Registrant No. 33-10583
Investment Company File No. 811-4873
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT No.
POST-EFFECTIVE AMENDMENT No. 13
X
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT No. 14 X
THE GABELLI GROWTH FUND
(Exact Name of Registrant as Specified in Charter)
One Corporate Center, Rye, New York 10580-1434
(Address of Principal Executive Office)
Registrant's Telephone Number (800) 422-3554
Bruce N. Alpert
Gabelli Funds, Inc.
One Corporate Center, Rye, New York 10580-1434
(Name Address of Agent for Service)
Copies to:
James E. McKee, Esq. Richard T. Prins, Esq.
Gabelli Funds, Inc. Skadden, Arps, Slate, Meagher & Flom
One Corporate Center 919 Third Avenue
Rye, New York 10580-1434 New York, New York 10022
(212) 735-2000
It is proposed that this filing will become effective (check
appropriate box):
immediately upon filing pursuant to paragraph (b); or
X on May 1, 1996 pursuant to paragraph (b); or
60 days after filing pursuant to paragraph (a); or
on [date] pursuant to paragraph (a) of Rule 485.
If appropriate, check the following box:
this post-effective amendment designates a new effective
date for a previously filed
post-effective amendment.
Registrant has registered an indefinite number of its shares of
beneficial interest pursuant to Rule 24f-2 under the Investment
Company Act of 1940, as amended and has filed a Rule 24f-2 Notice for
its most recent fiscal year ended December 31, 1995 on February 27,
1996.
CALCULATION OF REGISTRATION FEE UNDER
THE SECURITIES ACT OF 1933(1)
Proposed Proposed
Maximum Maximum
Offering Aggregate
Title of Securities Amount Being Price Per Offering
Amount of
Being Registered Registered Unit (2) Price (3)
Registration Fee
Shares of Beneficial 467,044.76 $23.26 $290,000 $100
Interest par value $.01
per share of
The Gabelli Growth Fund
(1) The shares being registered as set forth in this table are in
addition to the indefinite number of shares of beneficial interest
which Registrant has registered under the Securities Act of 1933, as
amended (the "1933 Act"), pursuant to Rule 24f-2 under the 1940 Act.
Registrant's Rule 24f-2 Notice for its fiscal year ended December 31,
1995, was filed on February 27, 1996.
(2) Based on the Registrant's closing price of $23.26 on April 17,
1996 pursuant to Rule 457(d) under the 1933 Act and Rule 24e-2(a)
under the 1940 Act.
(3) In response to Rule 24e-2(b) under the 1940 Act: (1) the
calculation of the maximum aggregate offering price is made pursuant
to Rule 24e-2; (2) 11,667,885 shares of beneficial interest were
redeemed by the Registrant during the fiscal year ended December 31,
1995; (3) 11,213,308 shares have been used for reductions pursuant to
Rule 24f-2 during the current year; and (4) 454,577 shares are being
used for reduction in this amendment pursuant to Rule 24e-2(a).
GABELLI GROWTH FUND
CROSS REFERENCE SHEET
(Pursuant to Rule 495(a))
Part A
Item No. Prospectus Captions
1. Cover Page Cover Page
2. Synopsis Table of Fees and Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant The Fund and Its Investment
Policies, Special Investment Methods
5. Management of the Fund Management of the Fund
5A. Management's Discussion of Fund Performance Not applicable
6. Capital Stock and Other Securities General Information
7. Purchase of Securities Being Offered Purchase of Shares
8. Redemption or Repurchase Redemption of Shares
9. Pending Legal Proceedings Not applicable
Part B Statement of Additional
Item No. Information Caption
10. Cover Page Cover Page
11. Table of Contents Cover Page
12. General Information and History Not Applicable
13. Investment Objectives and Policies (Prospectus "The Fund
and Its Investment Policies) Investment Policies; Special
Investment Methods; Special Risks; Investment Restrictions
14. Management of the Fund Trustees and Officers
15. Control Persons and Principal Holders of Securities Trustees
and Officers
16. Investment Advisory and Other Services (Prospectus-
"Management of the Fund"); Investment Adviser
17. Brokerage Allocation Portfolio Transactions and
Brokerage
18. Capital Stock and Other Securities (Prospectus-"General
Information"); General Information
19. Purchase, Redemption and Pricing (Prospectus-"Purchase of
Shares,
of Securities Being Offered Redemption of Shares");
Redemption of Shares; Net Asset Value
20. Tax Status (Prospectus-"Dividends, Distributions and
Taxes")
21. Underwriters Distributor
22. Calculation of Performance Data Investment Performance
Information
23. Financial Statements Report of Independent Accountants;
Financial Statements
Part C
Information required to be included in Part C is set
forth under the appropriate Item, so numbered, in Part C to
this Registration Statement.
THE GABELLI GROWTH FUND
PART A
<PAGE>
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The Gabelli Growth Fund
One Corporate Center, Rye, New York 10580-1434
Telephone: 1-800-GABELLI (1-800-422-3554)
http://www.gabelli.com
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PROSPECTUS
MAY 1, 1996
The Gabelli Growth Fund (the "Fund") is an open-end, no-load mutual fund which
seeks capital appreciation by investing in securities which are perceived by its
management to have favorable, yet undervalued, prospects for earnings growth.
Current income is a secondary investment objective. See "The Fund and its
Investment Policies".
----------------------
Shares of the Fund may be purchased without a sales load at the next determined
per share net asset value. There is no deferred sales or other charge on the
redemption of shares but the Fund may pay up to 0.25% of its average net assets
in any fiscal year for certain promotional, distribution expenses and
shareholder services (see "Distribution Plan"). The minimum initial investment
is $1,000 (see "Purchase of Shares") except for investments made through a
spousal Individual Retirement Account ("IRA") or Automatic Investment Plan (see
"Retirement Plans" or "Automatic Investment Plan"). For further information,
contact Gabelli & Company, Inc. at the address or telephone number shown above.
----------------------
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. A Statement of Additional Information,
dated May 1, 1996, containing additional and more complete information about the
Fund (the "Additional Statement") has been filed with the Securities and
Exchange Commission (the "SEC") and is incorporated in its entirety by reference
into this Prospectus. For a free copy, write or call the Fund at the telephone
number or address set forth above.
----------------------
This Prospectus should be retained by investors for future reference.
----------------------
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF FEES AND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum sales load imposed on purchases.................................................................. None
Maximum sales load imposed on reinvested dividends....................................................... None
Contingent deferred sales charge upon redemption of investments.......................................... None
Redemption fee........................................................................................... None*
ANNUAL FUND OPERATING EXPENSES:
(Percent of average net assets)
Management Fees.......................................................................................... 1.00%
Distribution (Rule 12b-1) Expenses (a)................................................................... .25%
Other Expenses........................................................................................... .19%
-----
Total Fund Operating Expenses...................................................................... 1.44%
-----
-----
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE:** 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return at the end of each period..................................... $ 15 $46 $79 $172
</TABLE>
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* Broker-dealers holding a shareholder's shares may charge a fee for
redemptions.
** The amounts listed in this example should not be considered as
representative of past or future expenses and actual expenses may be greater
or less than those indicated. Moreover, while the example assumes a 5%
annual return, the Fund's actual performance will vary and may result in an
actual return greater or less than 5%.
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(a) The foregoing table is to assist you in understanding the various costs and
expenses that an investor in the Fund would have borne directly or
indirectly. The expenses shown are at the levels incurred during the past
fiscal year and anticipated for the current fiscal year. The maximum level
of distribution expenses which may be borne by the Fund is 0.25% of its
average net assets (see "Distribution Plan"). As a result, long term
shareholders may pay more than the economic equivalent of the maximum
front-end sales charge permitted by the National Association of Securities
Dealers, Inc. ("NASD")
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Management's Discussion and Analysis of the Fund's performance during the fiscal
year ended December 31, 1995 is included in the Fund's Annual Report to
Shareholders dated December 31, 1995. The Fund's Annual Report to Shareholders
may be obtained upon request and without charge by writing or calling the Fund
at the address or telephone number listed on the Prospectus cover.
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2
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FINANCIAL HIGHLIGHTS
The following information has been audited by Price Waterhouse LLP, independent
accountants, whose unqualified report appears in the Additional Statement. This
table should be read in conjunction with the Financial Statements and related
notes that are included in the Additional Statement.
Per share amounts for a Fund share outstanding throughout each period/year ended
December 31,
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of
year........................ $ 19.68 $ 23.26 $ 21.59 $ 21.28 $ 16.27 $ 17.07 $ 12.65 $ 9.51
-------- -------- -------- -------- -------- -------- -------- -------
Net investment income(a)...... 0.05 0.07 0.06 0.08 0.16 0.37 0.18 0.05
Net realized and unrealized
gain/(loss) on
investments................. 6.39 (0.86) 2.37 0.88 5.42 (0.71) 4.89 3.62
-------- -------- -------- -------- -------- -------- -------- -------
Total from investment
operations.................. 6.44 (0.79) 2.43 0.96 5.58 (0.34) 5.07 3.67
-------- -------- -------- -------- -------- -------- -------- -------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income....... (0.05) (0.08) (0.05) (0.09) (0.15) (0.39) (0.17) (0.20)
Distributions in excess of
net investment income..... -- (0.01) -- -- -- -- -- --
Net realized gains.......... (3.91) (2.39) (0.67) (0.56) (0.42) (0.07) (0.48) (0.33)
Distributions in excess of
net realized gains........ -- (0.31) (0.04) -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------
Total distributions........... (3.96) (2.79) (0.76) (0.65) (0.57) (0.46) (0.65) (0.53)
-------- -------- -------- -------- -------- -------- -------- -------
Net asset value, end of
year........................ $ 22.16 $ 19.68 $ 23.26 $ 21.59 $ 21.28 $ 16.27 $ 17.07 $ 12.65
======== ======== ======== ======== ======== ======== ======== =======
Total return**................ 32.7% (3.4)% 11.3% 4.5% 34.3% (2.0)% 40.1% 39.2%
======== ======== ======== ======== ======== ======== ======== =======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in
000's)...................... $533,041 $482,471 $695,013 $625,050 $422,589 $202,971 $113,187 $11,968
Ratio of net investment
income to average net
assets.................... 0.22% 0.31% 0.22% 0.46% 0.97% 2.67% 2.24% 0.72%
Ratio of operating expenses
to average net
assets(b)................. 1.44% 1.36% 1.41% 1.41% 1.45% 1.50% 1.85% 2.30%
Portfolio turnover rate....... 140.2% 40.3% 80.7% 45.9% 49.9% 74.7% 47.8% 81.7%
<CAPTION>
1987*
------
<S> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of
year........................ $10.00
------
Net investment income(a)...... 0.15
Net realized and unrealized
gain/(loss) on
investments................. (0.64)
------
Total from investment
operations.................. (0.49)
------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income....... --
Distributions in excess of
net investment income..... --
Net realized gains.......... --
Distributions in excess of
net realized gains........ --
------
Total distributions........... --
------
Net asset value, end of
year........................ $ 9.51
======
Total return**................ (4.9)%
======
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in
000's)...................... $3,532
Ratio of net investment
income to average net
assets.................... 2.94%+
Ratio of operating expenses
to average net
assets(b)................. 2.00%+
Portfolio turnover rate....... 80.0%
</TABLE>
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<TABLE>
<C> <S>
* The Fund commenced operations on April 10, 1987.
** 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) Net investment loss before expenses reimbursed by Adviser for the year ended December 31, 1988 and the period ended
December 31, 1987 was $(0.09) and $(0.08), respectively.
(b) Operating expense ratios before expenses reimbursed by Adviser for the year ended December 31, 1988 and the period
ended December 31, 1987 were 4.38% and 6.45%, respectively.
</TABLE>
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3
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THE FUND AND ITS INVESTMENT POLICIES
The Fund is an open-end, no-load diversified, management investment company
organized as a Massachusetts Business Trust on October 24, 1986. In seeking its
primary objective of capital appreciation, the Fund will emphasize investments
in securities of companies with favorable earnings dynamics and prospects for
significant price appreciation. Current income, to the extent it may affect
potential growth in capital, is a secondary objective. There is no assurance
that the Fund will achieve its investment objectives. The Fund has certain
investment restrictions which, together with its investment objectives and the
percentage restrictions listed below under "Special Investment Methods", may not
be changed without shareholder approval. Its other investment policies indicated
below may be changed by the Board of Trustees without shareholder approval.
The Fund expects that its assets will be invested primarily in a diversified
portfolio of readily marketable common stocks and securities convertible into
similar common stocks which are perceived by Gabelli Funds, Inc. (the "Adviser")
to be undervalued in relation to prevailing market multiples. Investments are
expected to be made largely in companies which are judged to have above-average
or expanding market shares, profit margins and returns on equity. When the
Fund's investments lose their perceived value relative to other similar or
alternative investments, they are sold. When deemed appropriate by the Adviser,
the Fund may without limit, invest temporarily in defensive securities such as
investment grade debt securities; obligations of the U.S. Government, its
agencies or instrumentalities; or commercial paper rated "A-1" or better by
Standard & Poor's Ratings Service, a division of McGraw-Hill Companies, Inc.
("S&P") or "P-1" or better by Moody's Investors Service, Inc. ("Moody's").
The Fund may also, subject to the diversification requirements of its investment
restrictions, invest not more than 35% of its total assets in securities for
which a tender or exchange offer has been made or announced and in securities of
companies for which a merger, consolidation, liquidation or similar
reorganization proposal has been announced if, in the judgment of the Adviser,
there is a reasonable prospect of capital appreciation significantly greater
than the added portfolio turnover expenses inherent in the short-term nature of
such transactions. The 35% limitation does not apply to the securities of
companies which may be involved in simply consummating an approved or agreed
upon merger, acquisition, consolidation, liquidation or reorganization. The
principal risk is that such offers or proposals may not be consummated within
the time and under the terms contemplated at the time of the investment in which
case, unless replaced by an equivalent or increased offer or proposal which is
consummated, the Fund may sustain a loss. For further information on such
investments, see "Special Risks" in the Additional Statement.
Fundamental security analysis is used to develop earnings forecasts for
companies and to identify investment opportunities. Specific sources of
information employed include general economic and industry data as provided by
the United States Government, various trade associations and other sources and
published corporate financial data such as annual reports, 10-Ks and quarterly
statements as well as direct interviews with company managements. Generally, the
investment decision process begins with looking at individual companies and then
scrutinizing their prospects in the framework of their industries and the
overall economy. Research is directed towards locating pockets of inefficiency
in terms of future earnings potential relative to current market valuations.
It is anticipated that most Fund investments will be long-term in nature and
that the annual turnover of the Fund's portfolio should not exceed 100%. A
portfolio turnover rate of 100% would occur if all the stocks in the portfolio
were replaced in a one year period. As the Fund's portfolio turnover increases,
so will its brokerage and other transaction related expenses. The Fund's
portfolio turnover rate for its fiscal years ended December 31, 1994 and
December 31,
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4
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1995 were 40.3% and 140.2%, respectively. The high portfolio turnover rate
during the fiscal year ended December 31, 1995 was due to restructuring of the
portfolio by the new portfolio manager during 1995.
SPECIAL INVESTMENT METHODS
The Fund will not in the aggregate, invest more than 10% of its net assets in
small, unseasoned companies, securities which are restricted for public sale,
securities for which market quotations are not readily available, and in
repurchase agreements maturing or terminable in more than seven days. Securities
freely saleable among qualified institutional investors under special rules
adopted by the SEC may be treated as liquid if they satisfy liquidity standards
established by the Board of Trustees. The continued liquidity of such securities
is not as well assured as that of publicly traded securities, and accordingly,
the Board of Trustees will monitor their liquidity. Information regarding the
investment restrictions of the Fund as well as further information on its
investment methods and policies of the Fund are set forth in the Additional
Statement.
The Fund may purchase and sell securities on a "when, as and if issued basis"
under which the issuance of the security depends upon the occurrence of a
subsequent event, such as approval of a merger, corporate reorganization or debt
restructuring. For further information, see "When Issued, Delayed Delivery
Securities & Forward Commitments" in the Additional Statement.
INVESTMENT IN SMALL, UNSEASONED COMPANIES
The Fund may invest up to 5% of its net assets in small, less well known
companies which (including predecessors) have operated less than three years.
The securities of such companies may have limited liquidity.
CONVERTIBLE SECURITIES
Convertible securities may include corporate notes or preferred stock but are
ordinarily long-term debt obligations of the issuer convertible at a stated
exchange rate during a specified period into common stock of the issuer. The
Fund may invest in convertible securities when it appears to the Adviser that it
may not be prudent to be fully invested in common stocks. In evaluating a
convertible security, the Adviser places primary emphasis on the attractiveness
of the underlying common stock and the potential for capital appreciation
through conversion.
As with all debt securities, the market value of convertible securities tend to
vary inversely to changes in the prevailing interest rates and when the market
price of the underlying common stock exceeds the conversion price, to reflect
the value of the underlying common stock. Although convertible securities
generally offer lower interest or dividend yields than non-convertible
securities of similar quality, they rank senior to common stocks in the capital
structure of an issuer and are consequently of higher quality and may entail
less risk than its common stock. However, the extent to which such risk is
reduced depends largely on the degree to which the convertible security sells
above its value as a fixed income security. For further information, see
"Convertible Securities" in the Additional Statement.
The Fund will normally purchase only in investment grade, convertible debt
securities having a rating of, or equivalent to, an S&P rating of at least
"BBB", or, if unrated, are judged by the Adviser to be of comparable quality.
However, the Fund reserves the right to invest up to 15% of its assets in lower
rated convertible debt securities if, in the judgment of the Adviser, such
purchase does not involve the acceptance of overly significant credit risks and
such securities have at least a rating of, or equivalent to, an S&P rating of
"B" or, if unrated, are judged by the Adviser to be of equivalent quality.
Although lower rated debt securities generally have higher yields, they are also
subject to a greater risk of default and more subject to market price volatility
based on increased sensitivity to changes in interest rates and economic
conditions or the liquidity of their secondary trading market. Debt securities
having an S&P rating of, or equivalent to, less than "A" may have speculative
charac-
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5
<PAGE>
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teristics. An S&P rating of, or equivalent to, "B" means that the security will
likely have some quality and protective features which, in the judgment of the
rating organization, are outweighed by large uncertainties or major risk
exposures to adverse conditions. A description of corporate debt ratings
including convertible securities is contained in Appendix A to the Additional
Statement.
WARRANTS AND RIGHTS
The Fund may invest up to 5% of its total assets in warrants or rights (other
than those acquired in units or attached to other securities) which entitle the
holder to buy equity securities at a specific period of time but will do so only
if such equity securities are deemed appropriate by the Adviser for inclusion in
the Fund's portfolio. The Fund will not invest more than 2% of its total assets
in warrants or rights which are not listed on the New York or American Stock
Exchanges.
FOREIGN SECURITIES
The Fund may invest up to 25% of its total assets in the securities of non-U.S.
issuers. These investments involve certain risks not ordinarily associated with
investments in securities of domestic issuers. These risks include fluctuations
in foreign exchange rates (which the Fund will not seek to hedge), future
political and economic developments, and the possible imposition of exchange
controls or other foreign governmental laws or restrictions. In addition, with
respect to certain countries, there is the possibility of expropriation of
assets, confiscatory taxation, political or social instability or diplomatic
developments which could adversely affect investments in those countries.
There may be less publicly available information about a foreign company than
about a U.S. company, and foreign companies may not be subject to accounting,
auditing and financial reporting standards and requirements comparable to or as
uniform as those of U.S. companies. Non-U.S. securities markets, while growing
in volume, have, for the most part, substantially less volume than U.S. markets,
and securities of many foreign companies are less liquid and their prices more
volatile than securities of comparable U.S. companies. Transaction costs of
investing in non-U.S. securities markets are generally higher than in the U.S.
There is generally less government supervision and regulation of exchanges,
brokers and issuers than there is in the U.S. The Fund might have greater
difficulty taking appropriate legal action in non-U.S. courts. Non-U.S. markets
also have different clearance and settlement procedures which in some markets
have at times failed to keep pace with the volume of transactions, thereby
creating substantial delays and settlement failures that could adversely affect
the Fund's performance.
Dividend and interest income from non-U.S. securities will generally be subject
to withholding taxes by the country in which the issuer is located and may not
be recoverable by the Fund or the investor.
LOANS OF PORTFOLIO SECURITIES
To increase income and pay a portion of its expenses, the Fund may lend its
portfolio securities to securities broker-dealers or financial institutions if
(i) the loan is collateralized in accordance with and otherwise satisfies all
applicable regulatory requirements and (ii) no loan will cause the value of all
loaned securities to exceed 25% of the value of the Fund's net assets. In the
event that a borrower of portfolio securities defaults on its obligation to
return securities to the Fund, the Fund may suffer a loss to the extent that the
value of the collateral held by the Fund is less than the value of the loaned
securities at the time.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with "primary dealers" in U.S.
Government securities and member banks of the Federal Reserve System. A
repurchase agreement is an instrument under which an investor (e.g., the Fund)
purchases a debt security from a seller which undertakes to repurchase the
security at a specified resale price on an agreed future date (ordinarily a week
or less). The resale price generally
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6
<PAGE>
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exceeds the purchase price by an amount which reflects an agreed-upon market
interest rate for the term of the repurchase agreement. The principal risk is
that, if the seller defaults, the Fund might suffer a loss to the extent that
the proceeds from the sale of the underlying securities and other collateral
held by the Fund are less than the repurchase price. Except for repurchase
agreements for a period of a week or less in respect to obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, not more
than 5% of the Fund's total assets may be so invested.
BORROWING
The Fund may not borrow money except for (i) short-term credits from banks as
may be necessary for the clearance of portfolio transactions, and (ii)
borrowings from banks for temporary or emergency purposes, including the meeting
of redemption requests, which would otherwise require the untimely disposition
of its portfolio securities. Borrowing for any purpose including redemptions may
not, in the aggregate, exceed 15%, and borrowing for purposes other than meeting
redemptions may not exceed 5%, of the value of the Fund's total assets at the
time a borrowing is made. The Fund will not make any additional purchases of
portfolio securities at any time its borrowing exceed 5% of its assets. The Fund
will not mortgage, pledge or hypothecate any of its assets except that, in
connection with the foregoing, not more than 20% of the assets of the Fund may
be used as collateral.
OTHER INVESTMENT COMPANIES
The Fund does not invest in the securities of other open-end investment
companies, but reserves the right to invest up to 10% of its total assets in the
securities of closed-end investment companies including small business
investment companies (not more than 5% of its total assets may be invested in
more than 3% of the securities of any one investment company).
MANAGEMENT OF THE FUND
The Fund's Board of Trustees (who, with its officers, are described in the
Additional Statement) has overall responsibility for the management of the Fund.
The Trustees decide upon matters of general policy and review the actions of the
Adviser and Gabelli & Company, Inc., the Fund's distributor (the "Distributor").
Pursuant to an Investment Advisory Contract (the "Advisory Contract") with the
Fund, the Adviser provides a continuous investment program for the Fund's
portfolio; provides all facilities and personnel, including officers, required
for its administrative management; and pays the compensation of all officers and
Trustees of the Fund who are its affiliates. As compensation for its services
and the related expenses borne by the Adviser, the Fund pays the Adviser a fee,
computed daily and payable monthly, equal to 1.00% per annum of the Fund's
average daily net assets, which is higher than that paid by most mutual funds.
The advisory fee paid by the Fund for its fiscal year ended December 31, 1995
was 1.00% of its average net assets and its total expenses for the same period
were 1.44% of its average net assets.
Gabelli Funds, Inc. acts as Adviser to the Fund. The Adviser was formed in 1980
and as of April 1, 1996 acts as investment adviser to the following funds with
aggregate assets of $4.3 billion.
<TABLE>
<CAPTION>
NET ASSETS
4/1/96
(in
OPEN-END FUNDS: millions)
----------
<S> <C>
The Gabelli Asset Fund $1,140
The Gabelli Growth Fund 582
The Gabelli Value Fund Inc. 417
The Gabelli Small Cap Growth Fund 230
The Gabelli Equity Income Fund 58
The Gabelli U.S. Treasury Money Market Fund 282
The Gabelli ABC Fund 25
The Gabelli Global Telecommunications Fund 125
The Gabelli Global Convertible
Securities Fund 16
The Gabelli Global Interactive Couch
Potato(R) Fund 37
Gabelli Gold Fund, Inc. 20
Gabelli Capital Asset Fund 35
Gabelli International Growth Fund, Inc. 4
CLOSED-END FUNDS:
The Gabelli Equity Trust Inc. 1,059
The Gabelli Convertible Securities Fund,
Inc. 91
The Gabelli Global Multimedia Trust Inc. 94
</TABLE>
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7
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The Distributor, which, is the principal distributor of the Fund for the sale of
its shares, is an indirect majority owned subsidiary of the Adviser. GAMCO
Investors, Inc. ("GAMCO"), a majority owned subsidiary of the Adviser, acts as
investment adviser for individuals, pension trusts, profit-sharing trusts and
endowments, having aggregate assets in excess of $5.4 billion as of April 1,
1996. Teton Advisers LLC, an affiliate of the Adviser, acts as investment
adviser to the Westwood Funds and as of April 1, 1996 had aggregate assets in
excess of $50 million. Mr. Mario J. Gabelli may be deemed a "controlling person"
of the Adviser and the Distributor on the basis of his ownership of stock of the
Adviser. The Adviser's address is the same as the Fund as shown on the cover of
this prospectus.
Howard Frank Ward has been designated by the Adviser to be the portfolio manager
primarily responsible for the day-to-day management of the Fund. Prior to
joining the Adviser, Mr. Ward was a managing Director and Director of the
Quality Growth Equity Management Group of Scudder, Stevens and Clark with which
he had been associated since 1982 and where he also served as a lead portfolio
manager for several of its registered investment companies.
In addition to the fees of the Adviser and the expenses which it agrees to bear
in its Distribution Plan (described below), the Fund is responsible for the
payment of all of its other expenses. The Additional Statement contains further
information on the Advisory Contract including a more complete description of
the advisory and expense arrangements, the exculpatory and brokerage provisions
of that Agreement as well as information on the brokerage practices of the Fund.
The Advisory Contract contains provisions relating to the selection of
securities brokers to effect the portfolio transactions of the Fund. Under those
provisions, subject to applicable law and procedures adopted by the Trustees,
the Adviser may (i) direct Fund portfolio brokerage to the Distributor, a
broker-dealer affiliate of the Adviser; (ii) pay commissions to brokers other
than the Distributor which are higher than might be charged by another qualified
broker to obtain brokerage and research services considered by the Adviser to be
useful or desirable for its investment management of the Fund and/or other
advisory accounts of itself and any investment adviser affiliated with it; and
(iii) consider the sales of shares of the Fund by brokers other than the
Distributor as a factor in its selection of brokers for Fund portfolio
transactions.
Affiliates of the Adviser may, in the ordinary course of their business, acquire
for their own account or for the accounts of their advisory clients, significant
(and possibly controlling) positions in the securities of companies that may
also be suitable for investment by the Fund. Although such activities may limit
to some extent the ability of the Fund to make such investments, the Adviser
does not believe that any such limitations will have a material adverse effect
on the ability of the Fund to achieve its investment objectives. Securities
purchased or sold pursuant to contemporaneous orders entered on behalf of the
investment company accounts of the Adviser or the advisory accounts managed by
its affiliates for their unaffiliated clients are allocated pursuant to
principles believed to be fair and not disadvantageous to any such accounts. In
addition, all such orders are accorded priority of execution over orders entered
on behalf of accounts in which the Adviser or its affiliates have a substantial
pecuniary interest. The Adviser may on occasion give advice or take action with
respect to other clients that differs from the actions taken with respect to the
Fund. The Fund may invest in the securities of companies which are investment
management clients of GAMCO, a subsidiary of the Adviser. In addition, portfolio
companies or their officers or directors may be minority shareholders of the
Adviser or its affiliates.
The Adviser has entered into a Sub-Administration Agreement with First Data
Investor Services Group, Inc., a subsidiary of First Data Corporation (the
"Sub-Administrator"), covering the Fund and certain other Funds advised by the
Adviser. Under the Sub-Administration Agreement, the Sub-Administrator provides
certain administra-
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8
<PAGE>
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tive services necessary for the Fund's operations including the preparation and
distribution of materials for meetings of the Fund's Board of Trustees,
compliance testing of Fund activities and assistance in the preparation of proxy
statements, reports to shareholders and other documentation. For such services
and related expenses borne by the Sub-Administrator, the Adviser pays the
Administrator an annual fee based on the aggregate average daily net assets of
all funds under its administration managed by the Adviser as follows: up to $1
billion -- 0.10%; $1 billion to $1.5 billion -- 0.08%; $1.5 billion to $3
billion -- 0.03%; over $3 billion -- 0.02%. No additional amount will be paid by
the Fund for services by the Sub-Administrator. The Sub-Administrator has its
principal office at Exchange Place, Boston, Massachusetts 02109.
DISTRIBUTION PLAN
On May 11, 1992, the shareholders of the Fund approved a Distribution Plan which
authorizes payments by the Fund in connection with the distribution of its
shares at an annual rate, as determined from time to time by the Board of
Trustees, of up to 0.25% of the Fund's average daily net assets. The
Distribution Plan permits payments to be made in subsequent years for expenses
incurred in prior years if the Fund's independent Trustees specifically
authorize such payments.
Payments may be made by the Fund under the Distribution Plan for the purpose of
financing any activity primarily intended to result in the sales of shares of
the Fund as determined by the Board of Trustees. Such activities typically
include advertising; compensation for sales and sales marketing activities of
the Distributor and other banks, broker-dealers and service providers;
shareholder account servicing; production and dissemination of prospectus and
sales and marketing materials; and capital or other expenses of associated
equipment, rent, salaries, bonuses, interest and other overhead. To the extent
any activity is one which the Fund may finance without a Distribution Plan, the
Fund may also make payments to finance such activity outside of the Plan and not
subject to its limitations.
The Plan has been implemented by written agreements between the Fund and/or the
Distributor and each person (including the Distributor) to which payments may be
made. Administration of the Plan is regulated by Rule 12b-1 under the Investment
Company Act of 1940 (the "Act"), which includes requirements that the Board of
Trustees receive and review at least quarterly reports concerning the nature and
qualification of expenses which are made, that the Board of Trustees approve all
agreements implementing the Plan and that the Plan may be continued from year to
year only if the Board of Trustees concludes at least annually that continuation
of the Plan is likely to benefit shareholders.
To the extent that payments under the Plan are based on allocation by the
Distributor, the Fund may be considered to be participating in joint
distribution activities with other funds distributed by the Distributor. Any
such allocations would be subject to approval by the Fund's non-interested
Trustees and would be based on such factors as the net assets of each Fund, the
number of shareholders, inquiries and similar pertinent criteria.
The expenses to be reimbursed must be paid or incurred by the Distributor in
that same fiscal year. In approving the Plan, the Trustees determined, in the
exercise of their business judgment and in light of their fiduciary duties, that
there is a reasonable likelihood that the Plan will benefit the Fund and its
shareholders. During 1995, the distribution fees paid to the Distributor totaled
$1,246,381 or 0.25% of average net assets.
PURCHASE OF SHARES
Shares of the Fund are offered without sales load as an investment vehicle for
individuals, institutions, fiduciaries and retirement plans. Prospectuses, sales
material and applications can be obtained from the Distributor. The Fund and the
Distributor are authorized to reject any purchase order.
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9
<PAGE>
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The minimum initial investment is $1,000 and there is no minimum for subsequent
investments. For special provisions governing investments through an IRA or
other qualified retirement plans, see "Retirement Plans". Purchase payments
accompanied by a purchase order in proper form as described below will be
invested in full and fractional shares at the per share net asset value of the
Fund next determined after receipt thereof by the Transfer Agent. Although most
shareholders elect not to receive stock certificates, certificates for whole
shares only can be obtained on specific written request to the Transfer Agent.
The Fund may waive or reduce the minimum initial investment for certain accounts
or classes of accounts from time to time.
Shares of the Fund may also be purchased through authorized broker-dealers who
may charge for their services. No such charge is imposed by the Fund or the
Distributor. Such charges may vary among broker-dealers who may impose higher
initial or subsequent minimum investment requirements than those established by
the Fund. Services provided by such broker-dealers may include holding Fund
shares in the name of the broker-dealer for the brokerage accounts of its
customers and allowing investors to borrow on the value of their Fund shares by
establishing a margin account with the broker-dealer. Shares so held may be
redeemed or transferred only by arrangement with the broker-dealer. It is the
responsibility of the shareholder's agent to establish procedures which would
assure that upon receipt of an order to purchase shares of the Fund, the order
will be transmitted so that it will be received by the distributor before the
time when the price applicable to the buy order expires.
The net asset value per share of the Fund is determined as of the close of the
regular trading session of the New York Stock Exchange currently 4:00 p.m., New
York time, on each day that the New York Stock Exchange is open by dividing the
value of the Fund's net assets (i.e., the value of its securities and other
assets less its liabilities, including expenses payable or accrued but excluding
capital stock and surplus) by the number of shares outstanding at the time the
determination is made. Portfolio securities which are readily marketable are
valued at market value based on reported prices or bid and asked quotations. All
other investments are valued at fair value under procedures established by and
under the general supervision of the Fund's Board of Trustees. See the
Additional Statement for further information.
MAIL
To make an initial purchase of shares of the Fund, send a completed subscription
order form with a check for the amount of the investment payable to "The Gabelli
Growth Fund" to: THE GABELLI FUNDS, P.O. BOX 8308, BOSTON, MA 02266-8308.
Subsequent purchases do not require a completed application and can be made by
(i) mailing a check to the same address noted above; (ii) bank wire; (iii)
personal delivery; or (iv) by telephone as indicated below. The exact name and
number of the shareholder's account should be clearly indicated.
Checks will be accepted if drawn in U.S. currency on a domestic bank for less
than $100,000. U.S. dollar checks drawn against a non-U.S. bank may be subject
to collection delays and will be accepted only upon actual receipt of funds by
the Fund's Transfer Agent. Bank collection fees may apply. Bank or certified
checks for investments of $100,000 or more will be required unless the investor
elects to invest by bank wire as described below.
BANK WIRE
To purchase shares of the Fund using the wire system for transmittal of money
among banks, the investor should instruct a Federal Reserve System member bank
to wire funds to:
State Street Bank and Trust Company
ABA # 011-0000-28 REF DDA # 99046187
Attn: Shareholder Services
Re: The Gabelli Growth Fund
A/C#
- -----------------------------------------------
(Registered Owner)
Account of
- -----------------------------------------
SS# / Tax I.D.#
- ------------------------------------
225 Franklin Street, Boston, MA 02110
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10
<PAGE>
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For initial purchases, an investor should first telephone the Fund at
1-800-GABELLI [422-3554] to obtain a new account number. The investor should
then mail a completed subscription order form to the Gabelli Funds at the
address shown above for mail purchases. State Street Bank and Trust Company does
not charge Fund investors for the receipt of wire transfers but there may be a
charge by your bank for transmitting the money by bank wire. If you are planning
to wire funds, it is suggested that you instruct your bank early in the day so
the wire transfer can be accomplished the same day.
PERSONAL DELIVERY
Deliver a check made payable to "The Gabelli Growth Fund" (with a completed
subscription order form for an initial purchase) to: THE GABELLI FUNDS, THE BFDS
BUILDING, 7TH FLOOR, TWO HERITAGE DRIVE, NORTH QUINCY, MA 02171.
TELEPHONE INVESTMENT PLAN
An investor may purchase additional shares of the Fund by telephone through the
Automated Clearing House ("ACH") system as long as your bank is a member of the
ACH system and you have a completed, approved Investment Plan application on
file with the Fund's Transfer Agent. The funding for your purchase will be
automatically deducted from the ACH eligible account you designate on the
application. Your investment will normally be credited to your mutual fund
account on the first business day following your telephone request. Your request
must be received no later than 4:00 p.m., Eastern time. There is a minimum of
$100 for each telephone investment. Any subsequent changes in banking
information must be submitted in writing and accompanied by a sample voided
check. To initiate an ACH purchase, please call 1-800-GABELLI (422-3554) or
1-800-872-5365. Fund shares purchased through the Investment Plan will not be
available for redemption for fifteen (15) days following the purchase date.
AUTOMATIC INVESTMENT PLAN
The Fund offers an automatic monthly investment plan through the ACH system,
details of which can be obtained from the Distributor. There is no minimum
initial investment for accounts establishing an automatic investment plan.
SYSTEMATIC WITHDRAWAL PLAN
Any shareholder who owns shares of the Fund with an aggregate value of $10,000
or more may establish a Systematic Withdrawal Plan under which he offers to sell
to the Fund at net asset value the number of full and fractional shares which
will produce the monthly, quarterly or annual payments specified. Systematic
withdrawals deplete the investor's principal. Investors contemplating
participation in this plan should consult their tax advisers.
Shareholders wishing to utilize this plan may do so by completing an application
which may be obtained by writing or calling the Distributor. No additional
charge to the shareholder is made for this service.
OTHER INVESTORS
No minimum initial investment is required for (i) officers or Trustees of the
Fund; (ii) officers, directors or full-time employees of the Adviser, the
Distributor or their affiliates, including members of the "immediate family" of
such employees. The term "immediate family" refers to spouses, children and
grandchildren adopted or natural, parents, grandparents, siblings, a spouse' s
siblings, a sibling's spouse and a sibling's children; (iii) retirement plans
established for such employees; or (iv) investments made through the Fund's
Automatic Investment Plan.
REDEMPTION OF SHARES
Upon receipt by the Transfer Agent of a redemption request in proper form,
shares of the Fund will be redeemed at their next determined net asset value.
There is no charge on the redemption of shares regardless of when purchased. The
proceeds of a redemption may be more or less than the amount invested and,
therefore, a redemption may result in gain or loss for income tax purposes.
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11
<PAGE>
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BY LETTER
Redemption requests may be made by letter to the Transfer Agent, specifying the
name of the Fund, the dollar amount or number of shares to be redeemed, and the
account number. The letter must be signed in exactly the same way the account is
registered (if there is more than one owner of the shares, all must sign) and,
if any certificates for the shares to be redeemed are outstanding, presentation
of such certificates properly endorsed are also required. Signatures on a
redemption request and/or certificates must be guaranteed by an eligible
guarantor institution which includes a domestic bank, a savings and loan
institution, a domestic credit union, a member bank of the Federal Reserve
System or a member firm of a national securities exchange; pursuant to the
Fund's transfer agent's standards and procedures (signature guarantees by
notaries public are not acceptable). Further documentation, such as copies of
corporate resolutions and instruments of authority, are normally requested from
corporations, administrators, executors, personal representatives, trustees or
custodians to evidence the authority of the person or entity making the
redemption request.
TELEPHONE REDEMPTION
BY CHECK
The Fund accepts telephone requests for redemption of unissued shares from
shareholders subject to a $25,000 limitation. By calling either 1-800-GABELLI
(422-3554) or 1-800-872-5365, you may request that a check be mailed to the
address of record on the account provided that the address has not changed
within thirty (30) days prior to your request. The check will be made payable to
the account as registered and mailed within seven (7) days.
BY BANK WIRE
The Fund accepts telephone requests for wire redemption in excess of $1,000 but
subject to a $25,000 limitation to a predesignated bank either on the
subscription order form or in a subsequent written authorization with the
signature guaranteed. The Fund accepts signature guaranteed written requests for
redemptions by bank wire without limitation. The proceeds are normally wired on
the following business day. Your bank must be either a member of the Federal
Reserve System or have a correspondent bank which is a member. Any change to the
banking information made at a later date must be submitted in writing with a
signature guarantee.
Requests for telephone redemption must be received between 9:00 a.m. and 4:00
p.m., Eastern time. If your telephone call is received after this time or on a
day when the New York Stock Exchange is not open, a new request will be required
the following business day. Shares are redeemed at the net asset value next
determined following your request. Fund shares purchased by check or through the
automatic purchase plan will not be available for redemption for fifteen (15)
days following the purchase. Shares held in certificate form must be returned to
the transfer agent for redeposit prior to the redemption of shares. Telephone
redemption is not available for Individual Retirement Accounts. The proceeds of
a telephone redemption may be directed to an existing account in another mutual
fund advised by Gabelli Funds, Inc. provided the registration of such account is
the same. Such a purchase will be made at the respective net asset value plus
applicable sales charge, if any.
Unless other instructions are given in proper form, a check for the proceeds of
a redemption will be sent to the shareholder's address of record and generally
will be mailed within seven days after receipt of the request.
Shareholders may also redeem Fund shares through registered broker-dealers
holding such shares who have made arrangements with the Fund permitting them to
redeem such shares by telephone or facsimile transmission and who may charge a
fee for this service.
The Fund may suspend the right of redemption during any period when (i) trading
on the New York Stock Exchange is restricted or the Exchange is closed, other
than customary weekend and holiday closings; (ii) the SEC has by
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12
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order permitted such suspension; or (iii) an emergency, as defined by rules of
the SEC, exists making disposal of portfolio investments or determination of the
value of the net assets of the Fund not reasonably practicable. The Fund may
postpone for more than seven days the date of payment for redemptions during any
period the right to redeem has been suspended.
If the Board of Trustees determines that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make payment wholly or
partly in cash, the Fund may, in conformity with applicable rules of the SEC,
pay the redemption price in whole or part by a distribution of portfolio
securities selected in the discretion of the Board of Trustees at the values
used in determining the net asset value of the Fund.
To minimize expenses, the Fund reserves the right to redeem, upon not less than
30 days' notice, all shares of the Fund in an account (other than an IRA) which
has a value below $500 due to prior shareholder redemptions. However, a
shareholder will be allowed to make additional investments prior to the date
fixed for redemption to avoid liquidation of the account.
The Fund and its transfer agent will not be liable for following telephone
instructions reasonably believed to be genuine. In this regard the Fund and its
transfer agent require personal identification information before accepting a
telephone redemption. If the Fund or its transfer agent fail to use reasonable
procedures, the Fund may be liable for losses due to fraudulent instructions.
RETIREMENT PLANS
The Fund has available a form of IRA for investment in Fund shares which may be
obtained from its Distributor. The minimum investment required to open an IRA
for investment in shares of the Fund is $1,000 for an individual, except that
both the individual and his or her spouse may establish separate IRAs if their
combined investment is $1,250. There is no minimum for additional investment in
an IRA account.
Self-employed investors may purchase shares of the Fund through tax-deductible
contributions to existing retirement plans for self-employed persons known as
Keogh or H.R. 10 plans. However, the Fund does not currently act as sponsor to
such plans. Fund shares may be a suitable investment for other types of
qualified pension or profit-sharing plans which are employer sponsored,
including deferred compensation or salary reduction plans known as "401(k)
Plans" which give participants the right to defer portions of their compensation
for investment on a tax-deferred basis until distributions are made from the
plans. The minimum initial investment for an individual under such plans is
$1,000 and there is no minimum for additional investments.
Under the Internal Revenue Code of 1986, as amended (the "Code"), individuals
may make wholly or partly tax deductible IRA contributions of up to $2,000
annually, depending on whether they are active participants in an
employer-sponsored retirement plan and on their income level. An individual with
a non-working spouse may establish a separate IRA for the spouse under the same
conditions and contribute a combined maximum of $2,250 annually to the two IRAs
provided that no more than $2,000 may be contributed to the IRA of either
spouse. Other provisions permit additional IRA contributions which are not tax
deductible but the tax on reinvested dividends and distributions is deferred
while held in the account. There are also rules on the amount of tax deductible
contributions which may be made to other retirement plans. Investors should be
aware that they may be subject to penalties or additional tax on withdrawals
from an IRA or other retirement plan which are considered premature under the
applicable provisions of the Code and prior to withdrawal, shareholders may be
required to certify their age and awareness of such restrictions in writing.
Persons desiring information concerning investments through IRA accounts or
other retirement plans should write or telephone the Distributor.
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13
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DIVIDENDS, DISTRIBUTIONS AND TAXES
Each dividend and capital gains distribution, if any, declared by the Fund on
its outstanding shares will, at the election of each shareholder, be paid on the
payment date fixed by the Board of Trustees in additional shares of the Fund
having an aggregate net asset value as of the ex-dividend date of such dividend
or distribution equal to the cash amount of such dividend or distribution. An
election to receive dividends and distributions in cash or shares is made at the
time shares are subscribed for and may be changed by notifying the Fund in
writing at any time prior to the record date for a particular dividend or
distribution. There are no sales or other charges in connection with the
reinvestment of dividends and capital gains distributions. There is no fixed
dividend rate, and there can be no assurance that the Fund will pay any
dividends or realize any capital gains.
The Fund has qualified and intends to continue to qualify for tax treatment as a
"Regulated Investment Company" under the Code in order to be relieved of Federal
income tax on that part of its net investment income and realized capital gains
which it pays out to its shareholders. To qualify, the Fund must meet certain
relatively complex tests, including the requirement that less than 30% of its
gross income must be derived from gains from the sale or other disposition of
securities held for less than three months. Because of such requirements,
qualification in any given year may not be feasible.
Dividends out of net investment income and distributions of realized short-term
capital gains are taxable to the recipient shareholders as ordinary income. In
the case of corporate shareholders, all or a portion of such distributions may
be eligible for the dividends-received deduction. Dividends of net long-term
capital gains, of which shareholders will be notified, are taxable to the
recipient as long-term capital gains. Dividends and distributions declared by
the Fund may also be subject to state and local taxes. The foregoing summary of
Federal income tax consequences is intended for general informational purposes
only. Prior to investing in shares of the Fund, prospective shareholders should
consult their tax adviser concerning the Federal, state and local tax
consequences of such an investment.
CALCULATION OF INVESTMENT PERFORMANCE
The investment performance of the Fund quoted in advertising for the sale of its
shares will be calculated on a "total return" basis which assumes the
reinvestment of all dividends and distributions. Total return is generally
quoted as a percentage calculated by combining the income and principal changes
of an assumed investment in shares of the Fund during the period specified and
dividing by the amount of the assumed initial investment. To illustrate the
components of its overall performance, investment performance may be given on a
cumulative basis (for periods greater than one year); for consecutive annual
periods; for consecutive quarterly or semi-annual periods as well as for the
year including such interim periods; or separately for investment income results
and capital gain or loss.
In each case, the average annual total return of the Fund since its inception,
for the five-year period and for the twelve-month period thru the most recent
calendar quarter, will also be given. The average annual total return will be
calculated pursuant to a standardized formula to reflect the hypothetical
annually compounded rate of return which would have produced the same cumulative
total return. Investors should recognize that an average annual return tends to
smooth out variations in the Fund's performance level and is therefore not the
same as actual year by year results. The Fund's average annual total returns for
the 1 year and 5 year periods ended December 31, 1995 and from inception through
December 31, 1995 were 32.7%, 14.9% and 15.9%, respectively.
GENERAL INFORMATION
DESCRIPTION OF SHARES, VOTING RIGHTS
AND LIABILITIES
As a Massachusetts Business Trust, the Fund is not required, and does not
intend, to hold regular
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14
<PAGE>
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annual shareholder meetings but may hold special meetings for the consideration
of proposals requiring shareholder approval such as changing fundamental
policies or, upon the written request of the recordholders of 33 1/3% of
outstanding shares (10% in the case of removing one or more trustees) for any
other purpose. The Fund will facilitate shareholder communications in this
regard. Shares of the Fund have equal rights with respect to voting and each
share represents an equal proportionate interest in the Fund with each other
share. The Fund may issue an unlimited number of full and fractional shares of
beneficial interest (par value $.01 per share) and the Trustees may divide or
combine the shares into a greater or lesser number of shares without changing
the proportionate beneficial interests in the Fund. When issued, shares are
fully paid and non-assessable (except as described in the Additional Statement
under "General Information") and have no pre-emptive or conversion rights.
The Fund sends semi-annual unaudited and annual audited reports to all its
shareholders which include a list of portfolio securities. Unless it is clear
that a shareholder holds as nominee for the account of an unrelated person or a
shareholder otherwise specifically requests in writing, the Fund may send a
single copy of semi-annual, annual and other reports to shareholders to all
accounts at the same address and all accounts of any person at that address.
INFORMATION FOR SHAREHOLDERS
All shareholder inquiries regarding administrative procedures should be directed
to the Distributor, Gabelli & Company, Inc., One Corporate Center, Rye, New York
10580-1435. For assistance, call 1-800-GABELLI (422-3554).
Upon request, Gabelli & Company will provide, without charge, a paper copy of
this Prospectus to investors or their representatives who received this
Prospectus in an electronic format.
This prospectus omits certain information contained in the Registration
Statement filed with the SEC. Copies of the Registration Statement, including
items omitted herein, may be obtained from the SEC by paying the charges
prescribed under its rules and regulations. The Additional Statement included in
such Registration Statement may be obtained without charge from the Fund or the
Distributor.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, MA 02110, is the Custodian for the Fund's cash and securities. Boston
Financial Data Services, Inc. located at Two Heritage Drive, North Quincy, MA
02171, an affiliate of State Street performs the services of Transfer and
Dividend Disbursing Agent for the Fund on behalf of State Street. State Street
does not assist in and is not responsible for investment decisions involving
assets of the Fund.
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15
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Table of Fees and Expenses........... 2
Financial Highlights................. 3
The Fund and Its Investment
Policies........................... 4
Special Investment Methods........... 5
Management of the Fund............... 7
Distribution Plan.................... 9
Purchase of Shares................... 9
Redemption of Shares................. 11
Retirement Plans..................... 13
Dividends, Distributions and Taxes... 14
Calculation of Investment
Performance........................ 14
General Information.................. 14
Custodian, Transfer Agent and
Dividend Disbursing Agent.......... 15
</TABLE>
- ------------------------------------------------------
No dealer, salesman or other person has been authorized to give any information
or to make any representation other than those contained in this Prospectus, the
Statement of Additional Information and in the Fund's official sales literature,
and if given or made, such information and representation may not be relied upon
as authorized by the Fund, its Investment Adviser, Distributor or any affiliate
thereof. This Prospectus does not constitute an offer to sell or a solicitation
of any offer to buy any of the securities offered hereby in any state to any
person to whom it is unlawful to make such offer in such state.
- ------------------------------------------------------
The
Gabelli
Growth
Fund
PROSPECTUS
MAY 1, 1996
GABELLI FUNDS, INC.
INVESTMENT ADVISER
GABELLI & COMPANY, INC.
DISTRIBUTOR
- --------------------------------------------------------------------------------
THE GABELLI GROWTH FUND
PART B
<PAGE>
THE GABELLI GROWTH FUND
One Corporate Center
Rye, New York 10580-1434
Telephone 1-800-GABELLI (1-800-422-3554)
http://www.gabelli.com
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1996
This Statement of Additional Information is not a prospectus and is only
authorized for distribution when preceded or accompanied by the The Gabelli
Growth Fund's (the "Fund") prospectus dated May 1, 1996, as supplemented from
time to time (the "Prospectus"). This Statement of Additional Information
contains additional and more detailed information than that set forth in the
Prospectus and should be read in conjunction with the Prospectus, additional
copies of which may be obtained without charge by writing or telephoning the
Fund at the address and telephone number set forth above.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Policies ...................................................... 2
Special Investment Methods ............................................... 2
Convertible Securities ................................................... 2
Repurchase Agreements .................................................... 3
Investments in Warrants and Rights ....................................... 3
Investments in Small, Unseasoned Companies ............................... 3
Loans of Portfolio Securities ............................................ 3
When Issued, Delayed Delivery Securities
& Forward Commitments ................................................. 4
Special Risks ............................................................ 4
Investment Restrictions .................................................. 5
Trustees and Officers .................................................... 6
Investment Adviser ....................................................... 10
Distributor .............................................................. 11
Distribution Plan ....................................................... 12
Portfolio Transactions and Brokerage ..................................... 12
Redemption of Shares ..................................................... 14
Net Asset Value .......................................................... 15
Investment Performance Information ....................................... 15
Counsel and Independent Accountants ...................................... 17
General Information ...................................................... 17
Financial Statements ..................................................... 18
Appendix A - Description of Corporate Debt Ratings ....................... A-1
</TABLE>
<PAGE>
INVESTMENT POLICIES
The Fund expects that, for most periods, its assets will be invested in
a diversified portfolio of common stocks judged by Gabelli Funds, Inc. (the
"Adviser") to have favorable value to price characteristics. Under the
circumstances described in the Prospectus, the Fund may also invest in U.S.
Treasury or other government obligations, investment grade corporate bonds,
preferred stocks, convertible securities, foreign securities and/or short term
money market instruments.
SPECIAL INVESTMENT METHODS
CONVERTIBLE SECURITIES
The Fund may invest in convertible securities as set forth in the
Prospectus. Prior to conversion, convertible securities have the same general
characteristics as non-convertible securities. As with all debt securities, the
market value of convertible securities tends to decline as interest rates
increase and, conversely, to increase as interest rates decline. Convertible
securities generally offer lower interest or dividend yields than
non-convertible securities of similar quality. However, when the market price of
the common stock underlying a convertible security exceeds the conversion price,
the price of the convertible security tends to reflect the value of the
underlying common stock. As the market price of the underlying common stock
declines, the convertible security tends to trade-increasingly on a yield basis,
and thus may not depreciate to the same extent as the underlying common stock.
Convertible securities rank senior to common stocks on an issuer's capital
structure and are consequently of higher quality and entail less risk than the
issuer's common stock, although the extent to which such risk is reduced depends
in large measure upon the degree to which the convertible security sells above
its value as a fixed income security.
In selecting convertible securities for the Fund, the Adviser relies
primarily on its own evaluation of the issuer and the potential for capital
appreciation through conversion. It does not rely on the rating of the security
or sell because of a change in rating absent a change in its own evaluation of
the underlying common stock and the ability of the issuer to pay principal and
interest or dividends when due without disrupting its business goals. Interest
or dividend yield is a factor only to the extent it is reasonably consistent
with prevailing rates for securities of similar quality and thereby provides a
support level for the market price of the security. The Fund will purchase the
convertible securities of highly leveraged issuers only when, in the judgement
of the Adviser, the risk of default is outweighed by the potential for capital
appreciation.
The issuers of debt obligations having speculative characteristics may
experience difficulty in paying principal and interest when due in the event of
a downturn in the economy or unanticipated corporate developments. The market
prices of such securities may become increasingly volatile in periods of
economic uncertainty. Moreover, adverse publicity or the perceptions of
investors over which the Adviser has no control, whether or not based on
fundamental analysis, may decrease the market price and liquidity of such
investments. Although the Adviser will attempt to avoid exposing the Fund to
such risks, there is no assurance that it will be successful or that a liquid
secondary market will continue to be available for the disposition of such
securities.
2
<PAGE>
REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreements as set forth in the
Prospectus. A repurchase agreement is an instrument under which the purchaser
(i.e., the Fund) acquires a debt security and the seller agrees, at the time of
the sale, to repurchase the obligation at a mutually agreed upon time and price,
thereby determining the yield during the purchaser's holding period. This
results in a fixed rate of return insulated from market fluctuations during such
period. The underlying securities are ordinarily U.S. Treasury or other
government obligations or high quality money market instruments. The Fund will
require that the value of such underlying securities, together with any other
collateral held by the Fund, always equals or exceeds the amount of the
repurchase obligations of the counter party. While the maturities of the
underlying securities in repurchase agreement transactions may be more than one
year, the term of each repurchase agreement will always be less than one year.
The Fund's risk is primarily that, if the seller defaults, the proceeds from the
disposition of underlying securities and other collateral for the seller's
obligation are less than the repurchase price. If the seller becomes bankrupt,
the Fund might be delayed in selling the collateral. Under the Investment
Company Act of 1940, as amended (the "1940 Act"), repurchase agreements are
considered loans. Repurchase agreements usually are for short periods, such as
one week or less, but could be longer. The Fund will not enter into repurchase
agreements of a duration of more than seven days if, taken together with
securities which are restricted from public sale or for which there is no liquid
market and other securities for which there are no readily available quotations,
more than 10% of its total assets would be so invested.
INVESTMENTS IN WARRANTS AND RIGHTS
Warrants basically are options to purchase equity securities at a
specified price valid for a specified period of time. Their prices do not
necessarily move parallel to the prices of the underlying securities. Rights are
similar to warrants, but normally have a short duration and are distributed
directly by the issuer to its shareholders. Rights and warrants have no voting
rights, receive no dividends and have no rights with respect to the assets of
the issuer.
INVESTMENTS IN SMALL, UNSEASONED COMPANIES
The securities of small, unseasoned companies may have a limited
trading market, which may adversely affect their disposition and can result in
their being priced lower than might otherwise be the case. If other investment
companies and investors who invest in such issuers trade the same securities
when the Fund attempts to dispose of its holdings, the Fund may receive lower
prices than might otherwise be obtained.
LOANS OF PORTFOLIO SECURITIES
The Fund may lend its portfolio securities subject to the restrictions
stated in the Prospectus. Under applicable regulatory requirements (which are
subject to change), the loan collateral must be cash, a letter of credit from a
U.S. bank or U.S. government securities and must at all times at least equal the
value of the loaned securities. The Fund must be subject to determination of the
Fund at any time; and the Fund must receive reasonable interest on the loan, any
distributions on the securities and any increase in their market value. The Fund
may also pay reasonable finder's, custodian and administrative fees. The terms
of the Fund's loans must meet
3
<PAGE>
applicable tests under the Internal Revenue Code of 1986, as amended (the
"Code") and permit it to reacquire loaned securities on five days' notice or in
time to vote on any important matter.
WHEN ISSUED, DELAYED DELIVERY SECURITIES & FORWARD COMMITMENTS
The Fund is authorized to buy and sell when issued securities as an
additional investment strategy in furtherance of its investment objectives.
In utilizing this strategy, the Fund may enter into forward commitments
for the purchase or sale of securities, including on a "when issued" or "delayed
delivery" basis in excess of customary settlement periods for the type of
security involved. In some cases, a forward commitment may be conditioned upon
the occurrence of a subsequent event, such as approval and consummation of a
merger, corporate reorganization or debt restructuring, i.e., a when, as and if
issued security. When such transactions are negotiated, the price is fixed at
the time of the commitment, with payment and delivery taking place in the
future, generally a month or more after the date of the commitment. While the
Fund will only enter into a forward commitment with the intention of actually
acquiring the security, the Fund may sell the security before the settlement
date if it is deemed advisable.
Securities purchased under a forward commitment are subject to market
fluctuation and no interest (or dividends) accrues to the Fund prior to the
settlement date. The Fund will segregate with its custodian cash or liquid
high-grade debt securities with the Fund's custodian in an aggregate amount at
least equal to the amount of its outstanding forward commitments.
SPECIAL RISKS
The Fund may invest up to 35% of its total assets in securities for
which a tender or exchange offer has been made or announced and in securities of
companies for which a merger, consolidation, liquidation or reorganization
proposal has been announced if, in the judgement of the Adviser, there is
reasonable prospect of capital appreciation significantly greater than the
brokerage and other transaction expenses involved. The 35% limitation does not
apply to the securities of companies which may be involved in simply
consummating an approved or agreed upon merger, acquisition, consolidation,
liquidation or reorganization. The primary risk of such investments is that if
the contemplated transaction is abandoned, revised, delayed or becomes subject
to unanticipated uncertainties, the market price of the securities may decline
below the purchase price paid by the Fund.
In general, securities which are the subject of such an offer or
proposal sell at a premium to their historic market price immediately prior to
the announcement of the offer or proposal. However, the increased market price
of such securities may also discount what the stated or appraised value of the
security would be if the contemplated transaction were approved or consummated.
Such investments may be advantageous when the discount significantly overstates
the risk of the contingencies involved; significantly undervalues the
securities, assets or cash to be received by shareholders of the prospective
portfolio company as a result of the contemplated transaction; or fails
adequately to recognize the possibility that the offer or proposal may be
replaced or superceded by an offer or proposal of greater value. The evaluation
of such contingencies requires unusually broad knowledge and experience on the
part of the Adviser which must appraise not only the value of the issuer and its
component businesses as well as the assets or securities to be received as a
result of the contemplated transaction, but also the financial resources
4
<PAGE>
and business motivation of the offeror as well as the dynamics of the business
climate when the offer or proposal is in process. In making such investments,
the Fund will not violate any of its diversification requirements or investment
restrictions (see below, "Investment Restrictions") including the requirement
that, except for the investment of up to 25% of its assets in any one company or
industry, not more than 5% of its assets may be invested in the securities of
any issuer. Since such investments are ordinarily short term in nature, they
will tend to increase the turnover ratio of the Fund thereby increasing its
brokerage and other transaction expenses as well as make it more difficult for
the Fund to meet the tests for favorable tax treatment as a "Registered
Investment Company" specified by the Code (see the Prospectus, "Dividends,
Distributions and Taxes"). The Adviser intends to select investments of the type
described which, in its view, have a reasonable prospect of capital appreciation
which is significant in relation to both the risk involved and the potential of
available alternate investments as well as monitor the effect of such
investments on the tax qualification tests of the Code.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions which may
not be changed without the approval of the Fund's shareholders. Under such
restrictions, the Fund may not:
(1) Purchase the securities of any one issuer, other than
the United States Government or any of its agencies or
instrumentalities, if immediately after such purchase more
than 5% of the value of its total assets would be invested in
such issuer or the Fund would own more than 10% of the
outstanding voting securities of such issuer, except that up
to 25% of the value of the Fund's total assets may be invested
without regard to such 5% and 10% limitations;
(2) Invest more than 25% of the value of its total assets
in any particular industry;
(3) Purchase securities on margin, but it may obtain such
short term credits from banks as may be necessary for the
clearance of purchase and sales of securities;
(4) Make loans of its assets except pursuant to the
conditions set forth in the Prospectus or for the purchase of
debt securities;
(5) Borrow money except subject to the restrictions set
forth in the Prospectus under "Borrowing";
(6) Mortgage, pledge or hypothecate any of its assets
except that, in connection with permissible borrowings
mentioned in paragraph 5 above, not more than 20% of the
assets of the Fund (not including amounts borrowed) may be
used as collateral:
(7) Invest more than 5% of its total assets in more than
3% of the securities of another investment company or invest
more than 10% of its total assets in the securities of other
investment companies, nor make any such investments other than
through purchase in the open market where to the best
information of the
5
<PAGE>
Fund no commission or profit to a sponsor or dealer (other
than the customary broker's commission) results from such
purchase;
(8) Act as an underwriter of securities of other issuers;
(9) Invest, in the aggregate, more than 10% of the value
of its total assets in securities for which market quotations
are not readily available, securities which are restricted for
public sale, or in repurchase agreements maturing or
terminable in more than seven days;
(10) Purchase or otherwise acquire interests in real
estate, real estate mortgage loans or interests in oil, gas or
other mineral exploration or development programs;
(11) Sell securities short or invest in puts, calls,
straddles, spreads or combinations thereof;
(12) Purchase or acquire commodities or commodity
contracts;
(13) Issue senior securities, except insofar as the Fund
may be deemed to have issued a senior security in connection
with any permitted borrowing;
(14) Participate on a joint, or a joint and several, basis
in any securities trading account; or
(15) Invest in companies for the purpose of exercising
control.
TRUSTEES AND OFFICERS
The Trustees and principal officers of the Fund, and their principal
occupations for the past five years, are listed below. Unless otherwise
specified, the address of each such person is One Corporate Center, Rye, New
York 10580-1434. Trustees deemed to be "interested persons" of the Fund for
purposes of the Act are indicated by an asterisk.
<TABLE>
<CAPTION>
Name, Age and Position(s)
with Fund Principal Occupations During Past Five Years
- --------- --------------------------------------------
<S> <C>
Mario J. Gabelli*, 53 Mr. Gabelli is Chairman of the Board, Chief
Trustee Executive Officer and Chief
Investment Officer of Gabelli Funds, Inc.;
Chief Investment Officer of GAMCO Investors,
Inc.; Chairman of the Board, President and
Chief Investment Officer and Director of
Gabelli Capital Series Fund, Inc.; President
and Chairman of The Gabelli Equity Trust Inc.
and The Gabelli Global Multimedia Trust Inc.;
President, Director and Chief Investment
Officer of Gabelli Global Series Funds, Inc.,
Gabelli Investor Funds, Inc., The Gabelli Value
Fund Inc., Gabelli Equity Series Funds, Inc.
and The Gabelli Convertible Securities Fund,
Inc.; Trustee of The
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Gabelli Asset Fund; Chairman of the Board of
Gabelli Gold Fund, Inc. and Gabelli
International Growth Fund, Inc.; Chairman and
Chief Executive Officer of Lynch Corporation;
Director of the Morgan Group, Inc. and
Spinnaker Industries, Inc.
<CAPTION>
Name, Age and Position(s)
with Fund Principal Occupations During Past Five Years
- --------- --------------------------------------------
<S> <C>
Felix J. Christiana, 70 Formerly Senior Vice President of Dry Dock
Trustee Savings Bank in White Plains, New York.
Director of Gabelli Global Series Funds, Inc.,
The Gabelli Equity Trust Inc., The Gabelli
Global Multimedia Trust Inc.; The Gabelli
Convertible Securities Fund, Inc., Gabelli
Equity Series Funds, Inc., The Gabelli Value
Fund Inc. and The Treasurer's Fund, Inc. and
Trustee of The Gabelli Asset Fund.
Anthony J. Colavita, 60 President and Attorney at Law in the law firm
Trustee of Anthony J. Colavita, P.C. since 1961.
Director of Gabelli Global Series Funds, Inc.,
Gabelli Investor Funds, Inc., The Gabelli
Convertible Securities Fund , Inc., Gabelli
Gold Fund, Inc., Gabelli Capital Series Funds,
Inc., Gabelli Equity Series Funds, Inc. and The
Gabelli Value Fund Inc. and a Trustee of The
Gabelli Asset Fund, The Gabelli Money Market
Funds and The Westwood Funds.
James P. Conn, 58 Managing Director/Chief Investment Officer of
Trustee Financial Security Assurance, since 1992.
President and Chief Executive Officer of Bay
Meadows Operating Company from 1988 through
1992. Director of The Gabelli Equity Trust Inc.
and The Gabelli Global Multimedia Trust Inc.
and Trustee of The Gabelli Asset Fund and The
Westwood Funds.
Anthony C. Pustorino, CPA, 70 Certified Public Accountant. Professor of
Trustee Accounting, Pace University, since 1965.
Director, President and shareholder of
Pustorino Puglisi & Co., P.C., certified public
accountants, 1961 to 1990. Director of The
Gabelli Equity Trust Inc., The Gabelli Global
Multimedia Trust Inc., The Gabelli Convertible
Securities Fund, Inc.; Gabelli Equity Series
Funds, Inc.; The Gabelli Value Fund Inc.; The
Treasurer's Fund, Inc. and Gabelli Capital
Series Funds, Inc. and a Trustee of The Gabelli
Asset Fund.
Karl Otto Pohl*, 66 Managing Partner of Sal Oppenheim Jr. & Cie.
Trustee since 1991; Former President of the Deutsche
Bundesbank and Chairman of its Central Bank
Council (1980-1991); currently board member of
IBM World Trade Europe/Middle East/Africa
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Corp.; Bertlesman AG; Zurich
Versicherungs-Gesellschaft; the International
Advisory Board of General Electric Company; the
International Council for JP Morgan & Co.; the
Board of Supervisory Directors of ROBECo/o
Group; and the Supervisory Board of Royal
Dutch; Advisory Director of Unilever N.V. and
Unilever Deutschland; German Governor,
International Monetary Fund (1980-1991); Board
Member, Bank for International Settlements
(1980-1991). Director or Trustee of all funds
advised by Gabelli Funds, Inc.
<CAPTION>
Name, Age and Position(s)
with Fund Principal Occupations During Past Five Years
- --------- --------------------------------------------
<S> <C>
Dugald A. Fletcher*, 64 President of Fletcher & Company, Inc. since
Trustee 1984; Director, President and Chief Executive
Officer of Binnings Building Products, Inc.
since 1989; Member of Advisory Board of Gabelli
& Rosenthal Limited Partners since 1986.
Director of The Gabelli Convertible Securities
Fund, Inc.
Anthony Torna*, 69 Registered Representative with Herzog, Heine &
Trustee Geduld, Inc.
Anthonie C. van Ekris, 61 Managing Director of Balmac International;
Trustee Director of Stahel Hardmeyer A.G. (through
present). Trustee of The Gabelli Asset Fund and
The Gabelli Money Market Funds; and Director of
The Gabelli Convertible Securities Fund, Inc.,
Gabelli Equity Series Funds, Inc., The Gabelli
Global Series Fund Inc. and Gabelli Gold Fund,
Inc., Gabelli Capital Series Funds, Inc.,
Gabelli International Growth Fund, Inc.
Salvatore J. Zizza, 50 President and Chief Executive Officer of the
Trustee LeHigh Group, Inc. Director of The Gabelli
Equity Trust Inc., The Gabelli Global
Multimedia Trust Inc., Gabelli Convertible
Securities Fund, Inc. and Debe Computer Systems
Corp. and a Trustee of The Gabelli Asset Fund.
Bruce N. Alpert, 44 Vice President, Treasurer and Chief Financial
President and and Administrative Officer of the investment
Treasurer advisory division of the Adviser; Vice
President and Treasurer of The Gabelli Equity
Trust Inc., The Gabelli Global Multimedia
Trust, Inc., Gabelli Equity Series Funds, Inc.,
Gabelli Convertible Securities Fund, Inc.,
Gabelli International Growth Fund, Inc., The
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Gabelli Value Fund Inc., Gabelli Global Series
Funds, Inc. and The Gabelli Investor Funds,
Inc.. President and Treasurer of The Gabelli
Asset Fund. Vice President of the Westwood
Funds and Manager of Teton Advisers LLC.
James E. McKee, 32 Vice President and General Counsel of GAMCO
Secretary Investors, Inc. since 1993 and of Gabelli
Funds, Inc. since August 1995. Secretary of all
funds advised by Gabelli Funds, Inc. and Teton
Advisers LLC since August 1995. Branch Chief
with the U.S. Securities and Exchange
Commission in New York (1992-1993.) Staff
attorney with the U.S. Securities and Exchange
Commission in New York (1989-1992.)
</TABLE>
No director, officer or employee of Gabelli & Company or the Adviser
or of any affiliate of Gabelli & Company or the Adviser will receive any
compensation from the Fund for serving as an officer or Trustee of the Fund. The
Fund pays each of its Trustees who is not a director, officer or employee of the
Adviser or any of their affiliates, $6,000 per annum plus $500 per meeting
attended and reimburses each director for related travel and out-of-pocket
expenses. The Fund also pays each Trustee serving as a member of the Audit,
Proxy or Nominating Committees a fee of $500 per committee meeting, if held on a
day other than a regularly scheduled board meeting and the Chairman of each
committee receives $1,000 per annum. For the fiscal year ended December 31,
1995, such fees totaled $80,568.
On April 1, 1996 the outstanding voting securities of the Fund
consisted of 24,265,914 shares of beneficial interest. As a group, the officers
and Trustees of the Fund owned beneficially, directly or indirectly, less than
1% of its outstanding voting shares.
Set forth below is certain information as to persons who owned 5% or
more of the Fund's outstanding shares as of April 1, 1996:
<TABLE>
<CAPTION>
Name and Address % of Class Nature of Ownership
- ---------------- ---------- -------------------
<S> <C> <C>
Charles Schwab & Co. Inc. 12% Record*
101 Montgomery Street
San Francisco, CA 94104-4122
</TABLE>
- ---------------
* Charles Schwab & Co. disclaims beneficial ownership and no one underlying
shareholder owns beneficially more than 5% of the shares of the Fund.
COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
(1) (2) (3) (4) (5)
Name of Person, Aggregate Compensa- Pension or Retirement Estimated Annual Ben- Total Compensation
Position tion from Registrant Benefits Accrued as efits upon Retirement from Registrant and
for Fiscal Year Part of Fund Expenses Fund Complex Paid
to Trustees for
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Calendar Year*
<S> <C> <C> <C> <C>
Mario J. Gabelli $ 0 0 0 $ 0
Trustee
Anthony J. Colavita $ 9,000 0 0 $68,253 (11)
Trustee
Felix J. Christiana $ 9,000 0 0 $71,500 (9)
Trustee
James P. Conn $ 8,000 0 0 $35,000 (5)
Trustee
Anthony R. Pustorino $10,378 0 0 $79,381 (10)
Trustee
Karl Otto Pohl $ 8,000 0 0 $80,253 (15)
Trustee
Dugald A. Fletcher $ 8,000 0 0 $13,000 (2)
Trustee
Anthony Torna $ 8,000 0 0 $ 8,000 (1)
Trustee
Anthonie C. van Ekris $ 8,000 0 0 $45,253 (10)
Trustee
Salvatore J. Zizza $ 8,000 0 0 $40,000 (5)
Trustee
</TABLE>
- --------------------
* The total compensation paid to such persons during the calendar year ending
December 31, 1995 by investment companies (including the Fund) from which
such person receives compensation that are part of the same Fund complex as
the Fund, because they have common or affiliated investment advisers. The
number in parentheses represents the number of such investment companies.
INVESTMENT ADVISER
The Adviser is a New York corporation with principal offices located at
One Corporate Center, Rye, New York 10580-1434. The Adviser also serves as
Adviser to The Gabelli Asset Fund, The Gabelli Value Fund, Inc., The Gabelli
Small Cap Growth Fund, The Gabelli Convertible Securities Fund, Inc., The
Gabelli ABC Fund, The Gabelli Global Telecommunications Fund, The Gabelli Global
Convertible Securities Fund , The Gabelli Global Interactive Couch Potato(R)
Fund, The Gabelli U.S. Treasury Money Market Fund, The Gabelli Equity Income
Fund, Gabelli Gold Fund Inc., Gabelli Capital Asset Fund and Gabelli
International Growth Fund, Inc., open-end investment companies, and The Gabelli
Equity Trust Inc., The Gabelli Convertible Securities Fund, Inc., and The
Gabelli Global Multimedia Trust Inc., closed-end investment companies. The
Adviser is a registered investment adviser under the Investment Advisers Act of
1940, as amended.
Pursuant to an Investment Advisory Contact, which was approved by
shareholders of the Fund at a meeting held on May 11, 1992, the Adviser
furnishes a continuous investment program for the Fund's portfolio, makes the
day-to-day investment decisions for the Fund, arranges the portfolio
transactions of the Fund and generally manages the Fund's investments in
accordance with the stated policies of the Fund, subject to the general
supervision of the Board of Trustees of the Fund.
Under the Investment Advisory Contract (the "Contract"), the Adviser
also (i) provides the Fund with services of persons competent to perform such
supervisory, administrative, and clerical functions as are necessary to provide
effective administration of the Fund, including maintaining certain books and
records and overseeing the activities of the Fund's Custodian and Transfer
Agent; (ii) oversees the performance of administrative and professional services
to the Fund by
10
<PAGE>
others, including the Fund's Custodian, Transfer Agent and Dividend Disbursing
Agent, as well as accounting, auditing and other services performed for the
Fund; (iii) provides the Fund with adequate office space and facilities; (iv)
prepares, but does not pay for, the periodic updating of the Fund's registration
statement, Prospectus and Statement of Additional Information, including the
printing of such documents for the purpose of filings with the Securities and
Exchange Commission and state securities administrators, the Fund's tax returns,
and reports to the Fund's shareholders and the Securities and Exchange
Commission; (v) calculates the net asset value of shares in the Fund; (vi)
prepares, but does not pay for, all filings under the securities or "Blue Sky"
laws of such states or countries as are designated by the Distributor, which may
be required to register or qualify, or continue the registration or
qualification, of the Fund and/or its shares under such laws; and (vii) prepares
notices and agendas for meetings of the Fund's Board of Trustees and minutes of
such meetings in all matters required by the Act to be acted upon by the Board.
Pursuant to a contract with the Adviser, First Data Investor Services
Group, Inc. (the "Sub-Administrator"), a subsidiary of First Data Corporation
(which is located at Exchange Place, Boston, Massachusetts 02109) administers on
behalf of the Adviser the operations of the Fund which do not concern the
investment advisory and portfolio management services of the Adviser. For such
services and the related expenses borne by the Sub-Administrator the Adviser
pays it an annual fee based on the aggregate average daily net assets of the
Funds under its administration advised by the Adviser as follows: up to $1
billion--0.10%; $1 billion to $1.5 billion--0.08%; $1.5 billion to $3
billion--0.03%; over $3 billion--0.02%. The Sub-Administrator's fee is paid by
the Adviser and will result in no additional expense to the Fund.
The Contract provides that absent willful misfeasance, bad faith, gross
negligence or reckless disregard of its duty, the Adviser and its employees,
officers, directors and controlling persons are not liable to the Fund or any of
its investors for any act or omission by the Adviser or for any error of
judgment or for losses sustained by the Fund. However, the Contract provides
that the Fund is not waiving any rights it may have with respect to any
violation of law which cannot be waived. The Contract also provides
indemnification for the Adviser and each of these persons for any conduct for
which they are not liable to the Fund. The Contract in no way restricts the
Adviser from acting as adviser to others. The Fund has agreed by the terms of
the Contract that the word "Gabelli" in its name is derived from the name of the
Adviser which in turn is derived from the name of Mario J. Gabelli; that such
name is the property of the Adviser for copyright and/or other purposes; and
that, therefore, such name may freely be used by the Adviser for other
investment companies, entities or products. The Fund has further agreed that in
the event that for any reason, the Adviser ceases to be its investment adviser,
the Fund will, unless the Adviser otherwise consents in writing, promptly take
all steps necessary to change its name to one which does not include "Gabelli."
The Contract also provides that the Adviser is obligated to reimburse
to the Fund any amount by which its aggregate expenses including the advisory
fees payable to the Adviser (but excluding interest, taxes, brokerage
commissions, certain distribution expenses and extraordinary expenses) exceed
the most restrictive expense limitation imposed by the securities law of any
state in which shares of the Fund are registered or qualified for sale. Such
limitation is currently believed to be 2.5% of the first $30 million of average
net assets, and 2% of the next $70 million of average net assets, and 1.5% of
average net assets in excess of $100 million. Fund expenses are accrued monthly
and the monthly fee otherwise payable to the Adviser is reduced to the extent
that Fund expenses exceed the amount of such limitation and, to the extent such
excess is greater than the monthly fee of the Adviser, the amount of such excess
is reimbursed by the Adviser.
11
<PAGE>
For the fiscal years ended December 31, 1993, December 31, 1994 and
December 31, 1995, the Adviser received advisory fees of $6,751,524 , $5,651,929
and $4,985,525, respectively.
By its terms, the Contract will remain in effect from year to year,
provided each such annual continuance is specifically approved by the Fund's
Board of Trustees or by a "majority" (as defined in the Act) vote of its
shareholders and, in either case, by a majority vote of the Trustees who are not
parties to the Contract or interested persons of any such party, cast in person
at a meeting called specifically for the purpose of voting on the Contract. The
Contract is terminable without penalty by the Fund on sixty days' written notice
when authorized either by majority vote of its outstanding voting shares or by a
vote of a majority of its Board of Trustees, or by the Adviser on sixty days'
written notice, and will automatically terminate in the event of its
"assignment" as defined by the 1940 Act.
DISTRIBUTOR
To implement the Fund's 12b-1 Plan, the Fund has entered into a
Distribution Agreement with Gabelli & Company, Inc. (the "Distributor"), a New
York corporation which is an indirect subsidiary of the Adviser, having
principal offices located at One Corporate Center, Rye, New York 10580-1434. The
Distributor acts as agent of the Fund for the continuous offering of its shares
on a best efforts basis.
DISTRIBUTION PLAN
During the fiscal year ended December 31, 1995, the Fund reimbursed the
Distributor for distribution expenses under the Plan in the amount of
$1,246,381. Pursuant to the Plan, the Distributor incurred the following
expenses: $687,528 was spent on advertising, $93,550 on
printing, postage and stationary, $170,561 on overhead support expenses and
$294,742 on salaries of personnel of the Distributor.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Under the Investment Advisory Agreement, the Adviser is authorized on
behalf of the Fund to employ brokers to effect the purchase or sale of portfolio
securities with the objective of obtaining prompt, efficient and reliable
execution and clearance of such transactions at the most favorable price
obtainable ("best execution") at reasonable expense. Transactions in securities
other than those for which a securities exchange is the principal market are
generally done with a brokerage firm and a commission is paid wherever it
appears that the broker can obtain a more favorable overall price. In general,
there may be no stated commission on principal transactions in over-the-counter
securities, but the prices of such securities may usually include undisclosed
commissions or markups.
When consistent with the objective of obtaining best execution, Fund
brokerage may be directed to brokers or dealers which furnish brokerage or
research services to the Fund or the Adviser of the type described in Section
28(e) of the Securities Exchange Act of 1934. The commissions charged by a
broker furnishing such brokerage or research services may be greater
12
<PAGE>
than that which another qualified broker might charge if the Adviser determines,
in good faith, that the amount of such greater commission is reasonable in
relation to the value of the additional brokerage or research services provided
by the executing broker, viewed in terms of either the particular transaction or
the overall responsibilities of the Adviser or its advisory affiliates to the
accounts over which they exercise investment discretion. Since it is not
feasible to do so, the Adviser need not attempt to place a specific dollar value
on such services or the portion of the commission which reflects the amount paid
for such services but must be prepared to demonstrate a good faith basis for its
determinations.
Investment research obtained by allocations of Fund brokerage is used
to augment the scope and supplement the internal research and investment
strategy capabilities of the Adviser but does not reduce the overall expenses of
the Adviser to any material extent. Such investment research may be in written
form or through direct contact with individuals and includes information on
particular companies and industries as well as market, economic or institutional
activity areas. Research services furnished by brokers through which the Fund
effects securities transactions are used by the Adviser and its advisory
affiliates in carrying out their responsibilities with respect to all of their
accounts over which they exercise investment discretion. Such investment
information may be useful only to one or more of the other accounts of the
Adviser and its advisory affiliates, and research information received for the
commissions of those particular accounts may be useful both to the Fund and one
or more of such other accounts.
Neither the Fund nor the Adviser has any agreement or legally binding
understanding with any broker regarding any specific amount of brokerage
commissions which will be paid in recognition of such services. However, in
determining the amount of portfolio commissions directed to such brokers, the
Adviser does consider the level of services provided and, based on such
determinations, has allocated brokerage commissions of $1,559,985 on portfolio
transactions in the principal amounts of $1,330,593,586 during 1995. The average
commission on these transactions was $0.0494 per share.
The Adviser may also place orders for the purchase or sale of portfolio
securities with Gabelli & Company, Inc. ("Gabelli"), a broker-dealer member of
the National Association of Securities Dealers, which is an affiliate of the
Adviser, when it appears that, as an introducing broker or otherwise, Gabelli
can obtain a price and execution which is at least as favorable as that of other
qualified brokers. As required by Rule 17e-1 under the Act, the Board of
Trustees of the Fund has adopted "Procedures" which provide that commissions
paid to Gabelli on stock exchange transactions may not exceed that which would
have been charged by another qualified broker or member firm able to effect the
same or a comparable transaction at an equally favorable price and contains a
schedule setting forth maximum commission charges for such transactions designed
to reflect that standard. Rule 17e-1 and the Procedures contain requirements
that the Board, including its independent Trustees, conduct periodic compliance
reviews of such brokerage allocations and review such schedule at least annually
for its continuing compliance with the foregoing standard. The Adviser and
Gabelli are also required to furnish reports and maintain records in connection
with such reviews.
To obtain the best execution of portfolio transactions on the New York
Stock Exchange, Gabelli controls and monitors the execution of such transactions
on the floor of the Exchange through independent "floor brokers" or through the
Designated Order Turnaround ("DOT") System of the Exchange. Such transactions
are then cleared, confirmed to the Fund for the account of Gabelli, and settled
directly with the Custodian of the Fund by a clearing house member firm which
13
<PAGE>
remits the commission less its clearance charges to Gabelli. Pursuant to an
agreement with the Fund, Gabelli pays all charges incurred for such services and
reports at least quarterly to the Board the amount of such expenses and
commissions. The net compensation realized by Gabelli for its brokerage services
is subject to the approval of the Board and the independent Trustees of the Fund
who must approve the continuance of the arrangement at least annually.
Commissions paid the Fund pursuant to the arrangement may not exceed the
commission level specified by the Procedures described above. Gabelli may also
effect Fund portfolio transactions in the same manner and pursuant to the same
arrangements on other national securities exchanges which adopt direct order
access rules similar to those of the New York Stock Exchange.
The amount of the brokerage commissions paid by the Fund in each of the
last three years, the percentage and amount of such commissions paid to Gabelli
and the percentage ratio which the aggregate principal amount of such
transactions bears to the aggregate dollar amount of all portfolio transactions
on which commissions were paid are as follows:
GABELLI & COMPANY, INC.
<TABLE>
<CAPTION>
Total Commissions Percentage of Total Percentage of Principal
Year Ended Paid Amount Commissions Amount
- ---------- ---- ------ ----------- ------
<S> <C> <C> <C> <C>
12/31/93 $1,080,946 $ 0 0.0% 0.00%
12/31/94 $ 728,490 $39,134 5.4% 5.81%
12/31/95 $1,559,985 $82,790 5.3% 3.13%
</TABLE>
The percentage of total Fund commissions paid to Gabelli differs from the
percentage of the principal amounts involved because commissions paid to Gabelli
are computed on a cents per share basis without regard to principal amount.
The Fund also paid brokerage commissions to Keeley Investment Corp.
("Keeley"). A significant shareholder of Keeley is a director of a company that
is an affiliate of the Adviser.
The amount of the commissions paid by the Fund, the percentage as well
as the amount of such commissions paid to Keeley, and the percentage ratio which
the aggregate principal amount of such transactions bears to the aggregate
dollar amount of all portfolio transactions on which commissions were paid are
as follows:
KEELEY INVESTMENT CORP.
<TABLE>
<CAPTION>
Percentage of Total Percentage of
Year Ended Total Comm. Paid Amount Commissions Principal Amount
- ---------- ---------------- ------ ----------- ----------------
<S> <C> <C> <C> <C>
12/31/94 $ 728,490 $13,385 1.84% 1.29%
12/31/95 $1,559,985 $ 0 0.00% 0.00%
</TABLE>
The Fund is required to identify the securities of its regular brokers
or dealers (as defined in Rule 10b-1 under the 1940 Act) or their parents
acquired by the Fund during the most recent fiscal year. As of December 31,
1995, the Fund held 241,400 shares of State Street Boston Corporation having a
market value of $10,863,000.
14
<PAGE>
REDEMPTION OF SHARES
Payment of the redemption price for shares redeemed may be made either
in cash or in portfolio securities (selected in the discretion of the Board of
Trustees of the Fund and taken at their value used in determining the Fund's net
asset value per share as described under "Net Asset Value"), or partly in cash
and partly in portfolio securities. However, payments will be made wholly in
cash unless the Board of Trustees believes that economic conditions exist which
would make such a practice detrimental to the best interests of the Fund. If
payment for shares redeemed is made wholly or partly in portfolio securities,
brokerage costs may be incurred by the investor in converting the securities to
cash. The Fund will not distribute in kind portfolio securities that are not
readily marketable. The Fund has filed a formal election with the Securities and
Exchange Commission pursuant to which the Fund will only effect a redemption in
portfolio securities where the particular shareholder of record is redeeming
more than $250,000 or 1.00% of the Fund's total net assets, whichever is less,
during any 90 day period. In the opinion of the Fund's management, however, the
amount of a redemption request would have to be significantly greater than
$250,000 before a redemption wholly or partly in portfolio securities would be
made.
Cancellation of purchase orders for Fund shares (as, for example, when
checks submitted to purchase shares are returned unpaid) causes a loss to be
incurred when the net asset value of the Fund shares on the date of cancellation
is less than on the original date of purchase. The investor is responsible for
such loss, and the Fund may reimburse itself or the Distributor for such loss by
automatically redeeming shares from any account registered at any time in that
shareholder's name, or by seeking other redress. In the event shares held in the
account of such shareholder are not sufficient to cover such loss, the
Distributor will promptly reimburse the Fund for the amount of such unrecovered
loss.
NET ASSET VALUE
For purposes of determining the Fund's net asset value per share,
readily marketable portfolio securities listed on the New York Stock Exchange
are valued, except as indicated below, at the last sale price reflected at the
close of the regular trading session of the New York Stock Exchange on the
business day as of which such value is being determined. If there has been no
sale on such day, the securities are valued at the mean of the closing bid and
asked prices 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. Readily marketable securities
not listed on the New York Stock Exchange but listed on other national
securities exchanges or admitted to trading on the National Association of
Securities Dealers Automated Quotations, Inc. ("NASDAQ") National List are
valued in like manner. Portfolio securities traded on more than one national
securities exchange are valued at the last sale price on the business day as of
which such value is being determined as reflected on the tape at the close of
the exchange representing the principal market for such securities.
Readily marketable securities traded in the over-the-counter market,
including listed securities whose primary market is believed by the Adviser 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
15
<PAGE>
NASDAQ, the National Quotation Bureau or such other comparable sources as the
Board of Trustees deems appropriate to reflect their fair value.
United States Government obligations and other debt instruments having
sixty days or less remaining until maturity are stated at amortized cost. Debt
instruments having a greater remaining maturity will be valued at the highest
bid price obtained from a dealer maintaining an active market in that security
or on the basis of prices obtained from a pricing service approved as reliable
by the Board of Trustees. All other investment assets, including restricted and
not readily marketable securities, are valued under procedures established by
and under the general supervision and responsibility of the Fund's Board of
Trustees designed to reflect in good faith the fair value of such securities.
As indicated in the Prospectus, the net asset value per share of the
Fund's shares will be determined on each day that the New York Stock Exchange is
open for trading. That Exchange annually announces the days on which it will not
be open for trading; the most recent announcement indicates that it will not be
open on the following days: New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
However, that Exchange may close on days not included in that announcement.
INVESTMENT PERFORMANCE INFORMATION
The investment performance of the Fund quoted in advertising or sales
literature for the sale of its shares will be calculated on a total return basis
which assumes the reinvestment of all dividends and distributions. Total return
is computed by comparing the value of an assumed investment in Fund shares at
the offering price in effect at the beginning of the period shown with the
redemption price of the same investment at the end of the period (including
share(s) accrued thereon by the reinvestment of dividends and distributions).
Performance quotations given as a percentage will be derived by dividing the
amount of such total return by the amount of the assumed investment. When the
period shown is greater than one year, the result is referred to as cumulative
performance or total return.
Performance quotations will ordinarily be accompanied by the average
annual total return of the Fund since inception, for the past five years and for
the twelve months through the end of the most recent calendar quarter.
Quotations of average annual total return for periods greater than one year will
be the compounded annual rate of return which equates to the result of the
previously described calculation of cumulative total return. Computed in the
manner described, the total return of the Fund has been:
<TABLE>
<S> <C>
Period ended 12/31/87 (4.9)%
Year ended 12/31/88 39.2%
Year ended 12/31/89 40.1%
Year ended 12/31/90 (2.0)%
Year ended 12/31/91 34.3%
Year ended 12/31/92 4.5%
Year ended 12/31/93 11.3%
Year ended 12/31/94 (3.4)%
Year ended 12/31/95 32.7%
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
Average annual return for 5 years through year ended December 31, 1995 14.9%
Compound annual rate of total return from inception (4/10/87) through year ended
December 31, 1995 15.9%
</TABLE>
The formula for computing the foregoing annual rate of total return is:
T=[nth root][superscript carat]R/P-1
P = Investment at the beginning of the period.
T = Compounded annual rate of total return.
n = Number of years.
R = Redemption value of the same investment at the end of the period assuming
the reinvestment of all dividends and distributions.
Investors are cautioned that past results are not necessarily representative of
future results; that investment returns and principal value will fluctuate; that
investment performance is primarily a function of portfolio management (which is
affected by the economic and market environment as well as the volatility of
portfolio investments) and operating expenses; and that performance information,
such as that described above, may not provide a valid basis of comparison with
other investments and investment companies using a different method of computing
performance data.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, New York, New
York 10022, is counsel to the Fund.
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York
10036, independent accountants, have been selected to audit and express their
opinion on the Fund's annual financial statements.
GENERAL INFORMATION
The Fund's Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of this
office. Under Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which the Fund itself is
unable to meet its obligations since the Declaration of Trust provides for
indemnification and reimbursement of expenses out of the property of the Fund to
any shareholder held personally liable for any obligation of the Fund and also
provides that the Fund shall, if requested, assume the defense of any claim made
against any shareholder for any act or obligation of the Trust and satisfy any
judgment recovered thereon.
17
<PAGE>
The Fund reserves the right to create and issue a number of series of
shares, in which case the shares of each series would participate equally in the
earnings, dividends and assets of the particular series and would vote
separately to approve management agreements or changes in investment policies,
but shares of all series would vote together in the election or selection of
Trustees, principal underwriters and accountants and on any proposed material
amendment to the Fund's Declaration of Trust. Upon liquidation of the Fund,
shareholders of each series would be entitled to share pro rata in the net
assets of their respective series available for distribution to shareholders.
Shareholders are entitled to one vote for each share held (and
fractional votes for fractional shares) and may vote on the election of Trustees
and on other matters submitted to meetings of shareholders. It is not
contemplated that regular annual meetings of shareholders will be held. The
Declaration of Trust provides that the Fund's shareholders have the right, upon
the declaration in writing or vote of more than two thirds of its outstanding
shares, to remove a Trustee. The Trustees will call a meeting of shareholders to
vote upon the written request of the shareholders of 33 1/3% of its shares (10%
in the case of removal of a Trustee). In addition, ten shareholders holding the
lesser of $25,000 worth or one percent of Fund shares may advise the Trustees in
writing that they wish to communicate with other shareholders for the purpose of
requesting a meeting to remove a Trustee. The Trustees will then, if requested
by the applicants, mail at the applicants' expense, the applicants'
communication to all other shareholders. Except for a change in the name of the
Trust, no amendment may be made to the Declaration of Trust without the
affirmative vote of the holders of more than 50% of its outstanding shares.
Shareholders have no preemptive or conversion rights. The Fund may be terminated
upon the sale of its assets to another issuer, if such sale is approved by the
vote of the holders of more than 50% of its outstanding shares. If not so
terminated, the fund will continue indefinitely.
18
THE GABELLI GROWTH FUND
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ------------ ------------ ------------
<S> <C> <C> <C>
COMMON STOCKS--98.0%
ADVERTISING--1.1%
137,700 Interpublic Group of
Companies.................. $ 4,896,236 $ 5,972,738
------------ ------------
AEROSPACE--6.5%
134,700 Allied-Signal Inc........... 6,443,083 6,398,250
61,000 Boeing Co................... 3,567,676 4,780,875
131,000 Rockwell International
Corp....................... 6,323,427 6,926,625
43,000 Sundstrand Corp............. 2,720,763 3,026,125
68,000 TRW, Inc.................... 4,828,575 5,270,000
87,000 United Technologies......... 7,955,788 8,254,125
------------ ------------
31,839,312 34,656,000
------------ ------------
BROADCASTING--0.7%
106,000 Infinity Broadcasting Corp.,
Class A+................... 3,450,025 3,948,500
------------ ------------
BUILDING AND CONSTRUCTION--1.5%
63,000 Fluor Corporation........... 2,597,602 4,158,000
86,000 Foster Wheeler
Corporation................ 2,848,408 3,655,000
------------ ------------
5,446,010 7,813,000
------------ ------------
BUSINESS SERVICES--10.1%
84,000 Automatic Data Processing,
Inc........................ 5,177,520 6,237,000
137,500 Ceridian Corporation+....... 4,909,412 5,671,875
65,000 DSC Communications
Corporation+............... 2,595,083 2,396,875
255,900 First Data Corporation...... 12,897,825 17,113,312
172,000 General Motors Corporation,
Class E.................... 7,334,363 8,944,000
43,000 Honeywell, Inc.............. 2,045,525 2,090,875
74,000 Oracle Systems Corp.+....... 3,251,129 3,135,750
92,000 Reuters Holdings plc, Class
B, ADR..................... 4,342,125 5,071,500
39,000 U.S. Robotics............... 3,643,567 3,422,250
------------ ------------
46,196,549 54,083,437
------------ ------------
CABLE--1.1%
120,000 Cox Communications Inc.,
Class A, New+.............. 2,018,934 2,340,000
190,000 Tele-Communications, Inc.,
Class A+................... 585,879 3,776,250
------------ ------------
2,604,813 6,116,250
------------ ------------
CONGLOMERATES--1.8%
192,000 General Motors Corporation,
Class H.................... 7,252,288 9,432,000
------------ ------------
CONSUMER PRODUCTS--7.5%
31,000 CUC International Inc.+..... 1,091,575 1,057,875
75,000 Duracell International
Inc........................ 3,200,938 3,881,250
1,800 Estee Lauder Companies+..... 46,800 62,775
80,000 General Electric Company.... 3,819,838 5,760,000
264,000 Gillette Company............ 8,953,776 13,761,000
27,000 Kimberly-Clark Corp......... 2,147,600 2,234,250
126,000 Procter & Gamble Company.... 8,278,281 10,458,000
40,000 Ralston Purina Group........ 1,625,938 2,495,000
------------ ------------
29,164,746 39,710,150
------------ ------------
ENTERTAINMENT--3.2%
72,500 Time Warner Inc............. 2,564,275 2,745,937
18,000 Viacom Inc., Class A+....... 607,725 825,750
119,000 Viacom Inc., Class B+....... 5,396,713 5,637,625
132,000 Walt Disney Company......... 6,606,127 7,788,000
------------ ------------
15,174,840 16,997,312
------------ ------------
FINANCIAL SERVICES--17.8%
174,000 American Express Company.... $ 5,114,078 $ 7,199,250
92,000 American International
Group, Inc................. 6,028,918 8,510,000
1,500 Amerin Corp.+............... 24,000 40,125
157,000 BankAmerica Corp............ 8,832,272 10,165,750
142,000 Barnett Banks Inc........... 6,735,314 8,378,000
24,500 BayBanks Inc................ 2,022,059 2,407,125
134,000 Citicorp.................... 6,436,489 9,011,500
9,000 Federal National Mortgage
Association................ 1,117,950 1,117,125
80,000 First Tennessee National
Corporation................ 3,918,736 4,840,000
49,000 General Re Corporation...... 6,641,328 7,595,000
91,000 H&R Block Inc............... 4,096,300 3,685,500
219,000 Mellon Bank Corporation..... 8,691,003 11,771,250
230,000 Norwest Corporation......... 5,426,126 7,590,000
241,400 State Street Boston
Corporation................ 7,819,484 10,863,000
32,000 T. Rowe Price Associates
Inc........................ 1,678,069 1,576,000
------------ ------------
74,582,126 94,749,625
------------ ------------
FOOD, BEVERAGE AND TOBACCO--9.4%
152,000 Coca-Cola Company........... 6,283,922 11,286,000
267,000 Nabisco Holdings Corp.,
Class A.................... 7,388,815 8,710,875
149,000 PepsiCo, Inc................ 5,350,838 8,325,375
160,000 Philip Morris Companies
Inc........................ 10,098,739 14,480,000
82,400 Tootsie Roll Industries,
Inc........................ 2,531,782 3,265,100
76,000 Wrigley (Wm.) Jr. Company... 2,250,922 3,990,000
------------ ------------
33,905,018 50,057,350
------------ ------------
HEALTH CARE--12.3%
85,000 Amgen Inc.+................. 1,545,381 5,046,875
5,000 Biogen, Inc.+............... 305,820 307,500
68,700 Bristol-Myers Squibb Co..... 5,350,885 5,899,613
1,000 Chiron Corporation+......... 86,720 110,500
1,000 Genzyme Corp.+.............. 54,665 62,375
136,000 Johnson & Johnson........... 6,528,483 11,645,000
158,000 Lilly (Eli) & Co............ 5,352,848 8,887,500
207,000 Merck & Co., Inc............ 8,908,587 13,610,250
105,000 Pfizer Inc.................. 5,447,138 6,615,000
245,000 Schering-Plough
Corporation................ 9,102,070 13,413,750
------------ ------------
42,682,597 65,598,363
------------ ------------
HOTELS/CASINOS--0.3%
18,100 HFS Inc.+................... 1,200,480 1,479,675
------------ ------------
INDUSTRIAL EQUIPMENT AND SUPPLIES--1.2%
107,000 Illinois Tool Works, Inc.... 2,687,995 6,313,000
------------ ------------
MEDIA--0.1%
35,000 K-III Communications
Corp.+..................... 414,113 424,375
------------ ------------
PUBLISHING--1.1%
92,000 Tribune Co.................. 5,774,850 5,623,500
------------ ------------
RESTAURANTS--1.3%
157,000 McDonald's Corporation...... 5,053,475 7,084,625
------------ ------------
RETAIL--4.2%
188,906 Home Depot, Inc............. 7,057,101 9,043,875
155,200 Mattel, Inc................. 3,815,910 4,772,400
212,000 Office Depot Inc.+.......... 5,237,963 4,187,000
140,000 Walgreen Co................. 2,673,766 4,182,500
------------ ------------
18,784,740 22,185,775
------------ ------------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
THE GABELLI GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ------------ ------------ ------------
<S> <C> <C> <C>
COMMON STOCKS (CONTINUED)
TECHNOLOGY--13.5%
40,000 AVX Corporation............. $ 1,187,895 $ 1,060,000
38,500 Bay Networks Inc.+.......... 1,588,132 1,583,312
45,000 Cisco Systems+.............. 3,437,954 3,358,125
145,000 Computer Associates
International, Inc......... 6,496,534 8,246,875
135,000 Digital Equipment Corp.+.... 6,202,817 8,656,875
70,000 Hewlett-Packard Co.......... 3,778,052 5,862,500
83,000 Intel Corporation........... 2,477,212 4,710,250
46,500 International Business
Machines Corporation....... 4,197,862 4,266,375
190,000 Loral Corporation........... 2,709,076 6,721,250
62,500 Molex Incorporated.......... 1,265,972 1,984,375
249,062 Molex Incorporated, Class
A.......................... 6,633,705 7,627,524
10,000 Raytheon Co................. 460,250 472,500
83,000 Silicon Graphics Inc.+...... 3,173,025 2,282,500
176,000 Sun Microsystems Inc.+...... 4,925,548 8,030,000
90,000 Texas Instruments, Inc...... 3,861,633 4,657,500
17,600 Xerox Corporation........... 2,292,055 2,411,200
------------ ------------
54,687,722 71,931,161
------------ ------------
TELECOMMUNICATIONS--2.7%
112,900 AT&T Corp................... 4,521,895 7,310,275
214,000 Ericsson (L.M.) Telephone
Company, Class B, ADR...... 2,989,692 4,173,000
25,000 Globalstar
Telecommunications+........ 500,000 943,750
58,000 Tellabs, Inc.+.............. 2,181,626 2,146,000
------------ ------------
10,193,213 14,573,025
------------ ------------
WIRELESS COMMUNICATIONS--0.6%
121,900 AirTouch Communications
Inc.+...................... $ 2,712,475 $ 3,443,675
------------ ------------
TOTAL COMMON STOCKS........................ 398,703,623 522,193,536
------------ ------------
<CAPTION>
PRINCIPAL
AMOUNT
- ------------
<S> <C> <C> <C>
U.S. TREASURY BILL--1.2%
$ 6,505,000 5.22% ++ due 02/08/1996..... 6,473,827 6,473,827
------------ ------------
TOTAL INVESTMENTS.................. 99.2% $405,177,450(a) 528,667,363
=============
OTHER ASSETS AND
LIABILITIES (NET)................. 0.8 4,373,762
----- ------------
NET ASSETS......................... 100.0% $533,041,125
===== =============
</TABLE>
- ---------------
(a) Aggregate cost for Federal tax purposes was $405,471,099. Net unrealized
appreciation for Federal tax purposes was $123,196,264 (gross unrealized
appreciation was $126,513,052 and gross unrealized depreciation was
$3,316,788).
+ Non-income producing security
++ Represents annualized yield at date of purchase.
ADR -- American Depositary Receipt
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
DECEMBER 31, 1995
<TABLE>
<S> <C>
First Data Corporation Mellon Bank Corporation
Philip Morris Companies Inc. Johnson & Johnson
Gillette Company Coca-Cola Company
Merck & Co., Inc. State Street Boston Corporation
Schering-Plough Corporation Procter & Gamble Company
</TABLE>
- -
- --------------------------------------------------------------------------------
- -
See Notes to Financial Statements
8
<PAGE>
THE GABELLI GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
- ----------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value
(Cost $405,177,450)................ $528,667,363
Cash................................. 13,901
Receivable for investments sold...... 10,236,343
Dividends receivable................. 823,527
Receivable for Fund shares sold...... 879,760
Other assets......................... 1,548,600
------------
Total Assets..................... 542,169,494
------------
LIABILITIES:
Payable for investments purchased.... 4,512,118
Dividend payable..................... 3,757,752
Payable for investment advisory
fee................................ 456,875
Payable for distribution fees........ 261,138
Payable for transfer agent fees...... 99,000
Accrued expenses and other payables.. 41,486
------------
Total Liabilities................ 9,128,369
------------
Net assets applicable to
24,059,631 shares of beneficial
interest
outstanding.................... $533,041,125
===============
NET ASSETS CONSIST OF:
Shares of beneficial interest at par
value.............................. $ 240,596
Additional paid-in capital........... 409,736,588
Distributions in excess of net
realized gain on investments....... (425,972)
Net unrealized appreciation of
investments........................ 123,489,913
------------
Total Net Assets................. $533,041,125
============
Net Asset Value, offering and
redemption price per share
($533,041,125 / 24,059,631
shares outstanding; unlimited
number of shares authorized of
$0.01 par value)............... $22.16
=====
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
- ----------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income (net of foreign
withholding taxes of $19,229)....... $ 7,735,331
Interest income....................... 549,634
------------
Total Investment Income........... 8,284,965
------------
EXPENSES:
Investment advisory fee............... 4,985,525
Distribution fees..................... 1,246,381
Transfer agent fees................... 591,682
Shareholder communications expense.... 109,928
Trustees' fees........................ 80,568
Legal and audit fees.................. 41,371
Other................................. 111,682
------------
Total Expenses.................... 7,167,137
------------
NET INVESTMENT INCOME.................. 1,117,828
------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain on investments
sold................................ 80,758,385
------------
Net unrealized appreciation of
investments:
Beginning of year..................... 65,395,180
End of year........................... 123,489,913
------------
Change in net unrealized
appreciation of investments..... 58,094,733
------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS........................... 138,853,118
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS....................... $139,970,946
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
12/31/95 12/31/94
------------- -------------
<S> <C> <C>
Net investment income....................................................................... $ 1,117,828 $ 1,771,347
Net realized gain on investments............................................................ 80,758,385 59,552,832
Net change in unrealized appreciation of investments........................................ 58,094,733 (84,422,105)
------------- -------------
Net increase/(decrease) in net assets resulting from operations............................. 139,970,946 (23,097,926)
Distributions to shareholders from:
Net investment income..................................................................... (1,002,446) (1,697,277)
Distributions in excess of net investment income.......................................... -- (167,272)
Net realized gain on investments.......................................................... (80,041,525) (58,588,684)
Distributions in excess of net realized gain on investments............................... -- (27,643)
Net decrease in net assets from Fund share transactions..................................... (8,356,403) (128,963,907)
------------- -------------
Net increase/(decrease) in net assets....................................................... 50,570,572 (212,542,709)
NET ASSETS:
Beginning of year........................................................................... 482,470,553 695,013,262
------------- -------------
End of year................................................................................. $ 533,041,125 $ 482,470,553
============= =============
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
THE GABELLI GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES. The Gabelli Growth Fund (the "Fund") was
organized on October 24, 1986 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 capital appreciation. The Fund commenced operations on April 10,
1987. The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates. The following is a
summary of significant accounting policies followed by the Fund in the
preparation of its financial statements.
SECURITY VALUATION. Portfolio securities which are traded only on a nationally
recognized securities exchange or in the over-the-counter market which are
National Market System Securities are valued at the last sale price as of the
close of business on the day the securities are being valued or, lacking any
sales, at the mean between closing bid and asked prices. Other over-the-counter
securities are valued at the mean between current bid and asked prices as
reported by NASDAQ, the National Quotation Bureau or such other comparable
sources as the Board of Trustees deems appropriate to reflect their fair value.
Portfolio securities which are traded both in the over-the-counter market and on
a stock exchange are valued according to the broadest and most representative
market, as determined by Gabelli Funds, Inc. (the "Adviser"). Securities and
assets for which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the Board of
Trustees of the Fund. Short-term investments that mature in more than 60 days
are valued at the highest bid price obtained from a dealer maintaining an active
market in that security. Short-term investments that mature in 60 days or fewer
are valued at amortized cost, unless the Board of Trustees determines that such
valuation does not constitute fair value.
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.
10
<PAGE>
THE GABELLI GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividend income and dividends and
distributions to shareholders are recorded on the ex-dividend date. Income
distributions and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments of
income and gains on various investment securities held by the Fund, timing
differences and differing characterization of distributions made by the Fund.
PROVISION FOR INCOME TAXES. The Fund has qualified and intends to continue to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. As a result, a Federal income tax provision is
not required.
2. AGREEMENTS WITH AFFILIATED PARTIES. The Fund has entered into an investment
advisory agreement (the "Advisory Agreement") with the Adviser which provides
that the Fund will pay the Adviser a fee, computed daily and paid monthly, at
the annual rate of 1.00 percent of the value of the Fund's average daily net
assets, to provide a continuous investment program for the Fund's portfolio,
provide all facilities and personnel, including offices, required for its
administrative management and pay the compensation of all officers and Trustees
of the Fund who are its affiliates. The Adviser is obligated to reimburse the
Fund in the event the Fund's expenses exceed the most restrictive expense ratio
limitation imposed by any state. No such reimbursement was required during the
year ended December 31, 1995.
3. DISTRIBUTION PLAN. The Fund has adopted a plan of distribution (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act. Pursuant to this Plan, the
Distributor, Gabelli & Company, Inc. ("Gabelli & Company"), an indirect
majority-owned subsidiary of the Adviser, is authorized to purchase advertising,
sales literature and other promotional material and to pay its own salespeople.
The Fund will reimburse the Distributor for these expenditures up to 0.25
percent on an annual basis of the value of the Fund's average daily net assets.
In addition, if and to the extent that the fee the Fund pays to the Adviser, as
well as other payments the Fund makes, are considered as indirectly financing
any activity which is primarily intended to result in the sale of the Fund's
shares, such payments are authorized under the Plan. For the year ended December
31, 1995, the Fund incurred distribution costs under the Plan of $1,246,381,
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 year ended December 31, 1995, other than U.S. government and
short-term securities, aggregated $685,007,880 and $780,465,467, respectively.
5. TRANSACTIONS WITH AFFILIATES. During the year ended December 31, 1995, the
Fund paid brokerage commissions of $82,790 to Gabelli & Company and its
affiliates.
6. SHARES OF BENEFICIAL INTEREST. Transactions in shares of beneficial interest
were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
12/31/95 12/31/94
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold................................................. 7,723,981 $ 177,580,810 8,826,361 $ 197,041,813
Shares issued upon reinvestment of dividends................ 3,489,327 77,284,488 2,929,789 57,657,339
Shares redeemed............................................. (11,667,885) (263,221,701) (17,122,413) (383,663,059)
----------- ------------- ----------- -------------
Net decrease................................................ (454,577) $ (8,356,403) (5,366,263) $(128,963,907)
=========== ============== =========== ==============
</TABLE>
11
<PAGE>
THE GABELLI GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Per share amounts for a Fund share outstanding throughout each period/year ended
December 31,
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990 1989 1988 1987*
--------- --------- --------- --------- --------- --------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of
year............................ $ 19.68 $ 23.26 $ 21.59 $ 21.28 $ 16.27 $ 17.07 $ 12.65 $ 9.51 $ 10.00
--------- --------- --------- --------- --------- --------- --------- -------- -------
Net investment income(a).......... 0.05 0.07 0.06 0.08 0.16 0.37 0.18 0.05 0.15
Net realized and unrealized gain
(loss) on investments........... 6.39 (0.86) 2.37 0.88 5.42 (0.71) 4.89 3.62 (0.64)
--------- --------- --------- --------- --------- --------- --------- -------- -------
Total from investment
operations...................... 6.44 (0.79) 2.43 0.96 5.58 (0.34) 5.07 3.67 (0.49)
--------- --------- --------- --------- --------- --------- --------- -------- -------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income........... (0.05) (0.08) (0.05) (0.09) (0.15) (0.39) (0.17) (0.20) --
Distributions in excess of net
investment income............. -- (0.01) -- -- -- -- -- -- --
Net realized gains.............. (3.91) (2.39) (0.67) (0.56) (0.42) (0.07) (0.48) (0.33) --
Distributions in excess of net
realized gains................ -- (0.31) (0.04) -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- -------- -------
Total distributions............... (3.96) (2.79) (0.76) (0.65) (0.57) (0.46) (0.65) (0.53) --
--------- --------- --------- --------- --------- --------- --------- -------- -------
Net asset value, end of year...... $ 22.16 $ 19.68 $ 23.26 $ 21.59 $ 21.28 $ 16.27 $ 17.07 $ 12.65 $ 9.51
========= ========= ========= ========= ========= ========= ========= ======== ========
Total return**.................... 32.7% (3.4)% 11.3% 4.5% 34.3% (2.0)% 40.1% 39.2% (4.9)%
========= ========= ========= ========= ========= ========= ========= ======== ========
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in
000's).......................... $ 533,041 $ 482,471 $ 695,013 $ 625,050 $ 422,589 $ 202,971 $ 113,187 $ 11,968 $ 3,532
Ratio of net investment income
to average net assets......... 0.22% 0.31% 0.22% 0.46% 0.97% 2.67% 2.24% 0.72% 2.94%+
Ratio of operating expenses to
average net assets(b)......... 1.44% 1.36% 1.41% 1.41% 1.45% 1.50% 1.85% 2.30% 2.00%+
Portfolio turnover rate........... 140.2% 40.3% 80.7% 45.9% 49.9% 74.7% 47.8% 81.7% 80.0%
</TABLE>
- ---------------
* The Fund commenced operations on April 10, 1987.
** 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) Net investment loss before expenses reimbursed by Adviser for the year ended
December 31, 1988 and the period ended December 31, 1987 was $(0.09) and
$(0.08), respectively.
(b) Operating expense ratios before expenses reimbursed by Adviser for the year
ended December 31, 1988 and the period ended December 31, 1987 were 4.38%
and 6.45%, respectively.
12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
THE GABELLI GROWTH FUND
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Gabelli Growth Fund (the
"Fund") at December 31, 1995, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the eight years in the
period then ended and for the period from April 10, 1987 (commencement of
operations) through December 31, 1987, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1995 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
February 13, 1996
- --------------------------------------------------------------------------------
1995 TAX NOTICE TO SHAREHOLDERS (UNAUDITED)
For the fiscal year ended December 31, 1995, the Fund paid to shareholders, on
December 29, 1995, ordinary income dividends (comprised of net investment income
and short-term capital gains) totaling $1.29 per share. Additionally, on that
date, the Fund paid $2.67 per share in long-term capital gains. For fiscal year
1995, 29.2% of the ordinary income dividend qualifies for the dividend received
deduction available to corporations.
U.S. GOVERNMENT INCOME:
The percentage of the ordinary income dividend paid by the Fund during fiscal
1995 which was derived from U.S. Treasury securities was 0.06%. Such income is
exempt from state and local income tax in all states. However, many states,
including New York and California, allow a tax exemption for a portion of the
income earned only if a mutual fund has invested at least 50% of its assets at
the end of each quarter of the Fund's fiscal year in U.S. Government securities.
The Gabelli Growth Fund did not meet this strict requirement in 1995. Due to the
diversity in state and local tax law, it is recommended that you consult your
personal tax advisor for the applicability of the information provided as to
your own situation.
- --------------------------------------------------------------------------------
<PAGE>
APPENDIX A
DESCRIPTION OF CORPORATE DEBT RATINGS
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in
high degree. Such issues are often in default or have other marked
shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Unrated: Where no rating has been assigned or where a rating has been suspended
or withdrawn, it may be for reasons unrelated to the quality of the
issue.
A-1
<PAGE>
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not rated
as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's Investors Services, Inc.'s publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgement to be formed; if a bond is
called for redemption; or for other reasons.
Note: Those bonds in the Aa A, Baa Ba and B groups which Moody's believe
possess the strongest investment attributes are designated by the
symbols Aa-1, A-1, Baa-1 and B-1.
STANDARD & POOR'S RATINGS SERVICE
AAA: Bonds rated AAA have the highest rating assigned by Standard & Poor's
Ratings Service, a division of McGraw-Hill Companies, Inc. ("S&P").
Capacity to pay interest and repay principal is extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A: Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds
in the highest rated categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than in higher
rated categories.
BB, B CCC, CC, C: Bonds rated BB, B, CCC, CC and C are regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of this obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such bonds will likely have some quality and
protective characteristics, they are outweighed by large uncertainties
of major risk exposures to adverse conditions.
C1: The rating C1 is reserved for income bonds on which no interest is
being paid.
D: Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
Plus(+) Or Minus(-): The ratings from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major
rating categories.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
A-2
THE GABELLI GROWTH FUND
PART C
PART C: OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Prospectus:
Financial Highlights
Included in the Statement of Additional Information:
Audited financial statements for the fiscal year
ended December 31, 1995 including:
Portfolio of Investments, December 31, 1995
Statement of Assets & Liabilities, December
31, 1995
Statement of Operations, year ended December
31, 1995
Statement of Changes in Net Assets, years
ended December 31, 1994
and December 31, 1995
Notes to Financial Statements
Financial Highlights
Report of Independent Accountants
(b) Exhibits
(1) Declaration of Trust*
(2) By-laws*
(3) Not applicable
(4) Specimen share certificate*
(5) Amended Investment Advisory Contract**
(6) Amended Distribution Agreement**
(7) Not applicable
(8) Custody Agreement*
(9) Transfer Agency Agreement*
(10) Opinion of Counsel regarding registration pursuant
to Rule 24e-2 is filed herewith.
(11)(a) Consent of Independent Accountants is filed
herewith
(11)(b) Powers of Attorney***
(12) Not applicable
(13) Agreement with initial shareholder*
(14) Form of Instructions and Agreement for Individual
Retirement Account (IRA)*
(15) Amended Distribution Plan**
(16) Sample Total Return Computation**
(17) Financial Data Schedule is filed herewith
(18) Not applicable
* Incorporated by reference to the Registrant's
Registration Statement on Form N-1A, as amended, as filed with
the Securities and Exchange Commission ("SEC").
** Incorporated by reference to Post-Effective Amendment
No. 8 to the Registrant's Registration Statement as filed with
the SEC on May 3, 1993.
*** Incorporated by reference to Post-Effective Amendment
No. 11 to the Registrant's Registration Statement as filed
with the SEC on February 28, 1995.
ITEM 25. Persons Controlled by or Under Common Control with
Registrant
None
ITEM 26. Number of Holders of Securities
(1) (2)
Title of Class Number of Record Holders
Beneficial Interest Value as of April 15,
1996
$.01 per share 41,021
ITEM 27. Indemnification
Reference is made to Subdivision (c) of Section 12 of Article
Seventh of Registrant's Declaration of Trust.
Insofar as indemnification of liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers
and controlling persons of Registrant pursuant to the
foregoing provisions, or otherwise, Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in that Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses
incurred or paid by a trustee, officer or controlling person
of Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or
controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
The Registrant hereby undertakes that it will apply the
indemnification provisions of its Declaration of Trust, its
By-laws, the Management Agreement, the Sub-Advisory Agreement,
the Administration Agreement and the Distribution Agreement in
a manner consistent with Release No. 11330 of the Securities
and Exchange Commission under the 1940 Act.
ITEM 28. Business and Other Connections of Investment
Adviser
Gabelli Funds, Inc. is the investment adviser of the
Registrant. For information as to its business, profession,
vocation or employment of a substantial nature, reference is
made to Form ADV filed by it under the Investment Advisers Act
of 1940. (SEC File No. 801-37706)
ITEM 29. Principal Underwriter
(a) The Distributor, Gabelli & Company, Inc., is also
the principal underwriter for The Gabelli ABC Fund, The
Gabelli Asset Fund, The Gabelli Value Fund, Inc., The Gabelli
Small Cap Growth Fund, Gabelli Equity Income Fund, Gabelli
Gold Fund, The Gabelli U.S. Treasury Money Market Fund, The
Gabelli Global Telecommunications Fund, The Gabelli Global
Interactive Couch Potato Fund, Gabelli Capital Asset Fund
and The Gabelli International Growth Fund, Inc., The Gabelli
Global Convertible Securities Fund and The Westwood Funds.
(b) For information as to such principal underwriter,
reference is made to Schedule A of Form BD filed by it under
the Securities Exchange Act of 1934. (SEC File No. 8-21373)
(c) Not applicable.
ITEM 30. Location of Accounts and Records
All such accounts, books and other documents are
maintained at the offices of the Adviser, Gabelli Funds,
Inc., One Corporate Center, Rye, New York 10580-1434, First
Data Investor Services Group, Inc., Exchange Place, Boston,
Massachusetts 02109, State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts, 02110, and BFDS, Two
Heritage Drive, North Quincy, Massachusetts, 02171.
ITEM 31. Management Services
Not Applicable.
ITEM 32. Undertakings
(a) Not applicable
(b) Not applicable
(c) The Registrant hereby undertakes to furnish to each
person to whom a prospectus is delivered a copy of the
Registrant's latest Annual Report to shareholders upon request
and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, the Registrant certifies
that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the Securities
Act of 1933 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereto duly authorized, in
the City of Rye and State of New York, on the 29th day of April,
1996.
THE GABELLI GROWTH FUND
(Registrant)
By: /s/ Bruce N. Alpert
Bruce N. Alpert
President
_____________________________________________________________________
_________
Pursuant to the requirments of the Securities Act of 1933, this
registration statement has been signed below by the following persons
in the capacities and on the date indicated.
Signature: Title:
Date:
/s/ Bruce N. Alpert President and Treasurer
April 29, 1996
Bruce N. Alpert
Mario J. Gabelli* Trustee
April 29, 1996
Mario J. Gabelli
Felix J. Christiana* Trustee
April 29, 1996
Felix J.Christiana
Anthony J. Colavita* Trustee
April 29, 1996
Anthony J. Colavita
James P. Conn* Trustee
April 29, 1996
James P. Conn
Dugald A. Fltecher* Trustee
April 29, 1996
Dugald A. Fletcher
Katl Otto Pohl* Trustee
April 29, 1996
Karl Otto Pohl
Anthony R. Pustorino* Trustee
April 29, 1996
Anthony R. Pustorino
Anthony Torna* Trustee
April 29, 1996
Anthony Torna
Anthonie van Ekris* Trustee
April 29, 1996
Anthonie van Ekris
Salvatore J. Zizza* Trustee
April 29, 1996
Salvatore J. Zizza
*By: /s/ Bruce N. Alpert
Bruce N. Alpert
Attorney-in-Fact
SCHEDULE OF EXHIBITS
EXHIBIT
NUMBER EXHIBIT
(10) Opinion of Counsel
(11)(a) Consent of Independent
Accountants
(17) Financial Data Schedule
shared/3rdparty/gabgrow/pea/#13/partc.doc
April 29, 1996
The Gabelli Growth Fund
One Corporate Center
Rye, New York 10580
Re: Filing Pursuant to Rule 24e-2
Gentlemen:
We have acted as special counsel to The Gabelli Growth
Fund (the "Company"), a voluntary association with transferable
shares organized and existing under and by virtue of the laws of the
Commonwealth of Massachusetts (a "Massachusetts Business Trust"), in
connection with a filing pursuant to Rule 24e-2 (the "Filing") with
the Securities and Exchange Commission (the "Commission") making
definite registration of an aggregate of 467,044.76 shares of
beneficial interest, par value $.01 per share (the "Fund Shares"), of
the Company.
In connection with the foregoing, we have examined the
originals or copies, certified or otherwise identified to our
satisfaction, of (i) the Declaration of Trust of the Company dated
October 24, 1986 (the "Declaration of Trust"); (ii) the By-Laws of
the Company; (iii) the Registration Statement of the Company on Form
N-1A, File No. 33-10583, as amended effective April 29, 1996 by
Post-Effective Amendment No. 13 under the Securities Act of 1933, as
amended, and Amendment No. 14 under the Investment Company Act of
1940, as amended, and the exhibits contained therein; (iv)
resolutions adopted by the Board of Trustees of the Company and
furnished to us by the Company; and (v) such other agreements,
documents, certificates and other records as we have deemed necessary
or appropriate as a basis for the opinions set forth
herein. In such examination we have assumed the legal
capacity of natural persons, the genuineness of all
signatures, the authenticity of all documents submitted to
us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic
copies, and the authenticity of the originals of such
copies. As to any facts material to this opinion which were
not independently established, we have relied on statements
or representations of officers of the Company or others.
We are admitted to the Bar in the Commonwealth
of Massachusetts, and we express no opinion as to the laws
of any other jurisdiction.
Based upon and subject to the foregoing, we are
of the opinion that the issuance and sale of the Fund
Shares by the Company are validly authorized and, assuming
certificates therefor are duly executed and delivered or
the shareholders' accounts are duly credited and the Fund
Shares represented thereby or so credited are fully paid
for according to the provisions of the prospectus relating
to the Fund Shares, such Fund Shares will be, subject to
the statements set forth below regarding the liability of a
shareholder of a Massachusetts Business Trust, validly
issued, fully paid and nonassessable.
Pursuant to certain decisions of the Supreme
Judicial Court of Massachusetts, shareholders of a
Massachusetts Business Trust may, under certain
circumstances, be held personally liable as partners for
the obligations of the trust. Even if the Company were
held to be a partnership, however, the possibility of the
holders of Fund Shares incurring personal liability for
financial loss appears remote because (i) Article EIGHTH,
Paragraph 2 of the Declaration of Trust contains an express
disclaimer of liability for holders of Fund Shares for the
obligations of the Company and Article SEVENTH, Paragraph
6(a) requires that in every note, bond, contract or other
undertaking issued by or on behalf of the Company include a
recitation limiting the obligation represented thereby to
the Company and its assets and (ii) Article EIGHTH,
Paragraph 1 provides that the Company shall indemnify and
hold each shareholder of the Company harmless from and
against all loss and expense arising from liabilities to
which such holder may become subject by reason of being or
having been a holder of Fund Shares.
We hereby consent to the filing of this opinion
with the Filing.
Very truly yours,
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM
The Gabelli Growth Fund
April 29, 1996
Page
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional
Information constituting part of this Post-Effective Amendment No. 13
to the registration statement on Form N-1A (the "Registration
Statement") of our report dated February 13, 1996, relating to the
financial statements and financial highlights of The Gabelli Growth
Fund, which appears in such Statement of Additional Information, and
to the incorporation by reference of our report into the Prospectus
which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Counsel and
Independent Accountants" in such Statement of Additional Information
and to the reference to us under the heading "Financial Highlights"
in such Prospectus.
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York
April 29, 1996
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