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 811-04494
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The Gabelli Asset Fund
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(Exact name of registrant as specified in charter)
One Corporate Center
Rye, New York 10580-1422
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(Address of principal executive offices) (Zip code)
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
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(Name and address of agent for service)
registrant's telephone number, including area code: 1-800-422-3554
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Date of fiscal year end: December 31
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Date of reporting period: December 31, 2006
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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 ASSET FUND
ANNUAL REPORT
DECEMBER 31, 2006
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, 2006 with a description of factors that affected the
performance during the past year.
PERFORMANCE DISCUSSION (UNAUDITED)
We are pleased to report that The Gabelli Asset Fund (Class AAA) gained
21.84% in 2006, outpacing the Dow Jones Industrial Average and the S&P 500
returns of 18.98% and 15.78% for the same period. The strongest S&P industry
group in 2006 was Telecommunications Services (up 37%), an area in which the
Fund is significantly overweighted. The only two S&P sectors not up
double-digits in 2006 were Healthcare and Information Technology, two areas in
which the Fund is underweighted.
With some exceptions, media and telecommunications, areas of focus for the
Fund, returned to favor in 2006. One of the Fund's major holdings, Cablevision
(+64% after adjusting for the $10 per share special distribution made in April
2006), benefited from strong fundamentals, a revaluation by investors of cable
equities and a buyout offer in October from the controlling Dolan family. Other
top media performers included Rogers Communications (+41%), News Corp. (+38%),
Time Warner (+25%) and CBS Corp. (+20%). Holdings over 1% that were up more than
20% included Greif Inc. (+79%), Telephone & Data Systems (+51%), Deere (+40%),
Diageo (+36%), and Groupe Danone (+32%).
Two exceptions to the strong performance of media and telecommunications
were Media General (-27%) and Sprint Nextel (-11%). Media General suffered along
with many of its newspaper peers from a shift in consumer attention and
advertising dollars to newer forms of media while Sprint Nextel has struggled
with the integration of Nextel. Dana Corp. (-81%) also contributed negatively to
the Fund's performance as it filed for bankruptcy protection in 2006. While
these holdings were less than 1% at the end of the year, they did impact the
Fund's performance negatively.
Sincerely yours,
/s/ Bruce N. Alpert
Bruce N. Alpert
President
January 22, 2007
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GABELLI ASSET FUND,
THE CONSUMER PRICE INDEX +10%, AND THE S&P 500 INDEX
[GRAPHIC OMITTED]
PLOT POINTS FOLLOW:
Gabelli Asset Fund Consumer Price
(Class AAA) S&P 500 Index Index + 10%
3/3/86 $ 10,000 $ 10,000 $ 10,000
12/31/86 11,280 10,980 11,160
12/31/87 13,111 11,556 12,678
12/31/88 17,189 13,470 14,503
12/31/89 21,691 17,731 16,621
12/31/90 20,611 17,179 19,297
12/31/91 24,350 22,402 21,825
12/31/92 27,976 24,107 24,640
12/31/93 34,086 26,532 27,769
12/31/94 34,035 26,879 31,296
12/31/95 42,523 36,967 35,208
12/31/96 48,204 45,451 39,891
12/31/97 66,555 60,609 44,558
12/31/98 77,157 77,943 49,727
12/31/99 99,139 94,335 56,042
12/31/00 96,790 85,751 63,552
12/31/01 96,945 75,563 70,924
12/31/02 83,111 58,871 79,718
12/31/03 108,518 75,750 89,205
12/31/04 126,423 83,984 101,069
12/31/05 132,011 88,107 114,612
12/31/06 160,842 102,011 128,939
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, 2006 (A)
----------------------------------------------------
Since
Inception
Quarter 1 Year 3 Year 5 Year 10 Year 15 Year 20 Year (3/3/86)
- --------------------------------------------------------------------------------------------------------------------
GABELLI ASSET FUND CLASS AAA ....... 9.29% 21.84% 14.01% 10.66% 12.81% 13.41% 14.21% 14.27%
S&P 500 Index ...................... 6.69 15.78 10.43 6.18 8.42 10.63 11.79 11.79
Dow Jones Industrial Average ....... 7.31 18.98 8.49 6.83 8.95 12.02 12.74 12.92
Nasdaq Composite Index ............. 6.95 9.52 6.43 4.37 6.46 9.90 10.16 9.57
Class A ............................ 9.30 21.86 14.01 10.66 12.81 13.41 14.21 14.27
3.02(b) 14.85(b) 11.79(b) 9.35(b) 12.14(b) 12.97(b) 13.87(b) 13.93(b)
Class B ............................ 9.07 20.93 13.18 10.17 12.56 13.25 14.09 14.15
4.07(c) 15.93(c) 12.39(c) 9.90(c) 12.56(c) 13.25(c) 14.09(c) 14.15(c)
Class C ............................ 9.10 20.94 13.16 10.16 12.55 13.24 14.08 14.14
8.10(d) 19.94(d) 13.16 10.16 12.55 13.24 14.08 14.14
(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 DISTRIBUTIONS 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.
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 CAREFULLY CONSIDER THE INVESTMENT
OBJECTIVES, RISKS, CHARGES, AND EXPENSES OF THE FUND BEFORE INVESTING. THE
PROSPECTUS CONTAINS MORE INFORMATION ABOUT THIS AND OTHER MATTERS AND SHOULD
BE READ CAREFULLY BEFORE INVESTING. THE DOW JONES INDUSTRIAL AVERAGE IS AN
UNMANAGED INDEX OF 30 LARGE CAPITALIZATION STOCKS. THE S&P 500 INDEX AND THE
NASDAQ COMPOSITE INDEX ARE UNMANAGED INDICATORS OF STOCK MARKET PERFORMANCE.
DIVIDENDS ARE CONSIDERED REINVESTED EXCEPT FOR THE NASDAQ COMPOSITE INDEX.
YOU CANNOT INVEST DIRECTLY IN AN INDEX.
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. 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.
(b) INCLUDES THE EFFECT OF THE MAXIMUM 5.75% SALES CHARGE AT THE BEGINNING OF
THE PERIOD.
(c) PERFORMANCE RESULTS INCLUDE THE DEFERRED SALES CHARGES FOR THE CLASS B
SHARES UPON REDEMPTION AT THE END OF THE QUARTER, ONE YEAR, THREE YEAR, FIVE
YEAR, TEN YEAR, FIFTEEN YEAR, TWENTY YEAR, AND SINCE INCEPTION PERIODS OF
5%, 5%, 3%, 2%, 0%, 0%, 0%, AND 0%, RESPECTIVELY, OF THE FUND'S NAV AT THE
TIME OF PURCHASE OR SALE, WHICHEVER IS LOWER. CLASS B SHARES ARE NOT
AVAILABLE FOR NEW PURCHASES.
(d) PERFORMANCE RESULTS INCLUDE THE DEFERRED SALES CHARGES FOR THE CLASS C
SHARES UPON REDEMPTION AT THE END OF THE QUARTER AND ONE YEAR PERIOD OF 1%
OF THE FUND'S NAV AT THE TIME OF PURCHASE OR SALE, WHICHEVER IS LOWER.
- --------------------------------------------------------------------------------
2
THE GABELLI ASSET FUND
DISCLOSURE OF FUND EXPENSES (UNAUDITED)
For the Six Month Period from July 1, 2006 through December 31, 2006
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, 2006.
Beginning Ending Annualized Expenses
Account Value Account Value Expense Paid During
07/01/06 12/31/06 Ratio Period*
- --------------------------------------------------------------------------------
THE GABELLI ASSET FUND
- --------------------------------------------------------------------------------
ACTUAL FUND RETURN
Class AAA $1,000.00 $1,125.10 1.35% $ 7.23
Class A $1,000.00 $1,125.30 1.33% $ 7.12
Class B $1,000.00 $1,120.30 2.10% $11.22
Class C $1,000.00 $1,120.90 2.10% $11.23
HYPOTHETICAL 5% RETURN
Class AAA $1,000.00 $1,018.40 1.35% $ 6.87
Class A $1,000.00 $1,018.50 1.33% $ 6.77
Class B $1,000.00 $1,014.62 2.10% $10.66
Class C $1,000.00 $1,014.62 2.10% $10.66
* 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
he 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, 2006:
GABELLI ASSET FUND
Food and Beverage .................................. 11.1%
Energy and Utilities ............................... 7.9%
Publishing ......................................... 6.9%
Financial Services ................................. 6.5%
Telecommunications ................................. 6.5%
Diversified Industrial ............................. 5.8%
Consumer Products .................................. 5.8%
Cable and Satellite ................................ 5.4%
Equipment and Supplies ............................. 5.3%
Entertainment ...................................... 5.2%
Health Care ........................................ 3.4%
Aviation: Parts and Services ....................... 3.1%
Automotive: Parts and Accessories .................. 2.9%
Hotels and Gaming .................................. 2.9%
Broadcasting ....................................... 2.1%
Consumer Services .................................. 1.9%
Machinery .......................................... 1.9%
Communications Equipment ........................... 1.8%
Specialty Chemicals ................................ 1.7%
Metals and Mining .................................. 1.6%
Environmental Services ............................. 1.3%
Electronics ........................................ 1.3%
Aerospace .......................................... 1.3%
Real Estate ........................................ 1.2%
Agriculture ........................................ 1.1%
Automotive ......................................... 1.0%
Wireless Communications ............................ 0.8%
Business Services .................................. 0.8%
Retail ............................................. 0.7%
Transportation ..................................... 0.6%
U.S. Government Obligations ........................ 0.3%
Manufactured Housing and Recreational Vehicles ..... 0.3%
Computer Software and Services ..................... 0.3%
Closed-End Funds ................................... 0.1%
Paper and Forest Products .......................... 0.0%
Other Assets and Liabilities (Net) ................. (0.8)%
-------
100.0%
======
THE FUND FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION (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, 2006. 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
SEC'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 is available without charge, upon request, by
(i) calling 800-GABELLI (800-422-3554); (ii) writing to The Gabelli Funds at One
Corporate Center, Rye, NY 10580-1422; or (iii) visiting the SEC's website at
www.sec.gov.
4
THE GABELLI ASSET FUND
SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2006
================================================================================
MARKET
SHARES COST VALUE
------ ---- -----
COMMON STOCKS -- 100.0%
AEROSPACE -- 1.1%
70,000 Boeing Co. ....................$ 2,424,385 $ 6,218,800
60,000 Herley Industries Inc.+ ....... 867,403 971,400
12,000 Lockheed Martin Corp. ......... 354,600 1,104,840
15,000 Northrop Grumman Corp. ........ 734,191 1,015,500
2,000,000 Rolls-Royce Group plc+ ........ 14,749,075 17,533,729
73,400,000 Rolls-Royce Group plc, Cl. B .. 139,666 145,872
-------------- --------------
19,269,320 26,990,141
-------------- --------------
AGRICULTURE -- 1.1%
635,000 Archer-Daniels-Midland Co. .... 8,714,776 20,294,600
20,000 Delta & Pine Land Co. ......... 461,178 809,000
85,058 Monsanto Co. .................. 818,413 4,468,097
1,000 Potash Corp. of
Saskatchewan Inc. ........... 41,184 143,480
100,000 The Mosaic Co.+ ............... 1,586,792 2,136,000
-------------- --------------
11,622,343 27,851,177
-------------- --------------
AUTOMOTIVE -- 1.0%
75,000 General Motors Corp. .......... 2,305,918 2,304,000
500,000 Navistar International Corp.+ . 8,980,097 16,715,000
67,500 PACCAR Inc. ................... 522,021 4,380,750
25,000 Volkswagen AG ................. 1,044,095 2,834,466
-------------- --------------
12,852,131 26,234,216
-------------- --------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 2.8%
97,000 BorgWarner Inc. ............... 1,907,160 5,724,940
240,000 CLARCOR Inc. .................. 1,718,044 8,114,400
340,000 Dana Corp.+ ................... 3,461,814 472,600
260,000 Earl Scheib Inc.+ ............. 1,603,290 920,400
195,000 Federal-Mogul Corp.+ .......... 411,720 114,075
520,000 Genuine Parts Co. ............. 12,888,512 24,663,600
145,000 Johnson Controls Inc. ......... 3,898,381 12,458,400
170,000 Midas Inc.+ ................... 2,224,151 3,910,000
285,000 Modine Manufacturing Co. ...... 6,650,816 7,133,550
145,000 Proliance International Inc.+ . 898,178 667,000
180,000 Standard Motor
Products Inc. ............... 2,488,936 2,696,400
75,000 Superior Industries
International Inc. .......... 1,853,169 1,445,250
90,000 Tenneco Inc.+ ................. 305,244 2,224,800
200,000 TI Automotive Ltd., Cl. A+ (b) 0 0
-------------- --------------
40,309,415 70,545,415
-------------- --------------
AVIATION: PARTS AND SERVICES -- 3.1%
520,000 Curtiss-Wright Corp. .......... 3,391,227 19,281,600
15,000 EDO Corp. ..................... 431,784 356,100
570,000 GenCorp Inc.+ ................. 2,079,772 7,991,400
110,000 Kaman Corp. ................... 1,534,270 2,462,900
320,000 Precision Castparts Corp. ..... 3,919,515 25,049,600
102,000 Sequa Corp., Cl. A+ ........... 4,294,565 11,736,120
MARKET
SHARES COST VALUE
------ ---- -----
105,000 Sequa Corp., Cl. B+ ...........$ 5,381,630 $ 12,066,600
225,000 The Fairchild Corp., Cl. A+ ... 1,287,962 492,750
-------------- --------------
22,320,725 79,437,070
-------------- --------------
BROADCASTING -- 2.1%
401,000 CBS Corp., Cl. A .............. 7,023,402 12,519,220
50,000 CBS Corp., Cl. B .............. 1,257,800 1,559,000
30,000 Clear Channel
Communications Inc. ......... 1,063,026 1,066,200
10,000 Cogeco Inc. ................... 194,764 250,911
13,333 Corus Entertainment Inc.,
Cl. B, New York ............. 43,320 479,455
6,667 Corus Entertainment Inc.,
Cl. B, Toronto .............. 21,662 237,260
75,700 Fisher
Communications Inc.+ ........ 4,068,701 3,346,697
166,000 Granite Broadcasting Corp.+ ... 69,153 21,580
325,000 Gray Television Inc. .......... 3,563,463 2,382,250
8,000 Gray Television Inc., Cl. A ... 76,930 65,760
30,000 ION Media Networks Inc.+ ...... 45,132 15,000
230,000 Liberty Media Corp. - Capital,
Cl. A+ ...................... 4,578,481 22,535,400
175,000 Lin TV Corp., Cl. A+ .......... 3,350,308 1,741,250
40,000 Sinclair Broadcast Group Inc.,
Cl. A ....................... 358,285 420,000
400,000 Television
Broadcasts Ltd. ............. 1,815,551 2,442,693
100,000 Univision Communications
Inc., Cl. A+ ................ 3,509,420 3,542,000
215,000 Young Broadcasting Inc.,
Cl. A+ ...................... 2,475,266 606,300
-------------- --------------
33,514,664 53,230,976
-------------- --------------
BUSINESS SERVICES -- 0.8%
25,851 ACCO Brands Corp.+ ............ 152,168 684,276
30,600 Avis Budget Group Inc. ........ 540,933 663,714
45,000 ChoicePoint Inc.+ ............. 1,609,312 1,772,100
12,500 Clear Channel Outdoor
Holdings Inc., Cl. A+ ....... 259,405 348,875
195,000 Ecolab Inc. ................... 1,837,427 8,814,000
10,000 Imation Corp. ................. 203,344 464,300
65,000 Landauer Inc. ................. 402,818 3,410,550
23,500 MasterCard Inc., Cl. A ........ 916,500 2,314,515
115,500 Nashua Corp.+ ................. 1,687,940 966,735
-------------- --------------
7,609,847 19,439,065
-------------- --------------
CABLE AND SATELLITE -- 5.4%
2,000,000 Cablevision Systems
Corp., Cl. A+ ............... 5,712,538 56,960,000
170,000 Comcast Corp., Cl. A+ ......... 4,255,879 7,196,100
40,000 Comcast Corp., Cl. A,
Special+ .................... 306,462 1,675,200
100,000 EchoStar Communications
Corp., Cl. A+ ............... 2,982,011 3,803,000
See accompanying notes to financial statements.
5
THE GABELLI ASSET FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 2006
================================================================================
MARKET
SHARES COST VALUE
------ ---- -----
COMMON STOCKS (CONTINUED)
CABLE AND SATELLITE (CONTINUED)
320,096 Liberty Global Inc., Cl. A+ ...$ 3,187,437 $ 9,330,798
260,000 Liberty Global Inc., Cl. C+ ... 2,801,037 7,280,000
655,000 Rogers Communications Inc.,
Cl. B, New York ............. 6,649,003 39,038,000
50,000 Rogers Communications Inc.,
Cl. B, Toronto .............. 229,820 1,487,802
60,000 Shaw Communications Inc.,
Cl. B ....................... 164,952 1,899,070
80,000 Shaw Communications Inc.,
Cl. B, Non-Voting ........... 312,647 2,536,800
170,000 The DIRECTV Group Inc.+ ....... 2,814,845 4,239,800
-------------- --------------
29,416,631 135,446,570
-------------- --------------
CLOSED-END FUNDS -- 0.1%
78,001 Royce Value Trust Inc. ........ 938,786 1,731,622
-------------- --------------
COMMUNICATIONS EQUIPMENT -- 1.6%
113,223 Agere Systems Inc.+ ........... 1,631,136 2,170,485
120,000 Alcatel-Lucent, ADR ........... 3,233,774 1,706,400
565,000 Corning Inc.+ ................. 4,174,676 10,571,150
250,000 Motorola Inc. ................. 2,584,418 5,140,000
20,000 Nortel Networks Corp.,
New York+ ................... 523,704 534,600
90,000 Nortel Networks Corp.,
Toronto+ .................... 2,888,687 2,405,608
390,000 Thomas & Betts Corp.+ ......... 7,652,903 18,439,200
-------------- --------------
22,689,298 40,967,443
-------------- --------------
COMPUTER SOFTWARE AND SERVICES -- 0.3%
10,000 CA Inc. ....................... 145,700 226,500
1,600 eBay Inc.+ .................... 24,652 48,112
50,000 Jupitermedia Corp.+ ........... 287,066 396,000
26,026 Telecom Italia Media SpA ...... 26,184 12,385
245,000 Yahoo! Inc.+ .................. 8,132,706 6,257,300
-------------- --------------
8,616,308 6,940,297
-------------- --------------
CONSUMER PRODUCTS -- 5.8%
50,000 Alberto-Culver Co. ............ 1,116,801 1,072,500
12,000 Altria Group Inc. ............. 360,636 1,029,840
10,000 Avon Products Inc. ............ 275,840 330,400
11,000 Christian Dior SA ............. 307,335 1,172,530
280,000 Church & Dwight Co. Inc. ...... 1,838,465 11,942,000
38,000 Clorox Co. .................... 2,111,402 2,437,700
40,000 Colgate-Palmolive Co. ......... 2,092,913 2,609,600
40,000 Eastman Kodak Co. ............. 950,513 1,032,000
275,000 Energizer Holdings Inc.+ ...... 4,987,400 19,522,250
110,000 Fortune Brands Inc. ........... 2,384,058 9,392,900
318,100 Gallaher Group plc, ADR ....... 7,190,109 28,613,095
3,000 Givaudan SA ................... 1,028,013 2,777,185
37,000 Harley-Davidson Inc. .......... 93,194 2,607,390
90,000 Lenox Group Inc.+ ............. 949,612 576,000
MARKET
SHARES COST VALUE
------ ---- -----
100,000 Mattel Inc. ...................$ 1,731,397 $ 2,266,000
41,200 National Presto
Industries Inc. ............. 1,329,853 2,466,644
520,000 Procter & Gamble Co. .......... 17,588,062 33,420,400
50,000 Reckitt Benckiser plc ......... 1,570,346 2,284,965
50,000 Sally Beauty Holdings Inc.+ ... 413,063 390,000
60,000 Spectrum Brands Inc.+ ......... 583,519 654,000
1,000,000 Swedish Match AB .............. 10,327,823 18,697,186
10,000 Syratech Corp.+ ............... 2,000 850
55,000 Wolverine World Wide Inc. ..... 511,559 1,568,600
-------------- --------------
59,743,913 146,864,035
-------------- --------------
CONSUMER SERVICES -- 1.9%
385,000 IAC/InterActiveCorp+ .......... 4,260,890 14,306,600
1,100,000 Liberty Media Corp. -
Interactive, Cl. A+ ......... 5,674,009 23,727,000
445,000 Rollins Inc. .................. 3,437,602 9,838,950
-------------- --------------
13,372,501 47,872,550
-------------- --------------
DIVERSIFIED INDUSTRIAL -- 5.8%
80,000 Acuity Brands Inc. ............ 1,124,000 4,163,200
5,000 Anixter International Inc.+ ... 45,044 271,500
75,403 Contax Participacoes SA,
ADR ......................... 30,974 69,220
245,000 Cooper Industries Ltd.,
Cl. A ....................... 12,041,804 22,155,350
420,000 Crane Co. ..................... 6,593,275 15,388,800
124,000 Gardner Denver Inc.+ .......... 983,688 4,626,440
230,000 Greif Inc., Cl. A ............. 5,290,617 27,232,000
425,000 Honeywell International Inc. .. 13,730,962 19,227,000
590,000 ITT Corp. ..................... 9,292,829 33,523,800
50,000 Jacuzzi Brands Inc.+ .......... 614,701 621,500
142,000 Katy Industries Inc.+ ......... 1,266,995 380,560
50,000 Magnetek Inc.+ ................ 267,903 282,500
240,000 Myers Industries Inc. ......... 1,460,520 3,758,400
51,000 Pentair Inc. .................. 730,157 1,601,400
80,000 Smiths Group plc .............. 880,176 1,553,071
185,000 The Lamson &
Sessions Co.+ ............... 1,134,427 4,488,100
112,500 Trinity Industries Inc. ....... 931,715 3,960,000
130,000 Tyco International Ltd. ....... 3,144,914 3,952,000
10,000 Walter Industries Inc. ........ 236,430 270,500
-------------- --------------
59,801,131 147,525,341
-------------- --------------
ELECTRONICS -- 1.3%
9,600 Chemring Group plc ............ 125,113 296,987
3,000 Hitachi Ltd., ADR ............. 172,200 187,080
13,000 Kyocera Corp., ADR ............ 448,062 1,233,570
22,000 Molex Inc., Cl. A ............. 609,932 609,400
46,000 Samsung Electronics Co.
Ltd., GDR (a) ............... 8,616,601 15,160,215
45,000 Sony Corp., ADR ............... 1,280,970 1,927,350
See accompanying notes to financial statements.
6
THE GABELLI ASSET FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 2006
================================================================================
MARKET
SHARES COST VALUE
------ ---- -----
COMMON STOCKS (CONTINUED)
ELECTRONICS (CONTINUED)
500,000 Symbol Technologies Inc. ......$ 7,466,873 $ 7,470,000
205,000 Texas Instruments Inc. ........ 5,187,155 5,904,000
-------------- --------------
23,906,906 32,788,602
-------------- --------------
ENERGY AND UTILITIES -- 7.9%
37,000 AGL Resources Inc. ............ 618,475 1,439,670
150,000 Allegheny Energy Inc.+ ........ 1,510,943 6,886,500
200,000 Aquila Inc.+ .................. 838,410 940,000
250,000 BP plc, ADR ................... 7,151,966 16,775,000
2,000 Cameron International Corp.+ .. 69,450 106,100
25,000 CH Energy Group Inc. .......... 1,040,745 1,320,000
354,000 Chevron Corp. ................. 13,555,634 26,029,620
360,000 ConocoPhillips ................ 10,273,006 25,902,000
20,000 Constellation
Energy Group ................ 484,262 1,377,400
124,000 Devon Energy Corp. ............ 1,695,494 8,317,920
120,000 DPL Inc. ...................... 2,716,196 3,333,600
20,000 DTE Energy Co. ................ 832,127 968,200
240,000 Duke Energy Corp. ............. 4,598,908 7,970,400
100,000 Duquesne Light
Holdings Inc. ............... 1,461,629 1,985,000
25,000 Edison International .......... 425,000 1,137,000
350,000 El Paso Corp. ................. 3,048,363 5,348,000
270,000 El Paso Electric Co.+ ......... 3,113,357 6,579,900
150,000 Energy East Corp. ............. 3,072,446 3,720,000
110,000 EOG Resources Inc. ............ 503,773 6,869,500
340,000 Exxon Mobil Corp. ............. 8,166,149 26,054,200
12,000 FPL Group Inc. ................ 347,582 653,040
40,625 GlobalSantaFe Corp. ........... 1,058,988 2,387,937
50,000 Halliburton Co. ............... 992,903 1,552,500
130,000 Mirant Corp. Escrow+ (b) ...... 0 0
1,000 Niko Resources Ltd. ........... 57,456 71,474
22,086 NiSource Inc. ................. 475,953 532,273
185,000 Northeast Utilities ........... 3,536,826 5,209,600
10,000 NSTAR ......................... 284,757 343,600
24,000 Oceaneering
International Inc.+ ......... 650,712 952,800
1,000 PetroChina Co. Ltd., ADR ...... 61,027 140,780
100,000 Progress Energy Inc., CVO+ .... 52,000 32,500
50,000 Royal Dutch Shell plc,
Cl. A, ADR .................. 2,980,580 3,539,500
125,000 SJW Corp. ..................... 2,012,082 4,845,000
280,000 Southwest Gas Corp. ........... 4,940,645 10,743,600
110,000 The AES Corp.+ ................ 434,151 2,424,400
65,000 Transocean Inc.+ .............. 3,979,635 5,257,850
60,000 TXU Corp. ..................... 421,432 3,252,600
16,666 UIL Holdings Corp. ............ 426,371 703,139
75,000 Weatherford
International Ltd.+ ......... 3,407,062 3,134,250
-------------- --------------
91,296,495 198,836,853
-------------- --------------
MARKET
SHARES COST VALUE
------ ---- -----
ENTERTAINMENT -- 5.2%
13,000 Aruze Corp. ...................$ 378,492 $ 373,598
8,010 Chestnut Hill Ventures+ (b) ... 218,000 172,005
715,000 Discovery Holding Co.,
Cl. A+ ...................... 5,339,540 11,504,350
45,000 DreamWorks Animation
SKG Inc., Cl. A+ ............ 1,084,168 1,327,050
19,406 EMI Group plc ................. 75,408 100,691
185,000 EMI Group plc, ADR ............ 1,538,472 1,918,968
600,000 Gemstar-TV Guide
International Inc.+ ......... 2,634,671 2,406,000
620,000 Grupo Televisa SA, ADR ........ 4,249,951 16,746,200
2,000,000 Rank Group plc ................ 9,837,464 9,153,566
20,000 Regal Entertainment Group,
Cl. A ....................... 290,903 426,400
100,000 Six Flags Inc.+ ............... 450,414 524,000
470,000 The Walt Disney Co. ........... 9,958,179 16,106,900
1,510,000 Time Warner Inc. .............. 20,179,133 32,887,800
50,000 Triple Crown Media Inc.+ ...... 549,453 387,000
400,000 Viacom Inc., Cl. A+ ........... 10,979,484 16,404,000
530,000 Vivendi ....................... 10,600,520 20,715,860
55,000 World Wrestling
Entertainment Inc., Cl. A ... 549,085 896,500
-------------- --------------
78,913,337 132,050,888
-------------- --------------
ENVIRONMENTAL SERVICES -- 1.3%
350,000 Allied Waste Industries Inc.+ . 3,229,628 4,301,500
300,000 Republic Services Inc. ........ 3,560,581 12,201,000
450,000 Waste Management Inc. ......... 8,655,112 16,546,500
-------------- --------------
15,445,321 33,049,000
-------------- --------------
EQUIPMENT AND SUPPLIES -- 5.3%
712,500 AMETEK Inc. ................... 2,763,994 22,686,000
3,000 Amphenol Corp., Cl. A ......... 23,162 186,240
106,000 CIRCOR International Inc. ..... 932,373 3,899,740
160,000 Crown Holdings Inc.+ .......... 721,328 3,347,200
155,000 CTS Corp. ..................... 815,744 2,433,500
4,000 Danaher Corp. ................. 70,641 289,760
380,000 Donaldson Co. Inc. ............ 1,470,210 13,189,800
285,000 Fedders Corp.+ ................ 1,170,585 285,000
417,000 Flowserve Corp.+ .............. 6,599,240 21,045,990
150,000 Gerber Scientific Inc.+ ....... 1,412,103 1,884,000
210,000 GrafTech International Ltd.+ .. 2,229,118 1,453,200
520,000 IDEX Corp. .................... 2,958,676 24,653,200
24,000 Ingersoll-Rand Co. Ltd.,
Cl. A ....................... 501,720 939,120
230,000 Interpump Group SpA ........... 903,920 2,081,249
200,000 Lufkin Industries Inc. ........ 1,810,811 11,616,000
47,866 Met-Pro Corp. ................. 321,979 710,331
16,524 Mueller Water Products Inc.,
Cl. B+ ...................... 227,158 246,208
10,000 Sealed Air Corp. .............. 168,679 649,200
See accompanying notes to financial statements.
7
THE GABELLI ASSET FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 2006
================================================================================
MARKET
SHARES COST VALUE
------ ---- -----
COMMON STOCKS (CONTINUED)
EQUIPMENT AND SUPPLIES (CONTINUED)
35,000 The Manitowoc Co. Inc. ........$ 127,596 $ 2,080,050
120,000 The Weir Group plc ............ 504,947 1,254,675
30,000 Valmont Industries Inc. ....... 242,908 1,664,700
410,000 Watts Water
Technologies Inc., Cl. A .... 4,751,606 16,855,100
-------------- --------------
30,728,498 133,450,263
-------------- --------------
FINANCIAL SERVICES -- 6.5%
15,000 Alleghany Corp.+ .............. 2,612,216 5,454,000
420,000 American Express Co. .......... 9,628,368 25,481,400
25,000 American International
Group Inc. .................. 1,677,250 1,791,500
85,000 Ameriprise Financial Inc. ..... 1,628,210 4,632,500
50,000 Argonaut Group Inc.+ .......... 1,184,298 1,743,000
10,000 Bank of America Corp. ......... 188,637 533,900
220 Berkshire Hathaway Inc.,
Cl. A+ ...................... 874,549 24,197,800
50,000 BKF Capital Group Inc.+ ....... 669,816 167,500
7,500 Calamos Asset
Management Inc., Cl. A ...... 135,000 201,225
300,000 Citigroup Inc. ................ 14,823,633 16,710,000
35,000 Commerzbank AG ................ 624,519 1,332,915
110,000 Commerzbank AG, ADR ........... 2,308,920 4,170,243
155,000 Deutsche Bank AG .............. 7,004,175 20,652,200
55,000 H&R Block Inc. ................ 694,635 1,267,200
120,000 Janus Capital Group Inc. ...... 2,225,261 2,590,800
26,400 JPMorgan Chase & Co. .......... 535,615 1,275,120
6,000 Legg Mason Inc. ............... 527,420 570,300
12,000 Lehman Brothers
Holdings Inc. ............... 54,150 937,440
76,000 Leucadia National Corp. ....... 662,967 2,143,200
120,000 Mellon Financial Corp. ........ 4,103,608 5,058,000
23,000 Merrill Lynch & Co. Inc. ...... 948,745 2,141,300
30,000 PNC Financial Services
Group Inc. .................. 1,456,850 2,221,200
2,500 Prudential Financial Inc. ..... 68,750 214,650
85,000 State Street Corp. ............ 661,975 5,732,400
20,000 SunTrust Banks Inc. ........... 424,879 1,689,000
60,000 T. Rowe Price Group Inc. ...... 1,012,984 2,626,200
1,000 TD Banknorth Inc. ............. 32,210 32,280
1,000 The Allstate Corp. ............ 23,675 65,110
55,000 The Bank of
New York Co. Inc. ........... 1,858,706 2,165,350
378,000 The Midland Co. ............... 1,942,907 15,857,100
150,000 The Phoenix Companies Inc. .... 2,222,423 2,383,500
40,000 The St. Paul Travelers
Companies Inc. .............. 1,575,006 2,147,600
19,000 Unitrin Inc. .................. 498,464 952,090
8,500 Value Line Inc. ............... 136,515 386,325
MARKET
SHARES COST VALUE
------ ---- -----
198,000 Waddell & Reed
Financial Inc., Cl. A .......$ 3,970,134 $ 5,417,280
-------------- --------------
68,997,470 164,941,628
-------------- --------------
FOOD AND BEVERAGE -- 11.1%
344,000 Brown-Forman Corp., Cl. A ..... 8,522,627 23,195,920
120,000 Cadbury Schweppes plc, ADR .... 4,284,867 5,151,600
150,000 Campbell Soup Co. ............. 4,181,186 5,833,500
80,000 Coca-Cola Enterprises Inc. .... 1,573,687 1,633,600
11,000 Coca-Cola Hellenic
Bottling Co. SA ............. 268,442 435,600
355,000 Corn Products
International Inc. .......... 4,319,939 12,261,700
40,000 Davide Campari-Milano SpA ..... 394,038 396,542
230,000 Del Monte Foods Co. ........... 2,246,650 2,536,900
318,000 Diageo plc, ADR ............... 11,903,832 25,220,580
70,000 Farmer Brothers Co. ........... 943,094 1,494,500
330,000 Flowers Foods Inc. ............ 2,105,149 8,906,700
11,400 Fomento Economico
Mexicano SAB de CV, ADR ..... 1,000,831 1,319,664
350,000 General Mills Inc. ............ 11,981,370 20,160,000
210,000 Groupe Danone ................. 20,879,524 31,823,642
90,000 Groupe Danone, ADR ............ 1,851,062 2,934,000
1,589,300 Grupo Bimbo SA de CV,
Cl. A ....................... 3,285,390 7,944,293
190,000 H.J. Heinz Co. ................ 6,807,817 8,551,900
10,000 Hain Celestial Group Inc.+ .... 141,134 312,100
10,000 Heineken NV ................... 473,801 475,612
200,000 ITO EN Ltd. ................... 6,242,089 6,117,390
125,000 Kellogg Co. ................... 3,311,846 6,257,500
95,000 Kerry Group plc, Cl. A ........ 1,122,284 2,357,599
88,000 Kikkoman Corp. ................ 990,823 1,062,611
33,000 LVMH Moet Hennessy
Louis Vuitton SA ............ 1,150,670 3,482,740
20,000 Myojo Foods Co. Ltd. .......... 131,843 139,490
9,000 Nestle SA ..................... 1,868,526 3,198,195
75,000 Nissin Food
Products Co. Ltd. ........... 2,783,594 2,779,295
770,000 PepsiAmericas Inc. ............ 11,293,018 16,154,600
355,000 PepsiCo Inc. .................. 9,198,266 22,205,250
8,720 Pernod-Ricard SA .............. 1,619,008 2,002,878
155,000 Ralcorp Holdings Inc.+ ........ 2,450,803 7,887,950
32,000 Remy Cointreau SA ............. 2,055,910 2,069,830
265,000 The Coca-Cola Co. ............. 10,217,331 12,786,250
65,000 The Hershey Co. ............... 1,230,126 3,237,000
20,000 The J.M. Smucker Co. .......... 547,733 969,400
158,117 Tootsie Roll Industries Inc. .. 2,005,307 5,170,426
255,000 Wm. Wrigley Jr. Co. ........... 6,240,995 13,188,600
63,750 Wm. Wrigley Jr. Co., Cl. B .... 1,658,999 3,276,750
185,000 YAKULT HONSHA Co. Ltd. ........ 5,068,329 5,316,583
-------------- --------------
158,351,940 280,248,690
-------------- --------------
See accompanying notes to financial statements.
8
THE GABELLI ASSET FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 2006
================================================================================
MARKET
SHARES COST VALUE
------ ---- -----
COMMON STOCKS (CONTINUED)
HEALTH CARE -- 3.4%
15,000 Advanced Medical
Optics Inc.+ ................$ 562,780 $ 528,000
26,222 Allergan Inc. ................. 2,458,117 3,139,822
5,000 Alpharma Inc., Cl. A .......... 110,675 120,500
44,000 Amgen Inc.+ ................... 203,194 3,005,640
24,000 AngioDynamics Inc.+ ........... 550,004 515,760
3,000 ArthroCare Corp.+ ............. 34,530 119,760
44,000 Biogen Idec Inc.+ ............. 409,921 2,164,360
5,000 Biomet Inc. ................... 156,210 206,350
28,000 Biosite Inc.+ ................. 1,285,660 1,367,800
150,000 Bristol-Myers Squibb Co. ...... 4,060,053 3,948,000
85,000 Chemed Corp. .................. 1,326,740 3,143,300
60,000 CONMED Corp.+ ................. 1,316,339 1,387,200
11,000 DENTSPLY International Inc. ... 209,434 328,350
90,000 Eli Lilly & Co. ............... 5,251,364 4,689,000
40,000 Exactech Inc.+ ................ 612,866 569,200
40,000 Henry Schein Inc.+ ............ 1,091,829 1,959,200
30,000 Hospira Inc.+ ................. 1,081,595 1,007,400
30,000 IMS Health Inc. ............... 800,421 824,400
15,000 Inverness Medical
Innovations Inc.+ ........... 255,011 580,500
45,000 Invitrogen Corp.+ ............. 2,307,565 2,546,550
105,000 Johnson & Johnson ............. 3,265,378 6,932,100
120,000 Medco Health
Solutions Inc.+ ............. 3,781,261 6,412,800
150,000 Merck & Co. Inc. .............. 4,480,183 6,540,000
2,000 Nobel Biocare Holding AG ...... 285,863 591,301
14,000 Orthofix International NV+ .... 472,410 700,000
4,000 OrthoLogic Corp.+ ............. 13,880 5,720
32,000 Patterson Companies Inc.+ ..... 702,130 1,136,320
570,000 Pfizer Inc. ................... 10,783,376 14,763,000
133,000 Schering-Plough Corp. ......... 2,512,360 3,144,120
5,039 Serono SA ..................... 4,528,202 4,524,141
2,000 Stryker Corp. ................. 65,440 110,220
40,000 Thoratec Corp.+ ............... 514,145 703,200
25,000 UnitedHealth Group Inc. ....... 1,172,152 1,343,250
35,000 William Demant
Holding A/S+ ................ 1,644,239 2,837,771
5,000 Wright Medical Group Inc.+ .... 92,660 116,400
55,000 Wyeth ......................... 2,169,854 2,800,600
1,000 Young Innovations Inc. ........ 30,000 33,300
3,500 Zimmer Holdings Inc.+ ......... 217,154 274,330
-------------- --------------
60,814,995 85,119,665
-------------- --------------
HOTELS AND GAMING -- 2.9%
55,000 Aztar Corp.+ .................. 1,243,242 2,993,100
15,200 Churchill Downs Inc. .......... 589,750 649,648
335,000 Gaylord Entertainment Co.+ .... 9,073,425 17,061,550
35,000 Harrah's Entertainment Inc. ... 765,198 2,895,200
590,000 Hilton Hotels Corp. ........... 6,738,575 20,591,000
MARKET
SHARES COST VALUE
------ ---- -----
40,000 Host Hotels & Resorts Inc. ....$ 817,800 $ 982,000
39,600 International Game
Technology .................. 1,114,521 1,829,520
1,582,576 Ladbrokes plc ................. 15,136,688 12,960,126
22,000 Las Vegas Sands Corp.+ ........ 809,047 1,968,560
447,000 Mandarin Oriental
International Ltd. .......... 754,937 746,490
50,000 MGM Mirage+ ................... 619,882 2,867,500
3,500 Orient-Express Hotels Ltd.,
Cl. A ....................... 154,525 165,620
10,000 Pinnacle Entertainment Inc.+ .. 176,000 331,400
90,000 Starwood Hotels & Resorts
Worldwide Inc. .............. 1,823,635 5,625,000
30,000 Wyndham
Worldwide Corp.+ ............ 714,450 960,600
-------------- --------------
40,531,675 72,627,314
-------------- --------------
MACHINERY -- 1.9%
140,000 Caterpillar Inc. .............. 927,858 8,586,200
37,300 CNH Global NV ................. 815,556 1,018,290
395,000 Deere & Co. ................... 6,618,190 37,552,650
-------------- --------------
8,361,604 47,157,140
-------------- --------------
MANUFACTURED HOUSING AND RECREATIONAL VEHICLES -- 0.3%
110,000 Cavalier Homes Inc.+ .......... 542,458 462,000
32,200 Cavco Industries Inc.+ ........ 609,204 1,128,288
110,000 Champion Enterprises Inc.+ .... 1,051,665 1,029,600
35,000 Coachmen Industries Inc. ...... 487,069 385,000
120,000 Fleetwood Enterprises Inc.+ ... 1,387,305 949,200
76,000 Huttig Building
Products Inc.+ .............. 232,463 402,040
12,500 Nobility Homes Inc. ........... 260,493 332,375
20,000 Palm Harbor Homes Inc.+ ....... 346,431 280,400
71,500 Skyline Corp. ................. 2,837,933 2,875,730
-------------- --------------
7,755,021 7,844,633
-------------- --------------
METALS AND MINING -- 1.6%
50,000 Alcoa Inc. .................... 1,385,170 1,500,500
75,000 Arizona Star
Resource Corp.+ ............. 312,749 887,536
403,580 Barrick Gold Corp. ............ 7,594,595 12,389,906
12,525 Freeport-McMoRan Copper
& Gold Inc., Cl. B .......... 272,500 698,018
100,000 Ivanhoe Mines Ltd.+ ........... 775,930 983,000
10,000 James River Coal Co.+ ......... 100,252 92,800
50,000 Kinross Gold Corp.+ ........... 359,224 594,000
510,000 Newmont Mining Corp. .......... 9,521,832 23,026,500
30,000 Peabody Energy Corp. .......... 1,314,868 1,212,300
-------------- --------------
21,637,120 41,384,560
-------------- --------------
PAPER AND FOREST PRODUCTS -- 0.0%
20,000 Svenska Cellulosa AB, Cl. B ... 864,557 1,044,413
-------------- --------------
See accompanying notes to financial statements.
9
THE GABELLI ASSET FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 2006
================================================================================
MARKET
SHARES COST VALUE
------ ---- -----
COMMON STOCKS (CONTINUED)
PUBLISHING -- 6.9%
230,000 Belo Corp., Cl. A .............$ 4,146,932 $ 4,225,100
70,000 Dow Jones & Co. Inc. .......... 2,814,568 2,660,000
25,000 Emap plc ...................... 362,733 395,268
9,000 Idearc Inc.+ .................. 234,217 257,850
220,000 Independent News & Media plc .. 674,635 874,134
38,000 Lee Enterprises Inc. .......... 875,843 1,180,280
65,535 McClatchy Co., Cl. A .......... 1,572,425 2,837,665
364,000 Media General Inc., Cl. A ..... 10,175,790 13,529,880
80,000 Meredith Corp. ................ 1,650,283 4,508,000
132,000 New York Times Co., Cl. A ..... 1,094,267 3,215,520
4,720,000 News Corp., Cl. A ............. 35,476,252 101,385,600
24,000 News Corp., Cl. B ............. 227,345 534,240
650,000 PRIMEDIA Inc.+ ................ 2,384,453 1,098,500
20,300 Seat Pagine Gialle SpA ........ 11,997 12,099
245,000 The E.W. Scripps Co., Cl. A ... 7,786,098 12,235,300
280,000 The McGraw-Hill
Companies Inc. .............. 2,576,918 19,045,600
235,000 The Reader's Digest
Association Inc. ............ 4,197,819 3,924,500
45,000 Tribune Co. ................... 1,405,463 1,385,100
-------------- --------------
77,668,038 173,304,636
-------------- --------------
REAL ESTATE -- 1.2%
120,082 Florida East Coast
Industries Inc. ............. 1,856,261 7,156,887
100,000 Griffin Land &
Nurseries Inc.+ ............. 1,372,091 3,245,000
70,000 ProLogis ...................... 1,800,934 4,253,900
50,000 Realogy Corp.+ ................ 968,275 1,516,000
259,000 The St. Joe Co. ............... 1,978,948 13,874,630
-------------- --------------
7,976,509 30,046,417
-------------- --------------
RETAIL -- 0.7%
15,000 Aaron Rents Inc. .............. 46,693 431,700
60,750 Aaron Rents Inc., Cl. A ....... 287,231 1,602,585
253,877 AutoNation Inc.+ .............. 2,169,222 5,412,658
20,000 AutoZone Inc.+ ................ 1,681,602 2,311,200
18,000 Coldwater Creek Inc.+ ......... 30,574 441,360
35,000 Costco Wholesale Corp. ........ 1,579,106 1,850,450
35,000 CSK Auto Corp.+ ............... 561,129 600,250
10,000 Safeway Inc. .................. 224,866 345,600
10,000 SUPERVALU Inc. ................ 297,500 357,500
20,000 The Home Depot Inc. ........... 689,370 803,200
118,000 The Kroger Co. ................ 693,975 2,722,260
-------------- --------------
8,261,268 16,878,763
-------------- --------------
SPECIALTY CHEMICALS -- 1.7%
350,000 Chemtura Corp. ................ 3,496,553 3,370,500
470,000 Ferro Corp. ................... 7,713,851 9,724,300
1,000 FMC Corp. ..................... 64,790 76,550
130,000 General Chemical
Group Inc.+ ................. 502,184 2,600
MARKET
SHARES COST VALUE
------ ---- -----
140,000 H.B. Fuller Co. ...............$ 1,076,987 $ 3,614,800
240,000 Hercules Inc.+ ................ 3,605,110 4,634,400
110,000 International Flavors &
Fragrances Inc. ............. 3,824,846 5,407,600
100,000 MacDermid Inc. ................ 3,407,960 3,410,000
100,000 Material Sciences Corp.+ ...... 934,840 1,294,000
648,000 Omnova Solutions Inc.+ ........ 2,046,412 2,967,840
350,000 Sensient Technologies Corp. ... 6,822,605 8,610,000
13,380 Tronox Inc., Cl. B ............ 152,038 211,270
-------------- --------------
33,648,176 43,323,860
-------------- --------------
TELECOMMUNICATIONS -- 6.5%
40,000 Alltel Corp. .................. 1,237,816 2,419,200
150,000 AT&T Inc. ..................... 3,658,467 5,362,500
14,000 Brasil Telecom Participacoes
SA, ADR ..................... 810,959 597,660
200,000 BT Group plc .................. 753,355 1,180,663
20,000 BT Group plc, ADR ............. 674,674 1,197,800
67,000 CenturyTel Inc. ............... 961,785 2,925,220
520,000 Cincinnati Bell Inc.+ ......... 3,080,199 2,376,400
80,000 Citizens Communications Co. ... 909,575 1,149,600
280,000 Commonwealth Telephone
Enterprises Inc. ............ 5,196,101 11,720,800
80,000 Deutsche Telekom AG, ADR ...... 1,229,873 1,456,000
44,000 Embarq Corp. .................. 1,359,270 2,312,640
35,000 France Telecom SA, ADR ........ 683,990 969,500
1,980,000 Qwest Communications
International Inc.+ ......... 5,539,649 16,572,600
1,040,000 Sprint Nextel Corp. ........... 14,860,987 19,645,600
75,403 Tele Norte Leste
Participacoes SA, ADR ....... 1,001,480 1,125,013
4,300,935 Telecom Italia SpA ............ 2,446,277 13,001,308
280,000 Telecom Italia SpA, ADR ....... 1,913,792 8,436,400
94,000 Telefonica SA, ADR ............ 3,341,710 5,992,500
10,400 Telefonica SA, BDR ............ 119,280 220,754
40,000 Telefonos de Mexico SAB
de CV, Cl. L, ADR ........... 171,746 1,130,400
592,000 Telephone & Data
Systems Inc. ................ 12,078,671 32,163,360
510,000 Telephone & Data
Systems Inc., Special ....... 10,262,077 25,296,000
180,000 Verizon
Communications Inc. ......... 5,621,212 6,703,200
40,000 Windstream Corp. .............. 266,735 568,800
-------------- --------------
78,179,680 164,523,918
-------------- --------------
TRANSPORTATION -- 0.6%
85,000 AMR Corp.+ .................... 1,245,604 2,569,550
260,000 GATX Corp. .................... 5,898,347 11,265,800
63,000 Grupo TMM SA, Cl. A, ADR+ ..... 411,039 158,760
4,000 Kansas City Southern+ ......... 7,317 115,920
7,900 Providence and Worcester
Railroad Co. ................ 103,258 154,050
-------------- --------------
7,665,565 14,264,080
-------------- --------------
See accompanying notes to financial statements.
10
THE GABELLI ASSET FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 2006
================================================================================
MARKET
SHARES COST VALUE
------ ---- -----
COMMON STOCKS (CONTINUED)
WIRELESS COMMUNICATIONS -- 0.8%
140,000 America Movil SAB de CV,
Cl. L, ADR ..................$ 893,948 $ 6,330,800
72,000 Price
Communications Corp. ........ 1,120,226 1,515,600
1,350 Tele Norte Celular
Participacoes SA, ADR ....... 20,857 12,150
3,375 Telemig Celular
Participacoes SA, ADR ....... 97,539 129,094
13,001 Tim Participacoes SA, ADR ..... 157,722 450,095
175,200 United States Cellular Corp.+ . 8,337,306 12,192,168
192 Vivo Participacoes SA+ ........ 670 1,321
67,505 Vivo Participacoes SA, ADR .... 648,113 276,770
4,174 Vivo Participacoes SA, Pfd.+ .. 66,002 17,075
4,375 Vodafone Group plc, ADR ....... 43,962 121,538
-------------- --------------
11,386,345 21,046,611
-------------- --------------
TOTAL
COMMON STOCKS ............... 1,174,467,533 2,525,007,852
-------------- --------------
PREFERRED STOCKS -- 0.2%
AEROSPACE -- 0.2%
29,000 Northrop Grumman Corp.,
7.000% Cv. Pfd., Ser. B ..... 3,379,080 3,857,000
-------------- --------------
PRINCIPAL
AMOUNT
------
CONVERTIBLE CORPORATE BONDS -- 0.3%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.1%
$1,000,000 Standard Motor Products Inc.,
Sub. Deb. Cv.,
6.750%, 07/15/09 ............ 949,651 950,000
1,500,000 The Pep Boys -
Manny, Moe & Jack, Cv.,
4.250%, 06/01/07 ............ 1,499,116 1,492,500
-------------- --------------
2,448,767 2,442,500
-------------- --------------
AVIATION: PARTS AND SERVICES -- 0.0%
500,000 GenCorp Inc., Sub. Deb. Cv.,
5.750%, 04/15/07 ............ 500,591 519,375
-------------- --------------
COMMUNICATIONS EQUIPMENT -- 0.2%
2,000,000 Agere Systems Inc.,
Sub. Deb. Cv.,
6.500%, 12/15/09 ............ 1,938,059 2,045,000
1,100,000 Nortel Networks Corp., Cv.,
4.250%, 09/01/08 ............ 1,080,050 1,069,750
-------------- --------------
3,018,109 3,114,750
-------------- --------------
TOTAL CONVERTIBLE
CORPORATE BONDS ............. 5,967,467 6,076,625
-------------- --------------
MARKET
SHARES COST VALUE
------ ---- -----
WARRANTS -- 0.0%
COMMUNICATIONS EQUIPMENT -- 0.0%
1,097 Alcatel-Lucent,
expire 12/10/07+ ............$ 1,821 $ 340
-------------- --------------
ENERGY AND UTILITIES -- 0.0%
11,313 Mirant Corp., Ser. A,
expire 01/03/11+ ............ 149,058 148,200
-------------- --------------
TOTAL WARRANTS ................ 150,879 148,540
-------------- --------------
PRINCIPAL
AMOUNT
------
U.S. GOVERNMENT OBLIGATIONS -- 0.3%
$8,520,000 U.S. Treasury Bills,
4.845% to 5.009%++,
01/04/07 to 04/26/07 ........ 8,453,393 8,456,527
-------------- --------------
TOTAL
INVESTMENTS -- 100.8% .......$1,192,418,352 2,543,546,544
==============
OTHER ASSETS AND LIABILITIES
(NET) -- (0.8)% ............................. (19,304,017)
--------------
NET ASSETS -- 100.0% .......................... $2,524,242,527
==============
- ----------------
(a) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. This security may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At December 31,
2006, the Rule 144A security is considered liquid and the market value
amounted to $15,160,215 or 0.60% of total investments.
(b) Security fair valued under procedures established by the Board of Trustees.
The procedures may include reviewing available financial information about
the company and reviewing valuation of comparable securities and other
factors on a regular basis. At December 31, 2006, the market value of the
fair valued securities amounted to $172,005 or 0.01% of total investments.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR American Depository Receipt
BDR Brazilian Depository Receipt
CVO Contingent Value Obligation
GDR Global Depository Receipt
See accompanying notes to financial statements.
11
THE GABELLI ASSET FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2006
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (cost $1,192,418,352) ........... $ 2,543,546,544
Cash .................................................. 954
Receivable for investments sold ....................... 3,091,855
Dividends and interest receivable ..................... 2,302,061
Receivable for Fund shares sold ....................... 1,989,985
Prepaid expense ....................................... 80,834
---------------
TOTAL ASSETS .......................................... 2,551,012,233
---------------
LIABILITIES:
Payable for investments purchased ..................... 19,326,946
Payable for Fund shares redeemed ...................... 4,276,178
Payable for investment advisory fees .................. 2,139,135
Payable for distribution fees ......................... 536,868
Payable for accounting fees ........................... 7,376
Other accrued expenses ................................ 483,203
---------------
TOTAL LIABILITIES ..................................... 26,769,706
---------------
NET ASSETS applicable to 53,279,635
shares outstanding .................................. $ 2,524,242,527
===============
NET ASSETS CONSIST OF:
Paid-in capital ....................................... $ 1,180,130,000
Accumulated net investment income ..................... 42,728
Accumulated distributions in excess of net
realized gain on investments and foreign
currency transactions ............................... (7,059,700)
Net unrealized appreciation on investments ............ 1,351,128,192
Net unrealized appreciation on foreign
currency translations ............................... 1,307
---------------
NET ASSETS ............................................ $ 2,524,242,527
===============
SHARES OF BENEFICIAL INTEREST:
CLASS AAA:
Net Asset Value, offering and redemption price
per share ($2,516,087,680 / 53,105,929 shares
outstanding; unlimited number of
shares authorized) .................................. $47.38
======
CLASS A:
Net Asset Value and redemption price per share
($4,805,851 / 101,804 shares outstanding;
unlimited number of shares authorized) .............. $47.21
======
Maximum offering price per share (NAV / .9425,
based on maximum sales charge of 5.75%
of the offering price) .............................. $50.09
======
CLASS B:
Net Asset Value and offering price per share
($1,449.7 / 31.03 shares outstanding;
unlimited number of shares authorized) .............. $46.72(a)
======
CLASS C:
Net Asset Value and offering price per share
($3,347,546 / 71,871 shares outstanding;
unlimited number of shares authorized) .............. $46.58(a)
======
- --------------------
(a) Redemption price varies based on the length of time held.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2006
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends (net of foreign taxes of $646,891) ............. $ 46,086,773
Interest ................................................. 1,125,958
-------------
TOTAL INVESTMENT INCOME .................................. 47,212,731
-------------
EXPENSES:
Investment advisory fees ................................. 23,228,484
Distribution fees - Class AAA ............................ 5,792,436
Distribution fees - Class A .............................. 7,963
Distribution fees - Class B .............................. 41
Distribution fees - Class C .............................. 27,201
Shareholder services fees ................................ 1,458,922
Shareholder communications expenses ...................... 296,768
Custodian fees ........................................... 325,149
Legal and audit fees ..................................... 81,765
Registration expenses .................................... 61,144
Trustees' fees ........................................... 52,995
Accounting fees .......................................... 45,000
Interest expense ......................................... 33,053
Miscellaneous expenses ................................... 220,193
-------------
TOTAL EXPENSES ........................................... 31,631,114
Less: Custodian fee credits .............................. (27,601)
-------------
NET EXPENSES ............................................. 31,603,513
-------------
NET INVESTMENT INCOME .................................... 15,609,218
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain on investments ......................... 122,935,649
Net realized gain on foreign
currency transactions .................................. 116,758
-------------
Net realized gain on investments and foreign
currency transactions .................................. 123,052,407
-------------
Net change in unrealized appreciation/
depreciation on investments ............................ 324,723,379
Net change in unrealized appreciation/
depreciation on foreign currency translations .......... 3,743
-------------
Net change in unrealized appreciation/
depreciation on investments and foreign
currency translations .................................. 324,727,122
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY ....................... 447,779,529
-------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ........................................ $ 463,388,747
=============
See accompanying notes to financial statements.
12
THE GABELLI ASSET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2006 DECEMBER 31, 2005
----------------- -----------------
OPERATIONS:
Net investment income ............................................ $ 15,609,218 $ 6,498,797
Net realized gain on investments and foreign currency transactions 123,052,407 107,057,442
Net change in unrealized appreciation/depreciation on investments
and foreign currency translations ............................... 324,727,122 (15,485,585)
--------------- ---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............. 463,388,747 98,070,654
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class AAA ...................................................... (15,507,490) (6,113,895)
Class A ........................................................ (32,680) (7,382)
Class C ........................................................ (1,640) (3,075)
--------------- ---------------
(15,541,810) (6,124,352)
--------------- ---------------
Net realized gain on investments and foreign currency transactions
Class AAA ...................................................... (123,401,185) (107,016,495)
Class A ........................................................ (235,506) (89,587)
Class B ........................................................ (72) (57)
Class C ........................................................ (166,895) (108,437)
--------------- ---------------
(123,803,658) (107,214,576)
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS .............................. (139,345,468) (113,338,928)
--------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Class AAA ...................................................... (53,691,894) 45,495,325
Class A ........................................................ 2,459,100 1,689,183
Class B ........................................................ (105) 58
Class C ........................................................ 734,082 1,985,171
--------------- ---------------
Net increase (decrease) in net assets from shares of
beneficial interest transactions ............................... (50,498,817) 49,169,737
--------------- ---------------
REDEMPTION FEES .................................................. 6,381 39,655
--------------- ---------------
NET INCREASE IN NET ASSETS ....................................... 273,550,843 33,941,118
NET ASSETS:
Beginning of period .............................................. 2,250,691,684 2,216,750,566
--------------- ---------------
End of period (including undistributed net
investment income of $42,728
and $76,880, respectively) .................................... $ 2,524,242,527 $ 2,250,691,684
=============== ===============
See accompanying notes to financial statements.
13
THE GABELLI ASSET FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION. The Gabelli Asset Fund (the "Fund") was organized on November
25, 1985 as a Massachusetts business 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's primary objective is growth of
capital. The Fund commenced investment operations on March 3, 1986.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with United States ("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 a foreign market are generally valued
at the preceding closing values of such securities on the relevant market, but
may be fair valued pursuant to procedures established by the Board if market
conditions change significantly after the close of the foreign market but prior
to the close of business on the day the securities are being valued. 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 fair valued 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
fair valued as determined by 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 American Depository
Receipt ("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.
In September 2006, the Financial Accounting Standards Board ("the FASB") issued
Statement of Financial Accounting Standards ("SFAS") 157, Fair Value
Measurements, which clarifies the definition of fair value and requires
companies to expand their disclosure about the use of fair value to measure
assets and liabilities in interim and annual periods subsequent to initial
recognition. Adoption of SFAS 157 requires the use of the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. SFAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. At this time,
management is
14
THE GABELLI ASSET FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
in the process of reviewing the requirements of SFAS 157 against its current
valuation policies to determine future applicability.
FORWARD FOREIGN EXCHANGE CONTRACTS. The Fund may engage in forward foreign
exchange contracts for hedging a specific transaction with respect to either the
currency in which the transaction is denominated or another currency as deemed
appropriate by the Adviser. Forward foreign exchange contracts are valued at the
forward rate and are marked-to-market daily. The change in market value is
included in unrealized appreciation/depreciation on investments and foreign
currency translations. When the contract is closed, the Fund records a realized
gain or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed.
The use of forward foreign exchange contracts does not eliminate fluctuations in
the underlying prices of the Fund's portfolio securities, but it does establish
a rate of exchange that can be achieved in the future. Although forward foreign
exchange contracts limit the risk of loss due to a decline in the value of the
hedged currency, they also limit any potential gain that might result should the
value of the currency increase. In addition, the Fund could be exposed to risks
if the counterparties to the contracts are unable to meet the terms of their
contracts. At December 31, 2006, there were no open forward foreign exchange
contracts.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currencies, investments, and other assets and
liabilities are translated into U.S. dollars at the current exchange rates.
Purchases and sales of investment securities, income, and expenses are
translated at the exchange rate prevailing on the respective dates of such
transactions. Unrealized gains and losses that result from changes in foreign
exchange rates and/or changes in market prices of securities have been included
in unrealized appreciation/depreciation on investments and foreign currency
translations. Net realized foreign currency gains and losses resulting from
changes in exchange rates include foreign currency gains and losses between
trade date and settlement date on investment securities transactions, foreign
currency transactions, and the difference between the amounts of interest and
dividends recorded on the books of the Fund and the amounts actually received.
The portion of foreign currency gains and losses related to fluctuation in
exchange rates between the initial trade date and subsequent sale trade date is
included in realized gain/(loss) on investments.
FOREIGN SECURITIES. The Fund may directly purchase securities of foreign
issuers. Investing in securities of foreign issuers involves special risks not
typically associated with investing in securities of U.S. issuers. The risks
include possible revaluation of currencies, the ability to repatriate funds,
less complete financial information about companies, and possible future adverse
political and economic developments. Moreover, securities of many foreign
issuers and their markets may be less liquid and their prices more volatile than
those of securities of comparable U.S. issuers.
FOREIGN TAXES. The Fund may be subject to foreign taxes on income, gains on
investments, or currency repatriation, a portion of which may be recoverable.
The Fund will accrue such taxes and recoveries as applicable, based upon its
current interpretation of tax rules and regulations that exist in the markets in
which it invests.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 10% of its net
assets in securities for which the markets are illiquid. Illiquid securities
include securities the disposition of which is subject to substantial legal or
contractual restrictions. The sale of illiquid securities often requires more
time and results in higher brokerage charges or dealer discounts and other
selling expenses than does the sale of securities eligible for trading on
national securities exchanges or in the over-the-counter markets. Restricted
securities may sell at a price lower than similar securities that are not
subject to restrictions on resale. Securities freely saleable among qualified
institutional investors under special rules adopted by the SEC may be treated as
liquid if they satisfy liquidity
15
THE GABELLI ASSET FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
standards established by the Board. The continued liquidity of such securities
is not as well assured as that of publicly traded securities, and accordingly
the Board will monitor their liquidity.
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 the 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 upon 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 AND INTEREST EXPENSE. 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, if any, shown as "custodian fee credits". When cash balances are
overdrawn, the Fund is charged an overdraft fee equal to 2.00% above the Federal
Funds rate on outstanding balances. This amount, if any, would be shown as
"interest expense" in the Statement of Operations.
DISTRIBUTIONS TO SHAREHOLDERS. 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 and foreign
currency transactions held by the Fund, timing differences, and differing
characterizations of distributions made by the Fund. Distributions from net
investment income include net realized gains on foreign currency transactions.
These book/tax differences are either temporary or permanent in nature. To the
extent these differences are permanent, adjustments are made to the appropriate
capital accounts in the period when the differences arise. These
reclassifications have no impact on the NAV of the Fund. For the fiscal year
ended December 31, 2006, reclassifications were made to decrease accumulated net
investment income by $101,560 and to increase accumulated distributions in
excess of net realized gain on investments and foreign currency transactions by
$101,560.
The tax character of distributions paid during the fiscal years ended December
31, 2006 and December 31, 2005 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2006 DECEMBER 31, 2005
----------------- -----------------
DISTRIBUTIONS PAID FROM:
Ordinary income
(inclusive of short-term
capital gains) ................ $ 18,460,454 $ 7,034,411
Net long-term capital gains ...... 120,885,014 106,304,517
------------ ------------
Total distributions paid ......... $139,345,468 $113,338,928
============ ============
16
THE GABELLI ASSET 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, 2006, the components of accumulated earnings/(losses) on a
tax basis were as follows:
Net unrealized appreciation on investments and
foreign currency transactions .................. $1,344,112,527
--------------
The following summarizes the tax cost of investments and the related unrealized
appreciation/(depreciation) at December 31, 2006:
GROSS GROSS
UNREALIZED UNREALIZED NET UNREALIZED
COST APPRECIATION DEPRECIATION APPRECIATION
---- ------------ ------------ ---------------
Investments ... $1,199,435,324 $1,379,595,696 $(35,484,476) $1,344,111,220
In July 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty
in Income Taxes, an Interpretation of FASB Statement No. 109" ("the
Interpretation"). The Interpretation establishes for all entities, including
pass-through entities such as the Fund, a minimum threshold for financial
statement recognition of the benefit of positions taken in filing tax returns
(including whether an entity is taxable in a particular jurisdiction), and
requires certain expanded tax disclosures. The Interpretation is required to be
implemented for a calendar-year open-end fund no later than its June 29, 2007
NAV, and is to be applied to all open tax years as of the date of effectiveness.
Management has begun to evaluate the application of the Interpretation to the
Fund, and is not in a position at this time to estimate the significance of its
impact, if any, on the Fund's financial statements.
3. INVESTMENT ADVISORY AGREEMENT AND OTHER TRANSACTIONS. 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 Fund pays each Trustee that is not considered to be an affiliated person an
annual retainer of $6,000 plus $500 for each Board meeting attended and they are
reimbursed for any out of pocket expenses incurred in attending meetings. All
Board committee members receive $500 per meeting attended and the chairman of
each committee also receives $1,000 per year. Trustees who are directors or
employees of the Adviser or an affiliated company receive no compensation or
expense reimbursement from the Fund.
4. DISTRIBUTION PLAN. The Fund's Board has adopted a distribution plan (the
"Plan") for each class of shares 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.
17
THE GABELLI ASSET FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
5. PORTFOLIO SECURITIES. Purchases and proceeds from the sales of securities for
the fiscal year ended December 31, 2006, other than short-term securities,
aggregated $167,065,826 and $195,713,942, respectively.
6. TRANSACTIONS WITH AFFILIATES. During the fiscal year ended December 31, 2006,
the Fund paid brokerage commissions of $306,553 to Gabelli & Company.
Additionally, Gabelli & Company informed the Fund that it received $14,133 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. During the fiscal year
ended December 31, 2006, the Fund paid or accrued $45,000 to the Adviser in
connection with the cost of computing the Fund's NAV.
7. LINE OF CREDIT. The Fund has access to an unsecured line of credit of up to
$25,000,000 from the custodian for temporary borrowing purposes. Borrowings
under this arrangement bear interest at 0.75% above the Federal Funds rate on
outstanding balances. This amount, if any, would be shown as "interest expense"
in the Statement of Operations. At December 31, 2006, there were no borrowings
outstanding from the line of credit.
The average daily amount of borrowings outstanding from the line of credit
within the fiscal year ended December 31, 2006 was $684,814 with a weighted
average interest rate of 5.48%. The maximum amount borrowed at any time during
the fiscal year ended December 31, 2006 was $14,523,000.
8. SHARES OF BENEFICIAL INTEREST. The Fund currently offers four classes of
shares - Class AAA Shares, Class A Shares, Class B Shares, and Class C Shares.
Class AAA Shares are offered only to investors who acquire them directly from
Gabelli & Company, or through selected broker/dealers, or the transfer agent
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 the original purchase or at the date of redemption,
based on the length of time held. Class C Shares are subject to a 1.00% 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. The Board has
approved Class I Shares which have not been offered publicly.
The Fund imposes a redemption fee of 2.00% on Class AAA Shares, Class A Shares,
Class B Shares, and Class C Shares that are redeemed or exchanged on or before
the seventh day after the date of a purchase. (Prior to June 15, 2005, the Fund
imposed a redemption fee on shares that were redeemed or exchanged on or before
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 fiscal
years ended December 31, 2006 and December 31, 2005 amounted to $6,381 and
$39,655, 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.
18
THE GABELLI ASSET FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Transactions in shares of beneficial interest were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2006 DECEMBER 31, 2005
---------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- -------------
CLASS AAA CLASS AAA
---------------------------- ---------------------------
Shares sold ............................. 4,386,829 $ 200,022,345 5,862,472 $ 244,466,062
Shares issued upon
reinvestment of distributions ......... 2,754,940 131,438,858 2,596,902 107,200,111
Shares redeemed ......................... (8,657,022) (385,153,097) (7,296,026) (306,170,848)
---------- ------------- ---------- -------------
Net increase (decrease) .............. (1,515,253) $ (53,691,894) 1,163,348 $ 45,495,325
========== ============= ========== =============
CLASS A CLASS A
---------------------------- ---------------------------
Shares sold ............................. 68,271 $ 3,117,967 41,938 $ 1,770,412
Shares issued upon
reinvestment of distributions ......... 5,392 256,308 2,327 95,775
Shares redeemed ......................... (20,401) (915,175) (4,190) (177,004)
---------- ------------- ---------- -------------
Net increase ......................... 53,262 $ 2,459,100 40,075 $ 1,689,183
========== ============= ========== =============
CLASS B CLASS B
---------------------------- ---------------------------
Share sold .............................. 133 $ 5,658 -- --
Shares issued upon
reinvestment of distributions ......... 2 72 1 $ 58
Shares redeemed ......................... (133) (5,835) -- --
---------- ------------- ---------- -------------
Net increase (decrease) .............. 2 $ (105) 1 $ 58
========== ============= ========== =============
CLASS C CLASS C
---------------------------- ---------------------------
Shares sold ............................. 17,459 $ 784,241 47,792 $ 2,009,812
Shares issued upon
reinvestment of distributions ......... 3,534 165,790 2,732 111,189
Shares redeemed ......................... (4,903) (215,949) (3,230) (135,830)
---------- ------------- ---------- -------------
Net increase ......................... 16,090 $ 734,082 47,294 $ 1,985,171
========== ============= ========== =============
9. 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.
10. OTHER MATTERS. The Adviser and/or affiliates received subpoenas from the
Attorney General of the State of New York and the SEC requesting information on
mutual fund share trading practices involving certain funds managed by the
Adviser. GAMCO Investors, Inc. ("GAMCO"), the Adviser's parent company,
responded to these requests for documents and testimony. In June 2006, GAMCO
began discussions with the SEC regarding a possible resolution of their inquiry.
In February 2007, the Adviser made an offer of settlement to the staff of the
SEC for communication to the Commission for its consideration to resolve this
matter. This offer of settlement is subject to agreement regarding the specific
language of the SEC's administrative order and other settlement documents. 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.
19
THE GABELLI ASSET 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)(a) Investments Operations Income Investments Distributions
- ----------- --------- --------- -------------- ---------- ---------- ----------- -------------
CLASS AAA
2006 $41.13 $ 0.30 $ 8.70 $9.00 $(0.31) $(2.44) $(2.75)
2005 41.45 0.12 1.73 1.85 (0.12) (2.05) (2.17)
2004 36.26 0.02 5.96 5.98 (0.03) (0.76) (0.79)
2003 28.25 0.04 8.60 8.64 (0.03) (0.60) (0.63)
2002 32.97 0.02 (4.72) (4.70) (0.02) (0.00)(b) (0.02)
CLASS A
2006 $41.01 $ 0.32 $ 8.66 $8.98 $(0.34) $(2.44) $(2.78)
2005 41.39 0.10 1.74 1.84 (0.17) (2.05) (2.22)
2004(c) 36.26 0.03 5.94 5.97 (0.08) (0.76) (0.84)
CLASS B
2006 $40.64 $ 0.18 $ 8.34 $8.52 -- $(2.44) $(2.44)
2005 41.16 (0.17) 1.70 1.53 -- (2.05) (2.05)
2004(c) 36.26 (0.25) 5.91 5.66 -- (0.76) (0.76)
CLASS C
2006 $40.54 $(0.03) $ 8.54 $8.51 $(0.03) $(2.44) $(2.47)
2005 41.14 (0.20) 1.71 1.51 (0.06) (2.05) (2.11)
2004(c) 36.26 (0.26) 5.92 5.66 (0.02) (0.76) (0.78)
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(a) Period Return+ (in 000's) (Loss) Expenses Rate
- ----------- ---------- ------ ------- ---------- ---- ---------- --------
CLASS AAA
2006 $0.00(b) $47.38 21.8% $2,516,088 0.67% 1.36% 7%
2005 0.00(b) 41.13 4.4 2,246,439 0.29 1.37 6
2004 0.00(b) 41.45 16.5 2,216,050 0.06 1.38 7
2003 -- 36.26 30.6 1,958,431 0.11 1.38 7
2002 -- 28.25 (14.3) 1,501,420 0.04 1.38 8
CLASS A
2006 $0.00(b) $47.21 21.9% $ 4,806 0.71% 1.35% 7%
2005 0.00(b) 41.01 4.4 1,991 0.23 1.38 6
2004(c) 0.00(b) 41.39 16.5 351 0.07 1.40 7
CLASS B
2006 $0.00(b) $46.72 20.9% $ 1 0.41% 2.11% 7%
2005 0.00(b) 40.64 3.7 1 (0.41) 2.02 6
2004(c) 0.00(b) 41.16 15.6 1 (0.67) 2.07 7
CLASS C
2006 $0.00(b) $46.58 20.9% $ 3,348 (0.07)% 2.11% 7%
2005 0.00(b) 40.54 3.6 2,261 (0.49) 2.13 6
2004(c) 0.00(b) 41.14 15.6 349 (0.68) 2.15 7
- ---------------------
+ 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 distributions and does not reflect applicable
sales charges.
(a) Per share amounts have been calculated using the average shares outstanding
method.
(b) Amount represents less than $0.005 per share.
(c) Class A, Class B, and Class C Shares were initially offered on
December 31, 2003.
See accompanying notes to financial statements.
20
THE GABELLI ASSET FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
The Gabelli Asset Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Gabelli Asset Fund (hereafter
referred to as the "Fund") at December 31, 2006, 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
presented, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements 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 are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 2006 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
February 28, 2007
21
THE GABELLI ASSET 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 Fund's Trustees and is available,
without charge, upon request, by calling 800-GABELLI (800-422-3554) or by
writing to The Gabelli Asset 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 TRUSTEE 4
- ---------------- ------------ ---------------- ---------------------- ------------------
INTERESTED DIRECTORS 3:
- ----------------------
MARIO J. GABELLI Since 1986 24 Chairman of the Board and Chief Executive Director of Morgan
Trustee and Chairman Officer of GAMCO Investors, Inc. and Chief Group Holdings, Inc.
Age: 64 Investment Officer - Value Portfolios (transportation services);
of Gabelli Funds, LLC and GAMCO Asset Chairman of the Board of
Management Inc.; Director/Trustee or Chief Lynch Interactive Corporation
Investment Officer of other registered (multimedia and communication
investment companies in the Gabelli Funds services company)
complex; Chairman and Chief Executive
Officer of GGCP, Inc.
JOHN D. GABELLI Since 1999 10 Senior Vice President of Gabelli & Director of GAMCO
Trustee Company, Inc. Investors, Inc.
Age: 62
INDEPENDENT TRUSTEES 5:
- ----------------------
ANTHONY J. COLAVITA Since 1989 34 Partner in the law firm of --
Trustee Anthony J. Colavita P.C.
Age: 71
JAMES P. CONN Since 1992 15 Former Managing Director and Chief Director of First Republic
Trustee Investment Officer of Financial Security Bank (banking)
Age: 68 Assurance Holdings Ltd. (1992-1998)
(insurance holding company)
ANTHONY R. PUSTORINO Since 1986 14 Certified Public Accountant; Professor Director of The LGL Group,
Trustee Emeritus, Pace University Inc. (diversified
Age: 81 manufacturing)
WERNER J. ROEDER, MD Since 2001 23 Medical Director of Lawrence Hospital --
Trustee and practicing private physician
Age: 66
ANTHONIE C. VAN EKRIS 1986-1989 17 Chairman of BALMAC --
Trustee 1992-present International, Inc. (commodities
Age: 72 and futures trading)
SALVATORE J. ZIZZA 1986-1996 25 Chairman of Hallmark Electrical Director of Hollis-Eden
Trustee 2000-present Supplies Corp. (distribution of Pharmaceuticals
Age: 61 electrical supplies) (biotechnology); Director
of Earl Scheib, Inc.
(automotive services)
22
THE GABELLI ASSET FUND
ADDITIONAL FUND INFORMATION (CONTINUED) (UNAUDITED)
- --------------------------------------------------------------------------------
TERM OF
OFFICE AND
NAME, POSITION(S) LENGTH OF
ADDRESS 1 TIME PRINCIPAL OCCUPATION(S)
AND AGE SERVED 2 DURING PAST FIVE YEARS
- ---------------- -------- -----------------------
OFFICERS:
- --------
BRUCE N. ALPERT Since 1994 Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC
President since 1988 and an officer of all of the registered investment companies
Age: 55 in the Gabelli Funds complex. Director and President of Gabelli Advisers, Inc.
since 1998
JAMES E. MCKEE Since 1995 Vice President, General Counsel and Secretary of GAMCO Investors, Inc.
Secretary since 1999 and GAMCO Asset Management Inc. since 1993;
Age: 43 Secretary of all of the registered investment companies in the
Gabelli Funds complex
AGNES MULLADY Since 2006 Treasurer of all of the registered investment companies in the Gabelli Funds
Treasurer complex; Senior Vice President of U.S. Trust Company, N.A. and Treasurer
Age: 48 and Chief Financial Officer of Excelsior Funds from 2004 through 2005;
Chief Financial Officer of AMIC Distribution Partners from 2002 through 2004;
Controller of Reserve Management Corporation and Reserve Partners, Inc. and
Treasurer of Reserve Funds from 2000 through 2002
PETER D. GOLDSTEIN Since 2004 Director of Regulatory Affairs at GAMCO Investors, Inc. since 2004;
Chief Compliance Officer Chief Compliance Officer of all of the registered investment companies
Age: 53 in the Gabelli Funds 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 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.
3 "Interested person" of the Fund as defined in the 1940 Act. Messrs. Gabelli
are each considered an "interested person" because of their affiliation
with Gabelli Funds, LLC which acts as the Fund's investment adviser. Mario
J. Gabelli and John D. Gabelli are brothers.
4 This column includes only directorships of companies required to report to
the SEC under the Securities Exchange Act of 1934, as amended (i.e. public
companies) or other investment companies registered under the 1940 Act.
5 Trustees who are not interested persons are considered "Independent"
Trustees.
- --------------------------------------------------------------------------------
2006 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the fiscal year ended December 31, 2006, the Fund paid to shareholders on
December 27, 2006 ordinary income dividends (comprised of net investment income
and short-term capital gains) totaling $0.364, $0.396, $0.057, and $0.081 and a
long-term capital gain distribution totaling $2.386 per share for Class AAA,
Class A, Class B, and Class C which is designated as a capital gain dividend.
The Fund designates a maximum of $120,885,014 of long-term capital gains as a
capital gain dividend for tax purposes. For the fiscal year ended December 31,
2006, 100% of the ordinary income dividend qualifies for the dividend received
deduction available to corporations and 100% of the ordinary income
distribution was qualified dividend income.
U.S. GOVERNMENT INCOME:
The percentage of the ordinary income dividend paid by the Fund during fiscal
year 2006 which was derived from U.S. Treasury securities was 1.10%. Such
income is exempt from state and local tax in all states. However, many states,
including New York and California, allow a tax exemption for a portion of the
income earned only if a mutual fund has invested at least 50% of its assets at
the end of each quarter of the Fund's fiscal year in U.S. Government
securities. The Gabelli Asset Fund did not meet this strict requirement in
2006. Due to the diversity in state and local tax law, it is recommended that
you consult your personal tax advisor as to the applicability of the
information provided to your specific situation.
- --------------------------------------------------------------------------------
23
THE GABELLI ASSET 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 per share available daily by calling
800-GABELLI after 6:00 P.M.
BOARD OF TRUSTEES
Mario J. Gabelli, CFA Anthony R. Pustorino
CHAIRMAN AND CHIEF CERTIFIED PUBLIC ACCOUNTANT,
EXECUTIVE OFFICER PROFESSOR EMERITUS
GAMCO INVESTORS, INC. PACE UNIVERSITY
Anthony J. Colavita Werner J. Roeder, MD
ATTORNEY-AT-LAW MEDICAL DIRECTOR
ANTHONY J. COLAVITA, P.C. LAWRENCE HOSPITAL
James P. Conn Anthonie C. van Ekris
FORMER CHIEF INVESTMENT OFFICER CHAIRMAN
FINANCIAL SECURITY ASSURANCE BALMAC INTERNATIONAL, INC.
HOLDINGS LTD.
Salvatore J. Zizza
John D. Gabelli CHAIRMAN
SENIOR VICE PRESIDENT HALLMARK ELECTRICAL SUPPLIES
GABELLI & COMPANY, INC. CORP.
OFFICERS
Bruce N. Alpert James E. McKee
PRESIDENT SECRETARY
Agnes Mullady Peter D. Goldstein
TREASURER 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 Asset Fund. It is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
GAB405Q406SR
[GRAPHIC OMITTED] E P
Gabelli Triangle P M
MANAGEMENT S V
CASH FLOW
RESEARCH
THE
GABELLI
ASSET
FUND
ANNUAL REPORT
DECEMBER 31, 2006
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 Anthony R. Pustorino 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
$40,829 for 2005 and $41,000 for 2006.
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 for 2005 and $0 for 2006.
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 $2,880 for 2005 and $3,100
for 2006. 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
for 2005 and $0 for 2006.
(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
registered public accounting firm to the registrant and (ii) all
permissible non-audit services to be provided by the independent
registered public accounting firm 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 registered public accounting firm's 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
permissible non-audit services were not recognized by the registrant at
the time of the engagement to be non-audit services; and (ii) 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) Not applicable
(c) 100%
(d) Not applicable
(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 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 $0 for 2005 and $0 for 2006.
(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 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) 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 Asset Fund
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By (Signature and Title)* /s/ Bruce N. Alpert
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Bruce N. Alpert, Principal Executive Officer
Date 03/01/2007
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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
Date 03/01/2007
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By (Signature and Title)* /s/ Agnes Mullady
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Agnes Mullady,
Principal Financial Officer & Treasurer
Date 03/01/2007
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* Print the name and title of each signing officer under his or her signature.