<PAGE>
THE GABELLI ASSET FUND
One Corporate Center
Rye, New York 10580-1434
SEMI-ANNUAL REPORT
JUNE 30, 1996
TO OUR SHAREHOLDERS,
Rebounding from the inventory contraction of the previous two quarters,
the malaise of a snowy winter and political stalemate in Washington, the economy
surged ahead. Domestic profits will likely benefit despite earnings from
continental European sources being hobbled by a weaker economic backdrop and a
stronger dollar. This stronger than expected economy re-awakened long dormant
inflationary fears and a slumping bond market sounded a cautionary note for
stocks. Still, buoyed by favorable flow of funds -- investment in equity mutual
funds remained near record levels -- the Dow Jones Industrial Average and
Standard & Poors' 500 forged ahead.
INVESTMENT PERFORMANCE - TEN YEAR STRIPES - MORNINGSTAR RATES GABELLI ASSET FUND
During the second quarter ended June 30, 1996, the Fund's total return was
2.4% compared to returns of 4.5%, 2.7%, and 4.0% over the same period for the
Standard & Poor's 500 Index (S&P 500), the Value Line Composite, and Russell
2000 Index, respectively. Each index is an unmanaged indicator of stock market
performance. For the 12 months ended June 30, 1996, the Fund gained 20.6%
including reinvested dividends, versus 26.0% for the S&P 500, 13.9% for the
Value Line Composite, and 23.9% for the Russell 2000 and our own long-term goal
of ten percent real. For the five-year period ended June 30, 1996, the Fund's
return averaged 15.2% annually, versus average annual returns of 15.7%, 15.7%,
and 17.6% for the S&P 500, Value Line Composite, and Russell 2000 Index,
respectively.
For the ten years ended June 30, 1996, the Asset Fund achieved a total
return of 313.8% which equates to an average annual return of 15.3%. This
compares favorably to average annual returns of 13.8% for the S&P 500, 11.4% for
the Value Line Composite and 10.5% for the Russell 2000 over the same period.
Since inception on March 3, 1986 through June 30, 1996, the Fund has had a total
return of 363.9%, which equates to an average annual return of 16.0%. Our
long-term record is excellent. The Asset Fund has received Morningstar's highest
rating -- five stars -- both overall and for the ten years ended June 30, 1996.
It is rated four stars based on three and five year returns. In addition,
BARRON'S, in its July 22, 1996 ranking of the 100 Best Fund Managers, rated the
Gabelli Asset Fund forty-six of all funds tracked. As of June 30, 1996, the
Fund's shareholders numbered 49,713 and total net assets were over $1.1 billion.
The Fund was rated five stars for the 10 year period and four stars for the five
and three year periods ended 6/30/96, among 539, 997 and 1,583 equity funds,
respectively.
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INVESTMENT RESULTS (a)
<TABLE>
<CAPTION>
Quarter
1st 2nd 3rd 4th Year
<S> <C> <C> <C> <C> <C> <C>
1996: Net Asset Value....................... $27.44 $28.09 __ __ __
Total Return.......................... 6.6% 2.4% __ __ __
1995: Net Asset Value....................... $23.84 $25.10 $26.76 $25.75 $25.75
Total Return.......................... 7.3% 5.3% 6.6% 3.7% 24.9%
1994: Net Asset Value....................... $22.63 $22.36 $23.56 $22.21 $22.21
Total Return.......................... (2.9)% (1.2)% 5.4% (1.2)% (0.1)%
1993: Net Asset Value....................... $21.10 $22.10 $23.63 $23.30 $23.30
Total Return.......................... 6.1% 4.7% 6.9% 2.5% 21.8%
1992: Net Asset Value....................... $19.04 $18.91 $19.02 $19.88 $19.88
Total Return.......................... 6.0% (0.7)% 0.6% 8.5% 14.9%
1991: Net Asset Value....................... $17.36 $17.36 $17.90 $17.96 $17.96
Total Return.......................... 11.1% 0.0% 3.1% 3.2% 18.1%
1990: Net Asset Value....................... $16.48 $16.81 $15.21 $15.63 $15.63
Total Return.......................... (4.5)% 2.0% (9.5)% 7.8% (5.0)%
1989: Net Asset Value....................... $16.46 $18.01 $18.73 $17.26 $17.26
Total Return.......................... 12.0% 9.4% 4.0% (1.0)% 26.2%
1988: Net Asset Value....................... $13.49 $14.62 $14.94 $14.69 $14.69
Total Return.......................... 14.4% 8.4% 2.2% 3.5% 31.1%
1987: Net Asset Value....................... $12.97 $13.93 $14.66 $12.61 $12.61
Total Return.......................... 19.6% 7.4% 5.2% (14.0)% 16.2%
1986: Net Asset Value....................... $10.44 $11.21 $11.29 $11.28 $11.28
Total Return.......................... 4.4%(b) 7.4% 0.7% (0.1)% 12.8%(b)
</TABLE>
<TABLE>
<CAPTION>
Average Annual Returns - June 30, 1996 (a)
- -------------------------------------------
<S> <C>
1 Year .............................. 20.6%
5 Year .............................. 15.2%
10 Year .............................. 15.3%
Life of Fund (b) ..................... 16.0%
</TABLE>
<TABLE>
<CAPTION>
Dividend History
Payment (ex) Date Rate Per Share Reinvestment Price
<S> <C> <C>
December 29, 1995 $2.000 $25.75
December 30, 1994 $1.056 $22.21
December 31, 1993 $0.921 $23.30
December 31, 1992 $0.755 $19.88
December 31, 1991 $0.505 $17.96
December 31, 1990 $0.770 $15.63
December 29, 1989 $1.278 $17.26
December 30, 1988 $0.775 $14.69
January 4, 1988 $0.834 $12.07
March 9, 1987 $0.505 $12.71
</TABLE>
(a) Total returns and average annual returns reflect changes in share price and
reinvestment of dividends and are net of expenses. The net asset value of the
Fund is reduced on the ex-dividend (payment) date by the amount of the dividend
paid. Of course, returns represent past performance 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 operations on March 3, 1986.
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WHAT WE DO
We do what is described as bottom-up research: we read annual reports; we
visit the competition; we talk to customers; we go belly to belly with
management. We structure our portfolio by picking stocks.
In past reports, we have tried to articulate our investment philosophy and
methodology. The following graphic further illustrates the interplay among the
four components of our valuation approach.
Our focus is on free cash flow; earnings before interest, taxes,
depreciation and amortization (EBITDA) minus the capital expenditures necessary
to grow the business. We believe free cash flow is the best barometer of a
business' value. Rising free cash flow often foreshadows net earnings
improvement. We also look at earnings per share trends. Unlike Wall Street's
ubiquitous earnings momentum players, we do not try to forecast earnings with
accounting precision and then trade stocks based on quarterly expectations and
realities. We simply try to position ourselves in front of long-term earnings
uptrends. In addition, we analyze on and off balance sheet assets and
liabilities such as plant and equipment, inventories, receivables, and legal,
environmental and health care issues. We want to know everything and anything
that will add to or detract from our private market value (PMV) estimates.
Finally, we look for a catalyst; something happening in the company's industry
or indigenous to the company itself that will surface value. In the case of the
independent telephone stocks, the catalyst is a regulatory change. In the
agricultural equipment business, it is the increasing worldwide demand for
American food and feed crops. In other instances, it may be a change in
management, sale or spin-off of a division or the development of a profitable
new business.
Once we identify stocks that qualify as fundamental and conceptual
bargains, we then become patient investors. This has been a proven long-term
method for preserving and enhancing wealth in the U.S. equities market. At the
margin, our new investments are focused on businesses that are well managed and
will benefit from sustainable long-term economic dynamics. These include macro
trends, such as globalization of the market in filmed entertainment and
telecommunications, and micro trends, such as increased focus on productivity
enhancing goods and services.
COMMENTARY
THE ECONOMY AND THE STOCK MARKET
There is an old saying that, "If you laid all the world's economists end
to end, they wouldn't reach a conclusion". To that, we would add, ". . . and if
they did, it would most likely be the wrong one". To wit, let's take a short
trip down memory lane to the beginning of this year. Following a sluggish fourth
quarter 1995 (0.5% GDP growth), the consensus expected only a modest pickup in
economic activity in the first half of 1996. Inflation was declared dead and it
would be just a matter of time before the Federal Reserve would jump-start the
economy by dropping short-term interest rates. Long rates would follow and we
would see a vibrant bond market that would help sustain the bull market in
stocks. Some well-known mutual fund managers, and one particularly visible, now
former, mutual fund manager, placed big bets on this economic scenario.
[GRAPH INSERTED HERE]
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What actually happened? The economy started the year strong with 2.3% GDP
growth in the first quarter and gained momentum -- the second quarter is
projected to come in at a 3.5 to 4.0% growth rate. Employment surged with a
series of not so good Fridays for the stock market (employment statistics are
released on the first Friday of every month). Grain prices soared with "beans in
the teens" as the rallying cry in the commodities pits. Higher oil and gasoline
prices made headlines before backing off in early summer. Lo and behold,
inflation was not dead! Bonds dropped and the Fed started hinting that their
next move was more likely up than down. Buoyed by strong cash inflow into equity
mutual funds, the stock market posted good gains. However, an increasingly
choppy market indicated that investors were finally looking down as well as up.
What have we learned from this? Despite being more right than wrong in our
own economic/market projections (we did forecast inflationary pressure and
higher long-term interest rates, but we also expressed limited expectations for
what has proved to be a fairly vibrant stock market), we were once again
reminded that our long held and articulated belief that focusing on the
fundamental value of individual stocks is, over the long term, a safer and
vastly more reliable way to generate consistent returns.
This is not to say that we don't have opinions on the economy and
financial markets. We do and will continue to share them with you. For example,
we have long opined that President Clinton was not likely to make the same
mistake in an election year that the then incumbent President Bush made in 1992.
He'll want a strong economy through the election. While domestic GDP growth is
likely to ebb in the second half from the unsustainable pace of the second
quarter as higher interest rates begin impacting economic activity and the
somewhat overextended American consumer tightens the purse strings, economic
growth should be good through the rest of the year. Corporate earnings will be
decent -- up around 10% for the year. It is inflation, interest rates and the
flow of funds that will call the tune for the stock and bond markets over the
next several quarters.
On the inflation front, we echo our comments from our year-end 1995 letter
to you. Inflation is peeking out of the coffin to which it was consigned by the
majority of Wall Street economists. What are the inflationary gremlins? Oil is a
wild card. The bombing of an American military base in Saudi Arabia may
represent an escalation of terrorism in the Mid-East. Political instability in
the region, along with increasing worldwide demand for oil, could translate into
higher prices. Wholesale food inflation is another wild card. With corn at $5.50
per bushel, soybeans at around $8.50, and wheat above $5.00, it is just a matter
of time before we see higher prices at the supermarket. Retail food inflation
has been moderated in the first half as declining meat prices have partially
compensated for higher grain prices -- cattle and hog farmers slaughter herds
rather than continue to fatten them up with more expensive grain. We will see
higher beef and pork prices next year. Finally and most importantly, we may see
upward pressure on wages as outsourcing, downsizing, globalization of labor and
technology inputs run their course. Strong employment and a potential showdown
between General Motors and the United Auto Workers may prove disquieting. The
recent confirmation of Federal Reserve Chairman Greenspan to another term should
pave the way for an early Fed response to these stirrings of inflation, even if
the action is prior to the election. Long rates are up more than 100 basis
points this year. Long bonds are already down 3% on a total return basis and
nearly double that in price alone. In addition, we expect both candidates to
talk about tax cuts - which could spark more jitters for the long bond. If, as
we anticipate, inflation does hit the 3.5% level in the second half, equity
investors may have cause to pause. In other words, if bonds keep sneezing,
sooner or later stocks will catch a cold.
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Market observers may respond to this note of caution by saying investors
no longer care about the economy, inflation, interest rates or valuations. Flow
of funds is the only thing that matters. The stock market will move relentlessly
higher until all the baby boomers who are pouring money into equity funds reach
retirement age. Other observers point out that the aging of populations around
the world and the explosive growth in private pension plans in industrial
countries such as Japan, Germany, France, Italy and England point to strong
demand for global equities and, ultimately, for U.S. equities. We do not
discount the favorable influence these demographics have on the flow of funds
and on the equities market. We do think valuations matter and competition to
stocks in the form of higher bond yields could easily disrupt this comfortable
scenario.
In previous letters, we shared with you our observations that deals
(takeovers) will dominate the investment landscape. In this report, we want to
highlight other themes.
THE CONSOLIDATORS - THE 1990S GAME
The 1960s was the decade of the conglomerates. Individuals like Harold
Geneen at ITT, Charlie Bluhdorn at Gulf & Western, and Royal Little at Textron
championed corporate growth and stability by bundling non-related businesses.
Wall Street was in love with the conglomerates. And why not? They were using
their shares trading at 12 times earnings to buy smaller less visible companies
at 8 times earnings. Earnings marched steadily upward as did conglomerate stock
prices.
Times change. Wall Street now shuns conglomerates. They are difficult for
analysts to understand and many are saddled with mature low-growth companies
that restrain, rather than contribute to, earnings growth. Corporate managers
are realizing that by shedding non-related divisions through direct sale or
spin-off to shareholders, they are getting much better valuations for their core
businesses. In short, investors are willing to pay more for the sum of the parts
than for the whole. Corporate chieftains like Harvey Golub of American Express
Company (AXP - $44.625 - NYSE), Tom Hays at American Brands, Inc. (AMB - $45.375
- - NYSE) and Bob Allen at AT&T Corp. (T - $62.00 - NYSE) have already
demonstrated the positive impact that consolidation has on stock prices.
Westinghouse Electric Corp.'s (WX - $18.75 - NYSE) Michael Jordan appears to be
following their lead with the acquisition of Infinity Broadcasting Corp. (INF -
$30.00 - NYSE) to compliment the CBS radio network and the revelation that he is
considering spinning off the company's industrial businesses.
There is another type of consolidation creating enthusiasm on Wall Street.
Consolidators are buying competitors, lowering expenses through enlarged buying
power, eliminating corporate overhead and driving growth rates in the process.
Consolidators are looking for fragmented industries where this strategy is most
effective. A prominent consolidator is Wayne Huzienga, who made his first
fortune consolidating the fragmented trash hauling industry with Waste
Management International Inc. (WME - $11.125 - NYSE). He repeated the pattern in
the video rental business via Blockbuster Entertainment. Now, under the
corporate banner of Republic Industries, Inc. (RWIN - $29.125 - NASDAQ), he is
consolidating the used car and electronic security businesses. We believe that
by buying smaller competitors, consolidating operations, and creating a national
brand name franchise, Mr. Huzienga will once again make a lot of money for
himself and Republic Industries shareholders. Other industries where this is
occurring are broadcasters, banks, brokers and, of course, health care.
5
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THE EXCITING WORLD OF FOOD RETAILING
Food retailers are dull. Who in their right mind would want to invest in a
business with such modest revenue growth and paper thin margins? Right now, we
do. There are several positive dynamics unfolding in the retail food industry,
which, for the value investor, make supermarket stocks more exciting than in the
past.
The first is wholesale food inflation. Grain prices are rising. Meat and
poultry prices will follow. Your friendly neighborhood grocer is going to pass
these higher costs on to you and tack on a little extra in the bargain. Yes,
supermarket margins generally rise during periods of wholesale food inflation.
Secondly, like most American industries, supermarkets are successfully reducing
costs through automation. More importantly, expansion has been curtailed.
Finally, just like the American banking industry, food retailing is ripe for
consolidation. Stronger supermarket chains are buying weaker chains, and this is
occurring as international food giants move into the U.S. (most recently, Royal
Ahold buying Stop & Shop) and are either operating them more cost efficiently or
simply closing the doors to eliminate unprofitable locations and increase
margins.
The end result is that the skinny margins in the industry are becoming a
little fatter. With current net after-tax margins averaging around 2% of
revenues, even modest margin improvement produces enormous earnings gains. To
wit, a 0.5% expansion in margins translates into a 25% earnings gain. That's why
smart people like Kohlberg, Kravis, and Roberts bought Bruno's, Inc. (BRNO -
$13.875 - NASDAQ) and why Royal Ahold NV of the Netherlands is buying Stop &
Shop Companies, Inc. (SHP - $33.375 - NYSE). That's why your Fund owns
Delchamps, Inc. (DLCH - $24.25 - NASDAQ) and Giant Food Inc. (GFS'A - $35.875 -
AMEX). Margins and earnings for both companies should improve, and if current
management can't make substantial progress in this favorable environment, a
stronger operator will step in.
CATS - THE PURR-FECT PET
No, not the long running Broadway play, but the pet of convenience for
increasingly busy American families. Cats are great. They don't chew the
furniture, they make their own fun, and you don't have to take them for walks.
Currently there are about 65 million cats in American households. The US
cat population is projected to grow at 5% per annum to about 83 million by the
year 2000. Total spending on cats (food, litter, toys, veterinary care and
medicine) is growing at slightly better than 10% per year. In short, the cat
industry is purring along quite nicely.
We are investing in both ends of the cat. Ralston Purina Group (RAL -
$64.125 - NYSE) is the largest producer of pet food in North America, with cat
food contributing an increasing percentage of total sales. Ralston's pet food
division provided a 39% return on assets in 1995 with cash flow margins in
excess of 20% of sales. Also, Ralston's Golden Cat currently has 25% of the
clumping cat litter market, the fastest growing and highest margin segment of
the category. Ralston's other big business, Eveready Batteries, should also keep
going and going and going . . . Leading market franchises in two strong
industries, combined with shareholder sensitive management which has jettisoned
less profitable businesses, and share repurchases which have halved equity float
in the last ten years, make Ralston
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Purina a terrific long term opportunity. Another portfolio company, First Brands
Corporation (FBR - $27.00 - NYSE), was one of the first into the box with its
Johnny Cat clumping cat litter product, which currently enjoys a 35% share of
the business.
PLACE YOUR BETS
Gaming stocks were among the Fund's best performers in the first half of
1996. We are betting they will continue to do well as gaming industry
consolidation gains momentum. Anti-gaming forces in state and city governments
have successfully contained the geographical spread of gaming. Disappointing
results from riverboat casinos in New Orleans and further up the Mississippi
have refocused the industry's attention on the traditional gambling meccas of
Atlantic City and Las Vegas. The game now becomes increasing market share in
these gambling havens via building new hotel/casinos or acquiring the weaker
operators. Mirage Resorts, Incorporated (MIR - $54.00 - NYSE) favors the former
with two new properties planned for Atlantic City while its new Bellagio nears
completion in Las Vegas. With a healthy balance sheet and plenty of cash, the
new ITT Corporation (ITT - $66.25 - NYSE) will either follow Hilton Hotels
Corporation (HLT - $112.50 - NYSE) and will look for complementary properties in
Las Vegas and Atlantic City, or will spend some money to build more of their
own.
With its strong balance sheet and excellent casino operating record,
Hilton will expand and improve the Bally's franchise. The UK's Ladbroke Group
plc (LADGY - $2.77 - NASDAQ), owner and operator of hotels under the Hilton
brand outside the U.S., could be new Hilton CEO Stephen Bollenbach's next
target. The end result is that there will be larger, better managed, and more
profitable gaming companies within the next several years.
LET'S TALK STOCKS
The following are stock specifics on selected holdings of our Fund's
investments. Favorable EBITDA prospects do not necessarily translate into higher
stock prices, but they do express a positive trend which we believe will develop
over time.
American Brands, Inc. (AMB - $45.375 - NYSE), based in Old Greenwich,
Connecticut, is a holding company for five separate business units:
international tobacco (Gallaher, the leading tobacco company in the U.K.),
distilled spirits (Jim Beam bourbon), hardware and home improvement products
(Moen faucets), office products (Acco) and golf products (Titleist and Pinnacle
golf balls and Cobra golf clubs). All are strong cash flow generators and are
leaders in their respective fields. American Brands is a focused,
marketing-oriented consumer products company. The company's shares trade at a
30% discount to their estimated 1996 PMV of $65, which we expect to increase to
$100 per share by the year 2000. A prospective catalyst is a sale or spinoff of
the distilled spirits and Gallaher tobacco operations. Earnings are projected to
grow 10% or more this year to $3.15 per share.
American Express Company (AXP - $44.625 - NYSE), founded in 1850, is a
diversified travel and financial services company operating in 160 countries
around the world. The company is best known for its American Express charge card
and travel-related services. Another important operation is Minneapolis-based
American Express Financial Advisors, Inc. (formerly IDS Financial Services),
which sells financial products ranging from mutual funds to annuities. Harvey
Golub, Chairman and CEO, has
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refocused AXP on its core "green" charge card and investment management
businesses. The company has significantly expanded the range of merchants who
welcome its cards. Management's objective is virtual parity with bankcard
networks. An electronic interactive service was introduced last year that
enables cardmembers to make travel arrangements, check the status of their
accounts, pay their bills and purchase catalogue merchandise. We believe the
company has been repositioned to enjoy double-digit earnings growth over the
balance of this decade.
Chris-Craft Industries, Inc. (CCN - $44.00 - NYSE),
through its 74% ownership of BHC Communications,
Inc., is primarily a television broadcaster. BHC owns [GRAPH
and operates UPN-affiliated TV stations in New York
(WWOR), Los Angeles (KCOP) and Portland (KPTV). BHC
also controls over 57% of United Television, Inc., which INSERTED
operates an NBC affiliate, an ABC affiliate and three
UPN affiliates. BHC also currently owns 100% of United
Paramount Network (UPN), but Viacom has an option to HERE]
purchase 50% of UPN by January 1997. CCN, with over
$1.5 billion in cash and marketable securities, is
strongly positioned to expand its operations. CCN is
the eighth-largest TVstation group owner in the U.S. and
covers almost 20% of TV households.
Deere & Company (DE - $40.00 - NYSE) is a leading manufacturer of farm equipment
including tractors, planting, harvesting and crop handling equipment. With corn,
soybeans and wheat selling at or near record levels, farm incomes in 1996 and
1997 should show substantial increases. In addition, greater overseas demand for
U.S. wheat should further boost farm income. With raw material costs under
control, Deere's near-term earnings should be impressive. Long-term prospects
for farm equipment manufacturers like Deere are enhanced as standards of living
improve overseas, in countries such as China, as evidenced by increased
consumption of chicken and pork.
General Electric Company (GE - $86.50 - NYSE), having an equity market valuation
of $145 billion, is the largest U.S. company. Earlier this year, GE passed
Nippon Telegraph & Telephone Corporation to become the world's largest
industrial company as well. Operating segments include aircraft engines,
appliances, broadcasting (NBC), industrial products, plastic materials, power
generating turbines and a hugely successful financial services business. Under
Jack Welch's guidance, GE has recorded a series of impressive earnings gains
which are anticipated to continue into the next century.
Neiman Marcus Group, Inc. (NMG - $27.00 - NYSE) operates 27 high-fashion
Neiman-Marcus stores and two Bergdorf Goodman stores in New York City. NMG has
an extensive mail order business. Harcourt General has a controlling, 65% voting
interest in NMG. Escaping the year-end malaise in domestic retailing, Neiman
Marcus is positioned to be an important participant in the trend to
higher-scale, consumer spending. We see earnings increasing to $2.00 per share
in the next few years.
PepsiCo. Inc. (PEP - $35.375 - NYSE) is a leading global beverage, snack food
and restaurant company. These three divisions contributed 37%, 39% and 24%
respectively, to profit in 1995. Some of its many brands include Pepsi, Lay's
Potato Chips and Pizza Hut. We believe Pepsico will achieve a growth rate of at
least 15% in earnings per share for the balance of the decade. Improved
performance from the
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restaurant segment and aggressive marketing strategies should help Pepsico to
seize growth opportunities both domestically and internationally. On April 1st,
Roger A. Enrico became the new CEO. Enrico's background is as a strong and
imaginative marketer.
Pittway Corporation (PRY - $44.00 - ASE; PRY'A - $46.50 - ASE) has undergone
significant changes over the past few years, selling or spinning off businesses
representing half its sales volume and over 60% of its income. The company has
two remaining core businesses: manufacturing and distributing professional
burglar and fire alarm equipment and publishing trade magazines and directories.
Its Ademco Security Group, approximately 75% of revenues, is growing rapidly.
Penton Publishing appears to be emerging from three years of difficult operating
conditions, as operating margins are now showing improvement. Pittway is also
involved in real estate and other promising ventures, including a 37% interest
in Cylink (Pittway owns 8.9 million shares), a leading manufacturer of
encryption equipment, and a 4.5% equity interest in U.S. Satellite Broadcasting
(Pittway owns 4.2 million shares), a direct-to-the-home (DTH) satellite
broadcast company.
Time Warner Inc. (TWX - $39.25 - NYSE), in a bold and brilliant tactic, is
endeavoring to acquire Turner Broadcasting Systems Inc. for $7.5 billion.
Management is currently working to obtain governmental approval of the
transaction. At the same time, efforts are underway to restructure TWX's
partnership with U.S. West Media Group. The acquisition would make TWX the
largest diversified media and publishing company in the world, adding a wealth
of programming to a company already rich in entertainment content. Time Warner
is redirecting its operations into two general areas: copyright and creativity,
which includes publishing, music and filmed entertainment, and distribution,
which is mostly cable. Its two summer movie hits are Twister and Eraser. Under
the aegis of Gerald M. Levin, investors can expect significant returns over the
rest of the decade.
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.
GABELLI U.S. TREASURY MONEY MARKET FUND
Shareholders of any of the Gabelli Funds may invest in The Gabelli U.S.
Treasury Money Market Fund with an initial investment of $3,000 or more. The
Fund provides checkwriting and exchange privileges. The Fund's expenses are
capped at .30% of average net assets, making it one of the most attractive U.S.
Treasury-only money market funds. With dividends that are exempt from state and
local income taxes in all states, the Fund is an excellent vehicle in which to
store idle cash. An investment in The Gabelli U.S. Treasury Money Market Fund is
neither insured nor guaranteed by the U.S. Government. There can be no assurance
that the Fund will maintain a stable $1 per share net asset value. Call us at
1-800-GABELLI (1-800-422-3554) for a prospectus which gives a more complete
description of the Fund, including management fees and expenses. Read it
carefully before you invest or send money.
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INTERNET
You can now visit us on the Internet. Our home page at
http://www.gabelli.com contains information about Gabelli Funds, Inc., the
Gabelli Mutual Funds, quarterly reports, closing prices, IRAs, 401(k)s and other
current news. You can also send us e-mail at info @ gabelli.com.
IN CONCLUSION
At the beginning of 1996, we forecast that higher than expected inflation
and rising long-term interest rates would restrain stock returns. Our economic
forecast has proved remarkably accurate. Thus far, the market has largely
ignored these economic signs and marched steadily forward. Whether it will
continue to do so in the second half is questionable.
As always, we are focusing on the individual stocks in the Fund's
portfolio. By concentrating on niche industry groups and individual companies
that can do well independent of prevailing economic and broad market trends, we
believe we are well positioned to prosper, even in a less generous market
environment. Our investment philosophy is simple and straightforward: buying
good businesses cheap will generate consistently superior returns.
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 GABAX. Please call us during the
day for further information.
We thank you for your confidence in our investing abilities and wish you a
productive and financially rewarding 1996.
Sincerely,
/s/ Mario J. Gabelli
----------------------------------------
MARIO J. GABELLI, CFA
Portfolio Manager and
Chief Investment Officer
August 1, 1996
TOP TEN HOLDINGS
JUNE 30, 1996
Time Warner Inc. Neiman Marcus Group, Inc.
American Express Company Pittway Corporation
PepsiCo Inc. American Brands, Inc.
General Electric Company Deere & Company
Chris-Craft Industries, Inc. Ralston Purina Group
NOTE: The views expressed in this report reflect those of the portfolio manager,
only through the end of the period of this report as stated on the cover. The
manager's views are subject to change at any time based on market and other
conditions.
10
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THE GABELLI ASSET FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ------------ ------------ --------------
<C> <S> <C> <C>
COMMON STOCKS--94.0%
AGRICULTURE--0.3%
200,000 Archer-Daniels-
Midland Co. ............... $ 3,723,994 $ 3,825,000
------------ --------------
AIRLINES--0.9%
117,000 AMR Corporation+........... 7,279,950 10,647,000
------------ --------------
AUTOMOTIVE--1.4%
275,000 General Motors
Corporation............... 9,401,064 14,403,125
24,000 Harley Davidson, Inc. ..... 236,600 987,000
------------ --------------
9,637,664 15,390,125
------------ --------------
AUTOMOTIVE: PARTS AND ACCESSORIES--4.9 %
33,500 APS Holding Corporation,
Class A+.................. 519,250 737,000
30,000 Borg-Warner Automotive,
Inc. ..................... 732,660 1,185,000
200,000 Echlin Inc. ............... 2,607,499 7,575,000
150,000 Federal-Mogul
Corporation............... 2,691,210 2,756,250
675,000 GenCorp Inc. .............. 3,881,263 10,209,375
245,000 Genuine Parts Company...... 8,476,926 11,208,750
205,000 Handy & Harman............. 2,814,301 3,485,000
100,000 Johnson Controls, Inc. .... 2,659,139 6,950,000
135,000 Modine Manufacturing
Company................... 1,302,844 3,577,500
39,875 Myers Industries, Inc. .... 139,536 742,672
170,000 Quaker State Corporation... 2,329,573 2,550,000
40,000 Republic Automotive
Parts, Inc.+.............. 230,625 590,000
115,000 Standard Motor
Products, Inc. ........... 1,008,712 2,055,625
13,200 Superior Industries
International, Inc. ...... 76,515 349,800
145,000 UAP Inc., Class A.......... 1,568,279 1,646,619
10,000 Wynn's International,
Inc. ..................... 143,667 282,500
------------ --------------
31,181,999 55,901,091
------------ --------------
AVIATION: PARTS AND SERVICES--2.6 %
88,000 Boeing Co. ................ 5,766,017 7,667,000
321,000 Coltec Industries Inc.+.... 4,247,503 4,574,250
100,000 Curtiss-Wright
Corporation............... 2,479,222 5,400,000
100,000 General Motors Corporation,
Class H................... 4,331,902 6,012,500
60,000 Hi-Shear Industries
Inc.+..................... 750,932 367,500
25,000 Hudson General
Corporation............... 550,813 884,375
120,000 Precision Castparts
Corp. .................... 4,563,925 5,160,000
------------ --------------
22,690,314 30,065,625
------------ --------------
BROADCASTING--4.8%
3,000 BHC Communications, Inc.,
Class A................... 194,433 293,250
397,206 Chris-Craft Industries,
Inc. ..................... 8,421,873 17,477,064
65,560 Chris-Craft Industries,
Inc.,
Class B................... 1,132,465 2,884,640
135,000 Citicasters Inc. .......... 1,779,125 4,218,750
300,000 Grupo Televisa S.A.,
GDR+...................... 6,197,136 9,225,000
<CAPTION>
MARKET
SHARES COST VALUE
- ------------ ------------ --------------
<C> <S> <C> <C>
150,000 Havas, Sponsored ADR....... $ 2,933,915 $ 3,112,500
72,000 Liberty Corporation........ 1,632,432 2,286,000
53,000 LIN Television
Corporation+.............. 587,795 1,908,000
16,000 Osborn Communications
Corporation+.............. 98,181 176,000
35,000 Paxson Communications
Corporation, Class A+..... 544,809 371,875
420,000 Television Broadcasting
Ltd. ORD.................. 1,893,731 1,576,204
100,000 United Television, Inc. ... 2,880,469 9,800,000
75,000 Westinghouse Electric
Corp. .................... 1,121,126 1,406,250
------------ --------------
29,417,490 54,735,533
------------ --------------
BUSINESS SERVICES--1.8%
24,000 BBN Corporation+........... 742,981 519,000
50,000 Berlitz International,
Inc., New+................ 725,813 1,062,500
80,000 Honeywell, Inc. ........... 3,462,315 4,360,000
120,000 International Business
Machines
Corporation............... 6,030,895 11,880,000
71,000 Landauer, Inc. ............ 441,367 1,499,875
70,000 Nashua Corporation......... 2,287,655 892,500
------------ --------------
13,691,026 20,213,875
------------ --------------
CABLE--3.5%
60,000 BET Holdings, Inc.,
Class A+................... 1,030,737 1,582,500
78,000 Cablevision Systems
Corporation, Class A+..... 4,232,961 3,607,500
60,000 Comcast Corporation,
Class A.................... 876,722 1,102,500
30,000 Comcast Corporation,
Class A, Special.......... 626,505 555,000
396,000 International Family
Entertainment, Inc.,
Class B+.................. 4,768,241 7,326,000
70,000 Shaw Communications Inc.,
Class B, Conv............. 555,126 494,781
815,000 Tele-Communications, Inc.,
Class A+.................. 13,407,538 14,771,875
350,500 Tele-Communications,
Inc./Liberty Media
Group, Class A+........... 8,132,456 9,288,250
60,000 United International
Holdings,
Inc., Class A+............ 824,424 825,000
50,000 US WEST Media Group+....... 832,425 912,500
------------ --------------
35,287,135 40,465,906
------------ --------------
CLOSED-END FUNDS--0.1%
79,628 Royce Value Trust, Inc. ... 888,814 985,397
------------ --------------
CONSUMER PRODUCTS--8.8%
380,000 American Brands, Inc. ..... 13,366,865 17,242,500
400,000 Carter-Wallace, Inc. ...... 6,621,432 5,850,000
213,000 Church & Dwight Co.,
Inc. ..................... 4,832,711 4,446,375
14,000 Culbro Corporation+........ 616,784 834,750
22,000 Duracell International
Inc. ..................... 625,711 951,500
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
THE GABELLI ASSET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ------------ ------------ --------------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
CONSUMER PRODUCTS (CONTINUED)
85,000 Eastman Kodak Company...... $ 4,712,103 $ 6,608,750
150,000 Fieldcrest Cannon, Inc.+... 2,136,897 2,943,750
70,000 First Brands Corporation... 938,875 1,890,000
240,000 General Electric Company... 11,702,211 20,760,000
53,000 Gillette Company........... 1,493,550 3,305,875
12,000 Philips Electronics N.V.,
New York.................. 199,400 391,500
32,000 Procter & Gamble Company... 1,759,100 2,900,000
255,000 Ralston Purina Group....... 10,117,437 16,351,875
90,000 Scotts Company, Class A+... 1,566,705 1,575,000
100,000 Syratech Corporation+...... 1,933,755 2,250,000
122,000 Tambrands Inc. ............ 5,024,810 4,986,750
310,000 Whitman Corporation........ 2,863,188 7,478,750
------------ --------------
70,511,534 100,767,375
------------ --------------
CONSUMER SERVICES--0.4%
200,000 Rollins, Inc. ............. 2,572,982 4,700,000
------------ --------------
DIVERSIFIED INDUSTRIAL--3.4%
129,000 Acme-Cleveland Corp. ...... 3,860,325 3,870,000
15,000 Anixter International
Inc.+..................... 135,131 223,125
67,000 GATX Corporation........... 2,030,611 3,232,750
165,000 ITT Industries Inc. ....... 2,666,861 4,145,625
150,000 Katy Industries, Inc. ..... 1,357,500 2,250,000
6,500 Kyocera Corporation, ADR... 448,063 905,125
360,000 Lamson & Sessions Co.+..... 1,947,317 4,275,000
100,000 Lawter International,
Inc. ..................... 812,500 1,250,000
100,000 Minnesota Mining and
Manufacturing Company..... 5,260,929 6,900,000
80,000 National Service
Industries, Inc. ......... 1,867,011 3,130,000
68,600 Thomas Industries Inc. .... 1,094,677 1,311,975
200,000 Trinity Industries,
Inc. ..................... 2,724,402 6,800,000
------------ --------------
24,205,327 38,293,600
------------ --------------
ELECTRONICS--0.1%
2,000 Hitachi, Ltd., ADR......... 221,767 187,500
10,000 Sony Corporation, ADR...... 544,303 661,250
------------ --------------
766,070 848,750
------------ --------------
ENERGY--3.5%
55,000 Atlantic Richfield
Company................... 5,930,401 6,517,500
35,000 British Petroleum Company
plc, ADR.................. 1,568,033 3,740,625
120,000 Burlington Resources
Inc. ..................... 5,328,611 5,160,000
30,000 Chevron Corporation........ 1,016,500 1,770,000
170,000 Eastern Enterprises........ 4,578,075 5,652,500
60,000 Enron Oil & Gas Company.... 548,976 1,672,500
105,000 Exxon Corporation.......... 6,387,342 9,121,875
20,000 Halliburton Company........ 840,758 1,110,000
70,000 Kaneb Services, Inc.+...... 241,888 227,500
45,000 PacifiCorp................. 875,118 1,001,250
<CAPTION>
MARKET
SHARES COST VALUE
- ------------ ------------ --------------
<C> <S> <C> <C>
80,000 Southwest Gas
Corporation............... $ 1,378,722 $ 1,280,000
30,000 Texaco Inc. ............... 1,890,875 2,516,250
------------ --------------
30,585,299 39,770,000
------------ --------------
ENTERTAINMENT--5.4%
55,000 Bay Meadows Operating
Company................... 908,526 941,875
205,458 Gaylord Entertainment
Company, Class A.......... 4,216,024 5,804,188
80,000 GC Companies, Inc.+........ 2,158,322 2,980,000
40,000 GTECH Holdings
Corporation+.............. 755,188 1,185,000
20,000 PolyGram NV................ 574,275 1,172,500
32,000 Santa Anita Realty
Enterprises, Inc. ........ 510,534 404,000
110,000 THORN EMI plc,
Sponsored ADR............. 1,609,000 3,047,000
700,000 Time Warner Inc. .......... 20,499,592 27,475,000
11,528 Todd-AO Corporation,
Class A................... 31,440 190,212
120,000 Viacom Inc., Class A+...... 1,750,202 4,575,000
210,000 Viacom Inc., Class B+...... 5,698,160 8,163,750
96,438 Walt Disney Company........ 4,767,583 6,063,539
------------ --------------
43,478,846 62,002,064
------------ --------------
FINANCIAL SERVICES--5.2%
1 Al-Zar Ltd.+ (a)........... 0 350
560,000 American Express Company... 13,816,188 24,990,000
220 Berkshire Hathaway Inc.+... 874,549 6,754,000
35,000 Commerzbank AG,
Sponsored ADR............. 1,366,544 1,452,500
140,000 Deutsche Bank AG,
Sponsored ADR............. 6,094,375 6,580,000
55,000 H&R Block Inc. ............ 2,069,368 1,794,375
50,000 KeyCorp.................... 1,792,150 1,937,500
270,000 Lehman Brothers
Holdings Inc. ............ 4,871,475 6,682,500
86,000 Midland Company............ 2,706,145 3,612,000
63,000 Salomon Inc. .............. 2,345,224 2,772,000
25,000 State Street Boston
Corporation............... 717,713 1,275,000
20,000 SunTrust Banks, Inc. ...... 424,879 740,000
11,941 Transamerica Corporation... 583,636 976,177
8,000 Value Line, Inc. .......... 115,500 272,000
------------ --------------
37,777,746 59,838,402
------------ --------------
FOOD AND BEVERAGE--6.9%
71,000 Brown-Forman Corporation,
Class A................... 2,365,112 2,804,500
60,000 Campbell Soup Company...... 1,483,100 4,230,000
74,263 Chock Full o'Nuts
Corporation............... 451,406 362,032
46,000 Coca-Cola Company.......... 395,569 2,248,250
17,000 CPC International Inc. .... 602,088 1,224,000
47,000 Delchamps, Inc. ........... 1,111,792 1,139,750
79,000 Dole Food Company, Inc. ... 2,044,644 3,397,000
4,500 Farmer Brothers Company.... 476,380 621,000
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
THE GABELLI ASSET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ------------ ------------ --------------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
FOOD AND BEVERAGE (CONTINUED)
62,500 General Mills, Inc. ....... $ 1,396,165 $ 3,406,250
37,500 Heinz Company (H.J.)....... 972,562 1,139,063
35,000 Hershey Foods
Corporation............... 1,493,437 2,568,125
82,000 Kellogg Company............ 3,106,755 6,006,500
25,000 LVHM Moet Hennessy Louis
Vuitton, Sponsored ADR.... 971,562 1,184,375
620,000 PepsiCo, Inc. ............. 13,493,879 21,932,500
235,000 Quaker Oats Company........ 7,143,176 8,019,375
65,000 Ralcorp Holdings, Inc.+.... 974,421 1,340,625
20,000 Rykoff-Sexton, Inc. ....... 369,400 287,500
285,000 Seagram Company Ltd. ...... 8,381,697 9,583,125
44,140 Tootsie Roll Industries,
Inc. ..................... 1,448,673 1,572,487
120,000 Wrigley (Wm.) Jr.
Company................... 5,306,862 6,060,000
------------ --------------
53,988,680 79,126,457
------------ --------------
HEALTH CARE--3.9 %
15,000 Amgen Inc.+................ 271,699 810,000
10,000 Biogen, Inc.+.............. 299,450 548,750
20,000 BioWhittaker, Inc.+........ 99,053 168,750
12,000 Chiron Corporation+........ 663,895 1,176,000
193,625 Community Health
Systems, Inc.+............ 10,017,597 10,020,094
100,000 Genentech, Inc.+........... 4,804,136 5,237,500
220,000 Johnson & Johnson.......... 4,507,902 10,890,000
70,000 Mallinckrodt Group,
Inc. ..................... 2,175,407 2,721,250
84,999 Merck & Co., Inc. ......... 2,880,816 5,493,060
100,000 Pfizer Inc. ............... 3,391,165 7,137,500
------------ --------------
29,111,120 44,202,904
------------ --------------
HOTELS/CASINOS--2.6 %
40,000 Circus Circus
Enterprises, Inc.+........ 1,104,666 1,640,000
16,000 Harrah's Entertainment
Inc.+..................... 150,027 452,000
133,000 Hilton Hotels
Corporation............... 7,181,575 14,962,500
100,000 ITT Corporation, New+...... 2,420,804 6,625,000
200,000 Ladbroke Group plc......... 522,219 554,903
110,000 Mirage Resorts,
Incorporated+............. 1,131,077 5,940,000
------------ --------------
12,510,368 30,174,403
------------ --------------
INDUSTRIAL EQUIPMENT AND SUPPLIES--12.3%
347,000 AMETEK, Inc. .............. 4,914,110 7,547,250
40,000 AMP Incorporated........... 1,458,407 1,605,000
25,000 Amphenol Corporation,
Class A+.................. 286,812 575,000
200,000 AptarGroup, Inc. .......... 2,882,986 6,000,000
64,000 Caterpillar Inc. .......... 1,729,874 4,336,000
65,000 CLARCOR Inc. .............. 1,239,362 1,608,750
150,000 Crane Co. ................. 3,970,482 6,150,000
100,000 CTS Corporation............ 2,084,351 4,700,000
430,000 Deere & Company............ 6,698,756 17,200,000
245,000 Donaldson Company, Inc. ... 2,871,498 6,308,750
<CAPTION>
MARKET
SHARES COST VALUE
- ------------ ------------ --------------
<C> <S> <C> <C>
150,000 Gerber Scientific, Inc. ... $ 1,448,232 $ 2,418,750
150,000 Greif Bros. Corporation,
Class A................... 2,793,010 4,706,250
12,546 Hach Company............... 148,380 200,736
354,000 IDEX Corporation........... 4,263,767 13,452,000
80,000 Ingersoll-Rand Company..... 2,987,489 3,500,000
200,000 Kollmorgen Corporation..... 1,861,980 2,950,000
95,000 Lufkin Industries, Inc. ... 1,718,761 1,947,500
60,000 Manitowoc Company, Inc. ... 1,343,957 2,152,500
245,000 Mark IV Industries,
Inc. ..................... 1,779,321 5,543,125
320,000 Navistar International
Corporation+.............. 5,593,992 3,160,000
165,000 Nortek, Inc.+.............. 659,077 1,918,125
4,333 Nortek, Inc., Special
Common+(a)................ 59,049 56,329
10,000 PACCAR Inc. ............... 522,020 490,000
120,000 Pittway Corporation........ 1,529,486 5,280,000
272,000 Pittway Corporation,
Class A................... 2,492,466 12,648,000
50,000 Sequa Corporation,
Class A+................... 1,974,636 2,156,250
78,200 Sequa Corporation, Class
B+........................ 3,771,525 3,910,000
80,000 SPS Technologies, Inc.+.... 2,233,594 5,640,000
130,000 St. Joe Corp. ............. 4,443,521 8,385,000
100,000 TransPro Inc. ............. 784,174 687,500
20,000 Valmont Industries,
Inc. ..................... 349,658 680,000
65,000 Varity Corporation, New+... 1,860,000 3,128,125
------------ --------------
72,754,733 141,040,940
------------ --------------
METALS AND MINING--0.8%
34,350 Barrick Gold Corporation... 733,755 931,744
75,000 Echo Bay Mines Ltd. ....... 844,400 806,250
45,000 Homestake Mining Company... 776,062 770,625
100,000 Horsham Corporation........ 1,401,937 1,387,500
33,000 Newmont Gold Company....... 1,375,428 1,662,375
160,000 Pegasus Gold Inc.+......... 2,519,244 1,960,000
17,500 Placer Dome Inc............ 336,400 417,812
180,000 Royal Oak Mines Inc.+...... 766,747 663,750
------------ --------------
8,753,973 8,600,056
------------ --------------
PUBLISHING--3.2%
75,000 American Media Inc.,
Class A+.................. 732,562 393,750
5,000 E.W. Scripps Company,
Class A................... 99,627 233,125
304,500 Golden Books Family
Entertainment, Inc.+...... 4,268,194 3,654,000
32,000 McClatchy Newspapers, Inc.,
Class A................... 640,975 884,000
150,000 McGraw-Hill Companies,
Inc. ..................... 4,267,901 6,862,500
382,000 Media General, Inc.,
Class A................... 9,498,474 14,229,500
30,000 Meredith Corporation....... 1,186,994 1,252,500
149,993 New York Times Company,
Class A................... 2,319,133 4,893,522
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
THE GABELLI ASSET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ------------ ------------ --------------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
PUBLISHING (CONTINUED)
15,000 News Corporation
Limited, ADS.............. $ 255,587 $ 352,500
84,000 Reader's Digest
Association, Inc.,
Class B................... 3,339,359 3,307,500
------------ --------------
26,608,806 36,062,897
------------ --------------
REAL ESTATE--0.2%
30,000 Castle & Cooke Inc.+....... 352,841 480,000
250,000 Catellus Development
Corporation+.............. 1,933,500 2,281,250
------------ --------------
2,286,341 2,761,250
------------ --------------
RETAIL--2.1%
46,000 Aaron Rents, Inc. ......... 159,101 580,750
20,000 Aaron Rents, Inc.,
Class A................... 83,263 307,500
150,000 Burlington Coat Factory
Warehouse Corporation+.... 1,977,862 1,575,000
125,000 Earl Scheib, Inc.+......... 885,924 929,688
50,000 Fingerhut Companies,
Inc. ..................... 711,335 781,250
80,000 Lillian Vernon
Corporation............... 1,146,934 1,020,000
675,000 Neiman Marcus Group,
Inc.+..................... 9,760,037 18,225,000
------------ --------------
14,724,456 23,419,188
------------ --------------
RETAIL: FOOD AND DRUG--1.3%
25,000 Albertson's, Inc. ......... 718,125 1,034,375
100,000 American Stores Company.... 2,530,213 4,125,000
45,000 Kroger Co.+................ 1,043,500 1,777,500
246,900 Stop & Shop
Companies, Inc. .......... 8,182,058 8,240,287
------------ --------------
12,473,896 15,177,162
------------ --------------
SPECIALTY CHEMICAL--0.9%
50,000 E.I. du Pont de Nemours and
Company................... 3,122,625 3,956,250
220,000 Ferro Corporation.......... 4,605,915 5,830,000
------------ --------------
7,728,540 9,786,250
------------ --------------
TELECOMMUNICATIONS--8.9%
170,000 AT&T Corp. ................ 8,848,325 10,540,000
100,000 BC TELECOM Inc. ........... 1,768,699 1,944,699
260,000 BCE Inc.................... 8,663,625 10,270,000
22,500 BellSouth Corporation...... 577,998 953,437
100,000 Cable & Wireless plc,
Sponsored ADR............. 2,083,454 1,975,000
275,000 C-TEC Corporation+......... 5,507,314 8,181,250
46,500 C-TEC Corporation,
Class B+.................. 730,744 1,365,938
40,000 Frontier Corporation....... 636,125 1,225,000
35,000 Globalstar
Telecommunications+....... 648,250 1,548,750
265,000 GTE Corporation............ 5,499,869 11,858,750
<CAPTION>
MARKET
SHARES COST VALUE
- ------------ ------------ --------------
<C> <S> <C> <C>
35,000 Hong Kong
Telecommunications
Ltd., Sponsored ADR....... $ 545,695 $ 634,375
50,000 Koninklijke PTT Nederland
(KPN), ADR+............... 1,337,435 1,887,500
120,000 Lincoln Telecommunications
Company................... 1,725,367 1,965,000
60,000 Motorola, Inc. ............ 831,606 3,772,500
25,000 Northern Telecom Limited... 941,875 1,359,375
82,000 NYNEX Corporation.......... 3,561,942 3,895,000
22,000 Pacific Telesis Group
Inc....................... 593,556 742,500
100,000 Rogers Communications,
Inc., Class B+............ 996,500 925,000
100,000 SBC Communications Inc. ... 2,131,081 4,925,000
28,000 Southern New England
Telecommunications
Corporation............... 942,025 1,176,000
270,000 Sprint Corporation......... 5,135,763 11,340,000
200,000 STET -- Societa Finanziaria
Telefonica SpA,
Sponsored ADR............. 4,738,203 6,850,000
1,500,000 Telecom Italia SpA ORD..... 1,753,810 3,226,701
110,000 Telecomunicacoes
Brasileiras SA (Telebras),
Sponsored ADR............. 3,293,058 7,658,750
65,224 Telecomunicacoes de Sao
Paulo SA (Telesp)+........ 10,474 13,965
1,521,945 Telecomunicacoes de Sao
Paulo SA (Telesp)
Preference Shares+........ 190,268 325,866
16,000 Telefonica de Espana,
Sponsored ADR............. 511,408 882,000
18,000 Telefonos De Mexico SA,
Class L, ADR.............. 598,837 603,000
------------ --------------
64,803,306 102,045,356
------------ --------------
TRANSPORTATION--0.1%
12,000 Florida East Coast
Industries, Inc. ......... 631,838 996,000
------------ --------------
WIRELESS COMMUNICATIONS--3.7%
200,000 AirTouch Communications
Inc.+..................... 4,649,781 5,650,000
115,000 Allen Group Inc. .......... 712,812 2,501,250
22,500 Associated Group, Inc.,
Class A+.................. 201,448 680,625
18,500 Associated Group, Inc.,
Class B+.................. 98,787 552,688
398,000 Century Telephone
Enterprises, Inc. ........ 9,074,938 12,686,250
140,000 COMSAT Corporation,
Series 1.................. 3,086,794 3,640,000
80,000 NEXTEL Communications,
Inc., Class A+............ 1,005,002 1,525,000
2,500,000 Telecom Italia Mobile
SpA....................... 2,256,896 5,590,011
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
THE GABELLI ASSET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ------------ ------------ --------------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
WIRELESS COMMUNICATIONS (CONTINUED)
146,000 Telephone and Data
Systems, Inc. ............ $ 1,651,679 $ 6,570,000
120,000 360(Degrees) Communications
Company+.................. 1,486,511 2,880,000
------------ --------------
24,224,648 42,275,824
------------ --------------
TOTAL COMMON STOCKS....................... 694,296,895 1,074,118,430
------------ --------------
PREFERRED STOCKS--0.4%
CONSUMER PRODUCTS--0.2%
43,000 Fieldcrest Cannon, Inc.,
Series A, 6.00%, Conv.
Pfd., 144A(c)............. 2,375,750 1,956,500
2,000 Kerr Group, Inc., Class B,
Series D, $1.70,
Cumulative Conv. Pfd. .... 33,975 27,000
------------ --------------
2,409,725 1,983,500
------------ --------------
INDUSTRIAL EQUIPMENT AND SUPPLIES--0.1%
20,000 Sequa Corporation, $5.00,
Cumulative Conv. Pfd. .... 1,538,833 1,437,500
------------ --------------
METALS AND MINING--0.0%
10,000 Freeport-McMoRan Inc.,
Depository Shares, 7.00%,
Cumulative Conv. Pfd. .... 213,000 272,500
------------ --------------
TELECOMMUNICATIONS--0.1%
13,500 Sprint Corporation,
8.25%, Conv. Pfd. ........ 430,312 543,375
------------ --------------
TOTAL PREFERRED STOCKS.................... 4,591,870 4,236,875
------------ --------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT COST VALUE
- ------------- ------------ --------------
<C> <S> <C> <C>
CORPORATE BONDS--0.3%
AUTOMOTIVE PARTS AND ACCESSORIES--0.1%
$ 400,000 GenCorp Inc., Conv. Sub.
Deb.,
8.00% due 08/01/2002..... $ 395,781 $ 431,000
------------ --------------
BROADCASTING--0.0%
FRF 593,750 Havas, Conv. Bonds,
Payment-in-kind,
3.00% due 12/31/1997..... 158,703 144,506
------------ --------------
ENTERTAINMENT--0.2%
$ 2,700,000 Viacom Inc., Sub. Deb.,
8.00% due 07/07/2006..... 1,823,883 2,497,500
------------ --------------
TOTAL CORPORATE BONDS..................... 2,378,367 3,073,006
------------ --------------
U.S. TREASURY BILLS--5.2%
60,154,000 4.97% to 5.01%++ due
07/05/1996 -- 08/22/1996.. 59,870,405 59,870,405
------------ --------------
TOTAL INVESTMENTS.................. 99.9% $761,137,537(b) 1,141,298,716
=============
OTHER ASSETS AND
LIABILITIES (NET)................. 0.1 1,034,179
----- --------------
NET ASSETS......................... 100.0% $1,142,332,895
===== ===============
</TABLE>
- ---------------
(a) Security fair valued by the Board of Trustees.
(b) Aggregate cost for Federal tax purposes was $761,876,869. Net unrealized
appreciation for Federal tax purposes was $379,421,847 (gross unrealized
appreciation was $388,012,126 and gross unrealized depreciation was
$8,590,279).
(c) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
+ Non-income producing security
++ Represents annualized yield at date of purchase.
ADR -- American Depositary Receipt
ADS -- American Depositary Share
FRF -- French Franc
GDR -- Global Depositary Receipt
ORD -- Ordinary Share
See Notes to Financial Statements.
15
<PAGE>
THE GABELLI ASSET FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
- ----------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value
(Cost $761,137,537)................ $1,141,298,716
Cash................................. 174,073
Receivable for Fund shares sold...... 1,907,780
Dividends and interest receivable.... 1,692,736
--------------
Total Assets....................... 1,145,073,305
--------------
LIABILITIES:
Payable for investment advisory fee.. 938,850
Payable for investments purchased.... 722,222
Payable for Fund shares redeemed..... 535,204
Payable for distribution fees........ 245,000
Accrued expenses and other
payables........................... 299,134
--------------
Total Liabilities.................. 2,740,410
--------------
Net assets applicable to 40,662,206
shares of beneficial interest
outstanding...................... $1,142,332,895
=================
NET ASSETS CONSIST OF:
Shares of beneficial interest at par
value.............................. $ 406,622
Additional paid-in capital........... 703,803,559
Accumulated net realized gain on
investments........................ 54,869,963
Undistributed net investment
income............................. 3,087,191
Net unrealized appreciation of
investments........................ 380,165,560
--------------
Total Net Assets................... $1,142,332,895
=================
Net Asset Value, offering and
redemption price per share
($1,142,332,895 / 40,662,206 shares
outstanding; unlimited number of
shares authorized of $0.01 par
value)............................... $28.09
======
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
- ----------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividend income (net of foreign
withholding taxes of $124,657)...... $ 8,969,630
Interest income....................... 1,711,758
------------
Total Investment Income............. 10,681,388
------------
EXPENSES:
Investment advisory fee............... 5,618,412
Distribution fees..................... 1,406,042
Shareholder services fees............. 449,639
Trustees' fees........................ 28,964
Legal and audit fees.................. 22,300
Other................................. 67,032
------------
Total Expenses...................... 7,592,389
------------
NET INVESTMENT INCOME.................. 3,088,999
------------
NET REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS:
Net realized gain on securities
sold................................ 55,630,049
Net realized loss on foreign currency
transactions........................ (902)
------------
Net realized gain on investments.... 55,629,147
------------
Net unrealized appreciation of
securities, foreign currency and other
assets and liabilities:
Beginning of period................... 341,177,313
End of period......................... 380,165,560
------------
Change in net unrealized
appreciation of securities,
foreign currency and other assets
and liabilities................... 38,988,247
------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS........................... 94,617,394
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS....................... $ 97,706,393
===============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
6/30/96 ENDED
(UNAUDITED) 12/31/95
-------------- --------------
<S> <C> <C>
Net investment income....................................................................... $ 3,088,999 $ 10,225,688
Net realized gain on investments............................................................ 55,629,147 69,013,606
Net change in unrealized appreciation of investments........................................ 38,988,247 157,165,724
-------------- --------------
Net increase in net assets resulting from operations........................................ 97,706,393 236,405,018
Distributions to shareholders from:
Net investment income...................................................................... -- (10,040,428)
Net realized gain on investments........................................................... -- (69,013,606)
Distributions in excess of net realized gain on investments................................ -- (94,875)
Net decrease in net assets from Fund share transactions..................................... (46,912,844) (47,966,474)
-------------- --------------
Net increase in net assets.................................................................. 50,793,549 109,289,635
NET ASSETS:
Beginning of period......................................................................... 1,091,539,346 982,249,711
-------------- --------------
End of period (including undistributed net investment income of $3,087,191 at June 30,
1996)...................................................................................... $1,142,332,895 $1,091,539,346
================= =================
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
THE GABELLI ASSET FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES. The Gabelli Asset Fund (the "Fund") was
organized on November 25, 1985 as a Massachusetts 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"), whose primary
objective is growth of capital. The Fund commenced operations on March 3, 1986.
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 which are traded only on a nationally
recognized securities exchange or in the over-the-counter market which are
National Market System Securities are valued at the last sale price as of the
close of business on the day the securities are being valued, or lacking any
sales, at the mean between closing bid and asked prices. Other over-the-counter
securities are valued at the mean between current bid and asked prices as
reported by NASDAQ, the National Quotation Bureau or such other comparable
sources as the Board of Trustees deems appropriate to reflect their fair value.
Portfolio securities which are traded both in the over-the-counter market and on
a stock exchange are valued according to the broadest and most representative
market, as determined by Gabelli Funds, Inc. (the "Adviser"). Securities and
assets for which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the Board of
Trustees of the Fund. Short-term investments that mature in more than 60 days
are valued at the highest bid price obtained from a dealer maintaining an active
market in that security. Short-term investments that mature in 60 days or fewer
are valued at amortized cost, unless the Board of Trustees determines that such
valuation does not constitute fair value. Debt instruments having a greater
maturity are valued at the highest bid price obtained from a dealer maintaining
an active market in those securities or on the basis of prices obtained from a
pricing service approved as reliable by the Board of Trustees.
FOREIGN CURRENCY. The books and records of the Fund are maintained in United
States (U.S.) dollars. Foreign currencies, investments and other assets and
liabilities are translated into U.S. dollars at the exchange rates prevailing at
the end of the period, and purchases and sales of investment securities, income
and expenses are translated on the respective dates of such transactions.
Unrealized gains and losses, not relating to securities, which result from
changes in foreign currency exchange rates have been included in unrealized
appreciation/depreciation of foreign currency and other assets and liabilities.
Unrealized gains and losses of securities, which result from changes in foreign
exchange rates as well as changes in market prices of securities, have been
included in unrealized appreciation/depreciation of investment securities. Net
realized foreign currency gains and losses resulting from changes in exchange
rates include foreign currency gains and losses between trade date and
settlement date on investment securities transactions, foreign currency
transactions and the difference between the amounts of interest and dividends
recorded on the books of the Fund and the amounts actually received. The portion
of foreign currency gains and losses related to fluctuation in exchange rates
between the initial trade date and subsequent sale trade date is included in
realized gain/(loss) on investments sold.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for on the trade date with realized gain or loss on investments
determined using specific identification as the cost method. Interest income
(including amortization of premium and accretion of discount) is recorded as
earned.
17
<PAGE>
THE GABELLI ASSET FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividend income and 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 has qualified and 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.
2. AGREEMENTS WITH AFFILIATED PARTIES. 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 percent 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, provides all facilities
and personnel, including offices, required for its administrative management,
and pays the compensation of all officers and Trustees of the Fund who are its
affiliates. The Adviser is obligated to reimburse the Fund in the event the
Fund's expenses exceed the most restrictive expense ratio limitation imposed by
any state. No such reimbursement was required during the six months ended June
30, 1996.
3. DISTRIBUTION PLAN. The Fund has adopted a plan of distribution (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act. Pursuant to this Plan, the
Distributor, Gabelli & Company, Inc. ("Gabelli & Company"), an indirect
majority-owned subsidiary of the Adviser, is authorized to purchase advertising,
sales literature and other promotional material and to pay its own salespeople.
The Fund will reimburse the Distributor for these expenditures up to 0.25
percent on an annual basis of the value of the Fund's average daily net assets.
In addition, if and to the extent that the fee the Fund pays to the Adviser, as
well as other payments the Fund makes, are considered as indirectly financing
any activity which is primarily intended to result in the sale of the Fund's
shares, such payments are authorized under the Plan. For the six months ended
June 30, 1996, the Fund incurred distribution costs under the Plan of
$1,406,042, representing 0.25 percent of the value of the Fund's average daily
net assets.
4. PORTFOLIO SECURITIES. Cost of purchases and proceeds from sales of
securities for the six months ended June 30, 1996, other than U.S. government
and short-term securities, aggregated $69,786,890 and $161,335,889,
respectively.
5. TRANSACTIONS WITH AFFILIATES. During the six months ended June 30, 1996, the
Fund paid brokerage commissions of $47,744 to Gabelli & Company and its
affiliates.
18
<PAGE>
THE GABELLI ASSET FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
6. SHARES OF BENEFICIAL INTEREST. Transactions in shares of beneficial interest
were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
6/30/96 12/31/95
---------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold................................................ 3,194,737 $ 86,857,603 6,338,311 $ 156,103,869
Shares issued upon reinvestment of dividends............... -- -- 2,772,475 71,391,947
Shares redeemed............................................ (4,927,799) (133,770,447) (10,946,512) (275,462,290)
---------- ------------- ----------- -------------
Net decrease............................................... (1,733,062) $ (46,912,844) (1,835,726) $ (47,966,474)
========== ============== =========== ==============
</TABLE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Per share amounts for a Fund share outstanding throughout each period.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED DECEMBER 31,
6/30/96 ----------------------------------------------------------------------
(UNAUDITED) 1995 1994 1993 1992 1991
----------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of
period............................. $ 25.75 $ 22.21 $ 23.30 $ 19.88 $ 17.96 $ 15.63
----------- ---------- -------- -------- -------- --------
Net investment income................ 0.08 0.26 0.26 0.16 0.26 0.39
Net realized and unrealized
gain/(loss) on investments......... 2.26 5.28 (0.30) 4.18 2.41 2.45
----------- ---------- -------- -------- -------- --------
Total from investment operations..... 2.34 5.54 (0.04) 4.34 2.67 2.84
----------- ---------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.............. -- (0.25) (0.25) (0.16) (0.25) (0.39)
Distributions in excess of net
investment income................ -- -- (0.01) -- -- --
Net realized gains................. -- (1.75) (0.76) (0.76) (0.50) (0.12)
Distributions in excess of net
realized gains................... -- (0.00)(a) (0.03) -- -- --
----------- ---------- -------- -------- -------- --------
Total distributions.................. -- (2.00) (1.05) (0.92) (0.75) (0.51)
----------- ---------- -------- -------- -------- --------
Net asset value, end of period....... $ 28.09 $ 25.75 $ 22.21 $ 23.30 $ 19.88 $ 17.96
============ ========== ========= ========= ========= =========
Total return*........................ 9.1% 24.9% (0.1)% 21.8% 14.9% 18.1%
============ ========== ========= ========= ========= =========
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA:
Net assets, end of period
(in 000's)........................ $1,142,333 $1,091,539 $982,250 $945,408 $632,575 $483,865
Ratio of net investment income to
average net assets............... 0.55 %+ 0.95% 1.10% 0.82% 1.42% 2.34%
Ratio of operating expenses to
average net assets............... 1.35 %+ 1.33% 1.28% 1.31% 1.31% 1.30%
Portfolio turnover rate.............. 6.5 % 26.4% 18.7% 16.0% 14.4% 20.1%
Average commission rate (per share of
security)(b)....................... $ 0.0485 N/A N/A N/A N/A N/A
</TABLE>
- ---------------
* Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the period
including reinvestment of dividends. Total return for the period of less than
one year is not annualized.
+ Annualized.
(a) Amount represents less than $0.01 per share.
(b) Average commission rate (per share of security) as required by amended
disclosure requirements effective September 1, 1995.
19
<PAGE>
THE GABELLI ASSET 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.)
<TABLE>
<S> <C>
BOARD OF TRUSTEES
Mario J. Gabelli, CFA Karl Otto Pohl
Chairman and Chief Former President
Investment Officer Deutsche Bundesbank
Gabelli Funds, Inc.
Felix J. Christiana Anthony R. Pustorino
Former Senior Certified Public Accountant
Vice President Professor, Pace University
Dollar Dry Dock Savings Bank
Anthony J. Colavita Anthonie C. van Ekris
Attorney-at-Law Managing Director
Anthony J. Colavita, P.C. BALMAC International, Inc.
James P. Conn Salvatore J. Zizza
Managing Director and Chairman, Chief
Chief Investment Officer Executive Officer
Financial Security Assurance The Lehigh Group, Inc.
Holdings Ltd.
OFFICERS AND PORTFOLIO MANAGERS
Mario J. Gabelli, CFA Bruce N. Alpert
Portfolio Manager President and Treasurer
James E. McKee
Secretary
</TABLE>
DISTRIBUTOR
Gabelli & Company, Inc.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT
State Street Bank and Trust Company
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Fiom
- -------------------------------------------------------------
This report is submitted for the general information of the shareholders of The
Gabelli Value Fund Inc. It is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective prospectus.
- -------------------------------------------------------------
[LOGO]
[PICTURE]
THE
GABELLI
ASSET
FUND
SEMI-ANNUAL REPORT
JUNE 30, 1996
