[PHOTOGRAPH]
Gabelli
International
Growth
Fund,
Inc.
ANNUAL REPORT
DECEMBER 31, 1995
<PAGE>
Gabelli International Growth Fund, Inc.
One Corporate Center
Rye, New York 10580-1434
Annual Report
December 31, 1995
To Our Shareholders:
As our shareholder base continues to expand, we would again like to thank
you for your investment in the Gabelli International Growth Fund. We would like
to take this opportunity to discuss what the Fund has accomplished thus far and
to give further insight into our criteria for and objectives in choosing stocks.
Each subsequent quarter we will provide updates on selected holdings and our
outlook for international investments. You may reach us by calling 1-800-GABELLI
(1-800-422-3554) with any questions you may have.
The Fund completed its second quarter of operations at the end of December
1995. For the quarter the Fund's net asset value appreciated by 3.9%. This
compares with a rise of 1.1% for the average international mutual fund monitored
by Lipper Analytical Services and 4.0% for the Morgan Stanley Capital
International Index of international equity markets with dividends reinvested.
For the six months since the Fund began operations on June 30, 1995, its net
asset value has appreciated by 9.8% compared with a rise of 6.1% and 8.4% for
the Lipper Analytical International Fund Index and the Morgan Stanley Capital
International Index, respectively.
INVESTMENT RESULTS (a)
- --------------------------------------------------------------------------------
Quarter
------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
1995: Net Asset Value .... --- --- $10.57 $10.98 $10.98
Total Return ....... --- --- 5.7%(b) 3.9% 9.8%(b)
- --------------------------------------------------------------------------------
(a) Total returns reflect changes in share price and are net of expenses. Of
course, returns represent past performance and do not guarantee future results.
Investment returns and the principal value of an investment will fluctuate. When
shares are redeemed they may be worth more or less than their original cost.
(b) From commencement of operations on June 30, 1995.
Note: Investing in foreign securities involves risks not ordinarily associated
with investments in domestic issues, including currency fluctuation, economic
and political risks.
- --------------------------------------------------------------------------------
Most of the major international equity markets had positive returns for
the fourth quarter although international markets, in aggregate, lagged Wall
Street. For example, Japan returned 4.9%, the United Kingdom 2.3%, Germany 1.6%
and France 4.8% For 1995 as a whole, the S&P 500 returned 37.6% compared with
11.2% for international markets, adjusted for movements in the dollar. The only
major overseas equity market that outperformed the U.S. was the Swiss market
which returned 44.1%. Viewed in absolute terms and relative to inflation, most
non-U.S. markets (with the exception of Japan which was flat), performed well in
1995. It is only in comparison with the stellar performance of Wall Street that
international returns looked mediocre.
<PAGE>
Comparison of Change in Value of a $10,000 Investment in the Gabelli
International Growth Fund, Inc., the Lipper Analytical Services International
Fund Index and the Morgan Stanley Capital International Index
[The following table was represented as a line graph in the printed material.]
Lipper Morgan
Analytical Stanley
Date International Growth International Capital
---- -------------------- ------------- ----------
6/30/95 $10,000 $10,000 $10,000
12/31/95 $10,980 $10,605 $10,837
For international investors, a major disappointment was the poor
performance of emerging markets for the second year in succession. All the Latin
American markets fell with the exception of Argentina and Peru. Mexico declined
by 23.2% and Brazil by 21.3%. Among the Far Eastern emerging markets, Indonesia
and Korea were the only ones to post a positive return as both of them rose by
less than 10%.
Our Approach
We purchase attractively valued companies which we believe have the
opportunity to grow earnings more rapidly than the average in that company's
local market. We pay close attention to a company's market position, management
and balance sheet, with particular emphasis on the ability of the company to
finance its growth. Generally we value a company relative to its local market
but, where appropriate, will attempt to benefit from valuation discrepancies
between markets. Our primary focus is on security selection and not country
allocation, but the Fund will remain well diversified by sector and geography.
Country allocation is likely to reflect broad economic, financial and currency
trends as well as relative size.
Market Outlook
A stable to firmer U.S. dollar and lower U.S. interest rates should
combine to drive European equity prices higher. The effect of a stronger dollar
is significant. First, European exports become more competitive and, secondly,
tension among the European currencies is reduced when money is not flowing into
the Deutchemark. Valuations in most European markets are reasonable in
comparison to their history and relative to interest rates. We expect domestic
institutions in continental Europe to switch assets from bonds and cash to
equities as interest rates fall and the take over boom in the United Kingdom to
continue. It is also likely that corporate activity among continental European
companies will increase.
2
<PAGE>
We believe that the outlook for the Japanese market continues to improve
and that the authorities should be successful in their attempts to avoid
deflation. Evidence of this is the recent weakness of the Yen, the fall in the
bond market and some signs of economic revival. Recently, the ruling coalition
appointed a new Prime Minister and progress has been made in the solving the
Jusen (housing loan) bad debt problem.
Portfolio Structure
The largest concentration by geography remains in Europe where over 41% of
the Fund is invested. We remain heavily invested in consumer and service
companies as we feel that economic weakness might lead to earnings
disappointments in the more cyclical sectors of the market. Examples of consumer
nondurable holdings include Hartwall Oy AB, a Finnish brewer, Bongrain S.A., a
French cheese manufacturer and Nestle SA. We remain excited by the prospects of
a number of luxury goods retailers including Gucci Group SpA, Bulgari SpA and
Compagnie Financiere Richemont AG. Later in the year we expect to raise the
Fund's exposure to more economically sensitive stocks.
By contrast, the Fund's investments in Japan are more heavily concentrated
in such economically sensitive industries such as retailing, electronics, motors
and steel. The Fund has no exposure to Japanese banks which we believe remain
crippled from bad debts and very overvalued. We still favor smaller companies
where management is a significant shareholder. Approximately 30% of the Fund is
invested in Japan.
In Southeast Asia, excluding Japan, investments are concentrated in the
Hong Kong, Australia and Thai markets. This region accounts for over 16% of the
portfolio.
International Allocation
The chart at the right presents the Fund's holdings by geographic region
as of December 31, 1995. The geographic allocation will change based on future
global market conditions. Countries and/or regions or companies represented in
the chart and below may or may not be included in the Fund's portfolio in the
future.
HOLDINGS BY GEOGRAPHIC REGION - 12/31/95
[The following table was represented by a pie chart in the printed material.]
Japan 29.9%
Asia/Far East 16.7%
Other 7.5%
Europe 41.4%
Cash 4.5%
3
<PAGE>
Let's Talk Stocks
The following are stock specifics on selected holdings of our Fund's
investments. Favorable EBITDA prospects do not necessarily translate into higher
stock prices, but they do express a positive trend which we believe will develop
over time.
Reuters Holdings plc (RTRSY - $55.125 - NASDAQ) is the world's largest financial
information vendor. The company employs 1,600 journalists and has clients in 150
countries around the world. Reuters has three divisions, the largest of which is
Information Products which accounts for about 70% of the firm's revenues. This
division delivers news and prices to customer screens covering currencies,
stocks, bonds and other financial instruments. The second largest division is
Transaction Products which enables traders to deal from their keyboards either
with chosen trading partners or through an automated matching system. The
smallest division, accounting for 6% of revenues, is Media Products which
delivers news to broadcasters and newspapers around the world. We believe that
Reuters is well-positioned to provide quotes and news stories in countries which
have recently implemented market-based reforms such as Russia and China as well
as increase its market share in established markets such as the U.S. and Japan.
Vodafone Group plc (VOD - $35.25 - NYSE) is a U.K.-based global provider of
wireless telecommunications services. The company's major interests in the U.K.
include cellular, paging and data transmission. Vodafone's shares sell at one of
the lowest multiples of EBITDA among the major wireless companies despite a
pristine balance sheet and prospects for 20% annual growth in earnings and cash
flow. Management is highly respected and has positioned the company to share in
the exciting and rewarding global growth market for wireless communications.
Sony Corporation ($59.975 - Tokyo Stock Exchange) Sony is one of the world's
largest consumer electronics companies with consolidated sales of over $40
billion. Even though the company was not founded until after the second world
war, Sony is one of the world's leading brand names. Sony's traditional
activities were largely limited to manufacturing electronic equipment in three
areas, namely: video, audio, and television. These businesses are very
competitive and Sony is aggressively cutting costs including moving production
outside Japan and developing new products integrating computer and television
innovations with their digital technology. Recently Sony has developed its
entertainment businesses which have good long-term growth potential. These
include music and pictures. Recent releases from the Pictures Group include
"Sense and Sensibility" and "City Hall".
Nomura Securities Company Ltd. ($21.80 - Tokyo Stock Exchange) Nomura is Japan's
largest securities firm. Nomura's principal activities include the dealing,
brokerage, underwriting and distribution of securities. Through its affiliates
and subsidiaries, Nomura is involved in a number of advisory businesses
including corporate finance, leasing, real estate, and asset management. Nomura
is well-positioned to benefit from the expected cyclical increase in stock
market activity following the long bear market. On a secular basis, Nomura
should benefit from the continued reorganization of Japanese industry and the
general development of Japan's relatively yen-sophisticated financial system.
Invik & Company AB ($24.70 - Stockholm) Invik is a Swedish company involved in a
number of financial activities. Three separate subsidiaries are responsible for
stock brokerage, insurance and banking. The company also has an equity portfolio
of long-term holdings. The most important equity investment is their holding in
Kinnevik which is a company quoted on the Stockholm Stock Exchange. Kinnevik is
an operating group involved in three activities, including TV and Media,
4
<PAGE>
Telecommunications, and paper and packaging. All these businesses have good
growth potential and Invik provides exposure to Kinnevik at a significant
discount.
Mitsubishi Heavy Industries Ltd. ($7.974 - Tokyo Stock Exchange) Mitsubishi
Heavy Industries is Japan's largest engineering company with consolidated sales
of about $28 billion. Its activities include shipbuilding, production and
engineering works for a variety of steel structures, boilers, turbines and
pumps, plant engineering and aerospace. Mitsubishi Heavy Industries is the core
company of the Mitsubishi Group and is the largest contractor for the Defense
Agency of Japan. The company has successfully cut costs in response to the weak
Japanese economy and high yen. The recent pick-up in their order backlog should
be reflected in strong earnings growth.
Minimum Initial Investment - $1,000
The Fund's minimum initial investment for both regular and retirement
accounts is $1,000. There are no subsequent minimums. No initial minimum is
required for those establishing an Automatic Investment Plan.
In Conclusion
The Fund's daily net asset value is available each evening after 6:00 PM
(Eastern Time) by calling 1-800-GABELLI (1-800-422-3554). The Fund's NASDAQ
symbol is GIGRX. Please call us during the day for further information.
We thank you for your confidence in our investing abilities and wish you a
productive and financially rewarding 1996.
Sincerely,
/s/ Caesar Bryan
Caesar Bryan
January 31, 1996 President and Portfolio Manager
- --------------------------------------------------------------------------------
Top Ten Holdings
December 31, 1995
-----------------
Scandinavia Mobility International Vodafone Group plc
Sony Corporation Mitsubishi Heavy Industries Ltd.
Westpac Banking Corp. Invik & Company AB
Circle K Corp. Japan Ltd. Gucci Group SpA
Nomura Securities Company Ltd. Reuters Holdings plc
- --------------------------------------------------------------------------------
NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period of this report as stated on the cover. The
manager's views are subject to change at any time based on market and other
conditions.
5
<PAGE>
Gabelli International Growth Fund, Inc.
Portfolio of Investments -- December 31, 1995
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS -- 94.58%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 2.87%
3,000 Nissan Motor Company Ltd. ......... $ 23,339 $ 23,050
2,000 Nittan Valve Co. .................. 11,289 11,045
1,500 Pininfarina SpA ................... 15,122 13,039
3,000 Swedish Motors Corp. .............. 12,233 12,981
---------- ----------
61,983 60,115
---------- ----------
BROADCASTING -- 1.03%
5,000 Spencer Gulf Telecasters
Ltd. ............................ 19,887 21,547
---------- ----------
CONSUMER PRODUCTS -- 9.44%
1,800 Brio Industries Inc.,
B Shares ........................ 15,066 15,948
15 Compagnie Financiere
Richemont AG .................... 19,544 22,467
2,500 Safilo SpA ........................ 22,801 32,362
300 Sanofi S.A ........................ 18,568 19,179
3,000 Scandinavia Mobility
International A/S+ .............. 65,726 71,929
600 Seagram Company Ltd. .............. 21,293 20,775
2,000 Tomiya Apparel Co., Ltd. .......... 13,350 15,250
---------- ----------
176,348 197,910
---------- ----------
DIVERSIFIED INDUSTRIAL -- 6.95%
6,300 Antofagasta Holdings plc .......... 30,589 28,611
250 Cubiertas y Mzov S.A .............. 15,078 13,808
5,000 Hutchison Whampoa Ltd. ............ 30,070 30,454
5,000 Mitsubishi Heavy Industries
Ltd. ............................ 37,666 39,870
10,000 PT Mustika Ratu+ .................. 14,233 15,741
3,000 Sanyo Electric Company Ltd. ....... 17,006 17,295
---------- ----------
144,642 145,779
---------- ----------
ELECTRONICS -- 6.86%
1,000 Alpine Electronics Inc. ........... 30,023 33,718
2,000 Hitachi, Ltd. ..................... 20,790 20,153
1,000 Japan Digital Laboratory Co. ...... 20,204 22,575
1,250 Nippon Ceramic Co.,
Ltd. ............................ 18,445 19,378
800 Sony Corporation .................. 39,615 47,980
---------- ----------
129,077 143,804
---------- ----------
ENERGY -- 1.08%
1,700 Saga Petroleum a.s.,
A Shares ........................ 23,196 22,626
---------- ----------
ENTERTAINMENT -- 5.27%
2,400 Granada Group plc ................. 24,498 23,994
200 Infogrames
Entertainment SA+ ............... 29,912 27,861
20,000 Sydney Harbour Casino
Holdings Limited+ ............... 24,712 25,262
5,000 Television Broadcasts Ltd. ........ 18,021 17,813
5,000 Village Roadshow Ltd. ............. 11,720 15,603
---------- ----------
108,863 110,533
---------- ----------
FINANCIAL SERVICES -- 13.12%
100 Berliner Bank
Aktiengesellschaft .............. 27,257 25,452
3,000 Dundee Bancorp Cl. A+ ............. 30,028 30,220
1,600 Invik & Company AB, B Free ........ 36,508 39,525
2,000 Nomura Securities
Company Ltd. .................... 41,025 43,600
500 ORIX Corp. ........................ 17,566 20,589
500 Promise Co., Ltd. ................. 21,298 24,077
1,700 Siam Commercial Bank Ltd. ......... 20,329 22,406
3,000 Skandinaviska Enskilda
Banken .......................... 22,088 24,779
10,000 Westpac Banking Corp. ............. 40,869 44,283
---------- ----------
256,968 274,931
---------- ----------
FOOD AND BEVERAGE-- 3.84%
20 Bongrain S.A ...................... 11,843 11,242
1,500 Hartwall Oy AB .................... 24,267 27,854
500 Nestle SA ADR ..................... 25,344 27,688
1,000 Yakult Honsha Co., Ltd. ........... 14,770 13,661
---------- ----------
76,224 80,445
---------- ----------
FOREST PRODUCTS -- 0.70%
6,000 Jefferson Smurfit Group plc ....... 18,571 14,660
---------- ----------
HOTELS AND LODGING-- 1.04%
40,000 AAPC Ltd. ......................... 21,435 21,696
---------- ----------
INDUSTRIAL SERVICES-- 0.81%
4,000 Hazama Corporation ................ 18,255 17,053
---------- ----------
MEDIA -- 2.21%
250 Kinnevik AB, B Shares ............. 8,297 7,790
700 Reuters Holdings plc ADR .......... 38,294 38,588
---------- ----------
46,591 46,378
---------- ----------
METALS AND MINING-- 9.96%
215 Acerinox, S.A ..................... 26,645 21,682
25,000 Golden Shamrock Mine Ltd.+ 15,134 . 15,417
1,000 Impala Platinum Holdings .......... 22,750 19,000
9,000 Kawasaki Steel .................... 31,801 31,392
12,000 Lonrho plc ........................ 31,338 32,736
6,040 Randgold and Exploration
Company Ltd.+ ................... 21,015 24,435
2,000 Stillwater Mining Ltd.+(a) ........ 43,000 38,500
4,000 Western Mining Corporation
Holdings Ltd. ................... 25,777 25,678
---------- ----------
217,460 208,840
---------- ----------
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Gabelli International Growth Fund, Inc.
Portfolio of Investments -- December 31, 1995 (Continued)
================================================================================
Market
Shares Cost Value
------ ---- -----
PHARMACEUTICALS -- 2.87%
800 Astra AB A ........................ $ 29,626 $ 31,837
2,000 Glaxo Wellcome plc ................ 24,656 28,365
---------- ----------
54,282 60,202
---------- ----------
PUBLISHING -- 3.81%
4,000 Dorling Kindersley plc ............ 30,806 33,108
3,200 Independent Newspapers
Ltd. ............................ 19,138 19,931
15,000 Star Publication Malaysia+ ........ 27,808 26,811
---------- ----------
77,752 79,850
---------- ----------
REAL ESTATE -- 2.14%
20,000 Amoy Properties Ltd. .............. 19,890 19,915
2,000 Mitsubishi Estate ................. 20,869 24,998
---------- ----------
40,759 44,913
---------- ----------
RETAIL -- 13.37%
4,500 Bulgari SpA ADS+(a) ............... 23,940 38,250
800 Chiyoda Corp. ..................... 13,266 18,603
1,000 Circle K Corp. Japan Ltd. ......... 29,821 44,085
2,000 Eiden Sakakiya Company
Ltd. ............................ 24,479 25,191
500 Family Mart Co., Ltd. ............. 20,872 22,575
1,000 Gucci Group SpA+ .................. 22,000 38,875
3,000 Haruyama Trading Co. .............. 23,009 26,451
770 Nissen ............................ 19,355 18,054
6,000 Renown Look Inc.+ ................. 19,562 20,870
25,000 Simint ............................ 29,539 27,244
---------- ----------
225,843 280,198
---------- ----------
TELECOMMUNICATIONS -- 3.08%
11,000 CPT Telefonica del Peru
Cl. B+ .......................... 21,559 23,311
3 DDI Corp. ......................... 24,598 23,254
650 Tele Danmark A/S ADR .............. 18,020 17,956
---------- ----------
64,177 64,521
---------- ----------
TRANSPORTATION -- 0.77%
12,000 Ocean Wilsons Holdings plc ........ 15,721 16,182
---------- ----------
WIRELESS COMMUNICATIONS -- 3.36%
700 Advanced Information
Service Ltd. .................... 10,977 12,286
10,000 Telecomm Italia Mobile
SpA+ ............................ 13,724 17,606
1,150 Vodafone Group plc ADR ............ 43,139 40,538
---------- ----------
67,840 70,430
---------- ----------
TOTAL COMMON STOCKS ............... 1,865,874 1,982,613
---------- ----------
PREFERRED STOCKS -- 0.56%
TELEPHONE EQUIPMENT -- 0.56%
300 Nokia Group AB Preference ......... 19,196 11,663
---------- ----------
TOTAL PREFERRED
STOCKS .......................... 19,196 11,663
---------- ----------
TOTAL INVESTMENTS* --
95.14% .......................... $1,885,070 1,994,276
==========
Cash and Other Assets
in excess of Liabilities -- 4.86% 101,881
----------
NET ASSETS -- 100.0%
(190,828 shares
outstanding) .................... $ 2,096,157
===========
Net Asset Value and
Redemption Price
Per Share ....................... $10.98
======
- ----------
(a) Security exempt from registration under Rule 144A of the Securities Act of
1933. This security may be resold in transactions exempt from registration,
normally to qualified institutional buyers. At December 31, 1995, Rule 144A
securities amounted to $76,750 or 3.7% of net assets.
ADR -- American Depositary Receipt
+ Non-income producing security
*For Federal income tax purposes:
Aggregate cost ................. $ 1,885,070
===========
Gross unrealized appreciation ............. $ 158,546
Gross unrealized depreciation ............. (49,340)
-----------
Net unrealized appreciation ............... $ 109,206
===========
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Gabelli International Growth Fund, Inc.
Statement of Assets and Liabilities
December 31, 1995
================================================================================
Assets:
Investments in securities, at value
(Cost $1,885,070) ....................................... $1,994,276
Cash ..................................................... 128,133
Receivable from Advisor .................................. 27,164
Receivable for investments sold .......................... 6,400
Dividends receivable ..................................... 1,656
Deferred organizational expenses ......................... 88,232
----------
Total Assets ........................................... 2,245,861
----------
Liabilities:
Payable for distribution fees ............................ 775
Payable for Fund shares redeemed ......................... 2,467
Payable for investments purchased ........................ 73,126
Deferred organization costs payable ...................... 56,278
Other accrued expenses ................................... 17,058
----------
Total Liabilities ...................................... 149,704
----------
Net Assets (applicable to 190,828
shares outstanding) .................................. $2,096,157
==========
Net asset value and redemption
price per share ....................................... $10.98
==========
Net Assets Consist of:
Capital stock, at par value .............................. $ 191
Additional paid-in capital ............................... 1,986,762
Net unrealized appreciation on
investments and assets and liabilities
denominated in foreign currencies ....................... 109,204
----------
Net Assets ............................................. $2,096,157
==========
Statement of Operations -- For the Period
June 30, 1995 (Commencement of Operations)
through December 31, 1995
================================================================================
Income:
Dividends (net of foreign taxes of $641) .................. $ 6,296
Interest .................................................. 3,460
---------
Total Income ............................................ 9,756
---------
Expenses:
Investment advisory fees .................................. 6,204
Legal and audit fees ...................................... 11,000
Amortization of organization expenses ..................... 9,768
Custodian fees and expenses ............................... 7,114
Registration fees ......................................... 4,231
Transfer and shareholder servicing agent .................. 3,826
Directors' fees and expenses .............................. 3,000
Printing and mailing ...................................... 2,896
Distribution expenses ..................................... 1,546
Miscellaneous ............................................. 970
---------
Total expenses before
expenses assumed by Advisor ............................. 50,555
Expenses assumed by Advisor ............................... (33,368)
---------
Total expenses ............................................ 17,187
---------
Investment loss - net ..................................... (7,431)
---------
Net Realized and Unrealized Gain on Investments
and Foreign Currency Transactions:
Net realized gain on investments and
foreign currency transactions ........................... 6,690
Net change in unrealized appreciation on
investments and assets and liabilities
denominated in foreign currencies ....................... 109,204
---------
Net gain on investments ................................. 115,894
---------
Net increase in net assets resulting from
operations ................................................ $ 108,463
=========
<TABLE>
<CAPTION>
Statement of Changes in Net Assets -- For the Period
June 30, 1995 (Commencement of Operations) through December 31, 1995
====================================================================================================================================
<S> <C>
Increase in Net Assets:
Investment loss - net ............................................................................................ ($7,431)
Net realized gain on investments and foreign currency transactions ............................................... 6,690
Net change in unrealized appreciation on investments and assets and liabilities denominated in foreign currencies 109,204
-----------
Net increase in net assets resulting from operations ............................................................. 108,463
-----------
Share transactions - net ......................................................................................... 1,887,694
-----------
Net increase in net assets ..................................................................................... 1,996,157
Net Assets:
Beginning of period .............................................................................................. 100,000
-----------
End of period .................................................................................................... $ 2,096,157
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Gabelli International Growth Fund, Inc.
Notes to Financial Statements
================================================================================
1. Significant Accounting Policies. The Gabelli International Growth Fund, Inc.
(the "Fund") was incorporated in Maryland on May 25, 1994. The Fund is a
no-load, open-end, diversified management investment company whose investment
objective is long-term capital appreciation. Prior to June 30, 1995
(commencement of operations), the Fund had no operations other than the sale of
10,000 shares of common stock at $10.00 per share to Gabelli Funds, Inc., the
Fund's advisor and an affiliate, on June 21, 1995. The preparation of financial
statements in accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates. The following is a summary of significant accounting policies
followed by the Fund:
Security Valuation. Portfolio securities listed or traded on the New York or
American Stock Exchanges, quoted by the National Association of Securities
Dealers Automated Quotations, Inc. ("NASDAQ") or traded on foreign exchanges are
valued at the last sale price on that exchange (if there were no sales that day,
the security is valued at the average of the bid and asked prices). All other
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest average of the bid and asked prices. When
market quotations are not readily available, portfolio securities are valued at
their fair value as determined in good faith under procedures established by and
under the general supervision of the Corporation's Directors. Short-term debt
securities with remaining maturities of 60 days or less are valued at amortized
cost, unless the Directors determine such does not reflect the securities' fair
value, in which case these securities will be valued at their fair value as
determined by the Directors. Options are valued at the last sale price on the
exchange on which they are listed, unless no sales of such options have taken
place that day, in which case they will be valued at the mean between their
closing bid and asked prices.
Foreign Currency Transactions. The books and records of the Fund are maintained
in U.S. dollars as follows:
(i) market value of investment securities and other assets and liabilities are
translated at the exchange rate on the valuation date.
(ii) purchases and sales of investment securities, income and expenses are
translated at the exchange rate prevailing on the respective date of such
transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuation
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments. Net
realized and unrealized foreign exchange gains and losses which arise from
changes in exchange rates involving assets and liabilities other than
investments in securities were immaterial for the period ended December 31,
1995.
Forward Foreign Currency Contracts. The Fund may hold currencies to meet
settlement requirements for foreign securities and may engage in currency
exchange transactions to hedge against changes in exchange rates. Forward
foreign currency contracts are valued at the forward rate and are
marked-to-market daily. The change in market value is recorded by the Fund as an
unrealized gain or loss. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate fluctuations in
the underlying prices of the Fund's portfolio securities, but it does establish
a rate of exchange that can be be achieved in the future. Although forward
foreign currency contracts limit the risk of loss due to a decline in the value
of the hedged currency, they also limit any potential gain that might result
should the value of the currency increase. In addition, the Fund could be
exposed to risks if the counterparties to the contracts are unable to meet the
terms of their contracts.
At December 31, 1995, the Fund had the following forward foreign currency
contracts open to hedge unsettled security purchases and sales:
<TABLE>
<CAPTION>
Foreign Net
Currency Maturity Unrealized
Amount Date Cost Value Depreciation
-------- -------- ------- ------- -----------
<S> <C> <C> <C> <C>
14,050 Bought Canadian Dollar 1/2/96 $10,321 $10,293 $ (28)
72,790 Bought Swedish Krona 1/3/96 10,946 10,931 (15)
10,159,200 Sold Italian Lira 1/8/96 6,397 6,400 (3)
70,563 Bought Malaysian Ringgits 1/3/96 27,808 27,781 (27)
-------
$ (73)
=======
</TABLE>
9
<PAGE>
Gabelli International Growth Fund, Inc.
Notes to Financial Statements (Continued)
================================================================================
Security Transactions and Investment Income. Security transactions are accounted
for on the dates the securities are purchased or sold (the trade dates), with
realized gain and loss on investments determined by using specific
identification as the cost method. Interest income (including amortization of
premium and discount) is recorded as earned. Dividend income and dividend and
capital gain distributions to shareholders are recorded on the ex-dividend date.
Federal Income Taxes. The Fund has qualified and intends to continue to qualify
as a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986 and distribute all of its taxable income and capital gains, if any,
to its shareholders. Therefore, no Federal income tax provision is required.
Dividends and interest from non-U.S. sources received by the Fund are generally
subject to non-U.S. withholding taxes at rates ranging to 30%. Such withholding
taxes may be reduced or eliminated under the terms of applicable U.S. income tax
treaties, and the Fund intends to undertake any procedural steps required to
claim the benefits of such treaties. If more than 50% in value of the Fund's
total assets at the close of any taxable year consists of stocks or securities
of non-U.S. corporations, the Fund is permitted and may elect to treat any
non-U.S. taxes paid by it as paid by its shareholders.
A portion of the Fund's net investment loss was used to offset net short-term
capital gain. As a result, $6,690 was charged against undistributed net realized
gain on investments. In addition, the remaining $741 of net investment loss was
charged to additional paid-in capital, as the loss cannot be carried forward for
Federal income tax purposes.
2. Capital Stock Transactions. The Articles of Incorporation, dated May 14,
1994, permit the Fund to issue 1,000,000,000 shares (par value $0.001) of
capital stock. Transactions in shares of capital stock were as follows:
June 30, 1995
(Commencement of Operations)
through December 31, 1995
----------------------------
Shares Amount
------ ------
Shares sold ................................... 195,806 $2,044,809
Shares redeemed ............................... (14,978) (157,115)
--------- ----------
Shares transactions -- net .................. 180,828 $1,887,694
========= ==========
3. Purchases and Sales of Securities. Purchases and sales of securities for the
period ended December 31, 1995, other than U.S. Government obligations and
short-term securities, aggregated $2,189,658 and $310,799, respectively.
4. Investment Advisory Contract. The Fund employs Gabelli Funds, Inc. (the
"Advisor") to provide a continuous investment program for the Fund's portfolio,
provide all facilities and personnel, including officers, required for its
administrative management, and to pay the compensation of all officers and
Directors of the Fund who are its affiliates. As compensation for the services
rendered and related expenses borne by the Advisor, the Fund pays the Advisor a
fee, computed and accrued daily and payable monthly, equal to 1.00% per annum of
the Fund's average daily net assets. The Advisor is obligated to reimburse the
Fund in the event the Fund's expenses exceed the most restrictive expense ratio
limitation imposed by any state, currently believed to be 2.5% of the first $30
million, 2% of the next $70 million and 1.5% of the excess over $100 million of
the Fund's average daily net assets (excluding taxes, interest, distribution
expenses and extraordinary items). Pursuant to this limitation, for the period
ended December 31, 1995, the Advisor assumed $33,368 in Fund expenses.
5. Organization Expenses. The organization expenses of the Fund are being
amortized on a straight-line basis over a period of 60 months. The Advisor has
agreed that in the event that any of the initial 10,000 shares it owns are
redeemed during the period of amortization of the Fund's organization and
start-up expenses, the redemption proceeds will be reduced by any such
unamortized organization expenses in the same proportion as the number of
initial shares redeemed to the number of initial shares outstanding at the time
of redemption.
6. Distribution Plan. The Fund's Board of Directors has adopted a distribution
plan (the "Plan") under Section 12(b) of the Investment Company Act of 1940 and
Rule 12b-1 thereunder under which the the Fund pays Gabelli & Company, Inc., the
distributor and an affiliate of the Advisor, an annual rate of up to 0.25% of
average net assets for the costs and expenses in connection with distributing
the Fund's shares. For the period ended December 31, 1995, the Fund has incurred
distribution costs of $1,546. The Board of Directors has approved that
Distribution costs incurred by Gabelli & Company, Inc., totalling $96,274 which
are in excess of the 0.25% limitation may be recovered from the Fund in future
periods, subject to such limitation.
10
<PAGE>
Financial Highlights
================================================================================
Selected data for a share of capital stock outstanding throughout the period
June 30, 1995 (Commencement of Operations) through December 31, 1995:
Operating Performance:
Net Asset Value, Beginning of Period ..................... $ 10.00
Increase from Investment Operations:
Net investment loss .................................... (0.03)+
Net realized and unrealized gain on securities ......... 1.01
---------
Total from Investment Operations ....................... 0.98
---------
Net Asset Value, End of Period ........................... $ 10.98
=========
Total Return ........................................... 9.80%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) ............... $ 2,096
Ratio of Expenses to Average Net Assets ................ 2.75%(a)(b)
Ratio of Net Investment Loss to Average Net Assets ..... (1.19%)(a)(b)
Portfolio Turnover Rate ................................ 29.55%
- -------------
+ Based on average month-end shares outstanding.
(a) Annualized.
(b) Before reimbursement, the ratios of expenses and net investment loss to
average net assets would have been 8.10% and (6.54%), respectively.
Gabelli International Growth Fund, Inc.
Report of Ernst & Young LLP, Independent Auditors
================================================================================
Shareholders and Board of Directors
Gabelli International Growth Fund, Inc.
We have audited the accompanying statement of assets and liabilities of The
Gabelli International Growth Fund, Inc., including the portfolio of investments,
as of December 31, 1995, and the related statements of operations and changes in
net assets, and financial highlights for the period from June 30, 1995
(commencement of operations) to December 31, 1995. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1995 by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Gabelli International Growth Fund, Inc. at December 31, 1995, and the results of
its operations, the changes in its net assets and the financial highlights for
the period from June 30, 1995 to December 31, 1995, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
January 24, 1996
<PAGE>
Gabelli International Growth Fund, Inc.
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
fax: 1-914-921-5118
http://www.gabelli.com
e-mail: [email protected]
(Net Asset Value may be obtained daily by calling
1-800-GABELLI after 6:00 P.M.)
Board of Directors
Mario J. Gabelli, CFA
Chairman and Chief
Investment Officer
Gabelli Funds, Inc.
Anthony J. Colavita
Attorney-at-Law
Anthony J. Colavita, P.C.
Anthonie C. van Ekris
Managing Director
BALMAC International, Inc.
Karl Otto Pohl
Former President
Deutsche Bundesbank
Werner J. Roeder, MD
Director of Surgery
Lawrence Hospital
Officers and Portfolio Managers
Caesar Bryan
President and Portfolio Manager
James E. McKee
Secretary
Bruce N. Alpert
Vice President and Treasurer
Distributor
Gabelli & Company, Inc.
Custodian, Transfer Agent and Dividend Agent
State Street Bank and Trust Company
Legal Counsel
Willkie Farr & Gallagher
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of
Gabelli International Growth Fund, Inc. It is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
