THE GABELLI BLUE CHIP VALUE FUND
SEMI-ANNUAL REPORT
JUNE 30, 2000
[PHOTO OF BARBARA MARCIN OMITTED]
BARBARA MARCIN
TO OUR SHAREHOLDERS,
The second quarter of 2000 continued the correction, which began on March
10, of some of the very high valuations in the technology and internet stocks.
The Nasdaq Composite Index (Nasdaq) fell steeply at the beginning of the
quarter, and was down 22% within the quarter through May 23, before rebounding
to close down 13% for the quarter. Broader market measures also corrected, with
the Standard & Poor's ("S&P") 500 and the Dow Jones Industrial Average down 2.7%
and 4.3%, respectively. The Dow was hurt by steep declines in the most cyclical
stocks, such as Alcoa (down 44%), Honeywell (down 36%), International Paper
(down 30%), General Motors (down 30%) and Dupont (down 17%). And to add insult
to injury, the top performer of the last decade, Microsoft, waited until it was
added to the Dow before it posted its worst quarterly decline ever, down 25%! In
general, investors began to pay attention to a company's current and future
earnings as well as to its price. We continue to believe that only attractively
valued companies, with improving cash flow and earnings, as well as the
opportunity to reinvest to increase value for shareholders, will perform well in
this volatile market.
INVESTMENT PERFORMANCE
For the second quarter ended June 30, 2000, the Gabelli Blue Chip Value
Fund (The "Fund") declined 1.94%, compared with losses of 2.66% and 2.40% for
the S&P 500 Index and the Lipper Large Cap Value Fund Average, respectively. The
S&P 500 Index is an unmanaged indicator of stock market performance, while the
Lipper Average reflects the average performance of mutual funds classified in
this particular category. For the first half of the year, the Fund returned
4.38% versus returns of (0.43)% and (1.66)% for the S&P 500 and the Lipper
Average, respectively. Since inception on August 26, 1999 through June 30 of
this year, the Fund has risen 22.94%, versus returns of 7.88% and 2.33% for the
S&P 500 and the Lipper Average, respectively.
Some of the larger positions in the portfolio, which contributed
positively to performance, included: Mattel (the toy company named a new Chief
Executive Officer who brings strong brand experience from Kraft); UnumProvident
(the disability insurer began to offer some evidence that its disability sales
<PAGE>
INVESTMENT RESULTS(a)
--------------------------------------------------------------------------------
Quarter
----------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
2000: Net Asset Value ...... $12.40 $12.16 -- -- --
Total Return ......... 6.4% (1.9)% -- -- --
--------------------------------------------------------------------------------
1999: Net Asset Value ...... -- -- $9.54 $11.65 $11.65
Total Return ......... -- -- (2.9)%(b) 23.5% 17.8%(b)
--------------------------------------------------------------------------------
---------------------------------------------------
Total Return - June 30, 2000 (a)
--------------------------------
Life of Fund (b) ............... 22.94%
---------------------------------------------------
Dividend History
---------------------------------------------------
Payment (ex) Date Rate Per Share Reinvestment Price
----------------- -------------- ------------------
December 27, 1999 $0.125 $11.33
(a) Total 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 and do not guarantee future results.
Investment returns and the principal value of an investment will fluctuate. When
shares are redeemed they may be worth more or less than their original cost. (b)
From commencement of investment operations on August 26, 1999. The returns
stated above cover short periods of less than one year beginning August 26, 1999
through September 30, 1999 and December 31, 1999, respectively, and may not be
indicative of long term results.
--------------------------------------------------------------------------------
decline had bottomed out); US West (whose acquisition by Qwest was completed
after the close of the quarter); and Providian (which reached a settlement of
its aggressive marketing issues and continued to post good earnings).
The largest sector weighting, financial services, contributed positively
to performance, as many of these stocks rose from their extremely depressed
first quarter prices. Leading the way were: UnumProvident; Amvescap, an asset
manager; Washington Mutual, the nation's largest savings and loan; Mellon
Financial, the bank and asset manager; and three diversified consumer finance
companies--Household International, Associates First Capital, and Countrywide
Credit.
The Fund's large positions which posted disappointing performances
included Hughes Electronics, Cendant and Gilat Satellite. Both Hughes and Gilat
declined over concerns about the growth in satellite services. Cendant's share
price reflects concerns over the effects of rising interest rates and a slowing
economy on its hotel and real estate businesses. These three stocks are
compellingly valued with good opportunities for growth ahead.
OUR APPROACH
The Gabelli Blue Chip Value Fund seeks to invest in the common stock of
companies that are temporarily out of favor, for which we can identify a
catalyst or sequence of events that will return the company to a higher value.
Generally these companies are: 1) in sectors that are out of favor relative to
the economic or operating environment; 2) undervalued on an asset valuation
basis; 3) or temporarily out of favor growth companies. Valuation remains an
important predictor of future performance.
2
<PAGE>
COMMENTARY
Investors acted on concerns that the Federal Reserve (the "Fed") would
push too hard on interest rates, with the accompanying risk of a severe slowdown
in the economy and corporate profits. These concerns were evident in the stocks
and sectors that fell dramatically in the second quarter. Companies in deeply
cyclical sectors, which are vulnerable to a slower economy, suffered the most.
These included basic materials (papers, chemicals and steel), capital goods and
manufacturing companies. Companies in sectors dependent upon consumer spending,
such as retailers, also fell. Banks performed particularly poorly, with money
center banks down by 20% on average, amid worries about increasing credit
problems for consumers and corporations in a much slower economy.
Announcements about sales and earnings shortfalls contributed to the
jitters, as leading companies such as Honeywell, AT&T, Xerox and Unisys
announced that earnings would fall short of expectations and their share prices
were beaten down. These companies offered the following reasons for their
earnings shortfalls: slower sales as their customers anticipated a slowing
economy; higher energy and raw material costs; higher interest rate costs; and
lower earnings from their overseas operations due to the strong dollar.
Investors continued the trend of the past year, severely punishing companies
which didn't meet expectations and looking beyond the year 2000 to a possible
slowdown in profit growth in 2001.
By the end of the second quarter, even the Federal Reserve pointed to
signs that the economy's growth was moderating, and refrained from raising
interest rates at its June meeting. Whether an economic slowdown is baked in or
the Federal Reserve has yet to bake it in, we will have a slower economy over
the next year. We want to own companies which can earn money, generate cash
flow, and have the opportunities to reinvest and grow.
LET'S TALK STOCKS
CENDANT CORP. (CD - $13.50 - NYSE) earns a fee each time a transaction occurs at
one of its franchise hotels (Ramada Inns, Days Inns, Travelodge), real estate
brokers (Coldwell Banker, Century 21) or at Avis, the car rental agency. The
company generates strong earnings and cash flow, and has bought back 20% of its
shares over the past year. These actions are good evidence of management's
commitment to shareholder value. We remain confident about the company's good
value and growth opportunities.
Financial services remains the largest industry sector in the Fund. LEHMAN
BROTHERS HOLDINGS INC. (LEH - $116.1875 - NYSE) continues to show strong
earnings growth from its investment banking and brokerage operations, and
continues to grow its overseas businesses. Because of its traditional bond
market strength, the company still receives too large a discount to its peers,
and we expect this to close over time. Providian Financial Corp. (PVN -
$101.8125 - NYSE), a leading credit card company, is good at determining risks
and opportunities in its customer base and continues to achieve above average
growth in assets and earnings as well as expanding overseas. UnumProvident Corp.
(UNM - $19.5625 - NYSE), the leading disability insurer, and Conseco Inc. (CNC -
$8.00 - NYSE), a life insurer that we purchased in the second quarter, are both
trading at very low valuations, reflecting current severe operating problems
which we believe will be overcome.
3
<PAGE>
BELL ATLANTIC CORP. (BEL - $50.1825 - NYSE) and SBC Communications Inc. (SBC -
$42.75 - NYSE) are two of the former regional local telephone companies that are
moving beyond regional and local business. Both of these companies will gain
incremental revenues and earnings from entry into the long distance business
this year and from the sale of DSL lines that offer faster Internet access. Bell
Atlantic merged with GTE Corp. (GTE - $62.25 - NYSE) early in July to form
Verizon Communications (VZ - NYSE).Verizon Communications has the nation's
largest wireless service through Verizon Wireless, its joint venture with
Vodafone. SBC has just gained approval to offer long distance in Texas and is
pending approval in other states.
PARKER HANNIFIN CORP. (PH - $34.75 - NYSE), HONEYWELL INC. (HON - $35.125 -
NYSE), ROCKWELL INTERNATIONAL CORP. (ROK - $36.6875 - NYSE), TEXTRON INC. (TXT -
$59.1875 - NYSE) and EATON CORP. (ETN - $67.75 - NYSE) are industrial companies
trading near historical lows amid investor fears that a slowing US economy will
kill demand for their capital goods components- cyclical businesses such as
construction, power, automotive, and fluid controls businesses, among others. We
believe these companies represent an opportunity for three reasons: 1) they have
already priced in a hard landing or recession, 2) they already have low
expectations built into their earnings and 3) we see solid economic growth in
most economies. These companies get a good portion of their sales abroad, and
the outlooks for Europe, Asia (including Japan) and Latin America are still
strengthening after the disastrous 1998 and 1999 slowdown in these regions. We
believe that even with a slowing U.S. economy, these companies, which are
selling for 10 to 12 times this year's profits, can continue to post improving
earnings and cash flow, and have opportunities to reinvest for growth in their
businesses here and overseas.
COMPAQ COMPUTER CORP. (CPQ - $27.75 - NYSE) has the opportunity to build
stronger sales over the next year with new products in its personal computer and
server lines. Improvements under Compaq's new leadership are poised to move
beyond expenses and margins to sales in their personal computers and servers.
The stock is priced for low expectations, whereas we believe that acceleration
in revenue growth and a sustainable turnaround are possible, and even likely,
over the next few quarters.
MINIMUM INITIAL INVESTMENT - $1,000
The Fund's minimum initial investment for both regular and retirement
accounts is $1,000. There are no subsequent investment minimums. No initial
minimum is required for those establishing an Automatic Investment Plan.
Additionally, the Fund and other Gabelli Funds are available through the
no-transaction fee programs at many major brokerage firms.
WWW.GABELLI.COM
Please visit us on the Internet. Our homepage at http://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 [email protected].
Subscribe in time and join me for a chat session entitled "Finding Value
in the U.S. Stock Market" on Wednesday, September 27.
4
<PAGE>
IN CONCLUSION
Today, reasonable valuations for a broad range of stocks combine with
decent economic fundamentals, including a strengthening global economy. As
previously discussed, we find reasonable valuations combined with the likelihood
of improving earnings and cash flow in the regional phone companies and
industrial companies; we also find these qualities in some of the energy
companies. Looking forward, we will continue to take advantage of low prices, as
investors punish companies whose short and intermediate-term outlooks get
questioned. The technology area has started to offer some companies for
consideration as value investments, as they have become less popular. We like
technology issues. However, we are not willing to pay high prices, even for good
companies, and will seek to take advantage of investors pushing some of these
stocks under fair value, just as they bid them up to bubble prices in the first
quarter. The positive aspect to focus on today is that there are many good
companies selling at good prices. It is a great time to be a value investor.
The Fund's daily net asset value is available in the financial press and
each evening after 6:00 PM (Eastern Time) by calling 1-800-GABELLI
(1-800-422-3554). The Fund's Nasdaq symbol is GABBX. Please call us during the
business day for further information.
Sincerely,
/S/ SIGNATURE OMITTED
BARBARA G. MARCIN, CFA
Portfolio Manager
July 14, 2000
--------------------------------------------------------------------------
TOP TEN HOLDINGS
JUNE 30, 2000
-------------
Cendant Corp. Compaq Computer Corp.
Lehman Brothers Holdings Inc. Mattel Inc.
Providian Financial Corp. Williams Communications Group Inc.
UnumProvident Corp. Conseco Inc.
General Motors Corp., Cl. H FleetBoston Financial Corp.
(Hughes Electronics)
---------------------------------------------------------------------------
NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period stated in this report. The manager's views
are subject to change at any time based on market and other conditions.
5
<PAGE>
THE GABELLI BLUE CHIP VALUE FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS -- 97.3%
AEROSPACE -- 3.6%
12,800 Raytheon Co., Cl. B ............ $ 255,377 $ 246,400
7,100 Rockwell International Corp. ... 305,892 223,650
---------- ----------
561,269 470,050
---------- ----------
AUTOMOTIVE -- 4.1%
4,900 Ford Motor Co. ................. 237,019 210,700
5,600 General Motors Corp. ........... 454,292 325,150
---------- ----------
691,311 535,850
---------- ----------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 1.4%
12,500 Delphi Automotive
Systems Corp. ................. 210,594 182,031
642 Visteon Corp.+ ................. 9,876 7,779
---------- ----------
220,470 189,810
---------- ----------
BUSINESS SERVICES -- 4.9%
45,700 Cendant Corp.+ ................. 759,029 639,800
---------- ----------
COMMUNICATIONS EQUIPMENT -- 3.9%
3,200 Gilat Satellite Networks Ltd.+ . 294,494 222,000
5,000 Motorola Inc. .................. 144,979 145,313
4,400 Williams Communications
Group Inc.+ ................... 162,063 146,025
---------- ----------
601,536 513,338
---------- ----------
COMPUTER HARDWARE -- 5.7%
19,200 Compaq Computer Corp. .......... 501,385 490,800
2,300 International Business
Machines Corp. ................ 246,834 251,994
---------- ----------
748,219 742,794
---------- ----------
CONSUMER PRODUCTS -- 3.3%
32,800 Mattel Inc. .................... 397,027 432,550
---------- ----------
DIVERSIFIED INDUSTRIAL -- 3.6%
2,000 Eaton Corp. .................... 164,975 134,000
6,200 Honeywell Inc. ................. 234,122 208,862
2,400 Textron Inc. ................... 140,930 130,350
---------- ----------
540,027 473,212
---------- ----------
ELECTRONICS -- 1.2%
1,200 Intel Corp. .................... 132,144 160,425
---------- ----------
ENERGY AND UTILITIES -- 11.6%
6,000 Baker Hughes Inc. .............. 172,706 192,000
4,600 Burlington Resources Inc. ...... 158,455 175,950
6,400 Conoco Inc., Cl. A ............. 160,364 140,800
7,000 EOG Resources Inc. ............. 149,475 234,500
2,000 Exxon Mobil Corp. .............. 159,362 157,000
2,500 Kinder Morgan Energy
Partners LP ................... 97,800 99,844
MARKET
SHARES COST VALUE
------ ---- ------
4,000 Kinder Morgan Inc. ............. $ 94,269 $ 138,250
9,200 Williams Companies
Inc. (The) .................... 358,786 383,525
---------- ----------
1,351,217 1,521,869
---------- ----------
ENTERTAINMENT -- 1.4%
2,800 Viacom Inc., Cl. B+ ............ 140,246 190,925
---------- ----------
EQUIPMENT AND SUPPLIES -- 1.9%
7,300 Parker Hannifin Corp. .......... 307,659 250,025
---------- ----------
FINANCIAL SERVICES -- 16.6%
1,400 Affiliated Managers
Group Inc.+ ................... 47,862 63,700
3,400 Amvescap plc, ADR .............. 214,715 266,475
8,000 Associates First Capital
Corp., Cl. A .................. 170,025 178,500
8,000 CIT Group Inc., Cl. A .......... 135,938 130,000
4,000 Countrywide Credit
Industries Inc. ............... 114,569 121,250
2,000 Household International Inc. ... 84,350 83,125
6,500 Lehman Brothers
Holdings Inc. ................. 494,300 614,656
3,000 Paine Webber Group Inc. ........ 129,940 136,500
6,500 Providian Financial Corp. ...... 531,055 585,000
---------- ----------
1,922,754 2,179,206
---------- ----------
FINANCIAL SERVICES: BANKS -- 7.2%
1,500 Bank of America Corp. .......... 71,325 64,500
1,500 Chase Manhattan Corp. .......... 67,481 69,094
10,000 FleetBoston Financial Corp. .... 368,925 340,000
5,400 Mellon Financial Corp. ......... 179,695 196,762
9,500 Washington Mutual Inc. ......... 251,194 274,312
---------- ----------
938,620 944,668
---------- ----------
FINANCIAL SERVICES: INSURANCE -- 8.6%
38,000 Conseco Inc. ................... 210,526 370,500
7,100 Everest Reinsurance
Holdings Inc. ................. 183,180 233,413
26,000 UnumProvident Corp. ............ 497,919 521,625
---------- ----------
891,625 1,125,538
---------- ----------
HEALTH CARE -- 1.8%
4,000 American Home
Products Corp. ................ 184,813 235,000
---------- ----------
PAPER AND FOREST PRODUCTS -- 1.0%
1,000 Boise Cascade Corp. ............ 27,738 25,875
2,000 International Paper Co. ........ 68,850 59,625
2,000 Mead Corp. ..................... 57,381 50,500
---------- ----------
153,969 136,000
---------- ----------
See accompanying notes to financial statements.
6
<PAGE>
THE GABELLI BLUE CHIP VALUE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
PUBLISHING -- 0.5%
700 Dow Jones & Co. Inc. ........... $ 45,179 $ 51,275
500 New York Times Co., Cl. A ...... 23,025 19,750
---------- ----------
68,204 71,025
---------- ----------
SATELLITE -- 3.8%
5,700 General Motors Corp., Cl. H+ ... 457,491 500,175
---------- ----------
SPECIALTY CHEMICALS -- 3.1%
7,000 Hercules Inc. .................. 115,475 98,437
18,200 Lyondell Chemical Co. .......... 263,498 304,850
---------- ----------
378,973 403,287
---------- ----------
TELECOMMUNICATIONS -- 8.1%
2,000 AT&T Corp. ..................... 69,225 63,250
3,500 Bell Atlantic Corp. ............ 183,400 177,844
6,000 SBC Communications Inc. ........ 268,113 259,500
5,600 Sprint Corp. ................... 326,886 285,600
3,200 US West Inc. ................... 213,157 274,400
---------- ----------
1,060,781 1,060,594
---------- ----------
TOTAL COMMON STOCKS 12,507,384 12,776,141
---------- ----------
MARKET
COST VALUE
---- ------
TOTAL
INVESTMENTS -- 97.3% $12,507,384 $12,776,141
=========== ===========
OTHER ASSETS AND
LIABILITIES (NET) -- 2.7% ................. 359,896
-----------
NET ASSETS -- 100.0%
(1,080,366 shares outstanding) ............ $13,136,037
===========
------------------------
For Federal tax purposes:
Aggregate cost ............................. $12,507,384
===========
Gross unrealized appreciation .............. $ 1,053,443
Gross unrealized depreciation .............. (784,686)
-----------
Net unrealized appreciation ................ $ 268,757
===========
------------------------
+ Non-income producing security.
ADR - American Depositary Receipt.
See accompanying notes to financial statements.
7
<PAGE>
THE GABELLI BLUE CHIP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
--------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost $12,507,384) .. $12,776,141
Dividends receivable ...................... 12,543
Receivable for Fund shares sold ........... 1,001,697
Receivable for investments sold ........... 30,637
-----------
TOTAL ASSETS .............................. 13,821,018
-----------
LIABILITIES:
Payable to custodian ...................... 444,741
Payable for investment purchased .......... 210,422
Payable for investment advisory fees ...... 3,706
Payable for distribution fees ............. 3,194
Other accrued expenses .................... 22,918
-----------
TOTAL LIABILITIES ......................... 684,981
-----------
NET ASSETS applicable to 1,080,366
shares outstanding ...................... $13,136,037
===========
NET ASSETS CONSIST OF:
Shares of beneficial interest, at par value $ 1,080
Additional paid-in capital ................ 11,940,087
Accumulated net investment loss ........... (18,402)
Accumulated net realized gain
on investments .......................... 944,515
Net unrealized appreciation
on investments .......................... 268,757
-----------
TOTAL NET ASSETS .......................... $13,136,037
===========
NET ASSET VALUE, offering and redemption price
per share ($13,136,037 / 1,080,366
shares outstanding; 500,000,000 shares
authorized of $0.001 par value) ........... $12.16
======
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
----------------------------------------------------------
INVESTMENT INCOME:
Dividends ................................. $ 75,865
Interest .................................. 10,774
-----------
TOTAL INVESTMENT INCOME ................... 86,639
-----------
EXPENSES:
Investment advisory fees .................. 52,586
Distribution fees ......................... 13,147
Legal and audit fees ...................... 16,667
Registration fees ......................... 13,264
Shareholder communications expenses ....... 12,413
Trustees' fees ............................ 9,142
Custodian fees ............................ 5,785
Shareholder services fees ................. 772
Miscellaneous expenses .................... 966
-----------
TOTAL EXPENSES ............................ 124,742
-----------
Less: Expense reimbursements .............. (19,701)
-----------
TOTAL NET EXPENSES ........................ 105,041
-----------
NET INVESTMENT LOSS ....................... (18,402)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investments .......... 962,025
Net change in unrealized appreciation
on investments .......................... (751,500)
-----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS .......................... 210,525
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ......................... $ 192,123
===========
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
---------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2000 PERIOD ENDED
(UNAUDITED) DECEMBER 31, 1999+
---------------- ------------------
<S> <C> <C>
OPERATIONS:
Net investment loss ..................................... $ (18,402) $ (8,652)
Net realized gain on investments ........................ 962,025 64,346
Net change in unrealized appreciation on investments .... (751,500) 1,020,257
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .... 192,123 1,075,951
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ................................... -- (64,346)
In excess of net realized gain on investments ........... -- (8,858)
------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ..................... -- (73,204)
------------- -------------
SHARE TRANSACTIONS:
Net increase in net assets from shares of beneficial
interest transactions ................................. 5,716,037 6,125,130
------------- -------------
NET INCREASE IN NET ASSETS .............................. 5,908,160 7,127,877
NET ASSETS:
Beginning of period ..................................... 7,227,877 100,000
------------- -------------
End of period ........................................... $ 13,136,037 $ 7,227,877
============= =============
</TABLE>
--------------
+ From commencement of operations on August 26, 1999 through December 31, 1999.
See accompanying notes to financial statements.
8
<PAGE>
THE GABELLI BLUE CHIP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
1. ORGANIZATION. The Gabelli Blue Chip Value Fund (the "Fund") was organized on
May 13, 1999 as a Delaware business trust. The Fund is a diversified, open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Fund had no operations until August 26,
1999 other than the purchase of 10,000 shares at a cost of $100,000 by Gabelli
Funds, LLC. The Fund's primary objective is long term growth of capital. The
Fund commenced investment operations on August 26, 1999.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange, quoted by the National Association of Securities
Dealers Automated Quotations, Inc. ("Nasdaq") or traded on foreign exchanges are
valued at the last sale price on that exchange 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, except for open short positions, which are
valued at the last asked price). 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. 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"). 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 Trustees. Short term debt securities with remaining maturities of 60 days or
less are valued at amortized cost, unless the Trustees determine such does not
reflect the securities' fair value, in which case these securities will be
valued at their fair value as determined by the Trustees. Debt instruments
having a maturity greater than 60 days are valued at the highest bid price
obtained from a dealer maintaining an active market in those securities.
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 Trustees. 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.
9
<PAGE>
THE GABELLI BLUE CHIP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
--------------------------------------------------------------------------------
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for on the trade date with realized gain or loss on investments
determined by using the identified cost method. Interest income (including
amortization of premium and accretion of discount) is recorded 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 generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund, timing differences and
differing characterization of distributions made by the Fund.
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.
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 Trustees of the Fund who are its affiliates. The Adviser
voluntarily agreed to reimburse expenses of the Fund to the extent necessary to
maintain the annualized total operating expenses of the Fund at 2.00% of the
value of the Fund's average daily net assets. Beginning January 1, 2000 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. For
the six months ended June 30, 2000, the Adviser reimbursed the Fund in the
amount of $41,543.
4. DISTRIBUTION PLAN. The Fund's Board of Trustees has adopted a distribution
plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. For the six months
ended June 30, 2000, the Fund incurred distribution costs payable to Gabelli &
Company, Inc., an affiliate of the Adviser, of $13,147, 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 six months
ended June 30, 2000, other than short term securities, aggregated $13,970,171
and $8,257,111, respectively.
6. SHARES OF BENEFICIAL INTEREST. Transactions in shares of beneficial interest
were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
JUNE 30, 2000 DECEMBER 31, 1999+
--------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- -------- ----------
<S> <C> <C> <C> <C>
Shares sold .................................... 1,045,045 $12,653,071 651,934 $6,533,684
Shares issued upon reinvestment of dividends ... -- -- 6,248 70,786
Shares redeemed ................................ (575,955) (6,937,034) (47,906) (479,340)
--------- ----------- -------- ----------
Net increase ............................... 469,090 $ 5,716,037 610,276 $6,125,130
========= =========== ======= ==========
</TABLE>
+ From commencement of investment operations on August 26, 1999 through December
31, 1999.
10
<PAGE>
THE GABELLI BLUE CHIP VALUE FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout the
period:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000 PERIOD ENDED
(UNAUDITED) DECEMBER 31, 1999+
----------------- ------------------
<S> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period .................. $11.65 $10.00
------ ------
Net investment loss ................................... (0.02) (0.01)
Net realized and unrealized gain on investments ....... 0.53 1.79
------ ------
Total from investment operations ...................... 0.51 1.78
------ ------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized gain on investments ...................... -- (0.11)
In excess of net realized gain on investments ......... -- (0.02)
------ ------
Total distributions ................................... -- (0.13)
------ ------
NET ASSET VALUE, END OF PERIOD ........................ $12.16 $11.65
====== =======
Total return++ ........................................ 4.4% 17.8%
====== =======
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .................. $13,136 $7,228
Ratio of net investment loss to average net assets (b) (0.35)%(a) (0.50)%(a)
Ratio of operating expenses to average net assets (b) . 2.00%(a) 2.00%(a)
Portfolio turnover rate ............................... 83% 71%
</TABLE>
--------------------------------
+ From commencement of investment operations on August 26, 1999 through
December 31, 1999.
++ 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 less than
one year is not annualized.
(a) Annualized.
(b) During the six months ended June 30, 2000 and the period ended December 31,
1999, the Adviser voluntarily reimbursed certain expenses. Before
reimbursement, the ratios of operating expenses to average net assets would
have been 2.38% and 4.86% (annualized), respectively. Before reimbursement,
the ratios of net investment loss to average net assets would have been
(0.73)% and (3.36)% (annualized), respectively.
See accompanying notes to financial statements.
11
<PAGE>
THE GABELLI BLUE CHIP VALUE FUND
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
FAX: 1-914-921-5118
HTTP://WWW.GABELLI.COM
E-MAIL: [email protected]
(Net Asset Value may be obtained daily by calling
1-800-GABELLI after 6:00 P.M.)
BOARD OF TRUSTEES
Mario J. Gabelli, CFA Mary E. Hauck
CHAIRMAN AND CHIEF (RETIRED) SENIOR PORTFOLIO MANAGER
INVESTMENT OFFICER GABELLI-O'CONNOR FIXED INCOME
GABELLI ASSET MANAGEMENT INC. MUTUAL FUND MANAGEMENT CO.
Anthony J. Colavita Karl Otto Pohl
ATTORNEY-AT-LAW FORMER PRESIDENT
ANTHONY J. COLAVITA, P.C. DEUTSCHE BUNDESBANK
Vincent D. Enright Werner J. Roeder, MD
FORMER SENIOR VICE PRESIDENT MEDICAL DIRECTOR
AND CHIEF FINANCIAL OFFICER LAWRENCE HOSPITAL
KEYSPAN ENERGY CORP.
OFFICERS AND PORTFOLIO MANAGERS
Mario J. Gabelli, CFA Barbara G. Marcin, CFA
PRESIDENT AND CHIEF PORTFOLIO MANAGER
INVESTMENT OFFICER
Bruce N. Alpert James E. McKee
VICE PRESIDENT AND TREASURER SECRETARY
DISTRIBUTOR
Gabelli & Company, Inc.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT
State Street Bank and Trust Company
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
--------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of The
Gabelli Blue Chip Value Fund. It is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
-------------------------------------------------------------------------------
GAB402Q200SR
[PHOTO OF MARIO J. GABELLI OMITTED]
THE
GABELLI
BLUE CHIP VALUE
FUND
SEMI-ANNUAL REPORT
JUNE 30, 2000
