THE GABELLI BLUE CHIP VALUE FUND
ANNUAL REPORT
DECEMBER 31, 1999
[Photo of Barbara Marcin omitted]
BARBARA MARCIN
TO OUR SHAREHOLDERS,
The past year remained a difficult environment for value stocks, which
have not had their day in a few years. Investors continued to be unwilling to
own stocks with poor short term fundamentals, even if their valuations have
discounted the bad times. The market continued along the concentrated path that
it took in 1998, when the world seemed poised on the brink of financial
disaster. At that time, investors sold off any asset class and security that was
considered of lesser quality, and bid up larger capitalization growth stocks and
U.S. Treasury bonds. The Treasury market gave back that premium over the past
year, with 1999 being the worst year for the bond market since regular sales of
these securities began 22 years ago.
Interest rates rose to 6.5% at year-end from 5.0% at the beginning of the
year. The deterioration in the broad market's basic foundation that began in
April 1998 also continued in 1999. Even within the Standard & Poor's 500 Index
there were more declining issues than advancing issues, with 256 issues
declining, 3 unchanged and 241 rising in price.
INVESTMENT PERFORMANCE
For the fourth quarter ended December 31, 1999, the Gabelli Blue Chip
Value Fund's (the "Fund") total return was 23.46%. The Standard & Poor's ("S&P")
500 Index and Lipper Large-Cap Value Fund Average had total returns of 14.87%
and 8.75%, 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 December 31, 1999, the Fund had a
cumulative total return of 17.78%. The S&P 500 Index and Lipper Large-Cap Value
Fund Average rose 8.34% and 5.38%, respectively, over the same period.
<PAGE>
INVESTMENT RESULTS (a)
- --------------------------------------------------------------------------------
QUARTER
-------------------------------------
1ST 2ND 3RD 4TH YEAR
--- --- --- --- ----
1999: Net Asset Value .. -- -- $9.54 $11.65 $11.65
Total Return ..... -- -- (2.9)%(b) 23.5% 17.8%(b)
- --------------------------------------------------------------------------------
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 December 31, 1999 and may not be indicative of long term results.
- --------------------------------------------------------------------------------
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
turnaround scenario or a catalyst that would return the company to a higher
valuation. Generally, there are three reasons we believe that a company would be
undervalued: either it is out of favor relative to the economic or operating
environment, underestimated on an asset valuation basis, or it may be a growth
company that has fallen temporarily out of favor. We especially like to invest
in companies that have strong franchises or brands because this offers us a
margin of safety in valuing a company's assets.
COMMENTARY
The silver lining in this value cloud is that there are an extraordinary
number of stocks which are trading at low multiples to earnings and or cash flow
estimates, which frequently already reflect reduced expectations. These include
consumer companies such as Mattel (12 times 2000 earnings), Cendant (8 times
2000 cash flow) and General Motors (7 times 2000 earnings); capital goods
companies such as Parker Hannifin (15 times 2000 earnings), Crane (10 times 2000
earnings) and Rockwell (14 times 2000 earnings); and financial services
companies such as Providian, (15 times 2000 earnings), Lehman Brothers (10 times
2000 earnings) and Chubb (12 times 2000 earnings). These are reasonable prices
for stocks that already appear to have priced in negative scenarios of higher
interest rates or a looming recession.
2
<PAGE>
There are many fundamental reasons to like these lower priced stocks. For
one thing, it is hard to see how we can have yet another year of positive
corporate earnings - which we expect - and positive economic growth and still
have a continued narrow market. And with the improving overseas economies and
accelerating exports to them, significantly undervalued manufacturing and
capital goods companies should do well.
It is easy to be concerned about the overall market. The market multiples
of earnings and cash flow are at all time highs. The broad market, as measured
by the S&P 500, has just experienced its fifth year of double-digit returns, an
unprecedented string of wins. The Nasdaq Composite was up over 80% in 1999, its
best year ever.
Technology stocks were clearly the favorites during the past few years,
and in 1999, along with telecommunications issues, they became "required
holdings" for many investors. The valuations placed on many of the technology
stocks rose to multiples of 2 to 3 times these companies' growth rates. The
strength in these sectors was derived from the glowing prospects of the growth
of the Internet, as the extraordinary changes brought about by the Internet
fueled investors' sense of wonder and infinite possibilities.
The degree of valuation difference between the better performing companies
and those with mediocre near term earnings has reached a new high. Investors
have been willing to pay an average of 2 to 3 times the earnings growth rate for
the most favored companies, such as General Electric, Cisco, and Wal-Mart.
However, investors do not seem willing to pay even 1 times longer term earnings
growth rates for more cyclical companies such as General Motors, or for
companies experiencing current earnings difficulties such as Chubb or Mattel.
At the same time, investors became so enamoured of new ways of
communicating and selling over the Internet that they became venture capitalists
to an extraordinary degree. Suddenly, individuals were willing to buy the stock
of companies whose lack of earnings and even sales would have made it impossible
to get past the venture capitalist stage just two years ago. These companies
even found willing investors for their secondary offerings, coming back to the
market shortly after their initial offerings, although the money sought was
targeted mostly for current expenses such as advertising. It was also common for
the chief executive officers of these companies to proclaim that they could not
and would not predict when the company would become profitable. Many of these
companies skyrocketed on their first days as public companies and still trade at
lofty prices.
While it has been somewhat frustrating to see investors ignore blue chip
value stocks with solid earnings and cash flow selling at attractive prices, the
flip side is that our portfolio holds excellent value. We concentrate on buying
larger capitalization, established companies that have brand and franchise
values. These "blue chip value" companies possess the financial strength to
rejuvenate growth and broadly distribute their products. In addition, there is
generally tremendous shareholder pressure on these larger companies to change
management or strategy when returns on the company's assets are poor for more
than a year or so.
3
<PAGE>
COUNTING THE CHIPS
Solid performance in the Fund since inception came from some of the
largest holdings, such as GM's Hughes Electronics, Cendant, Gilat Satellite,
Williams Communications Group, Amvescap, and Lehman Brothers. Other holdings
started out as excellent values and unfortunately, remained just that at year
end. These included Bell Atlantic, Providian Financial, Compaq, American Home
Products, Federated Department Stores and Travelers Property Casualty Corp.
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.
ALLSTATE CORP. (ALL - $24.0625 - NYSE), CHUBB CORP. (CB - $56.3125 - NYSE),
EVEREST REINSURANCE HOLDINGS INC. (RE - $22.3125 - NYSE) AND TRAVELERS PROPERTY
CASUALTY CORP. (TAP - $34.25 - NYSE) are in the property and casualty insurance
business. This sector of the insurance industry has been terrible over the past
few years, as price wars and higher than expected losses hurt company earnings.
These stocks have no prospects of improvement built into them and are selling at
their lowest multiple of earnings, which already reflect reduced expectations.
As the pricing has begun to bottom out, we believe that recognition of the brand
and franchise value these companies possess offer strong upside once the upturn
in earnings starts to become visible.
AMERICAN HOME PRODUCTS INC. (AHP - $39.25 - NYSE) has one of the best pipelines
in the drug industry, and should experience accelerating revenues and earnings
over the next several years. The company's stock sold off dramatically in 1999
because of (now settled) diet drug litigation and a messy fight with Pfizer over
the acquisition of Warner-Lambert. As this deal falls apart, AHP itself becomes
a valuable target.
BELL ATLANTIC CORP. (BEL - $61.5625 - NYSE) has accelerating revenue and
earnings as it enters the long distance and direct subscriber line Internet
service business. The stock price should begin to reflect these trends in 2000.
CENDANT CORP.'S (CD - $26.5625 - NYSE) earnings come primarily from royalties on
revenues generated from its strong consumer franchise brands in economy class
hotels (Ramada, Day's Inn, Travelodge), real estate brokers (Coldwell Banker,
Century 21), car rental (Avis) and time share vacation properties. The company
also has significant Internet assets that generate both sales and earnings.
Cendant had an event in late 1999 which should go a long way to closing the
quality discount earned after the disastrous merger with CUC in 1998. Liberty
Media Group made an investment in the company and its chairman, John Malone,
joined the Cendant board. With the company's low capital expenditures, strong
cash flow, and majority of revenue based upon long term contracts, we think the
company should trade at higher EBITDA multiples.
4
<PAGE>
HUGHES ELECTRONICS (GENERAL MOTORS CORP., CL. H) (GMH - $96.00 - NYSE) AND GILAT
SATELLITE NETWORKS LTD. (GILTF - $118.75 - NASDAQ) deliver services through
satellites. GMH is the largest provider of satellite direct broadcast television
services through its DirecTV offering and provides the OnStar directional
tracking system sold in GM vehicles. Pressure has mounted on GM to spin the
company off. Gilat is making the transition from a manufacturer of satellites to
offering telephony and data services to businesses and consumers.
LEHMAN BROTHERS HOLDINGS INC. (LEH - $84.6875 - NYSE) has slowly built itself
from an investment firm with a strong US bond underwriting business into a
globally diversified investment bank/brokerage firm. Because of its traditional
bond strength, the company still receives a large discount to the group of which
it has become a peer. It deserves to trade in line with its investment banking
peers.
MATTEL INC. (MAT - $13.125 - NYSE) is a powerful brand name company that has
been reinvesting earnings to accelerate growth and is using technology to
improve the sales volume of existing products. Mattel's brands include Barbie,
American Girl, Hot Wheels and Fisher Price. The company needs to show a return
to growth in order to achieve an improved earnings multiple.
PROVIDIAN FINANCIAL CORP. (PVN - $91.0625 - NYSE) is the sixth-largest credit
card issuer and a leader in providing services to credit challenged consumers.
The company should continue its above average growth in assets and earnings
relative to the industry through international expansion and Internet delivery.
WILLIAMS COMMUNICATIONS GROUP INC. (WCG - $28.9375 - NYSE) is in the process of
completing its nationwide fiber optic network focused on providing data,
Internet and voice services to communications providers. Management has a proven
track record in this business (having created and sold a network to LDDS in
1995) and has entered into strategic alliances to secure long term contracts for
its network from telecommunications providers such as SBC, Telefonos de Mexico,
Metromedia and US West.
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 Gabelli Blue Chip Value Fund and other Gabelli Funds are
available through the no-transaction fee programs at many major discount
brokerage firms.
5
<PAGE>
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/ signature
BARBARA G. MARCIN, CFA
Portfolio Manager
January 31, 2000
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
DECEMBER 31, 1999
-----------------
Cendant Corp. General Motors Cl. H (Hughes Electronics)
Gilat Satellite Networks Ltd. Amvescap plc
Providian Financial Corp. Travelers Property Casualty Corp.
Lehman Brothers Holdings Inc. Bell Atlantic Corp.
Williams Communications Group Seagate Technology 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.
6
<PAGE>
THE GABELLI BLUE CHIP VALUE FUND
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS -- 94.8%
AEROSPACE -- 0.7%
1,000 Rockwell International Corp. ... $ 53,856 $ 47,875
---------- ----------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 3.3%
2,500 Dana Corp. ..................... 68,719 74,844
8,000 Federal-Mogul Corp. ............ 158,206 161,000
---------- ----------
226,925 235,844
---------- ----------
BUSINESS SERVICES -- 8.4%
17,700 Cendant Corp.+ ................. 307,847 470,156
2,000 United Parcel Service Inc., Cl. B 100,000 138,000
---------- ----------
407,847 608,156
---------- ----------
CABLE -- 2.1%
2,000 MediaOne Group Inc.+ ........... 137,325 153,625
---------- ----------
COMMUNICATIONS EQUIPMENT -- 9.3%
2,700 Gilat Satellite
Networks Ltd.+ ................ 130,451 320,625
1,500 L-3 Communications
Holdings Inc.+ ................ 61,219 62,437
10,000 Williams Communications
Group Inc.+ ................... 230,000 289,375
---------- ----------
421,670 672,437
---------- ----------
COMPUTER HARDWARE -- 7.5%
2,000 3Com Corp.+ .................... 57,810 94,000
5,400 Compaq Computer Corp. .......... 131,032 146,137
1,300 International Business
Machines Corp. ................ 126,446 140,400
3,500 Seagate Technology Inc.+ ....... 115,812 162,969
---------- ----------
431,100 543,506
---------- ----------
CONSUMER PRODUCTS -- 2.2%
12,000 Mattel Inc. .................... 156,288 157,500
---------- ----------
DIVERSIFIED INDUSTRIAL-- 1.7%
6,000 Crane Co. ...................... 113,550 119,250
---------- ----------
ENERGY AND UTILITIES-- 5.3%
2,000 Baker Hughes Inc. .............. 33,850 42,125
2,400 Conoco Inc., Cl. A ............. 65,032 59,400
1,500 Halliburton Co. ................ 62,075 60,375
1,500 Kinder Morgan Energy
Partners LP ................... 60,150 62,156
6,700 Kinder Morgan Inc. ............. 139,391 135,256
1,000 USX-Marathon Group ............. 27,738 24,688
---------- ----------
388,236 384,000
---------- ----------
MARKET
SHARES COST VALUE
------ ---- ------
ENTERTAINMENT -- 2.6%
1,800 Disney (Walt) Co. .............. $ 50,665 $ 52,650
2,200 Viacom Inc., Cl. B+ ............ 101,073 132,962
---------- ----------
151,738 185,612
---------- ----------
EQUIPMENT AND SUPPLIES -- 1.4%
2,000 Parker Hannifin Corp. .......... 88,144 102,625
---------- ----------
FINANCIAL SERVICES -- 14.6%
3,200 Amvescap plc, ADR .............. 144,885 180,800
3,000 Countrywide Credit
Industries Inc. ............... 93,300 75,750
3,500 Lehman Brothers
Holdings Inc. ................. 199,756 296,406
400 Morgan (J.P.) & Co. Inc. ....... 55,295 50,650
1,000 Morgan Stanley Dean
Witter & Co. .................. 101,444 142,750
3,400 Providian Financial Corp. ...... 287,920 309,612
---------- ----------
882,600 1,055,968
---------- ----------
FINANCIAL SERVICES: BANKS -- 5.9%
4,500 Bank One Corp. ................. 141,631 144,281
500 Chase Manhattan Corp. .......... 38,644 38,844
1,100 Citigroup Inc. ................. 61,086 61,119
6,000 Washington Mutual Inc. ......... 154,425 156,000
700 Wells Fargo & Co. .............. 33,660 28,306
---------- ----------
429,446 428,550
---------- ----------
FINANCIAL SERVICES: INSURANCE -- 9.2%
3,500 Allstate Corp. ................. 93,694 84,000
1,000 Chubb Corp. .................... 55,738 56,312
4,100 Everest Reinsurance
Holdings Inc. ................. 105,030 91,481
1,000 Hartford Financial Services
Group Inc. .................... 46,900 47,375
1,100 MBIA Inc. ...................... 57,486 58,094
5,000 Travelers Property Casualty
Corp., Cl. A .................. 176,438 171,250
5,000 UnumProvident Corp. ............ 155,931 160,313
---------- ----------
691,217 668,825
---------- ----------
HEALTH CARE -- 1.6%
3,000 American Home Products Corp. ... 135,156 118,313
---------- ----------
HOTELS AND GAMING -- 1.4%
4,200 Starwood Hotels & Resorts
Worldwide Inc. ................ 89,660 98,700
---------- ----------
See accompanying notes to financial statements.
7
<PAGE>
THE GABELLI BLUE CHIP VALUE FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- ------
PUBLISHING -- 3.3%
2,200 Dow Jones & Co. Inc. ........... $ 128,941 $ 149,600
1,800 New York Times Co., Cl. A ...... 74,115 88,425
---------- ----------
203,056 238,025
---------- ----------
RETAIL -- 2.1%
3,000 Federated Department
Stores Inc.+ .................. 137,063 151,688
---------- ----------
SATELLITE -- 4.5%
3,000 General Motors Corp., Cl. H+ ... 154,287 288,000
1,600 Loral Space &
Communications Ltd.+ .......... 29,211 38,900
---------- ----------
183,498 326,900
---------- ----------
SPECIALTY CHEMICALS -- 2.1%
4,700 Lyondell Chemical Co. .......... 66,379 59,925
2,600 Monsanto Co. ................... 97,255 92,625
---------- ----------
163,634 152,550
---------- ----------
TELECOMMUNICATIONS -- 5.6%
2,700 Bell Atlantic Corp. ............ 170,873 166,219
1,800 Sprint Corp. ................... 82,040 121,163
1,600 US West Inc. ................... 87,518 115,200
---------- ----------
340,431 402,582
---------- ----------
TOTAL COMMON STOCKS ............ 5,832,440 6,852,531
---------- ----------
PRICIPAL MARKET
AMOUNT COST VALUE
------ ---- ------
U.S. TREASURY OBLIGATIONS -- 4.6%
$337,000 U.S. Treasury Bills,
5.30% to 5.47%++,
due 01/13/00 to 03/16/00 ...... $ 333,768 $ 333,934
---------- ----------
TOTAL
INVESTMENTS -- 99.4% ........... $6,166,208 7,186,465
==========
OTHER ASSETS AND
LIABILITIES (NET) -- 0.6% .................. 41,412
----------
NET ASSETS -- 100.0%
(620,276 shares outstanding) .............. $7,227,877
==========
NET ASSET VALUE,
OFFERING AND REDEMPTION
PRICE PER SHARE ........................... $11.65
======
------------------------
For Federal tax purposes:
Aggregate cost ............................. $6,193,481
==========
Gross unrealized appreciation .............. $1,102,043
Gross unrealized depreciation .............. (109,059)
----------
Net unrealized appreciation ................ $ 992,984
==========
------------------------
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
See accompanying notes to financial statements.
8
<PAGE>
THE GABELLI BLUE CHIP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost $6,166,208) ..... $7,186,465
Cash ........................................ 1,222
Dividends receivable ........................ 2,756
Receivable for Fund shares sold ............. 25,097
Receivable from adviser ..................... 49,488
----------
TOTAL ASSETS ................................ 7,265,028
----------
LIABILITIES:
Payable for Fund shares redeemed ............ 1,028
Payable for investment advisory fees ........ 6,845
Payable for distribution fees ............... 1,711
Other accrued expenses ...................... 27,567
----------
TOTAL LIABILITIES ........................... 37,151
----------
NET ASSETS applicable to 620,276
shares outstanding ........................ $7,227,877
==========
NET ASSETS CONSIST OF:
Shares of beneficial interest, at par value . $ 620
Additional paid-in capital .................. 6,224,510
Distributions in excess of net realized
gain on investments ....................... (17,510)
Net unrealized appreciation
on investments ............................ 1,020,257
----------
TOTAL NET ASSETS ............................ $7,227,877
==========
NET ASSET VALUE, offering and redemption
price per share ($7,227,877 / 620,276
shares outstanding; 500,000,000 shares
authorized of $0.001 par value) ........... $11.65
======
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1999 +
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends ............................... $ 15,998
Interest ................................ 9,964
----------
TOTAL INVESTMENT INCOME ................. 25,962
----------
EXPENSES:
Investment advisory fees ................ 17,312
Distribution fees ....................... 4,328
Registration fees ....................... 26,600
Legal and audit fees .................... 13,000
Shareholder communications expenses ..... 10,000
Custodian fees .......................... 7,073
Trustees' fees .......................... 5,350
Shareholder services fees ............... 268
Miscellaneous expenses .................. 171
----------
TOTAL EXPENSES .......................... 84,102
----------
Less: Expense reimbursements ............ (49,488)
----------
TOTAL NET EXPENSES ...................... 34,614
----------
NET INVESTMENT LOSS ..................... (8,652)
----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments ........ 64,346
Net change in unrealized appreciation
on investments ........................ 1,020,257
----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS ........................ 1,084,603
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ....................... $1,075,951
==========
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1999+
------------------
<S> <C>
OPERATIONS:
Net investment loss ........................................................................... $ (8,652)
Net realized gain on investments .............................................................. 64,346
Net change in unrealized appreciation on investments .......................................... 1,020,257
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .......................................... 1,075,951
----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized gain on investments .............................................................. (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 .................... 6,125,130
----------
NET INCREASE IN NET ASSETS .................................................................... 7,127,877
NET ASSETS:
Beginning of period ........................................................................... 100,000
----------
End of period ................................................................................. $7,227,877
==========
--------------
+ From commencement of investment operations on August 26, 1999 through
December 31, 1999.
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
THE GABELLI BLUE CHIP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 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
10
<PAGE>
THE GABELLI BLUE CHIP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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.
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.
For the period ended December 31, 1999, reclassifications were made to decrease
accumulated net investment loss for $8,652 with an offsetting adjustment to
distributions in excess of net realized gain on investments.
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. For the period ended December 31,
1999, the Adviser reimbursed the Fund in the amount of $49,488.
11
<PAGE>
THE GABELLI BLUE CHIP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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 period
ended December 31, 1999, the Fund incurred distribution costs payable to Gabelli
& Company, Inc., an affiliate of the Adviser, of $4,328, 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 period ended
December 31, 1999, other than short term securities, aggregated $8,756,068 and
$2,987,569, respectively.
6. SHARES OF BENEFICIAL INTEREST. Transactions in shares of beneficial interest
were as follows:
PERIOD ENDED
DECEMBER 31, 1999+
------------------------
SHARES AMOUNT
------ ------
Shares sold ..................................... 651,934 $6,533,684
Shares issued upon reinvestment of dividends .... 6,248 70,786
Shares redeemed ................................. (47,906) (479,340)
------- ----------
Net increase ................................ 610,276 $6,125,130
======= ==========
+ From commencement of investment operations on August 26, 1999 through December
31, 1999.
12
<PAGE>
THE GABELLI BLUE CHIP VALUE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout the
period:
PERIOD ENDED
DECEMBER 31, 1999+
------------------
OPERATING PERFORMANCE:
Net asset value, beginning of period .................... $10.00
------
Net investment loss ..................................... (0.01)
Net realized and unrealized gain on investments ......... 1.79
------
Total from investment operations ........................ 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 .......................... $11.65
======
Total return++ .......................................... 17.8%
======
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) .................... $7,228
Ratio of net investment loss to average net assets (b) .. (0.50)%(a)
Ratio of operating expenses to average net assets (b) ... 2.00%(a)
Portfolio turnover rate ................................. 71%
- --------------------------------
+ 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 period ended December 31, 1999, the Adviser voluntarily
reimbursed certain expenses. Before reimbursement, the ratios of operating
expenses and net investment loss to average net assets would have been 4.86%
and (3.36)% for 1999 (annualized), respectively.
See accompanying notes to financial statements.
13
<PAGE>
THE GABELLI BLUE CHIP VALUE FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
The Gabelli Blue Chip Value Fund
We have audited the accompanying statement of assets and liabilities of The
Gabelli Blue Chip Value Fund (the "Fund"), including the portfolio of
investments, as of December 31, 1999, and the related statement of operations,
changes in net assets and the financial highlights for the period August 26,
1999 (commencement of operations) to December 31, 1999. 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 December 31, 1999, by correspondence with
the custodian. 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 Blue Chip Value Fund as of December 31, 1999, and the results of its
operations, the changes in its net assets and the financial highlights for the
period August 26, 1999 to December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
/s/ signature
Ernst & Young LLP
New York, New York
February 11, 2000
- --------------------------------------------------------------------------------
1999 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the fiscal period ended December 31, 1999, the Fund paid to shareholders, on
December 27, 1999, an ordinary income dividend (comprised of short term capital
gains) totaling $0.125 per share. For the fiscal period ended December 31, 1999,
21.52% of the ordinary income dividend qualifies for the dividend received
deduction available to corporations.
U.S. GOVERNMENT INCOME:
The percentage of the ordinary income dividend paid by the Fund during fiscal
period 1999 which was derived from U.S. Treasury securities was 13.61%. 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 Blue Chip Value Fund did not meet this strict requirement in 1999.
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.
- --------------------------------------------------------------------------------
14
<PAGE>
- --------------------------------------------------------------------------------
GABELLI FAMILY OF FUNDS
- --------------------------------------------------------------------------------
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. (NO-LOAD)
PORTFOLIO MANAGER: MARIO J. GABELLI, CFA
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. (NO-LOAD)
PORTFOLIO MANAGER: HOWARD F. WARD, CFA
GABELLI WESTWOOD EQUITY FUND----------------------------------------------------
Seeks to invest primarily in the common stock of seasoned companies believed to
have proven records and above average historical earnings growth. The Fund's
primary objective is capital appreciation. (NO-LOAD)
PORTFOLIO MANAGER: SUSAN M. BYRNE
GABELLI SMALL CAP GROWTH FUND---------------------------------------------------
Seeks to invest primarily in common stock of smaller companies (market
capitalizations less than $500 million) believed to have rapid revenue and
earnings growth potential. The Fund's primary objective is capital appreciation.
(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 well-established, high quality companies that have market
capitalizations of greater than $5 billion. (NO-LOAD)
PORTFOLIO MANAGER: BARBARA MARCIN, CFA
GABELLI WESTWOOD SMALLCAP EQUITY FUND-------------------------------------------
Seeks to invest primarily in smaller capitalization equity securities - market
caps of $1 billion or less. The Fund's primary objective is long-term capital
appreciation. (NO-LOAD)
PORTFOLIO MANAGER: LYNDA CALKIN, CFA
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. (NO-LOAD)
PORTFOLIO MANAGER: PATRICIA FRAZE
GABELLI EQUITY INCOME FUND------------------------------------------------------
Seeks to invest primarily in equity securities with above market average yields.
The Fund pays quarterly dividends and seeks a high level of total return with an
emphasis on income. (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.
(NO-LOAD)
PORTFOLIO MANAGERS: SUSAN M. BYRNE & PATRICIA FRAZE
GABELLI WESTWOOD MIGHTY MITES[SERVICE MARK] 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.
(NO-LOAD)
TEAM MANAGED: MARIO J. GABELLI, CFA,
MARC J. GABELLI, LAURA K. LINEHAN AND
WALTER K. WALSH
GABELLI VALUE FUND--------------------------------------------------------------
Seeks to invest in securities of companies believed to be undervalued. The
Fund's primary objective is long-term capital appreciation. MAX. SALES CHARGE:
5 1/2%
PORTFOLIO MANAGER: MARIO J. GABELLI, CFA
GABELLI UTILITIES FUND----------------------------------------------------------
Seeks to provide a high level of total return through a combination of capital
appreciation and current income. (NO-LOAD)
PORTFOLIO MANAGER: TIMOTHY O'BRIEN, CFA
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
GABELLI MATHERS FUND------------------------------------------------------------
Seeks long-term capital appreciation in various market conditions without
excessive risk of capital loss. (NO-LOAD)
PORTFOLIO MANAGER: HENRY VAN DER EB, CFA
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
GABELLI CASH MANAGEMENT SHARES OF
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 bills, notes and bonds. 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
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.
GLOBAL SERIES
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. (NO-LOAD)
TEAM MANAGED: MARIO J. GABELLI, CFA,
MARC J. GABELLI AND IVAN ARTEAGA, CFA
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. (NO-LOAD)
PORTFOLIO MANAGER: HART WOODSON
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. (NO-LOAD)
PORTFOLIO MANAGER: MARC J. GABELLI
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.
(NO-LOAD)
PORTFOLIO MANAGERS: MARC J. GABELLI
AND CAESAR BRYAN
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. (NO-LOAD)
PORTFOLIO MANAGER: CAESAR BRYAN
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. (NO-LOAD)
PORTFOLIO MANAGER: CAESAR BRYAN
THE SIX FUNDS ABOVE INVEST IN FOREIGN SECURITIES WHICH INVOLVES RISKS NOT
ORDINARILY ASSOCIATED WITH INVESTMENTS IN DOMESTIC ISSUES, INCLUDING CURRENCY
FLUCTUATION, ECONOMIC AND POLITICAL RISKS. THE FUNDS LISTED ABOVE ARE
DISTRIBUTED BY GABELLI & COMPANY, INC.
- --------------------------------------------------------------------------------
TO RECEIVE A PROSPECTUS, CALL 1-800-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.
VISIT OUR WEBSITE AT:
WWW.GABELLI.COM
OR, CALL:
1-800-GABELLI
1-800-422-3554 [BULLET] 914-921-5100 [BULLET]
FAX: 914-921-5118 [BULLET] [email protected]
ONE CORPORATE CENTER, RYE, NEW YORK 10580
<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.
- --------------------------------------------------------------------------------
GAB402Q499SR
[Photo of Mario J. Gabelli omitted]
THE
GABELLI
BLUE CHIP VALUE
FUND
ANNUAL REPORT
DECEMBER 31, 1999
