N-CSR 1 eqinc.txt GABELLI EQUITY SERIES - ANNUAL 9-03 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-06367 Gabelli Equity Series Funds, Inc. ---------------------------------------------------- (Exact name of registrant as specified in charter) One Corporate Center Rye, NY 10580-1422 ---------------------------------------------------- (Address of principal executive offices) (Zip code) Bruce N. Alpert Gabelli Funds, LLC One Corporate Center Rye, NY 10580-1422 ---------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 800-422-3554 ------------ Date of fiscal year end: September 30, 2003 ------------------ Date of reporting period: September 30, 2003 ------------------ Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. THE GABELLI SMALL CAP GROWTH FUND ANNUAL REPORT SEPTEMBER 30, 2003 TO OUR SHAREHOLDERS, In many of our Funds' June 30, 2003 shareholder reports, we noted a change in the way we provide the portfolio manager's commentary to shareholders of our Funds. Our shareholder reports have typically contained commentary on each portfolio manager's assessment of the stock market, individual stocks and how economic events affect their thinking in managing a specific Fund. We have always provided details about performance and presented returns, both good and bad, hopefully in a clear and concise fashion. These comments have been included as part of each Fund's quarterly, semi-annual, and annual financial statements. The Sarbanes-Oxley Act's new corporate governance regulations now require a Fund's principal executive and financial officers to certify the entire contents of the semi-annual and annual shareholder reports in a filing with the Securities and Exchange Commission on Form N-CSR. This certification covers the portfolio manager's commentary and subjective opinions if they are attached to or a part of the financial statements. Rather than ask our portfolio managers to eliminate their opinions and/or restrict their commentary to historical facts only, we separated their commentary from the financial statements and investment portfolio and sent it separately. We will continue to mail the portfolio manager's commentary separately from the investment portfolio to ensure that its content is complete and unrestricted. Our Annual Reports will be mailed separately and include the performance of the Fund with a description of the factors affecting the performance during the past year, along with the financial statements and the investment portfolio. Both the commentary and the financial statements, including the portfolio of investments, are also available on our website at www.gabelli.com/funds. We trust that you understand that our approach is an unintended consequence of the ever-increasing regulatory requirements affecting public companies generally. We hope the specific certification requirements of these new regulations will be modified as they relate to mutual funds, since investment companies have different corporate structures and objectives than other public companies. Sincerely yours, /S/ BRUCE N. ALPERT Bruce N. Alpert Chief Operating Officer Gabelli Funds, LLC October 17, 2003 [GRAPHIC OMITTED] PLOT POINTS FOLLOW: COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GABELLI SMALL CAP GROWTH FUND, THE RUSSELL 2000 INDEX AND THE S&P 500 INDEX Gabelli Small Cap Russell 2000 Growth Fund Index S&P 500 Index 10/22/91 10,000 10,000 10,000 9/30/92 13,410 11,184 11,021 9/30/93 17,229 14,897 12,464 9/30/94 18,004 15,374 12,925 9/30/95 21,513 18,971 16,777 9/30/96 23,874 21,397 20,183 9/30/97 33,949 28,499 28,337 9/30/98 29,366 23,084 30,916 9/30/99 35,016 27,486 39,508 9/30/00 42,369 33,915 44,751 9/30/01 39,204 26,722 32,843 9/30/02 39,749 24,237 26,120 9/30/03 50,815 33,084 32,485 Past performance is not predictive of future results. The performance tables and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. COMPARATIVE RESULTS -------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS THROUGH SEPTEMBER 30, 2003 (A) -----------------------------------------------------
YEAR TO SINCE QUARTER DATE INCEPTION (B) 10 YEAR 5 YEAR 3 YEAR 1 YEAR ------- ------- ------------- ------- ------ ------ ------ Gabelli Small Cap Growth Fund ......... 6.71% 19.80% 14.57% 11.42% 11.59% 6.25% 27.84% Russell 2000 Index .................... 9.08% 28.58% 10.24% 8.28% 7.46% (0.82)% 36.50% Value Line Composite Index ............ 8.55% 28.36% 12.76% 11.73% 11.06% 5.48% 44.15%
(a) Returns represent past performance and do not guarantee future results. Total returns and average annual returns reflect changes in share price and reinvestment of dividends and are net of expenses. Investment returns and the principal value of an investment will fluctuate. When shares are redeemed, they may be worth more or less than their original cost. The Russell 2000 and Value Line Composite Indices are unmanaged indicators of stock market performance. Performance for periods less than one year is not annualized. Investing in small capitalization securities involves special challenges because these securities may trade less frequently and experience more abrupt price movements than large capitalization securities. (b) From commencement of investment operations on October 22, 1991. -------------------------------------------------------------------------------- 2 PERFORMANCE DISCUSSION Small cap stocks continued to outperform large cap stocks in the third quarter, and for the twelve month period through September 30, 2003 the Russell 2000 Index is up 36.5%, leading the Standard & Poor's ("S&P") 500 Index, which is up 24.4% during the trailing twelve month period, by a substantial margin. The Gabelli Small Cap Growth Fund is up 27.8% during the same one year period. Technology stocks have been the biggest winners in the small cap universe and our traditional under-weighting in the technology sector has restrained returns relative to the Russell 2000 Index. However, the strong performance of our industrial holdings and a good stock picking batting average produced solid returns this quarter and for the one year period. After three years of waiting, we are finally seeing a revival in merger and acquisition activity here and abroad. Although only one of our major positions was hit by takeover lightning -- SPS Technologies was acquired by Precision Castparts at a 45% premium -- deal activity has already had a ripple effect on the portfolio. Most notably, ArvinMeritor's hostile bid for Dana Corp. helped surface the values in auto parts company holdings such as Tenneco Automotive, Modine Manufacturing and Donaldson, all of which posted big gains this quarter and for the year. Once again, our biggest winners for the past twelve months came from a diverse group of industries, including wireless communications (Western Wireless), medical devices (Inamed), auto parts (Tenneco Automotive), bible publishing (Thomas Nelson), dental supplies (Sybron Dental) and computer software (Tyler Technologies). Our laggards list was also an eclectic group of companies including small group broadcaster Salem Communications, racetrack operator Magna Entertainment and irrigation equipment manufacturer Lindsay Manufacturing. Despite impressive performance this year, we believe small cap stocks are still reasonably valued. WWW.GABELLI.COM Please visit us on the Internet. Our homepage at www.gabelli.com contains information about Gabelli Asset Management Inc., the Gabelli Mutual Funds, IRAs, 401(k)s, quarterly reports, closing prices and other current news. You can send us e-mail at info@gabelli.com. In our efforts to bring to shareholders more timely portfolio information, Gabelli Funds' portfolio managers regularly participate in chat sessions on our website. Please visit www.gabelli.com for the specific dates and times of all of our upcoming chats. All chat sessions start at 4:15 PM (Eastern Time). Please arrive early, as participation is limited. You may sign up for our e-mail alerts at www.gabelli.com and receive early notice of chat sessions, closing mutual fund prices, news events and media sightings. 3 THE GABELLI SMALL CAP GROWTH FUND PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2003 -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ COMMON STOCKS -- 97.6% AEROSPACE -- 0.8% 25,000 Herley Industries Inc.+ ............$ 499,141 $ 438,000 196,000 Titan Corp.+ ....... 4,150,445 4,084,640 ------------ ------------ 4,649,586 4,522,640 ------------ ------------ AGRICULTURE -- 0.2% 30,000 Cadiz Inc.+ ........ 4,500 4,500 106,000 Sylvan Inc.+ ....... 1,168,567 1,049,400 ------------ ------------ 1,173,067 1,053,900 ------------ ------------ AUTOMOTIVE -- 0.0% 3,000 Oshkosh Truck Corp. 89,796 118,830 ------------ ------------ AUTOMOTIVE: PARTS AND ACCESSORIES -- 4.2% 15,000 Aftermarket Technology Corp.+ ........... 184,800 171,150 3,000 American Axle & Manufacturing Holdings Inc.+ ... 73,432 88,740 10,000 ArvinMeritor Inc. .. 262,831 178,100 41,000 BorgWarner Inc. .... 1,691,140 2,781,850 90,000 Exide Technologies+ 54,188 3,420 40,000 Federal-Mogul Corp.+ 79,500 8,800 315,000 GenCorp Inc. ....... 2,935,545 2,819,250 170,000 Midas Inc.+ ........ 2,117,273 2,237,200 235,000 Modine Manufacturing Co. .............. 5,682,804 5,593,000 5,250 Monro Muffler Brake Inc.+ ...... 52,860 155,400 20,000 Pep Boys - Manny, Moe & Jack ....... 191,638 306,000 153,500 Raytech Corp.+ ..... 494,691 538,785 195,500 Scheib (Earl) Inc.+ 1,317,365 529,805 160,000 Standard Motor Products Inc. .... 2,536,009 1,616,000 26,300 Strattec Security Corp.+ ........... 916,664 1,253,458 13,400 Superior Industries International Inc. 356,882 543,370 389,000 Tenneco Automotive Inc.+ ............ 906,080 2,446,810 14,000 Thor Industries Inc. 259,454 756,280 160,000 TransPro Inc.+ ..... 1,390,729 656,000 ------------ ------------ 21,503,885 22,683,418 ------------ ------------ AVIATION: PARTS AND SERVICES -- 3.5% 25,000 AAR Corp.+ ......... 302,990 200,500 100,000 Aviall Inc.+ ....... 896,691 1,238,000 23,000 Barnes Group Inc. .. 448,713 597,080 54,000 Curtiss-Wright Corp. 1,303,945 3,813,480 17,100 Curtiss-Wright Corp., Cl. B ............ 956,620 1,224,360 7,500 Ducommun Inc.+ ..... 80,125 122,250 18,000 EDO Corp. .......... 341,215 364,500 30,000 Embraer-Empresa Brasileira de Aeronautica, S.A., ADR ........ 508,773 633,000 132,700 Fairchild Corp., Cl. A+ ........... 867,236 656,865 9,000 Gamesa Corporacion Tecnologica, S.A. 165,313 214,650 MARKET SHARES COST VALUE ------ ---- ------ 448,500 Kaman Corp., Cl. A .$ 7,205,000 $ 5,812,560 95,000 Moog Inc., Cl. A+ .. 1,315,292 3,724,000 8,300 Woodward Governor Co. .............. 364,334 362,793 ------------ ------------ 14,756,247 18,964,038 ------------ ------------ BROADCASTING -- 4.8% 120,000 Acme Communications Inc.+ ............ 968,947 906,000 24,100 Beasley Broadcast Group Inc., Cl. A+ ..... 271,741 333,062 204,000 Crown Media Holdings Inc., Cl. A+ ........... 1,491,498 1,668,720 3,333 CTN Media Group Inc.+ (b) ........ 16,800 3 422,500 Granite Broadcasting Corp.+ ........... 1,722,038 1,077,375 400,000 Gray Television Inc. 4,147,023 4,672,000 40,000 Gray Television Inc., Cl. A ............ 586,301 464,000 50,000 Hearst-Argyle Television Inc.+ . 444,408 1,210,000 183,900 Liberty Corp. ...... 5,983,142 7,714,605 125,200 On Command Corp.+ .. 667,891 235,376 260,000 Paxson Communications Corp.+ ........... 2,424,058 1,289,600 113,500 Salem Communications Corp., Cl. A+ .... 1,836,909 2,200,765 150,000 Sinclair Broadcast Group Inc., Cl. A+ ..... 1,677,557 1,524,000 70,000 Spanish Broadcasting System Inc., Cl. A+ 656,620 595,000 110,000 Young Broadcasting Inc., Cl. A+ ........... 1,812,595 2,154,900 ------------ ------------ 24,707,528 26,045,406 ------------ ------------ BUILDING AND CONSTRUCTION -- 0.2% 50,000 Fleetwood Enterprises Inc.+ ............ 548,107 463,500 8,000 Florida Rock Industries Inc. .. 103,533 396,800 25,000 Huttig Building Products Inc.+ ... 90,165 67,750 9,000 Universal Forest Products Inc. .... 115,437 218,430 ------------ ------------ 857,242 1,146,480 ------------ ------------ BUSINESS SERVICES -- 2.4% 5,000 BrandPartners Group Inc.+ ...... 4,850 925 22,000 Bull Run Corp.+ .... 120,129 62,700 610,400 Career Blazers Inc. (b) ......... 236,019 107,125 6,000 Carlisle Holdings Ltd.+ ............ 30,250 37,500 1,000 CheckFree Corp.+ ... 9,040 20,000 35,000 Donnelley (R.H.) Corp.+ ........... 478,007 1,414,350 200,000 Edgewater Technology Inc.+ ............ 802,829 1,040,000 15,000 Fisher Scientific International Inc.+ ............ 346,675 595,350 20,000 Genuity Inc., Cl. A+ 1,620 180 150,000 GP Strategies Corp.+ 585,300 1,081,500 80,000 Industrial Distribution Group Inc.+ ...... 224,062 264,800 58,000 Interactive Data Corp.+ ........... 499,811 916,400 See accompanying notes to financial statements. 4 THE GABELLI SMALL CAP GROWTH FUND PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003 -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ COMMON STOCKS (CONTINUED) BUSINESS SERVICES (CONTINUED) 20,000 Interep National Radio Sales Inc., Cl. A+ .....$ 84,180 $ 49,000 13,000 Landauer Inc. ...... 234,859 460,590 5,000 MDC Communications Corp., Cl. A+ ........... 15,450 49,750 103,000 Nashua Corp.+ ...... 939,467 818,850 62,200 National Processing Inc.+ ............ 594,896 1,201,704 15,000 New England Business Service Inc. ..... 270,375 399,300 65,000 Paxar Corp.+ ....... 662,312 832,000 6,000 Princeton Video Image Inc.+ ...... 35,250 9 2,000 Protection One Inc.+ 3,720 1,540 72,000 Sohgo Security Services Co. Ltd. ......... 907,768 970,613 110,000 Stamps.com Inc.+ ... 494,648 640,200 5,000 StarTek Inc. ....... 94,750 160,000 53,000 The Brink's Co. .... 1,092,906 920,080 95,000 Trans-Lux Corp. (a) 781,543 654,550 ------------ ------------ 9,550,716 12,699,016 ------------ ------------ CABLE -- 2.4% 230,000 Adelphia Communications Corp., Cl. A+ .... 29,650 72,450 655,000 Cablevision Systems Corp., Cl. A+ ........... 3,785,247 11,855,500 15,000 Lin TV Corp., Cl. A+ 331,585 318,900 1,600 Outdoor Channel Holdings Inc.+ ............ 44,765 44,800 120,000 UnitedGlobalCom Inc., Cl. A+ ........... 970,183 733,200 ------------ ------------ 5,161,430 13,024,850 ------------ ------------ COMMUNICATIONS EQUIPMENT -- 0.8% 187,000 Andrew Corp.+ ...... 979,326 2,298,230 108,000 Communications Systems Inc. ..... 646,601 861,840 260,900 Sycamore Networks Inc.+ ............ 778,040 1,278,410 ------------ ------------ 2,403,967 4,438,480 ------------ ------------ COMPUTER HARDWARE -- 0.0% 10,000 Maxtor Corp.+ ...... 93,652 121,700 ------------ ------------ COMPUTER SOFTWARE AND SERVICES -- 1.5% 87,500 Ascential Software Corp.+ ........... 1,010,040 1,621,375 43,000 BNS Co., Cl. A+ .... 264,311 216,290 20,000 Global Sources Ltd.+ 377,373 160,500 50,000 Jupitermedia Corp.+ 435,800 228,000 200 Macromedia Inc.+ ... 2,370 4,948 15,187 MKS Instruments Inc.+ ............ 284,328 328,950 220,000 OpenTV Corp.+ ...... 1,189,078 726,000 8,000 Phoenix Technologies Ltd.+ ............ 55,158 50,160 550 SafeNet Inc.+ ...... 14,425 19,872 800,000 StorageNetworks Inc.+ ............ 1,043,244 1,312,000 368,800 Tyler Technologies Inc.+ ............ 1,432,000 2,611,104 MARKET SHARES COST VALUE ------ ---- ------ 20,000 VitalWorks Inc.+ ...$ 104,575 $ 105,000 190,000 Xanser Corp.+ ...... 667,708 497,800 ------------ ------------ 6,880,410 7,881,999 ------------ ------------ CONSUMER PRODUCTS -- 3.7% 3,500 Action Performance Companies Inc. ... 16,187 85,540 21,500 Adams Golf Inc.+ ... 63,940 9,030 3,500 Alberto-Culver Co., Cl. B ............ 169,299 205,870 28,000 Ashworth Inc.+ ..... 120,031 194,040 25,000 Chofu Seisakusho Co., Ltd. ........ 354,683 372,600 25,000 Church & Dwight Co. Inc. ......... 354,732 874,750 15,000 Coachmen Industries Inc. ............. 117,198 175,650 500 Del Laboratories Inc.+ ............ 14,525 14,125 46,000 Department 56 Inc.+ 542,911 584,200 33,000 Dial Corp. ......... 390,000 710,820 16,000 Elizabeth Arden Inc.+ ............ 201,080 263,680 2,000 Genlyte Group Inc.+ 8,580 89,040 2,000 Harley-Davidson Inc. 4,713 96,400 200,000 Hartmarx Corp.+ .... 967,321 800,000 30,000 Jacuzzi Brands Inc.+ 171,891 186,000 45,000 Levcor International Inc.+ ............ 92,197 123,750 4,000 Madden (Steven) Ltd.+ ............ 30,540 75,880 165,000 Marine Products Corp. ............ 238,676 2,428,800 59,000 National Presto Industries Inc. .. 2,126,839 2,026,060 5,000 Nature's Sunshine Products Inc. .... 68,955 41,500 40,000 Rayovac Corp.+ ..... 518,310 584,000 80,406 Revlon Inc., Cl. A+ 346,927 213,880 3,000 Scotts Co., Cl. A+ . 61,223 164,100 96,000 Skyline Corp. ...... 2,965,054 3,073,920 14,000 Stewart Enterprises Inc., Cl. A+ ........... 65,467 53,200 84,425 Syratech Corp.+ .... 15,626 67,540 17,000 WD-40 Co. .......... 470,278 538,730 701,000 Weider Nutrition International Inc.+ ............ 1,989,410 2,103,000 210,000 Wolverine World Wide Inc. ........ 2,710,774 4,074,000 ------------ ------------ 15,197,367 20,230,105 ------------ ------------ CONSUMER SERVICES -- 2.3% 30,000 Bowlin Travel Centers Inc.+ .... 22,612 61,500 5,600 Collectors Universe Inc.+ ............ 21,494 20,440 100,000 InterActiveCorp.+ .. 1,068,180 3,305,000 40,000 Loewen Group Inc.+ (b) ........ 60,400 0 16,000 Martha Stewart Living Omnimedia Inc., Cl. A+ ........... 167,206 148,000 20,000 Response USA Inc.+ . 16,500 91 255,000 Rollins Inc. ....... 3,324,569 4,549,200 115,000 Roto-Rooter Inc. ... 3,833,913 4,088,250 5,000 TiVo Inc.+ ......... 42,288 37,050 ------------ ------------ 8,557,162 12,209,531 ------------ ------------ See accompanying notes to financial statements. 5 THE GABELLI SMALL CAP GROWTH FUND PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003 -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ COMMON STOCKS (CONTINUED) DIVERSIFIED INDUSTRIAL -- 11.0% 235,000 Acuity Brands Inc. .$ 3,177,032 $ 4,244,100 35,000 Amatsuji Steel Ball Mfg. Co., Ltd. ... 280,463 307,031 100,000 Ampco-Pittsburgh Corp. ............ 972,481 1,199,000 6,000 Anixter International Inc.+ ............ 57,120 136,620 215,000 Baldor Electric Co. 4,198,556 4,538,650 175,000 Crane Co. .......... 3,610,203 4,096,750 117,200 Denison International plc, ADR+ ............. 1,635,795 2,388,536 5,000 ESCO Technologies Inc.+ ............ 166,379 226,350 90,000 Gardner Denver Inc.+ 1,110,443 1,890,900 120,000 GATX Corp. ......... 3,417,389 2,538,000 190,000 GenTek Inc.+ ....... 34,004 855 160,100 Greif Inc., Cl. A .. 3,139,843 4,162,600 1,000 Greif Inc., Cl. B .. 29,800 29,850 26,000 Harbor Global Co. Ltd.+ ........ 63,215 232,050 5,000 Insteel Industries Inc.+ ............ 4,250 3,500 66,000 Katy Industries Inc.+ ............ 546,731 343,200 220,300 Lamson & Sessions Co.+ ............. 1,280,436 1,216,056 74,000 Lindsay Manufacturing Co. .............. 746,915 1,487,400 210,000 MagneTek Inc.+ ..... 1,638,360 1,039,500 40,000 Matthews International Corp., Cl. A ..... 908,627 1,056,400 268,750 Myers Industries Inc. ............. 2,739,915 2,690,188 42,000 Mykrolis Corp.+ .... 535,407 509,880 610,400 Noel Group Inc.+ (b) 55,045 117,685 90,000 Oil-Dri Corporation of America ....... 954,711 1,080,000 15,000 Olin Corp. ......... 232,292 237,300 256,200 Park-Ohio Holdings Corp.+ ........... 1,675,272 2,090,592 50,000 Precision Castparts Corp. ............ 1,057,562 1,755,000 65,000 Roper Industries Inc. ............. 2,421,076 2,830,750 285,000 Sensient Technologies Corp. ............ 5,754,773 5,985,000 10,000 Sonoco Products Co. 231,715 219,500 65,000 Standex International Corp. ............ 1,318,407 1,579,500 15,500 Tech/Ops Sevcon Inc. 108,754 92,225 298,700 Thomas Industries Inc. ............. 4,179,859 8,518,924 30,000 Tredegar Corp. ..... 373,379 451,500 25,666 WHX Corp.+ ......... 338,289 59,288 ------------ ------------ 48,994,498 59,354,680 ------------ ------------ EDUCATIONAL SERVICES -- 0.0% 5,000 School Specialty Inc.+ ............ 119,700 141,050 ------------ ------------ ELECTRONICS -- 2.2% 204,600 CTS Corp. .......... 2,145,753 2,518,626 25,600 Fargo Electronics+ . 157,620 322,560 35,000 Lowrance Electronics Inc. ............. 93,891 405,650 100,000 Park Electrochemical Corp. ............ 2,305,799 2,275,000 300,000 Thomas & Betts Corp.+ ........... 5,553,334 4,755,000 69,690 Zoran Corp.+ ....... 1,221,203 1,358,955 ------------ ------------ 11,477,600 11,635,791 ------------ ------------ MARKET SHARES COST VALUE ------ ---- ------ ENERGY AND UTILITIES -- 5.2% 30,000 AGL Resources Inc. .$ 563,027 $ 845,100 100,200 Aquila Inc.+ ....... 230,601 338,676 6,400 BIW Ltd. ........... 94,562 114,240 95,000 Callon Petroleum Co.+ ............. 939,533 709,650 144,000 CH Energy Group Inc. 6,069,803 6,336,000 10,000 Chesapeake Utilities Corp. ............ 187,062 229,200 140,000 CMS Energy Corp. ... 843,947 1,031,800 23,000 Connecticut Water Service Inc. ..... 464,832 620,770 130,000 Duquesne Light Holdings Inc. .... 1,875,618 2,007,200 120,000 El Paso Electric Co.+ ............. 1,593,230 1,386,000 66,666 Florida Public Utilities Co. .... 792,692 1,025,990 33,000 Middlesex Water Co. 761,399 808,830 1,500 Neg Micon A/S+ ..... 26,992 18,702 17,000 Nicor Inc. ......... 359,962 597,380 15,000 Nordex AG+ ......... 32,726 13,800 8,000 Petroleum Geo-Services ASA, ADR+ ........ 100,956 8,320 2,000 PetroQuest Energy Inc.+ ............ 5,250 4,176 285,000 RPC Inc. ........... 954,877 2,850,000 30,000 SEMCO Energy Inc. .. 213,250 138,000 17,000 SJW Corp. .......... 1,657,489 1,436,500 48,159 Southern Union Co.+ 685,594 818,703 112,000 Southwest Gas Corp. 1,959,693 2,542,400 10,000 Tesoro Petroleum Corp.+ ........... 140,934 84,600 4,000 Toreador Resources Corp.+ ........... 15,250 10,120 10,000 Vestas Wind Systems A/S ...... 89,988 167,027 7,000 W-H Energy Services Inc.+ ... 148,589 124,600 200,000 Westar Energy Inc. . 3,304,001 3,690,000 ------------ ------------ 24,111,857 27,957,784 ------------ ------------ ENTERTAINMENT -- 1.9% 20,000 Canterbury Park Holding Corp. .... 215,807 299,000 145,000 Dover Motorsports Inc. ............. 802,568 545,200 64,465 Fisher Communications Inc.+ ............ 3,858,631 3,039,525 151,000 GC Companies Inc.+ . 164,590 49,830 245,000 Gemstar-TV Guide International Inc.+ 1,681,514 1,158,850 500 Integrity Media Inc.+ ............ 3,550 1,825 16,000 International Speedway Corp., Cl. A ............ 515,479 702,240 2,500 International Speedway Corp., Cl. B ............ 45,000 109,875 29,555 Liberty Media Corp., Cl. A+ ........... 336,617 294,663 20,000 Loews Cineplex Entertainment Corp.+ (b) ....... 20,008 40 10,000 Metromedia International Group Inc.+ (b) .. 6,700 1,300 540,000 Six Flags Inc.+ .... 3,693,989 2,840,400 56,700 Topps Co. Inc. ..... 323,892 552,825 80,000 World Wrestling Entertainment Inc. 971,385 801,600 ------------ ------------ 12,639,730 10,397,173 ------------ ------------ See accompanying notes to financial statements. 6 THE GABELLI SMALL CAP GROWTH FUND PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003 -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ COMMON STOCKS (CONTINUED) ENVIRONMENTAL SERVICES -- 1.4% 250,000 Allied Waste Industries Inc.+ ............$ 2,447,961 $ 2,700,000 30,000 Catalytica Energy Systems Inc.+ ............ 319,116 97,500 180,000 Republic Services Inc. ............. 2,563,261 4,075,200 70,000 Trojan Technologies Inc.+ ............ 392,797 417,056 ------------ ------------ 5,723,135 7,289,756 ------------ ------------ EQUIPMENT AND SUPPLIES -- 12.3% 118,000 AMETEK Inc. ........ 1,405,198 5,057,480 415,000 Baldwin Technology Co. Inc., Cl. A+ ........... 1,322,609 302,950 120,000 Belden Inc. ........ 2,301,081 2,096,400 12,000 C&D Technologies Inc. ............. 235,930 227,040 50,000 Capstone Turbine Corp.+ ........... 103,400 94,500 153,000 CIRCOR International Inc. ............. 1,903,630 2,937,600 218,500 CLARCOR Inc. ....... 2,686,151 8,521,500 236,800 Core Molding Technologies Inc.+ ............ 411,233 715,136 200,000 Crown Holdings Inc.+ 807,766 1,350,000 65,000 Cuno Inc.+ ......... 1,119,768 2,547,357 2,000 Danaher Corp. ...... 68,212 147,720 35,000 Donaldson Co. Inc. . 807,585 1,886,500 449,600 Fedders Corp. ...... 2,046,808 2,607,680 200,000 Flowserve Corp.+ ... 3,249,824 4,060,000 94,700 Franklin Electric Co. Inc. ......... 1,533,275 5,272,896 40,000 General Magnaplate Corp.+ (b) ....... 83,762 60,000 110,000 Gerber Scientific Inc.+ ............ 1,188,241 781,000 80,275 Gorman-Rupp Co. .... 1,956,309 1,815,018 65,000 Graco Inc. ......... 984,351 2,440,750 42,000 GrafTech International Ltd.+ ............ 574,742 336,000 2,000 Hughes Supply Inc. . 28,473 64,900 40,000 IDEX Corp. ......... 556,738 1,457,600 25,000 Imagistics International Inc.+ ............ 476,705 724,500 500,000 Interpump Group SpA 1,946,509 1,898,218 2,000 Jarden Corp.+ ...... 12,770 75,500 10,000 K-Tron International Inc.+ ............ 74,932 170,000 30,000 Littelfuse Inc.+ ... 551,467 690,000 60,000 Lufkin Industries Inc. ............. 1,137,385 1,440,000 36,000 Maezawa Kyuso Industries Co., Ltd. ............. 205,292 216,873 16,000 Met-Pro Corp. ...... 207,519 260,800 12,000 Mueller Industries Inc.+ ............ 309,156 305,400 4,500 Plantronics Inc.+ .. 56,548 107,415 30,000 Robbins & Myers Inc. 564,553 667,200 40,500 Sequa Corp., Cl. A+ 1,502,140 1,733,805 80,000 Sequa Corp., Cl. B+ 3,631,578 3,760,000 90,000 SL Industries Inc.+ 1,047,851 719,100 3,000 Smith (A.O.) Corp. . 49,213 84,030 15,000 Smith (A.O.) Corp., Cl. A ............ 336,569 420,150 MARKET SHARES COST VALUE ------ ---- ------ 100,000 SPS Technologies Inc.+ ............$ 3,111,351 $ 4,500,000 5,000 Teleflex Inc. ...... 76,167 217,150 50,000 Tennant Co. ........ 1,602,465 1,842,000 5,000 Valmont Industries Inc. ............. 40,625 98,950 7,875 Watsco Inc., Cl. B . 23,627 149,625 100,000 Watts Industries Inc., Cl. A ...... 1,467,451 1,762,000 15,000 Wolverine Tube Inc.+ 150,915 63,450 ------------ ------------ 43,957,874 66,686,193 ------------ ------------ FINANCIAL SERVICES -- 3.5% 12,030 Alleghany Corp.+ ... 2,267,949 2,348,857 47,000 Argonaut Group Inc. 1,033,209 611,000 66,000 Bankgesellschaft Berlin AG+ ....... 1,280,793 168,324 135,300 BKF Capital Group Inc.+ ...... 2,463,405 3,267,495 330,000 CNA Surety Corp.+ .. 3,652,439 3,316,500 4,000 Crazy Woman Creek Bancorp Inc. ..... 51,340 61,240 63,000 Danielson Holding Corp.+ ........... 255,200 86,310 3,000 Federal Agricultural Mortgage Corp., Cl. C+ .... 24,000 81,000 22,000 First Republic Bank 636,067 678,260 50,000 Flushing Financial Corp. ............ 1,037,207 1,042,000 62,000 Hibernia Corp., Cl. A ............ 827,787 1,256,120 24,900 J Net Enterprises Inc.+ 24,496 30,378 2,000 LandAmerica Financial Group Inc. ....... 24,350 91,680 15,000 Metris Companies Inc. 133,574 61,800 121,100 Midland Co. ........ 919,185 2,579,430 1,500 NetBank Inc. ....... 6,000 18,675 1,000 Republic Bancshares Inc. ............. 12,523 28,560 35,000 Riggs National Corp. 563,309 551,250 37,625 Sterling Bancorp ... 790,931 1,012,489 50,000 Wilmington Trust Corp. ............ 1,574,410 1,538,000 ------------ ------------ 17,578,174 18,829,368 ------------ ------------ FOOD AND BEVERAGE -- 5.9% 26,000 Boston Beer Co. Inc., Cl. A+ ..... 384,207 413,920 13,000 Brown-Forman Corp., Cl. A ............ 717,207 1,057,160 7,500 Cheesecake Factory Inc.+ ............ 37,036 271,275 30,000 Corn Products International Inc. 932,328 955,500 87,000 Del Monte Foods Co.+ 872,203 757,770 85,000 Denny's Corp.+ ..... 132,580 36,550 2,500 Farmer Brothers Co. 389,323 800,775 300,000 Flowers Foods Inc. . 3,491,964 6,840,000 500 Genesee Corp., Cl. A+ 0 2,625 21,500 Genesee Corp., Cl. B+ 49,823 100,298 463,500 Grupo Continental S.A. 700,243 684,521 10,000 Hain Celestial Group Inc.+ ...... 184,774 181,300 100,000 International Multifoods Corp.+ ........... 2,073,612 2,335,000 See accompanying notes to financial statements. 7 THE GABELLI SMALL CAP GROWTH FUND PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003 -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ COMMON STOCKS (CONTINUED) FOOD AND BEVERAGE (CONTINUED) 100,000 Interstate Bakeries Corp. ............$ 1,399,887 $ 1,500,000 7,000 J & J Snack Foods Corp.+ ........... 116,286 243,600 167,000 Kikkoman Corp. ..... 1,083,921 1,085,280 14,500 MGP Ingredients Inc. 208,250 129,485 34,000 Mondavi (Robert) Corp., Cl. A+ ........... 1,082,929 1,053,320 5,000 Northland Cranberries Inc., Cl. A+ ........... 4,200 2,450 4,000 Omni Nutraceuticals Inc.+ ............ 13,563 8 258,500 PepsiAmericas Inc. . 3,346,759 3,745,665 65,000 Ralcorp Holdings Inc.+ ............ 952,808 1,800,500 75,000 Smucker (J.M.) Co. . 1,717,692 3,162,000 100,000 The Steak n Shake Co.+ ............. 1,088,229 1,490,000 4,000 Todhunter International Inc.+ ............ 41,200 40,900 36,628 Tootsie Roll Industries Inc. .. 596,834 1,135,468 60,000 Triarc Companies Inc. ............. 429,705 604,200 120,000 Triarc Companies Inc., Cl. B ............ 1,025,442 1,248,000 ------------ ------------ 23,073,005 31,677,570 ------------ ------------ HEALTH CARE -- 4.6% 1,000 ArthroCare Corp.+ .. 9,040 17,820 7,000 Bio-Rad Laboratories Inc., Cl. A+ ........... 257,683 357,000 1,000 Biomet Inc. ........ 30,350 33,610 4,000 Bruker BioSciences Corp.+ ........... 15,165 17,600 1,000 CONMED Corp.+ ...... 15,430 20,640 10,000 Corixa Corp.+ ...... 196,695 79,600 45,120 Del Global Technologies Corp.+ ........... 165,594 84,374 4,000 Digene Corp+ ....... 32,000 163,440 1,050 Enzo Biochem Inc.+ . 13,097 20,485 30,000 Exactech Inc.+ ..... 405,834 490,500 30,000 Henry Schein Inc.+ . 1,051,908 1,701,000 89,000 Inamed Corp.+ ...... 2,304,490 6,537,050 2,000 Integra LifeSciences Holdings+ ........ 43,600 56,580 21,300 Interpore International Inc.+ ............ 159,054 327,168 37,400 Inverness Medical Innovations Inc.+ 678,329 949,960 33,000 Invitrogen Corp.+ .. 1,722,317 1,913,670 2,000 Lifecore Biomedical Inc.+ ............ 6,186 13,320 15,000 Nabi Biopharmaceuticals+ 105,625 126,450 1,300 Nobel Biocare Holding AG ....... 100,171 113,204 30,000 Orthodontic Centers of America Inc.+ .... 234,149 236,400 17,000 Orthofix International NV+ .............. 481,400 622,200 2,000 OrthoLogic Corp.+ .. 6,750 10,760 2,000 Osteotech Inc.+ .... 14,420 16,380 31,500 Owens & Minor Inc. . 605,454 759,150 51,000 Penwest Pharmaceuticals Co.+ ............. 368,868 1,096,500 MARKET SHARES COST VALUE ------ ---- ------ 51,600 PracticeWorks Inc.+ $ 1,092,477 $ 1,107,852 43,000 Priority Healthcare Corp., Cl. B+ ........... 862,278 883,220 20,000 Schick Technologies Inc.+ ............ 164,234 163,000 87,500 Sola International Inc.+ ............ 1,136,964 1,400,000 2,500 Straumann Holding AG - Reg ......... 224,698 261,239 1,000 Stryker Corp. ...... 65,440 75,310 200,000 Sybron Dental Specialties Inc.+ ............ 3,711,716 5,014,000 390,000 Twinlab Corp.+ ..... 1,279,077 7,800 75,000 Women First HealthCare Inc.+ . 97,658 101,250 1,000 Wright Medical Group Inc.+ ...... 16,460 25,280 5,100 Young Innovations Inc. ............. 128,516 163,251 ------------ ------------ 17,803,127 24,967,063 ------------ ------------ HOME FURNISHINGS -- 0.2% 16,000 Bassett Furniture Industries Inc. ............. 286,154 216,800 4,000 Bed Bath & Beyond Inc.+ ............ 11,125 152,720 15,000 Foamex International Inc.+ ............ 127,458 66,450 30,000 La-Z-Boy Inc. ...... 250,200 666,000 70,000 Oneida Ltd. ........ 732,976 215,600 ------------ ------------ 1,407,913 1,317,570 ------------ ------------ HOTELS AND GAMING -- 4.3% 165,000 Aztar Corp.+ ....... 1,292,911 2,922,150 140,300 Boca Resorts Inc., Cl. A+ ........... 1,850,748 1,818,288 12,000 Boyd Gaming Corp. .. 90,225 183,120 46,000 Churchill Downs Inc. 1,237,574 1,747,080 104,000 Dover Downs Gaming & Entertainment Inc. 1,038,939 854,880 40,000 Extended Stay America Inc.+ .... 448,203 597,200 165,000 Gaylord Entertainment Co.+ ............. 4,746,656 4,050,750 5,000 Jury' s Doyle Hotel Group plc ........ 27,762 56,481 68,000 Kerzner International Ltd+ ............. 1,386,965 2,419,440 380,000 La Quinta Corp.+ ... 975,912 2,367,400 80,000 Lakes Entertainment Inc.+ ............ 887,870 735,200 400,000 Magna Entertainment Corp., Cl. A+ ........... 2,611,594 1,664,000 140,000 Park Place Entertainment Corp.+ ........... 1,276,659 1,261,400 60,000 Penn National Gaming Inc.+ ..... 293,198 1,279,200 105,000 Pinnacle Entertainment Inc.+ ............ 830,250 735,000 3,000 Station Casinos Inc. 13,350 91,800 50,000 Trump Hotels & Casino Resorts Inc.+ .... 442,109 93,000 70,000 Wyndham International Inc., Cl. A+ ........... 153,945 39,200 22,000 Wynn Resorts Ltd.+ . 311,744 399,960 20,000 Youbet.com Inc.+ ... 51,494 51,800 ------------ ------------ 19,968,108 23,367,349 ------------ ------------ See accompanying notes to financial statements. 8 THE GABELLI SMALL CAP GROWTH FUND PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003 -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ COMMON STOCKS (CONTINUED) METALS AND MINING -- 0.4% 142,115 Kinross Gold Corp.+ $ 984,488 $ 1,060,178 10,000 Meridian Gold Inc.+ 75,630 117,300 70,000 Placer Dome Inc. ... 653,970 962,500 190,000 Royal Oak Mines Inc.+ ............ 322,487 1,235 26,148 Stillwater Mining Co.+ ............. 362,121 164,732 ------------ ------------ 2,398,696 2,305,945 ------------ ------------ MUTUAL FUNDS -- 0.5% 45,000 Central European Equity Fund Inc.+ ....... 608,109 915,750 36,266 France Growth Fund Inc.+ ....... 360,717 239,356 36,700 Germany Fund Inc. .. 386,832 217,264 25,000 Italy Fund Inc. Escrow (b) ....... 0 0 60,000 New Germany Fund Inc.+ ....... 699,559 353,400 110,304 Pimco RCM Europe Fund Inc.+ ....... 1,039,048 766,615 11,000 Spain Fund Inc. .... 103,029 94,600 ------------ ------------ 3,197,294 2,586,985 ------------ ------------ PAPER AND FOREST PRODUCTS -- 0.3% 40,000 Packaging Dynamics Corp.+ ........... 296,567 344,440 30,000 Schweitzer-Manduit International Inc. 725,185 757,500 24,000 Wausau-Mosinee Paper Corp. ...... 280,862 293,040 ------------ ------------ 1,302,614 1,394,980 ------------ ------------ PUBLISHING -- 4.9% 307,237 Independent News & Media plc ........ 431,671 597,515 130,000 Journal Register Co.+ ............. 2,099,165 2,437,500 15,000 Lee Enterprises Inc. 363,318 580,050 53,500 McClatchy Co., Cl. A 1,588,435 3,182,180 73,500 Media General Inc., Cl. A ............ 1,988,355 4,490,850 29,000 Meredith Corp. ..... 515,253 1,338,930 1,125,000 Penton Media Inc.+ . 1,738,342 1,451,250 400,000 PRIMEDIA Inc.+ ..... 1,290,397 1,140,000 130,000 Pulitzer Inc. ...... 4,366,943 6,773,000 281,000 Thomas Nelson Inc.+ 2,968,219 3,880,610 4,000 Value Line Inc. .... 162,772 192,000 12,000 Wiley (John) & Sons Inc., Cl. B ...... 46,500 310,800 ------------ ------------ 17,559,370 26,374,685 ------------ ------------ REAL ESTATE -- 1.2% 100,000 Catellus Development Corp.+ ........... 1,361,791 2,445,000 148,000 Griffin Land & Nurseries Inc.+ ............ 1,795,092 1,992,080 10,000 Gyrodyne Company of America Inc.+ .... 151,452 215,000 396 HomeFed Corp.+ ..... 10,969 9,801 25,000 Malan Realty Investors Inc. ... 243,160 116,000 110,000 Morguard Corp. ..... 1,392,683 1,711,796 ------------ ------------ 4,955,147 6,489,677 ------------ ------------ MARKET SHARES COST VALUE ------ ---- ------ RETAIL -- 2.7% 45,000 Aaron Rents Inc. ...$ 365,666 $ 942,750 97,500 Aaron Rents Inc., Cl. A ............ 524,217 1,925,625 100,000 Burlington Coat Factory Warehouse Corp. .. 1,080,938 1,870,000 10,000 Casey's General Stores Inc. ...... 155,152 140,300 31,500 Coldwater Creek Inc.+ ............ 239,553 309,330 175,000 Ingles Markets Inc., Cl. A ............ 2,176,507 1,715,000 130,000 Neiman Marcus Group Inc., Cl. B+ ........... 4,106,529 5,086,900 58,700 OfficeMax Inc.+ .... 515,221 550,019 10,000 The Sports Authority Inc.+ .. 81,174 314,600 54,600 Weis Markets Inc. .. 1,675,742 1,856,946 ------------ ------------ 10,920,699 14,711,470 ------------ ------------ SATELLITE -- 0.2% 21,500 Liberty Satellite & Technology Inc., Cl. A+ ..... 93,540 56,975 25,500 Pegasus Communications Corp.+ ........... 1,059,375 379,440 40,000 Sirius Satellite Radio Inc+ ....... 146,219 73,200 40,000 XM Satellite Radio Holdings Inc., Cl. A+ ..... 370,830 621,200 ------------ ------------ 1,669,964 1,130,815 ------------ ------------ SPECIALTY CHEMICALS -- 4.7% 40,000 Airgas Inc. ........ 237,525 712,000 38,000 Albemarle Corp. .... 838,805 1,043,100 60,000 Arch Chemicals Inc. 1,257,423 1,248,000 10,000 Cytec Industries Inc.+ ............ 278,296 365,000 10,000 Dionex Corp.+ ...... 300,000 393,600 157,000 Ferro Corp. ........ 3,513,047 3,353,520 130,000 Fuller (H.B.) Co. .. 2,306,337 3,155,100 255,146 General Chemical Group Inc.+ ...... 1,197,650 85,474 50,000 Great Lakes Chemical Corp. ... 1,247,733 1,005,500 450,000 Hercules Inc.+ ..... 4,361,521 5,098,500 1,500 IMC Global Inc. .... 10,470 9,615 165,000 MacDermid Inc. ..... 2,852,649 4,364,250 180,000 Material Sciences Corp.+ ........... 1,696,183 1,839,600 130,000 Omnova Solutions Inc.+ ............ 810,622 456,300 50,000 Penford Corp. ...... 539,601 650,000 10,000 Quaker Chemical Corp. ............ 181,138 232,600 73,000 Schulman (A.) Inc. . 850,409 1,157,780 ------------ ------------ 22,479,409 25,169,939 ------------ ------------ TELECOMMUNICATIONS -- 1.2% 9,200 Atlantic Tele- Network Inc. ..... 92,644 194,580 186,900 Cincinnati Bell Inc.+ ............ 459,601 951,321 55,000 Citizens Communications Co.+ ............. 524,892 616,550 79,460 Commonwealth Telephone Enterprises Inc.+ 1,517,147 3,188,730 6,795 Community Service Communications Inc.+ ............ 101,925 111,778 See accompanying notes to financial statements. 9 THE GABELLI SMALL CAP GROWTH FUND PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003 -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ COMMON STOCKS (CONTINUED) TELECOMMUNICATIONS (CONTINUED) 46,950 D&E Communications Inc. .............$ 605,207 $ 665,751 65,000 McLeodUSA Inc., Cl.A, Escrow+ (b) ...... 0 0 2,820 NTL Europe Inc.+ ... 1,861 84 162 NTL Inc.+ .......... 3,807 7,633 2,000 RCN Corp.+ ......... 9,221 3,680 25,000 Rogers Communications Inc., Cl. B, ADR ....... 226,378 383,250 11,000 Shenandoah Telecommunications Co. .............. 325,065 424,050 2,500 Telewest Communications plc, ADR+ ........ 8,875 15,625 4,417 WilTel Communications Group Inc.+ ...... 47,989 70,584 53,000 Winstar Communications Inc.+ ............ 133 53 ------------ ------------ 3,924,745 6,633,669 ------------ ------------ TRANSPORTATION -- 0.1% 90,000 Grupo TMM SA de CV, Cl. A, ADR+ ...... 847,399 280,800 2,000 Irish Continental Group plc ........ 18,258 23,094 50,000 OMI Corp.+ ......... 313,120 331,000 5,100 Providence & Worcester Railroad Co. ..... 42,979 45,441 ------------ ------------ 1,221,756 680,335 ------------ ------------ WIRELESS COMMUNICATIONS -- 2.1% 35,000 AirGate PCS Inc.+ .. 321,443 84,700 30,000 AT&T Wireless Services Inc.+ ... 203,776 245,400 50,000 Centennial Communications Corp.+ ........... 622,225 254,000 11 Microcell Telecommunications Inc., Cl. B+ ..... 77 130 5,000 Nextel Communications Inc., Cl. A+ ........... 35,338 98,450 75,000 Price Communications Corp.+ ........... 914,718 930,000 60,000 Rogers Wireless Communications Inc., Cl. B+ ..... 882,481 933,600 60,000 Rural Cellular Corp., Cl. A+ ........... 543,676 600,000 25,000 Triton PCS Holdings Inc., Cl. A+ ........... 388,518 111,500 10,000 Ubiquitel Inc.+ .... 42,850 15,500 74,000 Vimpel-Communications, ADR+ ............. 1,914,890 4,503,640 190,000 Western Wireless Corp., Cl. A+ ........... 969,262 3,541,600 ------------ ------------ 6,839,254 11,318,520 ------------ ------------ TOTAL COMMON STOCKS ........... 418,905,724 527,558,760 ------------ ------------ MARKET SHARES COST VALUE ------ ---- ------ PREFERRED STOCKS -- 2.0% BROADCASTING -- 0.3% 1,063 Granite Broadcasting Corp., 12.750% Pfd.+ ....$ 439,683 $ 744,100 100 Gray Television Inc., 8.000% Cv. Pfd., Ser. C (b)(d) .... 1,000,000 1,020,000 ------------ ------------ 1,439,683 1,764,100 ------------ ------------ BUSINESS SERVICES -- 0.4% 20,787 Interep National Radio Sales Inc., 4.000% Cv. Pfd., Ser. A+ (b)(d) ... 2,080,000 2,120,240 ------------ ------------ DIVERSIFIED INDUSTRIAL -- 0.1% WHX Corp., 58,000 6.500% Cv. Pfd., Ser. A+ .......... 463,067 290,000 39,400 $3.75 Cv. Pfd., Ser. B+ .......... 191,751 197,000 ------------ ------------ 654,818 487,000 ------------ ------------ PUBLISHING -- 0.8% 166,000 News Corp. Ltd., Pfd., ADR ........ 977,242 4,530,140 ------------ ------------ TELECOMMUNICATIONS -- 0.4% 13,000 Andrew Corp., 7.750% Cv. Pfd., Ser. D ........... 633,275 1,863,160 1,197 NTL Europe Inc., 10.000% Pfd., Ser. A+ 0 3,831 ------------ ------------ 633,275 1,866,991 ------------ ------------ TOTAL PREFERRED STOCKS ........... 5,785,018 10,768,471 ------------ ------------ WARRANTS -- 0.1% BUSINESS SERVICES -- 0.1% 250,000 GP Strategies Corp., Expires 08/14/08+ (b) .... 637,065 637,065 125,000 Interep National Radio Sales Inc.,+ (b) . 0 0 ------------ ------------ 637,065 637,065 ------------ ------------ COMPUTER SOFTWARE AND SERVICES -- 0.0% 430 Anacomp Inc., Cl. B+ 0 62 ------------ ------------ HEALTH CARE -- 0.0% 14,424 Del Global Technologies Corp. Expires 03/28/08+ 24,809 7,212 ------------ ------------ TELECOMMUNICATIONS -- 0.0% 86 NTL Inc., Expires 01/13/11+ 124 146 ------------ ------------ WIRELESS COMMUNICATIONS -- 0.0% 1,387 Microcell Telecommunications Inc., Cl. A, Expires 05/01/05+ 1,991 1,624 See accompanying notes to financial statements. 10 THE GABELLI SMALL CAP GROWTH FUND PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003 -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ WARRANTS (CONTINUED) WIRELESS COMMUNICATIONS (CONTINUED) 2,312 Microcell Telecommunications Inc., Cl. B, Expires 05/01/08+ $ 3,553 $ 3,992 ------------ ------------ 5,544 5,616 ------------ ------------ TOTAL WARRANTS ..... 667,542 650,101 ------------ ------------ PRINCIPAL AMOUNT --------- CORPORATE BONDS -- 0.4% AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.1% $ 800,000 Exide Corp., Sub. Deb. Cv., 2.900%, 12/15/05+ (c)(d) . 6,000 12,498 600,000 GenCorp Inc., Sub. Deb. Cv., 5.750%, 04/15/07 . 560,841 554,250 ------------ ------------ 566,841 566,748 ------------ ------------ BUILDING AND CONSTRUCTION -- 0.0% 100,000 Foster Wheeler Ltd., Sub. Deb. Cv., 6.500%, 06/01/07 . 31,974 24,250 ------------ ------------ BUSINESS SERVICES -- 0.3% 2,000,000 GP Strategies Corp., Sub. Deb., 6.000%, 08/14/08 (b) ..... 1,374,583 1,362,935 ------------ ------------ COMPUTER SOFTWARE AND SERVICES -- 0.0% 300,000 Exodus Communications Inc., Sub. Deb. Cv., 5.250%, 02/15/08+ (c) .... 1,185 1,125 ------------ ------------ ENERGY AND UTILITIES -- 0.0% 200,000 Friede Goldman Halter Inc., Sub. Deb. Cv., 4.500%, 09/15/04+ (c) .... 26,000 8,200 100,000 Ogden Corp., Sub. Deb. Cv., 6.000%, 06/01/49+ (c) .... 99,535 0 ------------ ------------ 125,535 8,200 ------------ ------------ PRINCIPAL MARKET AMOUNT COST VALUE --------- ---- ------ HEALTH CARE -- 0.0% $ 28,848 Del Global Technologies Corp., 6.000%, 03/28/07 (b) .....$ 28,848 $ 21,636 10,000 Inhale Therapeutic Systems, Sub. Deb. Cv., 6.750%, 10/13/06 (d) 6,526 9,294 ------------ ------------ 35,374 30,930 ------------ ------------ TELECOMMUNICATIONS -- 0.0% 400,000 Williams Comm Group Inc., Escrow, 10.875%, 10/01/09 (c) 0 0 200,000 XO Communications Inc., Sub. Deb. Cv., 5.750%, 01/15/09+ (c)(d) . 375 500 ------------ ------------ 375 500 ------------ ------------ TOTAL CORPORATE BONDS ............ 2,135,867 1,994,688 ------------ ------------ U.S. GOVERNMENT OBLIGATIONS -- 0.0% 35,000 U.S. Treasury Bills, 0.915%++, 11/06/03 34,968 34,968 ------------ ------------ TOTAL INVESTMENTS -- 100.1% ...........$427,529,119 541,006,988 ============ OTHER ASSETS AND LIABILITIES (NET) -- (0.1)% ............... (610,462) ------------ NET ASSETS -- 100.0% ............$540,396,526 ============ ----------------- For Federal tax purposes: Aggregate cost ..................$431,292,205 ============ Gross unrealized appreciation ...$146,549,015 Gross unrealized depreciation ... (36,834,232) ------------ Net unrealized appreciation .....$109,714,783 ============ ----------------- (a) Security considered an affiliated holding because the Fund owns at least 5% of the outstanding shares. (b) Security fair valued under procedures established by the Board of Directors. (c) Security is in default. (d) Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At September 30, 2003, the market value of Rule 144A securities amounted to $3,162,532 or .59% of total net assets. + Non-income producing security. ++ Represents annualized yield at date of purchase. ADR - American Depository Receipt. See accompanying notes to financial statements. 11 THE GABELLI SMALL CAP GROWTH FUND STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2003 -------------------------------------------------------------------------------- ASSETS: Investments, at value (Cost $427,529,119) ...................... $541,006,988 Cash ....................................... 108,497 Dividends and interest receivable .......... 428,982 Receivable for capital shares sold ......... 463,838 Other assets ............................... 6,714 ------------ TOTAL ASSETS ............................... 542,015,019 ------------ LIABILITIES: Payable for investments purchased .......... 34,994 Payable for capital shares redeemed ........ 740,482 Payable for investment advisory fees ....... 454,142 Payable for distribution fees .............. 113,535 Payable for registration fees .............. 16,209 Payable for shareholder communications fees 70,781 Payable for shareholder services fees ...... 109,076 Other accrued expenses ..................... 79,274 ------------ TOTAL LIABILITIES .......................... 1,618,493 ------------ NET ASSETS applicable to 25,156,394 shares outstanding ....................... $540,396,526 ============ NET ASSETS CONSIST OF: Capital stock, at par value ................ $ 25,156 Additional paid-in capital ................. 426,425,522 Accumulated net investment loss ............ (65,598) Accumulated net realized gain on investments and foreign currency transactions ........ 532,630 Net unrealized appreciation on investments and foreign currency transactions ........ 113,478,816 ------------ TOTAL NET ASSETS ........................... $540,396,526 ============ NET ASSET VALUE, offering and redemption price per share ($540,396,526 / 25,156,394 shares outstanding; unlimited number of shares authorized of $0.001 par value) ... $21.48 ====== STATEMENT OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 2003 -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends (net of foreign taxes of $18,409) ...... $ 5,449,414 Interest ......................................... 348,863 ------------ TOTAL INVESTMENT INCOME .......................... 5,798,277 ------------ EXPENSES: Investment advisory fees ......................... 4,715,146 Distribution fees ................................ 1,178,786 Shareholder services fees ........................ 520,144 Shareholder communications expenses .............. 131,234 Custodian fees ................................... 101,727 Registration fees ................................ 49,854 Directors' fees .................................. 43,925 Legal and audit fees ............................. 40,985 Miscellaneous expenses ........................... 62,973 ------------ TOTAL EXPENSES ................................... 6,844,774 ------------ NET INVESTMENT LOSS .............................. (1,046,497) ------------ NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS Net realized gain on investments, futures contracts and foreign currency transactions .... 5,606,020 Net change in unrealized appreciation/depreciation on investments, futures contracts and foreign currency transactions .................. 112,208,652 ------------ NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS, FUTURES CONTRACTS AND FOREIGN CURRENCY TRANSACTIONS .................. 117,814,672 ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................ $116,768,175 ============ STATEMENT OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED SEPTEMBER 30, 2003 SEPTEMBER 30, 2002 ------------------ ------------------ OPERATIONS: Net investment loss ............................... $ (1,046,497) $ (999,507) Net realized gain on investments, futures contracts and foreign currency transactions ............... 5,606,020 4,994,295 Net change in unrealized appreciation/ depreciation on investments, futures contracts and foreign currency transactions ..... 112,208,652 (10,113,304) ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...................... 116,768,175 (6,118,516) ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Net investment income ............................. -- (314,152) Net realized short-term gain on investments ....... (300,296) (3,455,301) Net realized long-term gain on investments ........ (6,071,352) (4,307,907) ------------ ------------ TOTAL DISTRIBUTIONS TO SHAREHOLDERS ............... (6,371,648) (8,077,360) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Net increase in net assets from capital share transactions ..................... 1,584,354 69,746,245 ------------ ------------ NET INCREASE IN NET ASSETS ........................ 111,980,881 55,550,369 NET ASSETS: Beginning of period ............................... 428,415,645 372,865,276 ------------ ------------ End of period ..................................... $540,396,526 $428,415,645 ============ ============
See accompanying notes to financial statements. 12 THE GABELLI SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 1. ORGANIZATION. The Gabelli Small Cap Growth Fund (the "Fund") is a series of Gabelli Equity Series Funds, Inc. (the "Corporation"), which was organized on July 25, 1991 as a Maryland corporation. The Fund is a diversified, open-end management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), and one of three separately managed portfolios (collectively, the "Portfolios") of the Corporation, each with four separate classes of shares known as Class AAA, Class A, Class B and Class C. Currently, only Class AAA Shares are offered to the public. The Fund's primary objective is capital appreciation. The Fund commenced investment operations on October 22, 1991. 2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. SECURITY VALUATION. Portfolio securities listed or traded on a nationally recognized securities exchange or traded in the U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a market's official closing price as of the close of business on the day the securities are being valued. If there were no sales that day, the security is valued at the average of the closing bid and asked prices or, if there were no asked prices quoted on that day, then the security is valued at the closing bid price on that day. All other portfolio securities for which over-the-counter market quotations are readily available are valued at the latest average of the bid and asked prices. If there were no asked prices quoted on that day, then the security is valued at the closing bid price. Portfolio securities traded on more than one national securities exchange or market are valued according to the broadest and most representative market, as determined by Gabelli Funds, LLC (the "Adviser"). Portfolio securities primarily traded on foreign markets are generally valued at the preceding closing values of such securities on their respective exchanges or if, after the close, market conditions change significantly, certain foreign securities may be fair valued pursuant to procedures established by the Board of Directors. Securities and assets for which market quotations are not readily available are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Board of Directors. Short-term debt securities with remaining maturities of 60 days or less are valued at amortized cost, unless the Board of Directors determines such does not reflect the securities' fair value, in which case these securities will be valued at their fair value as determined by the Board of Directors. Debt instruments having a maturity greater than 60 days are valued at the latest average of the bid and asked prices obtained from a pricing service approved by the Board of Directors, or a dealer maintaining an active market in those securities. Options are valued at the last sale price on the exchange on which they are listed. If no sales of such options have taken place that day, they will be valued at the mean between their closing bid and asked prices. REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with primary government securities dealers recognized by the Federal Reserve Board, with member banks of the Federal Reserve System or with other brokers or dealers that meet credit guidelines established by the Adviser and reviewed by the Board of Directors. Under the terms of a typical repurchase agreement, the Fund takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the Fund to resell, the obligation at an agreed-upon price and time, thereby determining the yield during the Fund's holding period. The Fund will always receive and maintain securities as collateral whose market value, including accrued 13 THE GABELLI SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- interest, will be at least equal to 100% of the dollar amount invested by the Fund in each agreement. The Fund will make payment for such securities only upon physical delivery or upon evidence of book entry transfer of the collateral to the account of the custodian. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to maintain the adequacy of the collateral. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. At September 30, 2003, there were no repurchase agreements. FUTURES CONTRACTS. The Fund may engage in futures contracts for the purpose of hedging against changes in the value of its portfolio securities and in the value of securities it intends to purchase. Upon entering into a futures contract, the Fund is required to deposit with the broker an amount of cash or cash equivalents equal to a certain percentage of the contract amount. This is known as the "initial margin". Subsequent payments ("variation margin") are made or received by the Fund each day, depending on the daily fluctuation of the value of the contract. The daily changes in the contract are included in unrealized gains or losses. The Fund recognizes a realized gain or loss when the contract is closed. At September 30, 2003, there were no futures contracts. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of futures contracts primarily corresponds with the value of their underlying instruments, which may not correlate with the change in value of the hedged investments. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market. FORWARD FOREIGN EXCHANGE CONTRACTS. The Fund may engage in forward foreign exchange contracts for hedging a specific transaction with respect to either the currency in which the transaction is denominated or another currency as deemed appropriate by the Adviser. Forward foreign exchange contracts are valued at the forward rate and are marked-to-market daily. The change in market value is included in unrealized appreciation/depreciation on investments and foreign currency transactions. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. At September 30, 2003, there were no open forward foreign exchange contracts. The use of forward foreign exchange contracts does not eliminate fluctuations in the underlying prices of the Fund's portfolio securities, but it does establish a rate of exchange that can be achieved in the future. Although forward foreign exchange contracts limit the risk of loss due to a decline in the value of the hedged currency, they also limit any potential gain/(loss) that might result should the value of the currency increase. In addition, the Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. FOREIGN CURRENCY TRANSLATION. The books and records of the Fund are maintained in United States (U.S.) dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the exchange rates prevailing at the end of the period, and purchases and sales of investment securities, income and expenses are translated at the exchange rate prevailing on the respective dates of such transactions. Unrealized gains and losses, which result from changes in foreign exchange rates and/or changes in market prices of securities, have been included in unrealized appreciation/depreciation on investments and foreign currency transactions. Net realized foreign currency gains and losses resulting from changes in exchange rates include foreign currency gains and losses between trade date and settlement date on investment securities 14 THE GABELLI SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- transactions, foreign currency transactions and the difference between the amounts of interest and dividends recorded on the books of the Fund and the amounts actually received. The portion of foreign currency gains and losses related to fluctuation in exchange rates between the initial trade date and subsequent sale trade date is included in realized gain/(loss) on investments. SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are accounted for on the trade date with realized gain or loss on investments determined by using the identified cost method. Interest income (including amortization of premium and accretion of discount) is recorded as earned. Dividend income is recorded on the ex-dividend date. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States. For fiscal year ended September 30, 2003, the tax character of distributions paid does not materially differ from the amounts recorded in accordance with accounting principles generally accepted in the United States. For the fiscal year ended September 30, 2003, reclassifications were made to decrease accumulated net investment loss for $984,787 and decrease accumulated net realized gain on investments for $974,892, with an offsetting adjustment to additional paid-in capital. EXPENSES. Certain administrative expenses are common to, and allocated among, the Portfolios. Such allocations are made on the basis of each Portfolio's average net assets or other criteria directly affecting the expenses as determined by the Adviser. PROVISION FOR INCOME TAXES. The Fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. As a result, a Federal income tax provision is not required. As of September 30, 2003, the components of accumulated earnings/(losses) on a tax basis were as follows: Undistributed ordinary income (inclusive of short-term capital gains) ...... $ 2,330,289 Undistributed long-term capital gains .......... 1,965,427 Post-October losses ............................ (710) Net unrealized appreciation .................... 109,715,730 Other temporary differences .................... (64,888) ------------ Total accumulated earnings ................... $113,945,848 ============ Dividends and interest from non-U.S. sources received by the Fund are generally subject to non-U.S. withholding taxes at rates ranging up to 30%. Such withholding taxes may be reduced or eliminated under the terms of applicable U.S. income tax treaties, and the Fund intends to undertake any procedural steps required to claim the benefits of such treaties. The difference between book and tax basis undistributed ordinary income is primarily due to the continued accrual of defaulted interest for tax purposes which has been written down for book purposes. The difference between book and tax basis unrealized appreciation is primarily due to deferral of losses from wash sales for tax purposes. 15 THE GABELLI SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 3. INVESTMENT ADVISORY AGREEMENT. The Fund has entered into an investment advisory agreement (the "Advisory Agreement") with the Adviser which provides that the Fund will pay the Adviser a fee, computed daily and paid monthly, at the annual rate of 1.00% of the value of the Fund's average daily net assets. In accordance with the Advisory Agreement, the Adviser provides a continuous investment program for the Fund's portfolio, oversees the administration of all aspects of the Fund's business and affairs and pays the compensation of all Officers and Directors of the Fund who are its affiliates. 4. DISTRIBUTION PLAN. The Fund's Board of Directors has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. For the year ended September 30, 2003, the Fund incurred distribution costs payable to Gabelli & Company, Inc., an affiliate of the Adviser, of $1,178,786, or 0.25% of average daily net assets, the annual limitation under the Plan. Such payments are accrued daily and paid monthly. 5. PORTFOLIO SECURITIES. Purchases and sales of securities for the year ended September 30, 2003, other than short term securities, aggregated $69,578,042 and $18,728,045, respectively. 6. TRANSACTIONS WITH AFFILIATES. During the fiscal year ended September 30, 2003, the Fund paid brokerage commissions of $174,657 to Gabelli & Company, Inc. The cost of calculating the Fund's net asset value per share is a Fund expense pursuant to the Investment Advisory Agreement between the Fund and Gabelli Funds, LLC (the "Adviser"). During fiscal 2003, the Fund reimbursed the Adviser $34,800 in connection with the cost of computing the Fund's net asset value. 7. LINE OF CREDIT. The Fund has access to an unsecured line of credit up to $25,000,000 from the custodian for temporary borrowing purposes. Borrowings under this arrangement bear interest at 0.75% above the Federal Funds rate on outstanding balances. There were no borrowings against the line of credit during the year ended September 30, 2003. 8. CAPITAL STOCK TRANSACTIONS. Transactions in shares of capital stock were as follows:
YEAR ENDED YEAR ENDED SEPTEMBER 30, 2003 SEPTEMBER 30, 2002 -------------------------- -------------------------- SHARES AMOUNT SHARES AMOUNT ---------- ------------- ---------- ------------- Shares sold .................... 6,936,908 $ 131,697,417 11,939,999 $ 234,497,129 Shares issued upon reinvestment of dividends .... 338,280 6,099,180 413,536 7,717,258 Shares redeemed ................ (7,267,158) (136,212,243) (8,971,244) (172,468,142) ---------- ------------- ---------- ------------- Net increase (decrease) ........ 8,030 $ 1,584,354 3,382,291 $ 69,746,245 ========== ============= ========== =============
9. TRANSACTIONS IN SECURITIES OF AFFILIATED ISSUERS. The 1940 Act defines affiliated issuers as those in which the Fund's holdings of an issuer represent 5% or more of the outstanding voting securities of the issuer. A summary of the Fund's transactions in the securities of these issuers during the year ended September 30, 2003, is set forth below:
PERCENT SHARES VALUE AT OWNED BEGINNING PURCHASED ENDING DIVIDEND SEPTEMBER 30, OF SHARES SHARES (SOLD) SHARES INCOME 2003 OUTSTANDING --------- --------- ------ -------- ------------- ----------- Trans-Lux Corp. ...... 90,000 5,000 95,000 $12,810 $654,550 9.76% ------ ----- ------ ------- -------- -----
16 THE GABELLI SMALL CAP GROWTH FUND FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- Selected data for a share of capital stock outstanding throughout each period:
YEAR ENDED SEPTEMBER 30, ----------------------------------------------------------- 2003 2002 2001 2000 1999 -------- -------- -------- -------- -------- OPERATING PERFORMANCE: Net asset value, beginning of period .................. $ 17.04 $ 17.13 $ 23.60 $ 21.84 $ 18.81 -------- -------- -------- -------- -------- Net investment income (loss) .......................... (0.05) (0.04) 0.06 0.06 (0.07) Net realized and unrealized gain (loss) on investments ...................................... 4.74 0.31 (1.75) 4.16 3.63 -------- -------- -------- -------- -------- Total from investment operations ...................... 4.69 0.27 (1.69) 4.22 3.56 -------- -------- -------- -------- -------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income ................................. -- (0.01) (0.05) -- -- Net realized gain on investments ...................... (0.25) (0.35) (4.73) (2.46) (0.53) -------- -------- -------- -------- -------- Total distributions ................................... (0.25) (0.36) (4.78) (2.46) (0.53) -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD ........................ $ 21.48 $ 17.04 $ 17.13 $ 23.60 $ 21.84 ======== ======== ======== ======== ======== Total return+ ......................................... 27.84% 1.39% (7.47)% 21.00% 19.24% ======== ======== ======== ======== ======== RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA: Net assets, end of period (in 000's) .................. $540,397 $428,416 $372,865 $366,459 $305,403 Ratio of net investment income (loss) to average net assets ............................... (0.22)% (0.22)% 0.30% 0.26% (0.34)% Ratio of operating expenses to average net assets ............................... 1.45% 1.45% 1.45% 1.49%(a) 1.56%(a) Portfolio turnover rate ............................... 4% 10% 17% 47% 24%
--------------------------- + Total return represents aggregate total return of a hypothetical $1,000 investment at the beginning of the period and sold at the end of the period including reinvestment of dividends. (a) The Fund incurred interest expense during the fiscal years ended September 30, 2000 and 1999. If interest expense had not been incurred, the ratios of operating expenses to average net assets would have been 1.49% and 1.53%, respectively. See accompanying notes to financial statements. 17 THE GABELLI SMALL CAP GROWTH FUND REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS -------------------------------------------------------------------------------- To the Shareholders and Board of Directors of The Gabelli Small Cap Growth Fund We have audited the accompanying statements of assets and liabilities, including the portfolio of investments, of The Gabelli Small Cap Growth Fund (the "Fund"), a series of the Gabelli Equity Series Funds, Inc., as of September 30, 2003, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of September 30, 2003 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Gabelli Small Cap Growth Fund at September 30, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States. /S/ ERNST & YOUNG LLP New York, New York November 7, 2003 -------------------------------------------------------------------------------- 2003 TAX NOTICE TO SHAREHOLDERS (Unaudited) For the fiscal year ended September 30, 2003, the Fund paid to shareholders, on December 20, 2002, an ordinary income dividend (comprised of net investment income and short term capital gains) totaling $0.012 per share and long term capital gains totaling $0.243 per share. For the fiscal year ended September 30, 2003, 100% of the ordinary income dividend qualifies for the dividend received deduction available to corporations. -------------------------------------------------------------------------------- 18 THE GABELLI SMALL CAP GROWTH FUND ADDITIONAL FUND INFORMATION (UNAUDITED) -------------------------------------------------------------------------------- The business and affairs of the Fund are managed under the direction of the Fund's Board of Directors. Information pertaining to the Directors and officers of the Fund is set forth below. The Fund's Statement of Additional Information includes additional information about The Gabelli Small Cap Growth Fund's Directors and is available, without charge, upon request, by calling 800-GABELLI (800-422-3554) or by writing to The Gabelli Small Cap Growth Fund at One Corporate Center, Rye, NY 10580-1422.
NUMBER OF FUNDS NAME, POSITION(S) TERM OF OFFICE IN FUND ADDRESS 1 AND LENGTH OF COMPLEX OVERSEEN PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS AND AGE TIME SERVED 2 BY DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 3 ----------------- -------------- ---------------- ----------------------- -------------------- INTERESTED DIRECTORS 4: MARIO J. GABELLI Since 1991 23 Chairman of the Board and Chief Executive Director of Morgan Group Director, President Officer of Gabelli Asset Management Inc. and Holdings, Inc. and Chief Investment Chief Investment Officer of Gabelli Funds, LLC (transportation services); Officer and GAMCO Investors, Inc.; Vice Chairman and Vice Chairman of Age: 61 Chief Executive Officer of Lynch Interactive Lynch Corporation Corporation (multimedia and services) (diversified manufacturing) JOHN D. GABELLI Since 1991 10 Senior Vice President of Gabelli & Company, -- Director Inc.; Director of Gabelli Advisers,Inc. Age: 59 KARL OTTO POHL Since 1992 32 Member of the Shareholder Committee of Sal Director of Gabelli Asset Director Oppenheim Jr. & Cie (private investment bank); Management Inc. (investment Age: 73 Former President of the Deutsche Bundesbank and management); Chairman, Chairman of its Central Bank Council (1980-1991) Incentive Capital and Incentive Asset Management (Zurich); Director at Sal Oppenheim Jr. & Cie, Zurich NON-INTERESTED DIRECTORS: ANTHONY J. COLAVITA Since 1991 34 President and Attorney at Law in the law firm -- Director of Anthony J. Colavita, P.C. Age: 67 VINCENT D. ENRIGHT Since 1991 12 Former Senior Vice President and Chief Financial -- Director Officer of KeySpan Energy Corporation Age: 59 ROBERT J. MORRISSEY Since 1991 10 Partner in the law firm of Morrissey, Hawkins -- Director & Lynch Age: 64 ANTHONY R. PUSTORINO Since 1991 17 Certified Public Accountant; Professor -- Director Emeritus, Pace University Age: 78 ANTHONIE C. VAN EKRIS Since 1991 19 Managing Director of BALMAC Director of Aurado Director International, Inc. Exploration Inc. Age: 69 SALVATORE J. ZIZZA Since 2001 10 Chairman, Hallmark Electrical Supplies Corp.; Director of Hollis Director Former Executive Vice President of FMG Group Eden Pharmaceuticals Age: 57 (OTC), a healthcare provider; Former President and Chief Executive Officer of the Lehigh Group Inc., an interior construction company, through 1997 OFFICERS: BRUCE N. ALPERT Since 1991 -- Executive Vice President and Chief Operating Officer -- President of Gabelli Funds, LLC since 1988 and an officer of all Age: 51 mutual funds advised by Gabelli Funds, LLC and its affiliates. Director and President of Gabelli Advisers, Inc. GUS A. COUTSOUROS Since 2000 -- Vice President and Chief Financial Officer of Gabelli -- Vice President and Funds, LLC since 1998 and an officer of all mutual Treasurer funds advised by Gabelli Funds, LLC and its affiliates Age: 41 JAMES E. MCKEE Since 1995 -- Vice President, General Counsel and Secretary of -- Secretary Gabelli Asset Management Inc. since 1999 and GAMCO Age: 40 Investors, Inc. since 1993; Secretary of all mutual funds advised by Gabelli Advisers, Inc. and Gabelli Funds, LLC
--------------- 1 Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise noted. 2 Each Director will hold office for an indefinite term until the earliest of (i) the next meeting of shareholders if any, called for the purpose of considering the election or re-election of such Director and until the election and qualification of his or her successor, if any, elected at such meeting, or (ii) the date a Director resigns or retires, or a Director is removed by the Board of Directors or shareholders, in accordance with the Fund's By-Laws and Articles of Incorporation. 3 This column includes only directorships of companies required to report to the SEC under the Securities and Exchange Act of 1934 (i.e. public companies) or other investment companies registered under the 1940 Act. 4 "Interested person" of the Fund as defined in the Investment Company Act of 1940. Messrs. Gabelli, Gabelli and Pohl are each considered an "interested person" because of their affiliation with Gabelli Funds, LLC which acts as each Fund's investment adviser. Mario J. Gabelli and John D. Gabelli are brothers. 19 Gabelli Equity Series Funds, Inc. THE GABELLI SMALL CAP GROWTH FUND One Corporate Center Rye, New York 10580-1422 800-GABELLI 800-422-3554 FAX: 914-921-5118 WEBSITE: WWW.GABELLI.COM E-MAIL: INFO@GABELLI.COM Net Asset Value available daily by calling 800-GABELLI after 6:00 P.M. BOARD OF DIRECTORS Mario J. Gabelli, CFA Karl Otto Pohl CHAIRMAN AND CHIEF FORMER PRESIDENT INVESTMENT OFFICER DEUTSCHE BUNDESBANK GABELLI ASSET MANAGEMENT INC. Anthony J. Colavita Anthony R. Pustorino ATTORNEY-AT-LAW CERTIFIED PUBLIC ACCOUNTANT ANTHONY J. COLAVITA, P.C. PROFESSOR EMERITUS PACE UNIVERSITY Vincent D. Enright Anthonie C. van Ekris FORMER SENIOR VICE PRESIDENT MANAGING DIRECTOR AND CHIEF FINANCIAL OFFICER BALMAC INTERNATIONAL, INC. KEYSPAN ENERGY CORP. John D. Gabelli Salvatore J. Zizza SENIOR VICE PRESIDENT CHAIRMAN GABELLI & COMPANY, INC. HALLMARK ELECTRICAL SUPPLIES CORP. Robert J. Morrissey ATTORNEY-AT-LAW MORRISSEY, HAWKINS & LYNCH OFFICERS Bruce N. Alpert Gus Coutsouros PRESIDENT VICE PRESIDENT AND TREASURER James E. McKee SECRETARY DISTRIBUTOR Gabelli & Company, Inc. CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT State Street Bank and Trust Company LEGAL COUNSEL Skadden, Arps, Slate, Meagher & Flom LLP -------------------------------------------------------------------------------- This report is submitted for the general information of the shareholders of The Gabelli Small Cap Growth Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. -------------------------------------------------------------------------------- GAB443Q303SR [GRAPHIC OMITTED] PICTURE OF MARIO GABELLI THE GABELLI SMALL CAP GROWTH FUND ANNUAL REPORT SEPTEMBER 30, 2003 THE GABELLI EQUITY INCOME FUND ANNUAL REPORT SEPTEMBER 30, 2003 TO OUR SHAREHOLDERS, In many of our Funds' June 30, 2003 shareholder reports, we noted a change in the way we provide the portfolio manager's commentary to shareholders of our Funds. Our shareholder reports have typically contained commentary on each portfolio manager's assessment of the stock market, individual stocks and how economic events affect their thinking in managing a specific Fund. We have always provided details about performance and presented returns, both good and bad, hopefully in a clear and concise fashion. These comments have been included as part of each Fund's quarterly, semi-annual, and annual financial statements. The Sarbanes-Oxley Act's new corporate governance regulations now require a Fund's principal executive and financial officers to certify the entire contents of the semi-annual and annual shareholder reports in a filing with the Securities and Exchange Commission on Form N-CSR. This certification covers the portfolio manager's commentary and subjective opinions if they are attached to or a part of the financial statements. Rather than ask our portfolio managers to eliminate their opinions and/or restrict their commentary to historical facts only, we separated their commentary from the financial statements and investment portfolio and sent it separately. We will continue to mail the portfolio manager's commentary separately from the investment portfolio to ensure that its content is complete and unrestricted. Our Annual Reports will be mailed separately and include the performance of the Fund with a description of the factors affecting the performance during the past year, along with the financial statements and the investment portfolio. Both the commentary and the financial statements, including the portfolio of investments, are also available on our website at www.gabelli.com/funds. We trust that you understand that our approach is an unintended consequence of the ever-increasing regulatory requirements affecting public companies generally. We hope the specific certification requirements of these new regulations will be modified as they relate to mutual funds, since investment companies have different corporate structures and objectives than other public companies. Sincerely yours, /S/ BRUCE N. ALPERT Bruce N. Alpert Chief Operating Officer Gabelli Funds, LLC October 17, 2003 [GRAPHIC OMITTED] PLOT POINTS FOLLOW: COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GABELLI EQUITY INCOME FUND, THE LIPPER EQUITY INCOME FUND AVERAGE AND THE S&P 500 INDEX Gabelli Equity Lipper Equity Income Fund Income Fund Average S&P 500 Index 1/2/92 10,000 10,000 10,000 9/30/92 10,580 10,530 10,250 9/30/93 12,750 12,415 11,583 9/30/94 13,171 12,688 12,011 9/30/95 15,700 15,226 15,590 9/30/96 18,320 17,783 18,755 9/30/97 24,549 23,865 26,332 9/30/98 25,285 23,889 28,728 9/30/99 30,296 26,825 36,712 9/30/00 32,844 29,027 41,584 9/30/01 32,703 26,342 30,518 9/30/02 28,916 21,853 24,271 9/30/03 36,026 26,300 30,186 Past performance is not predictive of future results. The performance tables and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. COMPARATIVE RESULTS --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH SEPTEMBER 30, 2003 (A)(B) -------------------------------------------------------- YEAR TO SINCE QUARTER DATE INCEPTION (C) 10 YEAR 5 YEAR 3 YEAR 1 YEAR ------- ------- ------------ ------- ------ ------ ------ Gabelli Equity Income Fund ........... 1.53% 13.56% 11.52% 10.94% 7.34% 3.13% 24.59% S&P 500 Index ........................ 2.65% 14.71% 9.85% 10.04% 1.00% (10.13)% 24.37% Nasdaq Composite Index ............... 10.11% 33.80% 9.95% 8.89% 1.08% (21.35)% 52.46% Lipper Equity Income Fund Avg. ....... 2.15% 12.00% 9.02% 8.26% 2.68% (2.52)% 20.35%
(a) Total returns and average annual returns reflect changes in share price and reinvestment of dividends and are net of expenses. The net asset value of the Fund is reduced on the ex-dividend (payment) date by the amount of the dividend paid. Of course, returns represent past performance does not guarantee future results. Investment returns and the principal value of an investment will fluctuate. When shares are redeemed, they may be worth more or less than their original cost. The S&P 500 Index and the Nasdaq Composite Index are unmanaged indicators of stock market performance, while the Lipper Average reflects the average performance of mutual funds classified in this particular category. Dividends are considered reinvested (except for the Nasdaq Composite Index). Performance for periods less than one year is not annualized. (b) The Fund's fiscal year ends September 30. (c) From commencement of investment operations on January 2, 1992. -------------------------------------------------------------------------------- 2 PERFORMANCE DISCUSSION Investors have opted for growth over yield during the past year's stock market rally. Despite losing the relative performance race to growth stocks this quarter, higher yielding equities delivered respectable returns. Buoyed by our industrial company holdings, the Gabelli Equity Income Fund (the "Fund") rose 24.6% for the one-year period ended September 30, 2003, performing in line with the Standard & Poor's ("S&P") 500 Index, which gained 24.4% during the same one-year period. Traditionally, growth stocks outperform during the early stages of an economic recovery. However, buoyed by the reduction of the tax rates on dividends to 15%, higher yielding stocks performed relatively well in the go-go rally. Financial services stocks led the performance parade for our Fund during the past year as J.P. Morgan Chase, Merrill Lynch, Sterling Bancorp and American Express rose sharply. Industrial stocks also performed well, with railcar manufacturer Trinity Industries, auto parts makers Dana Corp. and Modine Manufacturing, electric utility operator AES Corp. and agricultural machinery leader Deere & Company among our best performers. Integrated utilities stocks including Westar Energy and Constellation Energy also positively contributed to returns. In general during the past year, our healthcare investments disappointed, with Eli Lilly and Tenet Healthcare declining substantially and Baxter International treading water. Several blue chip companies also underperformed as AT&T and Coca-Cola lost ground. Specialty chemical investments such as Great Lakes Chemical and Ferro restrained portfolio performance. WWW.GABELLI.COM Please visit us on the Internet. Our homepage at www.gabelli.com contains information about Gabelli Asset Management Inc., the Gabelli Mutual Funds, IRAs, 401(k)s, quarterly reports, closing prices and other current news. You can send us e-mail at info@gabelli.com. In our efforts to bring to shareholders more timely portfolio information, Gabelli Funds' portfolio managers regularly participate in chat sessions on our website. Please visit www.gabelli.com for the specific dates and times of all of our upcoming chats. All chat sessions start at 4:15 PM (Eastern Time). Please arrive early, as participation is limited. You may sign up for our e-mail alerts at www.gabelli.com and receive early notice of chat sessions, closing mutual fund prices, news events and media sightings. 3 THE GABELLI EQUITY INCOME FUND PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2003 -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ COMMON STOCKS -- 87.8% AEROSPACE -- 0.9% 32,000 Boeing Co. .........$ 1,082,148 $ 1,098,560 5,000 Lockheed Martin Corp. ............ 104,386 230,750 7,000 Northrop Grumman Corp. ............ 431,350 603,540 10,000 Raytheon Co. ....... 279,250 280,000 2,000 Rockwell Automation Inc. ............. 25,686 52,500 2,000 Rockwell Collins Inc. 15,844 50,500 ------------ ------------ 1,938,664 2,315,850 ------------ ------------ AUTOMOTIVE -- 0.2% 4,500 Ford Motor Co. ..... 67,417 48,465 14,239 General Motors Corp. 538,747 582,802 ------------ ------------ 606,164 631,267 ------------ ------------ AUTOMOTIVE: PARTS AND ACCESSORIES -- 3.0% 2,000 ArvinMeritor Inc. .. 28,890 35,620 80,000 Dana Corp. ......... 1,053,083 1,234,400 6,400 Ethyl Corp.+ ....... 24,700 80,512 50,000 GenCorp Inc. ....... 429,459 447,500 125,000 Genuine Parts Co. .. 3,506,476 3,997,500 2,500 Johnson Controls Inc. ............. 127,000 236,500 60,000 Modine Manufacturing Co. .............. 1,160,998 1,428,000 20,000 Pep Boys - Manny, Moe & Jack ....... 158,436 306,000 ------------ ------------ 6,489,042 7,766,032 ------------ ------------ AVIATION: PARTS AND SERVICES -- 0.9% 20,000 Barnes Group Inc. .. 365,934 519,200 9,500 Curtiss-Wright Corp. 135,862 670,890 6,048 Curtiss-Wright Corp., Cl. B ............ 272,014 433,037 8,000 United Technologies Corp. ............ 281,946 618,240 ------------ ------------ 1,055,756 2,241,367 ------------ ------------ BROADCASTING -- 0.0% 20,000 Granite Broadcasting Corp.+ ........... 106,004 51,000 ------------ ------------ BUSINESS SERVICES -- 0.5% 4,000 Automatic Data Processing Inc. .. 126,808 143,400 6,000 Donnelley (R.H.) Corp.+ ........... 68,850 242,460 500 Imation Corp. ...... 7,150 16,325 2,500 Landauer Inc. ...... 60,337 88,575 5,000 National Processing Inc.+ ............ 77,065 96,600 26,000 New England Business Service Inc. ..... 494,245 692,120 ------------ ------------ 834,455 1,279,480 ------------ ------------ CABLE -- 0.2% 20,000 Comcast Corp., Cl. A+ ........... 690,329 617,600 ------------ ------------ COMMUNICATIONS EQUIPMENT -- 0.7% 45,000 Corning Inc.+ ...... 352,463 423,900 120,000 Motorola Inc. ...... 1,282,274 1,436,400 ------------ ------------ 1,634,737 1,860,300 ------------ ------------ MARKET SHARES COST VALUE ------ ---- ------ COMPUTER HARDWARE -- 0.1% 300 International Business Machines Corp. ...$ 3,810 $ 26,499 13,000 Xerox Corp.+ ....... 126,343 133,380 ------------ ------------ 130,153 159,879 ------------ ------------ COMPUTER SOFTWARE AND SERVICES -- 0.6% 10,000 Electronic Data Systems Corp. .... 172,160 202,000 40,000 EMC Corp.+ ......... 403,970 505,200 50,000 PeopleSoft Inc.+ ... 848,052 909,500 154 Telecom Italia Media SpA+ ....... 205 63 ------------ ------------ 1,424,387 1,616,763 ------------ ------------ CONSUMER PRODUCTS -- 6.1% 45,000 Altria Group Inc. .. 1,407,584 1,971,000 1,000 Clorox Co. ......... 33,050 45,870 80,000 Eastman Kodak Co. .. 2,328,029 1,675,200 45,500 Energizer Holdings Inc.+ ............ 1,130,002 1,673,035 74,000 Gallaher Group plc, ADR ......... 1,600,863 2,775,740 42,000 Gillette Co. ....... 1,233,027 1,343,160 70,000 Maytag Corp. ....... 1,736,480 1,747,900 36,000 National Presto Industries Inc. .. 1,245,262 1,236,240 19,000 Procter & Gamble Co. 1,393,252 1,763,580 13,000 Rothmans Inc. ...... 237,941 243,246 26,000 Unilever NV, ADR ... 1,542,066 1,538,680 ------------ ------------ 13,887,556 16,013,651 ------------ ------------ CONSUMER SERVICES -- 0.2% 35,000 Rollins Inc. ....... 454,969 624,400 ------------ ------------ DIVERSIFIED INDUSTRIAL -- 4.3% 5,000 3M Company ......... 213,645 345,350 22,000 Acuity Brands Inc. . 342,225 397,320 40,000 Cooper Industries Ltd., Cl. A ...... 1,657,009 1,921,200 22,000 GATX Corp. ......... 559,803 465,300 110,000 General Electric Co. 2,759,948 3,279,100 5,000 Harbor Global Co. Ltd.+ ........ 24,172 44,625 100,000 Honeywell International Inc. ............. 2,429,693 2,635,000 47,000 Sensient Technologies Corp. ............ 953,833 987,000 22,000 Thomas Industries Inc. ............. 250,524 627,440 4,000 Trinity Industries Inc. ............. 82,100 103,400 25,000 Tyco International Ltd. ............. 463,556 510,750 ------------ ------------ 9,736,508 11,316,485 ------------ ------------ ELECTRONICS -- 1.8% 20,000 Intel Corp. ........ 370,400 550,200 125,000 Texas Instruments Inc. ............. 2,489,961 2,850,000 20,000 Thermo Electron Corp.+ ........... 424,925 434,000 50,000 Thomas & Betts Corp.+ ........... 881,146 792,500 ------------ ------------ 4,166,432 4,626,700 ------------ ------------ See accompanying notes to financial statements. 4 THE GABELLI EQUITY INCOME FUND PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003 -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ COMMON STOCKS (CONTINUED) ENERGY AND UTILITIES: ELECTRIC -- 3.5% 80,000 AES Corp.+ .........$ 268,400 $ 593,600 12,000 American Electric Power Company Inc. ..... 310,790 360,000 81,000 Cinergy Corp. ...... 2,478,068 2,972,700 17,000 DTE Energy Co. ..... 740,420 627,130 100,000 El Paso Electric Co.+ 790,289 1,155,000 10,000 FPL Group Inc. ..... 527,548 632,000 35,000 Great Plains Energy Inc. ...... 748,610 1,061,200 90,000 Northeast Utilities 1,660,471 1,612,800 8,000 UIL Holdings Corp. . 290,482 279,920 ------------ ------------ 7,815,078 9,294,350 ------------ ------------ ENERGY AND UTILITIES: INTEGRATED -- 10.1% 38,000 Allegheny Energy Inc.+ ............ 318,325 347,320 105,000 Aquila Inc.+ ....... 296,671 354,900 44,000 BP plc, ADR ........ 1,030,211 1,852,400 42,000 Burlington Resources Inc. ... 1,618,222 2,024,400 44,000 CH Energy Group Inc. 1,809,289 1,936,000 70,000 Constellation Energy Group Inc. ....... 1,664,815 2,504,600 1,000 Dominion Resources Inc. ............. 48,852 61,900 105,000 Duke Energy Corp. .. 1,892,694 1,870,050 185,000 Duquesne Light Holdings Inc. .... 3,073,338 2,856,400 135,000 El Paso Corp. ...... 1,263,718 985,500 150,000 Energy East Corp. .. 3,071,332 3,364,500 29,000 Eni SpA ............ 304,221 443,088 40,000 NSTAR .............. 1,282,183 1,900,000 50,000 Progress Energy Inc. 2,144,038 2,223,000 15,000 Progress Energy Inc., CVO+ ............. 7,800 2,850 4,000 Public Service Enterprise Group Inc. ....... 131,300 168,000 12,000 ScottishPower plc, ADR ......... 314,381 284,400 56,000 TECO Energy Inc. ... 778,820 773,920 28,000 TXU Corp. .......... 572,163 659,680 95,000 Westar Energy Inc. . 1,388,045 1,752,750 ------------ ------------ 23,010,418 26,365,658 ------------ ------------ ENERGY AND UTILITIES: NATURAL GAS -- 2.6% 43,000 AGL Resources Inc. . 815,748 1,211,310 17,000 Atmos Energy Corp. . 372,478 406,980 25,000 National Fuel Gas Co. .......... 519,678 571,250 30,000 ONEOK Inc. ......... 477,001 605,100 3,000 Peoples Energy Corp. 103,187 124,140 12,000 Piedmont Natural Gas Co. Inc. ..... 394,017 468,000 18,000 SEMCO Energy Inc. .. 160,883 82,800 63,282 Southern Union Co.+ 904,305 1,075,794 100,000 Southwest Gas Corp. 1,777,547 2,270,000 ------------ ------------ 5,524,844 6,815,374 ------------ ------------ MARKET SHARES COST VALUE ------ ---- ------ ENERGY AND UTILITIES: OIL -- 6.5% 41,000 ChevronTexaco Corp. $ 1,927,546 $ 2,929,450 58,000 ConocoPhillips ..... 3,187,718 3,175,500 15,000 Devon Energy Corp. . 692,247 722,850 123,000 Exxon Mobil Corp. .. 3,351,043 4,501,800 18,000 Kerr-McGee Corp. ... 778,337 803,520 95,000 Royal Dutch Petroleum Co. .... 4,155,263 4,199,000 8,759 Total Petroleum of North America Ltd., ADR 299,550 663,932 ------------ ------------ 14,391,704 16,996,052 ------------ ------------ ENERGY AND UTILITIES: SERVICES -- 0.4% 14,000 Halliburton Co. .... 158,327 339,500 12,000 Schlumberger Ltd. .. 547,706 580,800 ------------ ------------ 706,033 920,300 ------------ ------------ ENERGY AND UTILITIES: WATER -- 0.1% 15,000 Philadelphia Suburban Corp. ... 230,874 361,200 ------------ ------------ ENTERTAINMENT -- 1.4% 60,000 AOL Time Warner Inc.+ ............ 784,500 906,600 17,000 Fox Entertainment Group Inc., Cl. A+ ........... 372,969 475,830 105,000 The Walt Disney Co. 1,745,083 2,117,850 3,000 Viacom Inc., Cl. A . 68,550 115,200 ------------ ------------ 2,971,102 3,615,480 ------------ ------------ ENVIRONMENTAL SERVICES -- 0.3% 30,000 Waste Management Inc. ............. 543,511 785,100 ------------ ------------ EQUIPMENT AND SUPPLIES -- 1.1% 3,000 Caterpillar Inc. ... 35,181 206,520 28,000 Deere & Co. ........ 567,189 1,492,680 13,000 Imagistics International Inc.+ ............ 251,735 376,740 3,000 Ingersoll-Rand Co., Cl. A ............ 125,173 160,320 1,500 Minerals Technologies Inc. ............. 37,938 76,350 2,000 Parker-Hannifin Corp. 77,350 89,400 16,000 Smith (A.O.) Corp. . 343,317 448,160 ------------ ------------ 1,437,883 2,850,170 ------------ ------------ FINANCIAL SERVICES -- 15.5% 9,000 Aegon NV, ADR ...... 112,578 105,300 7,120 Alleghany Corp.+ ... 1,311,997 1,390,180 5,000 Allstate Corp. ..... 177,405 182,650 73,500 American Express Co. 2,595,280 3,311,910 8,000 American International Group Inc. ....... 433,870 461,600 39,000 Argonaut Group Inc. 789,154 507,000 5,000 Banco Popular Espanol SA ....... 185,939 247,292 18,000 Banco Santander Central Hispano SA, ADR .. 64,963 153,180 2,000 Banco Santander Chile, ADR+ ...... 29,250 46,000 8,500 Bank of America Corp. ............ 158,255 663,340 See accompanying notes to financial statements. 5 THE GABELLI EQUITY INCOME FUND PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003 -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ COMMON STOCKS (CONTINUED) FINANCIAL SERVICES (CONTINUED) 44,000 Bank of New York Co. Inc. .........$ 1,423,658 $ 1,280,840 19,000 Bank One Corp. ..... 660,767 734,350 30,000 Bankgesellschaft Berlin AG+ ....... 201,349 76,511 8,000 Banque Nationale de Paris ......... 296,835 392,221 2,500 Bear Stearns Companies Inc. ... 161,375 187,000 1,000 Block (H&R) Inc. ... 15,746 43,150 30,000 Citigroup Inc. ..... 1,094,647 1,365,300 39,000 Commerzbank AG, ADR 834,873 563,176 35,000 Deutsche Bank AG, ADR .......... 1,966,015 2,124,150 2,000 Dun and Bradstreet Corp.+ ........... 20,476 83,080 3,500 Fannie Mae ......... 204,581 245,700 16,000 Fidelity Southern Corp. ............ 153,870 216,640 80,000 FleetBoston Financial Corp. ............ 1,785,143 2,412,000 25,000 Huntington Bancshares Inc. .. 407,250 494,750 45,000 John Hancock Financial Services Inc. .... 1,295,844 1,521,000 50,000 JP Morgan Chase & Co. ............ 1,578,693 1,716,500 10,000 Leucadia National Corp. ............ 327,010 378,500 55,000 Mellon Financial Corp. ............ 1,528,208 1,657,700 10,000 Merrill Lynch & Co. Inc. ......... 362,400 535,300 80,000 MONY Group Inc. .... 2,484,944 2,604,000 4,000 Moody's Corp. ...... 64,841 219,880 3,000 Municipal Mortgage & Equity, LLC ...... 60,488 73,560 6,000 Northern Trust Corp. 60,300 254,640 50,000 Phoenix Companies Inc. ............. 650,511 577,500 47,000 PNC Financial Services Group ............ 1,985,813 2,236,260 20,000 Schwab (Charles) Corp. ............ 270,593 238,200 25,000 St. Paul Companies Inc. ............. 937,999 925,750 100,000 Sterling Bancorp ... 1,578,737 2,691,000 12,000 SunTrust Banks Inc. 251,737 724,440 5,000 T. Rowe Price Group Inc. ....... 136,890 206,300 4,000 Travelers Property Casualty Corp., Cl. A ..... 64,200 63,520 57,000 Unitrin Inc. ....... 1,772,978 1,736,220 35,000 Wachovia Corp. ..... 1,027,147 1,441,650 45,000 Waddell & Reed Financial Inc., Cl. A ........... 816,259 1,060,650 75,000 Wilmington Trust Corp. ...... 2,342,833 2,307,000 ------------ ------------ 34,683,701 40,456,890 ------------ ------------ FOOD AND BEVERAGE -- 5.6% 54,000 Allied Domecq plc, ADR ......... 1,166,956 1,391,040 35,000 Cadbury Schweppes plc, ADR ......... 773,531 878,150 35,000 Campbell Soup Co. .. 794,372 927,500 40,000 Coca-Cola Amatil Ltd., ADR ........ 246,845 309,728 30,000 Coca-Cola Co. ...... 1,390,965 1,288,800 10,000 Corn Products International Inc. ............. 260,071 318,500 40,330 Del Monte Foods Co.+ 331,259 351,274 MARKET SHARES COST VALUE ------ ---- ------ 50,000 Diageo plc, ADR ....$ 1,987,727 $ 2,207,500 12,000 Fomento Economico Mexicano SA de CV, ADR ....... 416,490 457,800 20,000 General Mills Inc. . 928,400 941,400 64,000 Heinz (H.J.) Co. ... 2,169,869 2,193,920 3,000 Hershey Foods Corp. 164,533 218,040 15,000 Kellogg Co. ........ 416,865 500,250 3,000 Mondavi (Robert) Corp., Cl. A+ ........... 62,180 92,940 10,000 Nestle SA .......... 2,083,075 2,305,718 12,150 Tootsie Roll Industries Inc. .. 339,643 376,650 ------------ ------------ 13,532,781 14,759,210 ------------ ------------ HEALTH CARE -- 8.9% 5,000 Abbott Laboratories 181,280 212,750 3,000 Aventis SA, ADR .... 149,527 156,900 50,000 Baxter International Inc. ............. 1,412,798 1,453,000 16,000 Becton, Dickinson and Co. .......... 491,573 577,920 115,000 Bristol-Myers Squibb Co. ....... 3,194,320 2,950,900 68,000 Eli Lilly & Co. .... 3,976,966 4,039,200 11,276 GlaxoSmithKline plc, ADR ......... 515,984 478,102 10,000 Henry Schein Inc.+ 422,723 567,000 5,000 Interpore International Inc.+ ............ 37,780 76,800 4,000 Johnson & Johnson .. 39,338 198,080 6,030 Medco Health Solutions Inc.+ ............ 134,931 156,358 50,000 Merck & Co. Inc. ... 2,464,901 2,531,000 5,000 Orthofix International NV+ .............. 143,154 183,000 245,000 Pfizer Inc. ........ 7,775,358 7,443,100 105,000 Schering-Plough Corp. ............ 1,904,616 1,600,200 45,000 Tenet Healthcare Corp.+ ........... 643,935 651,600 2,000 Zimmer Holdings Inc.+ ............ 103,551 110,200 ------------ ------------ 23,592,735 23,386,110 ------------ ------------ HOTELS AND GAMING -- 0.5% 35,000 Starwood Hotels & Resorts Worldwide Inc. ... 868,448 1,218,000 ------------ ------------ METALS AND MINING -- 1.4% 76,000 Fording Canadian Coal Trust (Toronto) ........ 1,516,439 1,655,774 30,000 Freeport-McMoRan Copper & Gold Inc., Cl. B . 519,346 993,000 25,000 Newmont Mining Corp. 650,026 977,250 ------------ ------------ 2,685,811 3,626,024 ------------ ------------ PAPER AND FOREST PRODUCTS -- 0.1% 11,000 Pactiv Corp.+ ...... 174,996 223,080 ------------ ------------ PUBLISHING -- 1.9% 22,000 Dow Jones & Co. Inc. 949,819 1,041,700 10,000 Knight-Ridder Inc. . 662,210 667,000 1,500 McClatchy Co., Cl. A 85,925 89,220 10,000 McGraw-Hill Companies Inc. ... 502,221 621,300 See accompanying notes to financial statements. 6 THE GABELLI EQUITY INCOME FUND PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003 -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ COMMON STOCKS (CONTINUED) PUBLISHING (CONTINUED) 3,008 News Corp. Ltd., ADR ..............$ 70,881 $ 98,662 90,000 Reader's Digest Association Inc. ............. 1,224,956 1,259,100 406 Seat Pagine Gialle SpA+ ...... 1,350 374 10,000 Tribune Co. ........ 430,466 459,000 1,200 Washington Post Co., Cl. B ............ 700,030 798,000 ------------ ------------ 4,627,858 5,034,356 ------------ ------------ REAL ESTATE -- 0.2% 20,000 Catellus Development Corp.+ ........... 401,305 489,000 ------------ ------------ RETAIL -- 0.9% 25,000 Albertson's Inc. ... 540,435 514,250 2,500 Griffin Land & Nurseries Inc.+ .. 11,716 33,650 47,300 Safeway Inc.+ ...... 932,752 1,085,062 2,000 Sears, Roebuck & Co. 51,241 87,460 6,000 The Home Depot Inc. 127,998 191,100 10,000 Weis Markets Inc. .. 300,480 340,100 ------------ ------------ 1,964,622 2,251,622 ------------ ------------ SATELLITE -- 0.2% 45,900 General Motors Corp., Cl. H+ ........... 578,764 656,829 ------------ ------------ SPECIALTY CHEMICALS -- 1.4% 25,000 Albemarle Corp. .... 553,160 686,250 1,200 Celenese AG + ...... 16,129 39,636 1,611 Dow Chemical Co. ... 16,675 52,422 8,000 E.I. du Pont de Nemours and Co. .......... 330,550 320,080 6,000 Ferro Corp. ........ 135,135 128,160 31,000 Great Lakes Chemical Corp. ... 798,682 623,410 70,000 Monsanto Co. ....... 1,160,200 1,675,800 20,000 Omnova Solutions Inc.+ ............ 155,815 70,200 4,000 Quaker Chemical Corp. ............ 79,615 93,040 ------------ ------------ 3,245,961 3,688,998 ------------ ------------ TELECOMMUNICATIONS -- 5.1% 10,000 ALLTEL Corp. ....... 492,835 463,400 30,000 AT&T Corp. ......... 874,575 646,500 52,800 BCE Inc. ........... 1,130,618 1,153,680 25,000 BellSouth Corp. .... 664,377 592,000 300,000 BT Group plc ....... 1,251,761 897,159 30,000 BT Group plc, ADR .. 1,006,938 909,000 32,000 Cable & Wireless plc, ADR ......... 201,570 180,800 185,000 Cincinnati Bell Inc.+ ............ 1,399,175 941,650 20,000 Citizens Communications Co.+ 222,640 224,200 17,000 Deutsche Telekom AG, ADR+ ......... 283,227 245,480 12,000 France Telecom SA, ADR .......... 347,118 278,880 300,000 Qwest Communications International Inc.+ 1,256,877 1,020,000 MARKET SHARES COST VALUE ------ ---- ------ 74,000 SBC Communications Inc. .............$ 2,280,246 $ 1,646,500 40,000 Sprint Corp. - FON Group ........ 569,646 604,000 3,300 Telecom Italia SpA, ADR+ ........ 31,072 82,005 7,880 Telefonica SA, ADR+ 90,062 279,346 12,000 TELUS Corp. ........ 192,898 205,149 91,500 Verizon Communications Inc. ............. 3,477,183 2,968,260 3,118 WilTel Communications Group Inc.+ ...... 45,150 49,825 ------------ ------------ 15,817,968 13,387,834 ------------ ------------ WIRELESS COMMUNICATIONS -- 0.6% 100,000 AT&T Wireless Services Inc.+ ... 983,221 818,000 300,000 mm02 plc+ .......... 336,932 285,346 20,000 mm02 plc, ADR+ ..... 199,884 188,800 30,000 Sprint Corp. - PCS Group+ ....... 175,715 171,900 ------------ ------------ 1,695,752 1,464,046 ------------ ------------ TOTAL COMMON STOCKS .......... 203,657,305 229,766,457 ------------ ------------ PREFERRED STOCKS -- 5.9% AUTOMOTIVE -- 0.1% 1,000 Ford Motor Co. Capital Trust II, 6.500% Cv. Pfd. .. 45,215 43,310 General Motors Corp., 9,000 5.250% Cv. Pfd., Ser. B ........... 228,000 206,820 4,000 4.500% Cv. Pfd., Ser. A ........... 100,000 98,600 ------------ ------------ 373,215 348,730 ------------ ------------ AVIATION: PARTS AND SERVICES -- 0.1% 7,000 Coltec Capital Trust, 5.250% Cv. Pfd. .. 281,500 250,655 ------------ ------------ BROADCASTING -- 1.9% 58,000 CVC Equity Securities Trust I, 6.500% Cv. Pfd. .. 1,485,376 1,206,400 2,619 Granite Broadcasting Corp., 12.750% Pfd.+ .... 1,488,446 1,833,300 100 Gray Television Inc., 8.000% Cv. Pfd., Ser. C (b)(c) .. 1,000,000 1,020,000 46,100 Rainbow Equity Securities Trust II, 6.250% Cv. Pfd. .. 801,487 968,100 ------------ ------------ 4,775,309 5,027,800 ------------ ------------ COMMUNICATIONS EQUIPMENT -- 0.4% 1,100 Lucent Technologies Capital Trust I, 7.750% Cv. Pfd. .. 759,000 912,703 ------------ ------------ DIVERSIFIED INDUSTRIAL -- 0.1% 26,200 WHX Corp., $3.75 Cv. Pfd., Ser. B+ .......... 177,130 131,000 ------------ ------------ See accompanying notes to financial statements. 7 THE GABELLI EQUITY INCOME FUND PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003 -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ PREFERRED STOCKS (CONTINUED) ENTERTAINMENT -- 0.0% 3,000 Metromedia International Group Inc., 7.250% Cv. Pfd.+ .$ 5,310 $ 9,000 ------------ ------------ EQUIPMENT AND SUPPLIES -- 0.4% 13,800 Sequa Corp., $5.00 Cv. Pfd. ... 1,063,415 1,131,600 ------------ ------------ HEALTH CARE -- 0.0% 300 Bio-Rad Laboratories Inc., Cl. B ............ 11,100 15,306 ------------ ------------ METALS AND MINING -- 0.3% 25,000 Freeport-McMoRan Copper & Gold Inc., 7.000% Cv. Pfd. .. 503,515 708,250 ------------ ------------ PUBLISHING -- 0.0% 1,504 News Corp. Ltd., Pfd., ADR ........ 29,106 41,044 ------------ ------------ SPECIALTY CHEMICALS -- 0.0% 5,000 Hercules Trust I, 9.420% Pfd. ...... 111,930 124,000 ------------ ------------ TELECOMMUNICATIONS -- 2.6% 33,000 Cincinnati Bell Inc., 6.750% Cv. Pfd., Ser. B ........... 918,894 1,320,000 40,000 Citizens Communications Co., 5.000% Cv. Pfd. .. 1,869,091 1,996,000 32,000 CSC Holdings Inc., 11.125% Cv. Pfd., Ser. M ........... 1,335,000 3,356,160 ------------ ------------ 4,122,985 6,672,160 ------------ ------------ TOTAL PREFERRED STOCKS ........... 12,213,515 15,372,248 ------------ ------------ WARRANTS -- 0.2% BUSINESS SERVICES -- 0.2% 250,000 GP Strategies Corp., Expires 08/14/08+ (c) .... 637,065 637,065 ------------ ------------ PRINCIPAL AMOUNT --------- CORPORATE BONDS -- 4.4% AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.8% $1,400,000 GenCorp Inc., Sub. Deb. Cv., 5.750%, 04/15/07 . 1,318,428 1,293,250 800,000 Standard Motor Products Inc., Sub. Deb. Cv., 6.750%, 07/15/09 . 640,049 706,000 100,000 Tenneco Automotive Inc., 11.625%, 10/15/09 61,343 99,000 ------------ ------------ 2,019,820 2,098,250 ------------ ------------ BUSINESS SERVICES -- 0.5% 100,000 BBN Corp., Sub. Deb. Cv., 6.000%, 04/01/12+ (a)(c) . 97,500 0 2,000,000 GP Strategies Corp., Sub. Deb., 6.000%, 08/14/08 (c) ..... 1,374,583 1,362,935 ------------ ------------ 1,472,083 1,362,935 ------------ ------------ PRINCIPAL MARKET AMOUNT COST VALUE --------- ---- ------ CABLE -- 0.5% $1,500,000 Charter Communications Inc., Cv., 4.750%, 06/01/06 .$ 910,491 $ 1,290,000 ------------ ------------ ELECTRONICS -- 1.3% 1,800,000 Agere Systems Inc., Sub. Deb. Cv., 6.500%, 12/15/09 . 1,652,028 2,333,250 1,100,000 Oak Industries Inc., Sub. Deb. Cv., 4.875%, 03/01/08 . 774,138 1,049,125 ------------ ------------ 2,426,166 3,382,375 ------------ ------------ ENERGY AND UTILITIES -- 0.4% 1,600,000 Mirant Corp., Sub. Deb. Cv., 2.500%, 06/15/21+ (a) .... 1,193,786 864,000 ------------ ------------ FOOD AND BEVERAGE -- 0.1% 100,000 Parmalat Capital, Cv., 1.000%, 12/31/05 . 117,578 133,341 100,000 Parmalat Netherlands BV, Cv., 0.875%, 06/30/21 . 110,528 127,227 ------------ ------------ 228,106 260,568 ------------ ------------ HEALTH CARE -- 0.8% 2,000,000 IVAX Corp., Sub. Deb. Cv., 5.500%, 05/15/07 . 1,789,291 2,050,000 200,000 Twin Laboratories Inc., Sub. Deb. Cv., 10.250%, 05/15/06 95,572 113,000 ------------ ------------ 1,884,863 2,163,000 ------------ ------------ TELECOMMUNICATIONS -- 0.0% 200,000 Williams Comm Group Inc., Escrow, 10.875%, 10/01/09 (a)(c) .. 0 0 ------------ ------------ TOTAL CORPORATE BONDS ............ 10,135,315 11,421,128 ------------ ------------ U.S. GOVERNMENT OBLIGATIONS -- 1.6% 4,217,000 U.S. Treasury Bills, 0.845% to 0.865%++, 10/30/03 to 11/28/03 ......... 4,211,436 4,211,436 ------------ ------------ TOTAL INVESTMENTS -- 99.9% ............$230,854,636 261,408,334 ============ OTHER ASSETS AND LIABILITIES (NET) -- 0.1% ..... 368,823 ------------ NET ASSETS -- 100.0% ............$261,777,157 ============ ----------------- (a) Security in default. (b) Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At September 30, 2003, the market value of Rule 144A securities amounted to $1,020,000 or 0.39% of total net assets. (c) Securities fair valued under procedures established by the Board of Directors. + Non-income producing security. ++ Represents annualized yield at date of purchase. ADR - American Depository Receipt. CVO - Contingent Value Obligation. See accompanying notes to financial statements. 8 THE GABELLI EQUITY INCOME FUND STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2003 -------------------------------------------------------------------------------- ASSETS: Investments, at value (Cost $230,854,636) ....... $261,408,334 Cash and foreign currency, at value (Cost $3,489) 3,571 Dividends and interest receivable ............... 882,039 Receivable for investments sold ................. 363,925 Receivable for capital shares sold .............. 1,136,358 Other assets .................................... 3,021 ------------ TOTAL ASSETS .................................... 263,797,248 ------------ LIABILITIES: Payable for investments purchased ............... 1,307,418 Payable for capital shares redeemed ............. 272,840 Payable for investment advisory fees ............ 217,028 Payable for distribution fees ................... 54,257 Payable for shareholder communication fees ...... 26,625 Payable for shareholder services fees ........... 64,100 Distribution payable ............................ 50 Other accrued expenses .......................... 77,773 ------------ TOTAL LIABILITIES ............................... 2,020,091 ------------ NET ASSETS applicable to 17,929,416 shares outstanding ............................ $261,777,157 ============ NET ASSETS CONSIST OF: Capital stock, at par value ..................... $17,929 Additional paid-in capital ...................... 232,287,843 Accumulated net investment income ............... 672,481 Accumulated net realized loss on investments and foreign currency transactions ............. (1,755,511) Net unrealized appreciation on investments and foreign currency transactions ............. 30,554,415 ------------ TOTAL NET ASSETS ................................ $261,777,157 ============ NET ASSET VALUE, offering and redemption price per share ($261,777,157 (DIVIDE) 17,929,416 shares outstanding; unlimited number of shares authorized of $0.001 par value) $14.60 ====== STATEMENT OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 2003 -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends (net of foreign taxes of $128,175) ..... $ 7,197,324 Interest ......................................... 1,260,850 ----------- TOTAL INVESTMENT INCOME .......................... 8,458,174 ----------- EXPENSES: Investment advisory fees ......................... 2,360,531 Distribution fees ................................ 590,133 Shareholder services fees ........................ 244,745 Custodian fees ................................... 77,705 Shareholder communications expenses .............. 71,825 Registration fees ................................ 53,708 Legal and audit fees ............................. 46,226 Directors' fees .................................. 20,898 Interest expenses ................................ 12,635 Miscellaneous expenses ........................... 47,370 ----------- TOTAL EXPENSES ................................... 3,525,776 ----------- NET INVESTMENT INCOME ............................ 4,932,398 ----------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized loss on investments and foreign currency transactions .................. (1,080,553) Net change in unrealized appreciation/depreciation on investments and foreign currency transactions 47,288,390 ----------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS ................................... 46,207,837 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................ $51,140,235 =========== STATEMENT OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED SEPTEMBER 30, 2003 SEPTEMBER 30, 2002 ------------------ ------------------ OPERATIONS: Net investment income ........................................................ $ 4,932,398 $ 2,810,808 Net realized loss on investments and foreign currency transactions ........... (1,080,553) (385,184) Net change in unrealized appreciation/depreciation on investments and foreign currency transactions .......................................... 47,288,390 (26,141,739) ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .............. 51,140,235 (23,716,115) ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Net investment income ........................................................ (4,398,932) (2,790,101) Net realized short-term gain on investments .................................. -- (265,279) Net realized long-term gain on investments ................................... -- (1,408,019) ------------ ------------ TOTAL DISTRIBUTIONS TO SHAREHOLDERS .......................................... (4,398,932) (4,463,399) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Net increase in net assets from capital share transactions ................... 52,098,140 69,618,289 ------------ ------------ NET INCREASE IN NET ASSETS ................................................... 98,839,443 41,438,775 NET ASSETS: Beginning of period .......................................................... 162,937,714 121,498,939 ------------ ------------ End of period (including undistributed net investment income of $672,481 and $20,456, respectively) ........................................ $261,777,157 $162,937,714 ============ ============
See accompanying notes to financial statements. 9 THE GABELLI EQUITY INCOME FUND NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 1. ORGANIZATION. The Gabelli Equity Income Fund (the "Fund") is a series of Gabelli Equity Series Funds, Inc. (the "Corporation"), which was organized on July 25, 1991 as a Maryland corporation. The Fund is a diversified, open-end management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), and one of three separately managed portfolios (collectively, the "Portfolios") of the Corporation, each with four separate classes of shares known as Class AAA, Class A, Class B and Class C. Currently, only Class AAA Shares are offered to the public. The Fund's primary objective is to seek a high level of total return with an emphasis on income. The Fund commenced investment operations on January 2, 1992. 2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. SECURITY VALUATION. Portfolio securities listed or traded on a nationally recognized securities exchange or traded in the U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a market's official closing price as of the close of business on the day the securities are being valued. If there were no sales that day, the security is valued at the average of the closing bid and asked prices or, if there were no asked prices quoted on that day, then the security is valued at the closing bid price on that day. All other portfolio securities for which over-the-counter market quotations are readily available are valued at the latest average of the bid and asked prices. If there were no asked prices quoted on that day, then the security is valued at the closing bid price. Portfolio securities traded on more than one national securities exchange or market are valued according to the broadest and most representative market, as determined by Gabelli Funds, LLC (the "Adviser"). Portfolio securities primarily traded on foreign markets are generally valued at the preceding closing values of such securities on their respective exchanges or if, after the close, market conditions change significantly, certain foreign securities may be fair valued pursuant to procedures established by the Board of Directors. Securities and assets for which market quotations are not readily available are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Board of Directors. Short-term debt securities with remaining maturities of 60 days or less are valued at amortized cost, unless the Board of Directors determines such does not reflect the securities' fair value, in which case these securities will be valued at their fair value as determined by the Board of Directors. Debt instruments having a maturity greater than 60 days are valued at the latest average of the bid and asked prices obtained from a pricing service approved by the Board of Directors, or a dealer maintaining an active market in those securities. Options are valued at the last sale price on the exchange on which they are listed. If no sales of such options have taken place that day, they will be valued at the mean between their closing bid and asked prices. REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with primary government securities dealers recognized by the Federal Reserve Board, with member banks of the Federal Reserve System or with other brokers or dealers that meet credit guidelines established by the Adviser and reviewed by the Board of Directors. Under the terms of a typical repurchase agreement, the Fund takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the Fund to resell, the obligation at an agreed-upon price and time, thereby determining the yield during the Fund's holding period. The Fund will always receive and maintain securities as collateral whose market value, including accrued interest, will be at least equal to 100% of the dollar amount invested by the Fund in each agreement. The Fund will make payment for such 10 THE GABELLI EQUITY INCOME FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- securities only upon physical delivery or upon evidence of book entry transfer of the collateral to the account of the custodian. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to maintain the adequacy of the collateral. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. At September 30, 2003, there were no repurchase agreements. FUTURES CONTRACTS. The Fund may engage in futures contracts for the purpose of hedging against changes in the value of its portfolio securities and in the value of securities it intends to purchase. Upon entering into a futures contract, the Fund is required to deposit with the broker an amount of cash or cash equivalents equal to a certain percentage of the contract amount. This is known as the "initial margin". Subsequent payments ("variation margin") are made or received by the Fund each day, depending on the daily fluctuation of the value of the contract. The daily changes in the contract are included in unrealized gains or losses. The Fund recognizes a realized gain or loss when the contract is closed. At September 30, 2003, there were no open futures contracts. There are several risks in connection with the use of futures contracts as a hedging device. The change in value of future contracts primarily corresponds with the value of their underlying instruments, which may not correlate with the change in value of the hedged investments. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market. FORWARD FOREIGN EXCHANGE CONTRACTS. The Fund may engage in forward foreign exchange contracts for hedging a specific transaction with respect to either the currency in which the transaction is denominated or another currency as deemed appropriate by the Adviser. Forward foreign exchange contracts are valued at the forward rate and are marked-to-market daily. The change in market value is included in unrealized appreciation/depreciation on investments and foreign currency transactions. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. At September 30, 2003, there were no open forward foreign exchange contracts. The use of forward foreign exchange contracts does not eliminate fluctuations in the underlying prices of the Fund's portfolio securities, but it does establish a rate of exchange that can be achieved in the future. Although forward foreign exchange contracts limit the risk of loss due to a decline in the value of the hedged currency, they also limit any potential gain that might result should the value of the currency increase. In addition, the Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. FOREIGN CURRENCY TRANSLATION. The books and records of the Fund are maintained in United States (U.S.) dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the exchange rates prevailing at the end of the period, and purchases and sales of investment securities, income and expenses are translated at the exchange rate prevailing on the respective dates of such transactions. Unrealized gains and losses, which result from changes in foreign exchange rates and/or changes in market prices of securities, have been included in unrealized appreciation/depreciation on investments and foreign currency transactions. Net realized foreign currency gains and losses resulting from changes in exchange rates include foreign currency gains and losses between trade date and settlement date on investment securities transactions, foreign currency transactions and the difference between the amounts of interest and dividends 11 THE GABELLI EQUITY INCOME FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- recorded on the books of the Fund and the amounts actually received. The portion of foreign currency gains and losses related to fluctuation in exchange rates between the initial trade date and subsequent sale trade date is included in realized gain/(loss) on investments. SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are accounted for on the trade date with realized gain or loss on investments determined by using the identified cost method. Interest income (including amortization of premium and accretion of discount) is recorded as earned. Dividend income is recorded on the ex-dividend date. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income distributions and long-term capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States. For fiscal year ended September 30, 2003, the tax character of distributions paid does not materially differ from accounting principles generally accepted in the United States. For the fiscal year ended September 30, 2003, reclassifications were made to increase accumulated net investment income for $118,559 and increase accumulated net realized loss on investments for $111,659, with an offsetting adjustment to additional paid-in capital. EXPENSES. Certain administrative expenses are common to, and allocated among, the Portfolios. Such allocations are made on the basis of each Portfolio's average net assets or other criteria directly affecting the expenses as determined by the Adviser. PROVISION FOR INCOME TAXES. The Fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. As a result, a Federal income tax provision is not required. As of September 30, 2003, the components of accumulated earnings/(losses) on a tax basis were as follows: Undistributed ordinary income ....................... $ 714,701 Post-October losses ................................. (249,013) Capital loss carryforward ........................... (478,901) Net unrealized appreciation ......................... 29,520,445 Other temporary differences ......................... (35,847) ----------- Total accumulated earnings .......................... $29,471,385 =========== The Fund has a capital loss carryforward for Federal income tax purposes at September 30, 2003 of $478,901 which is available through 2011. Dividends and interest from non-U.S. sources received by the Fund are generally subject to non-U.S. withholding taxes at rates ranging up to 30%. Such withholding taxes may be reduced or eliminated under the terms of applicable U.S. income tax treaties, and the Fund intends to undertake any procedural steps required to claim the benefits of such treaties. The difference between book and tax basis undistributed ordinary income is primarily due to the accrual of defaulted interest for tax purposes. The difference between book and tax basis unrealized appreciation is primarily due to deferral of losses from wash sales for tax purposes. 12 THE GABELLI EQUITY INCOME FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 3. INVESTMENT ADVISORY AGREEMENT. The Fund has entered into an investment advisory agreement (the "Advisory Agreement") with the Adviser which provides that the Fund will pay the Adviser a fee, computed daily and paid monthly, at the annual rate of 1.00% of the value of the Fund's average daily net assets. In accordance with the Advisory Agreement, the Adviser provides a continuous investment program for the Fund's portfolio, oversees the administration of all aspects of the Fund's business and affairs and pays the compensation of all Officers and Directors of the Fund who are its affiliates. 4. DISTRIBUTION PLAN. The Fund's Board of Directors has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. For the fiscal year ended September 30, 2003, the Fund incurred distribution costs payable to Gabelli & Company, Inc., an affiliate of the Adviser, of $590,133, or 0.25% of average daily net assets, the annual limitation under the Plan. Such payments are accrued daily and paid monthly. 5. PORTFOLIO SECURITIES. Purchases and sales of securities for the fiscal year ended September 30, 2003, other than short term securities, aggregated $129,728,197 and $61,035,152, respectively. 6. TRANSACTIONS WITH AFFILIATES. During the fiscal year ended September 30, 2003, the Fund paid brokerage commissions of $230,467 to Gabelli & Company, Inc. and its affiliates. The cost of calculating the Fund's net asset value per share is a Fund expense pursuant to the Investment Advisory Agreement between the Fund and Gabelli Funds, LLC (the "Adviser"). During fiscal 2003, the Fund reimbursed the Adviser $34,800 in connection with the cost of computing the Fund's net asset value. 7. LINE OF CREDIT. The Fund has access to an unsecured line of credit up to $25,000,000 from the custodian for temporary borrowing purposes. Borrowings under this arrangement bear interest at 0.75% above the Federal Funds rate on outstanding balances. The average daily amount of borrowings within the year ended September 30, 2003 was $517,409 with a related weighted average interest rate of 1.89%. The maximum amount borrowed at any time during the year ended September 30, 2003 was $8,074,000. 8. CAPITAL STOCK TRANSACTIONS. Transactions in shares of capital stock were as follows:
YEAR ENDED YEAR ENDED SEPTEMBER 30, 2003 SEPTEMBER 30, 2002 ----------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT ----------- ------------- ---------- ------------ Shares sold ........................ 14,773,776 $ 197,502,549 8,239,851 $115,719,997 Shares issued upon reinvestment of dividends ..................... 292,370 4,080,708 302,700 4,184,306 Shares redeemed .................... (10,797,815) (149,485,117) (3,634,380) (50,286,014) ----------- ------------- ---------- ------------ Net increase ....................... 4,268,331 $ 52,098,140 4,908,171 $ 69,618,289 =========== ============= ========== ============
9. FOR FEDERAL TAX PURPOSES. Aggregate cost .....................$231,887,889 ============ Gross unrealized appreciation ......$ 38,522,140 Gross unrealized depreciation ...... (9,001,695) ------------ Net unrealized appreciation ........$ 29,520,445 ============ 13 THE GABELLI EQUITY INCOME FUND FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- Selected data for a share of capital stock outstanding throughout each period:
YEAR ENDED SEPTEMBER 30, ----------------------------------------------------------- 2003 2002 2001 2000 1999 --------- -------- -------- -------- ------- OPERATING PERFORMANCE: Net asset value, beginning of period .................. $ 11.93 $ 13.88 $ 16.35 $ 17.58 $ 15.97 -------- -------- -------- ------- ------- Net investment income ................................. 0.28 0.23 0.25 0.46 0.23 Net realized and unrealized gain (loss) on investments ...................................... 2.64 (1.79) (0.28) 0.81 2.82 -------- -------- -------- ------- ------- Total from investment operations ...................... 2.92 (1.56) (0.03) 1.27 3.05 -------- -------- -------- ------- ------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income ................................. (0.25) (0.23) (0.36) (0.36) (0.22) Net realized gain on investments ...................... -- (0.16) (2.08) (2.14) (1.22) -------- -------- -------- ------- ------- Total distributions ................................... (0.25) (0.39) (2.44) (2.50) (1.44) -------- -------- -------- ------- ------- NET ASSET VALUE, END OF PERIOD ........................ $ 14.60 $ 11.93 $ 13.88 $ 16.35 $ 17.58 ======== ======== ======== ======= ======= Total return+ ......................................... 24.59% (11.58)% (0.43)% 8.41% 19.82% ======== ======== ======== ======= ======= RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA: Net assets, end of period (in 000's) .................. $261,777 $162,938 $121,499 $89,164 $92,111 Ratio of net investment income to average net assets ............................... 2.09% 1.75% 1.65% 2.85% 1.32% Ratio of operating expenses to average net assets ............................... 1.49%(a) 1.50% 1.55% 1.66%(a) 1.60% Portfolio turnover rate ............................... 27% 12% 41% 33% 39%
--------------------- + Total return represents aggregate total return of a hypothetical $1,000 investment at the beginning of the period and sold at the end of the period including reinvestment of dividends. (a) The Fund incurred interest expense during the years ended September 30, 2003 and 2000. If interest expense had not been incurred, the ratio of operating expenses to average net assets would have been 1.49% and 1.61%, respectively. See accompanying notes to financial statements. 14 THE GABELLI EQUITY INCOME FUND REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS -------------------------------------------------------------------------------- To the Shareholders and Board of Directors of The Gabelli Equity Income Fund We have audited the accompanying statements of assets and liabilities, including the portfolio of investments, of The Gabelli Equity Income Fund (the "Fund"), a series of the Gabelli Equity Series Funds, Inc., as of September 30, 2003 and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of September 30, 2003 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Gabelli Equity Income Fund at September 30, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States. /S/ ERNST & YOUNG LLP New York, New York November 7, 2003 -------------------------------------------------------------------------------- 2003 TAX NOTICE TO SHAREHOLDERS (Unaudited) For the fiscal year ended September 30, 2003, the Fund paid to shareholders ordinary income dividends (comprised of net investment income totaling $0.250 per share). For the fiscal year ended September 30, 2003, 100% of the ordinary income dividend qualifies for the dividend received deduction available to corporations. An estimate of qualified dividend income of $4,932,398 was received by the Fund through September 30, 2003 that qualifies for a reduced tax rate pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003. U.S. GOVERNMENT INCOME: The percentage of the ordinary income dividend paid by the Fund during fiscal year 2003 which was derived from U.S. Treasury securities was 1.64%. Such income is exempt from state and local tax in all states. However, many states, including New York and California, allow a tax exemption for a portion of the income earned only if a mutual fund has invested at least 50% of its assets at the end of each quarter of the Fund's fiscal year in U.S. Government securities. The Gabelli Equity Income Fund did not meet this strict requirement in 2003. Due to the diversity in state and local tax law, it is recommended that you consult your personal tax advisor as to the applicability of the information provided to your specific situation. -------------------------------------------------------------------------------- 15 THE GABELLI EQUITY INCOME FUND ADDITIONAL FUND INFORMATION (UNAUDITED) -------------------------------------------------------------------------------- The business and affairs of the Fund are managed under the direction of the Fund's Board of Directors. Information pertaining to the Directors and officers of the Fund is set forth below. The Fund's Statement of Additional Information includes additional information about The Gabelli Equity Income Fund's Directors and is available, without charge, upon request, by calling 1-800-GABELLI (1-800-422-3554) or by writing to The Gabelli Equity Income Fund at One Corporate Center, Rye, NY 10580-1422.
TERM OF NUMBER OF NAME, POSITION(S) OFFICE AND FUNDS IN FUND ADDRESS 1 LENGTH OF COMPLEX OVERSEEN PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS AND AGE TIME SERVED 2 BY DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 3 ----------------- ------------- ---------------- ----------------------- ------------------- INTERESTED DIRECTORS 4: MARIO J. GABELLI Since 1991 23 Chairman of the Board and Chief Executive Director of Morgan Group Director, President and Officer of Gabelli Asset Management Inc. and Holdings, Inc. (transportation Chief Investment Officer Chief Investment Officer of Gabelli Funds, services); Vice Chairman of Age: 61 LLC and GAMCO Investors, Inc.; Vice Chairman Lynch Corporation (diversified and Chief Executive Officer of Lynch Interactive manufacturing) Corporation (multimedia and services) JOHN D. GABELLI Since 1991 10 Senior Vice President of Gabelli & Company, -- Director Inc.; Director of Gabelli Advisers, Inc. Age: 59 KARL OTTO POHL Since 1992 32 Member of the Shareholder Committee of Sal Director of Gabelli Asset Director Oppenheim Jr. & Cie (private investment Management Inc. (investment Age: 73 bank); Former President of the management); Chairman, Deutsche Bundesbank and Chairman of its Incentive Capital and Incentive Central Bank Council (1980-1991) Asset Management (Zurich); Director at Sal Oppenheim Jr. & Cie, Zurich NON-INTERESTED DIRECTORS: ANTHONY J. COLAVITA Since 1991 34 President and Attorney at Law in the law firm -- Director of Anthony J. Colavita, P.C. Age: 67 VINCENT D. ENRIGHT Since 1991 12 Former Senior Vice President and Chief Financial -- Director Officer of KeySpan Energy Corporation Age: 59 ROBERT J. MORRISSEY Since 1991 10 Partner in the law firm of Morrissey, Hawkins -- Director & Lynch Age: 64
16 THE GABELLI EQUITY INCOME FUND ADDITIONAL FUND INFORMATION (UNAUDITED) (CONTINUED) --------------------------------------------------------------------------------
TERM OF NUMBER OF NAME, POSITION(S) OFFICE AND FUNDS IN FUND ADDRESS 1 LENGTH OF COMPLEX OVERSEEN PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS AND AGE TIME SERVED 2 BY DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 3 ----------------- ------------- ---------------- ----------------------- ------------------- NON-INTERESTED DIRECTORS (CONTINUED): ANTHONY R. PUSTORINO Since 1991 17 Certified Public Accountant; Professor -- Director Emeritus, Pace University Age: 78 ANTHONIE C. VAN EKRIS Since 1991 19 Managing Director of BALMAC Director of Aurado Director International, Inc. Exploration Inc. Age: 69 SALVATORE J. ZIZZA Since 2001 10 Chairman, Hallmark Electrical Suppliers Corp.; Director of Hollis Eden Director Former Executive Vice President of FMG Group Pharmaceuticals Age: 57 (OTC), a healthcare provider; Former President and Chief Executive Officer of the Lehigh Group Inc., an interior construction company, through 1997 OFFICERS: BRUCE N. ALPERT Since 1991 -- Executive Vice President and Chief Operating -- President Officer of Gabelli Funds, LLC since 1988 and Age: 51 an officer of all mutual funds advised by Gabelli Funds, LLC and its affiliates. Director and President of Gabelli Advisers, Inc. GUS A. COUTSOUROS Since 2000 -- Vice President and Chief Financial Officer of Gabelli -- Vice President and Funds, LLC since 1998 and an officer of all mutual Treasurer funds advised by Gabelli Funds, LLC and its affiliates Age: 41 JAMES E. MCKEE Since 1995 -- Vice President, General Counsel and Secretary -- Secretary of Gabelli Asset Management Inc. since 1999 Age: 40 and GAMCO Investors, Inc. since 1993; Secretary of all mutual funds advised by Gabelli Advisers, Inc. and Gabelli Funds, LLC
----------------- 1 Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise noted. 2 Each Director will hold office for an indefinite term until the earliest of (i) the next meeting of shareholders if any, called for the purpose of considering the election or re-election of such Director and until the election and qualification of his or her successor, if any, elected at such meeting, or (ii) the date a Director resigns or retires, or a Director is removed by the Board of Directors or shareholders, in accordance with the Fund's By-Laws and Articles of Incorporation. 3 This column includes only directorships of companies required to report to the SEC under the Securities and Exchange Act of 1934 (i.e. public companies) or other investment companies registered under the 1940 Act. 4 "Interested person" of the Fund as defined in the Investment Company Act of 1940. Messrs. Gabelli, Gabelli and Pohl are each considered an "interested person" because of their affiliation with Gabelli Funds, LLC which acts as the Fund's investment adviser. Mario J. Gabelli and John D. Gabelli are brothers. 17 GABELLI FAMILY OF FUNDS VALUE ________________________________________ GABELLI ASSET FUND Seeks to invest primarily in a diversified portfolio of common stocks selling at significant discounts to their private market value. The Fund's primary objective is growth of capital. (CLASS AAA-NO-LOAD) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA GABELLI BLUE CHIP VALUE FUND Seeks long term growth of capital through investment primarily in the common stocks of established companies which are temporarily out of favor. The fund's objective is to identify a catalyst or sequence of events that will return the company to a higher value. (CLASS AAA-NO-LOAD) PORTFOLIO MANAGER: BARBARA MARCIN, CFA GABELLI WESTWOOD EQUITY FUND Seeks to invest primarily in the common stock of well-seasoned companies that have recently reported positive earnings surprises and are trading below Westwood's proprietary growth rate estimates. The Fund's primary objective is capital appreciation. (MULTICLASS) PORTFOLIO MANAGER: SUSAN M. BYRNE FOCUSED VALUE ______________________________ GABELLI VALUE FUND Seeks to invest in securities of companies believed to be undervalued. The Fund's primary objective is long-term capital appreciation. (MULTICLASS) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA SMALL CAP VALUE ____________________________ GABELLI SMALL CAP FUND Seeks to invest primarily in common stock of smaller companies (market capitalizations less than $1 billion) believed to have rapid revenue and earnings growth potential. The Fund's primary objective is capital appreciation. (CLASS AAA-NO-LOAD) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA GABELLI WOODLAND SMALL CAP VALUE FUND Seeks to invest primarily in the common stocks of smaller companies (market capitalizations less than $1.5 billion) believed to be undervalued with shareholder oriented management teams that are employing strategies to grow the company's value. The Fund's primary objective is capital appreciation. (MULTICLASS) PORTFOLIO MANAGER: ELIZABETH M. LILLY, CFA GROWTH ______________________________________ GABELLI GROWTH FUND Seeks to invest primarily in large cap stocks believed to have favorable, yet undervalued, prospects for earnings growth. The Fund's primary objective is capital appreciation. (CLASS AAA-NO-LOAD) PORTFOLIO MANAGER: HOWARD F. WARD, CFA GABELLI INTERNATIONAL GROWTH FUND Seeks to invest in the equity securities of foreign issuers with long-term capital appreciation potential. The Fund offers investors global diversification. (MULTICLASS) PORTFOLIO MANAGER: CAESAR BRYAN AGGRESSIVE GROWTH _________________________ GABELLI GLOBAL GROWTH FUND Seeks capital appreciation through a disciplined investment program focusing on the globalization and interactivity of the world's marketplace. The Fund invests in companies at the forefront of accelerated growth. The Fund's primary objective is capital appreciation. (MULTICLASS) TEAM MANAGED MICRO-CAP ___________________________________ GABELLI WESTWOOD MIGHTY MITES(SM) FUND Seeks to invest in micro-cap companies that have market capitalizations of $300 million or less. The Fund's primary objective is long-term capital appreciation. (MULTICLASS) TEAM MANAGED EQUITY INCOME _______________________________ GABELLI EQUITY INCOME FUND Seeks to invest primarily in equity securities with above market average yields. The Fund pays monthly dividends and seeks a high level of total return with an emphasis on income. (CLASS AAA-NO-LOAD) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA GABELLI WESTWOOD BALANCED FUND Seeks to invest in a balanced and diversified portfolio of stocks and bonds. The Fund's primary objective is both capital appreciation and current income. (MULTICLASS) CO-PORTFOLIO MANAGERS: SUSAN M. BYRNE MARK FREEMAN, CFA GABELLI WESTWOOD REALTY FUND Seeks to invest in securities that are primarily engaged in or related to the real estate industry. The Fund's primary objective is long-term capital appreciation. (MULTICLASS) PORTFOLIO MANAGER: SUSAN M. BYRNE SPECIALTY EQUITY ____________________________ GABELLI GLOBAL CONVERTIBLE SECURITIES FUND Seeks to invest principally in bonds and preferred stocks which are convertible into common stock of foreign and domestic companies. The Fund's primary objective is total return through a combination of current income and capital appreciation. (MULTICLASS) TEAM MANAGED GABELLI GLOBAL OPPORTUNITY FUND Seeks to invest in common stock of companies which have rapid growth in revenues and earnings and potential for above average capital appreciation or are undervalued. The Fund's primary objective is capital appreciation. (MULTICLASS) TEAM MANAGED SECTOR ______________________________________ GABELLI GLOBAL TELECOMMUNICATIONS FUND Seeks to invest in telecommunications companies throughout the world - targeting undervalued companies with strong earnings and cash flow dynamics. The Fund's primary objective is capital appreciation. (MULTICLASS) TEAM MANAGED GABELLI GOLD FUND Seeks to invest in a global portfolio of equity securities of gold mining and related companies. The Fund's objective is long-term capital appreciation. Investment in gold stocks is considered speculative and is affected by a variety of world-wide economic, financial and political factors. (CLASS AAA-NO-LOAD) PORTFOLIO MANAGER: CAESAR BRYAN GABELLI UTILITIES FUND Seeks to provide a high level of total return through a combination of capital appreciation and current income. (CLASS AAA-NO-LOAD) TEAM MANAGED MERGER AND ARBITRAGE _____________________ GABELLI ABC FUND Seeks to invest in securities with attractive opportunities for appreciation or investment income. The Fund's primary objective is total return in various market conditions without excessive risk of capital loss. (NO-LOAD) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA CONTRARIAN_________________________________ Gabelli Mathers Fund Seeks long-term capital appreciation in various market conditions without excessive risk of capital loss. (CLASS AAA-NO-LOAD) PORTFOLIO MANAGER: HENRY VAN DER EB, CFA COMSTOCK CAPITAL VALUE FUND Seeks capital appreciation and current income. The Fund may use either long or short positions to achieve its objective. (MULTICLASS) PORTFOLIO MANAGER: MARTIN WEINER, CFA COMSTOCK STRATEGY FUND The Fund emphasizes investments in debt securities, which maximize total return in light of credit risk, interest rate risk, and the risk associated with the length of maturity of the debt instrument. (MULTICLASS) PORTFOLIO MANAGER: MARTIN WEINER, CFA QUANTITATIVE_________________________________ NED DAVIS RESEARCH ASSET ALLOCATION FUND Seeks to achieve returns greater then the weighted composite benchmark consisting of 60% in the S&P 500 Index and 40% in the Lehman Long Term U.S. Government Bond Index through a flexible asset allocation strategy. The Fund's primary objective is capital appreciation. (MULTICLASS) TEAM MANAGED SMALL CAP GROWTH __________________________ GABELLI WESTWOOD SMALLCAP EQUITY FUND Seeks to invest primarily in smaller capitalization equity securities - market caps of $1.5 billion or less. The Fund's primary objective is long-term capital appreciation. (MULTICLASS) CO-PORTFOLIO MANAGERS: CHRISTOPHER J. MACDONALD, CFA FIXED INCOME ________________________________ GABELLI WESTWOOD INTERMEDIATE BOND FUND Seeks to invest in a diversified portfolio of bonds with various maturities. The Fund's primary objective is total return. (MULTICLASS) PORTFOLIO MANAGER: MARK FREEMAN, CFA CASH MANAGEMENT-MONEY MARKET __________ GABELLI U.S. TREASURY MONEY MARKET FUND Seeks to invest exclusively in short-term U.S. Treasury securities. The Fund's primary objective is to provide high current income consistent with the preservation of principal and liquidity. (NO-LOAD) PORTFOLIO MANAGER: JUDITH A. RANERI THE TREASURER'S FUND Three money market portfolios designed to generate superior returns without compromising portfolio safety. U.S. Treasury Money Market seeks to invest in U.S. Treasury securities and repurchase agreements. Tax Exempt Money Market seeks to invest in municipal securities. Domestic Prime Money Market seeks to invest in prime quality, domestic money market instruments. (NO-LOAD) PORTFOLIO MANAGER: JUDITH A. RANERI THE GLOBAL FUNDS INVEST IN FOREIGN SECURITIES WHICH INVOLVE RISKS NOT ORDINARILY ASSOCIATED WITH INVESTMENTS IN DOMESTIC ISSUES, INCLUDING CURRENCY FLUCTUATION, ECONOMIC AND POLITICAL RISKS. AN INVESTMENT IN THE ABOVE MONEY MARKET FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY GOVERNMENT AGENCY. ALTHOUGH THE FUNDS SEEK TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUNDS. TO RECEIVE A PROSPECTUS, CALL 800-GABELLI (422-3554). THE PROSPECTUS GIVES A MORE COMPLETE DESCRIPTION OF THE FUND, INCLUDING FEES AND EXPENSES. READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY. Gabelli Equity Series Funds, Inc. THE GABELLI EQUITY INCOME FUND One Corporate Center Rye, New York 10580-1422 800-GABELLI 800-422-3554 FAX: 914-921-5118 WEBSITE: WWW.GABELLI.COM E-MAIL: INFO@GABELLI.COM Net Asset Value available daily by calling 800-GABELLI after 6:00 P.M. BOARD OF DIRECTORS Mario J. Gabelli, CFA Karl Otto Pohl CHAIRMAN AND CHIEF FORMER PRESIDENT INVESTMENT OFFICER DEUTSCHE BUNDESBANK GABELLI ASSET MANAGEMENT INC. Anthony J. Colavita Anthony R. Pustorino ATTORNEY-AT-LAW CERTIFIED PUBLIC ACCOUNTANT ANTHONY J. COLAVITA, P.C. PROFESSOR EMERITUS PACE UNIVERSITY Vincent D. Enright Anthonie C. van Ekris FORMER SENIOR VICE PRESIDENT MANAGING DIRECTOR AND CHIEF FINANCIAL OFFICER BALMAC INTERNATIONAL, INC. KEYSPAN ENERGY CORP. John D. Gabelli Salvatore J. Zizza SENIOR VICE PRESIDENT CHAIRMAN GABELLI & COMPANY, INC. HALLMARK ELECTRICAL SUPPLIES CORP. Robert J. Morrissey ATTORNEY-AT-LAW MORRISSEY, HAWKINS & LYNCH OFFICERS Bruce N. Alpert Gus Coutsouros PRESIDENT VICE PRESIDENT AND TREASURER James E. McKee SECRETARY DISTRIBUTOR Gabelli & Company, Inc. CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT State Street Bank and Trust Company LEGAL COUNSEL Skadden, Arps, Slate, Meagher & Flom LLP -------------------------------------------------------------------------------- This report is submitted for the general information of the shareholders of The Gabelli Equity Income Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. -------------------------------------------------------------------------------- GAB444Q303SR [GRAPHIC OMITTED] PICTURE OF MARIO GABELLI THE GABELLI EQUITY INCOME FUND ANNUAL REPORT SEPTEMBER 30, 2003 THE GABELLI WOODLAND SMALL CAP VALUE FUND ANNUAL REPORT SEPTEMBER 30, 2003 TO OUR SHAREHOLDERS, In many of our Funds' June 30, 2003 shareholder reports, we noted a change in the way we provide the portfolio manager's commentary to shareholders of our Funds. Our shareholder reports have typically contained commentary on each portfolio manager's assessment of the stock market, individual stocks and how economic events affect their thinking in managing a specific Fund. We have always provided details about performance and presented returns, both good and bad, hopefully in a clear and concise fashion. These comments have been included as part of each Fund's quarterly, semi-annual, and annual financial statements. The Sarbanes-Oxley Act's new corporate governance regulations now require a Fund's principal executive and financial officers to certify the entire contents of the semi-annual and annual shareholder reports in a filing with the Securities and Exchange Commission on Form N-CSR. This certification covers the portfolio manager's commentary and subjective opinions if they are attached to or a part of the financial statements. Rather than ask our portfolio managers to eliminate their opinions and/or restrict their commentary to historical facts only, we separated their commentary from the financial statements and investment portfolio and sent it separately. We will continue to mail the portfolio manager's commentary separately from the investment portfolio to ensure that its content is complete and unrestricted. Our Annual Reports will be mailed separately and include the performance of the Fund with a description of the factors affecting the performance during the past year, along with the financial statements and the investment portfolio. Both the commentary and the financial statements, including the portfolio of investments, are also available on our website at www.gabelli.com/funds. We trust that you understand that our approach is an unintended consequence of the ever-increasing regulatory requirements affecting public companies generally. We hope the specific certification requirements of these new regulations will be modified as they relate to mutual funds, since investment companies have different corporate structures and objectives than other public companies. Sincerely yours, /S/ BRUCE N. ALPERT Bruce N. Alpert Chief Operating Officer Gabelli Funds, LLC October 17, 2003 PERFORMANCE DISCUSSION The Gabelli Woodland Small Cap Value Fund (the "Fund") gained 5.69% during the third quarter versus a gain of 9.08% for the Russell 2000 Index. From December 31, 2002, which is the Fund's commencement of operations, through September 30, 2003, the Fund is up 5.80% compared to a gain of 28.58% for the Russell 2000 Index during the same period. We previously talked about the current underlying performance drivers of the Russell 2000 Index (non-earnings companies and micro-caps); this past quarter still reflects the same underlying drivers. Investors are currently flocking to micro-cap and non-earning companies in an effort to add beta and keep up with the indices. A wide chasm of performance has developed in the small-cap segment of the market between the largest and smallest companies as well as between companies with positive earnings versus the companies with no earnings. According to Steve DeSanctis of Prudential Financial, the stocks in the fifth quintile (the smallest stocks) of the Russell 2000 Index were up 14.0% in the September quarter and are up 48.0% year-to-date while those in the first quintile (the largest small cap stocks) were only up 7.0% for the quarter and 21.0% year-to-date. To put this in further perspective, stocks with market caps greater than $1 billion (the Fund's weighted-average market cap is $1.3 billion) averaged a 5.6% return in the quarter and 18.3% year-to-date compared to stocks with market caps less than $500 million, which rose 12.4% during the quarter and 38.0% year-to-date. If we excluded the stocks with market caps below $500 million from the Russell 2000 Index its return would have been 4.7% for the quarter and 15.2% year-to-date. DeSanctis performed a similar analysis on the performance of stocks with positive earnings versus those with no earnings. The non-earners appreciated 14.0% during the quarter and 51.0% year-to-date compared to an increase of 8.1% for the quarter and 24.4% year-to-date for stocks with positive earnings. Another interesting data point is that stocks with prices less than $5 per share increased 25.0% during the quarter and are up an astonishing 76.9% year-to-date, while those with stock prices between $10 and $20 per share were up 9.4% for the quarter and 29.2% year-to-date, and stocks with prices greater than $20 per share only increased 6.5% during the quarter and 18.0% year-to-date. Our top three performing stocks this past quarter were Gaylord Entertainment, CNS Inc. and Cytyc Corporation. Gaylord Entertainment rose 25% in the quarter as the travel and lodging sector continued to recover. CNS, Inc. is a recent portfolio addition and rose 30% during the quarter. The company is best known for its Breathe Right nasal strips. Just last quarter Cytyc was one of the weakest performers in the portfolio due to investor concern over a new entrant into the Pap smear market and the potential impact on Cytyc's pricing and market share. In the most recent quarter the stock rose 42% and the company demonstrated its dominance as the market leader through increased share gains with the laboratories. Three of the weaker performers during the quarter included Danka Business Systems, Insurance Auto Auctions, and Key Energy Services. Both Danka and Insurance Auto Auctions are in the process of cumbersome Enterprise Resource Planning (ERP) system implementations and have had some problems, delays, and cost overruns that have disappointed investors and hampered earnings in the short-run. Key Energy is an on-shore provider of oil and gas well services in the United States. The company has a dominant 40% market share in the domestic market and has been the industry consolidator for the past couple years. 2 During this last quarter, five positions were eliminated: Station Casinos, Dillard's, ServiceMaster, Northwest Airlines and BMC Industries. Station Casinos was a very successful investment that earned well over 100% for us in less than one year. We sold our position because the stock price reached what we felt was a fair value for the business. With Dillard's and ServiceMaster, we lost confidence in management's ability to grow revenues and earnings and there were no visible catalysts in the foreseeable future. Finally, Northwest Airlines and BMC Industries were sold because both companies have the headwind of significant debt burdens going against them combined with very tough industry conditions. The Fund initiated several new positions: Park-Ohio Holdings, Jarden Corp., TBC Corp., ValueVision Media, Journal Communications, La-Z Boy, PepsiAmericas, Ionics, Stellent, American Axle & Manufacturing, and Payless Shoesource. INVESTMENT RESULTS (CLASS AAA SHARES)(A) ------------------------------------------------------------------------------- Calendar Quarter ---------------------------------------- 1ST 2ND 3RD 4TH YEAR --- --- --- --- ---- 2003: Net Asset Value .... $9.20 $10.01 $10.58 -- -- Total Return ....... (8.0)%(b) 8.8% 5.7% -- -- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- RETURNS THROUGH SEPTEMBER 30, 2003 (A) -------------------------------------- SINCE QUARTER INCEPTION (B) ------- ------------- Gabelli Woodland Small Cap Value Fund Class AAA ...... 5.69% 5.80% Russell 2000 Index ................................... 9.08% 28.58% ------------------------------------------------------------------------------- (a) Returns represent past performance and do not guarantee future results. Performance for a short period of time does not purport to represent long-term results. Total returns and average annual returns reflect changes in share price and reinvestment of dividends and are net of expenses. Investment return and the principal value of an investment will fluctuate. When shares are redeemed, they may be worth more or less than their original cost. The Russell 2000 Index is an unmanaged indicator of stock market performance. Investing in small capitalization securities involves special challenges because these securities may trade less frequently and experience more abrupt price movements than large capitalization securities. (b) From commencement of investment operations on December 31, 2002. -------------------------------------------------------------------------------- WWW.GABELLI.COM Please visit us on the Internet. Our homepage at www.gabelli.com contains information about Gabelli Asset Management Inc., the Gabelli Mutual Funds, IRAs, 401(k)s, quarterly reports, closing prices and other current news. You can send us e-mail at info@gabelli.com. In our efforts to bring to shareholders more timely portfolio information, Gabelli Funds' portfolio managers regularly participate in chat sessions on our website. Please visit www.gabelli.com for the specific dates and times of all of our upcoming chats. All chat sessions start at 4:15 PM (Eastern Time). Please arrive early, as participation is limited. You may sign up for our e-mail alerts at www.gabelli.com and receive early notice of chat sessions, closing mutual fund prices, news events and media sightings. 3 THE GABELLI WOODLAND SMALL CAP VALUE FUND PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2003 -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ COMMON STOCKS -- 89.8% AEROSPACE -- 1.9% 960 Alliant Techsystems Inc.+ ..............$ 49,302 $ 46,128 ---------- ---------- AGRICULTURE -- 0.6% 650 Delta & Pine Land Co. 15,463 14,956 ---------- ---------- AUTOMOTIVE: PARTS AND ACCESSORIES -- 2.1% 730 American Axle & Manufacturing Holdings Inc.+ .............. 23,736 21,593 1,200 TBC Corp.+ ........... 26,847 30,060 ---------- ---------- 50,583 51,653 ---------- ---------- BUSINESS SERVICES -- 7.9% 3,280 Bowne & Co. Inc. ..... 39,161 49,036 3,760 Danka Business Systems plc, ADR+ .......... 15,851 9,107 1,380 Hon Industries Inc. .. 41,297 51,005 3,210 The Brink's Co. ...... 48,180 55,726 1,180 Viad Corp. ........... 25,177 28,178 ---------- ---------- 169,666 193,052 ---------- ---------- COMPUTER SOFTWARE AND SERVICES -- 4.0% 3,200 Intergraph Corp.+ .... 67,863 74,496 2,980 Stellent Inc.+ ....... 24,684 23,125 ---------- ---------- 92,547 97,621 ---------- ---------- CONSUMER PRODUCTS -- 9.8% 990 Alberto-Culver Co., Cl. A .............. 48,911 56,816 2,880 Brunswick Corp. ...... 67,831 73,958 900 Church & Dwight Co. Inc. ........... 29,042 31,491 2,220 CNS Inc. ............. 21,446 24,618 160 Jarden Corp.+ ........ 5,247 6,040 1,100 La-Z-Boy Inc. ........ 23,461 24,420 1,350 ValueVision Media Inc., Cl. A+ ............. 21,135 21,479 ---------- ---------- 217,073 238,822 ---------- ---------- CONSUMER SERVICES -- 4.0% 2,260 Dollar Thrifty Automotive Group Inc.+ ........ 41,052 51,347 4,060 Insurance Auto Auctions Inc.+ ..... 53,014 45,675 ---------- ---------- 94,066 97,022 ---------- ---------- DIVERSIFIED INDUSTRIAL -- 11.4% 1,470 Albany International Corp., Cl. A ............. 36,652 45,335 5,440 Apogee Enterprises Inc. ............... 56,732 56,141 1,420 Griffon Corp.+ ....... 21,370 25,503 2,700 Material Sciences Corp.+ ............. 27,399 27,594 170 Park-Ohio Holdings Corp.+ ............. 893 1,387 1,630 Pentair Inc. ......... 63,543 64,988 2,320 Texas Industries Inc. 49,782 57,072 ---------- ---------- 256,371 278,020 ---------- ---------- MARKET SHARES COST VALUE ------ ---- ------ ENERGY AND UTILITIES -- 5.2% 3,430 ALLETE Inc. ..........$ 84,103 $ 93,913 3,380 Key Energy Services Inc.+ .............. 34,676 32,617 ---------- ---------- 118,779 126,530 ---------- ---------- ENTERTAINMENT -- 3.0% 1,710 Hasbro Inc. .......... 29,985 31,943 4,150 Topps Co. Inc. ....... 37,072 40,462 ---------- ---------- 67,057 72,405 ---------- ---------- EQUIPMENT AND SUPPLIES -- 2.8% 1,890 Tennant Co. .......... 66,769 69,628 ---------- ---------- FINANCIAL SERVICES -- 3.0% 1,520 TCF Financial Corp. .. 61,463 72,884 ---------- ---------- FOOD AND BEVERAGE -- 8.5% 5,280 Del Monte Foods Co.+ . 46,126 45,989 620 IHOP Corp. ........... 18,648 20,367 1,180 Ionics Inc.+ ......... 30,944 28,863 1,740 PepsiAmericas Inc. ... 25,027 25,212 2,900 Triarc Companies Inc. 23,906 29,203 5,720 Triarc Companies Inc., Cl. B .............. 56,300 59,488 ---------- ---------- 200,951 209,122 ---------- ---------- HEALTH CARE -- 8.6% 2,700 Apogent Technologies Inc.+ .............. 51,143 56,322 1,220 Apria Healthcare Group Inc.+ ........ 29,827 33,403 3,090 Cytyc Corp.+ ......... 34,847 46,474 1,380 Laboratory Corporation of America Holdings+ .. 41,323 39,606 4,290 Orthodontic Centers of America Inc.+ ...... 33,773 33,805 ---------- ---------- 190,913 209,610 ---------- ---------- HOTELS AND GAMING -- 3.1% 3,100 Gaylord Entertainment Co.+ ............... 67,516 76,105 ---------- ---------- PUBLISHING -- 5.0% 6,990 Hollinger International Inc. ............... 73,213 86,326 80 Journal Communications Inc., Cl. A+ ....... 1,200 1,324 1,210 Scholastic Corp.+ .... 37,021 34,836 ---------- ---------- 111,434 122,486 ---------- ---------- RETAIL -- 5.8% 2,950 Cole National Corp.+ . 34,086 36,757 2,980 Office Depot Inc.+ ... 41,584 41,869 1,790 Payless ShoeSource Inc.+ .............. 25,481 23,163 1,302 The Sports Authority Inc.+ .............. 31,970 40,961 ---------- ---------- 133,121 142,750 ---------- ---------- See accompanying notes to financial statements. 4 THE GABELLI WOODLAND SMALL CAP VALUE FUND PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2003 -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ COMMON STOCKS (CONTINUED) SPECIALTY CHEMICALS -- 3.1% 1,350 Cytec Industries Inc.+ ..............$ 46,319 $ 49,275 1,150 Fuller (H.B.) Co. .... 27,093 27,911 ---------- ---------- 73,412 77,186 ---------- ---------- TOTAL COMMON STOCKS .. 2,036,486 2,195,980 ---------- ---------- PRINCIPAL AMOUNT ---------- U.S. GOVERNMENT OBLIGATIONS -- 7.4% $182,000 U.S. Treasury Bills, 0.855% to 0.915%++, 10/09/03 to 12/26/03 ........... 181,821 181,824 ---------- ---------- TOTAL INVESTMENTS -- 97.2% ..............$2,218,307 2,377,804 ========== OTHER ASSETS AND LIABILITIES (NET) -- 2.8% .................. 67,251 ---------- NET ASSETS -- 100.0% ............. $2,445,055 ========== ---------------- For Federal tax purposes: Aggregate cost ................... $2,227,405 ========== Gross unrealized appreciation .... $ 192,053 Gross unrealized depreciation .... (41,654) ---------- Net unrealized appreciation ...... $ 150,399 ========== ---------------- + Non-income producing security. ++ Represents annualized yield at date of purchase. ADR - American Depository Receipt. See accompanying notes to financial statements. 5 THE GABELLI WOODLAND SMALL CAP VALUE FUND STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2003 -------------------------------------------------------------------------------- ASSETS: Investments, at value (Cost $2,218,307) ..... $2,377,804 Cash ........................................ 12,869 Dividends receivable ........................ 644 Receivable from Advisor ..................... 72,035 Other assets ................................ 14,820 ---------- TOTAL ASSETS ................................ 2,478,172 ---------- LIABILITIES: Payable for investments purchased ........... 7,231 Payable for distribution fees ............... 568 Payable for legal and audit fees ............ 15,051 Other accrued expenses ...................... 10,267 ---------- TOTAL LIABILITIES ........................... 33,117 ---------- NET ASSETS .................................. $2,445,055 ========== NET ASSETS CONSIST OF: Capital stock, at par value ................. $ 231 Additional paid-in capital .................. 2,294,425 Accumulated net realized loss on investments ............................ (9,098) Net unrealized appreciation on investments ............................ 159,497 ---------- TOTAL NET ASSETS ............................ $2,445,055 ========== SHARES OF BENEFICIAL INTEREST ($0.001 PAR VALUE): CLASS AAA: Net Asset Value, offering and redemption price per share (219,680 Shares outstanding) .... $10.58 ====== CLASS A: Net Asset Value, offering and redemption price per share (315 Shares outstanding) ........ $10.57 ====== Maximum sales charge ........................ 5.75% ====== Maximum offering price per share (NAV (DIVIDE) 0.9425, based on maximum sales charge of 5.75% of the offering price at September 30, 2003) $11.21 ====== CLASS B: Net Asset Value, offering and redemption price per share (10 Shares outstanding) ......... $10.59(a) ====== CLASS C: Net Asset Value and offering price per share (11,206 Shares outstanding) ............... $10.55(a) ====== STATEMENT OF OPERATIONS FOR THE PERIOD ENDED SEPTEMBER 30, 2003* -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends ................................... $ 8,575 Interest .................................... 1,261 --------- TOTAL INVESTMENT INCOME ..................... 9,836 --------- EXPENSES: Investment advisory fees .................... 9,547 Distribution fees ........................... 2,553 Amortization of offering expenses ........... 44,623 Custodian fees .............................. 28,000 Legal and audit fees ........................ 18,132 Registration fees ........................... 16,200 Shareholder services fees ................... 10,950 Shareholder communications expenses ......... 9,424 Directors' fees ............................. 50 Miscellaneous expenses ...................... 4,370 --------- TOTAL EXPENSES BEFORE FEES WAIVED AND EXPENSES REIMBURSED BY MANAGER ............ 143,849 --------- FEES WAIVED AND EXPENSES REIMBURSED BY MANAGER ................................ (124,599) --------- TOTAL EXPENSES -- NET ....................... 19,250 --------- NET INVESTMENT LOSS ......................... (9,414) --------- NET REALIZED AND UNREALIZED GAIN/ (LOSS) ON INVESTMENTS Net realized loss on investments ............ (586) Net change in unrealized appreciation on investments ............................ 159,497 --------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS ............................ 158,911 --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................... $ 149,497 ========= ------------------ * For the period December 31, 2002 (commencement of operations) through September 30, 2003. (a) Redemption price varies based on length of time held. See accompanying notes to financial statements. 6 THE GABELLI WOODLAND SMALL CAP VALUE FUND STATEMENT OF CHANGES IN NET ASSETS -------------------------------------------------------------------------------- PERIOD ENDED SEPTEMBER 30, 2003* ------------------- OPERATIONS: Net investment loss ...................................... $ (9,414) Net realized loss on investments ......................... (586) Net change in unrealized appreciation on investments ..... 159,497 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..... 149,497 ---------- CAPITAL SHARE TRANSACTIONS: Proceeds from shares issued Class AAA .............................................. 2,835,643 Class A ................................................ 2,926 Class B ................................................ 100 Class C ................................................ 113,807 ---------- 2,952,476 ---------- Cost of shares redeemed Class AAA .............................................. (656,918) ---------- Net increase in net assets from capital share transactions 2,295,558 ---------- NET INCREASE IN NET ASSETS ............................... 2,445,055 NET ASSETS: Beginning of period ...................................... -- ---------- End of period ............................................ $2,445,055 ========== -------------------- *For the period December 31, 2002 (commencement of operations) through September 30, 2003. NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 1. ORGANIZATION. The Gabelli Woodland Small Cap Value Fund (the "Fund") is a series of Gabelli Equity Series Funds, Inc. (the "Corporation"), which was organized on July 25, 1991 as a Maryland corporation. The Fund is a diversified, open-end management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), and one of three separately managed portfolios (collectively, the "Portfolios") of the Corporation, each with four separate classes of shares known as Class AAA, Class A, Class B and Class C. The Fund's primary objective is capital appreciation. The Fund commenced investment operations on December 31, 2002. 2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. 7 THE GABELLI WOODLAND SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- SECURITY VALUATION. Portfolio securities listed or traded on a nationally recognized securities exchange or traded in the U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a market's official closing price as of the close of business on the day the securities are being valued. If there were no sales that day, the security is valued at the average of the closing bid and asked prices or, if there were no asked prices quoted on that day, then the security is valued at the closing bid price on that day. All other portfolio securities for which over-the-counter market quotations are readily available are valued at the latest average of the bid and asked prices. If there were no asked prices quoted on that day, then the security is valued at the closing bid price. Portfolio securities traded on more than one national securities exchange or market are valued according to the broadest and most representative market, as determined by Gabelli Funds, LLC (the "Adviser"). Portfolio securities primarily traded on foreign markets are generally valued at the preceding closing values of such securities on their respective exchanges or if, after the close, market conditions change significantly, certain foreign securities may be fair valued pursuant to procedures established by the Board of Directors. Securities and assets for which market quotations are not readily available are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Board of Directors. Short-term debt securities with remaining maturities of 60 days or less are valued at amortized cost, unless the Board of Directors determines such does not reflect the securities' fair value, in which case these securities will be valued at their fair value as determined by the Board of Directors. Debt instruments having a maturity greater than 60 days are valued at the latest average of the bid and asked prices obtained from a pricing service approved by the Board of Directors, or a dealer maintaining an active market in those securities. Options are valued at the last sale price on the exchange on which they are listed. If no sales of such options have taken place that day, they will be valued at the mean between their closing bid and asked prices. REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with primary government securities dealers recognized by the Federal Reserve Board, with member banks of the Federal Reserve System or with other brokers or dealers that meet credit guidelines established by the Adviser and reviewed by the Board of Directors. Under the terms of a typical repurchase agreement, the Fund takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the Fund to resell, the obligation at an agreed-upon price and time, thereby determining the yield during the Fund's holding period. The Fund will always receive and maintain securities as collateral whose market value, including accrued interest, will be at least equal to 100% of the dollar amount invested by the Fund in each agreement. The Fund will make payment for such securities only upon physical delivery or upon evidence of book entry transfer of the collateral to the account of the custodian. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to maintain the adequacy of the collateral. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. At September 30, 2003, there were no repurchase agreements. SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are accounted for on the trade date with realized gain or loss on investments determined by using the identified cost method. Interest income (including amortization of premium and accretion of discount) is recorded as earned. Dividend income is recorded on the ex-dividend date. 8 THE GABELLI WOODLAND SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- OFFERING COSTS. The Fund incurred offering costs of $59,443. At September 30, 2003, the remaining balance of prepaid offering costs was $14,820. The offering costs are being amortized on a straight-line basis over twelve months starting from the date of commencement of operations. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to shareholders are recorded on the ex-dividend date. Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from accounting principles generally accepted in the United States. There were no distributions paid during the fiscal period ended September 30, 2003. For the fiscal period ended September 30, 2003, reclassifications were made to decrease accumulated net investment loss for $9,414 and increase accumulated net realized loss on investments for $8,512, with an offsetting adjustment to additional paid-in capital. EXPENSES. Certain administrative expenses are common to, and allocated among, the Portfolios. Such allocations are made on the basis of each Portfolio's average net assets or other criteria directly affecting the expenses as determined by the Adviser. PROVISION FOR INCOME TAXES. The Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. As a result, a Federal income tax provision is not required. As of September 30, 2003, the components of accumulated earnings/(losses) on a tax basis were as follows: Net unrealized appreciation ......... $150,399 -------- Total accumulated earnings ........ $150,399 ======== Dividends and interest from non-U.S. sources received by the Fund are generally subject to non-U.S. withholding taxes at rates ranging up to 30%. Such withholding taxes may be reduced or eliminated under the terms of applicable U.S. income tax treaties, and the Fund intends to undertake any procedural steps required to claim the benefits of such treaties. The difference between book and tax basis unrealized appreciation is primarily due to deferral of losses from wash sales for tax purposes. 3. INVESTMENT ADVISORY AGREEMENT. The Fund has entered into an investment advisory agreement (the "Advisory Agreement") with the Adviser which provides that the Fund will pay the Adviser a fee, computed daily and paid monthly, at the annual rate of 1.00% of the value of the Fund's average daily net assets. In accordance with the Advisory Agreement, the Adviser provides a continuous investment program for the Fund's portfolio, oversees the administration of all aspects of the Fund's business and affairs and pays the compensation of all Officers and Directors of the Fund who are its affiliates. The Adviser has agreed to waive its fees and reimburse expenses of the Fund to the extent necessary to maintain the annualized total operating expenses at 2.00%, 2.00%, 2.75% and 2.75% of average daily net assets for Class AAA, Class A, Class B and Class C Shares, respectively. For the period ended September 30, 2003, the Adviser reimbursed the Fund in the amount of $124,599. The Fund is obliged to repay the Adviser for a period of two fiscal years following the fiscal year in which the Adviser reimbursed the Fund only to the extent that the operating expenses of the Fund fall below 2.00% of average daily net assets. 9 THE GABELLI WOODLAND SMALL CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 4. DISTRIBUTION PLAN. The Fund's Board of Directors has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. For the period ended September 30, 2003, the Class AAA shares incurred distribution costs payable to Gabelli & Company, Inc., an affiliate of the Adviser, of $2,327, or 0.25% of average daily net assets, the annual limitation under the Plan. Such payments are accrued daily and paid monthly. For the period ended September 30, 2003, the Class A Shares incurred distribution costs payable to Gabelli & Company, Inc., an affiliate of the Adviser, of $4 or 0.25% of average daily net assets. Such payments are accrued daily and paid monthly. For the period ended September 30, 2003, the Class B Shares incurred distribution costs payable to Gabelli & Company, Inc., an affiliate of the Adviser, of $1 or 1.00% of average daily net assets. Such payments are accrued daily and paid monthly. For the period ended September 30, 2003, the Class C Shares incurred distribution costs payable to Gabelli & Company, Inc., an affiliate of the Adviser, of $221 or 1.00% of average daily net assets. Such payments are accrued daily and paid monthly. 5. PORTFOLIO SECURITIES. Purchases and sales of securities for the period ended September 30, 2003, other than short term securities, aggregated $2,512,389 and $475,317, respectively. 6. TRANSACTIONS WITH AFFILIATES. During the fiscal year ended September 30, 2003, the Fund paid brokerage commissions of $37 to Gabelli & Company, Inc. and its affiliates. 7. CAPITAL STOCK TRANSACTIONS. Transactions in shares of capital stock were as follows: PERIOD ENDED SEPTEMBER 30, 2003 ---------------------- SHARES AMOUNT ------ ------- CLASS AAA Shares sold ........................ 283,812 $2,835,643 Shares redeemed .................... (64,132) (656,918) ------- ---------- Net increase in Class AAA shares ... 219,680 $2,178,725 ======= ========== CLASS A Shares sold ........................ 315 $ 2,926 ------- ---------- Net increase in Class A shares ..... 315 $ 2,926 ======= ========== CLASS B Shares sold ........................ 10 $ 100 ------- ---------- Net increase in Class B shares ..... 10 $ 100 ======= ========== CLASS C Shares sold ........................ 11,206 $ 113,807 ------- ---------- Net increase in Class C shares ..... 11,206 $ 113,807 ======= ========== 10 THE GABELLI WOODLAND SMALL CAP VALUE FUND FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period:
OPERATING PERFORMANCE --------------------------------------------------- NET REALIZED NET ASSET NET AND TOTAL NET NET ASSETS, VALUE, INVESTMENT UNREALIZED FROM ASSET VALUE, END OF PERIOD ENDED BEGINNING INCOME GAIN (LOSS) ON INVESTMENT END OF TOTAL PERIOD SEPTEMBER 30 OF PERIOD(A) (LOSS)(C) INVESTMENTS OPERATIONS PERIOD RETURN+ IN (000'S) ------------ ----------- ---------- ------------ ------------- ------------ ------- ----------- CLASS AAA 2003 $10.00 $(0.07) $0.65 $0.58 $10.58 5.80% $2,323 CLASS A 2003 $10.00 $(0.07) $0.64 $0.57 $10.57 5.70% $ 3 CLASS B 2003 $10.00 $(0.12) $0.71 $0.59 $10.59 5.90% $ 0.1 CLASS C 2003 $10.00 $(0.11) $0.66 $0.55 $10.55 5.50% $ 118
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA -------------------------------------------------------------- NET INVESTMENT EXPENSES EXPENSES INCOME (LOSS) NET OF BEFORE PORTFOLIO PERIOD ENDED TO AVERAGE WAIVERS/ WAIVERS/ TURNOVER SEPTEMBER 30 NET ASSETS(D) REIMBURSEMENTS(D) REIMBURSEMENTS(B)(D) RATE ------------ ------------- ----------------- -------------------- --------- CLASS AAA 2003 (0.97)% 2.00% 15.05% 39% CLASS A 2003 (0.97)% 2.00% 15.05% 39% CLASS B 2003 (1.72)% 2.75% 15.80% 39% CLASS C 2003 (1.72)% 2.75% 15.80% 39%
-------------------------- + Total return represents aggregate total return of a hypothetical $1,000 investment at the beginning of the period and sold at the end of the period including reinvestment of dividends. Total return for the period of less than one year is not annualized. (a) As of December 31, 2002. (b) During the period, certain fees were voluntarily reduced and/or reimbursed. If such fee reductions and/or reimbursements had not occurred, the ratio would have been as shown. (c) Per share amounts have been calculated using the monthly average shares outstanding method. (d) Annualized. See accompanying notes to financial statements. 11 THE GABELLI WOODLAND SMALL CAP VALUE FUND REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS -------------------------------------------------------------------------------- TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF THE GABELLI WOODLAND SMALL CAP VALUE FUND We have audited the accompanying statements of assets and liabilities, including the portfolio of investments, of The Gabelli Woodland Small Cap Value Fund (the "Fund"), a series of Gabelli Equity Series Funds, Inc., as of September 30, 2003, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the period December 31, 2002 (commencement of operations) to September 30, 2003. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of September 30, 2003, by correspondence with the Fund's custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Gabelli Woodland Small Cap Value Fund at September 30, 2003, the results of its operations, the changes in its net assets, and its financial highlights for the period December 31, 2002 (commencement of operations) to September 30, 2003, in conformity with accounting principles generally accepted in the United States. /S/ ERNST & YOUNG LLP New York, New York November 7, 2003 12 THE GABELLI WOODLAND SMALL CAP VALUE FUND ADDITIONAL FUND INFORMATION (UNAUDITED) -------------------------------------------------------------------------------- The business and affairs of the Fund are managed under the direction of the Fund's Board of Directors. Information pertaining to the Directors and officers of the Fund is set forth below. The Fund's Statement of Additional Information includes additional information about The Gabelli Woodland Small Cap Value Fund's Directors and is available, without charge, upon request, by calling 800-GABELLI (800-422-3554) or by writing to The Gabelli Woodland Small Cap Value Fund at One Corporate Center, Rye, NY 10580-1422.
TERM OF NUMBER OF NAME, POSITION(S) OFFICE AND FUNDS IN FUND ADDRESS 1 LENGTH OF COMPLEX OVERSEEN PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS AND AGE TIME SERVED 2 BY DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 3 ----------------- ------------- ---------------- ----------------------- ------------------- INTERESTED DIRECTORS 4: MARIO J. GABELLI Since 1991 23 Chairman of the Board and Chief Executive Director of Morgan Group Director, President and Officer of Gabelli Asset Management Inc. and Holdings, Inc. (transportation Chief Investment Officer Chief Investment Officer of Gabelli Funds, services); Vice Chairman of Age: 61 LLC and GAMCO Investors, Inc.; Vice Chairman Lynch Corporation (diversified and Chief Executive Officer of Lynch Interactive manufacturing) Corporation (multimedia and services) JOHN D. GABELLI Since 1991 10 Senior Vice President of Gabelli & Company, -- Director Inc.; Director of Gabelli Advisers, Inc. Age: 59 KARL OTTO POHL Since 1992 32 Member of the Shareholder Committee of Sal Director of Gabelli Asset Director Oppenheim Jr. & Cie (private investment Management Inc. (investment Age: 73 bank); Former President of the management); Chairman, Deutsche Bundesbank and Chairman of its Incentive Capital and Incentive Central Bank Council (1980-1991) Asset Management (Zurich); Director at Sal Oppenheim Jr. & Cie, Zurich NON-INTERESTED DIRECTORS: ANTHONY J. COLAVITA Since 1991 34 President and Attorney at Law in the law firm -- Director of Anthony J. Colavita, P.C. Age: 67 VINCENT D. ENRIGHT Since 1991 12 Former Senior Vice President and Chief Financial -- Director Officer of KeySpan Energy Corporation Age: 59 ROBERT J. MORRISSEY Since 1991 10 Partner in the law firm of Morrissey, Hawkins -- Director & Lynch Age: 64
13 THE GABELLI WOODLAND SMALL CAP VALUE FUND ADDITIONAL FUND INFORMATION (UNAUDITED) (CONTINUED) --------------------------------------------------------------------------------
TERM OF NUMBER OF NAME, POSITION(S) OFFICE AND FUNDS IN FUND ADDRESS 1 LENGTH OF COMPLEX OVERSEEN PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS AND AGE TIME SERVED 2 BY DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 3 ----------------- ------------- ---------------- ----------------------- ------------------- NON-INTERESTED DIRECTORS (CONTINUED): ANTHONY R. PUSTORINO Since 1991 17 Certified Public Accountant; Professor -- Director Emeritus, Pace University Age: 78 ANTHONIE C. VAN EKRIS Since 1991 19 Managing Director of BALMAC Director of Aurado Director International, Inc. Exploration Inc. Age: 69 SALVATORE J. ZIZZA Since 2001 10 Chairman, Hallmark Electrical Supplies Corp.; Director of Hollis Eden Director Former Executive Vice President of FMG Group Pharmaceuticals Age: 57 (OTC), a healthcare provider; Former President and Chief Executive Officer of the Lehigh Group Inc., an interior construction company, through 1997 OFFICERS: BRUCE N. ALPERT Since 1991 -- Executive Vice President and Chief Operating -- President Officer of Gabelli Funds, LLC since 1988 and Age: 51 an officer of all mutual funds advised by Gabelli Funds, LLC and its affiliates. Director and President of Gabelli Advisers, Inc. GUS A. COUTSOUROS Since 2000 -- Vice President and Chief Financial Officer of Gabelli -- Vice President and Funds, LLC since 1998 and an officer of all mutual Treasurer funds advised by Gabelli Funds, LLC and its affiliates Age: 41 JAMES E. MCKEE Since 1995 -- Vice President, General Counsel and Secretary -- Secretary of Gabelli Asset Management Inc. since 1999 Age: 40 and GAMCO Investors, Inc. since 1993; Secretary of all mutual funds advised by Gabelli Advisers, Inc. and Gabelli Funds, LLC
------------------------- 1 Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise noted. 2 Each Director will hold office for an indefinite term until the earliest of (i) the next meeting of shareholders if any, called for the purpose of considering the election or re-election of such Director and until the election and qualification of his or her successor, if any, elected at such meeting, or (ii) the date a Director resigns or retires, or a Director is removed by the Board of Directors or shareholders, in accordance with the Fund's By-Laws and Articles of Incorporation. The Gabelli Woodland Small Cap Value Fund is a series of Gabelli Equity Series Funds, Inc., which was organized on July 25, 1991. The Fund commenced investment operations on December 31, 2002. 3 This column includes only directorships of companies required to report to the SEC under the Securities and Exchange Act of 1934 (i.e. public companies) or other investment companies registered under the 1940 Act. 4 "Interested person" of the Fund as defined in the Investment Company Act of 1940. Messrs. Gabelli, Gabelli and Pohl are each considered an "interested person" because of their affiliation with Gabelli Funds, LLC which acts as each Fund's investment adviser. Mario J. Gabelli and John D. Gabelli are brothers. 14 -------------------------------------------------------------------------------- GABELLI FUNDS AND YOUR PERSONAL PRIVACY --------------------------------------------------------------------------- WHO ARE WE? The Gabelli Funds are investment companies registered with the Securities and Exchange Commission under the Investment Company Act of 1940. We are managed by Gabelli Funds LLC, Gabelli Advisers, Inc. and Gabelli Fixed Income, LLC, which are affiliated with Gabelli Asset Management Inc. Gabelli Asset Management is a publicly-held company that has subsidiaries that provide investment advisory or brokerage services for a variety of clients. WHAT KIND OF NON-PUBLIC INFORMATION DO WE COLLECT ABOUT YOU IF YOU BECOME A GABELLI CUSTOMER? If you apply to open an account directly with us, you will be giving us some non-public information about yourself. The non-public information we collect about you is: o INFORMATION YOU GIVE US ON YOUR APPLICATION FORM. This could include your name, address, telephone number, social security number, bank account number, and other information. o INFORMATION ABOUT YOUR TRANSACTIONS WITH US, ANY TRANSACTIONS WITH OUR AFFILIATES AND TRANSACTIONS WITH THE ENTITIES WE HIRE TO PROVIDE SERVICES TO YOU. This would include information about the shares that you buy or redeem, and the deposits and withdrawals that you make. If we hire someone else to provide services--like a transfer agent--we will also have information about the transactions that you conduct through them. WHAT INFORMATION DO WE DISCLOSE AND TO WHOM DO WE DISCLOSE IT? We do not disclose any non-public personal information about our customers or former customers to anyone, other than our affiliates, our service providers who need to know such information and as otherwise permitted by law. If you want to find out what the law permits, you can read the privacy rules adopted by the Securities and Exchange Commission. They are in volume 17 of the Code of Federal Regulations, Part 248. The Commission often posts information about its regulations on its web site, www.sec.gov. WHAT DO WE DO TO PROTECT YOUR PERSONAL INFORMATION? We restrict access to non-public personal information about you to the people who need to know that information in order to provide services to you or the Fund and to ensure that we are complying with the laws governing the securities business. We maintain physical, electronic, and procedural safeguards to keep your personal information confidential. -------------------------------------------------------------------------------- Gabelli Equity Series Funds, Inc. THE GABELLI WOODLAND SMALL CAP VALUE FUND One Corporate Center Rye, New York 10580-1422 800-GABELLI 800-422-3554 FAX: 914-921-5118 WEBSITE: WWW.GABELLI.COM E-MAIL: INFO@GABELLI.COM Net Asset Value available daily by calling 800-GABELLI after 6:00 P.M. BOARD OF DIRECTORS Mario J. Gabelli, CFA Karl Otto Pohl CHAIRMAN AND CHIEF FORMER PRESIDENT INVESTMENT OFFICER DEUTSCHE BUNDESBANK GABELLI ASSET MANAGEMENT INC. Anthony J. Colavita Anthony R. Pustorino ATTORNEY-AT-LAW CERTIFIED PUBLIC ACCOUNTANT ANTHONY J. COLAVITA, P.C. PROFESSOR EMERITUS PACE UNIVERSITY Vincent D. Enright Anthonie C. van Ekris FORMER SENIOR VICE PRESIDENT MANAGING DIRECTOR AND CHIEF FINANCIAL OFFICER BALMAC INTERNATIONAL, INC. KEYSPAN ENERGY CORP. John D. Gabelli Salvatore J. Zizza SENIOR VICE PRESIDENT CHAIRMAN GABELLI & COMPANY, INC. HALLMARK ELECTRICAL SUPPLIES CORP. Robert J. Morrissey ATTORNEY-AT-LAW MORRISSEY, HAWKINS & LYNCH OFFICERS AND PORTFOLIO MANAGER Elizabeth M. Lilly, CFA Bruce N. Alpert PORTFOLIO MANAGER PRESIDENT James E. McKee Gus Coutsouros SECRETARY VICE PRESIDENT AND TREASURER DISTRIBUTOR Gabelli & Company, Inc. CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT State Street Bank and Trust Company LEGAL COUNSEL Skadden, Arps, Slate, Meagher & Flom LLP -------------------------------------------------------------------------------- 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. -------------------------------------------------------------------------------- GAB840Q303SR [GRAPHIC OMITTED] PICTURE OF MARIO GABELLI THE GABELLI WOODLAND SMALL CAP VALUE FUND ANNUAL REPORT SEPTEMBER 30, 2003 ITEM 2. CODE OF ETHICS. (a) The registrant, as of the end of the period covered by this report, has adopted a code of conduct that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (b) There have been no amendments, during the period covered by this report, to a provision of the code of conduct that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of conduct description. (c) The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of conduct that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item's instructions. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a) As of the end of the period covered by the report, the registrant's board of directors has determined that Anthony R. Pustorino is qualified to serve as an audit committee financial expert serving on its audit committee and that he is "independent." ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 9. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 10. EXHIBITS. (a)(1) Code of conduct, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. (a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) Gabelli Equity Series Funds Inc. By (Signature and Title)* /s/ Bruce N. Alpert ----------------------------------------------------- Bruce N. Alpert, Principal Executive Officer & Principal Financial Officer Date 12/5/2003 ---------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ Bruce N. Alpert ----------------------------------------------------- Bruce N. Alpert, Principal Executive Officer & Principal Financial Officer Date 12/5/2003 ---------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature.