UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-07326
Gabelli Investor Funds, Inc.
(Exact name of registrant as specified in charter)
One Corporate Center
Rye, New York 10580-1422
(Address of principal executive offices) (Zip code)
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
(Name and address of agent for service)
Registrant’s telephone number, including area code: 1-800-422-3554
Date of fiscal year end: December 31
Date of reporting period: June 30, 2020
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
The Report to Shareholders is attached herewith.
The Gabelli ABC Fund
Semiannual Report — June 30, 2020
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“Give a man a fish and you feed him for a day. Teach him how to arbitrage and you feed him forever.” — Warren Buffett |
|
To Our Shareholders,
For the six months ended June 30, 2020, the net asset value (NAV) per Class AAA Share of The Gabelli ABC Fund decreased 1.9% compared with an increase of 0.6% for the ICE Bank of America Merrill Lynch 3 Month U.S. Treasury Bill Index. Another class of shares is available. See page 2 for performance information for both classes of shares.
Enclosed are the financial statements, including the schedule of investments, as of June 30, 2020.
| Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s annual and semiannual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s website (www.gabelli.com), and you will be notified by mail each time a report is posted and provided with a website link to access the report. If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. To elect to receive all future reports on paper free of charge, please contact your financial intermediary, or, if you invest directly with the Fund, you may call 800-422-3554 or send an email request to info@gabelli.com. |
Comparative Results
| Average Annual Returns through June 30, 2020 (a) (Unaudited) |
Since | |||||||||||
| Six Months | 1 Year | 5 Year | 10 Year | 15 Year | Inception (5/14/93) | |||||||
| AAA Shares (GABCX) |
(1.86)% | 0.16% | 1.79% | 2.82% | 3.52% | 5.24% | ||||||
| Advisor Shares (GADVX) |
(1.98) | (0.14) | 1.54 | 2.57 | 3.29 | 5.11 | ||||||
| Lipper U.S. Treasury Money Market Fund Average |
0.30 | 1.14 | 0.83 | 0.42 | 1.03 | 2.09(b) | ||||||
| ICE Bank of America Merrill Lynch 3 Month U.S. Treasury Bill Index |
0.60 | 1.63 | 1.19 | 0.64 | 1.34 | 2.54 | ||||||
In the current prospectuses dated April 29, 2020, the expense ratios for the Class AAA and the Advisor Class Shares, are 0.68% and 0.93%, respectively. See page 11 for the expense ratios for the six months ended June 30, 2020. The Fund does not have a sales charge.
| (a) | Returns represent past performance and do not guarantee future results. Total returns and average annual returns reflect changes in share price, reinvestment of distributions, and are net of expenses. Investment returns and the principal value of an investment will fluctuate. When shares are redeemed, they may be worth more or less than their original cost. Current performance may be lower or higher than the performance data presented. Visit www.gabelli.com for performance information as of the most recent month end. Returns would have been lower had Gabelli Funds, LLC, the Adviser, not reimbursed certain expenses of the Fund for periods prior to December 31, 2007. The Fund imposes a 2% redemption fee on shares sold or exchanged within seven days after purchase. Performance returns for periods of less than one year are not annualized. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The prospectuses contain information about these and other matters and should be read carefully before investing. To obtain a prospectus, please visit our website at www.gabelli.com. The Lipper U.S. Treasury Money Market Fund Average reflects the average performance of mutual funds classified in this particular category. The ICE Bank of America Merrill Lynch 3 Month U.S. Treasury Bill Index is comprised of a single issue purchased at the beginning of the month and held for a full month. At the end of the month, that issue is sold and rolled into the outstanding Treasury Bill that matures closest to, but not beyond three months from the rebalancing date. To qualify for selection, an issue must have settled on or before the rebalancing (month end) date. Dividends are considered reinvested except for the ICE Bank of America Merrill Lynch 3 Month U.S. Treasury Bill Index. You cannot invest directly in an index. The Class AAA Share NAVs are used to calculate performance for the periods prior to the issuance of the Advisor Class Shares on May 1, 2007. The actual performance of the Advisor Class Shares would have been lower due to the additional expenses associated with this class of shares. |
| (b) | Lipper U.S. Treasury Money Market Fund Average and the ICE Bank of America Merrill Lynch 3 Month U.S. Treasury Bill Index since inception performance returns are as of April 30, 1993. |
2
| The Gabelli ABC Fund | ||
| Disclosure of Fund Expenses (Unaudited) | ||
| For the Six Month Period from January 1, 2020 through June 30, 2020 | Expense Table |
3
Summary of Portfolio Holdings (Unaudited)
The following table presents portfolio holdings as a percent of net assets as of June 30, 2020:
The Gabelli ABC Fund
The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (the SEC) for the first and third quarters of each fiscal year on Form N-PORT. Shareholders may obtain this information at www.gabelli.com or by calling the Fund at 800-GABELLI (800-422-3554). The Fund’s Form N-PORT is available on the SEC’s website at www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330.
Proxy Voting
The Fund files Form N-PX with its complete proxy voting record for the twelve months ended June 30, no later than August 31 of each year. A description of the Fund’s proxy voting policies, procedures, and how the Fund voted proxies relating to portfolio securities is available without charge, upon request, by (i) calling 800-GABELLI (800-422-3554); (ii) writing to The Gabelli Funds at One Corporate Center, Rye, NY 10580-1422; or (iii) visiting the SEC’s website at www.sec.gov.
4
The Gabelli ABC Fund
Schedule of Investments — June 30, 2020 (Unaudited)
See accompanying notes to financial statements.
5
The Gabelli ABC Fund
Schedule of Investments (Continued) — June 30, 2020 (Unaudited)
See accompanying notes to financial statements.
6
The Gabelli ABC Fund
Schedule of Investments (Continued) — June 30, 2020 (Unaudited)
See accompanying notes to financial statements.
7
The Gabelli ABC Fund
Schedule of Investments (Continued) — June 30, 2020 (Unaudited)
As of June 30, 2020, forward foreign exchange contracts outstanding were as follows:
| Currency Purchased | Currency Sold | Counterparty | Settlement Date | Unrealized Appreciation | ||||||||||||||||
| USD 11,836,576 |
JPY 1,260,000,000 | State Street Bank and Trust Co. | 07/31/20 | $162,570 | ||||||||||||||||
| USD 16,645,045 |
EUR 14,700,000 | State Street Bank and Trust Co. | 07/31/20 | 118,164 | ||||||||||||||||
| USD 4,652,310 |
CAD 6,300,000 | State Street Bank and Trust Co. | 07/31/20 | 11,358 | ||||||||||||||||
| USD 6,886,946 |
GBP 5,500,000 | State Street Bank and Trust Co. | 07/31/20 | 70,482 | ||||||||||||||||
| USD 301,502 |
SEK 2,800,000 | State Street Bank and Trust Co. | 07/31/20 | 897 | ||||||||||||||||
|
| ||||||||||||||||||||
| TOTAL FORWARD FOREIGN EXCHANGE CONTRACTS |
$363,471 | |||||||||||||||||||
|
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As of June 30, 2020, equity contract for difference swap agreements outstanding were as follows:
| Market Value Appreciation Received |
One Month LIBOR Plus 90 bps Plus Market Value Depreciation Paid |
Counterparty | Payment Frequency |
Termination Date |
Notional Amount |
Value | Upfront Payments/ Receipts |
Unrealized Appreciation | ||||||||||||||||
| Premier Foods plc |
Premier Foods plc | The Goldman Sachs Group, Inc. |
1 month | 04/01/2021 | $600,300 | $180,331 | — | $180,331 | ||||||||||||||||
|
| ||||||||||||||||||||||||
| TOTAL EQUITY CONTRACT FOR DIFFERENCE SWAP AGREEMENT |
|
$180,331 | ||||||||||||||||||||||
|
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See accompanying notes to financial statements.
8
The Gabelli ABC Fund
See accompanying notes to financial statements.
9
The Gabelli ABC Fund
Statement of Changes in Net Assets
| Six Months Ended June 30, 2020 (Unaudited) |
Year Ended December 31, 2019 | |||||||
| Operations: |
||||||||
| Net investment income |
$ 2,345,942 | $ 10,482,147 | ||||||
| Net realized gain on investments, securities sold short, swap contracts, forward foreign exchange contracts, and foreign currency transactions |
2,802,241 | 18,370,832 | ||||||
| Net change in unrealized appreciation/depreciation on investments, securities sold short, swap contracts, forward foreign exchange contracts, and foreign currency translations |
(24,910,936 | ) | 13,760,101 | |||||
| Net Increase/(Decrease) in Net Assets Resulting from Operations |
(19,762,753 | ) | 42,613,080 | |||||
| Distributions to Shareholders: |
||||||||
| Accumulated earnings |
||||||||
| Class AAA |
— | (16,178,369 | ) | |||||
| Advisor Class |
— | (7,474,616 | ) | |||||
| Total Distributions to Shareholders |
— | (23,652,985 | ) | |||||
| Capital Share Transactions: |
||||||||
| Class AAA |
(55,907,486 | ) | 41,793,539 | |||||
| Advisor Class |
(65,102,604 | ) | (104,674,767 | ) | ||||
| Net Decrease in Net Assets from Capital Share Transactions |
(121,010,090 | ) | (62,881,228 | ) | ||||
| Redemption Fees |
637 | 97 | ||||||
| Net Decrease in Net Assets |
(140,772,206 | ) | (43,921,036 | ) | ||||
| Net Assets: |
||||||||
| Beginning of year |
898,337,990 | 942,259,026 | ||||||
| End of period |
$ 757,565,784 | $ 898,337,990 | ||||||
See accompanying notes to financial statements.
10
The Gabelli ABC Fund
Financial Highlights
Selected data for a share of capital stock outstanding throughout each period:
| Income (Loss) from Investment Operations |
Distributions | Ratios to Average Net Assets/ Supplemental Data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Year Ended December 31 |
Net Asset Value, Beginning of Year |
Net Investment Income (Loss) (a) |
Net (Loss) on |
Total from Operations |
Net Investment Income |
Net Realized Gain on Investments |
Total Distributions |
Redemption Fees (a)(b) |
Net Asset Value, End of Period |
Total Return† |
Net Assets, (in 000’s) |
Net Investment Income (Loss) |
Operating Expenses(c)(d) |
Portfolio Turnover Rate | ||||||||||||||||||||||||||||||||||||||||||
| Class AAA |
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020(e) |
$ | 10.21 | $ | 0.03 | $ | (0.22 | ) | $ | (0.19 | ) | — | — | — | $ | 0.00 | $ | 10.02 | (1.9 | )% | $ | 549,926 | 0.64 | %(f) | 0.73 | %(f) | 101 | % | |||||||||||||||||||||||||||||
| 2019 |
10.03 | 0.12 | 0.36 | 0.48 | $ | (0.14 | ) | $ | (0.16 | ) | $ | (0.30 | ) | 0.00 | 10.21 | 4.8 | 618,374 | 1.18 | 0.64 | 278 | ||||||||||||||||||||||||||||||||||||
| 2018 |
10.38 | 0.15 | (0.13 | ) | 0.02 | (0.24 | ) | (0.13 | ) | (0.37 | ) | 0.00 | 10.03 | 0.2 | 564,929 | 1.41 | 0.57 | (g) | 231 | |||||||||||||||||||||||||||||||||||||
| 2017 |
10.17 | 0.05 | 0.17 | 0.22 | — | (0.01 | ) | (0.01 | ) | 0.00 | 10.38 | 2.2 | 660,559 | 0.51 | 0.58 | (g)(h) | 205 | |||||||||||||||||||||||||||||||||||||||
| 2016 |
10.10 | 0.02 | 0.29 | 0.31 | (0.07 | ) | (0.17 | ) | (0.24 | ) | 0.00 | 10.17 | 3.1 | 630,052 | 0.19 | 0.60 | (h) | 287 | ||||||||||||||||||||||||||||||||||||||
| 2015 |
10.13 | (0.00 | )(b) | 0.24 | 0.24 | (0.06 | ) | (0.21 | ) | (0.27 | ) | 0.00 | 10.10 | 2.3 | 630,205 | (0.01 | ) | 0.59 | 276 | |||||||||||||||||||||||||||||||||||||
| Advisor Class |
|
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| 2020(e) |
$ | 10.10 | $ | 0.02 | $ | (0.22 | ) | $ | (0.20 | ) | — | — | — | $ | 0.00 | $ | 9.90 | (2.0 | )% | $ | 207,640 | 0.43 | %(f) | 0.98 | %(f) | 101 | % | |||||||||||||||||||||||||||||
| 2019 |
9.93 | 0.09 | 0.35 | 0.44 | $ | (0.11 | ) | $ | (0.16 | ) | $ | (0.27 | ) | 0.00 | 10.10 | 4.4 | 279,964 | 0.92 | 0.89 | 278 | ||||||||||||||||||||||||||||||||||||
| 2018 |
10.27 | 0.12 | (0.13 | ) | (0.01 | ) | (0.20 | ) | (0.13 | ) | (0.33 | ) | 0.00 | 9.93 | (0.1 | ) | 377,330 | 1.14 | 0.82 | (g) | 231 | |||||||||||||||||||||||||||||||||||
| 2017 |
10.08 | 0.03 | 0.17 | 0.20 | — | (0.01 | ) | (0.01 | ) | 0.00 | 10.27 | 2.0 | 731,397 | 0.26 | 0.83 | (g)(h) | 205 | |||||||||||||||||||||||||||||||||||||||
| 2016 |
10.01 | (0.01 | ) | 0.30 | 0.29 | (0.05 | ) | (0.17 | ) | (0.22 | ) | 0.00 | 10.08 | 2.9 | 779,720 | (0.06 | ) | 0.85 | (h) | 287 | ||||||||||||||||||||||||||||||||||||
| 2015 |
10.05 | (0.03 | ) | 0.23 | 0.20 | (0.03 | ) | (0.21 | ) | (0.24 | ) | 0.00 | 10.01 | 2.0 | 717,303 | (0.27 | ) | 0.84 | 276 | |||||||||||||||||||||||||||||||||||||
| † | Total return represents aggregate total return of a hypothetical $1,000 investment at the beginning of the year and sold at the end of the period including reinvestment of distributions. Total return for a period of less than one year is not annualized. |
| (a) | Per share amounts have been calculated using the average shares outstanding method. |
| (b) | Amount represents less than $0.005 per share. |
| (c) | The Fund received credits from a designated broker who agreed to pay certain Fund operating expenses. For the six months ended June 30, 2020 and the years ended December 31, 2019, 2018, 2017, 2016, and 2015, there was no impact to the expense ratios. |
| (d) | The Fund incurred dividend expense and service fees on securities sold short. If these expenses and fees had not been incurred, the ratios of operating expenses to average net assets for the six months ended June 30, 2020 and the years ended December 31, 2019, 2018, 2017, 2016, and 2015 would have been 0.57%, 0.56%, 0.56%, 0.55%, 0.55%, and 0.55% (Class AAA) and 0.82%, 0.81%, 0.81%, 0.80%, 0.80%, and 0.77% (Advisor Class), respectively. |
| (e) | For the six months ended June 30, 2020, unaudited. |
| (f) | Annualized. |
| (g) | The Fund incurred tax expense during the years ended December 31, 2018 and 2017. For the year ended December 31, 2018, the effect was minimal. For the year ended December 31, 2017, if the tax expense had not been incurred, the ratios of operating expenses to average net assets would have been 0.57% (Class AAA) and 0.82% (Advisor Class). |
| (h) | During the years ended December 31, 2017 and 2016, the Fund received reimbursements of custody expenses paid in prior years. Had such reimbursements (allocated by relative net asset values of the Fund’s share classes) been included in the 2016 calculation, the annualized expense ratios would have been 0.58% (Class AAA) and 0.83% (Advisor Class). The 2017 reimbursement had no effect on the expense ratio. |
See accompanying notes to financial statements.
11
The Gabelli ABC Fund
Notes to Financial Statements (Unaudited)
1. Organization. The Gabelli ABC Fund, a series of Gabelli Investor Funds, Inc., was incorporated on October 30, 1992 in Maryland, and commenced investment operations on May 14, 1993. The Fund is a non-diversified open-end management investment company registered under the Investment Company Act of 1940, as amended (the 1940 Act). The Fund’s primary objective is to achieve total returns that are attractive to investors in various market conditions without excessive risk of capital loss.
2. Significant Accounting Policies. As an investment company, the Fund follows the investment company accounting and reporting guidance, which is part of U.S. generally accepted accounting principles (GAAP) that may require the use of management estimates and assumptions in the preparation of its financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements.
Security Valuation. Portfolio securities listed or traded on a nationally recognized securities exchange or traded in the U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a market’s official closing price as of the close of business on the day the securities are being valued. If there were no sales that day, the security is valued at the average of the closing bid and asked prices or, if there were no asked prices quoted on that day, then the security is valued at the closing bid price on that day. If no bid or asked prices are quoted on such day, the security is valued at the most recently available price or, if the Board of Directors (the Board) so determines, by such other method as the Board shall determine in good faith to reflect its fair market value. Portfolio securities traded on more than one national securities exchange or market are valued according to the broadest and most representative market, as determined by Gabelli Funds, LLC (the Adviser).
Portfolio securities primarily traded on a foreign market are generally valued at the preceding closing values of such securities on the relevant market, but may be fair valued pursuant to procedures established by the Board if market conditions change significantly after the close of the foreign market, but prior to the close of business on the day the securities are being valued. Debt obligations for which market quotations are readily available are valued at the average of the latest bid and asked prices. If there were no asked prices quoted on such day, the security is valued using the closing bid price, unless the Board determines such amount does not reflect the securities’ fair value, in which case these securities will be fair valued as determined by the Board. Certain securities are valued principally using dealer quotations. Futures contracts are valued at the closing settlement price of the exchange or board of trade on which the applicable contract is traded. OTC futures and options on futures for which market quotations are readily available will be valued by quotations received from a pricing service or, if no quotations are available from a pricing service, by quotations obtained from one of more dealers in the instrument in question by the Adviser.
Securities and assets for which market quotations are not readily available are fair valued as determined by the Board. Fair valuation methodologies and procedures may include, but are not limited to: analysis and review of available financial and non-financial information about the company; comparisons with the valuation and changes in valuation of similar securities, including a comparison of foreign securities with the equivalent U.S. dollar value American Depositary Receipt securities at the close of the U.S. exchange; and evaluation of any other information that could be indicative of the value of the security.
The inputs and valuation techniques used to measure fair value of the Fund’s investments are summarized into three levels as described in the hierarchy below:
12
The Gabelli ABC Fund
Notes to Financial Statements (Unaudited) (Continued)
| ● | Level 1 — quoted prices in active markets for identical securities; |
| ● | Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.); and |
| ● | Level 3 — significant unobservable inputs (including the Board’s determinations as to the fair value of investments). |
13
The Gabelli ABC Fund
Notes to Financial Statements (Unaudited) (Continued)
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input both individually and in the aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of the Fund’s investments in securities and other financial instruments by inputs used to value the Fund’s investments as of June 30, 2020 is as follows:
| Valuation Inputs | ||||||||||||||||
| Level 1 Quoted Prices |
Level 2 Other Significant Observable Inputs |
Level 3 Significant Unobservable Inputs |
Total Market Value at 6/30/20 |
|||||||||||||
| INVESTMENTS IN SECURITIES: |
||||||||||||||||
| ASSETS (Market Value): |
||||||||||||||||
| Common Stocks: |
||||||||||||||||
| Aerospace and Defense |
$ 366,572 | $ 6,914,937 | — | $ 7,281,509 | ||||||||||||
| Business Services |
13,331 | 15,544,000 | — | 15,557,331 | ||||||||||||
| Cable and Satellite |
3,156,675 | 3,822 | — | 3,160,497 | ||||||||||||
| Computer Software and Services |
11,139,432 | 49,130 | — | 11,188,562 | ||||||||||||
| Consumer Products |
735,026 | 32,688 | — | 767,714 | ||||||||||||
| Financial Services |
22,498,122 | 56,000 | — | 22,554,122 | ||||||||||||
| Health Care |
28,235,207 | 3,000 | — | 28,238,207 | ||||||||||||
| Hotels and Gaming |
393,847 | — | $ 520,980 | 914,827 | ||||||||||||
| Retail |
906 | 300,380 | — | 301,286 | ||||||||||||
| Transportation |
1,652,810 | 519,054 | — | 2,171,864 | ||||||||||||
| Wireless Telecommunications Services |
— | 868,000 | — | 868,000 | ||||||||||||
| Other Industries (a) |
143,699,785 | — | — | 143,699,785 | ||||||||||||
| Total Common Stocks |
211,891,713 | 24,291,011 | 520,980 | 236,703,704 | ||||||||||||
| Closed-End Funds |
— | 5,052,500 | — | 5,052,500 | ||||||||||||
| Rights (a) |
322,200 | 1,591,200 | 607,674 | 2,521,074 | ||||||||||||
| U.S. Government Obligations |
— | 504,419,067 | — | 504,419,067 | ||||||||||||
| TOTAL INVESTMENTS IN SECURITIES – ASSETS |
$212,213,913 | $535,353,778 | $1,128,654 | $748,696,345 | ||||||||||||
| LIABILITIES (Market Value): | ||||||||||||||||
| Common Stocks Sold Short (a) |
$ (48,470,561 | ) | — | — | $(48,470,561 | ) | ||||||||||
| TOTAL INVESTMENTS IN SECURITIES - LIABILITIES |
$ (48,470,561 | ) | — | — | $(48,470,561 | ) | ||||||||||
| OTHER FINANCIAL INSTRUMENTS:* |
||||||||||||||||
| ASSETS (Unrealized Appreciation): |
||||||||||||||||
| FORWARD CURRENCY EXCHANGE CONTRACTS |
||||||||||||||||
| Forward Foreign Exchange Contracts |
— | $ 363,471 | — | $ 363,471 | ||||||||||||
| EQUITY CONTRACTS |
||||||||||||||||
| Contract for Difference Swap Agreements |
— | 180,331 | — | 180,331 | ||||||||||||
| TOTAL OTHER FINANCIAL INSTRUMENTS: |
— | $ 543,802 | — | $ 543,802 | ||||||||||||
| (a) | Please refer to the Schedule of Investments (SOI) for the industry classifications of these portfolio holdings. |
| * | Other financial instruments are derivatives reflected in the SOI, such as options, futures, forwards, and swaps, which may be valued at the unrealized appreciation/(depreciation) of the instrument. |
The Fund did not have material transfers into or out of Level 3 during the six months ended June 30, 2020.
Additional Information to Evaluate Qualitative Information.
General. The Fund uses recognized industry pricing services – approved by the Board and unaffiliated with the Adviser – to value most of its securities, and uses broker quotes provided by market makers of securities not valued by these and other recognized pricing sources. Several different pricing feeds are received to value domestic equity securities, international equity securities, preferred equity securities, and fixed income securities.
14
The Gabelli ABC Fund
Notes to Financial Statements (Unaudited) (Continued)
The data within these feeds are ultimately sourced from major stock exchanges and trading systems where these securities trade. The prices supplied by external sources are checked by obtaining quotations or actual transaction prices from market participants. If a price obtained from the pricing source is deemed unreliable, prices will be sought from another pricing service or from a broker/dealer that trades that security or similar securities.
Fair Valuation. Fair valued securities may be common or preferred equities, warrants, options, rights, or fixed income obligations. Where appropriate, Level 3 securities are those for which market quotations are not available, such as securities not traded for several days, or for which current bids are not available, or which are restricted as to transfer. Among the factors to be considered to fair value a security are recent prices of comparable securities that are publicly traded, reliable prices of securities not publicly traded, the use of valuation models, current analyst reports, valuing the income or cash flow of the issuer, or cost if the preceding factors do not apply. A significant change in the unobservable inputs could result in a lower or higher value in Level 3 securities. The circumstances of Level 3 securities are frequently monitored to determine if fair valuation measures continue to apply.
The Adviser reports quarterly to the Board the results of the application of fair valuation policies and procedures. These may include back testing the prices realized in subsequent trades of these fair valued securities to fair values previously recognized.
Derivative Financial Instruments. The Fund may engage in various portfolio investment strategies by investing in derivative financial instruments for the purposes of increasing the income of the Fund, hedging against changes in the value of its portfolio securities and in the value of securities it intends to purchase, or hedging against a specific transaction with respect to either the currency in which the transaction is denominated or another currency. Investing in certain derivative financial instruments, including participation in the options, futures, or swap markets, entails certain execution, liquidity, hedging, tax, and securities, interest, credit, or currency market risks. Losses may arise if the Adviser’s prediction of movements in the direction of the securities, foreign currency, and interest rate markets is inaccurate. Losses may also arise if the counterparty does not perform its duties under a contract, or that, in the event of default, the Fund may be delayed in or prevented from obtaining payments or other contractual remedies owed to it under derivative contracts. The creditworthiness of the counterparties is closely monitored in order to minimize these risks. Participation in derivative transactions involves investment risks, transaction costs, and potential losses to which the Fund would not be subject absent the use of these strategies. The consequences of these risks, transaction costs, and losses may have a negative impact on the Fund’s ability to pay distributions.
Collateral requirements differ by type of derivative. Collateral requirements are set by the broker or exchange clearing house for exchange traded derivatives, while collateral terms are contract specific for derivatives traded over-the-counter. Securities pledged to cover obligations of the Fund under derivative contracts are noted in the Schedule of Investments. Cash collateral, if any, pledged for the same purpose will be reported separately in the Statement of Assets and Liabilities.
The Fund’s policy with respect to offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the master agreement does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the Fund and the applicable counterparty. The enforceability of the right to offset may vary by jurisdiction.
15
The Gabelli ABC Fund
Notes to Financial Statements (Unaudited) (Continued)
The Fund’s derivative contracts held at June 30, 2020, are not accounted for as hedging instruments under GAAP and are disclosed in the Schedule of Investments together with the related counterparty.
Swap Agreements. The Fund may enter into equity contract for difference swap transactions for the purpose of increasing the income of the Fund. The use of swaps is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio security transactions. In an equity contract for difference swap, a set of future cash flows is exchanged between two counterparties. One of these cash flow streams will typically be based on a reference interest rate combined with the performance of a notional value of shares of a stock. The other will be based on the performance of the shares of a stock. Depending on the general state of short term interest rates and the returns on the Fund’s portfolio securities at the time an equity contract for difference swap transaction reaches its scheduled termination date, there is a risk that the Fund will not be able to obtain a replacement transaction or that the terms of the replacement will not be as favorable as on the expiring transaction. Equity contract for difference swap agreements at June 30, 2020 are presented within the Schedule of Investments.
Unrealized gains related to swaps are reported as an asset and unrealized losses are reported as a liability in the Statement of Assets and Liabilities. The change in value of swaps, including the accrual of periodic amounts of interest to be received or paid on swaps, is reported as unrealized gain or loss in the Statement of Operations. A realized gain or loss is recorded upon receipt or payment of a periodic payment or termination of swap agreements.
The Fund’s volume of activity in equity contract for difference swap agreements during the six months ended June 30, 2020 had an average monthly notional amount of approximately $732,920 over the period that the swaps were outstanding.
At June 30, 2020, the value of equity contract for difference swap agreements can be found in the Statement of Assets and Liabilities under Assets, Unrealized appreciation on swap contracts. For the six months ended June 30, 2020, the effect of equity contract for difference swap agreements can be found in the Statement of Operations under Net Realized and Unrealized Gain/(Loss) on Investments, Securities Sold Short, Swap Contracts, Forward Foreign Exchange Contracts, and Foreign Currency within Net realized gain on swap contracts and Net change in unrealized appreciation/depreciation on swap contracts.
Forward Foreign Exchange Contracts. The Fund may engage in forward foreign exchange contracts for the purpose of hedging a specific transaction with respect to either the currency in which the transaction is denominated or another currency as deemed appropriate by the Adviser. Forward foreign exchange contracts are valued at the forward rate and are marked-to-market daily. The change in market value is included in unrealized appreciation/depreciation on foreign currency translations. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
The use of forward foreign exchange contracts does not eliminate fluctuations in the underlying prices of the Fund’s portfolio securities, but it does establish a rate of exchange that can be achieved in the future. Although forward foreign exchange contracts limit the risk of loss due to a decline in the value of the hedged currency, they also limit any potential gain that might result should the value of the currency increase. Forward foreign exchange contracts at June 30, 2020 are reflected within the Schedule of Investments. The Fund’s volume of
16
The Gabelli ABC Fund
Notes to Financial Statements (Unaudited) (Continued)
activity in forward foreign exchange contracts during the six months ended June 30, 2020 had an average monthly notional amount of approximately $394,128,571.
At June 30, 2020, the value of forward foreign exchange contracts can be found in the Statement of Assets and Liabilities under Assets, Unrealized appreciation on forward foreign exchange contracts. For the six months ended June 30, 2020, the effect of forward foreign exchange contracts can be found in the Statement of Operations under Net Realized and Unrealized Gain/(Loss) on Investments, Securities Sold Short, Swap Contracts, Forward Foreign Exchange Contracts, and Foreign Currency, within Net realized gain on forward foreign exchange contracts and Net change in unrealized appreciation/depreciation on forward foreign exchange contracts.
At June 30, 2020, the Fund’s derivative assets (by type) are as follows:
| Gross Amounts of Recognized Assets Presented in the Statement of Assets and Liabilities |
Gross Amounts Available for Offset in the Statement of Assets and Liabilities |
Net Amounts of Assets Presented in the Statement of Assets and Liabilities |
||||||||||||
|
|
|
|||||||||||||
| Assets |
||||||||||||||
| Equity Contract for Difference Swap Agreements |
$180,331 | — | $180,331 | |||||||||||
| Forward Foreign Exchange Contracts |
363,471 | — | 363,471 | |||||||||||
| Total |
$543,802 | — | $543,802 | |||||||||||
The following tables present the Fund’s derivative assets by counterparty net of the related collateral segregated by the Fund for the benefit of the counterparty as of June 30, 2020:
| Net Amounts Not Offset in the Statement of Assets and Liabilities |
||||||||||||||
|
|
||||||||||||||
| Net Amounts of Assets Presented in the Statement of Assets and Liabilities |
Securities Pledged as Collateral |
Cash Collateral Received |
Net Amount | |||||||||||
|
|
||||||||||||||
| Counterparty |
||||||||||||||
| State Street Bank & Trust Co. |
$363,471 | — | — | $363,471 | ||||||||||
| The Goldman Sachs Group, Inc. |
180,331 | — | — | 180,331 | ||||||||||
| Total |
$543,802 | — | — | $543,802 | ||||||||||
Securities Sold Short. The Fund enters into short sale transactions. Short selling involves selling securities that may or may not be owned and, at times, borrowing the same securities for delivery to the purchaser, with an obligation to replace such borrowed securities at a later date. The proceeds received from short sales are recorded as liabilities and the Fund records an unrealized gain or loss to the extent of the difference between the proceeds received and the value of an open short position on the day of determination. The Fund records a realized gain or loss when the short position is closed out. By entering into a short sale, the Fund bears the market risk of an unfavorable change in the price of the security sold short. Dividends on short sales are recorded as an expense by the Fund on the ex-dividend date and interest expense is recorded on the accrual basis. The broker retains collateral for the value of the open positions, which is adjusted periodically as the value of the position fluctuates. Securities sold short and details of collateral at June 30, 2020 are reflected within the
17
The Gabelli ABC Fund
Notes to Financial Statements (Unaudited) (Continued)
Schedule of Investments. For the six months ended June 30, 2020, the Fund incurred $225,421 in service fees related to its investment positions sold short and held by the broker. These amounts are included in the Statement of Operations under Expenses, Service fees for securities sold short.
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Foreign currencies, investments, and other assets and liabilities are translated into U.S. dollars at current exchange rates. Purchases and sales of investment securities, income, and expenses are translated at the exchange rate prevailing on the respective dates of such transactions. Unrealized gains and losses that result from changes in foreign exchange rates and/or changes in market prices of securities have been included in unrealized appreciation/depreciation on investments and foreign currency translations. Net realized foreign currency gains and losses resulting from changes in exchange rates include foreign currency gains and losses between trade date and settlement date on investment securities transactions, foreign currency transactions, and the difference between the amounts of interest and dividends recorded on the books of the Fund and the amounts actually received. The portion of foreign currency gains and losses related to fluctuation in exchange rates between the initial purchase trade date and subsequent sale trade date is included in realized gain/(loss) on investments.
Foreign Securities. The Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation of currencies, the inability to repatriate funds, less complete financial information about companies, and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than securities of comparable U.S. issuers.
Foreign Taxes. The Fund may be subject to foreign taxes on income, gains on investments, or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
Restricted Securities. The Fund may invest up to 15% of its net assets in securities for which the markets are restricted. Restricted securities include securities whose disposition is subject to substantial legal or contractual restrictions. The sale of restricted securities often requires more time and results in higher brokerage charges or dealer discounts and other selling expenses than does the sale of securities eligible for trading on national securities exchanges or in the over-the-counter markets. Restricted securities may sell at a price lower than similar securities that are not subject to restrictions on resale. Securities freely saleable among qualified institutional investors under special rules adopted by the SEC may be treated as liquid if they satisfy liquidity standards established by the Board. The continued liquidity of such securities is not as well assured as that of publicly traded securities, and accordingly the Board will monitor their liquidity. At June 30, 2020, the Fund held no restricted securities.
Investments in other Investment Companies. The Fund may invest, from time to time, in shares of other investment companies (or entities that would be considered investment companies but are excluded from the definition pursuant to certain exceptions under the 1940 Act) (the Acquired Funds) in accordance with the 1940 Act and related rules. Shareholders in the Fund would bear the pro rata port on of the periodic expenses of the Acquired Funds in addition to the Fund’s expenses. For the six months ended June 30, 2020, the Fund’s pro rata portion of the periodic expenses charged by the Acquired Funds was less than one basis point.
18
The Gabelli ABC Fund
Notes to Financial Statements (Unaudited) (Continued)
Securities Transactions and Investment Income. Securities transactions are accounted for on the trade date with realized gain/(loss) on investments determined by using the identified cost method. Interest income (including amortization of premium and accretion of discount) is recorded on an accrual basis. Premiums and discounts on debt securities are amortized using the effective yield to maturity method. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities that are recorded as soon after the ex-dividend date as the Fund becomes aware of such dividends.
Determination of Net Asset Value and Calculation of Expenses. Certain administrative expenses are common to, and allocated among, various affiliated funds. Such allocations are made on the basis of each fund’s average net assets or other criteria directly affecting the expenses as determined by the Adviser pursuant to procedures established by the Board.
In calculating the NAV per share of each class, investment income, realized and unrealized gains and losses, redemption fees, and expenses other than class specific expenses are allocated daily to each class of shares based upon the proportion of net assets of each class at the beginning of each day. Distribution expenses are borne solely by the class incurring the expense.
Distributions to Shareholders. Distributions to shareholders are recorded on the ex-dividend date. Distributions to shareholders are based on income and capital gains as determined in accordance with federal income tax regulations, which may differ from income and capital gains as determined under GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities and foreign currency transactions held by the Fund, timing differences, and differing characterizations of distributions made by the Fund. Distributions from net investment income for federal income tax purposes include net realized gains on foreign currency transactions. These book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent, adjustments are made to the appropriate capital accounts in the period when the differences arise. These reclassifications have no impact on the NAV of the Fund.
The tax character of distributions paid during the years ended December 31, 2019 was as follows:
| Distributions paid from:* |
||||
| Ordinary income (inclusive of short term capital gains) |
$ | 26,139,903 | ||
| Net long term capital gains |
1,914,996 | |||
|
|
|
|||
| Total distributions paid |
$ | 28,054,899 | ||
|
|
|
| * | Total distributions paid differs from the Statement of Changes in Net Assets due to the utilization of equalization. |
Provision for Income Taxes. The Fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the Code). It is the policy of the Fund to comply with the requirements of the Code applicable to regulated investment companies.
The following summarizes the tax cost of investments and the related net unrealized depreciation at June 30, 2020:
| Cost/ (Proceeds) |
Gross Unrealized Appreciation |
Gross Unrealized Depreciation |
Net Unrealized Depreciation | |||||||||||
| Investments and derivative instruments |
$714,163,126 | $28,378,765 | $(42,316,107) | $(13,937,342) |
The Fund is required to evaluate tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the
19
The Gabelli ABC Fund
Notes to Financial Statements (Unaudited) (Continued)
applicable tax authority. Income tax and related interest and penalties would be recognized by the Fund as tax expense in the Statement of Operations if the tax positions were deemed not to meet the more-likely-than-not threshold. For the six months ended June 30, 2020, the Fund did not incur any income tax, interest, or penalties. As of June 30, 2020, the Adviser has reviewed all open tax years and concluded that there was no impact to the Fund’s net assets or results of operations. The Fund’s federal and state tax returns for the prior three fiscal years remain open, subject to examination. On an ongoing basis, the Adviser will monitor the Fund’s tax positions to determine if adjustments to this conclusion are necessary.
3. Investment Advisory Agreement and Other Transactions. The Fund has entered into an investment advisory agreement (the Advisory Agreement) with the Adviser which provides that the Fund will pay the Adviser a fee, computed daily and paid monthly, at the annual rate of 0.50% of the value of its average daily net assets. In accordance with the Advisory Agreement, the Adviser provides a continuous investment program for the Fund’s portfolio, oversees the administration of all aspects of the Fund’s business and affairs, and pays the compensation of all Officers and Directors of the Fund who are affiliated persons of the Adviser.
The Fund pays each Director who is not considered an affiliated person an annual retainer of $9,000 plus $2,000 for each Board meeting attended. Each Director is reimbursed by the Fund for any out of pocket expenses incurred in attending meetings. All Board committee members receive $500 per meeting attended and the Chairman of the Audit Committee and the Lead Director each receives a $2,000 annual fee. A Director may receive a single meeting fee, allocated among the participating funds, for participation in certain meetings held on behalf of multiple funds. Directors who are directors or employees of the Adviser or an affiliated company receive no compensation or expense reimbursement from the Fund.
4. Distribution Plan. The Fund’s Board has adopted a distribution plan (the Plan) for the Advisor Class Shares pursuant to Rule 12b-1 under the 1940 Act. Under the Advisor Class Share Plan, payment is authorized to G.distributors, LLC (the Distributor), an affiliate of the Adviser, at an annual rate of 0.25% of the average daily net assets of the Advisor Class Shares, the annual limitation under the Plan. Such payments are accrued daily and paid monthly.
5. Portfolio Securities. Purchases and sales of securities during the six months ended June 30, 2020, other than short term securities and U.S. Government obligations, aggregated $355,042,646 and $495,366,319, respectively.
6. Transactions with Affiliates and Other Arrangements. During the six months ended June 30, 2020, the Fund paid $56,077 in brokerage commissions on security trades to G.research, LLC, an affiliate of the Adviser.
During the six months ended June 30, 2020, the Fund received credits from a designated broker who agreed to pay certain Fund operating expenses. The amount of such expenses paid through this directed brokerage arrangement during this period was $4,309.
The cost of calculating the Fund’s NAV per share is a Fund expense pursuant to the Advisory Agreement. Under the sub-administration agreement with Bank of New York Mellon, the fees paid include the cost of calculating the Fund’s NAV. The Fund reimburses the Adviser for this service. During the six months ended June 30, 2020, the Fund accrued $22,500 in accounting fees in the Statement of Operations.
20
The Gabelli ABC Fund
Notes to Financial Statements (Unaudited) (Continued)
As of June 30, 2020, the Fund’s Adviser and its affiliates beneficially owned greater than 25% of the voting securities of the Fund. This includes accounts for which the affiliates of the Adviser have voting control but disclaim pecuniary interest.
7. Line of Credit. The Fund participates in an unsecured line of credit, which expires on March 3, 2021 and may be renewed annually, of up to $75,000,000 under which it may borrow up to 10% of its net assets from the custodian for temporary borrowing purposes. Borrowings under this arrangement bears interest at a floating rate equal to the higher of the overnight Federal Funds rate plus 125 basis points or the 30 day ICE LIBOR plus 125 basis points in effect on that day. This amount, if any, would be included in “Interest expense” in the Statement of Operations. During the six months ended June 30, 2020, there were no borrowings outstanding under the line of credit.
The average daily amount of borrowings outstanding under the line of credit during the six months ended June 30, 2020 was $662,198 with a weighted average interest rate of 2.10%. The maximum amount borrowed at any time during the six months ended June 30, 2020 was $30,130,000.
8. Capital Stock. The Fund offers Class AAA Shares and Advisor Class Shares to investors without a front-end sales charge. Class AAA Shares are available directly through the Distributor or through the Fund’s transfer agent. Advisor Class Shares are available through registered broker-dealers or other financial intermediaries that have entered into appropriate selling agreements with the Distributor.
The Fund imposes a redemption fee of 2.00% on all classes of shares that are redeemed or exchanged on or before the seventh day after the date of a purchase. The redemption fee is deducted from the proceeds otherwise payable to the redeeming shareholders and is retained by the Fund as an increase in paid-in capital. The redemption fees retained by the Fund during the six months ended June 30, 2020 and the year ended December 31, 2019, if any, can be found in the Statement of Changes in Net Assets under Redemption Fees.
Transactions in shares of capital stock were as follows:
| Six Months Ended June 30, 2020 (Unaudited) |
Year Ended December 31, 2019 |
|||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||
| Class AAA |
||||||||||||||||||||||||||||
| Shares sold. |
2,878,621 | $ | 31,772,672 | 20,938,893 | $ | 214,314,889 | ||||||||||||||||||||||
| Shares issued upon reinvestment of distributions |
— | — | 1,551,464 | 15,840,475 | ||||||||||||||||||||||||
| Shares redeemed |
(8,572,711 | ) | (87,680,158 | ) | (18,205,351 | ) | (188,361,825 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Net increase/(decrease) |
(5,694,090 | ) | $ | (55,907,486 | ) | 4,285,006 | $ | 41,793,539 | ||||||||||||||||||||
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|
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| Advisor Class |
||||||||||||||||||||||||||||
| Shares sold. |
1,385,651 | $ | 15,143,974 | 4,467,232 | $ | 45,290,388 | ||||||||||||||||||||||
| Shares issued upon reinvestment of distributions |
— | — | 637,754 | 6,441,310 | ||||||||||||||||||||||||
| Shares redeemed |
(8,134,287 | ) | (80,246,578 | ) | (15,389,845 | ) | (156,406,465 | ) | ||||||||||||||||||||
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|
|
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|
|
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| Net decrease |
(6,748,636 | ) | $ | (65,102,604 | ) | (10,284,859 | ) | $ | (104,674,767 | ) | ||||||||||||||||||
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9. Indemnifications. The Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.
21
The Gabelli ABC Fund
Notes to Financial Statements (Unaudited) (Continued)
10. Subsequent Events. Management has evaluated the impact on the Fund of all subsequent events occurring through the date the financial statements were issued and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements.
22
The Gabelli ABC Fund
Board Consideration and Re-Approval of Investment Advisory Agreement (Unaudited)
At its meeting on February 11, 2020, the Board of Directors (Board) of the Fund approved the continuation of the investment advisory agreement with the Adviser for the Fund on the basis of the recommendation by the directors who are not “interested persons” of the Fund (the Independent Board Members). The following paragraphs summarize the material information and factors considered by the Independent Board Members as well as their conclusions relative to such factors.
Nature, Extent, and Quality of Services. The Independent Board Members considered information regarding the portfolio managers, the depth of the analyst pool available to the Adviser and the portfolio managers, the scope of administrative, shareholder and other services supervised or provided by the Adviser and the absence of significant service problems reported to the Board. The Independent Board Members noted the experience, length of service and reputation of the portfolio managers.
Investment Performance. The Independent Board Members reviewed the short, medium and long term performance (as of December 31, 2019) of the Fund against a peer group of four other comparable funds prepared by the Adviser (the Adviser Peer Group) and against a peer group prepared by Broadridge (the Broadridge Performance Peer Group) consisting of all retail alternative event driven funds, regardless of asset size or primary channel of distribution, as represented by the Lipper Alternative Event Driven Funds Index. The Independent Board Members noted that the Fund’s performance was in the fourth quintile for the one year and five year periods and in the fifth quintile for the three year period, as measured against the Adviser Peer Group. Against the Broadridge Performance Peer Group, the Independent Board Members noted that the Fund’s performance was in the fourth quintile for the one year, three year and five year periods.
Profitability. The Independent Board Members reviewed summary data regarding the profitability of the Fund to the Adviser both with an administrative overhead charge and without such a charge. The directors also noted that a substantial portion of the Fund’s portfolio transactions were executed by an affiliated broker.
Economies of Scale. The Independent Board Members discussed the major elements of the Adviser’s cost structure and the relationship of those elements to potential economies of scale. The Independent Board Members agreed that the low relative cost structure of the Fund and the low historical profitability of the Fund to the Adviser argued strongly against any concern regarding economies of scale.
Sharing of Economies of Scale. The Independent Board Members noted that the investment management fee schedule for the Fund does not take into account any potential economies of scale that may develop or any losses or diminished profitability to the Adviser in prior years.
Service and Cost Comparisons. The Independent Board Members compared the expense ratios of the investment management fee, other expenses and total expenses of the Fund to similar expense ratios of the Adviser Peer Group and a peer group of six other alternative event driven funds selected by Broadridge and noted that the Adviser’s management fee includes substantially all administrative services for the Fund as well as investment advisory services. The Independent Board Members noted that the Fund’s expense ratios were at the low end of each peer group and that the Fund’s size was above average within each peer group. The Independent Board Members also compared the management fee structure for the Fund to that in effect for most other Gabelli funds. The Independent Board Members were presented with, but did not consider to be material to their decision, various information comparing the advisory fee to the advisory fees for other types of accounts managed by affiliates of the Adviser. The Board recognized that the Adviser and its affiliates did not manage other accounts with similar strategies that had fees lower than those charged for the Fund. The Independent
23
The Gabelli ABC Fund
Board Consideration and Re-Approval of Investment Advisory Agreement (Unaudited) (Continued)
Board Members were presented with, but did not consider to be material to their decision, various information comparing the advisory fee with the fee for other types of accounts managed by the Adviser.
Conclusions. The Independent Board Members concluded that the Fund enjoyed highly experienced portfolio management services, good ancillary services and an adequate performance record. The Independent Board Members also concluded that the Fund’s expense ratios and the profitability to the Adviser of managing the Fund were lower than the average in both peer groups and that economies of scale were not a significant factor in their thinking at this time. The Independent Board Members did not view the potential profitability of ancillary services as material to their decision. On the basis of the foregoing and without assigning particular weight to any single conclusion, the Independent Board Members determined to recommend continuation of the Advisory Agreement to the full Board.
Based on a consideration of all these factors in their totality, the Board Members, including all of the Independent Board Members, determined that the Fund’s advisory fee was fair and reasonable with respect to the quality of services provided and in light of the other factors described above that the Board deemed relevant. Accordingly, the Board Members determined to approve the continuation of the Fund’s Advisory Agreement. The Board Members based their decision on evaluations of all these factors as a whole and did not consider any one factor as all-important or controlling.
24
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Gabelli/GAMCO Funds and Your Personal Privacy |
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Who are we?
The Gabelli/GAMCO Funds are investment companies registered with the Securities and Exchange Commission under the Investment Company Act of 1940. We are managed by Gabelli Funds, LLC, which is affiliated with GAMCO Investors, Inc., a publicly held company with subsidiaries and affiliates that provide investment advisory services for a variety of clients.
What kind of non-public information do we collect about you if you become a fund shareholder?
If you apply to open an account directly with us, you will be giving us some non-public information about yourself. The non-public information we collect about you is:
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| ● Information you give us on your application form. This could include your name, address, telephone number, social security number, bank account number, and other information. |
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| ● Information about your transactions with us, any transactions with our affiliates, and transactions with the entities we hire to provide services to you. This would include information about the shares that you buy or redeem. If we hire someone else to provide services — like a transfer agent — we will also have information about the transactions that you conduct through them. |
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What information do we disclose and to whom do we disclose it?
We do not disclose any non-public personal information about our customers or former customers to anyone other than our affiliates, our service providers who need to know such information, and as otherwise permitted by law. If you want to find out what the law permits, you can read the privacy rules adopted by the Securities and Exchange Commission. They are in volume 17 of the Code of Federal Regulations, Part 248. The Commission often posts information about its regulations on its website, www.sec.gov.
What do we do to protect your personal information?
We restrict access to non-public personal information about you to the people who need to know that information in order to provide services to you or the fund and to ensure that we are complying with the laws governing the securities business. We maintain physical, electronic, and procedural safeguards to keep your personal information confidential.
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THE GABELLI ABC FUND
One Corporate Center
Rye, NY 10580-1422
Portfolio Management Team Biographies
Mario J. Gabelli, CFA, is Chairman, Chief Executive Officer, and Chief Investment Officer - Value Portfolios of GAMCO Investors, Inc. that he founded in 1977, and Chief Investment Officer - Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management Inc. He is also Executive Chairman of Associated Capital Group, Inc. Mr. Gabelli is a summa cum laude graduate of Fordham University and holds an MBA degree from Columbia Business School and Honorary Doctorates from Fordham University and Roger Williams University.
Regina M. Pitaro is a Managing Director and Head of Institutional Marketing at GAMCO Investors, Inc. Ms. Pitaro joined the firm in 1984 and coordinates the organization’s focus with consultants and plan sponsors. She also serves as a Managing Director and Director of GAMCO Asset Management, Inc., and serves as a portfolio manager for Gabelli Funds, LLC. Ms. Pitaro holds an MBA in Finance from the Columbia University Graduate School of Business, a Master’s degree in Anthropology from Loyola University of Chicago, and a Bachelor’s degree from Fordham University.
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We have separated the portfolio manager’s commentary from the financial statements and investment portfolio due to corporate governance regulations stipulated by the Sarbanes-Oxley Act of 2002. We have done this to ensure that the content of the portfolio manager’s commentary is unrestricted. Both the commentary and the financial statements, including the portfolio of investments, will be available on our website at www.gabelli.com. |
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
| (a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. |
| (b) | Not applicable. |
| Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
| Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable.
| Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s Board of Directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. Controls and Procedures.
| (a) | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these |
| controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
| (b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d))) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13. Exhibits.
| (a)(1) | Not applicable. |
| (a)(2) |
| (a)(3) | Not applicable. |
| (a)(4) | Not applicable. |
| (b) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (Registrant) Gabelli Investor Funds, Inc. | ||||
| By (Signature and Title)* /s/ Bruce N. Alpert | ||||
| Bruce N. Alpert, Principal Executive Officer | ||||
| Date September 4, 2020 | ||||
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By (Signature and Title)* /s/ Bruce N. Alpert | ||||
| Bruce N. Alpert, Principal Executive Officer | ||||
|
Date September 4, 2020 |
||||
| By (Signature and Title)* /s/ John C. Ball | ||||
| John C. Ball, Principal Financial Officer and Treasurer | ||||
|
Date September 4, 2020 |
||||
* Print the name and title of each signing officer under his or her signature.