Gabelli
Gold
Fund,
Inc.
ANNUAL REPORT
DECEMBER 31, 1997
<PAGE>
Gabelli Gold Fund, Inc.
Annual Report - December 31, 1997
To Our Shareholders,
Caesar Bryan
1997 was one of the worst years for gold investors in recent memory. Gold
fell about $80 to $285 per ounce, a price not seen since 1979, and many gold
stocks declined in price by more than 50%.
The net asset value of the Gabelli Gold Fund declined by 35.4% in the
fourth quarter ended December 31, 1997. The Lipper Analytical Services Gold Fund
Average and the Philadelphia Gold & Silver (XAU) Index of large North American
gold companies declined by 30.3% and 32.2%, respectively, over the same period.
Each index is an unmanaged indicator of investment performance. The Fund was
down 51.9% for 1997. The Lipper Gold Fund Average and XAU Index declined 42.3%
and 36.5%, respectively, over the same twelve month period. Since inception on
July 11, 1994 through December 31, 1997, the Fund has a total return of (40.7)%,
which equates to an average annual return of (14.0)%.
INVESTMENT RESULTS (a)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
Quarter
-------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
<S> <C> <C> <C> <C> <C>
1997: Net Asset Value .............. $11.83 $ 9.79 $ 9.17 $ 5.87 $ 5.87
Total Return ................. (4.0)% (17.2)% (6.3)% (35.4)% (51.9)%
- -----------------------------------------------------------------------------------------
1996: Net Asset Value .............. $14.00 $13.40 $13.46 $12.32 $12.32
Total Return ................. 22.7% (4.3)% 0.4% (8.5)% 8.0%
- -----------------------------------------------------------------------------------------
1995: Net Asset Value .............. $11.00 $11.96 $12.27 $11.41 $11.41
Total Return ................. (0.6)% 8.7% 2.6% (7.0)% 3.1%
- -----------------------------------------------------------------------------------------
1994: Net Asset Value .............. -- -- $12.37 $11.07 $11.07
Total Return ................. -- -- 23.7%(b) (10.5)% 10.7%(b)
- -----------------------------------------------------------------------------------------
</TABLE>
Average Annual Returns - December 31, 1997 (a)
- ----------------------------------------------
1 Year............................... (51.9)%
3 Year............................... (18.8)%
Life of Fund(b)...................... (14.0)%
Dividend History
- -----------------------------------------------------
Payment (ex) Date Rate Per Share Reinvestment Price
- ----------------- -------------- ------------------
December 29, 1997 $0.058 $5.86
(a) Total returns and average annual returns reflect changes in share price and
reinvestment of dividends and are net of expenses. The net asset value of the
Fund is reduced on the ex-dividend (payment) date by the amount of the dividend
paid. Of course, returns represent past performance and do not guarantee future
results. 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. (b) From commencement of operations on July 11, 1994. Note:
Investing in foreign securities involves risks not ordinarily associated with
investments in domestic issues, including currency fluctuation, economic and
political risks. Investing in gold is considered speculative and is affected by
a variety of worldwide economic, financial and political factors.
- --------------------------------------------------------------------------------
<PAGE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GABELLI GOLD FUND,
THE LIPPER GOLD FUND AVERAGE AND THE PHILADELPHIA GOLD & SILVER INDEX
[The following table was depicted as a line chart in the printed material]
Gabelli Gold Fund* Lipper Gold Fund Average Phil. Gold & Silver Index
------------------ ------------------------ -------------------------
7/11/94 $10,000 10000 10000
12/31/94 $11,070 10040 9940
12/31/95 $11,413 9476 10948
12/31/96 $12,326 10189 10614
12/31/97 $ 6,000 5879 6745
- ----------
* Past Performance is not predictive of future performance.
Our Investment Objective
The Fund's objective is to obtain long term capital appreciation by
investing in equity securities of foreign and domestic issuers principally
engaged in gold and gold-related activities.
Our Approach
We look at a number of company specifics in order to determine which gold
stocks are relatively undervalued. Our primary focus is on capitalization per
ounce of production and, more importantly, on capitalization per ounce of
recoverable reserves. This determines how much gold actually backs every dollar
invested in a gold company. We appreciate that every mining company must replace
the gold that it mines, and we place a heavy emphasis on the quality of
management and their ability to create shareholder wealth. We invest globally
with an emphasis on gold-producing companies.
Global Allocation
The accompanying chart presents the Fund's holdings by geographic region
as of December 31, 1997. The geographic allocation will change based on current
global market conditions. Countries and/or regions represented in the chart and
below may or may not be included in the Fund's future portfolio.
[The following table was depicted as a pie chart in the printed material]
HOLDINGS BY GEOGRAPHIC REGION - 12/31/97
North America 70.0%
South Africa 14.7%
Australia 8.7%
South America 4.5%
Europe 2.1%
2
<PAGE>
COMMENTARY
The gold price has been driven down by increased central bank selling and
producer forward sales as well as dishoarding by residents of many Southeast
Asian countries. Although it is difficult to anticipate what central banks will
do in the future, it is reasonable to assume that most of the European central
bank selling, in the run up to the introduction of the euro, has been completed.
Indeed, the Bank of France, one of the largest holders of gold, has stated its
intent to not sell any gold. The Bundesbank has echoed this sentiment.
Much of the gold mining industry is uneconomic at today's gold price of
$280 per ounce. Average cash costs are estimated to be near $260 per ounce with
total costs over $315 per ounce. Many gold companies are surviving due to their
hedge programs, which nets them a gold price higher than the spot price.
However, a number of mine closures have been announced and more will follow.
Lower mine production will exacerbate the basic supply demand deficit which rose
to an estimated 800 tonnes in 1997 from 450 tonnes in 1996. This compares with
total mine production in 1997 of 2,400 tonnes. It is clear that as the gold
price has fallen forcing mine closures, demand for gold has risen.
If central banks curtail their lending and gold companies collapse their
hedges to book a profit, the gold price could rally. In this event, the price of
gold stocks will likely rise sharply from current, very oversold levels. The
current environment can be compared with early 1993. In November 1992, the gold
price was near $334 per ounce, the XAU Index of large gold companies was 65 and
sentiment was very poor. In early January 1998, the gold price is $280, the XAU
is trading at a level of 61 and sentiment is equally depressed. During the first
eight months of 1993, the gold price rose approximately 25% and gold equities,
as measured by the XAU index, appreciated by 85%.
We dare to hope that the bear market in gold equities, which began in
early 1996, is nearing its end. Gold remains an ignored and unloved asset class
with the price at levels not seen since the late 1970's. The gold industry is in
dire straits with mines being closed and exploration budgets slashed. Indeed,
the ability of many companies to withstand current prices is being called into
question. These appear to be signs of a major market bottom. We do not profess
to be able to forecast the price of gold, but do believe the price to be cheap
relative to its history, other asset classes and demand/supply fundamentals.
Therefore, the Gabelli Gold Fund will remain fully committed to gold equities
and not stray to cash or base metal equities in order to fully participate in
the recovery of gold equities when it occurs. The only non-gold equity that the
Fund owns is Stillwater Mining which mines palladium and platinum. Stillwater
controls a huge resource which we believe the company can successfully bring to
account.
3
<PAGE>
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 which we believe will develop over
time. The share prices of foreign holdings are stated in U.S. dollar equivalent
terms as of December 31, 1997.
Barrick Gold Corp. (ABX - $18.625 - NYSE) is one of the world's leading gold
mining companies. Much of Barrick's growth has come from their very high quality
mines near Elko in Nevada, which the company purchased in the early 1980s.
Barrick has used cash flows from its Nevada Mines and the profits from the
industry's most successful hedging programs to acquire other gold assets in both
North America and overseas. Barrick has low operating costs, a strong balance
sheet and entrepreneurial management.
Cia de Minas Buenaventura SA (BLE.LM - $7.52 - Lima Stock Exchange) is one of
Peru's leading mining companies. Its major asset is its stake in Yanacocha,
which is one of the most profitable gold operations in the world and South
America's largest gold mine. The operator is Newmont Mining and the mine is
expected to produce over one million ounces in 1998. Newmont Mining, in a recent
annual report, described Yanacocha as "a gold producer's dream." Buenaventura
has interests in a number of other gold and silver mines in Peru, as well as
promising exploration properties. Buenaventura's exploration joint venture
partners include Barrick Resources, Echo Bay and Cyprus Amex.
Euro-Nevada Mining Corp. (EN.TO - $13.52 - Toronto Stock Exchange) is a sister
company of Franco-Nevada and shares the same management. However, Euro-Nevada
only invests in gold royalty properties. The company's flagship royalty
properties are its 4% net smelter return and 5% net profits interest royalty on
Barrick Gold's Meikle Mine in the Carlin Trend of Nevada. The company has
assembled impressive royalty properties, many of which are in production. Among
a number of recent exciting developments is the continuing flow of news from the
company's Midas joint venture in Nevada with Franco-Nevada. Euro-Nevada owns 50%
of this project, which will be one of the lowest cost gold mines in the world
when it comes into production.
Franco-Nevada Mining Corp. (FN.TO - $19.64 - Toronto Stock Exchange) is a
Canadian company which invests in gold and other natural resource royalty
properties. Its major assets are the royalties attached to the Goldstrike Mine
operated by Barrick Gold in the Carlin Trend of Nevada. The company's other main
gold interest is a joint venture with Euro-Nevada at Midas, also in Nevada,
where exploration drilling is taking place. Recently, Franco-Nevada acquired a
5% net profit royalty on the Pandora platinum property owned by Rustenburg
Platinum in South Africa, which is estimated to contain 31 million ounces of
platinum group metal reserves. The company has a very strong balance sheet,
which was further strengthened by an equity offering that was completed in
January 1998.
4
<PAGE>
GoldCorp Inc. (GA.TO - $3.95 - Toronto Stock Exchange) is a mid-sized Canadian
gold producer with two producing gold mines and two industrial mineral
operations. The company's most significant asset is the Red Lake Mine which is
part of a major gold camp in Canada. Exploration drilling has revealed
previously unknown high-grade ore zones which will add significantly to the
mine's reserves. These new discoveries will result in increased production at
significantly lower costs. GoldCorp is undervalued relative to other mid-sized
producers and we expect management to add significantly to shareholder value.
Newmont Mining Corp. (NEM - $29.375 - NYSE) is one of the premier growth gold
mining companies in North America. Following a merger with Santa Fe Gold on May
5, 1997, Newmont has over 55 million ounces of gold reserves. Newmont expects to
produce about four million ounces in 1998. Seventy five percent of its
production comes from Nevada, where Newmont has a very large land position.
Outside the U.S., the company has operations in Indonesia, Peru and Uzbekistan.
The company is currently developing a large copper and gold porphyry in
Indonesia. Although Newmont is a low cost producer, the stock is very sensitive
to changes in the gold price because the company does not hedge its production
and has a significant amount of debt.
The Pioneer Group Inc. (PIOG - $28.125 - Nasdaq), based in Boston, engages in
two main businesses: asset management and natural resources development,
including gold mining. The company owns 90% of the Teberebie gold mine, which is
Ghana's second largest mine. The mine produces about 300,000 ounces on an annual
basis at a cost of less than $200 per ounce. Reserves at the mine are extensive
and should support further mine expansions. The company is exploring for gold in
Ghana and Russia and has extensive timber operations in eastern Russia. Pioneer
also operates a successful mutual fund business in the U.S. with over $20
billion under management. The company has also invested in financial services
businesses outside the U.S., primarily in Russia, Poland and the Czech Republic,
which we expect to be successful.
Prime Resources Group (PRM.TO - $6.64 - Toronto Stock Exchange) is a mid-sized
precious metals mining company which owns the Eskay Creek and Snip Mines in
northwestern British Columbia. The company is a 51%-owned subsidiary of
Homestake, a leading gold mining company based in the U.S. which, as a low cost
producer, does not hedge its production. At the end of 1997, Prime had resources
of 2.7 million ounces of gold and 117 million ounces of silver. The company
stands to benefit from the recent increase in the price of silver.
Stillwater Mining Co. (SWC - $16.75 - AMEX) is the only U.S. producer of
platinum and palladium, rare precious metals used in many industrial
applications and in the jewelry industry. The largest use for platinum is in
catalytic converters for the auto industry, while about half of the supply of
palladium is consumed in the production of electronic components for personal
computers and cellular telephones.
5
<PAGE>
Historically, platinum has traded at a premium to the gold price. Russia is the
world's major producer of palladium but due to uncertainties about supplies, the
price of palladium has risen sharply to over $200 per ounce during the past
year. Stillwater controls a massive high-grade platinum and palladium ore body
in southern Montana. New management has been successful in improving mining
operations and is now embarking on an expansion program. The company has
excellent growth potential.
TVX Gold Inc. (TVX - $3.375 - NYSE) is a mid-sized gold producer with four
operating mines. Its largest mine is La Coipa in Chile, a joint venture with
Placer Dome, one of the world's largest gold producers. TVX's other mines are
located in Brazil and Canada. The company has been very actively pursuing a
growth strategy, which includes acquisitions and exploration. The single most
exciting project within the company is at Kassandra in Greece. This property was
sold to TVX by the Government of Greece and mining has been conducted there for
centuries. However, TVX has discovered further resources and Kassandra will
become a significant producer of gold for the company. Recently, one of TVX's
development properties, Mussellwhite, operated by Placer Dome, began producing
gold. We believe TVX is one of the cheapest mid-capitalization gold stocks on a
reserve basis in North America.
Minimum Initial Investment - $1,000
The Fund's minimum initial investment for both regular and retirement
accounts is $1,000. There are no subsequent investment minimums. No initial
minimum is required for those establishing an Automatic Investment Plan.
Additionally, The Gabelli Gold Fund and other Gabelli Funds are available
through the no-transaction fee programs at many major discount brokerage firms.
The Roth IRA
The Taxpayer Relief Act of 1997 included new tax incentives and more
opportunities to save for retirement and other major expenditures. The Roth IRA
is just one of these new opportunities now available at Gabelli Funds. Our
investor representatives are available at 1-800-GABELLI (1-800-422-3554) to
speak with you about establishing a new Roth IRA and to discuss your investment
choices.
Gabelli U.S. Treasury Money Market Fund
Shareholders of any of the Gabelli Funds may invest in The Gabelli U.S.
Treasury Money Market Fund with an initial investment of $3,000 or more. The
Fund provides checkwriting and exchange privileges. The Fund's expenses are
capped at .30% of average net assets, making it one of the most attractive U.S.
Treasury-only money market funds. With dividends that are exempt from state and
local income taxes in all states, the Fund is an excellent vehicle in which to
store idle cash. An investment in The Gabelli U.S. Treasury Money Market Fund is
neither insured nor guaranteed by the U.S. Government. There can be no assurance
that the Fund will maintain a stable $1 per share net asset
6
<PAGE>
value. Call us at 1-800-GABELLI (1-800-422-3554) for a prospectus which gives a
more complete description of the Fund, including management fees and expenses.
Read the prospectus carefully before you invest or send money.
Internet
You can now visit us on the Internet. Our home page at
http://www.gabelli.com contains information about Gabelli Funds, Inc., the
Gabelli Mutual Funds, IRAs, 401(k)s, quarterly reports, closing prices and other
current news. You can send us e-mail at [email protected].
In Conclusion
The Fund's daily net asset value is available in the financial press and
each evening after 6:00 PM (Eastern Time) by calling 1-800-GABELLI
(1-800-422-3554). The Fund's Nasdaq symbol is GOLDX. Please call us during the
business day for further information.
As always, we thank you for your confidence in our investment abilities
and will strive to preserve and enhance the assets you have entrusted to us.
Sincerely,
Caesar Bryan
President and Portfolio Manager
February 1, 1998
- --------------------------------------------------------------------------------
Top Ten Holdings
December 31, 1997
-----------------
Stillwater Mining Co. Franco-Nevada Mining Corp.
Newmont Mining Corp. TVX Gold Inc.
Euro-Nevada Mining Corp. Cia de Minas Buenaventura SA
Barrick Gold Corp. Prime Resources Group
Pioneer Group Inc. GoldCorp Inc.
- --------------------------------------------------------------------------------
NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period of this report as stated on the cover. The
manager's views are subject to change at any time based on market and other
conditions.
7
<PAGE>
Gabelli Gold Fund, Inc.
Portfolio of Investments -- December 31, 1997
================================================================================
Market
Shares Cost Value
------ ---- ------
COMMON STOCKS -- 93.5%
METALS and MINING -- 93.5%
AUSTRALIA -- 8.1%
21,658 AGSM..................................... $ 1,897 $ 2,166
230,000 Emperor Mines Ltd.+...................... 314,712 67,437
50,000 Lihir Gold Ltd.+......................... 85,186 52,125
100,000 Normandy Mining Ltd...................... 136,536 97,083
60,000 Plutonic Resources Ltd................... 278,784 167,322
80,000 Ranger Minerals NL+...................... 235,400 172,014
140,000 Resolute Samantha Ltd.................... 279,858 102,166
----------- -----------
1,332,373 660,313
----------- -----------
IRELAND -- 1.9%
347,271 Glencar Explorations plc+................ 239,247 157,135
----------- -----------
NORTH AMERICA -- 66.0%
94,257 Avgold Ltd.+............................. 235,392 73,603
22,000 Barrick Gold Corp........................ 512,163 409,750
97,600 Bema Gold Corp.+......................... 200,000 237,900
38,500 Dayton Mining Corp.+..................... 120,951 72,641
35,200 Euro-Nevada Mining Corp.................. 219,367 475,969
19,000 Franco-Nevada
Mining Corp............................ 262,948 373,091
10,000 Getchell Gold Corp.+..................... 270,625 240,000
82,900 GoldCorp Inc., Cl. A+.................... 210,453 327,309
35,000 Golden Star
Resources Ltd.+........................ 273,762 122,290
25,000 Greenstone Resources Ltd.+............... 97,792 118,796
94,200 Guyanor Resources SA,
Cl. B+................................. 142,317 92,158
100,000 IAM Gold+................................ 418,212 314,461
70,000 Meridian Gold Inc.+...................... 253,534 195,665
17,000 Newmont Mining Corp...................... 831,050 499,375
14,200 Pioneer Group Inc........................ 321,369 399,375
12,300 Placer Dome Inc.......................... 251,528 156,056
50,000 Prime Resources Group.................... 369,310 331,931
33,250 Stillwater Mining Co.+................... 241,967 556,938
101,000 TVX Gold Inc.+........................... 709,736 342,309
47,437 Venoro Gold Corp., Cl A+................. 186,958 5,138
----------- -----------
6,129,434 5,344,755
----------- -----------
PERU -- 4.2%
45,301 Cia De Minas
Buenaventura SA, Cl. C................. 147,229 340,676
----------- -----------
SOUTH AFRICA -- 13.3%
100,000 Consolidated African Mines............... 59,000 28,783
130,000 Deelkraal Gold, ADR+..................... 249,773 65,000
69,475 Durban Roodepoort
Deep Ltd.+............................. 605,800 114,213
22,500 Durban Roodepoort Deep Ltd.,
ADR+................................... 188,200 33,750
30,000 Elandsrand Gold Mining Ltd............... 147,500 74,902
34,000 Harmony Gold Mining Ltd.,
ADR+................................... 359,375 76,500
128,355 Kalahari Goldridge Mining Co.
Ltd.+.................................. 72,594 19,518
367,750 Northam Platinum Ltd.+................... 452,320 151,140
20,000 Randfontein Estates
Gold Mining Co. Ltd.+.................. 39,600 30,207
31,195 Randfontein Estates
Gold Mining Co. Ltd.,
ADR+................................... 238,091 46,793
143,547 Randgold and
Exploration Co. Ltd.+.................. 470,530 185,836
20,161 Randgold and
Exploration Co. Ltd., ADR+............. 281,606 100,805
10,000 Saint Helena
Gold Mines Ltd......................... 40,100 25,000
36,700 Saint Helena Gold
Mines Ltd., ADR........................ 313,409 91,750
50,000 West Rand Consolidated
Mines Ltd.+............................ 137,500 31,250
----------- -----------
3,655,398 1,075,447
----------- -----------
TOTAL COMMON STOCKS...................... 11,503,681 7,578,326
----------- -----------
PREFERRED STOCKS -- 0.2%
SOUTH AFRICA -- 0.2%
11,000 Durban Roodepoort
Deep Ltd., Pfd......................... 65,351 15,823
----------- -----------
TOTAL PREFERRED
STOCKS................................. 65,351 15,823
----------- -----------
WARRANTS -- 0.5%
SOUTH AFRICA -- 0.5%
36,000 Durban Roodepoort
Deep Ltd.+............................. 129,440 23,726
23,630 Durban Roodepoort Deep Ltd.,
Series B+.............................. 54,682 13,353
----------- -----------
TOTAL WARRANTS........................... 184,122 37,079
----------- -----------
TOTAL
INVESTMENTS -- 94.2%.................. $11,753,154 7,631,228
===========
Other Assets and
Liabilities (Net) -- 5.8% 465,622
-----------
NET ASSETS -- 100.0%
(1,379,566 shares outstanding) $ 8,096,850
===========
NET ASSET VALUE,
Offering and Redemption
Price Per Share....................... $5.87
=====
- -------
For Federal income tax purposes:
Aggregate cost.................................... $ 12,137,978
============
Gross unrealized appreciation..................... 1,132,580
Gross unrealized depreciation..................... (5,639,330)
------------
Net unrealized depreciation....................... $ (4,506,750)
------------
- ----------
+ Non-income producing security.
ADR -- American Depositary Receipt.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Gabelli Gold Fund, Inc.
Statement of Assets and Liabilities
December 31, 1997
================================================================================
Assets:
Investments, at value (cost $11,753,154) ................. $ 7,631,228
Cash ..................................................... 64,629
Foreign cash, at value (cost $2,775) 2,779
Dividends and interest receivable ........................ 12,516
Receivable for Fund shares sold .......................... 455,026
Deferred organizational expenses ......................... 28,363
Other assets ............................................. 3,832
------------
Total Assets ........................................... 8,198,373
------------
Liabilities:
Payable for Fund shares redeemed ......................... 33,737
Payable for investment advisory fees 6,088
Payable for distribution fees ............................ 6,021
Other accrued expenses ................................... 55,677
------------
Total Liabilities ...................................... 101,523
------------
Net Assets (applicable to 1,379,566
shares outstanding) .................................. $ 8,096,850
============
Net Asset Value, offering and
redemption price per share ........................... $5.87
=====
Net Assets consist of:
Capital stock, at par value .............................. $ 1,380
Additional paid-in capital ............................... 14,652,083
Accumulated net investment loss .......................... (381,671)
Accumulated net realized loss
on investments and foreign
currency transactions .................................. (2,053,020)
Net unrealized depreciation on
investments and assets and liabilities
denominated in foreign currencies ...................... (4,121,922)
------------
Total Net Assets ....................................... $ 8,096,850
============
Statement of Operations
For the Year Ended December 31, 1997
================================================================================
Investment Income:
Dividends (net of foreign taxes of $2,769) ................ $ 56,941
Interest .................................................. 29,676
-----------
Total Investment Income ................................. 86,617
-----------
Expenses:
Investment advisory fees .................................. 136,830
Distribution fees ......................................... 34,237
Shareholder services fees ................................. 52,761
Legal and audit fees ...................................... 49,573
Shareholder report expenses ............................... 44,658
Registration fees ......................................... 39,598
Amortization of organizational expenses ................... 18,240
Interest expense .......................................... 17,502
Miscellaneous expenses .................................... 49,427
-----------
Total Expenses .......................................... 442,826
Custodian fee credit ...................................... (1,189)
-----------
Total Net Expenses ...................................... 441,637
-----------
Net Investment Loss ......................................... (355,020)
-----------
Net Realized and Unrealized Loss on
Investments:
Net realized loss on investments and foreign
currency transactions ................................... (1,233,715)
Net change in unrealized depreciation on
investments and assets and liabilities
denominated in foreign currencies ....................... (6,650,029)
-----------
Net realized and unrealized loss on
investments and foreign
currency transactions ................................... (7,883,744)
-----------
Net decrease in net assets resulting
from operations ........................................... $(8,238,764)
-----------
Statement of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
Operations:
Net investment loss ...................................................... $ (355,020) $ (291,200)
Net realized loss on investments and foreign currency transactions ....... (1,233,715) (382,767)
Net change in unrealized appreciation (depreciation) on investments and
assets and liabilities denominated in foreign currencies ............... (6,650,029) 1,837,504
------------ ------------
Net increase (decrease) in net assets resulting from operations ........ (8,238,764) 1,163,537
------------ ------------
Distribution to shareholders:
In excess of net investment income ....................................... (75,290) --
------------ ------------
Share transactions:
Net increase (decrease) in net assets from Fund share transactions ....... (552,389) 1,289,561
------------ ------------
Net increase (decrease) in net assets .................................. (8,866,443) 2,453,098
Net Assets:
Beginning of period ...................................................... 16,963,293 14,510,195
------------ ------------
End of period ............................................................ $ 8,096,850 $ 16,963,293
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Gabelli Gold Fund, Inc.
Notes to Financial Statements
================================================================================
1. Significant Accounting Policies. The Gabelli Gold Fund, Inc. (the "Fund") was
organized on May 13, 1994 as a Maryland corporation. The Fund is a diversified,
open-end management investment company registered under the Investment Company
Act of 1940, as amended (the "Act") whose primary objective is long term capital
appreciation. The Fund commenced operations on July 11, 1994. The preparation of
financial statements in accordance with 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, quoted by the National Association of Securities
Dealers Automated Quotations, Inc. ("Nasdaq") or traded on foreign exchanges are
valued at the last sale price on that exchange (if there were no sales that day,
the security is valued at the average of the bid and asked prices). All other
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest average of the bid and asked prices. When
market quotations are not readily available, portfolio securities are valued at
their fair value as determined in good faith under procedures established by and
under the general supervision of the Corporation's Directors. Short term debt
securities with remaining maturities of 60 days or less are valued at amortized
cost, unless the Directors determine such does not reflect the securities' fair
value, in which case these securities will be valued at their fair value as
determined by the Directors. Options are valued at the last sale price on the
exchange on which they are listed. If no sales of such options have taken place
that day, they will be valued at the mean between their closing bid and asked
prices.
Foreign Currency Translations. The books and records of the Fund are maintained
in U.S. dollars as follows:
(i) market value of investment securities and other assets and liabilities are
recorded at the exchange rate on the valuation date.
(ii) purchases and sales of investment securities, income and expenses are
recorded at the exchange rate prevailing on the respective date of such
transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss on investments.
Forward Foreign Currency Contracts. The Fund may engage in forward foreign
exchange contracts for hedging a specific transaction with respect to either the
currency in which the transaction is denominated or another currency as deemed
appropriate by the Adviser. Forward foreign currency contracts are valued at the
forward rate and are marked-to-market daily. The change in market value is
recorded by the Fund as an unrealized gain or loss. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed.
The use of forward foreign currency contracts does not eliminate fluctuations in
the underlying prices of the Fund's portfolio securities, but it does establish
a rate of exchange that can be achieved in the future. Although forward foreign
currency contracts limit the risk of loss due to a decline in the value of the
hedged currency, they also limit any potential gain that might result should the
value of the currency increase. In addition, the Fund could be exposed to risks
if the counterparties to the contracts are unable to meet the terms of their
contracts. The Fund held no forward foreign currency contracts at December 31,
1997.
10
<PAGE>
Gabelli Gold Fund, Inc.
Notes to Financial Statements (Continued)
================================================================================
Securities Transactions and Investment Income. Securities transactions are
accounted for on the trade date, with realized gain or loss on the sale of
investments determined by using the identified cost method. Interest income
(including amortization of premium and accretion of discount) is recorded as
earned. Dividend income is recorded on the ex-dividend date.
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders are recorded on the ex-dividend date. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from 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 characterization of distributions made by the Fund.
As of December 31, 1997, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to additional
paid-in-capital:
Accumulated Net
Accumulated Net Realized (Loss) on Investments
Investment (Loss) and Foreign Currency Transactions
----------------- ---------------------------------
$48,639 $(127,653)
Provision for Income Taxes. The Fund has qualified and intends to continue to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. As a result, a Federal income tax provision is
not required.
Dividends and interest from non-U.S. sources received by the Fund are generally
subject to non-U.S. withholding taxes at rates ranging up to 30%. Such
withholding taxes may be reduced or eliminated under the terms of applicable
U.S. income tax treaties, and the Fund intends to undertake any procedural steps
required to claim the benefits of such treaties. If the value of more than 50%
of the Fund's total assets at the close of any taxable year consists of stocks
or securities of non-U.S. corporations, the Fund is permitted and may elect to
treat any non-U.S. taxes paid by it as paid by its shareholders.
The Fund has a net capital loss carryforward for Federal income tax purposes of
$2,049,867. This loss carryforward is available to reduce future distributions
of net capital gains to shareholders. $6,761 of the loss carryforward is
available through 2002; $307,937 is available through 2003; $491,124 is
available through 2004; and $1,244,045 is available through 2005.
2. 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 the Fund's average daily net assets. In
accordance with the Advisory Agreement, the Adviser provides a continuous
investment program for the Fund's portfolio, oversees the administration of all
aspects of the Fund's business and affairs and pays the compensation of all
Officers and Directors of the Fund who are its affiliates.
11
<PAGE>
Gabelli Gold Fund, Inc.
Notes to Financial Statements (Continued)
================================================================================
3. Organizational Expenses. The organizational expenses of the Fund are being
amortized on a straight-line basis over a period of 60 months.
4. Distribution Plan. The Fund's Board of Directors has adopted a distribution
plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940. For the year ended December 31, 1997, the Fund incurred distribution costs
payable to Gabelli & Company, Inc., an indirect wholly-owned subsidiary of the
Adviser, of $34,237, or 0.25% of average net assets, the annual limitation under
the Plan.
5. Portfolio Securities. Purchases and sales of securities for the year ended
December 31, 1997, other than short term securities, aggregated $3,573,386 and
$5,155,941, respectively.
6. Bank Loan. The Fund has access to an unsecured line of credit from the
custodian for temporary purposes. Borrowings under this arrangement bear
interest at 0.75% above the Federal Funds rate on outstanding balances. There
were no borrowings outstanding at December 31,1997.
The average daily amount of borrowings outstanding during the year ended
December 31, 1997 was $49,781, with a related weighted average interest rate of
6.36%. The maximum amount borrowed at any time during the year ended December
31, 1997 was $1,520,000.
7. Capital Stock Transactions. Transactions in shares of common stock were as
follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1997 December 31, 1996
--------------------------- ---------------------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold ................................ 9,312,417 $ 92,169,066 5,950,581 $ 81,147,459
Shares issued upon reinvestment of dividends 12,000 70,322 -- --
Shares redeemed ............................ (9,321,359) (92,791,777) (5,846,234) (79,857,898)
------------ ------------ ------------ ------------
Net increase (decrease) .................. 3,058 $ (552,389) 104,347 $ 1,289,561
============ ============ ============ ============
</TABLE>
12
<PAGE>
Gabelli Gold Fund, Inc.
Financial Highlights
================================================================================
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1997 1996 1995 1994+
------- ------- ------- -------
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period ................ $ 12.32 $ 11.41 $ 11.07 $ 10.00
------- ------- ------- -------
Net investment loss ................................. (0.26) (0.19)(f) (0.15)(f) 0.00(f)
Net realized and unrealized gain
(loss) on investments ............................. (6.13) 1.10 0.49 1.07(e)
------- ------- ------- -------
Total from investment operations .................... (6.39) 0.91 0.34 1.07
------- ------- ------- -------
Distributions to shareholders:
In excess of net investment income .................. (0.06) -- -- --
------- ------- ------- -------
Net asset value, end of period ........................ $ 5.87 $ 12.32 $ 11.41 $ 11.07
------- ------- ------- -------
Total return(a) ..................................... (51.9)% 8.0% 3.1% 10.7%
======= ======= ======= =======
Ratios to average net assets and supplemental data:
Net assets, end of period (in 000's) ................ $ 8,097 $16,963 $14,510 $17,634
Ratio of net investment (loss) to average net assets (2.60)% (1.41)% (1.12)% (0.26)%(c)
Ratio of operating expenses to average net assets (b) 3.24% 2.17% 2.25% 2.04%(c)
Portfolio turnover rate ............................. 27% 54% 38% 12%
Average commission rate per share(d) ................ $0.0099 $0.0241 -- --
</TABLE>
- ----------
+ From commencement of operations on July 11, 1994.
(a) 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 dividends. Total return for the period of
less than one year is not annualized.
(b) The Fund incurred interest expense during the year ended December 31,
1997. If interest expense had not been incurred, the ratio of operating
expenses to average net assets would have been 3.10%. In addition, the
ratio does not include a reduction of expenses for custodian fee credits.
Including such credits, the ratio would have been 3.23%.
(c) Annualized.
(d) For fiscal years beginning on or after September 1, 1995, the SEC requires
a fund to disclose its average commission rate paid per share.
(e) Includes the effect of realized gains prior to significant increases in
shares outstanding.
(f) Based on average month-end shares outstanding.
13
<PAGE>
Gabelli Gold Fund, Inc.
Report of Ernst & Young LLP, Independent Auditors
================================================================================
Shareholders and Board of Directors
Gabelli Gold Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Gabelli Gold Fund, Inc. as of December 31,
1997, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended and the financial highlights for each of periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and the financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1997 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Gabelli Gold Fund, Inc. at December 31, 1997, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the indicated
periods, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
February 13, 1998
- --------------------------------------------------------------------------------
1997 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the year ended December 31, 1997, the Fund paid to shareholders, on December
29, 1997, an ordinary income dividend totalling $0.058 per share. None of this
distribution qualifies for the dividend received deduction available to
corporations.
U.S. Government Income:
The percentage of the ordinary income dividend paid by the Fund during 1997
which was derived from U.S. Treasury securities was 6.52%. Such income is exempt
from state and local tax in all states. However, many states, including New York
and California, allow a tax exemption for a portion of the income earned only if
a mutual fund has invested at least 50% of its assets at the end of each quarter
of the Fund's fiscal year in U.S. Government securities. The Gabelli Gold Fund,
Inc., did not meet this strict requirement in 1997. Due to the diversity in
state and local tax law, it is recommended that you consult your personal tax
advisor for the applicability of the information provided as to your own
situation
- --------------------------------------------------------------------------------
14
<PAGE>
GABELLI FAMILY OF FUNDS
Gabelli Asset Fund -------------------------------------------------------------
Invests in securities of companies selling below their intrinsic economic value.
The Fund's primary objective is long-term growth of capital. (No-load)
Portfolio Manager: Mario J. Gabelli, CFA
Gabelli Growth Fund ------------------------------------------------------------
Invests primarily in large-cap stocks believed to have superior earnings growth
potential. The Fund's primary objective is long-term capital appreciation.
(No-load)
Portfolio Manager: Howard F. Ward, CFA
GABELLI Westwood Equity Fund ---------------------------------------------------
Invests primarily in common stock of seasoned companies believed to have proven
records and above average historical earnings growth. The Fund's primary
objective is capital appreciation. (No-load)
Portfolio Manager: Susan M. Byrne
Gabelli Small Cap Growth Fund --------------------------------------------------
Invests primarily in common stock of smaller companies (market capitalizations
of $500 million or less) with rapid revenue and earnings growth potential. The
Fund's primary objective is long-term capital appreciation. (No-load)
Portfolio Manager: Mario J. Gabelli, CFA
GABELLI Westwood SmallCap Equity Fund ------------------------------------------
Invests primarily in smaller company equity securities (market capitalizations
of $1 billion or less). The Fund's primary objective is long-term capital
appreciation. (No-load)
Portfolio Manager: Lynda Calkin, CFA
Gabelli Value Fund -------------------------------------------------------------
Invests in securities of companies selling below their intrinsic economic value.
The Fund's primary objective is long-term growth of capital. Max. Sales charge:
5 1/2%
Portfolio Manager: Mario J. Gabelli, CFA
Gabelli Equity Income Fund -----------------------------------------------------
Invests primarily in equity securities with above market average yields. The
Fund pays quarterly dividends and seeks a high level of total return. (No-load)
Portfolio Manager: Mario J. Gabelli, CFA
GABELLI Westwood Balanced Fund -------------------------------------------------
Invests in a diversified portfolio of stocks and bonds. The Fund's primary
objectives are capital appreciation and current income. (No-load)
Portfolio Managers: Susan M. Byrne & Patricia Fraze
Gabelli ABC Fund ---------------------------------------------------------------
Invests in securities with capital appreciation potential and above market
average yields. The Fund's primary objective is consistent returns in various
market conditions without excessive risk of capital loss. (No-load)
Portfolio Manager: Mario J. Gabelli, CFA
Gabelli U.S. Treasury Money Market Fund ----------------------------------------
Invests 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. An investment in the Fund is neither insured nor
guaranteed by the U.S. Government and there can be no assurance that the Fund
will be able to maintain a stable net asset value of $1.00 per share.
Portfolio Manager: Judith A. Raneri
The Treasurer's Fund -----------------------------------------------------------
Three money market portfolios designed to generate superior returns without
compromising portfolio safety. U.S. Treasury Money Market invests in U.S.
Treasury bills, notes and bonds. Tax Exempt Money Market invests in municipal
securities. Domestic Prime Money Market invests in prime quality, domestic money
market instruments. (No-Load)
Portfolio Manager: Judith A. Raneri
GLOBAL SERIES
Gabelli Global Telecommunications Fund
Invests in telecommunications companies throughout the world - targeting
undervalued companies with strong earnings and cash flow dynamics. The
Fund's primary objective is long-term capital appreciation. (No-load)
Team Manager: Mario J. Gabelli, CFA
Gabelli Global Convertible Securities Fund
Invests 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. (No-load)
Portfolio Manager: Hart Woodson
Gabelli Global Interactive Couch Potato(R) Fund
Invests globally in companies creating and/or distributing information and
entertainment products and services. The Fund will also invest in
companies participating in emerging technological advances in interactive
services and products. The Fund's primary objective is long-term capital
appreciation. (No-load)
Portfolio Manager: Marc J. Gabelli
Gabelli Gold Fund --------------------------------------------------------------
Invests in a global portfolio of equity securities of gold mining and related
companies. The Fund's primary objective is capital appreciation. Investing in
gold is considered speculative and is affected by a variety of worldwide
economic, financial and political factors. (No-load)
Portfolio Manager: Caesar Bryan
Gabelli International Growth Fund ----------------------------------------------
Invests in international equity securities with superior long-term capital
appreciation potential. The Fund offers investors global diversification.
(No-load)
Portfolio Manager: Caesar Bryan
The five funds above invest in foreign securities which involves risks not
ordinarily associated with investments in domestic issues, including currency
fluctuation, economic and political risks. Distributed by Gabelli & Company,
Inc.
<PAGE>
Gabelli Gold Fund, Inc.
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
fax: 1-914-921-5118
http://www.gabelli.com
e-mail: [email protected]
(Net Asset Value may be obtained daily by calling
1-800-GABELLI after 6:00 P.M.)
Board of Directors
Mario J. Gabelli, CFA Werner J. Roeder, MD
Chairman and Chief Director of Surgery
Investment Officer Lawrence Hospital
Gabelli Funds, Inc.
Anthonie C. van Ekris
E. Val Cerutti Managing Director
Chief Executive Officer BALMAC International, Inc.
Cerutti Consultants, Inc.
Daniel E. Zucchi
Anthony J. Colavita President
Attorney-at-Law Daniel E. Zucchi Associates
Anthony J. Colavita, P.C.
Karl Otto Pohl
Former President
Deutsche Bundesbank
Officers and Portfolio Managers
Caesar Bryan Bruce N. Alpert
President and Vice President
Portfolio Manager and Treasurer
James E. McKee
Secretary
Distributor
Gabelli & Company, Inc.
Custodian, Transfer Agent and Dividend Agent
State Street Bank and Trust Company
Legal Counsel
Willkie Farr & Gallagher
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of
Gabelli Gold Fund, Inc. It is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
