<PAGE>
THE GABELLI GROWTH FUND
ANNUAL REPORT - DECEMBER 31, 1996
[Picture of Howard F. Ward]
TO OUR SHAREHOLDERS:
The election came and went. The reigning system of checks and balances, to
which Wall Street has become partial, was endorsed by voters yet again. In
portfolio management terms, the Government remains diversified with the
Republicans running Congress and the Democrats holding down the White House.
Diversification, we know, reduces risk. The American public sees no compelling
reason to change what has been a relatively successful power sharing
arrangement. After all, the economy is growing, inflation and unemployment are
low and capitalism is thriving the world over. What's more, we are not
militarily engaged. These are special times and many American companies are
standing tall on the so-called "bridge to the twenty-first century."
For the past two years, we have counseled shareholders to be long-term
investors and avoid the temptation to "time" the market. While we are not
changing our advice, we note with more than passing interest some developments -
other than stock market valuations - that make us think twice about our love
affair with stocks. For example, it took ten years but Wall Street employment
finally surpassed the record set in 1987, before the tide went out that October.
Additionally, a New York Stock Exchange "seat" recently sold for a record $1.45
million. What's more, there are more registered hedge funds (4,700) than there
are stocks listed on the New York Stock Exchange (3,419). How about the recent
New York Times magazine cover story about a mutual fund manager who signs
autographs. At least he wasn't charging for them. Of greater interest, the
measured chairman of the Federal Reserve Board, Alan Greenspan, expressed
concern regarding the stock market's "irrational exuberance." He seems to desire
a cooling off of share prices. Furthermore, the Government is giving serious
consideration to investing Social Security funds in the stock market. It's not a
bad idea. The timing, however, is incredible. Can a social security hedge fund
be far behind? As for the price of oil, it recently sold at a six year high.
Rising oil prices in 1973, brought on by the OPEC embargo, proved hostile to
stocks and investors. Will the recent rise prove lasting?
<PAGE>
<TABLE>
INVESTMENT RESULTS (a)
- ---------------------------------------------------------------------------------------
<CAPTION>
Quarter
-----------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
<S> <C> <C> <C> <C> <C>
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>
Average Annual Returns - December 31, 1996 (a)
- ----------------------------------------------
<S> <C>
1 Year ..................... 19.4%
5 Year ..................... 12.2%
Life of Fund (b) ........... 16.3%
</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) Average annual and total 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.
- -------------------------------------------------------------------------------
The financial markets are indeed flush with and loating on an ocean of
liquidity. We do not know, nor does anyone, how long this will last. The advance
in share prices the last two years has increased the risk of owning stocks.
Don't be surprised if your tolerance for volatility and long-term commitment to
stocks are tested this year. We stress that we are not forecasting a decline in
the market. Forecasting the direction of the market in the short run reduces the
serious business of investing to a casual flip of a coin. However, stock market
returns over the last two years easily exceed the historical average which
hovers around 10%. Over time, a regression to this average rate of advance is
highly likely. Of course, the timing and path of such a regression are unknowns.
2
<PAGE>
INVESTMENT RESULTS
For the three months ended December 31, 1996, The Gabelli Growth Fund's
total return was 4.4% after adjusting for the $2.324 per share dividend paid on
December 31, 1996. This compares to the average return for 777 growth funds of
5.1% for the quarter according to Lipper Analytical Services. The unmanaged
Standard and Poor's 500 Index return was 8.3% over the same period. For 1996,
the Fund's total return was 19.4% versus 23.0% for the S&P 500.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI GROWTH FUND AND THE S&P 500 INDEX
[Graph of Gabelli Growth Fund and S&P 500 Index]
*Past performance is not predictive of future performance.
The Fund's total return since inception on April 10, 1987 is 334.5%, which
equates to an average annual return of 16.3%. This compares favorably to a total
return of 222.9% for the S&P 500 over the same period, which is equivalent to an
average annual return of 12.8%. Our shareholders total 39,495 and net assets are
$609.4 million, as of December 31, 1996.
ECONOMIC BACKGROUND
Economists are having a tough time interpreting the economy's mixed
signals. There is a wide range of possible outcomes for the economy given the
latest goulash of economic data. Pity the submarine's crew whose sonar person is
dealt such a baffling brew of beeps, blips and pings.
You may recall that real Gross Domestic Product (GDP) growth slowed in the
third quarter of 1996 to 2.1% from 4.7% in the second quarter. It now appears as
if growth accelerated somewhat in the fourth quarter. While the final number is
not yet known, our current expectation is real GDP growth of about 3.5%.
Factors suggesting stronger growth included rising consumer confidence
(reaching a seven year high), construction spending, interest rates, purchasing
managers index and nonfarm payrolls. Signs pointing to slower growth included
housing starts, auto sales, retail sales, gold, consumer delinquency rates, and
initial claims for state unemployment insurance.
Importantly, the "core" consumer price index (CPI) growth rate (excludes
food and energy) actually declined last year, rising 2.6% versus 3.0% in 1995.
Including food and energy, the CPI rose 3.3%, compared to 2.5% in 1995. We
expect inflation will remain around 3% in 1997. The wild cards are energy prices
and wage rates.
[CAPTION]
4/10/87 12/87 12/88 12/89 12/90 12/91
[S] [C] [C] [C] [C] [C] [C]
Gabelli Growth Fund $10,000 $9,510 $13,238 $18,546 $18,175 $24,409
S&P 500 Index $10,000 $8,490 $9,891 $13,016 $12,612 $16,459
12/92 12/93 12/94 12/95 12/96
[S] [C] [C] [C] [C] [C]
Gabelli Growth Fund $25,507 $28,389 $27,424 $36,380 $43,449
S&P 500 Index $17,282 $19,027 $19,274 $26,521 $32,289
3
<PAGE>
Some of you will recall the hoopla surrounding the U.S. budget deficit in
the eighties and early nineties. We remember all sorts of horrific tales about
how we were doomed to become a second or third rate economic power. Our debt
would consume us and the Japanese and the Germans would throttle us with their
superior economic engines. How could so many smart people be so wrong? Of
course, if forecasting was easy, then we would all be too rich to work. The
deficit has declined by approximately $200 billion (to $125 billion) since 1992
and stands at a tolerable 1.6% of GDP. The U.S. economy is shining while much of
Europe and Japan is stuck in neutral. According to the Geneva-based
International Labor Organization, a United Nations affiliate, European
unemployment is above 11% (versus 5.5% here). In fact, they estimate global
unemployment at 30%, or about 1 billion people. This bodes well for limiting
upward pressure on wage rates in industries with the option of shifting
production offshore.
All in all, 1997 should be another year of modest real GDP growth (2 to
3%), inflation (2 to 3%) and unemployment (5 to 6%). The stock market will focus
on profit growth and that's likely to be modest too (5 to 10%). To be sure,
there will be surprises, both good and bad.
FINANCIAL MARKET OBSERVATIONS
Buyers of equities continue to exhibit a greater sense of urgency than
sellers, resulting in share prices hitting new highs. Mutual fund demand
exceeded 1995's record by about $100 billion. Approximately $220 billion flowed
into equity funds. Importantly, this eclipsed the $114 billion of new stock
issuance, itself a record. Clearly, a decline in positive mutual fund flows
would create a challenge for the market, particularly if stock issuance
continues to be strong. However, as of this writing, mutual fund flows continue
at a healthy pace. Domestic mergers of $659 billion (versus $519 billion in
1995) contributed to the apparent supply/demand imbalance although many of these
deals were done with stock and not cash. Globally, $1.14 trillion (versus $950
billion in 1995) of mergers were announced. Today's mergers are driven by
strategic business decisions and not the financial engineering made popular in
the eighties. While the role of mergers in reducing the equity supply has
lessened (since more deals are being done with stock), they nevertheless provide
psychological support for current valuation levels.
Some market observers, including more than a few that bailed out of the
market too soon, feel that stocks are demonstrably overvalued based on various
valuation criteria. Can a case be made for reasonable doubt? Yes. The market
sells for about 17 times expected 1997 earnings. This does exceed the average
price-earnings multiple historically, which is about 14. However, a PE of 17 is
about average during a business expansion with 3% inflation and growing profits.
We know the dividend yield on the market, at about 1.9%, is the lowest level
this century. However, the real dividend yield (adjusted for inflation) is
approximately -1.0%. It was similar, in fact lower, from 1987 through 1991, and
also from 1973 to 1982, when inflation was high. Additionally, companies are
paying out a record low level of earnings and are instead reinvesting cash into
their businesses and buying back stock which avoids the double taxation levied
on dividends. In other words, they have the means to pay out much more but have
chosen to use their cash for alternative purposes. It is worth noting that if
the consumer price index is overstated, as is now widely believed, then the real
dividend yield and price earnings ratio fare even better. What about the high
level of price-to-book value ratios? This criteria is not material unless you
expect to liquidate a company and sell off the assets. We invest in growth
stocks to buy a stream of earnings and not to liquidate the factories. Besides,
the stated book values are perhaps conservative given the numerous write-offs in
recent years. What about the high level of stock market capital relative
4
<PAGE>
to GDP? This fails to account for the large contribution to earnings from
foreign sources. This is especially true for many of our global companies. What
about Tobin's Q Ratio and the notion that stocks are selling for more than
underlying replacement values? This fails to account for the value of
intangibles. Isn't the Coca-Cola brand name worth something? Would a new cola
company get any shelf space? What about the value of a patent? What about the
many management and creative issues? It takes much more than capital to create
an Intel, Microsoft, Coca-Cola or Merck.
We are not trying to argue that stocks are cheap. We don't believe that
either. We are trying to illustrate the underlying complexity of the market's
personality. Perhaps the "exuberance" is not so "irrational." We make money by
finding good companies with healthy long-term prospects and defensible
valuations and not by divining the future course of stock prices in general.
Given existing economic fundamentals, our earnings valuation model suggests that
large cap growth stocks are close to fairly valued, some more so than others.
A number of our financial service stocks were strong in the fourth quarter,
led by T. Rowe Price (+34%). Other stand-outs included American Express (+22%),
Barnett Banks (+22%), BankAmerica (+21%), Mellon Bank (+20%), State Street Bank
(+13%) and Citicorp (+12%). Among our technology holdings, Intel (+37%),
Microsoft (+25%) and IBM (+22%) led the quarter's advance. Consumer oriented
stocks that excelled included Philip Morris (+26%), Procter & Gamble (+10%) and
Disney (+10%). We should also note the strong advance of healthcare companies
Warner Lambert (+14%), Merck (+13%), and Eli Lilly (+13%). Finally, aerospace
suppliers such as Boeing (+13%), Textron (+11%) and United Technologies (+10%)
made a positive contribution to performance.
LOOKING AHEAD
In last quarter's report we stated, "with the stock market in record high
territory, we must become increasingly selective and valuation conscious." True
to our word, we have culled the portfolio of the more marginal holdings,
reducing the number of companies in the portfolio from 94 to 75. Going forward,
we expect to continue to hold about 75 names.
You may recall that our largest exposure from an industry sector viewpoint
has been financial services. We have experienced substantial appreciation in
most of our investments in this area. With a strong fourth quarter, our
investment in financials peaked at year end at just over 22% of total portfolio
assets. This is higher than our general 20% maximum sector limit. We will
carefully realize some gains in this sector, investing sale proceeds elsewhere,
so that the portfolio is not overly dependent on any one industry group.
Providing meaningful diversification is an important part of our portfolio
management role.
The strategic direction of the portfolio remains largely unchanged. We
continue to favor global consumer brands (Gillette, Coca-Cola, Pepsi-Cola,
Philip Morris, Nabisco Holdings and McDonald's), leading financial service
providers (Citicorp, American International Group, Mellon Bank, American
Express, State Street Boston and Wells Fargo), global pharmaceutical companies
(Johnson & Johnson, Merck, Warner Lambert and Eli Lilly), technology platform
owners (Intel, Microsoft, Sun Microsystems, Hewlett-Packard), information
technology managers (First Data Corp., Reuters, Computer Sciences Corp.,
Electronic Data Systems), aerospace suppliers (General Electric, United
Technologies, Allied Signal, Honeywell and Sundstrand) and media content
franchises (Disney, Gannett and Tribune). Within retailing, we continue to
believe that Home Depot is substantially undervalued.
5
<PAGE>
When all is said and done, the outlook for the stock market is favorable,
given our expectations for 3% inflation, sub 7% bond yields, growing corporate
profits and a declining budget deficit. If we keep our expectations down,
knowing that stocks are not "cheap," then perhaps we will be pleasantly
surprised. We continue to believe the Fund is well-positioned in a diversified
portfolio of America's finest established growth companies and we ask you to
view The Gabelli Growth Fund as a long-term investment vehicle.
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.
FIRST DATA CORPORATION (FDC - $36.50 - 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, the company processes roughly one-third of all domestic
credit card transactions. Credit cards are presently used in one of every five
transactions. We expect credit cards 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 20% this year.
GENERAL ELECTRIC COMPANY (GE - $98.875 - NYSE) stands among the world's largest
and most profitable industrial concerns. As a company with a global footprint,
GE is a primary beneficiary of higher levels of trade overall and growth in the
emerging markets in particular. GE's varied businesses include financial
services (through General Electric Capital Corporation), broadcasting (through
the NBC Television Network) and jet engines. The company is also a leader in
home appliances and industrial power systems. Earnings and dividends should hit
record levels in 1997 and the shares should continue to benefit from ongoing
share buy backs. The company has one of the best management teams in the
corporate world.
GILLETTE COMPANY (G - $77.75 - NYSE), along with Coca Cola, is a premier example
of a consumer 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 just completed
acquisition of Duracell leverages the company's infrastructure and provides
additional products to fuel growth.
THE HOME DEPOT, INC. (HD - $50.125 - 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. Higher lumber
prices and housing turnover point to a reacceleration of earnings growth this
year. Longer term, the company has substantial international potential.
INTEL CORPORATION (INTC - $130.9375 - 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
6
<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).
MELLON BANK CORPORATION (MEL - $71.00 - 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 the company's share
repurchase program this year. Current business trends are strong.
MERCK & CO., INC. (MRK - $79.25 - 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.
PHILIP MORRIS COMPANIES INC. (MO - $113.50 - NYSE) is a leading consumer
products company concentrating on tobacco (44% of revenues), food (49% of
revenues) and beverages (6% of revenues). The company's Marlboro brand commands
about a 30% share of the domestic cigarette market and Miller beer is number two
(behind Anheuser Busch) in its market. Food brands include Jell-O, Kool-Aid,
Kraft, Sealtest and Post cereals. The company generates significant amounts of
excess cash which is used to repurchase stock and to support a healthy and
rising dividend payment to shareholders. We expect earnings per share to rise at
a high teen rate this year. We believe the likelihood of a legislated settlement
regarding product liability has increased.
STATE STREET BOSTON CORPORATION (STT - $64.50 - NYSE) is the nation's largest
custodian of mutual fund assets. Total assets under custody are approaching $3
trillion. The company is also one of the nation's largest asset managers with a
strong presence in passive management products for institutional investors.
Management is focused on expanding the company's global presence and
continuously updating information systems technology to gain competitive
advantages. We view State Street Boston as an excellent vehicle to gain exposure
to the ongoing growth in institutional funds management and custody.
WELLS FARGO & COMPANY (WFC - $269.75 - NYSE) is a holding company for The Wells
Fargo Bank, one of the nation's largest banking organizations. Wells Fargo
acquired First Interstate Bancorp. last year, further extending its market share
in the West. The management of Wells Fargo is among the best in the business.
The company is routinely among the most profitable banking groups. Management is
attacking costs aggressively, freeing up capital that will be used to buy back
stock. With much of its business based in California, the bank should benefit
from an improving California economy over the balance of this year.
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.
7
<PAGE>
GABELLI U.S. TREASURY MONEY MARKET FUND
Shareholders of any of the Gabelli Funds may invest in The Gabelli U.S.
Treasury Money Market Fund with an initial investment of $3,000 or more. The
Fund provides checkwriting and exchange privileges. The Fund's expenses are
capped at .30% of average net assets, making it one of the most attractive U.S.
Treasury-only money market funds. With dividends that are exempt from state and
local income taxes in all states, the Fund is an excellent vehicle in which to
store idle cash. An investment in The Gabelli U.S. Treasury Money Market Fund is
neither insured nor guaranteed by the U.S. Government. There can be no assurance
that the Fund will maintain a stable $1 per share net asset value. Call us at
1-800-GABELLI (1-800-422-3554) for a prospectus which gives a more complete
description of the Fund, including management fees and expenses. Read it
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, quarterly reports, closing prices, IRAs, 401(k)s and other
current news. You can also 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
day for further information.
Sincerely,
HOWARD F. WARD, CFA DONALD C. JENKINS, CFA
Portfolio Manager Associate Portfolio Manager
February 3, 1997
-------------------------------------------------------------------
TOP TEN HOLDINGS
DECEMBER 31, 1996
-----------------
Wells Fargo & Company Intel Corporation
Home Depot, Inc. Gillette Company
Mellon Bank Corporation State Street Boston Corporation
First Data Corporation Philip Morris Companies Inc.
General Electric Company Merck & Co., 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.
8
<PAGE>
THE GABELLI GROWTH FUND
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ---------- ------------- -------------
<C> <S> <C> <C>
COMMON STOCKS -- 100.0%
ADVERTISING -- 1.0%
132,700 Interpublic Group of
Companies............ $ 4,706,539 $ 6,303,250
------------- -------------
AEROSPACE -- 9.6%
150,600 Allied-Signal Inc...... 7,541,935 10,090,200
78,000 Boeing Co.............. 5,445,376 8,297,250
113,000 Honeywell, Inc......... 5,483,300 7,429,750
100,400 Lockheed Martin
Corp................. 8,510,444 9,186,600
196,200 Sundstrand Corp........ 6,812,261 8,338,500
62,000 Textron Inc............ 4,973,137 5,843,500
138,000 United Technologies.... 6,454,263 9,108,000
------------- -------------
45,220,716 58,293,800
------------- -------------
BROADCASTING -- 0.9%
157,000 Infinity Broadcasting
Corp., Class A+...... 3,428,475 5,335,841
------------- -------------
BUILDING AND CONSTRUCTION -- 1.2%
112,000 Fluor Corporation...... 5,675,022 7,028,000
------------- -------------
BUSINESS SERVICES -- 9.2%
188,000 Automatic Data
Processing, Inc...... 6,145,262 8,060,500
153,500 Ceridian
Corporation +........ 5,945,828 6,216,750
98,000 Computer Sciences
Corp. +.............. 7,107,307 8,048,250
142,000 Electronic Data Systems
Corp................. 6,202,225 6,141,500
524,800 First Data
Corporation.......... 14,758,099 19,155,200
40,000 Reuters Holdings plc,
Class B, ADR......... 1,742,178 3,060,000
174,000 Sysco Corporation...... 5,148,726 5,676,750
------------- -------------
47,049,625 56,358,950
------------- -------------
CONGLOMERATES -- 4.5%
182,000 General Electric
Company.............. 12,222,905 17,995,250
172,000 General Motors
Corporation, Class
H.................... 7,419,389 9,675,000
------------- -------------
19,642,294 27,670,250
------------- -------------
CONSUMER PRODUCTS -- 16.6%
110,000 Coca-Cola Company...... 2,134,737 5,788,750
119,000 ConAgra, Inc........... 5,287,083 5,920,250
100,000 Duracell International
Inc.................. 4,120,676 6,987,500
102,000 General Mills, Inc..... 5,585,188 6,464,250
202,000 Gillette Company....... 6,925,091 15,705,500
60,000 Kimberly-Clark
Corporation.......... 4,774,512 5,715,000
333,700 Nabisco Holdings Corp.,
Class A.............. 9,696,885 12,972,587
<CAPTION>
MARKET
SHARES COST VALUE
- ---------- ------------- -------------
<C> <S> <C> <C>
4,000 Nestle Corporation,
ADR.................. $ 217,750 $ 213,750
337,000 PepsiCo, Inc........... 7,007,438 9,857,250
133,000 Philip Morris Companies
Inc.................. 10,514,755 15,095,500
80,000 Procter & Gamble
Company.............. 4,837,651 8,600,000
57,000 Ralston Purina Group... 2,684,118 4,182,375
20,000 Unilever N.V., ADR..... 3,412,750 3,505,000
------------- -------------
67,198,634 101,007,712
------------- -------------
DIVERSIFIED INDUSTRIAL -- 3.1%
78,000 Emerson Electric
Company.............. 7,706,663 7,546,500
79,000 Illinois Tool Works,
Inc.................. 1,905,805 6,310,125
61,000 Minnesota Mining and
Manufacturing
Company.............. 4,734,425 5,055,375
------------- -------------
14,346,893 18,912,000
------------- -------------
ENTERTAINMENT -- 2.4%
18,000 Viacom Inc., Class
A +.................. 607,725 621,000
107,000 Viacom Inc., Class
B +.................. 4,747,665 3,731,625
146,000 Walt Disney Company.... 7,617,440 10,165,250
------------- -------------
12,972,830 14,517,875
------------- -------------
FINANCIAL SERVICES -- 22.3%
113,000 American Express
Company.............. 3,246,840 6,384,500
83,000 American International
Group, Inc........... 5,588,328 8,984,750
61,000 Associates First
Capital Corporation.. 2,079,677 2,691,625
71,000 Bancorp Hawaii Inc..... 2,584,820 2,982,000
99,000 BankAmerica Corp....... 5,402,735 9,875,250
232,000 Barnett Banks Inc...... 5,365,851 9,541,000
120,000 Citicorp............... 7,157,356 12,360,000
58,000 General Re
Corporation.......... 7,981,725 9,149,500
270,000 Mellon Bank
Corporation.......... 12,565,645 19,170,000
146,000 Norwest Corporation.... 3,254,656 6,351,000
240,400 State Street Boston
Corporation.......... 8,077,615 15,505,800
45,000 Swiss Reinsurance
Company, Sponsored
ADR.................. 2,447,500 2,362,500
224,000 T. Rowe Price
Associates Inc....... 5,744,497 9,744,000
77,499 Wells Fargo &
Company.............. 19,024,667 20,905,355
------------- -------------
90,521,912 136,007,280
------------- -------------
HEALTH CARE -- 9.8%
151,000 Abbott Laboratories.... 6,392,500 7,663,250
81,000 Amgen Inc. +........... 1,471,631 4,404,375
102,000 Chirex Inc. +.......... 1,326,000 1,224,000
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
THE GABELLI GROWTH FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ---------- ------------- -------------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
HEALTH CARE (CONTINUED)
132,000 Johnson & Johnson...... $ 2,553,423 $ 6,567,000
76,000 Lilly (Eli) & Co....... 2,681,926 5,548,000
183,000 Merck & Co., Inc....... 9,486,031 14,502,750
66,000 Pfizer Inc............. 3,377,038 5,469,750
88,000 Schering-Plough
Corporation.......... 3,196,641 5,698,000
115,000 Warner-Lambert
Company.............. 6,653,251 8,625,000
------------- -------------
37,138,441 59,702,125
------------- -------------
PUBLISHING -- 2.1%
75,000 Gannett Inc............ 5,053,753 5,615,625
94,000 Tribune Co............. 5,925,363 7,414,250
------------- -------------
10,979,116 13,029,875
------------- -------------
RESTAURANTS -- 0.8%
114,000 McDonald's
Corporation.......... 3,651,763 5,158,500
------------- -------------
RETAIL -- 4.8%
383,906 Home Depot, Inc........ 17,116,163 19,243,297
170,000 Mattel, Inc............ 3,290,577 4,717,500
128,000 Walgreen Co............ 2,478,937 5,120,000
------------- -------------
22,885,677 29,080,797
------------- -------------
TECHNOLOGY -- 11.2%
130,000 Computer Associates
International,
Inc.................. 4,386,039 6,467,500
138,000 Hewlett-Packard Co..... 5,290,042 6,934,500
136,000 Intel Corporation...... 13,475,924 17,807,500
95,500 International Business
Machines
Corporation.......... 11,027,723 14,420,500
76,000 Microsoft
Corporation +........ 4,611,234 6,279,500
<CAPTION>
MARKET
SHARES COST VALUE
- ---------- ------------- -------------
49,500 Molex Incorporated..... $ 1,001,581 $ 1,936,688
245,062 Molex Incorporated,
Class A.............. 6,497,944 8,730,335
210,000 Sun Microsystems
Inc. +............... 3,297,565 5,394,375
------------- -------------
49,588,052 67,970,898
------------- -------------
TELECOMMUNICATIONS -- 0.5%
25,000 Globalstar
Telecommunications +... 500,000 1,575,000
80,000 Loral Space &
Communications
Ltd. +............... 940,000 1,470,000
------------- -------------
1,440,000 3,045,000
------------- -------------
TOTAL COMMON STOCKS................. 436,445,989 609,422,153
------------- -------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- -----------
<C> <S> <C> <C>
U.S. TREASURY BILLS -- 3.3%
$20,024,000 4.914% to
4.924%++ due
02/13/1997 -
02/20/1997.... 19,907,623 19,907,623
------------ ------------
TOTAL INVESTMENTS.......... 103.3% $456,353,612(a) 629,329,776
============
OTHER ASSETS AND
LIABILITIES (NET)........ (3.3) (19,924,768)
----- ------------
NET ASSETS................. 100.0% $609,405,008
===== ============
</TABLE>
- ---------------
(a) Aggregate cost for Federal tax purposes was $457,042,355. Net unrealized
appreciation for Federal tax purposes was $172,287,421 (gross unrealized
appreciation was $173,715,349 and gross unrealized depreciation was
$1,427,928).
+ Non-income producing security
++ Represents annualized yield at date of purchase.
ADR -- American Depositary Receipt
See Notes to Financial Statements.
10
<PAGE>
THE GABELLI GROWTH FUND
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
- -------------------------------------------------------
<S> <C>
ASSETS:
Investments, at value (Cost
$456,353,612)....................... $ 629,329,776
Cash.................................. 816,498
Dividends receivable.................. 800,574
Receivable for Fund shares sold....... 552,927
-------------
Total Assets........................ 631,499,775
-------------
LIABILITIES:
Payable for Fund shares redeemed...... 16,563,856
Dividend payable...................... 2,473,376
Payable for investments purchased..... 2,290,225
Payable for investment advisory fee... 534,093
Payable for distribution fees......... 230,600
Accrued expenses and other payables... 2,617
-------------
Total Liabilities................... 22,094,767
-------------
Net assets applicable to 25,249,834
shares of beneficial interest
outstanding....................... $ 609,405,008
=============
NET ASSETS CONSIST OF:
Shares of beneficial interest at par
value............................... $ 252,498
Additional paid-in capital............ 436,336,210
Distributions in excess of net
realized gain on investments........ (206,977)
Undistributed net investment income... 47,113
Net unrealized appreciation of
investments......................... 172,976,164
-------------
Total Net Assets.................... $ 609,405,008
=============
Net Asset Value, offering and
redemption price per share
($609,405,008 / 25,249,834 shares
outstanding; unlimited number of
shares authorized of $0.01 par
value).............................. $24.14
======
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
- -------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Dividend income....................... $ 8,449,263
Interest income....................... 568,231
-------------
Total Investment Income............. 9,017,494
-------------
EXPENSES:
Investment advisory fee............... 5,831,475
Distribution fees..................... 1,457,893
Shareholder services fees............. 602,272
Trustees' fees........................ 78,643
Legal and audit fees.................. 40,300
Other................................. 327,000
-------------
Total Expenses...................... 8,337,583
-------------
NET INVESTMENT INCOME................... 679,911
-------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain on investments
sold................................ 53,997,190
-------------
Net unrealized appreciation of
investments:
Beginning of year................... 123,489,913
End of year......................... 172,976,164
-------------
Change in net unrealized
appreciation of investments..... 49,486,251
-------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS........................... 103,483,441
-------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS....................... $ 104,163,352
=============
</TABLE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR YEAR
ENDED ENDED
12/31/96 12/31/95
------------ ------------
<S> <C> <C>
Net investment income........................................................................ $ 679,911 $ 1,117,828
Net realized gain on investments............................................................. 53,997,190 80,758,385
Net change in unrealized appreciation of investments......................................... 49,486,251 58,094,733
------------ ------------
Net increase in net assets resulting from operations......................................... 104,163,352 139,970,946
Distributions to shareholders from:
Net investment income.................................................................... (632,798) (1,002,446)
Net realized gain on investments......................................................... (53,778,195) (80,041,525)
Net increase/(decrease) in net assets from Fund share transactions........................... 26,611,524 (8,356,403)
------------ ------------
Net increase in net assets................................................................... 76,363,883 50,570,572
NET ASSETS:
Beginning of year............................................................................ 533,041,125 482,470,553
------------ ------------
End of year (including undistributed net investment income of $47,113 at December 31,
1996)...................................................................................... $609,405,008 $533,041,125
============ ============
</TABLE>
See Notes to Financial Statements.
11
<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.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for on the trade date with realized gain or loss on investments
determined using specific identification as the cost method. Interest income
(including amortization of premium and accretion of discount) is recorded as
earned. Dividend income is recorded on the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders are recorded on the ex-dividend date. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund, timing differences and
differing characterization of distributions made by the Fund.
PROVISION FOR INCOME TAXES. The Fund has qualified and intends to continue to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. As a result, a Federal income tax provision is
not required.
2. AGREEMENTS WITH AFFILIATED PARTIES. The Fund has entered into an investment
advisory agreement (the "Advisory Agreement") with the Adviser which provides
that the Fund will pay the Adviser a fee, 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. The Adviser is obligated to reimburse the
Fund in the event the
12
<PAGE>
THE GABELLI GROWTH FUND -- NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
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,
1996.
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, 1996, the Fund incurred distribution costs under the Plan of $1,457,893,
representing 0.25 percent of the value of the Fund's average daily net assets,
the annual limitation under the Plan. The Board of Trustees has approved that
distribution costs incurred by Gabelli & Company in the amount of $81,500, which
are in excess of the 0.25 percent limitation, may be recovered from the Fund in
future periods, subject to such limitation.
4. PORTFOLIO SECURITIES. Cost of purchases and proceeds from sales of
securities for the year ended December 31, 1996, other than U.S. government and
short-term securities, aggregated $505,862,257 and $522,601,081, respectively.
5. TRANSACTIONS WITH AFFILIATES. During the year ended December 31, 1996, the
Fund incurred brokerage commissions of $22,360 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
12/31/96 12/31/95
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold................................................. 18,297,462 $ 445,159,849 7,723,981 $ 177,580,810
Shares issued upon reinvestment of dividends................ 2,151,430 51,935,527 3,489,327 77,284,488
Shares redeemed............................................. (19,258,689) (470,483,852) (11,667,885) (263,221,701)
----------- ------------- ----------- -------------
Net increase/(decrease)..................................... 1,190,203 $ 26,611,524 (454,577) $ (8,356,403)
=========== ============= =========== =============
</TABLE>
13
<PAGE>
THE GABELLI GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Per share amounts for a Fund share outstanding throughout each year ended
December 31,
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of year............................. $ 22.16 $ 19.68 $ 23.26 $ 21.59 $ 21.28
-------- -------- -------- -------- --------
Net investment income.......................................... 0.03 0.05 0.07 0.06 0.08
Net realized and unrealized gain/(loss) on investments......... 4.27 6.39 (0.86) 2.37 0.88
-------- -------- -------- -------- --------
Total from investment operations............................... 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 year................................... $ 24.14 $ 22.16 $ 19.68 $ 23.26 $ 21.59
======== ======== ======== ======== ========
Total return*.................................................. 19.4% 32.7% (3.4)% 11.3% 4.5%
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000's)............................. $609,405 $533,041 $482,471 $695,013 $625,050
Ratio of net investment income to average net assets......... 0.12% 0.22% 0.31% 0.22% 0.46%
Ratio of operating expenses to average net assets............ 1.43% 1.44% 1.36% 1.41% 1.41%
Portfolio turnover rate........................................ 88.2% 140.2% 40.3% 80.7% 45.9%
Average commission rate (per share of security)(a)............. $ 0.0500 N/A N/A N/A N/A
<FN>
- ---------------
* 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.
(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>
14
<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, 1996, 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 five years in the period
then ended, 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, 1996 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 14, 1997
- --------------------------------------------------------------------------------
1996 TAX NOTICE TO SHAREHOLDERS (UNAUDITED)
For the year ended December 31, 1996, the Fund paid to shareholders, on December
31, 1996, ordinary income dividends (comprised of net investment income and
short-term capital gains) totaling $0.814 per share. Additionally, on that date,
the Fund paid $1.510 per share in long-term capital gains. For 1996, 30.39% 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
1996 which was derived from U.S. Treasury securities was 1.86%. Such income may
be 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 the U.S. Government
securities. The Gabelli Growth Fund did not meet this strict requirement in
1996. 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.
- --------------------------------------------------------------------------------
15
<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.)
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 Certified Public Accountant
Vice President Professor, Pace University
Dollar Dry Dock Savings Bank
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
Dugald A. Fletcher Salvatore J. Zizza
President Chairman, Chief
Fletcher & Company, Inc. Executive Officer
The Lehigh Group, Inc.
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
DISTRIBUTOR
Gabelli & Company, Inc.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT
State Street Bank and Trust Company
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom
- --------------------------------------------------------------------------------
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 of Mario Gabelli]
THE
GABELLI
GROWTH
FUND
ANNUAL REPORT
DECEMBER 31, 1996
