GABELLI INTERNATIONAL GROWTH FUND, INC.
SEMI ANNUAL REPORT - JUNE 30, 1997
[PHOTO OMITTED]
CAESAR BRYAN
TO OUR SHAREHOLDERS:
For the second quarter ended June 30, 1997, the Gabelli International
Growth Fund's total return was 8.6%. The Lipper Analytical Services
International Fund Index and Morgan Stanley EAFE Index of international markets
had returns of 11.0% and 12.5%, respectively, over the same period. Each index
is an unmanaged indicator of stock market performance. The Fund is up 9.3%
year-to-date. The Lipper International Fund Index and Morgan Stanley EAFE Index
rose 12.5% and 10.4%, respectively, over the same six month period. Since
inception on June 30, 1995 through June 30, 1997, the Fund has a total return of
46.7%, which equates to an average annual return of 21.1%.
Nearly all international equity markets performed strongly during the
second quarter of 1997 due to falling interest rates and following the lead of
Wall Street. For the second consecutive quarter, the strength of the U.S. dollar
compared to overseas currencies limited the returns from international markets
when translated back to U.S. dollars. For example, at the end of March 1997, the
dollar-deutschemark exchange rate was 1.67%, but by the end of June, the dollar
had appreciated to 1.75%. This represents a rise of almost 5.0%. Despite the
strength in the dollar, nearly all the developed international equity markets
posted positive returns for the second quarter. The only exceptions were
Australia and Singapore.
<TABLE>
<CAPTION>
INVESTMENT RESULTS (a)
- ---------------------------------------------------------------------------------------------------------------------------
QUARTER
--------------------------------------
1ST 2ND 3RD 4TH YEAR
--- --- --- --- ----
<S> <C> <C> <C> <C> <C>
1997: Net Asset Value $13.51 $14.67 -- -- --
Total Return 0.7% 8.6% -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
1996: Net Asset Value $11.71 $12.55 $12.53 $13.42 $13.42
Total Return 6.6% 7.2% (0.2)% 7.1% 22.2%
- ---------------------------------------------------------------------------------------------------------------------------
1995: Net Asset Value -- -- $10.57 $10.98 $10.98
Total Return -- -- 5.7%(b) 3.9% 9.8%(b)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS - JUNE 30, 1997 (a)
- ------------------------------------------
1 Year ................................. 16.9%
Life of Fund (b) ....................... 21.1%
- --------------------------------------------------------------------------------
(a) Total returns and average annual 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>
The best performing international market was Japan, which rose by 23.8%
during the quarter under review, due largely to a sharp rebound in financial
stocks that were quite depressed. For the first six months of the year, the
Japanese market appreciated by a more modest 8.0%. Otherwise, in Southeast Asia,
the Hong Kong market rose by 21.3% in anticipation of a successful hand-over of
the territory from Britain to China that occurred at the end of June.
Among the European stock markets, the best performing were Spain, which
appreciated by 22.4% and Switzerland, which rose 17.8%. The largest European
equity markets, namely the United Kingdom, Germany and France, appreciated by
5.5%, 5.7% and 3.2%, respectively. As usual, the emerging markets provided mixed
performances. The Morgan Stanley Capital International Emerging Markets Index
was up 7.7%, but this masked a very different performance from Southeast Asia
and Latin America. The Southeast Asian markets in aggregate actually declined in
value during the quarter, while the Latin American emerging markets rose
approximately 20.0%, with Brazil's 25.0% increase being the star performer.
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.
[THE FOLLOWING REPRESENTS A PIE CHART IN THE PRINTED DOUCUMENT]
EUROPE 66.4%
SOUTHEAST ASIA 16.3%
JAPAN 10.0%
OTHER 3.8%
CASH 2.0%
CANADA 1.5%
INTERNATIONAL ALLOCATION
The chart to the right presents the Fund's holdings by geographic region
as of June 30, 1997. The geographic allocation will change based on current
global market conditions. Countries and/or regions represented in the chart and
below may or may not be included in the Fund's future portfolio.
PORTFOLIO STRUCTURE
Europe remains the largest geographic weighting in the portfolio by a
sizable amount. We continue to find attractively valued investments,
particularly many mid-sized companies that have been overlooked in the current
liquidity driven market. Most of the Fund's Southeast Asian investments are
limited to Australia and Hong Kong. Later in the year we expect to increase the
portfolio's exposure to other Southeast Asian markets such as Thailand and
Indonesia.
MARKET OUTLOOK
Just when investors thought that the investment environment could not get
any better, it did. The already low rate of inflation continues to decline. Even
the higher inflation countries in Europe, such as Spain and Italy, now enjoy
rates of inflation near 2%. This apparent lack of inflation allowed long-term
interest rates to fall, which helped propel stock prices higher.
Among the major economies, the U.S. bond market performed best because of
its higher nominal yields. The ten year Government bond rallied by 40 basis
points to yield 6.5% by the end of June. This, combined with continued strong
2
<PAGE>
corporate earnings in the U.S. and powerful flows into mutual funds, resulted in
a gain of 17.5% for the Standard & Poor's (S&P) 500 for the second quarter. The
German 10 year Government bond yield, by comparison, fell by only 20 basis
points to 5.72% at the end of June.
Mainland European economies received a shot in the arm from the recent
strength of the U.S. dollar, which improved Europe's export competitiveness. In
the current economic environment, currency weakness does not translate into
higher inflation, which is contrary to traditional economic theory. European
equity markets, particularly the large capitalization stocks, have benefited
greatly from currency weakness, improving corporate performance and powerful
money flows from both overseas and domestic sources.
The result of this strong performance is that valuations have become
stretched compared with recent history and many individual stocks have done so
well that a correction should be expected. The potential major problem facing
investors in Europe continues to revolve around the European Monetary Union
(EMU). The question of which countries will participate at the outset remains
unresolved, yet the market is currently discounting that Spain and Italy will be
members from January 1, 1999. However, in our opinion, a potentially larger
issue appears to be the inherent difference in attitude towards monetary matters
between the two major participants, namely France and Germany. It appears that
the French would prefer greater political control over the European central bank
and more participants in EMU in order to dilute German influence. This is
particularly so since the Socialists have taken control of the French
government. On the other hand, the German public, even if not industrialists who
are enjoying the competitive advantage that a slightly weaker deutschemark
provides, wants a strong Euro. Those differences may prove to be illusory but
the market has a nasty way of testing currency arrangements which are not
soundly based.
Southeast Asia experienced considerable currency difficulties in recent
months. Fast growing economies tend to run current account deficits which need
to be financed from overseas. This is healthy so long as foreign investors have
confidence in the country's economic management. Thailand has been running a
very large current account deficit and after trying to hold her currency steady
was forced to devalue. Nervousness spread to other Southeast Asian countries and
the Philippines was also forced to devalue. This led to stock market weakness
but longer term a more flexible currency policy should be positive for these
economies and equity markets. The Gabelli International Growth Fund did not have
any investments in Thailand, which fell by 25% in the second quarter, but as the
excesses are purged investment opportunities will arise.
LET'S TALK STOCKS
The following are stock specifics on selected holdings of our Fund.
Favorable earnings prospects do not necessarily translate into higher stock
prices, but they do express a positive trend which we believe will develop over
time.
NOVARTIS AG (NOVZN.S - $1597.54 - ZURICH STOCK EXCHANGE) was created by the
merger of two of Europe's largest pharmaceutical companies, namely Ciba Geigy
and Sandoz, both of which were headquartered in Basel, Switzerland. Apart from
pharmaceuticals, the merged company has a strong position in agribusiness and
nutrition. Ciba specialty chemicals, with sales of about $5 billion, was
recently spun off to shareholders as the new company concentrates on its core
divisions. Novartis has a number of new drugs in development that have excellent
sales potential and we believe management will reduce costs following the
merger. We expect at least 15% annual earnings growth for the next few years.
HELLENIC TELECOMMUNICATIONS ORGANIZATION S.A. (OTE) (OTER.AT - $23.48 - ATHENS
STOCK EXCHANGE) is a full service telecommunications provider offering public
telephony services on an exclusive basis throughout Greece. OTE also provides
other services including data transmission, paging and leased lines. Although
Greece has a high rate of line penetration relative to per capita income, the
company plans to maintain its position as the dominant provider of
telecommunications services in Greece by continuing to invest in the expansion
and digitalization of its network. Greece has an E.E.C. dispensation from
introducing competition in voice telephony until 2003. OTE will enter other
businesses such as mobile telephony this year and cable television in 1998. The
company has also formed joint ventures with telecom companies in neighboring
countries with whom Greece has long standing trading relationships.
3
<PAGE>
KSB AG (KSBGPF.F - $247.56 - FRANKFURT STOCK EXCHANGE) is one of the world's
leading pump and valve manufacturers and has been showing losses over the past
two years. This resulted in a thorough review of the company's operations. Like
much of the German manufacturing industry, KSB had become uncompetitive on a
global basis. New management moved to cut costs, close surplus manufacturing
plants in Europe and open facilities in lower cost countries such as India.
Management's recent moves and the weakening of the deutschemark should result in
a dramatic recovery in profitability.
SCHIBSTED A/A (SCHX.OL - $19.66 - OSLO STOCK EXCHANGE) is involved in all
aspects of the media business in Norway and is now expanding into the rest of
Scandinavia. The company is organized into three business groups: Print Media,
TV/Film and Multimedia. During recent years, cash flows from the original
newspaper businesses have been reinvested in television programming and
multimedia activities. We believe that these new activities will prove
successful.
SKANDIA FORSAKRINGS AB (SDIA.ST - $36.91 - STOCKHOLM STOCK EXCHANGE) is an
insurance company with its headquarters in Sweden. The most exciting aspect of
Skandia's operations is its unit linked savings business, commonly known in the
U.S. as variable annuities. Skandia has established leading market positions in
both the U.S. and U.K. as well as Scandinavia. Their variable annuity business,
known as AFS, has grown quickly and benefits from world-wide trends towards self
administrated savings plans. We believe that this rapid growth will continue and
that the market has not yet fully recognized the value of this business. If this
persists, we expect management to seek a separate listing for AFS.
PHOENIX AG (PHRG.F - $18.11 - FRANKFURT STOCK EXCHANGE) is a mid-sized
industrial products company based in Hamburg, Germany. The company manufactures
rubber and rubber-metal bonded products mainly for the automotive, mining and
construction industries. Management is in the midst of a restructuring program
aimed at focusing the company on its core activities. These core activities,
which have been identified by management, currently account for about 60% of
sales. Other segments that are not self financing and have operating margins of
less than 6% will be sold. This program is likely to improve profitability in
the medium term.
SAFRA REPUBLIC HOLDINGS SA (SASR.LU - $114.00 - LUXEMBOURG STOCK EXCHANGE),
incorporated in Luxembourg, is the holding company for six European banking
subsidiaries principally engaged in international private banking. The bank is
40% owned by Republic New York Corporation. Safra's strategy is to grow its
share of the world private banking market, backed by a very strong balance
sheet. At the end of December 1996, the bank had total assets of $17.2 billion
and shareholder's equity of $11.6 billion. Assets under management amounted to
$22.6 billion at the end of 1996 and we expect the bank to rapidly grow its
asset management business both organically and through acquisitions.
SWEDISH MATCH AB (SWMA.ST - $3.37 - STOCKHOLM STOCK EXCHANGE) is primarily a
tobacco company. The company is very diversified in terms of products and
markets, yet 70% of its sales are from products which have a leading market
share. Tobacco accounts for 65% of sales and includes cigarettes, chewing
tobacco, snuff and cigars. The remaining sales are accounted for by matches and
lighters. The company was a wholly-owned subsidiary of Volvo until May 1996 and
is now traded on the Stockholm Stock Exchange. Swedish Match is extremely
profitable, with an operating margin of 23% and a return on equity of 60%. We
believe the company will use its free cash flow to pay down debt and improve
operating efficiencies.
VOLKSWAGEN AG (VOWGPF.BE - $558.74 - BERLIN STOCK EXCHANGE) is the world's
fourth largest automobile company and Europe's largest, with a ten percent
market share of the global car market. The company has a market leadership
position in Europe, South America, China and South Africa. Its brand names
include VW, Audi, Seat and Skoda. VW is one of Europe's best known restructuring
stories, cutting costs at the same time as launching new models and gaining
market share. The company is now in the process of reducing its production
platforms from 16 to 4 which should enable VW to achieve its ambitious
profitability targets.
COMPAGNIE FINANCIERE RICHEMONT AG (RIFZ.Z - $1444.22 - ZURICH STOCK EXCHANGE) is
a Swiss-based holding company which exercises financial and operational control
over companies operating primarily in the fields of tobacco and luxury goods.
4
<PAGE>
Richemont's interests in the tobacco industry are held through Rothmans
International and three of the Group's trademarks: Rothmans, Dunhill and Peter
Stuyvesant are among the top fifteen international cigarette brands in the
world. Through its majority stake in Vendome Luxury Group, Richemont controls a
portfolio of leading luxury goods brands including Cartier, Piaget, Montblanc,
Karl Lagerfeld and Alfred Dunhill. Recently, the company sold its pay TV
company, Nethold, to CANAL + for a 15% stake in CANAL +. We believe this was an
excellent transaction and shows management's ability to create value.
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. Additionally, The Gabelli
International Growth Fund and other Gabelli funds are available through the
no-transaction 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, IRAs,
401(k)s, quarterly reports, closing prices and other current news. You can send
us e-mail at [email protected].
IN CONCLUSION
The Fund's daily net asset value is available in the financial press and each
evening after 6:00 PM (Eastern Time) by calling 1-800-GABELLI (1-800-422-3554).
The Fund's NASDAQ symbol is GIGRX. Please call us during the business day for
further information. As always, we thank you for your confidence in our
investment abilities and will work hard to preserve and enhance the assets you
have entrusted to us.
Sincerely,
/S/ CAESAR BRYAN
----------------
CAESAR BRYAN
President and Portfolio Manager
August 1, 1997
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS
JUNE 30, 1997
-------------
Novartis AG Phoenix AG
Hellenic Telecommunications Safra Republic Holdings SA
Organization S.A. (OTE) Swedish Match AB
KSB AG Volkswagen AG
Schibsted A/A Compagnie Financiere Richemont AG
Skandia Forsakrings AB
- --------------------------------------------------------------------------------
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 -- JUNE 30, 1997 (UNAUDITED)
================================================================================
Market
Shares Value
------ -----
COMMON STOCKS - 94.65%
AUTOMOTIVE - 0.97%
7,000 Toyota Motor Corporation........... $ 206,493
---------
AUTOMOTIVE: PARTS AND SERVICES - 2.39%
20,000 Oriental Holdings Berhad........... 150,495
20,000 Phoenix AG......................... 362,178
---------
512,673
---------
BROADCASTING - 2.10%
800 NRJ SA............................. 108,862
700 Pathe SA........................... 138,833
35,000 Publishing and Broadcasting Ltd.... 201,356
---------
449,051
---------
BUILDING AND CONSTRUCTION - 0.83%
17,000 CRH plc............................ 177,507
---------
CONGLOMERATES - 4.12%
33,000 Cheung Kong (Holdings) Limited..... 325,867
2,750 Oerlikon-Buehrle Holding AG........ 321,869
26,000 Swire Pacific Limited.............. 234,091
---------
881,827
---------
CONSUMER PRODUCTS - 8.72%
2,000 Christian Dior SA.................. 329,988
230 Compagnie Financiere Richemont AG.. 332,170
20,000 Lavipharm SA....................... 182,037
2,500 Nintendo Co., Ltd.................. 209,461
25,000 PT Hm Sampoerna.................... 95,371
2,500 Salomon SA......................... 190,551
2,200 Sony Corporation................... 191,814
100,000 Swedish Match AB................... 336,699
---------
1,868,091
---------
DIVERSIFIED INDUSTRIAL - 7.70%
26,300 Antofagasta Holdings plc........... 200,654
12,000 Doncasters plc ADR+................ 277,500
6,800 Invik & Company AB, B Free......... 300,285
1,600 KSB AG............................. 396,103
20,000 Mitsubishi Heavy Industries Ltd.... 153,430
375 Sulzer AG.......................... 320,842
---------
1,648,814
---------
ELECTRONICS - 2.02%
20,000 Hitachi, Ltd....................... 223,424
15,000 NEC Corp........................... 209,461
---------
432,885
---------
ENERGY - 3.49%
20,000 British Petroleum Company plc...... 248,435
115,000 Hong Kong and China Gas Company Ltd. 230,089
23,000 Van Der Horst Ltd.................. 42,301
4,000 Veba AG............................ 225,788
---------
746,613
---------
ENTERTAINMENT - 0.86%
14,000 Grenada Group plc.................. 184,038
---------
FINANCIAL SERVICES - 2.53%
180,000 Holding di Partecipazioni
Industriali SpA+ ................ 86,595
1,900 ORIX Corp.......................... 140,784
5,000 Reuters Holdings plc ADR........... 315,000
---------
542,379
---------
FINANCIAL SERVICES: BANKS - 13.06%
130,000 Banca Commerciale Italiana......... 269,652
4,000 Banco Pastor SA.................... 301,262
393,000 Bank Negara Indonesia.............. 250,545
30,000 Bank of Ireland.................... 317,649
40,000 Bank of Scotland................... 255,590
8,000 Bayerische Vereinsbank AG.......... 327,336
10,000 Dundee Bancorp, Inc., Cl. A+....... 231,716
10,176 HSBC Holdings plc.................. 306,050
3,000 Safra Republic Holdings SA......... 342,001
18,000 Skandinaviska Enskilda Banken...... 194,639
---------
2,796,440
---------
FOOD AND BEVERAGE - 3.79%
150,000 Foster's Brewing Group Limited+.... 278,226
3,500 Hartwall Oy AB..................... 202,376
5,000 Nestle SA ADR...................... 330,281
---------
810,883
---------
HEALTH CARE - 8.83%
17,000 Astra AB, Cl. A.................... 317,016
15,000 Bure Investment Aktiebolaget....... 189,394
15,000 Glaxo Wellcome plc................. 309,504
450 Novartis AG........................ 718,892
1,000 Rhone-Poulenc Rorer................ 90,875
8,000 Zeneca Group plc................... 264,376
---------
1,890,057
---------
HOTELS/GAMING - 0.10%
3000 Pandox Hotellfastigheter+.......... 20,202
---------
INSURANCE - 5.18%
25,670 Commercial Union plc............... 269,744
2,800 Mapfre Corp........................ 148,948
8,000 SCOR SA............................ 321,960
10,000 Skandia Forsakrings AB............. 369,075
---------
1,109,727
---------
METALS AND MINING - 1.49%
167,500 Glencar Explorations plc+.......... 115,286
5,000 Golden Star Resources Ltd.+........ 41,184
15,000 IAM Gold+.......................... 58,653
14,040 Randgold and Exploration Company Ltd. 61,918
2,000 Stillwater Mining Ltd.+............ 42,875
---------
319,916
---------
PUBLISHING - 7.92%
25,000 Arnoldo Mondadori Editore SpA...... 144,667
7,000 Grupo Anaya SA..................... 136,789
35,000 Independent Newspapers............. 194,698
31,574 Independent Newspapers Ltd......... 184,287
50,037 News Corporation Limited........... 239,573
20,000 Pearson plc........................ 231,462
20,000 Schibsted SA....................... 393,282
40,000 Star Publication Malaysia.......... 171,089
---------
1,695,847
---------
REAL ESTATE - 3.35%
155,000 Lai Sun Development Co............. 174,067
12,000 Mitsubishi Estate Company, Limited. 173,852
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
GABELLI INTERNATIONAL GROWTH FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED) -- JUNE 30, 1997 (UNAUDITED)
================================================================================
Principal
Amount
or Shares Value
--------- -----
COMMON STOCKS (CONTINUED)
REAL ESTATE (CONTINUED)
30,000 NK Cityfastigheter AB+............. $ 213,676
13,000 Sun Hung Kai Properties Ltd........ 156,480
-----------
718,075
-----------
RETAIL - 1.58%
65,000 Ramayana Lestari Raljorg........... 187,143
1,000 Selecta Group+..................... 151,951
-----------
339,094
-----------
SHIPBUILDING - 0.61%
60,000 Mitsui Engineering &
Shipbuilding Co., Ltd. .......... 130,913
-----------
SPECIALTY CHEMICALS - 1.51%
500 Clariant AG........................ 323,409
-----------
TELECOMMUNICATIONS - 6.16%
82,000 CPT Telefonica del Peru, Cl. B..... 215,675
20 DDI Corp........................... 147,616
24,930 Hellenic Telecommunications
Organization SA (OTE)............ 585,425
30 Nippon Telegraph and Telephone
Corp............................. 288,008
1,000 Telecel-Comunicacaoes Pessoais SA+. 82,955
-----------
1,319,679
-----------
TEXTILE - 1.79%
8,000 Kyokuichi Corporation.............. 78,897
50,000 Simint SpA......................... 304,950
-----------
383,847
-----------
TRANSPORTATION - 1.12%
15,300 MIF Limited+....................... 240,270
-----------
WIRELESS COMMUNICATIONS - 2.43%
90,000 Telecom Italia Mobile SpA.......... 295,139
4,650 Vodafone Group plc ADR............. 225,234
-----------
520,373
-----------
TOTAL COMMON STOCKS ............... 20,269,103
-----------
CONVERTIBLE CORPORATE BONDS - 0.23%
FINANCIAL SERVICES - 0.23%
$50,000 Randgold Finance Sub. Deb. Cv.
7.00%, 10/03/01 (a).............. 48,250
-----------
TOTAL CONVERTIBLE CORPORATE BONDS . 48,250
-----------
Market
Shares Value
------ -----
CONVERTIBLE PREFERRED STOCKS - 1.56%
ENTERTAINMENT - 0.83%
70,845 Village Roadshow Ltd............... $ 178,947
-----------
HOTELS/GAMING - 0.73%
100,000 Sydney Harbour Casino
Holdings Limited+ ............... 156,832
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS. 335,779
-----------
PREFERRED STOCKS - 1.57%
AUTOMOTIVE - 1.57%
600 Volkswagen AG Pfd.................. 335,244
-----------
TOTAL PREFERRED STOCKS ............ 335,244
-----------
OPTIONS - 0.09%
METALS AND MINING - 0.09%
16,000 Durban Roodepoort Deep, Ltd.+...... 19,400
-----------
TOTAL OPTIONS ..................... 19,400
-----------
WARRANTS - 0.01%
REAL ESTATE - 0.01%
31,109 Lai Sun Development Co.+........... 2,610
-----------
TELECOMMUNICATIONS - 0.00%
4,930 Hellenic Telecommunications
Organization S.A. (OTE) Rights+.. 606
-----------
TOTAL WARRANTS .................... 3,216
-----------
TOTAL INVESTMENTS - 98.11% ........ 21,010,992
(Cost $18,101,451)
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES - 1.89% ... 404,468
-----------
NET ASSETS - 100.00%
(1,460,201 shares outstanding) .. $21,415,460
===========
NET ASSET VALUE AND
REDEMPTION PRICE PER SHARE ..... $14.67
======
(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,
1997, Rule 144A securities amounted to $48,250 or 0.2% of net assets.
+ -- Non-income producing security
ADR -- American Depositary Receipt
For Federal income tax purposes:
Aggregate cost ........................... $18,101,451
==========
Gross unrealized appreciation ............ $3,449,971
Gross unrealized depreciation ............ 540,430
---------
Net unrealized appreciation .............. $2,909,541
=========
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
GABELLI INTERNATIONAL GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
================================================================================
ASSETS:
Investments in securities, at value
(Cost $18,101,451) ................ $21,010,992
Cash ................................ 506,173
Receivable for investments sold ..... 345,222
Receivable for Fund shares sold ..... 208,683
Dividends and interest receivable ... 75,964
Deferred organizational expenses .... 58,848
-----------
TOTAL ASSETS ...................... 22,205,882
-----------
LIABILITIES:
Payable to Advisor .................. 82,694
Payable for distribution fees ....... 68,963
Payable for investments purchased ... 457,268
Payable for Fund shares redeemed .... 181,497
-----------
TOTAL LIABILITIES ................. 790,422
-----------
NET ASSETS (applicable to 1,460,201
shares outstanding) ............. $21,415,460
===========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE ................. $ 14.67
==========
NET ASSETS CONSIST OF:
Capital Stock, at par value ......... $ 1,460
Additional paid-in capital .......... 18,226,719
Accumulated net investment loss ..... (31,272)
Accumulated net realized gains on
investments and foreign currency
transactions ...................... 304,671
Net unrealized appreciation
on investments and assets
and liabilities denominated
in foreign currencies ............. 2,913,882
-----------
NET ASSETS $21,415,460
===========
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
================================================================================
INCOME:
Dividends (net of foreign taxes
of $23,541) ........................... $ 190,327
Interest ................................ 19,479
---------
Total Income ......................... 209,806
---------
EXPENSES:
Investment advisory fees ................ 87,864
Transfer and shareholder servicing agent. 27,653
Registration fees ....................... 25,225
Legal and audit fees .................... 23,387
Distribution expenses ................... 21,959
Custodian fees and expenses ............. 20,362
Printing and mailing .................... 17,491
Amortization of organization expenses ... 9,741
Directors' fees and expenses ............ 4,000
Miscellaneous ........................... 3,396
---------
Total Expenses ........................ 241,078
---------
NET INVESTMENT LOSS ....................... (31,272)
---------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments ........ 255,475
Net realized loss on foreign currency
transactions .......................... (4,294)
---------
Net realized gain ....................... 251,181
Net change in unrealized appreciation ... 1,469,505
---------
Net gain on investments ............... 1,720,686
---------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS .............................. $1,689,414
=========
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Net investment loss............................................. ($31,272) ($78,570)
Net realized gain on investments and
foreign currency transactions................................. 251,181 53,490
Net change in unrealized appreciation .......................... 1,469,505 1,335,173
---------- ----------
Net increase in net assets resulting from operations.......... 1,689,414 1,310,093
Share transactions - net........................................ 6,910,653 9,409,143
---------- ----------
Net increase in net assets.................................... 8,600,067 10,719,236
NET ASSETS:
Beginning of period............................................. 12,815,393 2,096,157
---------- ----------
End of period................................................... $21,415,460 $12,815,393
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
GABELLI INTERNATIONAL GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES. The primary investment objective of the
Gabelli International Growth Fund, Inc. (the "Fund") is long-term capital
appreciation. The Fund is a no-load, open-end, diversified management investment
company incorporated in Maryland on May 25, 1994. The preparation of financial
statements in accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates. The following is a summary of significant accounting policies
followed by the Fund in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange, quoted by the National Association of Securities
Dealers Automated Quotations, Inc. ("NASDAQ") or traded on foreign exchanges are
valued at the last sale price on that exchange (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 their 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. If no sales of such options have taken place
that day, they will be valued at the mean between their closing bid and asked
prices.
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 engage in forward foreign
exchange contracts for hedging a specific transaction with respect to either the
currency in which the transaction is denominated or another currency as deemed
appropriate by the Advisor. 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 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) (CONTINUED)
================================================================================
At June 30, 1997, the Fund had short positions in the following forward foreign
currency contracts:
<TABLE>
<CAPTION>
Settlement Unrealized
Amount/Currency Date Value Gain/(Loss)
------------------------------- ------------------- --------- --------------------
<S> <C> <C> <C> <C>
323,269 Malaysian Ringgits 07/04/97 $128,027 ($15)
2,250,000 Portugese Escudos 07/01/97 12,784 20
522,900 Swedish Kronas 07/02/97 67,716 (101)
-------- ----
$208,527 ($96)
======== ====
</TABLE>
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for on the trade date, with realized gain or loss on investments
determined by using specific identification as the cost method. Interest income
(including amortization of premium and accretion discount) is recorded as
earned. Dividend income and dividend and capital gain distributions to
shareholders are recorded on the ex-dividend date.
PROVISION FOR INCOME TAXES. The Fund has qualified and intends to continue to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. As a result, a Federal income tax provision is
not required.
Dividends and interest from non-U.S. sources received by the Fund are generally
subject to non-U.S. withholding taxes at rates ranging up to 30%. Such
withholding taxes may be reduced or eliminated under the terms of applicable
U.S. income tax treaties, and the Fund intends to undertake any procedural steps
required to claim the benefits of such treaties. If the value of more than 50%
of the Fund's total 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. INVESTMENT ADVISORY AGREEMENT. The Fund has entered into an investment
advisory agreement (the "Advisory Agreement") with the Advisor which provides
that the Fund will pay the Advisor a fee, computed daily and paid monthly, at
the annual rate of 1.00 percent of the value of the Fund's average daily net
assets. In accordance with the Advisory Agreement, the Advisor provides a
continuous investment program for the Fund's portfolio, oversees the
administration of all aspects of the Fund's business and affairs, and pays the
compensation of all Officers and Directors of the Fund who are its affiliates.
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 of the Fund's average
daily net assets (excluding taxes, interest, distribution expenses and
extraordinary items). No such reimbursement was required during the six months
ended June 30, 1997.
3. ORGANIZATION EXPENSES. The Organization expenses of the Fund are being
amortized on a straight-line basis over a period of 60 months.
4. DISTRIBUTION PLAN. The Fund has adopted a plan of distribution (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Pursuant to
this Plan, the Distributor, Gabelli & Company, Inc. ("Gabelli & Company"), an
indirect wholly-owned subsidiary of the Advisor, is authorized to conduct
activities that are primarily intended to result in the sale and distribution of
shares of the Fund. The Fund pays Gabelli & Company as distribution payments
under this plan, an aggregate amount at a rate of 0.25 percent per year of the
average daily net assets of the Fund. Such payments are accrued daily and paid
monthly. For the six months ended June 30, 1997, the Fund incurred distribution
costs of $21,959, or 0.25% of average net assets.
10
<PAGE>
GABELLI INTERNATIONAL GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
===============================================================================
5. PORTFOLIO OF SECURITIES. Purchases and sales of securities for the six months
ended June 30, 1997, other than U.S. government obligations and short-term
securities, aggregated $11,062,539 and $4,233,352, respectively.
6. CAPITAL STOCK TRANSACTIONS. Transactions in shares of common stock were as
follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1997 December 31, 1996
------------------------ -------------------------
Shares Amount Shares Amount
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Shares sold................................... 1,162,375 $16,045,046 1,181,626 $14,647,029
Shares redeemed............................... (657,303) (9,134,393) (417,324) (5,237,886)
-------- ---------- --------- ----------
Net increase.................................. 505,072 $ 6,910,653 764,302 $ 9,409,143
======== ========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
===========================================================================================================================
Selected data for a share of capital stock outstanding throughout each period:
June 30, 1995
Six Months Ended (Commencement of Operations)
June 30, 1997 Year Ended through
(Unaudited) December 31, 1996 December 31, 1995
----------------- ---------------- ---------------------------
<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period.............. $13.42 $10.98 $10.00
------ ------ ------
Net investment loss............................... (0.02) (0.15) (0.03)
Net realized and unrealized gain on investments... 1.27 2.59 1.01
------ ------ ------
Total from investment operations.................. 1.25 2.44 0.98
------ ------ ------
NET ASSET VALUE, END OF PERIOD ..................... $14.67 $13.42 $10.98
====== ====== ======
Total Return(a)................................. 9.3% 22.2% 9.8%
RATIO OF AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands).......... $21,415 $12,815 $2,096
Ratio of operating expenses to average
net assets (c).................................. 2.74%(b) 2.72% 2.75%(b)
Ratio of net investment loss to average
net assets (c).................................. (0.35)%(b) (1.21)% (1.19)%(b)
Portfolio turnover rate........................... 25% 55% 30%
Average commission rate (d)....................... $0.0136 $0.0271 --
</TABLE>
(a)Total return is calculated assuming a purchase of shares on the first day and
a sale on the last day of each period reported. Total return for the period
of less than one year is not annualized.
(b)Annualized
(c)Before reimbursement, the ratios of expenses and net investment loss to
average net assets would have been 3.62% and (2.12%) for 1996 (annualized)
and 8.10% and (6.54%) for 1995 (annualized), respectively.
(d)For the fiscal years beginning on or after September 1, 1995, the SEC
requires the Fund to disclose its average commission rate paid per share of
security.
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 FORMER PRESIDENT
CHIEF INVESTMENT OFFICER DEUTSCHE BUNDESBANK
GABELLI FUNDS, INC.
Anthony J. Colavita Werner J. Roeder, MD
ATTORNEY-AT-LAW DIRECTOR OF SURGERY
ANTHONY J. COLAVITA, P.C. LAWRENCE HOSPITAL
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
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
GABELLI
INTERNATIONAL
GROWTH
FUND,
INC.
SEMI-ANNUAL REPORT
JUNE 30, 1997
