<PAGE>
THE GABELLI ASSET FUND
One Corporate Center
Rye, New York 10580-1434
THIRD QUARTER REPORT
SEPTEMBER 30, 1997
* * * * *
MORNINGSTAR RATES GABELLI ASSET FUND 5 STARS OVERALL AND FOR THE FIVE
AND TEN YEAR PERIODS ENDED 10/31/97 AMONG 1210 AND 642 DOMESTIC EQUITY FUNDS,
RESPECTIVELY. THE FUND RECEIVED 4 STARS FOR THE THREE YEAR PERIOD ENDED 10/31/97
AMONG 2189 FUNDS.
TO OUR SHAREHOLDERS,
In the third quarter of 1997, buoyed by low inflation, solid corporate
earnings, and ongoing merger and acquisition activity, stocks posted solid
gains. In the process, the market overcame global currency instability and
attendant concerns regarding the earnings prospects for multi-national consumer
staple companies such as Coca-Cola, Gillette, and Proctor and Gamble. As
demonstrated by the Fund's outstanding returns, stock pickers like us were well
rewarded for our efforts.
INVESTMENT PERFORMANCE
For the third quarter ended September 30, 1997, The Gabelli Asset Fund's
total return was 11.3%. The Standard & Poor's (S&P) 500, Value Line Composite
and the Russell 2000 Index had returns of 7.5%, 12.7% and 14.9%, respectively,
over the same period. Each index is an unmanaged indicator of stock market
performance. The Fund is up 32.4% year-to-date. The S&P 500, Value Line
Composite and Russell 2000 rose 29.6%, 29.9% and 26.6%, respectively, over the
same nine month period.
For the ten year period ended September 30, 1997, the Fund's return
averaged 15.4% annually, versus average annual returns of 14.7%, 12.9%, 12.3%
for the S&P 500, Value Line Composite and Russell 2000, respectively. Since
inception on March 3, 1986 through September 30, 1997, the Fund has a total
return of 538.5%, which equates to an average annual return of 17.3%.
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Past performance is no guarantee of future results. The Morningstar rating
reflects historical risk adjusted performance as of October 31, 1997 and is
subject to change every month. Morningstar proprietary ratings are calculated
from the Fund's three, five and ten year average annual returns in excess of
90-day T-bill returns with appropriate fee adjustments and a risk factor that
reflects fund performance below 90-day T-Bill returns. The top 10% of the funds
in an investment category receive five stars and the next 22.5% receive four
stars.
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INVESTMENT RESULTS (a)
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<TABLE>
<CAPTION>
Quarter
-----------------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
<S> <C> <C> <C> <C> <C>
1997: Net Asset Value ........ $27.00 $31.45 $34.99 -- --
Total Return ........... 2.2% 16.5% 11.3% -- --
1996: Net Asset Value ........ $27.44 $28.09 $27.92 $26.42 $26.42
Total Return ........... 6.6% 2.4% (0.6)% 4.5% 13.4%
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>
Average Annual Returns - September 30, 1997(a)
- ----------------------------------------------
1 Year ............................... 38.5%
5 Year ............................... 19.9%
10 Year .............................. 15.4%
Life of Fund (b) ..................... 17.3%
Dividend History
- --------------------------------------------------------
Payment (ex) Date Rate Per Share Reinvestment Price
- ----------------- -------------- ------------------
December 31, 1996 $2.770 $26.42
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
(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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2
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WHAT WE DO
The success of momentum investing in recent years and investors' desire for
instant gratification have combined to make value investing appear dull. At the
risk of being dull, we will once again describe the "boring" value approach that
has seen us through both good and bad markets over the last 12 years at The
Gabelli Asset Fund and for over 20 years at Gabelli Asset Management Company. 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.
[GRAPHIC]
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 the globalization of the market in filmed entertainment and
telecommunications, and micro trends, such as an increased focus on productivity
enhancing goods and services.
COMMENTARY
DEAL ACTIVITY SURFACES VALUE
A component of our investment methodology is to identify industry and
sector trends and themes ahead of the curve and position ourselves to benefit
from these developments. Industry consolidation is one such trend. As we have
discussed in previous letters, the continued strong activity in mergers and
acquisitions is providing a tailwind to the outstanding performance of the Fund
this year. The accompanying tables illustrate how deal activity surfaced value
in a small sample of the portfolio holdings.
3
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<TABLE>
<CAPTION>
1997 COMPLETED DEALS
Fund Holding 1997 Closing Date 1997 % Return(a)
- ------------ ----------------- ----------------
<S> <C> <C>
International Family Entertainment Inc. 9/5 125.4%
Rykoff-Sexton Inc. 7/3 54.3%
Delchamps Inc. 9/12 54.2%
BioWhittaker Inc. 9/25 44.5%
BBN Corp. 6/9 28.3%
PERCENTAGE CHANGES THROUGH 9/30/97 FOR ANNOUNCED DEALS
<CAPTION>
Third
Current Fund Holdings Quarter Return(b) Year-to-date Return(b)
- --------------------- ----------------- ----------------------
<S> <C> <C>
Fieldcrest Cannon Inc. 81.6% 117.3%
Ticketmaster Group Inc. 39.9% 91.8%
BET Holdings Inc. 61.5% 83.9%
ITT Corp. 11.0% 56.2%
Santa Anita Realty Enterprises Inc. 8.7% 28.6%
Gaylord Entertainment Co. 11.9% 12.8%
LIN Television Corp. 5.7% 10.4%
</TABLE>
THE ECONOMY AND THE STOCK MARKET: "BEAR WATCH"
In view of still favorable economic and investment demographic trends, the
Dow Jones Industrial Average is fairly, if not fully, valued at around 8,000. We
do not see many rampant excesses in the current market, but the margin of safety
is razor thin. As the doctors in charge of your financial health, we are always
looking for things that may cause investor indigestion. Accordingly, we are
keeping a close watch on the following developments that may cause us to change
our economic and market diagnoses.
INFLATION WATCH
In 1981-82, then President Reagan dealt a knockdown blow to labor by
breaking the air traffic controllers strike. The settlement in the recent UPS
strike may indicate labor is finally getting up off the canvas. Labor represents
about two-thirds of U.S. industries' total costs. If labor is making a comeback,
we may see more inflation than the consensus expects.
PROFIT TAKING
Wall Street was soundly in favor of a reduction in the capital gains tax
rate. Long term, it is a positive for stocks. However, shorter term, it may
entice investors to take some profits. Increased profit taking could temporarily
alter the very favorable supply and demand profile stocks have enjoyed for the
last several years.
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(a) Represents changes in share price and dividends paid from December 31, 1996
through the closing date.
(b) Represents changes in share price and dividends paid from beginning of the
period through September 30, 1997.
4
<PAGE>
CURRENCY TURMOIL - ASIAN FLU
Thus far, the currency crises in Thailand, the Philippines, Malaysia, and
Singapore have not spread to the Hong Kong dollar, which is the most stable and
critical currency in the region. The same is true in Latin America, where the
recent run on the Brazilian real has failed to upset the Mexican peso. If this
currency virus were to spread further, worldwide stock markets would likely
experience some vertigo.
STORMY WEATHER
On the food front, El Nino, the unusual weather pattern that threatens
warm, wet weather throughout the U.S. may play havoc with commodities prices. A
late planting season in the Midwest could send food prices higher. A warm winter
throughout the Northern states could send fuel prices lower while oil continues
to be in short term imbalance on the supply side. This could impact earnings
patterns for companies in a range of industry groups.
Having listed some of the things that could disrupt a still favorable
backdrop for the economy and stock market, let us acknowledge the positives.
Inflation remains restrained. With a historically large spread between inflation
and interest rates along the yield curve, rates could trend down from current
levels. Corporate earnings should grow by 8% to 9% in 1998. We do not believe
price/earnings multiples are likely to expand substantially in the year ahead,
but earnings progress could push the stock market higher. Specific to the Fund,
which owns many smaller companies in attractive niche businesses, the lower
capital gains tax rate should help promote even more deal activity in smaller
firms since family managements will be able to keep more of the proceeds from
any such transactions.
INDEXING REVISITED
In our first quarter 1997 report, we examined the phenomenon of S&P 500
Index fund investing and its impact on the market. In defending active
management in general and our value style in particular, we voiced two concerns
about S&P indexing. First, that valuations do matter and that the valuations for
the mega-cap growth stocks, which have such a disproportionate influence on the
capitalization weighted S&P, were more than a little rich. Second, that which
goes up the most is most vulnerable to any change in investor perception.
Our concerns were validated in August, when Coca-Cola (KO - $61.00 - NYSE)
and Gillette (G - $86.3125 - NYSE) plummeted following warnings of modestly
slowing growth. They took a few other large-cap market favorites with them,
dragging the S&P 500 down 5.6% for the month. Broader market indices held
relatively steady in August, with the mid-cap S&P 400 down just 0.1% and the
Russell 2000 gaining 2.3%.
Does this mean investors are abandoning blue chips with bloated valuations
and once again focusing on the kind of fundamental values more readily available
elsewhere? It's too early to tell. Coke, Gillette and many other mega-cap
branded consumer goods companies have bounced off their lows, and despite still
fanciful valuations, could regain momentum. Of importance, is that for the first
time in years, investors got a taste of what can happen to the S&P 500 when
something goes wrong for a few of its heav ily weighted component stocks. It may
be more than just a coincidence that in the week ending September 24, there was
a net outflow from S&P 500 Index funds for the first time in two years.
5
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We will continue to preach for our own church. Valuations do matter and,
over time, investors who buy good companies at bargain prices will generate very
attractive returns. Value investors may not outperform momentum players in an
euphoric market environment like 1995-96; they should, however, excel in flat
and down markets. The tortoise and the hare analogy is valid. We know who wins
the race in the end.
CABLE TELEVISION NETWORKS: GET THEM WHILE THEY'RE HOT
When we began accumulating cable television network companies, they were
priced like straw hats in winter. Today, they are hot retail items. Within the
last six months, Fox purchased International Family Entertainment, the Johnson
family and Liberty Media (LBTYA - $29.9375 - NASDAQ) agreed to jointly buy BET
Holdings Inc. (BTV - $52.875 - NYSE), Westinghouse (WX - $27.0625 - NYSE)
announced the acquisition of The Nashville Network and Country Music Channel
from Gaylord Entertainment (GET - $25.8125 - NYSE) and Seagram's (VO - $35.25 -
NYSE) negotiated the purchase of the other 50% of the USA Network from partner
Viacom (VIA - $31.4375 - ASE). All of these deals are being done at cash flow
multiples in the high teens. With the U.S. Supreme Court upholding "must carry"
rules that require cable systems to air local network programming, entrenched
cable networks are of increasing value to entertainment software producers and
distributors, particularly in a "capacity" constrained cable world.
Most of the smaller independent cable network companies are gone or going
from our portfolio at very nice premiums to our purchase prices. May they rest
in peace. We still own major cable network operators such as Liberty Media (with
stakes in The Discovery Channel, Court TV, Black Entertainment Television, QVC,
Home Shopping Network, Liberty Sports Networks and Time Warner, a
"clearinghouse" of cable network properties), Viacom (MTV, VH1 and Nickelodeon),
Time Warner (TWX - $54.1875 - NYSE) (CNN, CNBC, TNT and the new Cartoon
Channel), Seagram's (soon to be 100% owner of the USA Network) and Cablevision
Systems (CVC - $62.75 - ASE) (Rainbow cable network properties). With the
exception of Liberty Media, these are not pure cable network plays. The relative
success of their other businesses will have a material impact on their stock
prices. However, we do not believe the full value of these companies' cable
network operations are reflected in their current stock prices.
THROWING IN THE TOWEL
The Fund's single best performer this quarter is Fieldcrest Cannon (FLD -
$34.50 - NYSE), the leading manufacturer of towels in the U.S. Despite its
dominant market share in the towel business, the company's high debt, low
margins and unfocused management put Fieldcrest in Wall Street's discount sales
bin. Always looking for a bargain, we snapped it up thinking either management
would finally figure out how to make money in the business or someone else would
come along and take a crack at it. Indeed, we calculated that declining cotton
prices, more efficient processing of imported cotton, and better productivity
alone would generate $2.00 per share to Fieldcrest's 1997 earnings.
As is our custom, we were patient with our Fieldcrest investment. Finally,
Texas-based Pillowtex (PTX - $28.50 - NYSE), a leading sheet maker whose success
in the bedroom has encouraged it to expand into the bath, decided to take a
chance on turning Fieldcrest around by offering $34 per share in cash and stock
for the company. At this price, we are happy with Fieldcrest Cannon.
6
<PAGE>
THE CARS
Everyone knows the bearish view on the domestic auto makers. The economic
expansion is long of tooth, foreshadowing earnings deceleration for cyclical
industries like the autos. The strong dollar versus the Japanese yen is eroding
pricing advantages and shrinking market share. Increased incentives are pinching
profit margins. Finally, there is still excess world-wide capacity in the auto
industry.
We believe the short-term bad news is offset by much better than expected
long-term prospects. Going forward, we are not likely to experience the kind of
boom and bust cycles that have traditionally punished cyclical companies during
economic downturns. The auto makers are much more efficiently run today. To wit,
a tougher stance with the unions and outsourcing of parts manufacturing has
reduced inventory and assembly costs considerably. The "Big Three" are in the
pink financially, with enormous "war chests" to cushion themselves from an
industry slowdown and allow them to support stock prices through dividend
increases and share repurchase programs. Additionally, they are becoming more
focused by shedding unrelated assets.
We concede that demand, margins and operating earnings may slacken in the
year ahead. Longer- term, however, we believe the auto makers will surprise on
the upside. We believe General Motors (GM - $66.9375 - NYSE) is the best
investment vehicle. GM can make more progress on the cost cutting front than
Ford (F - $45.125 - NYSE) or Chrysler (C - $36.8125 - NYSE). It recently
introduced a series of new models which should help it preserve if not gain
market share. GM sold EDS to finance under-funded pensio n liabilities and is in
the process of selling subsidiary Hughes' defense electronics business to
Raytheon (RTN - $59.125 - NYSE). It will likely spin-off its promising DirecTV
division to shareholders. GM has a big pile of cash it can use to either raise
its dividend or preferably, repurchase shares to leverage earnings. GM stock is
trading at a price/earnings multiple which fully discounts the bad news and does
not reflect the positive changes in the industry and within the company itself.
THE AUTO AFTER-MARKET: COMING TOGETHER
The auto after-market industry has suffered in recent years as it worked
off an extended inventory glut resulting from the elimination of middlemen in
the distribution system. Today, that excess inventory is largely history. Parts
makers like Echlin (ECH - $35.0625 - NYSE), Standard Motor Products (SMP -
$23.375 - NYSE) and Federal Mogul (FMO - $37.125 - NYSE) and parts retailers
like Genuine Parts (GPC - $30.8125 - NYSE), have all restructured operations.
They are entering a period of very easy earnings comparisons. They do relatively
little foreign business, so they are not subject to the vicissitudes of currency
swings. Finally, they are much less cyclical than most industrial companies.
Yet, they trade at big price/earnings and price/cash flow discounts to the
market. Investors have largely overlooked this industry group. If earnings come
in as strong as we anticipate, it should attract investor attention.
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.
7
<PAGE>
AMERICAN EXPRESS CO. (AXP - $81.875 - 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 its
travel-related services. Minneapolis-based American Express Fina ncial Advisors
(formerly IDS Financial Services) sells financial products ranging from mutual
funds to annuities. Harvey Golub, Chairman and CEO, has refocused AXP on its
core charge card and investment management businesses. The company has
significantly expanded the range of merchants who welcome its cards and is
slowly gaining market share. Management's objective is virtual parity with
bankcard networks. American Express has joined forces with Microsoft to start an
online corporate travel service. As evidenced by a 15% increase in per share
earnings in 1996, we believe that American Express has been repositioned to
enjoy double digit earnings growth over the balance of this decade.
CHRIS-CRAFT INDUSTRIES INC. (CCN - $52.6875 - [Chris-Craft Industries
NYSE), through its 78% ownership of BHC Chart]
Communications (BHC - $129.50 - ASE), is primarily
a television broadcaster. BHC owns and operates
UPN affiliated TV stations in New York (WWOR), Los
Angeles (KCOP) and Portland (KPTV). BHC also owns
59% of United Television (UTVI - $104.25 -
NASDAQ), which operates an NBC affiliate, an ABC
affiliate and three UPN affiliates. United
Television has announced plans to purchase WRBW, a
UPN affiliate in Orlando, for approximately $60
million and WHSW in Baltimore for $80 million.
Chris-Craft's television stations constitute one
of the nation's largest television station groups,
reaching approximately 22% of U.S. households. The
Chris-Craft complex is debt free and strongly
positioned to expand its operations with roughly
$1.6 billion in cash and marketable securities.
DEERE & CO. (DE - $53.75 - NYSE) is the world's largest manufacturer of farm
equipment. The company's products include tractors and planting, harvesting and
crop handling equipment. With the U.S. government no longer restricting
plantings, additional acreage is likely to be cultivated by the nation's
farmers. Weather permitting, bountiful harvests are likely in 1997, so farm
incomes should show substantial increases. Global demand for U.S. wheat and
other crops should further boost farm income. Long term prospects for farm
equipment manufacturers like Deere are enhanced as incomes, diets and standards
of living improve overseas. Deere makes industrial equipment used in the
construction and forestry industries and a range of consumer products, including
lawn and garden tractors and outdoor power equipment. International sales
account for one-quarter of Deere's revenues.
GENCORP. INC. (GY - $28.4375 - NYSE) is a manufacturing company, with three
business segments. The Aerojet unit is a propulsion, electronic systems, smart
munitions, armaments and custom chemicals company. Polymer Products makes
vinyl-coated fabrics, latex, wallcoverings and Penn tennis balls. The Automotive
division makes vehicle seating products. Receipt of a settlement from the
Internal Revenue Service has significantly strengthened the company's balance
sheet.
NEIMAN MARCUS GROUP INC. (NMG - $32.00 - NYSE) operates 30 high fashion Neiman
Marcus stores and two Bergdorf Goodman stores in New York City. NMG's NM Direct
is a state-of-the-art direct marketing operation. Harcourt General (H - $49.5625
- - NYSE) is the company's major shareholder, holding 53% of the outstanding
common equity after 1996's public offering of eight million NMG shares. The
proceeds from the offering were used to partially fund the repurchase of all
Neiman Marcus' outstanding preferred
8
<PAGE>
stock (held by Harcourt General) for $416 million. 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.
QUAKER OATS CO. (OAT - $50.375 - NYSE) is a food and beverage company, featuring
Quaker Oats grain-based products and Gatorade drinks. Quaker is the dominant
producer of hot cereals, rice cakes and golden grain products, while maintaining
a profitable #4 position in ready-to-eat cereals. Gatorade is a global brand
name with worldwide sales of approximately $1.5 billion. In the U.S., Gatorade
maintains a dominant market share of over 80%, despite intense competition from
Coca-Cola and PepsiCo. The Snapple iced tea and juice business has been sold to
Triarc Co.
RHONE-POULENC RORER INC. (RPR - $96.6875 - NYSE) announced that its majority
shareholder, Rhone-Poulenc SA, made a $4.5 billion ($97 per share) bid to
acquire the 31.7% stake of Rhone-Poulenc Rorer that it does not already own.
Rhone-Poulenc also said it will combine its chemicals and fibers and polymers
activities into an independent company that will be floated on the stock market
in 1998. The plan is the latest in a series of restructurings that have
transformed the global chemical and pharmaceutical industries during the decade.
Driven by a desire to break up conglomerates, most large groups that once
included both chemicals and pharmaceutical businesses have opted to focus on one
activity or the other.
TELE-COMMUNICATIONS INC./LIBERTY MEDIA GROUP (LBTYA - $29.9375 - NASDAQ) owns a
collection of interests in some of the most powerful programming entities in the
world. Liberty Media is the second largest investor in Time Warner, the world's
largest media company. Liberty Media, News Corp. and Tele-Communications
International Inc. (TINTA - $16.375 - NASDAQ) have created a global sports joint
venture, Fox Sports, that offers an integrated package of sports programming
across network broadcast, national cable, and regional cable channels. Liberty's
49%-owned Discovery Communications is a major advertiser-supported basic cable
network that includes the flagship Discovery Channel, The Learning Channel and
developing businesses such as Discovery Europe and Animal Planet. We consider
Liberty Media to be ideally positioned to benefit from expanding distribution
channels, including direct broadcast satellite ventures like DirecTV and the
Internet.
TIME WARNER INC. (TWX - $54.1875 - NYSE), having completed its acquisition of
Turner Broadcasting in the fourth quarter of 1996, is the world's largest
diversified media and publishing company. The combined companies have more than
$23 billion in revenues and over $4.5 billion in EBITDA. Together they control a
host of powerful media brands, such as CNN, Warner Brothers, HBO, Cinemax and
Time and People magazines. Under the leadership of Chairman Gerald Levin and
Vice Chairman Ted Turner, Time Warner is now focused on reducing its almost $13
billion in debt and simplifying its capital structure. Cash flow in 1997 is
demonstrating a substantial increase as the companies reap the synergies of
their merged activities.
UNITED TELEVISION INC. (UTVI - $104.25 - NASDAQ) is a television broadcasting
company which owns and operates five television stations: one ABC, one NBC and
three UPN affiliates. UTVI has announced plans to purchase WRBW, a UPN affiliate
in Orlando, for approximately $60 million and WHSW in Baltimore for $80 million.
Its stations, including announced acquisitions, will cover approximately 8% of
the U.S. population. UTVI is a 59%-owned subsidiary of BHC Communications (BHC -
$129.50 - ASE).
9
<PAGE>
Strong advertising demand, prospects for favorable regulatory changes in the
industry and corporate cost controls will magnify EBITDA growth going forward.
Our 1997 PMV is estimated at $123 per share, $29 of which is cash. UTVI's PMV is
expected to reach $165 by the year 2000.
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 the
prospectus carefully before you invest or send money.
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, IRAs, 401(k)s, quarterly reports, closing prices and other
current news. You can send us e-mail at [email protected].
IN CONCLUSION
Little has changed in the favorable economic backdrop for stocks. That does
not necessarily mean there are not potential problems that could upset the
market apple cart. Barring any unexpected economic dilemmas, stocks should
continue to deliver respectable returns. More important, in our view, the market
is broadening and investors once again appear to be focusing on fundamental
value. Already, strong deal activity is gaining momentum. The capital gains tax
cut should encourage smaller niche companies' "urge to merge" in the year ahead.
10
<PAGE>
We close ever mindful of the potholes that will invariably challenge
equities investors, but remain confident the Fund's portfolio is well-positioned
to endure the long investment journey to your financial success.
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
business day for further information.
As always, we thank you for your confidence in our investment abilities and
will strive to preserve the assets you have entrusted to us.
Sincerely,
/s/ Mario J. Gabelli
MARIO J. GABELLI, CFA
Portfolio Manager and
Chief Investment Officer
October 25, 1997
TOP TEN HOLDINGS
SEPTEMBER 30, 1997
------------------
Rhone-Poulenc Rorer Deere & Co.
Time Warner Inc. Pittway Corp.
American Express Co. Viacom Inc.
United Television Inc. Quaker Oats Co.
Chris-Craft Industries Inc. Neiman Marcus Group Inc.
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.
11
<PAGE>
THE GABELLI ASSET FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- --------------
<C> <S> <C>
COMMON STOCKS--93.7%
AEROSPACE--0.4%
90,000 Boeing Co. ............................... $ 4,899,375
--------------
AGRICULTURE--0.3%
165,000 Archer-Daniels-Midland Co. ............... 3,949,688
--------------
AUTOMOTIVE--0.9%
170,000 General Motors Corp. ..................... 11,379,375
--------------
AUTOMOTIVE: PARTS AND ACCESSORIES--5.2%
30,000 Borg-Warner Automotive Inc. .............. 1,706,233
130,000 Echlin Inc. .............................. 4,558,125
200,000 Federal-Mogul Corp. ...................... 7,425,000
620,000 GenCorp Inc. ............................. 17,631,250
275,000 Genuine Parts Co. ........................ 8,473,438
170,000 Handy & Harman............................ 3,888,750
130,000 Johnson Controls Inc. .................... 6,443,125
130,000 Modine Manufacturing Co. ................. 4,533,750
46,062 Myers Industries Inc. .................... 760,023
160,000 Quaker State Corp. ....................... 2,730,000
115,000 Standard Motor Products Inc. ............. 2,688,125
13,200 Superior Industries International Inc. ... 365,475
100,000 TransPro Inc. ............................ 1,087,500
200,000 UAP Inc., Class A......................... 2,213,782
56,800 Wynn's International Inc. ................ 1,888,600
--------------
66,393,176
--------------
AVIATION: PARTS AND SERVICES--1.8%
10,000 BE Aerospace Inc.+........................ 360,000
390,000 Coltec Industries Inc.+................... 8,433,750
91,000 Curtiss-Wright Corp. ..................... 7,041,125
60,000 Hi-Shear Industries Inc. ................. 116,250
40,000 Hudson General Corp. ..................... 1,710,000
80,000 Precision Castparts Corp. ................ 5,200,000
--------------
22,861,125
--------------
BROADCASTING--5.4%
403,122 Chris-Craft Industries Inc. .............. 21,239,490
67,526 Chris-Craft Industries Inc., Class B(a)... 3,557,776
116,000 Gray Communications Systems Inc., Class B. 2,900,000
210,000 Grupo Televisa SA, GDR+................... 7,520,625
80,000 Liberty Corp. ............................ 3,620,000
64,000 LIN Television Corp.+..................... 2,984,000
100,000 Paxson Communications Corp., Class A+..... 1,162,500
400,000 Television Broadcasting Ltd., ORD......... 1,416,387
247,500 United Television Inc. ................... 25,801,875
--------------
70,202,653
--------------
BUILDING AND CONSTRUCTION--0.3%
160,000 Nortek Inc.+.............................. 4,150,000
4,333 Nortek Inc., Special Common+(a)........... 67,162
--------------
4,217,162
--------------
BUSINESS SERVICES--0.5%
50,000 Berlitz International Inc., New+.......... 1,328,125
50,000 Ecolab Inc. .............................. 2,428,125
16,546 Hach Co................................... 388,831
70,400 Landauer Inc. ............................ 1,760,000
80,000 Nashua Corp.+............................. 915,000
--------------
6,820,081
--------------
<CAPTION>
MARKET
SHARES VALUE
- ---------- --------------
<C> <S> <C>
CABLE--5.2%
85,000 BET Holdings Inc., Class A+............... $ 4,494,375
215,000 Cablevision Systems Corp., Class A+....... 13,491,250
40,000 Comcast Corp., Class A.................... 1,025,000
20,000 Comcast Corp., Class A, Special........... 515,000
40,000 Shaw Communications Inc., Class B......... 370,411
30,000 Shaw Communications Inc., Class B, Conv... 277,808
321,039 TCI Ventures Group........................ 6,621,429
508,961 Tele-Communications Inc., Class A New+.... 10,433,701
575,000 Tele-Communications Inc./Liberty Mediaedia
Group, Class A+......................... 17,214,063
60,000 United International Holdings Inc.,
Class A+.................................. 735,000
515,000 US WEST Media Group+...................... 11,490,938
--------------
66,668,975
--------------
CLOSED-END FUNDS--0.1%
84,000 Royce Value Trust Inc. ................... 1,365,000
--------------
COMMUNICATIONS EQUIPMENT--0.7%
110,000 Allen Telcom Inc.+........................ 3,135,000
47,000 Motorola Inc. ............................ 3,378,125
25,000 Northern Telecom Ltd. .................... 2,598,438
--------------
9,111,563
--------------
CONSUMER PRODUCTS--4.6%
510,000 Carter-Wallace Inc. ...................... 8,415,000
500 Christian Dior SA......................... 67,508
220,000 Church & Dwight Co. Inc. ................. 6,380,000
50,000 Department 56 Inc.+....................... 1,446,875
15,000 Eastman Kodak Co. ........................ 974,063
105,000 Fieldcrest Cannon Inc.+................... 3,622,500
65,000 First Brands Corp. ....................... 1,738,750
290,000 Fortune Brands Inc. ...................... 9,769,375
250,000 Gallaher Group plc, ADR+.................. 4,796,875
45,000 Gillette Co. ............................. 3,884,063
40,000 Harley Davidson Inc. ..................... 1,167,500
18,000 Mattel Inc. .............................. 596,250
10,000 National Presto Industries Inc. .......... 420,625
170,000 Ralston Purina Group...................... 15,045,000
41,700 Syratech Corp.+........................... 1,438,650
--------------
59,763,034
--------------
CONSUMER SERVICES--1.6%
93,357 General Cigar Holdings Inc., Class B+(a).. 2,695,683
285,000 HSN Inc.+................................. 11,578,125
200,000 Rollins Inc. ............................. 4,775,000
60,000 Ticketmaster Group Inc.+.................. 1,395,000
--------------
20,443,808
--------------
DIVERSIFIED INDUSTRIAL--3.6%
10,000 Anixter International Inc.+........... 171,875
215,000 Crane Co. ............................ 8,841,875
82,000 GATX Corp. ........................... 5,540,125
35,000 General Electric Co. ................. 2,382,188
75,000 Honeywell Inc. ....................... 5,039,063
185,000 ITT Industries Inc. .................. 6,139,688
150,000 Katy Industries Inc. ................. 2,700,000
6,500 Kyocera Corp., ADR.................... 858,813
345,000 Lamson & Sessions Co.+................ 2,652,188
170,000 Lawter International Inc. ............ 2,061,250
68,000 National Service Industries Inc. ..... 2,987,750
</TABLE>
12
<PAGE>
THE GABELLI ASSET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- --------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
DIVERSIFIED INDUSTRIAL (CONTINUED)
80,000 Thomas Industries Inc. ............... $ 2,400,000
100,000 Trinity Industries Inc. .............. 4,825,000
--------------
46,599,815
--------------
ELECTRONICS--0.1%
2,500 Hitachi Ltd., ADR..................... 220,469
10,000 Imation Corp.+........................ 266,875
10,000 Sony Corp., ADR....................... 939,375
--------------
1,426,719
--------------
ENERGY--4.6%
100,000 Atlantic Richfield Co. ............... 8,543,750
50,000 British Petroleum Co. plc, ADR........ 4,540,625
30,000 Chevron Corp. ........................ 2,495,625
150,000 Eastern Enterprises................... 5,596,875
60,000 Enron Oil & Gas Co. .................. 1,335,000
180,000 Exxon Corp. .......................... 11,531,250
15,000 Global Marine Inc.+................... 498,750
40,000 Halliburton Co. ...................... 2,080,000
90,000 Pennzoil Co. ......................... 7,171,875
300,000 Southwest Gas Corp. .................. 5,887,500
99,000 Tejas Gas Corp.+...................... 5,946,188
60,000 Texaco Inc. .......................... 3,686,250
--------------
59,313,688
--------------
ENTERTAINMENT--5.9%
230,000 Ascent Entertainment Group Inc. ...... 2,645,000
104,406 EMI Group plc, Sponsored ADR.......... 1,837,387
350,000 Gaylord Entertainment Co., Class A.... 9,034,375
113,500 GC Companies Inc.+.................... 4,880,500
130,000 Havas, Sponsored ADR.................. 2,145,000
20,000 PolyGram NV........................... 1,148,750
680,000 Time Warner Inc. ..................... 36,847,500
11,000 Todd-AO Corp., Class A................ 122,375
335,000 Viacom Inc., Class A+................. 10,531,563
200,000 Viacom Inc., Class B+................. 6,325,000
--------------
75,517,450
--------------
EQUIPMENT AND SUPPLIES--12.2%
30,000 Aeroquip-Vickers Inc. ................ 1,470,000
305,000 AMETEK Inc. .......................... 7,167,500
100,000 AMP Inc. ............................. 5,356,250
100,000 Amphenol Corp., Class A+.............. 4,312,500
55,000 AptarGroup Inc. ...................... 3,076,563
105,000 Caterpillar Inc. ..................... 5,663,438
67,400 CLARCOR Inc. ......................... 1,929,325
100,000 CTS Corp. ............................ 9,500,000
34,650 Culligan Water Technologies Inc.+..... 1,593,900
410,000 Deere & Co. .......................... 22,037,500
132,000 Donaldson Co. Inc. ................... 6,336,000
40,000 EG&G Inc. ............................ 827,500
5,000 Flowserve Corp. ...................... 149,375
160,000 Gerber Scientific Inc. ............... 3,870,000
445,000 IDEX Corp. ........................... 15,296,875
120,000 Ingersoll-Rand Co. ................... 5,167,500
200,000 Kollmorgen Corp. ..................... 3,750,000
90,000 Lufkin Industries Inc. ............... 2,756,250
<CAPTION>
MARKET
SHARES VALUE
- ---------- --------------
<C> <S> <C>
60,000 Manitowoc Co. Inc. ................... $ 2,141,250
175,000 Mark IV Industries Inc. .............. 4,703,125
3,000 Met-Pro Corp. ........................ 55,125
410,000 Navistar International Corp.+......... 11,326,250
20,000 PACCAR Inc. .......................... 1,120,000
145,500 Pittway Corp. ........................ 9,330,188
160,000 Pittway Corp., Class A................ 10,390,000
61,000 Sequa Corp., Class A+................. 3,515,125
90,000 Sequa Corp., Class B+................. 5,647,500
168,000 SPS Technologies Inc.+................ 7,896,000
30,000 Valmont Industries Inc. .............. 639,375
--------------
157,024,414
--------------
FINANCIAL SERVICES--6.0%
1 Al-Zar Ltd.+(a)....................... 350
345,000 American Express Co. ................. 28,246,875
220 Berkshire Hathaway Inc.+.............. 9,856,000
70,000 Commerzbank AG, Sponsored ADR......... 2,541,875
150,000 Deutsche Bank AG, Sponsored ADR....... 10,509,375
85,000 H&R Block Inc. ....................... 3,283,125
200,000 Lehman Brothers Holdings Inc. ........ 10,725,000
86,000 Midland Co. .......................... 4,945,000
30,000 Paine Webber Group Inc. .............. 1,396,875
10,000 Salomon Inc. ......................... 751,875
43,000 State Street Corp. ................... 2,620,313
20,000 SunTrust Banks Inc. .................. 1,358,750
11,941 Transamerica Corp. ................... 1,188,130
8,000 Value Line Inc. ...................... 314,000
--------------
77,737,543
--------------
FOOD AND BEVERAGE--6.5%
76,300 Brown-Forman Corp., Class A........... 3,691,013
90,000 Chock Full o'Nuts Corp.+.............. 708,750
45,000 Coca-Cola Co. ........................ 2,742,188
17,000 CPC International Inc. ............... 1,574,625
4,500 Farmer Brothers Co. .................. 666,000
70,000 General Mills Inc. ................... 4,825,625
35,000 Heinz Co. (H.J.)...................... 1,616,563
50,000 Hershey Foods Corp. .................. 2,825,000
160,000 Kellogg Co. .......................... 6,740,000
25,000 LVHM Moet Hennessy Louis Vuitton,
Sponsored ADR....................... 1,071,875
215,000 PepsiCo Inc. ......................... 8,720,938
385,000 Quaker Oats Co. ...................... 19,394,375
23,000 Ralcorp Holdings Inc.+................ 429,812
300,000 Seagram Co. Ltd. ..................... 10,575,000
62,914 Tootsie Roll Industries Inc. ......... 3,192,885
290,000 Whitman Corp. ........................ 7,902,500
88,000 Wrigley (Wm.) Jr. Co. ................ 6,627,500
--------------
83,304,649
--------------
HEALTH CARE--5.5%
12,000 Amgen Inc. ........................... 575,250
18,000 Biogen Inc.+.......................... 583,875
40,000 Chiron Corp.+......................... 905,000
100,000 Genentech Inc.+....................... 5,812,500
78,000 Johnson & Johnson..................... 4,494,750
60,000 Merck & Co. Inc. ..................... 5,996,250
120,000 Pfizer Inc. .......................... 7,207,500
470,000 Rhone-Poulenc Rorer Inc. ............. 45,443,125
--------------
71,018,250
--------------
</TABLE>
13
<PAGE>
THE GABELLI ASSET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- --------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
HOTELS AND GAMING--2.8%
100,000 Circus Circus Enterprises Inc.+........... $ 2,518,750
35,000 GTECH Holdings Corp.+..................... 1,196,563
12,000 Harrah's Entertainment Inc.+.............. 269,250
290,000 Hilton Hotels Corp. ...................... 9,769,375
220,000 ITT Corp., New+........................... 14,905,000
203,389 Ladbroke Group plc........................ 893,427
185,000 Mirage Resorts Inc.+...................... 5,573,125
15,000 Santa Anita Realty Enterprises Inc. ...... 506,250
--------------
35,631,740
--------------
METALS AND MINING--0.6%
30,000 Barrick Gold Corp. ....................... 742,500
150,000 Echo Bay Mines Ltd. ...................... 853,125
50,000 Homestake Mining Co. ..................... 765,625
33,000 Newmont Gold Co. ......................... 1,522,125
365,000 Pegasus Gold Inc.+........................ 2,053,125
17,500 Placer Dome Inc. ......................... 334,688
300,000 Royal Oak Mines Inc.+..................... 843,750
20,000 TVX Gold Inc.+............................ 125,000
--------------
7,239,938
--------------
PAPER AND FOREST PRODUCTS--1.3%
180,000 Greif Bros. Corp., Class A................ 5,850,000
108,000 St. Joe Corp. ............................ 10,692,000
--------------
16,542,000
--------------
PUBLISHING--2.8%
75,000 American Media Inc., Class A+............. 637,500
35,000 Dow Jones & Co. Inc. ..................... 1,636,250
5,000 E.W. Scripps Co., Class A................. 219,688
245,000 Golden Books Family Entertainment Inc.+... 2,725,625
60,000 Harcourt General Inc. .................... 2,973,750
43,750 McClatchy Newspapers Inc., Class A........ 1,503,906
75,000 McGraw-Hill Companies Inc. ............... 5,076,563
345,000 Media General Inc., Class A............... 13,670,625
90,000 Meredith Corp. ........................... 2,981,250
73,000 New York Times Co., Class A............... 3,832,500
15,000 News Corp. Ltd., ADR...................... 306,563
1,650,000 Seat SpA+................................. 617,501
--------------
36,181,721
--------------
REAL ESTATE--0.7%
330,000 Catellus Development Corp.+............... 6,847,500
12,000 Florida East Coast Industries Inc. ....... 1,338,000
60,000 Griffin Land & Nurseries Inc.+............ 1,027,500
1,000 Lennar Corp. ............................. 42,500
--------------
9,255,500
--------------
RETAIL--2.2%
41,000 Aaron Rents Inc. ......................... 717,500
20,000 Aaron Rents Inc., Class A................. 350,000
150,000 Burlington Coat Factory Warehouse Corp.+.. 3,168,750
180,000 Earl Scheib Inc.+......................... 1,620,000
50,000 Fingerhut Companies Inc. ................. 1,125,000
<CAPTION>
MARKET
SHARES VALUE
- ---------- --------------
<C> <S> <C>
130,000 Lillian Vernon Corp. ..................... $ 2,201,875
593,000 Neiman Marcus Group Inc.+................. 18,976,000
--------------
28,159,125
--------------
RETAIL: FOOD AND DRUG--0.6%
60,000 Albertson's Inc. ......................... 2,092,500
90,000 Giant Food Inc., Class A.................. 2,930,625
75,000 Kroger Co.+............................... 2,264,063
--------------
7,287,188
--------------
SPECIALTY CHEMICAL--0.7%
250,000 Ferro Corp. .............................. 9,546,875
--------------
TELECOMMUNICATIONS--6.3%
113,300 Aliant Communications Inc. ............... 2,747,525
160,000 AT&T Corp. ............................... 7,090,000
80,000 BC Telecom Inc. .......................... 2,066,197
215,000 BCE Inc. ................................. 6,423,125
18,000 BellSouth Corp. .......................... 832,500
100,000 Cable & Wireless plc, Sponsored ADR....... 2,587,500
178,000 C-TEC Corp.+.............................. 8,900,000
46,500 C-TEC Corp., Class B+..................... 2,287,219
60,000 Frontier Corp. ........................... 1,380,000
50,000 Globalstar Telecommunications+............ 2,625,000
165,000 GTE Corp. ................................ 7,486,875
35,000 Hong Kong Telecommunications Ltd.,
Sponsored ADR........................... 783,125
165,000 Rogers Communications Inc., Class B+...... 991,494
10,000 SBC Communications Inc. .................. 613,750
135,000 Southern New England
Telecommunications Corp. ............... 5,526,563
110,000 Sprint Corp. ............................. 5,500,000
642,000 Telecom Italia SpA, ORD................... 12,862,863
68,000 Telecomunicacoes Brasileiras SA
(Telebras), Sponsored ADR............... 8,755,000
15,000 Telefonica de Espana, Sponsored ADR....... 1,411,875
13,000 Telefonos De Mexico SA, Class L, ADR...... 672,750
--------------
81,543,361
--------------
TRANSPORTATION--0.8%
90,000 AMR Corp.+................................ 9,961,875
--------------
WIRELESS COMMUNICATIONS--3.5%
55,000 AirTouch Communications Inc.+............. 1,949,063
22,500 Associated Group Inc., Class A+........... 1,586,250
18,500 Associated Group Inc., Class B+........... 1,285,750
365,000 Century Telephone Enterprises Inc. ....... 16,060,000
195,000 COMSAT Corp. ............................. 4,643,438
55,000 NEXTEL Communications Inc., Class A+...... 1,588,125
140,000 TCI Satellite Entertainment Inc., Class A+ 1,058,750
1,900,000 Telecom Italia Mobile SpA................. 7,539,901
150,000 Telephone and Data Systems Inc. .......... 6,750,000
105,000 360 degrees Communications Co.+........... 2,191,875
--------------
44,653,152
--------------
TOTAL COMMON STOCKS.................................... 1,206,020,018
--------------
</TABLE>
14
<PAGE>
THE GABELLI ASSET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- --------------
<C> <S> <C>
PREFERRED STOCKS--0.4%
CONSUMER PRODUCTS--0.1%
28,500 Fieldcrest Cannon Inc., Series A, 6.00%,
Conv. Pfd. 144A(b)........................ $ 1,710,000
--------------
EQUIPMENT AND SUPPLIES--0.2%
19,300 Sequa Corp., $5.00, Cumulative Conv. Pfd. .. 1,746,650
--------------
METALS AND MINING--0.0%
10,000 Freeport-McMoRan Inc., Depository Shares,
7.00%, Cumulative Conv. Pfd. ............. 276,875
--------------
TELECOMMUNICATIONS--0.1%
22,000 Sprint Corp., 8.25%, Conv. Pfd. ............ 827,750
1,588,267 Telecomunicacoes de Sao Paulo SA
(Telesp), Preference Shares............... 484,229
--------------
1,311,979
--------------
TOTAL PREFERRED STOCKS............................. 5,045,504
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- -------------- --------------
<C> <S> <C> <C>
CORPORATE BONDS--0.2%
ENTERTAINMENT--0.2%
FRF 593,750 Havas, Conv. Bonds, Payment-in-kind,
3.00% due 12/31/1997............... $ 129,306
$ 2,600,000 Viacom Inc., Sub. Deb., 8.00% due
07/07/2006......................... 2,593,500
--------------
TOTAL CORPORATE BONDS................................. 2,722,806
--------------
U.S. TREASURY BILLS--5.7%
74,042,000 4.78% to 5.07%++ due
10/16/1997-11/28/1997.............. 73,615,398
--------------
TOTAL INVESTMENTS
(Cost $737,969,301)(c)....................... 100.0% 1,287,403,726
OTHER ASSETS AND LIABILITIES (NET)............. 0.0 313,781
----- --------------
NET ASSETS
(36,804,673 shares outstanding).............. 100.0% $1,287,717,507
===== ==============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE.............................. $34.99
======
</TABLE>
- ---------------
(a) Security fair valued by the Board of Trustees.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers. The market value
of this security at September 30, 1997 was $1,710,000, representing 0.13% of
total net assets.
(c) Aggregate cost for Federal tax purposes was $738,914,098. Net unrealized
appreciation for Federal tax purposes was $548,489,628 (gross unrealized
appreciation was $555,450,248 and gross unrealized depreciation was
$6,960,620).
+ Non-income producing security
++ Represents annualized yield at date of purchase.
ADR -- American Depositary Receipt FRF -- French Franc GDR -- Global
Depositary Receipt ORD -- Ordinary Share
15
<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 and 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 & Flom
LLP
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of The
Gabelli Asset Fund. It is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
[PICTURE OF MARIO J. GABELLI]
THE
GABELLI
ASSET
FUND
THIRD QUARTER REPORT
SEPTEMBER 30, 1997
