<PAGE> 1
THE GABELLI VALUE FUND
THIRD QUARTER REPORT
SEPTEMBER 30, 1998
TO OUR SHAREHOLDERS,
In the third quarter of 1998, ongoing international economic distress,
diminished corporate earnings prospects, our prime time political crisis and the
collapse of one of the world's largest hedge funds combined to send the stock
market sharply lower. Somewhat uncharacteristically, the richly priced large cap
growth stocks that dominate the Standard & Poor's 500 stock index held up better
than more reasonably valued market sectors. The yield on the 30 year Treasury
bond dropped below 5.0% as international and U.S. investors sought the safety of
the world's most secure credit.
INVESTMENT PERFORMANCE
For the third quarter ended September 30, 1998, The Gabelli Value Fund's
(the "Fund") net asset value declined 13.2%. The Standard & Poor's ("S&P") 500,
Value Line Composite and Russell 2000 Index declined 9.9%, 17.2% and 20.2%,
respectively, over the same period. Each index is an unmanaged indicator of
stock market performance. Over the trailing twelve month period, the Fund was up
11.7%. The S&P 500 rose 9.1% while the Value Line Composite and Russell 2000
declined 11.4% and 19.0%, respectively, over the same twelve month period.
For the five year period ended September 30, 1998, the Fund's return
averaged 15.6% annually versus average annual returns of 19.9%, 12.4% and 9.1%
for the S&P 500, Value Line Composite and Russell 2000, respectively. Since
inception on September 29, 1989 through September 30, 1998, the Fund has a total
return of 254.7%, which equates to an average annual return of 15.1%.
WHAT WE DO
The success of momentum investing in recent years and investors' desire
for instant gratification have combined to make value investing appear dull. At
the risk of being dull, we will once again describe the "boring" value approach
that has seen us through both good and bad markets over the last nine years at
The Gabelli Value Fund and for over 20 years at Gabelli Asset Management
Company. In past reports, we have tried to articulate our investment philosophy
[ARTWORK]
<PAGE> 2
INVESTMENT RESULTS (a)
<TABLE>
<CAPTION>
Quarter
---------------------------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
<S> <C> <C> <C> <C> <C>
1998: Net Asset Value $16.43 $16.94 $14.71 __ __
Total Return ................. 14.9% 3.1% (13.2)% __ __
- -----------------------------------------------------------------------------------------------------------------------------
1997: Net Asset Value $11.63 $14.11 $15.73 $14.30 $14.30
Total Return ................. 1.0% 21.3% 11.5% 8.6% 48.2%
- -----------------------------------------------------------------------------------------------------------------------------
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>
Average Annual Returns - September 30, 1998 (a)
<S> <C>
1 Year 11.7%
5.5%(c)
5 Year 15.6%
14.3%(c)
Life of Fund (b) 15.1%
14.4%(c)
</TABLE>
<TABLE>
<CAPTION>
Dividend History
- ---------------------------------------------------------------
Payment (ex) Date Rate Per Share Reinvestment Price
- ----------------- -------------- ------------------
<S> <C> <C>
December 29, 1997 $2.720 $14.01
December 27, 1996 $1.110 $11.57
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 $0.068 $ 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> 3
and methodology. The accompanying 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 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 the globalization of the market in filmed entertainment and
telecommunications, and micro trends, such as an increased focus on productivity
enhancing goods and services.
COMMENTARY
STORMY WEATHER OR THE PERFECT STORM
In recent years, equity investors have seen nothing but blue skies with
low inflation, low interest rates, a strong flow of funds into the markets and
robust corporate earnings growth. Now this benign weather pattern has changed.
Inflation remains in check and with deflationary winds blowing from the Far East
and South America, inflation could fall even lower. Long term government bond
yields are already at lows not seen in a generation and if the Federal Reserve
drops short term rates again, long term rates could slide even lower. However,
investors are starting to open umbrellas by putting more money into government
bonds and less into stocks. They have not yet reached for the foul weather gear,
but if the stock market storm intensifies, the flow of funds into equities may
turn into a trickle. Finally, the outlook for corporate profits has been clouded
by weak Asian economies and the possibility that the American consumer, much of
whose savings is in stocks, may stop spending.
The corporate profit picture is further obscured by storm clouds forming
over our important Latin American trading partners. Pressure on Latin American
currencies, particularly the Brazilian real, is threatening a regional
recession. While U.S. and international monetary authorities are poised to
provide disaster relief if necessary, any serious deterioration in Latin
American economies would damage U.S.
3
<PAGE> 4
corporate profits more than the tornadoes that swept through Southeast Asia.
Asia was to provide future years profits, with millions of new consumers buying
American products and services. Latin America is already a substantial source
of revenues and profits for American corporations.
HEDGE FUNDS--POTENTIAL FINANCIAL EARTHQUAKES
We can accurately predict rainfall and even hurricanes. Despite all the
improvements in seismic technology, earthquakes always take us by surprise and
generally cause substantial damage. The collapse of Long Term Capital Management
("LTCM"), one of the world's largest hedge funds, surprised nearly everyone in
the financial community, including the banks and brokerage firms that were
LTCM's largest lenders.
What is the potential damage from this financial earthquake? In recent
testimony to Congress explaining the Federal Reserve Bank of New York's role in
helping to arrange a bailout of Long Term Capital Management, Federal Reserve
Board Chairman Alan Greenspan said, "Had the failure of LTCM triggered the
seizing up of markets, substantial damage could have been inflicted on many
market participants, including some not directly involved with the firm, and
could have potentially impaired the economies of many nations, including our
own." Should the financial community's seismic experts have seen this coming? In
his testimony, Mr. Greenspan reminds us that, "No matter how skillful the
trading scheme, over the long haul, abnormal returns are sustained only through
abnormal exposure to risk."
What can we do to prevent another hedge fund earthquake and avoid damage
to our financial infrastructure? Mr. Greenspan concludes that any attempt at
direct regulation would simply drive hedge funds offshore. He urges
institutional investors to more adequately assess the risks inherent in the
highly leveraged, derivatives-based trading strategies employed by many hedge
funds. We suspect the best earthquake prevention mechanism may have already been
triggered, the substantial losses sustained by Long Term Capital's partners. We
think they and others will think twice before building big houses on a financial
fault line.
TOMORROW'S FORECAST
We have a healthy regard for Mother Nature's ability to surprise us and
we are therefore reluctant market forecasters. Nevertheless, we offer our
thoughts. Will the economy be impacted either through a reduction in consumer
spending or by a cutback in corporate expenditures? That depends on whether the
consumer chooses to focus on the sunshine (job security, low inflation, low
interest rates including lower mortgage payments and the possibility of lower
taxes) or the rain (reduced net worth resulting from declines in their
investment portfolios). Will corporations spend less in this uncertain global
economic environment? Probably, but they will make the capital investments most
necessary for their collective futures. Our forecast is for a profit slowdown,
perhaps a substantial one, but not the profit recession the market seems to be
anticipating. If we are right, stocks could rebound strongly from current
levels.
4
<PAGE> 5
MOSTLY CLOUDY WITH POCKETS OF SUNSHINE
In the third quarter of 1998, the sun shone on our gold mining holdings:
Placer Dome, Homestake Mining and Echo Bay Mines. Quaker Oats helped warm the
portfolio in the market storm. Telecommunications and media holdings were mixed,
with Southern New England Telecommunications, Century Telephone, Cablevision
Systems, Tele-Communications Inc. and Polygram brightening the portfolio, and
Tribune Company and Seagram among our dark clouds. The market rained on upscale
retailers such as Neiman Marcus, brokerage firms Lehman Brothers and Donaldson,
Lufkin & Jenrette, agricultural equipment maker Deere and gaming stocks Hilton
and Circus Circus Enterprises.
LET'S TALK STOCKS
The following are stock specifics on selected holdings of our Fund.
Favorable earnings prospects do not necessarily translate into higher stock
prices, but they do express a positive trend which we believe will develop over
time.
Cablevision Systems Corp. (CVC - $43.1875 - AMEX), based in Woodbury, NY, is one
of the nation's leading telecommunications and entertainment companies, with
operations including high speed multimedia delivery, subscription cable
television services, professional sports teams and national cable television
program networks. Cablevision serves over 3.3 million cable customers primarily
in three core media markets: New York, Boston and Cleveland. CVC's revenue per
subscriber is the highest in the cable industry. CVC has exercised its option to
purchase ITT's 50% stake in MSG (Madison Square Garden) Properties, including
the NY Knicks and NY Rangers. In March, Cablevision purchased
Tele-Communications Inc.'s New York area cable properties with 829,000
subscribers by issuing almost 24.5 million shares (adjusted for the March 30,
1998 two-for-one stock split) and assuming $670 million of TCI's debt. These
shares represent a one-third stake in CVC. The company's new, vigorous activity
includes the sale of a 40% stake in Rainbow Sports to a News Corp./TCI joint
venture with the proceeds used to pay down a significant portion of MSG's debt.
With its upgraded cable systems, CVC is well-positioned to offer telephony, high
speed data and enhanced video services.
Chris-Craft Industries Inc. (CCN - $44.1875 - NYSE), through its 79.9% ownership
of BHC Communications (BHC - $117.00 - AMEX), is primarily a television
broadcaster. BHC owns and operates UPN affiliated stations in New York (WWOR),
Los Angeles (KCOP) and Portland (KPTV). BHC also owns 58.6% of United Television
(UTVI - $106.75 - Nasdaq), which operates an NBC affiliate, an ABC affiliate and
four UPN affiliates. United Television has purchased WHSW in Baltimore for $80
million. The station's call letters were changed to WUTB and the station became
a UPN affiliate. UTVI has an agreement to purchase WRBW, a UPN affiliate in
Orlando, for $60 million. Chris-Craft's television stations constitute one of
the nation's largest television station groups, reaching approximately 22% of
U.S. households. The Chris-Craft complex is debt free and strongly positioned to
expand its operations with roughly $1.4 billion in cash and marketable
securities.
DeKalb Genetics Corp. (DKB - $92.00 - NYSE), an agricultural genetics and crop
biotechnology company, develops and sells hybrid seeds and is the second largest
supplier of hybrid seed corn.
5
<PAGE> 6
Monsanto (MTC - $56.25 - NYSE), which controls 40% of DeKalb's outstanding
shares, won a three-month-long auction by agreeing to pay $100 in cash for each
of the remaining shares, or $2.5 billion. The transaction is expected to be
completed by year end.
Media General Inc. (MEG'A - $38.75- AMEX) is a Richmond, Virginia-based
communications company, publishing newspapers throughout the Southeast with
daily circulation of about 250,000. Media General operates fourteen network
television stations in Southeastern markets, including Tampa, Jacksonville and
Birmingham and two cable television systems in Virginia. 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. The company also produces newsprint from recycled newspapers
at its Garden State Paper Co.
MediaOne Group Inc. (UMG - $44.4375 - NYSE), formerly US West Media Group, has
finalized its split from the parent company US West. UMG is involved in domestic
and international cable and telephony and international wireless communications.
It is the third largest broadband cable company in the U.S. with over 5 million
subscribers and 8 million homes passed. Its Directory and Informational business
has been transferred to US West. MediaOne's strong financial position should
allow the company to be one of the leaders in the upgrading of cable
infrastructures. The Group has a variety of investment interests including 25%
of Time Warner Entertainment (which includes Warner Brothers Studio and Home Box
Office), 24% of PCS Prime Co. and almost 27% of TeleWest plc.
Navistar International Corp. (NAV - $22.625 - NYSE) is the leading North
American producer of heavy and medium trucks and school buses under the
International brand. The company is also the leading supplier of mid-range, 160
to 300 horsepower, diesel engines. NAV has an approximate 40% share of the
medium duty truck market and 20% share of the heavy duty truck market. NAV
participates in cyclical industries. Nonetheless, the company generates
substantial cash flow, which is not presently taxed due to Navistar's large
(nearly $1.8 billion) tax loss carryforwards. Part of the anticipated increase
in cash flow is likely to be directed to a six year, $650 million capital
spending, development and production program for the company's "next generation"
truck.
Tele-Communications Inc. (TCOMA - $39.125 - Nasdaq), one of the largest cable
television operators in the U.S., is guided by Dr. John Malone - one of the most
shareholder sensitive managers we have found. Regulation has historically played
an important role in the valuation of cable properties. Passage of The
Telecommunications Reform Act of 1996, combined with the current deregulatory
climate in Congress, is providing a significant catalyst for cable stocks. TCOMA
is a well-positioned industry leader, from its wireless telephony PCS venture
with Sprint, Comcast and Cox Communications to its innovative Internet access
business, dubbed "@Home", and its 80% stake in Tele-Communications International
(TINTA - $20.75 - Nasdaq). An important strategic shift for the company is
underway as some cable properties are being sold or transferred to
allianced-partners, shifting debt and strengthening the company's balance sheet.
AT&T (T - $58.4375 - NYSE) has agreed to acquire TCI, offering 0.7757 AT&T
shares for each TCOMA share.
6
<PAGE> 7
Telephone & Data Systems Inc. (TDS - $34.875 - AMEX) is a diversified
telecommunications company with established cellular and local telephone
operations and a developing personal communications services ("PCS") business.
TDS provides high quality telecommunications services to 2.8 million customers
in 35 states. The company was active in the PCS auctions and was the high bidder
in markets with a combined population of 27 million. TDS owns 81.1% of United
States Cellular Corp. (USM - $29.8125 - AMEX) and 82.4% of Aerial Communications
(AERL - $3.6875 - Nasdaq), TDS's PCS subsidiary which owns the licenses to
provide PCS service in six major trading areas encompassing approximately 27.6
million population equivalents. The transfer of substantially all of the assets
of American Paging to TSR Wireless Holdings has been completed.
Viacom Inc. (VIA - $57.50 - AMEX; VIA'B - $58.00 - AMEX), long a major provider
of entertainment "content", has evolved into one of the world's dominant media
companies. Paramount Communications and Blockbuster Entertainment were acquired.
Non-core assets are being divested and debt has been reduced to approximately $8
billion. Viacom is focusing on global expansion of its media franchises. Viacom
is particularly well-positioned in music (notably MTV) and cable networks (such
as Nickelodeon).
USA Networks Inc. (USAI - $19.4375 - Nasdaq), through its subsidiaries, engages
in diversified media and electronic commerce businesses that include: electronic
retailing, ticketing operations and television broadcasting. Chairman and CEO
Barry Diller has brought together under one umbrella: the USA Network, the
Sci-Fi Channel, USA Networks Studios, USA Broadcasting, The Home Shopping
Network and the Ticketmaster Group. The plan is to integrate these assets,
leveraging programming, production capabilities and electronic commerce across
this strong distribution platform.
MINIMUM INITIAL INVESTMENT - $1,000
The Fund's minimum initial investment for both regular and retirement
accounts is $1,000. There are no subsequent investment minimums. No initial
minimum is required for those establishing an Automatic Investment Plan.
THE ROTH IRA
The Taxpayer Relief Act of 1997 included new tax incentives and more
opportunities to save for retirement and other major expenditures. The Roth IRA
is just one of these new opportunities now available at Gabelli Funds. Our
investor representatives are available at 1-800-GABELLI (1-800-422-3554) to
speak with you about establishing a new Roth IRA and to discuss your investment
choices. Ask our representatives about the advantage of converting to a Roth IRA
before 1999.
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, IRAs, 401(k)s, quarterly reports, closing prices and other
current news. You can send us e-mail at [email protected].
7
<PAGE> 8
IN CONCLUSION
Into everyone's life, a little rain must fall. We have enjoyed blue
skies for so long that some investors appear disoriented by the recent market
storms. We accept it as being a natural, in fact, necessary part of the
investment weather pattern. The picnic has been postponed, not canceled. Stocks
are now more reasonably priced and we believe we have a picnic basket full of
appetizing value. We may still experience more market thunderstorms, but they
will pass and the sun will reappear.
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
business day for further information.
Sincerely,
/s/ MARIO J. GABELLI
MARIO J. GABELLI, CFA
Portfolio Manager and
Chief Investment Officer
October 30, 1998
TOP TEN HOLDINGS
SEPTEMBER 30, 1998
------------------
Viacom Inc. Navistar International Corp.
Media General Inc. Tele-Communications Inc.
Cablevision Systems Corp. DeKalb Genetics Corp.
MediaOne Group Inc. USA Networks Inc.
Chris-Craft Industries Inc. Telephone & Data Systems
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.
8
<PAGE> 9
THE GABELLI VALUE FUND INC.
PORTFOLIO OF INVESTMENTS -- SEPTEMBER 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS--99.3%
AEROSPACE--1.1%
135,000 Boeing Co. ........................ $ 4,632,188
210,000 Fairchild Corp., Cl. A+............ 2,966,250
------------
7,598,438
------------
AGRICULTURE--2.7%
202,000 DeKalb Genetics Corp., Cl. B....... 18,584,000
------------
AUTOMOTIVE: PARTS AND ACCESSORIES--2.0%
311,000 Dana Corp. ........................ 11,604,188
25,600 Modine Manufacturing Co. .......... 742,400
19,900 Quaker State Corp. ................ 289,794
30,000 Ragan (Brad) Inc.+................. 1,147,500
------------
13,783,882
------------
AVIATION: PARTS AND SERVICES--0.5%
22,000 Barnes Group Inc. ................. 624,250
165,000 Coltec Industries Inc. ............ 2,495,625
10,000 Precision Castparts Corp. ......... 412,500
------------
3,532,375
------------
BROADCASTING--6.2%
160,000 Ackerley Group Inc. ............... 3,160,000
517,020 Chris-Craft Industries Inc.+....... 22,845,821
110,000 Gray Communications Systems Inc.,
Cl. B............................ 2,736,250
330,000 Grupo Televisa SA, GDR+............ 6,373,125
120,000 Liberty Corp. ..................... 4,987,500
275,000 Paxson Communications Corp., Cl.
A+............................... 2,526,563
------------
42,629,259
------------
BUSINESS SERVICES--0.5%
127,000 Berlitz International Inc., New+... 3,349,625
------------
CABLE--18.9%
20,750 Cable Michigan Inc.+............... 721,063
1,130,000 Cablevision Systems Corp., Cl.
A+............................... 48,801,875
1,000,000 MediaOne Group Inc. ............... 44,437,500
720,000 TCI Ventures Group................. 12,915,000
530,000 Tele-Communications Inc., Cl. A,
New+............................. 20,736,250
------------
127,611,688
------------
COMMUNICATIONS EQUIPMENT--0.3%
36,000 Northern Telecom Ltd. ............. 1,152,000
30,000 Scientific-Atlanta Inc. ........... 633,750
------------
1,785,750
------------
CONSUMER PRODUCTS--2.3%
450,000 Carter-Wallace Inc. ............... $ 7,059,375
110,000 General Cigar Holdings Inc. ....... 708,125
168,000 General Cigar Holdings Inc., Cl. B+
(a).............................. 1,081,500
190,000 Ralston Purina Group............... 5,557,500
41,700 Syratech Corp.+.................... 834,000
------------
15,240,500
------------
CONSUMER SERVICES--1.7%
190,000 Cendant Corp. ..................... 2,208,750
250,000 Loewen Group Inc. ................. 3,687,500
300,000 Rollins Inc. ...................... 5,325,000
------------
11,221,250
------------
DIVERSIFIED INDUSTRIAL--2.5%
80,000 Honeywell Inc. .................... 5,125,000
150,000 ITT Industries Inc. ............... 5,081,250
219,000 Katy Industries Inc. .............. 3,599,813
60,000 Lamson & Sessions Co.+............. 273,750
250,000 Tyler Corp.+....................... 1,906,250
65,000 WHX Corp. ......................... 836,875
------------
16,822,938
------------
ENERGY--1.5%
55,000 Global Marine Inc. ................ 608,438
200,000 Pennzoil Co. ...................... 7,012,500
140,000 Southwest Gas Corp. ............... 2,861,250
------------
10,482,188
------------
ENTERTAINMENT--13.3%
180,660 Ascent Entertainment Group Inc.+... 1,445,280
70,100 GC Companies Inc.+................. 2,707,613
5,000 PolyGram NV........................ 283,750
781,500 USA Networks Inc.+................. 15,190,406
72,000 Tele-Communications Inc./Liberty
Media Group, Cl. A............... 2,641,500
1,182,000 Viacom Inc., Cl. A+................ 67,965,000
------------
90,233,549
------------
EQUIPMENT AND SUPPLIES--9.4%
210,000 Aeroquip-Vickers Inc. ............. 6,037,500
310,000 AMP Inc. .......................... 11,082,500
50,000 Ampco-Pittsburgh Corp. ............ 731,250
28,000 Deere & Co. ....................... 847,000
175,000 Flowserve Corp. ................... 3,543,750
130,000 Gerber Scientific Inc. ............ 3,510,000
240,000 Hussmann International Inc. ....... 3,405,000
970,000 Navistar International Corp. ...... 21,946,250
263,600 Pittway Corp., Cl. A............... 6,293,450
75,000 Sequa Corp., Cl. A+................ 4,223,438
</TABLE>
9
<PAGE> 10
THE GABELLI VALUE FUND INC.
PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
EQUIPMENT AND SUPPLIES (CONTINUED)
24,500 Sequa Corp., Cl. B+................ $ 1,786,203
7,500 Smith (A.O.) Corp. ................ 146,250
------------
63,552,591
------------
FINANCIAL SERVICES--1.7%
55,000 Allied Group Inc. ................. 2,643,438
165,000 American Bankers Insurance Group
Inc. ............................ 7,012,500
2,000 Donaldson, Lufkin & Jenrette
Inc. ............................ 51,125
30,000 Lehman Brothers Holdings Inc. ..... 847,500
42,300 Pioneer Group Inc.................. 697,950
------------
11,252,513
------------
FOOD AND BEVERAGE--5.0%
33,739 Advantica Restaurant Group Inc.+... 160,260
75,000 Corn Products International
Inc.+............................ 1,893,750
300,000 PepsiCo Inc. ...................... 8,831,250
200,000 Quaker Oats Co. ................... 11,800,000
45,000 Seagram Co. Ltd. .................. 1,290,938
606,500 Whitman Corp. ..................... 9,666,094
------------
33,642,292
------------
HEALTH CARE--0.4%
300,000 IVAX Corp.+........................ 2,625,000
------------
HOTELS AND GAMING--2.6%
502,000 Aztar Corp.+....................... 1,945,250
200,000 Circus Circus Enterprises Inc.+.... 1,887,500
183,301 Gaylord Entertainment Co., Cl. A... 5,464,661
230,000 Hilton Hotels Corp. ............... 3,924,375
250,000 Mirage Resorts Inc.+............... 4,187,500
------------
17,409,286
------------
METALS AND MINING--0.6%
35,000 Barrick Gold Corp. ................ 700,000
158,000 Echo Bay Mines Ltd+................ 375,250
75,000 Homestake Mining Co. .............. 909,375
55,000 Placer Dome Inc. .................. 759,688
465,000 Royal Oak Mines Inc.+.............. 319,688
300,000 TVX Gold Inc.+..................... 806,250
------------
3,870,251
------------
PAPER AND FOREST PRODUCTS--0.2%
35,000 Sealed Air Corp. .................. 1,115,625
------------
PUBLISHING--12.3%
100,000 Golden Books Family Entertainment
Inc.+............................ $ 15,625
60,000 McGraw-Hill Companies Inc. ........ 4,755,000
1,700,000 Media General Inc., Cl. A.......... 65,875,000
160,000 Meredith Corp. .................... 5,120,000
170,000 Penton Media Inc. ................. 2,316,250
60,000 Reader's Digest Association Inc.,
Cl. A............................ 1,147,500
190,000 Reader's Digest Association Inc.,
Cl. B............................ 3,610,000
10,000 Tribune Co. ....................... 503,125
------------
83,342,500
------------
REAL ESTATE--1.5%
650,000 Catellus Development Corp.+........ 8,450,000
130,000 Griffin Land & Nurseries Inc.+..... 1,438,124
------------
9,888,124
------------
RETAIL--3.5%
40,000 American Stores Co. ............... 1,287,500
17,000 Burlington Coat Factory Warehouse
Corp. ........................... 250,750
314,400 Giant Food Inc., Cl. A............. 13,578,149
125,000 Hartmarx Corp.+.................... 820,313
50,000 Ingles Markets Inc., Cl. A......... 587,500
130,000 Lillian Vernon Corp. .............. 1,763,125
230,000 Neiman Marcus Group Inc.+.......... 4,973,750
40,000 Republic Industries Inc. .......... 582,500
------------
23,843,587
------------
SATELLITE--1.0%
150,000 COMSAT Corp. ...................... 5,287,500
45,000 Loral Space & Communications
Ltd.+............................ 663,750
200,000 TCI Satellite Entertainment Inc.,
Cl. A+........................... 575,000
------------
6,526,250
------------
SPECIALTY CHEMICALS--1.7%
121,800 BetzDearborn Inc. ................. 8,419,424
150,000 Ferro Corp. ....................... 2,981,250
------------
11,400,674
------------
TELECOMMUNICATIONS--2.3%
577,549 Citizen Utilities Co., Cl. B+...... 4,692,588
60,000 Commonwealth Telephone Enterprises
Inc.+............................ 1,225,625
180,000 Frontier Corp. .................... 4,927,500
134,000 RCN Corp.+......................... 1,742,000
37,000 Southern New England
Telecommunications Corp. ........ 2,890,624
------------
15,478,337
------------
</TABLE>
10
<PAGE> 11
THE GABELLI VALUE FUND INC.
PORTFOLIO OF INVESTMENTS (CONTINUED) -- SEPTEMBER 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
WIRELESS COMMUNICATIONS--3.6%
161,000 Century Telephone Enterprises
Inc. ............................ $ 7,607,250
60,000 Rogers Cantel Mobile Communications
Inc., Cl. B...................... 461,250
250,000 Telecom Italia Mobile SpA.......... 1,457,002
430,100 Telephone and Data Systems Inc. ... 14,999,737
------------
24,525,239
------------
TOTAL COMMON STOCKS................ 671,347,711
------------
PREFERRED STOCK--0.5%
PUBLISHING--0.5%
155,500 News Corp. Ltd., ADR Preference
Shares........................... 3,479,312
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
---------
<C> <S> <C>
CORPORATE BONDS--0.1%
ENTERTAINMENT--0.1%
$ 497,000 Viacom Inc., Sub. Deb.,
8.00% due 07/07/06.................. 508,182
------------
U.S. GOVERNMENT OBLIGATIONS--0.4%
3,014,000 U.S. Treasury Bills, 4.59% to
4.64%++ due 11/12/98-12/24/98 (b)... 2,992,427
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
------
<C> <S> <C>
TOTAL INVESTMENTS--100.3%
(Cost $520,380,322).............. $678,327,632
------------
OTHER ASSETS AND
LIABILITIES (NET)--(0.3)%........ (1,809,840)
------------
NET ASSETS--100.0% (45,998,680
shares outstanding).............. $676,517,792
============
NET ASSET VALUE, AND REDEMPTION
PRICE PER SHARE.................. $14.71
======
MAXIMUM OFFERING PRICE PER SHARE
($14.71/.945, based on maximum
sales charge of 5.5% of the
offering price at September 30,
1998.)........................... $15.57
======
FUTURES CONTRACTS
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
CONTRACTS APPRECIATION
- --------- ------------
<C> <S> <C>
200 Short S&P 500 Index Futures,
12/17/98........................ $ 303,466
</TABLE>
- ------------------------------
(a) Security fair valued as determined by the Board of Directors.
(b) Securities pledged as collateral for futures contracts.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR-- American Depositary Receipt.
GDR-- Global Depositary Receipt.
11
<PAGE> 12
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.
- --------------------------------------------------------------------------------
[MARIO J. GABELLI PHOTO]
THIRD QUARTER REPORT
SEPTEMBER 30, 1998
