THE GABELLI GROWTH FUND
FIRST QUARTER REPORT
MARCH 31, 1999
*****
Morningstar Rating(TM) of The Gabelli Growth Fund was 5 stars
overall and for the three-year period ended 3/31/99 among 2947
domestic equity funds, and for the five and ten-year periods ended
3/31/99 among 1810 and 743 domestic equity funds, respectively.
[PHOTO]
HOWARD WARD
TO OUR SHAREHOLDERS,
Welcome to the roaring nineties, where the fastest growing profession is
"day trader" and the stock market hits new highs on a weekly basis. It is a
world where more people are investing more money in stocks than ever before. The
sobering concerns of last fall, when the global financial system was seemingly
coming unglued, are a distant memory, if that. This is not your father's stock
market. This is a stock market in fast forward. Equity trading desks need
airbags. Large cap growth stocks have been exceeding the speed limit since the
end of 1994. Annualized returns for this category have averaged roughly 30%
during this period. Some of these stocks need to slow down before they hit a
wall.
Fortunately, not all growth stocks are fully priced. However, investor
expectations may be more than full. Since most quality growth stocks are not 30%
undervalued we doubt we can have another year of 30% type returns. Investment
success this year may mean a more modest profit. In a market that has given new
meaning to the term "volatility," success may mean holding on to the generous
atypical gains of years past. Great companies, such as Microsoft, try to
downplay investor expectations. It is time for us to do the same. We have
enjoyed the thrill of victory. We will work hard to sidestep the agony of
defeat. We hope to give you a positive surprise for the Millennium, but Mr.
Market's mood swings are beyond our control.
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PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Morningstar proprietary
ratings reflect historical risk adjusted performance as of March 31, 1999 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 a
broad asset class receive five stars, the next 22.5% receive four stars, the
next 35% receive three stars, the next 22.5% receive two stars and the bottom
10% receive one star.
<PAGE>
INVESTMENT RESULTS (a)
<TABLE>
<CAPTION>
Quarter
------------------------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
<S> <C> <C> <C> <C> <C>
1999: Net Asset Value............... $38.53 -- -- -- --
Total Return.................. 8.8% -- -- -- --
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1998: Net Asset Value............... $32.32 $33.37 $28.54 $35.40 $35.40
Total Return.................. 12.9% 3.2% 14.5)% 30.2% 29.8%
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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%
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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%
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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%
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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)%
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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%
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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%
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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%
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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)%
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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%
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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%
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1987: Net Asset Value............... -- $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 - March 31, 1999 (a)
- -------------------------------------------
<S> <C>
1 Year .......................... 25.1%
5 Year .......................... 26.8%
10 Year ........................... 19.6%
Life of Fund (b) .................. 19.8%
</TABLE>
<TABLE>
<CAPTION>
Dividend History
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Payment (ex) Date Rate Per Share Reinvestment Price
- -----------------------------------------------------------------
<S> <C> <C>
December 28, 1998 $1.745 $35.15
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 investment operations on April 10, 1987.
2
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INVESTMENT PERFORMANCE
For the first quarter ended March 31, 1999, The Gabelli Growth Fund's
(the "Fund") total return was 8.8%. The Lipper Growth Fund Average and Standard
and Poor's ("S&P") 500 Index had total returns of 4.4% and 5.0%, respectively,
over the same period. The S&P index is an unmanaged indicator of stock market
performance, while the Lipper Average reflects the average performance of mutual
funds classified in this particular category. The Fund was up 25.1% over the
trailing twelve-month period. The Lipper Growth Fund Average and S&P 500 rose
13.6% and 18.5%, respectively, over the same twelve-month period.
For the ten-year period ended March 31, 1999, the Fund's total return
averaged 19.6% annually versus average annual total returns of 16.3% and 19.0%
for the Lipper Growth Fund Average and S&P 500, respectively. Since inception on
April 10, 1987 through March 31, 1999, the Fund had a cumulative total return of
775.4%, which equates to an average annual total return of 19.8%. Our direct
shareholders total 62,699 and net assets are $2.034 billion as of March 31,
1999.
ECONOMIC BACKGROUND
The stock market's ascent in recent years has been driven by what is now
the longest peacetime economic expansion on record. Of course, given current
events in Yugoslavia, perhaps the term "peacetime" is no longer appropriate.
This is a troubling conflict, if not war, and merits our attention. However, it
is unlikely to become an economic event. Therefore, our economy should continue
to march forward. We have virtually no inflation, low unemployment and rising
profits. Some people even say the Federal budget is balanced. We do not know how
long this best of all possible economic environments may last, but it seems to
continue with the doggedness of the "Energizer bunny". There is no reason to
fear a recession this year. Our expectations for growth in real Gross Domestic
Product ("GDP") remain in the 3.0% area. We growth stock investors are hoping
for a continuation of this kind of modest growth with no inflation. It is an
ideal background for quality growth stocks. Should the economy materially
strengthen from here, we would expect large cap growth stocks to underperform
more cyclical and smaller cap issues. Strong cyclical profit growth does not
usually help the relative performance of large cap growth shares.
As you know by now, the information technology industry has become an
important engine of economic growth, accounting for approximately 40% of all new
jobs in the past year. Its impact is greater than Monica, McGwire and Meriwether
combined. It even over-shadows Jordan, Gretzky and Elway. At the center of the
information revolution is the Internet. As it plays an increasing role in
commerce, it is likely to assist the Federal Reserve Board in keeping inflation
in check. Most things that can be sold online will be priced like commodities in
a farmer's market. The Internet is apt to become a massive auction market for
goods and services where prices instantly adjust to changes in supply and
demand. All else being equal, consumers will cyber-shop where prices are lowest.
This development will be a windfall for consumers and pinch some corporate
profit margins. Some of today's brick and mortar distributors are doomed to
become tomorrow's day traders. While it is too early to fully understand how
3
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the Internet will impact the economy, it will continue to redistribute income to
the benefit of the information technology industry, as that industry continues
to increase its share of Gross Domestic Product.
THE STOCK MARKET
As for the stock market, the Internet has captured the fascination of
investors like nothing we have seen in the past. As you know, the "Net" has
given rise to online investing and day trading. Many of these investors seem to
have an affinity for Internet stocks as well. For some, investing has the look
and feel of a video game. While we share their enthusiasm for the "Net" as a new
mass medium, we find it hard to reconcile some Internet stock prices with
underlying business fundamentals. Priceline.com, the discount airline ticket
company, is one example. This recent IPO came public at $16 per share and
quickly rocketed to $134 per share, giving it a market value of over $17
billion. I suppose it is irrelevant that $17 billion exceeds the combined market
capitalizations of Delta Airlines, United Airlines and US Airways. Clearly it
does not matter that $17 billion is 485 times the company's revenues last year,
which reached $35 million. Profits? Forget it. The company lost $114 million
last year. Like I said, investing has become a video game for some.
What about America Online, or AOL as it is known? Come on Howard, this
is a real company. It has earnings. It has been added to the S&P 500 Stock
Index. It is a "Blue Chip". Don't you have to own it? Aren't you just mad that
you missed it? My first answer is an emphatic no. You don't have to own it. My
second answer is an emphatic yes. Of course I am mad I missed it. But that is
not the point. If the price made sense we would buy the stock today. The price
is full. At a price of $150 per share, AOL sells at roughly 400 times what it
will earn this year. That is over six times the earnings multiple of Microsoft,
which sells at about 60 times earnings. Microsoft is regarded as a pretty pricey
stock but AOL makes it look like a value stock and Microsoft is no value stock.
AOL's market cap is roughly $140 billion. Earnings this year will approximate
$350 million. For $140 billion, I could buy The Home Depot and Sun Microsystems,
two outstanding proven growth companies. Their combined profits this year should
be around $3.1 billion, or nearly nine times what AOL should earn.
Alternatively, you may choose to diversify your $140 billion by buying Merrill
Lynch, CBS, McGraw-Hill, The New York Times, Tiffany's, The Northern Trust
Company, Marsh & McLennan and Gannett. Their combined profits this year should
approximate $5.1 billion or nearly 15 times what AOL will earn. These are
excellent companies and we do own them, at least in part.
Obviously, we believe valuations matter. We should remember the S&P 500
sells at nearly 26 times this year's earnings, as does IBM. We like IBM and they
are showing their best growth in years. At 26 times earnings, it's a "gimme."
Unlike the Internet high fliers we do not need to construct a new valuation
methodology to justify the stock price. We agree with Professor Jeremy J. Siegel
of the Wharton School who reminds us that "eventually the value of all assets
must confront the law of economics. This law dictates that the value of any
asset must be tied to the future cash returns paid to the owner of the asset."
Now maybe, just maybe, AOL is a once in a lifetime stock that will continue to
enrich shareholders, regardless of what they pay for it. It could happen. Of
course, maybe The New York Rangers will ask me to replace Wayne Gretzky too.
4
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PORTFOLIO HIGHLIGHTS
Luckily, our anxiety over AOL's price did not preclude us from owning
other information highway investment vehicles. Charles Schwab is a stock that we
owned which metamorphosed into an Internet stock. As a leader in online trading,
our Schwab investment rose over five fold during the past 18 months and 71% in
the quarter ended March 31, 1999. Of course, with the stock recently fetching
more than 100 times earnings, four times the multiple accorded Merrill Lynch, we
felt obligated to sell our stake. We feel the valuation gap between Schwab and
Merrill is too great. Schwab has a lead in online trading. Merrill has a lead in
assets with over $1.5 trillion in client accounts and $700 billion under
management in its asset management arm. Other information highway holdings that
did exceptionally well in the first quarter include EMC, the leader in data
storage, up 50% and Sun Microsystems, the leader in Internet client servers, up
46%. Microsoft, the most valuable company in the world, in stock market terms,
rose 29%. Its market value now exceeds $420 billion, having surpassed General
Electric by $55 billion. On the cable front, our investment in MediaOne Group
rose 35% after Comcast made a bid to acquire the company. MediaOne's stock has
continued to rise through April as AT&T made the company an offer it could not
refuse.
Of course, there have been opportunities to make money outside of the
information world as well. Manufacturing is not as sexy but it may not be as
volatile either. Our investment in Sundstrand, an aerospace component supplier,
rose about 30% after United Technologies made an offer to acquire the company.
Other recent 20% plus gainers include Tiffany, Omnicom, Merrill Lynch, Marsh &
McLennan, AIG, CBS, Gillette and Clear Channel Communications.
LOOKING AHEAD
So what do we do now? How do we position the portfolio for the next
century? We will continue to try to identify America's greatest established
growth companies. We will follow our process of finding companies with distinct
competitive advantages that are capable of growing their earnings at
double-digit rates over a period of years. Growth stock investing is all about
compounding growth rates. We want companies that benefit from secular trends
such as the Information Revolution, the Aging of the Population and
Globalization. Finally, we want stocks that are priced at levels that make
economic sense. We do not know how you pay suppliers and employees with
"pageviews," "eyeballs," "hits," and "clicks." If I do not bring home the bacon,
in the form of dollars, my golden retriever, Missy, will go hungry.
Good examples of companies whose stocks meet our criteria are Texas
Instruments, for its leading position in digital signal processors, and IBM, for
its leading position in computer services. The turnaround of the year has to be
AT&T. Do not underestimate the leadership of Michael Armstrong. He is a winner
and AT&T is back. We like Warner-Lambert, for its blockbuster drug Lipitor, and
Amgen, for its anti-cancer compounds. It should be no surprise that we like the
mutual fund business. We have become a nation of budding capitalists. This can
only continue to help financial service powerhouses like State Street and Bank
of New York. These are just some of the companies that we think will keep our
asset values growing in the years ahead.
5
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LET'S TALK STOCKS
The following are stock specifics on selected holdings of our Fund.
Favorable earnings prospects do not necessarily translate into higher stock
prices, but they do express a positive trend which we believe will develop over
time.
Cisco Systems Inc. (CSCO - $109.5625 - Nasdaq) is the leading supplier of data
networking equipment such as routers and ATM switches for use in Local Area
Networks, Wide Area Networks and The Internet. As an integral provider of
infrastructure for the Internet, the company is a major beneficiary of the
"Net's" explosive growth. We expect significant growth in earnings to continue
over the next few years.
Home Depot Inc. (HD - $62.25 - NYSE) continues to take market share in the home
improvement retailing segment, in which it is the leader by a wide margin. HD
does not rest on its laurels. The company is set to begin testing a smaller
format store known as Villager's Hardware, which will compete with small
hardware stores. The company continues to roll out Expo Design Centers and is
expanding into institutional facilities maintenance through the purchase of
Maintenance Warehouse/America Corp. in 1997. Finally, Home Depot is developing
an Internet sales facility that will leverage the company's brand beyond
traditional retail outlets.
International Business Machines Corp. (IBM - $177.25 - NYSE) is a leading
supplier of hardware, software and outsourcing services for the computer
industry. Over 60% of the company's revenues now come from relatively higher
margin software and service businesses. IBM is well positioned as an electronic
commerce solutions provider, which also provides a platform to cross-sell the
company's many products. We expect the company to continue to grow earnings per
share going forward.
Lucent Technologies Inc. (LU - $107.75 - NYSE) was formerly the research arm of
AT&T and known as Bell Labs. AT&T spun-off Bell Labs in 1996 under the Lucent
name. The company is a leader in providing voice networking equipment and is
strengthening its data networking prospects with the recent announcement to
acquire Ascend Communications. The company is benefiting from the strong growth
in network traffic capacity requirements as Lucent is a supplier to most of the
major telephone companies.
Marsh & McLennan Companies Inc. (MMC - $74.1875 - NYSE) is the world's largest
insurance brokerage and one of the leading asset managers through its ownership
of The Putnam Funds. MMC is also a leader in employee benefit consulting with
its ownership of the Mercer Group. The company's growth rate has accelerated in
recent years due primarily to the success of Putnam. We expect overall growth to
continue based on sustained strong results at Putnam, albeit slower than last
year, and some modest improvement in the company's traditional insurance
brokerage business.
6
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MediaOne Group Inc. (UMG - $63.50 - NYSE) is the third largest owner of cable
television systems in the U.S. with substantial non-cable assets as well. Both
Comcast and AT&T have made bids for the company and as of this writing the
company has accepted the AT&T offer. Clearly, MediaOne's assets are in demand
and shareholders are benefiting from the stock's rise.
Mellon Bank Corp. (MEL - $70.375 - NYSE) is one of the largest asset managers in
the country. In addition to the Bank's asset gathering arm, their Dreyfus and
Boston Company subsidiaries continue to grow and prosper. New management is
shedding non-core assets to focus on the company's highest margin and best
growth opportunities. Fees represent over 60% of revenues and that number will
grow with the divestiture of the company's mortgage and credit card operations.
The bank prefers to remain independent but it is an attractive property to asset
manager "wannabes" that need scale to boost fee income meaningfully.
Microsoft Corp. (MSFT - $89.625 - Nasdaq) is the world's leading provider of
computer software with a dominant position in personal computer operating
systems. The company is a leading provider of application software as well, with
such popular programs as OFFICE `97 and Microsoft Word.
Northern Trust Corp. (NTRS - $88.8125 - Nasdaq) is one of an elite group of
institutions with a major presence in the wealth management market for high net
worth individuals and families. The company has established a network of offices
in the primary wealth markets across the country (Palm Beach, Beverly Hills,
etc...) and continues to build its fee income in a methodical way. We believe
earnings will continue to grow, powered by growth in assets under management,
which exceed $200 billion. We regard NTRS as a trophy property within the
banking sector.
Sun Microsystems Inc. (SUNW - $125.0625 - Nasdaq) is a leading provider of
hardware and software for network based distributed computing systems. While
most of the company's revenue is derived from UNIX-based workstations and client
servers, it is becoming best known for its JAVA operating software. Sun
Microsystems has entered into a joint venture with America Online, which
provides SUNW with a platform to enhance its presence in electronic commerce. As
the top supplier of client server computers to Internet Service Providers, SUNW
is a major beneficiary of continued Internet growth.
Texas Instruments Inc. (TXN - $99.25 - NYSE) is the largest provider of digital
signal processors, a critical component for digital communication devices,
including wireless phones. Having restructured the company in recent years, its
valuation is no longer hostage to the memory chip (DRAM) cycle and defense
businesses. We believe the DSP chip business, in which TXN is the leader, will
continue to grow rapidly in the foreseeable future.
7
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Time Warner Inc. (TWX - $71.0625 - NYSE) owns one of the finest collections of
media assets in the world. In addition to being the largest operator of cable
television systems, the company is a leading content provider through its
ownership of CNN, Warner Bros., HBO, Turner Broadcasting, The Cartoon Channel
and other premium and basic cable networks. Time Warner's media empire extends
to music and publishing, where it is a leader in both. The company's business
fundamentals are the best they have been in years with double digit growth in
operating cash flow expected to continue for the foreseeable future.
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.
PROPOSALS TO SHAREHOLDERS
The Fund's Board of Trustees has asked shareholders to consider a
proposal to amend the Fund's Declaration of Trust to permit the Fund to offer
additional classes of shares, and a proposal to amend the Fund's investment
policy with respect to options on securities that it holds or has the right to
obtain. We believe that all of these proposals would benefit the shareholders,
and we urge you to give them your careful consideration.
For existing shareholders we intend to remain a no-load fund. At the
same time, mutual fund distributors are increasingly employing a variety of
different types and combinations of sales charge arrangements for different
classes of shares that are targeted to the needs of particular types of
investors. Your Board of Trustees believes that the Fund should be able to
provide the distribution alternatives and investment flexibility provided by
other similarly situated funds that offer multiple classes of shares. We believe
that approval of the proposal to permit the Fund to offer additional classes of
shares will enhance the potential for the Fund to attract additional investors
in a manner that could provide additional benefits for all investors in the
Fund. Again, to repeat, approval of this proposal will not diminish the ability
of existing and future shareholders to purchase and redeem shares at net asset
value.
The second proposal relates to the use of options. If approved, the Fund
would be allowed to sell "covered" call options and to purchase put options in
securities, currencies or other assets owned by the Fund. Among other benefits,
this should enable the Fund to generate additional premium income which would
serve to enhance the Fund's total return and to protect against any anticipated
declines in the value of its assets.
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INTERNET
You can now visit us on the Internet. Our home page at
http://www.gabelli.com contains information about Gabelli Asset Management Inc.,
the Gabelli Mutual Funds, IRAs, 401(k)s, quarterly reports, closing prices and
other current news. You can send us e-mail at [email protected].
IN CONCLUSION
We are hopeful that the positive background for quality growth stocks
will continue. As change occurs, as it must, we will do our best to adapt and
succeed in this challenging, competitive and sometimes crazy stock market that
so many of us have come to love.
The Fund's daily net asset value is available in the financial press and
each evening after 6:00 PM (Eastern Time) by calling 1-800-GABELLI
(1-800-422-3554). The Fund's Nasdaq symbol is GABGX. Please call us during the
business day for further information.
Sincerely,
/s/ HOWARD F. WARD, CFA
HOWARD F. WARD, CFA
Portfolio Manager
April 30, 1999
TOP TEN HOLDINGS
MARCH 31, 1999
Home Depot Inc. MediaOne Group Inc.
Cisco Systems Inc. Mellon Bank Corp.
IBM Corp. Sun Microsystems Inc.
Marsh & McLennan Companies Time Warner Inc.
Northern Trust Corp. Texas Instruments Inc.
NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period stated in this report. The manager's views
are subject to change at any time based on market and other conditions.
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THE GABELLI GROWTH FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 1999 (UNAUDITED)
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<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS--97.8%
BROADCASTING--6.9%
950,600 CBS Corp.+.............................. $ 38,915,187
725,000 Chancellor Media Corp.+................. 34,165,625
866,600 Clear Channel Communications Inc.+...... 58,116,362
365,000 Infinity Broadcasting Corp.+............ 9,398,750
--------------
140,595,924
--------------
BUSINESS SERVICES--5.5%
810,000 Automatic Data Processing Inc. ......... 33,513,750
220,000 Ceridian Corp. ......................... 8,043,750
519,050 Interpublic Group of Companies Inc...... 40,421,019
312,000 Omnicom Group Inc. ..................... 24,940,500
95,000 Young & Rubicam Inc. ................... 3,871,250
--------------
110,790,269
--------------
CABLE--3.3%
1,040,000 MediaOne Group Inc.+.................... 66,040,000
--------------
COMMUNICATIONS EQUIPMENT--5.1%
770,750 Cisco Systems Inc.+..................... 84,445,295
180,000 Lucent Technologies Inc................. 19,395,000
--------------
103,840,295
--------------
COMPUTER HARDWARE--8.4%
650,000 Dell Computer Corp.+.................... 26,568,750
455,000 International Business Machines Corp.... 80,648,750
515,000 Sun Microsystems Inc.+.................. 64,407,188
--------------
171,624,688
--------------
COMPUTER SOFTWARE AND SERVICES--10.3%
690,600 Computer Sciences Corp.+................ 38,112,488
150,000 Electronic Data Systems Corp............ 7,303,125
480,000 EMC Corp.+.............................. 61,320,000
660,000 Microsoft Corp.+........................ 59,152,500
610,000 Oracle Corp.+........................... 16,088,750
692,000 SunGard Data Systems Inc.+.............. 27,680,000
--------------
209,656,863
--------------
CONSUMER PRODUCTS--2.1%
209,800 Gillette Co............................. 12,469,988
145,000 Procter & Gamble Co..................... 14,200,938
571,000 Ralston Purina Group.................... 15,238,563
--------------
41,909,489
--------------
DIVERSIFIED INDUSTRIAL--1.4%
265,000 General Electric Co..................... 29,315,624
--------------
ELECTRONICS--5.2%
375,000 Intel Corp.............................. 44,671,875
625,000 Texas Instruments Inc. ................. 62,031,250
--------------
106,703,125
--------------
ENTERTAINMENT--3.7%
378,000 Disney (Walt) Co........................ 11,765,250
885,000 Time Warner Inc......................... 62,890,313
10,000 Viacom Inc., CI. B+..................... 839,375
--------------
75,494,938
--------------
FINANCIAL SERVICES--8.5%
175,000 American International Group Inc. ...... 21,169,687
954,500 Marsh & McLennan Companies Inc. ........ 70,811,969
435,000 Merrill Lynch & Co. .................... 38,470,313
200,750 Schwab (Charles) Corp. ................. 19,297,094
653,000 T. Rowe Price Associates Inc. .......... 22,446,875
--------------
172,195,938
--------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
FINANCIAL SERVICES: BANKS--10.4%
760,000 Bank of New York Inc. .................. $ 27,312,500
938,000 Mellon Bank Corp. ...................... 66,011,750
770,000 Northern Trust Corp. ................... 68,385,625
609,400 State Street Corp. ..................... 50,085,063
--------------
211,794,938
--------------
FOOD AND BEVERAGE--2.1%
200,000 Coca-Cola Co. .......................... 12,275,000
397,000 PepsiCo Inc. ........................... 15,557,438
553,000 Sysco Corp. ............................ 14,550,813
--------------
42,383,251
--------------
HEALTH CARE--8.8%
272,000 Abott Laboratories...................... 12,733,000
430,000 Baxter International Inc. .............. 28,380,000
514,000 Bristol-Myers Squibb Co. ............... 33,056,624
147,000 Johnson & Johnson....................... 13,772,063
160,000 Lilly (Eli) & Co. ...................... 13,580,000
336,000 Merck & Co. Inc. ....................... 26,943,000
113,000 Pfizer Inc. ............................ 15,678,750
534,000 Warner-Lambert Co. ..................... 35,344,125
--------------
179,487,562
--------------
PUBLISHING--5.2%
640,000 Gannett Co. Inc. ....................... 40,320,000
434,000 McGraw-Hill Companies Inc. ............. 23,653,000
878,000 New York Times Co., CI. A............... 25,023,000
255,000 Tribune Co. ............................ 16,686,563
--------------
105,682,563
--------------
RETAIL--10.9%
1,417,718 Home Depot Inc. ........................ 88,252,946
904,000 Lowe's Companies Inc. .................. 54,692,000
517,100 Tiffany & Co. .......................... 38,653,225
440,000 Wal-Mart Stores Inc. ................... 40,562,500
--------------
222,160,671
--------------
TOTAL COMMON STOCKS..................... 1,989,676,138
--------------
<CAPTION>
PRINCIPAL
AMOUNT
- -----------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS--1.7%
$35,146,000 U.S. Treasury Bills, 4.46% to 4.94% ++,
due 04/08/99 to 05/06/99............... 35,064,160
--------------
TOTAL INVESTMENTS--99.5%................ $2,024,740,298
OTHER ASSETS AND LIABILITIES
(NET)--0.5%............................ 9,652,997
--------------
NET ASSETS--100.0%
(52,803,562 shares outstanding)........ $2,034,393,295
==============
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE........................ $38.53
======
For Federal tax purposes:
Aggregate cost......................... $1,373,235,183
==============
Gross unrealized appreciation.......... $ 659,250,014
Gross unrealized depreciation.......... (7,744,899)
--------------
Net unrealized appreciation $ 651,505,115
==============
</TABLE>
- ---------------
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
10
<PAGE>
GABELLI FAMILY OF FUNDS
GABELLI ASSET FUND ------------------------------------------------------------
Seeks to invest primarily in a diversified portfolio of common stocks selling at
significant discounts to their private market value. The Fund's primary
objective is growth of capital.
(No-load) Portfolio Manager: Mario J. Gabelli, CFA
GABELLI GROWTH FUND ------------------------------------------------------------
Seeks to invest primarily in large cap stocks believed to have favorable, yet
undervalued, prospects for earnings growth. The Fund's primary objective is
capital appreciation.
(No-Load) Portfolio Manager: Howard F. Ward, CFA
GABELLI WESTWOOD EQUITY FUND --------------------------------------------------
Seeks to invest primarily in the common stock of seasoned companies believed to
have proven records and above average historical earnings growth. The Fund's
primary objective is capital appreciation.
(No-load) Portfolio Manager: Susan M. Byrne
GABELLI SMALL CAP GROWTH FUND ------------------------------------------------
Seeks to invest primarily in common stock of smaller companies (market
capitalizations less than $500 million) believed to have rapid revenue and
earnings growth potential. The Fund's primary objective is capital appreciation.
(No-load) Portfolio Manager: Mario J. Gabelli, CFA
GABELLI WESTWOOD SMALLCAP EQUITY FUND ----------------------------------------
Seeks to invest primarily in smaller capitalization equity securities - market
caps of $1 billion or less. The Fund's primary objective is long-term capital
appreciation.
(No-load) Portfolio Manager: Lynda Calkin, CFA
GABELLI WESTWOOD INTERMEDIATE BOND FUND ----------------------------------------
Seeks to invest in a diversified portfolio of bonds with various maturities. The
Fund's primary objective is total return.
(No-load) Portfolio Manager: Patricia Fraze
GABELLI EQUITY INCOME FUND -----------------------------------------------------
Seeks to invest primarily in equity securities with above market average yields.
The Fund pays quarterly dividends and seeks a high level of total return with an
emphasis on income.
(No-load) Portfolio Manager: Mario J. Gabelli, CFA
GABELLI WESTWOOD BALANCED FUND -------------------------------------------------
Seeks to invest in a balanced and diversified portfolio of stocks and bonds. The
Fund's primary objective is both capital appreciation and current income.
(No-load) Portfolio Managers: Susan M. Byrne & Patricia Fraze
GABELLI WESTWOOD MIGHTY MITES(SM) FUND -----------------------------------------
Seeks to invest in micro-cap companies that have market capitalizations of $300
million or less. The Fund's primary objective is long-term capital appreciation.
(No-Load)
Team Managed: Mario J. Gabelli, CFA, Marc J. Gabelli,
Laura K. Linehan and Walter K. Walsh
GABELLI VALUE FUND -------------------------------------------------------------
Seeks to invest in securities of companies believed to be undervalued. The
Fund's primary objective is long-term capital appreciation. Max. Sales
charge:5 1/2%
Portfolio Manager: Mario J. Gabelli, CFA
GABELLI ABC FUND --------------------------------------------------------------
Seeks to invest in securities with attractive opportunities for appreciation or
investment income. The Fund's primary objective is total return in various
market conditions without excessive risk of capital loss. (No-load) Portfolio
Manager: Mario J. Gabelli, CFA
GABELLI U.S. TREASURY MONEY MARKET FUND ----------------------------------------
Seeks to invest exclusively in short-term U.S. Treasury securities. The Fund's
primary objective is to provide high current income consistent with the
preservation of principal and liquidity.
(No-load) Portfolio Manager: Judith A. Raneri
THE TREASURER'S FUND -----------------------------------------------------------
Three money market portfolios designed to generate superior returns without
compromising portfolio safety. U.S. Treasury Money Market seeks to invest in
U.S. Treasury bills, notes and bonds. Tax Exempt Money Market seeks to invest in
municipal securities. Domestic Prime Money Market seeks to invest in prime
quality, domestic money market instruments. (No-Load)
Portfolio Manager: Judith A. Raneri
An investment in the above Money Market Funds are neither insured nor guaranteed
by the Federal Deposit Insurance Corporation or any government agency. Although
the funds seek to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the Funds.
GLOBAL SERIES
GABELLI GLOBAL TELECOMMUNICATIONS FUND
Seeks to invest in telecommunications companies through-out the world -
targeting undervalued companies with strong earnings and cash flow
dynamics. The Fund's primary objective is capital appreciation. (No-load)
Team Manager: Mario J. Gabelli, CFA
GABELLI GLOBAL CONVERTIBLE SECURITIES FUND
Seeks to invest principally in bonds and preferred stocks which are
convertible into common stock of foreign and domestic companies. The Fund's
primary objective is total return through a combination of current income
and capital appreciation. (No-load) Portfolio Manager: Hart Woodson
GABELLI GLOBAL INTERACTIVE COUCH POTATO(R)FUND
Seeks to invest in securities of companies involved with communications,
creativity and copyright. The Fund also seeks to invest in companies
participating in emerging technological advances in interactive services
and products. The Fund's primary objective is capital appreciation.
(No-load) Portfolio Manager: Marc J. Gabelli
GABELLI GLOBAL OPPORTUNITY FUND
Seeks to invest in common stock of companies which have rapid growth in
revenues and earnings and potential for above average capital appreciation
or are undervalued. The Fund's primary objective is capital appreciation.
(No-load) Portfolio Managers: Marc J. Gabelli & Caesar Bryan
GABELLI GOLD FUND --------------------------------------------------------------
Seeks to invest in a global portfolio of equity securities of gold mining and
related companies. The Fund's objective is long-term capital appreciation.
Investment in gold stocks is considered speculative and is affected by a variety
of world-wide economic, financial and political factors. (No-load)
Portfolio Manager: Caesar Bryan
GABELLI INTERNATIONAL GROWTH FUND ----------------------------------------------
Seeks to invest in the equity securities of foreign issuers with long-term
capital appreciation potential. The Fund offers investors global
diversification. (No-load)
Portfolio Manager: Caesar Bryan
The six funds above invest in foreign securities which involves risks not
ordinarily associated with investments in domestic issues, including currency
fluctuation, economic and political risks.
THE FUNDS LISTED ABOVE ARE DISTRIBUTED BY GABELLI & COMPANY, INC.
- --------------------------------------------------------------------------------
To receive a prospectus, call 1-800-GABELLI (422-3554). The prospectus gives a
more complete description of the Fund, including fees and
expenses. Read the prospectus carefully before you invest or send money.
1-800-GABELLI
(1-800-422-3554) - fax: 1-914-921-5118 - www.gabelli.com - [email protected]
One Corporate Center, Rye, New York 10580
<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 Asset Management
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
Former Chief Investment Managing Director
Officer
Financial Security Assurance BALMAC International, Inc.
Holdings Ltd.
John D. Gabelli
Senior Vice President
Gabelli & Company, Inc.
OFFICERS AND PORTFOLIO MANAGERS
Bruce N. Alpert Howard F. Ward, CFA
President and Treasurer Portfolio Manager
James E. McKee
Secretary
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.
- ---------------------------------------
[PHOTO]
THE
GABELLI
GROWTH
FUND
FIRST QUARTER REPORT
MARCH 31, 1999
<PAGE>
