THE GABELLI BLUE CHIP VALUE FUND
FIRST QUARTER REPORT
MARCH 31, 2000
[GRAPHIC OMITTED]
BARBARA MARCIN
TO OUR SHAREHOLDERS,
In the first quarter of 2000 we started to see a break in the extremely
narrow market in which technology, Internet and telecommunications issues worked
almost alone to push the averages higher. Last year's extraordinary divergence
in the performance of stocks continued into the first quarter and was evidenced
by the performance of the Dow Jones Industrial Average ("Dow Jones") versus the
Nasdaq Composite Index ("Nasdaq"). The difference in the performance of these
two indices came to a peak on March 10, at which point the Nasdaq was up 24%
year to date while the Dow Jones had declined 14%, resulting in a large 38%
differential in performance. At that point, the Nasdaq got pulled over for
speeding, and at the same time a broad number of stocks in sectors that had not
risen began to participate in the advance. By the end of the quarter, the Nasdaq
composite was up 12.4% while the Dow Jones had recovered to close down only 5%.
At this point we believe that the majority of stocks are attractively valued,
and we are starting to see a return to a market in which valuation matters.
INVESTMENT PERFORMANCE
For the first quarter ended March 31, 2000, the Gabelli Blue Chip Value
Fund's (the "Fund") total return was 6.44%. The Standard & Poor's ("S&P") 500
Index and Lipper Large-Cap Value Fund Average had total returns of 2.29% and
0.72%, respectively, over the same period. 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.
Since inception on August 26, 1999 through March 31, 2000, the Fund had a
cumulative total return of 25.37%. The S&P 500 Index and Lipper Large-Cap Value
Fund Average rose 10.82% and 4.56%, respectively, over the same period.
<PAGE>
INVESTMENT RESULTS (a)
- --------------------------------------------------------------------------------
Quarter
------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
2000: Net Asset Value $12.40 -- -- -- --
Total Return 6.4% -- -- -- --
- ------------------------------------------------------------------------------
1999: Net Asset Value -- -- $9.54 $11.65 $11.65
Total Return -- -- (2.9)%(b) 23.5% 17.8%(b)
- ------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Return - March 31, 2000 (a)
---------------------------------
Life of Fund (b) ..................... 25.37%
- --------------------------------------------------------------------------------
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 March 31, 2000 and may not be indicative of long term results.
- --------------------------------------------------------------------------------
Two companies that received buyout offers buoyed the Fund's positive
performance in the first quarter. First, Seagate, which manufactures disk drives
and has investments in computer storage software, received a buyout offer from a
private firm. We sold the stock on the day of the offer. Second, Citibank
tendered a cash buyout offer for Travelers Property Casualty Corp. that will
close in the second quarter of this year.
The energy group rose strongly with the price of oil, as did our holdings
in Baker Hughes and Kinder Morgan. Other strong stocks included American Home
Products, a pharmaceutical company, Amvescap, a money manager, and Intel, the
maker of computer microprocessors.
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
that can return the company to a higher valuation. There are many inexpensive
companies today, and we want to identify those that we believe will be revalued
upwards. It is important to look not only at the past to see where an
undervalued company might be valued, but to the future to see how a company will
be able to improve quality, manage costs, and sell and price its products.
Competition is fierce, and the Internet is changing the way almost every
industry produces and sells products and services. It is a medium for
efficiently reducing the cost and time of comparison shopping, for delivering
products more quickly and cheaply and for making the performance of goods more
transparent. This results in driving demand for quality products, bringing down
the price of commodity products and increasing the pressure on companies to
continuously deliver more value-added products and services.
2
<PAGE>
COMMENTARY
Economic concerns in the first quarter contributed to the "Tale of Two
Markets". Investors were concerned that the Federal Reserve Board (the "Fed")
would continue to raise interest rates in response to strong growth due to
consumer spending fueled by wealth created in the strong stock market. Again,
companies were divided into winners and losers. Technology, telecommunications
and Internet companies initially perceived to be impervious to higher interest
rates and a slower economy tended to do well. The majority of companies,
however, were perceived to be vulnerable to a slowdown in the economy and
consumer spending and to higher interest rates and higher oil prices. Banks,
airlines, railroads, utilities, supermarkets, insurance companies, food
companies, industrial manufacturers and consumer staples companies all declined
20% or more from their highs on these concerns.
But, as mentioned earlier, this divergence peaked on March 10. What
changed? The quarter started out with investors pricing a small number of
companies, or "new economy stocks", as benefiting from the new ways of doing
business brought about by the Internet. "Old economy" stocks were priced
significantly lower. By the end of the quarter, however, several industries,
including automobile manufacturers, chemical companies, defense and aerospace
companies, steel-makers and retailers, announced they would join forces to reap
the benefits of an on-line marketplace. With these announcements, investors
began to realize that many large, established companies would not give away the
benefits that might accrue from the Internet. At the same time, investors have
begun to shun companies that seem to have no idea when they will turn a profit
and are returning to an examination of companies' valuations.
The result of this two-tiered market is a terrific opportunity to own
quality companies at excellent prices. Valuation remains an important predictor
of future performance. Today, more reasonable valuations for a broad range of
stocks have combined with decent visible economic fundamentals including a
continuing strong economy and incremental demand from reviving foreign
countries. Global economic growth is on solid footing, especially in Asia
(except Japan). A market rebound will likely be more inclusive this year as
investors seek to lower their risk profiles by holding stocks based upon the
quality of the company, operating fundamentals, and most of all, current and
future earnings.
LET'S TALK STOCKS
The following are stock specifics on selected holdings of our Fund.
Favorable earnings prospects do not necessarily translate into higher stock
prices, but they do express a positive trend which we believe will develop over
time.
CENDANT CORP. (CD - $18.50 - NYSE) continues to generate strong revenues from
royalties on its consumer brand franchises in economy class hotels (Ramada,
Day's Inn, Travelodge), real estate brokers (Coldwell Banker, Century 21), car
rental (Avis) and time share properties. The company also has significant
Internet assets that generate both sales and earnings, and is looking for ways
to realize value. With the company's low capital expenditures, strong cash flow
and the resolution of shareholders
3
<PAGE>
suits resulting from the disastrous CUC International acquisition now behind it,
we think the company will eventually be valued at much higher multiples of
earnings and cash flow.
GENERAL MOTORS CORP. (GM - $82.8125 - NYSE) continues to show determination to
realize the embedded value in its share price. Within the next few months it
will exchange GM stock for shares of Hughes Electronics, retire a significant
number of GM shares and boost earnings per share going forward. Longer term, the
company will increase its revenues from new services such as the OnStar global
positioning system that is becoming popular with auto purchasers. The Internet
will lower the cost of designing and manufacturing automobiles, reduce the
amount of capital or plant required, dramatically change the way cars are sold
from the current dealer system and make the product more attractive to the
consumer.
HUGHES ELECTRONICS (GENERAL MOTORS CORP., CL. H) (GMH - $124.50 - NYSE) AND
GILAT SATELLITE NETWORKS LTD. (GILTF - $117.25 - NASDAQ) deliver services
through satellites and have a tremendous opportunity to continue to increase
their customer base over the next year or two. GMH is the largest provider of
satellite direct broadcast television service through its DirecTV offering and
provides the OnStar directional tracking service sold in GM vehicles. GM is
continuing to spin off more of its ownership of the company and that will be
good for the valuation of both Hughes Electronics and General Motors. Gilat made
progress in its transition from a manufacturer of satellites to an Internet and
data service provider when it announced a partnership with Echostar, the second
largest satellite television service provider.
The largest industry sector in the Fund at the end of the first quarter was
financial services. With evidence still pointing to a strong economy, it looks
like the Federal Reserve will continue to raise interest rates for a while.
However, we believe the prices of financial stocks already reflect a rising
interest rate outlook and now represent good value. PROVIDIAN FINANCIAL CORP.
(PVN - $86.625 - NYSE) is a leading issuer of consumer credit, primarily through
its credit cards. The company has continued to achieve above average growth in
assets and earnings relative to the industry and is expanding internationally
and through the Internet. LEHMAN BROTHERS HOLDINGS INC. (LEH - $97.00 - NYSE)
continues to build itself into a globally diversified investment bank.
UNUMPROVIDENT CORP. (UNM - $17.00 - NYSE) is the leading disability insurer
whose credibility has suffered, along with its earnings, since the merger last
year of UNUM and Provident. If this company shows improvement in the next few
quarters, it could eventually trade much higher than its current valuation of
about 6 times earnings. FLEETBOSTON FINANCIAL CORP. (FBF - $36.50 - NYSE) is a
leading regional bank, formed from the merger of Fleet Bank and the Bank of
Boston last year, and the acquisitions of Quick & Reilly and Robertson Stephens.
MATTEL INC. (MAT - $10.4375 - NYSE) is a company with powerful global brands
such as Barbie, American Girl, and Fisher Price, whose efforts to increase
growth over the past year led to a disastrous acquisition. In the first quarter
of 2000, the company's Chief Executive Officer stepped down and Mattel admitted
that the acquisition of The Learning Company in 1998 was a mistake and would be
sold. The company's earning power is not reflected in the stock price, which has
considerable upside once Mattel hires a CEO who can instill some credibility in
the ability of the company to generate consistent returns.
4
<PAGE>
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 discount brokerage firms.
INTERNET
You can now visit us on the Internet. Our home page 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].
IN CONCLUSION
It is not hard to find inexpensive companies today. The hard part today is
identifying those companies that have a catalyst or sequence of events that will
cause investors to revalue the company's assets upwards over the next few years
so that your money is working for you.
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/ BARBARA G. MARCIN
BARBARA G. MARCIN, CFA
Portfolio Manager
April 14, 2000
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
MARCH 31, 2000
--------------
Providian Financial Corp. UnumProvident Corp.
Cendant Corp. Gilat Satellite Networks Ltd.
General Motors Corp., Cl. H (Hughes Electronics) Mattel Inc.
Williams Communications Group Inc. Lehman Brothers Holdings Inc.
Compaq Computer Corp. Washington Mutual Inc.
- --------------------------------------------------------------------------------
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 -- MARCH 31, 2000 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ------
COMMON STOCKS -- 74.6%
AEROSPACE -- 0.9%
2,000 Rockwell International Corp. .... $ 83,625
----------
AUTOMOTIVE -- 2.1%
2,500 General Motors Corp. ............ 207,031
----------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 1.8%
2,500 Delphi Automotive Systems Corp. . 40,000
8,000 Federal-Mogul Corp. ............. 133,500
----------
173,500
----------
BUSINESS SERVICES -- 3.5%
18,200 Cendant Corp.+ .................. 336,700
----------
COMMUNICATIONS EQUIPMENT -- 6.4%
2,000 Gilat Satellite Networks Ltd.+ .. 234,500
2,500 L-3 Communications Holdings Inc.+ 130,000
4,900 Williams Communications Group Inc.+ 253,881
----------
618,381
----------
COMPUTER HARDWARE -- 4.5%
800 3Com Corp.+ ..................... 44,500
9,000 Compaq Computer Corp. ........... 239,625
1,300 International Business Machines Corp. 153,400
----------
437,525
----------
CONSUMER PRODUCTS -- 2.4%
22,000 Mattel Inc. ..................... 229,625
----------
DIVERSIFIED INDUSTRIAL -- 2.9%
7,000 Crane Co. ....................... 164,937
1,000 Honeywell Inc. .................. 52,687
1,000 Textron Inc. .................... 60,875
----------
278,499
----------
ELECTRONICS -- 1.0%
700 Intel Corp. ..................... 92,356
----------
ENERGY AND UTILITIES -- 7.2%
4,500 Baker Hughes Inc. ............... 136,125
2,500 Burlington Resources Inc. ....... 92,500
5,000 Conoco Inc., Cl. A .............. 123,125
3,000 EOG Resources Inc. .............. 63,562
1,000 Exxon Mobil Corp. ............... 77,813
1,500 Kinder Morgan Energy Partners LP 59,531
3,100 Kinder Morgan Inc. .............. 106,950
1,000 Williams Companies Inc. (The) ... 43,937
----------
703,543
----------
MARKET
SHARES VALUE
------ ------
ENTERTAINMENT -- 1.8%
1,800 Disney (Walt) Co. ............... $ 74,475
2,000 Viacom Inc., Cl. B+ ............. 105,500
----------
179,975
----------
EQUIPMENT AND SUPPLIES -- 1.3%
3,000 Parker Hannifin Corp. ........... 123,938
----------
FINANCIAL SERVICES -- 11.7%
1,300 Amvescap plc, ADR ............... 92,300
3,000 Countrywide Credit Industries Inc. 81,750
2,300 Lehman Brothers Holdings Inc. ... 223,100
1,400 Mellon Financial Corp. .......... 41,300
600 Morgan (J.P.) & Co. Inc. ........ 79,050
1,600 Morgan Stanley Dean Witter & Co. 130,500
2,000 Paine Webber Group Inc. ......... 88,000
4,600 Providian Financial Corp. ....... 398,475
----------
1,134,475
----------
FINANCIAL SERVICES: BANKS -- 5.1%
800 Chase Manhattan Corp. ........... 69,750
1,500 Citigroup Inc. .................. 88,969
2,000 FleetBoston Financial Corp. ..... 73,000
8,000 Washington Mutual Inc. .......... 212,000
1,200 Wells Fargo & Co. ............... 49,125
----------
492,844
----------
FINANCIAL SERVICES: INSURANCE -- 7.1%
1,000 Chubb Corp. ..................... 67,563
5,600 Everest Reinsurance Holdings Inc. 182,700
5,000 Travelers Property Casualty Corp.,
Cl. A ......................... 206,250
14,000 UnumProvident Corp. ............. 238,000
----------
694,513
----------
HEALTH CARE -- 4.1%
1,500 Abbott Laboratories ............. 52,781
3,300 American Home Products Corp. .... 176,963
1,000 Bristol-Myers Squibb Co. ........ 57,750
600 Johnson & Johnson ............... 42,038
2,000 Pfizer Inc. ..................... 73,125
----------
402,657
----------
PUBLISHING -- 1.5%
1,500 Dow Jones & Co. Inc. ............ 107,719
1,000 New York Times Co., Cl. A ....... 42,938
----------
150,657
----------
RETAIL -- 1.5%
3,500 Federated Department Stores Inc.+ 146,125
----------
6
<PAGE>
THE GABELLI BLUE CHIP VALUE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- MARCH 31, 2000 (UNAUDITED)
- --------------------------------------------------------------------------------
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
SATELLITE -- 2.8%
2,200 General Motors Corp., Cl. H+ .... $ 273,900
----------
SPECIALTY CHEMICALS -- 1.5%
10,000 Lyondell Chemical Co. ........... 147,500
----------
TELECOMMUNICATIONS -- 3.5%
1,000 SBC Communications Inc. ......... 42,000
1,900 Sprint Corp. .................... 119,700
2,400 US West Inc. .................... 174,300
----------
336,000
----------
TOTAL COMMON STOCKS ............. 7,243,369
----------
TOTAL INVESTMENTS -- 74.6%
(Cost $6,289,905) ............. 7,243,369
OTHER ASSETS AND
LIABILITIES (NET) -- 25.4% .... 2,468,475
----------
(783,392 shares outstanding) .. $9,711,844
==========
------------------------
+ Non-income producing security.
ADR - American Depositary Receipt.
7
<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 Karl Otto Pohl
CHAIRMAN AND CHIEF FORMER PRESIDENT
INVESTMENT OFFICER DEUTSCHE BUNDESBANK
GABELLI ASSET MANAGEMENT INC.
Anthony J. Colavita Werner J. Roeder, MD
ATTORNEY-AT-LAW MEDICAL DIRECTOR
ANTHONY J. COLAVITA, P.C. LAWRENCE HOSPITAL
Vincent D. Enright
FORMER SENIOR VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
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.
- --------------------------------------------------------------------------------
GAB402Q100SR
[PHOTO OMITTED]
THE
GABELLI
BLUE CHIP VALUE
FUND
FIRST QUARTER REPORT
MARCH 31, 2000
