UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-06367
---------
Gabelli Equity Series Funds, Inc.
------------------------------------------------------------
(Exact name of registrant as specified in charter)
One Corporate Center
Rye, New York 10580-1422
------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
------------------------------------------------------------
(Name and address of agent for service)
registrant's telephone number, including area code: 1-800-422-3554
--------------
Date of fiscal year end: September 30
------------
Date of reporting period: September 30, 2007
------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. 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, 2007
TO OUR SHAREHOLDERS,
During the fiscal year ended September 30, 2007, The Gabelli Small Cap
Growth Fund (the "Fund") increased 21.95%, while the Russell 2000 Index rose
12.34% and the Value Line Composite Index increased 15.68%. The Fund gained
10.16% year to date through September 30th, outperforming the Russell 2000 Index
and Value Line Composite Index returns of 3.16% and 9.04%, respectively.
Enclosed are the investment portfolio and financial statements as of
September 30, 2007.
COMPARATIVE RESULTS
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH SEPTEMBER 30, 2007 (a)(b)
Since
Year to Inception
Quarter Date 1 Year 3 Year 5 Year 10 Year 15 Year (10/22/91)
------- ------- ------ ------ ------ ------- ------- ---------
GABELLI SMALL CAP GROWTH FUND
CLASS AAA ....................... (0.81)% 10.16% 21.95% 16.99% 19.95% 11.26% 14.36% 15.44%
Russell 2000 Index ................. (3.09) 3.16 12.34 13.36 18.75 7.22 11.48 11.34
Value Line Composite Index ......... 2.72 9.04 15.68 14.49 20.77 10.31 13.57 13.45
Class A ............................ (0.81) 10.16 21.95 16.97 19.95 11.26 14.36 15.45
(6.51)(c) 3.83(c) 14.94(c) 14.68(c) 18.54(c) 10.61(c) 13.91(c) 15.02(c)
Class B ............................ (1.01) 9.53 20.99 16.12 19.29 10.95 14.15 15.25
(5.96)(d) 4.53(d) 15.99(d) 15.37(d) 19.09(d) 10.95 14.15 15.25
Class C ............................ (0.98) 9.53 21.03 16.12 19.29 10.95 14.15 15.25
(1.97)(e) 8.53(e) 20.03(e) 16.12 19.29 10.95 14.15 15.25
THE EXPENSE RATIO FOR CLASS AAA, A, B, AND C SHARES IS 1.45%, 1.45%, 2.20%, AND
2.20%, RESPECTIVELY, IN THE CURRENT PROSPECTUS. CLASS AAA SHARES DO NOT HAVE A
SALES CHARGE. THE MAXIMUM SALES CHARGE FOR CLASS A, B, AND C SHARES IS 5.75%,
5.00%, AND 1.00%, RESPECTIVELY.
(a) THE FUND'S FISCAL YEAR ENDS SEPTEMBER 30.
(b) RETURNS REPRESENT PAST PERFORMANCE AND DO NOT GUARANTEE FUTURE RESULTS.
TOTAL RETURNS AND AVERAGE ANNUAL RETURNS REFLECT CHANGES IN SHARE PRICE
AND REINVESTMENT OF DISTRIBUTIONS AND ARE NET OF EXPENSES. INVESTMENT
RETURNS AND THE PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN
SHARES ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. PERFORMANCE RETURNS FOR PERIODS LESS THAN ONE YEAR ARE NOT
ANNUALIZED. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE
PERFORMANCE DATA PRESENTED. VISIT WWW.GABELLI.COM FOR PERFORMANCE
INFORMATION AS OF THE MOST RECENT MONTH END. INVESTORS SHOULD CAREFULLY
CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES, AND EXPENSES OF THE
FUND BEFORE INVESTING. THE PROSPECTUS CONTAINS MORE INFORMATION ABOUT THIS
AND OTHER MATTERS AND SHOULD BE READ CAREFULLY BEFORE INVESTING.
THE CLASS AAA SHARES' NET ASSET VALUES ("NAV'S") PER SHARE ARE USED TO
CALCULATE PERFORMANCE FOR THE PERIODS PRIOR TO THE ISSUANCE OF CLASS A
SHARES, CLASS B SHARES, AND CLASS C SHARES ON DECEMBER 31, 2003. THE
ACTUAL PERFORMANCE FOR THE CLASS B SHARES AND CLASS C SHARES WOULD HAVE
BEEN LOWER DUE TO THE ADDITIONAL EXPENSES ASSOCIATED WITH THESE CLASSES OF
SHARES. INVESTING IN SMALL CAPITALIZATION SECURITIES INVOLVES SPECIAL
RISKS BECAUSE THESE SECURITIES MAY TRADE LESS FREQUENTLY AND EXPERIENCE
MORE ABRUPT PRICE MOVEMENTS THAN LARGE CAPITALIZATION SECURITIES. THE
RUSSELL 2000 INDEX OF SMALL U.S. COMPANIES AND THE VALUE LINE COMPOSITE
INDEX (COMPOSED OF EQUALLY WEIGHTED POSITIONS IN EVERY STOCK COVERED IN
THE VALUE LINE INVESTMENT SURVEY) ARE UNMANAGED INDICATORS OF STOCK MARKET
PERFORMANCE. DIVIDENDS ARE CONSIDERED REINVESTED. YOU CANNOT INVEST
DIRECTLY IN AN INDEX.
(c) INCLUDES THE EFFECT OF THE MAXIMUM 5.75% SALES CHARGE AT THE BEGINNING OF
THE PERIOD.
(d) PERFORMANCE RESULTS INCLUDE THE DEFERRED SALES CHARGES FOR THE CLASS B
SHARES UPON REDEMPTION AT THE END OF THE QUARTER, YEAR TO DATE, ONE YEAR,
THREE YEAR, AND FIVE YEAR PERIODS OF 5%, 5%, 5%, 3%, AND 2%, RESPECTIVELY,
OF THE FUND'S NAV PER SHARE AT THE TIME OF PURCHASE OR SALE, WHICHEVER IS
LOWER. CLASS B SHARES ARE NOT AVAILABLE FOR NEW PURCHASES.
(e) PERFORMANCE RESULTS INCLUDE THE DEFERRED SALES CHARGE FOR THE CLASS C
SHARES UPON REDEMPTION AT THE END OF THE QUARTER, YEAR TO DATE, AND ONE
YEAR PERIODS OF 1% OF THE FUND'S NAV PER SHARE AT THE TIME OF PURCHASE OR
SALE, WHICHEVER IS LOWER.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
We have separated the portfolio manager's commentary from the financial
statements and investment portfolio due to corporate governance regulations
stipulated by the Sarbanes-Oxley Act of 2002. We have done this to ensure that
the content of the portfolio manager's commentary is unrestricted. The financial
statements and investment portfolio are mailed separately from the commentary.
Both the commentary and the financial statements, including the portfolio of
investments, will be available on our website at www.gabelli.com/funds.
- --------------------------------------------------------------------------------
PERFORMANCE DISCUSSION
During the twelve months ended September 30, the Small Cap Growth Fund
gained 21.95%, versus an increase of 12.34% in the Russell 2000 Index. For the
fiscal year ended September 30, 2007, the Fund's portfolio turnover rate was
15%.
Areas that performed well during the fiscal year included the Diversified
Industrial sector. Precision Castparts Corp. (1.2% of net assets as of September
30, 2007), which makes metal products for jet engines, rose 130% as the
aerospace sector soared. Kaman Corp. (1.5%) and Sequa Corp. (2.1%), which also
serve the aerospace sector, rose 100% and 83%, respectively, this year, while
Flowserve Corp. (1.4%), which provides pumps, valves, and seals for industrial
flow management, rose 58%. Tennant Co. (0.8%), AMETEK Inc. (1.0%), and Greif
Inc. (1.4%) all returned 50% or better.
The Consumer sector also did well, though not as exceptionally as the
Industrial sector. Gemstar-TV Guide International Inc. (0.4%) doubled in price
as it considers selling the company. Gaming names like Wynn Resorts Ltd. (0.2%)
and Penn National Gaming Inc. (0.5%) did well, while "traditional" media names
such as Hearst-Argyle Television Inc. (0.1%), Meredith Corp. (0.1%) were down.
The Financial sector, which we have traditionally underweighted, was weak
as uncertain credit markets took their toll on stocks like CNA Surety Corp.
(0.6%). There continued to be difficulties in the Automotive: Parts &
Accessories sector. These companies have been weak, as continued sales woes and
cost cutting initiatives at Detroit's auto manufacturers affected portfolio
holdings such as Standard Motor Products Inc. (0.2%) and CSK Auto Corp. (0.1%).
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI SMALL CAP GROWTH FUND CLASS AAA,
THE RUSSELL 2000 INDEX, AND THE S&P 500 INDEX
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
The Gabelli Small
Cap Growth Fund Russell 2000
(Class AAA) Index S&P 500 Index
10/22/1991 $10,000 $10,000 $10,000
9/30/1992 $13,186 $10,854 $11,174
9/30/1993 $17,228 $14,456 $12,623
9/30/1994 $17,999 $14,835 $13,088
9/30/1995 $21,504 $18,307 $16,976
9/30/1996 $23,871 $20,710 $20,426
9/30/1997 $33,950 $27,584 $28,684
9/30/1998 $29,356 $22,338 $31,288
9/30/1999 $35,005 $26,597 $39,983
9/30/2000 $42,356 $32,818 $45,289
9/30/2001 $39,192 $25,858 $33,238
9/30/2002 $39,736 $23,453 $26,434
9/30/2003 $50,775 $32,013 $32,876
9/30/2004 $61,641 $38,022 $37,433
9/30/2005 $74,330 $44,852 $41,580
9/30/2006 $80,927 $49,302 $46,062
9/30/2007 $98,690 $55,435 $54,358
- -----------------------------------------------------
Average Annual Total Return*
- -----------------------------------------------------
1 Year 5 Year 10 Year Life of Fund
- -----------------------------------------------------
Class AAA 21.95% 19.95% 11.26% 15.44%
- -----------------------------------------------------
* 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, 2007 through September 30, 2007
EXPENSE TABLE
- --------------------------------------------------------------------------------
We believe it is important for you to understand the impact of fees and expenses
regarding your investment. All mutual funds have operating expenses. As a
shareholder of a fund, you incur ongoing costs, which include costs for
portfolio management, administrative services, and shareholder reports (like
this one), among others. Operating expenses, which are deducted from a fund's
gross income, directly reduce the investment return of a fund. When a fund's
expenses are expressed as a percentage of its average net assets, this figure is
known as the expense ratio. The following examples are intended to help you
understand the ongoing costs (in dollars) of investing in your Fund and to
compare these costs with those of other mutual funds. The examples are based on
an investment of $1,000 made at the beginning of the period shown and held for
the entire period.
The Expense Table below illustrates your Fund's costs in two ways:
ACTUAL FUND RETURN: This section provides information about actual account
values and actual expenses. You may use this section to help you to estimate the
actual expenses that you paid over the period after any fee waivers and expense
reimbursements. The "Ending Account Value" shown is derived from the Fund's
ACTUAL return during the past six months, and the "Expenses Paid During Period"
shows the dollar amount that would have been paid by an investor who started
with $1,000 in the Fund. You may use this information, together with the amount
you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your Fund under the heading "Expenses Paid During Period" to estimate
the expenses you paid during this period.
HYPOTHETICAL 5% RETURN: This section provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio. It assumes a hypothetical annualized return of 5% before expenses during
the period shown. In this case - because the hypothetical return used is NOT the
Fund's actual return - the results do not apply to your investment and you
cannot use the hypothetical account value and expense to estimate the actual
ending account balance or expenses you paid for the period. This example is
useful in making comparisons of the ongoing costs of investing in the Fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as sales
charges (loads), redemption fees, or exchange fees, if any, which are described
in the Prospectus. If these costs were applied to your account, your costs would
be higher. Therefore, the 5% hypothetical return is useful in comparing ongoing
costs only, and will not help you determine the relative total costs of owning
different funds. The "Annualized Expense Ratio" represents the actual expenses
for the last six months and may be different from the expense ratio in the
Financial Highlights which is for the year ended September 30, 2007.
Beginning Ending Annualized Expenses
Account Value Account Value Expense Paid During
04/01/07 09/30/07 Ratio Period*
- --------------------------------------------------------------------------------
THE GABELLI SMALL CAP GROWTH FUND
- --------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class AAA $1,000.00 $1,057.20 1.42% $ 7.28
Class A $1,000.00 $1,057.50 1.42% $ 7.28
Class B $1,000.00 $1,053.10 2.17% $11.11
Class C $1,000.00 $1,053.80 2.17% $11.11
HYPOTHETICAL 5% RETURN
Class AAA $1,000.00 $1,017.85 1.42% $ 7.14
Class A $1,000.00 $1,017.85 1.42% $ 7.14
Class B $1,000.00 $1,014.11 2.17% $10.90
Class C $1,000.00 $1,014.11 2.17% $10.90
* Expenses are equal to the Fund's annualized expense ratio for the last six
months multiplied by the average account value over the period, multiplied
by the number of days in the most recent fiscal half-year, then divided by
365.
3
SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED)
The following table presents portfolio holdings as a percent of total net assets
as of September 30, 2007:
THE GABELLI SMALL CAP GROWTH FUND
U.S. Government Obligations .......................................... 12.5%
Equipment and Supplies ............................................... 11.8%
Health Care .......................................................... 9.6%
Diversified Industrial ............................................... 8.5%
Aviation: Parts and Services ......................................... 5.7%
Food and Beverage .................................................... 4.9%
Energy and Utilities ................................................. 4.7%
Specialty Chemicals .................................................. 4.4%
Financial Services ................................................... 3.2%
Hotels and Gaming .................................................... 2.9%
Business Services .................................................... 2.8%
Automotive: Parts and Accessories .................................... 2.7%
Wireless Communications .............................................. 2.2%
Cable ................................................................ 2.1%
Entertainment ........................................................ 2.1%
Electronics .......................................................... 1.9%
Consumer Products .................................................... 1.9%
Communications Equipment ............................................. 1.8%
Retail ............................................................... 1.6%
Telecommunications ................................................... 1.5%
Publishing ........................................................... 1.5%
Broadcasting ......................................................... 1.3%
Manufactured Housing and Recreational Vehicles ....................... 1.3%
Computer Software and Services ....................................... 1.3%
Real Estate .......................................................... 1.1%
Environmental Services ............................................... 1.1%
Consumer Services .................................................... 0.9%
Metals and Mining .................................................... 0.7%
Transportation ....................................................... 0.7%
Closed-End Funds ..................................................... 0.6%
Building and Construction ............................................ 0.2%
Aerospace ............................................................ 0.2%
Agriculture .......................................................... 0.2%
Educational Services ................................................. 0.1%
Paper and Forest Products ............................................ 0.1%
Home Furnishings ..................................................... 0.0%
Automotive ........................................................... 0.0%
Other Assets and Liabilities (Net) ................................... (0.1)%
-----
100.0%
=====
THE FUND FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION (THE "SEC") FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL
YEAR ON FORM N-Q, THE LAST OF WHICH WAS FILED FOR THE QUARTER ENDED JUNE 30,
2007. SHAREHOLDERS MAY OBTAIN THIS INFORMATION AT WWW.GABELLI.COM OR BY CALLING
THE FUND AT 800-GABELLI (800-422-3554).THE FUND'S FORM N-Q IS AVAILABLE ON THE
SEC'S WEBSITE AT WWW.SEC.GOV AND MAY ALSO BE REVIEWED AND COPIED AT THE SEC'S
PUBLIC REFERENCE ROOM IN WASHINGTON, DC. INFORMATION ON THE OPERATION OF THE
PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330.
PROXY VOTING
The Fund files Form N-PX with its complete proxy voting record for the 12 months
ended June 30th, no later than August 31st of each year. A description of the
Fund's proxy voting policies, procedures, and how the Fund voted proxies
relating to portfolio securities is available without charge, upon request, by
(i) calling 800-GABELLI (800-422-3554); (ii) writing to The Gabelli Funds at One
Corporate Center, Rye, NY 10580-1422; or (iii) visiting the SEC's website at
www.sec.gov.
4
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS -- SEPTEMBER 30, 2007
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
- ------------ ------------ ---------------
COMMON STOCKS -- 87.2%
AEROSPACE -- 0.2%
110,000 Herley Industries Inc.+ ........ $ 1,891,583 $ 1,645,600
2,000 Innovative Solutions &
Support Inc.+ ............... 35,890 37,940
------------ --------------
1,927,473 1,683,540
------------ --------------
AGRICULTURE -- 0.2%
1,200 Cadiz Inc.+ .................... 4,500 22,680
29,000 The Mosaic Co.+ ................ 441,978 1,552,080
------------ --------------
446,478 1,574,760
------------ --------------
AUTOMOTIVE -- 0.0%
6,000 Oshkosh Truck Corp. ............ 89,796 371,820
------------ --------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 2.7%
3,816 Aftermarket Technology
Corp.+ ...................... 47,013 121,120
1,000 BERU AG ........................ 106,336 104,094
75,000 BorgWarner Inc. ................ 1,609,839 6,864,750
200,000 Dana Corp.+ .................... 439,275 39,000
240,900 Earl Scheib Inc.+ (a) .......... 1,475,236 903,375
60,000 Federal-Mogul Corp.+ ........... 87,700 54,000
270,000 Midas Inc.+ .................... 4,010,223 5,094,900
220,000 Modine Manufacturing Co. ....... 5,254,348 5,856,400
7,875 Monro Muffler Brake Inc. ....... 52,860 266,096
180,000 Proliance International Inc.+ .. 1,292,359 379,800
2,000 Puradyn Filter
Technologies Inc.+ .......... 2,750 800
50,000 SORL Auto Parts Inc.+ .......... 362,500 388,000
75,375 Spartan Motors Inc. ............ 365,562 1,268,561
212,000 Standard Motor Products Inc. ... 2,878,492 1,992,800
27,000 Strattec Security Corp. ........ 1,058,830 1,256,040
10,400 Superior Industries
International Inc. .......... 230,289 225,576
8,000 Tenneco Inc.+ .................. 16,720 248,080
120,000 The Pep Boys - Manny,
Moe & Jack .................. 1,628,358 1,683,600
27,000 Thor Industries Inc. ........... 250,194 1,214,730
------------ --------------
21,168,884 27,961,722
------------ --------------
AVIATION: PARTS AND SERVICES -- 5.7%
25,000 AAR Corp.+ ..................... 302,990 758,500
10,000 Astronics Corp.+ ............... 48,990 435,700
14,000 Barnes Group Inc. .............. 119,438 446,880
122,000 Curtiss-Wright Corp. ........... 1,495,053 5,795,000
7,500 Ducommun Inc.+ ................. 80,125 242,250
20,000 EDO Corp. ...................... 441,767 1,120,200
30,000 Embraer-Empresa Brasileira
de Aeronautica SA, ADR ...... 508,773 1,317,600
24,000 Gamesa Corp. Tecnologica SA .... 146,892 980,479
280,000 GenCorp Inc.+ .................. 2,915,852 3,348,800
450,000 Kaman Corp. .................... 7,217,248 15,552,000
86,000 Moog Inc., Cl. A+ .............. 555,984 3,778,840
35,000 Sequa Corp., Cl. A+ ............ 1,455,627 5,802,300
92,500 Sequa Corp., Cl. B+ ............ 5,105,751 15,401,250
MARKET
SHARES COST VALUE
- ------------ ------------ ---------------
513,000 The Fairchild Corp., Cl. A+ .... $ 1,603,305 $ 1,026,000
33,500 Woodward Governor Co. .......... 657,315 2,090,400
------------ --------------
22,655,110 58,096,199
------------ --------------
BROADCASTING -- 1.3%
125,000 Acme Communications Inc. ....... 938,974 483,750
51,000 Beasley Broadcast
Group Inc., Cl. A ........... 490,780 383,010
2,000 Cogeco Inc. .................... 39,014 76,007
295,000 Crown Media Holdings
Inc., Cl. A+ ................ 1,848,397 2,121,050
3,333 CTN Media Group Inc.+ (b) ...... 16,800 3
2,000 Global Traffic Network Inc.+ ... 11,904 15,000
2,433 Granite Broadcasting Corp.+ .... 822,771 77,856
420,000 Gray Television Inc. ........... 3,765,759 3,565,800
35,000 Gray Television Inc., Cl. A .... 413,341 300,650
48,000 Hearst-Argyle Television Inc. .. 425,523 1,246,080
250 Liberty Media Corp. -
Capital, Cl. A+ ............. 15,724 31,207
20,000 Nexstar Broadcasting
Group Inc., Cl. A+ .......... 187,302 209,800
120,000 Salem Communications
Corp., Cl. A ................ 1,540,338 960,000
190,000 Sinclair Broadcast Group
Inc., Cl. A ................. 2,054,325 2,287,600
200,000 Sirius Satellite Radio Inc.+ ... 981,915 698,000
52,000 Spanish Broadcasting
System Inc., Cl. A+ ......... 462,516 134,160
35,000 XM Satellite Radio
Holdings Inc., Cl. A+ ....... 302,980 495,950
329,500 Young Broadcasting
Inc., Cl. A+ ................ 2,591,177 724,900
------------ --------------
16,909,540 13,810,823
------------ --------------
BUILDING AND CONSTRUCTION -- 0.2%
16,500 Florida Rock Industries Inc. ... 96,939 1,031,085
25,000 Huttig Building
Products Inc.+ .............. 90,165 134,500
20,000 Insituform Technologies
Inc., Cl. A+ ................ 387,695 304,600
4,000 The Genlyte Group Inc.+ ........ 8,580 257,040
1,000 Universal Forest
Products Inc. ............... 12,125 29,900
------------ --------------
595,504 1,757,125
------------ --------------
BUSINESS SERVICES -- 2.5%
5,000 ACCO Brands Corp.+ ............. 123,890 112,200
240,000 AMICAS Inc.+ ................... 1,041,111 705,600
6,000 BB Holdings Ltd.+ .............. 23,159 26,850
5,000 BrandPartners Group Inc.+ ...... 4,850 450
2,400 Carlisle Group Ltd.+ ........... 3,630 6,383
1,000 CheckFree Corp.+ ............... 9,040 46,540
2,500 comScore Inc.+ ................. 41,250 67,500
400,000 Edgewater Technology Inc.+ ..... 2,131,840 3,484,000
25,000 Getty Images Inc.+ ............. 1,037,923 696,000
54,000 GP Strategies Corp.+ ........... 446,988 599,400
See accompanying notes to financial statements.
5
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2007
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
- ------------ ------------ ---------------
COMMON STOCKS (CONTINUED)
BUSINESS SERVICES (CONTINUED)
22,589 GSE Systems Inc.+ .............. $ 31,625 $ 152,476
500 GSI Commerce Inc.+ ............. 8,649 13,300
100,000 Industrial Distribution
Group Inc.+ ................. 405,322 944,000
60,000 Interactive Data Corp. ......... 534,171 1,692,000
200,000 Intermec Inc.+ ................. 4,088,640 5,224,000
13,000 Landauer Inc. .................. 234,859 662,480
4,000 MDC Partners Inc., Cl. A+ ...... 12,360 43,440
166,000 Nashua Corp.+ .................. 1,597,567 1,842,600
375 OneSource Services Inc.+ ....... 3,461 4,987
19,000 R. H. Donnelley Corp.+ ......... 255,103 1,064,380
600 Shellshock Ltd.+ ............... 0 0
68,000 Sohgo Security Services
Co. Ltd. .................... 864,949 1,104,671
20,000 Stamps.com Inc.+ ............... 109,872 239,400
5,000 StarTek Inc. ................... 73,657 50,650
80,000 The Brink's Co. ................ 1,986,050 4,470,400
10,000 The Interpublic Group of
Companies Inc.+ ............. 104,116 103,800
160,265 Trans-Lux Corp.+ (a) ........... 1,219,543 841,391
72,000 ValueClick Inc.+ ............... 1,873,770 1,617,120
------------ --------------
18,267,395 25,816,018
------------ --------------
CABLE -- 2.1%
230,000 Adelphia Communications
Corp., Cl. A+ ............... 29,650 4,600
230,000 Adelphia Communications
Corp., Cl. A, Escrow+ ....... 0 0
230,000 Adelphia Recovery Trust+ ....... 0 0
495,000 Cablevision Systems Corp.,
Cl. A+ ...................... 0 17,295,300
9,329 Liberty Global Inc., Cl. A+ .... 249,972 382,676
9,329 Liberty Global Inc., Cl. C+ .... 240,169 360,659
300,000 Lin TV Corp., Cl. A+ ........... 4,764,278 3,903,000
4,000 Outdoor Channel
Holdings Inc.+ .............. 44,765 36,120
------------ --------------
5,328,834 21,982,355
------------ --------------
CLOSED-END FUNDS -- 0.6%
86,000 The Central Europe and
Russia Fund Inc. ............ 1,997,126 4,816,860
36,700 The European Equity
Fund Inc. ................... 386,832 478,568
54,000 The New Germany Fund Inc. ...... 635,491 949,320
11,000 The Spain Fund Inc. ............ 103,029 172,480
------------ --------------
3,122,478 6,417,228
------------ --------------
COMMUNICATIONS EQUIPMENT -- 1.8%
60,000 Andrew Corp.+ .................. 243,556 831,000
150,000 Communications
Systems Inc. ................ 1,040,821 1,575,000
260,900 Sycamore Networks Inc.+ ........ 778,040 1,061,863
260,000 Thomas & Betts Corp.+ .......... 4,754,753 15,246,400
------------ --------------
6,817,170 18,714,263
------------ --------------
MARKET
SHARES COST VALUE
- ------------ ------------ ---------------
COMPUTER SOFTWARE AND SERVICES -- 1.3%
73,000 Borland Software Corp.+ ........ $ 612,810 $ 317,550
90,000 FalconStor Software Inc.+ ...... 636,868 1,084,500
290,000 Furmanite Corp.+ ............... 1,059,514 2,639,000
54,099 Global Sources Ltd.+ ........... 834,272 1,199,375
50,000 Jupitermedia Corp.+ ............ 435,800 316,500
80,000 Limelight Networks Inc.+ ....... 804,336 702,400
20,187 MKS Instruments Inc.+ .......... 367,981 383,957
22,000 NAVTEQ Corp.+ .................. 858,735 1,715,340
65,000 OpenTV Corp., Cl. A+ ........... 342,899 96,200
6,000 Phoenix Technologies Ltd.+ ..... 41,368 64,260
215,000 Stamford Industrial
Group Inc.+ ................. 156,830 425,700
800,000 StorageNetworks Inc.,
Escrow+ (b) ................. 0 24,000
295,000 Tyler Technologies Inc.+ ....... 1,113,084 3,938,250
------------ --------------
7,264,497 12,907,032
------------ --------------
CONSUMER PRODUCTS -- 1.9%
6,200 1-800-FLOWERS.COM
Inc., Cl. A+ ................ 60,304 71,858
27,000 Adams Golf Inc.+ ............... 71,200 55,350
5,250 Alberto-Culver Co. ............. 123,588 130,148
16,000 Ashworth Inc.+ ................. 69,906 98,400
33,500 Chofu Seisakusho Co. Ltd. ...... 484,644 583,293
37,500 Church & Dwight Co. Inc. ....... 354,732 1,764,000
45,000 Coachmen Industries Inc. ....... 512,420 301,500
6,000 Elizabeth Arden Inc.+ .......... 82,125 161,760
50,000 Escada AG+ ..................... 1,708,416 1,844,458
2,000 Harley-Davidson Inc. ........... 4,712 92,420
200,000 Hartmarx Corp.+ ................ 1,011,455 980,000
86,300 Lenox Group Inc.+ .............. 900,581 414,240
5,000 Levcor International Inc.+ ..... 7,650 1,425
290,000 Marine Products Corp. .......... 193,214 2,459,200
32,000 National Presto
Industries Inc. ............. 1,003,041 1,696,000
10,000 Oakley Inc. .................... 286,983 290,300
84,200 Revlon Inc., Cl. A+ ............ 259,765 96,830
75,250 Sally Beauty Holdings Inc.+ .... 588,091 635,862
699,100 Schiff Nutrition
International Inc. .......... 1,873,361 4,187,609
90,000 Spectrum Brands Inc.+ .......... 982,754 522,000
5,500 Steven Madden Ltd. ............. 26,985 104,225
14,000 Stewart Enterprises Inc.,
Cl. A ....................... 65,467 106,680
87,425 Syratech Corp.+ ................ 17,426 1,749
4,000 The Scotts Miracle-Gro Co.,
Cl. A ....................... 45,880 171,000
17,000 WD-40 Co. ...................... 470,278 580,380
73,000 Wolverine World Wide Inc. ...... 710,596 2,000,200
------------ --------------
11,915,574 19,350,887
------------ --------------
CONSUMER SERVICES -- 0.9%
35,000 Bowlin Travel Centers Inc.+ .... 32,451 87,150
2,500 Collectors Universe Inc. ....... 8,720 35,200
See accompanying notes to financial statements.
6
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2007
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
- ------------ ------------ ---------------
COMMON STOCKS (CONTINUED)
CONSUMER SERVICES (CONTINUED)
10,000 eLong Inc., ADR+ ............... $ 113,711 $ 96,600
2,000 Expedia Inc.+ .................. 19,829 63,760
40,000 IAC/InterActiveCorp+ ........... 471,794 1,186,800
50,000 Martha Stewart Living
Omnimedia Inc., Cl. A+ ...... 625,306 582,500
20,000 Response USA Inc.+ ............. 16,500 50
267,000 Rollins Inc. ................... 2,284,661 7,126,230
10,000 TiVo Inc.+ ..................... 74,563 63,500
------------ --------------
3,647,535 9,241,790
------------ --------------
DIVERSIFIED INDUSTRIAL -- 8.4%
42,000 Acuity Brands Inc. ............. 488,472 2,120,160
2,000 Albany International
Corp., Cl. A ................ 71,251 74,980
103,100 Ampco-Pittsburgh Corp. ......... 1,446,420 4,060,078
6,000 Anixter International Inc.+ .... 57,120 494,700
290,000 Baldor Electric Co. ............ 7,881,723 11,585,500
150,000 Crane Co. ...................... 3,282,255 7,195,500
100,000 Delta plc ...................... 212,289 269,048
4,000 ESCO Technologies Inc.+ ........ 66,552 132,960
803 Foster Wheeler Ltd.+ ........... 3,183 105,418
12,000 Gardner Denver Inc.+ ........... 103,046 468,000
218,000 Greif Inc., Cl. A .............. 2,194,018 13,228,240
26,000 Greif Inc., Cl. B .............. 948,864 1,469,000
155,000 Griffon Corp.+ ................. 3,648,830 2,340,500
10,000 Insteel Industries Inc. ........ 4,250 153,500
80,000 Katy Industries Inc.+ .......... 535,525 128,000
73,000 Lindsay Corp. .................. 781,892 3,195,940
210,000 Magnetek Inc.+ ................. 1,254,989 1,008,000
37,000 Matthews International
Corp., Cl. A ................ 861,644 1,620,600
275,000 Myers Industries Inc. .......... 2,505,876 5,450,500
130,000 National Patent
Development Corp.+ .......... 86,241 309,400
101,000 Oil-Dri Corp. of America ....... 873,490 1,858,400
15,000 Olin Corp. ..................... 232,292 335,700
220,000 Park-Ohio Holdings Corp.+ ...... 1,220,379 5,709,000
86,000 Precision Castparts Corp. ...... 1,571,868 12,726,280
32,000 Roper Industries Inc. .......... 620,029 2,096,000
33,000 Sonoco Products Co. ............ 911,856 995,940
63,000 Standex International Corp. .... 1,253,307 1,302,840
120,000 Tech/Ops Sevcon Inc. ........... 827,687 1,044,000
125,000 The Lamson & Sessions Co.+ ..... 831,798 3,370,000
80,000 Tredegar Corp. ................. 1,219,764 1,380,000
73,048 WHX Corp.+ ..................... 1,180,253 547,860
------------ --------------
37,177,163 86,776,044
------------ --------------
EDUCATIONAL SERVICES -- 0.1%
6,000 Career Education Corp.+ ........ 139,615 167,940
1,000 School Specialty Inc.+ ......... 33,907 34,630
70,000 Universal Technical
Institute Inc.+ ............. 1,571,936 1,260,000
------------ --------------
1,745,458 1,462,570
------------ --------------
MARKET
SHARES COST VALUE
- ------------ ------------ ---------------
ELECTRONICS -- 1.9%
90,000 Badger Meter Inc. .............. $ 2,071,994 $ 2,884,500
37,700 Bel Fuse Inc., Cl. A ........... 1,354,853 1,439,386
357,800 California Micro
Devices Corp.+ .............. 1,864,519 1,570,742
200,000 CTS Corp. ...................... 2,193,163 2,580,000
165,000 Greatbatch Inc.+ ............... 4,578,537 4,387,350
17,000 IMAX Corp.+ .................... 147,321 71,400
210,000 KEMET Corp.+ ................... 1,694,144 1,543,500
69,300 Methode Electronics Inc. ....... 650,898 1,042,965
100,000 Park Electrochemical Corp. ..... 2,335,078 3,358,000
20,000 Trident Microsystems Inc.+ ..... 119,857 317,800
3,576 Trimble Navigation Ltd.+ ....... 99,306 140,215
20,000 Zoran Corp.+ ................... 121,523 404,000
------------ --------------
17,231,193 19,739,858
------------ --------------
ENERGY AND UTILITIES -- 4.7%
3,000 AGL Resources Inc. ............. 51,525 118,860
1,000,000 Aquila Inc.+ ................... 3,741,907 4,010,000
6,400 BIW Ltd. ....................... 94,563 148,800
95,000 Callon Petroleum Co.+ .......... 939,533 1,322,400
35,000 CH Energy Group Inc. ........... 1,460,330 1,673,000
12,000 Chesapeake Utilities Corp. ..... 236,752 407,880
70,000 CMS Energy Corp. ............... 395,665 1,177,400
23,000 Connecticut Water Service Inc. . 464,832 532,680
3,500 Consolidated Water Co. Ltd. .... 83,341 105,070
150,000 Covanta Holding Corp.+ ......... 644,530 3,676,500
145,000 El Paso Electric Co.+ .......... 1,886,797 3,353,850
20,000 Environmental Power Corp.+ ..... 110,000 106,000
126,800 Florida Public Utilities Co. ... 1,177,900 1,496,240
43,000 Middlesex Water Co. ............ 743,997 812,700
10,000 Nicor Inc. ..................... 221,002 429,000
20,000 Oceaneering
International Inc.+ ......... 544,313 1,516,000
2,000 PetroQuest Energy Inc.+ ........ 5,250 21,460
973,500 RPC Inc. ....................... 1,021,292 13,833,435
35,000 SEMCO Energy Inc.+ ............. 218,317 276,150
77,000 SJW Corp. ...................... 1,182,745 2,628,780
72,500 Southern Union Co. ............. 1,296,863 2,255,475
100,000 Southwest Gas Corp. ............ 1,772,385 2,829,000
20,000 Tesoro Corp. ................... 140,933 920,400
4,000 Toreador Resources Corp.+ ...... 15,250 47,320
10,000 Vestas Wind Systems A/S+ ....... 89,988 789,992
10,000 W-H Energy Services Inc.+ ...... 212,864 737,500
145,000 Westar Energy Inc. ............. 2,240,149 3,561,200
------------ --------------
20,993,023 48,787,092
------------ --------------
ENTERTAINMENT -- 2.1%
120,000 Aruze Corp. .................... 2,786,374 5,348,888
42,500 Canterbury Park
Holding Corp. ............... 594,314 518,500
6,048 Chestnut Hill Ventures+ (b) .... 164,590 275,236
500 Discovery Holding Co., Cl. A+ .. 6,095 14,425
201,000 Dover Motorsports Inc. ......... 1,104,623 1,300,470
100,000 Fisher Communications Inc.+ .... 5,554,857 4,987,000
See accompanying notes to financial statements.
7
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2007
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
- ------------ ------------ ---------------
COMMON STOCKS (CONTINUED)
ENTERTAINMENT (CONTINUED)
581,466 Gemstar-TV Guide
International Inc.+ ......... $ 3,218,348 $ 4,047,003
16,000 International Speedway
Corp., Cl. A ................ 515,479 733,760
2,500 International Speedway
Corp., Cl. B ................ 45,000 113,750
10,000 Metromedia International
Group Inc.+ ................. 6,700 17,900
320,000 Six Flags Inc.+ ................ 1,620,999 1,107,200
200,000 The Topps Co. Inc. ............. 1,626,618 1,938,000
50,530 Triple Crown Media Inc.+ ....... 587,404 311,770
50,000 World Wrestling
Entertainment Inc., Cl. A ... 581,121 754,000
35,000 WPT Enterprises Inc.+ .......... 274,988 100,800
------------ --------------
18,687,510 21,568,702
------------ --------------
ENVIRONMENTAL SERVICES -- 1.1%
200,000 Allied Waste Industries Inc.+ .. 1,943,361 2,550,000
8,000 Basin Water Inc.+ .............. 72,458 94,640
18,000 Catalytica Energy
Systems Inc.+ ............... 87,322 23,040
262,500 Republic Services Inc. ......... 2,490,315 8,586,375
------------ --------------
4,593,456 11,254,055
------------ --------------
EQUIPMENT AND SUPPLIES -- 11.8%
15,000 A.O. Smith Corp., Cl. A ........ 336,569 769,125
249,000 AMETEK Inc. .................... 996,986 10,761,780
425,000 Baldwin Technology Co.
Inc., Cl. A+ ................ 1,353,684 2,129,250
26,000 Belden Inc. .................... 290,500 1,219,660
6,000 C&D Technologies Inc.+ ......... 72,457 29,880
50,000 Capstone Turbine Corp.+ ........ 103,400 60,000
252,400 CIRCOR International Inc. ...... 5,113,231 11,461,484
400,000 CLARCOR Inc. ................... 2,448,277 13,684,000
200,000 Core Molding
Technologies Inc.+ .......... 299,389 1,532,000
170,000 Crown Holdings Inc.+ ........... 687,034 3,869,200
2,000 Danaher Corp. .................. 34,106 165,420
66,000 Donaldson Co. Inc. ............. 761,576 2,756,160
350,000 Enodis plc ..................... 1,147,011 1,249,591
90,000 Entegris Inc.+ ................. 708,040 781,200
435,000 Fedders Corp.+ ................. 1,492,346 20,010
188,000 Flowserve Corp. ................ 3,473,080 14,321,840
152,500 Franklin Electric Co. Inc. ..... 1,244,803 6,269,275
10,000 Gehl Co.+ ...................... 266,202 223,300
135,000 Gerber Scientific Inc.+ ........ 1,290,225 1,464,750
84,000 Graco Inc. ..................... 928,834 3,285,240
155,000 GrafTech International Ltd.+ ... 1,069,681 2,765,200
90,000 IDEX Corp. ..................... 556,738 3,275,100
90,000 Interpump Group SpA ............ 353,472 888,719
2,000 Itron Inc.+ .................... 139,496 186,140
4,000 Jarden Corp.+ .................. 11,351 123,760
9,700 K-Tron International Inc.+ ..... 71,782 921,500
MARKET
SHARES COST VALUE
- ------------ ------------ ---------------
64,000 L.S. Starrett Co., Cl. A ....... $ 1,091,156 $ 1,238,400
30,000 Littelfuse Inc.+ ............... 611,444 1,070,700
107,000 Lufkin Industries Inc. ......... 1,029,240 5,887,140
55,000 Maezawa Kyuso
Industries Co. Ltd. ......... 359,609 1,005,528
26,666 Met-Pro Corp. .................. 192,463 431,456
2,000 Middleby Corp.+ ................ 37,310 129,080
20,800 Mueller Industries Inc. ........ 661,915 751,712
10,000 Plantronics Inc. ............... 246,559 285,500
50,000 Robbins & Myers Inc. ........... 1,023,975 2,864,500
95,000 SL Industries Inc.+ ............ 1,114,953 2,165,050
5,000 Teleflex Inc. .................. 76,167 389,600
175,000 Tennant Co. .................... 3,865,562 8,522,500
255,000 The Gorman-Rupp Co. ............ 6,126,194 8,455,800
5,000 Valmont Industries Inc. ........ 40,625 424,250
40,000 Vicor Corp. .................... 452,690 484,800
7,875 Watsco Inc., Cl. B ............. 23,627 365,558
85,000 Watts Water Technologies
Inc., Cl. A ................. 1,642,405 2,609,500
15,000 Wolverine Tube Inc.+ ........... 150,915 19,500
------------ --------------
43,997,079 121,314,158
------------ --------------
FINANCIAL SERVICES -- 3.2%
10,000 Alleghany Corp.+ ............... 1,731,082 4,060,000
25,287 Argo Group International
Holdings Ltd.+ .............. 844,293 1,100,237
60,000 Bank of Florida Corp.+ ......... 900,000 976,800
87,300 BKF Capital Group Inc.+ ........ 1,125,332 209,520
360,000 CNA Surety Corp.+ .............. 3,944,587 6,346,800
21,000 Crazy Woman Creek
Bancorp Inc. ................ 325,590 441,000
500 Duff & Phelps Corp., Cl. A+ .... 8,000 9,175
37,000 Epoch Holding Corp.+ ........... 63,098 520,960
3,000 Federal Agricultural
Mortgage Corp., Cl. C ....... 24,000 88,080
160,000 Flushing Financial Corp. ....... 2,479,766 2,688,000
208,000 Franklin Bank Corp.+ ........... 4,164,739 1,913,600
1,000 KBW Inc.+ ...................... 21,000 28,780
67,000 LaBranche & Co. Inc.+ .......... 632,416 313,560
1,000 LandAmerica Financial
Group Inc. .................. 12,175 38,980
66,000 Landesbank Berlin
Holding AG .................. 1,280,794 637,140
3,000 Leucadia National Corp. ........ 24,354 144,660
5,000 MB Financial Inc. .............. 178,537 172,750
55,000 MVC Capital Inc. ............... 545,282 1,019,150
1,500 NetBank Inc.+ .................. 6,000 102
100,000 NewAlliance Bancshares Inc. .... 1,463,358 1,468,000
5,000 PrivateBancorp Inc. ............ 169,194 174,200
100,320 Sterling Bancorp ............... 1,755,223 1,404,480
10,000 Sterling Financial Corp. ....... 179,253 171,500
80,000 SWS Group Inc. ................. 1,752,170 1,415,200
107,500 The Midland Co. ................ 822,713 5,908,200
50,000 Wilmington Trust Corp. ......... 1,574,410 1,945,000
------------ --------------
26,027,366 33,195,874
------------ --------------
See accompanying notes to financial statements.
8
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2007
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
- ------------ ------------ ---------------
COMMON STOCKS (CONTINUED)
FOOD AND BEVERAGE -- 4.9%
30,000 Boston Beer Co. Inc., Cl. A+ ... $ 468,757 $ 1,459,800
25,000 Brown-Forman Corp., Cl. A ...... 697,122 1,950,000
50,000 Bull-Dog Sauce Co. Ltd. ........ 658,452 139,294
100 Compania Cervecerias
Unidas SA, ADR .............. 2,455 3,850
20,000 CoolBrands International
Inc.+ ....................... 81,374 19,303
34,000 Corn Products
International Inc. .......... 548,897 1,559,580
220,000 Davide Campari-Milano SpA ...... 2,261,447 2,258,695
100,000 Del Monte Foods Co. ............ 997,536 1,050,000
85,000 Denny's Corp.+ ................. 132,580 340,000
800,000 Dynasty Fine Wines
Group Ltd. .................. 294,142 312,844
100 Embotelladora Andina SA,
Cl. A, ADR .................. 1,295 1,720
25,000 Farmer Brothers Co. ............ 389,323 622,000
330,000 Flowers Foods Inc. ............. 1,820,889 7,194,000
500 Genesee Corp., Cl. A+ .......... 0 0
21,500 Genesee Corp., Cl. B+ .......... 15,392 0
701,500 Grupo Continental
SAB de CV ................... 1,058,724 1,475,168
10,000 Hain Celestial Group Inc.+ ..... 184,774 321,300
70,000 ITO EN Ltd. .................... 1,697,853 1,706,351
21,000 ITO EN Ltd., Preference+ ....... 478,882 417,751
20,000 J & J Snack Foods Corp. ........ 441,518 696,400
298,000 Kikkoman Corp. ................. 2,382,970 4,498,603
30,000 Lifeway Foods Inc.+ ............ 174,542 504,900
20,000 Meiji Seika Kaisha Ltd. ........ 87,470 100,640
35,000 MGP Ingredients Inc. ........... 243,900 359,450
150,000 Morinaga Milk
Industry Co. Ltd. ........... 640,663 600,705
15,000 Nathan's Famous Inc.+ .......... 155,721 247,500
110,850 Nissin Food Products
Co. Ltd. .................... 3,863,480 3,956,688
4,000 Omni Nutraceuticals Inc.+ ...... 13,563 16
40,000 PepsiAmericas Inc. ............. 755,762 1,297,600
53,000 Ralcorp Holdings Inc.+ ......... 794,081 2,958,460
105,000 Rock Field Co. Ltd. ............ 1,758,855 1,527,489
12,250 The Cheesecake
Factory Inc.+ ............... 63,971 287,507
66,000 The J.M. Smucker Co. ........... 1,599,230 3,525,720
200,000 The Steak n Shake Co.+ ......... 2,658,177 3,002,000
70,700 Tootsie Roll Industries Inc. ... 1,411,016 1,875,671
49,000 Triarc Cos. Inc., Cl. A ........ 348,372 602,210
119,000 Triarc Cos. Inc., Cl. B ........ 1,016,318 1,488,690
2,000 Vina Concha Y Toro SA, ADR ..... 54,957 93,520
1,000 Willamette Valley
Vineyards Inc.+ ............. 3,994 6,770
80,000 YAKULT HONSHA Co. Ltd. ......... 2,083,464 1,821,268
------------ --------------
32,341,918 50,283,463
------------ --------------
MARKET
SHARES COST VALUE
- ------------ ------------ ---------------
HEALTH CARE -- 9.6%
250,000 Advanced Medical
Optics Inc.+ ................ $ 9,170,486 $ 7,647,500
47,000 Align Technology Inc.+ ......... 409,536 1,190,510
100,000 Allergan Inc. .................. 1,964,408 6,447,000
130,000 Alpharma Inc., Cl. A ........... 3,020,550 2,776,800
128,000 AngioDynamics Inc.+ ............ 2,573,986 2,412,800
5,000 Anika Therapeutics Inc.+ ....... 64,475 104,050
230,000 Animal Health
International Inc.+ ......... 2,746,769 2,559,900
41,000 ArthroCare Corp.+ .............. 856,241 2,291,490
7,800 Bio-Rad Laboratories
Inc., Cl. A+ ................ 309,943 705,900
9,000 Bruker BioSciences Corp.+ ...... 34,729 79,200
130,000 Chemed Corp. ................... 2,092,697 8,080,800
73,000 CONMED Corp.+ .................. 1,929,954 2,043,270
130,000 Crucell NV, ADR+ ............... 2,827,283 2,683,200
60,000 Cutera Inc.+ ................... 1,473,942 1,572,600
50,000 Dade Behring Holdings Inc. ..... 3,598,463 3,817,500
82,000 Del Global Technologies Corp.+ . 251,543 241,900
79,000 DexCom Inc.+ ................... 1,034,629 789,210
5,000 DJO Inc.+ ...................... 177,313 245,500
90,000 Edwards Lifesciences Corp.+ .... 3,180,397 4,437,900
70,000 Exactech Inc.+ ................. 1,002,986 1,123,500
47,000 Henry Schein Inc.+ ............. 827,131 2,859,480
32,000 ICU Medical Inc.+ .............. 940,126 1,240,000
15,000 IMS Health Inc. ................ 412,500 459,600
2,000 Integra LifeSciences
Holdings Corp.+ ............. 43,600 97,160
3,000 Invacare Corp. ................. 73,652 70,140
30,000 Inverness Medical
Innovations Inc.+ ........... 554,733 1,659,600
25,000 Invitrogen Corp.+ .............. 1,286,160 2,043,250
220,000 Lifecore Biomedical Inc.+ ...... 2,847,832 2,838,000
40,000 MWI Veterinary Supply Inc.+ .... 972,736 1,510,000
15,000 Nabi Biopharmaceuticals+ ....... 105,625 60,900
3,000 NeoPharm Inc.+ ................. 29,760 2,970
5,000 NeuroMetrix Inc.+ .............. 45,273 43,650
1,300 Nobel Biocare Holding AG ....... 100,171 352,008
100,000 Odyssey HealthCare Inc.+ ....... 1,239,359 961,000
15,000 Opko Health Inc.+ .............. 61,059 60,000
50,000 Orthofix International NV+ ..... 1,906,624 2,448,500
2,000 OrthoLogic Corp.+ .............. 6,750 2,820
35,000 Owens & Minor Inc. ............. 692,324 1,333,150
50,000 Pain Therapeutics Inc.+ ........ 421,441 467,500
50,000 Palomar Medical
Technologies Inc.+ .......... 1,563,276 1,424,500
100,000 Penwest
Pharmaceuticals Co.+ ........ 1,185,995 1,101,000
50,000 Possis Medical Inc.+ ........... 623,493 677,500
30,000 PSS World Medical Inc.+ ........ 367,273 573,900
1,779 Qiagen NV+ ..................... 7,992 34,530
205,000 Quidel Corp.+ .................. 1,712,623 4,009,800
See accompanying notes to financial statements.
9
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2007
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
- ------------ ------------ ---------------
COMMON STOCKS (CONTINUED)
HEALTH CARE (CONTINUED)
100,000 Regeneration
Technologies Inc.+ .......... $ 1,003,406 $ 1,072,000
15,000 Sirona Dental Systems Inc.+ .... 149,545 535,050
59,000 SNIA SpA ....................... 133,755 92,460
130,000 Sonic Innovations Inc.+ ........ 601,533 1,192,100
2,800,000 Sorin SpA+ ..................... 8,490,551 5,809,294
1,100,000 SSL International plc .......... 8,745,703 9,565,022
2,500 Straumann Holding AG ........... 224,697 702,169
4,200 Stryker Corp. .................. 162,570 288,792
40,000 Thoratec Corp.+ ................ 478,455 827,600
24,000 United-Guardian Inc. ........... 210,782 244,800
45,000 Vascular Solutions Inc.+ ....... 386,334 359,100
1,000 Wright Medical Group Inc.+ ..... 16,460 26,820
5,100 Young Innovations Inc. ......... 128,516 145,911
10,000 Zymogenetics Inc.+ ............. 131,026 130,500
------------ --------------
77,611,171 98,573,106
------------ --------------
HOME FURNISHINGS -- 0.0%
13,000 Bassett Furniture
Industries Inc. ............. 215,616 134,940
4,000 Bed Bath & Beyond Inc.+ ........ 11,125 136,480
250 Foamex International Inc.+ ..... 8,062 2,313
27,000 La-Z-Boy Inc. .................. 226,525 199,260
------------ --------------
461,328 472,993
------------ --------------
HOTELS AND GAMING -- 2.9%
12,000 Boyd Gaming Corp. .............. 90,225 514,200
71,000 Churchill Downs Inc. ........... 2,287,092 3,547,160
100,000 Dover Downs Gaming &
Entertainment Inc. .......... 666,063 1,039,000
160,000 Gaylord Entertainment Co.+ ..... 4,728,162 8,515,200
20,002 Harrah's Entertainment Inc. .... 1,354,634 1,738,774
10,000 Home Inns & Hotels
Management Inc., ADR+ ....... 291,038 348,000
140,000 Lakes Entertainment Inc.+ ...... 717,933 1,334,200
1,200 Las Vegas Sands Corp.+ ......... 34,800 160,104
320,000 Magna Entertainment
Corp., Cl. A+ ............... 2,079,594 726,400
20,000 Marcus Corp. ................... 377,480 384,000
26,000 Orient-Express Hotels
Ltd., Cl. A ................. 1,266,565 1,333,020
80,000 Penn National Gaming Inc.+ ..... 181,379 4,721,600
90,000 Pinnacle Entertainment Inc.+ ... 787,681 2,450,700
11,700 Sonesta International
Hotels Corp., Cl. A ......... 454,232 499,122
3,000 Station Casinos Inc. ........... 11,670 262,440
16,000 Wynn Resorts Ltd. .............. 135,778 2,520,960
20,000 Youbet.com Inc.+ ............... 51,494 37,800
------------ --------------
15,515,820 30,132,680
------------ --------------
MANUFACTURED HOUSING AND RECREATIONAL VEHICLES -- 1.3%
58,000 Cavco Industries Inc.+ ......... 1,127,032 1,943,000
330,000 Champion Enterprises Inc.+ ..... 3,439,560 3,623,400
17,000 Drew Industries Inc.+ .......... 296,303 691,560
MARKET
SHARES COST VALUE
- ------------ ------------ ---------------
200,000 Fleetwood Enterprises Inc.+ .... $ 2,557,247 $ 1,710,000
63,000 Monaco Coach Corp .............. 1,376,125 883,890
6,000 Nobility Homes Inc. ............ 127,347 114,000
135,000 Skyline Corp. .................. 4,382,320 4,060,800
------------ --------------
13,305,934 13,026,650
------------ --------------
METALS AND MINING -- 0.7%
60,000 Arizona Star Resource Corp.+ ... 248,020 829,437
52,003 Barrick Gold Corp. ............. 1,522,648 2,094,681
10,000 Inmet Mining Corp. ............. 325,911 1,002,865
15,000 Ivanhoe Mines Ltd.+. ........... 111,730 195,750
142,115 Kinross Gold Corp.+. ........... 984,488 2,128,883
10,000 Meridian Gold Inc.+ ............ 75,630 331,000
2,000 Northwest Pipe Co.+. ........... 55,888 75,640
190,000 Royal Oak Mines Inc.+ .......... 322,487 0
30,148 Stillwater Mining Co.+ ......... 389,561 310,223
52,000 Uranium Resources Inc.+ ........ 287,136 488,280
------------ --------------
4,323,499 7,456,759
------------ --------------
PAPER AND FOREST PRODUCTS -- 0.1%
35,000 Pope & Talbot Inc.+. ........... 481,405 9,800
18,000 Schweitzer-Mauduit
International Inc. .......... 424,690 419,400
30,000 Wausau Paper Corp. ............. 367,090 334,500
------------ --------------
1,273,185 763,700
------------ --------------
PUBLISHING -- 1.5%
307,237 Independent News &
Media plc ................... 431,671 1,143,448
12,000 John Wiley & Sons Inc., Cl. B .. 46,500 537,000
110,000 Journal Communications
Inc., Cl. A ................. 1,597,923 1,042,800
180,000 Journal Register Co. ........... 1,677,710 432,000
25,000 Lee Enterprises Inc.. .......... 500,395 389,250
80,000 McClatchy Co., Cl. A ........... 2,279,343 1,598,400
63,000 Media General Inc., Cl. A ...... 1,925,836 1,733,130
23,000 Meredith Corp. ................. 429,183 1,317,900
260,000 News Corp., Cl. A .............. 765,310 5,717,400
63,333 PRIMEDIA Inc. .................. 1,161,306 889,195
4,500 Value Line Inc. ................ 183,817 221,715
------------ --------------
10,998,994 15,022,238
------------ --------------
REAL ESTATE -- 1.1%
190 Case Pomeroy & Co.
Inc., Cl. A+ (b) ............ 222,300 388,075
169,500 Griffin Land &
Nurseries Inc.+ ............. 2,189,170 6,190,140
9,000 Gyrodyne Co. of America Inc. ... 135,071 445,410
20,000 Malan Realty
Investors Inc.+ (b). ........ 53,529 14,800
106,000 Morguard Corp. ................. 1,344,892 4,475,946
------------ --------------
3,944,962 11,514,371
------------ --------------
RETAIL -- 1.6%
144,000 Aaron Rents Inc., Cl. A ........ 521,690 3,081,600
35,000 Big 5 Sporting Goods Corp. ..... 657,716 654,500
8,000 Casey's General Stores Inc. .... 124,503 221,600
See accompanying notes to financial statements.
10
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2007
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
- ------------ ------------ ---------------
COMMON STOCKS (CONTINUED)
RETAIL (CONTINUED)
62,000 Coldwater Creek Inc.+ .......... $ 127,466 $ 673,320
61,000 Copart Inc.+ ................... 1,852,119 2,097,790
110,000 CSK Auto Corp.+ ................ 1,749,994 1,171,500
3,000 Gander Mountain Co.+ ........... 27,860 16,230
158,500 Ingles Markets Inc., Cl. A ..... 1,980,267 4,542,610
35,000 Movado Group Inc. .............. 515,027 1,117,200
30,000 Pier 1 Imports Inc. ............ 202,215 141,900
14,000 Tractor Supply Co.+ ............ 655,632 645,260
5,000 Village Super Market
Inc., Cl. A ................. 226,833 260,000
40,000 Weis Markets Inc. .............. 1,174,744 1,707,600
------------ --------------
9,816,066 16,331,110
------------ --------------
SPECIALTY CHEMICALS -- 4.4%
40,000 A. Schulman Inc. ............... 739,148 789,200
24,000 Airgas Inc. .................... 150,350 1,239,120
80,000 Albemarle Corp. ................ 1,125,964 3,536,000
35,000 Arch Chemicals Inc. ............ 766,922 1,640,800
400,000 Chemtura Corp. ................. 4,238,263 3,556,000
10,000 Cytec Industries Inc. .......... 278,296 683,900
4,000 Dionex Corp.+ .................. 120,000 317,840
180,400 Ferro Corp. .................... 4,048,878 3,604,392
236,000 H.B. Fuller Co. ................ 2,083,971 7,004,480
100,000 Hawkins Inc. ................... 1,439,496 1,440,000
390,000 Hercules Inc. .................. 3,763,087 8,197,800
150,000 Material Sciences Corp.+ ....... 1,394,190 1,593,000
155,000 Omnova Solutions Inc.+ ......... 948,026 895,900
50,000 Penford Corp. .................. 539,601 1,885,000
10,000 Quaker Chemical Corp. .......... 181,137 235,200
280,000 Sensient Technologies Corp. .... 5,695,625 8,083,600
------------ --------------
27,512,954 44,702,232
------------ --------------
TELECOMMUNICATIONS -- 1.5%
45,000 Alltel Corp. ................... 1,481,936 3,135,600
23,000 Atlantic Tele-Network Inc. ..... 92,644 836,050
200,000 Cincinnati Bell Inc.+ .......... 517,183 988,000
30,000 Citizens Communications Co. .... 440,400 429,600
6,795 Community Service
Communications Inc.+ ........ 0 22,593
46,000 D&E Communications Inc. ........ 592,050 654,120
10,000 New Ulm Telecom Inc. ........... 131,062 125,000
3,000 North Pittsburgh
Systems Inc. ................ 68,488 71,280
120,000 Rogers Communications
Inc., Cl. B ................. 579,562 5,463,600
63,000 Shenandoah
Telecommunications Co. ...... 373,895 1,370,880
37,584 Verizon Communications Inc. .... 905,273 1,664,220
870 Virgin Media Inc. .............. 13,291 21,115
24,000 Windstream Corp. ............... 25,072 338,880
53,000 Winstar Communications
Inc.+ (b) ................... 133 53
------------ --------------
5,220,989 15,120,991
------------ --------------
MARKET
SHARES COST VALUE
- ------------ ------------ ---------------
TRANSPORTATION -- 0.7%
150,000 GATX Corp. ..................... $ 4,610,043 $ 6,412,500
117,000 Grupo TMM SA, Cl. A, ADR+ ...... 858,411 369,720
2,000 Irish Continental Group plc+ ... 17,409 73,750
20,200 Providence and Worcester
Railroad Co. ................ 333,471 365,620
------------ --------------
5,819,334 7,221,590
------------ --------------
WIRELESS COMMUNICATIONS -- 2.2%
45,000 Centennial Communications
Corp.+ ...................... 246,806 455,400
40,000 Nextwave Wireless Inc.+ ........ 437,163 228,800
72,000 Price Communications
Corp., Escrow+ .............. 0 0
55,000 Rural Cellular Corp., Cl. A+ ... 374,090 2,392,500
1,000 SunCom Wireless
Holdings Inc., Cl. A+ ....... 16,504 25,800
710,000 Vimpel-Communications,
ADR ......................... 1,207,055 19,198,400
17 Xanadoo Co.+ ................... 4,148 3,715
------------ --------------
2,285,766 22,304,615
------------ --------------
TOTAL COMMON STOCKS ............ 501,040,436 896,710,413
------------ --------------
PREFERRED STOCKS -- 0.2%
BROADCASTING -- 0.0%
1,103 PTV Inc., 10.000% Pfd.,
Ser. A ...................... 0 7,280
------------ --------------
BUSINESS SERVICES -- 0.1%
23,382 Interep National
Radio Sales Inc.,
4.000% Cv. Pfd.,
Ser. A+ (b)(c)(d) ........... 2,163,146 409,188
------------ --------------
DIVERSIFIED INDUSTRIAL -- 0.1%
151 Foster Wheeler Ltd.,
Pfd., Ser. B+ (b) ........... 38,060 1,288,513
------------ --------------
TOTAL PREFERRED STOCKS ......... 2,201,206 1,704,981
------------ --------------
RIGHTS -- 0.0%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.0%
800,000 Exide Technologies,
Escrow Rights+ (b) .......... 0 0
------------ --------------
EQUIPMENT AND SUPPLIES -- 0.0%
15,000 Wolverine Tube Inc. Rights+ .... 0 0
------------ --------------
TOTAL RIGHTS ................... 0 0
------------ --------------
WARRANTS -- 0.1%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.0%
1,213 Exide Technologies,
expire 05/05/11+ ............ 2,247 807
------------ --------------
See accompanying notes to financial statements.
11
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2007
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
- ------------ ------------ ---------------
WARRANTS (CONTINUED)
BROADCASTING -- 0.0%
6,082 Granite Broadcasting Corp.,
Ser. A, expire 06/04/12+ .... $ 0 $ 18,246
3,430 Granite Broadcasting Corp.,
Ser. B, expire 06/04/12+ .... 0 6,860
------------ --------------
0 25,106
------------ --------------
BUSINESS SERVICES -- 0.1%
161,431 GP Strategies Corp.,
expire 08/14/08+ (b)(c) ........ 391,882 888,857
------------ --------------
DIVERSIFIED INDUSTRIAL -- 0.0%
379,703 National Patent
Development Corp.,
expire 08/14/08+ (b)(c) ..... 0 20,259
13,217 WHX Corp.,
expire 02/28/08+ ............ 52,373 2,709
------------ --------------
52,373 22,968
------------ --------------
HEALTH CARE -- 0.0%
14,424 Del Global Technologies Corp.,
expire 03/28/08+ ............ 24,809 21,636
------------ --------------
TELECOMMUNICATIONS -- 0.0%
86 Virgin Media Inc.,
expire 01/10/11+ ............ 124 24
------------ --------------
TOTAL WARRANTS ................. 471,435 959,398
------------ --------------
PRINCIPAL
AMOUNT
- ------------
CORPORATE BONDS -- 0.1%
BUSINESS SERVICES -- 0.1%
$ 1,430,098 GP Strategies Corp.,
Sub. Deb.,
6.000%, 08/14/08 (b)(c) ..... 1,237,417 974,719
------------ --------------
COMPUTER SOFTWARE AND SERVICES -- 0.0%
300,000 Exodus Communications Inc.,
Sub. Deb. Cv.,
5.250%, 02/15/08+ (b) ....... 1,185 0
------------ --------------
TELECOMMUNICATIONS -- 0.0%
400,000 Williams Communications
Group Inc., Escrow,
10.875%, 10/01/09+ (b) ...... 0 0
------------ --------------
TOTAL CORPORATE BONDS .......... 1,238,602 974,719
------------ --------------
U.S. GOVERNMENT OBLIGATIONS -- 12.5%
129,695,000 U.S. Treasury Bills,
3.165% to 5.062%++,
10/04/07 to 02/07/08 ........ 128,975,033 128,991,429
------------ --------------
TOTAL
INVESTMENTS -- 100.1% ....... $633,926,712 1,029,340,940
============
OTHER ASSETS AND LIABILITIES (NET) -- (0.1)% (1,418,171)
--------------
NET ASSETS -- 100.0% ........... $1,027,922,769
==============
- ----------
(a) Security considered an affiliated holding because the Fund owns at least
5% of the outstanding shares.
(b) Security fair valued under procedures established by the Board of
Directors. The procedures may include reviewing available financial
information about the company and reviewing valuation of comparable
securities and other factors on a regular basis. At September 30, 2007,
the market value of fair valued securities amounted to $4,283,703 or 0.42%
of total net assets.
(c) At September 30, 2007, the Fund held investments in restricted and
illiquid securities amounting to $2,293,023 or 0.22% of total net assets,
which were valued under methods approved by the Board, as follows:
ACQUISITION 09/30/07
SHARES/ CARRYING
PRINCIPAL ACQUISITION ACQUISITION VALUE
AMOUNT ISSUER DATE COST PER UNIT
- ------------ ------ ----------- ----------- --------
$ 1,430,098 GP Strategies Corp., Sub. Deb.,
6.000%, 08/14/08 ................. 08/08/03 $ 974,565 $68.1575
161,431 GP Strategies Corp. warrants
expire 08/14/08 .................. 08/08/03 391,882 5.5061
23,382 Interep National Radio
Sales Inc., 4.000% Cv. Pfd.,
Ser. A ........................... 05/03/02 2,163,146 17.5001
379,703 National Patent Development
Corp. warrants expire
08/14/08 ......................... 11/24/04 0.00 0.0534
(d) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At September 30,
2007, the market value of the Rule 144A security amounted to $409,188 or
0.04% of total net assets.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR American Depository Receipt
See accompanying notes to financial statements.
12
THE GABELLI SMALL CAP GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2007
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (cost $631,231,933) .............. $ 1,027,596,174
Investments in affiliates,
at value (cost $2,694,779) .......................... 1,744,766
Cash ................................................... 1,308
Foreign currency, at value (cost $9) ................... 9
Receivable for Fund shares sold ........................ 4,316,716
Receivable for investments sold ........................ 3,945,278
Dividends and interest receivable ...................... 717,158
Prepaid expense ........................................ 57,510
---------------
TOTAL ASSETS ........................................... 1,038,378,919
---------------
LIABILITIES:
Payable for Fund shares redeemed ....................... 574,456
Payable for investments purchased ...................... 8,528,993
Payable for investment advisory fees ................... 819,846
Payable for distribution fees .......................... 210,562
Payable for accounting fees ............................ 3,750
Other accrued expenses ................................. 318,543
---------------
TOTAL LIABILITIES ...................................... 10,456,150
===============
NET ASSETS applicable to 29,918,562
shares outstanding .................................. $ 1,027,922,769
===============
NET ASSETS CONSIST OF:
Paid-in capital, each class at $0.001 par value ........ $ 589,419,649
Accumulated net investment loss ........................ (70,863)
Accumulated net realized gain on investments
and foreign currency transactions ................... 43,159,095
Net unrealized appreciation on investments ............. 395,414,228
Net unrealized appreciation on foreign
currency translations ............................... 660
---------------
NET ASSETS ............................................. $ 1,027,922,769
===============
SHARES OF CAPITAL STOCK:
CLASS AAA:
Net Asset Value, offering and redemption price
per share ($1,002,576,837 / 29,171,996 shares
outstanding; 150,000,000 shares authorized) $ 34.37
===============
CLASS A:
Net Asset Value and redemption price per
share ($15,484,881 / 450,572 shares
outstanding; 50,000,000 shares authorized) $ 34.37
===============
Maximum offering price per share
(NAV / .9425, based on maximum sales
charge of 5.75% of the offering price) .............. $ 36.47
===============
CLASS B:
Net Asset Value and offering price per share
($125,750 / 3,774 shares outstanding;
50,000,000 shares authorized) ....................... $ 33.32(a)
===============
CLASS C:
Net Asset Value and offering price per share
($9,735,301 / 292,220 shares outstanding;
50,000,000 shares authorized) ....................... $ 33.32(a)
===============
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2007
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends (net of foreign taxes of $73,987) ............ $ 9,574,183
Interest ............................................... 2,359,540
Interest - affiliated .................................. 8,456
---------------
TOTAL INVESTMENT INCOME ................................ 11,942,179
---------------
EXPENSES:
Investment advisory fees ............................... 8,620,634
Distribution fees - Class AAA .......................... 2,130,243
Distribution fees - Class A ............................ 11,863
Distribution fees - Class B ............................ 1,240
Distribution fees - Class C ............................ 50,967
Shareholder services fees .............................. 821,270
Shareholder communications expenses .................... 266,789
Custodian fees ......................................... 130,092
Legal and audit fees ................................... 65,200
Accounting fees ........................................ 45,000
Registration expenses .................................. 42,942
Directors' fees ........................................ 28,567
Interest expense ....................................... 7,513
Miscellaneous expenses ................................. 74,663
---------------
TOTAL EXPENSES ......................................... 12,296,983
Less: Custodian fee credits ............................ (14,350)
---------------
TOTAL NET EXPENSES ..................................... 12,282,633
---------------
NET INVESTMENT LOSS .................................... (340,454)
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain on investments ....................... 46,620,925
Capital gain distributions from
investment companies ................................ 426,022
Net realized loss on foreign
currency transactions ............................... (7,941)
---------------
Net realized gain on investments and
foreign currency transactions ....................... 47,039,006
---------------
Net change in unrealized appreciation/
depreciation on investments ......................... 111,347,031
Net change in unrealized appreciation/
depreciation on foreign currency translations 772
---------------
Net change in unrealized appreciation/
depreciation on investments and foreign
currency translations ............................... 111,347,803
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY ................. 158,386,809
---------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ........................... $ 158,046,355
===============
- ----------
(a) Redemption price varies based on the length of time held.
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, 2007 SEPTEMBER 30, 2006
------------------ ------------------
OPERATIONS:
Net investment loss ...................................................... $ (340,454) $ (714,480)
Net realized gain on investments and foreign currency transactions ....... 47,039,006 64,428,922
Net change in unrealized appreciation/depreciation on
investments and foreign currency translations ......................... 111,347,803 (40,414)
------------------ ------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..................... 158,046,355 63,674,028
------------------ ------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized gain on investments
Class AAA ............................................................. (54,810,246) (50,200,421)
Class A ............................................................... (187,774) (124,948)
Class B ............................................................... (8,873) (9,605)
Class C ............................................................... (241,821) (119,963)
------------------ ------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ...................................... (55,248,714) (50,454,937)
------------------ ------------------
CAPITAL SHARE TRANSACTIONS:
Class AAA ............................................................. 173,228,328 (18,592,269)
Class A ............................................................... 12,781,396 639,229
Class B ............................................................... (1,610) (26,318)
Class C ............................................................... 6,620,118 1,122,817
------------------ ------------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS .... 192,628,232 (16,856,541)
------------------ ------------------
REDEMPTION FEES .......................................................... 13,640 3,895
------------------ ------------------
NET INCREASE (DECREASE) IN NET ASSETS .................................... 295,439,513 (3,633,555)
NET ASSETS:
Beginning of period ...................................................... 732,483,256 736,116,811
------------------ ------------------
End of period (including undistributed net investment income
of $0 and $0, respectively) ........................................... $ 1,027,922,769 $ 732,483,256
================== ==================
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. The Fund's
primary objective is capital appreciation. The Fund commenced investment
operations on October 22, 1991.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with United States ("U.S.") generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates. The following is a summary of significant accounting
policies followed by the Fund in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange or traded in the U.S. over-the-counter market for
which market quotations are readily available are valued at the last quoted sale
price or a market's official closing price as of the close of business on the
day the securities are being valued. If there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day. If no bid or asked prices are quoted on such
day, the security is valued at the most recently available price or, if the
Board of Directors (the "Board") so determines, by such other method as the
Board shall determine in good faith to reflect its fair market value. Portfolio
securities traded on more than one national securities exchange or market are
valued according to the broadest and most representative market, as determined
by Gabelli Funds, LLC (the "Adviser").
Portfolio securities primarily traded on a foreign market are generally valued
at the preceding closing values of such securities on the relevant market, but
may be fair valued pursuant to procedures established by the Board if market
conditions change significantly after the close of the foreign market but prior
to the close of business on the day the securities are being valued. Debt
instruments with remaining maturities of 60 days or less that are not credit
impaired are valued at amortized cost, unless the Board determines such amount
does not reflect the securities' fair value, in which case these securities will
be fair valued as determined by the Board. Debt instruments having a maturity
greater than 60 days for which market quotations are readily available are
valued at the average of the latest bid and asked prices. If there were no asked
prices quoted on such day, the security is valued using the closing bid price.
Futures contracts are valued at the closing settlement price of the exchange or
board of trade on which the applicable contract is traded.
Securities and assets for which market quotations are not readily available are
fair valued as determined by the Board. Fair valuation methodologies and
procedures may include, but are not limited to: analysis and review of available
financial and non-financial information about the company; comparisons 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)
- --------------------------------------------------------------------------------
In September 2006, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") 157, Fair Value
Measurements, which clarifies the definition of fair value and requires
companies to expand their disclosure about the use of fair value to measure
assets and liabilities in interim and annual periods subsequent to initial
recognition. Adoption of SFAS 157 requires the use of the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. At this time,
management is in the process of reviewing the requirements of SFAS 157 against
its current valuation policies to determine future applicability.
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, 2007, 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 fluctuations in the
value of the contract, which are included in unrealized
appreciation/depreciation on investments and futures contracts. The Fund
recognizes a realized gain or loss when the contract is closed.
There are several risks in connection with the use of futures contracts as a
hedging instrument. The change in value of futures contracts primarily
corresponds with the value of their underlying instruments, which may not
correlate with the change in value of the hedged investments. In addition, there
is the risk that the Fund may not be able to enter into a closing transaction
because of an illiquid secondary market. At September 30, 2007, there were no
open futures contracts.
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 translations. When the contract is closed, the Fund records a realized
gain or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed.
16
THE GABELLI SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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, 2007, there were no open forward foreign exchange
contracts.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currencies, investments, and other assets and
liabilities are translated into U.S. dollars at the current exchange rates.
Purchases and sales of investment securities, income, and expenses are
translated at the exchange rate prevailing on the respective dates of such
transactions. Unrealized gains and losses that result from changes in foreign
exchange rates and/or changes in market prices of securities have been included
in unrealized appreciation/depreciation on investments and foreign currency
translations. Net realized foreign currency gains and losses resulting from
changes in exchange rates include foreign currency gains and losses between
trade date and settlement date on investment securities transactions, foreign
currency transactions, and the difference between the amounts of interest and
dividends recorded on the books of the Fund and the amounts actually received.
The portion of foreign currency gains and losses related to fluctuation in
exchange rates between the initial trade date and subsequent sale trade date is
included in realized gain/(loss) on investments.
FOREIGN SECURITIES. The Fund may directly purchase securities of foreign
issuers. Investing in securities of foreign issuers involves special risks not
typically associated with investing in securities of U.S. issuers. The risks
include possible revaluation of currencies, the ability to repatriate funds,
less complete financial information about companies, and possible future adverse
political and economic developments. Moreover, securities of many foreign
issuers and their markets may be less liquid and their prices more volatile than
those of securities of comparable U.S. issuers.
FOREIGN TAXES. The Fund may be subject to foreign taxes on income, gains on
investments, or currency repatriation, a portion of which may be recoverable.
The Fund will accrue such taxes and recoveries as applicable, based upon its
current interpretation of tax rules and regulations that exist in the markets in
which it invests.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 15% of its net
assets in securities for which the markets are illiquid. Illiquid securities
include securities the disposition of which is subject to substantial legal or
contractual restrictions. The sale of illiquid securities often requires more
time and results in higher brokerage charges or dealer discounts and other
selling expenses than does the sale of securities eligible for trading on
national securities exchanges or in the over-the-counter markets. Restricted
securities may sell at a price lower than similar securities that are not
subject to restrictions on resale. Securities freely saleable among qualified
institutional investors under special rules adopted by the SEC may be treated as
liquid if they satisfy liquidity standards established by the Board. The
continued liquidity of such securities is not as well assured as that of
publicly traded securities, and accordingly the Board will monitor their
liquidity.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for on the trade date with realized gain or loss on investments
determined by using the identified cost method. Interest income (including
amortization of premium and accretion of discount) is recorded on the accrual
basis. Premiums and discounts on debt securities are amortized using the
effective yield to maturity method. Dividend income is recorded on the
ex-dividend date except for certain dividends which are recorded as soon as the
Fund is informed of the dividend.
17
THE GABELLI SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE AND CALCULATION OF EXPENSES. Certain
administrative expenses are common to, and allocated among, various affiliated
funds. Such allocations are made on the basis of each Fund's average net assets
or other criteria directly affecting the expenses as determined by the Adviser
pursuant to procedures established by the Board.
In calculating the NAV per share of each class, investment income, realized and
unrealized gains and losses, redemption fees, and expenses other than class
specific expenses are allocated daily to each class of shares based upon the
proportion of net assets of each class at the beginning of each day.
Distribution expenses are borne solely by the class incurring the expense.
CUSTODIAN FEE CREDITS AND INTEREST EXPENSE. When cash balances are maintained in
the custody account, the Fund receives credits which are used to offset
custodian fees. The gross expenses paid under the custody arrangement are
included in custodian fees in the Statement of Operations with the corresponding
expense offset, if any, shown as "custodian fee credits." When cash balances are
overdrawn, the Fund is charged an overdraft fee equal to 2.00% above the federal
funds rate on outstanding balances. This amount, if any, would be shown as
"interest expense" in the Statement of Operations.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions to shareholders are recorded on the
ex-dividend date. Distributions to shareholders are based on income and capital
gains as determined in accordance with federal income tax regulations, which may
differ from income and capital gains as determined under U.S. generally accepted
accounting principles. These differences are primarily due to differing
treatments of income and gains on various investment securities and foreign
currency transactions held by the Fund, timing differences, and differing
characterizations of distributions made by the Fund. Distributions from net
investment income include net realized gains on foreign currency transactions.
These book/tax differences are either temporary or permanent in nature. To the
extent these differences are permanent, adjustments are made to the appropriate
capital accounts in the period when the differences arise. These
reclassifications have no impact on the NAV of the Fund. For the fiscal year
ended September 30, 2007, reclassifications were made to decrease accumulated
net investment loss by $301,714 and decrease accumulated net realized gain on
investments by $301,714.
The tax character of distributions paid during the fiscal years ended September
30, 2007 and September 30, 2006 was as follows:
FISCAL YEAR ENDED FISCAL YEAR ENDED
SEPTEMBER 30, 2007 SEPTEMBER 30, 2006
------------------ ------------------
DISTRIBUTIONS PAID FROM:
Ordinary income (inclusive of short-term capital gains) .. -- $ 648,028
Net long-term capital gains .............................. $55,248,714 49,806,909
----------- -------------
Total distributions paid ................................. $55,248,714 $ 50,454,937
=========== =============
PROVISION FOR INCOME TAXES. The Fund intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). It is the policy of the Fund to comply with the
requirements of the Code applicable to regulated investment companies and to
distribute substantially all of its net investment company taxable income and
net capital gains. Therefore, no provision for federal income taxes is required.
18
THE GABELLI SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
As of September 30, 2007, the components of accumulated earnings/(losses) on a
tax basis were as follows:
Undistributed ordinary income .................. $ 1,776,538
Undistributed long-term capital gains .......... 44,545,200
Post-October currency losses ................... (7,864)
Net unrealized appreciation .................... 392,252,245
Other temporary differences .................... (62,999)
-------------
Total accumulated earnings .................. $ 438,503,120
=============
At September 30, 2007, 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 and tax
adjustments due to a partnership security.
At September 30, 2007, the difference between book and tax basis unrealized
appreciation is primarily due to deferral of losses on wash sales.
Under the current tax law, capital losses related to securities and foreign
currency realized after October 31 and prior to the Fund's fiscal year end may
be treated as occurring on the first day of the following year. For the fiscal
year ended September 30, 2007, the Fund deferred currency losses of $7,864.
The following summarizes the tax cost of investments and the related unrealized
appreciation/depreciation at September 30, 2007:
GROSS GROSS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
COST APPRECIATION DEPRECIATION (DEPRECIATION)
------------ ------------ ------------ --------------
Investments ................... $634,394,576 $439,048,744 $(45,847,146) $ 393,201,598
Investments in affiliates ..... 2,694,779 -- (950,013) (950,013)
------------ ------------ ------------ --------------
$637,089,355 $439,048,744 $(46,797,159) $ 392,251,585
============ ============ ============ ==============
FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an
Interpretation of FASB Statement No. 109" (the "Interpretation") established a
minimum threshold for financial statement recognition of the benefit of
positions taken in filing tax returns (including whether the Fund is taxable in
a particular jurisdiction) and required certain expanded tax disclosures. The
Fund has adopted the Interpretation for all open tax years and it had no impact
on the amounts reported in the financial statements.
3. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS. The Fund has entered
into an investment advisory agreement (the "Advisory Agreement") with the
Adviser which provides that the Fund will pay the Adviser a fee, computed daily
and paid monthly, at the annual rate of 1.00% of the value of its average daily
net assets. In accordance with the Advisory Agreement, the Adviser provides a
continuous investment program for the Fund's portfolio, oversees the
administration of all aspects of the Fund's business and affairs, and pays the
compensation of all Officers and Directors of the Fund who are affiliated
persons of the Adviser.
The Corporation pays each Director that is not considered to be an affiliated
person an annual retainer of $6,000 plus $1,000 for each Board meeting attended
and they are reimbursed for any out of pocket expenses incurred in attending
meetings. All Board committee members receive $500 per meeting attended.
Directors who are directors or employees of the Adviser or an affiliated company
receive no compensation or expense reimbursement from the Fund.
19
THE GABELLI SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
4. DISTRIBUTION PLAN. The Fund's Board has adopted a distribution plan (the
"Plan") for each class of shares 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, 2007, other than short-term securities and
U.S. Government obligations, aggregated $206,816,182 and $106,371,128,
respectively.
6. TRANSACTIONS WITH AFFILIATES. During the fiscal year ended September 30,
2007, the Fund paid brokerage commissions on security trades of $209,215 to
Gabelli & Company. Additionally, Gabelli & Company informed the Fund that it
received $36,915 from investors representing commissions (sales charges and
underwriting fees) on sales and redemptions of Fund shares.
The cost of calculating the Fund's NAV per share is a Fund expense pursuant to
the Advisory Agreement between the Fund and the Adviser. During the fiscal year
ended September 30, 2007, the Fund paid or accrued $45,000 to the Adviser in
connection with the cost of computing the Fund's NAV.
7. LINE OF CREDIT. Effective June 20, 2007, the Fund participates in an
unsecured line of credit of up to $75,000,000, and may borrow up to 10% of its
net assets from the custodian for temporary borrowing purposes. Prior to June
20, 2007, the line of credit was $25,000,000. Borrowings under this arrangement
bear interest at 0.75% above the federal funds rate on outstanding balances.
This amount, if any, is shown as "interest expense" in the Statement of
Operations. At September 30, 2007, there were no borrowings outstanding under
the line of credit.
The average daily amount of borrowings outstanding from the line of credit
within the fiscal year ended September 30, 2007 was $120,463 with a weighted
average interest rate of 6.01%. The maximum amount borrowed at any time during
the fiscal year ended September 30, 2007 was $20,353,000.
8. CAPITAL STOCK TRANSACTIONS. The Fund currently offers four classes of shares
- - Class AAA Shares, Class A Shares, Class B Shares, and Class C Shares. Class
AAA Shares are offered only to investors who acquire them directly from Gabelli
& Company, or through selected broker/dealers, or the transfer agent without a
sales charge. Class A Shares are subject to a maximum front-end sales charge of
5.75%. Class B Shares are subject to a contingent deferred sales charge ("CDSC")
upon redemption within six years of purchase and automatically convert to Class
A Shares approximately eight years after the original purchase. The applicable
CDSC is equal to a declining percentage of the lesser of the NAV per share at
the date of the original purchase or at the date of redemption, based on the
length of time held. Class C Shares are subject to a 1.00% CDSC for one year
after purchase. Class B Shares are available only through exchange of Class B
Shares of other funds distributed by Gabelli & Company. The Board has approved
Class I Shares which have not been offered publicly.
The Fund imposes a redemption fee of 2.00% on Class AAA Shares, Class A Shares,
Class B Shares, and Class C Shares that are redeemed or exchanged on or before
the seventh day after the date of a purchase. The redemption fee is deducted
from the proceeds otherwise payable to the redeeming shareholders and is
retained by the Fund. The redemption fees retained by the Fund during the fiscal
years ended September 30, 2007 and September 30, 2006 amounted to $13,640 and
$3,895, respectively.
20
THE GABELLI SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The redemption fee does not apply to redemptions of shares where (i) the shares
were purchased through automatic reinvestment of dividends or other
distributions, (ii) the redemption was initiated by the Fund, (iii) the shares
were purchased through programs that collect the redemption fee at the program
level and remit them to the Fund, or (iv) the shares were purchased through
programs that the Adviser determines to have appropriate anti-short-term trading
policies in place or as to which the Adviser has received assurances that
look-through redemption fee procedures or effective anti-short-term trading
policies and procedures are in place.
Transactions in shares of capital stock were as follows:
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2007 SEPTEMBER 30, 2006
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------- -------------- ---------- --------------
CLASS AAA CLASS AAA
--------------------------- ---------------------------
Shares sold ....................................................... 9,055,569 $ 300,679,400 3,275,191 $ 97,982,057
Shares issued upon reinvestment of distributions .................. 1,662,686 51,559,994 1,698,995 47,843,699
Shares redeemed ................................................... (5,467,632) (179,011,066) (5,511,639) (164,418,025)
---------- -------------- ---------- --------------
Net increase (decrease) ........................................ 5,250,623 $ 173,228,328 (537,453) $ (18,592,269)
========== ============== ========== ==============
CLASS A CLASS A
--------------------------- ---------------------------
Shares sold ....................................................... 394,109 $ 13,318,089 39,452 $ 1,176,826
Shares issued upon reinvestment of distributions .................. 5,751 178,354 4,228 119,107
Shares redeemed ................................................... (21,600) (715,047) (21,919) (656,704)
---------- -------------- ---------- --------------
Net increase ................................................... 378,260 $ 12,781,396 21,761 $ 639,229
========== ============== ========== ==============
CLASS B CLASS B
--------------------------- ---------------------------
Shares issued upon reinvestment of distributions .................. 294 $ 8,873 346 $ 9,605
Shares redeemed ................................................... (326) (10,483) (1,211) (35,923)
---------- -------------- ---------- --------------
Net decrease ................................................... (32) $ (1,610) (865) $ (26,318)
========== ============== ========== ==============
CLASS C CLASS C
--------------------------- ---------------------------
Shares sold ....................................................... 214,901 $ 7,004,093 46,604 $ 1,371,491
Shares issued upon reinvestment of distributions .................. 7,732 233,806 4,190 116,097
Shares redeemed ................................................... (19,457) (617,781) (12,415) (364,771)
---------- -------------- ---------- --------------
Net increase ................................................... 203,176 $ 6,620,118 38,379 $ 1,122,817
========== ============== ========== ==============
21
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 fiscal year
ended September 30, 2007 is set forth below:
NET CHANGE PERCENT
DIVIDEND/ IN UNREALIZED VALUE AT OWNED
BEGINNING SHARES/PAR SHARES/PAR ENDING INTEREST APPRECIATION/ SEPTEMBER 30, OF SHARES
SHARES/PAR PURCHASED SOLD SHARES/PAR INCOME (DEPRECIATION) 2007 OUTSTANDING
---------- ---------- ---------- ---------- --------- -------------- ------------- -----------
Earl Scheib Inc. ..... 200,000 40,900 -- 240,900 -- $ 39,492 $ 903,375 5.49%
Trans-Lux Corp. ...... 116,200 44,065 -- 160,265 -- (154,465) 841,391 7.94
Trans-Lux Corp.,
Sub. Deb. Cv.,
8.250%, 03/01/12 ... 148,000 75,000 (223,000) -- $ 8,456 (1,795) -- --
10. INDEMNIFICATIONS. The Fund enters into contracts that contain a variety of
indemnifications. The Fund's maximum exposure under these arrangements is
unknown. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
11. OTHER MATTERS. The Adviser and/or affiliates received subpoenas from the
Attorney General of the State of New York and the SEC requesting information on
mutual fund trading practices involving certain funds managed by the Adviser.
GAMCO Investors, Inc. ("GAMCO"), the Adviser's parent company, responded to
these requests for documents and testimony. In June 2006, GAMCO began
discussions with the SEC regarding a possible resolution of their inquiry. In
February 2007, the Adviser made an offer of settlement to the staff of the SEC
for communication to the Commission for its consideration to resolve this
matter. This offer of settlement is subject to agreement regarding the specific
language of the SEC's administrative order and other settlement documents. On a
separate matter, in September 2005, the Adviser was informed by the staff of the
SEC that the staff may recommend to the Commission that an administrative remedy
and a monetary penalty be sought from the Adviser in connection with the actions
of two of nine closed-end funds managed by the Adviser relating to Section 19(a)
and Rule 19a-1 of the 1940 Act. These provisions require registered investment
companies to provide written statements to shareholders when a dividend is made
from a source other than net investment income. While the two closed-end funds
sent annual statements and provided other materials containing this information,
the funds did not send written statements to shareholders with each distribution
in 2002 and 2003. The Adviser believes that all of the funds are now in
compliance. The Adviser believes that these matters would have no effect on the
Fund or any material adverse effect on the Adviser or its ability to manage the
Fund.
22
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 Net Realized and Total Net
Period Value, Investment Unrealized from Realized
Ended Beginning Income/ Gain on Investment Gain on Total
September 30 of Period (Loss)(a)(e) Investments Operations Investments Distributions
- ------------- ---------- ------------ ------------ ---------- ----------- -------------
CLASS AAA
2007 $ 30.41 $ (0.01) $ 6.42 $ 6.41 $ (2.45) $ (2.45)
2006 29.97 (0.03) 2.53 2.50 (2.06) (2.06)
2005 25.88 (0.01) 5.25 5.24 (1.15) (1.15)
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)
CLASS A
2007 $ 30.41 $ 0.06 $ 6.35 $ 6.41 $ (2.45) $ (2.45)
2006 29.98 (0.02) 2.51 2.49 (2.06) (2.06)
2005 25.89 (0.01) 5.25 5.24 (1.15) (1.15)
2004(c) 24.49 (0.06) 1.46 1.40 -- --
CLASS B
2007 $ 29.77 $ (0.26) $ 6.26 $ 6.00 $ (2.45) $ (2.45)
2006 29.58 (0.25) 2.50 2.25 (2.06) (2.06)
2005 25.74 (0.22) 5.21 4.99 (1.15) (1.15)
2004(c) 24.49 (0.19) 1.44 1.25 -- --
CLASS C
2007 $ 29.76 $ (0.22) $ 6.23 $ 6.01 $ (2.45) $ (2.45)
2006 29.58 (0.24) 2.48 2.24 (2.06) (2.06)
2005 25.74 (0.23) 5.22 4.99 (1.15) (1.15)
2004(c) 24.49 (0.20) 1.45 1.25 -- --
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-----------------------------------------------
Net Asset Net Assets Net
Period Value, End of Investment Portfolio
Ended Redemption End of Total Period Income/ Operating Turnover
September 30 Fees(a) Period Return+ (in 000's) (Loss)(e) Expenses Rate
- ------------- ---------- --------- ------- ----------- ---------- --------- ---------
CLASS AAA
2007 $ 0.00(b) $ 34.37 21.95% $ 1,002,577 (0.04)% 1.42% 15%
2006 0.00(b) 30.41 8.88 727,521 (0.09) 1.44 6
2005 0.00(b) 29.97 20.58 732,965 (0.03) 1.44 6
2004 -- 25.88 21.34 620,334 (0.15) 1.42 10
2003 -- 21.48 27.84 540,397 (0.22) 1.45 4
CLASS A
2007 $ 0.00(b) $ 34.37 21.95% $ 15,485 0.19% 1.42% 15%
2006 0.00(b) 30.41 8.84 2,199 (0.08) 1.44 6
2005 0.00(b) 29.98 20.57 1,515 (0.03) 1.48 6
2004(c) -- 25.89 5.72 58 (0.32)(d) 1.42(d) 10
CLASS B
2007 $ 0.00(b) $ 33.32 20.99% $ 126 (0.81)% 2.17% 15%
2006 0.00(b) 29.77 8.11 113 (0.85) 2.19 6
2005 0.00(b) 29.58 19.69 138 (0.79) 2.20 6
2004(c) -- 25.74 5.10 55 (1.02)(d) 2.17(d) 10
CLASS C
2007 $ 0.00(b) $ 33.32 21.03% $ 9,735 (0.69)% 2.17% 15%
2006 0.00(b) 29.76 8.08 2,650 (0.83) 2.19 6
2005 0.00(b) 29.58 19.69 1,499 (0.80) 2.23 6
2004(c) -- 25.74 5.10 24 (1.07)(d) 2.17(d) 10
- ----------
+ Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the
period including reinvestment of distributions and does not reflect
applicable sales charges. Total return for a period of less than one year
is not annualized.
(a) Per share amounts have been calculated using the average shares
outstanding method.
(b) Amount represents less than $0.005 per share.
(c) From the commencement of offering Class A, Class B, and Class C Shares on
December 31, 2003.
(d) Annualized.
(e) Due to capital share activity throughout the fiscal year, net investment
income per share and the ratio to average net assets are not necessarily
correlated among the different classes of shares.
See accompanying notes to financial statements.
23
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, 2007, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of September 30, 2007, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Gabelli Small Cap Growth Fund, a series of Gabelli Equity Series Funds, Inc., at
September 30, 2007, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and its financial highlights for each of the periods indicated therein, in
conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
November 19, 2007
24
THE GABELLI SMALL CAP GROWTH FUND
ADDITIONAL FUND INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
The business and affairs of the Fund are managed under the direction of the
Corporation's Board of Directors. Information pertaining to the Directors and
officers of the Corporation is set forth below. The Corporation's Statement of
Additional Information includes additional information about the Corporation's
Directors and is available, without charge, upon request, by calling 800-GABELLI
(800-422-3554) or by writing to The Gabelli Small Cap Growth Fund at One
Corporate Center, Rye, NY 10580-1422.
NAME, POSITION(S) TERM OF OFFICE NUMBER OF FUNDS
ADDRESS 1 AND LENGTH OF IN FUND COMPLEX PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
AND AGE TIME SERVED 2 OVERSEEN BY DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 3
- ------------------------ -------------- -------------------- ---------------------------------- -----------------------------
INTERESTED DIRECTORS 4:
MARIO J. GABELLI Since 1991 26 Chairman and Chief Executive Director of Morgan Group
Director and Officer of GAMCO Investors, Inc. Holdings, Inc. (holding
Chief Investment Officer and Chief Investment Officer-Value company); Chairman of the
Age: 65 Portfolios of Gabelli Funds, LLC Board of LICT Corp.
and GAMCO Asset Management Inc.; (multimedia and communication
Director/Trustee or Chief services company)
Investment Officer of other
registered investment companies in
the Gabelli/GAMCO Funds complex;
Chairman and Chief Executive
Officer of GGCP, Inc.
JOHN D. GABELLI Since 1991 10 Senior Vice President of Gabelli & Director of GAMCO Investors,
Director Company, Inc. Inc. (asset management)
Age: 63
INDEPENDENT DIRECTORS 5:
ANTHONY J. COLAVITA Since 1991 35 Partner in the law firm of Anthony --
Director J. Colavita, P.C.
Age: 71
VINCENT D. ENRIGHT Since 1991 15 Former Senior Vice President and --
Director Chief Financial Officer of KeySpan
Age: 63 Corporation (public utility)
ROBERT J. MORRISSEY Since 1991 6 Partner in the law firm of --
Director Morrissey, Hawkins & Lynch
Age: 68
ANTHONY R. PUSTORINO Since 1991 14 Certified Public Accountant; Director of The LGL Group,
Director Professor Emeritus, Pace University Inc. (diversified
Age: 82 manufacturing)
ANTHONIE C. VAN EKRIS Since 1991 19 Chairman of BALMAC International, --
Director Inc. (commodities and futures
Age: 73 trading)
SALVATORE J. ZIZZA Since 2001 26 Chairman of Zizza & Company, Ltd. Director of Hollis-Eden
Director (consulting) Pharmaceuticals
Age: 61 (biotechnology); Director of
Earl Scheib, Inc. (automotive
services)
25
THE GABELLI SMALL CAP GROWTH FUND
ADDITIONAL FUND INFORMATION (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
NAME, POSITION(S) TERM OF OFFICE
ADDRESS 1 AND LENGTH OF PRINCIPAL OCCUPATION(S)
AND AGE TIME SERVED 2 DURING PAST FIVE YEARS
- ------------------------ -------------- --------------------------------------------------------------------------------
OFFICERS:
BRUCE N. ALPERT Since 1991 Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC since
President 1988 and an officer of all of the registered investment companies in the
Age: 55 Gabelli/GAMCO Funds complex; Director and President of Gabelli Advisers, Inc.
since 1998
JAMES E. MCKEE Since 1995 Vice President, General Counsel, and Secretary of GAMCO Investors, Inc. since
Secretary 1999 and GAMCO Asset Management Inc. since 1993; Secretary of all of the
Age: 44 registered investment companies in the Gabelli/GAMCO Funds complex
AGNES MULLADY Since 2006 Vice President of Gabelli Funds LLC since 2007; Officer of all of the registered
Treasurer investment companies in the Gabelli/GAMCO Funds complex; Senior Vice President
Age: 49 of U.S. Trust Company, N.A and Treasurer and Chief Financial Officer of
Excelsior Funds from 2004 through 2005; Chief Financial Officer of AMIC
Distribution Partners from 2002 through 2004; Controller of Reserve Management
Corporation and Reserve Partners, Inc. and Treasurer of Reserve Funds from 2000
through 2002
PETER D. GOLDSTEIN Since 2004 Director of Regulatory Affairs at GAMCO Investors, Inc. since 2004; Chief
Chief Compliance Officer Compliance Officer of all of the registered investment companies in the
Age: 54 Gabelli/GAMCO Funds complex; Vice President of Goldman Sachs Asset Management
from 2000 through 2004
- ----------
1 Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise noted.
2 Each Director will hold office for an indefinite term until the earliest
of (i) the next meeting of shareholders, if any, called for the purpose of
considering the election or re-election of such Director and until the
election and qualification of his or her successor, if any, elected at
such meeting, or (ii) the date a Director resigns or retires, or a
Director is removed by the Board of Directors or shareholders, in
accordance with the Corporation's By-Laws and Articles of Incorporation.
Each officer will hold office for an indefinite term until the date he or
she resigns or retires or until his or her successor is elected and
qualified.
3 This column includes only directorships of companies required to report to
the SEC under the Securities Exchange Act of 1934 (i.e. public companies)
or other investment companies registered under the 1940 Act.
4 "Interested person" of the Fund as defined in the Investment Company Act
of 1940. Messrs. Gabelli are each considered an "interested person"
because of their affiliation with Gabelli Funds, LLC which acts as the
Fund's investment adviser. Mario J. Gabelli and John D. Gabelli are
brothers.
5 Directors who are not interested persons are considered "Independent"
Directors.
- --------------------------------------------------------------------------------
2007 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the fiscal year ended September 30, 2007, the Fund paid to Class AAA, Class
A, Class B, and Class C shareholders, on December 20, 2006 long-term capital
gains totaling $55,248,714.
- --------------------------------------------------------------------------------
26
- --------------------------------------------------------------------------------
GABELLI/GAMCO FUNDS AND YOUR PERSONAL PRIVACY
- --------------------------------------------------------------------------------
WHO ARE WE?
The Gabelli/GAMCO Funds are investment companies registered with the Securities
and Exchange Commission under the Investment Company Act of 1940. We are managed
by Gabelli Funds, LLC and Gabelli Advisers, Inc., which are affiliated with
GAMCO Investors, Inc. GAMCO Investors, Inc. is a publicly held company that has
subsidiaries that provide investment advisory or brokerage services for a
variety of clients.
WHAT KIND OF NON-PUBLIC INFORMATION DO WE COLLECT ABOUT YOU IF YOU BECOME A
SHAREHOLDER?
If you apply to open an account directly with us, you will be giving us some
non-public information about yourself. The non-public information we collect
about you is:
o INFORMATION YOU GIVE US ON YOUR APPLICATION FORM. This could include your
name, address, telephone number, social security number, bank account
number, and other information.
o INFORMATION ABOUT YOUR TRANSACTIONS WITH US, ANY TRANSACTIONS WITH OUR
AFFILIATES, AND TRANSACTIONS WITH THE ENTITIES WE HIRE TO PROVIDE SERVICES
TO YOU. This would include information about the shares that you buy or
redeem. If we hire someone else to provide services--like a transfer
agent--we will also have information about the transactions that you
conduct through them.
WHAT INFORMATION DO WE DISCLOSE AND TO WHOM DO WE DISCLOSE IT?
We do not disclose any non-public personal information about our customers or
former customers to anyone other than our affiliates, our service providers who
need to know such information, and as otherwise permitted by law. If you want to
find out what the law permits, you can read the privacy rules adopted by the
Securities and Exchange Commission. They are in volume 17 of the Code of Federal
Regulations, Part 248. The Commission often posts information about its
regulations on its website, www.sec.gov.
WHAT DO WE DO TO PROTECT YOUR PERSONAL INFORMATION?
We restrict access to non-public personal information about you to the people
who need to know that information in order to provide services to you or the
Fund and to ensure that we are complying with the laws governing the securities
business. We maintain physical, electronic, and procedural safeguards to keep
your personal information confidential.
- --------------------------------------------------------------------------------
Gabelli Equity Series Funds, Inc.
THE GABELLI SMALL CAP GROWTH FUND
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
FAX: 914-921-5118
WEBSITE: WWW.GABELLI.COM
E-MAIL: INFO@GABELLI.COM
Net Asset Value per share available daily by calling
800-GABELLI after 6:00 P.M.
BOARD OF DIRECTORS
Mario J. Gabelli, CFA Robert J. Morrissey
CHAIRMAN AND CHIEF ATTORNEY-AT-LAW
EXECUTIVE OFFICER MORRISSEY, HAWKINS & LYNCH
GAMCO INVESTORS, INC.
Anthony R. Pustorino
Anthony J. Colavita CERTIFIED PUBLIC ACCOUNTANT,
ATTORNEY-AT-LAW PROFESSOR EMERITUS
ANTHONY J. COLAVITA, P.C. PACE UNIVERSITY
Vincent D. Enright Anthonie C. van Ekris
FORMER SENIOR VICE PRESIDENT CHAIRMAN
AND CHIEF FINANCIAL OFFICER BALMAC INTERNATIONAL, INC.
KEYSPAN CORP.
Salvatore J. Zizza
John D. Gabelli CHAIRMAN
SENIOR VICE PRESIDENT ZIZZA & CO., LTD.
GABELLI & COMPANY, INC.
OFFICERS
Bruce N. Alpert James E. McKee
PRESIDENT SECRETARY
Agnes Mullady Peter D. Goldstein
TREASURER CHIEF COMPLIANCE OFFICER
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.
- --------------------------------------------------------------------------------
GAB443Q307SR
[GRAPHIC OMITTED]
THE
GABELLI
SMALL CAP
GROWTH FUND
ANNUAL REPORT
SEPTEMBER 30, 2007
THE GABELLI EQUITY INCOME FUND
ANNUAL REPORT (a)
SEPTEMBER 30, 2007
TO OUR SHAREHOLDERS,
The Gabelli Equity Income Fund (the "Fund") gained 1.60% during the third
quarter of 2007. Calendar year to date through September 30th, the Fund gained
10.46% while the Standard & Poor's ("S&P") 500 Index rose 9.45% over the same
period.
Enclosed are the investment portfolio and financial statements as of
September 30, 2007.
COMPARATIVE RESULTS
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH SEPTEMBER 30, 2007 (a)(b)
Since
Year to Inception
Quarter Date 1 Year 3 Year 5 Year 10 Year 15 Year (1/2/92)
------- ------- ------ ------ ------ ------- ------- ---------
GABELLI EQUITY INCOME FUND
CLASS AAA ....................... 1.60% 10.46% 18.19% 15.14% 17.38% 10.13% 12.79% 12.56%
S&P 500 Index ...................... 2.33 9.45 16.78 13.24 15.51 6.60 11.12 10.72
Nasdaq Composite Index ............. 3.77 11.85 19.62 12.51 18.18 4.83 10.76 10.19
Lipper Equity Income Fund Average .. 0.71 8.12 15.59 13.92 15.79 7.50 10.93 10.91
Class A ............................ 1.60 10.50 18.20 15.12 17.35 10.11 12.79 12.55
(4.24)(c) 4.14(c) 11.40(c) 12.87(c) 15.97(c) 9.46(c) 12.34(c) 12.13(c)
Class B ............................ 1.37 9.83 17.28 14.31 16.71 9.81 12.58 12.36
(3.63)(d) 4.83(d) 12.28(d) 13.54(d) 16.49(d) 9.81 12.58 12.36
Class C ............................ 1.37 9.83 17.29 14.30 16.73 9.82 12.59 12.36
0.37(e) 8.83(e) 16.29(e) 14.30 16.73 9.82 12.59 12.36
THE EXPENSE RATIO FOR CLASS AAA, A, B, AND C SHARES IS 1.46%, 1.46%, 2.21%, AND
2.21%, RESPECTIVELY, IN THE CURRENT PROSPECTUS. CLASS AAA SHARES DO NOT HAVE A
SALES CHARGE. THE MAXIMUM SALES CHARGE FOR CLASS A, B, AND C SHARES IS 5.75%,
5.00%, AND 1.00%, RESPECTIVELY.
(a) THE FUND'S FISCAL YEAR ENDS SEPTEMBER 30.
(b) RETURNS REPRESENT PAST PERFORMANCE AND DO NOT GUARANTEE FUTURE RESULTS.
TOTAL RETURNS AND AVERAGE ANNUAL RETURNS REFLECT CHANGES IN SHARE PRICE
AND REINVESTMENT OF DISTRIBUTIONS AND ARE NET OF EXPENSES. INVESTMENT
RETURNS AND THE PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN
SHARES ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. PERFORMANCE RETURNS FOR PERIODS LESS THAN ONE YEAR ARE NOT
ANNUALIZED. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE
PERFORMANCE DATA PRESENTED. VISIT WWW.GABELLI.COM FOR PERFORMANCE
INFORMATION AS OF THE MOST RECENT MONTH END. INVESTORS SHOULD CAREFULLY
CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES, AND EXPENSES OF THE
FUND BEFORE INVESTING. THE PROSPECTUS CONTAINS MORE INFORMATION ABOUT THIS
AND OTHER MATTERS AND SHOULD BE READ CAREFULLY BEFORE INVESTING.
THE CLASS AAA SHARES' NET ASSET VALUES ("NAV'S") PER SHARE ARE USED TO
CALCULATE PERFORMANCE FOR THE PERIODS PRIOR TO THE ISSUANCE OF CLASS A
SHARES, CLASS B SHARES, AND CLASS C SHARES ON DECEMBER 31, 2003. THE
ACTUAL PERFORMANCE FOR THE CLASS B SHARES AND CLASS C SHARES WOULD HAVE
BEEN LOWER DUE TO THE ADDITIONAL EXPENSES ASSOCIATED WITH THESE CLASSES OF
SHARES. THE S&P 500 INDEX OF THE LARGEST U.S. COMPANIES AND THE NASDAQ
COMPOSITE INDEX (MEASURES ALL NASDAQ DOMESTIC AND INTERNATIONAL COMMON
TYPE STOCKS UNDER AN UNMANAGED MARKET CAPITALIZATION WEIGHTED METHODOLOGY)
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). YOU CANNOT INVEST DIRECTLY IN AN INDEX.
(c) INCLUDES THE EFFECT OF THE MAXIMUM 5.75% SALES CHARGE AT THE BEGINNING OF
THE PERIOD.
(d) PERFORMANCE RESULTS INCLUDE THE DEFERRED SALES CHARGES FOR THE CLASS B
SHARES UPON REDEMPTION AT THE END OF THE QUARTER, YEAR TO DATE, ONE YEAR,
THREE YEAR, AND FIVE YEAR PERIODS OF 5%, 5%, 5%, 3%, AND 2%, RESPECTIVELY,
OF THE FUND'S NAV PER SHARE AT THE TIME OF PURCHASE OR SALE, WHICHEVER IS
LOWER. CLASS B SHARES ARE NOT AVAILABLE FOR NEW PURCHASES.
(e) PERFORMANCE RESULTS INCLUDE THE DEFERRED SALES CHARGE FOR THE CLASS C
SHARES UPON REDEMPTION AT THE END OF THE QUARTER, YEAR TO DATE, AND ONE
YEAR PERIODS OF 1% OF THE FUND'S NAV PER SHARE AT THE TIME OF PURCHASE OR
SALE, WHICHEVER IS LOWER.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
We have separated the portfolio manager's commentary from the financial
statements and investment portfolio due to corporate governance regulations
stipulated by the Sarbanes-Oxley Act of 2002. We have done this to ensure that
the content of the portfolio manager's commentary is unrestricted. The financial
statements and investment portfolio are mailed separately from the commentary.
Both the commentary and the financial statements, including the portfolio of
investments, will be available on our website at www.gabelli.com/funds.
- --------------------------------------------------------------------------------
PERFORMANCE DISCUSSION
For the fiscal year ended September 30, 2007, The Gabelli Equity Income
Fund's net asset value per share rose 18.19% versus an increase of 16.78% in the
S&P 500 Index. For the fiscal year ended September 30, 2007, the Fund's
portfolio turnover rate was 12%.
The financial sector was weak as uncertain credit markets took their toll
on stocks like Sovereign Bancorp Inc. (0.1%) of net assets as of September 30,
2007), Citigroup Inc. (1.9%), and Bank of America Corp. (0.5%) all having
negative returns for the fiscal year. There continued to be difficulties in the
broadcasting and publishing sectors as these sectors continued to face greater
competition from online media companies like Google and Facebook. Holdings that
disappointed in these sectors included Clear Channel Communications Inc. (1.4%)
down 2.0% since it was purchased during the fiscal year, and Tribune Co. (0.2%)
down 15.4%, while Viacom Inc. (0.6%) was up 4.4%. Motorola Inc. (0.2%) declined
25.1% as it continued to lose share of the global market for mobile phone
handsets.
Most of our Energy and Utility companies, a sector that our Fund is
overweight, did well due to positive industry dynamics as well as rising oil and
natural gas prices. Significant holdings in this sector that contributed to
performance were Transocean Inc. (0.6%) up 54.4%, ConocoPhillips (1.3%) up
50.1%, and Chevron Corp. (1.5%) up 47.7%. Several long-term holdings were
takeover targets and were acquired at significant premiums to their closing
share price the day before the deal was announced including Sequa Corp. (0.5%),
Hilton Hotels Corp. (0.2%), Dow Jones & Co. Inc. (0.9%), and BCE Inc. (0.8%).
Increased demand for air travel contributed to companies operating in this
sector with Boeing Co. (0.3%) up 34.9% and Rolls-Royce Group (1.1%) up 26.0%.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI EQUITY INCOME FUND CLASS AAA,
THE LIPPER EQUITY INCOME FUND AVERAGE, AND THE S&P 500 INDEX
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
The Gabelli Equity Lipper Equity
Income Fund Income Fund
(Class AAA) Average S&P 500 Index
1/2/1992 $10,000 $10,000 $10,000
9/30/1992 $10,582 $10,601 $10,242
9/30/1993 $12,752 $12,554 $11,570
9/30/1994 $13,173 $12,748 $11,996
9/30/1995 $15,708 $15,429 $15,560
9/30/1996 $18,323 $17,974 $18,722
9/30/1997 $24,549 $23,632 $26,291
9/30/1998 $25,281 $24,459 $28,679
9/30/1999 $30,291 $27,673 $36,648
9/30/2000 $32,839 $30,539 $41,512
9/30/2001 $32,694 $28,228 $30,465
9/30/2002 $28,908 $23,570 $24,229
9/30/2003 $36,017 $28,352 $30,134
9/30/2004 $42,187 $33,079 $34,310
9/30/2005 $48,975 $37,607 $38,513
9/30/2006 $54,484 $42,022 $42,665
9/30/2007 $64,395 $48,574 $49,824
- -----------------------------------------------------
Average Annual Total Return*
- -----------------------------------------------------
1 Year 5 Year 10 Year Life of Fund
- -----------------------------------------------------
Class AAA 18.19% 17.38% 10.13% 12.56%
- -----------------------------------------------------
* 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, 2007 through September 30, 2007
EXPENSE TABLE
- --------------------------------------------------------------------------------
We believe it is important for you to understand the impact of fees and expenses
regarding your investment. All mutual funds have operating expenses. As a
shareholder of a fund, you incur ongoing costs, which include costs for
portfolio management, administrative services, and shareholder reports (like
this one), among others. Operating expenses, which are deducted from a fund's
gross income, directly reduce the investment return of a fund. When a fund's
expenses are expressed as a percentage of its average net assets, this figure is
known as the expense ratio. The following examples are intended to help you
understand the ongoing costs (in dollars) of investing in your Fund and to
compare these costs with those of other mutual funds. The examples are based on
an investment of $1,000 made at the beginning of the period shown and held for
the entire period.
The Expense Table below illustrates your Fund's costs in two ways:
ACTUAL FUND RETURN: This section provides information about actual account
values and actual expenses. You may use this section to help you to estimate the
actual expenses that you paid over the period after any fee waivers and expense
reimbursements. The "Ending Account Value" shown is derived from the Fund's
ACTUAL return during the past six months, and the "Expenses Paid During Period"
shows the dollar amount that would have been paid by an investor who started
with $1,000 in the Fund. You may use this information, together with the amount
you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your Fund under the heading "Expenses Paid During Period" to estimate
the expenses you paid during this period.
HYPOTHETICAL 5% RETURN: This section provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio. It assumes a hypothetical annualized return of 5% before expenses during
the period shown. In this case - because the hypothetical return used is NOT the
Fund's actual return - the results do not apply to your investment and you
cannot use the hypothetical account value and expense to estimate the actual
ending account balance or expenses you paid for the period. This example is
useful in making comparisons of the ongoing costs of investing in the Fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as sales
charges (loads), redemption fees, or exchange fees, if any, which are described
in the Prospectus. If these costs were applied to your account, your costs would
be higher. Therefore, the 5% hypothetical return is useful in comparing ongoing
costs only, and will not help you determine the relative total costs of owning
different funds. The "Annualized Expense Ratio" represents the actual expenses
for the last six months and may be different from the expense ratio in the
Financial Highlights which is for the year ended September 30, 2007.
Beginning Ending Annualized Expenses
Account Value Account Value Expense Paid During
04/01/07 09/30/07 Ratio Period*
- --------------------------------------------------------------------------------
THE GABELLI EQUITY INCOME FUND
- --------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class AAA $1,000.00 $1,084.50 1.45% $ 7.54
Class A $1,000.00 $1,084.80 1.45% $ 7.54
Class B $1,000.00 $1,080.40 2.21% $11.46
Class C $1,000.00 $1,080.50 2.20% $11.41
HYPOTHETICAL 5% RETURN
Class AAA $1,000.00 $1,017.70 1.45% $ 7.29
Class A $1,000.00 $1,017.70 1.45% $ 7.29
Class B $1,000.00 $1,013.91 2.21% $11.10
Class C $1,000.00 $1,013.96 2.20% $11.05
* Expenses are equal to the Fund's annualized expense ratio for the last six
months multiplied by the average account value over the period, multiplied
by the number of days in the most recent fiscal half-year, then divided by
365.
3
SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED)
The following table presents portfolio holdings as a percent of total net assets
as of September 30, 2007:
THE GABELLI EQUITY INCOME FUND
Food and Beverage .................................................... 11.0%
Financial Services ................................................... 10.5%
Health Care .......................................................... 9.0%
Energy and Utilities: Oil ............................................ 8.2%
Consumer Products .................................................... 7.6%
Energy and Utilities: Integrated ..................................... 4.9%
Telecommunications ................................................... 4.7%
Retail ............................................................... 4.0%
Diversified Industrial ............................................... 3.6%
Specialty Chemicals .................................................. 2.8%
Metals and Mining .................................................... 2.7%
U.S. Government Obligations .......................................... 2.6%
Aerospace ............................................................ 2.4%
Electronics .......................................................... 2.4%
Broadcasting ......................................................... 2.1%
Computer Hardware .................................................... 1.9%
Publishing ........................................................... 1.8%
Communications Equipment ............................................. 1.6%
Equipment and Supplies ............................................... 1.5%
Energy and Utilities: Electric ....................................... 1.5%
Energy and Utilities: Services ....................................... 1.5%
Energy and Utilities: Natural Gas .................................... 1.4%
Entertainment ........................................................ 1.4%
Automotive: Parts and Accessories .................................... 1.3%
Automotive ........................................................... 1.3%
Hotels and Gaming .................................................... 1.2%
Aviation: Parts and Services ......................................... 0.8%
Cable and Satellite .................................................. 0.8%
Environmental Services ............................................... 0.6%
Machinery ............................................................ 0.6%
Wireless Communications .............................................. 0.6%
Computer Software and Services ....................................... 0.4%
Transportation ....................................................... 0.4%
Agriculture .......................................................... 0.2%
Business Services .................................................... 0.2%
Manufactured Housing ................................................. 0.1%
Consumer Services .................................................... 0.1%
Energy and Utilities: Water .......................................... 0.0%
Real Estate .......................................................... 0.0%
Other Assets and Liabilities (Net) ................................... 0.3%
-----
100.0%
=====
THE FUND FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION (THE "SEC") FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL
YEAR ON FORM N-Q, THE LAST OF WHICH WAS FILED FOR THE QUARTER ENDED JUNE 30,
2007. SHAREHOLDERS MAY OBTAIN THIS INFORMATION AT WWW.GABELLI.COM OR BY CALLING
THE FUND AT 800-GABELLI (800-422-3554).THE FUND'S FORM N-Q IS AVAILABLE ON THE
SEC'S WEBSITE AT WWW.SEC.GOV AND MAY ALSO BE REVIEWED AND COPIED AT THE SEC'S
PUBLIC REFERENCE ROOM IN WASHINGTON, DC. INFORMATION ON THE OPERATION OF THE
PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330.
PROXY VOTING
The Fund files Form N-PX with its complete proxy voting record for the 12 months
ended June 30th, no later than August 31st of each year. A description of the
Fund's proxy voting policies, procedures, and how the Fund voted proxies
relating to portfolio securities is available without charge, upon request, by
(i) calling 800-GABELLI (800-422-3554); (ii) writing to The Gabelli Funds at One
Corporate Center, Rye, NY 10580-1422; or (iii) visiting the SEC's website at
www.sec.gov.
4
THE GABELLI EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS -- SEPTEMBER 30, 2007
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
- ------------ ------------ --------------
COMMON STOCKS -- 96.0%
AEROSPACE -- 2.4%
32,000 Boeing Co. ..................... $ 1,082,148 $ 3,359,680
2,000 Lockheed Martin Corp. .......... 47,350 216,980
3,500 Northrop Grumman Corp. ......... 125,556 273,000
10,000 Raytheon Co. ................... 279,250 638,200
170,000 Rockwell Automation Inc. ....... 10,745,251 11,816,700
2,000 Rockwell Collins Inc. .......... 15,844 146,080
1,260,000 Rolls-Royce Group plc+ ......... 8,984,010 13,469,802
------------ --------------
21,279,409 29,920,442
------------ --------------
AGRICULTURE -- 0.2%
50,000 The Mosaic Co.+ ................ 739,297 2,676,000
------------ --------------
AUTOMOTIVE -- 1.3%
410,000 General Motors Corp. ........... 12,855,346 15,047,000
7,000 Navistar International Corp.+ .. 228,260 431,900
------------ --------------
13,083,606 15,478,900
------------ --------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 1.2%
1,000 ArvinMeritor Inc. .............. 10,487 16,820
1,000 BERU AG ........................ 106,340 104,094
170,000 Dana Corp.+ .................... 594,032 33,150
250,000 Genuine Parts Co. .............. 8,986,399 12,500,000
2,000 Johnson Controls Inc. .......... 50,425 236,220
45,000 Modine Manufacturing Co. ....... 693,569 1,197,900
10,000 Proliance International Inc.+ .. 27,051 21,100
82,000 The Pep Boys - Manny,
Moe & Jack .................. 1,109,227 1,150,460
------------ --------------
11,577,530 15,259,744
------------ --------------
AVIATION: PARTS AND SERVICES -- 0.8%
6,000 Barnes Group Inc. .............. 57,237 191,520
46,192 Curtiss-Wright Corp. ........... 349,652 2,194,120
35,000 GenCorp Inc.+ .................. 299,658 418,600
34,000 Sequa Corp., Cl. A+ ............ 2,265,036 5,636,520
20,000 United Technologies Corp. ...... 557,839 1,609,600
------------ --------------
3,529,422 10,050,360
------------ --------------
BROADCASTING -- 1.9%
151,000 CBS Corp., Cl. A ............... 3,876,844 4,758,010
25,000 CBS Corp., Cl. B ............... 651,930 787,500
460,000 Clear Channel
Communications Inc. ......... 17,572,157 17,222,400
132 Granite Broadcasting Corp.+ .... 10,795 4,224
------------ --------------
22,111,726 22,772,134
------------ --------------
BUSINESS SERVICES -- 0.2%
4,000 Automatic Data
Processing Inc. ............. 114,127 183,720
4,000 Landauer Inc. .................. 134,546 203,840
7,500 MasterCard Inc., Cl. A ......... 292,500 1,109,775
12,000 PHH Corp.+ ..................... 366,934 315,360
3,000 R. H. Donnelley Corp.+ ......... 33,450 168,060
------------ --------------
941,557 1,980,755
------------ --------------
MARKET
SHARES COST VALUE
- ------------ ------------ --------------
CABLE AND SATELLITE -- 0.8%
140,000 Cablevision Systems
Corp., Cl. A+ ............... $ 1,769,455 $ 4,891,600
80,000 EchoStar Communications
Corp., Cl. A+ ............... 2,660,220 3,744,800
40,000 The DIRECTV Group Inc.+ ........ 705,262 971,200
------------ --------------
5,134,937 9,607,600
------------ --------------
COMMUNICATIONS EQUIPMENT -- 1.0%
175,000 Corning Inc. ................... 2,000,662 4,313,750
100,000 Motorola Inc. .................. 830,109 1,853,000
25,000 Nortel Networks Corp.+ ......... 665,450 424,500
100,000 Thomas & Betts Corp.+ .......... 2,992,412 5,864,000
------------ --------------
6,488,633 12,455,250
------------ --------------
COMPUTER HARDWARE -- 1.9%
176,000 International Business
Machines Corp. .............. 14,186,415 20,732,800
150,000 Xerox Corp.+ ................... 2,243,383 2,601,000
------------ --------------
16,429,798 23,333,800
------------ --------------
COMPUTER SOFTWARE AND SERVICES -- 0.4%
2,000 EMC Corp.+ ..................... 19,360 41,600
60,000 Microsoft Corp. ................ 1,696,653 1,767,600
154 Telecom Italia Media SpA+ ...... 205 60
133,000 Yahoo! Inc.+ ................... 4,182,277 3,569,720
------------ --------------
5,898,495 5,378,980
------------ --------------
CONSUMER PRODUCTS -- 7.6%
190,000 Altadis SA ..................... 12,784,832 13,367,651
35,000 Altria Group Inc. .............. 857,074 2,433,550
220,000 Avon Products Inc. ............. 6,783,318 8,256,600
15,000 Clorox Co. ..................... 823,581 914,850
40,000 Colgate-Palmolive Co. .......... 2,281,604 2,852,800
50,000 Eastman Kodak Co. .............. 1,175,567 1,338,000
55,000 Energizer Holdings Inc.+ ....... 1,956,959 6,096,750
61,000 Fortune Brands Inc. ............ 4,566,009 4,970,890
5,000 Hanesbrands Inc.+ .............. 108,950 140,300
100,000 Kimberly-Clark Corp. ........... 6,968,734 7,026,000
7,000 National Presto
Industries Inc. ............. 206,562 371,000
10,000 Pactiv Corp.+ .................. 161,895 286,600
220,000 Procter & Gamble Co. ........... 12,495,175 15,474,800
100,000 Reckitt Benckiser plc .......... 3,154,703 5,876,095
26,000 Rothmans Inc. .................. 237,941 602,523
940,500 Swedish Match AB ............... 9,972,140 19,556,959
78,000 Unilever NV, ADR ............... 1,542,066 2,406,300
10,000 UST Inc. ....................... 364,903 496,000
------------ --------------
66,442,013 92,467,668
------------ --------------
CONSUMER SERVICES -- 0.1%
45,000 Rollins Inc. ................... 386,886 1,201,050
------------ --------------
DIVERSIFIED INDUSTRIAL -- 3.6%
5,000 3M Co. ......................... 213,645 467,900
8,000 Acuity Brands Inc. ............. 106,412 403,840
See accompanying notes to financial statements.
5
THE GABELLI EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2007
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
- ------------ ------------ --------------
COMMON STOCKS (CONTINUED)
DIVERSIFIED INDUSTRIAL (CONTINUED)
110,000 Cooper Industries Ltd., Cl. A .. $ 3,148,666 $ 5,619,900
70,000 Crane Co. ...................... 3,206,300 3,357,900
380,000 General Electric Co. ........... 12,230,147 15,732,000
180,000 Honeywell International Inc. ... 5,361,035 10,704,600
25,100 ITT Corp. ...................... 1,246,573 1,705,043
6,000 Trinity Industries Inc. ........ 82,100 225,240
125,650 Tyco International Ltd. ........ 5,803,618 5,571,321
2,000 Walter Industries Inc. ......... 46,073 53,800
54,000 WHX Corp.+ ..................... 603,303 405,000
------------ --------------
32,047,872 44,246,544
------------ --------------
ELECTRONICS -- 2.4%
600,000 Intel Corp. .................... 12,298,251 15,516,000
330,000 LSI Corp.+ ..................... 3,043,428 2,448,600
180,000 Texas Instruments Inc. ......... 3,980,219 6,586,200
5,000 Thermo Fisher Scientific
Inc.+ ....................... 127,325 288,600
118,750 Tyco Electronics Ltd. .......... 4,044,177 4,207,313
------------ --------------
23,493,400 29,046,713
------------ --------------
ENERGY AND UTILITIES: ELECTRIC -- 1.5%
30,000 American Electric
Power Co. Inc. .............. 932,060 1,382,400
16,000 DTE Energy Co. ................. 695,800 775,040
85,000 El Paso Electric Co.+ .......... 670,852 1,966,050
70,000 FPL Group Inc. ................. 2,529,239 4,261,600
45,000 Great Plains Energy Inc. ....... 1,055,160 1,296,450
60,000 Korea Electric
Power Corp., ADR ............ 977,409 1,389,000
56,086 Mirant Corp.+ .................. 936,815 2,281,588
1,200,000 Mirant Corp., Escrow+ (a) ...... 0 0
110,000 Northeast Utilities ............ 2,074,836 3,142,700
80,000 The AES Corp.+ ................. 268,400 1,603,200
13,333 UIL Holdings Corp. ............. 293,785 419,990
------------ --------------
10,434,356 18,518,018
------------ --------------
ENERGY AND UTILITIES: INTEGRATED -- 4.8%
42,000 Allegheny Energy Inc.+ ......... 404,378 2,194,920
500,000 Aquila Inc.+ ................... 1,761,421 2,005,000
44,000 BP plc, ADR .................... 1,030,210 3,051,400
44,000 CH Energy Group Inc. ........... 1,809,289 2,103,200
55,000 Constellation Energy
Group Inc. .................. 1,783,439 4,718,450
1,000 Dominion Resources Inc. ........ 86,700 84,300
120,000 DPL Inc. ....................... 3,161,330 3,151,200
200,000 Duke Energy Corp. .............. 2,462,844 3,738,000
250,000 El Paso Corp. .................. 2,705,219 4,242,500
150,000 Energy East Corp. .............. 3,071,332 4,057,500
29,000 ENI SpA ........................ 304,221 1,074,748
6,269 Iberdrola SA, ADR .............. 312,666 367,317
30,000 Integrys Energy Group Inc. ..... 1,433,063 1,536,900
80,000 NSTAR .......................... 1,282,183 2,784,800
75,000 OGE Energy Corp. ............... 2,043,450 2,482,500
MARKET
SHARES COST VALUE
- ------------ ------------ --------------
80,000 Progress Energy Inc. ........... $ 3,424,284 $ 3,748,000
15,000 Progress Energy Inc.,
CVO+ (a) .................... 7,800 4,950
5,000 Public Service Enterprise
Group Inc. .................. 202,775 439,950
20,000 Suncor Energy Inc.,
New York .................... 1,043,936 1,896,200
10,000 Suncor Energy Inc., Toronto .... 900,982 949,681
55,000 TECO Energy Inc. ............... 740,886 903,650
150,000 TXU Corp. ...................... 8,905,861 10,270,500
140,000 Westar Energy Inc. ............. 2,333,669 3,438,400
------------ --------------
41,211,938 59,244,066
------------ --------------
ENERGY AND UTILITIES: NATURAL GAS -- 1.4%
18,000 AGL Resources Inc. ............. 348,154 713,160
45,000 Atmos Energy Corp. ............. 1,122,361 1,274,400
40,000 National Fuel Gas Co. .......... 1,155,528 1,872,400
70,000 ONEOK Inc. ..................... 1,559,551 3,318,000
24,000 Piedmont Natural Gas Co. Inc. .. 394,017 602,160
200,000 SEMCO Energy Inc.+ ............. 1,522,839 1,578,000
110,000 Southern Union Co. ............. 2,047,400 3,422,100
55,000 Southwest Gas Corp. ............ 1,082,022 1,555,950
100,000 Spectra Energy Corp. ........... 1,783,439 2,448,000
------------ --------------
11,015,311 16,784,170
------------ --------------
ENERGY AND UTILITIES: OIL -- 8.2%
46,000 Anadarko Petroleum Corp. ....... 2,010,548 2,472,500
28,000 Cameron International Corp.+ ... 804,246 2,584,120
35,000 Canadian Oil Sands Trust ....... 1,062,358 1,161,212
192,000 Chevron Corp. .................. 8,828,069 17,967,360
187,000 ConocoPhillips ................. 5,471,173 16,412,990
10,000 Denbury Resources Inc.+ ........ 340,653 446,900
49,000 Devon Energy Corp. ............. 2,021,181 4,076,800
150,000 Exxon Mobil Corp. .............. 4,749,795 13,884,000
30,000 Nexen Inc. ..................... 924,468 916,604
2,000 Niko Resources Ltd. ............ 114,911 195,546
96,000 Occidental Petroleum Corp. ..... 3,728,771 6,151,680
22,000 Oceaneering International
Inc.+ ....................... 592,204 1,667,600
45,000 OPTI Canada Inc.+ .............. 998,980 842,407
11,000 PetroChina Co. Ltd., ADR ....... 747,751 2,036,210
30,000 Repsol YPF SA, ADR ............. 631,290 1,065,000
120,000 Royal Dutch Shell plc,
Cl. A, ADR .................. 5,536,434 9,861,600
25,000 Statoil ASA, ADR ............... 327,939 848,000
50,000 Synenco Energy Inc., Cl. A+ .... 734,933 564,520
17,518 Total SA, ADR .................. 290,564 1,419,484
69,000 Transocean Inc.+ ............... 4,140,969 7,800,450
170,000 UTS Energy Corp.+ .............. 997,986 943,447
95,000 Weatherford International
Ltd.+ ....................... 4,138,872 6,382,100
30,000 Western Oil Sands Inc.,
Cl. A+ ...................... 1,027,912 1,174,484
------------ --------------
50,222,007 100,875,014
------------ --------------
See accompanying notes to financial statements.
6
THE GABELLI EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2007
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
- ------------ ------------ --------------
COMMON STOCKS (CONTINUED)
ENERGY AND UTILITIES: SERVICES -- 1.5%
30,000 ABB Ltd., ADR .................. $ 351,824 $ 786,900
350,000 Halliburton Co. ................ 10,802,922 13,440,000
40,000 Schlumberger Ltd. .............. 1,275,020 4,200,000
------------ --------------
12,429,766 18,426,900
------------ --------------
ENERGY AND UTILITIES: WATER -- 0.0%
25,000 Aqua America Inc. .............. 243,835 567,000
40,000 Suez SA, Strips+ ............... 0 570
------------ --------------
243,835 567,570
------------ --------------
ENTERTAINMENT -- 1.4%
250,000 Rank Group plc ................. 1,763,532 827,349
25,000 The Walt Disney Co. ............ 604,578 859,750
190,000 Time Warner Inc. ............... 3,093,052 3,488,400
200,000 Viacom Inc., Cl. A+ ............ 8,280,646 7,790,000
90,000 Vivendi ........................ 2,782,949 3,798,714
------------ --------------
16,524,757 16,764,213
------------ --------------
ENVIRONMENTAL SERVICES -- 0.6%
200,000 Waste Management Inc. .......... 6,034,604 7,548,000
------------ --------------
EQUIPMENT AND SUPPLIES -- 1.5%
12,000 A.O. Smith Corp. ............... 253,183 526,560
10,000 Danaher Corp. .................. 734,591 827,100
85,000 Flowserve Corp. ................ 2,437,365 6,475,300
6,000 Ingersoll-Rand Co.
Ltd., Cl. A ................. 125,173 326,820
1,500 Minerals Technologies Inc. ..... 37,938 100,500
40,000 Mueller Industries Inc. ........ 1,650,585 1,445,600
7,609 Mueller Water Products
Inc., Cl. B ................. 111,552 83,699
8,000 Parker Hannifin Corp. .......... 459,607 894,640
65,000 Tenaris SA, ADR ................ 3,179,856 3,420,300
1,000,000 Tomkins plc .................... 4,862,592 4,649,521
------------ --------------
13,852,442 18,750,040
------------ --------------
FINANCIAL SERVICES -- 10.5%
25,358 ABN AMRO Holding NV ............ 1,241,102 1,336,060
25,000 ABN AMRO Holding NV, ADR ....... 1,230,611 1,312,500
6,200 Alleghany Corp.+ ............... 1,036,283 2,517,200
205,000 American Express Co. ........... 9,237,970 12,170,850
160,000 American International
Group Inc. .................. 10,605,002 10,824,000
55,000 Ameriprise Financial Inc. ...... 2,188,879 3,471,050
23,990 Argo Group International
Holdings Ltd.+ .............. 741,793 1,043,805
25,000 Banco Popular Espanol SA ....... 185,939 429,565
2,000 Banco Santander
Chile SA, ADR ............... 29,250 101,140
18,000 Banco Santander SA, ADR ........ 64,963 347,580
130,000 Bank of America Corp. .......... 3,918,781 6,535,100
8,825 BNP Paribas .................... 362,345 965,692
510,000 Citigroup Inc. ................. 25,039,070 23,801,700
MARKET
SHARES COST VALUE
- ------------ ------------ --------------
40,000 Commerzbank AG, ADR ............ $ 855,073 $ 1,619,548
34,000 Deutsche Bank AG ............... 1,919,040 4,365,260
35,000 Discover Financial Services+ ... 769,312 728,000
3,000 Fannie Mae ..................... 153,815 182,430
20,000 Fidelity Southern Corp. ........ 229,670 298,600
170,000 H&R Block Inc. ................. 3,921,787 3,600,600
25,000 Huntington Bancshares Inc. ..... 407,250 424,500
20,000 Janus Capital Group Inc. ....... 553,800 565,600
82,080 JPMorgan Chase & Co. ........... 2,489,151 3,760,906
1,000 KeyCorp ........................ 30,270 32,330
30,000 Landesbank Berlin
Holding AG .................. 201,349 289,609
16,000 Legg Mason Inc. ................ 1,558,953 1,348,640
30,000 Leucadia National Corp. ........ 329,356 1,446,600
55,000 Loews Corp. .................... 2,852,630 2,659,250
2,000 Manulife Financial Corp. ....... 24,694 82,520
426,000 Marsh & McLennan
Companies Inc. .............. 12,969,097 10,863,000
13,000 Merrill Lynch & Co. Inc. ....... 525,900 926,640
8,000 Moody's Corp. .................. 64,841 403,200
45,000 Morgan Stanley ................. 2,464,163 2,835,000
3,000 Municipal Mortgage &
Equity, LLC ................. 60,488 68,130
6,000 Northern Trust Corp. ........... 60,300 397,620
45,000 PNC Financial Services
Group Inc. .................. 1,905,739 3,064,500
55,000 Popular Inc. ................... 1,196,641 675,400
500 Raiffeisen International
Bank Holding AG ............. 28,874 73,080
90,000 Sovereign Bancorp Inc. ......... 2,097,761 1,533,600
150,000 Sterling Bancorp ............... 2,161,997 2,100,000
12,000 SunTrust Banks Inc. ............ 251,737 908,040
40,000 T. Rowe Price Group Inc. ....... 896,910 2,227,600
1,000 The Allstate Corp. ............. 33,300 57,190
96,509 The Bank of New York
Mellon Corp. ................ 2,951,848 4,259,907
4,500 The Bear Stearns
Companies Inc. .............. 475,210 552,645
5,000 The Charles Schwab Corp. ....... 77,500 108,000
2,000 The Dun & Bradstreet Corp. ..... 20,476 197,220
50,000 The Phoenix Companies Inc. ..... 650,511 705,500
36,000 The Travelers Companies Inc. ... 1,428,424 1,812,240
40,000 Unitrin Inc. ................... 1,156,156 1,983,600
10,000 Wachovia Corp. ................. 348,442 501,500
120,000 Waddell & Reed
Financial Inc., Cl. A ....... 2,632,714 3,243,600
55,000 Wilmington Trust Corp. ......... 1,712,407 2,139,500
------------ --------------
108,349,574 127,897,347
------------ --------------
FOOD AND BEVERAGE -- 11.0%
150,000 Anheuser-Busch Companies Inc. .. 6,901,020 7,498,500
50,000 Brown-Forman Corp., Cl. A ...... 3,068,834 3,900,000
See accompanying notes to financial statements.
7
THE GABELLI EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2007
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
- ------------ ------------ --------------
COMMON STOCKS (CONTINUED)
FOOD AND BEVERAGE (CONTINUED)
140,000 Cadbury Schweppes
plc, ADR .................... $ 5,006,504 $ 6,512,800
60,000 Campbell Soup Co. .............. 1,626,168 2,220,000
40,000 Coca-Cola Amatil Ltd., ADR ..... 246,844 637,164
15,000 Coca-Cola Femsa
SAB de CV, ADR .............. 388,903 643,650
50,000 Constellation Brands Inc.,
Cl. A+ ...................... 1,205,950 1,210,500
16,000 Corn Products
International Inc. .......... 197,587 733,920
60,000 Del Monte Foods Co. ............ 619,820 630,000
60,000 Diageo plc, ADR ................ 2,617,330 5,263,800
138,000 Fomento Economico
Mexicano SAB de CV, ADR ..... 2,683,945 5,161,200
210,000 General Mills Inc. ............. 10,507,932 12,182,100
137,000 Groupe Danone .................. 7,478,976 10,783,556
1,000,000 Grupo Bimbo SAB de CV,
Cl. A ....................... 3,093,579 5,577,194
105,000 H.J. Heinz Co. ................. 3,702,553 4,851,000
60,000 Heineken NV .................... 2,385,009 3,937,316
110,000 ITO EN Ltd. .................... 2,765,284 2,681,409
33,000 ITO EN Ltd., Preference+ ....... 779,952 656,466
5,000 Kellogg Co. .................... 149,740 280,000
525,500 Kraft Foods Inc., Cl. A ........ 15,582,171 18,135,005
10,000 Nestle SA ...................... 2,083,075 4,492,162
150,000 Nissin Food Products
Co. Ltd. .................... 5,070,962 5,354,111
25,000 PepsiCo Inc. ................... 1,573,601 1,831,500
9,004 Pernod-Ricard SA ............... 1,365,225 1,964,782
10,000 Remy Cointreau SA .............. 704,212 724,379
50,000 Sapporo Holdings Ltd. .......... 510,013 330,388
365,000 The Coca-Cola Co. .............. 16,799,135 20,976,550
22,000 The Hershey Co. ................ 1,071,183 1,021,020
40,063 Tootsie Roll Industries Inc. ... 1,055,603 1,062,871
100 Wimm-Bill-Dann Foods
OJSC, ADR ................... 8,304 10,934
10,000 Wm. Wrigley Jr. Co. ............ 475,992 642,300
750 Wm. Wrigley Jr. Co., Cl. B ..... 41,831 47,708
110,000 YAKULT HONSHA Co. Ltd. ......... 3,085,422 2,504,244
------------ --------------
104,852,659 134,458,529
------------ --------------
HEALTH CARE -- 9.0%
16,000 Abbott Laboratories ............ 618,814 857,920
75,000 Advanced Medical
Optics Inc.+ ................ 2,801,360 2,294,250
25,000 Aetna Inc. ..................... 890,584 1,356,750
100,000 Baxter International Inc. ...... 3,481,862 5,628,000
92,000 Becton, Dickinson & Co. ........ 5,893,321 7,548,600
250,000 Boston Scientific Corp.+ ....... 3,627,688 3,487,500
72,000 Bristol-Myers Squibb Co. ....... 1,764,502 2,075,040
118,750 Covidien Ltd.+ ................. 4,462,540 4,928,125
MARKET
SHARES COST VALUE
- ------------ ------------ --------------
140,000 Eli Lilly & Co. ................ $ 7,861,239 $ 7,970,200
11,276 GlaxoSmithKline plc, ADR ....... 515,984 599,883
22,000 Henry Schein Inc.+ ............. 566,365 1,338,480
120,000 Hospira Inc.+ .................. 4,302,544 4,974,000
120,000 Johnson & Johnson .............. 7,213,260 7,884,000
2,000 Laboratory Corp. of
America Holdings+ ........... 156,489 156,460
82,000 Medco Health Solutions Inc.+ ... 4,072,517 7,411,980
105,000 Merck & Co. Inc. ............... 3,358,120 5,427,450
1,000 Nobel Biocare Holding AG ....... 139,480 270,775
140,000 Novartis AG, ADR ............... 7,727,317 7,694,400
30,000 Patterson Companies Inc.+ ...... 1,080,112 1,158,300
610,000 Pfizer Inc. .................... 16,976,375 14,902,300
145,000 Schering-Plough Corp. .......... 2,687,613 4,586,350
100,000 St. Jude Medical Inc.+ ......... 4,411,409 4,407,000
462,000 Tenet Healthcare Corp.+ ........ 3,698,828 1,552,320
135,000 UnitedHealth Group Inc. ........ 6,686,367 6,538,050
20,000 William Demant
Holding A/S+ ................ 983,839 1,767,440
44,000 Zimmer Holdings Inc.+ .......... 2,802,455 3,563,560
------------ --------------
98,780,984 110,379,133
------------ --------------
HOTELS AND GAMING -- 1.2%
50,000 Hilton Hotels Corp. ............ 2,283,500 2,324,500
20,000 International Game
Technology .................. 608,024 862,000
529,411 Ladbrokes plc .................. 7,677,932 4,676,594
35,000 Las Vegas Sands Corp.+ ......... 2,707,899 4,669,700
25,000 Starwood Hotels &
Resorts Worldwide Inc. ...... 447,533 1,518,750
------------ --------------
13,724,888 14,051,544
------------ --------------
MACHINERY -- 0.6%
50,000 Baldor Electric Co. ............ 1,700,000 1,997,500
6,000 Caterpillar Inc. ............... 35,181 470,580
31,000 Deere & Co. .................... 752,487 4,601,020
------------ --------------
2,487,668 7,069,100
------------ --------------
MANUFACTURED HOUSING -- 0.1%
140,000 Champion Enterprises Inc.+ ..... 1,407,727 1,537,200
------------ --------------
METALS AND MINING -- 2.7%
120,000 Alcan Inc. ..................... 11,804,000 12,009,600
95,000 Alcoa Inc. ..................... 3,014,857 3,716,400
5,000 Carpenter Technology Corp. ..... 453,570 650,050
27,000 Fording Canadian Coal Trust .... 179,580 1,043,734
50,000 Freeport-McMoRan
Copper & Gold Inc. .......... 1,000,213 5,244,500
195,000 Newmont Mining Corp. ........... 7,983,095 8,722,350
30,000 Peabody Energy Corp. ........... 1,165,852 1,436,100
------------ --------------
25,601,167 32,822,734
------------ --------------
PUBLISHING -- 1.8%
180,000 Dow Jones & Co. Inc. ........... 8,154,213 10,746,000
6,500 Idearc Inc. .................... 188,753 204,555
See accompanying notes to financial statements.
8
THE GABELLI EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2007
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
- ------------ ------------- --------------
COMMON STOCKS (CONTINUED)
PUBLISHING (CONTINUED)
22,100 Lee Enterprises Inc. .......... $ 419,560 $ 344,097
23,000 McClatchy Co., Cl. A .......... 781,900 459,540
2,000 News Corp., Cl. A ............. 26,461 43,980
6,016 News Corp., Cl. B ............. 70,881 140,714
100,000 PagesJaunes Groupe SA ......... 2,774,394 2,054,785
406 Seat Pagine Gialle SpA ........ 1,350 226
65,000 The E.W. Scripps Co., Cl. A ... 3,091,527 2,730,000
24,000 The McGraw-Hill
Companies Inc. .............. 742,578 1,221,840
25,000 The New York Times Co.,
Cl. A ....................... 695,769 494,000
1,200 The Washington Post Co.,
Cl. B ....................... 700,030 963,360
101,493 Tribune Co. ................... 3,092,609 2,772,789
1,300 Value Line Inc. ............... 56,478 64,051
------------- --------------
20,796,503 22,239,937
------------- --------------
REAL ESTATE -- 0.0%
7,000 Griffin Land &
Nurseries Inc.+ ............. 137,444 255,640
------------- --------------
RETAIL -- 4.0%
60,000 Copart Inc.+ .................. 1,827,705 2,063,400
200,000 Costco Wholesale Corp. ........ 10,357,002 12,274,000
320,000 CVS Caremark Corp. ............ 11,998,232 12,681,600
5,000 Ingles Markets Inc., Cl. A .... 64,548 143,300
150,000 Safeway Inc. .................. 3,114,997 4,966,500
500 Sears Holdings Corp.+ ......... 40,733 63,600
100,000 SUPERVALU Inc. ................ 2,935,535 3,901,000
73,000 The Great Atlantic & Pacific
Tea Co. Inc.+ ............... 2,428,323 2,223,580
20,000 Tractor Supply Co.+ ........... 1,003,626 921,800
160,000 Wal-Mart Stores Inc. .......... 7,588,643 6,984,000
10,000 Weis Markets Inc. ............. 300,480 426,900
35,000 Whole Foods Market Inc. ....... 1,565,488 1,713,600
------------- --------------
43,225,312 48,363,280
------------- --------------
SPECIALTY CHEMICALS -- 2.8%
44,000 Albemarle Corp. ............... 576,219 1,944,800
437 Arkema, ADR+ .................. 8,969 26,544
32,000 Ashland Inc. .................. 2,056,624 1,926,720
205,200 Chemtura Corp. ................ 1,932,532 1,824,228
50,000 E.I. du Pont de
Nemours & Co. ............... 2,361,626 2,478,000
120,000 Ferro Corp. ................... 2,375,006 2,397,600
2,000 FMC Corp. ..................... 64,790 104,040
100,000 Hercules Inc. ................. 1,164,285 2,102,000
70,000 International Flavors &
Fragrances Inc. ............. 3,373,184 3,700,200
133,000 Monsanto Co. .................. 1,227,948 11,403,420
3,500 NewMarket Corp. ............... 13,508 172,830
100,000 Omnova Solutions Inc.+ ........ 667,863 578,000
4,000 Quaker Chemical Corp. ......... 79,615 94,080
SHARES/ MARKET
UNITS COST VALUE
- ------------ ------------- --------------
60,000 Sensient Technologies Corp. ... $ 1,253,015 $ 1,732,200
90,000 The Dow Chemical Co. .......... 3,950,210 3,875,400
2,542 Tronox Inc., Cl. B ............ 22,513 22,954
------------- --------------
21,127,907 34,383,016
------------- --------------
TELECOMMUNICATIONS -- 4.6%
100,000 Alltel Corp. .................. 6,648,143 6,968,000
280,000 AT&T Inc. ..................... 6,551,058 11,846,800
240,000 BCE Inc. ...................... 6,194,922 9,612,000
4,495 Bell Aliant Regional
Communications Income
Fund (a)(b) ................. 117,429 144,795
200,000 BT Group plc .................. 825,179 1,256,240
30,000 BT Group plc, ADR ............. 1,006,938 1,884,900
140,000 Cable & Wireless plc .......... 273,765 527,048
10,000 CenturyTel Inc. ............... 359,546 462,200
300,000 Cincinnati Bell Inc.+ ......... 1,684,531 1,482,000
270,000 Deutsche Telekom AG, ADR ...... 4,915,593 5,300,100
10,000 Embarq Corp. .................. 462,900 556,000
15,000 France Telecom SA, ADR ........ 436,434 501,600
140,000 Qwest Communications
International Inc.+ ......... 582,200 1,282,400
250,000 Sprint Nextel Corp. ........... 4,540,676 4,750,000
3,300 Telecom Italia SpA, ADR ....... 31,072 99,891
8,195 Telefonica SA, ADR ............ 80,699 686,577
12,000 TELUS Corp. ................... 185,454 693,711
13,800 TELUS Corp.,
Non-Voting, ADR ............. 691,183 777,700
180,000 Verizon Communications
Inc. ........................ 6,640,097 7,970,400
5,000 Windstream Corp. .............. 43,990 70,600
------------- --------------
42,271,809 56,872,962
------------- --------------
TRANSPORTATION -- 0.4%
100,000 GATX Corp. .................... 3,855,499 4,275,000
25,000 Laidlaw International Inc. .... 864,427 880,500
------------- --------------
4,719,926 5,155,500
------------- --------------
WIRELESS COMMUNICATIONS -- 0.6%
300,000 Dobson Communications
Corp., Cl. A+ ............... 3,768,060 3,837,000
2,000 NTT DoCoMo Inc. ............... 2,937,841 2,855,526
------------- --------------
6,705,901 6,692,526
------------- --------------
TOTAL COMMON STOCKS ........... 885,743,066 1,175,532,379
------------- --------------
CONVERTIBLE PREFERRED STOCKS -- 0.3%
COMMUNICATIONS EQUIPMENT -- 0.1%
1,100 Lucent Technologies
Capital Trust I,
7.750% Cv. Pfd. ............. 759,000 1,056,000
------------- --------------
ENERGY AND UTILITIES: INTEGRATED -- 0.1%
300 El Paso Corp.,
4.990% Cv. Pfd. (b) ......... 293,192 424,556
------------- --------------
See accompanying notes to financial statements.
9
THE GABELLI EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2007
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
- ------------ ------------- --------------
CONVERTIBLE PREFERRED STOCKS (CONTINUED)
ENTERTAINMENT -- 0.0%
3,000 Metromedia International
Group Inc.,
7.250% Cv. Pfd.+ ............ $ 5,310 $ 132,000
------------- --------------
TELECOMMUNICATIONS -- 0.1%
33,000 Cincinnati Bell Inc.,
6.750% Cv. Pfd., Ser. B ..... 918,894 1,501,170
------------- --------------
TOTAL CONVERTIBLE
PREFERRED STOCKS ............ 1,976,396 3,113,726
------------- --------------
RIGHTS -- 0.0%
FINANCIAL SERVICES -- 0.0%
500 Raiffeisen International
Bank Holding AG,
expire 10/03/07+ ............ 0 0
------------- --------------
WARRANTS -- 0.0%
BROADCASTING -- 0.0%
330 Granite Broadcasting Corp.,
Ser. A, expire 06/04/12+ .... 0 990
330 Granite Broadcasting Corp.,
Ser. B, expire 06/04/12+ .... 0 660
------------- --------------
0 1,650
------------- --------------
DIVERSIFIED INDUSTRIAL -- 0.0%
379,703 National Patent
Development Corp.,
expire 08/14/08+ (a)(c) ..... 0 20,259
3,625 WHX Corp.,
expire 02/28/08+ ............ 14,168 743
------------- --------------
14,168 21,002
------------- --------------
TOTAL WARRANTS ................ 14,168 22,652
------------- --------------
PRINCIPAL
AMOUNT
- ------------
CORPORATE BONDS -- 0.8%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.1%
$ 800,000 Standard Motor Products
Inc., Sub. Deb. Cv.,
6.750%, 07/15/09 ............ 735,266 766,000
------------- --------------
BROADCASTING -- 0.2%
350,000 Sinclair Broadcast Group
Inc., Cv. (STEP),
4.875%, 07/15/18 ............ 322,271 332,063
2,200,000 Sinclair Broadcast Group
Inc., Sub. Deb. Cv.,
6.000%, 09/15/12 ............ 1,873,722 2,057,000
------------- --------------
2,195,993 2,389,063
------------- --------------
BUSINESS SERVICES -- 0.0%
100,000 BBN Corp., Sub. Deb. Cv.,
6.000%, 04/01/12+ (a) ....... 97,499 0
470,162 GP Strategies Corp., Sub. Deb.,
6.000%, 08/14/08 (a)(c) ..... 406,536 320,450
------------- --------------
504,035 320,450
------------- --------------
PRINCIPAL MARKET
AMOUNT COST VALUE
- ------------ ------------- --------------
COMMUNICATIONS EQUIPMENT -- 0.5%
$ 4,000,000 Agere Systems Inc.,
Sub. Deb. Cv.,
6.500%, 12/15/09 ............ $ 3,945,932 $ 4,060,000
2,625,000 Nortel Networks Corp., Cv.,
4.250%, 09/01/08 ............ 2,570,397 2,588,906
------------- --------------
6,516,329 6,648,906
------------- --------------
TELECOMMUNICATIONS -- 0.0%
200,000 Williams Communications
Group Inc., Escrow,
10.875%, 10/01/09+ (a) ...... 0 0
------------- --------------
TOTAL CORPORATE BONDS ......... 9,951,623 10,124,419
------------- --------------
U.S. GOVERNMENT OBLIGATIONS -- 2.6%
31,811,000 U.S. Treasury Bills,
3.349% to 4.139%++,
10/04/07 to 03/20/08 ........ 31,577,868 31,578,178
------------- --------------
TOTAL
INVESTMENTS -- 99.7% ........ $ 929,263,121 1,220,371,354
=============
OTHER ASSETS AND LIABILITIES (NET) -- 0.3% 3,915,627
--------------
NET ASSETS -- 100.0% .......................... $1,224,286,981
==============
- ----------
(a) 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. At September 30, 2007,
the market value of fair valued securities amounted to $490,454 or 0.04%
of total net assets.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At
September 30, 2007, the market value of Rule 144A securities amounted to
$569,351 or 0.05% of total net assets.
(c) At September 30, 2007, the Fund held investments in restricted and
illiquid securities amounting to $340,709 or 0.03% of total net assets,
which were valued under methods approved by the Board, as follows:
ACQUISITION 09/30/07
SHARES/ CARRYING
PRINCIPAL ACQUISITION ACQUISITION VALUE
AMOUNT ISSUER DATE COST PER UNIT
- ------------ ------ ----------- ----------- --------
$ 470,162 GP Strategies Corp., Sub. Deb.,
6.00%, 08/14/08 ............. 08/08/03 $ 320,861 $68.1574
379,703 National Patent Development Corp.
warrants expire 08/14/08 .... 11/24/04 0.00 0.0534
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR American Depository Receipt
CVO Contingent Value Obligation
OJSC Open Joint Stock Company
STEP Step coupon bond. The rate disclosed is that in effect at September 30,
2007.
See accompanying notes to financial statements.
10
THE GABELLI EQUITY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2007
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (cost $929,263,121) ............... $1,220,371,354
Cash .................................................... 597
Receivable for investments sold ......................... 12,432,048
Receivable for Fund shares sold ......................... 4,918,286
Dividends and interest receivable ....................... 1,931,902
Prepaid expense ......................................... 47,547
--------------
TOTAL ASSETS ............................................ 1,239,701,734
--------------
LIABILITIES:
Payable for investments purchased ....................... 12,447,318
Payable for Fund shares redeemed ........................ 1,372,439
Payable for investment advisory fees .................... 972,274
Payable for distribution fees ........................... 253,450
Unrealized depreciation on swap contracts ............... 15,324
Payable for accounting fees ............................. 3,750
Other accrued expenses .................................. 350,198
--------------
TOTAL LIABILITIES ....................................... 15,414,753
--------------
NET ASSETS applicable to 53,297,891
shares outstanding .................................... $1,224,286,981
==============
NET ASSETS CONSIST OF:
Paid-in capital, each class at $0.001 par value ......... $ 919,611,797
Accumulated distributions in excess of net
investment income ..................................... (127,246)
Accumulated net realized gain on investments and foreign
currency transactions ................................. 13,707,284
Net unrealized appreciation on investments .............. 291,108,233
Net unrealized depreciation on swap contracts ........... (15,324)
Net unrealized appreciation on foreign
currency translations ................................. 2,237
--------------
NET ASSETS .............................................. $1,224,286,981
==============
SHARES OF CAPITAL STOCK:
CLASS AAA:
Net Asset Value, offering and redemption price
per share ($1,191,351,373 / 51,839,735
shares outstanding; 150,000,000
shares authorized) .................................... $ 22.98
==============
CLASS A:
Net Asset Value and redemption price per share
($15,312,735 / 668,398 shares outstanding;
50,000,000 shares authorized) ......................... $ 22.91
==============
Maximum offering price per share (NAV / .9425,
based on maximum sales charge of 5.75%
of the offering price) ................................ $ 24.31
==============
CLASS B:
Net Asset Value and offering price per share
($343,767 / 15,399 shares outstanding;
50,000,000 shares authorized) ......................... $ 22.32(a)
==============
CLASS C:
Net Asset Value and offering price per share
($17,279,106 / 774,359 shares outstanding;
50,000,000 shares authorized) ......................... $ 22.31(a)
==============
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2007
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends (net of foreign taxes of $544,129) ............ $ 22,964,326
Interest ................................................ 2,016,465
--------------
TOTAL INVESTMENT INCOME ................................. 24,980,791
--------------
EXPENSES:
Investment advisory fees ................................ 10,230,112
Distribution fees - Class AAA ........................... 2,498,174
Distribution fees - Class A ............................. 27,827
Distribution fees - Class B ............................. 3,497
Distribution fees - Class C ............................. 122,611
Shareholder services fees ............................... 1,073,601
Shareholder communications expenses ..................... 341,615
Custodian fees .......................................... 154,060
Registration expenses ................................... 70,817
Legal and audit fees .................................... 64,200
Accounting fees ......................................... 45,000
Directors' fees ......................................... 33,326
Interest expense ........................................ 27,269
Miscellaneous expenses .................................. 76,703
--------------
TOTAL EXPENSES .......................................... 14,768,812
Less: Custodian fee credits ............................. (23,620)
--------------
NET EXPENSES ............................................ 14,745,192
--------------
NET INVESTMENT INCOME ................................... 10,235,599
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, SWAP CONTRACTS, AND FOREIGN CURRENCY:
Net realized gain on investments ........................ 25,680,696
Net realized loss on swap contracts ..................... (20,017)
Net realized gain on foreign currency
transactions .......................................... 1,597
--------------
Net realized gain on investments, swap
contracts, and foreign currency transactions .......... 25,662,276
--------------
Net change in unrealized appreciation/
depreciation on investments ........................... 129,151,249
Net change in unrealized appreciation/
depreciation on swap contracts ........................ (15,324)
Net change in unrealized appreciation/
depreciation on foreign currency translations ......... 2,913
--------------
Net change in unrealized appreciation/
depreciation on investments, swap contracts,
and foreign currency translations ..................... 129,138,838
--------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS, SWAP CONTRACTS, AND
FOREIGN CURRENCY ...................................... 154,801,114
--------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ....................................... $ 165,036,713
==============
- ----------
(a) Redemption price varies based on the length of time held.
See accompanying notes to financial statements.
11
THE GABELLI EQUITY INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2007 SEPTEMBER 30, 2006
------------------ ------------------
OPERATIONS:
Net investment income .............................................. $ 10,235,599 $ 13,923,606
Net realized gain on investments, swap contracts, and foreign
currency transactions ............................................ 25,662,276 15,512,152
Net change in unrealized appreciation/depreciation on investments,
swap contracts, and foreign currency translations ................ 129,138,838 49,558,089
--------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............... 165,036,713 78,993,847
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class AAA ........................................................ (10,622,391) (13,070,105)
Class A .......................................................... (122,443) (126,247)
Class B .......................................................... (3,257) (2,901)
Class C .......................................................... (146,754) (118,288)
--------------- ---------------
(10,894,845) (13,317,541)
--------------- ---------------
Net realized gain on investments
Class AAA ........................................................ (25,511,616) (6,315,010)
Class A .......................................................... (276,274) (51,353)
Class B .......................................................... (11,191) (532)
Class C .......................................................... (275,224) (52,102)
--------------- ---------------
(26,074,305) (6,418,997)
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ................................ (36,969,150) (19,736,538)
--------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Class AAA ........................................................ 271,771,201 156,224,106
Class A .......................................................... 5,538,183 4,102,822
Class B .......................................................... (51,212) 305,182
Class C .......................................................... 7,800,453 4,122,904
--------------- ---------------
NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS 285,058,625 164,755,014
--------------- ---------------
REDEMPTION FEES .................................................... 10,314 7,401
--------------- ---------------
NET INCREASE IN NET ASSETS ......................................... 413,136,502 224,019,724
NET ASSETS:
Beginning of period ................................................ 811,150,479 587,130,755
--------------- ---------------
End of period (including undistributed net investment income of
$0 and $543,923, respectively) ................................... $1,224,286,981 $ 811,150,479
=============== ===============
See accompanying notes to financial statements.
12
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. The Fund's
primary objective is to seek a high level of total return with an emphasis on
income. The Fund commenced investment operations on January 2, 1992.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with United States ("U.S.") generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates. The following is a summary of significant accounting
policies followed by the Fund in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange or traded in the U.S. over-the-counter market for
which market quotations are readily available are valued at the last quoted sale
price or a market's official closing price as of the close of business on the
day the securities are being valued. If there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day. If no bid or asked prices are quoted on such
day, the security is valued at the most recently available price or, if the
Board of Directors (the "Board") so determines, by such other method as the
Board shall determine in good faith to reflect its fair market value. Portfolio
securities traded on more than one national securities exchange or market are
valued according to the broadest and most representative market, as determined
by Gabelli Funds, LLC (the "Adviser").
Portfolio securities primarily traded on a foreign market are generally valued
at the preceding closing values of such securities on the relevant market, but
may be fair valued pursuant to procedures established by the Board if market
conditions change significantly after the close of the foreign market but prior
to the close of business on the day the securities are being valued. Debt
instruments with remaining maturities of 60 days or less that are not credit
impaired are valued at amortized cost, unless the Board determines such amount
does not reflect the securities' fair value, in which case these securities will
be fair valued as determined by the Board. Debt instruments having a maturity
greater than 60 days for which market quotations are readily available are
valued at the average of the latest bid and asked prices. If there were no asked
prices quoted on such day, the security is valued using the closing bid price.
Futures contracts are valued at the closing settlement price of the exchange or
board of trade on which the applicable contract is traded.
Securities and assets for which market quotations are not readily available are
fair valued as determined by the Board. Fair valuation methodologies and
procedures may include, but are not limited to: analysis and review of available
financial and non-financial information about the company; comparisons 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.
In September 2006, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") 157, Fair Value
Measurements, which clarifies the definition of fair value and requires
companies to expand their disclosure about the use of fair value to measure
assets and liabilities in interim and annual periods subsequent to initial
recognition. Adoption of SFAS 157 requires the use of the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. At this time,
management is in the process of reviewing the requirements of SFAS 157 against
its current valuation policies to determine future applicability.
13
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, 2007, there were no open repurchase agreements.
SWAP AGREEMENTS. The Fund may enter into equity swap transactions. The use of
equity swaps is a highly specialized activity that involves investment
techniques and risks different from those associated with ordinary portfolio
security transactions. An equity swap is a swap where a set of future cash flows
are exchanged between two counterparties. One of these cash flow streams will
typically be based on a reference interest rate combined with the performance of
a notional value of shares of a stock. The other will be based on the
performance of the shares of a stock. There is no assurance that the swap
contract counterparties will be able to meet their obligations pursuant to the
swap contracts, or that, in the event of default, the Fund will succeed in
pursuing contractual remedies. The Fund thus assumes the risk that it may be
delayed in or prevented from obtaining payments owed to it pursuant to the swap
contracts. The creditworthiness of the swap contract counterparties is closely
monitored in order to minimize the risk. Depending on the general state of
short-term interest rates and the returns of the Fund's portfolio securities at
that point in time, such a default could negatively affect the Fund's ability to
make dividend payments. In addition, at the time an equity swap transaction
reaches its scheduled termination date, there is a risk that the Fund will not
be able to obtain a replacement transaction or that the terms of the replacement
will not be as favorable as on the expiring transaction. If this occurs, it
could have a negative impact on the Fund's ability to make dividend payments.
The use of derivative instruments involves, to varying degrees, elements of
market and counterparty risk in excess of the amount recognized below. The
change in value of swaps, including the accrual of periodic amounts of interest
to be paid or received on swaps is reported as unrealized appreciation or
depreciation.
The Fund has entered into equity swaps with Bear, Stearns International Limited.
Details of the equity swaps at September 30, 2007 are as follows:
NOTIONAL EQUITY SECURITY INTEREST RATE/ TERMINATION NET UNREALIZED
AMOUNT RECEIVED EQUITY SECURITY PAID DATE DEPRECIATION
- ------------------------ --------------- -------------------------------- ----------- --------------
Market Value Overnight LIBOR plus 40 bps plus
Appreciation on: Market Value Depreciation on:
$312,083 (90,000 shares) Rank Group plc Rank Group plc 05/15/08 $(15,324)
FUTURES CONTRACTS. The Fund may engage in futures contracts for the purpose of
hedging against changes in the value of its portfolio securities and in the
value of securities it intends to purchase. Upon entering into a futures
contract, the Fund is required to deposit with the broker an amount of cash or
cash equivalents equal to a certain percentage of the contract amount. This is
known as the "initial margin." Subsequent payments ("variation margin") are made
or received by the Fund each day, depending on the daily fluctuations in the
value of the contract, which are included in unrealized
appreciation/depreciation on investments and futures contracts. The Fund
recognizes a realized gain or loss when the contract is closed.
14
THE GABELLI EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
There are several risks in connection with the use of futures contracts as a
hedging instrument. The change in value of futures contracts primarily
corresponds with the value of their underlying instruments, which may not
correlate with the change in value of the hedged investments. In addition, there
is the risk that the Fund may not be able to enter into a closing transaction
because of an illiquid secondary market. At September 30, 2007, there were no
open futures contracts.
SECURITIES SOLD SHORT. The Fund may enter into short sale transactions. Short
selling involves selling securities that may or may not be owned and, at times,
borrowing the same securities for delivery to the purchaser, with an obligation
to replace such borrowed securities at a later date. The proceeds received from
short sales are recorded as liabilities and the Fund records an unrealized gain
or loss to the extent of the difference between the proceeds received and the
value of an open short position on the day of determination. The Fund records a
realized gain or loss when the short position is closed out. By entering into a
short sale, the Fund bears the market risk of an unfavorable change in the price
of the security sold short. Dividends on short sales are recorded as an expense
by the Fund on the ex-dividend date and interest expense is recorded on the
accrual basis. The Fund did not hold any short positions as of September 30,
2007.
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 translations. When the contract is closed, the Fund records a realized
gain or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed.
The use of forward foreign exchange contracts does not eliminate fluctuations in
the underlying prices of the Fund's portfolio securities, but it does establish
a rate of exchange that can be achieved in the future. Although forward foreign
exchange contracts limit the risk of loss due to a decline in the value of the
hedged currency, they also limit any potential gain that might result should the
value of the currency increase. In addition, the Fund could be exposed to risks
if the counterparties to the contracts are unable to meet the terms of their
contracts. At September 30, 2007, there were no open forward foreign exchange
contracts.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currencies, investments, and other assets and
liabilities are translated into U.S. dollars at the current exchange rates.
Purchases and sales of investment securities, income, and expenses are
translated at the exchange rate prevailing on the respective dates of such
transactions. Unrealized gains and losses that result from changes in foreign
exchange rates and/or changes in market prices of securities have been included
in unrealized appreciation/depreciation on investments and foreign currency
translations. Net realized foreign currency gains and losses resulting from
changes in exchange rates include foreign currency gains and losses between
trade date and settlement date on investment securities transactions, foreign
currency transactions, and the difference between the amounts of interest and
dividends recorded on the books of the Fund and the amounts actually received.
The portion of foreign currency gains and losses related to fluctuation in
exchange rates between the initial trade date and subsequent sale trade date is
included in realized gain/(loss) on investments.
FOREIGN SECURITIES. The Fund may directly purchase securities of foreign
issuers. Investing in securities of foreign issuers involves special risks not
typically associated with investing in securities of U.S. issuers. The risks
include possible revaluation of currencies, the ability to repatriate funds,
less complete financial information about companies, and possible future adverse
political and economic developments. Moreover, securities of many foreign
issuers and their markets may be less liquid and their prices more volatile than
those of securities of comparable U.S. issuers.
15
THE GABELLI EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
FOREIGN TAXES. The Fund may be subject to foreign taxes on income, gains on
investments, or currency repatriation, a portion of which may be recoverable.
The Fund will accrue such taxes and recoveries as applicable, based upon its
current interpretation of tax rules and regulations that exist in the markets in
which it invests.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 15% of its net
assets in securities for which the markets are illiquid. Illiquid securities
include securities the disposition of which is subject to substantial legal or
contractual restrictions. The sale of illiquid securities often requires more
time and results in higher brokerage charges or dealer discounts and other
selling expenses than does the sale of securities eligible for trading on
national securities exchanges or in the over-the-counter markets. Restricted
securities may sell at a price lower than similar securities that are not
subject to restrictions on resale. Securities freely saleable among qualified
institutional investors under special rules adopted by the SEC may be treated as
liquid if they satisfy liquidity standards established by the Board. The
continued liquidity of such securities is not as well assured as that of
publicly traded securities, and accordingly the Board will monitor their
liquidity.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for on the trade date with realized gain or loss on investments
determined by using the identified cost method. Interest income (including
amortization of premium and accretion of discount) is recorded on the accrual
basis. Premiums and discounts on debt securities are amortized using the
effective yield to maturity method. Dividend income is recorded on the
ex-dividend date except for certain dividends which are recorded as soon as the
Fund is informed of the dividend.
DETERMINATION OF NET ASSET VALUE AND CALCULATION OF EXPENSES. Certain
administrative expenses are common to, and allocated among, various affiliated
funds. Such allocations are made on the basis of each Fund's average net assets
or other criteria directly affecting the expenses as determined by the Adviser
pursuant to procedures established by the Board.
In calculating the NAV per share of each class, investment income, realized and
unrealized gains and losses, redemption fees, and expenses other than class
specific expenses are allocated daily to each class of shares based upon the
proportion of net assets of each class at the beginning of each day.
Distribution expenses are borne solely by the class incurring the expense.
CUSTODIAN FEE CREDITS AND INTEREST EXPENSE. When cash balances are maintained in
the custody account, the Fund receives credits which are used to offset
custodian fees. The gross expenses paid under the custody arrangement are
included in custodian fees in the Statement of Operations with the corresponding
expense offset, if any, shown as "custodian fee credits." When cash balances are
overdrawn, the Fund is charged an overdraft fee equal to 2.00% above the federal
funds rate on outstanding balances. This amount, if any, would be shown as
"interest expense" in the Statement of Operations.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions to shareholders are recorded on the
ex-dividend date. Distributions to shareholders are based on income and capital
gains as determined in accordance with federal income tax regulations, which may
differ from income and capital gains as determined under U.S. generally accepted
accounting principles. These differences are primarily due to differing
treatments of income and gains on various investment securities and foreign
currency transactions held by the Fund, timing differences, and differing
characterizations of distributions made by the Fund. Distributions from net
investment income include net realized gains on foreign currency transactions.
These book/tax differences are either temporary or permanent in nature. To the
extent these differences are permanent, adjustments are made to the appropriate
capital accounts in the period when the differences arise. These
reclassifications have no impact on the NAV of the Fund. For the fiscal year
ended September 30, 2007, reclassifications were made to increase accumulated
distributions in excess of net investment income by $11,923 and increase
accumulated net realized gain on investments by $10,278, with an offsetting
adjustment to additional paid-in capital.
16
THE GABELLI EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The tax character of distributions paid during the fiscal years ended September
30, 2007 and September 30, 2006 was as follows:
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2007 SEPTEMBER 30, 2006
------------------ ------------------
DISTRIBUTIONS PAID FROM:
Ordinary income
(inclusive of short-term capital gains) ... $ 20,253,574 $ 13,317,541
Net long-term capital gains .................. 16,715,576 6,418,997
------------ ------------
Total distributions paid ..................... $ 36,969,150 $ 19,736,538
============ ============
The Fund has a fixed distribution policy. Under the policy, the Fund declares
and pays monthly distributions from net investment income and capital gains. The
actual source of the distribution is determined after the end of the calendar
year. To the extent such distributions are made from current earnings and
profits, they are considered ordinary income or long-term capital gains. The
Fund's current distribution policy may restrict the Fund's ability to pay out
all of its net realized long-term capital gains as a Capital Gain Dividend. The
Fund continues to evaluate its distribution policy in light of ongoing economic
and market conditions and may change the amount of the monthly distributions in
the future. The Fund currently intends to pay $0.03 per share on a monthly
basis.
PROVISION FOR INCOME TAXES. The Fund intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). It is the policy of the Fund to comply with the
requirements of the Code applicable to regulated investment companies and to
distribute substantially all of its net investment company taxable income and
net capital gains. Therefore, no provision for federal income taxes is required.
As of September 30, 2007, the components of accumulated earnings/(losses) on a
tax basis were as follows:
Undistributed long-term capital gains .......... $ 16,360,583
Net unrealized appreciation .................... 288,468,221
Other temporary differences .................... (153,620)
-------------
Total accumulated earnings .................. $ 304,675,184
=============
At September 30, 2007, the difference between book and tax basis unrealized
appreciation is primarily due to deferral of losses on wash sales, basis
adjustments on investments in partnerships, and return of capital basis
adjustments.
The following summarizes the tax cost of investments and the related unrealized
appreciation/(depreciation) at September 30, 2007:
GROSS GROSS
UNREALIZED UNREALIZED NET UNREALIZED
COST APPRECIATION DEPRECIATION APPRECIATION
------------ ------------ ------------ --------------
Investments ....... $931,890,047 $314,378,826 $(25,897,519) $288,481,307
FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an
Interpretation of FASB Statement No. 109" (the "Interpretation") established a
minimum threshold for financial statement recognition of the benefit of
positions taken in filing tax returns (including whether the Fund is taxable in
a particular jurisdiction) and required certain expanded tax disclosures. The
Fund has adopted the Interpretation for all open tax years and it had no impact
on the amounts reported in the financial statements.
3. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS. The Fund has entered
into an investment advisory agreement (the "Advisory Agreement") with the
Adviser which provides that the Fund will pay the Adviser a fee, computed daily
and paid monthly, at the annual rate of 1.00% of the value of its average daily
net assets. In accordance with the Advisory Agreement, the Adviser provides a
continuous investment program for the Fund's portfolio, oversees the
administration of all aspects of the Fund's business and affairs, and pays the
compensation of all Officers and Directors of the Fund who are affiliated
persons of the Adviser.
17
THE GABELLI EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The Corporation pays each Director that is not considered to be an affiliated
person an annual retainer of $6,000 plus $1,000 for each Board meeting attended
and they are reimbursed for any out of pocket expenses incurred in attending
meetings. All Board committee members receive $500 per meeting attended.
Directors who are directors or employees of the Adviser or an affiliated company
receive no compensation or expense reimbursement from the Fund.
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, 2007, other than short-term securities and
U.S. government obligations, aggregated $431,811,734 and $124,139,486,
respectively.
6. TRANSACTIONS WITH AFFILIATES. During the fiscal year ended September 30,
2007, the Fund paid brokerage commissions on security trades of $394,803 to
Gabelli & Company. Additionally, Gabelli & Company informed the Fund that it
received $36,489 from investors representing commissions (sales charges and
underwriting fees) on sales and redemptions of Fund shares.
The cost of calculating the Fund's NAV per share is a Fund expense pursuant to
the Advisory Agreement between the Fund and the Adviser. During the fiscal year
ended September 30, 2007, the Fund paid or accrued $45,000 to the Adviser in
connection with the cost of computing the Fund's NAV.
7. LINE OF CREDIT. Effective June 20, 2007, the Fund participates in an
unsecured line of credit of up to $75,000,000, and may borrow up to 10% of its
net assets from the custodian for temporary borrowing purposes. Prior to June
30, 2007, the line of credit was $25,000,000. Borrowings under this arrangement
bear interest at 0.75% above the federal funds rate on outstanding balances.
This amount, if any, is shown as "interest expense" in the Statement of
Operations. At September 30, 2007, there were no borrowings outstanding under
the line of credit.
The average daily amount of borrowings outstanding from the line of credit
within the fiscal year ended September 30, 2007 was $436,315 with a weighted
average interest rate of 6.06%. The maximum amount borrowed at any time during
the fiscal year ended September 30, 2007 was $14,209,000.
8. CAPITAL STOCK TRANSACTIONS. The Fund currently offers four classes of shares
- - Class AAA Shares, Class A Shares, Class B Shares, and Class C Shares. Class
AAA Shares are offered only to investors who acquire them directly from Gabelli
& Company, or through selected broker/dealers, or the transfer agent without a
sales charge. Class A Shares are subject to a maximum front-end sales charge of
5.75%. Class B Shares are subject to a contingent deferred sales charge ("CDSC")
upon redemption within six years of purchase and automatically convert to Class
A Shares approximately eight years after the original purchase. The applicable
CDSC is equal to a declining percentage of the lesser of the NAV per share at
the date of the original purchase or at the date of redemption, based on the
length of time held. Class C Shares are subject to a 1.00% CDSC for one year
after purchase. Class B Shares are available only through exchange of Class B
Shares of other funds distributed by Gabelli & Company. The Board has approved
Class I Shares which have not been offered publicly.
The Fund imposes a redemption fee of 2.00% on Class AAA Shares, Class A Shares,
Class B Shares, and Class C Shares that are redeemed or exchanged on or before
the seventh day after the date of a purchase. The redemption fee is deducted
from the proceeds otherwise payable to the redeeming shareholders and is
retained by the Fund. The redemption fees retained by the Fund during the fiscal
years ended September 30, 2007 and September 30, 2006 amounted to $10,314 and
$7,401, respectively.
18
THE GABELLI EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The redemption fee does not apply to redemptions of shares where (i) the shares
were purchased through automatic reinvestment of dividends or other
distributions, (ii) the redemption was initiated by the Fund, (iii) the shares
were purchased through programs that collect the redemption fee at the program
level and remit them to the Fund, or (iv) the shares were purchased through
programs that the Adviser determines to have appropriate anti-short-term trading
policies in place or as to which the Adviser has received assurances that
look-through redemption fee procedures or effective anti-short-term trading
policies and procedures are in place. Transactions in shares of capital stock
were as follows:
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2007 SEPTEMBER 30, 2006
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------- -------------- ---------- --------------
CLASS AAA CLASS AAA
--------------------------- ---------------------------
Shares sold ....................................................... 20,047,350 $ 435,048,849 16,251,000 $ 309,539,237
Shares issued upon reinvestment of distributions .................. 1,598,441 33,658,795 951,459 18,000,990
Shares redeemed ................................................... (9,065,356) (196,936,443) (8,928,232) (171,316,121)
---------- -------------- ---------- --------------
Net increase ................................................... 12,580,435 $ 271,771,201 8,274,227 $ 156,224,106
========== ============== ========== ==============
CLASS A CLASS A
--------------------------- ---------------------------
Shares sold ....................................................... 337,809 $ 7,382,957 316,965 $ 5,979,164
Shares issued upon reinvestment of distributions .................. 15,265 320,840 7,240 137,173
Shares redeemed ................................................... (100,074) (2,165,614) (104,070) (2,013,515)
---------- -------------- ---------- --------------
Net increase ................................................... 253,000 $ 5,538,183 220,135 $ 4,102,822
========== ============== ========== ==============
CLASS B CLASS B
--------------------------- ---------------------------
Shares sold ....................................................... -- -- 15,928 $ 302,564
Shares issued upon reinvestment of distributions .................. 700 $ 14,330 181 3,433
Shares redeemed ................................................... (3,076) (65,542) (43) (815)
---------- -------------- ---------- --------------
Net increase (decrease) ........................................ (2,376) $ (51,212) 16,066 $ 305,182
========== ============== ========== ==============
CLASS C CLASS C
--------------------------- ---------------------------
Shares sold ....................................................... 400,018 $ 8,488,767 344,076 $ 6,388,556
Shares issued upon reinvestment of distributions .................. 18,848 388,816 8,157 152,213
Shares redeemed ................................................... (50,547) (1,077,130) (128,826) (2,417,865)
---------- -------------- ---------- --------------
Net increase ................................................... 368,319 $ 7,800,453 223,407 $ 4,122,904
========== ============== ========== ==============
9. INDEMNIFICATIONS. The Fund enters into contracts that contain a variety of
indemnifications. The Fund's maximum exposure under these arrangements is
unknown. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
10. OTHER MATTERS. The Adviser and/or affiliates received subpoenas from the
Attorney General of the State of New York and the SEC requesting information on
mutual fund share trading practices involving certain funds managed by the
Adviser. GAMCO Investors, Inc. ("GAMCO"), the Adviser's parent company,
responded to these requests for documents and testimony. In June 2006, GAMCO
began discussions with the SEC regarding a possible resolution of their inquiry.
In February 2007, the Adviser made an offer of settlement to the staff of the
SEC for communication to the Commission for its consideration to resolve this
matter. This offer of settlement is subject to agreement regarding the specific
language of the SEC's administrative order and other settlement documents. On a
separate matter, in September 2005, the Adviser was informed by the staff of the
SEC that the staff may recommend to the Commission that an administrative remedy
and a monetary penalty be sought from the Adviser in connection with the actions
of two of nine closed-end funds managed by the Adviser relating to Section 19(a)
and Rule 19a-1 of the 1940 Act. These provisions require registered investment
companies to provide written statements to shareholders when a dividend is made
from a source other than net investment income. While the two closed-end funds
sent annual statements and provided other materials containing this information,
the funds did not send written statements to shareholders with each distribution
in 2002 and 2003. The Adviser believes that all of the funds are now in
compliance. The Adviser believes that these matters would have no effect on the
Fund or any material adverse effect on the Adviser or its ability to manage the
Fund.
19
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(a) Investments Operations Income Investments Distributions
- ------------- --------- ---------- -------------- ---------- ---------- ----------- -------------
CLASS AAA
2007 $ 20.23 $ 0.22 $ 3.37 $ 3.59 $ (0.29) $ (0.55) $ (0.84)
2006 18.72 0.38 1.68 2.06 (0.36) (0.19) (0.55)
2005 16.73 0.24 2.41 2.65 (0.24) (0.42) (0.66)
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)
CLASS A
2007 $ 20.17 $ 0.22 $ 3.36 $ 3.58 $ (0.29) $ (0.55) $ (0.84)
2006 18.66 0.39 1.67 2.06 (0.36) (0.19) (0.55)
2005 16.72 0.20 2.43 2.63 (0.27) (0.42) (0.69)
2004(d) 16.40 0.16 0.43 0.59 (0.20) (0.07) (0.27)
CLASS B
2007 $ 19.82 $ 0.06 $ 3.28 $ 3.34 $ (0.29) $ (0.55) $ (0.84)
2006 18.48 0.36 1.53 1.89 (0.36) (0.19) (0.55)
2005 16.62 0.04 2.46 2.50 (0.22) (0.42) (0.64)
2004(d) 16.40 0.07 0.42 0.49 (0.20) (0.07) (0.27)
CLASS C
2007 $ 19.81 $ 0.05 $ 3.29 $ 3.34 $ (0.29) $ (0.55) $ (0.84)
2006 18.47 0.24 1.65 1.89 (0.36) (0.19) (0.55)
2005 16.64 0.07 2.43 2.50 (0.25) (0.42) (0.67)
2004(d) 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
Period Value, End of Net Portfolio
Ended Redemption End of Total Period Investment Operating Turnover
September 30 Fees(a) Period Return+ (in 000's) Income Expenses Rate
- ------------- ---------- --------- ------- ---------- ---------- --------- ---------
CLASS AAA
2007 $ 0.00(b) $ 22.98 18.19% $1,191,351 1.01% 1.43% 12%
2006 0.00(b) 20.23 11.25 794,375 1.98 1.46(c) 14
2005 0.00(b) 18.72 16.09 580,081 1.33 1.46 11
2004 -- 16.73 17.13 355,321 1.42 1.49 12
2003 -- 14.60 24.59 261,777 2.09 1.49 27
CLASS A
2007 $ 0.00(b) $ 22.91 18.20% $ 15,313 1.00% 1.43% 12%
2006 0.00(b) 20.17 11.29 8,379 2.02 1.46(c) 14
2005 0.00(b) 18.66 15.99 3,644 1.08 1.50 11
2004(d) -- 16.72 3.62 124 1.33(e) 1.49(e) 12
CLASS B
2007 $ 0.00(b) $ 22.32 17.28% $ 344 0.29% 2.18% 12%
2006 0.00(b) 19.82 10.46 352 1.91 2.21(c) 14
2005 0.00(b) 18.48 15.28 32 0.20 2.22 11
2004(d) -- 16.62 3.00 1 0.56(e) 2.24(e) 12
CLASS C
2007 $ 0.00(b) $ 22.31 17.29% $ 17,279 0.24% 2.18% 12%
2006 0.00(b) 19.81 10.46 8,044 1.26 2.21(c) 14
2005 0.00(b) 18.47 15.24 3,374 0.37 2.24 11
2004(d) -- 16.64 3.13 79 0.62(e) 2.24(e) 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 distributions and does not reflect
applicable sales charges. Total return for a period of less than one year
is not annualized.
(a) Per share amounts have been calculated using the average shares
outstanding method.
(b) Amount represents less than $0.005 per share.
(c) The ratios do not include a reduction of expenses for custodian fee
credits on cash balances maintained with the custodian. Including such
custodian fee credits, the expense ratios for the fiscal year ended
September 30, 2006 would have been 1.45%, 1.45%, 2.20%, and 2.20% for
Class AAA, Class A, Class B, and Class C, respectively. Custodian fee
credits for the fiscal year ended September 30, 2007 were minimal.
(d) From the commencement of offering Class A, Class B, and Class C Shares on
December 31, 2003.
(e) Annualized.
See accompanying notes to financial statements.
20
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, 2007, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of September 30, 2007, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Gabelli Equity Income Fund, a series of Gabelli Equity Series Funds, Inc., at
September 30, 2007, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and its financial highlights for each of the periods indicated therein, in
conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
November 19, 2007
21
THE GABELLI EQUITY INCOME FUND
ADDITIONAL FUND INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
The business and affairs of the Fund are managed under the direction of the
Corporation's Board of Directors. Information pertaining to the Directors and
officers of the Corporation is set forth below. The Corporation's Statement of
Additional Information includes additional information about the Corporation's
Directors and is available, without charge, upon request, by calling 800-GABELLI
(800-422-3554) or by writing to The Gabelli Equity Income Fund at One Corporate
Center, Rye, NY 10580-1422.
NAME, POSITION(S) TERM OF OFFICE NUMBER OF FUNDS
ADDRESS 1 AND LENGTH OF IN FUND COMPLEX PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
AND AGE TIME SERVED 2 OVERSEEN BY DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 3
- ------------------- -------------- -------------------- ----------------------- ------------------
INTERESTED DIRECTORS 4:
- -----------------------
MARIO J. GABELLI Since 1991 26 Chairman and Chief Executive Officer Director of Morgan Group
Director and of GAMCO Investors, Inc. and Chief Holdings, Inc. (holding
Chief Investment Investment Officer-Value Portfolios company); Chairman of the
Officer of Gabelli Funds, LLC and GAMCO Asset Board of LICT Corp.
Age: 65 Management Inc.; Director/Trustee or (multimedia and communication
Chief Investment Officer of other services company)
registered investment companies in
the Gabelli/GAMCO Funds complex;
Chairman and Chief Executive Officer
of GGCP, Inc.
JOHN D. GABELLI Since 1991 10 Senior Vice President of Gabelli & Director of GAMCO Investors,
Director Company, Inc. Inc. (asset management)
Age: 63
INDEPENDENT DIRECTORS 5:
- -----------------------
ANTHONY J. COLAVITA Since 1991 35 Partner in the law firm of Anthony J. --
Director Colavita, P.C.
Age: 71
VINCENT D. ENRIGHT Since 1991 15 Former Senior Vice President and --
Director Chief Financial Officer of KeySpan
Age: 63 Corporation (public utility)
ROBERT J. MORRISSEY Since 1991 6 Partner in the law firm of Morrissey, --
Director Hawkins & Lynch
Age: 68
ANTHONY R. PUSTORINO Since 1991 14 Certified Public Accountant; Director of The LGL Group,
Director Professor Emeritus, Pace University Inc. (diversified
Age: 82 manufacturing)
ANTHONIE C. VAN EKRIS Since 1991 19 Chairman of BALMAC International, --
Director Inc. (commodities and futures trading)
Age: 73
SALVATORE J. ZIZZA Since 2001 26 Chairman of Zizza & Company, Ltd. Director of Hollis-Eden
Director (consulting) Pharmaceuticals
Age: 61 (biotechnology); Director of
Earl Scheib, Inc. (automotive
services)
22
THE GABELLI EQUITY INCOME FUND
ADDITIONAL FUND INFORMATION (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
NAME, POSITION(S) TERM OF OFFICE
ADDRESS 1 AND LENGTH OF PRINCIPAL OCCUPATION(S)
AND AGE TIME SERVED 2 DURING PAST FIVE YEARS
- ------------------------ -------------- -----------------------
OFFICERS:
- ---------
BRUCE N. ALPERT Since 1991 Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC since
President 1988 and an officer of all of the registered investment companies in the
Age: 55 Gabelli/GAMCO Funds complex; Director and President of Gabelli Advisers, Inc.
since 1998
JAMES E. MCKEE Since 1995 Vice President, General Counsel, and Secretary of GAMCO Investors, Inc. since
Secretary 1999 and GAMCO Asset Management Inc. since 1993; Secretary of all of the
Age: 44 registered investment companies in the Gabelli/GAMCO Funds complex
AGNES MULLADY Since 2006 Vice President of Gabelli Funds LLC since 2007; Officer of all of the registered
Treasurer investment companies in the Gabelli/GAMCO Funds complex; Senior Vice President
Age: 49 of U.S. Trust Company, N.A. and Treasurer and Chief Financial Officer of
Excelsior Funds from 2004 through 2005; Chief Financial Officer of AMIC
Distribution Partners from 2002 through 2004; Controller of Reserve Management
Corporation and Reserve Partners, Inc. and Treasurer of Reserve Funds from 2000
through 2002
PETER D. GOLDSTEIN Since 2004 Director of Regulatory Affairs at GAMCO Investors, Inc. since 2004; Chief
Chief Compliance Officer Compliance Officer of all of the registered investment companies in the
Age: 54 Gabelli/GAMCO Funds complex; Vice President of Goldman Sachs Asset Management
from 2000 through 2004
- ----------
1 Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise noted.
2 Each Director will hold office for an indefinite term until the earliest
of (i) the next meeting of shareholders, if any, called for the purpose of
considering the election or re-election of such Director and until the
election and qualification of his or her successor, if any, elected at
such meeting, or (ii) the date a Director resigns or retires, or a
Director is removed by the Board of Directors or shareholders, in
accordance with the Corporation's By-Laws and Articles of Incorporation.
Each officer will hold office for an indefinite term until the date he or
she resigns or retires or until his or her successor is elected and
qualified.
3 This column includes only directorships of companies required to report to
the SEC under the Securities Exchange Act of 1934 (i.e., public companies)
or other investment companies registered under the 1940 Act.
4 "Interested person" of the Fund as defined in the Investment Company Act
of 1940. Messrs. Gabelli are each considered an "interested person"
because of their affiliation with Gabelli Funds, LLC which acts as the
Fund's investment adviser. Mario J. Gabelli and John D. Gabelli are
brothers.
5 Directors who are not interested persons are considered "Independent"
Directors.
- --------------------------------------------------------------------------------
2007 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the fiscal year ended September 30, 2007, the Fund paid to shareholders
ordinary income dividends (comprised of net investment income and short-term
capital gains) totaling $0.44, $0.44, $0.44, and $0.44 per share for Class AAA,
Class A, Class B, and Class C, respectively, and long-term capital gains
totaling $16,715,576. The distributions of long-term capital gains have been
designated as Capital Gain Dividends by the Fund's Board of Directors. For the
fiscal year ended September 30, 2007, 91.52% of the ordinary income dividend
qualifies for the dividends received deduction available to corporations. The
Fund designates 100% of the ordinary income distribution as qualified dividend
income pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003.
The Fund designates 10.16% of the ordinary income distribution as qualified
interest income, and 100% of the ordinary income distribution as qualified
short-term gain, pursuant to the American Jobs Creation Act of 2004.
U.S. GOVERNMENT INCOME:
The percentage of the ordinary income dividend paid by the Fund during fiscal
year 2007 which was derived from U.S.Treasury securities was 3.53%. 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 2007. Due
to the diversity in state and local tax law, it is recommended that you consult
your personal tax adviser as to the applicability of the information provided to
your specific situation.
- --------------------------------------------------------------------------------
23
[GRAPHIC OMITTED]
THE
GABELLI
EQUITY
INCOME
FUND
ANNUAL REPORT
SEPTEMBER 30, 2007
Gabelli Equity Series Funds, Inc.
THE GABELLI EQUITY INCOME FUND
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
FAX: 914-921-5118
WEBSITE: WWW.GABELLI.COM
E-MAIL: INFO@GABELLI.COM
Net Asset Value per share available daily by calling
800-GABELLI after 6:00 P.M.
BOARD OF DIRECTORS
Mario J. Gabelli, CFA Robert J. Morrissey
CHAIRMAN AND CHIEF ATTORNEY-AT-LAW
EXECUTIVE OFFICER MORRISSEY, HAWKINS & LYNCH
GAMCO INVESTORS, INC.
Anthony R. Pustorino
Anthony J. Colavita CERTIFIED PUBLIC ACCOUNTANT,
ATTORNEY-AT-LAW PROFESSOR EMERITUS
ANTHONY J. COLAVITA, P.C. PACE UNIVERSITY
Vincent D. Enright Anthonie C. van Ekris
FORMER SENIOR VICE PRESIDENT CHAIRMAN
AND CHIEF FINANCIAL OFFICER BALMAC INTERNATIONAL, INC.
KEYSPAN CORP.
Salvatore J. Zizza
John D. Gabelli CHAIRMAN
SENIOR VICE PRESIDENT ZIZZA & CO., LTD.
GABELLI & COMPANY, INC.
OFFICERS
Bruce N. Alpert James E. McKee
PRESIDENT SECRETARY
Agnes Mullady Peter D. Goldstein
TREASURER CHIEF COMPLIANCE OFFICER
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.
- --------------------------------------------------------------------------------
GAB444Q307SR
THE GABELLI WOODLAND SMALL CAP VALUE FUND
ANNUAL REPORT (a)
SEPTEMBER 30, 2007
TO OUR SHAREHOLDERS,
The Gabelli Woodland Small Cap Value Fund (the "Fund") outperformed its
small cap benchmark, the Russell 2000 Index, as well as other broad based market
indices for the twelve month period ended September 30, 2007. During this
period, the Fund rose by 20.71% versus gains of 12.34% for the Russell 2000
Index, 16.78% for the Standard & Poor's ("S&P") 500 Index and 15.68% for the
Value Line Composite Index.
COMPARATIVE RESULTS
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH SEPTEMBER 30, 2007 (a)(b)
Since
Six Inception
Quarter Months 1 Year 3 Year (12/31/02)
-------- ------ ------ ------ ----------
GABELLI WOODLAND SMALL CAP VALUE FUND CLASS AAA ... 0.56% 6.50% 20.71% 13.23% 13.99%
Russell 2000 Index ................................ (3.09) 1.19 12.34 13.36 18.33
S&P 500 Index ..................................... 2.33 8.75 16.78 13.24 14.42
Value Line Composite Index ........................ 2.72 2.84 15.68 14.49 19.04
Class A ........................................... 0.55 6.46 20.94 13.32 14.05
(5.23)(c) 0.34(c) 13.98(c) 11.11(c) 12.63(c)
Class B ........................................... 0.40 5.97 19.73 12.35 13.78
(4.60)(d) 0.97(d) 14.73(d) 11.55(d) 13.39(d)
Class C ........................................... 0.41 6.11 19.84 12.43 13.24
(0.59)(e) 5.11(e) 18.84(e) 12.43 13.24
THE GROSS EXPENSE RATIO FOR CLASS AAA, A, B, AND C SHARES IS 2.31%, 2.31%,
3.06%, AND 3.06%, RESPECTIVELY, IN THE CURRENT PROSPECTUS. THE NET EXPENSE RATIO
AFTER CONTRACTUAL REIMBURSEMENTS BY THE ADVISER IN PLACE THROUGH SEPTEMBER 30,
2008 IS 2.00%, 2.00%, 2.75%, AND 2.75%, RESPECTIVELY. CLASS AAA SHARES DO NOT
HAVE A SALES CHARGE. THE MAXIMUM SALES CHARGE FOR CLASS A, B, AND C SHARES IS
5.75%, 5.00%, AND 1.00%, RESPECTIVELY.
(a) THE FUND'S FISCAL YEAR ENDS SEPTEMBER 30.
(b) RETURNS REPRESENT PAST PERFORMANCE AND DO NOT GUARANTEE FUTURE RESULTS.
TOTAL RETURNS AND AVERAGE ANNUAL RETURNS REFLECT CHANGES IN SHARE PRICE
AND REINVESTMENT OF DISTRIBUTIONS AND ARE NET OF EXPENSES. INVESTMENT
RETURNS AND THE PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN
SHARES ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. PERFORMANCE RETURNS FOR PERIODS LESS THAN ONE YEAR ARE NOT
ANNUALIZED. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE
PERFORMANCE DATA PRESENTED. VISIT WWW.GABELLI.COM FOR PERFORMANCE
INFORMATION AS OF THE MOST RECENT MONTH END. INVESTORS SHOULD CAREFULLY
CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES, AND EXPENSES OF THE
FUND BEFORE INVESTING. THE PROSPECTUS CONTAINS MORE INFORMATION ABOUT THIS
AND OTHER MATTERS AND SHOULD BE READ CAREFULLY BEFORE INVESTING.
INVESTING IN SMALL CAPITALIZATION SECURITIES INVOLVES SPECIAL CHALLENGES
BECAUSE THESE SECURITIES MAY TRADE LESS FREQUENTLY AND EXPERIENCE MORE
ABRUPT PRICE MOVEMENTS THAN LARGE CAPITALIZATION SECURITIES. THE RUSSELL
2000 INDEX OF SMALL U.S. COMPANIES, THE S&P 500 INDEX OF THE LARGEST U.S.
COMPANIES, AND THE VALUE LINE COMPOSITE INDEX (COMPRISED OF EQUALLY
WEIGHTED POSITIONS IN EVERY STOCK COVERED IN THE VALUE LINE INVESTMENT
SURVEY) ARE UNMANAGED INDICATORS OF STOCK MARKET PERFORMANCE. DIVIDENDS
ARE CONSIDERED REINVESTED. YOU CANNOT INVEST DIRECTLY IN AN INDEX.
(c) INCLUDES THE EFFECT OF THE MAXIMUM 5.75% SALES CHARGE AT THE BEGINNING OF
THE PERIOD.
(d) PERFORMANCE RESULTS INCLUDE THE DEFERRED SALES CHARGES FOR THE CLASS B
SHARES UPON REDEMPTION AT THE END OF THE QUARTER, SIX MONTHS, ONE YEAR,
THREE YEAR, AND SINCE INCEPTION PERIODS OF 5%, 5%, 5%, 3%, AND 2%,
RESPECTIVELY, OF THE FUND'S NET ASSET VALUE ("NAV") PER SHARE AT THE TIME
OF PURCHASE OR SALE, WHICHEVER IS LOWER. CLASS B SHARES ARE NOT AVAILABLE
FOR NEW PURCHASES.
(e) PERFORMANCE RESULTS INCLUDE THE DEFERRED SALES CHARGES FOR THE CLASS C
SHARES UPON REDEMPTION AT THE END OF THE QUARTER, SIX MONTHS, AND ONE YEAR
PERIODS OF 1% OF THE FUND'S NAV PER SHARE AT THE TIME OF PURCHASE OR SALE,
WHICHEVER IS LOWER.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
We have separated the portfolio manager's commentary from the financial
statements and investment portfolio due to corporate governance regulations
stipulated by the Sarbanes-Oxley Act of 2002. We have done this to ensure that
the content of the portfolio manager's commentary is unrestricted. The financial
statements and investment portfolio are mailed separately from the commentary.
Both the commentary and the financial statements, including the portfolio of
investments, will be available on our website at www.gabelli.com/funds.
- --------------------------------------------------------------------------------
PERFORMANCE DISCUSSION
The Gabelli Woodland Small Cap Value Fund (the "Fund") increased 20.71%
for the fiscal year ended September 30, 2007 versus the Russell 2000, which
increased 12.34%. Large cap stocks outperformed small cap stocks during the same
time period, with the S&P 500 increasing 16.78%.
During the past year we had several investments add to our overall
performance. The three biggest contributors were EDO Corporation (2.2% of net
assets as of September 30, 2007), Tennant (4.1%), and PepsiAmericas (1.6%). EDO
rose 145% over the last twelve months. EDO is a leading supplier of advanced
electronics, military weapons systems, and precision materials to defense prime
contractors and the government. Over the last year, EDO was selected as the sole
source provider on CREW 2.1. The contract has a potential value in excess of $1
billion over the next several years. In September, ITT Corporation, recognizing
the value inherent in EDO's patent portfolio as well as their superior
Improvised Explosive Device (IED) technology, announced a definitive agreement
to acquire EDO for $56 per share in cash. Tennant, up 100% during the year, is a
leader in floor maintenance and outdoor cleaning equipment. Over the last year
the company has laid out a plan to expand operating margins, improve new product
development, expand market coverage, and grow their international presence. We
expect the free cash flow (FCF) and return on invested capital (ROIC) will
accelerate as the company's cost reduction efforts, global expansion, and new
products drive expansion in operating margins. PepsiAmericas rose 52% over the
last twelve months. PepsiAmericas manufactures, distributes, and markets
beverage products in the United States, Central Europe, and the Caribbean, and
is the second largest Pepsi-Cola bottler. Under CEO Robert Pohlad, the
management team has focused on expanding operating margins, FCF, and driving
ROIC. Over the last year, the company has delivered strong results in Central
Europe as the strong Euro and cost initiatives drove revenue growth and
operating margin expansion.
One of our weaker performers during the year, which we sold, was BUCA,
Inc. which was down 65%. BUCA owns and operates 92 full service family style
Italian restaurants under the name Buca di Beppo. In late 2004 BUCA brought in a
new management team to engineer the turnaround of the business. CEO Wally Doolin
and his management team have been focused on divesting of non-core restaurant
concepts, closing unprofitable locations, and refocusing the company on growth,
while at the same time working on improving average unit volume and returning
Earnings Before Interest, Tax, Depreciation and Appreciation margins to double
digit levels. The company has been faced with a slowing economy and the
challenge of changing the image from family style dinner only concept to a lunch
and dinner menu.
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
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
The Gabelli Woodland
Small Cap Value Fund
(Class AAA) Russell 2000 Index
12/31/2002 $10,000 $10,000
9/30/2003 $10,580 $12,858
9/30/2004 $12,825 $15,271
9/30/2005 $15,476 $18,022
9/30/2006 $15,422 $19,800
9/30/2007 $18,616 $22,265
- ------------------------------------------------------
Average Annual Total Return*
- ------------------------------------------------------
1 Year 3 Year Life of Fund
- ------------------------------------------------------
Class AAA 20.71% 13.23% 13.99%
Russell 2000 12.34 13.36 18.33
- ------------------------------------------------------
* 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 WOODLAND SMALL CAP VALUE FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
For the Six Month Period from April 1, 2007 through September 30, 2007
EXPENSE TABLE
- --------------------------------------------------------------------------------
We believe it is important for you to understand the impact of fees and expenses
regarding your investment. All mutual funds have operating expenses. As a
shareholder of a fund, you incur ongoing costs, which include costs for
portfolio management, administrative services, and shareholder reports (like
this one), among others. Operating expenses, which are deducted from a fund's
gross income, directly reduce the investment return of a fund. When a fund's
expenses are expressed as a percentage of its average net assets, this figure is
known as the expense ratio. The following examples are intended to help you
understand the ongoing costs (in dollars) of investing in your Fund and to
compare these costs with those of other mutual funds. The examples are based on
an investment of $1,000 made at the beginning of the period shown and held for
the entire period.
The Expense Table below illustrates your Fund's costs in two ways:
ACTUAL FUND RETURN: This section provides information about actual account
values and actual expenses. You may use this section to help you to estimate the
actual expenses that you paid over the period after any fee waivers and expense
reimbursements. The "Ending Account Value" shown is derived from the Fund's
ACTUAL return during the past six months, and the "Expenses Paid During Period"
shows the dollar amount that would have been paid by an investor who started
with $1,000 in the Fund. You may use this information, together with the amount
you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your Fund under the heading "Expenses Paid During Period" to estimate
the expenses you paid during this period.
HYPOTHETICAL 5% RETURN: This section provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio. It assumes a hypothetical annualized return of 5% before expenses during
the period shown. In this case - because the hypothetical return used is NOT the
Fund's actual return - the results do not apply to your investment and you
cannot use the hypothetical account value and expense to estimate the actual
ending account balance or expenses you paid for the period. This example is
useful in making comparisons of the ongoing costs of investing in the Fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as sales
charges (loads), redemption fees, or exchange fees, if any, which are described
in the Prospectus. If these costs were applied to your account, your costs would
be higher. Therefore, the 5% hypothetical return is useful in comparing ongoing
costs only, and will not help you determine the relative total costs of owning
different funds. The "Annualized Expense Ratio" represents the actual expenses
for the last six months and may be different from the expense ratio in the
Financial Highlights which is for the year ended September 30, 2007.
Beginning Ending Annualized Expenses
Account Value Account Value Expense Paid During
04/01/07 09/30/07 Ratio Period*
- --------------------------------------------------------------------------------
THE GABELLI WOODLAND SMALL CAP VALUE FUND
- --------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class AAA $1,000.00 $1,065.00 2.01% $10.35
Class A $1,000.00 $1,064.60 2.01% $10.35
Class B $1,000.00 $1,059.70 2.76% $14.17
Class C $1,000.00 $1,061.10 2.76% $14.18
HYPOTHETICAL 5% RETURN
Class AAA $1,000.00 $1,014.91 2.01% $10.10
Class A $1,000.00 $1,014.91 2.01% $10.10
Class B $1,000.00 $1,011.17 2.76% $13.84
Class C $1,000.00 $1,011.17 2.76% $13.84
* Expenses are equal to the Fund's annualized expense ratio for the last six
months multiplied by the average account value over the period, multiplied
by the number of days in the most recent fiscal half-year, then divided by
365.
3
SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED)
The following table presents portfolio holdings as a percent of total net assets
as of September 30, 2007:
THE GABELLI WOODLAND SMALL CAP VALUE FUND
Health Care .......................................................... 10.7%
Diversified Industrial ............................................... 8.7%
Equipment and Supplies ............................................... 8.7%
Business Services .................................................... 8.5%
Computer Software and Services ....................................... 8.4%
Consumer Products .................................................... 8.2%
Specialty Chemicals .................................................. 6.3%
Financial Services ................................................... 5.9%
Food and Beverage .................................................... 5.6%
U.S. Government Obligations .......................................... 4.6%
Hotels and Gaming .................................................... 4.4%
Energy and Utilities ................................................. 4.2%
Entertainment ........................................................ 4.2%
Communications Equipment ............................................. 2.9%
Automotive: Parts and Accessories .................................... 2.6%
Aerospace ............................................................ 2.4%
Aviation: Parts and Services ......................................... 2.2%
Telecommunications ................................................... 1.0%
Publishing ........................................................... 0.9%
Other Assets and Liabilities (Net) ................................... (0.4)%
-----
100.0%
=====
THE FUND FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION (THE "SEC") FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL
YEAR ON FORM N-Q, THE LAST OF WHICH WAS FILED FOR THE QUARTER ENDED JUNE 30,
2007. SHAREHOLDERS MAY OBTAIN THIS INFORMATION AT WWW.GABELLI.COM OR BY CALLING
THE FUND AT 800-GABELLI (800-422-3554). THE FUND'S FORM N-Q IS AVAILABLE ON THE
SEC'S WEBSITE AT WWW.SEC.GOV AND MAY ALSO BE REVIEWED AND COPIED AT THE SEC'S
PUBLIC REFERENCE ROOM IN WASHINGTON, DC. INFORMATION ON THE OPERATION OF THE
PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330.
PROXY VOTING
The Fund files Form N-PX with its complete proxy voting record for the 12 months
ended June 30th, no later than August 31st of each year. A description of the
Fund's proxy voting policies, procedures, and how the Fund voted proxies
relating to portfolio securities is available without charge, upon request, by
(i) calling 800-GABELLI (800-422-3554); (ii) writing to The Gabelli Funds at One
Corporate Center, Rye, NY 10580-1422; or (iii) visiting the SEC's website at
www.sec.gov.
4
THE GABELLI WOODLAND SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS -- SEPTEMBER 30, 2007
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
- ------------ ------------ -------------
COMMON STOCKS -- 95.8%
AEROSPACE -- 2.4%
2,105 Alliant Techsystems Inc.+ ....... $ 133,748 $ 230,077
------------ -------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 2.6%
4,490 Midas Inc.+ ..................... 88,000 84,726
7,610 Noble International Ltd. ........ 153,912 162,017
------------ -------------
241,912 246,743
------------ -------------
AVIATION: PARTS AND SERVICES -- 2.2%
3,625 EDO Corp. ....................... 95,087 203,036
------------ -------------
BUSINESS SERVICES -- 8.5%
41,700 AMICAS Inc.+ .................... 189,424 122,598
6,090 Deluxe Corp. .................... 149,014 224,356
3,680 Imation Corp. ................... 155,361 90,270
4,980 Intermec Inc.+ .................. 121,430 130,078
4,220 The Brink's Co. ................. 127,650 235,813
------------ -------------
742,879 803,115
------------ -------------
COMMUNICATIONS EQUIPMENT -- 2.9%
15,320 Andrew Corp.+ ................... 168,324 212,182
5,430 Radyne Corp.+ ................... 48,897 57,232
------------ -------------
217,221 269,414
------------ -------------
COMPUTER SOFTWARE AND SERVICES -- 8.4%
12,980 eResearch Technology Inc.+ ...... 95,018 147,842
15,620 Furmanite Corp.+ ................ 93,402 142,142
29,710 Lawson Software Inc.+ ........... 224,862 297,397
20,230 Tier Technologies Inc., Cl. B+ .. 198,351 206,346
------------ -------------
611,633 793,727
------------ -------------
CONSUMER PRODUCTS -- 8.2%
7,770 Alberto-Culver Co. .............. 185,737 192,618
11,310 Callaway Golf Co. ............... 178,025 181,073
4,435 Church & Dwight Co. Inc. ........ 96,869 208,622
6,790 Kimball International Inc., Cl. B 89,844 77,270
13,530 Sally Beauty Holdings Inc.+ ..... 111,710 114,329
------------ -------------
662,185 773,912
------------ -------------
DIVERSIFIED INDUSTRIAL -- 8.7%
4,230 Columbus McKinnon Corp.+ ........ 100,116 105,285
7,750 Hawk Corp., Cl. A+ .............. 105,880 107,493
2,590 L.B. Foster Co., Cl. A+ ......... 62,402 112,561
32,270 Magnetek Inc.+ .................. 160,211 154,896
2,020 Pentair Inc. .................... 74,321 67,024
3,500 Texas Industries Inc. ........... 156,835 274,750
------------ -------------
659,765 822,009
------------ -------------
ENERGY AND UTILITIES -- 4.2%
2,879 ALLETE Inc. ..................... 82,984 128,864
4,890 Comstock Resources Inc.+ ........ 137,083 150,808
5,740 Mariner Energy Inc.+ ............ 106,895 118,875
------------ -------------
326,962 398,547
------------ -------------
ENTERTAINMENT -- 4.2%
10,040 Discovery Holding Co., Cl. A+ ... 153,429 289,654
3,430 Steinway Musical
Instruments Inc. ................ 117,419 101,597
------------ -------------
270,848 391,251
------------ -------------
MARKET
SHARES COST VALUE
- ------------ ------------ -------------
EQUIPMENT AND SUPPLIES --8.7%
17,220 C&D Technologies Inc.+ .......... $ 95,800 $ 85,756
42,800 FSI International Inc.+ ......... 245,249 99,724
7,880 Tennant Co. ..................... 158,379 383,756
4,150 The Toro Co. .................... 110,608 244,144
------------ -------------
610,036 813,380
------------ -------------
FINANCIAL SERVICES -- 5.9%
6,690 Franklin Bank Corp.+ ............ 115,638 61,548
4,510 Hilb Rogal & Hobbs Co. .......... 193,409 195,418
2,830 HMN Financial Inc. .............. 98,886 83,853
14,700 NewAlliance Bancshares Inc. ..... 218,159 215,796
------------ -------------
626,092 556,615
------------ -------------
FOOD AND BEVERAGE -- 5.6%
14,320 Del Monte Foods Co. ............. 171,228 150,360
4,620 PepsiAmericas Inc. .............. 72,529 149,873
13,580 Triarc Cos. Inc., Cl. A ......... 159,346 166,898
4,880 Triarc Cos. Inc., Cl. B ......... 56,528 61,049
------------ -------------
459,631 528,180
------------ -------------
HEALTH CARE -- 10.7%
5,210 K-V Pharmaceutical Co., Cl. A+ .. 147,864 149,006
15,542 Lifecore Biomedical Inc.+ ....... 199,695 200,492
4,330 PolyMedica Corp. ................ 151,115 227,412
5,736 SurModics Inc.+ ................. 190,283 281,121
3,480 West Pharmaceutical
Services Inc. ................... 143,094 144,977
------------ -------------
832,051 1,003,008
------------ -------------
HOTELS AND GAMING -- 4.4%
5,370 Gaylord Entertainment Co.+ ...... 144,011 285,791
6,460 Marcus Corp. .................... 152,320 124,032
------------ -------------
296,331 409,823
------------ -------------
PUBLISHING -- 0.9%
9,760 Voyager Learning Co.+ ........... 130,162 80,325
------------ -------------
SPECIALTY CHEMICALS -- 6.3%
5,100 Arch Chemicals Inc. ............. 148,970 239,088
4,460 FMC Corp. ....................... 162,098 232,009
4,170 H.B. Fuller Co. ................. 115,812 123,766
------------ -------------
426,880 594,863
------------ -------------
TELECOMMUNICATIONS -- 1.0%
9,290 HickoryTech Corp. ............... 89,600 90,020
------------ -------------
TOTAL COMMON STOCKS ............. 7,433,023 9,008,045
------------ -------------
PRINCIPAL
AMOUNT
- ------------
U.S. GOVERNMENT OBLIGATIONS -- 4.6%
$ 429,000 U.S. Treasury Bills,
3.684% to 3.700%++,
10/11/07 to 12/27/07 ......... 426,075 425,983
------------ -------------
TOTAL INVESTMENTS -- 100.4% ..... $ 7,859,098 9,434,028
============
OTHER ASSETS AND LIABILITIES (NET) -- (0.4)%... (33,937)
-------------
NET ASSETS -- 100.0% ............ $ 9,400,091
=============
- ----------
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
See accompanying notes to financial statements.
5
THE GABELLI WOODLAND SMALL CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2007
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (cost $7,859,098) ................... $ 9,434,028
Cash ...................................................... 3,046
Receivable for Fund shares sold ........................... 599
Dividends receivable ...................................... 2,155
Prepaid expense ........................................... 17,395
------------
TOTAL ASSETS .............................................. 9,457,223
------------
LIABILITIES:
Payable for investment advisory fees ...................... 8,730
Payable for distribution fees ............................. 2,065
Payable for legal and audit fees .......................... 31,724
Payable for shareholder communications expenses ........... 10,546
Other accrued expenses .................................... 4,067
------------
TOTAL LIABILITIES ......................................... 57,132
------------
NET ASSETS applicable to 746,072 shares outstanding ....... $ 9,400,091
============
NET ASSETS CONSIST OF:
Paid-in capital, each class at $0.001 par value ........... $ 6,566,325
Accumulated net realized gain on investments .............. 1,258,836
Net unrealized appreciation on investments ................ 1,574,930
------------
NET ASSETS ................................................ $ 9,400,091
============
SHARES OF CAPITAL STOCK:
CLASS AAA:
Net Asset Value, offering and redemption price
per share ($9,040,055 / 716,696 shares
outstanding; 100,000,000 shares authorized) ............ $ 12.61
============
CLASS A:
Net Asset Value and redemption price per share
($64,614 / 5,091 shares outstanding;
50,000,000 shares authorized) .......................... $ 12.69
============
Maximum offering price per share (NAV / .9425,
based on maximum sales charge of 5.75%
of the offering price) ................................. $ 13.46
============
CLASS B:
Net Asset Value and offering price per share
($184 / 14.60 shares outstanding;
50,000,000 shares authorized) .......................... $ 12.60(a)
============
CLASS C:
Net Asset Value and offering price per share
($295,238 / 24,270 shares outstanding;
50,000,000 shares authorized) .......................... $ 12.16(a)
============
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2007
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends ................................................. $ 212,340
Interest .................................................. 20,354
------------
TOTAL INVESTMENT INCOME ................................... 232,694
------------
EXPENSES:
Investment advisory fees .................................. 97,004
Distribution fees - Class AAA ............................. 23,116
Distribution fees - Class A ............................... 176
Distribution fees - Class B ............................... 2
Distribution fees - Class C ............................... 3,836
Legal and audit fees ...................................... 32,975
Shareholder communications expenses ....................... 27,012
Registration expenses ..................................... 14,999
Shareholder services fees ................................. 13,666
Custodian fees ............................................ 7,672
Interest expense .......................................... 1,293
Directors' fees ........................................... 347
Miscellaneous expenses .................................... 6,854
------------
TOTAL EXPENSES BEFORE FEES WAIVED AND
EXPENSES REIMBURSED BY ADVISER AND
CUSTODIAN FEE CREDITS ................................. 228,952
------------
LESS:
Fees waived and expenses reimbursed
by Adviser .......................................... (30,587)
Custodian fee credits ................................. (185)
------------
NET EXPENSES .............................................. 198,180
------------
NET INVESTMENT INCOME ..................................... 34,514
------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments .......................... 1,560,963
Net change in unrealized appreciation/
depreciation on investments ........................... 267,092
------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS ........................................ 1,828,055
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ....................................... $ 1,862,569
============
- ----------
(a) Redemption price varies based on the length of time held.
See accompanying notes to financial statements.
6
THE GABELLI WOODLAND SMALL CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2007 SEPTEMBER 30, 2006
------------------ ------------------
OPERATIONS:
Net investment income (loss) ............................................ $ 34,514 $ (93,708)
Net realized gain on investments ........................................ 1,560,963 2,164,088
Net change in unrealized appreciation/depreciation on investments ....... 267,092 (2,049,195)
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................... 1,862,569 21,185
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class AAA ............................................................. (39,316) --
Class A ............................................................... (73) --
------------- -------------
(39,389) --
------------- -------------
Net realized gain on investments
Class AAA ............................................................. (2,044,419) (973,344)
Class A ............................................................... (10,469) (9,260)
Class B ............................................................... (37) (13)
Class C ............................................................... (99,535) (24,564)
------------- -------------
(2,154,460) (1,007,181)
------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ..................................... (2,193,849) (1,007,181)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Class AAA ............................................................. 214,548 (1,759,221)
Class A ............................................................... (40,999) 2,012
Class B ............................................................... 36 13
Class C ............................................................... (103,753) 268,884
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ... 69,832 (1,488,312)
------------- -------------
REDEMPTION FEES ......................................................... 9 1
------------- -------------
NET DECREASE IN NET ASSETS .............................................. (261,439) (2,474,307)
NET ASSETS:
Beginning of period ..................................................... 9,661,530 12,135,837
------------- -------------
End of period (including undistributed net investment income
of $0 and $0, respectively) ........................................... $ 9,400,091 $ 9,661,530
============= =============
See accompanying notes to financial statements.
7
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. The Fund's primary objective is capital appreciation. The Fund's
Adviser currently characterizes small capitalization companies for the Fund as
those with a total market value at the time of investment not greater than that
of the largest company in the Russell 2000 Index or $3.0 billion, whichever is
greater. The Fund commenced investment operations on December 31, 2002.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with United States ("U.S.") generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates. The following is a summary of significant accounting
policies followed by the Fund in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange or traded in the U.S. over-the-counter market for
which market quotations are readily available are valued at the last quoted sale
price or a market's official closing price as of the close of business on the
day the securities are being valued. If there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day. If no bid or asked prices are quoted on such
day, the security is valued at the most recently available price or, if the
Board of Directors (the "Board") so determines, by such other method as the
Board shall determine in good faith to reflect its fair market value. Portfolio
securities traded on more than one national securities exchange or market are
valued according to the broadest and most representative market, as determined
by Gabelli Funds, LLC (the "Adviser").
Portfolio securities primarily traded on a foreign market are generally valued
at the preceding closing values of such securities on the relevant market, but
may be fair valued pursuant to procedures established by the Board if market
conditions change significantly after the close of the foreign market but prior
to the close of business on the day the securities are being valued. Debt
instruments with remaining maturities of 60 days or less that are not credit
impaired are valued at amortized cost, unless the Board determines such amount
does not reflect the securities' fair value, in which case these securities will
be fair valued as determined by the Board. Debt instruments having a maturity
greater than 60 days for which market quotations are readily available are
valued at the average of the latest bid and asked prices. If there were no asked
prices quoted on such day, the security is valued using the closing bid price.
Futures contracts are valued at the closing settlement price of the exchange or
board of trade on which the applicable contract is traded.
Securities and assets for which market quotations are not readily available are
fair valued as determined by the Board. Fair valuation methodologies and
procedures may include, but are not limited to: analysis and review of available
financial and non-financial information about the company; comparisons to the
valuation and changes in valuation of similar securities, including a comparison
of foreign securities to the equivalent U.S. dollar value American Depository
Receipts 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.
8
THE GABELLI WOODLAND SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
In September 2006, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") 157, Fair Value
Measurements, which clarifies the definition of fair value and requires
companies to expand their disclosure about the use of fair value to measure
assets and liabilities in interim and annual periods subsequent to initial
recognition. Adoption of SFAS 157 requires the use of the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. At this time,
management is in the process of reviewing the requirements of SFAS 157 against
its current valuation policies to determine future applicability.
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, 2007, there were no open repurchase agreements.
FOREIGN SECURITIES. The Fund may directly purchase securities of foreign
issuers. Investing in securities of foreign issuers involves special risks not
typically associated with investing in securities of U.S. issuers. The risks
include possible revaluation of currencies, the ability to repatriate funds,
less complete financial information about companies, and possible future adverse
political and economic developments. Moreover, securities of many foreign
issuers and their markets may be less liquid and their prices more volatile than
those of securities of comparable U.S. issuers.
FOREIGN TAXES. The Fund may be subject to foreign taxes on income, gains on
investments, or currency repatriation, a portion of which may be recoverable.
The Fund will accrue such taxes and recoveries as applicable, based upon its
current interpretation of tax rules and regulations that exist in the markets in
which it invests.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for on the trade date with realized gain or loss on investments
determined by using the identified cost method. Interest income (including
amortization of premium and accretion of discount) is recorded on the accrual
basis. Premiums and discounts on debt securities are amortized using the
effective yield to maturity method. Dividend income is recorded on the
ex-dividend date except for certain dividends which are recorded as soon as the
Fund is informed of the dividend.
DETERMINATION OF NET ASSET VALUE AND CALCULATION OF EXPENSES. Certain
administrative expenses are common to, and allocated among, various affiliated
funds. Such allocations are made on the basis of each Fund's average net assets
or other criteria directly affecting the expenses as determined by the Adviser
pursuant to procedures established by the Board.
9
THE GABELLI WOODLAND SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
In calculating the NAV per share of each class, investment income, realized and
unrealized gains and losses, redemption fees, and expenses other than class
specific expenses are allocated daily to each class of shares based upon the
proportion of net assets of each class at the beginning of each day.
Distribution expenses are borne solely by the class incurring the expense.
CUSTODIAN FEE CREDITS AND INTEREST EXPENSE. When cash balances are maintained in
the custody account, the Fund receives credits which are used to offset
custodian fees. The gross expenses paid under the custody arrangement are
included in custodian fees in the Statement of Operations with the corresponding
expense offset, if any, shown as "custodian fee credits." When cash balances are
overdrawn, the Fund is charged an overdraft fee equal to 2.00% above the federal
funds rate on outstanding balances. This amount, if any, would be shown as
"interest expense" in the Statement of Operations.
DISTRIBUTIONS TO SHAREHOLDERS. Distributions to shareholders are recorded on the
ex-dividend date. Distributions to shareholders are based on income and capital
gains as determined in accordance with federal income tax regulations, which may
differ from income and capital gains as determined under U.S. generally accepted
accounting principles. These differences are primarily due to differing
treatments of income and gains on various investment securities held by the
Fund, timing differences, and differing characterizations of distributions made
by the Fund. These book/tax differences are either temporary or permanent in
nature. To the extent these differences are permanent, adjustments are made to
the appropriate capital accounts in the period when the differences arise. These
reclassifications have no impact on the NAV of the Fund. For the fiscal year
ended September 30, 2007, reclassifications were made to decrease accumulated
distributions in excess of net investment income by $4,875 and to decrease
accumulated net realized gain on investments by $4,875.
The tax character of distributions paid during the fiscal years ended September
30, 2007 and September 30, 2006 was as follows:
FISCAL YEAR ENDED FISCAL YEAR ENDED
SEPTEMBER 30, 2007 SEPTEMBER 30, 2006
------------------ ------------------
DISTRIBUTIONS PAID FROM:
Ordinary income
(inclusive of short-term capital gains) ... $ 320,582 --
Net long-term capital gains .................. 1,873,267 $ 1,007,181
----------- -----------
Total distributions paid ..................... $ 2,193,849 $ 1,007,181
=========== ===========
PROVISION FOR INCOME TAXES. The Fund intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). It is the policy of the Fund to comply with the
requirements of the Code applicable to regulated investment companies and to
distribute substantially all of its net investment company taxable income and
net capital gains. Therefore, no provision for federal income taxes is required.
As of September 30, 2007, the components of accumulated earnings (losses) on tax
basis were as follows:
Undistributed ordinary income .................. $ 27,341
Undistributed long-term capital gains .......... 1,241,609
Net unrealized appreciation .................... 1,564,816
------------
Total accumulated earnings ..................... $ 2,833,766
============
10
THE GABELLI WOODLAND SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
At September, 30, 2007, the difference between book and tax basis unrealized
appreciation is primarily due to deferral of losses on wash sales.
The following summarizes the tax cost of investments and the related unrealized
appreciation/(depreciation) at September 30, 2007:
GROSS GROSS
UNREALIZED UNREALIZED NET UNREALIZED
COST APPRECIATION DEPRECIATION APPRECIATION/
------------ ------------ ------------ --------------
Investments ....... $ 7,869,212 $2,077,269 $(512,453) $1,564,816
FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an
Interpretation of FASB Statement No. 109" (the "Interpretation") established a
minimum threshold for financial statement recognition of the benefit of
positions taken in filing tax returns (including whether the Fund is taxable in
a particular jurisdiction) and required certain expanded tax disclosures. The
Fund has adopted the Interpretation for all open tax years and it had no impact
on the amounts reported in the financial statements.
3. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS. The Fund has entered
into an investment advisory agreement (the "Advisory Agreement") with the
Adviser which provides that the Fund will pay the Adviser a fee, computed daily
and paid monthly, at the annual rate of 1.00% of the value of its average daily
net assets. In accordance with the Advisory Agreement, the Adviser provides a
continuous investment program for the Fund's portfolio, oversees the
administration of all aspects of the Fund's business and affairs, and pays the
compensation of all Officers and Directors of the Fund who are affiliated
persons of the Adviser.
The Adviser has contractually agreed to waive its fees and reimburse expenses of
the Fund to the extent necessary to maintain the annualized total operating
expenses (exclusive of brokerage fees, interest, taxes, and extraordinary
expenses) at 2.00%, 2.00%, 2.75%, and 2.75% of the value of the Fund's average
daily net assets for Class AAA, Class A, Class B, and Class C Shares,
respectively, through September 30, 2008. For the fiscal year ended September
30, 2007, the Adviser reimbursed the Fund in the amount of $30,587. 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 the applicable expense limitations. At
September 30, 2007, the cumulative amount which the Fund may repay the Adviser
is $63,093.
The Corporation pays each Director that is not considered to be an affiliated
person an annual retainer of $6,000 plus $1,000 for each Board meeting attended
and they are reimbursed for any out of pocket expenses incurred in attending
meetings. All Board committee members receive $500 per meeting attended.
Directors who are directors or employees of the Adviser or an affiliated company
receive no compensation or expense reimbursement from the Fund.
11
THE GABELLI WOODLAND SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
4. DISTRIBUTION PLAN. The Fund's Board has adopted a distribution plan (the
"Plan") for each class of shares 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, 2007, other than short-term securities and
U.S. Government obligations, aggregated $4,754,822 and $6,652,367, respectively.
6. TRANSACTIONS WITH AFFILIATES. During the fiscal year ended September 30,
2007, the Fund paid brokerage commissions on security trades of $1,410 to
Gabelli & Company. Additionally, Gabelli & Company informed the Fund that it
received $1,516 from investors representing commissions (sales charges and
underwriting fees) on sales and redemptions of Fund shares.
7. LINE OF CREDIT. Effective June 20, 2007, the Fund participated in an
unsecured line of credit of up to $75,000,000, and may borrow up to 10% of its
net assets from the custodian for temporary borrowing purposes. Prior to June
20, 2007, the line of credit was $25,000,000. Borrowings under this arrangement
bear interest at 0.75% above the federal funds rate on outstanding balances.
This amount, if any, is shown as "interest expense" in the Statement of
Operations. At September 30, 2007, there were no borrowings outstanding under
the line of credit.
The average daily amount of borrowings outstanding from the line of credit
within the fiscal year ended September 30, 2007 was $13,458 with a weighted
average interest rate of 6.03%. The maximum amount borrowed at any time during
the fiscal year ended September 30, 2007 was $395,000.
8. CAPITAL STOCK TRANSACTIONS. The Fund currently offers four classes of shares
- - Class AAA Shares, Class A Shares, Class B Shares, and Class C Shares. Class
AAA Shares are offered only to investors who acquire them directly from Gabelli
& Company, or through selected broker/dealers, or the transfer agent without a
sales charge. Class A Shares are subject to a maximum front-end sales charge of
5.75%. Class B Shares are subject to a contingent deferred sales charge ("CDSC")
upon redemption within six years of purchase and automatically convert to Class
A Shares approximately eight years after the original purchase. The applicable
CDSC is equal to a declining percentage of the lesser of the NAV per share at
the date of the original purchase or at the date of redemption, based on the
length of time held. Class C Shares are subject to a 1.00% CDSC for one year
after purchase. Class B Shares are available only through exchange of Class B
Shares of other funds distributed by Gabelli & Company. The Board has approved
Class I Shares which have not been offered publicly.
The Fund imposes a redemption fee of 2.00% on Class AAA Shares, Class A Shares,
Class B Shares, and Class C Shares that are redeemed or exchanged on or before
the seventh day after the date of a purchase. The redemption fee is deducted
from the proceeds otherwise payable to the redeeming shareholders and is
retained by the Fund. The redemption fees retained by the Fund during the fiscal
years ended September 30, 2007 and September 30, 2006 amounted to $9 and $1,
respectively.
12
THE GABELLI WOODLAND SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The redemption fee does not apply to redemptions of shares where (i) the shares
were purchased through automatic reinvestment of dividends or other
distributions, (ii) the redemption was initiated by the Fund, (iii) the shares
were purchased through programs that collect the redemption fee at the program
level and remit them to the Fund, or (iv) the shares were purchased through
programs that the Adviser determines to have appropriate anti-short-term trading
policies in place or as to which the Adviser has received assurances that
look-through redemption fee procedures or effective anti-short-term trading
policies and procedures are in place.
Transactions in shares of capital stock were as follows:
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2007 SEPTEMBER 30, 2006
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------- -------------- ---------- --------------
CLASS AAA CLASS AAA
--------------------------- ---------------------------
Shares sold ....................................................... 37,674 $ 483,712 75,819 $ 1,059,134
Shares issued upon reinvestment of distributions .................. 168,367 1,958,111 69,511 930,753
Shares redeemed ................................................... (173,852) (2,227,275) (269,630) (3,749,108)
---------- -------------- ---------- --------------
Net increase (decrease) ........................................ 32,189 $ 214,548 (124,300) $ (1,759,221)
========== ============== ========== ==============
CLASS A CLASS A
--------------------------- ---------------------------
Shares sold ....................................................... 1,239 $ 16,152 1,276 $ 17,788
Shares issued upon reinvestment of distributions .................. 902 10,542 691 9,260
Shares redeemed ................................................... (4,553) (67,693) (1,812) (25,036)
---------- -------------- ---------- --------------
Net increase (decrease) ........................................ (2,412) $ (40,999) 155 $ 2,012
========== ============== ========== ==============
CLASS B CLASS B
--------------------------- ---------------------------
Shares issued upon reinvestment of distributions .................. 3 $ 36 1 $ 13
---------- -------------- ---------- --------------
Net increase ................................................... 3 $ 36 1 $ 13
========== ============== ========== ==============
CLASS C CLASS C
--------------------------- ---------------------------
Shares sold ....................................................... 810 $ 9,500 18,046 $ 249,342
Shares issued upon reinvestment of distributions .................. 8,824 99,535 1,872 24,565
Shares redeemed ................................................... (18,030) (212,788) (378) (5,023)
---------- -------------- ---------- --------------
Net increase (decrease) ........................................ (8,396) $ (103,753) 19,540 $ 268,884
========== ============== ========== ==============
13
THE GABELLI WOODLAND SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
9. INDEMNIFICATIONS. The Fund enters into contracts that contain a variety of
indemnifications. The Fund's maximum exposure under these arrangements is
unknown. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
10. OTHER MATTERS. The Adviser and/or affiliates received subpoenas from the
Attorney General of the State of New York and the SEC requesting information on
mutual fund share trading practices involving certain funds managed by the
Adviser. GAMCO Investors, Inc. ("GAMCO"), the Adviser's parent company,
responded to these requests for documents and testimony. In June 2006, GAMCO
began discussions with the SEC regarding a possible resolution of their inquiry.
In February 2007, the Adviser made an offer of settlement to the staff of the
SEC for communication to the Commission for its consideration to resolve this
matter. This offer of settlement is subject to agreement regarding the specific
language of the SEC's administrative order and other settlement documents. On a
separate matter, in September 2005, the Adviser was informed by the staff of the
SEC that the staff may recommend to the Commission that an administrative remedy
and a monetary penalty be sought from the Adviser in connection with the actions
of two of nine closed-end funds managed by the Adviser relating to Section 19(a)
and Rule 19a-1 of the 1940 Act. These provisions require registered investment
companies to provide written statements to shareholders when a dividend is made
from a source other than net investment income. While the two closed-end funds
sent annual statements and provided other materials containing this information,
the funds did not send written statements to shareholders with each distribution
in 2002 and 2003. The Adviser believes that all of the funds are now in
compliance. The Adviser believes that these matters would have no effect on the
Fund or any material adverse effect on the Adviser or its ability to manage the
Fund.
14
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 Net Realized and Total Net
Period Value, Investment Unrealized from Net Realized
Ended Beginning Income/ Gain on Investment Investment Gain on Total Redemption
September 30 of Period (Loss)(a)(h) Investments Operations Income Investments Distributions Fees(a)
- ------------ --------- ------------ ------------ ---------- ---------- ----------- ------------- ----------
CLASS AAA
2007 $ 13.35 $ 0.05 $ 2.44 $ 2.49 $(0.06) $ (3.17) $ (3.23) $ 0.00(d)
2006 14.64 (0.12) 0.07 (0.05) -- (1.24) (1.24) 0.00(d)
2005 12.79 (0.11) 2.69 2.58 -- (0.73) (0.73) 0.00(d)
2004 10.58 (0.14) 2.38 2.24 -- (0.03) (0.03) --
2003(f) 10.00 (0.07) 0.65 0.58 -- -- -- --
CLASS A
2007 $ 13.36 $ 0.13 $ 2.39 $ 2.52 $(0.02) $ (3.17) $ (3.19) $ 0.00(d)
2006 14.65 (0.12) 0.07 (0.05) -- (1.24) (1.24) 0.00(d)
2005 12.79 (0.09) 2.68 2.59 -- (0.73) (0.73) 0.00(d)
2004 10.57 (0.14) 2.39 2.25 -- (0.03) (0.03) --
2003(f) 10.00 (0.07) 0.64 0.57 -- -- -- --
CLASS B
2007 $ 13.37 $(0.09) $ 2.49 $ 2.40 -- $ (3.17) $ (3.17) $ 0.00(d)
2006 14.77 (0.25) 0.09 (0.16) -- (1.24) (1.24) 0.00(d)
2005 12.98 (0.21) 2.73 2.52 -- (0.73) (0.73) 0.00(d)
2004 10.59 0.02 2.40 2.42 -- (0.03) (0.03) --
2003(f) 10.00 (0.12) 0.71 0.59 -- -- -- --
CLASS C
2007 $ 13.00 $(0.03) $ 2.36 $ 2.33 -- $ (3.17) $ (3.17) $ 0.00(d)
2006 14.39 (0.21) 0.06 (0.15) -- (1.24) (1.24) 0.00(d)
2005 12.66 (0.20) 2.66 2.46 -- (0.73) (0.73) 0.00(d)
2004 10.55 (0.23) 2.37 2.14 -- (0.03) (0.03) --
2003(f) 10.00 (0.11) 0.66 0.55 -- -- -- --
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------
Expenses Expenses
Net Asset Net Assets Net of Before
Period Value, End of Net Waivers/ Waivers/ Portfolio
Ended End of Total Period Investment Reimburse- Reimburse- Turnover
September 30 Period Return+ (in 000's) Income/(Loss)(h) ments(b) ments(c) Rate
- ------------ --------- ------- ---------- ---------------- ---------- ---------- ---------
CLASS AAA
2007 $ 12.61 20.71% $ 9,040 0.38% 2.01% 2.33% 51%
2006 13.35 (0.35) 9,137 (0.84) 2.01 2.31 59
2005 14.64 20.67 11,839 (0.78) 2.01(e) 2.99 35
2004 12.79 21.22 3,388 (1.14) 2.00 5.94 45
2003(f) 10.58 5.80 2,323 (0.97)(g) 2.00(g) 15.05(g) 39
CLASS A
2007 $ 12.69 20.94% $ 65 1.00% 2.01% 2.33% 51%
2006 13.36 (0.36) 100 (0.83) 2.01 2.31 59
2005 14.65 20.76 108 (0.68) 2.01(e) 3.17 35
2004 12.79 21.34 47 (1.16) 2.00 5.94 45
2003(f) 10.57 5.70 3 (0.97)(g) 2.00(g) 15.05(g) 39
CLASS B
2007 $ 12.60 19.73% $ 0.1 (0.68)% 2.76% 3.07% 51%
2006 13.37 (1.19) 0.1 (1.77) 2.76 3.06 59
2005 14.77 19.86 0.1 (1.50) 2.75(e) 3.87 35
2004 12.98 22.91 0.1 0.18 2.75 6.69 45
2003(f) 10.59 5.90 0.1 (1.72)(g) 2.75(g) 15.80(g) 39
CLASS C
2007 $ 12.16 19.84% $ 295 (0.26)% 2.76% 3.08% 51%
2006 13.00 (1.11) 425 (1.58) 2.76 3.06 59
2005 14.39 19.91 189 (1.46) 2.76(e) 3.87 35
2004 12.66 20.33 41 (1.88) 2.75 6.69 45
2003(f) 10.55 5.50 118 (1.72)(g) 2.75(g) 15.80(g) 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 distributions and does not reflect
applicable sales charges. Total return for a period of less than one year
is not annualized.
(a) Per share amounts have been calculated using the average shares
outstanding method.
(b) The Fund incurred interest expense during fiscal years ended September 30,
2007 and September 30, 2006. If interest expense had not been incurred,
the ratios of operating expenses to average net assets would have been
2.00% and 2.00% (Class AAA), 2.00% and 2.00% (Class A), 2.75% and 2.75%
(Class B), and 2.75% and 2.75% (Class C), respectively.
(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) Amount represents less than $0.005 per share.
(e) The ratios do not include a reduction of expenses for custodian fee
credits on cash balances maintained with the custodian. Including such
custodian fee credits, the expense ratios for the fiscal year ended
September 30, 2005 would have been 2.00%, 2.00%, 2.75% and 2.75% for Class
AAA, Class A, Class B, and Class C, respectively. Custodian fee credits
for the period ended September 30, 2007 were minimal.
(f) From commencement of investment operations on December 31, 2002 through
September 30, 2003.
(g) Annualized.
(h) Due to capital share activity throughout the fiscal year, net investment
income per share and the ratio to average net assets are not necessarily
correlated among the different classes of shares.
See accompanying notes to financial statements.
15
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,
2007, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the periods indicated therein.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of September 30, 2007, by correspondence with the custodian
and brokers. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Gabelli Woodland Small Cap Value Fund, a series of Gabelli Equity Series Funds,
Inc., at September 30, 2007, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for each of the periods indicated
therein, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
November 19, 2007
16
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
Corporation's Board of Directors. Information pertaining to the Directors and
officers of the Corporation is set forth below. The Corporation's Statement of
Additional Information includes additional information about the Corporation's
Directors and is available, without charge, upon request, by calling 800-GABELLI
(800-422-3554) or by writing to The Gabelli Woodland Small Cap Value Fund at One
Corporate Center, Rye, NY 10580-1422.
NUMBER OF FUNDS
NAME, POSITION(S) TERM OF OFFICE IN FUND COMPLEX
ADDRESS 1 AND LENGTH OF OVERSEEN 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 26 Chairman and Chief Executive Officer of Director of Morgan Group
Director and GAMCO Investors, Inc. and Chief Holdings, Inc. (holding
Chief Investment Investment Officer-Value Portfolios of company); Chairman of the
Officer Gabelli Funds, LLC and GAMCO Asset Board of LICT Corp.
Age: 65 Management Inc.; Director/Trustee or (multimedia and communication
Chief Investment Officer of other services company)
registered investment companies in the
Gabelli/GAMCO Funds complex; Chairman
and Chief Executive Officer of GGCP,
Inc.
JOHN D. GABELLI Since 1991 10 Senior Vice President of Gabelli & Director of GAMCO Investors,
Director Company, Inc. Inc. (asset management)
Age: 63
INDEPENDENT DIRECTORS 5:
ANTHONY J. COLAVITA Since 1991 35 Partner in the law firm of Anthony J. --
Director Colavita, P.C.
Age: 71
VINCENT D. ENRIGHT Since 1991 15 Former Senior Vice President and Chief --
Director Financial Officer of KeySpan
Age: 63 Corporation (public utility)
ROBERT J. MORRISSEY Since 1991 6 Partner in the law firm of Morrissey, --
Director Hawkins & Lynch
Age: 68
ANTHONY R. PUSTORINO Since 1991 14 Certified Public Accountant; Professor Director of The LGL Group,
Director Emeritus, Pace University Inc. (diversified
Age: 82 manufacturing)
ANTHONIE C. VAN EKRIS Since 1991 19 Chairman of BALMAC International, Inc. --
Director (commodities and futures trading)
Age: 73
SALVATORE J. ZIZZA Since 2001 26 Chairman of Zizza & Company, Ltd. Director of Hollis-Eden
Director (consulting) Pharmaceuticals
Age: 61 (biotechnology); Director of
Earl Scheib, Inc. (automotive
services)
17
THE GABELLI WOODLAND SMALL CAP VALUE FUND
ADDITIONAL FUND INFORMATION (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
NAME, POSITION(S) TERM OF OFFICE
ADDRESS 1 AND LENGTH OF PRINCIPAL OCCUPATION(S)
AND AGE TIME SERVED 2 DURING PAST FIVE YEARS
- ------------------------ -------------- ---------------------------------------------------------------------------------
OFFICERS:
BRUCE N. ALPERT Since 1991 Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC since
President 1988; and an officer of all of the registered investment companies in the
Age: 55 Gabelli/GAMCO Funds complex; Director and President of Gabelli Advisers, Inc.
since 1998
JAMES E. MCKEE Since 1995 Vice President, General Counsel, and Secretary of GAMCO Investors, Inc. since
Secretary 1999 and GAMCO Asset Management Inc. since 1993; Secretary of all of the
Age: 44 registered investment companies in the Gabelli/GAMCO Funds complex
AGNES MULLADY Since 2006 Vice President of Gabelli Funds, LLC since 2007; Officer of all of the registered
Treasurer investment companies in the Gabelli/GAMCO Funds complex; Senior Vice President of
Age: 49 U.S. Trust Company, N.A. and Treasurer and Chief Financial Officer of Excelsior
Funds from 2004 through 2005; Chief Financial Officer of AMIC Distribution
Partners from 2002 through 2004; Controller of Reserve Management Corporation
and Reserve Partners, Inc. and Treasurer of Reserve Funds from 2000 through 2002
PETER D. GOLDSTEIN Since 2004 Director of Regulatory Affairs at GAMCO Investors, Inc. since 2004; Chief
Chief Compliance Officer Compliance Officer of all of the registered investment companies in the
Age: 54 Gabelli/GAMCO Funds complex; Vice President of Goldman Sachs Asset Management
from 2000 through 2004
- ----------
1 Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise
noted.
2 Each Director will hold office for an indefinite term until the
earliest of (i) the next meeting of shareholders, if any, called for
the purpose of considering the election or re-election of such
Director and until the election and qualification of his or her
successor, if any, elected at such meeting, or (ii) the date a
Director resigns or retires, or a Director is removed by the Board
of Directors or shareholders, in accordance with the Corporation's
By-Laws and Articles of Incorporation. Each officer will hold office
for an indefinite term until the date he or she resigns or retires
or until his or her successor is elected and qualified.
3 This column includes only directorships of companies required to
report to the SEC under the Securities Exchange Act of 1934 (i.e.
public companies) or other investment companies registered under the
1940 Act.
4 "Interested person" of the Fund as defined in the Investment Company
Act of 1940. Messrs. Gabelli are each considered an "interested
person" because of their affiliation with Gabelli Funds, LLC which
acts as the Fund's investment adviser. Mario J. Gabelli and John D.
Gabelli are brothers.
5 Directors who are not interested persons are considered
"Independent" Directors.
- --------------------------------------------------------------------------------
2007 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the fiscal year ended September 30, 2007, the Fund paid to shareholders on
December 20, 2006 ordinary income dividends (comprised of net investment income
and short-term capital gains) totaling $0.47, $0.43, $0.41, and $0.41 per share
for Class AAA, Class A, Class B, and Class C, respectively, and long-term
capital gains totaling $1,873,267. The distributions of long-term capital gains
have been designated as Capital Gain Dividends by the Fund's Board of Directors.
For the fiscal year ended September 30, 2007, 40.39% of the ordinary income
dividend qualifies for the dividends received deduction available to
corporations. The Fund designates 61.03% of the ordinary income distribution as
qualified dividend income, pursuant to the Jobs and Growth Tax Relief
Reconciliation Act of 2003. The Fund designates 37.57% of the ordinary income
distribution as qualified interest income, and 100% of the ordinary income
distribution as qualified short-term gain, pursuant to the American Jobs
Creation Act of 2004.
U.S. GOVERNMENT INCOME:
The percentage of the ordinary income dividend paid by the Fund during fiscal
year 2007 which was derived from U.S. Treasury securities was 0.94%. 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 Woodland Small Cap Value Fund did not meet this strict requirement
in 2007. Due to the diversity in state and local tax law, it is recommended that
you consult your personal tax adviser as to the applicability of the information
provided to your specific situation.
- --------------------------------------------------------------------------------
18
- --------------------------------------------------------------------------------
GABELLI/GAMCO FUNDS AND YOUR PERSONAL PRIVACY
- --------------------------------------------------------------------------------
WHO ARE WE?
The Gabelli/GAMCO Funds are investment companies registered with the Securities
and Exchange Commission under the Investment Company Act of 1940. We are managed
by Gabelli Funds, LLC and Gabelli Advisers, Inc., which are affiliated with
GAMCO Investors, Inc. GAMCO Investors, Inc. is a publicly held company that has
subsidiaries that provide investment advisory or brokerage services for a
variety of clients.
WHAT KIND OF NON-PUBLIC INFORMATION DO WE COLLECT ABOUT YOU IF YOU BECOME A
SHAREHOLDER?
If you apply to open an account directly with us, you will be giving us some
non-public information about yourself. The non-public information we collect
about you is:
o INFORMATION YOU GIVE US ON YOUR APPLICATION FORM. This could include your
name, address, telephone number, social security number, bank account
number, and other information.
o INFORMATION ABOUT YOUR TRANSACTIONS WITH US, ANY TRANSACTIONS WITH OUR
AFFILIATES, AND TRANSACTIONS WITH THE ENTITIES WE HIRE TO PROVIDE SERVICES
TO YOU. This would include information about the shares that you buy or
redeem. If we hire someone else to provide services--like a transfer
agent--we will also have information about the transactions that you
conduct through them.
WHAT INFORMATION DO WE DISCLOSE AND TO WHOM DO WE DISCLOSE IT?
We do not disclose any non-public personal information about our customers or
former customers to anyone other than our affiliates, our service providers who
need to know such information, and as otherwise permitted by law. If you want to
find out what the law permits, you can read the privacy rules adopted by the
Securities and Exchange Commission. They are in volume 17 of the Code of Federal
Regulations, Part 248. The Commission often posts information about its
regulations on its website, www.sec.gov.
WHAT DO WE DO TO PROTECT YOUR PERSONAL INFORMATION?
We restrict access to non-public personal information about you to the people
who need to know that information in order to provide services to you or the
Fund and to ensure that we are complying with the laws governing the securities
business. We maintain physical, electronic, and procedural safeguards to keep
your personal information confidential.
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
THE
GABELLI
WOODLAND
SMALL CAP
VALUE
FUND
ANNUAL REPORT
SEPTEMBER 30, 2007
Gabelli Equity Series Funds, Inc.
THE GABELLI WOODLAND SMALL CAP VALUE FUND
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
FAX: 914-921-5118
WEBSITE: WWW.GABELLI.COM
E-MAIL: INFO@GABELLI.COM
Net Asset Value per share available daily by calling
800-GABELLI after 6:00 P.M.
BOARD OF DIRECTORS
Mario J. Gabelli, CFA Robert J. Morrissey
CHAIRMAN AND CHIEF ATTORNEY-AT-LAW
EXECUTIVE OFFICER MORRISSEY, HAWKINS & LYNCH
GAMCO INVESTORS, INC.
Anthony R. Pustorino
Anthony J. Colavita CERTIFIED PUBLIC ACCOUNTANT,
ATTORNEY-AT-LAW PROFESSOR EMERITUS
ANTHONY J. COLAVITA, P.C. PACE UNIVERSITY
Vincent D. Enright Anthonie C. van Ekris
FORMER SENIOR VICE PRESIDENT CHAIRMAN
AND CHIEF FINANCIAL OFFICER BALMAC INTERNATIONAL, INC.
KEYSPAN CORP.
Salvatore J. Zizza
John D. Gabelli CHAIRMAN
SENIOR VICE PRESIDENT ZIZZA & CO., LTD.
GABELLI & COMPANY, INC.
OFFICERS AND PORTFOLIO MANAGER
Elizabeth M. Lilly, CFA Bruce N. Alpert
PORTFOLIO MANAGER PRESIDENT
James E. McKee Peter D. Goldstein
SECRETARY CHIEF COMPLIANCE OFFICER
Agnes Mullady
TREASURER
DISTRIBUTOR
Gabelli & Company, Inc.
CUSTODIAN, TRANSFER AGENT, AND DIVIDEND AGENT
State Street Bank and Trust Company
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
GAB840Q307SR
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party.
(c) There have been no amendments, during the period covered by this
report, to a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, and that relates to any element of
the code of ethics description.
(d) The registrant has not granted any waivers, including an implicit
waiver, from a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, that relates to one or more of the
items set forth in paragraph (b) of this item's instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the registrant's board of
directors has determined that Anthony R. Pustorino is qualified to serve as an
audit committee financial expert serving on its audit committee and that he is
"independent."
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
AUDIT FEES
(a) The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the
audit of the registrant's annual financial statements or services that
are normally provided by the accountant in connection with statutory
and regulatory filings or engagements for those fiscal years are
$109,300 for 2007 and $102,400 for 2006.
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 for 2007 and $0 for 2006.
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 $0 for 2007 and $11,700
for 2006. 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
for 2007 and $0 for 2006.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
Pre-Approval Policies and Procedures. The Audit Committee ("Committee")
of the registrant is responsible for pre-approving (i) all audit and
permissible non-audit services to be provided by the independent
registered public accounting firm to the registrant and (ii) all
permissible non-audit services to be provided by the independent
registered public accounting firm to the Adviser, Gabelli Funds, LLC,
and any affiliate of Gabelli Funds, LLC ("Gabelli") that provides
services to the registrant (a "Covered Services Provider") if the
independent registered public accounting firm's engagement related
directly to the operations and financial reporting of the registrant.
The Committee may delegate its responsibility to pre-approve any such
audit and permissible non-audit services to the Chairperson of the
Committee, and the Chairperson must report to the Committee, at its
next regularly scheduled meeting after the Chairperson's pre-approval
of such services, his or her decision(s). The Committee may also
establish detailed pre-approval policies and procedures for
pre-approval of such services in accordance with applicable laws,
including the delegation of some or all of the Committee's pre-approval
responsibilities to the other persons (other than Gabelli or the
registrant's officers). Pre-approval by the Committee of any
permissible non-audit services is not required so long as: (i) the
permissible non-audit services were not recognized by the registrant at
the time of the engagement to be non-audit services; and (ii) such
services are promptly brought to the attention of the Committee and
approved by the Committee or Chairperson prior to the completion of the
audit.
(e)(2) The percentage of services described in each of paragraphs (b) through
(d) of this Item that were approved by the audit committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows:
(b) Not applicable
(c) 100%
(d) Not applicable
(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 $65,000 for 2007 and $149,750 for 2006.
(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.
Schedule of Investments in securities of unaffiliated issuers as of the close of
the reporting period is included as part of the report to shareholders filed
under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's second fiscal
quarter of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) Gabelli Equity Series Funds, Inc.
-------------------------------------------------------------------
By (Signature and Title)* /s/ Bruce N. Alpert
-------------------------------------------------------
Bruce N. Alpert, Principal Executive Officer
Date 12/5/07
----------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Bruce N. Alpert
-------------------------------------------------------
Bruce N. Alpert, Principal Executive Officer
Date 12/5/07
----------------------------------------------------------------------------
By (Signature and Title)* /s/ Agnes Mullady
-------------------------------------------------------
Agnes Mullady,
Principal Financial Officer and Treasurer
Date 12/5/07
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.