The Gabelli Asset Fund

The Gabelli Asset Fund Shareholder Commentary December 31, 2015 (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, 2015, the net asset value ( NAV ) per Class AAA Share of The Gabelli Asset Fund increased 3.2% compared with an increase of 7.0% for the Standard & Poor s ( S&P ) 500 Index. See page 2 for additional performance information. Finding Value in a Low Growth World Among those who passed away in 2015 was legendary New York Yankee catcher Yogi Berra, known for his durability across eighteen All-Star seasons and his pithy turns-of-phrase. It s like déjà vu all over again was one Yogism that applied to 2015 as commodity prices continued their fall and unrest returned in the Middle East, the Ukraine, and the South China Sea, punctuated by acts of terrorism by ISIS. Where 2015 differed substantially from 2014 was the flatness in returns across most major bond and equity indices. We attribute this to a tepid forecast for global growth and inflation. To borrow another Yogism, in the unenthusiastic outlook of most investors, the future ain t what it used to be. The Economy The world exited 2015 with China decelerating to sub-7% official growth, Japan sinking into its second recession in as many years, and commodity-driven countries, such as Russia and Brazil, experiencing depression conditions; the U.S. and Europe muddled along at 1%-2%. This follows years of sub-par growth. The base case for future economic activity is likely to include more of the same. At the moment, downside risks, including acts of war and terrorism, social unrest, further competitive currency devaluations, and increased trade barriers and greater than expected wage acceleration, outweigh risks to the upside. There may be some bright spots for the economy, however, as the year-on-year impact of a strong dollar moderates, and lower oil and commodity prices are reflected as a net benefit to consumers. The process of normalizing interest rates could also pull forward investment demand and clarify much of the uncertainty decision makers have been operating under since the start of monetary easing.

Comparative Results Average Annual Returns through December 31, 2015 (a) Since Inception Quarter 1 Year 5 Year 10 Year 15 Year (3/3/86) Class AAA (GABAX)........................ 3.17% (5.87)% 8.59% 7.57% 7.18% 11.74% S&P 500 Index............................. 7.04 1.38 12.57 7.31 5.00 10.15(d) Dow Jones Industrial Average................. 7.68 0.22 11.24 7.72 5.79 10.96(d) Nasdaq Composite Index..................... 8.76 7.13 15.00 9.78 5.86 9.10(d) Class A (GATAX)........................... 3.17 (5.88) 8.59 7.57 7.18 11.74 With sales charge (b)........................ (2.76) (11.29) 7.31 6.94 6.76 11.51 Class C (GATCX)........................... 2.96 (6.59) 7.78 6.78 6.55 11.40 With contingent deferred sales charge (c)........ 1.96 (7.52) 7.78 6.78 6.55 11.40 Class I (GABIX)............................ 3.23 (5.64) 8.86 7.79 7.32 11.81 In the current prospectuses dated April 30, 2015, 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 www.gabelli.com for performance information as of the most recent month end. Returns would have been lower had Gabelli Funds, LLC (the "Adviser") not reimbursed certain expenses of the Fund for periods prior to December 31, 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 www.gabelli.com. 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 www.gabelli.com. 2

Barron s 2016 Roundtable Mario J. Gabelli, our Chief Investment Officer, has appeared in the prestigious Barron s Roundtable discussion annually since 1980. Many of our readers enjoyed the inclusion of selected and edited comments from Barron s Roundtable in previous reports to shareholders. As is our custom, we are including selected comments of Mario Gabelli from Barron s 2016 Roundtable Part 1 and Part 2, published on January 16 and January 23, 2016, respectively. 3 Photo: Brad Trent for Barron's

Barron s: Happy New Year, everyone. It has been a great year so far, if you ignore the stock market, the economy, the Middle East, and anyone running for president. Let s start with the outlook for the economy. Mario Gabelli, the master of GAMCO Investors and a shrewd guide to corporate deal-making, rounds out this week s quartet with a look at media companies that could enrich shareholders by buying, selling, or rearranging valuable assets. There is a lot to chew on in his calculations and commentary. Mario, what lies ahead? MARIO GABELLI Gabelli: The consumer accounts for 70% of the U.S. economy, and is doing well. Wages are rising, jobs are increasing, and consumer balance sheets are OK, even after the decline in the stock market in the past three weeks. Automobile sales will flatten this year, the consumer will spend, and housing is improving. Consumer outlays for food and fuel will continue to decline, at least through the fall. Congress has passed an infrastructure bill and a tax bill. We re finally spending more on the military. We will have to deal with the cost of government entitlement programs, and a strong dollar is having a negative impact on exports. But, overall, the U.S. economy could grow by 2% this year. How do things look in other parts of the world? Gabelli: ln Europe, Mario Draghi [president of the European Central Bank] has stimulated the economy, and things will continue to improve. In China, the consumer economy, which accounts for about 40% of the total, could grow by 10% a year in the next five years. The balance of the economy will grow at a 3% to 4% rate, and has challenges. I like what India s Prime Minister, Narendra Modi, is doing. I like what is happening in Japan. But I don t have much optimism for most Latin American economies. Gabelli: We have talked today about the impact of China s weakening economy on the commodities market, and how problems in the industrial sector will hurt Standard & Poor s 500 earnings. I am going to discuss something unrelated: a company I have followed for some time that has grown more exciting [puts on New York Knicks cap]. I am referring to Madison Square Garden [MSG], which owns the greatest sports arena in the world, Madison Square Garden, in New York. The company has 25 million shares outstanding, selling at $154 each, for a market capitalization of $3.8 billion. It has $1.5 billion of net cash, and has committed to buying back $500 million worth of stock. Madison Square Garden owns several sports franchises, including the New York Knicks, New York Rangers, and New York Liberty women s basketball team. As a group, its sports franchises could be worth $1.7 billion. In addition to the Garden, the company owns properties such as the Forum in L.A., and the Chicago Theatre. It leases Radio City Music Hall and the Beacon Theatre in New York. And it is a real estate play. Gabelli: That s right. From Manhattan s West 34th Street south along the High Line, there has been a construction renaissance. There have been many discussions about renovating Penn Station. The air rights over Madison Square Garden, which sits atop Penn Station, could be worth as much as $500 million, and the company is starting to look at ways to monetize that asset. The combination of cash flow, asset values, and stock buybacks allows me to put a value on the stock of $200 to $300 per share. Another way to look at it is, if you buy the stock, you get the Knicks for free. Through its 4.5 million B shares, the Dolan family controls the company. There are a lot of ways to make money here by monetizing the company s assets. Next, Griffon [GFF] is a small cap stock. The company has 48 million shares. The stock sells for $16.60. Griffon is involved in several industries. Through its home and building products division, the company is involved in the U.S. garage door business. It is a $1.8 billion market, and Griffon s Clopay unit has a 25% market share. It competes with Overhead Door and others. It sells mostly through Home Depot. This is a good business, and it is improving. The company has added a few product lines in its home division, including True Temper garden and snow-removal tools. 4

What are Griffon s other businesses? Gabelli: The company is a component supplier for diapers. Procter & Gamble [PG] accounts for half of Griffon s diaper business and is gaining share. Griffon s costs have fallen as resin prices have come down, and these cost savings are passed on to customers. But, on balance, this too is a good business for the company. Griffon also develops and sells equipment for the military through its Telephonics unit. It makes submarine monitoring hardware for helicopters, and is a first tier supplier to Lockheed Martin [LMT]. Military spending will increase in 2016, 17, and 18, given China s more aggressive posture in the South Photo: Jenna Bascom for Barron's China Sea, North Korea s reported test of a hydrogen bomb, and the events in the Middle East. The U.S. has underspent on its military, and we ll have a new president next year, which means spending will rise. Here are the numbers. Griffon generated revenue of about $2 billion for the fiscal year ended Sept. 30. EBITDA, or earnings before interest, taxes, depreciation, and amortization, was about $171 million. In the current fiscal year, revenue could rise to $2.05 billion and EBITDA, to $180 million. Griffon earned 73 cents a share in its latest fiscal year. It could earn 85 cents a share this year and $1 in fiscal 2017. Goldman Sachs owns more than five million shares. Is there any chance Griffon might break itself up or spin off businesses? Gabelli: We would prefer that they don t break things up. We d like management to focus on using the company s cash flow to grow the businesses it is in, and make a few tuck-in acquisitions. To me, Griffon is in the right businesses. Kaman [KAMN], based in Connecticut, ties into two themes: higher military spending, and the struggles of the energy, metals, and mining industries. Kaman has about 30 million fully diluted shares. The stock is trading for $38. Pro forma, with two acquisitions, net debt is $435 million. Kaman acquired Timken Alcor Aerospace Technologies from Timken [TKR] for $45 million. Kaman sells JPFs, or joint programmable fuzes, used to program precision-guided bombs aboard military planes. The U.S. Air Force has placed orders for Kaman s JPFs, as have other nations. One small but important concern is that the U.S. Navy just awarded a fuze contract to another company, which will be phased in starting in 2021. Witmer: Which company is that? Gabelli: It s Orbital ATK [OA]. Kaman also is a subcontractor to Lockheed Martin for cockpits for the Black Hawk helicopter. It has an aerospace structures business. But the crown jewel is a business that manufactures tapered roller bearings for commercial aircraft. As 5

the ramp rate rises on new planes from Boeing [BA] and Airbus Group [AIR-FR], Kaman benefits. This business has been particularly strong. Including recent acquisitions, bearings revenue could reach about $300 million this year and $320 million in 2017. EBITDA could rise from $105 million in 2016 to $120 million in 2017. The JPF business is operating at capacity. Growth can be accommodated by machinery and labor. What is happening on the industrial side of the company? Gabelli: That business faces challenges. Kaman generates about $1.2 billion in annual revenue from its distribution segment, which mainly includes the sale of MRO [maintenance, repair, and overhaul] supplies. About 20% of distribution revenue is tied to EMM energy, mining, and metals. The company acquired a business with operations in Pennsylvania, near the Marcellus Shale. That has become an air pocket: Revenue in the distribution segment declined at an accelerating rate in the fourth quarter, as energy prices fell, and will probably continue deteriorating. Kaman generates a lot of cash. It is reasonably well managed, and the defense side of the company will get more traction in coming years. Charles Chuck Kaman founded the company in the 1940s. As an aside, the first time I visited his office, the guy s dog, Otto, came over and put his head on my lap. I didn t ask any aggressive questions after that. Chuck Kaman was a smart man. Gabelli: I expect Kaman to earn $2.90 a share this year and $3.10 in 2017. Auto-parts stocks were a tale of two cities last year. O Reilly Automotive [ORLY] was up 31%. Pep Boys Manny, Moe & Jack [PBY] was up 87%. Genuine Parts [GPC] was down about 20%. Genuine Parts is trading for $78 and has 150.8 million shares. The company has raised the dividend annually for the past 59 years. It has four operating segments. The automotive business, conducted under the NAPA name, contributed $8 billion out of a total $15 billion in 2015 revenue. We expect revenue of closer to $16 billion this year and $16.5 billion in 2017. Why has the stock underperformed peers? Gabelli: About 25% of automotive revenue comes from Canada, Australia, New Zealand, and Mexico. Revenue was up nicely in local currency last year, but down significantly when translated into dollars. At some point, the currency head wind will flatten out and the negative impact will disappear. Genuine Parts also has an MRO business, which sells repair parts. It competes with Fastenal [FAST] and W.W. Grainger [GWW]. Annual revenue for this business is about $4.5 billion. It has been declining sequentially in the past few months, but the business is OK. I expect Genuine Parts to earn $4.50 a share for 2015, $5 this year, and $5.50 next year. The company pays an annual dividend of $2.46 a share, which it is likely to raise again this year. Shifting gears [everyone groans], people are uncomfortable with the outlook for emerging markets, but I like Kinnevik [KINV B -SK], a Swedish company that has several emerging market subsidiaries. I recommended it last January. If you give $1 billion to a private equity fund, they take fees and 20% of profits, and you have no liquidity. In MARIO GABELLI S PICKS Company Ticker Price 1/8/16 Madison Square Garden MSG $153.84 Griffon GFF $16.60 Kaman KAMN $38.40 Genuine Parts GPC $78.56 Millicom Intl Cellular MIICF $51.90 CBS CBS 46.46 Discovery Communications DISCA $26.01 Source: Bloomberg 6

Kinnevik s case, you can invest in a basket of companies selling at a discount to net asset value; management doesn t take two-and- 20 [2% in fees and 20% of profits], and you can get your money out. What is the stock price? Gabelli: Kinnevik has 277 million A and B class shares. The stock was priced at 238 Swedish kronor [$28] last Friday. Kinnevik has investments in e-commerce operations. The business I am focused on is Millicom International Cellular [MIICF]. Millicom has 60 million wireless customers in Africa and Latin America. In Africa, it is cash breakeven. At some point, Millicom will be able to monetize its African business. The Latin America business operates in Costa Rica, Honduras, Guatemala, El Salvador, Bolivia, Colombia, and Paraguay. The company already has sold off its Asian operations. How will it monetize the Latin American portion? Gabelli: John Malone [chairman of Liberty Media /LMCA] recently merged Columbus International, a telecom provider in the Caribbean and Central and South America, into Cable & Wireless Communications [CWC-LN], in which he has a stake. Last summer Liberty Global [LBTYA], which he controls, created a tracking stock called Liberty LiLAC Group [LILAK] to track its operations in Latin America and the Caribbean. Next, Malone is likely to use Liberty LiLAC to further consolidate operations in that part of the world. Millicom is likely to be sold at the right price. The current CEO of Millicom previously ran the Chilean operations of Liberty LiLAC. What could Millicom be worth in a break-up and sale? Gabelli: Let me put it this way: If I were running Millicom, I would first sell off the African business for a couple of billion dollars. It has about $200 million in annual EBITDA. Then I would consolidate Latin American operations with Malone s. This is going to be a big winner. Here s the math: Millicom has 100 million shares. The U.S. shares are trading for $52. The company could generate $7 billion in revenue this year, and $2.3 billion in EBITDA. Next year revenue could hit $7.4 billion, and EBITDA, $2.4 billion. Annual capex is $1.2 billion, so the business is cash flow positive. Next, CBS [CBS] has 38 million class A shares, of which Sumner Redstone s National Amusements owns 30 million. There are eight million in public hands. Our clients own about four million of the A shares. The A shares are selling around $50, and the B shares at $46. There are 474 million shares in all. CBS has an equity market capitalization of $22 billion, $8 billion of debt, and an enterprise value of $30 billion. The company operates television stations and produces content for TV. CBS had $13.8 billion in revenue last year, going up to $14.6 billion this year. Election-related and Super Bowl 50 advertising will bolster revenue in 2016. EBITDA was $3.1 billion, and could rise to $3.4 billion. The company might be harvesting assets through the spectrum auction later this year. The prior spectrum auction generated proceeds of more than $40 billion, although this auction won t generate close to that, due to buyer exhaustion. What is CBS likely to generate in earnings? Gabelli: The company earned $3.30 a share last year, and could earn $3.90 this year and $4.25 next year. The stock is selling for 11 times next year s estimate. The broadcasting business accounts for almost $9 billion of revenue. On the programming side, I like Ray Donovan better than Downton Abbey, and I like The Walking Dead. Gundlach: That s a lot of TV. Gabelli: In addition to big sources of advertising and the spectrum sale, there is CBS All Access, the company s over-the-top or streaming service. Black: The stock is cheap statistically, but [CBS CEO] Leslie Moonves makes north of $50 million a year and hasn t delivered much top line growth. Gabelli: Come on, hedge-fund managers make a lot of money. This guy [points to Gundlach, sitting to his right] runs $63 billion in fixed income portfolios, and makes a lot. 7

Give us the range of outcomes at CBS. Gabelli: Redstone is 92. When he passes from the scene, will his family hang on to Viacom [VIAB], which he also controls, and sell CBS? A lot of organizations and individuals might like CBS. Lastly, Discovery Communications [DISCA] has 645 million shares outstanding: 223 million A shares have one vote, seven million B shares have 10 votes, and 415 million C shares don t get a vote. Malone is involved with this company, too; he owns about six million of the B shares. Discovery has $7.3 billion of debt, and a $25 stock price. It has a market cap of $16 billion and an enterprise value of $23.7 billion. The company s various cable TV channels generated $6.4 billion of revenue in the latest year, about half outside the U.S. Revenue could climb to $6.8 billion this year and $7.2 billion next year. We forecast EBITDA of $2.6 billion for 2016, and $2.9 billion for 2017. The company earned $1.80 last year. It could earn $2.15 this year and $2.55 next year. Neither CBS nor Discovery has much capex. They are great cash generators. The big issue for Discovery is how to migrate its content to global platforms, including smartphones. The CEO, David Zaslav, is terrific. Discovery won the non-u.s. broadcast rights for the Olympic Games from 2018 through 2024. That s it. In that case, thank you. Mario J. Gabelli, CFA, is Chairman, Chief Executive Officer, and Chief Investment Officer Value Portfolios of GAMCO Investors, Inc. that he founded in 1977, and Chief Investment Officer Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management Inc. He is also Chief Executive Officer and Chairman of the Board of Directors of Associated Capital Group, Inc. 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, 2015, The Gabelli Asset Fund held, as a percentage of its net assets, the following companies mentioned in this article: 1.6% of Genuine Parts Co., less than 1.0% of CBS Corp., The Boeing Co., Discovery Communications Inc., Kaman Corp., Kinnevik, Liberty Global Class A, Liberty Global Class C, Liberty Media Corp., Liberty LiLAC Group Class A, Liberty LiLAC Group Class C, Lockheed Martin, Madison Square Garden, Millicom International Cellular SA, O Reilly Automotive Inc., Procter & Gamble and The Timken Co., and no shares of Airbus Group, Cable & Wireless Communications plc, Fastenal, Griffon Corp., Orbital ATK, Pep Boys Manny, Moe & Jack, Viacom Inc., and WW Grainger. The views expressed in this article reflect those of the Chief Investment Officer only through the date of the interview. Minor edits were made. The Chief Investment Officer s 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) growth prospects do not necessarily translate into higher stock prices, but they do express a positive trend which 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. Stocks are subject to market, economic and business risks that cause their prices to fluctuate. Consequently, you can lose money by investing in the Fund. Investors should carefully consider the investment objectives, risks, sales 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 call 800 GABELLI or visit www.gabelli.com For more information, visit our website: www.gabelli.com or call: 800-GABELLI 800-422-3554 914-921-5100 Fax: 914-921-5118 info@gabelli.com Distributed by G.distributors, LLC., a registered broker-dealer and member of FINRA One Corporate Center, Rye, New York 10580 8

Whether this period of slow growth is cyclical or secular has important implications for future investment. As with many things, the answer is likely a little bit of both. The current expansion is clearly aging, having started in June 2009, and has been characterized by too much debt globally and too much regulation in the U.S. Secular issues are also at play. Like the seventy-seven month expansion, populations in the developed world are also getting older, and many baby boomers are retiring earlier than their parents, leaving a smaller workforce to service debt and retirement obligations while driving output. Some countries, such as Japan, are relying on technology to fill this labor shortfall. At the same time, technological disruption brought on by innovative companies like Amazon, Uber, Airbnb, Netflix, and Venmo have reduced friction costs (in many cases meaning people), boosting consumer utility but possibly weighing on wages and labor participation. Ultimately, we view this process of creative destruction, identified by Joseph Schumpeter in the 1940 s, as normal and healthy for the economy, if not for those directly (and hopefully temporarily) impacted by dislocation. Mr. Market Increased volatility featured again in 2015. Markets began the year strongly, fueled by monetary easing by the European Union and Japan and a speculative bubble in China. The summer months brought out a sweat in most investors, as the S&P 500 declined 12%, its first correction in three years. Declining commodity prices, a collapse in China, and trepidation at the onset of a rate hiking cycle by the Federal Reserve, all with a familiar ring, were to blame. The market retraced its losses in October and took the December rate hike in stride, but the aforementioned concerns returned at year end, leaving December in the red. Against a sluggish economic backdrop, the market disproportionately rewarded companies that could demonstrate robust topline growth, including the so-called FANG of (F)acebook, (A)mazon, (N)etflix and (G)oogle (now called Alphabet) which rose an average of 80%. Those companies alone contributed 196 basis points to the S&P 500, meaning that without them, the S&P 500, before dividends, would have declined 2.7%. Historically, we have avoided high growth companies because so much of their value is tied to a future which may encompass a high degree of variability, because they do not have a clear path to positive cash flow, and/or because they are characterized by short product cycles. This is not to say that we do not invest in technology or growing companies many of our investments in aerospace, oil extraction, and telecommunications feature significant amounts of technology. Growth is merely a component of value. We weigh our degree of confidence in future growth against the price for which that opportunity is on sale in the market. Deals, Deals & More Deals Worldwide merger and acquisition (M&A) activity totaled $4.7 trillion, an increase of 42% over the $3.3 trillion in 2014, making it the most active year for M&A on record. The fourth quarter of 2015 was the third consecutive quarter with more than $1 trillion in deals announced, and it was also the busiest quarter for M&A on record at $1.6 trillion. In the Fund, two substantial deals closed during the year. In February, Harris Corp. (0.1% of net assets as of December 31, 2015), a large defense contractor, announced the purchase of ITT spin-off Exelis Corp, which closed on May 29 for $16.625 per share in cash and 0.1025 shares of Harris Corp. The second deal that closed was the sale of DIRECTV to AT&T (0.6%) on July 24 for $95 per share in cash ($28.50) and 1.892 shares of AT&T. 9

There were also a number of announced transactions of portfolio companies in 2015 that are currently underway. On August 10, Berkshire Hathaway (1.4%) (Warren Buffett) announced the acquisition of Precision Castparts (0.6%) for $235 per share in cash. This was followed later in August by Schlumberger s agreement to acquire Cameron International (CAM) for $14.44 per share in cash and 0.716 shares of Schlumberger, equating to $66.36 per share of CAM. In September, Cablevision (1.1%) agreed to merge with Netherlandsbased cable and telecommunications company Altice for $34.90 per share in cash. Journal Media (less than 0.1%), formerly Journal Communications, announced a deal to be acquired by Gannett at $12 per share in cash. This follows a restructuring of Journal Communication s assets with E.W. Scripps (0.1%) in April that created the resulting pure-play print media company that is being purchased. Also in September, Media General (0.3%) announced a proposal to purchase Meredith Corp (0.1%), and early in 2016, Nexstar Broadcasting formalized a competing bid for Media General, the outcome of which is unknown at this writing. Finally, another competitive situation arose as an $18.50 per share bid for Pep Boys by Carl Icahn supplanted Bridgestone s earlier agreement to acquire the company. Financial engineering continues to impact the Fund. Energizer was re-christened Edgewell Personal Care (EPC) (1.2%), and its battery business was spun-off into the new Energizer (0.4%) on July 1. Baxter (0.1%) spun-off its biopharmaceuticals business into Baxalta (0.1%) on July 1 as well. Graham Holdings (less than 0.1%) spun-off its cable business, Cable One (0.1%), into a new public company on July 1. On October 1, Madison Square Garden (0.8%) completed the spin-off of its regional sports network, MSG Networks (MSGN) (0.3%). One notable spin-off in action is ConAgra s (0.6%) decision to separate its Lamb-Weston potato business later this year. The primary drivers behind what we have previously termed the Fifth Wave of M&A the low cost of capital and limited organic growth opportunities remain in place. In addition, the frequency of activist shareholders playing the role of catalyst in corporate restructurings has accelerated. As a consequence, we expect 2016 to be another fruitful year for deals. Let s Talk Stocks The following are stock specifics on selected holdings of our 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 share prices are listed first in United States dollars (USD) and second in the local currency, where applicable, and are presented as of December 31, 2015. Bank of New York Mellon Corp. (1.0% of net assets as of December 31, 2015) (BK $41.22 NYSE) is a global leader in providing financial services to institutions and individuals. The company operates in more than one hundred markets worldwide and strives to be the global provider of choice for investment management and investment services. As of September 30, 2015, the firm had $27.4 trillion in assets under custody and $1.5 trillion in assets under management. Going forward, we expect BK to benefit from rising global incomes and the cross border movement of financial transactions. BK is also well positioned to grow earnings in a rising interest rate environment, given its large customer cash deposits and significant loan book. Brown-Forman Corp. (2.5%) (BF/A $110.11 NYSE; BF/B $99.28 NYSE) is a leading global distilled spirits producer. Spirits is an advantaged category that enjoys high margins, low capital requirements, strong free cash flow generation and good pricing power. The company s global brands include Jack Daniel s 10

Tennessee whiskey, Southern Comfort, Finlandia vodka, Woodford Reserve bourbon, and el Jimador and Herradura tequilas. Jack Daniel s is one of the world s most valuable spirits brands, enjoying strong growth both in the U.S. and internationally as consumers increasingly choose to drink American whiskies. The company has also successfully expanded the brand into the fast growing flavored whiskey category. While Brown-Forman does face some near term headwinds from negative foreign currency exposure (over half of sales come from outside the U.S.), the company is positioned to grow revenues and profits substantially over the next several years, and has significant balance sheet flexibility. While the company is family controlled, we believe that if it ever became available for sale it would be highly coveted by other large global spirits players. Cablevision Systems Corp. (1.1%) (CVC $31.90 NYSE) provides broadband, television, and phone service to approximately three million subscribers in the New York metropolitan area. An industry pioneer, CVC developed the most advanced cable plant in the country and converted over 70% of its subscribers into triple play (video, phone, and broadband) customers. After years as a potential acquisition candidate, in September 2015 Cablevision agreed to a sale to Altice for $34.90 per share in cash. The deal represents the culmination of efforts to surface value through transactions such as the spin-offs of Madison Square Garden and AMC Networks (0.5%) in February 2010 and June 2011, respectively. ConAgra Foods Inc. (0.6%) (CAG $42.16 NYSE), headquartered in Omaha, Nebraska, is a manufacturer and marketer of food products focused in three areas: branded packaged food products, private label food products, and commercial foods (specialty potato and foodservice). ConAgra s brands include Healthy Choice meals, Hebrew National hot dogs, Orville Redenbacher s popcorn, PAM cooking spray, Reddi-whip and Slim Jim jerky. Private label food was dramatically expanded with the 2013 acquisition of Ralcorp Holdings for $6.8 billion. The deal has not gone well, with the business experiencing integration issues and significant sales declines, all while taking management attention away from the company s branded business. Following the announcement that activist investor JANA Partners had taken a stake in the company, new CEO Sean Connolly (formerly of Hillshire) announced ConAgra s intention to exit the private label business when the company reported earnings on June 30, 2015. On November 2, 2015, CAG announced a definitive agreement to sell the private label business to TreeHouse Foods for $2.7 billion. On November 18, 2015 the company announced another strategic step, its plan to split the company through a tax-free spin-off of its Lamb Weston frozen potato business in the fall of 2016. CVS Health Corp. (1.0%) (CVS $97.77 NYSE) is the leading pharmacy and pharmacy benefits manager in the country, with over $150 billion in annual revenue. The company s recent acquisitions of institutional pharmacy Omnicare and the pharmacies inside Target stores should add $0.15 to earnings in 2016 and further CVS s dominance across the pharmacy channel. Same store sales should improve in 2016 now that the company has annualized its decision to stop selling tobacco, and that decision has helped them win over $11 billion in net new business for its pharmacy benefits management (PBM) division. Edgewell Personal Care Co. (1.2%) (EPC $78.37 NYSE), based in St. Louis, Missouri, is the renamed Energizer Holdings, Inc. following the tax-free spin-off to shareholders of the household products division on July 1, 2015. Edgewell generates approximately $2.5 billion of revenue through its principal businesses: wet shaving, including Schick-branded razors and blades, Edge and Skintimate shaving preparation and private label shaving products; sun care, including the Banana Boat and Hawaiian Tropic brands; feminine care, Playtex and o.b. tampons and Carefree and Stayfree liners and pads; and infant care, utilizing the Playtex and Diaper Genie brands. As a pure-play personal care company, Edgewell competes in high margin, attractive 11

categories with leading brands. We expect management to focus on improving margins through product mix, restructuring savings and operating leverage, which should afford it flexibility to reinvest in growth opportunities. At the outset, the company has approximately $1 billion of net debt, providing management with sufficient flexibility to invest in internal growth, make acquisitions and/or repurchase shares. EPC is a likely acquisition target, as a multinational competitor with a strong international infrastructure would benefit from scale and cost synergies, as well the ability to accelerate international expansion. Energizer Holdings Inc. (0.4%) (ENR $34.06 NYSE), based in St. Louis, Missouri, became a standalone company on July 1, 2015 through a tax-free spin-off to shareholders from Edgewell Personal Care. The battery and lighting company generated pro forma revenue of $1.6 billion, EBITDA of $318 million and earnings of $2.82 per share for the fiscal year ending September 2015. Management remains focused on optimizing its cost structure across trade investment, go-to-market, working capital, procurement, and integrated supply chain, which should result in steady profit improvement over time, and which is expected to deliver low-single digit EBITDA growth. This, coupled with working capital improvements, is expected to generate industry leading cash flow in the range of 10%-12% of sales. Honeywell International Inc. (1.5%) (HON $103.57 NYSE) operates as a diversified technology company with highly engineered products, including turbine propulsion engines, auxiliary power units, turbochargers, brake pads, environmental and combustion controls, sensors, security and life safety products, resins and chemicals, nuclear services, and process technology for the petrochemical and refining industries. One of the key drivers of HON s growth is acquisitions that increase the company s growth profile globally, creating both organic and inorganic opportunities. The company recently acquired Elster Industries, a leading provider of thermal gas solutions, smart meters, software and data analytics for the commercial, industrial, and residential heating market. Elster s gas business offers products in high demand among natural gas customers and brings a strong, global distribution network and numerous cross-selling opportunities for existing HON technologies to new customers. Elster s gas, electric and water meters are highly valued for their reliability, safety, and accuracy. The company maintains an installed base of more than 200 million meter modules deployed over the course of the last 10 years that generate significant recurring revenues. We believe acquisitions such as Elster should drive meaningful and sustained growth for HON spurred by global energy efficiency initiatives and natural resource management. Madison Square Garden Co. (0.8%) (MSG $161.80 NYSE) is an integrated sports and entertainment company that owns the New York Knicks, the New York Rangers, the Radio City Christmas Spectacular, The Forum, and that iconic New York venue, Madison Square Garden. These evergreen content and venue assets benefit from sustainable barriers to entry and long term secular growth. We believe the now complete transformation project, the rising value of sports franchises (as demonstrated by the sale of the Clippers), and share repurchases, should dramatically increase MSG s per share value. Republic Services Inc. (1.0%) (RSG - $43.99 NYSE), based in Phoenix, Arizona, became the second largest solid waste company in North America after its acquisition of Allied Waste Industries in December 2008. Republic provides nonhazardous solid waste collection services for commercial, industrial, municipal, and residential customers in forty-one states and Puerto Rico. Republic serves more than 2,800 municipalities and operates 193 landfills, 201 transfer stations, 340 collection operations, and 67 recycling facilities. Since the Allied merger, Republic has benefited from synergies driven by route density, beneficial use of acquired assets, and reduction in redundant corporate overhead. Republic is committed to its core solid waste business. While other providers have strayed into alternative waste resource technologies and strategies, we view Republic s 12

plan to remain steadfast in the traditional solid waste business positively. We expect continued solid waste growth acquisitions, earnings improvement, and incremental route density and internalization growth in already established markets to generate real value in the near to medium term, highlighting the company s potential. Investment Scorecard The largest contributor to performance in 2015 was Cablevision Systems Corp. (+36%), which in September agreed to be acquired by European telecommunications operator Altice for $34.90 per share in cash. Other takeovers that were top contributors were Exelis Inc. (+42%), the ITT (0.3% of net assets as of December 31, 2015) spin-off that was acquired by Harris Corp., and DIRECTV (+8%), which in 2014 had agreed to be acquired by AT&T. Consumer staples companies Swedish Match (+17%), Jack Daniels distiller Brown-Forman (+27%), Dr. Pepper Snapple (0.6%) (+33%) and Kikkoman (0.6%) (+43%) performed well and added stability to the portfolio. Finally, O Reilly Automotive (0.8%) (+32%), reported strong results in part as a beneficiary of lower gasoline prices. Detractors from performance included media companies Twenty-First Century Fox (2.2%) (-28%) and Viacom (0.7%) (-40%) which were beset with renewed concerns about changing TV viewing habits such as cord-cutting by cable subscribers stoked in part by subscriber losses reported by ESPN. The group has been stronger early in 2016 as consolidation becomes a more frequent topic. Navistar (0.2%) (-74%) struggled to regain market share in a slowing U.S. truck market with a leveraged balance sheet; the company s market position remains interesting to foreign buyers. Similarly, Rolls Royce (0.6%) (-36%) had execution issues and suffers from concerns over a slowdown in aerospace cycle. Finally, American Express (1.5%) (-24%), a valuable brand with an irreplaceable card network, suffered a series of setbacks, most notably the loss of its Costco co-branding relationship beginning in 2016. Conclusion & Outlook Although the current year began with a thud, moderating headwinds from currency and energy, coupled with continued improvement in consumer spending and relatively low interest rates, should lead to better earnings growth in 2016. As usual, we will take advantage of market volatility to improve the overall price/value characteristics of the portfolio. Notwithstanding the market leadership of a handful of large capitalization, often tech-oriented companies, we have not and will not alter our investment philosophy and process. We start with bottom-up fundamental research, and employ our Private Market Value (PMV) with a Catalyst stock selection process to identify stocks ripe for change, including potential acquisition targets and likely candidates for financial engineering. We believe we can deliver superior risk-adjusted returns in any growth environment. January 15, 2016 Top Ten Holdings (Percent of Net Assets) December 31, 2015 Brown-Forman Corp. 2.5% Twenty-First Century Fox Inc. 2.2% Ametek Inc. 2.1% Genuine Parts Co. 1.6% Idex Corp. 1.5% American Express Co. 1.5% Honeywell International Inc. 1.5% Berkshire Hathaway Inc. 1.4% Swedish Match AB 1.3% Wells Fargo & Co. 1.2% 13

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 Fund s 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. www.gabelli.com Please visit us on the Internet. Our homepage at www.gabelli.com 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 info@gabelli.com. The Fund s daily NAVs are available in the financial press and each evening after 7:00 PM (Eastern Time) by calling 800-GABELLI (800-422-3554). 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 www.gabelli.com and receive early notice of quarterly report availability, news events, media sightings, and mutual fund prices and performance. e-delivery 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 www.gabelli.com. 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 Fund s 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. 14

THE GABELLI ASSET FUND One Corporate Center Rye, NY 10580-1422 Portfolio Management Team Biographies Mario J. Gabelli, CFA, Chairman, Chief Executive Officer, and Chief Investment Officer Value Portfolios of GAMCO Investors, Inc. that he founded in 1977, and Chief Investment Officer Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management Inc. He is also Chief Executive Officer and Chairman of the Board of Directors of Associated Capital Group, Inc. Mr. Gabelli is a summa cum laude graduate of Fordham University and holds an MBA degree from Columbia Business School, and Honorary Doctorates from Fordham University and Roger Williams University. 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. 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 fund s 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 fund s 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. 15

THE GABELLI ASSET FUND One Corporate Center Rye, NY 10580-1422 t 800-GABELLI (800-422-3554) f 914-921-5118 e info@gabelli.com GABELLI.COM Net Asset Value per share available daily by calling 800-GABELLI after 7:00 P.M. BOARD OF TRUSTEES Mario J. Gabelli, CFA Chairman and Chief Executive Officer, GAMCO Investors, Inc. Chairman and Chief Executive Officer, Associated Capital Group Inc. Anthony J. Colavita President, 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 President, 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 Chairman, BALMAC International, Inc. Salvatore J. Zizza Chairman, Zizza & Associates Corp. OFFICERS Bruce N. Alpert President Andrea R. Mango Secretary Agnes Mullady Treasurer Richard J. Walz Chief Compliance Officer DISTRIBUTOR G.distributors, LLC CUSTODIAN, TRANSFER AGENT, AND DIVIDEND DISBURSING AGENT State Street Bank and Trust Company LEGAL COUNSEL Skadden, Arps, Slate, Meagher & Flom LLP T H E G A B E L L I A S S E T F U N D Shareholder Commentary December 31, 2015 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. GAB405Q415SC