<PAGE>
THE GABELLI GROWTH FUND
SEMI-ANNUAL REPORT - JUNE 30, 1998
[GRAPHIC OMITTED: FIVE STARS]
[GRAPHIC OMITTED: PHOTOGRAPH OF HOWARD WARD]
MORNINGSTAR RATED THE GABELLI GROWTH FUND 5 STARS OVERALL AND FOR THE
THREE, FIVE AND TEN YEAR PERIODS ENDED 6/30/98 AMONG 2545,
1462 AND 707 DOMESTIC EQUITY FUNDS, RESPECTIVELY.
TO OUR SHAREHOLDERS,
The stock market behaved indecisively in the second quarter. The three
month period ended with a modest gain despite many market mood swings. Once
again, the public was not fazed by the market's daily gyrations. Indeed, the
public has demonstrated more stock market savvy than many pros. Stock market
volatility, like the Chicago Bulls winning basketball championships, has become
the norm. Unfortunately, while the U.S. economy continues to appear healthy, we
are not completely immune from the destruction of wealth which is ongoing in
Asia. Russia continues to struggle as well. Slumping oil prices can fuel
economic weakness and social instability in the major oil producing regions of
the world. At the margin, our economy will be weakened by events that transpire
beyond our borders. So far, our economy and stock market have weathered these
distant financial storms with extraordinary grace. The big question, which
remains a mystery, is whether the drama unfolding in Japan and the emerging
markets can continue to be contained.
INVESTMENT PERFORMANCE
For the second quarter ended June 30, 1998, The Gabelli Growth Fund's (the
"Fund") total return was 3.2%. The Lipper Analytical Services Growth Fund
Average and Standard & Poor's ("S&P") 500 had returns of 1.9% and 3.3%,
respectively, over the same period. Each index is an unmanaged indicator of
investment performance. The Fund was up 37.2% over the trailing twelve month
period. The Lipper Growth Fund Average and S&P 500 rose 25.4% and 30.2%,
respectively, over the same twelve month period.
For the ten year period ended June 30, 1998, the Fund's return averaged
19.1% annually, versus average annual returns of 16.5% and 18.5% for the Lipper
Growth Fund Average and S&P 500, respectively. Since inception on April 10, 1987
through June 30, 1998, the Fund had a total return of 622.3%, which equates to
an average annual return of 19.2%. Our shareholders total 59,190 and net assets
are $1.6 billion as of June 30, 1998.
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Morningstar proprietary
ratings reflect historical risk adjusted performance as of June 30, 1998 and are
subject to change every month. Morningstar ratings are calculated from a Fund's
three, five and ten year average annual returns in excess of 90-day T-bill
returns with appropriate fee adjustments and a risk factor that reflects fund
performance below 90-day T-Bill returns. The top 10% of the funds in an
investment category receive five stars.
<PAGE>
INVESTMENT RESULTS (a)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
----------------QUARTER--------------
1ST 2ND 3RD 4TH YEAR
--- --- --- --- ----
<S> <C> <C> <C> <C> <C>
1998: Net Asset Value ................ $32.32 $33.37 - - -
Total Return ................... 12.9% 3.2% - - -
- --------------------------------------------------------------------------------------------------
1997: Net Asset Value ................ $24.50 $29.25 $33.41 $28.63 $28.63
Total Return ................... 1.5% 19.4% 14.2% 3.1% 42.6%
- --------------------------------------------------------------------------------------------------
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, 1998 (a)
- ------------------------------------------
<S> <C>
1 Year ........................ 37.2%
5 Year ........................ 22.9%
10 Year ......................... 19.1%
Life of Fund (b) ................ 19.2%
</TABLE>
<TABLE>
<CAPTION>
DIVIDEND HISTORY
- -----------------------------------------------------
PAYMENT (EX) DATE RATE PER SHARE REINVESTMENT PRICE
- ----------------- -------------- ------------------
<S> <C> <C>
December 30, 1997 $5.790 $28.58
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>
ECONOMIC BACKGROUND
Labor unrest is becoming more common and vocal. Last year, Teamsters at the
United Parcel Service walked out. This year, the United Auto Workers of General
Motors are striking. Health care workers recently held a rally in midtown
Manhattan. With a national unemployment rate below five percent, good help has
been hard to find and labor has more leverage than it has had since the pre-
downsizing years. Labor market pressure may soon ease, however, as late in the
second quarter we saw signs of a weakening economy. The unemployment rate inched
higher, layoffs rose and the National Association of Purchasing Managers Index
fell below 50, indicative of a modest contraction in manufacturing activity.
Given the declining rate of economic activity in Japan and the emerging markets,
we expect to see more signs of weakness in the U.S. during the third quarter.
Exports are declining and pricing power is mostly nonexistent. Overall,
continued low interest rates - 30 year U.S. Treasury Bonds are at record lows as
of this writing - will keep our economy moving forward. Real Gross Domestic
Product growth of 2.0% to 3.0% over the balance of the year is a reasonable
forecast. However, profit growth will be a challenge for many companies.
FINANCIAL MARKETS
Does size matter? Many companies seem to think so given the laundry list of
mega-mergers announced this year. During the quarter, we directly benefited from
the pending purchases of Citicorp by Travelers and General Re by Warren
Buffett's Berkshire Hathaway. Other super-sized deals announced and pending
include AT&T and Tele-Communications Inc., Wells Fargo and Norwest Bank, BankOne
and First Chicago NBD, NationsBank and BankAmerica, Daimler Benz and Chrysler,
SBC Communications and Ameritech, Halliburton and Dresser Industries, Compaq and
Digital Equipment, Baker Hughes and Western Atlas and American Home Products and
Monsanto. The Bank of New York tried to buy Mellon Bank and was rebuffed by
Mellon's management. As shareholders, we would have liked to put this issue to a
vote. Mellon's management felt otherwise. Without a doubt, this trend of
mega-deals will continue. Increasingly, corporate America seems to have the look
and feel of that treasured board game Monopoly.
Although stock valuations are extended, the deal flow and sub-six percent
interest rates will likely keep stock prices propped up. We admit to not
understanding the prices investors are paying for the Internet stocks but then
value, like beauty, is in the eyes of the beholder. A stock, like a painting, is
worth whatever someone is willing to pay for it. Maybe Internet stocks are like
professional sports franchises. Most of these lose money on an operating basis
but their values rise in anticipation of ever greater advertising deals in the
future. On the other hand, Internet-mania could be like the tulip-mania in
Holland during the 1630s. At least we are in good company, as Warren Buffett
says he doesn't understand these stocks either.
Our best performing stocks during the quarter included technology holdings:
Dell Computer, Cisco Systems, BMC Software and Microsoft. Financial service
leaders included American Express, AIG and General Re. Other holdings among our
top 15 gainers were Home Depot, Warner-Lambert, Walgreens, Computer Sciences
Corp., Lowe's, Becton Dickinson, The New York Times and Schering-Plough.
3
<PAGE>
Our investment in oil service companies (7% of the portfolio) has not lived
up to our expectations so far. The companies (Schlumberger, Halliburton, Baker
Hughes and Smith International) all reported healthy double-digit gains in
earnings in the first quarter. We expected more double-digit gains in the second
quarter. However, the warm winter and shrinking oil demand from Asia caused oil
prices to plummet and soured the intermediate term outlook for oil company
capital spending. We will review our commitment to these stocks after second
quarter earnings are released.
LOOKING AHEAD
Given the turmoil in Asia, the portfolio has a stronger bias toward
domestic oriented companies than usual. We still like a number of multinational
companies, especially in less economically sensitive areas like health care, but
we are favoring domestic retailers (Home Depot and Lowe's), financial services
(Mellon Bank, Northern Trust and Marsh & McLennan) and media (New York Times,
Gannett, Clear Channel, CBS, Tribune and Disney). Earnings visibility is
increasingly important and we want to emphasize the companies with the most
visibility. This implies only limited exposure to Asia. In the declining
interest rate environment we expect, domestic growth stocks should have
valuation support (from higher present values for future cash flows) and
continued earnings growth from a still growing domestic economy.
We do not know if the so called "Asian Flu" will spoil the good times on
Wall Street. We do know stocks are not cheap and you should invest in stocks
with a long term horizon. We will continue to deliver a well-diversified
portfolio of America's greatest established growth companies selling at prices
that can be rationalized using fundamental security analysis.
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.
COMPUTER SCIENCES CORP. (CSC - $64.00 - NYSE) is a leading provider of
technology outsourcing services to industry and government. As such, the company
is well-positioned to benefit from the expected growth in demand for outsourcing
services. This growing demand is driven by companies' desire to improve
productivity and simplify the management of increasingly complex technology
systems. Based in El Segundo, California, the company successfully fought off a
takeover attempt by Computer Associates earlier this year.
FIRST DATA CORP. (FDC - $33.3125 - 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 health care industries.
4
<PAGE>
GANNETT CO. INC. (GCI - $71.0625 - NYSE) is best known for its USA TODAY
newspaper publication. Gannett publishes an additional 189 newspapers in 38
states. The company also operates 13 radio and 15 network affiliated television
stations. Earnings are strong due to healthy advertising trends and solid
expense control. This high quality publisher should be able to consistently grow
earnings at a low double-digit rate.
GILLETTE CO. (G - $56.6875 - NYSE), along with Coca-Cola, is a premier example
of a consumer products company that is well-situated to exploit opportunities on
a global basis. The company is aggressively pursuing foreign markets and
developing an impressive number of new products. The acquisition of Duracell
leverages Gillette's infrastructure and provides additional products to fuel
growth.
THE HOME DEPOT INC. (HD - $83.0625 - NYSE) is the undisputed leader of the home
improvement warehouse retailers. Led by Bernie Marcus and Arthur Blank, the
company's founders, Home Depot is testing new store formats which appeal to new
markets (smaller stores and upscale furnishings), providing incremental growth
to what remains a terrific franchise in do-it-yourself home hardware and
supplies. Geographic expansion continues to drive square footage growth as the
company increases its presence in the Midwest and continues to penetrate the
Northeast. Home Depot has substantial international potential over the long
term. The company plans to open its first store in Chile this year.
MARSH & MCLENNAN COMPANIES INC. (MMC - $60.4375 - NYSE), with the recent
acquisition of Johnson and Higgins, holds the number one position in insurance
brokerage. Additionally, the company owns The Putnam Group, the Boston-based
asset manager (assets under management exceed $250 billion), and Mercer Group, a
leader in employee benefits consulting.
MELLON BANK CORP. (MEL - $69.625 - NYSE), with the acquisitions in recent years
of Dreyfus, The Boston Company and Founders Asset Management, 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 - $133.75 - NYSE) is one of the world's largest health
care 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. We
expect the company to use some of its significant free cash flow to buy back
stock and increase the dividend.
NORTHERN TRUST CORP. (NTRS - $76.25 - NASDAQ) is one of a few public asset
managers with a strong franchise in the wealth management market. With nearly
$200 billion in assets under management and fees generating 65% of income, the
bank's stock appears undervalued. Northern Trust is a trophy property within the
banking sector.
5
<PAGE>
SCHLUMBERGER LTD. (SLB - $68.3125 - NYSE) is the leading provider of engineering
services to the oil and gas industries. Fully 75% of sales (approximately $10
billion total) comes from non-U.S. customers. The company is the industry leader
in terms of research and development, spending about $300 million annually.
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.
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.
We thank you for your loyalty and as always, pledge our best efforts on
your behalf.
Sincerely,
/s/ Howard F. Ward /s/ Donald C. Jenkins
HOWARD F. WARD, CFA DONALD C. JENKINS, CFA
Portfolio Manager Associate Portfolio Manager
July 31, 1998
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
JUNE 30, 1998
-------------
The Home Depot Inc. Computer Sciences Corp.
Marsh & McLennan Companies Gannett Co. Inc.
Northern Trust Corp. Merck & Co. Inc.
Mellon Bank Corp. Schlumberger Ltd.
First Data Corp. Gillette Co.
- --------------------------------------------------------------------------------
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, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
COMMON STOCKS--97.4%
ADVERTISING--1.4%
364,050 Interpublic Group of Companies
Inc. ........................... $ 14,318,601 $ 22,093,284
20,000 Young & Rubicam Inc. ............ 500,000 640,000
-------------- --------------
14,818,601 22,733,284
-------------- --------------
BROADCASTING--3.6%
720,600 CBS Corp.+....................... 22,071,827 22,879,050
303,800 Clear Channel Communications
Inc.+ .......................... 26,378,532 33,152,175
-------------- --------------
48,450,359 56,031,225
-------------- --------------
BUSINESS SERVICES--8.2%
310,000 Automatic Data Processing
Inc. ........................... 14,166,648 22,591,250
680,600 Computer Sciences Corp.+......... 27,531,190 43,558,400
1,587,800 First Data Corp. ................ 50,289,990 52,893,587
523,000 Sysco Corp. ..................... 8,444,165 13,401,875
-------------- --------------
100,431,993 132,445,112
-------------- --------------
CABLE--1.2%
445,000 MediaOne Group Inc. ............. 16,342,371 19,552,188
-------------- --------------
CONSUMER PRODUCTS--5.7%
181,800 Avon Products Inc. .............. 10,915,340 14,089,500
140,000 Coca-Cola Co. ................... 4,765,076 11,970,000
664,800 Gillette Co. .................... 27,510,492 37,685,850
262,000 PepsiCo Inc. .................... 6,143,386 10,791,125
142,000 Ralston Purina Group............. 10,549,695 16,587,375
-------------- --------------
59,883,989 91,123,850
-------------- --------------
DIVERSIFIED INDUSTRIAL--6.3%
411,200 Allied-Signal Inc. .............. 13,991,374 18,247,000
358,000 Honeywell Inc. .................. 23,792,082 29,915,375
436,908 Molex Inc., Cl. A................ 8,549,146 10,212,725
521,200 Sundstrand Corp. ................ 26,694,249 29,838,700
142,000 United Technologies.............. 7,467,087 13,135,000
-------------- --------------
80,493,938 101,348,800
-------------- --------------
ENERGY--7.0%
694,000 Baker Hughes Inc. ............... 28,883,454 23,986,375
545,000 Halliburton Co. ................. 23,825,159 24,286,562
619,000 Schlumberger Ltd. ............... 37,994,153 42,285,437
651,800 Smith International Inc.+........ 39,489,042 22,690,788
-------------- --------------
130,191,808 113,249,162
-------------- --------------
ENTERTAINMENT--0.9%
141,000 Walt Disney Co. ................. 9,190,596 14,813,812
-------------- --------------
FINANCIAL SERVICES--10.8%
100,000 American Express Co. ............ 2,871,609 11,400,000
137,000 American International Group
Inc. ........................... 6,689,315 20,002,000
69,000 General Re Corp. ................ 15,354,976 17,681,250
1,024,500 Marsh & McLennan Companies
Inc. ........................... 54,929,628 61,918,219
275,000 Merrill Lynch & Co. ............. 16,147,593 25,368,750
560,500 Schwab (Charles) Corp. .......... 17,384,252 18,216,250
493,000 T. Rowe Price Associates Inc. ... 13,095,366 18,518,313
-------------- --------------
126,472,739 173,104,782
-------------- --------------
FINANCIAL SERVICES: BANKS--11.8%
425,000 Bank of New York Inc. ........... 24,814,619 25,792,187
103,000 Citicorp......................... 7,914,200 15,372,750
863,000 Mellon Bank Corp. ............... 33,072,219 60,086,375
800,000 Northern Trust Corp. ............ 44,464,501 61,000,000
409,400 State Street Corp. .............. 12,604,488 28,453,300
-------------- --------------
122,870,027 190,704,612
-------------- --------------
HEALTH CARE--14.0%
302,000 Abbott Laboratories.............. 6,983,738 12,344,250
485,000 Baxter International Inc. ....... 24,610,495 26,099,062
147,000 Becton Dickinson & Co. .......... 10,758,672 11,410,875
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
HEALTH CARE (CONTINUED)
220,000 Bristol-Myers Squibb Co. ........ $ 24,290,798 $ 25,286,250
397,000 Johnson & Johnson................ 19,795,967 29,278,750
250,000 Lilly (Eli) & Co. ............... 11,458,167 16,515,625
321,000 Merck & Co. Inc. ................ 27,808,760 42,933,750
73,000 Pfizer Inc. ..................... 1,889,897 7,934,188
141,000 Schering-Plough Corp. ........... 2,551,873 12,919,125
435,000 Sigma-Aldrich Corp. ............. 16,651,950 15,279,375
265,000 SmithKline Beecham plc, ADR...... 10,698,576 16,032,500
129,000 Warner-Lambert Co. .............. 2,383,565 8,949,375
-------------- --------------
159,882,458 224,983,125
-------------- --------------
PUBLISHING--6.4%
605,000 Gannett Co. Inc. ................ 30,187,568 42,992,813
342,000 McGraw-Hill Companies Inc. ...... 18,037,227 27,894,375
269,000 New York Times Co., Cl. A........ 14,809,846 21,318,250
165,000 Tribune Co. ..................... 5,694,432 11,354,063
-------------- --------------
68,729,073 103,559,501
-------------- --------------
RETAIL--8.1%
758,859 Home Depot Inc. ................. 24,493,089 63,032,726
921,000 Lowe's Companies Inc. ........... 31,978,674 37,358,063
422,100 Tiffany & Co. ................... 19,578,679 20,260,800
246,000 Walgreens Co. ................... 2,383,163 10,162,875
-------------- --------------
78,433,605 130,814,464
-------------- --------------
TECHNOLOGY--12.0%
324,000 BMC Software Inc.+............... 9,921,036 16,827,750
200,500 Cisco Systems Inc.+.............. 9,312,103 18,458,531
450,500 Computer Associates International
Inc. ........................... 19,150,494 25,030,906
105,000 Dell Computer Corp.+............. 2,625,825 9,745,312
340,000 EMC Corp. ....................... 15,114,047 15,236,250
340,000 Hewlett-Packard Co. ............. 25,149,112 20,357,500
155,000 Intel Corp. ..................... 11,188,968 11,489,375
107,000 Microsoft Corp.+................. 4,395,469 11,596,125
410,000 Sun Microsystems Inc.+........... 13,181,452 17,809,375
562,000 SunGard Data Systems Inc.+....... 20,426,353 21,566,750
350,000 Tellabs Inc.+.................... 18,675,416 25,068,781
-------------- --------------
149,140,275 193,186,655
-------------- --------------
TOTAL COMMON STOCKS.......................... 1,165,331,832 1,567,650,572
-------------- --------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
---------
<C> <S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--3.2%
$52,028,000 U.S. Treasury Bills, 4.87% to
5.16%++ due 08/06/98 to
09/17/98........................ 51,754,149 51,754,149
------------ ------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL INVESTMENTS................... 100.6% $1,217,085,981 $1,619,404,721
==============
OTHER ASSETS AND LIABILITIES
(NET).............................. (0.6)% (10,003,719)
----- --------------
NET ASSETS
(48,231,023 shares outstanding).... 100.0% $1,609,401,002
===== ==============
NET ASSET VALUE, OFFERING AND
REDEMPTION PRICE PER SHARE......... $33.37
======
</TABLE>
- ------------------------------
<TABLE>
<S> <C> <C>
For Federal tax purposes:
Aggregate cost $1,217,085,981
==============
Gross unrealized appreciation $ 430,178,260
Gross unrealized depreciation (27,859,520)
--------------
Net unrealized appreciation $ 402,318,740
==============
+ Non-income producing security.
++ Represents annualized yield at date of
purchase.
ADR-- American Depositary Receipt.
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
THE GABELLI GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
- -------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $1,217,085,981)... $1,619,404,721
Cash.......................................... 66,589
Dividends receivable.......................... 1,257,304
Receivable for investments sold............... 873,101
Receivable for shares of beneficial interest
sold........................................ 4,989,439
--------------
TOTAL ASSETS................................ 1,626,591,154
--------------
LIABILITIES:
Payable for investments purchased............. 13,895,727
Payable for shares of beneficial interest
redeemed.................................... 1,329,451
Payable for investment advisory fees.......... 1,267,293
Payable for distribution fees................. 316,823
Other accrued expenses........................ 380,858
--------------
TOTAL LIABILITIES........................... 17,190,152
--------------
NET ASSETS applicable to 48,231,023 shares
outstanding............................... $1,609,401,002
==============
NET ASSETS CONSIST OF:
Shares of beneficial interest, at par value... $ 482,310
Additional paid-in capital.................... 1,139,076,763
Accumulated net investment loss............... (818,394)
Accumulated net realized gain on
investments................................. 68,341,583
Net unrealized appreciation on investments.... 402,318,740
--------------
TOTAL NET ASSETS............................ $1,609,401,002
==============
NET ASSET VALUE, offering and redemption
price per share
($1,609,401,002 / 48,231,023 shares
outstanding; unlimited number of shares
authorized of $0.01 par value)............ $33.37
=====
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
- -------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends...................................... $ 6,043,549
Interest....................................... 2,299,845
------------
TOTAL INVESTMENT INCOME...................... 8,343,394
------------
EXPENSES:
Investment advisory fees....................... 6,609,578
Distribution fees.............................. 1,525,146
Shareholder services fees...................... 567,290
Trustees' fees................................. 60,911
Legal and audit fees........................... 29,950
Miscellaneous expenses......................... 368,913
------------
TOTAL EXPENSES............................... 9,161,788
------------
NET INVESTMENT LOSS.......................... (818,394)
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments............... 68,735,115
Net change in unrealized appreciation on
investments.................................. 123,258,428
------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS.................................. 191,993,543
------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS..................................... $191,175,149
============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31,
(UNAUDITED) 1997
---------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment loss....................................... $ (818,394) $ (1,809,135)
Net realized gain on investments.......................... 68,735,115 161,959,991
Net change in unrealized appreciation on investments...... 123,258,428 106,084,148
-------------- ------------
Net increase in net assets resulting from operations.... 191,175,149 266,235,004
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment loss....................................... -- (47,113)
In excess of net investment income........................ -- (8,321)
Net realized gain on investments.......................... -- (160,337,412)
In excess of net realized gain on investments............. -- (97,442)
-------------- ------------
Total distributions to shareholders..................... -- (160,490,288)
-------------- ------------
SHARE TRANSACTIONS:
Net increase in net assets from shares of beneficial
interest transactions................................... 474,240,803 228,835,326
-------------- ------------
Net increase in net assets.............................. 665,415,952 334,580,042
NET ASSETS:
Beginning of period....................................... 943,985,050 609,405,008
-------------- ------------
End of period............................................. $1,609,401,002 $943,985,050
============== ============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
THE GABELLI GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. DESCRIPTION. 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.
2. SIGNIFICANT ACCOUNTING POLICIES. 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 listed or traded on a nationally
recognized securities exchange, quoted by the National Association of Securities
Dealers Automated Quotations, Inc. ("Nasdaq") or traded on foreign exchanges are
valued at the last sale price on that exchange as of the close of business on
the day the securities are being valued (if there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day). All other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest average of the bid and asked prices. 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 the Adviser. When
market quotations are not readily available, portfolio securities are valued at
their fair value as determined in good faith under procedures established by and
under the general supervision of the Board of Trustees. Short term debt
securities with remaining maturities of 60 days or less are valued at amortized
cost, unless the Trustees determine such does not reflect the securities' fair
value, in which case these securities will be valued at their fair value as
determined by the Trustees. Debt instruments having a greater maturity are
valued at the highest bid price obtained from a dealer maintaining an active
market in those securities.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for on the trade date with realized gain or loss on investments
determined by using the identified 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.
9
<PAGE>
THE GABELLI GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
3. INVESTMENT ADVISORY AGREEMENT. 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% of the value of the Fund's average daily net assets. In
accordance with the Advisory Agreement, the Adviser provides a continuous
investment program for the Fund's portfolio, oversees the administration of all
aspects of the Fund's business and affairs and pays the compensation of all
Officers and Trustees of the Fund who are its affiliates.
4. DISTRIBUTION PLAN. The Fund's Board of Trustees has adopted a distribution
plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. For the six months
ended June 30, 1998 the Fund incurred distribution costs payable to Gabelli &
Company, Inc., an indirect wholly-owned subsidiary of the Adviser, of
$1,525,146, or 0.25% of average daily net assets, the annual limitation under
the Plan. Such payments are accrued daily and paid monthly.
5. PORTFOLIO SECURITIES. Purchases and sales of securities for the six months
ended June 30, 1998, other than short term securities, aggregated $572,618,400
and $132,068,903, respectively.
6. SHARES OF BENEFICIAL INTEREST. Transactions in shares of beneficial interest
were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold........................................ 20,489,514 $ 640,272,639 29,696,140 $ 857,263,991
Shares issued upon reinvestment of dividends....... -- -- 5,734,075 153,468,414
Shares redeemed.................................... (5,229,815) (166,031,836) (27,348,725) (781,897,079)
---------- ------------- ----------- -------------
Net increase..................................... 15,259,699 $ 474,240,803 7,721,490 $ 228,835,326
========== ============= =========== =============
</TABLE>
10
<PAGE>
THE GABELLI GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of beneficial interest outstanding throughout each
period:
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1998 ------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993
------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period...... $ 28.63 $ 24.14 $ 22.16 $ 19.68 $ 23.26 $ 21.59
---------- -------- -------- -------- -------- --------
Net investment income (loss).............. (0.09) (0.06) 0.03 0.05 0.07 0.06
Net realized and unrealized gain (loss)
on investments.......................... 4.83 10.34 4.27 6.39 (0.86) 2.37
---------- -------- -------- -------- -------- --------
Total from investment operations.......... 4.74 10.28 4.30 6.44 (0.79) 2.43
---------- -------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income..................... -- (0.00)(a) (0.02) (0.05) (0.08) (0.05)
In excess of net investment income........ -- (0.00)(a) -- -- (0.01) --
Net realized gain on investments.......... -- (5.79) (2.30) (3.91) (2.39) (0.67)
In excess of net realized gain
on investments.......................... -- (0.00)(a) -- -- (0.31) (0.04)
---------- -------- -------- -------- -------- --------
Total distributions....................... -- (5.79) (2.32) (3.96) (2.79) (0.76)
---------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD............ $ 33.37 $ 28.63 $ 24.14 $ 22.16 $ 19.68 $ 23.26
========== ======== ======== ======== ======== ========
Total return+............................. 16.6% 42.6% 19.4% 32.7% (3.4)% 11.3%
RATIOS TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)...... $1,609,401 $943,985 $609,405 $533,041 $482,471 $695,013
Ratio of net investment income (loss)
to average net assets................... (0.12)%(b) (0.23)% 0.12% 0.22% 0.31% 0.22%
Ratio of operating expenses
to average net assets................... 1.39%(b) 1.43% 1.43% 1.44% 1.36% 1.41%
Portfolio turnover rate................... 10% 83% 88% 140% 40% 81%
</TABLE>
- ---------------
+ 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) Amount represents less than $0.005 per share.
(b) Annualized.
See accompanying notes to financial statements.
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.)
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
Chief Investment Officer Managing Director
Financial Security Assurance BALMAC International, Inc.
Holdings Ltd.
OFFICERS AND PORTFOLIO MANAGERS
Bruce N. Alpert Howard F. Ward, CFA
President and Treasurer Portfolio Manager
James E. McKee Donald C. Jenkins, CFA
Secretary Associate Portfolio Manager
DISTRIBUTOR
Gabelli & Company, Inc.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT
State Street Bank and Trust Company
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
- -------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of The
Gabelli Growth Fund. It is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective prospectus.
- -------------------------------------------------------------------------------
[PHOTOGRAPH]
THE
GABELLI
GROWTH
FUND
SEMI-ANNUAL REPORT
JUNE 30, 1998
