THE GABELLI ASSET FUND
THIRD QUARTER REPORT
SEPTEMBER 30, 2000
[GRAPHIC OF FOUR STARS OMITTED]
MORNINGSTAR RATED[TRADE MARK] GABELLI ASSET FUND 4 STARS OVERALL
AND FOR THE THREE-YEAR PERIOD ENDED 09/30/00 AMONG 3876
DOMESTIC EQUITY FUNDS, AND FOR THE FIVE AND TEN-YEAR
PERIODS ENDED 09/30/00
AMONG 2419 AND 796 DOMESTIC EQUITY FUNDS, RESPECTIVELY.
TO OUR SHAREHOLDERS,
Declining market interest rates (bond yields), a quiescent Federal
Reserve, and reasonable second quarter earnings spawned a late summer rally,
temporarily putting the Standard & Poor's 500 and Nasdaq Composite Indices into
positive performance territory for the year. However, stocks retreated in
September as higher oil prices, the plummeting Euro, and third quarter earnings
jitters eroded investor confidence. The Dow Jones Industrial Average ("DJIA")
managed a slight gain for the third quarter, but the S&P 500 and Nasdaq
Composite Indices closed with losses.
Buoyed by deals for a handful of portfolio companies, a strong rebound in
aerospace stocks, and generally positive performance from our utility holdings,
the Gabelli Asset Fund was essentially unchanged for the quarter.
INVESTMENT PERFORMANCE
For the third quarter ended September 30, 2000, The Gabelli Asset Fund's
(the "Fund") net asset value fell 0.10%. The Standard & Poor's ("S&P") 500 Index
and the Nasdaq Composite Index declined 0.97% and 7.35%, respectively, while the
Value Line Composite and Russell 2000 Indices rose 6.40% and 1.11%,
respectively, over the same period. Each index is an unmanaged indicator of
stock market performance. The Fund was up 13.35% over the trailing twelve-month
period. The S&P 500, Nasdaq Composite, Value Line Composite and Russell 2000
Indices rose 13.27%, 33.99%, 17.59% and 23.39%, respectively, over the same
twelve-month period.
For the ten-year period ended September 30, 2000, the Fund's total return
averaged 17.69% annually versus average annual returns of 19.42%, 26.67%, 17.45%
and 16.93% for the S&P 500, Nasdaq Composite, Value Line Composite and Russell
2000 Indices, respectively. Since inception on March 3, 1986 through September
30, 2000, the Fund had a cumulative total return of 874.55%, which equates to an
average annual total return of 16.89%.
--------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Morningstar proprietary
ratings reflect historical risk adjusted performance as of September 30, 2000
and are subject to change every month. Morningstar ratings are calculated from a
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 a
broad asset class receive five stars, the next 22.5% receive four stars, the
next 35% receive three stars, the next 22.5% receive two stars and the bottom
10% receive one star.
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT RESULTS (a)
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Quarter
-----------------------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
<S> <C> <C> <C> <C> <C>
2000: Net Asset Value $40.93 $40.18 $40.14 -- --
Total Return ......... 0.2% (1.8)% (0.1)% -- --
---------------------------------------------------------------------------------------
1999: Net Asset Value $37.18 $41.38 $39.52 $40.84 $40.84
Total Return ......... 4.8% 11.3% (4.5)% 15.3% 28.5%
---------------------------------------------------------------------------------------
1998: Net Asset Value $36.00 $36.41 $31.24 $35.47 $35.47
Total Return ......... 13.0% 1.1% (14.2)% 18.2% 15.9%
---------------------------------------------------------------------------------------
1997: Net Asset Value $27.00 $31.45 $34.99 $31.85 $31.85
Total Return ......... 2.2% 16.5% 11.3% 4.3% 38.1%
---------------------------------------------------------------------------------------
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>
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Average Annual Returns - September 30, 2000 (a)
-----------------------------------------------
1 Year ....................................... 13.35%
5 Year ....................................... 18.90%
10 Year ...................................... 17.69%
Life of Fund (b) ............................. 16.89%
----------------------------------------------------------
Dividend History
------------------------------------------------------
Payment (ex) Date Rate Per Share Reinvestment Price
December 27, 1999 $4.630 $39.92
December 28, 1998 $1.419 $34.60
December 30, 1997 $4.610 $31.73
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 investment operations on March 3, 1986.
--------------------------------------------------------------------------------
2
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COMMENTARY
THE FIVE E'S
In the third quarter of 2000, investors focused on the five E's--Energy,
the Euro, the Economy, Earnings, and the Election. We will share our perspective
on the five E's and offer an opinion on how they may impact the market going
forward.
[PYRAMID GRAPHIC OMITTED]
PYRAMID TEXT AS FOLLOWS:
EPS
PMV
MANAGEMENT
CASH FLOW
RESEARCH
ENERGY
The price of oil hit a ten-year high in the third quarter. Gasoline prices
exceeded $2.00 per gallon in many areas of the country this summer and home
heating costs are expected to rise by 50% this winter. Rising oil prices have
already sparked demonstrations in Europe and energy has become a political issue
in the U.S. as well. Although OPEC has increased production and is publicly
targeting a $25 to $28 per barrel price, global inventories are still tight and
the price of oil remains well over $30 per barrel. The U.S. is attempting to
influence the world energy market by dipping into its strategic oil reserves.
However, this is not likely to have a meaningful near term impact on oil prices.
Treasury Secretary Lawrence Summers recently characterized high oil prices as
"the biggest cloud in the relatively blue sky" of a fundamentally sound global
economy. We agree.
We do not anticipate a repeat of the 1973-74 oil shock, which sent the
global economy into recession and sparked the last great bear market in stocks.
After the Gulf War, we doubt Middle East oil producers, particularly the
Saudi's, would risk alienating their protectors. Only in our worst nightmares do
we consider the impact that $50 per barrel of oil would have on today's equity
markets. Our best guess is that oil prices will decline from their peaks, but
remain high enough to keep pressure on global economies.
THE EURO
[GRAPHIC OMITTED]
EURO VS. U.S. DOLLAR
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:
1999 2000
------ ------
Jan 1.1874 1.0155
1.1761 1.0309
1.1637 1.0335
1.1675 1.0324
1.1556 1.0294
1.1535 1.0252
1.1555 1.0322
1.1698 1.0281
1.1687 1.0270
1.1592 1.0128
1.1603 1.0121
1.1604 1.0115
1.1574 1.0133
1.1578 1.0100
1.1583 1.0019
1.1568 1.0041
1.1575 1.0011
1.1478 0.9890
1.1393 0.9765
1.1374 0.9757
Feb 1.1303 0.9731
1.1328 0.9768
1.1338 0.9887
1.1308 0.9760
1.1283 0.9783
1.1297 0.9862
1.1303 0.9914
1.1330 0.9865
1.1303 0.9847
1.1283 0.9783
1.1247 0.9834
1.1191 0.9842
1.1231 0.9863
1.1223 0.9850
1.1072 1.0060
1.1037 1.0017
1.0994 0.9931
1.0975 0.9763
1.1069 0.9669
1.0993 0.9643
1.0891 0.9700
Mar 1.0929 0.9619
1.0887 0.9618
1.0825 0.9603
1.0843 0.9560
1.0901 0.9576
1.0873 0.9684
1.0961 0.9659
1.0917 0.9648
1.0948 0.9644
1.0930 0.9696
1.0916 0.9710
1.1017 0.9694
1.0993 0.9710
1.0925 0.9703
1.0918 0.9608
1.0919 0.9691
1.0924 0.9724
1.0872 0.9645
1.0745 0.9614
1.0718 0.9524
1.0734 0.9594
1.0809 0.9574
1.0780 0.9560
Apr 1.0707 0.9588
1.0842 0.9647
1.0785 0.9580
1.0842 0.9590
1.0785 0.9588
1.0843 0.9591
1.0780 0.9551
1.0780 0.9524
1.0718 0.9564
1.0690 0.9550
1.0610 0.9477
1.0631 0.9369
1.0614 0.9376
1.0599 0.9379
1.0633 0.9396
1.0590 0.9265
1.0649 0.9217
1.0618 0.9083
1.0597 0.9089
1.0566 0.9120
1.0570 0.9068
1.0594 0.8891
May 1.0725 0.8907
1.0779 0.8953
1.0785 0.8950
1.0790 0.9023
1.0723 0.9097
1.0667 0.9021
1.0624 0.9080
1.0652 0.9138
1.0672 0.9053
1.0672 0.8921
1.0643 0.8952
1.0632 0.8946
1.0575 0.9036
1.0589 0.9032
1.0469 0.9096
1.0439 0.9072
1.0426 0.9310
1.0436 0.9314
1.0446 0.9328
1.0360 0.9307
1.0347 0.9432
1.0330 0.9471
Jun 1.0298 0.9570
1.0442 0.9600
1.0451 0.9548
1.0479 0.9526
1.0519 0.9544
1.0418 0.9619
1.0420 0.9590
1.0303 0.9530
1.0329 0.9648
1.0368 0.9622
1.0324 0.9557
1.0322 0.9455
1.0320 0.9398
1.0371 0.9358
1.0443 0.9382
1.0372 0.9444
1.0339 0.9444
1.0300 0.9515
1.0248 0.9545
1.0224 0.9526
1.0252 0.9548
1.0221 0.9527
Jul 1.0200 0.9484
1.0187 0.9521
1.0138 0.9497
1.0179 0.9401
1.0216 0.9339
1.0221 0.9374
1.0204 0.9351
1.0204 0.9322
1.0418 0.9237
1.0526 0.9292
1.0509 0.9343
1.0501 0.9314
1.0653 0.9391
1.0628 0.9413
1.0645 0.9331
1.0716 0.9246
1.0696 0.9266
1.0680 0.9228
1.0769 0.9137
1.0794 0.9042
1.0771 0.9075
1.0712 0.9105
Aug 1.0752 0.9019
1.0664 0.8991
1.0635 0.9077
1.0570 0.9046
1.0559 0.9037
1.0524 0.9135
1.0508 0.9143
1.0644 0.9152
1.0655 0.9068
1.0553 0.9027
1.0502 0.8965
1.0468 0.8967
1.0440 0.9028
1.0464 0.9024
1.0449 0.9002
1.0581 0.8966
1.0583 0.8924
1.0691 0.8878
1.0607 0.8993
1.0582 0.8876
1.0591 0.8702
1.0541 0.8740
Sep 1.0401 0.8664
1.0401 0.8624
1.0404 0.8596
1.0388 0.8640
1.0417 0.8617
1.0401 0.8572
1.0409 0.8527
1.0462 0.8514
1.0503 0.8463
1.0416 0.8559
1.0469 0.8794
1.0432 0.8738
1.0513 0.8813
1.0616 0.8807
1.0642 0.8830
1.0717 0.8842
1.0704 0.8788
1.0692 0.8745
1.0703 0.8727
1.0722 0.8691
1.0633 0.8686
Oct 1.0737 0.8682
1.0761 0.8716
1.0803 0.8644
1.0888 0.8567
1.0864 0.8491
1.0833 0.8509
1.0764 0.8391
1.0808 0.8412
1.0679 0.8406
1.0668 0.8364
1.0578 0.8365
1.0533 0.8274
1.0519 0.8273
1.0519 0.8408
1.0495 0.8433
1.0507 0.8485
1.0487 0.8588
1.0439 0.8579
1.0402 0.8619
1.0362 0.8585
1.0402 0.8585
Nov 1.0444 0.8554
1.0315 0.8574
1.0316 0.8624
1.0319 0.8574
1.0403 0.8571
1.0306 0.8534
1.0315 0.8517
1.0329 0.8487
1.0262 0.8460
1.0177 0.8424
1.0199 0.8401
1.0138 0.8383
1.0103 0.8503
1.0077 0.8545
1.0068 0.8577
1.0026 0.8694
1.0016 0.8768
Dec 1.0253 0.8876
1.0223 0.8803
1.0262
1.0165
1.0161
1.0122
1.0068
1.0066
1.0169
1.0089
1.0068
1.0097
1.0080
1.0164
1.0132
1.0046
1.0029
1.0064
1.0070
In January 1999, the Euro was introduced with great fanfare. Originally
expected to be a strong international currency, the Euro has declined against
the Japanese yen and plummeted against the U.S. dollar.
3
<PAGE>
The plunging Euro presents a threat to the U.S. economy and stock market.
Europe is by far the largest market for U.S. exports. As the dollar strengthens
against the Euro, our exports become more expensive for European and other
global consumers. Conversely, European imports become cheaper for American
consumers as well as Latin American and Asian purchasers. This is making the
already troublesome balance of trade deficit even more problematic for the U.S.
Eventually, the dollar will have to be contained. While this will help on the
balance of trade front, it may have the adverse affect of reducing foreign
investment in U.S. capital markets. This is a long-term quandary without any
easy solutions.
A secondary effect of the weak Euro--but one with a more immediate impact
on U.S. stocks--is that the earnings for U.S. multi-national companies that do a
significant amount of business in Europe are being penalized significantly as
Euro denominated revenues and profits are translated back into dollars for
reporting purposes. This results in earnings shortfalls for some of the U.S.
market's "bellwether" stocks.
THE ECONOMY
Prior to the rapid increase in oil prices and the collapse of the Euro,
the global economic picture looked relatively bright. Asia had recovered, Europe
was gaining momentum, and after six Federal Reserve interest rate hikes, the
U.S. economy appeared headed for a soft landing. Now, this comfortable economic
scenario is threatened. Will we have a "hard landing?"
EARNINGS
The potential for slower economic growth in the U.S. has investors
questioning whether third and fourth quarter corporate 2000 earnings will meet
what may now be optimistic expectations.
Relatively high equity valuations do not leave much room for earnings
disappointments. The most richly valued sectors of the market (technology in
particular) are well above Benjamin Graham's "safety net". To wit, technology
bellwether Intel lost approximately 20% of its market value in after hours
trading following its announcement that third quarter revenues and earnings
would fall modestly short of consensus Wall Street expectations. After a sharp
decline on the opening bell the next day, stocks rebounded and ended the day
mixed. We question whether stocks will continue to be so resilient if we see
more widespread disappointments during the upcoming 2000 earnings reporting
seasons.
THE ELECTION
After this summer's relatively quiet campaigning, the political rhetoric
is heating up as we approach the November election. There are very clear
differences in the Republicans' and Democrats' positions on a number of economic
issues, in particular, what to do with the growing Federal Government budget
surplus. The Republicans favor large tax cuts. The Democrats are advocating
using the surplus to continue to reduce government debt and plug some holes in
the social safety net. The Republicans tend to view consolidation as an integral
part of global economic evolution. The Democrats are concerned that
consolidation will reduce competition, leaving consumers vulnerable. The
Republicans do not want to interfere in the energy markets. The Democrats are
calling for action. As we write, it appears the election is up for grabs,
creating even more uncertainty in an already uncertain economic and market
environment.
4
<PAGE>
OUR ADVICE
Our stock selection process is based on a "bottoms up" approach. We review
relevant economic and market issues--a list of our current hopes and fears--and
offer carefully considered opinions on their short-term investment implications.
This is a courtesy to shareholders that want to know what we are thinking. It
does not influence our investment strategy. We strive to identify and invest in
undervalued companies with favorable long-term business prospects. Over the
short term, these stocks will be impacted by broad market trends. Over the long
term, they will be judged on their own individual merit. So, our advice to
shareholders is simply to be patient and have faith that selected businesses
purchased at reasonable prices to intrinsic value will produce long-term
rewards.
INVESTMENT SCOREBOARD - THE ENVELOPE PLEASE
Each quarter, we give out Oscars to the portfolio's top performers. The
outstanding performers in the financial services category include Lehman
Brothers, which we believe will attract a larger corporate suitor as
consolidation in the industry continues, Allstate and First Union. In the
aerospace and aerospace component field, the winners are Boeing, Northrop
Grumman, Fairchild and Aviall. Utility holdings DPL Inc., AGL Resources, El Paso
Electric, and Energy East Corp. enjoyed good reviews this quarter.
We also recognize each quarter's biggest box office busts.
Telecommunications companies such as Sprint, Sprint PCS Group, and Nextel failed
at the box office. All were previous portfolio stars, which we believe will be
applauded again in the year ahead. Food companies H.J. Heinz and Kellogg and
food retailer Albertson's also proved unappetizing to investors this quarter.
TMT
Technology, media, and telecommunications ("TMT") stocks produced
exceptional returns in 1997-99. This year, media and telecommunications stocks
languished. This is partially the result of good old-fashioned profit taking in
stocks that had delivered spectacular returns and momentum investors were
dumping.
However, there are other factors that have temporarily soured investors on
media and telecommunication stocks. Consolidation has slowed as regulators here
and abroad are redefining "competitive" standards. European regulators rejected
Time Warner's proposed acquisition of European recorded music powerhouse EMI.
The WorldCom/Sprint merger was derailed by U.S. regulators. U.S. antitrust
authorities are taking a hard look at the Time Warner/AOL deal. These actions
have put potential international telecommunications acquirers such as Deutsche
Telecom temporarily on hold. Smaller deals without antitrust implications are
being completed. However, these smaller deals do not generate the kind of
headlines that captivate investors. Is this the start of a global regulatory
backlash? We do not think so. Consolidation in these industries makes economic
sense in a truly global marketplace.
The constricted capital markets are also causing disruption. As a result
of the "dot.com" stock massacre, the new issue market appears to be closed for
the season and venture capital firms have pulled in their horns. Internet
start-ups are not the only companies being hurt. Promising young media and
telecommunications companies are just not going to be able to survive without
being able to tap the equity or venture capital markets for cash infusions.
These cash-burn casualties will be absorbed by larger entities at rock-bottom
prices, indiscriminately depressing asset values for more worthy competitors.
For
5
<PAGE>
example, Time Warner Telecom scooped up bankrupt competitive local exchange
carrier ("CLEC") GST Telecommunications at a fire sale price. Shortly
thereafter, virtually every CLEC stock got shelled.
Media and telecommunications companies do face serious challenges in the
years ahead. Not all will be up to the task. The Internet is the competitive
tool of the future, but not all media companies will make a successful
transition into the online world. This will be a particularly tough hurdle for
print media companies without a well-planned Internet strategy. The long
distance telephony market is besieged by cutthroat competition and pricing. This
will likely continue for the foreseeable future as margins and earnings are
sacrificed on the altar of market share. Technology will bring new entrants and
established companies will have to fight vigorously to preserve their
franchises.
All things considered, how do we feel about the media and
telecommunications stocks that have rewarded us so generously over the past
several years, but performed so poorly in 2000? Just fine thank you. There are
going to be winners and losers in these rapidly changing industries. Risk and
reward always go hand in hand. Going forward, stock selection remains the key to
making money in these dynamic industries. The silver lining in the cloud
overhanging the media and telecommunications groups is that we now have more
value oriented opportunities to choose from. We believe if we do our analysis,
we can identify many of the companies that will prosper while avoiding most of
those that will fail. A solid stock picking batting average in these groups
should produce attractive long-term returns.
A MEDIA BASTILLE DAY?
In recent years, regulatory barricades in the media industry have been
coming down. Television and radio station cross-ownership barriers have fallen
and broadcast companies have been allowed to substantially expand their national
footprints. But, there are still walls preventing media companies from realizing
their full potential. Media companies are not permitted to own television
stations and newspapers in the same market. Broadcasters and cable television
companies still have onerous and unnecessary restrictions on the number of
customers they can service. We believe as the Internet Age unfolds--making
information and entertainment instantly available to an increasing percentage of
the American public--media companies will be liberated from largely unnecessary
restrictions. Federal Communications Commission ("FCC") Chairman William Kennard
is retiring after the election. The new FCC boss, whether a Democrat or a
Republican, may promote more market oriented regulation. Eventually, common
sense and economic realities will rise above politics, and media companies will
be unshackled. Our portfolio is well positioned to celebrate a Bastille Day for
the media industry. Content will again be King--just as Cash is again King.
SPECTRUM
America is well behind the rest of the developed world in building
state-of-the-art wireless communications systems. One of the reasons is that the
FCC has kept tight control over the transmission spectrum needed to fully
develop wireless networks. Broadcasters have been allocated large chunks of
spectrum to be used to deliver high definition television ("HDTV"). It now
appears that the demand for HDTV will fall well short of previous expectations.
Currently, there is a debate over whether the FCC should retake control of this
spectrum or allow broadcasters to sell it on the open market. We think the
latter option makes more sense. This is a win/win situation. Broadcasters could
make a bundle by
6
<PAGE>
auctioning off spectrum and wireless communications companies would be able to
acquire the spectrum they need to further develop their systems.
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.
BESTFOODS INC. (BFO - $72.75 - NYSE) agreed to a sweetened buyout offer from
Unilever (UN - $48.25 - NYSE) of $73 per share in cash, or $24.3 billion
including assumed debt. The merger will create the world's largest food company.
The transaction is conditioned on the approvals of BFO and UN shareholders and
regulatory approvals, including the European Union and United States antitrust
clearance. The deal is not contingent upon financing. It is expected to close in
the fourth quarter of 2000. The acquisition adds such well-known brands to UN's
portfolio as Entenmann's baked goods and Hellmann's mayonnaise. It will be
accretive to UN's cash earnings per share in the first full year of operation,
resulting in cost savings of about $750 million annually. The
hostile-turned-friendly deal is Unilever's third notable food acquisition in
past months, as it recently acquired SlimFast diet foods and Ben & Jerry's ice
cream for $2.6 billion.
CARTER-WALLACE INC. (CAR - $24.4375 - NYSE), founded in 1880 as the Carter
Medicine Company marketing a single product called Carter Little Liver Pills,
now manufactures and sells a diversified line of consumer health care products
including toiletries, pharmaceuticals, diagnostic specialties, proprietary drugs
and pet supplies. Such brands as Arrid deodorant, Nair hair remover and Pearl
Drops toothpaste are Carter-Wallace products. The company also sells certain
products exclusively in international markets.
CHRIS-CRAFT INDUSTRIES INC. (CCN - $82.375 - NYSE), through its 80% ownership of
BHC Communications (BHC - $157.375 - AMEX), is primarily a television
broadcaster. BHC owns and operates UPN affiliated stations in New York (WWOR),
Los Angeles (KCOP) and Portland, Oregon (KPTV). BHC also owns 58% of United
Television (UTVI - $147.00 - Nasdaq), which operates an NBC affiliate, an ABC
affiliate and five UPN affiliates. Chris-Craft's television stations constitute
one of the nation's largest television station groups, reaching approximately
22% of U.S. households. Chris-Craft is a major beneficiary of the recent FCC
ruling allowing television duopoly, or ownership of two stations in a single
market. The Chris-Craft complex is debt free, with roughly $1.5 billion in cash
and marketable securities. On August 14, News Corp. (NWS - $56.0625 - NYSE)
announced that it would purchase Chris-Craft (along with BHC and United
Television) in a deal worth $5.35 billion. According to the terms of the deal,
CCN shareholders will receive a package of cash and securities having an
"initial" stated value of $85 per share.
DONALDSON, LUFKIN & JENRETTE INC. (DLJ - $89.4375 - NYSE) was acquired by Credit
Suisse Group for $13.4 billion in cash and stock on November 2. DLJ shareholders
received $90 per share. Credit Suisse paid DLJ's parent, French insurer Axa SA,
$8.14 billion in cash and stock. All other shareholders got cash. Credit Suisse
has spent about $12 billion the past three years to expand in insurance, money
management, and securities. The purchase of DLJ, which generates four-fifths of
its profit in the U.S., will strengthen the Credit Suisse First Boston
investment bank's telecommunications and junk-bond businesses.
7
<PAGE>
LIBERTY MEDIA GROUP (LMG'A - $18.00 - NYSE), run by savvy media investor John
Malone, is engaged in businesses that provide programming services (including
production, acquisition and distribution through all media formats) as well as
businesses engaged in electronic retailing, direct marketing and other services.
LMG holds interests in globally branded entertainment networks such as Discovery
Channel, USA Network, QVC, Encore and STARZ! Liberty's investment portfolio also
includes interests in international video distribution businesses, international
telephony and domestic wireless companies, plant and equipment manufacturers,
and other businesses related to broadband services. Liberty Media Group Class A
and Class B common stock are tracking stocks of AT&T.
NAVISTAR INTERNATIONAL CORP. (NAV - $29.9375 - NYSE), with world headquarters in
Chicago, is a leading North American manufacturer and marketer of medium and
heavy trucks and school buses, and a worldwide leader in the manufacture of
mid-range diesel engines, produced in a range of 160 to 300 horsepower for the
International[REGISTRATION MARK] brand. The company is also a private label
designer and manufacturer of diesel engines for the full-size pickup truck and
van markets. The company's products, parts and services are sold through a
network of 1,000 International[REGISTRATION MARK] brand dealer outlets in the
United States, Canada, Brazil and Mexico, and through more than 90 separate
dealers in 75 countries. Navistar provides financing for its customers and
distributors principally through its wholly-owned subsidiary, Navistar Financial
Corporation.
SEAGRAM CO. (VO - $57.4375 - NYSE) operates two global businesses: beverages and
entertainment. The beverage group's major brands include Chivas Regal, Martell,
Mumm, Crown Royal and Seagram's Gin. With its $10.4 billion December acquisition
of Polygram, Seagram has created the world's leading music company, the
Universal Music Group. Seagram's entertainment business includes the Universal
Motion Pictures Group, the Universal Studios Recreation Group and a 46% interest
in USA Networks (USAI - $21.9375 - Nasdaq). On June 20th, Seagram agreed to
merge with French companies Vivendi and Canal Plus, creating a fully integrated
global media and communications company for the wired and wireless world.
TELEPHONE & DATA SYSTEMS INC. (TDS - $110.70 - AMEX) is a diversified
telecommunications service company with cellular telephone, local telephone and
personal communications services ("PCS") operations. TDS serves 3.7 million
customers in 35 states. TDS conducts the vast majority of its cellular
operations through its 81% owned United States Cellular Corp. (USM - $70.00 -
AMEX) and conducts its telephone operations through its wholly-owned TDS
Telecommunications Corp. ("TDS Telecom") subsidiary, a full-service local
exchange carrier. Having completed a merger of its 82%-owned PCS subsidiary
Aerial Communications with VoiceStream Wireless (VSTR - $116.0625 - Nasdaq), TDS
now owns 35.6 million shares of VSTR valued at over $4.0 billion. VSTR is in the
process of being acquired by Deutsche Telecom (DT - $34.25 - NYSE), a former
German phone monopoly, for 3.2 DT shares plus $30 in cash per VSTR share.
TIME WARNER INC. (TWX - $78.25 - NYSE) is the global leader in media and
entertainment, with interests in filmed entertainment, television production and
broadcasting, recorded music, cable television programming, magazine and book
publishing, direct marketing and cable television systems. Time Warner controls
a host of powerful brands, such as Warner Brothers, CNN, HBO, Cinemax, and Time
magazine. Under the terms of a definitive agreement approved by the boards of
both companies, Time Warner and America Online (AOL - $53.75 - NYSE) have agreed
to merge in an all-stock combination, creating a global new- media powerhouse
for the 21st century.
8
<PAGE>
UNITED TELEVISION INC. (UTVI - $147.00 - NASDAQ), headquartered in Beverly
Hills, California, is a television broadcasting group which owns and operates
seven of the stations (one ABC, one NBC and five UPN affiliates) that comprise
Chris-Craft's (CCN - $82.375 - NYSE) television division. UTVI stations cover
approximately nine percent of the U.S. population. UTVI is 58%-owned by BHC
Communications (BHC - $157.375 - AMEX). United Television is a beneficiary of
the recent FCC ruling allowing television duopoly, or ownership of two stations
in a single market. On August 14, News Corp. (NWS - $56.0625 - NYSE) announced
it would purchase United Television (along with Chris-Craft and BHC) in a deal
worth $5.35 billion.
USA NETWORKS INC. (USAI - $21.9375 - NASDAQ), through its subsidiaries, engages
in diversified media and electronic commerce businesses that include electronic
retailing, ticketing operations and television broadcasting. Chairman and CEO
Barry Diller has brought together under one umbrella the USA Network, the Sci-Fi
Channel, USA Networks Studios, USA Broadcasting, The Home Shopping Network and
the Ticketmaster Group. The plan is to integrate these assets, leveraging
programming, production capabilities and electronic commerce across this strong
distribution platform.
WHITMAN CORP. (WH - $11.5625 - NYSE), through its principal operating company,
Pepsi-Cola General Bottlers Inc., manufactures, packages, sells and distributes
carbonated and non-carbonated Pepsi-Cola beverages as well as a variety of other
non-alcoholic beverages in the United States and Central Europe. Pepsi General
serves a significant portion of a ten state region, primarily in the Midwest,
with a population of approximately 35 million people. In addition, Pepsi General
serves territories in Poland, Hungary, the Czech Republic and the Republic of
Slovakia. Pepsi General's three largest brands in terms of volume are
Pepsi-Cola, Diet Pepsi and Mountain Dew.
MINIMUM INITIAL INVESTMENT - $1,000
The Fund's minimum initial investment for both regular and retirement
accounts is $1,000. There are no subsequent investment minimums. No initial
minimum is required for those establishing an Automatic Investment Plan.
Additionally, the Fund and other Gabelli Funds are available through the
no-transaction fee programs at many major brokerage firms.
WWW.GABELLI.COM
Please visit us on the Internet. Our homepage at http://www.gabelli.com
contains information about Gabelli Asset Management Inc., the Gabelli Mutual
Funds, IRAs, 401(k)s, quarterly reports, closing prices and other current news.
You can send us e-mail at [email protected].
IN CONCLUSION
The market has behaved like a swimmer in distress in the third quarter of
2000. Every time stocks struggled to the surface, they were pulled back under
the waves. As we write, stocks are sinking under the weight of higher oil
prices, the weak Euro, and earnings uncertainties. Moderation in oil prices, a
firmer Euro, and solid third quarter earnings would provide a lifeline for
stocks. We will not speculate on the near term prospects for the market. We will
simply continue to practice our time tested investment
9
<PAGE>
strategy of buying quality companies at discount prices. Over the long term, we
remain confident this will produce attractive returns.
The Fund's daily net asset value is available in the financial press and
each evening after 6:00 PM (Eastern Time) by calling 1-800-GABELLI
(1-800-422-3554). The Fund's Nasdaq symbol is GABVX. Please call us during the
business day for further information.
Sincerely,
/S/ SIGNATURE
MARIO J. GABELLI, CFA
Portfolio Manager and
Chief Investment Officer
November 14, 2000
--------------------------------------------------------------------------
TOP TEN HOLDINGS
SEPTEMBER 30, 2000
------------------
Liberty Media Group Cablevision Systems Corp.
Telephone & Data Systems Inc. USA Networks Inc.
Viacom Inc. United Television Inc.
Chris-Craft Industries Inc. Bestfoods Inc.
Time Warner Inc. Donaldson, Lufkin & Jenrette Inc.
--------------------------------------------------------------------------
NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period stated in this report. The manager's views
are subject to change at any time based on market and other conditions.
10
<PAGE>
THE GABELLI ASSET FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 2000 (UNAUDITED)
================================================================================
MARKET
SHARES VALUE
------ ------
COMMON STOCKS -- 93.2%
AEROSPACE -- 1.4%
150,000 Boeing Co. ............................. $ 9,450,000
200,000 Lockheed Martin Corp. .................. 6,592,000
125,000 Northrop Grumman Corp. ................. 11,359,375
--------------
27,401,375
--------------
AGRICULTURE -- 0.3%
20,000 Agribrands International Inc. .......... 872,500
600,000 Archer-Daniels-Midland Co. ............. 5,175,000
15,000 Delta & Pine Land Co. .................. 385,312
--------------
6,432,812
--------------
AUTOMOTIVE -- 0.6%
155,000 General Motors Corp. ................... 10,075,000
20,000 Volkswagen AG .......................... 901,839
--------------
10,976,839
--------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 2.5%
90,000 ArvinMeritor Inc. ...................... 1,321,875
50,000 Borg-Warner Automotive Inc. ............ 1,656,250
235,000 Dana Corp. ............................. 5,052,500
175,000 Federal-Mogul Corp. .................... 951,562
630,000 GenCorp Inc. ........................... 5,118,750
500,000 Genuine Parts Co. ...................... 9,531,250
160,000 Johnson Controls Inc. .................. 8,510,000
100,000 Midas Inc. ............................. 1,400,000
300,000 Modine Manufacturing Co. ............... 8,451,562
202,500 Scheib (Earl) Inc.+ .................... 658,125
210,000 Standard Motor Products Inc. ........... 1,680,000
110,000 Superior Industries International Inc. . 3,300,000
300,000 Tenneco Automotive Inc. ................ 1,556,250
100,000 TransPro Inc. .......................... 350,000
--------------
49,538,12
--------------
AVIATION: PARTS AND SERVICES -- 0.6%
75,000 Aviall Inc.+ ........................... 482,812
181,000 Curtiss-Wright Corp. ................... 8,540,937
70,000 Fairchild Corp., Cl. A+ ................ 446,250
60,000 Hi-Shear Industries Inc. ............... 105,000
30,000 Kaman Corp., Cl. A ..................... 378,750
40,000 Precision Castparts Corp. .............. 1,535,000
--------------
11,488,749
--------------
BROADCASTING -- 5.8%
28,000 BHC Communications Inc., Cl. A+ ........ 4,406,500
560,000 Chris-Craft Industries Inc.+ ........... 46,130,000
73,786 Chris-Craft Industries Inc., Cl. B+ (a) 6,078,122
20,000 Corus Entertainment Inc., Cl. B+ ....... 584,861
260,000 Granite Broadcasting Corp.+ ............ 1,194,375
30,000 Gray Communications Systems Inc. ....... 339,375
200,000 Gray Communications Systems Inc., Cl. B 2,087,500
95,000 Grupo Televisa SA, GDR+ ................ 5,480,312
170,000 Liberty Corp. .......................... 5,886,250
120,000 Paxson Communications Corp., Cl. A+ .... 1,380,000
400,000 Television Broadcasting Ltd. ........... 2,400,957
MARKET
SHARES VALUE
------ ------
247,000 United Television Inc. ................. $ 36,309,000
60,000 Young Broadcasting Inc., Cl. A+ ........ 1,886,250
--------------
114,163,502
--------------
BUILDING AND CONSTRUCTION -- 0.2%
80,111 Huttig Building Products Inc.+ ......... 360,499
175,000 Nortek Inc.+ ........................... 3,062,500
4,333 Nortek Inc., Special Common+ (a) ....... 75,827
--------------
3,498,826
--------------
BUSINESS SERVICES -- 0.5%
100,000 ANC Rental Corp.+ ...................... 575,000
60,000 Berlitz International Inc.+ ............ 510,000
260,000 Cendant Corp.+ ......................... 2,827,500
105,000 Ecolab Inc. ............................ 3,786,562
10,000 Imation Corp.+ ......................... 186,250
66,500 Landauer Inc. .......................... 1,253,525
135,000 Nashua Corp.+ .......................... 1,139,062
--------------
10,277,899
--------------
CABLE -- 2.5%
635,000 Cablevision Systems Corp., Cl. A+ ...... 42,108,437
40,000 Comcast Corp., Cl. A ................... 1,627,500
40,000 Comcast Corp., Cl. A, Special .......... 1,637,500
7,163 NTL Inc.+ .............................. 331,736
60,000 Shaw Communications Inc., Cl. B ........ 1,375,753
80,000 Shaw Communications Inc., Cl. B, Non-Voting+ 1,815,000
32,500 UnitedGlobalCom Inc., Cl. A+ ........... 975,000
--------------
49,870,926
--------------
CLOSED END FUNDS -- 0.1%
84,000 Royce Value Trust Inc. ................. 1,212,750
--------------
COMMUNICATIONS EQUIPMENT -- 0.4%
305,000 Allen Telecom Inc.+ .................... 5,165,938
114,000 Motorola Inc. .......................... 3,220,500
4,000 Nortel Networks Corp. .................. 238,250
--------------
8,624,688
--------------
COMPUTER HARDWARE -- 0.3%
43,000 Hewlett-Packard Co. .................... 4,171,000
100,000 Xerox Corp. ............................ 1,506,250
--------------
5,677,250
--------------
COMPUTER SOFTWARE AND SERVICES -- 0.1%
40,000 Computer Associates International Inc. . 1,007,500
100,000 Genuity Inc.+ .......................... 653,125
5,000 Global Sources Ltd.+ ................... 160,625
24,000 Internet.com Corp.+ .................... 742,500
--------------
2,563,750
--------------
CONSUMER PRODUCTS -- 4.9%
10,000 Avon Products Inc. ..................... 408,750
700,000 Carter-Wallace Inc. .................... 17,106,250
11,000 Christian Dior SA ...................... 592,593
260,000 Church & Dwight Co. Inc. ............... 4,777,500
60,000 Department 56 Inc.+ .................... 791,250
265,000 Energizer Holdings Inc.+ ............... 6,492,500
11
<PAGE>
THE GABELLI ASSET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2000 (UNAUDITED)
================================================================================
MARKET
SHARES VALUE
------ -----
COMMON STOCKS (CONTINUED)
CONSUMER PRODUCTS (CONTINUED)
260,000 Fortune Brands Inc. .................... $ 6,890,000
330,000 Gallaher Group plc, ADR ................ 7,672,500
175,000 Gillette Co. ........................... 5,403,125
80,000 Harley Davidson Inc. ................... 3,830,000
25,000 Maytag Corp. ........................... 776,562
65,000 National Presto Industries Inc. ........ 1,945,937
100,000 Philip Morris Companies Inc. ........... 2,943,750
50,000 Procter & Gamble Co. ................... 3,350,000
1,030,000 Ralston Purina Group ................... 24,398,125
395,500 Shaw Industries Inc. ................... 7,316,750
41,000 Syratech Corp.+ ........................ 322,875
15,000 Whirlpool Corp. ........................ 583,125
-----------
95,601,592
-----------
CONSUMER SERVICES -- 0.3%
50,000 Ogden Corp. ............................ 678,125
400,000 Rollins Inc. ........................... 5,925,000
-----------
6,603,125
-----------
DIVERSIFIED INDUSTRIAL -- 3.3%
5,000 Anixter International Inc.+ ............ 145,625
110,000 Cooper Industries Inc. ................. 3,877,500
420,000 Crane Co. .............................. 9,607,500
100,000 Gardner Denver Machinery Corp.+ ........ 1,625,000
210,000 GATX Corp. ............................. 8,793,750
4,000 General Electric Co. ................... 230,750
150,000 GenTek Inc. ............................ 2,287,500
320,000 Honeywell Inc. ......................... 11,400,000
380,000 ITT Industries Inc.+ ................... 12,326,250
150,000 Katy Industries Inc. ................... 1,050,000
305,000 Lamson & Sessions Co.+ ................. 3,621,875
10,000 MagneTek Inc. .......................... 106,250
120,000 Myers Industries Inc. .................. 1,522,500
130,000 National Service Industries Inc. ....... 2,543,125
18,000 Pentair Inc. ........................... 481,500
155,000 Thomas Industries Inc. ................. 3,138,750
200,000 TI Group plc ........................... 1,064,520
80,000 Trinity Industries Inc. ................ 1,870,000
-----------
65,692,395
-----------
ELECTRONICS -- 1.4%
5,000 Advanced Micro Devices Inc.+ ........... 118,125
3,000 Hitachi Ltd., ADR ...................... 342,750
13,000 Kyocera Corp., ADR ..................... 1,955,687
15,000 Molex Inc., Cl. A ...................... 621,562
635,000 Oak Technology Inc.+ ................... 17,383,125
40,000 Sony Corp., ADR ........................ 4,037,500
175,000 Thomas & Betts Corp. ................... 3,051,562
-----------
27,510,311
-----------
ENERGY AND UTILITIES -- 6.2%
140,000 AGL Resources Inc. ..................... 2,808,750
234,000 BP Amoco plc, ADR ...................... 12,402,000
38,000 Brown (Tom) Inc. ....................... 931,000
MARKET
SHARES VALUE
------ ------
10,000 Burlington Resources Inc. .............. $ 368,125
30,000 Chevron Corp. .......................... 2,557,500
180,000 Columbia Energy Group .................. 12,780,000
350,000 Conectiv Inc. .......................... 6,256,250
50,000 Devon Energy Corp. ..................... 3,007,500
39,998 DPL Inc. ............................... 1,189,940
35,000 E'Town Corp. ........................... 2,340,625
200,000 Eastern Enterprises .................... 12,762,500
240,000 El Paso Electric Co.+ .................. 3,304,800
40,000 Energy East Corp. ...................... 905,000
32,000 EnergyNorth Inc. ....................... 1,942,000
60,000 EOG Resources Inc. ..................... 2,332,500
140,000 Exxon Mobil Corp. ...................... 12,477,500
100,000 Florida Progress Corp. ................. 5,293,750
25,000 Global Marine Inc.+ .................... 771,875
50,000 GPU Inc. ............................... 1,621,875
40,000 Halliburton Co. ........................ 1,957,500
125,000 MCN Energy Group Inc. .................. 3,203,125
705,500 Niagara Mohawk Holdings Inc. ........... 11,111,625
100,000 Northeast Utilities .................... 2,168,750
50,000 Pennzoil-Quaker State Co.+ ............. 525,000
12,000 SJW Corp. .............................. 1,425,000
325,000 Southwest Gas Corp. .................... 6,804,687
165,000 Texaco Inc. ............................ 8,662,500
11,000 UIL Holdings Corp. ..................... 565,812
------------
122,477,489
------------
ENTERTAINMENT -- 12.5%
60,000 Disney (Walt) Co. ...................... 2,295,000
19,406 EMI Group plc .......................... 154,936
100,000 EMI Group plc, ADR ..................... 1,601,221
24,000 Fisher Companies Inc. .................. 1,728,000
40,000 Fox Entertainment Group Inc. ........... 1,060,000
187,500 GC Companies Inc.+ ..................... 562,500
4,000 Liberty Livewire Corp., Cl. A+ ......... 123,000
4,360,000 Liberty Media Group, Cl. A+ ............ 78,480,000
33,000 Metro-Goldwyn-Mayer Inc.+ .............. 792,000
300,000 Seagram Co. ............................ 17,231,250
40,000 Six Flags Inc. ......................... 620,000
658,000 Time Warner Inc. ....................... 51,488,500
1,720,000 USA Networks Inc.+ ..................... 37,732,500
910,000 Viacom Inc., Cl. A+ .................... 53,235,000
-----------
247,103,907
-----------
ENVIRONMENTAL SERVICES -- 0.6%
75,000 EnviroSource Inc.+ ..................... 24,750
300,000 Republic Services Inc.+ ................ 3,937,500
500,000 Waste Management Inc. .................. 8,718,750
-----------
12,681,000
-----------
EQUIPMENT AND SUPPLIES -- 5.5%
310,000 AMETEK Inc. ............................ 6,568,125
43,000 Amphenol Corp., Cl. A+ ................. 2,448,312
72,000 Caterpillar Inc. ....................... 2,430,000
100,000 CIRCOR International Inc.+ ............. 1,031,250
125,000 CLARCOR Inc. ........................... 2,437,500
12
<PAGE>
THE GABELLI ASSET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2000 (UNAUDITED)
================================================================================
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
EQUIPMENT AND SUPPLIES (CONTINUED)
100,000 CTS Corp. .............................. $ 5,062,500
10,000 Danaher Corp. .......................... 497,500
390,000 Deere & Co. ............................ 12,967,500
240,000 Donaldson Co. Inc. ..................... 5,280,000
60,000 Fedders Corp. .......................... 232,500
520,000 Flowserve Corp. ........................ 8,547,500
170,000 Gerber Scientific Inc. ................. 1,466,250
462,000 IDEX Corp. ............................. 12,907,125
50,000 Ingersoll-Rand Co. ..................... 1,693,750
90,000 Lufkin Industries Inc. ................. 1,833,750
18,000 Manitowoc Co. Inc. ..................... 346,500
35,000 Met-Pro Corp. .......................... 354,375
460,000 Navistar International Corp.+ .......... 13,771,250
20,000 PACCAR Inc. ............................ 741,250
93,000 Sequa Corp., Cl. A+ .................... 3,952,500
104,000 Sequa Corp., Cl. B+ .................... 6,188,000
205,000 SPS Technologies Inc.+ ................. 9,942,500
330,000 UCAR International Inc.+ ............... 4,186,875
30,000 Valmont Industries Inc. ................ 596,250
320,000 Watts Industries Inc., Cl. A ........... 3,200,000
120,000 Weir Group plc ......................... 353,953
--------------
109,037,015
--------------
FINANCIAL SERVICES-- 6.6%
28,000 Aegon NV, ADR .......................... 1,039,500
1 Al-Zar Ltd.+ (a) ....................... 140
8,000 Alleghany Corp. ........................ 1,568,000
125,000 Allstate Corp. ......................... 4,343,750
192,000 American Express Co. ................... 11,664,000
60,000 Argonaut Group Inc. .................... 1,050,000
28,000 AXA Financial Inc. ..................... 1,426,250
68,000 Bank One Corp. ......................... 2,626,500
220 Berkshire Hathaway Inc., Cl. A+ ........ 14,168,000
160,000 Block (H&R) Inc. ....................... 5,930,000
120,000 Commerzbank AG, ADR .................... 3,557,941
150,000 Deutsche Bank AG, ADR .................. 12,442,200
280,000 Donaldson, Lufkin & Jenrette Inc. ...... 25,042,500
30,000 Dresdner Bank AG, ADR .................. 1,306,431
220,000 First Union Corp. ...................... 7,081,250
19,000 Lehman Brothers Holdings Inc. .......... 2,807,250
40,000 Leucadia National Corp. ................ 1,070,000
85,000 Mellon Financial Corp. ................. 3,941,875
47,751 Metris Companies Inc. .................. 1,886,165
245,000 Midland Co. ............................ 6,492,500
2,000 MONY Group Inc. ........................ 79,750
60,000 Paine Webber Group Inc. ................ 4,087,500
150,000 Pioneer Group Inc.+ .................... 6,595,313
30,000 St. Paul Companies Inc. ................ 1,479,375
43,000 State Street Corp. ..................... 5,590,000
16,000 Stilwell Financial Inc.+ ............... 696,000
20,000 SunTrust Banks Inc. .................... 996,250
8,000 Value Line Inc. ........................ 280,625
MARKET
SHARES VALUE
------ ------
18,000 Waddell & Reed Financial Inc., Cl. A ... $ 558,000
--------------
129,807,065
--------------
FOOD AND BEVERAGE -- 8.4%
400,000 Bestfoods Inc. ......................... 29,100,000
223,000 Brown-Forman Corp., Cl. A .............. 12,028,063
45,000 Coca-Cola Co. .......................... 2,480,625
50,000 Coca-Cola Enterprises Inc. ............. 796,875
250,000 Corn Products International Inc. ....... 5,687,500
290,000 Diageo plc, ADR ........................ 10,240,625
7,500 Farmer Brothers Co. .................... 1,350,000
125,000 Flowers Industries Inc. ................ 2,437,500
400,000 General Mills Inc. ..................... 14,200,000
20,000 Hain Celestial Group Inc.+ ............. 702,500
110,000 Heinz (H.J.) Co. ....................... 4,076,875
75,000 Hershey Foods Corp. .................... 4,059,375
185,000 Keebler Foods Co.+ ..................... 7,770,000
263,000 Kellogg Co. ............................ 6,361,313
165,000 LVMH Moet Hennessy Louis Vuitton, ADR .. 2,454,375
200,000 Nabisco Holdings Corp., Cl. A .......... 10,750,000
300,000 PepsiAmericas Inc.+ .................... 1,050,000
265,000 PepsiCo Inc. ........................... 12,190,000
150,000 Quaker Oats Co. ........................ 11,868,750
140,000 Ralcorp Holdings Inc.+ ................. 1,977,500
10,000 Sara Lee Corp. ......................... 203,125
137,494 Tootsie Roll Industries Inc. ........... 5,396,640
800,000 Whitman Corp. .......................... 9,250,000
115,000 Wrigley (Wm.) Jr. Co. .................. 8,610,625
--------------
165,042,266
--------------
HEALTH CARE -- 2.3%
25,000 American Home Products Corp. ........... 1,414,063
48,000 Amgen Inc.+ ............................ 3,351,750
36,000 Biogen Inc.+ ........................... 2,196,000
90,000 Block Drug Co. Inc., Cl. A ............. 3,881,250
30,000 Bristol-Myers Squibb Co. ............... 1,713,750
40,000 Chiron Corp.+ .......................... 1,800,000
10,000 Glaxo Wellcome plc, ADR ................ 604,375
30,000 Johnson & Johnson ...................... 2,818,125
16,000 Life Technologies Inc. ................. 1,088,160
113,000 Merck & Co. Inc. ....................... 8,411,438
250,000 Pfizer Inc. ............................ 11,234,375
50,000 Pharmacia Corp. ........................ 3,009,375
10,000 SmithKline Beecham plc, ADR ............ 686,250
35,000 VISX Inc.+ ............................. 942,813
70,000 Wesley Jessen VisionCare Inc.+ ......... 2,690,625
220,000 Women First HealthCare Inc.+ ........... 110,000
--------------
45,952,349
--------------
HOTELS AND GAMING -- 1.9%
80,000 Aztar Corp.+ ........................... 1,230,000
92,000 Boca Resorts Inc., Cl. A+ .............. 1,006,250
400,000 Gaylord Entertainment Co. .............. 9,550,000
30,000 GTECH Holdings Corp.+ .................. 496,875
12,000 Harrah's Entertainment Inc. ............ 330,000
13
<PAGE>
THE GABELLI ASSET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2000 (UNAUDITED)
================================================================================
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
HOTELS AND GAMING (CONTINUED)
914,000 Hilton Group plc ....................... $ 2,621,617
750,000 Hilton Hotels Corp. .................... 8,671,875
100,000 Mandalay Resort Group .................. 2,562,500
220,000 Park Place Entertainment Corp.+ ........ 3,327,500
240,000 Starwood Hotels & Resorts Worldwide Inc. 7,500,000
60,000 Trump Hotels & Casino Resorts Inc.+ .... 150,000
-----------
37,446,617
-----------
METALS AND MINING -- 0.5%
200,000 Alcoa Inc. ............................. 5,062,500
40,000 Barrick Gold Corp. ..................... 610,000
250,000 Echo Bay Mines Ltd.+ ................... 187,500
45,000 Homestake Mining Co. ................... 233,438
140,000 Newmont Mining Corp. ................... 2,380,000
25,000 Placer Dome Inc. ....................... 235,938
250,000 Royal Oak Mines Inc.+ .................. 1,625
80,000 TVX Gold Inc.+ ......................... 130,000
-----------
8,841,001
-----------
PAPER AND FOREST PRODUCTS -- 1.0%
220,000 Greif Bros. Corp., Cl. A ............... 7,315,000
312,000 St. Joe Co. ............................ 8,658,000
65,000 Westvaco Corp. ......................... 1,734,688
50,000 Willamette Industries Inc. ............. 1,400,000
-----------
19,107,688
-----------
PUBLISHING -- 4.1%
40,000 Belo (A.H.) Corp., Cl. A ............... 737,500
15,000 Dow Jones & Co. Inc. ................... 907,500
104,000 Harcourt General Inc. .................. 6,136,000
50,000 Lee Enterprises Inc. ................... 1,443,750
60,000 McClatchy Newspapers Inc., Cl. A ....... 2,111,250
138,000 McGraw-Hill Companies Inc. ............. 8,771,625
411,000 Media General Inc., Cl. A .............. 17,673,000
85,000 Meredith Corp. ......................... 2,507,500
132,000 New York Times Co., Cl. A .............. 5,189,250
14,000 News Corp. Ltd., ADR ................... 784,875
377,000 Penton Media Inc. ...................... 10,367,500
25,000 PRIMEDIA Inc.+ ......................... 409,375
130,000 Pulitzer Inc. .......................... 5,583,500
140,000 Reader's Digest Association Inc., Cl. B 4,418,750
11,900 Scripps (E.W.) Co., Cl. A .............. 642,600
115,000 Thomas Nelson Inc. ..................... 941,563
270,550 Tribune Co. ............................ 11,802,744
-----------
80,428,282
-----------
REAL ESTATE -- 0.5%
400,000 Catellus Development Corp.+ ............ 7,000,000
48,000 Florida East Coast Industries Inc. ..... 1,968,000
71,000 Griffin Land & Nurseries Inc.+ ......... 896,375
3,961 HomeFed Corp.+ ......................... 2,377
-----------
9,866,752
-----------
MARKET
SHARES VALUE
------ ------
RETAIL -- 2.2%
41,000 Aaron Rents Inc. ....................... $ 527,875
20,000 Aaron Rents Inc., Cl. A ................ 302,500
400,000 Albertson's Inc. ....................... 8,400,000
592,800 AutoNation Inc.+ ....................... 3,556,800
200,000 Blockbuster Inc., Cl. A ................ 1,762,500
175,000 Burlington Coat Factory Warehouse Corp. 2,504,688
12,000 Coldwater Creek Inc.+ .................. 324,000
18,699 Delhaize America Inc., Cl. A ........... 326,064
140,000 Kroger Co.+ ............................ 3,158,750
180,500 Lillian Vernon Corp. ................... 1,759,875
620,000 Neiman Marcus Group Inc., Cl. B+ ....... 17,747,500
870,000 Rite Aid Corp.+ ........................ 3,480,000
-----------
43,850,552
-----------
SATELLITE -- 0.4%
175,099 General Motors Corp., Cl. H+ ........... 6,510,181
85,000 Globalstar Telecommunications Ltd.+ .... 733,125
75,000 Loral Space & Communications Ltd.+ ..... 459,375
-----------
7,702,681
-----------
SPECIALTY CHEMICALS -- 1.7%
20,000 Bush Boake Allen Inc.+ ................. 956,250
60,000 Dexter Corp. ........................... 4,250,628
5,000 du Pont de Nemours (E.I.) & Co. ........ 207,188
440,000 Ferro Corp. ............................ 8,387,500
30,000 Fuller (H.B.) Co. ...................... 862,500
150,000 General Chemical Group Inc. ............ 140,625
100,000 Great Lakes Chemical Corp. ............. 2,931,250
180,000 Material Sciences Corp.+ ............... 2,047,500
630,000 Omnova Solutions Inc. .................. 3,504,375
230,000 Rohm & Haas Co. ........................ 6,684,375
95,000 Sybron Chemicals Inc.+ ................. 3,295,313
-----------
33,267,504
-----------
TELECOMMUNICATIONS -- 7.4%
7,500 Allegiance Telecom Inc.+ ............... 279,375
100,000 ALLTEL Corp. ........................... 5,218,750
470,000 AT&T Corp. ............................. 13,806,250
200,000 BCE Inc. ............................... 4,675,000
40,000 BellSouth Corp. ........................ 1,610,000
13,500 Brasil Telecom Participacoes SA, ADR ... 786,375
210,000 Cable & Wireless plc, ADR .............. 8,938,125
575,000 CenturyTel Inc. ........................ 15,668,750
420,000 Citizens Communications Co. ............ 5,643,750
325,665 Commonwealth Telephone Enterprises Inc.+ 12,008,897
32,600 Commonwealth Telephone
Enterprises Inc., Cl. B+ ............. 1,312,150
60,000 Embratel Participacoes SA, ADR+ ........ 1,110,000
25,000 Global Crossing Ltd.+ .................. 775,000
22,045 Pacific Century CyberWorks Ltd., ADR+ .. 242,495
80,000 Qwest Communications International Inc.+ 3,845,000
295,000 RCN Corp.+ ............................. 6,121,250
10,000 Rogers Communications Inc., Cl. B+ ..... 236,935
430,000 Rogers Communications Inc., Cl. B, ADR+ 10,185,625
14
<PAGE>
THE GABELLI ASSET FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 2000 (UNAUDITED)
================================================================================
MARKET
SHARES VALUE
------ ------
COMMON STOCKS (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
135,000 SBC Communications Inc. ................ $ 6,750,000
160,000 Sprint Corp.+ .......................... 4,690,000
75,403 Tele Norte Leste Participacoes SA, ADR . 1,724,844
500,000 Telecom Italia SpA ..................... 5,312,202
119,000 Telecom Italia SpA, ADR ................ 12,495,000
85,825 Telefonica SA, ADR ..................... 5,101,223
20,000 Telefonos de Mexico SA, Cl. L, ADR ..... 1,063,750
37,500 TELUS Corp. ............................ 1,009,384
22,500 TELUS Corp., ADR ....................... 605,631
12,500 TELUS Corp., Non-Voting ................ 324,831
21,500 TELUS Corp., Non-Voting, ADR ........... 558,709
270,000 Verizon Communications ................. 13,078,125
--------------
145,177,426
--------------
TRANSPORTATION -- 0.2%
95,000 AMR Corp.+ ............................. 3,105,313
4,000 Kansas City Southern Industries Inc. ... 34,750
3,000 Providence & Worcester Railroad Co. .... 21,188
35,000 Ryder System Inc. ...................... 645,313
--------------
3,806,564
--------------
WIRELESS COMMUNICATIONS -- 6.0%
70,000 AT&T Wireless Group+ ................... 1,461,250
10,000 Leap Wireless International Inc.+ ...... 625,625
91,994 Nextel Communications Inc., Cl. A+ ..... 4,300,720
30,000 Price Communications Corp.+ ............ 586,875
125,000 Rogers Wireless
Communications Inc., Cl. B+ .......... 3,796,875
310,000 Sprint Corp. (PCS Group)+ .............. 10,869,375
6,750 Tele Celular Sul Participacoes SA, ADR . 202,500
22,500 Tele Centro Oeste Celular
Participacoes SA, ADR ............. 239,063
1,350 Tele Leste Celular Participacoes SA, ADR 54,422
3,375 Tele Nordeste Celular Participacoes SA, ADR 158,625
1,350 Tele Norte Celular Participacoes SA, ADR 54,000
1,800,000 Telecom Italia Mobile SpA .............. 14,549,433
11,162 Telefonica SA, BDR+ .................... 220,822
3,375 Telemig Celular Participacoes SA, ADR .. 178,664
700,000 Telephone & Data Systems Inc. .......... 77,490,000
27,000 Telesp Celular Participacoes SA, ADR ... 889,313
40,000 Teligent Inc., Cl. A+ .................. 520,000
27,000 Vodafone Group plc, ADR ................ 999,000
14,000 VoiceStream Wireless Corp.+ ............ 1,624,875
18,000 Winstar Communications Inc.+ ........... 279,000
--------------
119,100,437
--------------
TOTAL COMMON STOCKS .................... 1,837,831,508
--------------
PREFERRED STOCKS -- 0.0%
METALS AND MINING -- 0.0%
15,000 Freeport-McMoRan Copper & Gold Inc.,
7.00% Cv. Pfd. ....................... 187,500
--------------
TELECOMMUNICATIONS -- 0.0%
13,000 Citizens Communications Co.,
5.00% Cv. Pfd. ....................... $ 705,250
--------------
WIRELESS COMMUNICATIONS -- 0.0%
7,686,101 Telesp Celular Participacoes SA, Pfd.+ . 100,816
--------------
TOTAL PREFERRED STOCKS ................. 993,566
--------------
PRINCIPAL
AMOUNT
---------
CORPORATE BONDS -- 0.0%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.0%
$ 1,200,000 Standard Motor Products Inc.,
Sub. Deb. Cv.
6.75%, 07/15/09 ...................... 618,000
--------------
SHARES
-------
WARRANTS -- 0.0%
WIRELESS COMMUNICATIONS -- 0.0%
768,610 Telesp Celular Participacoes SA ........ 8
2,700 Telesp Celular Participacoes SA, ADR ... 0
--------------
TOTAL WARRANTS ......................... 8
--------------
PRINCIPAL
AMOUNT
---------
U.S. GOVERNMENT OBLIGATIONS -- 6.7%
$133,754,000 U.S. Treasury Bills,
6.13% to 6.29%++,
due 10/12/00 to 12/28/00 ............. 132,285,614
--------------
TOTAL INVESTMENTS -- 99.9%
(Cost $1,258,175,666) ................ 1,971,728,696
==============
OTHER ASSETS AND
LIABILITIES (NET) -- 0.1% ........... 1,257,210
--------------
NET ASSETS -- 100.0%
(49,156,120 shares outstanding) ...... $1,972,985,906
==============
SETTLEMENT NET UNREALIZED
DATE APPRECIATION
--------------------------------------------------------------------------------
FORWARD FOREIGN EXCHANGE CONTRACTS
17,267,780(b)Deliver Hong Kong Dollars
in exchange for
USD 2,217,740 08/03/01 $ 7,258
=======
------------------------
(a) Security fair valued under procedures established by Board of Trustees.
(b) Principal amount denoted in Hong Kong Dollars.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR - American Depositary Receipt.
BDR - Brazilian Depositary Receipt.
GDR - Global Depositary Receipt.
USD - U.S. Dollars.
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.)
BOARD OF TRUSTEES
Mario J. Gabelli, CFA Karl Otto Pohl
CHAIRMAN AND CHIEF FORMER PRESIDENT
INVESTMENT OFFICER DEUTSCHE BUNDESBANK
GABELLI ASSET MANAGEMENT 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
FORMER CHIEF INVESTMENT OFFICER CHAIRMAN
FINANCIAL SECURITY ASSURANCE THE BETHLEHEM CORP.
HOLDINGS LTD.
John D. Gabelli
SENIOR VICE PRESIDENT
GABELLI & COMPANY, INC.
OFFICERS AND PORTFOLIO MANAGERS
Mario J. Gabelli, CFA Bruce N. Alpert
PORTFOLIO MANAGER PRESIDENT AND TREASURER
James E. McKee
SECRETARY
DISTRIBUTOR
Gabelli & Company, Inc.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT
State Street Bank and Trust Company
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
--------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of The
Gabelli Asset Fund. It is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective prospectus.
--------------------------------------------------------------------------------
GAB405Q300SR
[PHOTO OF MARIO J. GABELLI OMITTED]
THE
GABELLI
ASSET
FUND
THIRD QUARTER REPORT
SEPTEMBER 30, 2000
