<PAGE> 1
THE GABELLI VALUE FUND INC.
FIRST QUARTER REPORT
MARCH 31, 1999
****
Morningstar Rating(TM) of The Gabelli Value Fund was 4 stars overall and
for the three-year period ended 3/31/99 among 2947 domestic equity funds,
and for the five-year period ended 3/31/99 among 1810 domestic equity funds.
TO OUR SHAREHOLDERS,
The first quarter of 1999 was an up, then down, and then up again period
for stocks. January's gains eroded in February as a much stronger than expected
U.S. economy sparked inflationary concerns. Bonds declined, ultimately dragging
stocks down with them. Then, in March, a favorable employment report coupled
with positive comments on inflation from Federal Reserve Chairman Greenspan
encouraged investors and, as a result, stocks and bonds rallied.
The market advance continued to be uneven, strongly favoring large cap
stocks over mid caps and small caps, and growth stocks over the value sector
across the market capitalization spectrum. Mid cap and small cap indices closed
the quarter with losses.
INVESTMENT PERFORMANCE
For the first quarter ended March 31, 1999, The Gabelli Value Fund's
(the "Fund") total return was 7.5%. The Standard & Poor's ("S&P") 500 Index had
a total return of 5.0% while the Value Line Composite and Russell 2000 Indices
declined 3.7% and 5.4%, respectively, over the same period. Each index is an
unmanaged indicator of stock market performance. The Fund was up 15.3% over the
trailing twelve-month period. The S&P 500 rose 18.5% while the Value Line
Composite and Russell 2000 declined 8.7% and 16.3%, respectively, over the same
twelve-month period.
For the five-year period ended March 31, 1999, the Fund's total return
averaged 22.7% annually versus average annual total returns of 26.2%, 14.9% and
11.2% for the S&P 500, Value Line Composite and Russell 2000, respectively.
Since inception on September 29, 1989 through March 31, 1999, the Fund had a
cumulative total return of 356.9%, which equates to an average annual total
return of 17.3%.
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Morningstar proprietary
ratings reflect historical risk adjusted performance as of March 31, 1999 and
are subject to change every month. Morningstar ratings are calculated from a
Fund's three, five and ten-year average annual returns in excess of 90-day
T-Bill returns with appropriate fee adjustments and a risk factor that reflects
fund performance below 90-day T-Bill returns. The top 10% of the funds in a
broad asset class receive five stars, the next 22.5% receive four stars, the
next 35% receive three stars, the next 22.5% receive two stars and the bottom
10% receive one star.
<PAGE> 2
INVESTMENT RESULTS (a)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Quarter
---------------------------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
<S> <C> <C> <C> <C> <C>
1999: Net Asset Value ............... $17.29 __ __ __ __
Total Return .................. 7.5% __ __ __ __
- ------------------------------------------------------------------------------------------------------------------------------
1998: Net Asset Value ............... $16.43 $16.94 $14.71 $16.08 $16.08
Total Return .................. 14.9% 3.1% (13.2)% 19.8% 23.2%
- ------------------------------------------------------------------------------------------------------------------------------
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>
<CAPTION>
Dividend History
- ------------------------------------------------------------------------------
Payment (ex) Date Rate Per Share Reinvestment Price
- ----------------- -------------- ------------------
<S> <C> <C>
December 28, 1998 $1.490 $15.54
December 29,1997 $2.720 $14.01
December 27, 1996 $1.110 $11.57
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 $0.0678 $ 9.58
</TABLE>
Average Annual Returns - March 31, 1999 (a)
--------------------------------------------
<TABLE>
<S> <C>
1 Year ............................................... 15.3%
............................................... 9.0%(c)
5 Year ............................................... 22.7%
............................................... 21.3%(c)
Life of Fund (b) ......................................... 17.3%
............................................... 16.6%(c)
</TABLE>
(a) Total returns and average annual returns reflect changes in share price and
reinvestment of dividends and are net of expenses. The net asset value of the
Fund is reduced on the ex-dividend (payment) date by the amount of the dividend
paid. Of course, returns represent past performance and do not guarantee future
results. Investment returns and the principal value of an investment will
fluctuate. When shares are redeemed they may be worth more or less than their
original cost. (b) From commencement of investment operations on September 29,
1989. (c) Includes the effect of the maximum 5.5% sales charge at beginning of
period.
2
<PAGE> 3
WHY DID WE DO SO WELL?
With our small to mid cap value bias, how did we outperform our
benchmark and the Russell 2000 and Value Line Composite Indices? The answer is
simple. We buy high-quality companies run by shareholder sensitive managements
at opportunistic prices. We benefit directly when corporate acquirers scoop up
the bargains in our portfolio, and indirectly, when merger and acquisition
activity alerts investors to value in our portfolio holdings' industry groups.
To wit, take our investment in Aeroquip-Vickers, where we applaud Chairman
Darryl Allen for agreeing to sell the company to Eaton Corp. at a price of $58
per share, 54.3% higher than our average investment cost of $37.60 on the
320,000 shares held. In the cable trenches, we also saw substantive gains in
Tele-Communications Inc., TCI Ventures and MediaOne Group as deal activity
helped surface values throughout the sector.
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 22 years at Gabelli Asset Management
Company. In past reports, we have tried to articulate our investment philosophy
and methodology. The accompanying 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 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. equity markets. At the
margin, our new investments are focused on businesses that are well-
3
<PAGE> 4
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
THE ECONOMY AND THE MARKET--A REVERSAL OF FORTUNES?
In 1998, the drivers of the market were declining interest rates and
continued liquidity as opposed to corporate earnings. For the year, S&P 500
earnings rose a modest 2.0% and if calculated on a non-weighted basis, earnings
were flat. However, the 30-year Treasury bond yield dropped nearly a full
percentage point from its March 1998 high, resulting in a significant expansion
of equities' price/earnings multiples and a 28.7% annual gain for the S&P 500.
We are faced with a mirror image situation today. We believe S&P
earnings can grow in the 8.0% to 10.0% range, a terrific showing compared to
1998. If interest rates hold relatively steady near current levels, the S&P
500's current lofty price/earnings multiple could be sustained and the market
could advance in line with earnings gains. The less optimistic picture would be
rising inflation, materially higher interest rates, rapidly contracting equity
multiples and a meaningful correction in the S&P 500. At this stage, we think
either scenario is plausible and will leave market forecasting to the Wall
Street gurus.
AMERICAN CONSUMERS: WILL THE ENGINE OF GLOBAL ECONOMIC GROWTH CONTINUE STEAMING
ALONG?
In our September 30, 1998 report, we pondered the impact of our "Four
M's" (Market, McGwire, Monica and Meriwether) on the American consumer. Would
the American consumer stop spending because of global economic turmoil,
accentuated in the U.S. and global capital markets by John Meriwether (the head
of ill-fated Long Term Capital Management), and the domestic political crisis
spawned by President Clinton's relationship with Monica Lewinsky? Or, would the
consumer be buoyed by rising capital markets resulting from a strong domestic
economy along with the heroics of baseball slugger Mark McGwire and continue to
help sustain economic momentum here and overseas. We favored the latter
conclusion. In retrospect, the American consumer continued to be the engine
driving global economic growth.
Today, we still ask the same question. Will the American consumer
continue to carry the rest of the world, or will the consumer eventually run low
on confidence and/or the resources required to nourish the global economy? Put
another way, can the U.S. continue to run enormous balance of payment deficits
that provide hope and sustenance for the other economies of the world as they
attempt to emerge from their economic malaise?
REFLATION VERSUS DEFLATION
Another critical economic and market question is whether domestic
inflation will continue to be subdued. Thus far, deflationary pressures from
abroad have kept inflation in check at home. A question to keep in mind though
is how long will the "price dumping" of exports from Asian and Latin American
4
<PAGE> 5
nations continue? Oil has already spiked up. Asian and European economies are in
the process of being reflated--the Japanese are essentially giving money away in
an attempt to revive their moribund economy while Euroland is cutting interest
rates in order to accelerate economic momentum. We also wonder how much longer
productivity gains will continue to offset rising wages in fully employed
America. We have our fingers crossed, but suspect that at some point, inflation
may once again raise its ugly head and create a headwind for the American
financial markets.
We remain focused on values and individual investment opportunities. If
one looks exclusively at the S&P 500, which is trading at more than 30 times
trailing earnings, stocks would have to be characterized as richly valued. But
in reality, the S&P 500 is a narrow gauge of the market, with the largest 25
component stocks having an enormous influence on the performance of the index.
The same can be said about the Nasdaq Composite Index, which is driven by a
relative handful of large technology stocks. However, there are many cheap
stocks available, as reflected in the much more reasonable valuations of broader
market indices. It is anyone's guess as to when the investing public will stop
chasing the high priced market favorites and begin gravitating toward more
realistically priced stocks. Nonetheless, we note that corporate buyers are out
in force, searching for business bargains. As we have repeatedly stated over the
past several years, quality companies trading at low valuations--the type of
stocks we favor--should continue to attract corporate bargain hunters and
provide a tailwind for our portfolio.
FLOW OF FUNDS ($ Billions)
<TABLE>
<CAPTION>
SOURCES 1993 1994 1995 1996 1997 1998
- ------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
U.S. Deals $ 234 $ 340 $ 511 $ 652 $ 919 $ 1,620
Stock Buybacks 37 46 99 176 181 207
Equity Mutual Funds (Net) 130 119 128 222 232 159
Dividends 158 182 205 262 275 279
------- ------- ------- ------- ------- -------
TOTAL SOURCES: 558 688 943 1,312 1,607 2,265
------- ------- ------- ------- ------- -------
USES
- ----
IPOs 103 62 82 115 118 108
U.S./International Equity Capital Flow
U.S. Purchases of Non-U.S. Equities (net) 63 48 50 60 41 (25)
International Purchases of U.S. Equities (net) 21 1 17 11 64 (22)
------- ------- ------- ------- ------- -------
Net Flow: 43 47 34 49 (23) (3)
------- ------- ------- ------- ------- -------
TOTAL USES: 146 109 116 164 95 105
------- ------- ------- ------- ------- -------
NET FLOW OF FUNDS: $ 413 $ 579 $ 827 $ 1,148 $ 1,513 $ 2,160
======= ======= ======= ======= ======= =======
</TABLE>
Sources: Securities Data Corp, Investment Company Institute, Birinyi Associates.
(C) 1999 Gabelli Asset Management Inc.
5
<PAGE> 6
A FLY (OR A FLYSPECK) IN THE MERGER AND ACQUISITION OINTMENT?
The accounting profession is once again meddling with the "deal" world.
The pencil pushers have decided to take a hard look at "pooling of interest"
accounting that minimizes the consequences on reported earnings of many
corporate mergers by essentially allowing companies to merge at book value, thus
eliminating goodwill charges. We suspect the rules will be changed within the
next several years. In the short term, a change will likely ignite deal fervor.
In the long run, we doubt it will restrain merger and acquisition activity for
long, if at all. We recall that in the late 1960s and early 1970s, changes in
the accounting standards for amortizing goodwill had a negative impact on
reported net earnings for merging companies. In fact, that is what inspired us
to begin focusing on EBITDA instead of net earnings in valuing stocks. By the
time the accounting rules changes were on the books, the investment bankers and
financial engineers had figured out how to thwart the new rules and deals
continued to be transacted.
We think the same thing will happen this time. By the time the
accountants develop new rules for pooling of interest in mergers, smart money
will have figured out how to circumvent the new rules and structure deals so
that they still make economic sense. In fact, we may see mergers and
acquisitions accelerate as companies scramble to get deals done before the rules
change.
REST IN PEACE
During the first quarter, we bid a sad (tongue firmly planted in cheek)
farewell to Aeroquip-Vickers, which passed on to Eaton Corp. We also mourn the
impending demise of Southwest Gas to Oneok or Southern Union, Frontier Corp. to
Global Crossing and MediaOne to AT&T. We will miss these portfolio friends, but
are comforted by their generous bequests to portfolio performance this quarter.
A component of our investment methodology is to identify industry and
sector trends and themes ahead of the curve and position ourselves to take
advantage of these developments. Industry consolidation is one such trend. As we
have discussed in previous letters, the continued high level of activity in
mergers and acquisitions contributed significantly to the solid performance of
the Value Fund. The accompanying table illustrates how deal activity surfaced
value in a small sample of the portfolio holdings.
FIRST QUARTER 1999 COMPLETED DEALS
<TABLE>
<CAPTION>
NUMBER AVERAGE COST CLOSING
FUND HOLDING OF SHARES (a) PER SHARE (b) PRICE (c) CLOSING DATE %RETURN (d)
- ------------ ------------- ------------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C>
TCI Ventures Group 720,000 $ 8.41 $28.00 3/10/99 232.86%
TCI/Liberty Media Group 82,000 37.93 54.44 3/10/99 43.53
Tele-Communications Inc., Cl. A 465,000 13.48 67.88 3/10/99 403.56
</TABLE>
- -------------------------------------------------------------------------------
(a) Number of shares held by the Fund on the final day of trading for the
issuer.
(b) Average purchase price of issuer's shares held by the Fund on the final day
of trading for the issuer.
(c) Closing price on the final day of trading for the issuer or the tender price
on the closing date of the tender offer.
(d) Represents average estimated return based on average cost per share and
closing price per share.
Note: See the Portfolio of Investments for a complete listing of holdings.
6
<PAGE> 7
Going forward, we expect accelerating deal activity from large companies
using high price/earnings multiple stock as currency to buy smaller companies
with much lower P/Es. This is accounting magic. If your stock is trading at 30
times earnings, you can pay a 100% premium for a smaller company trading at 10
times earnings and the transaction will still be accretive to earnings. This is
before factoring in any potential cost savings from combining the two companies'
operations. This price/earnings multiple arbitrage will be a deal too good for
many savvy business buyers to pass up.
FIRST QUARTER SCORECARD
In addition to the aforementioned "Rest in Peace" companies, our big
hits this quarter include Liberty Media Group, the former Tele-Communication
Inc.'s ("TCI") cable programming subsidiary, now trading as a tracking stock of
AT&T. Former TCI Chairman John Malone has been given free reign to put Liberty
Media's $5.5 billion in cash to work, doing what he has always done best,
investing in media companies. Our other cable television ("CATV") holding,
Cablevision Systems, also contributed handsomely to returns. Additionally, we
received a performance boost from the recovery in our Latin American media
investment, Grupo Televisa.
Commodity oriented holdings such as Archer-Daniels-Midland and Corn
Products International; capital goods investments such as Gerber Scientific; and
energy positions such as PennzEnergy must be scored as portfolio errors this
quarter. Funeral home and cemetery owner/operator Loewen Group, which turned
down an attractive takeover offer from Service Corp. International two years ago
and embarked on an ill-advised acquisition rampage, deserves Hall of Shame
recognition for burying more investors than clients this quarter.
TUNING IN TO CABLE VALUES
As aforementioned, our cable television holdings continued to contribute
to portfolio returns. A flurry of smaller private acquisitions in the CATV
industry, Adelphia's purchase of Century Communications and AT&T's bid for
MediaOne, have resulted in the average transactional value of a cable subscriber
(as measured by acquisition price) jumping from $2,500 to nearly $4,000 in the
last year.
Are these values economically justifiable? If you believe, as we do,
that cable television will become the dominant Internet transmission pipeline
and the most effective way for long distance telephone giants to enter the local
telephone business, then today's cable values may look cheap compared to
tomorrow's. An examination of AT&T's recent agreement with Time Warner provides
an illustration. AT&T has agreed to pay Time Warner $1.50 per cable
subscriber/per month for exclusive access to its cable network this year. Over
the next five years, this price escalates to $6.00 per cable subscriber/per
month. Theoretically, this adds $12 billion of economic value to Time Warner's
cable television business five years hence! Despite the strong gains of recent
years, if you plug these types of numbers into other large cable holdings such
as Cablevision Systems, cable operators look dirt cheap at today's prices. We
are not suggesting that AT&T will strike similar deals with other cable
companies. However, AT&T is not the only company in the world seeking access to
the cable television pipeline.
7
<PAGE> 8
THE INTERNET--A REALITY THAT IS CHANGING OUR WORLD
As the Internet becomes more firmly entrenched in our everyday lives, we
would like to share with you a sampling of past technological advances that
contributed to improved quality of life and productivity.
<TABLE>
<CAPTION>
INVENTION DATE INVENTOR
- --------- ---- --------
<S> <C> <C>
Internal Combustion Engine 1860 Jean Joseph Etienne-Lenoir
Stock Ticker 1869 Thomas Edison
Telephone 1876 Alexander Graham Bell
Incandescent Electric Lamp 1879 Thomas Edison
Electric Motor 1881 Thomas Edison
Radio 1895 Guglielmo Marconi
Talking Motion Picture 1913 Thomas Edison
Television 1926 Philo Farnsworth
Nylon 1935 DuPont and Co.
Internet 1969 BBN Corp.
</TABLE>
Internet stocks have dominated the business and consumer headlines.
There are two widely divergent schools of thought on Internet stocks. The bulls,
led by a whole new category of investors (aggressive on-line day traders), seem
to believe that even the most optimistic projections fall well short of
accurately reflecting the true growth potential of Internet companies. Their
approach seems to be one of discounting valuations because no price is too high
to pay for a stock with a "dot.com" at the end of its name. Stodgy investment
traditionalists, who were brought up believing that stock prices should have
some rational relationship to current as well as future value, are, of course,
appalled at the notion that any young company in even the most explosive growth
industry should trade at 100 times revenues.
We fall somewhere in between. We think some of the current Internet
stars (and perhaps a few "garage stage" companies we do not even know about),
will go on to become giant, highly profitable companies. At some point down the
road, we may look back and realize that a few Internet companies would have been
bargains at 200 times revenues. Unfortunately, we do not know which Internet
companies will end up in the S&P 500 and which will end up on the market trash
heap.
So, we will continue to pass on the richly priced pure Internet plays.
But, we hope to continue to profit from reasonably valued companies that can
benefit from the growth of the Internet. In recent years, we have reaped
tremendous gains from cable television stocks, which as we anticipated, have
become legitimate Internet players. More recently, we added Reader's Digest to
the portfolio--remember the company that publishes the wholesome little magazine
your grandparents and parents loved. Reader's Digest as an Internet company? We
will see. The company has aggressive new management, which has shed money losing
and marginally profitable businesses. Management also has a new business plan to
capitalize on its data bank of 140 million names concentrated in the 50 year old
and over
8
<PAGE> 9
demographic, which controls 70% of America's net worth. Reader's Digest will be
on the Internet, selling home improvement, health care, financial and religious
products--the kind of products in demand by its customer base. Over the next
five years, the company's goal is to increase revenues from $2.8 billion to $5.0
billion, and profits from $100 million to $500 million. We think new Chairman
and CEO Thomas Ryder, an American Express veteran who knows a few things about
leveraging sales to an existing customer base, may be able to meet these goals.
Another favorite is Navistar, which has a 38% share of the medium sized
trucking market. If e-commerce lives up to growth expectations, the demand for
medium sized trucks to deliver smaller packages over a wider distribution
network should increase. Navistar's balance sheet is now more stable, and over
the last two years, earnings have exceeded consensus estimates. If e-commerce
helps improve demand in the medium sized truck market that Navistar dominates,
earnings may continue to surprise on the upside. There is also some potential
takeover speculation with Sweden's Volvo reportedly on the prowl for an
acquisition in the trucking industry.
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.
Aeroquip-Vickers Inc. (ANV - $57.3125 - NYSE) is a leading worldwide
manufacturer and distributor of components and systems to industrial, automotive
and aerospace markets. Aeroquip's products include pressure hoses, fittings,
adapters, couplings, fluid connectors and precision molded and extruded plastic
products. Vickers' products include hydraulic pumps, motors and cylinders,
electric motors and drivers, electronic controls, filters, and fluid-evaluation
products and services. Eaton Corp. (ETN - $71.50 - NYSE) completed its
acquisition of Aeroquip in April for $2 billion, or $58 per share.
Cablevision Systems Corp. (CVC - $74.125 - AMEX) is one of the nation's leading
communications and entertainment companies, with a portfolio of operations that
span state-of-the-art, high-speed multimedia delivery, subscription cable
television services, championship professional sports teams and national cable
television networks. Headquartered in Bethpage, NY, Cablevision serves more than
3.4 million cable customers primarily in three core markets: New York, Boston
and Cleveland. Cablevision is a leader in delivering cutting-edge technological
innovation, such as Optimum TV, to the home. Through its Rainbow Media Holdings
subsidiary, Cablevision manages and develops internationally recognized content
offerings such as the popular national television networks American Movie
Classics, Bravo and The Independent Film Channel. Cablevision has a controlling
interest in New York City's famed Madison Square Garden which includes the arena
complex, the NY Knicks, the NY Rangers and the MSG network. Cablevision operates
Radio City Entertainment and holds a long term lease for Radio City Music Hall,
home of the world famous Radio City Rockettes.
Coltec Industries Inc. (COT - $18.1875 - NYSE) manufactures a diversified range
of engineered aerospace and industrial products. The aerospace division is a
leading producer of landing gear systems, engine fuel controls, cockpit seating,
turbine blades and fuel injectors for commercial and
9
<PAGE> 10
military aircraft. The industrial division manufactures seals, gaskets,
packaging products and self-lubricating bearings. The B.F. Goodrich Co. (GR -
$34.3125 - NYSE) is in the process of acquiring Coltec for $2.2 billion, or
$20.125 per share.
Dana Corp. (DCN - $38.00 - NYSE) is one of the world's largest independent
suppliers to vehicle and engine manufacturers and related aftermarkets. Dana
produces engine, drive-train and braking components and systems. Founded in 1904
and based in Toledo, Ohio, the company operates some 340 major facilities in 32
countries and employs more than 86,000 people. A significant portion of the
Automotive Aftermarket Group's resources came to Dana from its recent
acquisition of Echlin Inc.
Ferro Corp. (FOE - $24.75 - NYSE), established in 1919 and based in Cleveland,
Ohio, is a leading producer of porcelain enamel frit, powder coating and plastic
compounds. Ferro is being repositioned as a premier specialty chemical company,
producing specialty materials for industry including coatings, colors, ceramics,
chemicals and plastics. Ferro's major markets are building and renovation, major
appliances, household furnishings, transportation, industrial products,
packaging and leisure products.
Liberty Media Group (LMG'A - $52.625 - NYSE) is engaged in businesses which
provide programming services, including production, acquisition and distribution
through all available media formats, and businesses engaged in electronic
retailing, direct marketing and other services. LMG holds interests in globally
branded entertainment networks such as Discovery Channel, USA, QVC, Encore and
STARZ!. Liberty's assets also include interests in international video
distribution businesses; international telephony and domestic wireless; plant
and equipment manufacturers; and other businesses related to broadband services.
Liberty Media Group Class A and Class B common stock are tracking stocks of AT&T
Corp. (T - $79.8125 - NYSE) and are now traded on the New York Stock Exchange.
Media General Inc. (MEG'A - $46.50 - 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 - $63.50 - NYSE) is one of the nation's leading
broadband services companies. UMG provides more than five million subscribers in
17 states with basic and premium cable television services and has recently
introduced high speed Internet access, telephone services and digital television
in some of its service areas. MediaOne was created from the 1996 union of
telecommunications company MediaOne Group (formerly US West Media Group) and
Continental Cablevision. Headquartered in Englewood, Colorado, MediaOne provides
high quality cable television services. The company is conducting a national
upgrade of its hybrid fiber optic/coaxial cable ("HFC") network to broadband
technology which improves traditional cable service and enables next-generation
10
<PAGE> 11
products and services. The Group's investment interests include 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. The number three
U.S. cable television company recently agreed to be acquired by AT&T Corp. (T -
$79.8125 - NYSE) for $54 billion.
Mirage Resorts Inc. (MIR - $21.25 - NYSE) owns and operates casino-based
entertainment resorts primarily in Las Vegas and Laughlin, Nevada. These resorts
include Bellagio, Golden Nugget, The Mirage, Treasure Island and the Golden
Nugget Laughlin. The $1.6 billion Bellagio hotel-casino next to Caesars Palace
was opened in October. The $600 million Beau Rivage is set to open in Biloxi,
Mississippi. A resort is planned for Atlantic City.
Navistar International Corp. (NAV - $40.1875 - NYSE) is the leading North
American producer of heavy and medium duty 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 $1.6 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.
Telephone & Data Systems Inc. (TDS - $56.375 - 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 3 million customers in
35 states. TDS owns 81.1% of United States Cellular Corp. (USM - $44.00 - AMEX),
the nation's seventh largest cellular telephone company. It also owns 82.4% of
Aerial Communications Inc. (AERL - $7.75 - Nasdaq), TDS's PCS subsidiary which
owns the licenses to provide PCS service in six major trading areas ("MTAs")
encompassing approximately 27.6 million population equivalents. On December 8,
1998, TDS announced its intent to spin-off its Aerial stake to existing TDS
shareholders on a tax-free basis and focus on its core wireline and cellular
operations. The transaction is expected to close by the end of the year.
Viacom Inc. (VIA'A - $83.3125 - AMEX), long a major provider of entertainment
"content", has evolved into one of the world's dominant media companies. The
addition of Paramount Communications, Blockbuster Entertainment (acquired in
1994), along with publisher Simon & Schuster, makes Viacom one of the largest
entertainment and publishing companies. 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).
11
<PAGE> 12
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.
INTERNET
You can now visit us on the Internet. Our home page at
http://www.gabelli.com contains information about Gabelli Asset Management Inc.,
the Gabelli Mutual Funds, IRAs, 401(k)s, quarterly reports, closing prices and
other current news. You can send us e-mail at [email protected].
IN CONCLUSION
We are pleased with our competitive returns versus the growth oriented
S&P 500 and superior returns relative to broader market indices and most of our
value peers. We believe the S&P 500, where valuations have been growing much
faster than earnings, is vulnerable at current levels. However, we are
continuing to find what we view as great values in an otherwise reasonably
priced stock market.
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
April 30, 1999
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
MARCH 31, 1999
Viacom Inc. Navistar International Corp.
Media General Inc. USA Networks Inc.
Cablevision Systems Corp. Dana Corp.
MediaOne Group Inc. Chris-Craft Industries Inc.
Telephone & Data Systems Liberty Media Group
- --------------------------------------------------------------------------------
NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period stated in this report. The manager's views
are subject to change at any time based on market and other conditions.
12
<PAGE> 13
THE GABELLI VALUE FUND INC.
PORTFOLIO OF INVESTMENTS -- MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS--93.5%
AGRICULTURE--0.7%
440,000 Archer-Daniels-Midland Co. ....... $ 6,462,500
------------
AUTOMOTIVE: PARTS AND ACCESSORIES--3.9%
730,000 Dana Corp. ....................... 27,740,000
232,400 Modine Manufacturing Co. ......... 6,521,725
------------
34,261,725
------------
AVIATION: PARTS AND SERVICES--0.9%
55,000 Barnes Group Inc. ................ 1,031,250
200,000 Coltec Industries Inc. ........... 3,637,500
242,000 Fairchild Corp., Cl. A+........... 2,465,375
10,000 Precision Castparts Corp. ........ 402,500
------------
7,536,625
------------
BROADCASTING--5.2%
160,000 Ackerley Group Inc. .............. 2,710,000
556,221 Chris-Craft Industries Inc.+...... 25,377,565
165,000 Gray Communications Systems Inc.,
Cl. B........................... 2,206,875
195,000 Grupo Televisa SA, GDR+........... 6,118,125
130,000 Liberty Corp. .................... 6,816,875
270,000 Paxson Communications Corp., Cl.
A+.............................. 2,311,875
------------
45,541,315
------------
BUSINESS SERVICES--1.0%
148,900 Berlitz International Inc.,
New+............................ 3,368,862
330,000 Cendant Corp. .................... 5,197,500
------------
8,566,362
------------
CABLE--15.3%
1,012,000 Cablevision Systems Corp., Cl.
A+.............................. 75,014,500
930,000 MediaOne Group Inc. .............. 59,055,000
------------
134,069,500
------------
COMMUNICATIONS EQUIPMENT--0.5%
28,000 Northern Telecom Ltd. ............ 1,739,500
30,000 Scientific-Atlanta Inc. .......... 817,500
50,000 Xylan Corp. ...................... 1,840,625
------------
4,397,625
------------
COMPUTER SOFTWARE AND SERVICES--0.1%
50,000 PLATINUM Technology International
Inc. ........................... 1,275,000
------------
CONSUMER PRODUCTS--2.4%
500,000 Carter-Wallace Inc. .............. 9,062,500
211,400 General Cigar Holdings Inc. ...... 1,968,662
168,000 General Cigar Holdings Inc., Cl.
B+(a)........................... 1,564,500
125,000 Hartmarx Corp.+................... 609,375
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
90,000 Mattel Inc. ...................... $ 2,238,750
170,000 Ralston Purina Group.............. 4,536,875
41,700 Syratech Corp. +.................. 667,200
------------
20,647,862
------------
CONSUMER SERVICES--0.9%
250,000 Loewen Group Inc. ................ 453,125
445,000 Rollins Inc. ..................... 7,481,562
------------
7,934,687
------------
DIVERSIFIED INDUSTRIAL--1.3%
50,000 Ampco-Pittsburgh Corp. ........... 493,750
78,000 Honeywell Inc. ................... 5,913,375
219,000 Katy Industries Inc. ............. 2,847,000
60,000 Lamson & Sessions Co.+............ 296,250
215,000 Tyler Corp.+...................... 940,625
120,000 WHX Corp. ........................ 945,000
------------
11,436,000
------------
ENERGY AND UTILITIES--1.7%
581,880 Citizens Utilities Co., Cl. B+.... 4,509,570
25,000 Global Marine Inc. ............... 293,750
300,000 PennzEnergy Co. .................. 3,150,000
215,000 Pennzoil-Quaker State Co. ........ 2,660,625
156,000 Southwest Gas Corp. .............. 4,290,000
------------
14,903,945
------------
ENTERTAINMENT--17.6%
183,160 Ascent Entertainment Group
Inc.+........................... 2,003,312
88,000 GC Companies Inc.+................ 2,766,500
456,400 Liberty Media Group, Cl. A+....... 24,018,050
800,000 USA Networks Inc.+................ 28,650,000
1,164,000 Viacom Inc., Cl. A+............... 96,975,750
------------
154,413,612
------------
EQUIPMENT AND SUPPLIES--9.3%
320,000 Aeroquip-Vickers Inc. ............ 18,340,000
40,000 AMP Inc. ......................... 2,147,500
40,000 Deere & Co. ...................... 1,545,000
210,000 Flowserve Corp. .................. 3,268,125
130,000 Gerber Scientific Inc. ........... 2,624,375
235,000 Hussmann International Inc. ...... 3,451,563
945,000 Navistar International Corp. ..... 37,977,188
263,600 Pittway Corp., Cl. A.............. 6,985,400
75,000 Sequa Corp., Cl. A+............... 3,768,750
24,500 Sequa Corp., Cl. B+............... 1,659,875
7,500 Smith (A.O.) Corp. ............... 146,250
------------
81,914,026
------------
</TABLE>
13
<PAGE> 14
THE GABELLI VALUE FUND INC.
PORTFOLIO OF INVESTMENTS (CONTINUED) -- MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES--1.7%
200,000 American Bankers Insurance Group
Inc. ........................... $ 10,400,000
45,000 BA Merchant Services Inc. ........ 916,875
16,000 Lehman Brothers Holdings Inc. .... 956,000
20,000 Mellon Bank Corp. ................ 1,407,500
81,000 Pioneer Group Inc. ............... 1,199,812
------------
14,880,187
------------
FOOD AND BEVERAGE--3.4%
33,739 Advantica Restaurant Group
Inc.+........................... 168,695
110,000 Corn Products International
Inc. ........................... 2,633,125
230,000 PepsiCo Inc. ..................... 9,013,125
80,000 Quaker Oats Co. .................. 5,005,000
45,000 Seagram Co. ...................... 2,250,000
640,000 Whitman Corp. .................... 11,000,000
------------
30,069,945
------------
HEALTH CARE--0.4%
300,000 IVAX Corp.+....................... 3,543,750
------------
HOTELS AND GAMING--2.5%
540,000 Aztar Corp.+...................... 2,598,750
120,000 Circus Circus Enterprises Inc.+... 2,107,500
263,401 Gaylord Entertainment Co., Cl.
A............................... 6,387,474
260,000 Hilton Hotels Corp. .............. 3,656,250
250,000 Mirage Resorts Inc.+.............. 5,312,500
280,000 Park Place Entertainment Corp. ... 2,117,500
------------
22,179,974
------------
METALS AND MINING--0.3%
32,000 Barrick Gold Corp. ............... 546,000
201,000 Echo Bay Mines Ltd.+.............. 339,187
70,000 Homestake Mining Co. ............. 603,750
55,000 Placer Dome Inc. ................. 615,313
365,000 Royal Oak Mines Inc.+............. 32,850
300,000 TVX Gold Inc.+.................... 375,000
------------
2,512,100
------------
PUBLISHING--11.0%
44,000 McGraw-Hill Companies Inc. ....... 2,398,000
1,674,000 Media General Inc., Cl. A (b)..... 77,841,000
124,000 Meredith Corp. ................... 3,898,250
170,000 Penton Media Inc. ................ 3,825,000
250,000 Reader's Digest Association Inc.,
Cl. B........................... 6,875,000
22,000 Tribune Co. ...................... 1,439,625
------------
96,276,875
------------
REAL ESTATE--1.2%
730,000 Catellus Development Corp.+....... 9,763,750
130,000 Griffin Land & Nurseries Inc.+.... 1,202,500
------------
10,966,250
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ ------
<C> <S> <C>
RETAIL--1.4%
17,100 Burlington Coat Factory Warehouse
Corp. .......................... $ 200,925
140,000 Food Lion Inc., Cl. A............. 1,288,438
50,000 Ingles Markets Inc., Cl. A........ 575,000
130,000 Lillian Vernon Corp. ............. 1,560,000
252,400 Neiman Marcus Group Inc.+......... 5,710,550
220,000 Republic Industries Inc. ......... 2,722,500
------------
12,057,413
------------
SATELLITE--0.6%
150,000 COMSAT Corp. ..................... 4,340,625
50,000 Loral Space & Communications
Ltd.+........................... 721,875
150,000 TCI Satellite Entertainment Inc.,
Cl. A+.......................... 98,438
------------
5,160,938
------------
SPECIALTY CHEMICALS--1.1%
30,000 Dexter Corp. ..................... 945,000
200,000 Ferro Corp. ...................... 4,950,000
100,000 Morton International Inc. ........ 3,675,000
------------
9,570,000
------------
TELECOMMUNICATIONS--3.6%
160,000 AT&T Corp. ....................... 12,770,000
168,462 Commonwealth Telephone Enterprises
Inc.+........................... 6,201,507
150,000 Frontier Corp. ................... 7,781,250
110,000 RCN Corp.+........................ 3,691,875
60,000 Rogers Communications Inc., Cl.
B+.............................. 1,087,500
------------
31,532,132
------------
WIRELESS COMMUNICATIONS--5.5%
105,000 Rogers Cantel Mobile
Communications Inc., Cl. B...... 1,896,563
250,000 Telecom Italia Mobile SpA......... 1,682,880
785,000 Telephone & Data Systems Inc. .... 44,254,375
------------
47,833,818
------------
TOTAL COMMON STOCKS............... 819,944,166
------------
PREFERRED STOCKS--0.5%
PUBLISHING--0.5%
155,500 News Corp. Ltd., ADR Preference
Shares.......................... 4,276,250
------------
</TABLE>
14
<PAGE> 15
THE GABELLI VALUE FUND INC.
PORTFOLIO OF INVESTMENTS (CONTINUED) -- MARCH 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
- ---------- -----------
<C> <S> <C>
CORPORATE BONDS--0.1%
ENTERTAINMENT--0.1%
$ 497,000 Viacom Inc., Sub. Deb. 8.00%,
07/07/06........................ $ 516,880
------------
REPURCHASE AGREEMENT--0.5%
4,507,000 Agreement with Salomon Smith
Barney, 4.88%, due 04/01/99
(c)............................. 4,507,000
------------
U.S. GOVERNMENT OBLIGATIONS--5.3%
46,500,000 U.S.Treasury Bills, 4.74% to
4.94%++, due 04/22/99........... 46,371,375
------------
TOTAL INVESTMENTS--99.9% (Cost
$562,300,839)................... 875,615,671
OTHER ASSETS AND LIABILITIES
(NET)--0.1%..................... 1,004,366
------------
NET ASSETS--100.0% (50,703,301
shares outstanding)............. $876,620,037
============
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
-----
<C> <S> <C>
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE................. $17.29
=====
MAXIMUM OFFERING PRICE PER SHARE
($17.29/.945, based on maximum
sales charge of 5.5% of the
offering price at March 31,
1999.).......................... $18.30
=====
</TABLE>
- ------------------------------
(a) Security fair valued as determined by the Board of Directors.
(b) Security considered an affiliated holding because the Fund owns at least
5% of the outstanding shares.
(c) Agreement dated 03/31/99 to be repurchased at $4,507,610. Collateralized
by $4,625,000 U.S. Treasury Bill, 4.69%++ due 05/13/99 (value $4,599,563).
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR--American Depositary Receipt.
GDR--Global Depositary Receipt.
15
<PAGE> 16
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 & Lynch
Gabelli Asset Management
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, 1999