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
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Gabelli Equity Series Funds, Inc.
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(Exact name of registrant as specified in charter)
One Corporate Center
Rye, NY 10580-1422
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(Address of principal executive offices) (Zip code)
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center
Rye, NY 10580-1422
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(Name and address of agent for service)
Registrant's telephone number, including area code: 800-422-3554
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Date of fiscal year end: September 30
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Date of reporting period: September 30, 2004
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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 Report to Shareholders is attached herewith.
THE GABELLI SMALL CAP GROWTH FUND
ANNUAL REPORT (A)
SEPTEMBER 30, 2004
TO OUR SHAREHOLDERS,
During the fiscal year ended September 30, 2004, the Gabelli Small Cap
Growth Fund (the "Fund") rose 21.3%, while the Russell 2000 Index and the Value
Line Composite Index both rose by 18.8%. The Fund gained 5.7% year-to-date
through September 30th, outperforming the Russell 2000 Index for both of these
periods as well as all longer-term intervals shown in the comparative results
table below.
Enclosed is the investment portfolio and financial statements as of
September 30, 2004.
COMPARATIVE RESULTS
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH SEPTEMBER 30, 2004 (B)
- --------------------------------------------------------------------------------
SINCE
YEAR TO INCEPTION
QUARTER DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR (10/22/91)
---------------------------------------------------------------------------
GABELLI SMALL CAP GROWTH FUND
CLASS AAA ........................ (2.45)% 5.68% 21.34% 16.30% 11.98% 13.10% 15.08%
Russell 2000 Index ................. (2.86) 3.71 18.77 13.71 7.41 9.87 10.88
Value Line Composite Index ......... (3.37) 2.98 18.78 15.96 10.39 13.03 13.22
Class A ............................ (2.45) 5.72 21.39 16.31 11.99 13.11 15.08
(8.06)(c) (0.35)(c) 14.41(c) 14.03(c) 10.68(c) 12.44(c) 14.56(c)
Class B ............................ (2.65) 5.10 20.69 16.09 11.86 13.04 15.03
(7.52)(d) 0.10(d) 15.69(d) 15.34(d) 11.73(d) 13.04(d) 15.03(d)
Class C ............................ (2.61) 5.10 20.69 16.09 11.86 13.04 15.03
(3.58)(d) 4.10(d) 19.69(d) 16.09(d) 11.86(d) 13.04(d) 15.03(d)
<FN>
(a)The Fund's fiscal year ends September 30.
(b)Returns represent past performance and do not guarantee future results.
Total returns and average annual returns reflect changes in share price and
reinvestment of 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. Dividends are considered reinvested. Current
performance may be lower or higher than the performance data presented.
Visit www.gabelli.com for performance information as of the most recent
month-end. Investors should consider the investment objectives, risks and
charges and expenses of the Fund before investing. Investing in small
capitalization securities involves special challenges because these
securities may trade less frequently and experience more abrupt price
movements than large capitalization securities. The prospectus contains
more complete information about this and other matters and should be read
carefully before investing. Performance for periods less than one year is
not annualized. The Class AAA Shares' net asset values are used to
calculate performance for the periods prior to the issuance of Class A
Shares, Class B Shares and Class C Shares on December 31, 2003.The actual
performance for the Class A Shares, Class B Shares and Class C Shares would
have been lower due to the additional expenses associated with these
classes of shares.
(c)Includes the effect of the maximum 5.75% sales charge at the beginning of
the period.
(d)Includes the effect of the applicable contingent deferred sales charge at
the end of the period shown for Class B and Class C Shares, respectively.
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</FN>
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We have separated the portfolio manager's commentary from the financial
statements and investment portfolio due to new corporate governance
regulations stipulated by the Sarbanes-Oxley Act of 2002. We have done this to
ensure that the content of the portfolio manager's commentary is unrestricted.
The financial statements and investment portfolio are mailed separately from
the commentary. Both the commentary and the financial statements, including
the portfolio of investments, will be available on our website at
www.gabelli.com/funds.
- --------------------------------------------------------------------------------
PERFORMANCE DISCUSSION
During the fiscal year ended September 30, 2004, the Fund's Class
AAA Shares rose 21.3% and outperformed the Russell 2000 Index, which rose 18.8%
over the same twelve-month period. Small cap stocks, as measured by the Russell
2000 Index, continued to materially outperform large cap stocks, as measured by
the Standard & Poor's ("S&P") 500 Index, which rose 13.9% over the past twelve
months. This occurred despite the fact that small cap stocks have traditionally
lagged other capitalization sectors during periods when liquidity was being
drained from the financial system (Federal Reserve tightening).
Diversified industrial manufacturers Park-Ohio and Franklin Electric and
Russian telecom operator Vimpel-Communications were among the Fund's larger
holdings that performed exceptionally well during the past twelve months (up
over 30%). Manufactured housing (mobile home) stocks such as Champion
Enterprises, Fleetwood and Cavco also substantially contributed to the Fund's
performance during the fiscal year. Gaming-related stocks (Wynn Resorts, Penn
National Gaming, Pinnacle Entertainment and Boyd Gaming) enjoyed solid gains
during the past year. As is usually the case, our biggest laggards come from a
diverse group of industries including broadcasting (Young Broadcasting), waste
services (Allied Waste), medical device components (Wilson Greatbatch) and
automation systems (Unova). Publishers Media General and Pulitzer were also
among our portfolio disappointments.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI SMALL CAP GROWTH FUND CLASS AAA,
THE RUSSELL 2000 INDEX AND THE S&P 500 INDEX
[GRAPHIC OMITTED]
PLOT POINTS FOLLOW:
Gabelli Small Cap
Growth Fund
(Class AAA) Russell 2000 Index S&P 500 Index
----------------- ------------------ -------------
10/22/91 10,000 10,000 10,000
9/30/92 13,186 10,854 11,174
9/30/93 17,228 14,456 12,623
9/30/94 17,999 14,835 13,088
9/30/95 21,504 18,307 16,976
9/30/96 23,871 20,710 20,426
9/30/97 33,950 27,584 28,684
9/30/98 29,356 22,338 31,288
9/30/99 35,005 26,597 39,983
9/30/00 42,356 32,818 45,289
9/30/01 39,192 25,858 33,238
9/30/02 39,736 23,453 26,434
9/30/03 50,775 32,013 32,876
9/30/04 61,641 38,022 37,433
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Average Annual Total Return*
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1 Year 5 Year 10 Year Life of Fund
- --------------------------------------------------------------------------------
Class AAA 21.34% 11.98% 13.10% 15.09%
- --------------------------------------------------------------------------------
* Past performance is not predictive of future results. The performance tables
and graph do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of fund shares.
2
THE GABELLI SMALL CAP GROWTH FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
For the Six Month Period from April 1, 2004 through September 30, 2004
EXPENSE TABLE
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We believe it is important for you to understand the impact of fees and expenses
regarding your investment. All mutual funds have operating expenses. As a
shareholder of the Fund, you incur ongoing costs, which include costs for
portfolio management, administrative services, and shareholder reports (like
this one), among others. Operating expenses, which are deducted from a fund's
gross income, directly reduce the investment return of the Fund. When a fund's
expenses are expressed as a percentage of its average net assets, this figure is
known as the expense ratio. The following examples are intended to help you
understand the ongoing fees (in dollars) of investing in your Fund and to
compare these costs with those of other mutual funds. The examples are based on
an investment of $1,000 made at the beginning of the period shown and held for
the entire period.
The Expense Table below illustrates your Fund's costs in two ways:
ACTUAL FUND RETURN: This section helps you to estimate the actual expenses that
you paid over the period after any fee waivers and expense reimbursements. The
"Ending Account Value" shown is derived from the Fund's actual return, and the
"Expenses Paid During Period" shows the dollar amount that would have been paid
by an investor who started with $1,000 in the Fund. You may use this
information, together with the amount you invested, to estimate the expenses
that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your Fund under the heading "Expenses Paid During Period."
HYPOTHETICAL 5% RETURN: This section is intended to help you compare your Fund's
costs with those of other mutual funds. It assumes that the Fund had a return of
5% before expenses during the period shown, but that the expense ratio is
unchanged. In this case -- because the return used is not the Fund's actual
return -- the results do not apply to your investment. This example is useful in
making comparisons because the Securities and Exchange Commission requires all
mutual funds to calculate expenses based on a 5% return. You can assess your
Fund's costs by comparing this hypothetical example with the hypothetical
examples that appear in shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight and help
you compare your ongoing costs only and do not reflect any transactional costs
such as sales charges (loads), and redemption fees, which are described in the
Prospectus. If these costs were applied to your account, your costs would be
higher. The "Annualized Expense Ratio" represents the actual expenses for the
period and may be different from the expense ratio in the Financial Highlights
which is for the year ended September 30, 2004.
Beginning Ending Annualized Expenses
Account Value Account Value Expense Paid During
4/1/04 9/30/04 Ratio Period*
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SMALL CAP GROWTH FUND
- --------------------------------------------------------------------------------
Actual Fund Return
Class AAA $1,000.00 $1,004.70 1.41% $7.07
Class A $1,000.00 $1,004.70 1.41% $7.07
Class B $1,000.00 $1,000.80 2.16% $10.80
Class C $1,000.00 $1,000.80 2.16% $10.80
HYPOTHETICAL 5% RETURN
Class AAA $1,000.00 $1,017.95 1.41% $7.11
Class A $1,000.00 $1,017.95 1.41% $7.11
Class B $1,000.00 $1,014.20 2.16% $10.88
Class C $1,000.00 $1,014.20 2.16% $10.88
* Expenses are equal to the Fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by the number of days in the
most recent fiscal half-year, then divided by 366.
3
SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED)
The SEC adopted a requirement that all Funds present their categories of
portfolio holdings in a table, chart or graph format in their annual and
semi-annual shareholder reports, whether or not a schedule of investments is
utilized. The following table which presents portfolio holdings as a percent of
total net assets is provided in compliance with such requirement.
THE GABELLI SMALL CAP GROWTH FUND
Equipment and Supplies ...................................... 12.6%
Diversified Industrial ...................................... 9.0%
Health Care ................................................. 7.1%
Specialty Chemicals ......................................... 5.5%
Energy and Utilities ........................................ 5.3%
Hotels and Gaming ........................................... 5.0%
Publishing .................................................. 4.9%
Food and Beverage ........................................... 4.3%
Automotive: Parts and Accessories ........................... 3.9%
Aviation: Parts and Services ................................ 3.9%
Broadcasting ................................................ 3.9%
Financial Services .......................................... 3.7%
Business Services ........................................... 3.5%
Consumer Products ........................................... 3.4%
Retail ...................................................... 3.1%
Manufactured Housing and
Recreational Vehicles .................................... 2.4%
Cable ....................................................... 2.2%
Entertainment ............................................... 2.2%
Communications Equipment .................................... 2.0%
Wireless Communications ..................................... 2.0%
Computer Software and Services .............................. 1.4%
Environmental Services ...................................... 1.3%
Consumer Services ........................................... 1.2%
Real Estate ................................................. 1.2%
Electronics ................................................. 1.1%
Telecommunications .......................................... 1.0%
Transportation .............................................. 0.7%
Metals and Mining ........................................... 0.5%
Closed-End Funds ............................................ 0.4%
Paper and Forest Products ................................... 0.4%
Satellite ................................................... 0.3%
Aerospace ................................................... 0.2%
Automotive .................................................. 0.2%
Home Furnishings ............................................ 0.2%
Building and Construction ................................... 0.1%
Other Assets and Liabilities - Net .......................... (0.1)%
------
100.0%
======
The Fund files a complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q, the first of which
will be filed for the quarter ending December 31, 2004.Shareholders may obtain
this information at www.gabelli.com or by calling the Fund at
800-GABELLI(800-422-3554). The Fund's Form N-Q will be available on the SEC's
website at www.sec.gov and may also be reviewed and copied at the Commission's
Public Reference Room in Washington, DC. Information on the operation of the
Public Reference Room may be obtained by calling 1-800-SEC-0330.
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A description of the Fund's proxy voting policies and procedures and
how the Fund voted proxies relating to portfolio securities during the
most recent 12-month period ended June 30, 2004 are available without
charge (i) upon request, by calling 800-GABELLI (800-422-3554); (ii)
by writing to The Gabelli Funds at One Corporate Center, Rye, NY
10580-1422; and (iii) on the Securities and Exchange Commission's
website at www.sec.gov.
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4
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS -- SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS -- 97.9%
AEROSPACE -- 0.2%
50,000 Herley Industries Inc.+ ...... $ 990,343 $ 934,500
20,000 Titan Corp.+ ................. 344,904 279,400
------------ ------------
1,335,247 1,213,900
------------ ------------
AGRICULTURE -- 0.0%
1,200 Cadiz Inc.+ .................. 4,500 14,400
------------ ------------
AUTOMOTIVE -- 0.2%
69,400 Adesa Inc.+ .................. 1,209,190 1,140,242
3,000 Oshkosh Truck Corp. .......... 89,796 171,180
------------ ------------
1,298,986 1,311,422
------------ ------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 3.9%
3,816 Aftermarket Technology Corp.+ 47,013 48,005
78,000 BorgWarner Inc. .............. 1,609,455 3,376,620
485 Exide Technologies+ .......... 3,751 7,687
40,000 Federal-Mogul Corp.+ ......... 79,500 7,200
200,000 Midas Inc.+ .................. 2,538,716 3,240,000
220,000 Modine Manufacturing Co. ..... 5,253,133 6,624,200
7,875 Monro Muffler Brake Inc.+ .... 52,860 172,069
7,000 Pep Boys - Manny, Moe & Jack.. 83,964 98,000
3,000 Puradyn Filter
Technologies Inc.+ ......... 7,205 3,330
167,900 Raytech Corp.+ ............... 520,096 303,899
195,000 Scheib (Earl) Inc.+ .......... 1,314,528 624,000
175,000 Standard Motor Products Inc. . 2,624,107 2,644,250
29,000 Strattec Security Corp.+ ..... 1,100,557 1,805,540
6,000 Superior Industries
International Inc. ......... 167,156 179,700
270,000 Tenneco Automotive Inc.+ ..... 564,300 3,537,000
28,000 Thor Industries Inc. ......... 259,454 741,160
160,000 TransPro Inc.+ ............... 1,390,729 831,200
------------ ------------
17,616,524 24,243,860
------------ ------------
AVIATION: PARTS AND SERVICES -- 3.8%
25,000 AAR Corp.+ ................... 302,990 311,250
10,000 Astronics Corp.+ ............. 48,990 51,200
77,000 Aviall Inc.+ ................. 566,047 1,570,800
16,000 Barnes Group Inc. ............ 273,828 439,520
60,000 Curtiss-Wright Corp. ......... 856,451 3,433,800
34,200 Curtiss-Wright Corp., Cl. B .. 956,620 1,850,220
7,500 Ducommun Inc.+ ............... 80,125 167,625
16,000 EDO Corp. .................... 328,407 444,000
30,000 Embraer-Empresa Brasileira
de Aeronautica, SA, ADR .... 508,773 792,000
195,400 Fairchild Corp., Cl. A+ ...... 1,193,712 777,692
25,000 Gamesa Corporacion
Tecnologica, SA .............. 153,032 366,702
310,000 GenCorp Inc. ................. 2,892,672 4,200,500
430,000 Kaman Corp., Cl. A ........... 6,855,690 5,134,200
MARKET
SHARES COST VALUE
------ ---- ------
90,000 Moog Inc., Cl. A+ ............ $ 847,225 $ 3,267,000
8,000 Woodward Governor Co. ........ 347,309 539,920
------------ ------------
16,211,871 23,346,429
------------ ------------
BROADCASTING -- 3.7%
120,000 Acme Communications Inc.+ .... 968,947 714,000
24,100 Beasley Broadcast Group
Inc., Cl. A+ ............... 271,741 378,370
257,000 Crown Media Holdings Inc.,
Cl. A+ ..................... 1,887,214 2,145,950
3,333 CTN Media Group Inc.+ (b) .... 16,800 0
400,000 Granite Broadcasting Corp.+ .. 1,496,086 92,000
400,000 Gray Television Inc. ......... 4,147,023 4,760,000
33,300 Gray Television Inc., Cl. A .. 493,240 370,962
48,000 Hearst-Argyle Television Inc. 425,523 1,173,600
183,900 Liberty Corp. ................ 5,983,141 7,308,186
20,000 Nexstar Broadcasting Group
Inc., Cl. A+ ............... 216,125 170,400
200,000 Paxson Communications
Corp.+ ..................... 1,837,377 270,000
94,650 Salem Communications
Corp., Cl. A+ .............. 1,412,784 2,396,538
170,000 Sinclair Broadcast Group
Inc., Cl. A ................ 1,887,374 1,241,000
57,000 Spanish Broadcasting
System Inc., Cl. A+ ........ 508,514 560,880
110,000 Young Broadcasting Inc.,
Cl. A+ ..................... 1,812,595 1,195,700
------------ ------------
23,364,484 22,777,586
------------ ------------
BUILDING AND CONSTRUCTION -- 0.1%
12,000 Florida Rock Industries Inc. . 103,533 587,880
25,000 Huttig Building
Products Inc.+ ............. 90,165 226,250
1,500 Universal Forest
Products Inc. .............. 18,188 51,300
------------ ------------
211,886 865,430
------------ ------------
BUSINESS SERVICES -- 2.8%
5,000 BrandPartners Group Inc.+ .... 4,850 3,325
610,400 Career Blazers Inc.+ (b) ..... 236,019 107,125
6,000 Carlisle Holdings Ltd. ....... 30,250 38,160
1,000 CheckFree Corp.+ ............. 9,040 27,670
27,000 Donnelley (R.H.) Corp.+ ...... 366,555 1,332,720
200,000 Edgewater Technology Inc.+ ... 802,829 990,000
20 Gabriel Technologies Corp.+ .. 35,250 60
130,000 GP Strategies Corp.+ ......... 507,300 968,500
80,000 Industrial Distribution
Group Inc.+ ................ 224,062 782,400
60,000 Interactive Data Corp.+ ...... 534,171 1,129,200
13,000 Landauer Inc. ................ 234,859 610,090
5,000 MDC Partners Inc., Cl. A+ .... 15,450 63,400
103,000 Nashua Corp.+ ................ 939,467 1,138,150
See accompanying notes to financial statements.
5
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
BUSINESS SERVICES (CONTINUED)
60,000 National Processing Inc.+ .... $ 575,323 $ 1,591,200
100,000 Paxar Corp.+ ................. 1,199,175 2,268,000
2,000 Protection One Inc.+ ......... 3,720 540
81,300 Sohgo Security Services
Co. Ltd. ................... 1,033,411 1,064,428
52,000 Stamps.com Inc.+ ............. 285,667 691,600
3,000 StarTek Inc. ................. 55,967 94,080
53,000 The Brink's Co. .............. 1,092,906 1,599,010
100,000 Trans-Lux Corp. (a) .......... 821,193 643,000
140,000 UNOVA Inc.+ .................. 2,654,956 1,967,000
------------ ------------
11,662,420 17,109,658
------------ ------------
CABLE -- 2.2%
230,000 Adelphia Communications
Corp., Cl. A+ .............. 29,650 85,100
575,000 Cablevision Systems Corp.,
Cl. A+ ..................... 3,365,084 11,661,000
600 Liberty Media International
Inc., Cl. A+ ............... 20,333 20,017
52,000 Lin TV Corp., Cl. A+ ......... 1,166,825 1,012,960
4,000 Outdoor Channel
Holdings Inc.+ ............. 44,765 62,000
148,823 UnitedGlobalCom Inc., Cl. A+ . 1,141,414 1,111,708
------------ ------------
5,768,071 13,952,785
------------ ------------
CLOSED-END FUNDS -- 0.4%
60,000 Central Europe and Russia
Fund Inc. .................. 920,409 1,417,200
36,700 Germany Fund Inc. ............ 386,832 249,927
20,000 MVC Capital Inc.+ ............ 185,408 187,400
60,000 New Germany Fund Inc. ........ 699,559 452,400
11,000 Spain Fund Inc. .............. 103,029 124,300
------------ ------------
2,295,237 2,431,227
------------ ------------
COMMUNICATIONS EQUIPMENT -- 1.7%
30,000 Andrew Corp.+ ................ 183,720 367,200
130,000 Communications Systems Inc. .. 840,303 1,081,600
260,900 Sycamore Networks Inc.+ ...... 778,040 986,202
300,000 Thomas & Betts Corp.+ ........ 5,553,334 8,046,000
------------ ------------
7,355,397 10,481,002
------------ ------------
COMPUTER SOFTWARE AND SERVICES -- 1.4%
100,000 Ascential Software Corp.+ .... 1,202,565 1,347,000
50,000 Borland Software Corp.+ ...... 428,300 417,500
17,500 FalconStor Software Inc.+ .... 133,800 130,375
19,000 Global Sources Ltd.+ ......... 306,293 152,000
50,000 Jupitermedia Corp.+ .......... 435,800 890,000
200 Macromedia Inc.+ ............. 2,370 4,016
50,000 MarketWatch Inc.+ ............ 471,531 624,500
15,187 MKS Instruments Inc.+ ........ 284,328 232,665
210,000 OpenTV Corp.+ ................ 1,134,300 640,500
8,000 Phoenix Technologies Ltd.+ ... 55,158 39,920
550 SafeNet Inc.+ ................ 14,425 14,509
MARKET
SHARES COST VALUE
------ ---- ------
800,000 StorageNetworks Inc. .........
Escrow+ .................... $ 0 $ 24,000
350,000 Tyler Technologies Inc.+ ..... 1,343,893 3,094,000
120,000 VitalWorks Inc.+ ............. 583,918 447,600
190,000 Xanser Corp.+ ................ 667,708 465,500
------------ ------------
7,064,389 8,524,085
------------ ------------
CONSUMER PRODUCTS -- 3.4%
3,500 Action Performance
Companies Inc. ............. 16,187 35,455
27,000 Adams Golf Inc.+ ............. 71,200 29,700
5,250 Alberto-Culver Co. ........... 169,298 228,270
18,000 Ashworth Inc.+ ............... 77,969 147,600
33,500 Chofu Seisakusho Co. Ltd. .... 484,644 553,799
37,500 Church & Dwight Co. Inc. ..... 354,732 1,052,250
30,000 Coachmen Industries Inc. ..... 362,198 473,400
10,075 Del Laboratories Inc.+ ....... 320,140 332,475
44,000 Department 56 Inc.+ .......... 514,126 717,200
6,000 Elizabeth Arden Inc.+ ........ 82,125 126,360
2,000 Genlyte Group Inc.+ .......... 8,580 128,780
2,000 Harley-Davidson Inc. ......... 4,712 118,880
185,000 Hartmarx Corp.+ .............. 862,196 1,372,700
74,400 Jacuzzi Brands Inc.+ ......... 477,471 691,920
40,000 Levcor International Inc.+ ... 80,931 90,000
4,000 Madden (Steven) Ltd.+ ........ 30,540 70,600
225,000 Marine Products Corp. ........ 219,039 4,050,000
53,900 National Presto
Industries Inc. ............ 1,895,350 2,254,098
3,000 Nature's Sunshine
Products Inc. .............. 36,938 45,510
22,000 Rayovac Corp.+ ............... 288,366 579,700
80,000 Revlon Inc., Cl. A+ .......... 286,117 201,600
3,000 Scotts Co., Cl. A+ ........... 61,223 192,450
14,000 Stewart Enterprises Inc.,
Cl. A+ ..................... 65,467 97,300
87,425 Syratech Corp.+ .............. 17,426 23,168
300,000 TL Administration Corp.+ ..... 783,952 3,600
17,000 WD-40 Co. .................... 470,278 486,200
690,000 Weider Nutrition
International Inc.+ ........ 1,834,341 3,139,500
160,000 Wolverine World Wide Inc. .... 2,125,223 4,032,000
------------ ------------
12,000,769 21,274,515
------------ ------------
CONSUMER SERVICES -- 1.2%
30,000 Bowlin Travel Centers Inc.+ .. 22,611 54,750
5,000 Collectors Universe Inc.+ .... 17,324 72,900
95,000 IAC/InterActiveCorp+ ......... 1,015,587 2,091,900
16,000 Martha Stewart Living
Omnimedia Inc., Cl. A+ ..... 167,206 251,200
20,000 Response USA Inc.+ ........... 16,500 11
215,000 Rollins Inc. ................. 2,789,158 5,222,350
10,000 TiVo Inc.+ ................... 74,563 66,200
------------ ------------
4,102,949 7,759,311
------------ ------------
See accompanying notes to financial statements.
6
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
DIVERSIFIED INDUSTRIAL -- 8.9%
175,000 Acuity Brands Inc. ........... $ 2,351,391 $ 4,159,750
43,000 Amatsuji Steel Ball
Mfg. Co. Ltd. .............. 357,633 442,816
100,000 Ampco-Pittsburgh Corp. ....... 972,481 1,326,000
6,000 Anixter International Inc. ... 57,120 210,540
160,000 Baldor Electric Co. .......... 3,149,954 3,785,600
150,000 Crane Co. .................... 3,282,255 4,338,000
3,000 ESCO Technologies Inc.+ ...... 99,827 203,280
7,000 Gardner Denver Inc.+ ......... 120,221 192,990
160,100 Greif Inc., Cl. A ............ 3,139,843 6,748,215
1,000 Greif Inc., Cl. B ............ 29,800 42,000
26,000 Harbor Global Co. Ltd.+ ...... 63,215 260,000
5,000 Insteel Industries Inc.+ ..... 4,250 70,000
66,000 Katy Industries Inc.+ ........ 546,731 351,120
220,300 Lamson & Sessions Co.+ ....... 1,280,436 2,004,730
72,000 Lindsay Manufacturing Co. .... 727,700 1,931,760
197,000 MagneTek Inc.+ ............... 1,479,085 1,471,590
38,000 Matthews International Corp.,
Cl. A ...................... 884,314 1,287,440
275,000 Myers Industries Inc. ........ 2,505,876 3,011,250
70,500 Mykrolis Corp.+ .............. 798,586 709,935
610,400 Noel Group Inc.+ (b) ......... 55,045 117,685
80,000 Oil-Dri Corporation of America 810,055 1,218,400
15,000 Olin Corp. ................... 232,292 300,000
240,000 Park-Ohio Holdings Corp.+ .... 1,445,560 4,296,000
50,000 Precision Castparts Corp. .... 1,702,840 3,002,500
30,000 Roper Industries Inc. ........ 1,152,649 1,723,800
10,000 Sonoco Products Co. .......... 231,715 264,400
63,000 Standex International Corp. .. 1,253,307 1,543,500
20,000 Tech/Ops Sevcon Inc. ......... 136,228 118,800
296,000 Thomas Industries Inc. ....... 4,161,994 9,294,400
50,000 Tredegar Corp. ............... 671,722 910,000
8,000 WHX Corp.+ ................... 24,008 8,720
------------ ------------
33,728,133 55,345,221
------------ ------------
EDUCATIONAL SERVICES -- 0.0%
1,000 Career Education Corp.+ ...... 34,100 28,430
3,000 School Specialty Inc.+ ....... 71,820 118,230
------------ ------------
105,920 146,660
------------ ------------
ELECTRONICS -- 1.1%
100,000 California Micro Devices
Corp.+ ..................... 841,101 773,000
204,600 CTS Corp. .................... 2,145,753 2,577,960
22,000 Fargo Electronics+ ........... 132,606 213,180
34,000 KEMET Corp.+ ................. 397,014 275,060
23,000 Lowrance Electronics Inc. .... 61,591 563,960
80,000 Park Electrochemical Corp. ... 1,821,898 1,696,000
10,000 Trident Microsystems Inc.+ ... 119,857 100,700
20,000 Wilson Greatbatch
Technologies Inc.+ ........... 592,676 357,800
22,000 Zoran Corp.+ ................. 132,267 345,840
------------ ------------
6,244,763 6,903,500
------------ ------------
MARKET
SHARES COST VALUE
------ ---- ------
ENERGY AND UTILITIES -- 5.3%
10,000 AGL Resources Inc. ........... $ 166,125 $ 307,700
380,000 Aquila Inc.+ ................. 1,290,571 1,185,600
6,400 BIW Ltd. ..................... 94,562 119,936
95,000 Callon Petroleum Co.+ ........ 939,533 1,204,600
142,000 CH Energy Group Inc. ......... 5,982,836 6,503,600
10,000 Chesapeake Utilities Corp. ... 187,062 251,000
130,000 CMS Energy Corp.+ ............ 778,987 1,237,600
23,000 Connecticut Water
Service Inc. ............... 464,832 608,120
120,000 Duquesne Light Holdings Inc. . 1,663,452 2,155,200
150,000 El Paso Electric Co.+ ........ 1,983,209 2,410,500
66,000 Florida Public Utilities Co. . 784,438 1,131,900
44,399 Middlesex Water Co. .......... 768,686 795,630
10,000 Nicor Inc. ................... 221,003 367,000
15,000 Nordex AG+ ................... 32,726 11,737
2,000 PetroQuest Energy Inc.+ ...... 5,250 10,380
291,000 RPC Inc. ..................... 1,028,612 5,203,080
25,000 SEMCO Energy Inc. ............ 164,830 137,250
48,000 SJW Corp. .................... 1,557,739 1,584,960
48,300 Southern Union Co.+ .......... 646,551 990,150
112,000 Southwest Gas Corp. .......... 1,959,693 2,682,400
10,000 Tesoro Petroleum Corp.+ ...... 140,934 295,300
4,000 Toreador Resources Corp.+ .... 15,250 38,160
10,000 Vestas Wind Systems A/S+ ..... 89,988 144,786
7,000 W-H Energy Services Inc.+ .... 148,589 145,250
170,000 Westar Energy Inc. ........... 2,801,066 3,434,000
------------ ------------
23,916,524 32,955,839
------------ ------------
ENTERTAINMENT -- 2.2%
20,000 Canterbury Park
Holding Corp. .............. 215,807 316,000
200,000 Dover Motorsports Inc. ....... 1,098,503 858,000
78,000 Fisher Communications Inc.+ .. 4,537,195 3,744,000
151,000 GC Companies Inc.+ ........... 164,590 129,860
560,000 Gemstar-TV Guide
International Inc.+ .......... 3,263,728 3,164,000
16,000 International Speedway Corp.,
Cl. A ...................... 515,479 798,400
2,500 International Speedway Corp.,
Cl. B ...................... 45,000 125,000
10,000 Liberty Media Corp., Cl. A+ .. 87,067 87,200
10,000 Metromedia International
Group Inc.+ ................ 6,700 4,900
360,000 Six Flags Inc.+ .............. 1,823,603 1,958,400
133,900 Topps Co. Inc. ............... 1,056,131 1,309,542
70,000 World Wrestling
Entertainment Inc. ......... 837,190 855,400
40,000 WPT Enterprises Inc.+ ........ 314,988 400,000
------------ ------------
13,965,981 13,750,702
------------ ------------
See accompanying notes to financial statements.
7
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
ENVIRONMENTAL SERVICES -- 1.3%
240,000 Allied Waste Industries Inc.+ $ 2,348,086 $ 2,124,000
30,000 Catalytica Energy
Systems Inc.+ .............. 278,600 63,300
175,000 Republic Services Inc. ....... 2,490,315 5,208,000
76,000 Trojan Technologies Inc.+ .... 428,681 634,760
------------ ------------
5,545,682 8,030,060
------------ ------------
EQUIPMENT AND SUPPLIES -- 12.6%
217,000 AMETEK Inc. .................. 1,279,148 6,579,440
425,000 Baldwin Technology Co. Inc.,
Cl. A+ ..................... 1,353,684 1,190,000
105,000 Belden CDT Inc. .............. 1,915,011 2,289,000
12,000 C&D Technologies Inc. ........ 235,930 228,240
50,000 Capstone Turbine Corp.+ ...... 103,400 76,500
153,000 CIRCOR International Inc. .... 1,903,630 2,983,500
213,000 CLARCOR Inc. ................. 2,626,458 10,153,710
236,800 Core Molding
Technologies Inc.+ ......... 411,233 632,256
200,000 Crown Holdings Inc.+ ......... 807,766 2,062,000
60,000 Cuno Inc.+ ................... 1,049,568 3,465,000
3,000 Danaher Corp. ................ 51,159 153,840
67,000 Donaldson Co. Inc. ........... 773,078 1,902,130
450,000 Fedders Corp. ................ 2,048,076 1,840,500
190,000 Flowserve Corp.+ ............. 3,099,865 4,594,200
178,000 Franklin Electric Co. Inc. ... 1,444,274 7,048,800
40,000 General Magnaplate Corp.+ (b) 83,762 60,000
150,000 Gerber Scientific Inc.+ ...... 1,456,281 988,500
100,343 Gorman-Rupp Co. .............. 1,956,301 2,042,983
90,000 Graco Inc. ................... 965,753 3,015,000
42,000 GrafTech International Ltd.+ . 574,742 585,900
4,000 Hughes Supply Inc. ........... 28,473 120,280
60,000 IDEX Corp. ................... 556,738 2,037,600
20,000 Imagistics International Inc.+ 387,725 672,000
250,000 Interpump Group SpA .......... 981,867 1,301,000
3,000 Jarden Corp.+ ................ 12,770 109,470
10,000 K-Tron International Inc.+ ... 74,932 221,200
28,000 Littelfuse Inc.+ ............. 538,592 966,840
58,000 Lufkin Industries Inc. ....... 1,104,055 2,158,760
62,700 Maezawa Kyuso Industries
Co. Ltd. ................... 402,043 810,666
20,000 Met-Pro Corp. ................ 192,469 263,000
1,000 Middleby Corp. ............... 37,310 52,650
12,000 Mueller Industries Inc. ...... 309,156 515,400
4,500 Plantronics Inc. ............. 56,548 194,580
50,000 Robbins & Myers Inc. ......... 1,023,975 1,100,000
40,500 Sequa Corp., Cl. A+ .......... 1,502,140 2,114,505
80,000 Sequa Corp., Cl. B+ .......... 3,631,577 4,319,200
90,000 SL Industries Inc.+ .......... 1,047,851 990,000
2,000 Smith (A.O.) Corp. ........... 32,663 48,700
15,000 Smith (A.O.) Corp., Cl. A .... 336,569 365,250
MARKET
SHARES COST VALUE
------ ---- ------
5,000 Teleflex Inc. ................ $ 76,167 $ 212,500
48,000 Tennant Co. .................. 1,556,465 1,945,440
5,000 Valmont Industries Inc. ...... 40,625 104,350
7,875 Watsco Inc., Cl. B ........... 23,627 236,250
205,000 Watts Water Technologies
Inc., Cl. A ................ 3,522,935 5,504,250
15,000 Wolverine Tube Inc.+ ......... 150,915 173,250
------------ ------------
41,767,306 78,428,640
------------ ------------
FINANCIAL SERVICES -- 3.7%
11,000 Alleghany Corp.+ ............. 2,026,816 3,001,900
40,000 Argonaut Group Inc.+ ......... 867,813 746,800
66,000 Bankgesellschaft Berlin AG+ .. 1,280,794 164,764
135,300 BKF Capital Group Inc. ....... 2,463,405 3,964,290
370,000 CNA Surety Corp.+ ............ 4,080,505 3,922,000
4,000 Crazy Woman Creek
Bancorp Inc. ............... 51,340 75,000
98,169 Danielson Holding Corp.+ ..... 271,171 597,849
3,000 Federal Agricultural
Mortgage Corp., Cl. C+ ..... 24,000 66,570
22,000 First Republic Bank .......... 636,067 1,012,000
90,000 Flushing Financial Corp. ..... 1,299,892 1,710,900
62,000 Hibernia Corp., Cl. A ........ 827,787 1,637,420
29,600 J Net Enterprises Inc.+ ...... 31,002 78,440
1,500 LandAmerica Financial
Group Inc. ................. 18,262 68,250
1,000 Leucadia National Corp. ...... 24,354 56,650
109,000 Midland Co. .................. 833,351 2,981,150
1,500 NetBank Inc. ................. 6,000 15,015
32,000 Sterling Bancorp ............. 670,453 865,600
50,000 Wilmington Trust Corp. ....... 1,574,410 1,810,500
------------ ------------
16,987,422 22,775,098
------------ ------------
FOOD AND BEVERAGE -- 4.3%
26,000 Boston Beer Co. Inc., Cl. A+ . 384,207 655,200
24,000 Brown-Forman Corp., Cl. A .... 665,535 1,122,960
7,500 Cheesecake Factory Inc.+ ..... 37,036 325,500
24,000 Corn Products
International Inc. ......... 763,944 1,106,400
100,000 Del Monte Foods Co.+ ......... 997,536 1,049,000
85,000 Denny's Corp.+ ............... 132,580 229,500
25,000 Farmer Brothers Co. .......... 389,323 668,250
205,000 Flowers Foods Inc. ........... 2,522,839 5,299,250
500 Genesee Corp., Cl. A+ ........ 0 1,000
21,500 Genesee Corp., Cl. B+ ........ 32,823 43,000
701,500 Grupo Continental SA ......... 1,058,724 1,045,867
10,000 Hain Celestial Group Inc.+ ... 184,774 176,800
20,000 Interstate Bakeries Corp. .... 181,356 78,000
6,000 J & J Snack Foods Corp.+ ..... 100,375 257,280
212,000 Kikkoman Corp. ............... 1,388,604 1,867,731
26,000 MGP Ingredients Inc. ......... 166,063 257,920
33,000 Mondavi (Robert) Corp.,
Cl. A+ ..................... 1,048,679 1,292,610
See accompanying notes to financial statements.
8
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
FOOD AND BEVERAGE (CONTINUED)
5,000 Northland Cranberries Inc.,
Cl. A+ ..................... $ 4,200 $ 3,875
4,000 Omni Nutraceuticals Inc.+ .... 13,562 10
50,000 PepsiAmericas Inc. ........... 705,179 955,000
57,000 Ralcorp Holdings Inc.+ ....... 862,281 2,057,700
70,000 Smucker (J.M.) Co. ........... 1,627,033 3,108,700
100,000 The Steak n Shake Co.+ ....... 1,088,229 1,708,000
5,000 Todhunter International Inc.+ 51,750 60,800
37,726 Tootsie Roll Industries Inc. . 596,821 1,102,354
60,000 Triarc Companies Inc., Cl. A . 429,705 685,800
120,000 Triarc Companies Inc., Cl. B . 1,025,442 1,376,400
------------ ------------
16,458,600 26,534,907
------------ ------------
HEALTH CARE -- 7.1%
55,000 ArthroCare Corp.+ ............ 1,133,267 1,610,950
6,500 Bio-Rad Laboratories Inc.,
Cl. A+ ..................... 236,003 332,150
1,000 Biomet Inc. .................. 30,350 46,880
10,000 Biosite Inc.+ ................ 253,600 489,600
4,600 Bruker BioSciences Corp.+ .... 18,009 15,916
120,300 Chemed Corp. ................. 4,028,096 6,705,522
18,000 CNS Inc. ..................... 203,745 198,000
1,000 CONMED Corp.+ ................ 15,430 26,300
8,000 Corixa Corp.+ ................ 151,695 33,280
82,000 Del Global Technologies
Corp.+ ..................... 260,262 221,400
1,000 Digene Corp.+ ................ 8,000 25,960
100,000 Edwards Lifesciences Corp.+ .. 3,548,020 3,350,000
1,050 Enzo Biochem Inc.+ ........... 13,097 15,750
40,000 Exactech Inc.+ ............... 572,732 818,000
12,000 Fisher Scientific
International Inc.+ ........ 277,503 699,960
26,000 Henry Schein Inc.+ ........... 913,231 1,620,060
25,000 ICU Medical Inc.+ ............ 804,326 651,000
127,000 INAMED Corp.+ ................ 2,208,615 6,054,090
2,000 Integra LifeSciences
Holdings+ .................. 43,600 64,220
35,000 Inverness Medical
Innovations Inc.+ .......... 638,388 728,000
28,000 Invitrogen Corp.+ ............ 1,441,198 1,539,720
60,000 Lifecore Biomedical Inc.+ .... 411,697 420,000
15,000 Nabi Biopharmaceuticals+ ..... 105,625 200,700
1,300 Nobel Biocare Holding AG ..... 100,171 201,710
10,000 OCA Inc.+ .................... 75,721 47,400
30,000 Orthofix International NV+ ... 980,600 1,030,500
2,000 OrthoLogic Corp.+ ............ 6,750 14,080
35,000 Owens & Minor Inc. ........... 692,324 889,000
51,000 Penwest Pharmaceuticals Co.+ . 368,867 575,790
43,000 Priority Healthcare Corp.,
Cl. B+ ..................... 862,278 866,450
MARKET
SHARES COST VALUE
------ ---- ------
105,000 Regeneration Technologies
Inc.+ ...................... $ 1,047,404 $ 842,100
40,000 Schick Technologies Inc.+ .... 319,003 438,000
590,000 Snia SpA+ .................... 272,969 178,066
83,000 Sola International Inc.+ ..... 1,076,827 1,581,150
1,900,000 Sorin SpA+ ................... 6,471,014 5,380,364
2,500 Straumann Holding AG ......... 224,697 530,552
2,000 Stryker Corp. ................ 65,440 96,160
165,000 Sybron Dental
Specialties Inc.+ .......... 3,050,163 4,898,850
30,000 Thoratec Corp.+ .............. 388,553 288,600
72,000 Women First HealthCare Inc.+ . 91,845 216
1,000 Wright Medical Group Inc.+ ... 16,460 25,120
5,100 Young Innovations Inc. ....... 128,516 168,300
------------ ------------
33,556,091 43,919,866
------------ ------------
HOME FURNISHINGS -- 0.2%
15,000 Bassett Furniture
Industries Inc. ............ 262,461 283,200
4,000 Bed Bath & Beyond Inc.+ ...... 11,125 148,440
15,000 Foamex International Inc.+ ... 127,457 55,050
30,000 La-Z-Boy Inc. ................ 250,200 455,400
36,000 Oneida Ltd.+ ................. 376,432 56,160
------------ ------------
1,027,675 998,250
------------ ------------
HOTELS AND GAMING -- 5.0%
165,000 Aztar Corp.+ ................. 1,292,911 4,372,500
140,300 Boca Resorts Inc., Cl. A+ .... 1,850,748 2,605,371
12,000 Boyd Gaming Corp. ............ 90,225 337,800
115,000 Caesars Entertainment Inc.+ .. 1,070,485 1,920,500
48,500 Churchill Downs Inc. ......... 1,330,001 1,898,775
104,000 Dover Downs Gaming &
Entertainment Inc. ......... 1,038,939 1,070,160
150,000 Gaylord Entertainment Co.+ ... 4,244,031 4,650,000
5,000 Jury's Doyle Hotel Group plc . 27,762 65,516
60,000 Kerzner International Ltd.+ .. 1,415,009 2,638,200
375,000 La Quinta Corp.+ ............. 949,412 2,925,000
145,000 Lakes Entertainment Inc.+ .... 742,275 1,519,600
370,000 Magna Entertainment Corp.,
Cl. A+ ..................... 2,412,094 2,016,500
20,000 Marcus Corp. ................. 377,480 389,400
50,000 Penn National Gaming Inc.+ ... 236,302 2,020,000
90,000 Pinnacle Entertainment Inc.+ . 705,885 1,242,000
3,000 Station Casinos Inc. ......... 13,350 147,120
5,000 Trump Hotels & Casino
Resorts Inc.+ .............. 9,091 3,250
70,000 Wyndham International Inc.,
Cl. A+ ..................... 153,945 57,400
16,000 Wynn Resorts Ltd.+ ........... 231,002 827,040
20,000 Youbet.com Inc.+ ............. 51,494 55,200
------------ ------------
18,242,441 30,761,332
------------ ------------
See accompanying notes to financial statements.
9
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
MANUFACTURED HOUSING AND RECREATIONAL VEHICLES -- 2.4%
30,000 Cavco Industries Inc.+ ....... $ 1,163,917 $ 1,133,100
330,000 Champion Enterprises Inc.+ ... 3,441,777 3,395,700
2,500 Drew Industries Inc.+ ........ 94,558 89,625
205,000 Fleetwood Enterprises Inc.+ .. 2,634,462 3,111,900
75,000 Monaco Coach Corp. ........... 1,660,313 1,623,750
140,000 Skyline Corp. ................ 4,450,174 5,607,000
------------ ------------
13,445,201 14,961,075
------------ ------------
METALS AND MINING -- 0.5%
142,115 Kinross Gold Corp.+ .......... 984,488 963,540
10,000 Meridian Gold Inc.+ .......... 75,630 167,200
70,000 Placer Dome Inc. ............. 653,970 1,391,600
190,000 Royal Oak Mines Inc.+ ........ 322,487 2,660
26,148 Stillwater Mining Co.+ ....... 362,121 405,294
------------ ------------
2,398,696 2,930,294
------------ ------------
PAPER AND FOREST PRODUCTS -- 0.4%
40,000 Packaging Dynamics Corp. ..... 296,566 572,000
50,000 Pope & Talbot Inc. ........... 863,268 880,000
18,000 Schweitzer-Mauduit
International Inc. ......... 424,690 583,200
22,000 Wausau-Mosinee Paper Corp. ... 255,362 366,300
------------ ------------
1,839,886 2,401,500
------------ ------------
PUBLISHING -- 4.1%
307,237 Independent News & Media plc . 431,671 778,443
40,000 Journal Communications Inc.,
Cl. A ...................... 759,162 701,600
120,000 Journal Register Co.+ ........ 1,938,438 2,268,000
11,000 Lee Enterprises Inc. ......... 261,685 509,740
53,000 McClatchy Co., Cl. A ......... 1,581,315 3,753,990
68,000 Media General Inc., Cl. A .... 1,858,924 3,804,600
28,000 Meredith Corp. ............... 500,908 1,438,640
1,050,000 Penton Media Inc.+ ........... 951,840 173,250
400,000 PRIMEDIA Inc.+ ............... 1,290,396 940,000
130,000 Pulitzer Inc. ................ 4,366,943 6,422,000
215,000 Thomas Nelson Inc. ........... 2,192,528 4,203,250
4,000 Value Line Inc. .............. 162,772 148,000
12,000 Wiley (John) & Sons Inc.,
Cl. B ...................... 46,500 385,200
------------ ------------
16,343,082 25,526,713
------------ ------------
REAL ESTATE -- 1.2%
30,000 Catellus Development Corp. ... 466,892 795,300
162,600 Griffin Land & Nurseries Inc.+ 2,014,556 3,902,400
9,000 Gyrodyne Company of
America Inc.+ .............. 135,071 324,000
396 HomeFed Corp.+ ............... 10,969 16,929
20,000 Malan Realty Investors Inc.+ (b) 169,429 103,800
110,000 Morguard Corp. ............... 1,392,683 2,107,779
------------ ------------
4,189,600 7,250,208
------------ ------------
MARKET
SHARES COST VALUE
------ ---- ------
RETAIL -- 3.1%
27,000 Aaron Rents Inc. ............. $ 241,500 $ 587,520
146,250 Aaron Rents Inc., Cl. A ...... 524,217 2,907,450
35,000 Big 5 Sporting Goods Corp.+ .. 657,716 798,000
100,000 Burlington Coat Factory
Warehouse Corp. ............ 1,080,938 2,123,000
8,000 Casey's General Stores Inc. .. 124,503 148,720
45,000 Coldwater Creek Inc.+ ........ 225,969 939,150
80,000 CSK Auto Corp.+ .............. 1,331,224 1,065,600
2,000 Gander Mountain Co.+ ......... 44,220 40,030
175,000 Ingles Markets Inc., Cl. A ... 2,176,507 2,110,500
30,000 Movado Group Inc. ............ 420,497 510,000
130,000 Neiman Marcus Group Inc.,
Cl. B ...................... 4,106,529 6,922,500
1,500 The Sports Authority Inc.+ ... 9,198 34,800
40,000 Weis Markets Inc. ............ 1,174,744 1,355,200
------------ ------------
12,117,762 19,542,470
------------ ------------
SATELLITE -- 0.3%
38,000 Pegasus Communications
Corp., Cl. A+ .............. 427,374 285,000
100,000 Sirius Satellite Radio Inc.+ . 279,419 320,000
40,000 XM Satellite Radio
Holdings Inc., Cl. A+ ...... 370,830 1,240,800
------------ ------------
1,077,623 1,845,800
------------ ------------
SPECIALTY CHEMICALS -- 5.5%
35,000 Airgas Inc. .................. 211,400 842,450
55,000 Albemarle Corp. .............. 1,441,314 1,929,950
45,000 Arch Chemicals Inc. .......... 964,488 1,282,500
10,000 Cytec Industries Inc. ........ 278,296 489,500
8,000 Dionex Corp.+ ................ 240,000 437,600
149,600 Ferro Corp. .................. 3,398,534 3,262,776
130,000 Fuller (H.B.) Co. ............ 2,306,337 3,562,000
50,000 Great Lakes Chemical Corp. ... 1,247,733 1,280,000
435,000 Hercules Inc.+ ............... 4,216,424 6,198,750
1,500 IMC Global Inc.+ ............. 10,470 26,085
140,000 MacDermid Inc. ............... 2,361,630 4,054,400
170,000 Material Sciences Corp.+ ..... 1,589,043 2,293,300
130,000 Omnova Solutions Inc.+ ....... 810,622 783,900
50,000 Penford Corp. ................ 539,601 870,500
10,000 Quaker Chemical Corp. ........ 181,137 241,500
20,000 Schulman (A.) Inc. ........... 240,000 440,800
280,000 Sensient Technologies Corp. .. 5,652,884 6,059,200
------------ ------------
25,689,913 34,055,211
------------ ------------
TELECOMMUNICATIONS -- 1.0%
9,200 Atlantic Tele-Network Inc. ... 92,644 264,960
190,000 Cincinnati Bell Inc.+ ........ 475,442 663,100
85,000 Commonwealth Telephone
Enterprises Inc.+ .......... 1,950,492 3,701,750
6,795 Community Service
Communications Inc.+ ....... 0 26,501
See accompanying notes to financial statements.
10
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
46,950 D&E Communications Inc. ...... $ 605,207 $ 539,925
277 NTL Inc.+ .................... 8,407 17,193
25,000 Rogers Communications
Inc., Cl. B ................ 226,377 505,250
20,000 Shenandoah
Telecommunications Co. ..... 296,543 512,200
621 Telewest Global Inc.+ ........ 8,867 7,216
53,000 Winstar
Communications Inc.+ ....... 133 58
------------ ------------
3,664,112 6,238,153
------------ ------------
TRANSPORTATION -- 0.7%
130,000 GATX Corp. ................... 3,650,103 3,465,800
97,500 Grupo TMM SA, Cl. A, ADR+ .... 866,789 231,075
2,000 Irish Continental Group plc+ . 17,829 25,153
50,000 OMI Corp. .................... 313,120 801,000
5,100 Providence & Worcester
Railroad Co. ............... 42,979 56,202
------------ ------------
4,890,820 4,579,230
------------ ------------
WIRELESS COMMUNICATIONS -- 2.0%
6,000 Airgate Pcs Inc.+ ............ 137,880 117,600
50,000 Centennial Communications
Corp.+ ..................... 545,692 294,000
13 Microcell Telecommunications
Inc., Cl. B+ ............... 111 366
5,000 Nextel Communications Inc.,
Cl. A+ ..................... 35,338 119,200
72,000 Price Communications Corp.+ .. 905,273 1,098,000
43,700 Rogers Wireless
Communications Inc., Cl. B+ 574,257 1,372,617
55,000 Rural Cellular Corp., Cl. A+ . 374,090 378,950
12,000 Triton PCS Holdings Inc.,
Cl. A+ ..................... 93,020 30,720
5,000 UbiquiTel Inc.+ .............. 2,700 20,000
64,000 Vimpel-Communications,
ADR+ ....................... 1,651,615 6,963,200
80,000 Western Wireless Corp.,
Cl. A+ ..................... 279,042 2,056,800
------------ ------------
4,599,018 12,451,453
------------ ------------
TOTAL COMMON STOCKS .......... 412,094,981 607,637,792
------------ ------------
MARKET
SHARES COST VALUE
------ ---- ------
PREFERRED STOCKS -- 1.7%
BROADCASTING -- 0.2%
1,063 Granite Broadcasting Corp.,
12.750% Pfd.+ .............. $ 439,683 $ 435,830
100 Gray Television Inc.,
8.000% Cv. Pfd.,
Ser. C (b)(d) .............. 1,000,000 1,020,000
1,131 PTV Inc., 10.000% Pfd.,
Ser. A ..................... 0 5,909
------------ ------------
1,439,683 1,461,739
------------ ------------
BUSINESS SERVICES -- 0.3%
21,618 Interep National Radio Sales
Inc., 4.000% Cv. Pfd.,
Ser. A (b)(d) .............. 2,163,147 1,746,746
------------ ------------
COMMUNICATIONS EQUIPMENT -- 0.3%
13,000 Andrew Corp.,
7.750% Cv. Pfd., Ser. A .... 633,275 2,223,000
------------ ------------
DIVERSIFIED INDUSTRIAL -- 0.1%
WHX Corp.,
39,400 $3.75 Cv. Pfd., Ser. B+ .... 191,751 197,000
58,000 6.500% Cv. Pfd., Ser. A+ ... 463,067 284,200
------------ ------------
654,818 481,200
------------ ------------
PUBLISHING -- 0.8%
155,000 News Corp. Ltd., Pfd., ADR ... 912,485 4,856,150
------------ ------------
TOTAL PREFERRED STOCKS 5,803,408 10,768,835
------------ ------------
WARRANTS -- 0.1%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.0%
1,213 Exide Technologies,
expires 05/05/11+ .......... 2,247 3,616
------------ ------------
BUSINESS SERVICES -- 0.1%
250,000 GP Strategies Corp.,
expires 08/14/08+ (b) ...... 637,065 637,065
------------ ------------
COMPUTER SOFTWARE AND SERVICES -- 0.0%
430 Anacomp Inc., Cl. B,
expires 12/10/06+ .......... 0 34
------------ ------------
HEALTH CARE -- 0.0%
14,424 Del Global Technologies Corp.,
expires 03/28/08+ .......... 24,809 15,866
------------ ------------
TELECOMMUNICATIONS -- 0.0%
86 NTL Inc., expires 01/13/11+ .. 124 461
------------ ------------
See accompanying notes to financial statements.
11
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
WARRANTS (CONTINUED)
WIRELESS COMMUNICATIONS -- 0.0%
1,387 Microcell Telecommunications
Inc., Cl. A, expires
05/01/05+ .................. $ 1,990 $ 17,645
2,312 Microcell Telecommunications
Inc., Cl. B,
expires 05/01/08+ .......... 3,553 28,317
------------ ------------
5,543 45,962
------------ ------------
TOTAL WARRANTS ............... 669,788 703,004
------------ ------------
PRINCIPAL
AMOUNT
---------
CORPORATE BONDS -- 0.4%
AVIATION: PARTS AND SERVICES -- 0.1%
$ 600,000 GenCorp Inc., Sub. Deb. Cv.,
5.750%, 04/15/07 ........... 570,724 616,500
------------ ------------
BUILDING AND CONSTRUCTION -- 0.0%
100,000 Foster Wheeler Ltd.,
Sub. Deb. Cv.,
6.500%, 06/01/07 (b)(e) .... 41,638 90,500
------------ ------------
BUSINESS SERVICES -- 0.3%
2,000,000 GP Strategies Corp., Sub. Deb.,
6.000%, 08/14/08 (b) ....... 1,463,787 1,377,950
------------ ------------
COMPUTER SOFTWARE AND SERVICES -- 0.0%
300,000 Exodus Communications Inc.,
Sub. Deb. Cv.,
5.250%, 02/15/08+ (b)(c) ... 1,185 0
------------ ------------
HEALTH CARE -- 0.0%
28,848 Del Global Technologies Corp.,
6.000%, 03/28/07 (b) ....... 28,848 21,636
------------ ------------
TOTAL CORPORATE BONDS ........ 2,106,182 2,106,586
------------ ------------
TOTAL
INVESTMENTS -- 100.1% ...... $420,674,359 621,216,217
============
OTHER ASSETS AND LIABILITIES (NET) -- (0.1)% (745,467)
------------
NET ASSETS -- 100.0% ......... $620,470,750
============
- ----------
For Federal tax purposes:
Aggregate cost of investments ................ $422,888,176
============
Gross unrealized appreciation ................ $225,151,899
Gross unrealized depreciation ................ (26,823,858)
------------
Net unrealized appreciation (depreciation) ... $198,328,041
============
- ----------
(a) Security considered an affiliated holding because the Fund owns at least
5% of the outstanding shares. See Note 9.
(b) Security fair valued under procedures established by the Board of
Directors. The procedures may include reviewing available financial
information about the company and reviewing valuation of comparable
securities and other factors on a regular basis. The aggregate value of
such securities is $5,282,507 or 0.9% of net assets.
(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, 2004, the market value of Rule 144A securities amounted to
$2,766,746 or 0.4% of total net assets.
(e) This bond was exchanged for 151 shares of the company's 0.00% Series B
Preferred Stock and 16,060 shares of its Common Stock, effective
9/21/2004. Details of the exchanged securities and their market value were
not available as of 9/30/2004 and the bond was fair valued at that date.
+ Non-income producing security.
ADR - American Depository Receipt.
See accompanying notes to financial statements.
12
THE GABELLI SMALL CAP GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (cost $419,853,166) .............. $620,573,217
Investments in affiliates, at value
(cost $821,193) ...................................... 643,000
Foreign currency, at value (cost $10,139) .............. 10,343
Dividends and interest receivable ...................... 498,004
Receivable for investments sold ........................ 420,930
Receivable for Fund shares sold ........................ 661,853
Other assets ........................................... 5,165
------------
TOTAL ASSETS ........................................... 622,812,512
------------
LIABILITIES:
Due to custodian ....................................... 304,944
Payable for investments purchased ...................... 216,800
Payable for Fund shares redeemed ....................... 923,339
Payable for investment advisory fees ................... 506,164
Payable for distribution fees .......................... 126,588
Payable for shareholder services fees .................. 126,119
Payable for shareholder communication fees ............. 52,753
Other accrued expenses ................................. 85,055
------------
TOTAL LIABILITIES ...................................... 2,341,762
------------
NET ASSETS applicable to 23,978,758
shares outstanding ................................... $620,470,750
============
NET ASSETS CONSIST OF:
Capital stock, at $0.001 par value ..................... $ 23,979
Additional paid-in capital ............................. 396,877,526
Accumulated net investment loss ........................ (105,829)
Accumulated net realized gain on investments
and foreign currency transactions .................... 23,132,693
Net unrealized appreciation on investments
and foreign currency translations .................... 200,542,381
------------
TOTAL NET ASSETS ....................................... $620,470,750
============
SHARES OF CAPITAL STOCK:
CLASS AAA:
Net Asset Value, offering and redemption price
per share ($620,333,778 / 23,973,450 shares
outstanding; 200,000,000 shares authorized of
$0.001 par value) .................................... $25.88
======
CLASS A:
Net Asset Value and redemption price per share
($58,046 / 2,242 shares outstanding;
50,000,000 shares authorized of
$0.001 par value) .................................... $25.89
======
Maximum sales charge ................................... 5.75%
======
Maximum offering price per share (NAV / 0.9425,
based on maximum sales charge of 5.75% of
the offering price at September 30, 2004) ............ $27.47
======
CLASS B:
Net Asset Value and offering price per share
($54,801 / 2,129 shares outstanding; 50,000,000
shares authorized of $0.001 par value) ............... $25.74(a)
======
CLASS C:
Net Asset Value and offering price per share
($24,125 / 937.3 shares outstanding; 50,000,000
shares authorized of $0.001 par value) ............... $25.74(a)
======
- ----------
(a) Redemption price varies based on length of time held.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends (net of foreign taxes of $27,313) ............... $ 7,546,460
Interest .................................................. 276,969
------------
TOTAL INVESTMENT INCOME ................................... 7,823,429
------------
EXPENSES:
Investment advisory fees .................................. 6,144,534
Distribution fees -- Class AAA ............................ 1,536,007
Distribution fees -- Class A .............................. 59
Distribution fees -- Class B .............................. 235
Distribution fees -- Class C .............................. 35
Shareholder services fees ................................. 546,368
Shareholder communications expenses ....................... 161,260
Custodian fees ............................................ 133,839
Legal and audit fees ...................................... 53,030
Directors' fees ........................................... 45,250
Registration fees ......................................... 26,820
Miscellaneous expenses .................................... 99,053
------------
TOTAL EXPENSES ............................................ 8,746,490
------------
NET INVESTMENT LOSS ....................................... (923,061)
------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS, FUTURES CONTRACTS AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments and
futures contracts ....................................... 27,633,502
Net realized loss on foreign currency transactions ........ (2,001)
Net change in unrealized appreciation/depreciation
on investments and foreign currency
translations ............................................ 87,063,565
------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS, FUTURES CONTRACTS AND
FOREIGN CURRENCY TRANSACTIONS ........................... 114,695,066
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ......................................... $113,772,005
============
See accompanying notes to financial statements.
13
THE GABELLI SMALL CAP GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
Year Ended Year Ended
September 30, 2004 September 30, 2003
------------------ ------------------
OPERATIONS:
Net investment loss ................................................................. $ (923,061) $ (1,046,497)
Net realized gain on investments, futures contracts and foreign currency transactions 27,631,501 5,606,020
Net change in unrealized appreciation/depreciation on investments, futures contracts
and foreign currency translations ................................................. 87,063,565 112,208,652
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................ 113,772,005 116,768,175
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized short-term gain on investment transactions
Class AAA ......................................................................... (2,246,976) (300,296)
Net realized long-term gain on investment transactions
Class AAA ......................................................................... (2,105,462) (6,071,352)
------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ................................................. (4,352,438) (6,371,648)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Class AAA ........................................................................... (29,481,563) 1,584,354
Class A ............................................................................. 57,577 --
Class B ............................................................................. 54,633 --
Class C ............................................................................. 24,010 --
------------ ------------
Net increase/(decrease) in net assets from capital share transactions ............... (29,345,343) 1,584,354
------------ ------------
NET INCREASE IN NET ASSETS .......................................................... 80,074,224 111,980,881
NET ASSETS:
Beginning of period ................................................................. 540,396,526 428,415,645
------------ ------------
End of period ....................................................................... $620,470,750 $540,396,526
============ ============
See accompanying notes to financial statements.
14
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. 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 U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates. The following is a summary of significant accounting policies
followed by the Fund in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange or traded in the U.S. over-the-counter market for
which market quotations are readily available are valued at the last quoted sale
price or a market's official closing price as of the close of business on the
day the securities are being valued. If there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day. If no bid or asked prices are quoted on such
day, the security is valued at the most recently available price or, if the
Board of Directors (the "Board") so determines, by such other method as the
Board shall determine in good faith, to reflect its fair market value. Portfolio
securities traded on more than one national securities exchange or market are
valued according to the broadest and most representative market, as determined
by Gabelli Funds, LLC (the "Adviser").
Portfolio securities primarily traded on foreign markets are generally valued at
the preceding closing values of such securities on their respective exchanges or
if after the close of the foreign markets, but prior to the close of business on
the day the securities are being valued, market conditions change significantly,
certain foreign securities may be fair valued pursuant to procedures established
by the Board. Debt instruments that are not credit impaired with remaining
maturities of 60 days or less are valued at amortized cost, unless the Board
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. Debt
instruments having a maturity greater than 60 days for which 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 such day, the security is valued
using the closing bid price. Futures contracts are valued at the closing
settlement price of the exchange or board of trade on which the applicable
contract is traded.
Securities and assets for which market quotations are not readily available are
valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Board. Fair valuation
methodologies and procedures may include, but are not limited to: analysis and
review of available financial and non-financial information about the company;
comparisons to the valuation and changes in valuation of similar securities,
including a comparison of foreign securities to the equivalent U.S. dollar value
ADR securities at the close of the U.S. exchange; and evaluation of any other
information that could be indicative of the value of the security.
15
THE GABELLI SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
primary government securities dealers recognized by the Federal Reserve Board,
with member banks of the Federal Reserve System or with other brokers or dealers
that meet credit guidelines established by the Adviser and reviewed by the
Board. Under the terms of a typical repurchase agreement, the Fund takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
The Fund will always receive and maintain securities as collateral whose market
value, including accrued interest, will be at least equal to 102% of the dollar
amount invested by the Fund in each agreement. The Fund will make payment for
such securities only upon physical delivery or upon evidence of book entry
transfer of the collateral to the account of the custodian. To the extent that
any repurchase transaction exceeds one business day, the value of the collateral
is marked-to-market on a daily basis to maintain the adequacy of the collateral.
If the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited. At
September 30, 2004, there were no open 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, 2004, there were no futures contracts.
There are several risks in connection with the use of futures contracts as a
hedging device. The change in the 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.
The use of forward foreign exchange contracts does not eliminate fluctuations in
the underlying prices of the Fund's portfolio securities, but it does establish
a rate of exchange that can be achieved in the future. Although forward foreign
exchange contracts limit the risk of loss due to a decline in the value of the
hedged currency, they also limit any potential gain that might result should the
value of the currency increase. In addition, the Fund could be exposed to risks
if the counterparties to the contracts are unable to meet the terms of their
contracts. At September 30, 2004, there were no open forward foreign exchange
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
16
THE GABELLI SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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
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 dividends and capital
gain distributions are determined in accordance with Federal income tax
regulations which may differ from U.S. generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund, timing differences and
differing characterization of distributions made by the Fund.
For the fiscal year ended September 30, 2004, reclassifications were made to
decrease accumulated net investment loss by $882,830 and decrease accumulated
net realized gain on investments by $679,000, with an offsetting adjustment to
additional paid-in capital.
For the fiscal years ended September 30, 2004 and 2003, the tax character of
distributions is $2,246,976 of ordinary income and $2,105,462 of long-term
capital gain and $300,296 of ordinary income and $6,071,352 of long-term capital
gain, respectively.
EXPENSES. Certain administrative expenses are common to, and allocated among,
the Portfolios and then among the Classes of Shares. Such allocations are made
on the basis of each Portfolio's and Class' average net assets or other criteria
directly affecting the expenses as determined by the Adviser pursuant to
procedures established by the Board.
PROVISION FOR INCOME TAXES. The Fund intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). It is the Fund's policy to comply with the
requirements of the Code applicable to regulated investment companies and to
distribute substantially all of its net investment company taxable income and
net capital gains. Therefore, no provision for Federal income taxes is required.
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.
17
THE GABELLI SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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.
As of September 30, 2004, the components of accumulated earnings/(losses) on a
tax basis were as follows:
Undistributed long-term capital gains ......... $ 25,399,703
Post-October losses ........................... 2,189
Net unrealized appreciation ................... 198,328,041
Other temporary differences ................... (160,688)
------------
Total accumulated earnings .................. $223,569,245
============
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 has adopted a distribution plan (the
"Plan") for each class of shares pursuant to Rule 12b-1 under the 1940 Act.
Gabelli & Company, Inc. ("Gabelli & Company"), an affiliate of the Adviser,
serves as distributor of the Fund. Under the Class AAA, Class A, Class B and
Class C Share Plans, payments are authorized to Gabelli & Company at annual
rates of 0.25%, 0.25%, 1.00% and 1.00%, respectively, of the average daily net
assets of those Classes, the annual limitations under each Plan. Such payments
are accrued daily and paid monthly.
5. PORTFOLIO SECURITIES. Purchases and proceeds from the sales of securities for
the year ended September 30, 2004, other than short-term securities, aggregated
$63,915,865 and $91,705,162, respectively.
6. TRANSACTIONS WITH AFFILIATES. During the fiscal year ended September 30,
2004, the Fund paid brokerage commissions of $201,259 to Gabelli & Company.
During the fiscal year ended September 30, 2004, Gabelli & Company received $458
from investors representing commissions (sales charges and underwriting fees) on
sales and redemptions of Fund shares.
The cost of calculating the Fund's net asset value per share is a Fund expense
pursuant to the Advisory Agreement. During the fiscal year ended September 30,
2004, the Fund reimbursed the Adviser $34,800 in connection with the cost of
computing the Fund's net asset value, which is included in miscellaneous
expenses in the Statement of Operations.
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 outstanding at September 30,
2004.
The average daily amount of borrowings outstanding within the year ended
September 30, 2004 was $1,272,549 with a related weighted average interest rate
of 1.78%. The maximum amount borrowed at any time during the year ended
September 30, 2004 was $9,451,000.
18
THE GABELLI SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
8. CAPITAL STOCK TRANSACTIONS. The Fund offers four classes of shares--Class AAA
Shares, Class A Shares, Class B Shares, and Class C Shares. Class AAA Shares are
offered through selected broker/dealers without a sales charge. Class A Shares
are subject to a maximum front-end sales charge of 5.75%. Class B Shares are
subject to a contingent deferred sales charge (CDSC) upon redemption within six
years of purchase. The applicable CDSC is equal to a declining percentage of the
lesser of the net asset value per share at the date of the original purchase or
at the date of redemption, based on the length of time held. Class C Shares are
subject to a 1% CDSC for one year after purchase. As of July 27, 2004, Class
BShares are available only through exchange of Class BShares of other Funds
distributed by Gabelli &Company.
Effective November 1, 2004, the Fund will impose a 2.00% redemption fee on Class
AAA, Class A, Class B and Class C shares that are purchased on or after November
1, 2004, and redeemed or exchanged within 60 days after the date of a purchase.
The redemption fee is deducted from the proceeds otherwise payable to the
redeeming shareholders and retained by the Fund.
Transactions in shares of capital stock were as follows:
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
--------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- -------------
CLASS AAA CLASS AAA
--------------------------- ------------------------------
Shares sold ................................ 6,139,577 $ 153,305,617 6,936,908 $ 131,697,417
Shares issued upon reinvestment of dividends 172,209 4,162,298 338,280 6,099,180
Shares redeemed ............................ (7,494,730) (186,949,478) (7,267,158) (136,212,243)
---------- ------------- ---------- -------------
Net increase/(decrease) ................ (1,182,944) $ (29,481,563) 8,030 $ 1,584,354
========== ============= ========== =============
CLASS A CLASS A
--------------------------- ------------------------------
Shares sold ................................ 2,253 $ 57,859 -- --
Shares issued upon reinvestment of dividends -- -- -- --
Shares redeemed ............................ (11) (282) -- --
---------- ------------- ---------- -------------
Net increase ........................... 2,242 $ 57,577 -- --
========== ============= ========== =============
CLASS B CLASS B
--------------------------- ------------------------------
Shares sold ................................ 2,268 $ 58,160 -- --
Shares issued upon reinvestment of dividends -- -- -- --
Shares redeemed ............................ (139) (3,527) -- --
---------- ------------- ---------- -------------
Net increase ........................... 2,129 $ 54,633 -- --
========== ============= ========== =============
CLASS C CLASS C
--------------------------- ------------------------------
Shares sold ................................ 937 $ 24,010 -- --
Shares issued upon reinvestment of dividends -- -- -- --
Shares redeemed ............................ -- -- -- --
---------- ------------- ---------- -------------
Net increase ........................... 937 $ 24,010 -- --
========== ============= ========== =============
19
THE GABELLI SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
9. TRANSACTIONS IN SECURITIES OF AFFILIATED ISSUERS. The 1940 Act defines
affiliated issuers as those in which 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, 2004 is set forth below:
Net Change Percent
Shares in Unrealized Value at Owned
Beginning Purchased Ending Dividend Appreciation/ September 30, of Shares
Shares (Sold) Shares Income Depreciation 2004 Outstanding
--------- --------- ------- -------- ------------- ------------- -----------
Trans-Lux Corp. 95,000 5,000 100,000 $13,650 $(51,200) $643,000 10.28%
--------- --------- ------- -------- ------------- ------------- -----------
10. OTHER MATTERS. On October 7, 2003, the Fund's Adviser received a subpoena
from the Attorney General of the State of New York requesting information on
mutual fund shares trading practices. The Adviser has also received a subpoena
and letters from the SEC requesting information about mutual fund trading
practices and valuation of portfolio securities. The Adviser is responding to
these requests. The Fund does not believe that these matters will have a
material adverse effect on the Fund's financial position or the results of its
operations.
11. INDEMNIFICATIONS. The Fund enters into contracts that contain a variety of
indemnifications. The Fund's maximum exposure under these arrangements is
unknown. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
20
THE GABELLI SMALL CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each period:
INCOME
FROM INVESTMENT OPERATIONS DISTRIBUTIONS
--------------------------------------------------------------- ----------------------------------------------
Net
Net Asset Realized and Total Net
Period Value, Net Unrealized from Net Realized
Ended Beginning Investment Gain/(Loss) on Investment Investment Gain on Total
September 30 of Period Income/(Loss) Investments Operations Income Investments Distributions
- ------------ --------- ------------- -------------- ---------- ---------- ----------- -------------
Class AAA
2004 $21.48 $(0.04) $4.61 $4.57 -- $(0.17) $(0.17)
2003 17.04 (0.05) 4.74 4.69 -- (0.25) (0.25)
2002 17.13 (0.04) 0.31 0.27 $(0.01) (0.35) (0.36)
2001 23.60 0.06 (1.75) (1.69) (0.05) (4.73) (4.78)
2000 21.84 0.06 4.16 4.22 -- (2.46) (2.46)
Class A
2004(a) $24.49 $(0.06) $1.46 $1.40 -- -- --
Class B
2004(a) $24.49 $(0.19) $1.44 $1.25 -- -- --
Class C
2004(a) $24.49 $(0.20) $1.45 $1.25 -- -- --
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
---------------------------------------------------------
Net Asset Net Assets
Period Value, End of Net Portfolio
Ended End of Total Period Investment Operating Turnover
September 30 Period Return+ (in 000's) Income/(Loss) Expenses Rate
- ------------ --------- ------- ----------- ------------- --------- ---------
Class AAA
2004 $25.88 21.34% $620,334 (0.15)% 1.42% 10%
2003 21.48 27.84 540,397 (0.22) 1.45 4
2002 17.04 1.39 428,416 (0.22) 1.45 10
2001 17.13 (7.47) 372,865 0.30 1.45 17
2000 23.60 21.00 366,459 0.26 1.49 47
Class A
2004(a) $25.89 5.72% $58 (0.32)%(b) 1.42%(b) 10%
Class B
2004(a) $25.74 5.10% $55 (1.02)%(b) 2.17%(b) 10%
Class C
2004(a) $25.74 5.10% $24 (1.07)%(b) 2.17%(b) 10%
<FN>
- ----------
+ 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) From the commencement of offering Class A, Class B and Class C Shares on
December 31, 2003.
(b) Annualized.
</FN>
See accompanying notes to financial statements.
21
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
The Gabelli Small Cap Growth Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of The Gabelli Small Cap Growth Fund (the "Fund"),
a series of Gabelli Equity Series Funds, Inc., as of September 30, 2004, 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. 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, 2004, by
correspondence with the Fund's custodian and brokers or by other appropriate
auditing procedures where replies from brokers were not received. 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, 2004, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and its financial highlights for each of
the five years in the period then ended, in conformity with U.S. generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
New York, New York
November 12, 2004
22
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
IN FUND
COMPLEX
NAME, POSITION(S) TERM OF OFFICE OVERSEEN
ADDRESS 1 AND LENGTH OF BY PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
AND AGE TIME SERVED 2 DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 3
- ------------------ -------------- --------- ----------------------- -------------------
INTERESTED DIRECTORS 4:
- ----------------------
MARIO J. GABELLI Since 1991 24 Chairman of the Board and Chief Director of Morgan Group
Director and Executive Officer of Gabelli Asset Holdings, Inc.
Chief Investment Officer Management Inc. and (holding company)
Age: 62 Chief Investment Officer of Gabelli
Funds, LLC and GAMCO Investors, Inc.;
Vice Chairman and Chief Executive
Officer of Lynch Interactive Corporation
(multimedia and services)
JOHN D. GABELLI Since 1991 10 Senior Vice President of Gabelli & Company, --
Director Inc.; Director of Gabelli Advisers, Inc.
Age: 60
KARL OTTO POHL Since 1992 34 Member of the Shareholder Committee of Director of Gabelli Asset Management
Director Sal Oppenheim Jr. & Cie (private Inc. (investment management); Chairman,
Age: 74 investment bank); Former President of Incentive Capital and Incentive Asset
the Deutsche Bundesbank and Chairman of Management (Zurich); Director at Sal
its Central Bank Council (1980-1991) Oppenheim Jr. & Cie, Zurich
NON-INTERESTED DIRECTORS:
- ------------------------
ANTHONY J. COLAVITA Since 1991 36 President and Attorney at Law in the law --
Director firm of Anthony J. Colavita, P.C.
Age: 68
VINCENT D. ENRIGHT Since 1991 13 Former Senior Vice President and Chief Director of Aphton Corporation
Director Financial Officer of KeySpan Energy (biopharmaceutical company)
Age: 60 Corporation
ROBERT J. MORRISSEY Since 1991 10 Partner in the law firm of Morrissey, --
Director Hawkins & Lynch
Age: 65
ANTHONY R. PUSTORINO Since 1991 17 Certified Public Accountant; Professor Director of Lynch Corporation
Director Emeritus, Pace University (diversified manufacturing)
Age: 79
ANTHONIE C. VAN EKRIS Since 1991 20 Managing Director of BALMAC Director of Aurado Energy, Inc.
Director International, Inc. (commodities) (oil and gas operations)
Age: 70
SALVATORE J. ZIZZA Since 2001 24 Chairman, Hallmark Electrical Supplies Director of Hollis Eden
Director Corp.; Former Executive Vice President Pharmaceuticals; Director of Earl
Age: 58 of FMG Group (OTC), a healthcare Scheib, Inc. (automotive services)
provider.
OFFICERS:
- --------
BRUCE N. ALPERT Since 1991 -- Executive Vice President and Chief --
President and Treasurer Operating Officer of Gabelli Funds, LLC
Age: 52 since 1988 and an officer of all mutual
funds advised by Gabelli Funds, LLC and
its affiliates. Director and President
of Gabelli Advisers, Inc.
JAMES E. MCKEE Since 1995 -- Vice President, General Counsel and --
Secretary Secretary of Gabelli Asset Management
Age: 41 Inc. since 1999 and GAMCO Investors,
Inc. since 1993; Secretary of all
mutual funds advised by Gabelli Advisers,
Inc. and Gabelli Funds, LLC
<FN>
- -----------
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.
</FN>
- --------------------------------------------------------------------------------
2004 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the fiscal year ended September 30, 2004, the Fund paid to Class
AAA shareholders, on December 22, 2003, an ordinary income dividend
(comprised of short-term capital gains) totaling $0.0888 per share and
long-term capital gains totaling $0.0832 per share. For the fiscal
year ended September 30, 2004, 0% of the ordinary income dividend
qualifies for the dividend received deduction available to
corporations and 31.63% of the ordinary income distribution was
qualifying dividend income. An estimate of qualified dividend income
of $7,104,617 was received by the Fund through September 30, 2004 that
qualifies for a reduced tax rate pursuant to the Jobs and Growth Tax
Relief Reconciliation Act of 2003.
- --------------------------------------------------------------------------------
23
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 James E. McKee
PRESIDENT AND TREASURER 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.
- --------------------------------------------------------------------------------
GAB443Q304SR
[PHOTO OMITTED]
THE
GABELLI
SMALL CAP
GROWTH
FUND
ANNUAL REPORT
SEPTEMBER 30, 2004
THE GABELLI EQUITY INCOME FUND
ANNUAL REPORT (A)
SEPTEMBER 30, 2004
TO OUR SHAREHOLDERS,
During the fiscal year ended September 30, 2004, the Gabelli Equity Income
Fund (the "Fund") rose 17.1%, while the Standard & Poor's ("S&P") 500 Index and
the Lipper Equity Income Fund Average rose 13.9% and 16.7%, respectively. The
Fund outperformed both of those indices for the trailing twelve months as well
as for all the longer-term intervals shown in the comparative results table
below.
Enclosed is the investment portfolio and financial statements as of
September 30, 2004.
COMPARATIVE RESULTS
- -----------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH SEPTEMBER 30, 2004 (B)
-----------------------------------------------------
Since
Year to Inception
Quarter Date 1 Year 3 Year 5 Year 10 Year (1/2/92)
--------- ------- ------ ------ ------ ------- --------
GABELLI EQUITY INCOME FUND CLASS AAA ... (0.46)% 3.68% 17.13% 8.87% 6.85% 12.34% 11.95%
S&P 500 Index .......................... (1.87) 1.51 13.86 4.04 (1.31) 11.08 10.16
Nasdaq Composite Index ................. (7.37) (5.32) 6.15 8.17 (7.13) 9.52 9.65
Lipper Equity Income Fund Avg. ......... 0.55 3.70 16.67 5.18 3.35 9.93 10.03
Class A ................................ (0.53) 3.62 17.06 8.85 6.84 12.34 11.94
(6.24)(c) (2.34)(c) 10.34(c) 6.69(c) 5.57(c) 11.67(c) 11.42(c)
Class B ................................ (0.76) 3.00 16.37 8.63 6.71 12.27 11.89
(5.73)(d) (2.00)(d) 11.37(d) 7.78(d) 6.56(d) 12.27(d) 11.89(d)
Class C ................................ (0.70) 3.13 16.51 8.68 6.74 12.28 11.90
(1.70)(d) 2.13(d) 15.51(d) 8.68(d) 6.74(d) 12.28(d) 11.90(d)
(a) THE FUND'S FISCAL YEAR ENDS SEPTEMBER 30.
(b) RETURNS REPRESENT PAST PERFORMANCE AND DO NOT GUARANTEE FUTURE RESULTS.
TOTAL RETURNS AND AVERAGE ANNUAL RETURNS REFLECT CHANGES IN SHARE PRICE AND
REINVESTMENT OF 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 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). CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE
DATA PRESENTED. VISIT WWW.GABELLI.COM FOR PERFORMANCE INFORMATION AS OF THE
MOST RECENT MONTH END. INVESTORS SHOULD CONSIDER THE INVESTMENT OBJECTIVES,
RISKS AND CHARGES AND EXPENSES OF THE FUND BEFORE INVESTING. THE PROSPECTUS
CONTAINS MORE COMPLETE INFORMATION ABOUT THIS AND OTHER MATTERS AND SHOULD
BE READ CAREFULLY BEFORE INVESTING. PERFORMANCE FOR PERIODS LESS THAN ONE
YEAR IS NOT ANNUALIZED.
THE CLASS AAA SHARES' NET ASSET VALUES ARE USED TO CALCULATE PERFORMANCE
FOR THE PERIODS PRIOR TO THE ISSUANCE OF CLASS A SHARES, CLASS B SHARES AND
CLASS C SHARES ON DECEMBER 31, 2003. THE ACTUAL PERFORMANCE FOR THE CLASS A
SHARES, CLASS B SHARES AND CLASS C SHARES WOULD HAVE BEEN LOWER DUE TO THE
ADDITIONAL EXPENSES ASSOCIATED WITH THESE CLASSES OF SHARES.
(c) INCLUDES THE EFFECT OF THE MAXIMUM 5.75% SALES CHARGE AT THE BEGINNING OF
THE PERIOD.
(d) INCLUDES THE EFFECT OF THE APPLICABLE CONTINGENT DEFERRED SALES CHARGE AT
THE END OF THE PERIOD SHOWN FOR CLASS B AND CLASS C SHARES, RESPECTIVELY.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
We have separated the portfolio manager's commentary from the financial
statements and investment portfolio due to new corporate governance
regulations stipulated by the Sarbanes-Oxley Act of 2002. We have done this to
ensure that the content of the portfolio manager's commentary is unrestricted.
The financial statements and investment portfolio are mailed separately from
the commentary. Both the commentary and the financial statements, including
the portfolio of investments, will be available on our website at
www.gabelli.com/funds.
- --------------------------------------------------------------------------------
PERFORMANCE DISCUSSION
Investors' newly found appreciation of dividend-paying stocks helped them
outperform broad stock market indices during the past twelve months. The Fund's
Class AAA Shares gained 17.1% during the past year, outperforming both the S&P
500 Index and the Lipper Equity Income Fund Average, which rose 13.9% and 16.7%,
respectively, during the same period.
In recent years, utilities have been among the most under-loved market
sectors. Ill-conceived (and generally unprofitable) forays into non-regulated,
non-core businesses weakened balance sheets and hurt profits. Utilities were
also tarred by the Enron scandal. Utility companies have gone back to basics.
Many have dumped non-core businesses and used the proceeds to strengthen their
balance sheets. The bold have begun to initiate sensible "growth by acquisition"
strategies, buying companies in contiguous operating areas and realizing
meaningful economies of scale. Investors have started to take notice. The
utilities sector was among the best performing sectors during the past year as
the Dow Jones Utilities Average posted a 22.3% gain in the trailing twelve-month
period through September 30, 2004 versus a 13.9% gain for the S&P 500 Index and
11.0% gain for the Dow Jones Industrial Average.
Not surprisingly, several of the Fund's best performing stocks during the
past year were in the energy and utilities sector. Among our energy holdings,
Burlington Resources, ConocoPhillips, ChevronTexaco, Devon Energy and Exxon
Mobil stand out as stellar performers. In the utilities arena, TXU Corp., El
Paso Electric and Allegheny excelled. Our telecommunications holdings, most
notably Sprint, Verizon and SBC Communications, also contributed positively to
performance. In general, our media sector investments disappointed, with Tribune
and Viacom performing poorly during the trailing twelve-month period.
Broadcasting companies Sinclair and Granite and health care stocks such as Merck
and Bristol-Myers Squibb lagged the market and detracted from performance during
the fiscal year.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI EQUITY INCOME FUND CLASS AAA,
THE LIPPER EQUITY INCOME FUND AVERAGE AND THE S&P 500 INDEX
[GRAPHIC OMITTED]
PLOT POINTS FOLLOW:
Gabelli Equity Lipper Equity S&P 500
Income Fund Fund Average Index
1/2/92 $10,000 $10,000 $10,000
9/30/92 10,582 10,601 10,242
9/30/93 12,752 12,554 11,570
9/30/94 13,173 12,748 11,996
9/30/95 15,708 15,429 15,560
9/30/96 18,323 17,974 18,722
9/30/97 24,549 23,632 26,291
9/30/98 25,281 24,459 28,679
9/30/99 30,291 27,673 36,648
9/30/00 32,839 30,539 41,512
9/30/01 32,694 28,228 30,465
9/30/02 28,908 23,570 24,229
9/30/03 36,017 28,352 30,134
9/30/04 42,187 33,079 34,310
- -----------------------------------------------------
Average Annual Total Return*
- -----------------------------------------------------
1 Year 5 Year 10 Year Life of Fund
- -----------------------------------------------------
Class AAA 17.13% 6.85% 12.34% 11.95%
- -----------------------------------------------------
*Past performance is not predictive of future results. The performance tables
and graph do not reflect the deduction of taxes that a shareholder would pay on
fund distributions or the redemption of fund shares.
2
THE GABELLI EQUITY INCOME FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
For the Six Month Period from April 1, 2004 through September 30, 2004
EXPENSE TABLE
- --------------------------------------------------------------------------------
We believe it is important for you to understand the impact of fees and expenses
regarding your investment. All mutual funds have operating expenses. As a
shareholder of the Fund, you incur ongoing costs, which include costs for
portfolio management, administrative services, and shareholder reports (like
this one), among others. Operating expenses, which are deducted from a fund's
gross income, directly reduce the investment return of the Fund. When a fund's
expenses are expressed as a percentage of its average net assets, this figure is
known as the expense ratio. The following examples are intended to help you
understand the ongoing fees (in dollars) of investing in your Fund and to
compare these costs with those of other mutual funds. The examples are based on
an investment of $1,000 made at the beginning of the period shown and held for
the entire period.
The Expense Table below illustrates your Fund's costs in two ways:
ACTUAL FUND RETURN: This section helps you to estimate the actual expenses that
you paid over the period after any fee waivers and expense reimbursements. The
"Ending Account Value" shown is derived from the Fund's ACTUAL return, and the
"Expenses Paid During Period" shows the dollar amount that would have been paid
by an investor who started with $1,000 in the Fund. You may use this
information, together with the amount you invested, to estimate the expenses
that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your Fund under the heading "Expenses Paid During Period."
HYPOTHETICAL 5% RETURN: This section is intended to help you compare your Fund's
costs with those of other mutual funds. It assumes that the Fund had a return of
5% before expenses during the period shown, but that the expense ratio is
unchanged. In this case -- because the return used is NOT the Fund's actual
return -- the results do not apply to your investment. This example is useful in
making comparisons because the Securities and Exchange Commission requires all
mutual funds to calculate expenses based on a 5% return. You can assess your
Fund's costs by comparing this hypothetical example with the hypothetical
examples that appear in shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight and help
you compare your ongoing costs only and do not reflect any transactional costs
such as sales charges (loads), and redemption fees, which are described in the
Prospectus. If these costs were applied to your account, your costs would be
higher. The "Annualized Expense Ratio" represents the actual expenses for the
period and may be different from the expense ratio in the Financial Highlights
which is for the year ended September 30, 2004.
Beginning Ending Annualized Expenses
Account Value Account Value Expense Paid During
4/1/04 9/30/04 Ratio Period*
- --------------------------------------------------------------------------------
EQUITY INCOME FUND
- --------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class AAA $1,000.00 $1,008.50 1.50% $ 7.53
Class A $1,000.00 $1,008.50 1.50% $ 7.53
Class B $1,000.00 $1,004.30 2.25% $11.27
Class C $1,000.00 $1,004.90 2.25% $11.28
HYPOTHETICAL 5% RETURN
Class AAA $1,000.00 $1,017.50 1.50% $ 7.57
Class A $1,000.00 $1,017.50 1.50% $ 7.57
Class B $1,000.00 $1,013.75 2.25% $11.33
Class C $1,000.00 $1,013.75 2.25% $11.33
* Expenses are equal to the Fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by the number of days in the
most recent fiscal half-year, then divided by 366.
3
SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED)
The SEC adopted a requirement that all Funds present their categories of
portfolio holdings in a table, chart or graph format in their annual and
semi-annual shareholder reports, whether or not a schedule of investments is
utilized. The following table which presents portfolio holdings as a percent of
total net assets is provided in compliance with such requirement.
EQUITY INCOME FUND
Financial Services ................................. 12.7%
Energy and Utilities: Integrated ................... 8.8%
Consumer Products .................................. 7.9%
Energy and Utilities: Oil .......................... 7.1%
Health Care ........................................ 7.0%
Food and Beverage .................................. 5.6%
Telecommunications ................................. 5.5%
U.S. Government Obligations ........................ 4.4%
Diversified Industrial ............................. 3.4%
Wireless Communications ............................ 3.3%
Energy and Utilities: Electric ..................... 3.1%
Automotive: Parts and Accessories .................. 3.0%
Communications Equipment ........................... 2.5%
Energy and Utilities: Natural Gas .................. 2.3%
Publishing ......................................... 2.2%
Retail ............................................. 1.9%
Specialty Chemicals ................................ 1.9%
Aviation: Parts and Services ....................... 1.8%
Broadcasting ....................................... 1.8%
Entertainment ...................................... 1.7%
Metals and Mining .................................. 1.4%
Electronics ........................................ 1.3%
Aerospace .......................................... 1.3%
Hotels and Gaming .................................. 1.3%
Real Estate ........................................ 1.2%
Business Services .................................. 0.8%
Cable and Satellite ................................ 0.8%
Machinery .......................................... 0.6%
Computer Software and Services ..................... 0.5%
Environmental Services ............................. 0.5%
Energy and Utilities: Services ..................... 0.4%
Automotive ......................................... 0.3%
Equipment and Supplies ............................. 0.3%
Manufactured Housing ............................... 0.3%
Consumer Services .................................. 0.2%
Energy and Utilities ............................... 0.2%
Transportation ..................................... 0.2%
Computer Hardware .................................. 0.1%
Energy and Utilities: Water ........................ 0.1%
Other Assets and Liabilities - Net ................. 0.3%
------
100.0%
======
THE FUND FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SEC FOR THE
FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q, THE FIRST OF WHICH
WILL BE FILED FOR THE QUARTER ENDING DECEMBER 31, 2004. SHAREHOLDERS MAY OBTAIN
THIS INFORMATION AT WWW.GABELLI.COM OR BY CALLING THE FUND AT
800-GABELLI(800-422-3554). THE FUND'S FORM N-Q WILL BE AVAILABLE ON THE SEC'S
WEBSITE AT WWW.SEC.GOV AND MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S
PUBLIC REFERENCE ROOM IN WASHINGTON, DC. INFORMATION ON THE OPERATION OF THE
PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330.
- ------------------------------------------------------------------------------
A description of the Fund's proxy voting policies and procedures and how the
Fund voted proxies relating to portfolio securities during the most recent
12-month period ended June 30, 2004 are available without charge (i) upon
request, by calling 800-GABELLI (800-422-3554); (ii) by writing to The
Gabelli Funds at One Corporate Center, Rye, NY 10580-1422; and (iii) on the
Securities and Exchange Commission's website at www.sec.gov.
- ------------------------------------------------------------------------------
4
THE GABELLI EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS -- SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS -- 88.8%
AEROSPACE -- 1.3%
32,000 Boeing Co. ............... $ 1,082,148 $ 1,651,840
5,000 Lockheed Martin Corp. .... 104,386 278,900
14,000 Northrop Grumman Corp. ... 431,350 746,620
10,000 Raytheon Co. ............. 279,250 379,800
2,000 Rockwell Automation Inc. . 25,686 77,400
2,000 Rockwell Collins Inc. .... 15,844 74,280
100,000 Titan Corp.+ ............. 1,840,860 1,397,000
------------ ------------
3,779,524 4,605,840
------------ ------------
AUTOMOTIVE -- 0.2%
2,000 Ford Motor Co. ........... 29,963 28,100
16,239 General Motors Corp. ..... 638,747 689,833
------------ ------------
668,710 717,933
------------ ------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 2.5%
2,000 ArvinMeritor Inc. ........ 28,890 37,500
100,000 Dana Corp. ............... 1,459,536 1,769,000
125,000 Genuine Parts Co. ........ 3,542,195 4,797,500
5,000 Johnson Controls Inc. .... 127,000 284,050
60,000 Modine Manufacturing Co. . 1,160,998 1,806,600
3,000 Pep Boys - Manny, Moe & Jack 27,885 42,000
------------ ------------
6,346,504 8,736,650
------------ ------------
AVIATION: PARTS AND SERVICES -- 0.9%
20,000 Barnes Group Inc. ........ 365,934 549,400
12,500 Curtiss-Wright Corp. ..... 88,906 715,375
12,096 Curtiss-Wright Corp., Cl. B 272,014 654,394
40,000 GenCorp Inc. ............. 342,710 542,000
8,000 United Technologies Corp. 281,946 747,040
------------ ------------
1,351,510 3,208,209
------------ ------------
BROADCASTING -- 0.0%
20,000 Granite Broadcasting Corp.+ 106,004 4,600
------------ ------------
BUSINESS SERVICES -- 0.2%
4,000 Automatic Data
Processing Inc. ........ 126,808 165,280
6,000 Donnelley (R.H.) Corp.+ .. 68,850 296,160
500 Imation Corp. ............ 7,150 17,795
2,500 Landauer Inc. ............ 60,337 117,325
5,000 National Processing Inc.+ 77,065 132,600
------------ ------------
340,210 729,160
------------ ------------
CABLE AND SATELLITE -- 0.4%
15,000 Comcast Corp., Cl. A+ .... 483,405 423,600
10,000 Cox Communications Inc.,
Cl. A+ ................. 330,000 331,300
36,000 DIRECTV Group Inc.+ ...... 429,789 633,240
------------ ------------
1,243,194 1,388,140
------------ ------------
COMMUNICATIONS EQUIPMENT -- 1.3%
100,000 Corning Inc.+ ............ 1,049,695 1,108,000
115,000 Motorola Inc. ............ 1,200,428 2,074,600
50,000 Thomas & Betts Corp.+ .... 881,146 1,341,000
------------ ------------
3,131,269 4,523,600
------------ ------------
MARKET
SHARES COST VALUE
------ ---- ------
COMPUTER HARDWARE -- 0.1%
300 International Business
Machines Corp. ......... $ 3,810 $ 25,722
13,000 Xerox Corp.+ ............. 126,343 183,040
------------ ------------
130,153 208,762
------------ ------------
COMPUTER SOFTWARE AND SERVICES -- 0.5%
2,000 Electronic Data
Systems Corp. .......... 35,580 38,780
10,000 EMC Corp.+ ............... 91,150 115,400
50,000 Microsoft Corp. .......... 1,289,860 1,382,500
15,000 PeopleSoft Inc.+ ......... 262,495 297,750
154 Telecom Italia Media SpA+ 205 50
------------ ------------
1,679,290 1,834,480
------------ ------------
CONSUMER PRODUCTS -- 7.9%
35,000 Altria Group Inc. ........ 1,051,855 1,646,400
1,000 Clorox Co. ............... 33,050 53,300
75,000 Eastman Kodak Co. ........ 2,014,593 2,416,500
44,000 Energizer Holdings Inc.+ . 1,104,727 2,028,400
90,000 Gallaher Group plc, ADR .. 2,468,961 4,182,300
42,000 Gillette Co. ............. 1,233,027 1,753,080
36,000 National Presto
Industries Inc. ........ 1,245,262 1,505,520
10,000 Pactiv Corp.+ ............ 161,895 232,500
38,000 Procter & Gamble Co. ..... 1,393,252 2,056,560
13,000 Rothmans Inc. ............ 237,941 359,938
957,500 Swedish Match AB ......... 10,137,905 10,127,126
26,000 Unilever NV, ADR ......... 1,542,066 1,502,800
10,000 UST Inc. ................. 364,903 402,600
------------ ------------
22,989,437 28,267,024
------------ ------------
CONSUMER SERVICES -- 0.2%
35,000 Rollins Inc. ............. 454,969 850,150
------------ ------------
DIVERSIFIED INDUSTRIAL -- 3.4%
5,000 3M Co. ................... 213,645 399,850
22,000 Acuity Brands Inc. ....... 342,225 522,940
30,000 Cooper Industries Ltd.,
Cl. A .................. 1,194,666 1,770,000
115,000 General Electric Co. ..... 2,904,598 3,861,700
5,000 Harbor Global Co. Ltd.+ .. 24,172 50,000
120,000 Honeywell International
Inc. ................... 3,109,683 4,303,200
22,000 Thomas Industries Inc. ... 250,524 690,800
4,000 Trinity Industries Inc. .. 82,100 124,680
10,000 Tyco International Ltd. .. 128,601 306,600
------------ ------------
8,250,214 12,029,770
------------ ------------
ELECTRONICS -- 1.0%
20,000 Intel Corp. .............. 370,400 401,200
140,000 Texas Instruments Inc. ... 2,856,614 2,979,200
11,000 Thermo Electron Corp.+ ... 217,973 297,220
------------ ------------
3,444,987 3,677,620
------------ ------------
See accompanying notes to financial statements.
5
THE GABELLI EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
ENERGY AND UTILITIES: ELECTRIC -- 3.1%
80,000 AES Corp.+ ............... $ 268,400 $ 799,200
12,000 American Electric
Power Co. Inc. ......... 310,790 383,520
81,000 Cinergy Corp. ............ 2,478,068 3,207,600
16,000 DTE Energy Co. ........... 695,800 675,040
100,000 El Paso Electric Co.+ .... 790,289 1,607,000
20,000 FPL Group Inc. ........... 1,218,598 1,366,400
35,000 Great Plains Energy Inc. . 748,610 1,020,250
90,000 Northeast Utilities ...... 1,660,471 1,745,100
7,000 UIL Holdings Corp. ....... 245,744 344,330
------------ ------------
8,416,770 11,148,440
------------ ------------
ENERGY AND UTILITIES: INTEGRATED -- 8.8%
38,000 Allegheny Energy Inc.+ ... 318,325 606,480
180,000 Aquila Inc.+ ............. 483,805 561,600
44,000 BP plc, ADR .............. 1,030,211 2,531,320
84,000 Burlington Resources Inc. 1,618,222 3,427,200
44,000 CH Energy Group Inc. ..... 1,809,289 2,015,200
70,000 Constellation Energy
Group Inc. ............. 1,664,815 2,788,800
1,000 Dominion Resources Inc. .. 48,852 65,250
100,000 Duke Energy Corp. ........ 1,795,444 2,289,000
150,000 Duquesne Light
Holdings Inc. .......... 2,318,392 2,694,000
140,000 El Paso Corp. ............ 1,299,018 1,286,600
150,000 Energy East Corp. ........ 3,071,332 3,777,000
29,000 Eni SpA .................. 304,221 649,767
40,000 NSTAR .................... 1,282,183 1,964,000
2,000 OGE Energy Corp. ......... 47,090 50,460
50,000 Progress Energy Inc. ..... 2,144,038 2,117,000
15,000 Progress Energy Inc.,
CVO+ ................... 7,800 2,400
4,000 Public Service Enterprise
Group Inc. ............. 131,300 170,400
12,000 Scottish Power plc, ADR .. 314,381 370,080
50,000 TECO Energy Inc. ......... 645,886 676,500
27,000 TXU Corp. ................ 548,964 1,293,840
95,000 Westar Energy Inc. ....... 1,388,045 1,919,000
------------ ------------
22,271,613 31,255,897
------------ ------------
ENERGY AND UTILITIES: NATURAL GAS -- 2.3%
30,000 AGL Resources Inc. ....... 579,226 923,100
24,500 Atmos Energy Corp. ....... 559,166 617,155
25,000 National Fuel Gas Co. .... 519,678 708,250
45,000 ONEOK Inc. ............... 796,167 1,170,900
5,000 Peoples Energy Corp. ..... 185,826 208,400
12,000 Piedmont Natural
Gas Co. Inc. ........... 394,017 527,280
40,000 SEMCO Energy Inc. ........ 282,604 219,600
63,000 Southern Union Co.+ ...... 845,950 1,291,500
100,000 Southwest Gas Corp. ...... 1,777,547 2,395,000
------------ ------------
5,940,181 8,061,185
------------ ------------
MARKET
SHARES COST VALUE
------ ---- ------
ENERGY AND UTILITIES: OIL -- 7.1%
82,000 ChevronTexaco Corp. ...... $ 1,927,546 $ 4,398,480
58,000 ConocoPhillips ........... 3,187,718 4,805,300
15,000 Devon Energy Corp. ....... 692,247 1,065,150
133,000 Exxon Mobil Corp. ........ 3,778,618 6,427,890
18,000 Kerr-McGee Corp. ......... 778,337 1,030,500
30,000 Repsol YPF SA, ADR ....... 631,290 657,600
108,000 Royal Dutch Petroleum Co. 4,789,614 5,572,800
25,000 Statoil ASA, ADR ......... 327,939 361,000
8,759 Total SA, ADR ............ 299,550 894,907
------------ ------------
16,412,859 25,213,627
------------ ------------
ENERGY AND UTILITIES: SERVICES -- 0.4%
14,000 Halliburton Co. .......... 158,327 471,660
12,000 Schlumberger Ltd. ........ 547,706 807,720
------------ ------------
706,033 1,279,380
------------ ------------
ENERGY AND UTILITIES: WATER -- 0.1%
18,750 Aqua America Inc. ........ 230,874 414,562
------------ ------------
ENTERTAINMENT -- 1.7%
20,000 Fox Entertainment Group Inc.,
Cl. A+ ................. 453,939 554,800
130,000 The Walt Disney Co. ...... 2,355,768 2,931,500
110,000 Time Warner Inc.+ ........ 1,635,600 1,775,400
25,000 Viacom Inc., Cl. A ....... 836,760 850,000
------------ ------------
5,282,067 6,111,700
------------ ------------
ENVIRONMENTAL SERVICES -- 0.5%
60,000 Waste Management Inc. .... 1,436,233 1,640,400
------------ ------------
EQUIPMENT AND SUPPLIES -- 0.3%
11,000 Imagistics International
Inc.+ .................. 212,935 369,600
3,000 Ingersoll-Rand Co.,
Cl. A .................. 125,173 203,910
1,500 Minerals Technologies
Inc. ................... 37,937 88,290
2,000 Parker Hannifin Corp. .... 77,350 117,720
16,000 Smith (A.O.) Corp. ....... 343,317 389,600
------------ ------------
796,712 1,169,120
------------ ------------
FINANCIAL SERVICES -- 12.7%
4,190 Aegon NV, ADR ............ 38,587 45,257
7,000 Alleghany Corp.+ ......... 1,260,332 1,910,300
3,000 Allstate Corp. ........... 104,446 143,970
95,000 American Express Co. ..... 3,691,849 4,888,700
12,000 American International
Group Inc. ............. 705,110 815,880
39,000 Argonaut Group Inc.+ ..... 789,154 728,130
5,000 Banco Popular Espanol SA . 185,939 277,837
18,000 Banco Santander Central
Hispano SA, ADR ........ 64,963 176,040
2,000 Banco Santander Chile
SA, ADR ................ 29,250 55,880
102,000 Bank of America Corp. .... 1,909,706 4,419,660
44,000 Bank of New York Co. Inc. 1,423,658 1,283,480
30,000 Bankgesellschaft Berlin AG+ 201,349 74,893
8,000 Banque Nationale de Paris SA 296,835 516,674
See accompanying notes to financial statements.
6
THE GABELLI EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
2,000 Bear Stearns
Companies Inc. ......... $ 129,100 $ 192,340
40,000 Citigroup Inc. ........... 1,559,517 1,764,800
39,000 Commerzbank AG, ADR+ ..... 834,873 721,730
35,000 Deutsche Bank AG, ADR .... 1,966,016 2,517,900
2,000 Dun and Bradstreet
Corp.+ ................. 20,476 117,400
3,000 Fannie Mae ............... 173,213 190,200
16,000 Fidelity Southern Corp. .. 153,870 243,840
8,000 H&R Block Inc. ........... 346,546 395,360
25,000 Huntington Bancshares Inc. 407,250 622,750
72,080 JPMorgan Chase & Co. ..... 2,124,720 2,863,738
25,000 KeyCorp .................. 745,844 790,000
11,000 Leucadia National Corp. .. 361,227 623,150
22,037 Manulife Financial Corp. . 543,059 965,000
55,000 Mellon Financial Corp. ... 1,528,208 1,522,950
10,000 Merrill Lynch & Co. Inc. . 362,400 497,200
4,000 Moody's Corp. ............ 64,841 293,000
3,000 Municipal Mortgage &
Equity, LLC ............ 60,488 75,660
6,000 Northern Trust Corp. ..... 60,300 244,800
50,000 Phoenix Companies Inc. ... 650,511 521,000
47,000 PNC Financial
Services Group ......... 1,985,813 2,542,700
15,000 Schwab (Charles) Corp. ... 232,500 137,850
40,000 St. Paul Travelers
Companies Inc. ......... 1,573,259 1,322,400
90,000 Sterling Bancorp ......... 1,456,021 2,434,500
12,000 SunTrust Banks Inc. ...... 251,737 844,920
15,000 T. Rowe Price Group Inc. . 617,260 764,100
55,000 Unitrin Inc. ............. 1,694,247 2,286,350
15,000 Wachovia Corp. ........... 441,375 704,250
45,000 Waddell & Reed Financial Inc.,
Cl. A .................. 816,259 990,000
75,000 Wilmington Trust Corp. ... 2,342,833 2,715,750
------------ ------------
34,204,941 45,242,339
------------ ------------
FOOD AND BEVERAGE -- 5.6%
50,000 Allied Domecq plc, ADR ... 1,100,950 1,714,000
37,000 Cadbury Schweppes
plc, ADR ............... 871,787 1,143,670
35,000 Campbell Soup Co. ........ 794,372 920,150
40,000 Coca-Cola Amatil
Ltd., ADR .............. 246,844 406,796
35,000 Coca-Cola Co. ............ 1,612,295 1,401,750
10,000 Corn Products
International Inc. ..... 260,071 461,000
50,000 Del Monte Foods Co.+ ..... 439,041 524,500
50,000 Diageo plc, ADR .......... 1,987,727 2,521,500
40,000 Dreyer's Grand Ice Cream
Holdings Inc., Cl. A ... 3,173,220 3,198,840
17,000 Fomento Economico
Mexicano SA de
CV, ADR ................ 631,836 751,060
25,000 General Mills Inc. ....... 1,158,300 1,122,500
64,000 Heinz (H.J.) Co. ......... 2,169,869 2,305,280
6,000 Hershey Foods Corp. ...... 164,533 280,260
MARKET
SHARES COST VALUE
------ ---- ------
13,000 Kellogg Co. .............. $ 368,299 $ 554,580
3,000 Mondavi (Robert) Corp.,
Cl. A+ ................. 62,180 117,510
10,000 Nestle SA ................ 2,083,075 2,290,382
12,514 Tootsie Roll
Industries Inc. ........ 339,630 365,659
------------ ------------
17,464,029 20,079,437
------------ ------------
HEALTH CARE -- 7.0%
10,000 Abbott Laboratories ...... 367,668 423,600
35,000 Baxter International Inc. 902,048 1,125,600
16,000 Becton, Dickinson & Co. .. 491,573 827,200
300 Bio-Rad Laboratories Inc.,
Cl. B+ ................. 11,100 15,750
105,000 Bristol-Myers Squibb Co. . 2,745,293 2,485,350
73,000 Eli Lilly & Co. .......... 4,314,956 4,383,650
11,276 GlaxoSmithKline plc, ADR . 515,984 493,100
15,000 Henry Schein Inc.+ ....... 744,638 934,650
1,000 Hospira Inc.+ ............ 23,468 30,600
20,000 Johnson & Johnson ........ 1,034,361 1,126,600
15,030 Medco Health
Solutions Inc.+ ........ 432,351 464,427
65,000 Merck & Co. Inc. ......... 3,165,426 2,145,000
1,000 Nobel Biocare Holding AG . 139,480 155,161
3,000 Orthofix International NV+ 84,894 103,050
260,000 Pfizer Inc. .............. 8,285,305 7,956,000
100,000 Schering-Plough Corp. .... 1,808,966 1,906,000
5,000 Tenet Healthcare Corp.+ .. 58,560 53,950
2,000 Zimmer Holdings Inc.+ .... 103,551 158,080
------------ ------------
25,229,622 24,787,768
------------ ------------
HOTELS AND GAMING -- 1.3%
50,000 Hilton Hotels Corp. ...... 867,453 942,000
10,000 Mandalay Resort Group .... 677,440 686,500
125,200 Prime Hospitality Corp.+ . 1,510,675 1,523,684
30,000 Starwood Hotels &
Resorts Worldwide Inc. . 755,965 1,392,600
------------ ------------
3,811,533 4,544,784
------------ ------------
MACHINERY -- 0.6%
3,000 Caterpillar Inc. ......... 35,181 241,350
28,000 Deere & Co. .............. 567,189 1,807,400
------------ ------------
602,370 2,048,750
------------ ------------
MANUFACTURED HOUSING -- 0.3%
120,000 Champion Enterprises Inc.+ 1,203,097 1,234,800
------------ ------------
METALS AND MINING -- 1.4%
30,000 Fording Canadian Coal
Trust (Toronto) ........ 598,595 1,672,395
55,875 Freeport-McMoRan Copper
& Gold Inc., Cl. B ..... 1,202,109 2,262,938
25,000 Newmont Mining Corp. ..... 650,026 1,138,250
------------ ------------
2,450,730 5,073,583
------------ ------------
PUBLISHING -- 2.1%
25,000 Dow Jones & Co. Inc. ..... 1,104,769 1,015,250
11,000 Knight-Ridder Inc. ....... 725,310 719,950
See accompanying notes to financial statements.
7
THE GABELLI EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
PUBLISHING (CONTINUED)
1,500 McClatchy Co., Cl. A ..... $ 85,925 $ 106,245
10,000 McGraw-Hill Companies Inc. 502,221 796,900
3,008 News Corp. Ltd., ADR ..... 70,880 98,873
90,000 Reader's Digest
Association Inc. ....... 1,224,956 1,313,100
406 Seat Pagine Gialle SpA ... 1,350 132
52,000 Tribune Co. .............. 2,383,633 2,139,800
1,200 Washington Post Co.,
Cl. B .................. 700,030 1,104,000
------------ ------------
6,799,074 7,294,250
------------ ------------
REAL ESTATE -- 1.2%
5,000 Griffin Land &
Nurseries Inc.+ ........ 71,716 120,000
62,500 Rouse Co. ................ 4,162,199 4,180,000
------------ ------------
4,233,915 4,300,000
------------ ------------
RETAIL -- 1.9%
150,000 Albertson's Inc. ......... 3,438,252 3,589,500
125,300 Safeway Inc.+ ............ 2,643,678 2,419,543
2,000 Sears, Roebuck & Co. ..... 51,241 79,700
6,000 The Home Depot Inc. ...... 127,998 235,200
10,000 Weis Markets Inc. ........ 300,480 338,800
------------ ------------
6,561,649 6,662,743
------------ ------------
SPECIALTY CHEMICALS -- 1.9%
20,000 Albemarle Corp. .......... 434,626 701,800
10,000 Dow Chemical Co. ......... 360,656 451,800
20,000 E.I. du Pont de Nemours
and Co. ................ 857,331 856,000
6,000 Ferro Corp. .............. 135,135 130,860
25,000 Great Lakes
Chemical Corp. ......... 609,306 640,000
68,000 Monsanto Co. ............. 1,137,102 2,476,560
6,000 NewMarket Corp.+ ......... 23,156 125,280
20,000 Omnova Solutions Inc.+ ... 155,815 120,600
4,000 Quaker Chemical Corp. .... 79,615 96,600
60,000 Sensient Technologies
Corp. .................. 1,213,542 1,298,400
------------ ------------
5,006,284 6,897,900
------------ ------------
TELECOMMUNICATIONS -- 5.1%
15,000 ALLTEL Corp. ............. 745,513 823,650
60,000 AT&T Corp. ............... 1,406,235 859,200
63,900 BCE Inc. ................. 1,358,957 1,383,435
35,000 BellSouth Corp. .......... 934,347 949,200
300,000 BT Group plc ............. 1,251,761 975,806
30,000 BT Group plc, ADR ........ 1,006,938 988,500
20,000 Cable & Wireless plc, ADR 112,000 105,200
190,000 Cincinnati Bell Inc.+ .... 1,244,063 663,100
50,000 Citizens Communications Co. 705,345 669,500
50,000 Deutsche Telekom AG, ADR+ 875,541 933,000
12,000 France Telecom SA, ADR ... 347,118 300,000
420,000 Qwest Communications
International Inc.+ .... 1,745,277 1,398,600
75,000 SBC Communications Inc. .. 2,281,410 1,946,250
65,000 Sprint Corp. ............. 934,361 1,308,450
MARKET
SHARES COST VALUE
------ ---- ------
3,300 Telecom Italia SpA, ADR .. $ 31,072 $ 101,508
7,880 Telefonica SA, ADR ....... 86,781 354,521
20,000 TELUS Corp. .............. 327,674 414,049
100,000 Verizon Communications
Inc. ................... 3,769,983 3,938,000
------------ ------------
19,164,376 18,111,969
------------ ------------
TRANSPORTATION -- 0.2%
33,100 GATX Corp. ............... 823,544 882,446
------------ ------------
WIRELESS COMMUNICATIONS -- 3.3%
650,000 AT&T Wireless
Services Inc.+ ......... 8,772,488 9,607,000
40,000 Microcell Telecommunications
Inc., Cl. B+ ........... 1,057,396 1,125,203
300,000 mm02 plc+ ................ 336,932 533,368
20,000 mm02 plc, ADR+ ........... 199,884 355,000
------------ ------------
10,366,700 11,620,571
------------ ------------
TOTAL COMMON STOCKS ...... 253,331,181 315,857,589
------------ ------------
PREFERRED STOCKS -- 3.3%
AUTOMOTIVE -- 0.1%
1,000 Ford Motor Co. Capital Trust II,
6.500% Cv. Pfd. ........ 45,215 52,280
General Motors Corp.,
6,000 5.250% Cv. Pfd., Ser. B 152,000 143,460
4,000 4.500% Cv. Pfd., Ser. A 100,000 101,640
------------ ------------
297,215 297,380
------------ ------------
AVIATION: PARTS AND SERVICES -- 0.5%
7,000 Coltec Capital Trust,
5.250% Cv. Pfd. ........ 281,500 313,250
13,900 Sequa Corp.,
$5.00 Cv. Pfd. ......... 1,073,040 1,341,350
------------ ------------
1,354,540 1,654,600
------------ ------------
BROADCASTING -- 1.8%
65,000 CVC Equity Securities Trust I,
6.500% Cv. Pfd. ........ 1,576,340 1,356,550
2,619 Granite Broadcasting Corp.,
12.750% Pfd.+ .......... 1,488,446 1,073,790
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 1,034,023
50,500 Sinclair Broadcast Group Inc.,
6.000% Cv. Pfd., Ser. D 2,362,125 2,031,615
------------ ------------
7,228,398 6,515,978
------------ ------------
COMMUNICATIONS EQUIPMENT -- 0.4%
1,100 Lucent Technologies
Capital Trust I,
7.750% Cv. Pfd. ........ 759,000 1,320,000
------------ ------------
See accompanying notes to financial statements.
8
THE GABELLI EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
PREFERRED STOCKS (CONTINUED)
DIVERSIFIED INDUSTRIAL -- 0.0%
26,200 WHX Corp.,
$3.75 Cv. Pfd., Ser. B+ $ 177,129 $ 131,000
------------ ------------
ENTERTAINMENT -- 0.0%
3,000 Metromedia International Group Inc.,
7.250% Cv. Pfd.+ ....... 5,310 44,100
------------ ------------
PUBLISHING -- 0.1%
5,730 News Corp. Ltd., Pfd., ADR 152,085 179,521
------------ ------------
TELECOMMUNICATIONS -- 0.4%
33,000 Cincinnati Bell Inc.,
6.750% Cv. Pfd., Ser. B 918,894 1,386,000
------------ ------------
TOTAL PREFERRED STOCKS ... 10,892,571 11,528,579
------------ ------------
WARRANTS -- 0.2%
BUSINESS SERVICES -- 0.2%
250,000 GP Strategies Corp.,
Expire 08/14/08+ (c) ... 637,065 637,065
------------ ------------
PRINCIPAL
AMOUNT
------
CORPORATE BONDS -- 3.0%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.5%
$ 1,000,000 Pep Boys - Manny, Moe & Jack, Cv.,
4.250%, 06/01/07 ....... 987,203 995,000
800,000 Standard Motor Products Inc.,
Sub. Deb. Cv.,
6.750%, 07/15/09 ....... 658,832 792,000
100,000 Tenneco Automotive Inc., Ser. B,
Sub. Deb.,
11.625%, 10/15/09 ...... 64,691 106,000
------------ ------------
1,710,726 1,893,000
------------ ------------
AVIATION: PARTS AND SERVICES -- 0.4%
1,400,000 GenCorp Inc., Sub. Deb. Cv.,
5.750%, 04/15/07 ....... 1,338,483 1,438,500
------------ ------------
BUSINESS SERVICES -- 0.4%
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) ... 1,463,787 1,377,950
------------ ------------
1,561,287 1,377,950
------------ ------------
CABLE AND SATELLITE -- 0.4%
1,500,000 Charter Communications Inc.,
Cv.,
4.750%, 06/01/06 ....... 1,079,346 1,290,000
------------ ------------
COMMUNICATIONS EQUIPMENT -- 0.8%
1,800,000 Agere Systems Inc.,
Sub. Deb. Cv.,
6.500%, 12/15/09 ....... 1,667,249 1,811,250
1,000,000 Nortel Networks Corp., Cv.,
4.250%, 09/01/08 ....... 977,179 970,000
------------ ------------
2,644,428 2,781,250
------------ ------------
PRINCIPAL MARKET
AMOUNT COST VALUE
--------- ---- ------
ELECTRONICS -- 0.3%
$ 1,100,000 Oak Industries Inc.,
Sub. Deb. Cv.,
4.875%, 03/01/08 ....... $ 828,979 $ 1,137,125
------------ ------------
ENERGY AND UTILITIES -- 0.2%
1,200,000 Mirant Corp., Deb. Cv.,
2.500%, 06/15/21+ (a) .. 886,921 762,000
------------ ------------
FOOD AND BEVERAGE -- 0.0%
100,000 Parmalat Capital, Cv.,
1.000%, 12/31/05+ (a) .. 117,308 22,069
100,000 Parmalat Netherlands BV, Cv.,
0.875%, 06/30/21+ (a) .. 110,542 36,639
------------ ------------
227,850 58,708
------------ ------------
HEALTH CARE -- 0.0%
200,000 Twin Laboratories Inc.,
Sub. Deb.,
10.250%, 05/15/06+ (a) . 98,105 57,000
------------ ------------
TOTAL CORPORATE BONDS .... 10,376,125 10,795,533
------------ ------------
U.S. GOVERNMENT OBLIGATIONS -- 4.4%
15,689,000 U.S. Treasury Bills,
1.116% to 1.705%++,
10/07/04 to 12/30/04 ... 15,660,104 15,659,864
------------ ------------
TOTAL
INVESTMENTS -- 99.7% ... $290,897,046 354,478,630
============
OTHER ASSETS AND LIABILITIES
(NET) -- 0.3% ......................... 1,046,837
------------
NET ASSETS -- 100.0% .................... $355,525,467
============
- ----------------
For Federal tax purposes:
Aggregate cost of investments ........... $291,974,892
============
Gross unrealized appreciation ........... $ 70,439,287
Gross unrealized depreciation ........... (7,935,549)
------------
Net unrealized appreciation
(depreciation) ........................ $ 62,503,738
============
- ----------------
(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, 2004, the Rule 144A securities are considered liquid and the
market value amounted to $1,020,000 or 0.29% of total net assets.
(c) Securities fair valued under procedures established by the Board of
Directors. The procedures may include reviewing available financial
information about the company and reviewing valuation of comparable
securities and other factors on a regular basis. The aggregate value of
such securities is $3,035,015 or 0.85% of total net assets.
+ 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.
9
THE GABELLI EQUITY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (cost $290,897,046) ..... $354,478,630
Cash .......................................... 1,400
Receivable for investments sold ............... 277,485
Receivable for Fund shares sold ............... 1,200,428
Dividends and interest receivable ............. 768,392
Other assets .................................. 2,621
------------
TOTAL ASSETS .................................. 356,728,956
------------
LIABILITIES:
Payable for Fund shares redeemed .............. 628,077
Payable for investment advisory fees .......... 288,421
Payable for distribution fees ................. 72,146
Payable for shareholder services fees ......... 88,613
Payable for shareholder communication fees .... 48,941
Other accrued expenses ........................ 77,291
------------
TOTAL LIABILITIES ............................. 1,203,489
------------
NET ASSETS applicable to 21,255,923
shares outstanding .......................... $355,525,467
============
NET ASSETS CONSIST OF:
Capital stock, at $0.001 par value ............ $ 21,256
Additional paid-in capital .................... 287,475,972
Accumulated (distributions in excess of)
net investment income ....................... 1,790,018
Accumulated net realized gain on investments
and foreign currency transactions ........... 2,655,907
Net unrealized appreciation on investments
and foreign currency translations ........... 63,582,314
------------
TOTAL NET ASSETS .............................. $355,525,467
============
SHARES OF CAPITAL STOCK:
CLASS AAA:
Net Asset Value, offering and redemption price per
share ($355,321,623 / 21,243,708 shares
outstanding; 200,000,000 shares authorized
of $0.001 par value) ........................ $16.73
======
CLASS A:
Net Asset Value and redemption price per share
($123,726 / 7,400 shares outstanding;
50,000,000 shares authorized of
$0.001 par value) ........................... $16.72
======
Maximum sales charge .......................... 5.75%
======
Maximum offering price per share (NAV / .9425,
based on maximum sales charge of 5.75% of
the offering price at September 30, 2004) ... $17.74
======
CLASS B:
Net Asset Value and offering price per share
($1,030 / 61.97 shares outstanding; 50,000,000
shares authorized of $0.001 par value) ...... $16.62(a)
======
CLASS C:
Net Asset Value and offering price per share
($79,088 / 4,753 shares outstanding; 50,000,000
shares authorized of $0.001 par value) ...... $16.64(a)
======
- ---------------
(a) Redemption price varies based on length of time held.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends (net of foreign taxes of $106,636) .............. $ 8,198,013
Interest .................................................. 1,093,407
-----------
TOTAL INVESTMENT INCOME ................................... 9,291,420
-----------
EXPENSES:
Investment advisory fees .................................. 3,186,312
Distribution fees -- Class AAA ............................ 796,500
Distribution fees -- Class A .............................. 40
Distribution fees -- Class B .............................. 8
Distribution fees -- Class C .............................. 131
Shareholder services fees ................................. 361,261
Shareholder communications expenses ....................... 165,659
Custodian fees ............................................ 77,643
Legal and audit fees ...................................... 52,522
Registration fees ......................................... 28,796
Directors' fees ........................................... 22,928
Miscellaneous expenses .................................... 63,053
-----------
TOTAL EXPENSES ............................................ 4,754,853
-----------
NET INVESTMENT INCOME ..................................... 4,536,567
-----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS:
Net realized gain on investments .......................... 8,024,719
Net realized gain on foreign
currency transactions ................................... 4,564
Net change in unrealized appreciation/
depreciation on investments and foreign
currency translations ................................... 33,027,899
-----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS ............................................ 41,057,182
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ......................................... $45,593,749
===========
See accompanying notes to financial statements.
10
THE GABELLI EQUITY INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
------------------ ------------------
OPERATIONS:
Net investment income ........................................................ $ 4,536,567 $ 4,932,398
Net realized gain/(loss) on investments and foreign currency transactions .... 8,029,283 (1,080,553)
Net change in unrealized appreciation/depreciation on investments
and foreign currency translations .......................................... 33,027,899 47,288,390
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ......................... 45,593,749 51,140,235
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class AAA .................................................................. (5,229,584) (4,398,932)
Class A .................................................................... (389) --
Class B .................................................................... (13) --
Class C .................................................................... (259) --
------------ ------------
(5,230,245) (4,398,932)
------------ ------------
Net realized capital gain
Class AAA .................................................................. (1,806,422) --
Class A .................................................................... (135) --
Class B .................................................................... (4) --
Class C .................................................................... (89) --
------------ ------------
(1,806,650) --
------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS .......................................... (7,036,895) (4,398,932)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Class AAA .................................................................... 54,989,849 52,098,140
Class A ...................................................................... 123,156 --
Class B ...................................................................... 1,017 --
Class C ...................................................................... 77,434 --
------------ ------------
Net increase in net assets from capital share transactions ................... 55,191,456 52,098,140
------------ ------------
NET INCREASE IN NET ASSETS ................................................... 93,748,310 98,839,443
NET ASSETS:
Beginning of period .......................................................... 261,777,157 162,937,714
------------ ------------
End of period (including undistributed net investment income of
$0 and $672,481, respectively) ............................................. $355,525,467 $261,777,157
============ ============
See accompanying notes to financial statements.
11
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. 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 U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates. The following is a summary of significant accounting policies
followed by the Fund in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange or traded in the U.S. over-the-counter market for
which market quotations are readily available are valued at the last quoted sale
price or a market's official closing price as of the close of business on the
day the securities are being valued. If there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day. If no bid or asked prices are quoted on such
day, the security is valued at the most recently available price or, if the
Board of Directors (the "Board") so determines, by such other method as the
Board shall determine in good faith, to reflect its fair market value. Portfolio
securities traded on more than one national securities exchange or market are
valued according to the broadest and most representative market, as determined
by Gabelli Funds, LLC (the "Adviser").
Portfolio securities primarily traded on foreign markets are generally valued at
the preceding closing values of such securities on their respective exchanges or
if after the close of the foreign markets, but prior to the close of business on
the day the securities are being valued, market conditions change significantly,
certain foreign securities may be fair valued pursuant to procedures established
by the Board. Debt instruments that are not credit impaired with remaining
maturities of 60 days or less are valued at amortized cost, unless the Board
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. Debt
instruments having a maturity greater than 60 days for which 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 such day, the security is valued
using the closing bid price. Futures contracts are valued at the closing
settlement price of the exchange or board of trade on which the applicable
contract is traded.
Securities and assets for which market quotations are not readily available are
valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Board. Fair valuation
methodologies and procedures may include, but are not limited to: analysis and
review of available financial and non-financial information about the company;
comparisons to the valuation and changes in valuation of similar securities,
including a comparison of foreign securities to the equivalent U.S. dollar value
ADR securities at the close of the U.S. exchange; and evaluation of any other
information that could be indicative of the value of the security.
12
THE GABELLI EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
primary government securities dealers recognized by the Federal Reserve Board,
with member banks of the Federal Reserve System or with other brokers or dealers
that meet credit guidelines established by the Adviser and reviewed by the
Board. Under the terms of a typical repurchase agreement, the Fund takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
The Fund will always receive and maintain securities as collateral whose market
value, including accrued interest, will be at least equal to 102% of the dollar
amount invested by the Fund in each agreement. The Fund will make payment for
such securities only upon physical delivery or upon evidence of book entry
transfer of the collateral to the account of the custodian. To the extent that
any repurchase transaction exceeds one business day, the value of the collateral
is marked-to-market on a daily basis to maintain the adequacy of the collateral.
If the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited. At
September 30, 2004, there were no open 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, 2004, 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 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.
The use of forward foreign exchange contracts does not eliminate fluctuations in
the underlying prices of the Fund's portfolio securities, but it does establish
a rate of exchange that can be achieved in the future. Although forward foreign
exchange contracts limit the risk of loss due to a decline in the value of the
hedged currency, they also limit any potential gain that might result should the
value of the currency increase. In addition, the Fund could be exposed to risks
if the counterparties to the contracts are unable to meet the terms of their
contracts. At September 30, 2004, there were no open forward foreign exchange
contracts.
13
THE GABELLI EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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 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 dividends and capital
gain distributions are determined in accordance with Federal income tax
regulations which may differ from U.S. generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund, timing differences and
differing characterization of distributions made by the Fund.
For the fiscal year ended September 30, 2004 reclassifications were made to
increase accumulated net investment income by $4,565 and decrease accumulated
net realized gain on investments by $4,565.
For the fiscal years ended September 30, 2004 and 2003, the tax character of
distributions is all ordinary income.
EXPENSES. Certain administrative expenses are common to, and allocated among,
the Portfolios and then among the Classes of Shares. Such allocations are made
on the basis of each Portfolio's and Class' average net assets or other criteria
directly affecting the expenses as determined by the Adviser pursuant to
procedures established by the Board.
PROVISION FOR INCOME TAXES. The Fund intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). It is the Fund's policy to comply with the
requirements of the Code applicable to regulated investment companies and to
distribute substantially all of its net investment company taxable income and
net capital gains. Therefore, no provision for Federal income taxes is required.
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.
14
THE GABELLI EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The difference between book and tax basis unrealized appreciation is primarily
due to deferral of losses from wash sales for tax purposes.
As of September 30, 2004, the components of accumulated earnings/(losses) on a
tax basis were as follows:
Undistributed ordinary income
(inclusive of short-term capital gains) ...... $ 1,374,937
Undistributed long-term capital gains .......... 4,171,499
Net unrealized appreciation .................... 62,503,738
Other temporary differences .................... (21,935)
-----------
Total accumulated earnings ................... $68,028,239
===========
The Fund utilized capital loss carryforwards of $478,901 during fiscal year
2004.
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 has adopted a distribution plan (the
"Plan") for each class of shares pursuant to Rule 12b-1 under the 1940 Act.
Gabelli & Company, Inc. ("Gabelli & Company"), an affiliate of the Adviser,
serves as distributor of the Fund. Under the Class AAA, Class A, Class B and
Class C Share Plans, payments are authorized to Gabelli & Company at annual
rates of 0.25%, 0.25%, 1.00% and 1.00%, respectively, of the average daily net
assets of those Classes, the annual limitations under each Plan. Such payments
are accrued daily and paid monthly.
5. PORTFOLIO SECURITIES. Purchases and proceeds from the sales of securities for
the fiscal year ended September 30, 2004, other than short term securities,
aggregated $85,582,284 and $35,946,446, respectively.
6. TRANSACTIONS WITH AFFILIATES. During the fiscal year ended September 30,
2004, the Fund paid brokerage commissions of $119,977 to Gabelli & Company.
During the fiscal year ended September 30, 2004, Gabelli & Company received $905
from investors representing commissions (sales charges and underwriting fees) on
sales and redemptions of Fund shares.
The cost of calculating the Fund's net asset value per share is a Fund expense
pursuant to the Advisory Agreement. During the year ended September 30, 2004,
the Fund reimbursed the Adviser $34,800 in connection with the cost of computing
the Fund's net asset value, which is included in miscellaneous expenses in the
Statement of Operations.
7. LINE OF CREDIT. The Fund has access to an unsecured line of credit of 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. During the year ended September 30, 2004, there were no
borrowings from the line of credit.
15
THE GABELLI EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
8. CAPITAL STOCK TRANSACTIONS. The Fund offers four classes of shares -- Class
AAA Shares, Class A Shares, Class B Shares and Class C Shares. Class AAA Shares
are offered through selected broker/dealers without a sales charge. Class A
Shares are subject to a maximum front-end sales charge of 5.75%. Class B Shares
are subject to a contingent deferred sales charge (CDSC) upon redemption within
six years of purchase. The applicable CDSC is equal to a declining percentage of
the lesser of the net asset value per share at the date of the original purchase
or at the date of redemption, based on the length of time held. Class C Shares
are subject to a 1% CDSC for one year after purchase. As of July 27, 2004, Class
B Shares are available only through exchange of Class B Shares of other Funds
distributed by Gabelli & Company.
Effective November 1, 2004, the Fund will impose a 2.00% redemption fee on Class
AAA, Class A, Class B and Class C shares that are purchased on or after November
1, 2004, and redeemed or exchanged within 60 days after the date of a purchase.
The redemption fee is deducted from the proceeds otherwise payable to the
redeeming shareholders and retained by the Fund.
16
THE GABELLI EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Transactions in shares of capital stock were as follows:
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
CLASS AAA CLASS AAA
---------------------------- ----------------------------
Shares sold ........................................ 7,919,728 $130,184,333 14,773,776 $ 197,502,549
Shares issued upon reinvestment of dividends ....... 393,424 6,453,128 292,370 4,080,708
Shares redeemed .................................... (4,998,860) (81,647,612) (10,797,815) (149,485,117)
---------- ------------ ----------- -------------
Net increase ....................................... 3,314,292 $ 54,989,849 4,268,331 $ 52,098,140
========== ============ =========== =============
CLASS A CLASS A
---------------------------- ----------------------------
Shares sold ........................................ 7,383 $ 122,882 -- --
Shares issued upon reinvestment of dividends ....... 17 274 -- --
Shares redeemed .................................... -- -- -- --
---------- ------------ ----------- -------------
Net increase ....................................... 7,400 $ 123,156 -- --
========== ============ =========== =============
CLASS B CLASS B
---------------------------- ----------------------------
Shares sold ........................................ 61 $ 1,000 -- --
Shares issued upon reinvestment of dividends ....... 1 17 -- --
Shares redeemed .................................... -- -- -- --
---------- ------------ ----------- -------------
Net increase ....................................... 62 $ 1,017 -- --
========== ============ =========== =============
CLASS C CLASS C
---------------------------- ----------------------------
Shares sold ........................................ 4,732 $ 77,086 -- --
Shares issued upon reinvestment of dividends ....... 21 348 -- --
Shares redeemed .................................... -- -- -- --
---------- ------------ ----------- -------------
Net increase ....................................... 4,753 $ 77,434 -- --
========== ============ =========== =============
9. OTHER MATTERS. On October 7, 2003, the Fund's Adviser received a subpoena
from the Attorney General of the State of New York requesting information on
mutual fund shares trading practices. The Adviser has also received a subpoena
and letters from the SEC requesting information about mutual fund trading
practices and valuation of portfolio securities. The Adviser is responding to
these requests. The Fund does not believe that these matters will have a
material adverse effect on the Fund's financial position or the results of its
operations.
10. INDEMNIFICATIONS. The Fund enters into contracts that contain a variety of
indemnifications. The Fund's maximum exposure under these arrangements is
unknown. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
17
THE GABELLI EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each period:
INCOME
FROM INVESTMENT OPERATIONS DISTRIBUTIONS
------------------------------------------------------ --------------------------------------
Net
Net Asset Realized and Total Net
Period Value, Net Unrealized from Net Realized
Ended Beginning Investment Gain/(Loss) on Investment Investment Gain on Total
September 30 of Period Income/(Loss) Investments Operations Income Investments Distributions
- ------------ --------- ------------- -------------- ---------- ---------- ----------- -------------
CLASS AAA
2004 $14.60 $0.23 $ 2.26 $ 2.49 $(0.27) $(0.09) $(0.36)
2003 11.93 0.28 2.64 2.92 (0.25) -- (0.25)
2002 13.88 0.23 (1.79) (1.56) (0.23) (0.16) (0.39)
2001 16.35 0.25 (0.28) (0.03) (0.36) (2.08) (2.44)
2000 17.58 0.46 0.81 1.27 (0.36) (2.14) (2.50)
CLASS A
2004(a) $16.40 $0.16 $ 0.43 $ 0.59 $(0.20) $(0.07) $(0.27)
CLASS B
2004(a) $16.40 $0.07 $ 0.42 $ 0.49 $(0.20) $(0.07) $(0.27)
CLASS C
2004(a) $16.40 $0.08 $ 0.43 $ 0.51 $(0.20) $(0.07) $(0.27)
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
------------------------------------------------------------
Net Asset Net Assets Net
Period Value, End of Investment Portfolio
Ended End of Total Period Income/ Operating Turnover
September 30 Period Return+ (in 000's) (Loss) Expenses Rate
- ------------ ------ ------- --------- ---------- --------- ----------
CLASS AAA
2004 $16.73 17.13% $355,321 1.42% 1.49% 12%
2003 14.60 24.59 261,777 2.09 1.49 27
2002 11.93 (11.58) 162,938 1.75 1.50 12
2001 13.88 (0.43) 121,499 1.65 1.55 41
2000 16.35 8.41 89,164 2.85 1.66(c) 33
CLASS A
2004(a) $16.72 3.62% $124 1.33%(b) 1.49%(b) 12%
CLASS B
2004(a) $16.62 3.00% $1 0.56%(b) 2.24%(b) 12%
CLASS C
2004(a) $16.64 3.13% $79 0.62%(b) 2.24%(b) 12%
- ---------------------
+ 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) From the commencement of offering Class A, Class B and Class C Shares on
December 31, 2003.
(b) Annualized.
(c) The Fund incurred interest expense during the year ended September 30, 2000.
If interest expense had not been incurred, the ratio of operating expenses
to average net assets would have been 1.61%.
See accompanying notes to financial statements.
18
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
The Gabelli Equity Income Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of The Gabelli Equity Income Fund (the "Fund"), a
series of Gabelli Equity Series Funds, Inc., as of September 30, 2004, 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. 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, 2004, 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 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, 2004, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and its financial highlights for each of the five
years in the period then ended, in conformity with U.S. generally accepted
accounting principles.
/s/ Ernst & Young LLP
New York, New York
November 12, 2004
19
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 800-GABELLI
(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 24 Chairman of the Board and Chief Executive Director of Morgan Group
Director and Officer of Gabelli Asset Management Inc. and Holdings, Inc. (holding
Chief Investment Officer Chief Investment Officer of Gabelli Funds, company)
Age: 62 LLC and GAMCO Investors, Inc.; Vice Chairman
and Chief Executive Officer of Lynch
Interactive Corporation (multimedia
and services)
JOHN D. GABELLI Since 1991 10 Senior Vice President of Gabelli & Company, --
Director Inc.; Director of Gabelli Advisers, Inc.
Age: 60
KARL OTTO POHL Since 1992 34 Member of the Shareholder Committee of Sal Director of Gabelli Asset
Director Oppenheim Jr. & Cie (private investment Management Inc. (investment
Age: 74 bank); Former President of the management); Chairman,
Deutsche Bundesbank and Chairman of its Incentive Capital and
Central Bank Council (1980-1991) Incentive Asset Management
(Zurich); Director at Sal
Oppenheim Jr. & Cie, Zurich
NON-INTERESTED DIRECTORS:
- ------------------------
ANTHONY J. COLAVITA Since 1991 36 President and Attorney at Law in the law firm --
Director of Anthony J. Colavita, P.C.
Age: 68
VINCENT D. ENRIGHT Since 1991 13 Former Senior Vice President and Chief Director of Aphton Corporation
Director Financial Officer of KeySpan Energy (biopharmaceutical company)
Age: 60 Corporation
ROBERT J. MORRISSEY Since 1991 10 Partner in the law firm of Morrissey, Hawkins --
Director & Lynch
Age: 65
20
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 of Lynch Corporation
Director Emeritus, Pace University (diversified manufacturing)
Age: 79
ANTHONIE C. VAN EKRIS Since 1991 20 Managing Director of BALMAC Director of Aurado Energy, Inc.
Director International, Inc. (commodities) (oil & gas operations)
Age: 70
SALVATORE J. ZIZZA Since 2001 24 Chairman, Hallmark Electrical Suppliers Corp.; Director of Hollis Eden
Director Former Executive Vice President of FMG Group Pharmaceuticals; Director of
Age: 58 (OTC), a healthcare provider Earl Scheib, Inc. (automotive
services)
OFFICERS:
- ---------
BRUCE N. ALPERT Since 1991 -- Executive Vice President and Chief Operating --
President and Treasurer Officer of Gabelli Funds, LLC since 1988 and
Age: 52 an officer of all mutual funds advised by
Gabelli Funds, LLC and its affiliates.
Director and President of Gabelli Advisers, Inc.
JAMES E. MCKEE Since 1995 -- Vice President, General Counsel and Secretary --
Secretary of Gabelli Asset Management Inc. since 1999
Age: 41 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.
- --------------------------------------------------------------------------------
2004 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the fiscal year ended September 30, 2004, the Fund paid to shareholders
ordinary income dividends (comprised of net investment income and short-term
capital gains) totaling $0.36, $0.27, $0.27 and $0.27 per share for Class
AAA, Class A, Class B and Class C, respectively. For the fiscal year ended
September 30, 2004, 85.79% of the ordinary income dividend qualifies for the
dividend received deduction available to corporations and 100% of the
ordinary income distribution was qualifying dividend income. An estimate of
qualified dividend income of $7,036,895 was received by the Fund through
September 30, 2004 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 2004 which was derived from U.S. Treasury securities was 0.77%. 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 2004. 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.
- --------------------------------------------------------------------------------
21
GABELLI FAMILY OF FUNDS
VALUE ________________________________________
GABELLI ASSET FUND
Seeks to invest primarily in a diversified portfolio of common stocks selling at
significant discounts to their private market value. The Fund's primary
objective is growth of capital. (MULTICLASS)
PORTFOLIO MANAGER: MARIO J. GABELLI, CFA
GABELLI BLUE CHIP VALUE FUND
Seeks long term growth of capital through investment primarily in the common
stocks of established companies which are temporarily out of favor. The fund's
objective is to identify a catalyst or sequence of events that will return the
company to a higher value.
(MULTICLASS) PORTFOLIO MANAGER: BARBARA MARCIN, CFA
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.
(MULTICLASS) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA
GABELLI WESTWOOD SMALLCAP EQUITY FUND
Seeks to invest primarily in smaller capitalization equity securities - market
caps of $2.5 billion or less. The Fund's primary objective is long-term capital
appreciation. (MULTICLASS) TEAM MANAGED
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. (MULTICLASS) 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. (MULTICLASS) 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. (MULTICLASS)
PORTFOLIO MANAGER: CAESAR BRYAN
GABELLI UTILITIES FUND
Seeks to provide a high level of total return through a combination of capital
appreciation and current income. (MULTICLASS) TEAM MANAGED
MERGER AND ARBITRAGE _____________________
GABELLI ABC FUND
Seeks to invest in securities with attractive opportunities for appreciation or
investment income. The Fund's primary objective is total return in various
market conditions without excessive risk of capital loss.
(NO-LOAD) 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
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). INVESTORS SHOULD CONSIDER
THE INVESTMENT OBJECTIVES, RISKS AND CHARGES AND EXPENSES OF THE FUND CAREFULLY
BEFORE INVESTING. THE PROSPECTUS CONTAINS MORE COMPLETE INFORMATION
ABOUT THIS AND OTHER MATTERS AND SHOULD BE READ CAREFULLY BEFORE INVESTING.
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 James E. McKee
PRESIDENT AND TREASURER 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.
- --------------------------------------------------------------------------------
GAB444Q304SR
[GRAPHIC OMITTED]
PICTURE OF MARIO GABELLI
THE
GABELLI
EQUITY
INCOME
FUND
ANNUAL REPORT
SEPTEMBER 30, 2004
THE GABELLI WOODLAND SMALL CAP VALUE FUND
ANNUAL REPORT (A)
SEPTEMBER 30, 2004
TO OUR SHAREHOLDERS,
During the fiscal year ended September 30, 2004, the Gabelli Woodland
Small Cap Value Fund (the "Fund") rose 21.2% while the Russell 2000 Index rose
18.8%.
Enclosed is the investment portfolio and financial statements as of
September 30, 2004.
COMPARATIVE RESULTS
- ---------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS -- SEPTEMBER 30, 2004 (B)
- ---------------------------------------------------------------------------------------------
CLASS AAA SHARES CLASS A SHARES CLASS B SHARES CLASS C SHARES
- ---------------------------------------------------------------------------------------------
Quarter ................. (1.24)% (1.16)% (0.84)% (1.40)%
(6.85)(c) (5.80)(d) (2.39)(d)
Year to Date ............ 6.23 6.32 7.63 5.68
0.24(c) 2.63(d) 4.68(d)
One Year ................ 21.22 21.34 22.91 20.33
14.41(c) 17.91(d) 19.33(d)
Since Inception (e) ..... 15.25 15.25 16.22 14.58
11.42(c) 14.17(d) 14.58(d)
(a) THE FUND'S FISCAL YEAR ENDS SEPTEMBER 30.
(b) TOTAL RETURNS AND AVERAGE ANNUAL RETURNS REFLECT CHANGES IN SHARE PRICE
AND REINVESTMENT OF DIVIDENDS AND ARE NET OF EXPENSES. RETURNS REPRESENT
PAST PERFORMANCE AND DO NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS
AND THE PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN SHARES ARE
REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
PERFORMANCE RESULTS FOR PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED. THE
RUSSELL 2000 INDEX IS AN UNMANAGED INDICATOR OF STOCK MARKET PERFORMANCE.
DIVIDENDS ARE CONSIDERED REINVESTED. THE ADVISER REIMBURSED EXPENSES TO
LIMIT THE EXPENSE RATIO. HAD SUCH LIMITATION NOT BEEN IN PLACE, RETURNS
WOULD HAVE BEEN LOWER. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE
PERFORMANCE DATA PRESENTED. VISIT WWW.GABELLI.COM TO OBTAIN PERFORMANCE
INFORMATION AS OF THE MOST RECENT MONTH-END. INVESTORS SHOULD CONSIDER THE
INVESTMENT OBJECTIVES, RISKS AND CHARGES AND EXPENSES OF THE FUND BEFORE
INVESTING. THE PROSPECTUS CONTAINS MORE COMPLETE INFORMATION ABOUT THIS
AND OTHER MATTERS AND SHOULD BE READ CAREFULLY BEFORE INVESTING.
(c) INCLUDES THE EFFECT OF THE MAXIMUM 5.75% SALES CHARGE AT THE BEGINNING OF
THE PERIOD.
(d) INCLUDES THE EFFECT OF THE APPLICABLE CONTINGENT DEFERRED SALES CHARGE AT
THE END OF THE PERIOD SHOWN FOR CLASS B AND CLASS C SHARES, RESPECTIVELY.
(e) TOTAL RETURNS FROM COMMENCEMENT OF INVESTMENT OPERATIONS ON DECEMBER 31,
2002.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
We have separated the portfolio manager's commentary from the financial
statements and investment portfolio due to new corporate governance
regulations stipulated by the Sarbanes-Oxley Act of 2002. We have done this to
ensure that the content of the portfolio manager's commentary is unrestricted.
The financial statements and investment portfolio are mailed separately from
the commentary. Both the commentary and the financial statements, including
the portfolio of investments, will be available on our website at
www.gabelli.com/funds.
- --------------------------------------------------------------------------------
PERFORMANCE DISCUSSION
Fund performance for the fiscal year ending September 30, 2004
outperformed the Russell 2000. The Class AAA Shares of the Fund gained 21.2%
versus a gain of 18.8% for the Russell 2000 Index. Calendar year-to-date the
Fund is up 6.3% versus a gain of 3.7% for the Russell 2000.
Last year when we wrote to you the war in Iraq was clearly the major
challenge confronting us followed by the economic recovery, corporate scandals
and the threat of terrorist activity. Over the past year, we have seen the
economy continue to move forward and corporate scandals appear to be receding.
However, the ongoing "civil war" in Iraq and rising raw materials cost continue
to be major impediments to the market. In addition the dramatic rise in fuel
costs have imposed a "tax" that is putting a drag on overall consumer
discretionary spending. It always seems that the moment we solve/settle one
problem another rises to take its place. That is the long-term history of the
market. We have and will continue to deal with that reality.
During the past year we had several investments add to our overall
performance. The three biggest contributors were Texas Industries, Cole
National, and Pentair. Texas Industries rose 109.1% over the last twelve months.
As a leading supplier of steel and cement, they have been able to take advantage
of higher steel pricing and strong demand for cement. Cole National was
purchased for the portfolio in June 2003 and was sold less than a year later in
May 2004 due to a merger agreement with Luxottica Group at a gain of greater
than 65%. Finally, Pentair rose 75.2% over the past twelve months. Pentair has
benefited from a strong management group that has restructured and repositioned
the company from multiple businesses into an industry leading Water and
Enclosures Company.
We were not without our share of disappointments during the past year. Two
disappointments were Wilson Greatbatch and Concorde Career Colleges. We
typically sell stocks for two reasons: 1) they reach our appraisal of their
intrinsic value or 2) we lose confidence in the company (and our valuation
estimate) due to a change in the competitive landscape or an unforeseen negative
event, which can include management misallocating capital. For a variety of
reasons, we lost confidence in each of these companies and sold them at a
discount to their original cost.
We remain disciplined in our investment approach. We are focused on
investing in companies with positive and growing earnings and free cash flow,
operated by management teams that are excellent allocators of capital, and trade
at prices we believe are significantly less than our appraisal of their
intrinsic value.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GABELLI
WOODLAND SMALL CAP VALUE FUND CLASS AAA AND THE RUSSELL 2000 INDEX
[GRAPHIC OMITTED]
PLOT POINTS FOLLOW:
Gabelli Woodland Small
Cap Value Fund (Class AAA) Russell 2000 Index
12/31/02 $10,000 $10,000
9/30/03 10,580 12,858
9/30/04 12,825 15,271
- -------------------------------------------------
Average Annual Total Return*
- -------------------------------------------------
1 Year Life of Fund
- -------------------------------------------------
Class AAA 21.22% 15.25%
Russell 2000 18.77 27.38
- -------------------------------------------------
*Past performance is not predictive of future results. The performance tables
and graph do not reflect the deduction of taxes that a shareholder would pay on
fund distributions or the redemption of fund shares.
2
GABELLI WOODLAND SMALL CAP VALUE FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
For the Six Month Period from April 1, 2004 through September 30, 2004
EXPENSE TABLE
- --------------------------------------------------------------------------------
We believe it is important for you to understand the impact of fees and expenses
regarding your investment. All mutual funds have operating expenses. As a
shareholder of the Fund, you incur ongoing costs, which include costs for
portfolio management, administrative services, and shareholder reports (like
this one), among others. Operating expenses, which are deducted from a fund's
gross income, directly reduce the investment return of the Fund. When a fund's
expenses are expressed as a percentage of its average net assets, this figure is
known as the expense ratio. The following examples are intended to help you
understand the ongoing fees (in dollars) of investing in your Fund and to
compare these costs with those of other mutual funds. The examples are based on
an investment of $1,000 made at the beginning of the period shown and held for
the entire period.
The Expense Table below illustrates your Fund's costs in two ways:
ACTUAL FUND RETURN: This section helps you to estimate the actual expenses that
you paid over the period after any fee waivers and expense reimbursements. The
"Ending Account Value" shown is derived from the Fund's ACTUAL return, and the
"Expenses Paid During Period" shows the dollar amount that would have been paid
by an investor who started with $1,000 in the Fund. You may use this
information, together with the amount you invested, to estimate the expenses
that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your Fund under the heading "Expenses Paid During Period."
HYPOTHETICAL 5% RETURN: This section is intended to help you compare your Fund's
costs with those of other mutual funds. It assumes that the Fund had a return of
5% before expenses during the period shown, but that the expense ratio is
unchanged. In this case -- because the return used is NOT the Fund's actual
return -- the results do not apply to your investment. This example is useful in
making comparisons because the Securities and Exchange Commission requires all
mutual funds to calculate expenses based on a 5% return. You can assess your
Fund's costs by comparing this hypothetical example with the hypothetical
examples that appear in shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight and help
you compare your ongoing costs only and do not reflect any transactional costs
such as sales charges (loads), and redemption fees, which are described in the
Prospectus. If these costs were applied to your account, your costs would be
higher. The "Annualized Expense Ratio" represents the actual expenses for the
period and may be different from the expense ratio in the Financial Highlights
which is for the year ended September 30, 2004.
Beginning Ending Annualized Expenses
Account Value Account Value Expense Paid During
4/1/04 9/30/04 Ratio Period*
- --------------------------------------------------------------------------------
WOODLAND SMALL CAP VALUE FUND
- --------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class AAA $1,000.00 $1,010.30 2.00% $10.05
Class A $1,000.00 $1,011.10 2.00% $10.06
Class B $1,000.00 $1,019.60 2.75% $13.88
Class C $1,000.00 $1,007.20 2.75% $13.80
HYPOTHETICAL 5% RETURN
Class AAA $1,000.00 $1,015.00 2.00% $10.08
Class A $1,000.00 $1,015.00 2.00% $10.08
Class B $1,000.00 $1,011.25 2.75% $13.83
Class C $1,000.00 $1,011.25 2.75% $13.83
* Expenses are equal to the Fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by the number of days in the
most recent fiscal half-year, then divided by 366.
3
SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED)
The SEC adopted a requirement that all Funds present their categories of
portfolio holdings in a table, chart or graph format in their annual and
semi-annual shareholder reports, whether or not a schedule of investments is
utilized. The following table which presents portfolio holdings as a percent of
total net assets is provided in compliance with such requirement.
THE GABELLI WOODLAND SMALL CAP VALUE FUND
Diversified Industrial ........................ 16.2%
Health Care ................................... 11.0%
Consumer Products ............................. 10.7%
Business Services ............................. 9.5%
Food and Beverage ............................. 7.5%
Computer Software and Services ................ 7.0%
U.S. Government Obligations ................... 6.1%
Equipment and Supplies ........................ 4.5%
Hotels and Gaming ............................. 4.1%
Financial Services ............................ 3.1%
Consumer Services ............................. 2.4%
Publishing .................................... 2.4%
Specialty Chemicals ........................... 2.4%
Retail ........................................ 2.3%
Energy and Utilities .......................... 2.1%
Aerospace ..................................... 1.9%
Automotive: Parts and Accessories ............. 1.8%
Entertainment ................................. 1.4%
Manufactured Housing and
Recreational Vehicles ...................... 1.2%
Agriculture ................................... 0.6%
Educational Services .......................... 0.4%
Other Assets and Liabilities - Net ............ 1.4%
------
100.0%
======
THE FUND FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SEC FOR THE
FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q, THE FIRST OF WHICH
WILL BE FILED FOR THE QUARTER ENDING DECEMBER 31, 2004. SHAREHOLDERS MAY OBTAIN
THIS INFORMATION AT WWW.GABELLI.COM OR BY CALLING THE FUND AT
800-GABELLI(800-422-3554). THE FUND'S FORM N-Q WILL BE AVAILABLE ON THE SEC'S
WEBSITE AT WWW.SEC.GOV AND MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S
PUBLIC REFERENCE ROOM IN WASHINGTON, DC. INFORMATION ON THE OPERATION OF THE
PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330.
- --------------------------------------------------------------------------------
A description of the Fund's proxy voting policies and procedures and how the
Fund voted proxies relating to portfolio securities during the most recent
12-month period ended June 30, 2004 are available without charge (i) upon
request, by calling 800-GABELLI (800-422-3554); (ii) by writing to The
Gabelli Funds at One Corporate Center, Rye, NY 10580-1422; and (iii) on the
Securities and Exchange Commission's website at www.sec.gov.
- --------------------------------------------------------------------------------
4
THE GABELLI WOODLAND SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS -- SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS -- 92.5%
AEROSPACE -- 1.9%
1,080 Alliant Techsystems Inc.+ .. $ 56,717 $ 65,340
---------- ----------
AGRICULTURE -- 0.6%
810 Delta & Pine Land Co. ...... 19,426 21,667
---------- ----------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 1.8%
980 American Axle & Manufacturing
Holdings Inc. ............ 33,716 28,675
1,450 TBC Corp.+ ................. 34,610 32,393
---------- ----------
68,326 61,068
---------- ----------
BUSINESS SERVICES -- 9.5%
1,900 Acxiom Corp. ............... 32,449 45,106
3,310 Adesa Inc.+ ................ 54,439 54,383
4,140 Bowne & Co. Inc. ........... 54,461 53,779
4,760 Danka Business Systems
plc, ADR+ ................ 18,939 18,088
1,670 HNI Corp. .................. 55,127 66,099
3,060 The Brink's Co. ............ 55,300 92,320
---------- ----------
270,715 329,775
---------- ----------
COMPUTER SOFTWARE AND SERVICES -- 7.0%
1,140 Harland Co., John H. ....... 34,323 35,739
3,952 Intergraph Corp.+ .......... 93,948 107,376
2,670 Plato Learning Inc.+ ....... 23,644 23,603
6,290 Stellent Inc.+ ............. 53,097 48,496
3,030 Tyler Technologies Inc.+ ... 27,107 26,785
---------- ----------
232,119 241,999
---------- ----------
CONSUMER PRODUCTS -- 10.7%
1,570 Alberto-Culver Co. ......... 57,045 68,263
1,810 Brunswick Corp. ............ 51,537 82,826
1,335 Church & Dwight Co. Inc. ... 30,761 37,460
7,950 CNS Inc. ................... 83,561 87,450
1,430 Jarden Corp.+ .............. 42,142 52,181
3,390 ValueVision Media Inc.,
Cl. A+ ................... 53,942 45,392
---------- ----------
318,988 373,572
---------- ----------
CONSUMER SERVICES -- 2.4%
4,870 Insurance Auto
Auctions Inc.+ ........... 66,324 83,520
---------- ----------
DIVERSIFIED INDUSTRIAL -- 16.2%
1,690 Albany International Corp.,
Cl. A .................... 50,956 50,379
6,590 Apogee Enterprises Inc. .... 71,373 85,209
960 Carlisle Companies Inc. .... 48,379 61,373
260 ESCO Technologies Inc.+ .... 13,956 17,617
2,740 Griffon Corp.+ ............. 50,989 57,814
3,440 Material Sciences Corp.+ ... 35,661 46,406
MARKET
SHARES COST VALUE
------ ---- ------
1,110 Matthews International Corp.,
Cl. A .................... $ 34,845 $ 37,607
3,850 Pentair Inc. ............... 82,980 134,403
1,410 Texas Industries Inc. ...... 37,393 72,530
---------- ----------
426,532 563,338
---------- ----------
EDUCATIONAL SERVICES -- 0.4%
810 Concorde Career
Colleges Inc.+ ........... 17,581 12,450
---------- ----------
ENERGY AND UTILITIES -- 2.1%
956 ALLETE Inc. ................ 31,380 31,070
3,850 Key Energy Services Inc.+ .. 39,771 42,543
---------- ----------
71,151 73,613
---------- ----------
ENTERTAINMENT -- 1.4%
5,000 Topps Co. Inc. ............. 46,074 48,900
---------- ----------
EQUIPMENT AND SUPPLIES -- 4.5%
2,090 Tennant Co. ................ 77,110 84,708
1,060 Toro Co. ................... 54,527 72,398
---------- ----------
131,637 157,106
---------- ----------
FINANCIAL SERVICES -- 3.1%
3,600 TCF Financial Corp. ........ 78,811 109,044
---------- ----------
FOOD AND BEVERAGE -- 7.5%
7,120 Del Monte Foods Co.+ ....... 67,822 74,689
1,580 Ionics Inc.+ ............... 42,110 42,660
2,030 PepsiAmericas Inc. ......... 31,560 38,773
2,910 Triarc Companies Inc.,
Cl. A .................... 25,899 33,261
6,190 Triarc Companies Inc.,
Cl. B .................... 63,273 70,999
---------- ----------
230,664 260,382
---------- ----------
HEALTH CARE -- 11.0%
1,663 Fisher Scientific
International Inc.+ ...... 64,117 97,003
1,680 Laboratory Corporation of
America Holdings+ ........ 54,002 73,450
4,260 Lifecore Biomedical Inc.+ .. 32,392 29,820
1,400 NeighborCare Inc.+ ......... 30,878 35,490
2,000 PolyMedica Corp. ........... 60,168 61,600
2,210 SurModics Inc.+ ............ 48,957 52,487
840 Techne Corp.+ .............. 30,434 32,071
---------- ----------
320,948 381,921
---------- ----------
HOTELS AND GAMING -- 4.1%
3,200 Gaylord Entertainment Co.+ . 78,996 99,200
2,390 Vail Resorts Inc.+ ......... 39,631 43,187
---------- ----------
118,627 142,387
---------- ----------
See accompanying notes to financial statements.
5
THE GABELLI WOODLAND SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS -- SEPTEMBER 30, 2004 (CONTINUED)
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
MANUFACTURED HOUSING AND RECREATIONAL VEHICLES -- 1.2%
4,100 Champion Enterprises Inc.+ . $ 43,582 $ 42,189
---------- ----------
PUBLISHING -- 2.4%
2,690 Hollinger International Inc.,
Cl. A .................... 36,338 46,510
2,140 Journal Communications Inc.,
Cl. A .................... 39,582 37,536
---------- ----------
75,920 84,046
---------- ----------
RETAIL -- 2.3%
2,810 Office Depot Inc.+ ......... 42,368 42,234
1,612 The Sports Authority Inc.+ . 48,351 37,399
---------- ----------
90,719 79,633
---------- ----------
SPECIALTY CHEMICALS -- 2.4%
1,040 Cytec Industries Inc. ...... 38,251 50,908
1,220 Fuller (H.B.) Co. .......... 30,775 33,428
---------- ----------
69,026 84,336
---------- ----------
TOTAL COMMON STOCKS ........ 2,753,887 3,216,286
---------- ----------
PRINCIPAL MARKET
AMOUNT COST VALUE
--------- ---- ------
U.S. GOVERNMENT OBLIGATIONS -- 6.1%
$212,000 U.S. Treasury Bill,
1.700%++, 12/23/04 ....... $ 211,184 $ 211,195
---------- ----------
TOTAL
INVESTMENTS -- 98.6% ..... $2,965,071 3,427,481
==========
OTHER ASSETS AND LIABILITIES
(NET) -- 1.4% ......................... 48,749
----------
NET ASSETS -- 100.0% .................... $3,476,230
==========
- ----------------
For Federal tax purposes:
Aggregate cost of investments ........... $2,970,589
==========
Gross unrealized appreciation ........... $ 507,886
Gross unrealized depreciation ........... (50,994)
----------
Net unrealized appreciation
(depreciation) ........................ $ 456,892
==========
- ----------------
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR - American Depository Receipt.
- --------------------------------------------------------------------------------
2004 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the fiscal year ended September 30, 2004, the Fund paid to shareholders,
on December 22, 2003 an ordinary income dividend (comprised of short-term
capital gains) totaling $0.0328 per share. For the fiscal year ended
September 30, 2004, 12.02% of the ordinary income dividend qualifies for the
dividend received deduction available to corporations and 100% of the
ordinary income distribution was qualifying dividend income. An estimate of
qualified dividend income of $23,593 was received by the Fund through
September 30, 2004 that qualifies for a reduced tax rate pursuant to the Jobs
and Growth Tax Relief Reconciliation Act of 2003.
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
6
THE GABELLI WOODLAND SMALL CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (cost $2,965,071) ............. $3,427,481
Cash ................................................ 67,569
Dividends receivable ................................ 422
Receivable from Adviser ............................. 21,992
Receivable for Fund shares sold ..................... 356
Other assets ........................................ 331
----------
TOTAL ASSETS ........................................ 3,518,151
----------
LIABILITIES:
Payable for investments purchased ................... 423
Payable for distribution fees ....................... 718
Payable for legal and audit fees .................... 25,416
Payable for shareholder communication fees .......... 9,568
Payable for registration fees ....................... 2,014
Other accrued expenses .............................. 3,782
----------
TOTAL LIABILITIES ................................... 41,921
----------
NET ASSETS applicable to 271,778
shares outstanding ................................ $3,476,230
==========
NET ASSETS CONSIST OF:
Capital stock, at $0.001 par value .................. $ 272
Additional paid-in capital .......................... 2,812,420
Accumulated net realized gain on investments ........ 201,128
Net unrealized appreciation on investments .......... 462,410
----------
TOTAL NET ASSETS .................................... $3,476,230
==========
SHARES OF CAPITAL STOCK:
CLASS AAA:
Net Asset Value, offering and redemption price
per share ($3,388,010 / 264,845 shares
outstanding; 150,000,000 shares authorized of
$0.001 par value) ................................. $12.79
======
CLASS A:
Net Asset Value and redemption price per share
($47,083 / 3,682.6 shares outstanding;
50,000,000 shares authorized of
$0.001 par value) ................................. $12.79
======
Maximum sales charge ................................ 5.75%
======
Maximum offering price per share (NAV / 0.9425,
based on maximum sales charge of 5.75% of
the offering price at September 30, 2004) ......... $13.57
======
CLASS B:
Net Asset Value and offering price per share
($130 / 10.015 shares outstanding; 50,000,000
shares authorized of $0.001 par value) ............ $12.98(a)
======
CLASS C:
Net Asset Value and offering price per share
($41,007 / 3,240 shares outstanding; 50,000,000
shares authorized of $0.001 par value) ............ $12.66(a)
======
- ------------------------
(a) Redemption price varies based on length of time held.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2004
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends ............................................ $ 23,593
Interest ............................................. 1,624
---------
TOTAL INVESTMENT INCOME .............................. 25,217
---------
EXPENSES:
Investment advisory fees ............................. 29,230
Distribution fees -- Class AAA ....................... 7,063
Distribution fees -- Class A ......................... 55
Distribution fees -- Class B ......................... 1
Distribution fees -- Class C ......................... 757
Legal and audit fees ................................. 32,702
Shareholder communications expenses .................. 31,027
Registration fees .................................... 21,823
Shareholder services fees ............................ 16,959
Custodian fees ....................................... 15,476
Amortization of offering costs ....................... 14,820
Directors' fees ...................................... 209
Miscellaneous expenses ............................... 3,958
---------
TOTAL EXPENSES BEFORE FEES WAIVED AND
EXPENSES REIMBURSED BY MANAGER ..................... 174,080
---------
FEES WAIVED AND EXPENSES REIMBURSED
BY MANAGER ......................................... (115,018)
---------
TOTAL EXPENSES -- NET ................................ 59,062
---------
NET INVESTMENT LOSS .................................. (33,845)
---------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments ..................... 251,438
Net change in unrealized appreciation/
depreciation on investments ........................ 302,913
---------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS ..................................... 554,351
---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS .................................... $ 520,506
=========
See accompanying notes to financial statements.
7
THE GABELLI WOODLAND SMALL CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003*
------------------ -------------------
OPERATIONS:
Net investment loss ........................................... $ (33,845) $ (9,414)
Net realized gain/(loss) on investments ....................... 251,438 (586)
Net change in unrealized appreciation/
depreciation on investments ................................. 302,913 159,497
---------- ----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .......... 520,506 149,497
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized short-term gain on investment transactions
Class AAA ................................................... (6,975) --
Class A ..................................................... (29) --
Class B ..................................................... (1) --
Class C ..................................................... (362) --
---------- ----------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ........................... (7,367) --
---------- ----------
CAPITAL SHARE TRANSACTIONS:
Class AAA ................................................... 573,650 2,178,725
Class A ..................................................... 41,636 2,926
Class B ..................................................... -- 100
Class C ..................................................... (97,250) 113,807
---------- ----------
Net increase in net assets from capital share transactions .... 518,036 2,295,558
---------- ----------
NET INCREASE IN NET ASSETS .................................... 1,031,175 2,445,055
NET ASSETS:
Beginning of period ........................................... 2,445,055 --
---------- ----------
End of period ................................................. $3,476,230 $2,445,055
========== ==========
- ----------------------
* For the period December 31, 2002 (commencement of operations) through
September 30, 2003.
See accompanying notes to financial statements.
8
THE GABELLI WOODLAND SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION. The Gabelli Woodland Small Cap Value Fund (the "Fund") is a
series of Gabelli Equity Series Funds, Inc. (the "Corporation"), which was
organized on July 25, 1991 as a Maryland corporation. The Fund is a
non-diversified, open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), and one of three
separately managed portfolios (collectively, the "Portfolios") of the
Corporation, 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 U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates. The following is a summary of significant accounting policies
followed by the Fund in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange or traded in the U.S. over-the-counter market for
which market quotations are readily available are valued at the last quoted sale
price or a market's official closing price as of the close of business on the
day the securities are being valued. If there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day. If no bid or asked prices are quoted on such
day, the security is valued at the most recently available price or, if the
Board of Directors (the "Board") so determines, by such other method as the
Board shall determine in good faith, to reflect its fair market value. Portfolio
securities traded on more than one national securities exchange or market are
valued according to the broadest and most representative market, as determined
by Gabelli Funds, LLC (the "Adviser").
Portfolio securities primarily traded on foreign markets are generally valued at
the preceding closing values of such securities on their respective exchanges or
if after the close of the foreign markets, but prior to the close of business on
the day the securities are being valued, market conditions change significantly,
certain foreign securities may be fair valued pursuant to procedures established
by the Board. Debt instruments that are not credit impaired with remaining
maturities of 60 days or less are valued at amortized cost, unless the Board
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. Debt
instruments having a maturity greater than 60 days for which 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 such day, the security is valued
using the closing bid price. Futures contracts are valued at the closing
settlement price of the exchange or board of trade on which the applicable
contract is traded.
Securities and assets for which market quotations are not readily available are
valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Board. Fair valuation
methodologies and procedures may include, but are not limited to: analysis and
review of available financial and non-financial information about the company;
comparisons to the valuation and changes in valuation of similar securities,
including a comparison of foreign securities to the equivalent U.S. dollar value
ADR securities at the close of the U.S. exchange; and evaluation of any other
information that could be indicative of the value of the security.
9
THE GABELLI WOODLAND SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
primary government securities dealers recognized by the Federal Reserve Board,
with member banks of the Federal Reserve System or with other brokers or dealers
that meet credit guidelines established by the Adviser and reviewed by the
Board. Under the terms of a typical repurchase agreement, the Fund takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
The Fund will always receive and maintain securities as collateral whose market
value, including accrued interest, will be at least equal to 102% of the dollar
amount invested by the Fund in each agreement. The Fund will make payment for
such securities only upon physical delivery or upon evidence of book entry
transfer of the collateral to the account of the custodian. To the extent that
any repurchase transaction exceeds one business day, the value of the collateral
is marked-to-market on a daily basis to maintain the adequacy of the collateral.
If the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited. At
September 30, 2004, there were no open 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.
OFFERING COSTS. The Fund incurred offering costs of $59,443 related to the
initial offering. The offering costs were 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 dividends and capital
gain distributions are determined in accordance with Federal income tax
regulations which may differ from U.S. generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund, timing differences and
differing characterization of distributions made by the Fund.
For the fiscal year ended September 30, 2004, reclassifications were made to
decrease accumulated net investment loss by $33,845 and decrease accumulated net
realized gain on investments by $33,845.
For the fiscal year ended September 30, 2004, the tax character of distributions
is all ordinary income.
EXPENSES. Certain administrative expenses are common to, and allocated among,
the Portfolios and then among the Classes of Shares. Such allocations are made
on the basis of each Portfolio's and Class' average net assets or other criteria
directly affecting the expenses as determined by the Adviser pursuant to
procedures established by the Board.
PROVISION FOR INCOME TAXES. The Fund intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). It is the Fund's policy to comply with the
requirements of the Code applicable to regulated investment companies and to
distribute substantially all of its net investment company taxable income and
net capital gains. Therefore, no provision for Federal income taxes is required.
10
THE GABELLI WOODLAND SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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.
As of September 30, 2004, the components of accumulated earnings/(losses) on a
tax basis were as follows:
Undistributed ordinary income
(inclusive of short-term capital gains) .............. $188,894
Undistributed long-term capital gains .................. 17,752
Net unrealized appreciation ............................ 456,892
--------
Total accumulated earnings ........................... $663,538
========
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 fiscal year ended September 30, 2004, the
Adviser reimbursed the Fund in the amount of $115,018. 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%, 2.00%, 2.75% and 2.75% on an annualized
basis of average daily net assets for Class AAA, Class A, Class B and Class C,
respectively. The cumulative amount for which the Fund may repay the adviser is
$239,617.
4. DISTRIBUTION PLAN. The Fund's Board of Directors has adopted a distribution
plan (the "Plan") for each class of shares pursuant to Rule 12b-1 under the 1940
Act. Gabelli & Company, Inc. ("Gabelli & Company"), an affiliate of the Adviser,
serves as distributor of the Fund. Under the Class AAA, Class A, Class B and
Class C Share Plans, payments are authorized to Gabelli & Company at annual
rates of 0.25%, 0.25%, 1.00% and 1.00%, respectively, of the average daily net
assets of those Classes, the annual limitations under each Plan. Such payments
are accrued daily and paid monthly.
5. PORTFOLIO SECURITIES. Purchases and proceeds from the sales of securities for
the fiscal year ended September 30, 2004, other than short-term securities,
aggregated $1,708,745 and $1,242,506, respectively.
6. TRANSACTIONS WITH AFFILIATES. During the fiscal year ended September 30,
2004, the Fund paid brokerage commissions of $303 to Gabelli & Company. During
the fiscal year ended September 30, 2004, Gabelli & Company received $1,271 from
investors representing commissions (sales charges and underwriting fees) on
sales and redemptions of Fund shares.
7. LINE OF CREDIT. The Fund has access to an unsecured line of credit of up to
$25,000,000 from the custodian for temporary borrowing purposes. Borrowings
under this agreement bear interest at 0.75% above the Federal Funds rate on
outstanding balances. During the year ended September 30, 2004, there were no
borrowings from the line of credit.
11
THE GABELLI WOODLAND SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
8. CAPITAL STOCK TRANSACTIONS. The Fund offers four classes of shares--Class AAA
Shares, Class A Shares, Class B Shares and Class C Shares. Class AAA Shares are
offered through selected broker/dealers without a sales charge. Class A Shares
are subject to a maximum front-end sales charge of 5.75%. Class B Shares are
subject to a contingent deferred sales charge (CDSC) upon redemption within six
years of purchase. The applicable CDSC is equal to a declining percentage of the
lesser of the net asset value per share at the date of the original purchase or
at the date of redemption, based on the length of time held. Class C Shares are
subject to a 1% CDSC for one year after purchase. As of July 27, 2004, Class B
Shares are available only through exchange of Class B Shares of other Funds
distributed by Gabelli & Company.
Effective November 1, 2004, the Fund will impose a 2.00% redemption fee on Class
AAA, Class A, Class B and Class C shares that are purchased on or after November
1, 2004, and redeemed or exchanged within 60 days after the date of a purchase.
The redemption fee is deducted from the proceeds otherwise payable to the
redeeming shareholders and retained by the Fund.
Transactions in shares of capital stock were as follows:
YEAR ENDED PERIOD ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ -------
CLASS AAA CLASS AAA
------------------------- ------------------------
Shares sold ........................................... 125,294 $1,550,393 283,812 $2,835,643
Shares issued upon reinvestment of dividends .......... 579 6,880 -- --
Shares redeemed ....................................... (80,708) (983,623) (64,132) (656,918)
------- ---------- ------- ----------
Net increase .......................................... 45,165 $ 573,650 219,680 $2,178,725
======= ========== ======= ==========
CLASS A CLASS A
------------------------- ------------------------
Shares sold ........................................... 3,366 $ 41,607 315 $ 2,926
Shares issued upon reinvestment of dividends .......... 2 29 -- --
Shares redeemed ....................................... -- -- -- --
------- ---------- ------- ----------
Net increase .......................................... 3,368 $ 41,636 315 $ 2,926
======= ========== ======= ==========
CLASS B CLASS B
------------------------- ------------------------
Shares sold ........................................... -- -- 10 $ 100
Shares issued upon reinvestment of dividends .......... -- -- -- --
Shares redeemed ....................................... -- -- -- --
------- ---------- ------- ----------
Net increase .......................................... -- -- 10 $ 100
======= ========== ======= ==========
CLASS C CLASS C
------------------------- ------------------------
Shares sold ........................................... 31 $ 362 11,206 $ 113,807
Shares issued upon reinvestment of dividends .......... -- -- -- --
Shares redeemed ....................................... (7,997) (97,612) -- --
------- ---------- ------- ----------
Net increase/(decrease) ............................... (7,966) $ (97,250) 11,206 $ 113,807
======= ========== ======= ==========
9. OTHER MATTERS. On October 7, 2003, the Fund's Adviser received a subpoena
from the Attorney General of the State of New York requesting information on
mutual fund shares trading practices. The Adviser has also received a subpoena
and letters from the SEC requesting information about mutual fund trading
practices and valuation of portfolio securities. The Adviser is responding to
these requests. The Fund does not believe that these matters will have a
material adverse effect on the Fund's financial position or the results of its
operations.
10. INDEMNIFICATIONS. The Fund enters into contracts that contain a variety of
indemnifications. The Fund's maximum exposure under these arrangements is
unknown. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
12
THE GABELLI WOODLAND SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each period:
INCOME
FROM INVESTMENT OPERATIONS DISTRIBUTIONS
-------------------------------------------------------- ---------------------------
Net
Net Asset Realized and Total Net Net Asset
Period Value, Net Unrealized from Realized Value,
Ended Beginning Investment Gain/(Loss) on Investment Gain on Total End of Total
September 30 of Period Income/(Loss)(d) Investments Operations Investments Distributions Period Return+
- ------------ --------- ---------------- -------------- ---------- ----------- ------------- --------- -------
CLASS AAA
2004 $10.58 $(0.14) $2.38 $2.24 $(0.03) $(0.03) $12.79 21.22%
2003(a) 10.00 (0.07) 0.65 0.58 -- -- 10.58 5.80
CLASS A
2004 $10.57 $(0.14) $2.39 $2.25 $(0.03) $(0.03) $12.79 21.34%
2003(a) 10.00 (0.07) 0.64 0.57 -- -- 10.57 5.70
CLASS B
2004 $10.59 $ 0.02 $2.40 $2.42 $(0.03) $(0.03) $12.98 22.91%
2003(a) 10.00 (0.12) 0.71 0.59 -- -- 10.59 5.90
CLASS C
2004 $10.55 $(0.23) $2.37 $2.14 $(0.03) $(0.03) $12.66 20.33%
2003(a) 10.00 (0.11) 0.66 0.55 -- -- 10.55 5.50
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------
Net Assets Expenses Expenses
Period End of Net Net of Before Portfolio
Ended Period Investment Waivers/ Waivers/ Turnover
September 30 (in 000's) Income/(Loss) Reimbursements Reimbursements(c) Rate
- ------------ ---------- ------------- -------------- ----------------- ----------
CLASS AAA
2004 $3,388 (1.14)% 2.00% 5.94% 45%
2003(a) 2,323 (0.97)(b) 2.00(b) 15.05(b) 39
CLASS A
2004 $47 (1.16)% 2.00% 5.94% 45%
2003(a) 3 (0.97)(b) 2.00(b) 15.05(b) 39
CLASS B
2004 $0.1 0.18% 2.75% 6.69% 45%
2003(a) 0.1 (1.72)(b) 2.75(b) 15.80(b) 39
CLASS C
2004 $41 (1.88)% 2.75% 6.69% 45%
2003(a) 118 (1.72)(b) 2.75(b) 15.80(b) 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) From commencement of investment operations on December 31, 2002 through
September 30, 2003.
(b) Annualized.
(c) During the period, expenses were voluntarily reduced and/or reimbursed. If
such fee reductions and/or reimbursements had not occurred, the ratio would
have been as shown.
(d) Per share amounts have been calculated using the average shares method.
See accompanying notes to financial statements.
13
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
The Gabelli Woodland Small Cap Value Fund
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of The Gabelli Woodland Small Cap Value Fund (the
"Fund"), a series of Gabelli Equity Series Funds, Inc., as of September 30,
2004, and the related statement of operations for the year then ended, and the
statement of changes in net assets and financial highlights for the year then
ended and for the period December 31, 2002 (commencement of operations) through
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
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. 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, 2004, by
correspondence with the Fund's custodian and brokers or by other appropriate
auditing procedures where replies from brokers were not received. 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 Woodland Small Cap Value Fund at September 30, 2004, the results of its
operations for the year then ended, and the changes in its net assets and
financial highlights for the year then ended and for the period December 31,
2002 (commencement of operations) through September 30, 2003, in conformity with
U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
November 12, 2004
14
THE GABELLI WOODLAND SMALL CAP VALUE 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 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
- ----------------- ------------- ---------------- ----------------------- -------------------
INTERESTED DIRECTORS 4:
- ----------------------
MARIO J. GABELLI Since 1991 24 Chairman of the Board and Chief Executive Director of Morgan Group
Director and Officer of Gabelli Asset Management Inc. and Holdings, Inc. (holding
Chief Investment Officer Chief Investment Officer of Gabelli Funds, company)
Age: 62 LLC and GAMCO Investors, Inc.; Vice Chairman
and Chief Executive Officer of Lynch Interactive
Corporation (multimedia and services)
JOHN D. GABELLI Since 1991 10 Senior Vice President of Gabelli & Company, --
Director Inc.; Director of Gabelli Advisers,Inc.
Age: 60
KARL OTTO POHL Since 1992 34 Member of the Shareholder Committee of Sal Director of Gabelli Asset
Director Oppenheim Jr. & Cie (private investment Management Inc. (investment
Age: 74 bank); Former President of the management); Chairman,
Deutsche Bundesbank and Chairman of its Incentive Capital and
Central Bank Council (1980-1991) Incentive Asset Management
(Zurich); Director at Sal
Oppenheim Jr. & Cie, Zurich
NON-INTERESTED DIRECTORS:
- ------------------------
ANTHONY J. COLAVITA Since 1991 36 President and Attorney at Law in the law --
Director firm of Anthony J. Colavita, P.C.
Age: 68
VINCENT D. ENRIGHT Since 1991 13 Former Senior Vice President and Chief Director of Aphton
Director Financial Officer of KeySpan Energy Corporation
Age: 60 Corporation (biopharmaceutical company)
ROBERT J. MORRISSEY Since 1991 10 Partner in the law firm of Morrissey, Hawkins --
Director & Lynch
Age: 65
ANTHONY R. PUSTORINO Since 1991 17 Certified Public Accountant; Professor Director of Lynch Corporation
Director Emeritus, Pace University (diversified manufacturing)
Age: 79
ANTHONIE C. VAN EKRIS Since 1991 20 Managing Director of BALMAC Director of Aurado
Director International, Inc. (commodities) Energy Inc. (oil and gas
Age: 70 operations)
SALVATORE J. ZIZZA Since 2001 24 Chairman, Hallmark Electrical Supplies Director of Hollis Eden
Director Corp.; Former Executive Vice President Pharmaceuticals; Director
Age: 58 of FMG Group(OTC), a healthcare provider of Earl Scheib, Inc.
(automotive services)
OFFICERS:
- --------
BRUCE N. ALPERT Since 1991 -- Executive Vice President and Chief Operating --
President and Treasurer Officer of Gabelli Funds, LLC since 1988 and
Age: 52 an officer of all mutual funds advised by
Gabelli Funds, LLC and its affiliates.
Director and President of Gabelli Advisers, Inc.
JAMES E. MCKEE Since 1995 -- Vice President, General Counsel and Secretary --
Secretary of Gabelli Asset Management Inc. since 1999
Age: 41 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. 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.
15
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 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 Woodland Small Cap Value Fund. It is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
GAB840Q304SR
[GRAPHIC OMITTED]
PICTURE OF MARIO GABELLI
THE
GABELLI
WOODLAND
SMALL CAP
VALUE
FUND
ANNUAL REPORT
SEPTEMBER 30, 2004
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party.
(c) There have been no amendments, during the period covered by this
report, to a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, and that relates to any element of
the code of ethics description.
(d) The registrant has not granted any waivers, including an implicit
waiver, from a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, that relates to one or more of the
items set forth in paragraph (b) of this item's instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the registrant's board of
directors has determined that Anthony R. Pustorino is qualified to serve as an
audit committee financial expert serving on its audit committee and that he is
"independent."
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees
- ----------
(a) The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the
audit of the registrant's annual financial statements or services that
are normally provided by the accountant in connection with statutory
and regulatory filings or engagements for those fiscal years are
$87,900 in 2004 and $82,500 in 2003.
Audit-Related Fees
- ------------------
(b) The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the registrant's
financial statements and are not reported under paragraph (a) of this
Item are $0 in 2004 and $0 in 2003.
Tax Fees
- --------
(c) The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning are $10,800 in 2004 and
$10,200 in 2003.
Tax fees represent tax compliance services provided in connection with
the review of the Registrant's tax returns.
All Other Fees
- --------------
(d) The aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other than
the services reported in paragraphs (a) through (c) of this Item are $0
in 2004 and $0 in 2003.
(e)(1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of
Regulation S-X.
Pre-Approval Policies and Procedures. The Audit Committee
("Committee") of the registrant is responsible for pre-approving
(i) all audit and permissible non-audit services to be provided by
the independent auditors to the registrant and (ii) all
permissible non-audit services to be provided by the independent
auditors to Gabelli and any affiliate of Gabelli that provides
services to the registrant (a "Covered Services Provider") if the
independent auditors' engagement relates directly to the
operations and financial reporting of the registrant. The
Committee may delegate its responsibility to pre-approve any such
audit and permissible non-audit services to the Chairperson of the
Committee, and the Chairperson must report to the Committee, at
its next regularly scheduled meeting after the Chairperson's
pre-approval of such services, his or her decision(s). The
Committee may also establish detailed pre-approval policies and
procedures for pre-approval of such services in accordance with
applicable laws, including the delegation of some or all of the
Committee's pre-approval responsibilities to other persons (other
than Gabelli or the registrant's officers). Pre-approval by the
Committee of any permissible non-audit services is not required so
long as: (i) the aggregate amount of all such permissible
non-audit services provided to the registrant, Gabelli and any
Covered Services Provider constitutes not more than 5% of the
total amount of revenues paid by the registrant to its independent
auditors during the fiscal year in which the permissible non-audit
services are provided; (ii) the permissible non-audit services
were not recognized by the registrant at the time of the
engagement to be non-audit services; and (iii) such services are
promptly brought to the attention of the Committee and approved by
the Committee or the Chairperson prior to the completion of the
audit.
(e)(2) The percentage of services described in each of paragraphs (b)
through (d) of this Item that were approved by the audit committee
pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X
are as follows:
(b) N/A
(c) 100%
(d) N/A
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year that were attributed to work performed by persons
other than the principal accountant's full-time, permanent employees
was zero percent (0%).
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling, controlled by,
or under common control with the adviser that provides ongoing services
to the registrant for each of the last two fiscal years of the
registrant was $75,800 in 2004 and $69,200 in 2003.
(h) The registrant's audit committee of the board of directors HAS
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser), and any
entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not yet applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not yet applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Board of Directors has a Nominating Committee comprised of two
"non-interested" (as such term is defined by the Investment Company Act of 1940,
as amended) Directors, namely Anthony J. Colavita and Robert J. Morrisey. The
Nominating Committee is responsible for identifying individuals believed to be
qualified to become Board members in the event that a position is vacated or
created. The Nominating Committee will consider Director candidates recommended
by shareholders. In considering candidates submitted by shareholders, the
Nominating Committee will take into consideration the needs of the Board of
Directors, the qualifications of the candidate and the interests of
shareholders. The Nominating Committee may also take into consideration the
number of shares held by the recommending shareholder and the length of time
that such shares have been held. To have a candidate considered by the
Nominating Committee, a shareholder must submit the recommendation in writing
and must include the following information:
o The name of the shareholder and evidence of the person's ownership of
shares of the Company, including the number of shares owned and the
length of time of ownership;
o The name of the candidate, the candidate's resume or a listing of his
or her qualifications to be a Director of the Company and the person's
consent to be named as a Director if selected by the Nominating
Committee and nominated by the Board of Directors; and
o If requested by the Nominating Committee, a completed and signed
directors questionnaire.
The shareholder recommendation and information described above must be sent to
the Company's Secretary c/o Gabelli Funds, LLC, James E. McKee and must be
received by the Secretary no less than 120 days prior to the anniversary date of
the Company's most recent annual meeting of shareholders or, if the meeting has
moved by more than 30 days, a reasonable amount of time before the meeting.
The Nominating Committee believes that the minimum qualifications for serving as
a Director of the Company are that the individual demonstrate, by significant
accomplishment in his or her field, an ability to make a meaningful contribution
to the Board of Directors' oversight of the business and affairs of the Company
and have an impeccable record and reputation for honest and ethical conduct in
both his or her professional and personal activities. In addition, the
Nominating Committee examines a candidate's specific experiences and skills,
time availability in light of other commitments, potential conflicts of interest
and independence from management and the Fund. The Nominating Committee also
seeks to have the Board of Directors represent a diversity of backgrounds and
experience.
The Company's Nominating Committee has adopted a charter (the "Charter"), which
was approved by the Board of Directors on May 11, 2004.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's 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 12. EXHIBITS.
(a)(1) Code of ethics, that is the subject of disclosure required by Item
2, filed as exhibit (a)(1) to the Registrant's Form N-CSR, filed
on December 8, 2003 (Accession No. 0000935069-03-001625).
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) Gabelli Equity Series Funds, Inc.
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By (Signature and Title)* /s/ Bruce N. Alpert
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Bruce N. Alpert, Principal Executive Officer
Date December 8, 2004
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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
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Bruce N. Alpert, Principal Executive
Officer & Principal Financial Officer
Date December 8, 2004
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* Print the name and title of each signing officer under his or her signature.