[PHOTO OMITTED]
Gabelli
Gold
Fund,
Inc.
SEMI-ANNUAL REPORT
JUNE 30, 1998
<PAGE>
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Gabelli Gold Fund, Inc.
Semi-Annual Report - June 30, 1998
[PHOTO OMITTED]
Caesar Bryan
To Our Shareholders,
All of the gains achieved by the Gabelli Gold Fund in the first four
months of the year were given up as the gold price fell from $315 per ounce in
late April to under $290 per ounce in mid-June. By the end of June 1998, the
price of gold had recovered somewhat to $297 per ounce.
The net asset value of the Gabelli Gold Fund (the "Fund") declined by
14.3% in the second quarter ended June 30, 1998. The Lipper Analytical Services
Gold Fund Average and the Philadelphia Gold & Silver (XAU) Index of large North
American gold companies declined by 16.0% and 12.2%, respectively, over the same
period. Each index is an unmanaged indicator of investment performance. The Fund
was down 41.4% over the trailing twelve month period. The Lipper Gold Fund
Average and XAU Index declined 35.0% and 25.0%, respectively, over the same
twelve month period. Since inception on July 11, 1994 through June 30, 1998, the
Fund had a total return of (42.6)%, which equates to an average annual return of
(13.0)%.
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.
<PAGE>
INVESTMENT RESULTS(a)
- --------------------------------------------------------------------------------
Quarter
---------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
1998: Net Asset Value ... $6.63 $5.68 -- -- --
Total Return ...... 12.9% (14.3)% -- -- --
- --------------------------------------------------------------------------------
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)
- --------------------------------------------------------------------------------
- ------------------------------------------------
Average Annual Returns - June 30, 1998(a)
-----------------------------------------
1 Year ................................ (41.4)%
3 Year ................................ (21.7)%
Life of Fund(b) ....................... (13.0)%
- ------------------------------------------------
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.
- --------------------------------------------------------------------------------
Global Allocation
The accompanying chart presents the Fund's holdings by geographic region
as of June 30, 1998. 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 represented by a pie chart in the printed material.]
HOLDINGS BY GEOGRAPHIC REGION - 6/30/98
North America 63.2%
South Africa 21.8%
Australia 10.0%
Latin America 1.3%
Cash 1.3%
Europe 2.4%
2
<PAGE>
COMMENTARY
Optimism over the level of gold reserves that would be held by the new
European Central Bank (E.C.B.) helped push the gold price to $315 per ounce by
mid-April. However, rumors that the E.C.B. would not hold any gold, combined
with the further erosion in commodity prices caused by the Asian crisis,
resulted in gold selling off to under $290 per ounce by the middle of June.
Since then, prices have stabilized at between $290 per ounce and $295 per ounce.
Wim Duisenberg, shortly after being named head of the E.C.B., made a few
comments about gold's role in the euro's reserves. He announced that 15% of the
euro's reserves would be held in gold. The consensus estimate had varied over
time from very little, say 5%, to as much as 25%. There remains some doubt about
whether the E.C.B. will control the gold left in the member states reserves. We
believe that the E.C.B. will control these reserves and certainly this would be
in the best interests of France and Germany, the largest holders of gold, who in
effect, have a controlling vote at the E.C.B. Both countries have said that they
will not sell any of their gold. Although it is unlikely that the E.C.B. will
permit member states to sell gold in the medium term, the issue of gold lending
remains unclear. We believe it is the lending of considerable amounts of gold by
the central banks for a nominal fee that has contributed significantly to the
fall in the price of gold.
Over the past two years, gold has been closely correlated with the U.S.
dollar. As the dollar has strengthened, gold has declined. The dollar has been
the prime beneficiary of the Asian crisis as investors have sought safe haven
investments such as U.S. Treasury Bills. Japanese investors, whose foreign
exchange control regulations have recently been eased, have been particularly
attracted to U.S. dollar bonds. This attraction is based not only on the
material yield pick-up but also on the prospect of foreign exchange gains as the
dollar strengthens against the yen.
So what are the prospects for the dollar? As long as the U.S. economy
outperforms foreign economies, capital flows will likely be attracted to the
dollar. However, should Japan and Southeast Asia recover and the euro gain
creditability, investors may start to focus on the massive U.S. current account
deficit. Strength at home and weakness overseas combined with the strong dollar
has caused the U.S. trade deficit to balloon to nearly $15 billion per month.
For how long and at what price will foreigners be willing to finance this?
Very few of the Fund's holdings appreciated during the quarter. The best
performing share was West Rand Consolidated which controls Kalgold, a stock the
Fund also holds. West Rand rose by 86% and Kalgold was up 62%, both from very
depressed levels. Additionally in South Africa, Harmony Gold Mining and
Randfontein performed well, both rising by more than 10%. Both of these
companies offer excellent value and should continue to perform well. The weaker
rand has made all South Africa producers considerably more profitable. We
believe that this occurence has not yet been fully appreciated by the market.
The Fund's largest holding, Stillwater Mining, continues to perform well
as the company delivers much improved operating results. However, the bulk of
the Fund's holdings declined as the gold price slipped and investors liquidated
positions. With share prices at current levels we expect more corporate
activity. One of the Fund's larger holdings, Prime Resources, received an offer
from Homestake during the second quarter.
3
<PAGE>
The Fund's strategy is based upon owning the best quality North American
and Australian gold producers that have growth potential and strong balance
sheets. In South Africa, the Fund's investments are in gold companies that have
huge operational leverage.
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 June 30, 1998.
Euro-Nevada Mining Corp. (EN.TO - $13.63 - 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.
Freeport-McMoRan Copper & Gold Inc. (FCX - $15.1875 - NYSE) controls one of the
world's richest mines. The mine, called Grasberg, is located in Irian Jaya,
Indonesia and is one of the world's largest and lowest cost copper and gold
producers. At a gold price of $300 per ounce, the cash cost of producing copper
in 1998 is expected to be below 20 cents per pound. This is at the bottom of the
copper industry's cost curve. This year, the company's share of Grasberg's
production is expected to be 1.4 billion pounds of copper and 2.2 million ounces
of gold and the mine has extensive reserves which will permit further expansion.
GoldCorp Inc. (GA.TO - $4.69 - 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.
Prime Resources Group (PRM.TO - $7.00 - 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, only hedges a small amount of its production. At the end of 1997,
Prime had resources of 2.7 million ounces of gold and 117 million ounces of
silver. Homestake has offered to buy the shares of Prime that it does not
already own using its own shares as consideration and Prime's independent
directors are now considering the fairness of the bid.
Stillwater Mining Co. (SWC - $27.125 - 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
4
<PAGE>
consumed in the production of electronic components for personal computers and
cellular telephones. 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, combined with strong demand, the price of
palladium has risen sharply during the past year. Stillwater controls a massive
high-grade platinum/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.
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.
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.
We thank you for your loyalty and as always, pledge our best efforts on
your behalf.
Sincerely,
/s/ Caesar Bryan
Caesar Bryan
President and Portfolio Manager
July 31, 1998
------------------------------------------------------------
Top Ten Holdings
June 30, 1998
Stillwater Mining Co. Franco-Nevada Mining Corp.
GoldCorp Inc. The Pioneer Group Inc.
Euro-Nevada Mining Corp. Freeport-McMoRan Copper & Gold
Prime Resources Group Durban Roodepoort Deep Ltd.
Barrick Gold Corp. Newmont Mining Corp.
------------------------------------------------------------
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.
5
<PAGE>
Gabelli Gold Fund, Inc.
Portfolio of Investments -- June 30, 1998 (Unaudited)
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS - 96.4%
Metals and Mining - 96.4%
Australia - 9.8%
21,658 AGSM .............................. $ 1,897 $ 2,166
230,000 Emperor Mines Ltd.+ ............... 314,712 65,516
245,000 Lihir Gold Ltd.+ .................. 346,055 301,914
400,000 Normandy Mining Ltd. .............. 487,352 326,963
80,000 Ranger Minerals NL+ ............... 235,400 177,848
435,000 Resolute Samantha Ltd. ............ 560,249 263,985
----------- -----------
1,945,665 1,138,392
----------- -----------
Ireland - 2.3%
414,771 Glencar Explorations plc+ ......... 268,410 269,898
----------- -----------
North America - 61.9%
330,000 Avgold Ltd.+ ...................... 295,467 204,498
27,000 Barrick Gold Corp. ................ 603,288 518,063
32,600 Bema Gold Corp.+ .................. 66,803 52,975
41,200 Euro-Nevada Mining Corp. .......... 388,166 561,738
10,000 Francisco Gold Corp.+ ............. 120,736 86,703
26,000 Franco-Nevada Mining Corp. ........ 441,414 515,388
30,000 Freeport-McMoRan
Copper & Gold Inc., Cl. B ........ 612,032 455,625
7,000 Getchell Gold Corp.+ .............. 162,913 105,000
122,900 GoldCorp Inc., Cl. A+ ............. 525,165 576,665
35,000 Golden Star Resources Ltd.+ ....... 273,762 72,592
35,000 Greenstone Resources Ltd.+ ........ 213,847 132,094
94,200 Guyanor Resources SA, Cl. B+ ...... 142,317 115,304
119,700 IAM Gold+ ......................... 491,997 305,245
90,000 Kinross Gold Corp.+ ............... 380,845 302,950
80,000 Meridian Gold Inc.+ ............... 285,547 166,435
18,000 Newmont Mining Corp. .............. 605,400 425,250
19,100 Pioneer Group Inc. ................ 484,411 502,569
30,300 Placer Dome Inc. .................. 435,977 356,025
80,000 Prime Resources Group ............. 608,961 560,338
29,250 Stillwater Mining Co.+ ............ 258,742 793,405
121,000 TVX Gold Inc.+ .................... 781,876 366,522
22,437 Venoro Gold Corp., Cl A+ .......... 88,428 1,526
----------- -----------
8,268,094 7,176,910
----------- -----------
Peru - 1.3%
23,801 Cia De Minas Buenaventura SA,
Cl. C ........................... 85,310 155,865
----------- -----------
South Africa - 21.1%
5,355 Anglogold Ltd. .................... 400,073 217,290
46,000 Driefontein Consolidated Ltd.,
ADR .............................. 319,463 235,750
170,475 Durban Roodepoort Deep Ltd.+ ...... 840,734 376,259
15,000 Durban Roodepoort Deep Ltd.,
ADR .............................. 39,843 33,281
138,000 Eastvaal Gold Holdings Ltd.+ ...... 175,645 126,519
40,000 Gold Fields Ltd.+ ................. 257,466 169,779
20,000 Harmony Gold Mining Ltd.+ ......... 63,423 83,192
63,000 Harmony Gold Mining Ltd., ADR+ .... 440,600 255,938
26,000 Impala Platinum Holdings Ltd.,
ADR .............................. 308,425 223,600
128,355 Kalahari Goldridge Mining Co. Ltd.+ 72,594 46,853
367,750 Northam Platinum Ltd.+ ............ 452,320 167,329
90,000 Randfontein Estates Gold
Mining Co. Ltd.+ ................. 303,306 192,529
90,000 Randgold and Exploration Co. Ltd.+ 290,102 68,760
20,161 Randgold and Exploration Co. Ltd.,
ADR+ ............................. 281,606 108,365
10,000 Saint Helena Gold Mines Ltd. ...... 40,234 21,222
31,700 Saint Helena Gold Mines Ltd.,
ADR .............................. 270,288 64,391
52,200 West Rand Consolidated Mines
Ltd.+ ............................ 142,173 51,402
----------- -----------
4,698,295 2,442,459
----------- -----------
TOTAL COMMON STOCKS ............... 15,265,774 11,183,524
----------- -----------
RIGHTS - 0.0%
Australia - 0.0%
93,214 Resolute Ltd. ..................... 0 1,039
----------- -----------
WARRANTS - 0.3%
South Africa - 0.3%
47,000 Durban Roodepoort Deep Ltd.+ ...... 143,391 19,949
23,630 Durban Roodepoort Deep Ltd.,
Ser. B+ .......................... 54,682 8,746
19,750 Northam Platinum Ltd. ............. 0 302
----------- -----------
TOTAL WARRANTS .................... 198,073 28,997
----------- -----------
Principal
Amount
------
U.S. GOVERNMENT OBLIGATIONS - 1.3%
North America - 1.3%
$147,000 U.S. Treasury Bills, 4.88%
to 4.95%, due 09/10/98++ ......... 145,579 145,579
----------- -----------
TOTAL INVESTMENTS - 98.0% ....... $15,609,426 11,359,139
===========
Other Assets and
Liabilities (Net) - 2.0% ....... 229,858
-----------
NET ASSETS - 100.0%
(2,041,931 shares outstanding) ... $11,588,997
===========
NET ASSET VALUE,
Offering and Redemption
Price Per Share .................. $5.68
=====
- ----------
For Federal tax purposes:
Aggregate cost ........................................ $15,609,426
===========
Gross unrealized appreciation ......................... $ 722,461
Gross unrealized depreciation ......................... (4,972,748)
-----------
Net unrealized depreciation ........................... $(4,250,287)
===========
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR - American Depositary Receipt.
See accompanying notes to financial statements.
6
<PAGE>
Gabelli Gold Fund, Inc.
Statement of Assets and Liabilities
June 30, 1998 (Unaudited)
================================================================================
Assets:
Investments, at value (Cost $15,609,426) ................ $ 11,359,139
Foreign currency, at value (Cost $304,961) .............. 312,692
Dividends and interest receivable ....................... 13,320
Deferred organizational expenses ........................ 19,318
------------
Total Assets ....................................... 11,704,469
------------
Liabilities:
Payable for investment advisory fees .................... 9,746
Payable for distribution fees ........................... 2,441
Payable to custodian .................................... 55,816
Other accrued expenses .................................. 47,469
------------
Total Liabilities .................................. 115,472
------------
Net Assets applicable to 2,041,931
shares outstanding ............................... $ 11,588,997
============
Net Assets consist of:
Capital stock, at par value ............................. $ 2,042
Additional paid-in capital .............................. 19,432,211
Accumulated net investment loss ......................... (501,413)
Accumulated net realized loss on investments
and foreign currency transactions ................... (3,101,285)
Net unrealized depreciation on investments
and foreign currency transactions ................... (4,242,558)
------------
Total Net Assets ................................... $ 11,588,997
============
Net Asset Value, offering and redemption
price per share ($11,588,997 / 2,041,931
shares outstanding; 1,000,000,000 shares
authorized of $0.001 par value) .................. $5.68
====
Statement of Operations
For the Six Months Ended June 30, 1998
(Unaudited)
================================================================================
Investment Income:
Dividends (net of foreign taxes of $2,326) .............. $ 38,043
Interest ................................................ 21,614
------------
Total Investment Income ............................ 59,657
------------
Expenses:
Investment advisory fees ................................ 62,226
Distribution fees ....................................... 15,556
Registration fees ....................................... 19,631
Legal and audit fees .................................... 18,476
Shareholder services fees ............................... 16,689
Shareholder report expenses ............................. 13,981
Organizational expenses ................................. 9,045
Interest expense ........................................ 4,096
Miscellaneous expenses .................................. 19,699
------------
Total Expenses ..................................... 179,399
------------
Net Investment Loss ................................ (119,742)
------------
Net Realized and Unrealized Loss
on Investments:
Net realized loss on investments and
foreign currency transactions ...................... (1,048,266)
Net change in unrealized depreciation
on investments and foreign currency
transactions ....................................... (120,635)
------------
Net realized and unrealized loss
on investments and foreign
currency transactions .............................. (1,168,901)
------------
Net decrease in net assets resulting
from operations .......................................... $ (1,288,643)
============
Statement of Changes in Net Assets
================================================================================
Six Months Ended Year Ended
June 30, 1998 December 31,
(Unaudited) 1997
---------------- ------------
Operations:
Net investment loss ....................... $ (119,742) $ (355,020)
Net realized loss on investments and
foreign currency transactions ........... (1,048,266) (1,233,715)
Net change in unrealized depreciation
on investments and foreign currency
transactions ............................ (120,635) (6,650,029)
------------ ------------
Net decrease in net assets resulting
from operations ....................... (1,288,643) (8,238,764)
------------ ------------
Distributions to shareholders:
In excess of net investment income ........ -- (75,290)
------------ ------------
Capital share transactions:
Net increase (decrease) in net assets
from capital share transactions ......... 4,780,790 (552,389)
------------ ------------
Net increase (decrease) in net assets ... 3,492,147 (8,866,443)
Net Assets:
Beginning of period ....................... 8,096,850 16,963,293
------------ ------------
End of period ............................. $ 11,588,997 $ 8,096,850
============ ============
See accompanying notes to financial statements.
7
<PAGE>
Gabelli Gold Fund, Inc.
Notes to Financial Statements (Unaudited)
================================================================================
1. Description. 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 "1940 Act"), whose primary objective is long term capital
appreciation. The Fund commenced operations on July 11, 1994.
2. Significant Accounting Policies. 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 as of the close of business on
the day the securities are being valued (if there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day). 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. Portfolio securities traded on more
than one national securities exchange or market are valued according to the
broadest and most representative market, as determined by the Adviser. 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 Board of 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. Debt instruments having a greater maturity are
valued at the highest bid price obtained from a dealer maintaining an active
market in those securities. 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.
Repurchase Agreements. The Fund may enter into repurchase agreements with
government securities dealers recognized by the Federal Reserve Board, with
member banks of the Federal Reserve System or with other brokers or dealers that
meet credit guidelines established by the Directors. Under the terms of a
typical repurchase agreement, the Fund takes possession of an underlying debt
obligation subject to an obligation of the seller to repurchase, and the Fund to
resell, the obligation at an agreed-upon price and time, thereby determining the
yield during the Fund's holding period. The Fund will always receive and
maintain securities as collateral whose market value, including accrued
interest, will be at least equal to 100% of the dollar amount invested by the
Fund in each agreement. The Fund will make payment for such securities only upon
physical delivery or upon evidence of book entry transfer of the collateral to
the account of the custodian. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is marked-to-market on a
daily basis to maintain the adequacy of the collateral. If the seller defaults
and the value of the collateral declines or if bankruptcy proceedings are
commenced with respect to the seller of the security, realization of the
collateral by the Fund may be delayed or limited.
8
<PAGE>
Gabelli Gold Fund, Inc.
Notes to Financial Statements (Continued) (Unaudited)
================================================================================
Foreign Currency Translation. The books and records of the Fund are maintained
in United States (U.S.) dollars. Foreign currencies, investments and other
assets and liabilities are translated into U.S. dollars at the exchange rates
prevailing at the end of the period, and purchases and sales of investment
securities, income and expenses are translated at the exchange rate prevailing
on the respective dates of such transactions. Unrealized gains and losses, which
result from changes in foreign exchange rates and/or changes in market prices of
securities, have been included in unrealized appreciation/depreciation on
investments. Net realized foreign currency gains and losses resulting from
changes in exchange rates include foreign currency gains and losses between
trade date and settlement date on investment securities transactions, foreign
currency transactions and the difference between the amounts of interest and
dividends recorded on the books of the Fund and the amounts actually received.
The portion of foreign currency gains and losses related to fluctuation in
exchange rates between the initial trade date and subsequent sale trade date is
included in realized gain/(loss) on investments.
Securities Transactions and Investment Income. Securities transactions are
accounted for on the trade date with realized gain or loss on investments
determined by using the identified cost method. Interest income (including
amortization of premium and accretion of discount) is recorded 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.
For the year ended December 31, 1997, reclassifications were made to increase
undistributed net investment income for $48,639 and accumulated net realized
loss on investments and foreign currency transactions for $127,653 with an
offsetting adjustment to additional paid-in-capital.
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 net 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 at
December 31, 1997 of $2,049,867. This capital 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.
9
<PAGE>
Gabelli Gold Fund, Inc.
Notes to Financial Statements (Continued) (Unaudited)
================================================================================
3. Investment Advisory Agreement. The Fund has entered into an investment
advisory agreement (the "Advisory Agreement") with the Adviser which provides
that the Fund will pay the Adviser a fee, computed daily and paid monthly, at
the annual rate of 1.00% of the value of 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.
4. Distribution Plan. The Fund's Board of Directors has adopted a distribution
plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. For the six months
ended June 30, 1998 the Fund incurred distribution costs payable to Gabelli &
Company, Inc., an indirect wholly-owned subsidiary of the Adviser, of $15,556,
or 0.25% of average net assets, the annual limitation under the Plan. Such
payments are accrued daily and paid monthly.
5. Organizational Expenses. The organizational expenses of the Fund are being
amortized on a straight-line basis over a period of 60 months.
6. Portfolio Securities. Purchases and sales of securities for the six months
ended June 30, 1998, other than short term securities, aggregated $8,212,135 and
$3,422,308, respectively.
7. 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 June 30, 1998.
The average daily amount of borrowings outstanding during the six months ended
June 30, 1998 was $65,414, with a related weighted average interest rate of
6.16%. The maximum amount borrowed at any time during the six months ended June
30, 1998 was $2,660,000.
8. Capital Stock Transactions. Transactions in shares of capital stock were as
follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1998 December 31, 1997
--------------------------- ---------------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold .................................... 5,865,014 $ 38,885,339 9,312,417 $ 92,169,066
Shares issued upon reinvestment of dividends ... -- -- 12,000 70,322
Shares redeemed ................................ (5,202,649) (34,104,549) (9,321,359) (92,791,777)
---------- ------------ ---------- ------------
Net increase (decrease) ...................... 662,365 $ 4,780,790 3,058 $ (552,389)
---------- ------------ ---------- ------------
</TABLE>
10
<PAGE>
Gabelli Gold Fund, Inc.
Financial Highlights
================================================================================
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31,
June 30, 1998 -----------------------------------------------------------
(Unaudited) 1997 1996 1995 1994+
------------- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period .. $ 5.87 $ 12.32 $ 11.41 $ 11.07 $ 10.00
---------- ---------- ---------- ---------- ----------
Net investment loss ................... (0.06) (0.26) (0.19)(a) (0.15)(a) 0.00(a)
Net realized and unrealized gain (loss)
on investments ...................... (0.13) (6.13) 1.10 0.49 1.07(b)
---------- ---------- ---------- ---------- ----------
Total from investment operations ...... (0.19) (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 ........ $ 5.68 $ 5.87 $ 12.32 $ 11.41 $ 11.07
========== ========== ========== ========== ==========
Total return++ ........................ (3.2)% (51.9)% 8.0% 3.1% 10.7%
Ratios to average net assets and
supplemental data:
Net assets, end of period (in 000's) .. $ 11,589 $ 8,097 $ 16,963 $ 14,510 $ 17,634
Ratio of net investment income (loss)
to average net assets ............... (1.92)%(c) (2.60)% (1.41)% (1.12)% (0.26)%(c)
Ratio of operating expenses
to average net assets(a) ............ 2.88%(c) 3.24% 2.17% 2.25% 2.04%(c)
Portfolio turnover rate ............... 29% 27% 54% 38% 12%
</TABLE>
- ----------
+ From commencement of operations on July 11, 1994.
++ 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.
(a) Based on average month-end shares outstanding.
(b) Includes the effect of realized gains prior to significant increases in
shares outstanding.
(c) Annualized.
(d) The Fund incurred interest expense during the six months ended June 30,
1998 and the fiscal year ended December 31, 1997. If interest expense had
not been incurred, the ratios of operating expenses to average net assets
would have been 2.81% and 3.10%, respectively. In addition, the ratio for
the year ended December 31, 1997 does not include a reduction of expenses
for custodian fee credits. Including such credits, the ratio would have
been 3.23%.
See accompanying notes to financial statements.
11
<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.
- --------------------------------------------------------------------------------
