<PAGE> 1
THE GABELLI ABC FUND
One Corporate Center
Rye, New York 10580-1434
SEMI-ANNUAL REPORT
JUNE 30, 1997
TO OUR SHAREHOLDERS:
In the second quarter of 1997, equities investors concluded that inflation
was just a bad dream after all and that "Captain Greenspan" was bringing the
economy in for another soft landing. Blue chip stocks remained in the
limelight, but smaller stocks participated in the surge. The Dow Jones
Industrial Average (DJIA) gained 17.1%.
INVESTMENT RESULTS (a)
<TABLE>
<CAPTION>
Quarter
----------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
<S> <C> <C> <C> <C> <C> <C>
1997: Net Asset Value..................... $9.98 $10.45 __ __ __
Total Return........................ 1.4% 4.7% __ __ __
- ---------------------------------------------------------------------------------------------------------
1996: Net Asset Value..................... $10.10 $10.16 $9.77 $9.84 $9.84
Total Return........................ 4.1% 0.6% 0.8% 2.2% 7.8%
- ---------------------------------------------------------------------------------------------------------
1995: Net Asset Value..................... $9.94 $10.14 $10.41 $9.71 $9.71
Total Return........................ 3.9% 2.0% 2.7% 2.2% 11.2%
- ---------------------------------------------------------------------------------------------------------
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)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS - JUNE 30, 1997 (a)
-----------------------------------------
<S> <C>
1 YEAR.................................... 9.4%
3 YEAR.................................... 9.7%
LIFE OF FUND (b).......................... 9.4%
</TABLE>
<TABLE>
<CAPTION>
Dividend History
- ---------------------------------------------------------------------------------------
Payment (ex) Date Rate Per Share Reinvestment Price
- ----------------- -------------- -------------------
<S> <C> <C>
December 27, 1996 $0.146 $9.83
September 30, 1996 $0.470 $9.77
December 28, 1995 $0.930 $9.71
December 28, 1994 $0.910 $9.52
December 31, 1993 $0.880 $10.03
</TABLE>
(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.
<PAGE> 2
INVESTMENT PERFORMANCE
For the second quarter ended June 30, 1997, the Gabelli ABC Fund's total
return was 4.7%. The Fund is up 6.1% year-to-date. Since inception on May 14,
1993 through June 30, 1997, the Fund has a total return of 45.2%, which equates
to an average annual return of 9.4%. The Fund, which seeks to achieve a
positive return in various market environments, is meeting its objectives of
providing an attractive rate of return without excessive risk of capital.
Gabelli Funds, Inc.'s Performance Guaranty Program concluded on December 31,
1996. This program was unique because it provided investors the full upside
potential of the investment while guaranteeing a minimum return of 5%.
Although the Performance Guaranty Program is not being offered for 1997, the
Fund continues striving to achieve the same objectives.
COMMENTARY
During the heyday of the leveraged buyout (LBO) in the 1980s, individuals
did not have the opportunity to invest alongside leading LBO firms like
Kohlberg, Kravis, Roberts (KKR) & Co. Now, they can and Gabelli ABC Fund
shareholders are participating. To take advantage of current accounting
regulations, LBO firms are no longer taking companies private by retiring all
of a company's publicly held stock. Instead, they are leaving a small
percentage (at least 13%) of equity ownership in public hands. These publicly
traded shares are known as "stubs". This frees the companies from having to
amortize goodwill against reported earnings. When LBO firms eventually unwind
their large positions in these companies by selling equity back to the public,
they can obtain a better price due to the companies' cleaner earnings records.
We are exploiting this opportunity to "partner" with focused LBO firms by
buying fundamentally attractive "stubs". Current examples in the portfolio
include Amphenol Corporation (APH - $38.875 - NYSE), a Connecticut based
manufacturer of electrical equipment, and Bruno's, Inc. (BRNO - $11.50 -
NASDAQ), an Alabama based grocery chain. KKR, one of the most highly
profitable leveraged buyout firms, created both of these "stubs". We continue
to seek companies such as these that will allow us to participate in the
investment strategies of the leading LBO firms.
LET'S TALK STOCKS
The following are company 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.
Genentech, Inc. (GNE - $58.9375 - NYSE) is a leader in the biotechnology
industry, making and marketing such products as Activase thrombolytic agent,
Nutropin growth hormones and Actimmune. Hoffman-La Roche owns about 68% of
Genentech's stock. Roche's option agreement to buy the remaining 32% has been
revised by extending the option to 1999 and by increasing the purchase price to
2
<PAGE> 3
$82.50 per share. The 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 does not elect to buy the shares then outstanding.
Giddings & Lewis Inc. (GIDL - $20.875 - NASDAQ), a maker of machine tools and
assembly line equipment, agreed to be acquired by Germany's Thyssen AG in a
$675 million bid that topped a rival offer. Thyssen, a diversified German
steelmaker, launched a $21 per share cash tender offer for all Giddings &
Lewis' outstanding shares. The offer topped a $19 per share bid from
Harnischfeger Industries Inc. (HPH - $42.875 - NYSE), also a machine-tools
maker, which Giddings rejected in May. The acquisition would give Thyssen a
manufacturing base in the U.S. while Giddings would benefit from the larger
company's global presence and common ties to the automobile industry. The
tender is subject to Thyssen receiving a majority of Giddings & Lewis'
outstanding shares in the offer, as well as approval from U.S. and German
regulators.
Integon Corp. (IN - $25.00 - NYSE) agreed to be acquired by General Motors
Acceptance Corp., a unit of General Motors Corporation, for $700 million in
cash and assumed debt. GMAC is seeking to increase its presence in the auto
insurance market. The move comes after Integon retained Goldman, Sachs & Co.,
in the wake of steep first-quarter losses of $2.21 a share, to explore
alternatives including a possible sale. Based in Winston Salem, N.C., Integon
is a "nonstandard" automobile insurance company, offering insurance to
customers who do not qualify for standard rates due to various risk factors,
such as a poor driving record. The acquisition will help GMAC's insurance
business reach a broader range of auto insurance customers. Under terms of the
deal, GMAC will pay $26 per share in cash for each of Integon's 16 million
outstanding shares. The transaction is conditioned upon acceptance by Integon
shareholders, antitrust clearance, and North Carolina state insurance approval.
The merger is expected to be completed by the end of the third quarter of 1997.
International Family Entertainment, Inc. (FAM - $34.375 - NYSE) is a
Virginia-based entertainment company with production and distribution
operations around the world. With such key assets as The Family Channel, MTM
and Cable Health Club, FAM is a leading provider of cable programming oriented
toward families. The Family Channel is performing exceptionally well, and MTM
has been re-energized. FAM has created an exceptional franchise which
attracted News Corporation Limited (NWS - $19.25 - NYSE), whose Fox Kids
Worldwide Inc. unit agreed to buy FAM for $35 a share cash in a transaction
valued at $1.9 billion.
Mafco Consolidated Group, Inc. (MFO - $33.50 - NYSE) completed its merger with
Mafco Holdings Inc., which acquired the remaining 15 percent of Mafco
Consolidated's publicly-held common shares for $33.50 a share, or $150.8
million in cash. Mafco Consolidated is a holding company, owning about 36% of
M&F Worldwide Corp. (MFW - $8.75 - NYSE), a producer of licorice extract, and
about 64% of Consolidated Cigar Holdings Inc. (CIG - $27.75 - NYSE).
3
<PAGE> 4
Prime Service Inc. (PRS - $31.9375 - NYSE) signed a definitive agreement to be
acquired by Atlas Copco AB, a Swedish maker of industrial machinery, through a
$32 per share cash tender. Atlas Copco will pay a total of $900 million and
assume $260 million in debt to acquire Prime Services, the second largest
machinery rental company in the U.S. The bid comes as users of machinery such
as forklifts and jackhammers are increasingly turning to the rental market to
get the newest technology. Shareholders owning 74 percent of Prime Services
agreed to accept the offer. Atlas Copco's products account for about 20
percent of Prime Services' rentals. The transaction cleared antitrust review
and is only subject to Atlas Copco receiving a majority of Prime Services'
shares in the offer.
Rhone-Poulenc Rorer, Inc. (RPR - $90.875 - NYSE) announced that its majority
shareholder Rhone-Poulenc SA, was considering a $4.3 billion ($92-per-share)
bid to acquire the 31.7% stake of Rhone-Poulenc Rorer that it does not already
own. Rhone-Poulenc also said it will combine its chemicals and fibers and
polymers activities into an independent company that will be floated on the
stock market in 1998 whether or not it goes through with the Rhone-Poulenc
Rorer buyout. The plan is the latest in a series of restructurings that have
transformed the global chemical and pharmaceutical industries during the
decade. Driven by a desire to break up conglomerates, most large groups that
once had both chemicals and pharmaceutical business have opted for one activity
or the other. The buyout offer will be presented to Rorer's board of directors
and Rorer's independent directors are expected to form a special committee to
evaluate the offer.
Southwest Gas Corporation (SWX - $19.875 - NYSE) is a natural gas utility based
in Las Vegas, providing natural gas service to approximately 1.1 million
residential, commercial and industrial customers in the fastest growing regions
of the United States - Arizona, Nevada and parts of northern and southern
California. The company added 63,000 customers during 1996, which was another
record-breaking year.
Syratech Corporation (SYR - $32.125 - NYSE) was acquired by Boston financier
Thomas H. Lee for about $281 million, expanding his portfolio of small to
mid-size growth companies. Lee paid $32 a share for Syratech, a maker of
gifts, silverware and Faberware pots and pans. Leonard Florence, Chairman and
CEO of Syratech, and certain other executive officers of the company retained
equity interests in the surviving entity having an aggregate value of at least
$24 million. There were approximately 9 million Syratech shares outstanding, of
which Mr. Florence owned approximately 32%. Shareholders could have elected to
receive $32 per share in cash or retain as much 32% of their holdings in the
form of the new company created after the merger. The Fund elected to retain
shares in Syratech.
Tambrands Inc. (TMB - $49.875 - NYSE) agreed to be acquired by Procter & Gamble
Company for $2 billion in cash and assumed debt. P&G will pay $50 a share in
cash, or $1.85 billion, and assume $150 million in debt for Tambrands. The
purchase would make P&G the largest producer of feminine hygiene products. P&G
will give Tambrands the financial resources, marketing experience and
distribution network to expand sales outside the U.S. While Tambrands has half
of the U.S. tampon market, valued at $800 million, sales are much lower in
foreign markets. P&G hopes to distribute Tampax in Latin America and Asia,
which account for more than half of the world's population, yet contribute less
than 5 percent of Tampax's volume sales. The transaction is expected to be
completed during the third quarter of 1997.
4
<PAGE> 5
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.
NO LOAD - EFFECTIVE JANUARY 2, 1997
Effective January 2, 1997, the Fund no longer imposes a front-end sales
charge. All purchases made after January 1, 1997 are no-load, that is, without
a sales charge. New and current shareholders may purchase shares of the Fund
at any time.
GABELLI U.S. TREASURY MONEY MARKET FUND
Shareholders of any of the Gabelli Funds may invest in The Gabelli U.S.
Treasury Money Market Fund with an initial investment of $3,000 or more. 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. An investment in The Gabelli U.S. Treasury Money Market
Fund is neither insured nor guaranteed by the U.S. Government. There can be no
assurance that the Fund will maintain a stable $1 per share net asset value.
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
the prospectus carefully before you invest or send money.
INTERNET
You can now visit us on the Internet. Our home page at
http://www.gabelli.com contains information about Gabelli Funds, Inc., the
Gabelli Mutual Funds, IRAs, 401(k)s, quarterly reports, closing prices and
other current news. You can send us e-mail at [email protected].
IN CONCLUSION
The strength of the market is understandable considering today's favorable
economic/earnings/interest rate backdrop and the enormous amount of money being
poured into equities mutual funds. Although high by historical standards,
current equities valuations may be justified as long as these "best of all
possible worlds" market conditions can be sustained. If something happens to
disrupt this comfortable scenario--our best guess is it may come in the form of
more widespread earnings disappointments as the slowing economy begins to
impact corporate profitability--the market could run into some trouble.
5
<PAGE> 6
We are encouraged by the broadening of this bull market and some evidence
that investors are once again focusing on fundamental value instead of just
momentum. Stock pickers across the land rejoice! Ongoing merger and
acquisition activity should continue to provide a tailwind for 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 business day for further information.
As always, we thank you for your confidence in our investment abilities and
will work hard to preserve and enhance the assets you have entrusted to us.
Sincerely,
/s/ MARIO J. GABELLI
MARIO J. GABELLI, CFA
Portfolio Manager and
Chief Investment Officer
August 1, 1997
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
JUNE 30, 1997
-------------
International Family Entertainment, Inc. Integon Corp.
Giddings & Lewis Inc. Syratech Corporation
Mafco Consolidated Group, Inc. Prime Service Inc.
Rhone-Poulenc Rorer, Inc. Southwest Gas Corporation
Tambrands Inc. Genentech, Inc.
- --------------------------------------------------------------------------------
NOTE: The views expressed in this report reflect those of the portfolio
manager, only through the end of the period of this report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions.
6
<PAGE> 7
THE GABELLI ABC FUND
PORTFOLIO OF INVESTMENTS -- JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ----------- ------------
<C> <S> <C>
COMMON STOCKS -- 57.44%
AVIATION: PARTS AND SERVICES -- 0.05%
6,000 Hi-Shear Industries Inc.+................... $ 14,063
------------
BROADCASTING -- 0.15%
2,000 Gray Communications Systems, Inc. .......... 44,875
------------
BUSINESS SERVICES -- 2.37%
22,500 Prime Service Inc.+ ........................ 718,594
------------
CABLE -- 12.89%
5,000 Cablevision Systems Corporation, Cl. A+..... 270,000
100,000 International Family Entertainment, Inc.+... 3,437,499
8,000 Tele-Communications, Inc./Liberty Media
Group, Cl. A+.............................. 190,000
------------
3,897,499
------------
COMPUTER SOFTWARE AND SERVICES -- 0.08%
1,000 DecisionOne Holdings Corp.+................. 22,750
------------
CONSUMER PRODUCTS -- 12.82%
13,000 Carter-Wallace, Inc. ....................... 232,375
4,000 Kerr Group, Inc.+........................... 15,500
60,000 Mafco Consolidated Group Inc. .............. 2,009,999
32,500 Tambrands Inc. ............................. 1,620,938
------------
3,878,812
------------
DIVERSIFIED INDUSTRIAL -- 0.59%
12,000 Katy Industries, Inc. ...................... 178,500
------------
ENERGY -- 1.32%
20,000 Southwest Gas Corporation................... 397,500
------------
ENTERTAINMENT -- 1.09%
8,000 Topps Company Inc.+......................... 33,500
10,000 Viacom Inc., Cl. A+......................... 296,875
------------
330,375
------------
EQUIPMENT AND SUPPLIES -- 8.50%
7,000 Ampco-Pittsburgh Corporation................ 102,813
9,000 Amphenol Corporation, Cl. A+................ 349,874
100,000 Giddings & Lewis, Inc. ..................... 2,087,499
500 Sequa Corporation, Cl. A+................... 28,188
------------
2,568,374
------------
HEALTH CARE -- 7.18%
6,000 Genentech, Inc.+............................ 353,625
20,000 Rhone-Poulenc Rorer, Inc. .................. 1,817,501
------------
2,171,126
------------
HOTELS/GAMING -- 0.61%
3,000 ITT Corporation (New)+...................... 183,188
------------
INSURANCE -- 4.14%
50,000 Integon Corp.+.............................. 1,250,000
------------
PAPER AND FOREST PRODUCTS -- 0.28%
1,000 St Joe Corp. ............................... 83,750
------------
PUBLISHING -- 0.24%
1,500 Harcourt General, Inc. ..................... 71,438
------------
REAL ESTATE -- 0.02%
1,000 Property Capital Trust...................... 6,375
------------
RETAIL -- 3.94%
5,000 Bruno's, Inc.+.............................. 57,500
3,000 Delchamps, Inc.............................. 96,000
6,000 Giant Food Inc., Cl. A...................... 195,750
5,000 Lillian Vernon Corporation.................. 84,375
23,630 Syratech Corporation+....................... 756,160
------------
1,189,785
------------
TELECOMMUNICATIONS -- 0.99%
15,000 Frontier Corporation........................ $ 299,063
------------
WIRELESS COMMUNICATIONS -- 0.18%
1,000 CommNet Cellular Inc.+...................... 34,750
2,500 TCI Satellite Entertainment Inc., Cl. A+.... 19,688
------------
54,438
------------
TOTAL COMMON STOCKS......................... 17,360,505
------------
CONVERTIBLE PREFERRED STOCKS -- 0.58%
PUBLISHING -- 0.20%
1,000 Golden Books Family Entertainment, Inc.
8.75% Cv. Pfd. (a)......................... 61,375
------------
WIRELESS COMMUNICATIONS -- 0.38%
4,000 AirTouch Communications Inc. 6.00% Cv. Pfd.,
Cl. B+ 114,000
------------
TOTAL CONVERTIBLE PREFERRED STOCKS.......... 175,375
------------
<CAPTION>
PRINCIPAL
AMOUNT CONVERTIBLE CORPORATE BONDS -- 0.64%
- -----------
<C> <S> <C>
EQUIPMENT AND SUPPLIES -- 0.09%
$ 28,500 Fedders Corporation 8.50%, 06/15/12......... 28,215
------------
FOOD AND BEVERAGE -- 0.28%
500,000 Flagstar Companies, Inc. Sub. Deb. Cv.
10.00%, 11/01/14........................... 84,500
------------
RETAIL -- 0.27%
100,000 General Host Corporation Sub. Deb. Cv.
8.00%, 02/15/02............................ 81,500
------------
TOTAL CONVERTIBLE CORPORATE BONDS........... 194,215
------------
CORPORATE BONDS -- 0.21%
FOOD AND BEVERAGE -- 0.21%
150,000 Flagstar Companies, Inc. 11.25%, 11/01/04... 62,250
------------
TOTAL CORPORATE BONDS....................... 62,250
------------
U.S. GOVERNMENT OBLIGATIONS -- 36.88%
11,200,000 U.S. Treasury Bills 4.62% to 5.00%, due
07/10/97 to 08/21/97....................... 11,146,823
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS........... 11,146,823
------------
TOTAL INVESTMENTS -- 95.75%
(Cost -- $28,339,845)...................... 28,939,168
CASH AND OTHER ASSETS IN EXCESS OF
LIABILITIES -- 4.25%....................... 1,283,272
------------
NET ASSETS -- 100.00%
(2,891,014 shares outstanding)............. $ 30,222,440
============
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE............................ $10.45
====
</TABLE>
- ---------------
<TABLE>
<C> <C> <S>
(a) -- Security exempt from registration under Rule
144A of the Securities Act of 1933. This
security may be resold in transactions exempt
from registration, normally to qualified
institutional buyers. At June 30, 1997, Rule
144A securities amounted to $61,375 or 0.20% of
net assets.
+ -- Non-income producing security
For Federal income tax purposes:
Aggregate cost...................... $28,339,845
===========
Gross unrealized appreciation....... $ 981,378
Gross unrealized depreciation....... (382,055)
-----------
Net unrealized appreciation......... $ 599,323
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE> 8
THE GABELLI ABC FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
- ----------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (Cost
$28,339,845)............................ $ 28,939,168
Cash...................................... 1,375
Receivable for investments sold........... 3,215,075
Dividends and interest receivable......... 47,507
Deferred organizational expenses.......... 21,138
------------
TOTAL ASSETS............................ 32,224,263
------------
LIABILITIES:
Payable to Advisor........................ 23,478
Payable for distribution fees............. 5,877
Payable for investments purchased......... 1,936,566
Payable for Fund shares redeemed.......... 31,115
Other accrued expenses.................... 4,787
------------
TOTAL LIABILITIES....................... 2,001,823
------------
NET ASSETS (applicable to 2,891,014
shares outstanding)................... $ 30,222,440
============
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE................................. $ 10.45
============
NET ASSETS CONSIST OF:
Capital Stock, at par value............... $ 2,891
Additional paid-in-capital................ 28,515,275
Accumulated net investment income......... 243,225
Accumulated net realized gain on
investments and foreign currency
transactions............................ 862,213
Net unrealized appreciation on investments
and assets and liabilities denominated
in foreign currencies................... 598,836
------------
NET ASSETS.............................. $ 30,222,440
============
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
- ----------------------------------------------------------
<TABLE>
<S> <C>
INCOME:
Interest.................................... $ 309,694
Dividends................................... 194,818
----------
Total investment income................... 504,512
----------
EXPENSES:
Investment advisory fees.................... 119,666
Transfer and shareholder servicing agent.... 39,157
Distribution expenses....................... 29,916
Legal and audit fees........................ 17,671
Printing and mailing........................ 14,711
Custodian fees and expenses................. 14,710
Amortization of organization expenses....... 12,070
Registration fees........................... 6,359
Directors' fees and expenses................ 4,000
Miscellaneous............................... 3,792
----------
Total expenses............................ 262,052
----------
NET INVESTMENT INCOME......................... 242,460
----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS:
Net realized gain on investments and foreign
currency transactions..................... 843,327
Net change in unrealized appreciation....... 432,883
----------
Net gain on investments................... 1,276,210
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................. $ 1,518,670
==========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
---------------- -----------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Net investment income............................................................ $ 242,460 $ 570,427
Net realized gain on investments and foreign currency transactions............... 843,327 1,086,110
Net change in unrealized appreciation............................................ 432,883 374,989
----------- -----------
Net increase in net assets resulting from operations......................... 1,518,670 2,031,526
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................................ -- (559,000)
Net realized gain................................................................ -- (1,090,311)
----------- -----------
-- (1,649,311)
----------- -----------
Share transactions -- net........................................................ 1,902,060 6,557,281
----------- -----------
Net increase in net assets................................................... 3,420,730 6,939,496
NET ASSETS:
Beginning of period.............................................................. 26,801,710 19,862,214
----------- -----------
End of period.................................................................... $ 30,222,440 $26,801,710
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE> 9
THE GABELLI ABC FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES. The primary investment objective of The
Gabelli ABC Fund (the "Fund") is to achieve total returns that are attractive to
investors in various market conditions without excessive risk of capital loss.
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 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 (if there were no sales that day,
the security is valued at the average of the bid and asked prices). All other
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest average of their 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 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. Options are valued at the last sale price on the
exchange on which they are listed. If no sales of such options have taken place
that day, they will be valued at the mean between their closing bid and asked
prices.
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 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.
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.
SHORT SALES. The Fund is authorized to engage in short-selling, which obligates
the Fund to replace the security borrowed and sold short by purchasing the
security at current market value sometime in the future.
9
<PAGE> 10
THE GABELLI ABC FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
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 a segregated account with cash and/or U.S. Government securities
sufficient to cover its short position on a daily basis.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for on the trade date, with realized gain or loss on investments
determined by using specific identification as the cost method. Interest income
(including amortization of premium and accretion of discount) is recorded as
earned. Dividend income and dividend and capital gain distributions to
shareholders are 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.
PROVISION FOR 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, as amended. As a result, a Federal income tax provision is
not required.
2. INVESTMENT ADVISORY AGREEMENT. The Fund has entered into an investment
advisory agreement (the "Advisory Agreement") with the Advisor which provides
that the Fund will pay the Advisor a fee, computed daily and paid monthly, at
the annual rate of 1.00 percent of the value of the Fund's average daily net
assets. In accordance with the Advisory Agreement, the Advisor 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.
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, 1997.
3. ORGANIZATION EXPENSES. The organization expenses of the Fund are being
amortized on a straight-line basis over a period of 60 months.
4. DISTRIBUTION PLAN. The Fund has adopted a distribution plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Pursuant to
this Plan, the Fund reimburses the Distributor, Gabelli & Company, Inc.
("Gabelli & Company"), an indirect wholly-owned subsidiary of the Advisor, for
expenses incurred by the Distributor in connection with the distribution and
activities primarily intended to result in the sale of shares of the Fund. The
distribution expenses are reimbursed at an annual rate up to 0.25 percent of the
value of the Fund's average daily net assets which accrue daily and are paid
monthly. For the six months ended June 30, 1997, the Fund incurred distribution
costs of $29,916, or 0.25% of average net assets. The Board of Directors
approved that distribution costs incurred by Gabelli & Company totaling
$209,073, which are in excess of the 0.25% limitation, may be recovered from the
Fund in future periods.
5. PORTFOLIO SECURITIES. Purchases and sales of securities for the six months
ended June 30, 1997, other than U.S. government obligations and short-term
securities, aggregated $45,420,882 and $42,175,186, respectively.
10
<PAGE> 11
THE GABELLI ABC FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
6. TRANSACTIONS WITH AFFILIATES. During the six months ended June 30, 1997, the
Fund paid brokerage commissions of $19,033 to Gabelli & Company and its
affiliates.
7. CAPITAL STOCK TRANSACTIONS. Transactions in shares of common stock were as
follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1997 December 31, 1996
-------------------------- -----------------------------
Shares Amount Shares Amount
--------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Shares sold....................................................... 1,003,685 $ 10,296,289 1,737,678 $ 17,232,605
Shares issued upon reinvestment of dividends...................... -- -- 159,323 1,558,644
Shares redeemed................................................... (836,611) (8,394,229) (1,219,557) (12,233,968)
--------- ----------- ---------- ------------
Net increase...................................................... 167,074 $ 1,902,060 677,444 $ 6,557,281
========= =========== ========== ============
</TABLE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
May 14, 1993
Six Months Ended Year Ended December 31, (Commencement of
June 30, 1997 -------------------------------------- Operations) through
(Unaudited) 1996 1995 1994 December 31, 1993
---------------- ---------------- ------- ------- -------------------
<S> <C> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period......... $ 9.84 $ 9.71 $ 9.57 $ 10.03 $ 10.00
------- ------- ------- ------- ------
Net investment income........................ 0.08 0.21 0.21 0.33 0.29
Net realized and unrealized gain on
investments................................ 0.53 0.54 0.86 0.12 0.62
------- ------- ------- ------- ------
Total from investment operations............. 0.61 0.75 1.07 0.45 0.91
------- ------- ------- ------- ------
DISTRIBUTIONS:
Dividends from net investment income......... -- (0.21) (0.21) (0.33) (0.29)
Dividends from net realized gain on
investments................................ -- (0.41) (0.72) (0.58) (0.59)
------- ------- ------- ------- ------
Total distributions.......................... -- (0.62) (0.93) (0.91) (0.88)
------- ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD............... $ 10.45 $ 9.84 $ 9.71 $ 9.57 $ 10.03
======= ======= ======= ======= ======
Total return(a).............................. 6.1% 7.8% 11.2% 4.5% 9.1%
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)..... $ 30,222 $ 26,801 $19,862 $24,419 $ 8,847
Ratio of operating expenses to average net
assets(b).................................. 2.19%(c) 2.09% 2.10% 2.09% 2.75%(c)
Ratio of net investment income to average net
assets(b).................................. 2.03%(c) 2.11% 1.83% 2.95% 2.96%(c)
Portfolio turnover rate...................... 305% 343% 508% 490% 232%
Average commission rate(d)................... $ 0.0483 $ 0.0499 -- -- --
</TABLE>
- ---------------
(a) 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. Total return for the period of less
than one year is not annualized.
(b) Net of expenses assumed by the Advisor equivalent to 0.14% and 0.82% of
average net assets for 1994 and 1993, respectively.
(c) Annualized.
(d) For fiscal years beginning on or after September 1, 1995, the SEC requires
the Fund to disclose its average commission rate paid per share of security.
11
<PAGE> 12
THE GABELLI ABC FUND
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
FAX: 1-914-921-5118
E-MAIL: [email protected]
HTTP://WWW.GABELLI.COM
(Net Asset Value may be obtained daily by calling
1-800-GABELLI after 6:00 P.M.)
BOARD OF DIRECTORS
Mario J. Gabelli, CFA Karl Otto Pohl
Chairman and Chief Former President
Investment Officer Deutsche Bundesbank
Gabelli Funds, Inc.
Anthony J. Colavita Werner J. Roeder, MD
Attorney-at-Law Director of Surgery
Anthony J. Colavita, P.C. Lawrence Hospital
Vincent D. Enright
Senior Vice President
and Chief Financial Officer
The Brooklyn Union Gas
Company
OFFICERS
Mario J. Gabelli, CFA Bruce N. Alpert
President and Vice President and
Chief Investment Officer Treasurer
James E. McKee
Secretary
DISTRIBUTOR
Gabelli & Company, Inc.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT
State Street Bank and Trust Company
LEGAL COUNSEL
Skadden, Arps, Slate, Meagher & Flom L.L.P.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
[PHOTO]
[THE GABELLI FUND LOGO]
SEMI-ANNUAL REPORT
JUNE 30, 1997
