<PAGE>
THE GABELLI VALUE FUND INC.
One Corporate Center
Rye, New York 10580-1434
SEMI-ANNUAL REPORT
JUNE 30, 1996
TO OUR SHAREHOLDERS:
Rebounding from the inventory contraction of the previous two quarters,
the malaise of a snowy winter and political stalemate in Washington, the economy
surged ahead. Domestic profits will likely benefit despite earnings from
continental European sources being hobbled by a weaker economic backdrop and a
stronger dollar. This stronger than expected economy re-awakened long dormant
inflationary fears and a slumping bond market sounded a cautionary note for
stocks. Still, buoyed by favorable flow of funds -- investment in equity mutual
funds remained near record levels -- the Dow Jones Industrial Average and
Standard & Poors' 500 forged ahead.
INVESTMENT RESULTS (a)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Quarter
------------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
<S> <C> <C> <C> <C> <C>
1996: Net Asset Value ........ $12.88 $13.08 -- -- --
Total Return ........... 10.9% 1.6% -- -- --
- ------------------------------------------------------------------------------------------
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>
<CAPTION>
- ------------------------------------------
Average Annual Returns - June 30, 1996 (a)
<S> <C>
1 Year ........................ 23.2%
........................ 16.4%(c)
5 Year ........................ 17.5%
........................ 16.2%(c)
Life of Fund (b) .............. 13.9%
........................ 13.0%(c)
- ------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Dividend History
- -------------------------------------------------------
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 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 September 29, 1989. (c)
Includes the effect of the maximum 5.5% sales charge at beginning of period.
- --------------------------------------------------------------------------------
<PAGE>
INVESTMENT PERFORMANCE
During the second quarter ended June 30, 1996, the Gabelli Value Fund's
(the "Fund") total return was 1.6% compared to returns of 4.5%, 2.7%, and 4.0%
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. For the 12 months ended June 30, 1996,
the Fund gained 23.2% including reinvested dividends, versus 26.0% for the S&P
500, 13.9% for the Value Line Composite, and 23.9% for the Russell 2000.
For the five year period ended June 30 1996, the Value Fund's return
averaged 17.5% annually, versus average annual returns of 15.7%, 15.7%, and
17.6% for the S&P 500, Value Line Composite, and Russell 2000 Index,
respectively.
Since inception on September 29, 1989 through June 30, 1996, the Fund has
had a total return of 141.0%, which equates to an average annual return of
13.9%. As of June 30, 1996, the Fund's shareholders numbered 35,549 and total
net assets were $515.4 billion.
COMMENTARY
THE EXCITING WORLD OF FOOD RETAILING
Food retailers are dull. Who in their right mind would want to invest in a
business with such modest revenue growth and paper thin margins? Right now, we
do. There are several positive dynamics unfolding in the retail food industry,
which, for the value investor, make supermarket stocks more exciting than in the
past.
The first is wholesale food inflation. Grain prices are rising. Meat and
poultry prices will follow. Your friendly neighborhood grocer is going to pass
these higher costs on to you and tack on a little extra in the bargain. Yes,
supermarket margins generally rise during periods of wholesale food inflation.
Secondly, like most American industries, supermarkets are successfully reducing
costs through automation. More importantly, expansion has been curtailed.
Finally, just like the American banking industry, food retailing is ripe for
consolidation. Stronger supermarket chains are buying weaker chains, and this is
occurring as international food giants move into the U.S. (most recently, Royal
Ahold buying Stop & Shop) and are either operating them more cost efficiently or
simply closing the doors to eliminate unprofitable locations and increase
margins.
The end result is that the skinny margins in the industry are becoming a
little fatter. With current net after-tax margins averaging around 2% of
revenues, even modest margin improvement produces enormous earnings gains. To
wit, a 0.5% expansion in margins translates into a 25% earnings gain. That's why
smart people like Kohlberg, Kravis, and Roberts bought Bruno's, Inc. (BRNO -
$13.875 - NASDAQ) and why Royal Ahold NV of the Netherlands is buying Stop &
Shop Companies, Inc. (SHP - $33.375 - NYSE).
2
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BARRON'S 75TH SPECIAL ANNIVERSARY ISSUE
BARRON'S asked our Chief Investment Officer, Mario J. Gabelli, to discuss his
investment themes in its 75th Special Anniversary Issue. While these comments
were written in mid-February, we believe they are still valid today. Discussion
of individual companies is not necessarily reflective of the fund's entire
portfolio.
BARRON'S
75th
Grand Slam Hitting
The new international middle class will be taking
to the friendly skies, for business and pleasure.
By Mario Gabelli
[Photo]
The ancient Greek dramatist Euripides said, "The best of seers is he
who guesses well." Each year since 1980, Barron's has given me the opportunity
to sit down with a distinguished group of good guessers at the annual
Roundtable and divine what the economy, the markets and some individual stocks
would do in the year ahead. Now, in honor of Barron's 75th Anniversary, I've
been invited to stick my neck out even further and discuss several investment
themes that will theoretically enrich readers over the next five years. Fair
enough.
I will begin with the confession that over the past 20 years, our
annual macro-economic and market forecasts haven't always been right.
Fortunately for our clients and Barron's readers, our investment methodology is
not built upon accurately predicting interest-rate trends or timing the market,
but rather on picking stocks, and many of our picks have fared quite well.
One reason is that we've had a good batting average identifying trends
- -- we call them -- catalysts -- that have unlocked value in selected industry
groups. A catalyst can be a change in regulatory standards such as the original
cable television deregulation bill of 1984 that led us to lucrative investments
in cable stocks. It can be consolidation within an industry. The scramble for
filmed entertainment assets engendered by expanding distribution systems
throughout the 1980s and early 1990s inspired us to take substantial and
ultimately quite profitable positions in Warner Communications, MCA and
Paramount prior to their acquisitions by Time Inc., Matsushita and Viacom,
respectively.
Catalysts can also be corporate restructurings. The recent trend to
help realize shareholder value through the sale or spinoff of businesses has
helped us earn good returns from -- "Humpty Dumpty" companies as all the king's
horses and all the king's men help break conglomerates into pieces again. Among
them have been Tenneco, American Brands, American Express, ITT and, now, AT&T.
Over the next five years, the most powerful trend we see is the
explosive growth of the international marketplace for American goods and
services. This traces its roots to two major catalysts: the rejuvenation of
American industry spawned by a declining cost of capital and enormous
productivity gains, and the victory of global capitalism symbolized best by the
crumbling of the Berlin Wall. Good old-fashioned Yankee ingenuity has made us
more than competitive with Japan and Germany. We are now in a terrific position
to conquer new international economic frontiers.
With free-market economies evolving in China and the former Soviet
bloc, and the middle classes rapidly expanding in developing nations in Latin
America and the Pacific Rim, there will be 2.5 billion to three billion new
consumers by the turn of the century. How is this emerging international middle
class going to spend its money? If past is prologue -- and we can learn
something by looking back at the economic evolution of the great American
middle class -- the new international middle class
[Clip Art]
- --------------------
Mario Gabelli, a regular member of Barron's Roundtable since 1980, is chairman
and chief investment officer of Gabelli Funds Inc.
3
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will upgrade their food consumption habits; if it made available, they will buy
telephone service; they will spend money on entertainment, and they will travel.
Investors of our persuasion -- stockpickers, if you will -- can't talk
about investment trends without naming some names. Unlike the Roundtable, where
we are constantly prodded both by BARRON's and our colleagues to fill in the
fundamental blanks on individual stock selections, I won't be providing hard
data on the companies I mention in this article. Nor will I make predictions
about short-term earnings and cash flow. That said, consistent with our
Graham-and-Dodd-oriented value philosophy, we would like to own the businesses
named here for the long term.
It's Not Chickenfeed: Let's start in, of all places, Iowa. The American
grains farmer is the most productive in the world. Iowa is agriculturally
state-of-the-art. Let me give you a hypothetical example. There are seven
ounces of grain needed to produce one ounce of meat at market. If chicken or
pork consumption in China were to increase by one ounce per capita, and Iowa
were to produce all the grain used to fatten these Chinese chickens and hogs,
on a gross national product basis, Iowa would be among the richest countries in
the world. This may be perceived as a silly example. But its purpose is to call
attention to the tremendous upside potential for American grain farmers and
vendors to those farmers. Agricultural equipment manufacturers like JOHN DEERE,
companies that move grains to shipping centers, like ARCHER-DANIELS-MIDLAND,
and irrigation-equipment makers like LINDSAY MANUFACTURING should all be
long-term beneficiaries of the increased role the American farmer will play in
feeding the world.
Dialing for Dollars: Once the new international consumer puts some more
meat on the table, what else would make his or her life better? Being able to
call friends and family on the telephone would be a big step forward. In fact,
you could argue that telecommunications is both the engine and the caboose in
the emergence of the international middle class. To compete on the global
stage, businesses in developing countries need healthy stock markets to attract
global capital. Modern telecommunications systems are a prerequisite. As
efficient telecommunications systems further enhance economic growth and expand
the middle class, the demand for more universal telephone service increases.
Here, we need to tip our hat to Craig McCaw's evolutionary theory of time and
space, which effectively jump-started the cellular telephone industry. And
when it comes to developing countries, it is wireless service that will help
bring telecommunications services at reasonable prices.
Arguably, telecommunications is the No. 1 global growth industry for the
next decade or more. Consequently, long-term investors will not have to be
terribly discriminating to earn pretty good returns in this sector. But rather
than take a scattershot approach, investors might maximize their returns by
focusing on those segments of the industry that will grow the fastest and the
dominant players therein. The big three U.S. long distance companies, AT&T, MCI
and SPRINT, are rapidly developing the strategic alliances with national and
local carriers around the world that should allow them to dominate the
international long-distance market. Telecommunications equipment manufacturers
like LUCENT, the spinoff from AT&T, and NORTHERN TELECOM will play a big role
in wiring the world. Suppliers of advanced cable equipment like SCIENTIFIC
ATLANTA also have terrific international growth prospects. On the wireless
side, cellular-phone makers like MOTOROLA and NOKIA should thrive. A special
mention should go to AIRTOUCH, which has done a terrific job winning
joint-venture cellular-telephone franchises throughout Europe. Two other
cellular investments worth considering are 360 COMMUNICATIONS, which is the
domestic cellular spinoff from SPRINT, and Britain's VODAFONE.
If you favor a more focused "special situation" approach, the Canadian
telephone giant BCE should benefit when it sells off its substantial investment
in NORTHERN TELECOM and as Canadian deregulation catches up to the rest of the
world. On a per-capita basis, the Vancouver metropolitan area has the highest
concentration of expatriate Chinese in North America. This could prove to be a
great "gateway to China."
Global Eyeballs: No American products travel better than filmed
entertainment and pre-recorded music. Several years ago, the investor relations
people at TIME WARNER were kind enough to give us a tape of Warner cartoon
characters providing a global geography lesson dubbed in a dozen foreign
languages. We've used this tape at our annual client meeting to illustrate the
global reach of the American entertainment industry. There is simply no place
you can go in the world without American film being a staple of cinematics,
cable TV or broadcast entertainment. The same goes for music. Just look at the
convergence of the computer, telephone and cable television industries in the
U.S. Overseas opportunities beckon as well. In the past five years alone, the
number of satellite dishes in India has gone from 400,000 to 10 million. As the
distribution channels expand worldwide, the value of entertainment will
continue to increase.
With the consolidation we've already experienced in the filmed
entertainment industry, there are fewer ways to participate. TIME WARNER is a
dominant global company in both filmed entertainment and pre-recorded music.
Assuming the marriage with TURNER BROADCASTING is consummated, Time could
become an international cable TV powerhouse as well. The stock price has been
restrained by concerns about Time's debt, the unwinding of what has become an
acrimonious relationship with US WEST, and the uncertain prospects for Time
Warner's huge cable television operations. Investors are currently blind to the
forest through the trees on this one. In the long run, however, we are
confident the market will reorganize Time Warner's pre-eminent global position
in entertainment software.
Other beneficiaries of this favorable long-term trend for entertainment
software producers and packagers also include VIACOM -- the world wants its
MTV; SEAGRAM, the new owner of MCA, and LIBERTY MEDIA, John Malone's
combination of TELE-COMMUNICATIONS INC.'s cable network investments.
Up, Up and Away: Air traffic is tremendously sensitive to increases in
personal income. The new international middle class will be taking to the
friendly skies. They will fly for business, and they will fly for pleasure.
Over the next five years, you could probably make a lot of money investing in
international airline stocks. But it will be less complicated and perhaps just
as profitable investing in Boeing, which along with Europe's Airbus consortium,
will build the foreign fleets to accommodate increasing air traffic abroad.
We are almost right at the bottom of a five-year down cycle in the
aircraft industry. Industry studies indicate that in the next 20 years, there
will be 12,000 new aircraft built to satisfy incremental global demand and
4,000 to replace aircraft that will be retired because they are too old or
fuel-inefficient or don't meet new noise-control requirements. That's 16,000 new
4
<PAGE>
airplanes to be built over the next two decades. Boeing, which is a
technological leader, will get the lion's share of orders.
Another option is to invest in vendors to Boeing. There are very few
pure plays in this arena, but companies deriving a material volume of revenues
from commercial aerospace include AMETEK, PRECISION CASTPARTS, MOOG, CRANE, SPS
TECHNOLOGIES, HONEYWELL and CURTISS-WRIGHT. SEQUA CORP., whose Chromalloy
division is a leader in jet engine maintenance and repair, would be a good
"aging of the existing fleet" play.
The Deal: Another global dynamic that isn't new, but is far from
finished, is strategic merger-and-acquisition activity. At the 1995 Roundtable,
I said there would be a ton of deals done in the year ahead. It worked out to
be $458 billion in deals in the U.S. and $866 billion globally. I don't know
that we will see that kind of record volume this year, but you will see some
big numbers. Why? The world is awash in liquidity, rising equity markets make
stock a more valuable currency and, most importantly, it is still cheaper to
buy businesses on global stock markets than it is to build them from scratch.
How do you take advantage of this long-term trend? I am going to
unabashedly preach for my own church here. As Benjamin Graham and his
successor at Columbia, Roger Murray, instructed us, and as Warren Buffett has
put so profitably into practice, you approach stocks as if they were pieces of
a business you want to buy at a discount to what Graham called intrinsic value,
others call economic value, and what years ago was termed "private market
value."
How do you go about quantifying value? We believe free cash flow,
defined as earnings before interest, taxes and depreciation (EBITD), or a
slight variation, EBITDA, both minus the capital expenditures necessary to grow
the business, is the best barometer of a company's value. Most corporate
merger-and-acquisition people look at the very same thing. When the informed
industrialist is evaluating a business for purchase, he or she is not going to
put a lot of weight on stated book value. That's for accountants, not for savvy
buyers of businesses. They probably don't care much about net earnings. Clever
corporate managements can be creative in booking earnings. What that informed
industrialist wants to know is: How much cash is this business throwing off
today and how much is he going to have to invest in this business to sustain or
grow this stream of cash in the future?
There are other factors in determining a stock's private market value.
Cost of capital always affects a company's values. That's why stocks tend to be
valued lower when interest rates rise. Cash flow growth rates will alter
values, too. Just as growth-stock investors will pay a higher price-to-earnings
ratio for higher earnings growth, private-market-value investors will pay a
higher multiple of cash flow for faster cash-flow growth. Finally,
sophisticated business buyers will look beyond the balance sheet for hidden
assets--valuable land on the books at original cost or an overfunded pension
plan--as well as hidden liabilities, like unfunded health-care responsibilities
or potentially costly environmental problems.
By doing this kind of analysis of income statements and balance sheets,
and checking out all those little footnotes attached, and keeping an eye on the
prices businesses are being bought and sold at every day out there in the real
world, you can quantify the value of a business or group of businesses. You can
usually find fundamental bargains--stocks selling at substantial discounts to
private market value. Then you have to ask the subjective questions: Who might
want to own this company? Would management be receptive to a takeover proposal?
Are the target company's assets so unique that someone might pay well above
fair value?
If you can come up with some positive answers to questions like these,
you may well have found yourself a terrific takeover candidate.
Don't Expect Too Much: Lastly, some comments on the longer-term
prospects for equities. I'm not talking about what is going to happen to the
market over the next quarter or even the next several years. However, I do
think investors should have some perspective on what they can expect. The
average annualized return on equities over the last 15 years, as measured by
the S&P 500, is 14.8%. That's almost 50% above the historical return on stocks
on an annualized basis. When you compound this out 10 years, the differential
is staggering. Will we see the same kind of returns from stocks over the next
15 years? I wouldn't bet the ranch on it. Sooner or later, this roaring bull
market will end, either with a substantial correction or a bear market, or
preferably, an extended period of much more modest returns.
How should today's investor prepare for this? I would start by
adjusting expectations. When making financial planning assumptions, use
conservative return figures for equities, and save and invest accordingly. In
other words, if you are putting a given amount of dollars into equities and
assuming that it will compound at 15% a year over the next 10-20 years, you
will likely find your children's college fund or your retirement nest egg more
than a little short.
Secondly, you might want to look at alternative investment strategies.
Market-neutral disciplines like risk arbitrage, which is capable of delivering
low- to mid-double-digit annualized returns regardless of the direction of the
broad equities market, should be considered. This will be particularly
rewarding if what we have characterized as the third great wave of mergers
continues as long as we expect it to.
Finally, although one can play many global trends from the relative
comfort of the New York Stock Exchange, investors should internationalize their
portfolios. Twenty-five years ago, U.S. equities represented 66% of the
capitalization of the total global equities market. Today it is 38%. Twenty
years ago, only the most adventurous Americans would invest in places like
Spain or Italy. Today, there are billions of American dollars in emerging
markets in Latin America and the Pacific Rim. It has always been my inclination
to challenge the conventional wisdom. But I do think there is some legitimacy
to the idea that many foreign economies will grow faster than the U.S., and
that returns from foreign equities markets will trend higher than our own.
5
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THE CONSOLIDATORS
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
Company (AXP - $44.625 - NYSE), Tom Hays at American Brands, Inc. (AMB - $45.375
- - NYSE) and Bob Allen at AT&T Corp. (T - $62.00 - NYSE) have already
demonstrated the positive impact that consolidation has on stock prices.
Westinghouse Electric Corp.'s (WX - $18.75 - NYSE) Michael Jordan appears to be
following their lead with the acquisition of Infinity Broadcasting Corporation
(INF - $30.00 - NYSE) to compliment the CBS radio network and the revelation
that he is considering spinning off 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 fragmented trash hauling industry with Waste
Management International Inc. (WME - $11.125 - NYSE). He repeated the pattern in
the video rental business via Blockbuster Entertainment. Now, under the
corporate banner of Republic Industries, Inc. (RWIN - $29.125 - 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 and, of course, health care.
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]
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
6
<PAGE>
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 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.
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 47% of the portfolio at June 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.
7
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Chris-Craft Industries, Inc. (CCN - $44.00 - 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 over $1.5 billion in cash and
marketable securities, is strongly positioned to expand its operations. CCN is
the eighth-largest TVstation group owner in the U.S. and covers almost 20% of TV
households.
[GRAPHIC]
General Electric Company (GE - $86.50 - NYSE), having an equity market valuation
of $145 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. 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 - $30.75 - 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 been hurt in line with the
Mexican market and economy, but nevertheless, remains the best vehicle for
accessing the growth of disposable income among the Spanish speaking population
on a global basis. The business mix includes film, music, cable television, and
broadcasting. The stock market does not appear to be giving appropriate
attention to the company's holdings in PanAmSat Corporation (SPOT - $29.00 -
NASDAQ) and Univision.
Hilton Hotels Corporation (HLT - $112.50 - NYSE) is a major lodging and gaming
company. Throughout the United States, Hilton owns and manages approximately 23
hotels, manages 40 hotels owned by others and franchises the Hilton name to
hotel operators for 160 properties. Hilton's hotels include the Waldorf-Astoria
(New York) (owned), the Beverly Hilton (Los Angeles) (franchise), the Chicago
Hilton (franchise) and a 50% interest in Hilton Hawaiian Village. HLT's
international hotel business is operated under the Conrad name. (Hotels bearing
the "Hilton" name outside the U.S. are properties of the British company
Ladbroke Group, plc.) HLT operates gaming properties, primarily in Nevada,
including the Flamingo and the Las Vegas Hilton, two casino-hotels in Reno and
one in Laughlin. HLT's Nevada properties have over 11,000 rooms and 364,000
square feet of gaming space. Steve Bollenbach, the new President and CEO, has
joined the company from Walt Disney Co. He has sparked renewed interest in HLT,
particularly in his enterprising move to acquire, for $2 billion in stock, Bally
Entertainment Corp.
Media General, Inc. (MEG'A - $37.25 - ASE) (our largest holding, representing
15.7% of net assets) 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
8
<PAGE>
increasing the franchise values of strong, well-positioned media properties such
as those owned by Media General.
Time Warner Inc. (TWX - $39.25 - NYSE), in a bold and brilliant tactic, is
endeavoring to acquire Turner Broadcasting Systems Inc. for $7.5 billion.
Management is currently working to obtain governmental approval of the
transaction. At the same time, efforts are underway to restructure TWX's
partnership with U.S. West Media Group. The acquisition would make TWX the
largest diversified media and publishing company in the world, adding a wealth
of programming to a company already rich in entertainment content. Time Warner
is redirecting its operations into two general areas: copyright and creativity,
which includes publishing, music and filmed entertainment, and distribution,
which is mostly cable. Its two summer movie hits are Twister and Eraser. Under
the aegis of Gerald M. Levin, investors can expect significant returns over the
rest of the decade.
Tele-Communications, Inc. (TCOMA - $18.125 - 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 recent 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
telephony joint-venture with Sprint to its innovative Internet access
business, dubbed "@ Home", to its 80% ownershipof Tele-Communications
International.
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.
GABELLI U.S. TREASURY MONEY MARKET FUND
Shareholders of any of the Gabelli Funds may invest in The Gabelli U.S.
Treasury Money Market Fund with an initial investment of $3,000 or more. The
Fund provides checkwriting and exchange privileges. The Fund's expenses are
capped at .30% of average net assets, making it one of the most attractive U.S.
Treasury-only money market funds. With dividends that are exempt from state and
local income taxes in all states, the Fund is an excellent vehicle in which to
store idle cash. An investment in The Gabelli U.S. Treasury Money Market Fund is
neither insured nor guaranteed by the U.S. Government. There can be no assurance
that the Fund will maintain a stable $1 per share net asset value. Call us at
1-800-GABELLI (1-800-422-3554) for a prospectus which gives a more complete
description of the Fund, including management fees and expenses. Read it
carefully before you invest or send money.
INTERNET
You can now visit us on the Internet. Our home page at
http://www.gabelli.com contains information about Gabelli Funds, Inc., the
Gabelli Mutual Funds, quarterly reports, closing prices, IRAs, 401(k)s and other
current news. You can also send us e-mail at [email protected].
9
<PAGE>
IN CONCLUSION
At the beginning of 1996, we forecast that higher than expected inflation
and rising long-term interest rates would restrain stock returns. Our economic
forecast has proved remarkably accurate. Thus far, the market has largely
ignored these economic signs and marched steadily forward. Whether it will
continue to do so in the second half is questionable.
As always, we are focusing on the individual stocks in the Fund's
portfolio. By concentrating on niche industry groups and individual companies
that can do well independent of prevailing economic and broad market trends, we
believe we are well positioned to prosper, even in a less generous market
environment. Our investment philosophy is simple and straightforward: buying
good businesses cheap will generate consistently superior returns.
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 1996.
Sincerely,
/s/ Mario J. Gabelli
------------------------
MARIO J. GABELLI, CFA
President and
Chief Investment Officer
August 1, 1996
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
JUNE 30, 1996
Media General, Inc. Tele-Communications, Inc.
Grupo Televisa S.A. Community Health Systems, Inc.
General Electric Company Hilton Hotels Corporation
Chris-Craft Industries, Inc. Century Telephone Enterprises, Inc
Time Warner Inc. Westinghouse Electric Corp.
- --------------------------------------------------------------------------------
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.
10
<PAGE>
THE GABELLI VALUE FUND INC.
PORTFOLIO OF INVESTMENTS -- JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ----------- ------------ ------------
<C> <S> <C> <C>
COMMON STOCKS--98.8%
PUBLISHING--17.9%
240,000 Golden Books Family
Entertainment,
Inc.+................ $ 3,727,751 $ 2,880,000
74,000 McGraw-Hill Companies,
Inc.................. 2,581,357 3,385,500
2,170,000 Media General, Inc.,
Class A.............. 47,907,175 80,832,500
118,000 Meredith Corporation... 4,613,870 4,926,500
------------ ------------
58,830,153 92,024,500
------------ ------------
BROADCASTING--15.5%
511,837 Chris-Craft Industries,
Inc.................. 13,819,204 22,520,828
758,000 Grupo Televisa S.A.,
GDR+................. 16,631,737 23,308,500
110,000 Liberty Corporation.... 2,631,819 3,492,500
66,100 LIN Television
Corporation+......... 1,791,928 2,379,600
100,000 Turner Broadcasting
System, Inc.,
Class A............. 1,540,938 2,700,000
126,000 United Television,
Inc.................. 11,014,683 12,348,000
700,000 Westinghouse Electric
Corp................. 10,688,778 13,125,000
------------ ------------
58,119,087 79,874,428
------------ ------------
CONSUMER PRODUCTS--11.6%
125,000 American Brands,
Inc.................. 5,117,053 5,671,875
300,000 Carter-Wallace, Inc.... 4,183,581 4,387,500
74,000 Culbro Corporation+.... 2,005,426 4,412,250
265,000 General Electric
Company.............. 13,424,936 22,922,500
165,000 Ralston Purina Group... 7,488,615 10,580,625
100,000 Syratech
Corporation+......... 1,767,238 2,250,000
24,000 Tambrands Inc.......... 922,700 981,000
344,300 Whitman Corporation.... 2,773,862 8,306,237
------------ ------------
37,683,411 59,511,987
------------ ------------
CABLE--9.2%
180,000 Cablevision Systems
Corporation,
Class A+............. 9,753,292 8,325,000
80,000 General Instrument
Corporation+......... 2,140,385 2,310,000
280,000 Home Shopping Network,
Inc.+................ 2,432,164 3,360,000
281,000 International Family
Entertainment, Inc.,
Class B+............. 4,431,275 5,198,500
<CAPTION>
MARKET
SHARES COST VALUE
- ----------- ------------ ------------
<C> <S> <C> <C>
960,000 Tele-Communications,
Inc., Class A+....... $ 10,468,544 $ 17,400,000
399,500 Tele-Communications,
Inc./Liberty Media
Group, Class A+...... 7,708,479 10,586,750
------------ ------------
36,934,139 47,180,250
------------ ------------
ENTERTAINMENT--5.4%
520,000 Time Warner Inc........ 19,242,016 20,410,000
200,000 Viacom Inc.,
Class A+............. 4,578,115 7,625,000
------------ ------------
23,820,131 28,035,000
------------ ------------
INDUSTRIAL EQUIPMENT AND SUPPLIES--5.0%
50,000 AMP Incorporated....... 1,944,240 2,006,250
50,000 Ampco-Pittsburgh
Corporation.......... 250,018 587,500
19,000 Brad Ragan, Inc.+...... 459,325 584,250
44,000 Deere & Company........ 767,633 1,760,000
140,000 Gerber Scientific,
Inc.................. 1,080,076 2,257,500
70,000 Ingersoll-Rand
Company.............. 2,609,907 3,062,500
150,000 Navistar International
Corporation+......... 2,897,463 1,481,250
238,750 Pittway Corporation,
Class A.............. 1,747,980 11,101,875
30,000 Scientific-Atlanta,
Inc.................. 545,488 465,000
48,500 Sequa Corporation,
Class A+............. 1,489,009 2,091,563
5,000 Sequa Corporation,
Class B+............. 189,250 250,000
------------ ------------
13,980,389 25,647,688
------------ ------------
WIRELESS COMMUNICATIONS--4.9%
100,000 AirTouch Communications
Inc.+................ 2,299,273 2,825,000
430,000 Century Telephone
Enterprises, Inc..... 8,640,669 13,706,250
20,000 COMSAT Corporation,
Series 1............. 476,000 520,000
140,000 Loral Space &
Communications
Ltd.+................ 1,687,000 1,907,500
500,000 Telecom Italia
Mobile SpA+.......... 655,379 1,118,002
110,000 Telephone and Data
Systems, Inc......... 4,525,137 4,950,000
15,001 360(++) Communications
Company+............. 309,218 360,024
------------ ------------
18,592,676 25,386,776
------------ ------------
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
THE GABELLI VALUE FUND INC.
PORTFOLIO OF INVESTMENTS (CONTINUED) -- JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ----------- ------------ ------------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
HOTELS/CASINOS--4.7%
200,000 Aztar Corporation+..... $ 832,697 $ 2,300,000
100,000 Circus Circus
Enterprises, Inc.+... 2,690,916 4,100,000
122,000 Hilton Hotels
Corporation.......... 7,579,925 13,725,000
80,000 Mirage Resorts,
Incorporated+........ 1,606,412 4,320,000
------------ ------------
12,709,950 24,445,000
------------ ------------
FOOD AND BEVERAGE--4.0%
250,000 PepsiCo, Inc........... 7,963,825 8,843,750
260,000 Quaker Oats Company.... 8,778,632 8,872,500
40,000 Seagram Company Ltd.... 1,090,750 1,345,000
30,000 Wrigley (Wm.) Jr.
Company.............. 1,517,512 1,515,000
------------ ------------
19,350,719 20,576,250
------------ ------------
RETAIL--3.9%
20,000 Burlington Coat
Factory Warehouse
Corporation+......... 248,188 210,000
30,000 Hartmarx
Corporation+......... 205,875 187,500
60,000 Lillian Vernon
Corporation.......... 823,625 765,000
280,000 Neiman Marcus
Group, Inc.+......... 4,721,338 7,560,000
340,000 Stop & Shop Companies,
Inc.................. 11,265,070 11,347,500
------------ ------------
17,264,096 20,070,000
------------ ------------
FINANCIAL SERVICES--3.4%
245,000 American Express
Company.............. 5,690,674 10,933,125
180,000 Lehman Brothers
Holdings Inc......... 3,190,250 4,455,000
50,000 Salomon Inc............ 2,064,979 2,200,000
------------ ------------
10,945,903 17,588,125
------------ ------------
HEALTH CARE--3.2%
323,500 Community Health
Systems, Inc.+....... 16,790,601 16,741,125
------------ ------------
DIVERSIFIED INDUSTRIAL--1.7%
12,000 Brady (W.H.) Co.,
Class A.............. 185,602 267,000
120,000 ITT Industries Inc..... 2,858,725 3,015,000
217,500 Katy Industries,
Inc.................. 1,818,150 3,262,500
<CAPTION>
MARKET
SHARES COST VALUE
- ----------- ------------ ------------
<C> <S> <C> <C>
60,000 Lamson & Sessions
Co.+................. $ 341,438 $ 712,500
30,000 Trinity Industries,
Inc.................. 361,680 1,020,000
178,000 Tyler Corporation+..... 519,950 489,500
------------ ------------
6,085,545 8,766,500
------------ ------------
TELECOMMUNICATIONS--1.6%
50,000 BCE Inc................ 1,640,450 1,975,000
76,000 C-TEC Corporation+..... 1,270,000 2,261,000
28,000 Lincoln
Telecommunications
Company.............. 375,125 458,500
5,000 Motorola, Inc.......... 66,111 314,375
40,000 Northern Telecom
Limited.............. 1,517,750 2,175,000
30,000 Southern New England
Telecommunications
Corporation.......... 921,603 1,260,000
------------ ------------
5,791,039 8,443,875
------------ ------------
AUTOMOTIVE: PARTS AND ACCESSORIES--1.4%
2,200 Echlin Inc............. 80,410 83,325
162,000 Handy & Harman......... 2,463,263 2,754,000
50,000 Johnson Controls,
Inc.................. 1,390,779 3,475,000
50,000 Quaker State
Corporation.......... 570,157 750,000
------------ ------------
4,504,609 7,062,325
------------ ------------
BUSINESS SERVICES--1.3%
130,000 Berlitz International,
Inc., New+........... 1,958,460 2,762,500
3,000 Dun & Bradstreet
Corp. ............... 185,275 187,500
38,000 Honeywell, Inc......... 1,652,202 2,071,000
135,000 Nashua Corporation..... 5,455,523 1,721,250
------------ ------------
9,251,460 6,742,250
------------ ------------
METALS AND MINING--1.2%
65,000 Barrick Gold
Corporation.......... 1,826,631 1,763,125
60,000 Echo Bay Mines Ltd. ... 755,625 645,000
60,000 Homestake Mining
Company.............. 1,181,500 1,027,500
70,000 Placer Dome Inc........ 1,728,613 1,671,250
300,000 Royal Oak Mines
Inc.+................ 1,279,299 1,106,250
------------ ------------
6,771,668 6,213,125
------------ ------------
AUTOMOTIVE--0.8%
77,000 General Motors
Corporation.......... 3,184,913 4,032,875
------------ ------------
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
THE GABELLI VALUE FUND INC.
PORTFOLIO OF INVESTMENTS (CONTINUED) -- JUNE 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
- ----------- ------------ ------------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
ENERGY--0.7%
20,000 Atlantic Richfield
Company.............. $ 2,050,080 $ 2,370,000
30,000 Burlington Resources
Inc.................. 1,226,301 1,290,000
------------ ------------
3,276,381 3,660,000
------------ ------------
SPECIALITY CHEMICAL--0.6%
110,000 Ferro Corporation...... 2,046,238 2,915,000
------------ ------------
REAL ESTATE--0.5%
310,000 Catellus Development
Corporation+......... 2,453,827 2,828,750
------------ ------------
AVIATION: PARTS AND SERVICE--0.3%
30,000 Coltec Industries
Inc.+................ 411,500 427,500
34,000 Hudson General
Corporation.......... 625,007 1,202,750
------------ ------------
1,036,507 1,630,250
------------ ------------
TOTAL COMMON STOCKS................. 369,423,442 509,376,079
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT COST VALUE
- ----------- ------------ ------------
<C> <S> <C> <C>
CORPORATE BOND--0.1%
ENTERTAINMENT--0.1%
$ 497,000 Viacom Inc., Sub.
Deb., 8.00%
due 07/07/2006...... $ 322,429 $ 460,036
------------ ------------
REPURCHASE AGREEMENT--1.3 %
6,688,000 Agreement with Salomon
Inc., 5.45% due
07/01/1996(a)....... 6,688,000 6,688,000
------------ ------------
TOTAL INVESTMENTS........ 100.2% $376,433,871(b) 516,524,115
===========
OTHER ASSETS AND
LIABILITIES (NET)...... (0.2) (1,102,420)
----- ------------
NET ASSETS............... 100.0% $515,421,695
===== ===========
</TABLE>
- ------------------------------
(a) Agreement dated 06/28/1996, to be repurchased at $6,691,037, collateralized
by $5,390,000 U.S. Treasury Note, 9.25% due 02/15/2016 (value $7,023,410).
(b) Aggregate cost for Federal tax purposes was $376,757,465. Net unrealized
appreciation for Federal tax purposes was $139,766,650 (gross unrealized
appreciation was $148,301,324 and gross unrealized depreciation was
$8,534,674).
+ Non-income producing security
GDR--Global Depositary Receipt
See Notes to Financial Statements.
13
<PAGE>
THE GABELLI VALUE FUND INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $376,433,871)...... $516,524,115
Cash........................................... 3,404
Dividends and interest receivable.............. 270,245
Receivable for Fund shares sold................ 134,567
-----------
Total Assets................................. 516,932,331
-----------
LIABILITIES:
Payable for investment advisory fee............ 423,573
Payable for Fund shares redeemed............... 324,097
Accrued shareholder communications expense..... 240,756
Payable for distribution fees.................. 227,000
Payable for shareholder services fees.......... 108,250
Payable for investments purchased.............. 80,410
Accrued Directors' fees........................ 21,000
Accrued expenses and other payables............ 85,550
-----------
Total Liabilities............................ 1,510,636
-----------
Net assets applicable to 39,409,680 shares of
common stock outstanding................... $515,421,695
===========
NET ASSETS CONSIST OF:
Shares of common stock at par value............ $ 39,410
Additional paid-in capital..................... 355,480,625
Accumulated net realized gain on investments... 20,008,701
Accumulated net investment loss................ (197,505)
Net unrealized appreciation of investments..... 140,090,464
-----------
Total Net Assets............................. $515,421,695
===========
Net Asset Value and redemption price per share
($515,421,695 / 39,409,680 shares out-
standing; 300,000,000 shares authorized of
$0.001 par value).......................... $13.08
=====
Maximum offering price per share
($13.08 / .945, based on maximum sales
charge of 5.5% of the offering price at
June 30, 1996)............................. $13.84
=====
</TABLE>
- -------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
- -------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income (net of foreign withholding
taxes of $18,885)............................. $ 2,567,080
Interest income................................. 849,673
----------
Total Investment Income....................... 3,416,753
----------
EXPENSES:
Investment advisory fee......................... 2,582,560
Distribution fees............................... 646,102
Shareholder services fees....................... 175,823
Directors' fees................................. 38,613
Legal and audit fees............................ 34,087
Other........................................... 137,073
----------
Total Expenses................................ 3,614,258
----------
NET INVESTMENT LOSS............................... (197,505)
----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS:
Net realized gain on securities sold............ 21,204,590
Net realized loss on futures transactions....... (741,577)
Net realized gain on foreign currency
transactions.................................. 189
----------
Net realized gain on investments.............. 20,463,202
----------
Net unrealized appreciation of securities,
foreign currency and other assets and
liabilities:
Beginning of period........................... 98,878,573
End of period................................. 140,090,464
----------
Change in net unrealized appreciation of
securities, foreign currency and other
assets and liabilities.................... 41,211,891
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS... 61,675,093
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS...................................... $61,477,588
==========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED 6/30/96 ENDED
(UNAUDITED) 12/31/95
------------- ------------
<S> <C> <C>
Net investment income/(loss)...................................................................... $ (197,505 ) $ 2,002,360
Net realized gain on investments.................................................................. 20,463,202 46,633,649
Net change in unrealized appreciation of investments.............................................. 41,211,891 45,158,696
------------ ------------
Net increase in net assets resulting from operations.............................................. 61,477,588 93,794,705
Distributions to shareholders from:
Net investment income........................................................................... -- (1,998,027)
Net realized gain on investments................................................................ -- (45,317,754)
Net increase/(decrease) in net assets from Fund share transactions................................ (32,200,186 ) 3,036,372
------------ ------------
Net increase in net assets........................................................................ 29,277,402 49,515,296
NET ASSETS:
Beginning of period............................................................................... 486,144,293 436,628,997
------------ ------------
End of period..................................................................................... $515,421,695 $486,144,293
============ ============
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
THE GABELLI VALUE FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES. The Gabelli Value Fund Inc. (the "Fund")
was organized on July 20, 1989 as a Maryland corporation. The Fund is a
non-diversified, open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), whose primary
objective is long-term capital appreciation. The Fund commenced operations on
September 29, 1989. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities which are traded only on a nationally
recognized securities exchange or in the over-the-counter market which are
National Market System Securities are valued at the last sale price as of the
close of business on the day the securities are being valued, or lacking any
sales, at the mean between closing bid and asked prices. Other over-the-counter
securities are valued at the most recent bid prices as obtained from one or more
dealers that make markets in the securities. Portfolio securities which are
traded both in the over-the-counter market and on a stock exchange are valued
according to the broadest and most representative market, as determined by
Gabelli Funds, Inc. (the "Adviser"). Securities and assets for which market
quotations are not readily available are valued at fair value as determined in
good faith by or under the direction of the Board of Directors of the Fund.
Short-term investments that mature in more than 60 days are valued at the
highest bid price obtained from a dealer maintaining an active market in that
security. U.S. government securities and other debt instruments that mature in
60 days or fewer are valued at amortized cost, unless the Board of Directors
determines that such valuation does not constitute fair value. Debt instruments
having a greater maturity are valued at the highest bid price obtained from a
dealer maintaining an active market in those securities or on the basis of
prices obtained from a pricing service approved as reliable by the Board of
Directors.
REPURCHASE AGREEMENTS. The Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
This arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Fund's holding period. The value of the collateral is at
least equal at all times to the total amount of the repurchase obligations,
including interest. In the event of counterparty default, the Fund has the right
to use the collateral to offset losses incurred. There is potential loss to the
Fund in the event the Fund is delayed or prevented from exercising its rights to
dispose of the collateral securities, including the risk of a possible decline
in the value of the underlying securities during the period while the Fund seeks
to assert its rights. The Adviser, acting under the supervision of the Board of
Directors, reviews the value
15
<PAGE>
THE GABELLI VALUE FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
of the collateral and the creditworthiness of those banks and dealers with which
the Fund enters into repurchase agreements to evaluate potential risks.
FUTURES CONTRACTS. The Fund may engage in futures contracts for the purpose of
hedging against changes in the value of its portfolio securities and in the
value of securities it intends to purchase. Upon entering into a futures
contract, the Fund is required to deposit with the broker an amount of cash or
cash equivalents equal to a certain percentage of the contract amount. This is
known as the "initial margin." Subsequent payments ("variation margin") are made
or received by the Fund each day, depending on the daily fluctuation of the
value of the contract. The daily changes in the contract are recorded as
unrealized gains or losses. The Fund recognizes a realized gain or loss when the
contract is closed.
There are several risks in connection with the use of futures contracts as a
hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in value of the hedged investments. In addition, there is the risk that
the Fund may not be able to enter into a closing transaction because of an
illiquid secondary market.
FOREIGN CURRENCY. The books and records of the Fund are maintained in United
States (U.S.) dollars. Foreign currencies, investments and other assets and
liabilities are translated into U.S. dollars at the exchange rates prevailing at
the end of the period, and purchases and sales of investment securities, income
and expenses are translated on the respective dates of such transactions.
Unrealized gains and losses, not relating to securities, which result from
changes in foreign currency exchange rates have been included in unrealized
appreciation/depreciation of foreign currency and other assets and liabilities.
Unrealized gains and losses of securities, which result from changes in foreign
exchange rates as well as changes in market prices of securities, have been
included in unrealized appreciation/depreciation of investment securities. Net
realized foreign currency gains and losses resulting from changes in exchange
rates include foreign currency gains and losses between trade date and
settlement date on investment securities transactions, foreign currency
transactions and the difference between the amounts of interest and dividends
recorded on the books of the Fund and the amounts actually received. The portion
of foreign currency gains and losses related to fluctuation in exchange rates
between the initial trade date and subsequent sale trade date is included in
realized gain/(loss) on investments sold.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for on the trade date with realized gain or loss on investments
determined using specific identification as the cost method. Interest income
(including amortization of premium and accretion of discount) is recorded as
earned.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividend income and dividends and
distributions to shareholders are recorded on the ex-dividend date. Income
distributions and capital gain distributions
16
<PAGE>
THE GABELLI VALUE FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
are determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily due to
differing treatments of income and gains on various investment securities held
by the Fund, timing differences and differing characterization of distributions
made by the Fund.
PROVISION FOR INCOME TAXES. The Fund has qualified and intends to continue to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. As a result, a Federal income tax provision is
not required.
2. AGREEMENTS WITH AFFILIATED PARTIES. The Fund has entered into an investment
advisory agreement (the "Advisory Agreement") with the Adviser which provides
that the Fund will pay the Adviser a fee, computed daily and paid monthly, at
the annual rate of 1.00 percent of the value of the Fund's average daily net
assets. In accordance with the Advisory Agreement, the Adviser manages the
Fund's portfolio, makes investment decisions for the Fund, places orders to
purchase and sell securities of the Fund, and oversees the administration of all
aspects of the Fund's business and affairs. The Adviser is obligated to
reimburse the Fund in the event the Fund's expenses exceed the most restrictive
expense ratio limitation imposed by any state. No such reimbursement was
required during the six months ended June 30, 1996.
3. DISTRIBUTION PLAN. The Fund has adopted a plan of distribution (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund pays Gabelli
& Company, Inc. ("Gabelli & Company"), an indirect majority-owned subsidiary of
the Adviser, a distribution fee, accrued daily and paid monthly, calculated at
the annual rate of 0.25 percent of the value of the Fund's average daily net
assets, for activities primarily intended to result in the sale of the Fund's
shares of common stock.
4. PORTFOLIO SECURITIES. Cost of purchases and proceeds from sales of
securities for the six months ended June 30, 1996, other than U.S. government
and short-term securities, aggregated $108,507,471 and $119,714,995,
respectively.
5. TRANSACTIONS WITH AFFILIATES. During the six months ended June 30, 1996, the
Fund paid brokerage commissions of $39,125 to Gabelli & Company and its
affiliates. For the six months ended June 30, 1996, Gabelli & Company informed
the Fund that it received $171,793 from investors representing commissions
(sales charges and underwriting fees) on sales of Fund shares.
6. SHARES OF COMMON STOCK. Common stock transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
6/30/96 12/31/95
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold.......................................... 2,299,906 $ 28,226,960 2,510,990 $ 31,004,832
Shares issued upon reinvestment of dividends......... -- -- 3,413,613 39,463,662
Shares redeemed...................................... (4,772,415) (60,427,146) (5,667,280) (67,432,122)
---------- ------------ ---------- ------------
Net increase/(decrease).............................. (2,472,509) $(32,200,186) 257,323 $ 3,036,372
========== ============= ========== =============
</TABLE>
17
<PAGE>
THE GABELLI VALUE FUND INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Per share amounts for a Fund share outstanding throughout each period.
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED DECEMBER 31,
6/30/96 ----------------------------------------------------------------------------------
(UNAUDITED) 1995 1994 1993 1992 1991(A) 1990 1989*
----------- -------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of
period..................... $ 11.61 $ 10.49 $ 12.09 $ 10.13 $ 9.48 $ 8.51 $ 9.58 $ 9.45
-------- -------- -------- -------- -------- -------- -------- ----------
Net investment
income/(loss).............. (0.01) 0.05 0.09 0.05 0.09 0.13 0.45 0.16
Net realized and unrealized
gain/(loss) on
investments................ 1.48 2.30 (0.09) 3.95 1.11 1.17 (0.98) 0.04
-------- -------- -------- -------- -------- -------- -------- ----------
Total from investment
operations................. 1.47 2.35 0.00 4.00 1.20 1.30 (0.53) 0.20
-------- -------- -------- -------- -------- -------- -------- ----------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income...... -- (0.05) (0.09) (0.01) (0.09) (0.19) (0.54) (0.06)
Distributions in excess of
net investment income.... -- -- (0.00)(b) (0.04) -- -- -- --
Net realized gains......... -- (1.18) (1.50) (1.99) (0.46) (0.14) -- (0.01)
Distributions in excess of
net realized gains....... -- -- (0.01) -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- ----------
Total distributions.......... -- (1.23) (1.60) (2.04) (0.55) (0.33) (0.54) (0.07)
-------- -------- -------- -------- -------- -------- -------- ----------
Net asset value, end of
period..................... $ 13.08 $ 11.61 $ 10.49 $ 12.09 $ 10.13 $ 9.48 $ 8.51 $ 9.58
======== ======== ======== ======== ======== ======== ======== ==========
Total return**............... 12.7% 22.5% 0.0% 39.4% 12.7% 15.3% (5.6)% 2.1%
======== ======== ======== ======== ======== ======== ======== ==========
RATIOS TO AVERAGE NET
ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in
000's)..................... $ 515,422 $486,144 $436,629 $491,193 $423,381 $574,676 $850,685 $1,126,146
Ratio of net investment
income/(loss) to average
net assets............... (0.08)%+ 0.42% 0.73% 0.38% 0.75% 1.43% 4.45% 6.06%+
Ratio of operating expenses
to average net assets.... 1.40%+ 1.50% 1.50% 1.53% 1.52% 1.45% 1.39% 1.48%+
Portfolio turnover rate...... 22.2% 64.6% 66.6% 21.4% 0.1% 16.2% 58.6% 73.3%
Average commission rate (per
share of security)(c)...... $ 0.0495 N/A N/A N/A N/A N/A N/A N/A
</TABLE>
- ---------------
<TABLE>
<C> <S>
* The Fund commenced operations on September 29, 1989.
** 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 and does not reflect any applicable sales
charges. Total return for the period of less than one year is not annualized.
+ Annualized.
(a) Per share amounts have been calculated using the monthly average share method for the year ended December 31,
1991.
(b) Amount represents less than $0.01 per share.
(c) Average commission rate (per share of security) as required by amended disclosure requirements effective September
1, 1995.
</TABLE>
18
<PAGE>
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<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>
<S> <C>
BOARD OF DIRECTORS
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.
- -------------------------------------------------------------
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THE
GABELLI
VALUE
FUND
INC.
SEMI-ANNUAL REPORT
JUNE 30, 1996
