<PAGE>
THE GABELLI ASSET FUND
One Corporate Center
Rye, New York 10580-1434
SEMI-ANNUAL REPORT
JUNE 30, 1997
TO OUR SHAREHOLDERS,
In the second quarter of 1997, equities investors concluded that inflation
was just a bad dream after all and that "Captain Greenspan" was bringing the
economy in for another soft landing. Blue chip stocks remained in the limelight,
but smaller stocks participated in the surge. The Dow Jones Industrial Average
(DJIA) gained 17.1%.
INVESTMENT PERFORMANCE
For the second quarter ended June 30, 1997, The Gabelli Asset Fund's total
return was 16.5%. The Value Line Composite, Russell 2000 Index and Standard &
Poor's (S&P) 500 had returns of 15.0%, 16.2% and 17.5%, respectively, over the
same period. Each index is an unmanaged indicator of stock market performance.
The Fund is up 19.0% year-to-date. The Value Line Composite, Russell 2000 and
S&P 500 rose 15.2%, 10.2% and 20.6%, respectively, over the same six-month
period.
For the ten-year period ended June 30, 1997, The Fund's return averaged
14.8% annually, versus average annual returns of 14.0%, 11.1% and 14.6% for the
Value Line Composite, Russell 2000 and S&P 500, respectively. Since inception on
March 3, 1986 through June 30, 1997, the Fund has a total return of 473.9%,
which equates to an average annual return of 16.7%. We believe that the future
will again witness our ability to attain and exceed our long-term return goal of
ten percent real.
<PAGE>
INVESTMENT RESULTS (a)
<TABLE>
<CAPTION>
Quarter
-----------------------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
<S> <C> <C> <C> <C> <C>
1997: Net Asset Value .... $27.00 $31.45 -- -- --
Total Return ....... 2.2% 16.5% -- -- --
- -------------------------------------------------------------------------------------------------------
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>
<TABLE>
<CAPTION>
Average Annual Returns - June 30, 1997 (a)
------------------------------------------
<S> <C>
1 Year ................................. 23.7%
5 Year ................................. 17.5%
10 Year .................................. 14.8%
Life of Fund (b) ......................... 16.7%
</TABLE>
<TABLE>
<CAPTION>
Dividend History
- -------------------------------------------------------------------
Payment (ex) Date Rate Per Share Reinvestment Price
- ----------------- -------------- ------------------
<S> <C> <C>
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
</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.
2
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WHAT WE DO
[GRAPHIC]
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 world-wide 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
THE ECONOMY AND THE STOCK MARKET: HAVING YOUR CAKE AND EATING IT TOO
From 1995 through the second quarter of 1997, equities investors have
enjoyed their just desserts. Modest economic growth, low inflation, and strong
corporate earnings have translated into spectacular equities returns. The "What
Me Worry" market cheerleaders are now projecting these favorable conditions
forward indefinitely in order to justify high equities valuations and to support
their fantastic predictions for the Dow and S&P. We look at the same picture and
wonder whether all the economic components that have combined to propel this
historic market advance are sustainable.
If it is truly different this time around, the stock market tree can grow
to the sky. Stocks probably deserve to trade at 20 times earnings or higher if
the following scenario holds: the Federal Reserve and corporate managements have
really tamed the business cycle; inflation is truly dead rather than dormant;
3
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further cost cutting and productivity gains allow American corporations to
continue to grow earnings at three to four times top line revenues; and there
are no major political or financial accidents here or abroad. In other words,
everything has to remain right for the fundamentals to raise the safety net --
we just do not have a "margin of safety".
Let's look at what's been going so right and what could go wrong. We
applaud Alan Greenspan's Federal Reserve and corporate managements for reducing
economic volatility. More modest but sustainable economic growth is vastly
preferable to the boom/bust business cycles of the past. The business cycle has
not disappeared, but the 3 1/2 billion new consumers in the global market place
have added extra secular growth to the global economy, perhaps diluting the
cyclical effects of economic policy most of us have lived through. We do not
believe inflation is dead, but it is certainly subdued.
Can net earnings continue to outpace top line revenue growth? Corporate
America has been on "Slim Fast" for almost a decade. Management has restructured
and technology has contributed to enormous productivity gains. How much more
efficiently can we run our businesses? Rebounding from 1994's inventory bubble,
S&P 500 earnings grew approximately 18% in 1995. These earnings rose nearly 10%
in 1996, and are projected to advance another 9% to 11% in 1997. These are
impressive numbers considering the economy has chugged along at a modest 3% to
4% annual growth rate over this same time period. Return on equity has exceeded
the expectation of even the most optimistic. Will we retreat to a more normal
relationship between top line revenue and earnings growth?
This year, equities investors have been so concerned about inflation and
the potential for higher interest rates, while praying so fervently for a slower
economy, that they seem to have lost sight of the fact that one of the
consequences may be corporate earnings growth below "enhanced expectations."
With Europe and the Far East gaining economic momentum, second half earnings for
U.S. multinationals should be okay, with an obvious yellow flag associated with
"currency" adjustments. But, we are likely to see disappointments domestically.
Investors' recent reaction to warnings of earnings shortfalls from a string of
leading technology companies may be duplicated in other industry groups in the
next six months.
The final piece of the puzzle is always the most difficult to
predict--some form of political or financial accident that could spread like a
California brush fire in the increasingly interconnected global economy and
capital markets. That is the "G Factor" - only God knows.
What do we conclude from all this conjecture? If we continue to be blessed
with this highly favorable economic backdrop for equities, the stock market can
continue to advance, albeit at a much less torrid pace than we have enjoyed over
the last 2 1/2 years. Equities investors can continue to have their cake and eat
it too, but it will be served in significantly smaller portions. If there proves
to be one or more flies in the ointment, we could see a substantial correction
that lasts for more than just a few weeks. We also believe we are entering what
could be an extended phase of a market of stocks rather than a stock market.
Investors have been broadening their horizons as evidenced by the much stronger
relative performance of broader market indices. This would indicate that
individual stock fundamentals are becoming as important as sheer market momentum
in the decision making process.
4
<PAGE>
CABLE TELEVISION: ONE MAN'S JUNK IS BILL GATES' TREASURE
We have been analyzing the cable television (CATV) stocks for many years.
We've experienced the thrill of victory--the pricing deregulation and rampant
consolidation of the industry in the mid eighties--and over the last few years,
the agony of defeat--re-regulation and the threat of competition from telcos and
satellite broadcasters. Through it all, we have viewed cable TV as a good
long-term investment. The business has most of the economic and financial
characteristics we favor: an identifiable franchise, high operating margins, and
strong cash flow. We are aware of the negatives: lousy service by new entrants,
high debt, the need for a second round of substantial capital investment to
technologically upgrade systems, and the prospect for increased competition.
However, we remain confident that the value of all those connections to American
homes will ultimately be recognized.
Cablevision Systems Corporation (CVC - $53.50 - ASE) best illustrates the
recent trials and tribulations of cable television operators and investors. A
great growth company in the 1980s, Cablevision built a terrific franchise in the
New York metropolitan area. They were also early to recognize the potential of
cable networks and programming by investing in American Movie Classics, Bravo,
eight regional sports networks, and 50% of MSG (Madison Square Garden, the NY
Knicks and the NY Rangers). In the process, they leveraged the company to the
hilt and were as vulnerable as anyone to potential competition from News
Corporation Limited (NWS - $19.25 - NYSE) Chairman Rupert Murdoch's plan for a
national satellite broadcast system--labeled by Wall Street as the "Death Star"
for the CATV industry. In the last year, Cablevision stock fell from the mid
$50's to a low of $25 per share.
Then, things got interesting. Murdoch's Death Star was grounded.
Recognizing cable television lines were likely to continue to be the speediest
data transmission highway into the home, Microsoft Corporation's (MSFT -
$126.375 - Nasdaq) Bill Gates invested $1 billion in Comcast Corporation (CMCSA
- - $20.9375 - Nasdaq), instantly ratcheting up the value of every cable
television link in the country. Cablevision moved quickly to further consolidate
its system by swapping 33% of its stock to Tele-Communications, Inc. (TCOMA -
$14.875 - Nasdaq) in return for an additional 820,000 subscribers in the New
York metropolitan area. It then closed on the remaining 50% of MSG from its
partner ITT Corporation (ITT - $61.0625 - NYSE). Finally, in a particularly deft
move, Cablevision sold 40% of its Rainbow cable network and programming unit to
News Corp's Fox unit for $850 million, bolstering both its network/programming
assets through a planned national sports network with its new partners and its
debt heavy balance sheet. Cablevision's stock went from deep in Wall Street's
doghouse to the penthouse almost overnight. We expect a lot more from
Cablevision.
Although a much more diversified media company, Time Warner Inc. (TWX -
$48.25 - NYSE) stock has been stuck in the mud due to its substantial cable
television operations. Chairman Gerald Levin has been pressured by Wall Street
and several large institutional and corporate shareholders to reduce the
company's exposure to the business by off-loading cable systems to US West Media
Group (UMG - $20.25 - NYSE) in return for its minority stake in Time Warner
Entertainment. Believing Levin would be forced to throw in the towel on cable,
US West Media Group held out for a higher price (more cable subscribers) than
Levin was willing to part with. Perhaps US West Media has outfoxed itself. With
the escalating value of its assets, Time Warner is now in the driver's seat in
negotiating a deal. We believe Time Warner will eventually reduce its exposure
to cable and focus more on its programming and publishing assets. When they pull
the trigger on cable, they will get a much better price.
5
<PAGE>
LET'S MAKE A DEAL
NEWS CORP/INTERNATIONAL FAMILY ENTERTAINMENT
CTS CORPORATION/DYNAMICS CORPORATION OF AMERICA
ITT INDUSTRIES/GOULDS PUMPS
In the long-running game show "Let's Make a Deal", host Monty Hall would
urge his contestants to deal for the fabulous prizes hidden behind door number
one, two, or three. This quarter, we've had portfolio prizes hidden behind all
three doors. Seeking a national distribution channel for its children's
programming and shut out by a Supreme Court ruling upholding "must carry"
requirements, News Corp. wooed and won International Family Entertainment, Inc.
(FAM - $34.375 - NYSE). To further extend its fluid handling operations, ITT
Industries, Inc. (IIN - $25.75 - NYSE) bought Goulds Pumps Incorporated.
Finally, after heated competition with WHX Corporation, CTS Corporation (CTS -
$68.9375 - NYSE) appears to have won Dynamics Corporation of America (DYA -
$62.25 - NYSE). This last contest may not yet be concluded because Ron Labow's
WHX (financial engineers operating from the shell of a small steel company) may
turn its attention from the original prize Dynamics to the winning bidder CTS.
We'll stay tuned for the exciting conclusion of this one. Your advisor was the
dominant holder of these three take out investments.
We believe the current "Let's Make a Deal" market may run as long as the
popular game show. There is tremendous liquidity in the financial system. With
modest top line revenue growth, minimal pricing flexibility, and limits to
further margin expansion through cost cutting and productivity gains, the
ability of many companies to grow earnings from existing operations is
restrained. The answer for many will be to grow via acquisitions. This will not
take the form of the re-conglomeratization of American business. Instead, we
will see larger companies buying smaller niche companies to complement their
existing businesses. This feeds nicely into our focus on smaller niche
franchises and we expect to be bidding a fond farewell to additional portfolio
holdings in the years ahead. We identified the "urge to consolidate" in previous
reports to you. We have announced and heralded this Third Wave of Mergers in all
of our letters to you since General Electric Company (GE - $65.375 - NYSE)
attempted a hostile takeover of Kemper in February 1994. A reduction in
long-term capital gains rates will fan the flames of an already raging fire.
THE LAST SHALL BE FIRST
Our investment thesis is that if you buy good businesses at the right
price, and hold them long term, you will eventually earn a satisfactory return.
Often, it takes quite awhile for the corporate values we identify to be
recognized by other investors. Generally, our patience is rewarded. This
quarter, many of our sleepers have come to life. Golden Books Family
Entertainment, Inc. (GBFE - $12.50 - Nasdaq), Cablevision (CVC - $53.50 - ASE),
and GenCorp Inc. (GY - $23.125 - NYSE) were among our top performing stocks,
posting large percentage gains after somewhat extended naps. If you factor in
our holding periods, there are not many grand slam home runs. These are singles
and doubles, and in some cases, the count is just now even. But, they are
helping to produce the kind of consistent investment progress our value
discipline is designed to provide. In this age of instant gratification, most
investors are simply not willing to wait on stocks that aren't moving. They dump
and run, chasing momentum not
6
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value. This may work well during roaring bull markets. But, over the long term
and through the market cycles, it has not proven to be a particularly effective
way to generate superior returns.
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.
American Express Company (AXP - $74.50 - 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 Financial
Advisors, Inc. (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. The company has joined forces with Microsoft to start an
on-line 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 - $48.25 - NYSE), through its 77% ownership of
BHC Communications, Inc. (BHC - $119.50 - 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 controls over 59% of
United Television, Inc. (UTVI - $99.00 - Nasdaq), which operates an NBC
affiliate, an ABC affiliate and three UPN affiliates. Chris-Craft's eight
television stations constitute one of the nation's largest television station
groups, reaching approximately 20% of U.S. households. BHC owned 100% of United
Paramount Network (UPN), but Viacom has exercised its option to purchase 50% of
UPN for $160 million, which is equal to about one-half of UPN's operating losses
to date. The Chris-Craft complex is debt free and strongly positioned to expand
its operations with about $1.6 billion in cash and marketable securities.
- ----------------------
Chris-Craft Industries
- ----------------------
77% |
- ----------------------
BHC Communications
- ----------------------
59% |
- ----------------------
United Television
- ----------------------
Deere & Company (DE - $54.875 - NYSE) is the largest manufacturer of farm
equipment in the world. 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. 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 incomes, diets and
standards of living improve overseas.
7
<PAGE>
GenCorp. Inc. (GY - $23.125 - NYSE) operates three business segments. The
Aerojet division designs and manufactures propulsion systems and electronic
surveillance systems. Polymer Products makes vinyl-coated fabrics, latex,
wallcoverings and Penn tennis balls. The Automotive division makes vehicle
seating products.
IDEX Corporation (IEX - $33.00 - NYSE) makes fluid handling and industrial
products. 1996 was another record year in sales and earnings. Sales increased
15% and earnings per share rose 17%. The company's growth is the result of new
product introductions, market share gains and acquisitions. Acquisitions are an
important part of the company's business strategy and are designed to become
quickly additive to earnings. We anticipate IDEX will again set records in
sales, net income and earnings per share in 1997. IDEX is a well managed company
with excellent growth potential.
Neiman Marcus Group, Inc. (NMG - $26.25 - 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, Inc. (H -
$47.625 - NYSE) is the company's major shareholder, holding 53% of the
outstanding common equity after last fall'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 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 Company (OAT - $44.875 - NYSE) is a food and beverage company,
featuring Quaker Oats grain-based products and Gatorade drinks. Quaker is the
dominant player in 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 world-wide 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.
Ralston Purina Group (RAL - $82.1875 - NYSE), based in St. Louis, Missouri, is a
holding company for four separate business units: pet products (Ralston Purina,
the world's largest dog and cat food producer), battery products (Eveready
Battery, a global leader in supplying portable power), soy protein products
(Protein Technologies International, a supplier of soy protein and fiber food
ingredients), and agricultural products (Ralston Purina International, a
worldwide supplier of formula animal feed). All are strong, stable, free cash
flow generators with leading market shares of either #1 or #2 in their
respective fields. By spinning off Ralcorp Holdings, Inc. (RAH - $14.75 - NYSE)
in April 1994 and selling Continental Baking Corp. in July 1995, management
demonstrated its focus on increasing shareholder value.
Time Warner Inc. (TWX - $48.25 - 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 film, 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.
8
<PAGE>
Achievement of both goals would be greatly aided by a successful restructuring
of the Time Warner Entertainment partnership with US West Media Group (UMG -
$20.25 - NYSE).
United Television, Inc. (UTVI - $99.00 - Nasdaq) is a television broadcasting
company which owns and operates five television stations: one ABC, one NBC and
three UPN affiliates. Its stations cover approximately 6% of the U.S.
population. UTVI is a 59%-owned subsidiary of BHC Communications, Inc. (BHC -
$119.50 - ASE). Strong advertising demand, prospects for favorable regulatory
changes in the industry and corporate cost controls should magnify EBITDA growth
going forward. Our 1997 PMV is estimated at $125 per share, $26 of which is
cash. UTVI's PMV is expected to reach $162 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].
9
<PAGE>
IN CONCLUSION
The strength of the market is understandable considering today's favorable
economic/earnings/ interest rate backdrop and the enormous amount of money being
poured into equities mutual funds. Although high by historical standards,
current equities valuations may be justified as long as these "best of all
possible worlds" market conditions can be sustained. If something happens to
disrupt this comfortable scenario--our best guess is it may come in the form of
more widespread earnings disappointments as the slowing economy begins to impact
corporate profitability--the market could run into some trouble.
We are encouraged by the broadening of this bull market and some evidence
that investors are once again focusing on fundamental value instead of just
momentum. Stock pickers across the land rejoice! Ongoing merger and acquisition
activity should continue to provide a tailwind for our portfolio.
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 investing abilities and
will work hard to preserve and enhance the assets you have entrusted to us.
Sincerely,
/s/ MARIO J. GABELLI
MARIO J. GABELLI, CFA
Portfolio Manager and
Chief Investment Officer
August 1, 1997
TOP TEN HOLDINGS
JUNE 30, 1997
Time Warner Inc.
American Express Company
United Television, Inc.
Chris-Craft Industries, Inc.
Deere & Company
Quaker Oats Company
Neiman Marcus Group, Inc.
IDEX Corporation
GenCorp 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, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ----------- ------------ --------------
<C> <S> <C> <C>
COMMON STOCKS--97.9%
AEROSPACE--0.7%
150,000 Boeing Co. ........................ $ 4,925,117 $ 7,959,375
------------ --------------
AGRICULTURE--0.4%
200,000 Archer-Daniels-Midland Co. ........ 3,652,714 4,700,000
------------ --------------
AUTOMOTIVE--0.8%
177,000 General Motors Corporation......... 5,641,029 9,856,687
------------ --------------
AUTOMOTIVE: PARTS AND ACCESSORIES--5.7%
25,000 APS Holding Corporation, Class
A+................................ 387,500 218,750
33,000 Borg-Warner Automotive, Inc. ...... 842,685 1,784,063
145,000 Echlin Inc. ....................... 1,856,438 5,220,000
222,400 Federal-Mogul Corporation.......... 4,351,017 7,784,000
699,898 GenCorp Inc. ...................... 4,277,578 16,185,141
330,000 Genuine Parts Company.............. 7,689,544 11,178,750
180,000 Handy & Harman..................... 2,665,941 3,127,500
165,000 Johnson Controls, Inc. ............ 2,900,688 6,775,312
125,000 Modine Manufacturing Company....... 1,213,531 3,718,750
41,875 Myers Industries, Inc. ............ 172,636 706,641
160,000 Quaker State Corporation........... 2,160,106 2,440,000
115,000 Standard Motor Products, Inc. ..... 1,008,713 1,581,250
13,200 Superior Industries International,
Inc. ............................. 76,515 349,800
100,600 TransPro Inc. ..................... 789,604 873,963
170,000 UAP Inc., Class A.................. 1,863,579 1,972,736
60,000 Wynn's International, Inc. ........ 997,184 1,702,500
------------ --------------
33,253,259 65,619,156
------------ --------------
AVIATION: PARTS AND SERVICES--1.9%
10,000 BE Aerospace Inc.+................. 193,625 316,250
420,000 Coltec Industries Inc.+............ 5,738,871 8,190,000
101,000 Curtiss-Wright Corporation......... 2,532,272 5,883,250
60,000 Hi-Shear Industries Inc. .......... 510,932 146,250
40,000 Hudson General Corporation......... 1,121,008 1,520,000
95,000 Precision Castparts Corp........... 3,605,425 5,664,375
------------ --------------
13,702,133 21,720,125
------------ --------------
BROADCASTING--5.8%
409,122 Chris-Craft Industries, Inc. ...... 8,421,871 19,740,136
67,526 Chris-Craft Industries, Inc., Class
B(a).............................. 1,132,452 3,258,130
116,000 Gray Communications Systems, Inc.,
Class B........................... 2,231,956 2,421,500
315,000 Grupo Televisa S.A., GDR+.......... 6,594,350 9,568,125
76,000 Liberty Corporation................ 1,759,798 3,097,000
53,000 LIN Television Corporation+........ 587,795 2,338,625
100,000 Paxson Communications Corporation,
Class A+.......................... 1,104,809 1,312,500
400,000 Television Broadcasting Ltd. ORD... 1,815,551 1,796,755
247,500 United Television, Inc. ........... 15,847,291 24,502,500
------------ --------------
39,495,873 68,035,271
------------ --------------
BUILDING AND CONSTRUCTION--0.3%
165,000 Nortek, Inc.+...................... 659,077 3,980,625
4,333 Nortek, Inc., Special Common+(a)... 59,049 67,161
------------ --------------
718,126 4,047,786
------------ --------------
<CAPTION>
MARKET
SHARES COST VALUE
- ----------- ------------ --------------
<C> <S> <C> <C>
BUSINESS SERVICES--1.8%
50,000 Berlitz International, Inc.,
New+.............................. $ 725,813 $ 1,246,875
50,000 Ecolab Inc. ....................... 1,571,512 2,387,500
12,546 Hach Company....................... 148,380 247,784
153,000 International Business Machines
Corporation ...................... 3,669,267 13,798,687
71,000 Landauer, Inc. .................... 441,367 1,646,312
70,000 Nashua Corporation................. 2,231,718 761,250
23,000 Reynolds & Reynolds, Class A....... 372,025 362,250
------------ --------------
9,160,082 20,450,658
------------ --------------
CABLE--5.0%
70,000 BET Holdings, Inc., Class A+....... 1,285,712 2,292,500
215,000 Cablevision Systems Corporation,
Class A+.......................... 8,255,952 11,502,500
40,000 Comcast Corporation, Class A....... 593,113 837,500
20,000 Comcast Corporation, Class A,
Special........................... 423,835 427,500
430,000 International Family Entertainment,
Inc., Class B+.................... 5,794,441 14,781,250
40,000 Shaw Communications Inc., Class
B................................. 363,398 294,001
30,000 Shaw Communications Inc., Class B,
Conv.............................. 191,728 220,500
810,000 Tele-Communications, Inc., Class
A New............................. 12,127,597 12,048,750
574,500 Tele-Communications, Inc./Liberty
Media Group, Class A+............. 8,971,422 13,644,375
60,000 United International Holdings, Inc.,
Class A+.......................... 824,424 622,500
70,000 US WEST Media Group+............... 1,245,925 1,417,500
------------ --------------
40,077,547 58,088,876
------------ --------------
CLOSED-END FUNDS--0.1%
84,000 Royce Value Trust, Inc. ........... 949,972 1,155,000
------------ --------------
COMMUNICATIONS EQUIPMENT--0.7%
115,000 Allen Telcom Inc.+ ................ 712,812 2,386,250
50,000 Motorola, Inc. .................... 668,703 3,800,000
25,000 Northern Telecom Limited........... 941,875 2,275,000
------------ --------------
2,323,390 8,461,250
------------ --------------
CONSUMER PRODUCTS--7.0%
500,000 Carter-Wallace, Inc. .............. 7,690,789 8,937,500
500 Christian Dior SA.................. 75,078 82,529
220,000 Church & Dwight Co., Inc. ......... 4,983,260 5,885,000
21,000 Culbro Corporation+................ 1,027,454 2,922,937
57,300 Department 56, Inc.+............... 1,264,020 1,271,344
18,000 Eastman Kodak Company.............. 1,059,775 1,381,500
160,000 Fieldcrest Cannon, Inc.+........... 2,309,272 3,040,000
65,000 First Brands Corporation........... 910,851 1,490,938
300,000 Fortune Brands, Inc. .............. 6,762,277 11,193,750
250,000 Gallaher Group plc, ADR+........... 3,094,360 4,609,375
170,000 General Electric Company........... 4,163,850 11,113,750
50,000 Gillette Company................... 1,419,452 4,737,500
20,000 Harley Davidson, Inc. ............. 198,900 958,750
5,000 National Presto Industries,
Inc. ............................. 185,312 201,563
188,000 Ralston Purina Group............... 6,914,219 15,451,250
65,000 Scotts Company, Class A+........... 1,169,400 1,885,000
41,700 Syratech Corporation+.............. 954,711 1,339,404
100,000 Tambrands Inc. .................... 4,210,600 4,987,500
------------ --------------
48,393,580 81,489,590
------------ --------------
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
THE GABELLI ASSET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ----------- ------------ --------------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
CONSUMER SERVICES--1.3%
285,000 HSN, Inc.+......................... $ 6,646,484 $ 8,906,250
205,000 Rollins, Inc. ..................... 2,676,982 4,125,625
125,900 Ticketmaster Group Inc.+........... 1,774,771 2,093,088
------------ --------------
11,098,237 15,124,963
------------ --------------
DIVERSIFIED INDUSTRIAL--3.9%
10,000 Anixter International Inc.+........ 90,088 171,875
225,000 Crane Co. ......................... 3,970,482 9,407,813
82,000 GATX Corporation................... 2,736,466 4,735,500
75,000 Honeywell, Inc. ................... 3,267,189 5,690,625
185,000 ITT Industries Inc. ............... 3,158,961 4,763,750
150,000 Katy Industries, Inc. ............. 1,357,500 2,231,250
6,500 Kyocera Corporation, ADR........... 448,062 1,033,500
345,000 Lamson & Sessions Co.+............. 1,862,283 2,867,813
166,000 Lawter International, Inc. ........ 1,599,025 2,095,750
68,000 National Service Industries,
Inc. ............................. 1,591,349 3,310,750
80,000 Thomas Industries Inc. ............ 1,298,410 2,300,000
200,000 Trinity Industries, Inc. .......... 2,233,672 6,350,000
------------ --------------
23,613,487 44,958,626
------------ --------------
ELECTRONICS--0.1%
2,500 Hitachi, Ltd., ADR................. 266,354 282,500
11,000 Imation Corporation+............... 224,636 290,125
10,000 Sony Corporation, ADR.............. 544,303 880,000
------------ --------------
1,035,293 1,452,625
------------ --------------
ENERGY--3.9%
100,000 Atlantic Richfield Company......... 5,368,509 7,050,000
60,000 British Petroleum Company plc,
ADR............................... 1,335,782 4,492,500
30,000 Chevron Corporation................ 1,016,500 2,218,125
165,000 Eastern Enterprises................ 4,444,700 5,744,063
60,000 Enron Oil & Gas Company............ 548,976 1,087,500
180,000 Exxon Corporation.................. 5,413,043 11,070,000
40,000 Global Marine Inc. ................ 822,250 930,000
20,000 Halliburton Company................ 840,758 1,585,000
45,000 Halter Marine Group, Inc.+ ........ 327,638 1,080,000
40,000 Pennzoil Company................... 3,042,468 3,070,000
175,000 Southwest Gas Corporation.......... 3,153,873 3,478,125
30,000 Texaco Inc. ....................... 1,890,875 3,262,500
------------ --------------
28,205,372 45,067,813
------------ --------------
ENTERTAINMENT--5.8%
97,760 Ascent Entertainment Group Inc. ... 636,390 892,060
110,000 EMI Group plc, Sponsored ADR....... 1,251,853 1,993,750
285,000 Gaylord Entertainment Company, Class
A................................. 5,987,890 6,572,813
113,500 GC Companies, Inc.+................ 3,403,171 5,221,000
145,000 Havas, Sponsored ADR............... 2,826,458 2,537,500
20,000 PolyGram NV........................ 574,275 1,076,250
692,000 Time Warner Inc. .................. 20,265,405 33,389,000
11,000 Todd-AO Corporation, Class A....... 30,000 107,078
322,000 Viacom Inc., Class A+.............. 7,855,442 9,478,875
210,000 Viacom Inc., Class B+.............. 5,698,160 6,300,000
2,000 Walt Disney Company................ 95,252 160,500
------------ --------------
48,624,296 67,728,826
------------ --------------
<CAPTION>
MARKET
SHARES COST VALUE
- ----------- ------------ --------------
<C> <S> <C> <C>
EQUIPMENT AND SUPPLIES--12.7%
30,000 Aeroquip-Vickers Inc. ............. $ 931,675 $ 1,417,500
355,000 AMETEK, Inc. ...................... 5,065,510 8,342,500
100,000 AMP Incorporated................... 3,799,733 4,175,000
100,323 Amphenol Corporation, Class A+..... 2,600,874 3,900,057
130,000 AptarGroup, Inc. .................. 1,947,295 5,882,500
60,000 Caterpillar Inc. .................. 1,619,251 6,442,500
65,000 CLARCOR Inc. ...................... 1,239,362 1,608,750
100,000 CTS Corporation.................... 2,084,351 6,893,750
410,000 Deere & Company.................... 6,454,360 22,498,750
195,000 Donaldson Company, Inc. ........... 2,291,946 7,410,000
5,000 Durco International Inc. .......... 120,040 146,250
40,000 EG&G Inc. ......................... 709,125 900,000
165,000 Gerber Scientific, Inc. ........... 1,665,194 3,258,750
492,000 IDEX Corporation................... 3,986,920 16,236,000
86,000 Ingersoll-Rand Company............. 3,250,039 5,310,500
200,000 Kollmorgen Corporation............. 1,861,980 3,162,500
90,000 Lufkin Industries, Inc. ........... 1,627,761 2,362,500
55,000 Manitowoc Company, Inc. ........... 818,138 2,571,250
230,000 Mark IV Industries, Inc. .......... 1,603,090 5,520,000
3,000 Met-Pro Corp. ..................... 41,875 45,375
430,000 Navistar International
Corporation+...................... 6,397,176 7,417,500
20,000 PACCAR Inc. ....................... 522,021 928,750
140,500 Pittway Corporation................ 2,587,410 7,025,000
168,000 Pittway Corporation, Class A....... 1,515,822 8,358,000
61,000 Sequa Corporation, Class A+........ 2,440,436 3,438,875
90,000 Sequa Corporation, Class B+........ 4,393,591 5,602,500
84,000 SPS Technologies, Inc.+............ 2,480,544 5,964,000
30,000 Valmont Industries, Inc. .......... 242,908 570,000
------------ --------------
64,298,427 147,389,057
------------ --------------
FINANCIAL SERVICES--5.9%
1 Al-Zar Ltd.+(a).................... 0 350
345,000 American Express Company........... 8,129,884 25,702,500
220 Berkshire Hathaway Inc.+........... 874,549 10,384,000
70,000 Commerzbank AG, Sponsored ADR...... 1,365,494 1,946,875
150,000 Deutsche Bank AG, Sponsored ADR.... 6,596,875 8,690,625
90,000 H&R Block Inc. .................... 2,829,150 2,902,500
200,000 Lehman Brothers Holdings Inc. ..... 3,607,975 8,100,000
86,000 Midland Company.................... 2,706,145 4,300,000
30,000 Salomon Inc........................ 1,237,436 1,668,750
50,000 State Street Corporation........... 717,713 2,312,500
20,000 SunTrust Banks, Inc. .............. 424,879 1,101,250
11,941 Transamerica Corporation........... 583,636 1,117,230
8,000 Value Line, Inc. .................. 115,500 346,000
------------ --------------
29,189,236 68,572,580
------------ --------------
FOOD AND BEVERAGE--7.4%
76,300 Brown-Forman Corporation, Class
A................................. 2,574,752 3,681,475
93,763 Chock Full o'Nuts Corporation...... 571,819 685,642
46,000 Coca-Cola Company.................. 395,569 3,208,500
17,000 CPC International Inc. ............ 602,088 1,569,312
4,500 Farmer Brothers Company............ 476,380 571,500
70,000 General Mills, Inc. ............... 1,808,141 4,558,750
32,000 Heinz Company (H.J.)............... 823,059 1,476,000
55,000 Hershey Foods Corporation.......... 1,164,188 3,042,187
80,000 Kellogg Company.................... 2,972,655 6,850,000
25,000 LVHM Moet Hennessy Louis Vuitton,
Sponsored ADR..................... 971,563 1,346,875
250,000 PepsiCo, Inc. ..................... 5,696,189 9,390,625
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
THE GABELLI ASSET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ----------- ------------ --------------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
FOOD AND BEVERAGE (CONTINUED)
420,000 Quaker Oats Company................ $ 14,190,134 $ 18,847,500
50,000 Ralcorp Holdings, Inc.+............ 255,676 737,500
20,000 Rykoff-Sexton, Inc. ............... 316,400 466,250
300,000 Seagram Company Ltd. .............. 9,018,197 12,075,000
60,914 Tootsie Roll Industries, Inc....... 1,978,942 2,710,673
300,000 Whitman Corporation................ 2,746,742 7,593,750
100,000 Wrigley (Wm.) Jr. Company.......... 4,508,233 6,700,000
------------ --------------
51,070,727 85,511,539
------------ --------------
HEALTH CARE--3.1%
12,000 Amgen Inc.......................... 220,320 697,500
20,000 Biogen, Inc.+...................... 299,450 677,500
10,000 BioWhittaker, Inc.+................ 40,787 111,250
42,000 Chiron Corporation+................ 578,710 876,750
100,000 Genentech, Inc.+................... 4,804,136 5,893,750
100,000 Johnson & Johnson.................. 2,050,278 6,437,500
70,000 Mallinckrodt Inc. ................. 2,175,407 2,660,000
70,000 Merck & Co., Inc. ................. 2,366,125 7,245,000
78,000 Pfizer Inc. ....................... 2,590,344 9,321,000
25,000 Rhone-Poulenc Rorer, Inc........... 2,277,399 2,271,875
------------ --------------
17,402,956 36,192,125
------------ --------------
HOTELS/GAMING--2.7%
100,000 Circus Circus Enterprises, Inc.+... 2,849,290 2,462,500
40,000 GTECH Holdings Corporation+........ 755,188 1,290,000
12,000 Harrah's Entertainment Inc.+....... 113,002 219,000
365,000 Hilton Hotels Corporation.......... 5,259,454 9,695,313
185,000 ITT Corporation, New+.............. 6,630,634 11,296,562
203,389 Ladbroke Group plc................. 535,440 795,954
195,000 Mirage Resorts, Incorporated+...... 1,006,678 4,923,750
26,000 Santa Anita Realty Enterprises,
Inc. ............................. 409,664 807,625
------------ --------------
17,559,350 31,490,704
------------ --------------
METALS AND MINING--0.5%
30,000 Barrick Gold Corporation........... 622,076 660,000
125,000 Echo Bay Mines Ltd. ............... 1,226,550 718,750
45,000 Homestake Mining Company........... 776,062 587,812
33,000 Newmont Gold Company............... 1,375,428 1,317,937
360,000 Pegasus Gold Inc.+................. 3,983,564 2,205,000
17,500 Placer Dome Inc. .................. 336,400 286,562
220,000 Royal Oak Mines Inc.+.............. 891,185 522,500
------------ --------------
9,211,265 6,298,561
------------ --------------
PAPER AND FOREST PRODUCTS--1.2%
180,000 Greif Bros. Corporation, Class A... 3,637,710 4,860,000
112,500 St. Joe Corp. ..................... 3,953,976 9,421,875
------------ --------------
7,591,686 14,281,875
------------ --------------
PUBLISHING--3.3%
75,000 American Media Inc., Class A+...... 732,562 525,000
12,000 Dow Jones & Company Inc. .......... 490,600 482,250
5,000 E.W. Scripps Company, Class A...... 62,219 208,125
295,000 Golden Books Family Entertainment,
Inc.+............................. 4,103,544 3,687,500
60,000 Harcourt General, Inc. ............ 2,770,063 2,857,500
43,750 McClatchy Newspapers, Inc., Class
A................................. 723,251 1,285,156
122,000 McGraw-Hill Companies, Inc. ....... 3,610,738 7,175,125
370,000 Media General, Inc., Class A....... 9,032,196 14,800,000
<CAPTION>
MARKET
SHARES COST VALUE
- ----------- ------------ --------------
<C> <S> <C> <C>
PUBLISHING (CONTINUED)
90,000 Meredith Corporation............... $ 1,821,493 $ 2,610,000
76,000 New York Times Company, Class A.... 1,229,686 3,762,000
15,000 News Corporation Limited, ADR...... 255,587 288,750
1,650,000 Seat SpA+.......................... 343,343 531,914
------------ --------------
25,175,282 38,213,320
------------ --------------
REAL ESTATE--0.6%
330,000 Catellus Development
Corporation+...................... 2,786,250 5,981,250
12,000 Florida East Coast Industries,
Inc. ............................. 631,838 1,332,000
------------ --------------
3,418,088 7,313,250
------------ --------------
RETAIL--2.2%
46,000 Aaron Rents, Inc. ................. 159,101 615,250
20,000 Aaron Rents, Inc., Class A......... 83,263 238,750
160,000 Burlington Coat Factory Warehouse
Corporation+...................... 2,109,612 3,120,000
180,000 Earl Scheib, Inc.+................. 1,247,799 1,091,250
50,000 Fingerhut Companies, Inc. ......... 711,335 871,875
130,000 Lillian Vernon Corporation......... 1,854,859 2,193,750
675,000 Neiman Marcus Group, Inc.+......... 9,760,037 17,718,750
27,500 THORN plc, ADR..................... 357,147 317,969
------------ --------------
16,283,153 26,167,594
------------ --------------
RETAIL: FOOD AND DRUG--1.0%
115,000 Albertson's, Inc. ................. 3,865,730 4,197,500
50,000 Delchamps, Inc. ................... 1,171,317 1,600,000
100,000 Giant Food Inc., Class A........... 3,307,809 3,262,500
85,000 Kroger Co.+........................ 987,125 2,465,000
------------ --------------
9,331,981 11,525,000
------------ --------------
SPECIALTY CHEMICAL--0.8%
250,000 Ferro Corporation.................. 5,437,040 9,265,625
------------ --------------
TELECOMMUNICATIONS--6.9%
120,000 Aliant Communications Inc.......... 1,725,366 2,340,000
170,000 AT&T Corp. ........................ 6,035,760 5,960,625
100,000 BC TELECOM Inc. ................... 1,768,699 2,346,210
235,000 BCE Inc. .......................... 3,759,410 6,580,000
18,000 BellSouth Corporation.............. 455,094 834,750
100,000 Cable & Wireless plc, Sponsored
ADR............................... 2,083,453 2,793,750
265,000 C-TEC Corporation+................. 5,372,532 9,241,875
46,500 C-TEC Corporation, Class B+........ 730,744 1,598,438
65,000 Frontier Corporation............... 1,202,242 1,295,937
54,000 Globalstar Telecommunications+..... 460,975 1,653,750
180,000 GTE Corporation.................... 4,127,620 7,897,500
35,000 Hong Kong Telecommunications Ltd.,
Sponsored ADR..................... 545,695 818,125
15,000 Koninklijke PTT Nederland NV,
Sponsored ADR..................... 401,231 594,375
175,000 Rogers Communications, Inc., Class
B+................................ 1,504,290 1,083,576
15,000 SBC Communications Inc. ........... 381,937 928,125
40,000 Southern New England
Telecommunications Corporation.... 1,379,750 1,555,000
120,000 Sprint Corporation................. 2,336,302 6,315,000
155,000 STET--Societa Finanziaria
Telefonica SpA, Sponsored ADR..... 3,394,626 9,048,125
1,350,000 Telecom Italia SpA ORD............. 1,576,654 4,042,297
72,000 Telecomunicacoes Brasileiras SA
(Telebras), Sponsored ADR........ 2,130,445 10,926,000
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
THE GABELLI ASSET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ----------- ------------ --------------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
17,000 Telefonica de Espana, Sponsored
ADR............................... $ 578,958 $ 1,466,250
15,000 Telefonos De Mexico SA, Class L,
ADR............................... 474,563 716,250
------------ --------------
42,426,346 80,035,958
------------ --------------
TRANSPORTATION--0.8%
104,000 AMR Corporation+................... 6,472,595 9,620,000
------------ --------------
WIRELESS COMMUNICATIONS--3.6%
190,000 AirTouch Communications Inc.+...... 4,414,002 5,201,250
22,500 Associated Group, Inc., Class A+... 201,448 900,000
18,500 Associated Group, Inc., Class B+... 98,787 716,875
385,000 Century Telephone Enterprises,
Inc. ............................. 8,866,381 12,969,688
200,000 COMSAT Corporation................. 3,708,579 4,762,500
65,000 NEXTEL Communications, Inc., Class
A+................................ 798,199 1,230,937
150,000 TCI Satellite Entertainment Inc.,
Class A+.......................... 1,815,916 1,181,250
2,100,000 Telecom Italia Mobile SpA.......... 1,917,110 6,794,517
150,000 Telephone and Data Systems,
Inc. ............................. 1,821,004 5,690,625
110,000 360 degrees Communications
Company+.......................... 1,485,593 1,883,750
------------ --------------
25,127,019 41,331,392
------------ --------------
TOTAL COMMON STOCKS............................. 644,864,658 1,139,125,207
------------ --------------
PREFERRED STOCKS--0.4%
CONSUMER PRODUCTS--0.1%
30,000 Fieldcrest Cannon, Inc., Series A,
6.00%, Conv. Pfd. 144A(b)......... 1,657,500 1,380,000
------------ --------------
EQUIPMENT AND SUPPLIES--0.2%
19,300 Sequa Corporation, $5.00,
Cumulative Conv. Pfd. ............ 1,482,798 1,679,100
------------ --------------
METALS AND MINING--0.0%
10,000 Freeport-McMoRan Inc., Depository
Shares, 7.00%, Cumulative Conv.
Pfd. ............................. 213,000 273,750
------------ --------------
TELECOMMUNICATIONS--0.1%
10,000 Sprint Corporation, 8.25%, Conv.
Pfd. ............................. 318,750 361,250
1,588,267 Telecomunicacoes de Sao Paulo SA
(Telesp), Preference Shares....... 210,189 518,579
------------ --------------
528,939 879,829
------------ --------------
TOTAL PREFERRED STOCKS.......................... 3,882,237 4,212,679
------------ --------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT COST VALUE
- ----------- ------------ --------------
<C> <S> <C> <C>
CORPORATE BONDS--0.2%
ENTERTAINMENT--0.2%
FRF 593,750 Havas, Conv. Bonds,
Payment-in-kind, 3.00% due
12/31/97.......................... $ 158,703 $ 130,375
$ 2,700,000 Viacom Inc., Sub. Deb., 8.00% due
07/07/06.......................... 1,869,183 2,612,250
------------ --------------
2,027,886 2,742,625
------------ --------------
TOTAL CORPORATE BONDS........................... 2,027,886 2,742,625
------------ --------------
U.S. TREASURY BILLS--1.8%
21,041,000 4.68% to 5.00%++ due 07/03/1997--
08/14/1997........................ 20,952,890 20,952,890
------------ --------------
TOTAL INVESTMENTS.................... 100.3 $671,727,671(c) 1,167,033,401
============
OTHER ASSETS AND LIABILITIES (NET)... (0.3) (3,813,658)
----- --------------
NET ASSETS........................... 100.0% $1,163,219,743
===== ==============
</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. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. The market value
of these securities at June 30, 1997 was $1,380,000, representing 0.12% of
total net assets.
(c) Aggregate cost for Federal tax purposes was $672,684,892. Net unrealized
appreciation for Federal tax purposes was $494,348,509 (gross unrealized
appreciation was $502,703,227 and gross unrealized depreciation was
$8,354,718).
+ 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
See Notes to Financial Statements.
14
<PAGE>
THE GABELLI ASSET FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
- ------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $671,727,671)... $1,167,033,401
Receivable for investments sold............. 6,543,410
Dividends and interest receivable........... 2,091,929
Receivable for Fund shares sold............. 102,842
Net unrealized appreciation of forward
foreign exchange contracts................ 122
------------
Total Assets.............................. 1,175,771,704
------------
LIABILITIES:
Payable for investments purchased........... 7,956,548
Payable to custodian........................ 2,852,431
Payable for investment advisory fee......... 945,447
Payable for distribution fees............... 482,746
Payable for Fund shares redeemed............ 218,224
Accrued expenses and other payables......... 96,565
------------
Total Liabilities......................... 12,551,961
------------
Net assets applicable to 36,988,352 shares
of beneficial interest outstanding...... $1,163,219,743
============
NET ASSETS CONSIST OF:
Shares of beneficial interest at par
value..................................... $ 369,884
Additional paid-in capital.................. 595,091,588
Undistributed net investment income......... 2,638,922
Accumulated net realized gain on investments
sold...................................... 69,816,780
Net unrealized appreciation of
investments............................... 495,302,569
------------
Total Net Assets.......................... $1,163,219,743
============
Net Asset Value, offering and redemption
price per share ($1,163,219,743 /
36,988,352 shares outstanding; unlimited
number of shares authorized of $0.01 par
value).................................. $31.45
=====
<CAPTION>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
- ------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividend income (net of foreign withholding
taxes of $85,386)........................... $ 9,734,455
Interest income............................... 382,364
------------
Total Investment Income..................... 10,116,819
------------
EXPENSES:
Investment advisory fee....................... 5,380,449
Distribution fees............................. 1,321,110
Shareholder services fees..................... 449,590
Trustees' fees................................ 28,720
Legal and audit fees.......................... 22,500
Other......................................... 275,528
------------
Total Expenses.............................. 7,477,897
------------
NET INVESTMENT INCOME........................... 2,638,922
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on securities sold.......... 70,921,561
Net realized gain on forward foreign exchange
contracts and foreign currency
transactions................................ 35
------------
Net realized gain on investments............ 70,921,596
------------
Net unrealized appreciation of securities,
foreign currency and other assets and
liabilities:
Beginning of period......................... 377,087,602
End of period............................... 495,302,569
------------
Change in net unrealized appreciation of
securities, foreign currency and other
assets and liabilities.................. 118,214,967
------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS................................... 189,136,563
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................... $191,775,485
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED 6/30/97 ENDED
(UNAUDITED) 12/31/96
-------------- --------------
<S> <C> <C>
Net investment income......................................................................... $ 2,638,922 $ 5,747,905
Net realized gain on investments.............................................................. 70,921,596 97,358,216
Net change in unrealized appreciation of investments.......................................... 118,214,967 35,910,289
-------------- --------------
Net increase in net assets resulting from operations.......................................... 191,775,485 139,016,410
Distributions to shareholders from:
Net investment income....................................................................... -- (5,681,295)
Net realized gain on investments............................................................ -- (97,358,216)
Distributions in excess of net realized gain on investments................................. -- (410,434)
Net decrease in net assets from Fund share transactions....................................... (109,195,014) (46,466,539)
-------------- --------------
Net increase/(decrease) in net assets......................................................... 82,580,471 (10,900,074)
NET ASSETS:
Beginning of period........................................................................... 1,080,639,272 1,091,539,346
-------------- --------------
End of period (including undistributed net investment income of $2,638,922 at June 30,
1997)....................................................................................... $1,163,219,743 $1,080,639,272
============== ==============
</TABLE>
See Notes to Financial Statements.
15
<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; if there were no asked
prices quoted on such day, then the security is valued at the closing bid price
on such day. Readily marketable securities traded in the over-the-counter
market, including listed securities whose primary market is believed by the
Advisor to be over-the-counter but excluding securities admitted to trading on
the Nasdaq National List, are valued at the mean of the current bid and asked
prices as reported by Nasdaq, or, in the case of securities not quoted by
Nasdaq, the National Quotation Bureau or other comparable sources as the Board
of Trustees deems appropriate to reflect their fair value. If no asked prices
are quoted on such day, then the security is valued at the closing bid price on
such day. If no bid or asked prices are quoted on such day, then the security is
valued by such method as the Board of Trustees shall determine in good faith to
reflect its fair market value. Portfolio securities traded on more than one
national securities exchange or market are valued according to the broadest and
most representative market, as determined by Gabelli Funds, 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. U.S. government securities and
other debt instruments 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.
FORWARD FOREIGN EXCHANGE CONTRACTS. The Fund may engage in forward foreign
exchange contracts for hedging a specific transaction with respect to either the
currency in which the transaction is denominated or another currency as deemed
appropriate by the Adviser. Forward foreign exchange contracts are valued at the
forward rate and are marked-to-market daily. The change in market value is
recorded by the Fund as an unrealized gain or loss. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed.
16
<PAGE>
THE GABELLI ASSET FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
The use of forward foreign exchange contracts does not eliminate fluctuations in
the underlying prices of the Fund's portfolio securities, but it does establish
a rate of exchange that can be achieved in the future. Although forward foreign
exchange contracts limit the risk of loss due to a decline in the value of the
hedged currency, they also limit any potential gain that might result should the
value of the currency increase. In addition, the Fund could be exposed to risks
if the counterparties to the contracts are unable to meet the terms of their
contracts.
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. Dividend income is recorded on the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders are recorded on the ex-dividend date. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund, timing differences and
differing characterization of distributions made by the Fund.
PROVISION FOR INCOME TAXES. The Fund 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,
17
<PAGE>
THE GABELLI ASSET FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
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.
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
wholly-owned subsidiary of the Adviser, is authorized to purchase advertising,
sales literature and other promotional material and to pay its own salespeople.
Effective February 26, 1997, the Fund pays Gabelli & Company as distribution
payments under this Plan, an aggregate amount at a rate of 0.25 percent per year
of the average daily net assets of the Fund each fiscal year. Such payments are
accrued daily and paid monthly. Prior to this change, the Fund reimbursed the
Distributor up to 0.25 percent on an annual basis of the value of the Fund's
average daily net assets based on expenses incurred by the Distributor in
connection with the distribution of shares of the Fund. For the six months ended
June 30, 1997, the Fund incurred distribution costs under the Plan of
$1,321,110, 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, 1997, other than U.S. government
and short-term securities, aggregated $74,356,041 and $186,676,610,
respectively.
5. TRANSACTIONS WITH AFFILIATES. During the six months ended June 30, 1997, the
Fund paid brokerage commissions of $88,364 to Gabelli & Company and its
affiliates.
6. SHARES OF BENEFICIAL INTEREST. Transactions in shares of beneficial interest
were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
6/30/97 12/31/96
----------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold...................................... 4,362,895 $ 121,410,853 6,138,309 $ 168,589,644
Shares issued upon reinvestment of dividends..... -- -- 3,624,998 95,772,441
Shares redeemed.................................. (8,281,908) (230,605,867) (11,251,210) (310,828,624)
---------- ------------- ------------ -------------
Net decrease..................................... (3,919,013) $(109,195,014) (1,487,903) $ (46,466,539)
========== ============= ============ =============
</TABLE>
18
<PAGE>
THE GABELLI ASSET FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Per share amounts for a Fund share outstanding throughout each period.
<TABLE>
<CAPTION>
SIX
MONTHS YEAR ENDED
ENDED DECEMBER 31,
6/30/97 ----------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
----------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of
period......................... $ 26.42 $ 25.75 $ 22.21 $ 23.30 $ 19.88 $ 17.96
-------- ---------- ---------- -------- -------- --------
Net investment income............ 0.07 0.15 0.26 0.26 0.16 0.26
Net realized and unrealized gain/
(loss) on investments.......... 4.96 3.29 5.28 (0.30) 4.18 2.41
-------- ---------- ---------- -------- -------- --------
Total from investment
operations..................... 5.03 3.44 5.54 (0.04) 4.34 2.67
-------- ---------- ---------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income.......... -- (0.15) (0.25) (0.25) (0.16) (0.25)
Distributions in excess of net
investment income............ -- -- -- (0.01) -- --
Net realized gains............. -- (2.61) (1.75) (0.76) (0.76) (0.50)
Distributions in excess of net
realized gains............... -- (0.01) (0.00)(a) (0.03) -- --
-------- ---------- ---------- -------- -------- --------
Total distributions.............. -- (2.77) (2.00) (1.05) (0.92) (0.75)
-------- ---------- ---------- -------- -------- --------
Net asset value, end of period... $ 31.45 $ 26.42 $ 25.75 $ 22.21 $ 23.30 $ 19.88
======== ========== ========== ======== ======== ========
Total return*.................... 19.0% 13.4% 24.9% (0.1)% 21.8% 14.9%
======== ========== ========== ======== ======== ========
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in
000's)......................... $1,163,220 $1,080,639 $1,091,539 $982,250 $945,408 $632,575
Ratio of net investment income
to average net assets........ 0.49% + 0.52% 0.95% 1.10% 0.82% 1.42%
Ratio of operating expenses to
average net assets........... 1.39% + 1.34% 1.33% 1.28% 1.31% 1.31%
Portfolio turnover rate.......... 6.9% 14.9% 26.4% 18.7% 16.0% 14.4%
Average commission rate
(per share of security)(b)..... $ 0.0470 $ 0.0484 N/A N/A N/A N/A
</TABLE>
- ---------------
<TABLE>
<C> <S>
* 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 $0.005 per share.
(b) Average commission rate (per share of security) as required by amended SEC disclosure requirements
effective for fiscal years beginning after September 1, 1995.
</TABLE>
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 Vice President Certified Public Accountant
Dollar Dry Dock Savings Bank Professor, Pace University
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 & Flom L.L.P.
- -------------------------------------------------------------
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.
- -------------------------------------------------------------
[PHOTO]
THE
GABELLI
ASSET
FUND
SEMI-ANNUAL REPORT
JUNE 30, 1997
