<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1999
SECURITIES ACT FILE NO. 33-79180
INVESTMENT COMPANY ACT FILE NO. 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. 7 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 8 [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, LLC
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, LLC Willkie Farr & Gallagher
One Corporate Center 787 Seventh Avenue
Rye, New York 10580-1434 New York, New York 10019
It is proposed that this filing will be effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[X] on May 3, 1999 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.
<PAGE> 2
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
<TABLE>
<S> <C>
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
</TABLE>
OFFICERS AND PORTFOLIO MANAGERS
<TABLE>
<S> <C>
Caesar Bryan Bruce N. Alpert
President and Vice President
Portfolio Manager and Treasurer
James E. McKee
Secretary
</TABLE>
QUESTIONS?
Call 1-800-GABELLI
or your investment representative.
GABELLI
GOLD
FUND, INC.
PROSPECTUS
MAY 1, 1999
THE SECURITIES AND EXCHANGE COMMISSION
HAS NOT APPROVED OR DISAPPROVED THE SHARES
DESCRIBED IN THIS PROSPECTUS OR DETERMINED
WHETHER THIS PROSPECTUS IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 3
GABELLI GOLD FUND, INC. TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
RISK/RETURN SUMMARY AND FUND EXPENSES
Carefully review this important 3-5
section, which summarizes the
Fund's investments, risks, past
performance and fees.
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
Review this section for 6-7
information on investment
strategies and their risks.
FUND MANAGEMENT
Review this section for details 8 The Investment Adviser
on the people and organizations 8 The Portfolio Manager
who oversee the Fund. 8 The Distributor
SHAREHOLDER INFORMATION
Review this section and the 9 Pricing of Fund Shares
accompanying Owner's Manual for 9 Purchasing, Selling and Exchanging Shares
details on how shares are 10 Distribution Arrangements
valued, how to purchase, sell 10 Dividends, Distributions and Taxes
and exchange shares, related 10 Other Shareholder Services
charges and payments of
dividends and distributions.
FINANCIAL HIGHLIGHTS
11
BACK COVER
Where to learn more about this Fund
</TABLE>
2
<PAGE> 4
RISK/RETURN SUMMARY AND FUND EXPENSES
- -
<TABLE>
<S> <C>
RISK/RETURN SUMMARY
INVESTMENT OBJECTIVE The Fund seeks to provide investors with long-term
appreciation of capital.
PRINCIPAL INVESTMENT The Fund invests primarily in equity securities of foreign
STRATEGY and domestic issuers engaged in principally gold-related
activities. The Fund seeks to achieve its objective by
focusing on stocks that are undervalued but have favorable
prospects for growth. The Fund concentrates its investments
in gold-related industries.
PRINCIPAL INVESTMENT RISKS The Fund's share prices will fluctuate with changes in the
market value of the Fund's securities. Stocks are subject to
market, economic and business risks. The Fund is also
subject to the risk that the growth potential of particular
stocks is incorrect. Foreign securities, especially those in
emerging markets, are subject to currency, information and
political risks. Securities of companies involved in
gold-related industries are considered speculative and the
prices of these securities may experience greater volatility
than companies not involved in this industry. Because of the
concentration in gold-related securities, the Fund may
experience greater volatility than a broader based fund.
When you sell Fund shares, they may be worth less than what
you paid for them. You can lose money by investing in the
Fund.
WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
[ ] ARE SEEKING A LONG-TERM GOAL SUCH AS RETIREMENT
[ ] ARE LOOKING TO ADD AN AGGRESSIVE GROWTH COMPONENT TO
YOUR PORTFOLIO
[ ] ARE WILLING TO ACCEPT HIGHER RISKS OF INVESTING IN A
SECTOR OF THE STOCK MARKET IN EXCHANGE FOR LONG TERM RETURNS
This Fund will not be appropriate for anyone:
[ ] SEEKING MONTHLY INCOME
[ ] PURSUING A SHORT-TERM GOAL OR INVESTING EMERGENCY
RESERVES
[ ] SEEKING SAFETY OF PRINCIPAL
</TABLE>
3
<PAGE> 5
RISK/RETURN SUMMARY AND FUND EXPENSES
- -
The chart on this page shows the Fund's annual returns over the past four
years and provides some indication of the risks of investing in the Fund by
showing how its performance has varied from year to year. The table below
compares the Fund's performance over time to that of the Lipper Gold Fund
Average ("LGFA") and the Philadelphia Gold & Silver Index ("PGSI"). The LGFA
represents an unmanaged index composed of gold-related mutual funds, as
tracked by Lipper, Inc. The PGSI is widely recognized, unmanaged index
composed of precious metals-related common stocks. Of course, past
performance does not indicate how the Fund will perform in the future. Both
the chart and table assume reinvestment of dividends and distributions.
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
Best quarter: 1(st)
Qtr 1996 22.70 %
Worst quarter: 4(th)
Qtr 1997 (35.35)%
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)
<TABLE>
<CAPTION>
SINCE INCEPTION
INCEPTION DATE PAST YEAR OF FUND
<S> <C> <C> <C>
GOLD FUND 7/1/94 (3.6)% (11.7)%
Philadelphia Gold & Silver Index (12.4)% (11.1)%
Lipper Gold Fund Average (10.9)% (13.4)%
</TABLE>
4
<PAGE> 6
RISK/RETURN SUMMARY AND FUND EXPENSES
- -
FUND EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND
ASSETS)
Management fees 1.00%
Distribution (12b-1) fees .25%
Other expenses 1.68%
Total annual Fund operating expenses 2.93%
</TABLE>
FEES AND EXPENSES
As an investor in the
Fund, you will pay the
following fees and
expenses when you buy and
hold shares. Annual Fund
operating expenses are
paid out of Fund assets,
and are reflected in the
share price.
There are no front or back end sales charges or
fees for exchanges of Class AAA shares.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
GABELLI GOLD FUND $296 $907 $1,543 $3,252
</TABLE>
EXPENSE EXAMPLE
Use the example shown here
to compare fees and
expenses with those of
other funds. It
illustrates the amount of
fees and expenses you
would pay, assuming the
following:
- $10,000 investment
- 5% annual return
- redemption at the end of
each period
- no changes in the Fund's
operating expenses
Because this example is
hypothetical and for
comparison only, your
actual costs may be higher
or lower.
5
<PAGE> 7
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
- -
INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES
The Fund seeks long-term capital appreciation. To achieve its investment
objective, the Fund invests primarily in the equity securities of foreign and
domestic issuers principally engaged in gold-related activities. There is no
assurance that the Fund will achieve its investment objective.
The Fund provides 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. Because gold (a tangible asset) has not always moved in
close correlation with financial assets, an investment in the Fund would
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 the 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
"gold-related" activities. A company is principally engaged in gold-related
activities if it derives more than 50% of its income or devotes 50% or more
of its assets to those 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. Equity securities include:
- common and preferred stocks;
- securities convertible into common stocks; and
- securities such as rights and warrants that have common stock
characteristics.
In choosing investments, the Adviser focuses on stocks that are undervalued,
but which appear to have favorable prospects for growth. Factors considered
in this determination include capitalization per ounce of production,
capitalization per ounce of recoverable reserves, quality of management and
its ability to create shareholder wealth.
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, including those located in developed as well
as emerging markets. The percentage of Fund assets invested in particular
countries or regions will change from time to time based on the Adviser's
judgment. Among other things, the Adviser will consider the economic
stability and economic outlook of these countries and regions.
As a defensive tactic in unusual market conditions, the Fund may temporarily
invest up to 100% of its assets in money market instruments. This could
potentially keep the Fund from achieving its goal.
RISK FACTORS
Investing in the Fund involves the following risks, listed in the order of
importance. An investment in the Fund is not a bank deposit, is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility," may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of
6
<PAGE> 8
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
- -
the economy or the market as a whole. Market risk is common to most
investments - including stocks and bonds and the mutual funds that invest in
them.
FOREIGN SECURITIES RISK A fund that invests outside the U.S. carries
additional risks that include:
- CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar
and foreign currencies may negatively affect an investment. Adverse
changes in exchange rates may erode or reverse any gains produced by
foreign-currency denominated investments and may widen any losses. The
Fund may, but is not required to, seek to reduce currency risk by
hedging part or all of its exposure to various foreign currencies.
- INFORMATION RISK Key information about an issuer, security or market
may be inaccurate or unavailable.
- POLITICAL RISK Foreign governments may expropriate assets, impose
capital or currency controls, punitive taxes or nationalize a company
or industry. Any of these actions could have a severe effect on
security prices and impair the Fund's ability to bring its capital
economic policy changes, social and political instability, military
action and war.
- ACCESS RISK The risk that some countries may restrict the Fund's access
to investments or offer terms that are less advantageous than those for
local investors. This could limit the attractive investment
opportunities available to the Fund.
GOLD-RELATED RISKS The risk that the stock prices of companies involved in
precious metals-related industries will experience greater volatility than
companies not involved in the precious metals industry. Investments related
to gold and other precious metals and minerals are considered speculative and
are affected by a variety of worldwide 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.
CONCENTRATION RISK Because the Fund will invest more than 25% of its total
assets in securities of companies involved in gold-related or precious
metals-related activities, the Fund may be subject to greater volatility with
respect to its portfolio securities than a fund that is more broadly
diversified.
EMERGING MARKETS RISK Investing in emerging (less developed) markets involves
higher levels of risk, including increased currency, information, liquidity,
market, political and valuation risks. Deficiencies in regulatory oversight,
market infrastructure, shareholder protections and company laws could expose
the Fund to operational and other risks as well. Additionally, emerging
markets often face serious economic problems (such as high external debt,
inflation and unemployment) that could subject the Fund to increased
volatility or substantial declines in value. The typically small size of
these markets 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 securities held by the Fund.
FUND AND MANAGEMENT RISK The risk that a strategy used by the Fund's
management may fail to produce the intended result. The Fund invests in
growth stocks and the Fund's price may decline if the market favors other
types of stocks. If the Adviser is incorrect in its assessment of the growth
prospects of the securities it holds, the value of the Fund's shares may
decline.
7
<PAGE> 9
FUND MANAGEMENT
THE INVESTMENT ADVISER
Gabelli Funds, LLC (the "Adviser"), One Corporate Center, Rye, NY 10580 is a
limited liability company organized in 1999 after a reorganization of the
predecessor, Gabelli Funds, Inc., which was formed in 1980. As of December
31, 1998, Gabelli Funds, LLC and its affiliates manage more than $16.3
billion in assets. Through its portfolio management team, Gabelli Funds, LLC
makes the day-to-day investment decisions and continuously reviews,
supervises and administers the Fund's investment programs.
For these advisory services, the Adviser was paid a fee of 1.00% of average
net assets during the fiscal year ended December 31, 1998. Any portion of the
total fees received by the Adviser may be used by the Adviser to provide
shareholder and administrative services.
THE PORTFOLIO MANAGER
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 and Portfolio Manager
with GAMCO Investors, Inc., a wholly-owned subsidiary of Gabelli Asset
Management Inc., the parent company of the Adviser, and Portfolio Manager of
the Gabelli International Growth Fund, Inc. since June 1995. Mr. Bryan served
as Senior Vice President of Lexington Management Corporation from 1986 until
May 1994.
THE DISTRIBUTOR
Gabelli & Company, Inc. is the Fund's distributor. Its address is One
Corporate Center, Rye, NY 10580.
The Statement of Additional Information has more detailed information about
the Adviser and other service providers.
YEAR 2000. As the year 2000 approaches, an issue has emerged regarding how
the software used by the Fund's service providers can accommodate the date
"2000." Failure to adequately address this issue could result in major
systems or process failures which could disrupt the Fund's operations. 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.
The Fund cannot guarantee, however, that all year 2000 issues will be
identified and corrected by January 1, 2000, and any non-compliant computer
system could hurt key Fund operations, such as shareholder servicing, pricing
and trading. In addition, the Year 2000 problem may adversely affect the
companies in which the Fund invests, particularly companies in foreign
countries. For example, these companies may incur substantial costs to
correct the problem. To the extent that the impact on a Fund holding is
negative, it could seriously affect the Fund's performance.
8
<PAGE> 10
SHAREHOLDER INFORMATION
- -
PRICING OF FUND SHARES
HOW NAV IS CALCULATED
The NAV is calculated by
adding the total value of
the Fund's investments and
other assets, subtracting
its liabilities and then
dividing that figure by the
number of outstanding
shares of the Fund:
NAV =
Total Assets - Liabilities
------------------------------------------------------------------------------
Number of Shares
Outstanding
---------------------------
You can find the Fund's NAV
daily in the Wall Street
Journal and other
newspapers or by calling
1-800-GABELLI
(800-442-3554).
The Fund's net asset value, or NAV, is
determined and its shares are priced
at the close of regular trading of the
New York Stock Exchange, normally at
4:00 p.m., eastern time, on days the
New York Stock Exchange is open. Your
order for purchase, sale or exchange
of shares is priced at the next NAV
calculated after your order is
received by the Fund. This is what is
known as the offering price.
Fund securities are valued as of the
close of trading on the primary
exchange on which they trade. The
Fund's securities are generally valued
at current market prices. If market
quotations are not available, prices
will be based on the average of the
latest bid and asked quotations for
such securities prior to the valuation
time, or the latest bid price if asked
prices are not available. Debt
securities with remaining maturities
of 60 days or less will be 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.
Some Fund securities may be listed on
foreign exchanges that are open on
days (such as U.S. holidays) when the
Fund does not compute its NAV. This
could cause the value of the Fund's
portfolio investments to be affected
on days when you cannot buy or sell
shares.
PURCHASING, SELLING AND EXCHANGING SHARES
Information about purchasing, selling and exchanging your shares is contained
in a separate document called the Owner's Manual. If you have not received
it, please contact your broker or financial consultant or the Fund at the
number listed on the back page of this Prospectus. The Owner's Manual is
considered an integral part of this Prospectus.
9
<PAGE> 11
SHAREHOLDER INFORMATION
- -
DISTRIBUTION ARRANGEMENTS
The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the
1940 Act which authorizes payments by the Fund of .25% of the average daily
net assets of the Fund to compensate the Distributor and other dealers and
investment representatives for services and expenses relating to the sale and
distribution of the Fund's shares. Rule 12b-1 fees are paid from Fund assets
on an ongoing basis, and increase the cost of your investment and may cost
you more than paying other types of sales charges.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Any income the Fund receives in the form of interest or dividends is paid
out, less expenses, to its shareholders. The Fund declares and pays dividends
from net investment income and capital gains, if any, on an annual basis.
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
The Fund expects that its dividends will primarily consist of net investment
income and, if any, short-term and long-term capital gains. Fund
distributions are taxed based on the length of time the Fund holds its
assets, regardless of how long you have held Fund shares. Distributions from
net investment income and short-term capital gains are taxable as ordinary
income. Such distributions are taken into account for tax purposes in the
year in which they are declared, even if they appear on your account
statement the following year. Long-term capital gain distributions are
taxable at long-term capital gain tax rates.
Any time you sell or exchange shares, it is considered a taxable event for
you. Depending on the purchase price and the sale price of the shares you
sell or exchange, you may have a gain or loss on the transaction. You are
responsible for any federal income tax liabilities generated by your
transaction.
You will be notified in January each year about the federal tax status of
distributions made by the Fund. Depending on your residence for tax purposes,
distributions also may be subject to state and local taxes, including
withholding taxes.
TAX IDENTIFICATION NUMBER
The Fund is required to withhold 31% of taxable dividends,
capital gains distributions and redemptions proceeds paid to
shareholders who have not provided the Fund with their Taxpayer
Identification Number in compliance with IRS rules. To avoid
this, make sure you provide your correct Tax Identification
Number (Social Security Number for most investors) on your
account application.
Foreign shareholders may be subject to special withholding requirements.
Consult your tax adviser about the federal, state and local tax consequences
in your particular circumstances.
OTHER SHAREHOLDER SERVICES
As a shareholder of the Fund, you can take advantage of other service
privileges which are described in the Owner's Manual:
- Telephone Investment and Redemption Plan
- Automatic Investment Plan
- Systematic Withdrawal Plan
- Retirement Plans
10
<PAGE> 12
FINANCIAL HIGHLIGHTS
- -
The financial highlights table is intended to help you understand the Fund's
financial performance since inception. Certain information reflects financial
results for a single Fund share. The total returns in the table represent the
rate that you would have earned or lost on an investment in the Fund
(assuming reinvestment of all dividends and distributions). This information
has been audited by Ernst & Young LLP, whose report, along with the Fund's
financial statements, are included in the Statement of Additional
Information, which is available upon request.
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR:
<TABLE>
<CAPTION>
YEAR 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++ (3.60)% (51.90)% 8.00% 3.10% 10.70%
======= ======= ======= ======= =======
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 for the years ended December 31, 1998
and 1997. If interest expense had not been incurred, the ratio 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%.
11
<PAGE> 13
GABELLI GOLD FUND, INC.
FOR MORE INFORMATION:
For more information about the Fund, the following documents are available free
upon request:
OWNER'S MANUAL:
Information about purchasing, selling and exchanging shares of the Fund is
included in a separate document entitled "Owner's Manual." The Owner's Manual is
incorporated by reference into the Prospectus. If you have not received it,
please contact the Fund at the number listed below.
ANNUAL/SEMI-ANNUAL REPORTS:
The Fund's semi-annual and audited annual reports to shareholders contain
detailed information on the Fund's investments. In the annual report, you will
find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Fund, including its
operations and investment policies. It is incorporated by reference, and is
legally considered a part of this prospectus.
You can get free copies of these documents and prospectuses of other Funds
in the Gabelli family, or request other information and discuss your
questions about the Fund by contacting:
Gabelli Gold Fund, Inc.
One Corporate Center
Rye, NY 10580
Telephone: 1-800-GABELLI (1-800-422-3554)
www.gabelli.com
You can review the Fund's reports and SAIs at the Public Reference Room of the
Securities and Exchange Commission. You can get text-only copies:
- - For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or calling 1-800-SEC-0330.
- - Free from the Commission's Website at http://www.sec.gov.
(Investment Company Act file no. 811-8518)
<PAGE> 14
GABELLI FUNDS
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]
QUESTIONS?
Call 1-800-GABELLI
or your investment representative.
THE
GABELLI FAMILY OF
FUNDS
OWNER'S MANUAL
AAA CLASS -
NO-LOAD CLASS
MAY 1, 1999
- GABELLI GLOBAL SERIES FUNDS, INC.
- GABELLI GOLD FUND, INC.
- GABELLI INTERNATIONAL GROWTH FUND, INC.
- GABELLI ABC FUND
- GABELLI ASSET FUND
- GABELLI GROWTH FUND
THE INFORMATION CONTAINED IN THE OWNER'S MANUAL IS INCORPORATED BY REFERENCE
INTO, AND IS LEGALLY CONSIDERED PART OF, THE PROSPECTUSES FOR THE GABELLI
FAMILY OF FUNDS. THE OWNER'S MANUAL MUST BE PRECEDED OR ACCOMPANIED BY A
GABELLI FUNDS PROSPECTUS.
<PAGE> 15
OWNER'S MANUAL TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
PURCHASING SHARES
3 Instructions for Opening or Adding to an Account
4 Telephone Investment Plan
4 Automatic Investment Plan
4 Retirement Plans
4 Minimum Investments
4 Dividends and Distributions
SELLING SHARES
5 Instructions for Selling Shares
5 By Bank Wire or Check via Telephone
5 By Bank Wire or Check via Mail
5 General Policies on Selling Shares
5 Signature Guarantees
6 Verifying Telephone Redemptions
6 Redemptions Within 15 Days of Investment
6 Redemption in Kind
6 Refusal of Redemption Request
6 Closing of Small Accounts
6 Undeliverable Distribution Checks
EXCHANGING SHARES
7 Instructions for Exchanging Shares
PRICING OF FUND SHARES
8 How NAV is Calculated
</TABLE>
2
<PAGE> 16
PURCHASING SHARES
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
PURCHASES THROUGH BROKERS/DEALERS:
If purchasing through your financial advisor or brokerage account, simply
tell your advisor or broker that you wish to purchase shares of the Funds and
he or she will take care of the necessary documentation. You should state
specifically which class of shares you are buying. For all other purchases
directly with the Fund, follow the instructions below.
PURCHASES DIRECTLY FROM THE FUND:
All investments made by regular mail or personal delivery, whether initial or
subsequent, should be sent to:
<TABLE>
BY
REGULAR
MAIL BY OVERNIGHT DELIVERY
<S> <C>
The Gabelli Funds The Gabelli Funds
PO Box 8308 c/o BFDS
Boston, MA 02266-8308 66 Brooks Drive
Braintree, MA 02184
</TABLE>
For Initial Investment:
1. Carefully read and complete the application.
2. Make check, bank draft or money order payable to "[name of Fund]."
3. Mail or deliver application and payment to the address above.
For Subsequent Investments:
1. Make check, bank draft or money order payable to "[name of Fund]" or
"Gabelli Funds."
2. Provide the exact name and number of your account.
3. Mail or deliver payment to the address above.
BY WIRE TRANSFER
For Initial Investment:
Call 1-800-GABELLI (1-800-422-3554) to obtain a new account number. Promptly
mail the completed application to the address shown above for regular mail,
and
For Initial and Subsequent Investments:
Instruct your bank to wire transfer your investment to:
STATE STREET BANK AND TRUST COMPANY
ABA #011-0000-28 REF DDA# 9904-6187
ATTN: SHAREHOLDER SERVICES
RE: [FUND NAME]
A/C#
---------------------------------
YOUR NAME
----------------------------
225 FRANKLIN STREET, BOSTON, MA 02110
NOTE: YOUR BANK MAY CHARGE A WIRE TRANSFER FEE.
3
<PAGE> 17
PURCHASING SHARES
You can add to your account by using the convenient options described
below. The Fund reserves the right to change or eliminate these privileges
at any time upon 60 days notice to shareholders.
TELEPHONE INVESTMENT PLAN
You may purchase additional shares of the Funds by telephone as long as your
bank is a member of the Automated Clearing House (ACH) system. You must also
have a completed, approved Investment Plan application on file with the
Fund's Transfer Agent. There is a minimum of $100 for each telephone
investment. To initiate an ACH purchase, please call 1-800-GABELLI
(1-800-422-3554) or 1-800-872-5365.
AUTOMATIC INVESTMENT PLAN
You can make automatic monthly investments in the Funds. Details about this
plan can be obtained from the Distributor on a separate application by
calling 1-800-GABELLI (800-422-3554).
RETIREMENT PLANS
You can invest in various types of retirement plans through the Fund. Details
about these plans can be obtained from the Distributor on a separate
application by calling 1-800-GABELLI (800-422-3554).
<TABLE>
<CAPTION>
MINIMUM
MINIMUM INITIAL SUBSEQUENT
ACCOUNT TYPE INVESTMENT INVESTMENT
<S> <C> <C>
Regular (non-retirement) $1,000 $ 0
Retirement (IRA)
Traditional IRA $1,000 $ 0
Roth IRA $1,000 $ 0
Spousal IRA $ 250 $ 0
Education IRA $ 250 $ 0
Automatic Investment Plan $ 0 $100
Telephone Investment Plan $ 100 $100
</TABLE>
MINIMUM INVESTMENTS
You may purchase Funds
through the Distributor
or participating
organizations, which
may charge additional
fees and may require
higher or lower minimum
investments or impose
other limitations on
buying and selling
shares.
All purchases must be in U.S. dollars. A fee will be
charged for any checks that do not clear.
Third-party checks are not accepted. Your purchase
of shares will be effective on the same business day
if the Fund's Transfer Agent receives your order by
4:00 p.m. (12 noon for a money market fund), and
receives your form of payment by 4:00 p.m., eastern
time. Otherwise, your purchase will be effective on
the next business day. (See "Pricing of Fund
Shares.") Shares are held on account for you unless
you specify in writing that you would like to
receive a stock certificate (certificates are not
available for money market funds). We can only issue
a certificate for whole shares.
The Distributor may reject a purchase order if it
considers it in the best interest of the Fund and
its shareholders. A Fund may waive its minimum
purchase requirement.
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions will be automatically reinvested unless you
request otherwise.
4
<PAGE> 18
SELLING SHARES
As a mutual fund
shareholder, you are
technically selling shares
when you request a
withdrawal in cash. This
is also known as redeeming
shares.
WITHDRAWING MONEY FROM YOUR INVESTMENT
You may sell your shares at any time. Your
sales price will be the next NAV after your
sell order is received by the Fund, its
transfer agent, or your investment
representative. See section on "General
Policies on Selling Shares" below.
SYSTEMATIC WITHDRAWAL PLAN
You can receive automatic payments from your
account on a monthly, quarterly or annual
basis. You can obtain details from the
Distributor.
INSTRUCTIONS FOR SELLING SHARES
The Fund accepts telephone requests for redemptions of unissued shares.
BY BANK WIRE OR CHECK VIA TELEPHONE
1. Call 1-800-GABELLI (1-800-422-3554) with your account number, the amount
of the redemption and instructions as to how you wish to receive your
funds.
2. If you are unable to reach the Fund by telephone, you may telecopy your
redemption request to the Fund at 914-921-5118.
NOTE: If you call by 4:00 p.m., eastern time, your payment will normally be
wired to your bank on the following business day. (For Money Market Funds: If
you call before 12:00 noon, eastern time, your payment will be wired to your
bank on that day.) If you call after that time, your payment will be wired to
your bank on the next business day. If you request your wire redemption by
telephone, it must be at least $1,000. Your bank may charge a fee for
incoming wires.
BY BANK WIRE OR CHECK VIA MAIL
Submit a redemption request to the Fund. Redemption requests may be made by
letter to the Transfer Agent. You must specify the name of the Fund, the
dollar amount or number of shares you wish to redeem and the account number.
You must sign the letter in exactly the same way the account is registered,
and if there is more than one owner of shares, all must sign. A signature
guarantee is required for most requests.
GENERAL POLICIES ON SELLING SHARES
SIGNATURE GUARANTEES
Signature guarantees are required on redemption requests for the following:
- The check is not being mailed to the address on your account
- The check is not being made payable to the owner of the account
- The redemption proceeds are being transferred to another person's Fund
account.
A signature guarantee can be obtained from most banks and securities dealers.
Notarized signatures are not considered a signature guarantee.
5
<PAGE> 19
SELLING SHARES
VERIFYING TELEPHONE REDEMPTIONS
The Fund makes every effort to ensure that telephone redemptions are only
made by authorized shareholders. All telephone calls are recorded for your
protection and you will be asked for information to verify your identity. If
appropriate precautions have not been taken, the Fund may be liable for
losses due to unauthorized transactions.
REDEMPTIONS WITHIN 15 DAYS OF INVESTMENT
When you have made an investment by check or through the automatic investment
plan, your redemption proceeds will not be mailed until the Transfer Agent is
satisfied that the check has cleared (which may require up to 15 days). You
can avoid this delay by purchasing shares with a certified check or federal
funds wire.
REDEMPTION IN KIND
The Fund reserves the right to make a redemption in kind - payment in
portfolio securities rather than cash - for certain large redemption amounts
that could hurt fund operations.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission in order to protect
remaining shareholders.
CLOSING OF SMALL ACCOUNTS
If your account (other than an IRA) falls below $500, the Fund may ask you to
increase your balance. If it is still below $500 after 30 days, the Fund may
close your account and send you the proceeds at the current NAV.
UNDELIVERABLE DISTRIBUTION CHECKS
If distribution checks (1) are returned and marked as "undeliverable" or (2)
remain uncashed for six months, your account will be changed automatically so
that all future distributions are reinvested in your account. Checks that
remain uncashed for six months will be canceled and the money reinvested in
the Fund at the then current net asset value.
QUESTIONS?
Call 1-800-GABELLI
or your investment
representative.
6
<PAGE> 20
EXCHANGING SHARES
You can exchange your
shares in one Fund for
shares of the same class of
another Fund managed by
Gabelli Funds, LLC, or its
affiliates, usually without
paying additional sales
charges (see "Notes on
Exchanges" below).
You must meet the minimum
investment requirements for
the Fund into which you are
exchanging. Exchanges from
one Fund to another are
taxable transactions.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges may be made by sending a
written request to The Gabelli
Funds, PO Box 8308, Boston, MA
02266-8308 or by calling
1-800-GABELLI (1-800-422-3554).
Please provide the following
information:
- Your name and telephone number
- The exact name on your account and
account number
- Taxpayer identification number
(usually your Social Security
number)
- Dollar value or number of shares
to be exchanged
- The names of the Funds from/into
which the exchange is to be made
See "Selling Shares" for important
information about telephone
transactions.
NOTES ON EXCHANGES
- When exchanging from a Fund that
has no sales charge or a lower
sales charge to a Fund with a
higher sales charge, you will pay
the difference.
- The registration and tax
identification numbers of the two
accounts must be identical.
- This exchange privilege may be
changed or eliminated at any time
upon a 60-day notice to
shareholders.
- Be sure to read the prospectus
carefully of any Fund into which
you wish to exchange shares.
7
<PAGE> 21
PRICING OF FUND SHARES
HOW NAV IS CALCULATED
The NAV is calculated by
adding the total value of
the Fund's investments and
other assets, subtracting
its liabilities and then
dividing that figure by the
number of outstanding
shares of the Fund:
NAV =
Total Assets - Liabilities
----------------------------
Number of Shares
Outstanding
You can find the Fund's NAV
daily in the Wall Street
Journal and other
newspapers, or by calling
1-800-GABELLI
(800-422-3554).
The net asset value, or NAV, of each
Fund's Class AAA shares is determined
and such shares are priced at the
close of regular trading on the New
York Stock Exchange, normally at 4:00
p.m., eastern time, on days the New
York Stock Exchange is open. Your
order for purchase, sale or exchange
of shares is priced at the next NAV
calculated after your order is
received by the Fund. This is what is
known as the offering price.
Fund securities are valued as of the
close of trading on the primary
exchange on which they trade. Fund
securities are generally valued at
current market prices. If market
quotations are not available, prices
will be based on the average of the
latest bid and asked quotations for
such securities prior to the valuation
time, or the latest bid price if asked
prices are not available. Debt
securities with remaining maturities
of 60 days or less will be valued at
amortized cost, which the Board of
Directors believes represents fair
value.
Some Fund securities may be listed on
foreign exchanges that are open on
days (such as U.S. holidays) when a
Fund does not compute its NAV. This
could cause the value of a Fund's
portfolio investments to be affected
on days when you cannot buy or sell
shares.
QUESTIONS?
Call 1-800-GABELLI
or your investment
representative.
8
<PAGE> 22
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, 1999
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, 1999, 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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investments....................................................................... B-02
The Adviser....................................................................... B-11
The Distributor................................................................... B-12
The Distribution Plan............................................................. B-12
Directors and Officers............................................................ B-13
Investment Restrictions........................................................... B-15
Portfolio Transactions and Brokerage.............................................. B-16
Purchase and Redemption of Shares................................................. B-18
Exchange Privilege................................................................ B-19
Net Asset Value................................................................... B-19
Dividends, Distributions and Taxes................................................ B-20
Investment Performance Information................................................ B-22
Service Providers................................................................. B-23
Financial Statements.............................................................. B-23
Description of Shares, Voting Rights and Liabilities.............................. B-23
Shares of Beneficial Interest..................................................... B-24
Appendix-- Description of Ratings................................................. B-25
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 23
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. 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.
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.
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.
B-2
<PAGE> 24
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.
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.
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 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, LLC (the
"Adviser"), in evaluating the creditworthiness of an issuer. In this evaluation,
the Adviser will take into consideration, among other things, the issuer's
B-3
<PAGE> 25
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. At times, adverse publicity regarding lower-quality
securities has depressed prices for such securities to some extent.
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.
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. While no securities investment is completely without risk,
investments in convertible securities generally entail less risk than common
stock, although the extent to which such risk is reduced depends in large
measure upon the degree to which the convertible security sells above its value
as a fixed-income security.
B-4
<PAGE> 26
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 have limited
legal recourse in the event of default. Also, the Fund may have difficulty
disposing of certain sovereign debt obligations because there may be a limited
trading market for such securities.
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 Monetary
Unit (the "EUR"), which is a combination of the economic structures of the
member nations of the European Monetary Union into to a single currency. This
union includes France, Germany, the Netherlands, and other countries. The
specific legacy currencies rates comprising the EUR were fixed on December 31,
1998 to reflect the relative values of the underlying currencies to the newly
created EUR. Such investments involve credit risks associated with the issuer
and currency risks associated with the currency in which the obligation is
denominated.
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
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<PAGE> 27
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 aggregate initial margin and premiums required to
establish such positions, other than for hedging purposes, will not exceed 5% of
the Fund's total assets after taking into account unrealized profits and
unrealized losses on any such contracts it has entered into.
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.
Investing in rights and warrants can provide a greater potential for profit
or loss than an equivalent investment in the underlying security, and, thus, can
be a speculative investment. The value of a right or warrant may decline because
of a decline in the value of the underlying security, the passage of time,
changes in interest rates or in the dividend or other policies of the company
whose equity underlies the warrant or a change in the perception as to the
future price of the underlying security, or any combination thereof. Rights and
warrants generally pay no dividends and confer no voting or other rights other
than to purchase the underlying security.
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
B-6
<PAGE> 28
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. When the Fund engages in when-issued, delayed
delivery or forward commitment transactions, it relies on the other party to
consummate the trade. Failure of the other party to do so may result in the Fund
incurring a loss or missing an opportunity to obtain a price considered to be
advantageous.
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 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 regard 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.
B-7
<PAGE> 29
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
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
B-8
<PAGE> 30
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.
MONEY MARKET INSTRUMENTS
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.
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. Aggregate initial
margin and premiums required to establish positions other than those considered
by the Commodity Futures Trading Commission ("CFTC") to be "bona fide hedging"
will not exceed 5% of the Fund's net asset value after taking into account
unrealized profits and unrealized losses on any such contracts. 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
B-9
<PAGE> 31
that have been designated as "contract markets" by the CFTC, 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 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.
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<PAGE> 32
THE ADVISER
The Adviser is a New York company 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 February 17, 1999, 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-11
<PAGE> 33
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,
1996 1997 1998
---- ---- ----
$205,967 $136,830 $121,860
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, LLC, 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 PLAN
Pursuant to the distribution and service plan (the "Plan") adopted by the
Fund pursuant to Rule 12b-1 under the 1940 Act and the Distribution Agreement,
the Distributor incurs the expenses of distributing the Fund's shares.
The Plan continues in effect from year to year, provided that each such
continuance is approved at least annually by a vote of the Board of Directors,
including a majority vote of the Directors who are not interested persons of the
Fund and who have no direct or indirect financial interest in the operation of
the Plan (the Independent Directors), cast in person at a meeting called for the
purpose of voting on such continuance. The Plan may each be terminated at any
time, without penalty, by the vote of a majority of the Independent Directors,
or by the vote of the holders of a majority of the outstanding shares of the
Fund on not more than 30 days' written notice to any other party to the Plan.
The Plans may not be amended to increase materially the amounts to be spent for
the services described therein without approval by the shareholders and all
material amendments are required to be approved by the Board of Directors in the
manner described above. The Plan will automatically terminate in the event of
its assignment. The Fund will not be contractually obligated to pay expenses
incurred under the Plan if it is terminated or not continued.
Pursuant to the Plan, the Board of Directors will review at least quarterly
a written report of the distribution expenses incurred on behalf of the Fund by
the Distributor. The report includes an itemization of the distribution expenses
and the purposes of such expenditures. In addition, as long as the Plan remains
in effect, the selection and nomination of Independent Directors shall be
committed to the Independent Directors.
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<PAGE> 34
Pursuant to the Distribution Agreement, the Fund has agreed to indemnify
the Distributor to the extent permitted by applicable law against certain
liabilities under the federal securities laws.
During the fiscal year ended December 31, 1998, the Distributor incurred
distribution expenses under the Distribution Plan of $45,900. Of this amount
$8,100 was spent on printing, postage and stationery, $20,600 on overhead
support expenses, $16,700 on salaries of personnel of the Distributor and $500
to third party brokers. Pursuant to the Distribution Plan, the Fund paid the
Distributor $30,400, or .25% of its average daily net assets.
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 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.
DIRECTORS AND OFFICERS
The Fund's Board of Directors has overall responsibility for the management
of the Fund. The Board of Directors decides upon matters of general policy and
reviews the actions of the Fund's Adviser, Distributor and other service
providers. 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.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS;
NAME, POSITION WITH FUND AND ADDRESS AFFILIATIONS WITH THE ADVISER OR ADMINISTRATOR
------------------------------------ ----------------------------------------------
<S> <C>
Mario J. Gabelli* Chairman of the Board, Chief Executive Officer and Chief
Chairman of the Board Investment Officer of Gabelli Asset Management Inc., the
One Corporate Center Adviser, and GAMCO Investors, Inc., Chairman of the
Rye, New York 10580 Board and Chief Executive Officer of Lynch Corporation,
Age: 55 a diversified manufacturing, communications and services
company; Director of East/West Communications, Inc.;
officer and/or Director or Trustee of 12 other Gabelli
funds.
Caesar M.P. Bryan Senior Vice President of, and Portfolio Manager with,
President & Portfolio Manager GAMCO Investors, Inc., a wholly owned subsidiary of the
One Corporate Center Adviser, since May 1994 and President of Gabelli
Rye, New York 10580 International Growth Fund, Inc.; Formerly Senior Vice
Age: 43 President and Portfolio Manager of Lexington Management
Corporation (until May 1994).
</TABLE>
B-13
<PAGE> 35
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS;
NAME, POSITION WITH FUND AND ADDRESS AFFILIATIONS WITH THE ADVISER OR ADMINISTRATOR
------------------------------------ ----------------------------------------------
<S> <C>
E. Val Cerutti Chief Executive Officer of Cerutti Consultants, Inc.;
Director Former President and Chief Operating Officer of Stella
227 McLain Street D'oro Biscuit Company (through 1992); Adviser, Iona
Mount Kisco, New York 10549 College School of Business; Director of Lynch
Age: 59 Corporation and Director of 1 other Gabelli fund.
Anthony J. Colavita President and Attorney at Law in the law firm of Anthony
Director J. Colavita, P.C. since 1961; Director or Trustee of 12
575 White Plains Road other Gabelli funds.
Eastchester, New York 10709
Age: 62
Karl Otto Pohl*+ Member of the Shareholder Committee of Sal Oppenheim Jr.
Director & Cie. (private investment bank); Former President of
One Corporate Center the Deutsche Bundesbank (Germany's Central Bank) and
Rye, New York 10580 Chairman of its Central Bank Council (1980-1991);
Age: 66 Currently board member of Gabelli Asset Management Inc.;
Zurich Versicherungs-Gesellshaft (insurance); the
International Council for JP Morgan & Co.; Trizechtahn
Corp.; Director or Trustee of 14 other Gabelli Funds.
Werner Roeder, M.D. Director of Surgery, Lawrence Hospital, and practicing
Director private physician. Director or Trustee of 6 other
One Corporate Center Gabelli funds.
Rye, New York 10580
Age: 58
Anthonie C. van Ekris Managing Director of Balmac International, Ltd.;
Director Director of Spinnaker Industries, Inc. and Stahel
One Corporate Center Mardmeyer A.Z.; and Director or Trustee of 9 other
Rye, New York 10580 Gabelli funds.
Age: 63
Daniel E. Zucchi President of Daniel E. Zucchi Associates. Formerly
Director Senior Vice President and Director of Consumer Marketing
One Corporate Center of Hearst Magazines (through 1995).
Rye, New York 10580
Age: 57
Bruce N. Alpert Executive Vice President, Chief Operating Officer of
Vice President and Treasurer Gabelli Funds, LLC (the "Adviser"); President and
One Corporate Center Director of Gabelli Advisers, Inc.; officer of each
Rye, New York 10580 mutual fund managed by the Adviser or its affiliates.
Age: 46
</TABLE>
- -----------------------
*Mr. Pohl is a director of Gabelli Asset Management Inc.
B-14
<PAGE> 36
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS;
NAME, POSITION WITH FUND AND ADDRESS AFFILIATIONS WITH THE ADVISER OR ADMINISTRATOR
------------------------------------ ----------------------------------------------
<S> <C>
James E. McKee Vice President and General Counsel of Gabelli Asset
Secretary Management Inc., and of GAMCO Investors, Inc. since
One Corporate Center 1993; Secretary all Funds management by the Adviser or
Rye, New York 10580 its affiliates; Branch Chief with the U.S. Securities
Age: 35 and Exchange Commission in New York 1992 through 1993.
Staff attorney with the U.S. Securities and Exchange
Commission in New York from 1989 through 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, 1998 in excess of $60,000.
<TABLE>
<CAPTION>
COMPENSATION TABLE
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 $82,000(13)
Director
Karl Otto Pohl $ 1,750 $98,466(15)
Director
Werner Roeder, M.D $ 2,000 $25,500(7)
Director
Anthonie C. van Ekris $ 2,000 $57,500(10)
Director
Daniel E. Zucchi $ 2,000 $ 2,000(1)
Director
</TABLE>
*Represents the total compensation paid to such persons during the calendar year
ended December 31, 1998. 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.
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:
B-15
<PAGE> 37
(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;
(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
B-16
<PAGE> 38
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 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 $64,675 on portfolio transactions
in the principal amount of $14,193,971 during 1998, to various broker-dealers
that have provided research services to the Adviser.
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, 1996, 1997 and 1998.
<TABLE>
<CAPTION>
TOTAL BROKERAGE
BROKERAGE COMMISSIONS PAID
PERIOD COMMISSIONS TO GABELLI
PAID AFFILIATES
<S> <C> <C>
1996............................... $49,039 $ 0
1997............................... $20,298 $ 0
1998............................... $73,049 $ 0
</TABLE>
B-17
<PAGE> 39
For the fiscal year ended December 31, 1998 0.0% of aggregate brokerage
commissions paid by the Fund were paid to Gabelli & Company, Inc., or 0.0% of
the Fund's aggregate dollar amount of transactions involving the payment of
commissions.
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
PURCHASE OF SHARES
Shares of the Fund are offered exclusively to investors acquiring shares
directly from the Distributor or from a financial intermediary with whom the
Distributor has entered into an agreement expressly authorizing the sale by such
intermediary of shares. 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
Payment of the redemption price for shares redeemed may be made either in
cash or in portfolio securities (selected at the discretion of the Board of
Directors of the Fund and taken at their value used in determining the Fund's
net asset value per share as we described under "Net Asset Value" below), or
partly in cash and partly in portfolio securities. However, payments will be
made wholly in cash unless the Board of Directors believes that economic
conditions exist which would make such a practice detrimental to the best
interest of the Fund. If payment for shares redeemed is made wholly or partly in
portfolio securities, brokerage costs may be incurred by the investor in
converting the securities to cash. The Fund will not distribute in-kind
portfolio securities that are not readily marketable. The Fund has filed a
formal election with the SEC pursuant to which the Fund will only effect a
redemption in portfolio securities where the particular shareholder of record is
redeeming more than $250,000 or 1.00% of the Fund's total net assets, whichever
is less, during any 90-day period. In the opinion of the Fund's management,
however, the amount of a redemption request would have to be significantly
greater than $250,000 before a redemption wholly or partly in portfolio
securities would be made.
Cancellation of purchase orders for Fund shares (as, for example, when
checks submitted to purchase shares are returned unpaid) causes a loss to be
incurred when the net asset value of the Fund shares on the date of cancellation
is less than on the original date of purchase. The investor is responsible for
such loss, and the Fund may reimburse itself or the Distributor for such loss by
automatically redeeming shares from any account registered at any time in that
shareholder's name, or by seeking other redress. In the event shares held in the
account of such shareholder are not sufficient to cover such loss, the
Distributor will promptly reimburse the Fund for the amount of such unrecovered
loss.
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.
B-18
<PAGE> 40
EXCHANGE PRIVILEGES
The Fund makes available to its shareholders the privilege of exchanging
their shares for shares of certain other funds managed by the Adviser or an
affiliate, including one or more specified money market funds, subject in each
case to the minimum investment requirements of each fund (the "Exchange
Privilege"). Shares of such other Gabelli Funds may also be exchanged for shares
of the Fund. All exchanges are made on the basis of the relative NAV next
determined after receipt of an order in proper form. An exchange will be treated
as a redemption and purchase for tax purposes. Shares may be exchanged for
shares of another fund only if shares of such fund may legally be sold under
applicable state laws. For retirement and group plans having a limited menu of
Gabelli funds, the Exchange Privilege is available for those funds eligible for
investment in the particular program.
The Fund's shares may be exchanged for Class AAA shares of any other funds
managed by the Adviser or an affiliate of the Adviser that offers Class AAA
shares or the no-load shares of Funds which do not have a multi-class structure
and money market funds.
Additional details about the Exchange Privilege and prospectuses for each
of the funds managed by the Adviser or an affiliate are available from the
Fund's Transfer Agent. The Exchange Privilege may be modified, terminated or
suspended on sixty days' notice, and any fund, or the Distributor, has the right
to reject any exchange application relating to such fund's shares.
NET ASSET VALUE
For purposes of determining the Fund's net asset value per share, readily
marketable portfolio securities listed on the NYSE are valued, except as
indicated below, at the last sale price reflected at the close of the regular
trading session of the NYSE on the business day as of which such value is being
determined. If there has been no sale on such day, the securities are valued at
the mean of the closing bid and asked prices on such day. If no asked prices are
quoted on such day, then the security is valued at the closing bid price on such
day. If no bid or asked prices are quoted on such day, then the security is
valued by such method as the Board of Directors shall determine in good faith to
reflect its fair market value. Readily marketable securities not listed on the
NYSE but listed on other national securities exchanges or admitted to trading on
the National Association of Securities Dealers Automated Quotations, Inc.
("NASDAQ") National List are valued in like manner.
Readily marketable securities traded in the over-the-counter market,
including listed securities whose primary market is believed by the Adviser to
be over-the-counter but excluding securities admitted to trading on the NASDAQ
National List, are valued at the mean of the current bid and asked prices as
reported by NASDAQ or, in the case of securities not quoted by NASDAQ, the
National Quotation Bureau or such other comparable sources as the Board of
Directors deems appropriate to reflect their fair value. If no bid or asked
prices are quoted on such day, then the security is valued by such method as the
Board of Directors shall determine in good faith to reflect its fair market
value.
Portfolio securities traded on more than one national securities exchange
or market are valued according to the broadest and most representative market as
determined by the Adviser. Securities traded primarily on foreign exchanges are
valued at the closing price on such foreign exchange immediately prior to the
close of the NYSE.
United States Government obligations and other debt instruments having
sixty days or less remaining until maturity are stated at amortized cost. Debt
instruments having a greater remaining maturity will be valued at the highest
bid price obtained from a dealer maintaining an active market in that security
or on the basis of prices obtained from a pricing service approved as reliable
by the Board of Directors. 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
B-19
<PAGE> 41
faith to reflect most accurately their fair market value. All other investment
assets, including restricted and not readily marketable securities, are valued
under procedures established by and under the general supervision and
responsibility of the Fund's Board of Directors designed to reflect in good
faith the fair value of such securities.
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 the 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 one
year.
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 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.
B-20
<PAGE> 42
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 and dividend 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 just
prior to a distribution may reflect the amount of the forthcoming distribution.
Those purchasing at that time 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-termor 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 and redemption proceeds 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.
FOREIGN WITHHOLDING TAXES
Income received by the Fund from investments to foreign securities may be
subject to withholding and other taxes imposed by foreign 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.
B-21
<PAGE> 43
CREATION OF ADDITIONAL SHARES
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
In its reports, investor communications or advertisements, the Fund may
include: (i) its total return performance; (ii) its performance compared with
various indexes or other mutual funds; (iii) published evaluations by nationally
recognized ranking services and financial publications; (iv) descriptions and
updates concerning its strategies and portfolio investments; (v) its goals, risk
factors and expenses compared with other mutual funds; (vi) analysis of its
investments by industry, country, credit quality and other characteristics;
(vii) a discussion of the risk/return continuum relating to different
investments; (viii) the potential impact of adding foreign stocks to a domestic
portfolio; (ix) the general biography or work experience of the portfolio
manager of the Fund; (x) portfolio manager commentary or market updates; (xi)
discussion of macroeconomic factors affecting the Fund and its investments; and
(xii) other information of interest to investors. "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)6 - 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, 1998, the Fund's current yield was (3.0)%.
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/ Weisenberger Investment Company
Service, Barron's, Business Week, Changing Times, Financial World,
B-22
<PAGE> 44
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 $1,000 payment made at the beginning of the period. All total
return figures will reflect the deduction of Fund expenses (net of certain
expenses reimbursed by the Adviser) on an annual basis, and will assume that all
dividends and distributions are reinvested and will deduct the maximum sales
charge, if any is imposed.
For the year ended December 31, 1998, the Fund's cumulative total return
was (3.6)% and since inception it was (42.8)%. The average annual return since
inception was (11.7)%.
SERVICE PROVIDERS
Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York 10019,
serves as counsel for the Fund.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, has been
appointed independent auditor for the Fund.
State Street Bank and Trust Company ("State Street") is the Custodian for
the Fund's cash and securities as well as the Transfer and Dividend Disbursing
Agent for its shares. Boston Financial Data Services, Inc., an affiliate of
State Street, performs the shareholder services on behalf of State Street and is
located at the BFDS Building, 2 Heritage Drive, North Quincy, Massachusetts
07171.
FINANCIAL STATEMENTS
The Fund's Financial Statements for the year ended December 31, 1998,
including the Report of Ernst & Young LLP, independent auditors, is incorporated
herein by reference to the Fund's Annual Report. The Fund's Annual Report is
available upon request and without charge.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund was organized as a Maryland corporation on May 13, 1994. Its
authorized capital stock consists of one billion shares of stock having a par
value of one tenth of one cent ($.001) per share. The Fund is not required, and
does not intend, to hold regular annual shareholder 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.
B-23
<PAGE> 45
The Fund sends semi-annual and audited annual reports to all shareholders
which include lists of portfolio securities 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.
SHARES OF BENEFICIAL INTEREST
As of April 23, 1999, the Officers and Directors of the Fund as a group
owned 1.12% of the outstanding shares. As of April 23, 1999, the following
persons were 5% or greater shareholders of the Fund:
PERCENTAGE OF SHARES
SHAREHOLDER OUTSTANDING(1)
----------- --------------------
Charles Schwab & Co Inc 23.75%
Special Custody Acct FBO
Exclusive Benefit of Customers
Attn Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
National Financial Serv Corp 8.28%
for the Exclusive Benefit of
Our Customers
150 Essex Street
Milburn, NJ 07041-1603
- ------------
(1) Based on 1,945,910.848 shares outstanding as of April 23, 1999.
B-24
<PAGE> 46
APPENDIX TO STATEMENT 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-25
<PAGE> 47
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.
B-26
<PAGE> 48
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. 7 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 28th
day of April, 1999.
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. 7 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 28, 1999
- -------------------------------------
Mario J. Gabelli
/s/ Caesar Bryan President April 28, 1999
- -------------------------------------
Caesar Bryan
/s/ Bruce N. Alpert Vice President, Treasurer April 28, 1999
- ------------------------------------- and Chief Financial Officer
Bruce N. Alpert
* Director April 28, 1999
- -------------------------------------
E. Val Cerutti
* Director April 28, 1999
- -------------------------------------
Anthony Colavita
Director April 28, 1999
- -------------------------------------
Karl Otto Pohl
* Director April 28, 1999
- -------------------------------------
Werner Roeder, M.D.
* Director April 28, 1999
- -------------------------------------
Anthonie Van Ekris
* Director April 28, 1999
- -------------------------------------
Daniel E. Zucchi
*By: /s/Bruce N. Alpert
--------------------------------
Bruce N. Alpert
Attorney-in-Fact
</TABLE>
<PAGE> 49
PART C: OTHER INFORMATION
ITEM 23. 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, 1997 and 1998.
(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, 1998
(c) Portfolio of Investments, December 31, 1998
(d) Statement of Operations for the fiscal year ended December 31, 1998.
(e) Statement of Changes in Net Assets for each of the years ended
December 31, 1997 and 1998.
(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, 1997 and 1998.
(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 (Filed herewith)
10(c) Consent of Venable, Baetjer and Howard (Filed herewith)
11 Consent of Independent Auditors (Filed herewith)
12 Not applicable
13 Subscription Agreement***
14 Not applicable
15 Distribution Plan under Rule 12b-1*****
<PAGE> 50
16 Not applicable
17 Financial Data Schedule (Filed herewith)
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 as an exhibit to the Post-Effective Amendment No. 5 to
Registration Statement No. 33-79180 filed on April 30, 1998.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 25. 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 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.
2
<PAGE> 51
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Gabelli Funds, LLC 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 27. 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 28. LOCATION OF ACCOUNTS AND RECORDS
All such accounts, books and other documents are maintained at the offices of:
Gabelli Funds, LLC, 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 29. MANAGEMENT SERVICES
Not applicable.
ITEM 30. 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> 1
CONSENT OF COUNSEL
Gabelli Gold Fund, Inc.
We hereby consent to being named in the Statement of
Additional Information included in Post-Effective Amendment No. 7 (the
"Amendment") to the Registration Statement on Form N-1A (Securities Act File No.
33-79180, Investment Company Act File No. 811-8518) of Gabelli Gold Fund, Inc.
(the "Fund") under the caption "Counsel" and to the Fund's filing a copy of this
Consent as an exhibit to the Amendment. Further, we hereby consent to the Fund's
reliance on our legal opinion dated June 23, 1994 currently on file with the
Securities and Exchange Commission in connection with the offering of the
existing class of the Fund's shares.
Willkie Farr & Gallagher
April 30, 1999
New York, New York
<PAGE> 1
Exhibit 10(c)
April 30, 1999
Wilkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019-6099
RE: GABELLI GOLD FUND, INC. (THE "FUND")
Ladies and Gentlemen:
You may rely on our attached opinion dated June 23, 1994 for purposes
of your proposed consent attached hereto with respect to Post-Effective
Amendment No.7 to the Fund's Registration Statement pertaining to the Fund's
sole existing class of Common Stock on Form N-1A, Securities Act (File No.
33-79180), and Investment Company Act (File No. 811-8518) (the "Registration
Statement").
For purposes of this letter, we have examined and relied upon a
certificate of the Maryland State Department of Assessments and Taxation to the
effect that the Fund is duly incorporated and existing under the laws of the
State of Maryland and is in good standing and duly authorized to transact
business in the State of Maryland. We have also examined and relied upon a
Certificate of the Assistant Secretary of the Fund, dated as of the date hereof,
with respect to such matters as we have deemed necessary to provide this letter.
Moreover, we have assumed for purposes of this letter that the terms and
consideration with respect to the issuance of shares of the Fund's Common Stock
as set forth in the Registration Statement remain the same as those set forth in
the Registration Statement at the time of our attached opinion in all material
respects.
We consent to the filing of this letter as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Venable, Baetjer and Howard, LLP
<PAGE> 2
June 23, 1994
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Re: Gabelli Gold Fund, Inc.
Ladies and Gentlemen:
We have acted as special Maryland counsel for Gabelli Gold Fund, Inc.,
a Maryland corporation (the "Fund"), in conneciton with the organization of the
Fund and the issuance of shares of its Common Stock, par value $.001 per share
(the "Common Stock").
As Maryland counsel for the Fund, we are familiar with its Charter and
Bylaws. We have examined the prospectus included in its Registration Statement
on Form N-1A, Securities Act File No. 33-79180 and Investment Company Act File
No. 811-8518 (the "Registration Statement"), substantially in the form in which
it is to become effective (the "Prospectus"). We have further examined and
relied upon a certificate of the Maryland State Department of Assessments and
Taxation to the effect that the Fund is duly incorporated and existing under the
laws of the State of Maryland and is in good standing and duly authorized to
transact business in the State of Maryland.
We have also examined and relied upon such corporate records of the
Fund and other documents and certificates with respect to factual matters as we
have deemed necessary to render the opinion expressed herein. We have assumed,
without independent verification, the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, and the conformity
with originals of all documents submitted to us as copies.
<PAGE> 3
Willkie Farr & Gallagher
June 23, 1994
Page 2
Based on such examination, we are of the opinion and so advise you
that:
1. The Fund is duly organized and validly existing as a
corporation in good standing under the laws of the State of
Maryland.
2. The 10,000 presently issued and outstanding shares of Common
Stock of the Fund have been validly and legally issued and are
fully paid and nonassessable.
3. The shares of Common Stock of the Fund to be offered for sale
pursuant to the Prospectus are, to the extent of the number of
shares authorized to be issued by the Fund in its Articles of
Incorporation, duly authorized and, when sold, issued and paid
for as contemplated by the Prospectus, will have been validly
and legally issued and will be fully paid and nonassessable.
This letter expresses our opinion with respect to the Maryland General
Corporation Law governing matters such as due organization and the authorization
and issuance of stock. It does not extend to the securities of "Blue Sky" laws
of Maryland, to federal securities laws or to other laws.
You may rely upon our foregoing opinion in rendering your opinion to
the Fund that is to be filed as an exhibit to the Registration Statement. We
consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ Venable, Baetjer and Howard, LLP
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Service Providers" and to the use of our report dated February
12, 1999. which is incorporated by reference in this Registration Statement
(Form N-1A No. 33-79180) of the Gabelli Gold Fund, Inc.
/s/ ERNST & YOUNG LLP
New York, New York
April 29, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000923459
<NAME> GABELLI GOLD FUND, INC.
<SERIES>
<NUMBER> 00
<NAME> GABELLI GOLD FUND, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 13650048
<INVESTMENTS-AT-VALUE> 11402811
<RECEIVABLES> 318863
<ASSETS-OTHER> 99448
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11821122
<PAYABLE-FOR-SECURITIES> 78128
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 467184
<TOTAL-LIABILITIES> 545312
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 18975152
<SHARES-COMMON-STOCK> 1990617
<SHARES-COMMON-PRIOR> 1379566
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 247016
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 5204151
<ACCUM-APPREC-OR-DEPREC> (2248175)
<NET-ASSETS> 11275810
<DIVIDEND-INCOME> 123991
<INTEREST-INCOME> 17433
<OTHER-INCOME> 0
<EXPENSES-NET> 362905
<NET-INVESTMENT-INCOME> (221481)
<REALIZED-GAINS-CURRENT> (3093749)
<APPREC-INCREASE-CURRENT> 1873747
<NET-CHANGE-FROM-OPS> (1441483)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9430921
<NUMBER-OF-SHARES-REDEEMED> 8819870
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 3178960
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 381671
<OVERDIST-NET-GAINS-PRIOR> 2053020
<GROSS-ADVISORY-FEES> 121860
<INTEREST-EXPENSE> 5095
<GROSS-EXPENSE> 362905
<AVERAGE-NET-ASSETS> 12194639
<PER-SHARE-NAV-BEGIN> 5.87
<PER-SHARE-NII> (0.03)
<PER-SHARE-GAIN-APPREC> (0.18)
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 5.66
<EXPENSE-RATIO> 2.98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
