Gabelli
International
Growth
Fund,
Inc.
SEMI-ANNUAL REPORT
JUNE 30, 1998
<PAGE>
[GRAPHIC OMITTED]
Gabelli International Growth Fund, Inc.
Semi-Annual Report -- June 30, 1998
* * * * *
Morningstar rated Gabelli International Growth Fund 5
stars overall and for the three year period ended [PHOTO OMITTED]
6/30/98 among 778 international equity funds.
Caesar Bryan
To Our Shareholders,
The Gabelli International Growth Fund celebrated its three year
anniversary on June 30, 1998. Upon reaching this milestone, the Fund became
eligible for an evaluation of its historical performance by Morningstar, Inc. We
are pleased to inform you that the Fund received Morningstar's highest rating, 5
stars, overall and for its three year performance among 778 international equity
funds.
After an excellent first three months of the year, most equity markets
marked time during the second quarter. Two major influences continue to dominate
markets. On the positive side, long term interest rates declined during the
quarter. On the opposite side, bad news continues to emanate from Southeast Asia
and Japan.
The best performing equity markets of the second quarter were located in
Europe and included Belgium (+20.4%), Germany (+18.4%) and France (+11.1%).
However, some European markets declined during the quarter, namely the United
Kingdom (-1.7%) and Italy (-4.8%). The Japanese market fell by 8.0%. Emerging
markets as a group fell by 24.2%, which is their worst performance since 1987.
The "Asian Flu" has tended to encourage investors to seek the safety of
U.S. dollar denominated assets. This resulted in the dollar strengthening
against the yen and deutschemark.
Investment Performance
The net asset value of the Gabelli International Growth Fund (the "Fund")
appreciated by 3.2% in the second quarter ended June 30, 1998. The Lipper
Analytical Services International Fund Average and Morgan Stanley EAFE Index of
international markets had returns of 0.7% and 1.1%, respectively, over the same
period. Each index is an unmanaged indicator of investment performance. The Fund
was up 19.8% over the trailing twelve month period. The Lipper International
Fund Average and Morgan Stanley EAFE Index rose 8.2% and 6.4%, respectively,
over the same twelve month period. Since inception on June 30, 1995 through June
30, 1998, the Fund had a total return of 75.8%, which equates to an average
annual return of 20.6%.
- --------------------------------------------------------------------------------
Past performance is no guarantee of future results. Morningstar proprietary
ratings reflect historical risk adjusted performance as of June 30, 1998 and are
subject to change every month. Morningstar ratings are calculated from a Fund's
three, five and ten year average annual returns in excess of 90-day T-bill
returns with appropriate fee adjustments and a risk factor that reflects fund
performance below 90-day T-Bill returns. The top 10% of the funds in an
investment category receive five stars.
<PAGE>
INVESTMENT RESULTS(a)
- --------------------------------------------------------------------------------
Quarter
-------------------------------------
1st 2nd 3rd 4th Year
1998: Net Asset Value ... $17.03 $17.58 -- -- --
Total Return ...... 18.3% 3.2% -- -- --
- --------------------------------------------------------------------------------
1997: Net Asset Value ... $13.51 $14.67 $15.31 $14.40 $14.40
Total Return ...... 0.7% 8.6% 4.4% (5.9)% 7.3%
- --------------------------------------------------------------------------------
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)
- --------------------------------------------------------------------------------
- -----------------------------------------
Average Annual Returns - June 30, 1998(a)
1 Year ......................... 19.8%
Life of Fund (b) ............... 20.6%
- -----------------------------------------
(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.
- --------------------------------------------------------------------------------
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.
Geographic Allocation
The accompanying chart presents the Fund's holdings by geographic region
as of June 30, 1998. The geographic allocation will change based on current
global market conditions. Countries and/or regions represented in the chart and
below may or may not be included in the Fund's future portfolio.
[The following table was depicted as a pie chart in the printed material.]
HOLDINGS BY GEOGRAPHIC REGION - 6/30/98
Other Europe 10.9%
Germany 8.8%
Scandinavia 15.0%
France 7.2%
Australia 6.1%
Japan 5.7%
Canada 1.6%
Switzerland 18.5%
Hong Kong 1.1%
United Kingdom 25.1%
2
<PAGE>
Portfolio Structure
The Fund remains heavily concentrated in the developed equity markets of
Europe. Outside Europe, the Fund is invested in Japan, Australia, Canada and
Hong Kong. By sector, the Fund is heavily exposed to financial services, health
care, media and the consumer.
COMMENTARY
Europe took another important step towards integration at the beginning of
May when European leaders reached an agreement as to which countries would join
the single currency. There were no surprises and out of fifteen European Union
member countries, those not joining the euro club at the outset include the
United Kingdom, Sweden, Denmark and Greece. After considerable haggling, it was
also decided that a former central banker and finance minister from Holland, Wim
Duisenberg, will head the European Central Bank which will be headquartered in
Frankfurt. Beginning on January 1, 1999, responsibility for European monetary
policy will transfer from national central banks, such as the Bundesbank and the
Bank of France, to the European Central Bank. For investors, Mr. Duisenberg is
about to become a very important person.
Economic activity in continental Europe has accelerated and hopefully
France's victory in the World Cup will put French consumers in a better mood.
However, with unemployment levels remaining very high and little evidence of
inflation, it is unlikely that interest rates will be raised during the
remainder of the year. In this event, the euro will begin life with an interest
rate structure similar to that which currently exists in France and Germany,
where short term interest rates are about 3.5%. Therefore, rates in other
European countries, such as Spain and Italy, have further to fall. Italy, a
country with a very high savings rate, has never before experienced interest
rates at current low levels. This has caused savers to shift assets from
traditional fixed bank deposits to equities. Indeed, one analyst quipped that
the only things that people are buying in Italy are mutual funds and cellular
telephones. Banca Commerciale Italiana and Telecom Italia Mobile, both
significant holdings in the Fund, continued their strong performance during the
second quarter.
Many industries remain relatively fragmented in Europe and we expect a
continuing high level of corporate activity. The largest deal by far announced
during the quarter was Daimler Benz's proposed merger with Chrysler. This
sparked interest in other European auto manufacturers and the Fund's two
holdings in the sector, namely Volkswagen and Renault, both performed strongly.
Volkswagen has agreed to buy Rolls Royce and is eager to do further deals to
round out its product offering. Renault's earnings are recovering sharply
following the success of recently introduced models.
Financial and telecom stocks continued their strong performance during the
quarter. In the former category, Deutsche Bank, Skandia and SCOR performed well.
Warren Buffett's recently announced acquisition of General Re highlighted the
value in SCOR, which is one of Europe's largest reinsurance companies.
In the telecom sector, Vodafone, the U.K.-based cellular operator,
appreciated by over 20% during the quarter. Other solid performers were Invik,
Nestle, Swatch Group (formerly S.M.H.) and Pearson. The extent that these
companies have anything in common is that they are not particularly economically
sensitive and have pro-active managements working on our behalf.
3
<PAGE>
On the other side of the coin, some of the winners from the first quarter
did not do well in the second quarter. These include Bank of Scotland and CGU
(formerly Commercial Union) in the United Kingdom and the two large Swiss
pharmaceutical companies, Novartis and Roche Holdings.
The market continued to punish companies involved in commodities or doing
significant business in the Far East. HSBC Holdings, based in Hong Kong,
Publishing and Broadcasting in Australia, and Independent Newspapers, which is
listed in Ireland, fall into this category. All three companies have strong
market positions.
Japan continues to misfire on all cylinders and remains in recession.
Indeed, the only bright spot in the economy up to now, due to the yen's
weakness, has been exports. And even exports are now declining on a year-to-year
basis.
Early in July, Japanese voters handed the ruling party a defeat in Upper
House elections and the Prime Minister has resigned. A new Prime Minister is
expected to be more aggressive in cleaning up the bad debt mess and encouraging
consumption through fiscal reform.
Japan's weakness is another blow to Southeast Asia, which is attempting to
recover from collapsing currencies and crippling levels of foreign debt. It is
important for the global economy that the "Asian Flu" is contained and does not
spread. Potential trouble spots, which we have to monitor closely, include
Russia, China and Brazil. The U.S. and European economies continue to perform
well and have actually been helped by lower commodity prices, which tend to
reduce inflation. However, with valuations at current levels, there is little
margin for error with regard to earnings disappointments.
The Fund's exposure to Southeast Asia has remained largely unchanged
during the quarter. Apart from HSBC Holdings which is based in Hong Kong but is
a global company, the Fund's investments in the region are limited to leading
companies in Japan and Australia, such as News Corp and Nintendo, which both
performed strongly during the quarter. The decline in the region's equity
markets has been so severe that many of the region's markets are now very small.
For example, the Korean stock market is now the same size, in terms of market
capitalization, as the 45th largest company in the Standard & Poor's (S&P) 500
Index.
We certainly do not profess to be able to forecast the full effect of the
"Asian Flu" on the major world equity markets. However, we will continue to
invest in leading non-U.S. based companies, paying close attention to valuation
levels.
Let's Talk Stocks
The following are stock specifics on selected holdings of our Fund.
Favorable earnings prospects do not necessarily translate into higher stock
prices, but they do express a positive trend which we believe will develop over
time. The share prices of the following holdings are stated in U.S. dollar
equivalent terms as of June 30, 1998.
Banca Commerciale Italiana (BCMI.MI - $5.99 - Milan Stock Exchange) is one of
the largest Italian commercial banks. BCI has a very strong market position in
corporate banking in Italy and has considerable overseas investments with an
historic presence in Latin America. We believe that there are a number of
4
<PAGE>
trends in place which should prove beneficial to the Italian banking industry.
First, the macroeconomic environment in Italy has improved considerably and
Italy will join the European Monetary Union at the outset. Second, the
government recognizes the need to improve the industry's returns and this should
pave the way for a consolidation among the larger banks. We expect BCI, under
new management, to be involved in this process. BCI is currently benefiting from
a surge in its asset management business as customers move assets from deposit
accounts to mutual funds due to the secular decline in Italian interest rates.
Bank of Ireland (BKIR.I - $20.51 - Irish Stock Exchange) is the second largest
bank in Ireland behind Allied Irish Banks. Roughly half of the bank's revenues
are derived from Ireland. Apart from a small presence in the United States, the
remainder of the Bank's activities are located in the United Kingdom. The
company is experiencing excellent growth in Ireland as the Irish economy is
growing rapidly with low inflation. The Bank recently bought a building society
in the west of England and an insurance company in Ireland. We believe these
acquisitions were good strategic moves. The Bank of Ireland's ability to
generate high returns on risk assets and equity should support substantial
dividend increases over the next few years.
CGU (CGU.L - $18.65 - London Stock Exchange) is the resulting entity from
Commercial Union's successfully completed takeover of General Accident during
the second quarter of 1998. This will form one of the world's largest general
insurance companies with revenues of almost $25 billion, 40% of which is life
insurance and about 70% originating from Europe. We believe that this merger
will be successful with General Accident's management bringing a sharper profit
focus to Commercial Union's book of business. The new company is well positioned
to exploit the expected growth in life insurance and savings in Europe.
Deutsche Bank AG (DBKG.F - $84.68 - Frankfurt Stock Exchange) is the leading
publicly quoted bank in Germany with total assets of nearly $600 billion. The
bank is organized into three divisions, namely: Retail, Corporate and Investment
Banking. Deutsche Bank is using its strong market position in Germany to expand
throughout Europe either by organic growth or acquisition. Already 30% of the
bank's network is located outside Germany. The Bank has an extremely strong
balance sheet with listed securities including stakes in Daimler Benz and
Allianz, which have a market value of $41 billion as of year end 1997.
Glaxo Wellcome plc (GLX.L - $30.19 - London Stock Exchange) is one of the
world's premier health care companies. The company has a five percent share of
the global pharmaceutical market with leadership positions in gastrointestinal,
respiratory and viral infection therapies. The company's best known product,
Zantac, has recently lost patent protection but other drugs are experiencing
rapid growth. One of the company's strengths is the effectiveness of their
research and development effort and Glaxo remains on track to bring three
significant medicines to the market per year from the year 2000 onwards.
Invik & Co. AB (INVKb.ST - $78.37 - Stockholm Stock Exchange) 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 the holding in Kinnevik, which is a company listed on the
Stockholm Stock Exchange. Kinnevik is an operating group involved in three
activities, including television and media, telecommunications, and paper and
packaging. All of these businesses have solid growth potential and Invik
provides exposure to Kinnevik at a significant discount.
5
<PAGE>
Nestle SA (NESZ.S - $107.00 - Zurich Stock Exchange), based in Switzerland, is
one of the world's leading food companies. Its major business groups include
beverages, milk products, prepared dishes and confectionery. 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 strong positions in developing countries
which, we believe, will contribute increasingly to revenues in the future. For
example, of fifteen factories opened in the past three years, twelve were
located in emerging markets. We expect fairly strong profit growth in the medium
term after a few years of lackluster performance. The stock appears undervalued
relative to its peers.
Novartis AG (NOVZN.S - $1,664.02 - Zurich Stock Exchange) is one of the world's
largest pharmaceutical companies and was created by the merger of two of
Europe's dominant pharmaceutical companies, 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 nearly $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 continue to reduce costs.
Oerlikon-Buhrle Holding AG (OBZn.S - $182.62 - Zurich Stock Exchange) is a
Zurich-based holding company best known for being involved in businesses as
diverse as shoes and defense equipment. The gem within this company is their
wholly-owned subsidiary called Balzers and Leybold, which manufactures vacuum
pumps and thin film-coating systems. These products are sold to semiconductor
manufacturers and companies involved in data storage. Balzers and Leybold is a
market leader in most of its areas of operation and the business is very
profitable. We believe the market has overlooked the excellent growth potential
at Balzers and has rather focused on Oerlikon-Buhrle's second largest operating
unit, Bally. Bally is one of the world's best-known shoe manufacturers but
suffers from low profitability. New management has recently been appointed and
has embarked on a program to surface shareholder value.
SCOR SA (SCOR.PA - $63.43 - Paris Stock Exchange) is a leading European
reinsurance company based in France. The reinsurance industry is in the midst of
a period of consolidation that will likely raise a barrier to entry. This
consolidation trend should have a positive impact on profitability. SCOR trades
at a meaningful discount to its competitors which, we believe, will narrow over
time.
Minimum Initial Investment - $1,000
The Fund's minimum initial investment for both regular and retirement
accounts is $1,000. There are no subsequent investment minimums. No initial
minimum is required for those establishing an Automatic Investment Plan.
Additionally, The Gabelli International Growth Fund and other Gabelli Funds are
available through the no-transaction fee programs at many major discount
brokerage firms.
6
<PAGE>
The Roth IRA
The Taxpayer Relief Act of 1997 included new tax incentives and more
opportunities to save for retirement and other major expenditures. The Roth IRA
is just one of these new opportunities now available at Gabelli Funds. Our
investor representatives are available at 1-800-GABELLI (1-800-422-3554) to
speak with you about establishing a new Roth IRA and to discuss your investment
choices.
Internet
You can now visit us on the Internet. Our home page at
http://www.gabelli.com contains information about Gabelli 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.
Sincerely,
Caesar Bryan
President and Portfolio Manager
July 31, 1998
------------------------------------------------------
Top Ten Holdings
June 30, 1998
Banca Commerciale Italiana CGU
Oerlikon-Buhrle Holding AG Nestle SA
Novartis AG Bank of Ireland
SCOR SA Deutsche Bank AG
Invik & Co. AB Glaxo Wellcome 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.
7
<PAGE>
Gabelli International Growth Fund, Inc.
Portfolio of Investments -- June 30, 1998 (Unaudited)
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS -- 96.2%
Automotive -- 2.3%
9,000 Renault SA+ ............................ $ 288,043 $ 511,923
9,000 Toyota Motor Corp. ..................... 226,808 232,806
----------- -----------
514,851 744,729
----------- -----------
Automotive: Parts and Accessories -- 0.9%
13,500 Phoenix AG ............................. 213,919 310,008
----------- -----------
Broadcasting -- 4.3%
36,000 Granada Group plc ...................... 536,822 663,129
1,450 NRJ SA ................................. 199,183 231,193
1,800 Pathe SA ............................... 402,104 352,794
35,000 Publishing and
Broadcasting Ltd. .................... 147,471 150,632
----------- -----------
1,285,580 1,397,748
----------- -----------
Building and Construction -- 1.9%
45,000 CRH plc ................................ 581,567 638,953
----------- -----------
Business Services -- 1.2%
5,833 Reuters Holdings plc, ADR .............. 434,245 399,561
----------- -----------
Computer Software and Services -- 1.0%
25,000 Merkantildata ASA ...................... 220,070 316,021
----------- -----------
Conglomerates -- 2.3%
9,800 Invik & Co. AB, B Free ................. 389,728 768,030
----------- -----------
Consumer Products -- 9.4%
2,500 Christian Dior SA ...................... 378,184 314,669
420 Compagnie Financiere
Richemont AG ......................... 591,226 549,640
20,000 Matsushita Electronic
Industrial Co. Ltd. .................. 370,816 321,360
4,000 Nintendo Co. Ltd. ...................... 282,942 370,357
25,000 Reckitt & Colman plc ................... 517,142 477,192
4,200 Sony Corp. ............................. 319,105 361,638
600 Swatch Group AG ........................ 363,327 463,604
65,000 Swedish Match AB ....................... 212,565 215,989
----------- -----------
3,035,307 3,074,449
----------- -----------
Diversified Industrial -- 4.3%
10,000 Indus Holding AG ....................... 322,759 398,330
5,500 Oerlikon-Buhrle Holding AG ............. 793,824 1,004,410
----------- -----------
1,116,583 1,402,740
----------- -----------
Energy -- 2.8%
20,000 British Petroleum Co. plc .............. 281,523 291,654
9,000 Veba AG ................................ 604,805 613,285
----------- -----------
886,328 904,939
----------- -----------
Equipment and Supplies -- 0.8%
1,000 KSB AG ................................. 164,833 249,303
----------- -----------
Financial Services -- 5.6%
154,492 Colonial Ltd. .......................... 454,062 466,864
19,000 Nomura Securities Co. Ltd. ............. 263,014 221,097
7,000 Safra Republic Holdings SA ............. 338,000 525,000
12,000 Schroders plc .......................... 355,051 309,540
10,000 Trimark Financial Corp. ................ 396,833 309,410
----------- -----------
1,806,960 1,831,911
----------- -----------
Financial Services: Banks -- 17.0%
175,000 Banca Commerciale Italiana ............. 491,607 1,047,608
10,000 Banco Pastor SA ........................ 357,974 565,027
35,237 Bank of Ireland ........................ 355,763 722,668
59,000 Bank of Scotland ....................... 428,975 660,051
8,500 Deutsche Bank AG ....................... 621,382 719,779
13,000 Dundee Bancorp Inc., Cl. A+ ............ 192,651 205,536
14,775 HSBC Holdings plc ...................... 386,768 361,339
37,000 Skandinaviska Enskilda
Banken ............................... 414,368 633,296
1,750 UBS AG ................................. 590,924 650,707
----------- -----------
3,840,412 5,566,011
----------- -----------
Food and Beverage -- 6.7%
200,000 Foster's Brewing Group Ltd. ............ 395,233 470,628
15,000 Hartwall Oy AB ......................... 67,785 481,182
1,000 Moevenpick Holding AG .................. 462,543 495,118
7,000 Nestle SA, ADR ......................... 491,469 749,005
----------- -----------
1,417,030 2,195,933
----------- -----------
Health Care -- 10.2%
30,000 Astra AB, Cl. A ........................ 559,073 613,170
23,000 Glaxo Wellcome plc ..................... 458,397 694,290
600 Novartis AG ............................ 736,927 998,410
50 Roche Holding AG ....................... 504,482 490,997
13,000 Zeneca Group plc ....................... 460,629 558,531
----------- -----------
2,719,508 3,355,398
----------- -----------
Insurance -- 9.7%
25,000 AMP Ltd.+ .............................. 286,574 292,594
40,670 CGU plc ................................ 558,939 758,652
100,000 Istituto Nazionale delle
Assicurazioni ........................ 321,636 284,099
8,600 Mapfre Corp. ........................... 292,450 302,227
14,000 SCOR SA ................................ 667,263 888,021
45,000 Skandia Forsakrings AB ................. 298,784 643,264
----------- -----------
2,425,646 3,168,857
----------- -----------
See accompanying notes to financial statements.
8
<PAGE>
Gabelli International Growth Fund, Inc.
Portfolio of Investments (Continued) -- June 30, 1998 (Unaudited)
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (Continued)
Metals and Mining -- 0.3%
26,081 Antofagasta Holding plc ................ $ 156,374 $ 109,878
----------- -----------
Publishing -- 7.7%
30,000 Arnoldo Mondadori Editore
SpA .................................. 261,389 354,420
35,000 Independent Newspapers plc ............. 184,724 188,332
56,573 Independent Newspapers
Ltd. ................................. 312,794 303,803
70,037 News Corp. Ltd. ........................ 388,676 571,620
33,000 Pearson plc ............................ 454,691 605,666
30,000 Schibsted SA ........................... 538,173 504,331
----------- -----------
2,140,447 2,528,172
----------- -----------
Telecommunications -- 1.0%
40 Nippon Telegraph &
Telephone Corp. ...................... 312,085 331,448
----------- -----------
Textile -- 0.9%
30,000 Simint SpA+ ............................ 78,840 292,819
----------- -----------
Transportation -- 1.9%
15,637 MIF Ltd. + ............................. 188,903 311,781
18,000 SAS Norge ASA, Cl. B ................... 226,873 307,290
----------- -----------
415,776 619,071
----------- -----------
Wireless Communications -- 4.0%
110,000 Telecom Italia Mobile SpA .............. 376,532 671,182
5,150 Vodafone Group plc, ADR ................ 278,431 649,225
----------- -----------
654,963 1,320,407
----------- -----------
TOTAL COMMON
STOCKS ................................. 24,811,052 31,526,386
----------- -----------
PREFERRED STOCKS -- 1.6%
Automotive -- 1.6%
750 Volkswagen AG Pfd. ..................... 332,030 516,888
----------- -----------
OPTIONS -- 0.0%
Metals and Mining -- 0.0%
16,000 Durban Roodepoort Deep
Ltd.+ ................................ 62,700 6,791
----------- -----------
TOTAL INVESTMENTS
-- 97.8% ............................... $25,205,782 32,050,065
===========
Other Assets and
Liabilities (Net) -- 2.2% ............. 732,035
-----------
NET ASSETS -- 100.0%
(1,864,427 shares outstanding) ........ $32,782,100
===========
NET ASSET VALUE,
Offering and Redemption
Price Per Share ...................... $17.58
======
- ----------
For Federal tax purposes:
Aggregate cost $25,205,782
===========
Gross unrealized appreciation $ 7,519,324
Gross unrealized depreciation (675,041)
-----------
Net unrealized appreciation $ 6,844,283
===========
- ----------
+ Non-income producing security.
ADR -- American Depositary Receipt.
% of
Market Market
Geographic Diversification Value Value
- -------------------------- ----- -----
Europe 85.5% $27,375,945
Asia/Pacific Rim 7.2% 2,313,677
Japan 5.7% 1,838,706
North America 1.6% 514,946
South Africa 0.0% 6,791
------ ----------
100.0% $32,050,065
====== ==========
See accompanying notes to financial statements.
9
<PAGE>
Gabelli International Growth Fund, Inc.
Statement of Assets and Liabilities
June 30, 1998 (Unaudited)
================================================================================
Assets:
Investments, at value (Cost $25,205,782) .................. $32,050,065
Foreign currency, at value (Cost $253,439) ................ 254,017
Cash ...................................................... 333,265
Dividends and interest receivable ......................... 60,072
Receivable for investments sold ........................... 55,440
Receivable for capital shares sold ........................ 208,735
Deferred organizational expenses .......................... 39,205
-----------
Total Assets ............................................ 33,000,799
-----------
Liabilities:
Payable for investments purchased ......................... 71,752
Payable for capital shares redeemed ....................... 60,416
Payable for investment advisory fees ...................... 26,624
Payable for distribution fees ............................. 6,633
Payable to custodian ...................................... 16,357
Other accrued expenses .................................... 36,917
-----------
Total Liabilities ....................................... 218,699
-----------
Net Assets applicable to 1,864,427
shares outstanding .................................... $32,782,100
===========
Net Assets consist of:
Capital stock, at par value ............................... $ 1,864
Additional paid-in capital ................................ 25,322,817
Undistributed net investment income ....................... 143,134
Accumulated net realized gain on investments
and foreign currency transactions ....................... 472,073
Net unrealized appreciation on investments
and foreign currency transactions ....................... 6,842,212
-----------
Total Net Assets ........................................ $32,782,100
===========
Net Asset Value, offering and redemption
price per share ($32,782,100 1,864,427
shares outstanding; 1,000,000,000
shares authorized of $0.001 par value) ................ $ 17.58
===========
Statement of Operations
For the Six Months Ended June 30, 1998 (Unaudited)
================================================================================
Investment Income:
Dividends (net of foreign taxes of $39,348) ............... $ 348,685
Interest .................................................. 29,904
-----------
Total Investment Income ................................. 378,589
-----------
Expenses:
Investment advisory fees .................................. 134,827
Distribution fees ......................................... 33,707
Custodian fees ............................................ 17,124
Organizational expenses ................................... 9,741
Shareholder services fees ................................. 9,291
Miscellaneous expenses .................................... 30,182
-----------
Total Expenses .......................................... 234,872
-----------
Net Investment Income ................................... 143,717
-----------
Net Realized and Unrealized Gain
on Investments:
Net realized gain on investments and
foreign currency transactions ........................... 483,663
Net change in unrealized appreciation
on investments and foreign currency
transactions ............................................ 3,874,146
-----------
Net realized and unrealized gain
on investments and foreign
currency transactions ................................... 4,357,809
-----------
Net increase in net assets resulting
from operations ........................................... $ 4,501,526
===========
Statement of Changes in Net Assets
================================================================================
Six Months Ended Year Ended
June 30, 1998 December 31,
(Unaudited) 1997
---------------- ----------------
Operations:
Net investment income (loss) ............... $ 143,717 $ (157,817)
Net realized gain (loss) on investments
and foreign currency transactions ........ 483,663 (3,387)
Net change in unrealized appreciation on
investments and foreign currency
transactions ............................. 3,874,146 1,523,689
------------ ------------
Net increase in net assets resulting
from operations ........................ 4,501,526 1,362,485
------------ ------------
Capital share transactions:
Net increase in net assets from capital
share transactions ....................... 10,147,496 3,955,200
------------ ------------
Net increase in net assets ............... 14,649,022 5,317,685
Net Assets:
Beginning of period ........................ 18,133,078 12,815,393
------------ ------------
End of period .............................. $ 32,782,100 $ 18,133,078
============ ============
See accompanying notes to financial statements.
10
<PAGE>
Gabelli International Growth Fund, Inc.
Notes to Financial Statements (Unaudited)
================================================================================
1. Description. The Gabelli International Growth Fund, Inc. (the "Fund") was
organized on May 25, 1994 as a Maryland corporation. The Fund is a diversified,
open-end management investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), whose primary objective is long term
capital appreciation. The Fund commenced operations on June 30, 1995.
2. Significant Accounting Policies. The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Security Valuation. Portfolio securities listed or traded on a nationally
recognized securities exchange, quoted by the National Association of Securities
Dealers Automated Quotations, Inc. ("Nasdaq") or traded on foreign exchanges are
valued at the last sale price on that exchange as of the close of business on
the day the securities are being valued (if there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day). All other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest average of the bid and asked prices. Portfolio securities traded on more
than one national securities exchange or market are valued according to the
broadest and most representative market, as determined by the Adviser. 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 Board of Directors. Short term debt
securities with remaining maturities of 60 days or less are valued at amortized
cost, unless the Directors determine such does not reflect the securities' fair
value, in which case these securities will be valued at their fair value as
determined by the Directors. Debt instruments having a greater maturity are
valued at the highest bid price obtained from a dealer maintaining an active
market in those securities. Options are valued at the last sale price on the
exchange on which they are listed. If no sales of such options have taken place
that day, they will be valued at the mean between their closing bid and asked
prices.
Repurchase Agreements. The Fund may enter into repurchase agreements with
government securities dealers recognized by the Federal Reserve Board, with
member banks of the Federal Reserve System or with other brokers or dealers that
meet credit guidelines established by the Directors. Under the terms of a
typical repurchase agreement, the Fund takes possession of an underlying debt
obligation subject to an obligation of the seller to repurchase, and the Fund to
resell, the obligation at an agreed-upon price and time, thereby determining the
yield during the Fund's holding period. The Fund will always receive and
maintain securities as collateral whose market value, including accrued
interest, will be at least equal to 100% of the dollar amount invested by the
Fund in each agreement. The Fund will make payment for such securities only upon
physical delivery or upon evidence of book entry transfer of the collateral to
the account of the custodian. To the extent that any repurchase transaction
exceeds one business day, the value of the collateral is marked-to-market on a
daily basis to maintain the adequacy of the collateral. If the seller defaults
and the value of the collateral declines or if bankruptcy proceedings are
commenced with respect to the seller of the security, realization of the
collateral by the Fund may be delayed or limited.
11
<PAGE>
Gabelli International Growth Fund, Inc.
Notes to Financial Statements (Unaudited)
================================================================================
Foreign Currency Translation. The books and records of the Fund are maintained
in United States (U.S.) dollars. Foreign currencies, investments and other
assets and liabilities are translated into U.S. dollars at the exchange rates
prevailing at the end of the period, and purchases and sales of investment
securities, income and expenses are translated at the exchange rate prevailing
on the respective dates of such transactions. Unrealized gains and losses, which
result from changes in foreign exchange rates and/or changes in market prices of
securities, have been included in unrealized appreciation/depreciation on
investments. Net realized foreign currency gains and losses resulting from
changes in exchange rates include foreign currency gains and losses between
trade date and settlement date on investment securities transactions, foreign
currency transactions and the difference between the amounts of interest and
dividends recorded on the books of the Fund and the amounts actually received.
The portion of foreign currency gains and losses related to fluctuation in
exchange rates between the initial trade date and subsequent sale trade date is
included in realized gain/(loss) on investments.
Securities Transactions and Investment Income. Securities transactions are
accounted for on the trade date with realized gain or loss on investments
determined by using the identified cost method. Interest income (including
amortization of premium and accretion of discount) is recorded as earned.
Dividend income is recorded on the ex-dividend date.
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders are recorded on the ex-dividend date. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund, timing differences and
differing characterization of distributions made by the Fund.
For the year ended December 31, 1997, reclassifications were made to decrease
accumulated net investment loss for $157,234 and increase accumulated net
realized loss on investments and foreign currency transactions for $61,693 with
an offsetting adjustment to additional paid-in-capital.
Provision for Income Taxes. The Fund has qualified and intends to continue to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. As a result, a Federal income tax provision is
not required.
Dividends and interest from non-U.S. sources received by the Fund are generally
subject to non-U.S. withholding taxes at rates ranging up to 30%. Such
withholding taxes may be reduced or eliminated under the terms of applicable
U.S. income tax treaties, and the Fund intends to undertake any procedural steps
required to claim the benefits of such treaties. If the value of more than 50%
of the Fund's total net assets at the close of any taxable year consists of
stocks or securities of non-U.S. corporations, the Fund is permitted and may
elect to treat any non-U.S. taxes paid by it as paid by its shareholders.
The Fund has a net capital loss carryforward for Federal income tax purposes at
December 31, 1997 of $11,590. This capital loss carryforward is available
through 2005 to reduce future distributions of net capital gains to
shareholders.
12
<PAGE>
Gabelli International Growth Fund, Inc.
Notes to Financial Statements (Unaudited)
================================================================================
3. Investment Advisory Agreement. The Fund has entered into an investment
advisory agreement (the "Advisory Agreement") with the Adviser which provides
that the Fund will pay the Adviser a fee, computed daily and paid monthly, at
the annual rate of 1.00% of the value of the Fund's average daily net assets. In
accordance with the Advisory Agreement, the Adviser provides a continuous
investment program for the Fund's portfolio, oversees the administration of all
aspects of the Fund's business and affairs and pays the compensation of all
Officers and Directors of the Fund who are its affiliates.
4. Distribution Plan. The Fund's Board of Directors has adopted a distribution
plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. For the six months
ended June 30, 1998 the Fund incurred distribution costs payable to Gabelli &
Company, Inc., an indirect wholly-owned subsidiary of the Adviser, of $33,707,
or 0.25% of average net assets, the annual limitation under the Plan. Such
payments are accrued daily and paid monthly.
5. Organizational Expenses. The organizational expenses of the Fund are being
amortized on a straight-line basis over a period of 60 months.
6. Portfolio Securities. Purchases and sales of securities for the six months
ended June 30, 1998, other than short term securities, aggregated $14,083,449
and $4,816,404, respectively.
7. Bank Loan. The Fund has access to an unsecured line of credit from the
custodian for temporary purposes. Borrowings under this arrangement bear
interest at 0.75% above the Federal Funds rate on outstanding balances. There
were no borrowings outstanding at June 30, 1998.
8. Capital Stock Transactions. Transactions in shares of capital stock were as
follows:
Six Months Ended Year Ended
June 30, 1998 December 31, 1997
-------------------------- --------------------------
Shares Amount Shares Amount
---------- ----------- ---------- -----------
Shares sold ...... 1,630,269 $27,679,165 2,060,711 $29,142,430
Shares redeemed .. (1,025,002) (17,531,669) (1,756,680) (25,187,230)
---------- ----------- ---------- -----------
Net increase ... 605,267 $10,147,496 304,031 $ 3,955,200
========== =========== ========== ===========
13
<PAGE>
Gabelli International Growth Fund, Inc.
Financial Highlights
================================================================================
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31,
June 30, 1998 -------------------------------
(Unaudited) 1997 1996 1995+
------------- ------- ------- -------
<S> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 14.40 $ 13.42 $ 10.98 $ 10.00
------- ------- ------- -------
Net investment income (loss) ........ 0.08 (0.13) (0.15)(a) (0.03)(a)
Net realized and unrealized gain
on investments .................... 3.10 1.11 2.59 1.01
------- ------- ------- -------
Total from investment operations .... 3.18 0.98 2.44 0.98
------- ------- ------- -------
Net asset value, end of period ...... $ 17.58 $ 14.40 $ 13.42 $ 10.98
======= ======= ======= =======
Total return++ ...................... 22.1% 7.3% 22.2% 9.8%
Ratios to average net assets and
supplemental data:
Net assets, end of period (in 000's) $32,782 $18,133 $12,815 $2,096
Ratio of net investment income (loss)
to average net assets (c) ......... 1.06%(b) (0.82)% (1.21)% (1.19)%(b)
Ratio of operating expenses
to average net assets (c) ......... 1.74%(b) 2.46% 2.72% 2.75%(b)
Portfolio turnover rate ............. 19% 63% 55% 30%
</TABLE>
- ----------
+ From commencement of operations on June 30, 1995.
++ Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the
period. Total return for the period of less than one year is not
annualized.
(a) Based on average month-end shares outstanding.
(b) Annualized.
(c) The Fund incurred interest expense for the year ended December 31, 1997.
If interest expense had not been incurred, the ratio of operating expenses
to average net assets would have been 2.44%. Before reimbursement, the
ratios of operating expenses and net investment loss to average net assets
would have been 3.62% and (2.12)% for 1996 and 8.10% and (6.54)%
(annualized) for 1995, respectively.
See accompanying notes to financial statements.
14
<PAGE>
================================================================================
Gabelli Family of Funds
================================================================================
Gabelli Asset Fund ____________________________________________________________
Seeks to invest primarily in a diversified portfolio of common stocks selling at
significant discounts to their private market value. The Fund's primary
objective is growth of capital. (No-load)
Portfolio Manager: Mario J. Gabelli, CFA
Gabelli Growth Fund ____________________________________________________________
Seeks to invest primarily in large cap stocks believed to have favorable, yet
undervalued, prospects for earnings growth. The Fund's primary objective is
capital appreciation. (No-Load) Portfolio Manager: Howard F. Ward, CFA
Gabelli Westwood Equity Fund ___________________________________________________
Seeks to invest primarily in the common stock of seasoned companies believed to
have proven records and above average historical earnings growth. The Fund's
primary objective is capital appreciation. (No-load)
Portfolio Manager: Susan M. Byrne
Gabelli Small Cap Growth Fund __________________________________________________
Seeks to invest primarily in common stock of smaller companies (market
capitalizations less than $500 million) believed to have rapid revenue and
earnings growth potential. The Fund's primary objective is capital appreciation.
(No-load) Portfolio Manager: Mario J. Gabelli, CFA
Gabelli Westwood SmallCap Equity Fund __________________________________________
Seeks to invest primarily in smaller capitalization equity securities with
market capitalizations of $1 billion or less. The Fund's primary objective is
long-term capital appreciation. (No-load)
Portfolio Manager: Lynda J. Calkin, CFA
Gabelli Westwood Mighty Mites(SM) Fund _________________________________________
Seeks to invest in micro-cap companies that have market capitalizations of $300
million or less. The Fund's primary objective is long-term capital appreciation.
(No-Load)
Team Managed by: Mario J. Gabelli, Marc J. Gabelli,
Laura S. Linehan and Walter K. Walsh
Gabelli Equity Income Fund _____________________________________________________
Seeks to invest primarily in equity securities with above market average yields.
The Fund pays quarterly dividends and seeks a high level of total return with an
emphasis on income. (No-load) Portfolio Manager: Mario J. Gabelli, CFA
Gabelli ABC Fund ______________________________________________________________
Seeks to invest in securities with attractive opportunities for appreciation or
investment income. The Fund's primary objective is total return in various
market conditions without excessive risk of capital loss. (No-load)
Portfolio Manager: Mario J. Gabelli, CFA
Gabelli Westwood Balanced Fund _________________________________________________
Seeks to invest in a balanced and diversified portfolio of stocks and bonds. The
Fund's primary objective is both capital appreciation and current income.
(No-load) Portfolio Managers: Susan M. Byrne & Patricia R. Fraze
Gabelli Westwood Intermediate Bond Fund ________________________________________
Seeks to invest in a diversified portfolio of high quality bonds with various
maturities. The Fund's primary objective is total return. (No-load)
Portfolio Manager: Patricia R. Fraze
Gabelli Value Fund _____________________________________________________________
Seeks to invest in securities of companies believed to be undervalued. The
non-diversified Fund's primary objective is long-term capital appreciation. Max.
Sales Charge: 51/2% Portfolio Manager: Mario J. Gabelli, CFA
Global Series
Gabelli Global Telecommunications Fund
Seeks to invest in telecommunications companies throughout the world -
targeting undervalued companies with strong earnings and cash flow
dynamics. The Fund's primary objective is capital appreciation. (No-load)
Team Manager: Mario J. Gabelli, CFA
Gabelli Global Interactive Couch Potato(R)Fund
Seeks to invest in securities of companies involved with communications,
creativity and copyright. The Fund also seeks to invest in companies
participating in emerging technological advances in interactive services
and products. The Fund's primary objective is capital appreciation.
(No-load) Portfolio Manager: Marc J. Gabelli
Gabelli Global Opportunity Fund
Seeks to invest in common stock of companies which have rapid growth in
revenues and earnings and potential for above average capital appreciation
or are undervalued. The Fund's primary objective is capital appreciation.
(No-load) Portfolio Managers: Marc J. Gabelli and Caesar Bryan
Gabelli Global Convertible Securities Fund
Seeks to invest principally in bonds and preferred stocks which are
convertible into common stock of foreign and domestic companies. The
Fund's primary objective is total return through a combination of current
income and capital appreciation. (No-load) Portfolio Manager: Hart Woodson
Gabelli Gold Fund ______________________________________________________________
Seeks to invest in a global portfolio of equity securities of gold mining and
related companies. The Fund's objective is long-term capital appreciation.
Investment in gold stocks is considered speculative and is affected by a variety
of worldwide economic, financial and political factors. (No-load)
Portfolio Manager: Caesar Bryan
Gabelli International Growth Fund ______________________________________________
Seeks to invest in the equity securities of foreign issuers with long-term
capital appreciation potential. The Fund offers investors global
diversification. (No-load) Portfolio Manager: Caesar Bryan
The six funds above invest in foreign securities which involves risks not
ordinarily associated with investments in domestic issues, including currency
fluctuation, economic and political risks.
Gabelli U.S. Treasury Money Market Fund ________________________________________
Seeks to invest exclusively in short-term U.S. Treasury securities. The Fund's
primary objective is to provide high current income consistent with the
preservation of principal and liquidity. (No-load)
Portfolio Manager: Judith A. Raneri
The Treasurer's Fund ___________________________________________________________
Three money market portfolios designed to generate superior returns without
compromising portfolio safety. U.S. Treasury Money Market seeks to invest in
U.S. Treasury bills, notes and bonds. Tax Exempt Money Market seeks to invest in
municipal securities. Domestic Prime Money Market seeks to invest in prime
quality, domestic money market instruments. (No-Load)
Portfolio Manager: Judith A. Raneri
An investment in a Money Market Fund is neither insured nor guaranteed by the
U.S. Government and there can be no assurance that the Funds will be able to
maintain a stable net asset value of $1.00 per share.
The Funds listed above are distributed by Gabelli & Company, Inc.
================================================================================
To receive a prospectus, call 1-800-GABELLI (422-3554). The prospectus gives
a more complete description of the Fund, including fees and expenses.
Read the prospectus carefully before you invest or send money.
1-800-GABELLI
(1-800-422-3554) o fax: 1-914-921-5118 o www.gabelli.com o [email protected]
One Corporate Center, Rye, New York 10580
<PAGE>
Gabelli 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 Werner J. Roeder, MD
Chairman and Chief Director of Surgery
Investment Officer Lawrence Hospital
Gabelli Funds, Inc.
Anthony J. Colavita Anthonie C. van Ekris
Attorney-at-Law Managing Director
Anthony J. Colavita, P.C. BALMAC International, Inc.
Karl Otto Pohl
Former President
Deutsche Bundesbank
Officers and Portfolio Managers
Caesar Bryan Bruce N. Alpert
President and Vice President
Portfolio Manager and Treasurer
James E. McKee
Secretary
Distributor
Gabelli & Company, Inc.
Custodian, Transfer Agent and Dividend Agent
State Street Bank and Trust Company
Legal Counsel
Willkie Farr & Gallagher
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of
Gabelli International Growth Fund, Inc. It is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
