THE GABELLI VALUE FUND INC.
ANNUAL REPORT
DECEMBER 31, 1999
{Graphic of five stars omitted]
MORNINGSTAR RATED(TM) GABELLI VALUE FUND 5 STARS FOR THE THREE-YEAR PERIOD ENDED
12/31/99 AMONG 3469 DOMESTIC EQUITY FUNDS, AND 4 STARS OVERALL AND FOR THE FIVE
AND TEN-YEAR PERIODS ENDED 12/31/99 AMONG 3469, 2180 AND 770 DOMESTIC EQUITY
FUNDS, RESPECTIVELY.
TO OUR SHAREHOLDERS,
The leading stock market indices rallied strongly in the fourth quarter of
1999 and finished the year at or near record highs. However, relatively few
stocks participated in this year's stock market bonanza. New lows outnumbered
new highs on the NYSE by a wide margin throughout much of the year. Growth
continued to out-perform value across the market capitalization spectrum and
large cap stocks continued to outperform small caps. Technology stocks were the
biggest winners, with the tech-heavy Nasdaq Composite outdistancing all other
major market indices.
In this uneven market environment, we are extremely pleased to report that
the Fund materially outperformed the Dow Jones Industrials, the Standard &
Poor's 500, the Russell 2000, and the vast majority of our value fund peers.
INVESTMENT PERFORMANCE
For the fourth quarter ended December 31, 1999, The Gabelli Value Fund's
(the "Fund") total return was a solid 12.06%. The Standard & Poor's ("S&P") 500,
Value Line Composite and Russell 2000 Indices had total returns of 14.87%, 6.67%
and 18.44%, respectively, over the same period. Each index is an unmanaged
indicator of stock market performance. The Fund was up 31.92% for 1999. The S&P
500, Value Line Composite and Russell 2000 Indices rose 21.03%, 10.56% and
21.26%, respectively, over the same twelve-month period.
For the ten-year period ended December 31, 1999, the Fund's total return
averaged 18.57% annually versus average annual total returns of 18.19%, 13.46%
and 13.40% for the S&P 500, Value Line Composite and Russell 2000 Indices,
respectively. Since inception on September 29, 1989 through December 31, 1999,
the Fund had a cumulative total return of 460.60%, which equates to an average
annual total return of 18.29%.
- --------------------------------------------------------------------------------
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Morningstar proprietary
ratings reflect historical risk adjusted performance as of December 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>
<TABLE>
<CAPTION>
INVESTMENT RESULTS (a)
- ----------------------------------------------------------------------------------------------------------------
Quarter
-------------------------------------------
1st 2nd 3rd 4th Year
----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C>
1999: Net Asset Value .................... $17.29 $19.58 $18.93 $19.45 $19.45
Total Return ....................... 7.5% 13.2% (3.3)% 12.1% 31.9%
- ----------------------------------------------------------------------------------------------------------------
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>
- -------------------------------------------------------
Average Annual Returns - December 31, 1999 (a)
- -------------------------------------------------------
1 Year .................................... 31.92%
.................................... 24.63%(c)
5 Year .................................... 26.26%
.................................... 24.84%(c)
10 Year ................................... 18.57%
.................................... 17.90%(c)
Life of Fund (b) .......................... 18.29%
.................................... 17.64%(c)
- -------------------------------------------------------
Dividend History
- ---------------------------------------------------------
Payment (ex) Date Rate Per Share Reinvestment Price
- ----------------- -------------- ------------------
December 27, 1999 $1.720 $18.98
December 28, 1998 $1.490 $15.54
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
(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>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI VALUE FUND, THE CONSUMER PRICE INDEX +10% AND THE S&P 500 INDEX
[line graph omitted--plot points as follows]
<TABLE>
<CAPTION>
GABELLI VALUE FUND CONSUMER PRICE INDEX +10% S&P 500 INDEX
<S> <C> <C> <C>
9/29/89 $ 9,450 $10,000 $10,000
12/89 9,648 10,338 10,210
9,108 12,003 9,893
12/91 10,502 13,571 12,910
11,836 15,322 13,556
12/93 16,510 17,275 14,925
16,510 19,464 15,119
12/95 20,220 21,905 20,803
21,979 24,823 25,588
12/97 32,579 27,727 34,122
40,137 30,946 43,915
12/99 52,000 34,876 54,000
actual is 52,949* actual number is 53,150
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
*INCLUDES EFFECT OF MAXIMUM SALES CHARGE OF 5.5%.
</TABLE>
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 ten years at
The Gabelli Value Fund and for over 23 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 of Pyramid omitted--text as follows]
EPS
PMV
MANAGEMENT
CASH FLOW
RESEARCH
[End of Pyramid text]
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
3
<PAGE>
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-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
1999'S HAVE AND HAVE NOT MARKET
At year-end 1999, many investors were left pondering how and why their
individual stock and/or mutual fund portfolios performed so poorly in a year in
which all the leading stock market indices posted strong gains. The answer is
simple. A relative handful of increasingly popular technology and
Internet-related stocks propelled the capitalization-weighted market indices
higher, while the majority of stocks languished. If you owned these types of
companies, you were a winner. If you owned index funds, you earned respectable
returns. If you owned most anything else, especially value stocks and most value
oriented funds, you had a "dull year".
How did our largely non-tech, value-oriented portfolio perform so well in
this extremely narrow market? First, we pick businesses with good growth
prospects that are reasonably valued compared to their "intrinsic value".
Secondly, we look for a "catalyst" that will surface that underlying value.
The seeds for this year's performance harvest were sown four and five
years ago when we were buying telecommunications, cable television and media
stocks at what we viewed as bargain basement prices. Our intensive research in
these groups, and the identification of "catalysts" that would surface value,
rewarded us in 1997 - 1998 and again this year. Importantly, despite recent
years' excellent performance, our holdings in these industries remain quite
reasonably valued in light of still favorable business prospects.
And, of course, we benefited from financial engineering - particularly
deals, as merger and acquisition activity was at an all time high.
4
<PAGE>
- --------------------------------------------------------------------------------
FLOW OF FUNDS ($ Billions)
<TABLE>
<CAPTION>
SOURCES 1994 1995 1996 1997 1998 1999(E)
- ------- ---- ---- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
U.S. Deals $340 $511 $ 652 $ 919 $1,620 $1,745
Stock Buybacks 47 99 176 181 207 178
Equity Mutual Funds (Net) 119 128 222 232 157 188
Dividends 182 254 298 334 349 367
---- ---- ------- ------ ------ -------
TOTAL SOURCES: 688 992 1,348 1,666 2,333 2,478
---- ---- ------- ------ ------ -------
USES
- ----
IPOs 29 30 50 43 37 69
U.S./International Equity Capital Flow
U.S. Purchases of Non-U.S. Equities (net) 48 50 59 41 (6) 22
International Purchases of U.S. Equities (net) 1 11 12 70 50 73
---- ---- ------- ------ ------ -------
Net Flow: 47 39 47 (29) (56) (51)
---- ---- ------- ------ ------ -------
TOTAL USES: 76 69 97 14 (19) 18
---- ---- ------- ------ ------ -------
NET FLOW OF FUNDS: $612 $923 $1,251 $1,652 $2,352 $2,460
==== ==== ======= ====== ====== =======
</TABLE>
SOURCES: SECURITIES DATA CORP, INVESTMENT COMPANY INSTITUTE, BIRINYI ASSOCIATES,
FEDERAL RESERVE BOARD (SAAR-DIV.) (C)2000 GABELLI ASSET MANAGEMENT INC.
- --------------------------------------------------------------------------------
THE ECONOMY AND THE MARKET: INFLATION, INTEREST RATES, AND CORPORATE PROFITS
Inflation, interest rates and corporate profits represent an economic
trifecta for stocks. Through most of this historic eighteen-year bull market, we
have enjoyed low inflation, declining interest rates and strong corporate profit
growth. Over the last two years the market has managed to advance despite one or
another of these economic horses breaking stride. In 1998, the market shrugged
off lackluster corporate earnings growth. This year, the market delivered
double-digit returns despite higher inflation and materially higher interest
rates. Looking ahead, we suspect the market will not be able to maintain its
pace if one or more of these horses pull up lame.
We believe corporate earnings will continue to run strong. The global
economic recovery improves the profit picture for many American companies. The
Asian and European economies continue to advance and we see synchronized global
growth in the year 2000 providing corporate profits with a tailwind that will
result in earnings that may be even better than current Wall Street estimates.
The wild card is the American consumer. At present, consumer confidence remains
strong. Everyone who wants a job has one and wages are rising. However, it now
costs more to gas up the car and heat our homes. Variable rate mortgage payments
will soon be higher and the days of raising spending money by refinancing your
home at lower fixed rates are over for the time being. Also, with the yen
strengthening against the dollar, all of the Japanese cars, televisions,
stereos, and video games that the American consumer loves will be more
expensive. Will all this be enough to cause the American consumer to tighten the
purse strings? Or will the "wealth effect" of a rising stock market and a
significant tax cut--the Republicans are running on the "3 Fs" (Faith, Finances,
and Family)--provide a bonus for Americans to spend?
5
<PAGE>
Inflation, as measured by the Consumer Price Index ("CPI"), is currently
running around 2.7%--about a percentage point higher than last year, but still
in the comfort zone. Can we expect inflation to stabilize at present levels or
will it trend materially higher, eventually disrupting the economy and stock
market? This depends on two things: (1) whether the Federal Reserve will succeed
in cooling the economy and (2) whether improving productivity will continue to
offset rising wages in today's tight market. Nobody (and that includes us) seems
to have a good handle on these two issues and, consequently, the short term
outlook for inflation remains cloudy. Longer term, we see the Internet as a
disinflationary force. E-commerce is taking the middleman out of the picture and
in the process eliminating an entire level of cost in the economic system. It is
also heightening price competition. If E-commerce approaches its growth
potential, we believe inflation will remain in check.
Without a clear reading on the inflation front, making near term interest
rate forecasts is an even greater folly than usual. We note that although stocks
advanced while bonds declined from January through April, they eventually
stalled as bonds continued to drift lower. When bonds rallied briefly in late
October, stocks took off shortly thereafter. At year-end, bonds were once again
sinking, but stocks moved steadily higher. If bonds continue to decline and
market interest rates continue to rise, it will eventually take the wind out of
the stock market's sail.
GREENSPEAK
The following is excerpted from Federal Reserve Board Chairman Alan
Greenspan's speech, given before the Economic Club of New York on January 13,
2000. Greenspan ponders the impending arrival of the U.S. economy at its longest
peacetime expansion of this half-century, reflecting on the "New Economy" and
where we will go from here:
"WE ARE WITHIN WEEKS OF ESTABLISHING A RECORD FOR THE LONGEST ECONOMIC
EXPANSION IN THIS NATION'S HISTORY. THE 106-MONTH EXPANSION OF THE 1960S, WHICH
WAS ELONGATED BY THE VIETNAM WAR, WILL BE SURPASSED IN FEBRUARY. NONETHELESS,
THERE REMAIN FEW EVIDENT SIGNS OF GERIATRIC STRAIN THAT TYPICALLY PRESAGE AN
IMMINENT ECONOMIC DOWNTURN...
WHAT SHOULD BE INDISPUTABLE IS THAT A NUMBER OF NEW TECHNOLOGIES THAT
EVOLVED LARGELY FROM THE CUMULATIVE INNOVATIONS OF THE PAST HALF-CENTURY HAVE
NOW BEGUN TO BRING ABOUT AWESOME CHANGES IN THE WAY GOODS AND SERVICES ARE
PRODUCED AND, ESPECIALLY, IN THE WAY THEY ARE DISTRIBUTED TO FINAL USERS...
CAPITAL MARKETS, NOT COMFORTABLE WITH DISCONTINUOUS SHIFTS IN ECONOMIC
STRUCTURE, ARE GROPING FOR SENSIBLE EVALUATIONS OF [INNOVATIVE INTERNET STARTUP
FIRMS]... ONE RESULT OF THE MORE-RAPID PACE OF IT INNOVATION HAS BEEN A VISIBLE
ACCELERATION OF THE PROCESS OF "CREATIVE DESTRUCTION," A SHIFTING OF CAPITAL
FROM FAILING TECHNOLOGIES INTO THOSE TECHNOLOGIES AT THE CUTTING EDGE...
INDEED, THESE DEVELOPMENTS EMPHASIZE THE ESSENCE OF INFORMATION
TECHNOLOGY--THE EXPANSION OF KNOWLEDGE AND ITS OBVERSE, THE REDUCTION IN
UNCERTAINTY. AS A CONSEQUENCE, RISK PREMIUMS THAT WERE ASSOCIATED WITH ALL FORMS
OF BUSINESS ACTIVITIES HAVE DECLINED... THE RELATIONSHIP BETWEEN BUSINESSES AND
CONSUMERS ALREADY IS BEING CHANGED BY THE EXPANDING OPPORTUNITIES FOR
E-COMMERCE. THE FORCES UNLEASHED BY THE INTERNET ARE ALMOST SURELY TO BE EVEN
MORE POTENT WITHIN AND AMONG BUSINESSES, WHERE UNCERTAINTIES ARE BEING REDUCED
BY IMPROVING THE QUANTITY, THE RELIABILITY, AND THE TIMELINESS OF INFORMATION.
THIS IS THE CASE IN MANY RECENT INITIATIVES, ESPECIALLY AMONG OUR MORE SEASONED
COMPANIES, TO CONSOLIDATE AND RATIONALIZE THEIR SUPPLY CHAINS USING THE
INTERNET...
6
<PAGE>
AN ABILITY TO REORGANIZE PRODUCTION AND DISTRIBUTION PROCESSES IS
ESSENTIAL TO TAKE ADVANTAGE OF NEWER TECHNOLOGIES. INDEED, THE COMBINATION OF A
MARKED SURGE IN MERGERS AND ACQUISITIONS, AND ESPECIALLY THE VAST INCREASE IN
STRATEGIC ALLIANCES, INCLUDING ACROSS BORDERS, IS DRAMATICALLY ALTERING BUSINESS
STRUCTURES TO CONFORM TO THE IMPERATIVES OF THE NEWER TECHNOLOGIES.
TO BE SURE, INCREASES IN WAGES IN EXCESS OF PRODUCTIVITY GROWTH MAY NOT BE
INFLATIONARY, AND DESTRUCTIVE OF ECONOMIC GROWTH, IF OFFSET BY DECREASES IN
OTHER COSTS OR DECLINING PROFIT MARGINS. A PROTRACTED DECLINE IN MARGINS,
HOWEVER, IS A RECIPE FOR RECESSION. THUS, IF OUR OBJECTIVE OF MAXIMUM
SUSTAINABLE ECONOMIC GROWTH IS TO BE ACHIEVED, THE POOL OF AVAILABLE WORKERS
CANNOT SHRINK INDEFINITELY...IF A TREND CANNOT CONTINUE, IT WILL STOP. WHAT WILL
STOP THE WEALTH-INDUCED EXCESS OF DEMAND OVER PRODUCTIVITY-EXPANDED SUPPLY IS
LARGELY DEVELOPMENTS IN FINANCIAL MARKETS...
WE ARE IN A PERIOD OF DRAMATIC GAINS IN INNOVATION AND TECHNICAL CHANGE
THAT CHALLENGE ALL OF US, AS OWNERS OF CAPITAL, AS SUPPLIERS OF LABOR, AS VOTERS
AND POLICYMAKERS. HOW WELL POLICY CAN BE FASHIONED TO ALLOW THE PRIVATE SECTOR
TO MAXIMIZE THE BENEFITS OF INNOVATIONS THAT WE CURRENTLY ENJOY, AND TO CONTAIN
THE IMBALANCES THEY CREATE, WILL SHAPE THE ECONOMIC CONFIGURATION OF THE FIRST
PART OF THE NEW CENTURY."
SUPPLY/DEMAND AND VALUATIONS
Although 1999 was a big year for Initial Public Offerings ("IPOs"), it was
an even bigger year for deals. The end result was that the supply of stock in
the market continued to shrink. We believe that what we have termed "The Third
Great Wave of Takeovers" is far from cresting. In fact, we think it will
continue to swell as companies throughout the world attempt to lower costs and
improve their competitive positions via acquisitions. The elimination of
"pooling of interest" accounting in stock swap mergers--scheduled to take effect
at the beginning of January 2001--will likely accelerate deal activity this
year.
Fueled by IRA, 401K, and Keogh Plan investing, demand for equities remains
strong. The market's sharp September/October correction didn't seem to
discourage investors, who in recent years have become accustomed to buying
stocks on dips. Barring a severe recession and/or a full scale bear market, we
believe the demand for stocks will continue to grow.
Where, then, will demand be channeled? Will demand go to the same handful
of stocks every one wants to own today, or to what has become a vast wasteland
of high quality companies in other industries that have been largely ignored in
recent years? We believe valuations will ultimately come into play. Great
technology companies have terrific growth prospects. They also have current
valuations that defy economic gravity. Sooner or later, investors will realize
that you can pay too much for good technology companies, particularly when there
are so many equally good companies in other good businesses trading at bargain
basement prices. Ironically, this may eventually result in a mirror image
market, with the leading market indices being dragged down by flagging
technology stocks and the majority of stocks doing better on an absolute and
relative basis.
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.
7
<PAGE>
- --------------------------------------------------------------------------------
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>
COMSAT Corp. 230,000 $26.81 $45.50 09/17/99 69.71%
Whitman Corp. 640,000 12.02 17.94 05/20/99 49.25%
BA Merchant Services Inc. 150,000 20.33 20.44 04/27/99 0.54%
AMP Inc. 40,000 39.33 53.75 04/02/99 36.66%
TCI/ Liberty Media Group 456,400 37.93 54.44 03/10/99 43.53%
TCI Ventures 450,000 8.41 28.00 03/10/99 232.94%
Tele-Communications Inc., Cl.A 720,000 13.48 67.88 03/10/99 403.56%
- ----------------------------------------------------------------------------------------------------------------
</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.
- --------------------------------------------------------------------------------
THIS YEAR'S SCORECARD
Telecommunications (both wired and wireless) stocks, including Telephone &
Data Systems, Telecom Italia Mobile, Rogers Cantel, Rogers Communications, RCN,
Commonwealth Telephone and Citizens Utilities, were at the top of 1999's
performance list. Cable television stocks MediaOne and Cablevision Systems also
performed extremely well, as did cable network companies AT&T / Liberty Media
Group and USA Networks. Small group broadcasters BHC Communications, Chris-Craft
and Paxson Communications contributed to returns. Multimedia giants Viacom, News
Corp., and Tribune were also stellar performers.
After a good start, our industrial cyclical investments disappointed.
Auto-parts suppliers Superior Industries, Modine and Dana were all positioned at
the rear of our portfolio return rankings and Genuine Parts, the world's largest
auto-parts retailer, fell sharply. Aerospace component manufacturers Barnes
Group, Fairchild and Sequa stalled on the performance runway. There was nothing
comforting about declines in consumer products companies Carter -Wallace and
Ralston Purina, and our cigars faded out this year with General Cigar and
Gallaher Group.
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.
CITIZENS UTILITIES CO. (CZN - $14.1875 - NYSE) provides telecommunications
services and public services to approximately 1.8 million customers in 21
states. Citizens owns 83% of Electric Lightwave (ELIX - $18.75 - Nasdaq), a
competitive local exchange carrier ("CLEC") serving primarily the western U.S.
Last year, management authorized the separation of Citizens' telecommunications
businesses and public services businesses into two stand-alone, publicly traded
companies. Recently, CZN announced
8
<PAGE>
agreements to acquire about 900,000 rural access lines in 11 states for $2.8
billion. CZN intends to finance the transactions by divesting its public
services operations. It has already announced the sale of its water operations
to American Water Resources for $835 million. The company has sold its 16% stake
in Centennial Cellular Corp. for approximately $205 million. Citizens has
monetized its ownership of Century Communications' (CTYA - $45.625 - Nasdaq)
stock and cable operations through a sale to Adelphia Communications for
approximately $220 million.
DEXTER CORP. (DEX - $39.75 - NYSE), located in Windsor Locks, Connecticut, is a
specialty materials company principally serving the worldwide aerospace,
electronics, food packaging and medical markets, with products based on
proprietary technologies. Through 75% ownership of Life Technologies, Inc.
Dexter's life sciences segment focuses on the development and manufacture of
precise, reproducible biological and biochemical products for life sciences
research and commercial applications within the medical market. The non-wovens
segment focuses on the proprietary formulation and manufacture of long-fiber,
wet-formed products, primarily for use in the food packaging, medical and
hygiene markets. The specialty polymers segment includes product offerings based
on polymer technology for the formulation and processing of specialty adhesives,
coatings and encapsulants primarily for use in the aerospace and electronics
markets.
FERRO CORP. (FOE - $22.00 - NYSE), based in Cleveland, is a global specialty
chemical manufacturer. The company is a leading producer of frits, powder
coatings, polymer additives and plastic compounds. New CEO Hector Ortino is
positioning Ferro to be a premier specialty chemical provider by focusing on
profitable growth and shareholder value. The company's new strategy of using
mature, cash generating businesses in the portfolio to finance investments in
"springboard" businesses should help to accelerate earnings per share growth.
ROLLINS INC. (ROL - $15.00 - NYSE), which observed its 50th anniversary in 1998,
is one of the nation's largest consumer services companies. Through its
wholly-owned subsidiary, Orkin Exterminating Company, Inc., the Company provides
essential pest control services and protection against termite damage, rodents,
and insects to approximately 1.6 million residential and commercial customers.
Orkin serves customers in the U.S., Canada and Mexico from over 400
company-owned and franchised branch locations.
WATTS INDUSTRIES INC. (WTS - $14.75 - NYSE) was founded in 1874 to make steam
pressure regulators for the New England textile industry. Based in North
Andover, Massachusetts, Watts is now one of the world's largest independent
valve companies, designing, manufacturing and selling an extensive line of
valves for the plumbing and heating, water quality, industrial and oil and gas
markets. In December 1998, the company announced plans to spin off its CIRCOR
International industrial oil and gas unit to shareholders. The spin-off was
completed on October 6, 1999. Watts shareholders received one CIRCOR share
valued at $10.625 per share for every two Watts shares. Watts will now focus on
its remaining plumbing and heating and water quality businesses.
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.
9
<PAGE>
IN CONCLUSION
Without technology superstars or surging Internet stocks, the Fund
outperformed all the major stock market indices. We finished well ahead of most
of our value fund peers. As always, we have some reservations about the
market--at least the market as represented by capitalization weighted indices
dominated by small handfuls of those stocks that everyone wants to own. However,
we see exceptional value in the vast wasteland of quality companies that have
been virtually ignored in recent years.
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/ signature omitted]
MARIO J. GABELLI, CFA
Portfolio Manager and
Chief Investment Officer
January 31, 2000
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
DECEMBER 31, 1999
-----------------
Viacom Inc. Liberty Media Group
Media General Inc. Chris-Craft Industries Inc.
Telephone & Data Systems Inc. USA Networks Inc.
Cablevision Systems Corp. Navistar International Corp.
MediaOne Group Inc. Liberty Corp.
- --------------------------------------------------------------------------------
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.
10
<PAGE>
THE GABELLI VALUE FUND INC.
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- --------
COMMON STOCKS -- 93.4%
AGRICULTURE -- 0.6%
580,000 Archer-Daniels-Midland Co. .. $ 9,097,400 $ 7,068,750
------------ ------------
AUTOMOTIVE -- 0.2%
30,000 General Motors Corp. ........ 1,962,750 2,180,625
------------ ------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 3.6%
635,000 Dana Corp. .................. 26,533,545 19,010,312
500,000 GenCorp Inc. ................ 5,544,805 4,937,500
300,000 Genuine Parts Co. ........... 7,714,116 7,443,750
260,000 Modine Manufacturing Co. .... 8,282,310 6,500,000
45,000 Superior Industries
International Inc. ........ 1,130,006 1,206,562
400,000 Tenneco Automotive Inc. ..... 3,750,573 3,725,000
------------ ------------
52,955,355 42,823,124
------------ ------------
AVIATION: PARTS AND SERVICES -- 0.3%
75,000 Barnes Group Inc. ........... 1,688,150 1,223,438
270,000 Fairchild Corp., Cl. A+ ..... 4,799,427 2,446,875
------------ ------------
6,487,577 3,670,313
------------ ------------
BROADCASTING -- 7.6%
150,000 Ackerley Group Inc. ......... 2,315,758 2,718,750
3,300 BHC Communications
Inc., Cl. A ............... 439,728 528,000
645,000 Chris-Craft Industries Inc.+ 19,479,611 46,520,625
165,000 Gray Communications
Systems Inc., Cl. B ....... 2,336,155 2,227,500
90,000 Grupo Televisa SA, GDR+ ..... 1,995,026 6,142,500
706,500 Liberty Corp. ............... 30,592,962 29,805,469
320,000 Paxson Communications
Corp., Cl. A+ ............. 2,908,637 3,820,000
------------ ------------
60,067,877 91,762,844
------------ ------------
BUSINESS SERVICES -- 1.0%
160,000 Berlitz International Inc.+ . 2,838,075 2,750,000
330,369 Cendant Corp.+ .............. 6,378,754 8,775,427
50,000 National Processing Inc.+ ... 453,594 443,750
------------ ------------
9,670,423 11,969,177
------------ ------------
CABLE -- 11.4%
945,000 Cablevision Systems
Corp., Cl. A+ ............. 12,027,966 71,347,500
860,000 MediaOne Group Inc.+ ........ 21,775,115 66,058,750
------------ ------------
33,803,081 137,406,250
------------ ------------
COMMUNICATIONS EQUIPMENT -- 0.1%
30,000 Scientific-Atlanta Inc. ..... 545,488 1,668,750
------------ ------------
MARKET
SHARES COST VALUE
------ ---- --------
COMPUTER SOFTWARE AND SERVICES -- 0.1%
180,000 Tyler Technologies Inc. ..... $ 387,050 $ 990,000
------------ ------------
CONSUMER PRODUCTS -- 2.8%
505,000 Carter-Wallace Inc. ......... 7,574,631 9,058,437
30,000 Gallaher Group plc, ADR ..... 703,539 461,250
290,000 General Cigar
Holdings Inc.+ ............ 3,209,979 2,410,625
168,000 General Cigar
Holdings Inc., Cl. B+ (a) . 1,414,002 1,396,500
170,000 Hartmarx Corp.+ ............. 1,174,937 690,625
250,000 Imasco Ltd. ................. 6,611,445 6,918,947
10,000 National Presto Industries Inc. 353,156 355,000
400,000 Ralston Purina Group ........ 9,398,363 11,150,000
41,700 Syratech Corp.+ ............. 983,310 333,600
85,000 Wolverine World Wide Inc. ... 855,819 929,687
------------ ------------
32,279,181 33,704,671
------------ ------------
CONSUMER SERVICES -- 0.6%
510,000 Rollins Inc. ................ 8,910,327 7,650,000
------------ ------------
DIVERSIFIED INDUSTRIAL -- 0.7%
50,000 Ampco-Pittsburgh Corp. ...... 250,017 506,250
100,000 GenTek Inc. ................. 987,458 1,043,750
225,000 Katy Industries Inc. ........ 1,943,459 1,954,687
85,000 Lamson & Sessions Co.+ ...... 486,339 414,375
40,000 Reynolds Metals Co. ......... 2,706,478 3,065,000
145,000 WHX Corp.+ .................. 1,613,331 1,305,000
------------ ------------
7,987,082 8,289,062
------------ ------------
ELECTRONICS -- 0.7%
100,000 Thomas & Betts Corp. ........ 3,030,729 3,187,500
145,000 Watkins-Johnson Co. ......... 4,372,669 5,800,000
------------ ------------
7,403,398 8,987,500
------------ ------------
ENERGY AND UTILITIES -- 1.4%
130,000 Columbia Energy Group ....... 8,383,050 8,222,500
110,000 Florida Progress Corp. ...... 5,138,168 4,654,375
156,000 Southwest Gas Corp. ......... 3,027,730 3,588,000
------------ ------------
16,548,948 16,464,875
------------ ------------
ENTERTAINMENT -- 20.0%
200,000 Ascent Entertainment
Group Inc.+ ............... 2,147,378 2,537,500
150,000 GC Companies Inc.+ .......... 5,696,631 3,881,250
879,800 Liberty Media Group, Cl. A+ . 8,770,477 49,928,650
115,000 Seagram Co. ................. 5,507,439 5,167,813
770,000 USA Networks Inc.+ .......... 10,480,314 42,542,500
2,260,000 Viacom Inc., Cl. A+ ......... 36,443,972 136,588,750
------------ ------------
69,046,211 240,646,463
------------ ------------
See accompanying notes to financial statements.
11
<PAGE>
THE GABELLI VALUE FUND INC.
PORTFOLIO OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- --------
COMMON STOCKS (CONTINUED)
ENVIRONMENTAL SERVICES -- 1.1%
765,000 Waste Management Inc. ....... $ 16,631,262 $ 13,148,437
------------ ------------
EQUIPMENT AND SUPPLIES -- 7.2%
150,000 CIRCOR International Inc.+ .. 1,383,138 1,546,875
30,000 Deere & Co. ................. 804,338 1,301,250
250,000 Flowserve Corp. ............. 5,729,068 4,250,000
130,000 Gerber Scientific Inc. ...... 1,111,661 2,851,875
225,000 Hussmann
International Inc. ........ 1,810,085 3,389,062
800,000 Mark IV Industries Inc. ..... 14,824,962 14,150,000
780,000 Navistar International
Corp.+ .................... 20,812,885 36,952,500
239,000 Pittway Corp., Cl. A ........ 490,526 10,710,187
75,000 Sequa Corp., Cl. A+ ......... 2,704,459 4,045,312
24,500 Sequa Corp., Cl. B+ ......... 1,203,320 1,470,000
7,500 Smith (A.O.) Corp., Cl. A ... 208,100 159,375
2,500 Smith (A.O.) Corp., Cl. B ... 62,781 54,687
400,000 Watts Industries Inc., Cl. A 4,957,061 5,900,000
------------ ------------
56,102,384 86,781,123
------------ ------------
FINANCIAL SERVICES -- 0.8%
12,000 Chase Manhattan Corp. ....... 878,350 932,250
35,000 Mellon Financial Corp. ...... 1,233,281 1,192,188
60,000 Merrill Lynch & Co. Inc. .... 4,123,389 5,010,000
150,000 Pioneer Group Inc.+ ......... 2,818,058 2,362,500
15,000 St. Paul Companies Inc. ..... 505,719 505,313
------------ ------------
9,558,797 10,002,251
------------ ------------
FOOD AND BEVERAGE -- 2.5%
35,000 Advantica Restaurant
Group Inc.+ ............... 307,389 61,250
35,000 Bestfoods Inc. .............. 1,746,063 1,839,688
55,000 Celestial Seasonings Inc.+ .. 947,508 1,023,516
185,000 Corn Products
International Inc. ........ 5,548,285 6,058,750
360,000 PepsiCo Inc. ................ 12,667,623 12,690,000
640,000 Whitman Corp. ............... 7,692,913 8,600,000
------------ ------------
28,909,781 30,273,204
------------ ------------
HEALTH CARE -- 1.0%
110,000 American Home
Products Corp. ............ 4,876,438 4,338,125
280,000 IVAX Corp.+ ................. 2,615,606 7,210,000
------------ ------------
7,492,044 11,548,125
------------ ------------
HOTELS AND GAMING -- 3.5%
600,000 Aztar Corp.+ ................ 4,319,446 6,525,000
270,000 Gaylord Entertainment
Co., Cl. A ................ 7,844,274 8,083,125
MARKET
SHARES COST VALUE
------ ---- --------
670,000 Hilton Hotels Corp. ......... $ 9,995,067 $ 6,448,750
1,750,000 Ladbroke Group plc, ADR ..... 7,520,890 5,604,082
1,000,000 Mirage Resorts Inc.+ ........ 15,831,143 15,312,500
------------ ------------
45,510,820 41,973,457
------------ ------------
METALS AND MINING -- 0.4%
15,000 Barrick Gold Corp. .......... 269,828 265,313
500,000 Echo Bay Mines Ltd.+ ........ 1,487,760 593,750
80,000 Homestake Mining Co. ........ 952,438 625,000
50,000 Newmont Mining Corp. ........ 1,292,125 1,225,000
55,000 Placer Dome Inc. ............ 651,513 591,250
365,000 Royal Oak Mines Inc.+ ....... 533,235 15,131
2,000,000 TVX Gold Inc.+ .............. 2,601,767 1,625,000
------------ ------------
7,788,666 4,940,444
------------ ------------
PAPER AND FOREST PRODUCTS-- 0.4%
500,000 Pactiv Corp.+ ............... 6,003,369 5,312,500
------------ ------------
PUBLISHING -- 9.5%
25,000 McGraw Hill Companies Inc. .. 771,004 1,540,625
1,752,000 Media General Inc., Cl. A (b) 38,654,098 91,104,000
115,000 Meredith Corp. .............. 2,294,407 4,794,063
350,000 Penton Media Inc. ........... 4,061,045 8,400,000
250,000 Reader's Digest
Association Inc., Cl. B ... 6,210,153 6,625,000
35,000 Tribune Co. ................. 1,070,950 1,927,188
------------ ------------
53,061,657 114,390,876
------------ ------------
REAL ESTATE -- 0.9%
750,000 Catellus Development
Corp.+ .................... 9,453,786 9,609,375
130,000 Griffin Land &
Nurseries Inc.+ ........... 1,463,689 1,495,000
------------ ------------
10,917,475 11,104,375
------------ ------------
RETAIL -- 3.0%
300,000 Albertson's Inc. ............ 9,382,650 9,675,000
1,450,000 AutoNation Inc.+ ............ 18,801,850 13,412,500
100,000 Blockbuster Inc., Cl. A+ .... 1,201,624 1,337,500
15,000 Burlington Coat Factory
Warehouse Corp. ........... 236,342 208,125
60,000 Delhaize America Inc., Cl. A 1,663,792 1,218,750
63,600 Ingles Markets Inc., Cl. A .. 813,890 707,550
140,000 Lillian Vernon Corp. ........ 2,004,440 1,557,500
298,000 Neiman Marcus Group Inc.+ ... 7,843,569 8,027,375
------------ ------------
41,948,157 36,144,300
------------ ------------
See accompanying notes to financial statements.
12
<PAGE>
THE GABELLI VALUE FUND INC.
PORTFOLIO OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 1999
- --------------------------------------------------------------------------------
MARKET
SHARES COST VALUE
------ ---- --------
COMMON STOCKS (CONTINUED)
SATELLITE -- 0.9%
250,000 COMSAT Corp. ................ $ 6,147,202 $ 4,968,750
145,000 Loral Space &
Communications Ltd.+ ...... 2,557,395 3,525,313
132,600 TCI Satellite Entertainment
Inc., Cl. A+ .............. 1,104,453 2,121,600
------------ -------------
9,809,050 10,615,663
------------ -------------
SPECIALTY CHEMICALS -- 0.9%
25,000 Dexter Corp. ................ 766,919 993,750
250,000 Ferro Corp. ................. 4,571,499 5,500,000
100,000 General Chemical Group Inc. . 330,642 231,250
130,000 Monsanto Co. ................ 5,563,118 4,631,250
------------ -------------
11,232,178 11,356,250
------------ -------------
TELECOMMUNICATIONS -- 2.4%
780,000 Citizens Utilities Co., Cl. B+ 8,019,934 11,066,250
172,462 Commonwealth Telephone
Enterprises Inc.+ ......... 3,170,439 9,118,928
100,000 RCN Corp.+ .................. 602,133 4,850,000
144,000 Rogers Communications
Inc., Cl. B, ADR+ ......... 2,407,223 3,564,000
------------ -------------
14,199,729 28,599,178
------------ -------------
WIRELESS COMMUNICATIONS -- 7.8%
144,000 Rogers Cantel Mobile
Communications Inc., Cl. B+ 2,209,939 5,238,000
500,000 Telecom Italia Mobile SpA ... 1,844,697 5,585,202
660,000 Telephone & Data
Systems Inc. .............. 28,192,007 83,160,000
------------ -------------
32,46,643 93,983,202
------------ -------------
TOTAL COMMON STOCKS 668,564,160 1,125,455,789
------------ -------------
PREFERRED STOCK -- 0.4%
PUBLISHING -- 0.4%
155,500 News Corp. Ltd., Pfd., ADR .. 2,390,998 5,199,531
------------ -------------
PRINCIPAL
AMOUNT
------
U.S. GOVERNMENT OBLIGATIONS -- 4.2%
$52,274,000 U.S. Treasury Bills,
5.17% to 5.33%++,
due 01/13/00 to 03/30/00 (c) 51,631,786 51,646,366
------------ -------------
PRINCIPAL MARKET
AMOUNT COST VALUE
------ ---- --------
REPURCHASE AGREEMENTS -- 1.9%
$22,358,000 Agreement with State Street
Bank & Trust Co.,
3.25%, dated 12/31/99,
due 01/03/00, proceeds at
maturity $22,364,055 (d) .. $ 22,358,000 $ 22,358,000
------------ --------------
TOTAL
INVESTMENTS -- 99.9% ........ $744,944,944 1,204,659,686
============
OTHER ASSETS AND
LIABILITIES (NET)-- 0.1% ................. 660,758
--------------
NET ASSETS -- 100.0%
(61,973,517 shares outstanding) .......... $1,205,320,444
==============
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE .......................... $19.45
======
MAXIMUM OFFERING PRICE PER SHARE
($19.45 / .945, based on maximum
sales charge of 5.5% of the offering
price at December 31, 1999) ............. $20.58
======
- ------------------------
For Federal tax purposes:
Aggregate cost ............................ $745,858,564
------------
Gross unrealized appreciation ............. $506,604,673
Gross unrealized depreciation ............. (47,803,551)
------------
Net unrealized appreciation ............... $458,801,122
============
NUMBER OF UNREALIZED
CONTRACTS DEPRECIATION
--------- ------------
FUTURES CONTRACTS
100 Short S&P 500 Index Futures
03/16/00 ................................ $ (1,107,000)
------------
------------------------
(a) Security fair valued under procedures established by the
Board of Directors.
(b) Security considered an affiliated holding because the Fund owns
at least 5% of the outstanding shares.
(c) Security was pledged as collateral for future contracts.
(d) Collateralized by U.S. Treasury Bond, 8.50%, due 02/15/20, market
value $22,805,550.
+ Non-income producing security.
++ Represents annualized yield at the date of purchase.
ADR - American Depositary Receipt.
GDR - Global Depositary Receipt.
See accompanying notes to financial statements.
13
<PAGE>
THE GABELLI VALUE FUND INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Cost $744,944,944) ...... $1,204,659,686
Cash and foreign currency,
at value (Cost $31,448) ...................... 32,078
Dividends and interest receivable .............. 404,488
Receivable for investments sold ................ 2,141,877
Receivable for Fund shares sold ................ 3,061,379
--------------
TOTAL ASSETS ................................... 1,210,299,508
--------------
LIABILITIES:
Payable for investments purchased .............. 2,056,965
Payable for Fund shares redeemed ............... 991,543
Payable for investment advisory fees ........... 988,093
Payable for distribution fees .................. 476,676
Payable to custodian ........................... 80,000
Payable for shareholder services fees .......... 89,500
Variation margin ............................... 85,000
Other accrued expenses ......................... 211,287
--------------
TOTAL LIABILITIES .............................. 4,979,064
--------------
NET ASSETS applicable to 61,973,517
shares outstanding ........................... $1,205,320,444
==============
NET ASSETS CONSIST OF:
Shares of capital stock, at par value .......... $ 61,974
Additional paid-in capital ..................... 746,456,718
Accumulated net realized gain on investments,
futures contracts and foreign currency
transactions ................................. 193,380
Net unrealized appreciation on investments,
futures contracts and foreign currency
transactions ................................. 458,608,372
--------------
TOTAL NET ASSETS .............................. $1,205,320,444
==============
NET ASSET VALUE and redemption price per
share ($1,205,320,444 / 61,973,517 shares
outstanding; 300,000,000 shares authorized
of $0.001 par value) ......................... $19.45
======
Maximum offering price per share ($19.45 / .945,
based on maximum sales charge of 5.5% of the
offering price at December 31, 1999) ......... $20.58
======
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends (net of foreign taxes of $15,044) .... $ 5,263,790
Dividends from securities of affiliated issuers 1,008,900
Interest ....................................... 3,514,929
------------
TOTAL INVESTMENT INCOME ........................ 9,787,619
------------
EXPENSES:
Investment advisory fees ....................... 10,010,005
Distribution fees .............................. 2,502,501
Shareholder services fees ...................... 643,961
Custodian fees ................................. 231,546
Shareholder communications expenses ............ 205,677
Directors' fees ................................ 82,724
Legal and audit fees ........................... 72,108
Miscellaneous expenses ......................... 50,480
------------
TOTAL EXPENSES ................................. 13,799,002
------------
NET INVESTMENT LOSS ............................ (4,011,383)
------------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments, futures
contracts and foreign currency transactions .. 100,076,762
Net realized gain on investments in securities of
affiliated issuers ........................... 774,663
Net change in unrealized appreciation on
investments, futures contracts and foreign
currency transactions ........................ 175,404,520
------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS, FUTURES CONTRACTS AND
FOREIGN CURRENCY TRANSACTIONS ................ 276,255,945
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS .............................. $272,244,562
============
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
OPERATIONS:
Net investment loss ....................................................... $ (4,011,383) $ (3,003,546)
Net realized gain on investments, futures contracts
and foreign currency transactions ....................................... 100,851,425 71,122,721
Net change in unrealized appreciation on investments, futures
contracts and foreign currency transactions ............................. 175,404,520 78,651,758
-------------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................... 272,244,562 146,770,933
-------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized gain on investments .......................................... (98,020,328) (67,357,159)
-------------- ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ....................................... (98,020,328) (67,357,159)
-------------- ------------
CAPITAL SHARE TRANSACTIONS:
Net increase in net assets from capital share transactions ................ 232,283,949 122,851,446
-------------- ------------
NET INCREASE IN NET ASSETS ................................................ 406,508,183 202,265,220
NET ASSETS:
Beginning of period ....................................................... 798,812,261 596,547,041
-------------- ------------
End of period ............................................................. $1,205,320,444 $798,812,261
============== ============
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
THE GABELLI VALUE FUND INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION. The Gabelli Value Fund Inc. (the "Fund") was organized on July
20, 1989 as a Maryland corporation. The Fund is a non-diversified, open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Fund's primary objective is long term
capital appreciation. The Fund commenced investment operations on September 29,
1989.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange, quoted by the National Association of Securities
Dealers Automated Quotations, Inc. ("Nasdaq") or traded on foreign exchanges are
valued at the last sale price on that exchange as of the close of business on
the day the securities are being valued (if there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day). All other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest average of the bid and asked prices. Portfolio securities traded on more
than one national securities exchange or market are valued according to the
broadest and most representative market, as determined by Gabelli Funds, LLC
(the "Adviser"). Securities and assets for which market quotations are not
readily available are valued at their fair value as determined in good faith
under procedures established by and under the general supervision of the Board
of Directors. Short term debt securities with remaining maturities of 60 days or
less are valued at amortized cost, unless the Directors determine such does not
reflect the securities' fair value, in which case these securities will be
valued at their fair value as determined by the Directors. Debt instruments
having a maturity greater than 60 days are valued at the highest bid price
obtained from a dealer maintaining an active market in those securities.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
primary government securities dealers recognized by the Federal Reserve Board,
with member banks of the Federal Reserve System or with other brokers or dealers
that meet credit guidelines established by the Directors. Under the terms of a
typical repurchase agreement, the Fund takes possession of an underlying debt
obligation subject to an obligation of the seller to repurchase, and the Fund to
resell, the obligation at an agreed-upon price and time, thereby determining the
yield during the Fund's holding period. The Fund will always receive and
maintain securities as collateral whose market value, including accrued
interest, will be at least equal to 100% of the dollar amount invested by the
Fund in each agreement. The Fund will make payment for such securities only upon
physical delivery or upon evidence of book entry transfer of the collateral to
the account of the custodian. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is marked-to-market on a
daily basis to maintain the adequacy of the collateral. If the seller defaults
and the value of the collateral declines or if bankruptcy proceedings are
commenced with respect to the seller of the security, realization of the
collateral by the Fund may be delayed or limited.
FUTURES CONTRACTS. The Fund may engage in futures contracts for the purpose of
hedging against changes in the value of its portfolio securities and in the
value of securities it intends to purchase. Upon entering into a futures
contract, the Fund is required to deposit with the broker an amount of cash or
cash equivalents equal to a certain percentage of the contract amount. This is
known as the "initial margin."
15
<PAGE>
THE GABELLI VALUE FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Subsequent payments ("variation margin") are made or received by the Fund each
day, depending on the daily fluctuation of the value of the contract. The daily
changes in the contract are included in unrealized gains or losses. The Fund
recognizes a realized gain or loss when the contract is closed.
There are several risks in connection with the use of futures contracts as a
hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in value of the hedged investments. In addition, there is the risk that
the Fund may not be able to enter into a closing transaction because of an
illiquid secondary market.
FOREIGN CURRENCY TRANSLATION. The books and records of the Fund are maintained
in United States (U.S.) dollars. Foreign currencies, investments and other
assets and liabilities are translated into U.S. dollars at the exchange rates
prevailing at the end of the period, and purchases and sales of investment
securities, income and expenses are translated at the exchange rate prevailing
on the respective dates of such transactions. Unrealized gains and losses, which
result from changes in foreign exchange rates and/or changes in market prices of
securities, have been included in unrealized appreciation/depreciation on
investments and foreign currency transactions. Net realized foreign currency
gains and losses resulting from changes in exchange rates include foreign
currency gains and losses between trade date and settlement date on investment
securities transactions, foreign currency transactions and the difference
between the amounts of interest and dividends recorded on the books of the Fund
and the amounts actually received. The portion of foreign currency gains and
losses related to fluctuation in exchange rates between the initial trade date
and subsequent sale trade date is included in realized gain/(loss) on
investments.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for on the trade date with realized gain or loss on investments
determined by using the identified cost method. Interest income (including
amortization of premium and accretion of discount) is recorded as earned.
Dividend income is recorded on the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders are recorded on the ex-dividend date. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund, timing differences and
differing characterization of distributions made by the Fund.
For the year ended December 31, 1999, reclassifications were made to increase
undistributed net investment loss for $4,011,383 and decrease accumulated net
realized gain on investments, futures contracts and foreign currency
transactions for $3,646,035 with an offsetting adjustment to additional paid-in
capital.
PROVISION FOR INCOME TAXES. The Fund intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended. As a result, a Federal income tax provision is not required.
Dividends and interest from non-U.S. sources received by the Fund are generally
subject to non-U.S. withholding taxes at rates ranging up to 30%. Such
withholding taxes may be reduced or eliminated under the terms of applicable
U.S. income tax treaties, and the Fund intends to undertake any procedural steps
required to claim the benefits of such treaties.
16
<PAGE>
THE GABELLI VALUE FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
3. INVESTMENT ADVISORY AGREEMENT. The Fund has entered into an investment
advisory agreement (the "Advisory Agreement") with the Adviser which provides
that the Fund will pay the Adviser a fee, computed daily and paid monthly, at
the annual rate of 1.00% of the value of the Fund's average daily net assets. In
accordance with the Advisory Agreement, the Adviser provides a continuous
investment program for the Fund's portfolio, oversees the administration of all
aspects of the Fund's business and affairs and pays the compensation of all
officers and Directors of the Fund who are its affiliates.
4. DISTRIBUTION PLAN. The Fund's Board of Directors has adopted a distribution
plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. For the year ended
December 31, 1999, the Fund incurred distribution costs payable to Gabelli &
Company, Inc., an affiliate of the Adviser, of $2,502,501, or 0.25% of average
daily net assets, the annual limitation under the Plan. Such payments are
accrued daily and paid monthly.
5. PORTFOLIO SECURITIES. Purchases and sales of securities for the year ended
December 31, 1999, other than short term securities, aggregated $625,528,419 and
$544,854,807, respectively.
6. TRANSACTIONS WITH AFFILIATES. During the year ended December 31, 1999, the
Fund paid brokerage commissions of $842,016 to Gabelli & Company, Inc. and its
affiliates. During the year ended December 31, 1999, Gabelli & Company, Inc.
informed the Fund that it received $429,606 from investors representing
commissions (sales charges and underwriting fees) on sales of Fund shares.
7. CAPITAL STOCK TRANSACTIONS. Transactions in shares of capital stock were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Shares sold ...................................... 46,091,287 $854,723,224 27,523,248 $432,994,065
Shares issued upon reinvestment of dividends ..... 4,831,785 91,140,380 3,911,560 60,786,193
Shares redeemed .................................. (38,641,620) (713,579,655) (23,466,641) (370,928,812)
----------- ------------ ----------- ------------
Net increase ................................. 12,281,452 $232,283,949 7,968,167 $122,851,446
=========== ============ =========== ============
</TABLE>
8. TRANSACTIONS IN SECURITIES OF AFFILIATED ISSUERS. The 1940 Act defines
affiliated issuers as those in which the Fund's holdings of an issuer represent
5% or more of the outstanding voting securities of the issuer. A summary of the
Fund's transactions in the securities of these issuers during the year ended
December 31, 1999, is set forth below:
<TABLE>
<CAPTION>
PERCENT
NET VALUE AT OWNED
BEGINNING SHARES ENDING REALIZED DIVIDEND DECEMBER 31, OF SHARES
SHARES PURCHASED SHARES GAIN INCOME 1999 OUTSTANDING
--------- --------- ------ -------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Media General Inc., CI. A 1,678,000 74,000 1,752,000 $774,663 $1,008,900 $91,104,000 6.73%
======== ========== ===========
</TABLE>
9. NEW SHARE CLASSES. On February 17, 1999, the Board of Directors of the Fund
approved a Rule 18f-3 Multi-Class Plan relating to the creation of two
additional classes of shares of the Fund -- Class B Shares and Class C Shares
(the "New Share Classes"). The existing class of shares was redesignated as
Class A Shares. In addition, the Board had also approved an Amended and Restated
Distribution Agreement, Rule 12b-1 plans for each of the New Share Classes and
an Amended and Restated Plan of Distribution for the existing class of shares
(Class A Shares) to be effective upon the commencement of the offering of the
New Share Classes. The New Share Classes are currently not being offered to the
public.
17
<PAGE>
THE GABELLI VALUE FUND INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period ........ $ 16.08 $ 14.30 $ 11.52 $ 11.61 $ 10.49
---------- ------- -------- -------- --------
Net investment income (loss) ................ (0.06) (0.05) (0.05) (0.02) 0.05
Net realized and unrealized gain
on investments ............................ 5.15 3.32 5.55 1.04 2.30
---------- ------- -------- -------- --------
Total from investment operations ............ 5.09 3.27 5.50 1.02 2.35
---------- ------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ....................... -- -- -- -- (0.05)
Net realized gain on investments ............ (1.72) (1.49) (2.72) (1.10) (1.18)
Paid-in capital ............................. -- -- -- (0.01) --
---------- ------- -------- -------- --------
Total distributions ......................... (1.72) (1.49) (2.72) (1.11) (1.23)
---------- ------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD .............. $ 19.45 $ 16.08 $ 14.30 $ 11.52 $ 11.61
========== ======= ======== ======== ========
Total return+ ............................... 31.9% 23.2% 48.2% 8.7% 22.5%
========== ======= ======== ======== ========
RATIOS TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ........ $1,205,320 $798,812 $596,547 $460,836 $486,144
Ratio of net investment income (loss)
to average net assets ..................... (0.40)% (0.41)% (0.45)% (0.12)% 0.42%
Ratio of operating expenses
to average net assets ..................... 1.38% 1.40% 1.42% 1.40% 1.50%
Portfolio turnover rate ..................... 59% 46% 44% 37% 65%
</TABLE>
- -------------------------------
+ Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the period
including reinvestment of dividends and does not reflect any applicable sales
charges.
See accompanying notes to financial statements.
18
<PAGE>
THE GABELLI VALUE FUND INC.
REPORT OF PRICEWATERHOUSECOOPERS LLP, INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To The Board of Directors and Shareholders of
The Gabelli Value Fund Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Gabelli Value Fund Inc. (the
"Fund") at December 31, 1999, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the five years in the period
then ended, in conformity with accounting principles generally accepted in the
United States. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
February 11, 2000
- --------------------------------------------------------------------------------
1999 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the fiscal year ended December 31, 1999, the Fund paid to shareholders, on
December 27, 1999, an ordinary income dividend (comprised of short term capital
gains) totaling $0.41 per share and long term capital gains totaling $1.31 per
share. For the fiscal year ended December 31, 1999, 25.32% of the ordinary
income dividend qualifies for the dividend received deduction available to
corporations.
U.S. GOVERNMENT INCOME:
The percentage of the ordinary income dividend paid by the Fund during fiscal
year 1999 which was derived from U.S. Treasury securities was 9.02%. Such income
is exempt from state and local tax in all states. However, many states,
including New York and California, allow a tax exemption for a portion of the
income earned only if a mutual fund has invested at least 50% of its assets at
the end of each quarter of the Fund's fiscal year in U.S. Government securities.
The Gabelli Value Fund did not meet this strict requirement in 1999. Due to the
diversity in state and local tax law, it is recommended that you consult your
personal tax advisor as to the applicability of the information provided to your
specific situation.
- --------------------------------------------------------------------------------
19
<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.)
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.
Felix J. Christiana Karl Otto Pohl
FORMER SENIOR VICE PRESIDENT FORMER PRESIDENT
DOLLAR DRY DOCK SAVINGS BANK DEUTSCHE BUNDESBANK
Anthony J. Colavita Anthony R. Pustorino
ATTORNEY-AT-LAW CERTIFIED PUBLIC ACCOUNTANT
ANTHONY J. COLAVITA, P.C. PROFESSOR, PACE UNIVERSITY
OFFICERS
Mario J. Gabelli, CFA Bruce N. Alpert
PRESIDENT AND CHIEF CHIEF OPERATING OFFICER
INVESTMENT OFFICER VICE PRESIDENT AND
TREASURER
James E. McKee
SECRETARY
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.
- --------------------------------------------------------------------------------
GAB409Q499SR
[Photo of Mario J. Gabelli omitted]
THE
GABELLI
VALUE
FUND
INC.
ANNUAL REPORT
DECEMBER 31, 1999
