<PAGE>
THE GABELLI GROWTH FUND
SEMI-ANNUAL REPORT - JUNE 30, 1997
* * * * *
[PHOTO HOWARD WARD]
TO OUR SHAREHOLDERS:
As a St. Louis Cardinals fan growing up in Indiana, the animated play by
play of baseball announcer Harry Carey remains fresh in my mind. His trademark
"holy cows" were frequent in those days as the Cardinals of Gibson, Brock,
Flood, McCarver and Cepeda were champions. This stock market is a champion too,
and "holy cow" is about the only way to describe this year's second quarter. It
was one of the best ever and came with little warning, like a tornado screaming
across the peaceful farmland of the Midwest, earning the respect of everyone in
its path. It is unexpected surges in the market like those we have just
witnessed that remind us what economists, market timers, bond investors and Wall
Street strategists have in common. None of them are listed among the four
hundred wealthiest Americans according to Forbes magazine. Owning a stake in the
production of goods and services or strategically placed real estate created
most of the wealth in this country.
Without getting too dramatic, the business of America is now the business
of the world. That was no twister screaming across the plains of the Midwest; it
was a freight train called capitalism. The cost of buying an ownership interest
in a company positioned to profit from the global expansion of capitalism has
gone up and for good reason. These multinational companies have superior
long-term earnings visibility. Global capitalism improves the profit outlook for
global companies. In the short run, we would not be surprised to see the stock
market stub its toe. However, we own a collection of America's finest
established global growth companies, and if we stick with them, we will be
rewarded.
INVESTMENT RESULTS
For the second quarter ended June 30, 1997, The Gabelli Growth Fund's
total return was 19.4%. The Lipper Analytical Services Growth Fund Index and
Standard & Poor's (S&P) 500 had returns of 15.8% and 17.5%, respectively, over
the same period. Each index is an unmanaged indicator of stock market
performance. The Fund is up 21.2% year-to-date. The Lipper Growth Fund Index and
S&P 500 rose 14.3% and 20.6%, respectively, over the same six-month period.
For the ten-year period ended June 30, 1997, the Fund's return averaged
17.1% annually, versus average annual returns of 13.1% and 14.6% for the Lipper
Growth Fund Index and S&P 500,
- --------------------------------------------------------------------------------
Gabelli Growth Fund received Morningstar's highest rating -- 5 stars for overall
performance ended 6/30/97. The Fund received five stars for the ten and three
year periods ended 6/30/97 among 1,997 and 618 funds, respectively. The
Morningstar rating reflects historical risk adjusted performance as of 6/30/97
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. The Fund received four stars for the 5-year period ended
6/30/97 among 1,134 funds.
<PAGE>
INVESTMENT RESULTS (a)
<TABLE>
<CAPTION>
Quarter
------------------------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
<S> <C> <C> <C> <C> <C>
1997: Net Asset Value .... $24.50 $29.25 -- -- --
Total Return ....... 1.5% 19.4% -- -- --
- ----------------------------------------------------------------------------------------------------------
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>
Average Annual Returns - June 30, 1997 (a)
------------------------------------------
<S> <C>
1 Year ............................ 31.7%
5 Year ............................ 18.4%
10 Year ............................ 17.1%
Life of Fund (b) ................... 17.6%
</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>
(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.
2
<PAGE>
respectively. Since inception on April 10, 1987 through June 30, 1997, the Fund
has a total return of 426.5%, which equates to an average annual return of
17.6%. Our shareholders total 39,193 and net assets are $750 million, as of June
30, 1997.
ECONOMIC BACKGROUND
Inflation remains contained. This is a critical variable for investors in
all asset classes. Twenty years ago, component suppliers demanded and received
cost of living increases in multi-year production contracts with original
equipment manufacturers. Today, the manufacturers demand and receive from their
suppliers, annual reductions in contract payments to reflect the lack of pricing
power and the competitive business environment. A system that fed inflation in
the seventies has shifted 180 degrees and is now deflationary in practice. The
price of gold, traditionally an inflation hedge, is hitting a twelve year low as
of this writing. We expect the consumer price index to rise less than 3% this
year.
We expect profit growth to be uneven this year and some companies may
disappoint. Nevertheless, we expect few negative surprises over the balance of
the year. Consumer confidence is in record territory, interest rates are
trending down and corporate profitability has rarely, if ever, been higher. The
"not too hot and not too cold" Goldilocks economy with real gross domestic
product growth of about 3% seems likely to continue.
FINANCIAL MARKET OBSERVATIONS
A cooling economy and continued merger and acquisition activity (announced
deals set a record of $366 billion for the first half of the year) propelled
stocks to record highs in the first six months of 1997. Brokerage and money
management firms, primary beneficiaries of the bull market, are hot properties
as both domestic and foreign banks and insurance companies rush to buy market
share. Announced deals this quarter included Bankers Trust buying Alex. Brown,
BankAmerica Co. (BAC - $64.5625 - NYSE) buying Robertson Stephens, NationsBank
buying Montgomery Securities, Zurich Kemper Insurance buying Scudder, Stevens
and Clark and SBC Warburg buying Dillon Read. Additionally, J.P. Morgan is in
talks to purchase a stake in American Century. This trend will continue as the
pressure to gain scale and expertise becomes difficult to ignore, for both buyer
and seller.
LOOKING AHEAD
As we all know, the stock market is a discounting mechanism. Stock prices
reflect future expectations of variables which include inflation, interest rates
and earnings. At about 19 times earnings, the market seems to expect continued
low inflation and some further decline in interest rates. The long Government
bond has a current yield to maturity below 6.6%. Inflation of 3% or less could
indeed support lower bond yields. The market further seems to expect continued
growth in corporate profits. This is likely as the economy has not overheated
and has not created the impetus for a recession and lower profits.
During the second quarter we increased our exposure to technology stocks.
Many of these lagged the market during the first quarter and became deliciously
undervalued. We do not invest in second tier companies. In technology, as
elsewhere, we want to own the leading companies such as Intel Corporation (INTC
- - $141.8125 - Nasdaq), Microsoft Corporation (MSFT - $126.375 - Nasdaq),
3
<PAGE>
Compaq Computer Corp. (CPQ - $99.25 - NYSE), Cisco Systems, Inc. (CSCO - $67.125
- - Nasdaq) and Dell Computer Corporation (DELL - $117.4375 - Nasdaq). Funds were
drawn from the realization of some profits in consumer staples stocks which have
been good performers.
Our long-term investment horizon and focus on global leaders remains
unchanged. We will not engage in market timing and we will always emphasize
companies with superior prospects for growing their earnings. As you know, the
level of the stock market's volatility seems to have increased this year. While
our stocks fluctuate in value like all others, their industry leading positions
lend them a durability from which we take comfort.
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 - $67.125 - 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 - $99.25 - NYSE) is the leading brand of personal
computers in terms of market share. About one half of revenue is sourced from
abroad. The company sells through mail order as well as the retail channel.
Compaq is benefiting from strong demand for PCs on a global scale. We expect
earnings growth to exceed 20% this year.
First Data Corporation (FDC - $43.9375 - 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 approximately 18% this year.
The Home Depot, Inc. (HD - $68.9375 - 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. Longer term,
Home Depot has substantial international potential.
Intel Corporation (INTC - $141.8125 - Nasdaq) is one of the most pronounced
beneficiaries of the growing demand for desktop computing in the office and
personal computers for use in the home. With a
4
<PAGE>
research effort second to none, Intel is likely to remain the primary supplier
of microprocessors to the PC industry. The demand for personal computers remains
robust, driven by the availability of more powerful hardware, namely new Intel
Pentium pro and MMX chips, and more sophisticated and user friendly software
(Windows 95 and Windows NT).
The McGraw-Hill Companies, Inc. (MHP - $58.8125 - 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 Corporation (MEL - $45.125 - NYSE), with the acquisitions in recent
years of Dreyfus Corporation 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.
Merck & Co., Inc. (MRK - $103.50 - NYSE) is one of the world's largest
healthcare companies and a leader in pharmaceutical research and development.
Merck operates the largest of the pharmacy benefit managers, an area that has
produced exceptional growth. Merck's research effort is consistently among the
best. Earnings are likely to rise at a mid double-digit rate this year. We
expect the company to use some of its significant free cash flow to buy back
stock and increase the dividend.
Merrill Lynch & Company (MER - $59.625 - NYSE) has leading positions in almost
every facet of the securities industry. The company is an asset gathering
machine, with over $800 billion in client accounts and about $250 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.
Schlumberger Ltd. (SLB - $125.00 - 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. Earnings should grow by more than 20% 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.
GABELLI U.S. TREASURY MONEY MARKET FUND
Shareholders of any of the Gabelli Funds may invest in The Gabelli U.S.
Treasury Money Market Fund with an initial investment of $3,000 or more. The
Fund provides checkwriting and exchange
5
<PAGE>
privileges. The Fund's expenses are capped at .30% of average net assets, making
it one of the most attractive U.S. Treasury-only money market funds. With
dividends that are exempt from state and local income taxes in all states, the
Fund is an excellent vehicle in which to store idle cash. An investment in The
Gabelli U.S. Treasury Money Market Fund is neither insured nor guaranteed by the
U.S. Government. There can be no assurance that the Fund will maintain a stable
$1 per share net asset value. Call us at 1-800-GABELLI (1-800-422-3554) for a
prospectus which gives a more complete description of the Fund, including
management fees and expenses. Read the prospectus carefully before you invest or
send money.
INTERNET
You can now visit us on the Internet. Our home page at
http://www.gabelli.com contains information about Gabelli Funds, Inc., the
Gabelli Mutual Funds, IRAs, 401(k)s, quarterly reports, closing prices and other
current news. You can send us e-mail at [email protected].
IN CONCLUSION
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
August 1, 1997
TOP TEN HOLDINGS
JUNE 30, 1997
First Data Corporation
The Home Depot, Inc.
Schlumberger Ltd.
Cisco Systems, Inc.
Compaq Computer Corp.
Intel Corporation
Merrill Lynch & Company
Mellon Bank Corporation
Merck & Co., Inc.
The McGraw-Hill Companies, Inc.
NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period of this report as stated on the cover. The
manager's views are subject to change at any time based on market and other
conditions.
6
<PAGE>
THE GABELLI GROWTH FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ----------- ------------ ------------
<C> <S> <C> <C>
COMMON STOCKS--99.0%
ADVERTISING--1.2%
142,700 Interpublic Group of Companies,
Inc. .............................. $ 5,210,789 $ 8,749,294
------------ ------------
AEROSPACE--5.3%
135,600 Allied-Signal Inc. ................. 6,561,184 11,390,400
126,000 Boeing Co. ......................... 3,973,966 6,685,875
191,200 Sundstrand Corp. ................... 6,645,391 10,671,350
130,000 United Technologies................. 5,961,437 10,790,000
------------ ------------
23,141,978 39,537,625
------------ ------------
BUSINESS SERVICES--8.4%
193,000 Automatic Data Processing, Inc. .... 6,354,887 9,071,000
153,000 Computer Sciences Corp.+............ 10,841,408 11,035,125
782,800 First Data Corporation.............. 24,172,699 34,394,275
234,000 Sysco Corp. ........................ 7,119,851 8,541,000
------------ ------------
48,488,845 63,041,400
------------ ------------
CONSUMER PRODUCTS--5.7%
141,800 Avon Products, Inc. ................ 8,706,815 10,005,762
82,400 Gillette Company.................... 3,811,689 7,807,400
140,000 Nike, Inc., Class B................. 8,071,204 8,172,500
165,000 Philip Morris Companies Inc. ....... 3,844,657 7,321,875
35,000 Procter & Gamble Company............ 1,929,000 4,943,750
57,000 Ralston Purina Group................ 2,684,118 4,684,687
------------ ------------
29,047,483 42,935,974
------------ ------------
DIVERSIFIED INDUSTRIAL--6.0%
162,000 Emerson Electric Company............ 7,907,783 8,920,125
115,000 General Electric Company............ 4,151,563 7,518,125
103,000 Honeywell, Inc. .................... 4,933,274 7,815,125
158,000 Illinois Tool Works, Inc. .......... 1,905,805 7,890,125
61,875 Molex Incorporated.................. 1,001,581 2,258,438
306,327 Molex Incorporated, Class A......... 6,497,944 10,683,154
------------ ------------
26,397,950 45,085,092
------------ ------------
ENERGY--5.2%
100,000 Halliburton Company................. 6,889,438 7,925,000
248,000 Schlumberger Ltd. .................. 27,527,217 31,000,000
------------ ------------
34,416,655 38,925,000
------------ ------------
ENTERTAINMENT--1.4%
131,000 Walt Disney Company................. 6,707,003 10,512,750
------------ ------------
FINANCIAL SERVICES--19.4%
105,000 American Express Company............ 3,015,609 7,822,500
88,000 American International Group,
Inc. .............................. 6,175,940 13,145,000
110,000 BankAmerica Co. .................... 2,968,884 7,101,875
136,000 Barnett Banks Inc. ................. 3,123,258 7,140,000
128,000 Citicorp............................ 8,678,516 15,432,000
573,000 Mellon Bank Corporation............. 16,498,954 25,856,625
440,000 Merrill Lynch & Company............. 20,576,254 26,235,000
280,000 Northern Trust Corporation.......... 13,037,355 13,545,000
129,000 Norwest Corporation................. 2,898,809 7,256,250
264,400 State Street Boston Corporation..... 4,037,834 12,228,500
<CAPTION>
MARKET
SHARES COST VALUE
- ----------- ------------ ------------
<C> <S> <C> <C>
FINANCIAL SERVICES (CONTINUED)
195,000 T. Rowe Price Associates Inc. ...... $ 7,299,736 $ 10,066,875
------------ ------------
88,311,149 145,829,625
------------ ------------
FOOD AND BEVERAGE--3.4%
100,000 Coca-Cola Company................... 1,938,813 6,975,000
119,000 ConAgra, Inc. ...................... 5,287,083 7,630,875
292,000 PepsiCo, Inc. ...................... 6,190,013 10,968,250
------------ ------------
13,415,909 25,574,125
------------ ------------
HEALTH CARE--12.5%
146,000 Abbott Laboratories................. 6,175,250 9,745,500
156,000 Amgen Inc.+......................... 5,853,058 9,067,500
112,000 Johnson & Johnson................... 2,158,310 7,210,000
117,000 Lilly (Eli) & Co. .................. 6,879,753 12,789,563
215,000 Merck & Co., Inc. .................. 12,480,756 22,252,500
64,000 Pfizer Inc. ........................ 3,271,763 7,648,000
166,000 Schering-Plough Corporation......... 3,011,085 7,947,250
100,000 SmithKline Beecham plc.............. 7,332,838 9,162,500
63,000 Warner-Lambert Company.............. 3,512,552 7,827,750
------------ ------------
50,675,365 93,650,563
------------ ------------
PUBLISHING--6.8%
175,000 Gannett Co., Inc. .................. 13,105,291 17,281,250
337,000 McGraw-Hill Companies, Inc. ........ 17,738,165 19,819,813
115,000 New York Times Company, Class A..... 5,276,470 5,692,500
168,000 Tribune Co. ........................ 5,233,738 8,074,500
------------ ------------
41,353,664 50,868,063
------------ ------------
RETAIL--5.2%
465,906 Home Depot, Inc. ................... 21,426,989 32,118,395
128,000 Walgreen Co. ....................... 2,478,938 6,864,000
------------ ------------
23,905,927 38,982,395
------------ ------------
TECHNOLOGY--18.5%
429,000 Cisco Systems, Inc.+................ 27,694,342 28,796,625
275,000 Compaq Computer Corp.+.............. 24,111,565 27,293,750
99,000 Computer Associates International,
Inc. .............................. 2,931,924 5,513,062
160,000 Dell Computer Corporation+.......... 12,812,586 18,790,000
188,000 Intel Corporation................... 21,712,360 26,660,750
96,000 Microsoft Corporation+.............. 6,914,538 12,132,000
195,000 Oracle Corp.+....................... 8,684,381 9,823,125
260,000 Sun Microsystems Inc.+.............. 5,254,266 9,676,875
------------ ------------
110,115,962 138,686,187
------------ ------------
TOTAL COMMON STOCKS.............................. 501,188,679 742,378,093
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- ------------
<C> <S> <C> <C>
U.S. TREASURY BILL--1.8%
$ 13,983,000 5.10%++ due 08/14/1997........... 13,897,548 13,897,548
------------ ------------
TOTAL INVESTMENTS..................... 100.8% $515,086,227(a) 756,275,641
============
OTHER ASSETS AND LIABILITIES (NET).... (0.8) (6,322,110)
----- ------------
NET ASSETS............................ 100.0% $749,953,531
===== ============
</TABLE>
- ------------------------------
(a) Aggregate cost for Federal tax purposes was $515,474,319. Gross unrealized
appreciation for Federal tax purposes was $240,801,322.
+ Non-income producing security
++ Represents annualized yield at date of purchase.
See Notes to Financial Statements.
7
<PAGE>
THE GABELLI GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
- -------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $515,086,227)...... $756,275,641
Receivable for investments sold................ 2,984,342
Dividends receivable........................... 581,329
Receivable for Fund shares sold................ 567,574
----------
Total Assets................................. 760,408,886
----------
LIABILITIES:
Due to custodian............................... 5,897,130
Payable for investments purchased.............. 3,294,138
Payable for investment advisory fee............ 613,611
Payable for distribution fees.................. 430,559
Payable for Fund shares redeemed............... 27,711
Accrued expenses and other payables............ 192,206
----------
Total Liabilities............................ 10,455,355
----------
Net assets applicable to 25,635,743 shares of
beneficial interest outstanding............ $749,953,531
==========
NET ASSETS CONSIST OF:
Shares of beneficial interest at par value..... $ 256,357
Additional paid-in capital..................... 445,973,056
Undistributed net investment loss.............. (368,054)
Accumulated net realized gain on investments
sold......................................... 62,902,758
Net unrealized appreciation of investments..... 241,189,414
----------
Total Net Assets............................. $749,953,531
==========
Net Asset Value, offering and redemption price per share
($749,953,531/25,635,743 shares outstanding;
unlimited number of shares authorized of
$0.01 par value)........................... $29.25
=====
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
- -------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income................................ $ 4,199,546
Interest income................................ 346,166
----------
Total Investment Income...................... 4,545,712
----------
EXPENSES:
Investment advisory fee........................ 3,331,994
Distribution fees.............................. 833,023
Shareholder services fees...................... 554,549
Trustees' fees................................. 36,720
Legal and audit fees........................... 27,579
Other.......................................... 177,014
----------
Total Expenses............................... 4,960,879
----------
NET INVESTMENT LOSS.............................. (415,167)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments sold.......... 63,109,735
----------
Net unrealized appreciation of investments:
Beginning of period.......................... 172,976,164
End of period................................ 241,189,414
----------
Change in net unrealized appreciation
of investments........................... 68,213,250
----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS.................................... 131,322,985
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS..................................... $130,907,818
==========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED 6/30/97 ENDED
(UNAUDITED) 12/31/96
------------- ------------
<S> <C> <C>
Net investment income/(loss)...................................................................... $ (415,167) $ 679,911
Net realized gain on investments.................................................................. 63,109,735 53,997,190
Net change in unrealized appreciation of investments.............................................. 68,213,250 49,486,251
------------ ------------
Net increase in net assets resulting from operations.............................................. 130,907,818 104,163,352
Distributions to shareholders from:
Net investment income........................................................................... -- (632,798)
Net realized gain on investments................................................................ -- (53,778,195)
Net increase in net assets from Fund share transactions........................................... 9,640,705 26,611,524
------------ ------------
Net increase in net assets........................................................................ 140,548,523 76,363,883
NET ASSETS:
Beginning of period............................................................................... 609,405,008 533,041,125
------------ ------------
End of period (including undistributed net investment income/(loss) of $(368,054) and $47,113,
respectively)................................................................................... $749,953,531 $609,405,008
============ ============
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
THE GABELLI GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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; if there were no asked
prices quoted on such day, then the security is valued at the closing bid price
on such day. Readily marketable securities traded in the over-the-counter
market, including listed securities whose primary market is believed by the
Advisor to be over-the-counter but excluding securities admitted to trading on
the NASDAQ National List, are valued at the mean of the current bid and asked
prices as reported by NASDAQ, or, in the case of securities not quoted by
NASDAQ, the National Quotation Bureau or other comparable sources as the Board
of Trustees deems appropriate to reflect their fair value. If no asked prices
are quoted on such day, then the security is valued at the closing bid price on
such day. If no bid or asked prices are quoted on such day, then the security is
valued by such method as the Board of Trustees shall determine in good faith to
reflect its fair market value. Portfolio securities traded on more than one
national securities exchange or market are valued according to the broadest and
most representative market, as determined by Gabelli Funds, Inc. (the
"Adviser"). Securities and assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Board of Trustees of the Fund. U.S. government securities and
other debt instruments that mature in 60 days or fewer are valued at amortized
cost, unless the Board of Trustees determines that such valuation does not
constitute fair value. Debt instruments having a greater maturity are valued at
the highest bid price obtained from a dealer maintaining an active market in
those securities or on the basis of prices obtained from a pricing service
approved as reliable by the Board of Trustees.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for on the trade date with realized gain or loss on investments
determined using specific identification as the cost method. Interest income
(including amortization of premium and accretion of discount) is recorded as
earned. Dividend income is recorded on the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders are recorded on the ex-dividend date. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting princi-
9
<PAGE>
THE GABELLI GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
ples. 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 pays the compensation of all officers and Trustees
of the Fund who are its affiliates.
3. DISTRIBUTION PLAN. The Fund has adopted a plan of distribution (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act. Pursuant to this Plan, the
Distributor, Gabelli & Company, Inc. ("Gabelli & Company"), an indirect
wholly-owned subsidiary of the Adviser, is authorized to purchase advertising,
sales literature and other promotional material and to pay its own salespeople.
Effective February 26, 1997, the Fund pays Gabelli & Company as distribution
payments under this Plan, an aggregate amount at a rate of 0.25 percent per year
of the average daily net assets of the Fund each fiscal year. Such payments are
accrued daily and paid monthly. Prior to this change, the Fund reimbursed the
Distributor up to 0.25 percent on an annual basis of the value of the Fund's
average daily net assets based on expenses incurred by the Distributor in
connection with the distribution of shares of the Fund. For the six months ended
June 30, 1997, the Fund incurred distribution costs under the Plan of $833,023,
representing 0.25 percent of the value of the Fund's average daily net assets.
4. PORTFOLIO SECURITIES. Cost of purchases and proceeds from sales of
securities for the six months ended June 30, 1997, other than U.S. government
and short-term securities, aggregated $359,264,787 and $357,669,344,
respectively.
5. TRANSACTIONS WITH AFFILIATES. During the six months ended June 30, 1997, the
Fund incurred brokerage commissions of $3,750 to Gabelli & Company and its
affiliates.
6. SHARES OF BENEFICIAL INTEREST. Transactions in shares of beneficial interest
were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
6/30/97 12/31/96
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold..................................... 17,209,391 $ 452,981,636 18,297,462 $ 445,159,849
Shares issued upon reinvestment of dividends.... -- -- 2,151,430 51,935,527
Shares redeemed................................. (16,823,482) (443,340,931) (19,258,689) (470,483,852)
------------ ------------- ------------ -------------
Net increase.................................... 385,909 $ 9,640,705 1,190,203 $ 26,611,524
============ ============= ============ =============
</TABLE>
10
<PAGE>
THE GABELLI GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Per share amounts for a Fund share outstanding throughout each period.
<TABLE>
<CAPTION>
SIX
MONTHS YEAR ENDED
ENDED DECEMBER 31,
6/30/97 --------------------------------------------------------
(UNAUDITED) 1996 1995 1994 1993 1992
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of
period............................ $ 24.14 $ 22.16 $ 19.68 $ 23.26 $ 21.59 $ 21.28
-------- -------- -------- -------- -------- --------
Net investment income (loss)........ (0.02) 0.03 0.05 0.07 0.06 0.08
Net realized and unrealized
gain/(loss) on investments........ 5.13 4.27 6.39 (0.86) 2.37 0.88
-------- -------- -------- -------- -------- --------
Total from investment operations.... 5.11 4.30 6.44 (0.79) 2.43 0.96
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............. -- (0.02) (0.05) (0.08) (0.05) (0.09)
Distributions in excess of net
investment income............... -- -- -- (0.01) -- --
Net realized gains................ -- (2.30) (3.91) (2.39) (0.67) (0.56)
Distributions in excess of net
realized gains.................. -- -- -- (0.31) (0.04) --
-------- -------- -------- -------- -------- --------
Total distributions................. -- (2.32) (3.96) (2.79) (0.76) (0.65)
-------- -------- -------- -------- -------- --------
Net asset value, end of period...... $ 29.25 $ 24.14 $ 22.16 $ 19.68 $ 23.26 $ 21.59
======== ======== ======== ======== ======== ========
Total return*....................... 21.2% 19.4% 32.7% (3.4)% 11.3% 4.5%
======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in
000's)............................ $ 749,954 $609,405 $533,041 $482,471 $695,013 $625,050
Ratio of net investment income
(loss) to average net assets.... (0.12)%+ 0.12% 0.22% 0.31% 0.22% 0.46%
Ratio of operating expenses to
average net assets.............. 1.49%+ 1.43% 1.44% 1.36% 1.41% 1.41%
Portfolio turnover rate............. 54.5% 88.2% 140.2% 40.3% 80.7% 45.9%
Average commission rate (per share
of security)(a)................... $ 0.0505 $ 0.0500 N/A N/A N/A N/A
</TABLE>
- ---------------
<TABLE>
<C> <S>
* Total return represents aggregate total return of a hypothetical $1,000 investment at the beginning
of the period and sold at the end of the period including reinvestment of dividends. Total return for
the period of less than one year is not annualized.
+ Annualized.
(a) Average commission rate (per share of security) as required by amended SEC disclosure requirements
effective for fiscal years beginning after September 1, 1995.
</TABLE>
11
<PAGE>
THE GABELLI GROWTH FUND
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
FAX: 1-914-921-5118
HTTP://WWW.GABELLI.COM
E-MAIL: [email protected]
(Net Asset Value may be obtained daily by calling
1-800-GABELLI after 6:00 P.M.)
<TABLE>
<S> <C>
BOARD OF TRUSTEES
Mario J. Gabelli, CFA Karl Otto Pohl
Chairman and Chief Former President
Investment Officer Deutsche Bundesbank
Gabelli Funds, Inc.
Felix J. Christiana Anthony R. Pustorino
Former Senior Vice President Certified Public Accountant
Dollar Dry Dock Savings Bank Professor, Pace University
Anthony J. Colavita Anthony Torna
Attorney-at-Law Herzog, Heine & Geduld, Inc.
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
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 L.L.P.
- -------------------------------------------------------------
This report is submitted for the general information of the shareholders of The
Gabelli Growth Fund. It is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective prospectus.
- -------------------------------------------------------------
[PHOTO]
THE
GABELLI
GROWTH
FUND
SEMI-ANNUAL REPORT
JUNE 30, 1997
