UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-06367
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Gabelli Equity Series Funds, Inc.
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(Exact name of registrant as specified in charter)
One Corporate Center
Rye, New York 10580-1422
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(Address of principal executive offices) (Zip code)
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
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(Name and address of agent for service)
registrant's telephone number, including area code: 1-800-422-3554
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Date of fiscal year end: September 30
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Date of reporting period: March 31, 2008
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 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
SEMI-ANNUAL REPORT (a)
MARCH 31, 2008
TO OUR SHAREHOLDERS,
For the six month period ended March 31, 2007, The Gabelli Small Cap
Growth Fund's Class AAA Shares gave up 9.87%, outperforming the Russell 2000
Index decline of 14.02%, the Standard & Poor's 500 Index decline of 12.46%, and
the Dow Jones Industrial Average decline of 10.64%.
COMPARATIVE RESULTS
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AVERAGE ANNUAL RETURNS THROUGH MARCH 31, 2008 (a)(b)
----------------------------------------------------
Since
Inception
Quarter 1 Year 3 Year 5 Year 10 Year 15 Year (10/22/91)
------- ------ ------ ------ ------- ------- ----------
GABELLI SMALL CAP GROWTH FUND
CLASS AAA ....................... (7.42)% (4.71)% 8.50% 17.19% 9.07% 12.23% 14.22%
Russell 2000 Index ................. (9.90) (13.00) 5.06 14.90 4.96 9.04 9.96
Value Line Composite Index ......... (8.67) (10.83) 5.72 15.94 7.68 11.28 12.04
Class A ............................ (7.42) (4.68) 8.49 17.18 9.07 12.23 14.22
(12.75)(c) (10.16)(c) 6.37(c) 15.81(c) 8.42(c) 11.79(c) 13.81(c)
Class B ............................ (7.59) (5.42) 7.70 16.45 8.73 12.00 14.00
(12.21)(d) (10.15)(d) 6.83(d) 16.23(d) 8.73 12.00 14.00
Class C ............................ (7.59) (5.39) 7.69 16.45 8.72 11.99 14.00
(8.51)(e) (6.34)(e) 7.69 16.45 8.72 11.99 14.00
Class I ............................ (7.39) (4.68) 8.51 17.19 9.07 12.23 14.22
IN THE CURRENT PROSPECTUS, THE EXPENSE RATIOS FOR CLASS AAA, A, B, C, AND I
SHARES ARE 1.44%, 1.44%, 2.18%, 2.18%, AND 1.18%, RESPECTIVELY. CLASS AAA AND I
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 AND CLASS
I SHARES ON JANUARY 11, 2008. THE ACTUAL PERFORMANCE FOR THE CLASS B
SHARES AND CLASS C SHARES WOULD HAVE BEEN LOWER AND CLASS I SHARES WOULD
HAVE BEEN HIGHER DUE TO THE DIFFERENCES IN 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, ONE YEAR, THREE YEAR,
AND FIVE YEAR PERIODS OF 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, AND ONE YEAR PERIODS OF
1% OF THE FUND'S NAV PER SHARE AT THE TIME OF PURCHASE OR SALE, WHICHEVER
IS LOWER.
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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.
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THE GABELLI SMALL CAP GROWTH FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
For the Six Month Period from October 1, 2007 through March 31, 2008
EXPENSE TABLE
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We believe it is important for you to understand the impact of fees and expenses
regarding your investment. All mutual funds have operating expenses. As a
shareholder of 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.
Beginning Ending Annualized Expenses
Account Value Account Value Expense Paid During
10/01/07 03/31/08 Ratio Period*
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THE GABELLI SMALL CAP GROWTH FUND
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ACTUAL FUND RETURN
Class AAA $1,000.00 $ 901.30 1.41% $ 6.70
Class A $1,000.00 $ 901.30 1.41% $ 6.70
Class B $1,000.00 $ 898.10 2.16% $10.25
Class C $1,000.00 $ 897.80 2.16% $10.25
Class I** $1,000.00 $ 901.70 1.16% $ 2.35
HYPOTHETICAL 5% RETURN
Class AAA $1,000.00 $1,017.95 1.41% $ 7.11
Class A $1,000.00 $1,017.95 1.41% $ 7.11
Class B $1,000.00 $1,014.20 2.16% $10.88
Class C $1,000.00 $1,014.20 2.16% $10.88
Class I** $1,000.00 $1,008.19 1.16% $ 2.48
* 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
366.
** Class I Shares were first issued on January 11, 2008. Account values and
expense ratios are calculated from January 11, 2008 through March 31,
2008.
2
SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED)
The following table presents portfolio holdings as a percent of total net assets
as of March 31, 2008:
THE GABELLI SMALL CAP GROWTH FUND
Equipment and Supplies ............................................... 12.4%
U.S. Government Obligations .......................................... 10.9%
Health Care .......................................................... 8.9%
Diversified Industrial ............................................... 7.8%
Energy and Utilities ................................................. 5.7%
Food and Beverage .................................................... 5.3%
Specialty Chemicals .................................................. 4.9%
Financial Services ................................................... 4.3%
Business Services .................................................... 4.0%
Automotive: Parts and Accessories .................................... 3.2%
Aviation: Parts and Services ......................................... 3.1%
Electronics .......................................................... 2.7%
Wireless Communications .............................................. 2.6%
Retail ............................................................... 2.5%
Hotels and Gaming .................................................... 2.2%
Computer Software and Services ....................................... 2.0%
Entertainment ........................................................ 2.0%
Consumer Products .................................................... 1.8%
Cable ................................................................ 1.6%
Publishing ........................................................... 1.4%
Communications Equipment ............................................. 1.2%
Manufactured Housing and Recreational Vehicles ....................... 1.1%
Broadcasting ......................................................... 1.1%
Telecommunications ................................................... 1.1%
Environmental Services ............................................... 1.0%
Consumer Services .................................................... 1.0%
Real Estate .......................................................... 0.9%
Transportation ....................................................... 0.8%
Metals and Mining .................................................... 0.8%
Closed-End Funds ..................................................... 0.6%
Educational Services ................................................. 0.3%
Aerospace ............................................................ 0.2%
Agriculture .......................................................... 0.1%
Paper and Forest Products ............................................ 0.1%
Building and Construction ............................................ 0.0%
Home Furnishings ..................................................... 0.0%
Automotive ........................................................... 0.0%
Other Assets and Liabilities (Net) ................................... 0.4%
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100.0%
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THE FUND FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION (THE "SEC") FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL
YEAR ON FORM N-Q, THE LAST OF WHICH WAS FILED FOR THE QUARTER ENDED DECEMBER 31,
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.
3
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS -- MARCH 31, 2008 (UNAUDITED)
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MARKET
SHARES COST VALUE
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COMMON STOCKS -- 88.4%
AEROSPACE -- 0.2%
165,000 Herley Industries Inc.+ ......... $ 2,632,821 $ 1,706,100
3,000 Innovative Solutions &
Support Inc.+ ................ 45,808 31,710
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2,678,629 1,737,810
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AGRICULTURE -- 0.1%
1,200 Cadiz Inc.+ ..................... 4,500 18,456
9,000 The Mosaic Co.+ ................. 160,365 923,400
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164,865 941,856
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AUTOMOTIVE -- 0.0%
6,000 Oshkosh Corp. ................... 89,796 217,680
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AUTOMOTIVE: PARTS AND ACCESSORIES -- 3.2%
3,816 Aftermarket Technology Corp.+ ... 47,013 74,183
1,000 BERU AG ......................... 106,336 117,065
150,000 BorgWarner Inc. ................. 1,609,839 6,454,500
12,000 China Automotive
Systems Inc.+ ................ 78,831 68,280
30,000 Dana Holding Corp.+ ............. 285,700 300,000
240,900 Earl Scheib Inc.+ (a) ........... 1,475,236 635,976
60,000 Lear Corp.+ ..................... 1,970,281 1,554,600
270,000 Midas Inc.+ ..................... 4,010,223 4,641,300
230,000 Modine Manufacturing Co. ........ 5,382,506 3,332,700
11,812 Monro Muffler Brake Inc. ........ 52,857 199,623
200,000 O'Reilly Automotive Inc.+ ....... 5,994,117 5,704,000
200,000 Proliance International Inc.+ ... 1,342,357 364,000
2,000 Puradyn Filter
Technologies Inc.+ ........... 2,750 640
64,000 SORL Auto Parts Inc.+ ........... 472,135 324,480
75,375 Spartan Motors Inc. ............. 365,563 637,672
240,000 Standard Motor Products Inc. .... 3,125,763 1,468,800
27,000 Strattec Security Corp. ......... 1,058,830 1,142,910
45,000 Superior Industries
International Inc. ........... 897,906 933,750
40,000 Tenneco Inc.+ ................... 939,826 1,117,600
220,000 The Pep Boys -
Manny, Moe & Jack ............ 3,093,105 2,191,200
27,000 Thor Industries Inc. ............ 250,194 803,790
4,000 Wonder Auto Technology Inc.+ .... 32,796 32,920
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32,594,164 32,099,989
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AVIATION: PARTS AND SERVICES -- 3.1%
25,000 AAR Corp.+ ...................... 302,990 681,750
10,000 Astronics Corp.+ ................ 48,990 193,200
14,000 Barnes Group Inc. ............... 119,438 321,300
122,000 Curtiss-Wright Corp. ............ 1,495,053 5,060,560
7,500 Ducommun Inc.+ .................. 80,125 207,525
30,000 Embraer-Empresa Brasileira de
Aeronautica SA, ADR .......... 508,773 1,185,300
23,000 Gamesa Corp. Tecnologica SA ..... 140,752 1,049,399
280,000 GenCorp Inc.+ ................... 2,915,852 2,881,200
MARKET
SHARES COST VALUE
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450,000 Kaman Corp. ..................... $ 7,217,248 $ 12,730,500
90,000 Moog Inc., Cl. A+ ............... 732,783 3,798,900
500,000 The Fairchild Corp., Cl. A+ ..... 1,399,826 1,140,000
80,200 Woodward Governor Co. ........... 1,052,265 2,142,944
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16,014,095 31,392,578
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BROADCASTING -- 1.1%
128,000 Acme Communications Inc.+ ....... 946,329 258,560
85,800 Beasley Broadcast Group Inc.,
Cl. A ........................ 680,297 305,448
2,000 Cogeco Inc. ..................... 39,014 59,428
295,000 Crown Media Holdings Inc.,
Cl. A+ ....................... 1,848,397 1,525,150
3,333 CTN Media Group Inc.+ (b) ....... 16,800 4
2,000 Global Traffic Network Inc.+ .... 11,904 17,520
2,433 Granite Broadcasting Corp.+ ..... 822,771 41,361
425,000 Gray Television Inc. ............ 3,793,791 2,418,250
35,000 Gray Television Inc., Cl. A ..... 413,341 207,025
48,000 Hearst-Argyle Television Inc. ... 425,523 990,240
115,000 Ideation Acquisition Corp.+ ..... 916,125 839,500
250 Liberty Media Corp. -
Capital, Cl. A+ .............. 2,516 3,935
17,000 Nexstar Broadcasting
Group Inc., Cl. A+ ........... 153,927 100,300
225,000 Salem Communications Corp.,
Cl. A ........................ 1,999,858 902,250
200,000 Sinclair Broadcast Group Inc.,
Cl. A ........................ 2,184,852 1,782,000
200,000 Sirius Satellite Radio Inc.+ .... 981,915 572,000
50,000 Spanish Broadcasting
System Inc., Cl. A+ .......... 448,766 88,500
35,000 XM Satellite Radio
Holdings Inc., Cl. A+ ........ 302,980 406,700
550,000 Young Broadcasting Inc.,
Cl. A+ ....................... 2,780,092 418,000
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18,769,198 10,936,171
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BUILDING AND CONSTRUCTION -- 0.0%
25,000 Huttig Building Products Inc.+ .. 90,165 58,000
25,000 Insituform Technologies Inc.,
Cl. A+ ....................... 464,645 345,750
1,000 Universal Forest Products Inc. .. 12,125 32,200
1 Vulcan Materials Co. ............ 1 1
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566,936 435,951
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BUSINESS SERVICES -- 3.8%
5,000 ACCO Brands Corp.+ .............. 123,890 67,850
245,000 AMICAS Inc.+ .................... 1,054,108 551,250
6,000 BB Holdings Ltd.+ ............... 23,159 30,750
440,000 BPW Acquisition Corp.+ .......... 4,396,038 4,206,400
5,000 BrandPartners Group Inc.+ ....... 4,850 210
2,400 Carlisle Group Ltd.+ ............ 3,303 4,120
4,500 Cockleshell Ltd.+ ............... 0 5,225
See accompanying notes to financial statements.
4
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- MARCH 31, 2008 (UNAUDITED)
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MARKET
SHARES COST VALUE
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COMMON STOCKS (CONTINUED)
BUSINESS SERVICES (CONTINUED)
2,500 comScore Inc.+ .................. $ 41,250 $ 50,150
200,000 Diebold Inc. .................... 7,424,413 7,510,000
430,000 Edgewater Technology Inc.+ ...... 2,324,540 2,266,100
4,100 GP Strategies Corp.+ ............ 33,938 38,950
22,589 GSE Systems Inc.+ ............... 31,625 183,874
500 GSI Commerce Inc.+ .............. 8,649 6,575
100,000 Industrial Distribution
Group Inc.+ .................. 405,322 1,004,000
60,000 Interactive Data Corp. .......... 534,171 1,708,200
300,000 Intermec Inc.+ .................. 6,190,203 6,657,000
13,000 Landauer Inc. ................... 234,859 654,420
4,000 MDC Partners Inc., Cl. A+ ....... 12,360 29,080
170,000 Nashua Corp.+ ................... 1,640,781 1,868,300
30,000 R. H. Donnelley Corp.+ .......... 311,072 151,800
600 Shellshock Ltd.+ ................ 327 792
68,000 Sohgo Security
Services Co. Ltd. ............ 864,949 948,234
12,500 SP Acquisition Holdings Inc.+ ... 125,000 122,250
18,000 Stamps.com Inc.+ ................ 98,885 184,680
5,000 StarTek Inc.+ ................... 73,657 46,050
55,000 The Brink's Co. ................. 1,420,728 3,694,900
400,000 The Interpublic Group of
Companies Inc.+ .............. 3,473,211 3,364,000
170,000 Trans-Lux Corp.+ (a) ............ 1,270,779 595,000
25,050 TransAct Technologies Inc.+ ..... 125,082 122,996
100,000 ValueClick Inc.+ ................ 2,458,603 1,725,000
-------------- --------------
34,709,752 37,798,156
-------------- --------------
CABLE -- 1.6%
230,000 Adelphia Communications
Corp., Cl. A+ (b) ............ 29,650 0
230,000 Adelphia Communications
Corp., Cl. A, Escrow+ (b) .... 0 0
230,000 Adelphia Recovery Trust+ (b) .... 0 0
500,000 Cablevision Systems Corp.,
Cl. A+ ....................... 121,520 10,715,000
9,329 Liberty Global Inc., Cl. A+ ..... 249,972 317,932
9,329 Liberty Global Inc., Cl. C+ ..... 240,169 303,006
325,000 Lin TV Corp., Cl. A+ ............ 5,012,105 3,123,250
8,000 Outdoor Channel
Holdings Inc.+ ............... 72,605 58,800
60,000 The DIRECTV Group Inc.+ ......... 1,465,253 1,487,400
-------------- --------------
7,191,274 16,005,388
-------------- --------------
CLOSED-END FUNDS -- 0.6%
101,202 The Central Europe and
Russia Fund Inc. ............. 2,879,202 4,800,011
36,700 The European Equity Fund Inc. ... 386,832 392,690
54,000 The New Germany Fund Inc. ....... 635,491 834,300
11,000 The Spain Fund Inc. ............. 103,029 133,540
-------------- --------------
4,004,554 6,160,541
-------------- --------------
MARKET
SHARES COST VALUE
------ -------------- --------------
COMMUNICATIONS EQUIPMENT -- 1.2%
150,000 Communications
Systems Inc. ................. $ 1,040,821 $ 1,615,500
260,900 Sycamore Networks Inc.+ ......... 778,040 954,894
258,000 Thomas & Betts Corp.+ ........... 4,715,067 9,383,460
-------------- --------------
6,533,928 11,953,854
-------------- --------------
COMPUTER SOFTWARE AND SERVICES -- 2.0%
500,000 BEA Systems Inc.+ ............... 9,543,500 9,575,000
70,000 Borland Software Corp.+ ......... 586,785 141,400
90,000 FalconStor Software Inc.+ ....... 636,867 684,900
300,000 Furmanite Corp.+ ................ 1,146,864 2,550,000
59,508 Global Sources Ltd.+ ............ 834,258 883,694
40,000 Jupitermedia Corp.+ ............. 295,800 83,600
2,000 Limelight Networks Inc.+ ........ 15,963 6,480
20,187 MKS Instruments Inc.+ ........... 367,981 432,002
10,000 NAVTEQ Corp.+ ................... 369,415 680,000
60,000 OpenTV Corp., Cl. A+ ............ 315,990 70,800
6,000 Phoenix Technologies Ltd.+ ...... 41,368 93,960
215,000 Stamford Industrial
Group Inc.+ .................. 156,830 290,250
800,000 StorageNetworks Inc.,
Escrow+ (b) .................. 0 24,000
290,000 Tyler Technologies Inc.+ ........ 1,092,388 4,054,200
-------------- --------------
15,404,009 19,570,286
-------------- --------------
CONSUMER PRODUCTS -- 1.8%
70,000 1-800-FLOWERS.COM Inc.,
Cl. A+ ....................... 658,180 595,700
6,750 Adams Golf Inc.+ ................ 71,200 56,025
5,250 Alberto-Culver Co. .............. 123,588 143,902
16,000 Ashworth Inc.+ .................. 69,906 45,760
33,500 Chofu Seisakusho Co. Ltd. ....... 484,644 671,815
36,000 Church & Dwight Co. Inc. ........ 344,519 1,952,640
45,000 Coachmen Industries Inc. ........ 503,207 134,100
6,000 Elizabeth Arden Inc.+ ........... 82,125 119,700
55,771 Escada AG+ ...................... 1,833,070 1,530,288
2,000 Harley-Davidson Inc. ............ 4,712 75,000
210,000 Hartmarx Corp.+ ................. 1,039,708 613,200
45,000 Lenox Group Inc.+ ............... 367,390 79,650
5,000 Levcor International Inc.+ ...... 7,650 1,450
300,000 Marine Products Corp. ........... 273,738 2,424,000
31,000 National Presto Industries
Inc. ......................... 966,705 1,624,400
83,000 Revlon Inc., Cl. A+ ............. 253,933 81,340
110,250 Sally Beauty Holdings Inc.+ ..... 858,715 760,725
700,000 Schiff Nutrition
International Inc. ........... 1,877,976 4,193,000
55,000 Spectrum Brands Inc.+ ........... 546,017 251,350
1,070 Steven Madden Ltd.+ ............. 4,726 18,329
14,000 Stewart Enterprises Inc.,
Cl. A ........................ 65,467 89,880
87,425 Syratech Corp.+ ................. 17,426 1,749
4,000 The Scotts Miracle-Gro Co.,
Cl. A ........................ 45,880 129,680
See accompanying notes to financial statements.
5
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- MARCH 31, 2008 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ -------------- --------------
COMMON STOCKS (CONTINUED)
CONSUMER PRODUCTS (CONTINUED)
17,000 WD-40 Co. ....................... $ 470,278 $ 565,250
73,000 Wolverine World Wide Inc. ....... 710,597 2,117,730
-------------- --------------
11,681,357 18,276,663
-------------- --------------
CONSUMER SERVICES -- 1.0%
34,000 Bowlin Travel Centers Inc.+ ..... 31,812 54,400
2,500 Collectors Universe Inc. ........ 8,720 25,975
10,000 eLong Inc., ADR+ ................ 113,711 83,200
2,000 Expedia Inc.+ ................... 19,829 43,780
40,000 IAC/InterActiveCorp+ ............ 471,794 830,400
210,000 Martha Stewart Living
Omnimedia Inc., Cl. A+ ....... 1,819,834 1,560,300
20,000 Response USA Inc.+ .............. 16,500 31
400,500 Rollins Inc. .................... 2,284,661 7,084,845
10,000 TiVo Inc.+ ...................... 74,563 87,600
-------------- --------------
4,841,424 9,770,531
-------------- --------------
DIVERSIFIED INDUSTRIAL -- 7.7%
42,000 Acuity Brands Inc. .............. 410,317 1,803,900
5,000 Albany International Corp.,
Cl. A ........................ 177,158 180,700
103,100 Ampco-Pittsburgh Corp. .......... 1,446,420 4,432,269
6,000 Anixter International Inc.+ ..... 57,120 384,240
312,000 Baldor Electric Co. ............. 8,576,516 8,736,000
151,000 Crane Co. ....................... 3,330,687 6,092,850
100,000 Delta plc ....................... 212,289 186,556
3,000 ESCO Technologies Inc.+ ......... 49,914 119,160
1,626 Foster Wheeler Ltd.+ ............ 3,194 92,064
12,000 Gardner Denver Inc.+ ............ 103,046 445,200
188,000 Greif Inc., Cl. A ............... 1,907,682 12,770,840
26,000 Greif Inc., Cl. B ............... 948,864 1,589,380
370,000 Griffon Corp.+ .................. 5,675,398 3,182,000
48,000 Hawk Corp., Cl. A+ .............. 768,610 840,960
10,000 Insteel Industries Inc. ......... 4,250 116,300
180,000 Katy Industries Inc.+ ........... 701,316 279,000
69,000 Lindsay Corp. ................... 742,781 7,070,430
325,000 Magnetek Inc.+ .................. 1,712,191 1,118,000
32,000 Matthews International Corp.,
Cl. A ........................ 748,294 1,544,000
270,000 Myers Industries Inc. ........... 2,441,846 3,545,100
150,000 National Patent
Development Corp.+ ........... 135,611 360,000
101,000 Oil-Dri Corp. of America ........ 873,490 1,806,890
15,000 Olin Corp. ...................... 232,292 296,400
230,000 Park-Ohio Holdings Corp.+ ....... 1,384,871 3,613,300
86,000 Precision Castparts Corp. ....... 1,571,868 8,778,880
32,000 Roper Industries Inc. ........... 620,029 1,902,080
33,000 Sonoco Products Co. ............. 911,856 944,790
63,000 Standex International Corp. ..... 1,253,307 1,407,420
145,000 Tech/Ops Sevcon Inc. ............ 1,023,242 1,015,000
100,000 Tredegar Corp. .................. 1,493,541 1,821,000
73,048 WHX Corp.+ ...................... 1,038,747 191,751
-------------- --------------
40,556,747 76,666,460
-------------- --------------
MARKET
SHARES COST VALUE
------ -------------- --------------
EDUCATIONAL SERVICES -- 0.3%
30,000 Career Education Corp.+ ......... $ 453,735 $ 381,600
150,000 Corinthian Colleges Inc.+ ....... 1,184,223 1,084,500
1,000 School Specialty Inc.+ .......... 33,907 31,540
150,100 Universal Technical
Institute Inc.+ .............. 2,878,683 1,760,673
-------------- --------------
4,550,548 3,258,313
-------------- --------------
ELECTRONICS -- 2.7%
76,000 Badger Meter Inc. ............... 1,817,889 3,283,200
85,000 Bel Fuse Inc., Cl. A ............ 2,885,032 2,668,150
478,500 California Micro
Devices Corp.+ ............... 2,312,047 1,406,790
220,000 CTS Corp. ....................... 2,392,912 2,354,000
45,000 Excel Technology Inc.+ .......... 1,202,663 1,213,200
220,000 Greatbatch Inc.+ ................ 5,801,037 4,050,200
16,000 IMAX Corp.+ ..................... 137,281 111,520
230,000 KEMET Corp.+ .................... 1,799,362 929,200
75,000 Methode Electronics Inc. ........ 710,862 876,750
224,800 Park Electrochemical Corp. ...... 5,434,085 5,811,080
120,000 Stoneridge Inc.+ ................ 1,127,216 1,614,000
150,000 Trident Microsystems Inc.+ ...... 798,820 772,500
150,000 Zoran Corp.+ .................... 1,820,015 2,049,000
-------------- --------------
28,239,221 27,139,590
-------------- --------------
ENERGY AND UTILITIES -- 5.7%
3,000 AGL Resources Inc. .............. 51,525 102,960
1,300,000 Aquila Inc.+ .................... 4,798,721 4,173,000
95,000 Callon Petroleum Co.+ ........... 939,533 1,718,550
70,200 CH Energy Group Inc. ............ 2,828,896 2,730,780
12,000 Chesapeake Utilities Corp. ...... 236,752 355,680
65,000 CMS Energy Corp. ................ 363,722 880,100
23,000 Connecticut Water Service Inc. .. 464,832 544,410
3,500 Consolidated Water Co. Ltd. ..... 83,341 77,105
150,000 Covanta Holding Corp.+ .......... 644,530 4,125,000
145,000 El Paso Electric Co.+ ........... 1,886,797 3,098,650
12,500 EnergySouth Inc. ................ 702,377 652,375
20,000 Environmental Power Corp.+ ...... 110,000 83,000
132,000 Florida Public Utilities Co. .... 1,239,946 1,471,800
43,000 Middlesex Water Co. ............. 743,997 780,880
10,000 Nicor Inc. ...................... 221,002 335,100
20,000 Oceaneering
International Inc.+ .......... 544,313 1,260,000
26,200 Pennichuck Corp. ................ 609,739 605,220
2,000 PetroQuest Energy Inc.+ ......... 5,250 34,680
200,000 PNM Resources Inc. .............. 2,480,622 2,494,000
30,000 Rowan Companies Inc. ............ 1,124,461 1,235,400
1,015,000 RPC Inc. ........................ 1,503,947 15,417,850
77,000 SJW Corp. ....................... 1,182,745 2,201,430
85,000 Southern Union Co. .............. 1,641,113 1,977,950
110,000 Southwest Gas Corp. ............. 2,061,384 3,075,600
20,000 Tesoro Corp. .................... 140,933 600,000
4,000 Toreador Resources Corp.+ ....... 15,250 31,120
See accompanying notes to financial statements.
6
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- MARCH 31, 2008 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ -------------- --------------
COMMON STOCKS (CONTINUED)
ENERGY AND UTILITIES (CONTINUED)
6,000 Union Drilling Inc.+ ............ $ 83,892 $ 104,940
10,000 Vestas Wind Systems A/S+ ........ 89,988 1,092,434
10,000 W-H Energy Services Inc.+ ....... 212,864 688,500
195,000 Westar Energy Inc. .............. 3,421,319 4,440,150
-------------- --------------
30,433,791 56,388,664
-------------- --------------
ENTERTAINMENT -- 2.0%
125,000 Aruze Corp. ..................... 2,945,400 3,862,360
42,500 Canterbury Park
Holding Corp. ................ 594,314 401,625
45,000 Carmike Cinemas Inc. ............ 431,520 462,600
6,048 Chestnut Hill Ventures+ (b) ..... 164,590 170,238
20,000 Discovery Holding Co., Cl. A+ ... 477,503 424,400
201,000 Dover Motorsports Inc. .......... 1,104,623 1,236,150
108,000 Fisher Communications Inc.+ ..... 5,806,649 3,365,280
581,466 Gemstar-TV Guide
International Inc.+ .......... 3,218,348 2,732,890
16,000 International Speedway Corp.,
Cl. A ........................ 515,479 659,200
2,500 International Speedway Corp.,
Cl. B ........................ 45,000 101,625
1,000 Liberty Media Corp. -
Entertainment, Cl. A+ ........ 13,208 22,640
280,000 Six Flags Inc.+ ................. 1,414,739 459,200
178,600 Take-Two Interactive
Software Inc.+ ............... 4,602,533 4,557,872
95,030 Triple Crown Media Inc.+ ........ 802,174 265,134
50,000 World Wrestling
Entertainment Inc., Cl. A .... 581,121 930,500
30,000 WPT Enterprises Inc.+ ........... 203,513 43,500
-------------- --------------
22,920,714 19,695,214
-------------- --------------
ENVIRONMENTAL SERVICES -- 1.0%
200,000 Allied Waste Industries Inc.+ ... 1,943,361 2,162,000
10,000 Basin Water Inc.+ ............... 84,528 57,400
2,500 Renegy Holdings Inc.+ ........... 16,031 10,750
262,500 Republic Services Inc. .......... 2,490,315 7,675,500
-------------- --------------
4,534,235 9,905,650
-------------- --------------
EQUIPMENT AND SUPPLIES -- 12.4%
15,000 A.O. Smith Corp., Cl. A ......... 336,569 521,250
249,000 AMETEK Inc. ..................... 996,986 10,933,590
425,000 Baldwin Technology Co. Inc.,
Cl. A+ ....................... 1,353,684 1,092,250
25,000 Belden Inc. ..................... 279,400 883,000
5,000 C&D Technologies Inc.+ .......... 51,765 25,100
50,000 Capstone Turbine Corp.+ ......... 103,400 106,000
253,000 CIRCOR International Inc. ....... 5,138,983 11,701,250
400,000 CLARCOR Inc. .................... 2,448,277 14,220,000
200,000 Core Molding
Technologies Inc.+ ........... 299,389 1,425,000
MARKET
SHARES COST VALUE
------ -------------- --------------
170,000 Crown Holdings Inc.+ ............ $ 687,034 $ 4,277,200
2,000 Danaher Corp. ................... 34,106 152,060
66,000 Donaldson Co. Inc. .............. 761,576 2,658,480
225,000 Enodis plc ...................... 756,230 621,812
90,000 Entegris Inc.+ .................. 708,040 647,100
40,000 Fedders Corp.+ .................. 10,068 360
174,000 Flowserve Corp. ................. 3,239,900 18,162,120
160,000 Franklin Electric Co. Inc. ...... 1,496,658 5,467,200
22,000 Gehl Co.+ ....................... 462,399 372,680
151,000 Gerber Scientific Inc.+ ......... 1,472,095 1,342,390
84,000 Graco Inc. ...................... 928,834 3,045,840
250,000 GrafTech International Ltd.+ .... 2,524,711 4,052,500
90,000 IDEX Corp. ...................... 556,738 2,762,100
30,000 Interpump Group SpA ............. 117,824 287,728
1,200 Itron Inc.+ ..................... 83,560 108,276
4,000 Jarden Corp.+ ................... 11,351 86,960
9,000 K-Tron International Inc.+ ...... 85,088 1,080,990
64,000 L.S. Starrett Co., Cl. A ........ 1,091,156 1,231,360
30,000 Littelfuse Inc.+ ................ 611,444 1,049,100
107,000 Lufkin Industries Inc. .......... 1,029,240 6,828,740
55,000 Maezawa Kyuso
Industries Co. Ltd. .......... 359,609 1,045,596
35,554 Met-Pro Corp. ................... 192,459 398,916
2,000 Middleby Corp.+ ................. 37,310 124,780
20,800 Mueller Industries Inc. ......... 661,915 600,080
10,000 Plantronics Inc. ................ 246,559 193,100
88,000 Robbins & Myers Inc. ............ 967,454 2,873,200
95,000 SL Industries Inc.+ ............. 1,114,953 1,890,500
5,000 Teleflex Inc. ................... 76,167 238,550
180,000 Tennant Co. ..................... 4,093,798 7,165,800
318,750 The Gorman-Rupp Co. ............. 6,126,194 10,483,687
5,000 Valmont Industries Inc. ......... 40,625 439,450
60,000 Vicor Corp. ..................... 715,458 716,400
7,875 Watsco Inc., Cl. B .............. 23,627 326,813
90,000 Watts Water Technologies Inc.,
Cl. A ........................ 1,777,805 2,522,700
61,050 Wolverine Tube Inc.+ ............ 201,570 51,282
-------------- --------------
44,312,008 124,213,290
-------------- --------------
FINANCIAL SERVICES -- 4.3%
10,200 Alleghany Corp.+ ................ 1,731,082 3,483,300
25,287 Argo Group International
Holdings Ltd.+ ............... 844,293 898,194
100,000 Bank of Florida Corp.+ .......... 1,294,226 1,014,000
87,000 BKF Capital Group Inc.+ ......... 1,119,917 167,040
422,800 CNA Surety Corp.+ ............... 4,898,999 6,502,664
21,000 Crazy Woman Creek
Bancorp Inc................... 325,590 407,400
17,813 Deerfield Capital Corp. ......... 25,294 25,116
10,000 Duff & Phelps Corp., Cl. A+ ..... 158,736 179,900
37,000 Epoch Holding Corp. ............. 63,098 443,260
See accompanying notes to financial statements.
7
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- MARCH 31, 2008 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ -------------- --------------
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
3,000 Federal Agricultural
Mortgage Corp., Cl. C ........ $ 24,000 $ 78,300
175,000 Flushing Financial Corp. ........ 2,721,158 3,076,500
205,000 Franklin Bank Corp.+ ............ 4,073,434 621,150
2,000 KBW Inc.+ ....................... 40,585 44,100
70,000 LaBranche & Co. Inc.+ ........... 646,126 304,500
1,000 LandAmerica Financial
Group Inc. ................... 12,175 39,470
3,000 Leucadia National Corp. ......... 24,354 135,660
75,000 MVC Capital Inc. ................ 861,134 1,143,000
225,000 Nara Bancorp Inc. ............... 2,756,543 2,922,750
3,000 NetBank Inc.+ ................... 6,056 54
135,000 NewAlliance Bancshares Inc. ..... 1,912,557 1,655,100
6,000 Och-Ziff Capital Management
Group LLC, Cl. A ............. 145,218 126,000
10,000 PrivateBancorp Inc. ............. 306,851 314,700
145,320 Sterling Bancorp ................ 2,392,075 2,256,820
60,000 Sterling Financial Corp. ........ 1,000,493 1,047,000
125,000 SWS Group Inc. .................. 2,412,738 1,528,750
107,500 The Midland Co. ................. 822,713 6,979,975
4,500 Value Line Inc. ................. 183,817 206,550
150,000 Waddell & Reed Financial Inc.,
Cl. A ........................ 4,642,735 4,819,500
63,600 Wilmington Trust Corp. .......... 1,990,755 1,977,960
-------------- --------------
37,436,752 42,398,713
-------------- --------------
FOOD AND BEVERAGE -- 5.3%
28,500 Boston Beer Co. Inc., Cl. A+ .... 446,357 1,354,890
25,000 Brown-Forman Corp., Cl. A ....... 697,122 1,731,000
200,000 Bull-Dog Sauce Co. Ltd. ......... 658,452 511,637
100 Compania Cervecerias
Unidas SA, ADR ............... 2,455 3,534
200,000 CoolBrands International Inc.+ .. 201,970 163,671
34,000 Corn Products International
Inc. ......................... 548,898 1,262,760
260,000 Davide Campari-Milano SpA ....... 2,616,561 2,522,379
155,000 Del Monte Foods Co. ............. 1,477,478 1,477,150
85,000 Denny's Corp.+ .................. 132,581 253,300
1,200,000 Dynasty Fine Wines Group Ltd. ... 403,579 260,580
100 Embotelladora Andina SA,
Cl. A, ADR ................... 1,295 1,925
25,000 Farmer Brothers Co. ............. 389,323 578,500
330,000 Flowers Foods Inc. .............. 1,916,058 8,167,500
500 Genesee Corp., Cl. A+ (b) ....... 0 0
21,500 Genesee Corp., Cl. B+ (b) ....... 15,393 0
701,500 Grupo Continental SAB de CV+ .... 1,058,724 1,697,270
10,000 Hain Celestial Group Inc.+ ...... 184,774 295,000
140,000 ITO EN Ltd. ..................... 3,039,334 2,477,528
25,000 ITO EN Ltd., Preference ......... 531,595 282,404
25,000 J & J Snack Foods Corp. ......... 577,813 686,750
350,000 Kikkoman Corp. .................. 3,180,129 4,301,264
MARKET
SHARES COST VALUE
------ -------------- --------------
100,000 Lifeway Foods Inc.+ ............. $ 896,450 $ 1,068,000
20,000 Meiji Seika Kaisha Ltd. ......... 87,470 101,725
40,000 MGP Ingredients Inc. ............ 278,545 279,600
160,000 Morinaga Milk Industry
Co. Ltd. ..................... 666,865 489,567
15,000 Nathan's Famous Inc.+ ........... 155,721 210,000
122,850 Nissin Food Products Co. Ltd. ... 4,244,502 4,141,011
20,000 NuCo2 Inc.+ ..................... 562,688 555,400
4,000 Omni Nutraceuticals Inc.+ ....... 13,563 3
80,000 PepsiAmericas Inc. .............. 1,798,266 2,042,400
56,000 Ralcorp Holdings Inc.+ .......... 999,311 3,256,400
140,000 Rock Field Co. Ltd. ............. 2,262,956 2,213,483
60,000 Smart Balance Inc.+ ............. 568,588 474,000
14,300 The Cheesecake Factory Inc.+ .... 106,751 311,597
66,000 The J.M. Smucker Co. ............ 1,599,230 3,340,260
85,190 Tootsie Roll Industries Inc. .... 1,712,813 2,146,788
49,000 Triarc Cos. Inc., Cl. A ......... 348,372 308,700
119,000 Triarc Cos. Inc., Cl. B ......... 1,016,318 822,290
2,000 Vina Concha Y Toro SA, ADR ...... 54,957 73,520
1,000 Willamette Valley
Vineyards Inc.+ .............. 3,994 7,250
100,000 YAKULT HONSHA Co. Ltd. .......... 2,539,866 3,099,920
-------------- --------------
37,997,117 52,970,956
-------------- --------------
HEALTH CARE -- 8.9%
375,000 Advanced Medical
Optics Inc.+ ................. 12,458,208 7,612,500
47,000 Align Technology Inc.+ .......... 409,536 522,170
100,000 Allergan Inc. ................... 1,964,408 5,639,000
138,000 Alpharma Inc., Cl. A+ ........... 3,198,529 3,616,980
175,000 AngioDynamics Inc.+ ............. 2,960,164 2,023,000
5,000 Anika Therapeutics Inc.+ ........ 64,475 42,400
215,000 Animal Health
International Inc.+ .......... 2,557,725 2,352,100
65,000 ArthroCare Corp.+ ............... 1,937,039 2,167,750
7,500 Bio-Rad Laboratories Inc.,
Cl. A+ ....................... 296,935 667,125
30,000 BioLase Technology Inc.+ ........ 102,764 92,700
9,000 Bruker Corp.+ ................... 34,729 138,510
112,000 Chemed Corp. .................... 1,802,990 4,726,400
74,400 CONMED Corp.+ ................... 1,963,103 1,907,616
190,000 Crucell NV, ADR+ ................ 3,746,685 2,927,900
215,000 Cutera Inc.+ .................... 3,762,183 2,896,050
100,000 Del Global
Technologies Corp.+ .......... 306,703 235,000
100,000 DexCom Inc.+ .................... 1,179,570 414,000
90,000 Edwards Lifesciences Corp.+ ..... 3,180,397 4,009,500
68,000 Exactech Inc.+ .................. 982,431 1,712,920
42,000 Henry Schein Inc.+ .............. 739,631 2,410,800
100,000 ICU Medical Inc.+ ............... 2,851,239 2,877,000
15,000 IMS Health Inc. ................. 412,500 315,150
See accompanying notes to financial statements.
8
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- MARCH 31, 2008 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ -------------- --------------
COMMON STOCKS (CONTINUED)
HEALTH CARE (CONTINUED)
2,000 Integra LifeSciences
Holdings Corp.+ .............. $ 43,600 $ 86,940
3,000 Invacare Corp. .................. 73,652 66,840
30,000 Inverness Medical
Innovations Inc.+ ............ 554,733 903,000
25,000 Invitrogen Corp.+ ............... 1,286,160 2,136,750
10,000 K-V Pharmaceutical Co.,
Cl. A+ ....................... 286,714 249,600
45,000 Mentor Corp. .................... 1,439,762 1,157,400
60,000 Micrus Endovascular Corp.+ ...... 943,894 741,600
40,000 MWI Veterinary Supply Inc.+ ..... 972,736 1,410,400
16,000 Nabi Biopharmaceuticals+ ........ 109,645 64,320
4,000 NeoPharm Inc.+ .................. 21,310 2,241
10,000 NeuroMetrix Inc.+ ............... 67,433 18,200
800 Nobel Biocare Holding AG ........ 61,643 186,084
200,000 Odyssey HealthCare Inc.+ ........ 2,203,256 1,800,000
50,000 Opko Health Inc.+ ............... 164,099 104,000
54,000 Orthofix International NV+ ...... 2,056,097 2,147,580
2,000 OrthoLogic Corp.+ ............... 6,750 1,700
35,000 Owens & Minor Inc. .............. 692,324 1,376,900
120,000 Pain Therapeutics Inc.+ ......... 1,086,242 1,014,000
220,000 Palomar Medical
Technologies Inc.+ ........... 4,170,333 3,322,000
101,500 Penwest
Pharmaceuticals Co.+ ......... 1,136,172 263,900
30,000 PSS World Medical Inc.+ ......... 367,273 499,800
1,779 Qiagen NV+ ...................... 7,992 37,003
205,000 Quidel Corp.+ ................... 1,712,623 3,292,300
120,000 RTI Biologics Inc.+ ............. 1,178,032 1,134,000
8,000 Sirona Dental Systems Inc.+ ..... 95,126 215,760
20,000 SNIA SpA+ ....................... 41,661 17,240
140,000 Sonic Innovations Inc.+ ......... 646,693 676,200
2,600,000 Sorin SpA+ ...................... 7,847,452 4,227,909
1,100,000 SSL International plc ........... 8,745,703 9,900,372
2,300 Straumann Holding AG ............ 206,988 656,580
4,200 Stryker Corp. ................... 162,570 273,210
40,000 Thoratec Corp.+ ................. 478,455 571,600
30,000 United-Guardian Inc. ............ 275,421 307,200
60,000 Vascular Solutions Inc.+ ........ 480,529 367,800
1,000 Wright Medical Group Inc.+ ...... 16,460 24,140
10,000 Young Innovations Inc. .......... 237,253 173,200
15,000 Zymogenetics Inc.+ .............. 177,307 147,000
-------------- --------------
86,966,037 88,881,340
-------------- --------------
HOME FURNISHINGS -- 0.0%
12,000 Bassett Furniture Industries
Inc. ......................... 192,256 148,080
4,000 Bed Bath & Beyond Inc.+ ......... 11,125 118,000
250 Foamex International Inc.+ ...... 8,062 408
18,000 La-Z-Boy Inc. ................... 160,438 150,120
-------------- --------------
371,881 416,608
-------------- --------------
MARKET
SHARES COST VALUE
------ -------------- --------------
HOTELS AND GAMING -- 2.2%
12,000 Boyd Gaming Corp. ............... $ 90,225 $ 240,000
78,000 Churchill Downs Inc. ............ 2,596,841 3,684,720
100,000 Dover Downs Gaming &
Entertainment Inc. ........... 666,063 851,000
170,000 Gaylord Entertainment Co.+ ...... 5,025,021 5,149,300
28,000 Home Inns & Hotels
Management Inc., ADR+ ........ 709,811 551,320
140,000 Lakes Entertainment Inc.+ ....... 717,933 618,800
10,000 Las Vegas Sands Corp.+ .......... 778,331 736,400
110,000 Magna Entertainment Corp.,
Cl. A+ ....................... 620,140 37,400
35,000 Marcus Corp. .................... 627,819 672,000
40,000 Orient-Express Hotels Ltd.,
Cl. A ........................ 1,854,955 1,726,400
52,000 Penn National Gaming Inc.+ ...... 134,938 2,273,960
125,000 Pinnacle
Entertainment Inc.+ .......... 1,680,650 1,600,000
90,488 Sonesta International
Hotels Corp., Cl. A .......... 2,573,461 2,239,578
16,000 Wynn Resorts Ltd. ............... 135,778 1,610,240
20,000 Youbet.com Inc.+ ................ 51,494 16,200
-------------- --------------
18,263,460 22,007,318
-------------- --------------
MANUFACTURED HOUSING AND RECREATIONAL VEHICLES -- 1.1%
50,000 Cavalier Homes Inc.+ ............ 95,636 79,000
58,000 Cavco Industries Inc.+ .......... 1,127,032 2,032,320
340,000 Champion Enterprises Inc.+ ...... 3,532,538 3,410,200
17,000 Drew Industries Inc.+ ........... 296,303 415,820
210,000 Fleetwood Enterprises Inc.+ ..... 2,603,146 966,000
55,000 Monaco Coach Corp. .............. 1,196,024 521,400
13,400 Nobility Homes Inc. ............. 262,206 234,500
136,000 Skyline Corp. ................... 4,410,274 3,783,520
-------------- --------------
13,523,159 11,442,760
-------------- --------------
METALS AND MINING -- 0.8%
52,003 Barrick Gold Corp. .............. 1,522,648 2,259,530
10,000 Inmet Mining Corp. .............. 325,911 730,674
15,000 Ivanhoe Mines Ltd.+ ............. 111,730 154,800
142,115 Kinross Gold Corp. .............. 984,488 3,142,163
2,000 Northwest Pipe Co.+ ............. 55,888 84,980
190,000 Royal Oak Mines Inc.+ (b) ....... 322,487 0
30,148 Stillwater Mining Co.+ .......... 389,561 466,389
52,000 Uranium Resources Inc.+ ......... 287,137 311,480
22,350 Yamana Gold Inc. ................ 75,630 326,757
-------------- --------------
4,075,480 7,476,773
-------------- --------------
PAPER AND FOREST PRODUCTS -- 0.1%
18,000 Schweitzer-Mauduit
International Inc. ........... 424,690 416,520
25,000 Wausau Paper Corp. .............. 303,338 206,500
-------------- --------------
728,028 623,020
-------------- --------------
See accompanying notes to financial statements.
9
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- MARCH 31, 2008 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ -------------- --------------
COMMON STOCKS (CONTINUED)
PUBLISHING -- 1.4%
2,500 AH Belo Corp., Cl. A+ ........... $ 36,780 $ 28,575
4,000 Belo Corp., Cl. A ............... 62,018 42,280
160,000 Il Sole 24 Ore+ ................. 968,808 1,009,141
307,237 Independent News & Media plc .... 431,671 1,008,909
12,000 John Wiley & Sons Inc., Cl. B ... 46,500 473,520
375,000 Journal Communications Inc.,
Cl. A ........................ 3,769,669 2,767,500
70,000 Journal Register Co. ............ 234,396 38,500
50,000 Lee Enterprises Inc. ............ 812,427 500,500
50,000 McClatchy Co., Cl. A ............ 1,525,655 535,000
110,000 Media General Inc., Cl. A ....... 2,830,961 1,542,200
23,000 Meredith Corp. .................. 429,183 879,750
260,000 News Corp., Cl. A ............... 765,310 4,875,000
80,333 PRIMEDIA Inc. ................... 1,280,186 590,447
-------------- --------------
13,193,564 14,291,322
-------------- --------------
REAL ESTATE -- 0.9%
172,100 Griffin Land & Nurseries Inc. ... 2,278,599 5,935,729
9,000 Gyrodyne Co. of America Inc.+ ... 135,071 361,125
20,000 Malan Realty Investors
Inc.+ (b) .................... 53,529 390
106,000 Morguard Corp. .................. 1,344,892 3,098,056
-------------- --------------
3,812,091 9,395,300
-------------- --------------
RETAIL -- 2.5%
144,000 Aaron Rents Inc., Cl. A ......... 521,690 2,736,000
50,000 Big 5 Sporting Goods Corp. ...... 834,145 438,500
8,000 Casey's General Stores Inc. ..... 124,503 180,800
270,000 Coldwater Creek Inc.+ ........... 1,654,580 1,363,500
45,000 Copart Inc.+ .................... 1,358,442 1,744,200
364,700 CSK Auto Corp.+ ................. 3,833,863 3,395,357
4,000 Gander Mountain Co.+ ............ 32,640 24,320
250,000 Ingles Markets Inc., Cl. A ...... 4,113,943 6,147,500
35,000 Movado Group Inc. ............... 515,027 682,150
30,000 Pier 1 Imports Inc.+ ............ 202,215 188,400
22,000 Rush Enterprises Inc., Cl. B+ ... 332,286 322,960
250,000 The Bon-Ton Stores Inc. ......... 1,998,967 1,367,500
255,000 The Steak n Shake Co.+ .......... 3,297,198 2,006,850
45,000 Tractor Supply Co.+ ............. 1,815,959 1,778,400
6,000 Village Super Market Inc.,
Cl. A ........................ 272,152 309,000
44,000 Weis Markets Inc. ............... 1,323,449 1,516,680
25,000 Winn-Dixie Stores Inc.+ ......... 445,808 449,000
-------------- --------------
22,676,867 24,651,117
-------------- --------------
SPECIALTY CHEMICALS -- 4.9%
60,000 A. Schulman Inc. ................ 1,199,761 1,231,800
24,000 Airgas Inc. ..................... 150,350 1,091,280
78,000 Albemarle Corp. ................. 1,104,310 2,848,560
MARKET
SHARES COST VALUE
------ -------------- --------------
35,000 Arch Chemicals Inc. ............. $ 766,922 $ 1,304,100
580,000 Chemtura Corp. .................. 5,756,417 4,257,200
10,000 Cytec Industries Inc. ........... 278,296 538,500
3,200 Dionex Corp.+ ................... 96,000 246,368
260,000 Ferro Corp. ..................... 5,609,101 3,863,600
236,000 H.B. Fuller Co. ................. 2,083,971 4,816,760
123,000 Hawkins Inc. .................... 1,787,715 1,869,600
450,000 Hercules Inc. ................... 4,892,305 8,230,500
145,000 Material Sciences Corp.+ ........ 1,346,282 1,125,200
160,000 Omnova Solutions Inc.+ .......... 970,604 638,400
50,000 Penford Corp. ................... 539,601 1,086,500
10,000 Quaker Chemical Corp. ........... 181,137 312,900
23,000 Rockwood Holdings Inc.+ ......... 853,750 753,710
265,000 Sensient Technologies Corp. ..... 5,389,956 7,814,850
450,000 Zep Inc. ........................ 6,196,193 7,299,000
-------------- --------------
39,202,671 49,328,828
-------------- --------------
TELECOMMUNICATIONS -- 1.1%
23,000 Atlantic Tele-Network Inc. ...... 92,644 778,090
300,000 Cincinnati Bell Inc.+ ........... 1,006,471 1,278,000
30,000 Citizens Communications Co. ..... 440,400 314,700
6,795 Community Service
Communications Inc.+ ......... 0 19,196
105 Consolidated Communications
Holdings Inc. ................ 2,001 1,588
46,000 D&E Communications Inc. ......... 592,050 409,400
55,000 HickoryTech Corp. ............... 506,308 449,350
50,825 New Ulm Telecom Inc. ............ 625,883 546,369
118,000 Rogers Communications Inc.,
Cl. B ........................ 569,865 4,238,560
63,000 Shenandoah
Telecommunications Co. ....... 373,895 934,920
37,584 Verizon Communications Inc. ..... 905,273 1,369,937
24,000 Windstream Corp. ................ 25,072 286,800
53,000 Winstar
Communications Inc.+ (b) ..... 133 53
-------------- --------------
5,139,995 10,626,963
-------------- --------------
TRANSPORTATION -- 0.8%
170,000 GATX Corp. ...................... 5,286,254 6,641,900
125,000 Grupo TMM SA, Cl. A, ADR+ ....... 875,461 250,000
2,000 Irish Continental Group plc+ .... 17,409 73,507
37,000 Providence and Worcester
Railroad Co. ................. 636,416 712,250
-------------- --------------
6,815,540 7,677,657
-------------- --------------
WIRELESS COMMUNICATIONS -- 2.6%
100,000 Centennial
Communications Corp.+ ........ 726,670 591,000
100,000 Nextwave Wireless Inc.+ ......... 758,861 505,000
72,000 Price Communications Corp.,
Escrow+ (b) .................. 0 0
100,000 Rural Cellular Corp., Cl. A+ .... 2,361,364 4,423,000
See accompanying notes to financial statements.
10
THE GABELLI SMALL CAP GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- MARCH 31, 2008 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ -------------- --------------
COMMON STOCKS (CONTINUED)
WIRELESS COMMUNICATIONS (CONTINUED)
685,000 Vimpel-Communications, ADR ...... $ 1,162,023 $ 20,474,650
17 Xanadoo Co.+ .................... 4,148 7,480
-------------- --------------
5,013,066 26,001,130
-------------- --------------
TOTAL COMMON STOCKS ............. 626,006,953 882,754,440
-------------- --------------
PREFERRED STOCKS -- 0.1%
BROADCASTING -- 0.0%
1,103 PTV Inc., 10.000% Pfd., Ser. A .. 0 386
-------------- --------------
BUSINESS SERVICES -- 0.0%
24,317 Interep National Radio Sales Inc.,
4.000% Cv. Pfd.,
Ser. A+ (b)(c)(d) ............ 2,163,146 48,635
-------------- --------------
DIVERSIFIED INDUSTRIAL -- 0.1%
142 Foster Wheeler Ltd., 0.000%
Pfd., Ser. B+ (b) ............ 35,792 1,045,205
-------------- --------------
TOTAL PREFERRED STOCKS .......... 2,198,938 1,094,226
-------------- --------------
RIGHTS -- 0.0%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.0%
800,000 Exide Technologies,
expire 05/05/11
Escrow Rights+(b) ............ 0 0
-------------- --------------
WARRANTS -- 0.1%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.0%
1,213 Exide Technologies,
expire 05/05/11+ ............. 2,247 1,395
4,532 Federal-Mogul Corp.,
expire 12/27/14+ ............. 87,700 16,087
-------------- --------------
89,947 17,482
-------------- --------------
BROADCASTING -- 0.0%
6,082 Granite Broadcasting Corp.,
Ser. A, expire 06/04/12+ ..... 0 1,825
3,430 Granite Broadcasting Corp.,
Ser. B, expire 06/04/12+ ..... 0 857
-------------- --------------
0 2,682
-------------- --------------
BUSINESS SERVICES -- 0.1%
161,431 GP Strategies Corp.,
expire 08/14/08+ (b)(c) ...... 391,882 598,919
-------------- --------------
DIVERSIFIED INDUSTRIAL -- 0.0%
379,703 National Patent Development Corp.,
expire 08/14/08+ (b)(c) ...... 0 6,774
-------------- --------------
HEALTH CARE -- 0.0%
14,424 Del Global Technologies Corp.,
expire 03/28/09+ ............. 24,809 19,472
-------------- --------------
TELECOMMUNICATIONS -- 0.0%
86 Virgin Media Inc.,
expire 01/10/11+ ............. 124 8
-------------- --------------
TOTAL WARRANTS .................. 506,762 645,337
-------------- --------------
PRINCIPAL MARKET
AMOUNT COST VALUE
- ------------ -------------- --------------
CORPORATE BONDS -- 0.1%
BUSINESS SERVICES -- 0.1%
$ 1,430,098 GP Strategies Corp., Sub. Deb.,
6.000%, 08/14/08 (b)(c) ...... $ 1,269,293 $ 1,282,481
-------------- --------------
COMPUTER SOFTWARE AND SERVICES -- 0.0%
300,000 Exodus Communications Inc.,
Sub. Deb. Cv.,
5.250%, 02/15/09+ (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 ........... 1,270,478 1,282,481
-------------- --------------
U.S. GOVERNMENT OBLIGATIONS -- 10.9%
108,801,000 U.S. Treasury Bills,
0.446% to 2.181%++,
04/03/08 to 09/18/08 ......... 108,378,486 108,320,552
-------------- --------------
TOTAL
INVESTMENTS -- 99.6% ......... $ 738,361,617 994,097,036
==============
OTHER ASSETS AND LIABILITIES (NET) -- 0.4% ...... 4,315,746
--------------
NET ASSETS -- 100.0% ............................ $ 998,412,782
==============
- ----------
(a) Security considered an affiliated holding because the Fund owns at least
5% of its 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 March 31, 2008, the
market value of fair valued securities amounted to $3,176,699 or 0.32% of
total net assets.
(c) At March 31, 2008, the Fund held investments in restricted and illiquid
securities amounting to $1,936,809 or 0.19% of total net assets, which
were valued under methods approved by the Board, as follows:
PRINCIPAL 03/31/08
AMOUNT/ CARRYING
ACQUISITION ACQUISITION ACQUISITION VALUE
SHARES ISSUER DATE COST PER UNIT
- ------------ ---------------------------------- ----------- ----------- ---------
$ 1,430,098 GP Strategies Corp., Sub. Deb.,
Cv., 6.000%, 08/14/08 ......... 08/08/03 $ 974,565 $ 89.6778
161,431 GP Strategies Corp.
warrants expire 08/14/08 ...... 08/08/03 391,882 3.7101
24,317 Interep National Radio Sales Inc.,
4.000% Cv. Pfd., Ser. A ....... 05/03/02 2,163,146 2.0000
379,703 National Patent Development Corp.
warrants expire 08/14/08 ...... 11/24/04 0.00 0.0178
(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 March 31,
2008, the market value of the Rule 144A security amounted to $48,635 or
0.00% of total net assets.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR American Depositary Receipt
See accompanying notes to financial statements.
11
THE GABELLI SMALL CAP GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2008 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (cost $735,615,602) .............. $ 992,866,060
Investments in affiliates, at value (cost $2,746,015) .. 1,230,976
Cash ................................................... 2,517
Foreign currency, at value (cost $27,041) .............. 25,976
Receivable for investments sold ........................ 4,006,628
Receivable for Fund shares sold ........................ 2,854,706
Dividends and interest receivable ...................... 922,828
Prepaid expenses ....................................... 80,598
---------------
TOTAL ASSETS ........................................... 1,001,990,289
---------------
LIABILITIES:
Payable for investments purchased ...................... 1,415,892
Payable for Fund shares redeemed ....................... 831,872
Payable for investment advisory fees ................... 832,741
Payable for distribution fees .......................... 217,730
Payable for accounting fees ............................ 3,750
Unrealized depreciation on swap contracts .............. 1,119
Other accrued expenses ................................. 274,403
---------------
TOTAL LIABILITIES ...................................... 3,577,507
---------------
NET ASSETS applicable to 33,809,331 shares
outstanding ......................................... $ 998,412,782
===============
NET ASSETS CONSIST OF:
Paid-in capital, each class at $0.001 par value ........ $ 714,040,132
Accumulated net investment loss ........................ (193,456)
Accumulated net realized gain on investments, swap
contracts, and foreign currency transactions ......... 28,830,140
Net unrealized appreciation on investments ............. 255,735,419
Net unrealized depreciation on swap contracts .......... (1,119)
Net unrealized appreciation on foreign currency
translations ......................................... 1,666
---------------
NET ASSETS ............................................. $ 998,412,782
===============
SHARES OF CAPITAL STOCK:
CLASS AAA:
Net Asset Value, offering, and redemption price per
share ($960,198,990 / 32,495,535 shares
outstanding; 150,000,000 shares authorized) .......... $ 29.55
===============
CLASS A:
Net Asset Value and redemption price per share
($20,319,749 / 687,598 shares outstanding;
50,000,000 shares authorized) ........................ $ 29.55
===============
Maximum offering price per share (NAV / .9425, based
on maximum sales charge of 5.75% of the offering
price) ............................................... $ 31.35
===============
CLASS B:
Net Asset Value and offering price per share
($112,545 / 3,949 shares outstanding; 50,000,000
shares authorized) ................................... $ 28.50(a)
===============
CLASS C:
Net Asset Value and offering price per share
($16,327,131 / 573,052 shares outstanding;
50,000,000 shares authorized) ........................ $ 28.49(a)
===============
CLASS I:
Net Asset Value, offering, and redemption price per
share ($1,454,367 / 49,197 shares outstanding;
50,000,000 shares authorized) ........................ $ 29.56
===============
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2008 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends (net of foreign taxes of $27,167) ............ $ 4,872,980
Interest ............................................... 2,215,127
---------------
TOTAL INVESTMENT INCOME ................................ 7,088,107
---------------
EXPENSES:
Investment advisory fees ............................... 5,074,333
Distribution fees - Class AAA .......................... 1,229,549
Distribution fees - Class A ............................ 22,442
Distribution fees - Class B ............................ 596
Distribution fees - Class C ............................ 62,802
Shareholder services fees .............................. 478,163
Shareholder communications expenses .................... 129,391
Custodian fees ......................................... 80,269
Registration expenses .................................. 38,915
Legal and audit fees ................................... 32,603
Accounting fees ........................................ 22,500
Directors' fees ........................................ 14,086
Miscellaneous expenses ................................. 35,958
---------------
TOTAL EXPENSES ......................................... 7,221,607
Less: Custodian fee credits ............................ (10,907)
---------------
TOTAL NET EXPENSES ..................................... 7,210,700
---------------
NET INVESTMENT LOSS .................................... (122,593)
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, SWAP CONTRACTS, AND FOREIGN CURRENCY:
Net realized gain on investments - unaffiliated ........ 32,503,069
Net realized loss on investments - affiliated .......... (719)
Capital gain distributions from investment companies ... 817,783
Net realized gain on swap contracts .................... 3,986
Net realized gain on foreign currency transactions ..... 25,831
---------------
Net realized gain on investments, swap contracts,
and foreign currency transactions .................... 33,349,950
---------------
Net change in unrealized appreciation/depreciation
on investments ....................................... (139,678,809)
Net change in unrealized appreciation/depreciation
on swap contracts .................................... (1,119)
Net change in unrealized appreciation/depreciation
on foreign currency translations ..................... 1,006
---------------
Net change in unrealized appreciation/depreciation
on investments, swap contracts, and foreign
currency translations ................................ (139,678,922)
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, SWAP CONTRACTS, AND FOREIGN CURRENCY .... (106,328,972)
---------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ... $ (106,451,565)
===============
- ----------
(a) Redemption price varies based on the length of time held.
See accompanying notes to financial statements.
12
THE GABELLI SMALL CAP GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2008 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2007
---------------- ------------------
OPERATIONS:
Net investment loss ................................................ $ (122,593) $ (340,454)
Net realized gain on investments, swap contracts, and foreign
currency transactions ............................................ 33,349,950 47,039,006
Net change in unrealized appreciation/depreciation on investments,
swap contracts, and foreign currency translations ................ (139,678,922) 111,347,803
---------------- ------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .... (106,451,565) 158,046,355
---------------- ------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized gain on investments
Class AAA ........................................................ (46,324,791) (54,810,246)
Class A .......................................................... (797,034) (187,774)
Class B .......................................................... (5,830) (8,873)
Class C .......................................................... (551,250) (241,821)
---------------- ------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ................................ (47,678,905) (55,248,714)
---------------- ------------------
CAPITAL SHARE TRANSACTIONS:
Class AAA ........................................................ 107,110,053 173,228,328
Class A .......................................................... 7,523,989 12,781,396
Class B .......................................................... 5,444 (1,610)
Class C .......................................................... 8,487,400 6,620,118
Class I .......................................................... 1,487,731 --
---------------- ------------------
NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ......... 124,614,617 192,628,232
---------------- ------------------
REDEMPTION FEES .................................................... 5,866 13,640
---------------- ------------------
NET INCREASE (DECREASE) IN NET ASSETS .............................. (29,509,987) 295,439,513
NET ASSETS:
Beginning of period ................................................ 1,027,922,769 732,483,256
---------------- ------------------
End of period (including undistributed net investment income of
$0 and $0, respectively) ......................................... $ 998,412,782 $ 1,027,922,769
================ ==================
See accompanying notes to financial statements.
13
THE GABELLI SMALL CAP GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each period:
INCOME/(LOSS)
FROM INVESTMENT OPERATIONS DISTRIBUTIONS
------------------------------------------ ---------------------------
Net
Net Asset Net Realized and Total Net
Period Value, Investment Unrealized from Realized
Ended Beginning Income/ Gain/(Loss) on Investment Gain on Total
September 30 of Period (Loss)(a)(b) Investments Operations Investments Distributions
- -------------- --------- ------------ -------------- ---------- ----------- -------------
CLASS AAA
2008(c) $ 34.37 $ (0.00)(d) $ (3.27) $ (3.27) $ (1.55) $ (1.55)
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
2008(c) $ 34.37 $ (0.01) $ (3.26) $ (3.27) $ (1.55) $ (1.55)
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(g) 24.49 (0.06) 1.46 1.40 -- --
CLASS B
2008(c) $ 33.32 $ (0.12) $ (3.15) $ (3.27) $ (1.55) $ (1.55)
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(g) 24.49 (0.19) 1.44 1.25 -- --
CLASS C
2008(c) $ 33.32 $ (0.12) $ (3.16) $ (3.28) $ (1.55) $ (1.55)
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(g) 24.49 (0.20) 1.45 1.25 -- --
CLASS I
2008(h) $ 30.06 $ (0.01) $ (0.49) $ (0.50) -- --
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)(b) Expenses Rate++
- --------------- ---------- ----------- ----------- ----------- ---------- -------------- ----------
CLASS AAA
2008(c) $ 0.00(d) $ 29.55 (9.87)% $ 960,199 (0.01)%(e) 1.41%(e)(f) 17%
2007 0.00(d) 34.37 21.95 1,002,577 (0.04) 1.42 15
2006 0.00(d) 30.41 8.88 727,521 (0.09) 1.44 6
2005 0.00(d) 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
2008(c) $ 0.00(d) $ 29.55 (9.87)% $ 20,320 (0.07)%(e) 1.42%(e)(f) 17%
2007 0.00(d) 34.37 21.95 15,485 0.19 1.42 15
2006 0.00(d) 30.41 8.84 2,199 (0.08) 1.44 6
2005 0.00(d) 29.98 20.57 1,515 (0.03) 1.48 6
2004(g) -- 25.89 5.72 58 (0.32)(e) 1.42(e) 10
CLASS B
2008(c) $ 0.00(d) $ 28.50 (10.19)% $ 113 (0.76)%(e) 2.16%(e)(f) 17%
2007 0.00(d) 33.32 20.99 126 (0.81) 2.17 15
2006 0.00(d) 29.77 8.11 113 (0.85) 2.19 6
2005 0.00(d) 29.58 19.69 138 (0.79) 2.20 6
2004(g) -- 25.74 5.10 55 (1.02)(e) 2.17(e) 10
CLASS C
2008(c) $ 0.00(d) $ 28.49 (10.22)% $ 16,327 (0.79)%(e) 2.17%(e)(f) 17%
2007 0.00(d) 33.32 21.03 9,735 (0.69) 2.17 15
2006 0.00(d) 29.76 8.08 2,650 (0.83) 2.19 6
2005 0.00(d) 29.58 19.69 1,499 (0.80) 2.23 6
2004(g) -- 25.74 5.10 24 (1.07)(e) 2.17(e) 10
CLASS I
2008(h) $ 0.00(d) $ 29.56 (9.83)% $ 1,454 (0.16)%(e) 1.17%(e)(f) 17%
- ----------
+ Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the
period including reinvestment of distributions and does not reflect
applicable sales charges. Total returns for the periods of less than one
year are not annualized.
++ Effective in 2008, a change in accounting policy was adopted with regard
to the calculation of the portfolio turnover rate. Had this policy been
adopted retroactively, the portfolio turnover rate for the fiscal years
ended September 30, 2007 and 2003 would have been 21% and 7%,
respectively. The portfolio turnover rate for the fiscal years ended 2006,
2005, and 2004 would have been as shown.
(a) Per share amounts have been calculated using the average shares
outstanding method.
(b) Due to capital share activity throughout the period, net investment income
per share and the ratio to average net assets are not necessarily
correlated among the different classes of shares.
(c) For the six months ended March 31, 2008, unaudited.
(d) Amount represents less than $0.005 per share.
(e) Annualized.
(f) The ratio does not include a reduction of expenses for custodian fee
credits on cash balances maintained with the custodian. Including such
custodian fee credits, the expense ratio for the six months ended March
31, 2008 would have been 1.41% (Class AAA and Class A), 2.16% (Class B and
Class C), and 1.16% (Class I), respectively.
(g) From the commencement of offering Class A, Class B, and Class C Shares on
December 31, 2003.
(h) From the commencement of offering Class I Shares on January 11, 2008
through March 31, 2008.
See accompanying notes to financial statements.
14
THE GABELLI SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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.
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
15
THE GABELLI SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
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. As of March 31, 2008, the adoption of
SFAS 157 had no impact on the amounts reported in the financial statements.
In March 2008, FASB issued Statement of Financial Accounting Standards No. 161,
"Disclosures about Derivative Instruments and Hedging Activities" ("SFAS 161")
was issued and is effective for fiscal years beginning after November 15, 2008.
SFAS 161 is intended to improve financial reporting for derivative instruments
by requiring enhanced disclosure that enables investors to understand how and
why an entity uses derivatives, how derivatives are accounted for, and how
derivative instruments affect an entity's results of operations and financial
position. Management is currently evaluating the implications of SFAS 161. The
impact on the Fund's financial statement disclosures, if any, is currently being
assessed.
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 March
31, 2008, there were no open repurchase agreements.
SWAP AGREEMENTS. The Fund may enter into equity and contract for difference swap
transactions. The use of swaps is a highly specialized activity that involves
investment techniques and risks different from those associated with ordinary
portfolio security transactions. A swap is 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 a swap transaction reaches its
scheduled termination date, there is a risk that the Fund will not be able to
obtain a replacement transaction or that the terms of the replacement will not
be as favorable as on the expiring transaction. If this occurs, it could have a
negative impact on the Fund's ability to make dividend payments.
16
THE GABELLI SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
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 a contract for difference swap with Bear, Stearns
International Limited. Details of the swap at March 31, 2008 are as follows:
NET
NOTIONAL EQUITY SECURITY INTEREST RATE/ TERMINATION UNREALIZED
AMOUNT RECEIVED EQUITY SECURITY PAID DATE DEPRECIATION
---------- ---------------- -------------------------------- ----------- ------------
Market Value Overnight LIBOR plus 40 bps plus
Appreciation on: Market Value Depreciation on:
$54,132 (10,000 Shares) Whatman plc Whatman plc 12/15/08 $ (1,119)
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 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 March 31, 2008, 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 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 March 31, 2008, 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
17
THE GABELLI SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
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.
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
18
THE GABELLI SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
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.
The tax character of distributions paid during the fiscal year ended September
30, 2007:
DISTRIBUTIONS PAID FROM:
Net long-term capital gains .. $ 55,248,714
------------
Total distributions paid ..... $ 55,248,714
============
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.
The following summarizes the tax cost of investments and the related unrealized
appreciation/(depreciation) at March 31, 2008:
GROSS GROSS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
COST APPRECIATION DEPRECIATION (DEPRECIATION)
------------- ------------- ------------- --------------
Investments ................ $ 738,665,289 $ 341,009,364 $ (86,808,593) $ 254,200,771
Investments in affiliates .. 2,746,015 -- (1,515,039) (1,515,039)
Swap contracts ............. -- -- (1,119) (1,119)
------------- ------------- ------------- --------------
$ 741,411,304 $ 341,009,364 $ (88,324,751) $ 252,684,613
============= ============= ============= ==============
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.
For the six months ended March 31, 2008, the Fund did not have any liability for
any unrecognized tax benefits. The Fund recognizes interest and penalties, if
any, related to unrecognized tax benefits as income tax expenses in the
Statement of Operations. The Fund is not subject to examination by U.S. federal
tax authorities for tax years before 2003 and by state tax authorities for tax
years before 2002.
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
19
THE GABELLI SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
for the Fund's portfolio, oversees the administration of all aspects of the
Fund's business and affairs, and pays the compensation of all Officers and
Directors of the Fund who are affiliated persons of the Adviser.
The Corporation pays each Director who is not considered 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, except for Class I 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 six months ended March 31, 2008, other than short-term securities and U.S.
Government obligations, aggregated $207,088,864 and $114,022,496, respectively.
Purchases and proceeds from the sales of U.S. Government obligations for the six
months ended March 31, 2008, other than short-term obligations, aggregated
$40,068,750 and $40,021,875, respectively.
6. TRANSACTIONS WITH AFFILIATES. During the six months ended March 31, 2008, the
Fund paid brokerage commissions on security trades of $222,882 to Gabelli &
Company. Additionally, Gabelli & Company informed the Fund that it received
$24,001 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 six months
ended March 31, 2008, the Fund paid or accrued $22,500 to the Adviser in
connection with the cost of computing the Fund's NAV.
7. LINE OF CREDIT. The Fund participates in an unsecured line of credit of up to
$75,000,000, and may borrow up to 10% of its net assets from the custodian for
temporary borrowing purposes. 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. During the six
months ended March 31, 2008, there were no borrowings outstanding under the line
of credit.
8. CAPITAL STOCK TRANSACTIONS. The Fund currently offers five classes of shares
- - Class AAA Shares, Class A Shares, Class B Shares, Class C Shares, and Class I
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 I Shares are offered to foundations,
endowments, institutions, and employee benefit plans. 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
20
THE GABELLI SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
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. Class I Shares were first issued on January 11, 2008.
The Fund imposes a redemption fee of 2.00% on all classes of shares that are
redeemed or exchanged on or before the seventh day after the date of a purchase.
The redemption fee is deducted from the proceeds otherwise payable to the
redeeming shareholders and is retained by the Fund. The redemption fees retained
by the Fund during the six months ended March 31, 2008 and the fiscal year ended
September 30, 2007 amounted to $5,866 and $13,640, respectively.
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:
SIX MONTHS ENDED
MARCH 31, 2008 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2007
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- --------------
CLASS AAA CLASS AAA
---------------------------- ----------------------------
Shares sold ....................................... 5,610,384 $ 178,234,613 9,055,569 $ 300,679,400
Shares issued upon reinvestment of distributions .. 1,383,508 44,189,238 1,662,686 51,559,994
Shares redeemed ................................... (3,670,353) (115,313,798) (5,467,632) (179,011,066)
----------- -------------- ----------- --------------
Net increase ................................... 3,323,539 $ 107,110,053 5,250,623 $ 173,228,328
=========== ============== =========== ==============
CLASS A CLASS A
---------------------------- ----------------------------
Shares sold ....................................... 268,057 $ 8,449,627 394,109 $ 13,318,089
Shares issued upon reinvestment of distributions .. 23,670 756,001 5,751 178,354
Shares redeemed ................................... (54,701) (1,681,639) (21,600) (715,047)
----------- -------------- ----------- --------------
Net increase ................................... 237,026 $ 7,523,989 378,260 $ 12,781,396
=========== ============== =========== ==============
CLASS B CLASS B
---------------------------- ----------------------------
Shares issued upon reinvestment of distributions .. 189 $ 5,830 294 $ 8,873
Shares redeemed ................................... (14) (386) (326) (10,483)
----------- -------------- ----------- --------------
Net increase (decrease) ........................ 175 $ 5,444 (32) $ (1,610)
=========== ============== =========== ==============
CLASS C CLASS C
---------------------------- ----------------------------
Shares sold ....................................... 292,907 $ 8,815,710 214,901 $ 7,004,093
Shares issued upon reinvestment of distributions .. 17,152 529,496 7,732 233,806
Shares redeemed ................................... (29,227) (857,806) (19,457) (617,781)
----------- -------------- ----------- --------------
Net increase ................................... 280,832 $ 8,487,400 203,176 $ 6,620,118
=========== ============== =========== ==============
CLASS I*
----------------------------
Shares sold ....................................... 50,133 $ 1,514,820
Shares redeemed ................................... (936) (27,089)
----------- --------------
Net increase ................................... 49,197 $ 1,487,731
=========== ==============
- ----------
* From the commencement of offering Class I Shares on January 11, 2008.
21
THE GABELLI SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
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 six months
ended March 31, 2008 is set forth below:
NET CHANGE PERCENT
IN UNREALIZED VALUE AT OWNED
BEGINNING SHARES SHARES ENDING APPRECIATION MARCH 31, OF SHARES
SHARES/PAR PURCHASED SOLD SHARES (DEPRECIATION) 2008 OUTSTANDING
---------- --------- ------ -------- -------------- ---------- -----------
Earl Scheib Inc. ....... 240,900 -- -- 240,900 (267,399) $ 635,976 6.01%
Trans-Lux Corp. ........ 160,265 10,000 (265) 170,000 (297,627) 595,000 8.42%
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. On April 24, 2008, the Adviser entered into an administrative
settlement with the SEC to resolve the SEC's inquiry regarding prior frequent
trading activity in shares of the GAMCO Global Growth Fund (the "Global Growth
Fund") by one investor who was banned from the Global Growth Fund in August
2002. In the settlement, the SEC found that the Adviser had violated Section
206(2) of the Investment Advisers Act, Section 17(d) of the 1940 Act and Rule
17d-1 thereunder, and had aided and abetted and caused violations of Section
12(d)(1)(B)(i) of the 1940 Act. Under the terms of the settlement, the Adviser,
while neither admitting nor denying the SEC's findings and allegations, agreed,
among other things, to pay the previously reserved total of $16 million
(including a $5 million penalty), of which at least $11 million will be
distributed to shareholders of the Global Growth Fund in accordance with a plan
to be developed by an independent distribution consultant and approved by the
independent directors of the Global Growth Fund and the staff of the SEC, and to
cease and desist from future violations of the above referenced federal
securities laws. The settlement will not have a material adverse impact on the
Adviser or its ability to fulfill its obligations under the Advisory Agreement.
On the same day, the SEC filed a civil action against the Executive Vice
President and Chief Operating Officer of the Adviser, alleging violations of
certain federal securities laws arising from the same matter. The officer is
also an officer of the Global Growth Fund and other funds in the Gabelli/GAMCO
fund complex. The officer denies the allegations and is continuing in his
positions with the Adviser and the funds. The Adviser currently expects that any
resolution of the action against the officer will not have a material adverse
impact on the Adviser or its ability to fulfill its obligations under the
Advisory Agreement.
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
BOARD CONSIDERATION AND RE-APPROVAL OF ADVISORY AGREEMENT (UNAUDITED)
During the six months ended March 31, 2008, the Board of Directors of the
Corporation approved the continuation of the Investment Advisory Agreement with
the Adviser for the Fund on the basis of the recommendation by the Directors
(the "independent directors") who are not "interested persons" of the Fund. The
following paragraphs summarize the material information and factors considered
by the independent directors as well as their conclusions relative to such
factors.
NATURE, EXTENT, AND QUALITY OF SERVICES. The Independent Board Members
considered information regarding the portfolio manager, the depth of the analyst
pool available to the Adviser and the portfolio manager, the scope of
administrative, shareholder, and other services supervised or provided by the
Adviser and the absence of significant service problems reported to the Board.
The Independent Board Members noted the experience, length of service, and
reputation of the portfolio manager.
INVESTMENT PERFORMANCE. The Independent Board Members reviewed the short,
medium, and long-term performance of the Fund against a peer group of small cap
value and small cap core funds chosen by Lipper as being comparable. The
Independent Board Members noted that the Fund's performance was above average
for the ten year period, approximately average for the five year period and
below average for the three and one year periods.
PROFITABILITY. The Independent Board Members reviewed summary data regarding the
profitability of the Fund to the Adviser both with an administrative overhead
charge and without such a charge. The Independent Board Members also noted that
a substantial portion of the Fund's portfolio transactions were executed by an
affiliated broker and that the affiliated broker received distribution fees and
minor amounts of sales commissions.
ECONOMIES OF SCALE. The Independent Board Members discussed the major elements
of the Adviser's cost structure and the relationship of those elements to
potential economies of scale.
SHARING OF ECONOMIES OF SCALE. The Independent Board Members noted that the
investment management fee schedule for the Fund does not take into account any
potential economies of scale that may develop.
SERVICE AND COST COMPARISONS. The Independent Board Members compared the expense
ratios of the investment management fee, other expenses, and total expenses of
the Fund to similar expense ratios of the peer group of small cap value and
small cap core funds and noted that the Adviser's management fee includes
substantially all administrative services of the Fund as well as investment
advisory services. The Independent Board Members noted that the Fund's expense
ratios were at and the Fund's size was above average within this group. The
Independent Board Members also noted that the management fee structure was the
same as that in effect for most of the Gabelli funds. The Independent Board
Members did not compare the management fee to the fee for other types of
accounts managed by the Adviser.
CONCLUSIONS. The Independent Board Members concluded that the Fund enjoyed
highly experienced portfolio management services, good ancillary services, and a
good performance record, particularly over the longer term, but that the fee
structure of the Fund in relation to its peer group should be revisited if both
the long-term and short-term performance record were not strong. The Independent
Board Members also concluded that the Fund's expense ratios and the
profitability to the Adviser of managing the Fund were reasonable in light of
the Fund's performance and that economies of scale were not a significant factor
in their thinking at this time. The Independent Board Members did not view the
potential profitability of ancillary services as material to their decision. On
the basis of the foregoing and without assigning particular weight to any single
conclusion, the Independent Board Members determined to recommend continuation
of the Investment Management Agreement to the full Board.
23
Gabelli Equity Series Funds, Inc.
THE GABELLI SMALL CAP GROWTH FUND
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
FAX: 914-921-5118
WEBSITE: WWW.GABELLI.COM
E-MAIL: INFO@GABELLI.COM
Net Asset Value 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 Agnes Mullady
PRESIDENT AND SECRETARY TREASURER
Peter D. Goldstein
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
[GRAPHIC OMITTED] E P
Gabelli Triangle P M
MANAGEMENT S V
CASH FLOW
RESEARCH
THE
GABELLI
SMALL CAP
GROWTH
FUND
SEMI ANNUAL REPORT
MARCH 31, 2008
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
GAB443Q108SR
THE GABELLI EQUITY INCOME FUND
SEMI-ANNUAL REPORT (a)
MARCH 31, 2008
TO OUR SHAREHOLDERS,
For the six month period ended March 31, 2008, The Gabelli Equity Income
Fund's Class AAA Shares surrendered 9.50% versus the Standard & Poor's ("S&P")
500 Index decline of 12.46%, the Nasdaq Composite Index decline of 15.64%, and
the Lipper Equity Income Fund Average slide of 11.55%.
COMPARATIVE RESULTS
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH MARCH 31, 2008 (a)(b)
----------------------------------------------------
Since
Inception
Quarter 1 Year 3 Year 5 Year 10 Year 15 Year (1/2/92)
------- ------ ------ ------ ------- ------- ---------
GABELLI EQUITY INCOME FUND CLASS AAA .. (8.21)% (1.86)% 8.14% 13.70% 7.66% 11.24% 11.46%
S&P 500 Index ......................... (9.44) (5.08) 5.84 11.32 3.50 9.45 9.48
Nasdaq Composite Index ................ (14.07) (5.89) 4.46 11.19 2.19 8.29 8.72
Lipper Equity Income Fund Average ..... (7.94) (5.75) 6.21 12.17 4.64 9.01 9.57
Class A ............................... (8.19) (1.81) 8.13 13.68 7.65 11.24 11.46
(13.47)(c) (7.46)(c) 6.01(c) 12.34(c) 7.02(c) 11.23(c) 11.05(c)
Class B ............................... (8.38) (2.55) 7.35 12.98 7.32 10.79 11.25
(12.96)(d) (7.43)(d) 6.48(d) 12.73(d) 7.32 11.00 11.25
Class C ............................... (8.38) (2.55) 7.36 13.00 7.33 11.00 11.25
(9.30)(e) (3.53)(e) 7.36 13.00 7.33 11.01 11.25
Class I ............................... (8.12) (1.76) 8.18 13.72 7.67 11.25 11.47
IN THE CURRENT PROSPECTUS, THE EXPENSE RATIOS FOR CLASS AAA, A, B, C, AND I
SHARES ARE 1.43%, 1.43%, 2.18%, 2.18%, AND 1.18%, RESPECTIVELY. CLASS AAA AND I
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 AND CLASS
I SHARES ON JANUARY 11, 2008. THE ACTUAL PERFORMANCE FOR THE CLASS B
SHARES AND CLASS C SHARES WOULD HAVE BEEN LOWER AND CLASS I SHARES WOULD
HAVE BEEN HIGHER DUE TO THE DIFFERENCES IN 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 EQUITY INCOME FUND 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, ONE YEAR, THREE YEAR,
AND FIVE YEAR PERIODS OF 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 CHARGES FOR THE CLASS C
SHARES UPON REDEMPTION AT THE END OF THE QUARTER 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.
- --------------------------------------------------------------------------------
THE GABELLI EQUITY INCOME FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
For the Six Month Period from October 1, 2007 through March 31, 2008
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.
Beginning Ending Annualized Expenses
Account Value Account Value Expense Paid During
10/01/07 03/31/08 Ratio Period*
- -------------------------------------------------------------------------------
THE GABELLI EQUITY INCOME FUND
- -------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class AAA $1,000.00 $ 905.00 1.40% $ 6.67
Class A $1,000.00 $ 905.10 1.40% $ 6.67
Class B $1,000.00 $ 901.90 2.15% $10.22
Class C $1,000.00 $ 901.90 2.15% $10.22
Class I** $1,000.00 $ 905.90 1.15% $ 2.34
HYPOTHETICAL 5% RETURN
Class AAA $1,000.00 $1,018.00 1.40% $ 7.06
Class A $1,000.00 $1,018.00 1.40% $ 7.06
Class B $1,000.00 $1,014.25 2.15% $10.83
Class C $1,000.00 $1,014.25 2.15% $10.83
Class I** $1,000.00 $1,008.20 1.15% $ 2.46
* 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
366.
** Class I Shares were first issued on January 11, 2008. Account values and
expense ratios are calculated from January 11, 2008 through March 31,
2008.
2
SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED)
The following table presents portfolio holdings as a percent of total net assets
as of March 31, 2008:
THE GABELLI EQUITY INCOME FUND
Food and Beverage ..................................................... 11.8%
Financial Services .................................................... 10.4%
Health Care ........................................................... 8.9%
Energy and Utilities: Oil ............................................. 7.5%
U.S. Government Obligations ........................................... 7.1%
Consumer Products ..................................................... 6.5%
Retail ................................................................ 5.6%
Energy and Utilities: Integrated ...................................... 3.8%
Telecommunications .................................................... 3.4%
Diversified Industrial ................................................ 3.2%
Specialty Chemicals ................................................... 2.5%
Aerospace ............................................................. 2.2%
Entertainment ......................................................... 2.0%
Equipment and Supplies ................................................ 2.0%
Electronics ........................................................... 2.0%
Computer Hardware ..................................................... 1.9%
Metals and Mining ..................................................... 1.7%
Hotels and Gaming ..................................................... 1.6%
Agriculture ........................................................... 1.5%
Energy and Utilities: Services ........................................ 1.5%
Energy and Utilities: Electric ........................................ 1.5%
Communications Equipment .............................................. 1.5%
Energy and Utilities: Natural Gas ..................................... 1.4%
Computer Software and Services ........................................ 1.3%
Automotive: Parts and Accessories ..................................... 1.1%
Business Services ..................................................... 0.9%
Automotive ............................................................ 0.8%
Broadcasting .......................................................... 0.6%
Publishing ............................................................ 0.6%
Machinery ............................................................. 0.6%
Cable and Satellite ................................................... 0.6%
Environmental Services ................................................ 0.6%
Transportation ........................................................ 0.4%
Wireless Communications ............................................... 0.3%
Aviation: Parts and Services .......................................... 0.3%
Manufactured Housing .................................................. 0.1%
Consumer Services ..................................................... 0.1%
Energy and Utilities: Water ........................................... 0.0%
Building and Construction ............................................. 0.0%
Real Estate ........................................................... 0.0%
Other Assets and Liabilities (Net) .................................... 0.2%
------
100.0%
======
THE FUND FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION (THE "SEC") FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL
YEAR ON FORM N-Q, THE LAST OF WHICH WAS FILED FOR THE QUARTER ENDED DECEMBER 31,
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.
3
THE GABELLI EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS -- MARCH 31, 2008 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ -------------- --------------
COMMON STOCKS -- 91.3%
AEROSPACE -- 2.2%
80,000 Boeing Co. ...................... $ 5,156,434 $ 5,949,600
2,000 Lockheed Martin Corp. ........... 47,350 198,600
3,500 Northrop Grumman Corp. .......... 125,556 272,335
10,000 Raytheon Co. .................... 279,250 646,100
160,000 Rockwell Automation Inc. ........ 9,998,916 9,187,200
2,000 Rockwell Collins Inc. ........... 15,843 114,300
1,260,000 Rolls-Royce Group plc+ .......... 8,984,010 10,077,600
112,896,000 Rolls-Royce Group plc, Cl. B .... 224,236 224,058
-------------- --------------
24,831,595 26,669,793
-------------- --------------
AGRICULTURE -- 1.5%
40,000 Archer-Daniels-Midland Co. ...... 1,395,583 1,646,400
132,000 Monsanto Co. .................... 1,220,335 14,718,000
24,000 The Mosaic Co.+ ................. 366,985 2,462,400
-------------- --------------
2,982,903 18,826,800
-------------- --------------
AUTOMOTIVE -- 0.8%
480,000 General Motors Corp. ............ 15,499,687 9,144,000
7,000 Navistar International Corp.+ ... 228,260 421,050
-------------- --------------
15,727,947 9,565,050
-------------- --------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 1.0%
1,000 ArvinMeritor Inc. ............... 10,487 12,510
2,000 BERU AG ......................... 211,491 234,130
250,000 Genuine Parts Co. ............... 8,986,399 10,055,000
6,000 Johnson Controls Inc. ........... 50,425 202,800
45,000 Modine Manufacturing Co. ........ 693,569 652,050
10,000 Proliance International Inc.+ ... 27,051 18,200
82,000 The Pep Boys -
Manny, Moe & Jack ............ 1,109,227 816,720
-------------- --------------
11,088,649 11,991,410
-------------- --------------
AVIATION: PARTS AND SERVICES -- 0.3%
6,000 Barnes Group Inc. ............... 57,237 137,700
46,192 Curtiss-Wright Corp. ............ 349,652 1,916,044
35,000 GenCorp Inc.+ ................... 299,658 360,150
20,000 United Technologies Corp. ....... 557,839 1,376,400
-------------- --------------
1,264,386 3,790,294
-------------- --------------
BROADCASTING -- 0.4%
160,000 CBS Corp., Cl. A ................ 4,125,633 3,536,000
25,000 CBS Corp., Cl. B ................ 651,930 552,000
40,000 Clear Channel
Communications Inc. .......... 1,436,699 1,168,800
132 Granite Broadcasting Corp.+ ..... 10,795 2,244
2,000 Societe Television Francaise 1 .. 50,938 43,984
-------------- --------------
6,275,995 5,303,028
-------------- --------------
BUILDING AND CONSTRUCTION -- 0.0%
918 Colas SA ........................ 318,206 325,831
-------------- --------------
MARKET
SHARES COST VALUE
------ -------------- --------------
BUSINESS SERVICES -- 0.9%
4,000 Automatic Data
Processing Inc. .............. $ 114,127 $ 169,560
100,000 ChoicePoint Inc.+ ............... 4,819,670 4,760,000
95,300 Diebold Inc. .................... 3,652,424 3,578,515
4,000 Landauer Inc. ................... 134,546 201,360
7,500 MasterCard Inc., Cl. A .......... 292,500 1,672,425
20,000 PHH Corp.+ ...................... 538,366 348,600
3,000 R. H. Donnelley Corp.+ .......... 33,450 15,180
-------------- --------------
9,585,083 10,745,640
-------------- --------------
CABLE AND SATELLITE -- 0.6%
140,000 Cablevision Systems Corp.,
Cl. A+ ....................... 1,769,455 3,000,200
80,000 DISH Network Corp., Cl. A+ ...... 2,181,380 2,298,400
16,000 EchoStar Corp., Cl. A+ .......... 478,840 472,640
40,000 The DIRECTV Group Inc.+ ......... 705,262 991,600
-------------- --------------
5,134,937 6,762,840
-------------- --------------
COMMUNICATIONS EQUIPMENT -- 0.8%
175,000 Corning Inc. .................... 2,000,662 4,207,000
100,000 Motorola Inc. ................... 830,109 930,000
90,000 Nortel Networks Corp.+ .......... 1,625,543 602,100
100,000 Thomas & Betts Corp.+ ........... 2,992,412 3,637,000
-------------- --------------
7,448,726 9,376,100
-------------- --------------
COMPUTER HARDWARE -- 1.9%
176,000 International Business
Machines Corp. ............... 14,186,415 20,264,640
200,000 Xerox Corp. ..................... 3,030,383 2,994,000
-------------- --------------
17,216,798 23,258,640
-------------- --------------
COMPUTER SOFTWARE AND SERVICES -- 1.3%
300,000 BEA Systems Inc.+ ............... 5,725,500 5,745,000
2,000 EMC Corp.+ ...................... 19,360 28,680
70,000 Metavante Technologies Inc.+ .... 1,631,680 1,399,300
150,000 Microsoft Corp. ................. 4,412,630 4,257,000
154 Telecom Italia Media SpA+ ....... 205 34
170,000 Yahoo! Inc.+ .................... 5,202,473 4,918,100
-------------- --------------
16,991,848 16,348,114
-------------- --------------
CONSUMER PRODUCTS -- 6.5%
55,000 Altria Group Inc. ............... 677,620 1,221,000
200,000 Avon Products Inc. .............. 6,048,261 7,908,000
15,000 Clorox Co. ...................... 823,581 849,600
35,000 Colgate-Palmolive Co. ........... 2,020,423 2,726,850
2,000 Compagnie Financiere
Richemont SA, Cl. A .......... 130,051 112,174
50,000 Eastman Kodak Co. ............... 1,175,567 883,500
52,000 Energizer Holdings Inc.+ ........ 1,954,896 4,704,960
61,000 Fortune Brands Inc. ............. 4,566,009 4,239,500
5,000 Hanesbrands Inc.+ ............... 108,950 146,000
113,000 Kimberly-Clark Corp. ............ 7,873,946 7,294,150
See accompanying notes to financial statements.
4
THE GABELLI EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- MARCH 31, 2008 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ -------------- --------------
COMMON STOCKS (CONTINUED)
CONSUMER PRODUCTS (CONTINUED)
7,000 National Presto
Industries Inc. .............. $ 206,562 $ 366,800
10,000 Pactiv Corp.+ ................... 161,895 262,100
55,000 Philip Morris
International Inc.+ .......... 1,581,113 2,781,900
220,000 Procter & Gamble Co. ............ 12,495,175 15,415,400
100,000 Reckitt Benckiser Group plc ..... 3,154,703 5,539,128
26,000 Rothmans Inc. ................... 237,941 661,873
940,500 Swedish Match AB ................ 9,972,140 20,497,783
78,000 Unilever NV, ADR ................ 1,542,066 2,630,940
10,000 UST Inc. ........................ 364,903 545,200
-------------- --------------
55,095,802 78,786,858
-------------- --------------
CONSUMER SERVICES -- 0.1%
67,500 Rollins Inc. .................... 386,886 1,194,075
-------------- --------------
DIVERSIFIED INDUSTRIAL -- 3.2%
5,000 3M Co. .......................... 213,645 395,750
8,000 Acuity Brands Inc. .............. 89,386 343,600
1,000 Alstom .......................... 200,850 216,795
110,000 Cooper Industries Ltd., Cl. A ... 3,148,666 4,416,500
50,000 Crane Co. ....................... 2,304,586 2,017,500
380,000 General Electric Co. ............ 12,230,147 14,063,800
180,000 Honeywell International Inc. .... 5,361,035 10,155,600
25,100 ITT Corp. ....................... 1,246,573 1,300,431
6,000 Trinity Industries Inc. ......... 82,100 159,900
125,650 Tyco International Ltd. ......... 5,803,618 5,534,882
2,000 Walter Industries Inc. .......... 46,073 125,260
54,000 WHX Corp.+ ...................... 609,703 141,750
-------------- --------------
31,336,382 38,871,768
-------------- --------------
ELECTRONICS -- 2.0%
600,000 Intel Corp. ..................... 12,298,251 12,708,000
330,000 LSI Corp.+ ...................... 3,043,428 1,633,500
180,000 Texas Instruments Inc. .......... 3,980,219 5,088,600
5,000 Thermo Fisher Scientific Inc.+ .. 127,325 284,200
118,750 Tyco Electronics Ltd. ........... 4,044,177 4,075,500
-------------- --------------
23,493,400 23,789,800
-------------- --------------
ENERGY AND UTILITIES: ELECTRIC -- 1.5%
30,000 American Electric
Power Co. Inc. ............... 932,060 1,248,900
14,000 DTE Energy Co. .................. 606,560 544,460
85,000 El Paso Electric Co.+ ........... 670,852 1,816,450
90,000 FPL Group Inc. .................. 3,906,222 5,646,600
45,000 Great Plains Energy Inc. ........ 1,055,160 1,109,250
60,000 Korea Electric Power Corp.,
ADR .......................... 977,409 902,400
56,086 Mirant Corp.+ (a) ............... 936,815 2,040,979
1,200,000 Mirant Corp., Escrow+ ........... 0 0
110,000 Northeast Utilities ............. 2,074,836 2,699,400
80,000 The AES Corp.+ .................. 268,400 1,333,600
13,333 UIL Holdings Corp. .............. 293,785 401,723
-------------- --------------
11,722,099 17,743,762
-------------- --------------
MARKET
SHARES COST VALUE
------ -------------- --------------
ENERGY AND UTILITIES: INTEGRATED -- 3.8%
42,000 Allegheny Energy Inc. ........... $ 404,378 $ 2,121,000
626,800 Aquila Inc.+ .................... 2,282,556 2,012,028
44,000 BP plc, ADR ..................... 1,030,211 2,668,600
44,000 CH Energy Group Inc. ............ 1,809,289 1,711,600
53,000 Constellation Energy Group Inc... 1,738,231 4,678,310
15,000 Dominion Resources Inc. ......... 621,531 612,600
120,000 DPL Inc. ........................ 3,161,330 3,076,800
200,000 Duke Energy Corp. ............... 2,462,844 3,570,000
250,000 El Paso Corp. ................... 2,705,219 4,160,000
150,000 Energy East Corp. ............... 3,071,332 3,618,000
29,000 ENI SpA ......................... 304,221 988,933
6,269 Iberdrola SA, ADR ............... 312,666 390,192
25,000 Integrys Energy Group Inc. ...... 1,192,521 1,166,000
80,000 NSTAR ........................... 1,282,183 2,434,400
75,000 OGE Energy Corp. ................ 2,043,450 2,337,750
80,000 Progress Energy Inc. ............ 3,424,284 3,336,000
15,000 Progress Energy Inc.,
CVO+ (a) ..................... 7,800 4,950
7,200 Public Service Enterprise
Group Inc. ................... 156,820 289,368
20,000 Suncor Energy Inc., New York .... 1,043,936 1,927,000
10,000 Suncor Energy Inc., Toronto ..... 900,982 966,535
55,000 TECO Energy Inc. ................ 740,886 877,250
140,000 Westar Energy Inc. .............. 2,333,669 3,187,800
-------------- --------------
33,030,339 46,135,116
-------------- --------------
ENERGY AND UTILITIES: NATURAL GAS -- 1.4%
18,000 AGL Resources Inc. .............. 348,154 617,760
45,000 Atmos Energy Corp. .............. 1,122,361 1,147,500
45,000 National Fuel Gas Co. ........... 1,395,226 2,124,450
70,000 ONEOK Inc. ...................... 1,559,551 3,124,100
24,000 Piedmont Natural Gas Co. Inc. ... 394,017 630,240
110,000 Southern Union Co. .............. 2,047,400 2,559,700
65,000 Southwest Gas Corp. ............. 1,365,198 1,817,400
200,000 Spectra Energy Corp. ............ 4,249,072 4,550,000
-------------- --------------
12,480,979 16,571,150
-------------- --------------
ENERGY AND UTILITIES: OIL -- 7.5%
52,000 Anadarko Petroleum Corp. ........ 2,394,703 3,277,560
52,000 Cameron International Corp.+ .... 746,014 2,165,280
35,000 Canadian Oil Sands Trust ........ 1,062,358 1,415,071
192,000 Chevron Corp. ................... 8,828,069 16,389,120
187,000 ConocoPhillips .................. 5,471,173 14,251,270
20,000 Denbury Resources Inc.+ ......... 340,653 571,000
49,000 Devon Energy Corp. .............. 2,021,181 5,112,170
149,000 Exxon Mobil Corp. ............... 4,735,083 12,602,420
30,000 Nexen Inc. ...................... 924,468 890,253
2,000 Niko Resources Ltd. ............. 114,911 162,210
94,000 Occidental Petroleum Corp. ...... 3,654,851 6,877,980
40,000 Oceaneering
International Inc.+ .......... 1,762,700 2,520,000
See accompanying notes to financial statements.
5
THE GABELLI EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- MARCH 31, 2008 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ -------------- --------------
COMMON STOCKS (CONTINUED)
ENERGY AND UTILITIES: OIL (CONTINUED)
45,000 OPTI Canada Inc.+ ............... $ 998,980 $ 758,439
9,700 PetroChina Co. Ltd., ADR ........ 666,227 1,215,507
1,000 Petroleo Brasileiro SA, ADR ..... 109,393 102,110
30,000 Repsol YPF SA, ADR .............. 631,290 1,032,300
120,000 Royal Dutch Shell plc,
Cl. A, ADR ................... 5,536,434 8,277,600
25,000 StatoilHydro ASA, ADR ........... 327,939 746,750
17,518 Total SA, ADR ................... 290,563 1,296,507
27,000 Transocean Inc.+ ................ 2,352,390 3,650,400
170,000 UTS Energy Corp.+ ............... 997,986 866,189
95,000 Weatherford
International Ltd.+ .......... 4,138,872 6,884,650
40,000 WesternZagros
Resources Ltd.+ .............. 147,109 95,085
-------------- --------------
48,253,347 91,159,871
-------------- --------------
ENERGY AND UTILITIES: SERVICES -- 1.5%
30,000 ABB Ltd., ADR ................... 351,824 807,600
350,000 Halliburton Co. ................. 10,802,922 13,765,500
40,000 Schlumberger Ltd. ............... 1,275,020 3,480,000
-------------- --------------
12,429,766 18,053,100
-------------- --------------
ENERGY AND UTILITIES: WATER -- 0.0%
25,000 Aqua America Inc. ............... 243,835 469,500
40,000 Suez SA, Strips+ ................ 0 631
-------------- --------------
243,835 470,131
-------------- --------------
ENTERTAINMENT -- 2.0%
60,000 Grupo Televisa SA, ADR .......... 1,493,782 1,454,400
200,000 Rank Group plc .................. 1,020,671 350,289
25,000 The Walt Disney Co. ............. 604,578 784,500
310,000 Time Warner Inc. ................ 4,846,642 4,346,200
260,000 Viacom Inc., Cl. A+ ............. 10,910,554 10,303,800
185,000 Vivendi ......................... 6,813,381 7,228,730
-------------- --------------
25,689,608 24,467,919
-------------- --------------
ENVIRONMENTAL SERVICES -- 0.6%
200,000 Waste Management Inc. ........... 6,034,603 6,712,000
-------------- --------------
EQUIPMENT AND SUPPLIES -- 2.0%
12,000 A.O. Smith Corp. ................ 253,183 394,440
10,000 Danaher Corp. ................... 734,591 760,300
115,000 Flowserve Corp. ................. 5,141,384 12,003,700
6,000 Ingersoll-Rand Co. Ltd., Cl. A .. 120,853 267,480
1,500 Minerals Technologies Inc. ...... 37,937 94,200
40,000 Mueller Industries Inc. ......... 1,650,585 1,154,000
7,609 Mueller Water Products Inc.,
Cl. B ........................ 111,552 59,959
12,000 Parker Hannifin Corp. ........... 459,607 831,240
100,000 Tenaris SA, ADR ................. 4,514,368 4,985,000
1,000,000 Tomkins plc ..................... 4,862,592 3,547,542
-------------- --------------
17,886,652 24,097,861
-------------- --------------
MARKET
SHARES COST VALUE
------ -------------- --------------
FINANCIAL SERVICES -- 10.4%
6,324 Alleghany Corp.+ ................ $ 1,036,283 $ 2,159,646
220,000 American Express Co. ............ 9,953,228 9,618,400
190,000 American International
Group Inc. ................... 12,100,166 8,217,500
45,000 Ameriprise Financial Inc. ....... 1,843,914 2,333,250
23,990 Argo Group International
Holdings Ltd.+ ............... 741,793 852,125
25,000 Banco Popular Espanol SA ........ 185,939 453,892
2,000 Banco Santander Chile SA,
ADR .......................... 29,250 104,520
18,000 Banco Santander SA, ADR ......... 64,963 358,920
138,000 Bank of America Corp. ........... 4,272,294 5,231,580
8,825 BNP Paribas ..................... 362,345 890,149
590,000 Citigroup Inc. .................. 27,136,120 12,637,800
40,000 Commerzbank AG, ADR ............. 855,073 1,263,844
34,000 Deutsche Bank AG ................ 1,919,041 3,843,700
70,000 Discover Financial Services ..... 1,333,774 1,145,900
160,000 Federal National Mortgage
Association .................. 5,726,720 4,211,200
20,000 Fidelity Southern Corp. ......... 229,670 168,200
75,000 Freddie Mac ..................... 2,826,187 1,899,000
185,000 H&R Block Inc. .................. 4,179,158 3,840,600
25,000 Huntington Bancshares Inc. ...... 407,250 268,750
30,000 Janus Capital Group Inc. ........ 846,728 698,100
110,080 JPMorgan Chase & Co. ............ 3,774,995 4,727,936
5,000 KeyCorp ......................... 118,570 109,750
38,000 Legg Mason Inc. ................. 3,179,578 2,127,240
30,000 Leucadia National Corp. ......... 329,356 1,356,600
90,000 Loews Corp. ..................... 4,421,111 3,619,800
13,000 M&T Bank Corp. .................. 1,128,525 1,046,240
2,000 Manulife Financial Corp. ........ 24,694 75,960
426,000 Marsh & McLennan
Companies Inc. ............... 12,969,097 10,373,100
76,000 Merrill Lynch & Co. Inc. ........ 4,438,021 3,096,240
10,000 Moody's Corp. ................... 171,766 348,300
48,000 Morgan Stanley .................. 2,631,592 2,193,600
3,000 Municipal Mortgage &
Equity, LLC .................. 60,488 15,450
6,000 Northern Trust Corp. ............ 60,300 398,820
45,000 PNC Financial Services
Group Inc. ................... 1,905,739 2,950,650
55,000 Popular Inc. .................... 1,112,791 641,300
500 Raiffeisen International
Bank Holding AG .............. 28,874 68,163
130,000 SLM Corp.+ ...................... 3,381,107 1,995,500
135,000 Sovereign Bancorp Inc. .......... 2,682,873 1,258,200
150,000 Sterling Bancorp ................ 2,161,997 2,329,500
12,000 SunTrust Banks Inc. ............. 251,737 661,680
50,000 T. Rowe Price Group Inc. ........ 1,388,039 2,500,000
1,000 The Allstate Corp. .............. 33,300 48,060
See accompanying notes to financial statements.
6
THE GABELLI EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- MARCH 31, 2008 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ -------------- --------------
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
96,509 The Bank of New York
Mellon Corp. ................. $ 2,951,848 $ 4,027,321
120,000 The Bear Stearns
Companies Inc. ............... 1,930,741 1,258,800
5,000 The Charles Schwab Corp. ........ 77,500 94,150
2,000 The Dun & Bradstreet Corp. ...... 20,476 162,760
10,000 The Goldman Sachs
Group Inc. ................... 1,973,608 1,653,900
50,000 The Phoenix Companies Inc. ...... 650,511 610,500
2,000 The Student Loan Corp. .......... 210,503 197,800
36,000 The Travelers Companies Inc. .... 1,428,424 1,722,600
40,000 Unitrin Inc. .................... 1,156,156 1,413,600
34,000 Wachovia Corp. .................. 1,438,282 918,000
120,000 Waddell & Reed Financial Inc.,
Cl. A ........................ 2,632,714 3,855,600
240,000 Wells Fargo & Co. ............... 7,461,435 6,984,000
55,000 Wilmington Trust Corp. .......... 1,712,407 1,710,500
-------------- --------------
145,949,051 126,748,696
-------------- --------------
FOOD AND BEVERAGE -- 11.8%
170,000 Anheuser-Busch
Companies Inc. ............... 7,888,949 8,066,500
50,000 Brown-Forman Corp., Cl. A ....... 3,068,834 3,462,000
155,000 Cadbury Schweppes plc, ADR ...... 5,701,404 6,854,100
90,000 Campbell Soup Co. ............... 2,648,894 3,055,500
40,000 Coca-Cola Amatil Ltd., ADR ...... 246,845 620,740
15,000 Coca-Cola Femsa SAB de CV,
ADR .......................... 388,903 844,950
95,000 Constellation Brands Inc.,
Cl. A+ ....................... 2,110,323 1,678,650
16,000 Corn Products
International Inc. ........... 197,588 594,240
75,000 Del Monte Foods Co. ............. 754,461 714,750
60,000 Diageo plc, ADR ................. 2,617,330 4,879,200
145,000 Fomento Economico Mexicano
SAB de CV, ADR ............... 3,025,539 6,058,100
210,000 General Mills Inc. .............. 10,507,932 12,574,800
130,000 Groupe Danone ................... 7,099,747 11,624,698
980,000 Grupo Bimbo SAB de CV, Cl. A .... 3,043,113 5,893,214
105,000 H.J. Heinz Co. .................. 3,702,553 4,931,850
100,000 Heineken NV ..................... 4,539,926 5,808,244
160,000 ITO EN Ltd. ..................... 3,749,452 2,831,461
35,000 ITO EN Ltd., Preference ......... 808,031 395,365
5,000 Kellogg Co. ..................... 149,740 262,800
500,000 Kraft Foods Inc., Cl. A ......... 15,272,342 15,505,000
10,000 Nestle SA ....................... 2,083,075 4,996,979
150,000 Nissin Food Products Co. Ltd. ... 5,070,962 5,056,180
10,000 PepsiAmericas Inc. .............. 266,589 255,300
25,000 PepsiCo Inc. .................... 1,573,601 1,805,000
24,008 Pernod-Ricard SA ................ 2,033,447 2,469,745
MARKET
SHARES COST VALUE
------ -------------- --------------
15,000 Remy Cointreau SA ............... $ 1,060,116 $ 1,008,825
50,000 Sapporo Holdings Ltd. ........... 510,013 408,808
365,000 The Coca-Cola Co. ............... 16,799,135 22,217,550
70,000 The Hershey Co. ................. 3,017,148 2,636,900
51,565 Tootsie Roll Industries Inc. .... 1,298,584 1,299,435
100 Wimm-Bill-Dann Foods
OJSC, ADR .................... 8,304 10,248
10,000 Wm. Wrigley Jr. Co. ............. 475,992 628,400
750 Wm. Wrigley Jr. Co., Cl. B ...... 41,832 46,650
135,000 YAKULT HONSHA Co. Ltd. .......... 3,659,573 4,184,892
-------------- --------------
115,420,277 143,681,074
-------------- --------------
HEALTH CARE -- 8.9%
16,000 Abbott Laboratories ............. 618,814 882,400
125,000 Advanced Medical Optics Inc.+ ... 4,003,513 2,537,500
25,000 Aetna Inc. ...................... 890,584 1,052,250
112,000 Baxter International Inc. ....... 4,185,106 6,475,840
100,000 Becton Dickinson & Co. .......... 6,601,932 8,585,000
260,000 Boston Scientific Corp.+ ........ 3,744,288 3,346,200
72,000 Bristol-Myers Squibb Co. ........ 1,764,502 1,533,600
60,000 Covidien Ltd. ................... 2,400,946 2,655,000
140,000 Eli Lilly & Co. ................. 7,861,239 7,222,600
11,276 GlaxoSmithKline plc, ADR ........ 515,984 478,440
22,000 Henry Schein Inc.+ .............. 566,365 1,262,800
105,000 Hospira Inc.+ ................... 3,804,994 4,490,850
200,000 Johnson & Johnson ............... 12,432,566 12,974,000
4,000 Laboratory Corp. of America
Holdings+ .................... 293,687 294,720
60,000 Medco Health Solutions Inc.+ .... 1,573,865 2,627,400
110,000 Merck & Co. Inc. ................ 3,523,449 4,174,500
1,000 Nobel Biocare Holding AG ........ 139,480 232,605
140,000 Novartis AG, ADR ................ 7,727,317 7,172,200
30,000 Patterson Companies Inc.+ ....... 1,080,112 1,089,000
850,000 Pfizer Inc. ..................... 22,555,122 17,790,500
150,000 Schering-Plough Corp. ........... 2,759,763 2,161,500
100,000 St. Jude Medical Inc.+ .......... 4,411,409 4,319,000
500,000 Tenet Healthcare Corp.+ ......... 3,843,283 2,830,000
220,000 UnitedHealth Group Inc. ......... 11,197,983 7,559,200
20,000 William Demant Holding A/S+ ..... 983,839 1,598,425
44,000 Zimmer Holdings Inc.+ ........... 2,802,455 3,425,840
-------------- --------------
112,282,597 108,771,370
-------------- --------------
HOTELS AND GAMING -- 1.6%
30,000 International Game
Technology ................... 1,074,204 1,206,300
529,411 Ladbrokes plc ................... 7,677,933 3,270,272
45,000 Las Vegas Sands Corp.+ .......... 3,804,470 3,313,800
171,035 MGM Mirage+ ..................... 13,136,601 10,051,727
40,000 Starwood Hotels & Resorts
Worldwide Inc. ............... 1,100,856 2,070,000
-------------- --------------
26,794,064 19,912,099
-------------- --------------
See accompanying notes to financial statements.
7
THE GABELLI EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- MARCH 31, 2008 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ -------------- --------------
COMMON STOCKS (CONTINUED)
MACHINERY -- 0.6%
55,000 Baldor Electric Co. ............. $ 1,853,207 $ 1,540,000
6,000 Caterpillar Inc. ................ 35,181 469,740
62,000 Deere & Co. ..................... 752,487 4,987,280
-------------- --------------
2,640,875 6,997,020
-------------- --------------
MANUFACTURED HOUSING -- 0.1%
140,000 Champion Enterprises Inc.+ ...... 1,407,727 1,404,200
-------------- --------------
METALS AND MINING -- 1.7%
100,000 Alcoa Inc. ...................... 3,169,536 3,606,000
5,000 Carpenter Technology Corp. ...... 240,642 279,850
27,000 Fording Canadian Coal Trust ..... 179,580 1,413,590
50,000 Freeport-McMoRan Copper
& Gold Inc. .................. 1,000,213 4,811,000
195,000 Newmont Mining Corp. ............ 7,983,095 8,833,500
3,000 Patriot Coal Corp.+ ............. 69,951 140,910
30,000 Peabody Energy Corp. ............ 1,095,901 1,530,000
-------------- --------------
13,738,918 20,614,850
-------------- --------------
PUBLISHING -- 0.6%
10,000 Idearc Inc. ..................... 167,232 36,400
30,000 Lee Enterprises Inc. ............ 513,623 300,300
10,000 McClatchy Co., Cl. A ............ 267,269 107,000
6,016 News Corp., Cl. B ............... 70,881 114,545
90,000 PagesJaunes Groupe SA ........... 2,496,955 1,602,753
406 Seat Pagine Gialle SpA .......... 1,350 70
65,000 The E.W. Scripps Co., Cl. A ..... 3,091,527 2,730,650
34,000 The McGraw-Hill
Companies Inc. ............... 1,239,272 1,256,300
22,000 The New York Times Co.,
Cl. A ........................ 600,828 415,360
1,200 The Washington Post Co.,
Cl. B ........................ 700,030 793,800
2,000 Value Line Inc. ................. 84,436 91,800
-------------- --------------
9,233,403 7,448,978
-------------- --------------
REAL ESTATE -- 0.0%
7,000 Griffin Land & Nurseries Inc. ... 137,444 241,430
-------------- --------------
RETAIL -- 5.3%
40,000 Copart Inc.+ .................... 1,212,543 1,550,400
200,000 Costco Wholesale Corp. .......... 10,357,002 12,994,000
330,000 CVS Caremark Corp. .............. 12,367,408 13,368,300
30,000 Ingles Markets Inc., Cl. A ...... 684,263 737,700
85,000 Macy's Inc. ..................... 2,102,473 1,960,100
15,000 Metro Inc., Cl. A ............... 422,865 355,108
150,000 Safeway Inc. .................... 3,114,997 4,402,500
500 Sears Holdings Corp.+ ........... 40,733 51,045
100,000 SUPERVALU Inc. .................. 2,935,535 2,998,000
120,000 The Great Atlantic &
Pacific Tea Co. Inc.+ ........ 3,730,562 3,146,400
55,000 The Home Depot Inc. ............. 1,655,855 1,538,350
45,000 Tractor Supply Co.+ ............. 2,021,475 1,778,400
SHARES/ MARKET
UNITS COST VALUE
--------- -------------- --------------
250,000 Wal-Mart Stores Inc. ............ $ 11,938,144 $ 13,170,000
85,000 Walgreen Co. .................... 3,233,974 3,237,650
10,000 Weis Markets Inc. ............... 300,480 344,700
90,000 Whole Foods Market Inc. ......... 3,794,953 2,967,300
-------------- --------------
59,913,262 64,599,953
-------------- --------------
SPECIALTY CHEMICALS -- 2.5%
44,000 Albemarle Corp. ................. 576,219 1,606,880
437 Arkema, ADR+ .................... 8,969 24,526
34,000 Ashland Inc. .................... 2,146,264 1,608,200
210,000 Chemtura Corp. .................. 1,963,900 1,541,400
80,000 E.I. du Pont de
Nemours & Co. ................ 3,753,842 3,740,800
120,000 Ferro Corp. ..................... 2,375,006 1,783,200
2,000 FMC Corp. ....................... 64,790 110,980
100,000 Hercules Inc. ................... 1,164,286 1,829,000
70,000 International Flavors &
Fragrances Inc. .............. 3,373,184 3,083,500
3,500 NewMarket Corp. ................. 13,508 264,075
100,000 Omnova Solutions Inc.+ .......... 667,863 399,000
4,000 Quaker Chemical Corp. ........... 79,615 125,160
180,000 Rohm & Haas Co. ................. 8,895,257 9,734,400
55,000 Sensient Technologies Corp. ..... 1,148,680 1,621,950
90,000 The Dow Chemical Co. ............ 3,950,210 3,316,500
2,542 Tronox Inc., Cl. B .............. 22,513 9,914
4,000 Zep Inc. ........................ 17,026 64,880
-------------- --------------
30,221,132 30,864,365
-------------- --------------
TELECOMMUNICATIONS -- 3.3%
300,000 AT&T Inc. ....................... 7,261,766 11,490,000
200,000 BCE Inc. ........................ 5,385,194 6,746,000
4,495 Bell Aliant Regional
Communications
Income Fund (a)(b) ........... 117,429 134,805
200,000 BT Group plc .................... 825,179 862,326
30,000 BT Group plc, ADR ............... 1,006,938 1,293,000
140,000 Cable & Wireless plc ............ 273,765 413,718
10,000 CenturyTel Inc. ................. 359,546 332,400
350,000 Cincinnati Bell Inc.+ ........... 1,886,496 1,491,000
271,100 Deutsche Telekom AG, ADR ........ 4,934,018 4,494,838
10,000 Embarq Corp. .................... 462,900 401,000
15,000 France Telecom SA, ADR .......... 436,434 503,700
140,000 Qwest Communications
International Inc. ........... 582,200 634,200
300,000 Sprint Nextel Corp. ............. 4,989,890 2,007,000
3,300 Telecom Italia SpA, ADR ......... 31,072 68,937
8,195 Telefonica SA, ADR .............. 80,699 708,949
12,000 TELUS Corp. ..................... 185,454 522,578
17,000 TELUS Corp., Non-Voting,
ADR .......................... 838,127 711,450
210,000 Verizon Communications Inc. ..... 7,702,532 7,654,500
5,000 Windstream Corp. ................ 43,990 59,750
-------------- --------------
37,403,629 40,530,151
-------------- --------------
See accompanying notes to financial statements.
8
THE GABELLI EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- MARCH 31, 2008 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ -------------- --------------
COMMON STOCKS (CONTINUED)
TRANSPORTATION -- 0.4%
5,000 Burlington Northern
Santa Fe Corp. ............... $ 444,482 $ 461,100
115,000 GATX Corp. ...................... 4,379,544 4,493,050
-------------- --------------
4,824,026 4,954,150
-------------- --------------
WIRELESS COMMUNICATIONS -- 0.3%
2,600 NTT DoCoMo Inc. ................. 3,779,517 3,938,604
-------------- --------------
TOTAL COMMON STOCKS ............. 960,696,693 1,111,723,891
-------------- --------------
CONVERTIBLE PREFERRED STOCKS -- 0.2%
COMMUNICATIONS EQUIPMENT -- 0.1%
1,100 Lucent Technologies Capital Trust I,
7.750% Cv. Pfd. .............. 759,000 770,000
-------------- --------------
ENERGY AND UTILITIES: INTEGRATED -- 0.0%
300 El Paso Corp.,
4.990% Cv. Pfd. (b) .......... 293,192 408,693
-------------- --------------
ENTERTAINMENT -- 0.0%
3,000 Metromedia International Group Inc.,
7.250% Cv. Pfd.+ ............. 5,310 102,750
-------------- --------------
TELECOMMUNICATIONS -- 0.1%
33,000 Cincinnati Bell Inc.,
6.750% Cv. Pfd., Ser. B ...... 918,894 1,399,200
-------------- --------------
TOTAL CONVERTIBLE
PREFERRED STOCKS ............. 1,976,396 2,680,643
-------------- --------------
WARRANTS -- 0.0%
BROADCASTING -- 0.0%
330 Granite Broadcasting Corp.,
Ser. A, expire 06/04/12+ ..... 0 99
330 Granite Broadcasting Corp.,
Ser. B, expire 06/04/12+ ..... 0 82
-------------- --------------
0 181
-------------- --------------
DIVERSIFIED INDUSTRIAL -- 0.0%
379,703 National Patent Development Corp.,
expire 08/14/08+ (a)(c) ...... 0 6,774
-------------- --------------
TOTAL WARRANTS .................. 0 6,955
-------------- --------------
PRINCIPAL
AMOUNT
- ------------
CORPORATE BONDS -- 1.2%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.1%
$ 800,000 Standard Motor Products Inc.,
Sub. Deb. Cv.,
6.750%, 07/15/09 ............. 751,685 766,000
-------------- --------------
BROADCASTING -- 0.2%
350,000 Sinclair Broadcast Group Inc.,
Cv. (STEP),
4.875%, 07/15/18 ............. 326,170 320,250
PRINCIPAL MARKET
AMOUNT COST VALUE
- ------------ -------------- --------------
$ 2,200,000 Sinclair Broadcast Group Inc.,
Sub. Deb. Cv.,
6.000%, 09/15/12 ............. $ 1,893,897 $ 1,963,500
200,000 Young Broadcasting Inc.,
Sub. Deb.,
10.000%, 03/01/11 ............ 149,332 126,500
-------------- --------------
2,369,399 2,410,250
-------------- --------------
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) ...... 417,447 421,631
-------------- --------------
514,946 421,631
-------------- --------------
COMMUNICATIONS EQUIPMENT -- 0.6%
4,000,000 Agere Systems Inc., Sub. Deb. Cv.,
6.500%, 12/15/09 ............. 3,956,315 4,060,000
2,625,000 Nortel Networks Corp., Cv.,
4.250%, 09/01/08 ............. 2,599,828 2,605,312
-------------- --------------
6,556,143 6,665,312
-------------- --------------
RETAIL -- 0.3%
4,000,000 The Great Atlantic &
Pacific Tea Co. Inc., Cv.,
5.125%, 06/15/11 ............. 4,000,000 3,970,000
-------------- --------------
TELECOMMUNICATIONS -- 0.0%
200,000 Williams Communications
Group Inc., Escrow,
10.875%, 10/01/09+ (a) ....... 0 0
-------------- --------------
TOTAL CORPORATE BONDS ........... 14,192,173 14,233,193
-------------- --------------
U.S. GOVERNMENT OBLIGATIONS -- 7.1%
U.S. TREASURY BILLS -- 6.9%
84,381,000 U.S. Treasury Bills,
1.017% to 2.181%++,
04/03/08 to 09/18/08 ......... 84,130,680 84,136,776
-------------- --------------
U.S. TREASURY NOTES -- 0.2%
2,887,000 U.S. Treasury Note,
5.125%, 06/30/08 ............. 2,908,427 2,914,519
-------------- --------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS .................. 87,039,107 87,051,295
-------------- --------------
TOTAL
INVESTMENTS -- 99.8% ......... $1,063,904,369 1,215,695,977
==============
OTHER ASSETS AND LIABILITIES (NET) -- 0.2% ...... 1,861,987
--------------
NET ASSETS -- 100.0% ............................ $1,217,557,964
==============
See accompanying notes to financial statements.
9
THE GABELLI EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- MARCH 31, 2008 (UNAUDITED)
- --------------------------------------------------------------------------------
- ----------
(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 March 31, 2008, the
market value of fair valued securities amounted to $568,160 or 0.05% of
total net assets.
(b) Securities 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 March
31, 2008, the market value of Rule 144A securities amounted to $543,498 or
0.04% of total net assets.
(c) At March 31, 2008, the Fund held investments in restricted and illiquid
securities amounting to $428,405 or 0.04% of total net assets, which were
valued under methods approved by the Board, as follows:
PRINCIPAL 03/31/08
AMOUNT/ CARRYING
ACQUISITION ACQUISITION ACQUISITION VALUE
SHARES ISSUER DATE COST PER UNIT
- ----------- ------------------------------- ----------- ----------- --------
$ 470,162 GP Strategies Corp., Sub. Deb.,
6.00%, 08/14/08 ............ 08/08/03 $ 320,860 $89.6778
379,703 National Patent Development
Corp., Warrants,
expire 08/14/08 ............ 11/24/04 0.00 0.0178
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR American Depositary Receipt
CVO Contingent Value Obligation
STEP Step coupon bond. The rate disclosed is that in effect at March 31, 2008.
See accompanying notes to financial statements.
10
THE GABELLI EQUITY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2008 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (cost $1,063,904,369) ............ $ 1,215,695,977
Cash ................................................... 986
Receivable for investments sold ........................ 2,491,889
Receivable for Fund shares sold ........................ 5,377,539
Dividends and interest receivable ...................... 2,141,860
Prepaid expenses ....................................... 87,212
---------------
TOTAL ASSETS ........................................... 1,225,795,463
---------------
LIABILITIES:
Payable for investments purchased ...................... 5,097,279
Payable for Fund shares redeemed ....................... 1,553,537
Payable for investment advisory fees ................... 1,023,035
Payable for distribution fees .......................... 267,668
Payable for accounting fees ............................ 3,750
Unrealized depreciation on swap contracts .............. 23,439
Other accrued expenses ................................. 268,791
---------------
TOTAL LIABILITIES ...................................... 8,237,499
---------------
NET ASSETS applicable to 60,061,863
shares outstanding ................................... $ 1,217,557,964
===============
NET ASSETS CONSIST OF:
Paid-in capital, each class at $0.001 par value ........ $ 1,067,060,443
Accumulated distributions in excess of net
investment income .................................... (4,684,775)
Accumulated net realized gain on investments,
swap contracts, and foreign
currency transactions ................................ 3,413,876
Net unrealized appreciation on investments ............. 151,791,608
Net unrealized depreciation on swap contracts .......... (23,439)
Net unrealized appreciation on foreign
currency translations ................................ 251
---------------
NET ASSETS ............................................. $ 1,217,557,964
===============
SHARES OF CAPITAL STOCK:
CLASS AAA:
Net Asset Value, offering, and redemption price per
share ($1,179,367,734 / 58,144,043 shares
outstanding; 150,000,000 shares authorized) .......... $ 20.28
===============
CLASS A:
Net Asset Value and redemption price per share
($18,748,310 / 927,347 shares outstanding;
50,000,000 shares authorized) ........................ $ 20.22
===============
Maximum offering price per share (NAV /.9425,
based on maximum sales charge of 5.75%
of the offering price) ............................... $ 21.45
===============
CLASS B:
Net Asset Value and offering price per share
($313,091 / 15,961.63 shares outstanding;
50,000,000 shares authorized) ........................ $ 19.62(a)
===============
CLASS C:
Net Asset Value and offering price per share
($18,571,542 / 947,055 shares outstanding;
50,000,000 shares authorized) ........................ $ 19.61(a)
===============
CLASS I:
Net Asset Value, offering, and redemption price
per share ($557,287/ 27,456 shares
outstanding; 50,000,000 shares authorized) ........... $ 20.30
===============
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2008 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends (net of foreign taxes of $154,319) ........... $ 11,272,825
Interest ............................................... 1,682,120
---------------
Total Investment Income ................................ 12,954,945
---------------
EXPENSES:
Investment advisory fees ............................... 6,143,421
Distribution fees - Class AAA .......................... 1,490,284
Distribution fees - Class A ............................ 22,007
Distribution fees - Class B ............................ 1,650
Distribution fees - Class C ............................ 91,467
Shareholder services fees .............................. 544,457
Shareholder communications expenses .................... 155,220
Custodian fees ......................................... 90,282
Legal and audit fees ................................... 32,447
Registration expenses .................................. 31,237
Accounting fees ........................................ 22,500
Directors' fees ........................................ 16,832
Interest expense ....................................... 14
Miscellaneous expenses ................................. 40,823
---------------
TOTAL EXPENSES ......................................... 8,682,641
Less: Custodian fee credits ............................ (7,371)
---------------
NET EXPENSES ........................................... 8,675,270
---------------
NET INVESTMENT INCOME .................................. 4,279,675
---------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, SWAP CONTRACTS, AND
FOREIGN CURRENCY:
Net realized gain on investments ....................... 11,985,359
Net realized loss on swap contracts .................... (174,863)
Net realized gain on foreign currency
transactions ......................................... 48,423
---------------
Net realized gain on investments, swap contracts,
and foreign currency transactions .................... 11,858,919
---------------
Net change in unrealized appreciation/
depreciation on investments .......................... (139,316,625)
Net change in unrealized appreciation/
depreciation on swap contracts ....................... (8,115)
Net change in unrealized appreciation/
depreciation on foreign currency translations ........ (1,986)
---------------
Net change in unrealized appreciation/
depreciation on investments, swap contracts,
and foreign currency translations .................... (139,326,726)
---------------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS, SWAP CONTRACTS, AND
FOREIGN CURRENCY ..................................... (127,467,807)
---------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ...................................... $ (123,188,132)
===============
- ----------
(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
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2008 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2007
---------------- ------------------
OPERATIONS:
Net investment income ................................................... $ 4,279,675 $ 10,235,599
Net realized gain on investments, swap contracts, and foreign currency
transactions .......................................................... 11,858,919 25,662,276
Net change in unrealized appreciation/depreciation on investments,
swap contracts, and foreign currency translations ..................... (139,326,726) 129,138,838
---------------- ------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........ (123,188,132) 165,036,713
---------------- ------------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class AAA ............................................................. (8,568,519) (10,622,391)
Class A ............................................................... (129,528) (122,443)
Class B ............................................................... (2,367) (3,257)
Class C ............................................................... (134,377) (146,754)
Class I ............................................................... (2,413) --
---------------- ------------------
(8,837,204) (10,894,845)
---------------- ------------------
Net realized gain on investments
Class AAA ............................................................. (21,496,322) (25,511,616)
Class A ............................................................... (318,823) (276,274)
Class B ............................................................... (6,209) (11,191)
Class C ............................................................... (330,973) (275,224)
---------------- ------------------
(22,152,327) (26,074,305)
---------------- ------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ..................................... (30,989,531) (36,969,150)
---------------- ------------------
CAPITAL SHARE TRANSACTIONS:
Class AAA ............................................................. 137,502,923 271,771,201
Class A ............................................................... 5,668,001 5,538,183
Class B ............................................................... 11,732 (51,212)
Class C ............................................................... 3,668,906 7,800,453
Class I ............................................................... 591,247 --
---------------- ------------------
NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS. ............. 147,442,809 285,058,625
---------------- ------------------
REDEMPTION FEES ......................................................... 5,837 10,314
---------------- ------------------
NET INCREASE (DECREASE) IN NET ASSETS ................................... (6,729,017) 413,136,502
NET ASSETS:
Beginning of period ..................................................... 1,224,286,981 811,150,479
---------------- ------------------
End of period (including undistributed net investment income of
$0 and $0, respectively) .............................................. $ 1,217,557,964 $ 1,224,286,981
================ ==================
See accompanying notes to financial statements.
12
THE GABELLI EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each 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/(Loss) on Investment Investment Gain on Total
September 30 of Period (Loss)(a) Investments Operations Income Investments Distributions
- ------------ --------- ---------- -------------- ---------- ---------- ----------- -------------
CLASS AAA
2008(c) $ 22.98 $ 0.08 $ (2.22) $ (2.14) $ (0.16) $ (0.40) $ (0.56)
2007 20.23 0.22 3.37 3.59 (0.39) (0.45) (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
2008(c) $ 22.91 $ 0.08 $ (2.21) $ (2.13) $ (0.16) $ (0.40) $ (0.56)
2007 20.17 0.22 3.36 3.58 (0.39) (0.45) (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(f) 16.40 0.16 0.43 0.59 (0.20) (0.07) (0.27)
CLASS B
2008(c) $ 22.32 $(0.00)(d) $ (2.15) $ (2.15) $ (0.15) $ (0.40) $ (0.55)
2007 19.82 0.06 3.28 3.34 (0.39) (0.45) (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(f) 16.40 0.07 0.42 0.49 (0.20) (0.07) (0.27)
CLASS C
2008(c) $ 22.31 $(0.00)(d) $ (2.15) $ (2.15) $ (0.15) $ (0.40) $ (0.55)
2007 19.81 0.05 3.29 3.34 (0.39) (0.45) (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(f) 16.40 0.08 0.43 0.51 (0.20) (0.07) (0.27)
CLASS I
2008(g) $ 21.42 $ 0.05 $ (1.08) $ (1.03) $ (0.09) -- $ (0.09)
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) Expenses(b) Rate++
- ------------ ---------- --------- ------- ----------- ---------- ----------- ---------
CLASS AAA
2008(c) $ 0.00(d) $ 20.28 (9.50)% $ 1,179,368 0.71%(e) 1.40%(e) 12%
2007 0.00(d) 22.98 18.19 1,191,351 1.01 1.43 12
2006 0.00(d) 20.23 11.25 794,375 1.98 1.46 14
2005 0.00(d) 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
2008(c) $ 0.00(d) $ 20.22 (9.49)% $ 18,748 0.72%(e) 1.40%(e) 12%
2007 0.00(d) 22.91 18.20 15,313 1.00 1.43 12
2006 0.00(d) 20.17 11.29 8,379 2.02 1.46 14
2005 0.00(d) 18.66 15.99 3,644 1.08 1.50 11
2004(f) -- 16.72 3.62 124 1.33(e) 1.49(e) 12
CLASS B
2008(c) $ 0.00(d) $ 19.62 (9.81)% $ 313 (0.05)%(e) 2.15%(e) 12%
2007 0.00(d) 22.32 17.28 344 0.29 2.18 12
2006 0.00(d) 19.82 10.46 352 1.91 2.21 14
2005 0.00(d) 18.48 15.28 32 0.20 2.22 11
2004(f) -- 16.62 3.00 1 0.56(e) 2.24(e) 12
CLASS C
2008(c) $ 0.00(d) $ 19.61 (9.81)% $ 18,572 (0.03)%(e) 2.15%(e) 12%
2007 0.00(d) 22.31 17.29 17,279 0.24 2.18 12
2006 0.00(d) 19.81 10.46 8,044 1.26 2.21 14
2005 0.00(d) 18.47 15.24 3,374 0.37 2.24 11
2004(f) -- 16.64 3.13 79 0.62(e) 2.24(e) 12
CLASS I
2008(g) $ 0.00(d) $ 20.30 (9.41)% $ 557 1.21%(e) 1.15%(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.
++ Effective in 2008, a change in accounting policy was adopted with regard
to the calculation of the portfolio turnover rate. Had this policy been
adopted retroactively, the portfolio turnover rate for the fiscal years
ended September 30, 2007, 2006, 2005, 2004, and 2003 would have been 20%,
34%, 26%, 15%, and 34%, respectively.
(a) Per share amounts have been calculated using the average shares
outstanding method.
(b) 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 six months ended March 31, 2008, and fiscal year ended
September 30, 2007 were minimal.
(c) For the six months ended March 31, 2008, unaudited.
(d) Amount represents less than $0.005 per share.
(e) Annualized.
(f) From the commencement of offering Class A, Class B, and Class C Shares on
December 31, 2003.
(g) From the commencement of offering Class I Shares on January 11, 2008
through March 31, 2008.
See accompanying notes to financial statements.
13
THE GABELLI EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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.
14
THE GABELLI EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
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. As of March
31, 2008, the adoption of SFAS 157 had no impact on the amounts reported in the
financial statements.
In March 2008, FASB issued Statement of Financial Accounting Standards No. 161,
"Disclosures about Derivative Instruments and Hedging Activities" ("SFAS 161")
was issued and is effective for fiscal years beginning after November 15, 2008.
SFAS 161 is intended to improve financial reporting for derivative instruments
by requiring enhanced disclosure that enables investors to understand how and
why an entity uses derivatives, how derivatives are accounted for, and how
derivative instruments affect an entity's results of operations and financial
position. Management is currently evaluating the implications of SFAS 161. The
impact on the Fund's financial statement disclosures, if any, is currently being
assessed.
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 March
31, 2008, there were no open repurchase agreements.
SWAP AGREEMENTS. The Fund may enter into equity and contract for difference swap
transactions. The use of swaps is a highly specialized activity that involves
investment techniques and risks different from those associated with ordinary
portfolio security transactions. A swap is 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
15
THE GABELLI EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
affect the Fund's ability to make dividend payments. In addition, at the time a
swap transaction reaches its scheduled termination date, there is a risk that
the Fund will not be able to obtain a replacement transaction or that the terms
of the replacement will not be as favorable as on the expiring transaction. 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 contract for difference swaps with Bear, Stearns
International Limited. Details of the swaps at March 31, 2008 are as follows:
NET
NOTIONAL EQUITY SECURITY INTEREST RATE/ TERMINATION UNREALIZED
AMOUNT RECEIVED EQUITY SECURITY PAID DATE DEPRECIATION
- ------------------------ --------------------- -------------------------------- ----------- ------------
Market Value Overnight LIBOR plus 40 bps plus
Appreciation on: Market Value Depreciation on:
$258,986 (140,000 shares) Rank Group plc Rank Group plc 05/15/08 $(14,146)
169,018 (20,000 shares) Rolls-Royce Group plc Rolls-Royce Group plc 12/15/08 (9,293)
--------
$(23,439)
========
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 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 March 31, 2008, 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 March 31, 2008.
16
THE GABELLI EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
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 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 March 31, 2008, 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
17
THE GABELLI EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
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.
The tax character of distributions paid during the fiscal year ended September
30, 2007 was as follows:
DISTRIBUTIONS PAID FROM:
Ordinary income
(inclusive of short-term capital gains)..... $ 20,253,574
Net long-term capital gains .................. 16,715,576
------------
Total distributions paid ..................... $ 36,969,150
============
18
THE GABELLI EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
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.
The following summarizes the tax cost of investments and the related unrealized
appreciation/(depreciation) at March 31, 2008:
GROSS GROSS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
COST APPRECIATION DEPRECIATION (DEPRECIATION)
--------------- ------------- ------------- --------------
Investments ....... $ 1,072,987,279 $ 239,646,101 $ (96,937,403) $ 142,708,698
Swap contracts .... -- -- (23,439) (23,439)
------------- ------------- --------------
$ 239,646,101 $ (96,960,842) $ 142,685,259
============= ============= ==============
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.
For the six months ended March 31, 2008, the Fund did not have any liability for
any unrecognized tax benefits. The Fund recognizes interest and penalties, if
any, related to unrecognized tax benefits as income tax expenses in the
Statement of Operations. The Fund is not subject to examination by U.S. federal
tax authorities for tax years before 2003 and by state tax authorities for tax
years before 2002.
3. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS. The Fund has entered
into an investment advisory agreement (the "Advisory Agreement") with the
Adviser which provides that the Fund will pay the Adviser a fee, computed daily
and paid monthly, at the annual rate of 1.00% of the value of its average daily
net assets. In accordance with the Advisory Agreement, the Adviser provides a
continuous investment program for the Fund's portfolio, oversees the
administration of all aspects of the Fund's business and affairs, and pays the
compensation of all Officers and Directors of the Fund who are affiliated
persons of the Adviser.
The Corporation pays each Director who is not considered 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 EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
4. DISTRIBUTION PLAN. The Fund's Board has adopted a distribution plan (the
"Plan") for each class of shares, except for Class I Shares, pursuant to Rule
12b-1 under the 1940 Act. 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 six months ended March 31, 2008, other than short-term securities and U.S.
Government obligations, aggregated $205,808,868 and $142,715,024, respectively.
Purchases of U.S. Government obligations for the six months ended March 31,
2008, other than short-term obligations, aggregated $2,921,283.
6. TRANSACTIONS WITH AFFILIATES. During the six months ended March 31, 2008, the
Fund paid brokerage commissions on security trades of $204,017 to Gabelli &
Company. Additionally, Gabelli & Company informed the Fund that it received
$21,058 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 six months
ended March 31, 2008, the Fund paid or accrued $22,500 to the Adviser in
connection with the cost of computing the Fund's NAV.
7. LINE OF CREDIT. The Fund participates in an unsecured line of credit of up to
$75,000,000, and may borrow up to 10% of its net assets from the custodian for
temporary borrowing purposes. 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. During the six
months ended March 31, 2008, there were no borrowings under the line of credit.
8. CAPITAL STOCK TRANSACTIONS. The Fund currently offers five classes of shares
- - Class AAA Shares, Class A Shares, Class B Shares, Class C Shares, and Class I
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 I Shares are offered to foundations,
endowments, institutions, and employee benefit plans. 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. Class I Shares were first issued on January 11, 2008.
The Fund imposes a redemption fee of 2.00% on all classes of shares that are
redeemed or exchanged on or before the seventh day after the date of a purchase.
The redemption fee is deducted from the proceeds otherwise payable to the
redeeming shareholders and is retained by the Fund. The redemption fees retained
by the Fund during the six months ended March 31, 2008 and the fiscal year ended
September 30, 2007 amounted to $5,837 and $10,314, respectively.
20
THE GABELLI EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
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:
SIX MONTHS ENDED
MARCH 31, 2008 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2007
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------- -------------
CLASS AAA CLASS AAA
----------------------------- -----------------------------
Shares sold ....................................... 12,287,889 $ 265,451,063 20,047,350 $ 435,048,849
Shares issued upon reinvestment of distributions .. 1,282,785 28,229,344 1,598,441 33,658,795
Shares redeemed ................................... (7,266,366) (156,177,484) (9,065,356) (196,936,443)
------------- ------------- ------------- -------------
Net increase ................................... 6,304,308 $ 137,502,923 12,580,435 $ 271,771,201
============= ============= ============= =============
CLASS A CLASS A
----------------------------- -----------------------------
Shares sold ....................................... 326,546 $ 7,095,587 337,809 $ 7,382,957
Shares issued upon reinvestment of distributions .. 17,134 375,504 15,265 320,840
Shares redeemed ................................... (84,731) (1,803,090) (100,074) (2,165,614)
------------- ------------- ------------- -------------
Net increase ................................... 258,949 $ 5,668,001 253,000 $ 5,538,183
============= ============= ============= =============
CLASS B CLASS B
----------------------------- -----------------------------
Shares sold ....................................... 224 $ 4,456 -- --
Shares issued upon reinvestment of distributions .. 402 8,576 700 $ 14,330
Shares redeemed ................................... (63) (1,300) (3,076) (65,542)
------------- ------------- ------------- -------------
Net increase (decrease) ........................ 563 $ 11,732 (2,376) $ (51,212)
============= ============= ============= =============
CLASS C CLASS C
----------------------------- -----------------------------
Shares sold ....................................... 225,338 $ 4,722,734 400,018 $ 8,488,767
Shares issued upon reinvestment of distributions .. 20,510 437,094 18,848 388,816
Shares redeemed ................................... (73,152) (1,490,922) (50,547) (1,077,130)
------------- ------------- ------------- -------------
Net increase ................................... 172,696 $ 3,668,906 368,319 $ 7,800,453
============= ============= ============= =============
CLASS I*
-----------------------------
Shares sold ....................................... 27,802 $ 598,528
Shares issued upon reinvestment of distributions .. 116 2,414
Shares redeemed ................................... (462) (9,695)
------------- -------------
Net increase ................................... 27,456 $ 591,247
============= =============
- ----------
* From the commencement of offering Class I Shares on January 11, 2008.
21
THE GABELLI EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
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. On April 24, 2008, the Adviser entered into an administrative
settlement with the SEC to resolve the SEC's inquiry regarding prior frequent
trading activity in shares of the GAMCO Global Growth Fund (the "Global Growth
Fund") by one investor who was banned from the Global Growth Fund in August
2002. In the settlement, the SEC found that the Adviser had violated Section
206(2) of the Investment Advisers Act, Section 17(d) of the 1940 Act and Rule
17d-1 thereunder, and had aided and abetted and caused violations of Section
12(d)(1)(B)(i) of the 1940 Act. Under the terms of the settlement, the Adviser,
while neither admitting nor denying the SEC's findings and allegations, agreed,
among other things, to pay the previously reserved total of $16 million
(including a $5 million penalty), of which at least $11 million will be
distributed to shareholders of the Global Growth Fund in accordance with a plan
to be developed by an independent distribution consultant and approved by the
independent directors of the Global Growth Fund and the staff of the SEC, and to
cease and desist from future violations of the above referenced federal
securities laws. The settlement will not have a material adverse impact on the
Adviser or its ability to fulfill its obligations under the Advisory Agreement.
On the same day, the SEC filed a civil action against the Executive Vice
President and Chief Operating Officer of the Adviser, alleging violations of
certain federal securities laws arising from the same matter. The officer is
also an officer of the Global Growth Fund and other funds in the Gabelli/GAMCO
fund complex. The officer denies the allegations and is continuing in his
positions with the Adviser and the funds. The Adviser currently expects that any
resolution of the action against the officer will not have a material adverse
impact on the Adviser or its ability to fulfill its obligations under the
Advisory Agreement.
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 EQUITY INCOME FUND
BOARD CONSIDERATION AND RE-APPROVAL OF ADVISORY AGREEMENT (UNAUDITED)
During the six months ended March 31, 2008, the Board of Directors of the
Corporation approved the continuation of the Investment Advisory Agreement with
the Adviser for the Fund on the basis of the recommendation by the Directors
(the "independent directors") who are not "interested persons" of the Fund. The
following paragraphs summarize the material information and factors considered
by the independent directors as well as their conclusions relative to such
factors.
NATURE, EXTENT, AND QUALITY OF SERVICES. The Independent Board Members
considered information regarding the portfolio manager, the depth of the analyst
pool available to the Adviser and the portfolio manager, the scope of
administrative, shareholder, and other services supervised or provided by the
Adviser and the absence of significant service problems reported to the Board.
The Independent Board Members noted the experience, length of service, and
reputation of the portfolio manager.
INVESTMENT PERFORMANCE. The Independent Board Members reviewed the short,
medium, and long-term performance of the Fund against a peer group of equity
income funds. The Independent Board Members noted that the Fund's performance
was in the top one-third of the funds in its category for all relevant periods.
PROFITABILITY. The Independent Board Members reviewed summary data regarding the
profitability of the Fund to the Adviser both with an administrative overhead
charge and without such a charge. The Independent Board Members also noted that
a substantial portion of the Fund's portfolio transactions were executed by an
affiliated broker, that the affiliated broker received distribution fees and
minor amounts of sales commissions, and that the Adviser received a moderate
level of soft dollar research benefits through the Fund's portfolio brokerage.
ECONOMIES OF SCALE. The Independent Board Members discussed the major elements
of the Adviser's cost structure and the relationship of those elements to
potential economies of scale.
SHARING OF ECONOMIES OF SCALE. The Independent Board Members noted that the
investment management fee schedule for the Fund does not take into account any
potential economies of scale that may develop.
SERVICE AND COST COMPARISONS. The Independent Board Members compared the expense
ratios of the investment management fee, other expenses, and total expenses of
the Fund to similar expense ratios of the peer group of equity income funds and
noted that the Adviser's management fee includes substantially all
administrative services of the Fund as well as investment advisory services. The
Independent Board Members noted that the Fund's expense ratios and the Fund's
size were above average within this group. The Independent Board Members also
noted that the management fee structure was the same as that in effect for most
of the Gabelli funds. The Independent Board Members did not compare the
management fee to the fee for other types of accounts managed by the Adviser.
CONCLUSIONS. The Independent Board Members concluded that the Fund enjoyed
highly experienced portfolio management services, good ancillary services, and
an excellent performance record. The Independent Board Members also concluded
that the Fund's expense ratios and the profitability to the Adviser of managing
the Fund were reasonable, particularly in light of the Fund's performance, and
that economies of scale were not a significant factor in their thinking at this
time. The Independent Board Members did not view the potential profitability of
ancillary services as material to their decision. On the basis of the foregoing
and without assigning particular weight to any single conclusion, the
Independent Board Members determined to recommend continuation of the Investment
Management Agreement to the full Board.
23
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 Agnes Mullady
PRESIDENT AND SECRETARY TREASURER
Peter D. Goldstein
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
[GRAPHIC OMITTED] E P
Gabelli Triangle P M
MANAGEMENT S V
CASH FLOW
RESEARCH
THE
GABELLI
EQUITY
INCOME
FUND
SEMI ANNUAL REPORT
MARCH 31, 2008
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
GAB444Q108SR
THE GABELLI WOODLAND SMALL CAP VALUE FUND
SEMI-ANNUAL REPORT (a)
MARCH 31, 2008
TO OUR SHAREHOLDERS,
The Gabelli Woodland Small Cap Value Fund, for the six months ended March
31, 2008, declined 13.57% versus declines of 14.02% for the Russell 2000 Index,
12.46% for the S&P 500 Index, and 13.30% for the Value Line Composite Index.
COMPARATIVE RESULTS
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH MARCH 31, 2008 (a)(b)
----------------------------------------------------
Since
Inception
Quarter 1 Year 3 Year 5 Year (12/31/02)
------- ------ ------ ------ ----------
GABELLI WOODLAND SMALL CAP VALUE FUND
CLASS AAA ............................ (9.30)% (7.95)% 3.92% 11.83% 9.49%
Russell 2000 Index ...................... (9.90) (13.00) 5.06 14.90 13.15
S&P 500 Index ........................... (9.44) (5.08) 5.84 11.32 10.08
Value Line Composite Index .............. (8.67) (10.83) 5.72 15.94 13.94
Class A ................................. (9.33) (7.97) 4.04 11.89 9.54
(14.54)(c) (13.26)(c) 2.01(c) 10.57(c) 8.31(c)
Class B ................................. (9.53) (8.81) 2.80 11.54 9.22
(14.05)(d) (13.37)(d) 1.85(d) 11.28(d) 9.09(d)
Class C ................................. (9.52) (8.59) 3.22 11.06 8.77
(10.42)(e) (9.51)(e) 3.22 11.06 8.77
Class I ................................. (9.30) (7.95) 3.92 11.83 9.49
IN THE CURRENT PROSPECTUS, THE GROSS EXPENSE RATIOS FOR CLASS AAA, A, B, C, AND
I SHARES ARE 2.33%, 2.33%, 3.08%, 3.08%, AND 2.08%, RESPECTIVELY. THE NET
EXPENSE RATIOS AFTER CONTRACTUAL REIMBURSEMENTS BY THE ADVISER IN PLACE THROUGH
SEPTEMBER 30, 2008 ARE 2.00%, 2.00%, 2.75%, 2.75%, AND 1.75% RESPECTIVELY. CLASS
AAA AND I 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 ARE USED TO CALCULATE PERFORMANCE
FOR THE PERIODS PRIOR TO THE ISSUANCE OF CLASS I SHARES ON JANUARY 11,
2008. THE ACTUAL PERFORMANCE OF CLASS I SHARES WOULD HAVE BEEN HIGHER DUE
TO LOWER EXPENSES ASSOCIATED WITH THIS CLASS OF SHARES. 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, ONE YEAR, THREE YEAR,
FIVE YEAR AND SINCE INCEPTION PERIODS OF 5%, 5%, 3%, 2%, AND 1%,
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, 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.
- --------------------------------------------------------------------------------
THE GABELLI WOODLAND SMALL CAP VALUE FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
For the Six Month Period from October 1, 2007 through March 31, 2008
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.
Beginning Ending Annualized Expenses
Account Value Account Value Expense Paid During
10/01/07 03/31/08 Ratio Period*
- --------------------------------------------------------------------------------
THE GABELLI WOODLAND SMALL CAP VALUE FUND
- --------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class AAA $1,000.00 $ 864.30 2.01% $ 9.37
Class A $1,000.00 $ 864.40 2.01% $ 9.37
Class B $1,000.00 $ 860.50 2.76% $12.84
Class C $1,000.00 $ 861.40 2.76% $12.84
Class I** $1,000.00 $ 864.30 1.76% $ 3.50
HYPOTHETICAL 5% RETURN
Class AAA $1,000.00 $1,014.95 2.01% $10.13
Class A $1,000.00 $1,014.95 2.01% $10.13
Class B $1,000.00 $1,011.20 2.76% $13.88
Class C $1,000.00 $1,011.20 2.76% $13.88
Class I** $1,000.00 $1,006.91 1.76% $ 3.77
* Expenses are equal to the Fund's annualized expense ratio for the last six
months multiplied by the average account value over the period, multiplied
by the number of days in the most recent fiscal half-year, then divided by
366.
** Class I Shares were first issued on January 11, 2008. Account values and
expense ratios are calculated from January 11, 2008 through March 31,
2008.
2
SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED)
The following table presents portfolio holdings as a percent of total net assets
as of March 31, 2008:
THE GABELLI WOODLAND SMALL CAP VALUE FUND
Diversified Industrial ............................................... 15.0%
Business Services .................................................... 13.1%
Consumer Products .................................................... 8.8%
Equipment and Supplies ............................................... 7.6%
Computer Software and Services ....................................... 7.3%
Specialty Chemicals .................................................. 6.6%
Financial Services ................................................... 6.0%
Health Care .......................................................... 5.8%
U.S. Government Obligations .......................................... 5.7%
Energy and Utilities ................................................. 5.6%
Food and Beverage .................................................... 4.6%
Hotels and Gaming .................................................... 3.8%
Aerospace ............................................................ 3.3%
Automotive: Parts and Accessories .................................... 2.4%
Entertainment ........................................................ 2.0%
Telecommunications ................................................... 1.3%
Communications Equipment ............................................. 1.0%
Real Estate Investment Trusts ........................................ 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 DECEMBER 31,
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.
3
THE GABELLI WOODLAND SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS -- MARCH 31, 2008 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ -------------- --------------
COMMON STOCKS -- 94.2%
AEROSPACE -- 3.3%
1,465 Alliant Techsystems Inc.+ ....... $ 100,915 $ 151,672
3,370 Kaman Corp. ..................... 96,990 95,337
-------------- --------------
197,905 247,009
-------------- --------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 2.4%
6,490 Midas Inc.+ ..................... 122,392 111,563
10,830 Noble International Ltd. ........ 212,771 67,688
-------------- --------------
335,163 179,251
-------------- --------------
BUSINESS SERVICES -- 13.1%
8,090 Deluxe Corp. .................... 195,190 155,409
12,150 Edgewater Technology Inc.+ ...... 92,991 64,030
12,610 Federal Signal Corp. ............ 148,084 176,036
8,470 Imation Corp. ................... 271,461 192,608
7,350 Intermec Inc.+ .................. 178,882 163,096
3,320 The Brink's Co. ................. 115,092 223,038
-------------- --------------
1,001,700 974,217
-------------- --------------
COMMUNICATIONS EQUIPMENT -- 1.0%
8,540 Radyne Corp.+ ................... 78,769 72,761
-------------- --------------
COMPUTER SOFTWARE AND SERVICES -- 7.3%
7,300 eResearch Technology Inc.+ ...... 53,381 90,666
11,500 Furmanite Corp.+ ................ 70,489 97,750
24,410 Lawson Software Inc.+ ........... 184,137 183,808
21,530 Tier Technologies Inc., Cl. B+ .. 209,466 171,594
-------------- --------------
517,473 543,818
-------------- --------------
CONSUMER PRODUCTS -- 8.8%
7,770 Alberto-Culver Co. .............. 185,737 212,976
2,085 Church & Dwight Co. Inc. ........ 53,976 113,090
11,180 Kimball International Inc.,
Cl. B ......................... 149,008 119,850
11,600 Sally Beauty Holdings Inc.+ ..... 102,151 80,040
4,680 Steinway Musical Instruments
Inc.+ ......................... 152,717 133,473
-------------- --------------
643,589 659,429
-------------- --------------
DIVERSIFIED INDUSTRIAL -- 15.0%
2,880 Barnes Group Inc. ............... 77,491 66,096
6,150 Columbus McKinnon Corp.+ ........ 149,602 190,527
14,910 Griffon Corp.+ .................. 165,850 128,226
9,100 Hawk Corp., Cl. A+ .............. 125,355 159,432
7,920 LeCroy Corp.+ ................... 75,284 68,587
29,440 Magnetek Inc.+ .................. 144,666 101,274
5,600 OSI Systems Inc.+ ............... 150,311 128,912
2,020 Pentair Inc. .................... 74,321 64,438
3,500 Texas Industries Inc. ........... 156,835 210,385
-------------- --------------
1,119,715 1,117,877
-------------- --------------
ENERGY AND UTILITIES -- 5.6%
2,879 ALLETE Inc. ..................... 82,984 111,187
3,710 Comstock Resources Inc.+ ........ 103,496 149,513
5,740 Mariner Energy Inc.+ ............ 106,895 155,037
-------------- --------------
293,375 415,737
-------------- --------------
ENTERTAINMENT -- 2.0%
7,170 Discovery Holding Co., Cl. A+ ... 108,572 152,147
-------------- --------------
MARKET
SHARES COST VALUE
------ -------------- --------------
EQUIPMENT AND SUPPLIES -- 7.6%
23,600 C&D Technologies Inc.+ .......... $ 128,303 $ 118,472
2,230 Powell Industries Inc.+ ......... 88,982 87,795
4,770 Tennant Co. ..................... 96,287 189,894
4,150 The Toro Co. .................... 110,608 171,768
-------------- --------------
424,180 567,929
-------------- --------------
FINANCIAL SERVICES -- 6.0%
15,880 Franklin Bank Corp.+ ............ 169,728 48,116
4,950 Hilb Rogal & Hobbs Co. .......... 212,773 155,777
2,830 HMN Financial Inc. .............. 98,886 65,316
14,700 NewAlliance Bancshares Inc. ..... 218,159 180,222
-------------- --------------
699,546 449,431
-------------- --------------
FOOD AND BEVERAGE -- 4.6%
14,320 Del Monte Foods Co. ............. 171,229 136,470
3,100 PepsiAmericas Inc. .............. 50,889 79,143
15,260 Triarc Cos. Inc., Cl. A ......... 177,782 96,138
4,880 Triarc Cos. Inc., Cl. B ......... 56,528 33,721
-------------- --------------
456,428 345,472
-------------- --------------
HEALTH CARE -- 5.8%
5,210 K-V Pharmaceutical Co., Cl. A+ .. 147,865 130,042
3,616 SurModics Inc.+ ................. 125,588 151,438
3,480 West Pharmaceutical Services
Inc. .......................... 143,094 153,920
-------------- --------------
416,547 435,400
-------------- --------------
HOTELS AND GAMING -- 3.8%
5,370 Gaylord Entertainment Co.+ ...... 144,011 162,657
6,460 Marcus Corp. .................... 152,320 124,032
-------------- --------------
296,331 286,689
-------------- --------------
REAL ESTATE INVESTMENT TRUSTS -- 0.0%
2,135 Deerfield Capital Corp. ......... 3,032 3,011
-------------- --------------
SPECIALTY CHEMICALS -- 6.6%
5,100 Arch Chemicals Inc. ............. 148,969 190,026
2,560 FMC Corp. ....................... 93,043 142,054
4,200 H.B. Fuller Co. ................. 117,601 85,722
1,010 NewMarket Corp. ................. 53,833 76,205
-------------- --------------
413,446 494,007
-------------- --------------
TELECOMMUNICATIONS -- 1.3%
11,400 HickoryTech Corp. ............... 109,915 93,138
-------------- --------------
TOTAL COMMON STOCKS ............. 7,115,686 7,037,323
-------------- --------------
PRINCIPAL
AMOUNT
- ------------
U.S. GOVERNMENT OBLIGATIONS -- 5.7%
$ 423,000 U.S. Treasury Bills, 1.261% to
2.161%++, 05/08/08 to
06/26/08 ...................... 421,904 421,891
-------------- --------------
TOTAL INVESTMENTS -- 99.9% ...... $ 7,537,590 7,459,214
==============
OTHER ASSETS AND LIABILITIES (NET) -- 0.1% ...... 10,080
--------------
NET ASSETS -- 100.0% ............................ $ 7,469,294
==============
- ----------
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
See accompanying notes to financial statements.
4
THE GABELLI WOODLAND SMALL CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2008 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (cost $7,537,590) ................... $ 7,459,214
Cash ...................................................... 77,936
Receivable for investments sold ........................... 54,530
Receivable for Fund shares sold ........................... 400
Dividends receivable ...................................... 4,333
Prepaid expenses .......................................... 26,266
------------
TOTAL ASSETS .............................................. 7,622,679
------------
LIABILITIES:
Payable for investments purchased ......................... 96,990
Payable for Fund shares redeemed .......................... 2,516
Payable for investment advisory fees ...................... 1,402
Payable for distribution fees ............................. 1,659
Payable for legal and audit fees .......................... 29,379
Payable for shareholder
communications expenses ................................ 16,602
Other accrued expenses .................................... 4,837
------------
TOTAL LIABILITIES ......................................... 153,385
------------
NET ASSETS applicable to 807,272
shares outstanding ..................................... $ 7,469,294
============
NET ASSETS CONSIST OF:
Paid-in capital, each class at $0.001 par value ........... $ 7,169,820
Accumulated net investment loss ........................... (33,029)
Accumulated net realized gain on investments .............. 410,879
Net unrealized depreciation on investments ................ (78,376)
------------
NET ASSETS ................................................ $ 7,469,294
============
SHARES OF CAPITAL STOCK:
CLASS AAA:
Net Asset Value, offering and redemption price
per share ($7,199,147 / 777,306 shares
outstanding; 100,000,000 shares authorized) ............ $ 9.26
============
CLASS A:
Net Asset Value and redemption price per share
($50,890 / 5,455 shares outstanding;
50,000,000 shares authorized) .......................... $ 9.33
============
Maximum offering price per share (NAV /9425,
based on maximum sales charge of 5.75% of
the offering price) .................................... $ 9.90
============
CLASS B:
Net Asset Value and offering price per share
($158.71 / 17.25 shares outstanding;
50,000,000 shares authorized) .......................... $ 9.20(a)
============
CLASS C:
Net Asset Value and offering price per share
($163,768 / 18,521 shares outstanding;
50,000,000 shares authorized) .......................... $ 8.84(a)
============
CLASS I:
Net Asset Value, offering and redemption price per
share ($55,330 / 5,973 shares outstanding;
50,000,000 shares authorized) .......................... $ 9.26
============
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2008 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends ................................................. $ 44,275
Interest .................................................. 7,059
------------
TOTAL INVESTMENT INCOME ................................... 51,334
------------
EXPENSES:
Investment advisory fees .................................. 41,627
Distribution fees - Class AAA ............................. 10,004
Distribution fees - Class A ............................... 69
Distribution fees - Class B ............................... 1
Distribution fees - Class C ............................... 1,224
Legal and audit fees ...................................... 15,430
Shareholder communications expenses ....................... 11,968
Registration expenses ..................................... 11,835
Shareholder services fees ................................. 6,372
Custodian fees ............................................ 4,483
Interest expense .......................................... 218
Directors' fees ........................................... 126
Miscellaneous expenses .................................... 3,446
------------
TOTAL EXPENSES BEFORE FEES WAIVED AND
EXPENSES REIMBURSED BY ADVISER ......................... 106,803
LESS:
Fees waived and expenses reimbursed
by Adviser .......................................... (22,308)
Custodian fee credits .................................. (132)
------------
NET EXPENSES .............................................. 84,363
------------
NET INVESTMENT LOSS ....................................... (33,029)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investments .......................... 466,648
Net change in unrealized appreciation/depreciation
on investments ......................................... (1,653,306)
------------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS ......................................... (1,186,658)
------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ........................................ $ (1,219,687)
============
- ----------
(a) Redemption price varies based on length of time held.
See accompanying notes to financial statements.
5
THE GABELLI WOODLAND SMALL CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2008 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2007
---------------- ------------------
OPERATIONS:
Net investment income (loss) ...................................... $ (33,029) $ 34,514
Net realized gain on investments .................................. 466,648 1,560,963
Net change in unrealized appreciation/depreciation on
investments ..................................................... (1,653,306) 267,092
------------- ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ... (1,219,687) 1,862,569
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class AAA ...................................................... -- (39,316)
Class A ........................................................ -- (73)
------------- ------------
-- (39,389)
------------- ------------
Net realized gain on investments
Class AAA ...................................................... (1,262,098) (2,044,419)
Class A ........................................................ (9,144) (10,469)
Class B ........................................................ (26) (37)
Class C ........................................................ (43,337) (99,535)
------------- ------------
(1,314,605) (2,154,460)
------------- ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ............................... (1,314,605) (2,193,849)
------------- ------------
CAPITAL SHARE TRANSACTIONS:
Class AAA ...................................................... 594,290 214,548
Class A ........................................................ 3,295 (40,999)
Class B ........................................................ 26 36
Class C ........................................................ (50,598) (103,753)
Class I ........................................................ 56,480 --
------------- ------------
NET INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ........ 603,493 69,832
------------- ------------
REDEMPTION FEES ................................................... 2 9
------------- ------------
NET DECREASE IN NET ASSETS ........................................ (1,930,797) (261,439)
NET ASSETS:
Beginning of period ............................................... 9,400,091 9,661,530
------------- ------------
End of period (including undistributed net investment income of
$0 and $0, respectively) ....................................... $ 7,469,294 $ 9,400,091
============= ============
See accompanying notes to financial statements.
6
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/(Loss) on Investment Investment Gain on Total
September 30 of Period (Loss)(a)(b) Investments Operations Income Investments Distributions
- ------------- --------- ------------ -------------- ---------- ---------- ----------- -------------
CLASS AAA
2008(e) $ 12.61 $ (0.04) $ (1.51) $ (1.55) -- $ (1.80) $ (1.80)
2007 13.35 0.05 2.44 2.49 $ (0.06) (3.17) (3.23)
2006 14.64 (0.12) 0.07 (0.05) -- (1.24) (1.24)
2005 12.79 (0.11) 2.69 2.58 -- (0.73) (0.73)
2004 10.58 (0.14) 2.38 2.24 -- (0.03) (0.03)
2003(i) 10.00 (0.07) 0.65 0.58 -- -- --
CLASS A
2008(e) $ 12.69 $ (0.04) $ (1.52) $ (1.56) -- $ (1.80) $ (1.80)
2007 13.36 0.13 2.39 2.52 $ (0.02) (3.17) (3.19)
2006 14.65 (0.12) 0.07 (0.05) -- (1.24) (1.24)
2005 12.79 (0.09) 2.68 2.59 -- (0.73) (0.73)
2004 10.57 (0.14) 2.39 2.25 -- (0.03) (0.03)
2003(i) 10.00 (0.07) 0.64 0.57 -- -- --
CLASS B
2008(e) $ 12.60 $ (0.08) $ (1.52) $ (1.60) -- $ (1.80) $ (1.80)
2007 13.37 (0.09) 2.49 2.40 -- (3.17) (3.17)
2006 14.77 (0.25) 0.09 (0.16) -- (1.24) (1.24)
2005 12.98 (0.21) 2.73 2.52 -- (0.73) (0.73)
2004 10.59 0.02 2.40 2.42 -- (0.03) (0.03)
2003(i) 10.00 (0.12) 0.71 0.59 -- -- --
CLASS C
2008(e) $ 12.16 $ (0.08) $ (1.44) $ (1.52) -- $ (1.80) $ (1.80)
2007 13.00 (0.03) 2.36 2.33 -- (3.17) (3.17)
2006 14.39 (0.21) 0.06 (0.15) -- (1.24) (1.24)
2005 12.66 (0.20) 2.66 2.46 -- (0.73) (0.73)
2004 10.55 (0.23) 2.37 2.14 -- (0.03) (0.03)
2003(i) 10.00 (0.11) 0.66 0.55 -- -- --
CLASS I
2008(j) $ 9.41 $ (0.00)(f) $ (0.15) $ (0.15) -- -- --
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
--------------------------------------------------------------
Expenses Expenses
Net Asset Net Assets Net Net of Before
Period Value, End of Investment Waivers/ Waivers/ Portfolio
Ended Redemption End of Total Period Income/ Reimburse- Reimburse- Turnover
September 30 Fees(a) Period Return+ (in 000's) (Loss)(b) ments(c) ments(d) Rate++
- ------------- ---------- --------- -------- ---------- ---------- ----------- ---------- ---------
CLASS AAA
2008(e) $ 0.00(f) $ 9.26 (13.57)% $ 7,199 (0.77)%(g) 2.01%(g)(h) 2.54%(g) 23%
2007 0.00(f) 12.61 20.71 9,040 0.38 2.01 2.33 51
2006 0.00(f) 13.35 (0.35) 9,137 (0.84) 2.01 2.31 59
2005 0.00(f) 14.64 20.67 11,839 (0.78) 2.01(h) 2.99 35
2004 -- 12.79 21.22 3,388 (1.14) 2.00 5.94 45
2003(i) -- 10.58 5.80 2,323 (0.97)(g) 2.00(g) 15.05(g) 39
CLASS A
2008(e) $ 0.00(f) $ 9.33 (13.56)% $ 51 (0.77)%(g) 2.01%(g)(h) 2.54%(g) 23%
2007 0.00(f) 12.69 20.94 65 1.00 2.01 2.33 51
2006 0.00(f) 13.36 (0.36) 100 (0.83) 2.01 2.31 59
2005 0.00(f) 14.65 20.76 108 (0.68) 2.01(h) 3.17 35
2004 -- 12.79 21.34 47 (1.16) 2.00 5.94 45
2003(i) -- 10.57 5.70 3 (0.97)(g) 2.00(g) 15.05(g) 39
CLASS B
2008(e) $ 0.00(f) $ 9.20 (13.95)% $ 0.1 (1.66)%(g) 2.76%(g)(h) 3.28%(g) 23%
2007 0.00(f) 12.60 19.73 0.1 (0.68) 2.76 3.07 51
2006 0.00(f) 13.37 (1.19) 0.1 (1.77) 2.76 3.06 59
2005 0.00(f) 14.77 19.86 0.1 (1.50) 2.75(h) 3.87 35
2004 -- 12.98 22.91 0.1 0.18 2.75 6.69 45
2003(i) -- 10.59 5.90 0.1 (1.72)(g) 2.75(g) 15.80(g) 39
CLASS C
2008(e) $ 0.00(f) $ 8.84 (13.86)% $ 164 (1.58)%(g) 2.76%(g)(h) 3.29%(g) 23%
2007 0.00(f) 12.16 19.84 295 (0.26) 2.76 3.08 51
2006 0.00(f) 13.00 (1.11) 425 (1.58) 2.76 3.06 59
2005 0.00(f) 14.39 19.91 189 (1.46) 2.76(h) 3.87 35
2004 -- 12.66 20.33 41 (1.88) 2.75 6.69 45
2003(i) -- 10.55 5.50 118 (1.72)(g) 2.75(g) 15.80(g) 39
CLASS I
2008(j) $ 0.00(f) $ 9.26 (13.57)% $ 55 (0.08)%(g) 1.76%(g) 2.31%(g) 23%
- ----------
+ 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.
++ Effective in 2008, a change in accounting policy was adopted with regard
to the calculation of the portfolio turnover rate. Had this policy been
adopted retroactively, the portfolio turnover rate for the fiscal years
ended September 30, 2007, 2006, 2005, 2004, and 2003 would have been as
shown.
(a) Per share amounts have been calculated using the average shares
outstanding method.
(b) Due to capital share activity throughout the period, net investment income
per share and the ratio to average net assets are not necessarily
correlated among the different classes of shares.
(c) The Fund incurred interest expense during six months ended March 31, 2008
and the fiscal year ended September 30, 2007. 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), 2.75% and 2.75% (Class C), and 1.20% (Class I),
respectively.
(d) 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.
(e) For the six months ended March 31, 2008, unaudited.
(f) Amount represents less than $0.005 per share.
(g) Annualized.
(h) 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 six months ended March
31, 2008 and the fiscal year ended September 30, 2005 would have been
2.00% and 2.00% (Class AAA), 2.00% and 2.00% (Class A), 2.75% and 2.75%
(Class B), 2.75% and 2.75% (Class C), and 1.20% (Class I), respectively.
Custodian fee credits for the fiscal year ended September 30, 2007 were
minimal.
(i) From the commencement of investment operations on December 31, 2002
through September 30, 2003.
(j) From the commencement of offering Class I Shares on January 11, 2008
through March 31, 2008.
See accompanying notes to financial statements.
7
THE GABELLI WOODLAND SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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 Depositary
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) (UNAUDITED)
- --------------------------------------------------------------------------------
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. As of March
31, 2008, the adoption of SFAS 157 had no impact on the amounts reported in the
financial statements.
In March 2008, FASB issued Statement of Financial Accounting Standards No. 161,
"Disclosures about Derivative Instruments and Hedging Activities" ("SFAS 161")
was issued and is effective for fiscal years beginning after November 15, 2008.
SFAS 161 is intended to improve financial reporting for derivative instruments
by requiring enhanced disclosure that enables investors to understand how and
why an entity uses derivatives, how derivatives are accounted for, and how
derivative instruments affect an entity's results of operations and financial
position. Management is currently evaluating the implications of SFAS 161. The
impact on the Fund's financial statement disclosures, if any, is currently being
assessed.
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 March
31, 2008, 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.
9
THE GABELLI WOODLAND SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
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 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.
The tax character of distributions paid during the fiscal year ended September
30, 2007 was as follows:
DISTRIBUTIONS PAID FROM:
Ordinary income
(inclusive of short-term capital gains) .... $ 320,582
Net long-term capital gains .................. 1,873,267
-----------
Total distributions paid ..................... $ 2,193,849
===========
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.
10
THE GABELLI WOODLAND SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
The following summarizes the tax cost of investments and the related unrealized
appreciation/(depreciation) at March 31, 2008:
GROSS GROSS NET
UNREALIZED UNREALIZED UNREALIZED
COST APPRECIATION DEPRECIATION DEPRECIATION
---------- ------------ ------------- ------------
Investments ... $7,539,272 $982,825 $(1,062,883) $(80,058)
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.
For the six months ended March 31, 2008, the Fund did not have any liability for
any unrecognized tax benefits. The Fund recognizes interest and penalties, if
any, related to unrecognized tax benefits as income tax expense in the Statement
of Operations. The Fund is not subject to examination by U.S. federal tax
authorities for tax years before 2003 and by state tax authorities for tax years
before 2002.
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%, 2.75%, and 1.75% of the value of the Fund's
average daily net assets for Class AAA, Class A, Class B, Class C, and Class I
Shares, respectively, through September 30, 2008. For the six months ended March
31, 2008, the Adviser reimbursed the Fund in the amount of $22,308. 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
March 31, 2008, the cumulative amount which the Fund may repay the Adviser is
$85,401.
The Corporation pays each Director who 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, except for Class I 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.
11
THE GABELLI WOODLAND SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
5. PORTFOLIO SECURITIES. Purchases and proceeds from the sales of securities for
the six months ended March 31, 2008, other than short-term securities and U.S.
Government obligations, aggregated $1,822,602 and $2,369,809, respectively.
6. TRANSACTIONS WITH AFFILIATES. During the six months ended March 31, 2008,
Gabelli & Company informed the Fund that it received $224 from investors
representing commissions (sales charges and underwriting fees) on sales and
redemptions of Fund shares.
7. LINE OF CREDIT. The Fund participates in an unsecured line of credit of up to
$75,000,000, and may borrow up to 10% of its net assets from the custodian for
temporary borrowing purposes. 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. During the six
months ended March 31, 2008, there were no borrowings under the line of credit.
8. CAPITAL STOCK TRANSACTIONS. The Fund currently offers five classes of shares
- - Class AAA Shares, Class A Shares, Class B Shares, Class C Shares, and Class I
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 I Shares are offered to foundations,
endowments, institutions, and employee benefit plans. 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. Class I Shares were first issued on January 11, 2008.
The Fund imposes a redemption fee of 2.00% on all classes of shares that are
redeemed or exchanged on or before the seventh day after the date of a purchase.
The redemption fee is deducted from the proceeds otherwise payable to the
redeeming shareholders and is retained by the Fund. The redemption fees retained
by the Fund during the six months ended March 31, 2008 and the fiscal year ended
September 30, 2007 amounted to $2 and $9, respectively.
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.
12
THE GABELLI WOODLAND SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
Transactions in shares of capital stock were as follows:
SIX MONTHS ENDED
MARCH 31, 2008 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2007
----------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ------------ --------- ------------
CLASS AAA CLASS AAA
----------------------- ------------------------
Shares sold ............................................... 22,008 $ 225,270 37,674 $ 483,712
Shares issued upon reinvestment of distributions .......... 124,080 1,259,410 168,367 1,958,111
Shares redeemed ........................................... (85,478) (890,390) (173,852) (2,227,275)
-------- ------------ --------- ------------
Net increase ........................................... 60,610 $ 594,290 32,189 $ 214,548
======== ============ ========= ============
CLASS A CLASS A
----------------------- ------------------------
Shares sold ............................................... 343 $ 3,298 1,239 $ 16,152
Shares issued upon reinvestment of distributions .......... 895 9,144 902 10,542
Shares redeemed ........................................... (874) (9,147) (4,553) (67,693)
-------- ------------ --------- ------------
Net increase/(decrease) ................................ 364 $ 3,295 (2,412) $ (40,999)
======== ============ ========= ============
CLASS B CLASS B
----------------------- ------------------------
Shares issued upon reinvestment of distributions .......... 3 $ 26 3 $ 36
-------- ------------ --------- ------------
Net increase ........................................... 3 $ 26 3 $ 36
======== ============ ========= ============
CLASS C CLASS C
----------------------- ------------------------
Shares sold ............................................... 282 $ 3,500 810 $ 9,500
Shares issued upon reinvestment of distributions .......... 4,463 43,337 8,824 99,535
Shares redeemed ........................................... (10,494) (97,435) (18,030) (212,788)
-------- ------------ --------- ------------
Net decrease ........................................... (5,749) $ (50,598) (8,396) $ (103,753)
======== ============ ========= ============
CLASS I*
-----------------------
Shares sold ............................................... 6,764 $ 63,920
Shares redeemed ........................................... (791) (7,440)
-------- ------------
Net increase ........................................... 5,973 $ 56,480
======== ============
- ----------
* From the commencement of offering Class I Shares on January 11, 2008.
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.
13
THE GABELLI WOODLAND SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
10. OTHER MATTERS. On April 24, 2008, the Adviser entered into an administrative
settlement with the SEC to resolve the SEC's inquiry regarding prior frequent
trading activity in shares of the GAMCO Global Growth Fund (the "Global Growth
Fund") by one investor who was banned from the Global Growth Fund in August
2002. In the settlement, the SEC found that the Adviser had violated Section
206(2) of the Investment Advisers Act, Section 17(d) of the 1940 Act and Rule
17d-1 thereunder, and had aided and abetted and caused violations of Section
12(d)(1)(B)(i) of the 1940 Act. Under the terms of the settlement, the Adviser,
while neither admitting nor denying the SEC's findings and allegations, agreed,
among other things, to pay the previously reserved total of $16 million
(including a $5 million penalty), of which at least $11 million will be
distributed to shareholders of the Global Growth Fund in accordance with a plan
to be developed by an independent distribution consultant and approved by the
independent directors of the Global Growth Fund and the staff of the SEC, and to
cease and desist from future violations of the above referenced federal
securities laws. The settlement will not have a material adverse impact on the
Adviser or its ability to fulfill its obligations under the Advisory Agreement.
On the same day, the SEC filed a civil action against the Executive Vice
President and Chief Operating Officer of the Adviser, alleging violations of
certain federal securities laws arising from the same matter. The officer is
also an officer of the Global Growth Fund and other funds in the Gabelli/GAMCO
fund complex. The officer denies the allegations and is continuing in his
positions with the Adviser and the funds. The Adviser currently expects that any
resolution of the action against the officer will not have a material adverse
impact on the Adviser or its ability to fulfill its obligations under the
Advisory Agreement.
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
BOARD CONSIDERATION AND RE-APPROVAL OF ADVISORY AGREEMENT (UNAUDITED)
During the six months ended March 31, 2008, the Board of Directors of the
Corporation approved the continuation of the Investment Advisory Agreement with
the Adviser for the Fund on the basis of the recommendation by the Directors
(the "independent directors") who are not "interested persons" of the Fund. The
following paragraphs summarize the material information and factors considered
by the independent directors as well as their conclusions relative to such
factors.
NATURE, EXTENT AND QUALITY OF SERVICES. The Independent Board Members considered
information regarding the portfolio manager, the depth of the analyst pool
available to the Adviser and the portfolio manager, the scope of administrative,
shareholder, and other services supervised or provided by the Adviser and the
absence of significant service problems reported to the Board. The Independent
Board Members noted the experience, length of service, and reputation of the
portfolio manager.
INVESTMENT PERFORMANCE. The Independent Board Members reviewed the performance
of the Fund over various periods against a peer group of small cap value and
core funds. The Independent Board Members noted that the Fund's performance was
at or near the top one-third for the one and three year periods and considerably
below average for the five year period. The Independent Board Members also noted
that the Fund's performance had improved relative to its peers over time.
PROFITABILITY. The Independent Board Members reviewed summary data regarding the
lack of profitability of the Fund to the Adviser both with an administrative
overhead charge and without such a charge. The Independent Board Members also
noted that an affiliated broker of the Adviser received distribution fees and
minor amounts of sales commissions and that the Adviser received a moderate
level of soft dollar research benefits through the Fund's portfolio brokerage.
ECONOMIES OF SCALE. The Independent Board Members discussed the major elements
of the Adviser's cost structure and the relationship of those elements to
potential economies of scale. The Independent Board Members agreed that
economies of scale were not an issue for this small and slow growing Fund that
has been unprofitable to the Adviser.
SHARING OF ECONOMIES OF SCALE. The Independent Board Members noted that the
investment management fee schedule for the Fund does not take into account any
potential economies of scale that may develop or any losses or diminished
profitability to the Adviser in prior years.
SERVICE AND COST COMPARISONS. The Independent Board Members compared the expense
ratios of the investment management fee, other expenses, and total expenses of
the Fund to similar expense ratios of the peer group of small cap value and core
funds and noted that the Adviser's management fee includes substantially all
administrative services of the Fund as well as investment advisory services. The
Independent Board Members noted that the Fund's expense ratios after waivers
were above and the Fund's size was far below average within this group and that
the Adviser had been waiving substantial portions of its fees in order to make
the Fund a more attractive investment. The Independent Board Members also noted
that the management fee structure before waivers was the same as that in effect
for most of the Gabelli funds. The Independent Board Members did not compare the
management fee to the fee for other types of accounts managed by the Adviser.
CONCLUSIONS. The Independent Board Members concluded that the Fund enjoyed
highly experienced portfolio management services, good ancillary services, and
an improving performance record during its limited life. The Independent Board
Members also concluded that the Fund's expense ratios were reasonable in light
of the lack of profitability to the Adviser of managing the Fund, and that
economies of scale were not a factor in their thinking at this time. The
Independent Board Members did not view the potential profitability of ancillary
services as material to their decision. On the basis of the foregoing and
without assigning particular weight to any single conclusion, the Independent
Board Members determined to recommend continuation of the Investment Management
Agreement to the full Board.
15
Gabelli Equity Series Funds, Inc.
THE GABELLI WOODLAND SMALL CAP VALUE FUND
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
FAX: 914-921-5118
WEBSITE: WWW.GABELLI.COM
E-MAIL: INFO@GABELLI.COM
Net Asset Value 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 AND SECRETARY
Peter D. Goldstein Agnes Mullady
CHIEF COMPLIANCE OFFICER 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
[GRAPHIC OMITTED] E P
Gabelli Triangle P M
MANAGEMENT S V
CASH FLOW
RESEARCH
THE
GABELLI
WOODLAND
SMALL CAP
VALUE
FUND
SEMI ANNUAL REPORT
MARCH 31, 2008
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This report is submitted for the general information of the shareholders of The
Gabelli Woodland Small Cap Value Fund. It is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
GAB840Q108SR
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a) Schedule of Investments in securities of unaffiliated issuers as of the
close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's second fiscal
quarter of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(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.
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By (Signature and Title)* /s/ Bruce N. Alpert
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Bruce N. Alpert, Principal Executive Officer
Date 5/27/08
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Bruce N. Alpert
-------------------------------------------------------
Bruce N. Alpert, Principal Executive Officer
Date 5/27/08
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By (Signature and Title)* /s/ Agnes Mullady
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Agnes Mullady,
Principal Financial Officer and Treasurer
Date 5/27/08
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* Print the name and title of each signing officer under his or her signature.