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, 2020
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, 450 Fifth Street, NW, Washington, DC 20549-0609. 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 Equity Income Fund
Annual Report — September 30, 2020
To Our Shareholders,
For the fiscal year ended September 30, 2020, the net asset value (NAV) total return per Class AAA Share of The Gabelli Equity Income Fund was 0.9% compared with a total return 15.2% for the Standard & Poor’s (S&P) 500 Index. Other classes of shares are available. See page 3 for performance information for all classes.
Enclosed are the financial statements, including the schedule of investments, as of September 30, 2020.
Performance Discussion (Unaudited)
The Fund will seek to achieve its investment objective through a combination of capital appreciation and current income by investing, under normal market conditions, at least 80% of its net assets in income producing equity securities. Income producing equity securities include, for example, common stock, preferred stock, and convertible securities.
While change is constant, the fundamental underpinnings of common stock value investing remain unchanged. Our stock selection process is based on the investment principles first articulated in 1934 by the fathers of security analysis, Benjamin Graham and David Dodd. Their work provided the framework for value investing. Our Firm contributed to the academic and empirical research on value investing by introducing the concept of Private Market Value (PMV) with a Catalyst. This is our proprietary research methodology that focuses on individual stock selection by identifying stocks of firms selling at a discount to intrinsic value per share with a reasonable probability of realizing their PMVs. We define PMV as the price a strategic acquirer would likely be willing to pay for the entire enterprise. Catalysts are specific events or circumstances with varying time horizons that can trigger a narrowing of the difference between the market price of a stock and its estimated PMV per share. Price appreciation can occur instantly, as in the case in an announced takeover, or more gradually over time. There are a variety of catalysts that can cause change. Some general categories include: company specific, industry, regulatory, demographic, political, and economic. We continue to find good value in many companies that have some combination of long term growth prospects, strong cash flow generation, good balance sheets as well as shareholder friendly management teams. We thank you for your investment in the Fund and we look forward to serving you in the future.
The first quarter of 2020 was one of the worst in stock market history, with the novel coronavirus that causes COVID-19 spreading rapidly around the globe, and societies everywhere responding with various forms of “social distancing”, culminating with most of the global economy being effectively shut down. First and foremost, our thoughts are with all those personally impacted by the virus, with either themselves or a loved one being afflicted, as well as those unemployed or furloughed as a result of business shutdowns. We applaud the heroic efforts of all of our health care workers, as well as those employed in other essential businesses, keeping our grocery shelves stocked, our public transportation running, and our waste collected.
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s website (https://gabelli.com/), and you will be notified by mail each time a report is posted and provided with a website link to access the report. If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. To elect to receive all future reports on paper free of charge, please contact your financial intermediary, or, if you invest directly with the Fund, you may call 800-422-3554 or send an email request to info@gabelli.com
The cost of closures and social distancing was considerable, as the global economy nearly ground to a halt. In order to stabilize markets and the economy, the Fed slashed rates near zero, and bought securities in a number of asset classes – treasuries, mortgaged backed securities, asset backed securities, corporate credit, and loans backed by the Small Business Administration.
While this recession was especially painful due to its quickness and severity, we are reminded that bear markets, like recessions, are necessary to the capitalist system, cleansing its excesses. Over the four decade plus history of our Firm, there have been five bear markets ranging in length from three to thirty months. We had been anticipating a correction for some time, though the trigger for and pace of the decline – one of the most rapid in history – took us by surprise. The market quickly bounced into technical “bull market” status from its lows.
We continue to emphasize the basics: does a company’s business model remain sound? Does it have a strong enough balance sheet to withstand the short term pain? Is management focused on shareholder value? The situation changes daily, but we believe the best way to participate in the return of health and prosperity is to own a portfolio of excellent businesses.
Among our better performing stocks for the fiscal year were Swedish Match AB (6.9% of net assets as of September 30, 2020), Deere & Co. (2.8%), and Newmont Corp. (1.8%). Swedish Match AB produces tobacco products including snus and snuff, chewing tobacco, cigars, and lights. The company has benefited from the growth of the smokeless tobacco market in both Scandinavia and the U.S., as public smoking bans and health concerns are driving consumers to seek alternative tobacco products to cigarettes. Deere & Co. headquartered in Moline, Illinois, is a leading global manufacturer of machinery for agricultural, construction, and forestry usage. Newmont Corporation based in Denver, Colorado, is the largest gold mining company in the world, and was founded in 1921 and publicly traded since 1925.
A few of our weaker performers were Wells Fargo & Co. (0.6%), Royal Dutch Shell plc (0.1%), and PNC Financial Services Group Inc. (1.8%). Wells Fargo, the national banking company, increased its customer remediation accruals and restructuring charges, and saw revenue decline by 13% in its third quarter. Royal Dutch Shell suffered a negative impact on LNG margins resulting from pricing linked to oil. PNC Financial Services Group Inc. is one of the nation’s largest diversified financial services organizations, but increased net income and revenue were not enough to please investors.
We appreciate your confidence and trust.
2
Comparative Results
Average Annual Returns through September 30, 2020 (a)(b) (Unaudited) | Since | |||||||||||||||||||||||||||||
Inception | ||||||||||||||||||||||||||||||
1 Year | 5 Year | 10 Year | 15 Year | (01/02/92) | ||||||||||||||||||||||||||
Class AAA (GABEX) | 0.93 | % | 6.21 | % | 8.14 | % | 6.37 | % | 9.15 | % | ||||||||||||||||||||
S&P 500 Index | 15.15 | 14.15 | 13.74 | 9.19 | 9.73 | (c) | ||||||||||||||||||||||||
Lipper Equity Income Fund Average | (1.21 | ) | 8.94 | 9.93 | 6.72 | 8.14 | ||||||||||||||||||||||||
Class A (GCAEX) | 0.95 | 6.21 | 8.14 | 6.38 | 9.14 | |||||||||||||||||||||||||
With sales charge (d) | (4.86 | ) | 4.96 | 7.50 | 5.96 | 8.92 | ||||||||||||||||||||||||
Class C (GCCEX) | 0.27 | 5.44 | 7.34 | 5.59 | 8.68 | |||||||||||||||||||||||||
With contingent deferred sales charge (e) | (0.73 | ) | 5.44 | 7.34 | 5.59 | 8.68 | ||||||||||||||||||||||||
Class I (GCIEX) | 1.14 | 6.47 | 8.40 | 6.60 | 9.27 | |||||||||||||||||||||||||
In the current prospectuses dated January 28, 2020, the expense ratios for Class AAA, A, C, and I Shares are 1.46%, 1.46%, 2.21%, and 1.21%, respectively. See page 12 for the expense ratios for the fiscal year ended September 30, 2020. Class AAA and Class I Shares do not have a sales charge. The maximum sales charge for Class A Shares and Class 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 of purchase. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The prospectuses contain 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 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 Lipper Equity Income Fund Average includes the 30 largest equity funds in this category tracked by Lipper, Inc. Dividends are considered reinvested. You cannot invest directly in an index. (b) The Fund’s fiscal year ends September 30. (c) S&P 500 Index since inception performance figure is as of December 31, 1991. (d) Performance results include the effect of the maximum 5.75% sales charge at the beginning of the period. (e) 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 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. |
3
The Gabelli Equity Income Fund
Disclosure of Fund Expenses (Unaudited)
For the Six Month Period from April 1, 2020 through September 30, 2020 | 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 fiscal year ended September 30, 2020.
Beginning Account Value 04/01/20 | Ending Account Value 09/30/20 | Annualized Expense Ratio | Expenses Paid During Period* | |||||||||||||||||
The Gabelli Equity Income Fund |
| |||||||||||||||||||
Actual Fund Return | ||||||||||||||||||||
Class AAA | $ | 1,000.00 | $ | 1,257.10 | 1.42 | % | $ | 8.01 | ||||||||||||
Class A | $ | 1,000.00 | $ | 1,257.60 | 1.42 | % | $ | 8.01 | ||||||||||||
Class C | $ | 1,000.00 | $ | 1,254.50 | 2.16 | % | $ | 12.17 | ||||||||||||
Class I | $ | 1,000.00 | $ | 1,258.50 | 1.16 | % | $ | 6.55 | ||||||||||||
Hypothetical 5% Return |
| |||||||||||||||||||
Class AAA | $ | 1,000.00 | $ | 1,017.90 | 1.42 | % | $ | 7.16 | ||||||||||||
Class A | $ | 1,000.00 | $ | 1,017.90 | 1.42 | % | $ | 7.16 | ||||||||||||
Class C | $ | 1,000.00 | $ | 1,014.20 | 2.16 | % | $ | 10.88 | ||||||||||||
Class I | $ | 1,000.00 | $ | 1,019.20 | 1.16 | % | $ | 5.86 |
* | 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 366. |
4
Summary of Portfolio Holdings (Unaudited)
The following table presents portfolio holdings as a percent of net assets as of September 30, 2020:
The Gabelli Equity Income Fund
Food and Beverage | 20.2 | % | ||
Financial Services | 13.2 | % | ||
Consumer Products | 8.8 | % | ||
Health Care | 5.1 | % | ||
Telecommunications | 5.0 | % | ||
Business Services | 4.9 | % | ||
Retail | 4.5 | % | ||
Diversified Industrial | 4.3 | % | ||
Automotive: Parts and Accessories | 4.1 | % | ||
Equipment and Supplies | 3.9 | % | ||
Machinery | 3.3 | % | ||
Metals and Mining | 2.1 | % | ||
Electronics | 2.0 | % | ||
Entertainment | 2.0 | % | ||
Computer Software and Services | 1.9 | % | ||
Building and Construction | 1.8 | % | ||
Computer Hardware | 1.7 | % | ||
Energy and Utilities: Oil | 1.7 | % | ||
Energy and Utilities: Natural Gas | 1.5 | % | ||
Transportation | 1.4 | % | ||
Wireless Communications | 1.3 | % |
Automotive | 1.2 | % | ||
Aerospace | 1.1 | % | ||
Specialty Chemicals | 1.0 | % | ||
Cable and Satellite | 0.9 | % | ||
Real Estate | 0.8 | % | ||
Energy and Utilities: Integrated | 0.7 | % | ||
Agriculture | 0.6 | % | ||
Energy and Utilities: Services | 0.4 | % | ||
Energy and Utilities: Electric | 0.4 | % | ||
Communications Equipment | 0.3 | % | ||
Environmental Services | 0.3 | % | ||
Broadcasting | 0.2 | % | ||
Consumer Services | 0.2 | % | ||
Energy and Utilities: Water | 0.2 | % | ||
Hotels and Gaming | 0.1 | % | ||
Paper and Forest Products | 0.1 | % | ||
Publishing | 0.0 | %* | ||
Other Assets and Liabilities (Net) | (3.2 | )% | ||
|
| |||
100.0 | % | |||
|
|
* | Amount represents less than 0.05%. |
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-PORT. 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-PORT 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.
5
The Gabelli Equity Income Fund
Schedule of Investments — September 30, 2020
Shares | Cost | Market Value | ||||||||||
COMMON STOCKS — 103.2% |
| |||||||||||
Aerospace — 1.1% |
| |||||||||||
55,000 | Aerojet Rocketdyne Holdings Inc.† | $ | 287,378 | $ | 2,193,950 | |||||||
2,000 | Lockheed Martin Corp. | 47,350 | 766,560 | |||||||||
11,500 | Raytheon Technologies Corp. | 677,634 | 661,710 | |||||||||
9,500 | Rockwell Automation Inc. | 285,402 | 2,096,460 | |||||||||
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1,297,764 | 5,718,680 | |||||||||||
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Agriculture — 0.6% |
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60,000 | Archer-Daniels-Midland Co. | 1,545,955 | 2,789,400 | |||||||||
12,000 | The Mosaic Co. | 186,246 | 219,240 | |||||||||
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1,732,201 | 3,008,640 | |||||||||||
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Automotive — 1.2% |
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125,000 | Navistar International Corp.† | 2,322,530 | 5,442,500 | |||||||||
11,000 | PACCAR Inc. | 434,258 | 938,080 | |||||||||
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|
|
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2,756,788 | 6,380,580 | |||||||||||
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Automotive: Parts and Accessories — 4.1% |
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76,000 | Dana Inc. | 1,193,901 | 936,320 | |||||||||
217,000 | Genuine Parts Co.(a) | 9,105,787 | 20,651,890 | |||||||||
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10,299,688 | 21,588,210 | |||||||||||
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Broadcasting — 0.2% |
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38,000 | Liberty Global plc, Cl. A† | 841,273 | 798,380 | |||||||||
10,000 | Liberty Global plc, Cl. C† | 216,949 | 205,350 | |||||||||
34,500 | MSG Networks Inc., Cl. A† | 128,602 | 330,165 | |||||||||
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1,186,824 | 1,333,895 | |||||||||||
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Building and Construction — 1.8% |
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30,000 | Carrier Global Corp. | 254,819 | 916,200 | |||||||||
59,000 | Fortune Brands Home & |
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Security Inc. | 597,191 | 5,104,680 | ||||||||||
43,000 | Herc Holdings Inc.† | 1,371,812 | 1,703,230 | |||||||||
50,000 | Johnson Controls |
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International plc | 879,939 | 2,042,500 | ||||||||||
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3,103,761 | 9,766,610 | |||||||||||
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Business Services — 4.9% |
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16,500 | Automatic Data Processing Inc. | 626,536 | 2,301,585 | |||||||||
40,700 | Mastercard Inc., Cl. A(a) | 288,788 | 13,763,519 | |||||||||
2,400 | MSC Industrial Direct Co. Inc., Cl. A | 165,490 | 151,872 | |||||||||
32,000 | Pentair plc | 622,795 | 1,464,640 | |||||||||
22,500 | S&P Global Inc. | 939,590 | 8,113,500 | |||||||||
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2,643,199 | 25,795,116 | |||||||||||
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Cable and Satellite — 0.9% |
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6,000 | AMC Networks Inc., Cl. A† | 182,851 | 148,260 | |||||||||
138,000 | DISH Network Corp., Cl. A† | 2,544,807 | 4,006,140 | |||||||||
16,000 | EchoStar Corp., Cl. A† | 389,202 | 398,240 | |||||||||
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3,116,860 | 4,552,640 | |||||||||||
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Shares | Cost | Market Value | ||||||||||
Communications Equipment — 0.3% |
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44,000 | Corning Inc. | $ | 504,755 | $ | 1,426,040 | |||||||
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Computer Hardware — 1.7% |
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51,500 | Apple Inc. | 942,969 | 5,964,215 | |||||||||
24,000 | International Business |
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Machines Corp. | 1,918,125 | 2,920,080 | ||||||||||
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2,861,094 | 8,884,295 | |||||||||||
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Computer Software and Services — 1.9% |
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100,000 | Hewlett Packard Enterprise Co. | 577,778 | 937,000 | |||||||||
43,000 | Microsoft Corp. | 1,201,420 | 9,044,190 | |||||||||
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1,779,198 | 9,981,190 | |||||||||||
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Consumer Products — 8.8% |
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14,000 | Altria Group Inc. | 141,517 | 540,960 | |||||||||
11,000 | Edgewell Personal Care Co.† | 358,158 | 306,680 | |||||||||
53,000 | Energizer Holdings Inc. | 1,441,783 | 2,074,420 | |||||||||
30,000 | Essity AB, Cl. A† | 529,907 | 1,030,053 | |||||||||
1,500 | National Presto Industries Inc. | 45,698 | 122,790 | |||||||||
35,000 | Reckitt Benckiser Group plc | 1,038,729 | 3,414,282 | |||||||||
443,000 | Swedish Match AB | 5,166,671 | 36,247,860 | |||||||||
42,000 | Unilever NV | 838,099 | 2,536,800 | |||||||||
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9,560,562 | 46,273,845 | |||||||||||
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Consumer Services — 0.2% |
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1,600 | Allegion plc | 19,252 | 158,256 | |||||||||
21,000 | Rollins Inc. | 31,319 | 1,137,990 | |||||||||
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50,571 | 1,296,246 | |||||||||||
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Diversified Industrial — 4.3% |
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80,000 | Crane Co. | 2,475,345 | 4,010,400 | |||||||||
38,000 | Eaton Corp. plc | 1,404,455 | 3,877,140 | |||||||||
2,700 | Honeywell International Inc. | 57,888 | 444,447 | |||||||||
8,824 | Ingersoll Rand Inc.† | 46,675 | 314,134 | |||||||||
48,000 | ITT Inc. | 961,318 | 2,834,400 | |||||||||
33,000 | Jardine Matheson Holdings Ltd. | 1,611,232 | 1,309,440 | |||||||||
148,000 | Jardine Strategic Holdings Ltd. | 3,394,976 | 2,931,880 | |||||||||
24,000 | nVent Electric plc | 242,295 | 424,560 | |||||||||
116,000 | Textron Inc. | 735,799 | 4,186,440 | |||||||||
162,000 | Toray Industries Inc. | 1,084,606 | 736,231 | |||||||||
10,000 | Trane Technologies plc | 160,959 | 1,212,500 | |||||||||
25,000 | Trinity Industries Inc. | 324,983 | 487,500 | |||||||||
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12,500,531 | 22,769,072 | |||||||||||
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Electronics — 2.0% |
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15,500 | Sony Corp. | 360,409 | 1,180,448 | |||||||||
42,000 | Sony Corp., ADR | 985,416 | 3,223,500 | |||||||||
51,000 | TE Connectivity Ltd. | 1,676,574 | 4,984,740 | |||||||||
10,000 | Texas Instruments Inc. | 147,000 | 1,427,900 | |||||||||
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3,169,399 | 10,816,588 | |||||||||||
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Energy and Utilities: Electric — 0.4% |
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6,000 | Avangrid Inc. | 140,662 | 302,760 |
See accompanying notes to financial statements.
6
The Gabelli Equity Income Fund
Schedule of Investments (Continued) — September 30, 2020
Shares | Cost | Market Value | ||||||||||
COMMON STOCKS (Continued) |
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Energy and Utilities: Electric (Continued) |
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26,000 | Korea Electric Power Corp., ADR† | $ | 315,395 | $ | 226,460 | |||||||
76,000 | The AES Corp. | 360,728 | 1,376,360 | |||||||||
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816,785 | 1,905,580 | |||||||||||
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Energy and Utilities: Integrated — 0.7% |
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50,000 | Energy Transfer LP | 82,174 | 271,000 | |||||||||
24,000 | Eni SpA | 252,050 | 188,193 | |||||||||
6,500 | Iberdrola SA, ADR | 98,020 | 321,685 | |||||||||
58,000 | OGE Energy Corp. | 773,496 | 1,739,420 | |||||||||
24,000 | PNM Resources Inc. | 246,922 | 991,920 | |||||||||
|
|
|
| |||||||||
1,452,662 | 3,512,218 | |||||||||||
|
|
|
| |||||||||
Energy and Utilities: Natural Gas — 1.5% |
| |||||||||||
117,300 | National Fuel Gas Co. | 5,201,509 | 4,761,207 | |||||||||
11,500 | ONE Gas Inc. | 48,202 | 793,615 | |||||||||
68,000 | ONEOK Inc. | 230,708 | 1,766,640 | |||||||||
7,500 | Southwest Gas Holdings Inc. | 153,948 | 473,250 | |||||||||
|
|
|
| |||||||||
5,634,367 | 7,794,712 | |||||||||||
|
|
|
| |||||||||
Energy and Utilities: Oil — 1.7% |
| |||||||||||
56,000 | Chevron Corp. | 2,046,372 | 4,032,000 | |||||||||
7,000 | ConocoPhillips | 128,274 | 229,880 | |||||||||
12,500 | Exxon Mobil Corp. | 327,921 | 429,125 | |||||||||
66,000 | Hess Corp. | 3,200,714 | 2,701,380 | |||||||||
18,000 | Marathon Petroleum Corp. | 234,717 | 528,120 | |||||||||
12,000 | Royal Dutch Shell plc, Cl. A, ADR | 484,098 | 302,040 | |||||||||
16,000 | TOTAL SE, ADR | 267,781 | 548,800 | |||||||||
15,000 | WPX Energy Inc.† | 78,706 | 73,500 | |||||||||
|
|
|
| |||||||||
6,768,583 | 8,844,845 | |||||||||||
|
|
|
| |||||||||
Energy and Utilities: Services — 0.4% |
| |||||||||||
149,700 | Halliburton Co. | 3,539,649 | 1,803,885 | |||||||||
9,000 | Oceaneering International Inc.† | 166,793 | 31,680 | |||||||||
10,000 | Schlumberger NV | 206,840 | 155,600 | |||||||||
|
|
|
| |||||||||
3,913,282 | 1,991,165 | |||||||||||
|
|
|
| |||||||||
Energy and Utilities: Water — 0.2% |
| |||||||||||
5,000 | Essential Utilities Inc. | 36,851 | 201,250 | |||||||||
25,000 | Severn Trent plc | 637,468 | 786,795 | |||||||||
|
|
|
| |||||||||
674,319 | 988,045 | |||||||||||
|
|
|
| |||||||||
Entertainment — 2.0% |
| |||||||||||
28,000 | Grupo Televisa SAB, ADR† | 249,704 | 173,040 | |||||||||
1,000 | Madison Square Garden Entertainment Corp.† | 16,681 | 68,490 | |||||||||
1,000 | Madison Square Garden Sports Corp.† | 39,524 | 150,480 | |||||||||
337,500 | ViacomCBS Inc., Cl. A | 8,475,108 | 10,222,875 | |||||||||
|
|
|
| |||||||||
8,781,017 | 10,614,885 | |||||||||||
|
|
|
|
Shares | Cost | Market Value | ||||||||||
Environmental Services — 0.3% |
| |||||||||||
10,000 | Republic Services Inc. | $ | 338,000 | $ | 933,500 | |||||||
3,600 | Waste Management Inc. | 104,078 | 407,412 | |||||||||
|
|
|
| |||||||||
442,078 | 1,340,912 | |||||||||||
|
|
|
| |||||||||
Equipment and Supplies — 3.9% |
| |||||||||||
10,000 | A.O. Smith Corp. | 26,646 | 528,000 | |||||||||
16,000 | Danaher Corp. | 467,288 | 3,445,280 | |||||||||
171,500 | Flowserve Corp. | 2,195,435 | 4,680,235 | |||||||||
55,500 | Graco Inc. | 937,975 | 3,404,925 | |||||||||
21,000 | Minerals Technologies Inc. | 744,387 | 1,073,100 | |||||||||
157,000 | Mueller Industries Inc. | 2,974,108 | 4,248,420 | |||||||||
15,500 | Parker-Hannifin Corp. | 822,277 | 3,136,270 | |||||||||
|
|
|
| |||||||||
8,168,116 | 20,516,230 | |||||||||||
|
|
|
| |||||||||
Financial Services — 13.2% |
| |||||||||||
3,700 | Alleghany Corp. | 549,815 | 1,925,665 | |||||||||
24,000 | AllianceBernstein Holding LP | 157,937 | 648,960 | |||||||||
41,000 | American Express Co.(a) | 626,999 | 4,110,250 | |||||||||
21,500 | Ameris Bancorp | 229,000 | 489,770 | |||||||||
7,000 | Argo Group International Holdings Ltd. | 130,783 | 241,010 | |||||||||
5,195 | Banco Santander Chile, ADR | 29,250 | 72,003 | |||||||||
148,000 | Bank of America Corp. | 955,325 | 3,565,320 | |||||||||
13,056 | BNP Paribas SA† | 580,935 | 474,153 | |||||||||
31,000 | Eaton Vance Corp. | 884,159 | 1,182,650 | |||||||||
45,000 | Interactive Brokers Group Inc., Cl. A | 668,166 | 2,174,850 | |||||||||
15,000 | Jefferies Financial Group Inc. | 263,160 | 270,000 | |||||||||
14,500 | JPMorgan Chase & Co. | 281,381 | 1,395,915 | |||||||||
56,000 | Julius Baer Group Ltd. | 1,816,954 | 2,387,623 | |||||||||
44,000 | Kinnevik AB, Cl. A | 929,439 | 1,778,502 | |||||||||
83,000 | Loews Corp. | 3,069,539 | 2,884,250 | |||||||||
19,000 | M&T Bank Corp. | 1,606,534 | 1,749,710 | |||||||||
28,000 | Marsh & McLennan Cos. Inc. | 779,261 | 3,211,600 | |||||||||
15,000 | Morgan Stanley | 376,186 | 725,250 | |||||||||
9,000 | Popular Inc. | 158,610 | 326,430 | |||||||||
95,000 | SLM Corp. | 469,915 | 768,550 | |||||||||
125,000 | State Street Corp. | 5,702,036 | 7,416,250 | |||||||||
265,000 | Sterling Bancorp | 2,828,809 | 2,787,800 | |||||||||
6,600 | T. Rowe Price Group Inc. | 130,264 | 846,252 | |||||||||
313,000 | The Bank of New York Mellon Corp.(a) | 7,793,118 | 10,748,420 | |||||||||
18,000 | The Goldman Sachs Group Inc. | 2,189,431 | 3,617,460 | |||||||||
8,000 | The Hartford Financial Services Group Inc. | 245,451 | 294,880 | |||||||||
87,000 | The PNC Financial Services Group Inc.(a) | 4,577,784 | 9,562,170 | |||||||||
53,000 | Valley National Bancorp | 331,250 | 363,050 | |||||||||
52,000 | Waddell & Reed Financial Inc., Cl. A | 841,802 | 772,200 |
See accompanying notes to financial statements.
7
The Gabelli Equity Income Fund
Schedule of Investments (Continued) — September 30, 2020
Shares | Cost | Market Value | ||||||||||
COMMON STOCKS (Continued) |
| |||||||||||
Financial Services (Continued) |
| |||||||||||
125,000 | Wells Fargo & Co. | $ | 3,546,850 | $ | 2,938,750 | |||||||
|
|
|
| |||||||||
42,750,143 | 69,729,693 | |||||||||||
|
|
|
| |||||||||
Food and Beverage — 20.2% |
| |||||||||||
1,000 | Anheuser-Busch InBev SA/NV | 15,876 | 54,197 | |||||||||
275,000 | Brown-Forman Corp., Cl. A | 4,340,423 | 18,887,000 | |||||||||
34,000 | Campbell Soup Co. | 1,061,533 | 1,644,580 | |||||||||
80,000 | Coca-Cola Amatil Ltd., ADR | 246,845 | 544,000 | |||||||||
19,000 | Coca-Cola European Partners plc | 427,500 | 737,390 | |||||||||
10,000 | Coca-Cola Femsa SAB de CV, ADR | 340,563 | 407,200 | |||||||||
6,000 | Constellation Brands Inc., Cl. A | 74,420 | 1,137,060 | |||||||||
48,000 | Danone SA | 2,051,715 | 3,107,667 | |||||||||
390,000 | Davide Campari-Milano NV | 1,313,766 | 4,261,188 | |||||||||
52,000 | Diageo plc, ADR | 3,169,455 | 7,158,320 | |||||||||
86,000 | Fomento Economico Mexicano SAB de CV, ADR | 2,055,532 | �� | 4,832,340 | ||||||||
1,000 | General Mills Inc. | 26,640 | 61,680 | |||||||||
1,880,000 | Grupo Bimbo SAB de CV, Cl. A | 1,505,754 | 3,497,872 | |||||||||
97,000 | Heineken NV | 4,614,139 | 8,629,703 | |||||||||
160,000 | ITO EN Ltd. | 2,950,372 | 11,393,353 | |||||||||
21,500 | Kellogg Co. | 1,125,039 | 1,388,685 | |||||||||
2,000 | McCormick & Co. Inc., Cl. V | 137,120 | 390,640 | |||||||||
17,500 | McCormick & Co. Inc., Non-Voting | 770,162 | 3,396,750 | |||||||||
37,000 | Mondelēz International Inc., Cl. A | 666,521 | 2,125,650 | |||||||||
35,000 | Nestlé SA. | 717,103 | 4,154,932 | |||||||||
63,000 | Nissin Foods Holdings Co. Ltd. | 1,970,277 | 5,913,810 | |||||||||
37,000 | PepsiCo Inc. | 2,404,450 | 5,128,200 | |||||||||
29,500 | Pernod Ricard SA | 2,556,230 | 4,709,084 | |||||||||
44,000 | Remy Cointreau SA | 2,451,855 | 8,037,425 | |||||||||
35,000 | Sapporo Holdings Ltd. | 785,546 | 626,227 | |||||||||
10,000 | The Coca-Cola Co. | 208,400 | 493,700 | |||||||||
1,000 | The Hershey Co. | 36,300 | 143,340 | |||||||||
50,000 | The Kraft Heinz Co. | 1,403,471 | 1,497,500 | |||||||||
6,001 | Tootsie Roll Industries Inc. | 104,489 | 185,431 | |||||||||
32,000 | Yakult Honsha Co. Ltd. | 799,840 | 1,774,996 | |||||||||
|
|
|
| |||||||||
40,331,336 | 106,319,920 | |||||||||||
|
|
|
| |||||||||
Health Care — 5.1% |
| |||||||||||
5,500 | Abbott Laboratories | 126,068 | 598,565 | |||||||||
3,000 | AbbVie Inc. | 74,560 | 262,770 | |||||||||
4,000 | Alcon Inc.† | 133,378 | 227,800 | |||||||||
77,000 | Baxter International Inc. | 1,706,880 | 6,192,340 | |||||||||
5,200 | Bio-Rad Laboratories Inc., Cl. A† 510,780 2,680,392 |
| ||||||||||
114,000 | Bristol Myers Squibb Co. | 2,735,877 | 6,873,060 | |||||||||
72,000 | Demant A/S† | 696,881 | 2,262,083 | |||||||||
8,000 | GlaxoSmithKline plc, ADR | 327,365 | 301,120 |
Shares | Cost | Market Value | ||||||||||
32,000 | Henry Schein Inc.† | $ | 324,916 | $ | 1,880,960 | |||||||
16,000 | Merck & Co. Inc. | 296,127 | 1,327,200 | |||||||||
16,000 | Novartis AG, ADR | 780,337 | 1,391,360 | |||||||||
20,000 | Pfizer Inc. | 336,990 | 734,000 | |||||||||
45,000 | Roche Holding AG, ADR | 826,666 | 1,926,450 | |||||||||
2,500 | Zimmer Biomet Holdings Inc. | 130,888 | 340,350 | |||||||||
|
|
|
| |||||||||
9,007,713 | 26,998,450 | |||||||||||
|
|
|
| |||||||||
Hotels and Gaming — 0.1% |
| |||||||||||
21,000 | MGM Resorts International | 253,359 | 456,750 | |||||||||
1,500 | Wynn Resorts Ltd. | 71,983 | 107,715 | |||||||||
|
|
|
| |||||||||
325,342 | 564,465 | |||||||||||
|
|
|
| |||||||||
Machinery — 3.3% |
| |||||||||||
6,000 | Caterpillar Inc. | 35,181 | 894,900 | |||||||||
66,000 | Deere & Co. | 2,406,084 | 14,627,580 | |||||||||
11,000 | Otis Worldwide Corp. | 376,780 | 686,620 | |||||||||
11,500 | Xylem Inc. | 280,917 | 967,380 | |||||||||
|
|
|
| |||||||||
3,098,962 | 17,176,480 | |||||||||||
|
|
|
| |||||||||
Metals and Mining — 2.1% |
| |||||||||||
130,000 | Freeport-McMoRan Inc. | 1,449,762 | 2,033,200 | |||||||||
146,000 | Newmont Corp. | 3,449,852 | 9,263,700 | |||||||||
|
|
|
| |||||||||
4,899,614 | 11,296,900 | |||||||||||
|
|
|
| |||||||||
Paper and Forest Products — 0.1% |
| |||||||||||
23,000 | Svenska Cellulosa AB SCA, Cl. A† | 94,735 | 337,969 | |||||||||
|
|
|
| |||||||||
Publishing — 0.0% |
| |||||||||||
3,000 | Value Line Inc. | 41,976 | 74,100 | |||||||||
|
|
|
| |||||||||
Real Estate — 0.8% |
| |||||||||||
9,000 | Griffin Industrial Realty Inc. | 219,808 | 481,050 | |||||||||
124,000 | Weyerhaeuser Co., REIT | 1,975,837 | 3,536,480 | |||||||||
|
|
|
| |||||||||
2,195,645 | 4,017,530 | |||||||||||
|
|
|
| |||||||||
Retail — 4.5% |
| |||||||||||
14,000 | Cie Financiere Richemont SA, Cl. A | 470,500 | 937,843 | |||||||||
35,200 | Copart Inc.† | 312,517 | 3,701,632 | |||||||||
11,000 | Costco Wholesale Corp. | 514,650 | 3,905,000 | |||||||||
98,800 | CVS Health Corp. | 3,281,243 | 5,769,920 | |||||||||
68,500 | Ingles Markets Inc., Cl. A | 1,075,142 | 2,605,740 | |||||||||
80,000 | Seven & i Holdings Co. Ltd. | 2,389,965 | 2,465,273 | |||||||||
7,000 | The Home Depot Inc. | 193,314 | 1,943,970 | |||||||||
60,000 | Walgreens Boots Alliance Inc. | 1,792,640 | 2,155,200 | |||||||||
1,000 | Walmart Inc. | 43,340 | 139,910 | |||||||||
5,200 | Weis Markets Inc. | 156,250 | 249,600 | |||||||||
|
|
|
| |||||||||
10,229,561 | 23,874,088 | |||||||||||
|
|
|
| |||||||||
Specialty Chemicals — 1.0% |
| |||||||||||
7,500 | Albemarle Corp. | 76,168 | 669,600 | |||||||||
3,000 | Ashland Global Holdings Inc. | 67,390 | 212,760 | |||||||||
66,000 | Ferro Corp.† | 116,767 | 818,400 |
See accompanying notes to financial statements.
8
The Gabelli Equity Income Fund
Schedule of Investments (Continued) — September 30, 2020
Shares | Cost | Market Value | ||||||||||
COMMON STOCKS (Continued) |
| |||||||||||
Specialty Chemicals (Continued) |
| |||||||||||
8,000 | FMC Corp. | $ | 161,197 | $ | 847,280 | |||||||
46,000 | H.B. Fuller Co. | 950,216 | 2,105,880 | |||||||||
2,000 | NewMarket Corp. | 7,719 | 684,640 | |||||||||
600 | Quaker Chemical Corp. | 6,478 | 107,826 | |||||||||
|
|
|
| |||||||||
1,385,935 | 5,446,386 | |||||||||||
|
|
|
| |||||||||
Telecommunications — 5.0% |
| |||||||||||
118,000 | BCE Inc. | 2,177,943 | 4,893,460 | |||||||||
190,000 | Deutsche Telekom AG, ADR | 2,540,248 | 3,201,500 | |||||||||
15,500 | Loral Space & Communications Inc. | 427,407 | 283,650 | |||||||||
12,000 | Orange SA, ADR | 138,547 | 124,560 | |||||||||
13,000 | Proximus SA | 318,676 | 237,393 | |||||||||
25,520 | Telefonica SA, ADR | 85,752 | 87,789 | |||||||||
136,000 | Telephone and Data Systems Inc | 3,639,897 | 2,507,840 | |||||||||
94,000 | TELUS Corp. | 713,431 | 1,655,340 | |||||||||
220,500 | Verizon Communications Inc.(a) | 7,164,660 | 13,117,545 | |||||||||
|
|
|
| |||||||||
17,206,561 | 26,109,077 | |||||||||||
|
|
|
| |||||||||
Transportation — 1.4% |
| |||||||||||
118,500 | GATX Corp. | 3,652,166 | 7,554,375 | |||||||||
|
|
|
|
Shares | Cost | Market Value | ||||||||||
Wireless Communications — 1.3% |
| |||||||||||
100,000 | BT Group plc, Cl. A | $ | 277,705 | $ | 126,945 | |||||||
180,000 | NTT DOCOMO Inc. | 2,604,380 | 6,630,636 | |||||||||
20,000 | Turkcell Iletisim Hizmetleri A/S, ADR | 91,562 | 95,800 | |||||||||
|
|
|
| |||||||||
2,973,647 | 6,853,381 | |||||||||||
|
|
|
| |||||||||
TOTAL COMMON STOCKS | 231,407,740 | 543,453,053 | ||||||||||
|
|
|
| |||||||||
WARRANTS — 0.0% |
| |||||||||||
Energy and Utilities: Oil — 0.0% |
| |||||||||||
1,250 | Occidental Petroleum Corp., expire 08/03/27† | 6,187 | 3,750 | |||||||||
|
|
|
| |||||||||
TOTAL INVESTMENTS — 103.2% | $ | 231,413,927 | 543,456,803 | |||||||||
|
| |||||||||||
Other Assets and Liabilities (Net) — (3.2)% |
| (16,767,539 | ) | |||||||||
|
| |||||||||||
NET ASSETS — 100.0% |
| $ | 526,689,264 | |||||||||
|
|
(a) | Securities, or a portion thereof, with a value of $39,958,200 were deposited with Pershing LLC. |
† | Non-income producing security. |
ADR | American Depositary Receipt |
REIT Real Estate Investment Trust
See accompanying notes to financial statements.
9
The Gabelli Equity Income Fund
Statement of Assets and Liabilities
September 30, 2020
Assets: | ||||
Investments, at value (cost $231,413,927) | $543,456,803 | |||
Cash | 6,189 | |||
Deposit at brokers | 5 | |||
Receivable for Fund shares sold | 1,076,738 | |||
Receivable for investments sold | 202,424 | |||
Dividends receivable | 1,574,226 | |||
Prepaid expenses | 20,374 | |||
Total Assets | 546,336,759 | |||
Liabilities: | ||||
Line of credit payable | 17,888,000 | |||
Payable for Fund shares redeemed | 899,152 | |||
Payable for investment advisory fees | 449,250 | |||
Payable for distribution fees | 120,153 | |||
Payable for accounting fees | 3,750 | |||
Other accrued expenses | 287,190 | |||
Total Liabilities | 19,647,495 | |||
Net Assets | $526,689,264 | |||
Net Assets Consist of: | ||||
Paid-in capital | $218,694,934 | |||
Total distributable earnings | 307,994,330 | |||
Net Assets | $526,689,264 | |||
Shares of Capital Stock, each at $0.001 par value: | ||||
Class AAA: | ||||
Net Asset Value, offering, and redemption price per share ($272,980,219 ÷ 27,190,563 shares outstanding; 150,000,000 shares authorized) | $10.04 | |||
Class A: | ||||
Net Asset Value and redemption price per share ($69,200,711 ÷ 6,978,175 shares outstanding; 50,000,000 shares authorized) | $ 9.92 | |||
Maximum offering price per share (NAV ÷ 0.9425, based on maximum sales charge of 5.75% of the offering price) | $10.53 | |||
Class C: | ||||
Net Asset Value and offering price per share ($53,605,415 ÷ 9,233,907 shares outstanding; 50,000,000 shares authorized) | $ 5.81 | (a) | ||
Class I: | ||||
Net Asset Value, offering, and redemption price per share ($130,902,919 ÷ 11,738,133 shares outstanding; 50,000,000 shares authorized) | $11.15 |
Statement of Operations
For the Year Ended September 30, 2020
Investment Income: | ||||
Dividends (net of foreign withholding taxes of $324,931) | $ | 13,132,369 | ||
Non-cash dividends | 453,980 | |||
Interest | 53 | |||
|
| |||
Total Investment Income | 13,586,402 | |||
|
| |||
Expenses: | ||||
Investment advisory fees | 6,176,244 | |||
Distribution fees - Class AAA | 780,475 | |||
Distribution fees - Class A | 181,690 | |||
Distribution fees - Class C | 719,617 | |||
Shareholder services fees | 502,543 | |||
Interest expense | 175,524 | |||
Shareholder communication expenses | 149,637 | |||
Custodian fees | 112,017 | |||
Registration expenses | 69,647 | |||
Legal and audit fees | 52,382 | |||
Directors’ fees | 45,844 | |||
Accounting fees | 45,000 | |||
Miscellaneous expenses | 65,886 | |||
|
| |||
Total Expenses | 9,076,506 | |||
|
| |||
Less: | ||||
Expenses paid indirectly by broker (See Note 6) | (7,779 | ) | ||
|
| |||
Net Expenses | 9,068,727 | |||
|
| |||
Net Investment Income | 4,517,675 | |||
|
| |||
Net Realized and Unrealized Gain/(Loss) on Investments and Foreign Currency: | ||||
Net realized gain on investments | 137,689,003 | |||
Net realized gain on foreign currency transactions | 5,504 | |||
|
| |||
Net realized gain on investments and foreign currency transactions | 137,694,507 | |||
|
| |||
Net change in unrealized appreciation/depreciation: on investments | (141,922,026 | ) | ||
on foreign currency translations | 13,227 | |||
|
| |||
Net change in unrealized appreciation/ depreciation on investments and foreign currency translations | (141,908,799 | ) | ||
|
| |||
Net Realized and Unrealized Gain/(Loss) on Investments and Foreign Currency | (4,214,292 | ) | ||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 303,383 | ||
|
|
(a) | Redemption price varies based on the length of time held. |
See accompanying notes to financial statements.
10
The Gabelli Equity Income Fund
Statement of Changes in Net Assets
Year Ended | Year Ended | |||||||||
September 30, 2020 | September 30, 2019 | |||||||||
Operations: | ||||||||||
Net investment income | $ | 4,517,675 | $ | 6,418,727 | ||||||
Net realized gain on investments and foreign currency transactions | 137,694,507 | 196,762,218 | ||||||||
Net change in unrealized appreciation/depreciation on investments and foreign currency translations | (141,908,799 | ) | (230,703,306 | ) | ||||||
|
|
|
| |||||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | 303,383 | (27,522,361 | ) | |||||||
|
|
|
| |||||||
Distributions to Shareholders: | ||||||||||
Accumulated earnings | ||||||||||
Class AAA | (60,530,136 | ) | (92,298,815 | ) | ||||||
Class A | (14,287,953 | ) | (16,960,746 | ) | ||||||
Class C | (19,964,287 | ) | (36,745,051 | ) | ||||||
Class I | (29,113,541 | ) | (53,493,080 | ) | ||||||
|
|
|
| |||||||
(123,895,917 | ) | (199,497,692 | ) | |||||||
|
|
|
| |||||||
Return of capital | ||||||||||
Class AAA | (22,602,669 | ) | (24,603,802 | ) | ||||||
Class A | (6,706,415 | ) | (5,770,903 | ) | ||||||
Class C | (6,207,826 | ) | (6,210,850 | ) | ||||||
Class I | (8,566,767 | ) | (9,279,754 | ) | ||||||
|
|
|
| |||||||
(44,083,677 | ) | (45,865,309 | ) | |||||||
|
|
|
| |||||||
Total Distributions to Shareholders | (167,979,594 | ) | (245,363,001 | ) | ||||||
|
|
|
| |||||||
Capital Share Transactions: | ||||||||||
Class AAA | (21,606,608 | ) | (15,978,648 | ) | ||||||
Class A | 16,928,786 | 10,674,357 | ||||||||
Class C | (20,000,786 | ) | (27,546,923 | ) | ||||||
Class I | (40,684,434 | ) | (76,334,869 | ) | ||||||
|
|
|
| |||||||
Net Decrease in Net Assets from Capital Share Transactions | (65,363,042 | ) | (109,186,083 | ) | ||||||
�� |
|
|
| |||||||
Redemption Fees | 1,452 | 2,975 | ||||||||
|
|
|
| |||||||
Net Decrease in Net Assets | (233,037,801 | ) | (382,068,470 | ) | ||||||
Net Assets: | ||||||||||
Beginning of year | 759,727,065 | 1,141,795,535 | ||||||||
|
|
|
| |||||||
End of year | $ | 526,689,264 | $ | 759,727,065 | ||||||
|
|
|
|
See accompanying notes to financial statements.
11
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 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Realized | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
and | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Asset | Unrealized | Net | Net Asset | Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Value, | Net | Gain/(Loss) | Total from | Net | Realized | Return | Value, | Net Assets | Investment | Portfolio | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended | Beginning | Investment | on | Investment | Investment | Gain on | of | Total | Redemption | End of | Total | End of year | Income | Operating | Turnover | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
September 30 | of Year | Income (Loss)(a) | Investments | Operations | Income | Investments | Capital | Distributions | Fees (a)(b) | Year | Return † | (in 000’s) | (Loss) | Expenses(c)(d) | Rate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class AAA | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | $ | 13.61 | $ | 0.10 | (e) | $ | (0.02 | ) | $ | 0.08 | $ | (0.11 | ) | $ | (2.39 | ) | $ | (1.15 | ) | $ | (3.65 | ) | $ | 0.00 | $ | 10.04 | 0.93 | % | $ | 272,980 | 0.75 | %(e) | 1.45 | % | 0 | %(f) | |||||||||||||||||||||||||||||||||||||||
2019 | 19.09 | 0.13 | (0.38 | ) | (0.25 | ) | (0.15 | ) | (3.72 | ) | (1.36 | ) | (5.23 | ) | 0.00 | 13.61 | (1.09 | ) | 377,589 | 0.76 | 1.45 | 1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2018 | 22.84 | 0.19 | 1.34 | 1.53 | (0.20 | ) | (3.68 | ) | (1.40 | ) | (5.28 | ) | 0.00 | 19.09 | 6.77 | 521,485 | 0.82 | 1.40 | 0 | (f) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 | 24.06 | 0.24 | 2.97 | 3.21 | (0.25 | ) | (3.33 | ) | (0.85 | ) | (4.43 | ) | 0.00 | 22.84 | 13.91 | 662,696 | 0.97 | 1.39 | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 | 25.08 | 0.26 | 2.72 | 2.98 | (0.26 | ) | (2.35 | ) | (1.39 | ) | (4.00 | ) | 0.00 | 24.06 | 11.31 | 833,154 | 0.99 | 1.39 | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | $ | 13.49 | $ | 0.10 | (e) | $ | (0.02 | ) | $ | 0.08 | $ | (0.11 | ) | $ | (2.39 | ) | $ | (1.15 | ) | $ | (3.65 | ) | $ | 0.00 | $ | 9.92 | 0.95 | % | $ | 69,201 | 0.75 | %(e) | 1.45 | % | 0 | %(f) | |||||||||||||||||||||||||||||||||||||||
2019 | 18.97 | 0.13 | (0.38 | ) | (0.25 | ) | (0.15 | ) | (3.72 | ) | (1.36 | ) | (5.23 | ) | 0.00 | 13.49 | (1.08 | ) | 72,778 | 0.76 | 1.45 | 1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2018 | 22.73 | 0.19 | 1.33 | 1.52 | (0.20 | ) | (3.68 | ) | (1.40 | ) | (5.28 | ) | 0.00 | 18.97 | 6.76 | 86,332 | 0.82 | 1.40 | 0 | (f) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 | 23.96 | 0.24 | 2.96 | 3.20 | (0.25 | ) | (3.33 | ) | (0.85 | ) | (4.43 | ) | 0.00 | 22.73 | 13.92 | 115,702 | 0.96 | 1.39 | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 | 24.99 | 0.26 | 2.71 | 2.97 | (0.26 | ) | (2.35 | ) | (1.39 | ) | (4.00 | ) | 0.00 | 23.96 | 11.31 | 160,593 | 0.99 | 1.39 | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | $ | 9.48 | $ | 0.00 | (b)(e) | $ | (0.02 | ) | $ | (0.02 | ) | $ | (0.06 | ) | $ | (2.39 | ) | $ | (1.20 | ) | $ | (3.65 | ) | $ | 0.00 | $ | 5.81 | 0.27 | % | $ | 53,605 | 0.00 | %(e)(g) | 2.20 | % | 0 | %(f) | ||||||||||||||||||||||||||||||||||||||
2019 | 15.03 | (0.00 | )(b) | (0.32 | ) | (0.32 | ) | (0.05 | ) | (3.72 | ) | (1.46 | ) | (5.23 | ) | 0.00 | 9.48 | (1.87 | ) | 100,467 | (0.00 | )(g) | 2.20 | 1 | |||||||||||||||||||||||||||||||||||||||||||||||||||
2018 | 19.17 | 0.01 | 1.13 | 1.14 | (0.07 | ) | (3.68 | ) | (1.53 | ) | (5.28 | ) | 0.00 | 15.03 | 6.02 | 176,167 | 0.07 | 2.15 | 0 | (f) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 | 20.99 | 0.05 | 2.56 | 2.61 | (0.10 | ) | (3.33 | ) | (1.00 | ) | (4.43 | ) | 0.00 | 19.17 | 13.04 | 246,690 | 0.22 | 2.14 | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 | 22.48 | 0.06 | 2.45 | 2.51 | (0.09 | ) | (2.35 | ) | (1.56 | ) | (4.00 | ) | 0.00 | 20.99 | 10.51 | 306,349 | 0.24 | 2.14 | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class I | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | $ | 14.68 | $ | 0.14 | (e) | $ | (0.02 | ) | $ | 0.12 | $ | (0.14 | ) | $ | (2.39 | ) | $ | (1.12 | ) | $ | (3.65 | ) | $ | 0.00 | $ | 11.15 | 1.14 | % | $ | 130,903 | 1.00 | %(e) | 1.20 | % | 0 | %(f) | |||||||||||||||||||||||||||||||||||||||
2019 | 20.13 | 0.19 | (0.41 | ) | (0.22 | ) | (0.19 | ) | (3.72 | ) | (1.32 | ) | (5.23 | ) | 0.00 | 14.68 | (0.86 | ) | 208,893 | 1.00 | 1.20 | 1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2018 | 23.75 | 0.26 | 1.40 | 1.66 | (0.26 | ) | (3.68 | ) | (1.34 | ) | (5.28 | ) | 0.00 | 20.13 | 7.07 | 357,812 | 1.08 | 1.15 | 0 | (f) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 | 24.80 | 0.31 | 3.07 | 3.38 | (0.31 | ) | (3.33 | ) | (0.79 | ) | (4.43 | ) | 0.00 | 23.75 | 14.19 | 443,912 | 1.21 | 1.14 | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 | 25.68 | 0.33 | 2.79 | 3.12 | (0.32 | ) | (2.35 | ) | (1.33 | ) | (4.00 | ) | 0.00 | 24.80 | 11.59 | 484,305 | 1.24 | 1.14 | 1 |
† | Total return represents aggregate total return of a hypothetical $1,000 investment at the beginning of the year and sold at the end of the year including reinvestment of distributions and does not reflect the 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. |
(c) | The Fund incurred interest expense during the fiscal years ended September 30, 2020, 2019, 2018, and 2017. If interest expense had not been incurred, the ratio of operating expenses to average net assets would have been 1.42%, 1.40%, 1.39%, and 1.38% (Class AAA and Class A), 2.17%, 2.15%, 2.14%, and 2.13% (Class C), and 1.17%, 1.15%, 1.14%, and 1.13% (Class I), respectively. For the fiscal year ended September 30, 2016 the effect of interest expense was minimal. |
(d) | The Fund received credits from a designated broker who agreed to pay certain Fund operating expenses. For the fiscal years ended September 30, 2020, 2019, 2018, 2017, and 2016, there was no impact on the expense ratios. |
(e) | Includes income resulting from special dividends. Without these dividends, the per share income (loss) amounts would have been $0.09 (Class AAA and Class A), $(0.01) (Class C), and $0.13 (Class I), respectively, and the net investment income (loss) ratio would have been 0.68% (Class AAA and Class A), (0.07)% (Class C), and 0.93% (Class I), respectively. |
(f) | Amount represents less than 0.5%. |
(g) | Amount represents less than 0.005%. |
See accompanying notes to financial statements.
12
The Gabelli Equity Income Fund
Notes to Financial Statements
1. Organization. The Gabelli Equity Income Fund is a series of the Gabelli Equity Series Funds, Inc. (the Corporation). 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 four separately managed portfolios of the Corporation. The Fund seeks to provide 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. As an investment company, the Fund follows the investment company accounting and reporting guidance, which is part of U.S. generally accepted accounting principles (GAAP) that may require the use of management estimates and assumptions in the preparation of its financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements.
The global outbreak of the novel coronavirus disease, known as COVID-19, has caused adverse effects on many companies, sectors, nations, regions and the markets in general, and may continue for an unpredictable duration. The effects of this pandemic may materially impact the value and performance of the Fund, its ability to buy and sell fund investments at appropriate valuations, and its ability to achieve its investment objectives.
New Accounting Pronouncements. To improve the effectiveness of fair value disclosure requirements, the Financial Accounting Standards Board recently issued Accounting Standard Update (ASU) 2018-13, Fair Value Measurement Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13), which adds, removes, and modifies certain aspects relating to fair value disclosure. ASU 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption of the additions relating to ASU 2018-13 is not required, even if early adoption is elected for the removals and modifications under ASU 2018-13. Management has early adopted the removals and modifications set forth in ASU 2018-13 in these financial statements and has not early adopted the additions set forth in ASU 2018-13.
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provides optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the 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
13
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
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 obligations 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 securities are valued using the closing bid price, 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. 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. OTC futures and options on futures for which market quotations are readily available will be valued by quotations received from a pricing service or, if no quotations are available from a pricing service, by quotations obtained from one or more dealers in the instrument in question by the Adviser.
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.
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 Board’s determinations as to the fair value of investments). |
14
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
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 and other financial instruments by inputs used to value the Fund’s investments as of September 30, 2020 is as follows:
Valuation Inputs | ||||||||||
Level 1 | Total Market Value | |||||||||
Quoted Prices | at 9/30/20 | |||||||||
INVESTMENTS IN SECURITIES: | ||||||||||
ASSETS (Market Value): | ||||||||||
Common Stocks: (a) | $ | 543,453,053 | $ | 543,453,053 | ||||||
Warrants (a) | 3,750 | 3,750 | ||||||||
TOTAL INVESTMENTS IN SECURITIES – ASSETS | $ | 543,456,803 | $ | 543,456,803 |
(a) | Please refer to the Schedule of Investments for the industry classifications of these portfolio holdings. |
The Fund did not have transfers into or out of Level 3 during the fiscal year ended September 30, 2020.
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 are 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.
Fair Valuation. Fair valued securities may be common or preferred equities, warrants, options, rights, or 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. When fair valuing a security, factors to consider include 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 may include backtesting the prices realized in subsequent trades of these fair valued securities to fair values previously recognized.
Securities Sold Short. The Fund may enter into short sale transactions. Short selling involves selling securities that may or may not be owned and, at times, borrowing the same securities for delivery to the purchaser, with an obligation to replace such borrowed securities at a later date. The proceeds received from short sales are
15
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
recorded as liabilities and the Fund records an unrealized gain or loss to the extent of the difference between the proceeds received and the value of an open short position on the day of determination. The Fund records a realized gain or loss when the short position is closed out. By entering into a short sale, the Fund bears the market risk of an unfavorable change in the price of the security sold short. Dividends on short sales are recorded as an expense by the Fund on the ex-dividend date and interest expense is recorded on the accrual basis. The broker retains collateral for the value of the open positions, which is adjusted periodically as the value of the position fluctuates. During the fiscal year ended September 30, 2020, there were no short sales.
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 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 the sale of securities eligible for trading on national securities exchanges or in the over-the-counter markets. Restricted securities may sell at a price lower than similar securities that are not subject to restrictions on resale. Securities freely saleable among qualified institutional investors under special rules adopted by the SEC may be treated as liquid if they satisfy liquidity standards established by the Board. The continued liquidity of such securities is not as well assured as that of publicly traded securities, and accordingly the Board will monitor their liquidity. At September 30, 2020, the Fund held no restricted securities.
Investments in other Investment Companies. The Fund may invest, from time to time, in shares of other investment companies (or entities that would be considered investment companies but are excluded from the definition pursuant to certain exceptions under the 1940 Act) (the Acquired Funds) in accordance with the 1940
16
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
Act and related rules. Shareholders in the Fund would bear the pro rata port on of the periodic expenses of the Acquired Funds in addition to the Fund’s expenses. For the fiscal year ended September 30, 2020, the Fund’s pro rata portion of the periodic expenses charged by the Acquired Funds was less than 1%.
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 or amortized to the earliest call date, if applicable. 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. The characterization of distributions to shareholders is 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 the basis adjustments on investments in partnerships and reversal of previous year reclassification of REIT distributions, and equalization utilized. These reclassifications have no impact on the NAV of the Fund. For the fiscal year ended September 30, 2020, reclassifications were made to increase paid-in capital of $17,937,436 with an offsetting adjustment to total distributable earnings.
The tax character of distributions paid during the fiscal years ended September 30, 2020 and 2019 was as follows:
Year Ended | Year Ended | |||||||||
September 30, 2020* | September 30, 2019 | |||||||||
Distributions paid from: | ||||||||||
Ordinary income | $ | 5,482,409 | $ | 7,210,893 | ||||||
Net long term capital gains | 136,799,128 | 192,286,799 | ||||||||
Return of capital | 44,083,677 | 45,865,309 | ||||||||
|
|
|
| |||||||
Total distributions paid | $ | 186,365,214 | $ | 245,363,001 | ||||||
|
|
|
|
* | Total distributions paid differs from the Statement of Changes in Net Assets due to the utilization of equalization. |
17
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
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. 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.
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, 2020, the components of accumulated earnings/losses on a tax basis were as follows:
Net unrealized appreciation on investments | $ | 307,994,330 | |||
|
| ||||
Total | $ | 307,994,330 | |||
|
|
At September 30, 2020, the temporary difference between book basis and tax basis net unrealized appreciation on investments was due to deferral of losses from wash sales for tax purposes and tax basis adjustments on investments in partnerships.
The following summarizes the tax cost of investments and the related net unrealized appreciation at September 30, 2020:
Gross | Gross | |||||||||||||||||||
Unrealized | Unrealized | Net Unrealized | ||||||||||||||||||
Cost | Appreciation | Depreciation | Appreciation | |||||||||||||||||
Investments | $ | 235,471,037 | $ | 324,511,170 | $ | (16,525,404 | ) | $ | 307,985,766 |
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. During the fiscal year ended September 30, 2020, the Fund did not incur any income tax, interest, or penalties. As of September 30, 2020, 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. The Fund’s federal and state tax returns for the prior three fiscal years remain open, subject to examination. 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.
18
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
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 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 fiscal year ended September 30, 2020, other than short term securities and U.S. Government obligations, aggregated $2,117,850 and $250,843,951, respectively.
6. Transactions with Affiliates and Other Arrangements. During the fiscal year ended September 30, 2020, the Fund paid $88,207 in brokerage commissions on security trades to G.research, LLC, an affiliate of the Adviser. Additionally, the Distributor retained a total of $49,363 from investors representing commissions (sales charges and underwriting fees) on sales and redemptions of Fund shares.
During the fiscal year ended September 30, 2020, the Fund received credits from a designated broker who agreed to pay certain Fund operating expenses. The amount of such expenses paid through this directed brokerage arrangement during this period was $7,779.
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, 2020, the Fund accrued $45,000 in connection with the cost of computing the Fund’s NAV.
7. Line of Credit. The Fund participates in an unsecured line of credit, which expires on March 3, 2021 and may be renewed annually, 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 a floating rate equal to the higher of the overnight Federal Funds rate plus 125 basis points or the 30 day ICE LIBOR plus 125 basis points in effect on that day. This amount, if any, would be included in “interest expense” in the Statement of Operations. At September 30, 2020, there was $17,888,000 outstanding under the line of credit.
The average daily amount of borrowings outstanding under the line of credit during the fiscal year ended September 30, 2020 was $5,109,081 with a weighted average interest rate of 2.48%. The maximum amount borrowed at any time during the fiscal year ended September 30, 2020 was $35,915,000.
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 and Class I Shares are offered without a sales charge. 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.
19
The Gabelli Equity Income Fund
Notes to Financial Statements (Continued)
The Fund imposes a redemption fee of 2.00% on all classes of shares that are redeemed or exchanged on or before the seventh day after the date of a purchase. The redemption fee is deducted from the proceeds otherwise payable to the redeeming shareholders and is retained by the Fund as an increase in paid-in capital. The redemption fees retained by the Fund during the fiscal years ended September 30, 2020 and 2019, if any, can be found in the Statement of Changes in Net Assets under Redemption Fees.
Transactions in shares of capital stock were as follows:
Year Ended | Year Ended | |||||||||||||||
September 30, 2020 | September 30, 2019 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class AAA | ||||||||||||||||
Shares sold | 517,283 | $ | 6,576,297 | 551,364 | $ | 9,573,175 | ||||||||||
Shares issued upon reinvestment of distributions | 7,517,054 | 80,737,011 | 7,879,869 | 113,070,696 | ||||||||||||
Shares redeemed | (8,582,075 | ) | (108,919,916 | ) | (8,006,331 | ) | (138,622,519 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase/(decrease) | (547,738 | ) | $ | (21,606,608 | ) | 424,902 | $ | (15,978,648 | ) | |||||||
|
|
|
|
|
|
|
| |||||||||
Class A | ||||||||||||||||
Shares sold | 2,531,411 | $ | 32,538,086 | 1,344,564 | $ | 23,616,884 | ||||||||||
Shares issued upon reinvestment of distributions | 1,830,657 | 19,372,951 | 1,513,270 | 21,444,473 | ||||||||||||
Shares redeemed | (2,778,776 | ) | (34,982,251 | ) | (2,013,390 | ) | (34,387,000 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net increase | 1,583,292 | $ | 16,928,786 | 844,444 | $ | 10,674,357 | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Class C | ||||||||||||||||
Shares sold | 1,439,486 | $ | 12,895,728 | 1,736,090 | $ | 22,864,320 | ||||||||||
Shares issued upon reinvestment of distributions | 3,855,885 | 25,043,742 | 3,798,546 | 39,055,202 | ||||||||||||
Shares redeemed | (6,657,072 | ) | (57,940,256 | ) | (6,663,277 | ) | (89,466,445 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net decrease | (1,361,701 | ) | $ | (20,000,786) | (1,128,641 | ) | $ | (27,546,923 | ) | |||||||
|
|
|
|
|
|
|
| |||||||||
Class I | ||||||||||||||||
Shares sold | 1,325,390 | $ | 18,231,196 | 1,730,545 | $ | 31,554,186 | ||||||||||
Shares issued upon reinvestment of distributions | 3,055,726 | 36,304,618 | 3,787,581 | 58,581,403 | ||||||||||||
Shares redeemed | (6,873,418 | ) | (95,220,248 | ) | (9,066,293 | ) | (166,470,458 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net decrease | (2,492,302 | ) | $ | (40,684,434) | (3,548,167 | ) | $ | (76,334,869 | ) | |||||||
|
|
|
|
|
|
|
|
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. 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.
20
The Gabelli Equity Income Fund
Report of Independent Registered Public Accounting Firm
To the Shareholders of The Gabelli Equity Income Fund
and the Board of Directors of Gabelli Equity Series Funds, Inc.
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of The Gabelli Equity Income Fund (the “Fund”) (one of the funds constituting Gabelli Equity Series Funds, Inc. (the “Corporation”)), including the schedule of investments, as of September 30, 2020, 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, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting Gabelli Equity Series Funds, Inc.) at September��30, 2020, 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.
Basis for Opinion
These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Corporation is not required to have, nor were we engaged to perform, an audit of the Corporation’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2020, by correspondence with the custodian. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Gabelli/GAMCO Funds investment companies since 1992.
Philadelphia, Pennsylvania
November 25, 2020
21
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 Overseen by Director | Principal Occupation(s) During Past Five Years | Other Directorships Held by Director3 | ||||
INTERESTED DIRECTORS4: | ||||||||
Mario J. Gabelli, CFA Director and Chief Investment Officer Age: 78 | Since 1991 | 33 | Chairman, Chief Executive Officer, and 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 within the Fund Complex; Chief Executive Officer of GGCP, Inc.; Executive Chairman of Associated Capital Group, Inc. | Director of Morgan Group Holdings, Inc. (holding company); Chairman of the Board and Chief Executive Officer of LICT Corp. (multimedia and communication services company); Director of CIBL, Inc. (broadcasting and wireless communications); Director of ICTC Group Inc. (communications) (2013-2018) | ||||
John D. Gabelli Director Age: 76 | Since 1991 | 12 | Senior Vice President of G.research, LLC | — | ||||
INDEPENDENT DIRECTORS5: | ||||||||
Elizabeth C. Bogan Director Age: 76 | Since 2019 | 8 | Senior Lecturer in Economics at Princeton University | — | ||||
Anthony J. Colavita6 Director Age: 84 | Since 1991 | 20 | President of the law firm of Anthony J. Colavita, P.C. | — | ||||
Vincent D. Enright Director Age: 76 | Since 1991 | 17 | Former Senior Vice President and Chief Financial Officer of KeySpan Corp. (public utility) (1994-1998) | Director of Echo Therapeutics, Inc. (therapeutics and diagnostics) (2008- 2014); Director of The LGL Group, Inc. (diversified manufacturing) (2011-2014) | ||||
Robert J. Morrissey Director Age: 81 | Since 1991 | 7 | Partner in the law firm of Morrissey, Hawkins & Lynch | Chairman of the Board of Directors, Belmont Savings Bank | ||||
Kuni Nakamura Director Age: 52 | Since 2009 | 32 | President of Advanced Polymer, Inc. (chemical manufacturing company); President of KEN Enterprises, Inc. (real estate); Trustee on Long Island University Board of Trustees | — | ||||
Anthonie C. van Ekris6 Director Age: 86 | Since 1991 | 23 | Chairman and Chief Executive Officer of BALMAC International, Inc. (global import/ export company) | — | ||||
Salvatore J. Zizza7 Director Age: 74 | Since 2001 | 30 | President of Zizza & Associates Corp. (private holding company); President of Bergen Cove Realty Inc.; Chairman of Harbor Diversified, Inc. (pharmaceuticals) (2009-2018); Chairman of BAM (semiconductor and aerospace manufacturing)(2000-2018); Chairman of Metropolitan Paper Recycling Inc. (recycling) (2005-2014) | Director and Chairman of Trans-Lux Corporation (business services); Director and Chairman of Harbor Diversified Inc. (pharmaceuticals) (2009-2018) |
22
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 Age: 68 | Since 1991 | Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC since 1988; Officer of registered investment companies within the Fund Complex; Senior Vice President of GAMCO Investors, Inc. since 2008; Chief Executive Officer of G.distributors, LLC since January 2020 | ||
John C. Ball Treasurer Age: 44 | Since 2017 | Treasurer of registered investment companies within the Fund Complex since 2017; Vice President and Assistant Treasurer of AMG Funds, 2014-2017 | ||
Peter Goldstein Secretary Age: 67 | Since 2020 | General Counsel, Gabelli Funds, LLC since July 2020; General Counsel and Chief Compliance Officer, Buckingham Capital Management, Inc. (2012-2020); Chief Legal Officer and Chief Compliance Officer, The Buckingham Research Group, Inc. (2012-2020) | ||
Richard J. Walz Chief Compliance Officer Age: 61 | Since 2013 | Chief Compliance Officer of registered investment companies within the Fund Complex since 2013; Chief Compliance Office for Gabelli Funds, LLC since 2015 |
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. For officers, includes time served in prior officer positions with the Fund. Each officer will hold office for an indefinite term until the date he or she resigns or retires or until his or her successor is elected and qualified. |
3 | This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934, as amended, i.e., public companies, or other investment companies registered under the 1940 Act. |
4 | “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. |
5 | Directors who are not interested persons are considered “Independent” Directors. |
6 | Mr. Colavita’s son, Anthony S. Colavita, serves as a director of other funds in the Gabelli/GAMCO Fund Complex. Mr. van Ekris is an independent director of Gabelli International Ltd., Gabelli Fund, LDC, GAMA Capital Opportunities Master, Ltd., and GAMCO International SICAV, which may be deemed to be controlled by Mario J. Gabelli and/or affiliates and in that event would be deemed to be under common control with the Fund’s Adviser. |
7 | Mr. Zizza is an independent director of Gabelli International Ltd., which may be deemed to be controlled by Mario J. Gabelli and/or affiliates and in that event would be deemed to be under common control with the Fund’s Adviser. On September 9, 2015, Mr. Zizza entered into a settlement with the SEC to resolve an inquiry relating to an alleged violation regarding the making of false statements or omissions to the accountants of a company concerning a related party transaction. The company in question is not an affiliate of, nor has any connection to, the Fund. Under the terms of the settlement, Mr. Zizza, without admitting or denying the SEC’s findings and allegation, paid $150,000 and agreed to cease and desist committing or causing any future violations of Rule 13b2-2 of the Securities Exchange Act of 1934, as amended. The Board has discussed this matter and has determined that it does not disqualify Mr. Zizza from serving as an Independent Director. |
23
THE GABELLI EQUITY INCOME FUND
2020 TAX NOTICE TO SHAREHOLDERS (Unaudited)
During the fiscal year ended September 30, 2020, the Fund paid to shareholders ordinary income distributions totaling $0.1123, $0.1127, $0.0564, and $0.1445 for each of Class AAA, Class A, Class C, and Class I, respectively, and long term capital gains totaling $136,799,128, 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 fiscal year ended September 30, 2020, 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 0.00% of the ordinary income distribution as qualified interest income pursuant to the Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010.
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.
Portfolio Manager Biography
Mario J. Gabelli, CFA, is Chairman, Chief Executive Officer, and Chief Investment Officer - Value Portfolios of GAMCO Investors, Inc. that he founded in 1977, and Chief Investment Officer - Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management Inc. He is also Executive Chairman of Associated Capital Group, 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.
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. Both the commentary and the financial statements, including the portfolio of investments, will be available on our website at www.gabelli.com.
Gabelli Funds and Your Personal Privacy
|
Who are we?
The Gabelli 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., a publicly held company with subsidiaries and affiliates that provide investment advisory 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.
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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. Executive Chairman, Associated Capital Group, Inc.
Elizabeth C. Bogan Senior Lecturer, Princeton University
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, LLC
Robert J. Morrissey Partner, Morrissey, Hawkins & Lynch
Kuni Nakamura President, Advanced Polymer, Inc.
Anthonie C. van Ekris Chairman, BALMAC International, Inc. |
Salvatore J. Zizza Chairman, Zizza & Associates Corp.
OFFICERS
Bruce N. Alpert President
John C. Ball Treasurer
Peter Goldstein Secretary
Richard J. Walz Chief Compliance Officer
DISTRIBUTOR
G.distributors, LLC
CUSTODIAN
State Street Bank and Trust Company
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
DST Asset Manager Solutions, Inc.
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.
GAB444Q320AR
The Gabelli Small Cap Growth Fund
Annual Report — September 30, 2020
To Our Shareholders,
For the fiscal year ended September 30, 2020, the net asset value (NAV) total return per Class AAA Share of The Gabelli Small Cap Growth Fund was (2.1)% compared with a total return of 0.4% for the Russell 2000 Index. Other classes of shares are available. See page 3 for performance information for all classes of shares.
Enclosed are the financial statements, including the summary schedule of investments, as of September 30, 2020.
Performance Discussion
The Fund invests primarily in small cap companies, that through bottom-up fundamental research, the portfolio manager believes are attractively priced relative to their earnings growth potential or private market value. The Fund characterizes small capitalization companies as those companies with a market capitalization of $3 billion or less at the time of the Fund’s initial investment.
The novel coronavirus that causes COVID-19 spreading rapidly around the globe, and societies everywhere responded with various forms of “social distancing”, culminated with most of the global economy being effectively shut down. First and foremost, our thoughts are with all those personally impacted by the virus, with either themselves or a loved one being afflicted, as well as those unemployed or furloughed as a result of business shutdowns. We applaud the heroic efforts of all of our health care workers, as well as those employed in other essential businesses, keeping our grocery shelves stocked, our public transportation running, and our waste collected.
The cost of closures and social distancing was considerable, as the global economy nearly ground to a halt. The Fed slashed rates near zero, and bought securities in a number of asset classes – treasuries, mortgage backed securities, asset backed securities, corporate credit, loans backed by the Small Business Administration – in order to stabilize markets and the economy.
While this recession was especially painful due to its quickness and severity, we are reminded that bear markets, like recessions, are necessary to the capitalist system, cleansing its excesses. Over the four decades plus history of our Firm, there have been five bear markets ranging in length from three to thirty months. We had been anticipating a correction for some time, though the trigger for and pace of the decline – one of the most rapid in history – took us by surprise. The market quickly bounced into technical “bull market” status from its lows.
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s website (https://gabelli.com/), and you will be notified by mail each time a report is posted and provided with a website link to access the report. If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. To elect to receive all future reports on paper free of charge, please contact your financial intermediary, or, if you invest directly with the Fund, you may call 800-422-3554 or send an email request to info@gabelli.com
We continue to emphasize the basics: does a company’s business model remain sound? Does it have a strong enough balance sheet to withstand the short term pain? Is management focused on shareholder value? The situation changes daily, but we believe the best way to participate in the return of health and prosperity is to own a portfolio of excellent businesses.
Among the better performing stocks for the fiscal year were: Navistar International Corp. (2.6% of net assets as of September 30, 2020), Lisle, Illinois based Navistar is a leading North American commercial vehicle manufacturer and one that, for the majority of its history, had been the only one without a global parent. Quidel Corporation (1.5%) develops, manufactures, and markets diagnostic testing solutions for applications in infectious diseases, cardiology, thyroid, women’s and general health, eye health, gastrointestinal diseases, and toxicology worldwide. Rollins, Inc., (1.3%) through its subsidiaries, provides pest and termite control services to residential and commercial customers. It offers protection against termite damage, rodents, and insects to homes and businesses, including hotels, food service establishments, food manufacturers, retailers, and transportation companies.
Our weaker performing stocks during the year were: Ryman Hospitality Properties, Inc. (0.8%), a leading lodging and hospitality real estate investment trust that specializes in upscale convention center resorts and country music entertainment experiences. Kaman Corporation (1.7%), which together with its subsidiaries, operates in the aerospace, medical, and industrial markets. Crane Co. (1.1%), which manufactures and sells engineered industrial products in the United States, Canada, the United Kingdom, Continental Europe, and internationally.
We appreciate your confidence and trust.
2
Comparative Results
Average Annual Returns through September 30, 2020 (a)(b) (Unaudited) | Since | ||||||||||||||||||||||||
Inception | |||||||||||||||||||||||||
1 Year | 5 Year | 10 Year | 15 Year | (10/22/91) | |||||||||||||||||||||
Class AAA (GABSX) | (2.08 | )% | 6.57 | % | 8.75 | % | 7.64 | % | 11.34 | % | |||||||||||||||
Russell 2000 Index. | 0.39 | 8.00 | 9.85 | 7.30 | 9.05 | ||||||||||||||||||||
S&P SmallCap 600 Index | (8.29 | ) | 7.20 | 10.57 | 7.50 | N/A | (e) | ||||||||||||||||||
Lipper Small-Cap Core Funds Average | (7.81 | ) | 6.30 | 8.72 | 6.48 | N/A | (f) | ||||||||||||||||||
Class A (GCASX) | (2.08 | ) | 6.57 | 8.75 | 7.63 | 11.34 | |||||||||||||||||||
With sales charge (c) | (7.71 | ) | 5.31 | 8.11 | 7.21 | 11.11 | |||||||||||||||||||
Class C (GCCSX) | (2.80 | ) | 5.78 | 7.94 | 6.84 | 10.86 | |||||||||||||||||||
With contingent deferred sales charge (d) | (3.77 | ) | 5.78 | 7.94 | 6.84 | 10.86 | |||||||||||||||||||
Class I (GACIX) | (1.83 | ) | 6.84 | 9.02 | 7.87 | 11.47 |
In the current prospectuses dated January 28, 2020, the expense ratios for Class AAA, A, C, and I Shares are 1.40%, 1.40%, 2.15%, and 1.15%, respectively. See page 12 for the expense ratios for the fiscal year ended September 30, 2020. Class AAA and Class I Shares have no sales charge. The maximum sales charge for Class A and Class 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. 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 of purchase. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The prospectuses contain 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 associated with 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 and the S&P SmallCap 600 Index is an unmanaged indicator which measures the performance of the small cap segment of the U.S. equity market. The Lipper Small-Cap Core Funds Average reflects the average performance of mutual funds classified in this particular category. Dividends are considered reinvested. You cannot invest directly in an index. |
(b) | The Fund’s fiscal year end is 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 SmallCap 600 Index inception date as of December 31, 1994. |
(f) | Lipper Small-Cap Core Funds Average inception date as of December 31, 1991. |
3
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI SMALL CAP GROWTH FUND CLASS AAA AND S&P SMALL CAP 600 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. |
4
The Gabelli Small Cap Growth Fund
Disclosure of Fund Expenses (Unaudited)
For the Six Month Period from April 1, 2020 through September 30, 2020 | 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, 2020.
Beginning Account Value 04/01/20 | Ending Account Value 09/30/20 | Annualized Expense Ratio | Expenses Paid During Period* | |||||||||||||||||
The Gabelli Small Cap Growth Fund |
| |||||||||||||||||||
Actual Fund Return |
| |||||||||||||||||||
Class AAA | $ | 1,000.00 | $ | 1,303.40 | 1.39 | % | $ | 8.00 | ||||||||||||
Class A | $ | 1,000.00 | $ | 1,303.40 | 1.39 | % | $ | 8.00 | ||||||||||||
Class C | $ | 1,000.00 | $ | 1,298.80 | 2.14 | % | $ | 12.30 | ||||||||||||
Class I | $ | 1,000.00 | $ | 1,305.10 | 1.14 | % | $ | 6.57 | ||||||||||||
Hypothetical 5% Return |
| |||||||||||||||||||
Class AAA | $ | 1,000.00 | $ | 1,018.05 | 1.39 | % | $ | 7.01 | ||||||||||||
Class A | $ | 1,000.00 | $ | 1,018.05 | 1.39 | % | $ | 7.01 | ||||||||||||
Class C | $ | 1,000.00 | $ | 1,014.30 | 2.14 | % | $ | 10.78 | ||||||||||||
Class I | $ | 1,000.00 | $ | 1,019.30 | 1.14 | % | $ | 5.76 |
* | 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 366. |
5
Summary of Portfolio Holdings (Unaudited)
The following table presents portfolio holdings as a percent of net assets as of September 30, 2020:
The Gabelli Small Cap Growth Fund
Equipment and Supplies | 14.7 | % | ||
Food and Beverage | 9.6 | % | ||
Diversified Industrial | 9.0 | % | ||
Health Care | 6.4 | % | ||
Building and Construction | 6.2 | % | ||
Retail | 4.8 | % | ||
Hotels and Gaming | 3.6 | % | ||
Financial Services | 3.6 | % | ||
Specialty Chemicals | 3.5 | % | ||
Automotive: Parts and Accessories | 3.5 | % | ||
Aviation: Parts and Services | 3.1 | % | ||
Business Services | 3.0 | % | ||
Automotive | 2.6 | % | ||
Consumer Products | 2.6 | % | ||
Machinery | 2.4 | % | ||
Real Estate | 2.3 | % | ||
Computer Software and Services | 2.2 | % | ||
Energy and Utilities | 2.2 | % | ||
Aerospace | 2.1 | % | ||
Electronics | 1.8 | % | ||
Transportation | 1.8 | % |
Consumer Services | 1.6 | % | ||
Broadcasting | 1.6 | % | ||
Entertainment | 1.3 | % | ||
Manufactured Housing and Recreational Vehicles | 1.2 | % | ||
Telecommunications | 1.0 | % | ||
Publishing | 0.8 | % | ||
Cable | 0.7 | % | ||
Environmental Services | 0.5 | % | ||
Miscellaneous Investments | 0.5 | % | ||
Home Furnishings | 0.3 | % | ||
Closed-End Funds | 0.2 | % | ||
Wireless Communications | 0.1 | % | ||
Metals and Mining | 0.1 | % | ||
Communications Equipment | 0.1 | % | ||
Agriculture | 0.0 | %* | ||
Other Assets and Liabilities (Net) | (1.0 | )% | ||
|
| |||
100.0 | % | |||
|
|
* | Amount represents less than 0.05%. |
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-PORT. 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-PORT 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.
6
The Gabelli Small Cap Growth Fund
Summary Schedule of Investments — September 30, 2020
Shares | Cost | Market Value | ||||||||||
COMMON STOCKS* — 100.0% |
| |||||||||||
Aerospace — 2.1% |
| |||||||||||
853,000 | Aerojet Rocketdyne Holdings Inc.† | $ | 4,102,921 | $ | 34,026,170 | |||||||
60,000 | Various Securities | 794,550 | 1,099,200 | |||||||||
|
|
|
| |||||||||
4,897,471 | 35,125,370 | |||||||||||
|
|
|
| |||||||||
Agriculture — 0.0% |
| |||||||||||
25,800 | Various Securities | 351,263 | 316,500 | |||||||||
|
|
|
| |||||||||
Automotive — 2.6% |
| |||||||||||
979,000 | Navistar International Corp.† | 24,284,197 | 42,625,660 | |||||||||
1,500 | Various Securities | 55,714 | 127,920 | |||||||||
|
|
|
| |||||||||
24,339,911 | 42,753,580 | |||||||||||
|
|
|
| |||||||||
Automotive: Parts and Accessories — 3.2% |
| |||||||||||
1,135,000 | Dana Inc. | 9,544,908 | 13,983,200 | |||||||||
880,000 | Freni Brembo SpA† | 1,632,589 | 8,800,929 | |||||||||
247,400 | Strattec Security Corp.(a) | 4,786,696 | 4,923,260 | |||||||||
1,255,422 | Various Securities | 8,121,407 | 24,866,788 | |||||||||
|
|
|
| |||||||||
24,085,600 | 52,574,177 | |||||||||||
|
|
|
| |||||||||
Aviation: Parts and Services — 3.1% |
| |||||||||||
696,000 | Kaman Corp. | 10,704,490 | 27,123,120 | |||||||||
4,070,000 | Signature Aviation plc | 9,884,377 | 12,546,427 | |||||||||
242,100 | Various Securities | 3,173,630 | 11,854,364 | |||||||||
|
|
|
| |||||||||
23,762,497 | 51,523,911 | |||||||||||
|
|
|
| |||||||||
Broadcasting — 1.6% |
| |||||||||||
2,258,602 | Various Securities | 11,555,907 | 25,994,188 | |||||||||
|
|
|
| |||||||||
Building and Construction — 6.2% |
| |||||||||||
464,000 | Herc Holdings Inc.† | 15,667,050 | 18,379,040 | |||||||||
400,000 | Lennar Corp., Cl. B | 9,784,772 | 26,264,000 | |||||||||
2,700 | NVR Inc.† | 1,908,453 | 11,024,424 | |||||||||
1,008,800 | Various Securities | 12,638,406 | 45,796,898 | |||||||||
|
|
|
| |||||||||
39,998,681 | 101,464,362 | |||||||||||
|
|
|
| |||||||||
Business Services — 3.0% |
| |||||||||||
225,000 | IAA Inc.† | 1,845,352 | 11,715,750 | |||||||||
1,739,000 | Trans-Lux Corp.†(a) | 1,714,044 | 347,800 | |||||||||
2,288,600 | Various Securities | 14,375,000 | 37,611,339 | |||||||||
|
|
|
| |||||||||
17,934,396 | 49,674,889 | |||||||||||
|
|
|
| |||||||||
Cable — 0.7% | ||||||||||||
601,000 | Various Securities | 9,582,976 | 12,156,410 | |||||||||
|
|
|
| |||||||||
Communications Equipment — 0.1% |
| |||||||||||
248,000 | Various Securities | 1,684,302 | 949,840 | |||||||||
|
|
|
| |||||||||
Computer Software and Services — 2.2% |
| |||||||||||
39,000 | Rockwell Automation Inc. | 918,657 | 8,606,520 | |||||||||
42,000 | Tyler Technologies Inc.† | 86,100 | 14,639,520 | |||||||||
997,000 | Various Securities | 7,733,624 | 12,689,170 | |||||||||
|
|
|
| |||||||||
8,738,381 | 35,935,210 | |||||||||||
|
|
|
| |||||||||
Consumer Products — 2.6% |
| |||||||||||
111,000 | Swedish Match AB | 2,143,578 | 9,082,421 |
Shares | Cost | Market Value | ||||||||||
1,179,900 | Various Securities | $ | 13,359,245 | $ | 33,245,921 | |||||||
|
|
|
| |||||||||
15,502,823 | 42,328,342 | |||||||||||
|
|
|
| |||||||||
Consumer Services — 1.6% |
| |||||||||||
394,000 | Rollins Inc. | 578,623 | 21,350,860 | |||||||||
323,750 | Various Securities | 1,468,383 | 4,690,352 | |||||||||
|
|
|
| |||||||||
2,047,006 | 26,041,212 | |||||||||||
|
|
|
| |||||||||
Diversified Industrial — 9.0% |
| |||||||||||
364,000 | Crane Co. | 7,932,157 | 18,247,320 | |||||||||
1,410,000 | Griffon Corp. | 16,076,530 | 27,551,400 | |||||||||
952,000 | Myers Industries Inc. | 13,237,132 | 12,594,960 | |||||||||
370,000 | Textron Inc. | 2,276,853 | 13,353,300 | |||||||||
2,821,596 | Various Securities | 48,131,173 | 76,162,038 | |||||||||
|
|
|
| |||||||||
87,653,845 | 147,909,018 | |||||||||||
|
|
|
| |||||||||
Electronics — 1.8% |
| |||||||||||
161,000 | Badger Meter Inc. | 2,143,613 | 10,524,570 | |||||||||
216,000 | Bel Fuse Inc., Cl. A(a) | 4,115,394 | 2,408,400 | |||||||||
500,000 | CTS Corp. | 4,412,357 | 11,015,000 | |||||||||
277,000 | Various Securities | 2,239,423 | 5,007,348 | |||||||||
|
|
|
| |||||||||
12,910,787 | 28,955,318 | |||||||||||
|
|
|
| |||||||||
Energy and Utilities — 2.2% |
| |||||||||||
2,658,500 | Various Securities | 14,612,885 | 35,655,292 | |||||||||
|
|
|
| |||||||||
Entertainment — 1.3% |
| |||||||||||
703,500 | Various Securities | 8,634,548 | 20,544,624 | |||||||||
|
|
|
| |||||||||
Environmental Services — 0.5% |
| |||||||||||
92,000 | Various Securities | 831,067 | 8,588,200 | |||||||||
|
|
|
| |||||||||
Equipment and Supplies — 14.7% |
| |||||||||||
439,500 | AMETEK Inc. | 747,849 | 43,686,300 | |||||||||
141,000 | Crown Holdings Inc.† | 569,461 | 10,837,260 | |||||||||
205,500 | Franklin Electric Co. Inc. | 804,756 | 12,089,565 | |||||||||
500,000 | Graco Inc. | 3,336,420 | 30,675,000 | |||||||||
51,000 | IDEX Corp. | 186,874 | 9,302,910 | |||||||||
715,000 | Mueller Industries Inc. | 19,007,547 | 19,347,900 | |||||||||
175,000 | Tennant Co. | 2,986,539 | 10,563,000 | |||||||||
786,000 | The Gorman-Rupp Co. | 12,468,177 | 23,155,560 | |||||||||
2,557,300 | Various Securities | 24,482,813 | 81,138,470 | |||||||||
|
|
|
| |||||||||
64,590,436 | 240,795,965 | |||||||||||
|
|
|
| |||||||||
Financial Services — 3.6% |
| |||||||||||
131,000 | Calamos Asset Management Inc., Escrow†(b) | 0 | 0 | |||||||||
738,000 | KKR & Co. Inc. | 3,183,446 | 25,342,920 | |||||||||
10,000 | Waterloo Investment Holdings Ltd.†(b) | 1,373 | 2,100 | |||||||||
3,190,670 | Various Securities | 34,128,758 | 33,662,985 | |||||||||
|
|
|
| |||||||||
37,313,577 | 59,008,005 | |||||||||||
|
|
|
| |||||||||
Food and Beverage — 9.6% |
| |||||||||||
204,500 | Chr. Hansen Holding A/S | 8,521,649 | 22,730,452 | |||||||||
415,000 | Flowers Foods Inc. | 986,370 | 10,096,950 | |||||||||
128,000 | ITO EN Ltd. | 2,461,981 | 9,114,683 |
See accompanying notes to financial statements.
7
The Gabelli Small Cap Growth Fund
Summary Schedule of Investments (Continued) — September 30, 2020
Shares | Cost | Market Value | ||||||||||
COMMON STOCKS* (Continued) |
| |||||||||||
Food and Beverage (Continued) |
| |||||||||||
660,000 | Kikkoman Corp. | $ | 5,955,162 | $ | 36,421,562 | |||||||
700,000 | Maple Leaf Foods Inc. | 12,211,478 | 14,272,840 | |||||||||
5,872,001 | Various Securities | 28,283,550 | 65,443,969 | |||||||||
|
|
|
| |||||||||
58,420,190 | 158,080,456 | |||||||||||
|
|
|
| |||||||||
Health Care — 6.4% |
| |||||||||||
40,500 | Masimo Corp.† | 977,000 | 9,560,430 | |||||||||
111,000 | Quidel Corp.† | 514,839 | 24,351,180 | |||||||||
1,642,700 | Various Securities | 26,432,632 | 71,686,934 | |||||||||
|
|
|
| |||||||||
27,924,471 | 105,598,544 | |||||||||||
|
|
|
| |||||||||
Home Furnishings — 0.3% |
| |||||||||||
281,000 | Various Securities | 3,526,109 | 5,279,240 | |||||||||
|
|
|
| |||||||||
Hotels and Gaming — 3.6% |
| |||||||||||
136,800 | Churchill Downs Inc. | 1,308,844 | 22,410,576 | |||||||||
342,000 | Ryman Hospitality Properties Inc., REIT | 7,089,047 | 12,585,600 | |||||||||
8,132,294 | Various Securities | 17,128,798 | 24,171,187 | |||||||||
|
|
|
| |||||||||
25,526,689 | 59,167,363 | |||||||||||
|
|
|
| |||||||||
Machinery — 2.4% |
| |||||||||||
353,000 | Astec Industries Inc. | 12,385,722 | 19,150,250 | |||||||||
1,427,000 | CNH Industrial NV† | 4,242,733 | 11,159,140 | |||||||||
498,300 | Various Securities | 7,329,089 | 8,813,966 | |||||||||
|
|
|
| |||||||||
23,957,544 | 39,123,356 | |||||||||||
|
|
|
| |||||||||
Manufactured Housing and Recreational Vehicles — 1.2% |
| |||||||||||
71,500 | Cavco Industries Inc.† | 1,435,393 | 12,892,165 | |||||||||
209,000 | Various Securities | 1,887,271 | 6,675,630 | |||||||||
|
|
|
| |||||||||
3,322,664 | 19,567,795 | |||||||||||
|
|
|
| |||||||||
Metals and Mining — 0.1% |
| |||||||||||
160,000 | Various Securities | 571,901 | 1,018,337 | |||||||||
|
|
|
| |||||||||
Publishing — 0.8% |
| |||||||||||
980,000 | The E.W. Scripps Co., Cl. A | 6,690,668 | 11,211,200 | |||||||||
71,200 | Various Securities | 1,579,103 | 1,918,022 | |||||||||
|
|
|
| |||||||||
8,269,771 | 13,129,222 | |||||||||||
|
|
|
| |||||||||
Real Estate — 2.3% |
| |||||||||||
259,000 | Griffin Industrial Realty | 4,769,035 | 13,843,550 | |||||||||
558,000 | The St. Joe Co.† | 9,085,399 | 11,511,540 | |||||||||
456,567 | Various Securities | 6,505,504 | 12,062,605 | |||||||||
|
|
|
| |||||||||
20,359,938 | 37,417,695 | |||||||||||
|
|
|
| |||||||||
Retail — 4.8% |
| |||||||||||
101,000 | Copart Inc.† | 856,018 | 10,621,160 | |||||||||
550,000 | Ingles Markets Inc., Cl. A | 8,345,405 | 20,922,000 | |||||||||
238,000 | Rush Enterprises Inc., Cl. B | 2,569,325 | 10,543,400 | |||||||||
933,175 | Various Securities | 12,757,605 | 36,114,269 | |||||||||
|
|
|
| |||||||||
24,528,353 | 78,200,829 | |||||||||||
|
|
|
|
Shares | Cost | Market Value | ||||||||||
Specialty Chemicals — 3.5% |
| |||||||||||
1,800,000 | Ferro Corp.† | $ | 8,911,421 | $ | 22,320,000 | |||||||
285,000 | H.B. Fuller Co. | 3,612,486 | 13,047,300 | |||||||||
619,200 | Various Securities | 7,305,901 | 22,428,712 | |||||||||
|
|
|
| |||||||||
19,829,808 | 57,796,012 | |||||||||||
|
|
|
| |||||||||
Telecommunications — 1.0% |
| |||||||||||
1,451,000 | Various Securities | 7,197,191 | 16,225,943 | |||||||||
|
|
|
| |||||||||
Transportation — 1.8% |
| |||||||||||
440,000 | GATX Corp. | 12,935,300 | 28,050,000 | |||||||||
98,600 | Various Securities | 779,328 | 736,622 | |||||||||
|
|
|
| |||||||||
13,714,628 | 28,786,622 | |||||||||||
|
|
|
| |||||||||
Wireless Communications — 0.1% |
| |||||||||||
53,500 | Various Securities | 2,067,534 | 1,579,855 | |||||||||
|
|
|
| |||||||||
TOTAL COMMON STOCKS | 650,245,150 | 1,639,265,682 | ||||||||||
|
|
|
| |||||||||
CLOSED-END FUNDS* — 0.2% |
| |||||||||||
278,266 | Various Securities | 3,815,933 | 3,962,079 | |||||||||
|
|
|
| |||||||||
PREFERRED STOCKS* — 0.3% |
| |||||||||||
Automotive: Parts and Accessories — 0.3% |
| |||||||||||
115,000 | Various Securities | 788,352 | 3,969,469 | |||||||||
|
|
|
| |||||||||
RIGHTS* — 0.0% |
| |||||||||||
Entertainment — 0.0% |
| |||||||||||
1,680,000 | Media General Inc., | 2 | 2 | |||||||||
|
|
|
| |||||||||
WARRANTS* — 0.0% |
| |||||||||||
Business Services — 0.0% |
| |||||||||||
1 | Various Securities | 0 | 652 | |||||||||
|
|
|
| |||||||||
Diversified Industrial — 0.0% |
| |||||||||||
140,000 | Various Securities | 95,648 | 51,800 | |||||||||
|
|
|
| |||||||||
TOTAL WARRANTS | 95,648 | 52,452 | ||||||||||
|
|
|
| |||||||||
TOTAL MISCELLANEOUS INVESTMENTS — | 2,273,446 | 7,255,027 | ||||||||||
|
|
|
| |||||||||
TOTAL INVESTMENTS — 101.0% | $ | 657,218,531 | 1,654,504,711 | |||||||||
|
| |||||||||||
Other Assets and Liabilities (Net) — (1.0)% |
| (15,619,202 | ) | |||||||||
|
| |||||||||||
NET ASSETS — 100.0% |
| $ | 1,638,885,509 | |||||||||
|
|
See accompanying notes to financial statements.
8
The Gabelli Small Cap Growth Fund
Summary Schedule of Investments (Continued) — September 30, 2020
This Summary Schedule of Investments does not reflect the complete portfolio holdings of the Fund. It includes the Fund’s 50 largest holdings, each investment of any issuer that exceeds 1% of the Fund’s net assets, and affiliated or Level 3 securities, if any.
* | “Various Securities” consist of issuers not identified as a top 50 holding, issues or issuers not exceeding 1% of net assets individually or in the aggregate, any issuers that are not affiliated or level 3 securities, if any, as of September 30, 2020. The complete Schedule of Investments is available (i) without charge, upon request, by calling 800-GABELLI (800-422-3554); and (ii) on the SEC’S website at http://www.sec.gov. |
(a) | Security considered an affiliated holding because the Fund owns at least 5% of its outstanding shares. |
(b) | Security is valued under procedures adopted by the Board of Trustees and is classified as Level 3 in the fair value hierarchy. |
(c) | Represents previously undisclosed, unrestricted securities which the Fund has held for less than one year. |
† | Non-income producing security. |
REIT Real Estate Investment Trust
CVR Contingent Value Right
See accompanying notes to financial statements.
9
The Gabelli Small Cap Growth Fund
Statement of Assets and Liabilities
September 30, 2020
Assets: | ||||
Investments, at value (cost $641,833,362) | $1,632,981,701 | |||
Investments in affiliates, at value | 21,523,010 | |||
Foreign currency, at value (cost $116,084) | 116,991 | |||
Cash | 530 | |||
Receivable for Fund shares sold | 465,344 | |||
Dividends and interest receivable | 1,518,193 | |||
Prepaid expenses | 31,102 | |||
Total Assets | 1,656,636,871 | |||
Liabilities: | ||||
Line of credit payable | 13,504,000 | |||
Payable for Fund shares redeemed | 1,824,625 | |||
Payable for investment advisory fees | 1,358,339 | |||
Payable for distribution fees | 271,137 | |||
Payable for accounting fees | 3,750 | |||
Other accrued expenses | 789,511 | |||
Total Liabilities | 17,751,362 | |||
Net Assets | $1,638,885,509 | |||
Net Assets Consist of: | ||||
Paid-in capital | $ 342,657,825 | |||
Total distributable earnings | 1,296,227,684 | |||
Net Assets | $1,638,885,509 | |||
Shares of Capital Stock, each at $0.001 par value: | ||||
Class AAA: | ||||
Net Asset Value, offering, and redemption price per share ($884,340,668 ÷ 20,425,014 shares outstanding; 150,000,000 shares authorized) . | $43.30 | |||
Class A: | ||||
Net Asset Value and redemption price per share ($110,975,294 ÷ 2,565,244 shares outstanding; 50,000,000 shares authorized) | $43.26 | |||
Maximum offering price per share (NAV ÷ 0.9425, based on maximum sales charge of 5.75% of the offering price) | $45.90 | |||
Class C: | ||||
Net Asset Value and offering price per share ($75,504,438 ÷ 2,100,326 shares outstanding; 50,000,000 shares authorized) | $35.95 | (a) | ||
Class I: | ||||
Net Asset Value, offering, and redemption price per share ($568,065,109 ÷ 12,732,362 shares outstanding; 50,000,000 shares authorized) | $44.62 |
(a) | Redemption price varies based on the length of time held. |
Statement of Operations
For the Year Ended September 30, 2020
Investment Income: | ||||
Dividends - unaffiliated (net of foreign withholding taxes of $270,986) | $ | 28,314,007 | ||
Dividends - affiliated | 242,333 | |||
Interest | 6,229 | |||
|
| |||
Total Investment Income | 28,562,569 | |||
|
| |||
Expenses: | ||||
Investment advisory fees | 19,066,320 | |||
Distribution fees - Class AAA | 2,512,364 | |||
Distribution fees - Class A | 334,740 | |||
Distribution fees - Class C | 999,847 | |||
Shareholder services fees | 1,708,419 | |||
Interest expense | 419,394 | |||
Shareholder communication expenses | 359,998 | |||
Custodian fees | 228,977 | |||
Directors’ fees | 139,825 | |||
Registration expenses | 83,681 | |||
Legal and audit fees | 52,140 | |||
Accounting fees | 45,000 | |||
Miscellaneous expenses | 139,028 | |||
|
| |||
Total Expenses | 26,089,733 | |||
|
| |||
Less: | ||||
Advisory fee reduction on unsupervised assets (See Note 3) | (106,756 | ) | ||
Expenses paid indirectly by broker (See Note 6) | (22,695 | ) | ||
|
| |||
Total Reductions | (129,451 | ) | ||
|
| |||
Net Expenses | 25,960,282 | |||
|
| |||
Net Investment Income | 2,602,287 | |||
|
| |||
Net Realized and Unrealized Gain/(Loss) on Investments and Foreign Currency: | ||||
Net realized gain on investments - unaffiliated | 424,662,390 | |||
Net realized loss on investments - affiliated | (3,389,906 | ) | ||
Net realized loss on foreign currency transactions | (63,824 | ) | ||
|
| |||
Net realized gain on investments and foreign currency transactions | 421,208,660 | |||
|
| |||
Net change in unrealized appreciation/depreciation: | ||||
on investments | (507,444,641 | ) | ||
on affiliates | 6,040,722 | |||
on foreign currency translations | 23,165 | |||
|
| |||
Net change in unrealized appreciation/ depreciation on investments and foreign currency translations | (501,380,754 | ) | ||
|
| |||
Net Realized and Unrealized Gain/(Loss) on Investments and Foreign Currency | (80,172,094 | ) | ||
|
| |||
Net Decrease in Net Assets Resulting from Operations | $ | (77,569,807 | ) | |
|
|
See accompanying notes to financial statements.
10
The Gabelli Small Cap Growth Fund
Statement of Changes in Net Assets
Year Ended September 30, 2020 | Year Ended September 30, 2019 | |||||||||
Operations: | ||||||||||
Net investment income | $ | 2,602,287 | $ | 3,760,794 | ||||||
Net realized gain on investments and foreign currency transactions | 421,208,660 | 501,746,696 | ||||||||
Net change in unrealized appreciation/depreciation on investments and foreign currency translations | (501,380,754 | ) | (750,427,887 | ) | ||||||
|
|
|
| |||||||
Net Decrease in Net Assets Resulting from Operations | (77,569,807 | ) | (244,920,397 | ) | ||||||
|
|
|
| |||||||
Distributions to Shareholders: | ||||||||||
Class AAA | (225,788,690 | ) | (62,112,538 | ) | ||||||
Class A | (32,301,744 | ) | (7,573,003 | ) | ||||||
Class C | (27,339,966 | ) | (8,527,032 | ) | ||||||
Class I | (154,155,709 | ) | (61,933,596 | ) | ||||||
|
|
|
| |||||||
Total Distributions to Shareholders | (439,586,109 | ) | (140,146,169 | ) | ||||||
|
|
|
| |||||||
Capital Share Transactions: | ||||||||||
Class AAA | (95,842,744 | ) | (296,298,972 | ) | ||||||
Class A | (23,192,192 | ) | (18,442,606 | ) | ||||||
Class C | (33,587,375 | ) | (50,785,008 | ) | ||||||
Class I | (137,549,435 | ) | (564,742,691 | ) | ||||||
|
|
|
| |||||||
Net Decrease in Net Assets from Capital Share Transactions | (290,171,746 | ) | (930,269,277 | ) | ||||||
|
|
|
| |||||||
Redemption Fees | 5,069 | 1,663 | ||||||||
|
|
|
| |||||||
Net Decrease in Net Assets | (807,322,593 | ) | (1,315,334,180 | ) | ||||||
Net Assets: | ||||||||||
Beginning of year | 2,446,208,102 | 3,761,542,282 | ||||||||
|
|
|
| |||||||
End of year | $ | 1,638,885,509 | $ | 2,446,208,102 | ||||||
|
|
|
|
See accompanying notes to financial statements.
11
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 Beginning | Net Investment Income | Net | Total from Investment | Net Investment | Net | Total Distributions | Redemption | Net Asset | Total | Net Assets | Net | Operating Expenses | Portfolio | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class AAA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | $ | 53.92 | $ | 0.04 | $ | (0.63 | ) | $ | (0.59 | ) | $ | (0.07 | ) | $ | (9.96 | ) | $ | (10.03 | ) | $ | 0.00 | $ | 43.30 | (2.08 | )% | $ | 884,341 | 0.08% | 1.41%(f) | 0%(g) | ||||||||||||||||||||||||||||||||||||||||
2019 | 59.61 | 0.03 | (3.50 | ) | (3.47 | ) | (0.09 | ) | (2.13 | ) | (2.22 | ) | 0.00 | 53.92 | (5.72 | ) | 1,243,608 | 0.06 | 1.39(f) | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||
2018 | 58.63 | 0.09 | 4.01 | 4.10 | — | (3.12 | ) | (3.12 | ) | 0.00 | 59.61 | 7.21 | 1,711,850 | 0.16 | 1.36 | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 | 50.13 | 0.02 | 10.47 | 10.49 | — | (1.99 | ) | (1.99 | ) | 0.00 | 58.63 | 21.56 | 1,882,823 | 0.04 | 1.38 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 | 45.47 | 0.02 | 6.36 | 6.38 | — | (1.72 | ) | (1.72 | ) | 0.00 | 50.13 | 14.26 | 1,779,333 | 0.05 | 1.39(h) | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | $ | 53.89 | $ | 0.05 | $ | (0.64 | ) | $ | (0.59 | ) | $ | (0.08 | ) | $ | (9.96 | ) | $ | (10.04 | ) | $ | 0.00 | $ | 43.26 | (2.08 | )% | $ | 110,975 | 0.11% | 1.41%(f) | 0%(g) | ||||||||||||||||||||||||||||||||||||||||
2019 | 59.58 | 0.03 | (3.50 | ) | (3.47 | ) | (0.09 | ) | (2.13 | ) | (2.22 | ) | 0.00 | 53.89 | (5.73 | ) | 170,189 | 0.06 | 1.39(f) | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||
2018 | 58.60 | 0.09 | 4.01 | 4.10 | — | (3.12 | ) | (3.12 | ) | 0.00 | 59.58 | 7.21 | 208,947 | 0.16 | 1.36 | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 | 50.11 | 0.01 | 10.47 | 10.48 | — | (1.99 | ) | (1.99 | ) | 0.00 | 58.60 | 21.55 | 229,282 | 0.02 | 1.38 | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 | 45.45 | 0.02 | 6.36 | 6.38 | — | (1.72 | ) | (1.72 | ) | 0.00 | 50.11 | 14.26 | 270,163 | 0.05 | 1.39(h) | 4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | $ | 46.63 | $ | (0.24 | ) | $ | (0.48 | ) | $ | (0.72 | ) | — | $ | (9.96 | ) | $ | (9.96) | $ | 0.00 | $ | 35.95 | (2.80 | )% | $ | 75,505 | (0.65)% | 2.16%(f) | 0%(g) | ||||||||||||||||||||||||||||||||||||||||||
2019 | 52.16 | (0.32 | ) | (3.08 | ) | (3.40 | ) | — | (2.13 | ) | (2.13 | ) | 0.00 | 46.63 | (6.44 | ) | 141,522 | (0.69) | 2.14(f) | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||
2018 | 52.05 | (0.30 | ) | 3.53 | 3.23 | — | (3.12 | ) | (3.12 | ) | 0.00 | 52.16 | 6.41 | 215,939 | (0.59) | 2.11 | 3 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 | 45.04 | (0.34 | ) | 9.34 | 9.00 | — | (1.99 | ) | (1.99 | ) | 0.00 | 52.05 | 20.65 | 233,786 | (0.71) | 2.13 | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 | 41.31 | (0.30 | ) | 5.75 | 5.45 | — | (1.72 | ) | (1.72 | ) | 0.00 | 45.04 | 13.41 | 227,464 | (0.70) | 2.14(h) | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Class I | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | $ | 55.29 | $ | 0.15 | $ | (0.64 | ) | $ | (0.49 | ) | $ | (0.22 | ) | $ | (9.96 | ) | $ | (10.18 | ) | $ | 0.00 | $ | 44.62 | (1.83 | )% | $ | 568,065 | 0.34% | 1.16%(f) | 0%(g) | ||||||||||||||||||||||||||||||||||||||||
2019 | 61.09 | 0.17 | (3.59 | ) | (3.42 | ) | (0.25 | ) | (2.13 | ) | (2.38 | ) | 0.00 | 55.29 | (5.50 | ) | 890,889 | 0.32 | 1.14(f) | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||
2018 | 59.86 | 0.25 | 4.10 | 4.35 | — | (3.12 | ) | (3.12 | ) | 0.00 | 61.09 | 7.49 | 1,624,806 | 0.43 | 1.11 | 3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
2017 | 51.09 | 0.16 | 10.67 | 10.83 | (0.07 | ) | (1.99 | ) | (2.06 | ) | 0.00 | 59.86 | 21.84 | 1,404,639 | 0.30 | 1.13 | 4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2016 | 46.19 | 0.13 | 6.49 | 6.62 | — | (1.72 | ) | (1.72 | ) | 0.00 | 51.09 | 14.56 | 1,138,299 | 0.29 | 1.14(h) | 4 |
† | Total return represents aggregate total return of a hypothetical $1,000 investment at the beginning of the year and sold at the end of the year including reinvestment of distributions and does not reflect the 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 Fund received credits from a designated broker who agreed to pay certain Fund operating expenses. For the years ended September 30, 2020, 2019, 2018, 2017, and 2016, there was no impact on the expense ratios. |
(e) | Ratio of operating expenses includes advisory fee reduction on unsupervised assets totaling 0.01% of net assets for the fiscal year ended September 30, 2020. For the years ended September 30, 2019, 2018, 2017, and 2016, there was no impact on the expense ratios. |
(f) | The Fund incurred interest expense during the fiscal years ended September 30, 2020 and 2019. If interest expense had not been incurred, the ratios of operating expenses to average net assets would have been 1.39% and 1.38% (Class AAA and Class A), 2.14% and 2.13% (Class C), and 1.14% and 1.13% (Class I). For the years ended September 30, 2018, 2017, and 2016, the effect of interest expense was minimal. |
(g) | Amount represents less than 0.5%. |
(h) | During the year ended September 30, 2016, the Fund received a reimbursement of custody expenses paid in prior years. Had such reimbursement (allocated by relative net asset values of the Fund’s share classes) been included in that period, the expense ratios would have been 1.38% (Class AAA and Class A), 2.13% (Class C), and 1.13% (Class I). |
See accompanying notes to financial statements.
12
The Gabelli Small Cap Growth Fund
Notes to Financial Statements
1. Organization. The Gabelli Small Cap Growth Fund is a series of the Gabelli Equity Series Funds, Inc. (the Corporation), which 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 four 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. As an investment company, the Fund follows the investment company accounting and reporting guidance, which is part of U.S. generally accepted accounting principles (GAAP) that may require the use of management estimates and assumptions in the preparation of its financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements.
The global outbreak of the novel coronavirus disease, known as COVID-19, has caused adverse effects on many companies, sectors, nations, regions and the markets in general, and may continue for an unpredictable duration. The effects of this pandemic may materially impact the value and performance of the Fund, its ability to buy and sell fund investments at appropriate valuations, and its ability to achieve its investment objectives.
New Accounting Pronouncements. To improve the effectiveness of fair value disclosure requirements, the Financial Accounting Standards Board recently issued Accounting Standard Update (ASU) 2018-13, Fair Value Measurement Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13), which adds, removes, and modifies certain aspects relating to fair value disclosure. ASU 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption of the additions relating to ASU 2018-13 is not required, even if early adoption is elected for the removals under ASU 2018-13. Management has early adopted the removals set forth in ASU 2018-13 in these financial statements and has not early adopted the additions set forth in ASU 2018-13.
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provides optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the 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
13
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
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 obligations 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 securities are valued using the closing bid price, 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. 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. OTC futures and options on futures for which market quotations are readily available will be valued by quotations received from a pricing service or, if no quotations are available from a pricing service, by quotations obtained from one or more dealers in the instrument in question by the Adviser.
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.
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 Board’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, 2020 is as follows:
Valuation Inputs | ||||||||||||||||||||
Level 1 Quoted Prices | Level 2 Other Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total Market Value at 9/30/20 | |||||||||||||||||
INVESTMENTS IN SECURITIES: | ||||||||||||||||||||
ASSETS (Market Value): | ||||||||||||||||||||
Common Stocks: | ||||||||||||||||||||
Automotive: Parts and Accessories | $ | 52,573,682 | $ | 495 | — | $ | 52,574,177 | |||||||||||||
Aviation: Parts and Services | 51,347,986 | 175,925 | — | 51,523,911 | ||||||||||||||||
Business Services | 50,421,346 | 347,800 | — | 50,769,146 | ||||||||||||||||
Consumer Services | 25,888,837 | 152,375 | — | 26,041,212 | ||||||||||||||||
Diversified Industrial | 146,447,882 | 1,461,136 | — | 147,909,018 |
14
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
Valuation Inputs | ||||||||||||||||||||
Level 1 Quoted Prices | Level 2 Other Significant Observable Inputs | Level 3 Significant Unobservable Inputs | Total Market Value at 9/30/20 | |||||||||||||||||
Equipment and Supplies | $ | 238,957,861 | $ | 1,838,104 | — | $ | 240,795,965 | |||||||||||||
Financial Services | 58,661,715 | 344,190 | $ | 2,100 | 59,008,005 | |||||||||||||||
Publishing | 12,970,522 | 158,700 | — | 13,129,222 | ||||||||||||||||
Real Estate | 36,300,248 | 1,117,447 | — | 37,417,695 | ||||||||||||||||
Specialty Chemicals | 57,794,872 | 1,140 | — | 57,796,012 | ||||||||||||||||
Other Industries (a) | 909,556,346 | — | — | 909,556,346 | ||||||||||||||||
Total Common Stocks | 1,640,921,297 | 5,597,312 | 2,100 | 1,646,520,709 | ||||||||||||||||
Closed-End Funds | 3,962,079 | — | — | 3,962,079 | ||||||||||||||||
Preferred Stocks (a) | 3,969,469 | — | — | 3,969,469 | ||||||||||||||||
Rights (a) | — | — | 2 | 2 | ||||||||||||||||
Warrants (a) | 51,800 | 652 | — | 52,452 | ||||||||||||||||
TOTAL INVESTMENTS IN SECURITIES – ASSETS | $ | 1,648,904,645 | $ | 5,597,964 | $ | 2,102 | $ | 1,654,504,711 |
(a) | Please refer to the Summary Schedule of Investments for the industry classifications of these portfolio holdings. |
The Fund did not have transfers into or out of Level 3 during the fiscal year ended September 30, 2020.
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 are 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.
Fair Valuation. Fair valued securities may be common or preferred equities, warrants, options, rights, or 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 may include backtesting the prices realized in subsequent trades of these fair valued securities to fair values previously recognized.
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
15
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
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 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 the sale of securities eligible for trading on national securities exchanges or in the over-the-counter markets. Restricted securities may sell at a price lower than similar securities that are not subject to restrictions on resale. Securities freely saleable among qualified institutional investors under special rules adopted by the SEC may be treated as liquid if they satisfy liquidity standards established by the Board. The continued liquidity of such securities is not as well assured as that of publicly traded securities, and accordingly the Board will monitor their liquidity. At September 30, 2020, the Fund did not hold any restricted securities.
Investments in other Investment Companies. The Fund may invest, from time to time, in shares of other investment companies (or entities that would be considered investment companies but are excluded from the definition pursuant to certain exceptions under the 1940 Act) (the Acquired Funds) in accordance with the 1940 Act and related rules. Shareholders in the Fund would bear the pro rata port on of the periodic expenses of the Acquired Funds in addition to the Fund’s expenses. For the fiscal year ended September 30, 2020, the Fund’s pro rata portion of the periodic expenses charged by the Acquired Funds was less than one basis point.
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.
16
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
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 capital gains as determined under GAAP. 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 sale adjustments of investments in Passive Foreign Investment Companies, redesignation of dividends paid, and basis adjustments on sale of Partnerships. These reclassifications have no impact on the NAV of the Fund. For the fiscal year ended September 30, 2020, reclassifications were made to increase paid-in capital by $69,848,476 with an offsetting adjustment to total distributable earnings.
The tax character of distributions paid during the fiscal years ended September 30, 2020 and 2019 was as follows:
Year Ended September 30, 2020* | Year Ended September 30, 2019* | |||||||||
Distributions paid from: | ||||||||||
Ordinary income (inclusive of short term capital gains) | $ | 5,852,594 | $ | 10,698,763 | ||||||
Net long term capital gains | 503,827,323 | 211,098,097 | ||||||||
|
|
|
| |||||||
Total distributions paid | $ | 509,679,917 | $ | 221,796,860 | ||||||
|
|
|
|
* | Total distributions paid differs from the Statement of Changes in Net Assets due to the utilization of equalization. |
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, 2020, the components of accumulated earnings/losses on a tax basis were as follows:
Undistributed long term capital gains | $ | 321,272,807 | |||
Net unrealized appreciation on investments | 974,954,877 | ||||
|
| ||||
Total | $ | 1,296,227,684 | |||
|
|
17
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
At September 30, 2020, the temporary differences between book basis and tax basis unrealized appreciation on investments were primarily due to deferral of losses from wash sales for tax purposes, mark-to-market adjustments on investments no longer considered passive foreign investment companies, and basis adjustments in partnerships.
The following summarizes the tax cost of investments and the related net unrealized appreciation at September 30, 2020:
Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation | |||||||||||||||||
Investments | $ | 679,562,673 | $ | 1,042,715,596 | $ | (67,773,558 | ) | $ | 974,942,038 |
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. During the fiscal year ended September 30, 2020, the Fund did not incur any income tax, interest, or penalties. As of September 30, 2020, 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. The Fund’s federal and state tax returns for the prior three fiscal years remain open, subject to examination. 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 fiscal year ended September 30, 2020, 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 $106,756.
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 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 (Distributor), an affiliate of the Adviser, at annual rates
18
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
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 fiscal year ended September 30, 2020, other than short term securities and U.S. Government obligations, aggregated $7,329,301 and $757,454,971, respectively.
6. Transactions with Affiliates and Other Arrangements. During the fiscal year ended September 30, 2020, the Fund paid $331,048 in brokerage commissions on security trades to G.research, LLC, an affiliate of the Adviser. Additionally, the Distributor retained a total of $19,492 from investors representing commissions (sales charges and underwriting fees) on sales and redemptions of Fund shares.
During the fiscal year ended September 30, 2020, the Fund received credits from a designated broker who agreed to pay certain Fund operating expenses. The amount of such expenses paid through this directed brokerage arrangement during this period was $22,695.
The cost of calculating the Fund’s NAV per share is a Fund expense pursuant to the Advisory Agreement. During the fiscal year ended September 30, 2020, the Fund accrued $45,000 in connection with the cost of computing the Fund’s NAV.
During the fiscal year ended September 30, 2020, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser. These transactions complied with Rule 17a-7 under the Act and amounted to $1,031,544 and $2,828,009 in purchases and sales transactions, respectively.
7. Line of Credit. The Fund participates in an unsecured line of credit, which expires on March 3, 2021 and may be renewed annually, 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 a floating rate equal to the higher of the overnight Federal Funds rate plus 125 basis points or the 30 day ICE LIBOR plus 125 basis points in effect on that day. This amount, if any, would be included in “Interest expense” in the Statement of Operations. At September 30, 2020, there was $13,504,000 outstanding under the line of credit.
The average daily amount of borrowings outstanding under the line of credit during the fiscal year ended September 30, 2020 was $12,599,214 with a weighted average interest rate of 2.48%. The maximum amount borrowed at any time during the fiscal year ended September 30, 2020 was $57,245,000.
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 and Class I Shares are offered without a sales charge. Class A Shares are subject to a maximum front-end sales charge of 5.75%, and 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 fiscal years ended September 30, 2020 and 2019, if any, can be found in the Statement of Changes in Net Assets under Redemption Fees.
19
The Gabelli Small Cap Growth Fund
Notes to Financial Statements (Continued)
Transactions in shares of capital stock were as follows:
Year Ended | Year Ended | |||||||||||||||
September 30, 2020 | September 30, 2019 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class AAA | ||||||||||||||||
Shares sold | 598,564 | $ | 24,465,838 | 884,200 | $ | 46,559,000 | ||||||||||
Shares issued upon reinvestment of distributions | 4,774,548 | 218,340,063 | 1,153,577 | 60,515,890 | ||||||||||||
Shares redeemed | (8,012,510 | ) | (338,648,645 | ) | (7,690,327 | ) | (403,373,862 | ) | ||||||||
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|
|
|
|
|
|
| |||||||||
Net decrease | (2,639,398 | ) | $ | (95,842,744 | ) | (5,652,550 | ) | $ | (296,298,972 | ) | ||||||
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|
|
|
|
|
|
| |||||||||
Class A | ||||||||||||||||
Shares sold | 645,315 | $ | 29,221,937 | 574,000 | $ | 30,547,164 | ||||||||||
Shares issued upon reinvestment of distributions | 665,223 | 30,394,069 | 134,468 | 7,051,472 | ||||||||||||
Shares redeemed | (1,903,125 | ) | (82,808,198 | ) | (1,057,440 | ) | (56,041,242 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net decrease | (592,587 | ) | $ | (23,192,192 | ) | (348,972 | ) | $ | (18,442,606 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class C | ||||||||||||||||
Shares sold | 151,481 | $ | 5,540,011 | 178,656 | $ | 8,073,960 | ||||||||||
Shares issued upon reinvestment of distributions | 670,396 | 25,615,826 | 176,834 | 8,074,235 | ||||||||||||
Shares redeemed | (1,756,395 | ) | (64,743,212 | ) | (1,460,736 | ) | (66,933,203 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net decrease | (934,518 | ) | $ | (33,587,375 | ) | (1,105,246 | ) | $ | (50,785,008 | ) | ||||||
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|
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|
|
|
|
| |||||||||
Class I | ||||||||||||||||
Shares sold | 2,748,459 | $ | 121,429,673 | 4,152,983 | $ | 223,183,312 | ||||||||||
Shares issued upon reinvestment of distributions | 2,942,208 | 138,342,624 | 1,072,371 | 57,564,894 | ||||||||||||
Shares redeemed | (9,070,988 | ) | (397,321,732 | ) | (15,710,533 | ) | (845,490,897 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net decrease | (3,380,321 | ) | $ | (137,549,435 | ) | (10,485,179 | ) | $ | (564,742,691 | ) | ||||||
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|
|
|
|
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|
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 fiscal year ended September 30, 2020 is set forth below:
Change in | Percent | |||||||||||||||||||||||||||||||||||||||
Value at | Realized | Unrealized | Value at | Owned of | ||||||||||||||||||||||||||||||||||||
September 30, | Sales | Gain/ | Appreciation/ | September 30, | Shares | |||||||||||||||||||||||||||||||||||
2019 | Purchases | Proceeds | (Loss) | (Depreciation) | 2020 | Dividends | Outstanding | |||||||||||||||||||||||||||||||||
Bel Fuse Inc., Cl. A | $ | 3,523,470 | — | $ | 498,100 | $ | (854,158) | $ | 237,188 | $ | 2,408,400 | $ | 55,254 | 10.07 | % | |||||||||||||||||||||||||
Griffin Industrial Realty Inc. | 9,948,858 | — | 124,907 | 21,421 | 3,998,178 | 13,843,550 | 131,079 | 5.05 | % | |||||||||||||||||||||||||||||||
Katy Industries Inc.* | 7,560 | — | 0 | (2,604 | ) | (4,956 | ) | — | — | — | ||||||||||||||||||||||||||||||
Strattec Security Corp. | 3,996,000 | $ | 1,031,544 | 78,305 | (183,327 | ) | 157,348 | 4,923,260 | 56,000 | 6.48 | % | |||||||||||||||||||||||||||||
Trans-Lux Corp. | 1,660,756 | — | 594,682 | (2,371,238 | ) | 1,652,964 | 347,800 | — | 12.93 | % | ||||||||||||||||||||||||||||||
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|
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|
|
|
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| |||||||||||||||||||||||||||||||||
Total | $ | (3,389,906 | ) | $ | 6,040,722 | $ | 21,523,010 | $ | 242,333 | |||||||||||||||||||||||||||||||
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* | Security was not held as of September 30, 2020. |
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.
20
The Gabelli Small Cap Growth 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.
21
The Gabelli Small Cap Growth Fund
Report of Independent Registered Public Accounting Firm
To the Shareholders of The Gabelli Small Cap Growth Fund
and the Board of Directors of Gabelli Equity Series Funds, Inc.
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of The Gabelli Small Cap Growth Fund (the “Fund”) (one of the funds constituting Gabelli Equity Series Funds, Inc. (the “Corporation”)), including the summary schedule of investments, as of September 30, 2020, 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, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting Gabelli Equity Series Funds, Inc.) at September 30, 2020, 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.
Basis for Opinion
These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Corporation is not required to have, nor were we engaged to perform, an audit of the Corporation’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2020, by correspondence with the custodian. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Gabelli/GAMCO Funds investment companies since 1992.
Philadelphia, Pennsylvania
November 25, 2020
22
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 | Number of Funds in Fund Complex | Principal Occupation(s) During Past Five Years | Other Directorships Held by Director3 | ||||
INTERESTED DIRECTORS4: | ||||||||
Mario J. Gabelli, CFA Director and Chief Investment Officer Age: 78 | Since 1991 | 33 | Chairman, Chief Executive Officer, and 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 within the Fund Complex; Chief Executive Officer of GGCP, Inc.; Executive Chairman of Associated Capital Group, Inc. | Director of Morgan Group Holdings, Inc. (holding company); Chairman of the Board and Chief Executive Officer of LICT Corp. (multimedia and communication services company); Director of CIBL, Inc. (broadcasting and wireless communications); Director of ICTC Group Inc. (communications) (2013-2018) | ||||
John D. Gabelli Director Age: 76 | Since 1991 | 12 | Senior Vice President of G.research, LLC | — | ||||
INDEPENDENT DIRECTORS5: | ||||||||
Elizabeth C. Bogan Director Age: 76 | Since 2019 | 8 | Senior Lecturer in Economics at Princeton University | — | ||||
Anthony J. Colavita6 Director Age: 84 | Since 1991 | 20 | President of the law firm of Anthony J. Colavita, P.C. | — | ||||
Vincent D. Enright Director Age: 76 | Since 1991 | 17 | Former Senior Vice President and Chief Financial Officer of KeySpan Corp. (public utility) (1994-1998) | Director of Echo Therapeutics, Inc. (therapeutics and diagnostics) (2008- 2014); Director of The LGL Group, Inc. (diversified manufacturing) (2011-2014) | ||||
Robert J. Morrissey Director Age: 81 | Since 1991 | 7 | Partner in the law firm of Morrissey, Hawkins & Lynch | Chairman of the Board of Directors, Belmont Savings Bank | ||||
Kuni Nakamura Director Age: 52 | Since 2009 | 32 | President of Advanced Polymer, Inc. (chemical manufacturing company); President of KEN Enterprises, Inc. (real estate); Trustee on Long Island University Board of Trustees | — | ||||
Anthonie C. van Ekris6 Director Age: 86 | Since 1991 | 23 | Chairman and Chief Executive Officer of BALMAC International, Inc. (global import/ export company) | — | ||||
Salvatore J. Zizza7 Director Age: 74 | Since 2001 | 30 | President of Zizza & Associates Corp. (private holding company); President of Bergen Cove Realty Inc.; Chairman of Harbor Diversified, Inc. (pharmaceuticals) (2009-2018); Chairman of BAM (semiconductor and aerospace manufacturing)(2000-2018); Chairman of Metropolitan Paper Recycling Inc. (recycling) (2005-2014) | Director and Chairman of Trans-Lux Corporation (business services); Director and Chairman of Harbor Diversified Inc. (pharmaceuticals) (2009-2018) |
23
The Gabelli Small Cap Growth Fund
Additional Fund Information (Continued) (Unaudited)
Name, Position(s) Address1 and Age | Term of Office | Principal Occupation(s) During Past Five Years | ||
OFFICERS: | ||||
Bruce N. Alpert President Age: 68 | Since 1991 | Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC since 1988; Officer of registered investment companies within the Fund Complex; Senior Vice President of GAMCO Investors, Inc. since 2008; Chief Executive Officer of G.distributors, LLC since January 2020 | ||
John C. Ball Treasurer Age: 44 | Since 2017 | Treasurer of registered investment companies within the Fund Complex since 2017; Vice President and Assistant Treasurer of AMG Funds, 2014-2017 | ||
Peter Goldstein Secretary Age: 67 | Since 2020 | General Counsel, Gabelli Funds, LLC since July 2020; General Counsel and Chief Compliance Officer, Buckingham Capital Management, Inc. (2012-2020); Chief Legal Officer and Chief Compliance Officer, The Buckingham Research Group, Inc. (2012-2020) | ||
Richard J. Walz Chief Compliance Officer Age: 61 | Since 2013 | Chief Compliance Officer of registered investment companies within the Fund Complex since 2013; Chief Compliance Office for Gabelli Funds, LLC since 2015 |
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. For officers, includes time served in prior officer positions with the Fund. Each officer will hold office for an indefinite term until the date he or she resigns or retires or until his or her successor is elected and qualified. |
3 | This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934, as amended, i.e., public companies, or other investment companies registered under the 1940 Act. |
4 | “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. |
5 | Directors who are not interested persons are considered “Independent” Directors. |
6 | Mr. Colavita’s son, Anthony S. Colavita, serves as a director of several funds which are part of the Gabelli/GAMCO Fund Complex. Mr. van Ekris is an independent director of Gabelli International Ltd., Gabelli Fund, LDC, GAMA Capital Opportunities Master, Ltd., and GAMCO International SICAV, which may be deemed to be controlled by Mario J. Gabelli and/or affiliates and in that event would be deemed to be under common control with the Manager. |
7 | Mr. Zizza is an independent director of Gabelli International Ltd., which may be deemed to be controlled by Mario J. Gabelli and/or affiliates and in that event would be deemed to be under common control with the Fund’s Adviser. On September 9, 2015, Mr. Zizza entered into a settlement with the SEC to resolve an inquiry relating to an alleged violation regarding the making of false statements or omissions to the accountants of a company concerning a related party transaction. The company in question is not an affiliate of, nor has any connection to, the Fund. Under the terms of the settlement, Mr. Zizza, without admitting or denying the SEC’s findings and allegation, paid $150,000 and agreed to cease and desist committing or causing any future violations of Rule 13b2-2 of the Securities Exchange Act of 1934, as amended. The Board has discussed this matter and has determined that it does not disqualify Mr. Zizza from serving as an Independent Director. |
24
THE GABELLI SMALL CAP GROWTH FUND
2020 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the fiscal year ended September 30, 2020, the Fund paid to shareholders ordinary income distributions (inclusive of short term capital gains) totaling $0.0876, $0.0971, $0.0163, and $0.2336 per share for each of Class AAA, Class A, Class C, and Class I, respectively, and long term capital gains totaling $503,827,323 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 fiscal year ended September 30, 2020, 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 0.06% of the ordinary income distribution as qualified interest income pursuant to the Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010.
U.S. Government Income:
The percentage of the ordinary income distribution paid by the Fund during the fiscal year ended September 30, 2020 which was derived from U.S. Treasury securities was 0.05%. Such income is exempt from state and local tax in all states. However, many states, including New York and California, allow a tax exemption for a portion of the income earned only if a mutual fund has invested at least 50% of its assets at the end of each quarter of the Fund’s fiscal year in U.S. Government securities. The Gabelli Small Cap Growth Fund did not meet this strict requirement in 2020. There were no U.S. Government securities held as of September 30, 2020. 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.
Portfolio Manager Biography
Mario J. Gabelli, CFA, is Chairman, Chief Executive Officer, and Chief Investment Officer - Value Portfolios of GAMCO Investors, Inc. that he founded in 1977, and Chief Investment Officer - Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management Inc. He is also Executive Chairman of Associated Capital Group, 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.
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. Both the commentary and the financial statements, including the portfolio of investments, will be available on our website at www.gabelli.com.
Gabelli Funds and Your Personal Privacy
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Who are we?
The Gabelli 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., a publicly held company with subsidiaries and affiliates that provide investment advisory 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.
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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. Executive Chairman, Associated Capital Group, Inc.
Elizabeth C. Bogan Senior Lecturer, Princeton University
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, LLC
Robert J. Morrissey Partner, Morrissey, Hawkins & Lynch
Kuni Nakamura President, Advanced Polymer, Inc.
Anthonie C. van Ekris Chairman, BALMAC International, Inc. | Salvatore J. Zizza Chairman, Zizza & Associates Corp.
OFFICERS
Bruce N. Alpert President
John C. Ball Treasurer
Peter Goldstein Secretary
Richard J. Walz Chief Compliance Officer
DISTRIBUTOR
G.distributors, LLC
CUSTODIAN
State Street Bank and Trust Company
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
DST Asset Manager Solutions, Inc.
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.
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GAB443Q320AR |
The Gabelli Focus Five Fund
Annual Report — September 30, 2020 | ![]() | |
Daniel M. Miller | ||
Portfolio Manager | ||
To Our Shareholders, |
For the fiscal year ended September 30, 2020, the net asset value (NAV) total return per Class I Share of The Gabelli Focus Five Fund was (3.1)% compared with a total return of 5.9% for the Blended Index, the Fund’s benchmark. The Blended Index consists of 50% of the Russell 2500 Index, 25% of the Russell 1000 Index, and 25% of the MSCI AC World Ex-U.S. Index. Other classes of shares are available. See page 2 for performance information for all classes.
Enclosed are the financial statements, including the schedule of investments, as of September 30, 2020.
Performance Discussion (Unaudited)
The Focus Five Fund seeks to provide a high level of capital appreciation. Under normal circumstances, the Fund will invest in a concentrated portfolio of twenty-five to thirty-five equity securities. The Fund could potentially invest up to 50% of its net assets in five securities that represent the largest, and thus the highest conviction, positions.
As a Fund with a concentrated portfolio of holdings, stock selection is an important element of performance as the Fund is driven more by the results of the companies selected rather than the movement of the overall market.
Some of the better performing investments during the fiscal year were: PayPal Holdings Inc. (1.8% of net assets as of September 30, 2020) that operates as a technology platform and digital payments company enabling digital and mobile payments on behalf of consumers and merchants worldwide; NextEra Energy Partners LP (7.8%) that acquires, owns, and manages contracted clean energy projects in the United States. It owns a portfolio of contracted renewable generation assets consisting of wind and solar projects, as well as contracted natural gas pipeline assets; and Option Care Health Inc. (5.7%) that provides independent home and alternate site infusion services in the United States. The company offers immunoglobulin infusion therapy designed for the treatment of immune deficiencies; anti-infective therapy and services; infusion therapies for bleeding disorders, and other infusion therapies to treat various conditions, including heart failure, pain management, chemotherapy, and respiratory medications.
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s website (www.gabelli.com), and you will be notified by mail each time a report is posted and provided with a website link to access the report. If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. To elect to receive all future reports on paper free of charge, please contact your financial intermediary, or, if you invest directly with the Fund, you may call 800-422-3554 or send an email request to info@gabelli.com.
Investments that detracted from performance during the fiscal year and are no longer held included: Synchrony Financial that operates as a consumer financial services company in the United States. It delivers a range of specialized financing programs and consumer banking products to digital, retail, home, auto, travel, health, and pet industries; PGT Innovations Inc. that manufactures and supplies impact resistant residential windows and doors in the southeastern United States; and Internap Corp. that is a global provider of performance driven, full spectrum data center and cloud solutions.
We appreciate your confidence and trust.
Comparative Results
Average Annual Returns through September 30, 2020 (a)(b) (Unaudited)
Since | Since | |||||||||||||||||||||||
January 1, | Inception | |||||||||||||||||||||||
1 Year | 3 Year | 5 Year | 2012(c) | 10 Year | (12/31/02) | |||||||||||||||||||
Class I (GWSIX) | (3.14) | % | (4.66) | % | 1.42% | 5.15% | 5.32% | 5.99% | ||||||||||||||||
Class AAA (GWSVX) | (3.48) | (4.93) | 1.14 | 4.88 | 5.04 | 5.79 | ||||||||||||||||||
S&P MidCap 400 Index | (2.16) | 2.90 | 8.11 | 10.69(d) | 10.49 | 10.21 | ||||||||||||||||||
Russell 2500 Index | 2.22 | 4.45 | 8.97 | 11.01(d) | 10.81 | 10.34 | ||||||||||||||||||
Russell 1000 Index | 16.01 | 12.38 | 14.09 | 14.28 | 13.76 | 10.30 | ||||||||||||||||||
MSCI AC World Ex-U.S. Index | 3.45 | 1.65 | 6.74 | 6.02 | 4.48 | 7.74 | ||||||||||||||||||
Blended Index | 5.92 | 5.68 | 9.66 | 10.53 | 9.91 | 9.68 | ||||||||||||||||||
Class A (GWSAX) | (3.37) | (4.90) | 1.16 | 4.88 | 5.06 | 5.81 | ||||||||||||||||||
With sales charge (e) | (8.93) | (6.76) | (0.03) | 4.18 | 4.44 | 5.45 | ||||||||||||||||||
Class C (GWSCX) | (4.14) | (5.61) | 0.40 | 4.11 | 4.26 | 5.03 | ||||||||||||||||||
With contingent deferred sales charge (f) | (5.10) | (5.61) | 0.40 | 4.11 | 4.26 | 5.03 |
In the current prospectuses dated January 28, 2020, the expense ratios for Class AAA, A, C, and I Shares are 1.64%, 1.64%, 2.39%, and 1.39%, respectively. See page 9 for the expense ratios for the fiscal year ended September 30, 2020. Class AAA and Class I Shares have no sales charge. The maximum sales charge for Class A and Class 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. 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 of purchase. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The prospectuses contain 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 MidCap 400 Index is an index comprised of U.S. stocks in the middle capitalization range, which is generally considered to be between $200 million and $5 billion in market value. The Russell 2500 Index is a market capitalization weighted index of 2,500 U.S. traded stocks of small and mid capitalization stocks. The Russell 1000 Index is a market capitalization weighted index of 1,000 U.S. traded large capitalization stocks. The Morgan Stanley Capital International All Country World Index excluding the U.S. (MSCI ACWI Ex-U.S.) is a market capitalization weighted index of small, mid, and large capitalization stocks across developed and emerging markets, excluding U.S. stocks. The Blended Index consists of 50% Russell 2500 Index, 25% Russell 1000 Index, and 25% MSCI ACWI Ex-U.S. Index. 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 began operating under its current name. |
(d) | S&P MidCap 400 Index performance and Russell 2500 Index performance are 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. |
2
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI FOCUS FIVE FUND (CLASS AAA SHARES), THE BLENDED INDEX, AND
THE RUSSELL 2500 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. |
3
The Gabelli Focus Five Fund
Disclosure of Fund Expenses (Unaudited)
For the Six Month Period from April 1, 2020 through September 30, 2020 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 fiscal year ended September 30, 2020.
Beginning | Ending | Annualized | Expenses | |||||
Account Value | Account Value | Expense | Paid During | |||||
04/01/20 | 09/30/20 | Ratio | Period* | |||||
The Gabelli Focus Five Fund | ||||||||
Actual Fund Return | ||||||||
Class AAA | $1,000.00 | $1,327.70 | 1.72% | $10.01 | ||||
Class A | $1,000.00 | $1,328.40 | 1.72% | $10.01 | ||||
Class C | $1,000.00 | $1,323.40 | 2.48% | $14.41 | ||||
Class I | $1,000.00 | $1,329.90 | 1.48% | $ 8.62 | ||||
Hypothetical 5% Return | ||||||||
Class AAA | $1,000.00 | $1,016.40 | 1.72% | $ 8.67 | ||||
Class A | $1,000.00 | $1,016.40 | 1.72% | $ 8.67 | ||||
Class C | $1,000.00 | $1,012.60 | 2.48% | $12.48 | ||||
Class I | $1,000.00 | $1,017.60 | 1.48% | $ 7.47 |
* | 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 366. |
4
Summary of Portfolio Holdings (Unaudited)
The following table presents portfolio holdings as a percent of net assets as of September 30, 2020:
The Gabelli Focus Five Fund
Food and Beverage | 12.6 | % | ||
Financial Services | 11.1 | % | ||
Energy and Utilities | 9.9 | % | ||
Real Estate | 7.2 | % | ||
Consumer Services | 6.1 | % | ||
Building and Construction | 6.1 | % | ||
U.S. Government Obligations | 5.9 | % | ||
Health Care | 5.7 | % | ||
Computer Software and Services | 5.6 | % | ||
Diversified Industrial | 5.2 | % | ||
Retail | 5.0 | % |
Cable and Satellite | 4.6 | % | ||
Entertainment | 3.5 | % | ||
Automotive: Parts and Accessories | 3.1 | % | ||
Business Services | 3.1 | % | ||
Telecommunications | 3.0 | % | ||
Aerospace and Defense | 1.0 | % | ||
Automotive | 0.8 | % | ||
Other Assets and Liabilities (Net) | 0.5 | % | ||
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100.0 | % | |||
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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-PORT. 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-PORT 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.
5
The Gabelli Focus Five Fund
Schedule of Investments — September 30, 2020
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS — 91.8% |
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Aerospace and Defense — 1.0% |
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7,500 | Aerojet Rocketdyne Holdings Inc.† | $ | 297,379 | $ | 299,175 | |||||||
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Automotive — 0.8% |
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20,000 | Fiat Chrysler Automobiles NV† | 238,106 | 244,400 | |||||||||
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Automotive: Parts and Accessories — 3.1% |
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10,500 | Aptiv plc | 553,560 | 962,640 | |||||||||
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Building and Construction — 6.1% |
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46,914 | Herc Holdings Inc.† | 1,192,583 | 1,858,264 | |||||||||
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Business Services — 3.1% |
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35,000 | Macquarie Infrastructure Corp. | 1,244,442 | 941,150 | |||||||||
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Cable and Satellite — 4.6% |
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16,000 | EchoStar Corp., Cl. A† | 462,409 | 398,240 | |||||||||
30,000 | Liberty Media Corp.- Liberty Formula One, Cl. A† | 853,038 | 1,005,300 | |||||||||
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1,315,447 | 1,403,540 | |||||||||||
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Computer Software and Services — 5.6% |
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1,175 | Alphabet Inc., Cl. C† | 697,006 | 1,726,780 | |||||||||
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Consumer Services — 6.1% |
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6,892 | GCI Liberty Inc., Cl. A† | 294,370 | 564,868 | |||||||||
32,500 | ServiceMaster Global Holdings Inc.† | 1,069,694 | 1,296,100 | |||||||||
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1,364,064 | 1,860,968 | |||||||||||
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Diversified Industrial — 5.2% |
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25,000 | Colfax Corp.† | 574,218 | 784,000 | |||||||||
37,500 | Ferro Corp.† | 374,587 | 465,000 | |||||||||
850 | Roper Technologies Inc. | 244,942 | 335,843 | |||||||||
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1,193,747 | 1,584,843 | |||||||||||
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Energy and Utilities — 9.9% |
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25,000 | Enterprise Products Partners LP | 408,232 | 394,750 | |||||||||
40,000 | NextEra Energy Partners LP | 1,942,209 | 2,398,400 | |||||||||
4,000 | Southwest Gas Holdings Inc. | 248,136 | 252,400 | |||||||||
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2,598,577 | 3,045,550 | |||||||||||
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Entertainment — 3.5% |
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203,600 | Sirius XM Holdings Inc. | 606,755 | 1,091,296 | |||||||||
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Financial Services — 11.1% |
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35,000 | Apollo Global Management Inc. | 1,232,164 | 1,566,250 | |||||||||
7,500 | E*TRADE Financial Corp. | 296,738 | 375,375 | |||||||||
110,000 | New York Community Bancorp Inc. | 1,043,568 | 909,700 | |||||||||
2,750 | PayPal Holdings Inc.† | 261,358 | 541,833 | |||||||||
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2,833,828 | 3,393,158 | |||||||||||
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Market | ||||||||||||
Shares | Cost | Value | ||||||||||
Food and Beverage — 12.6% |
| |||||||||||
69,000 | Maple Leaf Foods Inc. | $ | 1,112,279 | $ | 1,406,894 | |||||||
16,500 | Mondelēz International Inc., Cl. A | 675,416 | 947,925 | |||||||||
17,500 | Post Holdings Inc.† | 582,636 | 1,505,000 | |||||||||
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2,370,331 | 3,859,819 | |||||||||||
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Health Care — 5.7% |
| |||||||||||
130,000 | Option Care Health Inc.† | 805,655 | 1,738,100 | |||||||||
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Real Estate — 7.2% |
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7,500 | Hannon Armstrong Sustainable Infrastructure Capital Inc., REIT | 131,644 | 317,025 | |||||||||
67,500 | MGM Growth Properties LLC, Cl. A, REIT | 1,403,168 | 1,888,650 | |||||||||
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1,534,812 | 2,205,675 | |||||||||||
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Retail — 3.2% |
| |||||||||||
7,500 | PetIQ Inc.† | 166,897 | 246,900 | |||||||||
11,500 | Shake Shack Inc., Cl. A† | 576,597 | 741,520 | |||||||||
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743,494 | 988,420 | |||||||||||
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Telecommunications — 3.0% |
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8,000 | T-Mobile US Inc.† | 598,537 | 914,880 | |||||||||
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TOTAL COMMON STOCKS | 20,188,323 | 28,118,658 | ||||||||||
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PREFERRED STOCKS — 1.8% |
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Retail — 1.8% |
| |||||||||||
5,500 | Qurate Retail Inc. 8.000%, 03/15/31 | 521,382 | 541,750 | |||||||||
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Principal Amount | ||||||||||||
U.S. GOVERNMENT OBLIGATIONS — 5.9% |
| |||||||||||
$1,810,000 | U.S. Treasury Bills, | 1,809,775 | 1,809,803 | |||||||||
|
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TOTAL INVESTMENTS — 99.5% | $ | 22,519,480 | 30,470,211 | |||||||||
|
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Other Assets and Liabilities (Net) — 0.5% |
| 145,572 | ||||||||||
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NET ASSETS — 100.0% | $ | 30,615,783 | ||||||||||
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† | Non-income producing security. |
†† | Represents annualized yields at dates of purchase. |
REIT | Real Estate Investment Trust |
See accompanying notes to financial statements.
6
The Gabelli Focus Five Fund
Statement of Assets and Liabilities
September 30, 2020
|
Statement of Operations
For the Year Ended September 30, 2020
Assets: | ||||
Investments, at value (cost $22,519,480) | $30,470,211 | |||
Foreign currency, at value (cost $6,999) | 7,047 | |||
Cash | 42,030 | |||
Receivable for investments sold | 411,646 | |||
Receivable for Fund shares sold | 100 | |||
Dividends receivable | 38,104 | |||
Prepaid expenses | 13,622 | |||
Total Assets | 30,982,760 | |||
Liabilities: | ||||
Payable for investments purchased | 256,916 | |||
Payable for Fund shares redeemed | 23,342 | |||
Payable for investment advisory fees | 25,402 | |||
Payable for distribution fees | 8,899 | |||
Payable for legal and audit fees | 21,800 | |||
Payable for shareholder communications expenses | 19,810 | |||
Other accrued expenses | 10,808 | |||
Total Liabilities | 366,977 | |||
Net Assets | ||||
(applicable to 2,519,641 shares outstanding) | $30,615,783 | |||
Net Assets Consist of: | ||||
Paid-in capital | $30,446,452 | |||
Total distributable earnings | 169,331 | |||
Net Assets | $30,615,783 | |||
Shares of Capital Stock, each at $0.001 par value: | ||||
Class AAA: | ||||
Net Asset Value, offering, and redemption price per share ($8,713,111 ÷ 698,173 shares outstanding; 100,000,000 shares authorized) | $12.48 | |||
Class A: | ||||
Net Asset Value and redemption price per share ($6,643,863 ÷ 526,649 shares outstanding; 50,000,000 shares authorized) | $12.62 | |||
Maximum offering price per share (NAV ÷ 0.9425, based on maximum sales charge of 5.75% of the offering price) | $13.39 | |||
Class C: | ||||
Net Asset Value and offering price per share ($6,925,641 ÷ 650,796 shares outstanding; 50,000,000 shares authorized) | $10.64 | (a) | ||
Class I: | ||||
Net Asset Value, offering, and redemption price per share ($8,333,168 ÷ 644,023 shares outstanding; 50,000,000 shares authorized) | $12.94 |
Investment Income: | ||||
Dividends (net of foreign withholding taxes of $5,110) | $ | 510,482 | ||
Interest | 48,900 | |||
|
| |||
Total Investment Income | 559,382 | |||
|
| |||
Expenses: | ||||
Investment advisory fees | 381,642 | |||
Distribution fees - Class AAA | 25,727 | |||
Distribution fees - Class A | 18,737 | |||
Distribution fees - Class C | 94,963 | |||
Registration expenses | 59,830 | |||
Legal and audit fees | 30,465 | |||
Shareholder communications expenses | 28,002 | |||
Shareholder services fees | 27,104 | |||
Custodian fees | 9,952 | |||
Directors’ fees | 2,831 | |||
Interest expense | 214 | |||
Miscellaneous expenses | 15,417 | |||
|
| |||
Total Expenses | 694,884 | |||
|
| |||
Net Investment Loss | (135,502 | ) | ||
|
| |||
Net Realized and Unrealized Gain/(Loss) on Investments, Written Options, and Foreign Currency: | ||||
Net realized loss on investments | (1,904,070 | ) | ||
Net realized gain on written options | 26,636 | |||
Net realized loss on foreign currency transactions | (542 | ) | ||
|
| |||
Net realized loss on investments, written options, and foreign currency transactions | (1,877,976 | ) | ||
|
| |||
Net change in unrealized appreciation/depreciation: |
| |||
on investments | (78,200 | ) | ||
on foreign currency translations | 60 | |||
|
| |||
Net change in unrealized appreciation/depreciation on investments and foreign currency translations | (78,140 | ) | ||
|
| |||
Net Realized and Unrealized Gain/(Loss) on Investments, Written Options, and Foreign Currency | (1,956,116 | ) | ||
|
| |||
Net Decrease in Net Assets Resulting from Operations | $ | (2,091,618 | ) | |
|
|
(a) | Redemption price varies based on the length of time held. |
See accompanying notes to financial statements.
7
The Gabelli Focus Five Fund
Statement of Changes in Net Assets
Year Ended | Year Ended | |||||||||
September 30, 2020 | September 30, 2019 | |||||||||
Operations: | ||||||||||
Net investment loss | $ | (135,502 | ) | $ | (436,046 | ) | ||||
Net realized loss on investments, written options, and foreign currency transactions | (1,877,976 | ) | (3,628,898 | ) | ||||||
Net change in unrealized appreciation/depreciation on investments and foreign currency translations | (78,140 | ) | (4,210,570 | ) | ||||||
|
|
|
| |||||||
Net Decrease in Net Assets Resulting from Operations | (2,091,618 | ) | (8,275,514 | ) | ||||||
|
|
|
| |||||||
Distributions to Shareholders: | ||||||||||
Class AAA | — | (11,940 | ) | |||||||
Class A | — | (10,608 | ) | |||||||
Class C | — | (20,011 | ) | |||||||
Class I | — | (22,594 | ) | |||||||
|
|
|
| |||||||
Total Distributions to Shareholders | — | (65,153 | ) | |||||||
|
|
|
| |||||||
Capital Share Transactions: | ||||||||||
Class AAA | (2,854,458 | ) | (3,143,551 | ) | ||||||
Class A | (2,048,935 | ) | (4,783,404 | ) | ||||||
Class C | (6,433,896 | ) | (8,686,557 | ) | ||||||
Class I | (6,519,450 | ) | (16,188,041 | ) | ||||||
|
|
|
| |||||||
Net Decrease in Net Assets from Capital Share Transactions | (17,856,739 | ) | (32,801,553 | ) | ||||||
|
|
|
| |||||||
Redemption Fees | 137 | — | ||||||||
|
|
|
| |||||||
Net Decrease in Net Assets. | (19,948,220 | ) | (41,142,220 | ) | ||||||
Net Assets: | ||||||||||
Beginning of year | 50,564,003 | 91,706,223 | ||||||||
|
|
|
| |||||||
End of year | $ | 30,615,783 | $ | 50,564,003 | ||||||
|
|
|
|
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) | Ratios to Average Net Assets/ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
from Investment Operations | Distributions | Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | Realized and | Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset | Net | Unrealized | Net | Asset | Net | Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Value, | Investment | Gain (Loss) | Total from | Realized | Value, | Assets | Investment | Portfolio | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended | Beginning | Income | on | Investment | Gain on | Total | Redemption | End of | Total | End of Year | Income | Operating | Turnover | ||||||||||||||||||||||||||||||||||||||||||||||||||||
September 30 | of Year | (Loss) (a)(b) | Investments | Operations | Investments | Distributions | Fees (b) | Year | Return † | (in 000’s) | (Loss) (a) | Expenses(c) | Rate | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Class AAA | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | $ | 12.93 | $ | (0.03 | ) | $ | (0.42 | ) | $ | (0.45 | ) | — | — | $ | 0.00 | (d) | $ | 12.48 | (3.48 | )% | $ | 8,713 | (0.24 | )% | 1.71 | % | 59 | % | |||||||||||||||||||||||||||||||||||||
2019 | 13.84 | (0.07 | ) | (0.83 | ) | (0.90 | ) | $ | (0.01 | ) | $ | (0.01 | ) | — | 12.93 | (6.50 | ) | 12,189 | (0.56 | ) | 1.64 | (e) | 67 | ||||||||||||||||||||||||||||||||||||||||||
2018 | 14.61 | (0.09 | ) | (0.61 | ) | (0.70 | ) | (0.07 | ) | (0.07 | ) | 0.00 | (d) | 13.84 | (4.78 | ) | 16,630 | (0.63 | ) | 1.53 | 105 | ||||||||||||||||||||||||||||||||||||||||||||
2017 | 13.70 | (0.15 | ) | 1.21 | 1.06 | (0.15 | ) | (0.15 | ) | 0.00 | (d) | 14.61 | 7.88 | 22,542 | (1.08 | ) | 1.43 | (e) | 77 | ||||||||||||||||||||||||||||||||||||||||||||||
2016 | 12.00 | (0.14 | ) | 1.84 | 1.70 | — | — | 0.00 | (d) | 13.70 | 14.17 | 33,695 | (1.11 | ) | 1.42 | (e) | 60 | ||||||||||||||||||||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | $ | 13.06 | $ | (0.03 | ) | $ | (0.41 | ) | $ | (0.44 | ) | — | — | $ | 0.00 | (d) | $ | 12.62 | (3.37 | )% | $ | 6,644 | (0.24 | )% | 1.71 | % | 59 | % | |||||||||||||||||||||||||||||||||||||
2019 | 13.98 | (0.07 | ) | (0.84 | ) | (0.91 | ) | $ | (0.01 | ) | $ | (0.01 | ) | — | 13.06 | (6.51 | ) | 9,013 | (0.57 | ) | 1.64 | (e) | 67 | ||||||||||||||||||||||||||||||||||||||||||
2018 | 14.76 | (0.09 | ) | (0.62 | ) | (0.71 | ) | (0.07 | ) | (0.07 | ) | 0.00 | (d) | 13.98 | (4.80 | ) | 15,137 | (0.65 | ) | 1.53 | 105 | ||||||||||||||||||||||||||||||||||||||||||||
2017 | 13.84 | (0.15 | ) | 1.22 | 1.07 | (0.15 | ) | (0.15 | ) | 0.00 | (d) | 14.76 | 7.87 | 29,391 | (1.08 | ) | 1.43 | (e) | 77 | ||||||||||||||||||||||||||||||||||||||||||||||
2016 | 12.12 | (0.14 | ) | 1.86 | 1.72 | — | — | 0.00 | (d) | 13.84 | 14.19 | 43,775 | (1.10 | ) | 1.42 | (e) | 60 | ||||||||||||||||||||||||||||||||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | $ | 11.10 | $ | (0.11 | ) | $ | (0.35 | ) | $ | (0.46 | ) | — | — | $ | 0.00 | (d) | $ | 10.64 | (4.14 | )% | $ | 6,926 | (1.00 | )% | 2.46 | % | 59 | % | |||||||||||||||||||||||||||||||||||||
2019 | 11.97 | (0.14 | ) | (0.72 | ) | (0.86 | ) | $ | (0.01 | ) | $ | (0.01 | ) | — | 11.10 | (7.18 | ) | 13,807 | (1.33 | ) | 2.39 | (e) | 67 | ||||||||||||||||||||||||||||||||||||||||||
2018 | 12.74 | (0.17 | ) | (0.53 | ) | (0.70 | ) | (0.07 | ) | (0.07 | ) | 0.00 | (d) | 11.97 | (5.48 | ) | 24,992 | (1.38 | ) | 2.28 | 105 | ||||||||||||||||||||||||||||||||||||||||||||
2017 | 12.06 | (0.22 | ) | 1.05 | 0.83 | (0.15 | ) | (0.15 | ) | 0.00 | (d) | 12.74 | 7.04 | 37,147 | (1.83 | ) | 2.18 | (e) | 77 | ||||||||||||||||||||||||||||||||||||||||||||||
2016 | 10.64 | (0.21 | ) | 1.63 | 1.42 | — | — | 0.00 | (d) | 12.06 | 13.35 | 57,796 | (1.85 | ) | 2.17 | (e) | 60 | ||||||||||||||||||||||||||||||||||||||||||||||||
Class I | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | $ | 13.36 | $ | 0.00 | (d) | $ | (0.42 | ) | $ | (0.42 | ) | — | — | $ | 0.00 | (d) | $ | 12.94 | (3.14 | )% | $ | 8,333 | 0.01 | % | 1.46 | % | 59 | % | |||||||||||||||||||||||||||||||||||||
2019 | 14.27 | (0.05 | ) | (0.85 | ) | (0.90 | ) | $ | (0.01 | ) | $ | (0.01 | ) | — | 13.36 | (6.30 | ) | 15,555 | (0.36 | ) | 1.39 | (e) | 67 | ||||||||||||||||||||||||||||||||||||||||||
2018 | 15.02 | (0.06 | ) | (0.62 | ) | (0.68 | ) | (0.07 | ) | (0.07 | ) | 0.00 | (d) | 14.27 | (4.50 | ) | 34,947 | (0.39 | ) | 1.28 | 105 | ||||||||||||||||||||||||||||||||||||||||||||
2017 | 14.05 | (0.11 | ) | 1.23 | 1.12 | (0.15 | ) | (0.15 | ) | 0.00 | (d) | 15.02 | 8.11 | 71,138 | (0.83 | ) | 1.18 | (e) | 77 | ||||||||||||||||||||||||||||||||||||||||||||||
2016 | 12.27 | (0.11 | ) | 1.89 | 1.78 | — | — | 0.00 | (d) | 14.05 | 14.51 | 103,490 | (0.85 | ) | 1.17 | (e) | 60 |
† | Total return represents aggregate total return of a hypothetical $1,000 investment at the beginning of the year and sold at the end of the year including reinvestment of distributions and does not reflect the applicable sales charges. |
(a) | Due to capital share activity, 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) | The Fund incurred interest expense. For the fiscal year ended September 30, 2020, if interest expense had not been incurred, the ratios of operating expenses to average net assets would have been 1.70% (Class AAA and Class A), 2.45% (Class C), and 1.45% (Class I). For the fiscal years ended September 30, 2019, 2018, 2017, and 2016, the effect of interest expense was minimal. |
(d) | Amount represents less than $0.005 per share. |
(e) | The Fund received credits from a designated broker who agreed to pay certain Fund operating expenses. If such credits had not been received the ratio of operating expenses to average net assets would have been 1.64% (Class AAA and Class A), 2.39% (Class C), and 1.40% (Class I) for the fiscal year ended September 30, 2019. For the fiscal years ended September 30, 2017 and 2016, there was no impact to the expense ratios. |
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 the Gabelli Equity Series Funds, Inc. (the Corporation), which 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 four 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. As an investment company, the Fund follows the investment company accounting and reporting guidance, which is part of U.S. generally accepted accounting principles (GAAP) that may require the use of management estimates and assumptions in the preparation of its financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements.
The global outbreak of the novel coronavirus disease, known as COVID-19, has caused adverse effects on many companies, sectors, nations, regions and the markets in general, and may continue for an unpredictable duration. The effects of this pandemic may materially impact the value and performance of the Fund, its ability to buy and sell fund investments at appropriate valuations, and its ability to achieve its investment objectives.
New Accounting Pronouncements. To improve the effectiveness of fair value disclosure requirements, the Financial Accounting Standards Board recently issued Accounting Standard Update (ASU) 2018-13, Fair Value Measurement Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13), which adds, removes, and modifies certain aspects relating to fair value disclosure. ASU 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption of the additions relating to ASU 2018-13 is not required, even if early adoption is elected for the removals and modifications under ASU 2018-13. Management has early adopted the removals and modifications set forth in ASU 2018-13 in these financial statements and has not early adopted the additions set forth in ASU 2018-13.
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provides optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the 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).
10
The Gabelli Focus Five Fund
Notes to Financial Statements (Continued)
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 obligations 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, 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. 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. OTC futures and options on futures for which market quotations are readily available will be valued by quotations received from a pricing service or, if no quotations are available from a pricing service, by quotations obtained from one or more dealers in the instrument in question by the Adviser.
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.
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 Board’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 Fund did not hold any Level 3 securities at the fiscal years ended September 30, 2019 and 2020. The summary of the Fund’s investments in securities and other financial instruments by inputs used to value the Fund’s investments as of September 30, 2020 is as follows:
Valuation Inputs | |||||||||||||||
Level 1 | Level 2 Other Significant | Total Market Value | |||||||||||||
Quoted Prices | Observable Inputs | at 9/30/20 | |||||||||||||
INVESTMENTS IN SECURITIES: | |||||||||||||||
ASSETS (Market Value): | |||||||||||||||
Common Stocks (a) | $ | 28,118,658 | — | $ | 28,118,658 | ||||||||||
Preferred Stocks (a) | 541,750 | — | 541,750 | ||||||||||||
U.S. Government Obligations | — | $ | 1,809,803 | 1,809,803 | |||||||||||
TOTAL INVESTMENTS IN SECURITIES – ASSETS | $ | 28,660,408 | $ | 1,809,803 | $ | 30,470,211 |
(a) Please refer to the Schedule of Investments for the industry classifications of these portfolio holdings.
11
The Gabelli Focus Five Fund
Notes to Financial Statements (Continued)
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 are 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.
Fair Valuation. Fair valued securities may be common or preferred equities, warrants, options, rights, or 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. When fair valuing a security, factors to consider 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 may include backtesting 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 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, 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.
Collateral requirements differ by type of derivative. Collateral requirements are set by the broker or exchange clearing house for exchange traded derivatives, while collateral terms are contract specific for derivatives traded over-the-counter. Securities pledged to cover obligations of the Fund under derivative contracts, if any, are noted in the Schedule of Investments. Cash collateral, if any, pledged for the same purpose will be reported, separately as Deposit at brokers, in the Statement of Assets and Liabilities.
12
The Gabelli Focus Five Fund
Notes to Financial Statements (Continued)
The Fund’s derivative contracts held at September 30, 2020, if any, are not accounted for as hedging instruments under GAAP and are disclosed in the Schedule of Investments.
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 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.
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.
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. In the case of call options, the 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. At September 30, 2020, the Fund held no option positions. For the fiscal year ended September 30, 2020, the effect of option contracts can be found in the Statement of Operations under Net Realized and Unrealized Gain/(Loss) on Investments, Written Options, and Foreign Currency within Net realized gain on written options.
The Fund’s volume of activity in equity options contracts during the fiscal year ended September 30, 2020 had an average monthly market value of approximately of $13,500.
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
13
The Gabelli Focus Five Fund
Notes to Financial Statements (Continued)
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 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 or amortized to the earliest call date, if applicable. 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. 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 current year write-off of net operating loss. These reclassifications have no impact on the NAV of the Fund. For the fiscal year ended September 30, 2020, reclassifications were made to decrease paid-in capital by $320,667, with an offsetting adjustment to total distributable earnings.
14
The Gabelli Focus Five Fund
Notes to Financial Statements (Continued)
The tax character of distributions paid during the fiscal year ended September 30, 2019 was as follows. There was no distribution during the fiscal year ended September 30, 2020.
Year Ended | |||||
September 30, 2019 | |||||
Distributions paid from: | |||||
Net long term capital gains | $ | 65,153 | |||
|
| ||||
Total distributions paid | $ | 65,153 | |||
|
|
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, 2020, the components of accumulated earnings/losses on a tax basis were as follows:
Accumulated capital loss carryforwards | $ | (5,318,864 | ) | |
Net unrealized appreciation on investments. | 7,932,303 | |||
Qualified late year loss deferral* | (2,444,108 | ) | ||
|
| |||
Total | $ | 169,331 | ||
|
|
* | Under the current law, qualified late year ordinary losses realized after December 31 or post October capital losses realized after October 31 and prior to the Fund’s year end may be elected as occurring on the first day of the following year. For the fiscal year ended September 30, 2020, the Fund elected to defer $71,075 of late year ordinary losses and $2,373,033 of post October capital losses. |
The Fund is permitted to carry capital losses forward for an unlimited period. Capital losses that are carried forward will retain their character as either short term or long term capital losses. The Fund has a short term capital loss carryforward with no expiration of $5,318,864.
At September 30, 2020, the temporary differences between book basis and tax basis unrealized appreciation on investments were primarily due to deferral of losses from wash sales for tax purposes.
The following summarizes the tax cost of investments and the related net unrealized appreciation at September 30, 2020:
Gross | Gross | |||||||||||||||||||
Unrealized | Unrealized | Net Unrealized | ||||||||||||||||||
Cost | Appreciation | Depreciation | Appreciation | |||||||||||||||||
Investments | $ | 22,537,956 | $ | 8,584,697 | $ | (652,442 | ) | $ | 7,932,255 |
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 fiscal year ended September 30, 2020, the Fund did not incur income tax, interest, or penalties. As of September 30, 2020, 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. The Fund’s federal and state tax returns for the prior three fiscal years remain open, subject to examination. On an ongoing basis, the Adviser will monitor the Fund’s tax positions to determine if adjustments to this conclusion are necessary.
15
The Gabelli Focus Five Fund
Notes to Financial Statements (Continued)
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 $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 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 fiscal year ended September 30, 2020, other than short term securities and U.S. Government obligations, aggregated $20,384,722 and $33,040,802, respectively.
6. Transactions with Affiliates and Other Arrangements. During the fiscal year ended September 30, 2020, the Fund paid $45 in brokerage commissions on security trades to G.research, LLC, an affiliate of the Adviser. Additionally, the Distributor retained a total of $681 from investors representing commissions (sales charges and underwriting fees) on sales and redemptions of Fund shares.
7. Line of Credit. The Fund participates in an unsecured line of credit, which expires on March 3, 2021 and may be renewed annually, 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 a floating rate equal to the higher of the overnight Federal Funds rate plus 125 basis points or the 30 day ICE LIBOR plus 125 basis points in effect on that day. This amount, if any, would be included in “Interest expense” in the Statement of Operations. During the fiscal year ended September 30, 2020, there were no borrowings under the line of credit.
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 and Class I Shares are offered without a sales charge. Class A Shares are subject to a maximum front-end sales charge of 5.75%, and 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.
16
The Gabelli Focus Five Fund
Notes to Financial Statements (Continued)
The redemption fees retained by the Fund during the fiscal years ended September 30, 2020 and 2019, if any, can be found in the Statement of Changes in Net Assets under Redemption Fees.
Transactions in shares of capital stock were as follows:
Year Ended | Year Ended | |||||||||||||||
September 30, 2020 | September 30, 2019 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class AAA | ||||||||||||||||
Shares sold | 31,364 | $ | 432,781 | 36,551 | $ | 450,109 | ||||||||||
Shares issued upon reinvestment of distributions | — | — | 1,846 | 22,967 | ||||||||||||
Shares redeemed | (276,063 | ) | (3,287,239 | ) | (297,070 | ) | (3,616,627 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net decrease | (244,699 | ) | $ | (2,854,458 | ) | (258,673 | ) | $ | (3,143,551 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class A | ||||||||||||||||
Shares sold | 135,152 | $ | 1,638,263 | 75,374 | $ | 959,065 | ||||||||||
Shares issued upon reinvestment of distributions | — | — | 789 | 10,014 | ||||||||||||
Shares redeemed | (298,561 | ) | (3,687,198 | ) | (468,679 | ) | (5,752,483 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net decrease | (163,409 | ) | $ | (2,048,935 | ) | (392,516 | ) | $ | (4,783,404 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class C | ||||||||||||||||
Shares sold | 36,416 | $ | 397,493 | 45,255 | $ | 476,557 | ||||||||||
Shares issued upon reinvestment of distributions | — | — | 1,718 | 18,647 | ||||||||||||
Shares redeemed | (629,588 | ) | (6,831,389 | ) | (890,312 | ) | (9,181,761 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net decrease | (593,172 | ) | $ | (6,433,896 | ) | (843,339 | ) | $ | (8,686,557 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Class I | ||||||||||||||||
Shares sold | 75,874 | $ | 1,024,738 | 222,615 | $ | 2,821,913 | ||||||||||
Shares issued upon reinvestment of distributions | — | — | 1,617 | 20,936 | ||||||||||||
Shares redeemed | (595,926 | ) | (7,544,188 | ) | (1,509,657 | ) | (19,030,890 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Net decrease | (520,052 | ) | $ | (6,519,450 | ) | (1,285,425 | ) | $ | (16,188,041 | ) | ||||||
|
|
|
|
|
|
|
|
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. 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.
17
The Gabelli Focus Five Fund
Report of Independent Registered Public Accounting Firm
To the Shareholders of The Gabelli Focus Five Fund
and the Board of Directors of Gabelli Equity Series Funds, Inc.
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of The Gabelli Focus Five Fund (the “Fund”) (one of the funds constituting Gabelli Equity Series Funds, Inc. (the “Corporation”)), including the schedule of investments, as of September 30, 2020, 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, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting Gabelli Equity Series Funds, Inc.) at September 30, 2020, 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.
Basis for Opinion
These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Corporation is not required to have, nor were we engaged to perform, an audit of the Corporation’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2020, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Gabelli/GAMCO Funds investment companies since 1992.
Philadelphia, Pennsylvania
November 25, 2020
18
The Gabelli Focus Five 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 Focus Five Fund at One Corporate Center, Rye, NY 10580-1422.
Number of Funds | ||||||||
Name, Position(s) | Term of Office | in Fund Complex | ||||||
Address1 | and Length of | Overseen | Principal Occupation(s) | Other Directorships | ||||
and Age | Time Served2 | by Director | During Past Five Years | Held by Director3 | ||||
INTERESTED DIRECTORS4: | ||||||||
Mario J. Gabelli, CFA Director and Chief Investment Officer Age: 78 | Since 1991 | 33 | Chairman, Chief Executive Officer, and 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 within the Fund Complex; Chief Executive Officer of GGCP, Inc.; Executive Chairman of Associated Capital Group, Inc. | Director of Morgan Group Holdings, Inc. (holding company); Chairman of the Board and Chief Executive Officer of LICT Corp. (multimedia and communication services company); Director of CIBL, Inc. (broadcasting and wireless communications); Director of ICTC Group Inc. (communications) (2013-2018) | ||||
John D. Gabelli Director Age: 76 | Since 1991 | 12 | Senior Vice President of G.research, LLC | — | ||||
INDEPENDENT DIRECTORS5: | ||||||||
Elizabeth C. Bogan Director Age: 76 | Since 2019 | 8 | Senior Lecturer in Economics at Princeton University | — | ||||
Anthony J. Colavita6 Director Age: 84 | Since 1991 | 20 | President of the law firm of Anthony J. Colavita, P.C. | — | ||||
Vincent D. Enright Director Age: 76 | Since 1991 | 17 | Former Senior Vice President and Chief Financial Officer of KeySpan Corp. (public utility) (1994-1998) | Director of Echo Therapeutics, Inc. (therapeutics and diagnostics) (2008- 2014); Director of The LGL Group, Inc. (diversified manufacturing) (2011-2014) | ||||
Robert J. Morrissey Director Age: 81 | Since 1991 | 7 | Partner in the law firm of Morrissey, Hawkins & Lynch | Chairman of the Board of Directors, Belmont Savings Bank | ||||
Kuni Nakamura Director Age: 52 | Since 2009 | 33 | President of Advanced Polymer, Inc. (chemical manufacturing company); President of KEN Enterprises, Inc. (real estate) | — | ||||
Anthonie C. van Ekris6 Director Age: 86 | Since 1991 | 23 | Chairman and Chief Executive Officer of BALMAC International, Inc. (global import/ export company) | — | ||||
Salvatore J. Zizza7 Director Age: 74 | Since 2001 | 31 | President of Zizza & Associates Corp. (private holding company); President of Bergen Cove Realty Inc. (2000-2018); Chairman of Harbor Diversified, Inc. (pharmaceuticals) (2009-2018); Chairman of BAM (semiconductor and aerospace manufacturing); Chairman of Metropolitan Paper Recycling Inc. (recycling) (2005- 2014) | Director and Chairman of Trans-Lux Corporation (business services); Director and Chairman of Harbor Diversified Inc. (pharmaceuticals) (2009-2018) |
19
The Gabelli Focus Five Fund
Additional Fund Information (Unaudited) (Continued)
Name, Position(s) | Term of Office | |||
Address1 | and Length of | Principal Occupation(s) | ||
and Age | Time Served2 | During Past Five Years | ||
OFFICERS: | ||||
Bruce N. Alpert President Age: 68 | Since 1991 | Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC since 1988; Officer of registered investment companies within the Fund Complex; Senior Vice President of GAMCO Investors, Inc. since 2008; Chief Executive Officer of G.distributors, LLC since January 2020 | ||
John C. Ball Treasurer Age: 44 | Since 2017 | Treasurer of registered investment companies within the Fund Complex since 2017; Vice President and Assistant Treasurer of AMG Funds, 2014-2017 | ||
Peter Goldstein Secretary Age: 67 | Since 2020 | General Counsel, Gabelli Funds, LLC since July 2020; General Counsel and Chief Compliance Officer, Buckingham Capital Management, Inc. (2012-2020); Chief Legal Officer and Chief Compliance Officer, The Buckingham Research Group, Inc. (2012-2020) | ||
Richard J. Walz Chief Compliance Officer Age: 61 | Since 2013 | Chief Compliance Officer of registered investment companies within the Fund Complex since 2013; Chief Compliance Office for Gabelli Funds, LLC since 2015 |
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. For officers, includes time served in prior officer positions with the Fund. Each officer will hold office for an indefinite term until the date he or she resigns or retires or until his or her successor is elected and qualified. |
3 | This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934, as amended, i.e., public companies, or other investment companies registered under the 1940 Act. |
4 | “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. |
5 | Directors who are not interested persons are considered “Independent” Directors. |
6 | Mr. Colavita’s son, Anthony S. Colavita, serves as a director of other funds in the Gabelli/GAMCO Fund Complex. Mr. van Ekris is an independent director of Gabelli International Ltd., Gabelli Fund, LDC, GAMA Capital Opportunities Master, Ltd., and GAMCO International SICAV, which may be deemed to be controlled by Mario J. Gabelli and/or affiliates and in that event would be deemed to be under common control with the Fund’s Adviser. |
7 | Mr. Zizza is an independent director of Gabelli International Ltd., which may be deemed to be controlled by Mario J. Gabelli and/or affiliates and in that event would be deemed to be under common control with the Fund’s Adviser. On September 9, 2015, Mr. Zizza entered into a settlement with the SEC to resolve an inquiry relating to an alleged violation regarding the making of false statements or omissions to the accountants of a company concerning a related party transaction. The company in question is not an affiliate of, nor has any connection to, the Fund. Under the terms of the settlement, Mr. Zizza, without admitting or denying the SEC’s findings and allegation, paid $150,000 and agreed to cease and desist committing or causing any future violations of Rule 13b2-2 of the Securities Exchange Act of 1934, as amended. The Board has discussed this matter and has determined that it does not disqualify Mr. Zizza from serving as an Independent Director. |
20
THE GABELLI FOCUS FIVE FUND
2020 TAX NOTICE TO SHAREHOLDERS (Unaudited)
During the fiscal year ended September 30, 2020, the Fund did not pay any distribution to shareholders.
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.
Portfolio Manager Biography
Daniel M. Miller has been the portfolio manager of the Gabelli Focus Five Fund since the inception of the current investment strategy of the Fund. He currently serves as a portfolio manager of Gabelli Funds, LLC and is also a Managing Director of GAMCO Investors, Inc. Mr. Miller joined the Firm in 2002 and graduated magna cum laude with a degree in finance from the University of Miami in Coral Gables, Florida.
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. Both the commentary and the financial statements, including the portfolio of investments, will be available on our website at www.gabelli.com.
Gabelli Funds and Your Personal Privacy
|
Who are we?
The Gabelli 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., a publicly held company with subsidiaries and affiliates that provide investment advisory 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.
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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., Executive Chairman, Associated Capital Group, Inc.
Elizabeth C. Bogan Senior Lecturer, Princeton University
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, LLC
Robert J. Morrissey Partner, Morrissey, Hawkins & Lynch
Kuni Nakamura President, Advanced Polymer, Inc.
Anthonie C. van Ekris Chairman, BALMAC International, Inc. | Salvatore J. Zizza Chairman, Zizza & Associates Corp.
OFFICERS Bruce N. Alpert President
John C. Ball Treasurer
Peter Goldstein Secretary
Richard J. Walz Chief Compliance Officer
DISTRIBUTOR G.distributors, LLC
CUSTODIAN State Street Bank and Trust Company
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT DST Asset Manager Solutions, Inc.
LEGAL COUNSEL Skadden, Arps, Slate, Meagher & Flom LLP
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This report is submitted for the general information of the shareholders of The Gabelli Focus Five Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus.
GAB840Q320AR
The Gabelli Global Financial Services Fund
Annual Report — September 30, 2020 | ||
Ian Lapey | ||
Portfolio Manager | ||
BA, Williams College | ||
MS, Northeastern University | ||
To Our Shareholders, | MBA, New York University |
For the fiscal year ended September 30, 2020, the net asset value (NAV) total return per Class AAA Share of The Gabelli Global Financial Services Fund was (20.3)% compared with a total return of (14.1)% for the Morgan Stanley Capital International (MSCI) World Financials Index. Other classes of shares are available. See page 2 for performance information for all classes.
Enclosed are the financial statements, including the schedule of investments, as of September 30, 2020.
Performance Discussion (Unaudited)
The goal of the Fund is to generate long term capital appreciation, and under normal market conditions, the Fund will invest at least 80% of the value of its net assets in the securities of companies principally engaged in the group of industries comprising the financial services sector. The Fund considers a company to be engaged in financial services if it devotes a significant portion of its assets to or derives a significant portion of its revenues from providing financial services. The Adviser’s investment philosophy with respect to buying and selling equity securities is to identify assets that are selling in the public market at a discount to their private market value (PMV). The Adviser defines PMV as the value informed purchasers are willing to pay to acquire assets with similar characteristics.
During the year ended September 30, 2020, the common stocks of most global financial services companies were negatively impacted by the decline in interest rates and the COVID-19 pandemic. The ten year US treasury rate fell to 0.8% from 1.7%, and the Federal Funds rate fell to a range of 0%-0.25% from 1.75%-2.0%. Although lower interest rates negatively impact the Net Interest Margin (NIM) generated by banks, there are several positive ramifications including higher asset values, lower funding costs, lower credit costs and boosts to interest rate sensitive industries like housing, auto and investment banking. The COVID-19 pandemic led to a 33% decline in second quarter 2020 US GDP and a sharp increase in US unemployment to a peak of 14.7% in April from 3.5% in February. This severe economic deterioration drove large increases in credit reserves for banks in the first two quarters of 2020. However, the capital positions for most banks have remained very strong, and demand for financial services has been robust. Most large banks should be able to avoid issuing dilutive equity capital. I believe these interest rate and pandemic headwinds have created attractive buying opportunities in the companies of many financial services companies, and I have made significant additional personal investments in the Fund. As of September 30, 2020, the Fund had 32 common stock positions and Net Assets of $13.5 million. I believe that the Fund’s aggregate valuation metrics are extremely attractive at about 70% of book value, 125% of tangible book value and 9 times expected 2021 earnings.
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s website (www.gabelli.com), and you will be notified by mail each time a report is posted and provided with a website link to access the report. If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. To elect to receive all future reports on paper free of charge, please contact your financial intermediary, or, if you invest directly with the Fund, you may call 800-422-3554 or send an email request to info@gabelli.com
The top contributor for the year was Dutch life insurer NN Group (5.3% of the Fund’s net assets as of September 30, 2020). The company reported resilient results for the first half of 2020, despite the pandemic, and an interim dividend that equated to 6.8% of its market cap. Daimler AG (2.8%), a German car (Mercedes Benz) and truck manufacturer with a significant financial services business, benefitted from a recovery in the auto market as the pandemic has increased demand for cars, and supply shortages have resulted in record high used car prices. Other positive contributors included State Street Corp (3.7%), a leading asset manager and custodian, and Janus Henderson Group (4.3%), a global asset management company. State Street reported a 33% increase in earnings through the first six months of 2020 as its fee-based business model with minimal credit risk has operated well during the pandemic. Janus Henderson’s investment teams have performed well, and the company has generated healthy cash flow and significant returns to shareholders in share repurchases and dividends.
The common stocks of Citigroup (4.0%), NatWest Group (2.4%), Standard Chartered (2.6%) and other banks fell sharply owing to the negative impact of pandemic related credit provisions and low interest rates on 2020 earnings. So far actual credit losses have been minimal as the companies have benefited from prudent underwriting in recent years. Their capital positions were robust heading in to 2020, and healthy earnings from capital markets and investment banking have contributed to continued financial strength despite booking large credit reserves. The largest individual detractor was Assured Guaranty, a leading municipal bond insurer. Despite a strong capital position and long term history of prudent underwriting, its stock fell sharply owing primarily to the pandemic’s pressure on the creditworthiness of many municipalities. The position was eliminated so that the Fund could add to positions with similarly depressed valuations but less long term investment risk, including all the common stocks mentioned above.
We appreciate your confidence and trust.
Comparative Results
Total Returns through September 30, 2020 (a)(b) (Unaudited) |
Since | ||||||||||||
Inception | ||||||||||||
1 Year | (10/1/18) | |||||||||||
Class AAA (GAFSX) | (20.33 | )% | (14.75 | )% | ||||||||
MSCI World Financials Index | (14.10 | ) | (7.21 | ) | ||||||||
Class A (GGFSX) | (20.24 | ) | (14.69 | ) | ||||||||
With sales charge (c) | (24.83 | ) | (17.18 | ) | ||||||||
Class C (GCFSX) | (20.97 | ) | (15.39 | ) | ||||||||
With contingent deferred sales charge (d) | (21.76 | ) | (15.39 | ) | ||||||||
Class I (GFSIX) | (20.17 | ) | (14.55 | ) |
In the current prospectuses dated January 28, 2020 and supplemented July 31, 2020, the gross expense ratios for Class AAA, A, C, and I Shares are 2.32%, 2.32%, 3.08%, and 2.07%, respectively, and the net expense ratios for these share classes after contractual reimbursements by Gabelli Funds, LLC, (the Adviser) are 1.25%, 1.25%, 2.00%, and 1.00%, respectively. See page 9 for the expense ratios for the fiscal year ended September 30, 2020. The contractual reimbursements are in effect through January 31, 2021. Class AAA and Class I Shares do not have a sales charge. The maximum sales charge for Class A Shares and Class 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. 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 of purchase. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The prospectuses contain 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. Investing in foreign securities involves risks not ordinarily associated with investments in domestic issues, including currency fluctuation, economic, and political risks. The MSCI World Financials Index captures large and mid cap securities in the Financials sector across 23 Developed Markets countries. 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. |
2
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI GLOBAL FINANCIAL SERVICES FUND (CLASS AAA SHARES),
AND MSCI WORLD FINANCIALS 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. |
3
The Gabelli Global Financial Services Fund Disclosure of Fund Expenses (Unaudited) For the Six Month Period from April 1, 2020 through September 30, 2020 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 fiscal year ended September 30, 2020.
Beginning Account Value 04/01/20 | Ending Account Value 09/30/20 | Annualized Ratio | Expenses Paid During Period* | |||||||||||||||||
The Gabelli Global Financial Services Fund |
| |||||||||||||||||||
Actual Fund Return |
| |||||||||||||||||||
Class AAA | $ | 1,000.00 | $ | 1,178.00 | 1.25 | % | $ | 6.81 | ||||||||||||
Class A | $ | 1,000.00 | $ | 1,180.00 | 1.25 | % | $ | 6.81 | ||||||||||||
Class C | $ | 1,000.00 | $ | 1,175.60 | 2.00 | % | $ | 10.88 | ||||||||||||
Class I | $ | 1,000.00 | $ | 1,180.00 | 1.00 | % | $ | 5.45 | ||||||||||||
Hypothetical 5% Return |
| |||||||||||||||||||
Class AAA | $ | 1,000.00 | $ | 1,018.75 | 1.25 | % | $ | 6.31 | ||||||||||||
Class A | $ | 1,000.00 | $ | 1,018.75 | 1.25 | % | $ | 6.31 | ||||||||||||
Class C | $ | 1,000.00 | $ | 1,015.00 | 2.00 | % | $ | 10.08 | ||||||||||||
Class I | $ | 1,000.00 | $ | 1,020.00 | 1.00 | % | $ | 5.05 |
* | 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 366. |
4
Summary of Portfolio Holdings (Unaudited)
The following table presents portfolio holdings as a percent of net assets as of September 30, 2020:
The Gabelli Global Financial Services Fund
Banks | 19.1 | % | ||
Investment Management | 17.8 | % | ||
Diversified Banks | 15.9 | % | ||
Institutional Brokerage | 10.9 | % | ||
Life Insurance | 9.2 | % | ||
Institutional Trust, Fiduciary, and Custody | 8.1 | % |
Consumer Finance | 6.5 | % | ||
Homebuilders | 6.2 | % | ||
Automobiles | 5.6 | % | ||
U.S. Government Obligations | 0.8 | % | ||
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-PORT. 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-PORT 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.
5
The Gabelli Global Financial Services Fund
Schedule of Investments — September 30, 2020
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS — 99.3% |
| |||||||||||
Automobiles — 5.6% |
| |||||||||||
7,000 | Daimler AG | $ | 378,427 | $ | 377,818 | |||||||
2,900 | Toyota Motor Corp., ADR | 346,541 | 384,076 | |||||||||
|
|
|
| |||||||||
724,968 | 761,894 | |||||||||||
|
|
|
| |||||||||
Banks — 19.1% | ||||||||||||
27,150 | CIT Group Inc. | 722,988 | 480,827 | |||||||||
120,200 | Commerzbank AG† | 899,607 | 590,916 | |||||||||
118,000 | Dah Sing Financial Holdings Ltd. | 604,591 | 283,503 | |||||||||
21,000 | ING Groep NV† | 163,478 | 149,133 | |||||||||
23,800 | Japan Post Bank Co. Ltd. | 266,114 | 185,273 | |||||||||
16,700 | Shinhan Financial Group Co. Ltd., ADR | 581,005 | 383,599 | |||||||||
28,100 | Shinsei Bank Ltd. | 415,367 | 344,772 | |||||||||
6,000 | Webster Financial Corp. | 164,458 | 158,460 | |||||||||
|
|
|
| |||||||||
3,817,608 | 2,576,483 | |||||||||||
|
|
|
| |||||||||
Consumer Finance — 6.5% |
| |||||||||||
21,600 | Ally Financial Inc. | 535,229 | 541,512 | |||||||||
4,700 | Capital One Financial Corp. | 376,974 | 337,742 | |||||||||
|
|
|
| |||||||||
912,203 | 879,254 | |||||||||||
|
|
|
| |||||||||
Diversified Banks — 15.9% |
| |||||||||||
272,500 | Barclays plc† | 568,208 | 343,218 | |||||||||
12,550 | Citigroup Inc. | 765,944 | 541,031 | |||||||||
44,900 | Credit Agricole SA† | 536,982 | 393,351 | |||||||||
236,500 | Natwest Group plc† | 610,981 | 323,632 | |||||||||
14,810 | Societe Generale SA† | 452,849 | 196,527 | |||||||||
76,100 | Standard Chartered plc† | 545,847 | 349,676 | |||||||||
|
|
|
| |||||||||
3,480,811 | 2,147,435 | |||||||||||
|
|
|
| |||||||||
Homebuilders — 6.2% |
| |||||||||||
2,990 | Cavco Industries Inc.† | 410,620 | 539,127 | |||||||||
21,309 | Legacy Housing Corp.† | 249,938 | 291,507 | |||||||||
|
|
|
| |||||||||
660,558 | 830,634 | |||||||||||
|
|
|
| |||||||||
Institutional Brokerage — 10.9% |
| |||||||||||
48,100 | Credit Suisse Group AG, ADR | 536,699 | 479,557 | |||||||||
88,800 | Daiwa Securities Group Inc. | 485,177 | 371,063 | |||||||||
34,610 | Jefferies Financial Group Inc. | 697,216 | 622,980 | |||||||||
|
|
|
| |||||||||
1,719,092 | 1,473,600 | |||||||||||
|
|
|
|
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
Institutional Trust, Fiduciary, and Custody — 8.1% |
| |||||||||||
8,450 | State Street Corp. | $ | 444,650 | $ | 501,339 | |||||||
17,150 | The Bank of New York Mellon Corp. | 819,232 | 588,931 | |||||||||
|
|
|
| |||||||||
1,263,882 | 1,090,270 | |||||||||||
|
|
|
| |||||||||
Investment Management — 17.8% |
| |||||||||||
4,550 | Diamond Hill Investment Group Inc. | 684,251 | 574,756 | |||||||||
25,250 | Franklin Resources Inc. | 702,363 | 513,837 | |||||||||
26,600 | Janus Henderson Group plc | 555,654 | 577,752 | |||||||||
39,800 | Waddell & Reed Financial Inc., Cl. A | 575,657 | 591,030 | |||||||||
13,204 | Westwood Holdings Group Inc. | 157,029 | 147,092 | |||||||||
|
|
|
| |||||||||
2,674,954 | 2,404,467 | |||||||||||
|
|
|
| |||||||||
Life Insurance — 9.2% | ||||||||||||
203,117 | Aegon NV | 932,286 | 528,684 | |||||||||
19,029 | NN Group NV | 764,717 | 715,057 | |||||||||
|
|
|
| |||||||||
1,697,003 | 1,243,741 | |||||||||||
|
|
|
| |||||||||
TOTAL COMMON STOCKS | 16,951,079 | 13,407,778 | ||||||||||
|
|
|
| |||||||||
Principal | ||||||||||||
Amount | ||||||||||||
U.S. GOVERNMENT OBLIGATIONS — 0.8% |
| |||||||||||
$105,000 | U.S. Treasury Bill, | 104,978 | 104,978 | |||||||||
|
|
|
| |||||||||
TOTAL INVESTMENTS — | $ | 17,056,057 | 13,512,756 | |||||||||
|
| |||||||||||
Other Assets and Liabilities (Net) — (0.1)% |
| (11,583 | ) | |||||||||
|
| |||||||||||
NET ASSETS — 100.0% |
| $ | 13,501,173 | |||||||||
|
|
† | Non-income producing security. |
†† | Represents annualized yield at date of purchase. |
ADR | American Depositary Receipt |
See accompanying notes to financial statements.
6
The Gabelli Global Financial Services Fund
Statement of Assets and Liabilities
September 30, 2020
|
Assets: | ||||
Investments, at value (cost $17,056,057) | $13,512,756 | |||
Receivable for investments sold | 75,906 | |||
Receivable from Adviser | 23,539 | |||
Dividends and interest receivable | 30,011 | |||
Prepaid expenses | 31,578 | |||
Total Assets | 13,673,790 | |||
Liabilities: | ||||
Foreign currency overdraft, at value (cost $10) | 10 | |||
Payable to custodian | 13,847 | |||
Payable for investments purchased | 85,774 | |||
Payable for investment advisory fees | 11,275 | |||
Payable for distribution fees | 19 | |||
Payable for legal and audit fees | 21,800 | |||
Payable for shareholder communications expenses | 27,262 | |||
Other accrued expenses. | 12,630 | |||
Total Liabilities | 172,617 | |||
Net Assets | ||||
(applicable to 1,905,883 shares outstanding) | $13,501,173 | |||
Net Assets Consist of: | ||||
Paid-in capital | $18,036,551 | |||
Total accumulated loss | (4,535,378) | |||
Net Assets | $13,501,173 | |||
Shares of Capital Stock, each at $0.001 par value: | ||||
Class AAA: | ||||
Net Asset Value, offering, and redemption price per share ($47,664 ÷ 6,730 shares outstanding; 120,000,000 shares authorized) | $7.08 | |||
Class A: | ||||
Net Asset Value and redemption price per share ($7,775 ÷ 1,098 shares outstanding; 60,000,000 shares authorized) | $7.08 | |||
Maximum offering price per share (NAV ÷ 0.9425, based on maximum sales charge of 5.75% of the offering price) | $7.51 | |||
Class C: | ||||
Net Asset Value and offering price per share ($716 ÷ 101.87 shares outstanding; 20,000,000 shares authorized) | $7.03 | (a) | ||
Class I: | ||||
Net Asset Value, offering, and redemption price per share ($13,445,018 ÷ 1,897,953 shares outstanding; 150,000,000 shares authorized) | $7.08 |
Statement of Operations
For the Year Ended September 30, 2020
Investment Income: | ||||
Dividends (net of foreign withholding taxes of $9,292) | $ | 390,500 | ||
Interest | 3,868 | |||
|
| |||
Total Investment Income | 394,368 | |||
|
| |||
Expenses: | ||||
Investment advisory fees | 139,049 | |||
Distribution fees - Class AAA | 180 | |||
Distribution fees - Class A | 73 | |||
Distribution fees - Class C | 8 | |||
Registration expenses | 58,744 | |||
Shareholder communication expenses | 39,201 | |||
Legal and audit fees | 28,410 | |||
Custodian fees | 21,934 | |||
Shareholder services fees | 11,966 | |||
Directors’ fees | 1,001 | |||
Interest expense | 7 | |||
Miscellaneous expenses | 13,587 | |||
|
| |||
Total Expenses | 314,160 | |||
|
| |||
Less: | ||||
Expense reimbursements (See Note 3) | (174,126 | ) | ||
Expenses paid indirectly by broker (See Note 6) | (717 | ) | ||
|
| |||
Total Reductions | (174,843 | ) | ||
|
| |||
Net Expenses | 139,317 | |||
|
| |||
Net Investment Income | 255,051 | |||
|
| |||
Net Realized and Unrealized Gain/(Loss) on Investments and Foreign Currency: | ||||
Net realized loss on investments | (1,018,824 | ) | ||
Net realized loss on foreign currency transactions | (229 | ) | ||
|
| |||
Net realized loss on investments and foreign currency transactions | (1,019,053 | ) | ||
|
| |||
Net change in unrealized appreciation/depreciation: | ||||
on investments | (2,604,052 | ) | ||
on foreign currency translations | 780 | |||
|
| |||
Net change in unrealized appreciation/depreciation on investments and foreign currency translations | (2,603,272 | ) | ||
|
| |||
Net Realized and Unrealized Gain/(Loss) on Investments and Foreign Currency | (3,622,325 | ) | ||
|
| |||
Net Decrease in Net Assets Resulting from Operations | $ | (3,367,274 | ) | |
|
|
(a) | Redemption price varies based on the length of time held. |
See accompanying notes to financial statements.
7
The Gabelli Global Financial Services Fund
Statement of Changes in Net Assets
Year Ended | Year Ended | |||||||||
September 30, 2020 | September 30, 2019(a) | |||||||||
Operations: | ||||||||||
Net investment income | $ | 255,051 | $ | 356,018 | ||||||
Net realized loss on investments and foreign currency transactions | (1,019,053 | ) | (160,556 | ) | ||||||
Net change in unrealized appreciation/depreciation on investments and foreign currency translations | (2,603,272 | ) | (939,477 | ) | ||||||
|
|
|
| |||||||
Net Decrease in Net Assets Resulting from Operations | (3,367,274 | ) | (744,015 | ) | ||||||
|
|
|
| |||||||
Distributions to Shareholders: | ||||||||||
Class AAA | (1,646 | ) | (310 | ) | ||||||
Class A | (264 | ) | (3 | ) | ||||||
Class C | (17 | ) | (1 | ) | ||||||
Class I | (377,283 | ) | (44,565 | ) | ||||||
|
|
|
| |||||||
Total Distributions to Shareholders | (379,210 | ) | (44,879 | ) | ||||||
|
|
|
| |||||||
Capital Share Transactions: | ||||||||||
Class AAA | (63,425 | ) | 139,202 | |||||||
Class A | (8,303 | ) | 10,263 | |||||||
Class C | 17 | 1,001 | ||||||||
Class I | 4,081,055 | 13,876,238 | ||||||||
|
|
|
| |||||||
Net Increase in Net Assets from Capital Share Transactions | 4,009,344 | 14,026,704 | ||||||||
|
|
|
| |||||||
Redemption Fees | 503 | — | ||||||||
|
|
|
| |||||||
Net Increase in Net Assets | 263,363 | 13,237,810 | ||||||||
Net Assets: | ||||||||||
Beginning of period | 13,237,810 | — | ||||||||
|
|
|
| |||||||
End of year | $ | 13,501,173 | $ | 13,237,810 | ||||||
|
|
|
|
(a) | The Fund commenced investment operations on October 1, 2018. |
See accompanying notes to financial statements.
8
The Gabelli Global Financial Services Fund
Financial Highlights
Selected data for a share of capital stock outstanding throughout the year:
Income (Loss) | Ratios to Average Net Assets/ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
from Investment Operations | Distributions | Supplemental Data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Realized | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
and | Net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Asset | Unrealized | Asset | Net | Operating | Operating | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Value, | Net | Gain/(Loss) | Total from | Net | Value, | Assets | Net | Expenses | Expenses | Portfolio | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year Ended | Beginning | Investment | on | Investment | Investment | Total | Redemption | End of | Total | End of Period | Investment | Before | Net of | Turnover | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
September 30 | of Period | Income(a) | Investments | Operations | Income | Distributions | Fees(a) | Period | Return † | (in 000’s) | Income | Reimbursement | Reimbursement(b) | Rate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class AAA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | $ 9.09 | $0.11 | $(1.90) | $(1.79) | $(0.22) | $(0.22) | $0.00(c) | $7.08 | (20.33) | % | $ 47 | 1.34 | % | 2.51 | % | 1.25 | %(d) | 18 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
2019(e) | 10.00 | 0.27 | (1.15) | (0.88) | (0.03) | (0.03) | — | 9.09 | (8.76) | 134 | 3.01 | 2.32 | 1.25 | 14 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | $ 9.10 | $0.16 | $(1.94) | $(1.78) | $(0.24) | $(0.24) | $0.00(c) | $7.08 | (20.24) | % | $ 8 | 2.12 | % | 2.51 | % | 1.25 | %(d) | 18 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
2019(e) | 10.00 | 0.35 | (1.22) | (0.87) | (0.03) | (0.03) | — | 9.10 | (8.71) | 10 | 3.77 | 2.32 | 1.25 | 14 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | $ 9.05 | $0.06 | $(1.91) | $(1.85) | $(0.17) | $(0.17) | $0.00(c) | $7.03 | (20.97) | % | $ 1 | 0.76 | % | 3.26 | % | 2.00 | %(d) | 18 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
2019(e) | 10.00 | 0.17 | (1.11) | (0.94) | (0.01) | (0.01) | — | 9.05 | (9.39) | 1 | 1.85 | 3.08 | 2.00 | 14 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class I | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | $ 9.11 | $0.14 | $(1.91) | $(1.77) | $(0.26) | $(0.26) | $0.00(c) | $7.08 | (20.17) | % | $13,445 | 1.84 | % | 2.26 | % | 1.00 | %(d) | 18 | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
2019(e) | 10.00 | 0.28 | (1.13) | (0.85) | (0.04) | (0.04) | — | 9.11 | (8.51) | 13,093 | 3.05 | 2.07 | 1.00 | 14 |
† | Total return represents aggregate total return of a hypothetical $1,000 investment at the beginning of the year and sold at the end of the year 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) | Under an expense reimbursement agreement with the Adviser, the Adviser reimbursed expenses of $174,126 and $124,154 for the fiscal years ended September 30, 2020 and 2019, respectively. |
(c) | Amount represents less than $0.005 per share. |
(d) | The Fund received credits from a designated broker who agreed to pay certain Fund expenses. For the fiscal year ended September 30, 2020, if credits had not been received, the expense ratios would have been 1.26% (Class AAA and Class A), 2.01% (Class C), and 1.01% (Class I). |
(e) | The Fund commenced investment operations on October 1, 2018. |
See accompanying notes to financial statements.
9
The Gabelli Global Financial Services Fund
Notes to Financial Statements
1. Organization. The Gabelli Global Financial Services Fund is a series of the 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 four separately managed portfolios of the Corporation. The Fund seeks to provide capital appreciation. The Fund commenced investment operations on October 1, 2018.
2. Significant Accounting Policies. As an investment company, the Fund follows the investment company accounting and reporting guidance, which is part of U.S. generally accepted accounting principles (GAAP) that may require the use of management estimates and assumptions in the preparation of its financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements.
The global outbreak of the novel coronavirus disease, known as COVID-19, has caused adverse effects on many companies, sectors, nations, regions and the markets in general, and may continue for an unpredictable duration. The effects of this pandemic may materially impact the value and performance of the Fund, its ability to buy and sell fund investments at appropriate valuations, and its ability to achieve its investment objectives.
New Accounting Pronouncements. To improve the effectiveness of fair value disclosure requirements, the Financial Accounting Standards Board recently issued Accounting Standard Update (ASU) 2018-13, Fair Value Measurement Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13), which adds, removes, and modifies certain aspects relating to fair value disclosure. ASU 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption of the additions relating to ASU 2018-13 is not required, even if early adoption is elected for the removals and modifications under ASU 2018-13. Management has early adopted the removals and modifications set forth in ASU 2018-13 in these financial statements and has not early adopted the additions set forth in ASU 2018-13.
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provides optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate (LIBOR) and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the 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).
10
The Gabelli Global Financial Services Fund
Notes to Financial Statements (Continued)
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 obligations 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 securities are valued using the closing bid price, 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. 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. OTC futures and options on futures for which market quotations are readily available will be valued by quotations received from a pricing service or, if no quotations are available from a pricing service, by quotations obtained from one or more dealers in the instrument in question by the Adviser.
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.
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 Board’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 Fund did not hold any Level 3 securities at the fiscal years ended September 30, 2019 and 2020. The summary of the Fund’s investments in securities and other financial instruments by inputs used to value the Fund’s investments as of September 30, 2020 is as follows:
Valuation Inputs | |||||||||||||||
Level 1 | Level 2 Other Significant | Total Market Value | |||||||||||||
Quoted Prices | Observable Inputs | at 9/30/20 | |||||||||||||
INVESTMENTS IN SECURITIES: | |||||||||||||||
ASSETS (Market Value): | |||||||||||||||
Common Stocks (a) | $ | 13,407,778 | — | $ | 13,407,778 | ||||||||||
U.S. Government Obligations | — | $ | 104,978 | 104,978 | |||||||||||
TOTAL INVESTMENTS IN SECURITIES – ASSETS | $ | 13,407,778 | $ | 104,978 | $ | 13,512,756 |
(a) | Please refer to the Schedule of Investments for the industry classifications of these portfolio holdings. |
11
The Gabelli Global Financial Services Fund
Notes to Financial Statements (Continued)
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 are 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.
Fair Valuation. Fair valued securities may be common or preferred equities, warrants, options, rights, or 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. When fair valuing a security, factors to consider include 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 may include backtesting the prices realized in subsequent trades of these fair valued securities to fair values previously recognized.
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 securities of comparable U.S. issuers.
12
The Gabelli Global Financial Services Fund
Notes to Financial Statements (Continued)
Foreign Taxes. The Fund may be subject to foreign taxes on income, gains on investments, or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
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 the sale of securities eligible for trading on national securities exchanges or in the over-the-counter markets. Restricted securities may sell at a price lower than similar securities that are not subject to restrictions on resale. Securities freely saleable among qualified institutional investors under special rules adopted by the SEC may be treated as liquid if they satisfy liquidity standards established by the Board. The continued liquidity of such securities is not as well assured as that of publicly traded securities, and accordingly the Board will monitor their liquidity. At September 30, 2020, 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 or amortized to the earliest call date, if applicable. 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. The characterization of distributions to shareholders is 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, 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 the tax treatment of currency gains and losses. These reclassifications have no impact on the NAV of the Fund.
13
The Gabelli Global Financial Services Fund
Notes to Financial Statements (Continued)
The tax character of distributions paid during the fiscal years ended September 30, 2020 and 2019 was as follows:
Year Ended September 30, 2020 | Year Ended September 30, 2019 | |||||||||
Distributions paid from: | ||||||||||
Ordinary income | $ | 379,210 | $ | 44,879 | ||||||
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Total distributions paid | $ | 379,210 | $ | 44,879 | ||||||
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Provision for Income Taxes. The Fund intends 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, 2020, the components of accumulated earnings/losses on a tax basis were as follows:
Net unrealized depreciation on investments | $ | (3,557,413 | ) | ||
Undistributed ordinary income. | 187,844 | ||||
Accumulated capital loss carryforwards | (132,728 | ) | |||
Qualified late year loss deferral* | (1,033,081 | ) | |||
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Total | $ | (4,535,378 | ) | ||
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* | Under the current law, qualified late year ordinary losses realized after December 31 or post October capital losses realized after October 31 and prior to the Fund’s year end may be elected as occurring on the first day of the following year. For the fiscal year ended September 30, 2020, the Fund elected to defer $1,033,081 of post October capital losses |
The Fund is permitted to carry capital losses forward for an unlimited period. Capital losses that are carried forward will retain their character as either short term or long term capital losses. The Fund has a short term capital loss carryforward with no expiration of $132,728. The Fund utilized $26,860 of the capital loss carryovers for the fiscal year ended September 30, 2020.
At September 30, 2020, the temporary difference between book basis and tax basis net unrealized depreciation on investments was due to deferral of losses from wash sales, and mark-to-market on investments considered passive foreign investment companies for tax purposes.
The following summarizes the tax cost of investments and the related net unrealized depreciation at September 30, 2020:
Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Depreciation | |||||||||||||||||
Investments | $ | 17,070,721 | $ | 524,928 | $ | (4,082,893 | ) | $ | (3,557,965 | ) |
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. During the fiscal year ended September 30, 2020, the Fund did not incur any income tax, interest, or penalties. As of September 30, 2020, the Adviser has reviewed the current and previous tax periods and concluded that there was no impact to the Fund’s net assets or results of operations. The Fund’s federal and
14
The Gabelli Global Financial Services Fund
Notes to Financial Statements (Continued)
state returns for the current and previous fiscal years remain open, subject to examination. 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 Adviser has contractually agreed to waive its investment advisory fees and/or to reimburse expenses of the Fund to the extent necessary to maintain the annualized total operating expenses of the Fund (excluding brokerage costs, acquired fund fees and expenses, interest, taxes, and extraordinary expenses) at no more than an annual rate of 1.25%, 1.25%, 2.00%, and 1.00% for Class AAA, Class A, Class C, and Class I shares, respectively. This arrangement is in effect through January 31, 2021. For the fiscal year ended September 30, 2020, the Adviser reimbursed the Fund in the amount of $174,126. In addition, the Fund has also agreed, during the two year period following any waiver or reimbursement by the Adviser, to repay such amount to the extent, that after giving effect to the repayments, such adjusted annualized total operating expenses of the Fund would not exceed the foregoing expense limitations of the value of the Fund’s average daily net assets for Class AAA, Class A, Class C, and Class I Shares. At September 30, 2020, the cumulative amount which the Fund may repay the Adviser, subject to the terms above, is $298,280:
For the fiscal year ended September 30, 2019, expiring September 30, 2021 | $ | 124,154 | |||
For the fiscal year ended September 30, 2020, expiring September 30, 2022 | 174,126 | ||||
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$ | 298,280 | ||||
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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 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 fiscal year ended September 30, 2020, other than short term securities and U.S. Government obligations, aggregated $6,406,523 and $2,458,584, respectively.
15
The Gabelli Global Financial Services Fund
Notes to Financial Statements (Continued)
6. Transactions with Affiliates and Other Arrangements. During the fiscal year ended September 30, 2020, the Fund paid $4,202 in brokerage commissions on security trades to G.research, LLC, an affiliate of the Adviser.
During the fiscal year ended September 30, 2020, the Fund received credits from a designated broker who agreed to pay certain Fund operating expenses. The amount of such expenses paid through this directed brokerage arrangement during this period was $717.
The cost of calculating the Fund’s NAV per share is a Fund expense pursuant to the Advisory Agreement. The Adviser did not seek a reimbursement during the fiscal year ended September 30, 2020.
7. Line of Credit. The Fund participates in an unsecured line of credit, which expires on March 3, 2021 and may be renewed annually, 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 a floating rate equal to the higher of the overnight Federal Funds rate plus 125 basis points or the 30 day ICE LIBOR plus 125 basis points in effect on that day. This amount, if any, would be included in “interest expense” in the Statement of Operations. At September 30, 2020, there were no borrowings outstanding under the line of credit.
The average daily amount of borrowings outstanding under the line of credit during the fiscal year ended September 30, 2020 was $478 with a weighted average interest rate of 1.45%. There was a one day borrowing of $175,000 during the fiscal year ended September 30, 2020.
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 and Class I Shares are offered without a sales charge. 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 fiscal years ended September 30, 2020 and 2019, if any, can be found in the Statement of Changes in Net Assets under Redemption Fees.
16
The Gabelli Global Financial Services Fund
Notes to Financial Statements (Continued)
Transactions in shares of capital stock were as follows:
Year Ended | Year Ended | ||||||||||||||||||||||||
September 30, 2020 | September 30, 2019(a) | ||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||
Class AAA | |||||||||||||||||||||||||
Shares sold | 9,216 | $ | 71,042 | 19,438 | $ | 181,324 | |||||||||||||||||||
Shares issued upon reinvestment of distributions | 171 | 1,647 | 37 | 310 | |||||||||||||||||||||
Shares redeemed | (17,429 | ) | (136,114 | ) | (4,703 | ) | (42,432 | ) | |||||||||||||||||
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Net increase/(decrease) | (8,042 | ) | $ | (63,425 | ) | 14,772 | $ | 139,202 | |||||||||||||||||
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Class A | |||||||||||||||||||||||||
Shares sold | 9,324 | $ | 59,425 | 1,095 | $ | 10,260 | |||||||||||||||||||
Shares issued upon reinvestment of distributions | 28 | 264 | 0 | * | 3 | ||||||||||||||||||||
Shares redeemed | (9,349 | ) | (67,992 | ) | — | — | |||||||||||||||||||
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Net increase/(decrease) | 3 | $ | (8,303 | ) | 1,095 | $ | 10,263 | ||||||||||||||||||
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Class C | |||||||||||||||||||||||||
Shares sold | — | — | 100 | $ | 1,000 | ||||||||||||||||||||
Shares issued upon reinvestment of distributions | 2 | $ | 17 | 0 | * | 1 | |||||||||||||||||||
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Net increase | 2 | $ | 17 | 100 | $ | 1,001 | |||||||||||||||||||
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Class I | |||||||||||||||||||||||||
Shares sold | 454,386 | $ | 3,950,997 | 1,431,995 | $ | 13,836,051 | |||||||||||||||||||
Shares issued upon reinvestment of distributions | 39,081 | 374,401 | 5,363 | 44,565 | |||||||||||||||||||||
Shares redeemed | (32,357 | ) | (244,343 | ) | (515 | ) | (4,378 | ) | |||||||||||||||||
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Net increase | 461,110 | $ | 4,081,055 | 1,436,843 | $ | 13,876,238 | |||||||||||||||||||
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* | Represents fewer than 0.50 shares. |
(a) | The Fund commenced investment operations on October 1, 2018. |
9. Significant Shareholder. As of September 30, 2020, approximately 95.9% of the Fund was beneficially owned by the Adviser and its affiliates.
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. 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.
17
The Gabelli Global Financial Services Fund
Report of Independent Registered Public Accounting Firm
To the Shareholders of The Gabelli Global Financial Services Fund
and the Board of Directors of Gabelli Equity Series Funds, Inc.
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of The Gabelli Global Financial Services Fund (the “Fund”) (one of the funds constituting Gabelli Equity Series Funds, Inc. (the “Corporation”)), including the schedule of investments, as of September 30, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets and the financial highlights for the year ended September 30, 2020 and the period from October 1, 2018 (commencement of operations) through September 30, 2019 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting Gabelli Equity Series Funds, Inc.) at September 30, 2020, the results of its operations for the year then ended, the changes in its net assets and its financial highlights for the year ended September 30, 2020 and the period from October 1, 2018 (commencement of operations) through September 30, 2019, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Corporation is not required to have, nor were we engaged to perform, an audit of the Corporation’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2020, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Gabelli/GAMCO Funds investment companies since 1992.
Philadelphia, Pennsylvania
November 25, 2020
18
The Gabelli Global Financial Services 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 Global Financial Services 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: 78 | Since 1991 | 33 | Chairman, Chief Executive Officer, and 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 within the Fund Complex; Chief Executive Officer of GGCP, Inc.; Executive Chairman of Associated Capital Group, Inc. | Director of Morgan Group Holdings, Inc. (holding company); Chairman of the Board and Chief Executive Officer of LICT Corp. (multimedia and communication services company); Director of CIBL, Inc. (broadcasting and wireless communications); Director of ICTC Group Inc. (communications) (2013-2018) | ||||
John D. Gabelli Director Age: 76 | Since 1991 | 12 | Senior Vice President of G.research, LLC | — | ||||
INDEPENDENT DIRECTORS5: | ||||||||
Elizabeth C. Bogan Director Age: 76 | Since 2019 | 8 | Senior Lecturer in Economics at Princeton University | — | ||||
Anthony J. Colavita6 Director Age: 84 | Since 1991 | 20 | President of the law firm of Anthony J. Colavita, P.C. | — | ||||
Vincent D. Enright Director Age: 76 | Since 1991 | 17 | Former Senior Vice President and Chief Financial Officer of KeySpan Corp. (public utility) (1994-1998) | Director of Echo Therapeutics, Inc. (therapeutics and diagnostics) (2008- 2014); Director of The LGL Group, Inc. (diversified manufacturing) (2011-2014) | ||||
Robert J. Morrissey Director Age: 81 | Since 1991 | 7 | Partner in the law firm of Morrissey, Hawkins & Lynch | Chairman of the Board of Directors, Belmont Savings Bank | ||||
Kuni Nakamura Director Age: 52 | Since 2009 | 32 | President of Advanced Polymer, Inc. (chemical manufacturing company); President of KEN Enterprises, Inc. (real estate); Trustee on Long Island University Board of Trustees | — | ||||
Anthonie C. van Ekris6 Director Age: 86 | Since 1991 | 23 | Chairman and Chief Executive Officer of BALMAC International, Inc. (global import/ export company) | — | ||||
Salvatore J. Zizza7 Director Age: 74 | Since 2001 | 30 | President of Zizza & Associates Corp. (private holding company); President of Bergen Cove Realty Inc.; Chairman of Harbor Diversified, Inc. (pharmaceuticals) (2009-2018); Chairman of BAM (semiconductor and aerospace manufacturing)(2000-2018); Chairman of Metropolitan Paper Recycling Inc. (recycling) (2005-2014) | Director and Chairman of Trans-Lux Corporation (business services); Director and Chairman of Harbor Diversified Inc. (pharmaceuticals) (2009-2018) |
19
The Gabelli Global Financial Services Fund
Additional Fund Information (Continued) (Unaudited)
Name, Position(s) and Age | Term of Office and Length of Time Served2 | Principal Occupation(s) During Past Five Years | ||
OFFICERS: | ||||
Bruce N. Alpert President Age: 68 | Since 1991 | Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC since 1988; Officer of registered investment companies within the Fund Complex; Senior Vice President of GAMCO Investors, Inc. since 2008; Chief Executive Officer of G.distributors, LLC since January 2020 | ||
John C. Ball Treasurer Age: 44 | Since 2017 | Treasurer of registered investment companies within the Fund Complex since 2017; Vice President and Assistant Treasurer of AMG Funds, 2014-2017 | ||
Peter Goldstein Secretary Age: 67 | Since 2020 | General Counsel, Gabelli Funds, LLC since July 2020; General Counsel and Chief Compliance Officer, Buckingham Capital Management, Inc. (2012-2020); Chief Legal Officer and Chief Compliance Officer, The Buckingham Research Group, Inc. (2012-2020) | ||
Richard J. Walz Chief Compliance Officer Age: 61 | Since 2013 | Chief Compliance Officer of registered investment companies within the Fund Complex since 2013; Chief Compliance Office for Gabelli Funds, LLC since 2015 |
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. |
6 | Mr. Colavita’s son, Anthony S. Colavita, serves as a director of other funds in the Fund Complex. Mr. van Ekris is an independent director of Gabelli International Ltd., Gabelli Fund, LDC, GAMA Capital Opportunities Master, Ltd., and GAMCO International SICAV, which may be deemed to be controlled by Mario J. Gabelli and/or affiliates and in that event would be deemed to be under common control with the Fund’s Adviser. |
7 | Mr. Zizza is an independent director of Gabelli International Ltd., which may be deemed to be controlled by Mario J. Gabelli and/or affiliates and in that event would be deemed to be under common control with the Fund’s Adviser. On September 9, 2015, Mr. Zizza entered into a settlement with the SEC to resolve an inquiry relating to an alleged violation regarding the making of false statements or omissions to the accountants of a company concerning a related party transaction. The company in question is not an affiliate of, nor has any connection to, the Fund. Under the terms of the settlement, Mr. Zizza, without admitting or denying the SEC’s findings and allegation, paid $150,000 and agreed to cease and desist committing or causing any future violations of Rule 13b2-2 of the Securities Exchange Act of 1934, as amended. The Board has discussed this matter and has determined that it does not disqualify Mr. Zizza from serving as an Independent Director. |
20
THE GABELLI GLOBAL FINANCIAL SERVICES FUND
2020 TAX NOTICE TO SHAREHOLDERS (Unaudited)
During the fiscal year ended September 30, 2020, the Fund paid to shareholders, ordinary income distributions totaling $0.2200, $0.2410, $0.1673, and $0.2605 per share for Class AAA, Class A, Class C, and Class I Shares, respectively. For the fiscal year ended September 30, 2020, 40.71% 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 1.93% of the ordinary income distribution as qualified interest income pursuant to the Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010.
U.S. Government Income:
The percentage of the ordinary income distribution paid by the Fund during the fiscal year ended September 30, 2020 which was derived from U.S. Treasury securities was 1.90%. 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 Global Financial Services Fund did not meet this strict requirement in 2020. The percentage of U.S. Government securities held as of September 30, 2020 was 0.78%. 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.
Gabelli Funds and Your Personal Privacy
|
Who are we?
The Gabelli 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., a publicly held company with subsidiaries and affiliates that provide investment advisory 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 GLOBAL FINANCIAL SERVICES FUND
One Corporate Center
Rye, NY 10580-1422
Portfolio Manager Biography
Ian Lapey joined Gabelli in October 2018 as a portfolio manager. Prior to joining Gabelli, Mr. Lapey was a research analyst and partner at Moerus Capital Management LLC. Prior to joining Moerus, he was a partner, research analyst, and a portfolio manager at Third Avenue Management. Mr. Lapey holds an MBA in Finance and Statistics from the Stern School of Business at New York University. He also holds a Master’s degree in Accounting from Northeastern University and a BA in Economics from Williams College.
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. 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 GLOBAL FINANCIAL SERVICES 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. Executive Chairman, Associated Capital Group, Inc.
Elizabeth C. Bogan Senior Lecturer, Princeton University
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, LLC
Robert J. Morrissey Partner, Morrissey, Hawkins & Lynch
Kuni Nakamura President, Advanced Polymer, Inc.
Anthonie C. van Ekris Chairman, BALMAC International, Inc. | Salvatore J. Zizza Chairman, Zizza & Associates Corp.
OFFICERS Bruce N. Alpert President
John C. Ball Treasurer
Peter Goldstein Secretary
Richard J. Walz Chief Compliance Officer
DISTRIBUTOR G.distributors, LLC
CUSTODIAN State Street Bank and Trust Company
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT DST Asset Manager Solutions, Inc.
LEGAL COUNSEL Skadden, Arps, Slate, Meagher & Flom LLP |
This report is submitted for the general information of the shareholders of The Gabelli Global Financial Services Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus.
GAB3630Q320AR
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 Vincent D. Enright is qualified to serve as an audit committee financial expert serving on its audit committee and that he is “independent.”
Item 4. Principal Accountant Fees and Services.
Audit Fees
(a) | The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $109,000 in 2019 and $109,000 in 2020. |
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 2019 and $0 in 2020. |
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 $15,200 in 2019 and $15,200 in 2020. 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 $4,615 in 2019 and $2,861 in 2020. The fees relate to Passive Foreign Investment Company identification database subscription fees billed on an annual basis. |
(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) 0%
(d) 0%
(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 less than fifty percent. |
(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 $64,998 in 2019 and $55,950 in 2020. |
(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) |
The Gabelli Small Cap Growth Fund
Schedule of Investments — September 30, 2020
Shares | Cost | Market Value | ||||||||
COMMON STOCKS —100.0% |
| |||||||||
Aerospace — 2.1% | ||||||||||
853,000 | Aerojet Rocketdyne Holdings Inc.† | $ | 4,102,921 | $ | 34,026,170 | |||||
20,000 | Allied Motion Technologies Inc. | 664,462 | 825,600 | |||||||
40,000 | Innovative Solutions and Support Inc. | 130,088 | 273,600 | |||||||
|
|
|
| |||||||
4,897,471 | 35,125,370 | |||||||||
|
|
|
| |||||||
Agriculture — 0.0% | ||||||||||
12,000 | Cadiz Inc.† | �� | 93,950 | 119,160 | ||||||
13,800 | Limoneira Co. | 257,313 | 197,340 | |||||||
|
|
|
| |||||||
351,263 | 316,500 | |||||||||
|
|
|
| |||||||
Automotive — 2.6% | ||||||||||
979,000 | Navistar International Corp.† | 24,284,197 | 42,625,660 | |||||||
1,500 | PACCAR Inc. | 55,714 | 127,920 | |||||||
|
|
|
| |||||||
24,339,911 | 42,753,580 | |||||||||
|
|
|
| |||||||
Automotive: Parts and Accessories — 3.2% |
| |||||||||
170,000 | BorgWarner Inc. | 815,098 | 6,585,800 | |||||||
88,022 | China Automotive Systems Inc.† | 420,368 | 260,545 | |||||||
1,135,000 | Dana Inc. | 9,544,908 | 13,983,200 | |||||||
880,000 | Freni Brembo SpA† | 1,632,589 | 8,800,929 | |||||||
387,000 | Modine Manufacturing Co.† | 3,535,149 | 2,418,750 | |||||||
18,000 | Monro Inc. | 80,738 | 730,260 | |||||||
4,400 | O’Reilly Automotive Inc.† | 94,684 | 2,028,752 | |||||||
45,000 | Puradyn Filter Technologies Inc.† | 11,732 | 495 | |||||||
192,000 | Standard Motor Products Inc. | 1,469,754 | 8,572,800 | |||||||
247,400 | Strattec Security Corp.(a) | 4,786,696 | 4,923,260 | |||||||
322,000 | Tenneco Inc., Cl. A† | 1,416,003 | 2,234,680 | |||||||
21,000 | Thor Industries Inc. | 194,527 | 2,000,460 | |||||||
8,000 | Uni-Select Inc. | 83,354 | 34,246 | |||||||
|
|
|
| |||||||
24,085,600 | 52,574,177 | |||||||||
|
|
|
| |||||||
Aviation: Parts and Services — 3.1% |
| |||||||||
21,000 | AAR Corp. | 244,115 | 394,800 | |||||||
9,500 | Astronics Corp.† | 13,628 | 73,340 | |||||||
22,700 | Astronics Corp., Cl. B† | 31,898 | 175,925 | |||||||
46,000 | Ducommun Inc.† | 918,285 | 1,514,320 | |||||||
696,000 | Kaman Corp. | 10,704,490 | 27,123,120 | |||||||
90,000 | Moog Inc., Cl. A | 1,139,951 | 5,717,700 | |||||||
16,500 | Moog Inc., Cl. B | 496,050 | 1,060,455 | |||||||
4,070,000 | Signature Aviation plc | 9,884,377 | 12,546,427 | |||||||
36,400 | Woodward Inc. | 329,703 | 2,917,824 | |||||||
|
|
|
| |||||||
23,762,497 | 51,523,911 | |||||||||
|
|
|
| |||||||
Broadcasting — 1.6% |
| |||||||||
265,000 | Beasley Broadcast Group Inc., Cl. A | 1,352,078 | 328,600 | |||||||
10,000 | Cogeco Communications Inc. | 340,851 | 820,022 | |||||||
23,300 | Cogeco Inc. | 592,837 | 1,540,734 |
Shares | Cost | Market Value | ||||||||
185,000 | Corus Entertainment Inc., Cl. B | $ | 679,390 | $ | 401,524 | |||||
40,000 | Fox Corp., Cl. A | 1,662,000 | 1,113,200 | |||||||
25,000 | Gray Television Inc.† | 73,674 | 344,250 | |||||||
72,350 | Gray Television Inc., Cl. A† | 386,480 | 886,287 | |||||||
275,000 | ITV plc | 561,685 | 239,948 | |||||||
17,000 | Liberty Broadband Corp., Cl. A† | 104,375 | 2,410,770 | |||||||
13,000 | Liberty Broadband Corp., Cl. C† | 69,160 | 1,857,310 | |||||||
20,000 | Liberty Media Corp.-Liberty Formula One, Cl. A† | 66,962 | 670,200 | |||||||
27,000 | Liberty Media Corp.-Liberty Formula One, Cl. C† | 91,359 | 979,290 | |||||||
64,000 | Liberty Media Corp.-Liberty SiriusXM, Cl. A† | 214,254 | 2,122,880 | |||||||
34,452 | Liberty Media Corp.-Liberty SiriusXM, Cl. C† | 294,603 | 1,139,672 | |||||||
345,000 | MSG Networks Inc., Cl. A† | 2,147,239 | 3,301,650 | |||||||
22,500 | Nexstar Media Group Inc., | 1,380,375 | 2,023,425 | |||||||
180,000 | Salem Media Group Inc. | 0 | 164,826 | |||||||
160,000 | Sinclair Broadcast Group Inc., | 1,221,814 | 3,076,800 | |||||||
480,000 | Sirius XM Holdings Inc. | 316,771 | 2,572,800 | |||||||
|
|
|
| |||||||
11,555,907 | 25,994,188 | |||||||||
|
|
|
| |||||||
Building and Construction — 6.2% |
| |||||||||
79,000 | Arcosa Inc. | 942,643 | 3,483,110 | |||||||
97,000 | D.R. Horton Inc. | 1,063,595 | 7,336,110 | |||||||
29,000 | Gibraltar Industries Inc.† | 546,825 | 1,889,060 | |||||||
464,000 | Herc Holdings Inc.† | 15,667,050 | 18,379,040 | |||||||
128,500 | KB Home | 1,277,157 | 4,933,115 | |||||||
400,000 | Lennar Corp., Cl. B | 9,784,772 | 26,264,000 | |||||||
160,000 | Louisiana-Pacific Corp. | 1,289,839 | 4,721,600 | |||||||
107,000 | MDC Holdings Inc. | 2,139,938 | 5,039,700 | |||||||
19,500 | Meritage Homes Corp.† | 338,849 | 2,152,605 | |||||||
2,700 | NVR Inc.† | 1,908,453 | 11,024,424 | |||||||
158,000 | PulteGroup Inc. | 976,094 | 7,313,820 | |||||||
65,000 | Titan Machinery Inc.† | 1,078,654 | 859,950 | |||||||
165,800 | Toll Brothers Inc. | 2,984,812 | 8,067,828 | |||||||
|
|
|
| |||||||
39,998,681 | 101,464,362 | |||||||||
|
|
|
| |||||||
Business Services — 3.0% |
| |||||||||
13,000 | ACCO Brands Corp. | 60,332 | 75,400 | |||||||
680,000 | Clear Channel Outdoor Holdings Inc.† | 1,762,880 | 680,000 | |||||||
414,000 | Diebold Nixdorf Inc.† | 4,171,398 | 3,162,960 | |||||||
85,000 | Element Solutions Inc.† | 792,541 | 893,350 | |||||||
70,000 | GP Strategies Corp.† | 579,429 | 674,800 | |||||||
13,000 | GSE Systems Inc.† | 18,200 | 13,520 | |||||||
225,000 | IAA Inc.† | 1,845,352 | 11,715,750 | |||||||
97,500 | Live Nation Entertainment Inc.† | 831,881 | 5,253,300 | |||||||
175,000 | Macquarie Infrastructure Corp. | 34,359 | 4,705,750 | |||||||
16,000 | McGrath RentCorp. | 411,253 | 953,440 | |||||||
20,000 | Sealed Air Corp. | 587,044 | 776,200 |
See accompanying notes to financial statements.
The Gabelli Small Cap Growth Fund
Schedule of Investments (Continued) — September 30, 2020
Shares | Cost | Market Value | ||||||||
COMMON STOCKS (Continued) |
| |||||||||
Business Services (Continued) |
| |||||||||
73,000 | Sohgo Security Services Co. Ltd. | $ | 848,008 | $ | 3,460,864 | |||||
9,500 | Stamps.com Inc.† | 79,071 | 2,289,025 | |||||||
149,000 | Team Inc.† | 2,056,182 | 819,500 | |||||||
409,000 | The Interpublic Group of Companies Inc. | 1,774,433 | 6,818,030 | |||||||
25,000 | TransAct Technologies Inc. | 115,198 | 125,000 | |||||||
1,739,000 | Trans-Lux Corp.†(a) | 1,714,044 | 347,800 | |||||||
39,600 | United Rentals Inc.† | 252,791 | 6,910,200 | |||||||
|
|
|
| |||||||
17,934,396 | 49,674,889 | |||||||||
|
|
|
| |||||||
Cable — 0.7% | ||||||||||
160,000 | AMC Networks Inc., Cl. A† | 1,836,742 | 3,953,600 | |||||||
40,000 | DISH Network Corp., Cl. A† | 746,475 | 1,161,200 | |||||||
30,000 | EchoStar Corp., Cl. A† | 479,334 | 746,700 | |||||||
121,000 | Liberty Global plc, Cl. A† | 2,700,564 | 2,542,210 | |||||||
160,000 | Liberty Global plc, Cl. C† | 3,112,971 | 3,285,600 | |||||||
90,000 | WideOpenWest Inc.† | 706,890 | 467,100 | |||||||
|
|
|
| |||||||
9,582,976 | 12,156,410 | |||||||||
|
|
|
| |||||||
Communications Equipment — 0.1% |
| |||||||||
248,000 | Communications Systems Inc. | 1,684,302 | 949,840 | |||||||
|
|
|
| |||||||
Computer Software and Services — 2.2% |
| |||||||||
19,500 | 3D Systems Corp.† | 236,041 | 95,745 | |||||||
85,500 | Activision Blizzard Inc. | 1,153,523 | 6,921,225 | |||||||
410,000 | Alithya Group Inc., Cl. A† | 1,281,794 | 852,800 | |||||||
194,000 | Avid Technology Inc.† | 1,128,059 | 1,660,640 | |||||||
182,000 | GTY Technology Holdings Inc.† | 1,771,986 | 482,300 | |||||||
14,000 | MKS Instruments Inc. | 246,336 | 1,529,220 | |||||||
39,000 | Rockwell Automation Inc. | 918,657 | 8,606,520 | |||||||
92,000 | Stratasys Ltd.† | 1,915,885 | 1,147,240 | |||||||
42,000 | Tyler Technologies Inc.† | 86,100 | 14,639,520 | |||||||
|
|
|
| |||||||
8,738,381 | 35,935,210 | |||||||||
|
|
|
| |||||||
Consumer Products — 2.6% |
| |||||||||
23,000 | 1-800-Flowers.com Inc., Cl. A† | 47,594 | 573,620 | |||||||
89,000 | Brunswick Corp. | 2,332,338 | 5,242,990 | |||||||
32,000 | Chofu Seisakusho Co. Ltd. | 461,495 | 667,217 | |||||||
41,000 | Church & Dwight Co. Inc. | 69,785 | 3,842,110 | |||||||
17,000 | Energizer Holdings Inc. | 709,960 | 665,380 | |||||||
13,000 | Ginko International Co. Ltd. | 108,593 | 60,148 | |||||||
2,000 | Harley-Davidson Inc. | 4,713 | 49,080 | |||||||
146,000 | Hunter Douglas NV† | 6,322,005 | 8,507,580 | |||||||
2,500 | Kobayashi Pharmaceutical Co. Ltd. | 103,323 | 241,075 | |||||||
6,200 | �� | LCI Industries | 102,829 | 658,998 | ||||||
238,000 | Marine Products Corp. | 148,400 | 3,722,320 | |||||||
3,000 | National Presto Industries Inc. | 83,060 | 245,580 | |||||||
230,000 | Sally Beauty Holdings Inc.† | 1,289,542 | 1,998,700 | |||||||
215,000 | Samick Musical Instruments Co. Ltd. | 289,566 | 247,264 |
Shares | Cost | Market Value | ||||||||
3,700 | Shimano Inc. | $ | 414,540 | $ | 726,914 | |||||
14,000 | Steven Madden Ltd. | 34,457 | 273,000 | |||||||
111,000 | Swedish Match AB | 2,143,578 | 9,082,421 | |||||||
10,000 | The Scotts Miracle-Gro Co. | 174,942 | 1,529,100 | |||||||
9,500 | WD-40 Co. | 248,399 | 1,798,445 | |||||||
85,000 | Wolverine World Wide Inc. | 413,704 | 2,196,400 | |||||||
|
|
|
| |||||||
15,502,823 | 42,328,342 | |||||||||
|
|
|
| |||||||
Consumer Services — 1.6% |
| |||||||||
53,000 | Bowlin Travel Centers Inc.† | 53,947 | 152,375 | |||||||
2,750 | Collectors Universe Inc. | 0 | 136,097 | |||||||
3,000 | H&E Equipment Services Inc. | 67,163 | 58,980 | |||||||
5,000 | IAC/InterActiveCorp.† | 16,882 | 598,900 | |||||||
260,000 | KAR Auction Services Inc. | 1,330,391 | 3,744,000 | |||||||
394,000 | Rollins Inc. | 578,623 | 21,350,860 | |||||||
|
|
|
| |||||||
2,047,006 | 26,041,212 | |||||||||
|
|
|
| |||||||
Diversified Industrial — 9.0% |
| |||||||||
10,500 | Acuity Brands Inc. | 99,097 | 1,074,675 | |||||||
65,000 | Albany International Corp., Cl. A | 1,320,757 | 3,218,150 | |||||||
187,496 | Ampco-Pittsburgh Corp.† | 1,034,471 | 654,361 | |||||||
69,400 | Burnham Holdings Inc., Cl. A | 1,216,539 | 806,775 | |||||||
364,000 | Crane Co. | 7,932,157 | 18,247,320 | |||||||
113,000 | EnPro Industries Inc. | 6,096,907 | 6,374,330 | |||||||
115,000 | Greif Inc., Cl. A | 2,267,516 | 4,164,150 | |||||||
95,700 | Greif Inc., Cl. B | 4,346,420 | 3,778,236 | |||||||
1,410,000 | Griffon Corp. | 16,076,530 | 27,551,400 | |||||||
190,000 | Jardine Strategic Holdings Ltd. | 3,487,637 | 3,763,900 | |||||||
6,000 | JSP Corp. | 134,248 | 91,424 | |||||||
83,000 | Kimball International Inc., | 785,684 | 874,820 | |||||||
60,000 | L.B. Foster Co., Cl. A† | 776,764 | 805,200 | |||||||
55,500 | Lawson Products Inc.† | 740,545 | 2,277,165 | |||||||
63,000 | Lincoln Electric Holdings Inc. | 1,641,404 | 5,798,520 | |||||||
43,000 | Lindsay Corp. | 932,963 | 4,157,240 | |||||||
27,000 | Lydall Inc.† | 286,221 | 446,580 | |||||||
30,500 | Matthews International Corp., Cl. A | 714,289 | 681,980 | |||||||
952,000 | Myers Industries Inc. | 13,237,132 | 12,594,960 | |||||||
74,500 | Oil-Dri Corp. of America | 529,097 | 2,664,865 | |||||||
14,000 | Olin Corp. | 221,218 | 173,320 | |||||||
300,000 | Park-Ohio Holdings Corp. | 2,625,435 | 4,821,000 | |||||||
12,500 | Pentair plc | 296,897 | 572,125 | |||||||
94,000 | Raven Industries Inc. | 2,319,682 | 2,022,880 | |||||||
16,500 | Roper Technologies Inc. | 310,694 | 6,519,315 | |||||||
69,000 | Sonoco Products Co. | 2,033,683 | 3,523,830 | |||||||
56,000 | Standex International Corp. | 1,494,342 | 3,315,200 | |||||||
175,000 | Steel Connect Inc.† | 286,839 | 94,920 | |||||||
11,000 | Steel Partners Holdings LP† | 159,362 | 67,913 | |||||||
13,000 | T. Hasegawa Co. Ltd. | 236,726 | 260,456 | |||||||
8,000 | Terex Corp. | 190,480 | 154,880 | |||||||
370,000 | Textron Inc. | 2,276,853 | 13,353,300 | |||||||
486,000 | Tredegar Corp. | 7,961,023 | 7,226,820 |
See accompanying notes to financial statements.
The Gabelli Small Cap Growth Fund
Schedule of Investments (Continued) — September 30, 2020
Shares | Cost | Market Value | ||||||||
COMMON STOCKS (Continued) |
| |||||||||
Diversified Industrial (Continued) |
| |||||||||
230,000 | Trinity Industries Inc. | $ | 2,621,672 | $ | 4,485,000 | |||||
48,000 | Ultra Electronics Holdings plc | 962,561 | 1,292,008 | |||||||
|
|
|
| |||||||
87,653,845 | 147,909,018 | |||||||||
|
|
|
| |||||||
Electronics — 1.8% |
| |||||||||
161,000 | Badger Meter Inc. | 2,143,613 | 10,524,570 | |||||||
216,000 | Bel Fuse Inc., Cl. A(a) | 4,115,394 | 2,408,400 | |||||||
500,000 | CTS Corp. | 4,412,357 | 11,015,000 | |||||||
33,000 | Daktronics Inc. | 281,209 | 130,680 | |||||||
116,000 | Gentex Corp. | 1,174,214 | 2,987,000 | |||||||
20,000 | IMAX Corp.† | 158,565 | 239,200 | |||||||
30,000 | Renesas Electronics Corp.† | 194,117 | 217,608 | |||||||
78,000 | Stoneridge Inc.† | 431,318 | 1,432,860 | |||||||
|
|
|
| |||||||
12,910,787 | 28,955,318 | |||||||||
|
|
|
| |||||||
Energy and Utilities — 2.2% |
| |||||||||
21,000 | Avangrid Inc. | 815,249 | 1,059,660 | |||||||
25,000 | Callon Petroleum Co.† | 174,121 | 120,500 | |||||||
21,500 | Chesapeake Utilities Corp. | 300,557 | 1,812,450 | |||||||
35,500 | CMS Energy Corp. | 181,989 | 2,180,055 | |||||||
11,000 | Consolidated Water Co. Ltd. | 141,093 | 114,510 | |||||||
100,000 | Covanta Holding Corp. | 24,597 | 775,000 | |||||||
56,000 | Diamondback Energy Inc. | 2,831,092 | 1,686,720 | |||||||
38,500 | Dril-Quip Inc.† | 1,483,503 | 953,260 | |||||||
74,000 | Energy Recovery Inc.† | 316,427 | 606,800 | |||||||
24,000 | Landis+Gyr Group AG† | 1,466,993 | 1,314,587 | |||||||
25,000 | Marathon Petroleum Corp. | 123,445 | 733,500 | |||||||
31,000 | Middlesex Water Co. | 523,319 | 1,926,650 | |||||||
11,000 | Northwest Natural Holding Co. | 518,541 | 499,290 | |||||||
21,500 | NorthWestern Corp. | 582,609 | 1,045,760 | |||||||
16,000 | Otter Tail Corp. | 317,433 | 578,720 | |||||||
86,000 | PNM Resources Inc. | 703,631 | 3,554,380 | |||||||
1,865,000 | RPC Inc.† | 889,096 | 4,923,600 | |||||||
20,000 | Siemens Gamesa Renewable Energy SA | 117,491 | 541,440 | |||||||
90,000 | SJW Group | 1,643,120 | 5,477,400 | |||||||
32,500 | Southwest Gas Holdings Inc. | 533,592 | 2,050,750 | |||||||
9,000 | Spire Inc. | 354,680 | 478,800 | |||||||
34,000 | The York Water Co. | 475,596 | 1,437,180 | |||||||
11,000 | Vestas Wind Systems A/S | 94,711 | 1,784,280 | |||||||
|
|
|
| |||||||
14,612,885 | 35,655,292 | |||||||||
|
|
|
| |||||||
Entertainment — 1.3% |
| |||||||||
50,000 | Discovery Inc., Cl. A† | 863,334 | 1,088,500 | |||||||
79,000 | Discovery Inc., Cl. C† | 524,418 | 1,548,400 | |||||||
81,000 | Inspired Entertainment Inc.† | 509,946 | 239,760 | |||||||
90,000 | Liberty Media Corp.- Liberty Braves, Cl. A† | 1,984,256 | 1,879,200 | |||||||
214,000 | Liberty Media Corp.- Liberty Braves, Cl. C† | 3,147,813 | 4,496,140 |
Shares | Cost | Market Value | ||||||||
33,500 | Madison Square Garden Sports Corp.† | $ | 0 | $ | 5,041,080 | |||||
34,000 | Manchester United plc, Cl. A | 542,466 | 494,360 | |||||||
10,000 | Take-Two Interactive Software Inc.† | 75,380 | 1,652,200 | |||||||
5,000 | The Walt Disney Co. | 28,673 | 620,400 | |||||||
38,000 | Universal Entertainment Corp.† . | 230,655 | 692,154 | |||||||
69,000 | World Wrestling Entertainment Inc., Cl. A | 727,607 | 2,792,430 | |||||||
|
|
|
| |||||||
8,634,548 | 20,544,624 | |||||||||
|
|
|
| |||||||
Environmental Services — 0.5% |
| |||||||||
92,000 | Republic Services Inc. | 831,067 | 8,588,200 | |||||||
|
|
|
| |||||||
Equipment and Supplies — 14.7% |
| |||||||||
31,600 | A.O. Smith Corp. | 74,355 | 1,668,480 | |||||||
439,500 | AMETEK Inc. | 747,849 | 43,686,300 | |||||||
52,000 | AZZ Inc. | 1,771,545 | 1,774,240 | |||||||
20,000 | Chart Industries Inc.† | 658,081 | 1,405,400 | |||||||
162,000 | CIRCOR International Inc.† | 2,611,735 | 4,430,700 | |||||||
333,000 | Core Molding Technologies Inc.† | 744,209 | 2,950,380 | |||||||
141,000 | Crown Holdings Inc.† | 569,461 | 10,837,260 | |||||||
2,025 | Danaher Corp. | 13,122 | 436,043 | |||||||
107,000 | Donaldson Co. Inc. | 615,370 | 4,966,940 | |||||||
65,000 | Entegris Inc. | 278,163 | 4,832,100 | |||||||
274,000 | Federal Signal Corp. | 1,470,809 | 8,014,500 | |||||||
249,000 | Flowserve Corp. | 1,610,407 | 6,795,210 | |||||||
205,500 | Franklin Electric Co. Inc. | 804,756 | 12,089,565 | |||||||
500,000 | Graco Inc. | 3,336,420 | 30,675,000 | |||||||
51,000 | IDEX Corp. | 186,874 | 9,302,910 | |||||||
185,000 | Interpump Group SpA | 855,699 | 6,880,210 | |||||||
11,000 | Littelfuse Inc. | 109,551 | 1,950,740 | |||||||
55,000 | Maezawa Kyuso Industries Co. Ltd. | 359,609 | 1,199,450 | |||||||
70,000 | Minerals Technologies Inc. | 3,212,544 | 3,577,000 | |||||||
6,000 | MSA Safety Inc. | 179,592 | 805,020 | |||||||
715,000 | Mueller Industries Inc. | 19,007,547 | 19,347,900 | |||||||
482,000 | Mueller Water Products Inc., Cl. A | 3,550,821 | 5,007,980 | |||||||
3,600 | Teleflex Inc. | 54,840 | 1,225,512 | |||||||
175,000 | Tennant Co. | 2,986,539 | 10,563,000 | |||||||
786,000 | The Gorman-Rupp Co. | 12,468,177 | 23,155,560 | |||||||
110,000 | The Greenbrier Companies Inc. | 1,383,138 | 3,234,000 | |||||||
97,000 | The L.S. Starrett Co., Cl. A† | 746,537 | 286,150 | |||||||
30,000 | The Manitowoc Co. Inc.† | 283,157 | 252,300 | |||||||
62,500 | The Middleby Corp.† | 722,852 | 5,606,875 | |||||||
38,000 | The Timken Co. | 1,288,260 | 2,060,360 | |||||||
30,000 | The Toro Co. | 524,020 | 2,518,500 | |||||||
7,500 | Valmont Industries Inc. | 172,236 | 931,350 | |||||||
6,200 | Vicor Corp.† | 29,426 | 481,926 | |||||||
7,875 | Watsco Inc., Cl. B | 23,627 | 1,838,104 |
See accompanying notes to financial statements.
The Gabelli Small Cap Growth Fund
Schedule of Investments (Continued) — September 30, 2020
Shares | Cost | Market Value | ||||||||
COMMON STOCKS (Continued) |
| |||||||||
Equipment and Supplies (Continued) |
| |||||||||
60,000 | Watts Water Technologies Inc., Cl. A | $ | 1,139,108 | $ | 6,009,000 | |||||
|
|
|
| |||||||
64,590,436 | 240,795,965 | |||||||||
|
|
|
| |||||||
Financial Services — 3.6% |
| |||||||||
6,000 | Alleghany Corp. | 923,013 | 3,122,700 | |||||||
8,240 | Ameris Bancorp | 71,898 | 187,707 | |||||||
25,000 | Argo Group International Holdings Ltd. | 493,734 | 860,750 | |||||||
131,000 | Calamos Asset Management Inc., Escrow†(b) | 0 | 0 | |||||||
12,000 | Capitol Federal Financial Inc. | 120,000 | 111,180 | |||||||
22,000 | Crazy Woman Creek Bancorp Inc. | 343,564 | 344,190 | |||||||
330,000 | Energy Transfer LP | 0 | 1,788,600 | |||||||
130 | Farmers & Merchants Bank of Long Beach | 846,022 | 792,740 | |||||||
348,000 | Flushing Financial Corp. | 5,737,095 | 3,660,960 | |||||||
66,000 | FNB Corp. | 659,922 | 447,480 | |||||||
240,000 | GAM Holding AG† | 976,978 | 463,818 | |||||||
278,000 | Hope Bancorp Inc. | 3,087,049 | 2,108,630 | |||||||
425,000 | Huntington Bancshares Inc. | 4,066,429 | 3,897,250 | |||||||
738,000 | KKR & Co. Inc. | 3,183,446 | 25,342,920 | |||||||
80,000 | Medallion Financial Corp.† | 362,763 | 200,000 | |||||||
55,000 | Pzena Investment Management Inc., Cl. A | 456,506 | 294,800 | |||||||
44,500 | Sandy Spring Bancorp Inc. | 1,518,598 | 1,027,060 | |||||||
13,500 | Sculptor Capital Management Inc. | 301,309 | 158,490 | |||||||
800 | South State Corp. | 58,904 | 38,520 | |||||||
9,000 | State Auto Financial Corp. | 208,279 | 123,840 | |||||||
404,000 | Sterling Bancorp | 4,356,771 | 4,250,080 | |||||||
80,000 | Synovus Financial Corp. | 2,160,858 | 1,693,600 | |||||||
16,000 | TFS Financial Corp. | 234,831 | 235,040 | |||||||
15,000 | Thomasville Bancshares Inc. | 570,703 | 693,750 | |||||||
230,000 | Valley National Bancorp | 1,437,500 | 1,575,500 | |||||||
35,500 | Value Line Inc. | 443,012 | 876,850 | |||||||
314,000 | Waddell & Reed Financial Inc., Cl. A | 4,602,068 | 4,662,900 | |||||||
10,000 | Waterloo Investment Holdings Ltd.†(b) | 1,373 | 2,100 | |||||||
133,000 | Wright Investors’ Service Holdings Inc.† | 90,952 | 46,550 | |||||||
|
|
|
| |||||||
37,313,577 | 59,008,005 | |||||||||
|
|
|
| |||||||
Food and Beverage — 9.6% |
| |||||||||
425,000 | Arca Continental SAB de CV | 763,179 | 1,831,931 | |||||||
89,500 | Brown-Forman Corp., Cl. A | 569,033 | 6,146,860 | |||||||
42,000 | Bull-Dog Sauce Co. Ltd. | 120,234 | 475,096 | |||||||
1,000,000 | China Tontine Wines Group Ltd.† | 105,355 | 11,613 |
Shares | Cost | Market Value | ||||||||
204,500 | Chr. Hansen Holding A/S | $ | 8,521,649 | $ | 22,730,452 | |||||
310,000 | Crimson Wine Group Ltd.† | 2,736,535 | 1,534,500 | |||||||
40,000 | Davide Campari-Milano NV | 64,106 | 437,045 | |||||||
220,000 | Denny’s Corp.† | 736,620 | 2,200,000 | |||||||
700,000 | Dynasty Fine Wines Group Ltd.† | 114,811 | 22,219 | |||||||
62,000 | Farmer Brothers Co.† | 835,850 | 274,040 | |||||||
415,000 | Flowers Foods Inc. | 986,370 | 10,096,950 | |||||||
128,000 | ITO EN Ltd. | 2,461,981 | 9,114,683 | |||||||
49,000 | Iwatsuka Confectionery Co. Ltd. | 1,717,459 | 1,765,515 | |||||||
23,000 | J & J Snack Foods Corp. | 509,737 | 2,998,970 | |||||||
118,000 | Kameda Seika Co. Ltd. | 4,751,460 | 6,041,815 | |||||||
660,000 | Kikkoman Corp. | 5,955,162 | 36,421,562 | |||||||
700,000 | Maple Leaf Foods Inc. | 12,211,478 | 14,272,840 | |||||||
6,000 | MEIJI Holdings Co. Ltd. | 117,526 | 457,403 | |||||||
21,000 | MGP Ingredients Inc. | 32,647 | 834,540 | |||||||
71,000 | Morinaga Milk Industry Co. Ltd. | 1,376,548 | 3,729,578 | |||||||
26,000 | National Beverage Corp.† | 1,065,624 | 1,768,260 | |||||||
52,500 | Nissin Foods Holdings Co. Ltd. | 1,761,959 | 4,928,175 | |||||||
15,000 | Post Holdings Inc.† | 62,689 | 1,290,000 | |||||||
150,000 | Rock Field Co. Ltd. | 1,078,378 | 2,097,852 | |||||||
2,000 | The Boston Beer Co. Inc., | 38,340 | 1,766,720 | |||||||
61,000 | The J.M. Smucker Co. | 1,432,586 | 7,046,720 | |||||||
625,000 | Tingyi (Cayman Islands) | |||||||||
Holding Corp. | 1,326,207 | 1,101,606 | ||||||||
204,001 | Tootsie Roll Industries Inc. | 3,183,000 | 6,303,631 | |||||||
390,000 | Vina Concha y Toro SA | 716,197 | 638,752 | |||||||
1,050,000 | Vitasoy International Holdings Ltd. | 615,385 | 4,071,264 | |||||||
20,000 | Willamette Valley Vineyards Inc.† | 73,225 | 123,000 | |||||||
100,000 | Yakult Honsha Co. Ltd. | 2,378,860 | 5,546,864 | |||||||
|
|
|
| |||||||
58,420,190 | 158,080,456 | |||||||||
|
|
|
| |||||||
Health Care — 6.4% |
| |||||||||
2,000 | Align Technology Inc.† | 13,951 | 654,720 | |||||||
7,000 | Bio-Rad Laboratories Inc., | 312,891 | 3,608,220 | |||||||
14,500 | Bruker Corp. | 120,643 | 576,375 | |||||||
60,000 | Cantel Medical Corp. | 618,282 | 2,636,400 | |||||||
1,000 | Chemed Corp. | 13,731 | 480,350 | |||||||
25,000 | CONMED Corp. | 524,502 | 1,966,750 | |||||||
32,000 | Covetrus Inc.† | 153,127 | 780,800 | |||||||
436,000 | Cutera Inc.† | 6,073,608 | 8,270,920 | |||||||
13,200 | DexCom Inc.† | 73,052 | 5,441,436 | |||||||
20,000 | Evolent Health Inc., Cl. A† | 222,100 | 248,200 | |||||||
173,000 | Globus Medical Inc., Cl. A† | 3,940,181 | 8,566,960 | |||||||
73,000 | Henry Schein Inc.† | 501,325 | 4,290,940 | |||||||
29,000 | ICU Medical Inc.† | 960,710 | 5,300,040 | |||||||
40,500 | Masimo Corp.† | 977,000 | 9,560,430 | |||||||
86,000 | Meridian Bioscience Inc.† | 1,359,200 | 1,460,280 |
See accompanying notes to financial statements.
The Gabelli Small Cap Growth Fund
Schedule of Investments (Continued) — September 30, 2020
Shares | Cost | Market | ||||||||||
COMMON STOCKS (Continued) |
| |||||||||||
Health Care (Continued) |
| |||||||||||
24,500 | Neogen Corp.† | $ | 504,369 | $ | 1,917,125 | |||||||
112,000 | NuVasive Inc.† | 3,005,221 | 5,439,840 | |||||||||
216,000 | OPKO Health Inc.† | 569,980 | 797,040 | |||||||||
133,000 | Orthofix Medical Inc.† | 2,998,197 | 4,141,620 | |||||||||
17,500 | Owens & Minor Inc. | 59,847 | 439,425 | |||||||||
22,000 | Patterson Cos. Inc. | 481,743 | 530,310 | |||||||||
111,000 | Quidel Corp.† | 514,839 | 24,351,180 | |||||||||
24,000 | Seikagaku Corp. | 280,995 | 251,458 | |||||||||
18,800 | STERIS plc | 1,401,352 | 3,312,372 | |||||||||
1,900 | Straumann Holding AG | 170,618 | 1,918,463 | |||||||||
3,000 | Stryker Corp. | 142,188 | 625,110 | |||||||||
32,000 | SurModics Inc.† | 651,429 | 1,245,120 | |||||||||
28,200 | Teladoc Health Inc.† | 943,344 | 6,182,568 | |||||||||
100 | The Cooper Companies Inc. | 3,627 | 33,712 | |||||||||
38,000 | United-Guardian Inc. | 332,419 | 570,380 | |||||||||
|
|
|
| |||||||||
27,924,471 | 105,598,544 | |||||||||||
|
|
|
| |||||||||
Home Furnishings — 0.3% |
| |||||||||||
195,000 | Bassett Furniture Industries Inc. | 2,054,436 | 2,667,600 | |||||||||
6,000 | Ethan Allen Interiors Inc. | 139,850 | 81,240 | |||||||||
80,000 | La-Z-Boy Inc. | 1,331,823 | 2,530,400 | |||||||||
|
|
|
| |||||||||
3,526,109 | 5,279,240 | |||||||||||
|
|
|
| |||||||||
Hotels and Gaming — 3.6% |
| |||||||||||
180,000 | Boyd Gaming Corp. | 965,827 | 5,524,200 | |||||||||
190,540 | Canterbury Park Holding Corp. | 1,961,480 | 2,320,777 | |||||||||
136,800 | Churchill Downs Inc. | 1,308,844 | 22,410,576 | |||||||||
130,000 | Formosa International Hotels Corp. | 872,527 | 596,989 | |||||||||
554,000 | Full House Resorts Inc.† | 1,622,914 | 1,074,760 | |||||||||
48,254 | Gaming and Leisure Properties Inc., REIT | 380,856 | 1,782,020 | |||||||||
800,000 | Genting Singapore Ltd. | 741,067 | 392,660 | |||||||||
170,000 | Golden Entertainment Inc.† | 1,518,492 | 2,351,100 | |||||||||
2,980,000 | Mandarin Oriental International Ltd.† | 4,175,855 | 5,364,000 | |||||||||
3,500 | Penn National Gaming Inc.† | 15,200 | 254,450 | |||||||||
342,000 | Ryman Hospitality Properties Inc., REIT | 7,089,047 | 12,585,600 | |||||||||
2,900,000 | The Hongkong & Shanghai Hotels Ltd. | 3,096,951 | 2,252,631 | |||||||||
162,000 | The Marcus Corp. | 1,777,629 | 1,252,260 | |||||||||
14,000 | Wynn Resorts Ltd. | 0 | 1,005,340 | |||||||||
|
|
|
| |||||||||
25,526,689 | 59,167,363 | |||||||||||
|
|
|
| |||||||||
Machinery — 2.4% | ||||||||||||
353,000 | Astec Industries Inc. | 12,385,722 | 19,150,250 | |||||||||
1,427,000 | CNH Industrial NV† | 4,242,733 | 11,159,140 | |||||||||
118,000 | Kennametal Inc. | 2,181,655 | 3,414,920 | |||||||||
5,300 | Nordson Corp. | 90,324 | 1,016,646 |
Shares | Cost | Market | ||||||||||
165,000 | The Eastern Co. | $ | 3,213,896 | $ | 3,220,800 | |||||||
120,000 | Twin Disc Inc.† | 1,408,528 | 607,200 | |||||||||
90,000 | Welbilt Inc.† | 434,686 | 554,400 | |||||||||
|
|
|
| |||||||||
23,957,544 | 39,123,356 | |||||||||||
|
|
|
| |||||||||
Manufactured Housing and Recreational Vehicles — 1.2% |
| |||||||||||
71,500 | Cavco Industries Inc.† | 1,435,393 | 12,892,165 | |||||||||
70,000 | Nobility Homes Inc. | 764,895 | 1,610,000 | |||||||||
85,000 | Skyline Champion Corp.† | 500,100 | 2,275,450 | |||||||||
54,000 | Winnebago Industries Inc. | 622,276 | 2,790,180 | |||||||||
|
|
|
| |||||||||
3,322,664 | 19,567,795 | |||||||||||
|
|
|
| |||||||||
Metals and Mining — 0.1% |
| |||||||||||
45,000 | Ivanhoe Mines Ltd., Cl. A† | 117,783 | 163,569 | |||||||||
95,000 | Kinross Gold Corp.† | 412,123 | 837,900 | |||||||||
20,000 | Turquoise Hill Resources Ltd.† | 41,995 | 16,868 | |||||||||
|
|
|
| |||||||||
571,901 | 1,018,337 | |||||||||||
|
|
|
| |||||||||
Publishing — 0.8% | ||||||||||||
2,200 | Graham Holdings Co., Cl. B | 981,258 | 889,042 | |||||||||
5,000 | John Wiley & Sons Inc., Cl. B | 19,375 | 158,700 | |||||||||
30,000 | Meredith Corp. | 530,432 | 393,600 | |||||||||
34,000 | News Corp., Cl. A | 48,038 | 476,680 | |||||||||
980,000 | The E.W. Scripps Co., Cl. A | 6,690,668 | 11,211,200 | |||||||||
|
|
|
| |||||||||
8,269,771 | 13,129,222 | |||||||||||
|
|
|
| |||||||||
Real Estate — 2.3% | ||||||||||||
78,500 | Capital Properties Inc., Cl. A | 935,416 | 1,117,447 | |||||||||
259,000 | Griffin Industrial Realty Inc.(a) | 4,769,035 | 13,843,550 | |||||||||
6,967 | Gyrodyne LLC† | 201,352 | 115,025 | |||||||||
19,000 | Lamar Advertising Co., Cl. A, REIT | 122,955 | 1,257,230 | |||||||||
90,000 | Morguard Corp. | 1,140,881 | 7,086,178 | |||||||||
3,500 | Reading International | 66,647 | 85,855 | |||||||||
14,000 | Seritage Growth Properties, Cl. A, REIT† | 221,185 | 188,300 | |||||||||
146,600 | Tejon Ranch Co.† | 3,464,813 | 2,074,390 | |||||||||
558,000 | The St. Joe Co.† | 9,085,399 | 11,511,540 | |||||||||
98,000 | Trinity Place Holdings Inc.† | 352,255 | 138,180 | |||||||||
|
|
|
| |||||||||
20,359,938 | 37,417,695 | |||||||||||
|
|
|
| |||||||||
Retail — 4.8% | ||||||||||||
16,000 | Aaron’s Inc. | 12,192 | 906,400 | |||||||||
130,000 | AutoNation Inc.† | 2,112,358 | 6,880,900 | |||||||||
35,000 | Big 5 Sporting Goods Corp. | 238,565 | 261,800 | |||||||||
975 | Biglari Holdings Inc., Cl. A† | 605,755 | 475,602 | |||||||||
101,000 | Copart Inc.† | 856,018 | 10,621,160 | |||||||||
2,500 | Dunkin’ Brands Group Inc. | 47,500 | 204,775 | |||||||||
100 | Hertz Global Holdings Inc.† | 950 | 111 | |||||||||
550,000 | Ingles Markets Inc., Cl. A | 8,345,405 | 20,922,000 | |||||||||
65,000 | Lands’ End Inc.† | 985,862 | 846,950 | |||||||||
84,000 | Movado Group Inc. | 1,401,207 | 834,960 | |||||||||
156,000 | Nathan’s Famous Inc. | 205,698 | 7,995,000 |
See accompanying notes to financial statements.
The Gabelli Small Cap Growth Fund
Schedule of Investments (Continued) — September 30, 2020
Shares | Cost | Market Value | ||||||||||
COMMON STOCKS (Continued) |
| |||||||||||
Retail (Continued) | ||||||||||||
72,000 | Penske Automotive Group Inc | $ | 1,051,522 | $ | 3,431,520 | |||||||
93,000 | Pets at Home Group plc | 159,631 | 507,373 | |||||||||
238,000 | Rush Enterprises Inc., Cl. B | 2,569,325 | 10,543,400 | |||||||||
9,000 | Salvatore Ferragamo SpA† | 179,197 | 132,640 | |||||||||
155,000 | The Cheesecake Factory Inc. | 3,614,224 | 4,299,700 | |||||||||
50,000 | Tractor Supply Co. | 430,097 | 7,167,000 | |||||||||
43,000 | Village Super Market Inc., | 1,076,393 | 1,058,230 | |||||||||
21,000 | Weis Markets Inc. | 595,263 | 1,008,000 | |||||||||
600 | Winmark Corp. | 41,191 | 103,308 | |||||||||
|
|
|
| |||||||||
24,528,353 | 78,200,829 | |||||||||||
|
|
|
| |||||||||
Specialty Chemicals — 3.5% |
| |||||||||||
51,000 | Albemarle Corp. | 759,937 | 4,553,280 | |||||||||
28,000 | Ashland Global Holdings Inc. | 210,127 | 1,985,760 | |||||||||
1,800,000 | Ferro Corp.† | 8,911,421 | 22,320,000 | |||||||||
110,000 | GCP Applied Technologies Inc.† | 2,849,884 | 2,304,500 | |||||||||
285,000 | H.B. Fuller Co. | 3,612,486 | 13,047,300 | |||||||||
17,000 | Hawkins Inc. | 529,212 | 783,700 | |||||||||
74,000 | Huntsman Corp. | 243,255 | 1,643,540 | |||||||||
6,800 | NewMarket Corp. | 684,657 | 2,327,776 | |||||||||
10,200 | Quaker Chemical Corp. | 162,280 | 1,833,042 | |||||||||
67,000 | Sensient Technologies Corp. | 1,305,562 | 3,868,580 | |||||||||
3,000 | Takasago International Corp. | 79,470 | 61,954 | |||||||||
91,200 | The General Chemical Group Inc.† | 1,186 | 1,140 | |||||||||
161,000 | Valvoline Inc. | 480,331 | 3,065,440 | |||||||||
|
|
|
| |||||||||
19,829,808 | 57,796,012 | |||||||||||
|
|
|
| |||||||||
Telecommunications — 1.0% |
| |||||||||||
83,000 | Consolidated Communications Holdings Inc.† | 549,537 | 472,270 | |||||||||
74,000 | Gogo Inc.† | 403,174 | 683,760 | |||||||||
107,000 | HC2 Holdings Inc.† | 388,379 | 258,940 | |||||||||
6,000 | IDT Corp., Cl. B† | 25,437 | 39,480 | |||||||||
112,000 | Iridium Communications Inc.† | 1,092,455 | 2,864,960 | |||||||||
51,000 | Loral Space & Communications Inc. | 1,702,820 | 933,300 | |||||||||
123,500 | Nuvera Communications Inc. | 1,080,602 | 2,136,550 | |||||||||
85,000 | Rogers Communications Inc., Cl. B | 307,210 | 3,370,250 | |||||||||
89,500 | Shenandoah Telecommuni- cations Co. | 220,152 | 3,976,933 | |||||||||
710,000 | VEON Ltd., ADR | 1,380,133 | 894,600 | |||||||||
10,000 | Verizon Communications Inc | 47,292 | 594,900 | |||||||||
|
|
|
| |||||||||
7,197,191 | 16,225,943 | |||||||||||
|
|
|
| |||||||||
Transportation — 1.8% |
| |||||||||||
440,000 | GATX Corp. | 12,935,300 | 28,050,000 | |||||||||
18,600 | Irish Continental Group plc | 13,660 | 67,822 | |||||||||
80,000 | Navigator Holdings Ltd.† | 765,668 | 668,800 | |||||||||
|
|
|
| |||||||||
13,714,628 | 28,786,622 | |||||||||||
|
|
|
|
Shares | Cost | Market Value | ||||||||||
Wireless Communications — 0.1% |
| |||||||||||
53,500 | United States Cellular Corp.† | $ | 2,067,534 | $ | 1,579,855 | |||||||
|
|
|
| |||||||||
TOTAL COMMON STOCKS | 650,245,150 | 1,639,265,682 | ||||||||||
|
|
|
| |||||||||
CLOSED-END FUNDS — 0.2% |
| |||||||||||
71,000 | MVC Capital Inc | 616,952 | 554,510 | |||||||||
55,000 | The Central Europe, Russia, and Turkey Fund Inc. | 1,214,513 | 1,080,200 | |||||||||
32,729 | The European Equity Fund Inc. | 325,355 | 309,584 | |||||||||
119,537 | The New Germany Fund Inc. | 1,659,113 | 2,017,785 | |||||||||
|
|
|
| |||||||||
TOTAL CLOSED-END FUNDS | 3,815,933 | 3,962,079 | ||||||||||
|
|
|
| |||||||||
PREFERRED STOCKS — 0.3% |
| |||||||||||
Automotive: Parts and Accessories — 0.3% |
| |||||||||||
115,000 | Jungheinrich AG | 788,352 | 3,969,469 | |||||||||
RIGHTS — 0.0% |
| |||||||||||
Entertainment — 0.0% |
| |||||||||||
1,680,000 | Media General Inc., CVR†(b) | 2 | 2 | |||||||||
|
|
|
| |||||||||
WARRANTS — 0.0% |
| |||||||||||
Business Services — 0.0% |
| |||||||||||
1 | Internap Corp., expire 05/08/24† | 0 | 652 | |||||||||
|
|
|
| |||||||||
Diversified Industrial — 0.0% |
| |||||||||||
140,000 | Ampco-Pittsburgh Corp., expire 08/01/25† | 95,648 | 51,800 | |||||||||
|
|
|
| |||||||||
TOTAL WARRANTS | 95,648 | 52,452 | ||||||||||
TOTAL MISCELLANEOUS INVESTMENTS — | 2,273,446 | 7,255,027 | ||||||||||
|
|
|
| |||||||||
TOTAL INVESTMENTS — 101.0% | $ | 657,218,531 | 1,654,504,711 | |||||||||
|
| |||||||||||
Other Assets and Liabilities |
| (15,619,202 | ) | |||||||||
|
| |||||||||||
NET ASSETS — 100.0% |
| $ | 1,638,885,509 | |||||||||
|
|
(a) | Security considered an affiliated holding because the Fund owns at least 5% of its outstanding shares. |
(b) | Security is valued under procedures adopted by the Board of Trustees and is classified as Level 3 in the fair value hierarchy. |
(c) | Represents previously undisclosed, unrestricted securities which the Fund has held for less than one year. |
† | Non-income producing security. |
ADR | American Depositary Receipt |
CVR | Contingent Value Right |
REIT | Real Estate Investment Trust |
See accompanying notes to financial statements.
Report of Independent Registered Public Accounting Firm
To the Shareholders of The Gabelli Small Cap Growth Fund
and the Board of Directors of Gabelli Equity Series Funds, Inc.
Opinion on the Financial Statements and Schedule of Investments in Securities
We have audited the accompanying statement of assets and liabilities of The Gabelli Small Cap Growth Fund (the “Fund”) (one of the funds constituting Gabelli Equity Series Funds, Inc. (the “Corporation”)), including the summary schedule of investments, as of September 30, 2020, 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, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”) (the financial statements are included in Item 1 of this Form N-CSR), and the schedule of investments in securities as of September 30, 2020 (included in Item 6 of this Form N-CSR). In our opinion, the financial statements and schedule of investments in securities present fairly, in all material respects, the financial position of the Fund (one of the funds constituting Gabelli Equity Series Funds, Inc.) at September 30, 2020, 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.
Basis for Opinion
These financial statements and schedule of investments in securities are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on the Fund’s financial statements and schedule of investments in securities based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and schedule of investments in securities are free of material misstatement, whether due to error or fraud. The Corporation is not required to have, nor were we engaged to perform, an audit of the Corporation’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and schedule of investments in securities, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and schedule of investments in securities. Our procedures included confirmation of securities owned as of
September 30, 2020, by correspondence with the custodian. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedule of investments in securities. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Gabelli/GAMCO Funds investment companies since 1992.
Philadelphia, Pennsylvania
November 25, 2020
(b) | Not applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing. |
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 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. | Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. |
Not applicable.
Item 13. Exhibits.
(a)(1) | ||
(a)(2) | ||
(a)(3) | Not applicable. | |
(a)(4) | Not applicable. | |
(b) |
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 December 4, 2020 |
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 December 4, 2020 |
By (Signature and Title)* /s/ John C. Ball |
John C. Ball, Principal Financial Officer and Treasurer |
Date December 4, 2020 |
* Print the name and title of each signing officer under his or her signature.