Recent Annual Report - Gabelli
Recent Annual Report - Gabelli
Recent Annual Report - Gabelli
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
The <strong>Gabelli</strong> Value Fund Inc.<br />
Shareholder Commentary<br />
December 31, 2012<br />
To Our Shareholders,<br />
For the quarter ended December 31, 2012, the net asset value (“NAV”) per Class A Share of The <strong>Gabelli</strong><br />
Value Fund Inc. increased 2.3% compared with decreases of 0.4% and 1.8% for the Standard & Poor’s (“S&P”)<br />
500 Index and the Dow Jones Industrial Average, respectively. See page 2 for additional performance information.<br />
Picking Stocks in a ‘Macro’ Driven Market<br />
Christopher J. Marangi<br />
Booms and busts, wars and pestilence have been facts of life since the dawn of civilization. Since the<br />
founding of our firm in 1977 we have witnessed inflations/deflations, burst bubbles, political scandals, several<br />
wars and the fall of Communism. Yet at no time since World War II have government actors and global events<br />
played such impactful roles in the everyday lives of Americans or the meanderings of the market. The headlines<br />
of the last five years have been dominated by two major themes:<br />
First, the developed world is in the midst of a major deleveraging as overconsumption financed by debt<br />
has constrained growth and pressured federal, state and local government budgets. While the situation is<br />
daunting, the U.S. possesses certain advantages. Namely, it does not face the demographic challenges of<br />
Japan or the political and monetary constraints of Europe. However, the ability of the U.S. to repay its debt in<br />
a currency it controls does come with certain dangers and we remain vigilant regarding inflation.<br />
Second, the developing world faces its own issues as nations, primarily in Asia and Latin America, attempt<br />
to command economic forces largely beyond their control. China, undergoing its own political transition, has been<br />
hard pressed to engineer a “soft landing” for its economy. At the same time, many of those same states face the<br />
longer term task of (peacefully) meeting the desire of their populace for greater political and economic freedom.<br />
The developed/developing world dichotomy is, of course, misleading. Add issues of food and energy<br />
allocation and climate change and the most pressing challenges today are global in nature, compounding their<br />
complexity and intractability. We think it is unrealistic to expect to solve any of these “problems” in the near<br />
term; at best they can only be managed over a longer time horizon.<br />
Against this backdrop, investment choices must be made. Macro issues can neither dictate stock<br />
selection nor can they be ignored. In our view, macro inputs represent a range of probabilities that inform our<br />
microeconomic forecasts and valuations. Our process and philosophy remain unchanged. It begins with a<br />
dedicated research team whose objective is to dominate the knowledge of their industries globally. We<br />
leverage that accumulated intellectual capital in a time-tested and repeatable investment process:<br />
• We seek high quality industries, companies and managements. Generally we begin with industries that<br />
we can readily understand, with manageable rates of change and limited exposure to variables beyond<br />
control. We look for companies with enduring competitive advantage which in most cases would imbue<br />
them with pricing power. Our ideal investment possesses a transparent Board of Directors and<br />
management with shareholder friendly capital allocation policies. And since the macro will surely<br />
surprise, we favor management teams that have proven themselves adaptable to change.
Comparative Results<br />
Average <strong>Annual</strong> Returns through December 31, 2012 (a)<br />
Since<br />
Inception<br />
Quarter<br />
—————<br />
1 Year<br />
————<br />
5 Year<br />
————<br />
10 Year<br />
————<br />
(9/29/89)<br />
—————<br />
Class A (GABVX) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.30% 16.95% 3.36% 8.35% 10.51%<br />
With sales charge (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.59) 10.23 2.14 7.71 10.22<br />
S&P 500 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.38) 16.00 1.66 7.10 8.55<br />
Dow Jones Industrial Average . . . . . . . . . . . . . . . . . . . . . . . . . (1.81) 10.14 2.60 7.32 9.73<br />
Nasdaq Composite Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2.48) 17.60 3.77 9.43 8.29<br />
Class AAA (GVCAX) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.29 16.97 3.37 8.36 10.51<br />
Class B (GVCBX) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.08 16.06 2.55 7.53 10.04<br />
With contingent deferred sales charge (c) . . . . . . . . . . . . . . . . (2.92) 11.06 2.19 7.53 10.04<br />
Class C (GVCCX) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.07 16.09 2.57 7.54 10.06<br />
With contingent deferred sales charge (d) . . . . . . . . . . . . . . . . 1.07 15.09 2.57 7.54 10.06<br />
Class I (GVCIX) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.29 17.17 3.62 8.49 10.57<br />
In the current prospectus dated April 27, 2012, the expense ratios for Class AAA, A, B, C, and I Shares are<br />
1.43%, 1.43%, 2.18%, 2.18%, and 1.18%, respectively. Class AAA and Class I Shares do not have a sales charge.<br />
The maximum sales charge for Class A, B, and C Shares is 5.75%, 5.00%, and 1.00%, respectively.<br />
(a) Returns represent past performance and do not guarantee future results. Total returns and average annual<br />
returns reflect changes in share prices, reinvestment of distributions, and are net of expenses. Investment returns<br />
and the principal value of an investment will fluctuate. When shares are redeemed, they may be worth more or less<br />
than their original cost. The Fund imposes a 2% redemption fee on shares sold or exchanged within seven days<br />
after the date of purchase. Performance returns for periods of less than one year are not annualized. Current<br />
performance may be lower or higher than the performance data presented. Visit www.gabelli.com for performance<br />
information as of the most recent month end. Investors should carefully consider the investment objectives,<br />
risks, charges, and expenses of the Fund before investing. The prospectus contains information about<br />
these and other matters and should be read carefully before investing. The Class A Share NAVs are used to<br />
calculate performance for the periods prior to the issuance of Class AAA Shares on April 30, 2010, Class B Shares<br />
and Class C Shares on March 15, 2000, and the Class I Shares on January 11, 2008. The actual performance of<br />
the Class B Shares and Class C Shares would have been lower due to the additional expenses associated with<br />
these classes of shares. The actual performance of the Class I Shares would have been higher due to lower<br />
expenses related to this class of shares. The S&P 500 Index is a market capitalization weighted index of 500 large<br />
capitalization stocks commonly used to represent the U.S. equity market. The Dow Jones Industrial Average and the<br />
Nasdaq Composite Index are unmanaged indicators of stock market performance. Dividends are considered<br />
reinvested, except for the Nasdaq Composite Index. You cannot invest directly in an index.<br />
(b) Performance results include the effect of the maximum 5.75% sales charge at the beginning of the period.<br />
(c) Assuming payment of the maximum contingent deferred sales charge (“CDSC”). The maximum CDSC for Class B<br />
Shares is 5% which is gradually reduced to 0% after six years.<br />
(d) Assuming payment of the 1% maximum CDSC imposed on redemptions made within one year of purchase.<br />
We have separated the portfolio managers’ commentary from the financial statements and investment portfolio<br />
due to corporate governance regulations stipulated by the Sarbanes-Oxley Act of 2002. We have done this to<br />
ensure that the content of the portfolio managers’ commentary is unrestricted. The financial statements and<br />
investment portfolio are mailed separately from the commentary. Both the commentary and the financial<br />
statements, including the portfolio of investments, are available on our website at www.gabelli.com.<br />
2
Barron’s 2013 Roundtable<br />
Mario J. <strong>Gabelli</strong>, our Chief Investment Officer, has appeared in the prestigious Barron’s Roundtable<br />
discussion annually since 1980. Many of our readers enjoyed the inclusion of selected and edited comments<br />
from Barron’s Roundtable in previous reports to shareholders. As is our custom, we are including selected<br />
comments of Mario <strong>Gabelli</strong> from Barron’s 2013 Roundtable, published on January 21, 2013.<br />
B<br />
arron’s: The stock market is<br />
coming off a good year, which<br />
some of you even predicted.<br />
What do you think of stocks now?<br />
Mario, start us off.<br />
<strong>Gabelli</strong>: Investors have been withdrawing<br />
money from the stock market. We have<br />
seen a negative flow of funds. But let’s<br />
look at China and Japan, which account<br />
for 20% of the $75 trillion global<br />
economy. They have a pretty good shot at<br />
starting their engines and reaccelerating.<br />
Europe is about 20% of the world<br />
economy, and is still a work in progress.<br />
The U.S. is 21%. The U.S. consumer’s net<br />
worth is at an all-time high. He is<br />
reducing debt. This is owed to a<br />
combination of Bernanke, Bernanke,<br />
Bernanke – in other words, the Federal<br />
Reserve [under Chairman Ben Bernanke]<br />
has been printing money, which has<br />
geared to drive financial assets and real<br />
estate prices higher.<br />
Barron’s: Get to the point. Are you<br />
bullish or bearish?<br />
<strong>Gabelli</strong>: I’m getting there. Corporate<br />
earnings will be okay in 2013, and 2014<br />
looks even better. Interest rates might<br />
rise, but the market has discounted that.<br />
Given the negative flow of funds and the<br />
market’s relatively low price/earnings<br />
multiple, you have to be positive. The<br />
BARRON’S<br />
ROUNDTABLE<br />
MARIO J. GABELLI<br />
Chairman and Chief Investment Officer – Value Portfolios<br />
GAMCO Investors, Inc.<br />
Here’s What’s Cooking for 2013<br />
The members of the Barron’s Roundtable see a year of modest gains for U.S. stocks, trouble for<br />
bonds, and good news for gold. Also featured this week: the best investment bets of<br />
Felix Zulauf and Mario <strong>Gabelli</strong>. How to play deal stocks, and Japan.<br />
Excerpted from January 21, 2013 by Lauren R. Rublin<br />
stock market could face a lot of potholes<br />
in the near term, and on balance, I don’t<br />
expect the market to rise more than 5%<br />
this year. But I have never been more<br />
excited about specific stocks. This year,<br />
you will be able to make a lot of money as<br />
a result of financial engineering –<br />
companies engaging in deals, takeovers,<br />
split-ups, spinoffs, and such. It is a<br />
phenomenal time to make money in the<br />
market. You get stocks like SodaStream<br />
International (ticker: SODA), which I’m<br />
not recommending, rising to $48 from<br />
$36. It will be a fantastic year to pick<br />
individual stocks.<br />
Barron’s: Then why will the broader<br />
indices see only modest gains?<br />
<strong>Gabelli</strong>: Our financial system has<br />
structural problems, and at some point the<br />
Fed will have to start withdrawing all the<br />
money it has poured into the system.<br />
Gross: Whenever somebody says, “I’ve<br />
never been more excited,” I run the other<br />
way.<br />
<strong>Gabelli</strong>: Well, I’m also excited about<br />
being short bonds.<br />
Barron’s: Mario, what did you bring us<br />
today?<br />
<strong>Gabelli</strong>: If you had been sitting here 12<br />
years ago, you wouldn’t have heard of<br />
Twitter or Facebook [FB] or Google<br />
[GOOG]. If you were here 15 years ago,<br />
3<br />
you were focused on Cisco and a bunch<br />
of tech companies. I am going to talk<br />
about something that has been around<br />
much, much longer. Homer’s Odyssey<br />
mentioned one of the oldest forms of<br />
processed food: sausages. The city of<br />
Frankfurt, in Germany, honored the<br />
creation of the hot dog at its 500th<br />
anniversary. Sausages will be around for<br />
the next couple of hundred years, too.<br />
Abby and I have discussed how you<br />
should be able to make money this year<br />
from spinoffs, split-ups, and oldfashioned<br />
mergers and acquisitions. She<br />
suggested M&A activity will pick up<br />
because companies want to grow. So, how<br />
do you combine sausages and spinoffs?<br />
Barron’s: We haven’t a clue.<br />
<strong>Gabelli</strong>: Hillshire Brands [HSH] makes<br />
sausages and hot dogs. It was spun out of<br />
Sara Lee, which I recommended in the<br />
past. Hillshire has 122 million shares outstanding.<br />
Investors got one share for<br />
every five shares of Sara Lee. Hillshire<br />
had $694 million of net debt as of<br />
Sept. 29. It could generate $4.1 billion of<br />
revenue in the fiscal year ending June 30.<br />
Earnings will be $1.60 to $1.65 a share.<br />
Three or four companies were looking to<br />
buy Hillshire from Sara Lee before it was<br />
spun off. It is about a $2.5 billion market.<br />
The sausage market is growing by about<br />
5% a year in the U.S. Breakfast sausages
are a $4.6 billion annual business. Lunch<br />
meats are $4.8 billion. The lowly hot dog<br />
is about a $2.5 billion market. Hillshire is<br />
a leader in all three categories. It could<br />
earn about $2.40 a share in fiscal 2017.<br />
Debt is falling substantially. The stock<br />
trades for $29 and change, and could be<br />
$35 to $50 a share two years out.<br />
Barron’s: Is Hillshire still an<br />
acquisition target?<br />
<strong>Gabelli</strong>: It could be bought by someone.<br />
Meanwhile, management is doing a terrific<br />
job of getting back to basics. I must<br />
say a kind word about another sausage<br />
company whose stock is too small to<br />
recommend. This company was founded<br />
in Coney Island in 1916. It sells Nathan’s<br />
hot dogs [holds aloft a plastic package of<br />
Nathan’s franks]. One of the dynamics<br />
behind Nathan’s Famous [NATH] is a<br />
capitalization shrink. The company has<br />
reduced its share count to 4.2 million from<br />
6.2 million. The shares are $35, and the<br />
company has a $140 million market<br />
capitalization. It cut a deal with<br />
Smithfield Foods [SFD], which will<br />
market its products starting in March<br />
2014. As a result, earnings should explode<br />
upward to about $3 a share in 2015 from<br />
an estimated $1.20 this year. The market<br />
soon will start discounting that.<br />
Grape Nuts [holds up cereal box] was<br />
founded in 1897. Ralcorp Holdings<br />
[RAH], which owned the brand, was<br />
approached about two years ago by<br />
ConAgra Foods [CAG], which wanted to<br />
buy it. Management decided not to sell. It<br />
then spun off the cereal business as Post<br />
Holdings [POST]. ConAgra is buying<br />
Ralcorp for $90 per share, but I’m<br />
recommending Post. Bill Stiritz, who<br />
runs Post, is a proven money maker, like<br />
Dr. John Malone of Liberty Media<br />
[LMCAD]. Stiritz sold Ralston Purina to<br />
Nestlé [NESN.Switzerland]. He has done<br />
other deals.<br />
We have been talking today about how to<br />
preserve wealth if inflation accelerates.<br />
You want to buy cash generating<br />
companies with pricing power that have<br />
had some sort of short-term hiccup. They<br />
must be run by CEOs who understand<br />
how to create value. The sun, moon, and<br />
stars are aligned at Post.<br />
Barron’s: How big is the cereal<br />
market?<br />
<strong>Gabelli</strong>: Cereal is a $28 billion market<br />
worldwide, and a $10 billion market in<br />
the U.S. Cereal is consumed not only by<br />
young folks but also by older folks at an<br />
increasing rate. Kellogg [K] is the<br />
industry’s big kahuna, with a 34% market<br />
share. General Mills [GIS] has 33%, and<br />
Post has 10.5%. Post came out of the box,<br />
so to speak, in February 2012. It was spun<br />
off with 34.5 million shares, and bought<br />
back 1.7 million. The stock is trading for<br />
$35. Net debt is about $890 million. The<br />
company should earn about $1.50 a share<br />
in the current year, ending Sept. 30, which<br />
can grow to $3 in the next three or four<br />
years. Stiritz started out in the business by<br />
filling shelves. With product innovation,<br />
marketing attention, a focus on cash flow,<br />
and a brand with longevity, you don’t have<br />
to worry about the next Twitter. I have a<br />
large number of Twitter followers. You<br />
can become my second one.<br />
We figured as much.<br />
<strong>Gabelli</strong>: Let’s talk about using cash flow<br />
to buy back stock. Viacom [VIA] has<br />
been doing this. I have been a Viacom<br />
investor for 25 years. Viacom and CBS<br />
[CBS] split on Dec. 31, 2005. CBS is<br />
doing well under Les Moonves, and<br />
Viacom is doing extraordinarily well<br />
under Philippe Dauman and Tom Dooley.<br />
Viacom had 755 million shares at the time<br />
of the split. They are now down to 507<br />
million. In the next three or four years,<br />
share count should fall to about 355<br />
million. Viacom reported $13.9 billion of<br />
revenue for the fiscal year ended Sept. 30.<br />
That could increase to $18 billion in the<br />
next several years. The company<br />
generates revenue from two sources:<br />
advertising and subscription fees. It also<br />
owns Paramount Pictures, which at some<br />
point may be merged with either Malone<br />
or Columbia Pictures.<br />
Viacom earned $4.36 a share in fiscal<br />
2012, and could earn $9 by 2016, as<br />
earnings grow slowly and shares<br />
outstanding shrink. Founder and<br />
Chairman Sumner Redstone controls the<br />
company. The A stock is fully<br />
exchangeable into the B. The A shares<br />
sell for $60, two dollars more than the<br />
nonvoting B shares. I want to own the A<br />
shares. Net debt is $7.3 billion, and<br />
capital spending is de minimis at $100<br />
million a year. The company generates<br />
$4.3 billion a year of earnings before<br />
interest, taxes, depreciation, and<br />
amortization, or EBITDA. The question<br />
is, what is Redstone’s exit strategy? He is<br />
a young 90 plus.<br />
Black: Nickelodeon lost a lot of market<br />
share last year.<br />
<strong>Gabelli</strong>: You don’t have to buy it. I<br />
recommended the stock at $30 a share<br />
several years ago. I said it would double<br />
in four years. It doubled in three years.<br />
You will get $100 a share in three years.<br />
Xylem [XYL] was spun out of ITT [ITT]<br />
in October 2011. It is assembling one of<br />
4<br />
the best packages of water infrastructure<br />
and water-treatment companies in the<br />
world. When I talked about it here last<br />
year, I was worried about a slowdown in<br />
state and local spending. Business in<br />
southern Europe is slow. Short term,<br />
earnings are lackluster. The stock rose<br />
about 10% in the past year, to $28. There<br />
are 186 million shares. The company had<br />
$788 million of net debt as of the end of<br />
September, the latest published number.<br />
Revenue last year was an estimated $3.8<br />
billion, which could rise to $4.6 billion by<br />
2016. EBITDA could rise to $800 million<br />
from $625 million. Capital spending is<br />
about $130 million a year. Per share<br />
earnings could go from $1.80 to $2.50.<br />
This is a yummy for a large corporation<br />
that wants to have distribution and<br />
products in water industry. Europe<br />
accounts for a third of the business; the<br />
U.S. is a third, and Asia-Pacific is 11%.<br />
They are accelerating their involvement<br />
in acquaculture [fish farming].<br />
What is your target price?<br />
<strong>Gabelli</strong>: The company could be bought at<br />
a 50% premium to its current stock price<br />
within two years.<br />
Graco [GGG] was founded in 1926. The<br />
stock is $53. There are 60.7 million<br />
shares outstanding. Net debt is $570<br />
million. The company makes equipment<br />
to apply foam on drilling rigs, and<br />
products for painters. It uses a razor and<br />
razor-blade model [applications are sold<br />
separately from applicators] and is a great<br />
cash generator. Graco tried to acquire a<br />
company from Illinois Tool Works [ITW]<br />
for $650 million, but the Federal Trade<br />
Commission gave it a hard time. So it had<br />
to sell a part of the ITW acquisition.<br />
Revenue is tied to the housing market,<br />
which has a long runway. There are a lot<br />
of ways to make money from housing.<br />
This is a side-door play. Pat McHale, who<br />
runs Graco, is terrific. The company<br />
could earn $2.20 a share for 2012, down<br />
from $2.32. Earnings could double in<br />
three or four years.<br />
How so?<br />
<strong>Gabelli</strong>: Through a combination of<br />
growth in the housing market and the<br />
absorption of some costs tied to the<br />
Illinois Tool Works acquisition. Also,<br />
Graco buys back stock from time to time,<br />
and introduces product innovations.<br />
Patterson Cos. [PDCO], formerly<br />
Patterson Dental, is in one of my favorite<br />
industries. As you age, you spend more per<br />
tooth. There are approximately 185,000<br />
dentists in the U.S., including 5,000<br />
orthodontists. Three or four companies sell<br />
products to the dental market. EBITDA has
Mario <strong>Gabelli</strong>’s Picks<br />
Company Ticker 1/11/13 Price<br />
Hillshire Farms HSH $29.58<br />
Post Holdings POST 35.27<br />
Viacom VIA 60.08<br />
Xylem XYL 27.18<br />
Graco GGG 53.48<br />
Patterson Cos. PDCO 35.49<br />
Weatherford Internat’l WFT 11.53<br />
National Fuel Gas NFG 49.10<br />
Boulder Brands BDBD 12.32<br />
Fisher Communications FSCI 33.26<br />
Source: Bloomberg<br />
been flat at about $400 million a year for<br />
the past four years, but is starting to ramp<br />
up. Capital spending is only $25 million a<br />
year, so the company generates a lot of<br />
cash. Local practitioners are buying more<br />
products such as dental-imaging systems,<br />
which they sell. The company competes<br />
with Henry Schein [HSIC], which is more<br />
cutting-edge. Patterson also has a<br />
veterinary supply business. There are 170<br />
million companion pets in this country.<br />
How big is the veterinary products<br />
market?<br />
<strong>Gabelli</strong>: It is about $3 billion a year, and<br />
three companies are important. MWI, out<br />
of Boise, does the best job, as far as I can<br />
tell. Patterson trades for $35 a share and<br />
there are 108 million shares. Net debt is<br />
$275 million. The company’s cash is held<br />
in Canada, but its debt is in the U.S. It<br />
could pay off the debt but would incur a<br />
tax hit to bring home the cash to do so.<br />
Patterson should earn $2.30 in the year<br />
ending in April 2013, marching up to $3<br />
in the next three or four year. This is a<br />
takeover or split-up candidate.<br />
Domestic energy also has a long runway.<br />
I am recommending two companies.<br />
Weatherford International [WFT] is a<br />
turnaround story. It was put together<br />
through acquisitions and had some issues<br />
with accounting, taxes, and foreign<br />
corrupt practices.<br />
More money is being spent on drilling,<br />
particularly in the Bakken shale and other<br />
fields in the U.S. Weatherford has a preeminent<br />
position in the artificial-lift<br />
market. Artificial lifts are mechanical<br />
devices inserted in wells that increase the<br />
flow of crude. Weatherford has a<br />
disproportionate share of the rod-lift<br />
market. Once the company gets some<br />
accounting, tax, and management issues<br />
settled, it will do well.<br />
The stock trades for $11.53, and there are<br />
767 million shares. Debt has been<br />
reduced but at glacier-like speed. There is<br />
about $8.5 billion of net debt, so<br />
enterprise value is $17.5 billion. This isn’t<br />
a small company, but it could be a good<br />
acquisition for a major capital-equipment<br />
company that wants to be in all segments<br />
of oil service. Earnings are a little hard to<br />
figure out. Weatherford earned maybe 60<br />
cents a share in 2012, but in three or four<br />
years it could earn about $2.40. It could<br />
be acquired in the next two years at<br />
somewhere between $18 and $24 a share.<br />
Management is motivated to sell.<br />
National Fuel Gas [NFG] has been a<br />
disappointment. Shares haven’t moved<br />
much, because the price of natural gas has<br />
fallen to $3 per Mcf [thousand cubic feet]<br />
from $5. There are 83 million shares, and<br />
the stock trades for $49. Net debt is $1.5<br />
billion. The company owns large acreage in<br />
the Marcellus shale. It also operates the gas<br />
utility in Buffalo. The third part of the<br />
business is a midstream pipeline in the<br />
Marcellus area that they can monetize by<br />
creating a master limited partnership. There<br />
is no reason this company can’t be split up.<br />
It pays a nice dividend. If natural gas were<br />
to rise to about $4.50 per Mcf, you would<br />
have a $100 stock. At current gas prices, the<br />
stock is worth about $85. The MLP could<br />
be worth $20 to $25 a share.<br />
You’re exhausting us. Is that it?<br />
<strong>Gabelli</strong>: No. Let’s talk about Glutino.<br />
Three million people in the U.S. and<br />
many around the world suffer from celiac<br />
disease. Consumers are looking for<br />
gluten-free foods, which are taking up<br />
more shelf space in supermarkets. My<br />
next company owns the Glutino brand.<br />
[Displays bag of Glutino gluten-free<br />
pretzels and passes it around.]<br />
The company changed its name from<br />
Smart Balance to Boulder Brands<br />
[BDBD]. It is run by Steve Hughes.<br />
Shareholders profited when he sold<br />
Celestial Seasonings to Hain. About two<br />
years ago, the company bought Glutino,<br />
which was based in Canada. It bought<br />
another company, Udi’s, in Colorado. It<br />
now has more brands, and its products are<br />
gaining traction. Boulder has about 60<br />
million shares. The stock is $12.30. The<br />
company should generate $370 million of<br />
revenue for 2012. It has $238 million of<br />
net debt. Earnings growth has lagged<br />
revenue growth due to spending on<br />
advertising, and start-up expenses. You<br />
may see 15 cents in earnings for 2012, but<br />
earnings go straight up thereafter. A large<br />
company might want to buy this for its<br />
brands. Boulder is a small-cap stock.<br />
My last pick is Fisher Communications<br />
[FSCI]. The company announced it is for<br />
sale. It has 8.9 million shares outstanding,<br />
and no debt. It operates ABC-affiliate<br />
television stations in Seattle and Portland,<br />
Ore. The stock is selling for $33 a share,<br />
and the company could be worth between<br />
$40 and $45.<br />
Thanks, Mario.<br />
Mario J. <strong>Gabelli</strong> is the Chairman and Chief Executive Officer of GAMCO Investors, Inc. and Portfolio Manager of various investment<br />
products at the Firm. The securities mentioned in the article are not representative of any portfolio, and the views expressed are subject<br />
to change at any time. As of December 31, 2012, The <strong>Gabelli</strong> Value Fund held, as a percentage of its net assets, the following<br />
companies mentioned in this article: Hillshire Brands 0.3%, Ralcorp Holdings 0.2%, Liberty Media 1.9%, Nestlé less than 0.1%,<br />
Viacom 7.4%, CBS 4.2%, Xylem 0.6%, ITT 0.3%, Weatherford International 0.1%, and National Fuel Gas 2.3%.<br />
A complete listing of the Fund’s portfolio holdings as of December 31, 2012 and a prospectus are available by calling the Fund at<br />
800-GABELLI (800-422-3554) or by visiting our website at www.gabelli.com. Investors should carefully consider the investment<br />
objectives, risks, charges, and expenses of the Fund before investing. The prospectus contains information about these and other<br />
matters and should be read carefully before investing.<br />
The views expressed in this article reflect those of the Portfolio Manager only through the date of the interview. Minor edits were<br />
made. The Portfolio Manager’s views are subject to change at any time based on market and other conditions. Favorable earnings or<br />
EBITDA (earnings before interest, taxes, depreciation, and amortization), or growth prospects do not necessarily translate into higher<br />
stock prices, but they do express a positive trend that we believe will develop over time. The information contained in this article is<br />
not an offer to sell or a solicitation to buy any security. No security or other product is offered or will be sold in any jurisdiction in<br />
which such offer or solicitation, purchase, or sale would be unlawful under the securities or other laws of the jurisdiction.<br />
5
• Second, we focus on companies whose public price is meaningfully less than our estimate of their<br />
Private Market Value (PMV), or what an informed buyer would pay to own the entire enterprise. This<br />
“margin of safety” provides us with significant upside potential and downside protection. Note that PMV<br />
is not static; it should grow along with a company’s assets and cash flow potential. Whether a security’s<br />
public price keeps pace with PMV growth can determine whether its margin of safety waxes or wanes.<br />
• Finally, we attempt to articulate one or more catalysts that will narrow a company’s discount to PMV.<br />
Catalysts can take many forms including mergers and acquisitions (M&A) activity, financial engineering<br />
such as spinoffs and buybacks, change in management, evolution in regulation, completion of a major<br />
project or introduction of a new product.<br />
As portfolio managers our job is to balance the above considerations: a high quality company with a near<br />
and certain catalyst could warrant a smaller margin of safety than the converse situation. Our aim is to<br />
maximize returns while minimizing the potential to permanently impair capital. We seed the portfolio with a<br />
diverse basket of ideas that can be harvested regularly at irregular intervals. Over time we have demonstrated<br />
this is the best way to generate superior returns.<br />
Deals, Deals, and More Deals<br />
After accelerating into year-end, worldwide M&A activity rose 2% in 2012 to $2.6 trillion. Several Fund<br />
holdings were subject to takeovers throughout the year. In May, Thomas & Betts was acquired by Swiss<br />
industrial giant ABB for $72 per share in cash, giving ABB a greater presence in the low-voltage electrical<br />
products market. In August, Robbins & Myers agreed to be taken over by National Oilwell Varco for $60 per<br />
share. In December, Eaton Corp. (0.1% of net assets as of December 31, 2012) completed its acquisition of<br />
Cooper Industries. Private label food manufacturer Ralcorp (0.2%) announced that it agreed to be acquired by<br />
ConAgra Foods for $90 per share in November. In December, Intermec (0.1%) agreed to be acquired by<br />
Honeywell (2.8%) for $10 per share.<br />
As noted in prior commentaries, 2012 brought a continuation of the trend of “financial engineering,” as<br />
companies surfaced value with spin-offs, split-offs, or the sale of a division. Ralcorp spun off Post Holdings, its<br />
branded cereal business, in January. At the end of June, Sara Lee paid a $3.00 per share special dividend and<br />
separated into two companies: Hillshire Brands (0.3%), a U.S. based producer and marketer of branded meat<br />
products, and D.E MASTER BLENDERS 1753 (0.5%), a Netherlands based coffee and tea company. In<br />
October, Kraft completed the spin-off of its North American retail business, Kraft Foods Group (0.2%), and<br />
renamed itself Mondelez International (0.4%), focusing on its higher-growth global snacks business. That same<br />
month, Tyco (0.5%) completed its business separation, with the “new” Tyco becoming a pure-play global fire<br />
and commercial security firm following the spin-off of its residential and small business alarm monitoring<br />
business ADT Corp. (0.5%) and the merger of its flow control business with Pentair Ltd. (0.1%), a global water<br />
focused pump and valve maker. Gaylord Entertainment completed its sale of the Gaylord Hotels brand and<br />
management company to Marriott International, and converted itself to a REIT structure, renaming itself Ryman<br />
Hospitality Properties (1.0%). Others are still in process, including News Corp. (1.5%), which will separate its<br />
extensive publishing operations from its faster-growing entertainment division. We believe many of these<br />
companies – as well as those that underwent financial engineering in 2011, such as Beam (0.9%), Exelis<br />
(0.3%), and Xylem (0.6%) – are potential takeover candidates.<br />
While the future is always impossible to predict, we are encouraged by continued ample cash on<br />
corporate balance sheets and financing availability at nearly unprecedented low interest rates. We believe that<br />
with increased visibility on future tax rates and regulations, we will see a continuation of the “Fifth Wave” of<br />
takeover activity in 2013 and beyond.<br />
6
Let’s Talk Stocks<br />
The following are stock specifics on selected holdings of our Fund. Favorable earnings prospects do not<br />
necessarily translate into higher stock prices, but they do express a positive trend that we believe will develop<br />
over time. Individual securities mentioned are not necessarily representative of the entire portfolio. For the<br />
following holdings, the percentage of net assets and their share prices stated in U.S. dollars or U.S. dollar<br />
equivalent terms are presented as of December 31, 2012.<br />
ADT Corp. (0.5% of net assets as of December 31, 2012) (ADT - $46.49 - NYSE) is a Boca-Raton, Florida<br />
based provider of electronic alarm monitoring products and services to U.S. residences and small businesses.<br />
The company is a subsidiary of Tyco International Ltd. (0.5%) and boasts strong brand recognition for its<br />
brands ADT, ADT Pulse, and Companion Service. ADT dominates the market even in the highly competitive<br />
alarm monitoring industry and will likely retain its market share alongside continued growth in the electronic<br />
security industry at large. The company expects consistent free cash flow generation in the near term due to<br />
a recently approved share repurchase program set to last three years and expire in November 2015.<br />
AMC Networks Inc. (2.1%) (AMCX - $49.50 - Nasdaq) owns and operates cable networks: AMC, WE tv, IFC,<br />
and The Sundance Channel. In addition, the company owns IFC Entertainment, an independent film<br />
distribution company, and AMC Network Communication, a network programming origination and distribution<br />
company. The AMC channel is highly rated and has benefited from growing popularity in an attractive and<br />
affluent demographic which should aid advertising sales. AMC offers the potential for levered equity returns and<br />
could be an attractive acquisition candidate to a number of large cable network operators.<br />
CBS Corp. (4.2%) (CBS - $37.98 - NYSE) operates the CBS television network, the premium cable network<br />
Showtime, owns 29 local television stations, 130 radio stations, and the third largest international outdoor<br />
advertising network. We believe CBS has a number of opportunities to generate incremental non-advertising<br />
revenue from the sale of existing content to OVDs (online video distributors) and through retransmission consent<br />
agreements with traditional distributors. In addition, we expect a continued recovery in advertising, especially in<br />
radio and outdoor, to contribute to earnings growth. Finally, we believe financial engineering, including the<br />
announced $3 billion share buyback or a potential spin-off of CBS Outdoor, could act as a catalyst for shares.<br />
CIRCOR International Inc. (1.0%) (CIR - $39.59 - NYSE) is a manufacturer of highly engineered products for<br />
the energy, aerospace, and flow control markets. In the energy market, the company makes ball, needle,<br />
butterfly, gate, and other valves for the drilling, production, separation, and transmission of oil and gas for large<br />
international energy projects and for small-to-medium size projects within North America. In the aerospace<br />
group, CIR manufactures landing gears, precision valves, pressure switches, regulators, actuators, and electric<br />
motors for air transports, cargo aircraft, regional jets, business airplanes, helicopters, and unmanned vehicles.<br />
In the flow control market, the company makes valves, fittings, and controls for the power generation, HVAC,<br />
steam, and industrial process markets. In December 2012, Bill Higgins stepped down as the company’s<br />
President and CEO to pursue other interests. Wayne Robbins, President of the Flow Technologies group was<br />
appointed acting President and CEO and the board has initiated a search process to identify a permanent<br />
President and CEO. In spite of the change in leadership, we believe the company is well positioned for future<br />
earnings growth driven by higher investments in the energy market, the increase in production of commercial<br />
aircraft, and more infrastructure investments in developed and developing countries.<br />
Diageo plc (3.3%) (DEO LN - $116.58 - NYSE) is the leading global producer of alcoholic beverages, with<br />
brands including Smirnoff, Johnny Walker, Ketel One, Captain Morgan, Crown Royal, J&B, Baileys, Tanqueray,<br />
and Guinness. The company has a balanced geographic presence in both mature and emerging markets, and<br />
benefits from the trend of consumers around the world trading up to premium branded products. In 2011 and<br />
2012, Diageo made several acquisitions that enhanced its presence in emerging markets: Mey Icki, the leading<br />
spirits company in Turkey; Shui Jing Fang, a leading Chinese baiju producer, Ypioca, the leading cachaca<br />
producer in Brazil; and an increased stake in Halico, the leading domestic spirits producer in Vietnam. Diageo<br />
7
also agreed to make an investment in United Spirits, the leading spirits producer in India, which if completed<br />
will provide the company with the leading position in another fast-growing emerging market. Over the medium<br />
term, Diageo expects organic top line growth of 6% and 200 bps of margin improvement, leading to double digit<br />
earnings per share growth.<br />
DISH Network Corp. (1.2%) (DISH - $36.40 - NYSE) is the third largest pay TV provider in the U.S., with<br />
approximately 14 million subscribers. As a satellite operator unburdened by local franchising requirements and<br />
wired plant, DISH can market and deliver video extremely efficiently across the entire country. Founder Charlie<br />
Ergen owns approximately 54% of company shares and lends his strategic vision. DISH has accumulated a<br />
significant spectrum position at attractive prices and may enter the mobility market through acquisition or<br />
partnership. Ultimately, we believe DISH could make an attractive acquisition target for a traditional telecom<br />
operator.<br />
Honeywell International, Inc. (2.8%) (HON - $63.47 - NYSE) is a leading producer of avionics, power, and<br />
electronic systems for the aerospace market, process automation, and security products for the industrial,<br />
residential, and commercial building markets. The company also makes turbochargers for the automotive industry<br />
and provides technologies to the energy market. HON has excellent products, a strong balance sheet, and<br />
generates substantial free cash flow that could be used for internal growth, acquisitions, and stock repurchases.<br />
In addition, the company is executing on its long-term strategy to expand in less costly regions of the world, while<br />
reducing costs in more costly countries by closing plants, consolidating facilities, and implementing six sigma and<br />
lean manufacturing. These dynamics should position HON for bigger profitability gains in the future.<br />
Internap Network Services (0.2%) (INAP - $6.94 - Nasdaq) provides IT infrastructure services through twelve<br />
owned and twenty-eight partner data centers in the U.S. The company enables corporate, government and<br />
institutional customers to outsource their computer processing needs in a secure, monitored setting. Internap<br />
has recently expanded its offerings to include a “cloud” solution in which customers can purchase computing<br />
power in a flexible, scalable manner. We believe the strong secular trend toward IT outsourcing underlies the<br />
recent consolidation of data center competitors by large telecommunications providers such as Verizon, Time<br />
Warner Cable, CenturyLink, and Cogeco. We think Internap will benefit from these trends as well as continued<br />
improvement in its own execution.<br />
Xylem Inc. (0.6%) (XYL - $27.10 - NYSE), is a global leader in the design, manufacturing, and application of<br />
highly engineered technologies for the transportation, treatment, and testing of water. The company is<br />
expected to benefit from favorable long term fundamentals in the water industry, driven by scarcity, population<br />
growth, aging of the infrastructure, and the need to improve water quality. Further, with a large installed base<br />
of pumps and systems, the company is well positioned to increase aftermarket revenue, which currently<br />
represents roughly forty percent of total revenues. Xylem’s attractive business mix also generates strong cash<br />
flow, which is expected to support acquisitions, debt service, and dividend growth. While current concerns<br />
regarding weakness in Europe and municipal spending levels in the U.S. are placing downward pressure on<br />
shares, we believe the long-term fundamentals outweigh these concerns.<br />
Investment Scorecard<br />
AMC Networks (+14%) was the largest contributor to returns in the fourth quarter as the company<br />
benefited from a favorable legal settlement with DISH Network and strong ratings for the third season of The<br />
Walking Dead. Likewise, DISH Network (+22%) rose as a result of the AMC legal settlement, FCC approval of<br />
its wireless spectrum purchase, and the announcement of a healthy 2013 price increase. Madison Square<br />
Garden (2.4% of net assets as of December 31, 2012) (+10%) continued to appreciate as the company<br />
completed the second of its three phase MSG arena “Transformation” and the NY Knicks began the year with<br />
the best record in the NBA. Other notable gainers included Intermec (+58%) which announced a long<br />
anticipated acquisition by Honeywell, Ford Motor (0.4%) (+32%), and Tenneco (0.2%) (+15%) which benefited<br />
8
from an improving auto sales outlook and ADT (+25%) the alarm monitoring company spun off from Tyco at<br />
the beginning of the quarter.<br />
The largest detractors from performance included Swedish Match (3.9%) (–17%) which was hurt by<br />
increased competitive intensity in Sweden, Telephone & Data Systems (1.7%) (–13%) which declined after<br />
initial enthusiasm for affiliate US Cellular’s (0.4%) sale of Chicago area spectrum and customers to Sprint<br />
Nextel (0.5%), and gold miners Newmont Mining (3.4%) (–16%) and Barrick Gold (1.1%) (–16%) whose<br />
performance represents the continuation of a trend of underperformance of the gold equities relative to the<br />
physical metal. The Fund has held positions in gold equities as we continue to believe government<br />
debasements of their currencies will lead to rising gold prices and benefit producers of the metal.<br />
Conclusion<br />
Stocks rose for the fourth year in a row in 2012 and began 2013 on a positive note as the U.S. postponed<br />
its date with the so-called fiscal cliff. Investors now await further skirmishes over fiscal policy. We expect the<br />
U.S. economic expansion to grind forward during 2013 and the evolving recovery in employment to continue<br />
to slowly broaden across the American economy. While we remain upbeat on the U.S. economy, we are<br />
watching macro and political developments in Beijing, Berlin, and Tokyo as they may impact the global<br />
economy. In the interim, we continue to select stocks using our Private Market with a Catalyst methodology.<br />
We believe a resurgence in deals will continue to add incremental value to the Fund.<br />
Sincerely,<br />
Mario J. <strong>Gabelli</strong>, CFA<br />
Portfolio Manager and<br />
Chief Investment Officer – Value Portfolios<br />
January 8, 2013<br />
Christopher J. Marangi<br />
Associate Portfolio Manager<br />
Viacom Inc. 7.4%<br />
CBS Corp. 4.2%<br />
Swedish Match AB 3.9%<br />
Newmont Mining Corp. 3.4%<br />
Diageo plc 3.3%<br />
Top Ten Holdings (Percent of Net Assets)<br />
December 31, 2012<br />
Note: The views expressed in this Shareholder Commentary reflect those of the Portfolio Managers only<br />
through the end of the period stated in this Shareholder Commentary. The Portfolio Managers’ views are subject<br />
to change at any time based on market and other conditions. The information in this Portfolio Managers’<br />
Shareholder Commentary represents the opinions of the individual Portfolio Managers and is not intended to be<br />
a forecast of future events, a guarantee of future results, or investment advice. Views expressed are those of<br />
the Portfolio Managers and may differ from those of other portfolio managers or of the Firm as a whole. This<br />
Shareholder Commentary does not constitute an offer of any transaction in any securities. Any recommendation<br />
contained herein may not be suitable for all investors. Information contained in this Shareholder Commentary<br />
has been obtained from sources we believe to be reliable, but cannot be guaranteed.<br />
9<br />
Honeywell International Inc. 2.8%<br />
Rolls-Royce Holding plc 2.5%<br />
American Express Co. 2.4%<br />
Madison Square Garden Co. 2.4%<br />
DIRECTV Group Inc. 2.4%
Portfolio Manager Compensation<br />
Mr. <strong>Gabelli</strong>’s incentive-based, variable compensation structure and dollar amount have been fully<br />
disclosed each year since April of 2000 in GAMCO Investors, Inc.’s (NYSE: GBL) annual proxy statement.<br />
Mr. <strong>Gabelli</strong> receives no base salary, no annual bonus, and no options.<br />
As founder and portfolio manager of The <strong>Gabelli</strong> Value Fund, Mr. <strong>Gabelli</strong> received $901,816 in calendar<br />
year 2011. Starting in September 1989, the Fund’s first year of operation, Mr. <strong>Gabelli</strong> received approximately<br />
$3,200,000. As beneficial owner, he had $100,778 invested in The <strong>Gabelli</strong> Value Fund as of December 31, 2012,<br />
which includes the holdings of GAMCO Asset Management, Inc. and GGCP, Inc., GBL’s parent holding<br />
company.<br />
Minimum Initial Investment – $1,000<br />
The Fund’s minimum initial investment for regular accounts is $1,000. There are no subsequent<br />
investment minimums. No initial minimum is required for those establishing an Automatic Investment Plan.<br />
Additionally, the Fund and other <strong>Gabelli</strong>/GAMCO Funds are available through the no-transaction fee programs<br />
at many major brokerage firms. The Fund imposes a 2% redemption fee on shares sold or exchanged within<br />
seven days after the date of purchase. See the prospectus for more details.<br />
www.gabelli.com<br />
Please visit us on the Internet. Our homepage at www.gabelli.com contains information about GAMCO<br />
Investors, Inc., the <strong>Gabelli</strong>/GAMCO Mutual Funds, IRAs, 401(k)s, current and historical quarterly reports, closing<br />
prices, and other current news. We welcome your comments and questions via e-mail at info@gabelli.com.<br />
You may sign up for our e-mail alerts at www.gabelli.com and receive early notice of quarterly report<br />
availability, news events, media sightings, and mutual fund prices and performance.<br />
The Fund’s daily net asset value is available in the financial press and each evening after 7:00 PM (Eastern<br />
Time) by calling 800-GABELLI (800-422-3554). The Fund’s Nasdaq symbol is GABVX for Class A Shares.<br />
Please call us during the business day, between 8:00 AM – 7:00 PM (Eastern Time), for further information.<br />
e-delivery<br />
We are pleased to offer electronic delivery of <strong>Gabelli</strong> fund documents. Direct shareholders of our mutual<br />
funds can elect to receive their <strong>Annual</strong>, Semiannual, and Quarterly Fund <strong>Report</strong>s, Manager Commentaries, and<br />
Prospectus via e-delivery. For more information or to sign up for e-delivery, please visit our website at<br />
www.gabelli.com.<br />
Multi-Class Shares<br />
The <strong>Gabelli</strong> Value Fund began offering additional classes of Fund shares on March 15, 2000. Class AAA<br />
are no-load shares available directly through selected broker/dealers. Class A and C Shares are offered to<br />
investors who seek advice through financial consultants. Class I Shares are available to certain institutions,<br />
directly through the Fund’s distributor or brokers that have entered into selling agreements specifically with<br />
respect to Class I Shares. The Board of Directors determined that expanding the types of Fund shares<br />
available through various distribution options will enhance the ability of the Fund to attract additional investors.<br />
10
VALUE ________________________________________<br />
<strong>Gabelli</strong> Asset Fund<br />
Seeks to invest primarily in a diversified portfolio of<br />
common stocks selling at significant discounts to<br />
their private market value. The Fund’s primary<br />
objective is growth of capital. (Multiclass)<br />
Team Managed<br />
<strong>Gabelli</strong> Dividend Growth Fund<br />
Seeks to invest at least 80% of its net assets in<br />
dividend paying stocks.<br />
(Multiclass)<br />
Portfolio Manager: Barbara G. Marcin, CFA<br />
TETON Westwood Equity Fund<br />
Seeks to invest primarily in the common stock of well<br />
seasoned companies that have recently reported<br />
positive earnings surprises and are trading below<br />
Westwood’s proprietary growth rate estimates. The<br />
Fund’s primary objective is capital appreciation.<br />
(Multiclass)<br />
Team Managed<br />
FOCUSED VALUE ______________________________<br />
<strong>Gabelli</strong> Value Fund<br />
Seeks to invest in securities of companies believed to<br />
be undervalued. The Fund’s primary objective is longterm<br />
capital appreciation. (Multiclass)<br />
Team Managed<br />
<strong>Gabelli</strong> Focus Five Fund<br />
Seeks to invest up to 50% of its net assets in the<br />
equity securities of five companies with the remaining<br />
net assets invested in ten to twenty other companies<br />
or short-term high grade investments or cash and<br />
cash equivalents. (Multiclass) Team Managed<br />
SMALL CAP ___________________________________<br />
<strong>Gabelli</strong> Small Cap Growth Fund<br />
Seeks to invest primarily in common stock of smaller<br />
companies (market capitalizations at the time of<br />
investment of $2 billion or less) believed to have rapid<br />
revenue and earnings growth potential. The Fund’s<br />
primary objective is capital appreciation. (Multiclass)<br />
Portfolio Manager: Mario J. <strong>Gabelli</strong>, CFA<br />
TETON Westwood SmallCap Equity Fund<br />
Seeks to invest primarily in smaller capitalization<br />
equity securities – market caps of $2.5 billion or less.<br />
The Fund’s primary objective is long-term capital<br />
appreciation. (Multiclass)<br />
Portfolio Manager: Nicholas F. Galluccio<br />
GROWTH ______________________________________<br />
GAMCO Growth Fund<br />
Seeks to invest primarily in large cap stocks believed<br />
to have favorable, yet undervalued, prospects for<br />
earnings growth. The Fund’s primary objective is<br />
capital appreciation. (Multiclass)<br />
Portfolio Manager: Howard F. Ward, CFA<br />
GAMCO International Growth Fund<br />
Seeks to invest in the equity securities of foreign<br />
issuers with long-term capital appreciation potential.<br />
The Fund offers investors global diversification.<br />
(Multiclass) Portfolio Manager: Caesar Bryan<br />
GABELLI FAMILY OF FUNDS<br />
AGGRESSIVE GROWTH _________________________<br />
GAMCO Global Growth Fund<br />
Seeks capital appreciation through a disciplined<br />
investment program focusing on the globalization and<br />
interactivity of the world’s marketplace. The Fund<br />
invests in companies at the forefront of accelerated<br />
growth. The Fund’s primary objective is capital<br />
appreciation. (Multiclass)<br />
Team Managed<br />
MICRO-CAP ___________________________________<br />
TETON Westwood Mighty Mites SM Fund<br />
Seeks to invest in micro-cap companies that have<br />
market capitalizations of $500 million or less. The<br />
Fund’s primary objective is long-term capital<br />
appreciation. (Multiclass) Team Managed<br />
EQUITY INCOME _______________________________<br />
<strong>Gabelli</strong> Equity Income Fund<br />
Seeks to invest primarily in equity securities with<br />
above average market yields. The Fund pays monthly<br />
dividends and seeks a high level of total return with an<br />
emphasis on income. (Multiclass)<br />
Portfolio Manager: Mario J. <strong>Gabelli</strong>, CFA<br />
TETON Westwood Balanced Fund<br />
Seeks to invest in a balanced and diversified portfolio<br />
of stocks and bonds. The Fund’s primary objective is<br />
both capital appreciation and current income.<br />
(Multiclass)<br />
Team Managed<br />
TETON Westwood Income Fund<br />
Seeks to provide a high level of current income as well<br />
as long-term capital appreciation by investing in<br />
income producing equity and fixed income securities.<br />
(Multiclass) Portfolio Manager: Barbara G. Marcin, CFA<br />
SPECIALTY EQUITY ____________________________<br />
GAMCO Vertumnus Fund<br />
Seeks to invest principally in common stock and<br />
convertible securities of domestic and foreign<br />
companies. The Fund’s primary objective is total<br />
return through a combination of current income and<br />
capital appreciation. (Multiclass)<br />
Portfolio Manager: Mario J. <strong>Gabelli</strong>, CFA<br />
GAMCO Global Opportunity Fund<br />
Seeks to invest in common stock of companies which<br />
have rapid growth in revenues and earnings and<br />
potential for above average capital appreciation or are<br />
undervalued. The Fund’s primary objective is capital<br />
appreciation. (Multiclass)<br />
Team Managed<br />
<strong>Gabelli</strong> SRI Green Fund<br />
Seeks to invest in common and preferred stocks<br />
meeting guidelines for social responsibility (avoiding<br />
defense contractors and manufacturers of alcohol,<br />
abortifacients, gaming, and tobacco products) and<br />
sustainability (companies engaged in climate change,<br />
energy security and independence, natural resource<br />
shortages, organic living, and urbanization). The Fund’s<br />
primary objective is capital appreciation. (Multiclass)<br />
Team Managed<br />
SECTOR ______________________________________<br />
GAMCO Global Telecommunications Fund<br />
Seeks to invest in telecommunications companies<br />
throughout the world – targeting undervalued<br />
companies with strong earnings and cash flow<br />
dynamics. The Fund’s primary objective is capital<br />
appreciation. (Multiclass)<br />
Team Managed<br />
<strong>Gabelli</strong> Gold Fund<br />
Seeks to invest in a global portfolio of equity<br />
securities of gold mining and related companies. The<br />
Fund’s objective is long-term capital appreciation.<br />
Investment in gold stocks is considered speculative<br />
and is affected by a variety of worldwide economic,<br />
financial, and political factors. (Multiclass)<br />
Portfolio Manager: Caesar Bryan<br />
<strong>Gabelli</strong> Utilities Fund<br />
Seeks to provide a high level of total return through a<br />
combination of capital appreciation and current<br />
income. (Multiclass)<br />
Portfolio Manager: Mario J. <strong>Gabelli</strong>, CFA<br />
MERGER AND ARBITRAGE _____________________<br />
<strong>Gabelli</strong> ABC Fund<br />
Seeks to invest in securities with attractive oppor -<br />
tunities for appreciation or investment income. The<br />
Fund’s primary objective is total return in various<br />
market conditions without excessive risk of capital loss.<br />
(No-load) Portfolio Manager: Mario J. <strong>Gabelli</strong>, CFA<br />
<strong>Gabelli</strong> Enterprise Mergers and Acquisitions Fund<br />
Seeks to invest in securities believed to be likely<br />
acquisition targets within 12–18 months or in arbitrage<br />
transactions of publicly announced mergers or other<br />
corporate reorganizations. The Fund’s primary objective<br />
is capital appreciation. (Multiclass)<br />
Portfolio Manager: Mario J. <strong>Gabelli</strong>, CFA<br />
CONTRARIAN _________________________________<br />
GAMCO Mathers Fund<br />
Seeks long-term capital appreciation in various market<br />
conditions without excessive risk of capital loss.<br />
(No-load) Portfolio Manager: Henry Van der Eb, CFA<br />
Comstock Capital Value Fund<br />
Seeks capital appreciation and current income. The<br />
Fund may use either long or short positions to achieve<br />
its objective. (Multiclass)<br />
Portfolio Managers: Charles L. Minter<br />
Martin Weiner, CFA<br />
FIXED INCOME ________________________________<br />
TETON Westwood Intermediate Bond Fund<br />
Seeks to invest in a diversified portfolio of bonds with<br />
various maturities. The Fund’s primary objective is<br />
total return. (Multiclass)<br />
Portfolio Manager: Mark R. Freeman, CFA<br />
CASH MANAGEMENT-MONEY MARKET __________<br />
<strong>Gabelli</strong> U.S. Treasury Money Market Fund<br />
Seeks to invest exclusively in short-term U.S. Treasury<br />
securities. The Fund’s primary objective is to provide<br />
high current income consistent with the preservation<br />
of principal and liquidity. (No-load)<br />
Co-Portfolio Managers: Judith A. Raneri<br />
Ronald S. Eaker<br />
An investment in the above Money Market Fund is<br />
neither insured nor guaranteed by the Federal<br />
Deposit Insurance Corporation or any government<br />
agency. Although the Fund seeks to preserve the<br />
value of your investment at $1.00 per share, it is<br />
possible to lose money by investing in the Fund.<br />
The Funds may invest in foreign securities which<br />
involve risks not ordinarily associated with<br />
investments in domestic issues, including currency<br />
fluctuation, economic, and political risks.<br />
To receive a prospectus, call 800-GABELLI (800-422-3554). Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund<br />
before investing. The prospectus contains more information about these and other matters and should be read carefully before investing.<br />
Distributed by G.distributors, LLC, One Corporate Center, Rye, NY 10580.
THE GABELLI VALUE FUND INC.<br />
One Corporate Center,<br />
Rye, NY 10580-1422<br />
t 800-GABELLI (800-422-3554)<br />
f 914-921-5118<br />
e info@gabelli.com<br />
GABELLI.COM<br />
Net Asset Value per share available daily<br />
by calling 800-GABELLI after 7:00 P.M.<br />
BOARD OF DIRECTORS<br />
Mario J. <strong>Gabelli</strong>, CFA<br />
Chairman and<br />
Chief Executive Officer,<br />
GAMCO Investors, Inc.<br />
Anthony J. Colavita<br />
President,<br />
Anthony J. Colavita, P.C.<br />
Robert J. Morrissey<br />
Partner,<br />
Morrissey, Hawkins & Lynch<br />
Anthony R. Pustorino<br />
Certified Public Accountant,<br />
Professor Emeritus,<br />
Pace University<br />
Werner J. Roeder, MD<br />
Medical Director,<br />
Lawrence Hospital<br />
OFFICERS<br />
Bruce N. Alpert<br />
President, Secretary, and Acting<br />
Chief Compliance Officer<br />
Agnes Mullady<br />
Treasurer<br />
DISTRIBUTOR<br />
G.distributors, LLC<br />
CUSTODIAN<br />
The Bank of New York Mellon<br />
TRANSFER AGENT AND<br />
DIVIDEND DISBURSING AGENT<br />
State Street Bank and Trust Company<br />
LEGAL COUNSEL<br />
Willkie Farr & Gallagher LLP<br />
THE<br />
GABELLI<br />
VALUE<br />
FUND INC.<br />
Shareholder Commentary<br />
December 31, 2012<br />
This report is submitted for the general information of the<br />
shareholders of The <strong>Gabelli</strong> Value Fund Inc. It is not<br />
authorized for distribution to prospective investors unless<br />
preceded or accompanied by an effective prospectus.<br />
GAB409Q412SC
The <strong>Gabelli</strong> Value Fund Inc.<br />
<strong>Annual</strong> <strong>Report</strong> — December 31, 2012<br />
To Our Shareholders,<br />
Christopher J. Marangi<br />
Portfolio Manager<br />
For the year ended December 31, 2012, the net asset value (“NAV”) per Class A Share of The <strong>Gabelli</strong><br />
Value Fund Inc. increased 17.0% compared with increases of 16.0% and 10.1% for the Standard & Poor’s<br />
(“S&P”) 500 Index and the Dow Jones Industrial Average, respectively. See page 3 for additional performance<br />
information.<br />
Enclosed are the schedule of investments and financial statements as of December 31, 2012.<br />
Performance Discussion (Unaudited)<br />
The stock market started the year with the best first quarter in over a decade. While gains were broad<br />
based, financials and housing related companies led the way. While the U.S. economy added 284,000 jobs in<br />
January 2012 and 227,000 in February, the unemployment rate continued to be high by historical standards.<br />
Data emanating from the second quarter – oil down 18%, copper lower by 9%, a slackening in job creation,<br />
and deceleration of production and retail sales – pointed to certain regions in recession. Central bankers hinted<br />
of further easing in order to soothe market nerves and prevent a negative feedback loop from emerging.<br />
U.S. stock prices marched upward each month during the third quarter, with the S&P finishing up 6.35%<br />
for the quarter and 16.00% year to date. While economic growth remained sluggish, the market decided to<br />
focus instead on monetary policy, both in the U.S. and abroad. In late July, European Central Bank President<br />
Mario Draghi vowed to do “whatever it takes to preserve the euro” and followed up in September by announcing<br />
Outright Monetary Transactions that would “provide a fully effective backstop to avoid destructive scenarios.”<br />
Ben Bernanke paved the way in August with the announcement of an additional round of quantitative easing,<br />
which is being called “QE3” or even “QE infinity.”<br />
The developed world continued major deleveraging as overconsumption financed by debt constrained<br />
growth and pressured federal, state, and local government budgets. The developing world faced its own issues<br />
as nations, primarily in Asia and Latin America, attempted to command economic forces largely beyond their<br />
control. China underwent its own political transition, and was hard pressed to engineer a “soft landing” for its<br />
economy.
Some contributors to returns for the year were CBS Corp. (4.2% of net assets as of December 31, 2012),<br />
The Madison Square Garden Co. (2.4%), and Diageo plc (3.3%). Some of the larger detractors to performance<br />
were Newmont Mining Corp. (3.4%), National Fuel Gas Co. (2.3%), and Swedish Match AB (3.9%).<br />
We appreciate your confidence and trust.<br />
Sincerely yours,<br />
February 22, 2013<br />
Bruce N. Alpert<br />
President<br />
We have separated the portfolio managers’ commentary from the financial statements and investment portfolio due to<br />
corporate governance regulations stipulated by the Sarbanes-Oxley Act of 2002. We have done this to ensure that the<br />
content of the portfolio managers’ commentary is unrestricted. Both the commentary and the financial statements, including<br />
the portfolio of investments, will be available on our website at www.gabelli.com.<br />
2
Comparative Results<br />
Average <strong>Annual</strong> Returns through December 31, 2012 (a) (Unaudited)<br />
Since<br />
Inception<br />
1 Year 5 Year 10 Year (9/29/89)<br />
Class A (GABVX) ................................................ 16.95% 3.36% 8.35% 10.51%<br />
With sales charge (b) .............................................. 10.23 2.14 7.71 10.22<br />
S&P 500 Index. .................................................. 16.00 1.66 7.10 8.55<br />
DowJonesIndustrialAverage........................................ 10.14 2.60 7.32 9.73<br />
NasdaqCompositeIndex ........................................... 17.60 3.77 9.43 8.29<br />
Class AAA (GVCAX) .............................................. 16.97 3.37 8.36 10.51<br />
Class B (GVCBX) ................................................ 16.06 2.55 7.53 10.04<br />
With contingent deferred sales charge (c) ................................ 11.06 2.19 7.53 10.04<br />
Class C (GVCCX) ................................................ 16.09 2.57 7.54 10.06<br />
With contingent deferred sales charge (d) ................................ 15.09 2.57 7.54 10.06<br />
Class I (GVCIX). ................................................. 17.17 3.62 8.49 10.57<br />
In the current prospectus dated April 27, 2012, the expense ratios for Class AAA, A, B, C, and I Shares are 1.43%, 1.43%, 2.18%,<br />
2.18%, and 1.18%, respectively. See page 11 for the expense ratios for the year ended December 31, 2012. Class AAA and Class I<br />
Shares do not have a sales charge. The maximum sales charge for Class A, B, and C Shares is 5.75%, 5.00%, and 1.00%,<br />
respectively.<br />
(a) Returns represent past performance and do not guarantee future results. Total returns and average annual returns reflect changes<br />
in share prices, reinvestment of distributions, and are net of expenses. Investment returns and the principal value of an investment will<br />
fluctuate. When shares are redeemed, they may be worth more or less than their original cost. The Fund imposes a 2% redemption fee on<br />
shares sold or exchanged within seven days after the date of purchase. Current performance may be lower or higher than the<br />
performance data presented. Visit www.gabelli.com for performance information as of the most recent month end. Investors should<br />
carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The prospectus<br />
contains information about these and other matters and should be read carefully before investing. The Class A Share NAVs are<br />
used to calculate performance for the periods prior to the issuance of Class AAA Shares on April 30, 2010, Class B Shares and Class C<br />
Shares on March 15, 2000, and the Class I Shares on January 11, 2008. The actual performance of the Class B Shares and Class C<br />
Shares would have been lower due to the additional expenses associated with these classes of shares. The actual performance of the<br />
Class I Shares would have been higher due to lower expenses related to this class of shares. The S&P 500 Index is a market capitalization<br />
weighted index of 500 large capitalization stocks commonly used to represent the U.S. equity market. The Dow Jones Industrial<br />
Average and the Nasdaq Composite Index are unmanaged indicators of stock market performance. Dividends are considered reinvested,<br />
except for the NASDAQ Composite Index. You cannot invest directly in an index.<br />
(b) Performance results include the effect of the maximum 5.75% sales charge at the beginning of the period.<br />
(c) Assuming payment of the maximum contingent deferred sales charge (CDSC). The maximum CDSC for Class B Shares is 5% which is<br />
gradually reduced to 0% after six years.<br />
(d) Assuming payment of the 1% maximum CDSC imposed on redemptions made within one year of purchase.<br />
$100,000<br />
$90,000<br />
$70,000<br />
$60,000<br />
$50,000<br />
$40,000<br />
$30,000<br />
$20,000<br />
$10,000<br />
$0<br />
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN<br />
THE GABELLI VALUE FUND (CLASS A SHARES) AND S&P 500 INDEX (Unaudited)<br />
$80,000 S&P 500 Index $67,277<br />
The <strong>Gabelli</strong> Value Fund (Class A Shares) $96,382<br />
Average <strong>Annual</strong> Total Returns*<br />
1 Year 5 Year 10 Year Since Inception<br />
Class A 16.95% 3.36% 8.35% 10.51%<br />
9/29/89 12/31/91 12/31/93 12/31/95 12/31/97 12/31/99 12/31/01 12/31/03 12/31/05 12/31/07 12/31/09 12/31/11 12/31/12<br />
* Past performance is not predictive of future results. The performance tables and graph do not reflect the deduction of taxes that a<br />
shareholder would pay on Fund distributions or the redemption of Fund shares.<br />
3
The <strong>Gabelli</strong> Value Fund Inc.<br />
Disclosure of Fund Expenses (Unaudited)<br />
For the Six Month Period from July 1, 2012 through December 31, 2012<br />
Expense Table<br />
We believe it is important for you to understand the<br />
impact of fees and expenses regarding your investment.<br />
All mutual funds have operating expenses. As a<br />
shareholder of a fund, you incur ongoing costs, which<br />
include costs for portfolio management, administrative<br />
services, and shareholder reports (like this one), among<br />
others. Operating expenses, which are deducted from<br />
a fund’s gross income, directly reduce the investment<br />
return of a fund. When a fund’s expenses are expressed<br />
as a percentage of its average net assets, this figure<br />
is known as the expense ratio. The following examples<br />
are intended to help you understand the ongoing costs<br />
(in dollars) of investing in your Fund and to compare<br />
these costs with those of other mutual funds. The examples<br />
are based on an investment of $1,000 made at the<br />
beginning of the period shown and held for the entire<br />
period.<br />
The Expense Table below illustrates your Fund’s costs<br />
in two ways:<br />
Actual Fund Return: This section provides information<br />
about actual account values and actual expenses. You<br />
may use this section to help you to estimate the actual<br />
expenses that you paid over the period after any fee<br />
waivers and expense reimbursements. The “Ending<br />
Account Value” shown is derived from the Fund’s<br />
actual return during the past six months, and the<br />
“Expenses Paid During Period” shows the dollar amount<br />
that would have been paid by an investor who started<br />
with $1,000 in the Fund. You may use this information,<br />
together with the amount you invested, to estimate the<br />
expenses that you paid over the period.<br />
To do so, simply divide your account value by $1,000<br />
(for example, an $8,600 account value divided by $1,000<br />
= 8.6), then multiply the result by the number given<br />
for your Fund under the heading “Expenses Paid During<br />
Period” to estimate the expenses you paid during this<br />
period.<br />
Hypothetical 5% Return: This section provides<br />
information about hypothetical account values and<br />
4<br />
hypothetical expenses based on the Fund’s actual expense<br />
ratio. It assumes a hypothetical annualized return of<br />
5% before expenses during the period shown. In this<br />
case – because the hypothetical return used is not<br />
the Fund’s actual return – the results do not apply to<br />
your investment and you cannot use the hypothetical<br />
account value and expense to estimate the actual ending<br />
account balance or expenses you paid for the period.<br />
This example is useful in making comparisons of the<br />
ongoing costs of investing in the Fund and other funds.<br />
To do so, compare this 5% hypothetical example with<br />
the 5% hypothetical examples that appear in shareholder<br />
reports of other funds.<br />
Please note that the expenses shown in the table are<br />
meant to highlight your ongoing costs only and do not<br />
reflect any transactional costs such as sales charges<br />
(loads), redemption fees, or exchange fees, if any, which<br />
would be described in the Prospectus. If these costs<br />
were applied to your account, your costs would be higher.<br />
Therefore, the 5% hypothetical return is useful in comparing<br />
ongoing costs only, and will not help you determine<br />
the relative total costs of owning different funds. The<br />
“<strong>Annual</strong>ized Expense Ratio” represents the actual<br />
expenses for the last six months and may be different<br />
from the expense ratio in the Financial Highlights which<br />
is for the year ended December 31, 2012.<br />
Beginning<br />
Account Value<br />
07/01/12<br />
Ending<br />
Account Value<br />
12/31/12<br />
<strong>Annual</strong>ized<br />
Expense<br />
Ratio<br />
Expenses<br />
Paid During<br />
Period*<br />
The <strong>Gabelli</strong> Value Fund Inc.<br />
Actual Fund Return<br />
Class AAA $1,000.00 $1,105.10 1.42% $ 7.51<br />
Class A $1,000.00 $1,105.10 1.41% $ 7.46<br />
Class B $1,000.00 $1,100.50 2.15% $11.35<br />
Class C $1,000.00 $1,100.90 2.16% $11.41<br />
Class I $1,000.00 $1,105.60 1.17% $ 6.19<br />
Hypothetical 5% Return<br />
Class AAA $1,000.00 $1,018.00 1.42% $ 7.20<br />
Class A $1,000.00 $1,018.05 1.41% $ 7.15<br />
Class B $1,000.00 $1,014.33 2.15% $10.89<br />
Class C $1,000.00 $1,014.28 2.16% $10.94<br />
Class I $1,000.00 $1,019.25 1.17% $ 5.94<br />
* Expenses are equal to the Fund’s annualized expense ratio for<br />
the last six months multiplied by the average account value over<br />
the period, multiplied by the number of days in the most recent<br />
fiscal half year (184 days), then divided by 366.
Summary of Portfolio Holdings (Unaudited)<br />
The following table presents portfolio holdings as a percent of net assets as of December 31, 2012:<br />
The <strong>Gabelli</strong> Value Fund Inc.<br />
Entertainment ...................... 14.4%<br />
Cable and Satellite.................. 13.4%<br />
FoodandBeverage................. 8.6%<br />
Broadcasting ....................... 6.1%<br />
Diversified Industrial................. 5.9%<br />
Financial Services .................. 5.5%<br />
Metals and Mining .................. 5.1%<br />
Consumer Products ................. 5.0%<br />
Energy and Utilities ................. 4.0%<br />
Equipment and Supplies ............. 3.2%<br />
Aerospace......................... 2.8%<br />
Telecommunications ................ 2.6%<br />
ConsumerServices................. 2.6%<br />
Business Services .................. 2.3%<br />
Machinery.......................... 2.2%<br />
Automotive: Parts and Accessories . . . 2.2%<br />
Publishing.......................... 1.9%<br />
HotelsandGaming ................. 1.9%<br />
EnvironmentalServices.............. 1.8%<br />
Retail.............................. 1.3%<br />
Electronics......................... 1.0%<br />
Automotive......................... 1.0%<br />
Wireless Communications............ 1.0%<br />
Aviation:PartsandServices ......... 0.8%<br />
ComputerSoftwareandServices..... 0.8%<br />
Real Estate ........................ 0.7%<br />
Specialty Chemicals................. 0.7%<br />
Health Care ........................ 0.6%<br />
CommunicationsEquipment.......... 0.3%<br />
U.S. Government Obligations......... 0.0%<br />
Other Assets and Liabilities (Net) ..... 0.3%<br />
100.0%<br />
The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (the<br />
“SEC”) for the first and third quarters of each fiscal year on Form N-Q. Shareholders may obtain this information<br />
at www.gabelli.com or by calling the Fund at 800-GABELLI (800-422-3554).The Fund’s Form N-Q is available<br />
on the SEC’s website at www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference<br />
Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by<br />
calling 800-SEC-0330.<br />
Proxy Voting<br />
The Fund files Form N-PX with its complete proxy voting record for the twelve months ended June 30, no later<br />
than August 31 of each year. A description of the Fund’s proxy voting policies, procedures, and how the Fund<br />
voted proxies relating to portfolio securities is available without charge, upon request, by (i) calling 800-GABELLI<br />
(800-422-3554); (ii) writing to The <strong>Gabelli</strong> Funds at One Corporate Center, Rye, NY 10580-1422; or (iii) visiting<br />
the SEC’s website at www.sec.gov.<br />
5
The <strong>Gabelli</strong> Value Fund Inc.<br />
Schedule of Investments — December 31, 2012<br />
Shares<br />
Cost<br />
Market<br />
Value<br />
COMMON STOCKS — 99.7%<br />
Aerospace — 2.8%<br />
122,000 Exelis Inc......................... $ 1,266,524 $ 1,374,940<br />
920,000 Rolls-Royce Holdings plc......... 6,481,183 13,054,469<br />
6,000 The Boeing Co.................... 438,267 452,160<br />
8,185,974 14,881,569<br />
Automotive — 1.0%<br />
54,000 Fiat Industrial SpA ............... 525,492 588,398<br />
174,000 Ford Motor Co.................... 2,213,116 2,253,300<br />
100,000 Navistar International Corp.† ..... 3,119,325 2,177,000<br />
5,857,933 5,018,698<br />
Automotive: Parts and Accessories — 2.2%<br />
8,000 BorgWarner Inc.† ................ 377,764 572,960<br />
38,000 China Yuchai International Ltd. . . . 300,576 599,260<br />
149,000 Genuine Parts Co. ................ 3,878,297 9,473,420<br />
25,000 Tenneco Inc.† .................... 828,780 877,750<br />
5,385,417 11,523,390<br />
Aviation: Parts and Services — 0.8%<br />
111,477 BBA Aviation plc ................. 222,905 403,830<br />
29,000 Curtiss-Wright Corp. ............. 601,942 952,070<br />
296,000 GenCorp Inc.† ................... 2,236,460 2,708,400<br />
3,061,307 4,064,300<br />
Broadcasting — 6.1%<br />
584,000 CBS Corp., Cl. A, Voting .......... 11,452,853 22,180,320<br />
86,000 Liberty Media Corp. - Liberty<br />
Capital, Cl. A† ................. 1,332,427 9,976,860<br />
12,785,280 32,157,180<br />
Business Services — 2.3%<br />
45,000 Ascent Capital Group Inc.,<br />
Cl.A† ......................... 1,175,027 2,787,300<br />
25,000 Blucora Inc.† .................... 377,785 392,750<br />
10,000 Broadridge Financial Solutions<br />
Inc. ........................... 113,116 228,800<br />
65,000 Clear Channel Outdoor Holdings<br />
Inc., Cl. A...................... 105,858 456,300<br />
2,800 Equinix Inc.†..................... 235,426 577,360<br />
49,250 Fidelity National Information<br />
Services Inc. .................. 1,064,884 1,714,392<br />
30,000 Intermec Inc.† ................... 182,856 295,800<br />
115,000 Internap Network Services<br />
Corp.† ........................ 676,769 798,100<br />
27,500 Macquarie Infrastructure Co. LLC. 652,324 1,252,900<br />
5,100 MasterCard Inc., Cl. A ............ 1,107,728 2,505,528<br />
41,000 The Brink’s Co.................... 1,121,870 1,169,730<br />
6,813,643 12,178,960<br />
Cable and Satellite — 13.4%<br />
130,000 Adelphia Communications Corp.,<br />
Cl. A†(a) ...................... 91,925 0<br />
Shares<br />
Cost<br />
Market<br />
Value<br />
130,000 Adelphia Communications Corp.,<br />
Escrow†(a).................... $ 0 $ 0<br />
130,000 Adelphia Recovery Trust† ........ 0 520<br />
223,000 AMC Networks Inc., Cl. A†........ 694,019 11,038,500<br />
759,000 Cablevision Systems Corp.,<br />
Cl.A .......................... 1,424,481 11,339,460<br />
130,000 Comcast Corp., Cl. A, Special..... 2,480,271 4,673,500<br />
247,000 DIRECTV† ....................... 3,415,720 12,389,520<br />
170,000 DISH Network Corp., Cl. A........ 3,136,053 6,188,000<br />
92,000 EchoStar Corp., Cl. A†............ 2,334,643 3,148,240<br />
140,000 Liberty Global Inc., Cl. A† ........ 2,522,198 8,818,600<br />
170,000 Rogers Communications Inc.,<br />
Cl.B .......................... 543,603 7,738,400<br />
90,000 Scripps Networks Interactive Inc.,<br />
Cl.A .......................... 2,946,856 5,212,800<br />
19,589,769 70,547,540<br />
Communications Equipment — 0.3%<br />
50,000 Corning Inc. ..................... 608,170 631,000<br />
22,000 Loral Space & Communications<br />
Inc. ........................... 849,588 1,202,520<br />
1,457,758 1,833,520<br />
Computer Software and Services — 0.8%<br />
65,000 EarthLink Inc. .................... 465,473 419,900<br />
32,000 eBay Inc.† ....................... 790,098 1,632,640<br />
45,000 RealD Inc.† ...................... 484,367 504,450<br />
75,000 Yahoo! Inc.† ..................... 1,251,039 1,492,500<br />
2,990,977 4,049,490<br />
Consumer Products — 5.0%<br />
16,000 Avon Products Inc................ 285,884 229,760<br />
26,000 Blyth Inc. ........................ 652,645 404,300<br />
55,000 Energizer Holdings Inc............ 1,336,532 4,398,900<br />
566 Givaudan SA ..................... 161,059 595,920<br />
200 National Presto Industries Inc..... 5,966 13,820<br />
610,000 Swedish Match AB ............... 9,321,932 20,467,312<br />
1,000 The Estee Lauder Companies Inc.,<br />
Cl.A .......................... 33,385 59,860<br />
11,797,403 26,169,872<br />
Consumer Services — 2.6%<br />
19,000 Coinstar Inc.†.................... 872,504 988,190<br />
238,000 Liberty Interactive Corp., Cl. A†. . . 3,309,709 4,683,840<br />
18,219 Liberty Ventures, Cl. A† .......... 619,100 1,234,519<br />
202,000 Rollins Inc. ...................... 662,012 4,452,080<br />
52,500 The ADT Corp. ................... 1,340,066 2,440,725<br />
6,803,391 13,799,354<br />
Diversified Industrial — 5.9%<br />
41,000 Ampco-Pittsburgh Corp........... 205,014 819,180<br />
125,000 Crane Co. ........................ 3,271,960 5,785,000<br />
5,000 Eaton Corp. plc .................. 259,545 271,017<br />
See accompanying notes to financial statements.<br />
6
The <strong>Gabelli</strong> Value Fund Inc.<br />
Schedule of Investments (Continued) — December 31, 2012<br />
Shares<br />
Cost<br />
Market<br />
Value<br />
COMMON STOCKS (Continued)<br />
Diversified Industrial (Continued)<br />
68,000 Fortune Brands Home & Security<br />
Inc.† .......................... $ 833,555 $ 1,986,960<br />
68,000 Griffon Corp...................... 733,354 779,280<br />
232,000 Honeywell International Inc. ...... 6,372,761 14,725,040<br />
62,000 ITT Corp. ........................ 1,088,182 1,454,520<br />
90,900 Katy Industries Inc.† ............. 167,685 16,362<br />
15,079 Pentair Ltd. ...................... 414,241 741,133<br />
6,000 Precision Castparts Corp. ........ 738,419 1,136,520<br />
10,000 Smiths Group plc ................ 151,874 193,473<br />
98,000 Tyco International Ltd............. 1,807,505 2,866,500<br />
16,044,095 30,774,985<br />
Electronics — 1.0%<br />
25,000 LSI Corp.† ....................... 149,083 177,000<br />
165,000 Texas Instruments Inc. ........... 3,807,774 5,105,100<br />
3,956,857 5,282,100<br />
Energy and Utilities — 4.0%<br />
2,000 Chevron Corp. ................... 135,096 216,280<br />
75,000 ConocoPhillips ................... 1,467,142 4,349,250<br />
26,000 CONSOL Energy Inc. ............. 1,069,192 834,600<br />
200,000 GenOn Energy Inc., Escrow†(a). . . 0 0<br />
240,000 National Fuel Gas Co.............. 10,705,193 12,165,600<br />
7,300 Occidental Petroleum Corp........ 567,572 559,253<br />
32,000 Phillips 66 ....................... 370,157 1,699,200<br />
23,000 Southwest Gas Corp.............. 608,479 975,430<br />
30,000 Weatherford International Ltd.†. . . 552,561 335,700<br />
15,475,392 21,135,313<br />
Entertainment — 14.4%<br />
41,700 Discovery Communications Inc.,<br />
Cl.A† ......................... 581,145 2,647,116<br />
87,700 Discovery Communications Inc.,<br />
Cl.C† ......................... 1,241,289 5,130,450<br />
53,000 Dover Motorsports Inc............ 209,213 89,570<br />
238,000 Grupo Televisa SAB, ADR......... 2,248,767 6,326,040<br />
284,000 The Madison Square Garden Co.,<br />
Cl.A† ......................... 1,155,535 12,595,400<br />
120,000 Time Warner Inc.................. 3,456,709 5,739,600<br />
719,000 Viacom Inc., Cl. A ................ 22,272,016 39,020,130<br />
190,000 Vivendi SA ....................... 2,757,947 4,250,924<br />
33,922,621 75,799,230<br />
Environmental Services — 1.8%<br />
25,000 Progressive Waste Solutions Ltd. . 484,034 540,000<br />
278,000 Republic Services Inc............. 3,705,469 8,153,740<br />
25,000 Waste Management Inc........... 704,929 843,500<br />
4,894,432 9,537,240<br />
Equipment and Supplies — 3.2%<br />
138,000 CIRCOR International Inc. ........ 1,731,208 5,463,420<br />
44,000 Flowserve Corp................... 603,146 6,459,200<br />
Shares<br />
Cost<br />
Market<br />
Value<br />
51,000 Gerber Scientific Inc.,<br />
Escrow†(a).................... $ 0 $ 510<br />
65,000 GrafTech International Ltd.† ...... 732,699 610,350<br />
25,000 Sealed Air Corp................... 372,835 437,750<br />
88,000 Watts Water Technologies Inc.,<br />
Cl.A .......................... 1,237,166 3,783,120<br />
4,677,054 16,754,350<br />
Financial Services — 5.5%<br />
223,000 American Express Co. ............ 5,951,965 12,818,040<br />
105,000 H&R Block Inc. .................. 1,843,667 1,949,850<br />
5,000 Interactive Brokers Group Inc.,<br />
Cl.A .......................... 74,363 68,400<br />
27,000 JPMorgan Chase & Co............ 1,092,710 1,187,190<br />
51,000 Kinnevik Investment AB, Cl. B .... 800,911 1,064,207<br />
54,000 Legg Mason Inc. ................. 1,322,015 1,388,880<br />
18,000 Loews Corp. ..................... 703,727 733,500<br />
13,000 Morgan Stanley .................. 329,939 248,560<br />
14,000 PNC Financial Services Group<br />
Inc. ........................... 868,578 816,340<br />
30,000 SLM Corp. ....................... 355,829 513,900<br />
19,000 State Street Corp. ................ 867,339 893,190<br />
20,000 Steel Excel Inc.† ................. 586,331 499,000<br />
102,000 The Bank of New York Mellon<br />
Corp........................... 2,842,395 2,621,400<br />
3,800 The Goldman Sachs Group Inc.. . . 453,865 484,728<br />
99,000 Wells Fargo & Co. ................ 3,048,243 3,383,820<br />
21,141,877 28,671,005<br />
Food and Beverage — 8.6%<br />
81,000 Beam Inc......................... 3,657,011 4,948,290<br />
54,000 Davide Campari - Milano SpA..... 254,633 413,411<br />
230,000 DE Master Blenders 1753 NV†.... 2,618,514 2,647,004<br />
150,000 Diageo plc, ADR.................. 5,798,723 17,487,000<br />
55,000 Dr Pepper Snapple Group Inc. .... 1,458,382 2,429,900<br />
72,000 Fomento Economico Mexicano<br />
SABdeCV,ADR............... 887,700 7,250,400<br />
60,000 Hillshire Brands Co. .............. 1,736,615 1,688,400<br />
6,000 John Bean Technologies Corp..... 87,400 106,620<br />
22,000 Kerry Group plc, Cl. A ............ 256,795 1,156,336<br />
10,000 Kikkoman Corp. .................. 106,788 141,975<br />
21,000 Kraft Foods Group Inc. ........... 654,237 954,870<br />
80,000 Mondelez International Inc., Cl. A . 1,620,935 2,037,600<br />
4,000 Nestlé SA ........................ 227,114 260,646<br />
12,000 Pernod-Ricard SA ................ 886,247 1,385,005<br />
11,000 Ralcorp Holdings Inc.† ........... 733,769 986,150<br />
14,000 Remy Cointreau SA .............. 825,768 1,528,801<br />
21,810,631 45,422,408<br />
Health Care — 0.6%<br />
4,000 Chemed Corp..................... 125,792 274,360<br />
28,000 Covidien plc...................... 1,113,252 1,616,720<br />
See accompanying notes to financial statements.<br />
7
The <strong>Gabelli</strong> Value Fund Inc.<br />
Schedule of Investments (Continued) — December 31, 2012<br />
Shares<br />
Cost<br />
Market<br />
Value<br />
COMMON STOCKS (Continued)<br />
Health Care (Continued)<br />
18,600 Mead Johnson Nutrition Co. ...... $ 759,054 $ 1,225,554<br />
1,998,098 3,116,634<br />
Hotels and Gaming — 1.9%<br />
13,000 Accor SA ........................ 450,008 458,072<br />
31,000 Dover Downs Gaming &<br />
Entertainment Inc. ............. 191,529 68,200<br />
25,000 International Game Technology . . . 364,423 354,250<br />
335,000 Ladbrokes plc.................... 1,750,361 1,079,136<br />
49,000 Las Vegas Sands Corp. ........... 1,109,843 2,261,840<br />
34,900 MGM Resorts International†...... 436,481 406,236<br />
133,541 Ryman Hospitality Properties Inc.. 3,792,196 5,135,973<br />
8,094,841 9,763,707<br />
Machinery — 2.2%<br />
48,000 CNH Global NV................... 978,159 1,933,920<br />
57,500 Deere & Co....................... 1,227,099 4,969,150<br />
125,000 Xylem Inc. ....................... 3,070,752 3,387,500<br />
34,000 Zebra Technologies Corp., Cl. A† . 919,422 1,335,520<br />
6,195,432 11,626,090<br />
Metals and Mining — 5.1%<br />
168,000 Barrick Gold Corp. ............... 3,841,220 5,881,680<br />
30,000 Freeport-McMoRan Copper &<br />
Gold Inc. ...................... 500,054 1,026,000<br />
90,000 Kinross Gold Corp. ............... 734,770 874,800<br />
38,000 Materion Corp. ................... 902,343 979,640<br />
389,000 Newmont Mining Corp............ 7,799,141 18,065,160<br />
13,777,528 26,827,280<br />
Publishing — 1.9%<br />
268,000 Media General Inc., Cl. A† ........ 4,472,509 1,152,400<br />
33,000 Meredith Corp. ................... 671,393 1,136,850<br />
282,000 News Corp., Cl. A ................ 4,078,408 7,202,280<br />
16,000 News Corp., Cl. B ................ 300,340 419,840<br />
5,000 Nielsen Holdings NV† ............ 143,932 152,950<br />
9,666,582 10,064,320<br />
Real Estate — 0.7%<br />
132,000 Griffin Land & Nurseries Inc. ..... 1,584,503 3,564,000<br />
Retail — 1.3%<br />
10,000 Barnes & Noble Inc.†............. 114,525 150,900<br />
40,000 CVS Caremark Corp. ............. 1,366,949 1,934,000<br />
39,000 HSN Inc.......................... 875,124 2,148,120<br />
50,000 Ingles Markets Inc., Cl. A ......... 572,181 863,000<br />
20,000 Safeway Inc. ..................... 388,300 361,800<br />
22,000 The Home Depot Inc.............. 666,670 1,360,700<br />
3,983,749 6,818,520<br />
Shares<br />
Cost<br />
Market<br />
Value<br />
Specialty Chemicals — 0.7%<br />
13,500 Airgas Inc. ....................... $ 893,974 $ 1,232,415<br />
115,000 Ferro Corp.† ..................... 795,410 480,700<br />
14,000 FMC Corp. ....................... 320,954 819,280<br />
14,000 International Flavors &<br />
Fragrances Inc. ................ 611,175 931,560<br />
2,621,513 3,463,955<br />
Telecommunications — 2.6%<br />
415,000 Cincinnati Bell Inc.† .............. 1,330,072 2,274,200<br />
445,000 Sprint Nextel Corp.†.............. 1,906,273 2,523,150<br />
409,000 Telephone & Data Systems Inc. . . . 8,257,622 9,055,260<br />
11,493,967 13,852,610<br />
Wireless Communications — 1.0%<br />
12,000 Millicom International Cellular SA,<br />
SDR........................... 907,147 1,037,959<br />
10,000 NII Holdings Inc.†................ 81,966 71,300<br />
60,000 United States Cellular Corp.† ..... 2,748,540 2,114,400<br />
70,000 Vodafone Group plc, ADR ........ 1,833,112 1,763,300<br />
5,570,765 4,986,959<br />
TOTAL COMMON STOCKS........ 271,638,789 523,684,579<br />
Principal<br />
Amount<br />
U.S. GOVERNMENT OBLIGATIONS — 0.0%<br />
$ 109,000 U.S. Treasury Bills,<br />
0.130%††, 03/28/13........... 108,966 108,992<br />
TOTAL INVESTMENTS — 99.7% ... $271,747,755 523,793,571<br />
Other Assets and Liabilities (Net) — 0.3% . . . 1,438,387<br />
NET ASSETS — 100.0% .............. $525,231,958<br />
(a) Security fair valued under procedures established by the Board of Directors.<br />
The procedures may include reviewing available financial information about<br />
the company and reviewing the valuation of comparable securities and other<br />
factors on a regular basis. At December 31, 2012, the market value of fair<br />
valued securities amounted to $510 or 0.00% of net assets.<br />
† Non-income producing security.<br />
†† Represents annualized yield at date of purchase.<br />
ADR American Depositary Receipt<br />
SDR Swedish Depositary Receipt<br />
See accompanying notes to financial statements.<br />
8
Statement of Assets and Liabilities<br />
December 31, 2012<br />
Assets:<br />
Investments, at value (cost $271,747,755) ...... $523,793,571<br />
Cash....................................... 2,607<br />
Receivable for investments sold ............... 2,370,118<br />
Receivable for Fund shares sold .............. 458,452<br />
Dividends receivable ......................... 463,503<br />
Prepaid expenses ........................... 49,705<br />
Total Assets ............................... 527,137,956<br />
Liabilities:<br />
Payable for Fund shares redeemed............ 1,106,860<br />
Payable for investment advisory fees .......... 440,981<br />
Payable for distribution fees .................. 112,100<br />
Payable for accounting fees .................. 3,750<br />
Payable for shareholder services fees.......... 109,285<br />
Other accrued expenses ..................... 133,022<br />
Total Liabilities ............................. 1,905,998<br />
Net Assets<br />
(applicable to 34,556,405 shares<br />
outstanding) .............................. $525,231,958<br />
Net Assets Consist of:<br />
Paid-in capital ............................... $280,462,230<br />
Undistributed net investment income ........... 15,410<br />
Accumulated net realized loss on investments<br />
and foreign currency transactions............ (7,292,200)<br />
Net unrealized appreciation on investments..... 252,045,816<br />
Net unrealized appreciation on foreign currency<br />
translations ............................... 702<br />
Net Assets ................................. $525,231,958<br />
The <strong>Gabelli</strong> Value Fund Inc.<br />
Shares of Capital Stock, each at $0.001 par value:<br />
Class AAA:<br />
Net Asset Value, offering, and redemption price<br />
per share ($1,192,386 ÷ 78,370 shares<br />
outstanding; 50,000,000 shares authorized) . . . $15.21<br />
Class A:<br />
Net Asset Value and redemption price per share<br />
($494,047,730 ÷ 32,425,478 shares<br />
outstanding; 100,000,000 shares authorized) . . $15.24<br />
Maximum offering price per share (NAV ÷<br />
0.9425, based on maximum sales charge of<br />
5.75%oftheofferingprice).................. $16.17<br />
Class B:<br />
Net Asset Value and offering price per share<br />
($152,401 ÷ 11,402 shares outstanding;<br />
50,000,000 shares authorized) ............... $13.37(a)<br />
Class C:<br />
Net Asset Value and offering price per share<br />
($8,913,618 ÷ 666,655 shares outstanding;<br />
50,000,000 shares authorized) ............... $13.37(a)<br />
Class I:<br />
Net Asset Value, offering, and redemption price<br />
per share ($20,925,823 ÷ 1,374,500 shares<br />
outstanding; 50,000,000 shares authorized) . . . $15.22<br />
Statement of Operations<br />
For the Year Ended December 31, 2012<br />
Investment Income:<br />
Dividends (net of foreign withholding taxes of<br />
$291,242).................................. $11,679,457<br />
Interest...................................... 4,483<br />
Total Investment Income ..................... 11,683,940<br />
Expenses:<br />
Investmentadvisoryfees ...................... 5,125,619<br />
Distribution fees - Class AAA .................. 2,190<br />
Distribution fees - Class A ..................... 1,215,278<br />
Distribution fees - Class B ..................... 2,854<br />
Distribution fees - Class C ..................... 83,023<br />
Shareholder services fees ..................... 396,784<br />
Shareholder communications expenses ......... 129,866<br />
Legalandauditfees .......................... 86,932<br />
Directors’fees................................ 78,102<br />
Custodian fees ............................... 73,158<br />
Registration expenses......................... 58,257<br />
Accountingfees .............................. 45,000<br />
Interestexpense.............................. 292<br />
Miscellaneous expenses....................... 44,140<br />
Total Expenses .............................. 7,341,495<br />
Less:<br />
Advisory fee reduction on unsupervised assets<br />
(Note3) ................................. (23,876)<br />
Net Expenses ............................... 7,317,619<br />
Net Investment Income ...................... 4,366,321<br />
Net Realized and Unrealized Gain/(Loss) on<br />
Investments and Foreign Currency:<br />
Net realized gain on investments ............... 28,816,276<br />
Net realized loss on foreign currency<br />
transactions ................................ (19,909)<br />
Net realized gain on investments and foreign<br />
currencytransactions ....................... 28,796,367<br />
Net change in unrealized appreciation/depreciation:<br />
oninvestments............................. 47,341,087<br />
on foreign currency translations .............. 2,000<br />
Net change in unrealized<br />
appreciation/depreciation on investments and<br />
foreign currency translations ................. 47,343,087<br />
Net Realized and Unrealized Gain/(Loss) on<br />
Investments and Foreign Currency ......... 76,139,454<br />
Net Increase in Net Assets Resulting from<br />
Operations ................................ $80,505,775<br />
(a)<br />
Redemption price varies based on the length of time held.<br />
See accompanying notes to financial statements.<br />
9
Statement of Changes in Net Assets<br />
The <strong>Gabelli</strong> Value Fund Inc.<br />
Year Ended<br />
December 31, 2012<br />
Year Ended<br />
December 31, 2011<br />
Operations:<br />
Netinvestmentincome......................................................... $ 4,366,321 $ 1,590,274<br />
Net realized gain on investments and foreign currency transactions ................. 28,796,367 55,672,817<br />
Net change in unrealized appreciation/depreciation on investments and foreign<br />
currency translations......................................................... 47,343,087 (57,598,707)<br />
Net Increase/(Decrease) in Net Assets Resulting from Operations ............... 80,505,775 (335,616)<br />
Distributions to Shareholders:<br />
Net investment income<br />
Class AAA.................................................................. (10,039) (2,088)<br />
Class A .................................................................... (4,086,739) (1,503,279)<br />
Class C .................................................................... (23,827) —<br />
Class I ..................................................................... (223,510) (54,644)<br />
(4,344,115) (1,560,011)<br />
Net realized gain<br />
Class AAA.................................................................. (61,140) (69,961)<br />
Class A .................................................................... (26,498,049) (51,630,300)<br />
Class B .................................................................... (9,662) (76,227)<br />
Class C .................................................................... (534,094) (926,019)<br />
Class I ..................................................................... (1,117,552) (988,739)<br />
(28,220,497) (53,691,246)<br />
Total Distributions to Shareholders ........................................... (32,564,612) (55,251,257)<br />
Capital Share Transactions:<br />
Class AAA.................................................................. 489,781 464,595<br />
Class A .................................................................... (32,559,337) (74,177,539)<br />
Class B .................................................................... (531,574) (1,157,931)<br />
Class C .................................................................... 444,913 1,431,050<br />
Class I ..................................................................... 11,425,616 1,641,005<br />
Net Decrease in Net Assets from Capital Share Transactions ................... (20,730,601) (71,798,820)<br />
Redemption Fees ............................................................ 1,511 55,515<br />
Net Increase/(Decrease) in Net Assets ......................................... 27,212,073 (127,330,178)<br />
Net Assets:<br />
Beginning of period ............................................................ 498,019,885 625,350,063<br />
End of period (including undistributed net investment income of $15,410 and $13,011,<br />
respectively)................................................................ $525,231,958 $ 498,019,885<br />
See accompanying notes to financial statements.<br />
10
The <strong>Gabelli</strong> Value Fund Inc.<br />
Financial Highlights<br />
Selected data for a share of capital stock outstanding throughout each period:<br />
Period Ended<br />
December 31<br />
Net Asset<br />
Value,<br />
Beginning<br />
of Period<br />
Net<br />
Investment<br />
Income<br />
(Loss)(a)<br />
Income (Loss)<br />
from Investment Operations Distributions<br />
Net<br />
Realized<br />
and<br />
Unrealized<br />
Gain (Loss)<br />
on<br />
Investments<br />
Total from<br />
Investment<br />
Operations<br />
Net<br />
Investment<br />
Income<br />
Net<br />
Realized<br />
Gain on<br />
Investments<br />
Return<br />
of<br />
Capital<br />
Total<br />
Distributions<br />
Redemption<br />
Fees (a)(b)<br />
Net Asset<br />
Value,<br />
End of<br />
Period<br />
Total<br />
Return†<br />
Net Assets,<br />
End of Period<br />
(in 000’s)<br />
Ratios to Average Net Assets /<br />
Supplemental Data<br />
Class AAA<br />
2012 $13.87 $ 0.14 $ 2.20 $ 2.34 $(0.14) $(0.86) — $(1.00) $0.00 $15.21 17.0% $ 1,192 0.92% 1.42% 3%<br />
2011 15.58 0.07 (0.08) (0.01) (0.05) (1.65) — (1.70) 0.00 13.87 0.1 634 0.45 1.43 6<br />
2010(c) 14.37 0.00(b) 1.70 1.70 (0.03) (0.46) — (0.49) 0.00 15.58 11.8 275 0.00(d)(e) 1.43(e) 14<br />
Class A<br />
2012 $13.89 $ 0.13 $ 2.21 $ 2.34 $(0.13) $(0.86) — $(0.99) $0.00 $15.24 17.0% $494,048 0.85% 1.42% 3%<br />
2011 15.59 0.05 (0.05) 0.00(b) (0.05) (1.65) — (1.70) 0.00 13.89 0.1 480,414 0.29 1.43 6<br />
2010 12.58 0.01 3.46 3.47 (0.00)(b) (0.46) — (0.46) 0.00 15.59 27.6 607,818 0.05 1.43 14<br />
2009 9.00 0.04 3.69 3.73 (0.04) (0.11) — (0.15) 0.00 12.58 41.4 449,865 0.36 1.52 5<br />
2008 16.78 0.04 (7.47) (7.43) (0.04) (0.03) $(0.28) (0.35) 0.00 9.00 (44.2) 366,568 0.28 1.41 4<br />
Class B<br />
2012 $12.27 $(0.02) $ 1.98 $ 1.96 — $(0.86) — $(0.86) $0.00 $13.37 16.1% $ 152 (0.17)% 2.17% 3%<br />
2011 14.04 (0.08) (0.04) (0.12) — (1.65) — (1.65) 0.00 12.27 (0.7) 640 (0.56) 2.18 6<br />
2010 11.45 (0.09) 3.14 3.05 — (0.46) — (0.46) 0.00 14.04 26.6 1,844 (0.72) 2.18 14<br />
2009 8.24 (0.03) 3.35 3.32 — (0.11) — (0.11) 0.00 11.45 40.3 3,850 (0.38) 2.27 5<br />
2008 15.46 (0.06) (6.85) (6.91) — (0.03) $(0.28) (0.31) 0.00 8.24 (44.6) 4,252 (0.48) 2.16 4<br />
Class C<br />
2012 $12.30 $ 0.02 $ 1.95 $ 1.97 $(0.04) $(0.86) — $(0.90) $0.00 $13.37 16.1% $ 8,914 0.12% 2.17% 3%<br />
2011 14.07 (0.06) (0.06) (0.12) — (1.65) — (1.65) 0.00 12.30 (0.7) 7,789 (0.43) 2.18 6<br />
2010 11.47 (0.09) 3.15 3.06 — (0.46) — (0.46) 0.00 14.07 26.7 7,378 (0.70) 2.18 14<br />
2009 8.25 (0.04) 3.37 3.33 — (0.11) — (0.11) 0.00 11.47 40.4 6,314 (0.39) 2.27 5<br />
2008 15.48 (0.06) (6.86) (6.92) — (0.03) $(0.28) (0.31) 0.00 8.25 (44.6) 5,686 (0.47) 2.16 4<br />
Class I<br />
2012 $13.88 $ 0.19 $ 2.18 $ 2.37 $(0.17) $(0.86) — $(1.03) $0.00 $15.22 17.2% $ 20,926 1.25% 1.17% 3%<br />
2011 15.58 0.09 (0.05) 0.04 (0.09) (1.65) — (1.74) 0.00 13.88 0.4 8,543 0.57 1.18 6<br />
2010 12.56 0.04 3.48 3.52 (0.04) (0.46) — (0.50) 0.00 15.58 28.0 8,035 0.31 1.18 14<br />
2009 8.99 0.06 3.69 3.75 (0.07) (0.11) — (0.18) 0.00 12.56 41.6 4,647 0.59 1.27 5<br />
2008(f) 15.87 0.08 (6.57) (6.49) (0.08) (0.03) $(0.28) (0.39) 0.00 8.99 (40.8) 3,528 0.66(e) 1.16(e) 4<br />
Net<br />
Investment<br />
Income<br />
(Loss)<br />
Operating<br />
Expenses<br />
Portfolio<br />
Turnover<br />
Rate<br />
† 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<br />
and does not reflect applicable sales charges. Total return for a period of less than one year is not annualized.<br />
(a) Per share amounts have been calculated using the average shares outstanding method.<br />
(b) Amount represents less than $0.005 per share.<br />
(c) From the commencement of offering Class AAA Shares on April 30, 2010 through December 31, 2010.<br />
(d) Amount represents less than 0.005%.<br />
(e) <strong>Annual</strong>ized.<br />
(f) From the commencement of offering Class I Shares on January 11, 2008 through December 31, 2008.<br />
See accompanying notes to financial statements.<br />
11
The <strong>Gabelli</strong> Value Fund Inc.<br />
Notes to Financial Statements<br />
1. Organization. The <strong>Gabelli</strong> Value Fund Inc. was incorporated on July 20, 1989 in Maryland. The Fund is a<br />
non-diversified open-end management investment company registered under the Investment Company Act of<br />
1940, as amended (the “1940 Act”). The Fund’s primary objective is long-term capital appreciation. The Fund<br />
commenced investment operations on September 29, 1989.<br />
2. Significant Accounting Policies. The Fund’s financial statements are prepared in accordance with U.S.<br />
Generally Accepted Accounting Principles (“GAAP”), which may require the use of management estimates and<br />
assumptions. Actual results could differ from those estimates. The following is a summary of significant accounting<br />
policies followed by the Fund in the preparation of its financial statements.<br />
Security Valuation. Portfolio securities listed or traded on a nationally recognized securities exchange or traded<br />
in the U.S. over-the-counter market for which market quotations are readily available are valued at the last<br />
quoted sale price or a market’s official closing price as of the close of business on the day the securities are<br />
being valued. If there were no sales that day, the security is valued at the average of the closing bid and asked<br />
prices or, if there were no asked prices quoted on that day, then the security is valued at the closing bid price<br />
on that day. If no bid or asked prices are quoted on such day, the security is valued at the most recently<br />
available price or, if the Board of Directors (the “Board”) so determines, by such other method as the Board<br />
shall determine in good faith to reflect its fair market value. Portfolio securities traded on more than one national<br />
securities exchange or market are valued according to the broadest and most representative market, as determined<br />
by <strong>Gabelli</strong> Funds, LLC (the “Adviser”).<br />
Portfolio securities primarily traded on a foreign market are generally valued at the preceding closing values<br />
of such securities on the relevant market, but may be fair valued pursuant to procedures established by the<br />
Board if market conditions change significantly after the close of the foreign market, but prior to the close of<br />
business on the day the securities are being valued. Debt instruments with remaining maturities of sixty days<br />
or less that are not credit impaired are valued at amortized cost, unless the Board determines such amount<br />
does not reflect the securities’ fair value, in which case these securities will be fair valued as determined by<br />
the Board. Debt instruments having a maturity greater than sixty days for which market quotations are readily<br />
available are valued at the average of the latest bid and asked prices. If there were no asked prices quoted<br />
on such day, the security is valued using the closing bid price. U.S. government obligations with maturities<br />
greater than sixty days are normally valued using a model that incorporates market observable data such as<br />
reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities<br />
are valued principally using dealer quotations.<br />
Securities and assets for which market quotations are not readily available are fair valued as determined by<br />
the Board. Fair valuation methodologies and procedures may include, but are not limited to: analysis and review<br />
of available financial and non-financial information about the company; comparisons with the valuation and<br />
changes in valuation of similar securities, including a comparison of foreign securities with the equivalent U.S.<br />
dollar value ADR securities at the close of the U.S. exchange; and evaluation of any other information that<br />
could be indicative of the value of the security.<br />
12
The <strong>Gabelli</strong> Value Fund Inc.<br />
Notes to Financial Statements (Continued)<br />
The inputs and valuation techniques used to measure fair value of the Fund’s investments are summarized<br />
into three levels as described in the hierarchy below:<br />
• Level 1 — quoted prices in active markets for identical securities;<br />
• Level 2 — other significant observable inputs (including quoted prices for similar securities, interest<br />
rates, prepayment speeds, credit risk, etc.); and<br />
• Level 3 — significant unobservable inputs (including the Fund’s determinations as to the fair value<br />
of investments).<br />
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input both<br />
individually and in the aggregate that is significant to the fair value measurement. The inputs or methodology<br />
used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.<br />
The summary of the Fund’s investments in securities by inputs used to value the Fund’s investments as of<br />
December 31, 2012 is as follows:<br />
Valuation Inputs<br />
Level 1<br />
Quoted Prices<br />
Level 2 Other Significant<br />
Observable Inputs<br />
Level 3 Significant<br />
Unobservable Inputs<br />
Total Market Value<br />
at 12/31/12<br />
INVESTMENTS IN SECURITIES:<br />
ASSETS (Market Value):<br />
Common Stocks:<br />
Cable and Satellite $ 70,547,540 — $ 0 $ 70,547,540<br />
Energy and Utilities 21,135,313 — 0 21,135,313<br />
Equipment and Supplies 16,753,840 — 510 16,754,350<br />
Other Industries (a) 415,247,376 — — 415,247,376<br />
Total Common Stocks 523,684,069 — 510 523,684,579<br />
U.S. Government Obligations — $108,992 — 108,992<br />
TOTAL INVESTMENTS IN SECURITIES –<br />
ASSETS $523,684,069 $108,992 $510 $523,793,571<br />
(a)<br />
Please refer to the Schedule of Investments for the industry classifications of these portfolio holdings.<br />
The Fund did not have transfers between Level 1 and Level 2 during the year ended December 31, 2012.<br />
The Fund’s policy is to recognize transfers among Levels as of the beginning of the reporting period.<br />
Additional Information to Evaluate Qualitative Information.<br />
General. The Fund uses recognized industry pricing services – approved by the Board and unaffiliated with<br />
the Adviser – to value most of its securities, and uses broker quotes provided by market makers of securities<br />
not valued by these and other recognized pricing sources. Several different pricing feeds are received to value<br />
domestic equity securities, international equity securities, preferred equity securities, and fixed income securities.<br />
The data within these feeds is ultimately sourced from major stock exchanges and trading systems where these<br />
securities trade. The prices supplied by external sources are checked by obtaining quotations or actual transaction<br />
prices from market participants. If a price obtained from the pricing source is deemed unreliable, prices will be<br />
sought from another pricing service or from a broker/dealer that trades that security or similar securities.<br />
Fair Valuation. Fair valued securities may be common and preferred equities, warrants, options, rights,<br />
and fixed income obligations. Where appropriate, Level 3 securities are those for which market quotations are<br />
not available, such as securities not traded for several days, or for which current bids are not available, or<br />
13
The <strong>Gabelli</strong> Value Fund Inc.<br />
Notes to Financial Statements (Continued)<br />
which are restricted as to transfer. Among the factors to be considered to fair value a security are recent prices<br />
of comparable securities that are publicly traded, reliable prices of securities not publicly traded, the use of<br />
valuation models, current analyst reports, valuing the income or cash flow of the issuer, or cost if the preceding<br />
factors do not apply. The circumstances of Level 3 securities are frequently monitored to determine if fair valuation<br />
measures continue to apply.<br />
The Adviser reports quarterly to the Board the results of the application of fair valuation policies and procedures.<br />
These include back testing the prices realized in subsequent trades of these fair valued securities to fair values<br />
previously recognized.<br />
Derivative Financial Instruments. The Fund may engage in various portfolio investment strategies by investing<br />
in a number of derivative financial instruments for the purposes of hedging against changes in the value of its<br />
portfolio securities and in the value of securities it intends to purchase. Investing in certain derivative financial<br />
instruments, including participation in the options, futures, or swap markets, entails certain execution, liquidity,<br />
hedging, tax, and securities, interest, credit, or currency market risks. Losses may arise if the Adviser’s prediction<br />
of movements in the direction of the securities, foreign currency, and interest rate markets is inaccurate. Losses<br />
may also arise if the counterparty does not perform its duties under a contract, or that, in the event of default,<br />
the Fund may be delayed in or prevented from obtaining payments or other contractual remedies owed to it<br />
under derivative contracts. The creditworthiness of the counterparties is closely monitored in order to minimize<br />
these risks. Participation in derivative transactions involves investment risks, transaction costs, and potential<br />
losses to which the Fund would not be subject absent the use of these strategies. The consequences of these<br />
risks, transaction costs, and losses may have a negative impact on the Fund’s ability to pay distributions.<br />
The Fund’s derivative contracts held at December 31, 2012, if any, are not accounted for as hedging instruments<br />
under GAAP and are disclosed in the Schedule of Investments together with the related counterparty.<br />
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Foreign<br />
currencies, investments, and other assets and liabilities are translated into U.S. dollars at current exchange<br />
rates. Purchases and sales of investment securities, income, and expenses are translated at the exchange<br />
rate prevailing on the respective dates of such transactions. Unrealized gains and losses that result from changes<br />
in foreign exchange rates and/or changes in market prices of securities have been included in unrealized<br />
appreciation/depreciation on investments and foreign currency translations. Net realized foreign currency gains<br />
and losses resulting from changes in exchange rates include foreign currency gains and losses between trade<br />
date and settlement date on investment securities transactions, foreign currency transactions, and the difference<br />
between the amounts of interest and dividends recorded on the books of the Fund and the amounts actually<br />
received. The portion of foreign currency gains and losses related to fluctuation in exchange rates between<br />
the initial purchase trade date and subsequent sale trade date is included in realized gain/(loss) on investments.<br />
Foreign Securities. The Fund may directly purchase securities of foreign issuers. Investing in securities of<br />
foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The<br />
risks include possible revaluation of currencies, the inability to repatriate funds, less complete financial information<br />
about companies, and possible future adverse political and economic developments. Moreover, securities of<br />
14
The <strong>Gabelli</strong> Value Fund Inc.<br />
Notes to Financial Statements (Continued)<br />
many foreign issuers and their markets may be less liquid and their prices more volatile than securities of<br />
comparable U.S. issuers.<br />
Foreign Taxes. The Fund may be subject to foreign taxes on income, gains on investments, or currency repatriation,<br />
a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable, based<br />
upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.<br />
Restricted Securities. The Fund may invest up to 10% of its net assets in securities for which the markets<br />
are restricted. Restricted securities include securities whose disposition is subject to substantial legal or contractual<br />
restrictions. The sale of restricted securities often requires more time and results in higher brokerage charges<br />
or dealer discounts and other selling expenses than does the sale of securities eligible for trading on national<br />
securities exchanges or in the over-the-counter markets. Restricted securities may sell at a price lower than<br />
similar securities that are not subject to restrictions on resale. Securities freely saleable among qualified institutional<br />
investors under special rules adopted by the SEC may be treated as liquid if they satisfy liquidity standards<br />
established by the Board. The continued liquidity of such securities is not as well assured as that of publicly<br />
traded securities, and accordingly the Board will monitor their liquidity. The Fund held no restricted securities<br />
at December 31, 2012.<br />
Securities Transactions and Investment Income. Securities transactions are accounted for on the trade date<br />
with realized gain or loss on investments determined by using the identified cost method. Interest income (including<br />
amortization of premium and accretion of discount) is recorded on the accrual basis. Premiums and discounts<br />
on debt securities are amortized using the effective yield to maturity method. Dividend income is recorded on<br />
the ex-dividend date, except for certain dividends from foreign securities that are recorded as soon after the<br />
ex-dividend date as the Fund becomes aware of such dividends.<br />
Determination of Net Asset Value and Calculation of Expenses. Certain administrative expenses are common<br />
to, and allocated among, various affiliated funds. Such allocations are made on the basis of each fund’s average<br />
net assets or other criteria directly affecting the expenses as determined by the Adviser pursuant to procedures<br />
established by the Board.<br />
In calculating the NAV per share of each class, investment income, realized and unrealized gains and losses,<br />
redemption fees, and expenses other than class specific expenses are allocated daily to each class of shares<br />
based upon the proportion of net assets of each class at the beginning of each day. Distribution expenses are<br />
borne solely by the class incurring the expense.<br />
Custodian Fee Credits and Interest Expense. When cash balances are maintained in the custody account,<br />
the Fund receives credits which are used to offset custodian fees. The gross expenses paid under the custody<br />
arrangement are included in custodian fees in the Statement of Operations with the corresponding expense<br />
offset, if any, shown as “Custodian fee credits.” When cash balances are overdrawn, the Fund is charged an<br />
overdraft fee equal to 2.00% above the federal funds rate on outstanding balances. This amount, if any, would<br />
be included in the Statement of Operations.<br />
Distributions to Shareholders. Distributions to shareholders are recorded on the ex-dividend date. Distributions<br />
to shareholders are based on income and capital gains as determined in accordance with federal income tax<br />
regulations, which may differ from income and capital gains as determined under GAAP. These differences<br />
are primarily due to differing treatments of income and gains on various investment securities and foreign<br />
15
The <strong>Gabelli</strong> Value Fund Inc.<br />
Notes to Financial Statements (Continued)<br />
currency transactions held by the Fund, timing differences, and differing characterizations of distributions made<br />
by the Fund. Distributions from net investment income for federal income tax purposes include net realized<br />
gains on foreign currency transactions. These book/tax differences are either temporary or permanent in nature.<br />
To the extent these differences are permanent, adjustments are made to the appropriate capital accounts in<br />
the period when the differences arise. Permanent differences are primarily due to the tax treatment of currency<br />
gains and losses and recharacterization of distributions. These reclassifications have no impact on the NAV<br />
of the Fund. For the year ended December 31, 2012, reclassifications were made to decrease undistributed<br />
net investment income by $19,807 and decrease accumulated net realized loss on investments and foreign<br />
currency transactions by $19,807.<br />
The tax character of distributions paid during the years ended December 31, 2012 and December 31, 2011<br />
was as follows:<br />
Year Ended<br />
December 31, 2012<br />
Year Ended<br />
December 31, 2011<br />
Distributions paid from:<br />
Ordinary income (inclusive of short-term capital<br />
gains)..................................... $ 4,344,013 $ 4,945,856<br />
Net long-term capital gains .................... 28,220,599 50,305,401<br />
Total distributions paid ........................ $32,564,612 $55,251,257<br />
Provision for Income Taxes. The Fund intends to continue to qualify as a regulated investment company<br />
under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). It is the policy of the<br />
Fund to comply with the requirements of the Code applicable to regulated investment companies and to distribute<br />
substantially all of its net investment company taxable income and net capital gains. Therefore, no provision<br />
for federal income taxes is required.<br />
As of December 31, 2012, the components of accumulated earnings/losses on a tax basis were as follows:<br />
Undistributed ordinary income ................................................ $ 2,399<br />
Undistributed long-term capital gains .......................................... 323,877<br />
Net unrealized appreciation on investments and foreign currency translations ...... 244,443,452<br />
Total ...................................................................... $244,769,728<br />
At December 31, 2012, the differences between book basis and tax basis unrealized appreciation were primarily<br />
due to deferral of losses from wash sales for tax purposes and basis adjustments on investments in<br />
partnerships.<br />
The following summarizes the tax cost of investments and the related net unrealized appreciation at<br />
December 31, 2012:<br />
Cost<br />
Gross<br />
Unrealized<br />
Appreciation<br />
Gross<br />
Unrealized<br />
Depreciation<br />
Net Unrealized<br />
Appreciation<br />
Investments........ $279,350,821 $259,990,227 $(15,547,477) $244,442,750<br />
The Fund is required to evaluate tax positions taken or expected to be taken in the course of preparing the<br />
Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the<br />
applicable tax authority. Income tax and related interest and penalties would be recognized by the Fund as<br />
tax expense in the Statement of Operations if the tax positions were deemed not to meet the more-likely-than-not<br />
16
The <strong>Gabelli</strong> Value Fund Inc.<br />
Notes to Financial Statements (Continued)<br />
threshold. For the year ended December 31, 2012, the Fund did not incur any income tax, interest, or penalties.<br />
As of December 31, 2012, the Adviser has reviewed all open tax years and concluded that there was no impact<br />
to the Fund’s net assets or results of operations. Tax years ended December 31, 2009 through December 31, 2012<br />
remain subject to examination by the Internal Revenue Service and state taxing authorities. On an ongoing<br />
basis, the Adviser will monitor the Fund’s tax positions to determine if adjustments to this conclusion are<br />
necessary.<br />
3. Investment Advisory Agreement and Other Transactions. The Fund has entered into an investment<br />
advisory agreement (the “Advisory Agreement”) with the Adviser which provides that the Fund will pay the<br />
Adviser a fee, computed daily and paid monthly, at the annual rate of 1.00% of the value of its average daily<br />
net assets. In accordance with the Advisory Agreement, the Adviser provides a continuous investment program<br />
for the Fund’s portfolio, oversees the administration of all aspects of the Fund’s business and affairs, and pays<br />
the compensation of all Officers and Directors of the Fund who are affiliated persons of the Adviser.<br />
There was a reduction in the advisory fee paid to the Adviser relating to certain portfolio holdings, i.e., unsupervised<br />
assets, of the Fund with respect to which the Adviser transferred dispositive and voting control to the Fund’s<br />
Proxy Voting Committee. During the year ended December 31, 2012, the Fund’s Proxy Voting Committee<br />
exercised control and discretion over all rights to vote or consent with respect to such securities, and the Adviser<br />
reduced its fee with respect to such securities by $23,876.<br />
The Fund pays each Director who is not considered an affiliated person an annual retainer of $9,000 plus<br />
$2,000 for each Board meeting attended, and they are reimbursed for any out of pocket expenses incurred in<br />
attending meetings. All Board committee members receive $500 per meeting attended. The Chairman of the<br />
Audit Committee and the Lead Director each receive an annual fee of $2,000 per year. The Chairman of the<br />
Nominating Committee and Proxy Voting Committee each receive an annual fee of $2,500. A Director may<br />
receive a single meeting fee, allocated among the participating funds, for attending certain meetings held on<br />
behalf of multiple funds. Directors who are directors or employees of the Adviser or an affiliated company<br />
receive no compensation or expense reimbursement from the Fund.<br />
4. Distribution Plan. The Fund’s Board has adopted a distribution plan (the “Plan”) for each class of shares,<br />
except for Class I Shares, pursuant to Rule 12b-1 under the 1940 Act. Under the Class AAA, Class A, Class B,<br />
and Class C Share Plans, payments are authorized to G.distributors, LLC (the “Distributor”), an affiliate of the<br />
Fund, at annual rates of 0.25%, 0.25%, 1.00%, and 1.00%, respectively, of the average daily net assets of<br />
those classes, the annual limitations under each Plan. Such payments are accrued daily and paid monthly.<br />
5. Portfolio Securities. Purchases and sales of securities during the year ended December 31, 2012, other<br />
than short-term securities and U.S. Government obligations, aggregated $13,763,001 and $61,564,547,<br />
respectively.<br />
6. Transactions with Affiliates. During the year ended December 31, 2012, the Fund paid brokerage commissions<br />
on security trades of $38,127 to <strong>Gabelli</strong> & Company, Inc., an affiliate of the Fund. Additionally, the Distributor<br />
retained a total of $16,690 from investors representing commissions (sales charges and underwriting fees) on<br />
sales and redemptions of Fund shares.<br />
17
The <strong>Gabelli</strong> Value Fund Inc.<br />
Notes to Financial Statements (Continued)<br />
The cost of calculating the Fund’s NAV per share is a Fund expense pursuant to the Advisory Agreement.<br />
During the year ended December 31, 2012, the Fund paid or accrued $45,000 to the Adviser in connection<br />
with the cost of computing the Fund’s NAV.<br />
7. Capital Stock. The Fund offers five classes of shares – Class AAA Shares, Class A Shares, Class B Shares,<br />
Class C Shares, and Class I Shares. Class AAA Shares are offered without a sales charge only to investors<br />
who acquire them directly from the Distributor, through selected broker/dealers, or the transfer agent. Class I<br />
Shares are offered without a sales charge, solely to certain institutions, directly through the Distributor, or brokers<br />
that have entered into selling agreements specifically with respect to Class I Shares. Class A Shares are subject<br />
to a maximum front-end sales charge of 5.75%. Class B Shares are subject to a contingent deferred sales<br />
charge (“CDSC”) upon redemption within six years of purchase and automatically convert to Class A Shares<br />
approximately eight years after the original purchase. The applicable Class B CDSC is equal to a percentage<br />
declining from 5% of the lesser of the NAV per share at the date of the original purchase or at the date of<br />
redemption, based on the length of time held. Class B Shares are available only through exchange of Class B<br />
Shares of other funds distributed by the Distributor. Class C Shares are subject to a 1.00% CDSC for one year<br />
after purchase.<br />
The Fund imposes a redemption fee of 2.00% on all classes of shares that are redeemed or exchanged on<br />
or before the seventh day after the date of a purchase. The redemption fee is deducted from the proceeds<br />
otherwise payable to the redeeming shareholders and is retained by the Fund as an increase in paid-in capital.<br />
The redemption fees retained by the Fund during the years ended December 31, 2012 and December 31, 2011<br />
amounted to $1,511 and $55,515, respectively.<br />
18
The <strong>Gabelli</strong> Value Fund Inc.<br />
Notes to Financial Statements (Continued)<br />
Transactions in shares of capital stock were as follows:<br />
Year Ended<br />
December 31, 2012<br />
Year Ended<br />
December 31, 2011<br />
Shares Amount Shares Amount<br />
Class AAA<br />
Sharessold................................................ 35,116 $ 526,378 97,971 $ 1,561,106<br />
Shares issued upon reinvestment of distributions ............... 4,720 71,179 5,251 72,049<br />
Shares redeemed .......................................... (7,173) (107,776) (75,143) (1,168,560)<br />
Netincrease............................................. 32,663 $ 489,781 28,079 $ 464,595<br />
Class A<br />
Sharessold................................................ 1,764,709 $26,711,110 1,884,560 $ 30,149,325<br />
Shares issued upon reinvestment of distributions ............... 1,896,070 28,649,609 3,591,880 49,352,430<br />
Shares redeemed .......................................... (5,822,119) (87,920,056) (9,865,497) (153,679,294)<br />
Netdecrease ............................................ (2,161,340) $(32,559,337) (4,389,057) $ (74,177,539)<br />
Class B<br />
Sharessold................................................ 2,675 $ 37,727 161 $ 1,950<br />
Shares issued upon reinvestment of distributions ............... 673 8,921 5,903 71,669<br />
Shares redeemed .......................................... (44,078) (578,222) (85,285) (1,231,550)<br />
Netdecrease ............................................ (40,730) $ (531,574) (79,221) $ (1,157,931)<br />
Class C<br />
Sharessold................................................ 114,405 $ 1,530,380 139,653 $ 2,003,019<br />
Shares issued upon reinvestment of distributions ............... 34,866 462,331 58,471 711,590<br />
Shares redeemed .......................................... (115,625) (1,547,798) (89,563) (1,283,559)<br />
Netincrease............................................. 33,646 $ 444,913 108,561 $ 1,431,050<br />
Class I<br />
Sharessold................................................ 990,796 $14,936,898 282,617 $ 4,570,830<br />
Shares issued upon reinvestment of distributions ............... 79,120 1,194,715 27,499 377,290<br />
Sharesredeemed .......................................... (311,123) (4,705,997) (210,200) (3,307,115)<br />
Netincrease............................................. 758,793 $11,425,616 99,916 $ 1,641,005<br />
8. Indemnifications. The Fund enters into contracts that contain a variety of indemnifications. The Fund’s<br />
maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or<br />
losses pursuant to these contracts. Management has reviewed the Fund’s existing contracts and expects the<br />
risk of loss to be remote.<br />
9. Other Matters. On April 24, 2008, the Adviser entered into a settlement with the SEC to resolve an inquiry<br />
regarding prior frequent trading in shares of the GAMCO Global Growth Fund (the “Global Growth Fund”) by<br />
one investor who was banned from the Global Growth Fund in August 2002. Under the terms of the settlement,<br />
the Adviser, without admitting or denying the SEC’s findings and allegations, paid $16 million (which included<br />
a $5 million civil monetary penalty). On the same day, the SEC filed a civil action in the U.S. District Court for<br />
the Southern District of New York against the Executive Vice President and Chief Operating Officer of the<br />
Adviser, alleging violations of certain federal securities laws arising from the same matter. The officer, who<br />
also is an officer of the Global Growth Fund and other funds in the <strong>Gabelli</strong>/GAMCO complex, including this<br />
Fund, denies the allegations and is continuing in his positions with the Adviser and the funds. The settlement<br />
by the Adviser did not have, and the resolution of the action against the officer is not expected to have, a<br />
material adverse impact on the Adviser or its ability to fulfill its obligations under the Advisory Agreement.<br />
19
The <strong>Gabelli</strong> Value Fund Inc.<br />
Notes to Financial Statements (Continued)<br />
10. Subsequent Events. Management has evaluated the impact on the Fund of all subsequent events occurring<br />
through the date the financial statements were issued and has determined that there were no subsequent<br />
events requiring recognition or disclosure in the financial statements.<br />
20
The <strong>Gabelli</strong> Value Fund Inc.<br />
<strong>Report</strong> of Independent Registered Public Accounting Firm<br />
To the Board of Directors and Shareholders of<br />
The <strong>Gabelli</strong> Value Fund Inc.:<br />
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments,<br />
and the related statements of operations and of changes in net assets and the financial highlights present<br />
fairly, in all material respects, the financial position of The <strong>Gabelli</strong> Value Fund Inc. (hereafter referred to as the<br />
“Fund”) at December 31, 2012, the results of its operations for the year then ended, the changes in its net<br />
assets for each of the two years in the period then ended and the financial highlights for each of the periods<br />
presented, in conformity with accounting principles generally accepted in the United States of America. These<br />
financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility<br />
of the Fund’s management. Our responsibility is to express an opinion on these financial statements based<br />
on our audits. We conducted our audits of these financial statements in accordance with the standards of the<br />
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform<br />
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.<br />
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial<br />
statements, assessing the accounting principles used and significant estimates made by management, and<br />
evaluating the overall financial statement presentation. We believe that our audits, which included confirmation<br />
of securities at December 31, 2012 by correspondence with the custodian and brokers, provide a reasonable<br />
basis for our opinion.<br />
PricewaterhouseCoopers LLP<br />
New York, New York<br />
February 28, 2013<br />
21
The <strong>Gabelli</strong> Value Fund Inc.<br />
Additional Fund Information (Unaudited)<br />
The business and affairs of the Fund are managed under the direction of the Fund’s Board of Directors. Information pertaining to the<br />
Directors and officers of the Fund is set forth below. The Fund’s Statement of Additional Information includes additional information about<br />
the Fund’s Directors and is available without charge, upon request, by calling 800-GABELLI (800-422-3554) or by writing to The <strong>Gabelli</strong><br />
Value Fund Inc. at One Corporate Center, Rye, NY 10580-1422.<br />
Name, Position(s)<br />
Address 1<br />
and Age<br />
INTERESTED DIRECTORS 3 :<br />
Mario J. <strong>Gabelli</strong>, CFA<br />
Director and<br />
Chief Investment Officer<br />
Age: 70<br />
INDEPENDENT DIRECTORS 5 :<br />
Anthony J. Colavita<br />
Director<br />
Age: 77<br />
Robert J. Morrissey<br />
Director<br />
Age: 73<br />
Anthony R. Pustorino<br />
Director<br />
Age: 87<br />
Werner J. Roeder, MD<br />
Director<br />
Age: 72<br />
Term of Office<br />
and Length of<br />
Time Served 2<br />
Number of Funds<br />
in Fund Complex<br />
Overseen by Director<br />
Principal Occupation(s)<br />
During Past Five Years<br />
Since 1989 27 Chairman, Chief Executive Officer, and Chief<br />
Investment Officer–Value Portfolios of GAMCO<br />
Investors, Inc. and Chief Investment Officer–<br />
Value Portfolios of <strong>Gabelli</strong> Funds, LLC, and<br />
GAMCO Asset Management Inc.; Director/<br />
Trustee or Chief Investment Officer of other<br />
registered investment companies in the<br />
<strong>Gabelli</strong>/GAMCO Funds Complex; Chief<br />
Executive Officer of GGCP, Inc.<br />
Since 1989 35 President of the law firm of Anthony J.<br />
Colavita, P.C.<br />
Since 1989 6 Partner in the law firm of Morrissey,<br />
Hawkins & Lynch<br />
Since 1989 13 Certified Public Accountant; Professor<br />
Emeritus, Pace University<br />
Since 2001 22 Medical Director of Lawrence Hospital and<br />
practicing private physician<br />
Other Directorships<br />
Held by Director 4<br />
Director of Morgan Group<br />
Holdings, Inc. (holding company);<br />
Chairman of the Board and Chief<br />
Executive Officer of LICT Corp.<br />
(multimedia and communication<br />
services company); Director of<br />
CIBL, Inc. (broadcasting and<br />
wireless communications);<br />
Director of RLJ Acquisition Inc.<br />
(blank check company) (2011-<br />
2012)<br />
—<br />
—<br />
Director of The LGL Group, Inc.<br />
(diversified manufacturing)<br />
(2002-2010)<br />
—<br />
22
The <strong>Gabelli</strong> Value Fund Inc.<br />
Additional Fund Information (Continued) (Unaudited)<br />
Name, Position(s)<br />
Address 1<br />
and Age<br />
OFFICERS:<br />
Bruce N. Alpert<br />
President, Secretary, and<br />
Acting Chief Compliance<br />
Officer<br />
Age: 61<br />
Agnes Mullady<br />
Treasurer<br />
Age: 54<br />
Term of Office<br />
and Length of<br />
Time Served 2<br />
Since 2003<br />
Since November<br />
2011<br />
Since 2006<br />
Principal Occupation(s)<br />
During Past Five Years<br />
Executive Vice President and Chief Operating Officer of <strong>Gabelli</strong> Funds, LLC since 1988;<br />
Officer of all of the registered investment companies in the <strong>Gabelli</strong>/GAMCO Funds<br />
Complex; Director of Teton Advisors, Inc. 1998-2012; Chairman of Teton Advisors, Inc.<br />
2008-2010; President of Teton Advisors, Inc. 1998-2008; Senior Vice President of GAMCO<br />
Investors, Inc. since 2008<br />
President and Chief Operating Officer of the Open-End Fund Division of <strong>Gabelli</strong> Funds, LLC<br />
since September 2010; Senior Vice President of GAMCO Investors, Inc. since 2009; Vice<br />
President of <strong>Gabelli</strong> Funds, LLC since 2007; Officer of all of the registered investment<br />
companies in the <strong>Gabelli</strong>/GAMCO Funds Complex<br />
1 Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise noted.<br />
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<br />
of considering the election or re-election of such Director and until the election and qualification of his or her successor, if any, elected<br />
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<br />
accordance with the Fund’s By-Laws and Articles of Incorporation. Each officer will hold office for an indefinite term until the date he<br />
or she resigns or retires or until his or her successor is elected and qualified.<br />
3 “Interested person” of the Fund as defined in the 1940 Act. Mr. <strong>Gabelli</strong> is considered an “interested person” because of his affiliation<br />
with <strong>Gabelli</strong> Funds, LLC which acts as the Fund’s investment adviser.<br />
4 This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934, as<br />
amended, i.e., public companies, or other investment companies registered under the 1940 Act.<br />
5 Directors who are not interested persons are considered “Independent” Directors.<br />
2012 TAX NOTICE TO SHAREHOLDERS (Unaudited)<br />
For the year ended December 31, 2012, the Fund paid to shareholders ordinary income distributions (comprised of net<br />
investment income and short-term capital gains) totaling $0.142, $0.133, $0.039, and $0.173 per share for Class AAA,<br />
Class A, Class C, and Class I, respectively, and long-term capital gains totaling $28,220,599, or the maximum allowable.<br />
The distribution of long-term capital gains has been designated as a capital gain dividend by the Fund’s Board of Directors.<br />
For the year ended December 31, 2012, 100% of the ordinary income distribution qualifies for the dividends received<br />
deduction available to corporations. The Fund designates 100% of the ordinary income distribution as qualified dividend<br />
income pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Fund designates 0.04% of the<br />
ordinary income distribution as qualified interest income pursuant to the Tax Relief, Unemployment Reauthorization,<br />
and Job Creation Act of 2010.<br />
U.S. Government Income<br />
The percentage of the ordinary income distribution paid by the Fund during 2012 which was derived from U.S. Treasury<br />
securities was 0.04%. Such income is exempt from state and local tax in all states. However, many states, including<br />
New York and California, allow a tax exemption for a portion of the income earned only if a mutual fund has invested<br />
at least 50% of its assets at the end of each quarter of the Fund’s fiscal year in U.S. Government securities. The Fund<br />
did not meet this strict requirement in 2012. The percentage of U.S. Government securities held as of December 31, 2012<br />
was 0.02%. Due to the diversity in state and local tax law, it is recommended that you consult your personal tax adviser<br />
as to the applicability of the information provided to your specific situation.<br />
All designations are based on financial information available as of the date of this annual report and, accordingly, are<br />
subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the<br />
Internal Revenue Code and the regulations thereunder.<br />
23
THE GABELLI VALUE FUND INC.<br />
One Corporate Center<br />
Rye, New York 10580-1422<br />
t 800-GABELLI (800-422-3554)<br />
f 914-921-5118<br />
e info@gabelli.com<br />
GABELLI.COM<br />
Net Asset Value per share available daily<br />
by calling 800-GABELLI after 7:00 P.M.<br />
BOARD OF DIRECTORS<br />
Mario J. <strong>Gabelli</strong>, CFA<br />
Chairman and<br />
Chief Executive Officer,<br />
GAMCO Investors, Inc.<br />
Anthony J. Colavita<br />
President,<br />
Anthony J. Colavita, P.C.<br />
Robert J. Morrissey<br />
Partner,<br />
Morrissey, Hawkins & Lynch<br />
Anthony R. Pustorino<br />
Certified Public Accountant,<br />
Professor Emeritus,<br />
Pace University<br />
Werner J. Roeder, MD<br />
Medical Director,<br />
Lawrence Hospital<br />
OFFICERS<br />
Bruce N. Alpert<br />
President, Secretary, and<br />
Acting Chief<br />
Compliance Officer<br />
Agnes Mullady<br />
Treasurer<br />
DISTRIBUTOR<br />
G.distributors, LLC<br />
CUSTODIAN<br />
The Bank of New York<br />
Mellon<br />
TRANSFER AGENT AND<br />
DIVIDEND DISBURSING<br />
AGENT<br />
State Street Bank and Trust<br />
Company<br />
LEGAL COUNSEL<br />
Paul Hastings LLP<br />
THE<br />
GABELLI<br />
VALUE<br />
FUND INC.<br />
<strong>Annual</strong> <strong>Report</strong><br />
December 31, 2012<br />
This report is submitted for the general information of the<br />
shareholders of The <strong>Gabelli</strong> Value Fund Inc. It is not authorized<br />
for distribution to prospective investors unless preceded or<br />
accompanied by an effective prospectus.<br />
GAB409Q412AR