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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1998
FILE NO. 33-79180
811-8518
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 5 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 6 [X]
(CHECK APPROPRIATE BOX OR BOXES)
GABELLI GOLD FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
ONE CORPORATE CENTER, RYE, NEW YORK 10580-1434
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER (800) 422-3554
BRUCE N. ALPERT
GABELLI FUNDS, INC.
ONE CORPORATE CENTER, RYE, NEW YORK 10580-1434
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES TO:
JAMES E. MCKEE, ESQ. DANIEL SCHLOENDORN, ESQ.
GABELLI FUNDS, INC. WILLKIE FARR & GALLAGHER
ONE CORPORATE CENTER ONE CITICORP CENTER
RYE, NEW YORK 10580-1434 153 EAST 53RD STREET
NEW YORK, NEW YORK 10022
It is proposed that this filing will be effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[X] on May 1, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a) of Rule 485(a)(2)
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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GABELLI GOLD FUND, INC.
FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
PART A
ITEM NO. LOCATION IN PROSPECTUS
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<S> <C> <C>
Item 1. Cover Page............................. Cover Page
Item 2. Synopsis............................... Table of Fees and Expenses for the Fund
Item 3. Condensed Financial Information........ General Information
Item 4. General Description of Registrant...... Cover Page; Investment Objective and Policies; Additional Investment
Policies; General Information
Item 5. Management of the Fund................. Management of the Fund
Item 5(a) Management's Discussion of
Fund Performance..................... Not Applicable
Item 6. Capital Stock and Other Securities..... Management of the Fund; Dividends, Distributions and Taxes; General
Information
Item 7. Purchase of Securities Being Offered... Management of the Fund; Distribution Plan; Purchase of Shares;
Retirement Plans
Item 8. Redemption or Repurchase............... Redemption of Shares
Item 9. Pending Legal Proceedings.............. Not Applicable
LOCATION IN
PART B STATEMENT OF
ITEM NO. ADDITIONAL INFORMATION
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Item 10. Cover.................................. Cover Page
Item 11. Table of Contents...................... Table of Contents
Item 12. General Information and History........ Notes to Financial Statements; See Prospectus -- "General Information"
Item 13. Investment Objective and Policies...... Investments; Investment Restrictions; See Prospectus -- "Investment
Objective and Policies" and "Additional Investment Policies"
Item 14. Management of the Fund................. The Adviser; The Distributor; Directors and Officers; See Prospectus
-- "Management of the Fund"
Item 15. Control Persons and Principal
Holders of Securities................ Management of the Fund; See Prospectus-- "Management of the Fund"
Item 16. Investment Advisory and
Other Services....................... The Adviser; The Distributor; Directors and Officers; See Prospectus
-- "Management of the Fund"
Item 17. Brokerage Allocation and
Other Practices...................... Portfolio Transactions and Brokerage
Item 18. Capital Stock and Other Securities..... Dividends, Distributions and Taxes; Notes to Financial Statements;
See Prospectus-- "Dividends, Distributions and Taxes" and "General
Information"
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered............. Purchase and Redemption of Shares
Item 20. Tax Status............................. Dividends, Distributions and Taxes; See Prospectus-- "Dividends,
Distributions and Taxes"
Item 21. Underwriters........................... Purchase and Redemption Information; See Prospectus-- "Management of
the Fund"
Item 22. Condensed Financial Information........ Investment Performance Information
Item 23. Financial Statements................... Incorporated by reference
</TABLE>
<PAGE> 3
PART C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.
<PAGE> 4
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Gabelli Gold Fund, Inc.
ONE CORPORATE CENTER, RYE, NEW YORK 10580-1434
TELEPHONE: 1-800-GABELLI (1-800-422-3554)
HTTP://WWW.GABELLI.COM
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PROSPECTUS
MAY 1, 1998
Gabelli Gold Fund, Inc. (the "Fund") is a no load, open-end, diversified
investment management company which seeks to provide long-term capital
appreciation. The Fund will seek to achieve its objective by investing primarily
in the equity securities of foreign and domestic issuers engaged in principally
gold-related activities. See "Investment Objective and Policies". Because the
securities in which the Fund invests may involve risks not associated with more
traditional investments, an investment in the Fund by itself should not be
considered a balanced investment program. See "Risk Factors".
----------------------
The Fund has a distribution plan which permits it to pay .25% per year of its
average daily net assets for marketing and shareholder services and expenses.
Shares of the Fund may be purchased without a sales load at net asset value. The
minimum initial investment in the Fund is currently $1,000. The Fund will
increase its minimum initial investment to $10,000 when it has either 10,000
shareholders or over $100,000,000 of assets under management. See "Purchase of
Shares". For further information, contact Gabelli & Company, Inc. at the address
or telephone number shown above.
----------------------
The Statement of Additional Information ("Additional Statement"), dated May 1,
1998, which may be revised from time to time, provides a further discussion of
certain areas in this Prospectus and other matters which may be of interest to
some investors. It has been filed with the Securities and Exchange Commission
(the "SEC") and is available for reference, along with other materials on the
SEC Internet Web Site (http://www.sec.gov) and is incorporated herein by
reference. For a free copy, write to Gabelli Gold Fund, Inc. at One Corporate
Center, Rye, New York 10580-1434 or call 1-(800) GABELLI (1-800-422-3554).
Purchase orders and redemption requests may be directed to the Gabelli Funds at
P.O. Box 8308, Boston, Massachusetts 02266-8909.
----------------------
Shares of the fund are not deposits or obligations of any bank, and are not
insured or guaranteed by any bank, the federal deposit insurance corporation,
the federal reserve board, or any other agency. An investment in the fund
involves investment risks, including the possible loss of principal.
----------------------
This Prospectus should be retained by investors for future reference.
----------------------
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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TABLE OF FEES AND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases..................... None
Maximum Sales Load Imposed on Reinvested Dividends.......... None
Deferred Sales Load......................................... None
Redemption Fees (a)......................................... None
Exchange Fees............................................... None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets):
Management Fees............................................. 1.00%
12b-1 Expenses (b).......................................... .25%
Other Expenses (c).......................................... 1.99%
-----
Total Fund Operating Expenses..................... 3.24%
=====
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment
assuming a 5% annual return:.............................. $33 $100 $169 $354
</TABLE>
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The amounts listed in this example should not be considered as representative of
future expenses, and actual expenses may be greater or less than those
indicated. Other expenses set forth above are based on estimated amounts for the
current fiscal year. Moreover, while the example assumes a 5% annual return, the
Fund's actual performance will vary and may result in an actual return greater
or less than 5%.
The information contained in the foregoing table is provided to assist you in
understanding the various direct and indirect costs and expenses that an
investor in the Fund would bear.
(a) Does not include any service fee on wire redemptions that may be imposed by
a shareholder's agent or predesignated bank.
(b) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted by the rules of the National
Association of Securities Dealers, Inc.
(c) Such expenses include custodian and transfer agency fees and other customary
Fund expenses.
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Management's Discussion and Analysis of the Fund's performance during the fiscal
year ended December 31, 1997 is included in the Fund's Annual Report to
Shareholders dated December 31, 1997. The Fund's Annual Report to Shareholders
may be obtained upon request and without charge by writing or calling the Fund
at the address or telephone number listed on the Prospectus cover.
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FINANCIAL HIGHLIGHTS
The following has been audited by Ernst & Young LLP, the Fund's independent
auditors, whose unqualified report thereon appears in the Additional Statement.
This information should be read in conjunction with the financial statements.
Selected data for a share of capital stock outstanding throughout each period
appears below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1997 1996 1995 1994+
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<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period...................... $ 12.32 $ 11.41 $ 11.07 $ 10.00
-------- -------- -------- -------
Net investment loss(e).................................... (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%) 8.00% 3.10% 10.70%
-------- -------- -------- -------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).................. $ 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>
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<TABLE>
<C> <S>
+ 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.
</TABLE>
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3
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INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is long-term capital appreciation. The
production of any current income is incidental to this objective. As further
described below, the Fund will seek to achieve its objective by investing
primarily in the equity securities of foreign and domestic issuers principally
engaged in gold-related activities. There can be no assurance that the Fund's
investment objective will be achieved. The Fund's investment objective and
policy regarding concentration described below are fundamental policies which
may not be changed without the approval of a majority of the Fund's outstanding
voting securities.
The Fund intends to provide investors with the opportunity to invest in gold and
gold-related securities. An investment in the Fund may offer better opportunity
for capital growth for the long-term investor willing to accept above-average
risk. Since, historically, gold as a tangible asset has not always moved in
close correlation with financial assets, an investment in the Fund may be used
to diversify an existing portfolio of non-gold-related securities and other
investments.
Under normal circumstances, the Fund will invest at least 65% of its total
assets in equity securities of companies principally engaged in the exploration,
mining, fabrication, processing, distribution or trading of gold or the
financing, managing, controlling or operating of companies engaged in such
activities. (Such activities and the activities of such related financing,
managing, controlling or operating of companies are referred to herein as
"gold-related" activities.) For these purposes, a company will be considered to
be principally engaged in such activities if it derives more than 50% of its
income or devotes 50% or more of its assets to such activities. The Fund may
also invest in equity securities of companies engaged in similar activities with
respect to silver, platinum or other precious metals or minerals ("precious
metals-related" activities) or of companies in other industries. Equity
securities in which the Fund may invest include common stocks, preferred stocks,
securities convertible into common stock and securities having common stock
characteristics, such as rights and warrants.
The Fund will invest more than 25% of its total assets in securities of
companies in the group of industries involved in gold-related or precious
metals-related activities, as described above. Potential investors in the Fund
should consider the possibly greater risk arising from the concentration of the
Fund's investments in such group of industries.
Because most of the world's gold production is outside of the United States, the
Fund expects that a significant portion of its assets may be invested in
securities of foreign issuers. The percentage of assets invested in particular
countries or regions will change from time to time in accordance with the
judgment of Gabelli Funds, Inc. (the "Adviser"), which may be based on, among
other things, consideration of the political stability and economic outlook of
these countries or regions.
The Fund expects to invest in the securities of companies located in developed
countries as well as those located in emerging markets. Investing in securities
issued by companies located in emerging markets involves not only the risks
discussed below with respect to investing in foreign securities, but also other
risks, including exposure to economic structures that are generally less diverse
and mature than, and to political systems that can be expected to have less
stability than, those of developed countries. Other characteristics of emerging
countries that may affect investment in their markets include certain national
policies that may restrict investment by foreigners in issuers or industries
deemed sensitive to relevant national interests and the absence of developed
legal structures governing private and foreign investments and private property.
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The typically small size of the markets for securities issued by companies
located in emerging countries and the possibility of a low or nonexistent volume
of trading in those securities may also result in a lack of liquidity and in
price volatility of those securities.
The Fund may also invest up to 10% of its total assets in bullion of gold and
other precious metals ("bullion"). Bullion will only be bought and sold through
U.S. and foreign banks, regulated U.S. commodities exchanges, exchanges
affiliated with a regulated U.S. stock exchange and dealers who are members of,
or affiliated with members of, a regulated U.S. commodities exchange, in
accordance with applicable investment laws. Investors should note that bullion
offers the potential for capital appreciation or depreciation, but unlike other
investments does not generate income, and in these transactions the Fund may
encounter higher custody and other costs (including shipping and insurance) than
costs normally associated with ownership of securities. The Fund may attempt to
minimize the costs associated with the actual custody of bullion by the use of
receipts or certificates representing ownership interests in bullion.
Subject to the Fund's policy of investing at least 65% of its total assets in
securities of companies engaged principally in gold-related activities, the Fund
may invest in money market instruments. In cases of abnormal market or economic
conditions, the Fund may invest up to 100% of its assets in money market
instruments for defensive purposes, although the Fund intends to stay invested
in securities satisfying its investment objective to the fullest extent
practicable. Money market instruments include obligations of the U.S. government
and its agencies and instrumentalities, commercial paper (including bank
obligations), certificates of deposit (including Eurodollar certificates of
deposit) and repurchase agreements. The Fund intends to invest only in
short-term and medium-term debt securities that the Adviser believes to be of
high quality, i.e., rated in one of the two highest categories by Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Rating Services ("S&P")
or, if unrated, determined to be equivalent in credit quality by the Adviser.
For liquidity purposes in meeting redemption requests or paying dividends or
expenses, the Fund may also invest its assets in such instruments.
As a diversified investment company, the Fund is subject to the following
limitations as to 75% of its total assets: (a) the Fund may not invest more than
5% of its total assets in the securities of any one issuer, except obligations
of the U.S. government and its agencies and instrumentalities, and (b) the Fund
may not own more than 10% of the outstanding voting securities of any one
issuer.
For hedging purposes only, the Fund may enter into forward foreign currency
exchange transactions, currency swaps, covered call and put options (listed on a
U.S. securities exchange or written in the over-the-counter market), futures
contracts and options on futures. The Fund may also enter into repurchase
agreements, purchase securities on a when-issued or delayed delivery basis and
lend its portfolio securities. For more information on these practices, see
"Additional Investment Policies" below and "Investments" in the Additional
Statement.
Although the Fund will generally invest for the long term, investment securities
may be sold from time to time without regard to the length of time they have
been held. It is anticipated that the annual turnover rate for the Fund will not
exceed 75% under normal circumstances.
Mr. Caesar M.P. Bryan is primarily responsible for the day-to-day management of
the Fund. Mr. Bryan has been a Senior Vice President of GAMCO Investors, Inc., a
wholly-owned subsidiary of the Adviser, since May 1994 and has been the
Portfolio Manager of the Gabelli International Growth Fund since its inception.
Mr. Bryan served as Senior Vice President and Portfolio
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5
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Manager of Lexington Management Corporation from 1986 until May 1994.
ADDITIONAL INVESTMENT POLICIES
GENERAL. Subject to the Fund's policy of investing at least 65% of its total
assets in securities of companies engaged principally in gold-related
activities, the Fund may invest in common stocks, preferred stocks, convertible
securities, depository receipts, bonds, notes and other debt obligations of any
maturity, warrants, options and futures contracts on securities and securities
indices, and securities of companies in bankruptcy or reorganization. Such
securities may be issued by domestic or foreign corporations or other types of
entities, governments or agencies or instrumentalities of governments or
supranational agencies. There is no minimum rating or credit quality of fixed
income securities in which the Fund may invest. Although up to 25% of the Fund's
assets may be invested in lower quality debt securities, the Fund currently does
not expect to invest in excess of 5% of its assets in fixed income securities
rated, at the time of investment, lower than BBB by S&P or Baa by Moody's or
unrated but determined by the Adviser to be of equivalent quality. Securities
rated BBB by S&P or Baa by Moody's, while considered investment-grade, may have
speculative characteristics. The Fund also does not expect to invest in excess
of 5% of its assets in securities of unseasoned issuers (companies that have
operated less than three years), which, due to their short operating history,
may have less information available and may not be as liquid as other
securities, or of companies in bankruptcy or reorganization. The Fund may also
utilize other investment strategies such as short selling, buying or selling
when-issued securities, entering into forward commitments and engaging in
various hedging strategies such as the use of futures and options and repurchase
agreements, and foreign currency transactions, including currency swaps.
Common stocks represent the residual ownership interest in an issuer and are
entitled to the income and increase in the value of the assets and business of
the entity after all of its obligations and preferred stock are satisfied.
Common stocks fluctuate in price in response to many factors, including
historical and prospective earnings of the issuer, the value of its assets,
general economic conditions, interest rates, investor perceptions and market
liquidity. Preferred stock has a preference over common stock in liquidation
(and generally dividends as well) but is subordinated to the liabilities of the
issuer in all respects. As a general rule the market value of preferred stock
with a fixed dividend rate and no conversion element varies inversely with
interest rates and perceived credit risk, while the market price of convertible
preferred stock generally also reflects some element of conversion value. Bonds,
debentures, notes and money market instruments such as commercial paper and
bankers' acceptances represent obligations of the issuer. Debt securities that
are convertible into or exchangeable for common or preferred stock are
liabilities of the issuer but are generally subordinated to more senior elements
of the issuer's balance sheet. Although such securities also generally reflect
an element of conversion value, their market value also varies with interest
rates and perceived risk. Depository receipts and shares are utilized to make
investing in a particular security (usually foreign) more convenient for
investors.
INVESTMENTS IN OPTIONS, WARRANTS AND INVESTMENT COMPANIES. The Fund may invest
up to 5% of its assets in options and up to 5% of its total assets in warrants
to buy securities. The Fund may also invest up to 10% of its total assets (5%
per issuer) in securities issued by other unaffiliated investment companies,
although the Fund may not acquire more than 3% of the voting securities of any
investment company. To the extent the Fund invests in other investment funds,
the Fund's shareholders will incur certain
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duplicative fees and expenses, including advisory fees.
The purchaser of an option risks a total loss of the premium paid for the option
if the price of the underlying security does not increase or decrease
sufficiently to justify exercise. The seller of an option, on the other hand,
will recognize the premium as income if the option expires unexercised but
forgoes any capital appreciation in excess of the exercise price in the case of
a call option and may be required to pay a price in excess of current market
value in the case of a put option. Options purchased and sold other than on an
exchange in private transactions also impose on the Fund the credit risk that
the counterparty will fail to honor its obligations.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may enter into forward
commitments for the purchase or sale of securities, including on a "when-issued"
or "delayed delivery" basis. In such transactions, instruments are bought with
payment and delivery taking place in the future in order to secure what is
considered to be an advantageous yield or price at the time of the transaction.
Securities purchased under a forward commitment are subject to market
fluctuation, and no interest (or dividends) accrues to the Fund prior to the
settlement date.
SHORT SALES. The Fund may make short sales of securities. A short sale is a
transaction in which a Fund sells a security it does not own in anticipation
that the market price of that security will decline. The market value of the
securities sold short of any one issuer will not exceed either 5% of the Fund's
total assets or 5% of such issuer's voting securities. The Fund will not make a
short sale, if, after giving effect to such sale, the market value of all
securities sold short exceeds 25% of the value of its assets or the Fund's
aggregate short sales of a particular class of securities exceeds 25% of the
outstanding securities of that class. Short sales may only be made in securities
listed on a national securities exchange. The Fund may also make short sales
"against the box" without respect to such limitations. In this type of short
sale, at the time of the sale the Fund owns or has the immediate and
unconditional right to acquire at no additional cost the identical security.
If the price of the security sold short increases between the time of the short
sale and the time the Fund replaces the borrowed security, the Fund will incur a
loss; conversely, if the price declines, the Fund will realize a capital gain.
Although the Fund's gain is limited to the price at which it sold the security
short, its potential loss is theoretically unlimited.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements with
respect to any securities it owns. Repurchase agreements are considered loans to
the counterparty, and will be fully collateralized at all times with liquid
securities and will only be entered into with financial institutions approved by
the Board of Directors. Repurchase agreements have the risk that collateral may
not be able to be disposed of at a desirable price, delays as a result of
bankruptcy of the counterparty or encumbrances of collateral or restrictions on
its disposition. The term of such agreements is usually from overnight to one
week.
BORROWINGS. The Fund may borrow from banks for temporary or emergency purposes
or to satisfy redemption requests in amounts not in excess of 15% of the Fund's
total assets, with such borrowing not to exceed 5% of the Fund's total assets
for purposes other than satisfying redemption requests. The Fund will not
purchase securities when borrowings exceed 5%.
FORWARD CURRENCY EXCHANGE CONTRACTS AND CURRENCY SWAPS. The Fund may enter into
forward currency exchange contracts and currency swaps to protect against the
effects of fluctuating rates of currency exchange and exchange control
regulations. Forward currency exchange contracts provide for the purchase or
sale of an
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amount of a specified currency at a future date. Currency swaps are agreements
to exchange cash flows based on changes in the values of the reference indices.
Purposes for which such currency transactions may be used include protecting
against a decline in a foreign currency against the U.S. dollar between the
trade date and the settlement date when the Fund purchases or sells non-U.S.
dollar-denominated securities, locking in the U.S. dollar value of dividends and
interest on securities held by the Fund and generally protecting the U.S. dollar
value of securities held by the Fund against exchange rate fluctuation. While
such forward contracts and currency swaps may limit losses to the Fund as a
result of exchange rate fluctuation, they will also limit any gains that may
otherwise have been realized. In addition to the hedging risks discussed below,
currency transactions include the risk securities losses could be magnified by
changes in the value of the currency in which a security is denominated relative
to the U.S. dollar.
PRECIOUS METALS FUTURES AND FORWARD CONTRACTS. The Fund may enter into futures
and forward contracts on precious metals as a hedge against changes in the
prices of precious metals held or intended to be acquired by the Fund, but not
for speculation or for achieving leverage. The Fund's hedging activities may
include purchases of futures and forward contracts as an offset against the
effect of anticipated increases in the price of a precious metal which the Fund
intends to acquire or sales of futures and forward contracts as an offset
against the effect of anticipated declines in the price of precious metals which
the Fund owns. Precious metals futures and forward contract prices can be
volatile and are influenced principally by changes in spot market prices, which
in turn are affected by a variety of political and economic factors. While the
correlation between changes in prices of futures and forward contracts and
prices of the precious metals being hedged by such contracts has historically
been very strong, the correlation may at times be imperfect and even a
well-conceived hedge may be unsuccessful to some degree because of market
behavior or unexpected precious metals price trends.
The Fund may also purchase and write covered call or put options on precious
metals futures contracts. Such options would be purchased solely for hedging
purposes. Call options might be purchased to hedge against an increase in the
price of precious metals the Fund intends to acquire, and put options may be
purchased to hedge against a decline in the price of precious metals owned by
the Fund. As is the case with futures contracts, options on precious metals
futures may facilitate the Fund's acquisition of precious metals or permit the
Fund to defer disposition of precious metals for tax or other purposes.
ILLIQUID AND RESTRICTED SECURITIES. The Fund may invest up to 15% of its net
assets in illiquid securities as to which market quotations are not readily
available, including repurchase agreements with more than seven days to
maturity. Nevertheless, to the extent it can do so consistent with the foregoing
limitations, the Fund may invest in non-publicly traded securities, including
securities that are not registered under the Securities Act of 1933, as amended,
but that can be offered and sold to qualified institutional buyers under Rule
144A under that Act. The Board of Directors has adopted guidelines and delegated
to the Adviser, subject to the supervision of the Board of Directors, the daily
function of determining and monitoring the liquidity of Rule 144A securities.
Rule 144A securities may become illiquid if qualified institutional buyers are
not interested in acquiring the securities.
Disposition of illiquid securities often takes more time than for more liquid
securities, may result in higher selling expenses and may not be able to be made
at desirable prices.
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See the Additional Statement for more information about these securities and
investment practices.
RISK FACTORS
ALL SECURITIES INVESTMENTS ARE SUBJECT TO RISKS. The equity securities in which
the Fund may invest are generally subordinated to the claims of creditors, and
market prices are subject to the performance of the issuer, its financial health
and market perceptions. In addition, as further described below, there are
special risks inherent in the Fund's policies of investing in gold and
gold-related securities. For certain additional risks relating to the Fund's
investment policies, see "Additional Investment Policies" above.
GOLD-RELATED RISKS. The Fund intends to invest at least 65% of its total assets
in securities of companies engaged in gold-related activities. As a result of
this policy, which is a fundamental policy of the Fund, the Fund's investments
may be subject to greater risk and market fluctuation than a fund that invests
in securities representing a broader range of investment alternatives.
Historically, stock prices of companies involved in precious metals-related
industries have been volatile. Investments related to gold and other precious
metals and minerals are considered speculative and are affected by a variety of
world-wide economic, financial and political factors. Prices of gold and other
precious metals may fluctuate sharply over short periods of time due to changes
in inflation or expectations regarding inflation in various countries, the
availability of supplies of precious metals, changes in industrial and
commercial demand, metal sales by governments, central banks or international
agencies, investment speculation, monetary and other economic policies of
various governments and government restrictions on private ownership of certain
precious metals and minerals.
FOREIGN SECURITIES. Investments in foreign securities involve certain risks not
ordinarily associated with investments in securities of domestic issuers,
including fluctuations in foreign exchange rates, future political and economic
developments, and the possible imposition of exchange controls or other foreign
governmental laws or restrictions. In addition, with respect to certain
countries, there is the possibility of expropriation of assets, confiscatory
taxation, political or social instability or diplomatic developments which could
adversely affect investments in those countries.
There may be less publicly available information about a foreign company than
about a U.S. company, and accounting, auditing and financial reporting standards
and requirements may not be comparable. Securities of many foreign companies are
less liquid and their prices more volatile than securities of comparable U.S.
companies. Transaction costs of investing in non-U.S. securities markets are
generally higher than markets in the U.S. There is generally less government
supervision and regulation of exchanges, brokers and issuers than there is in
the U.S. The Fund might have greater difficulty taking appropriate legal action
in non-U.S. courts. Depository receipts that are not sponsored by the issuer may
be less liquid.
Dividend and interest income from non-U.S. securities will generally be subject
to withholding taxes by the country in which the issuer is located and may not
be recoverable by the Fund or the investor.
Such investments in securities of foreign issuers are frequently denominated in
foreign currencies and because the Fund may temporarily hold uninvested reserves
in bank deposits in foreign currencies, the value of the Fund's assets as
measured in U.S. dollars may be affected favorably or unfavorably by changes in
currency rates and exchange control regulations, and the Fund may incur costs in
connection with conversions between various currencies.
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The Adviser will attempt to manage these risks so that such strategies and
investments benefit the Fund, but no assurance can be given that they will be
successfully managed.
DERIVATIVE TRANSACTIONS. As described above, the Fund may invest in options and
warrants, forward foreign currency exchange contracts, currency swaps, precious
metals futures and forward contracts, options on futures and other transactions
using derivative instruments. Derivative transactions have certain risks,
including imperfect market correlations, dependence on the credit of the
counterparty, possible inability to enter into offsetting transactions and
market fluctuations, that can result in the Fund being in a worse position than
if the transaction had not occurred. The loss from the Fund's investing in
futures and other derivative transactions is potentially unlimited.
MANAGEMENT OF THE FUND
The Fund's Board of Directors (who, with its officers, are described in the
Additional Statement) has overall responsibility for the management of the Fund.
The Board of Directors decides upon matters of general policy and reviews the
actions of Gabelli & Company, Inc. (the "Distributor") and the Adviser. Pursuant
to an Investment Advisory Contract with the Fund, the Adviser, under the
supervision of the Fund's Board of Directors, provides a continuous investment
program for the Fund's portfolio; provides investment research and makes and
executes recommendations for the purchase and sale of securities and gold and
other precious metals; provides facilities and personnel, and the exercise of
all voting and other rights appertaining thereto required for the Fund's
administrative management; supervises the performance of administrative and
professional services provided by others; and pays the compensation of the
Administrator and all officers and directors of the Fund who are its affiliates.
As compensation for its services and the related expenses borne by the Adviser,
the Fund pays the Adviser a fee, computed daily and payable monthly, equal, on
an annual basis, to 1.00% of the Fund's average daily net assets.
The Adviser is located at One Corporate Center, Rye, New York 10580-1434.
The Adviser was formed in 1980 and as of March 31, 1998 acts as investment
adviser to the following funds with aggregate assets in excess of $6.6 billion:
<TABLE>
<CAPTION>
NET ASSETS
3/31/98
Open-end funds: (in millions)
- --------------- -------------
<S> <C>
Gabelli Asset Fund........................ $ 1,559
Gabelli Growth Fund....................... 1,401
Gabelli Gold Fund, Inc.................... 12
Gabelli Value Fund Inc.................... 763
Gabelli Small Cap Growth Fund............. 348
Gabelli Equity Income Fund................ 88
Gabelli U.S. Treasury Money Market Fund... 308
Gabelli ABC Fund.......................... 62
Gabelli Global Telecommunications Fund.... 150
Gabelli Global Interactive Couch
Potato(R)Fund........................... 96
Gabelli Global Convertible Securities
Fund.................................... 9
Gabelli International Growth Fund, Inc.... 29
Gabelli Capital Asset Fund................ 138
CLOSED-END FUNDS:
- ------------------------------------------
Gabelli Convertible Securities Fund,
Inc..................................... 125
Gabelli Equity Trust Inc.................. 1,319
Gabelli Global Multimedia Trust Inc....... 159
</TABLE>
Gabelli & Company, Inc., the Distributor of each open-end fund's respective
shares, is an indirect majority owned subsidiary of the Adviser. GAMCO
Investors, Inc. ("GAMCO"), a wholly owned subsidiary of the Adviser, acts as
investment adviser for individuals, pension trusts, profit sharing trusts and
endowments. As of March 31, 1998, GAMCO had aggregate assets in excess of $7.2
billion under its management. Gabelli Advisers, Inc., an affiliate of the
Adviser, acts as Investment Adviser of The Gabelli Westwood Funds with assets
under management in excess of $349 million as of March 31, 1998. Gabelli Fixed
Income LLC is an affiliated Investment Adviser to The Treasurer's Fund, Inc. and
separate accounts with aggregate assets in excess of $1.2 billion. Mr. Mario J.
Gabelli may be deemed
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a "controlling person" of the Adviser and the Distributor on the basis of his
ownership of stock of the Adviser.
In addition to the fee of the Adviser, the Fund is responsible for the payment
of all its other operating expenses, which include, among other things, expenses
for legal and independent auditor services, costs of printing all materials sent
to shareholders, charges of State Street Bank and Trust Company (the
"Custodian", "Transfer Agent" and "Dividend Disbursing Agent") and any other
persons hired by the Fund, securities registration fees, fees and expenses of
unaffiliated directors, accounting and printing costs for reports and similar
materials sent to shareholders, membership fees in trade organizations, fidelity
bond and liability coverage for the Fund's directors, officers and employees,
interest, brokerage and other trading costs, taxes, expenses of qualifying the
Fund for sale in various jurisdictions, expense of its distribution plan adopted
under Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act"), expenses of personnel performing shareholder servicing functions,
litigation and other extraordinary or nonrecurring expenses and other expenses
properly payable by the Fund.
The Additional Statement contains further information about the Investment
Advisory Contract, including a more complete description of the advisory and
expense arrangements and administrative provisions.
Affiliates of the Adviser may, in the ordinary course of their business, acquire
for their own account or for the accounts of their advisory clients, significant
(and possibly controlling) positions in the securities of companies that may
also be suitable for investment by the Fund. The securities in which the Fund
might invest may thereby be limited to some extent. However, the Adviser does
not believe that the investment activities of its affiliates will have a
material adverse effect upon the Fund in seeking to achieve its investment
objective. The Adviser may on occasion give advice or take action with respect
to other clients that differs from the actions taken with respect to the Fund.
The Adviser has entered into a Sub-Administration Contract with BISYS Fund
Services L.P. ("BISYS" or the "Sub-Administrator") pursuant to which the
Sub-Administrator provides certain administrative services necessary for the
Fund's operations. These services include the preparation and distribution of
materials for meetings of the Fund's Board of Directors, compliance testing of
Fund activities and assistance in the preparation of proxy statements, reports
to shareholders and other documentation. For the services and related expenses
borne by BISYS, the Adviser pays it a prorated monthly fee at the annual rate of
.0625% of the average net assets (with a minimum annual fee of $30,000 per
portfolio) on the first $350 million of all the funds advised by the Adviser and
affiliates and administered by BISYS; .0425% of any assets above $350 million
and .0225% of any assets above $700 million which, together with the services to
be rendered, are subject to negotiation between the parties and both parties
retain the right unilaterally to terminate the arrangement on not less than 60
days' notice. BISYS has its principal office at 3435 Stelzer Rd., Columbus, Ohio
43219.
DISTRIBUTION PLAN
The Board of Directors of the Fund has approved on behalf of the Fund as being
in the best interests of the Fund and its shareholders, a Distribution Plan
which authorizes payments by the Fund in connection with the distribution of its
shares at an annual rate, as determined by the Board of Directors, of .25% of
the Fund's average daily net assets.
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Payments may be made by the Fund under its Distribution Plan for the purpose of
financing any activity primarily intended to result in the sale of shares as
determined by the Board of Directors. Such activities typically include
advertising; compensation for sales and marketing activities of the Distributor,
banks, broker-dealers and service providers; shareholder account servicing;
production and dissemination of prospectus and sales and marketing materials;
and capital or other expenses of associated equipment, rent, salaries, bonuses,
interest and other overhead. To the extent any activity is one which the Fund
may finance without its Distribution Plan, the Fund may also make payments to
finance such activity outside of the Plan and not be subject to its limitations.
The Plan has been implemented by written agreements between the Fund and/or the
Distributor and each person (including the Distributor) to which payments may be
made. Administration of the Plan is regulated by Rule 12b-1 under the 1940 Act,
which includes requirements that the Board of Directors receive and review, at
least quarterly, reports concerning the nature and qualification of expenses for
which payments are made, that the Board of Directors approve all agreements
implementing the Plan and that the Plan may be continued from year to year only
if the Board of Directors concludes at least annually that continuation of such
Plan is likely to benefit shareholders.
The Board of Directors has initially implemented the Plan by having the Fund
enter into an agreement with the Distributor authorizing payment to the
Distributor and its affiliates the .25% rate authorized by the Plan for
distribution activities of the types listed above. To the extent any of the
expenditures are based on allocations by the Distributor, the Fund may be
considered to be participating in joint distribution activities with other funds
distributed by the Distributor. Any such allocations would be subject to
approval by the Fund's non-interested Directors and would be based on such
factors as the net assets of the Fund, the number of shareholder or prospective
shareholder inquiries and similar pertinent criteria. For the fiscal year ended
December 31, 1997, the Fund incurred distribution costs of $34,237 or 0.25% of
average daily net assets under the Plan.
PURCHASE OF SHARES
Shares of the Fund are currently offered without a sales load as an investment
vehicle for individuals, institutions, fiduciaries and retirement plans. The
minimum initial investment in the Fund is currently $1,000. The Fund will
increase its minimum initial investment to $10,000 when it has either 10,000
shareholders or over $100,000,000 of assets under management. There is no
minimum for subsequent investments in the Fund. Investments through an
Individual Retirement Account ("IRA") or other retirement plans, however, have
different requirements (see "Retirement Plans"). Shares of the Fund are sold at
the net asset value per share next determined after receipt of an order by the
Fund's Distributor or Transfer Agent in proper form with accompanying check or
bank wire or other payment arrangements satisfactory to the Fund. Although most
shareholders elect not to receive stock certificates, certificates for whole
shares only can be obtained on specific written request to the Transfer Agent.
Shares of the Fund may also be purchased through shareholder agents that are not
affiliated with the Fund or the Distributor. There is no sales or service charge
imposed by the Fund other than as described, but agents who do not receive
distribution payments or sales charges may impose a charge to the investor for
their services. Such fees may vary among agents, and such agents may impose
higher initial or subsequent investment requirements than those established by
the Fund. Services provided by broker-dealers may include allowing the investor
to establish
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a margin account and to borrow on the value of the Fund's shares in that
account. It is the responsibility of the shareholder's agent to establish
procedures which would assure that upon receipt of an order to purchase shares
of the Fund the order will be transmitted so that it will be received by the
Distributor before the time when the price applicable to the buy order expires.
Prospectuses, sales material and applications may be obtained from the
Distributor. The Fund and its Distributor reserve the right in their sole
discretion (1) to suspend the offering of the Fund's shares and (2) to reject
purchase orders when, in the judgment of the Fund's management, such rejection
is in the best interests of the Fund.
The net asset value per share of the Fund is determined as of the close of the
regular session of the New York Stock Exchange, Inc. ("NYSE"), which is
generally 4:00 p.m., eastern time, on each day that trading is conducted on the
NYSE, by dividing the value of the Fund's net assets (i.e., the value of its
securities and other assets less its liabilities, including expenses payable or
accrued but excluding capital stock and surplus) by the number of shares
outstanding at the time the determination is made. Foreign securities are valued
as of the close of trading on the primary exchange on which they trade. Fund
securities for which market quotations are readily available are valued at
market value as determined by the last quoted sale price prior to the valuation
time on the valuation date in the case of securities traded on securities
exchanges or other markets for which such information is available. Other
readily marketable securities are valued at the average of the latest bid and
asked quotations for such securities prior to the valuation time. Debt
securities with remaining maturities of 60 days or less are valued at amortized
cost, which the Board of Directors believes represents fair value. Gold and
other precious metals held by the Fund are valued daily at fair market value,
based upon price quotations in common use, in such manner as the Board of
Directors from time to time determines in good faith to reflect most accurately
their fair market value. All other assets are valued at fair value as determined
by or under the supervision of the Board of Directors. See "Determination of Net
Asset Value" in the Additional Statement.
MAIL. To make an initial purchase by mail, send a completed subscription order
form with a check for the amount of the investment payable to the Fund to:
THE GABELLI FUNDS
P.O. BOX 8308
BOSTON, MA 02266-8308
Subsequent purchases do not require a completed application and can be made by
(1) mailing a check to the same address noted above or (2) bank wire, as
indicated below. The exact name and number of the shareholder's account should
be clearly indicated.
Checks will be accepted if drawn in U.S. currency on a domestic bank for less
than $100,000. U.S. dollar checks drawn against a non-U.S. bank may be subject
to collection delays and will be accepted only upon actual receipt of funds by
the Transfer Agent. Bank collection fees may apply. The Fund will not accept
checks made payable to a third party.
BANK WIRE. To initially purchase shares of the Fund using the wire system for
transmittal of money among banks, an investor should first telephone the Fund at
1-800-422-3554 to obtain a new account number. The investor should then instruct
a Federal Reserve System member bank to wire funds to:
State Street Bank and Trust Company
ABA # 011-0000-28 REF DDA # 99046187
Attn: Shareholder Services
Re: The Gabelli Gold Fund
A/C#
---------------------------------------------
Account of (Registered Owner)
----------------------------------------------
225 Franklin Street, Boston, MA 02110
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For initial purchases, the investor should promptly complete and mail the
subscription order form to the address shown above for mail purchases. There may
be a charge by your bank for transmitting the money by bank wire but State
Street Bank and Trust Company does not charge investors in the Fund for the
receipt of wire transfers. If you are planning to wire funds, it is suggested
that you instruct your bank early in the day so the wire transfer can be
accomplished the same day.
OVERNIGHT MAIL OR PERSONAL DELIVERY. Deliver a check made payable to the Fund
in which you wish to invest along with a completed subscription order form to:
THE GABELLI FUNDS
THE BFDS BUILDING, 6TH FLOOR
TWO HERITAGE DRIVE
NORTH QUINCY, MA 02171
TELEPHONE INVESTMENT PLAN. You may purchase additional shares of the Fund by
telephone through the Automated Clearing House (ACH) system as long as your bank
is a member of the ACH system and you have a completed, approved Investment Plan
application on file with our Transfer Agent. The funding for your purchase will
be automatically deducted from the ACH eligible account you designate on the
application. Your investment will normally be credited to your Mutual Fund
account on the first business day following your telephone request. Your request
must be received no later than 4:00 p.m. eastern time. There is a minimum of
$100 for each telephone investment. Any subsequent changes in banking
information must be submitted in writing and accompanied by a sample voided
check. To initiate an ACH purchase, please call 1-800-GABELLI (1-800-422-3554)
or 1-800-872-5365. Fund shares purchased through the Telephone or Automatic
Investment Plan will not be available for redemption for up to fifteen (15) days
following the purchase date.
AUTOMATIC INVESTMENT PLAN. The Fund offers an automatic monthly investment
plan, details of which can be obtained from the Distributor. There is no minimum
initial investment for accounts establishing an automatic investment plan.
SYSTEMATIC WITHDRAWAL PLAN. The Fund offers a systematic withdrawal program for
shareholders whereby they can authorize an automatic redemption on a monthly,
quarterly or annual basis. Details can be obtained from the Distributor.
OTHER INVESTORS. No minimum initial investment is required for officers,
directors or full-time employees of the Fund, other investment companies managed
by the Adviser, the Adviser, the Sub-Administrator, the Transfer Agent, the
Distributor or their affiliates, including members of the "immediate family" of
such individuals and retirement plans and trusts for their benefit. The term
"immediate family" refers to spouses, children and grandchildren (adopted or
natural), parents, grandparents, siblings, a spouse's siblings, a sibling's
spouse and a sibling's children.
REDEMPTION OF SHARES
Upon receipt by the Distributor or the Transfer Agent of a redemption request in
proper form, shares of the Fund will be redeemed at their next determined net
asset value. Redemption requests received after the time as of which the Fund's
net asset value is determined on a particular day will be redeemed at the net
asset value of the Fund determined on the next day that net asset value is
determined. Checks for redemption proceeds will normally be mailed to the
shareholder's address of record within seven days, but will not be mailed until
all checks in payment for the purchase of the shares to be redeemed have been
honored, which may take up to 15 days. Redemption requests may be made by letter
to the Transfer Agent specifying the name of the Fund, the dollar amount or num-
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<PAGE> 18
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ber of shares to be redeemed and the account number. The letter must be signed
in exactly the same way the account is registered (if there are more than one
owner of the shares, all must sign) and, if any certificates for the shares to
be redeemed are outstanding, presentation of such certificates properly endorsed
is also required. Signatures on the redemption request and/or certificates must
be guaranteed by an "eligible guarantor institution," which includes certain
banks, brokers, dealers, credit unions, securities exchanges and associations,
clearing agencies and savings associations (signature guarantees by notaries
public are not acceptable). Shareholders may also redeem the Fund's shares
through shareholder agents, who have made arrangements with the Fund permitting
them to redeem shares by telephone or facsimile transmission and who may charge
shareholders a fee for this service if they have not received any payments under
the appropriate Distribution Plan. It is the responsibility of the shareholder's
agent to establish procedures which would assure that upon receipt of a
shareholder's order to redeem shares of the Fund the order will be transmitted
so that it will be received by the Fund before the time when the price
applicable to the order expires.
Further documentation, such as copies of corporate resolutions and instruments
of authority, are normally requested from corporations, administrators,
executors, personal representatives, trustees or custodians to evidence the
authority of the person or entity making the redemption request.
The Fund may suspend the right of redemption or postpone the date of payment for
more than seven days during any period when (1) trading on the NYSE is
restricted or the NYSE is closed, other than customary weekend and holiday
closings; (2) the SEC has by order permitted such suspension or (3) an
emergency, as defined by rules of the SEC, exists, making disposal of portfolio
investments or determination of the value of the net assets of the Fund not
reasonably practicable.
To minimize expenses, the Fund reserves the right to redeem, upon not less than
30 days' notice, all shares of the Fund in an account (other than an IRA) which
as a result of shareholder redemption has a value below $500. However, a
shareholder will be allowed to make additional investments prior to the date
fixed for redemption to avoid liquidation of the account.
TELEPHONE REDEMPTION BY CHECK. Each Fund accepts telephone requests for
redemption of unissued shares, subject to a $25,000 limitation. By calling
either 1-800-GABELLI (422-3554) or 1-800-872-5365, you may request that a check
be mailed to the address of record on the account, provided that the address has
not changed within thirty (30) days prior to your request. The check will be
made payable to the person in whose name the account is registered and will
normally be mailed within seven (7) days.
BY BANK WIRE. The Fund accepts telephone requests from any investor for wire
redemption in excess of $1,000 (but subject to a $25,000 limitation) to a
predesignated bank either on the subscription order form or in a subsequent
written authorization with the signature guaranteed. The Fund accepts signature
guaranteed written requests for redemption by bank wire without limitation. The
proceeds are normally wired on the following business day. Your bank must be
either a member of the Federal Reserve System or have a correspondent bank which
is a member. Any change to the banking information made at a later date must be
submitted in writing with a signature guarantee. The Fund will not impose a wire
service fee. A shareholder's agent or the predesignated bank, however, may
impose its own service fee on wire transfers.
Requests for telephone redemption must be received between 9:00 a.m. and 4:00
p.m. eastern time. If your telephone call is received after
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this time or on a day when the NYSE is not open, the request will be entered the
following business day. Shares are redeemed at the net asset value next
determined following your request. The Fund's shares purchased by check or
through the automatic purchase plan will not be available for redemption for up
to fifteen (15) days following the purchase. Shares held in certificate form
must be returned to the Transfer Agent for redemption of shares. Telephone
redemption is not available for IRAs.
The proceeds of a telephone redemption may be directed to an account in another
mutual fund advised by the Adviser or its affiliates provided the account is
registered in the redeeming shareholder's name. Such purchase will be made at
the respective net asset value plus any applicable sales charge with credit
given for any sales charge previously paid to the Distributor.
The Fund and its Transfer Agent will not be liable for following telephone
instructions reasonably believed to be genuine. In this regard, the Fund and its
Transfer Agent require personal identification information before accepting a
telephone redemption. If the Fund or its Transfer Agent fail to use reasonable
procedures, the Fund may be liable for losses due to fraudulent instructions. A
shareholder may redeem shares by telephone unless he elects in the subscription
order form not to have such ability.
RETIREMENT PLANS
The Fund has available a form of IRA for investment in shares which may be
obtained from the Distributor. The minimum investment required to open an IRA
for investment in shares of the Fund is $1,000 for an individual, except that
both the individual and his or her spouse may establish separate IRAs if their
combined investment is $1,250. There is no minimum for additional investment in
an IRA. For tax years beginning after December 31, 1997, investors may be
eligible to make contributions to a new type of individual retirement account (a
"Roth IRA"). An investor can open a Roth IRA if he meets certain income limits
specified in the Internal Revenue Code of 1986, as amended (the "Code"). Any
contributions made by an investor to a Roth IRA are nondeductible for U.S.
Federal income tax purposes. Distributions from a Roth IRA are not included in
the investor's gross income and are not subject to a 10% penalty for early
withdrawal if the distributions are made after the end of the five-year period
beginning with the first tax year in which the investor made a contribution to
the Roth IRA and the distributions meet other criteria set forth in the Code.
The maximum annual aggregate contribution that can be made to IRAs and Roth IRAs
is $2,000. In addition, for tax years beginning after December 31, 1997, certain
low and middle-income investors may open an education individual retirement
account (an "Education IRA"). Eligible individuals are permitted to contribute
up to $500 per year per beneficiary under 18 years old to an Education IRA. The
minimum initial investment for an Education IRA through the Fund is $250. A
distribution from an education IRA is generally excludable from gross income to
the extent that such distribution does not exceed qualified higher education
expenses incurred by the beneficiary during the year in which the distribution
is made.
Investors who are self-employed may purchase shares of the Fund through
tax-deductible contributions to retirement plans for self-employed persons,
known as Keogh or H.R. 10 plans. The Fund does not currently act as a Sponsor
for such plans. The Fund's shares may also be a suitable investment for other
types of qualified pension or salary reduction plans known as "401(k) Plans"
which give participants the right to defer portions of their compensation for
investment on a tax-deferred basis until distributions are made from the plans.
The minimum initial investment for an individual under such plans is $1,000, and
there is no minimum for additional investments.
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Under the Code, individuals may make wholly or partly tax deductible IRA
contributions of up to $2,000 annually, depending on whether they are active
participants in an employer-sponsored retirement plan and on their income level.
However, dividends and distributions held in the account are not taxed until
withdrawn in accordance with the provisions of the Code. An individual with a
non-working spouse may establish a separate IRA for the spouse under the same
conditions and contribute a maximum of $4,000 annually to either or both IRAs,
provided that no more than $2,000 may be contributed to the IRA of either
spouse.
Investors should be aware that they may be subject to penalties or additional
tax on contributions to or withdrawals from IRAs or other retirement plans which
are not permitted by the applicable provisions of the Code. Persons desiring
information concerning investments through IRA accounts or other retirement
plans should write or telephone the Distributor.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each dividend and capital gains distribution, if any, declared by the Fund on
its outstanding shares will, unless the shareholder elects otherwise, be paid on
the payment date fixed by the Board of Directors in additional shares of the
Fund having an aggregate net asset value as of the ex-dividend date of such
dividend or distribution equal to the cash amount of such distribution. An
election to receive dividends and distributions may be changed by notifying the
Fund in writing at any time prior to the record date for a particular dividend
or distribution. There are no sales or other charges in connection with the
reinvestment of dividends and capital gains distributions. There is no fixed
dividend rate, and there can be no assurance that the Fund will pay any
dividends or realize any capital gains. However, the Fund currently intends to
pay dividends and capital gains distributions, if any, on an annual basis.
The Fund has qualified and intends to continue to qualify for tax treatment as a
"Regulated Investment Company" under the Code in order to be relieved of federal
income tax on that part of its net investment income and realized capital gains
which it pays out to its shareholders.
Dividends out of net investment income and distributions of realized short-term
capital gains are taxable to the recipient shareholders as ordinary income. In
the case of corporate shareholders, such distributions are eligible for the
dividends received deduction subject to proportionate reduction if the aggregate
qualifying dividends received by the Fund from domestic corporations in any year
are less than its "gross income" as defined by the Code. Distributions out of
long-term capital gains are taxable to the recipient as long-term capital gains.
Shareholders will be advised as to what portion of capital gains are to be
treated as "28% rate gain" or "20% rate gain" with respect to the maximum tax
rate for such gains (i.e., the portion of such capital gains that relates to
assets held for more than 12 months but not more than 18 months and the portion
that relates to assets held more than 18 months, respectively). Dividends and
distributions, if any, declared by the Fund may also be subject to state and
local taxes. Prior to investing in shares of the Fund, prospective shareholders
may wish to consult their tax advisers concerning the federal, state and local
tax consequences of such investment.
GENERAL INFORMATION
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES. The Fund was organized as
a Maryland corporation on May 13, 1994. Its authorized capital stock consists of
1 billion shares of stock having a par value of one tenth of one cent ($.001)
per share. The Fund is not required, and does not intend, to hold regular annual
share-
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holder meetings, but may hold special meetings for consideration of proposals
requiring shareholder approval, such as changing fundamental policies or upon
the written request of 10% of the Fund's shares to replace its Directors. The
Fund's Board of Directors is authorized to divide the unissued shares into
separate series of stock, each series representing a separate, additional
portfolio.
There are no conversion or preemptive rights in connection with any shares of
the Fund. All shares, when issued in accordance with the terms of the offering,
will be fully paid and nonassessable. Shares will be redeemed at net asset
value, at the option of the shareholder.
The Fund sends semi-annual and audited annual reports to all shareholders which
include lists of portfolio securities and other assets and the Fund's financial
statements, which shall be audited annually. Unless it is clear that a
shareholder is a nominee for the account of an unrelated person or a shareholder
otherwise specifically requests in writing, the Fund may send a single copy of
semi-annual, annual and other reports to shareholders to all accounts at the
same address and all accounts of any person at that address.
The shares of the Fund have noncumulative voting rights which means that the
holders of more than 50% of the shares can elect 100% of the Directors if the
holders choose to do so, and, in that event, the holders of the remaining shares
will not be able to elect any person or persons to the Board of Directors.
Unless specifically requested by an investor who is a shareholder of record, the
Fund does not issue certificates evidencing shares.
PORTFOLIO TURNOVER. The investment policies of the Fund may lead to frequent
changes in investments, particularly in periods of rapidly fluctuating interest
or currency exchange rates. The portfolio turnover may be higher than that of
other investment companies. During the fiscal years ended December 31, 1996 and
1997, the portfolio turnover rates were 54% and 27%, respectively.
Portfolio turnover generally involves some expense to the Fund, including
brokerage commissions or dealer mark-ups and other transaction costs on the sale
of securities and reinvestment in other securities. The portfolio turnover rate
is computed by dividing the lesser of the amount of the securities and other
assets purchased or securities and other assets sold by the average monthly
value of securities and other assets owned during the year (excluding securities
whose maturities at acquisition were one year or less).
PERFORMANCE INFORMATION. The Fund may furnish data about its investment
performance in advertisements, sales literature and reports to shareholders.
"Total return" represents the annual percentage change in value of $1,000
invested at the net asset value for the one, five and ten year periods (if
applicable) and the life of the Fund through the most recent calendar quarter,
assuming reinvestment of all dividends and distributions. The Fund may also
furnish total return calculations for other periods based on investments at
various net asset values.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. State Street Bank and
Trust Company is the Custodian for the Fund's cash and securities and other
assets as well as the Transfer and Dividend Disbursing Agent for its shares.
Boston Financial Data Services, Inc., an affiliate of State Street Bank and
Trust Company, performs the shareholder services on behalf of State Street and
is located at the BFDS Building, Two Heritage Drive, North Quincy, Massachusetts
02171. State Street Bank and Trust Company does not assist in and is not
responsible for investment decisions involving assets of the Fund.
INFORMATION FOR SHAREHOLDERS. All shareholder inquiries regarding
administrative proce-
- --------------------------------------------------------------------------------
18
<PAGE> 22
- --------------------------------------------------------------------------------
dures, including the purchase and redemption of shares, should be directed to
the Distributor, Gabelli & Company, Inc., One Corporate Center, Rye, New York
10580-1434. For assistance, call 1-800-GABELLI (1-800-422-3554).
Upon request, Gabelli & Company, Inc. will provide without charge, a paper copy
of this Prospectus to investors or their representatives who received this
Prospectus in an electronic format.
This Prospectus omits certain information contained in the Registration
Statement filed with the SEC. Copies of the Registration Statement, including
items omitted herein, may be obtained from the SEC by paying the charges
prescribed under its rules and regulations. The Statement of Additional
Information included in such Registration Statement may be obtained without
charge from the Fund or its Distributor.
YEAR 2000 UPDATE. As the year 2000 approaches, an issue has emerged regarding
how existing application software programs and operating systems can accommodate
this date value. Failure to adequately address this issue could have potentially
serious repercussions. The Adviser is in the process of working with the Fund's
service providers to prepare for the year 2000. Based on information currently
available, the Adviser does not expect that the Fund will incur significant
operating expenses or be required to incur material costs to be year 2000
compliant. Although the Adviser does not anticipate that the year 2000 issue
will have a material impact on the Fund's ability to provide service at current
levels, there can be no assurance that steps taken in preparation for the year
2000 will be sufficient to avoid any adverse impact on the Fund.
- --------------------------------------------------------------------------------
19
<PAGE> 23
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Table of Fees and Expenses........... 2
Financial Highlights................. 3
Investment Objective and Policies.... 4
Additional Investment Policies....... 6
Risk Factors......................... 9
Management of the Fund............... 10
Distribution Plan.................... 11
Purchase of Shares................... 12
Redemption of Shares................. 14
Retirement Plans..................... 16
Dividends, Distributions and Taxes... 17
General Information.................. 17
</TABLE>
- ------------------------------------------------------
No dealer, salesman or other person has been authorized to give any information
or to make any representation other than those contained in this Prospectus, and
if given or made, such information or representation may not be relied upon as
being authorized by the Fund, the Adviser, the Administrator, the Distributor or
any affiliate thereof.
- ------------------------------------------------------
GABELLI
GOLD
FUND, INC.
PROSPECTUS
MAY 1, 1998
GABELLI FUNDS, INC.
INVESTMENT ADVISER
GABELLI & COMPANY, INC.
DISTRIBUTOR
- --------------------------------------------------------------------------------
<PAGE> 24
THE GABELLI GOLD FUND, INC.
ONE CORPORATE CENTER, RYE, NEW YORK 10580-1434
TELEPHONE 1-800-GABELLI (1-800-422-3554)
http://www.gabelli.com
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998
This Statement of Additional Information ("Additional Statement") relates to
Gabelli Gold Fund, Inc., a Maryland Corporation (the "Fund"), and is not a
prospectus and is only authorized for distribution when preceded or accompanied
by the Fund's prospectus dated May 1, 1998, as supplemented from time to time
(the "Prospectus"). This Additional Statement contains information in addition
to that set forth in the Prospectus into which this document is incorporated by
reference and should be read in conjunction with the Prospectus. Additional
copies of this document may be obtained without charge by writing or telephoning
the Fund at the address and telephone number set forth above.
TABLE OF CONTENTS
PAGE
----
Investments........................................................... B- 2
The Adviser........................................................... B-10
The Distributor....................................................... B-11
Directors and Officers................................................ B-11
Investment Restrictions............................................... B-14
Portfolio Transactions and Brokerage.................................. B-15
Purchase and Redemption of Shares..................................... B-16
Dividends, Distributions and Taxes.................................... B-17
Investment Performance Information.................................... B-19
Counsel and Independent Auditors...................................... B-20
Shares of Beneficial Interest......................................... B-20
Appendix-- Description of Ratings..................................... B-21
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<PAGE> 25
THE FOLLOWING INFORMATION SUPPLEMENTS THAT IN THE PROSPECTUS
INVESTMENTS
Subject to the Fund's policy of investing at least 65% of its total assets in
the equity securities of foreign and domestic companies engaged principally in
gold-related activities, the Fund may invest in any of the securities described
below.
EQUITY SECURITIES
Because the Fund in seeking to achieve its investment objective may invest
in the common stocks of both domestic and foreign issuers, an investment in the
Fund should be made with an understanding of the risks inherent in any
investment in common stocks including the risk that the financial condition of
the issuers of the Fund's portfolio securities may become impaired or that the
general condition of the stock market may worsen (both of which may contribute
directly to a decrease in the value of the securities and thus in the value of
the Fund's shares). Additional risks include risks associated with the right to
receive payments from the issuer which is generally inferior to the rights of
creditors of, or holders of debt obligations or preferred stock issued by, the
issuer.
Moreover, common stocks do not represent an obligation of the issuer and
therefore do not offer any assurance of income or provide the degree of
protection of debt securities. The issuance of debt securities or even preferred
stock by an issuer will create prior claims for payment of principal, interest
and dividends which could adversely affect the ability and inclination of the
issuer to declare or pay dividends on its common stock or the economic interest
of holders of common stock with respect to assets of the issuer upon liquidation
or bankruptcy. Further, unlike the debt securities which typically have a stated
principal amount payable at maturity (which value will be subject to market
fluctuations prior thereto), common stocks have neither a fixed principal amount
nor a maturity and have values which are subject to market fluctuations for as
long as the common stocks remain outstanding. Common stocks are especially
susceptible to general stock market movements and to volatile increases and
decreases in value as market confidence in and perceptions of the issuers
change. These perceptions are based on unpredictable factors including
expectations regarding government, economic, monetary and fiscal policies,
inflation and interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises. The value of the common stocks
in the Fund's portfolio thus may be expected to fluctuate.
Preferred stocks are usually entitled to rights on liquidation which are
senior to those of common stocks. For these reasons, preferred stocks generally
entail less risk than common stocks. Such securities may pay cumulative
dividends. Because the dividend rate is pre-established, and they are senior to
common stocks, such securities tend to have less possibility of capital
appreciation.
Some of the securities in the Fund may be in the form of depository
receipts. Depository receipts usually represent common stock or other equity
securities of non-U.S. issuers deposited with a custodian in a depository. The
underlying securities are usually withdrawable at any time by surrendering the
depository receipt. Depository receipts are usually denominated in U.S. dollars
and dividends and other payments from the issuer are converted by the custodian
into U.S. dollars before payment to receipt holders. In other respects
depository receipts for foreign securities have the same characteristics as the
underlying securities. Depository receipts that are not sponsored by the issuer
may be less liquid and there may be less readily available public information
about the issuer.
BULLION OF GOLD AND OTHER PRECIOUS METALS
The Fund may also invest up to 10% of its total assets in bullion of gold
and other precious metals ("bullion"). Bullion will only be bought and sold
through U.S. and foreign banks, regulated U.S. commodities exchanges, exchanges
affiliated with a regulated U.S. stock exchange, and dealers who are members of,
or affiliated with members of, a regulated U.S. commodities exchange, in
accordance with applicable investment laws. Investors should note that bullion
offers the potential for capital appreciation
B-2
<PAGE> 26
or depreciation, but unlike other investments does not generate income, and in
these transactions the Fund may encounter higher custody and other costs
(including shipping and insurance) than costs normally associated with ownership
of securities. The Fund may attempt to minimize the costs associated with the
actual custody of bullion by the use of receipts or certificates representing
ownership interests in bullion.
NONCONVERTIBLE FIXED INCOME SECURITIES
The category of fixed income securities which are not convertible or
exchangeable for common stock includes preferred stocks, bonds, debentures,
notes and money market instruments such as commercial paper and bankers
acceptances. There is no minimum credit rating for these securities in which the
Fund may invest. Accordingly, the Fund could invest in securities in default
although the Fund will not invest more than 5% of its assets in such securities.
Up to 25% of the Fund's total assets may be invested in lower quality debt
securities although the Fund currently does not expect to invest more than 5% of
its assets in such securities. The market values of lower quality fixed income
securities tend to be less sensitive to changes in prevailing interest rates
than higher-quality securities but more sensitive to individual corporate
developments than higher-quality securities. Such lower-quality securities also
tend to be more sensitive to economic conditions than are higher-quality
securities. Accordingly, these lower-quality securities are considered
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation and will
generally involve more credit risk than securities in the higher-quality
categories. Even securities rated Baa or BBB by Moody's Investors Service, Inc.
("Moody's") and Standard and Poor's Rating Services ("S&P"), respectively, which
ratings are considered investment grade, possess some speculative
characteristics. See "Appendix -- Description of Ratings." There are risks
involved in applying credit ratings as a method of evaluating high yield
obligations in that credit ratings evaluate the safety of principal and interest
payments, not market value risk. In addition, credit rating agencies may not
change credit ratings on a timely basis to reflect changes in economic or
company conditions that affect a security's market value. The Fund will rely on
the judgment, analysis and experience of its adviser, Gabelli Funds, Inc. (the
"Adviser"), in evaluating the creditworthiness of an issuer. In this evaluation,
the Adviser will take into consideration, among other things, the issuer's
financial resources and ability to cover its interest and fixed charges, factors
relating to the issuer's industry and its sensitivity to economic conditions and
trends, its operating history, the quality of the issuer's management and
regulatory matters.
The risk of loss due to default by the issuer is significantly greater for
the holders of lower quality securities because such securities are generally
unsecured and are often subordinated to other obligations of the issuer. During
an economic downturn or a sustained period of rising interest rates, highly
leveraged issuers of lower quality securities may experience financial stress
and may not have sufficient revenues to meet their interest payment obligations.
An issuer's ability to service its debt obligations may also be adversely
affected by specific corporate developments, its inability to meet specific
projected business forecasts, or the unavailability of additional financing.
Factors adversely affecting the market value of high yield and other fixed
income securities will adversely affect the Fund's net asset value. In addition,
the Fund may incur additional expenses to the extent that it is required to seek
recovery upon a default in the payment of principal of or interest on its
portfolio holdings.
From time to time, proposals have been discussed regarding new legislation
designed to limit the use of certain high yield debt securities by issuers in
connection with leveraged buy-outs, mergers and acquisitions, or to limit the
deductibility of interest payments on such securities. Such proposals, if
enacted into law, could reduce the market for such debt securities generally,
could negatively affect the financial condition of issuers of high yield
securities by removing or reducing a source of future financing, and could
negatively affect the value of specific high yield issues and the high yield
market in general. For example, under a provision of the Internal Revenue Code
enacted in 1989, a corporate issuer may be limited from deducting all of the
original issue discount on high-yield discount obligations (i.e., certain types
of debt securities issued at a significant discount to their face amount). The
likelihood of passage of any additional legislation or the effect thereof is
uncertain.
B-3
<PAGE> 27
The secondary trading market for lower-quality fixed income securities is
generally not as liquid as the secondary market for higher-quality securities
and is very thin for some securities. The relative lack of an active secondary
market may have an adverse impact on market price and the Fund's ability to
dispose of particular issues when necessary to meet liquidity needs or in
response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. The relative lack of an active secondary market
for certain securities may also make it more difficult for the Fund to obtain
accurate market quotations for purposes of valuing its portfolio. Market
quotations are generally available on many high yield issuers only from a
limited number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales. During such times, the responsibility of the
Board of Directors to value the securities becomes more difficult and judgment
plays a greater role in valuation because there is less reliable, objective data
available.
CONVERTIBLE SECURITIES
The Fund may invest up to 25% of its total assets in convertible securities
rated, at the time of investment, less than BBB by S&P or Baa by Moody's or
unrated but of equivalent credit quality in the judgment of the Adviser.
Some of the convertible securities in the Fund's portfolio may be
"Pay-in-Kind" securities. During a designated period from original issuance, the
issuer or such a security may pay dividends or interest to the holder by issuing
additional fully paid and nonassessable shares or units of the same or another
specified security.
SOVEREIGN DEBT SECURITIES
The Fund may invest in securities issued or guaranteed by any country and
denominated in any currency. The Fund expects to invest in the securities of
companies located in developed countries as well as those located in emerging
markets. Developed markets include Australia, Austria, Belgium, Canada, Denmark,
Finland, France, Germany, Ireland, Italy, Japan, Luxembourg, the Netherlands,
New Zealand, Norway, Spain, Sweden, Switzerland, the United Kingdom and the
United States. An emerging country is any country which is generally considered
to be an emerging or developing country by the International Bank for
Reconstruction and Development (more commonly referred to as the World Bank) and
the International Finance Corporation, as well as countries that are classified
by the United Nations or otherwise regarded by its authorities as emerging or
developing, at the time of the Fund's investment. The obligations of
governmental entities have various kinds of government support and include
obligations issued or guaranteed by governmental entities with taxing power.
These obligations may or may not be supported by the full faith and credit of a
government. Debt securities issued or guaranteed by foreign governmental
entities have credit characteristics similar to those of domestic debt
securities but include additional risks. These additional risks include those
resulting from devaluation of currencies, future adverse political and economic
developments and other foreign governmental laws.
The Fund may also purchase securities issued by semi-governmental or
supranational agencies such as the Asian Development Bank, the International
Bank for Reconstruction and Development, the Export-Import Bank and the European
Investment Bank. The governmental members, or "stockholders," usually make
initial capital contributions to the supranational entity and in many cases are
committed to make additional capital contributions if the supranational entity
is unable to repay its borrowings. The Fund will not invest more than 25% of its
assets in the securities of such supranational entities.
The Fund may invest in securities denominated in a multi-national currency
unit. An illustration of a multi-national currency unit is the European Currency
Unit (the "ECU"), which is a "basket" consisting of specified amounts of the
currencies of the member states of the European Community, a Western European
economic cooperative organization that includes France, Germany, the
Netherlands, the United Kingdom and other countries. The specific amounts of
currencies comprising the ECU may be adjusted by the Council of Ministers of the
European Community to reflect changes in relative values of the underlying
currencies. Such investments involve credit risks associated with the issuer and
currency risks associated with the currency in which the obligation is
denominated.
B-4
<PAGE> 28
SECURITIES SUBJECT TO REORGANIZATION
The Fund may invest without limit in securities for which a tender or
exchange offer has been made or announced and in securities of companies for
which a merger, consolidation, liquidation or reorganization proposal has been
announced if, in the judgment of the Adviser, there is a reasonable prospect of
capital appreciation significantly greater than the brokerage and other
transaction expenses involved.
In general, securities which are the subject of such an offer or proposal
sell at a premium to their historic market price immediately prior to the
announcement of the offer or may also discount what the stated or appraised
value of the security would be if the contemplated transaction were approved or
consummated. Such investments may be advantageous when the discount
significantly overstates the risk of the contingencies involved; significantly
undervalues the securities, assets or cash to be received by shareholders of the
prospective portfolio company as a result of the contemplated transaction; or
fails adequately to recognize the possibility that the offer or proposal may be
replaced or superseded by an offer or proposal of greater value. The evaluation
of such contingencies requires unusually broad knowledge and experience on the
part of the Adviser which must appraise not only the value of the issuer and its
component businesses as well as the assets or securities to be received as a
result of the contemplated transaction but also the financial resources and
business motivation of the offeror and the dynamics and business climate when
the offer or proposal is in process. Since such investments are ordinarily
short-term in nature, they will tend to increase the turnover ratio of the Fund,
thereby increasing its brokerage and other transaction expenses. The Adviser
intends to select investments of the type described which, in its view, have a
reasonable prospect of capital appreciation which is significant in relation to
both risk involved and the potential of available alternate investments.
OPTIONS
The Fund may purchase or sell options on individual securities as well as
on indices of securities as a means of achieving additional return or of hedging
the value of its portfolio.
A call option is a contract that gives the holder of the option the right,
in return for a premium paid, to buy from the seller the security underlying the
option at a specified exercise price at any time during the term of the option
or, in some cases, only at the end of the term of the option. The seller of the
call option has the obligation upon exercise of the option to deliver the
underlying security upon payment of the exercise price. A put option is a
contract that gives the holder of the option the right in return for a premium
to sell to the seller the underlying security at a specified price. The seller
of the put option, on the other hand, has the obligation to buy the underlying
security upon exercise at the exercise price. The Fund's transactions in options
may be subject to specific segregation requirements.
See "Hedging Transactions" below.
If the Fund has sold an option, it may terminate its obligation by
effecting a closing purchase transaction. This is accomplished by purchasing an
option of the same series as the option previously sold. There can be no
assurance that a closing purchase transaction can be effected when the Fund so
desires.
The purchaser of an option risks a total loss of the premium paid for the
option if the price of the underlying security does not increase or decrease
sufficiently to justify exercise. The seller of an option, on the other hand,
will recognize the premium as income if the option expires unrecognized but
forgoes any capital appreciation in excess of the exercise price in the case of
a call option and may be required to pay a price in excess of the current market
value in the case of a put option. Options purchased and sold other than on an
exchange in private transactions also impose on the Fund the credit risk that
the counterparty will fail to honor its obligations. The Fund will not purchase
options if, as a result, the aggregate cost of all outstanding options exceeds
5% of the Fund's assets. To the extent that puts, straddles and similar
investment strategies involve instruments regulated by the Commodity Futures
Trading Commission, the Fund is limited to investments not in excess of 5% of
the its total assets.
B-5
<PAGE> 29
WARRANTS AND RIGHTS
The Fund may invest up to 5% of its total assets in warrants or rights
(other than those acquired in units or attached to other securities) which
entitle the holder to buy equity securities at a specific price for or at the
end of a specific period of time.
INVESTMENTS IN INVESTMENT COMPANIES
The Fund may invest up to 10% of its total assets (5% per issuer) in
securities issued by other unaffiliated investment companies, although the Fund
may not acquire more than 3% of the voting securities of any investment company.
WHEN ISSUED, DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS
The Fund may enter into forward commitments for the purchase or sale of
securities, including on a "when issued" or "delayed delivery" basis. In such
transactions, instruments are bought with payment and delivery taking place in
the future in order to secure what is considered to be an advantageous yield or
price at the time of the transaction. In some cases, a forward commitment may be
conditioned upon the occurrence of a subsequent event, such as approval and
consummation of a merger, corporate reorganization or debt restructuring, i.e.,
a when, as and if issued security. When such transactions are negotiated, the
price is fixed at the time of the commitment, with payment and delivery taking
place in the future, generally a month or more after the date of the commitment.
While the Fund will only enter into a forward commitment with the intention of
actually acquiring the security, the Fund may sell the security before the
settlement date if it is deemed advisable.
Securities purchased under a forward commitment are subject to market
fluctuation, and no interest (or dividends) accrues to the Fund prior to the
settlement date. The Fund will segregate with its custodian cash or liquid
securities in an aggregate amount at least equal to the amount of its
outstanding forward commitments.
SHORT SALES
The Fund may make short sales of securities. A short sale is a transaction
in which the Fund sells a security it does not own in anticipation that the
market price of that security will decline. The Fund expects to make short sales
both to obtain capital gains from anticipated declines in securities and as a
form of hedging to offset potential declines in long positions in the same or
similar securities. The short sale of a security is considered a speculative
investment technique.
When the Fund makes a short sale, it must borrow the security sold short
and deliver it to the broker-dealer through which it made the short sale in
order to satisfy its obligation to deliver the security upon conclusion of the
sale. The Fund may have to pay a fee to borrow particular securities and is
often obligated to pay over any payments received on such borrowed securities.
The Fund's obligation to replace the borrowed security will be secured by
collateral deposited with the broker-dealer, usually cash, U.S. government
securities or other liquid securities. The Fund will also be required to deposit
similar collateral with its Custodian to the extent, if any, necessary so that
the value of both collateral deposits in the aggregate is at all times equal to
the greater of the price at which the security is sold short or 100% of the
current market value of the security sold short. Depending on arrangements made
with the broker-dealer from which it borrowed the security regarding payment
over of any payments received by the Fund on such security, the Fund may not
receive any payments (including interest) on its collateral deposited with such
broker-dealer. If the price of the security sold short increases between the
time of the short sale and the time the Fund replaces the borrowed security, the
Fund will incur a loss; conversely, if the price declines, the Fund will realize
a capital gain. Any gain will be decreased, and any loss increased, by the
transaction costs described above. Although the Fund's gain is limited to the
price at which it sold the security short, its potential loss is theoretically
unlimited.
The market value of the securities sold short of any one issuer will not
exceed either 5% of the Fund's total assets or 5% of such issuer's voting
securities. The Fund will not make a short sale, if, after giving effect to such
sale, the market value of all securities sold short exceeds 25% of the value of
its assets or the
B-6
<PAGE> 30
Fund's aggregate short sales of a particular class of securities exceeds 25% of
the outstanding securities of that class. The Fund may also make short sales
"against the box" without respect to such limitations. In this type of short
sale, at the time of the sale, the Fund owns or has the immediate and
unconditional right to acquire at no additional cost the identical security.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest up to a total of 15% of its net assets in securities
that are subject to restrictions on resale and securities the markets for which
are illiquid, including repurchase agreements with more than seven days to
maturity. Illiquid securities include securities the disposition of which is
subject to substantial legal or contractual restrictions. The sale of illiquid
securities often requires more time and results in higher brokerage charges or
dealer discounts and other selling expenses than does the sale of securities
eligible for trading on national securities exchanges or in the over-the-counter
markets. Restricted securities may sell at a price lower than similar securities
that are not subject to restrictions on resale. Unseasoned issuers are companies
(including predecessors) that have operated less than three years. The continued
liquidity of such securities is not as well assured as that of publicly traded
securities, and accordingly the Board of Directors will monitor their liquidity.
The Board will review pertinent factors such as trading activity, reliability of
price information and trading patterns of comparable securities in determining
whether to treat any such security as liquid for purposes of the foregoing 15%
test. To the extent the Board treats such securities as liquid, temporary
impairments to trading patterns of such securities may adversely affect the
Fund's liquidity.
To the extent it can do so consistent with the foregoing limitations, the
Fund may invest in non-publicly traded securities, including securities that are
not registered under the Securities Act of 1933, as amended, but that can be
offered and sold to qualified institutional buyers under Rule 144A under that
Act. The Board of Directors has adopted guidelines and delegated to the Adviser,
subject to the supervision of the Board of Directors, the daily function of
determining and monitoring the liquidity of Rule 144A securities. Rule 144A
securities may become illiquid if qualified institutional buyers are not
interested in acquiring the securities.
REPURCHASE AGREEMENTS
The Fund may invest in repurchase agreements, which are agreements pursuant
to which securities are acquired by the Fund from a third party with the
understanding that they will be repurchased by the seller at a fixed price on an
agreed date. These agreements may be made with respect to any of the portfolio
securities in which the Fund is authorized to invest. Repurchase agreements may
be characterized as loans secured by the underlying securities. The Fund may
enter into repurchase agreements with (i) member banks of the Federal Reserve
System having total assets in excess of $500 million and (ii) securities
dealers, provided that such banks or dealers meet the creditworthiness standards
established by the Fund's Board of Directors ("Qualified Institutions"). The
Adviser will monitor the continued creditworthiness of Qualified Institutions,
subject to the supervision of the Board of Directors. The resale price reflects
the purchase price plus an agreed upon market rate of interest which is
unrelated to the coupon rate or date of maturity of the purchased security. The
collateral is marked to market daily. Such agreements permit the Fund to keep
all its assets earning interest while retaining "overnight" flexibility in
pursuit of investment of a longer-term nature.
THE USE OF REPURCHASE AGREEMENTS INVOLVES CERTAIN RISKS. For example, if
the seller of securities under a repurchase agreement defaults on its obligation
to repurchase the underlying securities, as a result of its bankruptcy or
otherwise, the Fund will seek to dispose of such securities, which action could
involve costs or delays. If the seller becomes insolvent and subject to
liquidation or reorganization under applicable bankruptcy or other laws, the
Fund's ability to dispose of the underlying securities may be restricted.
Finally, it is possible that the Fund may not be able to substantiate its
interest in the underlying securities. To minimize this risk, the securities
underlying the repurchase agreement will be held by the Fund's custodian at all
times in an amount at least equal to the repurchase price, including accrued
interest. If the seller fails to repurchase the securities, the Fund may suffer
a loss to the extent proceeds from the sale of the underlying securities are
less than the repurchase price. The Fund will not enter into repurchase
B-7
<PAGE> 31
agreements of a duration of more than seven days if, taken together with all
other illiquid securities in the Fund's portfolio, more than 15% of its net
assets would be so invested.
LOANS OF PORTFOLIO SECURITIES
To increase income, the Fund may lend its portfolio securities to
securities broker-dealers or financial institutions if (1) the loan is
collateralized in accordance with applicable regulatory requirements including
collateralization continuously at no less than 100% by marking to market daily,
(2) the loan is subject to termination by the Fund at any time, (3) the Fund
receives reasonable interest or fee payments on the loan, (4) the Fund is able
to exercise all voting rights with respect to the loaned securities and (5) the
loan will not cause the value of all loaned securities to exceed 33 1/3% of the
value of the Fund's assets.
If the borrower fails to maintain the requisite amount of collateral, the
loan automatically terminates and the Fund could use the collateral to replace
the securities while holding the borrower liable for any excess of replacement
cost over the value of the collateral. As with any extension of credit, there
are risks of delay in recovery and in some cases even loss of rights in
collateral should the borrower of the securities fail financially.
BORROWING
The Fund may not borrow money except for (1) short-term credits from banks
as may be necessary for the clearance of portfolio transactions, and (2)
borrowings from banks for temporary or emergency purposes, including the meeting
of redemption requests, which would otherwise require the untimely disposition
of its portfolio securities. Borrowing may not, in the aggregate, exceed 15% of
assets after giving effect to the borrowing, and borrowing for purposes other
than meeting redemptions may not exceed 5% of the value of the Fund's assets
after giving effect to the borrowing. The Fund will not make additional
investments when borrowings exceed 5% of assets. The Fund may mortgage, pledge
or hypothecate assets to secure such borrowings.
HEDGING TRANSACTIONS
FUTURES AND FORWARD CONTRACTS. The Fund may enter into futures and forward
contracts only for certain bona fide hedging, yield enhancement and risk
management purposes. The Fund may enter into futures and forward contracts on
precious metals as a hedge against changes in the prices of precious metals held
or intended to be acquired by the Fund, but not for speculation or for achieving
leverage. The Fund's hedging activities may include purchases of futures and
forward contracts as an offset against the effect of anticipated increases in
the price of a precious metal which the Fund intends to acquire or sales of
futures and forward contracts as an offset against the effect of anticipated
declines in the price of precious metals which the Fund owns. Precious metals
futures and forward contract prices can be volatile and are influenced
principally by changes in spot market prices, which in turn are affected by a
variety of political and economic factors. While the correlation between changes
in prices of futures and forward contracts and prices of the precious metals
being hedged by such contracts has historically been very strong, the
correlation may at times be imperfect and even a well conceived hedge may be
unsuccessful to some degree because of market behavior or unexpected precious
metals price trends. The Fund may also enter into futures and forward contracts
for the purchase or sale of debt securities, debt instruments, or indices of
prices thereof, stock index futures, other financial indices, and U.S.
Government Securities.
A "sale" of a futures contract (or a "short" futures position) means the
assumption of a contractual obligation to deliver the securities underlying the
contract at a specified price at a specified future time. A "purchase" of a
futures contract (or a "long" futures position) means the assumption of a
contractual obligation to acquire the securities underlying the contract at a
specified price at a specified future time.
Certain futures contracts are settled on a net cash payment basis rather
than by the sale and delivery of the securities underlying the futures
contracts. U.S. futures contracts have been designed by exchanges that have been
designated as "contract markets" by the Commodity Futures Trading Commission, an
agency of the U.S. Government, and must be executed through a futures commission
merchant (i.e., a brokerage firm) which is a member of the relevant contract
market. Futures contracts trade on these
B-8
<PAGE> 32
contract markets and the exchange's affiliated clearing organization guarantees
performance of the contracts as between the clearing members of the exchange.
The Fund may also purchase and write covered call or put options on
precious metals futures contracts. Such options would be purchased solely for
hedging purposes. Call options might be purchased to hedge against an increase
in the price of precious metals the Fund intends to acquire, and put options may
be purchased to hedge against a decline in the price of precious metals owned by
the Fund. As is the case with futures contracts, options on precious metals
futures may facilitate the Fund's acquisition of precious metals or permit the
Fund to defer disposition of precious metals for tax or other purposes.
These contracts entail certain risks, including but not limited to the
following: no assurance that futures contracts transactions can be offset at
favorable prices, possible reduction of the Fund's yield due to the use of
hedging, possible reduction in value of both the securities hedged and the
hedging instrument, possible lack of liquidity due to daily limits on price
fluctuation, imperfect correlation between the contracts and the securities
being hedged, and potential losses in excess of the amount invested in the
futures contracts themselves.
CURRENCY TRANSACTIONS. The Fund may enter into various currency
transactions, including forward foreign currency contracts, currency swaps,
foreign currency or currency index futures contracts and put and call options on
such contracts or on currencies. A forward foreign currency contract involves an
obligation to purchase or sell a specific currency for a set price at a future
date. A currency swap is an arrangement whereby each party exchanges one
currency for another on a particular day and agrees to reverse the exchange on a
later date at a specific exchange rate. Forward foreign currency contracts and
currency swaps are established in the interbank market conducted directly
between currency traders (usually large commercial banks or other financial
institutions) on behalf of their customers. Futures contracts are similar to
forward contracts except that they are traded on an organized exchange and the
obligations thereunder may be offset by taking an equal but opposite position to
the original contract, with profit or loss determined by the relative prices
between the opening and offsetting positions. The Fund expects to enter into
these currency contracts and swaps in primarily the following circumstances: to
"lock in" the U.S. dollar equivalent price of a security the Fund is
contemplating to buy or sell that is denominated in a non-U.S. currency; or to
protect against a decline against the U.S. dollar of the currency of a
particular country to which the Fund's portfolio has exposure. The Fund
anticipates seeking to achieve the same economic result by utilizing from time
to time for such hedging a currency different from the one of the given
portfolio security as long as, in the view of the Adviser, such currency is
essentially correlated to the currency of the relevant portfolio security based
on historic and expected exchange rate patterns.
The Adviser may choose to use such instruments on behalf of the Fund
depending upon market conditions prevailing and the perceived instrument needs
of the Fund. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals and
as agents utilizing standardized swap documentation. As a result, the swap
market has become relatively broad and deep as compared to the markets for
similar instruments which are established in the interbank market. In accordance
with the current position of the Securities and Exchange Commission, the Fund
will treat swap transactions as illiquid for purposes of the Fund's policy
regarding illiquid securities. Futures contracts, interest rate swaps, and
options on securities, indices and futures contracts and certain currency
contracts sold by the Fund are generally subject to segregation and coverage
requirements with the result that, if the Fund does not hold the security or
futures contract underlying the instrument, the Fund will be required to
segregate on an ongoing basis with its custodian, cash, U.S. government
securities, or other high grade liquid debt obligations in an amount at least
equal to the Fund's obligations with respect to such instruments. Such amounts
fluctuate as the obligations increase or decrease. The segregation requirement
can result in the Fund maintaining securities positions it would otherwise
liquidate or segregating assets at a time when it might be disadvantageous to do
so.
B-9
<PAGE> 33
THE ADVISER
The Adviser is a New York corporation with principal offices located at One
Corporate Center, Rye, New York 10580-1434.
Pursuant to an Investment Advisory Contract, which was approved by the
Fund's sole shareholder on June 15, 1994, and last approved by the Board of
Directors on May 14, 1997, the Adviser furnishes a continuous investment program
for the Fund's portfolio, makes the day-to-day investment decisions for the
Fund, arranges the portfolio transactions for the Fund and generally manages the
Fund's investments in accordance with the stated policies of the Fund, subject
to the general supervision of the Board of Directors of the Fund.
Under the Investment Advisory Contract, the Adviser also (1) provides the
Fund with the services of persons competent to perform such supervisory,
administrative, and clerical functions as are necessary to provide efficient
administration of the Fund, including maintaining certain books and records and
overseeing the activities of the Fund's Custodian and Transfer Agent; (2)
oversees the performance of administrative and professional services provided to
the Fund by others, including the Fund's Custodian, Transfer Agent and Dividend
Disbursing Agent, as well as legal, accounting, auditing and other services
performed for the Fund; (3) provides the Fund, if requested, with adequate
office space and facilities; (4) prepares, but does not pay for, periodic
updating of the Fund's registration statement, Prospectus and Additional
Statement, including the printing of such documents for the purpose of filings
with the SEC; (5) supervises the calculation of the net asset value of shares of
the Fund; (6) prepares, but does not pay for, all filings under state "Blue Sky"
laws of such states or countries as are designated by the Distributor, which may
be required to register or qualify, or continue the registration or
qualification, of the Fund and/or its shares under such laws; and (7) prepares
notices and agendas for meetings of the Fund's Board of Directors and minutes of
such meetings in all matters required by the Investment Company Act of 1940, as
amended (the "1940 Act"), to be acted upon by the Board.
The Adviser has entered into a Sub-Administration Contract with BISYS Fund
Services L.P. ("BISYS" or the "Sub-Administrator") pursuant to which the
Sub-Administrator provides certain administrative services necessary for the
Fund's operations but which do not concern the investment advisory and portfolio
management services provided by the Adviser. For such services and the related
expenses borne by the Sub-Administrator, the Adviser pays a prorated monthly fee
at the annual rate of .0625% of the average net assets of the Fund (minimum
annual fee of $30,000 per portfolio) on the first $350 million of all of the
funds advised by the Adviser and its affiliates and administered by BISYS and
.0425% of any net assets above $350 million, and .0225% of any assets above $700
million which, together with the services to be rendered, is subject to
negotiation between the parties and both parties retain the right unilaterally
to terminate the arrangement on not less than 60 days' notice.
The Investment Advisory Contract provides that absent willful misfeasance,
bad faith, gross negligence or reckless disregard of its duty, the Adviser and
its employees, officers, directors and controlling persons are not liable to the
Fund or any of its investors for any act or omission by the Adviser or for any
error of judgment or for losses sustained by the Fund. However, the Investment
Advisory Contract provides that the Fund is not waiving any rights it may have
with respect to any violation of law which cannot be waived. The Investment
Advisory Contract also provides indemnification for the Adviser and each of
these persons for any conduct for which they are not liable to the Fund. The
Investment Advisory Contract in no way restricts the Adviser from acting as
adviser to others. The Fund has agreed by the terms of its Investment Advisory
Contract that the word "Gabelli" in its name is derived from the name of the
Adviser which in turn is derived from the name of Mario J. Gabelli; that such
name is the property of the Adviser for copyright and/or other purposes; and
that, therefore, such name may freely be used by the Adviser for other
investment companies, entities or products. The Fund has further agreed that in
the event that for any reason the Adviser ceases to be its investment adviser,
it will, unless the Adviser otherwise consents in writing, promptly take all
steps necessary to change its name to one which does not include "Gabelli."
B-10
<PAGE> 34
The Investment Advisory Contract is terminable without penalty by the Fund
on not more than sixty days' written notice when authorized by the Directors of
the Fund; by the holders of a majority, as defined in the 1940 Act, of the
outstanding shares of the Fund; or by the Adviser. The Investment Advisory
Contract will automatically terminate in the event of its assignment, as defined
in the 1940 Act and rules thereunder, except to the extent otherwise provided by
order of the Securities and Exchange Commission or any rule under the 1940 Act
and except to the extent the 1940 Act no longer provides for automatic
termination, in which case the approval of a majority of the disinterested
Directors is required for any "assignment." The Investment Advisory Contract
provides that unless terminated it will remain in effect from year to year so
long as continuance of the Investment Advisory Contract is approved annually by
the Directors, or the shareholders of the Fund and in either case, by a majority
vote of the Directors who are not parties to the Investment Advisory Contract or
"interested persons" as defined in the 1940 Act of any such person, cast in
person at a meeting called specifically for the purpose of voting on the
continuance of the Investment Advisory Contract.
ADVISORY FEES EARNED
FOR THE YEAR ENDED DECEMBER 31,
1995 1996 1997
---- ---- ----
$174,090 $205,967 $136,830
THE DISTRIBUTOR
The Fund has entered into a Distribution Agreement with Gabelli & Company,
Inc. (the "Distributor"), a New York corporation which is a subsidiary of
Gabelli Funds, Inc., having principal offices located at One Corporate Center,
Rye, New York 10580-1434. The Distributor acts as agent of the Fund for the
continuous offering of its shares on a best efforts basis.
The Distribution Agreement is terminable by the Distributor or the Fund at
any time without penalty on not more than sixty nor less than thirty days'
written notice, provided, that termination by the Fund must be directed or
approved by the Board of Directors of the Fund, by the vote of the holders of a
majority of the outstanding securities of the Fund, or by written consent of a
majority of the Directors who are not interested persons of the Fund or the
Distributor. The Distribution Agreement will automatically terminate in the
event of its assignment, as defined in the 1940 Act. The Distribution Agreement
provides that, unless terminated, it will remain in effect from year to year, so
long as continuance of the Distribution Agreement is approved annually by the
Fund's Board of Directors or by a majority of the outstanding voting securities
of the Fund, and in either case, also by a majority of the Directors who are not
interested persons of the Fund or the Distributor. The Distribution Agreement
was last approved by the Board of Directors on May 14, 1997.
During the fiscal year ended December 31, 1997, the Distributor paid
distribution expenses under the Distribution Plan of $38,100. Of this amount
$9,900 was spent on printing, postage and stationery, $5,600 on overhead support
expenses, $15,100 on salaries of personnel of the Distributor and $7,500 on
third party brokers. Pursuant to the Distribution Plan, the Fund paid the
Distributor $34,237, or .25% of its average daily net assets.
DIRECTORS AND OFFICERS
The Directors and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with the
Adviser or the Sub-Administrator, are shown below. Directors deemed to be
"interested persons" of the Fund for purposes of the 1940 Act are indicated by
an asterisk.
B-11
<PAGE> 35
<TABLE>
<CAPTION>
NAME, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS;
AFFILIATIONS WITH THE ADVISER OR ADMINISTRATOR
<S> <C>
Mario J. Gabelli* Chairman of the Board and President of the Fund
Chairman of the Board since 1989; Chairman of the Board, Chief Executive
One Corporate Center Officer and Chief Investment Officer of Gabelli
Rye, New York 10580 Funds, Inc. and GAMCO Investors, Inc., Chairman of
Age: 55 the Board and Chief Executive Officer of Lynch
Corporation, a diversified manufacturing and
communications services company; Director of
East/West Communications, Inc.; Governor of
the American Stock Exchange and officer and/or
Director or Trustee of 12 other Gabelli funds.
Caesar M.P. Bryan Senior Vice President of GAMCO Investors, Inc., a
President wholly owned subsidiary of the Adviser, since May
One Corporate Center 1994 and President of Gabelli International Growth
Rye, New York 10580 Fund, Inc.; Formerly Senior Vice President and
Age: 43 Portfolio Manager of Lexington Management
Corporation (until May
1994).
E. Val Cerutti Chief Executive Officer of Cerutti Consultants,
Director Inc.; Former President and Chief Operating Officer
227 McLain Street of Stella D'oro Biscuit Company (through 1992);
Mount Kisco, New York 10549 Adviser, Iona College School of Business; Director
Age: 58 of Lynch Corporation and Director of 1 other
Gabelli fund.
Anthony J. Colavita President and Attorney at Law in the law firm of
Director Anthony J. Colavita, P.C. since 1961; Director or
575 White Plains Road Trustee of 12 other Gabelli funds.
Eastchester, New York 10709
Age: 62
Karl Otto Pohl* Partner of Sal Oppenheim Jr. & Cie (private
Director investment bank); Former President of the Deutsche
One Corporate Center Bundesbank and Chairman of its Central Bank Council
Rye, New York 10580 from 1980 through 1991; Currently Board Member of
Age: 68 IBM World Trade Europe/Middle East/Africa Corp.;
Bertelsmann AG, Zurich Versicherungs-Gesellschaft
(insurance); the International Advisory Board
for JP Morgan & Co.; Supervisory Board Member
of Royal Dutch (petroleum company) ROBECo/o
Group; Advisory Board of Unilever N.V. and
Unilever Deutschland; German Governor,
International Monetary Fund from 1980 through
1991; Board Member, Bank for International
Settlements from 1980 through 1991; and
Director or Trustee of 14 other Gabelli funds.
</TABLE>
B-12
<PAGE> 36
<TABLE>
<S> <C>
Werner Roeder, M.D. Director of Surgery, Lawrence Hospital, and
Director practicing private physician. Director or Trustee
One Corporate Center of 6 other Gabelli funds.
Rye, New York 10580
Age: 57
Anthonie C. van Ekris Managing Director of Balmac International, Ltd.;
Director Director of Spinnaker Industries, Inc. and Stahel
LeColumbia Mardmeyer A.Z.; and Director or Trustee of 9 other
11 Blvd. Princess Grace Gabelli funds.
Monaco, MC 98000
Age: 63
Daniel E. Zucchi President of Daniel E. Zucchi Associates. Formerly
Director Senior Vice President and Director of Consumer
One Corporate Center Marketing of Hearst Magazines (through 1995).
Rye, New York 10580
Age: 57
Bruce N. Alpert Vice President and Chief Operating Officer of the
Vice President and Treasurer Investment Advisory Division of Gabelli Funds, Inc.
One Corporate Center (the "Adviser"); officer of each mutual fund
Rye, New York 10580 managed by the Adviser or its affiliates.
Age: 46
James E. McKee Vice President and General Counsel of GAMCO
Secretary Investors, Inc. since 1993; Secretary of all mutual
One Corporate Center funds managed by the Adviser or its affiliates;
Rye, New York 10580 U.S. Securities and Exchange Commission, New York,
Age: 35 (Branch Chief, 1992-1993, Staff Attorney,
1989-1992).
</TABLE>
The Fund pays each Director who is not an employee of the Adviser or an
affiliated company an annual fee of $1,000 and $250 for each meeting of the
Board of Directors attended by the Director, and reimburses Directors for
certain travel and other out-of-pocket expenses incurred by them in connection
with attending such meetings. Directors and officers of the Fund who are
employed by the Adviser or an affiliated company receive no compensation or
expense reimbursement from the Fund.
The following table sets forth certain information regarding the
compensation of the Fund's directors and officers. Except as disclosed below, no
executive officer or person affiliated with the Fund received compensation from
the Fund for the calendar year ended December 31, 1997 in excess of $60,000.
B-13
<PAGE> 37
COMPENSATION TABLE
<TABLE>
<CAPTION>
TOTAL COMPENSATION
FROM THE FUND AND
NAME OF PERSON, AGGREGATE COMPENSATION FUND COMPLEX
POSITION FROM THE FUND PAID TO DIRECTORS*
------------ ------------------ --------------
<S> <C> <C>
Mario J. Gabelli 0 0
Chairman of the Board
E. Val Cerutti $ 2,000 $10,000(2)
Director
Anthony J. Colavita $ 2,000 $79,190(13)
Director
Karl Otto Pohl $ 1,750 $85,690(15)
Director
Werner Roeder, M.D $ 2,000 $21,691(7)
Director
Anthonie C. van Ekris $ 2,000 $55,190(10)
Director
Daniel E. Zucchi $ 2,000 $ 2,000(1)
Director
- -------------
<FN>
* Represents the total compensation paid to such persons during the calendar
year ended December 31, 1997. The parenthetical number represents the
number of investment companies (including the Fund) from which such person
receives compensation that are considered part of the same fund complex as
the Fund, because, among other things, they have a common investment
adviser.
</TABLE>
INVESTMENT RESTRICTIONS
The Fund's investment objective and the following investment restrictions
are fundamental and cannot be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities (defined in the 1940 Act as
the lesser of (a) more than 50% of the outstanding shares or (b) 67% or more of
the shares represented at a meeting at which more than 50% of the outstanding
shares are represented). All other investment policies or practices are
considered by the Fund not to be fundamental and accordingly may be changed
without stockholder approval. If a percentage restriction on investment or use
of assets set forth below is adhered to at the time a transaction is effected,
later changes in percentage resulting from changing market values or total
assets of the Fund will not be considered a deviation from policy. The Fund may
not:
(1) issue senior securities, except that the Fund may borrow money from a
bank, including on margin if margin securities are owned, in an amount
up to 33 1/3% of its total assets (including the amount of such
enumerated senior securities issued but excluding any liabilities and
indebtedness not constituting senior securities) and except that the
Fund may borrow up to an additional 5% of its total assets for
temporary purposes; or pledge its assets other than to secure such
issuances or in connection with hedging transactions, short sales,
when-issued and forward commitment transactions and similar investment
strategies;
(2) make loans of money or property to any person, except through loans of
portfolio securities, the purchase of fixed income securities or the
acquisition of securities subject to repurchase agreements;
(3) underwrite the securities of other issuers, except to the extent that
in connection with the disposition of portfolio securities or the sale
of its own shares the Fund may be deemed to be an underwriter;
(4) invest for the purpose of exercising control over management of any
company;
B-14
<PAGE> 38
(5) purchase real estate or interests therein, including limited
partnerships that invest primarily in real estate equity interests,
other than publicly traded real estate investment trusts and publicly
traded master limited partnership interests; or
(6) purchase or sell commodities or commodity contracts except for certain
bona fide hedging, yield enhancement and risk management purposes or
invest in any oil, gas or mineral interests, provided that the Fund may
invest in bullion.
In addition, as a diversified investment company, the Fund is subject to
the following limitations as to 75% of its total assets: (a) the Fund may not
invest more than 5% of its total assets in the securities of any one issuer,
except obligations of the U.S. Government and its agencies and
instrumentalities, and (b) the Fund may not own more than 10% of the outstanding
voting securities of any one issuer.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is authorized on behalf of the Fund to employ brokers to effect
the purchase or sale of portfolio securities with the objective of obtaining
prompt, efficient and reliable execution and clearance of such transactions at
the most favorable price obtainable ("best execution") at reasonable expense.
Transactions in securities other than those for which a securities exchange is
the principal market are generally done through a principal market maker.
However, such transactions may be effected through a brokerage firm and a
commission paid whenever it appears that a broker can obtain a more favorable
overall price. In general, there may be no stated commission in the case of
securities traded on the over-the-counter markets, but the prices of those
securities may include undisclosed commissions or markups. Options transaction
will usually be effected through a broker and a commission will be charged. The
Fund also expects that securities will be purchased at times in underwritten
offerings where the price includes a fixed amount of compensation generally
referred to as the underwriter's concession or discount.
The Adviser currently serves as adviser to a number of investment company
clients and may in the future act as adviser to others. Affiliates of the
Adviser act as investment adviser to numerous private accounts. It is the
practice of the Adviser and its affiliates to cause purchase and sale
transactions to be allocated among the Fund and others whose assets they manage
in such manner as it deems equitable. In making such allocations among the Fund
and other client accounts, the main factors considered are the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held and the opinions of the persons
responsible for managing the portfolios of the Fund and other client accounts.
The policy of each Fund regarding purchases and sales of portfolio
securities is that primary consideration will be given to obtaining the most
favorable prices and efficient execution of transactions. In seeking to
implement each Fund's policies, the Adviser effects transactions with those
brokers and dealers who the Adviser believes provide the most favorable prices
and are capable of providing efficient executions. If the Adviser believes such
price and execution are obtainable from more than one broker or dealer, it may
give consideration to placing portfolio transactions with those brokers and
dealers who also furnish research and other services to each Fund or the Adviser
of the type described in Section 28(e) of the Securities Exchange Act of 1934.
In doing so, each Fund may also pay higher commission rates than the lowest
available when the Adviser believes it is reasonable to do so in light of the
value of the brokerage and research services provided by the broker effecting
the transaction. Such services may include, but are not limited to, any one or
more of the following: information as to the availability of securities for
purchase or sale; statistical or factual information or opinions pertaining to
investment; wire services; and appraisals or evaluations of portfolio
securities.
Research services furnished by brokers or dealers through which the Fund
effects securities transactions are used by the Adviser and its advisory
affiliates in carrying out their responsibilities with respect to all of their
accounts over which they exercise investment discretion. Such investment
information may be useful only to one or more of the other accounts of the
Adviser and its advisory affiliates, and research information received for the
commissions of those particular accounts may be useful both to the Fund and
B-15
<PAGE> 39
one or more of such other accounts. The purpose of this sharing of research
information is to avoid duplicative charges for research provided by brokers and
dealers.
Neither the Fund nor the Adviser has any legally binding agreement with any
broker or dealer regarding any specific amount of brokerage commissions which
will be paid in recognition of such services. However, in determining the amount
of portfolio commissions directed to such brokers or dealers, the Adviser does
consider the level of services provided. Based on such determinations, the
Adviser has allocated brokerage commissions of $19,404 on portfolio transactions
in the principal amount of $5,302,299 during 1997, to various broker-dealers
that have provided research services to the Adviser. The average commission on
these transactions was $.0037 per share.
The Adviser may also place orders for the purchase or sale of portfolio
securities with Gabelli & Company, Inc. ("Gabelli"), a broker-dealer member of
the National Association of Securities Dealers, Inc. and an affiliate of the
Adviser, when it appears that, as an introducing broker or otherwise, Gabelli
can obtain a price and execution which is at least as favorable as that
obtainable by other qualified brokers. The Adviser may also consider sales of
shares of the Fund and any other registered investment companies managed by the
Adviser and its affiliates by brokers and dealers other than the Distributor as
a factor in its selection of brokers and dealers to execute portfolio
transactions for the Fund.
As required by Rule 17e-1 under the 1940 Act, the Board of Directors of the
Fund has adopted "Procedures" which provide that the commissions paid to Gabelli
on stock exchange transactions may not exceed that which would have been charged
by another qualified broker or member firm able to effect the same or a
comparable transaction at an equally favorable price. Rule 17e-1 and the
Procedures contain requirements that the Board, including independent Directors,
conduct periodic compliance reviews of such brokerage allocations and review
such schedule at least annually for its continuing compliance with the foregoing
standard. The Adviser and Gabelli are also required to furnish reports and
maintain records in connection with such reviews.
The following table sets forth certain information regarding the brokerage
commissions paid and the brokerage commissions paid to Gabelli affiliates for
the fiscal years ended December 31, 1995, 1996 and 1997.
<TABLE>
<CAPTION>
TOTAL BROKERAGE
BROKERAGE COMMISSIONS
PERIOD COMMISSIONS PAID TO GABELLI
------ PAID AFFILIATES
---- ----------
<S> <C> <C>
1995...................................$58,454 $ 0
1996...................................$49,039 $ 0
1997...................................$20,298 $ 0
</TABLE>
To obtain the best execution of portfolio trades on the New York Stock
Exchange, Inc. ("NYSE"), Gabelli controls and monitors the execution of such
transactions on the floor of the NYSE through independent "floor brokers" or
through the Designated Order Turnaround ("DOT") System of the NYSE. Such
transactions are then cleared, confirmed to the Fund for the account of Gabelli,
and settled directly with the Custodian of the Fund by a clearing house member
firm which remits the commission less its clearing charges to Gabelli. Gabelli
may also effect portfolio transactions on behalf of the Fund in the same manner
and pursuant to the same arrangements on other national securities exchanges
which adopts direct access rules similar to those of the NYSE.
PURCHASE AND REDEMPTION OF SHARES
Cancellation of purchase orders for shares of the Fund (as, for example,
when checks submitted to purchase shares are returned unpaid) cause a loss to be
incurred when the net asset value of the Fund's shares on the date of
cancellation is less than on the original date of purchase. The investor is
responsible
B-16
<PAGE> 40
for such loss, and the Fund may redeem shares from any account registered in
that shareholder's name, or by seeking other redress. If the Fund is unable to
recover any loss to itself, it is the position of the SEC that the Distributor
will be immediately obligated to make the Fund whole.
To minimize expenses, the Fund reserves the right to redeem, upon not less
than 30 days notice, all shares of the Fund in an account (other than an
Individual Retirement Account ("IRA")) which as a result of shareholder
redemption has a value below $500 and has reserved the ability to raise this
amount to up to $10,000. However, a shareholder will be allowed to make
additional investments prior to the date fixed for redemption to avoid
liquidation of the account.
DIVIDENDS, DISTRIBUTIONS AND TAXES
GENERAL
The Fund will determine either to distribute or to retain all or part of
any net long-term capital gains in any year for reinvestment. If any such gains
are retained, the Fund will be subject to a tax of 35% of such amount. In that
event, the Fund expects that it will designate the retained amount as
undistributed capital gains in a notice to its shareholders, each of whom (1)
will be required to include in income for tax purposes as long-term capital
gains, its share of undistributed amount, (2) will be entitled to credit its
proportionate share of the tax paid by the Fund against its federal income tax
liability and to claim refunds to the extent the credit exceeds such liability,
and (3) will increase its basis in its shares of the Fund by an amount equal to
65% of the amount of undistributed capital gains included in such shareholder's
gross income.
Under the Code, amounts not distributed on a timely basis in accordance
with a calendar year distribution requirement are subject to a nondeductible 4%
excise tax. To avoid the tax, the Fund must distribute during each calendar
year, an amount equal to, at the minimum, the sum of (1) 98% of its ordinary
income (not taking into account any capital gains or losses) for the calendar
year, (2) 98% of its capital gains in excess of its capital losses for the
twelve-month period ending on October 31 of the calendar year (unless an
election is made by the Fund with a November or December year-end to use the
Fund's fiscal year), and (3) all ordinary income and net capital gains for
previous years that were not previously distributed. A distribution will be
treated as paid during the calendar year if it is paid during the calendar year
or declared by the Fund in October, November or December of the year, payable to
shareholders of record on a date during such month and paid by the Fund during
January of the following year. Any such distributions paid during January of the
following year will be deemed to be received on December 31 of the year the
distributions are declared, rather than when the distributions are received.
Gains or losses on the sales of securities by the Fund will be long-term
capital gains or losses if the securities have been held by the Fund for more
than eighteen months. Gains or losses on the sale of securities held for more
than twelve months but less than eighteen months will be mid-term capital
gains or losses.
The Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Code. If so qualified, the Fund
will not be subject to Federal income tax on its net investment income and net
short-term capital gains, if any, realized during any fiscal year in which it
distributes such income and capital gains to its shareholders.
HEDGING TRANSACTIONS
Certain options, futures contracts and options on futures contracts are
"section 1256 contracts." Any gains or losses on section 1256 contracts are
generally considered 60% long-term and 40% short-term capital gains or losses
("60/40"). Also, section 1256 contracts held by the Fund at the end of each
taxable year are "marked-to-market" with the result that unrealized gains or
losses are treated as though they were realized and the resulting gain or loss
is treated as 60/40 gain or loss.
Generally, the hedging transactions undertaken by the Fund may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by the Fund. In addition, losses
realized by the Fund on positions that are part of a straddle may be deferred
under the
B-17
<PAGE> 41
straddle rules, rather than being taken into account in calculating the taxable
income for the taxable year in which such losses are realized.
Further, the Fund may be required to capitalize, rather than deduct
currently, any interest expense on indebtedness incurred or continued to
purchase or carry any positions that are a part of a straddle. Because only a
few regulations implementing the straddle rules have been promulgated, the tax
consequences of hedging transactions to the Fund are not entirely clear.
The Fund may make one or more of the elections available under the Code
which are applicable to straddles. If the Fund makes any of the elections, the
amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections
accelerate the recognition of gains or losses from the affected straddle
positions.
Because application of the straddle rules may affect the character of gains
or losses, defer losses and/or accelerate the recognition of gains or losses
from the affected straddle positions, and require the capitalization of interest
expense, the amount which must be distributed to shareholders, and which will be
taxed to shareholders as ordinary income or long-term capital gain, may be
increased or decreased substantially as compared to a fund that did not engage
in such hedging transactions.
DISTRIBUTIONS
Distributions of investment company taxable income (which includes taxable
interest income and the excess of net short-term capital gains over long-term
capital losses) are taxable to a U.S. shareholder as ordinary income, whether
paid in cash or shares. Dividends paid by the Fund will qualify for the 70%
deduction for dividends received by corporations to the extent the Fund's income
consists of qualified dividends received from U.S. corporations. Distributions
of net capital gains (which consists of the excess of long-term capital gains
over net short-term capital losses), if any, are taxable as long-term capital
gains, whether paid in cash or in shares, and are not eligible for the dividends
received deduction. Shareholders receiving distributions in the form of newly
issued shares will have a basis in such shares of the Fund equal to the fair
market value of such shares on the distribution date. If the net asset value of
shares is reduced below a shareholder's cost as a result of a distribution by
the Fund, such distribution will be taxable even though it represents a return
of invested capital. The price of shares purchased at this time may reflect the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will receive a distribution which will nevertheless be taxable to
them.
SALES OF SHARES
Upon a sale or exchange of his or her shares, a shareholder will realize a
taxable gain or loss depending upon his or her basis in the shares. Such gain or
loss will be long-term, mid-term, or short-term, generally depending upon the
shareholder's holding period for the shares. Any loss realized on a sale or
exchange will be disallowed to the extent the shares disposed of are replaced
within a period of 61 days beginning 30 days before and ending 30 days after the
shares are disposed of. In such case, the basis of the shares acquired will be
adjusted to reflect the disallowed loss.
Any loss realized by a shareholder on the sale of the Fund's shares held by
the shareholder for six months or less will be treated for tax purposes as a
long-term capital loss to the extent of any distributions of net capital gains
received by the shareholder with respect to such shares.
BACKUP WITHHOLDING
The Fund may be required to withhold federal income tax at the rate of 31%
of all taxable distributions payable to shareholders who fail to provide the
Fund with their correct taxpayer identification number or to make required
certifications, or who have been notified by the Internal Revenue Service that
they are subject to backup withholding. Backup withholding is not an additional
tax. Any amounts withheld may be credited against a shareholder's federal income
tax liability.
B-18
<PAGE> 42
FOREIGN WITHHOLDING TAXES
Income received by the Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to determine the rate of foreign tax in
advance since the amount of the Fund's assets to be invested in various
countries is not known. Because the Fund may have more than 50% of its total
assets invested in securities of foreign governments or corporations, the Fund
may be entitled to "pass-through" to shareholders the amount of foreign taxes
paid by the Fund. Shareholders are urged to consult their attorneys or tax
advisers regarding specific questions as to federal, state or local taxes.
CREATION OF ADDITIONAL SERIES
The Fund reserves the right to create and issue a number of series shares,
in which case the shares of each series would participate equally in the
earnings, dividends, and assets of the particular series and would vote
separately to approve management agreements or changes in investment policies,
but shares of all series would vote together in the election or selection of
Directors, principal underwriters and auditors and on any proposed material
amendment to the Fund's Certificate of Incorporation.
Upon liquidation of the Fund or any series, shareholders of the affected
series would be entitled to share pro rata in the net assets of their respective
series available for distribution to such shareholder.
INVESTMENT PERFORMANCE INFORMATION
The Fund may furnish data about its investment performance in
advertisements, sales literature and reports to shareholders. "Total return"
represents the annual percentage change in value of $1,000 invested at the
maximum public offering price for the one year period and the life of the Fund
through the most recent calendar quarter, assuming reinvestment of all dividends
and distributions. The Fund may also furnish total return calculations for these
and other periods, based on investments at various sales charge levels or net
asset value. Any performance data which is based on the Fund's net asset value
per share would be reduced if a sales charge were taken into account.
Quotations of yield will be based on the investment income per share earned
during a particular 30 day period, less expenses accrued during the period ("net
investment income") and will be computed by dividing net investment income by
the maximum offering price per share on the last day of the period, according to
the following formula:
(a - b)
-------
YIELD = 2[ (cd + 1)to the 6th power - 1]
where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of any reimbursements), c = the average daily number of
shares outstanding during the period that were entitled to receive dividends,
and d = the maximum offering price share on the last day of the period. For the
one-month period ended December 31, 1997, the Fund's current yield was (6.796)%.
Quotations of total return will reflect only the performance of a
hypothetical investment in the Fund during the particular time period shown. The
Fund's total return and current yield may vary from time to time depending on
market conditions, the compositions of its portfolio and operating expenses.
These factors and possible differences in the methods used in calculating yield
should be considered when comparing the Fund's current yield to yields published
for other investment companies and other investment vehicles. Total return and
yield should also be considered relative to changes in the value of the Fund's
shares and the risks associated with the Fund's investment objectives and
policies. At any time in the future, total return and yield may be higher or
lower than past total return and yield and there can be no assurance that any
historical return or yield will continue.
From time to time evaluations of performance are made by independent
sources that may be used in advertisements concerning the Fund. These sources
include: Lipper Analytical Services, CDA/
B-19
<PAGE> 43
Weisenberger Investment Company Service, Barron's, Business Week, Changing
Times, Financial World, Forbes, Fortune, Money, Personal Investor, Sylvia
Porter's Personal Finance, Bank Rate Monitor, Morningstar and The Wall Street
Journal.
In connection with communicating its yield or total return to current or
prospective shareholders, the Fund may also compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
other unmanaged indexes which may assume reinvestment of dividends but generally
do not reflect deductions for administrative and management costs.
Quotations of the Fund's total return will represent the average annual
compounded rate of return of a hypothetical investment in the Fund over periods
of 1, 5, and 10 years (up to the life of the Fund), and are calculated pursuant
to the following formula:
P (1+T)(n) = ERV
where P = a hypothetical initial payment of $1,000, T = the average annual total
return, n = the number of years, and ERV = the redeemable value at the end of
the period of a $1,000 payment made at the beginning of the period. All total
return figures will reflect the deduction of Fund expenses (net of certain
expenses reimbursed by the Adviser) on an annual basis, and will assume that all
dividends and distributions are reinvested and will deduct the maximum sales
charge, if any is imposed.
For the year ended December 31, 1997, the Fund's cumulative total return
was (51.9)% and since inception it was (40.7)%. The average annual return since
inception was (14.0)%.
COUNSEL AND INDEPENDENT AUDITORS
Willkie Farr & Gallagher, 153 East 53rd Street, New York, New York 10022,
serves as counsel for the Fund.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, has been
appointed independent auditor for the Fund.
SHARES OF BENEFICIAL INTEREST
As of April 3, 1998, the Officers and Directors of the Fund as a group
owned 2.9% of the outstanding shares. As of April 3, 1998, the following persons
were 5% or greater shareholders of the Fund:
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
SHAREHOLDER OUTSTANDING(1)
--------- ---------------
<S> <C>
National Financial Services Group 16.08%
One World Financial Center
200 Liberty Street
New York, NY 10281
Charles Schwab & Co. Inc. 14.83%
101 Montgomery Street
San Francisco, CA 94104
- ------------
<FN>
(1) Based on 1,925,230.377 shares outstanding as of April 3, 1998.
</TABLE>
B-20
<PAGE> 44
APPENDIX TO STATMENT OF ADDITIONAL INFORMATION
DESCRIPTION OF STANDARD & POOR'S RATINGS SERVICES ("S&P'S") CORPORATE DEBT
RATINGS
AAA: Debt rated AAA has the highest rating assigned by S&P's. Capacity to pay
interest and repay principal is extremely strong. AA: Debt rated AA has a very
strong capacity to pay interest and repay principal and differs from the highest
rated issues only in small degrees. A: Debt rated A has a strong capacity to pay
interest and repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt in
higher-rated categories. BBB: Debt rated BBB is regarded as having adequate
capacity to pay interest and repay principal. Whereas it normally exhibits
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than for debt in higher rated categories. BB, B, CCC,
CC, C: Debt rated BB, B, CCC, CC and C is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such debt will likely
have some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions. CI: The rating CI
is reserved for income bonds on which no interest is being paid. D: Debt rated D
is in payment default. The D rating category is used when interest payments or
principal payments are not made on the date due even if the applicable grace
period has not expired, unless S&P's believes that such payments will be made
during such grace period. The D rating also will be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized. Plus (+) or Minus
(-): The ratings from "AA" to "CCC" may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
r: The "r" symbol is attached to derivative, hybrid and certain other
obligations that S&P believes may experience high volatility or high variability
in expected returns due to non-credit risks created by the terms of the
obligation.
DESCRIPTION OF MOODY'S PREFERRED STOCK RATINGS
aaa: An issue which is rated aaa is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of preferred stocks. aa: An issue which
is rated aa is considered a high-grade preferred stock. This rating indicates
that there is reasonable assurance that earnings and asset protection will
remain relatively well maintained in the foreseeable future. a: An issue which
is rated a is considered to be an upper medium grade preferred stock. While
risks are judged to be somewhat greater than in the aaa and aa classifications,
earnings and asset protection are, nevertheless, expected to be maintained at
adequate levels. baa: An issue which is rated baa is considered to be medium
grade, neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present but may be questionable over any great
length of time. ba: An issue which is rated ba is considered to have speculative
elements and its future cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class. b: An
issue which is rated b generally lacks the characteristics of a desirable
investment. Assurance of dividend payments and maintenance of other terms of the
issue over any long period of time may be small. caa: An issue which is rated
caa is likely to be in arrears on dividend payments. This rating designation
does not purport to indicate the future status of payment. ca: An issue which is
rated ca is speculative in a high degree and is likely to be in arrears on
dividends with little likelihood of eventual payment. c: This is the lowest
rated class of preferred or preference stock. Issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
Note: Moody's may apply numerical modifiers 1, 2 and 3 in each rating
classification from "aa" through "b" in its preferred stock rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
B-21
<PAGE> 45
DESCRIPTION OF S&P'S PREFERRED STOCK RATINGS
AAA: This is the highest rating that may be assigned by S&P's to a preferred
stock issue and indicates an extremely strong capacity to pay the preferred
stock obligations. AA: A preferred stock issue rated AA also qualifies as a
high-quality fixed income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for issues rated
AAA. A: An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the adverse
effect of changes in circumstances and economic conditions. BBB: An issue rated
BBB is regarded as backed by an adequate capacity to pay the preferred stock
obligations. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to make payments for a preferred stock in this category than
for issues in the A category. BB, B, CCC: Preferred stock rated BB, B, and CCC
are regarded, on balance, as predominantly speculative with respect to the
issuer's capacity to pay preferred stock obligations. BB indicates the lowest
degree of speculation and CCC the highest degree of speculation. While such
issues will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
CC: The rating CC is reserved for a preferred stock in arrears on dividends or
sinking fund payments but that is currently paying. C: A preferred stock rated C
is a non-paying issue. D: A preferred stock rated D is a non-paying issue with
the issuer in default on debt instruments.
Plus (+) or Minus (-): The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
FINANCIAL STATEMENTS
The Fund's Financial Statements for the period ended December 31, 1997,
including the Report of Ernst & Young LLP, independent auditors, are
incorporated by reference to the Fund's Annual Report dated December 31, 1997.
B-22
<PAGE> 46
PART C: OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) Financial Statements:
(1) Financial Statements included in Part A, the Prospectus:
(a) Financial Highlights for the period from July 11, 1994 (commencement of
operations) through December 31, 1994 and for the fiscal years ended
December 31, 1995, 1996 and 1997.
(2) Financial Statements included in Part B, the Statement of Additional
Information:
(a) Report of Independent Auditors*****
(b) Statement of Assets and Liabilities, December 31, 1997*****
(c) Portfolio of Investments, December 31, 1997*****
(d) Statement of Operations for the fiscal year ended December 31,
1997.*****
(e) Statement of Changes in Net Assets for each of the years ended December
31, 1996 and 1997.*****
(f) Financial Highlights for the period from July 11, 1994 (commencement of
operations) through December 31, 1994 and for the fiscal years ended
December 31, 1995, 1996 and 1997.*****
(g) Notes to the Financial Statements*****
(B) Exhibits:
EXHIBIT NO. DESCRIPTION OF EXHIBITS
----------- -----------------------
1 Articles of Incorporation of Registrant***
2 By-Laws of Registrant***
3 Not applicable
4 Specimen copies of certificates for shares issued by
Registrant*
5 Form of Investment Advisory Agreement***
6 Form of Distribution Agreement***
7 Not applicable
8(a) Form of Custodian Contract
8(b) Form of Subcustodian Agreement (for precious metals)*
9(a) Transfer Agency and Service Agreement
9(b) Sub-Administration Agreement
10(a) Opinion and consent of Willkie Farr & Gallagher***
10(b) Consent of Willkie Farr & Gallagher*
11 Consent of Independent Auditors
12 Not applicable
13 Subscription Agreement***
14 Not applicable
<PAGE> 47
15 Distribution Plan under Rule 12b-1
16 Schedule for Performance Computation
17 Financial Data Schedule
24(a) Power of Attorney***
24(b) Additional Power of Attorney***
24(c) Additional Power of Attorney**
- ----------
* Previously filed as an exhibit to the Pre-Effective Amendment No. 1 to
Registration Statement No. 33-79180 filed on June 24, 1994.
** Previously filed as an exhibit to the Post-Effective Amendment No. 2 to
Registration Statement No. 33-79180 filed on April 28, 1995.
*** Previously filed as an exhibit to the Post-Effective Amendment No. 3 to
Registration Statement No. 33-79180 filed on April 26, 1996.
**** Previously filed as an exhibit to the Post-Effective Amendment No. 4 to
Registration Statement No. 33-79180 filed on April 30, 1997.
***** Previously filed with the annual report filed on February 26, 1998.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of April 3, 1998, the approximate number of holders of securities of the
registrant were:
TITLE OF CLASS NUMBER OF RECORD HOLDERS
- -------------- ------------------------
Common Stock, par value $.001 per share 1,687
ITEM 27. INDEMNIFICATION
Under Article V, Section 1, of the registrant's By-Laws, any past or present
director or officer of registrant is indemnified to the fullest extent permitted
by law against liability and all expenses reasonably incurred by him in
connection with any action, suit or proceeding to which he may be a party or
otherwise involved by reason of his being or having been a director or officer
of registrant. This provision does not authorize indemnification when it is
determined, in the manner specified in the By-Laws, that such director or
officer would otherwise be liable to registrant or its shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of his
duties. In addition, Section 1 provides that to the fullest extent permitted by
Maryland General Corporation Law, as amended from time to time, no director or
officer of the Fund shall be personally liable to the Fund or its stockholders
for money damages, except to the extent such exemption from liability or
limitation thereof is not permitted by the Investment Company Act of 1940, as
amended from time to time. Under Article V, Section 2, of the registrant's
By-Laws, expenses may be paid by registrant in advance of the final disposition
of any action, suit or proceeding upon receipt of an undertaking by such
director or officer to repay such expenses to registrant in the event that it is
ultimately determined that indemnification of the advanced expenses is not
authorized under the By-Laws.
Insofar as indemnification for liability arising under the Securities Act of
1933, as amended (the "1933 Act"), may be permitted to directors, officers and
controlling persons of registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
registrant of expenses incurred or paid by a director, officer or controlling
person of the
2
<PAGE> 48
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Gabelli Funds, Inc. is the investment adviser of the registrant (the "Adviser").
For a list of officers and directors of the Adviser, together with information
as to any other business, profession, vocation or employment of a substantial
nature engaged in by the Adviser or such officers and directors during the past
two years, reference is made to Form ADV filed by it under the Investment
Advisers Act of 1940.
ITEM 29. PRINCIPAL UNDERWRITERS
(A) The Distributor, Gabelli and Company, Inc., is also the principal
underwriter for The Gabelli ABC Fund, The Gabelli Growth Fund, The Gabelli
Asset Fund, The Gabelli Value Fund, The Gabelli Capital Asset Fund, The
Gabelli Small Cap Growth Fund, Gabelli Equity Income Fund, The Gabelli
Global Series Funds, Inc., Gabelli International Growth Fund, Inc., The
Gabelli Westwood Funds and The Gabelli U.S. Treasury Money Market Fund.
(B) For information with respect to each director and officer of Gabelli &
Company, Inc., reference is made to Form BD filed by Gabelli & Company,
Inc. under the Securities Exchange Act of 1934.
(C) Inapplicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All such accounts, books and other documents are maintained at the offices of:
Gabelli Funds, Inc., One Corporate Center, Rye, New York, 10580-1434; BISYS Fund
Services, 3435 Stelzer Rd, Columbus, Ohio 43219 and State Street Bank and Trust
Company, 1776 Heritage Drive, North Quincy, Massachusetts 02171.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(A) Registrant hereby undertakes to call a meeting of shareholders to remove
and elect directors at the request of shareholders entitled to cast 10% or
more of the votes entitled to be cast at the meeting.
(B) Registrant hereby undertakes to assist in shareholder communications
pursuant to Section 16(c) of the Investment Company Act of 1940.
3
<PAGE> 49
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all of the requirements for effectiveness of this Post-Effective Amendment
to the Registration Statement pursuant to Rule 485(b) under the Securities Act
of 1933, as amended, and has duly caused this Post-Effective Amendment No. 5 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Rye and State of New York on the 30th
day of April, 1998.
GABELLI GOLD FUND, INC.
/s/ Bruce N. Alpert
----------------------------------
By: Bruce N. Alpert
Title: Vice President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Post-Effective Amendment No. 5 to the Registration Statement has been signed
below by the following persons in the capacity and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Chairman of the Board April 30, 1998
- -------------------------------------
Mario J. Gabelli
/s/ Caesar Bryan President April 30, 1998
- -------------------------------------
Caesar Bryan
/s/ Bruce N. Alpert Vice President, Treasurer April 30, 1998
- ------------------------------------- and Chief Financial Officer
Bruce N. Alpert
* Director April 30, 1998
- -------------------------------------
E. Val Cerutti
* Director April 30, 1998
- -------------------------------------
Anthony Colavita
Director April 30, 1998
- -------------------------------------
Karl Otto Pohl
* Director April 30, 1998
- -------------------------------------
Werner Roeder, M.D.
* Director April 30, 1998
- -------------------------------------
Anthonie Van Ekris
* Director April 30, 1998
- -------------------------------------
Daniel E. Zucchi
</TABLE>
*By: /s/Bruce N. Alpert
--------------------------------
Bruce N. Alpert
Attorney-in-Fact
<PAGE> 1
Exhibit 8(a)
CUSTODIAN CONTRACT
Between
GABELLI GOLD FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE> 2
TABLE OF CONTENTS
-----------------
Page
----
1. Employment of Custodian and Property to be Held By It .............1
2. Duties of the Custodian with Respect to Property of
the Fund Held by the Custodian in the United States ...............2
2.1 Holding Securities .........................................2
2.2 Delivery of Securities .....................................3
2.3 Registration of Securities .................................7
2.4 Bank Accounts ..............................................8
2.5 Availability of Federal Funds ..............................9
2.6 Collection of Income .......................................9
2.7 Payment of Fund Monies ....................................10
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased ......................................13
2.9 Appointment of Agents .....................................13
2.10 Deposit of Securities in Securities System ................14
2.10A Fund Assets Held in the Custodian's Direct Paper System ...17
2.11 Segregated Account ........................................18
2.12 Ownership Certificates for Tax Purposes ...................20
2.13 Proxies ...................................................20
2.14 Communications Relating to Fund Portfolio Securities ......20
2.15 Reports to Fund by Independent Public Accountants .........21
3. Duties of the Custodian with Respect to Property of the Fund
Held Outside of the United States ................................22
3.1 Appointment of Foreign Sub-Custodians .....................22
3.2 Assets to be Held .........................................22
3.3 Foreign Securities Depositories ...........................23
3.4 Agreements with Foreign Banking Institutions ..............23
3.5 Access of Independent Accountants of the Fund .............24
3.6 Reports by Custodian ......................................24
3.7 Transactions in Foreign Custody Account ...................25
3.8 Liability of Foreign Sub-Custodians .......................25
3.9 Liability of Custodian ....................................26
3.10 Reimbursement for Advances ................................27
3.11 Monitoring Responsibilities ...............................28
3.12 Branches of U.S. Banks ....................................28
3.13 Tax Law ...................................................29
4. Payments for Repurchases or Redemptions and Sales of Shares
of the Fund ......................................................30
5. Proper Instructions ..............................................31
6. Actions Permitted Without Express Authority ......................31
<PAGE> 3
7. Evidence of Authority ............................................32
8. Duties of Custodian with Respect to the Books of Account and
Calculations of Net Asset Value and Net Income ...................33
9. Records ..........................................................33
10. Opinion of Fund's Independent Accountant .........................34
11. Compensation of Custodian ........................................34
12. Responsibility of Custodian ......................................34
13. Effective Period, Termination and Amendment ......................36
14. Successor Custodian ..............................................38
15. Interpretive and Additional Provisions ...........................39
16. Massachusetts Law to Apply .......................................40
17. Prior Contracts ..................................................40
18. Shareholder Communications Election ..............................40
<PAGE> 4
CUSTODIAN CONTRACT
------------------
This Contract between Gabelli Gold Fund, Inc., a corporation organized
and existing under the laws of Maryland, having its principal place of business
at One Corporate Center Rye, New York 10580-1434, hereinafter called the "Fund",
and State Street Bank and Trust Company, a Massachusetts trust company, having
its principal place of business at 225 Franklin Street, Boston, Massachusetts,
02110, hereinafter called the "Custodian",
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
The Fund hereby employs the Custodian as the custodian of its assets,
including securities it desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Articles of
Incorporation. The Fund agrees to deliver to the Custodian all securities and
cash owned by it, and all payments of income, payments of principal or capital
distributions received by it with respect to all securities owned by the Fund
from time to time, and the cash consideration received by it for such new or
treasury shares of capital stock, $ par value, ("Shares") of the Fund as may be
issued or sold from time to time. The Custodian shall not be responsible for any
property of the Fund held or received by the Fund and not delivered to the
Custodian.
<PAGE> 5
Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall from time to time employ one or more sub-custodians
located in the United States, but only in accordance with an applicable vote by
the Board of Directors of the Fund, and provided that the Custodian shall have
no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodians
for the Fund's securities and other assets the foreign banking institutions and
foreign securities depositories designated in Schedule "A" hereto but only in
accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held By
--------------------------------------------------------------------
the Custodian in the United States
- ----------------------------------
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of the Fund all non-cash property, to be held by it in
the United States, including all domestic securities owned by the Fund,
other than (a) securities which are maintained pursuant to Section 2.10
in a clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the Treasury,
collectively referred to herein as "Securities System" and (b)
commercial paper of an issuer for which State Street Bank and Trust
Company acts as issuing and paying agent ("Direct Paper") which is
deposited and/or maintained in the Direct Paper System of the Custodian
pursuant to Section 2.10A.
2
<PAGE> 6
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by the Fund held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's Direct
Paper book-entry system account ("Direct Paper System Account") only
upon receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, and only in the
following cases:
1) Upon sale of such securities for the account of the
Fund and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities
entered into by the Fund;
3) In the case of a sale effected through a Securities
System, in accordance with the provisions of Section
2.10 hereof;
4) To the depository agent in connection with tender or
other similar offers for portfolio securities of the
Fund;
5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or otherwise
become payable; provided that, in any such case, the
cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer
into the name of the Fund or into the name of any
nominee or nominees of the
3
<PAGE> 7
Custodian or into the name or nominee name of any
agent appointed pursuant to Section 2.9 or into the
name or nominee name of any sub-custodian appointed
pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other
evidence representing the same aggregate face amount
or number of units; provided that, in any such case,
the new securities are to be delivered to the
Custodian;
7) Upon the sale of such securities for the account of
the Fund, to the broker or its clearing agent,
against a receipt, for examination in accordance with
"street delivery" custom; provided that in any such
case, the Custodian shall have no responsibility or
liability for any loss arising from the delivery of
such securities prior to receiving payment for such
securities except as may arise from the Custodian's
own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization,
reorganization or readjustment of the securities of
the issuer of such securities, or pursuant to
provisions for conversion contained in such
securities, or
4
<PAGE> 8
pursuant to any deposit agreement; provided that, in
any such case, the new securities and cash, if any,
are to be delivered to the Custodian;
9) In the case of warrants, rights or similar
securities, the surrender thereof in the exercise of
such warrants, rights or similar securities or the
surrender of interim receipts or temporary securities
for definitive securities; provided that, in any such
case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of
securities made by the Fund, but only against receipt
of adequate collateral as agreed upon from time to
time by the Custodian and the Fund, which may be in
the form of cash or obligations issued by the United
States government, its agencies or instrumentalities,
except that in connection with any loans for which
collateral is to be credited to the Custodian's
account in the book-entry system authorized by the
U.S. Department of the Treasury, the Custodian will
not be held liable or responsible for the delivery of
securities owned by the Fund prior to the receipt of
such collateral;
5
<PAGE> 9
11) For delivery as security in connection with any
borrowings by the Fund requiring a pledge of assets
by the Fund, but only against receipt of amounts
borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian and a
broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a
member of The National Association of Securities
Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and of
any registered national securities exchange, or of
any similar organization or organizations, regarding
escrow or other arrangements in connection with
transactions by the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, and a
Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with
the rules of the Commodity Futures Trading Commission
and/or any Contract Market, or any similar
organization or organizations, regarding account
deposits in connection with transactions by the Fund;
14) Upon receipt of instructions from the transfer
6
<PAGE> 10
agent ("Transfer Agent") for the Fund, for delivery
to such Transfer Agent or to the holders of shares in
connection with distributions in kind, as may be
described from time to time in the Fund's currently
effective prospectus and statement of additional
information ("prospectus"), in satisfaction of
requests by holders of Shares for repurchase or
redemption; and
15) For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board of
Directors or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or
an Assistant Secretary, specifying the securities to
be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose
to be a proper corporate purpose, and naming the
person or persons to whom delivery of such securities
shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Fund or in the name of any nominee of the Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to the Fund,
unless the Fund has authorized in writing the appointment
7
<PAGE> 11
of a nominee to be used in common with other registered investment
companies having the same investment adviser as the Fund, or in the
name or nominee name of any agent appointed pursuant to Section 2.9 or
in the name or nominee name of any sub-custodian appointed pursuant to
Article 1. All securities accepted by the Custodian on behalf of the
Fund under the terms of this Contract shall be in "street name" or
other good delivery form. If, however, the Fund directs the Custodian
to maintain securities in "street name", the Custodian shall utilize
its best efforts only to timely collect income due the Fund on such
securities and to notify the Fund on a best efforts basis only of
relevant corporate actions including, without limitation, pendency of
calls, maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of the Fund,
subject only to draft or order by the Custodian acting pursuant to the
terms of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for
the account of the Fund, other than cash maintained by the Fund in a
bank account established and used in accordance with Rule 17f-3 under
the Investment Company Act of 1940. Funds held by the Custodian for the
Fund may be deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust companies
as it may in its discretion deem
8
<PAGE> 12
necessary or desirable; provided, however, that every such bank or
trust company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or trust company
and the funds to be deposited with each such bank or trust company
shall be approved by vote of a majority of the Board of Directors of
the Fund. Such funds shall be deposited by the Custodian in its
capacity as Custodian and shall be withdrawable by the Custodian only
in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund
and the Custodian, the Custodian shall, upon the receipt of Proper
Instructions, make federal funds available to the Fund as of specified
times agreed upon from time to time by the Fund and the Custodian in
the amount of checks received in payment for Shares of the Fund which
are deposited into the Fund's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to United States registered securities held hereunder to
which the Fund shall be entitled either by law or pursuant to custom in
the securities business, and shall collect on a timely basis all income
and other payments with respect to United States bearer securities if,
on the date of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such income, as
collected, to the Fund's custodian account.
9
<PAGE> 13
Without limiting the generality of the foregoing, the Custodian shall
detach and present for payment all coupons and other income items
requiring presentation as and when they become due and shall collect
interest when due on securities held hereunder. Income due the Fund on
United States securities loaned pursuant to the provisions of Section
2.2 (10) shall be the responsibility of the Fund. The Custodian will
have no duty or responsibility in connection therewith, other than to
provide the Fund with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to the Custodian
of the income to which the Fund is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out monies of the Fund in the following cases only:
1) Upon the purchase of domestic securities, options,
futures contracts or options on futures contracts for
the account of the Fund but only (a) against the
delivery of such securities, or evidence of title to
such options, futures contracts or options on futures
contracts, to the Custodian (or any bank, banking
firm or trust company doing business in the United
States or abroad which is qualified under the
Investment Company Act of 1940, as amended, to act as
a custodian and
10
<PAGE> 14
has been designated by the Custodian as its agent for
this purpose) registered in the name of the Fund or
in the name of a nominee of the Custodian referred to
in Section 2.3 hereof or in proper form for transfer;
(b) in the case of a purchase effected through a
Securities System, in accordance with the conditions
set forth in Section 2.10 hereof; (c) in the case of
a purchase involving the Direct Paper System, in
accordance with the conditions set forth in Section
2.10A; (d) in the case of repurchase agreements
entered into between the Fund and the Custodian, or
another bank, or a broker-dealer which is a member of
NASD, (i) against delivery of the securities either
in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with
such securities or (ii) against delivery of the
receipt evidencing purchase by the Fund of securities
owned by the Custodian along with written evidence of
the agreement by the Custodian to repurchase such
securities from the Fund or (e) for transfer to a
time deposit account of the Fund in any bank, whether
domestic or foreign; such transfer may be effected
prior to receipt of a confirmation
11
<PAGE> 15
from a broker and/or the applicable bank pursuant to
Proper Instructions from the Fund as defined in
Article 5;
2) In connection with conversion, exchange or surrender
of securities owned by the Fund as set forth in
Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by
the Fund as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred
by the Fund, including but not limited to the
following payments for the account of the Fund:
interest, taxes, management, accounting, transfer
agent and legal fees, and operating expenses of the
Fund whether or not such expenses are to be in whole
or part capitalized or treated as deferred expenses;
5) For the payment of any dividends declared pursuant to
the governing documents of the Fund;
6) For payment of the amount of dividends received in
respect of securities sold short;
7) For any other proper purpose, but only upon receipt
of, in addition to Proper Instructions, a certified
copy of a resolution of the Board of Directors or of
the Executive Committee of the Fund signed by an
officer of the Fund and
12
<PAGE> 16
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth
the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and
naming the person or persons to whom such payment is
to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of the Fund is made by the Custodian in advance of receipt of
the securities purchased in the absence of specific written
instructions from the Fund to so pay in advance, the Custodian shall be
absolutely liable to the Fund for such securities to the same extent as
if the securities had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, to act as a custodian, as its agent to carry out such
of the provisions of this Article 2 as the Custodian may from time to
time direct; provided, however, that the appointment of any agent shall
not relieve the Custodian of its responsibilities or liabilities
hereunder.
2.10 Deposit of Securities in Securities Systems. The Custodian
13
<PAGE> 17
may deposit and/or maintain domestic securities owned by the Fund in a
clearing agency registered with the Securities and Exchange Commission
under Section 17A of the Securities Exchange Act of 1934, which acts as
a securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as "Securities System" in accordance
with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep domestic securities of the
Fund in a Securities System provided that such
securities are represented in an account ("Account")
of the Custodian in the securities System which shall
not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise
for customers;
2) The records of the Custodian with respect to domestic
securities of the Fund which are maintained in a
Securities System shall identify by book-entry those
securities belonging to the Fund;
3) The Custodian shall pay for domestic securities
purchased for the account of the Fund upon (i)
receipt of advice from the Securities System
14
<PAGE> 18
that such securities have been transferred to the
Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and
transfer for the account of the Fund. The Custodian
shall transfer domestic securities sold for the
account of the Fund upon (i) receipt of advice from
the Securities System that payment for such
securities has been transferred to the Account, and
(ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for
the account of the Fund. Copies of all advices from
the Securities System of transfers of domestic
securities for the account of the Fund shall identify
the Fund, be maintained for the Fund by the Custodian
and be provided to the Fund at its request. Upon
request, the Custodian shall furnish the Fund
confirmation of each transfer to or from the account
of the Fund in the form of a written advice or notice
and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions
in the Securities System for the account of the Fund.
4) The Custodian shall provide the Fund with any report
obtained by the Custodian on the Securities System's
accounting system, internal
15
<PAGE> 19
accounting control and procedures for safeguarding
domestic securities deposited in the Securities
System;
5) The Custodian shall have received the initial or
annual certificate, as the case may be, required by
Article 13 hereof;
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable to the
Fund for any loss or damage to the Fund resulting
from use of the Securities System by reason of any
negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or
their employees or from failure of the Custodian or
any such agent to enforce effectively such rights as
it may have against the Securities System; at the
election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with
respect to any claim against the Securities System or
any other person which the Custodian may have as a
consequence of any such loss or damage if and to the
extent that the Fund has not been made whole for any
such loss or damage.
2.10A Fund Assets Held in the Custodian's Direct Paper System. The Custodian
may deposit and/or maintain securities owned by the Fund in the Direct
Paper System of the Custodian
16
<PAGE> 20
subject to the following provisions:
1) No transaction relating to securities in the
Direct Paper System will be effected in the
absence of Proper Instructions;
2) The Custodian may keep securities of the
Fund in the Direct Paper System only if such
securities are represented in an account
("Account") of the Custodian in the Direct
Paper System which shall not include any
assets of the Custodian other than assets
held as a fiduciary, custodian or otherwise
for customers;
3) The records of the Custodian with respect to
securities of the Fund which are maintained
in the Direct Paper System shall identify by
book-entry those securities belonging to the
Fund;
4) The Custodian shall pay for securities
purchased for the account of the Fund upon
the making of an entry on the records of the
Custodian to reflect such payment and
transfer of securities to the account of the
Fund. The Custodian shall transfer
securities sold for the account of the Fund
upon the making of an entry on the records
of the Custodian to reflect such transfer
and receipt of payment for the account of
the Fund;
5) The Custodian shall furnish the Fund
17
<PAGE> 21
confirmation of each transfer to or from the
account of the Fund, in the form of a
written advice or notice, of Direct Paper on
the next business day following such
transfer and shall furnish to the Fund
copies of daily transaction sheets
reflecting each day's transaction in the
Securities System for the account of the
Fund;
6) The Custodian shall provide the Fund with
any report on its system of internal
accounting control as the Fund may
reasonably request from time to time;
2.11 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts
for and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the Fund, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of
The Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions by the
18
<PAGE> 22
Fund, (ii) for purposes of segregating cash or government securities in
connection with options purchased, sold or written by the Fund or
commodity futures contracts or options thereon purchased or sold by the
Fund, (iii) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of
the Board of Directors or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate purposes.
2.12 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of the Fund held by it and
in connection with transfers of such securities.
2.13 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities
19
<PAGE> 23
are registered otherwise than in the name of the Fund or a nominee of
the Fund, all proxies, without indication of the manner in which such
proxies are to be voted, and shall promptly deliver to the Fund such
proxies, all proxy soliciting materials and all notices relating to
such securities.
2.14 Communications Relating to Fund Portfolio Securities. Subject to the
provisions of Section 2.3, the Custodian shall transmit promptly to the
Fund all written information (including, without limitation, pendency
of calls and maturities of domestic securities and expirations of
rights in connection therewith and notices of exercise of call and put
options written by the Fund and the maturity of futures contracts
purchased or sold by the Fund) received by the Custodian from issuers
of the domestic securities being held for the Fund. With respect to
tender or exchange offers, the Custodian shall transmit promptly to the
Fund all written information received by the Custodian from issuers of
the domestic securities whose tender or exchange is sought and from the
party (or his agents) making the tender or exchange offer. If the Fund
desires to take action with respect to any tender offer, exchange offer
or any other similar transaction, the Fund shall notify the Custodian
at least three business days prior to the date on which the Custodian
is to take such action.
2.15 Reports to Fund by Independent Public Accountants.
20
<PAGE> 24
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on
the accounting system, internal accounting control and procedures for
safeguarding securities, futures contracts and options on futures
contracts, including domestic securities deposited and/or maintained in
a Securities System, relating to the services provided by the Custodian
under this Contract; such reports shall be of sufficient scope and in
sufficient detail, as may reasonably be required by the Fund to provide
reasonable assurance that any material inadequacies would be disclosed
by such examination, and, if there are no such inadequacies, the
reports shall so state.
3. Duties of the Custodian with Respect to Property of the Fund Held
-----------------------------------------------------------------
Outside of the United States
- ----------------------------
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Fund's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories
designated on Schedule A hereto ("foreign sub-custodians"). Upon
receipt of "Proper Instructions", as defined in Section 5 of this
Contract, together with a certified resolution of the Fund's Board of
Directors, the Custodian and the Fund may agree to amend Schedule A
hereto from time to time to designate additional foreign banking
institutions and foreign securities depositories to act as
21
<PAGE> 25
sub-custodian. Upon receipt of Proper Instructions, the Fund may
instruct the Custodian to cease the employment of any one or more such
sub-custodians for maintaining custody of the Fund's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund may determine
to be reasonably necessary to effect the Fund's foreign securities
transactions. The Custodian shall identify on its books as belonging to
the Fund, the foreign securities of the Fund held by each foreign
sub-custodian.
3.3 Foreign Securities Depositories. Except as may otherwise be agreed upon
in writing by the Custodian and the Fund, assets of the Fund shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as
sub-custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements containing the
provisions set forth in Section 3.4 hereof.
3.4 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall be substantially in the form set
forth in Exhibit 1 hereto and
22
<PAGE> 26
shall provide that: (a) the Fund's assets will not be subject to any
right, charge, security interest, lien or claim of any kind in favor of
the foreign banking institution or its creditors or agent, except a
claim of payment for their safe custody or administration; (b)
beneficial ownership of the Fund's assets will be freely transferable
without the payment of money or value other than for custody or
administration; (c) adequate records will be maintained identifying the
assets as belonging to the Fund; (d) officers of or auditors employed
by, or other representatives of the Custodian, including to the extent
permitted under applicable law the independent public accountants for
the Fund, will be given access to the books and records of the foreign
banking institution relating to its actions under its agreement with
the Custodian; and (e) assets of the Fund held by the foreign
sub-custodian will be subject only to the instructions of the Custodian
or its agents.
3.5 Access of Independent Accountants of the Fund. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.
3.6 Reports by Custodian. The Custodian will supply to the
23
<PAGE> 27
Fund from time to time, as mutually agreed upon, statements in respect
of the securities and other assets of the Fund held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of the Fund's securities and other assets
and advices or notifications of any transfers of securities to or from
each custodial account maintained by a foreign banking institution for
the Custodian on behalf of the Fund indicating, as to securities
acquired for the Fund, the identity of the entity having physical
possession of such securities.
3.7 Transactions in Foreign Custody Account.
(a) Except as otherwise provided in paragraph (b) of this Section 3.7,
the provision of Sections 2.2 and 2.7 of this Contract shall apply,
mutatis mutandis to the foreign securities of the Fund held outside the
United States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of the
Fund and delivery of securities maintained for the account of the Fund
may be effected in accordance with the customary established securities
trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including,
without limitation, delivering securities to the purchaser thereof or
to a dealer therefor (or an agent for such purchaser or dealer) against
a
24
<PAGE> 28
receipt with the expectation of receiving later payment for such
securities from such purchaser or dealer.
(c) Securities maintained in the custody of a foreign sub-custodian may
be maintained in the name of such entity's nominee to the same extent
as set forth in Section 2.3 of this Contract, and the Fund agrees to
hold any such nominee harmless from any liability as a holder of record
of such securities.
3.8 Liability of Foreign Sub-Custodians. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care
in the performance of its duties and to indemnify, and hold harmless,
the Custodian and each Fund from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection with the
institution's performance of such obligations. At the election of the
Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a foreign banking
institution as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Fund has not been made
whole for any such loss, damage, cost, expense, liability or claim.
3.9 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether
25
<PAGE> 29
assets are maintained in the custody of a foreign banking institution,
a foreign securities depository or a branch of a U.S. bank as
contemplated by paragraph 3.12 hereof, the Custodian shall not be
liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the foregoing
provisions of this paragraph 3.9, in delegating custody duties to State
Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such delegation, except
such loss as may result from (a) political risk (including, but not
limited to, exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or
(b) other losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to Acts of God, nuclear
incident or other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
3.10 Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose including the purchase or
sale of foreign exchange or of contracts for foreign exchange, or in
the event that the Custodian or its nominee shall incur or be assessed
any taxes, charges, expenses, assessments, claims or
26
<PAGE> 30
liabilities in connection with the performance of this Contract, except
such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property at any
time held for the account of the Fund shall be security therefor and
should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize available cash and to dispose of the Fund
assets to the extent necessary to obtain reimbursement.
3.11 Monitoring Responsibilities. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Fund in the event that the Custodian learns of
a material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive order
from the Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood that
its shareholders' equity will decline below $200 million (U.S. dollars
or the equivalent thereof) or that its shareholders' equity has
declined below $200 million (in each case computed in accordance with
generally accepted U.S. accounting
27
<PAGE> 31
principles).
3.12 Branches of U.S. Banks.
(a) Except as otherwise set forth in this Contract, the provisions
hereof shall not apply where the custody of the Fund assets are
maintained in a foreign branch of a banking institution which is a
"bank" as defined by Section 2(a)(5) of the Investment Company Act of
1940 meeting the qualification set forth in Section 26(a) of said Act.
The appointment of any such branch as a sub-custodian shall be governed
by paragraph 1 of this Contract.
(b) Cash held for the Fund in the United Kingdom shall be maintained in
an interest bearing account established for the Fund with the
Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.
3.13 Tax Law.
The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of the United States of America or
any state or political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of the obligations
imposed on the Fund or the Custodian as custodian of the Fund by the
tax law of jurisdictions other than those mentioned in the above
sentence, including responsibility for withholding and other taxes,
assessments or other governmental charges,
28
<PAGE> 32
certifications and governmental reporting. The sole responsibility of
the Custodian with regard to such tax law shall be to use reasonable
efforts to assist the Fund with respect to any claim for exemption or
refund under the tax law of jurisdictions for which the Fund has
provided such information.
4. Payments for Repurchases or Redemptions and Sales of Shares of the Fund
-----------------------------------------------------------------------
From such funds as may be available for the purpose but subject to the
limitations of the Articles of Incorporation and any applicable votes of the
Board of Directors of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
The Custodian shall receive from the distributor for the Fund's Shares
or from the Transfer Agent of the Fund and deposit
29
<PAGE> 33
into the Fund's account such payments as are received for Shares of the Fund
issued or sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund and the Transfer Agent of any receipt by it of payments
for Shares of the Fund.
5. Proper Instructions
-------------------
Proper Instructions as used herein means a writing signed or initialled
by one or more person or persons as the Board of Directors shall have from time
to time authorized. Each such writing shall set forth the specific transaction
or type of transaction involved, including a specific statement of the purpose
for which such action is requested. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have been given by a
person authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed in writing.
Upon receipt of a certificate of the Secretary or an Assistant Secretary as to
the authorization by the Board of Directors of the Fund accompanied by a
detailed description of procedures approved by the Board of Directors, Proper
Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board of Directors
and the Custodian are satisfied that such procedures afford adequate safeguards
for the Fund's assets. For purposes of this Section, Proper Instructions shall
include instructions received by the Custodian pursuant to any three-party
agreement which requires a segregated asset account in accordance with Section
2.11.
30
<PAGE> 34
6. Actions Permitted without Express Authority
-------------------------------------------
The Custodian may in its discretion, without express authority from the
Fund:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this Contract,
provided that all such payments shall be accounted for to the Fund;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Fund, checks, drafts and
other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of the Fund except as otherwise directed by the
Board of Directors of the Fund.
7. Evidence of Authority
---------------------
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may receive and accept a certified copy of a vote of the Board of
Directors of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Directors pursuant to the Articles of Incorporation as described
in such vote, and such vote may be considered as in full force and effect until
31
<PAGE> 35
receipt by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and
------------------------------------------------------------
Calculation of Net Asset Value and Net Income
- ---------------------------------------------
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Directors of the Fund to keep
the books of account of the Fund and/or compute the net asset value per share of
the outstanding shares of the Fund or, if directed in writing to do so by the
Fund, shall itself keep such books of account and/or compute such net asset
value per share. If so directed, the Custodian shall also calculate daily the
net income of the Fund as described in the Fund's currently effective prospectus
and shall advise the Fund and the Transfer Agent daily of the total amounts of
such net income and, if instructed in writing by an officer of the Fund to do
so, shall advise the Transfer Agent periodically of the division of such net
income among its various components. The calculations of the net asset value per
share and the daily income of the Fund shall be made at the time or times
described from time to time in the Fund's currently effective prospectus.
9. Records
-------
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 3la-1 and 3la-2 thereunder.
All such records shall be the property of the Fund and shall at all times during
the regular business hours of the Custodian be open for
32
<PAGE> 36
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation of securities
owned by the Fund and held by the Custodian and shall, when requested to do so
by the Fund and for such compensation as shall be agreed upon between the Fund
and the Custodian, include certificate numbers in such tabulations.
10. Opinion of Fund's Independent Accountant
----------------------------------------
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-lA, and Form N-SAR or other
annual reports to the Securities and Exchange Commission and with respect to any
other requirements of such Commission.
11. Compensation of Custodian
-------------------------
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund and the Custodian.
12. Responsibility of Custodian
---------------------------
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
33
<PAGE> 37
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States (except as specifically provided in Article 3.9)
and, regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a U.S. bank
as contemplated by paragraph 3.12 hereof, the Custodian shall not be liable for
any loss, damage, cost, expense, liability or claim resulting from, or caused
by, the direction of or authorization by the Fund to maintain custody or any
securities or cash of the Fund in a foreign country including, but not limited
to, losses resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the
34
<PAGE> 38
Custodian or its nominee assigned to the Fund being liable for the payment of
money or incurring liability of some other form, the Fund, as a prerequisite to
requiring the Custodian to take such action, shall provide indemnity to the
Custodian in an amount and form satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement) or
in the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the Fund shall be security
therefor and should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize available cash and to dispose of the Fund assets to
the extent necessary to obtain reimbursement.
13. Effective Period, Termination and Amendment
-------------------------------------------
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however that the Custodian shall not act under
35
<PAGE> 39
Section 2.10 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of Directors of the Fund has
approved the initial use of a particular Securities System and the receipt of an
annual certificate of the Secretary or an Assistant Secretary that the Board of
Directors has reviewed the use by the Fund of such Securities System, as
required in each case by Rule 17f-4 under the Investment Company Act of 1940, as
amended and that the Custodian shall not act under Section 2.10A hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Directors has approved the initial use of the Direct
Paper System and the receipt of an annual certificate of the Secretary or an
Assistant Secretary that the Board of Directors has reviewed the use by the Fund
of the Direct Paper System; provided further, however, that the Fund shall not
amend or terminate this Contract in contravention of any applicable federal or
state regulations, or any provision of the Articles of Incorporation, and
further provided, that the Fund may at any time by action of its Board of
Directors (i) substitute another bank or trust company for the Custodian by
giving notice as described above to the Custodian, or (ii) immediately terminate
this Contract in the event of the appointment of a conservator or receiver for
the Custodian by the Comptroller of the Currency or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such
36
<PAGE> 40
termination and shall likewise reimburse the Custodian for its costs, expenses
and disbursements.
14. Successor Custodian
-------------------
If a successor custodian shall be appointed by the Board of Directors
of the Fund, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities then held by it hereunder and shall transfer to an
account of the successor custodian all of the Fund's securities held in a
Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian and all instruments held by the Custodian
relative thereto and all other property held by it under this Contract and to
transfer to an
37
<PAGE> 41
account of such successor custodian all of the Fund's securities held in any
Securities System. Thereafter, such bank or trust company shall be the successor
of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Directors to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
15. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Contract, the Custodian and
the Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Articles of Incorporation of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Contract.
38
<PAGE> 42
16. Massachusetts Law to Apply
--------------------------
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of the Commonwealth of Massachusetts.
17. Prior Contracts
---------------
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody of
the Fund's assets.
18. Shareholder Communications Election
-----------------------------------
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund tells the Custodian "no",
the Custodian will not provide this information to requesting companies. If the
Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the
Custodian is required by the rule to treat the Fund as consenting to disclosure
of this information for all securities owned by the Fund or any funds or
accounts established by the Fund. For the Fund's protection, the Rule prohibits
the requesting company from using the Fund's name and address for any purpose
other than corporate communications. Please indicate below whether the Fund
39
<PAGE> 43
consents or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name,
address, and share positions.
NO [X] The Custodian is not authorized to release the Fund's name,
address, and share positions.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the ____ day of ______________, 199_.
ATTEST GABELLI GOLD FUND, INC.
/s/ Terri Ellingway By /s/ Bruce N. Alpert
- --------------------------- ----------------------------
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ XXXXXXXXXXXXXXXX By /s/ XXXXXXXXXXXXXXXXXXX
- --------------------------- ----------------------------
Executive Vice President
40
<PAGE> 1
Exhibit 9.1
TRANSFER AGENCY AND SERVICE AGREEMENT
between
GABELLI GOLD FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
DAH053194
IA193
<PAGE> 2
TABLE OF CONTENTS
-----------------
Page
----
Article 1 Terms of Appointment; Duties of the Bank.................... 1
Article 2 Fees and Expenses........................................... 5
Article 3 Representations and Warranties of the Bank.................. 6
Article 4 Representations and Warranties of the Fund.................. 6
Article 5 Data Access and Proprietary Information..................... 7
Article 6 Indemnification............................................. 10
Article 7 Standard of Care............................................ 12
Article 8 Covenants of the Fund and the Bank.......................... 12
Article 9 Termination of Agreement.................................... 14
Article 10 Assignment.................................................. 14
Article 11 Amendment................................................... 15
Article 12 Massachusetts Law to Apply.................................. 15
Article 13 Force Majeure............................................... 15
Article 14 Consequential Damages....................................... 15
Article 15 Merger of Agreement......................................... 16
Article 16 Counterparts................................................ 16
<PAGE> 3
TRANSFER AGENCY AND SERVICE AGREEMENT
-------------------------------------
AGREEMENT made as of the ____ day of _____________, 1994, by and
between Gabelli Gold Fund, Inc., a Maryland corporation, having its principal
office and place of business at One Corporate Center Rye, New York 10580-1434
(the "Fund"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust
company having its principal office and place of business at 225 Franklin
Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund desires to appoint the Bank as its transfer agent,
dividend disbursing agent, custodian of certain retirement plans and agent in
connection with certain other activities, and the Bank desires to accept such
appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Article 1 Terms of Appointment: Duties of the Bank
----------------------------------------
1.01 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints the Bank to act as, and the Bank
agrees to act as its transfer agent for the Fund's authorized and issued shares
of its common stock, $___ par value, ("Shares"), dividend disbursing agent,
custodian of certain retirement plans and agent in connection with any
accumulation, open-account or similar plans provided to the shareholders of the
Fund ("Shareholders") and set out in the currently effective prospectus and
statement of additional information ("prospectus") of the Fund, including
without limitation any periodic investment plan or periodic withdrawal program.
1.02 The Bank agrees that it will perform the following
services:
(a) In accordance with procedures established from time to
time by agreement between the Fund and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of
Shares, and promptly deliver payment and appropriate
documentation thereof to the Custodian of the Fund
authorized pursuant to the Articles of Incorporation
of the Fund
2
<PAGE> 4
(the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate
number of Shares and hold such Shares in the
appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and
redemption directions and deliver the appropriate
documentation thereof to the Custodian;
(iv) In respect to the transactions in items (i), (ii) and
(iii) above, the Bank shall execute transactions
directly with broker-dealers authorized by the Fund
who shall thereby be deemed to be acting on behalf of
the Fund;
(v) At the appropriate time as and when it receives
monies paid to it by the Custodian with respect to
any redemption, pay over or cause to be paid over in
the appropriate manner such monies as instructed by
the redeeming Shareholders;
(vi) Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and
distributions declared by the Fund;
(viii) Issue replacement certificates for those certificates
alleged to have been lost, stolen or destroyed upon
receipt by the Bank of indemnification satisfactory
to the Bank and protecting the Bank and the Fund, and
the Bank at its option, may issue replacement
certificates in place of mutilated stock certificates
upon presentation thereof and without such indemnity;
(ix) Maintain records of account for and advise the Fund
and its Shareholders as to the foregoing; and
(x) Record the issuance of shares of the Fund and
maintain pursuant to SEC Rule 17Ad-1O(e) a record of
the total number of shares of the Fund which are
authorized, based upon data provided to it by the
Fund, and issued and outstanding. The Bank shall also
provide the Fund on a regular basis with
3
<PAGE> 5
the total number of shares which are authorized and
issued and outstanding and shall have no obligation,
when recording the issuance of shares, to monitor the
issuance of such shares or to take cognizance of any
laws relating to the issue or sale of such shares,
which functions shall be the sole responsibility of
the Fund.
(b) In addition to and neither in lieu nor in contravention of
the services set forth in the above paragraph (a), the Bank shall: (i) perform
the customary services of a transfer agent, dividend disbursing agent, custodian
of certain retirement plans and, as relevant, agent in connection with
accumulation, open-account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to: maintaining all Shareholder accounts, preparing Shareholder meeting
lists, mailing proxies, mailing Shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and non-resident alien
accounts, preparing and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and distributions by
federal authorities for all Shareholders, preparing and mailing confirmation
forms and statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in Shareholder
accounts, preparing and mailing activity statements for Shareholders, and
providing Shareholder account information and (ii) provide a system which will
enable the Fund to monitor the total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the Bank in
writing those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of transactions for
each State on the system prior to activation and thereafter monitor the daily
activity for each State. The responsibility of the Bank for the Fund's blue sky
State registration status is solely limited to the initial establishment of
transactions subject to blue sky compliance by the Fund and the reporting of
such transactions to the Fund as provided above.
(d) Procedures as to who shall provide certain of these
services in Article 1 may be established from time to time by agreement between
the Fund and the Bank per the attached
4
<PAGE> 6
service responsibility schedule. The Bank may at times perform only a portion of
these services and the Fund or its agent may perform these services on the
Fund's behalf.
(e) The Bank shall provide additional services on behalf of
the Fund (i.e., escheatment services) which may be agreed upon in writing
between the Fund and the Bank.
Article 2 Fees and Expenses
-----------------
2.01 For the performance by the Bank pursuant to this
Agreement, the Fund agrees to pay the Bank an annual maintenance fee for each
Shareholder account as set out in the initial fee schedule attached hereto. Such
fees and out-of-pocket expenses and advances identified under Section 2.02 below
may be changed from time to time subject to mutual written agreement between the
Fund and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the
Fund agrees to reimburse the Bank for out-of-pocket expenses, including but not
limited to confirmation production, postage, forms, telephone, microfilm,
microfiche, tabulating proxies, records storage, or advances incurred by the
Bank for the items set out in the fee schedule attached hereto. In addition, any
other expenses incurred by the Bank at the request or with the consent of the
Fund, will be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses
within five days following the receipt of the respective billing notice. Postage
for mailing of dividends, proxies, Fund reports and other mailings to all
shareholder accounts shall be advanced to the Bank by the Fund at least seven
(7) days prior to the mailing date of such materials.
Article 3 Representations and Warranties of the Bank
------------------------------------------
The Bank represents and warrants to the Fund that:
3.01 It is a trust company duly organized and existing and in
good standing under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the
Commonwealth of Massachusetts.
3.03 It is empowered under applicable laws and by its Charter
and By-Laws to
5
<PAGE> 7
enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
Article 4 Representations and Warranties of the Fund
------------------------------------------
The Fund represents and warrants to the Bank that:
4.01 It is a corporation duly organized and existing and in
good standing under the laws of ___________________.
4.02 It is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Articles of
Incorporation and ByLaws have been taken to authorize it to enter into and
perform this Agreement.
4.04 It is an open-end and diversified management investment
company registered under the Investment Company Act of 1940, as amended.
4.05 A registration statement under the Securities Act of
1933, as amended is currently effective and will remain effective, and
appropriate state securities law filings have been made and will continue to be
made, with respect to all Shares of the Fund being offered for sale.
Article 5 Data Access and Proprietary Information
---------------------------------------
5.01 The Fund acknowledges that the data bases, computer
programs, screen formats, report formats, interactive design techniques, and
documentation manuals furnished to the Fund by the Bank as part of the Fund's
ability to access certain Fund-related data ("Customer Data") maintained by the
Bank on data bases under the control and ownership of the Bank or other third
party ("Data Access Services") constitute copyrighted, trade secret, or other
proprietary information (collectively, "Proprietary Information") of substantial
value to the Bank or other third party. In no event shall Proprietary
Information be deemed Customer Data. The Fund agrees to treat all Proprietary
Information as proprietary to the Bank and further agrees that it shall not
divulge any
6
<PAGE> 8
Proprietary Information to any person or organization except as may be provided
hereunder. Without limiting the foregoing, the Fund agrees for itself and its
employees and agents:
(a) to access Customer Data solely from locations as may
be designated in writing by the Bank and solely in
accordance with the Bank's applicable user
documentation;
(b) to refrain from copying or duplicating in any way the
Proprietary Information;
(c) to refrain from obtaining unauthorized access to any
portion of the Proprietary Information, and if such
access is inadvertently obtained, to inform in a
timely manner of such fact and dispose of such
information in accordance with the Bank's
instructions;
(d) to refrain from causing or allowing third-party data
acquired hereunder from being retransmitted to any
other computer facility or other location, except
with the prior written consent of the Bank;
(e) that the Fund shall have access only to those
authorized transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the
Bank to protect at the Bank's expense the rights of
the Bank in Proprietary Information at common law,
under federal copyright law and under other federal
or state law.
Each party shall take reasonable efforts to advise its employees of
their obligations pursuant to this Article 5. The obligations of this Article
shall survive any earlier termination of this Agreement.
5.02 If the Fund notifies the Bank that any of the Data Access
Services do not operate in material compliance with the most recently issued
user documentation for such services, the Bank shall endeavor in a timely manner
to correct such failure. Organizations from which the Bank may obtain certain
data included in the Data Access Services are solely responsible for the
7
<PAGE> 9
contents of such data and the Fund agrees to make no claim against the Bank
arising out of the contents of such third-party data, including, but not limited
to, the accuracy thereof DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND
SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS IS,
AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE
EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5.03 If the transactions available to the Fund include the
ability to originate electronic instructions to the Bank in order to (i) effect
the transfer or movement of cash or Shares or (ii) transmit Shareholder
information or other information (such transactions constituting a "COEFI"),
then in such event the Bank shall be entitled to rely on the validity and
authenticity of such instruction without undertaking any further inquiry as long
as such instruction is undertaken in conformity with security procedures
established by the Bank from time to time.
Article 6 Indemnification
---------------
6.01 The Bank shall not be responsible for, and the Fund shall
indemnify and hold the Bank harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and liability arising
out of or attributable to:
(a) All actions of the Bank or its agent or subcontractors
required to be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful
misconduct which arise out of the breach of any representation or warranty of
the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or services which (i) are
received by the Bank or its agents or subcontractors, and (ii) have been
prepared, maintained or performed by the Fund or any other person or firm on
behalf of the Fund including but not limited to any previous transfer agent or
8
<PAGE> 10
registrar.
(d) The reliance on, or the carrying out by the Bank or its
agents or subcontractors of any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any
requirement under the federal securities laws or regulations or the securities
laws or regulations of any state that such Shares be registered in such state or
in violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in such
state.
6.02 At any time the Bank may apply to any officer of the Fund
for instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall not be liable and
shall be indemnified by the Fund for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. The Bank,
its agents and subcontractors shall be protected and indemnified in acting upon
any paper or document furnished by or on behalf of the Fund, reasonably believed
to be genuine and to have been signed by the proper person or persons, or upon
any instruction, information, data, records or documents provided the Bank or
its agents or subcontractors by machine readable input, telex, CRT data entry or
other similar means authorized by the Fund, and shall not be held to have notice
of any change of authority of any person, until receipt of written notice
thereof from the Fund. The Bank, its agents and subcontractors shall also be
protected and indemnified in recognizing stock certificates which are reasonably
believed to bear the proper manual or facsimile signatures of the officers of
the Fund, and the proper countersignature of any former transfer agent or former
registrar, or of a co-transfer agent or co-registrar.
6.03 In order that the indemnification provisions contained in
this Article 6 shall apply, upon the assertion of a claim for which the Fund may
be required to indemnify the Bank, the Bank shall promptly notify the Fund of
such assertion, and shall keep the Fund advised with respect to all developments
concerning such claim. The Fund shall have the option to participate with the
Bank in the defense of such claim or to defend against said claim in its own
name or in the name of
9
<PAGE> 11
the Bank. The Bank shall in no case confess any claim or make any compromise in
any case in which the Fund may be required to indemnify the Bank except with the
Fund's prior written consent.
Article 7 Standard of Care
----------------
7.01 The Bank shall at all times act in good faith and agrees
to use its best efforts within reasonable limits to insure the accuracy of all
services performed under this Agreement, but assumes no responsibility and shall
not be liable for loss or damage due to errors unless said errors are caused by
its negligence, bad faith, or willful misconduct of that of its employees.
Article 8 Covenants of the Fund and the Bank
----------------------------------
8.01 The Fund shall promptly furnish to the Bank the
following:
(a) A certified copy of the resolution of the Board of
Directors of the Fund authorizing the appointment of the Bank and the execution
and delivery of this Agreement.
(b) A copy of the Articles of Incorporation and By-Laws of the
Fund and all amendments thereto.
8.02 The Bank hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to the Fund for safekeeping of
stock certificates, check forms and facsimile signature imprinting devices, if
any; and for the preparation or use, and for keeping account of, such
certificates, forms and devices.
8.03 The Bank shall keep records relating to the services to
be performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the Bank
hereunder are the property of the Fund and will be preserved, maintained and
made available in accordance with such Section and Rules, and will be
surrendered promptly to the Fund on and in accordance with its request.
8.04 The Bank and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be
10
<PAGE> 12
voluntarily disclosed to any other person, except as may be required by law.
8.05 In case of any requests or demands for the inspection of
the Shareholder records of the Fund, the Bank will endeavor to notify the Fund
and to secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.
Article 9 Termination of Agreement
------------------------
9.01 This Agreement may be terminated by either party upon one
hundred twenty (120) days written notice to the other.
9.02 Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and material will
be borne by the Fund. Additionally, the Bank reserves the right to charge for
any other reasonable expenses associated with such termination and/or a charge
equivalent to the average of three (3) months' fees.
Article 10 Assignment
----------
10.01 Except as provided in Section 10.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
10.02 This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted successors and assigns.
10.03 The Bank may, without further consent on the part of the
Fund, subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly registered as
a transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange Act of
1934, as amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly registered
as a transfer agent pursuant to Section 17A(c)(1) or (iii) a BFDS affiliate;
provided, however, that the Bank shall be as fully responsible to the Fund for
the acts and omissions of any subcontractor as it is for its own acts and
omissions.
Article 11 Amendment
---------
11
<PAGE> 13
11.01 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution of
the Board of Directors of the Fund.
Article 12 Massachusetts Law to Apply
--------------------------
12.01 This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
Article 13 Force Majeure
-------------
13.01 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its control, or
other causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to perform or
otherwise from such causes.
Article 14 Consequential Damages
---------------------
14.01 Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of this Agreement or
for any consequential damages arising out of any act or failure to act
hereunder.
Article 15 Merger of Agreement
-------------------
15.01 This Agreement constitutes the entire agreement between
the parties hereto and supersedes any prior agreement with respect to the
subject matter hereof whether oral or written.
Article 16 Counterparts
------------
16.01 This Agreement may be executed by the parties hereto on
any number of counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
12
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
GABELLI GOLD FUND, INC.
BY: /s/ Bruce N. Alpert
-------------------------------
ATTEST:
/s/ Terri Ellingway
- ---------------------------
STATE STREET BANK AND TRUST COMPANY
BY: /s/ XXXXXXXXXXXXXX
-------------------------------
Executive Vice President
ATTEST:
/s/ XXXXXXXXXXXXXXXX
- ---------------------------
13
<PAGE> 15
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBILITIES*
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
1. Receives orders for the purchase. x
2. Issue Shares and hold Shares in x
Shareholders accounts.
3. Receive redemption requests. x
4. Effect transactions 1-3 above x
directly with broker-dealers.
5. Pay over monies to Redeeming x
Shareholders.
6. Effect transfers of Shares. x
7. Prepare and transmit dividends and x
distributions.
8. Issue Replacement Certificates. x
9. Reporting of abandoned property. x
10. Maintain records of account. x
11. Maintain and keep a current and x
accurate control book for each issue
of securities.
12. Mail proxies. x
13. Mail Shareholder reports. x
14. Mail prospectuses to current x
Shareholders.
15. Withhold taxes on U.S. resident and x
non-resident alien accounts.
14
<PAGE> 16
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
16. Prepare and file U.S. Treasury x
Department forms.
17. Prepare and mail account and x
confirmation statements for
Shareholders.
18. Provide Shareholder account x
information.
19. Blue sky reporting. x
* Such services are more fully described in Article 1.02 (a), (b) and (c) of
the Agreement.
GABELLI GOLD FUND, INC.
BY: /s/ Bruce N. Alpert
-------------------------------
ATTEST:
/s/ Terri Ellingway
- ---------------------------
STATE STREET BANK AND TRUST COMPANY
BY: /s/ XXXXXXXXXXXXXX
-------------------------------
Executive Vice President
ATTEST:
/s/ XXXXXXXXXXXXXXXX
- ---------------------------
15
<PAGE> 1
Exhibit 9.2
SUB-ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this 1st day of May, 1997, by and between
GABELLI FUNDS, INC. (the "Administrator"), and BISYS FUND SERVICES LIMITED
PARTNERSHIP, d/b/a BISYS FUND SERVICES ("BISYS").
WHEREAS, the Administrator is the investment adviser for the registered
investment companies (hereinafter referred to individually as a "Company" and
collectively as the "Companies") set forth in Schedule A attached hereto and is
responsible for the provision of administrative services to such Companies and
each of the Portfolios (hereinafter referred to individually as a "Portfolio"
and collectively as the "Portfolios") of such Companies;
WHEREAS, each Company is a management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Administrator desires to retain BISYS to assist it in
performing administrative services with respect to each Portfolio and BISYS is
willing to perform such services on the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Administrator and BISYS hereby agree as follows:
ARTICLE 1. Retention of BISYS. The Administrator hereby engages BISYS
to furnish each Portfolio with the administrative services as set forth in
Article 2 below (collectively, the "Services"). BISYS shall, for all purposes
herein, be deemed to be an independent contractor and, unless otherwise
expressly provided or authorized, shall have no authority to act for or
represent the Administrator or the Companies in any way.
ARTICLE 2. Administrative Services. BISYS shall perform or supervise
the performance by others of administrative services in connection with the
operations of the Portfolios, and, on behalf of the Companies, will investigate,
assist in the selection of and conduct relations with custodians, depositories,
accountants, legal counsel, underwriters, brokers and dealers, corporate
fiduciaries, insurers, banks and persons in any other capacity deemed to be
necessary or desirable for the Portfolios' operations. BISYS shall provide the
Directors/Trustees (hereafter, the "Directors") of the Companies with such
reports regarding investment performance as they may reasonably request but
shall have no responsibility for supervising the performance by any investment
adviser or sub-adviser of its responsibilities.
BISYS shall provide the Companies with regulatory reporting, all
necessary office space, equipment, personnel, compensation and facilities
(including facilities for meetings of shareholders ("Shareholders") and
Directors of the Companies) for handling the affairs of the Portfolios and such
other services as BISYS and the Administrator shall, from time to time,
determine to be necessary
<PAGE> 2
to perform BISYS' obligations under this Agreement. In addition, at the request
of the Boards of Directors, BISYS shall make reports to the Companies' Directors
concerning the performance of its obligations hereunder.
Without limiting the generality of the foregoing, BISYS shall:
(a) calculate contractual Company expenses and provide necessary
instructions for all disbursements for the Companies, and as
appropriate compute each Company's yields, total return,
expense ratios, portfolio turnover rate, average commission
rate and, if required, portfolio average dollar-weighted
maturity;
(b) assist Company counsel with the preparation of prospectuses,
statements of additional information, registration statements
and proxy materials;
(c) prepare such reports, applications and documents (including
reports regarding the sale and redemption of Shares as may be
required in order to comply with Federal and state securities
law) as may be necessary or desirable to register each
Company's Shares with state securities authorities, monitor
the sale of Company Shares for compliance with state
securities laws, and file with the appropriate state
securities authorities the registration statements and reports
for each Company and each Company's Shares and all amendments
thereto, as may be necessary or convenient to register and
keep effective each Company and its Shares with state
securities authorities to enable each Company to make a
continuous offering of its Shares;
(d) develop and prepare, with the assistance of the Administrator,
communications to Shareholders, including the annual report to
Shareholders, coordinate the mailing of prospectuses, notices,
proxy statements, proxies and other reports to Shareholders,
and supervise and facilitate the proxy solicitation process
for all shareholder meetings, including the tabulation of
shareholder votes;
(e) administer contracts on behalf of each Company with, among
others, each Company's investment adviser, distributor,
custodian, transfer agent and fund accountant;
(f) supervise the Companies' transfer agent with respect to the
payment of dividends and other distributions to Shareholders;
(g) calculate performance data of the Portfolios for dissemination
to information services covering the investment company
industry;
(h) prepare or cause to be prepared at its expense the filing of
each Company's tax returns;
2
<PAGE> 3
(i) examine and review the operations and performance of the
various organizations providing services to the Companies or
any Portfolio, including, without limitation, the investment
adviser, distributor, custodian, fund accountant, transfer
agent, outside legal counsel and independent public
accountants, and, at the request of a Company's Board of
Directors, report to the Board on the performance of such
organizations;
(j) assist with the layout and printing of publicly disseminated
prospectuses and assist with and coordinate layout and
printing of each Company's quarterly, semi-annual and annual
reports to Shareholders;
(k) assist with the design, development, and operation of the
Portfolios, including new classes, investment objectives,
policies and structure;
(l) provide individuals reasonably acceptable to each Company's
Board of Directors to serve as officers of the Company, who
will be responsible for the management of certain of the
Company's affairs as determined by the Company's Board of
Directors;
(m) advise each Company and its Board of Directors on matters
concerning the Company and its affairs;
(n) obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for each
Company in accordance with the requirements of Rules 17g-1 and
17d-1(7) under the 1940 Act as such bonds and policies are
approved by the Company's Board of Directors;
(o) monitor and advise each Company and its Portfolios on their
regulated investment company status under the Internal Revenue
Code of 1986, as amended;
(p) perform all administrative services and functions of each
Company and each Portfolio to the extent administrative
services and functions are not provided to the Company or such
Portfolio pursuant to the Company's or such Portfolio's
administration agreement, investment advisory agreement,
distribution agreement, custodian agreement, transfer agent
agreement and fund accounting agreement;
(q) furnish advice and recommendations with respect to other
aspects of the business and affairs of the Portfolios as the
Administrator and BISYS shall determine desirable;
(r) prepare and file with the SEC the semi-annual report for each
Company on Form N-SAR and all required notices pursuant to
Rule 24f-2;
3
<PAGE> 4
(s) assist each Company with respect to SEC examinations,
including the furnishing of documents and information, as
appropriate, and responding to SEC examination letters; and
(t) assist each Company in preparing for Board meetings by (i)
coordinating board book production and distribution, (ii)
preparing Board agendas, (iii) preparing the BISYS section of
Board materials, (iv) preparing special Board meeting
materials, including but not limited to, materials relating to
annual contract approvals and 12b-1 plan approvals, as agreed
upon by the parties, and (v) such other Board meeting
functions that are agreed upon by the parties.
BISYS shall perform in such other services for each Company that are
mutually agreed upon by the parties from time to time. Such services may include
performing internal audit examinations; mailing the annual reports of the
Portfolios; preparing an annual list of Shareholders; and mailing notices of
Shareholders' meetings, proxies and proxy statements, for all of which the
Administrator will pay or cause to be paid BISYS' reasonable out-of-pocket
expenses.
ARTICLE 3. Allocation of Charges and Expenses.
(A) BISYS. BISYS shall furnish at its own expense the executive,
supervisory and clerical personnel necessary to perform its obligations under
this Agreement. BISYS shall also provide the items which it is obligated to
provide under this Agreement, and shall pay all compensation, if any, of
officers of each Company as well as all Directors of each Company who are
affiliated persons of BISYS or any affiliated company of BISYS; provided,
however, that unless otherwise specifically provided, BISYS shall not be
obligated to pay the compensation of any employee of a Company retained by the
Directors of such Company to perform services on behalf of the Company.
(B) The Administrator. The Administrator hereby represents that each
Company has undertaken to pay or cause to be paid all other expenses of the
Company not otherwise allocated herein, including, without limitation,
organization costs, taxes, expenses for legal and auditing services, the
expenses of preparing (including typesetting), printing and mailing reports,
prospectuses, statements of additional information, proxy solicitation material
and notices to existing Shareholders, all expenses incurred in connection with
issuing and redeeming Shares, the costs of custodial services, the cost of
initial and ongoing registration of the Shares under Federal and state
securities laws, fees and out-of-pocket expenses of Directors who are not
affiliated persons of the Administrator or the Investment Adviser to the Company
or any affiliated corporation of the Administrator or the Investment Adviser,
insurance, interest, brokerage costs, litigation and other extraordinary or
nonrecurring expenses, and all fees and charges of investment advisers to the
Company.
4
<PAGE> 5
ARTICLE 4. Compensation of BISYS.
(A) Sub-Administration Fee. For the services rendered, the facilities
furnished and the expenses assumed by BISYS pursuant to this Agreement, the
Administrator shall pay to BISYS compensation at an annual rate specified in
Schedule A attached hereto.
(B) Survival of Compensation Rights. All rights of compensation under
this Agreement for services performed as of the termination date shall survive
the termination of this Agreement.
ARTICLE 5. Limitation of liability of BISYS. The duties of BISYS shall
be confined to those expressly set forth herein, and no implied duties are
assumed by or may be asserted against BISYS hereunder. BISYS shall not be liable
for any error of judgment or mistake of law or for any loss arising out of any
act or omission in carrying out its duties hereunder, except a loss resulting
from willful misfeasance, bad faith or negligence in the performance of its
duties, or by reason of reckless disregard of its obligations and duties
hereunder, except as may otherwise be provided under provisions of applicable
law which cannot be waived or modified hereby. (As used in this Article 5, the
term "BISYS" shall include partners, officers, employees and other agents of
BISYS as well as BISYS itself.)
So long as BISYS acts in good faith and with due diligence and without
negligence, the Administrator assumes full responsibility and shall indemnify
BISYS and hold it harmless from and against any and all actions, suits and
claims, whether groundless or otherwise, and from and against any and all
losses, damages, costs, charges, reasonable counsel fees and disbursements,
payments, expenses and liabilities (including reasonable investigation expenses)
arising directly or indirectly out of BISYS' actions taken or nonactions with
respect to the performance of services hereunder. The indemnity and defense
provisions set forth herein shall indefinitely survive the termination of this
Agreement.
The rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or threatened litigation with
respect to which indemnification hereunder may ultimately be merited. In order
that the indemnification provision contained herein shall apply, however, it is
understood that if in any case the Administrator may be asked to indemnify or
hold BISYS harmless, the Administrator shall be fully and promptly advised of
all pertinent facts concerning the situation in question, and it is further
understood that BISYS will use all reasonable care to identify and notify the
Administrator promptly concerning any situation which presents or appears likely
to present the probability of such a claim for indemnification against the
Administrator, but failure to do so in good faith shall not affect the rights
hereunder.
The Administrator shall be entitled to participate at its own expense
or, if it so elects, to assume the defense of any suit brought to enforce any
claims subject to this indemnity provision. If the Administrator elects to
assume the defense of any such claim, the defense shall be conducted by counsel
chosen by the Administrator and satisfactory to BISYS, whose approval shall not
be unreasonably withheld. In the event that the Administrator elects to assume
the defense of any suit
5
<PAGE> 6
and retain counsel, BISYS shall bear the fees and expenses of any additional
counsel retained by it. If the Administrator does not elect to assume the
defense of a suit, it will reimburse BISYS for the reasonable fees and expenses
of any counsel retained by BISYS.
BISYS may apply to the Administrator at any time for instructions and
may consult counsel for the Administrator or its own counsel and with
accountants and other experts with respect to any matter arising in connection
with BISYS' duties, and BISYS shall not be liable or accountable for any action
taken or omitted by it in good faith in accordance with such instruction or with
the opinion of such counsel, accountants or other experts.
Also, BISYS shall be protected in acting upon any document which it
reasonably believes to be genuine and to have been signed or presented by the
proper person or persons. BISYS will not be held to have notice of any change of
authority of any officers, employees or agents of the Administrator until
receipt of written notice thereof from the Administrator.
ARTICLE 6. Activities of BISYS. The services of BISYS rendered
hereunder are not to be deemed to be exclusive. BISYS is free to render such
services to others and to have other businesses and interests. It is understood
that directors, officers, employees and Shareholders are or may be or become
interested in BISYS, as officers, employees or otherwise and that partners,
officers and employees of BISYS and its counsel are or may be or become
similarly interested in the Companies, and that BISYS may be or become
interested in the Companies as a Shareholder or otherwise.
ARTICLE 7. Duration of this Agreement. The Term of this Agreement shall
be as specified in Schedule A hereto.
ARTICLE 8. Assignment. This Agreement shall not be assignable by either
party without the written consent of the other party; provided, however, that
BISYS may, with the prior consent of the Administrator, at its expense,
subcontract with any entity or person concerning the provision of the services
contemplated hereunder. BISYS shall not, however, be relieved of any of its
obligations under this Agreement by the appointment of such subcontractor and
provided further, that BISYS shall be responsible, to the extent provided in
Article 5 hereof, for all acts of such subcontractor as if such acts were its
own. This Agreement shall be binding upon, and shall inure to the benefit of,
the parties hereto and their respective successors and permitted assigns.
ARTICLE 9. Amendments. This Agreement may be amended if such amendment
is specifically approved in writing by the parties hereto.
ARTICLE 10. Certain Records. BISYS shall maintain customary records in
connection with its duties as specified in this Agreement. Any records required
to be maintained and preserved pursuant to Rules 3la-1 and 3la-2 under the 1940
Act which are prepared or maintained by BISYS on behalf of each Company shall be
prepared and maintained at the expense of BISYS, but shall be
6
<PAGE> 7
the property of each Company and will be made available to or surrendered
promptly to each Company on request.
In case of any request or demand for the inspection of such records by
another party, BISYS shall notify the Administrator and follow the
Administrator's instructions as to permitting or refusing such inspection;
provided that BISYS may exhibit such records to any person in any case where it
is advised by its counsel that it may be held liable for failure to do so,
unless (in cases involving potential exposure only to civil liability) the
Administrator or the appropriate Company has agreed to indemnify BISYS against
such liability.
ARTICLE 11. Definitions of Certain Terms. The terms "interested person"
and "affiliated person," when used in this Agreement, shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission.
ARTICLE 12. Notice. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice to the
other party at the following address: if to BISYS, to it at 3435 Stelzer Road,
Columbus, Ohio 43219, Attention: George O. Martinez, Esq.; if to the
Administrator, to it at One Corporate Center, Rye, New York 10580-1434,
Attention: Bruce N. Alpert, or at such other address as such party may from time
to time specify in writing to the other party pursuant to this Section.
ARTICLE 13. Confidential Information. Each party acknowledges that it
may acquire knowledge and information relating to the other party and its
affiliates or the Companies including, but not limited to, information
pertaining to business plans, employees, customers and/or suppliers, and that
all such knowledge and information acquired or developed is and shall be
confidential and proprietary information (all such confidential and proprietary
information is herein collectively referred to as the "Confidential
Information"). Each party agrees to hold the Confidential Information in strict
confidence, to refrain from directly or indirectly disclosing it to others or
using it in any way except for purposes of performing services hereunder, and to
prevent any unauthorized person access to it either before or after termination
of this Agreement, without the prior written consent of the other party. Both
parties further agree to take all action reasonable and necessary to protect the
confidentiality of the Confidential Information. The parties shall use their
best efforts to have their directors, officers, employees and agents agree to
the terms of this Section. The obligations of the parties contained in this
section shall survive termination of this Agreement. Neither party's
confidentiality obligations under this provision shall apply to such information
that (i) was in the public domain or available to a third party without
restrictions at or prior to the time such information was made known to such
party, (ii) had been independently known to such party at the time of disclosure
from persons who were not subject to similar confidentiality obligations, or
(iii) is required to be disclosed by law (except that each party will use best
efforts to give the other party written notice prior to any such disclosure).
7
<PAGE> 8
ARTICLE 14. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Ohio and the applicable provisions of
the 1940 Act. To the extent that the applicable laws of the State of Ohio, or
any of the provisions herein, conflict with the applicable provisions of the
1940 Act, the latter shall control.
ARTICLE 15. Multiple Originals. This Agreement may be executed in two
or more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
GABELLI FUNDS, INC.
By: /s/ Bruce N. Alpert
---------------------------
Title: Vice President and Chief
Operating Officer
------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By: /s/ George O. Marting
---------------------------
Title: Senior Vice President
------------------------
8
<PAGE> 9
SCHEDULE A
TO THE SUB-ADMINISTRATION AGREEMENT
DATED AS OF MAY 1, 1997
BETWEEN GABELLI FUNDS, INC.
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
Portfolios: This Agreement shall apply to all Portfolios, either now or
hereafter created of the Companies set forth below. The current
Portfolios of such Companies are also set forth below.
GABELLI CONVERTIBLE SECURITIES FUND, INC.
GABELLI EQUITY SERIES FUNDS, INC.
Gabelli Small Cap Fund
Gabelli Equity Income Fund
GABELLI GLOBAL SERIES FUNDS, INC.
Gabelli Global Telecommunications Fund
Gabelli Global Convertible Securities Fund
Gabelli Global Interactive Couch Potato Fund
Gabelli Global Entertainment & Media Fund
Gabelli Global Growth Fund
GABELLI GOLD FUND, INC.
Gabelli Gold Fund
GABELLI INTERNATIONAL GROWTH FUND, INC.
Gabelli International Growth Fund
GABELLI INVESTOR FUNDS, INC.
Gabelli ABC Fund
Fees: Pursuant to Article 4, in consideration of services rendered and
expenses assumed pursuant to this Agreement, the Administrator
will pay BISYS on the first business day of each month, or at
such time(s) as BISYS shall request and the parties hereto shall
agree, a fee based upon a prorated portion (as more particularly
described below) of the assets of all registered management
investment companies for which BISYS serves as Subadministrator
that are advised by Teton Advisers LLC, Gabelli Fixed Income
L.L.C., Gabelli Funds, Inc. or their affiliates
("BISYS-administered Investment Companies"). Such fee shall be
computed daily at the annual rate of:
A-1
<PAGE> 10
Six and one-quarter one-hundredths of one percent (.0625%)
of the BISYS-administered Investment Companies' average
daily net assets up to $350 million.
Four and one-quarter one-hundredths of one percent
(.0425%) of the BISYS-administered Investment Companies'
average daily net assets in excess of $350 million up to
$700 million.
Two and one-quarter one-hundredths of one percent (.0225%)
of the BISYS-administered Investment Companies' average
daily net assets in excess of $700 million.
The prorated portion of the fees that are payable to BISYS under
this Agreement shall be that portion of the fees described above
that is attributable to the average daily net assets of the
Portfolios. The fees set forth above shall be subject to a
minimum annual fee amount of $30,000 for each Portfolio. Such
fees shall be payable to BISYS on the first business day of each
month or at such other time(s) as the parties may agree upon.
The parties hereby acknowledge and agree that the compensation
under this Agreement due to BISYS shall be reduced in each month
(or other applicable payment period) by the amount of
compensation payable to BISYS Fund Services, Inc. under its Fund
Accounting Agreement with the Administrator with respect to the
Companies. The fee for the period from the day of the month this
Agreement is entered into until the end of that month shall be
prorated according to the proportion which such period bears to
the full monthly period. Upon any termination of this Agreement
before the end of any month, the fee for such part of a month
shall be prorated according to the proportion which such period
bears to the full monthly period and shall be payable upon the
date of termination of this Agreement.
For purposes of determining the fees payable to BISYS, the value
of the net assets of a particular Portfolio shall be computed in
the manner described in each Company's Articles of Incorporation
or in the Prospectus or Statement of Additional Information
respecting that Portfolio as from time to time is in effect for
the computation of the value of such net assets in connection
with the determination of the liquidating value of the shares of
such Portfolio.
The parties hereby confirm that the fees payable hereunder shall
be applied to each Portfolio as a whole, and not to separate
classes of shares within the Portfolios.
A-2
<PAGE> 11
Term: The initial term of this Agreement (the "Initial Term") shall
commence on May 1, 1997 and shall remain in effect through
December 31, 1997. This Agreement shall be renewed automatically
for successive periods of one year after the Initial Term, unless
written notice of nonrenewal is provided by either party not less
than 90 days prior to the end of the Initial Term or 90 days
advance written notice of termination is provided by either party
at any time following the Initial Term. In the event of any
breach of this Agreement by either party, the non-breaching party
shall notify the breaching party in writing of such breach and
upon receipt of such notice, the breaching party shall have 45
days to remedy the breach. In the event any material breach is
not remedied within such time period, the nonbreaching party may
immediately terminate this Agreement.
Notwithstanding the foregoing, after such termination for so long
as BISYS, with the written consent of the Administrator, in fact
continues to perform any one or more of the services contemplated
by this Agreement or any schedule or exhibit hereto, the
provisions of this Agreement, including without limitation the
provisions dealing with indemnification, shall continue in full
force and effect. Compensation due BISYS and unpaid by the
Administrator upon such termination shall be immediately due and
payable upon and notwithstanding such termination. BISYS shall be
entitled to collect from the Administrator, in addition to the
compensation described in this Schedule A, all costs reasonably
incurred in connection with BISYS' activities in effecting such
termination, including without limitation, the delivery to each
Company and/or its designees of the Company's property, records,
instruments and documents, or any copies thereof. To the extent
that BISYS may retain in its possession copies of any Company
documents or records subsequent to such termination which copies
had not been requested by the Administrator on behalf of a
Company in connection with the termination process described
above, BISYS will provide such Company with reasonable access to
such copies; provided, however, that, in exchange therefor, the
Administrator shall reimburse BISYS for all costs reasonably
incurred in connection therewith.
A-3
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Counsel and Independent Auditors" and to the use of our
report dated February 13, 1998, which is incorporated by reference in this
Registration Statement (Form N-1A No. 33-79180) of Gabelli Gold Fund, Inc.
/s/ ERNST & YOUNG LLP
----------------------------
ERNST & YOUNG LLP
New York, New York
April 28, 1998
<PAGE> 1
Exhibit 15
AMENDED AND RESTATED
PLAN OF DISTRIBUTION PURSUANT TO RULE l2b-l
OF
THE GABELLI GOLD FUND, INC.
The Gabelli Gold Fund, Inc. (the "Fund") is an open-end management
investment company registered as such under the Investment Company Act of 1940
(the "Act"). The Fund intends to employ Gabelli & Company, Inc. and/or others as
the principal underwriter and distributor (the "Distributor") of the shares of
the Fund pursuant to a written distribution agreement. The Fund has adopted a
plan of distribution pursuant to Rule 12b-1 under the Act to assist in the
distribution of shares of the Fund.
The Board of Directors (the "Board") of the Fund having determined that
it would be desirable to amend the current plan of distribution in certain
respects and to restate such amended plan in its entirety and that a plan of
distribution containing the terms set forth herein is reasonably likely to
benefit the Fund and its shareholders, the Fund hereby amends and restates its
plan of distribution (the "Plan") pursuant to Rule 12b-1 under the Act to read
in its entirety as follows:
1. In consideration of the services to be provided, and the expenses to
be incurred, by the Distributor pursuant to the distribution agreement, the Fund
will pay to the Distributor as distribution payments (the "Payments") in
connection with the distribution of shares of the Fund an aggregate amount at a
rate of 0.25% per year of the average daily net assets of the Fund. Such
Payments shall be accrued daily and paid monthly in arrears or shall be accrued
and paid at such other intervals as the Board shall determine. The Fund's
obligation hereunder shall be limited to the assets of the Fund and shall not
constitute an obligation of the Fund except out of such assets and shall not
constitute an obligation of any shareholder of the Fund.
2. It is understood that the Payments made by the Fund under this Plan
will be used by the Distributor for the purpose of financing or assisting in the
financing of any activity which is primarily intended to result in the sale of
shares of the Fund. The scope of the foregoing shall be interpreted by the
Board, whose decision shall be conclusive except to the extent it contravenes
established legal authority. Without in any way limiting the discretion of the
Board, the following activities are hereby declared to be primarily intended to
result in the sale of shares of the Fund: advertising the Fund or the Fund's
investment advisor's mutual fund activities; compensating underwriters, dealers,
brokers, banks and other selling entities (including the Distributor and its
affiliates) and sales and marketing personnel of any of them for sales of shares
of the Fund, whether in a lump sum or on a continuous, periodic, contingent,
deferred or other basis; compensating underwriters, dealers, brokers, banks and
other servicing entities and
<PAGE> 2
servicing personnel (including the Fund's investment adviser and its personnel)
of any of them for providing services to shareholders of the Fund relating to
their investment in the Fund, including assistance in connection with inquiries
relating to shareholder accounts; the production and dissemination of
prospectuses (including statements of additional information) of the Fund and
the preparation, production and dissemination of sales, marketing and
shareholder servicing materials; and the ordinary or capital expenses, such as
equipment, rent, fixtures, salaries, bonuses, reporting and recordkeeping and
third party consultancy or similar expenses relating to any activity for which
Payment is authorized by the Board; and the financing of any activity for which
Payment is authorized by the Board; and profit to the Distributor and its
affiliates arising out of their provision of shareholder services.
Notwithstanding the foregoing, this Plan does not require the Distributor or any
of its affiliates to perform any specific type or level of distribution
activities or shareholder services or to incur any specific level of expenses
for activities covered by this Section 2. In addition, Payments made in a
particular year shall not be refundable whether or not such Payments exceed the
expenses incurred for that year pursuant to this Section 2.
3. The Fund is hereby authorized and directed to enter into appropriate
written agreements with the Distributor and each other person to whom the Fund
intends to make any Payment, and the Distributor is hereby authorized and
directed to enter into appropriate written agreements with each person to whom
the Distributor intends to make any payments in the nature of a Payment. The
foregoing requirement is not intended to apply to any agreement or arrangement
with respect to which the party to whom Payment is to be made does not have the
purpose set forth in Section 2 above (such as the printer in the case of the
printing of a prospectus or a newspaper in the case of an advertisement) unless
the Board determines that such an agreement or arrangement should be treated as
a "related" agreement for purposes of Rule 12b-1 under the Act.
4. Each agreement required to be in writing by Section 3 must contain
the provisions required by Rule 12b-1 under the Act and must be approved by a
majority of the Board ("Board Approval") and by a majority of the Directors
("Disinterested Director Approval") who are not interested persons of the Fund
and have no direct or indirect financial interest in the operation of the Plan
or any such agreement, by vote cast in person at a meeting called for the
purposes of voting on such agreement. All determinations or authorizations of
the Board hereunder shall be made by Board Approval and Disinterested Board
Approval.
5. The officers, investment adviser or Distributor of the Fund, as
appropriate, shall provide to the Board and the Board shall review, at least
quarterly, a written report of the amounts expended pursuant to this Plan and
the purposes for which such Payments were made.
6. To the extent any activity is covered by Section 2 and is also an
activity which the Fund may pay for on behalf of the Fund without regard to the
existence or terms and conditions of a plan of distribution under Rule 12b-1 of
the Act, this Plan shall not be construed to prevent or restrict the Fund from
paying such amounts outside of this Plan and without limitation hereby and
without such payments being included in calculation of Payments subject to the
limitation
2
<PAGE> 3
set forth in Section 1.
7. This Plan shall not take effect until it has been approved by a vote
of at least a majority of the outstanding voting securities of the Fund. This
Plan may not be amended in any material respect without Board Approval and
Disinterested Director Approval and may not be amended to increase the maximum
level of Payments permitted hereunder without such approvals and further
approval by a vote of at least a majority of the outstanding voting securities
of the Fund. This Plan may continue in effect for longer than one year after its
approval by the shareholders of the Fund only as long as such continuance is
specifically approved at least annually by Board Approval and by Disinterested
Director Approval.
8. This Plan may be terminated at any time by a vote of the directors
who are not interested persons of the Fund and have no direct or indirect
financial interest in the operation of the Plan or any agreement hereunder, cast
in person at a meeting called for the purposes of voting on such termination or
by a vote of at least a majority of the outstanding voting securities of the
Fund.
9. For purposes of this Plan the terms "interested person" and "related
agreement" shall have the meanings ascribed to them in the Act and the rules
adopted by the Securities and Exchange Commission thereunder and the term "vote
of a majority of the outstanding voting securities" of the Fund shall mean the
vote, at the annual or a special meeting of the security holders of the Fund
duly called, (a) of 67% or more of the voting securities present at such
meeting, if the holders of more than 50% of the outstanding voting securities of
the Fund are present or represented by proxy or, if less, (b) more than 50% of
the outstanding voting securities of the Fund.
3
<PAGE> 1
GABELLI GOLD FUND, INC.
EXHIBIT 16
TOTAL RETURN
DATE AS OF: 12/31/97
== == ======== ====== = ========= ===== ======== === ======== === ======== =====
GABELLI GOLD FUND, INC.
AVERAGE ANNUAL RETURN
T=((ERV/P)exp(1/N))-1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
SINCE INCEPTION: (07/11/94 TO 12/31/97):
((591.9/1,000)exp(1/(1269/365))-1)= -14.00%
1 YEAR (12/31/96 TO 12/31/97):
((481.0/1,000)exp(1/(365/365))-1)= -51.90%
AGGREGATE ANNUAL RETURNS
T =((ERV/P)exp(1/N))-1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
SINCE INCEPTION: (07/11/94 TO 12/31/97):
((593.0/1,000)-1= -40.70%
1 YEAR (12/31/96 TO 12/31/97):
((481.0/1,000)-1= -51.90%
== == ======== ====== = ========= ===== ======== === ======== === ======== =====
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> GABELLI GOLD FUND, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 11753154
<INVESTMENTS-AT-VALUE> 7631228
<RECEIVABLES> 467542
<ASSETS-OTHER> 99603
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8198373
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 101523
<TOTAL-LIABILITIES> 101523
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 14653463
<SHARES-COMMON-STOCK> 1379566
<SHARES-COMMON-PRIOR> 1376508
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 381671
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2053020
<ACCUM-APPREC-OR-DEPREC> (4121922)
<NET-ASSETS> 8096850
<DIVIDEND-INCOME> 56941
<INTEREST-INCOME> 29676
<OTHER-INCOME> 0
<EXPENSES-NET> 441637
<NET-INVESTMENT-INCOME> (355020)
<REALIZED-GAINS-CURRENT> (1233715)
<APPREC-INCREASE-CURRENT> (6650029)
<NET-CHANGE-FROM-OPS> (8238764)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 75290
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9312417
<NUMBER-OF-SHARES-REDEEMED> 9321359
<SHARES-REINVESTED> 12000
<NET-CHANGE-IN-ASSETS> (8866443)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 691652
<GROSS-ADVISORY-FEES> 136830
<INTEREST-EXPENSE> 17502
<GROSS-EXPENSE> 442826
<AVERAGE-NET-ASSETS> 13671573
<PER-SHARE-NAV-BEGIN> 12.32
<PER-SHARE-NII> (.26)
<PER-SHARE-GAIN-APPREC> (6.13)
<PER-SHARE-DIVIDEND> .06
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 5.87
<EXPENSE-RATIO> 3.24
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
