[Photo of Mario J. Gabelli]
Gabelli
International
Growth
Fund,
Inc.
SEMI-ANNUAL REPORT
JUNE 30, 1996
<PAGE>
Gabelli International Growth Fund, Inc.
Semi-Annual Report - June 30, 1996
[Photo of Caesar Brown]
To Our Shareholders:
For the second quarter of 1996, the Gabelli International Growth Fund
returned 7.2%. For comparison, the average international equity mutual fund
monitored by Lipper Analytical Services appreciated by 3.9% and the Morgan
Stanley Capital International Index of International Equity Markets returned
1.1%. For the six months ended June 30, 1996, the Fund returned 14.3% compared
with 8.5% and 3.7% for the Lipper International Fund Index and the Morgan
Stanley Index, respectively.
At the end of June, the Fund completed its first full year of operation.
During the past twelve months the Fund returned 25.5% compared with 16.4% for
the Lipper International Fund Index.
Most international markets posted positive returns during the quarter on a
dollar adjusted basis. The two losers were Switzerland and Singapore, both of
which declined by small amounts. The best markets were located in continental
Europe and included Italy, Finland, Norway and Spain. Italy and Finland rose by
more than 10%. The two largest overseas markets, Japan and the United Kingdom,
both appreciated by just over 2%.
The emerging markets, as a group, performed well during the quarter. The
standouts, Taiwan and Brazil, both appreciated by more than 20%. Losers included
Thailand, South Africa and Korea.
The dollar continued to strengthen against both the yen and the
deutschemark as market participants began to discount a rise in U.S. interest
rates due to the continued strength of the U.S. economy. At the end of the
quarter the dollar was valued at 109.65 yen and 1.52 deutschemarks compared with
103.35 yen and 1.44 deutschemarks at the end of 1995.
INVESTMENT RESULTS (a)
- --------------------------------------------------------------------------------
Quarter
----------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
1996: Net Asset Value .... $11.71 $12.55 -- -- --
Total Return ....... 6.6% 7.2% -- -- --
------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
<PAGE>
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 of the market.
Market Outlook
We believe that the investment environment for the major overseas equity
markets remains favorable. This is based on low inflation and interest rates,
rising corporate profits and reasonable valuations.
Economic growth in both Europe and Japan remains sluggish. In Germany, the
recent weakening of the deutschemark and the reduction in the discount rate to
2.5% from 3.0% at the end of April should bring some relief to the economy even
though unemployment remains very high. In Japan, it appears that better growth
at the start of the year has proved to be unsustainable largely due to a fall
off in public sector expenditures. As a consequence, inflationary pressures in
both economies are insignificant except, in the case of Japan, for a small
increase in imported raw material prices due to the recent yen weakness. The
situation in the United States is different as strong employment growth has led
to speculation that the Federal Reserve might raise interest rates to counter
inflationary pressures building in the economy.
These differences have been reflected in recent bond market performance.
While the ten year U.S. government bond yield rose by almost 40 basis points
during the second quarter to 6.7%, bond yields in Japan and Germany rose only
very slightly to 3.2% and 6.5%, respectively, by the end of June. It is unlikely
that either Germany or Japan will raise short-term interest rates during the
next few months; indeed there is some speculation that German short-term rates
could decline further from their current level of 3.3%.
As the German economy recovers, corporate profit growth should remain
strong in most continental European markets. In Japan, large increases in
profitability should continue as corporations start to experience some revenue
growth.
International Allocation
The chart at the right presents the Fund's holdings by geographic region as
of June 30, 1996. 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.
[The following table was represented as a pie graph in the printed material.]
HOLDINGS BY GEOGRAPHIC REGION - 6/30/96
Japan 23.0%
Cash 11.4%
Asia/Pacific Rim 11.1%
Europe 47.1%
North America 5.3%
Other 2.1%
2
<PAGE>
Portfolio Structure
Almost half of the Fund is committed to Europe with the majority of that
invested in continental Europe. In spite of slow economic growth, many of the
more economically sensitive sectors have performed well. This has helped many of
the Fund's broadcasting and media holdings. Interest rate sensitive sectors,
such as financial services, have generally underperformed, and in the case of
banks, prices actually declined during the first half of the year. This is
likely to provide the Fund with a buying opportunity as some European banks
should experience rapid profit growth. Deutsche Bank's recent purchase of a
stake in another large German bank will act as a catalyst for the
rationalization of the sector not only in Germany but possibly elsewhere in
Europe. Most sectors in Europe require rationalization and we believe this will
be an ongoing theme which will provide excellent investment opportunities over
time.
In Japan, the Fund remains concentrated in service and manufacturing
companies such as telecommunications, retailing and autos. We continue to avoid
the banking sector in Japan which remains, in our opinion, overvalued. We
reduced our exposure to South East Asia as these markets generally have the
highest correlation with the U.S. market and with changes in U.S. interest
rates.
Let's Talk Stocks
The following are stock specifics on selected holdings of our Fund's
investments. Favorable EBITDA (earnings before interest, taxes, depreciation and
amortization) prospects do not necessarily translate into higher stock prices,
but they do express a positive trend which we believe will develop over time.
Arnoldo Mondadori Editore (MOND.MI - $5.824 - Milan Stock Exchange) is Italy's
leading publisher with about half of its turnover coming from its magazine and
advertising division. Other activities include book publishing, printing and
direct marketing. Mondadori has leading market shares in its major activities
including 34% of the Italian Magazine market. The company's priority is to
update existing titles and launch new products. In 1995, Chi was launched and
reached a weekly circulation of 400,000. In book publishing, Mondadori has a 30%
market share and its leadership is even stronger in the children's book sector.
The company is expanding into multimedia and is launching a yellow pages
directory. We believe Mondadori is positioned to benefit from the recovery in
the Italian economy and is materially undervalued relative to its growth
prospects.
Glaxo Wellcome plc (GLX.L - $13.457 - London Stock Exchange) is one of the
largest pharmaceutical companies in the world. In recent years, the company's
growth has been due to the success of the anti-ulcer drug Zantac, which
accounted for about 30% of Glaxo Wellcome's sales in 1995. Sales of Zantac are
now declining and, with the drug soon to lose its patent protection, investors
are concerned. However, we believe that this is now fully discounted in the
share price and that investors are ignoring Glaxo Wellcome's extensive portfolio
of new drugs currently in development and the growth potential of recently
launched drugs. At its current share price the stock yields about 5%.
Nestle SA (NESZ.Z - $57.00 - Zurich Stock Exchange) is one of the world's
leading food companies. Based in Switzerland, its major business groups include
Beverages, Milk Products, Prepared Dishes and Confectionary. Nestle invented
instant coffee and its brand Nescafe is the world's leading instant coffee.
Other well-known brands that Nestle controls include Perrier, Carnation,
Stouffer's, Alcon and L'Oreal. Nestle's sales are spread over the different
regions of the world with particularly good positions in developing countries
which, we believe, will contribute increasingly to revenues in the future. For
example, of the 15 factories the company opened in the past three years, 12 were
located in emerging
3
<PAGE>
markets. We expect fairly strong profit growth in the medium term after a few
years of lackluster performance and the stock appears undervalued relative to
its peers.
Schibsted A/A (SCHX.OL - $12.915 - Oslo Stock Exchange) is involved in all
aspects of the media business in Norway. The company is organized into three
business groups: Print Media, TV/Film and Multimedia. Cash flows from the
original newspaper businesses have been, during recent years, reinvested in
television, TV programming and multimedia activities. We believe that these new
activities will prove successful. The company recognizes the limitations of the
Norwegian market in terms of size and recently purchased a leading newspaper in
Sweden at what appears to be a very favorable price.
Telecom Italia Mobile SpA (TIM.MI - $2.232 - Milan Stock Exchange), formerly a
subsidiary of Telecom Italia the provider of wired local and long distance
telephone service in Italy, was spun-off last July and began trading on the
Milan stock exchange as an independent company. Today, Telecom Italia Mobile, is
the leading cellular provider in Italy. With four million subscribers, it is the
largest cellular provider in Europe. Telecom Italia Mobile's competitive
environment also remains favorable with only one new entrant in the market. No
new competitors are likely in the near future. The company remains attractive,
selling at less than 11 times EBITDA.
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. The Gabelli
International Growth Fund and many of our other Funds are available through the
no-transactions fee programs at many major discount brokerage firms.
Internet
You can now visit us on the Internet. Our home page at
http://www.gabelli.com contains information about Gabelli Funds, Inc., the
Gabelli Mutual Funds, quarterly reports, closing prices, IRAs, 401(k)s and other
current news. You can also send us e-mail at [email protected].
In Conclusion
The Fund's daily net asset value is now available in the financial press
and each evening after 6:00 PM (Eastern Time) by calling 1-800-GABELLI
(1-800-422-3554). The Fund's NASDAQ symbol is 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
President and Portfolio Manager
August 1, 1996
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.
4
<PAGE>
Gabelli International Growth Fund, Inc.
Portfolio of Investments -- June 30, 1996 (Unaudited)
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS -- 88.61%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 2.74%
5,000 Nissan Motor Company Ltd..... $ 39,179 $ 44,450
9,000 Nittan Valve Co.............. 51,460 51,804
3,000 Toyota Motor Corporation..... 69,906 75,103
----------- -----------
160,545 171,357
----------- -----------
BROADCASTING -- 2.28%
200 CANAL+....................... 47,825 48,883
300 Pathe SA..................... 72,357 70,355
5,000 Spencer Gulf Telecasters Ltd. 19,887 23,610
----------- -----------
140,069 142,848
----------- -----------
CONSUMER PRODUCTS -- 7.90%
1,800 Brio Industries Inc.,........ 15,066 15,718
60 Compagnie Financiere
Richemont AG............... 88,744 94,812
2,000 De Rigo Spa ADR.............. 46,350 45,750
9,000 Guiness plc.................. 65,171 65,412
600 Seagram Company Ltd.......... 21,293 20,175
50,000 Simint ...................... 78,378 187,357
21,000 Swedish Match AB............. 68,375 65,131
----------- -----------
383,377 494,355
----------- -----------
DIVERSIFIED INDUSTRIAL -- 9.18%
11,300 Antofagasta Holdings plc..... 56,819 56,683
1,100 Cubiertas y Mzov S.A......... 69,031 71,596
1,500 ICBT S.A..................... 69,211 59,260
100,000 JG Summit Holdings .......... 35,451 37,419
600 KSB AG....................... 73,077 76,428
8,000 Mitsubishi Heavy
Industries Ltd............. 64,048 69,658
2,000 Nanno Construction
Co. Ltd.................... 26,342 23,207
3,000 NBC Industries Co. Ltd....... 61,169 64,413
10,000 PT Mustika Ratu+............. 14,233 18,913
6,000 Sanyo Electric Company
Ltd........................ 35,600 36,674
2,500 Toolex Alpha NV.............. 52,500 60,000
----------- -----------
557,481 574,251
----------- -----------
ELECTRONICS -- 3.32%
7,000 Hitachi, Ltd................. 69,889 65,235
3,000 Japan Digital Laboratory
Co......................... 66,014 70,169
1,100 Sony Corporation............. 58,055 72,462
----------- -----------
193,958 207,866
----------- -----------
ENERGY -- 4.07%
8,000 British Petroleum
Company plc................ 66,573 70,133
1,000 Forasol-Foramer NV........... 12,000 12,625
4,000 Shaw Industries Ltd.......... 42,781 52,933
2,500 Smedvig A/S.................. 55,408 57,849
13,000 Van Der Horst Ltd............ 61,888 60,808
----------- -----------
238,650 254,348
----------- -----------
ENTERTAINMENT -- 3.41%
4,900 Granada Group plc............ 51,212 65,596
240 Infogrames Entertainment
SA+........................ 36,064 46,639
35,000 Sydney Harbour Casino
Holdings Limited+.......... 46,875 48,479
15,000 Village Roadshow Ltd......... 46,285 52,532
----------- -----------
180,436 213,246
----------- -----------
FINANCIAL SERVICES -- 9.60%
1,000 Banco Pastor S.A............. 53,763 62,359
2,000 CSA Management Limited
Cl. A...................... 19,233 21,994
20,000 Den Norske Bank.............. 59,021 60,578
5,000 Dundee Bancorp Cl. A+........ 54,290 61,216
200,000 Integrated Development
Capital Ltd................ 32,623 33,447
200,000 Integrated Development
Capital Ltd. - Options..... 5,931 5,509
2,600 Invik & Company AB, B
Free....................... 67,447 87,293
8,000 Nippon Fire & Marine
Insurance.................. 49,500 52,261
3,000 Nomura Securities
Company Ltd................ 60,246 58,657
1,900 ORIX Corp.................... 73,289 70,480
2,700 Siam Commercial Bank
Ltd........................ 36,971 39,149
6,000 Skandinaviska Enskilda
Banken..................... 44,282 47,877
----------- -----------
556,596 600,820
----------- -----------
FOOD AND BEVERAGE -- 2.34%
2,500 Hartwall Oy AB............... 41,880 61,140
1,500 Nestle SA ADR................ 80,844 85,500
----------- -----------
122,724 146,640
----------- -----------
FOREST PRODUCTS -- 0.71%
16,000 Jefferson Smurfit Group
plc........................ 42,663 44,433
----------- -----------
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Gabelli International Growth Fund, Inc.
Portfolio of Investments (Continued) -- June 30, 1996 (Unaudited)
================================================================================
Market
Shares Cost Value
------ ---- -----
HOTELS AND LODGING -- 0.86%
81,894 AAPC Ltd..................... $ 47,540 $ 51,561
3,200 Tourism Asset Holding
Ltd........................ 2,408 2,367
----------- -----------
49,948 53,928
----------- -----------
INDUSTRIAL SERVICES -- 1.62%
13,000 Hazama Corporation........... 56,680 56,894
2,000 ISS-International Service
System A/S Cl. A........... 41,861 44,626
----------- -----------
98,541 101,520
----------- -----------
MEDIA -- 1.27%
1,100 Reuters Holdings plc ADR..... 66,044 79,750
----------- -----------
METALS AND MINING -- 7.89%
415 Acerinox, S.A................ 47,882 43,185
6,000 Durban Roodeport Deep
Ltd. - Options............. 27,000 26,389
20,000 Emperor Mines Ltd............ 46,112 47,220
2,000 Golden Star Resources Ltd.... 20,350 28,739
3,000 Hullas de Coto Cortes ....... 46,370 55,655
15,000 IAM Gold International
African Mining............. 62,732 63,233
1,000 Impala Platinum Holdings..... 22,750 14,500
9,000 Kawasaki Steel............... 31,801 32,481
12,000 Lonrho plc................... 31,338 34,477
14,040 Randgold and Exploration
Company Ltd.+.............. 56,120 74,100
8,000 Ranger Minerals NL........... 24,729 26,443
2,000 Stillwater Mining Ltd.+(a)... 43,000 47,250
----------- -----------
460,184 493,672
----------- -----------
PHARMACEUTICALS -- 5.89%
1,800 Astra AB A .................. 71,279 79,404
3,000 Eisai Co., Ltd............... 54,012 56,738
6,000 Glaxo Wellcome plc........... 79,568 80,740
300 Roussel-Uclaf................ 58,350 71,928
70 Sandoz AG.................... 66,336 79,944
----------- -----------
329,545 368,754
----------- -----------
PUBLISHING -- 5.97%
11,000 Arnoldo Mondadori Editore ... 92,979 83,154
13,841 Independent Newspapers
Ltd. ...................... 52,973 64,064
2,733 Independent Newspapers
Ltd. - Rights.............. 0 872
10,000 News Corporation Ltd......... 54,953 56,743
7,000 Schibsted A/A................ 94,509 90,406
25,000 Star Publication Malaysia+... 58,853 78,156
----------- -----------
354,267 373,395
----------- -----------
REAL ESTATE -- 1.63%
6,000 Mitsubishi Estate............ 73,475 82,778
10,000 Sarawak Industries
Berhad..................... 23,558 19,238
----------- -----------
97,033 102,016
----------- -----------
RETAIL -- 9.74%
4,500 Bulgari SpA ADS+(a).......... 23,940 72,000
4,000 Chain Store Okuwa Co., Ltd... 73,353 70,169
2,000 Chiyoda Corp................. 37,043 46,962
1,000 Circle K Corp. Japan Ltd..... 24,851 51,896
5,000 Eiden Sakakiya Company
Ltd........................ 64,474 69,895
1,000 Gucci Group SpA+............. 22,000 64,500
3,000 Haruyama Trading Co.......... 23,009 45,774
800 Hornbach Holding AG.......... 51,899 68,812
3,000 Inaba Denkisangyo
Company................... 65,894 75,377
11,000 Renown Look Inc.+............ 38,764 44,121
----------- -----------
425,227 609,506
----------- -----------
TELECOMMUNICATIONS -- 4.15%
11,000 CPT Telefonica del Peru
Cl. B+..................... 21,559 22,125
7 DDI Corp..................... 57,165 61,143
4,930 Hellenic Telecommunications
Organization S.A. (OTE).... 81,404 81,764
8 Nippon Telegraph and
Telephone Corporation...... 61,357 59,351
2,000 Tele-Communications
International, Inc. Cl. A.. 35,350 35,250
----------- -----------
256,835 259,633
----------- -----------
TRANSPORTATION -- 0.96%
22,000 Ocean Wilsons Holdings
plc........................ 30,665 31,774
6,000 Stena Line AB B Shares....... 33,392 28,455
----------- -----------
64,057 60,229
----------- -----------
WIRELESS COMMUNICATIONS -- 3.08%
1,700 Advanced Information Service
Ltd........................ 30,929 25,188
1,000 Orange plc ADR............... 15,620 17,500
40,000 Telecomm Italia Mobile
SpA+....................... 72,894 89,280
1,650 Vodafone Group plc ADR....... 61,726 60,844
----------- -----------
181,169 192,812
----------- -----------
TOTAL COMMON STOCKS.......... 4,959,349 5,545,379
----------- -----------
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Gabelli International Growth Fund, Inc.
Portfolio of Investments (Continued) -- June 30, 1996 (Unaudited)
================================================================================
Market
Principal Amount Cost Value
- ---------------- ---- -----
U.S. GOVERNMENT OBLIGATIONS -- 9.53%
$ 600,000 U.S. Treasury Bills, 4.95%
due 08/15/96 .............. $ 596,288 $ 596,288
----------- -----------
TOTAL U.S. GOVERNMENT
OBLIGATIONS ............... 596,288 596,288
----------- -----------
TOTAL INVESTMENTS
-- 98.14%................... $ 5,555,637* 6,141,667
===========
Cash and Other Assets
in excess of Liabilities
-- 1.86%................... 116,258
-----------
NET ASSETS -- 100.00%
(498,815 shares outstanding) $ 6,257,925
===========
Net Asset Value and
Redemption Price
Per Share.................. $12.55
======
- ----------
(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 June 30, 1996, Rule 144A
securities amounted to $119,250 or 1.9% of net assets.
ADR -- American Depositary Receipt
+ Non-income producing security
*For Federal income tax purposes:
Aggregate cost................... $ 5,555,637
===========
Gross unrealized appreciation............... $ 665,470
Gross unrealized depreciation............... (79,440)
-----------
Net unrealized appreciation................. $ 586,030
===========
Market
Principal Amount Cost Value
- ---------------- ---- -----
FORWARD FOREIGN
CURRENCY EXCHANGE
4,267,478 Bought Japanese Yen
at Foreign Exchange Rate
109.20 due 07/01/96........ $ 38,990 $ 39,079
----------- -----------
39,890 Bought Deutsche Mark
at Foreign Exchange Rate
1.52 due 07/01/96.......... 26,192 26,243
----------- -----------
98,581 Bought French Franc
at Foreign Exchange Rate
5.141 due 07/01/96......... 19,138 19,175
----------- -----------
77,582 Bought Australian Dollars
at Foreign Exchange Rate
2.499 due 07/02/96......... 31,045 31,095
----------- -----------
3,008 Bought Australian Dollars
at Foreign Exchange Rate
.7927 due 07/02/96......... 2,384 2,367
----------- -----------
125,074 Bought French Franc
at Foreign Exchange Rate
5.1344 due 07/30/96........ 24,281 24,360
----------- -----------
Proceeds Value
----------- -----------
46,560 Sold French Franc
at Foreign Exchange Rate
5.1341 due 08/01/96........ $ 9,039 $ 9,069
----------- -----------
37,156 Sold Australian Dollars
at Foreign Exchange Rate
7903 due 07/01/96.......... 29,365 29,242
----------- -----------
- --------------------------------------------------------------------------------
Top Ten Holdings
June 30, 1996
Simint Nestle SA
Compagnie Financiere Richemont AG Arnoldo Mondadori Editore
Schibsted A/A Mitsubishi Estate
Telecom Italia Mobile SpA Hellenic Telecom. Organization S.A.
Invik & Company AB Glaxo Wellcome plc
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Statement of Assets and Liabilities
June 30, 1996 (Unaudited)
================================================================================
Assets:
Investments in securities, at value
(Cost $5,555,637) ..................................... $ 6,141,667
Cash .................................................... 137,333
Receivable from Advisor ................................. 26,687
Receivable for investments sold ......................... 53,381
Receivable for Fund shares sold ......................... 59,508
Dividends receivable .................................... 10,517
Deferred organizational expenses ........................ 78,464
-----------
Total Assets .......................................... 6,507,557
-----------
Liabilities:
Payable for distribution fees ........................... 1,124
Payable for investments purchased ....................... 182,798
Other accrued expenses .................................. 65,710
-----------
Total Liabilities ..................................... 249,632
-----------
Net Assets ............................................ $ 6,257,925
===========
Net asset value and redemption
price per share ..................................... $ 12.55
===========
Net Assets Consist of:
Capital stock, at par value ............................. $ 499
Additional paid-in capital .............................. 5,654,366
Accumulated net realized gains on
investments and foreign currency
transactions ........................................... 33,773
Accumulated net investment loss ......................... (16,588)
Net unrealized appreciation on
investments and assets and liabilities
denominated in foreign currencies ..................... 585,875
-----------
Net Assets ............................................ $ 6,257,925
===========
Statement of Operations -- For the Six Months
Ended June 30, 1996 (Unaudited)
================================================================================
Income:
Dividends (net of foreign taxes of $4,216) ................ $ 29,020
Interest .................................................. 7,130
---------
Total Income ............................................ 36,150
---------
Expenses:
Investment advisory fees .................................. 19,149
Legal and audit fees ...................................... 16,980
Printing and mailing ...................................... 10,894
Amortization of organization expenses ..................... 9,768
Custodian fees and expenses ............................... 9,357
Registration fees ......................................... 9,235
Transfer and shareholder servicing agent .................. 8,996
Distribution expenses ..................................... 4,766
Directors' fees and expenses .............................. 3,924
Miscellaneous ............................................. 5,505
---------
Total expenses before
expenses assumed by Advisor ............................. 98,574
Expenses assumed by Advisor ............................... (45,836)
---------
Total expenses .......................................... 52,738
---------
Investment loss - net ..................................... (16,588)
---------
Net Realized and Unrealized Gain on Investments
and Foreign Currency Transactions:
Net realized gain on investments and
foreign currency transactions ........................... 27,083
Net change in unrealized appreciation on
investments and assets and liabilities
denominated in foreign currencies ....................... 476,671
---------
Net gain on investments ................................. 503,754
---------
Net increase in net assets resulting from
operations ................................................ $ 487,166
=========
Statement of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
July 3, 1995
Six Months Ended (Commencement of
June 30, 1996 Operations) through
(Unaudited) December 31, 1995
----------- -----------------
<S> <C> <C>
Increase (decrease) in Net Assets:
Investment loss - net ................................................... ($ 16,588) ($ 7,431)
Net realized and unrealized gain on investments
and foreign currency transactions ..................................... 27,083 6,690
Net change in unrealized appreciation on investments and assets
and liabilities denominated in foreign currencies ..................... 476,671 109,204
----------- -----------
Net increase in net assets resulting from operations .................... 487,166 108,463
----------- -----------
Share transactions - net ................................................ 3,674,602 1,887,694
----------- -----------
Net increase in net assets ............................................ 4,161,768 1,996,157
Net Assets:
Beginning of period ..................................................... 2,096,157 100,000
----------- -----------
End of period ........................................................... $ 6,257,925 $ 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
recorded at the exchange rate on the valuation date.
(ii) purchases and sales of investment securities, income and expenses are
recorded at the exchange rate prevailing on the respective date of such
transactions.
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.
9
<PAGE>
Gabelli International Growth Fund, Inc.
Notes to Financial Statements (Unaudited)
================================================================================
At June 30, 1996, the Fund had sold short the following forward foreign currency
contracts:
<TABLE>
<CAPTION>
Foreign
Currency Settlement Unrealized
Amount Date Value Gain
--------- ---------- ---------- ----------
<C> <S> <C> <C> <C>
4,267,478 Bought Japanese Yen 7/1/96 $ 39,079 $ 89
39,890 Bought German Deutsche Mark 7/1/96 26,243 51
223,655 Bought French Franc 7/1/96 and 7/30/96 43,535 116
80,590 Bought Australian Dollars 7/2/96 33,462 33
46,560 Sold French Franc 8/1/96 9,069 (30)
37,156 Sold Australian Dollars 7/1/96 29,242 123
---------- ----------
$ 180,630 $ 382
========== ==========
</TABLE>
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 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 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 up to 30%. Such
withholding taxes may be reduced or eliminated under the terms of applicable
U.S. income tax treaties, and the Fund intends to undertake any procedural steps
required to claim the benefits of such treaties. If 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.
2. Capital Stock Transactions. The Articles of Incorporation, dated July 16,
1993, permit the Fund to issue 200,000,000 shares (par value $0.001).
Transactions in shares of capital stock were as follows:
Six Months June 30, 1995
Ended (Commencement of Operations)
June 30, 1996 through December 31, 1995
-------------------------- --------------------------
Shares Amount Shares Amount
----------- ----------- ----------- -----------
Shares sold ........ 367,625 $ 4,397,826 195,806 $ 2,044,809
Shares redeemed .... (59,637) (717,688) (14,978) (157,115)
----------- ----------- ----------- -----------
Net increase ..... 307,988 $ 3,680,138 180,828 $ 1,887,694
=========== =========== =========== ===========
3. Purchases and Sales of Securities. Purchases and sales of securities for the
six months ended June 30, 1996, other than U.S. Government obligations and
short-term securities, aggregated $4,037,929 and $990,747, 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
10
<PAGE>
Gabelli International Growth Fund, Inc.
Notes to Financial Statements (Unaudited) (Continued)
================================================================================
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 of the Fund's average daily net assets (excluding taxes, interest,
distribution expenses and extraordinary items). Pursuant to this limitation, for
the six months ended June 30, 1996, the Advisor assumed $45,836 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. For the six months ended June 30, 1996, the Fund has
incurred distribution costs of $4,766, or 0.25% of average net assets, the
annual limitation under the Plan. The Board of Directors has approved that
Distribution costs incurred by Gabelli & Company, Inc., totaling $134,527, which
are in excess of the 0.25% limitation may be recovered from the Fund in future
periods, subject to such limitation.
Financial Highlights (Unaudited)
================================================================================
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
June 30, 1995
Six Months (Commencement of Operations)
Ended through
June 30, 1996 December 31, 1995
------------ -----------------
<S> <C> <C>
Operating Performance:
Net asset value, beginning of period ................. $ 10.98 $10.00
------- ------
Net investment income ................................ (0.03) (0.03)
Net realized and unrealized gain (loss) on investments 1.60 1.01
------- ------
Total from investment operations ....................... 1.57 0.98
------- ------
Net asset value, end of period ........................... $ 12.55 $10.98
======= ======
Total Return ......................................... 14.30% 9.80%
Ratios to average net assets/supplemental data:
Net assets, end of period (in thousands) ............. $ 6,258 $2,096
Ratio of operating expenses to average net assets .... 2.75%(a) 2.75%(a)
Ratio of net investment loss to average net assets ... (1.15)%(a) (1.19)%(a)
Portfolio turnover ................................... 27.66% 29.55%
Average Commission Rate .............................. $0.0317 --
</TABLE>
- -----------
(a) Annualized.
11
<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 Karl Otto Pohl
Chairman and Chief Former President
Investment Officer Deutsche Bundesbank
Gabelli Funds, Inc.
Werner J. Roeder, MD
Anthony J. Colavita Director of Surgery
Attorney-at-Law Lawrence Hospital
Anthony J. Colavita, P.C.
Anthonie C. van Ekris
Managing Director
BALMAC International, Inc.
Officers and Portfolio Managers
Caesar Bryan Bruce N. Alpert
President and Vice President
Portfolio Manager and Treasurer
James E. McKee
Secretary
Distributor
Gabelli & Company, Inc.
Custodian, Transfer Agent and Dividend Agent
State Street Bank and Trust Company
Legal Counsel
Willkie Farr & Gallagher
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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.
- --------------------------------------------------------------------------------
