $ | 1,543,362 | $ | 2,678,060 | |||||||
188,000 | Diebold Inc. | 6,436,650 | 5,519,680 | |||||||||
4,000 | Landauer Inc. | 134,546 | 205,000 | |||||||||
10,400 | MasterCard Inc., Cl. A | 879,679 | 6,996,912 | |||||||||
30,000 | McGraw Hill Financial Inc. | 1,225,693 | 1,967,700 | |||||||||
6,146 | MSC Industrial Direct Co. Inc., Cl. A | 438,767 | 499,977 | |||||||||
|
|
|
| |||||||||
10,658,697 | 17,867,329 | |||||||||||
|
|
|
| |||||||||
Cable and Satellite — 0.7% |
| |||||||||||
33,000 | AMC Networks Inc., Cl. A† | 1,278,263 | 2,259,840 | |||||||||
140,000 | Cablevision Systems Corp., Cl. A | 1,650,260 | 2,357,600 | |||||||||
10,000 | DIRECTV† | 331,857 | 597,500 | |||||||||
180,000 | DISH Network Corp., Cl. A | 3,608,196 | 8,101,800 | |||||||||
16,000 | EchoStar Corp., Cl. A† | 478,840 | 703,040 | |||||||||
58,000 | Scripps Networks Interactive Inc., Cl. A | 2,452,305 | 4,530,380 | |||||||||
|
|
|
| |||||||||
9,799,721 | 18,550,160 | |||||||||||
|
|
|
| |||||||||
Communications Equipment — 0.5% |
| |||||||||||
15,000 | Cisco Systems Inc. | 279,075 | 351,300 | |||||||||
880,000 | Corning Inc. | 11,888,836 | 12,839,200 | |||||||||
|
|
|
| |||||||||
12,167,911 | 13,190,500 | |||||||||||
|
|
|
| |||||||||
Computer Hardware — 1.6% |
| |||||||||||
300,000 | Hewlett-Packard Co. | 6,437,422 | 6,294,000 | |||||||||
182,000 | International Business Machines Corp. | 15,123,120 | 33,702,760 | |||||||||
|
|
|
| |||||||||
21,560,542 | 39,996,760 | |||||||||||
|
|
|
| |||||||||
Computer Software and Services — 1.4% |
| |||||||||||
25,000 | eBay Inc.† | 779,839 | 1,394,750 | |||||||||
380,000 | EMC Corp. | 9,619,404 | 9,712,800 | |||||||||
122,000 | Fidelity National Information Services Inc. | 2,160,830 | 5,665,680 | |||||||||
360,000 | Microsoft Corp. | 9,920,506 | 11,991,600 | |||||||||
210,000 | Yahoo! Inc.† | 3,416,554 | 6,963,600 | |||||||||
|
|
|
| |||||||||
25,897,133 | 35,728,430 | |||||||||||
|
|
|
| |||||||||
Consumer Products — 4.1% |
| |||||||||||
45,000 | Altria Group Inc. | 538,092 | 1,545,750 | |||||||||
330,000 | Avon Products Inc. | 7,664,774 | 6,798,000 | |||||||||
76,000 | Energizer Holdings Inc. | 3,766,002 | 6,927,400 | |||||||||
5,000 | Hanesbrands Inc. | 108,950 | 311,550 | |||||||||
170,000 | Harman International Industries Inc. | 6,624,986 | 11,259,100 | |||||||||
2,500 | National Presto Industries Inc. | 74,242 | 176,025 | |||||||||
50,000 | Philip Morris International Inc. | 1,501,172 | 4,329,500 | |||||||||
105,000 | Reckitt Benckiser Group plc | 3,432,951 | 7,683,342 |
See accompanying notes to financial statements.
5
The Gabelli Equity Income Fund
Schedule of Investments (Continued) — September 30, 2013
Shares | Cost | Market Value | ||||||||||
COMMON STOCKS (Continued) | ||||||||||||
Consumer Products (Continued) | ||||||||||||
25,500 | Svenska Cellulosa AB, | $ | 439,719 | $ | 645,168 | |||||||
1,240,000 | Swedish Match AB | 16,678,674 | 43,759,939 | |||||||||
230,000 | The Procter & Gamble Co. | 13,512,663 | 17,385,700 | |||||||||
81,000 | Unilever NV - NY Shares | 1,639,778 | 3,055,320 | |||||||||
|
|
|
| |||||||||
55,982,003 | 103,876,794 | |||||||||||
|
|
|
| |||||||||
Consumer Services — 0.3% |
| |||||||||||
100,000 | Rollins Inc. | 381,843 | 2,651,000 | |||||||||
120,000 | The ADT Corp. | 3,117,793 | 4,879,200 | |||||||||
|
|
|
| |||||||||
3,499,636 | 7,530,200 | |||||||||||
|
|
|
| |||||||||
Diversified Industrial — 3.8% |
| |||||||||||
4,000 | Acuity Brands Inc. | 42,447 | 368,080 | |||||||||
4,000 | Alstom SA | 206,008 | 142,482 | |||||||||
100,000 | Crane Co. | 3,402,503 | 6,167,000 | |||||||||
115,000 | Eaton Corp. plc | 5,969,144 | 7,916,600 | |||||||||
1,500,000 | General Electric Co. | 30,045,202 | 35,835,000 | |||||||||
235,000 | Honeywell International Inc. | 8,486,747 | 19,514,400 | |||||||||
50,000 | ITT Corp. | 1,004,526 | 1,797,500 | |||||||||
30,000 | Jardine Matheson Holdings Ltd. | 1,300,044 | 1,647,000 | |||||||||
172,000 | Jardine Strategic Holdings Ltd. | 3,971,804 | 5,822,200 | |||||||||
46,000 | Pentair Ltd. | 1,457,495 | 2,987,240 | |||||||||
120,000 | Textron Inc. | 763,372 | 3,313,200 | |||||||||
50,000 | Toray Industries Inc. | 327,480 | 328,094 | |||||||||
18,000 | Trinity Industries Inc. | 530,674 | 816,300 | |||||||||
305,000 | Tyco International Ltd. | 6,428,113 | 10,668,900 | |||||||||
|
|
|
| |||||||||
63,935,559 | 97,323,996 | |||||||||||
|
|
|
| |||||||||
Electronics — 1.4% |
| |||||||||||
100,000 | Emerson Electric Co. | 4,955,000 | 6,470,000 | |||||||||
500,000 | Intel Corp. | 10,037,981 | 11,460,000 | |||||||||
70,000 | LSI Corp. | 616,011 | 547,400 | |||||||||
85,000 | TE Connectivity Ltd. | 2,886,395 | 4,401,300 | |||||||||
320,000 | Texas Instruments Inc. | 7,759,058 | 12,886,400 | |||||||||
|
|
|
| |||||||||
26,254,445 | 35,765,100 | |||||||||||
|
|
|
| |||||||||
Energy and Utilities: Electric — 0.8% |
| |||||||||||
60,000 | American Electric Power Co. Inc. | 2,198,544 | 2,601,000 | |||||||||
10,000 | DTE Energy Co. | 428,080 | 659,800 | |||||||||
90,000 | El Paso Electric Co. | 820,152 | 3,006,000 | |||||||||
1,200,000 | GenOn Energy Inc., Escrow† | 0 | 0 | |||||||||
110,000 | Great Plains Energy Inc. | 2,663,694 | 2,442,000 | |||||||||
100,000 | Korea Electric Power Corp., ADR† | 1,479,637 | 1,404,000 | |||||||||
170,000 | Northeast Utilities | 3,155,199 | 7,012,500 | |||||||||
245,000 | The AES Corp. | 2,306,408 | 3,256,050 | |||||||||
13,333 | UIL Holdings Corp. | 293,785 | 495,721 | |||||||||
|
|
|
| |||||||||
13,345,499 | 20,877,071 | |||||||||||
|
|
|
|
Shares | Cost | Market Value | ||||||||||
Energy and Utilities: Integrated — 3.2% | ||||||||||||
440,000 | BP plc, ADR | $ | 18,798,855 | $ | 18,493,200 | |||||||
160,000 | CONSOL Energy Inc. | 6,322,656 | 5,384,000 | |||||||||
100,000 | Dominion Resources Inc. | 4,101,684 | 6,248,000 | |||||||||
110,000 | Duke Energy Corp. | 5,111,218 | 7,345,800 | |||||||||
100,000 | Energy Transfer Equity LP | 3,323,390 | 6,578,000 | |||||||||
29,000 | Eni SpA | 304,221 | 664,994 | |||||||||
48,000 | FirstEnergy Corp. | 1,164,848 | 1,749,600 | |||||||||
120,000 | Hess Corp. | 7,451,605 | 9,280,800 | |||||||||
13,069 | Iberdrola SA, ADR | 299,699 | 304,246 | |||||||||
25,000 | Integrys Energy Group Inc. | 1,192,522 | 1,397,250 | |||||||||
116,000 | NextEra Energy Inc. | 5,624,121 | 9,298,560 | |||||||||
138,000 | OGE Energy Corp. | 1,883,215 | 4,980,420 | |||||||||
118,000 | PNM Resources Inc. | 1,394,458 | 2,670,340 | |||||||||
30,000 | Suncor Energy Inc., New York | 785,965 | 1,073,400 | |||||||||
2,000 | Suncor Energy Inc., Toronto | 61,550 | 71,511 | |||||||||
50,000 | TECO Energy Inc. | 652,639 | 827,000 | |||||||||
135,000 | Westar Energy Inc. | 2,217,074 | 4,137,750 | |||||||||
|
|
|
| |||||||||
60,689,720 | 80,504,871 | |||||||||||
|
|
|
| |||||||||
Energy and Utilities: Natural Gas — 1.9% |
| |||||||||||
10,000 | AGL Resources Inc. | 178,125 | 460,300 | |||||||||
8,000 | Atmos Energy Corp. | 210,433 | 340,720 | |||||||||
245,000 | Kinder Morgan Inc. | 7,298,260 | 8,714,650 | |||||||||
310,000 | National Fuel Gas Co. | 15,496,458 | 21,315,600 | |||||||||
143,000 | ONEOK Inc. | 1,617,481 | 7,624,760 | |||||||||
24,000 | Piedmont Natural Gas Co. Inc. | 394,017 | 789,120 | |||||||||
74,000 | Southwest Gas Corp. | 1,818,048 | 3,700,000 | |||||||||
195,000 | Spectra Energy Corp. | 4,167,926 | 6,674,850 | |||||||||
|
|
|
| |||||||||
31,180,748 | 49,620,000 | |||||||||||
|
|
|
| |||||||||
Energy and Utilities: Oil — 4.0% |
| |||||||||||
202,000 | Anadarko Petroleum Corp. | 10,808,768 | 18,783,980 | |||||||||
45,000 | Canadian Oil Sands Ltd. | 1,290,650 | 871,996 | |||||||||
5,000 | (a) | Canadian Oil Sands Trust† | 116,475 | 96,888 | ||||||||
188,000 | Chevron Corp. | 8,670,601 | 22,842,000 | |||||||||
180,000 | ConocoPhillips | 4,001,446 | 12,511,800 | |||||||||
22,000 | Denbury Resources Inc.† | 369,472 | 405,020 | |||||||||
58,000 | Devon Energy Corp. | 2,515,153 | 3,350,080 | |||||||||
151,000 | Exxon Mobil Corp. | 4,905,886 | 12,992,040 | |||||||||
40,000 | Marathon Oil Corp. | 1,000,063 | 1,395,200 | |||||||||
20,000 | Marathon Petroleum Corp. | 639,385 | 1,286,400 | |||||||||
100,000 | Occidental Petroleum Corp. | 4,145,051 | 9,354,000 | |||||||||
4,000 | PetroChina Co. Ltd., ADR | 317,768 | 439,800 | |||||||||
50,000 | Phillips 66 | 668,879 | 2,891,000 | |||||||||
36,000 | Repsol SA, ADR | 742,075 | 889,560 | |||||||||
120,000 | Royal Dutch Shell plc, Cl. A, ADR | 5,524,835 | 7,881,600 | |||||||||
40,000 | Statoil ASA | 1,019,952 | 907,995 | |||||||||
80,000 | Statoil ASA, ADR | 1,779,821 | 1,814,400 | |||||||||
300,000 | Talisman Energy Inc. | 5,401,388 | 3,450,000 | |||||||||
17,518 | Total SA, ADR | 290,564 | 1,014,643 |
See accompanying notes to financial statements.
6
The Gabelli Equity Income Fund
Schedule of Investments (Continued) — September 30, 2013
Shares | Cost | Market Value | ||||||||||
COMMON STOCKS (Continued) | ||||||||||||
Energy and Utilities: Oil (Continued) | ||||||||||||
40,000 | WesternZagros Resources Ltd.† | $ | 147,109 | $ | 37,280 | |||||||
|
|
|
| |||||||||
54,355,341 | 103,215,682 | |||||||||||
|
|
|
| |||||||||
Energy and Utilities: Services — 2.3% |
| |||||||||||
30,000 | ABB Ltd., ADR | 351,824 | 707,700 | |||||||||
52,000 | Cameron International Corp.† | 746,014 | 3,035,240 | |||||||||
350,000 | Halliburton Co. | 10,342,941 | 16,852,500 | |||||||||
94,000 | Oceaneering International Inc. | 2,032,090 | 7,636,560 | |||||||||
40,000 | Schlumberger Ltd. | 1,275,020 | 3,534,400 | |||||||||
80,000 | Transocean Ltd. | 4,742,599 | 3,560,000 | |||||||||
1,500,000 | Weatherford International Ltd.† | 24,207,409 | 22,995,000 | |||||||||
|
|
|
| |||||||||
43,697,897 | 58,321,400 | |||||||||||
|
|
|
| |||||||||
Energy and Utilities: Water — 0.3% |
| |||||||||||
45,000 | Aqua America Inc. | 458,537 | 1,112,850 | |||||||||
200,000 | Severn Trent plc | 5,304,473 | 5,708,273 | |||||||||
|
|
|
| |||||||||
5,763,010 | 6,821,123 | |||||||||||
|
|
|
| |||||||||
Entertainment — 1.9% |
| |||||||||||
130,000 | Grupo Televisa SAB, ADR | 2,961,072 | 3,633,500 | |||||||||
35,500 | The Madison Square Garden Co., Cl. A† | 445,361 | 2,061,485 | |||||||||
117,000 | Time Warner Inc. | 3,385,344 | 7,699,770 | |||||||||
106,016 | Twenty-First Century Fox Inc., Cl. B | 3,289,985 | 3,540,934 | |||||||||
306,000 | Viacom Inc., Cl. A | 12,096,487 | 25,645,860 | |||||||||
205,000 | Vivendi SA | 6,523,779 | 4,716,071 | |||||||||
|
|
|
| |||||||||
28,702,028 | 47,297,620 | |||||||||||
|
|
|
| |||||||||
Environmental Services — 0.3% |
| |||||||||||
30,000 | Republic Services Inc. | 1,008,307 | 1,000,800 | |||||||||
175,000 | Waste Management Inc. | 5,905,150 | 7,217,000 | |||||||||
|
|
|
| |||||||||
6,913,457 | 8,217,800 | |||||||||||
|
|
|
| |||||||||
Equipment and Supplies — 1.2% |
| |||||||||||
36,000 | A.O. Smith Corp. | 253,184 | 1,627,200 | |||||||||
28,000 | Danaher Corp. | 1,074,985 | 1,940,960 | |||||||||
214,000 | Flowserve Corp. | 2,756,400 | 13,351,460 | |||||||||
20,000 | Graco Inc. | 1,006,940 | 1,481,200 | |||||||||
12,000 | Ingersoll-Rand plc | 302,107 | 779,280 | |||||||||
25,000 | Minerals Technologies Inc. | 880,441 | 1,234,250 | |||||||||
95,000 | Mueller Industries Inc. | 3,794,476 | 5,288,650 | |||||||||
16,000 | Parker Hannifin Corp. | 791,261 | 1,739,520 | |||||||||
80,000 | Tenaris SA, ADR | 3,067,303 | 3,742,400 | |||||||||
|
|
|
| |||||||||
13,927,097 | 31,184,920 | |||||||||||
|
|
|
| |||||||||
Financial Services — 14.1% |
| |||||||||||
6,579 | Alleghany Corp.† | 1,015,114 | 2,695,087 | |||||||||
440,000 | AllianceBernstein Holding LP | 9,567,886 | 8,738,400 | |||||||||
383,000 | American Express Co. | 15,736,067 | 28,924,160 |
Shares | Cost | Market Value | ||||||||||
530,000 | American International Group Inc. | $ | 14,058,173 | $ | 25,773,900 | |||||||
27,489 | Argo Group International Holdings Ltd. | 772,108 | 1,178,728 | |||||||||
22,000 | Banco Popular Espanol SA† | 199,833 | 118,128 | |||||||||
5,195 | Banco Santander Chile, ADR | 29,250 | 136,577 | |||||||||
160,000 | Banco Santander SA, ADR | 1,233,058 | 1,307,200 | |||||||||
320,000 | Bank of America Corp. | 3,184,684 | 4,416,000 | |||||||||
12,156 | BNP Paribas SA | 506,339 | 822,263 | |||||||||
500,000 | Citigroup Inc. | 20,229,828 | 24,255,000 | |||||||||
24,000 | Deutsche Bank AG | 1,097,395 | 1,101,120 | |||||||||
78,000 | Dundee Corp., Cl. A† | 1,828,287 | 1,447,852 | |||||||||
35,000 | Eaton Vance Corp. | 968,411 | 1,359,050 | |||||||||
125,000 | Federated Investors Inc., Cl. B | 3,056,627 | 3,395,000 | |||||||||
33,870 | Fidelity Southern Corp. | 284,707 | 519,566 | |||||||||
270,000 | H&R Block Inc. | 4,898,488 | 7,198,200 | |||||||||
180,000 | Hartford Financial Services Group Inc. | 5,665,884 | 5,601,600 | |||||||||
60,000 | Hudson City Bancorp Inc. | 510,798 | 543,000 | |||||||||
55,000 | Interactive Brokers Group Inc., | 837,556 | 1,032,350 | |||||||||
210,000 | Janus Capital Group Inc. | 1,782,274 | 1,787,100 | |||||||||
278,000 | JPMorgan Chase & Co. | 9,867,050 | 14,369,820 | |||||||||
82,758 | Julius Baer Group Ltd. | 2,738,518 | 3,861,765 | |||||||||
40,000 | Kemper Corp. | 1,156,156 | 1,344,000 | |||||||||
90,100 | Kinnevik Investment AB, | 1,682,511 | 3,094,134 | |||||||||
19,000 | Kinnevik Investment AB, | 278,394 | 657,803 | |||||||||
473,000 | Legg Mason Inc. | 11,114,576 | 15,817,120 | |||||||||
19,000 | Leucadia National Corp. | 304,896 | 517,560 | |||||||||
180,000 | Loews Corp. | 7,797,363 | 8,413,200 | |||||||||
158,000 | M&T Bank Corp. | 11,613,841 | 17,683,360 | |||||||||
365,000 | Marsh & McLennan Companies Inc. | 11,002,192 | 15,895,750 | |||||||||
360,000 | Morgan Stanley | 9,580,097 | 9,702,000 | |||||||||
220,000 | Northern Trust Corp. | 10,796,541 | 11,965,800 | |||||||||
28,000 | Och-Ziff Capital Management Group LLC, Cl. A | 283,762 | 307,720 | |||||||||
40,000 | Oritani Financial Corp. | 400,000 | 658,400 | |||||||||
45,000 | Popular Inc.† | 1,154,011 | 1,180,350 | |||||||||
500 | Raiffeisen Bank International AG | 28,874 | 16,363 | |||||||||
48,000 | Royal Bank of Canada | 2,548,864 | 3,082,080 | |||||||||
391,000 | SLM Corp. | 5,853,704 | 9,735,900 | |||||||||
170,000 | State Street Corp. | 7,766,302 | 11,177,500 | |||||||||
250,000 | Sterling BanCorp | 3,529,115 | 3,432,500 | |||||||||
12,000 | SunTrust Banks Inc. | 251,737 | 389,040 | |||||||||
82,000 | T. Rowe Price Group Inc. | 3,733,964 | 5,898,260 | |||||||||
115,000 | TD Ameritrade Holding Corp. | 1,950,608 | 3,010,700 | |||||||||
1,040,000 | The Bank of New York Mellon Corp. | 29,547,257 | 31,397,600 | |||||||||
3,000 | The Dun & Bradstreet Corp. | 105,969 | 311,550 |
See accompanying notes to financial statements.
7
The Gabelli Equity Income Fund
Schedule of Investments (Continued) — September 30, 2013
Shares | Cost | Market Value | ||||||||||
COMMON STOCKS (Continued) |
| |||||||||||
Financial Services (Continued) |
| |||||||||||
15,000 | The Goldman Sachs Group Inc. | $ | 1,599,455 | $ | 2,373,150 | |||||||
106,000 | The PNC Financial Services Group Inc. | 5,651,498 | 7,679,700 | |||||||||
27,000 | The Travelers Companies Inc. | 1,032,136 | 2,288,790 | |||||||||
90,000 | W. R. Berkley Corp. | 3,297,008 | 3,857,400 | |||||||||
145,000 | Waddell & Reed Financial Inc., Cl. A | 3,298,893 | 7,464,600 | |||||||||
920,000 | Wells Fargo & Co. | 29,357,941 | 38,014,400 | |||||||||
410,000 | Wright Investors’ Service Holdings Inc.† | 1,009,526 | 871,250 | |||||||||
|
|
|
| |||||||||
267,795,526 | 358,819,846 | |||||||||||
|
|
|
| |||||||||
Food and Beverage — 11.8% |
| |||||||||||
30,000 | Anheuser-Busch InBev NV | 496,266 | 2,986,282 | |||||||||
270,000 | Beam Inc. | 10,793,498 | 17,455,500 | |||||||||
194,392 | Brown-Forman Corp., Cl. A | 7,502,319 | 12,864,863 | |||||||||
20,250 | Brown-Forman Corp., Cl. B | 825,919 | 1,379,632 | |||||||||
220,000 | Campbell Soup Co. | 6,897,934 | 8,956,200 | |||||||||
40,000 | Coca-Cola Amatil Ltd., ADR | 246,845 | 918,800 | |||||||||
20,000 | Coca-Cola Enterprises Inc. | 450,000 | 804,200 | |||||||||
13,600 | Coca-Cola Femsa SAB de CV, ADR | 502,169 | 1,713,328 | |||||||||
18,000 | Constellation Brands Inc., Cl. A† | 223,261 | 1,033,200 | |||||||||
136,389 | Danone SA | 6,897,164 | 10,266,355 | |||||||||
550,000 | Davide Campari - Milano SpA | 3,822,395 | 4,769,474 | |||||||||
130,000 | Dean Foods Co.† | 1,954,766 | 2,509,000 | |||||||||
1,000 | Diageo plc | 20,487 | 31,812 | |||||||||
93,000 | Diageo plc, ADR | 5,126,053 | 11,818,440 | |||||||||
103,000 | Dr Pepper Snapple Group Inc. | 2,277,323 | 4,616,460 | |||||||||
133,000 | Fomento Economico Mexicano SAB de CV, ADR | 3,194,849 | 12,912,970 | |||||||||
275,000 | General Mills Inc. | 7,537,273 | 13,178,000 | |||||||||
3,000,000 | Grupo Bimbo SAB de CV, Cl. A | 2,411,096 | 9,268,498 | |||||||||
142,000 | Heineken NV | 6,578,070 | 10,064,369 | |||||||||
17,000 | Heineken NV, ADR | 430,190 | 602,650 | |||||||||
240,004 | Hillshire Brands Co. | 6,836,690 | 7,377,723 | |||||||||
245,000 | ITO EN Ltd. | 5,089,181 | 5,560,761 | |||||||||
40,000 | Kellogg Co. | 2,011,521 | 2,349,200 | |||||||||
320,000 | Kraft Foods Group Inc. | 9,916,126 | 16,780,800 | |||||||||
24,000 | McCormick & Co. Inc., Non-Voting | 1,004,538 | 1,552,800 | |||||||||
1,020,000 | Mondelēz International Inc., Cl. A | 19,666,442 | 32,048,400 | |||||||||
102,000 | Nestlé SA | 2,185,232 | 7,133,853 | |||||||||
55,000 | Nestlé SA, ADR | 3,094,786 | 3,828,000 | |||||||||
130,000 | NISSIN FOODS HOLDINGS CO. LTD. | 4,309,367 | 5,329,874 | |||||||||
4,200,000 | Parmalat SpA | 11,859,744 | 14,068,562 |
Shares | Cost | Market Value | ||||||||||
120,053 | PepsiCo Inc. | $ | 7,713,785 | $ | 9,544,213 | |||||||
43,500 | Pernod Ricard SA | 3,504,187 | 5,401,749 | |||||||||
10,000 | Post Holdings Inc.† | 263,033 | 403,700 | |||||||||
52,700 | Remy Cointreau SA | 3,106,596 | 5,615,924 | |||||||||
20,000 | SABMiller plc | 733,959 | 1,017,808 | |||||||||
220,000 | Sapporo Holdings Ltd. | 1,080,450 | 953,456 | |||||||||
982,000 | The Coca-Cola Co. | 23,768,792 | 37,198,160 | |||||||||
2,000 | The Hershey Co. | 72,601 | 185,000 | |||||||||
89,654 | Tootsie Roll Industries Inc. | 1,956,728 | 2,763,136 | |||||||||
72,000 | Tyson Foods Inc., Cl. A | 727,056 | 2,036,160 | |||||||||
161,003 | WhiteWave Foods Co., | 2,204,291 | 3,215,230 | |||||||||
155,000 | Yakult Honsha Co. Ltd. | 4,171,714 | 7,750,394 | |||||||||
|
|
|
| |||||||||
183,464,696 | 300,264,936 | |||||||||||
|
|
|
| |||||||||
Health Care — 12.6% |
| |||||||||||
32,000 | Abbott Laboratories | 836,192 | 1,062,080 | |||||||||
20,000 | AbbVie Inc. | 496,537 | 894,600 | |||||||||
34,000 | Actavis Inc.† | 2,655,913 | 4,896,000 | |||||||||
43,324 | Aetna Inc. | 1,782,357 | 2,773,602 | |||||||||
146,000 | Baxter International Inc. | 6,239,268 | 9,590,740 | |||||||||
157,000 | Becton, Dickinson and Co. | 11,298,691 | 15,703,140 | |||||||||
23,500 | Bio-Rad Laboratories Inc., Cl. A† | 2,427,191 | 2,762,660 | |||||||||
800,000 | Boston Scientific Corp.† | 6,726,017 | 9,392,000 | |||||||||
650,000 | Bristol-Myers Squibb Co. | 17,077,002 | 30,082,000 | |||||||||
295,000 | Covidien plc | 10,136,389 | 17,977,300 | |||||||||
449,000 | Eli Lilly & Co. | 17,859,208 | 22,598,170 | |||||||||
11,000 | Express Scripts Holding Co.† | 347,042 | 679,580 | |||||||||
14,076 | GlaxoSmithKline plc, ADR | 635,995 | 706,193 | |||||||||
22,000 | Henry Schein Inc.† | 566,365 | 2,281,400 | |||||||||
235,000 | Hospira Inc.† | 7,755,633 | 9,216,700 | |||||||||
320,000 | Johnson & Johnson | 20,207,972 | 27,740,800 | |||||||||
23,000 | Laboratory Corp. of America Holdings† | 1,748,126 | 2,280,220 | |||||||||
45,000 | Life Technologies Corp.† | 3,332,325 | 3,367,350 | |||||||||
35,000 | Mallinckrodt plc† | 948,144 | 1,543,150 | |||||||||
100,000 | Mead Johnson Nutrition Co. | 4,689,231 | 7,426,000 | |||||||||
30,000 | Medtronic Inc. | 1,005,816 | 1,597,500 | |||||||||
510,000 | Merck & Co. Inc. | 15,703,221 | 24,281,100 | |||||||||
279,000 | Novartis AG, ADR | 15,298,186 | 21,402,090 | |||||||||
200,000 | Patterson Companies Inc. | �� | 6,945,790 | 8,040,000 | ||||||||
1,275,000 | Pfizer Inc. | 25,443,775 | 36,605,250 | |||||||||
68,000 | Roche Holding AG, ADR | 2,632,469 | 4,592,040 | |||||||||
40,000 | Roche Holding AG, Genusschein | 5,894,355 | 10,787,859 | |||||||||
51,000 | St. Jude Medical Inc. | 2,043,058 | 2,735,640 | |||||||||
260,000 | Tenet Healthcare Corp.† | 7,331,097 | 10,709,400 | |||||||||
240,000 | UnitedHealth Group Inc. | 9,652,496 | 17,186,400 | |||||||||
18,000 | William Demant Holding A/S† | 880,509 | 1,663,492 | |||||||||
60,000 | Wright Medical Group Inc.† | 949,266 | 1,564,800 | |||||||||
54,000 | Zimmer Holdings Inc. | 3,182,725 | 4,435,560 |
See accompanying notes to financial statements.
8
The Gabelli Equity Income Fund
Schedule of Investments (Continued) — September 30, 2013
Shares | Cost | Market Value | ||||||||||
COMMON STOCKS (Continued) |
| |||||||||||
Health Care (Continued) |
| |||||||||||
70,000 | Zoetis Inc. | $ | 2,041,079 | $ | 2,178,400 | |||||||
|
|
|
| |||||||||
216,769,440 | 320,753,216 | |||||||||||
|
|
|
| |||||||||
Hotels and Gaming — 1.1% |
| |||||||||||
90,000 | International Game Technology | 1,451,484 | 1,703,700 | |||||||||
2,004,352 | Ladbrokes plc | 10,531,607 | 5,490,309 | |||||||||
160,000 | Las Vegas Sands Corp. | 2,597,929 | 10,627,200 | |||||||||
80,000 | MGM Resorts International† | 813,235 | 1,635,200 | |||||||||
26,000 | Ryman Hospitality Properties Inc. | 892,462 | 897,260 | |||||||||
80,000 | Starwood Hotels & Resorts Worldwide Inc. | 1,673,543 | 5,316,000 | |||||||||
14,500 | Wynn Resorts Ltd. | 468,737 | 2,291,145 | |||||||||
|
|
|
| |||||||||
18,428,997 | 27,960,814 | |||||||||||
|
|
|
| |||||||||
Machinery — 1.2% |
| |||||||||||
6,000 | Caterpillar Inc. | 35,181 | 500,220 | |||||||||
318,000 | Deere & Co. | 15,873,262 | 25,882,020 | |||||||||
150,000 | Xylem Inc. | 4,170,939 | 4,189,500 | |||||||||
|
|
|
| |||||||||
20,079,382 | 30,571,740 | |||||||||||
|
|
|
| |||||||||
Metals and Mining — 1.4% |
| |||||||||||
855,000 | Alcoa Inc. | 9,069,561 | 6,942,600 | |||||||||
10,000 | Carpenter Technology Corp. | 327,255 | 581,100 | |||||||||
369,202 | Freeport-McMoRan Copper & Gold Inc. | 6,872,293 | 12,213,202 | |||||||||
330,000 | Newmont Mining Corp. | 14,923,249 | 9,273,000 | |||||||||
400,000 | Peabody Energy Corp. | 8,120,682 | 6,900,000 | |||||||||
2,000 | Royal Gold Inc. | 88,166 | 97,320 | |||||||||
6,615 | Teck Resources Ltd., Cl. B | 533,053 | 177,761 | |||||||||
|
|
|
| |||||||||
39,934,259 | 36,184,983 | |||||||||||
|
|
|
| |||||||||
Paper and Forest Products — 0.1% |
| |||||||||||
75,000 | International Paper Co. | 2,403,385 | 3,360,000 | |||||||||
|
|
|
| |||||||||
Publishing — 0.0% |
| |||||||||||
1,504 | News Corp., Cl. B† | 8,506 | 24,711 | |||||||||
1,000 | The Washington Post Co., Cl. B | 442,591 | 611,350 | |||||||||
2,700 | Value Line Inc. | 38,523 | 23,841 | |||||||||
|
|
|
| |||||||||
489,620 | 659,902 | |||||||||||
|
|
|
| |||||||||
Real Estate — 0.0% |
| |||||||||||
78,000 | Dream Unlimited Corp., Cl. A† | 1,030,053 | 984,418 | |||||||||
10,000 | Griffin Land & Nurseries Inc. | 224,290 | 321,000 | |||||||||
|
|
|
| |||||||||
1,254,343 | 1,305,418 | |||||||||||
|
|
|
| |||||||||
Real Estate Investment Trusts — 0.7% |
| |||||||||||
70,000 | Plum Creek Timber Co. Inc. | 2,874,828 | 3,278,100 | |||||||||
9,000 | Rayonier Inc. | 264,580 | 500,850 |
Shares | Cost | Market Value | ||||||||||
460,000 | Weyerhaeuser Co. | $ | 11,163,328 | $ | 13,169,800 | |||||||
|
|
|
| |||||||||
14,302,736 | 16,948,750 | |||||||||||
|
|
|
| |||||||||
Retail — 7.3% |
| |||||||||||
16,000 | Compagnie Financiere Richemont SA | 540,728 | 1,602,919 | |||||||||
40,266 | Copart Inc.† | 696,640 | 1,280,056 | |||||||||
218,000 | Costco Wholesale Corp. | 11,302,742 | 25,096,160 | |||||||||
575,000 | CVS Caremark Corp. | 20,427,489 | 32,631,250 | |||||||||
28,000 | Hertz Global Holdings Inc.† | 706,327 | 620,480 | |||||||||
113,800 | Ingles Markets Inc., Cl. A | 2,071,571 | 3,269,474 | |||||||||
340,000 | J.C. Penney Co. Inc.† | 7,443,696 | 2,998,800 | |||||||||
500,000 | Macy’s Inc. | 7,988,643 | 21,635,000 | |||||||||
230,017 | Safeway Inc. | 4,905,407 | 7,358,244 | |||||||||
214 | Sears Canada Inc. | 2,288 | 2,609 | |||||||||
500 | Sears Holdings Corp.† | 39,103 | 29,820 | |||||||||
109 | Sears Hometown and Outlet Stores Inc.† | 2,759 | 3,461 | |||||||||
90,000 | Seven & i Holdings Co. Ltd. | 2,692,986 | 3,277,888 | |||||||||
25,000 | SUPERVALU Inc.† | 59,348 | 205,750 | |||||||||
510,000 | The Home Depot Inc. | 14,399,640 | 38,683,500 | |||||||||
158,000 | Tractor Supply Co. | 1,377,651 | 10,612,860 | |||||||||
125,000 | Walgreen Co. | 3,937,736 | 6,725,000 | |||||||||
225,000 | Wal-Mart Stores Inc. | 10,637,800 | 16,641,000 | |||||||||
10,000 | Weis Markets Inc. | 300,480 | 489,400 | |||||||||
200,000 | Whole Foods Market Inc. | 3,392,986 | 11,700,000 | |||||||||
|
|
|
| |||||||||
92,926,020 | 184,863,671 | |||||||||||
|
|
|
| |||||||||
Specialty Chemicals — 1.9% |
| |||||||||||
43,000 | Albemarle Corp. | 564,900 | 2,706,420 | |||||||||
42,000 | Ashland Inc. | 1,444,320 | 3,884,160 | |||||||||
124,000 | E. I. du Pont de Nemours and Co. | 5,631,542 | 7,261,440 | |||||||||
295,000 | Ferro Corp.† | 2,499,418 | 2,687,450 | |||||||||
8,000 | FMC Corp. | 186,076 | 573,760 | |||||||||
50,000 | H.B. Fuller Co. | 1,032,850 | 2,259,500 | |||||||||
224,000 | International Flavors & Fragrances Inc. | 10,435,704 | 18,435,200 | |||||||||
3,000 | NewMarket Corp. | 11,578 | 863,730 | |||||||||
5,000 | Quaker Chemical Corp. | 90,412 | 365,250 | |||||||||
3,000 | Rockwood Holdings Inc. | 128,667 | 200,700 | |||||||||
40,000 | Sensient Technologies Corp. | 822,757 | 1,915,600 | |||||||||
165,000 | The Dow Chemical Co. | 5,508,445 | 6,336,000 | |||||||||
4,000 | Zep Inc. | 17,026 | 65,040 | |||||||||
|
|
|
| |||||||||
28,373,695 | 47,554,250 | |||||||||||
|
|
|
| |||||||||
Telecommunications — 3.1% |
| |||||||||||
360,000 | AT&T Inc. | 9,362,623 | 12,175,200 | |||||||||
515,000 | BCE Inc. | 11,794,458 | 21,990,500 | |||||||||
50,000 | Belgacom SA | 1,602,316 | 1,329,176 | |||||||||
4,495 | Bell Aliant Inc.(b) | 117,429 | 111,982 | |||||||||
50,000 | BT Group plc, Cl. A | 204,914 | 277,157 | |||||||||
16,000 | BT Group plc, ADR | 469,025 | 884,800 |
See accompanying notes to financial statements.
9
The Gabelli Equity Income Fund
Schedule of Investments (Continued) — September 30, 2013
Shares | Cost | Market Value | ||||||||||
COMMON STOCKS (Continued) |
| |||||||||||
Telecommunications (Continued) |
| |||||||||||
570,000 | Cincinnati Bell Inc.† | $ | 2,113,891 | $ | 1,550,400 | |||||||
435,000 | Deutsche Telekom AG, ADR | 6,985,799 | 6,351,000 | |||||||||
36,000 | Loral Space & Communications Inc. | 1,458,551 | 2,438,280 | |||||||||
25,000 | Orange SA, ADR | 424,798 | 312,750 | |||||||||
33,220 | Sprint Corp.† | 188,357 | 206,296 | |||||||||
30,010 | Telefonica SA, ADR† | 192,371 | 464,555 | |||||||||
340,000 | Telekom Austria AG | 4,971,579 | 2,850,889 | |||||||||
390,000 | Telephone & Data Systems Inc. | 11,671,223 | 11,524,500 | |||||||||
24,000 | TELUS Corp. | 185,454 | 795,457 | |||||||||
30,000 | TELUS Corp., New York | 687,084 | 993,600 | |||||||||
295,000 | Verizon Communications Inc. | 9,881,714 | 13,764,700 | |||||||||
|
|
|
| |||||||||
62,311,586 | 78,021,242 | |||||||||||
|
|
|
| |||||||||
Transportation — 0.3% |
| |||||||||||
171,000 | GATX Corp. | 6,081,094 | 8,125,920 | |||||||||
|
|
|
| |||||||||
Wireless Communications — 1.1% |
| |||||||||||
3,500,000 | Cable & Wireless Communications plc | 2,195,547 | 2,245,508 | |||||||||
8,000 | Millicom International Cellular SA | 636,267 | 709,360 | |||||||||
36,000 | Millicom International Cellular SA, SDR | 2,802,200 | 3,178,925 | |||||||||
240,000 | NTT DoCoMo Inc. | 3,485,733 | 3,887,075 | |||||||||
80,000 | Turkcell Iletisim Hizmetleri A/S, ADR† | 1,272,518 | 1,180,000 | |||||||||
32,000 | United States Cellular Corp. | 1,394,584 | 1,456,960 | |||||||||
440,000 | Vodafone Group plc, ADR | 11,867,079 | 15,479,200 | |||||||||
|
|
|
| |||||||||
23,653,928 | 28,137,028 | |||||||||||
|
|
|
| |||||||||
TOTAL COMMON STOCKS | 1,588,737,418 | 2,476,061,651 | ||||||||||
|
|
|
| |||||||||
CONVERTIBLE PREFERRED STOCKS — 0.1% |
| |||||||||||
Communications Equipment — 0.0% |
| |||||||||||
1,100 | Lucent Technologies Capital Trust I, 7.750% | 759,000 | 1,114,300 | |||||||||
|
|
|
| |||||||||
Food and Beverage — 0.0% |
| |||||||||||
1,000 | Post Holdings Inc., 3.750%(b) | 100,000 | 103,405 | |||||||||
|
|
|
| |||||||||
Telecommunications — 0.1% |
| |||||||||||
31,500 | Cincinnati Bell Inc., 6.750%, Ser. B | 766,264 | 1,327,725 | |||||||||
|
|
|
| |||||||||
TOTAL CONVERTIBLE | 1,625,264 | 2,545,430 | ||||||||||
|
|
|
|
Shares | Cost | Market Value | ||||||||||
RIGHTS — 0.0% |
| |||||||||||
Health Care — 0.0% |
| |||||||||||
260,000 | Sanofi, CVR, expire 12/31/20† | $ | 555,689 | $ | 525,200 | |||||||
|
|
|
| |||||||||
WARRANTS — 0.1% |
| |||||||||||
Energy and Utilities: Natural Gas — 0.1% |
| |||||||||||
330,000 | Kinder Morgan Inc., expire 05/25/17† | 589,946 | 1,640,100 | |||||||||
|
|
|
| |||||||||
Principal | ||||||||||||
CORPORATE BONDS — 0.3% |
| |||||||||||
Diversified Industrial — 0.3% |
| |||||||||||
$6,500,000 | Griffon Corp., Sub. Deb. Cv., 4.000%, 01/15/17(b) | 6,477,070 | 7,259,687 | |||||||||
|
|
|
| |||||||||
Energy and Utilities: Electric — 0.0% |
| |||||||||||
100,000 | Texas Competitive Electric | 82,745 | 2,750 | |||||||||
|
|
|
| |||||||||
TOTAL CORPORATE BONDS | 6,559,815 | 7,262,437 | ||||||||||
|
|
|
| |||||||||
U.S. GOVERNMENT OBLIGATIONS — 2.2% |
| |||||||||||
56,210,000 | U.S. Treasury Bills, | 56,205,363 | 56,207,970 | |||||||||
|
|
|
| |||||||||
TOTAL INVESTMENTS — 99.8% | $ | 1,654,273,495 | 2,544,242,788 | |||||||||
|
| |||||||||||
Other Assets and Liabilities (Net) — 0.2% |
| 4,971,422 | ||||||||||
|
| |||||||||||
NET ASSETS — 100.0% |
| $ | 2,549,214,210 | |||||||||
|
|
(a) | Denoted in units. |
(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, 2013, the market value of Rule 144A securities amounted to $7,475,074 or 0.29% of net assets. |
† | Non-income producing security. |
†† | Represents annualized yield at date of purchase. |
ADR | American Depositary Receipt |
CVR | Contingent Value Right |
SDR | Swedish Depositary Receipt |
See accompanying notes to financial statements.
10
The Gabelli Equity Income Fund
Statement of Assets and Liabilities
September 30, 2013
Assets: | ||||
Investments, at value (cost $1,654,273,495) | $2,544,242,788 | |||
Cash | 366 | |||
Receivable for Fund shares sold | 6,095,407 | |||
Receivable for investments sold | 354,833 | |||
Dividends and interest receivable | 4,004,183 | |||
Prepaid expenses | 57,591 | |||
|
| |||
Total Assets | 2,554,755,168 | |||
|
| |||
Liabilities: | ||||
Payable for Fund shares redeemed | 2,294,641 | |||
Payable for investment advisory fees | 2,088,637 | |||
Payable for distribution fees | 580,711 | |||
Payable for accounting fees | 3,750 | |||
Payable for shareholder services fees | 324,685 | |||
Other accrued expenses | 248,534 | |||
|
| |||
Total Liabilities | 5,540,958 | |||
|
| |||
Net Assets | ||||
(applicable to 96,074,001 shares outstanding) | $ | 2,549,214,210 | ||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $ | 1,681,175,604 | ||
Accumulated net investment income | 2,365,606 | |||
Accumulated net realized loss on investments and foreign currency transactions | (24,304,059 | ) | ||
Net unrealized appreciation on investments | 889,969,293 | |||
Net unrealized appreciation on foreign currency translations | 7,766 | |||
|
| |||
Net Assets | $ | 2,549,214,210 | ||
|
|
Shares of Capital Stock, each at $0.001 par value: | ||||
Class AAA: | ||||
Net Asset Value, offering, and redemption price per share ($1,726,723,597 ÷ 64,729,475 shares outstanding; 150,000,000 shares authorized) | $ | 26.68 | ||
|
| |||
Class A: | ||||
Net Asset Value and redemption price per share ($215,353,591 ÷ 8,098,126 shares outstanding; 50,000,000 shares authorized) | $ | 26.59 | ||
|
| |||
Maximum offering price per share (NAV ÷ 0.9425, based on maximum sales charge of 5.75% of the offering price) | $ | 28.21 | ||
|
| |||
Class C: | ||||
Net Asset Value and offering price per share ($224,804,244 ÷ 9,143,147 shares outstanding; 50,000,000 shares authorized) | $ | 24.59 | (a) | |
|
| |||
Class I: | ||||
Net Asset Value, offering, and redemption price per share ($382,332,778 ÷ 14,103,253 shares outstanding; 50,000,000 shares authorized) | $ | 27.11 | ||
|
|
(a) | Redemption price varies based on the length of time held. |
Statement of Operations
For the Year Ended September 30, 2013
Investment Income: | ||||
Dividends (net of foreign withholding taxes of $955,538) | $ | 59,099,593 | ||
Interest | 418,959 | |||
|
| |||
Total Investment Income | 59,518,552 | |||
|
| |||
Expenses: | ||||
Investment advisory fees | 23,496,165 | |||
Distribution fees - Class AAA | 4,122,514 | |||
Distribution fees - Class A | 463,202 | |||
Distribution fees - Class C | 1,852,216 | |||
Shareholder services fees | 2,064,448 | |||
Shareholder communication expenses | 401,882 | |||
Custodian fees | 294,945 | |||
Legal and audit fees | 101,888 | |||
Directors’ fees | 90,928 | |||
Registration expenses | 86,482 | |||
Accounting fees | 45,000 | |||
Interest expense | 5,949 | |||
Miscellaneous expenses | 144,119 | |||
|
| |||
Total Expenses | 33,169,738 | |||
|
| |||
Less: | ||||
Custodian fee credits | (190 | ) | ||
|
| |||
Net Expenses | 33,169,548 | |||
|
| |||
Net Investment Income | 26,349,004 | |||
|
| |||
Net Realized and Unrealized Gain on Investments and Foreign Currency: | ||||
Net realized gain on investments | 56,304,506 | |||
Net realized gain on foreign currency transactions | 138,389 | |||
|
| |||
Net realized gain on investments and foreign currency transactions | 56,442,895 | |||
|
| |||
Net change in unrealized appreciation/depreciation: | ||||
on investments | 366,261,540 | |||
on foreign currency translations | 8,149 | |||
|
| |||
Net change in unrealized appreciation/depreciation on investments and foreign currency translations | 366,269,689 | |||
|
| |||
Net Realized and Unrealized Gain on Investments and Foreign Currency | 422,712,584 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 449,061,588 | ||
|
|
See accompanying notes to financial statements.
11
The Gabelli Equity Income Fund
Statement of Changes in Net Assets
Year Ended September 30, 2013 | Year Ended September 30, 2012 | |||||||||
Operations: | ||||||||||
Net investment income | $ | 26,349,004 | $ | 24,425,358 | ||||||
Net realized gain on investments, swap contracts, and foreign currency transactions | 56,442,895 | 10,477,418 | ||||||||
Net change in unrealized appreciation on investments, swap contracts, and foreign currency translations | 366,269,689 | 393,599,625 | ||||||||
|
|
|
| |||||||
Net Increase in Net Assets Resulting from Operations | 449,061,588 | 428,502,401 | ||||||||
|
|
|
| |||||||
Distributions to Shareholders: | ||||||||||
Net investment income | ||||||||||
Class AAA | (41,888,838 | ) | (26,576,765 | ) | ||||||
Class A | (4,873,154 | ) | (2,457,235 | ) | ||||||
Class B* | — | (658 | ) | |||||||
Class C | (5,331,075 | ) | (1,443,579 | ) | ||||||
Class I | (8,549,926 | ) | (3,633,045 | ) | ||||||
|
|
|
| |||||||
(60,642,993 | ) | (34,111,282 | ) | |||||||
|
|
|
| |||||||
Return of capital | ||||||||||
Class AAA | — | (644,288 | ) | |||||||
Class A | — | (55,324 | ) | |||||||
Class B* | — | (464 | ) | |||||||
Class C | — | (1,054,766 | ) | |||||||
|
|
|
| |||||||
— | (1,754,842 | ) | ||||||||
|
|
|
| |||||||
Total Distributions to Shareholders | (60,642,993 | ) | (35,866,124 | ) | ||||||
|
|
|
| |||||||
Capital Share Transactions: | ||||||||||
Class AAA | (152,071,501 | ) | (173,419,541 | ) | ||||||
Class A | 20,867,415 | 21,812,344 | ||||||||
Class B* | — | (78,939 | ) | |||||||
Class C | 34,744,935 | 40,895,775 | ||||||||
Class I | 18,369,702 | 165,866,082 | ||||||||
|
|
|
| |||||||
Net Increase/(Decrease) in Net Assets from Capital Share Transactions | (78,089,449 | ) | 55,075,721 | |||||||
|
|
|
| |||||||
Redemption Fees | 12,890 | 2,134 | ||||||||
|
|
|
| |||||||
Net Increase in Net Assets | 310,342,036 | 447,714,132 | ||||||||
Net Assets: | ||||||||||
Beginning of year | 2,238,872,174 | 1,791,158,042 | ||||||||
|
|
|
| |||||||
End of year (including undistributed net investment income of $2,365,606 and $1,264,748, respectively) | $ | 2,549,214,210 | $ | 2,238,872,174 | ||||||
|
|
|
|
* | Class B Shares were redeemed and closed on September 25, 2012. |
See accompanying notes to financial statements.
12
The Gabelli Equity Income Fund
Financial Highlights
Selected data for a share of capital stock outstanding throughout each year:
Income (Loss) from Investment Operations | Distributions | Ratios to Average Net Assets/ Supplemental Data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended September 30 | Net Asset Value, Beginning of Period | Net Investment Income (a) | Net Realized and Unrealized Gain (Loss) on Investments | Total from Investment Operations | Net Investment Income | Return of Capital | Total Distributions | Redemption Fees (a)(b) | Net Asset Value, End of Period | Total Return † | Net Assets End of Period (in 000’s) | Net Investment Income | Operating Expenses | Portfolio Turnover Rate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class AAA |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 22.54 | $ | 0.29 | $ | 4.49 | $ | 4.78 | $ | (0.64 | ) | — | $ | (0.64 | ) | $ | 0.00 | $ | 26.68 | 21.38 | % | $ | 1,726,724 | 1.15 | % | 1.39 | % | 6 | % | |||||||||||||||||||||||||||||||||||||||||
2012 | 18.52 | 0.25 | 4.13 | 4.38 | (0.35 | ) | $ | (0.01 | ) | (0.36 | ) | 0.00 | 22.54 | 23.78 | 1,603,696 | 1.17 | 1.40 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 18.65 | 0.16 | 0.07 | 0.23 | (0.16 | ) | (0.20 | ) | (0.36 | ) | 0.00 | 18.52 | 1.05 | 1,464,658 | 0.79 | 1.41 | 14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 17.14 | 0.23 | 1.64 | 1.87 | (0.23 | ) | (0.13 | ) | (0.36 | ) | 0.00 | 18.65 | 11.03 | 1,330,970 | 1.29 | 1.44 | 14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | 18.00 | 0.21 | (0.71 | ) | (0.50 | ) | (0.21 | ) | (0.15 | ) | (0.36 | ) | 0.00 | 17.14 | (2.34 | ) | 1,088,655 | 1.46 | 1.50 | 17 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Class A |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 22.47 | $ | 0.28 | $ | 4.48 | $ | 4.76 | $ | (0.64 | ) | — | $ | (0.64 | ) | $ | 0.00 | $ | 26.59 | 21.36 | % | $ | 215,353 | 1.14 | % | 1.39 | % | 6 | % | |||||||||||||||||||||||||||||||||||||||||
2012 | 18.47 | 0.25 | 4.11 | 4.36 | (0.35 | ) | $ | (0.01 | ) | (0.36 | ) | 0.00 | 22.47 | 23.73 | 164,177 | 1.19 | 1.40 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 18.60 | 0.17 | 0.06 | 0.23 | (0.16 | ) | (0.20 | ) | (0.36 | ) | 0.00 | 18.47 | 1.06 | 115,210 | 0.82 | 1.41 | 14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 17.09 | 0.24 | 1.63 | 1.87 | (0.23 | ) | (0.13 | ) | (0.36 | ) | 0.00 | 18.60 | 11.06 | 67,314 | 1.35 | 1.44 | 14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | 17.95 | 0.21 | (0.71 | ) | (0.50 | ) | (0.21 | ) | (0.15 | ) | (0.36 | ) | 0.00 | 17.09 | (2.34 | ) | 31,104 | 1.46 | 1.50 | 17 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Class C |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 20.97 | $ | 0.09 | $ | 4.17 | $ | 4.26 | $ | (0.64 | ) | — | $ | (0.64 | ) | $ | 0.00 | $ | 24.59 | 20.50 | % | $ | 224,804 | 0.38 | % | 2.14 | % | 6 | % | |||||||||||||||||||||||||||||||||||||||||
2012 | 17.38 | 0.09 | 3.86 | 3.95 | (0.21 | ) | $ | (0.15 | ) | (0.36 | ) | 0.00 | 20.97 | 22.85 | 161,842 | 0.46 | 2.15 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 17.65 | 0.02 | 0.07 | 0.09 | (0.02 | ) | (0.34 | ) | (0.36 | ) | 0.00 | 17.38 | 0.31 | 98,296 | 0.09 | 2.16 | 14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 16.36 | 0.10 | 1.55 | 1.65 | (0.23 | ) | (0.13 | ) | (0.36 | ) | 0.00 | 17.65 | 10.20 | 43,429 | 0.61 | 2.19 | 14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | 17.33 | 0.10 | (0.71 | ) | (0.61 | ) | (0.21 | ) | (0.15 | ) | (0.36 | ) | 0.00 | 16.36 | (3.07 | ) | 22,919 | 0.70 | 2.25 | 17 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Class I |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $ | 22.84 | $ | 0.35 | $ | 4.56 | $ | 4.91 | $ | (0.64 | ) | — | $ | (0.64 | ) | $ | 0.00 | $ | 27.11 | 21.67 | % | $ | 382,333 | 1.38 | % | 1.14 | % | 6 | % | |||||||||||||||||||||||||||||||||||||||||
2012 | 18.71 | 0.33 | 4.16 | 4.49 | (0.36 | ) | — | (0.36 | ) | 0.00 | 22.84 | 24.13 | 309,157 | 1.54 | 1.15 | 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 18.80 | 0.23 | 0.04 | 0.27 | (0.22 | ) | $ | (0.14 | ) | (0.36 | ) | 0.00 | 18.71 | 1.26 | 112,929 | 1.10 | 1.16 | 14 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 17.23 | 0.35 | 1.58 | 1.93 | (0.23 | ) | (0.13 | ) | (0.36 | ) | 0.00 | 18.80 | 11.32 | 41,204 | 1.92 | 1.19 | 14 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | 18.04 | 0.25 | (0.70 | ) | (0.45 | ) | (0.21 | ) | (0.15 | ) | (0.36 | ) | 0.00 | 17.23 | (2.05 | ) | 8,819 | 1.71 | 1.25 | 17 |
† | 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. |
(a) | Per share amounts have been calculated using the average shares outstanding method. |
(b) | Amount represents less than $0.005 per share. |
See accompanying notes to financial statements.
13
The Gabelli Equity Income Fund
Notes to Financial Statements
1. Organization. The Gabelli Equity Income Fund, a series of the Gabelli Equity Series Funds, Inc. (the “Corporation”), was incorporated on July 25, 1991 in Maryland. 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 on its assets with an emphasis on income. The Fund commenced investment operations on January 2, 1992.
2. Significant Accounting Policies. The Fund’s financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), which may require the use of management estimates and assumptions. 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. U.S. government obligations with maturities greater than sixty days are normally valued using a model that incorporates market observable data such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued principally using dealer quotations.
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.
14
The Gabelli Equity Income Fund
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). |
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input both individually and in the aggregate that is significant to the fair value measurement. 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 in securities by inputs used to value the Fund’s investments as of September 30, 2013 is as follows:
Valuation Inputs | ||||||||||||||||||||
Level 1 Quoted Prices | Level 2 Other Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total Market Value at 9/30/13 | |||||||||||||||||
INVESTMENTS IN SECURITIES: | ||||||||||||||||||||
ASSETS (Market Value): | ||||||||||||||||||||
Common Stocks: | ||||||||||||||||||||
Energy and Utilities: Electric | $ | 20,877,071 | — | $ | 0 | $ | 20,877,071 | |||||||||||||
Other Industries (a) | 2,455,184,580 | — | — | 2,455,184,580 | ||||||||||||||||
Total Common Stocks | 2,476,061,651 | — | 0 | 2,476,061,651 | ||||||||||||||||
Convertible Preferred Stocks: | ||||||||||||||||||||
Food and Beverage | — | $ | 103,405 | — | 103,405 | |||||||||||||||
Other Industries (a) | 2,442,025 | — | — | 2,442,025 | ||||||||||||||||
Total Convertible Preferred Stocks | 2,442,025 | 103,405 | — | 2,545,430 | ||||||||||||||||
Rights (a) | 525,200 | — | — | 525,200 | ||||||||||||||||
Warrants (a) | 1,640,100 | — | — | 1,640,100 | ||||||||||||||||
Corporate Bonds (a) | — | 7,262,437 | — | 7,262,437 | ||||||||||||||||
U.S. Government Obligations | — | 56,207,970 | — | 56,207,970 | ||||||||||||||||
TOTAL INVESTMENTS IN SECURITIES – ASSETS | $ | 2,480,668,976 | $ | 63,573,812 | $ | 0 | $ | 2,544,242,788 |
(a) | Please refer to the Schedule of Investments for the industry classifications of these portfolio holdings. |
The Fund did not have transfers between Level 1 and Level 2 during the year ended September 30, 2013. The Fund’s policy is to recognize transfers among Levels as of the beginning of the reporting period.
Additional Information to Evaluate Qualitative Information.
General. The Fund uses recognized industry pricing services – approved by the Board and unaffiliated with the Adviser – to value most of its securities, and uses broker quotes provided by market makers of securities not valued by these and other recognized pricing sources. Several different pricing feeds are received to value domestic equity securities, international equity securities, preferred equity securities, and fixed income securities. The data within these feeds is ultimately sourced from major stock exchanges and trading systems where these securities trade. The prices supplied by external sources are checked by obtaining quotations or actual transaction prices from market participants. If a price obtained from the pricing source is deemed unreliable, prices will be sought from another pricing service or from a broker/dealer that trades that security or similar securities.
15
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
Fair Valuation. Fair valued securities may be common and preferred equities, warrants, options, rights, and fixed income obligations. Where appropriate, Level 3 securities are those for which market quotations are not available, such as securities not traded for several days, or for which current bids are not available, or which are restricted as to transfer. Among the factors to be considered to fair value a security are recent prices of comparable securities that are publicly traded, reliable prices of securities not publicly traded, the use of valuation models, current analyst reports, valuing the income or cash flow of the issuer, or cost if the preceding factors do not apply. A significant change in the unobservable inputs could result in a lower or higher value in Level 3 securities. The circumstances of Level 3 securities are frequently monitored to determine if fair valuation measures continue to apply.
The Adviser reports quarterly to the Board the results of the application of fair valuation policies and procedures. These include back testing the prices realized in subsequent trades of these fair valued securities to fair values previously recognized.
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.
The Fund’s derivative contracts held at September 30, 2013, if any, are not accounted for as hedging instruments under GAAP and are disclosed in the Schedule of Investments together with the related counterparty.
Accounting Standards Update (“ASU”) No. 2011-11 “Disclosures about Offsetting Assets and Liabilities.” ASU 2011-11 requires a fund to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of assets and liabilities and instruments and transactions subject to an agreement similar to a master netting arrangement. The scope of ASU 2011-11 includes derivatives and sale and repurchase agreements. The purpose of ASU 2011-11 is to facilitate comparison of financial statements prepared on the basis of GAAP and on the basis of International Financial Reporting Standards. ASU 2011-11 is effective for financial statements whose fiscal year begins after December 31, 2012. Management is currently evaluating the impact on the additional disclosure requirements on the Fund’s financial statements.
Swap Agreements. The Fund may enter into equity 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 an equity contract for difference swap, a set of future cash flows is exchanged between two counterparties.
16
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
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 received or paid 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, 2013, the Fund held no investments in equity contract for difference swap 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 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 purchase 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 inability 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 Securities. The Fund may invest up to 15% of its net assets in securities for which the markets are restricted. Restricted securities include securities whose disposition is subject to substantial legal or contractual restrictions. The sale of restricted 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
17
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
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. For the restricted securities the Fund held as of September 30, 2013, refer to the Schedule of Investments.
Securities Transactions and Investment Income. Securities transactions are accounted for on the trade date with realized gain/(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 from foreign securities that are recorded as soon after the ex-dividend date as the Fund becomes aware of such dividends.
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.
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 GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities and foreign currency transactions held by the Fund. Distributions from net investment income for federal income tax purposes 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. Permanent differences are primarily due to recharacterization of distributions, tax treatment of currency gains and losses, and reclassifications of distributions from investments in real estate investment trusts. These reclassifications have no impact on the NAV of the Fund. For the year ended September 30, 2013, reclassifications were made to increase accumulated net investment income by $35,394,847 and decrease accumulated net realized loss on investments and foreign currency transactions by $446,332, with an offsetting adjustment to paid-in-capital.
18
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
The tax character of distributions paid during the years ended September 30, 2013 and September 30, 2012 was as follows:
Year Ended | Year Ended | |||||||||
Distributions paid from: | ||||||||||
Ordinary income | $ | 60,642,993 | $ | 34,111,282 | ||||||
Return of capital | — | 1,754,842 | ||||||||
|
|
|
| |||||||
Total distributions paid | $ | 60,642,993 | $ | 35,866,124 | ||||||
|
|
|
|
The Fund has a fixed distribution policy. Under the policy, the Fund declares and pays monthly distributions from net investment income, capital gains, and paid-in capital. The actual source of the distribution is determined after the end of the calendar year. Pursuant to this policy, distributions during the calendar year are made in excess of required distributions. 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 pass through to shareholders all of its net realized long term capital gains as a Capital Gain Dividend, subject to the maximum federal income tax rate of 20%, and may cause such gains to be treated as ordinary income subject to a maximum federal income tax rate of 39.6%. In addition, for taxable years beginning on or after January 1, 2013, certain U.S. shareholders who are individuals, estates, or trusts and whose income exceeds certain thresholds will be required to pay 3.8% Medicare tax on their “net investment income,” which includes dividends received from the Fund and capital gains from the sale or other disposition of shares of the Fund. Distributions sourced from paid-in capital should not be considered as dividend yield or the total return from an investment in the Fund. The Board 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 current annualized rate is $1.20 per share.
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.
At September 30, 2013, the components of accumulated earnings/losses on a tax basis were as follows:
Accumulated capital loss carryforwards | $ | (14,023,002 | ) | |
Net unrealized appreciation on investments | 882,061,608 | |||
|
| |||
Total | $ | 868,038,606 | ||
|
|
At September 30, 2013, the Fund had net capital loss carryforwards for federal income tax purposes which are available to reduce future required distributions of net capital gains to shareholders. Under the Regulated Investment Company Modernization Act of 2010, the Fund will be permitted to carry forward for an unlimited period capital losses incurred in years beginning after December 22, 2010. In addition, these losses must be utilized prior to the losses incurred in pre-enactment taxable years. As a result of the rule, pre-enactment capital loss carryforwards may have an increased likelihood of expiring unused. Additionally, post enactment capital
19
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
losses that are carried forward will retain their character as either short term or long term capital losses rather than being considered all short term as under previous law.
Capital Loss Carryforward Available through 2018 | $ | 5,779,719 | ||
Capital Loss Carryforward Available through 2019 | 8,243,283 | |||
|
| |||
Total Capital Loss Carryforwards | $ | 14,023,002 | ||
|
|
During the year ended September 30, 2013, the Fund utilized capital loss carryforwards of $57,919,526.
At September 30, 2013, the differences between book basis and tax basis unrealized appreciation were primarily due to deferral of losses from wash sales for tax purposes and tax basis adjustments on partnership, investments in passive foreign investment companies, and real estate investments trusts.
The following summarizes the tax cost of investments and the related net unrealized appreciation at September 30, 2013:
Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation | |||||||||||||||||
Investments | $ | 1,662,188,946 | $ | 927,106,171 | $ | (45,052,329 | ) | $ | 882,053,842 |
The Fund is required to evaluate tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Income tax and related interest and penalties would be recognized by the Fund as tax expense in the Statement of Operations if the tax positions were deemed not to meet the more-likely-than-not threshold. For the year ended September 30, 2013, the Fund did not incur any income tax, interest, or penalties. As of September 30, 2013, the Adviser has reviewed all open tax years and concluded that there was no impact to the Fund’s net assets or results of operations. Tax years ended September 30, 2010 through September 30, 2013 remain subject to examination by the Internal Revenue Service and state taxing authorities. On an ongoing basis, the Adviser will monitor the Fund’s tax positions to determine if adjustments to this conclusion are necessary.
3. Investment Advisory Agreement and Other Transactions. The Fund has entered into an investment advisory agreement (the “Advisory Agreement”) with the Adviser which provides that the Fund will pay the Adviser a fee, computed daily and paid monthly, at the annual rate of 1.00% of the value of 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 $18,000 plus $2,000 for each Board meeting attended, and they are reimbursed for any out of pocket expenses incurred in attending meetings. All Board committee members receive $500 per meeting attended. The Chairman of the Audit Committee receives a $3,000 annual fee, and the Lead Director receives an annual fee of $2,000. A Director may receive a single meeting fee, allocated among the participating funds, for attending 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.
20
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
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. Under the Class AAA, Class A, and Class C Share Plans, payments are authorized to G.distributors, LLC (the “Distributor”), an affiliate of the Adviser, at annual rates of 0.25%, 0.25%, 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 during the year ended September 30, 2013, other than short term securities and U.S. Government obligations, aggregated $148,072,270 and $255,555,378, respectively.
6. Transactions with Affiliates. During the year ended September 30, 2013, the Fund paid brokerage commissions on security trades of $224,461 to G.research, Inc. (formerly Gabelli & Company, Inc.), an affiliate of the Adviser. Additionally, the Distributor retained a total of $197,891 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. During the year ended September 30, 2013, 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 rate 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, 2013, 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, 2013 was $818,162 with a weighted average interest rate of 1.15%. The maximum amount borrowed at anytime during the year ended September 30, 2013 was $17,427,000.
8. Capital Stock. The Fund offers four classes of shares – Class AAA Shares, Class A 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 the Distributor, through selected broker/dealers, or the transfer agent. Class I Shares are offered without a sales charge, directly through the Distributor or brokers that have entered into selling agreements specifically with respect to Class I Shares. Class A Shares are subject to a maximum front-end sales charge of 5.75%. Class C Shares are subject to a 1.00% contingent deferred sales charge for one year after purchase.
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 as an increase in paid-in capital. The redemption fees retained by the Fund during the years ended September 30, 2013 and September 30, 2012 amounted to $12,890 and $2,134, respectively.
21
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
Transactions in shares of capital stock were as follows:
Year Ended September 30, 2013 | Year Ended September 30, 2012 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class AAA | ||||||||||||||||
Shares sold | 7,432,312 | $ | 184,885,486 | 14,361,618 | $ | 303,464,063 | ||||||||||
Shares issued upon reinvestment of distributions | 1,589,668 | 40,317,142 | 1,199,611 | 25,557,490 | ||||||||||||
Shares redeemed | (15,448,311 | ) | (377,274,129 | ) | (23,498,722 | ) | (502,441,094 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net decrease | (6,426,331 | ) | $ | (152,071,501 | ) | (7,937,493 | ) | $ | (173,419,541 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class A | ||||||||||||||||
Shares sold | 2,373,529 | $ | 59,611,052 | 3,228,646 | $ | 67,537,066 | ||||||||||
Shares issued upon reinvestment of distributions | 159,832 | 4,056,585 | 97,038 | 2,064,798 | ||||||||||||
Shares redeemed | (1,741,311 | ) | (42,800,222 | ) | (2,258,986 | ) | (47,789,520 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase | 792,050 | $ | 20,867,415 | 1,066,698 | $ | 21,812,344 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class B* | ||||||||||||||||
Shares sold | — | — | 608 | $ | 11,530 | |||||||||||
Shares issued upon reinvestment of distributions | — | — | 51 | 1,005 | ||||||||||||
Shares redeemed | — | — | (4,422 | ) | (91,474 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net decrease | — | — | (3,763 | ) | $ | (78,939 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Class C | ||||||||||||||||
Shares sold | 2,804,546 | $ | 66,345,646 | 3,029,165 | $ | 60,064,059 | ||||||||||
Shares issued upon reinvestment of distributions | 166,930 | 3,934,359 | 88,822 | 1,775,195 | ||||||||||||
Shares redeemed | (1,545,194 | ) | (35,535,070 | ) | (1,056,164 | ) | (20,943,479 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase | 1,426,282 | $ | 34,744,935 | 2,061,823 | $ | 40,895,775 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class I | ||||||||||||||||
Shares sold | 5,027,715 | $ | 128,728,851 | 11,496,875 | $ | 252,401,765 | ||||||||||
Shares issued upon reinvestment of distributions | 270,917 | 6,997,768 | 153,070 | 3,333,904 | ||||||||||||
Shares redeemed | (4,731,705 | ) | (117,356,917 | ) | (4,148,114 | ) | (89,869,587 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase | 566,927 | $ | 18,369,702 | 7,501,831 | $ | 165,866,082 | ||||||||||
|
|
|
|
|
|
|
|
* | Class B Shares were fully redeemed and closed on September 25, 2012. |
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. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.
10. Other Matters. On April 24, 2008, the Adviser entered into a settlement with the SEC to resolve an inquiry regarding prior frequent trading 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. Under the terms of the settlement, the Adviser, without admitting or denying the SEC’s findings and allegations, paid $16 million (which included a $5 million civil monetary penalty). On the same day, the SEC filed a civil action in the U.S. District Court for the Southern District of New York 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, who also is an officer of the Global Growth Fund and other funds in the Gabelli/GAMCO complex, including this Fund, denies the allegations and is continuing in his positions with the Adviser and the funds. The settlement by the Adviser did not have, and the resolution of the action against the officer is not expected to have, a material adverse impact on the Adviser or its ability to fulfill its obligations under the Advisory Agreement.
22
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
11. Subsequent Events. Management has evaluated the impact on the Fund of all subsequent events occurring through the date the financial statements were issued and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements.
23
The Gabelli Equity Income Fund
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
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, 2013, 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 five years in the period then ended. 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, 2013, 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 Equity Income Fund, a series of Gabelli Equity Series Funds, Inc., at September 30, 2013, 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 five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York
November 25, 2013
24
The Gabelli Equity Income Fund
Additional Fund Information (Unaudited)
The business and affairs of the Corporation 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) Address1 and Age | Term of Office and Length of Time Served2 | Number of Funds in Fund Complex | Principal Occupation(s) | Other Directorships Held by Director4 | ||||
INTERESTED DIRECTORS3 : | ||||||||
Mario J. Gabelli, CFA Director and Chief Investment Officer Age: 71 | Since 1991 | 27 | Chairman, Chief Executive Officer, Chief Investment Officer–Value Portfolios 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; Chief Executive Officer of GGCP, Inc. | Director of Morgan Group Holdings, Inc. (holding company); Chairman of the Board and Chief Executive Officer of LICT Corp. (multimedia and communication services); Director of CIBL, Inc. (broadcasting and wireless communications); Director, ICTC Group, Inc. (communications); Director of RLJ Acquisition Inc. (blank check company) (2011-2012) | ||||
John D. Gabelli Director Age: 69 | Since 1991 | 10 | Senior Vice President of G.research, Inc. | — | ||||
INDEPENDENT DIRECTORS5 : | ||||||||
Anthony J. Colavita Director Age: 77 | Since 1991 | 35 | President of the law firm of Anthony J. Colavita, P.C. | — | ||||
Vincent D. Enright Director Age: 69 | Since 1991 | 17 | Former Senior Vice President and Chief Financial Officer of KeySpan Corporation (public utility) (1994-1998) | Director of Echo Therapeutics, Inc. (therapeutics and diagnostics); Director of LGL Group, Inc. (diversified manufacturing) | ||||
Robert J. Morrissey Director Age: 74 | Since 1991 | 6 | Partner in the law firm of Morrissey, Hawkins & Lynch | — | ||||
Kuni Nakamura Director Age: 45 | Since 2009 | 13 | President of Advanced Polymer, Inc. (chemical wholesale company) | — | ||||
Anthony R. Pustorino Director Age: 88 | Since 1991 | 13 | Certified Public Accountant; Professor Emeritus, Pace University | Director of LGL Group, Inc. (diversified manufacturing) (2002-2010) | ||||
Anthonie C. van Ekris Director Age: 79 | Since 1991 | 20 | Chairman of BALMAC International, Inc. (commodities and futures trading) | — | ||||
Salvatore J. Zizza Director Age: 67 | Since 2001 | 29 | Chairman (since 1978) of Zizza & Associates Corp. (financial consulting); Chairman (since 2005) of Metropolitan Paper Recycling, Inc. (recycling); Chairman (since 1999) of Harbor BioSciences, Inc. (biotechnology) | Director and Vice Chairman of Trans-Lux Corporation (business services); Director and Chairman of Harbor Diversified Inc. (pharmaceutical); Chairman of Bion Environmental Technologies (technology); Director, Chairman, and CEO of General Employment Enterprises (staffing services) (2009-2012). |
25
The Gabelli Equity Income Fund
Additional Fund Information (Continued) (Unaudited)
Name, Position(s) Address1 and Age | Term of Office and Length of Time Served2 | Principal Occupation(s) During Past Five Years | ||
OFFICERS: | ||||
Bruce N. Alpert President, Secretary, and Acting Chief Compliance Officer Age: 61 | Since 1991 Since November 2011 | Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC since 1988; Officer of all of the registered investment companies in the Gabelli/GAMCO Funds Complex; Director of Teton Advisors, Inc. 1998-2012; Chairman of Teton Advisors, Inc. 2008-2010; President of Teton Advisors, Inc. 1998-2008; Senior Vice President of GAMCO Investors, Inc. since 2008 | ||
Agnes Mullady Treasurer Age: 55 | Since 2006 | President and Chief Operating Officer of the Open-End Fund Division of Gabelli Funds, LLC since September 2010; 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 |
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 Fund’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 | “Interested person” of the Fund as defined in the 1940 Act. Messers. 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. |
4 | This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934, as amended, i.e., public companies, or other investment companies registered under the 1940 Act. |
5 | Directors who are not interested persons are considered “Independent” Directors. |
2013 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the year ended September 30, 2013, the Fund paid to shareholders ordinary income distributions (comprised of net investment income) totaling $0.64, $0.64, $0.64, and $0.64 per share for Class AAA, Class A, Class C, and Class I, respectively. For the year ended September 30, 2013, 78.56% of the ordinary income distribution qualifies for the dividends received deduction available to corporations. The Fund designates 93.62% 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 0.72% 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, 2013 which was derived from U.S. Treasury securities was 0.01%. 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 Fund did not meet this strict requirement in 2013. 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.
26
GABELLI EQUITY INCOME FUND
One Corporate Center
Rye, NY 10580-1422
Portfolio Manager Biography
Mario J. Gabelli, CFA, is Chairman and Chief Executive Officer of GAMCO Investors, Inc. that he founded in 1977 and Chief Investment Officer – Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management Inc. Mr. Gabelli is a summa cum laude graduate of Fordham University and holds an MBA degree from Columbia Business School and Honorary Doctorates from Fordham University and Roger Williams University.
Morningstar Rating™ is based on risk-adjusted returns. The Overall Morningstar Rating is derived from a weighted average of the performance figures associated with a fund’s three, five, and ten year (if applicable) Morningstar Rating metrics. For funds with at least a three year history, a Morningstar Rating is based on a risk-adjusted return measure (including the effects of sales charges, loads, and redemption fees) placing more emphasis on downward variations and rewarding consistent performance. That accounts for variations in a fund’s monthly performance. The top 10% of funds in each category receive 5 stars, the next 22.5% 4 stars, the next 35% 3 stars, the next 22.5% 2 stars, and the bottom 10% 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.) Morningstar Rating is for the AAA Share class only; other classes may have different performance characteristics. Ratings reflect relative performance. Results for certain periods were negative. © 2013 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
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.
Gabelli Equity Series Funds, Inc.
THE GABELLI EQUITY INCOME FUND
One Corporate Center
Rye, New York 10580-1422
t | 800-GABELLI (800-422-3554) |
f | 914-921-5118 |
e | info@gabelli.com |
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
Chairman and
Chief Executive Officer,
GAMCO Investors, Inc.
Anthony J. Colavita
President,
Anthony J. Colavita, P.C.
Vincent D. Enright
Former Senior Vice
President and Chief
Financial Officer,
KeySpan Corp.
John D. Gabelli
Senior Vice President,
G.research, Inc.
Robert J. Morrissey
Partner,
Morrissey, Hawkins & Lynch
Kuni Nakamura
President,
Advanced Polymer, Inc.
Anthony R. Pustorino
Certified Public Accountant,
Professor Emeritus,
Pace University
Anthonie C. van Ekris
Chairman,
BALMAC International, Inc.
Salvatore J. Zizza
Chairman,
Zizza & Associates Corp.
OFFICERS
Bruce N. Alpert
President, Secretary, and
Acting Chief Compliance
Officer
Agnes Mullady
Treasurer
DISTRIBUTOR
G.distributors, LLC
CUSTODIAN, TRANSFER
AGENT, AND DIVIDEND
DISBURSING AGENT
State Street Bank and Trust
Company
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher &
Flom LLP
This report is submitted for the general information of the shareholders of The Gabelli Equity Income Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus.
Overall Morningstar Rating | TM |
Morningstar® rated The Gabelli Equity Income Fund Class AAA Shares 4 stars overall, 3 stars for the three year period, 4 stars for the five year period, and 5 stars for the ten year period ended September 30, 2013 among 1,372, 1,372, 1,233, and 779 Large Blend funds, respectively. Morningstar RatingTM is based on risk-adjusted returns.
GAB444Q313AR
The Gabelli Focus Five Fund
Annual Report — September 30, 2013
To Our Shareholders,
For the fiscal year ended September 30, 2013, the net asset value (“NAV”) per Class I Share of The Gabelli Focus Five Fund increased 28.0% compared with an increase of 19.3% for the Standard & Poor’s (“S&P”) 500 Index. See page 2 for additional performance information.
Enclosed are the schedule of investments and financial statements as of September 30, 2013.
Performance Discussion (Unaudited)
During the fiscal year ended September 30, 2013, assets under management increased from $36.1 million to $408.5 million, a dramatic rise we attribute to the unique investment approach the Fund adopted on January 1, 2012. The Fund employed a small cap value strategy, prior to becoming a concentrated “best ideas” strategy comprised of 25-35 securities across all market capitalizations.
Despite the Fund’s strong investment performance during the fiscal year, the biggest detractor was the relatively high percentage of cash held as a result of the aforementioned inflows and a conservative methodology for allocating capital. Cash as a percentage of AUM averaged just under 20% during the fiscal year, and offset some of the better performing individual investments like Weatherford International Ltd. (4.0% of net assets as of September 30, 2013), GNC Holdings Inc. (3.0%), Inventure Foods Inc. (1.0%), and Tenneco Inc. (0.7%).
The Fund’s investment objective, seeking to provide a high level of capital appreciation, remains unchanged.
We appreciate your continuing confidence and trust.
Comparative Results
Average Annual Returns through September 30, 2013 (a)(b) (Unaudited)
1 Year(c) | 5 Year | 10 Year | Since January 1, 2012(c) | Since Inception (12/31/02) | |||||||||||||||||||||
Class AAA (GWSVX) | 27.74 | % | 10.50 | % | 9.67 | % | 25.53 | % | 9.54 | % | |||||||||||||||
S&P 500 Index | 19.34 | 10.02 | 7.57 | 20.69 | (d) | 8.40 | |||||||||||||||||||
Class A (GWSAX) | 27.76 | 10.52 | 9.72 | 25.58 | 9.57 | ||||||||||||||||||||
With sales charge (e) | 20.41 | 9.19 | 9.05 | 21.40 | 8.95 | ||||||||||||||||||||
Class C (GWSCX) | 26.80 | 9.71 | 8.88 | 24.64 | 8.78 | ||||||||||||||||||||
With contingent deferred sales charge (f) | 25.80 | 9.71 | 8.88 | 24.64 | 8.78 | ||||||||||||||||||||
Class I (GWSIX) | 28.00 | 10.82 | 9.84 | 25.89 | 9.69 |
In the current prospectuses dated January 28, 2013, the gross expense ratios for Class AAA, A, C, and I Shares are stated as 2.41%, 2.41%, 3.16%, and 2.16%, respectively, and the net expense ratios after contractual reimbursements by Gabelli Funds, LLC (the “Adviser”) in place through January 31, 2014 are 1.70%, 1.70%, 2.45%, and 1.45%, respectively. See page 9 for the expense ratios for the year ended September 30, 2013. Class AAA and Class I Shares do not have a sales charge. The maximum sales charge for Class A and C Shares is 5.75% and 1.00%, respectively. The actual expense ratios may be lower than what is stated in the prospectuses.
(a) | Returns represent past performance and do not guarantee future results. Total returns and average annual returns reflect changes in share price, 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. 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. Returns would have been lower had the Adviser not reimbursed certain expenses of the Fund. The Fund imposes a 2% redemption fee on shares sold or exchanged within seven days after the date of purchase. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The prospectus contains information about these and other matters and should be read carefully before investing. To obtain a prospectus please visit our website at www.gabelli.com. The Class AAA Share NAVs 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. The S&P 500 Index is a market capitalization weighted index of 500 large capitalization stocks commonly used to represent the U.S. equity market. Dividends are considered reinvested. You cannot invest directly in an index. |
(b) | The Fund’s fiscal year ends September 30. |
(c) | On January 1, 2012, the Fund changed its investment strategy to the current investment strategy. (d) S&P 500 Index performance is as of December 31, 2011. |
(e) | Performance results include the effect of the maximum 5.75% sales charge at the beginning of the period. |
(f) | Assuming payment of the 1% maximum contingent deferred sales charge imposed on redemptions made within one year of purchase. |
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI FOCUS FIVE FUND CLASS AAA AND THE S&P 500 INDEX (Unaudited)
* | Past performance is not predictive of future results. The performance tables and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
2
The Gabelli Focus Five Fund | ||||
Disclosure of Fund Expenses (Unaudited) | ||||
For the Six Month Period from April 1, 2013 through September 30, 2013 | 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, 2013.
Beginning Account Value 04/01/13 | Ending Account Value 09/30/13 | Annualized Expense Ratio | Expenses Paid During Period* | |||||
The Gabelli Focus Five Fund | ||||||||
Actual Fund Return | ||||||||
Class AAA | $1,000.00 | $1,064.40 | 1.48% | $7.66 | ||||
Class A | $1,000.00 | $1,064.60 | 1.48% | $7.66 | ||||
Class C | $1,000.00 | $1,061.20 | 2.23% | $11.52 | ||||
Class I | $1,000.00 | $1,065.70 | 1.23% | $6.37 | ||||
Hypothetical 5% Return | ||||||||
Class AAA | $1,000.00 | $1,017.65 | 1.48% | $7.49 | ||||
Class A | $1,000.00 | $1,017.65 | 1.48% | $7.49 | ||||
Class C | $1,000.00 | $1,013.89 | 2.23% | $11.26 | ||||
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 (183 days), 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, 2013:
The Gabelli Focus Five Fund
Long Positions | Percent | |||
U.S. Government Obligations | 19.1% | |||
Cable and Satellite | 10.8% | |||
Retail | 9.8% | |||
Health Care | 8.1% | |||
Computer Software and Services | 6.0% | |||
Energy and Utilities | 5.5% | |||
Consumer Services | 5.5% | |||
Diversified Industrial | 4.9% | |||
Food and Beverage | 4.8% | |||
Machinery | 4.8% | |||
Automotive | 4.4% | |||
Specialty Chemicals | 4.3% | |||
Financial Services | 3.9% | |||
Communications | 2.4% |
Publishing | 2.2% | |||
Entertainment | 2.1% | |||
Automotive: Parts and Accessories | 1.1% | |||
Equipment and Supplies | 0.0% | |||
Other Assets and Liabilities (Net) | 0.4% | |||
Short Positions | ||||
Call Options Written | (0.1)% | |||
Put Options Written | (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. 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 800-SEC-0330.
Proxy Voting
The Fund files Form N-PX with its complete proxy voting record for the twelve months ended June 30, no later than August 31 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 Focus Five Fund
Schedule of Investments — September 30, 2013
Shares | Cost | Market Value | ||||||||||
COMMON STOCKS — 80.6% | ||||||||||||
Automotive — 4.4% | ||||||||||||
500,000 | General Motors Co.† | $ | 15,539,042 | $ | 17,985,000 | |||||||
|
|
|
| |||||||||
Automotive: Parts and Accessories — 1.1% |
| |||||||||||
80,800 | Dana Holding Corp. | 986,548 | 1,845,472 | |||||||||
54,400 | Tenneco Inc.† | 2,069,271 | 2,747,200 | |||||||||
|
|
|
| |||||||||
3,055,819 | 4,592,672 | |||||||||||
|
|
|
| |||||||||
Cable and Satellite — 10.8% | ||||||||||||
288,900 | DIRECTV† | 16,310,964 | 17,261,775 | |||||||||
115,000 | EchoStar Corp., Cl. A† | 3,578,399 | 5,053,100 | |||||||||
290,100 | Liberty Global plc, Cl. C† | 20,484,416 | 21,882,243 | |||||||||
|
|
|
| |||||||||
40,373,779 | 44,197,118 | |||||||||||
|
|
|
| |||||||||
Communications — 2.4% | ||||||||||||
135,000 | American Tower Corp. | 9,495,094 | 10,007,550 | |||||||||
|
|
|
| |||||||||
Computer Software and Services — 6.0% |
| |||||||||||
175,000 | Blucora Inc.† | 2,596,149 | 4,021,500 | |||||||||
542,149 | Guidance Software Inc.† | 4,896,770 | 4,917,291 | |||||||||
1,367,012 | Internap Network Services Corp.† | 9,948,422 | 9,500,734 | |||||||||
849,764 | RealD Inc.† | 9,285,370 | 5,948,348 | |||||||||
|
|
|
| |||||||||
26,726,711 | 24,387,873 | |||||||||||
|
|
|
| |||||||||
Consumer Services — 5.5% | ||||||||||||
550,000 | The ADT Corp. | 22,415,369 | 22,363,000 | |||||||||
|
|
|
| |||||||||
Diversified Industrial — 4.9% | ||||||||||||
131,879 | Haynes International Inc. | 6,361,365 | 5,978,075 | |||||||||
125,705 | Tredegar Corp. | 3,088,470 | 3,268,330 | |||||||||
302,700 | Tyco International Ltd. | 9,655,929 | 10,588,446 | |||||||||
|
|
|
| |||||||||
19,105,764 | 19,834,851 | |||||||||||
|
|
|
| |||||||||
Energy and Utilities — 5.5% | ||||||||||||
190,000 | CONSOL Energy Inc. | 5,579,877 | 6,393,500 | |||||||||
1,062,100 | Weatherford International Ltd.† | 12,957,831 | 16,281,993 | |||||||||
|
|
|
| |||||||||
18,537,708 | 22,675,493 | |||||||||||
|
|
|
| |||||||||
Entertainment — 2.1% | ||||||||||||
481,540 | Take-Two Interactive Software Inc.† | 8,508,955 | 8,744,766 | |||||||||
|
|
|
| |||||||||
Equipment and Supplies — 0.0% | ||||||||||||
3,200 | Gerber Scientific Inc., Escrow† | 0 | 32 | |||||||||
|
|
|
| |||||||||
Financial Services — 3.9% | ||||||||||||
325,000 | CIT Group Inc.† | 14,018,996 | 15,850,250 | |||||||||
|
|
|
| |||||||||
Food and Beverage — 4.8% | ||||||||||||
70,000 | Boulder Brands Inc.† | 612,122 | 1,122,800 | |||||||||
304,495 | Hillshire Brands Co. | 9,831,034 | 9,360,176 | |||||||||
395,235 | Inventure Foods Inc.† | 2,547,687 | 4,149,968 | |||||||||
47,289 | The J.M. Smucker Co. | 4,740,481 | 4,967,237 | |||||||||
|
|
|
| |||||||||
17,731,324 | 19,600,181 | |||||||||||
|
|
|
|
Shares | Cost | Market Value | ||||||||||
Health Care — 8.1% | ||||||||||||
170,000 | DaVita HealthCare Partners Inc.† | $ | 9,517,864 | $ | 9,673,000 | |||||||
130,000 | Endo Health Solutions Inc.† | 3,903,912 | 5,907,200 | |||||||||
139,400 | Express Scripts Holding Co.† | 8,327,321 | 8,612,132 | |||||||||
1,014,817 | Lexicon Pharmaceuticals Inc.† | 1,983,981 | 2,405,116 | |||||||||
125,000 | Medtronic Inc. | 6,732,324 | 6,656,250 | |||||||||
|
|
|
| |||||||||
30,465,402 | 33,253,698 | |||||||||||
|
|
|
| |||||||||
Machinery — 4.8% | ||||||||||||
280,000 | Kennametal Inc. | 10,846,791 | 12,768,000 | |||||||||
239,000 | Xylem Inc. | 6,125,096 | 6,675,270 | |||||||||
|
|
|
| |||||||||
16,971,887 | 19,443,270 | |||||||||||
|
|
|
| |||||||||
Publishing — 2.2% | ||||||||||||
550,000 | News Corp., Cl. A† | 8,452,126 | 8,833,000 | |||||||||
|
|
|
| |||||||||
Retail — 9.8% | ||||||||||||
227,500 | GNC Holdings Inc., Cl. A | 7,923,200 | 12,428,325 | |||||||||
285,347 | Macy’s Inc. | 12,560,060 | 12,346,965 | |||||||||
302,202 | Outerwall Inc.† | 15,558,146 | 15,107,078 | |||||||||
|
|
|
| |||||||||
36,041,406 | 39,882,368 | |||||||||||
|
|
|
| |||||||||
Specialty Chemicals — 4.3% | ||||||||||||
600,000 | Chemtura Corp.† | 13,068,474 | 13,794,000 | |||||||||
191,384 | Huntsman Corp. | 3,752,707 | 3,944,424 | |||||||||
|
|
|
| |||||||||
16,821,181 | 17,738,424 | |||||||||||
|
|
|
| |||||||||
TOTAL COMMON STOCKS | 304,260,563 | 329,389,546 | ||||||||||
|
|
|
| |||||||||
Principal Amount | ||||||||||||
U.S. GOVERNMENT OBLIGATIONS — 19.1% |
| |||||||||||
$77,803,000 | U.S. Treasury Bills, | |||||||||||
0.010% to 0.090%††, | ||||||||||||
10/10/13 to 03/20/14(a) | 77,795,267 | 77,800,448 | ||||||||||
|
|
|
| |||||||||
TOTAL INVESTMENTS — 99.7% | $ | 382,055,830 | 407,189,994 | |||||||||
|
| |||||||||||
CALL OPTIONS WRITTEN — (0.1)% | (174,080 | ) | ||||||||||
PUT OPTIONS WRITTEN — (0.0)% | (13,750 | ) | ||||||||||
Other Assets and Liabilities (Net) — 0.4% |
| 1,464,484 | ||||||||||
|
| |||||||||||
NET ASSETS — 100.0% | $ | 408,466,648 | ||||||||||
|
|
See accompanying notes to financial statements.
5
The Gabelli Focus Five Fund
Schedule of Investments (Continued) — September 30, 2013
Number of Contracts | Expiration Date/ Exercise Price | Market Value | ||||||||||
OPTIONS CONTRACTS WRITTEN (b) — (0.1)% |
| |||||||||||
Call Options Written — (0.1)% | ||||||||||||
272 | Tenneco Inc. | Oct. 13/44 | $ | 174,080 | ||||||||
|
| |||||||||||
Put Options Written — (0.0)% | ||||||||||||
500 | National Fuel Gas Co. | Jan. 14/50 | 13,750 | |||||||||
|
| |||||||||||
TOTAL OPTIONS CONTRACTS WRITTEN |
| $ | 187,830 | |||||||||
|
|
(a) | At September 30, 2013, $11,140,000 of the principal amount was pledged as collateral for options written. |
(b) | At September 30, 2013, the Fund had entered into exchange traded Option Contracts Written with Pershing LLC. |
† | Non-income producing security. |
†† | Represents annualized yield at date of purchase. |
See accompanying notes to financial statements.
6
The Gabelli Focus Five Fund
Statement of Assets and Liabilities
September 30, 2013
Assets: | ||||
Investments, at value (cost $382,055,830) | $407,189,994 | |||
Cash | 1,779 | |||
Deposit at brokers | 927,368 | |||
Receivable for investments sold | 7,290,502 | |||
Receivable for Fund shares sold | 6,450,911 | |||
Dividends receivable | 126,314 | |||
Prepaid expenses | 34,041 | |||
|
| |||
Total Assets | 422,020,909 | |||
|
| |||
Liabilities: | ||||
Call options written (premiums received $76,961) | 174,080 | |||
Put options written (premiums received $72,025) | 13,750 | |||
Payable for investments purchased | 12,534,044 | |||
Payable for Fund shares redeemed | 285,228 | |||
Payable for investment advisory fees | 309,347 | |||
Payable for distribution fees | 92,971 | |||
Payable for accounting fees | 3,750 | |||
Other accrued expenses | 141,091 | |||
|
| |||
Total Liabilities | 13,554,261 | |||
|
| |||
Net Assets | $408,466,648 | |||
|
| |||
Net Assets Consist of: | ||||
Paid-in capital | $378,974,911 | |||
Accumulated net realized gain on investments | 4,396,417 | |||
Net unrealized appreciation on investments | 25,134,164 | |||
Net unrealized depreciation on written options | (38,844 | ) | ||
|
| |||
Net Assets | $408,466,648 | |||
|
|
Shares of Capital Stock, each at $0.001 par value: |
| |||
Class AAA: | ||||
Net Asset Value, offering, and redemption price per share ($50,274,825 ÷ 3,663,983 shares outstanding; 100,000,000 shares authorized) | $13.72 | |||
|
| |||
Class A: | ||||
Net Asset Value and redemption price per share ($192,156,714 ÷ 13,878,143 shares outstanding; 50,000,000 shares authorized) | $13.85 | |||
|
| |||
Maximum offering price per share (NAV ÷ 0.9425, based on maximum sales charge of 5.75% of the offering price) | $14.69 | |||
|
| |||
Class C: | ||||
Net Asset Value and offering price per share ($55,865,389 ÷ 4,473,358 shares outstanding; 50,000,000 shares authorized) | $12.49 | (a) | ||
|
| |||
Class I: | ||||
Net Asset Value, offering, and redemption price per share ($110,169,720 ÷ 7,905,371 shares outstanding; 50,000,000 shares authorized) | $13.94 | |||
|
|
(a) | Redemption price varies based on the length of time held. |
Statement of Operations
For the Year Ended September 30, 2013
Investment Income: | ||||
Dividends | $ | 857,719 | ||
Interest | 27,536 | |||
|
| |||
Total Investment Income | 885,255 | |||
|
| |||
Expenses: | ||||
Investment advisory fees | 1,793,203 | |||
Distribution fees - Class AAA | 76,242 | |||
Distribution fees - Class A | 218,716 | |||
Distribution fees - Class C | 229,624 | |||
Registration expenses | 108,738 | |||
Shareholder services fees | 99,128 | |||
Shareholder communications expenses | 44,450 | |||
Custodian fees | 38,940 | |||
Accounting fees | 37,500 | |||
Legal and audit fees | 32,093 | |||
Directors’ fees | 4,473 | |||
Miscellaneous expenses | 14,313 | |||
|
| |||
Total Expenses | 2,697,420 | |||
|
| |||
Plus: | ||||
Expenses recovered by the Adviser | 140,973 | |||
Less: | ||||
Custodian fee credits | (837 | ) | ||
|
| |||
Net Expenses | 2,837,556 | |||
|
| |||
Net Investment Loss | (1,952,301 | ) | ||
|
| |||
Net Realized and Unrealized Gain/(Loss) on Investments, Written Options, and Foreign Currency: | ||||
Net realized gain on investments | 6,327,190 | |||
Net realized gain on written options | 410,054 | |||
Net realized gain on foreign currency transactions | 40,184 | |||
|
| |||
Net realized gain on investments, written options, and foreign currency transactions | 6,777,428 | |||
|
| |||
Net change in unrealized appreciation/ depreciation | ||||
on investments | 23,429,780 | |||
on written options | (38,844 | ) | ||
|
| |||
Net change in unrealized appreciation/ depreciation on investments and written options | 23,390,936 | |||
|
| |||
Net Realized and Unrealized Gain/(Loss) on Investments, Written Options, and Foreign Currency | 30,168,364 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 28,216,063 | ||
|
|
See accompanying notes to financial statements.
7
The Gabelli Focus Five Fund
Statement of Changes in Net Assets
Year Ended September 30, 2013 | Year Ended September 30, 2012 | |||||||||
Operations: | ||||||||||
Net investment loss | $ | (1,952,301 | ) | $ | (134,190 | ) | ||||
Net realized gain on investments, written options, and foreign currency transactions | 6,777,428 | 1,294,797 | ||||||||
Net change in unrealized appreciation on investments and written options | 23,390,936 | 2,260,830 | ||||||||
|
|
|
| |||||||
Net Increase in Net Assets Resulting from Operations | 28,216,063 | 3,421,437 | ||||||||
|
|
|
| |||||||
Distributions to Shareholders: | ||||||||||
Net realized gain | ||||||||||
Class AAA | (419,316 | ) | (42,840 | ) | ||||||
Class A | (480,398 | ) | (2,071 | ) | ||||||
Class C | (124,218 | ) | (1,905 | ) | ||||||
Class I | (512,805 | ) | (702 | ) | ||||||
|
|
|
| |||||||
Total Distributions to Shareholders | (1,536,737 | ) | (47,518 | ) | ||||||
|
|
|
| |||||||
Capital Share Transactions: | ||||||||||
Class AAA | 33,193,251 | 4,537,223 | ||||||||
Class A | 171,356,636 | 7,210,628 | ||||||||
Class C | 51,046,361 | 1,586,991 | ||||||||
Class I | 90,128,010 | 13,734,180 | ||||||||
|
|
|
| |||||||
Net Increase in Net Assets from Capital Share Transactions. | 345,724,258 | 27,069,022 | ||||||||
|
|
|
| |||||||
Redemption Fees | 458 | 14 | ||||||||
|
|
|
| |||||||
Net Increase in Net Assets | 372,404,042 | 30,442,955 | ||||||||
Net Assets: | ||||||||||
Beginning of year | 36,062,606 | 5,619,651 | ||||||||
|
|
|
| |||||||
End of year (including undistributed net investment income of $0 and $0, respectively) | $ | 408,466,648 | $ | 36,062,606 | ||||||
|
|
|
|
See accompanying notes to financial statements.
8
The Gabelli Focus Five Fund
Financial Highlights
Selected data for a share of capital stock outstanding throughout each year:
Income (Loss) from Investment Operations | Distributions | Ratios to Average Net Assets/ Supplemental Data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended September 30 | Net Asset Value, Beginning of Period | Net Investment Loss (a)(b) | Net Realized and Unrealized Gain (Loss) on Investments | Total from Investment Operations | Net Realized Gain on Investments | Total Distributions | Redemption Fees (b)(c) | Net Asset Value, End of Period | Total Return † | Net Assets End of Period (in 000’s) | Net Investment Loss (a) | Expenses Net of Waivers/ Reimburse- ments (d) | Expenses Before Waivers/ Reimburse- ments | Portfolio Turnover Rate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class AAA |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $11.11 | $(0.14 | ) | $3.13 | $2.99 | $(0.38 | ) | $(0.38 | ) | $0.00 | $13.72 | 27.74 | % | $50,275 | (1.05 | )% | 1.54 | %(e) | 1.54 | %(e) | 69 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
2012 | 8.19 | (0.11 | ) | 3.10 | 2.99 | (0.07 | ) | (0.07 | ) | 0.00 | 11.11 | 36.71 | 11,714 | (1.09 | ) | 2.01 | 2.69 | (f) | 140 | |||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 8.92 | (0.12 | ) | (0.61 | ) | (0.73 | ) | — | — | 0.00 | 8.19 | (8.18 | ) | 5,207 | (1.21 | ) | 2.01 | 2.80 | (f) | 40 | ||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 7.90 | (0.11 | ) | 1.13 | 1.02 | — | — | — | 8.92 | 12.91 | 5,739 | (1.33 | ) | 2.01 | 3.09 | (f) | 61 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | 9.30 | (0.07 | ) | (0.92 | ) | (0.99 | ) | (0.41 | ) | (0.41 | ) | 0.00 | 7.90 | (8.99 | ) | 5,462 | (1.04 | ) | 2.01 | 3.34 | (f) | 62 | ||||||||||||||||||||||||||||||||||||||||||||||||
Class A |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $11.21 | $(0.14 | ) | $3.16 | $3.02 | $(0.38 | ) | $(0.38 | ) | $0.00 | $13.85 | 27.76 | % | $192,157 | (1.05 | )% | 1.54 | %(e) | 1.54 | %(e) | 69 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
2012 | 8.26 | (0.13 | ) | 3.15 | 3.02 | (0.07 | ) | (0.07 | ) | 0.00 | 11.21 | 36.76 | 7,574 | (1.20 | ) | 2.01 | 2.69 | (f) | 140 | |||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 8.99 | (0.12 | ) | (0.61 | ) | (0.73 | ) | — | — | 0.00 | 8.26 | (8.12 | ) | 139 | (1.21 | ) | 2.01 | 2.80 | (f) | 40 | ||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 7.96 | (0.11 | ) | 1.14 | 1.03 | — | — | — | 8.99 | 12.94 | 116 | (1.27 | ) | 2.01 | 3.09 | (f) | 61 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | 9.37 | (0.07 | ) | (0.93 | ) | (1.00 | ) | (0.41 | ) | (0.41 | ) | 0.00 | 7.96 | (9.04 | ) | 50 | (1.06 | ) | 2.01 | 3.34 | (f) | 62 | ||||||||||||||||||||||||||||||||||||||||||||||||
Class C |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $10.22 | $(0.22 | ) | $2.87 | $2.65 | $(0.38 | ) | $(0.38 | ) | $0.00 | $12.49 | 26.80 | % | $55,865 | (1.79 | )% | 2.29 | %(e) | 2.29 | %(e) | 69 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
2012 | 7.59 | (0.17 | ) | 2.87 | 2.70 | (0.07 | ) | (0.07 | ) | 0.00 | 10.22 | 35.79 | 1,913 | (1.83 | ) | 2.76 | 3.44 | (f) | 140 | |||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 8.33 | (0.18 | ) | (0.56 | ) | (0.74 | ) | — | — | 0.00 | 7.59 | (8.88 | ) | 192 | (1.96 | ) | 2.76 | 3.55 | (f) | 40 | ||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 7.43 | (0.16 | ) | 1.06 | 0.90 | — | — | — | 8.33 | 12.11 | 119 | (2.09 | ) | 2.76 | 3.84 | (f) | 61 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | 8.84 | (0.11 | ) | (0.89 | ) | (1.00 | ) | (0.41 | ) | (0.41 | ) | 0.00 | 7.43 | (9.61 | ) | 122 | (1.78 | ) | 2.76 | 4.09 | (f) | 62 | ||||||||||||||||||||||||||||||||||||||||||||||||
Class I |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 | $11.26 | $(0.11 | ) | $3.17 | $3.06 | $(0.38 | ) | $(0.38 | ) | $0.00 | $13.94 | 28.00 | % | $110,170 | (0.79 | )% | 1.29 | %(e) | 1.29 | %(e) | 69 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
2012 | 8.27 | (0.09 | ) | 3.15 | 3.06 | (0.07 | ) | (0.07 | ) | 0.00 | 11.26 | 37.21 | 14,862 | (0.84 | ) | 1.76 | 2.44 | (f) | 140 | |||||||||||||||||||||||||||||||||||||||||||||||||||
2011 | 8.98 | (0.10 | ) | (0.61 | ) | (0.71 | ) | — | — | 0.00 | 8.27 | (7.91 | ) | 82 | (0.96 | ) | 1.76 | 2.55 | (f) | 40 | ||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | 7.93 | (0.09 | ) | 1.14 | 1.05 | — | — | — | 8.98 | 13.24 | 67 | (1.09 | ) | 1.76 | 2.84 | (f) | 61 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2009 | 9.31 | (0.05 | ) | (0.92 | ) | (0.97 | ) | (0.41 | ) | (0.41 | ) | 0.00 | 7.93 | (8.76 | ) | 59 | (0.79 | ) | 1.76 | 3.09 | (f) | 62 |
† | 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. |
(a) | Due to capital share activity, net investment loss per share and the ratio to average net assets are not necessarily correlated among the different classes of shares. |
(b) | Per share amounts have been calculated using the average shares outstanding method. |
(c) | Amount represents less than $0.005 per share. |
(d) | The Fund incurred interest expense during the years ended September 30, 2011, 2010, and 2009. If interest expense had not been incurred, each year the ratios of operating expenses to average net assets would have been 2.00% (Class AAA and Class A), 2.75% (Class C), and 1.75% (Class I), respectively. For the year ended September 30, 2013, there was no interest expense, and for the year ended September 30, 2012, the effect of interest expense was minimal. |
(e) | Under an expense deferral agreement with the Adviser, the Adviser recovered from the Fund $140,973 for the year ended September 30, 2013, representing previously reimbursed expenses from the Adviser. Had such payment not been made, the expense ratio would have been 1.48% (Class AAA), 1.48% (Class A), 2.23% (Class C), and 1.23% (Class I). |
(f) | 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. |
See accompanying notes to financial statements.
9
The Gabelli Focus Five Fund
Notes to Financial Statements
1. Organization. The Gabelli Focus Five Fund is a series of Gabelli Equity Series Funds, Inc. (the “Corporation”). The Corporation was incorporated on July 25, 1991 in Maryland. 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 of the Corporation. The Fund seeks to provide a high level of capital appreciation. The Fund commenced investment operations on December 31, 2002.
2. Significant Accounting Policies. The Fund’s financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), which may require the use of management estimates and assumptions. 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. U.S. government obligations with maturities greater than sixty days are normally valued using a model that incorporates market observable data such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued principally using dealer quotations.
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 Focus Five Fund
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). |
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input both individually and in the aggregate that is significant to the fair value measurement. 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 in securities by inputs used to value the Fund’s investments as of September 30, 2013 is as follows:
Valuation Inputs | Total Market Value at 9/30/13 | |||||||||||||||||||
Level 1 Quoted Prices | Level 2 Other Significant Observable Inputs | Level 3 Significant Unobservable Inputs | ||||||||||||||||||
INVESTMENTS IN SECURITIES: | ||||||||||||||||||||
ASSETS (Market Value): | ||||||||||||||||||||
Common Stocks: | ||||||||||||||||||||
Equipment and Supplies | — | — | $ | 32 | $ | 32 | ||||||||||||||
Other Industries (a) | $ | 329,389,514 | — | — | 329,389,514 | |||||||||||||||
Total Common Stocks | 329,389,514 | — | 32 | 329,389,546 | ||||||||||||||||
U.S. Government Obligations | — | $ | 77,800,448 | — | 77,800,448 | |||||||||||||||
TOTAL INVESTMENTS IN SECURITIES – ASSETS | $ | 329,389,514 | $ | 77,800,448 | $ | 32 | $ | 407,189,994 | ||||||||||||
INVESTMENTS IN SECURITIES: | ||||||||||||||||||||
LIABILITIES (Market Value): | ||||||||||||||||||||
EQUITY CONTRACTS: | ||||||||||||||||||||
Call Options Written | $ | (174,080 | ) | — | — | $ | (174,080 | ) | ||||||||||||
Put Options Written | (13,750 | ) | — | — | (13,750 | ) | ||||||||||||||
TOTAL INVESTMENTS IN SECURITIES - LIABILITIES | $ | (187,830 | ) | — | — | $ | (187,830 | ) |
(a) | Please refer to the Schedule of Investments for the industry classifications of these portfolio holdings. |
The Fund did not have transfers between Level 1 and Level 2 during the year ended September 30, 2013. The Fund’s policy is to recognize transfers among Levels as of the beginning of the reporting period.
Additional Information to Evaluate Qualitative Information.
General. The Fund uses recognized industry pricing services – approved by the Board and unaffiliated with the Adviser – to value most of its securities, and uses broker quotes provided by market makers of securities not valued by these and other recognized pricing sources. Several different pricing feeds are received to value domestic equity securities, international equity securities, preferred equity securities, and fixed income securities. The data within these feeds is ultimately sourced from major stock exchanges and trading systems where these securities trade. The prices supplied by external sources are checked by obtaining quotations or actual transaction prices from market participants. If a price obtained from the pricing source is deemed unreliable, prices will be sought from another pricing service or from a broker/dealer that trades that security or similar securities.
11
The Gabelli Focus Five Fund
Notes to Financial Statements (Continued)
Fair Valuation. Fair valued securities may be common and preferred equities, warrants, options, rights, and fixed income obligations. Where appropriate, Level 3 securities are those for which market quotations are not available, such as securities not traded for several days, or for which current bids are not available, or which are restricted as to transfer. Among the factors to be considered to fair value a security are recent prices of comparable securities that are publicly traded, reliable prices of securities not publicly traded, the use of valuation models, current analyst reports, valuing the income or cash flow of the issuer, or cost if the preceding factors do not apply. A significant change in the unobservable inputs could result in a lower or higher value in Level 3 securities. The circumstances of Level 3 securities are frequently monitored to determine if fair valuation measures continue to apply.
The Adviser reports quarterly to the Board the results of the application of fair valuation policies and procedures. These include back testing the prices realized in subsequent trades of these fair valued securities to fair values previously recognized.
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. The Fund’s derivative contracts held at September 30, 2013, if any, are not accounted for as hedging instruments under GAAP and are disclosed in the Schedule of Investments together with the related counterparty.
Accounting Standards Update (“ASU”) No. 2011-11 “Disclosures about Offsetting Assets and Liabilities.” ASU 2011-11 requires a fund to disclose both gross information and net information about both instruments and transactions eligible for offset in the statement of assets and liabilities and instruments and transactions subject to an agreement similar to a master netting arrangement. The scope of ASU 2011-11 includes derivatives and sale and repurchase agreements. The purpose of ASU 2011-11 is to facilitate comparison of financial statements prepared on the basis of GAAP and on the basis of International Financial Reporting Standards. ASU 2011-11 is effective for financial statements whose fiscal year begins after December 31, 2012. Management is currently evaluating the impact on the additional disclosure requirements on the Fund’s financial statements.
Options. The Fund may purchase or write call or put options on securities or indices for the purpose of increasing the income of the Fund. As a writer of put options, the Fund receives a premium at the outset and then bears the risk of unfavorable changes in the price of the financial instrument underlying the option. The Fund would incur a loss if the price of the underlying financial instrument decreases between the date the
12
The Gabelli Focus Five Fund
Notes to Financial Statements (Continued)
option is written and the date on which the option is terminated. The Fund would realize a gain, to the extent of the premium, if the price of the financial instrument increases between those dates. If a written call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether there has been a realized gain or loss. If a written put option is exercised, the premium reduces the cost basis of the security. As a purchaser of put options, the Fund pays a premium for the right to sell to the seller of the put option the underlying security at a specified price. The seller of the put has the obligation to purchase the underlying security upon exercise at the exercise price. If the price of the underlying security declines, the Fund would realize a gain upon sale or exercise. If the price of the underlying security increases or stays the same, the Fund would realize a loss upon sale or at expiration date, but only to the extent of the premium paid.
In the case of call options, these exercise prices are referred to as “in-the-money,” “at-the-money,” and “out-of-the-money,” respectively. The Fund may write (a) in-the-money call options when the Adviser expects that the price of the underlying security will remain stable or decline during the option period, (b) at-the-money call options when the Adviser expects that the price of the underlying security will remain stable, decline, or advance moderately during the option period, and (c) out-of-the-money call options when the Adviser expects that the premiums received from writing the call option will be greater than the appreciation in the price of the underlying security above the exercise price. By writing a call option, the Fund limits its opportunity to profit from any increase in the market value of the underlying security above the exercise price of the option. Out-of-the-money, at-the-money, and in-the-money put options (the reverse of call options as to the relation of exercise price to market price) may be utilized in the same market environments that such call options are used in equivalent transactions. Option positions at September 30, 2013 are reflected within the Schedule of Investments.
The Fund’s volume of activity in equity options contracts during the year ended September 30, 2013 had an average monthly market value of approximately $470,414. Please refer to Note 5 for option activity during the year ended September 30, 2013.
As of September 30, 2013, the value of equity option positions can be found in the Statement of Assets and Liabilities under Liabilities, Call options written and Put options written. For the year ended September 30, 2013, the effect of equity option positions can be found in the Statement of Operations under Net Realized and Unrealized Gain/(Loss) on Investments, Written Options, and Foreign Currency, Net realized gain on written options and Net change in unrealized depreciation on written options.
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 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 purchase trade date and subsequent sale trade date is included in realized gain/(loss) on investments.
13
The Gabelli Focus Five Fund
Notes to Financial Statements (Continued)
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 inability 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.
Securities Transactions and Investment Income. Securities transactions are accounted for on the trade date with realized gain/(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 from foreign securities that are recorded as soon after the ex-dividend date as the Fund becomes aware of such dividends.
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.
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 GAAP. 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 for federal income tax purposes 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. Permanent differences were primarily due to reclassifications of short term gains against current year net operating loss. These reclassifications have no impact on the NAV of the Fund. For the year ended September 30, 2013, reclassifications were made to increase accumulated net investment income by $2,054,154 and decrease accumulated net realized gain on investments by $2,054,154.
14
The Gabelli Focus Five Fund
Notes to Financial Statements (Continued)
The tax character of distributions paid during the years ended September 30, 2013 and September 30, 2012 was as follows:
Year Ended September 30, 2013 | Year Ended September 30, 2012 | |||||||||
Distributions paid from: | ||||||||||
Ordinary income (inclusive of short term capital gains) | $ 768,368 | $35,473 | ||||||||
Net long term capital gains | 768,369 | 12,045 | ||||||||
|
|
|
| |||||||
Total distributions paid | $1,536,737 | $47,518 | ||||||||
|
|
|
|
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, 2013, the components of accumulated earnings/losses on a tax basis were as follows:
Undistributed ordinary income | $ | 3,947,292 | ||
Undistributed long term gains | 670,689 | |||
Net unrealized appreciation on investments | 24,873,756 | |||
|
| |||
Total | $ | 29,491,737 | ||
|
|
At September 30, 2013, the temporary difference between book basis and tax basis net unrealized appreciation/depreciation on investments was due to deferral of losses from wash sales for tax purposes.
The following summarizes the tax cost of investments, written options, and the related net unrealized appreciation/depreciation at September 30, 2013:
Cost/ Premiums | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation/ Depreciation | |||||||||||||||||
Investments | $ | 382,277,394 | $ | 30,565,631 | $ | (5,653,031 | ) | $ | 24,912,600 | |||||||||||
Written options | (148,986 | ) | 58,275 | (97,119 | ) | (38,844 | ) | |||||||||||||
|
|
|
|
|
| |||||||||||||||
$ | 30,623,906 | $ | (5,750,150 | ) | $ | 24,873,756 | ||||||||||||||
|
|
|
|
|
|
The Fund is required to evaluate tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Income tax and related interest and penalties would be recognized by the Fund as tax expense in the Statement of Operations if the tax positions were deemed not to meet the more-likely-than-not threshold. As of September 30, 2013, the Adviser has reviewed all open tax years and concluded that there was no impact to the Fund’s net assets or results of operations. Tax years ended September 30, 2010 through September 30, 2013 remain subject to examination by the Internal Revenue Service and state taxing authorities. On an ongoing basis, the Adviser will monitor the Fund’s tax positions to determine if adjustments to this conclusion are necessary.
3. Investment Advisory Agreement and Other Transactions. The Fund has entered into an investment advisory agreement (the “Advisory Agreement”) with the Adviser which provides that the Fund will pay the Adviser a fee, computed daily and paid monthly, at the annual rate of 1.00% of the value of its average daily
15
The Gabelli Focus Five Fund
Notes to Financial Statements (Continued)
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 investment advisory fees and/or reimburse expenses of the Fund to the extent necessary to maintain the annualized total operating expenses of the Fund (excluding of brokerage, acquired fund fees and expenses, interest, taxes, and extraordinary expenses) at 1.70%, 1.70%, 2.45%, and 1.45%, respectively, of Class AAA, Class A, Class C, and Class I Shares’ average daily net assets through January 31, 2014. 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, after giving effect to the reimbursement, would not exceed the foregoing limitations. During the year ended September 30, 2013, the Adviser recovered $140,973 representing the balance of previously reimbursed expenses.
The Corporation pays each Director who is not considered an affiliated person an annual retainer of $18,000 plus $2,000 for each Board meeting attended, and they are reimbursed for any out of pocket expenses incurred in attending meetings. All Board committee members receive $1,000 per meeting attended. The Chairman of the Audit Committee receives a $3,000 annual fee, and the Lead Director receives an annual fee of $2,000. A Director may receive a single meeting fee, allocated among the participating funds, for attending 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. Under the Class AAA, Class A, and Class C Share Plans, payments are authorized to G.distributors, LLC (the “Distributor”), an affiliate of the Fund, at annual rates of 0.25%, 0.25%, 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 during the year ended September 30, 2013, other than short term securities and U.S. Government obligations, aggregated $371,285,631 and $101,746,083, respectively.
Written options activity for the Fund for the year ended September 30, 2013 was as follows:
Number of Contracts | Premiums | |||||||||
Options outstanding at September 30, 2012 | 0 | $ | 0 | |||||||
Options written | 13,099 | 1,671,948 | ||||||||
Options closed | (3,257 | ) | (438,098 | ) | ||||||
Options expired | (6,862 | ) | (725,972 | ) | ||||||
Options exercised | (2,208 | ) | (358,892 | ) | ||||||
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|
|
| |||||||
Options outstanding at September 30, 2013 | 772 | $ | 148,986 | |||||||
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|
|
|
6. Transactions with Affiliates. During the year ended September 30, 2013, the Distributor retained a total of $198,620 from investors representing commissions (sales charges and underwriting fees) on sales and redemptions of Fund shares.
16
The Gabelli Focus Five Fund
Notes to Financial Statements (Continued)
The cost of calculating the Fund’s NAV per share is a Fund expense pursuant to the Advisory Agreement. During the year ended September 30, 2013, the Fund paid or accrued $37,500 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 rate 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, 2013, there were no borrowings under the line of credit.
8. Capital Stock Transactions. The Fund offers four classes of shares–Class AAA Shares, Class A 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 the Distributor, through selected broker/dealers, or the transfer agent. Class I Shares are offered without a sales charge, directly through the Distributor or brokers that have entered into selling agreements specifically with respect to Class I Shares. Class A Shares are subject to a maximum front-end sales charge of 5.75%. Class C Shares are subject to a 1.00% contingent deferred sales charge for one year after purchase.
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 as an increase in paid-in capital. The redemption fees retained by the Fund during the years ended September 30, 2013 and September 30, 2012 amounted to $458 and $14, respectively.
17
The Gabelli Focus Five Fund
Notes to Financial Statements (Continued)
Transactions in shares of capital stock were as follows:
Year Ended September 30, 2013 | Year Ended September 30, 2012 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class AAA | ||||||||||||||||
Shares sold | 3,555,515 | $ | 45,598,904 | 675,204 | $ | 7,074,187 | ||||||||||
Shares issued upon reinvestment of distributions | 36,030 | 398,495 | 4,401 | 39,124 | ||||||||||||
Shares redeemed | (981,549 | ) | (12,804,148 | ) | (261,417 | ) | (2,576,088 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase | 2,609,996 | $ | 33,193,251 | 418,188 | $ | 4,537,223 | ||||||||||
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| |||||||||
Class A | ||||||||||||||||
Shares sold | 14,002,932 | $ | 182,128,658 | 682,064 | $ | 7,454,632 | ||||||||||
Shares issued upon reinvestment of distributions | 41,652 | 464,833 | 201 | 1,797 | ||||||||||||
Shares redeemed | (841,890 | ) | (11,236,855 | ) | (23,610 | ) | (245,801 | ) | ||||||||
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|
|
|
|
|
|
| |||||||||
Net increase | 13,202,694 | $ | 171,356,636 | 658,655 | $ | 7,210,628 | ||||||||||
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|
|
| |||||||||
Class C | ||||||||||||||||
Shares sold | 4,391,247 | $ | 52,325,064 | 182,113 | $ | 1,777,069 | ||||||||||
Shares issued upon reinvestment of distributions | 11,250 | 113,960 | 125 | 1,035 | ||||||||||||
Shares redeemed | (116,286 | ) | (1,392,663 | ) | (20,340 | ) | (191,113 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase | 4,286,211 | $ | 51,046,361 | 161,898 | $ | 1,586,991 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class I | ||||||||||||||||
Shares sold | 7,175,192 | $ | 98,356,000 | 1,327,355 | $ | 13,915,179 | ||||||||||
Shares issued upon reinvestment of distributions | 45,742 | 512,762 | 77 | 694 | ||||||||||||
Shares redeemed | (635,776 | ) | (8,740,752 | ) | (17,163 | ) | (181,693 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase | 6,585,158 | $ | 90,128,010 | 1,310,269 | $ | 13,734,180 | ||||||||||
|
|
|
|
|
|
|
|
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. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.
10. Other Matters. On April 24, 2008, the Adviser entered into a settlement with the SEC to resolve an inquiry regarding prior frequent trading 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. Under the terms of the settlement, the Adviser, without admitting or denying the SEC’s findings and allegations, paid $16 million (which included a $5 million civil monetary penalty). On the same day, the SEC filed a civil action in the U.S. District Court for the Southern District of New York 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, who also is an officer of the Global Growth Fund and other funds in the Gabelli/GAMCO complex, including this Fund, denies the allegations and is continuing in his positions with the Adviser and the funds. The settlement by the Adviser did not have, and the resolution of the action against the officer is not expected to have, a material adverse impact on the Adviser or its ability to fulfill its obligations under the Advisory Agreement.
11. Subsequent Events. Effective November 20, 2013, Ms. Elizabeth Lilly and Ms. Sarah Donnelly resigned as Portfolio Managers of the Fund. Mr. Daniel Miller continues to serve as Portfolio Manager of the Fund. Mr. Miller has served as Portfolio Manager of the Fund since January 1, 2012.
18
The Gabelli Focus Five Fund
Notes to Financial Statements (Continued)
Management has evaluated the impact on the Fund of all other subsequent events occurring through the date the financial statements were issued and has determined that there were no additional subsequent events requiring recognition or disclosure in the financial statements.
19
The Gabelli Focus Five Fund
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
The Gabelli Focus Five Fund
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of The Gabelli Focus Five Fund (the “Fund”), a series of Gabelli Equity Series Funds, Inc., as of September 30, 2013, 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 five years in the period then ended. 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, 2013, 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 Focus Five Fund, a series of Gabelli Equity Series Funds, Inc., at September 30, 2013, 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 five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York
November 25, 2013
20
The Gabelli Focus Five Fund
Additional Fund Information
The business and affairs of the Corporation 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 Focus Five Fund at One Corporate Center, Rye, NY 10580-1422.
Name, Position(s) Address1 and Age | Term of Office and Length of Time Served2 | Number of Funds in Fund Complex Overseen by Director | Principal Occupation(s) During Past Five Years | Other Directorships Held by Director4 | ||||
INTERESTED DIRECTORS3 : | ||||||||
Mario J. Gabelli, CFA Director and Chief Investment Officer Age: 71 | Since 1991 | 27 | Chairman, Chief Executive Officer, Chief Investment Officer–Value Portfolios 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; Chief Executive Officer of GGCP, Inc. | Director of Morgan Group Holdings, Inc. (holding company); Chairman of the Board and Chief Executive Officer of LICT Corp. (multimedia and communication services); Director of CIBL, Inc. (broadcasting and wireless communications); Director, ICTC Group, Inc., (communications); Director of RLJ Acquisition Inc. (blank check company)(2011-2012) | ||||
John Gabelli Director Age: 69 | Since 1991 | 10 | Senior Vice President of G.research, Inc. | — | ||||
INDEPENDENT DIRECTORS5 : | ||||||||
Anthony J. Colavita Director Age: 77 | Since 1991 | 35 | President of the law firm of Anthony J. Colavita, P.C. | — | ||||
Vincent D. Enright Director Age: 69 | Since 1991 | 17 | Former Senior Vice President and Chief Financial Officer of KeySpan Corporation (public utility) (1994-1998) | Director of Echo Therapeutics, Inc. (therapeutics and diagnostics); Director of LGL Group, Inc. (diversified manufacturing) | ||||
Robert J. Morrissey Director Age: 74 | Since 1991 | 6 | Partner in the law firm of Morrissey, Hawkins & Lynch | — | ||||
Kuni Nakamura Director Age: 45 | Since 2009 | 13 | President of Advanced Polymer, Inc. (chemical wholesale company) | — | ||||
Anthony R. Pustorino Director Age: 88 | Since 1991 | 13 | Certified Public Accountant; Professor Emeritus, Pace University | Director of LGL Group, Inc. (diversified manufacturing) (2002-2010) | ||||
Anthonie C. van Ekris Director Age: 79 | Since 1991 | 20 | Chairman of BALMAC International, Inc. (commodities and futures trading) | — | ||||
Salvatore J. Zizza Director Age: 67 | Since 2001 | 29 | Chairman (since 1978) of Zizza & Associates Corp. (financial consulting); Chairman (since 2005) of Metropolitan Paper Recycling, Inc. (recycling); Chairman (since 1999) of Harbor BioSciences, Inc. (biotechnology) | Director and Vice Chairman of Trans-Lux Corporation (business services); Director and Chairman of Harbor Diversified Inc. (pharmaceuticals); Chairman of Bion Environmental Technologies (technology); Director, Chairman, and CEO of General Employment Enterprises (staffing services) (2009-2012). |
21
The Gabelli Focus Five Fund
Additional Fund Information (Continued)
Name, Position(s) Address1 and Age | Term of Office and Length of Time Served2 | Principal Occupation(s) During Past Five Years | ||
OFFICERS: | ||||
Bruce N. Alpert President, Secretary, and Acting Chief Compliance Officer Age: 61 | Since 1991 Since November 2011 | Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC since 1988; Officer of all of the registered investment companies in the Gabelli/GAMCO Funds Complex; Director of Teton Advisors, Inc. 1998-2012; Chairman of Teton Advisors, Inc. 2008-2010; President of Teton Advisors, Inc. 1998-2008; Senior Vice President of GAMCO Investors, Inc. since 2008 | ||
Agnes Mullady Treasurer Age: 55 | Since 2006 | President and Chief Operating Officer of the Open-End Fund Division of Gabelli Funds, LLC since September 2010; 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 |
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 Fund’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 | “Interested person” of the Fund as defined in the 1940 Act. 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. |
4 | This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934, as amended, i.e., public companies, or other investment companies registered under the 1940 Act. |
5 | Directors who are not interested persons are considered “Independent” Directors. |
2013 TAX NOTICE TO SHAREHOLDERS
For the year ended September 30, 2013, ordinary income distributions (comprised of short term capital gains) totaling $0.19 for each class, and long term capital gains totaling $768,369, or the maximum allowable. The distribution of long term capital gains has been designated as a capital gain dividend by the Fund’s Board of Directors. For the year ended September 30, 2013, 12.57% of the ordinary income distribution qualifies for the dividends received deduction available to corporations. The Fund designates 12.47% 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.
22
THE GABELLI FOCUS FIVE FUND
One Corporate Center
Rye, NY 10580-1422
Portfolio Manager Biography
Daniel M. Miller has been the portfolio manager of the Gabelli Focus Five Fund since inception of the investment strategy on January 1, 2012. He is also a Managing Director of GAMCO and Chairman of Gabelli & Company, the firm’s institutional research business. Mr. Miller served as Head of Institutional Equities at Gabelli & Company from 2004 - 2011, where he oversaw a significant expansion of the brokerage business. His responsibilities included managing the firm’s daily research meetings, the institutional sales and trading teams, and seven industry conferences. Mr. Miller graduated magna cum laude with a degree in finance from the University of Miami in Coral Gables, FL.
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.
Gabelli Equity Series Funds, Inc.
THE GABELLI FOCUS FIVE FUND
One Corporate Center
Rye, New York 10580-1422
t | 800-GABELLI (800-422-3554) |
f | 914-921-5118 |
e | info@gabelli.com |
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
Chairman and
Chief Executive Officer,
GAMCO Investors, Inc.
Anthony J. Colavita
President,
Anthony J. Colavita, P.C.
Vincent D. Enright
Former Senior Vice
President and Chief
Financial Officer,
KeySpan Corp.
John D. Gabelli
Senior Vice President,
G.research, Inc.
Robert J. Morrissey
Partner,
Morrissey, Hawkins & Lynch
Kuni Nakamura
President,
Advanced Polymer, Inc.
Anthony R. Pustorino
Certified Public Accountant,
Professor Emeritus,
Pace University
Anthonie C. van Ekris
Chairman,
BALMAC International, Inc.
Salvatore J. Zizza
Chairman,
Zizza & Associates Corp.
OFFICERS
Bruce N. Alpert
President, Secretary, and
Acting Chief Compliance
Officer
Agnes Mullady
Treasurer
DISTRIBUTOR
G.distributors, LLC
CUSTODIAN, TRANSFER
AGENT, AND DIVIDEND
DISBURSING AGENT
State Street Bank and Trust
Company
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher &
Flom LLP
This report is submitted for the general information of the shareholders of The Gabelli Focus Five Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus.
GAB840Q313AR
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 $77,300 in 2012 and $80,100 in 2013. |
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 2012 and $0 in 2013. |
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 $9,600 in 2012 and $10,200 in 2013. 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 2012 and $0 in 2013. |
(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 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 $38,700 in 2012 and $40,320 in 2013. |
(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. |
(12.other) Not applicable.
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
Bruce N. Alpert, Principal Executive Officer
Date 11/26/2013
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
Bruce N. Alpert, Principal Executive Officer
Date 11/26/2013
By (Signature and Title)* /s/ Agnes Mullady
Agnes Mullady, Principal Financial Officer and Treasurer
Date 11/26/2013
* Print the name and title of each signing officer under his or her signature.