<PAGE>
THE GABELLI VALUE FUND INC.
One Corporate Center
Rye, New York 10580-1434
FIRST QUARTER REPORT
MARCH 31, 1997
TO OUR SHAREHOLDERS:
The stock market roared out of the blocks in January, but quickly lost
momentum as inflation jitters and a slumping bond market muddied the track. In
late March, a rate hike by the Federal Reserve and much stronger than expected
economic data stampeded equities investors, eroding most of the market's earlier
gains. The Dow Jones Industrial Average and Standard & Poor's 500 Index closed
the quarter with modest gains of 1.7% and 2.7%, respectively. Smaller stocks
continued to lag as evidenced by the Russell 2000 Index's 5.2% decline.
INVESTMENT PERFORMANCE
For the first quarter ended March 31, 1997, the Gabelli Value Fund's (the
"Fund") total return was 1.0% compared to returns of 0.1%, (5.2)%, and 2.7% over
the same period for the Value Line Composite, Russell 2000 Index, and the S&P
500, respectively. Each index is an unmanaged indicator of stock market
performance.
For the five year period ended March 31, 1997, the Value Fund's return
averaged 14.0% annually, versus average annual returns of 14.2%, 12.8%, and
16.4% for the Value Line Composite, Russell 2000 Index, and S&P 500,
respectively.
Since inception on September 29, 1989 through March 31, 1997, the Fund has
had a total return of 134.9%, which equates to an average annual return of 12.0%
over its life.
<PAGE>
<TABLE>
INVESTMENT RESULTS (a)
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
QUARTER
-----------------------------------------
1ST 2ND 3RD 4TH YEAR
--- --- --- --- ----
<S> <C> <C> <C> <C> <C>
1997: Net Asset Value .......................... $11.63 __ __ __ __
Total Return ............................. 1.0% __ __ __ __
- --------------------------------------------------------------------------------------------------------------------
1996: Net Asset Value .......................... $12.88 $13.08 $12.63 $11.52 $11.52
Total Return ............................. 10.9% 1.6% (3.4)% 0.0% 8.7%
- --------------------------------------------------------------------------------------------------------------------
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>
DIVIDEND HISTORY
- -------------------------------------------------- -----------------------------------------------------
AVERAGE ANNUAL RETURNS - MARCH 31, 1997 (a) PAYMENT (EX) DATE RATE PER SHARE REINVESTMENT PRICE
-------------------------------------------- ----------------- -------------- ------------------
<S> <C> <C> <C> <C>
1 Year .............................. (1.0)% December 27, 1996 $1.110 $11.57
.............................. (6.5)%(c) December 27, 1995 $1.230 $11.56
5 Year .............................. 14.0% December 30, 1994 $1.600 $10.49
.............................. 12.7%(c) December 31, 1993 $2.036 $12.09
Life of Fund(b) ..................... 12.0% December 31, 1992 $0.553 $10.13
.............................. 11.2%(c) 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.
- -------------------------------------------------------------------------------
2
<PAGE>
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 [PYRAMID GRAPHIC]
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.
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 world-wide 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.
COMMENTARY
THE ECONOMY AND THE STOCK MARKET: TOO MUCH OF A GOOD THING
Once again, the economy confounded the Wall Street economists by growing
much faster than consensus expectations. Although inflation has not yet shown up
in the Producer Price and Consumer Price indices, Federal Reserve Chairman Alan
Greenspan and bond investors decided to err on the side of caution by taking
short- and long-term interest rates higher.
We applaud Fed Chairman Greenspan's preemptive strike against inflation. We
believe he will continue to take the steps necessary to combat inflation and, in
the process, provide confidence in Soft Landing - Part II. Over the short-term,
this may not be pleasant for equities investors. However, with the elimination
of some of the speculative excesses, the market will be on much better
fundamental footing going forward. We do not believe this is the beginning of a
secular bear market, but rather a healthy correction that is arguably long
overdue.
3
<PAGE>
What can we expect over the balance of this year? We should continue to see
a volatile market as skittish investors wrestle with the latest economic data
trying to determine if inflation is a real threat. While the jury may still be
out on inflation, higher interest rates are a reality and will be problematic
for stocks on several levels. Higher interest rates might trim the economy and
restrain corporate earnings growth putting consensus estimates of 9% to 10%
gains for 1997 in jeopardy. Higher rates also boost the U.S. dollar, further
crimping the U.S. dollar value of international earnings. Whether you are
looking at stocks on the basis of asset values or using a dividend discount
model, public prices of equities tend to decline as interest rates rise, all
else constant. So, price/cash flow and price/earnings multiples do contract,
should interest rates rise.
The wild card will be how investors react to any sustained decline in stock
prices. A tremendous amount of money has flowed into the equities market in the
last three years. Will it back out at the first sign of serious trouble? It may
not be how the great unwashed public reacts, but rather how the great unwashed
professional investorsNthose twenty and thirty something mutual fund managers
who have never experienced even a substantial market correctionNrespond to the
perceived crisis. Will they see the glass half empty or half full? We don't
know.
While we are dwelling on things on our watch list, we should also mention
the strong dollar. Despite the enormous advances in the quality of American made
goods in a wide variety of industries, the strong dollar will restrain exports
and currency translation will have an adverse impact on the earnings of U.S.
based multi-national companies. Longer term, we must also be sensitive to the
fact that substantial cost reductions and productivity gains in American
industry over the last five years may be close to running their course. In other
words, profit margins are unlikely to advance further.
We don't view a market correction as bad news. In general, we are not
exposed to those sectors and individual companies that have benefited most from
investor euphoria and which are, therefore, most vulnerable to a dramatic change
in investor sentiment. If anything, a market correction should provide a more
level playing field for disciplined investors focusing on the fundamental value
of individual stocks. We are just now emerging from a two year period in which
fundamentals mattered much less than market momentum. We are entering what may
prove to be an extended period in which stock pickers excel.
TO INDEX OR NOT INDEX - THE NEW RHETORIC
In 1995 and 1996, the S&P 500 Index proved to be a difficult benchmark for
active managers of all stripes. It has been a particularly tough hurdle for
value investors who have been unwilling to pay sky high price/earnings multiples
for the mega-cap market darlings that have such an enormous impact on S&P 500
returns.
There are several dynamics that have favored the largest S&P 500 stocks
over the last several years. The first is the growth of S&P 500 Index funds
themselves. S&P 500 Index mutual funds have grown at four times the rate of
actively managed mutual funds over the last five years. So, we have seen an
increasing amount of money chasing a finite number of large cap stocks and thus,
on a pure supply/demand basis, indexing has been a self fulfilling prophecy. In
addition, the substantial foreign money coming into the market is largely
devoted to the big cap, household name stocks that dominate the S&P. Finally,
active portfolio managers who have been under increasing pressure to be fully
invested regardless of their concerns over equity valuations have pumped money
into the large liquid stocks that comprise the S&P so that if something does go
wrong, they can get out in a hurry. Finally, stocks like Microsoft, Intel, P&G,
Coca-Cola and General Electric do benefit from faster growth in developing
economies.
4
<PAGE>
With all of these factors favoring S&P 500 indexing, why bother doing
anything else? We offer two answers. The first is that longer term, valuations
do matter. Supply and demand are powerful forces in the market, but at some
stage, economic reality always asserts itself. In the early 1970's the "Nifty
Fifty", a group of terrific large cap growth companies, dominated the market.
The consensus was that these were "one decision" stocks which you simply had to
own and didn't ever have to worry about selling . At the peak, these stocks sold
at ludicrous multiples relative to their economic value. When the fertilizer hit
the market fan in 1973-74, they fell off a cliff. Even after one of the great
long-term bull markets in history, some of these original "nifty-fifty" stocks
still have market capitalizations below their 1972-73 peaks. We have not yet
witnessed that level of speculative excess in today's market favorites, but we
are seeing heady multiples that don't make economic sense. At some point,
investors will come to their senses and realize that even the best (soft drink,
household product, software, semi-conductor, movie companyNpick one or more) is
not worth a price/earnings multiple two to three times its annual earnings
growth rate. Moreover, if earnings do not expand faster than revenues, and
interest rates continue to provide present "real" rates of return, then overall
stocks are unlikely to generate double-digit returns to investors.
Our second response is simply that what has gone up the most is likely to
fall the farthest with a major shift in investor sentiment. If and when we do
see net cash outflows from equities mutual funds, we suspect index funds will
get hit the hardest. Supply and demand is a two way street.
MUST CARRY
In an upset rivaling the University of Arizona's victory over Kentucky in
the 1997 NCAA basketball championship, the Supreme Court voted 5 to 4 to uphold
the "must carry" provision for local broadcast companies. The must carry rule
specified that cable television systems must make one-third of their channel
capacity available free to local broadcasters. Led by Ted Turner, the cable
television industry had challenged the rule on the grounds that it violated
their first amendment rights. The industry's economic goal was to free up
channel capacity for new cable television networks providing more popular
programming and paying the cable operator for channel space. The consensus of
the lawyers on both sides of the issue was the cable guys would win. However,
the Supreme Court decided that allowing cable operators to exclude local
broadcast channels would create undue economic hardship for many broadcasters
and threaten the survival of weaker independents.
Who are the winners and losers? The broadcasters, particularly those with
extensive UHF properties get a renewed lease on life as they maintain and in
some cases add to their cable audience. The entrenched cable television
networks, like International Family Entertainment, Inc. (FAM - $20.375 - NYSE),
BET Holdings, Inc. (BTV - $29.625 - NYSE), Gaylord Entertainment Company (GET -
$21.50 - NYSE), HSN, Inc. (HSNI - $25.375 - NASDAQ) and Tele-Communications,
Inc./Liberty Media Group (LBTYA - $19.9375 - NASDAQ) benefit because with cable
channel capacity still restrained, the value of their "slots" with cable
operators increase in value. For example, the prospective value of International
Family Entertainment to a News Corporation Limited (NWS - $18.00 - NYSE), which
is trying to expand distribution of its programming, increases substantially.
The biggest losers are the cable television network wannabes who will have to
wait until cable operators complete upgrades to their systems before channel
space is available.
5
<PAGE>
IN THIS CORNER WEARING THE RED TRUNKS . . .
A heavyweight battle is unfolding between Hilton Hotels Corporation
(HLT - $24.25 - NYSE) CEO Stephen Bollenbach and ITT Corporation (ITT - $58.875
- - NYSE) Chairman Rand Araskog. Bollenbach landed the first punch with an
unsolicited $56 per share offer for ITT. Araskog responded by selling off
non-core assets like ITT's 50% ownership of MSG (Madison Square Garden, the
Knicks, and the Rangers) to partner Cablevision Systems Corporation (CVC -
$29.75 - ASE) and ITT's 6% stake in French telecommunications giant Alsthom SA
(ALA - $23.75 - NYSE). ITT's Educational Services and Worldwide Yellow Pages
businesses are also on the block. For the time being, Bollenbach is circling the
ring waiting for Araskog to counter-attack. What does this wily veteran of many
takeover battles have up his sleeve? Our guess is that, aside from serving
K-rations to corporate staff, he will further build up his cash reserves for a
self tender in the $60 plus per share range. If this happens, we expect
Bollenbach to wade in looking for a merger. It's still too early in what should
be a full fifteen rounder to predict the winner. We're betting that shareholders
of both these firms will benefit from these corporate heavyweights slugging it
out.
SNAPPLE, CRACK AND POP
In another ring, Quaker Oats Company (OAT - $36.50 - NYSE) has thrown in
the towel on Snapple, selling it to Triarc Companies Inc. (TRY - $17.50 - NYSE)
for $300 million, $1.4 billion below the $1.7 billion it paid for the company
just three years ago. Despite having egg--or is that iced tea--all over its
face, Quaker Oats has become a much more attractive target for a larger food
company like Nestle SA (NESAF - $1,170.95 - NASDAQ) or RJR Nabisco Holdings
Corporation (RN - $32.25 - NYSE) looking for dominant market share brands like
Quaker Oats' Gatorade and ready-to-eat breakfast cereals. We believe the company
is worth well over $50 a share to the right buyer. Even if nothing develops on
this front, Quaker Oats' earnings should be refreshing as they discontinue
writing off all the goodwill on the ill-advised purchase of Snapple.
LET'S TALK STOCKS
The following are stock specifics on selected holdings of our Fund.
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 - $29.55 - NYSE) is an
independent telecommunications company based in Monroe, Louisiana with over
500,000 access lines in 14 states in the South and Midwest. As such, it 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 typically provided growth in
excess of the industry average. The company has announced its intent to purchase
Pacific Telecom's cellular operations. The transaction is expected to close in
the third quarter of 1997 and will increase CTL's cellular POP coverage 21%, to
9.7 million POPS, and add 90,000 subscribers. The company continues to build
value through its other ventures, primarily its long distance and competitive
local exchange carrier (CLEC) operations. On March 31, 1997, CTL made progress
towards surfacing hidden value in its CLEC business with its agreement to sell
metro access networking (MAN) to Brooks Fiber Properties (BFPT - $17.875 -
NASDAQ) in exchange for approximately 12% of BFPT's common equity.
6
<PAGE>
CHRIS-CRAFT INDUSTRIES, INC. (CCN - $39.625 - NYSE), through -----------------
its 76% ownership of BHC Communications, Inc., is primarily Chris-Craft
a television broadcaster. BHC owns and operates Industries
UPN-affiliated TV stations in New York (WWOR), Los Angeles -----------------
(KCOP) and Portland (KPTV). BHC also controls over 59% of 76%
United Television, Inc., which operates an NBC affiliate, an -----------------
ABC affiliate and three UPN affiliates. Chris-Craft's 8 BHC
television stations constitute one of the nation's largest Communications
television station groups, reaching approximately 20% of the -----------------
country's households. BHC had owned 100% of United Paramount 59%
Network (UPN), but Viacom has exercised its option to -----------------
purchase 50% of UPN for $160 million, which is equal to United
about one-half of UPN's operating losses to date. Debt free, Television
with about $1.5 billion in cash and marketable securities, -----------------
the Chris-Craft complex is strongly positioned to expand its
operations.
GENERAL ELECTRIC COMPANY (GE - $99.25 - NYSE), with an equity market valuation
of over $170 billion, is the largest U.S. company and one of the largest, most
diversified industrial companies in the world. 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 beyond the year 2000.
GRUPO TELEVISA S.A. (TV - $24.24 - 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. Its business mix includes film, music, cable television and
broadcasting. Grupo Televisa also has valuable holdings in PanAmSat Corporation
(SPOT - $28.75 - NASDAQ) and Univision Communications Inc. (UVN - $32.625 -
NYSE).
MEDIA GENERAL, INC. (MEG'A - $28.375 - ASE) our largest holding representing 14%
of our portfolio, is a Richmond, VA-based company, publishing daily newspapers
in Tampa, Winston-Salem and throughout the Southeast. Media General now owns
sixteen network television stations in southeast markets, inc luding Birmingham,
Tampa and Jacksonville and a cable television franchise in Fairfax County, VA.
The relaxation of broadcast station ownership restrictions provided by The
Telecommunications Reform 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 recently closed its purchase of
Park Acquisitions, Inc. for $710 million. Through its hubris and thirst for
"size", management has neglected its shareholders, but the slump in stock price
makes it a hold.
QUAKER OATS COMPANY (OAT - $36.50 - NYSE) has three brand franchises: Quaker
Oats grain-based products, Gatorade, and Snapple. It is the dominant player in
hot cereals, rice cakes, and golden grain products, while maintaining a
profitable #4 position in ready-to-eat cereals. Gatorade is a global brand name
with world-wide sales of approximately $1.5 billion. In the U.S., Gatorade has
maintained a dominant market share of over 80%, despite intense competition from
Coca-Cola and PepsiCo. Snapple is being sold to Triarc Beverages for
approximately $300 million in cash.
7
<PAGE>
TELE-COMMUNICATIONS, INC. (TCOMA - $12.00 - 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.
Regulation has historically played a major role in the valuation of cable
properties. We believe that the passage of The Telecommunications Reform 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% stake in Tele-Communications International, Inc. A major
cost containment effort is beginning to show results, leading to substantial
increases in operating cash flow.
TELE-COMMUNICATIONS, INC./LIBERTY MEDIA GROUP (LBTYA - $19.9375 - 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 (TWX - $43.25
- - NYSE), the world's largest media company. Liberty Media, News Corporation Ltd.
(NWS - $18.00 - NYSE), and Tele-Communications International, Inc. (TINTA -
$12.875 - NASDAQ) have created a global sports joint-venture, called Fox Sports,
that will offer an integrated package of sports programming across network
broadcast, national cable, and 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.
TIME WARNER INC. (TWX - $43.25 - NYSE), having completed its acquisition of
Turner Broadcasting in the fourth quarter of 1996, is the world's largest
diversified media and publishing company. The combined companies have more than
$23 billion in revenues and over $4.5 billion in EBITDA. Together they control a
host of powerful media brands, such as CNN, Warner Brothers film, HBO, Cinemax
and Time and People magazines. Under the leadership of Chairman Gerald Levin and
Vice-Chairman Ted Turner, Time Warner is now focused on reducing its almost $13
billion 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.
VIACOM INC. (VIA - $32.625 - ASE; VIA'B - $33.125 - ASE), long a major provider
of entertainment "content", has evolved into one of the world's dominant media
companies. Following its acquisitions of Paramount Communications and
Blockbuster Entertainment, the company is now divesting non-core assets to
reduce debt and is focusing on the global expansion of its media franchises. The
company has divested its cable systems subsidiary in a transaction with
Tele-Communications, Inc. which has reduced Viacom's debt by $1.7 billion and
the number of common shares outstanding by about 4%. Its radio group, Evergreen
Media, is being sold for $1.1 billion in cash. Viacom is well-positioned in
music (notably MTV) and cable networks such as Nickelodeon, USA (50% interest)
and the Sci-Fi Channel.
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.
8
<PAGE>
INTERNET
You can now visit us on the Internet. Our home page at
http://www.gabelli.com contains information about Gabelli Funds, Inc., the
Gabelli Mutual Funds, quarterly reports, closing prices, IRAs, 401(k)s and other
current news. You can also send us e-mail at [email protected].
IN CONCLUSION
In our year-end 1996 letter to you, we expressed our doubts about the
market's ability to duplicate its substantial gains in 1995 and 1996. After
getting off to a strong start, the market lost momentum and then sputtered badly
at the end of the first quarter of 1997 as strong economic data re-ignited
inflationary fears. As we write, the jury is still out on inflation, but long
interest rates are above 7%, providing sizeable "real" rates of return. Looking
ahead, we anticipate a continually volatile stock market that will have many
investors on the edge of their seats. We rest somewhat more comfortably having
been through such uneasy times before and having faith that our value oriented
discipline will sustain us as it has in the past.
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
May 1, 1997
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
MARCH 31, 1997
----------------
Media General, Inc. Century Telephone Enterprises, Inc
Time Warner Inc. TCI/Liberty Media Group
Chris-Craft Industries, Inc. Quaker Oats Company
Grupo Televisa S.A. Tele-Communications, Inc.
Viacom, Inc. General Electric Company
- --------------------------------------------------------------------------------
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 -- MARCH 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(c)
- ----------- ------------
<C> <S> <C>
COMMON STOCKS--98.2%
AUTOMOTIVE: PARTS AND ACCESSORIES--2.3%
50,000 Echlin Inc...................... $ 1,700,000
135,000 Federal-Mogul Corporation....... 3,324,375
25,000 GenCorp Inc..................... 475,000
87,225 Handy & Harman.................. 1,308,375
30,000 Johnson Controls, Inc........... 2,415,000
50,000 Quaker State Corporation........ 768,750
------------
9,991,500
------------
AVIATION: PARTS AND
SERVICE--1.0%
177,500 Coltec Industries Inc.+......... 3,283,750
36,000 Hudson General Corporation...... 1,341,000
------------
4,624,750
------------
BROADCASTING--14.1%
92,200 Ackerley Group.................. 1,210,125
527,192 Chris-Craft Industries, Inc..... 20,889,987
80,000 Gray Communications Systems,
Inc., Class B................. 1,360,000
790,000 Grupo Televisa S.A., GDR+....... 19,651,250
110,000 Liberty Corporation............. 4,620,000
60,000 LIN Television Corporation+..... 2,175,000
200,000 Paxson Communications
Corporation, Class A+......... 2,150,000
6,900 United Television, Inc.......... 604,612
500,000 Westinghouse Electric Corp...... 8,875,000
------------
61,535,974
------------
BUSINESS SERVICES--1.0%
127,000 Berlitz International, Inc.,
New+.......................... 2,841,625
138,000 Nashua Corporation.............. 1,656,000
------------
4,497,625
------------
CABLE--9.5%
245,000 Cablevision Systems Corporation,
Class A+...................... 7,288,750
80,000 General Instrument
Corporation+.................. 1,830,000
410,900 International Family
Entertainment, Inc.,
Class B+...................... 8,372,088
950,000 Tele-Communications, Inc.,
Class A+...................... 11,400,000
636,000 Tele-Communications,
Inc./Liberty Media Group,
Class A+...................... 12,680,250
------------
41,571,088
------------
COMMUNICATIONS EQUIPMENT--0.1%
30,000 Scientific-Atlanta, Inc......... 457,500
------------
CONSUMER PRODUCTS--8.4%
100,000 American Brands, Inc............ 5,062,500
330,000 Carter-Wallace, Inc............. 4,496,250
75,000 Culbro Corporation+............. 7,031,250
99,000 General Electric Company........ 9,825,750
80,000 Ralston Purina Group............ 6,250,000
120,000 Syratech Corporation+........... 3,840,000
------------
36,505,750
------------
CONSUMER SERVICES--1.5%
260,000 HSN, Inc.+...................... 6,597,500
------------
DIVERSIFIED INDUSTRIAL--2.3%
4,000 Brady (W.H.) Co., Class A....... $ 100,500
32,000 Honeywell, Inc.................. 2,172,000
120,000 ITT Industries Inc.............. 2,685,000
217,500 Katy Industries, Inc............ 3,398,438
60,000 Lamson & Sessions Co.+.......... 472,500
30,000 Trinity Industries, Inc......... 911,250
178,000 Tyler Corporation+.............. 289,250
------------
10,028,938
------------
ENERGY--0.3%
70,000 Southwest Gas Corporation....... 1,216,250
------------
ENTERTAINMENT--8.7%
35,000 GC Companies, Inc.+............. 1,373,750
550,000 Time Warner Inc................. 23,787,500
390,000 Viacom Inc., Class A+........... 12,723,750
------------
37,885,000
------------
EQUIPMENT AND SUPPLIES--6.1%
64,000 AMP Incorporated................ 2,200,000
50,000 Ampco-Pittsburgh Corporation.... 606,250
45,000 A.O. Smith Corporation.......... 1,569,375
19,000 Brad Ragan, Inc.+............... 522,500
42,000 Deere & Company................. 1,827,000
140,000 Gerber Scientific, Inc.......... 2,170,000
14,250 IDEX Corporation................ 334,875
70,000 Ingersoll-Rand Company.......... 3,053,750
110,000 Navistar International
Corporation+.................. 1,031,250
157,500 Pittway Corporation, Class A.... 7,638,750
67,000 Sequa Corporation, Class A+..... 2,989,875
20,000 Sequa Corporation, Class B+..... 1,027,500
55,000 TRINOVA Corporation............. 1,842,500
------------
26,813,625
------------
FINANCIAL SERVICES--2.0%
115,000 American Express Company........ 6,885,625
55,000 Lehman Brothers Holdings Inc.... 1,601,875
5,000 Salomon Inc..................... 249,375
------------
8,736,875
------------
FOOD AND BEVERAGE--5.3%
325,000 Quaker Oats Company............. 11,862,500
40,000 Seagram Company Ltd............. 1,530,000
330,000 Whitman Corporation............. 8,085,000
25,000 Wrigley (Wm.) Jr. Company....... 1,459,375
------------
22,936,875
------------
HEALTH CARE--0.3%
150,000 IVAX Corporation+............... 1,481,250
------------
HOTELS/GAMING--4.4%
450,000 Aztar Corporation+.............. 3,206,250
70,000 Circus Circus Enterprises,
Inc.+......................... 1,820,000
60,000 Hilton Hotels Corporation....... 1,455,000
165,000 ITT Corporation, New+........... 9,714,375
140,000 Mirage Resorts, Incorporated+... 2,975,000
------------
19,170,625
------------
</TABLE>
10
<PAGE>
THE GABELLI VALUE FUND INC.
PORTFOLIO OF INVESTMENTS (CONTINUED) -- MARCH 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE(c)
- ----------- ------------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
METALS AND MINING--1.4%
50,000 Barrick Gold Corporation........ $ 1,187,500
150,000 Echo Bay Mines Ltd.............. 993,750
70,000 Homestake Mining Company........ 1,058,750
70,000 Placer Dome Inc................. 1,268,750
440,000 Royal Oak Mines Inc.+........... 1,402,500
------------
5,911,250
------------
PUBLISHING--17.6%
240,000 Golden Books Family
Entertainment, Inc.+.......... 2,220,000
100,000 Harcourt General, Inc........... 4,650,000
65,000 McGraw-Hill Companies, Inc...... 3,323,125
2,157,000 Media General, Inc., Class A.... 61,204,875
240,000 Meredith Corporation............ 5,550,000
------------
76,948,000
------------
REAL ESTATE--1.4%
400,000 Catellus Development
Corporation+.................. 6,100,000
------------
RETAIL--2.6%
35,000 Burlington Coat Factory
Warehouse Corporation+........ 630,000
40,000 Giant Food Inc., Class A........ 1,280,000
35,000 Hartmarx Corporation+........... 201,250
100,000 Lillian Vernon Corporation...... 1,400,000
300,000 Neiman Marcus Group, Inc.+...... 7,725,000
------------
11,236,250
------------
SPECIALITY CHEMICAL--0.8%
110,000 Ferro Corporation............... 3,300,000
------------
TELECOMMUNICATIONS--1.7%
18,000 Aliant Communications Inc....... 297,000
28,000 BCE Inc......................... 1,288,000
76,000 C-TEC Corporation+.............. 2,147,000
40,000 Northern Telecom Limited........ 2,615,000
30,000 Southern New England
Telecommunications
Corporation................... 1,076,250
------------
7,423,250
------------
WIRELESS COMMUNICATIONS--5.4%
80,000 AirTouch Communications Inc.+... $ 1,840,000
430,000 Century Telephone Enterprises,
Inc........................... 12,685,000
75,000 COMSAT Corporation, Series 1.... 1,828,125
40,000 Loral Space & Communications
Inc.+......................... 565,000
120,000 TCI Satellite Entertainment
Inc.,
Class A+...................... 930,000
500,000 Telecom Italia Mobile SpA....... 1,439,496
115,000 Telephone and Data Systems,
Inc........................... 4,413,125
------------
23,700,746
------------
TOTAL COMMON STOCKS.......................... 428,670,621
------------
PREFERRED STOCK--0.5%
157,750 News Corporation Limited,
Sponsored ADR Preference
Shares........................ 2,346,531
------------
<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.......... 464,695
------------
REPURCHASE AGREEMENT--1.5%
6,607,000 Agreement with Morgan (J.P.) &
Co., Incorporated,
6.00% due 04/01/1997(a)....... 6,607,000
------------
TOTAL INVESTMENTS (Cost
$343,623,800)(b)................ 100.3% 438,088,847
OTHER ASSETS AND LIABILITIES
(NET)........................... (0.3) (1,306,049)
----- ------------
NET ASSETS APPLICABLE TO
37,569,458 SHARES OF COMMON
STOCK
OUTSTANDING..................... 100.0% $436,782,798
===== ============
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE..................... $11.63
======
MAXIMUM OFFERING PRICE PER SHARE
($11.63/.945 BASED ON MAXIMUM SALES
CHARGE OF 5.5% OF THE OFFERING PRICE
AT MARCH 31, 1997).................. $12.31
======
</TABLE>
- ------------------------------
(a) Agreement dated 03/31/1997, to be repurchased at $6,608,101, collateralized
by $5,854,000 U.S. Treasury Note, 8.500% due 02/15/2020 (value $6,739,710).
(b) Aggregate cost for Federal tax purposes was $343,960,964. Net unrealized
appreciation for Federal tax purposes was $94,127,883 (gross unrealized
appreciation was $107,583,436 and gross unrealized depreciation was
$13,455,553).
(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
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
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>
<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.
- --------------------------------------------------------------------------------
[PHOTO]
THE
GABELLI
VALUE
FUND
INC.
FIRST QUARTER REPORT
MARCH 31, 1997
