<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 1, 1999
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. 6 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 8 [X]
(CHECK APPROPRIATE BOX OR BOXES)
------------
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, LLC
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, LLC WILLKIE, FARR & GALLAGHER
ONE CORPORATE CENTER 787 SEVENTH AVE.
RYE, NEW YORK 10580-1434 NEW YORK, NEW YORK 10019
------------
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b); or
[ ] on [date] pursuant to paragraph (b); or
[ ] 60 days after filing pursuant to paragraph (a); or
[X] on May 1, 1999 pursuant to paragraph (a) of Rule 485.
[ ] 75 days after filings pursuant to paragraph (a) (2)
[ ] on [date] pursuant to paragraph (a) (2) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously files post-effective amendment.
<PAGE> 2
GABELLI INTERNATIONAL GROWTH FUND, INC.
FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
PART A
ITEM NO. PROSPECTUS HEADING
- ------- -----------------
<S> <C> <C>
1. Front and Back Cover Pages Front Cover; Back Cover
2. Risk/Return Summary: Investments, Risks, and Risk/Return Summary and Fund Expenses
Performance
3. Risk/Return Summary: Fee Table Risk/Return Summary and Fund Expenses
4. Investment Objectives, Principal Investment Investment Objectives, Policies and Risks
Strategies and Related Risks
5. Management's Discussion of Fund Performance Risk/Return Summary and Fund Expenses
6. Management, Organization, and Capital Fund Management
Structure
7. Shareholder Information Shareholder Information; Owner's Manual
8. Distribution Arrangements Fund Management
9. Financial Highlights Information Financial Highlights
PART B CAPTION IN STATEMENT
ITEM NO. OF ADDITIONAL INFORMATION
- ------- -----------------------
10. Cover Page and Table of Contents Cover Page
11. Fund History Investment Strategies and Risks; Shares of Beneficial
Interest; Description of Shares, Voting Rights and
Liabilities
12. Description of the Fund and Its Investments Cover Page; Investment Strategies & Risks;
and Risks Investment Restrictions
13. Management of the Fund Directors and Officers; The Adviser
14. Control Persons and Principal Directors and Officers; Description of Shares, Voting
Holders of Securities Rights and Liabilities
15. Investment Advisory and Other Directors and Officers; The Adviser; The Distributor;
Services The Distribution Plans
16. Brokerage Allocation and Other Portfolio Transactions and Brokerage
Practices
17. Capital Stock and Other Description of Shares. Voting Rights and Liabilities
Securities
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
18. Purchase, Redemption and Pricing Purchase and Redemption of Shares; Exchange
of Securities Being Offered Privilege
19. Taxation of the Fund Dividends, Distribution and Taxes
20. Underwriters Not applicable
21. Calculations of Performance Data Determination of Net Asset Value
22. Financial Statements 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.
<PAGE> 4
GABELLI INTERNATIONAL
GROWTH FUND, INC.
AAA CLASS PROSPECTUS
MAY 1, 1999
QUESTIONS?
CALL 1-800-GABELLI
OR YOUR INVESTMENT REPRESENTATIVE.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THE SHARES DESCRIBED IN
THIS PROSPECTUS OR DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 5
TABLE OF CONTENTS
CAREFULLY REVIEW THIS IMPORTANT SECTION, WHICH SUMMARIZES THE FUND'S
INVESTMENTS, RISKS, PAST PERFORMANCE AND FEES.
RISK/RETURN SUMMARY AND FUND EXPENSES
3-5
REVIEW THIS SECTION FOR INFORMATION ON INVESTMENT STRATEGIES AND THEIR RISKS.
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
5-9
REVIEW THIS SECTION FOR DETAILS ON THE PEOPLE AND ORGANIZATIONS WHO OVERSEE THE
FUND.
FUND MANAGEMENT
10 THE INVESTMENT ADVISER
10 THE PORTFOLIO MANAGER
10 THE DISTRIBUTOR
REVIEW THIS SECTION AND THE ACCOMPANYING OWNER'S MANUAL FOR DETAILS ON HOW
SHARES ARE VALUED, HOW TO PURCHASE, SELL AND EXCHANGE SHARES, RELATED CHARGES
AND PAYMENTS OF DIVIDENDS AND DISTRIBUTIONS.
SHAREHOLDER INFORMATION
11 PRICING OF FUND SHARES
11 PURCHASING, SELLING AND EXCHANGING SHARES
12 DISTRIBUTION ARRANGEMENTS
12 DIVIDENDS, DISTRIBUTIONS AND TAXES
13 OTHER SHAREHOLDER SERVICES
FINANCIAL HIGHLIGHTS
13
BACK COVER
14 WHERE TO LEARN MORE ABOUT THIS FUND
2
<PAGE> 6
RISK/RETURN SUMMARY AND FUND EXPENSES
RISK/RETURN SUMMARY
INVESTMENT OBJECTIVE The Fund seeks to provide investors
with long-term capital appreciation. The
production of any current income is
incidental.
PRINCIPAL INVESTMENT STRATEGY The Fund invests primarily in equity
securities of foreign issuers located in at
least three countries outside the United
States which are likely to have rapid growth
in revenues and earnings and potential for
above-average capital appreciation. The Fund
seeks companies that have the potential to
grow faster than other companies in their
respective equity markets and are priced at
attractive valuation levels.
PRINCIPAL INVESTMENT RISKS Principal risk factors of the Fund include:
[ ] MARKET RISK
[ ] FOREIGN SECURITIES RISK
[ ] EMERGING MARKETS RISKS
[ ] RISKS OF DERIVATIVE INSTRUMENTS
WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
[ ] ARE SEEKING A LONG-TERM GOAL SUCH AS
RETIREMENT
[ ] ARE LOOKING TO ADD A GROWTH COMPONENT TO
YOUR PORTFOLIO
[ ] ARE WILLING TO ACCEPT HIGHER RISKS OF
INVESTING IN THE STOCK MARKET IN EXCHANGE
FOR POTENTIALLY HIGHER LONG TERM RETURNS
[ ] ARE LOOKING TO DIVERSIFY DOMESTIC
INVESTMENTS WITH INVESTMENTS IN FOREIGN
SECURITIES
This Fund will not be appropriate for anyone:
[ ] SEEKING MONTHLY INCOME
[ ] PURSUING A SHORT-TERM GOAL OR INVESTING
EMERGENCY RESERVES
[ ] SEEKING SAFETY OF PRINCIPAL
3
<PAGE> 7
RISK/RETURN SUMMARY (CONTINUED)
The chart on this page shows the Fund's annual returns over the past three years
and provides some indication of the risks of investing in the Fund by showing
how its performance has varied from year to year. The table below compares the
Fund's performance over time to that of the Lipper International Fund Average
("LIFA") and the Morgan Stanley Capital International EAFE Index ("MSCI EAFE").
The MSCI EAFE is widely recognized, unmanaged index composed of a sample of
companies representative of the market structure of 20 European and Pacific
Basin countries. The LIFA represents an index of performance of returns of
international equity mutual funds as tracked by Lipper Analytical Services, Inc.
Of course, past performance does not indicate how the Fund will perform in the
future. Both the chart and table assume reinvestment of dividends and
distributions.
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
1996 22.20%
1997 7.30%
1998 17.40%
Best quarter: 1st Qtr 1998 18.26%
Worst quarter: 3rd Qtr 1998 (16.15)%
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)
<TABLE>
<CAPTION>
Inception Past Year Since Inception
Date of Fund
<S> <C> <C> <C>
GABELLI INTERNATIONAL GROWTH
FUND, INC. -
CLASS AAA 6/30/95 15.50% 16.10%
LIPPER INTERNATIONAL FUND _____% _____%
AVERAGE
MORGAN STANLEY CAPITAL _____% _____%
INTERNATIONAL EAFE INDEX
</TABLE>
4
<PAGE> 8
FUND EXPENSES
FEES AND EXPENSES
As an investor in the Fund, you will pay the following fees and expenses when
you buy and hold shares. Annual Fund operating expenses are paid out of Fund
assets, and are reflected in the share price.
EXPENSE EXAMPLE
Use the example below to compare fees and expenses with those of other funds. It
illustrates the amount of fees and expenses you would pay, assuming the
following:
- $10,000 investment
- 5% annual return
- redemption at the end of each period
- no changes in the Funds' operating expenses
Because this example is hypothetical and for comparison only, your actual costs
may be higher or lower.
Class
AAA
Shareholder fees None
(fees paid directly from your investment)
Annual Fund operating expenses
(expenses that are deducted from Fund
assets)
Management fees 1.00%
Distribution (12b-1) fees .25%
Other expenses .92%
Total annual Fund operating expenses 2.17%
There are no front or back end sales charges or fees for exchanges of Class AAA
shares.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
GABELLI INTERNATIONAL $220 $679 $1,164 $2,503
GROWTH FUND
</TABLE>
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES
The Fund seeks long-term capital appreciation. To achieve its investment
objective, the Fund invests primarily in the equity securities of foreign
issuers. The Fund's investment objective may not be changed without shareholder
approval. There is no assurance that the Fund will achieve its investment
objective.
5
<PAGE> 9
INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES (CONTINUED)
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 U.S. which the Adviser believes are likely to have rapid growth in
revenues and earnings and potential for above-average capital appreciation.
Equity securities include:
- common and preferred stocks;
- securities convertible into common stocks; and
- securities such as rights and warrants that have common stock
characteristics.
In choosing investments, the Adviser considers a number of factors, including:
- a company's potential to grow faster than other companies in
its respective equity market;
- valuation levels;
- the political stability and economic outlook of countries and
regions; and
- the prudent allocation among countries and regions to reduce
volatility in the Fund's portfolio.
The Fund intends to diversify its investments across different countries, but
the percentage of Fund assets invested in particular countries or regions will
change from time to time based on the Adviser's judgment. The Fund intends to
invest in the securities of companies located in developed countries and, to a
lesser extent, those located in emerging markets.
The Fund may invest in money market instruments. 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. or Standard & Poor's Ratings
Services or, if unrated, the equivalent in credit quality as determined by the
Adviser). The Fund may also invest in money market instruments for liquidity
purposes to meet redemption requests or to pay dividends and expenses. As a
defensive tactic in unusual market conditions, the Fund may temporarily invest
up to 100% of its assets in money market instruments. This could potentially
keep the Fund from achieving its goal.
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 invest up to 25% of its assets in lower quality debt securities,
but does not expect to invest more than 5% of its assets in debt securities
rated, at the time of purchase, lower than BBB by S&P or Baa by Moody's or, if
unrated, determined by the Adviser to be of similar quality.
6
<PAGE> 10
INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES (CONTINUED)
To a lesser extent, 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, lend its portfolio securities and engage in short-selling.
RISK FACTORS
The Fund's risk profile is largely defined by its investment goal and principal
strategies. You will find a concise description of the Fund's principal risks in
the "Risk/Return Summary."
In addition to the risks previously mentioned, the Fund may use certain
investment practices that have higher risks and opportunities associated with
them. However, the Fund has limitations and policies designed to reduce these
risks. To the extent the Fund utilizes these practices, its overall performance
may be affected, either positively or negatively.
ACCESS RISK The risk that some countries may restrict the Fund's access to
investments or offer terms that are less advantageous than those for local
investors. This could limit the attractive investment opportunities available to
the Fund.
CORRELATION RISK The risk that the relationships between markets are not
contemplated in the investment decision-making process. Incomplete correlation,
or inaccurately forecasted correlation, can result in unanticipated risks.
CREDIT RISK The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation.
DERIVATIVE INSTRUMENTS RISKS The use of these instruments requires special
skills, knowledge and investment techniques that differ from those required for
normal portfolio management. The success of the Fund in selecting these
instruments for its portfolio depends on the skill of the Adviser in predicting
the movement of interest rates, the value of particular instruments and other
economic variables. There is no assurance that the Adviser will accurately
predict these movements.
EMERGING MARKETS RISK Focusing on emerging (less developed) markets involves
higher levels of risk, including increased currency, information, liquidity,
market, political and valuation risks. Deficiencies in regulatory oversight,
market infrastructure, shareholder protections and company laws could expose the
Fund to operational and other risks as well. Some countries may have
restrictions that could limit the Fund's access to attractive opportunities.
Additionally, emerging markets often face serious economic problems (such as
high external debt, inflation and unemployment) that could subject the Fund to
increased volatility or substantial declines in value.
7
<PAGE> 11
RISK FACTORS (CONTINUED)
EXPOSURE RISK The risk associated with techniques that increase the Fund's
exposure to a security, index or its investment portfolio. Exposure is the
Fund's maximum potential gain or loss from an investment. Certain investments
(such as options and futures) and certain practices (such as short-selling) may
have the effect of magnifying declines as well as increases in the Fund's net
asset value. Losses from writing options and entering into futures and short
sales can be unlimited.
FOREIGN SECURITIES RISK A fund that invests outside the U.S. carries additional
risks that include:
CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar
and foreign currencies may negatively affect an investment. Adverse
changes in exchange rates may erode or reverse any gains produced by
foreign-currency denominated investments and may widen any losses. The
Fund may, but is not required to, seek to reduce currency risk by
hedging part or all of its exposure to various foreign currencies.
INFORMATION RISK Key information about an issuer, security or market
may be inaccurate or unavailable.
POLITICAL RISK Foreign governments may expropriate assets, impose
capital or currency controls, impose punitive taxes or nationalize a
company or industry. Any of these actions could have a severe effect on
security prices and impair the Fund's ability to bring its capital or
income back to the U.S. Other political risks include economic policy
changes, social and political instability, military action and war.
INTEREST RATE RISK The risk of a decline in an investment's market value
attributable to changes in interest rates. With bonds and other fixed income
securities, a rise in interest rates typically causes a fall in values, while a
fall in interest rates typically causes a rise in values.
LIQUIDITY RISK The risk that certain securities may be difficult or impossible
to sell at the time and the price that the seller would like. The seller may
have to lower the price, sell other securities instead or forego an investment
opportunity. Any of these could have a negative effect on Fund management or
performance.
MANAGEMENT AND OPPORTUNITY RISK The risk that a strategy used by the Fund's
management may fail to produce the intended result. The risk of missing out on
an investment opportunity because the assets necessary to take advantage of it
are tied up in other investments. These risks are common to all mutual funds.
MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility", may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy or the market as a whole. Market risk is common to most investments
- --including stocks and bonds and the mutual funds that invest in them.
8
<PAGE> 12
RISK FACTORS (CONTINUED)
NATURAL EVENT RISK The risk of losses attributable to natural disasters, crop
failures and similar events.
REGULATORY RISK Positions in futures and options on futures will be entered into
only to the extent they constitute permissible positions for the Fund according
to applicable rules of the Commodity Futures Trading Commission. At times, the
Adviser may be constrained in its ability to use futures, options on futures or
other derivatives by an unanticipated inability to close positions when it would
be most advantageous to do so or at favorable prices. These regulatory
constraints may have an adverse effect on Fund management or performance.
TRADING LIMIT AND TRADING HALT RISK Exchanges on which options and futures
contracts are traded, such as the Chicago Mercantile Exchange, have established
limits on how much an option or futures contract may decline over various time
periods within a day. If an option or futures contract's price declines more
than the established limits, no trading may occur at prices outside that limit.
If a trading limit is reached before the close of a trading day, the Fund may
not be able to purchase or sell options or futures contracts at advantageous
prices or at all. In such an event, the Fund also may be required to use a
"fair-value" method to price its outstanding contracts. In addition, the Chicago
Mercantile Exchange imposes intraday 10 minute trading halts when trades occur
at specified limits within the various time periods.
VALUATION RISK The risk that the Fund has valued certain of its securities at a
higher or lower price than it can sell them for.
YEAR 2000 Like other funds and business organizations around the world, the Fund
could be adversely affected if the computer systems used by the Adviser, the
Fund's other service providers and companies in which the Fund invests do not
properly process and calculate date-related information for the year 2000 and
beyond. The Fund has been informed that the Adviser and the Fund's other service
providers are taking steps to minimize the risk associated with the Year 2000
problem, including inventorying of software systems, determining inventory items
that may not function properly after December 31, 1999, reprogramming or
replacing such systems and retesting for Year 2000 readiness and obtaining
assurances from their vendors and suppliers in the same manner. Non-compliant
Year 2000 systems upon which the Fund is dependent may result in errors and
account maintenance failures. The Fund has no reason to believe that (1) the
Year 2000 plans of the Fund's key service providers for services critical to the
Fund's operations will not be completed by December 31, 1999, and (2) the costs
currently associated with the implementation of their plans will have material
adverse impact on the business, operations or financial condition of the Fund or
its service providers.
Since the ultimate costs or consequences of incomplete or untimely resolution of
the Year 2000 problem are unknown to the Fund at this time, there may be costs
or consequences having a material adverse impact on the Fund's key service
providers, your account records and/or the operations or investments of the
Fund. The Fund and the Adviser will continue to monitor developments relating to
this issue, including the development of contingency plans for providing back-up
computer services in the event of a systems failure.
9
<PAGE> 13
FUND MANAGEMENT
THE INVESTMENT ADVISER
Gabelli Funds, LLC (the "Adviser"), One Corporate Center, Rye, NY 10580 is a
limited liability company organized in 1998 after a reorganization of the
predecessor, Gabelli Funds, Inc., which was formed in 1980. As of December 31,
1998, Gabelli Funds, LLC and its affiliates manage more than $16.3 billion in
assets. Through its portfolio management team, Gabelli Funds, LLC makes the
day-to-day investment decisions and continuously reviews, supervises and
administers the Fund's investment programs.
For these advisory services, the Adviser was paid a fee of 1.00% of average net
assets during the fiscal year ended December 31, 1998. Any portion of the total
fees received by the Adviser may be used by the Adviser to provide shareholder
and administrative services.
THE PORTFOLIO MANAGER
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 the Gabelli Gold Fund, Inc. since May 1994. Mr. Bryan served as
Senior Vice President of Lexington Management Corporation from 1986 until May
1994.
THE DISTRIBUTOR
Gabelli & Company, Inc. is the Fund's distributor. Its address is One Corporate
Center, Rye, NY 10580.
The Statement of Additional Information has more detailed information about the
Adviser and other service providers.
10
<PAGE> 14
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
HOW NAV IS CALCULATED
The NAV is calculated by adding the total value of the Fund's investments and
other assets, subtracting its liabilities and then dividing that figure by the
number of outstanding shares of the Fund:
NAV =
TOTAL ASSETS - LIABILITIES
--------------------------
Number of Shares
Outstanding
You can find the Fund's NAV daily in the Wall Street Journal and other
newspapers or by calling 1-800-GABELLI (800-422-3554).
The Fund's net asset value, or NAV, is determined and its shares are priced at
the close of regular trading of the New York Stock Exchange, normally at 4:00
p.m., eastern time, on days the New York Stock Exchange is open. Your order for
purchase, sale or exchange of shares is priced at the next NAV calculated after
your order is received by the Fund. This is what is known as the offering price.
Fund securities are valued as of the close of trading on the primary exchange on
which they trade. The Fund's securities are generally valued at current market
prices. If market quotations are not available, prices will be based on the
average of the latest bid and asked quotations for such securities prior to the
valuation time, or the latest bid price if asked prices are not available. Debt
securities with remaining maturities of 60 days or less will be valued at
amortized cost, which the Board of Directors believes represents fair value.
Some Fund securities may be listed on foreign exchanges that are open on days
(such as U.S. holidays) when the Fund does not compute its NAV. This could cause
the value of the Fund's portfolio investments to be affected on days when you
cannot buy or sell shares.
PURCHASING, SELLING AND EXCHANGING SHARES
Information about purchasing, selling and exchanging your shares is contained in
a separate document called the Owner's Manual. If you have not received it,
please contact your broker or financial consultant or the Fund at the number
listed on the back page of this Prospectus. The Owner's Manual is considered an
integral part of this Prospectus.
11
<PAGE> 15
DISTRIBUTION ARRANGEMENTS
The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940
Act which authorizes payments by the Fund of .25% of the average daily net
assets of the Fund to compensate the Distributor and other dealers and
investment representatives for services and expenses relating to the sale and
distribution of the Fund's shares. Rule 12b-1 fees are paid from Fund assets on
an ongoing basis, and increase the cost of your investment.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Any income the Fund receives in the form of interest or dividends is paid out,
less expenses, to its shareholders. The Fund declares and pays dividends from
net investment income and capital gains, if any, on an annual basis.
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
The Fund expects that its dividends will primarily consist of net investment
income and, if any, long-term and short-term capital gains. Distributions from
net investment income and short-term capital gains are taxable as ordinary
income. Such distributions are taken into account for tax purposes in the year
in which they are declared, even if they appear on your account statement the
following year. Long-term capital gain distributions are taxable at long-term
capital gain tax rates. Exchanges of the Fund's shares for shares of another
fund will be treated as a sale of shares, and any gain on the transaction may be
subject to federal income tax.
You will be notified in January each year about the federal tax status of
distributions made by the Fund. Depending on your residence for tax purposes,
distributions also may be subject to state and local taxes, including
withholding taxes.
TAX IDENTIFICATION NUMBER
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions and redemptions proceeds paid to shareholders who have not
provided the Fund with their Taxpayer Identification Number in compliance
with IRS rules. To avoid this, make sure you provide your correct Tax
Identification Number (Social Security Number for most investors) on your
account application.
Foreign shareholders may be subject to special withholding requirements. Consult
your tax adviser about the federal, state and local tax consequences in your
particular circumstances.
12
<PAGE> 16
OTHER SHAREHOLDER SERVICES
As a shareholder of the Fund, you can take advantage of other service privileges
which are described in the Owner's Manual:
- Telephone Investment and Redemption Plan
- Automatic Investment Plan
- Systematic Withdrawal Plan
- Retirement Plans
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 4 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that you would have earned or lost on an investment in the
Fund (assuming reinvestment of all dividends and distributions).
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH YEAR:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995+
<S> <C> <C> <C> <C>
OPERATING PERFORMANCE:
Net asset value, beginning of period $ 14.40 $ 13.42 $ 10.98 $ 10.00
---------- ---------- ---------- ----------
Net investment loss (0.02) (0.13) (0.15)(a) (0.03)(a)
Net realized and unrealized gain on
investments 2.51 1.11 2.59 1.01
---------- ---------- ---------- ----------
Total from investment operations 2.49 0.98 2.44 0.98
---------- ---------- ---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
In excess of net investment income (0.03) -- -- --
Net realized gain on investments (1.23) -- -- --
---------- ---------- ---------- ----------
Total distributions (1.26) -- -- --
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 15.63 $ 14.40 $ 13.42 $ 10.98
========== ========== ========== ==========
Total return++ 17.4% 7.3% 22.2% 9.8%
========== ========== ========== ==========
RATIOS TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) $ 26,791 $ 18,133 $ 12,815 $ 2,096
Ratio of net investment loss to
average net assets(c) (0.14%) (0.82%) (1.21%) (1.19%)(b)
Ratio of operating expenses to
average net assets(c) 1.98% 2.46% 2.72% 2.75%(b)
Portfolio turnover rate 52% 63% 5% 30%
</TABLE>
- --------------
+ From commencement of operations on June 30, 1995.
++ Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the
period including reinvestment of dividends. Total return for the period
of less than one year is not annualized.
(a) Based on average month-end shares outstanding.
(b) Annualized.
(c) The Fund incurred interest expense for the years ended December 31,
1998 and 1997. If interest expense had not been incurred, the ratio of
operating expenses and net investment loss to average net assets would
have been 3.62% and (2.12%) for 1996 and 8.10% and (6.54%) for 1995
(annualized), respectively.
13
<PAGE> 17
FOR MORE INFORMATION:
For more information about the Fund, the following documents are available free
upon request:
OWNER'S MANUAL:
Information about purchasing, selling and exchanging shares of the Fund is
included in a separate document entitled "Owner's Manual." The Owner's Manual is
an integral part of the Prospectus. If you have not received it, please contact
the Fund at the number listed below.
ANNUAL/SEMI-ANNUAL REPORTS:
The Fund's semi-annual and audited annual reports to shareholders contain
detailed information on the Fund's investments. In the annual report, you will
find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Fund, including its
operations and investment policies. It is incorporated by reference, and is
legally considered a part of this prospectus.
YOU CAN GET FREE COPIES OF REPORTS AND SAI, PROSPECTUSES OF OTHER FUNDS IN THE
GABELLI FAMILY, OR REQUEST OTHER INFORMATION AND DISCUSS YOUR QUESTIONS ABOUT
THE FUND BY CONTACTING:
GABELLI INTERNATIONAL GROWTH FUND, INC.
ONE CORPORATE CENTER
RYE, NY 10580
TELEPHONE: 1-800-GABELLI (1-800-422-3554)
WWW.GABELLI.COM
You can review the Fund's reports and SAIs at the Public Reference Room of the
Securities and Exchange Commission. You can get text-only copies:
- For a fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009 or calling
1-800-SEC-0330.
- Free from the Commission's Website at http://www.sec.gov.
QUESTIONS?
CALL 1-800-GABELLI
OR YOUR INVESTMENT REPRESENTATIVE.
(Investment Company Act file no. 811-08560)
14
<PAGE> 18
THE GABELLI FAMILY
OF FUNDS
OWNER'S MANUAL
AAA CLASS -
NO-LOAD CLASS
GABELLI GLOBAL SERIES FUNDS, INC.
GABELLI GOLD FUND, INC.
GABELLI INTERNATIONAL GROWTH FUND, INC.
GABELLI ABC FUND
GABELLI ASSET FUND
GABELLI GROWTH FUND
MAY 1, 1999
THE INFORMATION CONTAINED IN THE OWNER'S MANUAL IS INCORPORATED BY REFERENCE
INTO, AND IS LEGALLY CONSIDERED PART OF, THE PROSPECTUSES FOR THE GABELLI FAMILY
OF FUNDS. THE OWNER'S MANUAL MUST BE PRECEDED OR ACCOMPANIED BY A GABELLI FUNDS
PROSPECTUS.
<PAGE> 19
OWNER'S MANUAL
TABLE OF CONTENTS
PURCHASING SHARES
3 Instructions for Opening or Adding to an Account
4 Telephone Investment Plan
4 Automatic Investment Plan
4 Retirement Plans
4 Minimum Investments
5 Dividends and Distributions
SELLING SHARES
5 Instructions for Selling Shares
5 By Bank Wire or Check via Telephone
5 By Bank Wire or Check via Mail
6 General Policies on Selling Shares
6 Signature Guarantees
6 Verifying Telephone Redemptions
6 Redemptions Within 15 Days of Investment
6 Refusal of Redemption Request
6 Closing of Small Accounts
6 Undeliverable Distribution Checks
EXCHANGING SHARES
7 Instructions for Exchanging Shares
PRICING OF FUND SHARES
7 How NAV is Calculated
2
<PAGE> 20
PURCHASING SHARES
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
PURCHASES THROUGH BROKERS/DEALERS:
If purchasing through your financial advisor or brokerage account, simply tell
your advisor or broker that you wish to purchase shares of the Funds and he or
she will take care of the necessary documentation. You should state specifically
which class of shares you are buying. For all other purchases directly with the
Fund, follow the instructions below.
PURCHASES DIRECTLY FROM THE FUND:
All investments made by regular mail or personal delivery, whether initial or
subsequent, should be sent to:
BY REGULAR MAIL BY OVERNIGHT DELIVERY
The Gabelli Funds The Gabelli Funds
PO Box 8308 c/o BFDS
Boston, MA 02266-8308 66 Brooks Drive
Braintree, MA 02184
For Initial Investment:
1. Carefully read and complete the application.
2. Make check, bank draft or money order payable to "[name of Fund]."
3. Mail or deliver application and payment to the address above.
For Subsequent Investments:
1. Make check, bank draft or money order payable to "[name of Fund]."
2. Provide the exact name and number of your account.
3. Mail or deliver payment to the address above.
BY WIRE TRANSFER
For Initial Investment:
Call 1-800-GABELLI (1-800-422-3554) to obtain a new account number. Promptly
mail the completed application to the address shown above for regular mail, and
For Initial and Subsequent Investments:
Instruct your bank to wire transfer your investment to:
STATE STREET BANK AND TRUST COMPANY
ABA #011-0000-28 REF DDA# 9904-6187
ATTN: SHAREHOLDER SERVICES
RE: [FUND NAME]
A/C#___________________________
YOUR NAME ______________________
225 FRANKLIN STREET, BOSTON, MA 02110
NOTE: YOUR BANK MAY CHARGE A WIRE TRANSFER FEE.
QUESTIONS?
CALL 1-800-GABELLI
OR YOUR INVESTMENT REPRESENTATIVE.
3
<PAGE> 21
PURCHASING SHARES (CONTINUED)
You can add to your account by using the convenient options described below. The
Fund reserves the right to change or eliminate these privileges at any time upon
60 days notice to shareholders.
TELEPHONE INVESTMENT PLAN
You may purchase additional shares of the Funds by telephone as long as your
bank is a member of the Automated Clearing House (ACH) system. You must also
have a completed, approved Investment Plan application on file with the Fund's
Transfer Agent.
There is a minimum of $100 for each telephone investment. To initiate an ACH
purchase, please call 1-800-GABELLI (1-800-422-3554) or 1-800-872-5365.
AUTOMATIC INVESTMENT PLAN
You can make automatic monthly investments in the Funds. Details about this plan
can be obtained from the Distributor on a separate application by calling
1-800-GABELLI (800-422-3554).
RETIREMENT PLANS
You can invest in various types of retirement plans through the Fund. Details
about these plans can be obtained from the Distributor on a separate application
by calling 1-800-GABELLI (800-422-3554).
MINIMUM INVESTMENTS
You may purchase Funds through the Distributor or participating organizations,
which may charge additional fees and may require higher or lower minimum
investments or impose other limitations on buying and selling shares.
<TABLE>
<CAPTION>
MINIMUM
INITIAL MINIMUM
ACCOUNT TYPE INVESTMENT SUBSEQUENT
<S> <C> <C>
Regular (non-retirement) $1,000 $ 0
Retirement (IRA)
Traditional IRA $1,000 $ 0
Roth IRA $1,000 $ 0
Spousal IRA $ 250 $ 0
Education IRA $ 250 $ 0
Automatic Investment Plan $ 0 $ 100
Telephone Investment Plan $ 100 $ 100
</TABLE>
All purchases must be in U.S. dollars. A fee will be charged for any checks that
do not clear. Third-party checks are not accepted. Your purchase of shares will
be effective on the same business day if the Fund's transfer agent receives your
order by 4:00 p.m. (12 noon for a money market fund), and receives your form of
payment by 4:00 p.m., eastern time. Otherwise, your purchase will be effective
on the next business day. (See "Pricing of Fund Shares.") Shares are held on
account for you unless you specify in writing that you would like to receive a
stock certificate (certificates are not available for money market funds). We
can only issue a certificate for whole shares.
The Distributor may reject a purchase order if it considers it in the best
interest of the Fund and its shareholders. A Fund may waive its minimum purchase
requirement.
4
<PAGE> 22
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions will be automatically reinvested unless you
request otherwise.
SELLING SHARES
As a mutual fund shareholder, you are technically selling shares when you
request a withdrawal in cash. This is also known as redeeming shares.
WITHDRAWING MONEY FROM YOUR INVESTMENT
You may sell your shares at any time. Your sales price will be the next NAV
after your sell order is received by the Fund, its transfer agent, or your
investment representative. See section on "General Policies on Selling Shares"
below.
SYSTEMATIC WITHDRAWAL PLAN
You can receive automatic payments from your account on a monthly, quarterly or
annual basis. You can obtain details from the Distributor.
INSTRUCTIONS FOR SELLING SHARES
The Fund accepts telephone requests for redemptions of unissued shares.
BY BANK WIRE OR CHECK VIA TELEPHONE
1. Call 1-800-GABELLI (1-800-422-3554) with your account number, the amount of
the redemption and instructions as to how you wish to receive your funds.
2. If you are unable to reach the Fund by telephone, you may telecopy your
redemption request to the Fund at 914-921-____.
NOTE: If you call by 4:00 p.m., eastern time, your payment will normally be
wired to your bank on the following business day. (For Money Market Funds: If
you call before 12:00 noon, eastern time, your payment will be wired to your
bank on that day.) If you call after that time, your payment will be wired to
your bank on the next business day. If you request your wire redemption by
telephone, it must be at least $1,000. Your bank may charge a fee for incoming
wires.
BY BANK WIRE OR CHECK VIA MAIL
Submit a redemption request to the Fund. Redemption requests may be made by
letter to the Transfer Agent. You must specify the name of the Fund, the dollar
amount or number of shares you wish to redeem and the account number. You must
sign the letter in exactly the same way the account is registered, and if there
is more than one owner of shares, all must sign. A signature guarantee is
required for most requests.
5
<PAGE> 23
SELLING SHARES (CONTINUED)
GENERAL POLICIES ON SELLING SHARES
SIGNATURE GUARANTEES
Signature guarantees are required on redemption requests for the following:
- The check is not being mailed to the address on your account
- The check is not being made payable to the owner of the
account
- The redemption proceeds are being transferred to another
person's Fund account.
A signature guarantee can be obtained from most banks and securities dealers.
Notarized signatures are not considered a signature guarantee.
VERIFYING TELEPHONE REDEMPTIONS
The Fund makes every effort to ensure that telephone redemptions are only made
by authorized shareholders. All telephone calls are recorded for your protection
and you will be asked for information to verify your identity. If appropriate
precautions have not been taken, the Fund may be liable for losses due to
unauthorized transactions.
REDEMPTIONS WITHIN 15 DAYS OF INVESTMENT
When you have made an investment by check or through the automatic investment
plan, your redemption proceeds will not be mailed until the Transfer Agent is
satisfied that the check has cleared (which may require up to 15 days). You can
avoid this delay by purchasing shares with a certified check or federal funds
wire.
REDEMPTION IN KIND
The Fund reserves the right to make a redemption in kind - payment in portfolio
securities rather than cash - for certain large redemption amounts that could
hurt fund operations.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission in order to protect
remaining shareholders.
CLOSING OF SMALL ACCOUNTS
If your account (other than an IRA) falls below $500, the Fund may ask you to
increase your balance. If it is still below $500 after 30 days, the Fund may
close your account and send you the proceeds at the current NAV.
UNDELIVERABLE DISTRIBUTION CHECKS
If distribution checks (1) are returned and marked as "undeliverable" or (2)
remain uncashed for six months, your account will be changed automatically so
that all future distributions are reinvested in your account. Checks that remain
uncashed for six months will be canceled and the money reinvested in the Fund at
the then current net asset value.
QUESTIONS?
CALL 1-800-GABELLI
OR YOUR INVESTMENT REPRESENTATIVE.
6
<PAGE> 24
EXCHANGING SHARES
You can exchange your shares in one Fund for shares of the same class of another
Fund managed by Gabelli Funds, LLC, or its affiliates, usually without paying
additional sales charges (see "Notes" below).
You must meet the minimum investment requirements for the Fund into which you
are exchanging. Exchanges from one Fund to another are taxable transactions.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges may be made by sending a written request to The Gabelli Funds, PO Box
8308, Boston, MA 02266-8308 or by calling 1-800-GABELLI (1-800-422-3554).
Please provide the following information:
- Your name and telephone number
- The exact name on your account and account number
- Taxpayer identification number (usually your Social Security
number)
- Dollar value or number of shares to be exchanged
- The names of the Funds from/into which the exchange is to be
made
See "Selling Shares" for important information about telephone
transactions.
NOTES ON EXCHANGES
- When exchanging from a Fund that has no sales charge or a
lower sales charge to a Fund with a higher sales charge, you
will pay the difference.
- The registration and tax identification numbers of the two
accounts must be identical.
- This exchange privilege may be changed or eliminated at any
time upon a 60-day notice to shareholders.
- Be sure to read the prospectus carefully of any Fund into
which you wish to exchange shares.
PRICING OF FUND SHARES
HOW NAV IS CALCULATED
The NAV is calculated by adding the total value of the Fund's investments and
other assets, subtracting its liabilities and then dividing that figure by the
number of outstanding shares of the Fund:
NAV =
TOTAL ASSETS - LIABILITIES
--------------------------
Number of Shares
Outstanding
You can find the Fund's NAV daily in the Wall Street Journal and other
newspapers, or by calling 1-800-GABELLI (800-422-3554).
A Fund's net asset value, or NAV, is determined and its shares are priced at the
close of regular trading on the New York Stock Exchange, normally at 4:00 p.m.,
eastern time, on days the New York Stock Exchange is open. Your order for
purchase, sale or exchange of shares is priced at the next NAV calculated after
your order is received by the Fund. This is what is known as the offering price.
Fund securities are valued as of the close of trading on the primary exchange on
which they trade. Fund securities are generally valued at current market prices.
If market quotations are not available, prices will be based on the average of
the latest bid and asked quotations for such securities prior to the valuation
time, or the latest bid price if asked prices are not available. Debt securities
with remaining maturities of 60 days or less will be valued at amortized cost,
which the Board of Directors believes represents fair value.
Some Fund securities may be listed on foreign exchanges that are open on days
(such as U.S. holidays) when a Fund does not compute its NAV. This could cause
the value of a Fund's portfolio investments to be affected on days when you
cannot buy or sell shares.
7
<PAGE> 25
GABELLI INTERNATIONAL
GROWTH FUND, INC.
PROSPECTUS
A CLASS
B CLASS
C CLASS
MAY 1, 1999
QUESTIONS?
CALL 1-800-GABELLI
OR YOUR INVESTMENT REPRESENTATIVE.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED THE SHARES DESCRIBED IN
THIS PROSPECTUS OR DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 26
TABLE OF CONTENTS
CAREFULLY REVIEW THIS IMPORTANT SECTION, WHICH SUMMARIZES THE FUND'S
INVESTMENTS, RISKS, PAST PERFORMANCE AND FEES.
RISK/RETURN SUMMARY AND FUND EXPENSES
3-5
REVIEW THIS SECTION FOR INFORMATION ON INVESTMENT STRATEGIES AND THEIR RISKS.
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
6-10
REVIEW THIS SECTION FOR DETAILS ON THE PEOPLE AND ORGANIZATIONS WHO OVERSEE THE
FUND.
FUND MANAGEMENT
10 THE INVESTMENT ADVISER
10 THE PORTFOLIO MANAGER
10 THE DISTRIBUTOR
REVIEW THIS SECTION AND THE ACCOMPANYING OWNER'S MANUAL FOR DETAILS ON HOW
SHARES ARE VALUED, HOW TO PURCHASE, SELL AND EXCHANGE SHARES, RELATED CHARGES
AND PAYMENTS OF DIVIDENDS AND DISTRIBUTIONS.
SHAREHOLDER INFORMATION
11 PRICING OF FUND SHARES
11 PURCHASING, SELLING AND EXCHANGING SHARES
12 DISTRIBUTION ARRANGEMENTS/SALES CHARGES
15 DIVIDENDS, DISTRIBUTIONS AND TAXES
16 OTHER SHAREHOLDER SERVICES
FINANCIAL HIGHLIGHTS
16
BACK COVER
17 WHERE TO LEARN MORE ABOUT THIS FUND
2
<PAGE> 27
RISK/RETURN SUMMARY AND FUND EXPENSES
RISK/RETURN SUMMARY
INVESTMENT OBJECTIVE The Fund seeks to provide investors with
long-term appreciation of capital. The
production of any current income is incidental.
PRINCIPAL INVESTMENT STRATEGY The Fund invests primarily in equity securities
of foreign issuers located in at least three
countries outside the United States which
are likely to have rapid growth in revenues
and earnings and potential for above-average
capital appreciation. The Fund seeks
companies that have the potential to grow
faster than other companies in their
respective equity markets and are priced at
attractive valuation levels.
PRINCIPAL INVESTMENT RISKS Principal risk factors of the Fund include:
[ ] MARKET RISK
[ ] FOREIGN SECURITIES RISK
[ ] EMERGING MARKETS RISKS
[ ] RISKS OF DERIVATIVE INSTRUMENTS
WHO MAY WANT TO INVEST? Consider investing in the Fund if you:
[ ] ARE SEEKING A LONG-TERM GOAL SUCH AS
RETIREMENT
[ ] ARE LOOKING TO ADD A GROWTH COMPONENT TO
YOUR PORTFOLIO
[ ] ARE WILLING TO ACCEPT HIGHER RISKS OF
INVESTING IN THE STOCK MARKET IN EXCHANGE
FOR POTENTIALLY HIGHER LONG TERM RETURNS
[ ] ARE LOOKING TO DIVERSIFY DOMESTIC
INVESTMENTS WITH INVESTMENTS IN FOREIGN
SECURITIES
This Fund will not be appropriate for anyone:
[ ] SEEKING MONTHLY INCOME
[ ] PURSUING A SHORT-TERM GOAL OR INVESTING
EMERGENCY RESERVES
[ ] SEEKING SAFETY OF PRINCIPAL
3
<PAGE> 28
RISK/RETURN SUMMARY (CONTINUED)
The chart on this page shows the Fund's annual returns over the past three years
and provides some indication of the risks of investing in the Fund by showing
how its performance has varied from year to year. The Class A, B and C Shares
are new classes of the Fund, for which performance is not yet available. The
Class AAA shares of the Fund are offered in a separate prospectus. The returns
for Class A, B and C shares will differ from Class AAA returns shown in the bar
chart because of differences in expenses and sales charges of each class. The
table below compares the Fund's performance over time to that of the Lipper
International Fund Average ("LIFA") and the Morgan Stanley Capital International
EAFE Index ("MSCI EAFE"). The MSCI EAFE is widely recognized, unmanaged index
composed of a sample of companies representative of the market structure of 20
European and Pacific Basin countries. The LIFA represents an index of
performance of returns of international equity mutual funds as tracked by Lipper
Analytical Services, Inc.
<TABLE>
YEAR-BY-YEAR TOTAL RETURNS AS OF 12/31
FOR CLASS AAA SHARES
<CAPTION>
<S> <C> <C>
22.20% 7.30% 17.40%
1996 1997 1998
</TABLE>
Best quarter: 1st Qtr 1998 18.26%
Worst quarter: 3rd Qtr 1998 (16.15)%
The bar chart above does not reflect the impact of any applicable sales charges
or account fees which would reduce returns. Of course, past performance does not
indicate how the Fund will perform in the future. Both the chart and table
assume reinvestment of dividends and distributions.
AVERAGE ANNUAL TOTAL RETURNS (for the periods ending December 31, 1998)
<TABLE>
<CAPTION>
Inception Past Year Since Inception
Date of Fund
<S> <C> <C> <C>
CLASS A 5/01/99 N/A N/A
CLASS B 5/01/99 N/A N/A
CLASS C 5/01/99 N/A N/A
CLASS AAA 6/30/95 15.50% 16.10%
LIPPER INTERNATIONAL FUND _____% _____%
AVERAGE
MORGAN STANLEY CAPITAL _____% _____%
INTERNATIONAL EAFE INDEX
</TABLE>
4
<PAGE> 29
FUND EXPENSES
FEES AND EXPENSES
As an investor in the Fund, you will pay the following fees and expenses when
you buy and hold shares. Annual Fund operating expenses are paid out of Fund
assets, and are reflected in the share price.
CONTINGENT DEFERRED SALES CHARGE
Some Fund share classes impose a back end sales charge (load) if you sell your
shares before a certain period of time has elapsed. This is called a Contingent
Deferred Sales Charge (CDSC).
<TABLE>
<CAPTION>
Shareholder fees A SHARES B SHARES C SHARES
(fees paid directly from your
investment)
<S> <C> <C> <C>
Maximum sales charge on purchases 5.75%(1) None None
Maximum deferred sales charge None 5.00%(2) 1.00%(2)
Redemption fees None None None
Exchange fees(3) None None None
Annual Fund operating expenses
(expenses that are deducted from Fund
assets)
Management fees 1.00% 1.00% 1.00%
Distribution (12b-1) fees .25% 1.00% 1.00%
Other expenses .92% .92% .92%
Total annual Fund operating expenses 2.17% 2.92% 2.92%
</TABLE>
EXPENSE EXAMPLE
Use the example below to compare fees and expenses with
those of other funds. It illustrates the amount of fees
and expenses you would pay, assuming the following:
- $10,000 investment
- 5% annual return
- redemption at the end of each period (except as noted)
- no changes in the Funds' operating expenses
Because this example is hypothetical and for comparison only, your actual costs
may be higher or lower.
<TABLE>
<CAPTION>
1 Year 3 Years
<S> <C> <C>
CLASS A SHARES $782 $1,215
CLASS B SHARES
Assuming Redemption $795 $1,204
Assuming no Redemption $295 $ 904
CLASS C SHARES
Assuming Redemption $395 $ 904
Assuming no Redemption $295 $ 904
</TABLE>
- -----------
(1) Lower sales charges are available depending upon the amount invested.
(2) A CDSC on Class B shares declines over seven years starting with year
one from: 5%, 4%, 3%, 3%, 2%, 1%, 0%. A CDSC of 1% applies to
redemptions of Class C shares within the first twenty-four months.
(3) Exchanges may be made only to the same class of other funds.
5
<PAGE> 30
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES
The Fund seeks long-term capital appreciation. To achieve its investment
objective, the Fund invests primarily in the equity securities of foreign
issuers. The Fund's investment objective may not be changed without shareholder
approval. There is no assurance that the Fund will achieve its investment
objective.
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 U.S. which the Adviser believes are likely to have rapid growth in
revenues and earnings and potential for above-average capital appreciation.
Equity securities include:
- common and preferred stocks;
- securities convertible into common stocks; and
- securities such as rights and warrants that have common stock
characteristics.
In choosing investments, the Adviser considers a number of factors, including:
- a company's potential to grow faster than other companies in
its respective equity market;
- valuation levels;
- the political stability and economic outlook of countries and
regions; and
- the prudent allocation among countries and regions to reduce
volatility in the Fund's portfolio.
The Fund intends to diversify its investments across different countries, but
the percentage of Fund assets invested in particular countries or regions will
change from time to time based on the Adviser's judgment. The Fund intends to
invest in the securities of companies located in developed countries and, to a
lesser extent, those located in emerging markets.
The Fund may invest in money market instruments. 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. or Standard & Poor's Ratings
Services or, if unrated, the equivalent in credit quality as determined by the
Adviser). The Fund may also invest in money market instruments for liquidity
purposes to meet redemption requests or to pay dividends and expenses. As a
defensive tactic in unusual market conditions, the Fund may temporarily invest
up to 100% of its assets in money market instruments. This could potentially
keep the Fund from achieving its goal.
6
<PAGE> 31
INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES (CONTINUED)
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 invest up to 25% of its assets in lower quality debt securities,
but does not expect to invest more than 5% of its assets in debt securities
rated, at the time of purchase, lower than BBB by S&P or Baa by Moody's or, if
unrated, determined by the Adviser to be of similar quality.
To a lesser extent, 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, lend its portfolio securities and engage in short-selling.
RISK FACTORS
The Fund's risk profile is largely defined by its investment goal and principal
strategies. You will find a concise description of the Fund's principal risks in
the "Risk/Return Summary."
In addition to the risks previously mentioned, the Fund may use certain
investment practices that have higher risks and opportunities associated with
them. However, the Fund has limitations and policies designed to reduce these
risks. To the extent the Fund utilizes these practices, its overall performance
may be affected, either positively or negatively.
ACCESS RISK The risk that some countries may restrict the Fund's access to
investments or offer terms that are less advantageous than those for local
investors. This could limit the attractive investment opportunities available to
the Fund.
CORRELATION RISK The risk that the relationships between markets are not
contemplated in the investment decision-making process. Incomplete correlation,
or inaccurately forecasted correlation, can result in unanticipated risks.
CREDIT RISK The risk that the issuer of a security, or the counterparty to a
contract, will default or otherwise become unable to honor a financial
obligation.
DERIVATIVE INSTRUMENTS RISKS The use of these instruments requires special
skills, knowledge and investment techniques that differ from those required for
normal portfolio management. The success of the Fund in selecting these
instruments for its portfolio depends on the skill of the Adviser in predicting
the movement of interest rates, the value of particular instruments and other
economic variables. There is no assurance that the Adviser will accurately
predict these movements.
7
<PAGE> 32
RISK FACTORS (CONTINUED)
EMERGING MARKETS RISK Focusing on emerging (less developed) markets involves
higher levels of risk, including increased currency, information, liquidity,
market, political and valuation risks. Deficiencies in regulatory oversight,
market infrastructure, shareholder protections and company laws could expose the
Fund to operational and other risks as well. Some countries may have
restrictions that could limit the Fund's access to attractive opportunities.
Additionally, emerging markets often face serious economic problems (such as
high external debt, inflation and unemployment) that could subject the Fund to
increased volatility or substantial declines in value.
EXPOSURE RISK The risk associated with techniques that increase the Fund's
exposure to a security, index or its investment portfolio. Exposure is the
Fund's maximum potential gain or loss from an investment. Certain investments
(such as options and futures) and certain practices (such as short-selling) may
have the effect of magnifying declines as well as increases in the Fund's net
asset value. Losses from writing options and entering into futures and short
sales can be unlimited.
FOREIGN SECURITIES RISK A fund that invests outside the U.S. carries additional
risks that include:
CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar
and foreign currencies may negatively affect an investment. Adverse
changes in exchange rates may erode or reverse any gains produced by
foreign-currency denominated investments and may widen any losses. The
Fund may, but is not required to, seek to reduce currency risk by
hedging part or all of its exposure to various foreign currencies.
INFORMATION RISK Key information about an issuer, security or market
may be inaccurate or unavailable.
POLITICAL RISK Foreign governments may expropriate assets, impose
capital or currency controls, impose punitive taxes or nationalize a
company or industry. Any of these actions could have a severe effect on
security prices and impair the Fund's ability to bring its capital or
income back to the U.S. Other political risks include economic policy
changes, social and political instability, military action and war.
INTEREST RATE RISK The risk of a decline in an investment's market value
attributable to changes in interest rates. With bonds and other fixed income
securities, a rise in interest rates typically causes a fall in values, while a
fall in interest rates typically causes a rise in values.
LIQUIDITY RISK The risk that certain securities may be difficult or impossible
to sell at the time and the price that the seller would like. The seller may
have to lower the price, sell other securities instead or forego an investment
opportunity. Any of these could have a negative effect on Fund management or
performance.
8
<PAGE> 33
RISK FACTORS (CONTINUED)
MANAGEMENT AND OPPORTUNITY RISK The risk that a strategy used by the Fund's
management may fail to produce the intended result. The risk of missing out on
an investment opportunity because the assets necessary to take advantage of it
are tied up in other investments. These risks are common to all mutual funds.
MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility", may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy or the market as a whole. Market risk is common to most investments
- --including stocks and bonds and the mutual funds that invest in them.
NATURAL EVENT RISK The risk of losses attributable to natural disasters, crop
failures and similar events.
REGULATORY RISK Positions in futures and options on futures will be entered into
only to the extent they constitute permissible positions for the Fund according
to applicable rules of the Commodity Futures Trading Commission. At times, the
Adviser may be constrained in its ability to use futures, options on futures or
other derivatives by an unanticipated inability to close positions when it would
be most advantageous to do so or at favorable prices. These regulatory
constraints may have an adverse effect on Fund management or performance.
TRADING LIMIT AND TRADING HALT RISK Exchanges on which options and futures
contracts are traded, such as the Chicago Mercantile Exchange, have established
limits on how much an option or futures contract may decline over various time
periods within a day. If an option or futures contract's price declines more
than the established limits, no trading may occur at prices outside that limit.
If a trading limit is reached before the close of a trading day, the Fund may
not be able to purchase or sell options or futures contracts at advantageous
prices or at all. In such an event, the Fund also may be required to use a
"fair-value" method to price its outstanding contracts. In addition, the Chicago
Mercantile Exchange imposes intraday 10 minute trading halts when trades occur
at specified limits within the various time periods.
VALUATION RISK The risk that the Fund has valued certain of its securities at a
higher price that it can sell them for.
YEAR 2000 Like other funds and business organizations around the world, the Fund
could be adversely affected if the computer systems used by the Adviser, the
Fund's other service providers and companies in which the Fund invests do not
properly process and calculate date-related information for the year 2000 and
beyond. The Fund has been informed that the Adviser and the Fund's other service
providers are taking steps to minimize the risk associated with the Year 2000
problem, including inventorying of software systems, determining inventory items
that may not function properly after December 31, 1999, reprogramming or
replacing such systems and retesting for Year 2000 readiness and obtaining
assurances from their vendors and suppliers in the same manner. Non-compliant
Year 2000 systems upon which the Fund is dependent may result in errors and
account maintenance failures. The Fund has no reason to believe that (1) the
Year 2000 plans of
9
<PAGE> 34
RISK FACTORS (CONTINUED)
the Fund's key service providers for services critical to the Fund's operations
will not be completed by December 31, 1999, and (2) the costs currently
associated with the implementation of their plans will have material adverse
impact on the business, operations or financial condition of the Fund or its
service providers.
Since the ultimate costs or consequences of incomplete or untimely resolution of
the Year 2000 problem are unknown to the Fund at this time, there may be costs
or consequences having a material adverse impact on the Fund's key service
providers, your account records and/or the operations or investments of the
Fund. The Fund and the Adviser will continue to monitor developments relating to
this issue, including the development of contingency plans for providing back-up
computer services in the event of a systems failure.
FUND MANAGEMENT
THE INVESTMENT ADVISER
Gabelli Funds, LLC (the "Adviser"), One Corporate Center, Rye, NY 10580 is a
limited liability company organized in 1998 after a reorganization of the
predecessor, Gabelli Funds, Inc., which was formed in 1980. As of December 31,
1998, Gabelli Funds, LLC and its affiliates manage more than $16.3 billion in
assets. Through its portfolio management team, Gabelli Funds, LLC makes the
day-to-day investment decisions and continuously reviews, supervises and
administers the Fund's investment programs.
For these advisory services, the Adviser earns a fee of 1.00% of average net
assets. Any portion of the total fees received by the Adviser may be used by the
Adviser to provide shareholder and administrative services.
THE PORTFOLIO MANAGER
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 the Gabelli Gold Fund, Inc. since May 1994. Mr. Bryan served as
Senior Vice President of Lexington Management Corporation from 1986 until May
1994.
THE DISTRIBUTOR
Gabelli & Company, Inc. is the Fund's distributor. Its address is One Corporate
Center, Rye, NY 10580.
The Statement of Additional Information has more detailed information about the
Adviser and other service providers.
10
<PAGE> 35
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
HOW NAV IS CALCULATED
The NAV is calculated by adding the total value of the Fund's investments and
other assets, subtracting its liabilities and then dividing that figure by the
number of outstanding shares of the Fund:
NAV =
TOTAL ASSETS - LIABILITIES
--------------------------
Number of Shares
Outstanding
You can find the Fund's NAV daily in the Wall Street Journal and other
newspapers or by calling 1-800-GABELLI (800-422-3554).
The Fund's net asset value, or NAV, is determined and its shares are priced at
the close of regular trading of the New York Stock Exchange, normally at 4:00
p.m., eastern time, on days the New York Stock Exchange is open. Your order for
purchase, sale or exchange of shares is priced at the next NAV calculated after
your order is received by the Fund less any applicable sales charges as noted in
the section on "Distribution Arrangements/Sales Charges." This is what is known
as the offering price.
Fund securities are valued as of the close of trading on the primary exchange on
which they trade. The Fund's securities are generally valued at current market
prices. If market quotations are not available, prices will be based on the
average of the latest bid and asked quotations for such securities prior to the
valuation time, or the latest bid prices if asked prices are not available. Debt
securities with remaining maturities of 60 days or less will be valued at
amortized cost, which the Board of Directors believes represents fair value.
Some Fund securities may be listed on foreign exchanges that are open on days
(such as U.S. holidays) when the Fund does not compute its NAV. This could cause
the value of the Fund's portfolio investments to be affected on days when you
cannot buy or sell shares.
PURCHASING, SELLING AND EXCHANGING SHARES
Information about purchasing, selling and exchanging your shares is contained in
a separate document called the Owner's Manual. If you have not received it,
please contact your broker or financial consultant or the Fund at the number
listed on the back page of this Prospectus. The Owner's Manual is considered an
integral part of this Prospectus.
QUESTIONS?
CALL 1-800-GABELLI
OR YOUR INVESTMENT REPRESENTATIVE.
11
<PAGE> 36
DISTRIBUTION ARRANGEMENT/SALES CHARGES
TYPES OF CHARGES
This section describes the sales charges and fees you will pay as an investor in
different share classes offered by the Fund and ways to qualify for reduced
sales charges.
<TABLE>
<CAPTION>
TYPES OF CHARGES CLASS A CLASS B CLASS C
- ------------------- ------------------------------- ------------------------------ -------------------------------
<S> <C> <C> <C>
Sales Charge Front-end sales charge; No front-end sales No front-end sales
(Load) reduced sales charges charge. A contingent charge, but 1% CDSC may
available. deferred sales charge be imposed on shares
(CDSC) may be imposed on redeemed within
shares redeemed within twenty-four months of
seventy-two months after purchase; unlike Class B,
purchase; shares Class C shares will never
automatically convert to convert to Class A shares.
Class A Shares after
eighty-four months.
Distribution Subject to annual Subject to annual Subject to annual
and Service distribution and distribution and distribution and
(12b-1) Fee shareholder servicing shareholder servicing shareholder servicing
fees of up to .25% of fees of up to 1.00% of fees of up to 1.00% of
the Fund's total assets. the Fund's assets. the Fund's assets.
Fund Expenses Lower annual expenses Higher annual expenses Higher annual expenses
then Class B or C shares. than Class A shares. than Class A or B Shares.
Class C shares are
similar to Class B
shares, except that the
contingent deferred sales
charge is imposed only on
shares redeemed within
twenty-four months of
purchase, there is no
maximum investment and
Class C shares do not
convert to Class A shares.
</TABLE>
CALCULATION OF SALES CHARGES
CLASS A SHARES
Class A shares are sold at their public offering price. This price includes the
initial sales charge. Therefore, part of the money you invest will be used to
pay the sales charge. The remainder is invested in Fund shares. The sales charge
decreases with larger purchases. There is no sales charge on reinvested
dividends and distributions and on purchases greater than $1 million.
12
<PAGE> 37
CALCULATION OF SALES CHARGES (CONTINUED)
The current sales charge rates are as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS A % OF SALES CHARGE AS A % OF DEALER CONCESSION AS A
YOUR INVESTMENT OFFERING PRICE(1) YOUR INVESTMENT % OF OFFERING PRICE
-------------------------------- ------------------------- ------------------------- ------------------------
<S> <C> <C> <C>
Up to $49,999 5.75% 6.10% 5.00%
$50,000 up to $99,999 4.50% 4.71% 4.00%
$100,000 up to $249,999 3.00% 3.63% 2.50%
$250,000 up to $499,999 2.50% 2.56% 2.00%
$500,000 up to $999,999 2.00% 2.04% 1.50%
$1,000,000 and above(2) None None 1.00%
</TABLE>
CLASS B AND CLASS C SHARES
Class B and Class C shares are offered at NAV, without any up-front sales
charge. Therefore, all the money you invest is used to purchase Fund shares.
However, if you sell your Class B shares of the Fund before the sixth
anniversary, you will have to pay a contingent deferred sales charge at the time
of redemption. If you sell your Class C shares before the second anniversary of
purchase, you will pay a 1% CDSC at the time of redemption. The CDSC will be
based upon the lower of the NAV at the time of purchase or the NAV at the time
of redemption according to the schedule below. There is no CDSC on reinvested
dividends or distributions.
- ----------
(1) The Distributor reserves the right to pay the entire sales charge to
dealers. If that occurs the dealer may be considered an "underwriter"
under federal securities laws.
(2) There is no initial sales charge on purchases of $1 million or more.
However, a contingent deferred sales charge (CDSC) of up to 1.00% of
the purchase price will be charged to the shareholder if shares are
redeemed in the first year after purchase. This charge will be based on
the lower of your cost for the shares or their NAV at the time of
redemption. There will be no CDSC on reinvested dividends and
distributions.
13
<PAGE> 38
DISTRIBUTION ARRANGEMENTS/SALES CHARGES (CONTINUED)
CLASS B SHARES
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
-------------------- ------------------------
<S> <C>
First 5.00%
Second 4.00%
Third 3.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and thereafter None
</TABLE>
CLASS C SHARES
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
MONTHS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
--------------------- ------------------------
<S> <C>
Less than 24 months 1.00%
More than 24 months None
</TABLE>
If you sell some but not all of your Class B or C shares, certain shares not
subject to the CDSC (i.e., shares purchased with reinvested dividends) will be
redeemed first, followed by shares subject to the lowest CDSC (typically shares
held for the longest time).
CONVERSION FEATURE - CLASS B SHARES
- - Class B shares automatically convert to Class A shares of the Fund on
the first business day of the eighty-fifth calendar month following the
calendar month in which such shares were issued.
- - After conversion, your shares will be subject to the lower distribution
fees charged on Class A shares, which will increase your investment
return compared to the Class B shares.
- - You will not pay any sales charge or fees when your shares convert, nor
will the transaction be subject to any tax.
- - If you purchased Class B shares of one Fund which you exchanged for
Class B shares of another Fund, your holding period will be calculated
from the time of your original purchase of Class B shares. The dollar
value of Class A shares you receive will equal the dollar value of the
B shares converted.
- - If you exchange shares into a Gabelli money market fund, your holding
period will be suspended.
- - The automatic conversion of Class B shares to Class A shares may be
suspended by the Board of Directors at any time it determines such
suspension to be required under applicable law or in the exercise of
their fiduciary duties; provided, however, that if the Board determines
that the suspension is likely to continue for a substantial period of
time, the Board of Directors will seek to create an additional class or
additional classes of shares into which Class B shares are eligible for
conversion under the rules of the Securities and Exchange Commission
and other applicable law.
14
<PAGE> 39
DISTRIBUTION (12b-1) FEES
The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the 1940
Act which authorizes payments by the Fund to compensate the Distributor and
other dealers and investment representatives for services and expenses relating
to the sale and distribution of the Fund's shares. Rule 12b-1 fees are paid from
Fund assets on an ongoing basis, and increase the cost of your investment.
[ ] The 12b-1 fees vary by share class as follows:
- Class A shares pay a 12b-1 fee of .25% of the average daily
net assets of the Fund.
- Class B and Class C shares pay a 12b-1 fee of 1.00% of the
average daily net assets of the Fund. This will cause annual
expenses for Class B and Class C shares to be higher and
dividends to be lower than for Class A shares.
[ ] The higher 12b-1 fee on Class B and Class C shares, together with the CDSC,
allow the Distributor to sell Class B and Class C shares without an
"up-front" sales charge. In particular, these fees help to defray the
Distributor's costs of advancing brokerage commissions to investment
representatives.
[ ] The Distributor may use up to .25% of the 12b-1 fee for shareholder
servicing and up to .75% for distribution.
Long-term shareholders may pay indirectly more than the equivalent of the
maximum permitted front-end sales charge due to the recurring nature of 12b-1
distribution fees.
DIVIDENDS, DISTRIBUTION AND TAXES
Any income the Fund receives in the form of interest or dividends is paid out,
less expenses, to its shareholders. The Fund declares and pays dividends from
net investment income and capital gains, if any, on an annual basis.
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
The Fund expects that its dividends will primarily consist of net investment
income and, if any, long-term and short-term capital gains. Distributions from
net investment income and short-term capital gains are taxable as ordinary
income. Such distributions are taken into account for tax purposes in the year
in which they are declared, even if they appear on your account statement the
following year. Long-term capital gain distributions are taxable at long-term
capital gain tax rates. Exchanges of the Fund's Shares for shares of another
fund will be treated as a sale of shares, and any gain on the transaction may be
subject to federal income tax.
You will be notified in January each year about the federal tax status of
distributions made by the Fund. Depending on your residence for tax purposes,
distributions also may be subject to state and local taxes, including
withholding taxes.
15
<PAGE> 40
DIVIDENDS, DISTRIBUTIONS AND TAXES (CONTINUED)
TAX IDENTIFICATION NUMBER
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions and redemptions proceeds paid to shareholders who have not
provided the Fund with their Taxpayer Identification Number in compliance
with IRS rules. To avoid this, make sure you provide your correct Tax
Identification Number (Social Security Number for most investors) on your
account application.
Foreign shareholders may be subject to special withholding requirements. Consult
your tax adviser about the federal, state and local tax consequences in your
particular circumstances.
OTHER SHAREHOLDER SERVICES
As a shareholder of the Fund, you can take advantage of other service privileges
which are described in the Owner's Manual:
- Telephone Investment and Redemption Plan
- Automatic Investment Plan
- Systematic Withdrawal Plan
- Retirement Plans
FINANCIAL HIGHLIGHTS
At this time, the Class A Shares, Class B Shares and Class C Shares have not
previously been offered.
QUESTIONS?
CALL 1-800-GABELLI
OR YOUR INVESTMENT REPRESENTATIVE.
16
<PAGE> 41
FOR MORE INFORMATION:
For more information about the Fund, the following documents are available free
upon request:
OWNER'S MANUAL:
Information about purchasing, selling and exchanging shares of the Fund is
included in a separate document entitled "Owner's Manual." The Owner's Manual is
an integral part of the Prospectus. If you have not received it, please contact
the Fund at the number listed below.
ANNUAL/SEMI-ANNUAL REPORTS:
The Fund's semi-annual and audited annual reports to shareholders contain
detailed information on the Fund's investments. In the annual report, you will
find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Fund, including their
operations and investment policies. It is incorporated by reference, and is
legally considered a part of this prospectus.
YOU CAN GET FREE COPIES OF REPORTS AND SAI, PROSPECTUSES OF OTHER FUNDS IN THE
GABELLI FAMILY, OR REQUEST OTHER INFORMATION AND DISCUSS YOUR QUESTIONS ABOUT
THE FUND BY CONTACTING:
GABELLI INTERNATIONAL GROWTH FUND, INC.
ONE CORPORATE CENTER
RYE, NY 10580
TELEPHONE: 1-800-GABELLI (1-800-422-3554)
WWW.GABELLI.COM
You can review the Fund's reports and SAIs at the Public Reference Room of the
Securities and Exchange Commission. You can get text-only copies:
- For a fee, by writing the Public Reference Section of the
Commission, Washington, D.C. 20549-6009 or calling
1-800-SEC-0330.
- Free from the Commission's Website at http://www.sec.gov.
(Investment Company Act file no. 811-08560)
17
<PAGE> 42
THE GABELLI FAMILY
OF FUNDS
OWNER'S MANUAL
A CLASS
B CLASS
C CLASS
GABELLI GLOBAL SERIES FUNDS, INC.
GABELLI INTERNATIONAL GROWTH FUND, INC.
GABELLI ASSET FUND
GABELLI GROWTH FUND
MAY 1, 1999
THE INFORMATION CONTAINED IN THE OWNER'S MANUAL IS INCORPORATED BY REFERENCE
INTO, AND IS LEGALLY CONSIDERED PART OF, THE PROSPECTUSES FOR THE GABELLI FAMILY
OF FUNDS. THE OWNER'S MANUAL MUST BE PRECEDED OR ACCOMPANIED BY A GABELLI FUNDS
PROSPECTUS.
<PAGE> 43
OWNER'S MANUAL
TABLE OF CONTENTS
PURCHASING SHARES
3 Instructions for Opening or Adding to
an Account
4 Telephone Investment Plan
4 Automatic Investment Plan
4 Retirement Plans
4 Minimum Investments
4 Dividends and Distributions
SELLING SHARES
5 Instructions for Selling Shares
5 By Bank Wire or Check via Telephone
5 By Bank Wire or Check via Mail
6 General Policies on Selling Shares
6 Signature Guarantees
6 Verifying Telephone Redemptions
6 Redemptions Within 15 Days of Investment
6 Refusal of Redemption Request
6 Closing of Small Accounts
6 Undeliverable Distribution Checks
EXCHANGING SHARES
7 Instructions for Exchanging Shares
PRICING OF FUND SHARES
7 How NAV is Calculated
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
8 Types of Charges
9 Calculation of Sales Charge
10 Conversion Feature
10 Sales Charge Reductions
11 Sales Charge Waivers
2
<PAGE> 44
PURCHASING SHARES
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
PURCHASES THROUGH BROKER/DEALERS:
If purchasing through your financial advisor or brokerage account, simply tell
your advisor or broker that you wish to purchase shares of the Funds and he or
she will take care of the necessary documentation. For all other purchases
directly with the Fund, follow the instructions below.
PURCHASES DIRECTLY FROM THE FUND:
All investments made by regular mail or personal delivery, whether initial or
subsequent, should be sent to:
BY REGULAR MAIL BY OVERNIGHT DELIVERY
--------------- ---------------------
The Gabelli Funds The Gabelli Funds
PO Box 8308 c/o BFDS
Boston, MA 02266-8308 66 Brooks Drive
Braintree, MA 02184
For Initial Investment:
1. Carefully read and complete the application.
2. Make check, bank draft or money order payable to "[name of Fund]."
3. Mail or deliver application and payment to the address above.
For Subsequent Investments:
1. Make check, bank draft or money order payable to "[name of Fund]."
2. Provide the exact name and number of your account.
3. Mail or deliver payment to the address above.
BY WIRE TRANSFER
For Initial Investment:
Call 1-800-GABELLI (1-800-422-3554) to obtain a new account number. Promptly
mail the completed application to the address shown above for regular mail, and
For Initial and Subsequent Investments:
Instruct your bank to wire transfer your investment to:
STATE STREET BANK AND TRUST COMPANY
ABA #011-0000-28 REF DDA# 9904-6187
ATTN: SHAREHOLDER SERVICES
RE: [FUND NAME]
A/C#___________________________
YOUR NAME ______________________
225 FRANKLIN STREET, BOSTON, MA 02110
NOTE: YOUR BANK MAY CHARGE A WIRE TRANSFER FEE.
QUESTIONS?
CALL 1-800-GABELLI
OR YOUR INVESTMENT REPRESENTATIVE.
3
<PAGE> 45
PURCHASING SHARES (CONTINUED)
You can add to your account by using the convenient options described below. The
Fund reserves the right to change or eliminate these privileges at any time upon
60 days notice to shareholders.
TELEPHONE INVESTMENT PLAN
You may purchase additional shares of the Funds by telephone as long as your
bank is a member of the Automated Clearing House (ACH) system. You must also
have a completed, approved Investment Plan application on file with the Fund's
Transfer Agent.
There is a minimum of $100 for each telephone investment. To initiate an ACH
purchase, please call 1-800-GABELLI (1-800-422-3554) or 1-800-872-5365.
AUTOMATIC INVESTMENT PLAN
You can make automatic monthly investments in the Funds. Details about this plan
can be obtained from the Distributor on a separate application by calling
1-800-GABELLI (800-422-3554).
RETIREMENT PLANS
You can invest in various types of retirement plans through the Fund. Details
about these plans can be obtained from the Distributor.
MINIMUM INVESTMENTS
You may purchase Funds through the Distributor or participating organizations,
which may charge additional fees and may require higher or lower minimum
investments or impose other limitations on buying and selling shares.
<TABLE>
<CAPTION>
MINIMUM INITIAL MINIMUM
ACCOUNT TYPE INVESTMENT SUBSEQUENT
<S> <C> <C>
Regular (non-retirement) $1,000 $ 0
Retirement (IRA)
Traditional IRA $1,000 $ 0
Roth IRA $1,000 $ 0
Spousal IRA $ 250 $ 0
Education IRA $ 250 $ 0
Automatic Investment Plan $ 0 $ 100
Telephone Investment Plan $ 100 $ 100
</TABLE>
All purchases must be in U.S. dollars. A fee will be charged for any checks that
do not clear. Third-party checks are not accepted. Your purchase of shares will
be effective on the same business day if the Fund's transfer agent receives your
order by 4:00 p.m. (12 noon for a money market fund), and receives your form of
payment by 4:00 p.m., eastern time. Otherwise, your purchase will be effective
on the next business day. (See "Pricing of Fund Shares.") Shares are held on
account for you unless you specify in writing that you would like to receive a
stock certificate (certificates are not available for money market funds). We
can only issue a certificate for whole shares.
The Distributor may reject a purchase order if it considers it in the best
interest of the Fund and its shareholders. A Fund may waive its minimum purchase
requirement
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions will be automatically reinvested unless you
request otherwise.
4
<PAGE> 46
SELLING SHARES
If selling your shares through your financial adviser or broker, ask him or her
for redemption procedures. Your adviser and/or broker may have transaction
minimums and/or transaction times which will affect your redemption.
For all other sales transactions, follow the instructions below.
As a mutual fund shareholder, you are technically selling shares when you
request a withdrawal in cash. This is also known as redeeming shares.
WITHDRAWING MONEY FROM YOUR INVESTMENT
You may sell your shares at any time. Your sales price will be the next NAV
after your sell order is received by the Fund, its transfer agent, or your
investment representative. See section on "General Policies on Selling Shares"
below.
CONTINGENT DEFERRED SALES CHARGE
When you sell Class B or C shares, you will be charged a fee for any shares that
have not been held for a sufficient length of time. These fees will be deducted
from the money paid to you. See the section on "Distribution Arrangements/Sales
Charges" below for details.
SYSTEMATIC WITHDRAWAL PLAN
You can receive automatic payments from your account on a monthly, quarterly or
annual basis. You can obtain details from the Distributor.
INSTRUCTIONS FOR SELLING SHARES
The Fund accepts requests for redemptions of unissued shares.
BY BANK WIRE OR CHECK VIA TELEPHONE
1. Call 1-800-GABELLI (1-800-422-3554) with your account number, the amount of
the redemption and instructions as to how you wish to receive your funds.
2. If you are unable to reach the Fund by telephone, you may telecopy your
redemption request to the Fund at 914-921-____.
NOTE: If you call by 4:00 p.m., eastern time, your payment will normally be
wired to your bank on the following business day. (For Money Market Funds: If
you call before 12:00 noon, eastern time, your payment will be wired to your
bank on that day). If you call after that time, your payment will be wired to
your bank on the next business day. If you request your wire redemption by
telephone, it must be at least $1,000. Your bank may charge a fee for incoming
wires.
BY BANK WIRE OR CHECK VIA MAIL
Submit a redemption request to the Fund. Redemption requests may be made by
letter to the Transfer Agent. You must specify the name of the Fund, the dollar
amount or number of shares you wish to redeem and the account number. You must
sign the letter in exactly the same way the account is registered, and if there
is more than one owner of shares, all must sign. A signature guarantee is
required for most requests.
5
<PAGE> 47
SELLING SHARES (CONTINUED)
GENERAL POLICIES ON SELLING SHARES
SIGNATURE GUARANTEES
Signature guarantees are required on redemption requests for the following:
- The check is not being mailed to the address on your account
- The check is not being made payable to the owner of the
account
- The redemption proceeds are being transferred to another
person's Fund account.
A signature guarantee can be obtained from most banks and securities dealers.
Notarized signatures are not considered a signature guarantee.
VERIFYING TELEPHONE REDEMPTIONS
The Fund makes every effort to ensure that telephone redemptions are only made
by authorized shareholders. All telephone calls are recorded for your protection
and you will be asked for information to verify your identity. If appropriate
precautions have not been taken, the Fund may be liable for losses due to
unauthorized transactions.
REDEMPTIONS WITHIN 15 DAYS OF INVESTMENT
When you have made an investment by check or through the automatic investment
plan, your redemption proceeds will not be mailed until the Transfer Agent is
satisfied that the check has cleared (which may require up to 15 days). You can
avoid this delay by purchasing shares with a certified check or federal funds
wire.
REDEMPTION IN KIND
The Fund reserves the right to make a redemption in kind - payment in portfolio
securities rather than cash - for certain large redemption amounts that could
hurt fund operations.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission in order to protect
remaining shareholders.
CLOSING OF SMALL ACCOUNTS
If your account (other than IRA) falls below $500, the Fund may ask you to
increase your balance. If it is still below $500 after 30 days, the Fund may
close your account and send you the proceeds at the current NAV.
UNDELIVERABLE DISTRIBUTION CHECKS
If distribution checks (1) are returned and marked as "undeliverable" or (2)
remain uncashed for six months, your account will be changed automatically so
that all future distributions are reinvested in your account. Checks that remain
uncashed for six months will be canceled and the money reinvested in the Fund at
the then current net asset value.
QUESTIONS?
CALL 1-800-GABELLI
OR YOUR INVESTMENT REPRESENTATIVE.
6
<PAGE> 48
EXCHANGING SHARES
You can exchange your shares in one Fund for shares of the same class of another
Fund managed by Gabelli Funds, LLC or its affiliates, usually without paying
additional sales charges (see "Notes" below).
You must meet the minimum investment requirements for the Fund into which you
are exchanging. Exchanges from one Fund to another are taxable transactions.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges may be made by sending a written request to The Gabelli Funds, PO Box
8308, Boston, MA 02266-8308 or by calling 1-800-GABELLI (1-800-422-3554).
Please provide the following information:
- Your name and telephone number
- The exact name on your account and account number
- Taxpayer identification number (usually your Social Security
number)
- Dollar value or number of shares to be exchanged
- The names of the Funds from/into which the exchange is to be
made
See "Selling Shares" for important information about telephone transactions.
NOTES ON EXCHANGES
- There will be no sales charge upon an exchange when exchanging
Class B and Class C shares for Class B and Class C shares,
respectively, of any other fund managed by the Adviser or an
affiliate, but a CDSC may be payable upon redeeming those
shares.
- The registration and tax identification numbers of the two
accounts must be identical.
- This Exchange Privilege may be changed or eliminated at any
time upon a 60-day notice to shareholders.
- Be sure to read the Prospectus carefully of any Fund into
which you wish to exchange shares.
PRICING OF FUND SHARES
HOW NAV IS CALCULATED
The NAV is calculated by adding the total value of the Fund's investments and
other assets, subtracting its liabilities and then dividing that figure by the
number of outstanding shares of the Fund:
NAV =
TOTAL ASSETS - LIABILITIES
--------------------------
Number of Shares
Outstanding
You can find the Fund's NAV daily in the Wall Street Journal and other
newspapers, or by calling 1-800-GABELLI (800-422-3554).
The Fund's net asset value, or NAV, is determined and its shares are priced at
the close of regular trading on the New York Stock Exchange, normally at 4:00
p.m., eastern time, on days the New York Stock Exchange is open. Your order for
purchase, sale or exchange of shares is priced at the next NAV calculated after
your order is received by the Fund less any applicable sales charge as noted in
the section on "Distribution Arrangements/Sales Charges." This is what is known
as the offering price.
Fund securities are valued as of the close of trading on the primary exchange on
which they trade. Fund securities are generally valued at current market prices.
If market quotations are not available, prices will be based on the average of
the latest bid and asked quotations for such securities prior to the valuation
time, or the latest bid price if asked prices are not available. Debt securities
with remaining maturities of 60 days or less will be valued at amortized cost,
which the Board of Directors believes represents fair value.
Some Fund securities may be listed on foreign exchanges that are open on days
(such as U.S. holidays) when a Fund does not compute its NAV. This could cause
the value of a Fund's portfolio investments to be affected on days when you
cannot buy or sell shares.
7
<PAGE> 49
DISTRIBUTION ARRANGEMENTS/SALES CHARGES
TYPES OF CHARGES
This section describes the sales charges and fees you will pay as an investor in
different share classes offered by the Fund and ways to qualify for reduced
sales charges.
<TABLE>
<CAPTION>
TYPES OF CHARGES CLASS A CLASS B CLASS C
- ------------------ ------------------------------ ----------------------------- -------------------------------
<S> <C> <C> <C>
Sales Charge Front-end sales charge; No front-end sales No front-end sales
(Load) reduced sales charges charge. A contingent charge, but 1% CDSC may
available. deferred sales charge be imposed on shares
(CDSC) may be imposed on redeemed within
shares redeemed within twenty-four months of
seventy-two months after purchase; unlike Class B,
purchase; shares Class C shares will never
automatically convert to convert to Class A shares.
Class A Shares after
eighty-four months.
Distribution Subject to annual Subject to annual Subject to annual
and Service distribution and distribution and distribution and
(12b-1) Fee shareholder servicing shareholder servicing shareholder servicing
fees of up to .25% of fees of up to 1.00% of fees of up to 1.00% of
the Fund's total assets. the Fund's assets. the Fund's assets.
Fund Expenses Lower annual expenses Higher annual expenses Higher annual expenses
then Class B or C shares. than Class A shares. than Class A or B Shares.
Class C shares are
similar to Class B
shares, except that the
contingent deferred sales
charge is imposed only on
shares redeemed within
twenty-four months of
purchase, there is no
maximum investment and
Class C shares do not
convert to Class A shares.
</TABLE>
8
<PAGE> 50
DISTRIBUTION ARRANGEMENTS/SALES CHARGES (CONTINUED)
CALCULATION OF SALES CHARGES
CLASS A SHARES
Class A shares are sold at their public offering price. This price includes the
initial sales charge. Therefore, part of the money you invest will be used to
pay the sales charge. The remainder is invested in Fund shares. The sales charge
decreases with larger purchases. There is no sales charge on reinvested
dividends and distributions and on purchases greater than $1 million.
The current sales charge rates are as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS A % OF SALES CHARGE AS A % OF DEALER CONCESSION AS A
YOUR INVESTMENT OFFERING PRICE(1) YOUR INVESTMENT % OF OFFERING PRICE
-------------------------------- ------------------------- ------------------------- ------------------------
<S> <C> <C> <C>
Up to $49,999 5.75% 6.10% 5.00%
$50,000 up to $99,999 4.50% 4.71% 4.00%
$100,000 up to $249,999 3.00% 3.63% 2.50%
$250,000 up to $499,999 2.50% 2.56% 2.00%
$500,000 up to $999,999 2.00% 2.04% 1.50%
$1,000,000 and above(2) None None 1.00%
</TABLE>
CLASS B AND CLASS C SHARES
Class B and Class C shares are offered at NAV, without any up-front sales
charge. Therefore, all the money you invest is used to purchase Fund shares.
However, if you sell your Class B shares of the Fund before the seventh
anniversary of purchase, you will have to pay a contingent deferred sales charge
at the time of redemption. If you sell your Class C shares before the second
anniversary of purchase, you will pay a 1% CDSC at the time of redemption. The
CDSC will be based upon the lower of the NAV at the time of purchase or the NAV
at the time of redemption according to the schedule below. There is no CDSC on
reinvested dividends or distributions.
<TABLE>
<CAPTION>
CLASS B SHARES
CDSC AS A % OF DOLLAR
YEARS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
-------------------- ------------------------
<S> <C>
First 5.00%
Second 4.00%
Third 3.00%
Fourth 3.00%
Fifth 2.00%
Sixth 1.00%
Seventh and thereafter None
</TABLE>
- ----------
(1) The Distributor reserves the right to pay the entire sales charge to
dealers. If that occurs the dealer may be considered an "underwriter"
under federal securities laws.
(2) There is no initial sales charge on purchases of $1 million or more.
However, a contingent deferred sales charge (CDSC) of up to 1.00% of
the purchase price will be charged to the shareholder if shares are
redeemed in the first year after purchase. This charge will be based on
the lower of your cost for the shares or their NAV at the time of
redemption. There will be no CDSC on reinvested dividends and
distributions.
9
<PAGE> 51
DISTRIBUTION ARRANGEMENTS/SALES CHARGES (CONTINUED)
CLASS C SHARES
<TABLE>
<CAPTION>
CDSC AS A % OF DOLLAR
MONTHS SINCE PURCHASE AMOUNT SUBJECT TO CHARGE
--------------------- ------------------------
<S> <C>
Less than 24 months 1.00%
More than 24 months None
</TABLE>
If you sell some but not all of your Class B or Class C shares, certain shares
not subject to the CDSC (i.e., shares purchased with reinvested dividends) will
be redeemed first, followed by shares subject to the lowest CDSC (typically
shares held for the longest time).
CONVERSION FEATURE - CLASS B SHARES
- - Class B shares automatically convert to Class A shares of the same Fund on
the first business day of the eighty-fifth calendar month following the
calendar month in which the shares were purchased.
- - After conversion, your shares will be subject to the lower distribution
fees charged on Class A shares, which will increase your investment return
compared to the Class B shares.
- - You will not pay any sales charge or fees when your shares convert, nor
will the transaction be subject to any tax.
- - If you purchased Class B shares of one Fund which you exchanged for Class B
shares of another Fund, your holding period will be calculated from the
time of your original purchase of Class B shares. The dollar value of Class
A shares you receive will equal the dollar value of the Class B shares
converted.
- - If you exchange shares into a Gabelli money market fund, your holding
period will be suspended.
- - The automatic conversion of Class B shares to Class A shares may be
suspended by the Board of Directors at any time it determines such
suspension to be required under applicable law or in the exercise of their
fiduciary duties; provided, however, that if the Board determines that the
suspension is likely to continue for a substantial period of time, the
Board of Directors will seek to create an additional class or additional
classes of shares into which Class B shares are eligible for conversion
under the rules of the Securities and Exchange Commission and other
applicable law.
SALES CHARGE REDUCTIONS
Reduced sales charges for Class A shares are available to shareholders with
investments of $50,000 or more. In addition, you may qualify for reduced sales
charges under the following circumstances:
- - Letter of Intent. You inform the Fund in writing that you intend to
purchase enough shares over a 13-month period to qualify for a reduced
sales charge. You must include a minimum of 5% of the total amount you
intend to purchase with your letter of intent.
- - Rights of Accumulation. When the value of shares you already own plus the
amount you intend to invest reaches the amount needed to qualify for
reduced sales charges, your added investment will qualify for the reduced
sales charge.
10
<PAGE> 52
DISTRIBUTION ARRANGEMENTS/SALES CHARGES (CONTINUED)
- - Combination Privilege. Combine accounts of multiple Funds or accounts of
immediate family household members (spouse and children under 21) to
achieve reduced sales charges.
SALES CHARGE WAIVERS
CLASS A SHARES
The following qualify for waivers of sales charges:
- - Reinvestment of distributions from a deferred compensation plan, agency,
trust, or custody account that was maintained by the Adviser, its
affiliates or any NASD member.
- - Shares purchased by directors, officers, employees of the Fund, the Adviser
or the Distributor and their affiliates, and members of the immediate
family. 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.
REINSTATEMENT PRIVILEGE
If you have sold Class A shares and decide to reinvest in the Fund
within a 30 day period, you will not be charged the applicable sales
load on amounts up to the value of the shares you sold. You must
provide a written reinstatement request and payment within 30 days of
the date your instructions to sell were processed.
CLASS B SHARES
The CDSC will be waived under certain circumstances, including the following:
- - Distributions from retirement plans if the distributions are made following
the death or disability of shareholders or plan participants.
- - Redemptions from accounts other than retirement accounts following the
death or disability of the shareholder.
- - Returns of excess contributions to retirement plans following the death or
disability of the shareholder.
- - Distributions of less than 5% of the annual account value under a
Systematic Withdrawal Plan.
- - Shares issued in a plan of reorganization sponsored by the Adviser, or
shares redeemed involuntarily in a similar situation.
11
<PAGE> 53
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, 1999
This Statement of Additional Information ("Additional Statement") relates to
Gabelli International Growth Fund, Inc., a Maryland corporation organized on May
25, 1994 (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,
1999, 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 OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investments .................................................................. B-02
The Adviser .................................................................. B-10
The Distributor .............................................................. B-11
The Distribution Plan ........................................................ B-11
Directors and Officers ....................................................... B-13
Investment Restrictions ...................................................... B-15
Portfolio Transactions and Brokerage ......................................... B-15
Purchase and Redemption of Shares ............................................ B-17
Exchange Privilege............................................................ B-21
Net Asset Value............................................................... B-22
Dividends, Distributions and Taxes ........................................... B-22
Investment Performance Information ........................................... B-25
Service Providers ............................................................ B-26
Description of Shares, Voting Rights and Liabilities ......................... B-26
Shares of Beneficial Interest ................................................ B-27
Appendix-- Description of Ratings ............................................ B-28
</TABLE>
<PAGE> 54
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. 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.
Moreover, common stocks do not represents 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 issuer's
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
B-2
<PAGE> 55
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 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 have limited legal recourse in the event of default. Also, the Fund
may have difficulty disposing of certain sovereign debt obligations because
there may be a limited trading market for such securities.
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 Monetary Unit
(the "EUR"), which is a combination of the economic structures of the member
nations of the European Monetary Union into to a single currency. This union
includes France, Germany, the Netherlands, and other countries. The specific
legacy currencies rates comprising the EUR were fixed on December 31, 1998 to
reflect the relative values of the underlying currencies to the newly created
EUR. 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
B-3
<PAGE> 56
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 may not 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 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. At times, adverse publicity regarding lower-quality
securities has depressed prices for such securities to some extent.
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
B-4
<PAGE> 57
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. While no securities investment is completely without risk,
investments in convertible securities generally entail less risk than common
stock, although the extent to which such risk is reduced depends in large
measure upon the degree to which the convertible security sells above its value
as a fixed-income 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 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,
B-5
<PAGE> 58
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, other than for hedging purposes, the aggregate
initial margin and premiums required to establish such positions will not exceed
5% of the Fund's total assets after taking into account unrealized profits and
unrealized losses on any such contracts it has entered into.
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.
Investing in rights and warrants can provide a greater potential for profit or
loss than an equivalent investment in the underlying security, and, thus, can be
a speculative investment. The value of a right or warrant may decline because of
a decline in the value of the underlying security, the passage of time, changes
in interest rates or in the dividend or other policies of the company whose
equity underlies the warrant or a change in the perception as to the future
price of the underlying security, or any combination thereof. Rights and
warrants generally pay no dividends and confer no voting or other rights other
than to purchase the underlying security.
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. When the Fund engages in when-issued, delayed
delivery or forward commitment transactions, it relies on the other party to
consummate the trade. Failure of the other party to do so may result in the Fund
incurring a loss or missing an opportunity to obtain a price considered to be
advantageous.
SHORT SALES
B-6
<PAGE> 59
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 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.
B-7
<PAGE> 60
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
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
B-8
<PAGE> 61
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.
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
B-9
<PAGE> 62
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-10
<PAGE> 63
THE ADVISER
The Adviser is a New York limited liability company 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 February 17, 1999, 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-11
<PAGE> 64
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 from year to year, 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.
ADVISORY FEES EARNED AND WAIVED
FOR THE FISCAL YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
Earned Waived Earned Waived Earned Waived
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
$65,095 $59,249 $193,382 $0 $276,379 $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.
DISTRIBUTION PLAN
Pursuant to separate distribution and service plans (the Class A Plan, the Class
B Plan, the Class C Plan and the Class AAA Plan, collectively, the Plans)
adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act and the
Distribution Agreement, the Distributor incurs the expenses of distributing the
Fund's Class A., Class B., Class C and Class AAA shares. In addition, the
Distributor receives the proceeds of contingent deferred sales charges paid by
investors upon certain redemptions of Class B and Class C shares.
The Class A, Class B, Class C and Class AAA Plans continue in effect from year
to year, provided that each such continuance is approved at least annually by a
vote of the Board of Directors, including a majority vote of the Directors who
are not interested persons of the Company and who have no direct or indirect
financial interest in the operation of the Class A, Class B, Class C or Class
AAA Plans (the Independent Directors), cast in person at a meeting called for
the purpose of voting on such continuance. The Plans may each be terminated at
any time, without penalty, by the vote of a majority of the Independent
Directors, or by the vote of the holders of a majority of the outstanding shares
of the applicable class of the Fund on not more than 30 days' written notice to
any other party to the Plans. The
B-12
<PAGE> 65
Plans may not be amended to increase materially the amounts to be spent for the
services described therein without approval by the shareholders of the
applicable class (by both Class A and Class B shareholders, voting separately,
in the case of material amendments to the Class A Plan), and all material
amendments are required to be approved by the Board of Directors in the manner
described above. Each Plan will automatically terminate in the event of its
assignment. The Fund will not be contractually obligated to pay expenses
incurred under any Plan if it is terminated or not continued.
Pursuant to each Plan, the Board of Directors will review at least quarterly a
written report of the distribution expenses incurred on behalf of each class of
shares of the Fund by the Distributor. The report includes an itemization of the
distribution expenses and the purposes of such expenditures. In addition, as
long as the Plans remain in effect, the selection and nomination of Independent
Directors shall be committed to the Independent Directors.
Pursuant to the Distribution Agreement, the Fund has agreed to indemnify the
Distributor to the extent permitted by applicable law against certain
liabilities under the federal securities laws.
Pursuant to rules of the NASD, the Distributor is required to limit aggregate
initial sales charges, deferred sales charges and asset-based sales charges to
6.25% of total gross sales of each class of shares. Interest charges on
unreimbursed distribution expenses equal to the prime rate plus one percent per
annum may be added to the 6.25% limitation. Additional shares resulting from the
reinvestment of dividends and distributions are not included in the calculation
of the 6.25% limitation. The annual asset-based sales charge on shares of the
Fund may not exceed .75 of 1% per class. The 6.25% limitation applies to each
class of the Fund rather than on a per shareholder basis. If aggregate sales
charges were to exceed 6.25% of total gross sales of any class, all sales
charges on shares of the class would be suspended.
During the fiscal year ended December 31, 1998, the Distributor incurred
distribution expenses under the Distribution Plan for Class AAA of $206,400. Of
this amount $68,600 was spent on printing, postage and stationery, $56,500 on
overhead support expenses, $70,800 on salaries of personnel of the Distributor
and $10,500 to third party brokers. Pursuant to the Distribution Plan, the Fund
paid the Distributor $69,200, or .25% of its average daily net assets.
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.
DIRECTORS AND OFFICERS
The Fund's Board of Directors has overall responsibility for the management of
the Fund. The Board of Directors decides upon matters of general policy and
reviews the actions of the Fund's Adviser, Distributor
B-13
<PAGE> 66
and other service providers. 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.
<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, Chief Executive Officer and
Chairman of the Board Chief Investment Officer of Gabelli Asset
One Corporate Center Management, Inc., the Adviser, and GAMCO Investors,
Rye, New York 10580 Inc., Chairman of the Board and Chief Executive
Age: 56 Officer of Lynch Corporation, a diversified
manufacturing, communications and services company;
Director of East/West Communications, Inc.;
officer and/or Director or Trustee of 12 other
Gabelli funds.
Caesar M.P. Bryan* Senior Vice President of and Portfolio Manager with
President and Portfolio Manager GAMCO Investors, Inc., wholly owned subsidiary of
One Corporate Center the Adviser, since May 1994 and President of
Rye, New York 10580 Gabelli Gold Fund, Inc.; Formerly Senior Vice
Age: 44 President and Portfolio 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
</TABLE>
B-14
<PAGE> 67
<TABLE>
<CAPTION>
NAME, POSITION WITH FUND AND PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS;
ADDRESS AFFILIATIONS WITH THE ADVISER OR ADMINISTRATOR
<S> <C>
Karl Otto Pohl Member of the Shareholder Committee of Sal
Director Oppenheim Jr. & Cie (private investment bank);
One Corporate Center Former President of the Deutsche Bundesbank and
Rye, New York 10580 Chairman of its Central Bank Council from 1980
Age: 66 through 1991; Currently Board Member of Gabelli
Asset Management Inc., Zurich Versicherungs-
Gesellschaft (insurance); International Council for
JP Morgan & Co. & Trizechtahn Corp.; 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: 58
Anthonie C. van Ekris Managing Director of Balmac International, Ltd.;
Director Director of Spinnaker Industries, Inc. and Stahel
One Corporate Center Mardmeyer A.Z.; and Director or Trustee of 9 other
Rye, New York 10580 Gabelli funds.
Age: 63
</TABLE>
B-15
<PAGE> 68
<TABLE>
<CAPTION>
NAME, POSITION WITH FUND AND PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS;
ADDRESS AFFILIATIONS WITH THE ADVISER OR ADMINISTRATOR
<S> <C>
Bruce N. Alpert Executive Vice President and Chief Operating
Vice President and Treasurer Officer of Gabelli Funds, LLC. (the "Adviser");
One Corporate Center President and Director of Gabelli Advisors, Inc.;
Rye, New York 10580 officer of each mutual fund managed by the Adviser
Age: 46 or its affiliates.
James E. McKee Vice President and General Counsel of Gabelli Asset
Secretary Management Inc., of GAMCO Investors, Inc. since
One Corporate Center 1993; Secretary of all mutual funds managed by the
Rye, New York 10580 Adviser or its affiliates; U.S. Securities and
Age: 35 Exchange Commission, New York, (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, 1998 in excess of $60,000.
COMPENSATION TABLE
<TABLE>
<CAPTION>
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 $82,000(13)
Director
</TABLE>
- --------
(1) Represents the total compensation paid to such persons during the calendar
year ended December 31, 1998. 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.
B-16
<PAGE> 69
<TABLE>
<S> <C> <C>
Karl Otto Pohl(2)......................................... $ 1,750 $98,466(15)
Director
Werner J. Roeder, M.D..................................... $ 2,000 $25,500(7)
Director
Anthonie C. van Ekris..................................... $ 2,000 $57,500(11)
Director
</TABLE>
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.
- ---------
(2) Mr. Pohl is a director of Gabelli Asset Management Inc.
B-17
<PAGE> 70
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
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 $2,852 on portfolio transactions
in the principal amount of $836,286 during 1998, to various broker-dealers that
have provided research services to the Adviser.
B-18
<PAGE> 71
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.
The following table sets forth certain information regarding the brokerage
commissions paid and the brokerage commissions paid to Gabelli affiliates for
the fiscal years ended December 31, 1996 and 1997 and 1998.
<TABLE>
<CAPTION>
TOTAL BROKERAGE BROKERAGE COMMISSIONS
PERIOD COMMISSIONS PAID PAID TO GABELLI
------ ---------------- ---------------------
<S> <C> <C>
1996............................................... $ 76,850 $ 25
1997............................................... $ 99,463 $ 0
1998............................................... $104,828 $ 300
</TABLE>
For the fiscal year ended December 31, 1998 .30% of aggregate brokerage
commissions paid by the Fund were paid to Gabelli & Company, Inc., or .37% of
the Fund's aggregate dollar amount of transactions involving the payment of
commissions.
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
PURCHASE OF SHARES
Shares of Class A, Class B and Class C of the Fund may be purchased at a price
equal to the next determined net asset value per share plus a sales charge
which, at the election of the investor, may be imposed either (i) at the time or
purchase (Class A shares) or (ii) on a deferred basis (Class B of Class C
shares.) Class AAA shares of the Fund are offered exclusively to clients of
Gabelli & Company, Inc., [the Fund or through any financial intermediary that
makes Class AAA shares available.] No minimum initial
B-19
<PAGE> 72
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.
Each class of shares represents an interest in the same assets of the Fund and
is identical in all respects except that (i) each class is subject to different
sales charges and distribution and/or service fees (except for Class AAA shares,
which are not subject to any sales charges), which will affect performance
differently, (ii) each class has exclusive voting rights with respect to any
matter submitted to shareholders that relates solely to its arrangement and has
separate voting rights on any matter submitted to shareholders in which the
interests of one class differ from the interests of any other class, (iii) each
class has a different exchange privilege, (iv) only Class B shares have a
conversion feature, (v) Class AAA shares are offered exclusively to investors
acquiring shares directly from the Distributor, or from a financial intermediary
with whom the Distributor has entered into an agreement expressly authorizing
the sale by such intermediary of Class AAA shares.
Under the current distribution arrangement between each Class and the
Distributor, Class A shares are sold at a maximum sales charge of 5.75% and
Class B *, Class C * and Class AAA shares are sold at net asset value.
Class B shares automatically convert to Class A shares of the Fund on the first
business day of the eighty-fifth calendar month following the calendar month in
which such shares were issued. The automatic conversion of Class B shares to
Class A shares may be suspended by the Board of Directors at any time it
determines such suspension to be required under applicable law or in the
exercise of their fiduciary duties; provided, however, that if the Board
determines that the suspension is likely to continue for a substantial period of
time, the Board of Directors will seek to create an additional class or
additional classes of shares into which Class B shares are eligible for
conversion under the rules of the Securities and Exchange Commission and other
applicable law.
If an investor or eligible group of related investors purchases Class A shares
of the Fund concurrently with Class A shares of other Gabelli funds, the
purchases may be combined to take advantage of the reduced sales charges
applicable to larger purchases.
An eligible group of related Fund investors includes any combination of the
following:
- - an individual;
- - the individual's spouse, their children and their parents;
- - the individual's and spouse's Individual Retirement Accounts (IRA);
- - any company controlled by the individual (a person, entity or group
that holds 25% or more of the outstanding voting securities of a
company will be deemed to control the company, and a partnership will
be deemed to be controlled by each of its general partners.);
- - a trust created by the individual, the beneficiaries of which are the
individual, his or her spouse, parents and/or children;
- - a Uniform Gift to Minors Act/Uniform Transfers to Minors Act account
created by the individual or the individual's spouse; and
- -------------
* Class B and Class C shares are subject to a contingent deferred sales charge
on certain redemptions.
B-20
<PAGE> 73
- - one or more employee benefit plans of a company controlled by an
individual.
In addition, an eligible group of related Fund investors may include an employer
(or group of related employers) and one or more retirement or group plans of
such employer or employers (an employer controlling, controlled by or under
common control with another employer is deemed related to that employer.)
The Distributor must be notified at the time of purchase that the investor is
entitled to a reduced sales charge. The reduced sales charge will be granted
subject to confirmation of the investor's holdings.
Rights of Accumulation. Reduced sales charges are also available through rights
of accumulation, under which an investor or an eligible group of related
investors, as described above, may aggregate the value of their existing
holdings of shares of the Fund and shares of other funds managed by the Adviser
or an affiliate (excluding money market funds other than those acquired pursuant
to the exchange privilege) to determine the reduced sales charge. The value of
existing holdings for purposes of determining the reduced sales charge is
calculated using the maximum offering price (net asset value plus maximum sales
charge) as of the previous business day.
Letters of Intent. Reduced sales charges are also available to investors (or an
eligible group of related investors), including retirement and group plans, who
enter into a written letter of intent (a "Letter of Intent") providing for the
purchase, within a thirteen-month period, of shares of the Fund and shares of
other funds managed by the Adviser or an affiliate (an "Investment Letter of
Intent"). Retirement and group plans may also qualify to purchase Class A shares
at net asset value by entering into a Letter of Intent whereby they agree to
enroll, within a thirteen-month period, a specified number of eligible employees
or participants (a "Participant Letter of Intent.").
For purposes of the Investment Letter of Intent, all shares of the Fund and
shares of other Gabelli funds (excluding money market funds other than those
acquired pursuant to the exchange privilege) which were previously purchased and
are still owned are also included in determining the applicable reduction.
A Letter of Intent permits a purchaser, in the case of an Investment Letter of
Intent, to establish a total investment goal to be achieved by any number of
investments over a thirteen-month period and, in case of a Participant Letter of
Intent, to establish a minimum eligible employee or participant enrollment goal
over a thirteen-month period. Each investment made during the period, in the
case of an Investment Letter of Intent, will receive the reduced sales charge
applicable to the amount represented by the goal, as if it were a single
investment. In the case of a Participant Letter of Intent, each investment made
during the period will be made at net asset value. Escrowed Class A shares
totaling 5% of the dollar amount of the Letter of Intent will be held by the
Transfer Agent in the name of the purchaser, except in the case of retirement
and group plans where the employer or plan sponsor will be responsible for
paying any applicable sales charge. The effective date of an Investment Letter
of Intent (except in the case of retirement and group plans) may be back-dated
up to 90 days, in order that any investments made during this 90-day period,
valued at the purchaser's cost, can be applied to the fulfillment of the Letter
of Intent goal.
The Investment Letter of Intent does not obligate the investor to purchase, nor
the Fund to sell, the indicated amount. Similarly, the Participant Letter of
Intent does not obligate the retirement or group plan to enroll the indicated
number of eligible employees or participants. In the event the Letter of Intent
goal is not achieved within the thirteen-month period, the purchaser (or the
employer or plan sponsor, in case of any retirement or group plan) is required
to pay the difference between the sales charge otherwise applicable to the
purchases actually made during this period and sales charges actually paid. Such
payment may be made directly to the Distributor or, if not paid, the Distributor
will liquidate sufficient escrowed shares to obtain such difference. Investors
electing to purchase Class A shares of the Fund pursuant to a Letter of Intent
should carefully read such Letter of Intent.
B-21
<PAGE> 74
The Distributor must be notified at the time of purchase that the investor is
entitled to a reduced sales charge. The reduced sales charge will, in the case
of an Investment Letter of Intent, be granted subject to confirmation of the
number of eligible employees or participants in the retirement or group plan.
Letters of Intent are not available to individual participants in any retirement
or group plans.
Waiver of Contingent Deferred Sales Charge - Class B Shares. The contingent
deferred sales charge is waived under the circumstances described in the Fund's
Prospectus and the accompanying Owner's Manual. In connection with these
waivers, the Transfer Agent will require the shareholder to submit the
supporting documentation set forth below.
<TABLE>
<CAPTION>
CATEGORY OF WAIVER REQUIRED DOCUMENTATION
- ------------------ ----------------------
<S> <C>
Death A copy of the shareholder's death
certificate or, in the case of a trust, a
copy of the grantor's death certificate,
plus a copy of the trust agreement
identifying the grantor.
Disability - An individual will A copy of the Social Security Administration
be considered disabled if he or award letter or a letter from a physician on
she is unable to engage in any the physician's letterhead stating that the
substantial gainful activity shareholder (or, in the case of a trust, the
by reason of any medically grantor) is permanently disabled. The letter
determinable physical or mental must also indicate the date of disability.
or mental impairment which can
be expected to result in death
or to be of long-continued and
indefinite duration.
Distribution from an IRA or 403 A copy of the distribution form from the
(b) Custodial Account custodial firm indicating (i) the date of
birth of the shareholder and (ii) that the
shareholder is over age 59 1/2and is taking
a normal distribution - signed by the
shareholder.
Distribution from Retirement Plan A letter signed by the plan administrator/
trustee indicating the reason for the
distribution.
Excess Contribution A letter from the shareholder (for an IRA)
or the plan administrator/trustee on company
letterhead indicating the amount of the
excess and whether or not taxes have been
paid.
</TABLE>
The Transfer Agent reserves the right to request such additional documents as it
may deem appropriate.
REDEMPTION OF SHARES
Payment of the redemption price for shares redeemed may be made either in cash
or in portfolio securities (selected at the discretion of the Board of Directors
of the Fund and taken at their value used in determining the Fund's net asset
value per share as we described under "Net Asset Value" below), or partly in
cash and partly in portfolio securities. However, payments will be made wholly
in cash unless the Board of Directors believes that economic conditions exist
which would make such a practice detrimental to the best interest of the Fund.
If payment for shares redeemed is made wholly or partly in portfolio securities,
brokerage costs may be incurred by the investor in converting the securities to
cash. The Fund will not distribute in-kind portfolio securities that are not
readily marketable. The Fund has filed a formal election with the SEC pursuant
to which the Fund will only effect a redemption in portfolio securities where
the particular shareholder of record is redeeming more than $250,000 or 1.00% of
the Fund's total net assets,
B-22
<PAGE> 75
whichever is less, during any 90-day period. In the opinion of the Fund's
management, however, the amount of a redemption request would have to be
significantly greater than $250,000 before a redemption wholly or partly in
portfolio securities would be made.
Cancellation of purchase orders for Fund shares (as, for example, when checks
submitted to purchase shares are returned unpaid) causes a loss to be incurred
when the net asset value of the Fund 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 reimburse itself or the Distributor for such loss by
automatically redeeming shares from any account registered at any time in that
shareholder's name, or by seeking other redress. In the event shares held in the
account of such shareholder are not sufficient to cover such loss, the
Distributor will promptly reimburse the Fund for the amount of such unrecovered
loss.
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.
EXCHANGE PRIVILEGE
The Fund makes available to its shareholders the privilege of exchanging their
shares for shares of certain other funds managed by the Adviser or an affiliate,
including one or more specified money market funds, subject in each case to the
minimum investment requirements of each fund (the "Exchange Privilege"). Shares
of such other Gabelli Funds may also be exchanged for shares of the Fund. All
exchanges are made on the basis of the relative NAV next determined after
receipt of an order in proper form. An exchange will be treated as a redemption
and purchase for tax purposes. Shares may be exchanged for shares of another
fund only if shares of such fund may legally be sold under applicable state
laws. For retirement and group plans having a limited menu of Gabelli funds, the
Exchange Privilege is available for those funds eligible for investment in the
particular program.
CLASS A SHARES
Shareholders of the Fund may exchange their Class A shares for Class A shares of
any other fund managed by the Adviser or an affiliate that offers Class A shares
and for shares of any money market fund managed by the Adviser or an affiliate
on the basis of relative NAV. No fee or sales load will be imposed upon the
exchange. Shareholders of money market funds who acquired such shares upon
exchange of Class A shares may use the Exchange Privilege only to acquire Class
A shares of the Gabelli funds participating in the Exchange Privilege as
identified by the Distributor from time to time.
CLASS B AND CLASS C SHARES
Shareholders of the Fund may exchange their Class B and Class C shares for Class
B and Class C shares, respectively, of any other fund managed by the Adviser or
an affiliate that offers Class B or Class C shares on the basis of relative NAV
and for shares of any money market fund managed by the Adviser or an affiliate.
No CDSC will be payable upon such exchange, but a CDSC may be payable upon the
redemption of the Class B and Class C shares acquired as a result of an
exchange. The applicable sales charge will be that imposed by the fund in which
shares were initially purchased and the purchase date will be deemed to be the
first day of the month after the initial purchase, rather than the date of the
exchange.
At any time after acquiring shares of other funds participating in the Class B
or Class C Exchange Privilege, a shareholder may again exchange those shares
(and any reinvested dividends and distributions) for Class B and Class C shares
of the Fund, respectively, without subjecting such shares to any CDSC upon
B-23
<PAGE> 76
the exchange. Shares of any fund participating in the Class B or Class C
exchange privilege that were acquired through reinvestment of dividends or
distributions may be exchanged for Class B or Class C shares, respectively, of
other funds without being subject to any CDSC.
CLASS AAA SHARES
Class AAA shares may be exchanged for Class AAA shares of any other funds
managed by the Adviser or an affiliate of the Adviser that offers Class AAA
shares or any other shares not subject to a front end load or CDSC. Additional
details about the Exchange Privilege and prospectuses for each of the funds
managed by the Adviser or an affiliate are available from the Fund's Transfer
Agent. The Exchange Privilege may be modified, terminated or suspended on sixty
days' notice, and any fund, or the Distributor, has the right to reject any
exchange application relating to such fund's shares.
NET ASSET VALUE
Net asset value is calculated separately for each class of the Fund. The net
asset value of Class B and Class C shares of the Fund will generally be lower
than the net asset value of Class A or Class AAA shares as a result of the
larger distribution-related fee to which Class B and Class C shares are subject.
It is expected, however, that the net asset value per share of each class will
tend to converge immediately after the recording of dividends, if any, which
will differ by approximately the amount of the distribution and/or service fee
expense accrual differential among the classes.
For purposes of determining the Fund's net asset value per share, readily
marketable portfolio securities listed on the NYSE are valued, except as
indicated below, at the last sale price reflected at the close of the regular
trading session of the NYSE on the business day as of which such value is being
determined. If there has been no sale on such day, the securities are valued at
the mean of the closing bid and asked prices on such day. If no asked prices are
quoted on such day, then the security is valued at the closing bid price on such
day. If no bid or asked prices are quoted on such day, then the security is
valued by such method as the Board of Directors shall determine in good faith to
reflect its fair market value. Readily marketable securities not listed on the
NYSE but listed on other national securities exchanges or admitted to trading on
the National Association of Securities Dealers Automated Quotations, Inc.
("NASDAQ") National List are valued in like manner.
Readily marketable securities traded in the over-the-counter market, including
listed securities whose primary market is believed by the Adviser to be
over-the-counter but excluding securities admitted to trading on the NASDAQ
National List, are valued at the mean of the current bid and asked prices as
reported by NASDAQ or, in the case of securities not quoted by NASDAQ, the
National Quotation Bureau or such other comparable sources as the Board of
Directors deems appropriate to reflect their fair value. If no bid or asked
prices are quoted on such day, then the security is valued by such method as the
Board of Directors shall determine in good faith to reflect its fair market
value.
Portfolio securities traded on more than one national securities exchange or
market are valued according to the broadest and most representative market as
determined by the Adviser. Securities traded primarily on foreign exchanges are
valued at the closing price on such foreign exchange immediately prior to the
close of the NYSE.
United States Government obligations and other debt instruments having sixty
days or less remaining until maturity are stated at amortized cost. Debt
instruments having a greater remaining maturity will be valued at the highest
bid price obtained from a dealer maintaining an active market in that security
or on the basis of prices obtained from a pricing service approved as reliable
by the Board of Directors. All other investment assets, including restricted and
not readily marketable securities, are valued under procedures
B-24
<PAGE> 77
established by and under the general supervision and responsibility of the
Fund's Board of Directors designed to reflect in good faith the fair value of
such securities.
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
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
twelve months.
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.
B-25
<PAGE> 78
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 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 and dividend 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 may
reflect the amount of the forthcoming distribution. Those purchasing at that
time 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 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
B-26
<PAGE> 79
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 SHARES
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 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
In its reports, investor communications or advertisements, the Fund may include:
(i) its total return performance; (ii) its performance compared with various
indexes or other mutual funds; (iii) published evaluations by nationally
recognized ranking services and financial publications; (iv) descriptions and
updates concerning its strategies and portfolio investments; (v) its goals, risk
factors and expenses compared with other mutual funds; (vi) analysis of its
investments by industry, country, credit quality and other characteristics;
(vii) a discussion of the risk/return continuum relating to different
investments; (viii) the potential impact of adding foreign stocks to a domestic
portfolio; (ix) the general biography or work experience of the portfolio
manager of the Fund; (x) portfolio manager commentary or market updates; (xi)
discussion of macroeconomic factors affecting the Fund and its investments; and
(xii) other information of interest to investors. "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)(6) - 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.
B-27
<PAGE> 80
For the 30-day period ended December 31, 1998 the Fund's yield for Class AAA
shares was ______%.
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.
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(1+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 $1,000 payment made at the beginning of the period. All total
return figures will reflect the deduction of Fund expenses (net of certain
expenses reimbursed by the Adviser) on an annual basis, and will assume that all
dividends and distributions are reinvested and will deduct the maximum sales
charge, if any is imposed.
For the year ended December 31, 1998, the Fund's total return for Class AAA
shares was 17.4%. The average annual total return since its inception on June
30, 1995 is 16.1%.
SERVICE PROVIDERS
Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York 10019, serves
as counsel for the Fund.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, has been
appointed independent auditor for the Fund.
State Street Bank and Trust Company ("State Street") is the Custodian for the
Fund's cash and securities as well as the Transfer and Dividend Disbursing Agent
for its shares. Boston Financial Data Services, Inc., an affiliate of State
Street, performs the shareholder services on behalf of State Street and is
located at the BFDS Building, 2 Heritage Drive, North Quincy, Massachusetts
07171.
B-28
<PAGE> 81
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Fund is an open-end management investment company that was organized as a
Maryland corporation on May 25, 1994. Its authorized capital stock consists of
one billion shares of stock having a par value of one tenth of one cent ($.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 record, the
Fund does not issue certificates evidencing shares.
SHARES OF BENEFICIAL INTEREST
(to be filed by amendment)
As of __________, 1999, the Officers and Directors of the Fund as a group owned
___% of the outstanding shares. As of _________, 1999, the following persons
were 5% or greater shareholders of the Fund's Class AAA shares:
PERCENTAGE OF
FUND/SHAREHOLDER SHARES OUTSTANDING
------------- --------------
B-29
<PAGE> 82
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-30
<PAGE> 83
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-31
<PAGE> 84
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, 1998,
including the Report of Ernst & Young LLP, independent auditors, are
incorporated by reference to the Fund's Annual Report dated December 31, 1998.
B-32
<PAGE> 85
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and
the Investment Company Act of 1940, as amended, the registrant has duly caused
this Amendment No. 5 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 26th day of February, 1999.
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. 5 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 February 26, 1999
/s/ Caesar M.P. Bryan
- --------------------------------
Caesar M.P. Bryan President February 26, 1999
/s/ Bruce N. Alpert
- --------------------------------
Bruce N. Alpert Vice President, Treasurer
and Chief Financial Officer February 26, 1999
*
- --------------------------------
Anthony J. Colavita Director February 26, 1999
*
- --------------------------------
Karl Otto Pohl Director February 26, 1999
*
- --------------------------------
Werner J. Roeder Director February 26, 1999
*
- --------------------------------
Anthonie C. van Ekris Director February 26, 1999
*By: /s/ Bruce N. Alpert
---------------------------
Bruce N. Alpert
Attorney-in-fact
</TABLE>
<PAGE> 86
PART C
OTHER INFORMATION
ITEM 23. FINANCIAL STATEMENTS AND EXHIBITS
(A) Financial Statements:
(i) Financial Statements included in Part A, the Prospectus: (CURRENTLY
UNAUDITED BY INDEPENDENT AUDITORS)
(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, 1997 and 1998.
(ii) Financial Statements included in Part B, the Statement of
Additional Information:
(a) Report of Independent Auditors.(4)
(b) Statement of Assets and Liabilities, December 31,
1998.(4)
(c) Portfolio of Investments, December 31, 1998.(4)
(d) Statement of Operations for the year ended December
31, 1998.(4)
(e) Statement of Changes in Net Assets for the fiscal
years ended December 31, 1997 and 1998.(4)
(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, 1997 and 1998.(4)
(g) Notes to the Financial Statements(4)
(B) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBITS
----------- -----------------------
<S> <C>
1 Articles of Incorporation of Registrant(6)
2 By-Laws of Registrant(6)
3 Not applicable
4 Specimen copies of certificates for shares issued by Registrant(1)
5 Investment Advisory Agreement(6)
6 Distribution Agreement(6)
7 Not applicable
8 Custodian Contract(6)
9(a) Transfer Agency and Service Agreement(6)
9(b) Sub-Administration Agreement(5)
10 Opinion and consent of Willkie Farr & Gallagher(3)
</TABLE>
<PAGE> 87
<TABLE>
<S> <C>
10(b) Consent of Willkie Farr & Gallagher(5)
11 Consent of Independent Auditors (TO BE FILED BY AMENDMENT)
12 Not applicable
13 Subscription Agreement(3)
14 Not applicable
15(a) Form of Amended and Restated Plan of Distribution relating to the Class AAA Shares
(FILED HEREWITH)
15(b) Form of Amended and Restated Plan of Distribution relating to the Class A Shares
(FILED HEREWITH)
15(c) Form of Amended and Restated Plan of Distribution relating to the Class B Shares
(FILED HEREWITH)
15(d) Form of Amended and Restated Plan of Distribution relating to the Class C Shares
(FILED HEREWITH)
16 Not applicable
17 Financial Data Schedule (TO BE FILED BY AMENDMENT)
18 Form of Rule 18f-3 Plan (FILED HEREWITH)
24(a) Power of Attorney(2)
(b) Power of Attorney(3)
</TABLE>
- ------------
(1) Previously filed as an exhibit to Registration Statement No. 33-79994
filed on June 9, 1994
(2) Previously filed as an exhibit to Pre-Effective Amendment No. 1 to
Registration Statement No. 33-79994 filed on September 30, 1994.
(3) Previously filed as an exhibit to Pre-Effective Amendment No. 2 to
Registration Statement No. 33-79994 filed on June 28, 1995.
(4) Previously filed with the Fund's Annual Report for the year ended
December 31, 1998.
(5) Previously filed as an exhibit to Post-Effective Amendment No. 3 to
Registration Statement No. 33-79994 filed on April 30, 1997.
(6) Previously filed as an exhibit to Post-Effective Amendment No. 4 to
Registration Statement No. 33-79994 filed on April 30, 1998.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 25. 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
<PAGE> 88
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 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 26. 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 27. 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 28. 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 29. MANAGEMENT SERVICES
Not applicable.
<PAGE> 89
ITEM 30. 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> 1
EXHIBIT 15(a)
AMENDED AND RESTATED
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
GABELLI INTERNATIONAL GROWTH FUND, INC.
WHEREAS, GABELLI INTERNATIONAL GROWTH FUND, INC., a Maryland
Corporation (the "Fund"), engages in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Act");
WHEREAS, the Fund has issued and is authorized to issue shares
of Common Stock ("Shares");
WHEREAS, Gabelli & Company, Inc. (the "Distributor") presently
serves as the principal distributor of the Shares pursuant to the distribution
agreement between the Fund and Distributor, which distribution agreement, as
amended, has been duly approved by the Board of Directors of the Fund (the
"Board"), in accordance with the requirements of the Act (the "Distribution
Agreement");
WHEREAS, the Fund has adopted a plan of distribution pursuant
to Rule 12b-1 under the Act to assist in the distribution of Shares (the
"Plan");
WHEREAS, the Fund has established and plans to offer shares of
its common stock denominated as Class AAA Shares (the "Class AAA Shares"),
pursuant to Rule 18f-3 under the Act that permits the Fund to implement a
multiple distribution system providing investors with the option of purchasing
shares of various classes;
WHEREAS, the Board as a whole, and the Directors who are not
interested persons of the Fund (as defined in the Act) and who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Disinterested Directors"), have determined, after
review of all information and consideration of all pertinent facts reasonably
necessary to an informed determination, that it would be desirable to amend the
Plan in certain respects and to restate such amended Plan in its entirety and
that, in the exercise of reasonable business judgment and in light of their
fiduciary duties, that there is a reasonable likelihood that a plan of
distribution containing the terms set forth herein will benefit the Fund and the
shareholders of the Class AAA Shares, and have accordingly approved the
2
<PAGE> 2
Plan by votes cast in person at a meeting called for the purpose of amending and
restating the Plan; and
WHEREAS, this Plan governs the Class AAA Shares and does not
relate to any class of shares which may be offered and sold by the Fund other
than the Class AAA Shares.
NOW, THEREFORE, in consideration of the foregoing, the Fund
hereby amends and restates the Plan in accordance with Rule 12b-1 under the Act
on the following terms and conditions:
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 Class AAA Shares an aggregate amount at a
rate of 0.25% per year of the average daily net assets of the Class AAA Shares.
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 Class AAA
Shares 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
Class AAA Shares. 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 Class AAA Shares: advertising the Class AAA Shares or the
Fund's investment adviser'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 Class AAA Shares, 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 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 Class
AAA Shares, 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,
2
<PAGE> 3
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 Disinterested
Directors ("Disinterested Director Approval"), 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 Director 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.
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 Class AAA Shares without regard to
the existence or terms and conditions of a plan of distribution under Rule 12b-1
of
3
<PAGE> 4
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 Class AAA Shares. 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 Class AAA Shares. This Plan may continue in effect for longer than one year
after its approval by a majority of the Class AAA Shares 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 Disinterested
Directors, 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 Class AAA Shares.
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 Class AAA Shares" shall mean the vote, at the annual or a
special meeting of the holders of the Class AAA Shares duly called, (a) of 67%
or more of the voting securities present at such meeting, if the holders of more
than 50% of the Class AAA Shares outstanding on the record date for such meeting
are present or represented by proxy or, if less, (b) more than 50% of the Class
AAA Shares outstanding on the record date for such meeting.
Dated: February 17, 1999
4
<PAGE> 1
EXHIBIT 15(b)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
GABELLI INTERNATIONAL GROWTH FUND, INC.
WHEREAS, GABELLI INTERNATIONAL GROWTH FUND, INC., a Maryland
Corporation (the "Fund"), engages in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Act");
WHEREAS, the Fund has issued and is authorized to issue shares
of Common Stock ("Shares");
WHEREAS, Gabelli & Company, Inc. (the "Distributor") presently
serves as the principal distributor of the Shares pursuant to the distribution
agreement between the Fund and the Distributor, which distribution agreement, as
amended, has been duly approved by the Board of Directors of the Fund (the
"Board"), in accordance with the requirements of the Act (the "Distribution
Agreement");
WHEREAS, the Fund has established and plans to offer shares of
its common stock denominated as Class A Shares (the "Class A Shares"), pursuant
to Rule 18f-3 under the Act that permits the Fund to implement a multiple
distribution system providing investors with the option of purchasing shares of
various classes;
WHEREAS, the Board as a whole, and the directors who are not
interested persons of the Fund (as defined in the Act) and who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Disinterested Directors"), have determined, after
review of all information and consideration of all pertinent facts reasonably
necessary to an informed determination, that it would be desirable to adopt a
plan of distribution for the Class A Shares and that, in the exercise of
reasonable business judgment and in light of their fiduciary duties, that there
is a reasonable likelihood that a plan of distribution containing the terms set
forth herein (the "Plan") will benefit the Fund and the shareholders of the
Class A Shares, and have accordingly approved the Plan by votes cast in person
at a meeting called for the purpose of voting on the Plan; and
WHEREAS, this Plan governs the Class A Shares and does not
relate to any class of shares which may be offered and sold by the Fund other
than the Class A Shares.
NOW, THEREFORE, in consideration of the foregoing, the Fund
hereby adopts the Plan in accordance with Rule 12b-1 under the Act on the
following terms and conditions:
<PAGE> 2
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 Class A Shares an aggregate amount at a rate
of 0.25% per year of the average daily net assets of the Class A Shares. 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 Class A Shares 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
Class A Shares. 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 Class A Shares: advertising the Class A Shares or the
Fund's investment adviser'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 Class A Shares, 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 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 Class A
Shares, 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.
<PAGE> 3
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 Disinterested
Directors ("Disinterested Director Approval"), 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 Director 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.
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 Class A Shares 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 Class A Shares. 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 Class A Shares. This Plan may continue in effect for longer than one year
after its approval by a majority of the Class A Shares only as long as such
continuance is specifically approved at least annually by Board Approval and by
Disinterested Director Approval.
<PAGE> 4
8. This Plan may be terminated at any time by a vote of the Disinterested
Director, 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 Class A Shares.
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 Class A Shares" shall mean the vote, at the annual or a
special meeting of the holders of the Class A Shares duly called, (a) of 67% or
more of the voting securities present at such meeting, if the holders of more
than 50% of the Class A Shares outstanding on the record date for such meeting
are present or represented by proxy or, if less, (b) more than 50% of the Class
A Shares outstanding on the record date for such meeting.
Dated: February 17, 1999
<PAGE> 1
EXHIBIT 15(c)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
GABELLI INTERNATIONAL GROWTH FUND, INC.
WHEREAS, GABELLI INTERNATIONAL GROWTH FUND, INC., a Maryland
Corporation (the "Fund"), engages in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Act");
WHEREAS, the Fund has issued and is authorized to issue shares
of Common Stock ("Shares");
WHEREAS, Gabelli & Company, Inc. (the "Distributor") presently
serves as the principal distributor of the Shares pursuant to the distribution
agreement between the Fund and the Distributor, which distribution agreement, as
amended, has been duly approved by the Board of Directors of the Fund (the
"Board"), in accordance with the requirements of the Act (the "Distribution
Agreement");
WHEREAS, the Fund has established and plans to offer shares of
its common stock denominated as Class B Shares (the "Class B Shares"), pursuant
to Rule 18f-3 under the Act that permits the Fund to implement a multiple
distribution system providing investors with the option of purchasing shares of
various classes;
WHEREAS, the Board as a whole, and the directors who are not
interested persons of the Fund (as defined in the Act) and who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Disinterested Directors"), have determined, after
review of all information and consideration of all pertinent facts reasonably
necessary to an informed determination, that it would be desirable to adopt a
plan of distribution for the Class B Shares and that, in the exercise of
reasonable business judgment and in light of their fiduciary duties, that there
is a reasonable likelihood that a plan of distribution containing the terms set
forth herein (the "Plan") will benefit the Fund and the shareholders of the
Class B Shares, and have accordingly approved the Plan by votes cast in person
at a meeting called for the purpose of voting on the Plan; and
WHEREAS, this Plan governs the Class B Shares and does not
relate to any class of shares which may be offered and sold by the Fund other
than the Class B Shares.
NOW, THEREFORE, in consideration of the foregoing, the Fund
hereby adopts the Plan in accordance with Rule 12b-1 under the Act on the
following terms and conditions:
<PAGE> 2
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 a distribution fee at the aggregate amount rate of
.75% per year of the average daily net asset value of the Class B Shares and a
service fee at the aggregate amount rate of .25% per year of the average daily
net asset value of the Class B Shares (the "Payments"). 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 Class B Shares 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
Class B Shares. 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 Class B Shares: advertising the Class B Shares or the
Fund's investment adviser'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 Class B Shares, 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 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 Class B
Shares, 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.
<PAGE> 3
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 Disinterested
Directors ("Disinterested Director Approval"), 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 Director 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.
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 Class B Shares 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 Class B Shares. 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 Class B Shares. This Plan may continue in effect for longer than one year
after its approval by a majority of the Class B Shares only as long as such
continuance is specifically approved at least annually by Board Approval and by
Disinterested Director Approval.
<PAGE> 4
8. This Plan may be terminated at any time by a vote of the Disinterested
Director, 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 Class B Shares.
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 Class B Shares" shall mean the vote, at the annual or a
special meeting of the holders of the Class B Shares duly called, (a) of 67% or
more of the voting securities present at such meeting, if the holders of more
than 50% of the Class B Shares outstanding on the record date for such meeting
are present or represented by proxy or, if less, (b) more than 50% of the Class
B Shares outstanding on the record date for such meeting.
Dated: February 17, 1999
<PAGE> 1
EXHIBIT 15(d)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
GABELLI INTERNATIONAL GROWTH FUND, INC.
WHEREAS, GABELLI INTERNATIONAL GROWTH FUND, INC., a Maryland
Corporation (the "Fund"), engages in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Act");
WHEREAS, the Fund has issued and is authorized to issue shares
of Common Stock ("Shares");
WHEREAS, Gabelli & Company, Inc. (the "Distributor") presently
serves as the principal distributor of the Shares pursuant to the distribution
agreement between the Fund and the Distributor, which distribution agreement, as
amended, has been duly approved by the Board of Directors of the Fund (the
"Board"), in accordance with the requirements of the Act (the "Distribution
Agreement");
WHEREAS, the Fund has established and plans to offer shares of
its common stock denominated as Class C Shares (the "Class C Shares"), pursuant
to Rule 18f-3 under the Act that permits the Fund to implement a multiple
distribution system providing investors with the option of purchasing shares of
various classes;
WHEREAS, the Board as a whole, and the directors who are not
interested persons of the Fund (as defined in the Act) and who have no direct or
indirect financial interest in the operation of the Plan or any agreements
related to the Plan (the "Disinterested Directors"), have determined, after
review of all information and consideration of all pertinent facts reasonably
necessary to an informed determination, that it would be desirable to adopt a
plan of distribution for the Class C Shares and that, in the exercise of
reasonable business judgment and in light of their fiduciary duties, that there
is a reasonable likelihood that a plan of distribution containing the terms set
forth herein (the "Plan") will benefit the Fund and the shareholders of the
Class C Shares, and have accordingly approved the Plan by votes cast in person
at a meeting called for the purpose of voting on the Plan; and
WHEREAS, this Plan governs the Class C Shares and does not
relate to any class of shares which may be offered and sold by the Fund other
than the Class C Shares.
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing, the Fund
hereby adopts the Plan in accordance with Rule 12b-1 under the Act on the
following terms and conditions:
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 a distribution fee at the aggregate amount rate of
.75% per year of the average daily net asset value of the Class C Shares and a
service fee at the aggregate amount rate of .25% per year of the average daily
net asset value of the Class C Shares (the "Payments"). 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 Class C Shares 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
Class C Shares. 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 Class C Shares: advertising the Class C Shares or the
Fund's investment adviser'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 Class C Shares, 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 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 Class C
Shares, 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
<PAGE> 3
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 Disinterested
Directors ("Disinterested Director Approval"), 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 Director 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.
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 Class C Shares 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.
<PAGE> 4
7. This Plan shall not take effect until it has been approved by a vote of at
least a majority of the Class C Shares. 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 Class C Shares. This Plan may continue in effect for longer than one year
after its approval by a majority of the Class C Shares 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 Disinterested
Directors, 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 Class C Shares.
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 Class C Shares" shall mean the vote, at the annual or a
special meeting of the holders of the Class C Shares duly called, (a) of 67% or
more of the voting securities present at such meeting, if the holders of more
than 50% of the Class C Shares outstanding on the record date for such meeting
are present or represented by proxy or, if less, (b) more than 50% of the Class
C Shares outstanding on the record date for such meeting.
Dated: February 17, 1999
<PAGE> 1
EXHIBIT 18
RULE 18f-3
MULTI-CLASS PLAN
FOR
GABELLI INTERNATIONAL GROWTH FUND, INC.
This Plan is adopted pursuant to Rule 18f-3 under the Act to
provide for the issuance and distribution of multiple classes of shares in
relation to Gabelli International Growth Fund, Inc. (the "Fund"), in accordance
with the terms, procedures and conditions set forth below. A majority of the
Directors of the Fund, including a majority of the Directors who are not
interested persons of the Fund within the meaning of the Act, have found this
Multi-Class Plan, including the expense allocations, to be in the best interest
of the Fund and each Class of Shares constituting the Fund.
A. Definitions. As used herein, the terms set forth below shall
have the meanings ascribed to them below.
1. The Act - the Investment Company Act of 1940, as
amended, and the rules and regulations promulgated
thereunder.
2. CDSC - contingent deferred sales charge.
3. CDSC Period - the period of time following
acquisition during which Shares are assessed a CDSC
upon redemption.
4. Class - a sub-series of Shares of the Fund.
5. Class A Shares - shall have the meaning ascribed in
Section B.1.
6. Class B Shares - shall have the meaning ascribed in
Section B.1.
7. Class C Shares - shall have the meaning ascribed in
Section B.1.
8. Class AAA Shares - shall have the meaning ascribed in
Section B.1.
9. Distribution Expenses - expenses, including allocable
overhead costs, imputed interest, any other expenses
and any element of profit referred to in a Plan of
Distribution and/or board resolutions, incurred in
activities which are primarily intended to result in
the distribution and sale of Shares.
10. Distribution Fee - a fee paid by the Fund in respect
of the assets of a Class of the Fund to the
Distributor pursuant to the Plan of Distribution
relating to the Class.
11. Directors - the directors of the Fund.
12. Distributor - Gabelli & Company, Inc.
<PAGE> 2
13. Fund - Gabelli International Growth Fund, Inc..
14. IRS - Internal Revenue Service
15. NASD - National Association of Securities Dealers,
Inc.
16. Plan of Distribution - any plan adopted under Rule
12b-1 under the Act with respect to payment of a
Distribution Fee.
17. Prospectus - the prospectus, including the statement
of additional information incorporated by reference
therein, covering the Shares of the referenced Class
or Classes of the Fund.
18. SEC - Securities and Exchange Commission
19. Service Fee - a fee paid to financial intermediaries,
including the Distributor and its affiliates, for the
ongoing provision of personal services to
shareholders of a Class and/or the maintenance of
shareholder accounts relating to a Class.
20. Share - a share in the Fund.
B. Classes. Subject to further amendment, the Fund may offer
different Classes of Shares constituting the Fund as follows:
1. Class A Shares. Class A Shares means Gabelli
International Growth Fund, Inc. Class A Stock as
designated by Articles Supplementary adopted by the
Directors. Class A Shares shall be offered at net
asset value plus a front-end sales charge set forth
in the Prospectus from time to time, which may be
reduced or eliminated in any manner not prohibited by
the Act or the NASD as set forth in the Prospectus.
Class A Shares that are not subject to a front-end
sales charge as a result of the foregoing may be
subject to a CDSC for the CDSC Period set forth in
Section D.1. The offering price of Class A Shares
subject to a front-end sales charge shall be computed
in accordance with the Act. Class A Shares shall be
subject to ongoing Distribution Fees or Service Fees
approved from time to time by the Directors and set
forth in the Prospectus.
<PAGE> 3
2. Class B Shares. Class B Shares means Gabelli
International Growth Fund, Inc. Class B Stock as
designated by Articles Supplementary adopted by the
Directors. Class B Shares shall be (1) offered at net
asset value, (2) subject to a CDSC for the CDSC
Period set forth in Section D.1, (3) subject to
ongoing Distribution Fees and Service Fees approved
from time to time by the Directors and set forth in
the Prospectus and (4) converted to Class A Shares on
the first business day of the eighty-fifth calendar
month following the calendar month in which such
Shares were issued. For Class B Shares previously
exchanged for shares of a money market fund the
investment adviser of which is the same as or an
affiliate of the investment adviser of the Fund, the
time period during which such Shares were held in the
money market fund will be excluded.
3. Class C Shares. Class C Shares means Gabelli
International Growth Fund, Inc. Class C Stock as
designated by Articles Supplementary adopted by the
Directors. Class C Shares shall be (1) offered at net
asset value, (2) subject to a CDSC for the CDSC
Period set forth in Section D.1. and (3) subject to
ongoing Distribution Fees and Service Fees approved
from time to time by the Directors and set forth in
the Prospectus.
4. Class AAA Shares. Class AAA Shares means Gabelli
International Growth Fund, Inc. Class AAA Stock as
designated by Articles Supplementary adopted by the
Directors. Class AAA Shares shall be (1) offered at
net asset value, (2) sold without a front end sales
charge or CDSC, (3) offered only to investors
acquiring Shares directly from the Distributor or
from a financial intermediary with whom the
Distributor has entered into an agreement expressly
authorizing the sale by such intermediary of Class
AAA Shares and (4) subject to ongoing Distribution
Fees or Service Fees approved from time to time by
the Directors and set forth in the Prospectus.
C. Rights and Privileges of Classes. Each of the Class A Shares,
Class B Shares, Class C Shares and Class AAA Shares will
represent an interest in the same portfolio of assets and will
have identical voting, dividend, liquidation and other rights,
preferences, powers, restrictions, limitations,
qualifications, designations and terms and conditions except
as described otherwise in the Articles Supplementary adopted
by the Directors with respect to each of such Classes.
D. CDSC. A CDSC may be imposed upon redemption of Class A Shares,
Class B Shares and Class C Shares that do not incur a front
end sales charge subject to the following conditions:
1. CDSC Period. The CDSC Period for Class A Shares and
Class C Shares shall be twenty-four months plus any
portion of the month during which payment for such
Shares was received. The CDSC Period for Class B
Shares shall be eighty-four months plus any portion
of the month during which payment for such Shares was
received.
<PAGE> 4
2. CDSC Rate. The CDSC rate shall be recommended by the
Distributor and approved by the Directors. If a CDSC
is imposed for a period greater than thirteen months
the CDSC rate must decline during the CDSC Period
such that (a) the CDSC rate is less in the last
twelve months of the CDSC Period than in the first
twelve months (plus any initial partial month) and
(b) in each succeeding twelve months the CDSC rate
shall be less than or equal to the CDSC rate in the
preceding twelve months (plus any initial partial
month).
3. Disclosure and changes. The CDSC rates and CDSC
Period shall be disclosed in the Prospectus and may
be decreased at the discretion of the Distributor but
may not be increased unless approved as set forth in
Section L.
4. Method of calculation. The CDSC shall be assessed on
an amount equal to the lesser of the then current net
asset value or the cost of the Shares being redeemed.
No CDSC shall be imposed on increases in the net
asset value of the Shares being redeemed above the
initial purchase price. No CDSC shall be assessed on
Shares derived from reinvestment of dividends or
capital gains distributions. The order in which Class
B Shares and Class C Shares are to be redeemed when
not all of such Shares would be subject to a CDSC
shall be as determined by the Distributor in
accordance with the provisions of Rule 6c-10 under
the Act.
5. Waiver. The Distributor may in its discretion waive a
CDSC otherwise due upon the redemption of Shares of
any Class under circumstances previously approved by
the Directors and disclosed in the Prospectus and as
allowed under Rule 6c-10 under the Act.
6. Calculation of offering price. The offering price of
Shares of any Class subject to a CDSC shall be
computed in accordance with Rule 22c-1 under the Act
and Section 22(d) of the Act and the rules and
regulations thereunder.
7. Retention by Distributor. The CDSC paid with respect
to Shares of any Class may be retained by the
Distributor to reimburse the Distributor for
commissions paid by it in connection with the sale of
Shares subject to a CDSC and for Distribution
Expenses.
E. Service and Distribution Fees. Class A Shares and Class AAA
Shares shall be subject to ongoing Distribution Fees or
Service Fees not in excess of 0.25% per annum of the average
daily net assets of the relevant Class. Class B Shares and
Class C Shares shall be subject to a Distribution Fee not in
excess of 0.75% per annum of the average daily net assets of
the Class and a Service Fee not in excess of 0.25% of the
average daily net assets of the Class. All other terms and
conditions with respect to Service Fees and Distribution Fees
shall be governed by the plans adopted by the Fund with
respect to such fees and Rule 12b-1 of the Act.
<PAGE> 5
F. Conversion. Shares acquired through the reinvestment of
dividends and capital gain distributions paid on Shares of a
Class subject to conversion shall be treated as if held in a
separate sub-account. Each time any Shares of a Class in a
shareholder's account (other than Shares held in the
sub-account) convert to Class A Shares, a proportionate number
of Shares held in the sub-account shall also convert to Class
A Shares. All conversions shall be effected on the basis of
the relative net asset values of the two Classes without the
imposition of any sales load or other charge. So long as any
Class of Shares converts into Class A Shares, the Distributor
shall waive or reimburse the Fund, or take such other actions
with the approval of the Directors as may be reasonably
necessary to ensure that, the expenses, including payments
authorized under a Plan of Distribution, applicable to the
Class A Shares are not higher than the expenses, including
payments authorized under a Plan of Distribution, applicable
to the Class of Shares that converts into Class A Shares.
Shares acquired through an exchange privilege will convert to
Class A Shares after expiration of the conversion period
applicable to such Shares. The continuation of the conversion
feature is subject to continued compliance with the rules and
regulations of the SEC, the NASD and the IRS.
G. Allocation of Liabilities, Expenses, Income and Gains Among
Classes.
1. Liabilities and Expenses applicable to a particular
Class. Each Class shall pay any Distribution Fee and
Service Fee applicable to that Class. Other expenses
applicable to any of the foregoing Classes such as
incremental transfer agency fees, but not including
advisory or custodial fees or other expenses related
to the management of the Fund's assets, shall be
allocated among such Classes in different amounts in
accordance with the terms of each such Class if they
are actually incurred in different amounts by such
Classes or if such Classes receive services of a
different kind or to a different degree than other
Classes.
2. Income, losses, capital gains and losses, and
liabilities and other expenses applicable to all
Classes. Income, losses, realized and unrealized
capital gains and losses, and any liabilities and
expenses not applicable to any particular Class shall
be allocated to each Class on the basis of the net
asset value of that Class in relation to the net
asset value of the Fund.
3. Determination of nature of items. The Directors shall
determine in their sole discretion whether any
liability, expense, income, gains or loss other than
those listed herein is properly treated as attributed
in whole or in part to a particular Class or all
Classes.
H. Exchange Privilege. Holders of Class A Shares, Class B Shares,
Class C Shares and Class AAA Shares shall have such exchange
privileges as are set forth in the Prospectus for such Class.
Exchange privileges may vary among Classes and among holders
of a Class.
<PAGE> 6
I. Voting Rights of Classes.
1. Shareholders of each Class shall have exclusive
voting rights on any matter submitted to them that
relates solely to that Class, provided that:
a. If any amendment is proposed to the Plan of
Distribution under which Distribution Fees
or Service Fees are paid with respect to
Class A Shares of the Fund that would
increase materially the amount to be borne
by Class A Shares under such Plan of
Distribution, then no Class B Shares shall
convert into Class A Shares of the Fund
until the holders of Class B Shares of the
Fund have also approved the proposed
amendment.
b. If the holders of either the Class B Shares
referred to in subparagraph a. do not
approve the proposed amendment, the
Directors and the Distributor shall take
such action as is necessary to ensure that
the Class voting against the amendment shall
convert into another Class identical in all
material respects to Class A Shares of the
Fund as constituted prior to the amendment.
2. Shareholders of a Class shall have separate voting
rights on any matter submitted to shareholders with
respect to which the interest of one Class differs
from the interests of any other Class, provided that:
a. If the holders of Class A Shares approve any
increase in expenses allocated to the Class
A Shares, then no Class B Shares shall
convert into Class A Shares of the Fund
until the holders of Class B Shares of the
Fund have also approved such expense
increase.
b. If the holders of Class B Shares referred to
in subparagraph a. do not approve such
increase, the Directors and the Distributor
shall take such action as is necessary to
ensure that the Class B Shares shall convert
into another Class identical in all material
respects to Class A Shares of the Fund as
constituted prior to the expense increase.
J. Dividends and Distributions. Dividends and capital gain
distributions paid by the Fund with respect to each Class, to
the extent any such dividends and distributions are paid, will
be calculated in the same manner and at the same time on the
same day and will be, after taking into account any
differentiation in expenses allocable to a particular Class,
in substantially the same proportion on a relative net asset
value basis.
K. Reports to Directors. The Distributor shall provide the
Directors such information as the Directors may from time to
time deem to be reasonably necessary to evaluate this Plan.
<PAGE> 7
L. Amendment. Any material amendment to this Plan shall be
approved by the affirmative vote of a majority (as defined in
the Act) of the Directors of the Fund, including the
affirmative vote of the Directors of the Fund who are not
interested persons of the Fund, except that any amendment that
increases the CDSC rate schedule or CDSC Period must also be
approved by the affirmative vote of a majority of the Shares
of the affected Class. Except as so provided, no amendment to
the Plan shall be required to be approved by the shareholders
of any Class of the Shares constituting the Fund. The
Distributor shall provide the Directors such information as
may be reasonably necessary to evaluate any amendment to this
Plan.
