<PAGE> 1
THE GABELLI ABC FUND
One Corporate Center
Rye, New York 10580-1434
FIRST QUARTER REPORT
MARCH 31, 1997
TO OUR SHAREHOLDERS:
The stock market roared out of the blocks in January, but quickly lost
momentum as inflation jitters and a slumping bond market muddied the track. In
late March, a rate hike by the Federal Reserve and much stronger than expected
economic data stampeded equities investors, eroding most of the market's
earlier gains. The Dow Jones Industrial Average and Standard & Poor's 500 Index
closed the quarter with modest gains of 1.7% and 2.7%, respectively. Smaller
stocks continued to lag as evidenced by the Russell 2000 Index's 5.2% decline.
INVESTMENT RESULTS (a)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Quarter
----------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
<C> <C> <C> <C> <C> <C>
1997: Net Asset Value $9.98 -- -- -- --
Total Return . . . . . . 1.4% -- -- -- --
- ----------------------------------------------------------------------------------------------
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 - MARCH 31, 1997 (a)
- -------------------------------------------
<S> <C>
1 Year........................ 5.1%
3 Year........................ 8.0%
Life of Fund (b).............. 8.8%
- -------------------------------------------
</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 first quarter ended March 31, 1997, The Gabelli ABC Fund's net
asset value increased 1.4% to $9.98 per share. During the year ended March 31,
1997, the Fund's return was 5.1%.
The Fund, which seeks to achieve a positive return in various market
environments, had a total return since inception on May 14, 1993 through March
31, 1997 of 38.6%, which equates to an 8.8% annualized rate of return. For the
three years through March 31, 1997, the Fund has had a total return of 25.9%,
which equates to an average annual return of 8.0%. The Fund has met its
objectives of providing an attractive rate of return without excessive risk of
capital.
The sales charge has been eliminated and new and existing shareholders may
invest freely. The equities market has been very alluring. We believe the Fund
will be an excellent vehicle for investors who want to participate in the
equities market without excessive risk of capital loss. Shareholders may
acquire additional shares at any time.
LET'S TALK STOCKS
The following are company specifics on selected holdings of our Fund.
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.
Amphenol Corp. (APH - $25.00 - NYSE) has agreed to be acquired by Kolberg
Kravis Roberts & Co. for $26 a share, or $1.05 billion plus debt, marking KKR's
first investment from a new $5.8 billion buyout fund. Amphenol, based in
Wallingford, Connecticut, makes electrical equipment such as connectors for the
communications and aerospace industries. KKR has offered to purchase about 90%
of Amphenol's shares. A so-called stub of stock, representing about 4.4 million
of Amphenol's 46.6 outstanding million shares, will remain publicly traded. The
family of Chairman Lawrence J. DeGeorge, which controls about 30% of Amphenol's
shares, has agreed to vote their shares in favor of the transaction. KKR will
receive an option to "call" the DeGeorge family shares, and the family will
have an option to "put" any shares retained to KKR at $26 a share. KKR will
also refinance about $250 million of Amphenol debt. KKR has committed $374
million to the deal, with the balance expected to come from a $240 million bond
offering and roughly $800 million in bank debt. The transaction is expected to
close in May.
Conrail, Inc. (CRR - $112.75 - NYSE) has announced that it has re-negotiated
its agreement to be acquired by CSX Corp. and Norfolk Southern Corp. so that
Conrail shareholders will receive $115 a share in cash, or about $10.5 billion.
The move cleared the way for CSX and Norfolk Southern to negotiate to split up
Conrail between them. The split up should allow CSX and Norfolk Southern to
dominate rail freight traffic in the East. Under the revised agreement, CSX is
amending its outstanding tender offer to increase the price and number of
shares sought. The tender is not subject to any financing conditions and is no
longer subject to a Conrail shareholder opt-out vote of certain Pennsylvania
statutory provisions. The offer is also not subject to approval by the Surface
Transportation
2
<PAGE> 3
Board since shares purchased in the offer will be put in a voting trust until
the STB approves the merger. The new tender offer expiration for all Conrail's
outstanding shares at $115 will be extended to May 23, 1997.
Genentech, Inc. (GNE - $57.125 - NYSE) is a leading player 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
GNE'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 $82.50
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 shares then outstanding.
Harcourt General, Inc. (H - $46.50 - NYSE) operates three business segments -
publishing, specialty retailing and professional services. Publishing
operations are world-wide and feature a balanced mix of education, scientific,
technical, medical, professional and trade publications. Specialty retailing
consists of 53%-owned Neiman Marcus Group with its 30 Neiman Marcus stores in
16 states, 2 Bergdorf Goodman stores in New York City and NM Direct marketing
catalogues. Professional services are represented by Drake Beam Morin which
provides human resources management consulting services to organizations and
individuals. Harcourt had almost $11 per share in cash assets as of year end
1996. In April 1995, the company completed a "Dutch Auction" tender offer,
purchasing approximately 5.4 million shares at $40.50 per share. Subsequently,
the board authorized the purchase of an additional 2.5 million shares which, in
December of 1996, was increased to 3.5 million shares.
Healthsource, Inc. (HS - $20.50 - NYSE) has agreed to be acquired by Cigna
Corp. for $1.7 billion in cash and assumed debt to build Cigna's health-care
business in the rapidly growing U.S. Southeast. The acquisition of Healthsource
would create an HMO and medical insurer covering 12.3 million customers. With
the purchase, for $21.75 a share in cash, Cigna joins Aetna Inc. and other U.S.
insurers trying to boost profits through the buying of rivals. Cigna plans to
pay for the acquisition by selling $650 million in bonds, taking out bank loans
and using some of its $400 million in cash. The merger is conditioned on
receiving Healthsource shareholder approval and approval from 15 different
states' insurance regulatory commissions. The transaction is expected to be
completed early in the third quarter of 1997.
International Family Entertainment, Inc. (FAM - $20.375 - 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. While the company posts strong operating margins in its
core businesses, it is currently funding losses in its start-up businesses. FAM
has formed a joint venture to launch three Latin American channels. These new
units provide operating leverage and, as they reach profitability, increase the
opportunity for capital appreciation.
3
<PAGE> 4
Mafco Consolidated Group, Inc. (MFO - $32.00 - NYSE) has announced that Mafco
Holdings Inc. has agreed to buy the remaining 15 percent of Mafco Consolidated
for $33.50 a share, or $150.8 million in cash. At the same time, Mafco said it
will pay investors a special cash dividend of $10 a share. Under the revised
terms, Mafco's investors will get a total of $43.50 a share, up from the $38.50
they initially were offered in January. These moves are part of financier
Ronald Perlman's efforts to take private Mafco Consolidated, whose main asset
is an 80.2 percent stake in Consolidated Cigar Holdings Inc. (CIG - $23.625 -
NYSE). Mafco also plans to sell 5 million shares of Consolidated Cigar in a
secondary offering, allowing Perlman to cash in on strong investor interest in
cigar makers. Closely held Mafco Holdings originally offered on January 21 to
buy the outstanding 4.5 million Mafco shares for $38.50. The dividend was
payable on March 14, 1997. The purchase, expected to be completed during the
second quarter, is subject to approvals from Mafco's shareholders and
regulators.
Renaissance Communications Corp. (RRR - $29.875 - NYSE) owned and operated a
diversified group of six television stations in Dallas/Ft. Worth, Miami/Ft.
Lauderdale, Sacramento, Hartford/New Haven, Indianapolis and Harrisburg. Four
are affiliates of the Fox Network and the other two are affiliates of the WB
Network. The company has agreed to merge with a subsidiary of the Tribune
Company by receiving $36.00 per share in cash.
Southwest Gas Corporation (SWX - $17.375 - NYSE) is a natural gas utility based
in Las Vegas, Nevada, 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, another
record-breaking year.
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, quarterly reports, closing prices, IRAs, 401(k)s and
other current news. You can also send us e-mail at [email protected].
4
<PAGE> 5
IN CONCLUSION
In our year-end 1996 letter to you, we expressed our doubts about the
market's ability to duplicate its substantial gains in 1995 and 1996. After
getting off to a strong start, the market lost momentum and then sputtered
badly at the end of the first quarter of 1997 as strong economic data
re-ignited inflationary fears. As we write, the jury is still out on inflation,
but long interest rates are above 7%, providing sizeable "real" rates of
return. Looking ahead, we anticipate a continually volatile stock market that
will have many investors on the edge of their seats. We rest somewhat more
comfortably having been through such uneasy times before and having faith that
our value oriented discipline will sustain us as it has in the past.
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 1997.
Sincerely,
/s/ MARIO J. GABELLI, CFA
MARIO J. GABELLI, CFA
President and
Chief Investment Officer
May 1, 1997
- -------------------------------------------------------------------------------
TOP TEN HOLDINGS
MARCH 31, 1997
Conrail, Inc. Healthsource, Inc.
Syratech Corporation International Family Entertainment, Inc.
Renaissance Communications Corp. Harcourt General, Inc.
Amphenol Corporation Southwest Gas Corporation
Mafco Consolidated Group, 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.
5
<PAGE> 6
THE GABELLI ABC FUND
PORTFOLIO OF INVESTMENTS -- MARCH 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- -----------
<C> <S>
COMMON STOCKS -- 52.06%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 1.53%
10,000 GenCorp Inc. ..................... $ 190,000
6,750 Wynn's International, Inc. ....... 156,093
-----------
346,093
-----------
AVIATION: PARTS AND ACCESSORIES -- 0.07%
6,000+ Hi-Shear Industries Inc.+ ........ 15,563
-----------
BROADCASTING -- 0.16%
2,000 Gray Telecommunications Systems,
Inc. ........................... 36,500
-----------
CABLE -- 2.95%
2,000 Cablevision Systems Corporation... 59,500
24,000 International Family
Entertainment, Inc. ............ 489,000
6,000 Tele-Communications, Inc./Liberty
Media Group..................... 119,625
-----------
668,125
-----------
CONSUMER PRODUCTS -- 3.89%
17,000 Carter-Wallace, Inc. ............. 231,625
4,000 Kerr Group, Inc.+ ................ 8,500
20,000 Mafco Consolidated Group, Inc. ... 640,000
-----------
880,125
-----------
DIVERSIFIED INDUSTRIAL -- 1.04%
1,000 GATX Corporation.................. 48,875
12,000 Katy Industries, Inc. ............ 187,500
-----------
236,375
-----------
ENERGY -- 1.54%
20,000 Southwest Gas Corporation......... 347,500
-----------
ENTERTAINMENT -- 0.39%
6,000 Topps Company, Inc. .............. 24,000
2,000 Viacom Inc. ...................... 65,250
-----------
89,250
-----------
EQUIPMENT AND SUPPLIES -- 4.89%
7,000 Ampco-Pittsburgh Corporation...... 84,875
40,000 Amphenol Corporation -- Class A... 1,000,000
500 Sequa Corporation CL A............ 22,314
-----------
1,107,189
-----------
<CAPTION>
SHARES VALUE
- ----------- -----------
<C> <S>
HEALTH CARE -- 4.23%
6,000 Genentech, Inc. .................. $ 342,750
30,000 Healthsource, Inc. ............... 615,000
-----------
957,750
-----------
HOTELS/CASINOS -- 6.60%
50,000 Renaissance Hotel Group........... 1,493,750
-----------
HOTELS/GAMING -- 0.01%
100 Santa Anita Realty Enterprises,
Inc. ........................... 2,725
-----------
PRINTING & PUBLISHING -- 1.64%
8,000 Harcourt General, Inc. ........... 372,000
-----------
PUMPS AND VALVES -- 0.21%
2,000 Goulds Pumps, Incorporated........ 46,750
-----------
RETAIL -- 9.97%
2,000 Burlington Coat Factory Warehouse
Corp. .......................... 36,000
3,200 Lillian Vernon Corporation........ 44,800
68,000 Syratech Corp. ................... 2,176,000
-----------
2,256,800
-----------
RETAIL -- FOOD & DRUG -- 0.85%
6,000 Giant Food, Inc. -- Class A....... 192,000
-----------
TELECOMMUNICATIONS -- 0.79%
10,000 Frontier Corporation.............. 178,750
-----------
TRANSPORTATION -- 9.97%
20,000 Conrail, Inc. .................... 2,255,000
-----------
WIRELESS COMMUNICATIONS -- 1.33%
10,000 Pacific Telecom, Inc.(a) ......... 300,000
-----------
TOTAL COMMON STOCKS
(Cost: $11,714,072)............. 11,782,245
-----------
</TABLE>
6
<PAGE> 7
THE GABELLI ABC FUND
PORTFOLIO OF INVESTMENTS (CONTINUED) -- MARCH 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
- ------------ ------------
<C> <S> <C>
CONVERTIBLE CORPORATE BONDS -- 0.89%
EQUIPMENT AND SUPPLIES -- 0.13%
$ 30,000 Fedders Corporation 8.50%,
6/15/12......................... $ 29,512
----------
FOOD AND BEVERAGE -- 0.40%
500,000 Flagstar Companies, Inc. Sub. Deb.
Cv. 10.00%, 11/01/14............ 87,500
----------
RETAIL -- 0.36%
100,000 General Host Corporation 8.00%,
02/15/2002...................... 82,000
----------
TOTAL CONVERTIBLE CORPORATE BONDS
(Cost: $281,453)................ 199,012
----------
CONVERTIBLE PREFERRED STOCKS -- 0.68%
DIVERSIFIED PUBLISHING -- 0.23%
1,000 Golden Books Family Entertainment,
Inc. ........................... 52,000
----------
WIRELESS COMMUNICATIONS -- 0.45%
4,000 AirTouch Communications Inc. --
Class B......................... 102,500
----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Cost: $167,250)................ 154,500
----------
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
- ------------ ------------
<C> <S> <C>
CORPORATE BONDS -- 0.30%
FOOD AND BEVERAGE --
$ 150,000 Flagstar Companies, Inc. 11.25%,
11/01/04........................ $ 67,875
----------
TOTAL CORPORATE BONDS
(Cost: $127,669)................ 67,875
----------
U.S. GOVERNMENT OBLIGATIONS -- 51.10%
11,600,000 U.S. Treasury Bills, 4.90% to
5.15% Due 04/03/97 to
05/22/97........................ 11,561,155
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost: $11,561,155)............. 11,561,155
-----------
TOTAL INVESTMENTS -- 105.03%
(Cost: $23,851,599)............. 23,764,787
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (5.03)%............... (1,138,671)
-----------
NET ASSETS -- 100.00%
(2,266,482 shares
outstanding).................... $22,626,116
===========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE................. $9.98
=====
</TABLE>
- ---------------
+ Non-income producing security.
(a) Security fair valued as determined by Board of Directors.
7
<PAGE> 8
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.
Werner J. Roeder, MD
Anthony J. Colavita Director of Surgery
Attorney-at-Law Lawrence Hospital
Anthony J. Colavita, P.C.
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 LLP
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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FIRST QUARTER REPORT
MARCH 31, 1997
