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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1998
FILE NO. 33-79994
811-8560
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 4 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 6 /X/
(CHECK APPROPRIATE BOX OR BOXES)
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GABELLI INTERNATIONAL GROWTH FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
ONE CORPORATE CENTER, RYE, NEW YORK 10580-1434
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER (800) 422-3554
BRUCE N. ALPERT
GABELLI FUNDS, INC.
ONE CORPORATE CENTER, RYE, NEW YORK 10580-1434
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPIES TO:
JAMES E. MCKEE, ESQ. DANIEL SCHLOENDORN, ESQ.
GABELLI FUNDS, INC. WILLKIE FARR & GALLAGHER
ONE CORPORATE CENTER ONE CITICORP CENTER
RYE, NEW YORK 10580-1434 153 EAST 53RD STREET
NEW YORK, NEW YORK 10022
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It is proposed that this filing will become effective (check appropriate box):
/ / immediately upon filing pursuant to paragraph (b); or
/X/ on May 1, 1998 pursuant to paragraph (b); or
/ / 60 days after filing pursuant to paragraph (a); or
/ / on (date) pursuant to paragraph (a) of Rule 485.
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GABELLI INTERNATIONAL GROWTH FUND, INC.
FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NO.
PART A PROSPECTUS HEADING
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<S> <C> <C> <C>
1. Cover Page Cover Page
2. Synopsis............................... Table of Fees and Expenses for each of the Funds
3. Condensed Financial Information........ General Information
4. General Description of Registrant...... Cover Page; Investment Objective and Policies; ...
Additional Investment Policies and Related Risk
Factors; General Information
5. Management of the Fund................. Management of the Fund
5(a) Management's Discussion
of Performance....................... Not Applicable
6. Capital Stock and Other Securities..... Management of the Fund; Dividends, .Distributions
and Taxes; General Information
7. Purchase of Securities Being Offered... Management of the Fund; Distribution Plan;
Purchase of Shares; Retirement Plans
8. Redemption or Repurchase............... Redemption of Shares
9. Pending Legal Proceedings.............. Not applicable
<CAPTION>
PART B STATEMENT OF ADDITIONAL
ITEM NO. INFORMATION HEADING
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<S> <C> <C> <C>
10. Cover Page............................. Cover Page
11. Table of Contents...................... Table of Contents
12. General Information and History........ Notes to Financial Statements; See Prospectus-- ..
"General Information"
13. Investment Objective and Policies...... Investments; Investment Restrictions; See Prospectus-- "Investment
Objectives and Policies" and "Additional Investment Policies and Risk
Factors"
14. Management of the Fund................. The Adviser; The Distributor; Directors and Officers; See Prospectus--
"Management of the Fund"
15. Control Persons and Principal
Holders of Securities................ See Prospectus-- "Management of the Fund"
</TABLE>
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<TABLE>
<S> <C> <C> <C>
16. Investment Advisory and
Other Services....................... The Adviser; The Distributor; Directors and Officers; See Prospectus--
"Management of the Fund"
17. Brokerage Allocation and Other
Practices............................ Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities..... Dividends, Distributions and Taxes; Notes to Financial Statements;
See Prospectus-- "Dividends, Distributions and Taxes" and "General
Information"
19. Purchase, Redemption and Pricing
of Securities Being Offered.......... Purchase and Redemption of Shares
20. Tax Status............................. Dividends, Distributions and Taxes; See Prospectus-- "Dividends,
Distributions and Taxes"
21. Underwriters........................... Purchase and Redemption Information; See
Prospectus-- "Management of the Fund"
22. Condensed Financial Information........ Investment Performance Information
23. Financial Statements................... Report of Independent Auditors; Financial
Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.
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Gabelli International Growth Fund, Inc.
ONE CORPORATE CENTER, RYE, NEW YORK 10580-1434
TELEPHONE: 1-800-GABELLI (1-800-422-3554)
HTTP://WWW.GABELLI.COM
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PROSPECTUS
MAY 1, 1998
Gabelli International Growth Fund, Inc. (the "Fund") is a no-load, open-end,
diversified investment management company which seeks to provide long-term
capital appreciation. The Fund will seek to achieve its objective by investing
primarily in the equity securities of foreign issuers. See "Investment Objective
and Policies."
----------------------
The Fund has a distribution plan which permits it to pay .25% per year of its
average daily net assets for marketing and shareholder services and expenses.
Shares of the Fund may be purchased without a sales load at net asset value. The
minimum initial investment in the Fund is currently $1,000. The Fund will
increase its minimum initial investment to $10,000 when it has either 10,000
shareholders or over $100,000,000 of assets under management. See "Purchase of
Shares." For further information, contact Gabelli & Company, Inc. at the address
or telephone number shown above.
----------------------
The Statement of Additional Information ("Additional Statement"), dated May 1,
1998, which may be revised from time to time, provides a further discussion of
certain areas in this Prospectus and other matters which may be of interest to
some investors. It has been filed with the Securities and Exchange Commission
(the "SEC") and is available for reference, along with other materials on the
SEC Internet Web Site (http://www.sec.gov) and is incorporated herein by
reference. For a free copy, write to Gabelli International Growth Fund, Inc. at
One Corporate Center, Rye, New York 10580-1434 or call 1-(800) GABELLI
(1-800-422-3554). Purchase orders and redemption requests may be directed to the
Gabelli Funds at P.O. Box 8308, Boston, Massachusetts 02266-8909.
----------------------
Shares of the Fund are not deposits or obligations of any bank, and are not
insured or guaranteed by any bank, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other agency. An investment in the Fund
involves investment risks, including the possible loss of principal.
----------------------
This Prospectus should be retained by investors for future reference.
----------------------
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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TABLE OF FEES AND EXPENSES FOR THE FUND (a)
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases..................... None
Maximum Sales Load Imposed on Reinvested Dividends.......... None
Deferred Sales Load......................................... None
Redemption Fees (b)......................................... None
Exchange Fees............................................... None
ANNUAL FUND OPERATING EXPENSES: (AS A PERCENTAGE OF AVERAGE
NET ASSETS)
Management Fees............................................. 1.00%
12b-1 Expenses (c).......................................... 0.25%
Other Expenses (d).......................................... 1.21%
------
Total Operating Expenses.................................. 2.46%
======
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment
assuming a 5% annual return............................... $25 $77 $131 $280
</TABLE>
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The information contained in the foregoing table is provided to assist you in
understanding the various direct and indirect costs and expenses that an
investor in the Fund would bear.
(a) The amounts listed in this example should not be considered as
representative of future expenses, and actual expenses may be greater or
less than those indicated. Moreover, while the example assumes a 5% annual
return, the Fund's actual performance will vary and may result in an actual
return greater or less than 5%. The amounts shown are based on the
annualized expenses incurred during the fiscal year ended December 31, 1997.
(b) Does not include any service fee on wire redemptions that may be imposed by
a shareholder's agent or predesignated bank.
(c) Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted by the rules of the National
Association of Securities Dealers, Inc.
(d) Such expenses include custodian and transfer agency fees and other customary
Fund expenses.
Management's Discussion and Analysis of the Fund's performance during the year
ended December 31, 1997, is included in the Fund's Annual Report to Shareholders
dated December 31, 1997. The Fund's Annual Report to Shareholders may be
obtained upon request and without charge by writing or calling the Fund at the
address or telephone number listed on the Prospectus cover.
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FINANCIAL HIGHLIGHTS
The following has been audited by Ernst & Young LLP, the Fund's independent
auditors whose unqualified report therein appears in the Additional Statement.
This information should be read in conjunction with the financial statements.
Selected data for a share of capital stock outstanding throughout each period
appears below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1997 1996 1995+
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<S> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period................. $ 13.42 $ 10.98 $ 10.00
Net investment loss.................................. (0.13) (0.15)(e) (0.03)(e)
Net realized and unrealized gain on investments...... 1.11 2.59 1.01
-------- -------- --------
Total from investment operations..................... 0.98 2.44 0.98
-------- -------- --------
Net asset value, end of period....................... $ 14.40 $ 13.42 $ 10.98
======== ======== ========
Total return (a)..................................... 7.3% 22.20% 9.80%
-------- -------- --------
RATIOS TO AVERAGE NET ASSETS AND SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)............. $ 18,133 $ 12,815 $ 2,096
Ratios of net investment loss to average net assets
(b)................................................ (0.82)% (1.21)% (1.19)%(c)
Ratio of operating expenses to average net assets
(b)................................................ 2.46% 2.72% 2.75%(c)
Portfolio turnover rate.............................. 63% 55% 30%
Average commission rate per share (d)................ $ 0.0165 $ 0.0271 --
</TABLE>
- ------------
<TABLE>
<C> <S>
+ From commencement of operations on June 30, 1995.
(a) 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.
(b) The Fund incurred interest expense during 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 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%) for 1995 (annualized), respectively.
(c) Annualized.
(d) For fiscal years beginning on or after September 1, 1995,
the SEC requires a fund to disclose its average commission
rate paid per share.
(e) Based on average month-end shares outstanding.
</TABLE>
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3
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INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is long-term capital appreciation. The
production of any current income is incidental to this objective. As further
described below, the Fund will seek to achieve its objective by investing
primarily in the equity securities of foreign issuers. There can be no assurance
that the Fund's investment objective will be achieved. The Fund's investment
objective is a fundamental policy which may not be changed without the approval
of a majority of the Fund's outstanding voting securities.
Under normal circumstances, the Fund will invest at least 65% of its total
assets in the equity securities of companies located in at least three countries
outside the United States which the Fund's adviser, Gabelli Funds, Inc. (the
"Adviser"), believes are likely to have rapid growth in revenues and earnings
and potential for above-average capital appreciation. The Adviser will seek
companies that have the potential to grow faster than other companies in their
respective equity markets and are priced at attractive valuation levels. Equity
securities in which the Fund may invest include common stocks, preferred stocks,
securities convertible into common stock and securities having common stock
characteristics, such as rights and warrants.
The percentage of the Fund's assets invested in particular countries or regions
will change from time to time in accordance with the judgment of the Adviser,
which may be based on, among other things, consideration of the political
stability and economic outlook of these countries or regions and prudent
allocation among countries and regions in an effort to reduce volatility in the
Fund's portfolio. The Fund expects to invest in the securities of companies
located in developed countries and, to a lesser extent, those located in
emerging markets. Investing in securities issued by companies located in
emerging markets involves not only the risks discussed below with respect to
investing in foreign securities, but also other risks, including exposure to
economic structures that are generally less diverse and mature and to political
systems that can be expected to have less stability than those of developed
countries. See "Risk Factors and Additional Investment Policies" below.
Subject to the Fund's policy of investing at least 65% of its total assets in
the equity securities of foreign companies, the Fund may invest in money market
instruments. In cases of abnormal market or economic conditions, the Fund may
invest up to 100% of its assets in money market instruments for temporary
defensive purposes, although the Fund intends to stay invested in securities
satisfying its investment objective to the fullest extent practicable. Money
market instruments include obligations of the U.S. and foreign governments and
their agencies and instrumentalities, commercial paper (including bank
obligations), certificates of deposit (including Eurodollar certificates of
deposit) and repurchase agreements. The Fund intends to invest only in money
market instruments that the Adviser believes to be of high quality, i.e., rated
in one of the two highest categories by Moody's Investor Service, Inc.
("Moody's") or Standard & Poor's Ratings Services ("S&P") or, if unrated,
determined to be equivalent in credit quality by the Adviser. For liquidity
purposes in meeting redemption requests or paying dividends or expenses, the
Fund may also invest its assets in such instruments. For a description of
ratings, see "Appendix -- Description of Ratings" in the Additional Statement.
As a diversified investment company, the Fund is subject to the following
limitations as to 75% of its total assets: (a) the Fund may not invest more than
5% of its total assets in the securities of any one issuer, except obligations
of the U.S. government and its agencies and instrumentalities, and (b) the Fund
may not own more than 10% of the outstanding voting securities of any one
issuer.
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4
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For hedging purposes only, the Fund may enter into forward foreign currency
exchange transactions, currency swaps, futures contracts and options on futures.
The Fund may also enter into covered call and put options (listed on a U.S.
securities exchange or written in the over-the-counter market), repurchase
agreements, purchase securities on a when-issued or delayed delivery basis and
lend its portfolio securities. For more information on these and other
practices, see "Risk Factors and Additional Investment Policies" below and
"Investments" in the Additional Statement.
Mr. Caesar M.P. Bryan is primarily responsible for the day-to-day management of
the Fund. Mr. Bryan has been a Senior Vice President and Portfolio Manager with
GAMCO Investors, Inc., a wholly-owned subsidiary of the Adviser, and Portfolio
Manager of Gabelli Gold Fund, Inc. since May 1994. Mr. Bryan served as Senior
Vice President and Portfolio Manager of Lexington Management Corporation from
1986 until May 1994.
RISK FACTORS AND
ADDITIONAL INVESTMENT POLICIES
GENERAL. Subject to the Fund's policy of investing at least 65% of its total
assets in securities of foreign companies, the Fund may invest in common stocks,
preferred stocks, convertible securities, depository receipts, bonds, notes and
other debt obligations of any maturity, warrants, options and futures contracts
on securities and securities indices and securities of companies in bankruptcy
or reorganization. Such securities may be issued by domestic or foreign
corporations or other types of entities, governments or agencies or
instrumentalities of governments or supranational agencies. There is no minimum
rating or credit quality of fixed income securities in which the Fund may
invest. Although up to 25% of the Fund's assets may be invested in lower quality
debt securities, the Fund currently does not expect to invest in excess of 5% of
its assets in fixed income securities rated, at the time of investment, lower
than BBB by S&P or Baa by Moody's or unrated but determined by the Adviser to be
of equivalent quality. Securities rated BBB by S&P or Baa by Moody's, while
considered investment-grade, may have speculative characteristics, and changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than is the case with
higher grade bonds. The Fund also does not expect to invest in excess of 5% of
its assets in securities of unseasoned issuers (companies that have operated
less than three years), which, due to their short operating history, may have
less information available and may not be as liquid as other securities. The
Fund may also utilize other investment strategies such as short selling, buying
or selling when-issued securities, entering into forward commitments and
engaging in various hedging strategies such as the use of futures and options
and foreign currency transactions, including currency swaps.
Common stocks represent the residual ownership interest in an issuer and are
entitled to the income and increase in the value of the assets and business of
the entity after all of its obligations and preferred stock are satisfied.
Common stocks fluctuate in price in response to many factors, including
historical and prospective earnings of the issuer, the value of its assets,
general economic conditions, interest rates, investor perceptions and market
liquidity. Preferred stock has a preference over common stock in liquidation
(and generally dividends as well) but is subordinated to the liabilities of the
issuer in all respects. As a general rule the market value of preferred stock
with a fixed dividend rate and no conversion element varies inversely with
interest rates and perceived credit risk, while the market price of convertible
preferred stock generally also reflects some element of conversion value. Bonds,
debentures, notes and money market instruments such as commercial paper and
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5
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bankers acceptances represent obligations of the issuer. Debt securities that
are convertible into or exchangeable for common or preferred stock are
liabilities of the issuer but are generally subordinated to more senior elements
of the issuer's balance sheet. Although such securities also generally reflect
an element of conversion value, their market value also varies with the interest
rates and perceived risk. Depositary receipts and shares are utilized to make
investing in a particular security (usually foreign) more convenient for
investors.
FOREIGN SECURITIES. Investments in foreign securities involve certain risks not
ordinarily associated with investments in securities of domestic issuers,
including fluctuations in foreign exchange rates future political and economic
developments, and the possible imposition of exchange controls or other foreign
governmental laws or restrictions. In addition, with respect to certain
countries, there is the possibility of expropriation of assets, confiscatory
taxation, political or social instability or diplomatic developments which could
adversely affect investments in those countries.
There may be less publicly available information about a foreign company than
about a U.S. company, and accounting, auditing and financial reporting standards
and requirements may not be comparable. Securities of many foreign companies are
less liquid and their prices more volatile than securities of comparable U.S.
companies. Transaction costs of investing in non-U.S. securities markets are
generally higher than markets in the U.S. There is generally less government
supervision and regulation of exchanges, brokers and issuers than there is in
the U.S. The Fund might have greater difficulty taking appropriate legal action
in non-U.S. courts. Depository receipts that are not sponsored by the issuer may
be less liquid, and there may be less readily available information about the
issuer.
Dividend and interest income from non-U.S. securities will generally be subject
to withholding taxes by the country in which the issuer is located and may not
be recoverable by the Fund or the investor.
Such investments in securities of foreign issuers are frequently denominated in
foreign currencies and because the Fund may temporarily hold uninvested reserves
in bank deposits in foreign currencies, the value of the Fund's assets as
measured in U.S. dollars may be affected favorably or unfavorably by changes in
currency rates and exchange control regulations, and the Fund may incur costs in
connection with conversions between various currencies.
The Adviser will attempt to manage these risks so that such strategies and
investments benefit the Fund, but no assurance can be given that they will be
successfully managed.
DERIVATIVE TRANSACTIONS. As stated below, the Fund may invest in options and
warrants, forward foreign currency exchange contracts, currency swaps, futures
contracts and options on futures. Derivative transactions have certain risks,
including imperfect market correlations, dependence on the credit of the
counterparty, possible inability to enter into offsetting transactions and
market fluctuations, that can result in the Fund being in a worse position than
if the transaction had not occurred. The loss from the Fund's investing in
futures and other derivative transactions is potentially unlimited.
SECURITIES SUBJECT TO REORGANIZATION. The Fund may invest in securities for
which a tender or exchange offer has been made or announced and in securities of
companies for which a merger, consolidation, liquidation or reorganization
proposal has been announced if, in the judgment of the Adviser, there is a
reasonable prospect of capital appreciation significantly greater than the
brokerage and other transaction expenses involved. The evaluation of the
contingencies associated with such proposals requires
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6
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unusually broad knowledge and experience on the part of the Adviser, which must
appraise not only the value of the issuer and its component businesses as well
as the assets or securities to be received as a result of the contemplated
transaction but also the financial resources and business motivation of the
offeror and the dynamics and business climate when the offer or proposal is in
process. Since such investments are ordinarily short-term in nature, they will
tend to increase the turnover ratio of the Fund thereby increasing its brokerage
and other transaction expenses. See "Dividends, Distributions and Taxes."
INVESTMENTS IN OPTIONS, WARRANTS AND INVESTMENT COMPANIES. The Fund may invest
up to 5% of its total assets in options and up to 5% of its total assets in
warrants to buy securities, with no more than 2% invested in unlisted warrants.
The Fund may also invest up to 10% of its total assets (5% per issuer) in
securities issued by other unaffiliated investment companies, although the Fund
may not acquire more than 3% of the voting securities of any investment company.
To the extent the Fund invests in other investment companies, the Fund's
shareholders will incur certain duplicative fees and expenses, including
advisory fees.
The purchaser of an option risks a total loss of the premium paid for the option
if the price of the underlying security does not increase or decrease
sufficiently to justify exercise. The seller of an option, on the other hand,
will recognize the premium as income if the option expires unexercised but
forgoes any capital appreciation in excess of the exercise price in the case of
a call option and may be required to pay a price in excess of current market
value in the case of a put option. Options purchased and sold other than on an
exchange in private transactions also impose on the Fund the credit risk that
the counterparty will fail to honor its obligations.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may enter into forward
commitments for the purchase or sale of securities, including those offered on a
"when-issued" or "delayed delivery" basis. In such transactions, instruments are
bought or sold with payment and delivery taking place in the future in order to
secure what is considered to be an advantageous yield or price at the time of
the transaction. Securities purchased under a forward commitment are subject to
market fluctuation, and no interest (or dividends) accrues to the Fund prior to
the settlement date.
SHORT SALES. The Fund may make short sales of securities. A short sale is a
transaction in which a Fund sells a security it does not own in anticipation
that the market price of that security will decline. The market value of the
securities sold short of any one issuer will not exceed either 5% of the Fund's
total assets or 5% of such issuer's voting securities. The Fund will not make a
short sale, if, after giving effect to such sale, the market value of all
securities sold short exceeds 5% of the value of its assets or the Fund's
aggregate short sales of a particular class of securities exceeds 5% of the
outstanding securities of that class. Short sales may only be made in securities
listed on a national securities exchange. The Fund may also make short sales
"against the box" without regard to such limitations. In this type of short
sale, at the time of the sale, the Fund owns or has the immediate and
unconditional right to acquire at no additional cost the identical security.
If the price of the security sold short increases between the time of the short
sale and the time the Fund replaces the borrowed security, the Fund will incur a
loss; conversely, if the price declines, the Fund will realize a capital gain.
Although the Fund's gain is limited to the price at which it sold the security
short, its potential loss is theoretically unlimited.
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REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements with
respect to any securities it owns. Repurchase agreements are considered loans to
the counterparty, and will be fully collateralized at all times with liquid
securities and will only be entered into with financial institutions approved by
the Board of Directors. Repurchase agreements have the risk that collateral may
not be able to be disposed of at a desirable price, delays as a result of
bankruptcy of the counterparty or encumbrances of collateral or restrictions on
its disposition. The term of such agreements is usually from overnight to one
week.
LOANS OF SECURITIES AND BORROWINGS. The Fund may also lend securities to
dealers or others and invest the collateral in obligations of the U.S.
government and other liquid securities. Lending of securities can result in a
failure to deliver the original security by the borrower, and similar risks with
respect to disposition of the collateral. Under its current policy, the Fund may
borrow from banks for temporary or emergency purposes or to satisfy redemption
requests in amounts not in excess of 15% of the Fund's total assets, with such
borrowing not to exceed 5% of the Fund's total assets for purposes other than
satisfying redemption requests. The Fund will not purchase securities when
borrowings exceed 5%.
FORWARD CURRENCY EXCHANGE CONTRACTS AND CURRENCY SWAPS. The Fund may enter into
forward currency exchange contracts and currency swaps to protect against the
effects of fluctuating rates of currency exchange and exchange control
regulations. Forward currency exchange contracts provide for the purchase or
sale of an amount of a specified currency at a future date. Currency swaps are
agreements to exchange cash flows based on changes in the values of the
reference currencies. Purposes for which such currency transactions may be used
include protecting against a decline in a foreign currency against the U.S.
dollar between the trade date and settlement date when the Fund purchases or
sells non-U.S. dollar-denominated securities, locking in the U.S. dollar value
of dividends and interest on securities held by the Fund and generally
protecting the U.S. dollar value of securities held by the Fund against exchange
rate fluctuation. While such forward contracts and currency swaps may limit
losses to the Fund as a result of exchange rate fluctuation, they will also
limit any gains that may otherwise have been realized. Currency transactions
include the risk that securities losses could be magnified by changes in the
value of the currency in which a security is denominated relative to the U.S.
dollar.
ILLIQUID AND RESTRICTED SECURITIES. The Fund may invest up to 15% of its net
assets in illiquid securities as to which market quotations are not readily
available, including repurchase agreements with more than seven days to
maturity. Nevertheless, to the extent it can do so consistent with the foregoing
limitations, the Fund may invest in non-publicly traded securities, including
securities that are not registered under the Securities Act of 1933, as amended,
but that can be offered and sold to qualified institutional buyers under Rule
144A under that Act. The Board of Directors has adopted guidelines and delegated
to the Adviser, subject to the supervision of the Board of Directors, the daily
function of determining and monitoring the liquidity of Rule 144A securities.
Rule 144A securities may become illiquid if qualified institutional buyers are
not interested in acquiring the securities. Disposition of illiquid securities
often takes more time than for more liquid securities, may result in higher
selling expenses and may not be able to be made at desirable prices. See the
Additional Statement for more information about these securities and investment
practices.
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MANAGEMENT OF THE FUND
The Fund's Board of Directors (who, with its officers, are described in the
Additional Statement) has overall responsibility for the management of the Fund.
The Board of Directors decides upon matters of general policy and reviews the
actions of Gabelli & Company, Inc. (the "Distributor") and the Adviser. Pursuant
to an Investment Advisory Contract with the Fund, the Adviser, under the
supervision of the Fund's Board of Directors, provides a continuous investment
program for the Fund's portfolio; provides investment research and makes and
executes recommendations for the purchase and sale of securities; provides
facilities and personnel, and the exercise of all voting and other rights
appertaining thereto required for the Fund's administrative management;
supervises the performance of administrative and professional services provided
by others; and pays the compensation of the Administrator and all officers and
directors of the Fund who are its affiliates. As compensation for its services
and the related expenses borne by the Adviser, the Fund pays the Adviser a fee,
computed daily and payable monthly, on an annual basis, of 1.00% of the Fund's
average daily net assets. The Adviser is located at One Corporate Center, Rye,
New York 10580-1434.
The Adviser was formed in 1980 and as of March 31, 1998 acted as investment
adviser to the following funds with aggregate assets of $6.6 billion:
<TABLE>
<CAPTION>
NET ASSETS
3/31/98
Open-end funds: (in millions)
- --------------- -------------
<S> <C>
Gabelli Asset Fund $1,559
Gabelli Growth Fund 1,401
Gabelli Value Fund Inc. 12
Gabelli Small Cap Growth Fund 763
Gabelli Equity Income Fund 348
Gabelli U.S. Treasury Money Market Fund 88
Gabelli ABC Fund 308
Gabelli Global Telecommunications Fund 62
Gabelli Global Interactive Couch Potato(R)
Fund 150
Gabelli Global Convertible Securities Fund 96
Gabelli Gold Fund, Inc. 9
Gabelli Capital Asset Fund 29
Gabelli International Growth Fund, Inc. 138
CLOSED-END FUNDS:
- ------------------------------------------
Gabelli Equity Trust Inc. 125
Gabelli Global Multimedia Trust Inc. 1,319
Gabelli Convertible Securities Fund, Inc. 159
</TABLE>
Gabelli & Company, Inc., the Distributor of each open-end fund's shares, is an
indirect majority owned subsidiary of the Adviser. GAMCO Investors, Inc.
("GAMCO"), a wholly owned subsidiary of the Adviser, acts as investment adviser
for individuals, pension trusts, profit sharing trusts and endowments. As of
March 31, 1998, GAMCO had aggregate assets in excess of $7.2 billion under its
management. Gabelli Advisers, Inc., an affiliate of the Adviser, acts as
investment adviser to The Gabelli Westwood Funds with assets under management in
excess of $349 million as of March 31, 1998. Gabelli Fixed Income LLC is an
affiliated Investment Adviser to The Treasurer's Fund, Inc. and separate
accounts with aggregate assets in excess of $1.2 billion. Mr. Mario J. Gabelli
may be deemed a "controlling person" of the Adviser and the Distributor on the
basis of his ownership of stock of the Adviser.
In addition to the fee of the Adviser, the Fund is responsible for the payment
of all its other operating expenses, which include, among other things, expenses
for legal and independent auditor services, costs of printing all materials sent
to shareholders, charges of State Street Bank and Trust Company (the
"Custodian", "Transfer Agent" and "Dividend Disbursing Agent") and any other
persons hired by the Fund, securities registration fees, fees and expenses of
unaffiliated directors, accounting and printing costs for reports and similar
materials sent to shareholders, membership fees in trade organizations, fidelity
bond and liability coverage for the Fund's directors, officers and employees,
interest, brokerage and other trading costs, taxes, expenses of qualifying the
Fund for sale in various jurisdictions, expense of its distribution plan adopted
under Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act"), expenses of personnel performing shareholder servicing functions,
litigation and other extraordinary or non-recurring expenses and other expenses
properly payable by the Fund.
- --------------------------------------------------------------------------------
9
<PAGE> 13
- --------------------------------------------------------------------------------
The Additional Statement contains further information about the Investment
Advisory Contract, including a more complete description of the advisory and
expense arrangements and administrative provisions.
Affiliates of the Adviser may, in the ordinary course of their business, acquire
for their own account or for the accounts of their advisory clients, significant
(and possibly controlling) positions in the securities of companies that may
also be suitable for investment by the Fund. The Adviser does not believe that
the investment activities of its affiliates will have a material adverse effect
upon the Fund in seeking to achieve its investment objective.
The Adviser has entered into a Sub-Administration Contract with BISYS Fund
Services L.P. ("BISYS" or the "Sub-Administrator") pursuant to which the
Sub-Administrator provides certain administrative services necessary for the
Fund's operations. These services include the preparation and distribution of
materials for meetings of the Fund's Board of Directors, compliance testing of
Fund activities and assistance in the preparation of proxy statements, reports
to shareholders and other documentation. The Adviser pays the Sub-Administrator
a prorated monthly fee at the annual rate of .0625% of the average daily net
assets (with a minimum annual fee of $30,000 per portfolio) on the first $350
million of all the funds advised by the Adviser and affiliates and administered
by BISYS; .0425% of any assets above $350 million and .0225% of any assets above
$700 million which, together with the services to be rendered, are subject to
negotiation between the parties and both parties retain the right unilaterally
to terminate the arrangement on not less than 60 days' notice. The
Sub-Administrator has its principal office at 3435 Stelzer Road, Columbus, Ohio
43219.
DISTRIBUTION PLAN
The Board of Directors of the Fund has approved, on behalf of the Fund as being
in the best interests of the Fund and its shareholders, and the Fund's sole
shareholder has approved, a Distribution Plan which authorizes payments by the
Fund in connection with the distribution of its shares at an annual rate, as
determined by the Board of Directors, of .25% of the Fund's average daily net
assets.
Payments may be made by the Fund under its Distribution Plan for the purpose of
financing any activity primarily intended to result in the sale of its shares as
determined by the Board of Directors. Such activities typically include
advertising; compensation for sales and marketing activities of the Distributor,
banks, broker-dealers and service providers; shareholder account servicing;
production and dissemination of prospectus and sales and marketing materials;
and capital or other expenses for associated equipment, rent, salaries, bonuses,
interest and other overhead. To the extent any activity is one which the Fund
may finance without its Distribution Plan, the Fund may also make payments to
finance such activity outside of the Plan and not be subject to its limitations.
The Plan has been implemented by written agreements between the Fund and/or the
Distributor and each person (including the Distributor) to which payments may be
made. Administration of the Plan is regulated by Rule 12b-1 under the 1940 Act,
which includes requirements that the Board of Directors receive and review at
least quarterly reports concerning the nature and qualification of expenses for
which payments are made, that the Board of Directors approve all agreements
implementing the Plan and that the Plan may be continued from year to year only
if the Board of Directors concludes at least annually that continuation of each
Plan is likely to benefit shareholders.
- --------------------------------------------------------------------------------
10
<PAGE> 14
- --------------------------------------------------------------------------------
The Board of Directors has implemented the Plan by having the Fund enter into an
agreement with the Distributor authorizing payment to the Distributor and its
affiliates the .25% rate authorized by the Plan for distribution activities of
the types listed above. To the extent any of the expenditures are based on
allocations by the Distributor, the Fund may be considered to be participating
in joint distribution activities with other funds distributed by the
Distributor. Any such allocations would be subject to approval by the Fund's
non-interested Directors and would be based on such factors as the net assets of
the Fund, the number of shareholder or prospective shareholder inquiries and
similar pertinent criteria. For the fiscal year ended December 31, 1997, the
Fund incurred distribution costs of $48,332 or 0.25% of average daily net assets
under the Plan.
PURCHASE OF SHARES
Shares of the Fund are currently offered without a sales load. The minimum
initial investment in the Fund is currently $1,000. The Fund will increase its
minimum initial investment to $10,000 when it has either 10,000 shareholders or
over $100,000,000 of assets under management. There is no minimum for subsequent
investments in the Fund. Investments through an Individual Retirement Account
("IRA") or other retirement plans, however, have different requirements (see
"Retirement Plans"). Shares of the Fund are sold at the net asset value per
share next determined after receipt of an order by the Fund's Distributor or
Transfer Agent in proper form with accompanying check or bank wire or other
payment arrangements satisfactory to the Fund. Although most shareholders elect
not to receive stock certificates, certificates for whole shares only can be
obtained on specific written request to the Transfer Agent.
Shares of the Fund may also be purchased through shareholder agents that are not
affiliated with the Fund or the Distributor. There is no sales or service charge
imposed by the Fund other than as described, but agents who do not receive
distribution payments or sales charges may impose a charge to the investor for
their services. Such fees may vary among agents, and such agents may impose
higher initial or subsequent investment requirements than those established by
the Fund. Services provided by broker-dealers may include allowing the investor
to establish a margin account and to borrow on the value of the Fund's shares in
that account. It is the responsibility of the shareholder's agent to establish
procedures which would assure that upon receipt of an order to purchase shares
of the Fund the order will be transmitted so that it will be received by the
Distributor before the time when the price applicable to the buy order expires.
Prospectuses, sales material and applications may be obtained from the
Distributor. The Fund and its Distributor reserve the right in their sole
discretion (1) to suspend the offering of the Fund's shares and (2) to reject
purchase orders when, in the judgment of the Fund's management, such rejection
is in the best interests of the Fund.
The net asset value per share of the Fund is determined as of the close of the
regular session of the New York Stock Exchange, Inc. ("NYSE"), which is
generally 4:00 p.m., eastern time, on each day that trading is conducted on the
NYSE, by dividing the value of the Fund's net assets (i.e., the value of its
securities and other assets less its liabilities, including expenses payable or
accrued but excluding capital stock and surplus) by the number of shares
outstanding at the time the determination is made. Foreign securities are valued
as of the close of trading on the primary exchange on which they trade. Fund
securities for which market quotations are readily available are valued at
market value as determined by the last quoted sale price prior to the valuation
time on the valuation date in the case of securities
- --------------------------------------------------------------------------------
11
<PAGE> 15
- --------------------------------------------------------------------------------
traded on securities exchanges or other markets for which such information is
available. Other readily marketable securities are valued at the average of the
latest bid and asked quotations for such securities prior to the valuation time.
Debt securities with remaining maturities of 60 days or less are valued at
amortized cost, which the Board of Directors believes represents fair value.
Corporate actions by issuers of securities held by the Fund, such as the payment
of dividends or distributions, are reflected in the net asset value on the
ex-dividend date therefore, except that they will be so reflected on the date
the Fund is actually advised of the corporate action if subsequent to the
ex-dividend date. All other assets are valued at fair value as determined by or
under the supervision of the Board of Directors.
MAIL. To make an initial purchase by mail, send a completed subscription order
form with a check for the amount of the investment payable to the Fund to:
THE GABELLI FUNDS
P.O. BOX 8308
BOSTON, MA 02266-8308
Subsequent purchases do not require a completed application and can be made by
(1) mailing a check to the address noted above or (2) bank wire, as indicated
below. The exact name and number of the shareholder's account should be clearly
indicated.
Checks will be accepted if drawn in U.S. currency on a domestic bank for less
than $100,000. U.S. dollar checks drawn against a non-U.S. bank may be subject
to collection delays and will be accepted only upon actual receipt of funds by
the Transfer Agent. Bank collection fees may apply. The Fund will not accept
checks made payable to a third party.
BANK WIRE. To initially purchase shares of the Fund using the wire system for
transmittal of money among banks, an investor should first telephone the Fund at
1-800-422-3554 to obtain a new account number. The investor should then instruct
a Federal Reserve System member bank to wire funds to:
State Street Bank and Trust Company
ABA # 011-0000-28 REF DDA # 9904-6187
Attn: Shareholder Services
Re: Gabelli International Growth Fund
A/C#
----------------------------------------------
Account of (Registered Owner)
----------------------------------------------
225 Franklin Street, Boston, MA 02110
For initial purchases, the investor should promptly complete and mail the
subscription order form to the address shown above for mail purchases. There may
be a charge by your bank for transmitting the money by bank wire but State
Street Bank and Trust Company does not charge investors in the Fund for the
receipt of wire transfers. If you are planning to wire funds, it is suggested
that you instruct your bank early in the day so the wire transfer can be
accomplished the same day.
OVERNIGHT MAIL OR PERSONAL DELIVERY. Deliver a check made payable to the Fund
in which you wish to invest along with a completed subscription order form to:
THE GABELLI FUNDS
THE BFDS BUILDING, 6TH FLOOR
TWO HERITAGE DRIVE
NORTH QUINCY, MA 02171
TELEPHONE INVESTMENT PLAN. You may purchase additional shares of the Fund by
telephone through the Automated Clearing House (ACH) system as long as your bank
is a member of the ACH system and you have a completed, approved Investment Plan
application on file with our Transfer Agent. The funding for your purchase will
be automatically deducted from the ACH eligible account you designate on the
application. Your investment will normally be credited to your mutual fund
account on the first business day following your telephone request. Your request
must be received no later than 4:00 p.m. eastern time. There is a minimum of
$100 for each telephone investment. Any subsequent changes in banking
information must be submit-
- --------------------------------------------------------------------------------
12
<PAGE> 16
- --------------------------------------------------------------------------------
ted in writing and accompanied by a sample voided check. To initiate an ACH
purchase, please call 1-800-GABELLI (1-800-422-3554) or 1-800-872-5365. Fund
shares purchased through the Telephone or Automatic Investment Plan will not be
available for redemption for up to fifteen (15) days following the purchase
date.
AUTOMATIC INVESTMENT PLAN. The Fund offers an automatic monthly investment
plan, details of which can be obtained from the Distributor.
There is no minimum initial investment for accounts establishing an automatic
investment plan.
OTHER INVESTORS. No minimum initial investment is required for officers,
directors or full-time employees of the Fund, other investment companies managed
by the Adviser, the Adviser, the Sub-Administrator, the Transfer Agent, the
Distributor or their affiliates, including members of the "immediate family" of
such individuals and retirement plans and trusts for their benefit. The term
"immediate family" refers to spouses, children and grandchildren (adopted or
natural), parents, grandparents, siblings, a spouse's siblings, a sibling's
spouse and a sibling's children.
REDEMPTION OF SHARES
Upon receipt by the Distributor or the Transfer Agent of a redemption request in
proper form, shares of the Fund will be redeemed at their next determined net
asset value. Redemption requests received after the time as of which the Fund's
net asset value is determined on a particular day will be redeemed at the next
determined net asset value of the Fund. Checks for redemption proceeds will
normally be mailed to the shareholder's address of record within seven days, but
will not be mailed until all checks in payment for the purchase of the shares to
be redeemed have been honored, which may take up to 15 days. Redemption requests
may be made by letter to the Transfer Agent specifying the name of the Fund, the
dollar amount or number of shares to be redeemed and the account number. The
letter must be signed in exactly the same way the account is registered (if
there is more than one owner of the shares, all must sign) and, if any
certificates for the shares to be redeemed are outstanding, presentation of such
certificates properly endorsed is also required. Signatures on the redemption
request and/or certificates must be guaranteed by an "eligible guarantor
institution," which includes certain banks, brokers, dealers, credit unions,
securities exchanges and associations, clearing agencies and savings
associations (signature guarantees by notaries public are not acceptable).
Shareholders may also redeem the Fund's shares through shareholder agents, who
have made arrangements with the Fund permitting them to redeem shares by
telephone or facsimile transmission and who may charge shareholders a fee for
this service if they have not received any payments under the appropriate
Distribution Plan. It is the responsibility of the shareholder's agent to
establish procedures which would assure that upon receipt of a shareholder's
order to redeem shares of the Fund the order will be transmitted so that it will
be received by the Fund before the time when the price applicable to the order
expires.
Further documentation, such as copies of corporate resolutions and instruments
of authority, are normally requested from corporations, administrators,
executors, personal representatives, trustees or custodians to evidence the
authority of the person or entity making the redemption request.
The Fund may suspend the right of redemption or postpone the date of payment for
more than seven days during any period when (1) trading on the NYSE is
restricted or closed, other than customary weekend and holiday closings; (2) the
SEC has by order permitted such suspension or (3) an emergency, as defined by
rules of the SEC, exists, making disposal of portfolio invest-
- --------------------------------------------------------------------------------
13
<PAGE> 17
- --------------------------------------------------------------------------------
ments or determination of the value of the net assets of the Fund not reasonably
practicable.
To minimize expenses, the Fund reserves the right to redeem, upon not less than
30 days' notice, all shares of the Fund in an account (other than an IRA) which
as a result of shareholder redemption has a value below $500. However, a
shareholder will be allowed to make additional investments prior to the date
fixed for redemption to avoid liquidation of the account.
TELEPHONE REDEMPTION BY CHECK. The Fund accepts telephone requests for
redemption of unissued shares, subject to a $25,000 limitation. By calling
1-800-GABELLI (1-800-422-3554) or 1-800-872-5365, you may request that a check
be mailed to the address of record on the account, provided that the address has
not changed within thirty (30) days prior to your request. The check will be
made payable to the person in whose name the account is registered and will
normally be mailed within seven (7) days.
BY BANK WIRE. The Fund also accepts telephone requests for wire redemption in
excess of $1,000 (but subject to a $25,000 limitation) to a predesignated bank
either on the subscription order form or in a subsequent written authorization
with the signature guaranteed. The Fund accepts signature guaranteed written
requests for redemption by bank wire without limitation. The proceeds are
normally wired on the following business day. Your bank must be either a member
of the Federal Reserve System or have a correspondent bank which is a member.
Any change to the banking information made at a later date must be submitted in
writing with a signature guarantee. The Fund will not impose a wire service fee.
A shareholder's agent or the predesignated bank, however, may impose its own
service fee on wire transfers.
Requests for telephone redemption by check or bank wire must be received between
9:00 a.m. and 4:00 p.m. eastern time. If your telephone call is received after
this time or on a day when the NYSE is not open, the request will be entered for
the following business day. Shares are redeemed at the net asset value next
determined following your request. Fund shares purchased by check or through the
automatic purchase plan will not be available for redemption for up to fifteen
(15) days following the purchase. Shares held in certificate form must be
returned to the Transfer Agent for redemption. Telephone redemption is not
available for IRAs.
The proceeds of a telephone redemption may be directed to an account in another
mutual fund advised by the Adviser or its affiliates, provided the account is
registered in the redeeming shareholder's name. Such purchase will be made at
the respective net asset value plus any applicable sales charges, with credit
given for any sales charges previously paid to the Distributor.
The Fund and its Transfer Agent will not be liable for following telephone
instructions reasonably believed to be genuine. In this regard, the Fund and its
Transfer Agent require personal identification information before accepting a
telephone redemption. If the Fund or its Transfer Agent fails to use reasonable
procedures, the Fund might be liable for losses due to fraudulent instructions.
A shareholder may redeem shares by telephone unless he or she elects on the
subscription order form not to have such ability.
SYSTEMATIC WITHDRAWAL PLAN. The Fund offers a systematic withdrawal program for
shareholders whereby they can authorize an automatic redemption on a monthly,
quarterly or annual basis. Details can be obtained from the Distributor.
RETIREMENT PLANS
The Fund has available a form of IRA for investment which may be obtained from
the Distributor. The minimum investment required to open an IRA for investment
in shares of the Fund is
- --------------------------------------------------------------------------------
14
<PAGE> 18
- --------------------------------------------------------------------------------
$1,000 for an individual, except that both the individual and his or her spouse
may establish separate IRAs if their combined investment is $1,250. There is no
minimum for additional investment in an IRA. For tax years beginning after
December 31, 1997, investors may be eligible to make contributions to a new type
of individual retirement account (a "Roth IRA"). An investor can open a Roth IRA
if he meets certain income limits specified in the Internal Revenue Code of
1986, as amended (the "Code"). Any contributions made by an investor to a Roth
IRA are nondeductible for U.S. Federal income tax purposes. Distributions from a
Roth IRA are not included in the investor's gross income and are not subject to
a 10% penalty for early withdrawal if the distributions are made after the end
of the five-year period beginning with the first tax year in which the investor
made a contribution to the Roth IRA and the distributions meet other criteria
set forth in the Code. The maximum annual aggregate contribution that can be
made to IRAs and Roth IRAs is $2,000. In addition, for tax years beginning after
December 31, 1997, certain low and middle-income investors may open an education
individual retirement account (an "Education IRA"). Eligible individuals are
permitted to contribute up to $500 per year per beneficiary under 18 years old
to an Education IRA. The minimum initial investment for an Education IRA through
the Fund is $250. A distribution from an education IRA is generally excludable
from gross income to the extent that such distribution does not exceed qualified
higher education expenses incurred by the beneficiary during the year in which
the distribution is made.
Investors who are self-employed may purchase shares of the Fund through
tax-deductible contributions to retirement plans for self-employed persons,
known as Keogh or H.R. 10 plans. The Fund does not currently act as a Sponsor
for such plans. The Fund's shares may also be a suitable investment for other
types of qualified pension or salary reduction plans known as "401(k) Plans"
which give participants the right to defer portions of their compensation for
investment on a tax-deferred basis until distributions are made from the plans.
The minimum initial investment for an individual under such plans is $1,000, and
there is no minimum for additional investments.
Under the Code, individuals may make wholly or partly tax deductible IRA
contributions of up to $2,000 annually, depending on whether they are active
participants in an employer-sponsored retirement plan and on their income level.
However, dividends and distributions held in the account are not taxed until
withdrawn in accordance with the provisions of the Code. An individual with a
non-working spouse may establish a separate IRA for the spouse under the same
conditions and contribute a maximum of $4,000 annually, provided that no more
than $2,000 may be contributed to the IRA of either spouse.
Investors should be aware that they may be subject to penalties or additional
tax on contributions or withdrawals from IRAs or other retirement plans which
are not permitted by the applicable provisions of the Internal Revenue Code.
Persons desiring information concerning investments through IRA accounts or
other retirement plans should write or telephone the Distributor.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each dividend and capital gains distribution, if any, declared by the Fund on
its outstanding shares will, unless the shareholder elects otherwise, be paid on
the payment date fixed by the Board of Directors in additional shares of the
Fund having an aggregate net asset value as of the ex-dividend date of such
dividend or distribution equal to the cash amount of such distribution. An
election to receive dividends and distributions may be changed by notifying the
Fund in writing at any time prior to the record date for a particular dividend
or distribution. There are no sales or other charges in connec-
- --------------------------------------------------------------------------------
15
<PAGE> 19
- --------------------------------------------------------------------------------
tion with the reinvestment of dividends and capital gains distributions. There
is no fixed dividend rate, and there can be no assurance that the Fund will pay
any dividends or realize any capital gains. However, the Fund currently intends
to pay dividends and capital gains distributions, if any, on an annual basis.
The Fund has qualified and intends to continue to qualify for tax treatment as a
"Regulated Investment Company" under the Code in order to be relieved of federal
income tax on that part of its net investment income and realized capital gains
which it pays out to its shareholders.
Dividends out of net investment income and distributions of realized short-term
capital gains are taxable to the recipient shareholders as ordinary income. In
the case of corporate shareholders, such distributions may be eligible for the
dividends-received deduction subject to proportionate reduction if the aggregate
qualifying dividends received by the Fund from domestic corporations in any year
are less than its "gross income" as defined by the Code. Distributions out of
long-term capital gains are taxable to the recipient as long-term capital gains.
Shareholders will be advised as to what portion of capital gains are to be
treated as "28% rate gain" or "20% rate gain" with respect to the maximum tax
rate for such gains (i.e., the portion of such capital gains that relates to
assets held for more than 12 months but not more than 18 months and the portion
that relates to assets held more than 18 months, respectively). Dividends and
distributions, if any, declared by the Fund may also be subject to state and
local taxes. In addition, because the Fund may have more than 50% of its total
assets invested in securities of foreign corporations, the Fund may be entitled
to "pass-through" to shareholders the amount of foreign taxes paid by the Fund.
Prior to investing in shares of the Fund, prospective shareholders may wish to
consult their tax advisers concerning the federal, state and local tax
consequences of such investment.
GENERAL INFORMATION
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES. The Fund was organized as
a Maryland corporation on May 25, 1994. Its authorized capital stock consists of
one billion shares of stock having a par value of one tenth of one cent ($.001)
per share. The Fund is not required, and does not intend, to hold regular annual
shareholder meetings, but may hold special meetings for consideration of
proposals requiring shareholder approval, such as changing fundamental policies
or upon the written request of 10% of the Fund's shares to replace its
Directors. The Fund's Board of Directors is authorized to divide the unissued
shares into separate series of stock, each series representing a separate,
additional portfolio.
There are no conversion or preemptive rights in connection with any shares of
the Fund. All shares, when issued in accordance with the terms of the offering,
will be fully paid and nonassessable. Shares will be redeemed at net asset
value, at the option of the shareholder.
The Fund sends semi-annual and audited annual reports to all shareholders which
include lists of portfolio securities and the Fund's financial statements, which
shall be audited annually. Unless it is clear that a shareholder is a nominee
for the account of an unrelated person or a shareholder otherwise specifically
requests in writing, the Fund may send a single copy of semi-annual, annual and
other reports to shareholders to all accounts at the same address and all
accounts of any person at that address.
The shares of the Fund have noncumulative voting rights which means that the
holders of more than 50% of the shares can elect 100% of the Directors if the
holders choose to do so, and, in that event, the holders of the remaining shares
will not be able to elect any person or persons to the Board of Directors.
Unless specifically requested by an investor who is a shareholder of
- --------------------------------------------------------------------------------
16
<PAGE> 20
- --------------------------------------------------------------------------------
record, the Fund does not issue certificates evidencing shares.
PORTFOLIO TURNOVER. During the fiscal years ended December 31, 1996 and
December 31, 1997, the portfolio turnover rates were 55% and 63%, respectively.
Although the Fund will generally invest for the long-term, investment securities
may be sold from time to time without regard to the length of time they have
been held.
PERFORMANCE INFORMATION. The Fund may furnish data about its investment
performance in advertisements, sales literature and reports to shareholders.
"Total return" represents the annual percentage change in value of $1,000
invested at the maximum public offering price for the one, five and ten year
periods (if applicable) and the life of the Fund through the most recent
calendar quarter, assuming reinvestment of all dividends and distributions. The
Fund may also furnish total return and yield calculations for other periods
and/or based on investments at various net asset values.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. State Street Bank and
Trust Company is the Custodian for the Fund's cash and securities as well as the
Transfer and Dividend Disbursing Agent for its shares. Boston Financial Data
Services, Inc., an affiliate of State Street Bank and Trust Company, performs
the shareholder services on behalf of State Street and is located at The BFDS
Building, Two Heritage Drive, North Quincy, Massachusetts 02171. State Street
Bank and Trust Company does not assist in and is not responsible for investment
decisions involving assets of the Fund.
INFORMATION FOR SHAREHOLDERS. All shareholder inquiries regarding
administrative procedures, including the purchase and redemption of shares,
should be directed to the Distributor, Gabelli & Company, Inc., One Corporate
Center, Rye, New York 10580-1434. For assistance, call 1-800-GABELLI
(1-800-422-3554).
Upon request, Gabelli & Company, Inc. will provide without charge, a paper copy
of this Prospectus to investors or their representatives who received this
Prospectus in an electronic format.
This Prospectus omits certain information contained in the Registration
Statement filed with the SEC. Copies of the Registration Statement, including
items omitted herein, may be obtained from the SEC by paying the charges
prescribed under its rules and regulations. The Additional Statement included in
such Registration Statement may be obtained without charge from the Fund or its
Distributor.
YEAR 2000 UPDATE. As the year 2000 approaches, an issue has emerged regarding
how existing application software programs and operating systems can accommodate
this date value. Failure to adequately address this issue could have potentially
serious repercussions. The Adviser is in the process of working with the Fund's
service providers to prepare for the year 2000. Based on information currently
available, the Adviser does not expect that the Fund will incur significant
operating expenses or be required to incur material costs to be year 2000
compliant. Although the Adviser does not anticipate that the year 2000 issue
will have a material impact on the Fund's ability to provide service at current
levels, there can be no assurance that steps taken in preparation for the year
2000 will be sufficient to avoid any adverse impact on the Fund.
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17
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Table of Fees and Expenses........... 2
Financial Highlights................. 3
Investment Objective and Policies.... 4
Risk Factors and Additional
Investment Policies................ 5
Management of the Fund............... 9
Distribution Plan.................... 10
Purchase of Shares................... 11
Redemption of Shares................. 13
Retirement Plans..................... 14
Dividends, Distributions and Taxes... 15
General Information.................. 16
</TABLE>
- ------------------------------------------------------
No dealer, salesman or other person has been authorized to give any information
or to make any representation other than those contained in this Prospectus, and
if given or made, such information or representation may not be relied upon as
being authorized by the Fund, the Adviser, the Sub-Administrator, the
Distributor or any affiliate thereof.
- ------------------------------------------------------
GABELLI
INTERNATIONAL
GROWTH
FUND, INC.
PROSPECTUS
MAY 1, 1998
GABELLI FUNDS, INC.
INVESTMENT ADVISER
GABELLI & COMPANY, INC.
DISTRIBUTOR
- --------------------------------------------------------------------------------
<PAGE> 22
THE GABELLI INTERNATIONAL GROWTH FUND
ONE CORPORATE CENTER, RYE, NEW YORK 10580-1434
TELEPHONE 1-800-GABELLI (1-800-422-3554)
http://www.gabelli.com
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998
This Statement of Additional Information ("Additional Statement") relates to
Gabelli International Growth Fund, Inc., a Maryland corporation (the "Fund"),
and is not a prospectus and is only authorized for distribution when preceded or
accompanied by the Fund's prospectus dated May 1, 1998, as supplemented from
time to time (the "Prospectus"). This Additional Statement contains information
in addition to that set forth in the Prospectus into which this document is
incorporated by reference and should be read in conjunction with the Prospectus.
Additional copies of this document may be obtained without charge by writing or
telephoning the Fund at the address and telephone number set forth above.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
Investments .................................................................. B- 2
The Adviser .................................................................. B-10
The Distributor .............................................................. B-11
Directors and Officers ....................................................... B-11
Investment Restrictions ...................................................... B-14
Portfolio Transactions and Brokerage ......................................... B-14
Purchase and Redemption of Shares ............................................ B-16
Dividends, Distributions and Taxes ........................................... B-16
Investment Performance Information ........................................... B-19
Counsel and Independent Auditors ............................................. B-20
Shares of Beneficial Interest ................................................ B-20
Appendix-- Description of Ratings ............................................ B-21
</TABLE>
<PAGE> 23
THE FOLLOWING INFORMATION SUPPLEMENTS THAT IN THE PROSPECTUS.
INVESTMENTS
Subject to the Fund's policy of investing at least 65% of its total assets in
the securities of foreign companies, the Fund may invest in any of the
securities described below.
EQUITY SECURITIES
Because the Fund in seeking to achieve its investment objective may invest in
the common stocks of both foreign and domestic issuers, an investment in the
Fund should be made with an understanding of the risks inherent in any
investment in common stocks including the risk that the financial condition of
the issuers of the Fund's portfolio securities may become impaired or that the
general condition of the stock market may worsen (both of which may contribute
directly to a decrease in the value of the securities and thus in the value of
the Fund's shares). Additional risks include risks associated with the right to
receive payments from the issuer which is generally inferior to the rights of
creditors of, or holders of debt obligations or preferred stock issued by, the
issuer.
Moreover, common stocks do not represent an obligation of the issuer and
therefore do not offer any assurance of income or provide the degree of
protection of debt securities. The issuance of debt securities or even preferred
stock by an issuer will create prior claims for payment of principal, interest
and dividends which could adversely affect the ability and inclination of the
issuer to declare or pay dividends on its common stock or the economic interest
of holders of common stock with respect to assets of the issuer upon liquidation
or bankruptcy. Further, unlike the debt securities which typically have a stated
principal amount payable at maturity (which value will be subject to market
fluctuations prior thereto), common stocks have neither a fixed principal amount
nor a maturity and have values which are subject to market fluctuations for as
long as the common stocks remain outstanding. Common stocks are especially
susceptible to general stock market movements and to volatile increases and
decreases in value as market confidence in and perceptions of the issuers
change. These perceptions are based on unpredictable factors including
expectations regarding government, economic, monetary and fiscal policies,
inflation and interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises. The value of the common stocks
in the Fund's portfolio thus may be expected to fluctuate.
Preferred stocks are usually entitled to rights on liquidation which are senior
to those of common stocks. For these reasons, preferred stocks generally entail
less risk than common stocks. Such securities may pay cumulative dividends.
Because the dividend rate is pre-established, and they are senior to common
stocks, such securities tend to have less possibility of capital appreciation.
Some of the securities in the Fund may be in the form of depository receipts.
Depository receipts usually represent common stock or other equity securities of
non-U.S. issuers deposited with a custodian in a depository. The underlying
securities are usually withdrawable at any time by surrendering the depository
receipt. Depository receipts are usually denominated in U.S. dollars and
dividends and other payments from the issuer are converted by the custodian into
U.S. dollars before payment to receipt holders. In other respects depository
receipts for foreign securities have the same characteristics as the underlying
securities. Depository receipts that are not sponsored by the issuer may be less
liquid and there may be less readily available public information about the
issuer.
SOVEREIGN DEBT SECURITIES
The Fund may invest in securities issued or guaranteed by any country and
denominated in any currency. The Fund expects to invest in the securities of
companies located in developed countries, and to a lesser extent, those located
in emerging markets. Developed markets include Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Luxembourg,
the Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland, the United
Kingdom and the United States. An emerging
B-2
<PAGE> 24
country is any country which is generally considered to be an emerging or
developing country by the International Bank for Reconstruction and Development
(more commonly referred to as the World Bank) and the International Finance
Corporation, as well as countries that are classified by the United Nations or
otherwise regarded by its authorities as emerging or developing, at the time of
the Fund's investment. The obligations of governmental entities have various
kinds of government support and include obligations issued or guaranteed by
governmental entities with taxing power. These obligations may or may not be
supported by the full faith and credit of a government. Debt securities issued
or guaranteed by foreign governmental entities have credit characteristics
similar to those of domestic debt securities but include additional risks. These
additional risks include those resulting from devaluation of currencies, future
adverse political and economic developments and other foreign governmental laws.
The Fund may also purchase securities issued by quasi-governmental or
supranational agencies such as the Asian Development Bank, the International
Bank for Reconstruction and Development, the Export-Import Bank and the European
Investment Bank. The governmental members, or "stockholders," usually make
initial capital contributions to the supranational entity and in many cases are
committed to make additional capital contributions if the supranational entity
is unable to repay its borrowings. The Fund will not invest more than 25% of its
assets in the securities of such supranational entities.
The Fund may invest in securities denominated in a multi-national currency unit.
An illustration of a multi-national currency unit is the European Currency Unit
(the "ECU"), which is a "basket" consisting of specified amounts of the
currencies of the member states of the European Community, a Western European
economic cooperative organization that includes France, Germany, the
Netherlands, the United Kingdom and other countries. The specific amounts of
currencies comprising the ECU may be adjusted by the Council of Ministers of the
European Community to reflect changes in relative values of the underlying
currencies. Such investments involve credit risks associated with the issuer and
currency risks associated with the currency in which the obligation is
denominated.
NONCONVERTIBLE FIXED INCOME SECURITIES
The category of fixed income securities which are not convertible or
exchangeable for common stock includes preferred stocks, bonds, debentures,
notes and money market instruments such as commercial paper and bankers
acceptances. There is no minimum credit rating for these securities in which the
Fund may invest. Accordingly, the Fund could invest in securities in default,
although the Fund will not invest more than 5% of its assets in such securities.
Up to 25% of the Fund's total assets may be invested in lower-quality debt
securities although the Fund currently does not expect to invest more than 5% of
its assets in such securities. The market values of lower-quality fixed income
securities tend to be less sensitive to changes in prevailing interest rates
than higher-quality securities but more sensitive to individual corporate
developments than higher-quality securities. Such lower-quality securities also
tend to be more sensitive to economic conditions than are higher-quality
securities. Accordingly, these lower-quality securities are considered
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation and will
generally involve more credit risk than securities in the higher-quality
categories. Even securities rated Baa or BBB by Moody's Investors Service, Inc.
("Moody's") and Standard and Poor's Ratings Services ("S&P"), respectively,
which ratings are considered investment grade, possess some speculative
characteristics, and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher-grade bonds. See "Appendix -- Description
of Ratings." There are risks involved in applying credit ratings as a method of
evaluating high yield obligations in that credit ratings evaluate the safety of
principal and interest payments, not market value risk. In addition, credit
rating agencies maynot change credit ratings on a timely basis to reflect
changes in economic or company conditions that affect a security's market value.
The Fund will rely on the judgment, analysis and experience of its adviser,
Gabelli Funds, Inc. (the "Adviser"), in evaluating the creditworthiness of an
issuer. In this evaluation, the Adviser will take into consideration, among
other things, the issuer's financial resources and ability to
B-3
<PAGE> 25
cover its interest and fixed charges, factors relating to the issuer's industry
and its sensitivity to economic conditions and trends, its operating history,
the quality of the issuer's management and regulatory matters.
The risk of loss due to default by the issuer is significantly greater for the
holders of lower quality securities because such securities are generally
unsecured and are often subordinated to other obligations of the issuer. During
an economic downturn or a sustained period of rising interest rates, highly
leveraged issuers of lower quality securities may experience financial stress
and may not have sufficient revenues to meet their interest payment obligations.
An issuer's ability to service its debt obligations may also be adversely
affected by specific corporate developments, its inability to meet specific
projected business forecasts, or the unavailability of additional financing.
Factors adversely affecting the market value of high yield and other fixed
income securities will adversely affect the Fund's net asset value. In addition,
the Fund may incur additional expenses to the extent that it is required to seek
recovery upon a default in the payment of principal of or interest on its
portfolio holdings.
From time to time, proposals have been discussed regarding new legislation
designed to limit the use of certain high yield debt securities by issuers in
connection with leveraged buy-outs, mergers and acquisitions, or to limit the
deductibility of interest payments on such securities. Such proposals, if
enacted into law, could reduce the market for such debt securities generally,
could negatively affect the financial condition of issuers of high yield
securities by removing or reducing a source of future financing, and could
negatively affect the value of specific high yield issues and the high yield
market in general. For example, under a provision of the Internal Revenue Code
enacted in 1989, a corporate issuer may be limited from deducting all of the
original issue discount on high-yield discount obligations (i.e., certain types
of debt securities issued at a significant discount to their face amount). The
likelihood of passage of any additional legislation or the effect thereof is
uncertain.
The secondary trading market for lower-quality fixed income securities is
generally not as liquid as the secondary market for higher-quality securities
and is very thin for some securities. The relative lack of an active secondary
market may have an adverse impact on market price and the Fund's ability to
dispose of particular issues when necessary to meet liquidity needs or in
response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. The relative lack of an active secondary market
for certain securities may also make it more difficult for the Fund to obtain
accurate market quotations for purposes of valuing its portfolio. Market
quotations are generally available on many high yield issues only from a limited
number of dealers and may not necessarily represent firm bids of such dealers or
prices for actual sales. During such times, the responsibility of the Board of
Directors to value the securities becomes more difficult and judgment plays a
greater role in valuation because there is less reliable, objective data
available.
CONVERTIBLE SECURITIES
The Fund may invest up to 25% of its total assets in convertible securities
rated, at the time of investment, less than BBB by S&P or Baa by Moody's or
unrated but of equivalent credit quality in the judgment of the Adviser,
although the Fund currently does not expect to invest in excess of 5% of its
assets in such securities.
Some of the convertible securities in the Fund's portfolio may be "Pay-in-Kind"
securities. During a designated period from original issuance, the issuer or
such a security may pay dividends or interest to the holder by issuing
additional fully paid and nonassessable shares or units of the same or another
specified security.
SECURITIES SUBJECT TO REORGANIZATION
The Fund may invest in securities for which a tender or exchange offer has been
made or announced and in securities of companies for which a merger,
consolidation, liquidation or reorganization proposal has been
B-4
<PAGE> 26
announced if, in the judgment of the Adviser, there is a reasonable prospect of
capital appreciation significantly greater than the brokerage and other
transaction expenses involved.
In general, securities which are the subject of such an offer or proposal sell
at a premium to their historic market price immediately prior to the
announcement of the offer or may also discount what the stated or appraised
value of the security would be if the contemplated transaction were approved or
consummated. Such investments may be advantageous when the discount
significantly overstates the risk of the contingencies involved; significantly
undervalues the securities, assets or cash to be received by shareholders of the
prospective portfolio company as a result of the contemplated transaction; or
fails adequately to recognize the possibility that the offer or proposal may be
replaced or superseded by an offer or proposal of greater value. The evaluation
of such contingencies requires unusually broad knowledge and experience on the
part of the Adviser, which must appraise not only the value of the issuer and
its component businesses as well as the assets or securities to be received as a
result of the contemplated transaction but also the financial resources and
business motivation of the offeror and the dynamics and business climate when
the offer or proposal is in process. Since such investments are ordinarily
short-term in nature, they will tend to increase the turnover ratio of the Fund,
thereby increasing its brokerage and other transaction expenses. The Adviser
intends to select investments of the type described which, in its view, have a
reasonable prospect of capital appreciation which is significant in relation to
both risk involved and the potential of available alternate investments.
OPTIONS
The Fund may purchase or sell options on individual securities as well as on
indices of securities as a means of achieving additional return or of hedging
the value of its portfolio.
A call option is a contract that gives the holder of the option the right, in
return for a premium paid, to buy from the seller the security underlying the
option at a specified exercise price at any time during the term of the option
or, in some cases, only at the end of the term of the option. The seller of the
call option has the obligation upon exercise of the option to deliver the
underlying security upon payment of the exercise price. A put option is a
contract that gives the holder of the option the right in return for a premium
to sell to the seller the underlying security at a specified price. The seller
of the put option, on the other hand, has the obligation to buy the underlying
security upon exercise at the exercise price. The Fund's transactions in options
may be subject to specific segregation requirements. See "Hedging Transactions"
below.
If the Fund has sold an option, it may terminate its obligation by effecting a
closing purchase transaction. This is accomplished by purchasing an option of
the same series as the option previously sold. There can be no assurance that a
closing purchase transaction can be effected when the Fund so desires.
The purchaser of an option risks a total loss of the premium paid for the option
if the price of the underlying security does not increase or decrease
sufficiently to justify exercise. The seller of an option, on the other hand,
will recognize the premium as income if the option expires unrecognized but
forgoes any capital appreciation in excess of the exercise price in the case of
a call option and may be required to pay a price in excess of current market
value in the case of a put option. Options purchased and sold other than on an
exchange in private transactions also impose on the Fund the credit risk that
the counterparty will fail to honor its obligations. The Fund will not purchase
options if, as a result, the aggregate cost of all outstanding options exceeds
5% of the Fund's assets. To the extent that puts, straddles and similar
investment strategies involve instruments regulated by the Commodity Futures
Trading Commission, the Fund is limited to investments not in excess of 5% of
its total assets.
WARRANTS AND RIGHTS
The Fund may invest up to 5% of its total assets in warrants or rights (other
than those acquired in units or attached to other securities) which entitle the
holder to buy equity securities at a specific price for or at the end of a
specific period of time.
B-5
<PAGE> 27
INVESTMENTS IN INVESTMENT COMPANIES
The Fund may invest up to 10% of its total assets (5% per issuer) in securities
issued by other unaffiliated investment companies, although the Fund may not
acquire more than 3% of the voting securities of any investment company.
WHEN ISSUED, DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS
The Fund may enter into forward commitments for the purchase or sale of
securities, including on a "when issued" or "delayed delivery" basis. In such
transactions, instruments are bought with payment and delivery taking place in
the future in order to secure what is considered to be an advantageous yield or
price at the time of the transaction. In some cases, a forward commitment may be
conditioned upon the occurrence of a subsequent event, such as approval and
consummation of a merger, corporate reorganization or debt restructuring, i.e.,
a when, as and if issued security. When such transactions are negotiated, the
price is fixed at the time of the commitment, with payment and delivery taking
place in the future, generally a month or more after the date of the commitment.
While the Fund will only enter into a forward commitment with the intention of
actually acquiring the security, the Fund may sell the security before the
settlement date if it is deemed advisable.
Securities purchased under a forward commitment are subject to market
fluctuation, and no interest (or dividends) accrues to the Fund prior to the
settlement date. The Fund will segregate with its custodian cash or liquid
securities in an aggregate amount at least equal to the amount of its
outstanding forward commitments.
SHORT SALES
The Fund may make short sales of securities. A short sale is a transaction in
which the Fund sells a security it does not own in anticipation that the market
price of that security will decline. The Fund expects to make short sales both
to obtain capital gains from anticipated declines in securities and as a form of
hedging to offset potential declines in long positions in the same or similar
securities. The short sale of a security is considered a speculative investment
technique.
When the Fund makes a short sale, it must borrow the security sold short and
deliver it to the broker-dealer through which it made the short sale in order to
satisfy its obligation to deliver the security upon conclusion of the sale. The
Fund may have to pay a fee to borrow particular securities and is often
obligated to pay over any payments received on such borrowed securities.
The Fund's obligation to replace the borrowed security will be secured by
collateral deposited with the broker-dealer, usually cash, U.S. government
securities or other liquid securities. The Fund will also be required to deposit
similar collateral with its Custodian to the extent, if any, necessary so that
the value of both collateral deposits in the aggregate is at all times equal to
the greater of the price at which the security is sold short or 100% of the
current market value of the security sold short. Depending on arrangements made
with the broker-dealer from which it borrowed the security regarding payment
over of any payments received by the Fund on such security, the Fund may not
receive any payments (including interest) on its collateral deposited with such
broker-dealer. If the price of the security sold short increases between the
time of the short sale and the time the Fund replaces the borrowed security, the
Fund will incur a loss; conversely, if the price declines, the Fund will realize
a capital gain. Any gain will be decreased, and any loss increased, by the
transaction costs described above. Although the Fund's gain is limited to the
price at which it sold the security short, its potential loss is theoretically
unlimited.
The market value of the securities sold short of any one issuer will not exceed
either 5% of the Fund's total assets or 5% of such issuer's voting securities.
The Fund will not make a short sale, if, after giving effect to such sale, the
market value of all securities sold short exceeds 5% of the value of its assets
or the Fund's aggregate short sales of a particular class of securities exceeds
5% of the outstanding securities of that class. The Fund may also make short
sales "against the box" without respect to such limitations. In this
B-6
<PAGE> 28
type of short sale, at the time of the sale, the Fund owns or has the immediate
and unconditional right to acquire at no additional cost the identical security.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest up to a total of 15% of its net assets in securities the
markets for which are illiquid, including repurchase agreements with more than
seven days to maturity. Within this 15% limitation, the Fund may invest up to 5%
of its net assets in the securities of unseasoned issuers. Illiquid securities
include securities the disposition of which is subject to substantial legal or
contractual restrictions. The sale of illiquid securities often requires more
time and results in higher brokerage charges or dealer discounts and other
selling expenses than does the sale of securities eligible for trading on
national securities exchanges or in the over-the-counter markets. Restricted
securities may sell at a price lower than similar securities that are not
subject to restrictions on resale. Unseasoned issuers are companies (including
predecessors) that have operated less than three years. The continued liquidity
of such securities is not as well assured as that of publicly traded securities,
and accordingly the Board of Directors will monitor their liquidity. The Board
will review pertinent factors such as trading activity, reliability of price
information and trading patterns of comparable securities in determining whether
to treat any such security as liquid for purposes of the foregoing 15% test. To
the extent the Board treats such securities as liquid, temporary impairments to
trading patterns of such securities may adversely affect the Fund's liquidity.
To the extent it can do so consistent with the foregoing limitations, the Fund
may invest in non-publicly traded securities, including securities that are not
registered under the Securities Act of 1933, as amended, but that can be offered
and sold to qualified institutional buyers under Rule 144A under that Act. The
Board of Directors has adopted guidelines and delegated to the Adviser, subject
to the supervision of the Board of Directors, the daily function of determining
and monitoring the liquidity of Rule 144A securities. Rule 144A securities may
become illiquid if qualified institutional buyers are not interested in
acquiring the securities.
REPURCHASE AGREEMENTS
The Fund may invest in repurchase agreements, which are agreements pursuant to
which securities are acquired by the Fund from a third party with the
understanding that they will be repurchased by the seller at a fixed price on an
agreed date. These agreements may be made with respect to any of the portfolio
securities in which the Fund is authorized to invest. Repurchase agreements may
be characterized as loans secured by the underlying securities. The Fund may
enter into repurchase agreements with (i) member banks of the Federal Reserve
System having total assets in excess of $500 million and (ii) securities
dealers, provided that such banks or dealers meet the creditworthiness standards
established by the Fund's Board of Directors ("Qualified Institutions"). The
Adviser will monitor the continued creditworthiness of Qualified Institutions,
subject to the supervision of the Board of Directors. The resale price reflects
the purchase price plus an agreed upon market rate of interest which is
unrelated to the coupon rate or date of maturity of the purchased security. The
collateral is marked to market daily. Such agreements permit the Fund to keep
all its assets earning interest while retaining "overnight" flexibility in
pursuit of investment of a longer-term nature. The following Information
supplements that in the Prospectus.
The use of repurchase agreements involves certain risks. For example, if the
seller of securities under a repurchase agreement defaults on its obligation to
repurchase the underlying securities, as a result of its bankruptcy or
otherwise, the Fund will seek to dispose of such securities, which action could
involve costs or delays. If the seller becomes insolvent and subject to
liquidation or reorganization under applicable bankruptcy or other laws, the
Fund's ability to dispose of the underlying securities may be restricted.
Finally, it is possible that the Fund may not be able to substantiate its
interest in the underlying securities. To minimize this risk, the securities
underlying the repurchase agreement will be held by the Fund's custodian at all
times in an amount at least equal to the repurchase price, including accrued
interest. If the seller fails to repurchase the securities, the Fund may suffer
a loss to the extent proceeds from the sale of the underlying securities are
less than the repurchase price. The Fund will not enter into repurchase
B-7
<PAGE> 29
agreements of a duration of more than seven days if, taken together with all
other illiquid securities in the Fund's portfolio, more than 15% of its net
assets would be so invested.
LOANS OF PORTFOLIO SECURITIES
To increase income, the Fund may lend its portfolio securities to securities
broker-dealers or financial institutions if (1) the loan is collateralized in
accordance with applicable regulatory requirements including collateralization
continuously at no less than 100% by marking to market daily, (2) the loan is
subject to termination by the Fund at any time, (3) the Fund receives reasonable
interest or fee payments on the loan, (4) the Fund is able to exercise all
voting rights with respect to the loaned securities and (5) the loan will not
cause the value of all loaned securities to exceed 33 1/3% of the value of the
Fund's assets.
If the borrower fails to maintain the requisite amount of collateral, the loan
automatically terminates and the Fund could use the collateral to replace the
securities while holding the borrower liable for any excess of replacement cost
over the value of the collateral. As with any extension of credit, there are
risks of delay in recovery and in some cases even loss of rights in collateral
should the borrower of the securities fail financially.
BORROWING
The Fund may not borrow money except for (1) short-term credits from banks as
may be necessary for the clearance of portfolio transactions, and (2) borrowings
from banks for temporary or emergency purposes, including the meeting of
redemption requests, which would otherwise require the untimely disposition of
its portfolio securities. Borrowing may not, in the aggregate, exceed 15% of the
Fund's total assets after giving effect to the borrowing, and borrowing for
purposes other than meeting redemptions may not exceed 5% of the Fund's assets
after giving effect to the borrowing. The Fund will not make additional
investments when borrowings exceed 5% of assets. The Fund may mortgage, pledge
or hypothecate assets to secure such borrowings.
HEDGING TRANSACTIONS
FUTURES AND FORWARD CONTRACTS. The Fund may enter into futures and forward
contracts only for certain bona fide hedging and risk management purposes. The
Fund may enter into futures and forward contracts for the purchase or sale of
debt securities, debt instruments, or indices of prices thereof, stock index
futures, other financial indices, and U.S. Government Securities.
A "sale" of a futures contract (or a "short" futures position) means the
assumption of a contractual obligation to deliver the securities underlying the
contract at a specified price at a specified future time. A "purchase" of a
futures contract (or a "long" futures position) means the assumption of a
contractual obligation to acquire the securities underlying the contract at a
specified price at a specified future time.
Certain futures contracts are settled on a net cash payment basis rather than by
the sale and delivery of the securities underlying the futures contracts. U.S.
futures contracts have been designed by exchanges that have been designated as
"contract markets" by the Commodity Futures Trading Commission, an agency of the
U.S. Government, and must be executed through a futures commission merchant
(i.e., a brokerage firm) which is a member of the relevant contract market.
Futures contracts trade on these contract markets and the exchange's affiliated
clearing organization guarantees performance of the contracts as between the
clearing members of the exchange.
These contracts entail certain risks, including but not limited to the
following: no assurance that futures contracts transactions can be offset at
favorable prices, possible reduction of the Fund's yield due to the use of
hedging, possible reduction in value of both the securities hedged and the
hedging instrument, possible lack of liquidity due to daily limits on price
fluctuation, imperfect correlation between the contracts and the securities
being hedged, and potential losses in excess of the amount invested in the
futures contracts themselves.
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<PAGE> 30
CURRENCY TRANSACTIONS. The Fund may enter into various currency transactions,
including forward foreign currency contracts, currency swaps, foreign currency
or currency index futures contracts and put and call options on such contracts
or on currencies. A forward foreign currency contract involves an obligation to
purchase or sell a specific currency for a set price at a future date. A
currency swap is an arrangement whereby each party exchanges one currency for
another on a particular day and agrees to reverse the exchange on a later date
at a specific exchange rate. Forward foreign currency contracts and currency
swaps are established in the interbank market conducted directly between
currency traders (usually large commercial banks or other financial
institutions) on behalf of their customers. Futures contracts are similar to
forward contracts except that they are traded on an organized exchange and the
obligations thereunder may be offset by taking an equal but opposite position to
the original contract, with profit or loss determined by the relative prices
between the opening and offsetting positions. The Fund expects to enter into
these currency contracts and swaps in primarily the following circumstances: to
"lock in" the U.S. dollar equivalent price of a security the Fund is
contemplating to buy or sell that is denominated in a non-U.S. currency; or to
protect against a decline against the U.S. dollar of the currency of a
particular country to which the Fund's portfolio has exposure. The Fund
anticipates seeking to achieve the same economic result by utilizing from time
to time for such hedging a currency different from the one of the given
portfolio security as long as, in the view of the Adviser, such currency is
essentially correlated to the currency of the relevant portfolio security based
on historic and expected exchange rate patterns.
The Adviser may choose to use such instruments on behalf of the Fund depending
upon market conditions prevailing and the perceived investment needs of the
Fund. The swap market has grown substantially in recent years with a large
number of banks and investment banking firms acting both as principals and as
agents utilizing standardized swap documentation. As a result, the swap market
has become relatively broad and deep as compared to the markets for similar
instruments which are established in the interbank market. In accordance with
the current position of the staff of the Securities and Exchange Commission (the
"SEC"), the Fund will treat swap transactions as illiquid for purposes of the
Fund's policy regarding illiquid securities. Futures contracts, interest rate
swaps, and options on securities, indices and futures contracts and certain
currency contracts sold by the Fund are generally subject to segregation and
coverage requirements with the result that, if the Fund does not hold the
security or futures contract underlying the instrument, the Fund will be
required to segregate on an ongoing basis with its custodian, cash, U.S.
government securities, or other liquid securities in an amount at least equal to
the Fund's obligations with respect to such instruments. Such amounts fluctuate
as the obligations increase or decrease. The segregation requirement can result
in the Fund maintaining securities positions it would otherwise liquidate or
segregating assets at a time when it might be disadvantageous to do so.
The Fund expects that its investments in these currency transactions and the
futures and forward contracts described above will be less than 5% of its net
assets.
PORTFOLIO TURNOVER
The investment policies of the Fund may lead to frequent changes in investments,
particularly in periods of rapidly fluctuating interest or currency exchange
rates. The portfolio turnover may be higher than that of other investment
companies. While it is impossible to predict with certainty the portfolio
turnover, the Adviser expects that the annual turnover rate of the Fund will not
exceed 75%. Portfolio turnover generally involves some expense to the Fund,
including brokerage commissions or dealer mark-ups and other transaction costs
on the sale of securities and reinvestment in other securities. The portfolio
turnover rate is computed by dividing the lesser of the amount of the securities
purchased or securities sold by the average monthly value of securities owned
during the year (excluding securities whose maturities at acquisition were one
year or less).
B-9
<PAGE> 31
THE ADVISER
The Adviser is a New York corporation with principal offices located at One
Corporate Center, Rye, New York 10580-1434.
Pursuant to an Investment Advisory Contract, which was approved by the Fund's
sole shareholder on June 28, 1995, and last approved by the Board of Directors
on May 14, 1997, the Adviser furnishes a continuous investment program for the
Fund's portfolio, makes the day-to-day investment decisions for the Fund,
arranges the portfolio transactions for the Fund and generally manages the
Fund's investments in accordance with the stated policies of the Fund, subject
to the general supervision of the Board of Directors of the Fund.
Under the Investment Advisory Contract, the Adviser also (1) provides the Fund
with the services of persons competent to perform such supervisory,
administrative, and clerical functions as are necessary to provide efficient
administration of the Fund, including maintaining certain books and records and
overseeing the activities of the Fund's Custodian and Transfer Agent; (2)
oversees the performance of administrative and professional services provided to
the Fund by others, including the Fund's Custodian, Transfer Agent and Dividend
Disbursing Agent, as well as legal, accounting, auditing and other services
performed for the Fund; (3) provides the Fund, if requested, with adequate
office space and facilities; (4) prepares, but does not pay for, periodic
updating of the Fund's registration statement, Prospectus and Additional
Statement, including the printing of such documents for the purpose of filings
with the SEC; (5) supervises the calculation of the net asset value of shares of
the Fund; (6) prepares, but does not pay for, all filings under state "Blue Sky"
laws of such states or countries as are designated by the Distributor, which may
be required to register or qualify, or continue the registration or
qualification of, the Fund and/or its shares under such laws; and (7) prepares
notices and agendas for meetings of the Fund's Board of Directors and minutes of
such meetings in all matters required by the Investment Company Act of 1940, as
amended (the "1940 Act"), to be acted upon by the Board.
The Adviser has entered into a Sub-Administration Contract with BISYS Fund
Services L.P. (the "Sub-Administrator") pursuant to which the Sub-Administrator
provides certain administrative services necessary for the Fund's operations but
which do not concern the investment advisory and portfolio management services
provided by the Adviser. For such services and the related expenses borne by the
Sub-Administrator, the Adviser pays a prorated monthly fee at the annual rate of
.0625% of the average net assets of the Fund (minimum annual fee of $30,000 per
portfolio) on the first $350 million of all of the funds advised by the Adviser
and its affiliates and administered by BISYS and .0425% of any net assets above
$350 million, and .0225% of any assets above $700 million which, together with
the services to be rendered, is subject to negotiation between the parties and
both parties retain the right unilaterally to terminate the arrangement on not
less than 60 days' notice.
The Investment Advisory Contract provides that absent willful misfeasance, bad
faith, gross negligence or reckless disregard of its duty, the Adviser and its
employees, officers, directors and controlling persons are not liable to the
Fund or any of its investors for any act or omission by the Adviser or for any
error of judgment or for losses sustained by the Fund. However, the Investment
Advisory Contract provides that the Fund is not waiving any rights it may have
with respect to any violation of law which cannot be waived. The Investment
Advisory Contract also provides indemnification for the Adviser and each of
these persons for any conduct for which they are not liable to the Fund. The
Investment Advisory Contract in no way restricts the Adviser from acting as
adviser to others. The Fund has agreed by the terms of its Investment Advisory
Contract that the word "Gabelli" in its name is derived from the name of the
Adviser which in turn is derived from the name of Mario J. Gabelli; that such
name is the property of the Adviser for copyright and/or other purposes; and
that, therefore, such name may freely be used by the Adviser for other
investment companies, entities or products. The Fund has further agreed that in
the event that for any reason the Adviser ceases to be its investment adviser,
it will, unless the Adviser otherwise consents in writing, promptly take all
steps necessary to change its name to one which does not include "Gabelli."
B-10
<PAGE> 32
The Investment Advisory Contract is terminable without penalty by the Fund on
not more than 60 days' written notice when authorized by the Directors of the
Fund; by the holders of a majority, as defined in the 1940 Act, of the
outstanding shares of the Fund; or by the Adviser. The Investment Advisory
Contract will automatically terminate in the event of its assignment, as defined
in the 1940 Act and rules thereunder, except to the extent otherwise provided by
order of the SEC or any rule under the 1940 Act and except to the extent the
1940 Act no longer provides for automatic termination, in which case the
approval of a majority of the disinterested Directors is required for any
"assignment." The Investment Advisory Contract provides that unless terminated
it will remain in effect until June 30, 1998, and from year to year thereafter,
so long as continuance of the Investment Advisory Contract is approved annually
by the Directors, or the shareholders of the Fund and in either case, by a
majority vote of the Directors who are not parties to the Investment Advisory
Contract or "interested persons" as defined in the 1940 Act of any such person
cast in person, at a meeting called specifically for the purpose of voting on
the continuance of the Investment Advisory Contract.
<TABLE>
<CAPTION>
ADVISORY FEES EARNED AND WAIVED
FOR THE FISCAL YEARS ENDED DECEMBER 31,
1995 1996 1997
---- ---- ----
Earned Waived Earned Waived Earned Waived
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
$6,204 $6,204 $65,095 $59,249 $193,382 $0
</TABLE>
THE DISTRIBUTOR
The Fund has entered into a Distribution Agreement with Gabelli & Company, Inc.
(the "Distributor"), a New York corporation which is a subsidiary of Gabelli
Funds, Inc., having principal offices located at One Corporate Center, Rye, New
York 10580-1434. The Distributor acts as agent of the Fund for the continuous
offering of its shares on a best efforts basis.
The Distribution Agreement is terminable by the Distributor or the Fund at any
time without penalty on not more than 60 nor less than 30 days' written notice,
provided that termination by the Fund must be directed or approved by the Board
of Directors of the Fund, by the vote of the holders of a majority of the
outstanding securities of the Fund, or by written consent of a majority of the
Directors who are not interested persons of the Fund or the Distributor. The
Distribution Agreement will automatically terminate in the event of its
assignment, as defined in the 1940 Act. The Distribution Agreement provides
that, unless terminated, it will remain in effect until June 30, 1998 and from
year to year thereafter, so long as continuance of the Distribution Agreement is
approved annually by the Fund's Board of Directors or by a majority of the
outstanding voting securities of the Fund, and in either case, also by a
majority of the Directors who are not interested persons of the Fund or the
Distributor. The Distribution Agreement was most recently approved by the Board
of Directors on May 14, 1997.
During the fiscal year ended December 31, 1997, the Fund paid distribution
expenses under the Distribution Plan of $91,000. Of this amount $34,700 was
spent on printing, postage and stationery, $16,300 on overhead support expenses,
$33,900 on salaries of personnel of the Distributor and $6,100 on third party
brokers. Pursuant to the Distribution Plan, the Fund paid the Distributor
$48,322, or .25% of its average daily net assets.
DIRECTORS AND OFFICERS
The Directors and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with the
Adviser or the Sub-Administrator, are shown below. Directors deemed to be
"interested persons" of the Fund for purposes of the 1940 Act are indicated by
an asterisk.
B-11
<PAGE> 33
<TABLE>
<CAPTION>
NAME, POSITION WITH FUND AND PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS;
ADDRESS AFFILIATIONS WITH THE ADVISER OR ADMINISTRATOR
<S> <C>
Mario J. Gabelli Chairman of the Board and President of the Fund
Chairman of the Board since 1989; Chairman of the Board, Chief Executive
One Corporate Center Officer and Chief Investment Officer of Gabelli
Rye, New York 10580 Funds, Inc. and GAMCO Investors, Inc., Chairman of
Age: 55 the Board and Chief Executive Officer of Lynch
Corporation, a diversified manufacturing,
communications and services company; Director of
East/West Communications, Inc.; Governor of the
American Stock Exchange and officer and/or
Director or Trustee of 12 other Gabelli funds.
Caesar M.P. Bryan Senior Vice President of GAMCO Investors, Inc.,
President wholly owned subsidiary of the Adviser, since May
One Corporate Center 1994 and President of Gabelli Gold Fund, Inc.;
Rye, New York 10580 Formerly Senior Vice President and Portfolio
Age: 43 Manager of Lexington Management Corporation (until
May 1994).
Anthony J. Colavita President and Attorney at Law in the law firm of
Director Anthony J. Colavita, P.C. since 1961; Director or
One Corporate Center Trustee of 12 other Gabelli funds.
Rye, New York 10580
Age: 62
Karl Otto Pohl Partner of Sal Oppenheim Jr. & Cie (private
Director investment bank); Former President of the Deutsche
One Corporate Center Bundesbank and Chairman of its Central Bank
Rye, New York 10580 Council from 1980 through 1991; Currently Board
Age: 68 Member of IBM World Trade Europe/Middle
East/Africa Corp.; Bertelsmann AG, Zurich
Versicherungs-Gesellschaft (insurance); the
International Advisory Board for JP Morgan & Co.;
Supervisory Board Member of Royal Dutch (petroleum
company) ROBECo/o Group; Advisory Board of
Unilever N.V. and Unilever Deutschland; German
Governor, International Monetary Fund from 1980
through 1991; Board Member, Bank for International
Settlements from 1980 through 1991; and Director
or Trustee of 14 other Gabelli funds.
Werner Roeder, M.D. Director of Surgery, Lawrence Hospital, and
Director practicing private physician. Director or Trustee
One Corporate Center of 6 other Gabelli funds.
Rye, New York 10580
Age: 57
</TABLE>
B-12
<PAGE> 34
<TABLE>
<S> <C>
Anthonie C. van Ekris Director of the Fund since 1992. Managing Director
Director of Balmac International, Ltd.; Director of
One Corporat Center Spinnaker Industries, Inc. and Stahel Mardmeyer
Rye, New York 10580 A.Z.; and Director or Trustee of 9 other Gabelli
Age: 63 funds.
Bruce N. Alpert Vice President and Chief Operating Officer of the
Vice President Investment Advisory Division of Gabelli Funds,
and Treasurer One Corporate Inc. (the "Adviser"); officer of each mutual fund
Center Rye, New York 10580 managed by the Adviser or its affiliates.
Age: 46
James E. McKee Vice President and General Counsel of GAMCO
Secretary Investors, Inc. since 1993; Secretary of all mutua
One Corporate Center funds managed by the Adviser or its affiliates;
Rye, New York 10580 U.S. Securities and Exchange Commission, New York,
Age: 35 (Branch Chief, 1992-1993, Staff Attorney,
1989-1992).
</TABLE>
The Fund pays each Director who is not an employee of the Adviser or an
affiliated company an annual fee of $1,000 and $250 for each meeting of the
Board of Directors attended by the Director, and reimburses Directors for
certain travel and other out-of-pocket expenses incurred by them in connection
with attending such meetings. Directors and officers of the Fund who are
employed by the Adviser or an affiliated company receive no compensation or
expense reimbursement from the Fund.
The following table sets forth certain information regarding the compensation of
the Fund's directors and officers. Except as disclosed below, no executive
officer or person affiliated with the Fund received compensation from the Fund
for the calendar year ended December 31, 1997 in excess of $60,000.
<TABLE>
<CAPTION>
COMPENSATION TABLE
TOTAL COMPENSATION
AGGREGATE FROM THE FUND
NAME OF PERSON COMPENSATION AND FUND COMPLEX
POSITION FROM THE FUND PAID TO DIRECTORS(1)
- -------------- ------------- --------------------
<S> <C> <C>
Mario J. Gabelli ................................... 0 0
Chairman of the Board
Anthony J. Colavita ................................ $ 2,000 $79,190(13)
Director
Karl Otto Pohl ..................................... $ 1,750 $85,690(15)
Director
Werner J. Roeder, M.D .............................. $ 2,000 $21,691(7)
Director
Anthonie C. van Ekris .............................. $ 2,000 $55,190(11)
Director
- --------
<FN>
1 Represents the total compensation paid to such persons during the calendar year ended
December 31, 1997. The parenthetical number represents the number of investment companies
(including the Fund) from which such person receives compensation that are considered part
of the same fund complex as the Fund, because, among other things, they have a common
investment adviser.
</FN>
</TABLE>
B-13
<PAGE> 35
INVESTMENT RESTRICTIONS
The Fund's investment objective and the following investment restrictions are
fundamental and cannot be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities (defined in the Act as the
lesser of (a) more than 50% of the outstanding shares or (b) 67% or more of the
shares represented at a meeting at which more than 50% of the outstanding shares
are represented). All other investment policies or practices are considered by
the Fund not to be fundamental and accordingly may be changed without
stockholder approval. If a percentage restriction on investment or use of assets
set forth below is adhered to at the time a transaction is effected, later
changes in percentage resulting from changing market values or total assets of
the Fund will not be considered a deviation from policy. The Fund may not:
(1) invest in more than 25% of the value of its total assets in any
particular industry (this restriction does not apply to obligations
issued or guaranteed by the U.S. government or its agencies or
instrumentalities);
(2) issue senior securities, except that the Fund may borrow money from a
bank, including on margin if margin securities are owned, in an amount
up to 33 1/3% of its total assets (including the amount of such
enumerated senior securities issued but excluding any liabilities and
indebtedness not constituting senior securities) and except that the
Fund may borrow up to an additional 5% of its total assets for
temporary purposes; or pledge its assets other than to secure such
issuances or in connection with hedging transactions, short sales,
when-issued and forward commitment transactions and similar investment
strategies;
(3) make loans of money or property to any person, except through loans of
portfolio securities, the purchase of fixed income securities or the
acquisition of securities subject to repurchase agreements;
(4) underwrite the securities of other issuers, except to the extent that
in connection with the disposition of portfolio securities or the sale
of its own shares the Fund may be deemed to be an underwriter;
(5) invest for the purpose of exercising control over management of any
company;
(6) purchase real estate or interests therein, including limited
partnerships that invest primarily in real estate equity interests,
other than publicly traded real estate investment trusts and publicly
traded master limited partnership interests; or
(7) purchase or sell commodities or commodity contracts except for certain
bona fide hedging, yield enhancement and risk management purposes or
invest in any oil, gas or mineral leases.
In addition, as a diversified investment company, the Fund is subject to the
following limitations as to 75% of its total assets: (a) the Fund may not invest
more than 5% of its total assets in the securities of any one issuer, except
obligations of the U.S. Government and its agencies and instrumentalities, and
(b) the Fund may not own more than 10% of the outstanding voting securities of
any one issuer.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is authorized on behalf of the Fund to employ brokers to effect the
purchase or sale of portfolio securities with the objective of obtaining prompt,
efficient and reliable execution and clearance of such transactions at the most
favorable price obtainable ("best execution") at reasonable expense.
Transactions in securities other than those for which a securities exchange is
the principal market are generally done through a principal market maker.
However, such transactions may be effected through a brokerage firm and a
commission paid whenever it appears that a broker can obtain a more favorable
B-14
<PAGE> 36
overall price. In general, there may be no stated commission in the case of
securities traded on the over-the-counter markets, but the prices of those
securities may include undisclosed commissions or markups. Options transaction
will usually be effected through a broker and a commission will be charged. The
Fund also expects that securities will be purchased at times in underwritten
offerings where the price includes a fixed amount of compensation generally
referred to as the underwriter's concession or discount.
The Adviser currently serves as adviser to a number of investment company
clients and may in the future act as adviser to others. Affiliates of the
Adviser act as investment adviser to numerous private accounts. It is the
practice of the Adviser and its affiliates to cause purchase and sale
transactions to be allocated among the Fund and others whose assets they manage
in such manner as it deems equitable. In making such allocations among the Fund
and other client accounts, the main factors considered are the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held and the opinions of the persons
responsible for managing the portfolios of the Fund and other client accounts.
The policy of each Fund regarding purchases and sales of portfolio securities is
that primary consideration will be given to obtaining the most favorable prices
and efficient execution of transactions. In seeking to implement each Fund's
policies, the Adviser effects transactions with those brokers and dealers who
the Adviser believes provide the most favorable prices and are capable of
providing efficient executions. If the Adviser believes such price and execution
are obtainable from more than one broker or dealer, it may give consideration to
placing portfolio transactions with those brokers and dealers who also furnish
research and other services to each Fund or the Adviser of the type described in
Section 28(e) of the Securities Exchange Act of 1934. In doing so, each Fund may
also pay higher commission rates than the lowest available when the Adviser
believes it is reasonable to do so in light of the value of the brokerage and
research services provided by the broker effecting the transaction. Such
services may include, but are not limited to, any one or more of the following:
information as to the availability of securities for purchase or sale;
statistical or factual information or opinions pertaining to investment; wire
services; and appraisals or evaluations of portfolio securities.
Research services furnished by brokers or dealers through which the Fund effects
securities transactions are used by the Adviser and its advisory affiliates in
carrying out their responsibilities with respect to all of their accounts over
which they exercise investment discretion. Such investment information may be
useful only to one or more of the other accounts of the Adviser and its advisory
affiliates, and research information received for the commissions of those
particular accounts may be useful both to the Fund and one or more of such other
accounts. The purpose of this sharing of research information is to avoid
duplicative charges for research provided by brokers and dealers.
Neither the Fund nor the Adviser has any legally binding agreement with any
broker or dealer regarding any specific amount of brokerage commissions which
will be paid in recognition of such services. However, in determining the amount
of portfolio commissions directed to such brokers or dealers, the Adviser does
consider the level of services provided. Based on such determinations, the
Adviser has allocated brokerage commissions of $99,166 on portfolio transactions
in the principal amount of $24,370,922 during 1997, to various broker-dealers
that have provided research services to the Adviser. The average commission on
these transactions was $.0041 per share.
The Adviser may also place orders for the purchase or sale of portfolio
securities with Gabelli & Company, Inc. ("Gabelli"), a broker-dealer member of
the National Association of Securities Dealers, Inc. and an affiliate of the
Adviser, when it appears that, as an introducing broker or otherwise, Gabelli
can obtain a price and execution which is at least as favorable as that
obtainable by other qualified brokers. The Adviser may also consider sales of
shares of the Fund and any other registered investment companies managed by the
Adviser and its affiliates by brokers and dealers other than the Distributor as
a factor in its selection of brokers and dealers to execute portfolio
transactions for the Fund.
B-15
<PAGE> 37
The following table sets forth certain information regarding the brokerage
commissions paid and the brokerage commissions paid to Gabelli affiliates for
the period from July 6, 1995 (commencement of operations) through December 31,
1995, and the fiscal years ended December 31, 1996 and 1997.
<TABLE>
<CAPTION>
TOTAL BROKERAGE BROKERAGE COMMISSIONS
PERIOD COMMISSIONS PAID PAID TO GABELLI AFFILIATES
- -------------------------------------------------- ---------------- --------------------------
<S> <C> <C>
1995 ............................................. $10,161 $ 0
1996 ............................................. $76,850 $25
1997 ............................................. $99,463 $ 0
</TABLE>
As required by Rule 17e-1 under the 1940 Act, the Board of Directors of the Fund
has adopted "Procedures" which provide that the commissions paid to Gabelli on
stock exchange transactions may not exceed that which would have been charged by
another qualified broker or member firm able to effect the same or a comparable
transaction at an equally favorable price. Rule 17e-1 and the Procedures contain
requirements that the Board, including independent Directors, conduct periodic
compliance reviews of such brokerage allocations and review such schedule at
least annually for its continuing compliance with the foregoing standard. The
Adviser and Gabelli are also required to furnish reports and maintain records in
connection with such reviews.
To obtain the best execution of portfolio trades on the New York Stock Exchange,
Inc. ("NYSE"), Gabelli controls and monitors the execution of such transactions
on the floor of the NYSE through independent "floor brokers" or through the
Designated Order Turnaround ("DOT") System of the NYSE. Such transactions are
then cleared, confirmed to the Fund for the account of Gabelli, and settled
directly with the Custodian of the Fund by a clearing house member firm which
remits the commission less its clearing charges to Gabelli. Gabelli may also
effect portfolio transactions on behalf of the Fund in the same manner and
pursuant to the same arrangements on other national securities exchanges which
adopt direct access rules similar to those of the NYSE.
PURCHASE AND REDEMPTION OF SHARES
Cancellation of purchase orders for shares of the Fund (as, for example, when
checks submitted to purchase shares are returned unpaid) cause a loss to be
incurred when the net asset value of the Fund's shares on the date of
cancellation is less than on the original date of purchase. The investor is
responsible for such loss, and the Fund may redeem shares from any account
registered in that shareholder's name, or by seeking other redress. If the Fund
is unable to recover any loss to itself, it is the position of the SEC that the
Distributor will be immediately obligated to make the Fund whole.
To minimize expenses, the Fund reserves the right to redeem, upon not less than
30 days' notice, all shares of the Fund in an account (other than an Individual
Retirement Account ("IRA")) which as a result of shareholder redemption has a
value below $500 and has reserved the ability to raise this amount to up to
$10,000. However, a shareholder will be allowed to make additional investments
prior to the date fixed for redemption to avoid liquidation of the account.
DIVIDENDS, DISTRIBUTIONS AND TAXES
GENERAL
The Fund will determine either to distribute or to retain all or part of any net
long-term capital gains in any year for reinvestment. If any such gains are
retained, the Fund will be subject to a tax of 35% of such amount. In that
event, the Fund expects that it will designate the retained amount as
undistributed capital gains in a notice to its shareholders, each of whom (1)
will be required to include in income for tax purposes as long-term capital
gains, its share of the undistributed amount, (2) will be entitled to credit its
B-16
<PAGE> 38
proportionate share of the tax paid by the Fund against its federal income tax
liability and to claim refunds to the extent the credit exceeds such liability,
and (3) will increase its basis in its shares of the Fund by an amount equal to
65% of the amount of undistributed capital gains included in such shareholder's
gross income.
Under the Code, amounts not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a nondeductible 4% excise
tax. To avoid the tax, the Fund must distribute during each calendar year, an
amount equal to, at the minimum, the sum of (1) 98% of its ordinary income (not
taking into account any capital gains or losses) for the calendar year, (2) 98%
of its capital gains in excess of its capital losses for the twelve-month period
ending on October 31 of the calendar year (unless an election is made by the
Fund with a November or December year-end to use the Fund's fiscal year), and
(3) all ordinary income and net capital gains for previous years that were not
previously distributed. A distribution will be treated as paid during the
calendar year if it is paid during the calendar year or declared by the Fund in
October, November or December of the year, payable to shareholders of record on
a date during such month and paid by the Fund during January of the following
year. Any such distributions paid during January of the following year will be
deemed to be received on December 31 of the year the distributions are declared,
rather than when the distributions are received.
Gains or losses on the sales of securities by the Fund will be long-term capital
gains or losses if the securities have been held by the Fund for more than
eighteen months. Gains or losses on the sale of securities held for more than
twelve months but less than eighteen months will be mid-term capital gains or
losses.
The Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Code. If so qualified, the Fund
will not be subject to federal income tax on its net investment income and net
short-term capital gains, if any, realized during any fiscal year in which it
distributes such income and capital gains to its shareholders.
HEDGING TRANSACTIONS
Certain options, futures contracts and options on futures contracts are "section
1256 contracts." Any gains or losses on section 1256 contracts are generally
considered 60% long-term and 40% short-term capital gains or losses ("60/40").
Also, section 1256 contracts held by the Fund at the end of each taxable year
are "marked-to-market" with the result that unrealized gains or losses are
treated as though they were realized and the resulting gain or loss is treated
as 60/40 gain or loss.
Generally, the hedging transactions undertaken by the Fund may result in
"straddles" for U.S. federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by the Fund. In addition, losses
realized by the Fund on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which such losses are realized.
Further, the Fund may be required to capitalize, rather than deduct currently,
any interest expense on indebtedness incurred or continued to purchase or carry
any positions that are a part of a straddle. Because only a few regulations
implementing the straddle rules have been promulgated, the tax consequences of
hedging transactions to the Fund are not entirely clear.
The Fund may make one or more of the elections available under the Code which
are applicable to straddles. If the Fund makes any of the elections, the amount,
character and timing of the recognition of gains or losses from the affected
straddle positions will be determined under rules that vary according to the
election(s) made. The rules applicable under certain of the elections accelerate
the recognition of gains or losses from the affected straddle positions. Because
application of the straddle rules may affect the character of gains or losses,
defer losses and/or accelerate the recognition of gains or losses from the
affected straddle positions, and require the capitalization of interest expense,
the amount which must be distributed to shareholders, and which will be taxed to
shareholders as ordinary income or long-term
B-17
<PAGE> 39
capital gain, may be increased or decreased substantially as compared to a fund
that did not engage in such hedging transactions.
DISTRIBUTIONS
Distributions of investment company taxable income (which includes taxable
interest income and the excess of net short-term capital gains over long-term
capital losses) are taxable to a U.S. shareholder as ordinary income, whether
paid in cash or shares. Dividends paid by the Fund will qualify for the 70%
deduction for dividends received by corporations to the extent the Fund's income
consists of qualified dividends received from U.S. corporations. Distributions
of net capital gains (which consists of the excess of long-term capital gains
over net short-term capital losses), if any, are taxable as long-term capital
gains, whether paid in cash or in shares, and are not eligible for the dividends
received deduction. Shareholders receiving distributions in the form of newly
issued shares will have a basis in such shares of the Fund equal to the fair
market value of such shares on the distribution date. If the net asset value of
shares is reduced below a shareholder's cost as a result of a distribution by
the Fund, such distribution will be taxable even though it represents a return
of invested capital. The price of shares purchased at this time may reflect the
amount of the forthcoming distribution. Those purchasing just prior to a
distribution will receive a distribution which will nevertheless be taxable to
them.
SALES OF SHARES
Upon a sale or exchange of his or her shares, a shareholder will realize a
taxable gain or loss depending upon his or her basis in the shares. Such gain or
loss will be treated as a long-term, mid-term, or short-term, generally
depending upon the shareholder's holding period for the shares. Any loss
realized on a sale or exchange will be disallowed to the extent the shares
disposed of are replaced, including replacement through reinvestment of
dividends and capital gains distributions in the Fund, within a period of 61
days beginning 30 days before and ending 30 days after the shares are disposed
of. In such case, the basis of the shares acquired will be adjusted to reflect
the disallowed loss.
Any loss realized by a shareholder on the sale of the Fund's shares held by the
shareholder for six months or less will be treated for tax purposes as a
long-term capital loss to the extent of any distributions of net capital gains
received by the shareholder with respect to such shares.
BACKUP WITHHOLDING
The Fund may be required to withhold federal income tax at the rate of 31% of
all taxable distributions payable to shareholders who fail to provide the Fund
with their correct taxpayer identification number or to make required
certifications, or who have been notified by the Internal Revenue Service that
they are subject to backup withholding. Backup withholding is not an additional
tax. Any amounts withheld may be credited against a shareholder's federal income
tax liability.
FOREIGN WITHHOLDING TAXES
Income received by the Fund from sources within foreign countries may be subject
to withholding and other taxes imposed by such countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes. It is impossible to determine the rate of foreign tax in advance since
the amount of the Fund's assets to be invested in various countries is not
known. Because the Fund may have more than 50% of its total assets invested in
securities of foreign corporations, the Fund may be entitled to "pass-through"
to shareholders the amount of foreign taxes paid by the Fund. Shareholders are
urged to consult their attorneys or tax advisers regarding specific questions as
to federal, state or local taxes.
CREATION OF ADDITIONAL SERIES
The Fund reserves the right to create and issue a number of series shares, in
which case the shares of each series would participate equally in the earnings,
dividends, and assets of the particular series and would
B-18
<PAGE> 40
vote separately to approve management agreements or changes in investment
policies, but shares of all series would vote together in the election or
selection of Directors, principal underwriters and auditors and on any proposed
material amendment to the Fund's Certificate of Incorporation.
Upon liquidation of the Fund or any series, shareholders of the affected series
would be entitled to share pro rata in the net assets of their respective series
available for distribution to such shareholder.
INVESTMENT PERFORMANCE INFORMATION
The Fund may furnish data about its investment performance in advertisements,
sales literature and reports to shareholders. "Total return" represents the
annual percentage change in value of $1,000 invested at the maximum public
offering price for the one-year period and the life of the Fund through the most
recent calendar quarter, assuming reinvestment of all dividends and
distributions. The Fund may also furnish total return calculations for these and
other periods, based on investments at various sales charge levels or net asset
value. Any performance data which is based on the Fund's net asset value per
share would be reduced if a sales charge were taken into account.
Quotations of yield will be based on the investment income per share earned
during a particular 30-day period, less expenses accrued during the period ("net
investment income") and will be computed by dividing net investment income by
the maximum offering price per share on the last day of the period, according to
the following formula:
a - b
-----
YIELD = 2[ (cd + 1) to the 6th power - 1]
where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of any reimbursements), c = the average daily number of
shares outstanding during the period that were entitled to receive dividends,
and d = the maximum offering price share on the last day of the period.
For the 30 day period ended December 31, 1997 the Fund's yield was (3.7553)%.
Quotations of total return will reflect only the performance of a hypothetical
investment in the Fund during the particular time period shown. The Fund's total
return and current yield may vary from time to time depending on market
conditions, the compositions of its portfolio and operating expenses. These
factors and possible differences in the methods used in calculating yield should
be considered when comparing the Fund's current yield to yields published for
other investment companies and other investment vehicles. Total return and yield
should also be considered relative to changes in the value of the Fund's shares
and the risks associated with the Fund's investment objectives and policies. At
any time in the future, total returns and yield may be higher or lower than past
total returns and yields and there can be no assurance that any historical
return or yield will continue.
From time to time evaluations of performance are made by independent sources
that may be used in advertisements concerning the Fund. These sources include:
Lipper Analytical Services, CDA/ Weisenberger Investment Company Service,
Barron's, Business Week, Changing Times, Financial World, Forbes, Fortune,
Money, Personal Investor, Sylvia Porter's Personal Finance, Bank Rate Monitor,
Morningstar and The Wall Street Journal.
In connection with communicating its yield or total return to current or
prospective shareholders, the Fund may also compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
other unmanaged indexes which may assume reinvestment of dividends but generally
do not reflect deductions for administrative and management costs.
B-19
<PAGE> 41
Quotations of the Fund's total return will represent the average annual
compounded rate of return of a hypothetical investment in the Fund over periods
of 1, 5, and 10 years (up to the life of the Fund), and are calculated pursuant
to the following formula:
P(I+T)(n) = ERV
where P = a hypothetical initial payment of $1,000, T = the average annual total
return, n = the number of years, and ERV = the redeemable value at the end of
the period of a $1,000 payment made at the beginning of the period. All total
return figures will reflect the deduction of Fund expenses (net of certain
expenses reimbursed by the Adviser) on an annual basis, and will assume that all
dividends and distributions are reinvested and will deduct the maximum sales
charge, if any is imposed.
For the year ended December 31, 1997, the Fund's total return was 7.30%. The
average annual total return since June 30, 1995 is 15.60%.
COUNSEL AND INDEPENDENT AUDITORS
Willkie Farr & Gallagher, 153 East 53rd Street, New York, New York 10022, serves
as counsel for the Fund.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, has been
appointed independent auditor for the Fund.
SHARES OF BENEFICIAL INTEREST
As of April 3, 1998, the Officers and Directors of the Fund as a group owned
8.2% of the outstanding shares. As of April 3, 1998, the following persons were
5% or greater shareholders of the Funds:
<TABLE>
<CAPTION>
PERCENTAGE OF
FUND/SHAREHOLDER SHARES OUTSTANDING
---------------- ------------------
<S> <C>
Gabelli International Growth Fund, Inc./ 7.70%
Charles Schwab & Co. Inc.
101 Montgomery Street
San Francisco, CA 94104
Gabelli International Growth Fund, Inc./ 17.33%
c/o W. Frewin-Cablevisions Systems
Wexford Clearing Services Corp. for
Charles F. Dolan
One Media Cross Ways
Woodbury, NY 11797
</TABLE>
B-20
<PAGE> 42
APPENDIX TO STATEMENT OF ADDITIONAL INFORMATION
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE
BOND RATINGS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Aa: Bonds which are rated Aa are
judged to be of high quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which made the long term risks appear
somewhat larger than in Aaa securities. A: Bonds which are rated A possess many
favorable investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future. Baa: Bonds which are rated Baa are considered
as medium grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well. Ba: Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class. B: Bonds which are
rated B generally lack characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract
over any long period of time may be small. Caa: Bonds which are rated Caa are of
poor standing. Such issues may be in default or there may be present elements of
danger with respect to principal or interest. Ca: Bonds which are rated Ca
represent obligations which are speculative in a high degree. Such issues are
often in default or have other marked shortcomings. C: Bonds which are rated C
are the lowest rated class of bonds and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
NOTE: Moody's may apply numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
DESCRIPTION OF STANDARD & POOR'S RATINGS SERVICES ("S&P'S") CORPORATE
DEBT RATINGS
AAA: Debt rated AAA has the highest rating assigned by S&P's. Capacity to pay
interest and repay principal is extremely strong. AA: Debt rated AA has a very
strong capacity to pay interest and repay principal and differs from the highest
rated issues only in small degrees. A: Debt rated A has a strong capacity to pay
interest and repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than debt in
higher-rated categories. BBB: Debt rated BBB is regarded as having adequate
capacity to pay interest and repay principal. Whereas it normally exhibits
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than for debt in higher rated categories. BB, B, CCC,
CC, C: Debt rated BB, B, CCC, CC and C is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree of
speculation and C the highest degree of speculation. While such debt will likely
have some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions. CI: The rating CI
is reserved for income bonds on which no interest is being paid. D: Debt rated D
is in payment default. The D rating category is used when interest payments or
principal payments are not made on the date due
B-21
<PAGE> 43
even if the applicable grace period has not expired, unless S&P's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized. PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.
R: The "r" symbol is attached to derivative, hybrid and certain other
obligations that S&P believes may experience high volatility or high variability
in expected returns due to non-credit risks created by the terms of the
obligation.
DESCRIPTION OF MOODY'S PREFERRED STOCK RATINGS
aaa: An issue which is rated aaa is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of preferred stocks. aa: An issue which
is rated aa is considered a high-grade preferred stock. This rating indicates
that there is reasonable assurance that earnings and asset protection will
remain relatively well maintained in the foreseeable future. a: An issue which
is rated a is considered to be an upper medium grade preferred stock. While
risks are judged to be somewhat greater than in the aaa and aa classifications,
earnings and asset protection are, nevertheless, expected to be maintained at
adequate levels. baa: An issue which is rated baa is considered to be medium
grade, neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present but may be questionable over any great
length of time. ba: An issue which is rated ba is considered to have speculative
elements and its future cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class. b: An
issue which is rated b generally lacks the characteristics of a desirable
investment. Assurance of dividend payments and maintenance of other terms of the
issue over any long period of time may be small. caa: An issue which is rated
caa is likely to be in arrears on dividend payments. This rating designation
does not purport to indicate the future status of payment. ca: An issue which is
rated ca is speculative in a high degree and is likely to be in arrears on
dividends with little likelihood of eventual payment. c: This is the lowest
rated class of preferred or preference stock. Issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
NOTE: Moody's may apply numerical modifiers 1, 2 and 3 in each rating
classification from "aa" through "b" in its preferred stock rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
DESCRIPTION OF S&P'S PREFERRED STOCK RATINGS
AAA: This is the highest rating that may be assigned by S&P's to a preferred
stock issue and indicates an extremely strong capacity to pay the preferred
stock obligations. AA: A preferred stock issue rated AA also qualifies as a
high-quality fixed income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for issues rated
AAA. A: An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the adverse
effect of changes in circumstances and economic conditions. BBB: An issue rated
BBB is regarded as backed by an adequate capacity to pay the preferred stock
obligations. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to make payments for a preferred stock in this category than
for issues in the A category. BB, B, CCC: Preferred stock rated BB, B, and CCC
are regarded, on balance, as predominantly speculative with respect to the
issuer's capacity to pay preferred stock obligations. BB indicates the lowest
degree of speculation and CCC the highest degree of speculation. While such
issues will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
CC: The rating CC is reserved for a preferred stock in arrears on dividends or
sinking fund payments but that is currently paying. C: A preferred stock rated C
is a non-
B-22
<PAGE> 44
paying issue. D: A preferred stock rated D is a non-paying issue with the issuer
in default on debt instruments.
PLUS (+) OR MINUS (-): The ratings from "AA" to "B" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
FINANCIAL STATEMENTS
The Fund's Financial Statements for the period ended December 31, 1997,
including the Report of Ernst & Young LLP, independent auditors, are
incorporated by reference to the Fund's Annual Report dated December 31, 1997.
B-23
<PAGE> 45
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) Financial Statements:
(i) Financial Statements included in Part A, the Prospectus:
(a) Financial Highlights for the period from June 30,
1995 (commencement of operations) through December
31, 1995 and the fiscal years ended December 31, 1996
and 1997.
(ii) Financial Statements included in Part B, the Statement of
Additional Information:
(a) Report of Independent Auditors.****
(b) Statement of Assets and Liabilities, December 31,
1997.****
(c) Portfolio of Investments, December 31, 1997.****
(d) Statement of Operations for the year ended December
31, 1997.****
(e) Statement of Changes in Net Assets for the fiscal
years ended December 31, 1996 and 1997.****
(f) Financial Highlights for the period from June 30,
1995 (commencement of operations) through December
31, 1995 and the fiscal years ended December 31, 1996
and 1997.****
(g) Notes to the Financial Statements****
(B) Exhibits:
EXHIBIT NO. DESCRIPTION OF EXHIBITS
----------- -----------------------
1 Articles of Incorporation of Registrant
2 By-Laws of Registrant
3 Not applicable
4 Specimen copies of certificates for shares issued by
Registrant*
5 Investment Advisory Agreement
6 Distribution Agreement
7 Not applicable
8 Custodian Contract
9(a) Transfer Agency and Service Agreement
9(b) Sub-Administration Agreement*****
10 Opinion and consent of Willkie Farr & Gallagher***
10(b) Consent of Willkie Farr & Gallagher*****
<PAGE> 46
11 Consent of Independent Auditors
12 Not applicable
13 Subscription Agreement***
14 Not applicable
15 Distribution Plan under Rule 12b-1
16 Schedule for Performance Computation
17 Financial Data Schedule
24(a) Power of Attorney**
(b) Power of Attorney***
- ------------
* Previously filed as an exhibit to Registration Statement No. 33-79994
filed on June 9, 1994
** Previously filed as an exhibit to Pre-Effective Amendment No. 1 to
Registration Statement No. 33-79994 filed on September 30, 1994.
*** Previously filed as an exhibit to Pre-Effective Amendment No. 2 to
Registration Statement No. 33-79994 filed on June 28, 1995.
**** Previously filed with the Fund's Annual Report for the year ended
December 31, 1997.
***** Previously filed as an exhibit to Post-Effective Amendment No. 3 to
Registration Statement No. 33-79994 filed on April 30, 1997.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
(1) (2)
Title of Class No. of Record Holders as of April 3, 1998
-------------- -----------------------------------------
<S> <C> <C>
Common Stock Par Value $.001 per share 1,897
</TABLE>
ITEM 27. INDEMNIFICATION
Under Article VIII of the registrant's Articles of Incorporation and
Article V, Section 1 of the registrant's By-Laws, any past or present director
or officer of registrant is indemnified to the fullest extent permitted by law
against liability and all expenses reasonably incurred by him in connection with
any action, suit or proceeding to which he may be a party or otherwise involved
by reason of his being or having been a director or officer of registrant. These
provisions do not authorize indemnification when it is determined, in the manner
specified in the Articles of Incorporation and By-Laws, that such director or
officer would otherwise be liable to registrant or its shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of his
duties. In addition, the Articles of Incorporation provide that to the fullest
extent permitted by Maryland General Corporation Law, as amended from time to
time, no director or officer of the Fund shall be personally liable to the Fund
or its stockholders for money damages, except to the extent such exemption from
liability or limitation thereof is not permitted by the
<PAGE> 47
Investment Company Act of 1940, as amended from time to time. Under Article V,
Section 2, of the registrant's By-Laws, expenses may be paid by registrant in
advance of the final disposition of any action, suit or proceeding upon receipt
of an undertaking by such director or officer to repay such expenses to
registrant in the event that it is ultimately determined that indemnification of
the advanced expenses is not authorized under the By-Laws.
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "1933 Act") may be permitted to directors, officers and controlling
persons of registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by registrant
of expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Gabelli Funds, Inc. is the investment adviser of the registrant (the
"Adviser"). For a list of officers and directors of the Adviser, together with
information as to any other business, profession, vocation or employment of a
substantial nature engaged in by the Adviser or such officers and directors
during the past two years, reference is made to Form ADV filed by it under the
Investment Advisers Act of 1940.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Gabelli & Company, Inc. is registrant's proposed principal
underwriter.
(b) For information with respect to each director and officer of Gabelli &
Company, Inc., reference is made to Form BD filed by Gabelli &
Company, Inc. under the Securities Exchange Act of 1934.
(c) Inapplicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All such accounts, books and other documents are maintained at the offices of:
Gabelli Funds, Inc., One Corporate Center, Rye, New York 10580-1434; State
Street Bank and Trust Company, 1776 Heritage Drive, North Quincy, Massachusetts
02171; and BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Registrant hereby undertakes to call a meeting of shareholders to
remove and elect directors at the request of shareholders entitled to
cast 10% or more of the votes entitled to be cast at the meeting.
(b) Registrant hereby undertakes to assist in shareholder communications
pursuant to Section 16(c) of the Investment Company Act of 1940.
<PAGE> 48
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the registrant certifies that it
meets all the requirements for effectiveness of this Post-Effective Amendment to
the Registration Statement pursuant to Rule 485(b) under the Securities Act of
1993, as amended, and has duly caused this Amendment No. 4 to the Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Rye and State of New York on the 30th day of April,
1998.
GABELLI INTERNATIONAL GROWTH FUND, INC.
By: /s/ Bruce N. Alpert
--------------------------------
Bruce N. Alpert
Vice President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 4 to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
*
- ----------------------------
Mario J. Gabelli Chairman of the Board April 30, 1998
/s/ Caesar M.P. Bryan
- ----------------------------
Caesar M.P. Bryan President April 30, 1998
/s/ Bruce N. Alpert
- ----------------------------
Bruce N. Alpert Vice President, Treasurer
and Chief Financial Officer April 30, 1998
*
- ----------------------------
Anthony J. Colavita Director April 30, 1998
*
- ----------------------------
Karl Otto Pohl Director April 30, 1998
*
- ----------------------------
Werner J. Roeder Director April 30, 1998
*
- ----------------------------
Anthonie C. van Ekris Director April 30, 1998
*By: /s/ Bruce N. Alpert
-------------------------
Bruce N. Alpert
Attorney-in-fact
</TABLE>
<PAGE> 1
Exhibit A
ARTICLES OF INCORPORATION
OF
GABELLI INTERNATIONAL GROWTH FUND, INC.
ARTICLE I
THE UNDERSIGNED, Jeffrey S. Hochman, whose post office address is c/o
Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York,
New York 10022, being at least 18 years of age, does hereby act as an
incorporator and forms a corporation, under and by virtue of the Maryland
General Corporation Law.
ARTICLE II
NAME
----
The name of the Corporation is Gabelli International Growth Fund, Inc.
(the "Corporation").
ARTICLE III
PURPOSES AND POWERS
-------------------
The Corporation is formed for the following purposes:
(1) To conduct and carry on the business of an investment company.
(2) To hold, invest and reinvest its assets in securities and other
investments or to hold part or all of its assets in cash.
(3) To issue and sell shares of its capital stock in such amounts and
on such terms and conditions and for such purposes and for such amount or kind
of consideration as may now or hereafter be permitted by law.
(4) To redeem, purchase or acquire in any other manner, hold, dispose
of, resell, transfer, reissue or cancel (all without the vote or consent of the
stockholders of the Corporation) shares of its capital stock, in any manner and
to the extent now or hereafter permitted by law and by these Articles of
Incorporation.
(5) To do any and all additional acts and to exercise any and all
additional powers or rights as may be necessary, incidental, appropriate or
desirable for the accomplishment of all or any of the foregoing purposes.
<PAGE> 2
of the Corporation to each stockholder of record entitled to vote at the
meeting, by placing the notice in the mail at least 10 (ten) days, but not more
than 90 (ninety) days, prior to the date designated for the meeting addressed to
each stockholder at his address appearing on the books of the Corporation or
supplied by the stockholder to the Corporation for the purpose of notice. The
notice of any meeting of stockholders may be accompanied by a form of proxy
approved by the Board of Directors in favor of the actions or persons as the
Board of Directors may select. Notice of any meeting of stockholders shall be
deemed waived by any stockholder who attends the meeting in person or by proxy,
or who before or after the meeting submits a signed waiver of notice that is
filed with the records of the meeting.
SECTION 4. Quorum. Except as otherwise provided by law or by the
Corporation's Articles of Incorporation, the presence in person or by proxy of
stockholders of the Corporation entitled to cast at least one-third of the votes
to be cast shall constitute a quorum at each meeting of the stockholders and all
questions shall be decided by a majority of the votes cast at the meeting,
except for the election of directors. A plurality of all the votes cast at a
meeting at which a quorum is present is sufficient to elect a director. In the
absence of a quorum, the stockholders present in person or by proxy, by majority
vote and without notice other than by announcement, may adjourn the meeting from
time to time as provided in Section 5 of this Article I until a quorum shall
attend. The stockholders present at any duly organized meeting may continue to
do business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. The absence from any meeting in person
or by proxy of holders of the number of shares of stock of the Corporation in
excess of one-third that may be required by the laws of the State of Maryland,
the Investment Company Act of 1940, as amended, or other applicable statute, the
Corporation's Articles of Incorporation or these By-Laws, for action upon any
given matter shall not prevent action at the meeting on any other matter or
matters that may properly come before the meeting, so long as there are present,
in person or by proxy, holders of the number of shares of stock of the
Corporation required for action upon the other matter or matters.
SECTION 5. Adjournment. Any meeting of the stockholders may be
adjourned from time to time, without notice other than by announcement at the
meeting at which the adjournment is taken. At any adjourned meeting at which a
quorum shall be present any action may be taken that could have been taken at
the meeting originally called. A meeting of the stockholders may not be
adjourned to a date more than 120 (one hundred twenty) days after the original
record date.
-2-
<PAGE> 3
(5) The Board of Directors shall have authority by resolution to
classify and reclassify any authorized but unissued shares of capital stock from
time to time by setting or changing in any one or more respects the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications or terms or conditions of redemption of the capital
stock.
(6) Unless otherwise required by law, at a meeting of stockholders the
presence in person or by proxy of stockholders entitled to cast one-third (1/3)
of all the votes entitled to be cast at the meeting constitutes a quorum.
(7) Notwithstanding any provision of law requiring any action to be
taken or authorized by the affirmative vote of a greater proportion of the votes
of all classes or of any class of stock of the Corporation, such action shall be
effective and valid if taken or authorized by the affirmative vote of a majority
of the total number of votes entitled to be cast thereon, except as otherwise
provided in this Charter.
ARTICLE VI
REDEMPTION
----------
Each holder of shares of the Corporation's capital stock shall be
entitled to require the Corporation to redeem al1 or any part of the shares of
capital stock of the Corporation standing in the name of the holder on the books
of the Corporation, and all shares of capital stock issued by the Corporation
shall be subject to redemption by the Corporation, at the redemption price of
the shares as in effect from time to time as may be determined by or pursuant to
the direction of the Board of Directors of the Corporation in accordance with
the provisions of Article VI, subject to the right of the Board of Directors of
the Corporation to suspend the right of redemption or postpone the date of
payment of the redemption price in accordance with provisions of applicable law.
Without limiting the generality of the foregoing, the Corporation shall, to the
extent permitted by applicable law, have the right at any time to redeem the
shares owned by any holder of capital stock of the Corporation (i) if the
redemption is, in the opinion of the Board of Directors of the Corporation,
desirable in order to prevent the Corporation from being deemed a "personal
holding company" within the meaning of the Internal Revenue Code of 1986 or (ii)
if the value of the shares in the account maintained by the Corporation or its
transfer agent for any class of stock for the stockholder is
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<PAGE> 4
SECTION 10. Inspectors. The Board of Directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at the meeting or
at any adjournment of the meeting. If the inspectors shall not be so appointed
or if any of them shall fail to appear or act, the chairman of the meeting may
appoint inspectors. Each inspector, before entering upon the discharge of his
duties, shall take and sign an oath to execute faithfully the duties of
inspector at the meeting with strict impartiality and according to the best of
his ability. The inspectors shall determine the number of shares outstanding and
the voting power of each share, the number of shares represented at the meeting,
the existence of a quorum and the validity and effect of proxies, and shall
receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do those acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the chairman of the meeting or any stockholder entitled to vote at
the meeting, the inspectors shall make a report in writing of any challenge,
request or matter determined by them and shall execute a certificate of any fact
found by them. No Director or candidate for the office of Director shall act as
inspector of an election of Directors. Inspectors need not be stockholders of
the Corporation.
SECTION 11. Consent of Stockholders in Lieu of Meeting. Except as
otherwise provided by statute, any action required to be taken at any meeting of
stockholders, or any action that may be taken at any meeting of the stockholder,
may be taken without a meeting, without prior notice and without a vote, if the
following are filed with the records of stockholders' meetings: (i) a unanimous
written consent that sets forth the action and is signed by each stockholder
entitled to vote on the matter and (ii) a written waiver of any right to dissent
signed by each stockholder entitled to notice of the meeting but not entitled to
vote at the meeting.
ARTICLE II
BOARD OF DIRECTORS
------------------
SECTION 1. General Powers. Except as otherwise provided in the
Corporation's Articles of Incorporation, the business and affairs of the
Corporation shall be managed under the direction of the Board of Directors. All
powers of the Corporation may be exercised by or under authority of the Board of
Directors except as conferred on or reserved to the
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<PAGE> 5
Corporation, except as conferred by Law or authorized by resolution of the Board
of Directors or of the stockholders.
(iii) Without the assent or vote of the stockholders, to
authorize the issuance from time to time of shares of the stock of any class of
the Corporation, whether now or hereafter authorized, and securities convertible
into shares of stock of the Corporation of any class or classes, whether now or
hereafter authorized, for such consideration as the Board of Directors may deem
advisable.
(iv) Without the assent or vote of the stockholders, to
authorize and issue obligations of the Corporation, secured and unsecured, as
the Board of Directors may determine, and to authorize and cause to be executed
mortgages and liens upon the real or personal property of the Corporation.
(v) Notwithstanding anything in this Charter to the contrary,
to establish in its absolute discretion the basis or method for determining the
value of the assets belonging to any class, the amount of the liabilities
belonging to any class and the net asset value of each share of any class of the
Corporation's stock.
(vi) To determine accordance with generally accepted
accounting principles and practices what constitutes net profits, earnings,
surplus or net assets in excess of capital, and to determine what accounting
periods shall be used by the Corporation for any purpose; to set apart out of
any funds of the Corporation reserves for such purposes as it shall determine
and to abolish the same; to declare and pay any dividends and distributions in
cash, securities or other property from surplus or any funds legally available
therefor, at such intervals as it shall determine; to declare dividends or
distributions by means of a formula or other method of determination, at
meetings held less frequently than the frequency of the effectiveness of such
declarations; and to establish payment dates for dividends or any other
distributions on any basis, including dates occuring less frequently than the
effectiveness of declarations thereof.
(vii) In addition to the powers and authorities granted herein
and by statute expressly conferred upon it, the Board of Directors is authorized
to exercise all powers and do all acts that may be exercised or done by the
Corporation pursuant to the provisions of the laws of the State of Maryland,
this Charter and the By-Laws of the Corporation.
(3) Any determination made in good faith, and in accordance with
accepted accounting practices, if applicable, by or pursuant
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Directors then holding office shall have been elected by the stockholders of the
Corporation. A majority of the entire Board then in office may fill a vacancy
which results from an increase in the number of Directors. In the event that at
any time a vacancy exists in any office of a Director that may not be filled by
the remaining Directors, a special meeting of the stockholders shall be held as
promptly as possible and in any event within 60 (sixty) days, for the purpose of
filling the vacancy or vacancies. Any Director elected or appointed to fill a
vacancy shall hold office until a successor has been chosen and qualifies or
until his earlier resignation or removal.
SECTION 7. Place of Meetings. Meetings of the Board may be held at any
place that the Board of Directors may from time to time determine or that is
specified in the notice of the meeting.
SECTION 8. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at the time and place determined by the Board of
Directors.
SECTION 9. Special Meetings. Special meetings of the Board of Directors
may be called by two or more Directors of the Corporation or by the Chairman of
the Board or the President.
SECTION 10. Notice of Special Meetings. Notice of each special meeting
of the Board of Directors shall be given by the Secretary as hereinafter
provided. Each notice shall state the time and place of the meeting and shall be
delivered to each Director, either personally or by telephone or other standard
form of telecommunication, at least 24 (twenty-four) hours before the time at
which the meeting is to be held, or by first-class mail, postage prepaid,
addressed to the Director at his residence or usual place of business, and
mailed at least 3 (three) days before the day on which the meeting is to be
held.
SECTION 11. Waiver of Notice of Meetings. Notice of any special meeting
need not be given to any Director who shall, either before or after the meeting,
sign a written waiver of notice that is filed with the records of the meeting or
who shall attend the meeting.
SECTION 12. Quorum and Voting. One-third (but not fewer than 2 (two))
of the members of the entire Board of Directors shall be present in person at
any meeting of the Board in order to constitute a quorum for the transaction of
business at the meeting (unless there is only one director, in which case that
one will constitute a quorum for the transaction of business), and except as
otherwise expressly required by statute,
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permitted by the Investment Company Act of 1940, as amended from time to time.
In addition, any person who was or is a party or is threatened to be made a
party in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is a current or former director or officer of the Corporation,
or is or was serving while a director or officer of the Corporation at the
request of the Corporation as a director, officer, partner, trustee, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust,
enterprise or employee benefit plan, shall be indemnified by the Corporation
against judgments, penalties, fines, excise taxes, settlements and reasonable
expenses (including attorneys' fees) actually incurred by such person in
connection with such action, suit or proceeding to the full extent permissible
under the Maryland General Corporation Law, the Securities Act of 1933 and the
Investment Company Act of 1940, as such statutes are now or hereafter in force,
except that such indemnity shall not protect any such person against any
liability to the Corporation or any stockholder thereof to which such person
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
ARTICLE IX
AMENDMENTS
----------
The Corporation reserves the right from time to time to make any
amendment to its Charter, now or hereafter authorized by law, including any
amendment that alters the contract rights, as expressly set forth in its
Charter, of any outstanding stock.
* * *
IN WITNESS WHEREOF, I have adopted and signed these Articles of
Incorporation and do hereby acknowledge that the adoption and signing are my
act.
By: /s/ Jeffrey S. Hochman
--------------------------
Jeffrey S. Hochman
Incorporator
Dated the 25th day of May, 1994
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<PAGE> 1
Exhibit B
BY-LAWS
OF
GABELLI INTERNATIONAL GROWTH FUND, !NC.
A Maryland Corporation
ARTICLE I
---------
STOCKHOLDERS
------------
SECTION 1. Annual Meetings. No annual meeting of the stockholders of
the Corporation shall be held unless required by applicable law or otherwise
determined by the Board of Directors. An annual meeting may be held at any place
within the United States as may be determined by the Board of Directors and as
shall be designated in the notice of the meeting, and at the time specified by
the Board of Directors. Any business of the Corporation may be transacted at an
annual meeting without being specifically designated in the notice unless
otherwise provided by statute, the Corporation's Articles of Incorporation or
these By-Laws.
SECTION 2. Special Meetings. Special meetings of the stockholders for
any purpose or purposes, unless otherwise prescribed by statute or by the
Corporation's Articles of Incorporation, may be held at any place within the
United States, and may be called at any time by the Board of Directors or by the
President, and shall be called by the Secretary at the request in writing of a
majority of the Board of Directors or at the request in writing of stockholders
entitled to cast at least 10 (ten) percent of the votes entitled to be cast at
the meeting upon payment by such stockholders to the Corporation of the
reasonably estimated cost of preparing and mailing a notice of the meeting
(which estimated cost shall be provided to such stockholders by the Secretary of
the Corporation). Notwithstanding the foregoing, unless requested by
stockholders entitled to cast a majority of the votes entitled to be cast at the
meeting, a special meeting of the stockholders need not be called at the request
of stockholders to consider any matter which is substantially the same as a
matter voted on at any special meeting of the stockholders held during the
preceding 12 (twelve) months. A written request shall state the purpose or
purposes of the proposed meeting.
SECTION 3. Notice of Meetings. Written or printed notice of the purpose
or purposes and of the time and place of every meeting of the stockholders shall
be given by the Secretary
<PAGE> 2
The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations by the
Maryland General Corporation Law now or hereafter in force, and the enumeration
of the foregoing shall not be deemed to exclude any powers, rights or privileges
so granted or conferred.
ARTICLE IV
----------
PRINCIPAL OFFICE AND RESIDENT AGENT
-----------------------------------
The post office address of the principal office of the Corporation in
the State of Maryland is c/o The Corporation Trust Incorporated, 32 South
Street, Baltimore, Maryland 21202. The name and address of the resident agent of
the Corporation in the State of Maryland is The Corporation Trust Incorporated,
a Maryland Corporation, 32 South Street, Baltimore, Maryland 21202.
ARTICLE V
---------
CAPITAL STOCK
-------------
(1) The total number of shares of capital stock that the Corporation
shall have authority to issue is one billion (1,000,000,000) shares, of the par
value of one tenth of one cent ($.001) per share and of the aggregate par value
of one million dollars ($1,000,000), all of which one billion (1,000,000,000)
shares are designated Common Stock.
(2) The Corporation may issue fractional shares. Any fractional share
shall carry proportionately the rights of a whole share including, without
limitation, the right to vote and the right to receive dividends. A fractional
share shall not, however, have the right to receive a certificate evidencing it.
(3) All persons who shall acquire stock in the Corporation shall
acquire the same subject to the provisions of this Charter and the By-Laws of
the Corporation.
(4) No holder of stock of the Corporation by virtue of being such a
holder shall have any right to purchase or subscribe for any shares of the
Corporation's capital stock or any other security that the Corporation may issue
or sell other than a right that the Board of Directors in its discretion may
determine to grant.
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<PAGE> 3
SECTION 6. Organization. At every meeting of the stockholders, the
Chairman of the Board, or in his absence or inability to act, the President, or
in his absence or inability to act, a Vice President, or in the absence or
inability to act of the Chairman of the Board, the President and all the Vice
Presidents, a Chairman chosen by the stockholders, shall act as Chairman of the
meeting. The Secretary, or in his absence or inability to act, a person
appointed by the Chairman of the meeting, shall act as secretary of the meeting
and keep the minutes of the meeting.
SECTION 7. Order of Business. The order of business at all meetings of
the stockholders shall be as determined by the chairman of the meeting.
SECTION 8. Voting. Except as otherwise provided by statute or the
Corporation's Articles of Incorporation, each holder of record of shares of
stock of the Corporation having voting power shall be entitled at each meeting
of the stockholders to one vote for every share of stock standing in his name on
the records of the Corporation as of the record date determined pursuant to
Section 9 of this Article I.
Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by a proxy signed by the
stockholder or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof, unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the stockholder
executing it, except in those cases in which the proxy states that it is
irrevocable and in which an irrevocable proxy is permitted by law.
If a vote shall be taken on any question then unless required by
statute or these By-Laws, or determined by the Chairman of the meeting to be
advisable, any such vote need not be by ballot. On a vote by ballot, each ballot
shall be signed by the stockholder voting, or by his proxy, and shall state the
number of shares voted.
SECTION 9. Fixing of Record Date. The Board of Directors may set a
record date for the purpose of determining stockholders entitled to vote at any
meeting of the stockholders. The record date for a particular meeting shall be
not more than 90 (ninety) nor fewer than 10 (ten) days before the date of the
meeting. All persons who were holders of record of shares as of the record date
of a meeting, and no others, shall be entitled to vote at such meeting and any
adjournment thereof.
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<PAGE> 4
less than any minimum value of shares as set forth in the then current
prospectus or statement of additional information of the Corporation and the
stockholder has been given written notice of the redemption and has failed to
make additional purchase of shares in an amount sufficient to bring the value in
his account to such minimum or more before the redemption is effected by the
Corporation. Payment of the redemption price shall be made in cash by the
Corporation at the time and in the manner as may be determined from time to time
by the Board of Directors of the Corporation unless, in the opinion of the Board
of Directors, which shall be conclusive, conditions exist that make payment
wholly in cash unwise or undesirable; in such event the Corporation may make
payment wholly or partly by securities or other property included in the assets
belonging or allocable to the class of the shares redemption of which is being
sought, the value of which shall be determined as provided herein. The Board of
Directors may established procedures for redemption of shares.
ARTICLE VII
-----------
BOARD OF DIRECTORS
------------------
(1) The number of directors constituting the Board of Directors
initially shall be one (1) and may in the future be such other number as may be
set forth in the By-Laws or determined by the Board of Directors pursuant to the
By-Laws. The number of Directors shall at no time be less than the minimum
number required under the Maryland General Corporation Law. Bruce N. Alpert is
appointed director of the Corporation to hold office until the first meeting of
stockholders or until his successor is elected and qualified.
(2) In furtherance, and not in limitation, of the powers conferred by
the laws of the State of Maryland, the Board of Directors is expressly
authorized:
(i) To make, alter or repeal the By-Laws of the Corporation,
except where such power is reserved by the By-Laws to the stockholders, and
except as otherwise required by the Investment Company Act of 1940, as amended.
(ii) From time to time to determine whether and to what extent
and at what times and places and under what conditions and regulations the books
and accounts of the Corporation, or any of them other than the stock ledger,
shall be open to the inspection of the stockholders. No stockholder shall have
any right to inspect any account or book or document of the
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<PAGE> 5
stockholder by law, by the Corporation's Articles of Incorporation or by these
By-Laws.
SECTION 2. Number of Directors. The number of Directors shall be fixed
from time to time by resolution of the Board of Directors adopted by a majority
of the entire Board of Directors then in office; provided, however, that the
number of Directors shall in no event be fewer than one nor more than fifteen.
Any vacancy created by an increase in Directors may be filled in accordance with
Section 6 of this Article II. No reduction in the number of Directors shall have
the effect of removing any Director from office prior to the expiration of his
term unless the Director is specifically removed pursuant to Section 5 of this
Article II at the time of the decrease. A Director need not be a stockholder of
the Corporation, a citizen of the United States or a resident of the State of
Maryland.
SECTION 3. Election and Term of Directors. The term of office of each
director shall be from the time of his election and qualification until his
successor shall have been elected and shall have qualified, or until his death,
or until he shall have resigned or have been removed as provided in these
By-Laws, or as otherwise provided by statute or the Corporation's Articles of
incorporation.
SECTION 4. Resignation. A Director of the Corporation may resign at any
time by giving written notice of his resignation to the Board of Directors or
the Chairman of the Board or to the President or the Secretary of the
Corporation. Any resignation shall take effect at the time specified in it or,
should the time when it is to become effective not be specified in it,
immediately upon its receipt. Acceptance of a resignation shall not be necessary
to make it effective unless the resignation states otherwise.
SECTION 5. Removal of Directors. Any Director of the Corporation may be
removed by the stockholders with or without cause at any time by a vote of a
majority of the votes entitled to be cast for the election of Directors.
SECTION 6. Vacancies. Subject to the provisions of the Investment
Company Act of 1940, as amended, any vacancies in the Board of Directors,
whether arising from death, resignation, removal or any other cause except an
increase in the number of Directors, shall be filled by a vote of the majority
of the Board of Directors then in office even though that majority is less than
a quorum, provided that no vacancy or vacancies shall be filled by action of the
remaining Directors if, after the filling of the vacancy or vacancies, fewer
than two-thirds of the
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<PAGE> 6
to the direction of the Board of Directors, with respect to the amount of
assets, obligations or liabilities of the Corporation, as to the amount of net
income of the Corporation from dividends and interest for any period or amounts
at any time legally available for the payment of dividends, as to the amount of
any reserves or charges set up and the propriety thereof, as to the time of or
purpose for creating reserves or as to the use, alteration or cancellation of
any reserves or charges (whether or not any obligation or liability for which
the reserves or charges have been created has been paid or discharged or is then
or thereafter required to be paid or discharged), as to the value of any
security or asset owned by the Corporation, the determination of the net asset
value of shares of any class of the Corporation's capital stock, or as to any
other matters relating to the issuance, sale or other acquisition or disposition
of securities or shares of capital stock of the Corporation, and any reasonable
determination made in good faith by the Board of Directors whether any
transaction constitutes a purchase of securities on "margin", a sale of
securities "short," or an underwriting of the sale of, or a participation in any
underwriting or selling group in connection with the public distribution of, any
securities, shall be final and conclusive, and shall be binding upon the
Corporation and all holders of its capital stock, past, present and future, and
shares of the capital stock of the Corporation are issued and sold on the
condition and understanding, evidenced by the purchase of shares of capital
stock or acceptance of share certificates, that any and all such determinations
shall be binding as aforesaid. No provision of this Charter of the Corporation
shall be effective to (i) require a waiver of compliance with any provision of
the Securities Act of 1933, as amended, or the Investment Company Act of 1940,
as amended, or of any valid rule, regulation or order of the Securities and
Exchange Commission under those Acts or (ii) protect or purport to protect any
director or officer of the Corporation against any liability to the Corporation
or its security holders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
ARTICLE VIII
------------
EXCULPATION AND INDEMNIFICATION
-------------------------------
To the fullest extent permitted by the Maryland General Corporation
Law, as amended from time to time, no director or officer of the Corporation
shall be personally liable to the Corporation or its stockholders for money
damages, except to the extent such exemption from liability or limitation
thereof is not
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<PAGE> 7
the Corporation's Articles of Incorporation, these By-Laws, the Investment
Company Act of 1940, as amended, or any other applicable statute, the act of a
majority of the Directors present at any meeting at which a quorum is present
shall be the act of the Board. In the absence of a quorum at any meeting of the
Board, a majority of the Directors present may adjourn the meeting to another
time and place until a quorum shall be present. Notice of the time and place of
any adjourned meeting shall be given to all Directors. At any adjourned meeting
at which a quorum is present, any business may be transacted that might have
been transacted at the meeting as originally called.
SECTION 13. Organization. The Board of Directors may designate a
Chairman of the Board, who shall preside at each meeting of the Board. In the
absence or inability of the Chairman of the Board to act, the President, or, in
his absence or inability to act, another Director chosen by a majority of the
Directors present, shall act as chairman of the meeting and preside at the
meeting. The Secretary, or, in his absence or inability to act, any person
appointed by the chairman, shall act as secretary of the meeting and keep the
minutes thereof.
SECTION 14. Committees. The Board of Directors may designate one or
more committees of the Board of Directors, each consisting of 2 (two) or more
Directors. To the extent provided in the resolution, and permitted by law, the
committee or committees shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the Corporation and
may authorize the seal of the Corporation to be affixed to all papers that may
require it. Any committee or committees shall have the name or names determined
from time to time by resolution adopted by the Board of Directors. Each
committee shall keep regular minutes of its meetings and report the same to the
Board of Directors when required. The members of a committee present at any
meeting, whether or not they constitute a quorum, may appoint a Director to act
in the place of an absent member.
SECTION 15. Written Consent of Directors in Lieu of a Meeting. Subject
to the provisions of the Investment Company Act of 1940, as amended, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee of the Board may be taken without a meeting if all members of the
Board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of the proceedings of the Board
or committee.
SECTION 16. Telephone Conference. Members of the Board of Directors or
any committee of the Board may participate
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<PAGE> 8
in any Board or committee meeting by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time. Participation by such means shall
constitute presence in person at the meeting.
SECTION 17. Compensation. Each Director shall be entitled to receive
compensation, if any, as may from time to time be fixed by the Board of
Directors, including a fee for each meeting of the Board or any committee
thereof, regular or special, he attends. Directors may also be reimbursed by the
Corporation for all reasonable expenses incurred in traveling to and from the
place of a Board or committee meeting.
ARTICLE III
-----------
OFFICERS, AGENTS AND EMPLOYEES
------------------------------
SECTION 1. Number and Qualifications. The officers of the Corporation
shall be a President, a Secretary and a Treasurer, each of whom shall be elected
by the Board of Directors. The Board of Directors may elect or appoint one or
more Vice Presidents and may also appoint any other officers, agents and
employees it deems necessary or proper. Any two or more offices may be held by
the same person, except the offices of President and Vice President, but no
officer shall execute, acknowledge or verify in more than one capacity any
instrument required by law to be executed, acknowledged or verified by more than
one officer. Officers shall be elected by the Board of Directors to hold office
until their successors shall have been duly elected and shall have qualified.
Officers shall serve at the pleasure of the Board of Directors. The Board of
Directors may from time to time elect, or delegate to the President the power to
appoint, such officers (including one or more Assistant Vice President, one or
more Assistant Treasurers and one or more Assistant Secretaries) and such agents
as may be necessary or desirable for the business of the Corporation. Such other
officers and agents shall have such duties and shall hold their offices for such
terms as may be prescribed by the Board or by the appointing authority.
SECTION 2. Resignations. Any officer of the Corporation may resign at
any time by giving written notice of his resignation to the Board of Directors,
the Chairman of the Board, the President or the Secretary. Any resignation shall
take effect at the time specified therein or, if the time when it shall become
effective is not specified therein, immediately upon
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<PAGE> 9
its receipt. Acceptance of a resignation shall not be necessary to make it
effective unless the resignation states otherwise.
SECTION 3. Removal of Officer, Agent or Employee. Any officer, agent or
employee of the Corporation may be removed by the Board of Directors with or
without cause at any time, and the Board may delegate the power of removal as to
agents and employees not elected or appointed by the Board of Directors. Removal
shall be without prejudice to the person's contract rights, if any, but the
appointment of any person as an officer, agent or employee of the Corporation
shall not of itself create contract rights.
SECTION 4. Vacancies. A vacancy in any office whether arising from
death, resignation, removal or any other cause, may be filled in the manner
prescribed in these By-Laws for the regular election or appointment to the
office.
SECTION 5. Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer with respect to other officers under his control.
SECTION 6. Bonds or Other Security. If required by the Board, any
officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in an amount and with any
surety or sureties as the Board may require.
SECTION 7. President. The President shall be the chief executive
officer of the Corporation. In the absence or inability of the Chairman of the
Board (or if there is none) to act, the President shall preside at all meetings
of the stockholders and of the Board of Directors. The President shall have,
subject to the control of the Board of Directors, general charge of the business
and affairs of the Corporation, and may employ and discharge employees and
agents of the Corporation, except those elected or appointed by the Board, and
he may delegate these powers.
SECTION 8. Chief Operating Officer. The Chief Operating Officer shall
be the Chief Operating Officer of the Corporation, and shall have responsibility
for the various operational facilities and personnel and related support
services of the Corporation. In general, he shall perform all duties incident to
the office of Chief Operating Officer and such other duties as from time to time
may be assigned to him by the Board of Directors or the President.
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<PAGE> 10
SECTION 9. Vice President. Each Vice President shall have the powers
and perform the duties that the Board of Directors or the President may from
time to time prescribe.
SECTION 10. Treasurer. Subject to the provisions of any contract that
may be entered into with any custodian pursuant to authority granted by the
Board of Directors, the Treasurer shall have charge of all receipts and
disbursements of the Corporation and shall have or provide for the custody of
the Corporation's funds and securities; he shall have full authority to receive
and give receipts for all money due and payable to the Corporation, and to
endorse checks, drafts and warrants, in its name and on its behalf and to give
full discharge for the same; he shall deposit all funds of the Corporation,
except those that may be required for current use, in such banks or other places
of deposit as the Board of Directors may from time to time designate; and, in
general, he shall perform all duties incident to the office of Treasurer and
such other duties as may from time to time be assigned to him by the Board of
Directors or the President.
SECTION 11. Secretary. The Secretary shall
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board of Directors, the committees
of the Board and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all stock certificates of the Corporation (unless
the seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to be
executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements certificates and other
documents and records required by law to be kept and filed are properly kept and
filed; and
(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board of Directors or the President.
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<PAGE> 11
SECTION 12. Delegation of Duties. In case of the absence of any officer
of the Corporation, or for any other reason that the Board of Directors may deem
sufficient, the Board may confer for the time being the powers or duties, or any
of them, of such officer upon any other officer or upon any Director.
ARTICLE IV
----------
STOCK
-----
SECTION 1. Stock Certificates. Each holder of stock of the Corporation
shall be entitled upon specific written request to such person as may be
designated by the Corporation to have a certificate or certificates, in a form
approved by the Board, representing the number of shares of stock of the
Corporation owned by him; provided, however, that certificates for fractional
shares will not be delivered in any case. The certificates representing shares
of stock shall be signed by or in the name of the Corporation by the President
or a Vice President and by the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer and sealed with the seal of the Corporation.
Any or all of the signatures or the seal on the certificate may be facsimiles.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate shall be
issued, it may be issued by the Corporation with the same effect as if such
officer, transfer agent or registrar were still in the office at the date of
issue.
SECTION 2. Transfers of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent or
transfer clerk, and on surrender of the certificate or certificates, if issued,
for the shares properly endorsed or accompanied by a duly executed stock
transfer power and the payment of all taxes thereon. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
right of a person in whose name any share or shares stand on the record of
stockholders as the owner of the share or shares for all purposes, including,
without limitation, the rights to receive dividends or other distributions and
to vote as the owner, and the Corporation shall not be bound to recognize any
equitable or legal claim to or interest in any such share or shares on the part
of any other person.
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<PAGE> 12
SECTION 3. Regulations. The Board of Directors may make any additional
rules and regulations, not inconsistent with these By-Laws, as it may deem
expedient concerning the issue, transfer and registration or certificates for
shares of stock of the Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer agents or one or more transfer clerks
and one or more registrars and may require all certificates for shares of stock
to bear the signature or signatures of any of them.
SECTION 4. Stolen, Lost, Destroyed or Mutilated Certificates. The
holder of any certificate representing shares of stock of the Corporation shall
immediately notify the Corporation of its theft, loss, destruction or mutilation
and the Corporation may issue a new certificate of stock in the place of any
certificate issued by it that has been alleged to have been stolen, lost or
destroyed or that shall have been mutilated. The Board may, in its discretion,
require the owner (or his legal representative) of a stolen, lost, destroyed or
mutilated certificate to give to the Corporation a bond in a sum, limited or
unlimited, and in a form and with any surety or sureties, as the Board in its
absolute discretion shall determine, to indemnify the Corporation against any
claim that may be made against it on account of the alleged theft, loss or
destruction of any such certificate, or issuance of a new certificate. Anything
herein to the contrary notwithstanding, the Board of Directors, in its absolute
discretion, may refuse to issue any such new certificate, except pursuant to
legal proceedings under the laws of the State of Maryland.
SECTION 5. Fixing of Record Date for Dividends, Distributions, etc. The
Board may fix, in advance, a date not more than 90 (ninety) days preceding the
date fixed for the payment of any dividend or the making of any distribution or
the allotment of rights to subscribe for securities of the Corporation, or for
the delivery of evidences of rights or evidences of interests arising out of any
change, conversion or exchange of common stock or other securities entitled to
receive any such dividend, distribution, allotment, rights or interests, and in
such case only the stockholders of record at the time so fixed shall be entitled
to receive such dividend, distribution, allotment, rights or interests.
SECTION 6. Information to Stockholders and Others. Any stockholder of
the Corporation or his agent may inspect and copy during the Corporation's usual
business hours the Corporations, By-Laws, minutes of the proceedings of its
stockholders, annual statements of its affairs and voting trust agreements on
file at its principal office.
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<PAGE> 13
ARTICLE V
---------
INDEMNIFICATION AND INSURANCE
-----------------------------
SECTION 1. Indemnification of Directors and Officers. Any person who
was or is a party or is threatened to be made a party in any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that such person is a current or former
Director or officer of the Corporation, or is or was serving while a Director or
officer of the Corporation at the request of the Corporation as a Director,
officer, partner, trustee, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust, enterprise or employee benefit plan, shall be
indemnified by the Corporation against judgments, penalties, fines, excise
taxes, settlements and reasonable expenses (including attorneys' fees) actually
incurred by such person in connection with such action, suit or proceeding to
the full extent permissible under the Maryland General Corporation Law, the
Securities Act of 1933 and the Investment Company Act of 1940, as such statutes
are now or hereafter in force, except that such indemnity shall not protect any
such person against any liability to the Corporation or any stockholder thereof
to which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office ("disabling conduct").
SECTION 2. Advances. Any current or former Director or officer of the
Corporation claiming indemnification within the scope of this Article V shall be
entitled to advances from the Corporation for payment of the reasonable expenses
incurred by him in connection with proceedings to which he is a party in the
manner and to the full extent permissible under the Maryland General Corporation
Law, the Securities Act of 1933 and the Investment Company Act of 1940, as such
statutes are now or hereafter in force; provided, however, that the person
seeking indemnification shall provide to the Corporation a written affirmation
of his good faith belief that the standard of conduct necessary for
indemnification by the Corporation has been met and a written undertaking to
repay any such advance unless it is ultimately determined that he is entitled to
indemnification, and provided further that at least one of the following
additional conditions are met: (1) the person seeking indemnification shall
provide a security in form and amount acceptable to the Corporation for his
undertaking; (2) the Corporation is insured against losses arising by reason of
the advance; or (3) a majority of a quorum of Directors of the Corporation who
are
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<PAGE> 14
neither "interested persons" as defined in Section 2(a)(19) of the Investment
Company Act of 1940, as amended, nor parties to the proceeding ("disinterested
non-party directors"), or independent legal counsel, in a written opinion, shall
determine, based on a review of facts readily available to the Corporation at
the time the advance is proposed to be made, that there is reason to believe
that the person seeking indemnification will ultimately be found to be entitled
to indemnification.
SECTION 3. Procedure. At the request of any current or former Director
or officer, or any employee or agent whom the Corporation proposes to indemnify,
the Board of Directors shall determine, or cause to be determined, in a manner
consistent with the Maryland General Corporation Law, the Securities Act of 1933
and the Investment Company Act of 1940, as such statutes are now or hereafter in
force, whether the standards required by this Article V have been met; provided,
however, that indemnification shall be made only following: (1) a final decision
on the merits by a court or other body before whom the proceeding was brought
that the person to be indemnified was not liable by reason of disabling conduct
or (2) in the absence of such a decision, a reasonable determination, based upon
a review of the facts, that the person to be indemnified was not liable by
reason of disabling conduct, by (a) the vote of a majority of a quorum of
disinterested non-party Directors or (b) an independent legal counsel in a
written opinion.
SECTION 4. indemnification of Employees and Agents. Employees and
agents who are not officers or Directors of the Corporation may be indemnified,
and reasonable expenses may be advanced to such employees or agents, in
accordance with the procedures set forth in this Article V to the extent
permissible under the Investment Company Act of 1940, the Securities Act of 1933
and the Maryland General Corporation Law, as such statutes are now or hereafter
in force, and to such further extent, consistent with the foregoing, as may be
provided by action of the Board of Directors or by contract.
SECTION 5. Other Rights. The indemnification provided by this Article V
shall not be deemed exclusive of any other right, in respect of indemnification
or otherwise, to which those seeking such indemnification may be entitled under
any insurance or other agreement, vote of stockholders or disinterested
Directors or otherwise, both as to action by a Director or officer of the
Corporation in his official capacity and as to action by such person in another
capacity while holding such office or position, and shall continue as to a
person who has ceased to be a Director or officer and shall inure to the benefit
of the heirs, executors and administrators of such a person.
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<PAGE> 15
SECTION 6. Insurance. The Corporation shall have the power to purchase
and maintain insurance on behalf of any person who is or was a Director,
officer, employee or agent of the Corporation, or who, while a Director,
officer, employee or agent of the Corporation, is or was serving at the request
of the Corporation as a Director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust, enterprise
or employee benefit plan, against any liability asserted against and incurred by
him in any such capacity, or arising out of his status as such.
SECTION 7. Constituent, Resulting or Surviving Corporations. For the
purposes of this Article V, references to the "Corporation" shall include all
constituent corporations absorbed in a consolidation or merger as well as the
resulting or surviving corporation so that any person who is or was a Director
or officer of a constituent corporation or is or was serving at the request of a
constituent corporation as a Director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise shall stand
in the same position under this Article V with respect to the resulting or
surviving corporation as he would if he had served the resulting or surviving
corporation in the same capacity.
ARTICLE VI
----------
SEAL
----
The seal of the Corporation shall be circular in form and shall bear
the name of the Corporation, the year of its incorporation, the words "Corporate
Seal" and "Maryland" and any emblem or device approved by the Board of
Directors. The seal may be used by causing it or a facsimile to be impressed or
affixed or in any other manner reproduced, or by placing the word "(seal)"
adjacent to the signature of the authorized officer of the Corporation.
ARTICLE VII
-----------
FISCAL YEAR
-----------
The Corporation's fiscal year shall be fixed by the Board of Directors.
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<PAGE> 16
ARTICLE VIII
------------
AMENDMENTS
----------
These By-Laws may be amended or repealed by the affirmative vote of a
majority of the Board of Directors at any regular or special meeting of the
Board of Directors, subject to the requirements of the Investment Company Act of
1940, as amended.
Dated: May __, 1994
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<PAGE> 1
Exhibit 5
INVESTMENT ADVISORY AGREEMENT
-----------------------------
INVESTMENT ADVISORY AGREEMENT, dated June 28, 1995, between Gabelli
International Growth Fund, Inc. (the "Company"), a Maryland corporation, and
Gabelli Funds, Inc. (the "Adviser"), a Delaware corporation.
In consideration of the mutual promises and agreements herein
contained and other good and valuable consideration, the receipt of which is
hereby acknowledged, it is agreed by and between the parties hereto as follows:
1. In General
----------
The Adviser agrees, all as more fully set forth herein, to act as
investment adviser to the Company with respect to the investment of the assets
of the Company and to supervise and arrange the purchase and sale of assets held
in the Company's investment portfolio.
2. Duties and obligations of the Adviser with respect
to investments of assets of the Company
---------------------------------------
(a) Subject to the succeeding provisions of this paragraph and
subject to the direction and control of the Company's Board of Directors, the
Adviser shall (i) act as investment adviser for and supervise and manage the
investment and reinvestment of the Company's assets and in connection therewith
have complete discretion in purchasing and selling securities and other assets
for the Company and in voting, exercising consents and exercising all other
rights appertaining to such securities and other assets on behalf of the
Company; (ii) arrange for the purchase and sale of securities and other assets
held in the investment portfolio of the Company and (iii) oversee the
administration of all aspects of the Company's business and affairs and provide,
or arrange for others whom it believes to be competent to provide, certain
services as specified in subparagraph (b) below. Nothing contained herein shall
be construed to restrict the Company's right to hire its own employees or to
contract for administrative services to be performed by third parties, including
but not limited to, the calculation of the net asset value of the Company's
shares.
(b) The specific services to be provided or arranged for by the
Adviser for the Company are (i) maintaining the Company's books and records,
such as journals, ledger accounts and other records in accordance with
applicable laws and regulations to the extent not maintained by the Company's
<PAGE> 2
custodian, transfer agent and dividend disbursing agent; (ii) transmitting
purchase and redemption orders for the Company's shares to the extent not
transmitted by the Company's distributor or others who purchase and redeem
shares; (iii) initiating all money transfers to the Company's custodian and from
the Company's custodian for the payment of the Company's expenses, investments,
dividends and share redemptions; (iv) reconciling account information and
balances among the Company's custodian, transfer agent, distributor, dividend
disbursing agent and the Adviser; (v) providing the Company, upon request, with
such office space and facilities, utilities and office equipment as are adequate
for the Company's needs; (vi) preparing, but not paying for, all reports by the
Company to its shareholders and all reports and filings required to maintain the
registration and qualification of the Company's shares under federal and state
law including periodic updating of the Company's registration statement and
Prospectus (including its Statement of Additional Information); (vii)
supervising the calculation of the net asset value of the Company's shares; and
(viii) preparing notices and agendas for meetings of the Company's shareholders
and the Company's Board of Directors as well as minutes of such meetings in all
matters required by applicable law to be acted upon by the Board of Directors.
(c) In the performance of its duties under this Agreement, the
Adviser shall at all times use all reasonable efforts to conform to, and act in
accordance with, any requirements imposed by (i) the provisions of the
Investment Company Act of 1940 (the "Act"), and of any rules or regulations in
force thereunder; (ii) any other applicable provision of law; (iii) the
provisions of the Articles of Incorporation and By-Laws of the Company, as such
documents are amended from time to time; (iv) the investment objectives,
policies and restrictions applicable to the Company as set forth in the
Company's Registration Statement on Form N-1A and (v) any policies and
determinations of the Board of Directors of the Company.
(d) The Adviser will seek to provide qualified personnel to
fulfill its duties hereunder and will bear all costs and expenses (including any
overhead and personnel costs) incurred in connection with its duties hereunder
and shall bear the costs of any salaries or directors' fees of any officers or
directors of the Company who are affiliated persons (as defined in the Act) of
the Adviser. If in any fiscal year the Company's aggregate expenses (excluding
interest, taxes, distribution expenses, brokerage commissions and extraordinary
expenses) exceed the most restrictive expense limitation imposed by the
securities law of any state in which the shares of the Company are registered or
qualified for sale, the Adviser will reimburse the Company for the amount of
such excess up to the amount of fees accrued for such fiscal year hereunder. The
amount of such reimbursement shall be calculated monthly and an appropriate
amount shall be held back or released to the Adviser each month so that the
aggregate amount held back at any particular time
<PAGE> 3
shall equal the net amount of the reimbursement on a cumulative year-to-date
basis. As of the end of the year the final amount of the total reimbursement
shall be calculated and the appropriate amount released to the Company or the
Adviser or paid to the Company by the Adviser. Subject to the foregoing, the
Company shall be responsible for the payment of all the Company's other
expenses, including (i) payment of the fees payable to the Adviser under
paragraph 4 hereof; (ii) organizational expenses; (iii) brokerage fees and
commissions; (iv) taxes; (v) interest charges on borrowings; (vi) the cost of
liability insurance or fidelity bond coverage for the Company's officers and
employees, and directors' and officers, errors and omissions insurance coverage;
(vii) legal, auditing and accounting fees and expenses; (viii) charges of the
Company's custodian, transfer agent and dividend disbursing agent; (ix) the
dues, fees and charges of any trade association of which the Company is a
member; (x) the expenses of printing, preparing and mailing proxies, stock
certificates and reports, including the Company's prospectuses and statements of
additional information, and notices to shareholders; (xi) filing fees for the
registration or qualification of the Company and its shares under federal or
state securities laws; (xii) the fees and expenses involved in registering and
maintaining registration of the Company's shares with the Securities and
Exchange Commission; (xiii) the expenses of holding shareholder meetings; (xiv)
the compensation, including fees, of any of the Company's directors, officers or
employees who are not affiliated persons of the Adviser; (xv) all expenses of
computing the Company's net asset value per share, including any equipment or
services obtained solely for the purpose of pricing shares or valuing the
Company's investment portfolio; (xvi) expenses of personnel performing
shareholder servicing functions and all other distribution expenses payable by
the Company; and (xvii) litigation and other extraordinary or non-recurring
expenses and other expenses properly payable by the Company.
(e) The Adviser shall give the Company the benefit of its best
judgment and effort in rendering services hereunder, but neither the Adviser nor
any of its officers, directors, employees, agents or controlling persons shall
be liable for any act or omission or for any loss sustained by the Company in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement; provided, however, that the
foregoing shall not constitute a waiver of any rights which the Company may have
which may not be waived under applicable law.
-3-
<PAGE> 4
(f) Nothing in this Agreement shall prevent the Adviser or any
director, officer, employee or other affiliate thereof from acting as investment
adviser for any other person, firm or corporation, or from engaging in any other
lawful activity, and shall not in any way limit or restrict the Adviser or any
of its directors, officers, employees or agents from buying, selling or trading
any securities for its or their own accounts or for the accounts of others for
whom it or they may be acting.
3. Portfolio Transactions
----------------------
In the course of the Adviser's execution of portfolio transactions for
the Company, it is agreed that the Adviser shall employ securities brokers and
dealers which, in its judgment, will be able to satisfy the policy of the
Company to seek the best execution of its portfolio transactions at reasonable
expenses. For purposes of this Agreement, "best execution" shall mean prompt,
efficient and reliable execution at the most favorable price obtainable. Under
such conditions as may be specified by the Company's Board of Directors in the
interest of its shareholders and to ensure compliance with applicable law and
regulations, the Adviser may (a) place orders for the purchase or sale of the
Company's portfolio securities with its affiliate, Gabelli & Company, Inc.; (b)
pay commissions to brokers other than its affiliate which are higher than might
be charged by another qualified broker to obtain brokerage and/or research
services considered by the Adviser to be useful or desirable in the performance
of its duties hereunder and for the investment management of other advisory
accounts over which it or its affiliates exercise investment discretion; and (c)
consider sales by brokers (other than its affiliate distributor) of shares of
the Company and any other mutual fund for which it or its affiliates act as
investment adviser, as a factor in its selection of brokers and dealers for the
Company's portfolio transactions.
4. Compensation of the Adviser
---------------------------
(a) Subject to paragraph 2(b), the Company agrees to pay to the
Adviser out of the Company's assets and the Adviser agrees to accept as full
compensation for all services rendered by or through the Adviser (other than any
amounts payable to the Adviser pursuant to paragraph 4(b)) a fee computed daily
and payable monthly in an amount equal on an annualized basis to 1.0% of the
Company's daily average net asset value. For any period less than a month during
which this Agreement is in effect, the fee shall be prorated according to the
proportion which such
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<PAGE> 5
period bears to a full month of 28, 29, 30 or 31 days, as the case may be.
(b) The Company will pay the Adviser separately for any costs and
expenses incurred by the Adviser in connection with distribution of the
Company's shares in accordance with the terms (including proration or nonpayment
as a result of allocations of payments) of a Plan of Distribution (the "Plan")
adopted for the Company pursuant to Rule 12b-1 under the Act as such Plan may be
in effect from time to time; provided, however, that no payments shall be due or
paid to the Adviser hereunder unless and until this Agreement shall have been
approved by Director Approval and Disinterested Director Approval (as such terms
are defined in such Plan). The Company reserves the right to modify or terminate
such Plan at any time as specified in the Plan and Rule 12b-1, and this
subparagraph shall thereupon be modified or terminated to the same extent
without further action of the parties. The persons authorized to direct the
payment of the funds pursuant to this Agreement and the Plan shall provide to
the Company's Board of Directors, and the Directors shall review, at least
quarterly a written report of the amount so paid and the purposes for which such
expenditures were made.
(c) For purposes of this Agreement, the net asset value of the
Company shall be calculated pursuant to the procedures adopted by resolutions of
the Directors of the Company for calculating the net asset value of the
Company's shares.
5. Indemnity
---------
(a) The Company hereby agrees to indemnify the Adviser and each
of the Adviser's directors, officers, employees, and agents (including any
individual who serves at the Adviser's request as director, officer, partner,
trustee or the like of another corporation) and controlling persons (each such
person being an "indemnitee") against any liabilities and expenses, including
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees (all as provided in accordance with applicable
corporate law) reasonably incurred by such indemnitee in connection with the
defense or disposition of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or investigative body in which he
may be or may have been involved as a party or otherwise or with which he may be
or may have been threatened, while acting in any capacity set forth above in
this paragraph or thereafter by reason of his having acted in any such capacity,
except with respect to any matter as to which he shall have been adjudicated not
to have acted in good faith in the reasonable belief that his action was in the
best interests of
-5-
<PAGE> 6
the Company and furthermore, in the case of any criminal proceeding, so long as
he had no reasonable cause to believe that the conduct was unlawful, provided,
however, that (1) no indemnitee shall be indemnified hereunder against any
liability to the Company or its shareholders or any expense of such indemnitee
arising by reason of (i) willful misfeasance, (ii) bad faith, (iii) gross
negligence or (iv) reckless disregard of the duties involved in the conduct of
his position (the conduct referred to in such clauses (i) through (iv) being
sometimes referred to herein as "disabling conduct"), (2) as to any matter
disposed of by settlement or a compromise payment by such indemnitee, pursuant
to a consent decree or otherwise, no indemnification either for said payment or
for any other expenses shall be provided unless there has been a determination
that such settlement or compromise is in the best interests of the Company and
that such indemnitee appears to have acted in good faith in the reasonable
belief that his action was in the best interests of the Company and did not
involve disabling conduct by such indemnitee and (3) with respect to any action,
suit or other proceeding voluntarily prosecuted by any indemnitee as plaintiff,
indemnification shall be mandatory only if the prosecution of such action, suit
or other proceeding by such indemnitee was authorized by a majority of the full
Board of the Company. Notwithstanding the foregoing, the Company shall not be
obligated to provide any such indemnification to the extent such provision would
waive any right which the Company cannot lawfully waive.
(b) The Company shall make advance payments in connection with
the expenses of defending any action with respect to which indemnification might
be sought hereunder if the Company receives a written affirmation of the
indemnitee's good faith belief that the standard of conduct necessary for
indemnification has been met and a written undertaking to reimburse the Company
unless it is subsequently determined that he is entitled to such indemnification
and if the directors of the Company determine that the facts then known to them
would not preclude indemnification. In addition, at least one of the following
conditions must be met: (A) the indemnitee shall provide a security for his
undertaking, (B) the Company shall be insured against losses arising by reason
of any lawful advances, or (C) a majority of a quorum of directors of the
Company who are neither "interested persons" of the Company (as defined in
Section 2(a)(19) of the Act) nor parties to the proceeding ("Disinterested
Non-Party Directors") or an independent legal counsel in a written opinion,
shall determine, based on a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to believe that the indemnitee
ultimately will be found entitled to indemnification.
-6-
<PAGE> 7
(c) All determinations with respect to indemnification hereunder
shall be made (1) by a final decision on the merits by a court or other body
before whom the proceeding was brought that such indemnitee is not liable by
reason of disabling conduct, or (2) in the absence of such a decision, by (i) a
majority vote of a quorum of the Disinterested Non-Party Directors of the
Company, or (ii) if such a quorum is not obtainable or even, if obtainable, if a
majority vote of such quorum so directs, independent legal counsel in a written
opinion.
The rights accruing to any indemnitee under these provisions
shall not exclude any other right to which he may be lawfully entitled.
6. Duration and Termination
------------------------
This Agreement shall become effective on the date hereof and shall
continue in effect for a period of two years and thereafter from year to year,
but only so long as such continuation is specifically approved at least annually
in accordance with the requirements of the Act.
This Agreement may be terminated by the Adviser at any time without
penalty upon giving the Company sixty days written notice (which notice may be
waived by the Company) and may be terminated by the Company at any time without
penalty upon giving the Adviser sixty days notice (which notice may be waived by
the Adviser), provided that such termination by the Company shall be directed or
approved by the vote of a majority of the Directors of the Company in office at
the time or by the vote of the holders of a "majority of the voting securities"
(as defined in the Act) of the Company at the time outstanding and entitled to
vote or, with respect to paragraph 4(b), by a majority of the Directors of the
Company who are not "interested persons" of the Company and who have no direct
or indirect financial interest in the operation of the Plan or any agreements
related to the Plan. This Agreement shall terminate automatically in the event
of its assignment (as "assignment" is defined in the Act and the rules
thereunder.)
It is understood and hereby agreed that the word "Gabelli" is the
property of the Adviser for copyright and other purposes. The Company further
agrees that the word "Gabelli" in its name is derived from the name of Mario J.
Gabelli and such name may freely be used by the Adviser for other investment
companies, entities or products. The Company further agrees that, in the event
that the Adviser shall cease to act as investment adviser to the Company with
respect to the investment
-7-
<PAGE> 8
of assets of the Company, the Company shall promptly take all necessary and
appropriate action to change its name to a name which does not include the word
"Gabelli"; provided, however, that the Company may continue to use the word
"Gabelli" if the Adviser consents in writing to such use.
7. Notices
-------
Any notice under this Agreement shall be in writing to the other party
at such address as the other party may designate from time to time for the
receipt of such notice and shall be deemed to be received on the earlier of the
date actually received or on the fourth day after the postmark if such notice is
mailed first class postage prepaid.
8. Governing Law
-------------
This Agreement shall be construed in accordance with the laws of the
State of New York for contracts to be performed entirely therein and in
accordance with the applicable provisions of the Act.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers, all as of the day
and the year first above written.
GABELLI INTERNATIONAL GROWTH FUND, INC.
By /s/ BRUCE N. ALPERT
-----------------------------
Name: Bruce N. Alpert
Title: Vice President
GABELLI FUNDS, INC.
By /s/ STEVEN G. BONDI
-----------------------------
Name: Steven G. Bondi
Title: Vice President-Finance
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<PAGE> 1
Exhibit 6
DISTRIBUTION AGREEMENT
----------------------
DISTRIBUTION AGREEMENT, dated June 28, 1995, between Gabelli
International Growth Fund, Inc., a Maryland corporation (the "Company"), and
Gabelli & Company, Inc., a New York corporation (the "Distributor"). The Company
is registered as an investment company under the Investment Company Act of 1940
(the 1940 Act"), and an indefinite number of shares of the Company, par value
$.001 per share (the "Shares"), have been registered under the Securities Act of
1933 (the 1933 Act") to be offered for sale to the public in a continuous public
offering in accordance with terms and conditions set forth in the Prospectus and
Statement of Additional Information (the "Prospectus") of the Company included
in the Company's Registration Statement on Form N-1A as such documents may be
amended from time to time.
In this connection, the Company desires that the Distributor act as its
exclusive sales agent and distributor for the sale and distribution of Shares.
The Distributor has advised the Company that it is willing to act in such
capacities, and it is accordingly agreed between them as follows:
1. The Company hereby appoints the Distributor as exclusive sales agent
and distributor for the sale and distribution of Shares pursuant to the
aforesaid continuous public offering of Shares, and the Company further agrees
from and after the commencement of such continuous public offering that it will
not, without the Distributor's consent, sell or agree to sell any Shares
otherwise than through the Distributor, except the Company may issue Shares in
connection with a merger, consolidation or acquisition of assets on such basis
as may be authorized or permitted under the 1940 Act.
2. The Distributor hereby accepts such appointment and agrees to use
its best efforts to sell such Shares, provided, however, that when requested by
the Company at any time for any reason the Distributor will suspend such
efforts. The Company may also withdraw the offering of Shares at any time when
required by the provisions of any statute, order, rule or regulation of any
governmental body having jurisdiction. It is understood that the Distributor
does not undertake to sell all or any specific portion of the Shares.
3. The Distributor represents that it is a member in good standing of
the National Association of Securities Dealers, Inc. and agrees that it will use
all reasonable efforts to maintain such status and to abide by the Rules of Fair
Practice, the Constitution and the Bylaws of the National Association of
Securities Dealers, Inc., and all other rules and regulations that are now or
may become applicable to its performance hereunder. The Distributor will
undertake and discharge its obligations hereunder as an independent contractor
and it shall have no authority or power to obligate or bind the Company by its
<PAGE> 2
actions, conduct or contracts except that it is authorized to accept orders for
the purchase or repurchase of Shares as the Company's agent and subject to its
approval. The Company reserves the right to reject any order in whole or in
part. The Distributor may appoint sub-agents or distribute through dealers or
otherwise as it may determine from time to time pursuant to agreements approved
by the Company, but this Agreement shall not be construed as authorizing any
dealer or other person to accept orders for sale or repurchase of Shares on
behalf of the Company or otherwise act as the Company's agent for any purpose.
The Distributor shall not utilize any materials in connection with the sale or
offering of Shares except the then current Prospectus and such other materials
as the Company shall provide or approve in writing.
4. Shares may be sold by the Distributor only at prices and terms
described in the then current Prospectus relating to the Shares and may be sold
either through persons with whom it has selling agreements in a form approved by
the Company's Board of Directors or directly to prospective purchasers. To
facilitate sales, the Company will furnish the Distributor with the net asset
value of its Shares promptly after each calculation thereof.
5. The Company has delivered to the Distributor a copy of its current
Prospectus. It agrees that it will use its best efforts to continue the
effectiveness of its Registration Statement filed under the 1933 Act and the
1940 Act. The Company further agrees to prepare and file any amendments to its
Registration Statement as may be necessary and any supplemental data in order to
comply with such Acts. The Company will furnish the Distributor at the
Distributor's expense with a reasonable number of copies of the Prospectus and
any amended Prospectus for use in connection with the sale of Shares.
6. At the Distributor's request, the Company will take such steps at
its own expense as may be necessary and feasible to qualify Shares for sale in
states, territories or dependencies of the United States of America and in the
District of Columbia in accordance with the laws thereof, and to renew or extend
any such qualification; provided, however, that the Company shall not be
required to qualify Shares or to maintain the qualification of Shares in any
state, territory, dependency or district where it shall deem such qualification
disadvantageous to the Company.
-2-
<PAGE> 3
7. The Distributor agrees that:
(a) It will furnish to the Company any pertinent information
required to be inserted with respect to the Distributor as exclusive sales agent
and distributor within the purview of Federal and state securities laws in any
reports or registrations required to be filed with any government authority;
(b) It will not make any representations inconsistent with the
information contained in the Registration Statement or Prospectus filed under
the Securities Act of 1933, as in effect from time to time;
(c) It will not use or distribute or authorize the use or
distribution of any statements other than those contained in the Company's then
current Prospectus or in such supplemental literature or advertising as may be
authorized in writing by the Company; and
(d) Subject to paragraph 9 below, the Distributor will bear
the costs and expenses of printing and distributing any copies of any
prospectuses and annual and interim reports of the Company (after such items
have been prepared and set in type) which are used in connection with the
offering of Shares, and the costs and expenses of preparing, printing and
distributing any other literature used by the Distributor or furnished by the
Distributor for use in connection with the offering of the Shares and the costs
and expenses incurred by the Distributor in advertising, promoting and selling
Shares of the Company to the public.
8. The Company will pay its legal and auditing expenses and the cost of
composition of any prospectuses and annual or interim reports of the Company.
9. The Company will pay the Distributor for costs and expenses incurred
by the Distributor in connection with distribution of Shares by the Distributor
in accordance with the terms of a Plan of Distribution (the "Plan") adopted by
the Company pursuant to Rule 12b-1 under the 1940 Act as such Plan may be in
effect from time to time; provided, however, that no payments shall be due or
paid to the Distributor hereunder unless and until this Agreement shall have
been approved by Director Approval and Disinterested Director Approval (as such
terms are defined in such Plan). The Company reserves the right to modify or
terminate such Plan at any time as specified in the Plan and Rule 12b-1, and
this Section 9 shall thereupon be modified or
-3-
<PAGE> 4
terminated to the same extent without further action of the parties. The persons
authorized to direct the payment of funds pursuant to this Agreement and the
Plan shall provide to the Company's Board of Directors, and the Directors shall
review, at least quarterly, a written report of the amounts so paid and the
purposes for which such expenditures were made.
10. The Company agrees to indemnify, defend and hold the Distributor,
its officers, directors, employees and agents and any person who controls the
Distributor within the meaning of Section 15 of the 1933 Act (each, an
"indemnitee"), free and harmless from any and all liabilities and expenses,
including costs of investigation or defense (including reasonable counsel fees)
incurred by such indemnitee in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, in which such
indemnitee may be or may have been involved as a party or otherwise or with
which he may be or may have been threatened, while the Distributor was active in
such capacity or by reason of the Distributor having acted in any such capacity
or arising out of or based upon any untrue statement of a material fact
contained in the then-current Prospectus relating to the Shares or arising out
of or based upon any alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such claims, demands, liabilities or expenses arise out of or
are based upon any such untrue statement or omission or alleged untrue statement
or omission made in reliance upon and in conformity with information furnished
in writing by the Distributor to the Company expressly for use in any such
Prospectus; provided, however, that (1) no indemnitee shall be indemnified
hereunder against any liability to the Company or its shareholders or any
expense of such indemnitee with respect to any matter as to which such
indemnitee shall have been adjudicated not to have acted in good faith in the
reasonable belief that its action was in the best interest of the Company or
arising by reason of such indemnitee's willful misfeasance, bad faith, or gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations under this Agreement ("disabling conduct"), or (2)
as to any matter disposed of by settlement or a compromise payment by such
indemnitee, no indemnification shall be provided unless there has been a
determination that such settlement or compromise is in the best interests of the
Company and that such indemnitee appears to have acted in good faith in the
reasonable belief that its action was in the best interest of the Company and
did not involve disabling conduct by such indemnitee. Notwithstanding the
foregoing, the Company shall not be obligated to provide any such
indemnification to the extent such provision would waive any right which the
Company cannot lawfully waive.
-4-
<PAGE> 5
The Distributor agrees to indemnify, defend and hold the Company, its
Directors, officers, employees and agents and any person who controls the
Company within the meaning of Section 15 of the 1933 Act (each, an
"indemnitee"), free and harmless from and against any and all liabilities and
expenses, including costs of investigation or defense (including reasonable
counsel fees) incurred by such indemnitee, but only to the extent that such
liability or expense shall arise out of or be based upon any untrue or alleged
untrue statement of a material fact contained in information furnished in
writing by the Distributor of the Company expressly for use in a Prospectus or
any alleged omission to state a material fact in connection with such
information required to be stated therein or necessary to make such information
not misleading or arising by reason of disabling conduct by such indemnitee or
any person selling Shares pursuant to an agreement with the Distributor.
The Company shall make advance payments in connection with the expenses
of defending any action with respect to which indemnification might be sought
hereunder if the Company receives a written affirmation of the indemnitee's good
faith belief that the standard of conduct necessary for indemnification has been
met and a written undertaking to reimburse the Company unless it is subsequently
determined that he is entitled to such indemnification and if the directors of
the Company determine that the facts then known to them would not preclude
indemnification. In addition, at least one of the following conditions must be
met: (A) the indemnitee shall provide a security for his undertaking, (B) the
Company shall be insured against losses arising by reason of any lawful
advances, or (C) a majority of a quorum of directors of the Company who are
neither "interested persons" of the Company (as defined in Section 2(a)(19) of
the Act) nor parties to the proceeding ("Disinterested Non-Party Directors") or
an independent legal counsel in a written opinion, shall determine, based on a
review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the indemnitee ultimately will be found
entitled to indemnification.
All determinations with respect to indemnification hereunder shall be
made (1) by a final decision on the merits by a court or other body before whom
the proceeding was brought that such indemnitee is not liable by reason of
disabling conduct, or (2) in the absence of such a decision, by (i) a majority
vote of a quorum of the Disinterested Non-Party Directors of the Company, or
(ii) if such a quorum is not obtainable or even, if obtainable, if a majority
vote of such quorum so directs, independent legal counsel in a written opinion.
-5-
<PAGE> 6
11. This Agreement shall become effective on the date first set forth
above and shall remain in effect for up to two years from such date (one year in
the case of Section 9) and thereafter from year to year provided such
continuance is specifically approved at least annually prior to each anniversary
of such date by (a) Director Approval or by vote at a meeting of shareholders of
the Company of the lesser of (i) 67 per cent of the Shares present or
represented by proxy and (ii) 50 per cent of the outstanding Shares and (b) by
Disinterested Director Approval.
12. This Agreement may be terminated (a) by the Distributor at any time
without penalty by giving sixty (60) days' written notice to the Company which
notice may be waived by the Company; or (b) by the Company at any time without
penalty upon sixty (60) days' written notice to the Distributor (which notice
may be waived by the Distributor); provided, however, that any such termination
by the Company shall be directed or approved in the same manner as required for
continuance of this Agreement by Section 11(a) (or, in the case of termination
of Section 9, by Section 11(b)).
13. This Agreement may not be amended or changed except in writing
signed by each of the parties hereto and approved in the same manner as provided
for continuance of this Agreement in Section 11(a) (or, in the case of amendment
of Section 9, by Section 11(b)). Any such amendment or change shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors, but this Agreement shall not be assigned by either party and shall
automatically terminate upon assignment (as such term is defined in the 1940 Act
and the rules thereunder).
14. This Agreement shall be construed in accordance with the laws of
the State of New York applicable to agreements to be performed entirely therein
and in accordance with applicable provisions of the 1940 Act.
15. If any provision of this Agreement shall be held or made invalid or
unenforceable by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected or impaired thereby.
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first written above.
GABELLI INTERNATIONAL GROWTH FUND,
INC.
By: /s/ Bruce N. Alpert
-----------------------------
Name: Bruce N. Alpert
Title: Vice President
GABELLI & COMPANY, INC.
By: /s/ Steven G. Bondi
-----------------------------
Name: Steven G. Bondi
Title: Vice President-Finance
-7-
<PAGE> 1
Exhibit 8
CUSTODIAN CONTRACT
Between
GABELLI INTERNATIONAL GROWTH FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE> 2
TABLE OF CONTENTS
-----------------
Page
----
1. Employment of Custodian and Property to be Held By It ..................1
2. Duties of the Custodian with Respect to Property of the Fund
Held by the Custodian in the United States .............................2
2.1 Holding Securities ..............................................2
2.2 Delivery of Securities ..........................................3
2.3 Registration of Securities ......................................7
2.4 Bank Accounts ...................................................8
2.5 Availability of Federal Funds ...................................9
2.6 Collection of Income ............................................9
2.7 Payment of Fund Monies .........................................10
2.8 Liability for Payment in Advance of Receipt of Securities
Purchased ......................................................13
2.9 Appointment of Agents ..........................................13
2.10 Deposit of Securities in Securities System .....................14
2.10A Fund Assets Held in the Custodian's Direct Paper System ........16
2.11 Segregated Account .............................................18
2.12 Ownership Certificates for Tax Purposes ........................19
2.13 Proxies ........................................................19
2.14 Communications Relating to Fund Portfolio Securities ...........20
2.15 Reports to Fund by Independent Public Accountants ..............21
3. Duties of the Custodian with Respect to Property of the Fund
Held Outside of the United States .....................................21
3.1 Appointment of Foreign Sub-Custodians ..........................21
3.2 Assets to be Held ..............................................22
3.3 Foreign Securities Depositories ................................22
3.4 Agreements with Foreign Banking Institutions ...................22
3.5 Access of Independent Accountants of the Fund ..................23
3.6 Reports by Custodian ...........................................24
3.7 Transactions in Foreign Custody Account ........................24
3.8 Liability of Foreign Sub-Custodians ............................25
3.9 Liability of Custodian .........................................25
3.10 Reimbursement for Advances .....................................26
3.11 Monitoring Responsibilities ....................................27
3.12 Branches of U.S. Banks .........................................28
3.13 Tax Law ........................................................28
4. Payments for Repurchases or Redemptions and Sales of Shares of
the Fund ..............................................................29
5. Proper Instructions ...................................................30
6. Actions Permitted Without Express Authority ...........................31
<PAGE> 3
7. Evidence of Authority .................................................31
8. Duties of Custodian with Respect to the Books of Account and
Calculations of Net Asset Value and Net Income ........................32
9. Records ...............................................................32
10. Opinion of Fund's Independent Accountant ..............................33
11. Compensation of Custodian .............................................33
12. Responsibility of Custodian ...........................................33
13. Effective Period, Termination and Amendment ...........................35
14. Successor Custodian ...................................................37
15. Interpretive and Additional Provisions ................................38
16. Massachusetts Law to Apply ............................................39
17. Prior Contracts .......................................................39
18. Shareholder Communications Election ...................................39
<PAGE> 4
CUSTODIAN CONTRACT
------------------
This Contract between Gabelli International Growth Fund Inc., a
corporation organized and existing under the laws of Maryland, having its
principal place of business at One Corporate Center, Rye, New York 10580-1434,
hereinafter called the "Fund", and State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian",
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
The Fund hereby employs the Custodian as the custodian of its assets,
including securities it desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the United
States ("foreign securities") pursuant to the provisions of the Articles of
Incorporation. The Fund agrees to deliver to the Custodian all securities and
cash owned by it, and all payments of income, payments of principal or capital
distributions received by it with respect to all securities owned by the Fund
from time to time, and the cash consideration received by it for such new or
treasury shares of capital stock, $0 par value, ("Shares") of the Fund as may be
issued or sold from time to time. The Custodian shall not be responsible for any
property of the Fund held or received by the Fund and not delivered to the
Custodian.
<PAGE> 5
Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall from time to time employ one or more sub-custodians
located in the United States, but only in accordance with an applicable vote by
the Board of Directors of the Fund, and provided that the Custodian shall have
no more or less responsibility or liability to the Fund on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as sub-custodians
for the Fund's securities and other assets the foreign banking institutions and
foreign securities depositories designated in Schedule "A" hereto but only in
accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held By
--------------------------------------------------------------------
the Custodian in the United States
- ----------------------------------
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of the Fund all non-cash property, to be held by it in
the United States, including all domestic securities owned by the Fund,
other than (a) securities which are maintained pursuant to Section 2.10
in a clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the Treasury,
collectively referred to herein as "Securities System" and (b)
commercial paper of an issuer for which State Street Bank and Trust
Company acts as issuing and paying agent ("Direct Paper") which is
deposited and/or maintained in the Direct Paper System of the Custodian
pursuant to Section 2.10A.
2
<PAGE> 6
2.2 Delivery of Securities. The Custodian shall release and deliver
domestic securities owned by the Fund held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's Direct
Paper book-entry system account ("Direct Paper System Account") only
upon receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, and only in the
following cases:
1) Upon sale of such securities for the account of the
Fund and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities
entered into by the Fund;
3) In the case of a sale effected through a Securities
System, in accordance with the provisions of Section
2.10 hereof;
4) To the depository agent in connection with tender or
other similar offers for portfolio securities of the
Fund;
5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or otherwise
become payable; provided that, in any such case, the
cash or other consideration is to be delivered to the
Custodian;
6) To the issuer thereof, or its agent, for transfer
into the name of the Fund or into the name of any
nominee or nominees of the
3
<PAGE> 7
Custodian or into the name or nominee name of any
agent appointed pursuant to Section 2.9 or into the
name or nominee name of any sub-custodian appointed
pursuant to Article 1; or for exchange for a
different number of bonds, certificates or other
evidence representing the same aggregate face amount
or number of units; provided that, in any such case,
the new securities are to be delivered to the
Custodian;
7) Upon the sale of such securities for the account of
the Fund, to the broker or its clearing agent,
against a receipt, for examination in accordance with
"street delivery" custom; provided that in any such
case, the Custodian shall have no responsibility or
liability for any loss arising from the delivery of
such securities prior to receiving payment for such
securities except as may arise from the Custodian's
own negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization,
reorganization or readjustment of the securities of
the issuer of such securities, or pursuant to
provisions for conversion contained in such
securities, or
4
<PAGE> 8
pursuant to any deposit agreement; provided that, in
any such case, the new securities and cash, if any,
are to be delivered to the Custodian;
9) In the case of warrants, rights or similar
securities, the surrender thereof in the exercise of
such warrants, rights or similar securities or the
surrender of interim receipts or temporary securities
for definitive securities; provided that, in any such
case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of
securities made by the Fund, but only against receipt
of adequate collateral as agreed upon from time to
time by the Custodian and the Fund, which may be in
the form of cash or obligations issued by the United
States government, its agencies or instrumentalities,
except that in connection with any loans for which
collateral is to be credited to the Custodian's
account in the book-entry system authorized by the
U.S. Department of the Treasury, the Custodian will
not be held liable or responsible for the delivery of
securities owned by the Fund prior to the receipt of
such collateral;
5
<PAGE> 9
11) For delivery as security in connection with any
borrowings by the Fund requiring a pledge of assets
by the Fund, but only against receipt of amounts
borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian and a
broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a
member of The National Association of Securities
Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and of
any registered national securities exchange, or of
any similar organization or organizations, regarding
escrow or other arrangements in connection with
transactions by the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund, the Custodian, and a
Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with
the rules of the Commodity Futures Trading Commission
and/or any Contract Market, or any similar
organization or organizations, regarding account
deposits in connection with transactions by the Fund;
14) Upon receipt of instructions from the transfer
6
<PAGE> 10
agent ("Transfer Agent") for the Fund, for delivery
to such Transfer Agent or to the holders of shares in
connection with distributions in kind, as may be
described from time to time in the Fund's currently
effective prospectus and statement of additional
information ("prospectus"), in satisfaction of
requests by holders of Shares for repurchase or
redemption; and
15) For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board of
Directors or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or
an Assistant Secretary, specifying the securities to
be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose
to be a proper corporate purpose, and naming the
person or persons to whom delivery of such securities
shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Fund or in the name of any nominee of the Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to the Fund,
unless the Fund has authorized in writing the appointment
7
<PAGE> 11
of a nominee to be used in common with other registered investment
companies having the same investment adviser as the Fund, or in the
name or nominee name of any agent appointed pursuant to Section 2.9 or
in the name or nominee name of any sub-custodian appointed pursuant to
Article 1. All securities accepted by the Custodian on behalf of the
Fund under the terms of this Contract shall be in "street name" or
other good delivery form. If, however, the Fund directs the Custodian
to maintain securities in "street name", the Custodian shall utilize
its best efforts only to timely collect income due the Fund on such
securities and to notify the Fund on a best efforts basis only of
relevant corporate actions including, without limitation, pendency of
calls, maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of the Fund,
subject only to draft or order by the Custodian acting pursuant to the
terms of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for
the account of the Fund, other than cash maintained by the Fund in a
bank account established and used in accordance with Rule 17f-3 under
the Investment Company Act of 1940. Funds held by the Custodian for the
Fund may be deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust companies
as it may in its discretion deem
8
<PAGE> 12
necessary or desirable; provided, however, that every such bank or
trust company shall be qualified to act as a custodian under the
Investment Company Act of 1940 and that each such bank or trust company
and the funds to be deposited with each such bank or trust company
shall be approved by vote of a majority of the Board of Directors of
the Fund. Such funds shall be deposited by the Custodian in its
capacity as Custodian and shall be withdrawable by the Custodian only
in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund
and the Custodian, the Custodian shall, upon the receipt of Proper
Instructions, make federal funds available to the Fund as of specified
times agreed upon from time to time by the Fund and the Custodian in
the amount of checks received in payment for Shares of the Fund which
are deposited into the Fund's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to United States registered securities held hereunder to
which the Fund shall be entitled either by law or pursuant to custom in
the securities business, and shall collect on a timely basis all income
and other payments with respect to United States bearer securities if,
on the date of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such income, as
collected, to the Fund's custodian account.
9
<PAGE> 13
Without limiting the generality of the foregoing, the Custodian shall
detach and present for payment all coupons and other income items
requiring presentation as and when they become due and shall collect
interest when due on securities held hereunder. Income due the Fund on
United States securities loaned pursuant to the provisions of Section
2.2 (10) shall be the responsibility of the Fund. The Custodian will
have no duty or responsibility in connection therewith, other than to
provide the Fund with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to the Custodian
of the income to which the Fund is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out monies of the Fund in the following cases only:
1) Upon the purchase of domestic securities, options,
futures contracts or options on futures contracts for
the account of the Fund but only (a) against the
delivery of such securities, or evidence of title to
such options, futures contracts or options on futures
contracts, to the Custodian (or any bank, banking
firm or trust company doing business in the United
States or abroad which is qualified under the
Investment Company Act of 1940, as amended, to act as
a custodian and
10
<PAGE> 14
has been designated by the Custodian as its agent for
this purpose) registered in the name of the Fund or
in the name of a nominee of the Custodian referred to
in Section 2.3 hereof or in proper form for transfer;
(b) in the case of a purchase effected through a
Securities System, in accordance with the conditions
set forth in Section 2.10 hereof; (c) in the case of
a purchase involving the Direct Paper System, in
accordance with the conditions set forth in Section
2.10A; (d) in the case of repurchase agreements
entered into between the Fund and the Custodian, or
another bank, or a broker-dealer which is a member of
NASD, (i) against delivery of the securities either
in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with
such securities or (ii) against delivery of the
receipt evidencing purchase by the Fund of securities
owned by the Custodian along with written evidence of
the agreement by the Custodian to repurchase such
securities from the Fund or (e) for transfer to a
time deposit account of the Fund in any bank, whether
domestic or foreign; such transfer may be effected
prior to receipt of a confirmation
11
<PAGE> 15
from a broker and/or the applicable bank pursuant to
Proper Instructions from the Fund as defined in
Article 5;
2) In connection with conversion, exchange or surrender
of securities owned by the Fund as set forth in
Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by
the Fund as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred
by the Fund, including but not limited to the
following payments for the account of the Fund:
interest, taxes, management, accounting, transfer
agent and legal fees, and operating expenses of the
Fund whether or not such expenses are to be in whole
or part capitalized or treated as deferred expenses;
5) For the payment of any dividends declared pursuant to
the governing documents of the Fund;
6) For payment of the amount of dividends received in
respect of securities sold short;
7) For any other proper purpose, but only upon receipt
of, in addition to Proper Instructions, a certified
copy of a resolution of the Board of Directors or of
the Executive Committee of the Fund signed by an
officer of the Fund and
12
<PAGE> 16
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth
the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and
naming the person or persons to whom such payment is
to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of the Fund is made by the Custodian in advance of receipt of
the securities purchased in the absence of specific written
instructions from the Fund to so pay in advance, the Custodian shall be
absolutely liable to the Fund for such securities to the same extent as
if the securities had been received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act of
1940, as amended, to act as a custodian, as its agent to carry out such
of the provisions of this Article 2 as the Custodian may from time to
time direct; provided, however, that the appointment of any agent shall
not relieve the Custodian of its responsibilities or liabilities
hereunder.
13
<PAGE> 17
2.10 Deposit of Securities in Securities Systems. The Custodian may deposit
and/or maintain domestic securities owned by the Fund in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as "Securities System" in accordance
with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep domestic securities of the
Fund in a Securities System provided that such
securities are represented in an account ("Account")
of the Custodian in the Securities System which shall
not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise
for customers;
2) The records of the Custodian with respect to domestic
securities of the Fund which are maintained in a
Securities System shall identify by book-entry those
securities belonging to the Fund;
3) The Custodian shall pay for domestic securities
purchased for the account of the Fund upon (i)
14
<PAGE> 18
receipt of advice from the Securities System that
such securities have been transferred to the Account,
and (ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for
the account of the Fund. The Custodian shall transfer
domestic securities sold for the account of the Fund
upon (i) receipt of advice from the Securities System
that payment for such securities has been transferred
to the Account, and (ii) the making of an entry on
the records of the Custodian to reflect such transfer
and payment for the account of the Fund. Copies of
all advices from the Securities System of transfers
of domestic securities for the account of the Fund
shall identify the Fund, be maintained for the Fund
by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish
the Fund confirmation of each transfer to or from the
account of the Fund in the form of a written advice
or notice and shall furnish to the Fund copies of
daily transaction sheets reflecting each day's
transactions in the Securities System for the account
of the Fund.
4) The Custodian shall provide the Fund with any report
obtained by the Custodian on the
15
<PAGE> 19
Securities System's accounting system, internal
accounting control and procedures for safeguarding
domestic securities deposited in the Securities
System;
5) The Custodian shall have received the initial or
annual certificate, as the case may be, required by
Article 13 hereof;
6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable to the
Fund for any loss or damage to the Fund resulting
from use of the Securities System by reason of any
negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or
their employees or from failure of the Custodian or
any such agent to enforce effectively such rights as
it may have against the Securities System; at the
election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with
respect to any claim against the Securities System or
any other person which the Custodian may have as a
consequence of any such loss or damage if and to the
extent that the Fund has not been made whole for any
such loss or damage.
2.10A Fund Assets Held in the Custodian's Direct Paper System The Custodian
may deposit and/or maintain securities owned
16
<PAGE> 20
by the Fund in the Direct Paper System of the Custodian subject to the
following provisions:
1) No transaction relating to securities in the Direct
Paper System will be effected in the absence of
Proper Instructions;
2) The Custodian may keep securities of the Fund in the
Direct Paper System only if such securities are
represented in an account ("Account") of the
Custodian in the Direct Paper System which shall not
include any assets of the Custodian other than assets
held as a fiduciary, custodian or otherwise for
customers;
3) The records of the Custodian with respect to
securities of the Fund which are maintained in the
Direct Paper System shall identify by book-entry
those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased for
the account of the Fund upon the making of an entry
on the records of the Custodian to reflect such
payment and transfer of securities to the account of
the Fund. The Custodian shall transfer securities
sold for the account of the Fund upon the making of
an entry on the records of the Custodian to reflect
such transfer and receipt of payment for the account
of the Fund;
17
<PAGE> 21
5) The Custodian shall furnish the Fund confirmation of
each transfer to or from the account of the Fund, in
the form of a written advice or notice, of Direct
Paper on the next business day following such
transfer and shall furnish to the Fund copies of
daily transaction sheets reflecting each day's
transaction in the Securities System for the account
of the Fund;
6) The Custodian shall provide the Fund with any report
on its system of internal accounting control as the
Fund may reasonably request from time to time;
2.11 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts
for and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the Fund, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of
The Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or
organizations, regarding escrow or
18
<PAGE> 22
other arrangements in connection with transactions by the Fund, (ii)
for purposes of segregating cash or government securities in connection
with options purchased, sold or written by the Fund or commodity
futures contracts or options thereon purchased or sold by the Fund,
(iii) for the purposes of compliance by the Fund with the procedures
required by Investment Company Act Release No. 10666, or any subsequent
release or releases of the Securities and Exchange Commission relating
to the maintenance of segregated accounts by registered investment
companies and (iv) for other proper corporate purposes, but only, in
the case of clause (iv), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Board of
Directors or of the Executive Committee signed by an officer of the
Fund and certified by the Secretary or an Assistant Secretary, setting
forth the purpose or purposes of such segregated account and declaring
such purposes to be proper corporate purposes.
2.12 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of the Fund held by it and
in connection with transfers of such securities.
2.13 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by
19
<PAGE> 23
the registered holder of such securities, if the securities are
registered otherwise than in the name of the Fund or a nominee of the
Fund, all proxies, without indication of the manner in which such
proxies are to be voted, and shall promptly deliver to the Fund such
proxies, all proxy soliciting materials and all notices relating to
such securities.
2.14 Communications Relating to Fund Portfolio Securities
Subject to the provisions of Section 2.3, the Custodian shall transmit
promptly to the Fund all written information (including, without
limitation, pendency of calls and maturities of domestic securities and
expirations of rights in connection therewith and notices of exercise
of call and put options written by the Fund and the maturity of futures
contracts purchased or sold by the Fund) received by the Custodian from
issuers of the domestic securities being held for the Fund. With
respect to tender or exchange offers, the Custodian shall transmit
promptly to the Fund all written information received by the Custodian
from issuers of the domestic securities whose tender or exchange is
sought and from the party (or his agents) making the tender or exchange
offer. If the Fund desires to take action with respect to any tender
offer, exchange offer or any other similar transaction, the Fund shall
notify the Custodian at least three business days prior to the date on
which the Custodian is to take such action.
20
<PAGE> 24
2.15 Reports to Fund Independent Public Accountants
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on
the accounting system, internal accounting control and procedures for
safeguarding securities, futures contracts and options on futures
contracts, including domestic securities deposited and/or maintained in
a Securities System, relating to the services provided by the Custodian
under this Contract; such reports shall be of sufficient scope and in
sufficient detail, as may reasonably be required by the Fund to provide
reasonable assurance that any material inadequacies would be disclosed
by such examination, and, if there are no such inadequacies, the
reports shall so state.
3. Duties of the Custodian with Respect to Property of the Fund Held
-----------------------------------------------------------------
Outside of the United States
- ----------------------------
3.1 Appointment of Foreign Sub-Custodians
The Fund hereby authorizes and instructs the Custodian to employ as
sub-custodians for the Fund's securities and other assets maintained
outside the United States the foreign banking institutions and foreign
securities depositories designated on Schedule A hereto ("foreign
sub-custodians"). Upon receipt of "Proper Instructions", as defined in
Section 5 of this Contract, together with a certified resolution of the
Fund's Board of Directors, the Custodian and the Fund may agree to
amend Schedule A hereto from time to time to designate additional
foreign banking
21
<PAGE> 25
institutions and foreign securities depositories to act as
sub-custodian. Upon receipt of Proper Instructions, the Fund may
instruct the Custodian to cease the employment of any one or more such
sub-custodians for maintaining custody of the Fund's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund may determine
to be reasonably necessary to effect the Fund's foreign securities
transactions. The Custodian shall identify on its books as belonging to
the Fund, the foreign securities of the Fund held by each foreign
sub-custodian.
3.3 Foreign Securities Depositories. Except as may otherwise be agreed upon
in writing by the Custodian and the Fund, assets of the Fund shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as
sub-custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements containing the
provisions set forth in Section 3.4 hereof.
3.4 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall be
22
<PAGE> 26
substantially in the form set forth in Exhibit 1 hereto and shall
provide that: (a) the Fund's assets will not be subject to any right,
charge, security interest, lien or claim of any kind in favor of the
foreign banking institution or its creditors or agent, except a claim
of payment for their safe custody or administration; (b) beneficial
ownership of the Fund's assets will be freely transferable without the
payment of money or value other than for custody or administration; (c)
adequate records will be maintained identifying the assets as belonging
to the Fund; (d) officers of or auditors employed by, or other
representatives of the Custodian, including to the extent permitted
under applicable law the independent public accountants for the Fund,
will be given access to the books and records of the foreign banking
institution relating to its actions under its agreement with the
Custodian; and (e) assets of the Fund held by the foreign sub-custodian
will be subject only to the instructions of the Custodian or its
agents.
3.5 Access of Independent Accountants of the Fund. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.
23
<PAGE> 27
3.6 Reports by Custodian. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Fund held by foreign sub-custodians,
including but not limited to an identification of entities having
possession of the Fund's securities and other assets and advices or
notifications of any transfers of securities to or from each custodial
account maintained by a foreign banking institution for the Custodian
on behalf of the Fund indicating, as to securities acquired for the
Fund, the identity of the entity having physical possession of such
securities.
3.7 Transactions in Foreign Custody Account
(a) Except as otherwise provided in paragraph (b) of this Section 3.7,
the provision of Sections 2.2 and 2.7 of this Contract shall apply,
mutatis mutandis to the foreign securities of the Fund held outside the
United States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of the
Fund and delivery of securities maintained for the account of the Fund
may be effected in accordance with the customary established securities
trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including,
without limitation, delivering securities to the purchaser thereof or
to a dealer therefor
24
<PAGE> 28
(or an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer. (c) Securities maintained in the custody of a
foreign sub-custodian may be maintained in the name of such entity's
nominee to the same extent as set forth in Section 2.3 of this
Contract, and the Fund agrees to hold any such nominee harmless from
any liability as a holder of record of such securities.
3.8 Liability of Foreign Sub-Custodians. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care
in the performance of its duties and to indemnify, and hold harmless,
the Custodian and each Fund from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection with the
institution's performance of such obligations. At the election of the
Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a foreign banking
institution as a consequence of any such loss, damage, cost, expense,
liability or claim if and to the extent that the Fund has not been made
whole for any such loss, damage, cost, expense, liability or claim.
3.9 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians
25
<PAGE> 29
generally in this Contract and, regardless of whether assets are
maintained in the custody of a foreign banking institution, a foreign
securities depository or a branch of a U.S. bank as contemplated by
paragraph 3.12 hereof, the Custodian shall not be liable for any loss,
damage, cost, expense, liability or claim resulting from
nationalization, expropriation, currency restrictions, or acts of war
or terrorism or any loss where the sub-custodian has otherwise
exercised reasonable care. Notwithstanding the foregoing provisions of
this paragraph 3.9, in delegating custody duties to State Street London
Ltd., the Custodian shall not be relieved of any responsibility to the
Fund for any loss due to such delegation, except such loss as may
result from (a) political risk (including, but not limited to, exchange
control restrictions, confiscation, expropriation, nationalization,
insurrection, civil strife or armed hostilities) or (b) other losses
(excluding a bankruptcy or insolvency of State Street London Ltd. not
caused by political risk) due to Acts of God, nuclear incident or other
losses under circumstances where the Custodian and State Street London
Ltd. have exercised reasonable care.
3.10 Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose including the purchase or
sale of foreign exchange or of contracts for foreign exchange, or in
the event that the Custodian or its nominee shall incur or be assessed
any
26
<PAGE> 30
taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may
arise from its or its nominee's own negligent action, negligent failure
to act or willful misconduct, any property at any time held for the
account of the Fund shall be security therefor and should the Fund fail
to repay the Custodian promptly, the Custodian shall be entitled to
utilize available cash and to dispose of the Fund assets to the extent
necessary to obtain reimbursement.
3.11 Monitoring Responsibilities. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Fund in the event that the Custodian learns of
a material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive order
from the Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood that
its shareholders' equity will decline below $200 million (U.S. dollars
or the equivalent thereof) or that its shareholders' equity has
declined below $200 million (in each case computed in
27
<PAGE> 31
accordance with generally accepted U.S. accounting principles).
3.12 Branches of U.S. Banks
(a) Except as otherwise set forth in this Contract, the provisions
hereof shall not apply where the custody of the Fund assets are
maintained in a foreign branch of a banking institution which is a
"bank" as defined by Section 2(a)(5) of the Investment Company Act of
1940 meeting the qualification set forth in Section 26(a) of said Act.
The appointment of any such branch as a sub-custodian shall be governed
by paragraph 1 of this Contract.
(b) Cash held for the Fund in the United Kingdom shall be maintained in
an interest bearing account established for the Fund with the
Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.
3.13 Tax Law
The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of the United States of America or
any state or political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of the obligations
imposed on the Fund or the Custodian as custodian of the Fund by the
tax law of jurisdictions other than those mentioned in the above
sentence, including responsibility for withholding
28
<PAGE> 32
and other taxes, assessments or other governmental charges,
certifications and governmental reporting. The sole responsibility of
the Custodian with regard to such tax law shall be to use reasonable
efforts to assist the Fund with respect to any claim for exemption or
refund under the tax law of jurisdictions for which the Fund has
provided such information.
4. Payments for Repurchases or Redemptions and Sales of Shares of the Fund
-----------------------------------------------------------------------
From such funds as may be available for the purpose but subject to the
limitations of the Articles of Incorporation and any applicable votes of the
Board of Directors of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a request
for redemption or repurchase of their Shares. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
The Custodian shall receive from the distributor for the
29
<PAGE> 33
Fund's Shares or from the Transfer Agent of the Fund and deposit into the Fund's
account such payments as are received for Shares of the Fund issued or sold from
time to time by the Fund. The Custodian will provide timely notification to the
Fund and the Transfer Agent of any receipt by it of payments for Shares of the
Fund.
5. Proper Instructions
-------------------
Proper Instructions as used herein means a writing signed or initialled
by one or more person or persons as the Board of Directors shall have from time
to time authorized. Each such writing shall set forth the specific transaction
or type of transaction involved, including a specific statement of the purpose
for which such action is requested. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have been given by a
person authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed in writing.
Upon receipt of a certificate of the Secretary or an Assistant Secretary as to
the authorization by the Board of Directors of the Fund accompanied by a
detailed description of procedures approved by the Board of Directors, Proper
Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board of Directors
and the Custodian are satisfied that such procedures afford adequate safeguards
for the Fund's assets. For purposes of this Section, Proper Instructions shall
include instructions received by the Custodian pursuant to any three-party
agreement which requires a segregated asset account
30
<PAGE> 34
in accordance with Section 2.11.
6. Actions Permitted without Express Authority
-------------------------------------------
The Custodian may in its discretion, without express authority from the
Fund:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this Contract,
provided that all such payments shall be accounted for to the Fund;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Fund, checks, drafts and
other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of the Fund except as otherwise directed by the
Board of Directors of the Fund.
7. Evidence of Authority
---------------------
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may receive and accept a certified copy of a vote of the Board of
Directors of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Directors pursuant to the Articles of Incorporation as described
in such vote, and
31
<PAGE> 35
such vote may be considered as in full force and effect until receipt by the
Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and
------------------------------------------------------------
Calculation of Net Asset Value and Net Income
- ---------------------------------------------
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Directors of the Fund to keep
the books of account of the Fund and/or compute the net asset value per share of
the outstanding shares of the Fund or, if directed in writing to do so by the
Fund, shall itself keep such books of account and/or compute such net asset
value per share. If so directed, the Custodian shall also calculate daily the
net income of the Fund as described in the Fund's currently effective prospectus
and shall advise the Fund and the Transfer Agent daily of the total amounts of
such net income and, if instructed in writing by an officer of the Fund to do
so, shall advise the Transfer Agent periodically of the division of such net
income among its various components. The calculations of the net asset value per
share and the daily income of the Fund shall be made at the time or times
described from time to time in the Fund's currently effective prospectus.
9. Records
-------
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 3la-1 and 3la-2 thereunder.
All such records shall be the property of the Fund and shall at all times
32
<PAGE> 36
during the regular business hours of the Custodian be open for inspection by
duly authorized officers, employees or agents of the Fund and employees and
agents of the Securities and Exchange Commission. The Custodian shall, at the
Fund's request, supply the Fund with a tabulation of securities owned by the
Fund and held by the Custodian and shall, when requested to do so by the Fund
and for such compensation as shall be agreed upon between the Fund and the
Custodian, include certificate numbers in such tabulations.
10. Opinion of Fund's Independent Accountant
----------------------------------------
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-1A, and Form N-SAR or other
annual reports to the Securities and Exchange Commission and with respect to any
other requirements of such Commission.
11. Compensation of Custodian
-------------------------
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund and the Custodian.
12. Responsibility of Custodian
---------------------------
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it
33
<PAGE> 37
to be genuine and to be signed by the proper party or parties, including any
futures commission merchant acting pursuant to the terms of a three-party
futures or options agreement. The Custodian shall be held to the exercise of
reasonable care in carrying out the provisions of this Contract, but shall be
kept indemnified by and shall be without liability to the Fund for any action
taken or omitted by it in good faith without negligence. It shall be entitled to
rely on and may act upon advice of counsel (who may be counsel for the Fund) on
all matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States (except as specifically provided in Article 3.9)
and, regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a U.S. bank
as contemplated by paragraph 3.12 hereof, the Custodian shall not be liable for
any loss, damage, cost, expense, liability or claim resulting from, or caused
by, the direction of or authorization by the Fund to maintain custody or any
securities or cash of the Fund in a foreign country including, but not limited
to, losses resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money
34
<PAGE> 38
or which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund being liable for the payment of money or
incurring liability of some other form, the Fund, as a prerequisite to requiring
the Custodian to take such action, shall provide indemnity to the Custodian in
an amount and form satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement) or
in the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the Fund shall be security
therefor and should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize available cash and to dispose of the Fund assets to
the extent necessary to obtain reimbursement.
13. Effective Period, Termination and Amendment
-------------------------------------------
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or
35
<PAGE> 39
mailing; provided, however that the Custodian shall not act under Section 2.10
hereof in the absence of receipt of an initial certificate of the Secretary or
an Assistant Secretary that the Board of Directors of the Fund has approved the
initial use of a particular Securities System and the receipt of an annual
certificate of the Secretary or an Assistant Secretary that the Board of
Directors has reviewed the use by the Fund of such Securities System, as
required in each case by Rule 17f-4 under the Investment Company Act of 1940, as
amended and that the Custodian shall not act under Section 2.10A hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Directors has approved the initial use of the Direct
Paper System and the receipt of an annual certificate of the Secretary or an
Assistant Secretary that the Board of Directors has reviewed the use by the Fund
of the Direct Paper System; provided further, however, that the Fund shall not
amend or terminate this Contract in contravention of any applicable federal or
state regulations, or any provision of the Articles of Incorporation, and
further provided, that the Fund may at any time by action of its Board of
Directors (i) substitute another bank or trust company for the Custodian by
giving notice as described above to the Custodian, or (ii) immediately terminate
this Contract in the event of the appointment of a conservator or receiver for
the Custodian by the Comptroller of the Currency or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund shall pay to the
36
<PAGE> 40
Custodian such compensation as may be due as of the date of such termination and
shall likewise reimburse the Custodian for its costs, expenses and
disbursements.
14. Successor Custodian
-------------------
If a successor custodian shall be appointed by the Board of Directors
of the Fund, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities then held by it hereunder and shall transfer to an
account of the successor custodian all of the Fund's securities held in a
Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian and all instruments held by the Custodian
relative thereto and all
37
<PAGE> 41
other property held by it under this Contract and to transfer to an account of
such successor custodian all of the Fund's securities held in any Securities
System. Thereafter, such bank or trust company shall be the successor of the
Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Directors to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
15. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Contract, the Custodian and
the Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Articles of Incorporation of the Fund. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
38
<PAGE> 42
amendment of this Contract.
16. Massachusetts Law to Apply
--------------------------
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of the Commonwealth of Massachusetts.
17. Prior Contracts
---------------
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody of
the Fund's assets.
18. Shareholder Communications Election
-----------------------------------
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund tells the Custodian "no",
the Custodian will not provide this information to requesting companies. If the
Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the
Custodian is required by the rule to treat the Fund as consenting to disclosure
of this information for all securities owned by the Fund or any funds or
accounts established by the Fund. For the Fund's protection, the Rule prohibits
the requesting company from
39
<PAGE> 43
using the Fund's name and address for any purpose other than corporate
communications. Please indicate below whether the Fund consents or objects by
checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's
name, address, and share positions.
NO [ X ] The Custodian is not authorized to release the Fund's
name, address, and share positions.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 28th day of July, 1994.
GABELLI INTERNATIONAL GROWTH
ATTEST FUND, INC.
/s/ Terri Ellenzweig By /s/ BRUCE N. ALPERT
- -------------------------- -------------------------------
ATTEST STATE STREET BANK AND TRUST
/s/ XXXXXXXXXXXXXXXXX By /s/ XXXXXXXXXXXXXXXXXXXXXx
- -------------------------- -------------------------------
Executive Vice President
40
<PAGE> 44
Schedule A
----------
The following foreign banking institutions and foreign securities
depositories have been approved by the Board of Directors of Gabelli
International Growth Fund for use as sub-custodians for the Fund's securities
and other assets:
(Insert banks and securities depositories)
Certified:
- ---------------------------
Fund's Authorized Officer
Date:
-----------------------
<PAGE> 1
Exhibit 9(a)
TRANSFER AGENCY AND SERVICE AGREEMENT
between
GABELLI INTERNATIONAL GROWTH FUND, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE> 2
TABLE OF CONTENTS
-----------------
Page
----
Article 1 Terms of Appointment; Duties of the Bank ................. 1
Article 2 Fees and Expenses ........................................ 4
Article 3 Representations and Warranties of the Bank ............... 4
Article 4 Representations and Warranties of the Fund ............... 5
Article 5 Data Access and Proprietary Information .................. 5
Article 6 Indemnification .......................................... 7
Article 7 Standard of Care ......................................... 9
Article 8 Covenants of the Fund and the Bank ....................... 9
Article 9 Termination of Agreement ................................. 10
Article 10 Assignment ............................................... 10
Article 11 Amendment ................................................ 11
Article 12 Massachusetts Law to Apply ............................... 11
Article 13 Force Majeure ............................................ 11
Article 14 Consequential Damages .................................... 11
Article 15 Merger of Agreement ...................................... 11
Article 16 Counterparts ............................................. 11
<PAGE> 3
TRANSFER AGENCY AND SERVICE AGREEMENT
-------------------------------------
AGREEMENT made as of the 28th day of July, 1994, by and between Gabelli
International Growth Fund, Inc., a Maryland corporation, having its principal
office and place of business at One Corporate Center, Rye, New York 10580-1434,
(the "Fund"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust
company having its principal office and place of business at 225 Franklin
Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund desires to appoint the Bank as its transfer agent,
dividend disbursing agent, custodian of certain retirement plans and agent in
connection with certain other activities, and the Bank desires to accept such
appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Article 1 Terms of Appointment; Duties of the Bank
----------------------------------------
1.01 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints the Bank to act as, and the Bank
agrees to act as its transfer agent for the Fund's authorized and issued shares
of its common stock, $_____ par value, ("Shares"), dividend disbursing agent,
custodian of certain retirement plans and agent in connection with any
accumulation, open-account or similar plans provided to the shareholders of the
Fund ("Shareholders") and set out in the currently effective prospectus and
statement of additional information ("prospectus") of the Fund, including
without limitation any periodic investment plan or periodic withdrawal program.
1.02 The Bank agrees that it will perform the following
services:
(a) In accordance with procedures established from time to
time by agreement between the Fund and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of
Shares, and promptly deliver payment and appropriate
documentation thereof to the Custodian of
<PAGE> 4
the Fund authorized pursuant to the Articles of
Incorporation of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate
number of Shares and hold such Shares in the
appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and
redemption directions and deliver the appropriate
documentation thereof to the Custodian;
(iv) In respect to the transactions in items (i), (ii) and
(iii) above, the Bank shall execute transactions
directly with broker-dealers authorized by the Fund
who shall thereby be deemed to be acting on behalf of
the Fund;
(v) At the appropriate time as and when it receives
monies paid to it by the Custodian with respect to
any redemption, pay over or cause to be paid over in
the appropriate manner such monies as instructed by
the redeeming Shareholders;
(vi) Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions;
(vii) Prepare and transmit payments for dividends and
distributions declared by the Fund;
(viii) Issue replacement certificates for those certificates
alleged to have been lost, stolen or destroyed upon
receipt by the Bank of indemnification satisfactory
to the Bank and protecting the Bank and the Fund, and
the Bank at its option, may issue replacement
certificates in place of mutilated stock certificates
upon presentation thereof and without such indemnity;
(ix) Maintain records of account for and advise the Fund
and its Shareholders as to the foregoing; and
(x) Record the issuance of shares of the Fund and
maintain pursuant to SEC Rule 17Ad-10(e) a record of
the total number of shares of the Fund which are
authorized, based upon data provided to it by the
Fund, and issued and
2
<PAGE> 5
outstanding. The Bank shall also provide the Fund on
a regular basis with the total number of shares which
are authorized and issued and outstanding and shall
have no obligation, when recording the issuance of
shares, to monitor the issuance of such shares or to
take cognizance of any laws relating to the issue or
sale of such shares, which functions shall be the
sole responsibility of the Fund.
(b) In addition to and neither in lieu nor in contravention of
the services set forth in the above paragraph (a), the Bank shall: (i) perform
the customary services of a transfer agent, dividend disbursing agent, custodian
of certain retirement plans and, as relevant, agent in connection with
accumulation, open-account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to: maintaining all Shareholder accounts, preparing Shareholder meeting
lists, mailing proxies, mailing Shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and non-resident alien
accounts, preparing and filing U.S. Treasury Department Forms 1099 and other
appropriate forms required with respect to dividends and distributions by
federal authorities for all Shareholders, preparing and mailing confirmation
forms and statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in Shareholder
accounts, preparing and mailing activity statements for Shareholders, and
providing Shareholder account information and (ii) provide a system which will
enable the Fund to monitor the total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to the Bank in
writing those transactions and assets to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of transactions for
each State on the system prior to activation and thereafter monitor the daily
activity for each State. The responsibility of the Bank for the Fund's blue sky
State registration status is solely limited to the initial establishment of
transactions subject to blue sky compliance by the Fund and the reporting of
such transactions to the Fund as provided above.
(d) Procedures as to who shall provide certain of these
services in Article 1 may be established from time to time by agreement between
the Fund and the Bank per the attached
3
<PAGE> 6
service responsibility schedule. The Bank may at times perform only a portion of
these services and the Fund or its agent may perform these services on the
Fund's behalf.
(e) The Bank shall provide additional services on behalf of
the Fund (i.e., escheatment services) which may be agreed upon in writing
between the Fund and the Bank.
Article 2 Fees and Expenses
-----------------
2.01 For the performance by the Bank pursuant to this
Agreement, the Fund agrees to pay the Bank an annual maintenance fee for each
Shareholder account as set out in the initial fee schedule attached hereto. Such
fees and out-of-pocket expenses and advances identified under Section 2.02 below
may be changed from time to time subject to mutual written agreement between the
Fund and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the
Fund agrees to reimburse the Bank for out-of-pocket expenses, including but not
limited to confirmation production, postage, forms, telephone, microfilm,
microfiche, tabulating proxies, records storage, or advances incurred by the
Bank for the items set out in the fee schedule attached hereto. In addition, any
other expenses incurred by the Bank at the request or with the consent of the
Fund, will be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses
within five days following the receipt of the respective billing notice. Postage
for mailing of dividends, proxies, Fund reports and other mailings to all
shareholder accounts shall be advanced to the Bank by the Fund at least seven
(7) days prior to the mailing date of such materials.
Article 3 Representations and Warranties of the Bank
------------------------------------------
The Bank represents and warrants to the Fund that:
3.01 It is a trust company duly organized and existing and in
good standing under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the
Commonwealth of Massachusetts.
3.03 It is empowered under applicable laws and by its Charter
and By-Laws to
4
<PAGE> 7
enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
Article 4 Representations and Warranties of the Fund
------------------------------------------
The Fund represents and warrants to the Bank that:
4.01 It is a corporation duly organized and existing and in
good standing under the laws of Maryland.
4.02 It is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said Articles of
Incorporation and By-Laws have been taken to authorize it to enter into and
perform this Agreement.
4.04 It is an open-end and diversified management investment
company registered under the Investment Company Act of 1940, as amended.
4.05 A registration statement under the Securities Act of
1933, as amended is currently effective and will remain effective, and
appropriate state securities law filings have been made and will continue to be
made, with respect to all Shares of the Fund being offered for sale.
Article 5 Data Access and Proprietary Information
---------------------------------------
5.01 The Fund acknowledges that the data bases, computer
programs, screen formats, report formats, interactive design techniques, and
documentation manuals furnished to the Fund by the Bank as part of the Fund's
ability to access certain Fund-related data ("Customer Data") maintained by the
Bank on data bases under the control and ownership of the Bank or other third
party ("Data Access Services") constitute copyrighted, trade secret, or other
proprietary information (collectively, "Proprietary Information") of substantial
value to the Bank or other third party. In no event shall Proprietary
Information be deemed Customer Data. The Fund agrees to treat all Proprietary
Information as proprietary to the Bank and further agrees that it shall not
divulge any
5
<PAGE> 8
Proprietary Information to any person or organization except as may be provided
hereunder. Without limiting the foregoing, the Fund agrees for itself and its
employees and agents:
(a) to access Customer Data solely from locations as may
be designated in writing by the Bank and solely in
accordance with the Bank's applicable user
documentation;
(b) to refrain from copying or duplicating in any way the
Proprietary Information;
(c) to refrain from obtaining unauthorized access to any
portion of the Proprietary Information, and if such
access is inadvertently obtained, to inform in a
timely manner of such fact and dispose of such
information in accordance with the Bank's
instructions;
(d) to refrain from causing or allowing third-party data
acquired hereunder from being retransmitted to any
other computer facility or other location, except
with the prior written consent of the Bank,
(e) that the Fund shall have access only to those
authorized transactions agreed upon by the parties;
(f) to honor all reasonable written requests made by the
Bank to protect at the Bank's expense the rights of
the Bank in Proprietary Information at common law,
under federal copyright law and under other federal
or state law.
Each party shall take reasonable efforts to advise its employees of
their obligations pursuant to this Article 5. The obligations of this Article
shall survive any earlier termination of this Agreement.
5.02 If the Fund notifies the Bank that any of the Data Access
Services do not operate in material compliance with the most recently issued
user documentation for such services, the Bank shall endeavor in a timely manner
to correct such failure. Organizations from which the Bank may obtain certain
data included in the Data Access Services are solely responsible for the
6
<PAGE> 9
contents of such data and the Fund agrees to make no claim against the Bank
arising out of the contents of such third-party data, including, but not limited
to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND
SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS IS,
AS AVAILABLE BASIS. THE BANK EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE
EXPRESSLY STATED HEREIN INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
5.03 If the transactions available to the Fund include the
ability to originate electronic instructions to the Bank in order to (i) effect
the transfer or movement of cash or Shares or (ii) transmit Shareholder
information or other information (such transactions constituting a "COEFI"),
then in such event the Bank shall be entitled to rely on the validity and
authenticity of such instruction without undertaking any further inquiry as long
as such instruction is undertaken in conformity with security procedures
established by the Bank from time to time.
Article 6 Indemnification
---------------
6.01 The Bank shall not be responsible for, and the Fund shall
indemnify and hold the Bank harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and liability arising
out of or attributable to:
(a) All actions of the Bank or its agent or subcontractors
required to be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful
misconduct which arise out of the breach of any representation or warranty of
the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records, documents or services which (i) are
received by the Bank or its agents or subcontractors, and (ii) have been
prepared, maintained or performed by the Fund or any other person or firm on
behalf of the Fund including but not limited to any previous transfer agent or
7
<PAGE> 10
registrar.
(d) The reliance on, or the carrying out by the Bank or its
agents or subcontractors of any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any
requirement under the federal securities laws or regulations or the securities
laws or regulations of any state that such Shares be registered in such state or
in violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in such
state.
6.02 At any time the Bank may apply to any officer of the Fund
for instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall not be liable and
shall be indemnified by the Fund for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. The Bank,
its agents and subcontractors shall be protected and indemnified in acting upon
any paper or document furnished by or on behalf of the Fund, reasonably believed
to be genuine and to have been signed by the proper person or persons, or upon
any instruction, information, data, records or documents provided the Bank or
its agents or subcontractors by machine readable input, telex, CRT data entry or
other similar means authorized by the Fund, and shall not be held to have notice
of any change of authority of any person, until receipt of written notice
thereof from the Fund. The Bank, its agents and subcontractors shall also be
protected and indemnified in recognizing stock certificates which are reasonably
believed to bear the proper manual or facsimile signatures of the officers of
the Fund, and the proper countersignature of any former transfer agent or former
registrar, or of a co-transfer agent or co-registrar.
6.03 In order that the indemnification provisions contained in
this Article 6 shall apply, upon the assertion of a claim for which the Fund may
be required to indemnify the Bank, the Bank shall promptly notify the Fund of
such assertion, and shall keep the Fund advised with respect to all developments
concerning such claim. The Fund shall have the option to participate with the
Bank in the defense of such claim or to defend against said claim in its own
name or in the name of
8
<PAGE> 11
the Bank. The Bank shall in no case confess any claim or make any compromise in
any case in which the Fund may be required to indemnify the Bank except with the
Fund's prior written consent.
Article 7 Standard of Care
----------------
7.01 The Bank shall at all times act in good faith and agrees
to use its best efforts within reasonable limits to insure the accuracy of all
services performed under this Agreement, but assumes no responsibility and shall
not be liable for loss or damage due to errors unless said errors are caused by
its negligence, bad faith, or willful misconduct of that of its employees.
Article 8 Covenants of the Fund and the Bank
----------------------------------
8.01 The Fund shall promptly furnish to the Bank the
following:
(a) A certified copy of the resolution of the Board of
Directors of the Fund authorizing the appointment of the Bank and the execution
and delivery of this Agreement.
(b) A copy of the Articles of Incorporation and By-Laws of the
Fund and all amendments thereto.
8.02 The Bank hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to the Fund for safekeeping of
stock certificates, check forms and facsimile signature imprinting devices, if
any; and for the preparation or use, and for keeping account of, such
certificates, forms and devices.
8.03 The Bank shall keep records relating to the services to
be performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the Bank
hereunder are the property of the Fund and will be preserved, maintained and
made available in accordance with such Section and Rules, and will be
surrendered promptly to the Fund on and in accordance with its request.
8.04 The Bank and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be
9
<PAGE> 12
voluntarily disclosed to any other person, except as may be required by law.
8.05 In case of any requests or demands for the inspection of
the Shareholder records of the Fund, the Bank will endeavor to notify the Fund
and to secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.
Article 9 Termination of Agreement
------------------------
9.01 This Agreement may be terminated by either party upon one
hundred twenty (120) days written notice to the other.
9.02 Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and material will
be borne by the Fund. Additionally, the Bank reserves the right to charge for
any other reasonable expenses associated with such termination and/or a charge
equivalent to the average of three (3) months' fees.
Article 10 Assignment
----------
10.01 Except as provided in Section 10.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
10.02 This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted successors and assigns.
10.03 The Bank may, without further consent on the part of the
Fund, subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly registered as
a transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange Act of
1934, as amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly registered
as a transfer agent pursuant to Section 17A(c)(1) or (iii) a BFDS affiliate;
provided, however, that the Bank shall be as fully responsible to the Fund for
the acts and omissions of any subcontractor as it is for its own acts and
omissions.
10
<PAGE> 13
Article 11 Amendment
---------
11.01 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution of
the Board of Directors of the Fund.
Article 12 Massachusetts Law to Apply
--------------------------
12.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
Article 13 Force Majeure
-------------
13.01 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
Article 14 Consequential Damages
---------------------
14.01 Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or for any
consequential damages arising out of any act or failure to act hereunder.
Article 15 Merger of Agreement
-------------------
15.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
Article 16 Counterparts
------------
16.01 This Agreement may be executed by the parties hereto on any
number of counterparts, and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
11
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
GABELLI INTERNATIONAL GROWTH
FUND, INC.
BY: /s/ BRUCE N. ALPERT
-------------------------------
ATTEST:
/s/ TERRI ELLINGWAY
- -------------------------------
STATE STREET BANK AND TRUST COMPANY
BY: /s/ XXXXXXXXXXXXXXXXXXXXXXX
-------------------------------
Executive Vice President
ATTEST:
/s/ XXXXXXXXXXXXXXXX
- -------------------------------
12
<PAGE> 15
STATE STREET BANK & TRUST COMPANY
FUND SERVICE RESPONSIBITIES*
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
1. Receives orders for the purchase of Shares. X
2. Issue Shares and hold Shares in Shareholders
accounts. X
3. Receive redemption requests. X
4. Effect transactions 1-3 above directly with
broker-dealers. X
5. Pay over monies to Redeeming Shareholders. X
6. Effect transfers of Shares. X
7. Prepare and transmit dividends and distributions. X
8. Issue Replacement Certificates. X
9. Reporting of abandoned property. X
10. Maintain records of account. X
11. Maintain and keep a current and accurate control
book for each issue of securities. X
12. Mail proxies. X
13. Mail Shareholder reports. X
14. Mail prospectuses to current Shareholders. X
15. Withhold taxes on U.S. resident and non-resident
alien accounts. X
<PAGE> 16
Service Performed Responsibility
- ----------------- --------------
Bank Fund
---- ----
16. Prepare and file U.S. Treasury Department forms. X
17. Prepare and mail account and confirmation statements
for Shareholders. X
18. Provide Shareholder account information. X
19. Blue sky reporting. X
* Such services are more fully described in Article 1.02 (a), (b) and (c) of
the Agreement.
GABELLI INTERNATIONAL GROWTH
FUND, INC.
BY: /s/ BRUCE N. ALPERT
-------------------------------
ATTEST:
/s/ TERRI ELLINGWAY
- -------------------------------
STATE STREET BANK AND TRUST COMPANY
BY: /s/ XXXXXXXXXXXXXXXXXXXXXXX
-------------------------------
Executive Vice President
ATTEST:
/s/ XXXXXXXXXXXXXXXX
- -------------------------------
<PAGE> 17
[STATE STREET LOGO]
July 11, 1995
Mr. Jeff Hochman
Wilkie Farr & Gallagher
153 East 53rd Street
New York, NY 10022
Dear Jeff:
The minimum monthly charge for both Transfer Agent and Custodian Fees will be
waived for a 12 month period from commencement of operation on the Gabelli
International Growth Fund, Inc. This means that the $1,000.00 Minimum will not
go into effect until 7/l/96/.
I have also enclosed copies of the Custodian and Transfer Agent Contracts.
Sincerely,
/s/ JANINE DONOVAN
Janine Donovan
Assistant Secretary
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Counsel and Independent Auditors" and to the use of our report
dated February 13, 1998 in this Registration Statement (Form N-1A No. 33-79994)
of Gabelli International Growth Fund, Inc.
/s/ ERNST & YOUNG LLP
------------------------
ERNST & YOUNG LLP
New York, New York
April 28, 1998
<PAGE> 1
Exhibit 15
AMENDED AND RESTATED
PLAN OF DISTRIBUTION PURSUANT TO RULE l2b-l
OF
THE GABELLI INTERNATIONAL GROWTH FUND, INC.
The Gabelli International Growth Fund, Inc. (the "Fund") is an open-end
management investment company registered as such under the Investment Company
Act of 1940 (the "Act"). The Fund intends to employ Gabelli & Company, Inc.
and/or others as the principal underwriter and distributor (the "Distributor")
of the shares of the Fund pursuant to a written distribution agreement. The Fund
has adopted a plan of distribution pursuant to Rule 12b-1 under the Act to
assist in the distribution of shares of the Fund.
The Board of Directors (the "Board") of the Fund having determined that
it would be desirable to amend the current plan of distribution in certain
respects and to restate such amended plan in its entirety and that a plan of
distribution containing the terms set forth herein is reasonably likely to
benefit the Fund and its shareholders, the Fund hereby amends and restates its
plan of distribution (the "Plan") pursuant to Rule 12b-1 under the Act to read
in its entirety as follows:
1. In consideration of the services to be provided, and the expenses to
be incurred, by the Distributor pursuant to the distribution agreement, the Fund
will pay to the Distributor as distribution payments (the "Payments") in
connection with the distribution of shares of the Fund an aggregate amount at a
rate of 0.25% per year of the average daily net assets of the Fund. Such
Payments shall be accrued daily and paid monthly in arrears or shall be accrued
and paid at such other intervals as the Board shall determine. The Fund's
obligation hereunder shall be limited to the assets of the Fund and shall not
constitute an obligation of the Fund except out of such assets and shall not
constitute an obligation of any shareholder of the Fund.
2. It is understood that the Payments made by the Fund under this Plan
will be used by the Distributor for the purpose of financing or assisting in the
financing of any activity which is primarily intended to result in the sale of
shares of the Fund. The scope of the foregoing shall be interpreted by the
Board, whose decision shall be conclusive except to the extent it contravenes
established legal authority. Without in any way limiting the discretion of the
Board, the following activities are hereby declared to be primarily intended to
result in the sale of shares of the Fund: advertising the Fund or the Fund's
investment advisor's mutual fund activities; compensating underwriters, dealers,
brokers, banks and other selling entities (including the Distributor and its
affiliates) and sales and marketing personnel of any of them for sales of shares
of the Fund, whether in a lump sum or on a continuous, periodic, contingent,
deferred or other basis; compensating underwriters, dealers, brokers, banks and
other servicing entities and
<PAGE> 2
servicing personnel (including the Fund's investment adviser and its personnel)
of any of them for providing services to shareholders of the Fund relating to
their investment in the Fund, including assistance in connection with inquiries
relating to shareholder accounts; the production and dissemination of
prospectuses (including statements of additional information) of the Fund and
the preparation, production and dissemination of sales, marketing and
shareholder servicing materials; and the ordinary or capital expenses, such as
equipment, rent, fixtures, salaries, bonuses, reporting and recordkeeping and
third party consultancy or similar expenses relating to any activity for which
Payment is authorized by the Board; and the financing of any activity for which
Payment is authorized by the Board; and profit to the Distributor and its
affiliates arising out of their provision of shareholder services.
Notwithstanding the foregoing, this Plan does not require the Distributor or any
of its affiliates to perform any specific type or level of distribution
activities or shareholder services or to incur any specific level of expenses
for activities covered by this Section 2. In addition, Payments made in a
particular year shall not be refundable whether or not such Payments exceed the
expenses incurred for that year pursuant to this Section 2.
3. The Fund is hereby authorized and directed to enter into appropriate
written agreements with the Distributor and each other person to whom the Fund
intends to make any Payment, and the Distributor is hereby authorized and
directed to enter into appropriate written agreements with each person to whom
the Distributor intends to make any payments in the nature of a Payment. The
foregoing requirement is not intended to apply to any agreement or arrangement
with respect to which the party to whom Payment is to be made does not have the
purpose set forth in Section 2 above (such as the printer in the case of the
printing of a prospectus or a newspaper in the case of an advertisement) unless
the Board determines that such an agreement or arrangement should be treated as
a "related" agreement for purposes of Rule 12b-1 under the Act.
4. Each agreement required to be in writing by Section 3 must contain
the provisions required by Rule 12b-1 under the Act and must be approved by a
majority of the Board ("Board Approval") and by a majority of the Directors
("Disinterested Director Approval") who are not interested persons of the Fund
and have no direct or indirect financial interest in the operation of the Plan
or any such agreement, by vote cast in person at a meeting called for the
purposes of voting on such agreement. All determinations or authorizations of
the Board hereunder shall be made by Board Approval and Disinterested Board
Approval.
5. The officers, investment adviser or Distributor of the Fund, as
appropriate, shall provide to the Board and the Board shall review, at least
quarterly, a written report of the amounts expended pursuant to this Plan and
the purposes for which such Payments were made.
2
<PAGE> 3
6. To the extent any activity is covered by Section 2 and is also an
activity which the Fund may pay for on behalf of the Fund without regard to the
existence or terms and conditions of a plan of distribution under Rule 12b-1 of
the Act, this Plan shall not be construed to prevent or restrict the Fund from
paying such amounts outside of this Plan and without limitation hereby and
without such payments being included in calculation of Payments subject to the
limitation set forth in Section 1.
7. This Plan shall not take effect until it has been approved by a vote
of at least a majority of the outstanding voting securities of the Fund. This
Plan may not be amended in any material respect without Board Approval and
Disinterested Director Approval and may not be amended to increase the maximum
level of Payments permitted hereunder without such approvals and further
approval by a vote of at least a majority of the outstanding voting securities
of the Fund. This Plan may continue in effect for longer than one year after its
approval by the shareholders of the Fund only as long as such continuance is
specifically approved at least annually by Board Approval and by Disinterested
Director Approval.
8. This Plan may be terminated at any time by a vote of the directors
who are not interested persons of the Fund and have no direct or indirect
financial interest in the operation of the Plan or any agreement hereunder, cast
in person at a meeting called for the purposes of voting on such termination or
by a vote of at least a majority of the outstanding voting securities of the
Fund.
9. For purposes of this Plan the terms "interested person" and "related
agreement" shall have the meanings ascribed to them in the Act and the rules
adopted by the Securities and Exchange Commission thereunder and the term "vote
of a majority of the outstanding voting securities" of the Fund shall mean the
vote, at the annual or a special meeting of the security holders of the Fund
duly called, (a) of 67% or more of the voting securities present at such
meeting, if the holders of more than 50% of the outstanding voting securities of
the Fund are present or represented by proxy or, if less, (b) more than 50% of
the outstanding voting securities of the Fund.
3
<PAGE> 1
GABELLI INTERNATIONAL GROWTH FUND, INC.
EXHIBIT 16
TOTAL RETURN
DATE AS OF: 12/31/97
== == ======== ====== = ========= ===== ======== === ======== === ======== =====
GABELLI INTERNATIONAL GROWTH FUND, INC.
AVERAGE ANNUAL RETURN
T=((ERV/P)exp(1/N))-1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
SINCE INCEPTION: (05/25/93 TO 12/31/97):
((1,949.62/1,000)exp(1/(1681/365))-1)= 15.60%
1 YEAR (12/31/96 TO 12/31/97):
((1,073.0/1,000)exp(1/(365/365))-1)= 7.30%
AGGREGATE ANNUAL RETURNS
T =((ERV/P)exp(1/N))-1
WHERE: T = TOTAL RETURN
ERV = REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL INVESTMENT OF $1,000.
N = NUMBER OF YEARS
EXAMPLE:
SINCE INCEPTION: (05/25/93 TO 12/31/97):
(1,440.0/1,000)-1= 44.00%
1 YEAR (12/31/96 TO 12/31/97):
(1,073.0/1,000)-1= 7.30%
== == ======== ====== = ========= ===== ======== === ======== === ======== =====
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000925463
<NAME> GABELLI INTERNATIONAL GROWTH FUND, INC.
<SERIES>
<NUMBER> 1
<NAME> GABELLI INTERNATIONAL GROWTH FUND, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 15,440,605
<INVESTMENTS-AT-VALUE> 18,408,110
<RECEIVABLES> 615,305
<ASSETS-OTHER> 107,745
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 19,131,160
<PAYABLE-FOR-SECURITIES> 5,591
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 992,491
<TOTAL-LIABILITIES> 998,082
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,177,185
<SHARES-COMMON-STOCK> 1,259,160
<SHARES-COMMON-PRIOR> 955,129
<ACCUMULATED-NII-CURRENT> (583)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (11,590)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,968,066
<NET-ASSETS> 18,133,078
<DIVIDEND-INCOME> 300,054
<INTEREST-INCOME> 18,354
<OTHER-INCOME> 0
<EXPENSES-NET> 476,225
<NET-INVESTMENT-INCOME> (157,817)
<REALIZED-GAINS-CURRENT> (3,387)
<APPREC-INCREASE-CURRENT> 1,523,689
<NET-CHANGE-FROM-OPS> 1,362,485
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,060,711
<NUMBER-OF-SHARES-REDEEMED> 1,756,680
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5,317,685
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 53,490
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 193,382
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 476,225
<AVERAGE-NET-ASSETS> 19,332,724
<PER-SHARE-NAV-BEGIN> 13.42
<PER-SHARE-NII> (0.13)
<PER-SHARE-GAIN-APPREC> 1.11
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.40
<EXPENSE-RATIO> 2.46
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
