N-CSRS 1 growth_ncsr0606.txt GAMCO GROWTH SEMI-ANNUAL 06/30/06 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 811-04873 --------- The GAMCO Growth Fund ------------------------------------------------ (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, 2006 -------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. The Report to Shareholders is attached herewith. THE GAMCO GROWTH FUND SEMI-ANNUAL REPORT JUNE 30, 2006 TO OUR SHAREHOLDERS, During the second quarter of 2006, The GAMCO Growth Fund (the "Fund") declined 4.0%, while the Russell 1000 Growth Index and the Standard & Poor's ("S&P") 500 Index were down 3.9% and 1.4%, respectively. For the six month period ended June 30, 2006, the Fund declined 0.5% versus a loss of 0.9% for the Russell 1000 Growth Index and a gain of 2.7% for the S&P 500 Index. Enclosed are the financial statements and the investment portfolio as of June 30, 2006.
COMPARATIVE RESULTS --------------------------------------------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 2006 (A) ------------------------------------------------ Since Year to Inception Quarter Date 1 Year 3 Year 5 Year 10 Year 15 Year (4/10/87) ------- ---- ------ ------ ------ ------- ------- --------- GAMCO GROWTH FUND CLASS AAA .... (3.95)% (0.49)% 10.02% 10.69% (1.66)% 7.16% 9.62% 11.40% S&P 500 Index .................. (1.44) 2.71 8.62 11.21 2.49 8.32 10.73 10.32 Russell 1000 Growth Index ...... (3.90) (0.93) 6.12 8.35 (0.76) 5.42 N/A* N/A* Class A ........................ (3.98) (0.49) 10.01 10.70 (1.65) 7.17 9.62 11.41 (9.50)(b) (6.21)(b) 3.69(b) 8.54(b) (2.81)(b) 6.53(b) 9.19(b) 11.07(b) Class B ........................ (4.16) (0.85) 9.20 10.00 (2.03) 6.96 9.48 11.30 (8.95)(c) (5.80)(c) 4.20(c) 9.17(c) (2.42)(c) 6.96(c) 9.48(c) 11.30(c) Class C ........................ (4.12) (0.85) 9.20 10.00 (2.03) 6.96 9.48 11.30 (5.08)(c) (1.84)(c) 8.20(c) 10.00(c) (2.03)(c) 6.96(c) 9.48(c) 11.30(c)
-------------------------------------------------------------------------------- (a) RETURNS REPRESENT PAST PERFORMANCE AND DO NOT GUARANTEE FUTURE RESULTS. TOTAL RETURNS AND AVERAGE ANNUAL RETURNS REFLECT CHANGES IN SHARE PRICE AND REINVESTMENT OF DISTRIBUTIONS AND ARE NET OF EXPENSES. INVESTMENT RETURNS AND THE PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. WHEN SHARES ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PERFORMANCE RETURNS FOR PERIODS LESS THAN ONE YEAR ARE NOT ANNUALIZED. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA PRESENTED. VISIT WWW.GABELLI.COM FOR PERFORMANCE INFORMATION AS OF THE MOST RECENT MONTH END. INVESTORS SHOULD CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES, AND EXPENSES OF THE FUND BEFORE INVESTING. THE PROSPECTUS CONTAINS MORE INFORMATION ABOUT THIS AND OTHER MATTERS AND SHOULD BE READ CAREFULLY BEFORE INVESTING. THE CLASS AAA SHARES' NET ASSET VALUES ARE USED TO CALCULATE PERFORMANCE FOR THE PERIODS PRIOR TO THE ISSUANCE OF CLASS A SHARES, CLASS B SHARES, AND CLASS C SHARES ON DECEMBER 31, 2003. THE ACTUAL PERFORMANCE FOR THE CLASS B SHARES AND CLASS C SHARES WOULD HAVE BEEN LOWER DUE TO THE ADDITIONAL EXPENSES ASSOCIATED WITH THESE CLASSES OF SHARES. THE S&P 500 INDEX AND THE RUSSELL 1000 GROWTH INDEX ARE UNMANAGED INDICATORS OF STOCK MARKET PERFORMANCE. DIVIDENDS ARE REINVESTED. (b) INCLUDES THE EFFECT OF THE MAXIMUM 5.75% SALES CHARGE AT THE BEGINNING OF THE PERIOD. (c) INCLUDES THE EFFECT OF THE APPLICABLE CONTINGENT DEFERRED SALES CHARGE AT THE END OF THE PERIOD SHOWN FOR CLASS B AND CLASS C SHARES, RESPECTIVELY. CLASS B SHARES ARE NOT AVAILABLE FOR NEW PURCHASES. * THERE IS NO DATA AVAILABLE FOR THE RUSSELL 1000 GROWTH INDEX PRIOR TO AUGUST 31, 1992. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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. The financial statements and investment portfolio are mailed separately from the commentary. Both the commentary and the financial statements, including the portfolio of investments, will be available on our website at www.gabelli.com/funds. -------------------------------------------------------------------------------- THE GAMCO GROWTH FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) For the Six Month Period from January 1, 2006 through June 30, 2006 EXPENSE TABLE -------------------------------------------------------------------------------- We believe it is important for you to understand the impact of fees and expenses regarding your investment. All mutual funds have operating expenses. As a shareholder of a fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund's gross income, directly reduce the investment return of a fund. When a fund's expenses are expressed as a percentage of its average net assets, this figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your Fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period. The Expense Table below illustrates your Fund's costs in two ways: ACTUAL FUND RETURN: This section provides information about actual account values and actual expenses. You may use this section to help you to estimate the actual expenses that you paid over the period after any fee waivers and expense reimbursements. The "Ending Account Value" shown is derived from the Fund's ACTUAL return during the past six months, and the "Expenses Paid During Period" shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your Fund under the heading "Expenses Paid During Period" to estimate the expenses you paid during this period. HYPOTHETICAL 5% RETURN: This section provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio. It assumes a hypothetical annualized return of 5% before expenses during the period shown. In this case - because the hypothetical return used is NOT the Fund's actual return - the results do not apply to your investment and you cannot use the hypothetical account value and expense to estimate the actual ending account balance or expenses you paid for the period. This example is useful in making comparisons of the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads), redemption fees, or exchange fees, if any, which are described in the Prospectus. If these costs were applied to your account, your costs would be higher. Therefore, the 5% hypothetical return is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. The "Annualized Expense Ratio" represents the actual expenses for the last six months and may be different from the expense ratio in the Financial Highlights which is for the six months ended June 30, 2006. Beginning Ending Annualized Expenses Account Value Account Value Expense Paid During 01/01/06 06/30/06 Ratio Period* -------------------------------------------------------------------------------- THE GAMCO GROWTH FUND -------------------------------------------------------------------------------- ACTUAL FUND RETURN Class AAA $1,000.00 $ 995.10 1.49% $ 7.37 Class A $1,000.00 $ 995.10 1.49% $ 7.37 Class B $1,000.00 $ 991.50 2.24% $11.06 Class C $1,000.00 $ 991.50 2.24% $11.06 HYPOTHETICAL 5% RETURN Class AAA $1,000.00 $1,017.41 1.49% $ 7.45 Class A $1,000.00 $1,017.41 1.49% $ 7.45 Class B $1,000.00 $1,013.69 2.24% $11.18 Class C $1,000.00 $1,013.69 2.24% $11.18 * Expenses are equal to the Fund's annualized expense ratio for the last six months multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 365. 2 SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED) The following table presents portfolio holdings as a percent of total net assets as of June 30, 2006: THE GAMCO GROWTH FUND Financial ......................................... 14.4% Industrial ........................................ 14.1% Energy ............................................ 13.1% Software & Services ............................... 13.1% Consumer Staples .................................. 12.2% Health Care Equipment & Services .................. 7.2% Pharmaceuticals & Biotechnology ................... 5.3% Retail ............................................ 5.0% Materials ......................................... 2.9% Semiconductors .................................... 2.9% Media ............................................. 2.2% Communications Equipment .......................... 2.0% U.S. Treasury Bills ............................... 1.8% Hotels and Gaming ................................. 1.8% Computers & Peripheral ............................ 1.4% Auto & Components ................................. 0.6% Telecommunications ................................ 0.3% Other Assets and Liabilities (Net) ................ (0.3)% ------ 100.0% ====== THE FUND FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SEC FOR THE FIRST AND THIRD QUARTERS OF EACH FISCAL YEAR ON FORM N-Q, THE LAST OF WHICH WAS FILED FOR THE QUARTER ENDING MARCH 31, 2006. SHAREHOLDERS MAY OBTAIN THIS INFORMATION AT WWW.GABELLI.COM OR BY CALLING THE FUND AT 800-GABELLI (800-422-3554). THE FUND'S FORM N-Q IS AVAILABLE ON THE SEC'S WEBSITE AT WWW.SEC.GOV AND MAY ALSO BE REVIEWED AND COPIED AT THE COMMISSION'S PUBLIC REFERENCE ROOM IN WASHINGTON, DC. INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM MAY BE OBTAINED BY CALLING 1-800-SEC-0330. PROXY VOTING The Fund files Form N-PX with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. A description of the Fund's proxy voting policies, procedures, and how the Fund voted proxies relating to portfolio securities is available without charge, upon request, (i) by calling 800-GABELLI (800-422-3554); (ii) by writing to The Gabelli Funds at One Corporate Center, Rye, NY 10580-1422; and (iii) by visiting the Securities and Exchange Commission's website at www.sec.gov. 3 THE GAMCO GROWTH FUND SCHEDULE OF INVESTMENTS -- JUNE 30, 2006 (UNAUDITED) -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ COMMON STOCKS -- 98.5% CONSUMER DISCRETIONARY -- 9.6% AUTO & COMPONENTS -- 0.6% 65,000 Harley-Davidson Inc. ................. $ 3,103,572 $ 3,567,850 35,000 PACCAR Inc. .......................... 2,688,047 2,883,300 ------------ -------------- 5,791,619 6,451,150 ------------ -------------- HOTELS AND GAMING -- 1.8% 140,000 Boyd Gaming Corp. .................... 6,809,155 5,650,400 50,000 Hilton Hotels Corp. .................. 1,435,487 1,414,000 65,000 Las Vegas Sands Corp.+ ............... 3,138,604 5,060,900 50,000 Marriott International Inc., Cl. A ... 1,850,822 1,906,000 10,000 MGM Mirage+ .......................... 461,368 408,000 20,000 Starwood Hotels & Resorts Worldwide Inc. 1,245,751 1,206,800 30,000 Station Casinos Inc. ................. 2,334,008 2,042,400 ------------ -------------- 17,275,195 17,688,500 ------------ -------------- MEDIA -- 2.2% 150,000 McGraw-Hill Companies Inc. ........... 3,798,929 7,534,500 210,000 News Corp., Cl. B .................... 4,077,630 4,237,800 590,000 Time Warner Inc. ..................... 8,983,471 10,207,000 ------------ -------------- 16,860,030 21,979,300 ------------ -------------- RETAIL -- 5.0% 60,000 Bed Bath & Beyond Inc.+ .............. 2,495,780 1,990,200 45,000 Best Buy Co. Inc. .................... 1,740,507 2,467,800 215,000 Cheesecake Factory Inc.+ ............. 5,475,834 5,794,250 120,000 Chico's FAS Inc.+ .................... 4,862,592 3,237,600 90,000 Coach Inc.+ .......................... 2,173,159 2,691,000 50,000 Costco Wholesale Corp. ............... 2,306,609 2,856,500 65,000 Kohl's Corp.+ ........................ 3,619,108 3,842,800 20,000 Staples Inc. ......................... 535,024 486,400 80,000 Starbucks Corp.+ ..................... 1,803,156 3,020,800 155,000 Target Corp. ......................... 6,785,649 7,574,850 206,577 The Home Depot Inc. .................. 5,685,167 7,393,391 213,400 Tiffany & Co. ........................ 5,707,333 7,046,468 150,000 Urban Outfitters Inc.+ ............... 4,576,941 2,623,500 ------------ -------------- 47,766,859 51,025,559 ------------ -------------- TOTAL CONSUMER DISCRETIONARY ......... 87,693,703 97,144,509 ------------ -------------- CONSUMER STAPLES -- 12.2% 30,000 Cadbury Schweppes plc, ADR ........... 1,225,209 1,164,600 230,000 Groupe Danone, ADR ................... 5,162,291 6,134,100 60,000 Nestle SA, ADR ....................... 4,446,450 4,702,038 450,000 PepsiCo Inc. ......................... 22,100,648 27,018,000 485,000 Procter & Gamble Co. ................. 26,316,250 26,966,000 190,000 The Hershey Co. ...................... 10,419,937 10,463,300 280,000 Wal-Mart Stores Inc. ................. 14,757,160 13,487,600 MARKET SHARES COST VALUE ------ ---- ------ 530,000 Walgreen Co. ......................... $ 16,456,457 $ 23,765,200 20,000 Whole Foods Market Inc. .............. 813,800 1,292,800 170,000 Wm. Wrigley Jr. Co. .................. 9,007,043 7,711,200 26,250 Wm. Wrigley Jr. Co., Cl. B ........... 1,574,598 1,189,125 ------------ -------------- TOTAL CONSUMER STAPLES ............... 112,279,843 123,893,963 ------------ -------------- ENERGY -- 13.1% 90,000 Anadarko Petroleum Corp. ............. 4,501,909 4,292,100 61,000 Apache Corp. ......................... 1,970,404 4,163,250 50,000 Baker Hughes Inc. .................... 2,616,718 4,092,500 20,000 BJ Services Co. ...................... 832,807 745,200 70,000 Canadian Natural Resources Ltd. ...... 3,271,408 3,876,600 175,000 Chesapeake Energy Corp. .............. 5,510,383 5,293,750 12,463 ConocoPhillips ....................... 573,368 816,700 85,000 Devon Energy Corp. ................... 3,965,184 5,134,850 40,000 EnCana Corp. ......................... 2,000,275 2,105,600 75,000 EOG Resources Inc. ................... 5,968,368 5,200,500 110,000 Halliburton Co. ...................... 8,120,821 8,163,100 135,000 Hess Corp. ........................... 6,180,309 7,134,750 110,000 Kerr-McGee Corp. ..................... 5,592,359 7,628,500 125,000 McDermott International Inc.+ ........ 4,840,905 5,683,750 55,000 Murphy Oil Corp. ..................... 2,242,801 3,072,300 90,000 National-Oilwell Varco Inc.+ ......... 5,380,325 5,698,800 70,000 Occidental Petroleum Corp. ........... 6,770,263 7,178,500 195,000 Peabody Energy Corp. ................. 7,540,805 10,871,250 123,000 Pioneer Natural Resources Co. ........ 5,957,898 5,708,430 50,000 Sasol Ltd., ADR ...................... 2,070,546 1,932,000 158,000 Schlumberger Ltd. .................... 5,142,155 10,287,380 100,000 Southwestern Energy Co.+ ............. 2,990,550 3,116,000 44,000 Suncor Energy Inc. ................... 1,541,174 3,564,440 60,000 Transocean Inc.+ ..................... 2,410,948 4,819,200 95,000 Valero Energy Corp. .................. 4,660,313 6,319,400 130,000 XTO Energy Inc. ...................... 5,524,477 5,755,100 ------------ -------------- TOTAL ENERGY ......................... 108,177,473 132,653,950 ------------ -------------- FINANCIAL -- 14.4% 80,000 Affiliated Managers Group Inc.+ ...... 7,835,936 6,951,200 315,000 American Express Co. ................. 13,426,012 16,764,300 80,000 American International Group Inc. .... 5,266,518 4,724,000 53,100 China Life Insurance Co. Ltd., ADR ... 3,297,347 3,361,230 560,000 Citigroup Inc. ....................... 25,839,355 27,014,400 125,000 Commerce Bancorp Inc. ................ 4,438,042 4,458,750 250,000 Credit Suisse Group, ADR ............. 13,747,905 13,997,500 60,000 Goldman Sachs Group Inc. ............. 8,269,505 9,025,800 See accompanying notes to financial statements. 4 THE GAMCO GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) -- JUNE 30, 2006 (UNAUDITED) -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ COMMON STOCKS (CONTINUED) FINANCIAL (CONTINUED) 30,000 HSBC Holdings plc, ADR ............... $ 2,706,890 $ 2,650,500 75,000 Legg Mason Inc. ...................... 8,598,925 7,464,000 145,000 Merrill Lynch & Co. Inc. ............. 6,330,411 10,086,200 30,000 Moody's Corp. ........................ 1,640,558 1,633,800 195,900 Northern Trust Corp. ................. 11,288,088 10,833,270 188,800 State Street Corp. ................... 9,069,793 10,967,392 50,000 T. Rowe Price Group Inc. ............. 2,040,354 1,890,500 125,000 UBS AG ............................... 10,834,255 13,712,500 ------------ -------------- TOTAL FINANCIAL ...................... 134,629,894 145,535,342 ------------ -------------- HEALTH CARE -- 12.5% HEALTH CARE EQUIPMENT & SERVICES -- 7.2% 90,000 Alcon Inc. ........................... 8,545,175 8,869,500 150,000 Biomet Inc. .......................... 6,321,694 4,693,500 110,000 Edwards Lifesciences Corp.+ .......... 4,543,567 4,997,300 35,000 IDEXX Laboratories Inc.+ ............. 2,225,465 2,629,550 70,000 Lincare Holdings Inc.+ ............... 3,008,947 2,648,800 135,000 Medtronic Inc. ....................... 6,189,982 6,334,200 60,000 Quest Diagnostics Inc. ............... 3,496,844 3,595,200 280,000 St. Jude Medical Inc.+ ............... 9,446,144 9,077,600 220,000 Stryker Corp. ........................ 10,945,256 9,264,200 100,000 UnitedHealth Group Inc. .............. 3,812,352 4,478,000 120,000 Varian Medical Systems Inc.+ ......... 4,796,238 5,682,000 195,000 Zimmer Holdings Inc.+ ................ 14,311,699 11,060,400 ------------ -------------- 77,643,363 73,330,250 ------------ -------------- PHARMACEUTICALS & BIOTECHNOLOGY -- 5.3% 218,000 Amgen Inc.+ .......................... 14,589,356 14,220,140 105,000 Eli Lilly & Co. ...................... 6,089,099 5,803,350 165,000 Genentech Inc.+ ...................... 11,078,269 13,497,000 100,000 Genzyme Corp.+ ....................... 5,739,755 6,105,000 70,000 Gilead Sciences Inc.+ ................ 4,481,872 4,141,200 164,000 Johnson & Johnson .................... 8,665,669 9,826,880 ------------ -------------- 50,644,020 53,593,570 ------------ -------------- TOTAL HEALTH CARE .................... 128,287,383 126,923,820 ------------ -------------- INDUSTRIAL -- 14.1% 90,000 3M Co. ............................... 7,378,186 7,269,300 55,000 C.H. Robinson Worldwide Inc. ......... 1,257,189 2,931,500 75,000 Caterpillar Inc. ..................... 3,331,977 5,586,000 130,000 Emerson Electric Co. ................. 10,996,470 10,895,300 50,000 Expeditors International of Washington Inc. .................... 1,228,395 2,800,500 45,000 FedEx Corp. .......................... 5,257,016 5,258,700 35,000 Fluor Corp. .......................... 1,629,609 3,252,550 162,000 General Dynamics Corp. ............... 5,670,262 10,604,520 1,295,000 General Electric Co. ................. 45,058,905 42,683,200 90,000 Ingersoll-Rand Co. Ltd., Cl. A ....... 3,668,937 3,850,200 MARKET SHARES COST VALUE ------ ---- ------ 300,000 ITT Industries Inc. .................. $ 13,764,080 $ 14,850,000 95,000 L-3 Communications Holdings Inc. ..... 4,346,496 7,164,900 95,000 Rockwell Automation Inc. ............. 5,919,823 6,840,950 60,000 United Parcel Service Inc., Cl. B .... 4,378,495 4,939,800 215,000 United Technologies Corp. ............ 10,259,579 13,635,300 ------------ -------------- TOTAL INDUSTRIAL ..................... 124,145,419 142,562,720 ------------ -------------- INFORMATION TECHNOLOGY -- 19.7% COMMUNICATIONS EQUIPMENT -- 2.0% 556,000 Cisco Systems Inc.+ .................. 8,830,648 10,858,680 40,000 Harman International Industries Inc. 3,337,982 3,414,800 161,000 QUALCOMM Inc. ........................ 5,532,862 6,451,270 ------------ -------------- 17,701,492 20,724,750 ------------ -------------- COMPUTERS & PERIPHERAL -- 1.4% 175,000 Apple Computer Inc.+ ................. 12,172,946 9,996,000 180,000 Dell Inc.+ ........................... 5,907,724 4,393,800 ------------ -------------- 18,080,670 14,389,800 ------------ -------------- SEMICONDUCTORS -- 2.9% 95,000 Broadcom Corp., Cl. A+ ............... 3,116,131 2,854,750 430,000 Intel Corp. .......................... 18,400,340 8,148,500 260,000 Linear Technology Corp. .............. 9,615,113 8,707,400 160,000 Microchip Technology Inc. ............ 4,322,022 5,368,000 146,000 Texas Instruments Inc. ............... 3,922,716 4,422,340 ------------ -------------- 39,376,322 29,500,990 ------------ -------------- SOFTWARE & SERVICES -- 13.1% 205,000 Adobe Systems Inc.+ .................. 6,260,089 6,223,800 65,000 CheckFree Corp.+ ..................... 2,323,579 3,221,400 420,000 eBay Inc.+ ........................... 16,591,931 12,301,800 55,000 Electronic Arts Inc.+ ................ 2,671,361 2,367,200 50,000 FactSet Research Systems Inc. ........ 2,174,561 2,365,000 100,000 Getty Images Inc.+ ................... 7,573,822 6,351,000 73,900 Google Inc., Cl. A+ .................. 20,936,952 30,988,487 100,000 International Game Technology ........ 3,077,224 3,794,000 1,560,000 Microsoft Corp. ...................... 40,626,884 36,348,000 105,000 NAVTEQ Corp.+ ........................ 4,632,396 4,691,400 70,000 SEI Investments Co. .................. 3,150,029 3,421,600 60,000 Trimble Navigation Ltd.+ ............. 2,740,072 2,678,400 535,000 Yahoo! Inc.+ ......................... 18,844,248 17,655,000 ------------ -------------- 131,603,148 132,407,087 ------------ -------------- TELECOMMUNICATIONS -- 0.3% 89,900 NeuStar Inc., Cl. A+ ................. 3,114,186 3,034,125 ------------ -------------- TOTAL INFORMATION TECHNOLOGY ......... 209,875,818 200,056,752 ------------ -------------- See accompanying notes to financial statements. 5 THE GAMCO GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) -- JUNE 30, 2006 (UNAUDITED) -------------------------------------------------------------------------------- MARKET SHARES COST VALUE ------ ---- ------ COMMON STOCKS (CONTINUED) MATERIALS -- 2.9% 60,000 Allegheny Technologies Inc. .......... $ 1,531,200 $ 4,154,400 95,000 BHP Billiton Ltd., ADR ............... 4,045,820 4,091,650 183,000 Commercial Metals Co. ................ 3,185,986 4,703,100 55,000 Freeport-McMoRan Copper & Gold Inc., Cl. B .................. 2,295,054 3,047,550 65,000 Newmont Mining Corp. ................. 3,215,192 3,440,450 60,000 Phelps Dodge Corp. ................... 5,145,272 4,929,600 25,000 Rio Tinto plc, ADR ................... 4,301,022 5,242,750 ------------ -------------- TOTAL MATERIALS ...................... 23,719,546 29,609,500 ------------ -------------- TOTAL COMMON STOCKS .................. 928,809,079 998,380,556 ------------ -------------- PRINCIPAL AMOUNT ------- U.S. GOVERNMENT OBLIGATIONS -- 1.8% $17,922,000 U.S. Treasury Bills, 4.502% to 4.923%++, 07/06/06 to 10/12/06 ............... 17,807,674 17,810,571 ------------ -------------- TOTAL INVESTMENTS -- 100.3% .............. $946,616,753 1,016,191,127 ============ OTHER ASSETS AND LIABILITIES (NET) -- (0.3)% ...... (3,207,910) -------------- NET ASSETS -- 100.0% .............................. $1,012,983,217 ============== ---------------- + Non-income producing security. ++ Represents annualized yield at date of purchase. ADR American Depository Receipt See accompanying notes to financial statements. 6 THE GAMCO GROWTH FUND STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2006 (UNAUDITED) -------------------------------------------------------------------------------- ASSETS: Investments, at value (cost $946,616,753) ................. $1,016,191,127 Cash ...................................................... 1,140 Receivable for investments sold ........................... 10,510,728 Dividends receivable ...................................... 765,432 Receivable for Fund shares sold ........................... 295,750 Other assets .............................................. 19,956 -------------- TOTAL ASSETS .............................................. 1,027,784,133 -------------- LIABILITIES: Payable for investments purchased ......................... 10,812,000 Payable for Fund shares redeemed .......................... 1,679,826 Payable for shareholder services fees ..................... 851,543 Payable for investment advisory fees ...................... 827,436 Payable for shareholder communications expenses ................................. 335,165 Payable for distribution fees ............................. 207,287 Payable for Trustees' fees ................................ 1,666 Other accrued expenses .................................... 85,993 -------------- TOTAL LIABILITIES ......................................... 14,800,916 -------------- NET ASSETS applicable to 35,336,715 shares outstanding ...................................... $1,012,983,217 ============== NET ASSETS CONSIST OF: Shares of beneficial interest, each class at $0.01 par value ......................................... $ 353,367 Additional paid-in capital ................................ 1,908,605,260 Accumulated net investment loss ........................... (699,007) Accumulated net realized loss on investments .............. (964,850,777) Net unrealized appreciation on investments ................ 69,574,374 -------------- NET ASSETS ................................................ $1,012,983,217 ============== SHARES OF BENEFICIAL INTEREST: CLASS AAA: Net Asset Value, offering and redemption price per share ($1,011,999,539 / 35,301,941 shares outstanding; unlimited number of shares authorized) ................................... $28.67 ====== CLASS A: Net Asset Value and redemption price per share ($280,407 / 9,778 shares outstanding; unlimited number of shares authorized) .................. $28.68 ====== Maximum offering price per share (NAV / .9425, based on maximum sales charge of 5.75% of the offering price) .................................. $30.43 ====== CLASS B: Net Asset Value and offering price per share ($271,725 / 9,657.6 shares outstanding; unlimited number of shares authorized) .................. $28.14(a) ====== CLASS C: Net Asset Value and offering price per share ($431,546 / 15,338 shares outstanding; unlimited number of shares authorized) .................. $28.14(a) ====== -------------------- (a) Redemption price varies based on length of time held. STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED) -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends (net of foreign taxes of $193,759) .............. $ 7,166,596 Interest .................................................. 306,148 ------------ TOTAL INVESTMENT INCOME ................................... 7,472,744 ------------ EXPENSES: Investment advisory fees .................................. 5,494,136 Distribution fees - Class AAA ............................. 1,372,326 Distribution fees - Class A ............................... 355 Distribution fees - Class B ............................... 1,385 Distribution fees - Class C ............................... 2,300 Shareholder services fees ................................. 792,837 Shareholder communications expenses ....................... 264,202 Custodian fees ............................................ 75,508 Legal and audit fees ...................................... 39,289 Trustees' fees ............................................ 34,166 Registration expenses ..................................... 21,635 Interest expense .......................................... 249 Miscellaneous expenses .................................... 74,550 ------------ TOTAL EXPENSES ............................................ 8,172,938 Less: Custodian fee credits ............................... (1,187) ------------ TOTAL NET EXPENSES ........................................ 8,171,751 ------------ NET INVESTMENT LOSS ....................................... (699,007) ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain on investments .......................... 96,572,469 Net change in unrealized appreciation/ depreciation on investments ............................. (98,020,271) ------------ NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS .......................................... (1,447,802) ------------ NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ......................................... $ (2,146,809) ============ See accompanying notes to financial statements. 7 THE GAMCO GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------------------------------------------- SIX MONTHS ENDED JUNE 30, 2006 YEAR ENDED (UNAUDITED) DECEMBER 31, 2005 -------------- ----------------- OPERATIONS: Net investment loss ........................................................ $ (699,007) $ (6,096,798) Net realized gain on investments ........................................... 96,572,469 117,060,872 Net change in unrealized appreciation/depreciation on investments .......... (98,020,271) 5,770,520 -------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............ (2,146,809) 116,734,594 -------------- -------------- SHARES OF BENEFICIAL INTEREST TRANSACTIONS: Class AAA .................................................................. (125,502,379) (424,688,588) Class A .................................................................... 8,263 192,347 Class C .................................................................... (121,969) 272,594 -------------- -------------- NET DECREASE IN NET ASSETS FROM SHARES OF BENEFICIAL INTEREST TRANSACTIONS ......................................... (125,616,085) (424,223,647) -------------- -------------- REDEMPTION FEES ............................................................ 4,905 25,950 -------------- -------------- NET DECREASE IN NET ASSETS ................................................. (127,757,989) (307,463,103) NET ASSETS: Beginning of period ........................................................ 1,140,741,206 1,448,204,309 -------------- -------------- End of period (including undistributed net investment income of $0 and $0, respectively) .............................................. $1,012,983,217 $1,140,741,206 ============== ==============
THE GAMCO GROWTH FUND NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -------------------------------------------------------------------------------- 1. ORGANIZATION. The GAMCO Growth Fund (the "Fund"), formerly The Gabelli Growth Fund, was organized on October 24, 1986 as a Massachusetts business trust. The Fund is a 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 capital appreciation. The Fund commenced investment operations on April 10, 1987. 2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in accordance with United States ("U.S.") generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. SECURITY VALUATION. Portfolio securities listed or traded on a nationally recognized securities exchange or traded in the U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a market's official closing price as of the close of business on the day the securities are being valued. If there were no sales that day, the security is valued at the average of the closing bid and asked prices or, if there were no asked prices quoted on that day, then the security is valued at the closing bid price on that day. If no bid or asked prices are quoted on such day, the security is valued at the most recently available price or, if the Board of Trustees (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"). 8 THE GAMCO GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) -------------------------------------------------------------------------------- Portfolio securities primarily traded on a foreign market are generally valued at the preceding closing values of such securities on the relevant market, but may be fair valued pursuant to procedures established by the Board if market conditions change significantly after the close of the foreign market but prior to the close of business on the day the securities are being valued. Debt instruments with remaining maturities of 60 days or less that are not credit impaired are valued at amortized cost, unless the Board determines such amount does not reflect the securities' fair value, in which case these securities will be fair valued as determined by the Board. Debt instruments having a maturity greater than 60 days for which market quotations are readily available are valued at the average of the latest bid and asked prices. If there were no asked prices quoted on such day, the security is valued using the closing bid price. Futures contracts are valued at the closing settlement price of the exchange or board of trade on which the applicable contract is traded. Securities and assets for which market quotations are not readily available are fair valued as determined by the Board. Fair valuation methodologies and procedures may include, but are not limited to: analysis and review of available financial and non-financial information about the company; comparisons to the valuation and changes in valuation of similar securities, including a comparison of foreign securities to the equivalent U.S. dollar value ADR securities at the close of the U.S. exchange; and evaluation of any other information that could be indicative of the value of the security. FOREIGN SECURITIES. The Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation of currencies, the ability to repatriate funds, less complete financial information about companies, and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. issuers. FOREIGN TAXES. The Fund may be subject to foreign taxes on income, gains on investments, or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests. SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are accounted for on the trade date with realized gain or loss on investments determined by using the identified cost method. Interest income (including amortization of premium and accretion of discount) is recorded on the accrual basis. Premiums and discounts on debt securities are amortized using the effective yield to maturity method. Dividend income is recorded on the ex-dividend date except for certain dividends which are recorded as soon as the Fund is informed of the dividend. DETERMINATION OF NET ASSET VALUE AND CALCULATION OF EXPENSES. Certain administrative expenses are common to, and allocated among, various affiliated funds. Such allocations are made on the basis of each Fund's average net assets or other criteria directly affecting the expenses as determined by the Adviser pursuant to procedures established by the Board. In calculating the net asset value ("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. 9 THE GAMCO GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) -------------------------------------------------------------------------------- CUSTODIAN FEE CREDITS. When cash balances are maintained in the custody account, the Fund receives credits which are used to offset custodian fees. The gross expenses paid under the custody arrangement are included in custodian fees in the Statement of Operations with the corresponding expense offset, if any, shown as "custodian fee credits". DISTRIBUTIONS TO SHAREHOLDERS. Distributions to shareholders are recorded on the ex-dividend date. Distributions to shareholders are based on income and capital gains as determined in accordance with Federal income tax regulations, which may differ from income and capital gains as determined under U.S. generally accepted accounting principles. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences, and differing characterizations of distributions made by the Fund. 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. For the fiscal year ended December 31, 2005, reclassifications were made to decrease accumulated net investment loss by $6,096,798, with an offsetting adjustment to additional paid-in capital. No distributions were made in the fiscal year ended December 31, 2005. PROVISION FOR INCOME TAXES. The Fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). It is the policy of the Fund to comply with the requirements of the Code applicable to regulated investment companies and to distribute substantially all of its net investment company taxable income and net capital gains. Therefore, no provision for Federal income taxes is required. At December 31, 2005, the difference between book basis and tax basis unrealized appreciation was primarily due to deferral of losses from wash sales for tax purposes. As of December 31, 2005, the components of accumulated earnings/(losses) on a tax basis were as follows: Accumulated capital loss carryforward ................ $(1,052,343,474) Net unrealized appreciation .......................... 158,514,873 --------------- Total ................................................ $ (893,828,601) =============== At December 31, 2005, the Fund had net capital loss carryforwards for Federal income tax purposes of $1,052,343,474, which are available to reduce future required distributions of net capital gains to shareholders. $701,151,305 is available through 2010; $350,050,494 is available through 2011; and $1,141,675 is available through 2012. For the year ended December 31, 2005, the Fund utilized capital loss carryforwards of $110,960,677. The following summarizes the tax cost of investments and the related unrealized appreciation/depreciation at June 30, 2006:
GROSS GROSS NET UNREALIZED UNREALIZED UNREALIZED APPRECIATION/ COST APPRECIATION DEPRECIATION (DEPRECIATION) ---- ------------ ------------ -------------- Investments ............... $952,440,028 $120,844,173 $(57,093,074) $63,751,099
10 THE GAMCO GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) -------------------------------------------------------------------------------- 3. INVESTMENT ADVISORY AGREEMENT. The Fund has entered into an investment advisory agreement (the "Advisory Agreement") with the Adviser which provides that the Fund will pay the Adviser a fee, computed daily and paid monthly, at the annual rate of 1.00% of the value of its average daily net assets. In accordance with the Advisory Agreement, the Adviser provides a continuous investment program for the Fund's portfolio, oversees the administration of all aspects of the Fund's business and affairs, and pays the compensation of all Officers and Trustees of the Fund who are affiliated persons of the Adviser. 4. DISTRIBUTION PLAN. The Fund's Board has adopted a distribution plan (the "Plan") for each class of shares pursuant to Rule 12b-1 under the 1940 Act. Gabelli & Company, Inc. ("Gabelli & Company"), an affiliate of the Adviser, serves as distributor of the Fund. Under the Class AAA, Class A, Class B, and Class C Share Plans, payments are authorized to Gabelli & Company at annual rates of 0.25%, 0.25%, 1.00%, and 1.00%, respectively, of the average daily net assets of those classes, the annual limitations under each Plan. Such payments are accrued daily and paid monthly. 5. PORTFOLIO SECURITIES. Purchases and proceeds from the sales of securities for the six months ended June 30, 2006, other than short-term securities, aggregated $258,470,990 and $388,835,385, respectively. 6. TRANSACTIONS WITH AFFILIATES. During the six months ended June 30, 2006, the Fund paid brokerage commissions of $19,561 to Gabelli & Company. Additionally, Gabelli & Company informed the Fund that it received $407 from investors representing commissions (sales charges and underwriting fees) on sales and redemptions of Fund shares. The cost of calculating the Fund's NAV per share is a Fund expense pursuant to the Advisory Agreement between the Fund and the Adviser. During the six months ended June 30, 2006, the Fund paid or accrued $22,500 to the Adviser in connection with the cost of computing the Fund's NAV, which is included in miscellaneous expenses in the Statement of Operations. 7. LINE OF CREDIT. The Fund has access to an unsecured line of credit of up to $25,000,000 from the custodian for temporary borrowing purposes. Borrowings under this arrangement bear interest at 0.75% above the Federal Funds rate on outstanding balances. During the six months ended June 30, 2006, there were no borrowings from the line of credit. 8. SHARES OF BENEFICIAL INTEREST. The Fund currently offers four classes of shares -- Class AAA Shares, Class A Shares, Class B Shares, and Class C Shares. Class AAA Shares are offered only to investors who acquire them directly from Gabelli & Company, or through selected broker/dealers, or the transfer agent without a sales charge. Class A Shares are subject to a maximum front-end sales charge of 5.75%. Class B Shares are subject to a contingent deferred sales charge ("CDSC") upon redemption within six years of purchase and automatically convert to Class A Shares approximately eight years after the original purchase. The applicable CDSC is equal to a declining percentage of the lesser of the NAV per share at the date of the original purchase or at the date of redemption, based on the length of time held. Class C Shares are subject to a 1% CDSC for one year after purchase. Class B Shares are available only through exchange of Class B Shares of other funds distributed by Gabelli & Company. The Board has approved Class I Shares which have not been offered publicly. Effective June 15, 2005, the Fund imposed a redemption fee of 2.00% on Class AAA Shares, Class A Shares, Class B Shares, and Class C Shares that are redeemed or exchanged on or before the seventh day after the date of a purchase. (Prior to June 15, 2005, the Fund imposed a redemption fee on shares that were redeemed or exchanged on or before the sixtieth day after the date of a purchase.) The redemption fee is deducted from the proceeds otherwise payable to the redeeming shareholders and is retained by the Fund. The redemption fees retained by the Fund during the six months ended June 30, 2006 and the fiscal year ended December 31, 2005 amounted to $4,905 and $25,950, respectively. 11 THE GAMCO GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) -------------------------------------------------------------------------------- The redemption fee does not apply to shares purchased through programs that the Adviser determined to have appropriate short-term trading policies in place. Additionally, certain recordkeepers for qualified and non-qualified retirement plans that could not collect the redemption fee at the participant level due to systems limitations have received an extension to implement such systems. Transactions in shares of beneficial interest were as follows:
SIX MONTHS ENDED JUNE 30, 2006 YEAR ENDED (UNAUDITED) DECEMBER 31, 2005 --------------------------- ---------------------------- SHARES AMOUNT SHARES AMOUNT --------------------------- ---------------------------- CLASS AAA CLASS AAA --------------------------- ---------------------------- Shares sold ...................................... 1,354,934 $ 39,969,021 4,243,927 $ 113,064,508 Shares redeemed .................................. (5,616,270) (165,471,400) (20,096,781) (537,753,096) ---------- ------------- ----------- ------------- Net decrease ................................... (4,261,336) $(125,502,379) (15,852,854) $(424,688,588) ========== ============- =========== ============= CLASS A CLASS A --------------------------- ---------------------------- Shares sold ...................................... 1,145 $ 33,273 7,311 $ 208,331 Shares redeemed .................................. (870) (25,010) (594) (15,984) ---------- ------------- ----------- ------------- Net increase ................................... 275 $ 8,263 6,717 $ 192,347 ========== ============- =========== ============= CLASS C CLASS C --------------------------- ---------------------------- Shares sold ...................................... 1,916 $ 54,400 14,494 $ 373,629 Shares redeemed .................................. (6,057) (176,369) (3,750) (101,035) ---------- ------------- ----------- ------------- Net increase (decrease) ........................ (4,141) $ (121,969) 10,744 $ 272,594 ========== ============- =========== =============
9. INDEMNIFICATIONS. The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 10. OTHER MATTERS. The Adviser and/or affiliates have received subpoenas from the Attorney General of the State of New York and the SEC requesting information on mutual fund trading practices involving certain funds managed by the Adviser. GAMCO Investors, Inc. ("GAMCO"), the Adviser's parent company, is responding to these requests for documents and testimony. In June 2006, GAMCO began discussions with the SEC regarding a possible resolution of their inquiry. Since these discussions are ongoing, it cannot be determined at this time whether they will ultimately result in a settlement of this matter. On a separate matter, in September 2005, the Adviser was informed by the staff of the SEC that the staff may recommend to the Commission that an administrative remedy and a monetary penalty be sought from the Adviser in connection with the actions of two of seven closed-end funds managed by the Adviser relating to Section 19(a) and Rule 19a-1 of the 1940 Act. These provisions require registered investment companies to provide written statements to shareholders when a dividend is made from a source other than net investment income. While the two closed-end funds sent annual statements and provided other materials containing this information, the funds did not send written statements to shareholders with each distribution in 2002 and 2003. The Adviser believes that all of the funds are now in compliance. The Adviser believes that these matters would have no effect on the Fund or any material adverse effect on the Adviser or its ability to manage the Fund. 12 THE GAMCO GROWTH FUND FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- Selected data for a share of beneficial interest outstanding throughout each period:
INCOME FROM INVESTMENT OPERATIONS DISTRIBUTIONS ----------------------------------------- -------------------------- Net Net Asset Realized and Total Net Period Value, Net Unrealized from Realized Ended Beginning Investment Gain/(Loss) on Investment Gain on Total December 31 of Period Loss(a) Investments Operations Investments Distributions ----------- --------- ------- ----------- ---------- ----------- ------------- CLASS AAA 2006(b) $28.81 $(0.02) $(0.12) $(0.14) -- -- 2005 26.12 (0.13) 2.82 2.69 -- -- 2004 24.95 (0.11) 1.28 1.17 -- -- 2003 18.99 (0.14) 6.10 5.96 -- -- 2002 28.68 (0.17) (9.52) (9.69) -- -- 2001 37.79 (0.23) (8.88) (9.11) $(0.00)(c) $(0.00)(c) CLASS A 2006(b) $28.82 $(0.02) $(0.12) $(0.14) -- -- 2005 26.13 (0.12) 2.81 2.69 -- -- 2004(e) 24.95 (0.02) 1.20 1.18 -- -- CLASS B 2006(b) $28.38 $(0.13) $(0.11) $(0.24) -- -- 2005 25.93 (0.32) 2.77 2.45 -- -- 2004(e) 24.95 (0.28) 1.26 0.98 -- -- CLASS C 2006(b) $28.38 $(0.13) $(0.11) $(0.24) -- -- 2005 25.93 (0.32) 2.77 2.45 -- -- 2004(e) 24.95 (0.21) 1.19 0.98 -- --
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA ------------------------------------------------------------- Net Asset Net Assets Period Value, End of Net Portfolio Ended Redemption End of Total Period Investment Operating Turnover December 31 Fees(a) Period Return+ (in 000's) Loss Expenses Rate ----------- ------- ------ ------- ---------- ---- -------- ---- CLASS AAA 2006(b) $0.00(c) $28.67 (0.5)% $1,012,000 (0.13)%(d) 1.49%(d) 24% 2005 0.00(c) 28.81 10.3 1,139,640 (0.48) 1.49 39 2004 0.00(c) 26.12 4.7 1,447,655 (0.46) 1.53 31 2003 -- 24.95 31.4 1,881,457 (0.60) 1.47 42 2002 -- 18.99 (33.8) 1,675,816 (0.68) 1.43 30 2001 -- 28.68 (24.1) 2,948,390 (0.71) 1.40 26 CLASS A 2006(b) $0.00(c) $28.68 (0.5)% $ 280 (0.12)%(d) 1.49%(d) 24% 2005 0.00(c) 28.82 10.3 274 (0.43) 1.47 39 2004(e) 0.00(c) 26.13 4.7 73 (0.09) 1.60 31 CLASS B 2006(b) $0.00(c) $28.14 (0.9)% $ 272 (0.87)%(d) 2.24%(d) 24% 2005 0.00(c) 28.38 9.5 274 (1.22) 2.24 39 2004(e) 0.00(c) 25.93 3.9 250 (1.12) 2.30 31 CLASS C 2006(b) $0.00(c) $28.14 (0.9)% $ 431 (0.90)%(d) 2.24%(d) 24% 2005 0.00(c) 28.38 9.5 553 (1.21) 2.23 39 2004(e) 0.00(c) 25.93 3.9 226 (0.88) 2.37 31
--------------------------- + Total return represents aggregate total return of a hypothetical $1,000 investment at the beginning of the period and sold at the end of the period including reinvestment of distributions and does not reflect applicable sales charges. Total return for the period of less than one year is not annualized. (a) Per share amounts have been calculated using the average shares outstanding method. (b) For the six months ended June 30, 2006, unaudited. (c) Amount represents less than $0.005 per share. (d) Annualized. (e) Class A, Class B, and Class C Shares were initially offered on December 31, 2003. See accompanying notes to financial statements. 13 THE GAMCO GROWTH FUND BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (UNAUDITED) At its meeting on February 15, 2006, the Board of Trustees ("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 trustees 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 manager, the depth of the analyst pool available to the Adviser and the portfolio manager, 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 manager. INVESTMENT PERFORMANCE. The independent board members reviewed the short, medium, and long-term performance of the Fund against a peer group of large-cap growth funds chosen by Lipper as being comparable. The independent board members noted that the Fund's performance was near the top 25% of the funds in its category for the one and ten year periods and the top 50% for the prior three year period, but was in or near the lowest 25% of the funds in its category for the five year period. The independent board members also discussed at length the performance for the five year period and changes made to the Fund's portfolio to seek to prevent a recurrence of the Fund's performance in 2002. 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 independent board members also noted that the Adviser's affiliated broker received distribution fees and minor amounts of sales commissions. 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. SHARING OF ECONOMIES OF SCALE. The independent board members noted that the investment advisory 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 advisory fee, other expenses, and total expenses of the Fund to similar expense ratios of the peer group of large-cap growth funds and noted that the advisory fee includes substantially all administrative services of the Fund as well as investment advisory services of the Adviser. The independent board members noted that the Fund's expense ratios were above and the Fund's size was above average within this group. The independent board members also noted that the advisory fee structure was the same as that in effect for most of the 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 fee for other types of accounts managed by affiliates of the Adviser. CONCLUSIONS. The independent board members concluded that the Fund enjoyed highly experienced portfolio management services and good ancillary services but that the five year performance record was poor and that the expense ratios were significantly higher than those of the peer group. The independent board members also noted that the longer and shorter-term performance was excellent or very good and that steps had been taken to seek to avoid the problems that led to the poor five year performance. They concluded that the positive trend and long-term record of the portfolio manager were sufficient in relation to the performance factor to warrant renewal of the investment advisory agreement at this time. The independent board members concluded that the profitability to the Adviser of managing the Fund was reasonable 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 investment advisory agreement to the full Board. 14 GABELLI FAMILY OF FUNDS VALUE _______________________________________ GABELLI ASSET FUND Seeks to invest primarily in a diversified portfolio of common stocks selling at significant discounts to their private market value. The Fund's primary objective is growth of capital. (MULTICLASS) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA GABELLI BLUE CHIP VALUE FUND Seeks long term growth of capital through investment primarily in the common stocks of established companies which are temporarily out of favor. The fund's objective is to identify a catalyst or sequence of events that will return the company to a higher value. (MULTICLASS) PORTFOLIO MANAGER: BARBARA MARCIN, CFA WESTWOOD EQUITY FUND Seeks to invest primarily in the common stock of well-seasoned companies that have recently reported positive earnings surprises and are trading below Westwood's proprietary growth rate estimates. The Fund's primary objective is capital appreciation. (MULTICLASS) PORTFOLIO MANAGER: SUSAN M. BYRNE FOCUSED VALUE _______________________________ GABELLI VALUE FUND Seeks to invest in securities of companies believed to be undervalued. The Fund's primary objective is long-term capital appreciation. (MULTICLASS) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA SMALL CAP VALUE _____________________________ GABELLI SMALL CAP FUND Seeks to invest primarily in common stock of smaller companies (market capitalizations less than $1 billion) believed to have rapid revenue and earnings growth potential. The Fund's primary objective is capital appreciation. (MULTICLASS) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA WESTWOOD SMALLCAP EQUITY FUND Seeks to invest primarily in smaller capitalization equity securities - market caps of $2.5 billion or less. The Fund's primary objective is long-term capital appreciation. (MULTICLASS) TEAM MANAGED GABELLI WOODLAND SMALL CAP VALUE FUND Seeks to invest primarily in the common stocks of smaller companies (market capitalizations less than $1.5 billion) believed to be undervalued with shareholder oriented management teams that are employing strategies to grow the company's value. The Fund's primary objective is capital appreciation. (MULTICLASS) PORTFOLIO MANAGER: ELIZABETH M. LILLY, CFA GROWTH ______________________________________ GAMCO GROWTH FUND Seeks to invest primarily in large cap stocks believed to have favorable, yet undervalued, prospects for earnings growth. The Fund's primary objective is capital appreciation. (MULTICLASS) PORTFOLIO MANAGER: HOWARD F. WARD, CFA GAMCO INTERNATIONAL GROWTH FUND Seeks to invest in the equity securities of foreign issuers with long-term capital appreciation potential. The Fund offers investors global diversification. (MULTICLASS) PORTFOLIO MANAGER: CAESAR BRYAN AGGRESSIVE GROWTH ___________________________ GAMCO GLOBAL GROWTH FUND Seeks capital appreciation through a disciplined investment program focusing on the globalization and interactivity of the world's marketplace. The Fund invests in companies at the forefront of accelerated growth. The Fund's primary objective is capital appreciation. (MULTICLASS) TEAM MANAGED MICRO-CAP ___________________________________ WESTWOOD MIGHTY MITES(SM) FUND Seeks to invest in micro-cap companies that have market capitalizations of $300 million or less. The Fund's primary objective is long-term capital appreciation. (MULTICLASS) TEAM MANAGED EQUITY INCOME _______________________________ GABELLI EQUITY INCOME FUND Seeks to invest primarily in equity securities with above market average yields. The Fund pays monthly dividends and seeks a high level of total return with an emphasis on income. (MULTICLASS) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA WESTWOOD BALANCED FUND Seeks to invest in a balanced and diversified portfolio of stocks and bonds. The Fund's primary objective is both capital appreciation and current income. (MULTICLASS) CO-PORTFOLIO MANAGERS: SUSAN M. BYRNE MARK FREEMAN, CFA WESTWOOD INCOME FUND Seeks to provide a high level of current income as well as long-term capital appreciation by investing in income producing equity and fixed income securities. (MULTICLASS) TEAM MANAGED SPECIALTY EQUITY ____________________________ GAMCO GLOBAL CONVERTIBLE SECURITIES FUND Seeks to invest principally in bonds and preferred stocks which are convertible into common stock of foreign and domestic companies. The Fund's primary objective is total return through a combination of current income and capital appreciation. (MULTICLASS) TEAM MANAGED GAMCO GLOBAL OPPORTUNITY FUND Seeks to invest in common stock of companies which have rapid growth in revenues and earnings and potential for above average capital appreciation or are undervalued. The Fund's primary objective is capital appreciation. (MULTICLASS) TEAM MANAGED SECTOR ______________________________________ GAMCO GLOBAL TELECOMMUNICATIONS FUND Seeks to invest in telecommunications companies throughout the world - targeting undervalued companies with strong earnings and cash flow dynamics. The Fund's primary objective is capital appreciation. (MULTICLASS) TEAM MANAGED GAMCO GOLD FUND Seeks to invest in a global portfolio of equity securities of gold mining and related companies. The Fund's objective is long-term capital appreciation. Investment in gold stocks is considered speculative and is affected by a variety of world-wide economic, financial, and political factors. (MULTICLASS) PORTFOLIO MANAGER: CAESAR BRYAN GABELLI UTILITIES FUND Seeks to provide a high level of total return through a combination of capital appreciation and current income. (MULTICLASS) TEAM MANAGED MERGER AND ARBITRAGE ________________________ GABELLI ABC FUND Seeks to invest in securities with attractive opportunities for appreciation or investment income. The Fund's primary objective is total return in various market conditions without excessive risk of capital loss. (NO-LOAD) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA CONTRARIAN___________________________________ GAMCO MATHERS FUND Seeks long-term capital appreciation in various market conditions without excessive risk of capital loss. (CLASS AAA-NO-LOAD) PORTFOLIO MANAGER: HENRY VAN DER EB, CFA COMSTOCK CAPITAL VALUE FUND Seeks capital appreciation and current income. The Fund may use either long or short positions to achieve its objective. (MULTICLASS) PORTFOLIO MANAGER: MARTIN WEINER, CFA COMSTOCK STRATEGY FUND The Fund emphasizes investments in debt securities, which maximize total return in light of credit risk, interest rate risk, and the risk associated with the length of maturity of debt instruments. (MULTICLASS) PORTFOLIO MANAGER: MARTIN WEINER, CFA FIXED INCOME ________________________________ WESTWOOD INTERMEDIATE BOND FUND Seeks to invest in a diversified portfolio of bonds with various maturities. The Fund's primary objective is total return. (MULTICLASS) PORTFOLIO MANAGER: MARK FREEMAN, CFA CASH MANAGEMENT-MONEY MARKET ________________ GABELLI U.S. TREASURY MONEY MARKET FUND Seeks to invest exclusively in short-term U.S. Treasury securities. The Fund's primary objective is to provide high current income consistent with the preservation of principal and liquidity. (NO-LOAD) PORTFOLIO MANAGER: JUDITH A. RANERI AN INVESTMENT IN THE ABOVE MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND. THE FUNDS MAY INVEST IN FOREIGN SECURITIES WHICH INVOLVE RISKS NOT ORDINARILY ASSOCIATED WITH INVESTMENTS IN DOMESTIC ISSUES, INCLUDING CURRENCY FLUCTUATION, ECONOMIC, AND POLITICAL RISKS. TO RECEIVE A PROSPECTUS, CALL 800-GABELLI (422-3554). INVESTORS SHOULD CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES, AND EXPENSES OF THE FUND BEFORE INVESTING. THE PROSPECTUS CONTAINS MORE INFORMATION ABOUT THIS AND OTHER MATTERS AND SHOULD BE READ CAREFULLY BEFORE INVESTING. THE GAMCO GROWTH FUND One Corporate Center Rye, New York 10580-1422 800-GABELLI 800-422-3554 FAX: 914-921-5118 WEBSITE: WWW.GABELLI.COM E-MAIL: INFO@GABELLI.COM Net Asset Value available daily by calling 800-GABELLI after 6:00 P.M. BOARD OF TRUSTEES Mario J. Gabelli, CFA Robert J. Morrissey CHAIRMAN AND CHIEF ATTORNEY-AT-LAW EXECUTIVE OFFICER MORRISSEY, HAWKINS & LYNCH GAMCO INVESTORS, INC. Anthony J. Colavita Anthony R. Pustorino ATTORNEY-AT-LAW CERTIFIED PUBLIC ACCOUNTANT, ANTHONY J. COLAVITA, P.C. PROFESSOR EMERITUS PACE UNIVERSITY James P. Conn Anthony Torna FORMER CHIEF INVESTMENT OFFICER MAXIM GROUP LLC FINANCIAL SECURITY ASSURANCE HOLDINGS LTD. Dugald A. Fletcher Anthonie C. van Ekris PRESIDENT CHAIRMAN FLETCHER & COMPANY, INC. BALMAC INTERNATIONAL, INC. John D. Gabelli Salvatore J. Zizza SENIOR VICE PRESIDENT CHAIRMAN, HALLMARK ELECTRICAL GABELLI & COMPANY, INC. SUPPLIES CORP. OFFICERS AND PORTFOLIO MANAGER Bruce N. Alpert Howard F. Ward, CFA PRESIDENT PORTFOLIO MANAGER James E. McKee Peter D. Goldstein SECRETARY CHIEF COMPLIANCE OFFICER Agnes Mullady TREASURER DISTRIBUTOR Gabelli & Company, Inc. CUSTODIAN, TRANSFER AGENT, AND DIVIDEND AGENT State Street Bank and Trust Company LEGAL COUNSEL Skadden, Arps, Slate, Meagher & Flom LLP -------------------------------------------------------------------------------- This report is submitted for the general information of the shareholders of The GAMCO Growth Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. -------------------------------------------------------------------------------- GAB406Q206SR GAMCO THE GAMCO GROWTH FUND SEMI-ANNUAL REPORT JUNE 30, 2006 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. SCHEDULE OF INVESTMENTS. Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant's Board of Trustees, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Not applicable. (a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (a)(3) Not applicable. (b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) The GAMCO Growth Fund -------------------------------------------------------------------- By (Signature and Title)* /s/ Bruce N. Alpert ------------------------------------------------------- Bruce N. Alpert, Principal Executive Officer Date September 1, 2006 ---------------------------------------------------------------------------- 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 1, 2006 ---------------------------------------------------------------------------- By (Signature and Title)* /s/ Agnes Mullady ------------------------------------------------------- Agnes Mullady, Principal Financial Officer & Treasurer Date September 1, 2006 ---------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature.