Gabelli
Gold
Fund,
Inc.
ANNUAL REPORT
DECEMBER 31, 1998
<PAGE>
Gabelli Gold Fund, Inc.
Annual Report - December 31, 1998
Caesar Bryan
To Our Shareholders,
During the fourth quarter of 1998, gold prices suffered as equity markets
recovered following their summer sell-off. The gold price declined by almost $9
per ounce to $288 per ounce over the quarter and gold equities, following their
powerful rally during September, drifted downwards. Not surprisingly, given this
environment, the Fund's holdings in mid-sized gold producers with positive
exploration news performed best. These included Getchell Gold, GoldCorp and
Meridian Gold, which all appreciated by more than 10%. However, the larger gold
producers, such as Newmont Mining and Homestake Mining underperformed. Mid-sized
companies were helped by speculation of further consolidation in the industry.
During the quarter, Placer Dome bid for Getchell Gold and a number of other
smaller transactions were initiated. In an environment of lower gold prices, the
gold industry is likely to consolidate further as companies seek to lower costs.
Investment Performance
For the fourth quarter ended December 31, 1998, The Gabelli Gold Fund's
(the "Fund") net asset value declined 8.3%. The Lipper Analytical Services Gold
Fund Average and Philadelphia Gold & Silver ("XAU") Index of large North
American gold companies declined 6.2% and 13.4%, respectively over the same
period. Each index is an unmanaged indicator of investment performance. The Fund
was down 3.6% for 1998. The Lipper Gold Fund Average and XAU Index declined
10.9% and 12.4%, respectively, over the same twelve month period.
For the three year period ended December 31, 1998, the Fund's total return
averaged (20.6)% annually versus average annual total returns of (18.2)% and
(13.5)% for the Lipper Gold Fund Average and XAU Index, respectively. Since
inception on July 11, 1994 through December 31, 1998, the Fund had a cumulative
total return of (42.8)%, which equates to an average annual return of (11.7)%.
<PAGE>
INVESTMENT RESULTS (a)
- --------------------------------------------------------------------------------
Quarter
--------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
1998: Net Asset Value $6.63 $5.68 $6.17 $5.66 $5.66
Total Return 12.9% (14.3)% 8.6% (8.3)% (3.6)%
------------------------------------------------------------------------------
1997: Net Asset Value $11.83 $9.79 $9.17 $5.87 $5.87
Total Return (4.0)% (17.2)% (6.3)% (35.4)% (51.9)%
------------------------------------------------------------------------------
1996: Net Asset Value $14.00 $13.40 $13.46 $12.32 $12.32
Total Return 22.7% (4.3)% 0.4% (8.5)% 8.0%
------------------------------------------------------------------------------
1995: Net Asset Value $11.00 $11.96 $12.27 $11.41 $11.41
Total Return (0.6)% 8.7% 2.6% (7.0)% 3.1%
------------------------------------------------------------------------------
1994: Net Asset Value -- -- $12.37 $11.07 $11.07
Total Return -- -- 23.7%(b) (10.5)% 10.7%(b)
------------------------------------------------------------------------------
------------------------------------------------------
Average Annual Returns - December 31, 1998 (a)
1 Year ....................................... (3.6)%
3 Year ....................................... (20.6)%
Life of Fund(b) .............................. (11.7)%
------------------------------------------------------
Dividend History
------------------------------------------------------
Payment (ex) Date Rate Per Share Reinvestment Price
----------------- -------------- ------------------
December 29, 1997 $0.058 $5.86
(a) Total returns and average annual returns reflect changes in share price and
reinvestment of dividends and are net of expenses. The net asset value of the
Fund is reduced on the ex-dividend (payment) date by the amount of the dividend
paid. Of course, returns represent past performance and do not guarantee future
results. Investment returns and the principal value of an investment will
fluctuate. When shares are redeemed they may be worth more or less than their
original cost.
(b) From commencement of operations on July 11, 1994. Note: Investing in foreign
securities involves risks not ordinarily associated with investments in domestic
issues, including currency fluctuation, economic and political risks. Investing
in gold is considered speculative and is affected by a variety of worldwide
economic, financial and political factors.
- --------------------------------------------------------------------------------
Our Investment Objective
The Fund's objective is to obtain long term capital appreciation by
investing in equity securities of foreign and domestic issuers principally
engaged in gold and gold-related activities.
Our Approach
We look at a number of company specifics in order to determine which gold
stocks are relatively undervalued. Our primary focus is on capitalization per
ounce of production and, more importantly, on capitalization per ounce of
recoverable reserves. This determines how much gold actually backs every dollar
invested in a gold company. We appreciate that every mining company must replace
the gold that it mines, and we place a heavy emphasis on the quality of
management and their ability to create shareholder wealth. We invest globally
with an emphasis on gold-producing companies.
2
<PAGE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI GOLD FUND, THE LIPPER GOLD FUND AVERAGE AND
THE PHILADELPHIA GOLD & SILVER INDEX
HOLDINGS BY GEOGRAPHIC REGION - 12/31/98
[GRAPHIC OMITTED]
[Plot Points to come]
Global Allocation
The accompanying chart presents the Fund's holdings by geographic region
as of December 31, 1998. The geographic allocation will change based on current
global market conditions. Countries and/or regions represented in the chart and
below may or may not be included in the Fund's future portfolio.
COMMENTARY
Current global economic and financial conditions are not favorable for
rising commodity prices. Worldwide economic growth rates are declining and many
commodity producing countries have devalued their currencies. Recently, the CRB
index of commodities hit new lows. Despite its monetary attributes, gold has not
been able to buck this trend and during the summer the gold price fell below
$280 per ounce, a level not seen for any length of time since the 1970s.
3
<PAGE>
Gold has suffered from other negative influences, the most important being
the continued sales and lending of gold reserves by central banks. This
mobilization of above ground supplies of gold has occurred at the same time that
demand for gold from traditional sources has declined.
We believe that many of these factors have now run their course. A more
optimistic outlook for gold is supported by both fundamental and technical
reasons. First, it is likely that central bank sales have largely been
completed. On January 1, 1999, the European Central Bank assumed the management
of most European currencies and has stated that they expect no more gold sales
from any member banks. Second, distress sales from the Far East have probably
ended as the economies of Korea and Thailand are now recovering.
Even though central bank sales may slow in the future, they remain eager
lenders of gold. Currently, the two most inexpensive assets to borrow are
Japanese yen and gold. Both cost less than 1.0% to borrow. The yen carry trade
was very popular until the second week in October when the yen rallied from 136
to 116 per dollar in one week. Those that had borrowed yen to invest in other
markets had to scramble to cover their short yen positions once they had
recovered from the shock that the yen could indeed rise in value relative to the
dollar. We believe that a similar trade borrowing gold instead of yen has been
implemented by a variety of borrowers. Estimates vary as to the amount of gold
that has been loaned but it probably amounts to a significant percentage of
total central bank holdings. Of course, much of this activity is borrowing by
gold mining companies using gold loans as a financial maneuver. However,
borrowing gold to finance other activities is considerably more risky. We
believe that there is a large short position in the gold market which will
eventually have to be covered.
The recent global economic turmoil has caused some imbalances to appear.
One is the growth in the U.S. current account deficit. American citizens have
become the consumers of last resort and this has caused the trade deficit to
rise significantly. Currently, the U.S. is running a monthly trade deficit of
nearly $15 billion and this could rise further in the next few months. We
believe that foreign investors may become increasingly hesitant to keep
financing these deficits which will likely result in a weaker dollar. A weaker
dollar is generally positive for gold prices.
Let's Talk Stocks
The following are stock specifics on selected holdings of our Fund.
Favorable earnings prospects do not necessarily translate into higher stock
prices, but they do express a positive trend which we believe will develop over
time. The share prices of foreign holdings are stated in U.S. dollar equivalent
terms as of December 31, 1998.
Anglogold Ltd. (ANGJ.J - $39.02 - Johannesburg Stock Exchange) comprises the
South African gold assets of the Anglo American Group. The company's
reorganization involved an offering of shares in Vaal Reefs to shareholders in
the other mines and then a name change from Vaal Reefs to Anglogold. The company
is solely focused on gold and in the future, management efforts will not be
diluted by other mining activities. Over time, we expect the company will expand
outside South Africa, possibly by
4
<PAGE>
acquiring Minorco's gold assets. In the meantime, further improvements can be
expected from the company's extensive South African assets.
Barrick Gold Corp. (ABX - $19.50 - NYSE) is one of the world's leading gold
mining companies. Much of Barrick's growth has come from their very high quality
mines near Elko in Nevada, which the company purchased in the early 1980s.
Barrick has used cash flows from its Nevada Mines and the profits from the
industry's most successful hedging programs to acquire other gold assets in both
North America and overseas. Barrick has low operating costs, a strong balance
sheet and entrepreneurial management.
Euro-Nevada Mining Corp. (EN.TO - $16.28 - Toronto Stock Exchange) is a sister
company of Franco-Nevada and shares the same management. However, Euro-Nevada
only invests in gold royalty properties. The company's flagship royalty
properties are its 4% net smelter return and 5% net profits interest royalty on
Barrick Gold's Meikle Mine in the Carlin Trend of Nevada. The company has
assembled impressive royalty properties, many of which are in production. Among
a number of recent exciting developments is the continuing flow of news from the
company's Midas joint venture in Nevada with Franco-Nevada. Euro-Nevada owns 50%
of this project, which will be one of the lowest cost gold mines in the world
when it comes into production.
Franco-Nevada Mining Corp. (FN.TO - $19.11 - Toronto Stock Exchange) is a
Canadian company which invests in gold and other natural resource royalty
properties. Its major assets are the royalties attached to the Goldstrike Mine
operated by Barrick Gold in the Carlin Trend of Nevada. The company's other main
gold interest is a joint venture with Euro-Nevada at Midas, also in Nevada,
where exploration drilling is taking place. Recently, Franco-Nevada acquired a
royalty over most of the Stillwater ore body in Montana from the Manville
Corporation. Franco-Nevada also owns a royalty over the Pandora platinum
property controlled by Amplats Platinum in South Africa. The company has a very
strong balance sheet, which was further strengthened by an equity offering that
was completed in January 1998.
GoldCorp Inc. (GA.TO - $5.66 - Toronto Stock Exchange) is a mid-sized Canadian
gold producer with two producing gold mines and two industrial mineral
operations. The company's most significant asset is the Red Lake Mine, which is
part of a major gold camp in Canada. Exploration drilling has revealed
previously unknown high-grade ore zones, which will add significantly to the
mine's reserves. These new discoveries will result in increased production at
significantly lower costs. GoldCorp is undervalued relative to other mid-sized
producers and we expect management to add significantly to shareholder value.
Placer Dome Inc. (PDG - $11.50 - NYSE) is one of the leading gold mining
companies in North America. In 1998, the company expects to produce 2.9 million
ounces of gold and over 10 million ounces of silver. Placer Dome also has copper
interests. The company operates mines in North America, Australia, Papua New
Guinea and Chile. Placer Dome's most profitable mine is the Pipeline in the
United States which produces gold at a cash cost of less than $100 per ounce.
For 1998, the company expects its cash costs not to exceed $160 per ounce.
Placer's main development property is located in Venezuela which is a large
project expected to cost over $500 million to bring into production.
5
<PAGE>
Stillwater Mining Co. (SWC - $41.00 - AMEX) is the only U.S. producer of
platinum and palladium, rare precious metals used in many industrial
applications and in the jewelry industry. The largest use for platinum is in
catalytic converters for the auto industry, while about half of the supply of
palladium is consumed in the production of electronic components for personal
computers and cellular telephones. Historically, platinum has traded at a
premium to the gold price. Russia is the world's major producer of palladium.
However, due to uncertainties about supplies, combined with strong demand, the
price of palladium has risen sharply during the past year. Stillwater controls a
massive high-grade platinum/palladium ore body in southern Montana. New
management has been successful in improving mining operations and is now
embarking on an expansion program. The company has excellent growth potential.
Minimum Initial Investment - $1,000
The Fund's minimum initial investment for both regular and retirement
accounts is $1,000. There are no subsequent investment minimums. No initial
minimum is required for those establishing an Automatic Investment Plan.
Additionally, The Gabelli Gold Fund and other Gabelli Funds are available
through the no-transaction fee programs at many major discount brokerage firms.
The Roth IRA
The Taxpayer Relief Act of 1997 included new tax incentives and more
opportunities to save for retirement and other major expenditures. The Roth IRA
is just one of these new opportunities now available at Gabelli Funds. Our
investor representatives are available at 1-800-GABELLI (1-800-422-3554) to
speak with you about the advantages of converting to a Roth IRA and to discuss
your investment choices.
Internet
You can now visit us on the Internet. Our home page at
http://www.gabelli.com contains information about Gabelli Asset Management Inc.,
the Gabelli Mutual Funds, IRAs, 401(k)s, quarterly reports, closing prices and
other current news. You can send us e-mail at [email protected].
6
<PAGE>
In Conclusion
The Fund remains concentrated in leading gold companies and mid-sized gold
producers with excellent growth potential. These companies are highly
operationally leveraged and should perform well in a higher gold price
environment.
The Fund's daily net asset value is available in the financial press and
each evening after 6:00 PM (Eastern Time) by calling 1-800-GABELLI
(1-800-422-3554). The Fund's Nasdaq symbol is GOLDX. Please call us during the
business day for further information.
We thank you for your loyalty and as always, pledge our best efforts on
your behalf.
Sincerely,
Caesar Bryan
President and Portfolio Manager
January 29, 1999
----------------------------------------------------------------------
Top Ten Holdings
December 31, 1998
Stillwater Mining Co. Homestake Mining Co.
GoldCorp Inc. Franco-Nevada Mining Corp.
Euro-Nevada Mining Corp. Gold Fields Ltd.
Harmony Gold Mining Ltd. Meridian Gold Inc.
Barrick Gold Corp. Placer Dome Inc.
----------------------------------------------------------------------
NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period stated in this report. The manager's views
are subject to change at any time based on market and other conditions.
7
<PAGE>
Gabelli Gold Fund, Inc.
Portfolio of Investments -- December 31, 1998
================================================================================
Market
Shares Cost Value
------ ---- ------
COMMON STOCKS -- 100.9%
Metals and Mining -- 100.9%
Australia -- 10.5%
345,000 Lihir Gold Ltd.+ ..................... $ 487,044 $ 381,956
300,000 Normandy Mining Ltd. ................. 350,817 282,820
80,000 Ranger Minerals NL+ .................. 235,400 196,275
385,000 Resolute Samantha Ltd. ............... 460,300 271,565
100,000 Ross Mining NL ....................... 64,380 55,202
----------- -----------
1,597,941 1,187,818
----------- -----------
Ireland -- 1.2%
214,771 Glencar Explorations plc+ ............ 140,524 130,428
----------- -----------
North America -- 59.1%
30,000 Barrick Gold Corp. ................... 630,813 585,000
32,600 Bema Gold Corp.+ ..................... 66,803 26,488
40,700 Euro-Nevada Mining Corp. ............. 428,166 662,460
26,700 Franco-Nevada Mining Corp. ........... 461,553 510,205
13,600 Getchell Gold Corp.+ ................. 219,970 370,600
122,900 GoldCorp Inc., Cl. A+ ................ 546,513 696,140
35,000 Golden Star Resources Ltd.+ .......... 273,762 35,320
100,000 Greenstone Resources Ltd.+ ........... 77,431 89,196
94,200 Guyanor Resources SA, Cl. B+ ......... 142,317 36,798
63,640 Homestake Mining Co. ................. 664,021 584,693
124,700 IAM Gold+ ............................ 491,911 324,752
55,000 Kinross Gold Corp.+ .................. 204,372 126,405
10,000 Meridian Gold Inc.+ .................. 43,000 56,875
70,000 Meridian Gold Inc., Instl.+ .......... 253,534 410,172
168,700 Moydow Mines
International Inc.+ (a) ............ 103,606 103,910
17,700 Newmont Mining Corp. ................. 515,635 319,706
40,000 Placer Dome Inc. ..................... 564,856 460,000
23,350 Stillwater Mining Co.+ ............... 302,207 957,349
176,000 TVX Gold Inc.+ ....................... 856,959 310,753
22,437 Venoro Gold Corp., Cl. A+ ............ 88,428 1,169
----------- -----------
6,935,857 6,667,991
----------- -----------
Peru -- 1.3%
23,801 Cia De Minas Buenaventura
SA, Cl. C .......................... 85,310 143,293
----------- -----------
South Africa -- 28.0%
8,529 Anglogold Ltd (a) .................... 575,717 332,840
5,400 Anglogold Ltd., ADR .................. 144,720 105,638
21,658 Ashanti Goldfields Ltd.(a) ........... 1,897 2,166
15,000 Ashanti Goldfields Ltd., ADR ......... 117,567 140,625
205,000 Avgold Ltd.+(a) ...................... 175,409 109,912
46,000 Driefontein Consolidated
Ltd., ADR .......................... 319,463 184,000
120,000 Durban Roodepoort Deep
Ltd. +(a) .......................... 420,797 329,160
95,000 Gold Fields Ltd. +(a) ................ 657,489 497,461
70,000 Harmony Gold Mining Ltd.+(a) ......... 297,728 331,650
58,000 Harmony Gold Mining Ltd.,
ADR+ ............................... 385,850 275,500
26,000 Impala Platinum Holdings
Ltd., ADR .......................... 308,425 343,199
128,355 Kalahari Goldridge Mining
Co. Ltd.+ .......................... 72,594 49,094
367,750 Northam Platinum Ltd.+ ............... 452,320 203,173
90,000 Randfontein Estates Gold
Mining Co. Ltd.+ ................... 303,306 198,891
52,200 West Rand Consolidated
Mines Ltd. + ....................... 142,175 57,678
----------- -----------
4,375,457 3,160,987
----------- -----------
United Kingdom -- 0.8%
34,273 Randgold Resources Ltd.,
ADR+ ............................... 316,886 85,683
----------- -----------
TOTAL COMMON STOCKS .................. 13,451,975 11,376,200
----------- -----------
Options -- 0.2%
South Africa -- 0.2%
47,000 Durban Roodepoort Deep
Ltd.+ .............................. 143,391 18,376
23,630 Durban Roodepoort Deep
Ltd., Ser. B+ ...................... 54,682 8,235
----------- -----------
TOTAL Options ........................ 198,073 26,611
----------- -----------
TOTAL INVESTMENTS --
101.1% ............................. $13,650,048 11,402,811
===========
Other Assets and
Liabilities (Net) -- (1.1)% ........ (127,001)
-----------
NET ASSETS -- 100.0%
(1,990,617 shares outstanding) ...... $11,275,810
===========
NET ASSET VALUE,
Offering and Redemption
Price Per Share .................... $5.66
-----
- ----------
For Federal tax purposes:
Aggregate cost ....................... $14,066,516
===========
Gross unrealized appreciation ........ $ 1,570,935
Gross unrealized depreciation ........ (4,234,640)
-----------
Net unrealized depreciation .......... $(2,663,705)
===========
- ----------
(a) Security fair valued as determined by the Board of Directors.
+ Non-income producing security.
ADR - American Depositary Receipt.
Instl - Institutional Receipt.
% of
Market Market
Geographic Diversification Value Value
- -------------------------- ----- -----
North America 58.5% $ 6,667,991
South Africa 27.9% 3,187,598
Australia 10.4% 1,187,818
Europe 1.9% 216,111
Latin America 1.3% 143,293
------ -----------
100.0% $11,402,811
====== ===========
See accompanying notes to financial statements.
8
<PAGE>
Gabelli Gold Fund, Inc.
Statement of Assets and Liabilities
December 31, 1998
================================================================================
Assets:
Investments, at value (Cost $13,650,048) .................. $ 11,402,811
Foreign currency, at value (Cost $89,621) ................. 89,325
Dividends and interest receivable ......................... 14,598
Receivable for investments sold ........................... 287,265
Receivable for capital shares sold ........................ 17,000
Deferred organizational expenses .......................... 10,123
------------
Total Assets ............................................ 11,821,122
------------
Liabilities:
Payable for investments purchased ......................... 78,128
Payable for capital shares redeemed ....................... 4,500
Payable for investment advisory fees ...................... 9,741
Payable for distribution fees ............................. 2,440
Payable to custodian ...................................... 360,617
Other accrued expenses .................................... 89,886
------------
Total Liabilities ....................................... 545,312
------------
Net Assets applicable to 1,990,617
shares outstanding .................................... $ 11,275,810
============
Net Assets consist of:
Capital stock, at par value ............................... $ 1,991
Additional paid-in capital ................................ 18,973,161
Accumulated net investment loss ........................... (247,016)
Accumulated net realized loss on investments
and foreign currency transactions ....................... (5,204,151)
Net unrealized depreciation on investments
and foreign currency transactions ....................... (2,248,175)
------------
Total Net Assets ........................................ $ 11,275,810
============
Net Asset Value, offering and redemption
price per share ($11,275,810 / 1,990,617
shares outstanding; 1,000,000,000 shares
authorized of $0.001 par value) ....................... $5.66
=====
Statement of Operations
For the Year Ended December 31, 1998
================================================================================
Investment Income:
Dividends (net of foreign taxes of $10,072) ............... $ 123,991
Interest .................................................. 17,433
-----------
Total Investment Income ................................. 141,424
-----------
Expenses:
Investment advisory fees .................................. 121,860
Distribution fees ......................................... 30,465
Registration fees ......................................... 38,801
Legal and audit fees ...................................... 36,622
Shareholder services fees ................................. 32,522
Shareholder report expenses ............................... 27,905
Directors' fees ........................................... 24,599
Custodian fees ............................................ 20,110
Organizational expenses ................................... 18,240
Interest expense .......................................... 5,095
Miscellaneous expenses .................................... 6,686
-----------
Total Expenses .......................................... 362,905
-----------
Net Investment Loss ..................................... (221,481)
-----------
Net Realized and Unrealized Gain (Loss)
on Investments:
Net realized loss on investments
and foreign currency transactions ....................... (3,093,749)
Net change in unrealized depreciation
on investments and foreign currency
transactions ............................................ 1,873,747
-----------
Net realized and unrealized loss on
investments ............................................. (1,220,002)
-----------
Net decrease in net assets resulting
from operations ........................................... $(1,441,483)
===========
Statement of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Operations:
Net investment loss ................................................. $ (221,481) $ (355,020)
Net realized loss on investments and foreign currency transactions .. (3,093,749) (1,233,715)
Net change in unrealized depreciation on investments
and foreign currency transactions ................................. 1,873,747 (6,650,029)
------------ ------------
Net decrease in net assets resulting from operations .............. (1,441,483) (8,238,764)
------------ ------------
Distributions to shareholders:
In excess of net investment income .................................. -- (75,290)
------------ ------------
Capital share transactions:
Net increase (decrease) in net assets from capital share transactions 4,620,443 (552,389)
------------ ------------
Net increase (decrease) in net assets ............................. 3,178,960 (8,866,443)
Net Assets:
Beginning of period ................................................. 8,096,850 16,963,293
------------ ------------
End of period ....................................................... $ 11,275,810 $ 8,096,850
============ ============
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
Gabelli Gold Fund, Inc.
Notes to Financial Statements
================================================================================
1. Description. The Gabelli Gold Fund, Inc. (the "Fund") was organized on May
13, 1994 as a Maryland corporation. The Fund is a diversified, open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Fund's primary objective is long term
capital appreciation. The Fund commenced investment operations on July 11, 1994.
2. Significant Accounting Policies. The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Security Valuation. Portfolio securities listed or traded on a nationally
recognized securities exchange, quoted by the National Association of Securities
Dealers Automated Quotations, Inc. ("Nasdaq") or traded on foreign exchanges are
valued at the last sale price on that exchange as of the close of business on
the day the securities are being valued (if there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day). All other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest average of the bid and asked prices. Portfolio securities traded on more
than one national securities exchange or market are valued according to the
broadest and most representative market, as determined by Gabelli Funds, Inc.
(the "Adviser"). Securities and assets for which market quotations are not
readily available are valued at their fair value as determined in good faith
under procedures established by and under the general supervision of the Board
of Directors. Short term debt securities with remaining maturities of 60 days or
less are valued at amortized cost, unless the Directors determine such does not
reflect the securities' fair value, in which case these securities will be
valued at their fair value as determined by the Directors. Debt instruments
having a greater maturity are valued at the highest bid price obtained from a
dealer maintaining an active market in those securities. Options are valued at
the last sale price on the exchange on which they are listed. If no sales of
such options have taken place that day, they will be valued at the mean between
their closing bid and asked prices.
Repurchase Agreements. The Fund may enter into repurchase agreements with
primary government securities dealers recognized by the Federal Reserve Bank of
New York, with member banks of the Federal Reserve System or with other brokers
or dealers that meet credit guidelines established by the Directors. Under the
terms of a typical repurchase agreement, the Fund takes possession of an
underlying debt obligation subject to an obligation of the seller to repurchase,
and the Fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Fund's holding period. The Fund will always
receive and maintain securities as collateral whose market value, including
accrued interest, will be at least equal to 100% of the dollar amount invested
by the Fund in each agreement. The Fund will make payment for such securities
only upon physical delivery or upon evidence of book entry transfer of the
collateral to the account of the custodian. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to maintain the adequacy of the collateral. If
the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
Foreign Currency Translation. The books and records of the Fund are maintained
in United States (U.S.) dollars. Foreign currencies, investments and other
assets and liabilities are translated into U.S. dollars at the exchange rates
prevailing at the end of the period, and purchases and sales of investment
securities, income and expenses are translated at the exchange rate prevailing
on the respective dates of such transactions. Unrealized gains and losses, which
result from changes in foreign exchange rates and/or changes in market prices of
securities, have been included
10
<PAGE>
Gabelli Gold Fund, Inc.
Notes to Financial Statements (Continued)
================================================================================
in unrealized appreciation/depreciation on investments. Net realized foreign
currency gains and losses resulting from changes in exchange rates include
foreign currency gains and losses between trade date and settlement date on
investment securities transactions, foreign currency transactions and the
difference between the amounts of interest and dividends recorded on the books
of the Fund and the amounts actually received. The portion of foreign currency
gains and losses related to fluctuation in exchange rates between the initial
trade date and subsequent sale trade date is included in realized gain/(loss) on
investments.
Securities Transactions and Investment Income. Securities transactions are
accounted for on the trade date with realized gain or loss on investments
determined by using the identified cost method. Interest income (including
amortization of premium and accretion of discount) is recorded as earned.
Dividend income is recorded on the ex-dividend date.
Dividends and Distributions to Shareholders. Dividends and distributions, if
any, to shareholders are recorded on the ex-dividend date. Income distributions
and capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund, timing differences and
differing characterization of distributions made by the Fund.
For the year ended December 31, 1998, reclassifications were made to increase
accumulated net investment loss for $356,136 and decrease accumulated net
realized loss on investments and foreign currency transactions for $57,382 with
an offsetting adjustment to additional paid-in capital.
Provision for Income Taxes. The Fund has qualified and intends to continue to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. As a result, a Federal income tax provision is
not required.
Dividends and interest from non-U.S. sources received by the Fund are generally
subject to non-U.S. withholding taxes at rates ranging up to 30%. Such
withholding taxes may be reduced or eliminated under the terms of applicable
U.S. income tax treaties, and the Fund intends to undertake any procedural steps
required to claim the benefits of such treaties. If the value of more than 50%
of the Fund's total net assets at the close of any taxable year consists of
stocks or securities of non-U.S. corporations, the Fund is permitted and may
elect to treat any non-U.S. taxes paid by it as paid by its shareholders.
The Fund has a net capital loss carryforward for Federal income tax purposes at
December 31, 1998 of $4,787,682. This capital loss carryforward is available to
reduce future distributions of net capital gains to shareholders. $6,761 of the
loss carryforward is available through 2002; $307,937 is available through 2003;
$491,124 is available through 2004; $1,244,045 is available through 2005; and
$2,737,815 is available through 2006.
3. Investment Advisory Agreement. The Fund has entered into an investment
advisory agreement (the "Advisory Agreement") with the Adviser which provides
that the Fund will pay the Adviser a fee, computed daily and paid monthly, at
the annual rate of 1.00% of the value of the Fund's average daily net assets. In
accordance with the Advisory Agreement, the Adviser provides a continuous
investment program for the Fund's portfolio, oversees the administration of all
aspects of the Fund's business and affairs and pays the compensation of all
Officers and Directors of the Fund who are its affiliates.
11
<PAGE>
Gabelli Gold Fund, Inc.
Notes to Financial Statements (Continued)
================================================================================
4. Distribution Plan. The Fund's Board of Directors has adopted a distribution
plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. For the year ended
December 31, 1998, the Fund incurred distribution costs payable to Gabelli &
Company, Inc., an indirect wholly-owned subsidiary of the Adviser, of $30,465,
or 0.25% of average daily net assets, the annual limitation under the Plan. Such
payments are accrued daily and paid monthly.
5. Organizational Expenses. The organizational expenses of the Fund are being
amortized on a straight-line basis over a period of 60 months.
6. Portfolio Securities. Purchases and sales of securities for the year ended
December 31, 1998, other than short term securities, aggregated $12,202,031 and
$7,277,179, respectively.
7. Bank Loan. The Fund has access to an unsecured line of credit from the
custodian for temporary borrowing purposes. Borrowings under this arrangement
bear interest at 0.75% above the Federal Funds rate on outstanding balances.
There were no borrowings outstanding at December 31, 1998.
The average daily amount of borrowings outstanding during the year ended
December 31, 1998 was $84,611, with a related weighted average interest rate of
6.02%. The maximum amount borrowed at any time during the year ended December
31, 1998 was $2,380,000.
8. Capital Stock Transactions. Transactions in shares of capital stock were as
follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
--------------------- ---------------------
Shares Amount Shares Amount
------- -------- ------- --------
<S> <C> <C> <C> <C>
Shares sold ................................... 9,430,921 $ 59,452,171 9,312,417 $ 92,169,066
Shares issued upon reinvestment of dividends .. -- -- 12,000 70,322
Shares redeemed ............................... (8,819,870) (54,831,728) (9,321,359) (92,791,777)
---------- ------------ ---------- ------------
Net increase (decrease) ..................... 611,051 $ 4,620,443 3,058 $ (552,389)
========== ============ ========== ============
</TABLE>
9. Subsequent Event. On February 9, 1999, the Adviser reorganized its operations
and corporate structure by transferring a portion of its assets and liabilities
to a successor adviser, Gabelli Funds, LLC, which is wholly owned by Gabelli
Asset Management Inc., a newly formed publicly traded company that is 80% owned
by the former Adviser. Counsel to the former Adviser has concluded that the
ownership change does not constitute an assignment as defined by the Investment
Company Act of 1940, as amended.
12
<PAGE>
Gabelli Gold Fund, Inc.
Financial Highlights
================================================================================
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Period Ended December 31,
-------------------------------------------------------
1998 1997 1996 1995 1994+
---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period .. $ 5.87 $ 12.32 $ 11.41 $ 11.07 $ 10.00
------ ------- ------- ------- -------
Net investment loss ................... (0.03) (0.26) (0.19)(a) (0.15)(a) 0.00(a)
Net realized and unrealized gain (loss)
on investments ...................... (0.18) (6.13) 1.10 0.49 1.07(b)
------ ------- ------- ------- -------
Total from investment operations ...... (0.21) (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 ........ $ 5.66 $ 5.87 $ 12.32 $ 11.41 $ 11.07
====== ======= ======= ======= =======
Total return ++ ....................... (3.6)% (51.9)% 8.0% 3.1% 10.7%
====== ======= ======= ======= =======
Ratios to average net assets and
supplemental data:
Net assets, end of period (in 000's) .. $11,276 $8,097 $16,963 $14,510 $17,634
Ratio of net investment loss
to average net assets ............... (1.82)% (2.60)% (1.41)% (1.12)% (0.26)%(c)
Ratio of operating expenses
to average net assets (d) ........... 2.98% 3.24% 2.17% 2.25% 2.04%(c)
Portfolio turnover rate ............... 63% 27% 54% 38% 12%
</TABLE>
- ----------
+ From commencement of operations on July 11, 1994.
++ Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the
period including reinvestment of dividends. Total return for the period of
less than one year is not annualized.
(a) Based on average month-end shares outstanding.
(b) Includes the effect of realized gains prior to significant increases in
shares outstanding.
(c) Annualized.
(d) The Fund incurred interest expense during the years ended December 31,
1998 and 1997. If interest expense had not been incurred, the ratios of
operating expenses to average net assets would have been 2.93% and 3.10%,
respectively. In addition, the ratio for the year ended December 31, 1997
does not include a reduction of expenses for custodian fee credits.
Including such credits, the ratio would have been 3.23%.
See accompanying notes to financial statements.
14
<PAGE>
Gabelli Gold Fund, Inc.
Report of Ernst & Young LLP, Independent Auditors
================================================================================
Shareholders and Board of Directors
Gabelli Gold Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Gabelli Gold Fund, Inc. as of December 31,
1998, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended and the financial highlights for each of periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and the financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1998 by correspondence with the custodian
and others. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Gabelli Gold Fund, Inc. at December 31, 1998, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the indicated
periods, in conformity with generally accepted accounting principles.
New York, New York
February 12, 1999
14
<PAGE>
- --------------------------------------------------------------------------------
Gabelli Family of Funds
- --------------------------------------------------------------------------------
Gabelli Asset Fund -------------------------------------------------------------
Seeks to invest primarily in a diversified portfolio of common stocks selling at
significant discounts to their private market value. The Fund's primary
objective is growth of capital. (No-load)
Portfolio Manager: Mario J. Gabelli, CFA
Gabelli Growth Fund ------------------------------------------------------------
Seeks to invest primarily in large cap stocks believed to have favorable, yet
undervalued, prospects for earnings growth. The Fund's primary objective is
capital appreciation. (No-Load)
Portfolio Manager: Howard F. Ward, CFA
Gabelli Westwood Equity Fund ---------------------------------------------------
Seeks to invest primarily in the common stock of seasoned companies believed to
have proven records and above average historical earnings growth. The Fund's
primary objective is capital appreciation. (No-load)
Portfolio Manager: Susan M. Byrne
Gabelli Small Cap Growth Fund --------------------------------------------------
Seeks to invest primarily in common stock of smaller companies (market
capitalizations less than $500 million) believed to have rapid revenue and
earnings growth potential. The Fund's primary objective is capital appreciation.
(No-load)
Portfolio Manager: Mario J. Gabelli, CFA
Gabelli Westwood SmallCap Equity Fund ------------------------------------------
Seeks to invest primarily in smaller capitalization equity securities with
market capitalizations of $1 billion or less. The Fund's primary objective is
long-term capital appreciation. (No-load)
Portfolio Manager: Lynda J. Calkin, CFA
Gabelli Westwood Mighty Mites(SM) Fund -----------------------------------------
Seeks to invest in micro-cap companies that have market capitalizations of $300
million or less. The Fund's primary objective is long-term capital appreciation.
(No-Load)
Team Managed by: Mario J. Gabelli, Marc J. Gabelli,
Laura S. Linehan and Walter K. Walsh
Gabelli Equity Income Fund -----------------------------------------------------
Seeks to invest primarily in equity securities with above market average yields.
The Fund pays quarterly dividends and seeks a high level of total return with an
emphasis on income. (No-load)
Portfolio Manager: Mario J. Gabelli, CFA
Gabelli ABC Fund ---------------------------------------------------------------
Seeks to invest in securities with attractive opportunities for appreciation or
investment income. The Fund's primary objective is total return in various
market conditions without excessive risk of capital loss. (No-load)
Portfolio Manager: Mario J. Gabelli, CFA
Gabelli Westwood Balanced Fund -------------------------------------------------
Seeks to invest in a balanced and diversified portfolio of stocks and bonds. The
Fund's primary objective is both capital appreciation and current income.
(No-load)
Portfolio Managers: Susan M. Byrne & Patricia R. Fraze
Gabelli Westwood Intermediate Bond Fund ----------------------------------------
Seeks to invest in a diversified portfolio of high quality bonds with various
maturities. The Fund's primary objective is total return. (No-load)
Portfolio Manager: Patricia R. Fraze
Gabelli Value Fund -------------------------------------------------------------
Seeks to invest in securities of companies believed to be undervalued. The
non-diversified Fund's primary objective is long-term capital appreciation. Max.
Sales Charge: 5 1/2%
Portfolio Manager: Mario J. Gabelli, CFA
Global Series
Gabelli Global Telecommunications Fund
Seeks to invest in telecommunications companies throughout the world -
targeting undervalued companies with strong earnings and cash flow dynamics.
The Fund's primary objective is capital appreciation. (No-load)
Team Manager: Mario J. Gabelli, CFA
Gabelli Global Interactive Couch Potato(R)Fund
Seeks to invest in securities of companies involved with communications,
creativity and copyright. The Fund also seeks to invest in companies
participating in emerging technological advances in interactive services and
products. The Fund's primary objective is capital appreciation. (No-load)
Portfolio Manager: Marc J. Gabelli
Gabelli Global Opportunity Fund
Seeks to invest in common stock of companies which have rapid growth in
revenues and earnings and potential for above average capital appreciation or
are undervalued. The Fund's primary objective is capital appreciation.
(No-load)
Portfolio Managers: Marc J. Gabelli and Caesar Bryan
Gabelli Global Convertible Securities Fund
Seeks to invest principally in bonds and preferred stocks which are
convertible into common stock of foreign and domestic companies. The Fund's
primary objective is total return through a combination of current income and
capital appreciation. (No-load)
Portfolio Manager: Hart Woodson
Gabelli Gold Fund --------------------------------------------------------------
Seeks to invest in a global portfolio of equity securities of gold mining and
related companies. The Fund's objective is long-term capital appreciation.
Investment in gold stocks is considered speculative and is affected by a variety
of worldwide economic, financial and political factors. (No-load)
Portfolio Manager: Caesar Bryan
Gabelli International Growth Fund ----------------------------------------------
Seeks to invest in the equity securities of foreign issuers with long-term
capital appreciation potential. The Fund offers investors global
diversification. (No-load)
Portfolio Manager: Caesar Bryan
The six funds above invest in foreign securities which involves risks not
ordinarily associated with investments in domestic issues, including currency
fluctuation, economic and political risks.
Gabelli U.S. Treasury Money Market Fund ----------------------------------------
Seeks to invest exclusively in short-term U.S. Treasury securities. The Fund's
primary objective is to provide high current income consistent with the
preservation of principal and liquidity. (No-load)
Portfolio Manager: Judith A. Raneri
The Treasurer's Fund -----------------------------------------------------------
Three money market portfolios designed to generate superior returns without
compromising portfolio safety. U.S. Treasury Money Market seeks to invest in
U.S. Treasury bills, notes and bonds. Tax Exempt Money Market seeks to invest in
municipal securities. Domestic Prime Money Market seeks to invest in prime
quality, domestic money market instruments. (No-Load)
Portfolio Manager: Judith A. Raneri
An investment in a Money Market Fund is neither insured nor guaranteed by the
U.S. Government or the Federal Deposit Insurance Corporation. Although the Funds
seek to preserve the value of an investment at $1.00 per share, there can be no
assurance that the Funds will maintain a stable $1.00 per share net asset value,
so it is possible to lose money by investing in the Funds.
The Funds listed above are distributed by Gabelli & Company, Inc.
- --------------------------------------------------------------------------------
To receive a prospectus, call 1-800-GABELLI (422-3554). The prospectus gives
a more complete description of the Fund, including fees and expenses.
Read the prospectus carefully before you invest or send money.
1-800-GABELLI
(1-800-422-3554) o fax: 1-914-921-5118 o www.gabelli.com o [email protected]
One Corporate Center, Rye, New York 10580
<PAGE>
Gabelli Gold Fund, Inc.
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
fax: 1-914-921-5118
http://www.gabelli.com
e-mail: [email protected]
(Net Asset Value may be obtained daily by calling
1-800-GABELLI after 6:00 P.M.)
Board of Directors
Mario J. Gabelli, CFA Werner J. Roeder, MD
Chairman and Chief Director of Surgery
Investment Officer Lawrence Hospital
Gabelli Asset Management Inc.
E. Val Cerutti Anthonie C. van Ekris
Chief Executive Officer Managing Director
Cerutti Consultants, Inc. BALMAC International, Inc.
Anthony J. Colavita Daniel E. Zucchi
Attorney-at-Law President
Anthony J. Colavita, P.C. Daniel E. Zucchi Associates
Karl Otto Pohl
Former President
Deutsche Bundesbank
Officers and Portfolio Managers
Caesar Bryan Bruce N. Alpert
President and Vice President
Portfolio Manager and Treasurer
James E. McKee
Secretary
Distributor
Gabelli & Company, Inc.
Custodian, Transfer Agent and Dividend Agent
State Street Bank and Trust Company
Legal Counsel
Willkie Farr & Gallagher
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of
Gabelli Gold Fund, Inc. It is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
