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The Gabelli Asset Fund

Shareholder Commentary December 31, 2014

Morningstar rated The Gabelli Asset Fund Class AAA Shares 4 stars overall, 2 stars for the three year period,
3 stars for the five year period, and 5 stars for the ten year period ended December 31, 2014 among 1,336, 1,336,
1,193, and 812 Large Blend funds, respectively. Morningstar Rating is based on risk-adjusted returns.
(Y)our Portfolio Management Team

Mario J. Gabelli, CFA Christopher J. Marangi Jeffrey J. Jonas, CFA Kevin V. Dreyer

To Our Shareholders,
For the quarter ended December 31, 2014, the net asset value (NAV) per Class AAA Share of The
Gabelli Asset Fund increased 4.0% compared with an increase of 4.9% for the Standard & Poors (S&P) 500
Index. See page 2 for additional performance information.
Annual (P)review
More than in previous years, 2014 offered many surprises, both positive and negative. We suspect few
prognosticators correctly predicted more than a handful of the headline economic indicators below:


10-year U.S. Treasury yield . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.03%

Consumer Price Index (November) . . . . . . . . . . . . . . . . . . . . . 1.2%
Annualized U.S. GDP growth . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3%
U.S. Unemployment rate (November) . . . . . . . . . . . . . . . . . . . 7.0%
$ per Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1.37
West Texas Intermediate (price/barrel) . . . . . . . . . . . . . . . . . . $98.17
S&P 500 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,848

trailing P/E ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . .



Comparative Results
Average Annual Returns through December 31, 2014 (a)

Class AAA (GABAX) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

S&P 500 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dow Jones Industrial Average . . . . . . . . . . . . . . . . . . . . . .
Nasdaq Composite Index . . . . . . . . . . . . . . . . . . . . . . . . . .
Class A (GATAX) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
With sales charge (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Class C (GATCX) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
With contingent deferred sales charge (c) . . . . . . . . . . . . .
Class I (GABIX) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .



1 Year


5 Year


10 Year




In the current prospectuses dated April 30, 2014, the expense ratios for Class AAA, A, C, and I Shares are 1.35%,
1.35%, 2.10%, and 1.10%, respectively. Class AAA and Class I Shares do not have a sales charge. The maximum
sales charge for Class A Shares and Class C Shares is 5.75% and 1.00%, respectively.
(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 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,
1988. The Fund imposes a 2% redemption fee on shares sold or exchanged within seven days after the date of
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 The S&P 500 Index is a market capitalization weighted
index of 500 large capitalization stocks commonly used to represent the U.S. equity market. The Dow Jones
Industrial Average and the Nasdaq Composite Index are unmanaged indicators of stock market performance.
Dividends are considered reinvested, except for the Nasdaq Composite Index. You cannot invest directly in an index.
The Class AAA Share NAVs are used to calculate performance for the periods prior to the issuance of Class A
Shares and Class C Shares on December 31, 2003 and Class I Shares on January 11, 2008. The actual
performance of the Class A Shares and Class C Shares would have been lower due to the additional fees and
expenses associated with these classes of shares. The actual performance of the Class I Shares would have been
higher due to lower expenses related to this class of shares.
(b) Performance results include the effect of the maximum 5.75% sales charge at the beginning of the period.
(c) Assuming payment of the 1% maximum contingent deferred sales charge imposed on redemptions made within one
year of purchase.
(d) S&P 500 Index, Dow Jones Industrial Average, and Nasdaq Composite Index since inception performance results
are as of February 28, 1986.

We have separated the portfolio managers 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 managers commentary is unrestricted. The financial statements and
investment portfolio are mailed separately from the commentary. Both the commentary and the financial
statements, including the portfolio of investments, are available on our website at

Barrons 2015 Roundtable

Mario J. Gabelli, our Chief Investment Officer, has appeared in the prestigious Barrons Roundtable discussion
annually since 1980. Many of our readers enjoyed the inclusion of selected and edited comments from Barrons Roundtable
in previous reports to shareholders. As is our custom, we are including selected comments of Mario Gabelli from Barrons
2015 Roundtable Part 1 and Part 3, published on January 19 and February 2, 2015, respectively.


Chairman and Chief Investment Officer Value Portfolios
GAMCO Investors, Inc.

Excerpted from January 19 and February 2, 2015

by Lauren R. Rublin

hether you favor tarot

cards, tea leaves, or
crystal balls, its hard to
predict the future. Just ask anyone
who correctly forecast that oil prices
would fall more than 50% in the past
few months and good luck finding
anyone who did.
Rising to the challenge of divining
economic trends, market moves, and
especially the actions of the worlds
central bankers, the members of the
Barrons Roundtable took their usual
seats last Monday at the Harvard Club
of New York and gamely got down to
the annual business of making sense
notwithstanding some good natured
grumbling about the perils of the
forecasting trade. Whether these
market seers ultimately get it right or
wrong, or get some things right and
others wrong, they are worth a serious
In a day-long session that covered
everything from macroeconomics to
their investment picks for 2015, the
Roundtable members debated the
causes of crudes plunge and its effect
on consumers; euronomics and
Abenomics; the limits of leverage; and

much, much more. On the whole, they

expect interest rates to stay
unnaturally low, and the U.S. to lead
the world in economic growth. Yet,
they doubt that will translate into
robust gains for the stock market.
Scott Blacks expectation that the
Standard & Poors 500 will return 10%
this year an 8% price advance and
a 2% dividend yield was as rosy as
it got. Marc Faber, we feel compelled
to warn you, thinks the market already
has made its high for 2015.
Gabelli: Unlike some in this room, I fill
up my own car with gas. The impact of
lower spot prices hits right away by
giving consumers more cash in their
pockets or lower credit card bills. It
was only around Thanksgiving that the
price at the pump collapsed. The effect
is appearing on credit card statements
now. The consumer accounts for 70%
of gross domestic product. His costs
are going down. Food will be the next
thing that falls in price. This is an
extraordinary after tax saving, and it
will start working in the real economy.
Gabelli: These are lagging figures, put
together by people who dont go to gas
stations. I talk to the guys who are

pumping gas, and they say the

consumer is buying more beer.
When I talk to many S&P 500
companies about their businesses in
Asia and Europe, there arent many
rays of hope coming from some of
those markets. There is a general
consensus around 3% GDP growth in
the U.S. I wouldnt be surprised to see
downward pressure on that estimate
as 2015 unfolds. It just feels like too
many things are going to drag on us,
including a decline in energy prices.
One of my Roundtable stock picks,
perhaps not surprisingly, is an oil
company. You have to buy when
things look really bad. That said, the
U.S. could have a tougher year than
people expect.
Gabelli: Im going back to the
consumer. His net worth is at an all
time high. Wages are starting to rise in
certain industries, but the psychology
is fantastic. When the consumer buys
gas every week, he feels good.
Schafer: You spend a lot of time at
gas stations. How many cars do you
have, Mario?
Gabelli: You city guys send someone
else to fill up your car. Go talk to the

One more thing: The combination of

lower interest rates and new U.S.
mortality tables, as people are
expected to live longer, will crimp cash
flow as companies put more cash into
defined-benefit retirement plans.
Interest rates could rise faster than we
anticipate. Also, we are assuming that
U.S. banks are in solid shape, despite
the sudden drop in oil. What if a bank
unexpectedly goes bust in the U.S.?
Third, there are natural disasters.
There hasnt been a really good
hurricane season for a long time, or a
big earthquake. Bill, you had your own
earthquake about 60 days ago.
Mario, youre last but by no means
least. And youre immensely
Mario Gabelli, center: Financial engineering will continue, and activist investors are
another spur to specific stocks. Photo: Jenna Bascom for Barron's

Gabelli: Oscars ideas are splendid.

Thanks for recommending Maple Leaf.
There is a lot going on there.

guy who fills it up. You learn a lot by

asking. Capital investment accounts
for 12% of the economy. The
government is going to examine ways
to improve infrastructure. The midterm
election resulted in a Republicancontrolled Congress, which has a clear
vision of less regulation and improving
the rate of return on investment.
Capital spending by the major oil
companies and the independents
could drop below $600 billion this year
from an estimated $725 billion last
year, which will be a challenge, but its
not a big deal. The housing recovery
has traction, and local-government
spending is up. The U.S. economy
could grow by 2.75% to 3.25% this
year, in real terms.

Schafer: You own it.

The U.S. is expected to be 22% of the

global economy this year. The
European Union is expected to be
25%. But, in relation to the oil surprise,
what is [Russian President Vladimir]
Putin going to do? Is he going to help
the Saudis deal with Iran? A year ago,
nobody thought about oil, or Putin
invading Crimea, or the spread of
Ebola. Nobody thought about the
psychological impact of these events,

which prompted investors to seek

refuge in the U.S. bond market, driving
down yields. My bet is that U.S.-centric
companies do well this year.
Mario, what is your market view?
Gabelli: Im looking at the moving
parts. The euro is $1.18 today. It was
$1.37 a year ago. For S&P 500
companies operating in Europe, the
currency will be a drag. Energy
earnings will be a big drag. On the
other hand, if interest rates go up in the
spring, that will help banks net interest
margins. Companies are going to
maintain profit margins as best they
can. With the Republicans gaining
control of the Senate and the House,
the rest of the world is saying this
socialist president wont gain any more
traction. Thus, the U.S. is a good place
to put your money. A lot of money is
moving into the U.S. market, and it isnt
going into small-caps. It is going into
large-caps. Foreign investors are
sector allocators. Financial engineering
will continue, and activist investors are
another spur to specific stocks. Putting
it all together, the market could rise 2%
or 3% this year.

Gabelli: My clients do. My first idea

today is Graham Holdings, which used
to be the Washington Post. There are
5.8 million shares, including a million A
shares, which have 10 votes apiece
and elect 70% of the directors. The B
shares have one vote and elect 30% of
the board. The company is controlled
by the Graham family, which sold the
Washington Post to Jeffrey Bezos in
2013. Last year, in a so-called cashrich spinoff, Graham swapped its
ownership in a Miami television
station, and cash, for Graham stock
owned by Warren Buffetts Berkshire
Hathaway BRKA. Graham also sold
some other assets separately.
Today, the company holds cash,
cable-TV assets, television stations,
the Kaplan education business, a
marketing company called Social
Code, some real estate, and other
assets. Graham has $120 a share in
cash. The TV stations are worth about
$250 a share. Cable ONE, its cable
business, is worth $500 a share.
Altogether, thats $870 a share in
assets. Graham has announced a

spinoff of Cable ONE, which will occur

sometime this year. If Cable ONE is
bought by another company after
the spinoff, shareholders avoid a
double tax.





Gabelli: If Graham sold the cable

business, it would pay a tax on the
proceeds, and shareholders would pay
a tax on the gain. If the business is
spun off and then sold, there is only a
tax at the shareholder level. A cash
rich spinoff is a terrific tax benefit, too.
John Malone [chairman of Liberty
Media (LMCA)] and Buffett have done
well with cash-rich spinoffs. Graham
has an overfunded pension fund, so it
has assets to buy other businesses.
Graham is trading for $870 a share.
Shareholders are getting the Kaplan
business for free. In addition, the cable
asset is going to be monetized.
Broadcasting EBITDA was about $190
million for 2014. That will drop to $160
million this year because of a decline
spending. Next year, however, there
will be a tsunami of spending on
political advertising. Grahams TV
stations are in markets such as
Houston, Detroit, Orlando, San
Antonio, and Jacksonville. They could
also get a benefit from spectrum
The cable business has about $300
million in EBITDA. It will be spun off
with about $450 million of debt.
Barrons: How much is Kaplan
Gabelli: Kaplan is the wild card. It runs
a for-profit college. In the U.S., the forprofit education industry is facing
challenges. Kaplan also has a test
preparation division, which has about
$30 million in EBITDA. Kaplans nonU.S.-college business has done OK.
Based on deals done for comparable
companies, Kaplan could be worth as
much as $800 a share.

Next, I was looking for a company with

a database of Christian contemporary
and country and western songs. I
found Gaylord Entertainment in
Nashville. After selling a lot of assets
and acquiring new management, the
company changed its name to Ryman
Hospitality Properties (RHP). It
converted to a REIT on Jan. 1, 2013.
Our clients got $6.84 a share in cash
and stock on the conversion. We have
been one of the largest shareholders
for a while.
Barrons: Thanks for sharing that.
Gabelli: Ryman has 50 million shares
outstanding. The stock is selling for
$54, and the market cap is $2.5 billion.
The company has two businesses
Hospitality and Opry and Attractions,
which includes two entertainment
venues and some other assets. The
hospitality business includes hotels
and convention centers operated by
Marriott International (MAR) near
Dallas, Orlando, Nashville, and
Maryland, outside Washington, D.C.
MGM Resorts International (MGM)
has a license to build a casino
megaplex in that area. Ryman
generated about $200 million in funds
from operations in 2014. It pays an
annual distribution of $2.20 a share
and yields 3.9%. Apply an appropriate
capitalization rate [rate of return,
calculated by dividing yearly income

by total value] to the REIT, and you get

a value of $55 a share.
Ryman also owns WSM, a radio
station in Nashville famous for country
music. Ryman is likely to engage in
financial engineering and spin off the
entertainment assets. In the right
hands, the entertainment assets could
be worth as much as $15 a share.
Ryman shareholders could benefit
from rising occupancy and room rates,
and financial engineering. We value
the company at $70 per share.
Next, why would you give your money
to Steve Schwarzman or Henry Kravis,
or David Rubenstein? [All three run
private-equity companies.]
Barrons: You mean, instead of
giving it to Gabelli?
Gabelli: I mean, why would you pay 2and-20 [management fees equal to
2% of assets and 20% of profits] and
tie your money up for 10 years? When
I buy what John Malone controls, I am
buying at a discount. I am not paying
2-and-20, and I have liquidity. Malone
has his fingerprints on $115 billion of
equity value, with investments
in companies that include, among
others, Liberty Media, Liberty
Broadband (LBRDA), Discovery
Communications (DISCA), and
DirecTV (DTV). His personal net worth




Price 1/9/15

Graham Holdings



Ryman Hospitality Properties



Cable & Wireless Comm.





Post Holdings






Patterson Cos.



49 pence

Source: Bloomberg

in these companies is about $8 billion,

marked to market. I like following
Malone, and have been doing so for
35 years. He is now getting involved in
an old-line British company that I
started following in the early 1990s
because I wanted exposure to
Hong Kong. I am talking about
Cable & Wireless Communications
(CWC.UK), which owned Hong Kong
Telecom, which it has since sold.
Cable & Wireless is selling for about
49 pence. The stock trades in London,
but the company has relocated its
headquarters to the Miami area, as it
provides telecom and video service in
the English-speaking Caribbean,
including Barbados and Jamaica.
There are 2.75 billion shares
outstanding, and the market cap is
about $2 billion. Cable & Wireless has
about $200 million of debt.
Barrons: What is the companys
connection with Malone?
Gabelli: A transformative transaction
is in process. Cable & Wireless is
buying privately held Columbus
International, in which Malone is a
large shareholder. Columbus provides
voice, video, data, and everything that
you heard Oscar talk about with regard
to Cogent Communications.
Columbus gives Cable & Wireless an
expanded footprint in the region. When
the deal is done, Cable & Wireless will
issue 1.5 billion of new shares and
have $1.7 billion of added debt. Pro
forma, Cable & Wireless will have 4.3
billion shares outstanding, and an
enterprise value of about $5.6 billion.
Columbus adds $600 million of
revenue to Cable & Wireless for the
year ending March 31, 2016. Cable &
Wireless is becoming an interesting
Caribbean play.
In exchange for his Columbus shares,
Malone will acquire Cable & Wireless
shares with a put. Tax structure is
fundamental to everything he does.
Scale and consolidation and deal
structure are in Malones DNA. Malone

will own 13% of Cable & Wireless after

the deal closes; he will have a $250
million stake in the company, which
isnt a big piece of his net worth, but he
isnt going to ignore it. He loves these
sorts of dynamics. John Risley, one of
the founders of Columbus, will own
20% of the combined company. The
company could have significant growth
in the next three or four years. You
could double your money, or do even
better than that.
Barrons: Its good to have John
Malone on your side.
Gabelli: Now I am revisiting
recommended last year. It came out of
bankruptcy protection in 2010. The
CEO, Craig Rogerson, said that
Chemtura would sell its Agro Solutions
unit. It did so, for $950 million, and has
used the proceeds to reduce debt and
buy back shares. Following a Dutch
auction, Chemtura had 72.7 million
shares outstanding, and $50 million of
debt. The company is buying back
$200 million of stock, and by the time
we see the next published share
count, it will have about 67 million
shares. Chemtura has two remaining
businesses: an oil lubricants business
and a bromine business that generate
about $2 billion of annual revenue.
Schafer: That is the old Great Lakes
Gabelli: Thats right. There is
overcapacity in the bromine business,
which is causing a short-term hiccup
for the company. Chemtura could
generate $400 million of EBITDA three
years out. Chemtura still has $650
million of NOLs [net operating losses
from prior years that can be used to
offset future taxes]. It will be able to
shelter [from taxes] about $80 million a
year of earnings.
The balance sheet is wonderful. The
CEO is doing good things with the
company. Notwithstanding the current
air pocket, he is committed to growing

EBITDA, getting a high stock market

value for it, and buying back a
significant amount of stock.
Next, I have talked about Post
Holdings (POST) in years past. It was
spun out of Ralcorp three years ago.
Post is in the cereal business, which
has lost some pricing power in the
short term. Cereal as a breakfast
option has been replaced by protein.
The company has increased its market
share to 11% of the cereal industry.
There has been some talk of
consolidation in this market. I have
called Bill Stiritz, the chairman, a
cereal acquirer. In the past two years,
he has bought 12 companies for $4.4
billion. Most recently, he acquired
Michael Foods, which sells egg whites,
among other food products. Post could
benefit from buying something in the
organic area.
Barrons: What are the numbers for
Gabelli: Post has about 62 million fully
diluted shares. The company posted
revenue of $2.4 billion for the fiscal
year ended last September. Helped by
acquisitions and organic growth,
revenue could climb to $4.5 billion in
the current fiscal year. EBITDA this
year will be about $575 million,
growing nicely in the next three or four
years due to synergies and
consolidation. Post is rolling up food
companies with a management team
engineering. Earnings will march
higher in the next few years, helped by
lower interest expense. Post could
earn $2.10 a share for fiscal 2017. The
company could have some near-term
challenges, but it has good longerterm prospects.
Black: From an operating standpoint,
didnt Post have disappointing revenue
and operating earnings in the past few
Gabelli: Stiritz has been buying
companies in the private-label food
business that fit into Posts distribution

network. He has also been buying

branded products and companies in
the nutritional foods business. When
you buy 11 or 12 companies in a short
amount of time, you will have some
short-term challenges. This is true in
any roll-up business. It is worth looking
two or three years down the road.

International Cellular (MIICF), a

wireless telecom company serving
Africa and Latin America. It could be
an attractive asset as the industry

In the midyear Roundtable, I recommended Kinnevik (KINVA.Sweden).

The company is based in Stockholm
and run by Cristina Stenbeck, a
granddaughter of one of the founders.
There are 42 million super-voting A
shares, of which the controlling family
owns 34 million. There are 235 million
B shares that have one vote apiece.
The stock is selling for 248 Swedish
kronor [$29.98]. When a company in
Sweden owns more than 10% of
another company and sells its stake, it
doesnt have to pay a tax on the profits.
That isnt the case in the U.S., where
you would have to engage in all sorts of
financial engineering to avoid the tax.

Gabelli: Kinnevik has been investing

in Rocket, an e-commerce business
incubator. Rocket is an investor in
many e-commerce companies. Rocket
went public three months ago.
Kinnevik is selling at a significant
discount to its holdings. It is constantly
juggling its assets.

Kinnevik owns other companies, and

has a marked-to-market portfolio worth
about SEK300 a share. One of its
biggest holdings is a stake in Millicom

Barrons: Remind us what else

Kinnevik owns.

Last, but not least, I want to talk about

pet care [puts on a baseball cap that
says WOOF]. VCA (VCA) handed out
these hats when it went public. There
are 96 million companion cats and 83
million dogs in the U.S. Spending per
animal is rising. You dont have to worry
about the Affordable Care Act when
you take care of your dog or cat.
AmerisourceBergen (ABC) announced today [Jan. 12] that it is
tendering for MWI Veterinary Supply
(MWIV) at $190 a share, or close to 20

times EBITDA. In the past, I

recommended Patterson Dental, now
called Patterson (PDCO), which
distributes dental and veterinary
supplies. There are 104 million shares,
and the stock is around $50. The
market cap is $5 billion.
On the dental side, Patterson is the
exclusive distributor in the U.S. for
Cerec, Sirona Dental Systems
(SIRO) industry leading dental
exclusive relationship with Sirona and
Cerec could end as early as 2017. In
addition, lumpiness for dental
equipment buying patterns has caused
lumpiness in reported revenue and
Patterson could earn $2.30 per share
in the year ending April. Earnings
could top $3 in the next three or four
years. Based on those earnings and
EBITDA assumptions, Patterson could
command a price of more than $80 per
share. The MWI acquisition price puts
a focus and a valuation baseline on
Barrons: Thank you, Mario, and

Mario J. Gabelli is the Chairman and Chief Executive Officer of GAMCO Investors, Inc. and Portfolio Manager of various
investment products at the Firm. The securities mentioned in the article are not representative of any portfolio, and the
views expressed are subject to change at any time.
As of December 31, 2014, The Gabelli Asset Fund held, as a percentage of its net assets, the following companies
mentioned in this article: 0.1% of Ryman Hospitality Properties, 1.8% of DirecTV, 0.1% of Kinnevik Class A, 0.1% of
Millicom International Cellular, 0.1% of Patterson Dental, 0.2% of MGM Resorts International, 0.2% of Post Holdings, 0.1%
of Graham Holdings Co., 0.1% of Kinnevik Class B, 0.2% of Discovery Communications Series A, 0.5% of Discovery
Communications Series C, 0.1% of Amerisource Bergen, 0.2% of Liberty Media Class A, 0.4% of Liberty Media Class C,
0.1% of Liberty Broadband Series A, 0.2% of Chemtura, 0.1% of Liberty Broadband Series C, 1.3% of Berkshire Hathaway,
less than 0.1% of Liberty Broadband Series B, and no shares of Sirona Dental Systems, Cable & Wireless
Communications, VCA, Marriott International, and MWI Veterinary Supply.
A complete listing of the Funds portfolio holdings as of December 31, 2014 and a prospectus are available by calling the
Fund at 800-GABELLI (800-422-3554) or by visiting our website at Investors should carefully consider
the investment objectives, risks, charges, and expenses of the Fund before investing. The prospectus contains information
about these and other matters and should be read carefully before investing.
The views expressed in this article reflect those of the Portfolio Manager only through the date of the interview. Minor edits
were made. The Portfolio Managers views are subject to change at any time based on market and other conditions.
Favorable earnings or EBITDA (earnings before interest, taxes, depreciation, and amortization), or growth prospects do not
necessarily translate into higher stock prices, but they do express a positive trend that we believe will develop over time.
The information contained in this article is 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 which such offer or solicitation, purchase, or sale would be unlawful under the
securities or other laws of the jurisdiction.

As bottom up stock pickers, we didnt hazard guesses at these numbers last year and we wont again this
year. However, we were admittedly surprised at just what a constructive environment for U.S. stocks it turned
out to be. With no other context, a year end perusal of the first six statistics would indicate that the U.S. economy
should be on increasingly firmer footing. The market, it seems, got it right in 2014.
Unfortunately, that conclusion is made in a vacuum with the benefit of hindsight. Reality has been more
eventful skirmishes in the Ukraine, ISIS reign of terror in the Middle East and the spread of the Ebola virus
added plenty of what, for now, appears to have been noise to the investment mosaic. More recently, the 40%+
crash in oil prices has been a focus. This development has spurred important questions about what triggered
the decline and how it might affect the global economy. Have prices collapsed because of increased supply, in
part from growth of U.S. shale production, and strategic inaction by the Saudis, or has demand abated due to
a slowdown in global growth? Will lower prices lead to greater political instability in places like Russia, the
Middle East and Venezuela? Can savings by the consumer at the pump offset the negative impact of oil
industry job losses and investment cuts? The answers to these questions are as yet unclear.
Notwithstanding the uncertainty around the culprits and implications for falling commodity prices, todays
leading indicators would lead one to believe that the odds of continuing improvement in the U.S. economy have
increased. But world events could be more than just distractions for the market in 2015. Sometimes noise is
meaningful and sometimesits just noise. Our job as analysts is not to make idle predictions, but to construct
an adaptable world view that is informed by new and changing data and to make stock selections based on
that view.
All this reinforces our belief in two differentiating aspects of our process and philosophy. First, we are
fundamentally bottom up stock pickers. We have chosen to focus on the companies in a subset of industries
in which sustainable competitive advantages can be cultivated. Volatile and unpredictable crude prices, for
example, are reasons we tend to avoid the energy sector and gravitate to less commoditized industries.
Second, we are value investors. Our contribution to the body of work begun by Benjamin Graham and David
Dodd has been the concept of Private Market Value (PMV) with a CatalystTM we seek businesses selling in
the public markets at a substantial discount to their PMVs and for which we can identify one or more events
that will narrow that discount. We tend to gravitate toward hard assets and cash flow and away from visions of
grandeur that may or may not occur in the future.
What Worked in 2014
Our focus on financial engineering and dealmaking bore fruit last year. In January, our ownership of Beam
Inc. was rewarded when Suntory (less than 0.1% of net assets as of December 31, 2014) of Japan offered to
purchase Beam at $83.50 per share, a transaction which closed on the last day of April. In May, the remaining
piece of Sara Lee, known as Hillshire Brands, made an ill-advised bid for Pinnacle Foods. Hillshires
management path to remain independent, as the company approached its two year anniversary as a public
company, backfired. It led (much to our delight) to a bidding war between JBS Pilgrims Pride and Tyson Foods
(less than 0.1%), with Tyson Foods the victor. Tysons purchase of Hillshire at $63 per share closed in July. In
media, DIRECTV (1.8%), once a tracker stock of General Motors (less than 0.1%), then a holding of Dr. John
Malones Liberty Entertainment, agreed to a sale to AT&T (less than 0.1%) for $95 per share in cash and stock.
Dr. Malone continued to be the most prolific financial engineer, giving birth to two new companies, Liberty
TripAdvisor (less than 0.1%) and Liberty Broadband (0.2%), while repositioning other assets.

Other Fund holdings announced restructurings including The Madison Square Garden Co. (0.9%), itself
a February 2010 spin-off of Cablevision (1.0%), which is evaluating the separation of its entertainment segment
from its Sports and its Entertainment segments. Graham Holdings Company (less than 0.1%), formerly the
Washington Post Company, announced it would spin-off its cable unit in a year in which it was rewarded for
concluding a cash-rich split-off transaction with Berkshire Hathaway (1.3%). Energizer (1.4%) announced it
would split its Household Products and Personal Care businesses, with each company possibly following the
path of Sara Lee into the arms of acquirers. Finally, in the fourth quarter, Chemtura (0.2%) completed the sale
of its AgroSolutions business and launched a Dutch auction to re-deploy cash via a capitalization shrink. Many
other holdings have catalysts in place, with Sony Corp. (0.5%), CBS (0.5%) and Viacom (1.0%), among others,
prime candidates for change.
The Funds returns, relative to its benchmark, were negatively impacted by our investment in small
capitalization stocks and our underweighting of certain strongly performing sectors including utilities and
biotechnology. In keeping with the philosophy outlined above, we do not allocate assets to market sectors on
a top-down basis. Unfortunately, at times areas where we possess accumulated compounded knowledge fall
out of favor 2014 was one of those periods. While small caps and media, for example, might not immediately
revert to market leadership, over an investment cycle we are confident our stock selection in those areas
should be rewarded.
Lets Talk Stocks
The following are stock specifics on selected holdings of the Fund. Favorable earnings prospects do not
necessarily translate into higher stock prices, but they do express a positive trend that we believe will develop
over time. Individual securities mentioned are not necessarily representative of the entire portfolio. For the
following holdings, the percentage of net assets and their share prices are presented as of December 31, 2014.
American Express Co. (1.7% of net assets as of December 31, 2014) (AXP $93.04 NYSE) is the largest
closed-loop credit card company in the world. The company operates its eponymous premiere branded
payment network and lends to its largely affluent customer base. American Express has 110 million cards in
force and over $67 billion in loans, while its customers charged nearly $950 billion of spending on their cards
in 2013. The companys strong consumer brand has allowed American Express to enter the deposit gathering
market as an alternate source of funding, while the companys affluent customers have picked up spending.
Longer term, American Express should capitalize on its higher spending customer base and continue to
expand into other payment related businesses, such as corporate purchasing, while also growing in emerging
markets. Similarly, the company is looking at the growing success of social media as an opportunity to expand
its product base and payment options.
Berkshire Hathaway Inc. (1.3%) (BRK/A $226,000.00 NYSE), based in Omaha, Nebraska, is the holding
company for a diverse group of operating subsidiaries, including insurance, freight rail transportation, utilities
and energy, finance, services, and retailing. The subsidiaries operate in an autonomous fashion, while
investment and capital allocation decisions are managed by 82 year-old Warren Buffett in consultation with
89 year-old Charlie Munger. From 1995 through December 31, 2013, the firm had an annual compounded gain
on book value of 19.7%.
CVS Health Corp. (0.9%) (CVS $96.31 NYSE) is a pharmacy innovation company helping people on their
path to better health. Through their 7,800 retail pharmacies, more than 900 walk-in medical clinics, a leading
pharmacy benefits manager with nearly 65 million plan members, and expanding specialty pharmacy services,
CVS Health enables people, businesses and communities to manage health in more affordable, effective ways.

Their unique integrated model increases access to quality care, delivers better health outcomes and lowers
overall health care costs.
DIRECTV (1.8%) (DTV $86.70 NASDAQ) is the largest pay television provider in the world, with over
twenty million subscribers in the U.S. and over twelve million throughout Latin America. Originally part of
General Motors (less than 0.1%), DTV used its technological advantage, focus on high income customers,
recognition of the necessity for superior customer service, and clever (Sunday Ticket) participation in exclusive
sports programming to cement its position in the U.S. The company used essentially the same strategy in Latin
America, where it is benefiting from the growth of the middle class in countries such as Brazil and Colombia.
Atop a superior operating business, DTV has layered a capital structure that maximizes equity returns. The
company has used modest leverage to repurchase stock, in the process cutting its shares outstanding by more
than half over the last five years. Long of interest to its telecom distribution partners, AT&T (less than 0.1%)
agreed to acquire the company in April 2014 for $95 per share in cash and stock. We expect the transaction
to be approved and close in the first half of 2015.
Energizer Holdings Inc. (1.4%) (ENR $128.56 NYSE) became an independent company after it was spun
off from Ralston Purina in April 2000. Energizer manufactures, markets and sells dry cell batteries and lighting
products worldwide. Subsequently, Energizer expanded its product portfolio through acquisitions, including
Schick-Wilkinson Sword (2003), Playtex (2007), Edge/Skintimate (2009), American Safety Razor (2010), and
most recently, Johnson & Johnsons (0.3%) feminine hygiene brands (2013). Today, Energizer reports results
for two segments: Household ($1.8 billion of revenue), which includes the domestic and international battery
businesses and Personal Care ($2.6 billion), which includes wet shaving, skin, feminine and infant care. In
April 2014, ENR announced its intention to split the company into two publicly traded firms through a tax-free
spin-off of the Household division. The transaction is expected to be completed by July 2015. This may be the
first step in realizing the full value of the two businesses, as both divisions may be more attractive acquisition
candidates on a standalone basis.
Genuine Parts Co. (1.6%) (GPC $106.57 NYSE) is an Atlanta based distributor of automotive and industrial
replacement parts, office products, and electrical and electronic components. We expect GPCs well known
NAPA Auto Parts group to benefit as an aged vehicle population, which includes the highest percentage of off
warranty vehicles in history, helps drive sales of automotive aftermarket products over the next several years.
Additionally, economic indicators remain supportive of the companys industrial and electrical parts distribution
businesses amid steady economic expansion. Finally, GPCs management has shown consistent dedication to
shareholder value via share repurchases and dividend increases.
Honeywell International Inc. (1.2%) (HON $99.92 NYSE) is a Fortune 100 company that invents and
manufactures technologies to address some of the worlds toughest challenges linked to global macrotrends
such as energy efficiency, clean energy generation, safety and security, globalization and customer
productivity. Based in Morris Township, New Jersey, the company employs approximately 132,000 people
worldwide, including more than 22,000 engineers and scientists.
Liberty Global plc (0.2%, 0.8%) (LBTYK $48.31 NASDAQ, LBTYA $50.21 NASDAQ) is the leading
international cable operator, offering advanced video, telephone, and broadband internet services. The
company operates broadband communications networks in 14 countries, principally located in Europe under
the brands UPC, Unitymedia (Germany), Virgin (UK), Telenet (Belgium), and VTR (Chile). As part of its June
2013 acquisition of Virgin Media, Liberty Global redomiciled in the UK, increasing its strategic flexibility in the
future. The company is internationally focused and well positioned to capitalize on the growing demand for
digital television, broadband internet, and digital telephony services in markets across its diverse geographic

footprint. The company closed its acquisition of Netherlands cable operator Ziggo, among its largest to date,
in November 2014. In an effort to surface additional value, in early 2015 Liberty Global is expected to issue a
stock tracking its Latin American operations.
National Fuel Gas Co. (0.5%) (NFG $69.53 NYSE) is a diversified natural gas company. NFG owns a
regulated gas utility serving the region around Buffalo, New York, gas pipelines that move gas between the
Midwest and Canada and from the Marcellus to the Northeast, gathering and processing systems, and an oil and
gas exploration and production business. NFGs regulated utility and pipeline businesses, as well as its California
oil production business, provide stable earnings and cash flows to support the dividend, while the natural gas
production business offers significant upside potential. NFGs ownership of 800,000 acres in the Marcellus shale,
including 745,000 acres in the shale fairway of Pennsylvania, holds enormous natural gas reserve potential, and
we believe the position could be worth $3.5 billion based on recent comparable transactions. We continue to
expect above average long term earnings and cash flow growth from rapidly growing gas production and
expansion of the strategically located pipeline network. The company has increased its dividend for over forty
consecutive years. In addition, NFG is considering corporate restructuring alternatives, such as a master
limited partnership (MLP) of its midstream assets.
Time Warner Inc. (0.3%) (TWX $152.06 NYSE), located in New York, New York, is a diversified media
company with operations in cable networks through HBO, TNT, TBS & CNN, and film & television production.
We like the companys cable networks, high margins and low capital intensity. We expect the company to use
its free cash flow to return capital to shareholders through its $1.27 per share dividend and aggressive share
repurchases. Following the $85 per share bid by Twenty-First Century Fox (2.2%), we expect Time Warner
could be an acquisition target.
Walgreens Boots Alliance Inc. (0.1%) (WBA $76.20 NYSE), based in Deerfield, Illinois is now the worlds
largest retail pharmacy chain and drug wholesaler. After several years of uneven performance, the company
is undergoing a complete management change as part of its just completed merger with Alliance Boots. Boots
Chairman Stefano Pessina will lead the company on an interim basis as it searches for a permanent leader
with global retail and pharmacy experience. New CFO Tim McLevish is aggressively cutting costs, accelerating
the integration of Alliance Boots, and returning more cash to shareholders. While there is still a lot of work left
to do, we believe that the combined company should be a global leader with significant free cash flow once the
integration is complete.
Investment Scorecard
The top contributors to performance for 2014 included takeover targets DIRECTV (1.8% of net assets as
of December 31, 2014) (+25%), Hillshire Brands (+90%), and Beam Inc. (+23%). Automotive parts retailers
Genuine Parts (1.6%) (+31%) and OReilly Automotive (0.9%) (+50%) and pharmacy CVS Health (0.9%) (+37%)
performed well in a benign consumer environment. Actavis (0.3%) (+53%) continued its string of accretive
acquisitions, and Berkshire Hathaways (1.3%) (+27%) businesses were strong, contributing positively to
Fund results.
Detractors from performance included Rolls-Royce (0.8%) (-34%), which committed execution
missteps against a background of weak defense and marine markets, Flowserve (1.0%) (-23%),
and Weatherford International (0.3%) (-26%) which were impacted late in the year by the fall in oil prices, and
Diageo (1.0%) (-11%), which faced slowing emerging markets growth. Media holdings Viacom (1.0%) (-13%)
and Discovery Communications (0.7%) (-20%) reported soft advertising trends and are plagued by
concerns over a potential shift in consumer viewing behavior.

While most signs point towards an improving U.S. economy, certain geopolitical dynamics are
concerning. The markets response to the potential for increased interest rates is also in question. As a result,
2015 could be a volatile year in which we will seek opportunity. Our focus remains on generating superior tax
efficient, inflation adjusted returns by relying upon our time tested people, process and Private Market Value
(PMV) with a CatalystTM philosophy. Our embrace of this philosophy and process has demonstrated superior
returns over the history of our firm and we have confidence this should remain the case in the future.
January 8, 2015

Top Ten Holdings (Percent of Net Assets)

December 31, 2014
Twenty-First Century Fox Inc. 2.5%
AMETEK Inc. 1.7%
American Express Co. 1.7%
Genuine Parts Co. 1.6%

Brown-Forman Corp. 1.6%

IDEX Corp. 1.5%
Deere & Co. 1.5%
Precision Castparts Corp. 1.4%
Energizer Holdings Inc. 1.4%

Note: The views expressed in this Shareholder Commentary reflect those of the Portfolio Managers only through
the end of the period stated in this Shareholder Commentary. The Portfolio Managers views are subject to
change at any time based on market and other conditions. The information in this Portfolio Managers
Shareholder Commentary represents the opinions of the individual Portfolio Managers and is not intended to be
a forecast of future events, a guarantee of future results, or investment advice. Views expressed are those of
the Portfolio Managers and may differ from those of other portfolio managers or of the Firm as a whole. This
Shareholder Commentary does not constitute an offer of any transaction in any securities. Any recommendation
contained herein may not be suitable for all investors. Information contained in this Shareholder Commentary
has been obtained from sources we believe to be reliable, but cannot be guaranteed.
Minimum Initial Investment $1,000
The Funds minimum initial investment for regular accounts is $1,000. There are no subsequent
investment minimums. No initial minimum is required for those establishing an Automatic Investment Plan.
Additionally, the Fund and other Gabelli/GAMCO Funds are available through the no-transaction fee programs
at many major brokerage firms. The Fund imposes a 2% redemption fee on shares sold or exchanged within
seven days after the date of purchase. See the prospectuses for more details.
Please visit us on the Internet. Our homepage at contains information about GAMCO
Investors, Inc., the Gabelli/GAMCO Mutual Funds, IRAs, 401(k)s, current and historical quarterly reports,
closing prices, and other current news. We welcome your comments and questions via e-mail at


The Funds daily NAV is available in the financial press and each evening after 7:00 PM (Eastern Time)
by calling 800-GABELLI (800-422-3554). The Funds Nasdaq symbol is GABAX for Class AAA Shares. Please
call us during the business day, between 8:00 AM 7:00 PM (Eastern Time), for further information.
You may sign up for our e-mail alerts at and receive early notice of quarterly report
availability, news events, media sightings, and mutual fund prices and performance.
We are pleased to offer electronic delivery of Gabelli fund documents. Direct shareholders of our mutual
funds can elect to receive their Annual and Semiannual Reports, Manager Commentaries, and Prospectus via
e-delivery. For more information or to sign up for e-delivery, please visit our website at
Multi-Class Shares
The Gabelli Asset Fund began offering additional classes of Fund shares on December 31, 2003. Class
AAA Shares are no-load shares offered directly through selected broker/dealers. Class A and Class C Shares
are targeted to the needs of investors who seek advice through financial consultants. Class I Shares are
available directly through the Funds distributor or brokers that have entered into selling agreements specifically
with respect to Class I Shares. The Board of Trustees determined that expanding the types of Fund shares
available through various distribution options will enhance the ability of the Fund to attract additional investors.

Morningstar Rating is based on risk-adjusted returns. The Overall Morningstar Rating is derived from a weighted average
of the performance figures associated with a funds three, five, and ten year (if applicable) Morningstar Rating metrics. For
funds with at least a three year history, a Morningstar Rating is based on a risk-adjusted return measure (including the
effects of sales charges, loads, and redemption fees) placing more emphasis on downward variations and rewarding
consistent performance. That accounts for variations in a funds monthly performance. The top 10% of funds in each
category receive 5 stars, the next 22.5% 4 stars, the next 35% 3 stars, the next 22.5% 2 stars, and the bottom 10% 1 star.
(Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight
variations in the distribution percentages.) Morningstar Rating is for the AAA Share class only; other classes may have
different performance characteristics. Ratings reflect relative performance. Results for certain periods were negative. 2014
Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content
providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither
Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.


Gabelli/GAMCO Funds and Your Personal Privacy

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 and
GAMCO Asset Management Inc., which are affiliated with GAMCO Investors, Inc. GAMCO Investors,
Inc. is a publicly held company that has subsidiaries that provide investment advisory or brokerage
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:
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.
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 serviceslike a
transfer agentwe will also have information about the transactions that you conduct through them.
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,
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.


One Corporate Center
Rye, NY 10580-1422

Portfolio Management Team Biographies

Mario J. Gabelli, CFA, is Chairman and Chief Executive Officer of GAMCO Investors, Inc. that he founded in
1977 and Chief Investment Officer Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management
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.
Kevin V. Dreyer joined Gabelli in 2005 as a research analyst covering companies within the consumer sector.
He currently serves as a portfolio manager of Gabelli Funds, LLC and manages several funds within the
Gabelli/GAMCO Funds Complex. Mr. Dreyer received a BSE from the University of Pennsylvania and an MBA
from Columbia Business School.
Jeffrey J. Jonas, CFA, joined Gabelli in 2003 as a research analyst. He focuses on companies in the
cardiovascular, healthcare services, and pharmacy benefits management sectors, among others. He also
serves as a portfolio manager of Gabelli Funds, LLC and manages several funds within the Gabelli/GAMCO
Funds Complex. Mr. Jonas was a Presidential Scholar at Boston College, where he received a BS in Finance
and Management Information Systems.
Christopher J. Marangi joined Gabelli in 2003 as a research analyst. He currently serves as a portfolio
manager of Gabelli Funds, LLC and manages several funds within the Gabelli/GAMCO Funds Complex.
Mr. Marangi graduated magna cum laude and Phi Beta Kappa with a BA in Political Economy from Williams
College and holds an MBA with honors from Columbia Business School.


One Corporate Center
Rye, NY 10580-1422
t 800-GABELLI (800-422-3554)
f 914-921-5118
G A B E L L I .C O M
Net Asset Value per share available daily
by calling 800-GABELLI after 7:00 P.M.

Mario J. Gabelli, CFA
Chairman and
Chief Executive Officer,
GAMCO Investors, Inc.
Anthony J. Colavita
Anthony J. Colavita, P.C.
James P. Conn
Former Chief Investment Officer,
Financial Security Assurance
Holdings Ltd.
John D. Gabelli
Senior Vice President,
G.research, Inc.
Kuni Nakamura
Advanced Polymer, Inc.
Anthony R. Pustorino
Certified Public Accountant,
Professor Emeritus,
Pace University
Werner J. Roeder, MD
Former Medical Director,
Lawrence Hospital

Anthonie C. van Ekris

BALMAC International, Inc.
Salvatore J. Zizza
Zizza & Associates Corp.

Bruce N. Alpert
Andrea R. Mango
Agnes Mullady
Richard J. Walz
Chief Compliance Officer

Shareholder Commentary
December 31, 2014

G.distributors, LLC

State Street Bank and Trust Company

Skadden, Arps, Slate, Meagher &
Flom LLP

This report is submitted for the general information of the

shareholders of The Gabelli Asset Fund. It is not
authorized for distribution to prospective investors unless
preceded or accompanied by an effective prospectus.

Overall Morningstar Rating TM

Morningstar rated The Gabelli Asset Fund Class AAA Shares 4 stars
overall, 2 stars for the three year period, 3 stars for the five year
period, and 5 stars for the ten year period ended December 31, 2014
among 1,336, 1,336, 1,193, and 812 Large Blend funds, respectively.
Morningstar Rating is based on risk-adjusted returns.
G A B 4 0 5 Q 41 4 S C


Overall Morningstar Rating TM

Morningstar Rating is based

on risk-adjusted returns.