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
Gabelli Investor Funds, Inc.
(Exact name of registrant as specified in charter)
One Corporate Center
Rye, New York 10580-1422
(Address of principal executive offices) (Zip code)
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
(Name and address of agent for service)
registrant's telephone number, including area code: 1-800-422-3554
Date of fiscal year end: December 31
Date of reporting period: December 31, 2008
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, 2008
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, 2008 with a description of factors that affected the
performance during the past year.
PERFORMANCE DISCUSSION (UNAUDITED)
The Gabelli ABC Fund (the "Fund") (Class AAA Shares) declined 2.63% in
2008.
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.
2008 was a period of upheaval in the equities market, and deal making was
not immune. As reported by Citi in its "Executive M&A Summary", the announced
deal volume for the year was $2.9 trillion - a reduction of 30% from the $4.2
trillion in 2007.
Notwithstanding ongoing constraints in the credit markets, this is not a
trend we necessarily expect to continue. However, strategic buyers with the
financial wherewithal will continue to improve their market positions through
acquisition activity. We also expect to see an increase in financial engineering
- - spins and split-offs - as companies reposition themselves and seek to maximize
value.
Holdings that contributed positively to performance in 2008 were UST Inc.
(21% of net assets as of December 31, 2008), Wm. Wrigley Jr., Anheuser-Busch,
and Foundry Networks. Detractors were Take-Two Interactive (0.5%), MGM Mirage
(0.3%), Rohm and Haas (4.0%), and Yahoo! (0.4%).
Sincerely yours,
/s/ Bruce N. Alpert
Bruce N. Alpert
February 20, 2009 President
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI ABC FUND CLASS AAA SHARES,
THE LIPPER U.S. TREASURY MONEY MARKET FUND AVERAGE, AND THE S&P 500 INDEX
(PERFORMANCE GRAPH)
Lipper U.S. Treasury
Gabelli ABC Fund Money Market Average S&P 500 Index
---------------- -------------------- -------------
5/14/1993 10,000 10,000 10,000
12/31/1993 10,910 10,163 10,809
12/31/1994 11,404 10,530 10,951
12/31/1995 12,679 11,091 15,060
12/31/1996 13,667 11,618 18,517
12/31/1997 15,409 12,138 24,692
12/31/1998 17,126 12,705 31,754
12/31/1999 18,667 13,247 38,432
12/31/2000 20,693 13,980 34,935
12/31/2001 21,636 14,450 30,781
12/31/2002 21,825 14,599 23,981
12/31/2003 22,903 14,660 30,857
12/31/2004 23,345 14,747 34,211
12/31/2005 24,507 15,089 35,891
12/31/2006 27,441 15,714 41,554
12/31/2007 29,389 16,356 43,836
12/31/2008 28,616 16,539 27,621
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, 2008 (a)
Since
Inception
Quarter 1 Year 3 Year 5 Year 10 Year 15 Year (5/14/93)
------- -------- ------ ------ ------- ------- ---------
GABELLI ABC FUND
AAA SHARES ........................ (1.22)% (2.63)% 5.30% 4.56% 5.27% 6.64% 6.96%
ADVISOR SHARES .................... (1.23) (2.84) 5.15 4.47 5.22 6.61 6.93
S&P 500 Index ........................ (21.95) (36.99) (8.36) (2.19) (1.38) 6.46 6.71
Lipper U.S. Treasury Money
Market Avg. ....................... 0.06 1.12 3.10 2.43 2.70 3.39 3.36(b)
IN THE CURRENT PROSPECTUS, THE FUND'S EXPENSE RATIOS ARE 0.65% FOR THE CLASS AAA
SHARES AND 0.92% FOR THE ADVISOR CLASS SHARES. THE FUND DOES NOT HAVE A SALES
CHARGE.
(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 OF 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 FROM APRIL 1, 2002 THROUGH APRIL 30,
2007. 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 FUND AVERAGE REFLECTS THE AVERAGE PERFORMANCE OF
MUTUAL FUNDS CLASSIFIED IN THIS PARTICULAR CATEGORY. DIVIDENDS ARE
CONSIDERED REINVESTED. YOU CANNOT INVEST DIRECTLY IN AN INDEX. THE CLASS
AAA SHARES NET ASSET VALUES ("NAVS") PER SHARE ARE USED TO CALCULATE
PERFORMANCE FOR THE PERIODS PRIOR TO THE ISSUANCE OF THE ADVISOR CLASS
SHARES ON MAY 1, 2007. THE ACTUAL PERFORMANCE OF THE ADVISOR CLASS SHARES
WOULD HAVE BEEN LOWER DUE TO THE ADDITIONAL EXPENSES ASSOCIATED WITH THIS
CLASS OF SHARES.
(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, 2008 through
December 31, 2008 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, 2008.
Beginning Ending Annualized Expenses
Account Value Account Value Expense Paid During
07/01/08 12/31/08 Ratio Period*
------------- ------------- ---------- -----------
THE GABELLI ABC FUND
ACTUAL FUND RETURN
Class AAA $1,000.00 $ 977.70 0.64% $3.18
Advisor Class $1,000.00 $ 976.50 0.88% $4.37
HYPOTHETICAL 5% RETURN
Class AAA $1,000.00 $1,021.92 0.64% $3.25
Advisor Class $1,000.00 $1,020.71 0.88% $4.47
* 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
366.
3
SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED)
The following table presents portfolio holdings as a percent of total net assets
as of December 31, 2008:
THE GABELLI ABC FUND
U.S. Government Obligations ........... 30.1%
Consumer Products ..................... 21.1%
Health Care ........................... 9.0%
Financial Services .................... 7.5%
Specialty Chemicals ................... 6.3%
Energy and Utilities .................. 4.5%
Computer Software and Services ........ 2.2%
Automotive: Parts and Accessories ..... 1.3%
Telecommunications .................... 1.1%
Food and Beverage ..................... 1.0%
Business Services ..................... 0.9%
Diversified Industrial ................ 0.8%
Entertainment ......................... 0.6%
Cable and Satellite ................... 0.5%
Metals and Mining ..................... 0.5%
Wireless Communications ............... 0.3%
Hotels and Gaming ..................... 0.3%
Electronics ........................... 0.2%
Retail ................................ 0.2%
Broadcasting .......................... 0.1%
Aerospace ............................. 0.1%
Publishing ............................ 0.0%
Equipment and Supplies ................ 0.0%
Aviation: Parts and Services .......... 0.0%
Mutual Funds .......................... 0.0%
Agriculture ........................... 0.0%
Communications Equipment .............. 0.0%
Home Furnishings ...................... 0.0%
Transportation ........................ 0.0%
Other Assets and Liabilities (Net) .... 11.4%
-----
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, 2008. 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, 2008
MARKET
SHARES COST VALUE
- ---------- ----------- ------------
COMMON STOCKS -- 57.9%
AEROSPACE -- 0.1%
10,000 Herley Industries Inc.+ .............. $ 114,714 $ 122,800
----------- ------------
AGRICULTURE -- 0.0%
300 Provimi SA ........................... 13,974 3,023
----------- ------------
AUTOMOTIVE: PARTS AND
ACCESSORIES -- 1.3%
16,500 BERU AG .............................. 1,431,039 1,697,248
14,000 Lear Corp.+ .......................... 47,000 19,740
22,000 O'Reilly Automotive Inc.+ ............ 483,167 676,280
----------- ------------
1,961,206 2,393,268
----------- ------------
AVIATION: PARTS AND SERVICES -- 0.0%
120,000 The Fairchild Corp., Cl. A+ .......... 334,457 36,000
----------- ------------
BROADCASTING -- 0.1%
9,000 Cogeco Inc. .......................... 175,303 181,531
10,000 Emmis Communications Corp., Cl. A+ ... 59,390 3,500
787 Granite Broadcasting Corp.+ .......... 9,454 787
500 Liberty Media Corp. -
Capital, Cl. A+ ................... 5,171 2,355
50,000 LIN TV Corp., Cl. A+ ................. 376,742 54,500
3,000 Salem Communications Corp., Cl. A+ ... 9,101 2,250
----------- ------------
635,161 244,923
----------- ------------
BUSINESS SERVICES -- 0.9%
400 Alliance Data Systems Corp.+ ......... 20,202 18,612
10,000 AMICAS Inc.+ ......................... 27,643 16,700
11,200 Ascent Media Corp., Cl. A+ ........... 274,494 244,608
46,000 Diebold Inc. ......................... 1,695,678 1,292,140
1,000 Distribucion y Servicio D&S SA, ADR .. 23,832 24,190
1,500 PHH Corp.+ ........................... 29,757 19,095
----------- ------------
2,071,606 1,615,345
----------- ------------
CABLE AND SATELLITE -- 0.5%
42,000 Cablevision Systems Corp., Cl. A ..... 913,038 707,280
32,000 Zon Multimedia Servicos de
Telecomunicacoes e Multimedia
SGPS SA ........................... 314,560 165,026
845 Zon Multimedia Servicos de
Telecomunicacoes e Multimedia
SGPS SA, ADR ...................... 12,126 4,358
----------- ------------
1,239,724 876,664
----------- ------------
COMPUTER SOFTWARE AND SERVICES -- 2.2%
1,500 Affiliated Computer
Services Inc., Cl. A+ ............. 62,327 68,925
2,000 i2 Technologies Inc.+ ................ 23,260 12,780
12,000 Mentor Graphics Corp.+ ............... 122,311 62,040
60,000 Metavante Technologies Inc.+ ......... 1,401,936 966,600
MARKET
SHARES COST VALUE
- ---------- ----------- ------------
25,000 NDS Group plc, ADR+ .................. $ 1,517,254 $ 1,433,500
60,000 SanDisk Corp.+ ....................... 881,436 576,000
1,215,000 StorageNetworks Inc., Escrow+ (a) .... 0 36,450
57,000 Yahoo! Inc.+ ......................... 1,627,008 695,400
----------- ------------
5,635,532 3,851,695
----------- ------------
CONSUMER PRODUCTS -- 21.1%
12,000 Harman International
Industries Inc. ................... 418,531 200,760
17,000 Heelys Inc. .......................... 86,220 38,590
1,800 Revlon Inc., Cl. A+ .................. 35,442 12,006
540,000 UST Inc. ............................. 36,791,804 37,465,200
----------- ------------
37,331,997 37,716,556
----------- ------------
DIVERSIFIED INDUSTRIAL -- 0.7%
1,000 Ampco-Pittsburgh Corp. ............... 15,394 21,700
5,500 Katy Industries Inc.+ ................ 19,913 6,325
20,000 Myers Industries Inc. ................ 367,968 160,000
284,777 National Patent
Development Corp.+ (a)(c) ......... 711,942 352,581
77,000 WHX Corp.+ ........................... 1,078,000 616,000
----------- ------------
2,193,217 1,156,606
----------- ------------
ELECTRONICS -- 0.2%
70,000 Alliance Semiconductor Corp. ......... 289,731 35,000
25,000 International Rectifier Corp.+ ....... 435,449 337,500
24,000 MoSys Inc.+ .......................... 91,807 50,400
----------- ------------
816,987 422,900
----------- ------------
ENERGY AND UTILITIES -- 4.1%
7,000 Anadarko Petroleum Corp. ............. 285,895 269,850
1 Forest Oil Corp.+ .................... 43 17
42,000 GDF Suez, Strips+ .................... 0 58
57,936 Great Plains Energy Inc. ............. 1,429,298 1,119,903
10,263 Mirant Corp.+ ........................ 175,575 193,663
250,000 Mirant Corp., Escrow+ (a) ............ 0 0
5,000 Northeast Utilities .................. 67,167 120,300
60,000 NorthWestern Corp. ................... 1,726,646 1,408,200
50,000 NRG Energy Inc.+ ..................... 1,208,275 1,166,500
2,200 Oesterreichische
Elektrizitaetswirtschafts
AG, Cl. A ......................... 113,854 99,572
1,000 Origin Energy Ltd. ................... 15,738 11,239
25,000 Progress Energy Inc., CVO+ (a) ....... 13,000 8,250
100,000 Puget Energy Inc. .................... 2,787,985 2,727,000
3,000 Queensland Gas Co. Ltd.+ ............. 3,186 12,027
400 REpower Systems AG+ .................. 61,426 61,718
95,000 WesternZagros Resources Ltd.+ ........ 350,101 46,172
----------- ------------
8,238,189 7,244,469
----------- ------------
See accompanying notes to financial statements.
5
THE GABELLI ABC FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 2008
MARKET
SHARES COST VALUE
- ---------- ----------- ------------
COMMON STOCKS (CONTINUED)
ENTERTAINMENT -- 0.6%
1,001 Chestnut Hill Ventures+ (a) .......... $ 3,749 $ 33,714
4,000 Discovery Communications
Inc., Cl. A+ ...................... 80,563 56,640
2,500 Discovery Communications
Inc., Cl. C+ ...................... 41,561 33,475
3,000 Liberty Media Corp. -
Entertainment, Cl. A+ ................ 45,016 52,440
115,000 Take-Two Interactive
Software Inc. ..................... 2,885,946 869,400
----------- ------------
3,056,835 1,045,669
----------- ------------
EQUIPMENT AND SUPPLIES -- 0.0%
25,000 Baldwin Technology Co. Inc., Cl. A+ .. 59,500 40,000
60 Hexpol AB+ ........................... 881 131
----------- ------------
60,381 40,131
----------- ------------
FINANCIAL SERVICES -- 7.5%
2,000 AllianceBernstein Holding LP ......... 39,737 41,580
2,000 Argo Group International
Holdings Ltd.+ .................... 52,801 67,840
3,000 Bank of America Corp. ................ 39,590 42,240
5,000 H&R Block Inc. ....................... 107,714 113,600
2,000 JPMorgan Chase & Co. ................. 61,940 63,060
2,200 Leucadia National Corp.+ ............. 22,128 43,560
3,000 Morgan Stanley ....................... 46,301 48,120
230,000 Nationwide Financial
Services Inc., Cl. A .............. 11,697,412 12,008,300
5,018 NewAlliance Bancshares Inc. .......... 69,527 66,087
818 PNC Financial Services
Group Inc. ........................ 55,392 40,082
2,000 Provident New York Bancorp ........... 30,603 24,800
55,000 SLM Corp.+ ........................... 1,150,186 489,500
2,000 The Bank of New York Mellon Corp. .... 55,155 56,660
10,000 Wachovia Corp. ....................... 32,095 55,400
2,000 Wells Fargo & Co. .................... 57,140 58,960
6,000 Willis Group Holdings Ltd. ........... 173,280 149,280
----------- ------------
13,691,001 13,369,069
----------- ------------
FOOD AND BEVERAGE -- 1.0%
24,000 Corn Products
International Inc. ................ 609,280 692,400
500 Genesee Corp., Cl. A+ (a) ............ 0 0
12,200 Genesee Corp., Cl. B+ (a) ............ 1,020 0
40,000 Grupo Continental SAB de CV .......... 61,459 66,144
1,000 Nissin Foods Holdings Co. Ltd. ....... 35,262 34,418
8,000 Pernod-Ricard SA ..................... 689,472 589,046
10,000 Remy Cointreau SA .................... 549,212 411,871
2,000 Sara Lee Corp. ....................... 27,225 19,580
----------- ------------
1,972,930 1,813,459
----------- ------------
SHARES/ MARKET
UNITS COST VALUE
- ---------- ----------- ------------
HEALTH CARE -- 9.0%
12,000 Advanced Medical
Optics Inc.+ ......................... $ 117,320 $ 79,320
468 Allergan Inc. ........................ 27,202 18,870
5,000 ArthroCare Corp.+ .................... 110,495 23,850
3,500 Biogen Idec Inc.+ .................... 185,503 166,705
7,000 Datascope Corp. ...................... 356,934 365,680
6,000 Fresenius Kabi Pharmaceuticals
Holding Inc., CVR+ ................ 0 2,100
107,600 Genentech Inc.+ ...................... 9,709,703 8,921,116
34,000 I-Flow Corp.+ ........................ 297,896 163,200
11,000 IMS Health Inc. ...................... 294,542 166,760
200,000 Mentor Corp. ......................... 6,153,904 6,186,000
3,100 UCB SA ............................... 111,299 101,092
----------- ------------
17,364,798 16,194,693
----------- ------------
HOTELS AND GAMING -- 0.3%
6,000 Las Vegas Sands Corp.+ ............... 34,154 35,580
40,000 MGM Mirage+ .......................... 2,199,821 550,400
----------- ------------
2,233,975 585,980
----------- ------------
METALS AND MINING -- 0.5%
2,000 Alcoa Inc. ........................... 22,380 22,520
5,000 Alpha Natural Resources Inc.+ ........ 117,732 80,950
5,500 Barrick Gold Corp. ................... 161,040 202,235
14,000 Freeport-McMoRan Copper
& Gold Inc. ....................... 330,879 342,160
10,000 Gold Fields Ltd., ADR ................ 127,424 99,300
3,000 Lonmin plc ........................... 84,323 39,294
8,000 NovaGold Resources Inc.+ ............. 22,280 11,920
10,000 Royal Oak Mines Inc.+ (a) ............ 11,858 0
5,000 Uranium One Inc.+ .................... 39,429 7,250
----------- ------------
917,345 805,629
----------- ------------
MUTUAL FUNDS -- 0.0%
10,000 KKR Private Equity
Investors LP ...................... 28,764 35,000
----------- ------------
PUBLISHING -- 0.0%
7,000 PagesJaunes Groupe SA ................ 159,996 68,404
----------- ------------
RETAIL -- 0.2%
50,000 Denny's Corp.+ ....................... 149,592 99,500
1,000 Genesco Inc.+ ........................ 23,989 16,920
15,000 Pier 1 Imports Inc.+ ................. 103,462 5,550
2,000 Saks Inc.+ ........................... 29,368 8,760
5,000 SUPERVALU Inc. ....................... 148,750 73,000
20,000 The Great Atlantic &
Pacific Tea Co. Inc.+ ............. 218,580 125,400
----------- ------------
673,741 329,130
----------- ------------
See accompanying notes to financial statements.
6
THE GABELLI ABC FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 2008
MARKET
SHARES COST VALUE
- ---------- ------------ ------------
COMMON STOCKS (CONTINUED)
SPECIALTY CHEMICALS -- 6.2%
89,000 Ciba Holding AG ..................... $ 3,768,259 $ 4,013,717
116,000 Rohm and Haas Co. ................... 8,557,691 7,167,640
------------ ------------
12,325,950 11,181,357
------------ ------------
TELECOMMUNICATIONS -- 1.1%
327,000 Asia Satellite
Telecommunications
Holdings Ltd. .................... 745,155 320,663
25,000 BCE Inc. ............................ 488,176 512,250
20,000 Corning Inc. ........................ 225,787 190,600
94 FairPoint Communications Inc. ....... 884 308
100,000 Portugal Telecom SGPS SA ............ 1,161,970 843,759
3,000 Telegroup Inc.+ (a) ................. 32 0
5,000 Verizon Communications Inc. ......... 177,034 169,500
------------ ------------
2,799,038 2,037,080
------------ ------------
WIRELESS COMMUNICATIONS -- 0.3%
500 American Tower Corp., Cl. A+ ........ 7,707 14,660
20,000 Centennial
Communications Corp.+ ............ 159,135 161,200
14,000 Metricom Inc.+ ...................... 1,680 6
10,000 United States Cellular Corp.+ ....... 413,660 432,400
3,000 Wayfinder System AB+ ................ 4,226 4,477
50,000 Winstar Communications Inc.+ (a) .... 2,125 50
------------ ------------
588,533 612,793
------------ ------------
TOTAL COMMON STOCKS ................. 116,460,051 103,802,643
------------ ------------
PREFERRED STOCKS -- 0.0%
COMMUNICATIONS EQUIPMENT -- 0.0%
RSL Communications Ltd.
1,000 7.500%, Cv. Pfd.+ (a)(b)(c) ......... 93 0
2,000 7.500%, Cv. Pfd., Ser. A+(a) ........ 185 0
------------ ------------
278 0
------------ ------------
HOME FURNISHINGS -- 0.0%
8,000 O'Sullivan Industries Holdings Inc.,
12.000% Pfd.+ (a) ................ 4,750 0
------------ ------------
TOTAL PREFERRED STOCKS .............. 5,028 0
------------ ------------
WARRANTS -- 0.0%
AUTOMOTIVE: PARTS AND
ACCESSORIES -- 0.0%
377 Federal-Mogul Corp.,
expire 12/27/14+ ................. 14,912 56
------------ ------------
BROADCASTING -- 0.0%
1,969 Granite Broadcasting Corp.,
Ser. A, expire 06/04/12+ ......... 0 20
1,969 Granite Broadcasting Corp.,
Ser. B, expire 06/04/12+ ......... 0 20
------------ ------------
0 40
------------ ------------
MARKET
SHARES COST VALUE
- ---------- ------------ ------------
CONSUMER PRODUCTS -- 0.0%
10,396 Pillowtex Corp.,
expire 11/24/09+ (a) ............. $ 45,461 $ 1
------------ ------------
TOTAL WARRANTS ...................... 60,373 97
------------ ------------
PRINCIPAL
AMOUNT
- ----------
CONVERTIBLE CORPORATE BONDS -- 0.2%
DIVERSIFIED INDUSTRIAL -- 0.1%
$ 500,000 SanDisk Corp., Cv.,
1.000%, 05/15/13 ................. 215,595 202,500
------------ ------------
SPECIALTY CHEMICALS -- 0.1%
500,000 Ferro Corp., Cv.,
6.500%, 08/15/13 ................. 257,066 244,375
------------ ------------
TRANSPORTATION -- 0.0%
850,000 Builders Transport Inc.,
Sub. Deb. Cv., Escrow,
6.500%, 12/31/20+ (a) ............ 0 0
------------ ------------
TOTAL CONVERTIBLE
CORPORATE BONDS .................. 472,661 446,875
------------ ------------
CORPORATE BONDS -- 0.4%
COMPUTER SOFTWARE AND
SERVICES -- 0.0%
100,000 Exodus Communications Inc.,
Sub. Deb.,
5.250%, 02/15/09+ (a) ............ 2,250 2,250
------------ ------------
CONSUMER PRODUCTS -- 0.0%
3,600,000 Pillowtex Corp., Sub. Deb.,
6.000%, 12/15/09+ (a) ............ 0 0
------------ ------------
ENERGY AND UTILITIES -- 0.4%
900,000 Texas Competitive Electric
Holdings Co. LLC, (STEP),
10.500%, 11/01/15 (c) ............ 612,606 643,500
------------ ------------
RETAIL -- 0.0%
200,000 RDM Sports Group Inc.,
Sub. Deb.,
8.000%, 08/15/15+ (a) ............ 4,000 0
------------ ------------
TOTAL CORPORATE BONDS ............... 618,856 645,750
------------ ------------
U.S. GOVERNMENT OBLIGATIONS -- 30.1%
U.S. TREASURY CASH
MANAGEMENT BILLS -- 3.0%
5,395,000 U.S. Treasury Cash Management Bills,
0.030% to 0.183%++,
04/29/09 to 06/24/09 ............. 5,392,787 5,393,510
------------ ------------
U.S. TREASURY BILLS -- 24.7%
44,210,000 U.S. Treasury Bills,
0.020% to 1.800%++,
01/02/09 to 06/25/09 ............. 44,186,214 44,188,276
------------ ------------
See accompanying notes to financial statements.
7
THE GABELLI ABC FUND
SCHEDULE OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 2008
PRINCIPAL MARKET
AMOUNT COST VALUE
- ---------- ------------ ------------
U.S. GOVERNMENT OBLIGATIONS (CONTINUED)
U.S. TREASURY NOTES -- 2.4%
$4,260,000 4.500%, 04/30/09 ................. $ 4,305,248 $ 4,321,574
------------ ------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS ...................... 53,884,249 53,903,360
------------ ------------
TOTAL
INVESTMENTS -- 88.6% ............. $171,501,218 158,798,725
============
OTHER ASSETS AND
LIABILITIES (NET) -- 11.4% ....... 20,365,828
------------
NET ASSETS -- 100.0% ................ $179,164,553
============
- ----------
(a) Securities 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, 2008, the
market value of fair valued securities amounted to $433,296 or 0.24% of net
assets.
(b) Illiquid security.
(c) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At December
31, 2008, the market value of Rule 144A securities amounted to $996,081 or
0.56% of net assets.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR American Depositary Receipt
CVO Contingent Value Obligation
CVR Contingent Value Rights
See accompanying notes to financial statements.
8
THE GABELLI ABC FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2008
ASSETS:
Investments, at value (cost $171,501,218) ........... $158,798,725
Receivable for investments sold ..................... 25,462,789
Receivable for Fund shares sold ..................... 2,140,976
Dividends and interest receivable ................... 95,625
Prepaid expenses .................................... 30,954
------------
TOTAL ASSETS ........................................ 186,529,069
------------
LIABILITIES:
Foreign currency, at value (cost $6,311) ............ 6,075
Payable to custodian ................................ 22,442
Payable for investments purchased ................... 6,909,513
Payable for Fund shares redeemed .................... 226,459
Payable for investment advisory fees ................ 83,566
Payable for distribution fees ....................... 9,412
Payable for accounting fees ......................... 7,501
Unrealized depreciation on swap contracts ........... 127
Other accrued expenses .............................. 99,421
------------
TOTAL LIABILITIES ................................... 7,364,516
------------
NET ASSETS applicable to 19,317,674
shares outstanding ............................... $179,164,553
============
NET ASSETS CONSIST OF:
Capital stock, at $0.001 par value .................. $193,214,833
Accumulated net investment income ................... 129
Accumulated distributions in excess of net
realized gain on investments, swap contracts,
and foreign currency transactions ................ (1,347,696)
Net unrealized depreciation on investments .......... (12,702,493)
Net unrealized depreciation on swap contracts ....... (127)
Net unrealized depreciation on foreign
currency translations ............................ (93)
------------
NET ASSETS .......................................... $179,164,553
============
SHARES OF BENEFICIAL INTEREST:
CLASS AAA:
Net Asset Value, offering, and redemption price per
share ($129,686,843 / 13,975,078 shares
outstanding; 500,000,000 shares authorized) ...... $ 9.28
============
ADVISOR CLASS:
Net Asset Value, offering, and redemption price per
share ($49,477,710 / 5,342,596 shares outstanding;
500,000,000 shares authorized) ................... $ 9.26
============
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2008
INVESTMENT INCOME:
Dividends (net of foreign taxes of $29,256) ......... $ 1,868,222
Interest ............................................ 1,899,278
------------
TOTAL INVESTMENT INCOME ............................. 3,767,500
------------
EXPENSES:
Investment advisory fees ............................ 1,078,744
Distribution fees - Advisor Class ................... 54,164
Custodian fees ...................................... 59,599
Shareholder communications expenses ................. 46,564
Accounting fees ..................................... 45,000
Registration expenses ............................... 41,542
Shareholder services fees ........................... 40,388
Legal and audit fees ................................ 36,681
Directors' fees ..................................... 11,102
Interest expense .................................... 1,671
Miscellaneous expenses .............................. 24,480
------------
TOTAL EXPENSES ...................................... 1,439,935
Less: Custodian fee credits ......................... (17,820)
------------
NET EXPENSES ........................................ 1,422,115
------------
NET INVESTMENT INCOME ............................... 2,345,385
------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS, SWAP CONTRACTS, AND FOREIGN CURRENCY:
Net realized gain on investments .................... 3,203,677
Net realized loss on swap contracts ................. (288,725)
Net realized gain on foreign currency
transactions ..................................... 9,969
------------
Net realized gain on investments, swap contracts,
and foreign currency transactions ................ 2,924,921
------------
Net change in unrealized appreciation/
(depreciation) on investments .................... (12,825,373)
Net change in unrealized appreciation/
(depreciation) on swap contracts ................. 115,190
Net change in unrealized appreciation/
(depreciation) on foreign currency translations .. (1,824)
------------
Net change in unrealized appreciation/
(depreciation) on investments, swap contracts,
and foreign currency translations ................ (12,712,007)
------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS, SWAP CONTRACTS, AND
FOREIGN CURRENCY ................................. (9,787,086)
------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS .................................. $ (7,441,701)
============
See accompanying notes to financial statements.
9
THE GABELLI ABC FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2008 2007
------------ ------------
OPERATIONS:
Net investment income ............................... $ 2,345,385 $ 3,493,442
Net realized gain on investments, swap contracts, and
foreign currency transactions ................... 2,924,921 14,874,842
Net change in unrealized appreciation/(depreciation)
on investments, swap contracts, and foreign
currency translations ............................ (12,712,007) (4,225,810)
------------ ------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS ....................................... (7,441,701) 14,142,474
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income
Class AAA ........................................ (1,265,491) (2,804,616)
Advisor Class .................................... (414,228) (99,460)
------------ ------------
(1,679,719) (2,904,076)
------------ ------------
Net realized gain
Class AAA ........................................ (2,247,640) (12,478,122)
Advisor Class .................................... (831,479) (476,767)
------------ ------------
(3,079,119) (12,954,889)
------------ ------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ................. (4,758,838) (15,858,965)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Class AAA ........................................ (36,121,173) 22,754,023
Advisor Class .................................... 44,217,497 7,454,321
------------ ------------
NET INCREASE IN NET ASSETS FROM CAPITAL SHARE
TRANSACTIONS ..................................... 8,096,324 30,208,344
------------ ------------
REDEMPTION FEES ..................................... 714 85
------------ ------------
NET INCREASE/(DECREASE) IN NET ASSETS ............... (4,103,501) 28,491,938
NET ASSETS:
Beginning of period ................................. 183,268,054 154,776,116
------------ ------------
End of period (including undistributed net investment
income of $129 and $115,319, respectively) ....... $179,164,553 $183,268,054
============ ============
See accompanying notes to financial statements.
10
THE GABELLI ABC FUND
FINANCIAL HIGHLIGHTS
Selected data for a share of capital stock outstanding throughout each period:
INCOME
FROM INVESTMENT OPERATIONS DISTRIBUTIONS
--------------------------------- ------------------------------------
Net
Realized
and Net Net
Net Asset Unrealized Net Asset Assets,
Period Value, Net Gain Total from Net Realized Value, End of
Ended Beginning Investment (Loss) on Investment Investment Gain on Total Redemption End Total Period
December 31 of Period Income(a) Investments Operations Income Investments Distributions Fees(a) Period Return+ (in 000's)
- ----------- --------- ---------- ----------- ---------- ---------- ----------- ------------- ---------- ------ ------- ----------
CLASS AAA
2008 $ 9.80 $0.11 $(0.37) $(0.26) $(0.09) $(0.17) $(0.26) $0.00(d) $ 9.28 (2.6)% $129,687
2007 10.00 0.16 0.55 0.71 (0.17) (0.74) (0.91) 0.00(d) 9.80 7.1 176,322
2006 9.85 0.30 0.88 1.18 (0.26) (0.77) (1.03) 0.00(d) 10.00 12.0 154,776
2005 9.85 0.17 0.32 0.49 (0.15) (0.34) (0.49) 0.00(d) 9.85 5.0 176,989
2004 9.83 0.08 0.11 0.19 (0.08) (0.09) (0.17) 0.00(d) 9.85 1.9 301,255
ADVISOR CLASS(e)
2008 $ 9.79 $0.09 $(0.37) $(0.28) $(0.08) $(0.17) $(0.25) $0.00(d) $ 9.26 (2.8)% $ 49,478
2007 10.33 0.12 0.24 0.36 (0.16) (0.74) (0.90) 0.00(d) 9.79 3.5 6,946
RATIOS TO AVERAGE NET ASSETS/
SUPPLEMENTAL DATA
-------------------------------------------
Operating Operating
Expenses Expenses
Period Net Before Net of Portfolio
Ended Investment Fees Fees Turnover
December 31 Income Waived Waived(b)(c) Rate++
- ----------- ---------- --------- ------------ ---------
CLASS AAA
2008 1.11% 0.64% 0.64% 472%
2007 1.50 0.79 0.65 204
2006 2.44 1.14 0.64 190
2005 1.26 1.14 0.64 127
2004 0.83 1.15 0.61 141
ADVISOR
CLASS(e)
2008 0.92% 0.89% 0.89% 472%
2007 1.74(f) 0.89(f) 0.92(f) 204
- ----------
+ 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. Total return for a period of less
than one year is not annualized.
++ Effective in 2008, a change in accounting policy was adopted with regard to
the calculation of the portfolio turnover rate to include cash proceeds due
to mergers. Had this policy been adopted retroactively, the portfolio
turnover rate for the years ended December 31, 2007, 2006, 2005, and 2004
would have been 439%, 394%, 302%, and 268%, respectively.
(a) Per share amounts have been calculated using the average shares outstanding
method.
(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 years ended December 31, 2008,
2007, 2006 and 2005 would have been 0.63%, 0.63%, 0.62%, and 0.62%,
respectively, for Class AAA. The expense ratios for the year ended December
31, 2008 and the period ended December 31, 2007 would have been 0.88% and
0.89%, respectively, for the Advisor Class.
(c) The Fund incurred interest expense during the years ended December 31, 2007
and 2006. If interest expense had not been incurred, the ratio of operating
expenses to average net assets would have been 0.63% and 0.61% for Class
AAA, and 0.88% for the period ended December 31, 2007 for the Advisor
Class. For the year ended December 31, 2008, the effect of interest expense
was minimal.
(d) Amount represents less than $0.005 per share.
(e) Advisor Class Shares were initially offered on May 1, 2007.
(f) Annualized.
See accompanying notes to financial statements.
11
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. On
February 21, 2007, the Board of Directors (the "Board") reclassified the Fund's
shares into Class AAA Shares and Advisor Class Shares and reallocated the
authorized shares evenly between these Share Classes. Advisor Class Shares were
first issued on May 1, 2007.
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 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 with the
valuation and changes in valuation of similar securities, including a comparison
of foreign securities with 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.
Statement of Financial Accounting Standard No. 157, "Fair Value Measurements"
("SFAS 157") clarifies the definition of fair value for financial reporting,
establishes a framework for measuring fair value, and requires additional
disclosures about the use of fair value measurements. The three levels of the
fair value hierarchy under SFAS 157 are described below:
- Level 1 - quoted prices in active markets for identical securities;
12
THE GABELLI ABC FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- Level 2 - other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speeds, credit
risk, etc.); and
- Level 3 - significant unobservable inputs (including the Fund's
determinations as to the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. The
summary of the Fund's investments and other financial instruments, by inputs
used to value the Fund's investments as of December 31, 2008 is, as follows:
INVESTMENTS IN OTHER FINANCIAL
SECURITIES INSTRUMENTS (UNREALIZED
(MARKET VALUE) DEPRECIATION)*
VALUATION INPUTS ASSETS LIABILITIES
- ---------------- -------------- -----------------------
Level 1 - Quoted Prices $103,371,693 --
Level 2 - Other Significant Observable Inputs 55,348,567 $(127)
Level 3 - Significant Unobservable Inputs 78,465 --
------------ -----
TOTAL $158,798,725 $(127)
============ =====
- ----------
* Other financial instruments are derivative instruments not reflected in the
Schedule of Investments, such as futures, forwards, and swaps which are
valued at the unrealized appreciation/depreciation on the investment.
The following is a reconciliation of Level 3 investments for which significant
unobservable inputs were used to determine fair value:
INVESTMENTS IN
SECURITIES
(MARKET VALUE)
--------------
BALANCE AS OF 12/31/07 $ 517,019
Accrued discounts/(premiums) 60,029
Realized gain/(loss) --
Change in unrealized appreciation/(depreciation)+ 10,793
Net purchases/(sales) (507,126)
Transfers in and/or out of Level 3 (2,250)
---------
BALANCE AS OF 12/31/08 $ 78,465
=========
Net change in unrealized appreciation/(depreciation) during
the period on Level 3 investments held at 12/31/08+ $ (4,238)
---------
- ----------
+ Net change in unrealized appreciation/(depreciation) is included in the
related amounts on investments in the Statement of Operations.
In March 2008, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standard No. 161, "Disclosures about
Derivative Instruments and Hedging Activities" ("SFAS 161") that is effective
for fiscal years beginning after November 15, 2008. SFAS 161 is intended to
improve financial reporting for derivative instruments by requiring enhanced
disclosure that enables investors to understand how and why an entity uses
derivatives, how derivatives are accounted for, and how derivative instruments
affect an entity's results of operations and financial position. Management is
currently evaluating the implications of SFAS 161 on the Fund's financial
statement disclosures.
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,
13
THE GABELLI ABC FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
thereby determining the yield during the Fund's holding period. It is the policy
of the Fund to always receive and maintain securities as collateral whose market
value, including accrued interest, are 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, 2008, there were no open repurchase agreements.
SWAP AGREEMENTS. The Fund may enter into equity and contract for difference swap
transactions. The use of swaps is a highly specialized activity that involves
investment techniques and risks different from those associated with ordinary
portfolio security transactions. In a swap, a set of future cash flows are
exchanged between two counterparties. One of these cash flow streams will
typically be based on a reference interest rate combined with the performance of
a notional value of shares of a stock. The other will be based on the
performance of the shares of a stock. There is no assurance that the swap
contract counterparties will be able to meet their obligations pursuant to the
swap contracts, or that, in the event of default, the Fund will succeed in
pursuing contractual remedies. The Fund thus assumes the risk that it may be
delayed in or prevented from obtaining payments owed to it pursuant to the swap
contracts. The creditworthiness of the swap contract counterparties is closely
monitored in order to minimize the risk. Depending on the general state of
short-term interest rates and the returns of the Fund's portfolio securities at
that point in time, such a default could negatively affect the Fund's ability to
make dividend payments. In addition, at the time a swap transaction reaches its
scheduled termination date, there is a risk that the Fund will not be able to
obtain a replacement transaction or that the terms of the replacement will not
be as favorable as on the expiring transaction. If this occurs, it could have a
negative impact on the Fund's ability to make dividend payments.
The use of derivative instruments involves, to varying degrees, elements of
market and counterparty risk in excess of the amount recognized below.
Unrealized gains related to swaps are reported as an asset and unrealized losses
are reported as a liability in the Statement of Assets and Liabilities. The
change in value of swaps, including the accrual of periodic amounts of interest
to be paid or received on swaps, is reported as unrealized gains or losses in
the Statement of Operations. A realized gain or loss is recorded upon payment or
receipt of a periodic payment or termination of swap agreements.
Effective March 16, 2008, Bear, Stearns International Limited entered into a
Guaranty Agreement with JPMorgan Chase & Co., whereby JPMorgan Chase & Co.
unconditionally guarantees the due and punctual payment of certain liabilities
of Bear, Stearns International Limited, including the current liabilities of
Bear, Stearns International Limited to the Fund. As of December 31, 2008, the
Fund held a contract for difference swap with Bear, Stearns International
Limited which is covered by the JPMorgan Chase & Co. Guaranty Agreement as of
the date of the report. Details of the swap at December 31, 2008 are as follows:
NOTIONAL EQUITY SECURITY INTEREST RATE/ TERMINATION NET UNREALIZED
AMOUNT RECEIVED EQUITY SECURITY PAID DATE DEPRECIATION
-------- ---------------- -------------------------------- ----------- --------------
Market Value Overnight LIBOR plus 40 bps plus
Appreciation on: Market Value Depreciation on:
$30,857 (2,000 Shares) Xstrata plc Xstrata plc 02/17/09 $(127)
14
THE GABELLI ABC FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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, 2008, 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,
2008.
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, 2008, 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
15
THE GABELLI ABC FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
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 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
16
THE GABELLI ABC FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 included in "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, including the Fund's
use of the tax accounting practice known as equalization, the utilization of
earnings and profits distributed to shareholders on redemption of shares as part
of the dividends-paid deduction for federal income tax purposes. For the year
ended December 31, 2008, reclassifications were made to decrease accumulated net
investment income by $780,856 and to increase accumulated distributions in
excess of net realized gain on investments, swap contracts, and foreign currency
transactions by $1,036,276, with an offsetting adjustment to paid-in capital.
The tax character of distributions paid during the years ended December 31, 2008
and December 31, 2007 was as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2008 DECEMBER 31, 2007
----------------- -----------------
DISTRIBUTIONS PAID FROM:
Ordinary income
(inclusive of short-term
capital gains) ................. $ 4,758,838 $12,197,421
Net long-term capital gains ....... -- 3,661,544
----------- -----------
Total distributions paid .......... $ 4,758,838 $15,858,965
=========== ===========
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.
At December 31, 2008, the difference between book basis and tax basis unrealized
depreciation was primarily due to deferral of losses from wash sales for tax
purposes.
As of December 31, 2008, the components of accumulated earning/losses on a tax
basis were as follows:
Undistributed ordinary income
(inclusive of short-term capital gains) ... $ 239,159
Net unrealized depreciation on investments
and foreign currency translations ......... (14,289,439)
------------
Total ........................................ $(14,050,280)
============
17
THE GABELLI ABC FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The following summarizes the tax cost of investments, swap contracts, and the
related unrealized appreciation/ depreciation at December 31, 2008:
GROSS GROSS
UNREALIZED UNREALIZED NET UNREALIZED
COST APPRECIATION DEPRECIATION DEPRECIATION
------------ ------------ ------------ --------------
Investments .... $173,088,071 $2,242,143 $(16,531,489) $(14,289,346)
Swap contacts .. -- -- (127) (127)
------------ ---------- ------------ ------------
$173,088,071 $2,242,143 $(16,531,616) $(14,289,473)
============ ========== ============ ============
FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN
48") provides guidance for how uncertain tax positions should be recognized,
measured, presented, and disclosed in the financial statements. FIN 48 requires
the evaluation of tax positions taken or expected to be taken in the course of
preparing the Fund's tax returns to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authority. Tax
positions not deemed to meet the "more-likely-than-not" threshold are recorded
as a tax benefit or expense in the current year. In accordance with FIN 48,
management has analyzed the Fund's tax positions taken on the federal and state
income tax returns for all open tax years (the current and prior three tax
years) and has concluded that no provision for income tax is required in the
Fund's financial statements. Management's determination regarding FIN 48 may be
subject to review and adjustment at a later date based on factors including, but
not limited to, an on-going analysis of tax laws, regulations, and
interpretations thereof.
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 0.50% 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.
The Fund pays each Director who 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 and the Chairman of
the Audit Committee and the Lead Director each receives a $1,000 annual fee.
Directors 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 the Advisor Class 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 Advisor Class Share Plan, payment
is authorized to Gabelli & Company at an annual rate of 0.25% of the average
daily net assets of the Advisor Class Shares, the annual limitation under the
Plan. Such payments are accrued daily and paid monthly.
5. PORTFOLIO SECURITIES. Purchases and proceeds from the sales of securities
during 2008, other than short-term securities and U.S. Government obligations,
aggregated $537,389,344 and $511,643,074, respectively.
Purchases and proceeds from the sales of U.S. Government obligations during
2008, other than short-term obligations, aggregated $19,170,112 and $19,430,736,
respectively.
18
THE GABELLI ABC FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. TRANSACTIONS WITH AFFILIATES. During 2008, the Fund paid brokerage
commissions on security trades of $230,614 to Gabelli & Company.
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 2008, 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 participates in an unsecured line of credit of up to
$75,000,000 from which it may borrow up to 10% of its net assets 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 included in "interest expense" in the Statement of
Operations. During 2008, there were no borrowings under the line of credit.
8. CAPITAL STOCK. The Fund offers Class AAA Shares and Advisor Class Shares to
investors without a front-end sales charge. Class AAA Shares are available
directly through the distributor or through the Fund's transfer agent. Advisor
Class Shares are available through registered broker-dealers or other financial
intermediaries that have entered into appropriate selling agreements with the
distributor.
The Fund imposes a redemption fee of 2.00% on all classes of shares that are
redeemed or exchanged on or before the seventh day after the date of a purchase.
The redemption fee is deducted from the proceeds otherwise payable to the
redeeming shareholders and is retained by the Fund. The redemption fees retained
by the Fund during the years ended December 31, 2008 and December 31, 2007
amounted to $714 and $85, respectively.
The redemption fee does not apply to redemptions of shares where (i) the shares
were purchased through automatic reinvestment of distributions, (ii) the
redemption was initiated by the Fund, (iii) the shares were purchased through
programs that collect the redemption fee at the program level and remit them to
the Fund, or (iv) the shares were purchased through programs that the Adviser
determines to have appropriate anti-short-term trading policies in place or as
to which the Adviser has received assurances that look-through redemption fee
procedures or effective anti-short-term trading policies and procedures are in
place.
Transactions in shares of capital stock were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2008 DECEMBER 31, 2007
--------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ---------- ------------
CLASS AAA CLASS AAA
--------------------------- -------------------------
Shares sold ................................................ 6,319,768 $ 61,917,062 6,893,007 $ 69,660,885
Shares issued upon reinvestment of distributions ........... 382,948 3,492,478 1,129,451 11,068,623
Shares redeemed ............................................ (10,716,067) (101,530,713) (5,508,625) (57,975,485)
----------- ------------- ---------- ------------
Net increase/(decrease) .................................... (4,013,351) $ (36,121,173) 2,513,833 $ 22,754,023
=========== ============= ========= ============
ADVISOR CLASS ADVISOR CLASS*
--------------------------- -------------------------
Shares sold ................................................ 6,231,694 $ 59,475,901 841,078 $ 8,859,863
Shares issued upon reinvestment of distributions ........... 84,013 764,517 57,999 568,384
Shares redeemed ............................................ (1,682,245) (16,022,921) (189,943) (1,973,926)
----------- ------------- -------- ------------
Net increase ............................................... 4,633,462 $ 44,217,497 709,134 $ 7,454,321
=========== ============= ======== ============
- ----------
* The Advisor Class Shares were initially offered on May 1, 2007.
19
THE GABELLI ABC FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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. On April 24, 2008, the Adviser entered into an administrative
settlement with the SEC to resolve the SEC's inquiry regarding prior frequent
trading activity in shares of the GAMCO Global Growth Fund (the "Global Growth
Fund") by one investor who was banned from the Global Growth Fund in August
2002. In the settlement, the SEC found that the Adviser had violated Section
206(2) of the Investment Advisers Act, Section 17(d) of the 1940 Act, and Rule
17d-1 thereunder and had aided and abetted and caused violations of Section
12(d)(1)(B)(i) of the 1940 Act. Under the terms of the settlement, the Adviser,
while neither admitting nor denying the SEC's findings and allegations, agreed,
among other things, to pay the previously reserved total of $16 million
(including a $5 million penalty), of which at least $11 million will be
distributed to shareholders of the Global Growth Fund in accordance with a plan
to be developed by an independent distribution consultant and approved by the
independent directors of the Global Growth Fund and the staff of the SEC and to
cease and desist from future violations of the above referenced federal
securities laws. The settlement is not expected to impact the Fund and will not
have a material adverse impact on the Adviser or its ability to fulfill its
obligations under the Advisory Agreement. On the same day, the SEC filed a civil
action against the Executive Vice President and Chief Operating Officer of the
Adviser, alleging violations of certain federal securities laws arising from the
same matter. The officer is also an officer of the Global Growth Fund and other
funds in the Gabelli/GAMCO fund complex including the Fund. The officer denies
the allegations and is continuing in his positions with the Adviser and the
funds. The Adviser currently expects that any resolution of the action against
the officer will not have a material adverse impact on the Adviser or its
ability to fulfill its obligations under the Advisory Agreement.
In a separate matter, on January 12, 2009, the SEC issued an administrative
action approving a final settlement of a previously disclosed matter with the
Adviser involving compliance with Section 19(a) of the Investment Company Act of
1940 and Rule 19a-1 thereunder by two closed-end funds. These provisions require
registered investment companies when making a distribution in the nature of a
dividend from sources other than net investment income to contemporaneously
provide written statements to shareholders, which adequately disclose the source
or sources of such distribution. While the two funds sent annual statements and
provided other materials containing this information, the shareholders did not
receive the notices required by Rule 19a-1 with any of the distributions that
were made for 2002 and 2003. The Adviser believes that the funds have been in
compliance with Section 19(a) and Rule 19a-1 since the beginning of 2004. As
part of the settlement, in which the Adviser neither admits nor denies the
findings by the SEC, the Adviser agreed to pay a civil monetary penalty of
$450,000 and to cease and desist from causing violations of Section 19(a) and
Rule 19a-1. In connection with the settlement, the SEC noted the remedial
actions previously undertaken by the Adviser.
20
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, 2008, and the related statement
of operations for the year then ended, the statements of changes in net assets
for each of the two years in the period then ended, and the financial highlights
for each of the five 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.
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, 2008, by correspondence with the 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,
2008, 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 five years in the period then ended, in conformity
with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
February 24, 2009
21
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 26 Chairman and Chief Executive Officer of Director of Morgan Group
Director and GAMCO Investors, Inc. and Chief Holdings, Inc. (holding
Chief Investment Officer Investment Officer - Value Portfolios of company); Chairman of the
Age: 66 Gabelli Funds, LLC and GAMCO Asset Board of LICT Corp.
Management Inc.; Director/Trustee or (multimedia and
Chief Investment Officer of other communication services
registered investment companies in the company)
Gabelli/GAMCO Funds complex; Chairman
and Chief Executive Officer of GGCP,
Inc.
INDEPENDENT DIRECTORS(5):
ANTHONY J. COLAVITA Since 1993 36 Partner in the law firm of Anthony J. --
Director Colavita, P.C.
Age: 73
VINCENT D. ENRIGHT Since 1993 16 Former Senior Vice President and Chief Director of Echo
Director Financial Officer of KeySpan Corporation Therapeutics, Inc.
Age: 65 (public utility) (therapeutics and
diagnostics)
MARY E. HAUCK Since 2000 3 Retired Senior Manager of the Gabelli --
Director O'Connor Fixed Income Mutual Funds
Age: 66 Management Company
WERNER J. ROEDER, MD Since 1993 22 Medical Director of Lawrence Hospital --
Director and practicing private physician
Age: 68
22
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 since 1988
President and Secretary and an officer of all of the registered investment companies in the Gabelli/GAMCO Funds
Age: 57 complex. Director and President of Teton Advisors, Inc. (formerly Gabelli Advisers,
Inc.) since 1998
AGNES MULLADY Since 2006 Vice President of Gabelli Funds, LLC since 2007; Officer of all of the registered
Treasurer investment companies in the Gabelli/GAMCO Funds complex; Senior Vice President of U.S.
Age: 50 Trust Company, N.A. and Treasurer and Chief Financial Officer of Excelsior Funds from
2004 through 2005; Chief Financial Officer of AMIC Distribution Partners from 2002
through 2004
PETER D. GOLDSTEIN Since 2004 Director of Regulatory Affairs at GAMCO Investors, Inc. since 2004; Chief Compliance
Chief Compliance Officer Officer of all of the registered investment companies in the Gabelli/GAMCO Funds
Age: 55 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 not interested persons are considered "Independent"
Directors.
2008 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the year ended December 31, 2008, the Fund paid to shareholders an ordinary
income distribution (comprised of net investment income and short-term capital
gains) totaling $0.263 and $0.233 per share for Class AAA and Advisor Class,
respectively. For the year ended December 31, 2008, 20.91% of the ordinary
income distribution qualifies for the dividends received deduction available to
corporations. The Fund designates 22.34% of the ordinary income distribution as
qualified dividend income pursuant to the Jobs and Growth Tax Relief
Reconciliation Act of 2003. The Fund designates 26.18% of the ordinary income
distribution as qualified interest income, and 64.70% of the ordinary income
distribution as qualified short-term gain, pursuant to the American Jobs
Creation Act of 2004.
U.S. GOVERNMENT INCOME:
The percentage of the ordinary income distribution paid by the Fund during 2008
which was derived from U.S. Treasury securities was 23.36%. 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 2008. The percentage of
net assets of U.S. Government securities held as of December 31, 2008 was
30.09%. Due to the diversity in state and local tax law, it is recommended that
you consult your personal tax adviser as to the applicability of the information
provided to your specific situation.
- --------------
All designations are based on financial information available as of the date of
this annual report and, accordingly, are subject to change. For each item, it is
the intention of the Fund to designate the maximum amount permitted under the
Internal Revenue Code and the regulations thereunder.
23
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
CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
GAMCO INVESTORS, INC.
Anthony J. Colavita
ATTORNEY-AT-LAW
ANTHONY J. COLAVITA, P.C.
Vincent D. Enright
FORMER SENIOR VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
KEYSPAN CORP.
Mary E. Hauck
FORMER SENIOR PORTFOLIO MANAGER
GABELLI-O'CONNOR FIXED INCOME
MUTUAL FUND MANAGEMENT CO.
Werner J. Roeder, MD
MEDICAL DIRECTOR
LAWRENCE HOSPITAL
OFFICERS
Bruce N. Alpert
PRESIDENT AND SECRETARY
Agnes Mullady
TREASURER
Peter D. Goldstein
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.
(GRAPHIC)
THE GABELLI ABC FUND
ANNUAL REPORT
DECEMBER 31, 2008
GAB408Q408AR
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
$32,200 for 2007 and $32,200 for 2008.
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 2007 and $0 for 2008.
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 $4,100 for 2007 and $4,300
for 2008. 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 2007 and $0 for 2008.
(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 zero percent (0%).
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling, controlled by,
or under common control with the adviser that provides ongoing services
to the registrant for each of the last two fiscal years of the
registrant was $69,100 for 2007 and $4,300 for 2008.
(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. INVESTMENTS.
(a) 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.
(b) Not applicable.
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.
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By (Signature and Title)* /s/ Bruce N. Alpert
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Bruce N. Alpert, Principal Executive Officer
Date 3/6/09
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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 3/6/09
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By (Signature and Title)* /s/ Agnes Mullady
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Agnes Mullady,
Principal Financial Officer and Treasurer
Date 3/6/09
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* Print the name and title of each signing officer under his or her signature.