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 811-07326
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Gabelli Investor Funds, Inc.
-----------------------------------------------------
(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
-------------------
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 ABC 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 schedule 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)
The Gabelli ABC Fund gained 11.97% during the full year 2006. We note that
2006 was the 14th consecutive calendar year during which the Fund had positive
performance.
The Fund invests a portion of its assets in "event" driven situations such
as announced mergers, acquisitions, and reorganizations. When a company agrees
to be acquired by another company, its stock price often quickly rises to just
below the stated acquisition price. If the Adviser, through extensive research,
determines that the acquisition is likely to be consummated on schedule at the
stated acquisition price, then the Fund may purchase the selling company's
securities, offering the Fund the possibility of generous returns relative to
cash equivalents with a limited risk of capital.
Among the deals that the Fund participated in during the year were ADESA
Inc., Albertson's Inc., American Power Conversion Corp., American Retirement
Corp., Andrx Corp., Aramark Corp., Artesyn Technologies Inc., Associated British
Ports Holdings plc, Aviall Inc., Aztar Corp., Duratek Inc., Emmis Communications
Corp., Enodis plc, Harrah's Entertainment Inc., ICOS Corp., Kerzner
International Ltd., KeySpan Corporation, Laserscope, Macdermid Inc., Metrologic
Instruments Inc., MRO Software Inc., Nextel Partners, PLIVA d.d., Reader's
Digest Association Inc., Serologicals Corp., Sportsman's Guide Inc., SSA Global
Technologies, Inc., TD Banknorth Inc., Univision Communications Inc., Water Pik
Technologies, Inc., and Western Gas Resources Inc.
Some of the best performers in 2006 from the long-term holdings in the ABC
Fund include Las Vegas Sands Corp., Endesa S.A., HeidelbergCement AG, Northeast
Utilities, and United States Cellular.
Stock positions that the Fund had at the beginning of 2006 that declined
during the year were WHX Corp., Fairchild Corp., and Corning, Inc.
The Fund's cash and cash equivalents at the end of 2006 were 14.5%.
Interest earned from our short-term U.S. Treasury Bill investments during the
year also helped returns.
Sincerely yours,
/s/ Bruce N. Alpert
Bruce N. Alpert
January 18, 2007
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GABELLI ABC FUND,
THE LIPPER U.S. TREASURY MONEY MARKET AVERAGE, AND THE S&P 500 INDEX
[GRAPHIC OMITTED]
Plot points follow:
Lipper U.S. Treasury
Gabelli ABC Fund Money Market Average S&P 500 Index
5/14/93 $10,000 $10,000 $10,000
12/31/93 10,910 10,163 10,809
12/31/94 11,404 10,530 10,951
12/31/95 12,679 11,091 15,060
12/31/96 13,667 11,618 18,517
12/31/97 15,409 12,138 24,692
12/31/98 17,126 12,705 31,754
12/31/99 18,667 13,247 38,432
12/31/00 20,693 13,980 34,935
12/31/01 21,636 14,450 30,781
12/31/02 21,825 14,599 23,981
12/31/03 22,903 14,660 30,857
12/31/04 23,345 14,747 34,211
12/31/05 24,507 15,089 35,891
12/31/06 27,441 15,714 41,554
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 (5/14/93)
- --------------------------------------------------------------------------------------------------------------------
GABELLI ABC FUND ................................... 2.88% 11.97% 6.21% 4.87% 7.22% 7.69%
S&P 500 Index ...................................... 6.69 15.78 10.43 6.18 8.42 11.01
Lipper U.S. Treasury Money Market Average .......... 1.11 4.14 2.33 1.71 3.14 3.45(b)
(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. RETURNS WOULD HAVE BEEN LOWER IF CERTAIN EXPENSES OF THE FUND
HAD NOT BEEN WAIVED OR REIMBURSED SINCE APRIL 2002. 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 S&P 500 INDEX IS AN UNMANAGED INDICATOR OF STOCK
MARKET PERFORMANCE, WHILE THE LIPPER U.S. TREASURY MONEY MARKET AVERAGE
REFLECTS THE AVERAGE PERFORMANCE OF MUTUAL FUNDS CLASSIFIED IN THIS
PARTICULAR CATEGORY. DIVIDENDS ARE CONSIDERED REINVESTED. YOU CAN NOT
INVEST DIRECTLY IN AN INDEX.
(b) FROM APRIL 30, 1993, THE DATE CLOSEST TO THE FUND'S INCEPTION FOR WHICH
DATA IS AVAILABLE.
- --------------------------------------------------------------------------------
2
THE GABELLI ABC 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 would be
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 ABC FUND
- --------------------------------------------------------------------------------
ACTUAL FUND RETURN
Gabelli ABC Fund $1,000.00 $1,047.40 0.59% $3.04
HYPOTHETICAL 5% RETURN
Gabelli ABC Fund $1,000.00 $1,022.23 0.59% $3.01
* Expenses are equal to the Fund's annualized expense ratio for the last six
months multiplied by the average account value over the period, multiplied by
the number of days in the most recent fiscal half-year, then divided by 365.
3
SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED)
The following table presents portfolio holdings as a percent of total net assets
as of December 31, 2006:
THE GABELLI ABC FUND
U.S. Government Obligations .................... 14.5%
Energy and Utilities ........................... 13.2%
Health Care .................................... 10.4%
Publishing ..................................... 6.8%
Electronics .................................... 6.4%
Real Estate Investment Trusts .................. 5.4%
Specialty Chemicals ............................ 4.4%
Computer Software and Services ................. 3.9%
Business Services .............................. 3.8%
Automotive ..................................... 3.6%
Financial Services ............................. 3.5%
Broadcasting ................................... 2.8%
Hotels and Gaming .............................. 2.8%
Real Estate .................................... 2.8%
Telecommunications ............................. 2.5%
Equipment and Supplies ......................... 2.5%
Automotive: Parts and Accessories .............. 2.1%
Metals and Mining .............................. 1.6%
Food and Beverage .............................. 1.5%
Consumer Products .............................. 1.1%
Agriculture .................................... 0.9%
Diversified Industrial ......................... 0.9%
Other Assets and Liabilities (Net) ............. 0.8%
Cable and Satellite ............................ 0.6%
Wireless Communications ........................ 0.4%
Retail ......................................... 0.4%
Consumer Services .............................. 0.2%
Aviation: Parts and Services ................... 0.2%
Entertainment .................................. 0.0%
Communications Equipment ....................... 0.0%
Transportation ................................. 0.0%
Home Furnishings ............................... 0.0%
------
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 ABC FUND
SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2006
================================================================================
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS -- 84.4%
AGRICULTURE -- 0.9%
35,000 Delta & Pine Land Co. .......$ 1,411,628 $ 1,415,750
------------ ------------
AUTOMOTIVE -- 3.6%
200,000 ADESA Inc. .................. 5,570,630 5,550,000
------------ ------------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 2.1%
1,000 Bandag Inc. ................. 50,500 50,430
15,000 Bandag Inc., Cl. A .......... 747,981 749,400
22,000 BERU AG ..................... 1,924,615 2,384,265
30,000 Dana Corp.+ ................. 60,145 41,700
5,000 Federal-Mogul Corp.+ ........ 14,938 2,925
1,000 Scania AB, Cl. A ............ 63,291 71,648
------------ ------------
2,861,470 3,300,368
------------ ------------
AVIATION: PARTS AND SERVICES -- 0.2%
7,000 Kaman Corp. ................. 122,323 156,730
50,000 The Fairchild Corp., Cl. A+ . 180,797 109,500
------------ ------------
303,120 266,230
------------ ------------
BROADCASTING -- 2.8%
50,000 Clear Channel
Communications Inc. ....... 1,773,229 1,777,000
10,000 Cogeco Inc. ................. 194,810 250,911
10,000 Crown Media Holdings Inc.,
Cl. A+ .................... 91,356 36,300
6,000 Emmis Communications Corp.,
Cl. A ..................... 78,950 49,440
500 Liberty Media Corp. - Capital,
Cl. A+ .................... 32,319 48,990
500 Salem Communications Corp.,
Cl. A ..................... 3,895 5,975
60,000 Univision Communications Inc.,
Cl. A+ .................... 2,017,628 2,125,200
------------ ------------
4,192,187 4,293,816
------------ ------------
BUSINESS SERVICES -- 3.6%
1,000 AMICAS Inc.+ ................ 3,096 2,940
50,000 Aramark Corp., Cl. B ........ 1,659,362 1,672,500
100,000 Digital Insight Corp.+ ...... 3,831,010 3,849,000
1,000 The Western Union Co. ....... 13,282 22,420
4,000 TNS Inc.+ ................... 80,876 77,000
------------ ------------
5,587,626 5,623,860
------------ ------------
CABLE AND SATELLITE -- 0.6%
30,000 Cablevision Systems Corp.,
Cl. A+ .................... 666,342 854,400
2,000 Moscow CableCom Corp.+ ...... 21,328 21,160
------------ ------------
687,670 875,560
------------ ------------
COMPUTER SOFTWARE AND SERVICES -- 3.9%
30,000 @Road Inc.+ ................. 217,190 219,000
1,000 Digitas Inc.+ ............... 13,360 13,410
5,000 John H. Harland Co. ......... 250,816 251,000
MARKET
SHARES COST VALUE
------ ---- ------
1,500 Kanbay International Inc.+ ..$ 42,685 $ 43,155
10,000 Netopia Inc.+ ............... 68,540 69,500
500 NetRatings Inc.+ ............ 8,400 8,755
10,000 Open Solutions Inc.+ ........ 373,467 376,400
2,000 Per-Se Technologies Inc.+ ... 55,210 55,560
200,000 Redback Networks Inc.+ ...... 5,016,012 4,988,000
1,000 Sierra Systems Group Inc. ... 8,049 7,889
1,215,000 StorageNetworks Inc.
Escrow+ (a) ............... 0 36,450
2,000 Traffic.com Inc.+ ........... 14,990 15,960
------------ ------------
6,068,719 6,085,079
------------ ------------
CONSUMER PRODUCTS -- 1.1%
1,000 Applica Inc.+ ............... 6,535 7,990
1,000 Gallaher Group plc, ADR ..... 81,040 89,950
100,000 Jacuzzi Brands Inc.+ ........ 1,229,155 1,243,000
55,000 Levcor International Inc.+ .. 128,920 22,000
50,000 Revlon Inc., Cl. A+ ......... 103,811 64,000
7,000 Yankee Candle Co. Inc. ...... 236,880 239,960
------------ ------------
1,786,341 1,666,900
------------ ------------
CONSUMER SERVICES -- 0.2%
2,000 IAC/InterActiveCorp+ ........ 47,446 74,320
2,500 Liberty Media Corp. -
Interactive, Cl. A+ ....... 44,632 53,925
5,000 Sabre Holdings Corp., Cl. A . 160,108 159,450
------------ ------------
252,186 287,695
------------ ------------
DIVERSIFIED INDUSTRIAL -- 0.8%
3,500 Ampco-Pittsburgh Corp. ...... 52,294 117,180
20,800 Bairnco Corp. ............... 246,616 265,200
2,500 Hexagon AB, Cl. B ........... 220,139 106,815
6,000 Katy Industries Inc.+ ....... 25,438 16,080
1,000 Oregon Steel Mills Inc.+ .... 62,451 62,410
2,000 Rinker Group Ltd., ADR ...... 143,554 142,100
200 SIG Holding AG+ ............. 55,826 66,804
50,000 WHX Corp.+ .................. 609,961 422,500
------------ ------------
1,416,279 1,199,089
------------ ------------
ELECTRONICS -- 6.4%
47,000 Alliance
Semiconductor Corp.+ ...... 187,691 205,860
30,000 Excel Technology Inc.+ ...... 894,672 767,700
50,000 MoSys Inc.+ ................. 191,265 462,500
3,000 Portalplayer Inc.+ .......... 40,041 40,350
1,140 Safran SA ................... 21,363 26,455
500,000 Symbol Technologies Inc. .... 7,388,078 7,470,000
185,000 Toshiba Ceramics Co. Ltd. ... 946,002 896,979
------------ ------------
9,669,112 9,869,844
------------ ------------
ENERGY AND UTILITIES -- 13.2%
1,000 Anadarko Petroleum Corp. .... 46,660 43,520
45,000 Cascade Natural Gas Corp. ... 1,151,616 1,166,400
12,000 Duquesne Light Holdings Inc. 232,390 238,200
See accompanying notes to financial statements.
5
THE GABELLI ABC FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 2006
================================================================================
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
ENERGY AND UTILITIES (CONTINUED)
18,000 Endesa SA ...................$ 457,676 $ 851,350
30,000 Giant Industries Inc.+ ...... 2,457,136 2,248,500
13,000 Green Mountain Power Corp. .. 439,081 440,570
1,000 Helix Energy Solutions
Group Inc.+ ............... 39,930 31,370
40,000 KeySpan Corp. ............... 1,624,575 1,647,200
97,000 Kinder Morgan Inc. .......... 10,083,955 10,257,750
10,000 Mirant Corp.+ ............... 165,181 315,700
1,000 Niko Resources Ltd. ......... 57,456 71,475
6,000 Northeast Utilities ......... 85,467 168,960
30,000 NorthWestern Corp. .......... 1,043,550 1,061,400
10,000 Oesterreichische
Elektrizitaetswirtschafts
AG, Cl. A ................. 528,859 533,562
3,500 Peoples Energy Corp. ........ 138,690 155,995
715 Petrohawk Energy Corp.+ ..... 7,894 8,222
25,000 Progress Energy Inc., CVO+ .. 13,000 8,125
10,000 Queensland Gas Co. Ltd.+ .... 10,619 10,498
16,000 Stone Energy Corp.+ ......... 757,353 565,600
44,000 Suez SA, Strips+ ............ 0 581
8,500 Techem AG ................... 514,479 622,731
------------ ------------
19,855,567 20,447,709
------------ ------------
ENTERTAINMENT -- 0.0%
1,001 Chestnut Hill Ventures+ (a) . 3,749 21,495
1,000 Discovery Holding Co., Cl. A+ 12,527 16,090
------------ ------------
16,276 37,585
------------ ------------
EQUIPMENT AND SUPPLIES -- 2.5%
70,000 American Power
Conversion Corp. .......... 2,119,820 2,141,300
25,000 Baldwin Technology Co. Inc.,
Cl. A+ .................... 59,500 125,000
250,000 Enodis plc .................. 813,513 975,320
4,500 HeidelbergCement AG ......... 327,161 658,946
------------ ------------
3,319,994 3,900,566
------------ ------------
FINANCIAL SERVICES -- 3.5%
10,000 Argonaut Group Inc.+ ........ 192,655 348,600
1,600 Clark Inc. .................. 26,564 26,608
15,000 Fifth Third Bancorp ......... 704,898 613,950
1,000 First Data Corp. ............ 15,593 25,520
2,000 First Federal Bancshares Inc. 45,410 45,690
5,000 Franklin Bank Corp.+ ........ 101,207 102,700
4,000 H&R Block Inc. .............. 89,704 92,160
3,000 Leucadia National Corp. ..... 30,175 84,600
1,000 Mercantile Bankshares Corp. . 44,868 46,790
1,000 Mid-State Bancshares ........ 36,239 36,390
5,018 NewAlliance Bancshares Inc. . 69,527 82,295
2,000 Provident New York Bancorp .. 30,603 29,960
500 Republic Bancorp Inc. ....... 6,235 6,730
120,000 TD Banknorth Inc. ........... 3,864,440 3,873,600
------------ ------------
5,258,118 5,415,593
------------ ------------
MARKET
SHARES COST VALUE
------ ---- ------
FOOD AND BEVERAGE -- 1.5%
50,000 Denny's Corp.+ ..............$ 149,592 $ 235,500
500 Genesee Corp., Cl. A+ ....... 750 830
12,200 Genesee Corp., Cl. B+ ....... 4,466 21,960
142,100 Grupo Continental SA ........ 218,331 302,536
80,000 Myojo Foods Co. Ltd. ........ 532,381 557,960
4,000 OSI Restaurant Partners Inc. 159,060 156,800
2,500 Pernod-Ricard SA ............ 417,494 574,220
1,000 Premium Standard
Farms Inc. ................ 19,085 18,570
1,000 Quilmes Industrial SA, ADR .. 58,913 65,960
5,000 Remy Cointreau SA ........... 318,742 323,411
1,000 Sara Lee Corp. .............. 16,434 17,030
------------ ------------
1,895,248 2,274,777
------------ ------------
HEALTH CARE -- 10.4%
234 Allergan Inc. ............... 27,203 28,019
25,000 Biomet Inc. ................. 1,014,985 1,031,750
10,000 Caremark Rx Inc. ............ 558,892 571,100
10,000 Conor Medsystems Inc.+ ...... 321,726 313,300
8,600 I-Flow Corp.+ ............... 115,062 128,570
260,000 ICOS Corp.+ ................. 8,554,535 8,785,400
50,000 IMS Health Inc. ............. 1,333,387 1,374,000
1,000 IntraLase Corp.+ ............ 20,655 22,380
2,000 Lifecore Biomedical Inc.+ ... 27,760 35,660
2,000 Serono SA ................... 1,804,196 1,795,650
100,000 Tanox Inc.+ ................. 1,963,490 1,990,000
1,747 UCB SA ...................... 123,761 119,803
------------ ------------
15,865,652 16,195,632
------------ ------------
HOTELS AND GAMING -- 2.8%
20,600 Aztar Corp.+ ................ 1,028,957 1,121,052
10,000 Four Seasons Hotels Inc. .... 817,980 819,900
20,000 Harrah's Entertainment Inc. . 1,554,411 1,654,400
5,000 Las Vegas Sands Corp.+ ...... 158,550 447,400
3,000 Station Casinos Inc. ........ 247,098 245,010
------------ ------------
3,806,996 4,287,762
------------ ------------
METALS AND MINING -- 1.6%
9,000 Alcan Inc. .................. 351,194 438,660
7,000 Barrick Gold Corp. .......... 204,960 214,900
10,000 Gold Fields Ltd., ADR ....... 127,423 188,800
4,000 NovaGold Resources Inc.+ .... 62,865 68,640
6,500 Novelis Inc., New York ...... 150,268 181,025
6,000 Novelis Inc., Toronto ....... 138,708 167,680
10,000 Phelps Dodge Corp. .......... 1,217,761 1,197,200
10,000 Royal Oak Mines Inc.+ ....... 11,858 1
------------ ------------
2,265,037 2,456,906
------------ ------------
PUBLISHING -- 6.8%
100,000 Banta Corp. ................. 3,954,706 3,640,000
25,000 Dow Jones & Co. Inc. ........ 986,386 950,000
500 Idearc Inc.+ ................ 15,938 14,325
20,000 PagesJaunes Groupe SA ....... 554,926 397,862
See accompanying notes to financial statements.
6
THE GABELLI ABC FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 2006
================================================================================
MARKET
SHARES COST VALUE
------ ---- ------
COMMON STOCKS (CONTINUED)
PUBLISHING (CONTINUED)
250,000 The Reader's Digest
Association Inc. ..........$ 4,206,550 $ 4,175,000
42,000 Tribune Co. ................. 1,339,774 1,292,760
------------ ------------
11,058,280 10,469,947
------------ ------------
REAL ESTATE -- 2.8%
1,055 Case Pomeroy & Co. Inc.,
Cl. A ..................... 1,798,775 1,951,750
70,900 Griffin Land &
Nurseries Inc.+ ........... 1,644,728 2,300,705
316 HomeFed Corp. ............... 566 20,856
------------ ------------
3,444,069 4,273,311
------------ ------------
REAL ESTATE INVESTMENT TRUSTS -- 5.4%
140,000 Columbia Equity Trust Inc. .. 2,637,169 2,675,400
105,000 Equity Office
Properties Trust .......... 5,040,390 5,057,850
300 Global Signal Inc. .......... 16,302 15,801
9,012 Kimco Realty Corp. .......... 400,133 405,090
5,000 Reckson Associates
Realty Corp. .............. 220,140 228,000
3,000 Trustreet Properties Inc. ... 51,080 50,550
------------ ------------
8,365,214 8,432,691
------------ ------------
RETAIL -- 0.4%
1,000 Claire's Stores Inc. ........ 33,386 33,140
35,000 Pier 1 Imports Inc. ......... 241,412 208,250
1,000 Saks Inc. ................... 17,450 17,820
10,000 SUPERVALU Inc. .............. 297,500 357,500
------------ ------------
589,748 616,710
------------ ------------
SPECIALTY CHEMICALS -- 4.4%
200,000 MacDermid Inc. .............. 6,825,155 6,820,000
------------ ------------
TELECOMMUNICATIONS -- 2.5%
1,000 Commonwealth Telephone
Enterprises Inc. .......... 37,410 41,860
15,000 Corning Inc.+ ............... 193,678 280,650
1,000 Essex Corp.+ ................ 23,535 23,910
240,000 Portugal Telecom SGPS SA .... 2,787,325 3,117,418
6,000 Portugal Telecom SGPS SA,
ADR ....................... 69,318 77,640
3,000 Telegroup Inc.+ ............. 32 1
10,000 Verizon
Communications Inc. ....... 382,515 372,400
------------ ------------
3,493,813 3,913,879
------------ ------------
TRANSPORTATION -- 0.0%
500 Swift Transportation
Co. Inc.+ .................. 14,862 13,135
------------ ------------
MARKET
SHARES COST VALUE
------ ---- ------
WIRELESS COMMUNICATIONS -- 0.4%
500 American Tower Corp.,
Cl. A+ .....................$ 7,707 $ 18,640
14,000 Metricom Inc.+ .............. 1,680 18
10,000 United States
Cellular Corp.+ ............ 466,745 695,900
50,000 Winstar
Communications Inc.+ (a) .. 2,125 50
------------ ------------
478,257 714,608
------------ ------------
TOTAL COMMON STOCKS ......... 126,359,254 130,705,002
------------ ------------
PREFERRED STOCKS -- 0.0%
COMMUNICATIONS EQUIPMENT -- 0.0%
RSL Communications Ltd.,
2,000 7.500% Cv. Pfd.,
Ser. A+ (a)(b) ............ 185 0
1,000 7.500% Cv. Pfd.+ (a)(b)(d) 93 0
------------ ------------
278 0
------------ ------------
HOME FURNISHINGS -- 0.0%
8,000 O'Sullivan Industries
Holdings Inc.,
12.000% Pfd.+ ............. 4,750 0
------------ ------------
TOTAL PREFERRED STOCKS ...... 5,028 0
------------ ------------
PRINCIPAL
AMOUNT
------
CORPORATE BONDS -- 0.2%
BUSINESS SERVICES -- 0.2%
$ 482,585 GP Strategies Corp., Sub. Deb.,
6.000%, 08/14/08 (a)(c) ... 401,636 323,897
------------ ------------
COMPUTER SOFTWARE AND SERVICES -- 0.0%
100,000 Exodus Communications Inc.,
Sub. Deb. Cv.,
5.250%, 02/15/08+ (a)(b) .. 2,250 0
------------ ------------
RETAIL -- 0.0%
200,000 RDM Sports Group Inc.,
Sub. Deb.,
8.000%, 08/15/03+ (a)(b) .. 4,000 4,000
------------ ------------
TRANSPORTATION -- 0.0%
850,000 Builders Transport Inc.,
Sub. Deb. Cv.,
6.500%, 05/01/11+ (a)(b) .. 8,500 0
------------ ------------
TOTAL CORPORATE BONDS ....... 416,386 327,897
------------ ------------
See accompanying notes to financial statements.
7
THE GABELLI ABC FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 2006
================================================================================
MARKET
SHARES COST VALUE
------ ---- ------
WARRANTS -- 0.1%
CONSUMER PRODUCTS -- 0.0%
10,396 Pillowtex Corp.,
expire 11/24/09+ (a) ......$ 45,461 $ 1
------------ ------------
DIVERSIFIED INDUSTRIAL -- 0.1%
284,777 National Patent Development Corp.,
expire 08/14/08+ (a)(c) ... 0 76,637
6,533 WHX Corp., expire 02/28/08+ . 53,205 2,679
------------ ------------
53,205 79,316
------------ ------------
TOTAL WARRANTS .............. 98,666 79,317
------------ ------------
RIGHTS -- 0.0%
CONSUMER PRODUCTS -- 0.0%
50,000 Revlon Inc., Cl. A Rights+ .. 0 2,500
------------ ------------
PRINCIPAL
AMOUNT
------
U.S. GOVERNMENT OBLIGATIONS -- 14.5%
$22,645,000 U.S. Treasury Bills,
4.859% to 5.101%++,
01/04/07 to 04/26/07 ...... 22,468,342 22,467,859
------------ ------------
TOTAL
INVESTMENTS -- 99.2% ......$149,347,676 153,582,575
============
OTHER ASSETS AND
LIABILITIES (NET) -- 0.8% .............. 1,193,541
------------
NET ASSETS -- 100.0% .................... $154,776,116
============
- -------------
(a) Security fair valued under procedures established by the Board of Directors.
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 fair
valued securities amounted to $462,530 or 0.30% of total net assets.
(b) Security in default.
(c) At December 31, 2006, the Fund held investments in restricted and illiquid
securities amounting to $400,534 or 0.26% of total net assets, which were
valued under methods approved by the Board as follows:
ACQUISITION 12/31/06
SHARES/ CARRYING
PRINCIPAL ACQUISITION ACQUISITION VALUE
AMOUNT ISSUER DATE COST PER UNIT
-------- ------ ----------- ----------- --------
284,777 National Patent Development Corp.
warrants expire 08/14/08 ...... 11/24/04 $ 0.00 $ 0.2691
$482,585 GP Strategies Corp., Sub. Deb.,
6.00%, 08/14/08 ............... 08/08/03 382,866 67.1171
(d) 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 market value of the Rule 144A security amounted to $0 or 0.00% of
total net assets.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR American Depository Receipt
CVO Contingent Value Obligation
See accompanying notes to financial statements.
8
THE GABELLI ABC FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2006
================================================================================
ASSETS:
Investments, at value (cost $149,347,676) .... $153,582,575
Cash ......................................... 1,219
Receivable for investments sold .............. 10,475,526
Receivable for Fund shares sold .............. 207,901
Dividends and interest receivable ............ 63,909
Prepaid expense .............................. 9,204
------------
TOTAL ASSETS ................................. 164,340,334
------------
LIABILITIES:
Payable for investments purchased ............ 9,427,164
Payable for investment advisory fees ......... 68,562
Payable for accounting fees .................. 7,501
Other accrued expenses ....................... 60,991
------------
TOTAL LIABILITIES ............................ 9,564,218
------------
NET ASSETS applicable to 15,474,596
shares outstanding ......................... $154,776,116
============
NET ASSETS CONSIST OF:
Paid-in capital, at $0.001 par value ......... $151,013,593
Accumulated distributions in excess of
net investment income ...................... (225,737)
Accumulated distributions in excess of
net realized gain on investments
and foreign currency transactions .......... (246,844)
Net unrealized appreciation on investments ... 4,234,899
Net unrealized appreciation on foreign
currency translations ...................... 205
------------
NET ASSETS ................................... $154,776,116
============
NET ASSET VALUE, offering and redemption price
per share ($154,776,116 / 15,474,596 shares
outstanding; 1,000,000,000 shares authorized) $10.00
======
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2006
================================================================================
INVESTMENT INCOME:
Dividends (net of foreign taxes of $118,951) ............ $ 1,950,570
Interest ................................................ 3,539,456
------------
TOTAL INVESTMENT INCOME ................................. 5,490,026
------------
EXPENSES:
Investment advisory fees ................................ 1,795,241
Custodian fees .......................................... 46,254
Accounting fees ............ ............................ 45,000
Legal and audit fees .................................... 35,480
Shareholder services fees ............................... 32,937
Shareholder communications expenses ..................... 24,046
Registration expenses ................................... 21,947
Interest expense ........................................ 14,774
Directors' fees ......................................... 9,500
Miscellaneous expenses .................................. 27,732
------------
TOTAL EXPENSES .......................................... 2,052,911
Less: Custodian fee credits ............................. (36,805)
Fees waived (see Note 3) ................................ (897,621)
------------
NET EXPENSES ............................................ 1,118,485
------------
NET INVESTMENT INCOME ................................... 4,371,541
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain on investments ........................ 13,964,022
Net realized gain on foreign currency transactions ...... 366,020
------------
Net realized gain on investments and foreign
currency transactions ................................. 14,330,042
------------
Net change in unrealized appreciation/
depreciation on investments ........................... 1,406,979
Net change in unrealized appreciation/
depreciation on foreign currency translations ......... 115,908
------------
Net change in unrealized appreciation/
depreciation on investments and foreign
currency translations ................................. 1,522,887
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY ...................... 15,852,929
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ....................................... $ 20,224,470
============
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
YEAR ENDED YEAR ENDED
DECEMBER 31, 2006 DECEMBER 31, 2005
------------------ -----------------
OPERATIONS:
Net investment income ....................................................... $ 4,371,541 $ 2,991,937
Net realized gain on investments and foreign currency transactions .......... 14,330,042 6,750,946
Net change in unrealized appreciation/depreciation on investments and foreign
currency translations ..................................................... 1,522,887 862,232
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................ 20,224,470 10,605,115
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ....................................................... (3,811,884) (2,627,453)
Net realized gain on investments ............................................ (11,289,043) (5,954,327)
------------- -------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ......................................... (15,100,927) (8,581,780)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Net decrease in net assets from capital share transactions .................. (27,337,170) (126,289,556)
------------- -------------
REDEMPTION FEES ............................................................. 406 332
------------- -------------
NET DECREASE IN NET ASSETS .................................................. (22,213,221) (124,265,889)
NET ASSETS:
Beginning of period ......................................................... 176,989,337 301,255,226
------------- -------------
End of period (including undistributed net investment income of
$0 and $0, respectively) .................................................. $ 154,776,116 $ 176,989,337
============= =============
See accompanying notes to financial statements.
9
THE GABELLI ABC FUND
NOTES TO FINANCIAL STATEMENTS
================================================================================
1. ORGANIZATION. The Gabelli ABC Fund (the "Fund"), a series of Gabelli Investor
Funds, Inc. (the "Corporation"), was organized on October 30, 1992 as a Maryland
corporation. The Fund is a non-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 to achieve total returns that are
attractive to investors in various market conditions without excessive risk of
capital loss. The Fund commenced investment operations on May 14, 1993.
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 Directors (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 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 in the process of reviewing the requirements of SFAS 157 against
its current valuation policies to determine future applicability.
10
THE GABELLI ABC FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
primary government securities dealers recognized by the Federal Reserve Board,
with member banks of the Federal Reserve System, or with other brokers or
dealers that meet credit guidelines established by the Adviser and reviewed by
the Board. Under the terms of a typical repurchase agreement, the Fund takes
possession of an underlying debt obligation subject to an obligation of the
seller to repurchase, and the Fund to resell, the obligation at an agreed-upon
price and time, thereby determining the yield during the Fund's holding period.
The Fund will always receive and maintain securities as collateral whose market
value, including accrued interest, will be at least equal to 102% of the dollar
amount invested by the Fund in each agreement. The Fund will make payment for
such securities only upon physical delivery or upon evidence of book entry
transfer of the collateral to the account of the custodian. To the extent that
any repurchase transaction exceeds one business day, the value of the collateral
is marked-to-market on a daily basis to maintain the adequacy of the collateral.
If the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited. At December
31, 2006, there were no open repurchase agreements.
FUTURES CONTRACTS. The Fund may engage in futures contracts for the purpose of
hedging against changes in the value of its portfolio securities and in the
value of securities it intends to purchase. Upon entering into a futures
contract, the Fund is required to deposit with the broker an amount of cash or
cash equivalents equal to a certain percentage of the contract amount. This is
known as the "initial margin". Subsequent payments ("variation margin") are made
or received by the Fund each day, depending on the daily fluctuations in the
value of the contract, which are included in unrealized
appreciation/depreciation on investments and futures contracts. The Fund
recognizes a realized gain or loss when the contract is closed.
There are several risks in connection with the use of futures contracts as a
hedging instrument. The change in value of futures contracts primarily
corresponds with the value of their underlying instruments, which may not
correlate with the change in value of the hedged investments. In addition, there
is the risk that the Fund may not be able to enter into a closing transaction
because of an illiquid secondary market. At December 31, 2006, there were no
open futures contracts.
SECURITIES SOLD SHORT. The Fund may enter into short sale transactions. Short
selling involves selling securities that may or may not be owned and, at times,
borrowing the same securities for delivery to the purchaser, with an obligation
to replace such borrowed securities at a later date. The proceeds received from
short sales are recorded as liabilities and the Fund records an unrealized gain
or loss to the extent of the difference between the proceeds received and the
value of an open short position on the day of determination. The Fund records a
realized gain or loss when the short position is closed out. By entering into a
short sale, the Fund bears the market risk of an unfavorable change in the price
of the security sold short. Dividends on short sales are recorded as an expense
by the Fund on the ex-dividend date and interest expense is recorded on the
accrual basis. The Fund did not hold any short positions as of December 31,
2006.
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.
11
THE GABELLI ABC FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
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 15% 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 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.
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.
12
THE GABELLI ABC FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
CUSTODIAN FEE CREDITS. When cash balances are maintained in the custody account,
the Fund receives credits which are used to offset custodian fees. The gross
expenses paid under the custody arrangement are included in custodian fees in
the Statement of Operations with the corresponding expense offset, if any, shown
as "custodian fee credits".
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 net asset value ("NAV") of the Fund,
including the Fund's use of the tax accounting practice known as equalization.
For the fiscal year ended December 31, 2006, reclassifications were made to
decrease accumulated distributions in excess of net investment income by
$651,839 and to decrease accumulated distributions in excess of net realized
gain on investments by $3,073,916, with an offsetting adjustment to paid-in
capital.
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) ... $15,554,899 $9,621,608
Net long-term capital gains ................. 3,318,578 191,573
----------- ----------
Total distributions paid .................... $18,873,477 $9,813,181
=========== ==========
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................. $3,988,773
Other temporary differences .................... (226,250)
----------
Total accumulated gain ......................... $3,762,523
==========
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 ...... $149,594,007 $6,509,893 $(2,521,325) $3,988,568
13
THE GABELLI ABC FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
At December 31, 2006, the difference between book basis and tax basis unrealized
appreciation was primarily due to deferral of losses from wash sales for tax
purposes.
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 Directors of the Fund who are affiliated
persons of the Adviser. Effective November 30, 2006, the Adviser has
contractually agreed to waive its management fee in the amount of 0.50% of the
Fund's average daily net assets. The arrangement is in effect through December
31, 2007 and is renewable annually by the Adviser. From April 1, 2002 through
November 30, 2006, the Adviser had voluntarily agreed to reduce its advisory fee
by 0.50%. The Fund's expenses were reduced by $897,621 for the fiscal year ended
December 31, 2006. Such amounts are not recoverable in future years.
The Fund pays each Director that is not considered to be an affiliated person an
annual retainer of $1,000 plus $250 for each Board meeting attended and they are
reimbursed for any out of pocket expenses incurred in attending meetings. All
Board committee members receive $250 per meeting attended. Directors who are
directors or employees of the Adviser or an affiliated company receive no
compensation or expense reimbursement from the Fund.
4. PORTFOLIO SECURITIES. Purchases and proceeds from the sales of securities for
the fiscal year ended December 31, 2006, other than short-term securities,
aggregated $430,758,273 and $208,317,165, respectively.
5. TRANSACTIONS WITH AFFILIATES. During the fiscal year ended December 31, 2006,
the Fund paid brokerage commissions of $233,483 to Gabelli & Company, Inc.
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.
6. 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. During the fiscal year ended December 31, 2006,
there were no borrowings from the line of credit.
14
THE GABELLI ABC FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
7. CAPITAL STOCK TRANSACTIONS. Transactions in shares of capital stock were as
follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2006 DECEMBER 31, 2005
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ----------- -------------
Shares sold ......................................... 4,109,656 $ 44,553,475 593,644 $ 5,899,245
Shares issued upon reinvestment of distributions .... 639,217 6,398,559 640,813 6,305,599
Shares redeemed .....................................(7,243,467) (78,289,204) (13,838,307) (138,494,400)
---------- ------------ ----------- -------------
Net decrease ......................................(2,494,594) $(27,337,170) (12,603,850) $(126,289,556)
========== ============ =========== =============
The Fund imposes a redemption fee of 2.00% on Fund 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 $406 and $332, 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.
8. INDEMNIFICATIONS. The Fund enters into contracts that contain a variety of
indemnifications. The Fund's maximum exposure under these arrangements is
unknown. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
9. OTHER MATTERS. The Adviser and/or affiliates 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.
15
THE GABELLI ABC FUND
FINANCIAL HIGHLIGHTS
================================================================================
Selected data for a share of capital stock outstanding throughout each period:
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
OPERATING PERFORMANCE:
Net asset value, beginning of period ................. $ 9.85 $ 9.85 $ 9.83 $ 9.64 $ 9.65
-------- -------- -------- -------- --------
Net investment income ................................ 0.30 0.17 0.08 0.05 0.07
Net realized and unrealized gain on investments ...... 0.88 0.32 0.11 0.43 0.01
-------- -------- -------- -------- --------
Total from investment operations ..................... 1.18 0.49 0.19 0.48 0.08
-------- -------- -------- -------- --------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income ................................ (0.26) (0.15) (0.08) (0.01) (0.05)
Net realized gain on investments ..................... (0.77) (0.34) (0.09) (0.28) (0.04)
-------- -------- -------- -------- --------
Total distributions .................................. (1.03) (0.49) (0.17) (0.29) (0.09)
-------- -------- -------- -------- --------
REDEMPTION FEES ...................................... 0.00(a) 0.00(a) 0.00(a) -- --
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD ....................... $ 10.00 $ 9.85 $ 9.85 $ 9.83 $ 9.64
======== ======== ======== ======== ========
Total return+ ........................................ 12.0% 5.0% 1.9% 4.9% 0.9%
======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ................. $154,776 $176,989 $301,255 $294,070 $261,014
Ratio of net investment income to
average net assets ................................. 2.44% 1.26% 0.83% 0.59% 0.74%
Ratio of operating expenses to average net asset
before fees waived ................................. 1.14% 1.14% 1.15% 1.40% 1.39%
Ratio of operating expenses to average net asset
net of fees waived ................................. 0.64%(b)(c) 0.64%(b) 0.61% 0.65% 0.99%
Portfolio turnover rate .............................. 190% 127% 141% 244% 252%
- -------------------
+ 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.
(a) Amount represents less than $0.005 per share.
(b) The ratios do not include a reduction of expenses for custodian fee credits
on cash balances maintained with the custodian. Including such custodian fee
credits, the expense ratios for the fiscal years ended December 31, 2006 and
December 31, 2005 would have been 0.62% and 0.62%, respectively.
(c) The fund incurred interest expense during the fiscal year ended December 31,
2006. If interest expense had not been incurred, the ratio of operating
expenses to average net assets would have been 0.61%.
See accompanying notes to financial statements.
16
THE GABELLI ABC FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
================================================================================
To the Shareholders and Board of Directors of
Gabelli Investor Funds, Inc.
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of The Gabelli ABC Fund (the "Fund"), a series of
Gabelli Investor Funds, Inc., as of December 31, 2006, and the related statement
of operations for the year then ended, the statements of changes in net assets
for each of the two years in the period then ended, and financial highlights for
each of the four years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights for the year
ended December 31, 2002 were audited by other auditors whose report dated
January 31, 2003, expressed an unqualified opinion on those financial
statements.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2006, by correspondence with the Fund's
custodian and brokers or by other appropriate auditing procedures where replies
from brokers were not received. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Gabelli ABC Fund, a series of Gabelli Investor Funds, Inc., 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 four years in the period then ended, in conformity
with U.S. generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Philadelphia, Pennsylvania
February 16, 2007
17
THE GABELLI ABC FUND
ADDITIONAL FUND INFORMATION (UNAUDITED)
================================================================================
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Directors. Information pertaining to the Directors and officers
of the Fund is set forth below. The Fund's Statement of Additional Information
includes additional information about the Fund's Directors and is available,
without charge, upon request, by calling 800-GABELLI (800-422-3554) or by
writing to The Gabelli ABC 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 DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 4
- ---------------- ------------ ---------------- ---------------------- ------------------
INTERESTED DIRECTORS 3:
- ----------------------
MARIO J. GABELLI Since 1993 24 Chairman of the Board and Chief Executive Director of Morgan Group
Director and Officer of GAMCO Investors, Inc. and Holdings, Inc.
Chief Investment Officer Chief Investment Officer - Value Portfolios (transportation services);
Age: 64 of Gabelli Funds, LLC and GAMCO Asset Chairman of the Board of
Management Inc.; Director/Trustee or Lynch Interactive
Chief Investment Officer of other registered Corporation (multimedia
investment companies in the Gabelli Funds and communication
complex; Chairman and Chief Executive services company)
Officer of GGCP, Inc.
INDEPENDENT DIRECTORS 5:
- -----------------------
ANTHONY J. COLAVITA Since 1993 34 Partner in the law firm of --
Director Anthony J. Colavita, P.C.
Age: 71
VINCENT D. ENRIGHT Since 1993 13 Former Senior Vice President and Chief --
Director Financial Officer of KeySpan Energy
Age: 63 Corporation (public utility) (1994-1998)
MARY E. HAUCK Since 2000 3 Retired Senior Manager of the Gabelli --
Director O'Connor Fixed Income Mutual Funds
Age: 64 Management Company
WERNER J. ROEDER, MD Since 1993 23 Medical Director of Lawrence Hospital and --
Director practicing private physician
Age: 66
18
THE GABELLI ABC FUND
ADDITIONAL FUND INFORMATION (CONTINUED) (UNAUDITED)
================================================================================
TERM OF
NAME, POSITION(S) OFFICE AND
ADDRESS 1 LENGTH OF PRINCIPAL OCCUPATION(S)
AND AGE TIME SERVED 2 DURING PAST FIVE YEARS
- ---------------- ------------- ----------------------
OFFICERS:
- --------
BRUCE N. ALPERT Since 2003 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.
Vice President and since 1999 and GAMCO Asset Management Inc. since 1993; Secretary of
Secretary all of the registered investment companies in the Gabelli Funds complex
Age: 43
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 Director 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 Director and until the
election and qualification of his or her successor, if any, elected at such
meeting, or (ii) the date a Director resigns or retires, or a Director is
removed by the Board of Directors or shareholders, in accordance with the
Corporation's By-Laws and Articles of Incorporation. 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. Mr. Gabelli is
considered an "interested person" because of his affiliation with Gabelli
Funds, LLC which acts as the Fund's investment adviser.
4 This column includes only directorships of companies required to report to
the SEC under the Securities Exchange Act of 1934, as amended (i.e. public
companies) or other investment companies registered under the 1940 Act.
5 Directors who are interested persons are considered "Independent" Directors.
- --------------------------------------------------------------------------------
2006 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the fiscal year ended December 31, 2006, the Fund paid to shareholders an
ordinary income dividend (comprised of net investment income and short-term
capital gains) totaling $0.84 and a distribution from long-term capital gain
totaling $0.19 per share which is designated as a capital gain dividend. The
Fund designates a maximum of $3,318,578 of long-term capital gains as a
capital gain dividend for tax purposes. For the fiscal year ended December 31,
2006, 7.05% of the ordinary income dividend qualifies for the dividend
received deduction available to corporations, and 11.19% 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 19.90%. 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 ABC 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.
- --------------------------------------------------------------------------------
19
THE GABELLI ABC 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 DIRECTORS
Mario J. Gabelli, CFA Mary E. Hauck
CHAIRMAN AND CHIEF FORMER SENIOR PORTFOLIO MANAGER
EXECUTIVE OFFICER GABELLI-O'CONNOR FIXED INCOME
GAMCO INVESTORS, INC. MUTUAL FUND MANAGEMENT CO.
Anthony J. Colavita Werner J. Roeder, MD
ATTORNEY-AT-LAW MEDICAL DIRECTOR
ANTHONY J. COLAVITA, P.C. LAWRENCE HOSPITAL
Vincent D. Enright
FORMER SENIOR VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
KEYSPAN ENERGY CORP.
OFFICERS
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 ABC Fund. It is not authorized for distribution to prospective investors
unless preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
GAB408Q406AR
[GRAPHIC OMITTED] E P
Gabelli Triangle P M
MANAGEMENT S V
CASH FLOW
RESEARCH
THE
GABELLI
ABC
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
Directors has determined that Vincent D. Enright is qualified to serve as an
audit committee financial expert serving on its audit committee and that he is
"independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
AUDIT FEES
(a) The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for the
audit of the registrant's annual financial statements or services that
are normally provided by the accountant in connection with statutory
and regulatory filings or engagements for those fiscal years are
$28,900 for 2005 and $30,500 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 $3,600 for 2005 and $0 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 $100,600 for 2005 and $73,050 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 Directors, 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) Gabelli Investor Funds, Inc.
--------------------------------------------------------------------
By (Signature and Title)* /s/ Bruce N. Alpert
-------------------------------------------------------
Bruce N. Alpert, Principal Executive Officer
Date 03/01/2007
----------------------------------------------------------------------------
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
-------------------------------------------------------
Bruce N. Alpert, Principal Executive Officer
Date 03/01/2007
----------------------------------------------------------------------------
By (Signature and Title)* /s/ Agnes Mullady
-------------------------------------------------------
Agnes Mullady,
Principal Financial Officer & Treasurer
Date 03/01/2007
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.