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, NY 10580-1422
----------------------------------------------------
(Address of principal executive offices) (Zip code)
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center
Rye, NY 10580-1422
----------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 800-422-3554
------------
Date of fiscal year end: September 30, 2003
------------------
Date of reporting period: September 30, 2003
------------------
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. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
THE GABELLI SMALL CAP GROWTH FUND
ANNUAL REPORT
SEPTEMBER 30, 2003
TO OUR SHAREHOLDERS,
In many of our Funds' June 30, 2003 shareholder reports, we noted a change
in the way we provide the portfolio manager's commentary to shareholders of our
Funds. Our shareholder reports have typically contained commentary on each
portfolio manager's assessment of the stock market, individual stocks and how
economic events affect their thinking in managing a specific Fund. We have
always provided details about performance and presented returns, both good and
bad, hopefully in a clear and concise fashion. These comments have been included
as part of each Fund's quarterly, semi-annual, and annual financial statements.
The Sarbanes-Oxley Act's new corporate governance regulations now require
a Fund's principal executive and financial officers to certify the entire
contents of the semi-annual and annual shareholder reports in a filing with the
Securities and Exchange Commission on Form N-CSR. This certification covers the
portfolio manager's commentary and subjective opinions if they are attached to
or a part of the financial statements.
Rather than ask our portfolio managers to eliminate their opinions and/or
restrict their commentary to historical facts only, we separated their
commentary from the financial statements and investment portfolio and sent it
separately. We will continue to mail the portfolio manager's commentary
separately from the investment portfolio to ensure that its content is complete
and unrestricted. Our Annual Reports will be mailed separately and include the
performance of the Fund with a description of the factors affecting the
performance during the past year, along with the financial statements and the
investment portfolio. Both the commentary and the financial statements,
including the portfolio of investments, are also available on our website at
www.gabelli.com/funds.
We trust that you understand that our approach is an unintended
consequence of the ever-increasing regulatory requirements affecting public
companies generally. We hope the specific certification requirements of these
new regulations will be modified as they relate to mutual funds, since
investment companies have different corporate structures and objectives than
other public companies.
Sincerely yours,
/S/ BRUCE N. ALPERT
Bruce N. Alpert
Chief Operating Officer
Gabelli Funds, LLC
October 17, 2003
[GRAPHIC OMITTED]
PLOT POINTS FOLLOW:
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI SMALL CAP GROWTH FUND,
THE RUSSELL 2000 INDEX AND THE S&P 500 INDEX
Gabelli Small Cap Russell 2000
Growth Fund Index S&P 500 Index
10/22/91 10,000 10,000 10,000
9/30/92 13,410 11,184 11,021
9/30/93 17,229 14,897 12,464
9/30/94 18,004 15,374 12,925
9/30/95 21,513 18,971 16,777
9/30/96 23,874 21,397 20,183
9/30/97 33,949 28,499 28,337
9/30/98 29,366 23,084 30,916
9/30/99 35,016 27,486 39,508
9/30/00 42,369 33,915 44,751
9/30/01 39,204 26,722 32,843
9/30/02 39,749 24,237 26,120
9/30/03 50,815 33,084 32,485
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.
COMPARATIVE RESULTS
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH SEPTEMBER 30, 2003 (A)
-----------------------------------------------------
YEAR TO SINCE
QUARTER DATE INCEPTION (B) 10 YEAR 5 YEAR 3 YEAR 1 YEAR
------- ------- ------------- ------- ------ ------ ------
Gabelli Small Cap Growth Fund ......... 6.71% 19.80% 14.57% 11.42% 11.59% 6.25% 27.84%
Russell 2000 Index .................... 9.08% 28.58% 10.24% 8.28% 7.46% (0.82)% 36.50%
Value Line Composite Index ............ 8.55% 28.36% 12.76% 11.73% 11.06% 5.48% 44.15%
(a) Returns represent past performance and do not guarantee future results.
Total returns and average annual returns reflect changes in share price and
reinvestment of dividends 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. The
Russell 2000 and Value Line Composite Indices are unmanaged indicators of
stock market performance. Performance for periods less than one year is not
annualized. Investing in small capitalization securities involves special
challenges because these securities may trade less frequently and
experience more abrupt price movements than large capitalization
securities.
(b) From commencement of investment operations on October 22, 1991.
- --------------------------------------------------------------------------------
2
PERFORMANCE DISCUSSION
Small cap stocks continued to outperform large cap stocks in the third
quarter, and for the twelve month period through September 30, 2003 the Russell
2000 Index is up 36.5%, leading the Standard & Poor's ("S&P") 500 Index, which
is up 24.4% during the trailing twelve month period, by a substantial margin.
The Gabelli Small Cap Growth Fund is up 27.8% during the same one year period.
Technology stocks have been the biggest winners in the small cap universe and
our traditional under-weighting in the technology sector has restrained returns
relative to the Russell 2000 Index. However, the strong performance of our
industrial holdings and a good stock picking batting average produced solid
returns this quarter and for the one year period.
After three years of waiting, we are finally seeing a revival in merger
and acquisition activity here and abroad. Although only one of our major
positions was hit by takeover lightning -- SPS Technologies was acquired by
Precision Castparts at a 45% premium -- deal activity has already had a ripple
effect on the portfolio. Most notably, ArvinMeritor's hostile bid for Dana Corp.
helped surface the values in auto parts company holdings such as Tenneco
Automotive, Modine Manufacturing and Donaldson, all of which posted big gains
this quarter and for the year.
Once again, our biggest winners for the past twelve months came from a
diverse group of industries, including wireless communications (Western
Wireless), medical devices (Inamed), auto parts (Tenneco Automotive), bible
publishing (Thomas Nelson), dental supplies (Sybron Dental) and computer
software (Tyler Technologies). Our laggards list was also an eclectic group of
companies including small group broadcaster Salem Communications, racetrack
operator Magna Entertainment and irrigation equipment manufacturer Lindsay
Manufacturing. Despite impressive performance this year, we believe small cap
stocks are still reasonably valued.
WWW.GABELLI.COM
Please visit us on the Internet. Our homepage at www.gabelli.com contains
information about Gabelli Asset Management Inc., the Gabelli Mutual Funds, IRAs,
401(k)s, quarterly reports, closing prices and other current news. You can send
us e-mail at info@gabelli.com.
In our efforts to bring to shareholders more timely portfolio information,
Gabelli Funds' portfolio managers regularly participate in chat sessions on our
website. Please visit www.gabelli.com for the specific dates and times of all of
our upcoming chats. All chat sessions start at 4:15 PM (Eastern Time). Please
arrive early, as participation is limited.
You may sign up for our e-mail alerts at www.gabelli.com and receive early
notice of chat sessions, closing mutual fund prices, news events and media
sightings.
3
THE GABELLI SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS -- 97.6%
AEROSPACE -- 0.8%
25,000 Herley Industries
Inc.+ ............$ 499,141 $ 438,000
196,000 Titan Corp.+ ....... 4,150,445 4,084,640
------------ ------------
4,649,586 4,522,640
------------ ------------
AGRICULTURE -- 0.2%
30,000 Cadiz Inc.+ ........ 4,500 4,500
106,000 Sylvan Inc.+ ....... 1,168,567 1,049,400
------------ ------------
1,173,067 1,053,900
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AUTOMOTIVE -- 0.0%
3,000 Oshkosh Truck Corp. 89,796 118,830
------------ ------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 4.2%
15,000 Aftermarket Technology
Corp.+ ........... 184,800 171,150
3,000 American Axle &
Manufacturing
Holdings Inc.+ ... 73,432 88,740
10,000 ArvinMeritor Inc. .. 262,831 178,100
41,000 BorgWarner Inc. .... 1,691,140 2,781,850
90,000 Exide Technologies+ 54,188 3,420
40,000 Federal-Mogul Corp.+ 79,500 8,800
315,000 GenCorp Inc. ....... 2,935,545 2,819,250
170,000 Midas Inc.+ ........ 2,117,273 2,237,200
235,000 Modine Manufacturing
Co. .............. 5,682,804 5,593,000
5,250 Monro Muffler
Brake Inc.+ ...... 52,860 155,400
20,000 Pep Boys - Manny,
Moe & Jack ....... 191,638 306,000
153,500 Raytech Corp.+ ..... 494,691 538,785
195,500 Scheib (Earl) Inc.+ 1,317,365 529,805
160,000 Standard Motor
Products Inc. .... 2,536,009 1,616,000
26,300 Strattec Security
Corp.+ ........... 916,664 1,253,458
13,400 Superior Industries
International Inc. 356,882 543,370
389,000 Tenneco Automotive
Inc.+ ............ 906,080 2,446,810
14,000 Thor Industries Inc. 259,454 756,280
160,000 TransPro Inc.+ ..... 1,390,729 656,000
------------ ------------
21,503,885 22,683,418
------------ ------------
AVIATION: PARTS AND SERVICES -- 3.5%
25,000 AAR Corp.+ ......... 302,990 200,500
100,000 Aviall Inc.+ ....... 896,691 1,238,000
23,000 Barnes Group Inc. .. 448,713 597,080
54,000 Curtiss-Wright Corp. 1,303,945 3,813,480
17,100 Curtiss-Wright Corp.,
Cl. B ............ 956,620 1,224,360
7,500 Ducommun Inc.+ ..... 80,125 122,250
18,000 EDO Corp. .......... 341,215 364,500
30,000 Embraer-Empresa Brasileira
de Aeronautica,
S.A., ADR ........ 508,773 633,000
132,700 Fairchild Corp.,
Cl. A+ ........... 867,236 656,865
9,000 Gamesa Corporacion
Tecnologica, S.A. 165,313 214,650
MARKET
SHARES COST VALUE
------ ---- ------
448,500 Kaman Corp., Cl. A .$ 7,205,000 $ 5,812,560
95,000 Moog Inc., Cl. A+ .. 1,315,292 3,724,000
8,300 Woodward Governor
Co. .............. 364,334 362,793
------------ ------------
14,756,247 18,964,038
------------ ------------
BROADCASTING -- 4.8%
120,000 Acme Communications
Inc.+ ............ 968,947 906,000
24,100 Beasley Broadcast Group
Inc., Cl. A+ ..... 271,741 333,062
204,000 Crown Media Holdings Inc.,
Cl. A+ ........... 1,491,498 1,668,720
3,333 CTN Media Group
Inc.+ (b) ........ 16,800 3
422,500 Granite Broadcasting
Corp.+ ........... 1,722,038 1,077,375
400,000 Gray Television Inc. 4,147,023 4,672,000
40,000 Gray Television Inc.,
Cl. A ............ 586,301 464,000
50,000 Hearst-Argyle
Television Inc.+ . 444,408 1,210,000
183,900 Liberty Corp. ...... 5,983,142 7,714,605
125,200 On Command Corp.+ .. 667,891 235,376
260,000 Paxson Communications
Corp.+ ........... 2,424,058 1,289,600
113,500 Salem Communications
Corp., Cl. A+ .... 1,836,909 2,200,765
150,000 Sinclair Broadcast Group
Inc., Cl. A+ ..... 1,677,557 1,524,000
70,000 Spanish Broadcasting
System Inc., Cl. A+ 656,620 595,000
110,000 Young Broadcasting Inc.,
Cl. A+ ........... 1,812,595 2,154,900
------------ ------------
24,707,528 26,045,406
------------ ------------
BUILDING AND CONSTRUCTION -- 0.2%
50,000 Fleetwood Enterprises
Inc.+ ............ 548,107 463,500
8,000 Florida Rock
Industries Inc. .. 103,533 396,800
25,000 Huttig Building
Products Inc.+ ... 90,165 67,750
9,000 Universal Forest
Products Inc. .... 115,437 218,430
------------ ------------
857,242 1,146,480
------------ ------------
BUSINESS SERVICES -- 2.4%
5,000 BrandPartners
Group Inc.+ ...... 4,850 925
22,000 Bull Run Corp.+ .... 120,129 62,700
610,400 Career Blazers
Inc. (b) ......... 236,019 107,125
6,000 Carlisle Holdings
Ltd.+ ............ 30,250 37,500
1,000 CheckFree Corp.+ ... 9,040 20,000
35,000 Donnelley (R.H.)
Corp.+ ........... 478,007 1,414,350
200,000 Edgewater Technology
Inc.+ ............ 802,829 1,040,000
15,000 Fisher Scientific
International
Inc.+ ............ 346,675 595,350
20,000 Genuity Inc., Cl. A+ 1,620 180
150,000 GP Strategies Corp.+ 585,300 1,081,500
80,000 Industrial Distribution
Group Inc.+ ...... 224,062 264,800
58,000 Interactive Data
Corp.+ ........... 499,811 916,400
See accompanying notes to financial statements.
4
THE GABELLI SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
BUSINESS SERVICES (CONTINUED)
20,000 Interep National Radio Sales
Inc., Cl. A+ .....$ 84,180 $ 49,000
13,000 Landauer Inc. ...... 234,859 460,590
5,000 MDC Communications Corp.,
Cl. A+ ........... 15,450 49,750
103,000 Nashua Corp.+ ...... 939,467 818,850
62,200 National Processing
Inc.+ ............ 594,896 1,201,704
15,000 New England Business
Service Inc. ..... 270,375 399,300
65,000 Paxar Corp.+ ....... 662,312 832,000
6,000 Princeton Video
Image Inc.+ ...... 35,250 9
2,000 Protection One Inc.+ 3,720 1,540
72,000 Sohgo Security Services
Co. Ltd. ......... 907,768 970,613
110,000 Stamps.com Inc.+ ... 494,648 640,200
5,000 StarTek Inc. ....... 94,750 160,000
53,000 The Brink's Co. .... 1,092,906 920,080
95,000 Trans-Lux Corp. (a) 781,543 654,550
------------ ------------
9,550,716 12,699,016
------------ ------------
CABLE -- 2.4%
230,000 Adelphia Communications
Corp., Cl. A+ .... 29,650 72,450
655,000 Cablevision Systems Corp.,
Cl. A+ ........... 3,785,247 11,855,500
15,000 Lin TV Corp., Cl. A+ 331,585 318,900
1,600 Outdoor Channel Holdings
Inc.+ ............ 44,765 44,800
120,000 UnitedGlobalCom Inc.,
Cl. A+ ........... 970,183 733,200
------------ ------------
5,161,430 13,024,850
------------ ------------
COMMUNICATIONS EQUIPMENT -- 0.8%
187,000 Andrew Corp.+ ...... 979,326 2,298,230
108,000 Communications
Systems Inc. ..... 646,601 861,840
260,900 Sycamore Networks
Inc.+ ............ 778,040 1,278,410
------------ ------------
2,403,967 4,438,480
------------ ------------
COMPUTER HARDWARE -- 0.0%
10,000 Maxtor Corp.+ ...... 93,652 121,700
------------ ------------
COMPUTER SOFTWARE AND SERVICES -- 1.5%
87,500 Ascential Software
Corp.+ ........... 1,010,040 1,621,375
43,000 BNS Co., Cl. A+ .... 264,311 216,290
20,000 Global Sources Ltd.+ 377,373 160,500
50,000 Jupitermedia Corp.+ 435,800 228,000
200 Macromedia Inc.+ ... 2,370 4,948
15,187 MKS Instruments
Inc.+ ............ 284,328 328,950
220,000 OpenTV Corp.+ ...... 1,189,078 726,000
8,000 Phoenix Technologies
Ltd.+ ............ 55,158 50,160
550 SafeNet Inc.+ ...... 14,425 19,872
800,000 StorageNetworks
Inc.+ ............ 1,043,244 1,312,000
368,800 Tyler Technologies
Inc.+ ............ 1,432,000 2,611,104
MARKET
SHARES COST VALUE
------ ---- ------
20,000 VitalWorks Inc.+ ...$ 104,575 $ 105,000
190,000 Xanser Corp.+ ...... 667,708 497,800
------------ ------------
6,880,410 7,881,999
------------ ------------
CONSUMER PRODUCTS -- 3.7%
3,500 Action Performance
Companies Inc. ... 16,187 85,540
21,500 Adams Golf Inc.+ ... 63,940 9,030
3,500 Alberto-Culver Co.,
Cl. B ............ 169,299 205,870
28,000 Ashworth Inc.+ ..... 120,031 194,040
25,000 Chofu Seisakusho
Co., Ltd. ........ 354,683 372,600
25,000 Church & Dwight
Co. Inc. ......... 354,732 874,750
15,000 Coachmen Industries
Inc. ............. 117,198 175,650
500 Del Laboratories
Inc.+ ............ 14,525 14,125
46,000 Department 56 Inc.+ 542,911 584,200
33,000 Dial Corp. ......... 390,000 710,820
16,000 Elizabeth Arden
Inc.+ ............ 201,080 263,680
2,000 Genlyte Group Inc.+ 8,580 89,040
2,000 Harley-Davidson Inc. 4,713 96,400
200,000 Hartmarx Corp.+ .... 967,321 800,000
30,000 Jacuzzi Brands Inc.+ 171,891 186,000
45,000 Levcor International
Inc.+ ............ 92,197 123,750
4,000 Madden (Steven)
Ltd.+ ............ 30,540 75,880
165,000 Marine Products
Corp. ............ 238,676 2,428,800
59,000 National Presto
Industries Inc. .. 2,126,839 2,026,060
5,000 Nature's Sunshine
Products Inc. .... 68,955 41,500
40,000 Rayovac Corp.+ ..... 518,310 584,000
80,406 Revlon Inc., Cl. A+ 346,927 213,880
3,000 Scotts Co., Cl. A+ . 61,223 164,100
96,000 Skyline Corp. ...... 2,965,054 3,073,920
14,000 Stewart Enterprises Inc.,
Cl. A+ ........... 65,467 53,200
84,425 Syratech Corp.+ .... 15,626 67,540
17,000 WD-40 Co. .......... 470,278 538,730
701,000 Weider Nutrition International
Inc.+ ............ 1,989,410 2,103,000
210,000 Wolverine World
Wide Inc. ........ 2,710,774 4,074,000
------------ ------------
15,197,367 20,230,105
------------ ------------
CONSUMER SERVICES -- 2.3%
30,000 Bowlin Travel
Centers Inc.+ .... 22,612 61,500
5,600 Collectors Universe
Inc.+ ............ 21,494 20,440
100,000 InterActiveCorp.+ .. 1,068,180 3,305,000
40,000 Loewen Group
Inc.+ (b) ........ 60,400 0
16,000 Martha Stewart Living
Omnimedia Inc.,
Cl. A+ ........... 167,206 148,000
20,000 Response USA Inc.+ . 16,500 91
255,000 Rollins Inc. ....... 3,324,569 4,549,200
115,000 Roto-Rooter Inc. ... 3,833,913 4,088,250
5,000 TiVo Inc.+ ......... 42,288 37,050
------------ ------------
8,557,162 12,209,531
------------ ------------
See accompanying notes to financial statements.
5
THE GABELLI SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
DIVERSIFIED INDUSTRIAL -- 11.0%
235,000 Acuity Brands Inc. .$ 3,177,032 $ 4,244,100
35,000 Amatsuji Steel Ball
Mfg. Co., Ltd. ... 280,463 307,031
100,000 Ampco-Pittsburgh
Corp. ............ 972,481 1,199,000
6,000 Anixter International
Inc.+ ............ 57,120 136,620
215,000 Baldor Electric Co. 4,198,556 4,538,650
175,000 Crane Co. .......... 3,610,203 4,096,750
117,200 Denison International plc,
ADR+ ............. 1,635,795 2,388,536
5,000 ESCO Technologies
Inc.+ ............ 166,379 226,350
90,000 Gardner Denver Inc.+ 1,110,443 1,890,900
120,000 GATX Corp. ......... 3,417,389 2,538,000
190,000 GenTek Inc.+ ....... 34,004 855
160,100 Greif Inc., Cl. A .. 3,139,843 4,162,600
1,000 Greif Inc., Cl. B .. 29,800 29,850
26,000 Harbor Global
Co. Ltd.+ ........ 63,215 232,050
5,000 Insteel Industries
Inc.+ ............ 4,250 3,500
66,000 Katy Industries
Inc.+ ............ 546,731 343,200
220,300 Lamson & Sessions
Co.+ ............. 1,280,436 1,216,056
74,000 Lindsay Manufacturing
Co. .............. 746,915 1,487,400
210,000 MagneTek Inc.+ ..... 1,638,360 1,039,500
40,000 Matthews International
Corp., Cl. A ..... 908,627 1,056,400
268,750 Myers Industries
Inc. ............. 2,739,915 2,690,188
42,000 Mykrolis Corp.+ .... 535,407 509,880
610,400 Noel Group Inc.+ (b) 55,045 117,685
90,000 Oil-Dri Corporation
of America ....... 954,711 1,080,000
15,000 Olin Corp. ......... 232,292 237,300
256,200 Park-Ohio Holdings
Corp.+ ........... 1,675,272 2,090,592
50,000 Precision Castparts
Corp. ............ 1,057,562 1,755,000
65,000 Roper Industries
Inc. ............. 2,421,076 2,830,750
285,000 Sensient Technologies
Corp. ............ 5,754,773 5,985,000
10,000 Sonoco Products Co. 231,715 219,500
65,000 Standex International
Corp. ............ 1,318,407 1,579,500
15,500 Tech/Ops Sevcon Inc. 108,754 92,225
298,700 Thomas Industries
Inc. ............. 4,179,859 8,518,924
30,000 Tredegar Corp. ..... 373,379 451,500
25,666 WHX Corp.+ ......... 338,289 59,288
------------ ------------
48,994,498 59,354,680
------------ ------------
EDUCATIONAL SERVICES -- 0.0%
5,000 School Specialty
Inc.+ ............ 119,700 141,050
------------ ------------
ELECTRONICS -- 2.2%
204,600 CTS Corp. .......... 2,145,753 2,518,626
25,600 Fargo Electronics+ . 157,620 322,560
35,000 Lowrance Electronics
Inc. ............. 93,891 405,650
100,000 Park Electrochemical
Corp. ............ 2,305,799 2,275,000
300,000 Thomas & Betts
Corp.+ ........... 5,553,334 4,755,000
69,690 Zoran Corp.+ ....... 1,221,203 1,358,955
------------ ------------
11,477,600 11,635,791
------------ ------------
MARKET
SHARES COST VALUE
------ ---- ------
ENERGY AND UTILITIES -- 5.2%
30,000 AGL Resources Inc. .$ 563,027 $ 845,100
100,200 Aquila Inc.+ ....... 230,601 338,676
6,400 BIW Ltd. ........... 94,562 114,240
95,000 Callon Petroleum
Co.+ ............. 939,533 709,650
144,000 CH Energy Group Inc. 6,069,803 6,336,000
10,000 Chesapeake Utilities
Corp. ............ 187,062 229,200
140,000 CMS Energy Corp. ... 843,947 1,031,800
23,000 Connecticut Water
Service Inc. ..... 464,832 620,770
130,000 Duquesne Light
Holdings Inc. .... 1,875,618 2,007,200
120,000 El Paso Electric
Co.+ ............. 1,593,230 1,386,000
66,666 Florida Public
Utilities Co. .... 792,692 1,025,990
33,000 Middlesex Water Co. 761,399 808,830
1,500 Neg Micon A/S+ ..... 26,992 18,702
17,000 Nicor Inc. ......... 359,962 597,380
15,000 Nordex AG+ ......... 32,726 13,800
8,000 Petroleum Geo-Services
ASA, ADR+ ........ 100,956 8,320
2,000 PetroQuest Energy
Inc.+ ............ 5,250 4,176
285,000 RPC Inc. ........... 954,877 2,850,000
30,000 SEMCO Energy Inc. .. 213,250 138,000
17,000 SJW Corp. .......... 1,657,489 1,436,500
48,159 Southern Union Co.+ 685,594 818,703
112,000 Southwest Gas Corp. 1,959,693 2,542,400
10,000 Tesoro Petroleum
Corp.+ ........... 140,934 84,600
4,000 Toreador Resources
Corp.+ ........... 15,250 10,120
10,000 Vestas Wind
Systems A/S ...... 89,988 167,027
7,000 W-H Energy
Services Inc.+ ... 148,589 124,600
200,000 Westar Energy Inc. . 3,304,001 3,690,000
------------ ------------
24,111,857 27,957,784
------------ ------------
ENTERTAINMENT -- 1.9%
20,000 Canterbury Park
Holding Corp. .... 215,807 299,000
145,000 Dover Motorsports
Inc. ............. 802,568 545,200
64,465 Fisher Communications
Inc.+ ............ 3,858,631 3,039,525
151,000 GC Companies Inc.+ . 164,590 49,830
245,000 Gemstar-TV Guide
International Inc.+ 1,681,514 1,158,850
500 Integrity Media
Inc.+ ............ 3,550 1,825
16,000 International
Speedway Corp.,
Cl. A ............ 515,479 702,240
2,500 International
Speedway Corp.,
Cl. B ............ 45,000 109,875
29,555 Liberty Media Corp.,
Cl. A+ ........... 336,617 294,663
20,000 Loews Cineplex Entertainment
Corp.+ (b) ....... 20,008 40
10,000 Metromedia International
Group Inc.+ (b) .. 6,700 1,300
540,000 Six Flags Inc.+ .... 3,693,989 2,840,400
56,700 Topps Co. Inc. ..... 323,892 552,825
80,000 World Wrestling
Entertainment Inc. 971,385 801,600
------------ ------------
12,639,730 10,397,173
------------ ------------
See accompanying notes to financial statements.
6
THE GABELLI SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
ENVIRONMENTAL SERVICES -- 1.4%
250,000 Allied Waste Industries
Inc.+ ............$ 2,447,961 $ 2,700,000
30,000 Catalytica Energy Systems
Inc.+ ............ 319,116 97,500
180,000 Republic Services
Inc. ............. 2,563,261 4,075,200
70,000 Trojan Technologies
Inc.+ ............ 392,797 417,056
------------ ------------
5,723,135 7,289,756
------------ ------------
EQUIPMENT AND SUPPLIES -- 12.3%
118,000 AMETEK Inc. ........ 1,405,198 5,057,480
415,000 Baldwin Technology Co. Inc.,
Cl. A+ ........... 1,322,609 302,950
120,000 Belden Inc. ........ 2,301,081 2,096,400
12,000 C&D Technologies
Inc. ............. 235,930 227,040
50,000 Capstone Turbine
Corp.+ ........... 103,400 94,500
153,000 CIRCOR International
Inc. ............. 1,903,630 2,937,600
218,500 CLARCOR Inc. ....... 2,686,151 8,521,500
236,800 Core Molding Technologies
Inc.+ ............ 411,233 715,136
200,000 Crown Holdings Inc.+ 807,766 1,350,000
65,000 Cuno Inc.+ ......... 1,119,768 2,547,357
2,000 Danaher Corp. ...... 68,212 147,720
35,000 Donaldson Co. Inc. . 807,585 1,886,500
449,600 Fedders Corp. ...... 2,046,808 2,607,680
200,000 Flowserve Corp.+ ... 3,249,824 4,060,000
94,700 Franklin Electric
Co. Inc. ......... 1,533,275 5,272,896
40,000 General Magnaplate
Corp.+ (b) ....... 83,762 60,000
110,000 Gerber Scientific
Inc.+ ............ 1,188,241 781,000
80,275 Gorman-Rupp Co. .... 1,956,309 1,815,018
65,000 Graco Inc. ......... 984,351 2,440,750
42,000 GrafTech International
Ltd.+ ............ 574,742 336,000
2,000 Hughes Supply Inc. . 28,473 64,900
40,000 IDEX Corp. ......... 556,738 1,457,600
25,000 Imagistics International
Inc.+ ............ 476,705 724,500
500,000 Interpump Group SpA 1,946,509 1,898,218
2,000 Jarden Corp.+ ...... 12,770 75,500
10,000 K-Tron International
Inc.+ ............ 74,932 170,000
30,000 Littelfuse Inc.+ ... 551,467 690,000
60,000 Lufkin Industries
Inc. ............. 1,137,385 1,440,000
36,000 Maezawa Kyuso
Industries Co.,
Ltd. ............. 205,292 216,873
16,000 Met-Pro Corp. ...... 207,519 260,800
12,000 Mueller Industries
Inc.+ ............ 309,156 305,400
4,500 Plantronics Inc.+ .. 56,548 107,415
30,000 Robbins & Myers Inc. 564,553 667,200
40,500 Sequa Corp., Cl. A+ 1,502,140 1,733,805
80,000 Sequa Corp., Cl. B+ 3,631,578 3,760,000
90,000 SL Industries Inc.+ 1,047,851 719,100
3,000 Smith (A.O.) Corp. . 49,213 84,030
15,000 Smith (A.O.) Corp.,
Cl. A ............ 336,569 420,150
MARKET
SHARES COST VALUE
------ ---- ------
100,000 SPS Technologies
Inc.+ ............$ 3,111,351 $ 4,500,000
5,000 Teleflex Inc. ...... 76,167 217,150
50,000 Tennant Co. ........ 1,602,465 1,842,000
5,000 Valmont Industries
Inc. ............. 40,625 98,950
7,875 Watsco Inc., Cl. B . 23,627 149,625
100,000 Watts Industries
Inc., Cl. A ...... 1,467,451 1,762,000
15,000 Wolverine Tube Inc.+ 150,915 63,450
------------ ------------
43,957,874 66,686,193
------------ ------------
FINANCIAL SERVICES -- 3.5%
12,030 Alleghany Corp.+ ... 2,267,949 2,348,857
47,000 Argonaut Group Inc. 1,033,209 611,000
66,000 Bankgesellschaft
Berlin AG+ ....... 1,280,793 168,324
135,300 BKF Capital
Group Inc.+ ...... 2,463,405 3,267,495
330,000 CNA Surety Corp.+ .. 3,652,439 3,316,500
4,000 Crazy Woman Creek
Bancorp Inc. ..... 51,340 61,240
63,000 Danielson Holding
Corp.+ ........... 255,200 86,310
3,000 Federal Agricultural
Mortgage
Corp., Cl. C+ .... 24,000 81,000
22,000 First Republic Bank 636,067 678,260
50,000 Flushing Financial
Corp. ............ 1,037,207 1,042,000
62,000 Hibernia Corp.,
Cl. A ............ 827,787 1,256,120
24,900 J Net Enterprises Inc.+ 24,496 30,378
2,000 LandAmerica Financial
Group Inc. ....... 24,350 91,680
15,000 Metris Companies Inc. 133,574 61,800
121,100 Midland Co. ........ 919,185 2,579,430
1,500 NetBank Inc. ....... 6,000 18,675
1,000 Republic Bancshares
Inc. ............. 12,523 28,560
35,000 Riggs National Corp. 563,309 551,250
37,625 Sterling Bancorp ... 790,931 1,012,489
50,000 Wilmington Trust
Corp. ............ 1,574,410 1,538,000
------------ ------------
17,578,174 18,829,368
------------ ------------
FOOD AND BEVERAGE -- 5.9%
26,000 Boston Beer Co.
Inc., Cl. A+ ..... 384,207 413,920
13,000 Brown-Forman Corp.,
Cl. A ............ 717,207 1,057,160
7,500 Cheesecake Factory
Inc.+ ............ 37,036 271,275
30,000 Corn Products
International Inc. 932,328 955,500
87,000 Del Monte Foods Co.+ 872,203 757,770
85,000 Denny's Corp.+ ..... 132,580 36,550
2,500 Farmer Brothers Co. 389,323 800,775
300,000 Flowers Foods Inc. . 3,491,964 6,840,000
500 Genesee Corp., Cl. A+ 0 2,625
21,500 Genesee Corp., Cl. B+ 49,823 100,298
463,500 Grupo Continental S.A. 700,243 684,521
10,000 Hain Celestial
Group Inc.+ ...... 184,774 181,300
100,000 International Multifoods
Corp.+ ........... 2,073,612 2,335,000
See accompanying notes to financial statements.
7
THE GABELLI SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
FOOD AND BEVERAGE (CONTINUED)
100,000 Interstate Bakeries
Corp. ............$ 1,399,887 $ 1,500,000
7,000 J & J Snack Foods
Corp.+ ........... 116,286 243,600
167,000 Kikkoman Corp. ..... 1,083,921 1,085,280
14,500 MGP Ingredients Inc. 208,250 129,485
34,000 Mondavi (Robert) Corp.,
Cl. A+ ........... 1,082,929 1,053,320
5,000 Northland Cranberries Inc.,
Cl. A+ ........... 4,200 2,450
4,000 Omni Nutraceuticals
Inc.+ ............ 13,563 8
258,500 PepsiAmericas Inc. . 3,346,759 3,745,665
65,000 Ralcorp Holdings
Inc.+ ............ 952,808 1,800,500
75,000 Smucker (J.M.) Co. . 1,717,692 3,162,000
100,000 The Steak n Shake
Co.+ ............. 1,088,229 1,490,000
4,000 Todhunter International
Inc.+ ............ 41,200 40,900
36,628 Tootsie Roll
Industries Inc. .. 596,834 1,135,468
60,000 Triarc Companies
Inc. ............. 429,705 604,200
120,000 Triarc Companies Inc.,
Cl. B ............ 1,025,442 1,248,000
------------ ------------
23,073,005 31,677,570
------------ ------------
HEALTH CARE -- 4.6%
1,000 ArthroCare Corp.+ .. 9,040 17,820
7,000 Bio-Rad Laboratories Inc.,
Cl. A+ ........... 257,683 357,000
1,000 Biomet Inc. ........ 30,350 33,610
4,000 Bruker BioSciences
Corp.+ ........... 15,165 17,600
1,000 CONMED Corp.+ ...... 15,430 20,640
10,000 Corixa Corp.+ ...... 196,695 79,600
45,120 Del Global Technologies
Corp.+ ........... 165,594 84,374
4,000 Digene Corp+ ....... 32,000 163,440
1,050 Enzo Biochem Inc.+ . 13,097 20,485
30,000 Exactech Inc.+ ..... 405,834 490,500
30,000 Henry Schein Inc.+ . 1,051,908 1,701,000
89,000 Inamed Corp.+ ...... 2,304,490 6,537,050
2,000 Integra LifeSciences
Holdings+ ........ 43,600 56,580
21,300 Interpore International
Inc.+ ............ 159,054 327,168
37,400 Inverness Medical
Innovations Inc.+ 678,329 949,960
33,000 Invitrogen Corp.+ .. 1,722,317 1,913,670
2,000 Lifecore Biomedical
Inc.+ ............ 6,186 13,320
15,000 Nabi
Biopharmaceuticals+ 105,625 126,450
1,300 Nobel Biocare
Holding AG ....... 100,171 113,204
30,000 Orthodontic Centers of
America Inc.+ .... 234,149 236,400
17,000 Orthofix International
NV+ .............. 481,400 622,200
2,000 OrthoLogic Corp.+ .. 6,750 10,760
2,000 Osteotech Inc.+ .... 14,420 16,380
31,500 Owens & Minor Inc. . 605,454 759,150
51,000 Penwest Pharmaceuticals
Co.+ ............. 368,868 1,096,500
MARKET
SHARES COST VALUE
------ ---- ------
51,600 PracticeWorks Inc.+ $ 1,092,477 $ 1,107,852
43,000 Priority Healthcare Corp.,
Cl. B+ ........... 862,278 883,220
20,000 Schick Technologies
Inc.+ ............ 164,234 163,000
87,500 Sola International
Inc.+ ............ 1,136,964 1,400,000
2,500 Straumann Holding
AG - Reg ......... 224,698 261,239
1,000 Stryker Corp. ...... 65,440 75,310
200,000 Sybron Dental Specialties
Inc.+ ............ 3,711,716 5,014,000
390,000 Twinlab Corp.+ ..... 1,279,077 7,800
75,000 Women First
HealthCare Inc.+ . 97,658 101,250
1,000 Wright Medical
Group Inc.+ ...... 16,460 25,280
5,100 Young Innovations
Inc. ............. 128,516 163,251
------------ ------------
17,803,127 24,967,063
------------ ------------
HOME FURNISHINGS -- 0.2%
16,000 Bassett Furniture Industries
Inc. ............. 286,154 216,800
4,000 Bed Bath & Beyond
Inc.+ ............ 11,125 152,720
15,000 Foamex International
Inc.+ ............ 127,458 66,450
30,000 La-Z-Boy Inc. ...... 250,200 666,000
70,000 Oneida Ltd. ........ 732,976 215,600
------------ ------------
1,407,913 1,317,570
------------ ------------
HOTELS AND GAMING -- 4.3%
165,000 Aztar Corp.+ ....... 1,292,911 2,922,150
140,300 Boca Resorts Inc.,
Cl. A+ ........... 1,850,748 1,818,288
12,000 Boyd Gaming Corp. .. 90,225 183,120
46,000 Churchill Downs Inc. 1,237,574 1,747,080
104,000 Dover Downs Gaming &
Entertainment Inc. 1,038,939 854,880
40,000 Extended Stay
America Inc.+ .... 448,203 597,200
165,000 Gaylord Entertainment
Co.+ ............. 4,746,656 4,050,750
5,000 Jury' s Doyle Hotel
Group plc ........ 27,762 56,481
68,000 Kerzner International
Ltd+ ............. 1,386,965 2,419,440
380,000 La Quinta Corp.+ ... 975,912 2,367,400
80,000 Lakes Entertainment
Inc.+ ............ 887,870 735,200
400,000 Magna Entertainment Corp.,
Cl. A+ ........... 2,611,594 1,664,000
140,000 Park Place Entertainment
Corp.+ ........... 1,276,659 1,261,400
60,000 Penn National
Gaming Inc.+ ..... 293,198 1,279,200
105,000 Pinnacle Entertainment
Inc.+ ............ 830,250 735,000
3,000 Station Casinos Inc. 13,350 91,800
50,000 Trump Hotels & Casino
Resorts Inc.+ .... 442,109 93,000
70,000 Wyndham International Inc.,
Cl. A+ ........... 153,945 39,200
22,000 Wynn Resorts Ltd.+ . 311,744 399,960
20,000 Youbet.com Inc.+ ... 51,494 51,800
------------ ------------
19,968,108 23,367,349
------------ ------------
See accompanying notes to financial statements.
8
THE GABELLI SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
METALS AND MINING -- 0.4%
142,115 Kinross Gold Corp.+ $ 984,488 $ 1,060,178
10,000 Meridian Gold Inc.+ 75,630 117,300
70,000 Placer Dome Inc. ... 653,970 962,500
190,000 Royal Oak Mines
Inc.+ ............ 322,487 1,235
26,148 Stillwater Mining
Co.+ ............. 362,121 164,732
------------ ------------
2,398,696 2,305,945
------------ ------------
MUTUAL FUNDS -- 0.5%
45,000 Central European Equity
Fund Inc.+ ....... 608,109 915,750
36,266 France Growth
Fund Inc.+ ....... 360,717 239,356
36,700 Germany Fund Inc. .. 386,832 217,264
25,000 Italy Fund Inc.
Escrow (b) ....... 0 0
60,000 New Germany
Fund Inc.+ ....... 699,559 353,400
110,304 Pimco RCM Europe
Fund Inc.+ ....... 1,039,048 766,615
11,000 Spain Fund Inc. .... 103,029 94,600
------------ ------------
3,197,294 2,586,985
------------ ------------
PAPER AND FOREST PRODUCTS -- 0.3%
40,000 Packaging Dynamics
Corp.+ ........... 296,567 344,440
30,000 Schweitzer-Manduit
International Inc. 725,185 757,500
24,000 Wausau-Mosinee
Paper Corp. ...... 280,862 293,040
------------ ------------
1,302,614 1,394,980
------------ ------------
PUBLISHING -- 4.9%
307,237 Independent News &
Media plc ........ 431,671 597,515
130,000 Journal Register
Co.+ ............. 2,099,165 2,437,500
15,000 Lee Enterprises Inc. 363,318 580,050
53,500 McClatchy Co., Cl. A 1,588,435 3,182,180
73,500 Media General Inc.,
Cl. A ............ 1,988,355 4,490,850
29,000 Meredith Corp. ..... 515,253 1,338,930
1,125,000 Penton Media Inc.+ . 1,738,342 1,451,250
400,000 PRIMEDIA Inc.+ ..... 1,290,397 1,140,000
130,000 Pulitzer Inc. ...... 4,366,943 6,773,000
281,000 Thomas Nelson Inc.+ 2,968,219 3,880,610
4,000 Value Line Inc. .... 162,772 192,000
12,000 Wiley (John) & Sons
Inc., Cl. B ...... 46,500 310,800
------------ ------------
17,559,370 26,374,685
------------ ------------
REAL ESTATE -- 1.2%
100,000 Catellus Development
Corp.+ ........... 1,361,791 2,445,000
148,000 Griffin Land & Nurseries
Inc.+ ............ 1,795,092 1,992,080
10,000 Gyrodyne Company of
America Inc.+ .... 151,452 215,000
396 HomeFed Corp.+ ..... 10,969 9,801
25,000 Malan Realty
Investors Inc. ... 243,160 116,000
110,000 Morguard Corp. ..... 1,392,683 1,711,796
------------ ------------
4,955,147 6,489,677
------------ ------------
MARKET
SHARES COST VALUE
------ ---- ------
RETAIL -- 2.7%
45,000 Aaron Rents Inc. ...$ 365,666 $ 942,750
97,500 Aaron Rents Inc.,
Cl. A ............ 524,217 1,925,625
100,000 Burlington Coat Factory
Warehouse Corp. .. 1,080,938 1,870,000
10,000 Casey's General
Stores Inc. ...... 155,152 140,300
31,500 Coldwater Creek
Inc.+ ............ 239,553 309,330
175,000 Ingles Markets Inc.,
Cl. A ............ 2,176,507 1,715,000
130,000 Neiman Marcus Group Inc.,
Cl. B+ ........... 4,106,529 5,086,900
58,700 OfficeMax Inc.+ .... 515,221 550,019
10,000 The Sports
Authority Inc.+ .. 81,174 314,600
54,600 Weis Markets Inc. .. 1,675,742 1,856,946
------------ ------------
10,920,699 14,711,470
------------ ------------
SATELLITE -- 0.2%
21,500 Liberty Satellite & Technology
Inc., Cl. A+ ..... 93,540 56,975
25,500 Pegasus Communications
Corp.+ ........... 1,059,375 379,440
40,000 Sirius Satellite
Radio Inc+ ....... 146,219 73,200
40,000 XM Satellite Radio Holdings
Inc., Cl. A+ ..... 370,830 621,200
------------ ------------
1,669,964 1,130,815
------------ ------------
SPECIALTY CHEMICALS -- 4.7%
40,000 Airgas Inc. ........ 237,525 712,000
38,000 Albemarle Corp. .... 838,805 1,043,100
60,000 Arch Chemicals Inc. 1,257,423 1,248,000
10,000 Cytec Industries
Inc.+ ............ 278,296 365,000
10,000 Dionex Corp.+ ...... 300,000 393,600
157,000 Ferro Corp. ........ 3,513,047 3,353,520
130,000 Fuller (H.B.) Co. .. 2,306,337 3,155,100
255,146 General Chemical
Group Inc.+ ...... 1,197,650 85,474
50,000 Great Lakes
Chemical Corp. ... 1,247,733 1,005,500
450,000 Hercules Inc.+ ..... 4,361,521 5,098,500
1,500 IMC Global Inc. .... 10,470 9,615
165,000 MacDermid Inc. ..... 2,852,649 4,364,250
180,000 Material Sciences
Corp.+ ........... 1,696,183 1,839,600
130,000 Omnova Solutions
Inc.+ ............ 810,622 456,300
50,000 Penford Corp. ...... 539,601 650,000
10,000 Quaker Chemical
Corp. ............ 181,138 232,600
73,000 Schulman (A.) Inc. . 850,409 1,157,780
------------ ------------
22,479,409 25,169,939
------------ ------------
TELECOMMUNICATIONS -- 1.2%
9,200 Atlantic Tele-
Network Inc. ..... 92,644 194,580
186,900 Cincinnati Bell
Inc.+ ............ 459,601 951,321
55,000 Citizens Communications
Co.+ ............. 524,892 616,550
79,460 Commonwealth Telephone
Enterprises Inc.+ 1,517,147 3,188,730
6,795 Community Service
Communications
Inc.+ ............ 101,925 111,778
See accompanying notes to financial statements.
9
THE GABELLI SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
46,950 D&E Communications
Inc. .............$ 605,207 $ 665,751
65,000 McLeodUSA Inc., Cl.A,
Escrow+ (b) ...... 0 0
2,820 NTL Europe Inc.+ ... 1,861 84
162 NTL Inc.+ .......... 3,807 7,633
2,000 RCN Corp.+ ......... 9,221 3,680
25,000 Rogers Communications Inc.,
Cl. B, ADR ....... 226,378 383,250
11,000 Shenandoah
Telecommunications
Co. .............. 325,065 424,050
2,500 Telewest Communications
plc, ADR+ ........ 8,875 15,625
4,417 WilTel Communications
Group Inc.+ ...... 47,989 70,584
53,000 Winstar Communications
Inc.+ ............ 133 53
------------ ------------
3,924,745 6,633,669
------------ ------------
TRANSPORTATION -- 0.1%
90,000 Grupo TMM SA de CV,
Cl. A, ADR+ ...... 847,399 280,800
2,000 Irish Continental
Group plc ........ 18,258 23,094
50,000 OMI Corp.+ ......... 313,120 331,000
5,100 Providence & Worcester
Railroad Co. ..... 42,979 45,441
------------ ------------
1,221,756 680,335
------------ ------------
WIRELESS COMMUNICATIONS -- 2.1%
35,000 AirGate PCS Inc.+ .. 321,443 84,700
30,000 AT&T Wireless
Services Inc.+ ... 203,776 245,400
50,000 Centennial Communications
Corp.+ ........... 622,225 254,000
11 Microcell Telecommunications
Inc., Cl. B+ ..... 77 130
5,000 Nextel Communications Inc.,
Cl. A+ ........... 35,338 98,450
75,000 Price Communications
Corp.+ ........... 914,718 930,000
60,000 Rogers Wireless Communications
Inc., Cl. B+ ..... 882,481 933,600
60,000 Rural Cellular Corp.,
Cl. A+ ........... 543,676 600,000
25,000 Triton PCS Holdings Inc.,
Cl. A+ ........... 388,518 111,500
10,000 Ubiquitel Inc.+ .... 42,850 15,500
74,000 Vimpel-Communications,
ADR+ ............. 1,914,890 4,503,640
190,000 Western Wireless Corp.,
Cl. A+ ........... 969,262 3,541,600
------------ ------------
6,839,254 11,318,520
------------ ------------
TOTAL COMMON
STOCKS ........... 418,905,724 527,558,760
------------ ------------
MARKET
SHARES COST VALUE
------ ---- ------
PREFERRED STOCKS -- 2.0%
BROADCASTING -- 0.3%
1,063 Granite Broadcasting Corp.,
12.750% Pfd.+ ....$ 439,683 $ 744,100
100 Gray Television Inc.,
8.000% Cv. Pfd.,
Ser. C (b)(d) .... 1,000,000 1,020,000
------------ ------------
1,439,683 1,764,100
------------ ------------
BUSINESS SERVICES -- 0.4%
20,787 Interep National Radio Sales Inc.,
4.000% Cv. Pfd.,
Ser. A+ (b)(d) ... 2,080,000 2,120,240
------------ ------------
DIVERSIFIED INDUSTRIAL -- 0.1%
WHX Corp.,
58,000 6.500% Cv. Pfd.,
Ser. A+ .......... 463,067 290,000
39,400 $3.75 Cv. Pfd.,
Ser. B+ .......... 191,751 197,000
------------ ------------
654,818 487,000
------------ ------------
PUBLISHING -- 0.8%
166,000 News Corp. Ltd.,
Pfd., ADR ........ 977,242 4,530,140
------------ ------------
TELECOMMUNICATIONS -- 0.4%
13,000 Andrew Corp.,
7.750% Cv. Pfd.,
Ser. D ........... 633,275 1,863,160
1,197 NTL Europe Inc.,
10.000% Pfd., Ser. A+ 0 3,831
------------ ------------
633,275 1,866,991
------------ ------------
TOTAL PREFERRED
STOCKS ........... 5,785,018 10,768,471
------------ ------------
WARRANTS -- 0.1%
BUSINESS SERVICES -- 0.1%
250,000 GP Strategies Corp.,
Expires
08/14/08+ (b) .... 637,065 637,065
125,000 Interep National Radio
Sales Inc.,+ (b) . 0 0
------------ ------------
637,065 637,065
------------ ------------
COMPUTER SOFTWARE AND SERVICES -- 0.0%
430 Anacomp Inc., Cl. B+ 0 62
------------ ------------
HEALTH CARE -- 0.0%
14,424 Del Global Technologies Corp.
Expires 03/28/08+ 24,809 7,212
------------ ------------
TELECOMMUNICATIONS -- 0.0%
86 NTL Inc.,
Expires 01/13/11+ 124 146
------------ ------------
WIRELESS COMMUNICATIONS -- 0.0%
1,387 Microcell Telecommunications
Inc., Cl. A,
Expires 05/01/05+ 1,991 1,624
See accompanying notes to financial statements.
10
THE GABELLI SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
WARRANTS (CONTINUED)
WIRELESS COMMUNICATIONS (CONTINUED)
2,312 Microcell Telecommunications
Inc., Cl. B,
Expires 05/01/08+ $ 3,553 $ 3,992
------------ ------------
5,544 5,616
------------ ------------
TOTAL WARRANTS ..... 667,542 650,101
------------ ------------
PRINCIPAL
AMOUNT
---------
CORPORATE BONDS -- 0.4%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.1%
$ 800,000 Exide Corp.,
Sub. Deb. Cv.,
2.900%,
12/15/05+ (c)(d) . 6,000 12,498
600,000 GenCorp Inc.,
Sub. Deb. Cv.,
5.750%, 04/15/07 . 560,841 554,250
------------ ------------
566,841 566,748
------------ ------------
BUILDING AND CONSTRUCTION -- 0.0%
100,000 Foster Wheeler Ltd.,
Sub. Deb. Cv.,
6.500%, 06/01/07 . 31,974 24,250
------------ ------------
BUSINESS SERVICES -- 0.3%
2,000,000 GP Strategies Corp.,
Sub. Deb.,
6.000%,
08/14/08 (b) ..... 1,374,583 1,362,935
------------ ------------
COMPUTER SOFTWARE AND SERVICES -- 0.0%
300,000 Exodus Communications Inc.,
Sub. Deb. Cv.,
5.250%,
02/15/08+ (c) .... 1,185 1,125
------------ ------------
ENERGY AND UTILITIES -- 0.0%
200,000 Friede Goldman Halter Inc.,
Sub. Deb. Cv.,
4.500%,
09/15/04+ (c) .... 26,000 8,200
100,000 Ogden Corp., Sub. Deb. Cv.,
6.000%,
06/01/49+ (c) .... 99,535 0
------------ ------------
125,535 8,200
------------ ------------
PRINCIPAL MARKET
AMOUNT COST VALUE
--------- ---- ------
HEALTH CARE -- 0.0%
$ 28,848 Del Global Technologies Corp.,
6.000%,
03/28/07 (b) .....$ 28,848 $ 21,636
10,000 Inhale Therapeutic Systems,
Sub. Deb. Cv.,
6.750%, 10/13/06 (d) 6,526 9,294
------------ ------------
35,374 30,930
------------ ------------
TELECOMMUNICATIONS -- 0.0%
400,000 Williams Comm Group Inc., Escrow,
10.875%, 10/01/09 (c) 0 0
200,000 XO Communications Inc.,
Sub. Deb. Cv.,
5.750%,
01/15/09+ (c)(d) . 375 500
------------ ------------
375 500
------------ ------------
TOTAL CORPORATE
BONDS ............ 2,135,867 1,994,688
------------ ------------
U.S. GOVERNMENT OBLIGATIONS -- 0.0%
35,000 U.S. Treasury Bills,
0.915%++, 11/06/03 34,968 34,968
------------ ------------
TOTAL
INVESTMENTS --
100.1% ...........$427,529,119 541,006,988
============
OTHER ASSETS AND LIABILITIES
(NET) -- (0.1)% ............... (610,462)
------------
NET ASSETS -- 100.0% ............$540,396,526
============
- -----------------
For Federal tax purposes:
Aggregate cost ..................$431,292,205
============
Gross unrealized appreciation ...$146,549,015
Gross unrealized depreciation ... (36,834,232)
------------
Net unrealized appreciation .....$109,714,783
============
- -----------------
(a) Security considered an affiliated holding because the Fund owns at least
5% of the outstanding shares.
(b) Security fair valued under procedures established by the Board of
Directors.
(c) Security is in default.
(d) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers.
At September 30, 2003, the market value of Rule 144A securities amounted
to $3,162,532 or .59% of total net assets.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR - American Depository Receipt.
See accompanying notes to financial statements.
11
THE GABELLI SMALL CAP GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value
(Cost $427,529,119) ...................... $541,006,988
Cash ....................................... 108,497
Dividends and interest receivable .......... 428,982
Receivable for capital shares sold ......... 463,838
Other assets ............................... 6,714
------------
TOTAL ASSETS ............................... 542,015,019
------------
LIABILITIES:
Payable for investments purchased .......... 34,994
Payable for capital shares redeemed ........ 740,482
Payable for investment advisory fees ....... 454,142
Payable for distribution fees .............. 113,535
Payable for registration fees .............. 16,209
Payable for shareholder communications fees 70,781
Payable for shareholder services fees ...... 109,076
Other accrued expenses ..................... 79,274
------------
TOTAL LIABILITIES .......................... 1,618,493
------------
NET ASSETS applicable to 25,156,394
shares outstanding ....................... $540,396,526
============
NET ASSETS CONSIST OF:
Capital stock, at par value ................ $ 25,156
Additional paid-in capital ................. 426,425,522
Accumulated net investment loss ............ (65,598)
Accumulated net realized gain on investments
and foreign currency transactions ........ 532,630
Net unrealized appreciation on investments
and foreign currency transactions ........ 113,478,816
------------
TOTAL NET ASSETS ........................... $540,396,526
============
NET ASSET VALUE, offering and redemption
price per share ($540,396,526 / 25,156,394
shares outstanding; unlimited number of
shares authorized of $0.001 par value) ... $21.48
======
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends (net of foreign taxes of $18,409) ...... $ 5,449,414
Interest ......................................... 348,863
------------
TOTAL INVESTMENT INCOME .......................... 5,798,277
------------
EXPENSES:
Investment advisory fees ......................... 4,715,146
Distribution fees ................................ 1,178,786
Shareholder services fees ........................ 520,144
Shareholder communications expenses .............. 131,234
Custodian fees ................................... 101,727
Registration fees ................................ 49,854
Directors' fees .................................. 43,925
Legal and audit fees ............................. 40,985
Miscellaneous expenses ........................... 62,973
------------
TOTAL EXPENSES ................................... 6,844,774
------------
NET INVESTMENT LOSS .............................. (1,046,497)
------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS, FUTURES CONTRACTS AND
FOREIGN CURRENCY TRANSACTIONS
Net realized gain on investments, futures
contracts and foreign currency transactions .... 5,606,020
Net change in unrealized appreciation/depreciation
on investments, futures contracts and
foreign currency transactions .................. 112,208,652
------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS, FUTURES CONTRACTS AND
FOREIGN CURRENCY TRANSACTIONS .................. 117,814,672
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................................ $116,768,175
============
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
------------------ ------------------
OPERATIONS:
Net investment loss ............................... $ (1,046,497) $ (999,507)
Net realized gain on investments, futures contracts
and foreign currency transactions ............... 5,606,020 4,994,295
Net change in unrealized appreciation/
depreciation on investments, futures
contracts and foreign currency transactions ..... 112,208,652 (10,113,304)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ...................... 116,768,175 (6,118,516)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ............................. -- (314,152)
Net realized short-term gain on investments ....... (300,296) (3,455,301)
Net realized long-term gain on investments ........ (6,071,352) (4,307,907)
------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ............... (6,371,648) (8,077,360)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net increase in net assets from
capital share transactions ..................... 1,584,354 69,746,245
------------ ------------
NET INCREASE IN NET ASSETS ........................ 111,980,881 55,550,369
NET ASSETS:
Beginning of period ............................... 428,415,645 372,865,276
------------ ------------
End of period ..................................... $540,396,526 $428,415,645
============ ============
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 (the "Fund") is a series of
Gabelli Equity Series Funds, Inc. (the "Corporation"), which was organized on
July 25, 1991 as a Maryland corporation. The Fund is a diversified, open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"), and one of three separately managed
portfolios (collectively, the "Portfolios") of the Corporation, each with four
separate classes of shares known as Class AAA, Class A, Class B and Class C.
Currently, only Class AAA Shares are offered to the public. The Fund's primary
objective is capital appreciation. The Fund commenced investment operations on
October 22, 1991.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates. The following is a summary of significant accounting
policies followed by the Fund in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange or traded in the U.S. over-the-counter market for
which market quotations are readily available are valued at the last quoted sale
price or a market's official closing price as of the close of business on the
day the securities are being valued. If there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day. All other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest average of the bid and asked prices. If there were no asked prices quoted
on that day, then the security is valued at the closing bid price. Portfolio
securities traded on more than one national securities exchange or market are
valued according to the broadest and most representative market, as determined
by Gabelli Funds, LLC (the "Adviser"). Portfolio securities primarily traded on
foreign markets are generally valued at the preceding closing values of such
securities on their respective exchanges or if, after the close, market
conditions change significantly, certain foreign securities may be fair valued
pursuant to procedures established by the Board of Directors. Securities and
assets for which market quotations are not readily available are valued at their
fair value as determined in good faith under procedures established by and under
the general supervision of the Board of Directors. Short-term debt securities
with remaining maturities of 60 days or less are valued at amortized cost,
unless the Board of Directors determines such does not reflect the securities'
fair value, in which case these securities will be valued at their fair value as
determined by the Board of Directors. Debt instruments having a maturity greater
than 60 days are valued at the latest average of the bid and asked prices
obtained from a pricing service approved by the Board of Directors, or a dealer
maintaining an active market in those securities. Options are valued at the last
sale price on the exchange on which they are listed. If no sales of such options
have taken place that day, they will be valued at the mean between their closing
bid and asked prices.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
primary government securities dealers recognized by the Federal Reserve Board,
with member banks of the Federal Reserve System or with other brokers or dealers
that meet credit guidelines established by the Adviser and reviewed by the Board
of Directors. Under the terms of a typical repurchase agreement, the Fund takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
The Fund will always receive and maintain securities as collateral whose market
value, including accrued
13
THE GABELLI SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
interest, will be at least equal to 100% of the dollar amount invested by the
Fund in each agreement. The Fund will make payment for such securities only upon
physical delivery or upon evidence of book entry transfer of the collateral to
the account of the custodian. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is marked-to-market on a
daily basis to maintain the adequacy of the collateral. If the seller defaults
and the value of the collateral declines or if bankruptcy proceedings are
commenced with respect to the seller of the security, realization of the
collateral by the Fund may be delayed or limited. At September 30, 2003, there
were no repurchase agreements.
FUTURES CONTRACTS. The Fund may engage in futures contracts for the purpose of
hedging against changes in the value of its portfolio securities and in the
value of securities it intends to purchase. Upon entering into a futures
contract, the Fund is required to deposit with the broker an amount of cash or
cash equivalents equal to a certain percentage of the contract amount. This is
known as the "initial margin". Subsequent payments ("variation margin") are made
or received by the Fund each day, depending on the daily fluctuation of the
value of the contract. The daily changes in the contract are included in
unrealized gains or losses. The Fund recognizes a realized gain or loss when the
contract is closed. At September 30, 2003, there were no futures contracts.
There are several risks in connection with the use of futures contracts as a
hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in value of the hedged investments. In addition, there is the risk that
the Fund may not be able to enter into a closing transaction because of an
illiquid secondary market.
FORWARD FOREIGN EXCHANGE CONTRACTS. The Fund may engage in forward foreign
exchange contracts for hedging a specific transaction with respect to either the
currency in which the transaction is denominated or another currency as deemed
appropriate by the Adviser. Forward foreign exchange contracts are valued at the
forward rate and are marked-to-market daily. The change in market value is
included in unrealized appreciation/depreciation on investments and foreign
currency transactions. When the contract is closed, the Fund records a realized
gain or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed. At September 30,
2003, there were no open forward foreign exchange contracts.
The use of forward foreign exchange contracts does not eliminate fluctuations in
the underlying prices of the Fund's portfolio securities, but it does establish
a rate of exchange that can be achieved in the future. Although forward foreign
exchange contracts limit the risk of loss due to a decline in the value of the
hedged currency, they also limit any potential gain/(loss) that might result
should the value of the currency increase. In addition, the Fund could be
exposed to risks if the counterparties to the contracts are unable to meet the
terms of their contracts.
FOREIGN CURRENCY TRANSLATION. The books and records of the Fund are maintained
in United States (U.S.) dollars. Foreign currencies, investments and other
assets and liabilities are translated into U.S. dollars at the exchange rates
prevailing at the end of the period, and purchases and sales of investment
securities, income and expenses are translated at the exchange rate prevailing
on the respective dates of such transactions. Unrealized gains and losses, which
result from changes in foreign exchange rates and/or changes in market prices of
securities, have been included in unrealized appreciation/depreciation on
investments and foreign currency transactions. Net realized foreign currency
gains and losses resulting from changes in exchange rates include foreign
currency gains and losses between trade date and settlement date on investment
securities
14
THE GABELLI SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
transactions, foreign currency transactions and the difference between the
amounts of interest and dividends recorded on the books of the Fund and the
amounts actually received. The portion of foreign currency gains and losses
related to fluctuation in exchange rates between the initial trade date and
subsequent sale trade date is included in realized gain/(loss) on investments.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for on the trade date with realized gain or loss on investments
determined by using the identified cost method. Interest income (including
amortization of premium and accretion of discount) is recorded as earned.
Dividend income is recorded on the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders are recorded on the ex-dividend date. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from accounting principles generally accepted in
the United States.
For fiscal year ended September 30, 2003, the tax character of distributions
paid does not materially differ from the amounts recorded in accordance with
accounting principles generally accepted in the United States.
For the fiscal year ended September 30, 2003, reclassifications were made to
decrease accumulated net investment loss for $984,787 and decrease accumulated
net realized gain on investments for $974,892, with an offsetting adjustment to
additional paid-in capital.
EXPENSES. Certain administrative expenses are common to, and allocated among,
the Portfolios. Such allocations are made on the basis of each Portfolio's
average net assets or other criteria directly affecting the expenses as
determined by the Adviser.
PROVISION FOR INCOME TAXES. The Fund intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended. As a result, a Federal income tax provision is not required.
As of September 30, 2003, the components of accumulated earnings/(losses) on a
tax basis were as follows:
Undistributed ordinary income
(inclusive of short-term capital gains) ...... $ 2,330,289
Undistributed long-term capital gains .......... 1,965,427
Post-October losses ............................ (710)
Net unrealized appreciation .................... 109,715,730
Other temporary differences .................... (64,888)
------------
Total accumulated earnings ................... $113,945,848
============
Dividends and interest from non-U.S. sources received by the Fund are generally
subject to non-U.S. withholding taxes at rates ranging up to 30%. Such
withholding taxes may be reduced or eliminated under the terms of applicable
U.S. income tax treaties, and the Fund intends to undertake any procedural steps
required to claim the benefits of such treaties.
The difference between book and tax basis undistributed ordinary income is
primarily due to the continued accrual of defaulted interest for tax purposes
which has been written down for book purposes.
The difference between book and tax basis unrealized appreciation is primarily
due to deferral of losses from wash sales for tax purposes.
15
THE GABELLI SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
3. INVESTMENT ADVISORY AGREEMENT. The Fund has entered into an investment
advisory agreement (the "Advisory Agreement") with the Adviser which provides
that the Fund will pay the Adviser a fee, computed daily and paid monthly, at
the annual rate of 1.00% of the value of the Fund's average daily net assets. In
accordance with the Advisory Agreement, the Adviser provides a continuous
investment program for the Fund's portfolio, oversees the administration of all
aspects of the Fund's business and affairs and pays the compensation of all
Officers and Directors of the Fund who are its affiliates.
4. DISTRIBUTION PLAN. The Fund's Board of Directors has adopted a distribution
plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. For the year ended
September 30, 2003, the Fund incurred distribution costs payable to Gabelli &
Company, Inc., an affiliate of the Adviser, of $1,178,786, or 0.25% of average
daily net assets, the annual limitation under the Plan. Such payments are
accrued daily and paid monthly.
5. PORTFOLIO SECURITIES. Purchases and sales of securities for the year ended
September 30, 2003, other than short term securities, aggregated $69,578,042 and
$18,728,045, respectively.
6. TRANSACTIONS WITH AFFILIATES. During the fiscal year ended September 30,
2003, the Fund paid brokerage commissions of $174,657 to Gabelli & Company, Inc.
The cost of calculating the Fund's net asset value per share is a Fund expense
pursuant to the Investment Advisory Agreement between the Fund and Gabelli
Funds, LLC (the "Adviser"). During fiscal 2003, the Fund reimbursed the Adviser
$34,800 in connection with the cost of computing the Fund's net asset value.
7. LINE OF CREDIT. The Fund has access to an unsecured line of credit up to
$25,000,000 from the custodian for temporary borrowing purposes. Borrowings
under this arrangement bear interest at 0.75% above the Federal Funds rate on
outstanding balances. There were no borrowings against the line of credit during
the year ended September 30, 2003.
8. CAPITAL STOCK TRANSACTIONS. Transactions in shares of capital stock were as
follows:
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- -------------
Shares sold .................... 6,936,908 $ 131,697,417 11,939,999 $ 234,497,129
Shares issued upon
reinvestment of dividends .... 338,280 6,099,180 413,536 7,717,258
Shares redeemed ................ (7,267,158) (136,212,243) (8,971,244) (172,468,142)
---------- ------------- ---------- -------------
Net increase (decrease) ........ 8,030 $ 1,584,354 3,382,291 $ 69,746,245
========== ============= ========== =============
9. TRANSACTIONS IN SECURITIES OF AFFILIATED ISSUERS. The 1940 Act defines
affiliated issuers as those in which the Fund's holdings of an issuer represent
5% or more of the outstanding voting securities of the issuer. A summary of the
Fund's transactions in the securities of these issuers during the year ended
September 30, 2003, is set forth below:
PERCENT
SHARES VALUE AT OWNED
BEGINNING PURCHASED ENDING DIVIDEND SEPTEMBER 30, OF SHARES
SHARES (SOLD) SHARES INCOME 2003 OUTSTANDING
--------- --------- ------ -------- ------------- -----------
Trans-Lux Corp. ...... 90,000 5,000 95,000 $12,810 $654,550 9.76%
------ ----- ------ ------- -------- -----
16
THE GABELLI SMALL CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each period:
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------
2003 2002 2001 2000 1999
-------- -------- -------- -------- --------
OPERATING PERFORMANCE:
Net asset value, beginning of period .................. $ 17.04 $ 17.13 $ 23.60 $ 21.84 $ 18.81
-------- -------- -------- -------- --------
Net investment income (loss) .......................... (0.05) (0.04) 0.06 0.06 (0.07)
Net realized and unrealized gain (loss)
on investments ...................................... 4.74 0.31 (1.75) 4.16 3.63
-------- -------- -------- -------- --------
Total from investment operations ...................... 4.69 0.27 (1.69) 4.22 3.56
-------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ................................. -- (0.01) (0.05) -- --
Net realized gain on investments ...................... (0.25) (0.35) (4.73) (2.46) (0.53)
-------- -------- -------- -------- --------
Total distributions ................................... (0.25) (0.36) (4.78) (2.46) (0.53)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD ........................ $ 21.48 $ 17.04 $ 17.13 $ 23.60 $ 21.84
======== ======== ======== ======== ========
Total return+ ......................................... 27.84% 1.39% (7.47)% 21.00% 19.24%
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .................. $540,397 $428,416 $372,865 $366,459 $305,403
Ratio of net investment income (loss)
to average net assets ............................... (0.22)% (0.22)% 0.30% 0.26% (0.34)%
Ratio of operating expenses
to average net assets ............................... 1.45% 1.45% 1.45% 1.49%(a) 1.56%(a)
Portfolio turnover rate ............................... 4% 10% 17% 47% 24%
- ---------------------------
+ Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the period
including reinvestment of dividends.
(a) The Fund incurred interest expense during the fiscal years ended September
30, 2000 and 1999. If interest expense had not been incurred, the ratios of
operating expenses to average net assets would have been 1.49% and 1.53%,
respectively.
See accompanying notes to financial statements.
17
THE GABELLI SMALL CAP GROWTH FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
The Gabelli Small Cap Growth Fund
We have audited the accompanying statements of assets and liabilities, including
the portfolio of investments, of The Gabelli Small Cap Growth Fund (the "Fund"),
a series of the Gabelli Equity Series Funds, Inc., as of September 30, 2003, and
the related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of September 30, 2003 by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Gabelli Small Cap Growth Fund at September 30, 2003, 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 the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States.
/S/ ERNST & YOUNG LLP
New York, New York
November 7, 2003
- --------------------------------------------------------------------------------
2003 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the fiscal year ended September 30, 2003, the Fund paid to shareholders,
on December 20, 2002, an ordinary income dividend (comprised of net
investment income and short term capital gains) totaling $0.012 per share and
long term capital gains totaling $0.243 per share. For the fiscal year ended
September 30, 2003, 100% of the ordinary income dividend qualifies for the
dividend received deduction available to corporations.
- --------------------------------------------------------------------------------
18
THE GABELLI SMALL CAP GROWTH FUND
ADDITIONAL FUND INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Directors. Information pertaining to the Directors and officers
of the Fund is set forth below. The Fund's Statement of Additional Information
includes additional information about The Gabelli Small Cap Growth Fund'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.
NUMBER OF FUNDS
NAME, POSITION(S) TERM OF OFFICE IN FUND
ADDRESS 1 AND LENGTH OF COMPLEX OVERSEEN PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
AND AGE TIME SERVED 2 BY DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 3
- ----------------- -------------- ---------------- ----------------------- --------------------
INTERESTED DIRECTORS 4:
MARIO J. GABELLI Since 1991 23 Chairman of the Board and Chief Executive Director of Morgan Group
Director, President Officer of Gabelli Asset Management Inc. and Holdings, Inc.
and Chief Investment Chief Investment Officer of Gabelli Funds, LLC (transportation services);
Officer and GAMCO Investors, Inc.; Vice Chairman and Vice Chairman of
Age: 61 Chief Executive Officer of Lynch Interactive Lynch Corporation
Corporation (multimedia and services) (diversified manufacturing)
JOHN D. GABELLI Since 1991 10 Senior Vice President of Gabelli & Company, --
Director Inc.; Director of Gabelli Advisers,Inc.
Age: 59
KARL OTTO POHL Since 1992 32 Member of the Shareholder Committee of Sal Director of Gabelli Asset
Director Oppenheim Jr. & Cie (private investment bank); Management Inc. (investment
Age: 73 Former President of the Deutsche Bundesbank and management); Chairman,
Chairman of its Central Bank Council (1980-1991) Incentive Capital and
Incentive Asset Management
(Zurich); Director at Sal
Oppenheim Jr. & Cie, Zurich
NON-INTERESTED DIRECTORS:
ANTHONY J. COLAVITA Since 1991 34 President and Attorney at Law in the law firm --
Director of Anthony J. Colavita, P.C.
Age: 67
VINCENT D. ENRIGHT Since 1991 12 Former Senior Vice President and Chief Financial --
Director Officer of KeySpan Energy Corporation
Age: 59
ROBERT J. MORRISSEY Since 1991 10 Partner in the law firm of Morrissey, Hawkins --
Director & Lynch
Age: 64
ANTHONY R. PUSTORINO Since 1991 17 Certified Public Accountant; Professor --
Director Emeritus, Pace University
Age: 78
ANTHONIE C. VAN EKRIS Since 1991 19 Managing Director of BALMAC Director of Aurado
Director International, Inc. Exploration Inc.
Age: 69
SALVATORE J. ZIZZA Since 2001 10 Chairman, Hallmark Electrical Supplies Corp.; Director of Hollis
Director Former Executive Vice President of FMG Group Eden Pharmaceuticals
Age: 57 (OTC), a healthcare provider; Former President
and Chief Executive Officer of the Lehigh Group
Inc., an interior construction company, through 1997
OFFICERS:
BRUCE N. ALPERT Since 1991 -- Executive Vice President and Chief Operating Officer --
President of Gabelli Funds, LLC since 1988 and an officer of all
Age: 51 mutual funds advised by Gabelli Funds, LLC and its
affiliates. Director and President of Gabelli Advisers, Inc.
GUS A. COUTSOUROS Since 2000 -- Vice President and Chief Financial Officer of Gabelli --
Vice President and Funds, LLC since 1998 and an officer of all mutual
Treasurer funds advised by Gabelli Funds, LLC and its affiliates
Age: 41
JAMES E. MCKEE Since 1995 -- Vice President, General Counsel and Secretary of --
Secretary Gabelli Asset Management Inc. since 1999 and GAMCO
Age: 40 Investors, Inc. since 1993; Secretary of all mutual funds
advised by Gabelli Advisers, Inc. and Gabelli Funds, LLC
- ---------------
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.
3 This column includes only directorships of companies required to report to
the SEC under the Securities and Exchange Act of 1934 (i.e. public companies)
or other investment companies registered under the 1940 Act.
4 "Interested person" of the Fund as defined in the Investment Company Act of
1940. Messrs. Gabelli, Gabelli and Pohl are each considered an "interested
person" because of their affiliation with Gabelli Funds, LLC which acts as
each Fund's investment adviser. Mario J. Gabelli and John D. Gabelli are
brothers.
19
Gabelli Equity Series Funds, Inc.
THE GABELLI SMALL CAP GROWTH FUND
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
FAX: 914-921-5118
WEBSITE: WWW.GABELLI.COM
E-MAIL: INFO@GABELLI.COM
Net Asset Value available daily by calling
800-GABELLI after 6:00 P.M.
BOARD OF DIRECTORS
Mario J. Gabelli, CFA Karl Otto Pohl
CHAIRMAN AND CHIEF FORMER PRESIDENT
INVESTMENT OFFICER DEUTSCHE BUNDESBANK
GABELLI ASSET MANAGEMENT INC.
Anthony J. Colavita Anthony R. Pustorino
ATTORNEY-AT-LAW CERTIFIED PUBLIC ACCOUNTANT
ANTHONY J. COLAVITA, P.C. PROFESSOR EMERITUS
PACE UNIVERSITY
Vincent D. Enright Anthonie C. van Ekris
FORMER SENIOR VICE PRESIDENT MANAGING DIRECTOR
AND CHIEF FINANCIAL OFFICER BALMAC INTERNATIONAL, INC.
KEYSPAN ENERGY CORP.
John D. Gabelli Salvatore J. Zizza
SENIOR VICE PRESIDENT CHAIRMAN
GABELLI & COMPANY, INC. HALLMARK ELECTRICAL
SUPPLIES CORP.
Robert J. Morrissey
ATTORNEY-AT-LAW
MORRISSEY, HAWKINS & LYNCH
OFFICERS
Bruce N. Alpert Gus Coutsouros
PRESIDENT VICE PRESIDENT AND TREASURER
James E. McKee
SECRETARY
DISTRIBUTOR
Gabelli & Company, Inc.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT
State Street Bank and Trust Company
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of The
Gabelli Small Cap Growth Fund. It is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
GAB443Q303SR
[GRAPHIC OMITTED]
PICTURE OF MARIO GABELLI
THE
GABELLI
SMALL CAP
GROWTH
FUND
ANNUAL REPORT
SEPTEMBER 30, 2003
THE GABELLI EQUITY INCOME FUND
ANNUAL REPORT
SEPTEMBER 30, 2003
TO OUR SHAREHOLDERS,
In many of our Funds' June 30, 2003 shareholder reports, we noted a change
in the way we provide the portfolio manager's commentary to shareholders of our
Funds. Our shareholder reports have typically contained commentary on each
portfolio manager's assessment of the stock market, individual stocks and how
economic events affect their thinking in managing a specific Fund. We have
always provided details about performance and presented returns, both good and
bad, hopefully in a clear and concise fashion. These comments have been included
as part of each Fund's quarterly, semi-annual, and annual financial statements.
The Sarbanes-Oxley Act's new corporate governance regulations now require
a Fund's principal executive and financial officers to certify the entire
contents of the semi-annual and annual shareholder reports in a filing with the
Securities and Exchange Commission on Form N-CSR. This certification covers the
portfolio manager's commentary and subjective opinions if they are attached to
or a part of the financial statements.
Rather than ask our portfolio managers to eliminate their opinions and/or
restrict their commentary to historical facts only, we separated their
commentary from the financial statements and investment portfolio and sent it
separately. We will continue to mail the portfolio manager's commentary
separately from the investment portfolio to ensure that its content is complete
and unrestricted. Our Annual Reports will be mailed separately and include the
performance of the Fund with a description of the factors affecting the
performance during the past year, along with the financial statements and the
investment portfolio. Both the commentary and the financial statements,
including the portfolio of investments, are also available on our website at
www.gabelli.com/funds.
We trust that you understand that our approach is an unintended
consequence of the ever-increasing regulatory requirements affecting public
companies generally. We hope the specific certification requirements of these
new regulations will be modified as they relate to mutual funds, since
investment companies have different corporate structures and objectives than
other public companies.
Sincerely yours,
/S/ BRUCE N. ALPERT
Bruce N. Alpert
Chief Operating Officer
Gabelli Funds, LLC
October 17, 2003
[GRAPHIC OMITTED]
PLOT POINTS FOLLOW:
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI EQUITY INCOME FUND,
THE LIPPER EQUITY INCOME FUND AVERAGE AND THE S&P 500 INDEX
Gabelli Equity Lipper Equity
Income Fund Income Fund Average S&P 500 Index
1/2/92 10,000 10,000 10,000
9/30/92 10,580 10,530 10,250
9/30/93 12,750 12,415 11,583
9/30/94 13,171 12,688 12,011
9/30/95 15,700 15,226 15,590
9/30/96 18,320 17,783 18,755
9/30/97 24,549 23,865 26,332
9/30/98 25,285 23,889 28,728
9/30/99 30,296 26,825 36,712
9/30/00 32,844 29,027 41,584
9/30/01 32,703 26,342 30,518
9/30/02 28,916 21,853 24,271
9/30/03 36,026 26,300 30,186
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.
COMPARATIVE RESULTS
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH SEPTEMBER 30, 2003 (A)(B)
--------------------------------------------------------
YEAR TO SINCE
QUARTER DATE INCEPTION (C) 10 YEAR 5 YEAR 3 YEAR 1 YEAR
------- ------- ------------ ------- ------ ------ ------
Gabelli Equity Income Fund ........... 1.53% 13.56% 11.52% 10.94% 7.34% 3.13% 24.59%
S&P 500 Index ........................ 2.65% 14.71% 9.85% 10.04% 1.00% (10.13)% 24.37%
Nasdaq Composite Index ............... 10.11% 33.80% 9.95% 8.89% 1.08% (21.35)% 52.46%
Lipper Equity Income Fund Avg. ....... 2.15% 12.00% 9.02% 8.26% 2.68% (2.52)% 20.35%
(a) Total returns and average annual returns reflect changes in share price
and reinvestment of dividends and are net of expenses. The net asset value
of the Fund is reduced on the ex-dividend (payment) date by the amount of
the dividend paid. Of course, returns represent past performance does not
guarantee future results. Investment returns and the principal value of an
investment will fluctuate. When shares are redeemed, they may be worth more
or less than their original cost. The S&P 500 Index and the Nasdaq
Composite Index are unmanaged indicators of stock market performance, while
the Lipper Average reflects the average performance of mutual funds
classified in this particular category. Dividends are considered reinvested
(except for the Nasdaq Composite Index). Performance for periods less than
one year is not annualized.
(b) The Fund's fiscal year ends September 30.
(c) From commencement of investment operations on January 2, 1992.
- --------------------------------------------------------------------------------
2
PERFORMANCE DISCUSSION
Investors have opted for growth over yield during the past year's stock
market rally. Despite losing the relative performance race to growth stocks this
quarter, higher yielding equities delivered respectable returns. Buoyed by our
industrial company holdings, the Gabelli Equity Income Fund (the "Fund") rose
24.6% for the one-year period ended September 30, 2003, performing in line with
the Standard & Poor's ("S&P") 500 Index, which gained 24.4% during the same
one-year period. Traditionally, growth stocks outperform during the early stages
of an economic recovery. However, buoyed by the reduction of the tax rates on
dividends to 15%, higher yielding stocks performed relatively well in the go-go
rally.
Financial services stocks led the performance parade for our Fund during
the past year as J.P. Morgan Chase, Merrill Lynch, Sterling Bancorp and American
Express rose sharply. Industrial stocks also performed well, with railcar
manufacturer Trinity Industries, auto parts makers Dana Corp. and Modine
Manufacturing, electric utility operator AES Corp. and agricultural machinery
leader Deere & Company among our best performers. Integrated utilities stocks
including Westar Energy and Constellation Energy also positively contributed to
returns.
In general during the past year, our healthcare investments disappointed,
with Eli Lilly and Tenet Healthcare declining substantially and Baxter
International treading water. Several blue chip companies also underperformed as
AT&T and Coca-Cola lost ground. Specialty chemical investments such as Great
Lakes Chemical and Ferro restrained portfolio performance.
WWW.GABELLI.COM
Please visit us on the Internet. Our homepage at www.gabelli.com contains
information about Gabelli Asset Management Inc., the Gabelli Mutual Funds, IRAs,
401(k)s, quarterly reports, closing prices and other current news. You can send
us e-mail at info@gabelli.com.
In our efforts to bring to shareholders more timely portfolio information,
Gabelli Funds' portfolio managers regularly participate in chat sessions on our
website. Please visit www.gabelli.com for the specific dates and times of all of
our upcoming chats. All chat sessions start at 4:15 PM (Eastern Time). Please
arrive early, as participation is limited.
You may sign up for our e-mail alerts at www.gabelli.com and receive early
notice of chat sessions, closing mutual fund prices, news events and media
sightings.
3
THE GABELLI EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS -- 87.8%
AEROSPACE -- 0.9%
32,000 Boeing Co. .........$ 1,082,148 $ 1,098,560
5,000 Lockheed Martin
Corp. ............ 104,386 230,750
7,000 Northrop Grumman
Corp. ............ 431,350 603,540
10,000 Raytheon Co. ....... 279,250 280,000
2,000 Rockwell Automation
Inc. ............. 25,686 52,500
2,000 Rockwell Collins Inc. 15,844 50,500
------------ ------------
1,938,664 2,315,850
------------ ------------
AUTOMOTIVE -- 0.2%
4,500 Ford Motor Co. ..... 67,417 48,465
14,239 General Motors Corp. 538,747 582,802
------------ ------------
606,164 631,267
------------ ------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 3.0%
2,000 ArvinMeritor Inc. .. 28,890 35,620
80,000 Dana Corp. ......... 1,053,083 1,234,400
6,400 Ethyl Corp.+ ....... 24,700 80,512
50,000 GenCorp Inc. ....... 429,459 447,500
125,000 Genuine Parts Co. .. 3,506,476 3,997,500
2,500 Johnson Controls
Inc. ............. 127,000 236,500
60,000 Modine Manufacturing
Co. .............. 1,160,998 1,428,000
20,000 Pep Boys - Manny,
Moe & Jack ....... 158,436 306,000
------------ ------------
6,489,042 7,766,032
------------ ------------
AVIATION: PARTS AND SERVICES -- 0.9%
20,000 Barnes Group Inc. .. 365,934 519,200
9,500 Curtiss-Wright Corp. 135,862 670,890
6,048 Curtiss-Wright Corp.,
Cl. B ............ 272,014 433,037
8,000 United Technologies
Corp. ............ 281,946 618,240
------------ ------------
1,055,756 2,241,367
------------ ------------
BROADCASTING -- 0.0%
20,000 Granite Broadcasting
Corp.+ ........... 106,004 51,000
------------ ------------
BUSINESS SERVICES -- 0.5%
4,000 Automatic Data
Processing Inc. .. 126,808 143,400
6,000 Donnelley (R.H.)
Corp.+ ........... 68,850 242,460
500 Imation Corp. ...... 7,150 16,325
2,500 Landauer Inc. ...... 60,337 88,575
5,000 National Processing
Inc.+ ............ 77,065 96,600
26,000 New England Business
Service Inc. ..... 494,245 692,120
------------ ------------
834,455 1,279,480
------------ ------------
CABLE -- 0.2%
20,000 Comcast Corp.,
Cl. A+ ........... 690,329 617,600
------------ ------------
COMMUNICATIONS EQUIPMENT -- 0.7%
45,000 Corning Inc.+ ...... 352,463 423,900
120,000 Motorola Inc. ...... 1,282,274 1,436,400
------------ ------------
1,634,737 1,860,300
------------ ------------
MARKET
SHARES COST VALUE
------ ---- ------
COMPUTER HARDWARE -- 0.1%
300 International Business
Machines Corp. ...$ 3,810 $ 26,499
13,000 Xerox Corp.+ ....... 126,343 133,380
------------ ------------
130,153 159,879
------------ ------------
COMPUTER SOFTWARE AND SERVICES -- 0.6%
10,000 Electronic Data
Systems Corp. .... 172,160 202,000
40,000 EMC Corp.+ ......... 403,970 505,200
50,000 PeopleSoft Inc.+ ... 848,052 909,500
154 Telecom Italia
Media SpA+ ....... 205 63
------------ ------------
1,424,387 1,616,763
------------ ------------
CONSUMER PRODUCTS -- 6.1%
45,000 Altria Group Inc. .. 1,407,584 1,971,000
1,000 Clorox Co. ......... 33,050 45,870
80,000 Eastman Kodak Co. .. 2,328,029 1,675,200
45,500 Energizer Holdings
Inc.+ ............ 1,130,002 1,673,035
74,000 Gallaher Group
plc, ADR ......... 1,600,863 2,775,740
42,000 Gillette Co. ....... 1,233,027 1,343,160
70,000 Maytag Corp. ....... 1,736,480 1,747,900
36,000 National Presto
Industries Inc. .. 1,245,262 1,236,240
19,000 Procter & Gamble Co. 1,393,252 1,763,580
13,000 Rothmans Inc. ...... 237,941 243,246
26,000 Unilever NV, ADR ... 1,542,066 1,538,680
------------ ------------
13,887,556 16,013,651
------------ ------------
CONSUMER SERVICES -- 0.2%
35,000 Rollins Inc. ....... 454,969 624,400
------------ ------------
DIVERSIFIED INDUSTRIAL -- 4.3%
5,000 3M Company ......... 213,645 345,350
22,000 Acuity Brands Inc. . 342,225 397,320
40,000 Cooper Industries
Ltd., Cl. A ...... 1,657,009 1,921,200
22,000 GATX Corp. ......... 559,803 465,300
110,000 General Electric Co. 2,759,948 3,279,100
5,000 Harbor Global
Co. Ltd.+ ........ 24,172 44,625
100,000 Honeywell International
Inc. ............. 2,429,693 2,635,000
47,000 Sensient Technologies
Corp. ............ 953,833 987,000
22,000 Thomas Industries
Inc. ............. 250,524 627,440
4,000 Trinity Industries
Inc. ............. 82,100 103,400
25,000 Tyco International
Ltd. ............. 463,556 510,750
------------ ------------
9,736,508 11,316,485
------------ ------------
ELECTRONICS -- 1.8%
20,000 Intel Corp. ........ 370,400 550,200
125,000 Texas Instruments
Inc. ............. 2,489,961 2,850,000
20,000 Thermo Electron
Corp.+ ........... 424,925 434,000
50,000 Thomas & Betts
Corp.+ ........... 881,146 792,500
------------ ------------
4,166,432 4,626,700
------------ ------------
See accompanying notes to financial statements.
4
THE GABELLI EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
ENERGY AND UTILITIES: ELECTRIC -- 3.5%
80,000 AES Corp.+ .........$ 268,400 $ 593,600
12,000 American Electric Power
Company Inc. ..... 310,790 360,000
81,000 Cinergy Corp. ...... 2,478,068 2,972,700
17,000 DTE Energy Co. ..... 740,420 627,130
100,000 El Paso Electric Co.+ 790,289 1,155,000
10,000 FPL Group Inc. ..... 527,548 632,000
35,000 Great Plains
Energy Inc. ...... 748,610 1,061,200
90,000 Northeast Utilities 1,660,471 1,612,800
8,000 UIL Holdings Corp. . 290,482 279,920
------------ ------------
7,815,078 9,294,350
------------ ------------
ENERGY AND UTILITIES: INTEGRATED -- 10.1%
38,000 Allegheny Energy
Inc.+ ............ 318,325 347,320
105,000 Aquila Inc.+ ....... 296,671 354,900
44,000 BP plc, ADR ........ 1,030,211 1,852,400
42,000 Burlington
Resources Inc. ... 1,618,222 2,024,400
44,000 CH Energy Group Inc. 1,809,289 1,936,000
70,000 Constellation Energy
Group Inc. ....... 1,664,815 2,504,600
1,000 Dominion Resources
Inc. ............. 48,852 61,900
105,000 Duke Energy Corp. .. 1,892,694 1,870,050
185,000 Duquesne Light
Holdings Inc. .... 3,073,338 2,856,400
135,000 El Paso Corp. ...... 1,263,718 985,500
150,000 Energy East Corp. .. 3,071,332 3,364,500
29,000 Eni SpA ............ 304,221 443,088
40,000 NSTAR .............. 1,282,183 1,900,000
50,000 Progress Energy Inc. 2,144,038 2,223,000
15,000 Progress Energy Inc.,
CVO+ ............. 7,800 2,850
4,000 Public Service Enterprise
Group Inc. ....... 131,300 168,000
12,000 ScottishPower
plc, ADR ......... 314,381 284,400
56,000 TECO Energy Inc. ... 778,820 773,920
28,000 TXU Corp. .......... 572,163 659,680
95,000 Westar Energy Inc. . 1,388,045 1,752,750
------------ ------------
23,010,418 26,365,658
------------ ------------
ENERGY AND UTILITIES: NATURAL GAS -- 2.6%
43,000 AGL Resources Inc. . 815,748 1,211,310
17,000 Atmos Energy Corp. . 372,478 406,980
25,000 National Fuel
Gas Co. .......... 519,678 571,250
30,000 ONEOK Inc. ......... 477,001 605,100
3,000 Peoples Energy Corp. 103,187 124,140
12,000 Piedmont Natural
Gas Co. Inc. ..... 394,017 468,000
18,000 SEMCO Energy Inc. .. 160,883 82,800
63,282 Southern Union Co.+ 904,305 1,075,794
100,000 Southwest Gas Corp. 1,777,547 2,270,000
------------ ------------
5,524,844 6,815,374
------------ ------------
MARKET
SHARES COST VALUE
------ ---- ------
ENERGY AND UTILITIES: OIL -- 6.5%
41,000 ChevronTexaco Corp. $ 1,927,546 $ 2,929,450
58,000 ConocoPhillips ..... 3,187,718 3,175,500
15,000 Devon Energy Corp. . 692,247 722,850
123,000 Exxon Mobil Corp. .. 3,351,043 4,501,800
18,000 Kerr-McGee Corp. ... 778,337 803,520
95,000 Royal Dutch
Petroleum Co. .... 4,155,263 4,199,000
8,759 Total Petroleum of North
America Ltd., ADR 299,550 663,932
------------ ------------
14,391,704 16,996,052
------------ ------------
ENERGY AND UTILITIES: SERVICES -- 0.4%
14,000 Halliburton Co. .... 158,327 339,500
12,000 Schlumberger Ltd. .. 547,706 580,800
------------ ------------
706,033 920,300
------------ ------------
ENERGY AND UTILITIES: WATER -- 0.1%
15,000 Philadelphia
Suburban Corp. ... 230,874 361,200
------------ ------------
ENTERTAINMENT -- 1.4%
60,000 AOL Time Warner
Inc.+ ............ 784,500 906,600
17,000 Fox Entertainment Group Inc.,
Cl. A+ ........... 372,969 475,830
105,000 The Walt Disney Co. 1,745,083 2,117,850
3,000 Viacom Inc., Cl. A . 68,550 115,200
------------ ------------
2,971,102 3,615,480
------------ ------------
ENVIRONMENTAL SERVICES -- 0.3%
30,000 Waste Management
Inc. ............. 543,511 785,100
------------ ------------
EQUIPMENT AND SUPPLIES -- 1.1%
3,000 Caterpillar Inc. ... 35,181 206,520
28,000 Deere & Co. ........ 567,189 1,492,680
13,000 Imagistics International
Inc.+ ............ 251,735 376,740
3,000 Ingersoll-Rand Co.,
Cl. A ............ 125,173 160,320
1,500 Minerals Technologies
Inc. ............. 37,938 76,350
2,000 Parker-Hannifin Corp. 77,350 89,400
16,000 Smith (A.O.) Corp. . 343,317 448,160
------------ ------------
1,437,883 2,850,170
------------ ------------
FINANCIAL SERVICES -- 15.5%
9,000 Aegon NV, ADR ...... 112,578 105,300
7,120 Alleghany Corp.+ ... 1,311,997 1,390,180
5,000 Allstate Corp. ..... 177,405 182,650
73,500 American Express Co. 2,595,280 3,311,910
8,000 American International
Group Inc. ....... 433,870 461,600
39,000 Argonaut Group Inc. 789,154 507,000
5,000 Banco Popular
Espanol SA ....... 185,939 247,292
18,000 Banco Santander Central
Hispano SA, ADR .. 64,963 153,180
2,000 Banco Santander
Chile, ADR+ ...... 29,250 46,000
8,500 Bank of America
Corp. ............ 158,255 663,340
See accompanying notes to financial statements.
5
THE GABELLI EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
44,000 Bank of New York
Co. Inc. .........$ 1,423,658 $ 1,280,840
19,000 Bank One Corp. ..... 660,767 734,350
30,000 Bankgesellschaft
Berlin AG+ ....... 201,349 76,511
8,000 Banque Nationale
de Paris ......... 296,835 392,221
2,500 Bear Stearns
Companies Inc. ... 161,375 187,000
1,000 Block (H&R) Inc. ... 15,746 43,150
30,000 Citigroup Inc. ..... 1,094,647 1,365,300
39,000 Commerzbank AG, ADR 834,873 563,176
35,000 Deutsche Bank
AG, ADR .......... 1,966,015 2,124,150
2,000 Dun and Bradstreet
Corp.+ ........... 20,476 83,080
3,500 Fannie Mae ......... 204,581 245,700
16,000 Fidelity Southern
Corp. ............ 153,870 216,640
80,000 FleetBoston Financial
Corp. ............ 1,785,143 2,412,000
25,000 Huntington
Bancshares Inc. .. 407,250 494,750
45,000 John Hancock Financial
Services Inc. .... 1,295,844 1,521,000
50,000 JP Morgan Chase
& Co. ............ 1,578,693 1,716,500
10,000 Leucadia National
Corp. ............ 327,010 378,500
55,000 Mellon Financial
Corp. ............ 1,528,208 1,657,700
10,000 Merrill Lynch &
Co. Inc. ......... 362,400 535,300
80,000 MONY Group Inc. .... 2,484,944 2,604,000
4,000 Moody's Corp. ...... 64,841 219,880
3,000 Municipal Mortgage &
Equity, LLC ...... 60,488 73,560
6,000 Northern Trust Corp. 60,300 254,640
50,000 Phoenix Companies
Inc. ............. 650,511 577,500
47,000 PNC Financial Services
Group ............ 1,985,813 2,236,260
20,000 Schwab (Charles)
Corp. ............ 270,593 238,200
25,000 St. Paul Companies
Inc. ............. 937,999 925,750
100,000 Sterling Bancorp ... 1,578,737 2,691,000
12,000 SunTrust Banks Inc. 251,737 724,440
5,000 T. Rowe Price
Group Inc. ....... 136,890 206,300
4,000 Travelers Property Casualty
Corp., Cl. A ..... 64,200 63,520
57,000 Unitrin Inc. ....... 1,772,978 1,736,220
35,000 Wachovia Corp. ..... 1,027,147 1,441,650
45,000 Waddell & Reed Financial Inc.,
Cl. A ........... 816,259 1,060,650
75,000 Wilmington
Trust Corp. ...... 2,342,833 2,307,000
------------ ------------
34,683,701 40,456,890
------------ ------------
FOOD AND BEVERAGE -- 5.6%
54,000 Allied Domecq
plc, ADR ......... 1,166,956 1,391,040
35,000 Cadbury Schweppes
plc, ADR ......... 773,531 878,150
35,000 Campbell Soup Co. .. 794,372 927,500
40,000 Coca-Cola Amatil
Ltd., ADR ........ 246,845 309,728
30,000 Coca-Cola Co. ...... 1,390,965 1,288,800
10,000 Corn Products
International
Inc. ............. 260,071 318,500
40,330 Del Monte Foods Co.+ 331,259 351,274
MARKET
SHARES COST VALUE
------ ---- ------
50,000 Diageo plc, ADR ....$ 1,987,727 $ 2,207,500
12,000 Fomento Economico
Mexicano SA
de CV, ADR ....... 416,490 457,800
20,000 General Mills Inc. . 928,400 941,400
64,000 Heinz (H.J.) Co. ... 2,169,869 2,193,920
3,000 Hershey Foods Corp. 164,533 218,040
15,000 Kellogg Co. ........ 416,865 500,250
3,000 Mondavi (Robert) Corp.,
Cl. A+ ........... 62,180 92,940
10,000 Nestle SA .......... 2,083,075 2,305,718
12,150 Tootsie Roll
Industries Inc. .. 339,643 376,650
------------ ------------
13,532,781 14,759,210
------------ ------------
HEALTH CARE -- 8.9%
5,000 Abbott Laboratories 181,280 212,750
3,000 Aventis SA, ADR .... 149,527 156,900
50,000 Baxter International
Inc. ............. 1,412,798 1,453,000
16,000 Becton, Dickinson
and Co. .......... 491,573 577,920
115,000 Bristol-Myers
Squibb Co. ....... 3,194,320 2,950,900
68,000 Eli Lilly & Co. .... 3,976,966 4,039,200
11,276 GlaxoSmithKline
plc, ADR ......... 515,984 478,102
10,000 Henry Schein Inc.+ 422,723 567,000
5,000 Interpore International
Inc.+ ............ 37,780 76,800
4,000 Johnson & Johnson .. 39,338 198,080
6,030 Medco Health Solutions
Inc.+ ............ 134,931 156,358
50,000 Merck & Co. Inc. ... 2,464,901 2,531,000
5,000 Orthofix International
NV+ .............. 143,154 183,000
245,000 Pfizer Inc. ........ 7,775,358 7,443,100
105,000 Schering-Plough
Corp. ............ 1,904,616 1,600,200
45,000 Tenet Healthcare
Corp.+ ........... 643,935 651,600
2,000 Zimmer Holdings
Inc.+ ............ 103,551 110,200
------------ ------------
23,592,735 23,386,110
------------ ------------
HOTELS AND GAMING -- 0.5%
35,000 Starwood Hotels & Resorts
Worldwide Inc. ... 868,448 1,218,000
------------ ------------
METALS AND MINING -- 1.4%
76,000 Fording Canadian Coal Trust
(Toronto) ........ 1,516,439 1,655,774
30,000 Freeport-McMoRan Copper &
Gold Inc., Cl. B . 519,346 993,000
25,000 Newmont Mining Corp. 650,026 977,250
------------ ------------
2,685,811 3,626,024
------------ ------------
PAPER AND FOREST PRODUCTS -- 0.1%
11,000 Pactiv Corp.+ ...... 174,996 223,080
------------ ------------
PUBLISHING -- 1.9%
22,000 Dow Jones & Co. Inc. 949,819 1,041,700
10,000 Knight-Ridder Inc. . 662,210 667,000
1,500 McClatchy Co., Cl. A 85,925 89,220
10,000 McGraw-Hill
Companies Inc. ... 502,221 621,300
See accompanying notes to financial statements.
6
THE GABELLI EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
PUBLISHING (CONTINUED)
3,008 News Corp. Ltd.,
ADR ..............$ 70,881 $ 98,662
90,000 Reader's Digest Association
Inc. ............. 1,224,956 1,259,100
406 Seat Pagine
Gialle SpA+ ...... 1,350 374
10,000 Tribune Co. ........ 430,466 459,000
1,200 Washington Post Co.,
Cl. B ............ 700,030 798,000
------------ ------------
4,627,858 5,034,356
------------ ------------
REAL ESTATE -- 0.2%
20,000 Catellus Development
Corp.+ ........... 401,305 489,000
------------ ------------
RETAIL -- 0.9%
25,000 Albertson's Inc. ... 540,435 514,250
2,500 Griffin Land &
Nurseries Inc.+ .. 11,716 33,650
47,300 Safeway Inc.+ ...... 932,752 1,085,062
2,000 Sears, Roebuck & Co. 51,241 87,460
6,000 The Home Depot Inc. 127,998 191,100
10,000 Weis Markets Inc. .. 300,480 340,100
------------ ------------
1,964,622 2,251,622
------------ ------------
SATELLITE -- 0.2%
45,900 General Motors Corp.,
Cl. H+ ........... 578,764 656,829
------------ ------------
SPECIALTY CHEMICALS -- 1.4%
25,000 Albemarle Corp. .... 553,160 686,250
1,200 Celenese AG + ...... 16,129 39,636
1,611 Dow Chemical Co. ... 16,675 52,422
8,000 E.I. du Pont de Nemours
and Co. .......... 330,550 320,080
6,000 Ferro Corp. ........ 135,135 128,160
31,000 Great Lakes
Chemical Corp. ... 798,682 623,410
70,000 Monsanto Co. ....... 1,160,200 1,675,800
20,000 Omnova Solutions
Inc.+ ............ 155,815 70,200
4,000 Quaker Chemical
Corp. ............ 79,615 93,040
------------ ------------
3,245,961 3,688,998
------------ ------------
TELECOMMUNICATIONS -- 5.1%
10,000 ALLTEL Corp. ....... 492,835 463,400
30,000 AT&T Corp. ......... 874,575 646,500
52,800 BCE Inc. ........... 1,130,618 1,153,680
25,000 BellSouth Corp. .... 664,377 592,000
300,000 BT Group plc ....... 1,251,761 897,159
30,000 BT Group plc, ADR .. 1,006,938 909,000
32,000 Cable & Wireless
plc, ADR ......... 201,570 180,800
185,000 Cincinnati Bell
Inc.+ ............ 1,399,175 941,650
20,000 Citizens
Communications Co.+ 222,640 224,200
17,000 Deutsche Telekom
AG, ADR+ ......... 283,227 245,480
12,000 France Telecom
SA, ADR .......... 347,118 278,880
300,000 Qwest Communications
International Inc.+ 1,256,877 1,020,000
MARKET
SHARES COST VALUE
------ ---- ------
74,000 SBC Communications
Inc. .............$ 2,280,246 $ 1,646,500
40,000 Sprint Corp. -
FON Group ........ 569,646 604,000
3,300 Telecom Italia
SpA, ADR+ ........ 31,072 82,005
7,880 Telefonica SA, ADR+ 90,062 279,346
12,000 TELUS Corp. ........ 192,898 205,149
91,500 Verizon Communications
Inc. ............. 3,477,183 2,968,260
3,118 WilTel Communications
Group Inc.+ ...... 45,150 49,825
------------ ------------
15,817,968 13,387,834
------------ ------------
WIRELESS COMMUNICATIONS -- 0.6%
100,000 AT&T Wireless
Services Inc.+ ... 983,221 818,000
300,000 mm02 plc+ .......... 336,932 285,346
20,000 mm02 plc, ADR+ ..... 199,884 188,800
30,000 Sprint Corp. -
PCS Group+ ....... 175,715 171,900
------------ ------------
1,695,752 1,464,046
------------ ------------
TOTAL COMMON
STOCKS .......... 203,657,305 229,766,457
------------ ------------
PREFERRED STOCKS -- 5.9%
AUTOMOTIVE -- 0.1%
1,000 Ford Motor Co. Capital Trust II,
6.500% Cv. Pfd. .. 45,215 43,310
General Motors Corp.,
9,000 5.250% Cv. Pfd.,
Ser. B ........... 228,000 206,820
4,000 4.500% Cv. Pfd.,
Ser. A ........... 100,000 98,600
------------ ------------
373,215 348,730
------------ ------------
AVIATION: PARTS AND SERVICES -- 0.1%
7,000 Coltec Capital Trust,
5.250% Cv. Pfd. .. 281,500 250,655
------------ ------------
BROADCASTING -- 1.9%
58,000 CVC Equity Securities Trust I,
6.500% Cv. Pfd. .. 1,485,376 1,206,400
2,619 Granite Broadcasting Corp.,
12.750% Pfd.+ .... 1,488,446 1,833,300
100 Gray Television Inc.,
8.000% Cv. Pfd.,
Ser. C (b)(c) .. 1,000,000 1,020,000
46,100 Rainbow Equity
Securities Trust II,
6.250% Cv. Pfd. .. 801,487 968,100
------------ ------------
4,775,309 5,027,800
------------ ------------
COMMUNICATIONS EQUIPMENT -- 0.4%
1,100 Lucent Technologies
Capital Trust I,
7.750% Cv. Pfd. .. 759,000 912,703
------------ ------------
DIVERSIFIED INDUSTRIAL -- 0.1%
26,200 WHX Corp.,
$3.75 Cv. Pfd.,
Ser. B+ .......... 177,130 131,000
------------ ------------
See accompanying notes to financial statements.
7
THE GABELLI EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
PREFERRED STOCKS (CONTINUED)
ENTERTAINMENT -- 0.0%
3,000 Metromedia International
Group Inc.,
7.250% Cv. Pfd.+ .$ 5,310 $ 9,000
------------ ------------
EQUIPMENT AND SUPPLIES -- 0.4%
13,800 Sequa Corp.,
$5.00 Cv. Pfd. ... 1,063,415 1,131,600
------------ ------------
HEALTH CARE -- 0.0%
300 Bio-Rad Laboratories Inc.,
Cl. B ............ 11,100 15,306
------------ ------------
METALS AND MINING -- 0.3%
25,000 Freeport-McMoRan Copper &
Gold Inc.,
7.000% Cv. Pfd. .. 503,515 708,250
------------ ------------
PUBLISHING -- 0.0%
1,504 News Corp. Ltd.,
Pfd., ADR ........ 29,106 41,044
------------ ------------
SPECIALTY CHEMICALS -- 0.0%
5,000 Hercules Trust I,
9.420% Pfd. ...... 111,930 124,000
------------ ------------
TELECOMMUNICATIONS -- 2.6%
33,000 Cincinnati Bell Inc.,
6.750% Cv. Pfd.,
Ser. B ........... 918,894 1,320,000
40,000 Citizens Communications Co.,
5.000% Cv. Pfd. .. 1,869,091 1,996,000
32,000 CSC Holdings Inc.,
11.125% Cv. Pfd.,
Ser. M ........... 1,335,000 3,356,160
------------ ------------
4,122,985 6,672,160
------------ ------------
TOTAL PREFERRED
STOCKS ........... 12,213,515 15,372,248
------------ ------------
WARRANTS -- 0.2%
BUSINESS SERVICES -- 0.2%
250,000 GP Strategies Corp.,
Expires
08/14/08+ (c) .... 637,065 637,065
------------ ------------
PRINCIPAL
AMOUNT
---------
CORPORATE BONDS -- 4.4%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.8%
$1,400,000 GenCorp Inc.,
Sub. Deb. Cv.,
5.750%, 04/15/07 . 1,318,428 1,293,250
800,000 Standard Motor
Products Inc.,
Sub. Deb. Cv.,
6.750%, 07/15/09 . 640,049 706,000
100,000 Tenneco Automotive
Inc.,
11.625%, 10/15/09 61,343 99,000
------------ ------------
2,019,820 2,098,250
------------ ------------
BUSINESS SERVICES -- 0.5%
100,000 BBN Corp., Sub. Deb. Cv.,
6.000%,
04/01/12+ (a)(c) . 97,500 0
2,000,000 GP Strategies Corp.,
Sub. Deb.,
6.000%,
08/14/08 (c) ..... 1,374,583 1,362,935
------------ ------------
1,472,083 1,362,935
------------ ------------
PRINCIPAL MARKET
AMOUNT COST VALUE
--------- ---- ------
CABLE -- 0.5%
$1,500,000 Charter Communications Inc., Cv.,
4.750%, 06/01/06 .$ 910,491 $ 1,290,000
------------ ------------
ELECTRONICS -- 1.3%
1,800,000 Agere Systems Inc.,
Sub. Deb. Cv.,
6.500%, 12/15/09 . 1,652,028 2,333,250
1,100,000 Oak Industries Inc.,
Sub. Deb. Cv.,
4.875%, 03/01/08 . 774,138 1,049,125
------------ ------------
2,426,166 3,382,375
------------ ------------
ENERGY AND UTILITIES -- 0.4%
1,600,000 Mirant Corp., Sub. Deb. Cv.,
2.500%,
06/15/21+ (a) .... 1,193,786 864,000
------------ ------------
FOOD AND BEVERAGE -- 0.1%
100,000 Parmalat Capital, Cv.,
1.000%, 12/31/05 . 117,578 133,341
100,000 Parmalat Netherlands BV, Cv.,
0.875%, 06/30/21 . 110,528 127,227
------------ ------------
228,106 260,568
------------ ------------
HEALTH CARE -- 0.8%
2,000,000 IVAX Corp.,
Sub. Deb. Cv.,
5.500%, 05/15/07 . 1,789,291 2,050,000
200,000 Twin Laboratories Inc.,
Sub. Deb. Cv.,
10.250%, 05/15/06 95,572 113,000
------------ ------------
1,884,863 2,163,000
------------ ------------
TELECOMMUNICATIONS -- 0.0%
200,000 Williams Comm Group Inc.,
Escrow, 10.875%,
10/01/09 (a)(c) .. 0 0
------------ ------------
TOTAL CORPORATE
BONDS ............ 10,135,315 11,421,128
------------ ------------
U.S. GOVERNMENT OBLIGATIONS -- 1.6%
4,217,000 U.S. Treasury Bills,
0.845% to 0.865%++,
10/30/03 to
11/28/03 ......... 4,211,436 4,211,436
------------ ------------
TOTAL
INVESTMENTS --
99.9% ............$230,854,636 261,408,334
============
OTHER ASSETS AND
LIABILITIES (NET) -- 0.1% ..... 368,823
------------
NET ASSETS -- 100.0% ............$261,777,157
============
- -----------------
(a) Security in default.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At
September 30, 2003, the market value of Rule 144A securities amounted to
$1,020,000 or 0.39% of total net assets.
(c) Securities fair valued under procedures established by the Board of
Directors.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR - American Depository Receipt.
CVO - Contingent Value Obligation.
See accompanying notes to financial statements.
8
THE GABELLI EQUITY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost $230,854,636) ....... $261,408,334
Cash and foreign currency, at value (Cost $3,489) 3,571
Dividends and interest receivable ............... 882,039
Receivable for investments sold ................. 363,925
Receivable for capital shares sold .............. 1,136,358
Other assets .................................... 3,021
------------
TOTAL ASSETS .................................... 263,797,248
------------
LIABILITIES:
Payable for investments purchased ............... 1,307,418
Payable for capital shares redeemed ............. 272,840
Payable for investment advisory fees ............ 217,028
Payable for distribution fees ................... 54,257
Payable for shareholder communication fees ...... 26,625
Payable for shareholder services fees ........... 64,100
Distribution payable ............................ 50
Other accrued expenses .......................... 77,773
------------
TOTAL LIABILITIES ............................... 2,020,091
------------
NET ASSETS applicable to 17,929,416
shares outstanding ............................ $261,777,157
============
NET ASSETS CONSIST OF:
Capital stock, at par value ..................... $17,929
Additional paid-in capital ...................... 232,287,843
Accumulated net investment income ............... 672,481
Accumulated net realized loss on investments
and foreign currency transactions ............. (1,755,511)
Net unrealized appreciation on investments
and foreign currency transactions ............. 30,554,415
------------
TOTAL NET ASSETS ................................ $261,777,157
============
NET ASSET VALUE, offering and redemption
price per share ($261,777,157 (DIVIDE) 17,929,416
shares outstanding; unlimited number of
shares authorized of $0.001 par value) $14.60
======
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends (net of foreign taxes of $128,175) ..... $ 7,197,324
Interest ......................................... 1,260,850
-----------
TOTAL INVESTMENT INCOME .......................... 8,458,174
-----------
EXPENSES:
Investment advisory fees ......................... 2,360,531
Distribution fees ................................ 590,133
Shareholder services fees ........................ 244,745
Custodian fees ................................... 77,705
Shareholder communications expenses .............. 71,825
Registration fees ................................ 53,708
Legal and audit fees ............................. 46,226
Directors' fees .................................. 20,898
Interest expenses ................................ 12,635
Miscellaneous expenses ........................... 47,370
-----------
TOTAL EXPENSES ................................... 3,525,776
-----------
NET INVESTMENT INCOME ............................ 4,932,398
-----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized loss on investments and
foreign currency transactions .................. (1,080,553)
Net change in unrealized appreciation/depreciation
on investments and foreign currency transactions 47,288,390
-----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS ................................... 46,207,837
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................................ $51,140,235
===========
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
------------------ ------------------
OPERATIONS:
Net investment income ........................................................ $ 4,932,398 $ 2,810,808
Net realized loss on investments and foreign currency transactions ........... (1,080,553) (385,184)
Net change in unrealized appreciation/depreciation on investments
and foreign currency transactions .......................................... 47,288,390 (26,141,739)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .............. 51,140,235 (23,716,115)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ........................................................ (4,398,932) (2,790,101)
Net realized short-term gain on investments .................................. -- (265,279)
Net realized long-term gain on investments ................................... -- (1,408,019)
------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS .......................................... (4,398,932) (4,463,399)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net increase in net assets from capital share transactions ................... 52,098,140 69,618,289
------------ ------------
NET INCREASE IN NET ASSETS ................................................... 98,839,443 41,438,775
NET ASSETS:
Beginning of period .......................................................... 162,937,714 121,498,939
------------ ------------
End of period (including undistributed net investment income of
$672,481 and $20,456, respectively) ........................................ $261,777,157 $162,937,714
============ ============
See accompanying notes to financial statements.
9
THE GABELLI EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION. The Gabelli Equity Income Fund (the "Fund") is a series of
Gabelli Equity Series Funds, Inc. (the "Corporation"), which was organized on
July 25, 1991 as a Maryland corporation. The Fund is a diversified, open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"), and one of three separately managed
portfolios (collectively, the "Portfolios") of the Corporation, each with four
separate classes of shares known as Class AAA, Class A, Class B and Class C.
Currently, only Class AAA Shares are offered to the public. The Fund's primary
objective is to seek a high level of total return with an emphasis on income.
The Fund commenced investment operations on January 2, 1992.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates. The following is a summary of significant accounting
policies followed by the Fund in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange or traded in the U.S. over-the-counter market for
which market quotations are readily available are valued at the last quoted sale
price or a market's official closing price as of the close of business on the
day the securities are being valued. If there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day. All other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest average of the bid and asked prices. If there were no asked prices quoted
on that day, then the security is valued at the closing bid price. Portfolio
securities traded on more than one national securities exchange or market are
valued according to the broadest and most representative market, as determined
by Gabelli Funds, LLC (the "Adviser"). Portfolio securities primarily traded on
foreign markets are generally valued at the preceding closing values of such
securities on their respective exchanges or if, after the close, market
conditions change significantly, certain foreign securities may be fair valued
pursuant to procedures established by the Board of Directors. Securities and
assets for which market quotations are not readily available are valued at their
fair value as determined in good faith under procedures established by and under
the general supervision of the Board of Directors. Short-term debt securities
with remaining maturities of 60 days or less are valued at amortized cost,
unless the Board of Directors determines such does not reflect the securities'
fair value, in which case these securities will be valued at their fair value as
determined by the Board of Directors. Debt instruments having a maturity greater
than 60 days are valued at the latest average of the bid and asked prices
obtained from a pricing service approved by the Board of Directors, or a dealer
maintaining an active market in those securities. Options are valued at the last
sale price on the exchange on which they are listed. If no sales of such options
have taken place that day, they will be valued at the mean between their closing
bid and asked prices.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
primary government securities dealers recognized by the Federal Reserve Board,
with member banks of the Federal Reserve System or with other brokers or dealers
that meet credit guidelines established by the Adviser and reviewed by the Board
of Directors. Under the terms of a typical repurchase agreement, the Fund takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
The Fund will always receive and maintain securities as collateral whose market
value, including accrued interest, will be at least equal to 100% of the dollar
amount invested by the Fund in each agreement. The Fund will make payment for
such
10
THE GABELLI EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
securities only upon physical delivery or upon evidence of book entry transfer
of the collateral to the account of the custodian. To the extent that any
repurchase transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to maintain the adequacy of the collateral. If
the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited. At
September 30, 2003, there were no repurchase agreements.
FUTURES CONTRACTS. The Fund may engage in futures contracts for the purpose of
hedging against changes in the value of its portfolio securities and in the
value of securities it intends to purchase. Upon entering into a futures
contract, the Fund is required to deposit with the broker an amount of cash or
cash equivalents equal to a certain percentage of the contract amount. This is
known as the "initial margin". Subsequent payments ("variation margin") are made
or received by the Fund each day, depending on the daily fluctuation of the
value of the contract. The daily changes in the contract are included in
unrealized gains or losses. The Fund recognizes a realized gain or loss when the
contract is closed. At September 30, 2003, there were no open futures contracts.
There are several risks in connection with the use of futures contracts as a
hedging device. The change in value of future contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in value of the hedged investments. In addition, there is the risk that
the Fund may not be able to enter into a closing transaction because of an
illiquid secondary market.
FORWARD FOREIGN EXCHANGE CONTRACTS. The Fund may engage in forward foreign
exchange contracts for hedging a specific transaction with respect to either the
currency in which the transaction is denominated or another currency as deemed
appropriate by the Adviser. Forward foreign exchange contracts are valued at the
forward rate and are marked-to-market daily. The change in market value is
included in unrealized appreciation/depreciation on investments and foreign
currency transactions. When the contract is closed, the Fund records a realized
gain or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed. At September 30,
2003, there were no open forward foreign exchange contracts.
The use of forward foreign exchange contracts does not eliminate fluctuations in
the underlying prices of the Fund's portfolio securities, but it does establish
a rate of exchange that can be achieved in the future. Although forward foreign
exchange contracts limit the risk of loss due to a decline in the value of the
hedged currency, they also limit any potential gain that might result should the
value of the currency increase. In addition, the Fund could be exposed to risks
if the counterparties to the contracts are unable to meet the terms of their
contracts.
FOREIGN CURRENCY TRANSLATION. The books and records of the Fund are maintained
in United States (U.S.) dollars. Foreign currencies, investments and other
assets and liabilities are translated into U.S. dollars at the exchange rates
prevailing at the end of the period, and purchases and sales of investment
securities, income and expenses are translated at the exchange rate prevailing
on the respective dates of such transactions. Unrealized gains and losses, which
result from changes in foreign exchange rates and/or changes in market prices of
securities, have been included in unrealized appreciation/depreciation on
investments and foreign currency transactions. Net realized foreign currency
gains and losses resulting from changes in exchange rates include foreign
currency gains and losses between trade date and settlement date on investment
securities transactions, foreign currency transactions and the difference
between the amounts of interest and dividends
11
THE GABELLI EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
recorded on the books of the Fund and the amounts actually received. The portion
of foreign currency gains and losses related to fluctuation in exchange rates
between the initial trade date and subsequent sale trade date is included in
realized gain/(loss) on investments.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for on the trade date with realized gain or loss on investments
determined by using the identified cost method. Interest income (including
amortization of premium and accretion of discount) is recorded as earned.
Dividend income is recorded on the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders are recorded on the ex-dividend date. Income distributions and
long-term capital gain distributions are determined in accordance with income
tax regulations which may differ from accounting principles generally accepted
in the United States.
For fiscal year ended September 30, 2003, the tax character of distributions
paid does not materially differ from accounting principles generally accepted in
the United States.
For the fiscal year ended September 30, 2003, reclassifications were made to
increase accumulated net investment income for $118,559 and increase accumulated
net realized loss on investments for $111,659, with an offsetting adjustment to
additional paid-in capital.
EXPENSES. Certain administrative expenses are common to, and allocated among,
the Portfolios. Such allocations are made on the basis of each Portfolio's
average net assets or other criteria directly affecting the expenses as
determined by the Adviser.
PROVISION FOR INCOME TAXES. The Fund intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended. As a result, a Federal income tax provision is not required.
As of September 30, 2003, the components of accumulated earnings/(losses) on a
tax basis were as follows:
Undistributed ordinary income ....................... $ 714,701
Post-October losses ................................. (249,013)
Capital loss carryforward ........................... (478,901)
Net unrealized appreciation ......................... 29,520,445
Other temporary differences ......................... (35,847)
-----------
Total accumulated earnings .......................... $29,471,385
===========
The Fund has a capital loss carryforward for Federal income tax purposes at
September 30, 2003 of $478,901 which is available through 2011.
Dividends and interest from non-U.S. sources received by the Fund are generally
subject to non-U.S. withholding taxes at rates ranging up to 30%. Such
withholding taxes may be reduced or eliminated under the terms of applicable
U.S. income tax treaties, and the Fund intends to undertake any procedural steps
required to claim the benefits of such treaties.
The difference between book and tax basis undistributed ordinary income is
primarily due to the accrual of defaulted interest for tax purposes.
The difference between book and tax basis unrealized appreciation is primarily
due to deferral of losses from wash sales for tax purposes.
12
THE GABELLI EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
3. INVESTMENT ADVISORY AGREEMENT. The Fund has entered into an investment
advisory agreement (the "Advisory Agreement") with the Adviser which provides
that the Fund will pay the Adviser a fee, computed daily and paid monthly, at
the annual rate of 1.00% of the value of the Fund's average daily net assets. In
accordance with the Advisory Agreement, the Adviser provides a continuous
investment program for the Fund's portfolio, oversees the administration of all
aspects of the Fund's business and affairs and pays the compensation of all
Officers and Directors of the Fund who are its affiliates.
4. DISTRIBUTION PLAN. The Fund's Board of Directors has adopted a distribution
plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. For the fiscal year
ended September 30, 2003, the Fund incurred distribution costs payable to
Gabelli & Company, Inc., an affiliate of the Adviser, of $590,133, or 0.25% of
average daily net assets, the annual limitation under the Plan. Such payments
are accrued daily and paid monthly.
5. PORTFOLIO SECURITIES. Purchases and sales of securities for the fiscal year
ended September 30, 2003, other than short term securities, aggregated
$129,728,197 and $61,035,152, respectively.
6. TRANSACTIONS WITH AFFILIATES. During the fiscal year ended September 30,
2003, the Fund paid brokerage commissions of $230,467 to Gabelli & Company, Inc.
and its affiliates.
The cost of calculating the Fund's net asset value per share is a Fund expense
pursuant to the Investment Advisory Agreement between the Fund and Gabelli
Funds, LLC (the "Adviser"). During fiscal 2003, the Fund reimbursed the Adviser
$34,800 in connection with the cost of computing the Fund's net asset value.
7. LINE OF CREDIT. The Fund has access to an unsecured line of credit up to
$25,000,000 from the custodian for temporary borrowing purposes. Borrowings
under this arrangement bear interest at 0.75% above the Federal Funds rate on
outstanding balances.
The average daily amount of borrowings within the year ended September 30, 2003
was $517,409 with a related weighted average interest rate of 1.89%. The maximum
amount borrowed at any time during the year ended September 30, 2003 was
$8,074,000.
8. CAPITAL STOCK TRANSACTIONS. Transactions in shares of capital stock were as
follows:
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ---------- ------------
Shares sold ........................ 14,773,776 $ 197,502,549 8,239,851 $115,719,997
Shares issued upon reinvestment
of dividends ..................... 292,370 4,080,708 302,700 4,184,306
Shares redeemed .................... (10,797,815) (149,485,117) (3,634,380) (50,286,014)
----------- ------------- ---------- ------------
Net increase ....................... 4,268,331 $ 52,098,140 4,908,171 $ 69,618,289
=========== ============= ========== ============
9. FOR FEDERAL TAX PURPOSES.
Aggregate cost .....................$231,887,889
============
Gross unrealized appreciation ......$ 38,522,140
Gross unrealized depreciation ...... (9,001,695)
------------
Net unrealized appreciation ........$ 29,520,445
============
13
THE GABELLI EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each period:
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------
2003 2002 2001 2000 1999
--------- -------- -------- -------- -------
OPERATING PERFORMANCE:
Net asset value, beginning of period .................. $ 11.93 $ 13.88 $ 16.35 $ 17.58 $ 15.97
-------- -------- -------- ------- -------
Net investment income ................................. 0.28 0.23 0.25 0.46 0.23
Net realized and unrealized gain (loss)
on investments ...................................... 2.64 (1.79) (0.28) 0.81 2.82
-------- -------- -------- ------- -------
Total from investment operations ...................... 2.92 (1.56) (0.03) 1.27 3.05
-------- -------- -------- ------- -------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ................................. (0.25) (0.23) (0.36) (0.36) (0.22)
Net realized gain on investments ...................... -- (0.16) (2.08) (2.14) (1.22)
-------- -------- -------- ------- -------
Total distributions ................................... (0.25) (0.39) (2.44) (2.50) (1.44)
-------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD ........................ $ 14.60 $ 11.93 $ 13.88 $ 16.35 $ 17.58
======== ======== ======== ======= =======
Total return+ ......................................... 24.59% (11.58)% (0.43)% 8.41% 19.82%
======== ======== ======== ======= =======
RATIOS TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .................. $261,777 $162,938 $121,499 $89,164 $92,111
Ratio of net investment income
to average net assets ............................... 2.09% 1.75% 1.65% 2.85% 1.32%
Ratio of operating expenses
to average net assets ............................... 1.49%(a) 1.50% 1.55% 1.66%(a) 1.60%
Portfolio turnover rate ............................... 27% 12% 41% 33% 39%
- ---------------------
+ Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the period
including reinvestment of dividends.
(a) The Fund incurred interest expense during the years ended September 30, 2003
and 2000. If interest expense had not been incurred, the ratio of operating
expenses to average net assets would have been 1.49% and 1.61%,
respectively.
See accompanying notes to financial statements.
14
THE GABELLI EQUITY INCOME FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
The Gabelli Equity Income Fund
We have audited the accompanying statements of assets and liabilities, including
the portfolio of investments, of The Gabelli Equity Income Fund (the "Fund"), a
series of the Gabelli Equity Series Funds, Inc., as of September 30, 2003 and
the related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the five years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of September 30, 2003 by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Gabelli Equity Income Fund at September 30, 2003, 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 the financial highlights for each of the five
years in the period then ended, in conformity with accounting principles
generally accepted in the United States.
/S/ ERNST & YOUNG LLP
New York, New York
November 7, 2003
- --------------------------------------------------------------------------------
2003 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the fiscal year ended September 30, 2003, the Fund paid to shareholders
ordinary income dividends (comprised of net investment income totaling $0.250
per share). For the fiscal year ended September 30, 2003, 100% of the
ordinary income dividend qualifies for the dividend received deduction
available to corporations. An estimate of qualified dividend income of
$4,932,398 was received by the Fund through September 30, 2003 that qualifies
for a reduced tax rate pursuant to the Jobs and Growth Tax Relief
Reconciliation Act of 2003.
U.S. GOVERNMENT INCOME:
The percentage of the ordinary income dividend paid by the Fund during fiscal
year 2003 which was derived from U.S. Treasury securities was 1.64%. Such
income is exempt from state and local tax in all states. However, many
states, including New York and California, allow a tax exemption for a
portion of the income earned only if a mutual fund has invested at least 50%
of its assets at the end of each quarter of the Fund's fiscal year in U.S.
Government securities. The Gabelli Equity Income Fund did not meet this
strict requirement in 2003. Due to the diversity in state and local tax law,
it is recommended that you consult your personal tax advisor as to the
applicability of the information provided to your specific situation.
- --------------------------------------------------------------------------------
15
THE GABELLI EQUITY INCOME FUND
ADDITIONAL FUND INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Directors. Information pertaining to the Directors and officers
of the Fund is set forth below. The Fund's Statement of Additional Information
includes additional information about The Gabelli Equity Income Fund's Directors
and is available, without charge, upon request, by calling 1-800-GABELLI
(1-800-422-3554) or by writing to The Gabelli Equity Income Fund at One
Corporate Center, Rye, NY 10580-1422.
TERM OF NUMBER OF
NAME, POSITION(S) OFFICE AND FUNDS IN FUND
ADDRESS 1 LENGTH OF COMPLEX OVERSEEN PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
AND AGE TIME SERVED 2 BY DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 3
- ----------------- ------------- ---------------- ----------------------- -------------------
INTERESTED DIRECTORS 4:
MARIO J. GABELLI Since 1991 23 Chairman of the Board and Chief Executive Director of Morgan Group
Director, President and Officer of Gabelli Asset Management Inc. and Holdings, Inc. (transportation
Chief Investment Officer Chief Investment Officer of Gabelli Funds, services); Vice Chairman of
Age: 61 LLC and GAMCO Investors, Inc.; Vice Chairman Lynch Corporation (diversified
and Chief Executive Officer of Lynch Interactive manufacturing)
Corporation (multimedia and services)
JOHN D. GABELLI Since 1991 10 Senior Vice President of Gabelli & Company, --
Director Inc.; Director of Gabelli Advisers, Inc.
Age: 59
KARL OTTO POHL Since 1992 32 Member of the Shareholder Committee of Sal Director of Gabelli Asset
Director Oppenheim Jr. & Cie (private investment Management Inc. (investment
Age: 73 bank); Former President of the management); Chairman,
Deutsche Bundesbank and Chairman of its Incentive Capital and Incentive
Central Bank Council (1980-1991) Asset Management (Zurich);
Director at Sal Oppenheim
Jr. & Cie, Zurich
NON-INTERESTED DIRECTORS:
ANTHONY J. COLAVITA Since 1991 34 President and Attorney at Law in the law firm --
Director of Anthony J. Colavita, P.C.
Age: 67
VINCENT D. ENRIGHT Since 1991 12 Former Senior Vice President and Chief Financial --
Director Officer of KeySpan Energy Corporation
Age: 59
ROBERT J. MORRISSEY Since 1991 10 Partner in the law firm of Morrissey, Hawkins --
Director & Lynch
Age: 64
16
THE GABELLI EQUITY INCOME FUND
ADDITIONAL FUND INFORMATION (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
TERM OF NUMBER OF
NAME, POSITION(S) OFFICE AND FUNDS IN FUND
ADDRESS 1 LENGTH OF COMPLEX OVERSEEN PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
AND AGE TIME SERVED 2 BY DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 3
- ----------------- ------------- ---------------- ----------------------- -------------------
NON-INTERESTED DIRECTORS (CONTINUED):
ANTHONY R. PUSTORINO Since 1991 17 Certified Public Accountant; Professor --
Director Emeritus, Pace University
Age: 78
ANTHONIE C. VAN EKRIS Since 1991 19 Managing Director of BALMAC Director of Aurado
Director International, Inc. Exploration Inc.
Age: 69
SALVATORE J. ZIZZA Since 2001 10 Chairman, Hallmark Electrical Suppliers Corp.; Director of Hollis Eden
Director Former Executive Vice President of FMG Group Pharmaceuticals
Age: 57 (OTC), a healthcare provider; Former President
and Chief Executive Officer of the Lehigh
Group Inc., an interior construction company,
through 1997
OFFICERS:
BRUCE N. ALPERT Since 1991 -- Executive Vice President and Chief Operating --
President Officer of Gabelli Funds, LLC since 1988 and
Age: 51 an officer of all mutual funds advised by
Gabelli Funds, LLC and its affiliates.
Director and President of Gabelli Advisers, Inc.
GUS A. COUTSOUROS Since 2000 -- Vice President and Chief Financial Officer of Gabelli --
Vice President and Funds, LLC since 1998 and an officer of all mutual
Treasurer funds advised by Gabelli Funds, LLC and its affiliates
Age: 41
JAMES E. MCKEE Since 1995 -- Vice President, General Counsel and Secretary --
Secretary of Gabelli Asset Management Inc. since 1999
Age: 40 and GAMCO Investors, Inc. since 1993;
Secretary of all mutual funds advised by
Gabelli Advisers, Inc. and Gabelli Funds, LLC
- -----------------
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.
3 This column includes only directorships of companies required to report to
the SEC under the Securities and Exchange Act of 1934 (i.e. public
companies) or other investment companies registered under the 1940 Act.
4 "Interested person" of the Fund as defined in the Investment Company Act of
1940. Messrs. Gabelli, Gabelli and Pohl 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.
17
GABELLI FAMILY OF FUNDS
VALUE ________________________________________
GABELLI ASSET FUND
Seeks to invest primarily in a diversified portfolio of common stocks selling at
significant discounts to their private market value. The Fund's primary
objective is growth of capital. (CLASS AAA-NO-LOAD)
PORTFOLIO MANAGER: MARIO J. GABELLI, CFA
GABELLI BLUE CHIP VALUE FUND
Seeks long term growth of capital through investment primarily in the common
stocks of established companies which are temporarily out of favor. The fund's
objective is to identify a catalyst or sequence of events that will return the
company to a higher value.
(CLASS AAA-NO-LOAD) PORTFOLIO MANAGER: BARBARA MARCIN, CFA
GABELLI WESTWOOD EQUITY FUND
Seeks to invest primarily in the common stock of well-seasoned companies that
have recently reported positive earnings surprises and are trading below
Westwood's proprietary growth rate estimates. The Fund's primary objective is
capital appreciation.
(MULTICLASS) PORTFOLIO MANAGER: SUSAN M. BYRNE
FOCUSED VALUE ______________________________
GABELLI VALUE FUND
Seeks to invest in securities of companies believed to be undervalued. The
Fund's primary objective is long-term capital appreciation. (MULTICLASS)
PORTFOLIO MANAGER: MARIO J. GABELLI, CFA
SMALL CAP VALUE ____________________________
GABELLI SMALL CAP FUND
Seeks to invest primarily in common stock of smaller companies (market
capitalizations less than $1 billion) believed to have rapid revenue and
earnings growth potential. The Fund's primary objective is capital appreciation.
(CLASS AAA-NO-LOAD) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA
GABELLI WOODLAND SMALL CAP VALUE FUND
Seeks to invest primarily in the common stocks of smaller companies (market
capitalizations less than $1.5 billion) believed to be undervalued with
shareholder oriented management teams that are employing strategies to grow the
company's value. The Fund's primary objective is capital appreciation.
(MULTICLASS) PORTFOLIO MANAGER: ELIZABETH M. LILLY, CFA
GROWTH ______________________________________
GABELLI GROWTH FUND
Seeks to invest primarily in large cap stocks believed to have favorable, yet
undervalued, prospects for earnings growth. The Fund's primary objective is
capital appreciation. (CLASS AAA-NO-LOAD)
PORTFOLIO MANAGER: HOWARD F. WARD, CFA
GABELLI INTERNATIONAL GROWTH FUND
Seeks to invest in the equity securities of foreign issuers with long-term
capital appreciation potential. The Fund offers investors global
diversification. (MULTICLASS) PORTFOLIO MANAGER: CAESAR BRYAN
AGGRESSIVE GROWTH _________________________
GABELLI GLOBAL GROWTH FUND
Seeks capital appreciation through a disciplined investment program focusing on
the globalization and interactivity of the world's marketplace. The Fund invests
in companies at the forefront of accelerated growth. The Fund's primary
objective is capital appreciation. (MULTICLASS) TEAM MANAGED
MICRO-CAP ___________________________________
GABELLI WESTWOOD MIGHTY MITES(SM) FUND
Seeks to invest in micro-cap companies that have market capitalizations of $300
million or less. The Fund's primary objective is long-term capital appreciation.
(MULTICLASS) TEAM MANAGED
EQUITY INCOME _______________________________
GABELLI EQUITY INCOME FUND
Seeks to invest primarily in equity securities with above market average yields.
The Fund pays monthly dividends and seeks a high level of total return with an
emphasis on income. (CLASS AAA-NO-LOAD)
PORTFOLIO MANAGER: MARIO J. GABELLI, CFA
GABELLI WESTWOOD BALANCED FUND
Seeks to invest in a balanced and diversified portfolio of stocks and bonds. The
Fund's primary objective is both capital appreciation and current income.
(MULTICLASS) CO-PORTFOLIO MANAGERS: SUSAN M. BYRNE
MARK FREEMAN, CFA
GABELLI WESTWOOD REALTY FUND
Seeks to invest in securities that are primarily engaged in or related to the
real estate industry. The Fund's primary objective is long-term capital
appreciation. (MULTICLASS) PORTFOLIO MANAGER: SUSAN M. BYRNE
SPECIALTY EQUITY ____________________________
GABELLI GLOBAL CONVERTIBLE SECURITIES FUND
Seeks to invest principally in bonds and preferred stocks which are convertible
into common stock of foreign and domestic companies. The Fund's primary
objective is total return through a combination of current income and capital
appreciation. (MULTICLASS) TEAM MANAGED
GABELLI GLOBAL OPPORTUNITY FUND
Seeks to invest in common stock of companies which have rapid growth in revenues
and earnings and potential for above average capital appreciation or are
undervalued. The Fund's primary objective is capital appreciation.
(MULTICLASS) TEAM MANAGED
SECTOR ______________________________________
GABELLI GLOBAL TELECOMMUNICATIONS FUND
Seeks to invest in telecommunications companies throughout the world - targeting
undervalued companies with strong earnings and cash flow dynamics. The Fund's
primary objective is capital appreciation. (MULTICLASS) TEAM MANAGED
GABELLI GOLD FUND
Seeks to invest in a global portfolio of equity securities of gold mining and
related companies. The Fund's objective is long-term capital appreciation.
Investment in gold stocks is considered speculative and is affected by a variety
of world-wide economic, financial and political factors. (CLASS AAA-NO-LOAD)
PORTFOLIO MANAGER: CAESAR BRYAN
GABELLI UTILITIES FUND
Seeks to provide a high level of total return through a combination of capital
appreciation and current income. (CLASS AAA-NO-LOAD) TEAM MANAGED
MERGER AND ARBITRAGE _____________________
GABELLI ABC FUND
Seeks to invest in securities with attractive opportunities for appreciation or
investment income. The Fund's primary objective is total return in various
market conditions without excessive risk of capital loss.
(NO-LOAD) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA
CONTRARIAN_________________________________
Gabelli Mathers Fund
Seeks long-term capital appreciation in various market conditions without
excessive risk of capital loss. (CLASS AAA-NO-LOAD)
PORTFOLIO MANAGER: HENRY VAN DER EB, CFA
COMSTOCK CAPITAL VALUE FUND
Seeks capital appreciation and current income. The Fund may use either long or
short positions to achieve its objective.
(MULTICLASS) PORTFOLIO MANAGER: MARTIN WEINER, CFA
COMSTOCK STRATEGY FUND
The Fund emphasizes investments in debt securities, which maximize total return
in light of credit risk, interest rate risk, and the risk associated with the
length of maturity of the debt instrument. (MULTICLASS)
PORTFOLIO MANAGER: MARTIN WEINER, CFA
QUANTITATIVE_________________________________
NED DAVIS RESEARCH ASSET ALLOCATION FUND
Seeks to achieve returns greater then the weighted composite benchmark
consisting of 60% in the S&P 500 Index and 40% in the Lehman Long Term U.S.
Government Bond Index through a flexible asset allocation strategy. The Fund's
primary objective is capital appreciation.
(MULTICLASS) TEAM MANAGED
SMALL CAP GROWTH __________________________
GABELLI WESTWOOD SMALLCAP EQUITY FUND
Seeks to invest primarily in smaller capitalization equity securities - market
caps of $1.5 billion or less. The Fund's primary objective is long-term capital
appreciation. (MULTICLASS)
CO-PORTFOLIO MANAGERS: CHRISTOPHER J. MACDONALD, CFA
FIXED INCOME ________________________________
GABELLI WESTWOOD INTERMEDIATE BOND FUND
Seeks to invest in a diversified portfolio of bonds with various maturities. The
Fund's primary objective is total return.
(MULTICLASS) PORTFOLIO MANAGER: MARK FREEMAN, CFA
CASH MANAGEMENT-MONEY MARKET __________
GABELLI U.S. TREASURY MONEY MARKET FUND
Seeks to invest exclusively in short-term U.S. Treasury securities. The Fund's
primary objective is to provide high current income consistent with the
preservation of principal and liquidity. (NO-LOAD)
PORTFOLIO MANAGER: JUDITH A. RANERI
THE TREASURER'S FUND
Three money market portfolios designed to generate superior returns without
compromising portfolio safety. U.S. Treasury Money Market seeks to invest in
U.S. Treasury securities and repurchase agreements. Tax Exempt Money Market
seeks to invest in municipal securities. Domestic Prime Money Market seeks to
invest in prime quality, domestic money market instruments.
(NO-LOAD) PORTFOLIO MANAGER: JUDITH A. RANERI
THE GLOBAL FUNDS INVEST IN FOREIGN SECURITIES WHICH INVOLVE RISKS NOT ORDINARILY
ASSOCIATED WITH INVESTMENTS IN DOMESTIC ISSUES, INCLUDING CURRENCY FLUCTUATION,
ECONOMIC AND POLITICAL RISKS.
AN INVESTMENT IN THE ABOVE MONEY MARKET FUNDS IS NEITHER INSURED NOR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY GOVERNMENT AGENCY. ALTHOUGH
THE FUNDS SEEK TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT
IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUNDS.
TO RECEIVE A PROSPECTUS, CALL 800-GABELLI (422-3554). THE PROSPECTUS GIVES A
MORE COMPLETE DESCRIPTION OF THE FUND, INCLUDING FEES AND EXPENSES. READ THE
PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
Gabelli Equity Series Funds, Inc.
THE GABELLI EQUITY INCOME FUND
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
FAX: 914-921-5118
WEBSITE: WWW.GABELLI.COM
E-MAIL: INFO@GABELLI.COM
Net Asset Value available daily by calling
800-GABELLI after 6:00 P.M.
BOARD OF DIRECTORS
Mario J. Gabelli, CFA Karl Otto Pohl
CHAIRMAN AND CHIEF FORMER PRESIDENT
INVESTMENT OFFICER DEUTSCHE BUNDESBANK
GABELLI ASSET MANAGEMENT INC.
Anthony J. Colavita Anthony R. Pustorino
ATTORNEY-AT-LAW CERTIFIED PUBLIC ACCOUNTANT
ANTHONY J. COLAVITA, P.C. PROFESSOR EMERITUS
PACE UNIVERSITY
Vincent D. Enright Anthonie C. van Ekris
FORMER SENIOR VICE PRESIDENT MANAGING DIRECTOR
AND CHIEF FINANCIAL OFFICER BALMAC INTERNATIONAL, INC.
KEYSPAN ENERGY CORP.
John D. Gabelli Salvatore J. Zizza
SENIOR VICE PRESIDENT CHAIRMAN
GABELLI & COMPANY, INC. HALLMARK ELECTRICAL
SUPPLIES CORP.
Robert J. Morrissey
ATTORNEY-AT-LAW
MORRISSEY, HAWKINS & LYNCH
OFFICERS
Bruce N. Alpert Gus Coutsouros
PRESIDENT VICE PRESIDENT AND TREASURER
James E. McKee
SECRETARY
DISTRIBUTOR
Gabelli & Company, Inc.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT
State Street Bank and Trust Company
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of The
Gabelli Equity Income Fund. It is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
GAB444Q303SR
[GRAPHIC OMITTED]
PICTURE OF MARIO GABELLI
THE
GABELLI
EQUITY
INCOME
FUND
ANNUAL REPORT
SEPTEMBER 30, 2003
THE GABELLI WOODLAND SMALL CAP VALUE FUND
ANNUAL REPORT
SEPTEMBER 30, 2003
TO OUR SHAREHOLDERS,
In many of our Funds' June 30, 2003 shareholder reports, we noted a change
in the way we provide the portfolio manager's commentary to shareholders of our
Funds. Our shareholder reports have typically contained commentary on each
portfolio manager's assessment of the stock market, individual stocks and how
economic events affect their thinking in managing a specific Fund. We have
always provided details about performance and presented returns, both good and
bad, hopefully in a clear and concise fashion. These comments have been included
as part of each Fund's quarterly, semi-annual, and annual financial statements.
The Sarbanes-Oxley Act's new corporate governance regulations now require
a Fund's principal executive and financial officers to certify the entire
contents of the semi-annual and annual shareholder reports in a filing with the
Securities and Exchange Commission on Form N-CSR. This certification covers the
portfolio manager's commentary and subjective opinions if they are attached to
or a part of the financial statements.
Rather than ask our portfolio managers to eliminate their opinions and/or
restrict their commentary to historical facts only, we separated their
commentary from the financial statements and investment portfolio and sent it
separately. We will continue to mail the portfolio manager's commentary
separately from the investment portfolio to ensure that its content is complete
and unrestricted. Our Annual Reports will be mailed separately and include the
performance of the Fund with a description of the factors affecting the
performance during the past year, along with the financial statements and the
investment portfolio. Both the commentary and the financial statements,
including the portfolio of investments, are also available on our website at
www.gabelli.com/funds.
We trust that you understand that our approach is an unintended
consequence of the ever-increasing regulatory requirements affecting public
companies generally. We hope the specific certification requirements of these
new regulations will be modified as they relate to mutual funds, since
investment companies have different corporate structures and objectives than
other public companies.
Sincerely yours,
/S/ BRUCE N. ALPERT
Bruce N. Alpert
Chief Operating Officer
Gabelli Funds, LLC
October 17, 2003
PERFORMANCE DISCUSSION
The Gabelli Woodland Small Cap Value Fund (the "Fund") gained 5.69% during
the third quarter versus a gain of 9.08% for the Russell 2000 Index. From
December 31, 2002, which is the Fund's commencement of operations, through
September 30, 2003, the Fund is up 5.80% compared to a gain of 28.58% for the
Russell 2000 Index during the same period.
We previously talked about the current underlying performance drivers of
the Russell 2000 Index (non-earnings companies and micro-caps); this past
quarter still reflects the same underlying drivers. Investors are currently
flocking to micro-cap and non-earning companies in an effort to add beta and
keep up with the indices. A wide chasm of performance has developed in the
small-cap segment of the market between the largest and smallest companies as
well as between companies with positive earnings versus the companies with no
earnings. According to Steve DeSanctis of Prudential Financial, the stocks in
the fifth quintile (the smallest stocks) of the Russell 2000 Index were up 14.0%
in the September quarter and are up 48.0% year-to-date while those in the first
quintile (the largest small cap stocks) were only up 7.0% for the quarter and
21.0% year-to-date. To put this in further perspective, stocks with market caps
greater than $1 billion (the Fund's weighted-average market cap is $1.3 billion)
averaged a 5.6% return in the quarter and 18.3% year-to-date compared to stocks
with market caps less than $500 million, which rose 12.4% during the quarter and
38.0% year-to-date. If we excluded the stocks with market caps below $500
million from the Russell 2000 Index its return would have been 4.7% for the
quarter and 15.2% year-to-date.
DeSanctis performed a similar analysis on the performance of stocks with
positive earnings versus those with no earnings. The non-earners appreciated
14.0% during the quarter and 51.0% year-to-date compared to an increase of 8.1%
for the quarter and 24.4% year-to-date for stocks with positive earnings.
Another interesting data point is that stocks with prices less than $5 per
share increased 25.0% during the quarter and are up an astonishing 76.9%
year-to-date, while those with stock prices between $10 and $20 per share were
up 9.4% for the quarter and 29.2% year-to-date, and stocks with prices greater
than $20 per share only increased 6.5% during the quarter and 18.0%
year-to-date.
Our top three performing stocks this past quarter were Gaylord
Entertainment, CNS Inc. and Cytyc Corporation. Gaylord Entertainment rose 25% in
the quarter as the travel and lodging sector continued to recover. CNS, Inc. is
a recent portfolio addition and rose 30% during the quarter. The company is best
known for its Breathe Right nasal strips. Just last quarter Cytyc was one of the
weakest performers in the portfolio due to investor concern over a new entrant
into the Pap smear market and the potential impact on Cytyc's pricing and market
share. In the most recent quarter the stock rose 42% and the company
demonstrated its dominance as the market leader through increased share gains
with the laboratories.
Three of the weaker performers during the quarter included Danka Business
Systems, Insurance Auto Auctions, and Key Energy Services. Both Danka and
Insurance Auto Auctions are in the process of cumbersome Enterprise Resource
Planning (ERP) system implementations and have had some problems, delays, and
cost overruns that have disappointed investors and hampered earnings in the
short-run. Key Energy is an on-shore provider of oil and gas well services in
the United States. The company has a dominant 40% market share in the domestic
market and has been the industry consolidator for the past couple years.
2
During this last quarter, five positions were eliminated: Station Casinos,
Dillard's, ServiceMaster, Northwest Airlines and BMC Industries. Station Casinos
was a very successful investment that earned well over 100% for us in less than
one year. We sold our position because the stock price reached what we felt was
a fair value for the business. With Dillard's and ServiceMaster, we lost
confidence in management's ability to grow revenues and earnings and there were
no visible catalysts in the foreseeable future. Finally, Northwest Airlines and
BMC Industries were sold because both companies have the headwind of significant
debt burdens going against them combined with very tough industry conditions.
The Fund initiated several new positions: Park-Ohio Holdings, Jarden
Corp., TBC Corp., ValueVision Media, Journal Communications, La-Z Boy,
PepsiAmericas, Ionics, Stellent, American Axle & Manufacturing, and Payless
Shoesource.
INVESTMENT RESULTS (CLASS AAA SHARES)(A)
- -------------------------------------------------------------------------------
Calendar Quarter
----------------------------------------
1ST 2ND 3RD 4TH YEAR
--- --- --- --- ----
2003: Net Asset Value .... $9.20 $10.01 $10.58 -- --
Total Return ....... (8.0)%(b) 8.8% 5.7% -- --
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
RETURNS THROUGH SEPTEMBER 30, 2003 (A)
--------------------------------------
SINCE
QUARTER INCEPTION (B)
------- -------------
Gabelli Woodland Small Cap Value Fund Class AAA ...... 5.69% 5.80%
Russell 2000 Index ................................... 9.08% 28.58%
- -------------------------------------------------------------------------------
(a) Returns represent past performance and do not guarantee future results.
Performance for a short period of time does not purport to represent
long-term results. Total returns and average annual returns reflect changes
in share price and reinvestment of dividends and are net of expenses.
Investment return and the principal value of an investment will fluctuate.
When shares are redeemed, they may be worth more or less than their
original cost. The Russell 2000 Index is an unmanaged indicator of stock
market performance. Investing in small capitalization securities involves
special challenges because these securities may trade less frequently and
experience more abrupt price movements than large capitalization
securities.
(b) From commencement of investment operations on December 31, 2002.
- --------------------------------------------------------------------------------
WWW.GABELLI.COM
Please visit us on the Internet. Our homepage at www.gabelli.com contains
information about Gabelli Asset Management Inc., the Gabelli Mutual Funds, IRAs,
401(k)s, quarterly reports, closing prices and other current news. You can send
us e-mail at info@gabelli.com.
In our efforts to bring to shareholders more timely portfolio information,
Gabelli Funds' portfolio managers regularly participate in chat sessions on our
website. Please visit www.gabelli.com for the specific dates and times of all of
our upcoming chats. All chat sessions start at 4:15 PM (Eastern Time). Please
arrive early, as participation is limited.
You may sign up for our e-mail alerts at www.gabelli.com and receive early
notice of chat sessions, closing mutual fund prices, news events and media
sightings.
3
THE GABELLI WOODLAND SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS -- 89.8%
AEROSPACE -- 1.9%
960 Alliant Techsystems
Inc.+ ..............$ 49,302 $ 46,128
---------- ----------
AGRICULTURE -- 0.6%
650 Delta & Pine Land Co. 15,463 14,956
---------- ----------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 2.1%
730 American Axle &
Manufacturing Holdings
Inc.+ .............. 23,736 21,593
1,200 TBC Corp.+ ........... 26,847 30,060
---------- ----------
50,583 51,653
---------- ----------
BUSINESS SERVICES -- 7.9%
3,280 Bowne & Co. Inc. ..... 39,161 49,036
3,760 Danka Business Systems
plc, ADR+ .......... 15,851 9,107
1,380 Hon Industries Inc. .. 41,297 51,005
3,210 The Brink's Co. ...... 48,180 55,726
1,180 Viad Corp. ........... 25,177 28,178
---------- ----------
169,666 193,052
---------- ----------
COMPUTER SOFTWARE AND SERVICES -- 4.0%
3,200 Intergraph Corp.+ .... 67,863 74,496
2,980 Stellent Inc.+ ....... 24,684 23,125
---------- ----------
92,547 97,621
---------- ----------
CONSUMER PRODUCTS -- 9.8%
990 Alberto-Culver Co.,
Cl. A .............. 48,911 56,816
2,880 Brunswick Corp. ...... 67,831 73,958
900 Church & Dwight
Co. Inc. ........... 29,042 31,491
2,220 CNS Inc. ............. 21,446 24,618
160 Jarden Corp.+ ........ 5,247 6,040
1,100 La-Z-Boy Inc. ........ 23,461 24,420
1,350 ValueVision Media Inc.,
Cl. A+ ............. 21,135 21,479
---------- ----------
217,073 238,822
---------- ----------
CONSUMER SERVICES -- 4.0%
2,260 Dollar Thrifty Automotive
Group Inc.+ ........ 41,052 51,347
4,060 Insurance Auto
Auctions Inc.+ ..... 53,014 45,675
---------- ----------
94,066 97,022
---------- ----------
DIVERSIFIED INDUSTRIAL -- 11.4%
1,470 Albany International Corp.,
Cl. A ............. 36,652 45,335
5,440 Apogee Enterprises
Inc. ............... 56,732 56,141
1,420 Griffon Corp.+ ....... 21,370 25,503
2,700 Material Sciences
Corp.+ ............. 27,399 27,594
170 Park-Ohio Holdings
Corp.+ ............. 893 1,387
1,630 Pentair Inc. ......... 63,543 64,988
2,320 Texas Industries Inc. 49,782 57,072
---------- ----------
256,371 278,020
---------- ----------
MARKET
SHARES COST VALUE
------ ---- ------
ENERGY AND UTILITIES -- 5.2%
3,430 ALLETE Inc. ..........$ 84,103 $ 93,913
3,380 Key Energy Services
Inc.+ .............. 34,676 32,617
---------- ----------
118,779 126,530
---------- ----------
ENTERTAINMENT -- 3.0%
1,710 Hasbro Inc. .......... 29,985 31,943
4,150 Topps Co. Inc. ....... 37,072 40,462
---------- ----------
67,057 72,405
---------- ----------
EQUIPMENT AND SUPPLIES -- 2.8%
1,890 Tennant Co. .......... 66,769 69,628
---------- ----------
FINANCIAL SERVICES -- 3.0%
1,520 TCF Financial Corp. .. 61,463 72,884
---------- ----------
FOOD AND BEVERAGE -- 8.5%
5,280 Del Monte Foods Co.+ . 46,126 45,989
620 IHOP Corp. ........... 18,648 20,367
1,180 Ionics Inc.+ ......... 30,944 28,863
1,740 PepsiAmericas Inc. ... 25,027 25,212
2,900 Triarc Companies Inc. 23,906 29,203
5,720 Triarc Companies Inc.,
Cl. B .............. 56,300 59,488
---------- ----------
200,951 209,122
---------- ----------
HEALTH CARE -- 8.6%
2,700 Apogent Technologies
Inc.+ .............. 51,143 56,322
1,220 Apria Healthcare
Group Inc.+ ........ 29,827 33,403
3,090 Cytyc Corp.+ ......... 34,847 46,474
1,380 Laboratory Corporation of
America Holdings+ .. 41,323 39,606
4,290 Orthodontic Centers of
America Inc.+ ...... 33,773 33,805
---------- ----------
190,913 209,610
---------- ----------
HOTELS AND GAMING -- 3.1%
3,100 Gaylord Entertainment
Co.+ ............... 67,516 76,105
---------- ----------
PUBLISHING -- 5.0%
6,990 Hollinger International
Inc. ............... 73,213 86,326
80 Journal Communications
Inc., Cl. A+ ....... 1,200 1,324
1,210 Scholastic Corp.+ .... 37,021 34,836
---------- ----------
111,434 122,486
---------- ----------
RETAIL -- 5.8%
2,950 Cole National Corp.+ . 34,086 36,757
2,980 Office Depot Inc.+ ... 41,584 41,869
1,790 Payless ShoeSource
Inc.+ .............. 25,481 23,163
1,302 The Sports Authority
Inc.+ .............. 31,970 40,961
---------- ----------
133,121 142,750
---------- ----------
See accompanying notes to financial statements.
4
THE GABELLI WOODLAND SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
SPECIALTY CHEMICALS -- 3.1%
1,350 Cytec Industries
Inc.+ ..............$ 46,319 $ 49,275
1,150 Fuller (H.B.) Co. .... 27,093 27,911
---------- ----------
73,412 77,186
---------- ----------
TOTAL COMMON STOCKS .. 2,036,486 2,195,980
---------- ----------
PRINCIPAL
AMOUNT
----------
U.S. GOVERNMENT OBLIGATIONS -- 7.4%
$182,000 U.S. Treasury Bills,
0.855% to 0.915%++,
10/09/03 to
12/26/03 ........... 181,821 181,824
---------- ----------
TOTAL
INVESTMENTS --
97.2% ..............$2,218,307 2,377,804
==========
OTHER ASSETS AND LIABILITIES
(NET) -- 2.8% .................. 67,251
----------
NET ASSETS -- 100.0% ............. $2,445,055
==========
- ----------------
For Federal tax purposes:
Aggregate cost ................... $2,227,405
==========
Gross unrealized appreciation .... $ 192,053
Gross unrealized depreciation .... (41,654)
----------
Net unrealized appreciation ...... $ 150,399
==========
- ----------------
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR - American Depository Receipt.
See accompanying notes to financial statements.
5
THE GABELLI WOODLAND SMALL CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost $2,218,307) ..... $2,377,804
Cash ........................................ 12,869
Dividends receivable ........................ 644
Receivable from Advisor ..................... 72,035
Other assets ................................ 14,820
----------
TOTAL ASSETS ................................ 2,478,172
----------
LIABILITIES:
Payable for investments purchased ........... 7,231
Payable for distribution fees ............... 568
Payable for legal and audit fees ............ 15,051
Other accrued expenses ...................... 10,267
----------
TOTAL LIABILITIES ........................... 33,117
----------
NET ASSETS .................................. $2,445,055
==========
NET ASSETS CONSIST OF:
Capital stock, at par value ................. $ 231
Additional paid-in capital .................. 2,294,425
Accumulated net realized loss
on investments ............................ (9,098)
Net unrealized appreciation
on investments ............................ 159,497
----------
TOTAL NET ASSETS ............................ $2,445,055
==========
SHARES OF BENEFICIAL INTEREST ($0.001 PAR VALUE):
CLASS AAA:
Net Asset Value, offering and redemption price
per share (219,680 Shares outstanding) .... $10.58
======
CLASS A:
Net Asset Value, offering and redemption price
per share (315 Shares outstanding) ........ $10.57
======
Maximum sales charge ........................ 5.75%
======
Maximum offering price per share (NAV (DIVIDE)
0.9425, based on maximum sales charge of 5.75%
of the offering price at September 30, 2003) $11.21
======
CLASS B:
Net Asset Value, offering and redemption price
per share (10 Shares outstanding) ......... $10.59(a)
======
CLASS C:
Net Asset Value and offering price per share
(11,206 Shares outstanding) ............... $10.55(a)
======
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED SEPTEMBER 30, 2003*
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends ................................... $ 8,575
Interest .................................... 1,261
---------
TOTAL INVESTMENT INCOME ..................... 9,836
---------
EXPENSES:
Investment advisory fees .................... 9,547
Distribution fees ........................... 2,553
Amortization of offering expenses ........... 44,623
Custodian fees .............................. 28,000
Legal and audit fees ........................ 18,132
Registration fees ........................... 16,200
Shareholder services fees ................... 10,950
Shareholder communications expenses ......... 9,424
Directors' fees ............................. 50
Miscellaneous expenses ...................... 4,370
---------
TOTAL EXPENSES BEFORE FEES WAIVED AND
EXPENSES REIMBURSED BY MANAGER ............ 143,849
---------
FEES WAIVED AND EXPENSES REIMBURSED
BY MANAGER ................................ (124,599)
---------
TOTAL EXPENSES -- NET ....................... 19,250
---------
NET INVESTMENT LOSS ......................... (9,414)
---------
NET REALIZED AND UNREALIZED GAIN/ (LOSS)
ON INVESTMENTS
Net realized loss on investments ............ (586)
Net change in unrealized appreciation
on investments ............................ 159,497
---------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS ............................ 158,911
---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ........................... $ 149,497
=========
- ------------------
* For the period December 31, 2002 (commencement of operations) through
September 30, 2003.
(a) Redemption price varies based on length of time held.
See accompanying notes to financial statements.
6
THE GABELLI WOODLAND SMALL CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
PERIOD ENDED
SEPTEMBER 30, 2003*
-------------------
OPERATIONS:
Net investment loss ...................................... $ (9,414)
Net realized loss on investments ......................... (586)
Net change in unrealized appreciation on investments ..... 159,497
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..... 149,497
----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued
Class AAA .............................................. 2,835,643
Class A ................................................ 2,926
Class B ................................................ 100
Class C ................................................ 113,807
----------
2,952,476
----------
Cost of shares redeemed
Class AAA .............................................. (656,918)
----------
Net increase in net assets from capital share transactions 2,295,558
----------
NET INCREASE IN NET ASSETS ............................... 2,445,055
NET ASSETS:
Beginning of period ...................................... --
----------
End of period ............................................ $2,445,055
==========
- --------------------
*For the period December 31, 2002 (commencement of operations) through September
30, 2003.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION. The Gabelli Woodland Small Cap Value Fund (the "Fund") is a
series of Gabelli Equity Series Funds, Inc. (the "Corporation"), which was
organized on July 25, 1991 as a Maryland corporation. The Fund is a diversified,
open-end management investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), and one of three separately managed
portfolios (collectively, the "Portfolios") of the Corporation, each with four
separate classes of shares known as Class AAA, Class A, Class B and Class C. The
Fund's primary objective is capital appreciation. The Fund commenced investment
operations on December 31, 2002.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates. The following is a summary of significant accounting
policies followed by the Fund in the preparation of its financial statements.
7
THE GABELLI WOODLAND SMALL CAP VALUE FUND
NOTES TO 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. All other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest average of the bid and asked prices. If there were no asked prices quoted
on that day, then the security is valued at the closing bid price. Portfolio
securities traded on more than one national securities exchange or market are
valued according to the broadest and most representative market, as determined
by Gabelli Funds, LLC (the "Adviser"). Portfolio securities primarily traded on
foreign markets are generally valued at the preceding closing values of such
securities on their respective exchanges or if, after the close, market
conditions change significantly, certain foreign securities may be fair valued
pursuant to procedures established by the Board of Directors. Securities and
assets for which market quotations are not readily available are valued at their
fair value as determined in good faith under procedures established by and under
the general supervision of the Board of Directors. Short-term debt securities
with remaining maturities of 60 days or less are valued at amortized cost,
unless the Board of Directors determines such does not reflect the securities'
fair value, in which case these securities will be valued at their fair value as
determined by the Board of Directors. Debt instruments having a maturity greater
than 60 days are valued at the latest average of the bid and asked prices
obtained from a pricing service approved by the Board of Directors, or a dealer
maintaining an active market in those securities. Options are valued at the last
sale price on the exchange on which they are listed. If no sales of such options
have taken place that day, they will be valued at the mean between their closing
bid and asked prices.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
primary government securities dealers recognized by the Federal Reserve Board,
with member banks of the Federal Reserve System or with other brokers or dealers
that meet credit guidelines established by the Adviser and reviewed by the Board
of Directors. Under the terms of a typical repurchase agreement, the Fund takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
The Fund will always receive and maintain securities as collateral whose market
value, including accrued interest, will be at least equal to 100% of the dollar
amount invested by the Fund in each agreement. The Fund will make payment for
such securities only upon physical delivery or upon evidence of book entry
transfer of the collateral to the account of the custodian. To the extent that
any repurchase transaction exceeds one business day, the value of the collateral
is marked-to-market on a daily basis to maintain the adequacy of the collateral.
If the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited. At
September 30, 2003, there were no repurchase agreements.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for on the trade date with realized gain or loss on investments
determined by using the identified cost method. Interest income (including
amortization of premium and accretion of discount) is recorded as earned.
Dividend income is recorded on the ex-dividend date.
8
THE GABELLI WOODLAND SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
OFFERING COSTS. The Fund incurred offering costs of $59,443. At September 30,
2003, the remaining balance of prepaid offering costs was $14,820. The offering
costs are being amortized on a straight-line basis over twelve months starting
from the date of commencement of operations.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders are recorded on the ex-dividend date. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from accounting principles generally accepted in
the United States.
There were no distributions paid during the fiscal period ended September 30,
2003.
For the fiscal period ended September 30, 2003, reclassifications were made to
decrease accumulated net investment loss for $9,414 and increase accumulated net
realized loss on investments for $8,512, with an offsetting adjustment to
additional paid-in capital.
EXPENSES. Certain administrative expenses are common to, and allocated among,
the Portfolios. Such allocations are made on the basis of each Portfolio's
average net assets or other criteria directly affecting the expenses as
determined by the Adviser.
PROVISION FOR INCOME TAXES. The Fund intends to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended. As a result, a Federal income tax provision is not required. As of
September 30, 2003, the components of accumulated earnings/(losses) on a tax
basis were as follows:
Net unrealized appreciation ......... $150,399
--------
Total accumulated earnings ........ $150,399
========
Dividends and interest from non-U.S. sources received by the Fund are generally
subject to non-U.S. withholding taxes at rates ranging up to 30%. Such
withholding taxes may be reduced or eliminated under the terms of applicable
U.S. income tax treaties, and the Fund intends to undertake any procedural steps
required to claim the benefits of such treaties.
The difference between book and tax basis unrealized appreciation is primarily
due to deferral of losses from wash sales for tax purposes.
3. INVESTMENT ADVISORY AGREEMENT. The Fund has entered into an investment
advisory agreement (the "Advisory Agreement") with the Adviser which provides
that the Fund will pay the Adviser a fee, computed daily and paid monthly, at
the annual rate of 1.00% of the value of the Fund's average daily net assets. In
accordance with the Advisory Agreement, the Adviser provides a continuous
investment program for the Fund's portfolio, oversees the administration of all
aspects of the Fund's business and affairs and pays the compensation of all
Officers and Directors of the Fund who are its affiliates. The Adviser has
agreed to waive its fees and reimburse expenses of the Fund to the extent
necessary to maintain the annualized total operating expenses at 2.00%, 2.00%,
2.75% and 2.75% of average daily net assets for Class AAA, Class A, Class B and
Class C Shares, respectively. For the period ended September 30, 2003, the
Adviser reimbursed the Fund in the amount of $124,599. The Fund is obliged to
repay the Adviser for a period of two fiscal years following the fiscal year in
which the Adviser reimbursed the Fund only to the extent that the operating
expenses of the Fund fall below 2.00% of average daily net assets.
9
THE GABELLI WOODLAND SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
4. DISTRIBUTION PLAN. The Fund's Board of Directors has adopted a distribution
plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. For the period
ended September 30, 2003, the Class AAA shares incurred distribution costs
payable to Gabelli & Company, Inc., an affiliate of the Adviser, of $2,327, or
0.25% of average daily net assets, the annual limitation under the Plan. Such
payments are accrued daily and paid monthly.
For the period ended September 30, 2003, the Class A Shares incurred
distribution costs payable to Gabelli & Company, Inc., an affiliate of the
Adviser, of $4 or 0.25% of average daily net assets. Such payments are accrued
daily and paid monthly.
For the period ended September 30, 2003, the Class B Shares incurred
distribution costs payable to Gabelli & Company, Inc., an affiliate of
the Adviser, of $1 or 1.00% of average daily net assets. Such payments are
accrued daily and paid monthly.
For the period ended September 30, 2003, the Class C Shares incurred
distribution costs payable to Gabelli & Company, Inc., an affiliate of the
Adviser, of $221 or 1.00% of average daily net assets. Such payments are accrued
daily and paid monthly.
5. PORTFOLIO SECURITIES. Purchases and sales of securities for the period ended
September 30, 2003, other than short term securities, aggregated $2,512,389 and
$475,317, respectively.
6. TRANSACTIONS WITH AFFILIATES. During the fiscal year ended September 30,
2003, the Fund paid brokerage commissions of $37 to Gabelli & Company, Inc. and
its affiliates.
7. CAPITAL STOCK TRANSACTIONS. Transactions in shares of capital stock were as
follows:
PERIOD ENDED
SEPTEMBER 30, 2003
----------------------
SHARES AMOUNT
------ -------
CLASS AAA
Shares sold ........................ 283,812 $2,835,643
Shares redeemed .................... (64,132) (656,918)
------- ----------
Net increase in Class AAA shares ... 219,680 $2,178,725
======= ==========
CLASS A
Shares sold ........................ 315 $ 2,926
------- ----------
Net increase in Class A shares ..... 315 $ 2,926
======= ==========
CLASS B
Shares sold ........................ 10 $ 100
------- ----------
Net increase in Class B shares ..... 10 $ 100
======= ==========
CLASS C
Shares sold ........................ 11,206 $ 113,807
------- ----------
Net increase in Class C shares ..... 11,206 $ 113,807
======= ==========
10
THE GABELLI WOODLAND SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period:
OPERATING PERFORMANCE
---------------------------------------------------
NET
REALIZED
NET ASSET NET AND TOTAL NET NET ASSETS,
VALUE, INVESTMENT UNREALIZED FROM ASSET VALUE, END OF
PERIOD ENDED BEGINNING INCOME GAIN (LOSS) ON INVESTMENT END OF TOTAL PERIOD
SEPTEMBER 30 OF PERIOD(A) (LOSS)(C) INVESTMENTS OPERATIONS PERIOD RETURN+ IN (000'S)
- ------------ ----------- ---------- ------------ ------------- ------------ ------- -----------
CLASS AAA
2003 $10.00 $(0.07) $0.65 $0.58 $10.58 5.80% $2,323
CLASS A
2003 $10.00 $(0.07) $0.64 $0.57 $10.57 5.70% $ 3
CLASS B
2003 $10.00 $(0.12) $0.71 $0.59 $10.59 5.90% $ 0.1
CLASS C
2003 $10.00 $(0.11) $0.66 $0.55 $10.55 5.50% $ 118
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA
--------------------------------------------------------------
NET
INVESTMENT EXPENSES EXPENSES
INCOME (LOSS) NET OF BEFORE PORTFOLIO
PERIOD ENDED TO AVERAGE WAIVERS/ WAIVERS/ TURNOVER
SEPTEMBER 30 NET ASSETS(D) REIMBURSEMENTS(D) REIMBURSEMENTS(B)(D) RATE
- ------------ ------------- ----------------- -------------------- ---------
CLASS AAA
2003 (0.97)% 2.00% 15.05% 39%
CLASS A
2003 (0.97)% 2.00% 15.05% 39%
CLASS B
2003 (1.72)% 2.75% 15.80% 39%
CLASS C
2003 (1.72)% 2.75% 15.80% 39%
- --------------------------
+ Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the period
including reinvestment of dividends. Total return for the period of less
than one year is not annualized.
(a) As of December 31, 2002.
(b) During the period, certain fees were voluntarily reduced and/or reimbursed.
If such fee reductions and/or reimbursements had not occurred, the ratio
would have been as shown.
(c) Per share amounts have been calculated using the monthly average shares
outstanding method.
(d) Annualized.
See accompanying notes to financial statements.
11
THE GABELLI WOODLAND SMALL CAP VALUE FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
THE GABELLI WOODLAND SMALL CAP VALUE FUND
We have audited the accompanying statements of assets and liabilities, including
the portfolio of investments, of The Gabelli Woodland Small Cap Value Fund (the
"Fund"), a series of Gabelli Equity Series Funds, Inc., as of September 30,
2003, and the related statement of operations, the statement of changes in net
assets, and the financial highlights for the period December 31, 2002
(commencement of operations) to September 30, 2003. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of September 30, 2003, by correspondence
with the Fund's custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Gabelli Woodland Small Cap Value Fund at September 30, 2003, the results of its
operations, the changes in its net assets, and its financial highlights for the
period December 31, 2002 (commencement of operations) to September 30, 2003, in
conformity with accounting principles generally accepted in the United States.
/S/ ERNST & YOUNG LLP
New York, New York
November 7, 2003
12
THE GABELLI WOODLAND SMALL CAP VALUE FUND
ADDITIONAL FUND INFORMATION (UNAUDITED)
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The business and affairs of the Fund are managed under the direction of the
Fund's Board of Directors. Information pertaining to the Directors and officers
of the Fund is set forth below. The Fund's Statement of Additional Information
includes additional information about The Gabelli Woodland Small Cap Value
Fund's Directors and is available, without charge, upon request, by calling
800-GABELLI (800-422-3554) or by writing to The Gabelli Woodland Small Cap Value
Fund at One Corporate Center, Rye, NY 10580-1422.
TERM OF NUMBER OF
NAME, POSITION(S) OFFICE AND FUNDS IN FUND
ADDRESS 1 LENGTH OF COMPLEX OVERSEEN PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
AND AGE TIME SERVED 2 BY DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 3
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INTERESTED DIRECTORS 4:
MARIO J. GABELLI Since 1991 23 Chairman of the Board and Chief Executive Director of Morgan Group
Director, President and Officer of Gabelli Asset Management Inc. and Holdings, Inc. (transportation
Chief Investment Officer Chief Investment Officer of Gabelli Funds, services); Vice Chairman of
Age: 61 LLC and GAMCO Investors, Inc.; Vice Chairman Lynch Corporation (diversified
and Chief Executive Officer of Lynch Interactive manufacturing)
Corporation (multimedia and services)
JOHN D. GABELLI Since 1991 10 Senior Vice President of Gabelli & Company, --
Director Inc.; Director of Gabelli Advisers, Inc.
Age: 59
KARL OTTO POHL Since 1992 32 Member of the Shareholder Committee of Sal Director of Gabelli Asset
Director Oppenheim Jr. & Cie (private investment Management Inc. (investment
Age: 73 bank); Former President of the management); Chairman,
Deutsche Bundesbank and Chairman of its Incentive Capital and Incentive
Central Bank Council (1980-1991) Asset Management (Zurich);
Director at Sal Oppenheim
Jr. & Cie, Zurich
NON-INTERESTED DIRECTORS:
ANTHONY J. COLAVITA Since 1991 34 President and Attorney at Law in the law firm --
Director of Anthony J. Colavita, P.C.
Age: 67
VINCENT D. ENRIGHT Since 1991 12 Former Senior Vice President and Chief Financial --
Director Officer of KeySpan Energy Corporation
Age: 59
ROBERT J. MORRISSEY Since 1991 10 Partner in the law firm of Morrissey, Hawkins --
Director & Lynch
Age: 64
13
THE GABELLI WOODLAND SMALL CAP VALUE FUND
ADDITIONAL FUND INFORMATION (UNAUDITED) (CONTINUED)
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TERM OF NUMBER OF
NAME, POSITION(S) OFFICE AND FUNDS IN FUND
ADDRESS 1 LENGTH OF COMPLEX OVERSEEN PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
AND AGE TIME SERVED 2 BY DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 3
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NON-INTERESTED DIRECTORS (CONTINUED):
ANTHONY R. PUSTORINO Since 1991 17 Certified Public Accountant; Professor --
Director Emeritus, Pace University
Age: 78
ANTHONIE C. VAN EKRIS Since 1991 19 Managing Director of BALMAC Director of Aurado
Director International, Inc. Exploration Inc.
Age: 69
SALVATORE J. ZIZZA Since 2001 10 Chairman, Hallmark Electrical Supplies Corp.; Director of Hollis Eden
Director Former Executive Vice President of FMG Group Pharmaceuticals
Age: 57 (OTC), a healthcare provider; Former President
and Chief Executive Officer of the Lehigh
Group Inc., an interior construction company,
through 1997
OFFICERS:
BRUCE N. ALPERT Since 1991 -- Executive Vice President and Chief Operating --
President Officer of Gabelli Funds, LLC since 1988 and
Age: 51 an officer of all mutual funds advised by
Gabelli Funds, LLC and its affiliates.
Director and President of Gabelli Advisers, Inc.
GUS A. COUTSOUROS Since 2000 -- Vice President and Chief Financial Officer of Gabelli --
Vice President and Funds, LLC since 1998 and an officer of all mutual
Treasurer funds advised by Gabelli Funds, LLC and its affiliates
Age: 41
JAMES E. MCKEE Since 1995 -- Vice President, General Counsel and Secretary --
Secretary of Gabelli Asset Management Inc. since 1999
Age: 40 and GAMCO Investors, Inc. since 1993;
Secretary of all mutual funds advised by
Gabelli Advisers, Inc. and Gabelli Funds, LLC
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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. The Gabelli Woodland
Small Cap Value Fund is a series of Gabelli Equity Series Funds, Inc.,
which was organized on July 25, 1991. The Fund commenced investment
operations on December 31, 2002.
3 This column includes only directorships of companies required to report to
the SEC under the Securities and Exchange Act of 1934 (i.e. public
companies) or other investment companies registered under the 1940 Act.
4 "Interested person" of the Fund as defined in the Investment Company Act of
1940. Messrs. Gabelli, Gabelli and Pohl are each considered an "interested
person" because of their affiliation with Gabelli Funds, LLC which acts as
each Fund's investment adviser. Mario J. Gabelli and John D. Gabelli are
brothers.
14
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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, Gabelli Advisers, Inc. and Gabelli Fixed
Income, LLC, which are affiliated with Gabelli Asset Management Inc.
Gabelli Asset Management is a publicly-held company that has subsidiaries
that provide investment advisory or brokerage services for a variety of
clients.
WHAT KIND OF NON-PUBLIC INFORMATION DO WE COLLECT ABOUT YOU IF YOU BECOME A
GABELLI CUSTOMER?
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:
o 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.
o 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, and the deposits and withdrawals that you make. 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 web site, 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 WOODLAND SMALL CAP VALUE FUND
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
FAX: 914-921-5118
WEBSITE: WWW.GABELLI.COM
E-MAIL: INFO@GABELLI.COM
Net Asset Value available daily by calling
800-GABELLI after 6:00 P.M.
BOARD OF DIRECTORS
Mario J. Gabelli, CFA Karl Otto Pohl
CHAIRMAN AND CHIEF FORMER PRESIDENT
INVESTMENT OFFICER DEUTSCHE BUNDESBANK
GABELLI ASSET MANAGEMENT INC.
Anthony J. Colavita Anthony R. Pustorino
ATTORNEY-AT-LAW CERTIFIED PUBLIC ACCOUNTANT
ANTHONY J. COLAVITA, P.C. PROFESSOR EMERITUS
PACE UNIVERSITY
Vincent D. Enright Anthonie C. van Ekris
FORMER SENIOR VICE PRESIDENT MANAGING DIRECTOR
AND CHIEF FINANCIAL OFFICER BALMAC INTERNATIONAL, INC.
KEYSPAN ENERGY CORP.
John D. Gabelli Salvatore J. Zizza
SENIOR VICE PRESIDENT CHAIRMAN
GABELLI & COMPANY, INC. HALLMARK ELECTRICAL
SUPPLIES CORP.
Robert J. Morrissey
ATTORNEY-AT-LAW
MORRISSEY, HAWKINS & LYNCH
OFFICERS AND PORTFOLIO MANAGER
Elizabeth M. Lilly, CFA Bruce N. Alpert
PORTFOLIO MANAGER PRESIDENT
James E. McKee Gus Coutsouros
SECRETARY VICE PRESIDENT AND TREASURER
DISTRIBUTOR
Gabelli & Company, Inc.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT
State Street Bank and Trust Company
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
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This report is submitted for the general information of the shareholders of The
Gabelli Woodland Small Cap Value Fund. It is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
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GAB840Q303SR
[GRAPHIC OMITTED]
PICTURE OF MARIO GABELLI
THE
GABELLI
WOODLAND
SMALL CAP
VALUE
FUND
ANNUAL REPORT
SEPTEMBER 30, 2003
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of conduct 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.
(b) There have been no amendments, during the period covered by this
report, to a provision of the code of conduct 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 conduct description.
(c) The registrant has not granted any waivers, including an implicit
waiver, from a provision of the code of conduct 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.
(a) As of the end of the period covered by the report, the registrant's
board of directors has determined that Anthony R. Pustorino is
qualified to serve as an audit committee financial expert serving on
its audit committee and that he is "independent."
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. 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 Exchange Act
(17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 10. EXHIBITS.
(a)(1) Code of conduct, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 are attached hereto.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) Gabelli Equity Series Funds Inc.
By (Signature and Title)* /s/ Bruce N. Alpert
-----------------------------------------------------
Bruce N. Alpert, Principal Executive Officer &
Principal Financial Officer
Date 12/5/2003
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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 &
Principal Financial Officer
Date 12/5/2003
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* Print the name and title of each signing officer under his or her signature.