<PAGE>
THE GABELLI VALUE FUND INC.
One Corporate Center
Rye, New York 10580-1434
THIRD QUARTER REPORT
SEPTEMBER 30, 1996
To Our Shareholders:
After a sharp correction in July, the Dow Jones Industrial Average (DJIA)
and the Standard & Poor's 500 (S&P 500) surged in September, closing the quarter
at record levels. Broader market indices such as the Value Line Composite and
smaller cap indices like the Russell 2000 rebounded as well, but lagged the
large cap indices by considerable margins.
<TABLE>
INVESTMENT RESULTS (a)
- --------------------------------------------------------------------------------
<CAPTION>
Quarter
----------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
<S> <C> <C> <C> <C> <C>
1996: Net Asset Value $12.88 $13.08 $12.63 -- --
Total Return ..... 10.9% 1.6% (3.4)% -- --
- --------------------------------------------------------------------------------
1995: Net Asset Value $11.41 $11.75 $12.81 $11.61 $11.61
Total Return ..... 8.8% 3.0% 9.0% 0.3% 22.5%
- --------------------------------------------------------------------------------
1994: Net Asset Value $11.37 $11.55 $12.43 $10.49 $10.49
Total Return ..... (6.0)% 1.6% 7.6% (2.7)% 0.0%
- --------------------------------------------------------------------------------
1993: Net Asset Value $11.15 $11.93 $13.92 $12.09 $12.09
Total Return ..... 10.1% 7.0% 16.7% 1.5% 39.4%
- --------------------------------------------------------------------------------
1992: Net Asset Value $10.40 $ 9.84 $10.04 $10.13 $10.13
Total Return ..... 9.7% (5.4)% 2.0% 6.4% 12.7%
- --------------------------------------------------------------------------------
1991: Net Asset Value $ 9.51 $ 9.50 $ 9.57 $ 9.48 $ 9.48
Total Return ..... 11.8% (0.1)% 0.7% 2.5% 15.3%
- --------------------------------------------------------------------------------
1990: Net Asset Value $ 9.23 $ 9.36 $ 8.19 $ 8.51 $ 8.51
Total Return ..... (2.4)% 1.4% (12.5)% 9.0 (5.6)%
- --------------------------------------------------------------------------------
1989: Net Asset Value -- -- -- $ 9.58 $ 9.58
Total Return ..... -- -- -- 2.1%(b) 2.1%(b)
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ------------------------------------------------
Average Annual Returns - September 30, 1996 (a)
- ------------------------------------------------
<C> <C>
1 Year ............... 9.1%
............... 3.1%(c)
5 Year ............... 16.5%
............... 15.2%(c)
Life of Fund (b) ..... 12.8%
............... 11.9%(c)
- ------------------------------------------------
</TABLE>
<TABLE>
Dividend History
- -----------------------------------------------------------
<CAPTION>
Payment (ex) Date Rate Per Share Reinvestment Price
- ----------------- -------------- ------------------
<S> <C> <C>
December 27, 1995 $1.230 $11.56
December 30, 1994 $1.600 $10.49
December 31, 1993 $2.036 $12.09
December 31, 1992 $0.553 $10.13
December 31, 1991 $0.334 $ 9.48
December 31, 1990 $0.420 $ 8.51
March 19, 1990 $0.120 $ 9.21
December 29, 1989 $0.0678 $ 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 return 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 September
29, 1989. (c) Includes the effect of the maximum 5.5% sales charge at beginning
of period.
<PAGE>
INVESTMENT PERFORMANCE
For the nine months ended September 30, 1996, the Gabelli Value Fund's (the
"Fund") total return was 8.8% compared to returns of 13.5%, 7.6%, and 10.7% over
the same period for the Standard & Poor's 500 Index (S&P 500), the Value Line
Composite, and Russell 2000 Index, respectively. Each index is an unmanaged
indicator of stock market performance. During the three months ended September
30, 1996, the Fund's net asset value decreased 3.4% to $12.63 per share. For the
twelve months ended September 30, 1996, the Fund gained 9.1% including
reinvested dividends, versus 20.3% for the S&P 500, 7.6% for the Value Line
Composite, and 12.8% for the Russell 2000.
For the five year period ended September 30 1996, the Value Fund's return
averaged 16.5% annually, outpacing average annual returns of 15.2%, 15.0%, and
15.8% for the S&P 500, Value Line Composite, and Russell 2000 Index,
respectively.
Since inception on September 29, 1989 through September 30, 1996, the Fund
has had a total return of 132.7%, which equates to an average annual return of
12.8% over its seven year life. As of September 30, 1996, the Fund's total net
assets were $486.4 million.
WHAT WE DO
We do what is described as bottom-up research: we read annual reports; we
visit the competition; we talk to customers; we go belly to belly with
management. We structure our portfolio by picking stocks.
In past reports, we have tried to articulate our investment philosophy and
methodology. The following graphic further illustrates the interplay among the
four components of our valuation approach.
[Graphic of a pyramid]
Our focus is on free cash flow; earnings before interest, taxes,
depreciation and amortization (EBITDA) minus the capital expenditures necessary
to grow the business. We believe free cash flow is the best barometer of a
business' value. Rising free cash flow often foreshadows net earnings
improvement. We also look at earnings per share trends. Unlike Wall Street's
ubiquitous earnings momentum players, we do not try to forecast earnings with
accounting precision and then trade stocks based on quarterly expectations and
realities. We simply try to position ourselves in front of long-term earnings
uptrends. In addition, we analyze on and off balance sheet assets and
liabilities such as plant and equipment, inventories, receivables, and legal,
environmental and health care issues. We want to know everything and anything
that will add to or detract from our private market value (PMV) estimates.
Finally, we look for a catalyst; something happening in the company's industry
or indigenous to the company itself that will surface value. In the case of the
independent telephone stocks, the catalyst is a regulatory change. In the
agricultural equipment business, it is the increasing worldwide demand for
American food and feed crops. In other instances, it may be a change in
management, sale or spin-off of a division or the development of a profitable
new business.
Once we identify stocks that qualify as fundamental and conceptual
bargains, we then become patient investors. This has been a proven long-term
method for preserving and enhancing wealth in the U.S. equities market. At the
margin, our new investments are focused on businesses that are well
2
<PAGE>
managed and will benefit from sustainable long-term economic dynamics. These
include macro trends, such as globalization of the market in filmed
entertainment and telecommunications, and micro trends, such as increased focus
on productivity enhancing goods and services.
COMMENTARY
THE ECONOMY AND THE STOCK MARKET
Robust second quarter GDP growth of 4.8%, higher energy and agricultural
commodities prices, and strong employment numbers rekindled inflationary fears
sparking a 7% market correction in July. In September, more encouraging economic
data, most notably modest increases in the Producer and Consumer Price Indices,
eased inflationary concerns. Fueled by strong cash flow into equity mutual
funds, the DJIA and S&P 500 moved back into record territory.
For the present, inflation appears to be in check. However, we don't think
it's been checkmated quite yet. The world-wide demand for agricultural and
selected industrial commodities is growing. Oil remains a wild card. Eventually,
higher prices will be passed along to the consumer. With outsourcing,
downsizing, globalization of labor, technology oriented productivity gains
decelerating, and unemployment at historically low levels, we still anticipate
upward pressure on wages. On the surface, the United Auto Workers recent labor
contract with Ford (F - $31.25 - NYSE) looks good. With just a 3% annual wage
hike over three years, Ford appears to have avoided inflationary wage increases.
However, by agreeing to limit outsourcing and, in effect, guaranteeing UAW
workers lifetime tenure, future productivity may be diminished. We have seen the
long-term implications of such labor rigidity in Europe. We fear Ford may have
just won a psychological victory. More importantly, if President Clinton wins in
a landslide, market observers will ask: What payback will he give to his
supporters? What will this mean for labor costs, productivity gains, inflation,
corporate earnings and the market?
Based largely on better than expected news on the inflation front, our
short-term posture toward the broad market has changed slightly from cautious to
cautiously optimistic. Corporate earnings should finish the year up around 10%.
Valuations are above the historic norm, but not yet at troublesome levels. If
inflation remains subdued (we're still not convinced it isn't peeking around the
corner), long interest rates stabilize at current levels, and mutual fund cash
inflows remain strong, 1996 equities returns may well exceed our expectations
after the Presidential Election.
Whatever the market has in store for us over the next several quarters,
there are attractive long-term opportunities in a variety of industries. World
class industrial companies will get a boost from recovering economies in Europe
and the Pacific Rim. Aerospace component suppliers will continue to benefit from
the strong world-wide demand for new aircraft. Selected telecommunications
stocks will prosper as the sweeping deregulation of the industry is implemented
in the U.S. and emerging nations invest heavily in building modern systems.
Entertainment software stocks should also do well as distribution networks here
and abroad continue to expand. AND DEALS WILL BE DONE. The record levels of
mergers and acquisitions experienced in 1995-1996 may well be exceeded. The
benefits of strategic combinations in a broad spectrum of industries will keep
investment bankers busy and value investors happy in the year ahead.
3
<PAGE>
GENERAL MOTORS: IT'S MORE THAN JUST A CAR COMPANY
In previous reports, we've talked about "Humpty Dumpty" conglomerates
surfacing value through the sale or spin-off of divisions. The good folks at
General Motors Corporation (GM - $48.00 - NYSE) may soon be adding their name to
a list that includes American Express Company (AXP - $46.25 - NYSE), American
Brands, Inc. (AMB - $42.25 - NYSE), ITT Corporation (ITT - $43.625 - NYSE), and
AT&T Corp. (T - $52.25 - NYSE) to name just a few. Encouraged by the successful
spin-off of Electronic Data Systems Corp. (EDS - $61.375 - NYSE), GM management
is now focusing on another GM tracking stock, GM Hughes (GMH - $57.75 - NYSE).
GMH has three businesses: auto electronics, aerospace, and a satellite
telecommunications division that includes the rapidly growing DirecTV and a
satellite video distribution business that will be strengthened with the
acquisition of PanAmSat Corporation (SPOT - $27.8125 - NASDAQ). GM has several
alternatives that would benefit GMH shareholders, the largest of which is GM
itself. One scenario would be to spin off DirecTV directly to GMH shareholders,
fold the auto electronics business back into the parent company, and sell the
aerospace business. GMH is currently valued at about 9 times 1996 cash flow.
With the potential for rapid cash flow and eventual earnings growth, DirecTV
will receive a much higher multiple as a stand alone company.
At its current price, marked to market, GMH represents about $23 of value
per GM share. Marked to our Private Market Value model for GMH, it represents
$30 of value. Should GM restructure GMH in the aforementioned manner, GM's auto
business would be trading at about half the cash flow multiples enjoyed by Ford
and Chrysler Corp. (C - $28.625 - NYSE). Ford and Chrysler do have cost
advantages relative to GM and the impending settlement with the UAW may hamper
GM's cost cutting progress. However, that is too deep a discount for an American
auto manufacturer with excellent long-term prospects.
ONE HURDLE LEFT
The Federal Trade Commission's recent approval of the Time Warner Inc. (TWX
- - $38.625 - NYSE)/Turner Broadcasting (TBS'A - $28.50 - ASE) merger eliminates
one of the hurdles facing TWX management. The Turner acquisition is hardly a
steal for Time Warner, but it does position them as an unparalleled global
powerhouse in the entertainment software and cable network businesses. Now,
Gerald Levin and company can focus on settling its differences with U.S. West
Media Group (UMG - $16.875 - NYSE), its disgruntled partner in the cable
television and entertainment software businesses. This may entail buying US West
Media out of Warner Brothers and HBO by giving them a bigger stake in Time
Warner Cable Television or outright ownership of selected cable systems. US West
Media appears committed to the cable industry. At this stage, a deal hinges on
price (how many cable subscribers TWX will give up for exclusive ownership of
filmed entertainment assets). With TWX stock languishing, Mr. Levin will be
under increasing pressure from shareholders like Ted Turner and
Tele-Communications Inc.'s (TCOMA - $14.9375 - NASDAQ) John Malone to get
something done. We believe a compromise that will enhance US West Media's
cable/telephony franchise and turn Time Warner into a purer entertainment/news
software play will be reached. TWX can then sell additional non-core assets
and/or spin off its share of the cable operations to shareholders. The end
result would be a much better looking balance sheet, a more focused company and,
we believe, a stock price in the mid $50s.
4
<PAGE>
THE CONSOLIDATORS - THE 1990S GAME
The 1960s was the decade of the conglomerates. Individuals like Harold
Geneen at ITT, Charlie Bluhdorn at Gulf & Western, and Royal Little at Textron
championed corporate growth and stability by bundling non-related businesses.
Wall Street was in love with the conglomerates. And why not? They were using
their shares trading at 12 times earnings to buy smaller, less visible companies
at 8 times earnings. Earnings marched steadily upward as did conglomerate stock
prices.
Times change. Wall Street now shuns conglomerates. They are difficult for
analysts to understand and many are saddled with mature low-growth companies
that restrain, rather than contribute to, earnings growth. Corporate managers
are realizing that by shedding non-related divisions through direct sale or
spin-off to shareholders, they are getting much better valuations for their core
businesses. In short, investors are willing to pay more for the sum of the parts
than for the whole. Corporate chieftains like Harvey Golub of American Express,
Tom Hays at American Brands and Rand Araskog at ITT have already demonstrated
the positive impact that consolidation has on stock prices. Westinghouse
Electric Corp.'s (WX - $18.625 - NYSE) Michael Jordan appears to be following
their lead with the acquisition of Infinity Broadcasting Corp. (INF - $31.50
- -NYSE) to complement the CBS radio network and the revelation that he is
considering spinning off or selling the company's industrial businesses.
There is another type of consolidation creating enthusiasm on Wall Street.
Consolidators are buying competitors, lowering expenses through enlarged buying
power, eliminating corporate overhead and driving growth rates in the process.
Consolidators are looking for fragmented industries where this strategy is most
effective. A prominent consolidator is Wayne Huzienga, who made his first
fortune consolidating the trash hauling industry with Waste Management
International Inc. (WME - $9.00 - NYSE). He repeated the pattern in the video
rental business via Blockbuster Entertainment. Now, under the corporate banner
of Republic Industries, Inc. (RWIN - $29.00 - NASDAQ), he is consolidating the
used car and electronic security businesses. We believe that by buying smaller
competitors, consolidating operations, and creating a national brand name
franchise, Mr. Huzienga will once again make a lot of money for himself and
Republic Industries' shareholders. Other industries where this is occurring are
broadcasters, banks, brokers, health care and even public utilities.
FARMER KRAVIS
Henry Kravis, one of the principals of Kravis, Kohlberg, & Roberts (KKR),
has been harvesting seeds planted by the firm during the heyday of leveraged
buyouts in the 1980s. The recent sale of Duracell International Inc. (DUR -
$64.047 - NYSE) (34% owned by KKR) to Gillette Co. (G - $72.125 - NYSE) follows
on the heels of the sale of KKR-controlled Red Lion Hotels Inc. (RL - $29.625
- -NYSE) to Doubletree Corp. (TREE - $39.875 - NYSE), Stop & Shop Companies Inc.
to Royal Ahold N.V., and American Re Corp. (ARN - $63.50 - NYSE) to Munich
Reinsurance Company. Farmer Kravis is unloading this bumper crop of fine
companies. Indeed, he is in the process of raising $5 billion in seed money for
planting new crops.
Why are we interested in what Farmer Kravis is doing? For a variety of
reasons, not the least of which is that with the exception of a failed tobacco
crop (KKR's ill-fated LBO of RJR), he's been a very profitable farmer. We like
to watch what Henry is buying - KKR's recent purchase of Bruno's reaffirms
5
<PAGE>
our notion of value in food retailers like Delchamps Inc. (DLCH - $20.00 -
NASDAQ) and Giant Food Inc. (GFS'A - $34.00 - ASE). We also monitor values
surfaced by his selling. The 13-14 times cash flow paid by Gillette for Duracell
has very positive implications for Ralston Purina Group (RAL - $68.50 -NYSE),
whose Eveready Battery business is a strong number two in the market to
Duracell. Finally, we are encouraged that Farmer Kravis is in the process of
raising a big pile of money to buy the kind of undervalued companies available
in our Fund's portfolio.
OUR APPROACH
The Fund is a non-diversified mutual fund which invests in a concentrated
portfolio of equity securities believed to have favorable EBITDA prospects. This
strategy allows the Fund to make larger commitments in industries or companies
which we believe offer dynamic growth opportunities, than are possible with a
more diversified portfolio. Consistent with this approach, the top ten holdings
of the Fund represented over 45% of the portfolio at September 30, 1996.
LET'S TALK STOCKS
The following are stock specifics on selected holdings of our Fund's
investments. Favorable EBITDA prospects do not necessarily translate into higher
stock prices, but they do express a positive trend which we believe will develop
over time.
CENTURY TELEPHONE ENTERPRISES, INC. (CTL - $31.875 - NYSE), an independent
telecommunications company based in Monroe, Louisiana, is a way to play the
migration trend to rural America. Through acquisitions, CTL has created clusters
of rural telephone and cellular companies within commuting distance of
metropolitan areas in 14 states including Wisconsin, Louisiana, Michigan, Ohio
and Arkansas. These systems have characteristically provided growth in excess of
the industry average. Management is expected to be less aggressive in its
acquisition program which should permit CTL's existing strong geographic
positioning to demonstrate an earnings growth rate of 15% or more to the year
2000. In addition, we see The Telecommunications Act signed into law on February
9, 1996 as incorporating favorable features for rural telephone companies.
CHRIS-CRAFT INDUSTRIES, INC. (CCN - $41.75 - NYSE), through its 74% ownership of
BHC Communications, Inc. is primarily a television broadcaster. BHC owns and
operates UPN-affiliated TV stations in New York (WWOR), Los Angeles (KCOP) and
Portland (KPTV). BHC also controls over 57% of United Television, Inc., which
operates an NBC affiliate, an ABC affiliate and three UPN affiliates. BHC also
currently owns 100% of United Paramount Network (UPN), but Viacom has an option
to purchase 50% of UPN by January 1997. CCN, with about $1.5 billion in cash and
marketable securities, is strongly positioned to expand its operations. CCN is
the eighth-largest TV station group owner in the U.S. and covers almost 20% of
TV households.
[INDUSTRY PERCENTAGE CHART]
GENERAL ELECTRIC COMPANY (GE - $91.00 - NYSE), with an equity market valuation
of over $155 billion, is the largest U.S. company. Earlier this year, GE passed
Nippon Telegraph & Telephone Corporation to become the world's largest
industrial company as well. The company is poised to become the world's
6
<PAGE>
most profitable company this year. Operating segments include aircraft engines,
appliances, broadcasting (NBC), industrial products, plastic materials, power
generating turbines and a hugely successful financial services business. Under
Jack Welch's guidance, GE has recorded a series of impressive earnings gains
which are anticipated to continue into the next century.
GRUPO TELEVISA S.A. (TV - $28.875 - NYSE) is a Mexican-based entertainment
company that dominates the Spanish speaking world through its fully integrated
mix of content and distribution. The stock has suffered in line with the Mexican
market and economy. Nevertheless, it remains an excellent vehicle for accessing
the growth in disposable income among the Spanish speaking population on a
global basis. It's business mix includes film, music, cable television, and
broadcasting. Grupo Televisa also has valuable holdings in PamAmSat Corporation
(SPOT - $27.8125 - NASDAQ) and Univision Communications Inc. (UVN - $33.50 -
NYSE).
MEDIA GENERAL, INC. (MEG'A - $31.50 - ASE) our largest holding representing 14%
of the portfolio, is a Richmond, VA-based company, publishing daily newspapers
in Tampa, Winston-Salem and throughout Virginia. Media General owns three
network television stations in Tampa, Charleston, and Jacksonville and a cable
television franchise in Fairfax County, VA. The relaxation of broadcast station
ownership restrictions provided by The Telecommunications Act of 1996 is driving
industry consolidation and is increasing the franchise values of strong,
well-positioned media properties such as those owned by Media General. Media
General has agreed to acquire Park Acquisitions, Inc. for $710 million. The
acquisition includes 10 television stations, 29 daily newspapers and 82 weekly
newspapers. Through its "hubris" and thirst for "size", management has neglected
its shareholders, but the slump in stock price makes it a hold.
TELE-COMMUNICATIONS, INC. (TCOMA - $14.9375 - NASDAQ), the largest cable TV
operator in the U.S., serving about 14 million subscribers, is guided by Dr.
John C. Malone - one of the most shareholder sensitive managers we have found.
Given that regulation has historically played a major role in the valuation of
cable properties, we believe that the passage of The Telecommunications Act of
1996, combined with the current deregulatory climate in Congress, could prove to
be a significant catalyst for cable stocks. Strategically, TCOMA is a
well-positioned industry leader, from its wireless telephony PCS venture with
Sprint, Comcast and Cox, to its innovative Internet access business, dubbed "@
Home", to its 80% ownership of Tele-Communications International, Inc.
TELE-COMMUNICATIONS, INC./LIBERTY MEDIA GROUP (LBTYA - $28.625 - NASDAQ) owns a
collection of interests in some of the most powerful programming entities in the
world. Liberty Media is the second largest investor in Time Warner, the world's
largest media company. Liberty Media, News Corporation Ltd. (NWS - $20.875
- -NYSE), and Tele-Communications International, Inc. (TINTA - $15.125 - NASDAQ)
have created a global sports joint-venture, called Fox Sports, that will offer
an integrated package of sports programming across 1) network broadcast, 2)
national cable, and 3) regional cable channels. Liberty's 49% owned Discovery
Communications is a major advertiser-supported basic cable network that includes
the flagship Discovery Channel, The Learning Channel, and developing businesses
such as Discovery Europe and Animal Planet. We consider Liberty Media to be
ideally positioned to benefit from expanding distribution channels, including
direct broadcast satellite ventures like DirecTV and the Internet.
7
<PAGE>
TIME WARNER INC. (TWX - $38.625 - NYSE), having completed its acquisition of
Turner Broadcasting, is the world's largest diversified media and publishing
company. The combined companies will have more than $21 billion in revenues and
control a host of powerful media brands, such as CNN, Warner Brothers film, HBO,
and Time magazine. Under the leadership of chairman Gerald Levin and
vice-chairman Ted Turner, Time Warner is now focused on reducing debt and
simplifying its capital structure. Achievement of both goals would be greatly
aided by a successful restructuring of the Time Warner Entertainment partnership
with U.S. West Media Group. Further, Time Warner's upcoming holiday film, Space
Jam, starring Michael Jordan and Bugs Bunny, has the potential to be a
blockbuster hit.
UNITED TELEVISION, INC. (UTVI - $96.25 - NASDAQ) is a television broadcasting
company which owns and operates five television stations: one ABC, one NBC and
three UPN affiliates. Its stations cover approximately 6% of the U.S.
population. UTVI is a 57%-owned subsidiary of BHC Communications. Strong
advertising demand, prospects for favorable regulatory changes in the industry
and corporate cost controls will magnify EBITDA growth going forward. Our 1996
PMV is estimated at $120 per share, $23 of which is cash. UTVI's PMV is expected
to approach $200 by the year 2000.
WESTINGHOUSE ELECTRIC CORP. (WX - $18.625 - NYSE) is a multi-industry company
whose dominant focus for growth and investment is now broadcasting. The company
acquired CBS Inc. for $5.4 billion, creating the nation's largest television and
radio broadcaster. Since the acquisition, management has paid down over $4
billion in debt through asset sales, primarily of its defense electronics and
office furnishing units. The remaining industrial portfolio includes Power
Systems, Thermo King Refrigeration Unit, Government Systems, and assorted
electronics-related businesses. The company has reached an agreement to acquire
Infinity Broadcasting, a major operator of radio stations, for $3.7 billion in
stock. The merger will combine the #1 and #2 U.S. radio companies to form a
radio group colossus with a strong presence in the nation's largest radio
markets.
MINIMUM INITIAL INVESTMENT - $1,000
The Fund's minimum initial investment is $1,000. No initial minimum is
required for those establishing an Automatic Investment Plan.
INTERNET
You can now visit us on the Internet. Our home page at
http://www.gabelli.com contains information about Gabelli Funds, Inc., the
Gabelli Mutual Funds, quarterly reports, closing prices, IRAs, 401(k)s and other
current news. You can also send us e-mail at [email protected].
8
<PAGE>
IN CONCLUSION
For the time being, equities investors are basking in the glow of low
inflation, relatively low interest rates, and good, if not great corporate
profits. We remain concerned that inflation will once again rear its ugly head,
making bonds and stocks vulnerable at current levels.
Our opinions on the market remain largely immaterial to the Fund's
investment posture. Cash balances in the portfolio are a function of the
availability of stocks representing good fundamental value. Our low level of
cash reserves reflects our belief that there are still numerous value oriented
opportunities of which we will continue to take advantage.
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 GABVX. Please call us during the
day for further information.
We thank you for your confidence in our investing abilities and wish you a
productive and financially rewarding 1997.
Sincerely,
/s/ Mario J. Gabelli
Mario J. Gabelli, CFA
President and
Chief Investment Officer
November 1, 1996
----------------------------------------------------------------------
TOP TEN HOLDINGS
SEPTEMBER 30, 1996
------------------
Media General, Inc. Century Telephone Enterprises, Inc
General Electric Company Tele-Communications, Inc.
Grupo Televisa S.A. Westinghouse Electric Corp.
Chris-Craft Industries, Inc. United Television Inc.
Time Warner Inc. TCI/Liberty Media Group
----------------------------------------------------------------------
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.
9
<PAGE>
THE GABELLI VALUE FUND INC.
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(C)
- ----------- ------------
<C> <S> <C>
COMMON STOCKS--99.7%
BROADCASTING--16.9%
511,837 Chris-Craft Industries, Inc..... $ 21,369,195
75,000 Gray Communications Systems,
Inc., Class B................. 1,359,375
777,000 Grupo Televisa S.A., GDR+....... 22,435,875
110,000 Liberty Corporation............. 3,863,750
66,100 LIN Television Corporation+..... 2,710,100
100,000 New World Communications Group,
Inc. ......................... 2,312,500
100,000 Turner Broadcasting System,
Inc., Class A................. 2,850,000
130,000 United Television, Inc.......... 12,512,500
680,000 Westinghouse Electric Corp...... 12,665,000
------------
82,078,295
------------
PUBLISHING--16.5%
240,000 Golden Books Family
Entertainment, Inc.+.......... 2,790,000
74,000 McGraw-Hill Companies, Inc...... 3,154,250
2,170,000 Media General, Inc., Class A.... 68,355,000
120,000 Meredith Corporation............ 5,925,000
------------
80,224,250
------------
CONSUMER PRODUCTS--12.1%
167,200 American Brands, Inc............ 7,064,200
330,000 Carter-Wallace, Inc............. 4,083,750
77,500 Culbro Corporation+............. 4,301,250
260,000 General Electric Company........ 23,660,000
140,000 Ralston Purina Group............ 9,590,000
105,000 Syratech Corporation+........... 2,572,500
340,000 Whitman Corporation............. 7,862,500
------------
59,134,200
------------
CABLE--9.4%
180,000 Cablevision Systems Corporation,
Class A+...................... 7,830,000
80,000 General Instrument
Corporation+.................. 1,980,000
500,000 Home Shopping Network, Inc.+.... 5,187,500
300,000 International Family
Entertainment, Inc., Class
B+............................ 4,912,500
960,000 Tele-Communications, Inc., Class
A+............................ 14,340,000
399,500 Tele-Communications,
Inc./Liberty Media Group,
Class A+...................... 11,435,687
------------
45,685,687
------------
ENTERTAINMENT--7.8%
10,000 GC Companies, Inc.+............. 360,000
220,000 ITT Corporation, New+........... 9,597,500
515,000 Time Warner Inc................. 19,891,875
226,000 Viacom Inc., Class A+........... 7,966,500
------------
37,815,875
------------
WIRELESS COMMUNICATIONS--5.5%
100,000 AirTouch Communications Inc.+... 2,762,500
430,000 Century Telephone Enterprises,
Inc........................... 14,781,250
75,000 COMSAT Corporation, Series 1.... 1,696,875
100,000 Loral Space & Communications
Ltd.+......................... 1,575,000
<CAPTION>
MARKET
SHARES VALUE(C)
- ----------- ------------
<C> <S> <C>
500,000 Telecom Italia Mobile SpA+...... $ 1,109,470
115,000 Telephone and Data Systems,
Inc........................... 4,628,750
------------
26,553,845
------------
INDUSTRIAL EQUIPMENT AND
SUPPLIES--5.3%
66,000 AMP Incorporated................ 2,557,500
50,000 Ampco-Pittsburgh Corporation.... 593,750
19,000 Brad Ragan, Inc.+............... 584,250
44,000 Deere & Company................. 1,848,000
140,000 Gerber Scientific, Inc.......... 1,995,000
10,000 IDEX Corporation................ 332,500
70,000 Ingersoll-Rand Company.......... 3,325,000
95,000 Navistar International
Corporation+.................. 807,500
238,750 Pittway Corporation, Class A.... 10,654,219
30,000 Scientific-Atlanta, Inc......... 476,250
48,500 Sequa Corporation, Class A+..... 2,164,313
5,000 Sequa Corporation, Class B+..... 266,250
------------
25,604,532
------------
HOTELS/CASINOS--4.2%
430,000 Aztar Corporation+.............. 3,762,500
100,000 Circus Circus Enterprises,
Inc.+......................... 3,537,500
320,000 Hilton Hotels Corporation....... 9,080,000
160,000 Mirage Resorts, Incorporated+... 4,100,000
------------
20,480,000
------------
FOOD AND BEVERAGE--4.1%
200,000 PepsiCo, Inc.................... 5,650,000
300,000 Quaker Oats Company............. 10,987,500
40,000 Seagram Company Ltd............. 1,495,000
30,000 Wrigley (Wm.) Jr. Company....... 1,807,500
------------
19,940,000
------------
FINANCIAL SERVICES--3.4%
230,000 American Express Company........ 10,637,500
165,000 Lehman Brothers Holdings Inc.... 4,207,500
40,000 Salomon Inc..................... 1,825,000
------------
16,670,000
------------
RETAIL--2.6%
20,000 Burlington Coat Factory
Warehouse Corporation+........ 220,000
20,000 Giant Food, Inc................. 680,000
30,000 Hartmarx Corporation+........... 146,250
85,000 Lillian Vernon Corporation...... 1,062,500
300,000 Neiman Marcus Group, Inc.+...... 10,575,000
------------
12,683,750
------------
AUTOMOTIVE: PARTS AND ACCESSORIES--2.3%
20,000 Echlin Inc...................... 627,500
140,000 Federal-Mogul Corporation....... 2,957,500
162,000 Handy & Harman.................. 2,895,750
50,000 Johnson Controls, Inc........... 3,750,000
50,000 Quaker State Corporation........ 862,500
------------
11,093,250
------------
</TABLE>
10
<PAGE>
THE GABELLI VALUE FUND INC.
PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(C)
- ----------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
DIVERSIFIED INDUSTRIAL--1.8%
12,000 Brady (W.H.) Co., Class A....... $ 301,500
120,000 ITT Industries Inc.............. 2,895,000
217,500 Katy Industries, Inc............ 2,365,312
60,000 Lamson & Sessions Co.+.......... 532,500
20,000 Minnesota Mining and
Manufacturing Company......... 1,397,500
30,000 Trinity Industries, Inc......... 1,001,250
178,000 Tyler Corporation+.............. 267,000
------------
8,760,062
------------
TELECOMMUNICATIONS--1.8%
28,000 Aliant Communications Inc....... 441,000
60,000 BCE Inc......................... 2,565,000
76,000 C-TEC Corporation+.............. 1,976,000
5,000 Motorola, Inc................... 258,125
40,000 Northern Telecom Limited........ 2,310,000
30,000 Southern New England
Telecommunications
Corporation................... 1,106,250
------------
8,656,375
------------
BUSINESS SERVICES--1.4%
127,000 Berlitz International, Inc.,
New+.......................... 2,841,625
38,000 Honeywell, Inc.................. 2,398,750
134,000 Nashua Corporation.............. 1,792,250
------------
7,032,625
------------
METALS AND MINING--1.2%
65,000 Barrick Gold Corporation........ 1,633,125
60,000 Echo Bay Mines Ltd. ............ 528,750
60,000 Homestake Mining Company........ 877,500
70,000 Placer Dome Inc. ............... 1,653,750
300,000 Royal Oak Mines Inc.+........... 1,181,250
------------
5,874,375
------------
AVIATION: PARTS AND
SERVICE--0.8%
156,500 Coltec Industries Inc.+......... 2,504,000
34,000 Hudson General Corporation...... 1,360,000
------------
3,864,000
------------
REAL ESTATE--0.8%
390,000 Catellus Development
Corporation+.................. 3,851,250
------------
<CAPTION>
MARKET
SHARES VALUE(C)
- ----------- ------------
<C> <S> <C>
ENERGY--0.6%
8,000 Atlantic Richfield Company...... $ 1,020,000
30,000 Burlington Resources Inc........ 1,331,250
40,000 Southwest Gas Corporation....... 700,000
------------
3,051,250
------------
SPECIALITY CHEMICAL--0.6%
110,000 Ferro Corporation............... 2,970,000
------------
AUTOMOTIVE--0.6%
60,000 General Motors Corporation...... 2,880,000
------------
TOTAL COMMON STOCKS............. 484,903,621
------------
PREFERRED STOCK--0.1%
20,000 News Corporation Ltd., ADR,
Pfd........................... 340,000
------------
<CAPTION>
PRINCIPAL
AMOUNT
- -----------
<C> <S> <C>
CORPORATE BOND--0.1%
ENTERTAINMENT--0.1%
$ 497,000 Viacom Inc., Sub. Deb.,
8.00% due 07/07/2006.......... 464,074
------------
REPURCHASE AGREEMENT--0.2%
1,073,000 Agreement with Salomon Inc.,
5.700% due 10/01/1996(a)...... 1,073,000
------------
TOTAL INVESTMENTS
(COST $368,188,667)(b)......... 100.1% 486,780,695
OTHER ASSETS AND LIABILITIES
(NET).......................... (0.1) (342,397)
----- ------------
NET ASSETS APPLICABLE TO
38,516,169 SHARES OF COMMON
STOCK OUTSTANDING.............. 100.0% $486,438,298
===== ============
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE..................... $12.63
======
MAXIMUM OFFERING PRICE PER SHARE
($12.63/.945 BASED ON MAXIMUM SALES
CHARGE OF 5.5% OF THE OFFERING PRICE
AT SEPTEMBER 30, 1996).............. $13.37
======
</TABLE>
- ------------------------------
(a) Agreement dated 09/30/1996, to be repurchased at $1,073,170, collateralized
by $1,060,000 U.S. Treasury Note, 6.500% due 04/30/1999 (value $1,124,220).
(b) Aggregate cost for Federal tax purposes was $368,512,261. Net unrealized
appreciation for Federal tax purposes was $118,268,434 (gross unrealized
appreciation was $129,636,960 and gross unrealized depreciation was
$11,368,526).
(c) Securities traded on a national securities exchange are valued at the last
sale price as of the close of business on the day the securities are being
valued. Securities for which no sale was reported on that day and
over-the-counter securities are valued at the mean between the last reported
bid and asked prices. U.S. Government obligations and other debt instruments
with 60 days or less to maturity are valued at amortized cost which
approximates market value. Short-term investments with greater than 60 days
to maturity are valued at the highest independent bid price as quoted by
market makers.
+ Non-income producing security.
11
<PAGE>
THE GABELLI VALUE FUND INC.
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
FAX: 1-914-921-5118
HTTP://WWW.GABELLI.COM
E-MAIL: [email protected]
(Net Asset Value may be obtained daily by calling
1-800-GABELLI after 6:00 P.M.)
<TABLE>
BOARD OF DIRECTORS
<S> <C>
Mario J. Gabelli, CFA Robert J. Morrissey
Chairman and Chief Attorney-at-Law
Investment Officer Morrissey & Hawkins
Gabelli Funds, Inc.
Bill Callaghan Karl Otto Pohl
President Former President
Bill Callaghan Associates Deutsche Bundesbank
Felix J. Christiana Anthony R. Pustorino
Former Senior Vice President Certified Public Accountant
Dollar Dry Dock Savings Bank Professor, Pace University
Anthony J. Colavita
Attorney-at-Law
Anthony J. Colavita, P.C.
OFFICERS
Mario J. Gabelli, CFA Bruce N. Alpert
President and Chief Chief Operating Officer,
Investment Officer Vice President and
Treasurer
James E. McKee
Secretary
</TABLE>
CUSTODIAN
Boston Safe Deposit and Trust Company
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
LEGAL COUNSEL
Willkie Farr & Gallagher
UNDERWRITER
Gabelli & Company, Inc.
- ------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of The
Gabelli Value Fund Inc. It is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective prospectus.
- ------------------------------------------------------------------------------
[PICTURE OF MARIO GABELLI]
THE
GABELLI
VALUE
FUND
INC.
THIRD QUARTER REPORT
SEPTEMBER 30, 1996
