GABELLI GROWTH FUND, N-30B-2, 1997-12-17

GABELLI GROWTH FUND
N-30B-2, 1997-12-17

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<PAGE>
THE GABELLI GROWTH FUND
THIRD QUARTER REPORT - SEPTEMBER 30, 1997

[PHOTOGRAPH
OF HOWARD WARD]
*****

Morningstar rates Gabelli Growth Fund 5 stars overall and for the three and ten
year periods ended 9/30/97 among 2143 and 638 domestic equity funds,
respectively. The fund received 4 stars for the five year period ended 9/30/97
among 1187 funds.

TO OUR SHAREHOLDERS,

Just when you thought it could not get any better, it did. Fortunately,
we have consistently applied a market timing strategy of not timing the market.
This is really more of an investment policy than a strategy. It is a policy
based on respect for the stock market's volatile history and overwhelming
evidence which underscores the futility of market timing. We do not ask for
credit regarding this successful non-strategy, as it may work against us when
the market declines.

As for El Nino, it has had nothing to do with the advance in share
prices and will play no role in the market's ultimate decline, whenever that may
occur.

Historically, there has been a seasonal decline in mutual fund inflows
during the summer months as investors focus more on outdoor sports and family
vacations. Cash flows to stock funds were strong this summer, perhaps in
celebration of the bull market's fifteenth anniversary on August 12.
Incidentally, the stock market's value is roughly $9 trillion higher today than
it was in the summer of 1982. Ronald Reagan was President at the time and one of
his priorities was to reduce the role of government, thus letting companies
compete in a free market environment. Today, Bill Clinton is President and while
he has largely advocated free markets, we have seen political interests surface
on several fronts recently. The White House, rightly or wrongly, refused to
accept the tobacco settlement crafted by the states (represented by their
Attorneys General), the tobacco companies and public health representatives.
Furthermore, antitrust regulators launched investigations into the business
practices of Microsoft and Intel, suggesting that they have been too successful
for their own good. The Feds also blocked the proposed merger of office supply
superstores Staples and Office Depot. History will pass judgment on the wisdom
of such interventions. Our point is simply to note that the political pendulum
has moved and the market may frown on any further escalation of such
interventions.

- --------------------------------------------------------------------------------
Past performance is no guarantee of future results. The Morningstar rating
reflects historical risk adjusted performance as of September 30, 1997 and is
subject to change every month. Morningstar proprietary ratings are
calculated from the Fund's three, five and ten year average annual returns in
excess of 90-day T-bill returns with appropriate fee adjustments and a risk
factor that reflects fund performance below 90-day T-Bill returns. The top
10% of the funds in an investment category receive five stars and the next
22.5% receive four stars.

<PAGE>

INVESTMENT RESULTS (a)

<TABLE>
<CAPTION>
Quarter
--------------------------------------------------
1st 2nd 3rd 4th Year
------ ------ ------ ------ ------
<C> <C> <C> <C> <C> <C>
1997: Net Asset Value............... $24.50 $29.25 $34.41 -- --
Total Return.................. 1.5% 19.4% 14.2% -- --
- -----------------------------------------------------------------------------------------------
1996: Net Asset Value............... $23.75 $24.34 $25.35 $24.14 $24.14
Total Return.................. 7.2% 2.5% 4.1% 4.4% 19.4%
- -----------------------------------------------------------------------------------------------
1995: Net Asset Value............... $20.86 $22.99 $24.91 $22.16 $22.16
Total Return.................. 6.0% 10.2% 8.4% 4.9% 32.7%
- -----------------------------------------------------------------------------------------------
1994: Net Asset Value............... $21.90 $21.23 $22.58 $19.68 $19.68
Total Return.................. (5.8)% (3.1)% 6.4% (0.5)% (3.4)%
- -----------------------------------------------------------------------------------------------
1993: Net Asset Value............... $21.71 $21.84 $23.43 $23.26 $23.26
Total Return.................. 0.6% 0.6% 7.3% 2.5% 11.3%
- -----------------------------------------------------------------------------------------------
1992: Net Asset Value............... $20.27 $19.72 $20.50 $21.59 $21.59
Total Return.................. (4.7)% (2.7)% 4.0% 8.5% 4.5%
- -----------------------------------------------------------------------------------------------
1991: Net Asset Value............... $18.18 $18.02 $19.51 $21.28 $21.28
Total Return.................. 11.7% (0.9)% 8.3% 12.0% 34.3%
- -----------------------------------------------------------------------------------------------
1990: Net Asset Value............... $16.74 $17.80 $15.75 $16.27 $16.27
Total Return.................. (1.9)% 6.3% (11.5)% 6.2% (2.0)%
- -----------------------------------------------------------------------------------------------
1989: Net Asset Value............... $13.99 $15.73 $17.46 $17.07 $17.07
Total Return.................. 10.6% 12.4% 11.0% 1.5% 40.1%
- -----------------------------------------------------------------------------------------------
1988: Net Asset Value............... $10.87 $12.40 $12.71 $12.65 $12.65
Total Return.................. 16.1% 14.1% 2.5% 2.5% 39.2%
- -----------------------------------------------------------------------------------------------
1987: Net Asset Value............... $10.00 $10.84 $11.28 $9.51 $9.51
Total Return.................. -- 8.4%(b) 4.1% (15.7)% (4.9)%(b)
- -----------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
Dividend History
- -----------------------------------------------------------
Payment (Ex) Date Rate Per Share Reinvestment Price
- ----------------- -------------- ------------------
<S> <C> <C>
December 31, 1996 $2.324 $24.14
December 29, 1995 $3.960 $22.16
December 30, 1994 $2.790 $19.68
December 31, 1993 $0.760 $23.26
December 31, 1992 $0.646 $21.59
December 31, 1991 $0.573 $21.28
December 31, 1990 $0.460 $16.27
December 29, 1989 $0.654 $17.07
December 30, 1988 $0.377 $12.65
January 4, 1988 $0.152 $ 9.58
</TABLE>

AVERAGE ANNUAL RETURNS - SEPTEMBER 30, 1997 (a)

(a) Total returns and average annual returns reflect changes in share price and
reinvestment of dividends and are net of expenses. The net asset value of the
Fund is reduced on the ex-dividend (payment) date by the amount of the dividend
paid. Of course, returns represent past performance and do not guarantee future
results. Investment returns and the principal value of an investment will
fluctuate. When shares are redeemed they may be worth more or less than their
original cost. (b) From commencement of operations on April 10, 1987.

<PAGE>

INVESTMENT RESULTS

For the third quarter ended September 30, 1997, The Gabelli Growth
Fund's total return was 14.2%. The Lipper Analytical Services Growth Fund
Average and Standard & Poor's (S&P) 500 had returns of 10.6% and 7.5%,
respectively, over the same period. Each index is an unmanaged indicator of
investment performance. The Fund is up 38.4% year-to-date. The Lipper Growth
Fund Average and S&P 500 rose 26.6% and 29.6%, respectively, over the same nine
month period.

For the ten year period ended September 30, 1997, the Fund's return
averaged 18.2% annually, versus average annual returns of 13.6% and 14.7% for
the Lipper Growth Fund Average and S&P 500, respectively. Since inception on
April 10, 1987 through September 30, 1997, the Fund has a total return of
501.3%, which equates to an average annual return of 18.7%. Our shareholders
total 40,083 and net assets are $881 million, as of September 30, 1997.

ECONOMIC BACKGROUND

Inflation continues to be contained while the risk of deflation, however
minor, has increased. Tight labor markets have been and continue to be the major
concern of the inflation hawks. This summer's strike against United Parcel
Service by the International Brotherhood of Teamsters is viewed as evidence of
developing labor shortages. While labor may be in short supply, little else is.
Most companies tell us they have little, if any, pricing power. This was prior
to the recent turmoil in Southeast Asia, which has a distinct deflationary
aroma. Gold continues to be treated like an unwelcome social disease (no one
admits to owning any) and interest rates continue to sink lower, albeit
erratically. As for the budget deficit, it's all but gone.

By and large, the economic backdrop for stocks remains positive. Profits
are rising and interest rates (and inflation) are declining. The deflationary
influences of the Southeast Asian slowdown will likely keep our economy from
overheating. The risk of recession is small although profit growth may continue
to decelerate. In short, the U.S. economy is in fine shape and unlikely to be
derailed anytime soon.

FINANCIAL MARKET OBSERVATIONS

The stock market, benefiting from substantial mutual fund inflows,
enjoyed a buoyant July. The market cooled off in August as concerns mounted
regarding currency and market troubles in Asia. Additionally, a reduction in the
capital gains tax rate took effect, leading to stepped-up selling of so called
heirloom stocks such as Coca-Cola, Gillette and Procter & Gamble. Merger and
acquisition activity continued at a feverish pitch, led by financial industry
takeovers such as NationsBank buying Barnett Banks (which we owned) for $15.4
billion in stock and Travelers buying Salomon Brothers (which we did not own)
for $9 billion in stock.

In Southeast Asia, currency speculators throttled the values of
currencies in Thailand, Malaysia, the Philippines, Singapore, Indonesia and
Taiwan. As of this writing, the speculators are challenging the Hong Kong
dollar's peg to the U.S. dollar and this is rattling markets everywhere. We
would be surprised if the market problems in Asia proved fatal to our long
running bull market. However, it has induced a

<PAGE>

correction which is long overdue. When the dust settles, the U.S. currency,
bonds and stocks will look pretty darn comfortable to battle scarred investors
returning from their investment junkets into emerging markets.

LOOKING AHEAD

When the final chapter is written on the stock market this year, much
will be made of a heightened level of price volatility. This price volatility
has increased, but not as smartly in percentage terms. Risk, one of the few four
letter words absent from Wall Street trading rooms until recently, now dominates
investment policy discussions.

The stock market is pretty fairly valued. There is not a lot of room to
further enhance stock valuations. Does it get any better than this? Maybe, if
earnings continue to grow (we think they will) and interest rates continue to
slump (a reasonable forecast). Investors should expect their patience and
commitment to stocks to be tested.

During the third quarter, we increased our exposure to oil service
(adding Smith International) and financial service companies (adding Marsh &
McLennan). We reduced our investment in some old favorites when their valuations
became "uneconomic." This led to the sale of General Electric, ConAgra and
Procter & Gamble. Additionally, we took our gain in Philip Morris as it rose on
settlement talk.

We have complete confidence that the companies we hold can weather any
kind of economic turbulence. Their stock prices fluctuate but their financial
strength and staying power are unquestioned. We will work to take advantage of
market volatility using a careful and methodical stock selection discipline. We
will not "time" the market and we will continue our quest to build the best
established growth company portfolio in the investing world.

LET'S TALK STOCKS

The following are stock specifics on selected holdings of our Fund.
Favorable earnings prospects do not necessarily translate into higher stock
prices, but they do express a positive trend which we believe will develop over
time.

Cisco Systems Inc. (CSCO - $73.0625 - NASDAQ) is the leading manufacturer of
computer networking products. Demand for the company's routers, switches and
network management software is robust. The company can be viewed as a major
supplier to the Information Superhighway. Cisco offers a broad product line
unmatched by competitors in a market that is estimated to be growing by at least
25% annually. The company has no long term debt and earnings should grow by 25%
or more over the next several years.

Compaq Computer Corp. (CPQ - $74.75 - NYSE) is the leading brand of personal
computers in terms of market share. The company is currently growing at three
times its industry's growth rate. About one-half of revenue is sourced from
abroad. Compaq sells through mail order as well as the retail channel. The
company is benefiting from strong demand for PCs on a global scale. We expect
earnings growth to exceed 40% this year.

<PAGE>

First Data Corp. (FDC - $37.5625 - NYSE) is a leading information processing
company. The company benefits from the increase in credit card usage, as it
processes credit and debit card transactions for over 1,400 financial
institutions. In fact, First Data processes roughly one-third of all domestic
credit card transactions. Credit cards are presently used in one of every five
transactions, and we expect them to become even more widely used in the future.
The company is also a leader in funds transfer services, as well as in
processing information for the mutual fund and healthcare industries. First
Data's earnings per share are likely to increase at a modest double digit rate
this year.

Gillette Co. (G - $86.3125 - NYSE), along with Coca-Cola, is a premier example
of a consumer products company that is well-situated to exploit opportunities on
a global basis. The company is aggressively pursuing foreign markets and
developing an impressive number of new products. Earnings should advance by more
than 15% this year, reflecting strong results both domestically and abroad. The
acquisition of Duracell leverages Gillette's infrastructure and provides
additional products to fuel growth.

The Home Depot Inc. (HD - $52.125 - NYSE) is the undisputed leader of the home
improvement warehouse retailers. Led by Bernie Marcus, the company's founder,
Home Depot is testing new store formats which appeal to new markets (farming
equipment and upscale furnishings), providing incremental growth to what remains
a terrific franchise in do-it-yourself home hardware and supplies. Geographic
expansion continues to drive square footage growth as the company increases its
presence in the Midwest and continues to penetrate the Northeast. Home Depot has
substantial international potential over the long term.

The McGraw-Hill Companies Inc. (MHP - $67.6875 - NYSE) is the nation's leading
publisher of textbooks. This business is doing well as Texas and California are
in the midst of new textbook adoption cycles. In financial services, McGraw-Hill
owns Standard and Poor's and management is expanding this franchise abroad. The
company also owns four television stations (ABC Network affiliates) and
publishes BUSINESS WEEK magazine. McGraw-Hill's collection of properties are
valuable indeed. Earnings should grow at about a 13% rate this year.

Mellon Bank Corp. (MEL - $54.75 - NYSE), with the acquisitions in recent years
of Dreyfus and The Boston Company, has become a powerhouse in money management
services. We believe the rising contribution to earnings from predictable fee
sources will enhance the company's valuation. We expect low double-digit growth
in earnings and a continuation of Mellon's share repurchase program this year.
Current business trends are strong.

Merrill Lynch & Co. (MER - $74.1875 - NYSE) has leading positions in almost
every facet of the securities industry. The company is an asset gathering
machine, with over $1 trillion in client accounts and about $275 billion in
assets under their direct management. Management has a strong shareholder
orientation, having retired over 100 million shares of common stock over the
last 10 years. Merrill is a financial services powerhouse well-situated to
handle the swelling savings of the aging baby boomers.

Northern Trust Corp. (NTRS - $59.125 - NASDAQ) is one of a few public asset
managers with a strong franchise in the wealth management market. With over $125
billion in assets under management and fees generating 65% of income, the bank's
stock appears undervalued. Earnings should grow by more than 15% this year.

<PAGE>

Schlumberger Ltd. (SLB - $84.1875 - NYSE) is the leading provider of engineering
services to the oil and gas industries. Fully 75% of sales (approximately $10
billion total) come from non-U.S. customers. The company is the industry leader
in terms of research and development, spending about $300 million annually.
Earnings should grow by more than 40% this year as oil companies increase their
exploration efforts.

MINIMUM INITIAL INVESTMENT - $1,000

The Fund's minimum initial investment for both regular and retirement
accounts is $1,000. There are no subsequent investment minimums. No initial
minimum is required for those establishing an Automatic Investment Plan.

INTERNET

You can now visit us on the Internet. Our home page at
http://www.gabelli.com contains information about Gabelli Funds, Inc., the
Gabelli Mutual Funds, IRAs, 401(k)s, quarterly reports, closing prices and other
current news. You can send us e-mail at [email protected].

The Fund's daily net asset value is available in the financial press and
each evening after 6:00 PM (Eastern Time) by calling 1-800-GABELLI
(1-800-422-3554). The Fund's NASDAQ symbol is GABGX. Please call us during the
business day for further information.

Sincerely,

/s/ Howard F. Ward /s/ Donald C. Jenkins

Howard F. Ward, CFA Donald C. Jenkins, CFA
Portfolio Manager Associate Portfolio Manager

October 25, 1997

<TABLE>
- -------------------------------------------------------------------------------
TOP TEN HOLDINGS
SEPTEMBER 30, 1997

<S> <C>

Mellon Bank Corp. Gillette Co.
Schlumberger Ltd. Northern Trust Corp.
The Home Depot Inc. Cisco Systems Inc.
Merrill Lynch & Co. The McGraw-Hill Companies Inc.
First Data Corp. Compaq Computer Corp.
- -------------------------------------------------------------------------------
</TABLE>

NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period of this report as stated on the cover. The
manager's views are subject to change at any time based on market and other
conditions.

<PAGE>

THE GABELLI GROWTH FUND
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
MARKET
SHARES VALUE
--------- ------------
<C> <S> <C>
COMMON STOCKS -- 96.1 %
ADVERTISING -- 1.0 %
169,050 Interpublic Group of Companies Inc........ $ 8,674,374
------------
BUSINESS SERVICES -- 8.0 %
193,000 Automatic Data Processing Inc............. 9,650,000
193,000 Computer Sciences Corp. +................. 13,654,750
1,032,800 First Data Corp........................... 38,794,550
234,000 Sysco Corp................................ 8,643,375
------------
70,742,675
------------
CONSUMER PRODUCTS -- 8.4 %
166,800 Avon Products Inc......................... 10,341,600
145,000 Coca-Cola Co.............................. 8,835,938
447,400 Gillette Co............................... 38,616,213
222,000 PepsiCo Inc............................... 9,004,875
82,000 Ralston Purina Group...................... 7,257,000
------------
74,055,626
------------
DIVERSIFIED INDUSTRIAL -- 6.1 %
201,200 Allied-Signal Inc......................... 8,551,000
208,000 Honeywell Inc............................. 13,975,000
286,327 Molex Inc., Class A....................... 11,667,825
191,200 Sundstrand Corp........................... 11,017,900
107,000 United Technologies....................... 8,667,000
------------
53,878,725
------------
ENERGY -- 7.6 %
200,000 Halliburton Co............................ 10,400,000
469,000 Schlumberger Ltd.......................... 39,483,938
221,800 Smith International Inc................... 17,231,088
------------
67,115,026
------------
ENTERTAINMENT -- 1.3 %
141,000 Walt Disney Co............................ 11,368,125
------------
FINANCIAL SERVICES -- 25.8 %
100,000 American Express Co....................... 8,187,500
132,000 American International Group Inc.......... 13,620,750
110,000 BankAmerica Co............................ 8,064,375
202,500 Charles Schwab Corp....................... 7,239,375
128,000 Citicorp.................................. 17,144,000
183,000 Marsh & McLennan Companies Inc............ 14,022,375
743,000 Mellon Bank Corp.......................... 40,679,250
525,000 Merrill Lynch & Co........................ 38,948,438
590,000 Northern Trust Corp....................... 34,883,750
119,000 Norwest Corp.............................. 7,288,750
264,400 State Street Corp......................... 16,111,875
300,000 T. Rowe Price Associates Inc.............. 20,175,000
------------
226,365,438
------------

<CAPTION>
MARKET
SHARES VALUE
--------- ------------
<C> <S> <C>
HEALTH CARE -- 11.3 %
131,000 Abbott Laboratories....................... $ 8,375,813
337,000 Johnson & Johnson......................... 19,419,625
80,000 Lilly (Eli) & Co.......................... 9,635,000
215,000 Merck & Co. Inc........................... 21,486,563
118,000 Pfizer Inc................................ 7,087,375
166,000 Schering-Plough Corp...................... 8,549,000
335,000 SmithKline Beecham plc.............. ..... 16,373,125
63,000 Warner-Lambert Co......................... 8,501,063
------------
99,427,564
------------
PUBLISHING -- 6.7 %
175,000 Gannett Co. Inc........................... 18,889,063
342,000 McGraw-Hill Companies Inc................. 23,149,125
160,000 New York Times Co., Class A............... 8,400,000
158,000 Tribune Co................................ 8,423,375
------------
58,861,563
------------
RETAIL -- 5.2 %
753,859 Home Depot Inc............................ 39,294,900
256,000 Walgreen Co............................... 6,560,000
------------
45,854,900
------------
TECHNOLOGY -- 14.7 %
452,000 Cisco Systems Inc. +...................... 33,024,250
295,500 Compaq Computer Corp. +................... 22,088,625
99,000 Computer Associates International Inc..... 7,109,438
215,000 Dell Computer Corp. +..................... 20,828,125
200,000 Intel Corp................................ 18,462,500
66,000 Microsoft Corp. +......................... 8,732,625
232,500 Oracle Corp. +............................ 8,471,719
240,000 Sun Microsystems Inc. +................... 11,235,000
------------
129,952,282
------------
TOTAL COMMON STOCKS.................................... 846,296,298
------------
</TABLE>

PRINCIPAL
AMOUNT
- ---------
<C> <S> <C> <C>

U.S. TREASURY BILL -- 0.0 %
$3,000 4.74%++ due 11/13/97...................... 2,983
------------
TOTAL INVESTMENTS
(Cost $566,980,950)(a).................... 96.1% 846,299,281
OTHER ASSETS AND LIABILITIES (NET).......... 3.9 34,788,830
----- ------------
NET ASSETS
(26,369,008 shares outstanding)........... 100.0% $881,088,111
===== ============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE................ $33.41
======
</TABLE>

- ---------------

(a) Aggregate cost for Federal tax purposes was $567,083,491. Net unrealized
appreciation for Federal tax purposes was $279,215,790 (gross unrealized
appreciation was $279,769,718 and gross unrealized depreciation was
$553,928).
+ Non-income producing security
++ Represents annualized yield at date of purchase.

<PAGE>

THE GABELLI GROWTH FUND
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI [PICTURE OF
[1-800-422-3554] MARIO J. GABELLI]
FAX: 1-914-921-5118
HTTP://WWW.GABELLI.COM
E-MAIL: [email protected]
(Net Asset Value may be obtained daily
by calling
1-800-GABELLI after 6:00 P.M.)

<TABLE>
<S> <C>
BOARD OF TRUSTEES
Mario J. Gabelli, CFA Karl Otto Pohl
Chairman and Chief Former President
Investment Officer Deutsche Bundesbank
Gabelli Funds, Inc.
THE
Felix J. Christiana Anthony R. Pustorino
Former Senior Vice President Certified Public Accountant GABELLI
Dollar Dry Dock Savings Bank Professor, Pace University
GROWTH
Anthony J. Colavita Anthony Torna
Attorney-at-Law Herzog, Heine & Geduld, Inc. FUND
Anthony J. Colavita, P.C.

James P. Conn Anthonie C. van Ekris
Managing Director and Managing Director
Chief Investment Officer BALMAC International, Inc.
Financial Security Assurance
Holdings Ltd.

OFFICERS AND PORTFOLIO MANAGERS
Bruce N. Alpert Howard F. Ward, CFA
President and Treasurer Portfolio Manager
James E. McKee Donald C. Jenkins, CFA
Secretary Associate Portfolio Manager
</TABLE>

DISTRIBUTOR
Gabelli & Company, Inc.

CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT
State Street Bank and Trust Company

LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP

- ---------------------------------------
This report is submitted for the
general information of the shareholders THIRD QUARTER REPORT
of The Gabelli Growth Fund. It is not SEPTEMBER 30, 1997
authorized for distribution to
prospective investors unless preceded
or accompanied by an effective
prospectus.
- ---------------------------------------