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The
Gabelli
ABC
Fund
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FIRST QUARTER REPORT
MARCH 31, 1999
<PAGE>
The Gabelli ABC Fund
First Quarter Report
March 31, 1999
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The Gabelli ABC Fund was rated "A"
by Business Week for superior
risk-adjusted total return in their
1999 Mutual Fund Scoreboard.
--------------------------------------
To Our Shareholders,
The first quarter of 1999 was an up, then down, and then up again period
for stocks. January's gains eroded in February as a much stronger than expected
U.S. economy sparked inflationary concerns. Bonds declined, ultimately dragging
stocks down with them. Then, in March, a favorable employment report coupled
with positive comments on inflation from Federal Reserve Chairman Greenspan
encouraged investors and stocks and bonds rallied.
The market advance continued to be uneven, strongly favoring large cap
stocks over mid cap and small caps, and growth stocks over the value sector
across the market capitalization spectrum. Mid cap and small cap indices closed
the quarter with losses.
Investment Performance
For the first quarter ended March 31, 1999, the Gabelli ABC Fund's (the
"Fund") total return was 0.6%. The Standard & Poor's ("S&P") 500 Index and
Lipper U.S. Treasury Money Market Average had total returns of 5.0% and 1.0%,
respectively, over the same period. The S&P index is an unmanaged indicator of
stock market performance, while the Lipper average reflects the average
performance of mutual funds classified in this particular category. The Fund was
up 7.5% over the trailing twelve-month period. The S&P 500 and Lipper U.S.
Treasury Money Market Average rose 18.5% and 4.6%, respectively, over the same
twelve-month period.
For the five-year period ended March 31, 1999, the Fund's total return
averaged 9.4% annually versus average annual total returns of 26.2% and 4.7% for
the S&P 500 and Lipper U.S. Treasury Money Market Average, respectively. Since
inception on May 14, 1993 through March 31, 1999, the Fund had a cumulative
total return of 72.4%, which equates to an average annual total return of 9.7%.
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Past performance is no guarantee of future results. Business Week's annual
Mutual Fund Scoreboard rated mutual funds based on five-year performance
adjusted for downside volatility. The top 7.5% of these funds earned A's for
superior risk-adjusted total returns. For 1998, 104 funds earned A's among
nearly 1,400 equity funds with a five-year history, the minimum history required
for a rating.
<PAGE>
INVESTMENT RESULTS (a)
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Quarter
---------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
1999: Net Asset Value .. $ 9.65 -- -- -- --
Total Return ..... 0.6% -- -- -- --
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1998: Net Asset Value .. $ 10.64 $ 10.68 $ 10.16 $ 9.59 $ 9.59
Total Return ..... 4.0% 0.4% (4.9)% 11.9% 11.1%
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1997: Net Asset Value .. $ 9.98 $ 10.45 $ 10.74 $ 10.23 $ 10.23
Total Return ..... 1.4% 4.7% 2.8% 3.3% 12.8%
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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%
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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%
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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%
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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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Average Annual Returns - March 31, 1999 (a)
-------------------------------------------
1 Year....................... 7.5%
5 Year....................... 9.4%
Life of Fund (b)............. 9.7%
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Dividend History
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Payment (ex) Date Rate Per Share Reinvestment Price
- ----------------- -------------- ------------------
December 28, 1998 $1.763 $ 9.50
December 29, 1997 $0.860 $ 10.17
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
(a) Total returns and average annual returns reflect changes in share price and
reinvestment of dividends and are net of expenses. The net asset value of the
Fund is reduced on the ex-dividend (payment) date by the amount of the dividend
paid. Of course, returns represent past performance and do not guarantee future
results. Investment returns and the principal value of an investment will
fluctuate. When shares are redeemed they may be worth more or less than their
original cost. (b) From commencement of investment operations on May 14, 1993.
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What We Do
The Gabelli ABC Fund and its unique Performance Guaranty Program was
created in 1993 for conservative investors who had been reluctant to participate
in the equity markets. In other words, it was a vehicle to allow investors to
"get their feet wet" in the stock market without risking loss of capital. We see
ourselves as an "enhanced money market". Our approach has been to maintain a
diversified portfolio of value-oriented equities, convertible preferred
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2
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stocks, convertible bonds and U.S. government securities. Conceptually, the
upside potential of stocks would help produce greater total return potential
than a straight bond or government securities fund and the risk in the equity
portion of the portfolio would be diminished by the combination of lower risk
convertible securities and virtually risk free U.S. Treasury bills. To date,
this approach has worked quite well. Although we have indefinitely suspended the
Performance Guaranty Program, we believe the Fund's investment strategy can
continue to produce favorable results.
History of the Fund
The Gabelli ABC Fund was launched on May 14, 1993 with a minimum
guaranteed total return of 6% through May 14, 1994. For 1994, 1995 and 1996, 5%
Performance Guaranty Programs were in place. These programs were unique because
they provided investors the full upside potential of the investment while
guaranteeing a minimum total return. Gabelli Funds, Inc.'s fourth Performance
Guaranty Program concluded on December 31, 1996 and a new program was not in
effect for 1997 or 1998. The Fund's annual total returns were 12.8% and 11.1%,
respectively, for those two years. Although the Performance Guaranty Program is
not being offered for 1999, the Fund continues striving to achieve the same
objectives. During the most recent four year period in which the S&P 500 has
delivered 25% plus annual returns, a minimum return guarantee of 5% appeared
dull and unattractive. However, in terms of market volatility, the Fund has
provided comfort to the risk averse.
The Adviser and Board of Directors continue to explore several options
involving a longer term guaranty program in a closed end structure. This would
require shareholder approval. Meanwhile, the Fund will continue to be managed,
as it has been the past six years, to provide an attractive rate of return
without excessive risk of capital.
COMMENTARY
The Economy and the Market--A Reversal of Fortunes?
In 1998, the drivers of the market were declining interest rates and
continued liquidity as opposed to corporate earnings. For the year, S&P 500
earnings rose a modest 2.0% and if calculated on a non-weighted basis, earnings
were flat. However, the 30-year Treasury bond yield dropped nearly a full
percentage point from its March 1998 high, resulting in a significant expansion
of equities' price/earnings multiples and a 28.7% annual gain for the S&P 500.
We are faced with a mirror image situation today. We believe S&P earnings
can grow in the 8.0% to 10.0% range, a terrific showing compared to 1998. If
interest rates hold relatively steady near current levels, the S&P 500's current
lofty price/earnings multiple could be sustained and the market could advance in
line with earnings gains. The less optimistic picture would be rising inflation,
materially higher
3
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interest rates, rapidly contracting equity multiples and a meaningful correction
in the S&P 500. At this stage, we think either scenario is plausible and will
leave market forecasting to the Wall Street gurus.
We remain focused on values and individual investment opportunities. If
one looks exclusively at the S&P 500, which is trading at more than 30 times
trailing earnings, stocks would have to be characterized as richly valued. But
in reality, the S&P 500 is a narrow gauge of the market, with the largest 25
component stocks having an enormous influence on the performance of the index.
The same can be said about the Nasdaq Composite Index, which is driven by a
relative handful of large technology stocks. However, there are many cheap
stocks available, as reflected in the much more reasonable valuations of broader
market indices. It is anyone's guess as to when the investing public will stop
chasing the high priced market favorites and begin gravitating toward more
realistically priced stocks. Nonetheless, we note that corporate buyers are out
in force, searching for business bargains. As we have repeatedly stated over the
past several years, quality companies trading at low valuations--the type of
stocks we favor--should continue to attract corporate bargain hunters and
provide a tailwind for our portfolio.
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Flow of Funds ($ Billions)
<TABLE>
<CAPTION>
Sources 1993 1994 1995 1996 1997 1998
- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
U.S. Deals $ 234 $ 340 $ 511 $ 652 $ 919 $ 1,620
Stock Buybacks 37 46 99 176 181 207
Equity Mutual Funds (Net) 130 119 128 222 232 159
Dividends 158 182 205 262 275 279
------- ------- ------- ------- ------- -------
Total Sources: 558 688 943 1,312 1,607 2,265
------- ------- ------- ------- ------- -------
Uses
IPOs 103 62 82 115 118 108
U.S./International Equity Capital Flow
U.S. Purchases of Non-U.S. Equities (net) 63 48 50 60 41 (25)
International Purchases of U.S. Equities (net) 21 1 17 11 64 (22)
------- ------- ------- ------- ------- -------
Net Flow: 43 47 34 49 (23) (3)
------- ------- ------- ------- ------- -------
Total Uses: 146 109 116 164 95 105
------- ------- ------- ------- ------- -------
Net Flow of Funds: $ 413 $ 579 $ 827 $ 1,148 $ 1,513 $ 2,160
======= ======= ======= ======= ======= =======
</TABLE>
Sources: Securities Data Corp, Investment Company Institute, Birinyi Associates.
(C) 1999 Gabelli Asset Management Inc.
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ABCs and Some XYZs
For the first quarter, Liberty Media Group (the former Tele-Communication
Inc.'s ("TCI") cable programming subsidiary, now trading as a tracking stock of
AT&T) was near the top of our performance alphabet. Liberty Media is a treasure
chest of cable television ("CATV") network assets and $5.5 billion in cash that
CEO John Malone is free to spend doing what he does best, invest in media
companies. Rogers Communications, the Canadian telecommunications and cable
television company, was also a top performer, thanks in part to transactions in
the cable industry that have surfaced the value of large CATV operators. Hudson
General stock soared after a premium bid from Lufthansa. Our cellular telephone
holdings (CommNet Cellular and Rural Cellular) performed well. Under aggressive
new management, stodgy old Reader's Digest added some spring to its step.
Our utility investments were mixed. Public Service Co. of North Carolina
posted a nice gain, but Citizens Utilities finished flat and Florida Public
Utilities and United Water Resources were down sharply. Despite a still vibrant
new car market, auto parts manufacturers Dana Corp. and Borg-Warner Automotive
declined.
The Role of Arbitrage in the ABC Fund Strategy
Arbitrage continues to be one of the investment strategies we employ to
preserve and enhance shareholder assets. So, we feel it appropriate to once
again explain arbitrage and the role it plays in our investment approach.
What is arbitrage? We define arbitrage as investing in "event" driven
situations; primarily, but not exclusively, in announced mergers, acquisitions,
reorganizations and other "work-out" opportunities. When a company agrees to be
acquired by another company, its stock price generally immediately rises to just
below the stated acquisition price. We look at the spread between the seller's
stock price and the announced deal price and the time frame in which the
acquisition is expected to close. If we are confident the acquisition will be
consummated on schedule at the full deal price and we can earn a annualized rate
of return materially higher than that likely to be realized through investing in
cash equivalents, then we are interested.
Then, we do the research. We value the target company to see if it is
really worth what the acquiring company has announced it will pay. Sometimes we
find it is worth even more, increasing the odds that some other company might
make a higher bid. We also research the acquiring company to ensure that it can
finance the deal. If it is a stock transaction, we need to know that we will be
receiving good value in return. We look at merger agreements to see if there are
any loopholes. We review any antitrust concerns raised by the government. In
short, we make judgments to assure that what we see will be what we get.
5
<PAGE>
There is greater risk in this strategy than in simply owning money market
instruments because announced acquisitions are not always completed and, in
situations where the deal currency is the acquirer's stock as opposed to cash,
the ultimate acquisition price may vary in value. However, if we do a thorough
job evaluating the downside risk, we can often earn very generous returns
relative to the money markets, particularly with today's low money market
yields. In summation, we think arbitrage, as we practice it in the ABC Fund,
represents an attractive investment opportunity with historically low
correlation to the performance of the overall stock market.
We borrow a quote from Warren Buffet to explain our use of arbitrage in
the Fund: "Our subsidiaries sometimes engage in arbitrage as an alternative to
holding short term cash equivalents. We prefer, of course, to make major long
term commitments. But we often have more cash than good ideas. At such times
arbitrage sometimes promises much greater returns than Treasury bills and,
equally important, cools any temptation we may have to relax our standards for
long term investments".
Let's Talk Stocks
The following are stock specifics on selected holdings of our Fund.
Favorable earnings prospects do not necessarily translate into higher stock
prices, but they do express a positive trend which we believe will develop over
time.
Aeroquip-Vickers Inc. (ANV - $57.3125 - NYSE) is a leading worldwide
manufacturer and distributor of components and systems to industrial, automotive
and aerospace markets. Aeroquip's products include pressure hoses, fittings,
adapters, couplings, fluid connectors and precision molded and extruded plastic
products. Vickers' products include hydraulic pumps, motors and cylinders,
electric motors and drivers, electronic controls, filters, and fluid-evaluation
products and services. Eaton Corp. (ETN - $71.50 - NYSE) completed its
acquisition of Aeroquip in April for $2 billion, or $58 per share.
American Bankers Insurance Group Inc. (ABI - $52.00 - NYSE) agreed to be
acquired by Fortis NV (AGFB.H - $33.03 - Amsterdam Stock Exchange) for $2.8
billion in cash and assumed debt, making the Dutch-Belgian financial company the
largest insurer of consumer and credit card loans in the U.S. Fortis, Belgium's
largest financial organization, will pay $55 for each ABI share and $109.86 for
each preferred share. Fortis has been expanding outside its home markets of
Belgium, the Netherlands and Luxembourg by developing specialized insurance
businesses, such as funeral insurance and health policies for small companies.
The transaction is expected to be completed during the second quarter of 1999.
BA Merchant Services Inc. (BPI - $20.375 - NYSE) has agreed to be acquired by
BankAmerica Co. (BAC - $70.625 - NYSE) for $333 million in cash. BAC will pay
$20.50 for each of BA Merchant's 16.2 million Class A shares. BankAmerica, which
spun off BA Merchant two years ago, owns all of the company's Class B shares,
representing 67 percent of its capital. The transaction is expected to close in
the second
6
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quarter of 1999. BA Merchant rejected a $252 million, $15.50 per share, offer
from BankAmerica in November. BAC raised its offer after an independent
committee determined the original offer was too low. BankAmerica owns 95.2
percent of the voting power of BA Merchant's common stock. BA Merchant is the
fifth-largest processor of merchant credit transactions in the country and the
exclusive provider of such services for Bank of America.
Brylane Inc. (BYL - $24.25 - NYSE), a U.S. catalog retailer, accepted a
sweetened $211 million takeover offer from Pinault-Printemps-Redoute SA (PP.PA -
$137.34 - Paris Stock Exchange), allowing the French company to accelerate its
expansion into the U.S. Pinault increased its offer to $24.50 per share from the
$20 per share proposed in December after Brylane's special committee determined
the offer was too low. The Paris-based retailer, which owns 49.9% of BYL, has
been building a stake in the catalog retailer since early 1998 as it expands its
mail-order business beyond Europe. The move will also help New York-based
Brylane expand into Europe. The tender offer expired on April 12, 1999.
LucasVarity plc (LVA - $46.25 - NYSE) agreed to be acquired by TRW (TRW - $45.50
- - NYSE), the number one U.S. manufacturer of automobile air bags, for $6.6
billion in cash, outbidding Federal-Mogul in the largest acquisition ever in the
automotive parts industry. The offer is for 288 pence per share, surpassing
Federal-Mogul's bid of 280 pence per share in cash and stock. The auto parts
industry is consolidating as companies attempt to expand globally and cut costs.
A combined TRW and LVA would provide front-end systems for cars by linking LVA
brakes and TRW steering and suspension systems. The tender offer for LucasVarity
was completed on March 25, 1999.
Morton International Inc. (MII - $36.75 - NYSE), based in Chicago, is a
manufacturer and marketer of specialty chemicals and salt. The company is the
number one salt company in North America. Specialty chemicals is the company's
largest business segment, accounting for approximately 70% of total sales and
75% of total operating profit. In February 1999, the company agreed to merge
with Rohm & Haas (ROH - $33.5625 - NYSE) in a transaction valued at $4.9
billion. Rohm & Haas is a specialty chemical manufacturer based in Philadelphia.
The merger is expected to close in June 1999.
Orange & Rockland Utilities Inc. (ORU - $57.4375 - NYSE) has agreed to be
acquired by Consolidated Edison (ED - $45.3125 - NYSE) for $1.15 billion in cash
and assumed debt, allowing Con Edison to boost its power transmission business
in a growing part of the New York City area. Orange & Rockland is a small
utility, with most of its customers in New York's northern suburbs. Con Edison
is to pay $58.50 per share for all of Orange & Rockland's 13.5 million
outstanding shares. Orange & Rockland shareholders approved the merger on August
20, 1998 and the companies have filed all necessary regulatory applications. The
transaction is expected to be completed once all state and federal regulatory
approvals are obtained which is expected during the second quarter of 1999. In
addition to the $58.50 per share, we will also receive Orange & Rockland's
$0.645 quarterly dividend.
7
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RELTEC Corp. (RLT - $29.4375 - NYSE) agreed to be acquired by General Electric
Co. plc (GEC.L - $9.00 - London Stock Exchange) for $2.1 billion in cash,
continuing GEC's push into telecommunications after selling their defense
businesses. GEC will pay Kohlberg Kravis Roberts, which owns 81.5% of RELTEC,
and other investors $29.50 per share in cash through a tender offer. GEC is
looking to RELTEC, which produces devices that help local phone networks carry
more calls, to expand its communications equipment business and to provide the
company with a foothold in the lucrative North American market. The tender offer
expired on April 8, 1999.
U.S. Filter Corp. (USF - $30.625 - NYSE) agreed to be acquired by Vivendi (EX.PA
- - $246.04 - Paris Stock Exchange), France's largest water utility, for
approximately $7.9 billion in cash and assumed debt as Vivendi moves to gain a
larger share of the global water treatment market. Vivendi is offering $31.50
for each share of U.S. Filter through a cash tender offer and would assume $1.7
billion in debt. The purchase will make Vivendi the world's largest water
business and help the company to outbid rivals for water treatment contracts by
lowering its equipment costs. The tender offer expired on April 22, 1999.
Xylan Corp. (XYLN - $36.8125 - Nasdaq) agreed to be acquired by Alcatel SA (ALA
- - $22.8125 - NYSE), Europe's number two communications equipment manufacturer,
for nearly $2 billion in cash. The acquisition gives Alcatel sophisticated
Internet equipment and expands their presence in the U.S. computer networking
market. Alcatel will pay $37 for each Xylan share through a cash tender offer.
Paris-based Alcatel is seeking to expand its line of data networking gear amid
slowing sales of its voice equipment, which hurt the company's 1998 profit. The
tender offer was completed on April 2, 1999.
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.
Additionally, The Gabelli ABC Fund and other Gabelli Funds are available through
the no-transaction fee programs at many major discount brokerage firms.
Internet
You can now visit us on the Internet. Our home page at
http://www.gabelli.com contains information about Gabelli Asset Management Inc.,
the Gabelli Mutual Funds, IRAs, 401(k)s, quarterly reports, closing prices and
other current news. You can send us e-mail at [email protected].
8
<PAGE>
In Conclusion
The ABC Fund took a small step towards its annual return goal this
quarter. As always, our Treasury bill holdings and arbitrage positions provided
portfolio stability. Returns from the equity portion of the portfolio were
modest in this volatile and uneven market. We remain committed to our risk
averse approach to the equity markets and confident we can achieve our long term
objective of preserving and enhancing the value of the assets you have entrusted
to us.
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.
Sincerely,
/s/ Mario J. Gabelli
Mario J. Gabelli, CFA
Portfolio Manager and
Chief Investment Officer
April 30, 1999
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Top Ten Holdings
March 31, 1999
--------------
BA Merchant Services Inc. Aeroquip-Vickers Inc.
U.S. Filter Corp. Orange & Rockland Utilities Inc.
Morton International Inc. Brylane Inc.
Xylan Corp. LucasVarity plc
RELTEC Corp. American Bankers Insurance Group
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NOTE: The views expressed in this report reflect those of the portfolio manager,
only through the end of the period stated in this report. The manager's views
are subject to change at any time based on market and other conditions.
9
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The Gabelli ABC Fund
Portfolio of Investments -- March31, 1999 (Unaudited)
================================================================================
Market
Shares Value
------ -----
COMMON STOCKS - 61.2%
Agriculture - 0.1%
1,500 Pioneer Hi-Bred International Inc. ........... $ 56,438
----------
Automotive: Parts and Accessories - 4.1%
660 Borg-Warner Automotive Inc. .................. 31,556
15,000 Dana Corp. ................................... 570,000
50,000 LucasVarity plc, ADR ......................... 2,312,500
----------
2,914,056
----------
Aviation: Parts and Services - 0.7%
20,000 Fairchild Corp., Cl. A+ ...................... 203,750
7,000 Hi-Shear Industries Inc.+ .................... 17,938
22,000 Kaman Corp., Cl. A ........................... 281,875
----------
503,563
----------
Broadcasting - 0.2%
1,000 Infinity Broadcasting Corp.+ ................. 25,750
2,500 Liberty Corp. ................................ 131,094
----------
156,844
----------
Business Services - 0.1%
2,580 Fisher Scientific International Inc.+ ........ 44,828
----------
Communications Equipment - 9.6%
75,000 Aydin Corp.+ ................................. 989,063
5,000 Dynatech Corp.+ .............................. 17,188
500 Gemstar International Group Ltd.+ ............ 37,625
1,000 L - 3 Communications Holdings Inc.+ .......... 46,250
100,000 Reltec Corp.+ ................................ 2,943,749
80,000 Xylan Corp.+ ................................. 2,944,999
----------
6,978,874
----------
Computer Software and Services - 0.1%
438 DecisionOne Holdings Corp.+ .................. 794
2,000 Platinum Technology International Inc.+ ...... 51,000
----------
51,794
----------
Consumer Products - 1.1%
12,500 Carter-Wallace Inc. .......................... 226,563
7,000 General Housewares Corp. ..................... 72,625
28,442 Syratech Corp.+ .............................. 455,072
----------
754,260
----------
Diversified Industrial - 0.3%
6,000 Ampco-Pittsburgh Corp. ....................... 59,250
10,000 Katy Industries Inc. ......................... 130,000
3,000 WHX Corp.+ ................................... 23,625
----------
212,875
----------
Electronics - 0.1%
7,000 UCAR International Inc.+ ..................... 98,875
----------
Energy and Utilities - 8.7%
10,600 AGL Resources Inc. ........................... 186,163
10,000 Cilcorp Inc. ................................. 600,625
30,603 Citizens Utilities Co., Cl. B+ ............... 237,173
20,000 Florida Public Utilities Co. ................. 295,000
1,000 Nevada Power Co. ............................. 24,750
8,000 New England Electric System .................. 388,000
44,000 Orange & Rockland Utilities Inc. ............. 2,527,249
26,000 PennzEnergy Co. .............................. 273,000
2,500 Piedmont Natural Gas Co. ..................... 87,500
1,000 Public Service Co. of North Carolina ......... 28,375
1,000 Sierra Pacific Resources ..................... 35,188
40,000 Southwest Gas Corp. .......................... 1,099,999
5,000 St. Joseph Light & Power Co. ................. 102,188
10,000 United Water Resources Inc. .................. 207,500
6,000 Wicor Inc. ................................... 121,500
----------
6,214,210
----------
Entertainment - 1.2%
9,000 Fisher Companies Inc. ........................ 522,000
10,000 Florida Panthers Holdings Inc.+ .............. 77,500
4,040 Liberty Media Group, Cl. A+ .................. 212,605
12,000 Topps Co. Inc.+ .............................. 52,500
----------
864,605
----------
Equipment and Supplies - 9.6%
50,000 Aeroquip-Vickers Inc. ........................ 2,865,625
4,500 Amphenol Corp., Cl. A+ ....................... 172,125
125,000 U.S. Filter Corp.+ ........................... 3,828,124
----------
6,865,874
----------
Financial Services - 11.9%
40,000 American Bankers Insurance Group Inc. ........ 2,080,000
30,000 Argonaut Group Inc. .......................... 770,625
266,000 BA Merchant Services Inc.+ ................... 5,419,749
1,200 Bankers Trust Corp. .......................... 105,900
5,000 Leucadia National Corp.+ ..................... 151,250
5,000 Pioneer Group Inc. ........................... 74,063
----------
8,601,587
----------
Food and Beverage - 0.3%
30,000 Advantica Restaurant Group Inc.+ ............. 150,000
3,000 Whitman Corp. ................................ 51,563
----------
201,563
----------
Health Care - 0.7%
6,000 Genentech Inc.+ .............................. 531,750
----------
Hotels and Gaming - 0.1%
15,000 Aztar Corp.+ ................................. 72,188
----------
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<PAGE>
The Gabelli ABC Fund
Portfolio of Investments (Continued) -- March 31, 1999 (Unaudited)
================================================================================
Market
Shares Value
------ -----
COMMON STOCKS (Continued)
Metals and Mining - 0.0%
155,000 Pegasus Gold Inc.+ ........................... $ 3,100
10,000 Royal Oak Mines Inc.+ ........................ 925
----------
4,025
----------
Publishing - 0.1%
2,000 Reader's Digest Association Inc., Cl. B ...... 55,000
----------
Real Estate - 1.6%
70,000 Catellus Development Corp.+ .................. 936,250
20,000 Griffin Land & Nurseries Inc.+ ............... 185,000
----------
1,121,250
----------
Retail - 3.8%
133,000 Bruno's Inc.+ ................................ 114,380
100,000 Brylane Inc.+ ................................ 2,425,000
6,000 Lillian Vernon Corp. ......................... 72,000
8,000 Republic Industries Inc.+ .................... 99,000
----------
2,710,380
----------
Specialty Chemicals - 5.5%
6,500 Bush Boake Allen Inc.+ ....................... 178,750
2,000 Dexter Corp. ................................. 63,000
100,000 Morton International Inc. .................... 3,675,000
----------
3,916,750
----------
Telecommunications - 0.3%
11,000 Rogers Communications Inc., Cl. B+ ........... 199,375
----------
Textiles - 0.4%
321,974 Carlyle Industries Inc.+ ..................... 256,573
----------
Wireless Communications - 0.6%
2,000 American Tower Corp., Cl. A+ ................. 49,000
21,000 CommNet Cellular Inc.+ ....................... 337,313
2,900 Rural Cellular Corp., Cl. A+ ................. 38,425
----------
424,738
----------
TOTAL COMMON STOCKS .......................... 43,812,275
----------
PREFERRED STOCKS - 2.4%
Diversified Industrial - 0.8%
11,000 WHX Corp., Pfd., Ser. A ...................... 381,563
6,000 WHX Corp., Pfd., Ser. B ...................... 216,000
----------
597,563
----------
Telecommunications - 1.6%
4,000 Citizens Utilities Co.,
5.00% Cv. Pfd. ............................ 161,000
13,000 Sprint Corp.,
8.25% Cv. Pfd. ............................ 949,000
----------
1,110,000
----------
TOTAL PREFERRED STOCKS ....................... 1,707,563
----------
Principal Market
Amount Value
------ -----
CORPORATE BONDS - 0.0%
Retail - 0.0%
$ 200,000 RDM Sports Group Inc., Cv.
8.00%, 08/15/03 ............................ $ 21,000
-----------
Transportation - 0.0%
850,000 Builders Transport Inc., Cv.
6.50%, 05/01/11 ............................ 12,750
-----------
TOTAL CORPORATE BONDS ........................ 33,750
-----------
U.S. GOVERNMENT OBLIGATIONS - 35.0%
25,157,000 U.S. Treasury Bills,
4.42% to 4.78%++,
due 04/22/99 to 06/24/99 ................... 25,057,874
-----------
TOTAL INVESTMENTS - 98.6%
(Cost $71,871,643) ......................... 70,611,462
Other Assets and
Liabilities (Net) - 1.4% ................. 970,766
-----------
NET ASSETS - 100.0%
(7,417,397 shares outstanding) ............. $71,582,228
===========
NET ASSET VALUE,
Offering and Redemption
Price Per Share ............................ $9.65
=====
- -----------
Net
Settlement Unrealized
Date Appreciation
---- ------------
FORWARD FOREIGN EXCHANGE CONTRACTS
1,440,000 (a) Sell British Pounds
in exchange for
USD 2,326,234 04/15/99 $3,881
(a) Principal amount denoted in British Pounds.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR - American Depositary Receipt.
11
<PAGE>
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 Asset Management Inc.
Anthony J. Colavita Werner J. Roeder, MD
Attorney-at-Law Director of Surgery
Anthony J. Colavita, P.C. Lawrence Hospital
Vincent D. Enright
Former Senior Vice President
and Chief Financial Officer
KeySpan Energy Corp.
Officers
Mario J. Gabelli, CFA Bruce N. Alpert
President and Chief Vice President
Investment Officer and 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
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This report is submitted for the general information of the share holders of The
Gabelli ABC Fund. It is not authorized for distribution to prospective investors
unless preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
