[PHOTO]
The
Gabelli
[LOGO] A B C
Fund
SEMI-ANNUAL REPORT
JUNE 30, 1995
<PAGE>
The Gabelli ABC Fund
One Corporate Center
Rye, New York 10580-1434
Semi-Annual Report
June 30, 1995
To Our Shareholders:
Strong corporate profits and declining long-term interest rates pushed the
stock market to record highs in the second quarter of 1995. Technology related
issues as well as financial stocks were particularly buoyant. Our Fund is
positioned to be a good alternative for risk averse individuals. Although the
equities market has been very alluring, you can be comforted to know that your
investment on January 3, 1995, up to $5,000, will provide you with no less than
a 5% return for 1995, even if the outstanding gains were to be eliminated in a
market decline.
<TABLE>
<CAPTION>
INVESTMENT RESULTS (a)
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Quarter
---------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
<S> <C> <C> <C> <C> <C>
1995: Net Asset Value...................... $9.94 $10.14 --- --- ---
Total Return ...................... 3.9% 2.0% --- --- ---
- ---------------------------------------------------------------------------------------------------------------------------
1994: Net Asset Value...................... $10.12 $10.11 $10.42 $9.57 $9.57
Total Return......................... 0.9% (0.1)% 3.1% 0.6% 4.5%
- ---------------------------------------------------------------------------------------------------------------------------
1993: Net Asset Value...................... --- $10.10 $10.63 $10.03 $10.03
Total Return......................... --- 1.0%(b) 5.2% 2.6% 9.1%(b)
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</TABLE>
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Average Annual Returns - June 30, 1995 (a)
------------------------------------------
1 Year.................................... 9.9%
.................................... 7.6%(c)
Life of Fund (b).......................... 9.3%
.................................... 8.3%(c)
- --------------------------------------------------------------------------------
Dividend History
- --------------------------------------------------------------------------------
Payment (ex) Date Rate Per Share Reinvestment Price
- ----------------- -------------- ------------------
December 28, 1994 $0.91 $9.52
December 31, 1993 $0.88 $10.03
(a) Total return and average annual return reflect changes in share price and
reinvestment of dividends and are net of expenses. The net asset value of the
Fund is reduced on the ex-dividend (payment) date by the amount of the dividend
paid. Of course, returns represent past performance and do not guarantee future
results. Investment returns and the principal value of an investment will
fluctuate. When shares are redeemed they may be worth more or less than their
original cost. (b) From commencement of operations on May 14, 1993. (c) Adjusted
for the maximum 2.0% sales charge applicable to investments not participating in
the Performance Guaranty Program.
- --------------------------------------------------------------------------------
For the three and six month periods ended June 30, 1995, The Gabelli ABC
Fund's net asset value increased 2.0% and 6.0%, respectively, to $10.14 per
share. The Fund seeks to achieve a positive return in various market
environments and increased 9.9% for the twelve months ended June 30, 1995. Since
its inception on May 14, 1993, the Fund has increased 20.8% through June 30,
1995, which equates to a 9.3% average annualized rate of return.
<PAGE>
What We Do
We do what is described as bottom up research: we read annual reports; we
visit the competition; we talk to customers; we go belly to belly with
management. We structure our portfolio by picking stocks.
In past reports, we have tried to articulate our investment philosophy and
methodology. The following graphic further illustrates the interplay among the
four components of our valuation approach.
[Pyramid drawing of the Fund's valuation approach.]
Our focus is on free cash flow: earnings before interest, taxes,
depreciation and amortization (EBITDA) minus the capital expenditures necessary
to grow the business. We believe free cash flow is the best barometer of a
business' value. Rising free cash flow often foreshadows net earnings
improvement. We also look at earnings per share trends. Unlike Wall Street's
ubiquitous earnings momentum players, we do not try to forecast earnings with
accounting precision and then trade stocks based on quarterly expectations and
realities. We simply try to position ourselves in front of long-term earnings
uptrends. In addition, we analyze on and off balance sheet assets and
liabilities such as plant and equipment, inventories, receivables, and legal,
environmental and health care issues. We want to know everything and anything
that will add to or detract from our private market value (PMV) estimates.
Finally, we look for a catalyst: something happening in the company's industry
or indigenous to the company itself that will surface value. In the case of the
independent telephone stocks, the catalyst is a regulatory change. In the
agricultural equipment business, it is the increasing worldwide demand for
American food and feed crops. In other instances, it may be a change in
management, a sale or spin-off of a division, or the development of a profitable
new business.
Once we have identified stocks that qualify as fundamental and conceptual
bargains, we then become patient investors. This has been a proven long-term
method for preserving and enhancing wealth in the U.S. equities market. At the
margin, our new investments are focused on businesses that are well managed and
will benefit from sustainable long-term economic dynamics. These include macro
trends, such as the globalization of the market in filmed entertainment and
telecommunications, and micro trends, such as an increased focus on productivity
enhancing goods and services.
Commentary
The Market
At the beginning of 1995, we opined that due to cost cutting and
productivity gains, corporate profits would remain strong even in a slowing
economy. We did not anticipate fully the 170 basis point decline in long-term
interest rates that has helped to propel the stock market to its present levels.
Despite the current conjecture that the Federal Reserve will cut
short-term interest rates to ensure a "soft landing" for the economy, we suspect
long-term and perhaps short-term rates are near an intermediate-term bottom.
This may restrain stocks over the balance of the year. However, we believe
companies that continue to report positive earnings and cash flow gains will be
adequately rewarded. In short, stock pickers will have an opportunity to excel.
2
<PAGE>
A "Deal-a-Day" Market
In our first quarter 1995 letter to you we discussed the impact that
accelerating merger and acquisition activity would have on the market in
general, and our portfolio in particular. For the first half of 1995, merger and
acquisition activity was at record levels. The value of announced domestic deals
through the first six months was $164.6 billion, up 20% from 1994's first half.
Merger and acquisition activity overseas was even stronger, as world-wide deal
volume totalled $334.6 billion in the first half, up 38% from the first half of
1994.
Deal activity has not been limited to a narrow range of industries.
Strategic buyers throughout the business spectrum are taking advantage of
liquidity in the capital markets to add product lines and extend distribution
systems. High equity prices have made stock a more valuable currency in
corporations' efforts to build on their business franchises.
Year-to-date 1995, our portfolio has benefitted from the actual and
impending transactions of Pet, Inc. (Grand Metropolitan plc) and RB&W
Corporation (Park-Ohio Industries, Inc.). We await further word on Multimedia,
Inc. (MMEDC - $38.75 - NASDAQ), whose efforts to realize value for shareholders
may involve a sale of the company.
Finally, A Comprehensive Telecommunications Bill?
Over the last several years, telecommunications, cable television and
until recently, broadcast stocks have languished. Uncertainty over regulatory
policy and future competition deserves most of the blame. With the Senate's
recent passage of a comprehensive telecommunications bill and an even more
deregulatory House bill near completion, we will soon have a functioning
blueprint for the telecommunications system of the future.
The clearest winners of the impending legislation appear to be the
broadcasters. The Senate bill enlarges television broadcast companies' total
population "footprint" from 25% to 35%. The House version expands it even
further to 50% of the total population. Restrictions on radio broadcasters are
eliminated entirely in the Senate bill. Assuming some reasonable compromise in
final legislation, group broadcasters will be extending their empires. With
television broadcasters already enjoying a strong cyclical upturn (witness
record "up-front" advertising sales for the networks), deals are likely to be
done at attractive premiums to current market prices. Renaissance
Communications' (RRR - $33.50 - NYSE) bid for Outlet Communications, Inc. (OCOMA
- - $37.50 - NASDAQ) is at approximately 13.5 times trailing cash flow, a heady
appraisal relative to public market prices for small group broadcasters. If a
feeding frenzy follows the passage of this legislation, we could see even higher
valuations.
Cable television companies will also benefit. After two rounds of mandated
price rollbacks in 1993 and 1994, the Senate bill allows cable companies to
price services within a collar of the national averages. The impending House
bill totally eliminates pricing restrictions after five years. In addition,
current restrictions on cable television/telephone cross ownership are likely to
be modified.
The future for telephone and cellular telephone companies remains more
cloudy. Investor uncertainty over how the new Personal Communications Services
(PCS) will impact traditional cellular operators has restrained the stocks of
3
<PAGE>
both cellular providers and PCS licensees. For example, Telephone and Data
Systems, Inc. (TDS - $36.375 - ASE), a telecommunications company with strong
cellular operations and an aggressive, successful bidder for PCS licenses, is
down for the year despite a strategy which we believe has added significant
value to the company.
VO On The Rocks and Caught TWX't a Rock and a Hard Place?
Judging by the precipitous fall of Seagram Company Ltd.'s (VO - $34.625 -
NYSE) stock immediately following its acquisition of 80% of MCA, investors
appeared to enjoy their whiskey straight with a dash of chemicals. Since then,
however, the market has begun to appreciate what we believe is a much more
exhilarating combination of a solid beverage business and a valuable collection
of entertainment software assets. Seagram's Chairman, Edgar Bronfman Jr., does
have a challenge in front of him: re-energizing MCA. We believe he will succeed.
He also has the financial strength to augment the existing entertainment
businesses by buying distribution. There will be potholes along the way -
overpaying for CBS (CBS - $67.00 - NYSE) is one that comes to mind. However, we
believe the global demand for entertainment software will be powerful enough to
compensate for any errors management may make in developing its new business.
Concurrently, Time Warner Inc. (TWX - $41.125 - NYSE) Chairman, Gerald
Levin, is taking a lot of heat from Wall Street for his failure to surface
value. There is no doubt in our mind that Time Warner is pursuing an optimal
strategy. Time Warner's partnerships with US WEST, Inc. (USW - $41.625 - NYSE),
C. Itoh, and Toshiba are making it cumbersome to restructure the company the way
management would like. Ultimately, however, we believe Mr. Levin will succeed in
separating Time Warner's cable television operations from its publishing and
entertainment software businesses. Once this is accomplished, we believe
investors will more fulIy appreciate the value of this unique collection of
consumer brands.
America - First Again
The much ballyhooed trade war with Japan has, for the time being, been
diffused by yet another promise from Japan to open its markets to U.S. cars and
car parts. Japan's policy of "Just Say Yes" has once again triumphed. We are
neither surprised nor disheartened. We have long promulgated the notion that
free trade and fair trade are joined at the hip. We find it somewhat ironic that
some in our country want to punish the Japanese for the virtues of saving and
investing that we seek to re-instill in Americans.
All this aside, we remain encouraged by the competitive progress American
industry is making against Japan and others. American companies are making world
class products and delivering world class services in many industries. While we
may never crack the Japanese market, we will take "global profit share" from the
Japanese. We reiterate our investment thesis that buying American in the stock
market will be an excellent method of profiting from economic growth overseas,
particularly in companies that sell to Japan.
The 5% Performance Guaranty Program For 1995
On January 3, 1995, Gabelli Funds, Inc. launched its third Performance
Guaranty Program, once again guaranteeing your principal investment up to $5,000
4
<PAGE>
plus a return of at least 5% for the one year period through December 31, 1995.
Accounts which participated in the 1994 Performance Guaranty Program are
participating in the new program if up to $5,000 of their investment remained in
the Fund on January 3, 1995 and is held through December 31, 1995 with
distributions reinvested. There was no sales charge for investments covered by
the new program. The portion of any new investment in excess of $5,000 made
after January 3, 1995 and additional investments made subsequent to that date
are subject to a 2% sales charge.
Questions & Answers
We thought we would reiterate the questions that individuals have asked us
about The Gabelli ABC Fund in this report.
Question: Where is the guaranty coming from?
Answer: The Guaranty is from State Street Bank and Trust Company. In
addition, the Gabelli organization has pledged collateral to State
Street Bank to make the investor whole. Simply stated, the Gabelli
organization is putting its capital behind the guaranty.
Question: How do you guarantee a return?
Answer: Gabelli Funds has arranged for the Letter of Credit to serve as
the guarantee. Gabelli Funds posts collateral to support the
amount of the Letter of Credit. Fees and expenses associated with
developing the Letter of Credit are assumed by Gabelli Funds.
Question: Are our personal holdings in The Gabelli ABC Fund liquid?
Answer: Like any mutual fund, you may sell your shares on any day at the
current net asset value. However, to maintain the guaranty you
must hold the shares for the entire guaranty period.
Question: What happens if the Gabelli organization makes poor investments?
Answer: This is a mutual fund and functions like a mutual fund. The assets
are invested by the investment advisor and State Street Bank
serves as the custodian. If the market were to drop sharply, and
the investments in the portfolio were to decline sharply, the
shareholders would look to State Street Bank for the return of
their money plus 5%. State Street looks to Gabelli.
Question: How have we done so far?
Answer The first Performance guaranty period was from May 14, 1993,
through May 13, 1994, during which period the fund grew by 9.8%.
During the second performance guaranty period (January 3, 1994
through December 31, 1994) investors earned 4.74% and were paid
the shortfall to bring the total return to 5%. For the six months
ended June 30, 1995 the Fund is up 6.0%, surpassing the minimum
guaranteed return. The Fund will continue to operate as a
conservative growth fund to achieve positive returns in any market
environment.
5
<PAGE>
Question: What impact will dividends have on the 5% guaranty?
Answer: Dividends which are distributed by the Fund and reinvested by
shareholders are counted as part of the guaranteed return.
Question: What about the investment strategy?
Answer: We are still being somewhat cautious. Last year's results were
helped by opportunistic investments, but rising interest rates
dampened returns on our fixed-income investments. We will continue
to selectively invest in equities.
Question: What are the risks involved?
Answer: With the standby Letter of Credit, the Performance Guaranty
Program has been designed to minimize risks. The principal risk is
the failure of any party to fulfill its obligation under the
contract. State Street Bank and Trust Company has a high quality
credit rating and a strong reputation.
Question: As for 1995, won't the high expense ratio deter the potential for
gains greater than 5%?
Answer: Because of its small size, the Fund's expense ratio is higher than
larger mutual funds. This will have a direct effect on the Fund's
net returns to shareholders. If the Fund's size increases through
additional investments or appreciation, the effect of fixed
expenses is reduced. In any event, your returns will be no less
than the performance guaranty amount on covered investments.
Question: Why are you doing this?
Answer: Gabelli Funds started this Fund to attract investors wary of the
securities market and individuals unfamiliar with mutual funds.
Low interest rates caused many to look for higher returns without
risk. This Fund provides an answer to all of these concerns. We
wanted to offer a unique product which differentiates our
organization from other mutual fund groups. This product is an
introduction to mutual fund investing.
Question: What type of fund is it?
Answer: It is a Fund that will utilize various investment techniques to
generate positive returns in various market conditions without
excessive risk of capital. This is a flexible portfolio.
Question: How will I be paid in the event the Fund does not perform to the
guaranty?
Answer: If we do not achieve our total return of 5%, State Street Bank and
Trust Company will fund your investment account with the
difference. If you elect to redeem the Fund at the end of the
guaranty program, your investment plus proceeds from the Letter of
Credit will be directed to you either by check or exchanged into
The Gabelli U.S. Treasury Money Market Fund. Alternatively, the
proceeds and your original investment may continue to be invested
in the Fund.
6
<PAGE>
Question: Is my principal guaranteed?
Answer: Yes, up to $5,000 for 1995. The Letter of Credit issued by State
Street Bank and Trust Company guaranteed your principal plus a
minimum 5% return, if you hold the securities and reinvest your
dividends throughout the guaranty period.
Question: Will you have a new performance guaranty program for 1996?
Answer: A decision has not yet been made. We invite you to write to us and
give us your opinion. Investors will be notified directly before
the end of the current performance guaranty program.
Let's Talk Stocks
The following are stock specifics on selected holdings of our Fund's
investments. Favorable EBITDA prospects do not necessarily translate into higher
stock prices, but they do express a positive trend which we believe will develop
over time.
Bruno's Inc. (BRNO - $11.625 - NASDAQ), located in Birmingham, Alabama, is a
regional food retailer operating in six southeastern states, Alabama, Georgia,
Mississippi, Florida, South Carolina and Tennessee. In mid-April, Bruno's signed
a definitive agreement to merge with an affiliate of Kohlberg Kravis Roberts and
Co. in a deal valued at about $1.2 billion, or $12.50 per share. The purchase
price was revised to $12.00 per share after KKR was able to review and assess
the materiality of information provided by the company. The deal is expected to
close in August.
Cellular Communications, Inc. (COMMA - $45.50 - NASDAQ), provides cellular
services in Michigan and Ohio. In August 1991, COMMA formed a joint venture with
AirTouch Communications Inc. (ATI - $28.50 - NYSE), formerly known as PacTel
Cellular. To maximize shareholder value, the joint venture agreement provides
for the total buyout, in stages, of Cellular Communications by AirTouch. The
buyout process, called the mandatory redemption obligation, starts in October
1995. At the present time, AirTouch owns approximately 13.4% of Cellular
Communications.
Flagstar Companies, Inc. (FLST - $5.625 - NASDAQ), one of the largest U.S.
restauranteurs, owns and operates or franchises over 1,500 Denny's restaurants,
Quincy's Steak House chain and El Pollo Loco, a 200 unit broiled chicken chain.
After years of losses and burdened by heavy debt, Flagstar is restructuring
operations, remodeling facilities and is endeavoring to reposition itself in its
markets.
Genentech, Inc. (GNE - $48.625 - NYSE) is a leading factor in the biotechnology
industry, making and marketing such products as Activase thrombolytic agent,
Nutropin growth hormones and Actimmune. Hoffman-La Roche owns 66% of GNE's
stock. An option agreement to buy the outstanding 34%, which was to expire June
30th, has been revised by extending Roche's purchase option for another 4 years,
to 1999, and increasing the purchase price to $82 per share. The new agreement
has an attractive feature permitting GNE's shareholders to "put" their shares to
Roche at $60 per share one month after the expiration date if Roche doesn't
elect to buy the remaining shares then outstanding.
7
<PAGE>
Katy Industries, Inc. (KT - $7.875 - NYSE) operates its business through three
principal groups: industrial machinery, industrial components and consumer
products. The industrial machinery group manufactures and sells die-cutting
machinery, food packaging machinery and production machinery for the shoe making
industry. The industrial components group manufactures and sells components such
as specialty metals and testing and measuring instruments. The consumer products
group manufactures and sells sanitary maintenance supplies and air filter and
electronic components. Katy also has a substantial investment portfolio.
LIN Broadcasting Corporation (LINB - $126.50 - NASDAQ) ranks among the largest
and most attractive cellular telephone operators in the U.S. with controlling
interests in the New York, Los Angeles, Dallas and Houston markets. McCaw
Cellular Communications, which was acquired by AT&T in 1994, controls 52% of
LIN. McCaw (AT&T) is buying the 48% balance of LIN for $129.50 per share in
cash. This price reflects AT&T's agreement to settle lawsuits brought by
LIN shareholders by paying an additional $2.00 per share; the initial purchase
price was $127.50 per share. The Fund is holding LIN to earn the difference
between the current market price and the "take out" price of LIN.
Lotus Development Corporation (LOTS - $63.75 - NASDAQ), [the Fund's largest
holding on June 30th], is one of the major independent makers of personal
computer software, including such well-recognized products as Lotus 1-2-3, Ami
Pro and Notes. The company has been acquired in a cash tender offer by
International Business Machines Corporation (IBM - $96.00 - NYSE). IBM on June
6th initially bid $60.00 per share, or $3.5 billion. This was sweetened six days
later to $64.00 per share and changed a hostile bid to a friendly, acceptable
agreement.
Marion Merrell Dow, Inc. (MKC - $25.50 - NYSE) is in the process of being
acquired by Hoechst AG for $25.75 a share, or $7.1 billion. Dow Chemical has
already completed the sale of its 72% stake in MKC to Hoechst. Hoechst is
pursuing MKC mainly to gain a greater presence in the U.S., the world's largest
pharmaceutical market. Hoechst's action follows other big European concerns that
have gained entry into the U.S. through major acquisitions, like Ciba-Geigy's
$2.1 billion investment in Chiron Corporation and Roche Holdings' $5.3 billion
merger with Syntex Corporation. The combined company would be the world's third
largest drugmaker, with yearly sales of about $9 billion and products ranging
from Seldane allergy medication to generic Albuterol.
Nortek, Inc. (NTK - $8.625 - NYSE) is a diversified manufacturer of residential
and commercial building products, including kitchen range hoods, bathroom fans,
shower doors, cabinets and central heating and air conditioning systems. Nortek
operates within three principal product groups: Residential Building Products,
Air Conditioning, and Heating Products and Plumbing Products. A prime
beneficiary of the do-it-yourself and professional replacement, remodeling and
renovation markets, sales growth of continuing businesses has been approximately
10% per year over the last few years. The company returned to profitability in
1994 and is expected to be a strong cash flow generator over the next five
years. NTK's private market value is estimated to reach $30 per share by 1997.
8
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Gabelli U.S. Treasury Money Market Fund
Many of our shareholders have become acquainted with The Gabelli U.S.
Treasury Money Market Fund. The Fund provides checkwriting and exchange
privileges. The Fund's expenses are capped at .30% of average net assets, making
it one of the most attractive U.S. Treasury-only money market funds. With
dividends that are exempt from state and local income taxes in all states, the
Fund is an excellent vehicle in which to store idle cash. Call us at
1-800-GABELLI (1-800-422-3554) for a prospectus which gives a more complete
description of the Fund, including management fees and expenses. Read it
carefully before you invest or send money.
In Conclusion
After a modest 1994, we are delighted that the Fund has generated strong
returns in the first half of 1995. We remain cautious regarding the short-term
prospects for the broad market. With accelerating merger and acquisition
activity worldwide, we expect investors to focus more intensely on value, to the
general advantage of our portfolio.
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 GABCX. Please call us during the
day for further information.
We thank you for your confidence in our investing abilities and wish you a
productive and financially rewarding 1995.
Sincerely,
/s/ Mario J. Gabelli
Mario J. Gabelli, CFA
President and
Chief Investment Officer
July 17, 1995
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Top Ten Holdings
June 30, 1995
-------------
Lotus Development Corp. Genentech, Inc.
Marion Merrell Dow, Inc. Brunos, Inc.
LIN Broadcasting Corporation Cellular Communications, Inc.
Time Warner Inc. Katy Industries, Inc.
Nortek, Inc. Flagstar Companies, Inc.
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9
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The Gabelli ABC Fund
Portfolio of Investments (Unaudited) -- June 30, 1995
================================================================================
<TABLE>
<CAPTION>
Principal
Amount Market
or Shares Cost Value
--------- ---- -----
<C> <S> <C> <C>
COMMON STOCKS--63.70%
AUTOMOTIVE: PARTS AND ACCESSORIES - 0.53%
4,300 Hi-Lo Automotive Inc.+................ $ 45,902 $ 45,150
3,000 Wynn's International, Inc............. 63,150 69,750
----------- ------------
109,052 114,900
----------- ------------
AVIATION: PARTS AND ACCESSORIES - 0.20%
6,000 Hi-Shear Industries Inc.+............. 31,300 44,250
----------- ------------
BROADCASTING - 0.08%
1,500 Ackerley Communications, Inc.+........ 13,575 18,375
----------- ------------
CABLE - 0.36%
2,000 Multimedia Inc.+...................... 78,037 77,500
----------- ------------
COMPUTER SOFTWARE AND SERVICES - 24.74%
1,000 Baan Company N.V.+.................... 16,000 30,875
3,500 LEGENT Corporation+................... 152,109 153,125
82,000 Lotus Development Corporation+........ 5,227,405 5,227,500
----------- ------------
5,395,514 5,411,500
----------- ------------
CONSUMER PRODUCTS - 0.68%
13,000 Carter-Wallace, Inc................... 136,244 147,875
----------- ------------
DIVERSIFIED INDUSTRIAL - 0.72%
20,000 Katy Industries, Inc.................. 499,425 157,500
----------- ------------
ENERGY - 0.33%
5,100 Southwest Gas Corporation............. 83,130 72,675
----------- ------------
FINANCIAL SERVICES - 0.05%
1,000 Duff & Phelps Corporation............. 12,426 10,750
----------- ------------
HEALTH CARE - 18.82%
6,000 Genentech, Inc.+...................... 287,150 291,750
150,000 Marion Merrell Dow Inc................ 3,770,834 3,825,000
----------- ------------
4,057,984 4,116,750
----------- ------------
INDUSTRIAL EQUIPMENT AND SUPPLIES - 0.57%
9,000 Ampco-Pittsburgh Corporation.......... 62,350 82,125
5,000 Nortek, Inc.+......................... 54,000 43,125
----------- ------------
116,350 125,250
----------- ------------
RETAIL - 1.33%
25,000 Bruno's, Inc.......................... 289,377 290,625
----------- ------------
WIRELESS COMMUNICATIONS - 15.29%
4,000 Cellular Communications, Inc.
Cl. A+............................. 185,830 182,000
25,000 LIN Broadcasting Corporation.......... 3,080,353 3,162,500
----------- ------------
3,266,183 3,344,500
----------- ------------
TOTAL COMMON STOCKS ................. 14,088,597 13,932,450
----------- ------------
CONVERTIBLE CORPORATE BONDS - 9.03%
BUSINESS SERVICES - 0.45%
$94,000 Trans-Lux Corporation Sub. Deb. Cv.
9.00%, 12/01/05.................... 96,203 97,760
----------- ------------
ENTERTAINMENT - 8.13%
1,700,000 Time Warner Inc. Sub. Deb. Cv.
8.75%, 01/10/15.................... 1,796,807 1,778,625
----------- ------------
FOOD AND BEVERAGE - 0.45%
$110,000 Flagstar Companies, Inc. Sub. Deb. Cv.
10.00%, 11/01/14.................... 103,691 78,100
20,000 Ingles Markets, Incorporated
Sub. Deb. Cv.
10.00%, 10/15/08................... 20,932 20,900
----------- ------------
124,623 99,000
----------- ------------
TOTAL CONVERTIBLE
CORPORATE BONDS .................... 2,017,633 1,975,385
----------- ------------
CONVERTIBLE PREFERRED STOCKS--0.22%
INDUSTRIAL EQUIPMENT AND SUPPLIES - 0.22%
500 Navistar International Corporation
$6.00 Cv. Pfd. Ser. G.............. 27,275 26,000
1,500 NYCOR, Inc. $1.70 Cv. Pfd............. 26,250 22,500
----------- ------------
53,525 48,500
----------- ------------
TOTAL CONVERTIBLE
PREFERRED STOCKS ................... 53,525 48,500
----------- ------------
CORPORATE BONDS - 3.67%
FOOD AND BEVERAGE - 0.36%
$100,000 Flagstar Companies, Inc.
11.25%, 11/01/04................... 100,792 78,500
----------- ------------
INDUSTRIAL EQUIPMENT
AND SUPPLIES--3.31%
800,000 Nortek, Inc.
9.875%, 03/01/04................... 794,245 724,000
----------- -----------
TOTAL CORPORATE BONDS ................ 895,037 802,500
----------- -----------
U.S. GOVERNMENT OBLIGATIONS--28.69%
$6,310,000 U.S. Treasury Bills, 5.27%
to 5.50% Due 07/27/95 to
08/17/95........................... 6,273,797 6,273,797
----------- -----------
TOTAL U.S. GOVERNMENT
OBLIGATIONS ........................ 6,273,797 6,273,797
----------- -----------
TOTAL INVESTMENTS--105.31%............ $23,328,589 23,032,632
=========== -----------
Liabilities in Excess of
Other Assets--(5.31%) .............. (1,161,990)
-----------
NET ASSETS--100.00% .................. $21,870,642
(2,156,354 shares outstanding)...... ===========
Net Asset Value and Redemption
Price Per Share ................... $10.14
======
MAXIMUM PUBLIC OFFERING PRICE PER SHARE
($10.14/.980 Based on a maximum
sales charge of 2.0%).............. $10.35
======
</TABLE>
- ----------------------
+Non-income producing security.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
The Gabelli ABC Fund
Statement of Assets and Liabilities (Unaudited)
June 30, 1995
====================================================================================================================================
<S> <C>
Assets:
Investments in securities, at value
(Cost $23,328,589).................................... $23,032,632
Cash ...................................................... 157,041
Accrued interest receivable.................................. 68,637
Receivable for Fund shares sold.............................. 2,625
Dividends receivable......................................... 39,890
Deferred organizational expenses ............................ 69,354
-----------
Total Assets ......................................... 23,370,179
-----------
Liabilities:
Payable for investments purchased............................ 1,419,419
Payable to Advisor........................................... 18,121
Payable to Custodian......................................... 1,812
Payable for Fund shares redeemed............................. 13,279
Payable for distribution fees................................ 9,290
Other accrued expenses....................................... 37,616
-----------
Total Liabilities .................................... 1,499,537
-----------
Net Assets (applicable to 2,156,354
shares outstanding)................................. $21,870,642
===========
Net asset value and redemption
price per share .................................... $10.14
===========
Maximum offering price per share
($10.14/.98 based on a
maximum sales charge of 2%) ........................ $10.35
===========
Net Assets Consist of:
Capital Stock, at par value.................................. $ 2,156
Additional paid-in-capital................................... 21,278,258
Accumulated undistributed net realized gain
on investments........................................ 669,759
Accumulated undistributed net investment
income................................................ 216,913
Net unrealized depreciation on investments
and assets and liabilities denominated
in foreign currencies................................. (296,444)
-----------
Net Assets ........................................... $21,870,642
===========
Statement of Operations (Unaudited)
For the Six Months Ended June 30, 1995
====================================================================================================================================
Investment Income:
Interest..................................................... $ 363,687
Dividends ................................................... 101,941
-----------
Total Income.......................................... 465,628
-----------
Expenses:
Investment advisory fee ..................................... 114,452
Transfer & shareholder servicing agent....................... 45,472
Distribution expenses........................................ 28,639
Legal and audit fees......................................... 15,000
Amortization of organization expenses........................ 12,729
Printing and mailing......................................... 8,000
Directors fees and expenses.................................. 6,500
Custodian fees and expenses.................................. 5,944
Registration fees............................................ 3,025
Miscellaneous................................................ 990
-----------
Total Expenses........................................ 240,751
-----------
Investment income - net...................................... 224,877
-----------
Net Realized and Unrealized Gain (Loss)
on Investments:
Net realized gain on investments and
foreign currency transactions......................... 718,754
Net realized loss on futures................................. (44,165)
Net change in unrealized depreciation........................ 440,276
-----------
Net gain on investments............................... 1,114,865
-----------
Net increase in net assets resulting
from operations ..................................... $1,339,742
===========
</TABLE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (Unaudited)
====================================================================================================================================
Six Months Ended Year Ended
June 30, 1995 December 31, 1994
---------------- -----------------
<S> <C> <C>
Increase in Net Assets:
Investment income - net.............................................. $ 224,877 $ 813,541
Net realized gain on investments and
foreign currency transactions...................................... 718,754 1,573,688
Net realized loss on futures ....................................... (44,165) (103,150)
Change in unrealized depreciation - net.............................. 440,276 (1,064,232)
----------- -----------
Net increase in net assets resulting from operations............... 1,339,742 1,219,847
----------- -----------
Distributions to shareholders from:
Net investment income.............................................. -- (820,606)
Net realized gain.................................................. -- (1,445,219)
----------- -----------
-- (2,265,825)
----------- -----------
Share transactions - net............................................. (3,887,823) 16,617,988
----------- -----------
Net increase (decrease) in net assets.............................. (2,548,081) 15,572,010
Net Assets:
Beginning of period.................................................. 24,418,723 8,846,713
----------- -----------
End of period (including undistributed
net investment income of $216,913 and
($7,964), respectively)............................................ $21,870,642 $24,418,723
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
The Gabelli ABC Fund
Notes to Financial Statements (Unaudited)
================================================================================
1. Significant Accounting Policies. The Gabelli ABC Fund, Inc. (the "Fund") is a
series of Gabelli Investor Funds, Inc. (the "Corporation"), incorporated in
Maryland on October 30, 1992. The Fund is an open-end, non-diversified
management investment company. The following is a summary of significant
accounting policies followed by the Fund:
Security Valuation. Portfolio securities listed or traded on the New York or
American Stock Exchanges or quoted by the National Association of Securities
Dealers Automated Quotations, Inc. ("NASDAQ") are valued at the last sale price
on that exchange (if there were no sales that day, the security is valued at the
average of the bid and asked price). All other portfolio securities for which
NASDAQ market quotations are readily available are valued at the latest average
of the bid and asked prices. When market quotations are not readily available,
portfolio securities are valued at their fair value as determined in good faith
under procedures established by and under the general supervision of the
Corporation's Directors. Short-term debt securities with remaining maturities of
60 days or fewer 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. Options are
valued at the last sale price on the exchange on which they are listed, unless
no sales of such options have taken place that day, in which case they will be
valued at the mean between their closing bid and asked prices.
Foreign Currency Transactions. The books and records of the Fund are maintained
in U.S. dollars as follows:
(i) market value of investment securities and other assets and liabilities are
recorded at the exchange rate on the valuation date.
(ii) purchases and sales of investment securities, income and expenses are
recorded at the exchange rate prevailing on the respective date of such
transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuation
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Security Transactions and Investment Income. Security transactions are accounted
for on the dates the securities are purchased or sold (the trade dates), with
realized gain and loss on investments determined by using specific
identification as the cost method. Interest income (including amortization of
premium and discount) is recorded as earned. Dividend income and dividend and
capital gain distributions to shareholders are recorded on the ex-dividend date.
Federal Income Taxes. The Fund has qualified and intends to continue to qualify
as a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986 and distribute all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
2. Capital Stock Transactions. The Articles of Incorporation, dated October 30,
1992, permit the Fund to issue one billion shares (par value $0.001).
Transactions in shares of common stock were as follows: Six Months Ended Year
Ended June 30, 1995 December 31, 1994
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1995 December 31, 19994
----------------------- -----------------------
Shares Amount Shares Amount
------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Shares sold..................................... 192,338 $ 1,843,147 2,151,014 $21,534,845
Shares issued upon reinvestment of dividends.... -- -- 236,769 2,254,043
Shares redeemed................................. (587,991) (5,730,970) (717,837) (7,170,900)
------- ----------- --------- -----------
Net increase (decrease)....................... (395,653) $(3,887,823) 1,669,946 $16,617,988
======= =========== ========= ===========
</TABLE>
12
<PAGE>
3. Purchases and Sales of Securities. Purchases and sales of securities for the
six months ended June 30, 1995, other than U.S. government obligations and
short-term securities, aggregated $52,662,806 and $49,853,095, respectively.
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. Such investments will only be made
if they are, in the opinion of Fund management, economically appropriate to the
reduction of risks involved in the management of the Fund. Upon entering into a
futures contract, the Fund is required to deposit with the broker an amount of
cash or cash equivalents equal to a certain percentage of the contract amount.
This is known as the "initial margin." Subsequent payments ("variation margin")
are made or received by the Fund each day, depending on the daily fluctuation of
the value of the contract. The daily changes in the contract are recorded as
unrealized gains or losses. The Fund recognizes a realized gain or loss when the
contract is closed. The net unrealized appreciation/depreciation is shown in the
financial statements.
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. During the six months ended June 30, 1995, the Fund
sold short futures contracts aggregating $2,430,000, and closed short futures
contracts aggregating $2,474,165.
Options. The Fund may purchase or write call or put options on securities or
indices. As a writer of call options, the Fund receives a premium at the outset
and then bears the market risk of unfavorable changes in the price of the
financial instrument underlying the option. The Fund would incur a loss if the
price of the underlying financial instrument, increases above the strike price
between the date the option is written and the date on which the option is
terminated if the option is not covered. The Fund would realize a gain, to the
extent of the premiums, if the option is not exercised. For the six months ended
June 30, 1995, the Fund had no activity in written call options.
As a purchaser of call options, the Fund pays a premium for the right to buy
from the seller of the call option the underlying security at a specified price.
The seller of the call has the obligation to sell the underlying security upon
exercise at the exercise price. For the six months ended June 30, 1995, the Fund
had no activity in purchased call options.
Short-selling. The Fund is engaged in short-selling, which obligates the Fund to
replace the security borrowed by purchasing the security at current market
value. The Fund would incur a loss if the price of the security increases
between the date of the short sale and the date on which the Fund replaces the
borrowed security. The Fund would realize a gain if the price of the security
declines between those dates. Until the Fund replaces the borrowed security, the
Fund will maintain daily, a segregated account with cash and/or U.S. Government
securities sufficient to cover its short position.
Repurchase Agreements. The Fund may enter into repurchase agreements with
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 the credit guidelines established by the Directors. 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, and the Fund will make payment for such
securities only upon physical delivery or upon evidence of book entry transfer,
13
<PAGE>
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.
4. Investment Advisory Contract. The Fund employs Gabelli Funds, Inc. (the
"Advisor") to provide a continuous investment program for the Fund's portfolio,
provide all facilities and personnel, including officers, required for its
administrative management, and to pay the compensation of all officers and
Directors of the Fund who are affiliated with the Advisor. As compensation for
the services rendered and related expenses borne by the Advisor, the Fund pays
the Advisor a fee, computed and accrued daily and payable monthly, equal to
1.00% per annum of the Fund's average daily net assets. The Advisor is obligated
to reimburse the Fund in the event the Fund's expenses exceed the most
restrictive expense ratio limitation imposed by any state, currently believed to
be 2.5% of the first $30 million of the Fund's average daily net assets
(excluding taxes, interest, distribution expenses and extraordinary items). No
such reimbursement was required during the six months ended June 30, 1995.
5. Organization Expenses. The organization expenses of the Fund are being
amortized on a straight-line basis over a period of 60 months. The Advisor has
agreed that in the event that any of the initial 10,000 shares it acquired on
April 23, 1993 are redeemed during the period of amortization of the Fund's
organization expenses, the redemption proceeds will be reduced by any such
unamortized organization expenses in the same proportion as the number of
initial shares being redeemed bears to the number of initial shares outstanding
at the time of redemption.
6. Distribution Plan. The Fund's Board of Directors has adopted a distribution
plan (the "Plan") under Section 12(b) of the Investment Company Act of 1940 and
Rule 12b-1 thereunder. For the six months ended June 30, 1995, the Fund has
incurred distribution costs of $28,639, or 0.25% of average net assets, the
annual limitation under the Plan, payable to Gabelli & Company, Inc., an
affiliate of the Advisor. The Board of Directors has approved that Distribution
costs incurred by Gabelli & Company, Inc., totalling $180,233 which are in
excess of the 0.25% limitation may be recovered from the Fund in future periods,
subject to such limitation.
7. Transactions with Affiliates. The Fund paid brokerage commissions during the
six months ended June 30, 1995 of $6,012 to Gabelli & Company, Inc. For the six
months ended June 30, 1995, Gabelli & Company, Inc. has informed the Fund that
it received $1,397 from investors in commissions (sales charges and underwriting
fees) on sales of Fund shares.
14
<PAGE>
<TABLE>
<CAPTION>
The Gabelli ABC Fund
Financial Highlights (Unaudited)
====================================================================================================================================
Selected data for a share of capital stock outstanding throughout each period:
May 14, 1993
Six Months (Commencement of
Ended Year Ended Operations) through
June 30, 1995 December 31, 1994 December 31, 1993
------------- ----------------- ------------------
<S> <C> <C> <C>
Operating Performance:
Net asset value, beginning of period ..................... $ 9.57 $ 10.03 $ 10.00
------- ------- -------
Net investment income .................................... 0.10 0.33 0.29
Net realized and unrealized gain on investments .......... 0.47 0.12 0.62
------- ------- -------
Total from investment operations ......................... 0.57 0.45 0.91
------- ------- -------
Less Distributions:
Dividends from net investment income ..................... -- (0.33) (0.29)
Distributions from net realized gain on investments ...... -- (0.58) (0.59)
------- ------- -------
Total distributions ...................................... -- (0.91) (0.88)
------- ------- -------
Net Asset Value, End of Period ........................... $ 10.14 $ 9.57 $ 10.03
======= ======= =======
Total Return (not reflecting sales load) ................. 5.96% 4.49% 9.10%
Ratios to average net assets/supplemental data:
Net assets, end of Period (in thousands) ................. $21,871 $24,419 $ 8,847
Ratio of operating expenses to average net assets+ ....... 2.10%* 2.09% 2.75%*
Ratio of net investment income to average net assets+ .... 1.97%* 2.95% 2.96%*
Portfolio Turnover Rate .................................. 307.85% 489.54% 232.33%
</TABLE>
- ------
* Annualized.
+ Net of expenses assumed by the Advisor equivalent to 0.00%, 0.14% and 0.82%,
respectively.
15
<PAGE>
The Gabelli ABC Fund
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
(Net Asset Value may be obtained daily by calling
1-800-GABELLI after 6:00 P.M.)
Board of Directors
Mario J. Gabelli, CFA
Chairman and Chief
Investment Officer
Gabelli Funds, Inc.
Anthony J. Colavita
Attorney-at-Law
Anthony J. Colavita, P.C.
Vincent D. Enright
Senior Vice President
and Chief Financial Officer
The Brooklyn Union Gas Company
Karl Otto Pohl
Former President
Deutsche Bundesbank
Werner J. Roeder, MD
Director of Surgery
Lawrence Hospital
Officers
Mario J. Gabelli, CFA
President and Chief
Investment Officer
James E. McKee
Secretary
Bruce N. Alpert
Vice President
and Treasurer
Distributor
Gabelli & Company, Inc.
Custodian, Transfer Agent and Dividend Agent
State Street Bank and Trust Company
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of The
Gabelli ABC Fund. It is not authorized for distribution to prospective investors
unless preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
