UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-09377
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The Gabelli Blue Chip Value Fund
--------------------------------------------
(Exact name of registrant as specified in charter)
One Corporate Center
Rye, New York 10580-1422
--------------------------------------------
(Address of principal executive offices) (Zip code)
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
--------------------------------------------
(Name and address of agent for service)
registrant's telephone number, including area code: 1-800-422-3554
--------------
Date of fiscal year end: December 31
-----------
Date of reporting period: December 31, 2005
-------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
THE GABELLI BLUE CHIP VALUE FUND
ANNUAL REPORT
DECEMBER 31, 2005
TO OUR SHAREHOLDERS,
The Sarbanes-Oxley Act requires a Fund's principal executive and financial
officers to certify the entire contents of the semi-annual and annual
shareholder reports in a filing with the Securities and Exchange Commission on
Form N-CSR. This certification would cover the portfolio manager's commentary
and subjective opinions if they are attached to or a part of the financial
statements. Many of these comments and opinions would be difficult or impossible
to certify.
Because we do not want our portfolio managers to eliminate their opinions
and/or restrict their commentary to historical facts, we have separated their
commentary from the financial statements and investment portfolio and have sent
it to you separately. Both the commentary and the financial statements,
including the portfolio of investments, will be available on our website at
www.gabelli.com/funds.
Enclosed are the audited financial statements and the investment portfolio
as of December 31, 2005 with a description of factors that affected the
performance during the past year.
PERFORMANCE DISCUSSION
The Gabelli Blue Chip Value Fund rose 6.69% for the full year, beating the
Lipper Large-Cap Value Fund average gain of 5.72% and the S&P 500 gain of 4.91%
for 2005.
The economy has been growing strongly and broadly, with both economic
growth and corporate profit growth ahead of forecasts. By almost any measure the
year was a good one for the U.S. economy, with the economy expanding by about
3.5% as measured by the gross domestic product. This was the fourth year of
solid growth, achieved despite much higher than expected energy prices.
Inflation remains mild, with consumer prices rising 2.2% in 2005, excluding the
volatile food and energy sectors (and 3.4% including them).
Of the ten industry sectors in the S&P 500, energy and utilities were by
far the strongest for the full year, posting gains of 31% and 17%, respectively.
Not surprisingly, the strongest performing stocks in our Fund in 2005 included
our energy holdings, Halliburton Co., Pioneer Natural Resources Co., Marathon
Oil Corp., Global Santa Fe Corp., Noble Corp., and ConocoPhillips, all of which
rose more than 20%. ConocoPhillips agreed to acquire the natural gas company,
Burlington Resources. Other companies whose stocks rose more than 20% for the
full year were Tiffany & Co., Texas Instruments Inc., Lehman Brothers Holdings
Inc., St. Paul Travelers Companies Inc., Hartford Financial Services Group Inc.,
and Union Pacific Corp.
Telecommunications, health care, specialty chemicals, and entertainment
sectors underperformed during the year. Verizon Communications Inc. was down
more than 20% for the year; Pfizer Inc., E.I. Du Pont de Nemours and Co., News
Corp, The Walt Disney Co., and Time Warner Inc. all declined over 10%.
Sincerely yours,
/s/ Bruce N. Alpert
Bruce N. Alpert
President
February 13, 2006
[GRAPHIC OMITTED]
PLOT POINTS FOLLOW:
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI BLUE CHIP VALUE FUND AND THE S&P 500 INDEX
Gabelli Blue Chip Fund S&P 500 Index
8/26/99 $10,000 $10,000
12/31/99 11,778 10,834
12/31/00 13,083 9,848
12/31/01 11,543 8,678
12/31/02 7,890 6,761
12/31/03 11,361 8,700
12/31/04 12,767 9,645
12/31/05 13,621 10,119
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The performance tables and
graph do not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
COMPARATIVE RESULTS
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS THROUGH DECEMBER 31, 2005 (A)
Since
Inception
QUARTER 1 YEAR 3 YEAR 5 YEAR (8/26/99)
- -------------------------------------------------------------------------------------------------------------
GABELLI BLUE CHIP VALUE FUND CLASS AAA........... 1.12% 6.69% 19.96% 0.81% 4.98%
S&P 500 Index.................................... 2.08 4.91 14.38 0.54 0.19
Lipper Large-Cap Value Average................... 1.65 5.72 15.05 3.10 3.38
Class A.......................................... 1.12 6.85 20.07 0.86 5.03
(4.68)(b) 0.72(b) 17.71(b) (0.32)(b) 4.05(b)
Class B.......................................... 0.89 6.04 19.43 0.54 4.76
(4.11)(c) 1.04(c) 18.73(c) 0.15(c) 4.52(c)
Class C.......................................... 0.97 6.04 19.43 0.54 4.76
(0.03)(c) 5.04(c) 19.43(c) 0.54(c) 4.76(c)
Class I.......................................... 1.20 7.10 20.16 0.91 5.06
(a) RETURNS REPRESENT PAST PERFORMANCE AND DO NOT GUARANTEE FUTURE RESULTS.
TOTAL RETURNS AND AVERAGE ANNUAL RETURNS REFLECT CHANGES IN SHARE PRICE AND
REINVESTMENT OF DIVIDENDS AND ARE NET OF EXPENSES. 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. DIVIDENDS
ARE CONSIDERED REINVESTED. PERFORMANCE RETURNS FOR PERIODS LESS THAN ONE
YEAR ARE NOT ANNUALIZED. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE
PERFORMANCE DATA PRESENTED. VISIT WWW.GABELLI.COM FOR PERFORMANCE
INFORMATION AS OF THE MOST RECENT MONTH END. INVESTORS SHOULD CONSIDER THE
INVESTMENT OBJECTIVES, RISKS, CHARGES, AND EXPENSES OF THE FUND CAREFULLY
BEFORE INVESTING. THE PROSPECTUS CONTAINS MORE INFORMATION ABOUT THIS AND
OTHER MATTERS AND SHOULD BE READ CAREFULLY BEFORE INVESTING. THE S&P 500
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 CLASS AAA SHARES' NET ASSET VALUES ARE USED TO CALCULATE PERFORMANCE FOR
THE PERIODS PRIOR TO THE ISSUANCE OF CLASS A SHARES, CLASS B SHARES AND
CLASS C SHARES ON DECEMBER 31, 2003 AND THE CLASS I SHARES ON JULY 1,
2004. THE ACTUAL PERFORMANCE FOR THE CLASS B SHARES AND CLASS C SHARES WOULD
HAVE BEEN LOWER DUE TO THE ADDITIONAL EXPENSES ASSOCIATED WITH THESE CLASSES
OF SHARES. THE ACTUAL PERFORMANCE FOR THE CLASS I SHARES WOULD HAVE BEEN
HIGHER DUE TO THE LOWER EXPENSES RELATED TO THIS CLASS OF SHARES.
(b) INCLUDES THE EFFECT OF THE MAXIMUM 5.75% SALES CHARGE AT THE BEGINNING OF
THE PERIOD.
(c) INCLUDES THE EFFECT OF THE APPLICABLE CONTINGENT DEFERRED SALES CHARGE AT
THE END OF THE PERIOD SHOWN FOR CLASS B AND CLASS C SHARES, RESPECTIVELY.
CLASS B SHARES ARE NOT AVAILABLE FOR NEW PURCHASES.
- --------------------------------------------------------------------------------
2
THE GABELLI BLUE CHIP VALUE FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
For the Six Month Period from July 1, 2005 through December 31, 2005
EXPENSE TABLE
================================================================================
We believe it is important for you to understand the impact of fees and expenses
regarding your investment. All mutual funds have operating expenses. As a
shareholder of a fund, you incur ongoing costs, which include costs for
portfolio management, administrative services, and shareholder reports (like
this one), among others. Operating expenses, which are deducted from a fund's
gross income, directly reduce the investment return of a fund. When a fund's
expenses are expressed as a percentage of its average net assets, this figure is
known as the expense ratio. The following examples are intended to help you
understand the ongoing costs (in dollars) of investing in your Fund and to
compare these costs with those of other mutual funds. The examples are based on
an investment of $1,000 made at the beginning of the period shown and held for
the entire period.
The Expense Table below illustrates your Fund's costs in two ways:
ACTUAL FUND RETURN: This section provides information about actual account
values and actual expenses. You may use this section to help you to estimate the
actual expenses that you paid over the period after any fee waivers and expense
reimbursements. The "Ending Account Value" shown is derived from the Fund's
ACTUAL return during the past six months, and the "Expenses Paid During Period"
shows the dollar amount that would have been paid by an investor who started
with $1,000 in the Fund. You may use this information, together with the amount
you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
given for your Fund under the heading "Expenses Paid During Period" to estimate
the expenses you paid during this period.
HYPOTHETICAL 5% RETURN: This section provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio. It assumes a hypothetical annualized return of 5% before expenses during
the period shown. In this case -- because the hypothetical return used is NOT
the Fund's actual return -- the results do not apply to your investment and you
cannot use the hypothetical account value and expense to estimate the actual
ending account balance or expenses you paid for the period. This example is
useful in making comparisons of the ongoing costs of investing in the Fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as sales
charges (loads), redemption fees, or exchange fees, if any, which are described
in the Prospectus. If these costs were applied to your account, your costs would
be higher. Therefore, the 5% hypothetical return is useful in comparing ongoing
costs only, and will not help you determine the relative total costs of owning
different funds. The Annualized Expense Ratio represents the actual expenses for
the last six months and may be different from the expense ratio in the Financial
Highlights which is for the year ended December 31, 2005.
Beginning Ending Annualized Expenses
Account Value Account Value Expense Paid During
07/01/05 12/31/05 Ratio Period*
- --------------------------------------------------------------------------------
GABELLI BLUE CHIP VALUE FUND
- --------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class AAA $1,000.00 $1,052.60 1.89% $ 9.78
Class A $1,000.00 $1,053.40 1.89% $ 9.78
Class B $1,000.00 $1,060.40 2.64% $13.71
Class C $1,000.00 $1,060.40 2.64% $13.71
Class I $1,000.00 $1,055.10 1.64% $ 8.50
HYPOTHETICAL 5% RETURN
Class AAA $1,000.00 $1,015.68 1.89% $ 9.60
Class A $1,000.00 $1,015.68 1.89% $ 9.60
Class B $1,000.00 $1,011.90 2.64% $13.39
Class C $1,000.00 $1,011.90 2.64% $13.39
Class I $1,000.00 $1,016.94 1.64% $ 8.34
* Expenses are equal to the Fund's annualized expense ratio for the last six
months multiplied by the average account value over the period, multiplied by
the number of days in the most recent fiscal half-year, then divided by 365.
3
SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED)
The following table presents portfolio holdings as a percent of total net assets
as of December 31, 2005:
GABELLI BLUE CHIP VALUE FUND
Financial Services............................ 21.9%
Energy and Utilities: Oil..................... 15.2%
Entertainment................................. 7.6%
Health Care................................... 7.1%
Diversified Industrial ....................... 6.9%
Insurance..................................... 6.0%
Electronics................................... 4.4%
Specialty Chemicals........................... 4.3%
Telecommunications............................ 3.5%
Retail........................................ 3.1%
Energy and Utilities: Electric................ 3.0%
Food and Beverage............................. 2.6%
Computer Software and Services................ 2.4%
Metals and Mining............................. 2.4%
Business Services............................. 2.2%
Aerospace..................................... 1.9%
Consumer Products............................. 1.6%
Cable ........................................ 1.1%
Transportation................................ 1.0%
Publishing.................................... 1.0%
Paper and Forest Products..................... 0.9%
U.S. Government Obligations................... 0.3%
Other Assets and Liabilities - Net............ (0.4)%
-------
100.0%
========
THE FUND FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SEC FOR THE
FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q, THE LAST OF WHICH WAS
FILED FOR THE QUARTER ENDED SEPTEMBER 30, 2005. SHAREHOLDERS MAY OBTAIN THIS
INFORMATION AT WWW.GABELLI.COM OR BY CALLING THE FUND AT 800-GABELLI
(800-422-3554). THE FUND'S FORM N-Q IS AVAILABLE ON THE SEC'S WEBSITE AT
WWW.SEC.GOV AND MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC
REFERENCE ROOM IN WASHINGTON, DC. INFORMATION ON THE OPERATION OF THE PUBLIC
REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330.
PROXY VOTING
The Fund files Form N-PX with its complete proxy voting record for the 12 months
ended June 30th, no later than August 31st of each year. A description of the
Fund's proxy voting policies, procedures, and how the Fund voted proxies
relating to portfolio securities are available without charge, upon request, (i)
by calling 800-GABELLI (800-422-3554); (ii) by writing to The Gabelli Funds at
One Corporate Center, Rye, NY 10580-1422; and (iii) by visiting the Securities
and Exchange Commission's website at www.sec.gov.
4
THE GABELLI BLUE CHIP VALUE FUND
SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2005
================================================================================
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS -- 100.1%
AEROSPACE -- 1.9%
2,400 General Dynamics Corp. ....... $ 184,493 $ 273,720
7,200 Northrop Grumman Corp. ....... 317,423 432,792
----------- -----------
501,916 706,512
----------- -----------
BUSINESS SERVICES -- 2.2%
45,800 Cendant Corp. ................ 792,356 790,050
----------- -----------
CABLE -- 1.1%
17,000 Cablevision Systems Corp.,
Cl. A+ ..................... 408,210 398,990
----------- -----------
COMPUTER SOFTWARE AND SERVICES -- 2.4%
34,000 Microsoft Corp. .............. 880,462 889,100
----------- -----------
CONSUMER PRODUCTS -- 1.6%
11,400 Harley-Davidson Inc. ......... 553,833 586,986
----------- -----------
DIVERSIFIED INDUSTRIAL -- 6.9%
27,500 General Electric Co. ......... 898,172 963,875
18,000 Honeywell International Inc. . 504,465 670,500
22,600 Ingersoll-Rand Co. Ltd., Cl. A 633,453 912,362
----------- -----------
2,036,090 2,546,737
----------- -----------
ELECTRONICS -- 4.4%
37,500 Applied Materials Inc. ....... 596,950 672,750
29,300 Texas Instruments Inc. ....... 604,862 939,651
----------- -----------
1,201,812 1,612,401
----------- -----------
ENERGY AND UTILITIES: ELECTRIC -- 3.0%
70,100 AES Corp.+ ................... 447,659 1,109,683
----------- -----------
ENERGY AND UTILITIES: OIL -- 15.2%
13,550 ConocoPhillips ............... 367,003 788,339
50,800 El Paso Corp. ................ 356,165 617,728
13,000 Exxon Mobil Corp. ............ 516,510 730,210
10,000 GlobalSantaFe Corp. .......... 392,130 481,500
13,300 Halliburton Co. .............. 345,579 824,068
7,800 Marathon Oil Corp. ........... 205,554 475,566
10,400 Noble Corp. .................. 360,364 733,616
7,000 Pioneer Natural
Resources Co. .............. 228,579 358,890
11,000 Valero Energy Corp. .......... 567,320 567,600
----------- -----------
3,339,204 5,577,517
----------- -----------
ENTERTAINMENT -- 7.6%
1,575 CCE Spinco Inc.+ ............. 15,324 20,632
12,600 Clear Channel
Communications Inc. ........ 367,774 396,270
4,500 Discovery Holding Co.,
Cl. A+ ..................... 56,969 68,175
22,000 News Corp., Cl. B ............ 367,860 365,420
17,000 The Walt Disney Co. .......... 363,473 407,490
45,400 Time Warner Inc. ............. 718,299 791,776
25,500 Univision Communications
Inc., Cl. A+ ............... 679,193 749,445
----------- -----------
2,568,892 2,799,208
----------- -----------
FINANCIAL SERVICES -- 21.9%
7,200 American Express Co.. ........ 280,750 370,512
24,400 Bank of America Corp. ........ 1,014,182 1,126,060
23,700 Citigroup Inc. ............... 1,093,685 1,150,161
6,000 Commerce Bancorp Inc. ........ 197,910 206,460
26,600 JPMorgan Chase & Co. ......... 925,885 1,055,754
3,000 Lehman Brothers Holdings Inc. 214,108 384,510
15,700 Merrill Lynch & Co. Inc. ..... 786,809 1,063,361
MARKET
SHARES COST VALUE
------ ---- ------
5,000 Morgan Stanley ............... $ 247,250 $ 283,700
32,700 Sovereign Bancorp Inc. ....... 735,537 706,974
8,200 State Street Corp. ........... 387,251 454,608
7,000 Wells Fargo & Co. ............ 431,321 439,810
10,500 Zions Bancorporation ......... 771,301 793,380
----------- -----------
7,085,989 8,035,290
----------- -----------
FOOD AND BEVERAGE -- 2.6%
10,000 Anheuser-Busch
Companies Inc. ............. 478,480 429,600
5,000 Coca-Cola Co. ................ 200,250 201,550
10,000 Heinz (H.J.) Co. ............. 364,472 337,200
----------- -----------
1,043,202 968,350
----------- -----------
HEALTH CARE -- 7.1%
28,100 Pfizer Inc. .................. 835,693 655,292
22,500 Sanofi-Aventis, ADR. ......... 943,052 987,750
20,600 Wyeth ........................ 917,476 949,042
----------- -----------
2,696,221 2,592,084
----------- -----------
INSURANCE -- 6.0%
17,000 American International
Group Inc. ................. 962,989 1,159,910
6,000 Hartford Financial
Services Group Inc. ........ 345,293 515,340
11,561 St. Paul Travelers
Companies Inc. ............. 431,113 516,430
----------- -----------
1,739,395 2,191,680
----------- -----------
METALS AND MINING -- 2.4%
29,900 Alcoa Inc. ................... 805,251 884,143
----------- -----------
PAPER AND FOREST PRODUCTS -- 0.9%
10,000 International Paper Co. ...... 321,813 336,100
----------- -----------
PUBLISHING -- 1.0%
10,000 Dow Jones & Co. Inc. ......... 388,597 354,900
----------- -----------
RETAIL -- 3.1%
16,000 The Home Depot Inc. .......... 626,393 647,680
12,400 Tiffany & Co. ................ 379,816 474,796
----------- -----------
1,006,209 1,122,476
----------- -----------
SPECIALTY CHEMICALS -- 4.3%
20,400 Dow Chemical Co. ............. 800,327 893,928
16,500 E.I. du Pont de
Nemours and Co. ............ 799,726 701,250
----------- -----------
1,600,053 1,595,178
----------- -----------
TELECOMMUNICATIONS -- 3.5%
17,100 AT&T Inc. .................... 426,755 418,779
28,200 Verizon
Communications Inc. ........ 937,667 849,384
----------- -----------
1,364,422 1,268,163
----------- -----------
TRANSPORTATION -- 1.0%
4,700 Union Pacific Corp. .......... 288,057 378,397
----------- -----------
TOTAL COMMON STOCKS .......... 31,069,643 36,743,945
----------- -----------
PRINCIPAL
AMOUNT
------
U.S. GOVERNMENT OBLIGATIONS -- 0.3%
$ 99,000 U.S. Treasury Bill,
3.947%++, 03/23/06 ......... 98,162 98,145
----------- -----------
TOTAL
INVESTMENTS -- 100.4% ...... $31,167,805 36,842,090
===========
OTHER ASSETS AND
LIABILITIES (NET) -- (0.4)% ............. (128,798)
-----------
NET ASSETS -- 100.0% ...................... $36,713,292
===========
- ----------------
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR American Depository Receipt
See accompanying notes to financial statements.
5
THE GABELLI BLUE CHIP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2005
================================================================================
ASSETS:
Investments, at value (cost $31,167,805) .................... $ 36,842,090
Cash ........................................................ 651
Dividends receivable ........................................ 36,739
Receivable for Fund shares sold ............................. 24,909
Other assets ................................................ 2,771
------------
TOTAL ASSETS ................................................ 36,907,160
------------
LIABILITIES:
Payable for Fund shares redeemed ............................ 91,448
Payable for investment advisory fees ........................ 31,622
Payable for distribution fees ............................... 7,910
Other accrued expenses ...................................... 62,888
------------
TOTAL LIABILITIES ........................................... 193,868
------------
NET ASSETS applicable to 2,913,178 shares outstanding ....... $ 36,713,292
============
NET ASSETS CONSIST OF:
Shares of beneficial interest, each class at $0.001 par value $ 2,913
Additional paid-in capital .................................. 39,045,712
Accumulated net realized loss on investments ................ (8,009,618)
Net unrealized appreciation on investments .................. 5,674,285
------------
NET ASSETS .................................................. $ 36,713,292
============
SHARES OF BENEFICIAL INTEREST:
CLASS AAA:
Net Asset Value, offering and redemption price per share
($36,662,628 / 2,909,158 shares outstanding; unlimited
number of shares authorized) .............................. $12.60
======
CLASS A:
Net Asset Value and redemption price per share
($42,183 / 3,341 shares outstanding; unlimited
number of shares authorized) .............................. $12.63
======
Maximum offering price per share
(NAV / 0.9425, based on maximum sales charge
of 5.75% of the offering price) ........................... $13.40
======
CLASS B:
Net Asset Value and offering price per share ($1,183 / 94.90
shares outstanding; unlimited number of shares
authorized) ............................................... $12.47(a)
======
CLASS C:
Net Asset Value and offering price per share ($6,145 / 492.80
shares outstanding; unlimited number of shares
authorized) ............................................... $12.47(a)
======
CLASS I:
Net Asset Value, offering and redemption price per
share ($1,153 / 91.30 shares outstanding;
unlimited number of shares authorized) .................... $12.63
======
- ------------------
(a) Redemption price varies based on the length of time held.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2005
================================================================================
INVESTMENT INCOME:
Dividends ....................................................... $ 664,189
Interest ........................................................ 12,848
-----------
TOTAL INVESTMENT INCOME ......................................... 677,037
-----------
EXPENSES:
Investment advisory fees ........................................ 373,235
Distribution fees - Class AAA ................................... 93,257
Distribution fees - Class A ..................................... 39
Distribution fees - Class B ..................................... 11
Distribution fees - Class C ..................................... 29
Shareholder communications expenses ............................. 78,851
Shareholder services fees ....................................... 47,519
Registration fees ............................................... 32,434
Legal and audit fees ............................................ 31,211
Trustees' fees .................................................. 23,217
Custodian fees .................................................. 11,463
Interest expense ................................................ 226
Miscellaneous expenses .......................................... 14,260
-----------
TOTAL EXPENSES .................................................. 705,752
Less: Custodian fee credits ..................................... (193)
-----------
NET EXPENSES .................................................... 705,559
-----------
NET INVESTMENT LOSS ............................................. (28,522)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments ................................ 3,374,488
Net change in unrealized appreciation/depreciation on investments (945,908)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS .......... 2,428,580
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............ $ 2,400,058
===========
See accompanying notes to financial statements.
6
THE GABELLI BLUE CHIP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
----------------- -----------------
OPERATIONS:
Net investment income (loss) .............. $ (28,522) $ 103,823
Net realized gain on investments .......... 3,374,488 4,236,236
Net change in unrealized appreciation/
depreciation on investments ............. (945,908) 191,519
------------ ------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ............... 2,400,058 4,531,578
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class AAA ............................... -- (109,308)
Class A ................................. -- (4)
Class I ................................. -- (6)
------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ....... -- (109,318)
------------ ------------
SHARES OF BENEFICIAL INTEREST TRANSACTIONS:
Class AAA ............................... (4,185,294) (14,476,855)
Class A ................................. 40,244 3
Class C ................................. 4,678 --
Class I ................................. -- 1,005
------------ ------------
NET DECREASE IN NET ASSETS FROM SHARES OF
BENEFICIAL INTEREST TRANSACTIONS ........ (4,140,372) (14,475,847)
------------ ------------
REDEMPTION FEES ........................... 1,630 2,604
------------ ------------
NET DECREASE IN NET ASSETS ................ (1,738,684) (10,050,983)
NET ASSETS:
Beginning of period ....................... 38,451,976 48,502,959
------------ ------------
End of period (including undistributed net
investment income of $0 and $0,
respectively) ........................... $ 36,713,292 $ 38,451,976
============ ============
See accompanying notes to financial statements.
7
THE GABELLI BLUE CHIP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. ORGANIZATION. The Gabelli Blue Chip Value Fund (the "Fund") was organized on
May 13, 1999 as a Delaware statutory trust. The Fund is a diversified open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Fund commenced operations on August 26,
1999. The Fund's primary objective is long-term growth of capital.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with U.S. 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 or traded in the U.S. over-the-counter market for
which market quotations are readily available are valued at the last quoted sale
price or a market's official closing price as of the close of business on the
day the securities are being valued. If there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day. If no bid or asked prices are quoted on such
day, the security is valued at the most recently available price or, if the
Board of Trustees (the "Board") so determines, by such other method as the Board
shall determine in good faith, to reflect its fair market value. Portfolio
securities traded on more than one national securities exchange or market are
valued according to the broadest and most representative market, as determined
by Gabelli Funds, LLC (the "Adviser").
Portfolio securities primarily traded on foreign markets are generally valued at
the preceding closing values of such securities on their respective exchanges or
if after the close of the foreign markets, but prior to the close of business on
the day the securities are being valued, market conditions change significantly,
certain foreign securities may be fair valued pursuant to procedures established
by the Board. Debt instruments with remaining maturities of 60 days or less that
are not credit impaired are valued at amortized cost, unless the Board
determines such amount does not reflect the securities' fair value, in which
case these securities will be valued at their fair value as determined by the
Board. Debt instruments having a maturity greater than 60 days for which market
quotations are readily available are valued at the average of the latest bid and
asked prices. If there were no asked prices quoted on such day, the security is
valued using the closing bid price. Futures contracts are valued at the closing
settlement price of the exchange or board of trade on which the applicable
contract is traded.
Securities and assets for which market quotations are not readily available are
valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Board. Fair valuation
methodologies and procedures may include, but are not limited to: analysis and
review of available financial and non-financial information about the company;
comparisons to the valuation and changes in valuation of similar securities,
including a comparison of foreign securities to the equivalent U.S. dollar value
ADR securities at the close of the U.S. exchange; and evaluation of any other
information that could be indicative of the value of the security.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
primary government securities dealers recognized by the Federal Reserve Board,
with member banks of the Federal Reserve System or with other brokers or dealers
that meet credit guidelines established by the Adviser and reviewed by the
Board. 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
8
THE GABELLI BLUE CHIP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
always receive and maintain securities as collateral whose market value,
including accrued interest, will be at least equal to 102% 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. At December
31, 2005, there were no open repurchase agreements.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for on the trade date with realized gain or loss on investments
determined by using the identified cost method. Interest income (including
amortization of premium and accretion of discount) is recorded on the accrual
basis. Premiums and discounts on debt securities are amortized using the
effective yield to maturity method. Dividend income is recorded on the
ex-dividend date except for certain dividends which are recorded as soon as the
Fund is informed of the dividend.
DETERMINATION OF NET ASSET VALUE AND CALCULATION OF EXPENSES. Certain
administrative expenses are common to, and allocated among, various affiliated
funds. Such allocations are made on the basis of each fund's average net assets
or other criteria directly affecting the expenses as determined by the Adviser
pursuant to procedures established by the Board.
In calculating net asset value ("NAV") per share of each class, investment
income, realized and unrealized gains and losses, redemption fees, and expenses
other than class specific expenses, are allocated daily to each class of shares
based on the proportion of net assets of each class at the beginning of each
day. Distribution expenses are borne solely by the class incurring the expense.
CUSTODIAN FEE CREDITS. When cash balances are maintained in the custody account,
the Fund receives credits which are used to offset custodian fees. The gross
expenses paid under the custody arrangement are included in custodian fees in
the Statement of Operations with the corresponding expense offset shown as
"custodian fee credits".
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions to
shareholders are recorded on the ex-dividend date. Distributions to shareholders
are based on income and capital gains as determined in accordance with Federal
income tax regulations, which may differ from income and capital gains as
determined under U.S. 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 characterizations of distributions made by the Fund. These book/tax
differences are either temporary or permanent in nature. To the extent these
differences are permanent, adjustments are made to the appropriate equity
accounts in the period when the differences arise. These reclassifications have
no impact on the NAV of the Fund and the calculation of net investment income
per share in the Financial Highlights excludes these adjustments. For the year
ended December 31, 2005, reclassifications were made to decrease accumulated net
investment loss for $28,522, with an offsetting adjustment to additional paid-in
capital.
No distributions were paid during the year ended December 31, 2005. The tax
character of distributions of $109,318 paid during the year ended December 31,
2004 was ordinary income.
9
THE GABELLI BLUE CHIP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
PROVISION FOR INCOME TAXES. The Fund intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). It is the policy of the Fund to comply with the
requirements of the Code applicable to regulated investment companies and to
distribute substantially all of its net investment company taxable income and
net capital gains. Therefore, no provision for Federal income taxes is required.
As of December 31, 2005, the components of earnings/(losses) on a tax basis were
as follows:
Capital loss carryforward.......... $(7,474,410)
Net unrealized appreciation........ 5,139,077
-----------
Total accumulated loss............. $(2,335,333)
===========
The Fund has a net capital loss carryforward for Federal income tax purposes at
December 31, 2005 of $7,474,410. This capital loss carryforward is available to
reduce future required distributions of net capital gains to shareholders.
$7,474,410 of the loss carryforward is available through 2010. For the year
ended December 31, 2005, the Fund utilized net capital loss carryforwards of
$2,828,559.
The following summarizes the tax cost of investments and related unrealized
appreciation (depreciation) at December 31, 2005:
GROSS GROSS NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION/
COST APPRECIATION DEPRECIATION (DEPRECIATION)
---- ------------ ------------ --------------
Investments....... $31,703,013 $6,201,817 $(1,062,740) $5,139,077
3. INVESTMENT ADVISORY AGREEMENT. The Fund has entered into an investment
advisory agreement (the "Advisory Agreement") with the Adviser which provides
that the Fund will pay the Adviser a fee, computed daily and paid monthly, at
the annual rate of 1.00% of the value of its average daily net assets. In
accordance with the Advisory Agreement, the Adviser provides a continuous
investment program for the Fund's portfolio, oversees the administration of all
aspects of the Fund's business and affairs, and pays the compensation of all
Officers and Trustees of the Fund who are affiliated persons of the Adviser. The
Adviser contractually agreed to reimburse expenses of the Fund to the extent
necessary to maintain the annualized total operating expenses of the Fund at
2.00%, 2.00%, 2.75%, 2.75%, and 1.75%, respectively, of Class AAA, Class A,
Class B, Class C, and Class I Shares' average daily net assets. The Fund is
obliged to repay the Adviser for a period of two fiscal years following the
fiscal year in which the Adviser reimbursed the Fund only to the extent that the
operating expenses of the Fund fell below 2.00%, 2.00%, 2.75%, 2.75%, and 1.75%
of average daily net assets for Class AAA, Class A, Class B, Class C, and Class
I Shares, respectively. There have been no expense reimbursements by the Adviser
in fiscal years 2004 or 2005.
4. DISTRIBUTION PLAN. The Fund's Board has adopted a distribution plan (the
"Plan") for each class of shares (other than Class I) pursuant to Rule 12b-1
under the 1940 Act. Gabelli & Company, Inc. ("Gabelli & Company"), an affiliate
of the Adviser, serves as distributor of the Fund. Under the Class AAA, Class A,
Class B, and Class C Share Plans, payments are authorized to Gabelli & Company
at annual rates of 0.25%, 0.25%, 1.00%, and 1.00%, respectively, of the average
daily net assets of those classes, the annual limitations under each Plan. Such
payments are accrued daily and paid monthly.
10
THE GABELLI BLUE CHIP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
5. PORTFOLIO SECURITIES. Purchases and proceeds from the sales of securities for
the year ended December 31, 2005, other than short-term securities, aggregated
$13,529,398 and $17,247,128, respectively.
6. TRANSACTIONS WITH AFFILIATES. During the year ended December 31, 2005, the
Fund paid brokerage commissions of $8,657 to Gabelli & Company. Gabelli &
Company has informed the Fund that it received $244 from investors representing
commissions (sales charges and underwriting fees) on sales and redemptions of
Fund shares.
The cost of calculating the Fund's NAV per share is a Fund expense pursuant to
the Advisory Agreement between the Fund and the Adviser. A reimbursement was not
sought by the Adviser during the year ended December 31, 2005.
7. SHARES OF BENEFICIAL INTEREST. The Fund currently offers five classes of
shares -- Class AAA Shares, Class A Shares, Class B Shares, Class C Shares, and
Class I Shares. Class AAA Shares are offered only to investors who acquire them
directly from Gabelli & Company or through selected broker/dealers without a
sales charge. Class A Shares are subject to a maximum front-end sales charge of
5.75%. Class B Shares are subject to a contingent deferred sales charge ("CDSC")
upon redemption within six years of purchase and automatically convert to Class
A Shares approximately eight years after the original purchase. The applicable
CDSC is equal to a declining percentage of the lesser of the NAV per share at
the date of original purchase or at the date of redemption, based on the length
of time held. Class C Shares are subject to a 1% CDSC for one year after
purchase. Class B Shares are available only through exchange of Class B Shares
of other Funds distributed by Gabelli & Company. Class I Shares are offered to
institutional investors that acquire the Fund directly through Gabelli &
Company.
Effective June 15, 2005, the Fund imposed a redemption fee of 2.00% on Class
AAA, Class A, Class B, Class C, and Class I Shares that are redeemed or
exchanged on or before the seventh day after the date of a purchase. (From
September 1, 2004 through June 14, 2005, the Fund imposed a redemption fee on
shares that were redeemed or exchanged within the sixtieth day after the date of
a purchase.) The redemption fee is deducted from the proceeds otherwise payable
to the redeeming shareholders and is retained by the Fund. The redemption fees
retained by the Fund during the years ended December 31, 2005 and December 31,
2004 amounted to $1,630 and $2,604, respectively.
The redemption fee does not apply to shares purchased through programs that the
Adviser determined to have appropriate short-term trading policies in place.
Additionally, certain recordkeepers for qualified and non-qualified retirement
plans that could not collect the redemption fee at the participant level due to
systems limitations have received an extension to implement such systems.
11
THE GABELLI BLUE CHIP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
Transactions in shares of beneficial interest were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- ---------- ------------
CLASS AAA CLASS AAA
-------------------------- ---------------------------
Shares sold ...................................... 416,116 $ 5,039,417 1,272,742 $ 13,787,702
Shares issued upon reinvestment of dividends....... -- -- 8,992 106,195
Shares redeemed .................................. (762,810) (9,224,711) (2,629,087) (28,370,752)
-------- ----------- ---------- ------------
Net increase (decrease) ......................... (346,694) $(4,185,294) (1,347,353) $(14,476,855)
======== =========== ========== ============
CLASS A CLASS A
-------------------------- ---------------------------
Shares sold ....................................... 3,246 $ 40,244 -- --
Shares issued upon reinvestment of dividends....... -- -- 0* $ 3
-------- ----------- ---------- ------------
Net increase .................................... 3,246 $ 40,244 0 $ 3
======== =========== ========== ============
CLASS C CLASS C
-------------------------- ---------------------------
Shares sold ....................................... 398 $ 4,678 -- --
-------- ----------- ---------- ------------
Net increase .................................... 398 $ 4,678 -- --
======== =========== ========== ============
CLASS I CLASS I**
-------------------------- ---------------------------
Shares sold ....................................... -- -- 100 $ 1,100
Shares issued upon reinvestment of dividends....... -- -- 1 6
Shares redeemed ................................... -- -- (10) (101)
-------- ----------- ---------- ------------
Net increase .................................... -- -- 91 $ 1,005
======== =========== ========== ============
- --------------
* Shares rounded to less than 0.5 shares.
** Class I Shares were first offered to the public and initial shares were sold
to GAMCO Investors, Inc. on June 30, 2004.
8. INDEMNIFICATIONS. The Fund enters into contracts that contain a variety of
indemnifications. The Fund's maximum exposure under these arrangements is
unknown. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
9. OTHER MATTERS. The Adviser and/or affiliates have received subpoenas from the
Attorney General of the State of New York and the Securities and Exchange
Commission (the "SEC") requesting information on mutual fund trading practices
involving certain funds managed by the Adviser. GAMCO Investors, Inc., the
Adviser's parent company, is responding to these requests for documents and
testimony. On a separate matter, in September 2005, the Adviser was informed by
the staff of the SEC that the staff may recommend to the Commission that an
administrative remedy and a monetary penalty be sought from the Adviser in
connection with the actions of two of seven closed-end funds managed by the
Adviser relating to Section 19(a) and Rule 19a-1 of the 1940 Act. These
provisions require registered investment companies to provide written statements
to shareholders when a dividend is made from a source other than net investment
income. While the two closed-end funds sent annual statements and provided other
materials containing this information, the funds did not send written statements
to shareholders with each distribution in 2002 and 2003. The Adviser believes
that all of the funds are now in compliance. The Adviser believes that these
matters would have no effect on the Fund or any material adverse effect on the
Adviser or its ability to manage the Fund.
12
THE GABELLI BLUE CHIP VALUE FUND
FINANCIAL HIGHLIGHTS
================================================================================
Selected data for a share of beneficial interest outstanding throughout each
period:
INCOME FROM INVESTMENT OPERATIONS DISTRIBUTIONS
-------------------------------------------------- -----------------------------------------
Net
Net Asset Net Realized and Total Net
Period Value, Investment Unrealized from Net Realized
Ended Beginning Income Gain/(Loss) on Investment Investment Gain on Total
December 31 of Period (Loss)(c) Investments Operations Income Investments Distributions
- ----------- --------- ---------- -------------- ---------- ---------- ----------- -------------
CLASS AAA
2005 $11.81 $(0.01) $ 0.80 $ 0.79 -- -- --
2004 10.54 0.03 1.27 1.30 $(0.03) -- $(0.03)
2003 7.32 (0.01) 3.23 3.22 -- -- --
2002 10.71 (0.03) (3.36) (3.39) -- -- --
2001 12.17 (0.05) (1.38) (1.43) -- $(0.03) (0.03)
CLASS A(b)
2005 $11.82 $(0.01) $ 0.82 $ 0.81 -- -- --
2004 10.54 0.04 1.28 1.32 $(0.04) -- $(0.04)
CLASS B(b)
2005 $11.76 $(0.09) $ 0.80 $ 0.71 -- -- --
2004 10.54 (0.04) 1.26 1.22 -- -- --
CLASS C(b)
2005 $11.76 $(0.09) $ 0.80 $ 0.71 -- -- --
2004 10.54 (0.08) 1.30 1.22 -- -- --
CLASS I
2005 $11.79 $ 0.03 $ 0.81 $ 0.84 -- -- --
2004(e) 11.01 0.05 0.80 0.85 $(0.07) -- $(0.07)
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA
-----------------------------------------------------
Net Asset Net Assets Net
Period Value, End of Investment Portfolio
Ended Redemption End of Total Period Income Operating Turnover
December 31 Fees(c) Period Return+ (in 000's) (Loss) Expenses(d) Rate
----------- ---------- ------ ------- ---------- --------- ----------- --------
CLASS AAA
2005 $0.00(f) $12.60 6.7% $36,663 (0.08)% 1.89% 37%
2004 0.00(f) 11.81 12.4 38,448 0.25 1.89 26
2003 -- 10.54 44.0 48,503 (0.12) 1.86 140
2002 -- 7.32 (31.7) 23,912 (0.40) 1.94 94
2001 -- 10.71 (11.8) 42,403 (0.36)(a) 1.75(a) 92
CLASS A(b)
2005 $0.00(f) $12.63 6.9% $ 42 (0.07)% 1.89% 37%
2004 0.00(f) 11.82 12.5 1 0.38 1.89 26
CLASS B(b)
2005 $0.00(f) $12.47 6.0% $ 1 (0.71)% 2.64% 37%
2004 0.00(f) 11.76 11.6 1 (0.38) 2.64 26
CLASS C(b)
2005 $0.00(f) $12.47 6.0% $ 6 (0.72)% 2.64% 37%
2004 0.00(f) 11.76 11.6 1 (0.71) 2.64 26
CLASS I
2005 $0.00(f) $12.63 7.1% $ 1 0.28% 1.64% 37%
2004(e) 0.00(f) 11.79 7.7 1 0.81(g) 1.59(g) 26
- --------------
+ Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the period
including reinvestment of dividends and does not reflect applicable sales
charges. Total return for the period of less than one year is not
annualized.
(a) Under an expense deferral agreement with the Adviser, the Fund repaid the
Adviser $34,909 during 2001, representing previous reimbursed expenses from
the Adviser. During the period ended December 31, 2001, had such payment not
been made, the expense ratio would have been 1.68% and the net investment
income ratio would have been (0.30)%.
(b) Class A, Class B, and Class C Shares were outstanding within the period
December 23, 2003 through December 31, 2003. Financial Highlights are not
presented for Class A, Class B, and Class C Shares as the information for
this period is not considered meaningful.
(c) Per share data is calculated using the average shares outstanding method.
(d) The Fund incurred interest expense for the year ended December 31, 2004. If
interest expense had not been incurred, the ratio of expenses to average net
assets for Class AAA, Class A, Class B, Class C, and Class I would have been
1.87%, 1.87%, 2.62%, 2.62%, and 1.62%, respectively. Interest expense in
2005 was immaterial.
(e) From the commencement of offering Class I Shares on June 30, 2004.
(f) Amount represents less than $0.005 per share.
(g) Annualized.
See accompanying notes to financial statements.
13
THE GABELLI BLUE CHIP VALUE FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
================================================================================
To the Shareholders and Board of Trustees of
The Gabelli Blue Chip Value Fund
We have audited the accompanying statement of assets and liabilities of The
Gabelli Blue Chip Value Fund (the "Fund"), including the schedule of
investments, as of December 31, 2005, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of the
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2005, by correspondence with the Fund's
custodian. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Gabelli Blue Chip Value Fund at December 31, 2005, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the periods
indicated therein, in conformity with U.S. generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Philadelphia, Pennsylvania
February 14, 2006
14
THE GABELLI BLUE CHIP VALUE FUND
ADDITIONAL FUND INFORMATION (UNAUDITED)
================================================================================
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Trustees. Information pertaining to the Trustees and officers of
the Fund is set forth below. The Fund's Statement of Additional Information
includes additional information about The Gabelli Blue Chip Value Fund Trustees
and is available, without charge, upon request, by calling 800-GABELLI
(800-422-3554) or by writing to The Gabelli Blue Chip Value Fund at One
Corporate Center, Rye, NY 10580-1422.
TERM OF NUMBER OF
NAME, POSITION(S) OFFICE AND FUNDS IN FUND
ADDRESS 1 LENGTH OF COMPLEX OVERSEEN PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
AND AGE TIME SERVED 2 BY TRUSTEE DURING PAST FIVE YEARS HELD BY DIRECTOR 4
- ----------------- ------------- ---------------- ---------------------- ------------------
INTERESTED TRUSTEES 3:
- ---------------------
MARIO J. GABELLI Since 1999 24 Chairman of the Board and Chief Executive Director of Morgan
Trustee Officer of GAMCO Investors, Inc. and Group Holdings, Inc.
Age: 63 Chief Investment Officer - Value Portfolios (holding company)
of Gabelli Funds, LLC and GAMCO Asset
Management Inc.; Chairman and Chief
Executive Officer of Lynch Interactive
Corporation (multimedia and services)
NON-INTERESTED TRUSTEES:
- -----------------------
ANTHONY J. COLAVITA Since 1999 34 Partner in the law firm of --
Trustee Anthony J. Colavita, P.C.
Age: 70
VINCENT D. ENRIGHT Since 1999 14 Former Senior Vice President and Chief Financial Director of Aphton
Trustee Officer of KeySpan Energy Corporation Corporation
Age: 62 (biopharmaceuticals)
MARY E. HAUCK Since 2000 3 Retired Senior Manager of the Gabelli O'Connor --
Trustee Fixed Income Mutual Funds Management
Age: 63 Company
WERNER J. ROEDER, MD Since 1999 23 Medical Director of Lawrence Hospital and --
Trustee practicing private physician
Age: 65
OFFICERS:
- --------
BRUCE N. ALPERT Since 2003 -- Executive Vice President and Chief Operating Officer --
President and Treasurer of Gabelli Funds, LLC since 1988 and an officer of
Age: 54 all of the registered investment companies in the
Gabelli Funds complex. Director and President
of Gabelli Advisers, Inc. since 1998.
JAMES E. MCKEE Since 1999 -- Vice President, General Counsel and Secretary of GAMCO --
Secretary Investors, Inc. since 1999 and GAMCO Asset Management
Age: 42 Inc. since 1993; Secretary of all of the registered
investment companies in the Gabelli Funds complex.
PETER D. GOLDSTEIN Since 2004 -- Director of Regulatory Affairs for GAMCO --
Chief Compliance Officer Investors, Inc. since 2004; Chief Compliance
Age: 52 Officer of all of the registered investment
companies in the Gabelli Fund complex; Vice
President of Goldman Sachs Asset Management
from 2000 through 2004.
- -----------------
1 Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise noted.
2 Each Trustee will hold office for an indefinite term until the earliest of
(i) the next meeting of shareholders, if any, called for the purpose of
considering the election or re-election of such Trustee and until the
election and qualification of his or her successor, if any, elected at such
meeting, or (ii) the date a Trustee resigns or retires, or a Trustee is
removed by the Board of Trustees or shareholders, in accordance with the
Fund's By-Laws and Agreement and Declaration of Trust. Each officer will
hold office for an indefinite term until the date he or she resigns or
retires or until his or her successor is elected and qualified. Effective
November 16, 2005, Mr. Karl Otto Pohl resigned from the Board of Trustees
and now serves as Trustee Emeritus.
3 "Interested person" of the Fund as defined in the Investment Company Act of
1940. Mr. Gabelli is considered an "interested person" because of his
affiliation with Gabelli Funds, LLC which acts as the Fund's investment
adviser.
4 This column includes only directorships of companies required to report to
the SEC under the Securities Exchange Act of 1934 (i.e. public companies) or
other investment companies registered under the 1940 Act.
15
THE GABELLI BLUE CHIP VALUE FUND
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
FAX: 914-921-5118
WEBSITE: WWW.GABELLI.COM
E-MAIL: INFO@GABELLI.COM
Net Asset Value available daily by calling
800-GABELLI after 6:00 P.M.
BOARD OF TRUSTEES
Mario J. Gabelli, CFA Mary E. Hauck
CHAIRMAN AND CHIEF FORMER SENIOR PORTFOLIO MANAGER
EXECUTIVE OFFICER GABELLI-O'CONNOR FIXED INCOME
GAMCO INVESTORS, INC. MUTUAL FUND MANAGEMENT CO.
Anthony J. Colavita Werner J. Roeder, MD
ATTORNEY-AT-LAW MEDICAL DIRECTOR
ANTHONY J. COLAVITA, P.C. LAWRENCE HOSPITAL
Vincent D. Enright
FORMER SENIOR VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
KEYSPAN ENERGY CORP.
OFFICERS AND PORTFOLIO MANAGER
Barbara G. Marcin, CFA Bruce N. Alpert
PORTFOLIO MANAGER PRESIDENT AND TREASURER
James E. McKee Peter D. Goldstein
SECRETARY CHIEF COMPLIANCE OFFICER
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 Blue Chip Value Fund. It is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
GAB402Q405SR
[GRAPHIC OMITTED]
TRIANGLE ART
THE
GABELLI
BLUE CHIP
VALUE
FUND
ANNUAL REPORT
DECEMBER 31, 2005
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party.
(c) There have been no amendments, during the period covered by this
report, to a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, and that relates to any element of
the code of ethics description.
(d) The registrant has not granted any waivers, including an implicit
waiver, from a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, that relates to one or more of the
items set forth in paragraph (b) of this item's instructions.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the registrant's Board of
Trustees has determined that Vincent D. Enright is qualified to serve as an
audit committee financial expert serving on its audit committee and that he is
"independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
AUDIT FEES
(a) The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the
audit of the registrant's annual financial statements or services that
are normally provided by the accountant in connection with statutory
and regulatory filings or engagements for those fiscal years are
$21,900 in 2005 and $20,300 in 2004.
AUDIT-RELATED FEES
(b) The aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the registrant's
financial statements and are not reported under paragraph (a) of this
Item are $0 in 2005 and $0 in 2004.
TAX FEES
(c) The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning are $3,600 in 2005 and $3,400
in 2004.
Tax fees represent tax compliance services provided in connection with
the review of the Registrant's tax returns.
ALL OTHER FEES
(d) The aggregate fees billed in each of the last two fiscal years for
products and services provided by the principal accountant, other than
the services reported in paragraphs (a) through (c) of this Item are $0
in 2005 and $0 in 2004.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
Pre-Approval Policies and Procedures. The Audit Committee ("Committee")
of the registrant is responsible for pre-approving (i) all audit and
permissible non-audit services to be provided by the independent
auditors to the registrant and (ii) all permissible non-audit services
to be provided by the independent auditors to the Adviser, Gabelli
Funds, LLC, and any affiliate of Gabelli Funds, LLC ("Gabelli") that
provides services to the registrant (a "Covered Services Provider") if
the independent auditors' engagement related directly to the operations
and financial reporting of the registrant. The Committee may delegate
its responsibility to pre-approve any such audit and permissible
non-audit services to the Chairperson of the Committee, and the
Chairperson must report to the Committee, at its next regularly
scheduled meeting after the Chairperson's pre-approval of such
services, his or her decision(s). The Committee may also establish
detailed pre-approval policies and procedures for pre-approval of such
services in accordance with applicable laws, including the delegation
of some or all of the Committee's pre-approval responsibilities to the
other persons (other than Gabelli or the registrant's officers).
Pre-approval by the Committee of any permissible non-audit services is
not required so long as: (i) the aggregate amount of all such
permissible non-audit services provided to the registrant, Gabelli and
any Covered Services Provider constitutes not more than 5% of the total
amount of revenues paid by the registrant to its independent auditors
during the fiscal year in which the permissible non-audit services are
provided; (ii) the permissible non-audit services were not recognized
by the registrant at the time of the engagement to be non-audit
services; and (iii) such services are promptly brought to the attention
of the Committee and approved by the Committee or Chairperson prior to
the completion of the audit.
(e)(2) The percentage of services described in each of paragraphs (b) through
(d) of this Item that were approved by the audit committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows:
(b) N/A
(c) 100%
(d) N/A
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year that were attributed to work performed by persons
other than the principal accountant's full-time, permanent employees
was zero percent (0%).
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling, controlled by,
or under common control with the adviser that provides ongoing services
to the registrant for each of the last two fiscal years of the
registrant was $68,600 in 2005 and $68,400 in 2004.
(h) The registrant's audit committee of the board of directors has
considered whether the provision of non-audit services that were
rendered to the registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser), and any
entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Schedule of Investments in securities of unaffiliated issuers as of the close of
the reporting period is included as part of the report to shareholders filed
under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's Board of Trustees, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR
240.14a-101), or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's second fiscal
quarter of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) The Gabelli Blue Chip Value Fund
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By (Signature and Title)* /s/ Bruce N. Alpert
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Bruce N. Alpert, Principal Executive Officer
Date March 8, 2006
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Bruce N. Alpert
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Bruce N. Alpert,
Principal Executive Officer & Principal
Financial Officer
Date March 8, 2006
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* Print the name and title of each signing officer under his or her signature.