[Photograph of Mario J. Gabelli]
The
Gabelli
Global
Interactive
Couch Potato(R)
Fund
SEMI-ANNUAL REPORT
JUNE 30, 1996
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Gabelli Global Series Funds, Inc.
One Corporate Center
Rye, New York 10580 - 1434
The Gabelli Global Interactive Couch Potato(R) Fund
Semi-Annual Report
June 30, 1996
To Our Shareholders:
Rebounding from the inventory contraction of the previous two quarters, the
malaise of a snowy winter and political stalemate in Washington, the economy
surged ahead. Domestic profits will likely benefit despite earnings from
continental European sources being hobbled by a weaker economic backdrop and a
stronger dollar. This stronger than expected economy re-awakened long dormant
inflationary fears and a slumping bond market sounded a cautionary note for
stocks. Still, buoyed by favorable flow of funds --investment in equity mutual
funds remained near record levels -- the Dow Jones Industrial Average and
Standard & Poors' 500 forged ahead.
Investment Performance (a)
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<TABLE>
<CAPTION>
Quarter
---------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
<S> <C> <C> <C> <C> <C>
1996: Net Asset Value ......... $12.57 $13.40 __ __ __
Total Return ............ 7.3% 6.6% __ __ __
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1995: Net Asset Value ......... $10.62 $11.28 $12.30 $11.72 $11.72
Total Return ............ 3.6% 6.2% 9.0% (1.8)% 17.9%
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1994: Net Asset Value ......... $ 9.90 $ 9.97 $10.54 $10.25 $10.25
Total Return ............ (1.0)%(b) 0.7% 5.7% (2.8)% 2.5%(b)
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</TABLE>
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Average Annual Returns - June 30, 1996 (a)
1 Year ..................... 22.5%
Life of Fund (b) ........... 14.4%
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Dividend History
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Payment (ex) Date Rate Per Share Reinvestment Price
- ----------------- -------------- ------------------
December 29, 1995 $0.363 $11.72
(a) Average annual and total returns reflect changes in share price and are net
of expenses. Of course, returns represent past performance and do not guarantee
future results. Investment returns and the principal value of an investment will
fluctuate. When shares are redeemed they may be worth more or less than their
original cost. Investing in foreign securities involves risks not ordinarily
associated with investments in domestic issues, including currency fluctuation,
economic and political risks.
(b) From commencement of operations on February 7, 1994.
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During the second quarter ended June 30, 1996, the Fund's total return of
6.6% compared favorably to returns of 4.5% and 3.8% over the same period for the
Standard & Poor's 500 Index (S&P 500) and the Lipper Global Fund Index,
respectively. The S&P 500 is an unmanaged indicator of stock market performance
and the Lipper Global Fund Index covers 30 global open-end mutual funds which
may invest in a diversified group of industry sectors. For the six months ended
June 30, 1996, the Fund was up 14.3%, outpacing the 10.1% and 9.7% returns for
the S&P 500 and the Lipper Global Fund Index, respectively. For the 12 months
ended June 30, 1996, the Fund gained 22.5%, including reinvested dividends,
versus 26.0% for the S&P 500 and 17.1% for the Lipper Global Fund Index.
Since inception on February 7, 1994, through June 30, 1996, the Fund
achieved a total return of 38.1%, which equates to an average annual return of
14.4%. As of June 30, 1996, the Fund's shareholders numbered 6,965 and total net
assets were $37.7 million.
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Interactive Couch Potato(R)
Interactive (in' ter ak' tiv) Having the capacity for
communication flow in each
direction.*
Couch (kouch) An appellation for the heavy user
of television, depicted in the
metaphor as plopped before the
Potato (po ta' to) television set like a vegetable
with eyes. The term was coined in
the early 1980s by a group of Baby
(pe ta' to) Boomers in the San Francisco area
who playfully glorified their
addiction to the tube. Calling
themselves The Couch Potatoes, they
formed a national club and
published a hilarious newsletter in
the couch potato lifestyle
containing bizarre recipes for that
vital companion to the TV set, the
toaster oven. After a burst of
enlistments, the club quietly
disappeared. All that remains today
is the metaphor, and its current
use tends to be more pejorative
than self-mocking or affectionate.*
* Source: NTCMass Media Directory.
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[Graphic depicting investment strategy]
What We Do
We do what is described as bottom-up research: we read annual reports; we
visit the competition; we talk to customers; we go belly to belly with
management. We structure our portfolio by picking stocks.
In past reports, we have tried to articulate our investment philosophy and
methodology. The following graphic further illustrates the interplay among the
four components of our valuation approach.
Our focus is on free cash flow; earnings before interest, taxes,
depreciation and amortization (EBITDA) minus the capital expenditures necessary
to grow the business. We believe free cash flow is the best barometer of a
business' value. Rising free cash flow often foreshadows net earnings
improvement. We also look at earnings per share trends. Unlike Wall Street's
ubiquitous earnings momentum players, we do not try to forecast earnings with
accounting precision and then trade stocks based on quarterly expectations and
realities. We simply try to position ourselves in front of long-term earnings
uptrends. In addition, we analyze on and off balance sheet assets and
liabilities such as plant and equipment, inventories, receivables, and legal,
environmental and health care issues. We want to know everything and anything
that will add to or detract from our private market value (PMV) estimates.
Finally, we look for a catalyst; something happening in the company's industry
or indigenous to the company itself that will surface value. In the case of the
independent telephone stocks, the catalyst is a regulatory change. In the
agricultural equipment business, it is the increasing worldwide demand for
American food and feed crops. In other instances, it may be a change in
management, sale or spin-off of a division or the development of a profitable
new business.
Once we identify stocks that qualify as fundamental and conceptual
bargains, we then become patient investors. This has been a proven long-term
method for preserving and enhancing wealth in the U.S. equities market. At the
margin, our new investments are focused on businesses that are well managed and
will benefit from sustainable long-term economic dynamics. These include macro
trends, such as globalization of the market in filmed entertainment and
telecommunications, and micro trends, such as increased focus on productivity
enhancing goods and services.
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BARRON'S 75th Special Anniversary Issue
BARRON'S asked our Chief Investment Officer, Mario J. Gabelli, to discuss his
investment themes in its 75th Special Anniversary Issue. While these comments
were written in mid-February, we believe they are still valid today. Discussion
of individual companies is not necessarily reflective of the Fund's entire
portfolio.
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BARRON'S
===================================== 75th =====================================
Grand Slam Hitting
The new international middle class will be taking
to the friendly skies, for business and pleasure.
By Mario Gabelli
[Photo]
The ancient Greek dramatist Euripides said, "The best of seers is he who guesses
well." Each year since 1980, Barron's has given me the opportunity to sit down
with a distinguished group of good guessers at the annual Roundtable and divine
what the economy, the markets and some individual stocks would do in the year
ahead. Now, in honor of Barron's 75th Anniversary, I've been invited to stick my
neck out even further and discuss several investment themes that will
theoretically enrich readers over the next five years. Fair enough.
I will begin with the confession that over the past 20 years, our annual
macroeconomic and market forecasts haven't always been right. Fortunately for
our clients and Barron's readers, our investment methodology is not built upon
accurately predicting interest-rate trends or timing the market, but rather on
picking stocks, and many of our picks have fared quite well.
One reason is that we've had a good batting average identifying trends - we
call them catalysts - that have unlocked value in selected industry groups. A
catalyst can be a change in regulatory standards such as the original cable
television deregulation bill of 1984 that led us to lucrative investments in
cable stocks. It can be consolidation within an industry. The scramble for
filmed entertainment assets engendered by expanding distribution systems
throughout the 1980s and early 1990s inspired us to take substantial and
ultimately quite profitable positions in Warner Communications, MCA and
Paramount prior to their acquisitions by Time Inc., Matsushita and Viacom,
respectively.
Catalysts can also be corporate restructurings. The recent trend to heap
realize shareholder value through the sale or spinoff of businesses has helped
us earn good returns from "Humpty Dumpty" companies as all the king's horses and
all the king's men help break conglomerates into pieces again. Among them have
been Tenneco, American Brands, American Express, ITT and, now, AT&T.
Over the next five years, the most powerful trend we see is the explosive
growth of the international marketplace for American goods and services. This
traces its roots to two major catalysts: the rejuvenation of American industry
spawned by a declining cost of capital and enormous productivity gains, and the
victory of global capitalism symbolized best by the crumbling of the Berlin
Wall. Good old-fashioned Yankee ingenuity has made us more than competitive with
Japan and Germany. We are now in a terrific position to conquer new
international economic frontiers.
With free-markets economies evolving in China and the former Soviet bloc,
and the middle classes rapidly expanding in developing nations in Latin America
and the Pacific Rim, there will be 2.5 billion to three billion new consumers by
the turn of the century. How is this emerging international middle class going
to spend its money? If past is prologue - and we can learn something by looking
back at the economic evolution of the great American middle class - the new
international middle class
- ------------------------------------
Mario Gabelli, a regular member of
Barron's Roundtable since 1980, is
chairman and chief investment officer
of Gabelli Funds Inc.
[Drawings]
Photograph: Merry Alpern/Jim Lukoski for Barron's;
Illustration: Jessie Hartland for Barrons
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3
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will upgrade their food consumption habits; if it is made available, they will
buy telephone service; they will spend money on entertainment, and they will
travel.
Investors of our persuasion - stockpickers, if you will - can't talk about
investment trends without naming some names. Unlike the Roundtable, where we are
constantly prodded both by Barron's and our colleagues to fill in the
fundamental blanks on individual stock selections, I won't be providing hard
data on the companies I mention in this article. Nor will I make predictions
about short-term earnings and cash flow. That said, consistent with our
Graham-and-Dodd-oriented value philosophy, we would like to own the businesses
named here for the long term.
It's Not Chickenfeed: Let's start in, of all places, Iowa. The American grains
farmer is the most productive in the world. Iowa is agriculturally
state-of-the-art. Let me give you a hypothetical example. There are seven ounces
of grain needed to produce one ounce of meat at market. If chicken or pork
consumption in China were to increase by one ounce per capita, and Iowa were to
produce all the grain used to fatten these Chinese chickens and hogs, on a gross
national product basis, Iowa would be among the richest countries in the world.
This may be perceived as a silly example. But its purpose is to call attention
to the tremendous upside potential for American grain farmers and vendors to
those farmers. Agricultural equipment manufacturers like John Deere, companies
that move grains to shipping centers, like Archer-Daniels-Midland, and
irrigation-equipment makers like Lindsay Manufacturing should all be long-term
beneficiaries of the increased role the American farmer will play in feeding the
world.
Dialing for Dollars: Once the new international consumer puts some more meat on
the table, what else would make his or her life better? Being able to call
friends and family on the telephone would be a big step forward. In fact, you
could argue that telecommunications is both the engine and the caboose in the
emergence of the international middle class. To compete on the global stage,
businesses in developing countries need healthy stock markets to attract global
capital. Modern telecommunications systems are a prerequisite. As efficient
telecommunications systems further enhance economic growth and expand the middle
class, the demand for more universal telephone service increases. Here, we need
to tip our hat to Craig McCaw's evolutionary theory of time and space, which
effectively jump-started the cellular telephone industry. And when it comes to
developing countries, it is wireless service that will help bring
telecommunications services at reasonable prices.
Arguably, telecommunications is the No. 1 global growth industry for the
next decade or more. Consequently, long-term investors will not have to be
terribly discriminating to earn pretty good returns in this sector. But rather
than take a scattershot approach, investors might maximize their returns by
focusing on those segments of the industry that will grow the fastest and the
dominant players therein. The big three U.S. long distance companies, AT&T, MCI
and Sprint, are rapidly developing the strategic alliances with national and
local carriers around the world that should allow them to dominate the
international long-distance market. Telecommunications equipment manufacturers
like Lucent, the spinoff from AT&T, and Northern Telecom will play a big role in
wiring the world. Suppliers of advanced cable equipment like Scientific Atlanta
also have terrific international growth prospects. On the wireless side,
cellular-phone makers like Motorola and Nokia should thrive. A special mention
should go to AirTouch, which has done a terrific job winning joint-venture
cellular-telephone franchises throughout Europe. Two other cellular investments
worth considering are 360 Communications, which is the domestic cellular spinoff
from Sprint, and Britain's Vodafone.
If you favor a more focused "special situation" approach, the Canadian
telephone giant BCE should benefit when it sells off its substantial investment
in Northern Telecom and as Canadian deregulation catches up to the rest of the
world. On a per-capital basis, the Vancouver metropolitan area has the highest
concentration of expatriate Chinese in North America. This could prove to be a
great "gateway to China."
Global Eyeballs: No American products travel better than filmed entertainment
and pre-recorded music. Several years ago, the investor relations people at Time
Warner were kind enough to give us a tape of Warner cartoon characters providing
a global geography lesson dubbed in a dozen foreign languages. We've used this
tape at our annual client meeting to illustrate the global reach of the American
entertainment industry. There is simply no place you can go in the world without
American film being a staple of cinematics, cable TV or broadcast entertainment.
The same goes for music. Just look at the convergence of the computer, telephone
and cable television industries in the U.S. Overseas opportunities beckon as
well. In the past five years alone, the number of satellite dishes in India has
gone from 400,000 to 10 million. As the distribution channels expand worldwide,
the value of entertainment will continue to increase.
With the consolidation we've already experienced in the filmed
entertainment industry, there are fewer ways to participate. Time Warner is a
dominant global company in both filmed entertainment and pre-recorded music.
Assuming the marriage with Turner Broadcasting is consummated, Time could become
an international cable TV powerhouse as well. The stock price has been
restrained by concerns about Time's debt, the unwinding of what has become an
acrimonious relationship with US West, and the uncertain prospects for Time
Warner's huge cable television operations. Investors are currently blind to the
forest through the trees on this one. In the long run, however, we are confident
the market will recognize Time Warner's pre-eminent global position in
entertainment software.
Other beneficiaries of this favorable long-term trend for entertainment
software producers and packagers also include Viacom - the world wants its MTV;
Seagram, the new owner of MCA, and Liberty Media, John Malone's combination of
Tele-Communications Inc.'s cable network investments.
Up, Up and Away: Air traffic is tremendously sensitive to increases in personal
income. The new international middle class will be taking to the friendly skies.
They will fly for business, and they will fly for pleasure. Over the next five
years, you could probably make a lot of money investing in international airline
stocks. But it will be less complicated and perhaps just as profitable investing
in Boeing, which along with Europe's Airbus consortium will build the foreign
fleets to accommodate increasing air traffic abroad.
We are almost right at the bottom of a five-year down cycle in the aircraft
industry. Industry studies indicate that in the next 20 years, there will be
12,000 new aircraft built to satisfy incremental global demand and 4,000 to
replace aircraft that will be retired because they are too old or
fuel-inefficient or don't meet new noise-control requirements. That's 16,000 new
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4
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airplanes to be built over the next two decades. Boeing, which is a
technological leader, will get the lion's share of orders.
Another option is to invest in vendors to Boeing. There are very few pure
plays in this arena, but companies deriving a material volume of revenues from
commercial aerospace include Ametek, Precision Castparts, Moog, Crane, SPS
Technologies, Honeywell and Curtiss-Wright. Sequa Corp., whose Chromalloy
division is a leader in jet engine maintenance and repair, would be a good
"aging of the existing fleet" play.
The Deal: Another global dynamic that isn't new, but is far from finished, is
strategic merger-and-acquisition activity. At the 1995 Roundtable, I said there
would be a ton of deals done in the year ahead. It worked out to be $458 billion
in deals in the U.S. and $866 billion globally. I don't know that we will see
that kind of record volume this year, but you will see some big numbers. Why?
The world is awash in liquidity, rising equity markets make stock a more
valuable currency and, most importantly, it is still cheaper to buy businesses
on global stock markets than it is to build them from scratch.
How do you take advantage of this long-term trend? I am going to
unabashedly preach for my own church here. As Benjamin Graham and his successor
at Columbia, Roger Murray, instructed us, and as Warren Buffett has put so
profitably into practice, you approach stocks as if they were pieces of a
business you want to buy at a discount to what Graham called intrinsic value,
others call economic value, and what years ago was termed "private market
value."
How do you go about quantifying value? We believe free cash flow, defined
as earnings before interest, taxes and depreciations (EBITD), or a slight
variation, EBITDA, both minus the capital expenditures necessary to grow the
business, is the best barometer of a company's value. Most corporate
merger-and-acquisition people look at the very same thing. When the informed
industrialist is evaluating a business for purchase, he or she is not going to
put a lot of weight on stated book value. That's for accountants, not for savvy
buyers of business. They probably don't care much about net earnings. Clever
corporate managements can be creative in booking earnings. What that informed
industrialist wants to know is: How much cash is this business throwing off
today and how much is he going to have to invest in this business to sustain or
grow this stream of cash in the future?
There are other factors in determining a stock's private market value. Cost
of capital always affects a company's values. That's why stocks tend to be
valued lower when interest rates rise. Cash flow growth rates will alter values,
too. Just as growth-stock investors will pay a higher price-to-earnings ratio
for higher earnings growth, private-market-value investors will pay a higher
multiple of cash flow for faster cash-flow growth. Finally, sophisticated
business buyers will look beyond the balance sheet for hidden assets - valuable
land on the books at original cost or an overfunded pension plan - as well as
hidden liabilities, like unfunded health-care responsibilities or potentially
costly environmental problems.
By doing this kind of analysis of income statements and balance sheets, and
checking out all those little footnotes attached, and keeping an eye on the
prices businesses are being bought and sold at every day out there in the real
world, you can quantify the value of a business or group of businesses. You can
usually find fundamental bargains - stocks selling at substantial discounts to
private market value. Then you have to ask the subjective questions: Who might
want to own this company? Would management be receptive to a takeover proposal?
Are the target company's assets so unique that someone might pay well above fair
value?
If you can come up with some positive answers to questions like these, you
may well have found yourself a terrific takeover candidate.
Don't Expect Too Much: Lastly, some comments on the longer-term prospects for
equities. I'm not talking about what is going to happen to the market over the
next quarter or even the next several years. However, I do think investors
should have some perspective on what they can expect. The average annualized
return on equities over the last 15 years, as measured by the S&P 500, is 14.8%.
That's almost 50% above the historical return on stocks on an annualized basis.
When you compound this out 10 years, the differential is staggering. Will we see
the same kind of returns from stocks over the next 15 years? I wouldn't bet the
ranch on it. Sooner or later, this roaring bull market will end, either with a
substantial correction or a bear market or, preferably, an extended period of
much more modest returns.
How should today's investor prepare for this? I would start by adjusting
expectations. When making financial planning assumptions, use conservative
return figures for equities, and save and invest accordingly. In other words, if
you are putting a given amount of dollars into equities and assuming that it
will compound at 15% a year over the next 10-20 years, you will likely find your
children's college fund or your retirement nest egg more than a little short.
Secondly, you might want to look at alternative investment strategies.
Market-neutral disciplines like risk arbitrage, which is capable of delivering
low- to mid-double-digit annualized returns regardless of the direction of the
broad equities market, should be considered. This will be particularly rewarding
if what we have characterized as the third great wave of mergers continues as
long as we expect it to.
Finally, although one can play many global trends from the relative comfort
of the New York Stock Exchange, investors should internationalize their
portfolios. Twenty-five years ago, U.S. equities represented 66% of the
capitalization of the total global equities market. Today it is 38%. Twenty
years ago, only the most adventurous Americans would invest in places like Spain
or Italy. Today, there are billions of American dollars in emerging markets in
Latin American and the Pacific Rim. It has always been my inclination to
challenge the conventional wisdom. But I do think there is some legitimacy to
the idea that many foreign economies will grow faster than the U.S., and that
returns from foreign equities markets will trend higher than our own.
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5
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THE PORTFOLIO
Global Allocation
The chart at the right represents the Fund's holdings by geographic region
as of June 30, 1996. The geographic allocation will change based on current
global market conditions. Countries and/or regions and companies represented in
the chart and below may or may not be included in the Fund's portfolio in the
future.
[The following table was represented as a pie graph in the printed material.]
HOLDINGS BY GEOGRAPHIC REGION - 6/30/96
United States 67.5%
Europe 13.4%
Asia/Pacific Rim 7.9%
Latin America 6.0%
Canada 5.2%
Equity Mix
As we have indicated in past discussions, the Interactive Couch Potato's(R)
investment premise falls within the context of two main investment universes: 1)
companies involved in creativity, as it relates to the development of
intellectual property rights (copyrights); and 2) companies involved in
distribution, as it relates to the delivery of these copyrights. Additionally,
this includes the broad scope of communications-related services such as basic
voice and data.
[The following table was represented as a pie graph in the printed material.]
Copyright/Creativity 63.7%
Distribution 36.3%
The chart above depicts our equity mix of the copyright/creativity and
distribution companies in our portfolio as of June 30, 1996.
Let's Talk Stocks
The following are stock specifics on selected holdings of our Fund's
investments. Favorable EBITDA prospects do not necessarily translate into higher
stock prices, but they do express a positive trend which we believe will develop
over time.
Ackerley Communications, Inc. (AK - $27.25 - ASE) is a Seattle-based company
that provides "out-of-home" advertising and owns six TV and three radio
stations, in addition to the Seattle Supersonics. Ackerley owns over 9,000
outdoor advertising displays and is the dominant outdoor "player" in markets
like Seattle, Portland, Boston, Miami and West Palm Beach. In addition, the
company has almost 5,000 displays in over 110 airports. With a PMV estimated at
$37 per share which is expected to reach almost $60 in the year 2000, at present
prices, buyers are getting the Supersonics "for free".
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BCE Inc. (BCE - $39.50 - NYSE) (Bell Canada Enterprises) is the holding company
for Bell Canada and has controlling interests in BCEMobile Communications, Inc.
(BCX - $33.125 -TSE) and Northern Telecom Limited (NT - $54.375 - NYSE). There
are excellent values in BCE. For example, "behind" each share of BCE, there is
0.4 share of NT. This NT interest, marked to market, is worth over $20 per BCE
share. The company is a possible split-up candidate. In the interim, the
Canadian Radio and Television Commission is providing a more attractive
framework for BCE to become more competitive in global markets.
Citicasters Inc. (CITI - $31.25 - NASDAQ), based in Cincinnati, Ohio, operates
19 radio stations and two network-affiliated television stations. The company
has recently agreed to be acquired by Jacor Communications Inc. for $29.50 and
1/5 of a stock purchase warrant per share. The relaxation of broadcast ownership
restrictions in the Telecommunications Act of 1996 makes such combinations
possible by allowing clusters such as the three FM stations and one AM in Tampa
and four FMs and two AMs in Cincinnati.
Havas (Sub. Deb. Cv., 3.00%, 12/31/97 ), the second largest multimedia company
in Europe, is involved in advertising, publishing and tourism. The company has a
good mix of cyclical and non-cyclical businesses. With investments in CANAL +,
the pay T.V. channel; EuroRSCG, Europe's leading advertising consultancy firm;
and CLT, one of Europe's main television and radio operators, Havas is in a
position to build a powerful multimedia group.
Home Shopping Network, Inc. (HSN - $12.00 - NYSE) is a direct marketer utilizing
television, catalogs, and mail order. Recent growth has been impeded by lawsuits
as well as some temporary merchandising and cost control problems. Now that
Barry Diller has arrived, the Home Shopping Channel promises to be an integral
part of the "Interactive Superhighway". The company will benefit from increased
activity in this area. The new management and improved earnings can be expected
to be reflected in a higher stock price.
Pulitzer Publishing Company (PTZ - $59.25 - NYSE) is a diversified media company
whose assets include newspapers and television and radio broadcasting
operations. The company publishes the St. Louis Post-Dispatch and the Arizona
Daily Star and has valuable TV properties in markets including Orlando, FL;
Greenville, SC and New Orleans, LA.
Time Warner Inc. (TWX - $39.25 - NYSE), in a bold and brilliant tactic, is
endeavoring to acquire Turner Broadcasting Systems Inc. for $7.5 billion.
Management is currently working to obtain governmental approval of the
transaction. At the same time, efforts are underway to restructure TWX's
partnership with U.S. West Media Group. The acquisition would make TWX the
largest diversified media and publishing company in the world, adding a wealth
of programming to a company already rich in entertainment content. Time Warner
is redirecting its operations into two general areas: copyright and creativity,
which includes publishing, music and filmed entertainment, and distribution,
which is mostly cable. Its two summer movie hits are Twister and Eraser. Under
the aegis of Gerald M. Levin, investors can expect significant returns over the
rest of the decade.
Viacom Inc. (VIA - $38.125 - ASE; VIA'B - $38.875 - ASE), long a major provider
of entertainment "content", has evolved into one of the world's dominant media
companies. Following its recent acquisitions of Paramount Communications and
Blockbuster Entertainment, the company is now
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divesting non-core assets to reduce debt and is focusing on the global expansion
of its media franchises. The company is endeavoring to split off its cable
properties in a transaction with Tele-Communications Inc. which would reduce
Viacom's debt by $1.7 billion. Viacom is well-positioned in music (notably MTV)
and cable networks such as Nickelodeon, USA (50% interest) and the Sci-Fi
Channel.
Walt Disney Company (DIS - $62.875 - NYSE) is one of the best, if not the best,
producer of filmed entertainment and related merchandise. Its theme parks
continue to produce exceptional profits. Demand for quality filmed entertainment
is high and rising, which is good news for the big studio operators like Disney.
We expect the company's recently released animated film, The Hunchback of Notre
Dame, to be a financial success. Management has announced plans for a new
attraction at Disney World to be built around an animal kingdom theme.
Additionally, the company is entering the cruise line business, although their
maiden voyage remains a couple of years away as the ships are presently under
construction. This company does not sit still.
Minimum Initial Investment - $1,000
The Fund's minimum initial investment for both regular and retirement
accounts is $1,000. There are no subsequent investment minimums. No initial
minimum is required for those establishing an Automatic Investment Plan.
Furthermore, the Gabelli Global Interactive Couch Potato(R) Fund and many of our
other Funds are available through the no-transaction fee programs at many major
discount brokerage firms.
Internet
You can now visit us on the Internet. Our home page at
http://www.gabelli.com contains information about Gabelli Funds, Inc., the
Gabelli Mutual Funds, quarterly reports, closing prices, IRAs, 401(k)s and other
current news. You can also send us e-mail at [email protected].
In Conclusion
At the beginning of 1996, we forecast that higher than expected inflation
and rising long-term interest rates would restrain stock returns. Our economic
forecast has proved remarkably accurate. Thus far, the market has largely
ignored these economic signs and marched steadily forward. Whether it will
continue to do so in the second half is questionable.
As always, we are focusing on the individual stocks in the Fund's
portfolio. By concentrating on niche industry groups and individual companies
that can do well independent of prevailing economic and broad market trends, we
believe we are well-positioned to prosper, even in a less generous market
environment. Our investment philosophy is simple and straightforward: buying
good businesses cheap will generate consistently superior returns.
The Fund's daily net asset value is available in the financial press and
each evening after 6:00 PM (Eastern Time) by calling 1-800-GABELLI
(1-800-422-3554). The Fund's NASDAQ symbol is GICPX. Please call us during the
day for further information.
8
<PAGE>
We thank you for your confidence in our investing abilities and wish you a
productive and financially rewarding 1996.
Sincerely,
/s/ Mario J. Gabelli, CFA /s/ Marc J. Gabelli
Mario J. Gabelli, CFA Marc J. Gabelli
President Portfolio Manager
/s/ Ivan Arteaga, CPA
Ivan Arteaga, CPA
Associate Portfolio Manager
August 1, 1996
- --------------------------------------------------------------------------------
Top Ten Holdings
June 30, 1996
-------------
Home Shopping Network, Inc. Time Warner Inc.
Citicasters Inc. Microsoft Corporation
Viacom Inc. BCE Inc.
Pulitzer Publishing Company Ackerley Communications, Inc.
Walt Disney Company Havas
- --------------------------------------------------------------------------------
NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period of this report as stated on the cover. The
manager's views are subject to change at any time based on market and other
conditions.
9
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Portfolio of Investments -- June 30, 1996 (Unaudited)
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS -- 98.30%
COPYRIGHT/CREATIVITY COMPANIES -- 63.71%
ADVERTISING -- 0.05%
100 Havas Advertising SA........... $ 9,563 $ 11,260
--------- ---------
100 Publicis SA.................... 6,985 7,843
--------- ---------
16,548 19,103
--------- ---------
BROADCASTING -- 13.87%
21,500 Ackerley Communications,
Inc.+....................... 136,762 585,875
4,000 BHC Communications, Inc.
Cl. A+...................... 305,375 391,000
1,000 British Sky Broadcasting
Group ADR+.................. 24,425 40,625
5,521 Can West Global
Communications Corp......... 85,596 151,787
2,500 Carlton Communications plc
ADR......................... 72,625 102,188
1,000 Central European Media
Enterprises Ltd.+........... 14,125 25,000
2,640 CEP Communications............. 240,367 222,947
1,440 CEP Communications
Warrants Exp: 12/1/97....... 4,359 4,193
6,210 Chris-Craft Industries, Inc.+.. 209,307 273,240
30,000 Citicasters Inc.+.............. 300,577 937,500
1,000 Clear Channel
Communications, Inc.+....... 28,244 82,375
500 Emmis Broadcasting
Corporation Cl. A+.......... 10,489 25,000
300 Europe 1 Communication......... 80,245 64,939
500 Evergreen Media Corporation
Cl. A+...................... 10,736 21,375
500 EZ Communications, Inc......... 7,911 11,875
1,500 Granada Group plc.............. 15,242 20,080
12,000 Grupo Radio Centro, S.A.
de CV....................... 120,588 118,500
500 Heftel Broadcasting
Corporation Cl. A+.......... 6,500 14,813
2,000 Heritage Media Corporation
Cl. A+...................... 34,725 79,750
750 Infinity Broadcasting
Corporation Cl. A+.......... 13,895 22,500
500 Jacor Communications, Inc.+.... 6,958 15,438
300 LaGardere Groupe............... 5,519 7,728
3,000 LIN Television Corporation+.... 71,684 108,000
200 Metropole TV M6 S.A............ 17,604 23,296
3,000 Multi-Market Radio, Inc. Cl. A+ 28,875 32,812
2,000 New World Communications
Group, Inc.+................ 23,675 29,250
1,100 Nippon Television
Broadcasting................ 287,828 341,709
11,000 Osborn Communications
Corporation+................ 82,875 121,000
800 Paxson Communications
Corp........................ 10,540 8,500
5,000 Publishing & Broadcasting
Ltd......................... 15,250 22,036
781 SAGA Communications,
Inc. Cl. A+................. 9,709 16,889
1,200 Scandinavian Broadcasting
System SA+.................. 27,161 29,400
2,500 Scottish Television plc........ 17,800 24,809
500 SFX Broadcasting, Inc.+........ 11,270 19,500
3,000 Silver King Communications,
Inc.+....................... 31,000 90,000
7,500 Sistem Televisyen Malaysia
Bhd......................... 13,387 15,331
7,500 Sistem Televisyen Malaysia
Bhd Cl. A................... 13,387 15,331
1,000 Telemundo Group Inc. Cl. A+.... 16,290 23,250
50,000 Television Broadcasting Ltd.... 192,049 187,661
1,000 Television Francaise 1......... 101,298 114,153
12,000 Tokyo Broadcasting System...... 202,185 212,700
30,000 United International
Holdings Inc. Cl. A+........ 448,934 412,500
10,000 Video Jukebox Network Inc...... 17,500 14,375
8,000 Westinghouse Electric Corp..... 131,400 150,000
--------- ---------
3,506,271 5,231,230
--------- ---------
CABLE TV -- 6.58%
9,500 BET Holdings, Inc.+............ 164,650 250,563
20,000 Cogeco Cable Ltd............... 118,268 97,141
30,000 Flextech plc+.................. 178,765 235,280
13,014 Gaylord Entertainment
Company..................... 290,298 367,645
35,000 Home Shopping Network,
Inc.+....................... 335,610 420,000
18,125 International Family
Entertainment, Inc.+........ 239,275 335,313
21,000 Tele-Communications, Inc. /
Liberty Media Group Cl. A... 536,612 556,500
12,000 Tele-Communications
International, Inc. Cl. A+.. 191,600 211,500
1,000 Valuevision International,
Inc. Cl. A+................. 5,125 6,938
--------- ---------
2,060,203 2,480,880
--------- ---------
ENTERTAINMENT PRODUCTION -- 5.45%
4,000 All American Communications,
Inc.+....................... 27,508 40,000
20,000 All American Communications,
Inc. Cl. B+................. 193,383 170,000
6,000 Ascent Entertainment Group
Inc.+....................... 89,665 151,500
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Portfolio of Investments (Continued) -- June 30, 1996 (Unaudited)
================================================================================
Market
Shares Cost Value
------ ---- -----
5,000 Canal + Spons. ADR............. $ 148,613 $ 244,556
1,000 Cinar Films Inc. Cl. B+........ 9,181 21,750
2,000 Cinergi Pictures Entertainment,
Inc.+....................... 8,500 4,500
2,500 Fisher Companies Inc........... 152,500 218,750
10,000 Golden Harvest Entertainment
Ltd......................... 3,250 3,618
3,000 Grammy Entertainment plc....... 29,024 41,608
1,000 Harvey Entertainment
Company+.................... 15,843 8,500
6,000 International CableTel
Incorporated................ 103,500 177,000
3,000 King World Productions, Inc.+.. 117,337 109,125
400 Matsushita Electric Industrial
Co., Ltd.................... 57,620 74,400
10,000 Metromedia International
Group Inc................... 110,000 122,500
2,500 People's Choice TV
Corporation+................ 51,160 45,625
2,000 Samuel Goldwyn Company+........ 14,850 8,250
7,500 Savoy Pictures Entertainment,
Inc.+....................... 50,105 40,313
145,000 Shaw Brothers (Hong Kong)
Ltd......................... 258,005 168,605
16,500 Spelling Entertainment Inc..... 159,650 125,813
10,000 THORN EMI plc ADR.............. 175,975 278,751
500 Tring International Group ..... 913 225
--------- ---------
1,776,582 2,055,389
--------- ---------
GAMING -- 3.14%
1,500 Bay Meadows Operating
Company..................... 24,375 25,688
4,000 Churchill Downs
Incorporated................ 175,938 144,000
4,000 GTECH Holdings Corporation+.... 73,387 118,500
1,500 Hilton Hotels Corporation...... 87,513 168,750
1,200 Hollywood Park Inc.+........... 13,710 11,550
5,000 International Game
Technology.................. 74,313 84,375
2,000 ITT Corporation+............... 103,388 132,500
100,000 Ladbroke Group plc............. 260,292 279,540
3,000 Mirage Resorts, Incorporated...+ 57,312 162,000
500 Nelvana Limited+............... 5,451 8,743
3,000 Santa Anita Realty
Enterprises, Inc............ 54,738 37,875
2,000 Video Lottery Technologies
Inc.+....................... 17,602 9,000
--------- ---------
948,019 1,182,521
--------- ---------
GLOBAL MEDIA AND ENTERTAINMENT -- 11.36%
15,000 Grupo Televisa S.A. GDR........ 283,828 461,250
3,500 Hasbro, Inc.................... 115,675 125,125
25,000 Havas ADR...................... 517,013 511,110
18,000 News Corporation
Limited ADR................. 352,861 423,000
6,000 News Corporation Limited
Preference Shares ADR....... 91,228 120,750
1,500 PolyGram NV ADR................ 60,313 87,938
5,500 Seagram Company Ltd............ 181,963 184,938
1,200 Sony Corporation ADR........... 66,299 79,350
17,500 Time Warner Inc................ 735,361 686,875
8,500 Turner Broadcasting System,
Inc. Cl. A.................. 184,588 229,500
2,500 Turner Broadcasting System,
Inc. Cl. B.................. 46,437 68,750
12,000 Viacom Inc. Cl. A+............. 475,475 457,500
4,000 Viacom Inc. Cl. B+............. 133,892 155,506
11,000 Walt Disney Company ........... 649,652 691,625
--------- ---------
3,894,585 4,283,217
--------- ---------
INFORMATION PUBLISHING -- 2.04%
8,000 Berlitz International, Inc.+... 109,750 170,000
14,000 Data Broadcasting
Corporation+................ 68,759 134,750
3,000 Dun & Bradstreet Corp.......... 173,963 187,500
3,000 Elsevier NV Spons. ADR+........ 57,250 91,125
2,500 Reuters Holdings plc ADR....... 115,977 181,250
100 Scholastic Inc................. 6,217 6,200
--------- ---------
531,916 770,825
--------- ---------
INTERACTIVE CONSUMER -- 0.27%
8,000 Lillian Vernon Corporation..... 120,088 102,000
--------- ---------
PUBLISHING -- 15.86%
50,000 American Media Inc. Cl. A+..... 425,863 262,500
10,000 Arnoldo Mondadori Editore
SpA+........................ 75,064 75,595
4,000 Belo (A.H.) Corporation........ 127,700 149,000
1,000 Central Newspaper, Inc. Cl. A.. 28,008 37,500
1,000 Dow Jones & Company Inc........ 30,925 41,750
300 Filipacchi Medias.............. 37,408 60,571
15,000 Golden Books Family
Entertainment, Inc.......... 159,348 180,000
2,500 Gray Communications
Systems Inc................. 46,306 57,188
1,000 Harcourt General, Inc.......... 30,675 50,000
14,000 Harte-Hanks Communications
Company..................... 298,545 388,500
10,000 Houghton Mifflin Company....... 437,250 497,500
33,760 Independent Newspapers Ltd..... 98,795 156,253
6,667 Independent Newspapers Ltd.
- Rights.................... 0 2,128
4,000 K-III Corp.+................... 40,000 50,000
2,000 Knight-Ridder ................. 113,579 145,000
10,000 Lee Enterprises,
Incorporated................ 171,513 236,250
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Portfolio of Investments (Continued) -- June 30, 1996 (Unaudited)
================================================================================
Market
Shares Cost Value
------ ---- -----
1,500 McClatchy Newspapers,
Inc. Cl. A.................. $ 35,638 $ 41,438
6,000 McGraw-Hill Companies, Inc..... 216,287 274,500
8,000 Media General, Inc. Cl. A...... 184,696 298,000
10,000 Meredith Corporation........... 232,613 417,500
9,500 Mirror Group plc............... 19,760 30,245
50,000 Nation Publishing Group
Company Ltd................. 77,769 168,440
4,000 New York Times Company
Cl. A....................... 91,825 130,500
150,000 Oriental Press Group........... 99,702 80,426
3,000 Pearson plc.................... 28,535 30,936
2,500 Playboy Enterprises, Inc.+..... 19,225 37,188
2,500 Post Publishing Company........ 9,572 9,259
20,000 Providence Journal Company..... 300,000 307,500
13,000 Pulitzer Publishing Company.... 525,200 770,250
3,000 Reader's Digest Association,
Inc. Cl. B.................. 119,667 118,125
3,000 Reed International plc ADR..... 72,250 100,500
390,000 South China Morning
Post Holdings............... 255,278 267,054
1,000 Thomas Nelson Inc.............. 12,800 13,375
3,000 Thomson Corporation............ 36,566 47,507
3,500 Times Mirror Company Cl. A..... 68,373 152,250
12,000 United Newspapers plc ADR...... 197,000 260,250
1,300 Wiley (John) & Sons, Inc. Cl. B 27,675 38,675
--------- ---------
4,751,410 5,983,653
--------- ---------
SOFTWARE -- 5.09%
5,000 Acclaim Entertainment, Inc.+... 76,268 48,125
1,400 America Online, Inc.+.......... 10,507 61,250
1,000 Broderbund Software, Inc.+..... 17,525 32,250
2,000 Electronic Arts Inc.+.......... 46,050 53,500
8,000 H&R Block Inc.................. 299,413 261,000
3,000 Intel Corporation.............. 162,240 220,312
200 Metatec Corporation Cl. A+..... 2,247 2,050
5,500 Microsoft Corporation+......... 405,755 660,688
200 NetCom ASA..................... 2,773 2,137
200 Netscape Communications
Corporation................. 2,800 12,450
12,000 Novell Inc..................... 197,126 166,500
17,500 NTN Communications, Inc.+...... 110,750 102,813
200 Pixar Inc...................... 4,400 3,900
1,000 Sega Enterprises............... 54,937 46,779
3,500 Sierra On-Line, Inc.+.......... 28,438 153,563
3,500 Spectrum HoloByte, Inc.+....... 34,037 20,125
8,000 StarSight Telecast, Inc........ 30,612 73,000
--------- ---------
1,485,878 1,920,442
--------- ---------
TOTAL COPYRIGHT/CREATIVITY
COMPANIES................... 19,091,500 24,029,260
--------- ---------
DISTRIBUTION COMPANIES -- 34.59%
CABLE TV -- 3.24%
1,000 Bell Cablemedia plc ADR+....... 17,165 16,750
10,000 Cablevision Systems
Corporation Cl. A+.......... 496,100 462,500
20,000 Comcast Corporation Cl. A...... 342,051 367,500
2,114 Cox Communications Inc.
Cl. A+...................... 33,543 45,715
2,000 General Cable Corporation
plc ADR..................... 29,165 30,750
500 NYNEX CableComms Group
plc ADR+.................... 10,905 8,125
1,000 Telewest Communications
plc ADR+.................... 24,750 24,938
7,350 Tele-Communications, Inc.
Cl. A+...................... 122,439 133,219
10,000 Videotron Groupe............... 85,072 94,575
2,000 Videotron Holdings plc ADR+.... 27,920 37,250
100 Wireless One Inc.+............. 1,330 1,800
--------- ---------
1,190,440 1,223,122
--------- ---------
ENTERTAINMENT DISTRIBUTION -- 2.28%
90,000 Cineplex Odeon Corporation..... 123,750 180,000
14,000 GC Companies, Inc.+............ 427,570 521,500
4,000 Lodgenet Entertainment
Corporation+................ 35,038 55,000
4,000 Shaw Communications Inc........ 28,122 28,299
4,000 US WEST Media Group+........... 76,348 73,000
--------- ---------
690,828 857,799
--------- ---------
EQUIPMENT -- 3.23%
1,000 Amphenol Corporation Cl. A+.... 17,125 23,000
2,200 Ericsson (L.M.) Telephone
Company ADR................. 25,286 47,300
3,000 General Instrument
Corporation+................ 66,675 86,625
1,000 Generale Des Eaux (Cie)........ 106,250 111,629
1,000 Leitch Technology Corporation+. 12,225 27,493
10,000 Lucent Technologies, Inc....... 270,000 378,750
200 Motorola, Inc.................. 8,985 12,575
2,000 Northern Telecom Limited....... 64,006 108,750
800 Omnipoint Corporation.......... 12,800 20,850
2,000 Scientific-Atlanta, Inc........ 29,237 31,000
1,000 Siemens AG ADR................. 41,650 53,412
23,000 Trans-Lux Corporation.......... 213,025 316,250
--------- ---------
867,264 1,217,634
--------- ---------
INTERNATIONAL TELEPHONE -- 11.57%
20,000 BC TELECOM Inc................. 356,969 389,296
10,000 BCE Inc.+...................... 338,013 395,000
3,000 BHI Corporation................ 51,200 43,875
500 British Telecommunications
plc ADR..................... 28,488 26,875
14,000 Cable & Wireless plc ADR....... 289,987 276,500
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Portfolio of Investments (Continued) -- June 30, 1996 (Unaudited)
================================================================================
Market
Shares Cost Value
------ ---- -----
5,000 Compania Telefonos Chile
S.A. ADR.................... $ 348,674 $ 490,625
30,000 CPT Telefonica del Peru Cl. B.. 67,794 60,343
50 DDI Corp....................... 401,727 436,729
2,000 Empresas Telex Chile........... 17,938 16,250
500 Hellenic Telecommunications
Organization S.A. (OTE)..... 8,276 8,292
2,000 Hong Kong Telecommunications
Ltd. ADR.................... 36,955 36,000
8 Japan Telecom Co. Ltd.+........ 179,249 177,615
10 Nippon Telegraph &
Telephone Corp.............. 81,575 74,189
1,000 PT Telekomunikasi Indonesia+... 20,185 29,750
1,000 Royal PTT Nederland NV ADR(a).. 26,749 37,750
2,000 Singapore Telecommunications
Limited..................... 4,700 5,330
5,000 STET SpA - Societa' Finanziaria
Telefonica SpA ADR.......... 140,063 171,250
1,500 Telecom Argentina Stet - France
Telecom S.A. ADR............ 60,216 70,313
500 Telecom Corporation of New
Zealand Limited............. 23,900 33,375
25,000 Telecom Italia SpA+............ 34,868 53,682
7,909 Telecomunicacoes Brasileiras
S.A. (Telebras) Spons. ADR+. 241,382 550,664
91 Telecomunicacoes Brasileiras
S.A. (Telebras) Spons.
ADR New....................... 5,122 6,335
3,000 Telefonica de Argentina SA
ADR......................... 64,774 88,875
10,000 Telefonica de Espana ADR....... 433,683 551,250
10,000 Telefonos De Mexico SA Cl.
L ADR....................... 361,265 335,000
--------- ---------
3,623,752 4,365,163
--------- ---------
TELECOMMUNICATIONS -- 1.54%
500 Atlantic Tele-Network ......... 8,458 12,000
3,000 Frontier Corporation........... 49,950 91,875
7,500 General Communication,
Inc. Cl. A+................. 36,388 60,000
800 Philippine Long Distance
Telephone Company........... 44,165 46,500
10,000 Rogers Communications, Inc.
Cl. B....................... 101,750 92,500
800 Teleport Communications Group
Inc. Cl. A.................. 12,800 15,300
6,000 Tel-Save Holdings, Inc.+....... 55,000 127,500
4,000 United Communication
Industry.................... 59,365 52,640
1,500 WorldCom Inc.+................. 29,502 83,063
--------- ---------
397,378 581,378
--------- ---------
US REGIONAL OPERATORS -- 1.63%
2,000 Bell Atlantic Corporation...... 107,850 127,500
1,000 Cincinnati Bell Inc............ 16,375 52,125
6,500 GTE Corporation................ 224,950 290,875
1,500 NYNEX Corporation.............. 54,388 71,250
1,000 Southern New England Telecom-
munications Corporation..... 32,300 42,000
1,000 US WEST Communications
Group....................... 27,810 31,875
--------- ---------
463,673 615,625
--------- ---------
WIRELESS COMMUNICATIONS -- 11.10%
5,000 Advanced Information
Services Ltd................ 74,683 78,408
5,000 AirTouch Communications,
Inc.+....................... 113,900 141,250
2,000 American Paging, Inc.+......... 13,813 14,875
300 Asia Satellite Telcommunications
Holdings Ltd................ 7,749 8,925
1,000 Associated Group, Inc. Cl. A+.. 19,214 30,250
500 Associated Group, Inc. Cl. B+.. 10,064 14,938
6,000 BCE Mobile Communications
Inc.+....................... 162,665 195,079
8,000 Cellular Communications,
Inc. Cl. A+................. 370,194 425,000
24,000 Centennial Cellular Corp.
Cl. A+...................... 395,745 405,000
5,000 Century Telephone Enterprises,
Inc. Cl. A.................. 131,975 159,375
15,000 COMSAT Corporation............. 347,156 390,000
7,000 General Motors Corporation
Cl. H....................... 271,610 420,875
303 Heartland Wireless Com-
munications, Inc............ 5,410 7,196
6,000 Himachal+...................... 52,375 25,500
12,500 NEXTEL Communications,
Inc. Cl. A.................. 159,289 238,281
2,000 PanAmSat Corp.+................ 30,370 58,000
8,000 Pittencrieff Communications,
Inc.+....................... 42,695 53,250
600 PT Indonesia Satellite ADR..... 20,093 20,100
10,000 Rogers Cantel Mobile Com-
munications Inc. Cl. B+..... 242,603 233,750
2,000 Rural Cellular Corp. Cl. A..... 20,000 25,500
200,000 Telecom Italia Mobile SpA...... 240,095 446,399
2,000 Telephone and Data
Systems, Inc................. 78,913 90,000
2,000 United States Cellular
Corporation+................ 57,725 62,000
12,000 U.S. Satellite Broadcasting Co. 324,000 453,000
750 Vanguard Cellular Systems,
Inc. Cl. A+................. 14,713 16,313
4,000 Vodafone Group plc ADR......... 110,905 147,500
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Portfolio of Investments (Continued) -- June 30, 1996 (Unaudited)
================================================================================
Principal
Amount Market
or Shares Cost Value
--------- ---- -----
1,000 WinStar Communications,
Inc.+ $ 5,550 $ 24,938
--------- ---------
3,323,504 4,185,702
--------- ---------
TOTAL DISTRIBUTION
COMPANIES................... 10,556,839 13,046,423
--------- ---------
TOTAL COMMON STOCKS............ 29,648,339 37,075,683
--------- ---------
CONVERTIBLE CORPORATE BONDS -- 2.87%
CABLE -- 1.90%
$500,000 Home Shopping Network, Inc.
Sub. Deb. Cv. 5.875%,
03/01/06.................... 500,000 585,000
150,000 Tele-Communications International,
Inc. Sub. Deb. Cv. 4.50%,
02/15/06.................... 151,210 129,000
--------- ---------
651,210 714,000
--------- ---------
ENTERTAINMENT -- 0.83%
100,000 All American Communications,
Inc. Sub. Deb. Cv.
6.50%, 10/01/03(a).......... 79,831 89,500
50,000 Savoy Pictures Entertainment,
Inc. Sub. Deb. Cv.
7.00%, 07/01/03............. 40,226 39,500
200,000 Viacom Inc. Sub. Deb. Cv.
8.00%, 07/07/06............. 134,678 185,000
--------- ---------
254,735 314,000
--------- ---------
MEDIA -- 0.14%
218,750(b) Havas Sub. Deb. Cv.
3.00%, 12/31/97............. 42,610 53,169
--------- ---------
TOTAL CONVERTIBLE
CORPORATE BONDS............. 948,555 1,081,169
--------- ---------
CONVERTIBLE PREFERRED STOCKS -- 0.26%
CABLE -- 0.07%
1,000 Cablevision Systems Corporation
8.50% Cv. Pfd. Ser. I........ 25,000 26,000
--------- ---------
ENTERTAINMENT -- 0.19%
1,500 AMC Entertainment, Inc.
$1.75 Cv. Pfd............... 37,825 71,438
--------- ---------
TOTAL CONVERTIBLE
PREFERRED STOCKS.............. 62,825 97,438
--------- ---------
Proceeds/ Market
Shares Cost Value
------ ---- -----
PREFERRED STOCK -- 0.02%
EQUIPMENT -- 0.02%
200 Nokia Group AB Preference...... $ 5,717 $ 7,400
--------- ---------
TOTAL PREFERRED STOCK.......... 5,717 7,400
--------- ---------
TOTAL INVESTMENTS
-- 101.45%................... $30,665,436* 38,261,690
===========
Liabilities, in excess of
Other Assets -- (1.45)%..... (545,669)
----------
NET ASSETS -- 100.00%.......... $37,716,021
==========
Net Asset Value And
Redemption Price
Per Share..................... $13.40
==========
- ----------
+ -- Non-income producing security.
ADR -- American Depositary Receipt.
GDR -- Global Depository Receipt.
(a) -- Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 1996,
Rule 144A securities amounted to $127,250 or 0.3% of net assets.
(b) -- Principal amount denoted in French Francs.
* For Federal income tax purposes:
Aggregate cost........................... $30,665,436
===========
Gross unrealized appreciation............ 8,532,770
Gross unrealized depreciation............ (936,516)
-----------
Net unrealized appreciation.............. $ 7,596,254
===========
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Statement of Assets and Liabilities (Unaudited)
June 30, 1996
================================================================================
Assets:
Investments in securities, at value
(Cost $30,665,436) .................................. $ 38,261,690
Cash ................................................... 86,624
Receivable for Fund shares sold ........................ 155,374
Receivable for investments sold ........................ 8,899
Dividends and interest receivable ...................... 79,921
Other assets ........................................... 747
Deferred organizational expenses ....................... 33,534
------------
Total Assets ......................................... 38,626,789
------------
Liabilities:
Payable to Advisor ..................................... 30,992
Payable for distribution fees .......................... 7,503
Payable for investments purchased ...................... 533,009
Payable for Fund shares redeemed ....................... 159,968
Other accrued expenses ................................. 179,296
------------
Total Liabilities .................................... 910,768
------------
Net Assets (applicable to 2,815,608
shares outstanding) .................................. $ 37,716,021
============
Net asset value and redemption
price per share ..................................... $ 13.40
============
Net Assets Consist of:
Capital Stock, at par value ............................ $ 2,816
Additional paid-in capital ............................. 28,688,015
Accumulated net investment loss ........................ (105,059)
Accumulated net realized gain on
investments and foreign currency
transactions .......................................... 1,533,657
Net unrealized appreciation on
investments and assets and liabilities
denominated in foreign currencies ..................... 7,596,592
------------
Net Assets ........................................... $ 37,716,021
============
Statement of Operations (Unaudited)
For the Six Months Ended June 30, 1996
================================================================================
Investment Income:
Dividends (Net of foreign taxes of $21,263) ............. $ 209,978
Interest ................................................ 45,578
-----------
Total income .......................................... 255,556
-----------
Expenses:
Investment Advisory ..................................... 180,478
Shareholder services .................................... 81,365
Distribution expenses ................................... 45,078
Legal and audit ......................................... 14,920
Printing and mailing .................................... 12,429
Custodian ............................................... 10,208
Amortization of organization expenses ................... 6,797
Registration ............................................ 4,892
Directors' fees and expenses ............................ 2,853
Miscellaneous ........................................... 1,595
-----------
Total expenses ........................................ 360,615
-----------
Net Investment Loss ......................................... (105,059)
-----------
Net Realized and Unrealized Gain on
Investments and Foreign Currency
Transactions:
Net realized gain on investments and
foreign currency transactions ........................ 1,632,747
Net change in unrealized appreciation ................... 3,203,899
-----------
Net gain on investments ............................... 4,836,646
-----------
Net increase in net assets resulting from
operations .............................................. $ 4,731,587
===========
Statement of Changes in Net Assets (Unaudited)
================================================================================
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, 1996 December 31, 1995
------------- -----------------
<S> <C> <C>
Increase (decrease) in Net Assets:
Net Investment Loss .................................. $ (105,059) $ (21,475)
Net Realized and Unrealized Gain on Investments and
Foreign Currency Transactions:
Net realized gain on investments ..................... 1,632,747 894,984
Net change in unrealized appreciation ................ 3,203,899 3,763,535
------------ ------------
Net increase in net assets resulting from operations 4,731,587 4,637,044
------------ ------------
Distributions from net realized gains ................ -- (945,951)
------------ ------------
Share transactions -- net ............................ 1,545,399 2,916,457
------------ ------------
Net increase in net assets ......................... 6,276,986 6,607,550
Net Assets:
Beginning of period .................................. 31,439,035 24,831,485
------------ ------------
End of period ........................................ $ 37,716,021 $ 31,439,035
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Notes to Financial Statements (Unaudited) (Continued)
================================================================================
1. Significant Accounting Policies. The primary investment objective of The
Gabelli Global Interactive Couch Potato Fund(R) (the "Fund") is capital
appreciation. The Fund is a series of Gabelli Global Series Funds, Inc. (the
"Corporation"), incorporated in Maryland on July 16, 1993. The Fund is a
no-load, open-end, non-diversified management investment company and one of five
separately managed portfolios of the Corporation. The Fund commenced investment
operations on February 7, 1994. The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund:
Security Valuation. Portfolio securities listed or traded on the New York or
American Stock Exchanges, quoted by the National Association of Securities
Dealers Automated Quotations, Inc. ("NASDAQ") or traded on foreign exchanges are
valued at the last sale price on that exchange (if there were no sales that day,
the security is valued at the average of the bid and asked prices). All other
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest average of their bid and asked prices. When
market quotations are not readily available, portfolio securities are valued at
their fair value as determined in good faith under procedures established by and
under the general supervision of the Corporation's Directors. Short-term debt
securities with remaining maturities of 60 days or less are valued at amortized
cost, unless the Directors determine such does not reflect the securities' fair
value, in which case these securities will be valued at their fair value as
determined by the Directors. Options are valued at the last sale price on the
exchange on which they are listed, unless no sales of of such options have taken
place that day, in which case they will be valued at the mean between their
closing bid and asked prices.
Foreign Currency Transactions. The books and records of the Fund are maintained
in U.S. dollars as follows:
(i) market value of investment securities and other assets and liabilities are
recorded at the exchange rate on the valuation date.
(ii) purchases and sales of investment securities, income and expenses are
recorded at the exchange rate prevailing on the respective date of such
transactions.
Forward Foreign Currency Contracts. The Fund may hold currencies to meet
settlement requirements for foreign securities and may engage in currency
exchange transactions to hedge against changes in exchange rates. Forward
foreign currency contracts are valued at the forward rate and are
marked-to-market daily. The change in market value is recorded by the Fund as an
unrealized gain or loss. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate fluctuations in
the underlying prices of the Fund's portfolio securities, but it does establish
a rate of exchange that can be achieved in the future. Although forward foreign
currency contracts limit the risk of loss due to a decline in the value of the
hedged currency, they also limit any potential gain that might result should the
value of the currency increase. In addition, the Fund could be exposed to risks
if the counterparties to the contracts are unable to meet the terms of their
contracts.
16
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Notes to Financial Statements (Unaudited) (Continued)
================================================================================
At June 30, 1996, the Fund had the following forward foreign currency contracts
open:
Foreign Currency Settlement Unrealized
Amount Date Value Gain
- ---------------- ---------- -------- ----------
5,000,000 Sold Short Hong Kong Dollar 8/13/96 $645,928 $251
20,000 Bought Thai Bahts 7/05/96 788 --
-------- ------
$646,716 $251
Security Transactions and Investment Income. Security transactions are accounted
for on the dates the securities are purchased or sold (the trade dates), with
realized gain or loss on investments determined by using specific identification
as the cost method. Interest income (including amortization of premium and
discount) is recorded as earned. Dividend income and dividend and capital gain
distributions to shareholders are recorded on the ex-dividend date.
Federal Income Taxes. The Fund intends to continue to qualify as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986 and
distribute all of its taxable income to its shareholders. Therefore, no Federal
income tax provision is required.
Dividends and interest from non-U.S. sources received by the Fund are generally
subject to non-U.S. withholding taxes at rates ranging up to 30%. Such
withholding taxes may be reduced or eliminated under the terms of applicable
U.S. income tax treaties, and the Fund intends to undertake any procedural steps
required to claim the benefits of such treaties. If more than 50% in value of
the Fund's total assets at the close of any taxable year consists of stocks or
securities of non-U.S. corporations, the Fund is permitted and may elect to
treat any non-U.S. taxes paid by it as paid by its shareholders.
2. Capital Stock Transactions. The Articles of Incorporation, dated July 16,
1993, permit the Fund to issue 200,000,000 shares (par value $0.001).
Transactions in shares of common stock were as follows:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, 1996 December 31, 1995
------------------------------ ------------------------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold ................................ 831,862 $ 10,370,050 781,367 $ 8,799,009
Shares issued upon reinvestment of dividends -- -- 77,654 910,107
Shares redeemed ............................ (698,238) (8,824,652) (598,521) (6,792,659)
------------ ------------ ------------ ------------
Net share transactions ................... 133,624 1,545,398 260,500 2,916,457
Reclassification of net investment loss .... -- -- -- (21,475)
------------ ------------ ------------ ------------
Net increase ............................... 133,624 $ 1,545,398 260,500 $ 2,894,982
============ ============ ============ ============
</TABLE>
3. Purchases and Sales of Securities. Purchases and sales of securities for the
six months ended June 30, 1996, other than U.S. government obligations and
short-term securities, aggregated $6,451,309 and $4,492,555, respectively.
Futures Contracts. The Fund may engage in futures contracts for the purpose of
hedging against changes in the value of its portfolio securities and in the
value of securities it intends to purchase. Such investments will only be made
if they are, in the opinion of management, economically appropriate to the
reduction of risks involved in the management of the Fund. Upon entering into a
futures contract, the Fund is required to deposit with the broker an amount of
cash or cash equivalents equal to a certain percentage of the contract amount.
This is known as the "initial margin". Subsequent payments ("variation margin")
are made or received by the
17
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Notes to Financial Statements (Unaudited) (Continued)
================================================================================
Fund each day, depending on the daily fluctuation of the value of the contract.
The daily changes in the contract's value are recorded as unrealized gains or
losses. The Fund recognizes a realized gain or loss when the contract is closed.
The net unrealized appreciation/depreciation is shown in the financial
statements. During the six months ended June 30, 1996, the Fund did not engage
in any futures contracts.
Repurchase Agreements. The Fund may enter into repurchase agreements with
government securities dealers recognized by the Federal Reserve Board, with
member banks of the Federal Reserve System or with other brokers or dealers that
meet the credit guidelines established by the Directors. The Fund will always
receive and maintain securities as collateral whose market value, including
accrued interest, will be at least equal to 100% of the dollar amount invested
by the Fund in each agreement, and the Fund will make payment for such
securities only upon physical delivery or upon evidence of book entry transfer,
of the collateral to the account of the custodian. To the extent that any
repurchase transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to maintain the adequacy of the collateral. If
the seller defaults and the value of the collateral declines, or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
4. Investment Advisory Contract. The Fund employs Gabelli Funds, Inc., (the
"Advisor") to provide a continuous investment program for the Fund's portfolio,
provide all facilities and personnel, including officers, required for its
administrative management, and to pay the compensation of all officers and
Directors of the Fund who are its affiliates. As compensation for the services
rendered and related expenses borne by the Advisor, the Fund pays the Advisor a
fee, computed and accrued daily and payable monthly, equal to 1.00% per annum of
the Fund's average daily net assets. The Advisor is obligated to reimburse the
Fund in the event the Fund's expenses exceed the most restrictive expense ratio
limitation imposed by any state, currently believed to be 2.5% of the first $30
million of the Fund's average daily net assets (excluding taxes, interest,
distribution expenses and extraordinary items). No such reimbursement was
required during the six months ended June 30, 1996.
5. Organization Expenses. The organization expenses of the Fund are being
amortized on a straight-line basis over a period of 60 months. The Advisor has
agreed that in the event that any of the initial 10,000 shares it owns are
redeemed during the period of amortization of the Fund's organization and
start-up expenses, the redemption proceeds will be reduced by any such
unamortized organization expenses in the same proportion as the number of
initial shares redeemed to the number of initial shares outstanding at the time
of redemption.
6. Distribution Plan. The Fund's Board of Directors has adopted a distribution
plan (the "Plan") under Section 12(b) of the Investment Company Act of 1940 and
Rule 12b-1 thereunder. For the six months ended June 30, 1996, the Fund has
incurred distribution costs of $45,078, or 0.25% of average net assets, the
annual limitation under the Plan. The Board of Directors has approved that
Distribution costs incurred by Gabelli & Company, Inc., totaling $400,759, which
are in excess of the 0.25% limitation may be recovered from the Fund in future
periods, subject to such limitation.
7. Transactions with Affiliates. The Fund paid brokerage commissions to Gabelli
& Company, Inc., an affiliate of the Advisor, during the six months ended June
30, 1996 of $3,355.
18
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Financial Highlights (Unaudited)
================================================================================
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Six Months February 7, 1994
Ended Year Ended (Commencement of Operations)
June 30, 1996 December 31, 1995 through December 31, 1994
------------- ----------------- -----------------------
<S> <C> <C> <C>
Operating Performance:
Net asset value, beginning of period ................. $ 11.72 $ 10.25 $ 10.00
------------ ------------ ------------
Net investment income (loss) ......................... (0.037) (0.014) (0.01)
Net realized and unrealized gain (loss) on investments 1.72 1.85 0.26
------------ ------------ ------------
Total from investment operations ..................... 1.68 1.84 0.25
------------ ------------ ------------
Less Distributions:
Distributions from net realized gain on investments .. -- (0.363) --
------------ ------------ ------------
Net asset value, end of period .................................. $ 13.40 $ 11.72 $ 10.25
============ ============ ============
Total Return(a) ...................................... 14.33% 17.88% 2.50%
Ratios to average net assets/supplemental data:
Net assets, end of period (in thousands) ............. $ 37,716 $ 31,439 $ 24,831
Ratio of operating expenses to average net assets .... 2.00%(b) 2.47% 2.47%(b)
Ratio of net investment loss to average net assets ... (0.58)%(b) (0.07)% (0.13)%(b)
Portfolio turnover ................................... 13% 33% 14%
Average Commission Rate .............................. $ 0.0309 -- --
</TABLE>
- ----------
(a) Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the period
including reinvestment of dividends. Total return for the period of less
than one year is not annualized.
(b) Annualized.
19
<PAGE>
Gabelli Global Series Funds, Inc.
The Gabelli Global Interactive Couch Potato(R) Fund
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
fax: 1-914-921-5118
http://www.gabelli.com
e-mail: [email protected]
(Net Asset Value may be obtained daily by calling
1-800-GABELLI after 6:00 P.M.)
Board of Directors
Mario J. Gabelli, CFA Karl Otto Pohl
Chairman and Chief Former President
Investment Officer Deutsche Bundesbank
Gabelli Funds, Inc.
Werner J. Roeder, MD
Felix J. Christiana Director of Surgery
Former Senior Lawrence Hospital
Vice President
Dollar Dry Dock Savings Bank Anthonie C. van Ekris
Managing Director
Anthony J. Colavita BALMAC International, Inc.
Attorney-at-Law
Anthony J. Colavita, P.C.
John D. Gabelli
Vice President
Gabelli & Company, Inc.
Officers and Portfolio Managers
Mario J. Gabelli, CFA Bruce N. Alpert
President Vice President
and Treasurer
Marc J. Gabelli
Portfolio Manager James E. McKee
Secretary
Ivan Arteaga, CPA
Associate Portfolio Manager
Distributor
Gabelli & Company, Inc.
Custodian, Transfer Agent and Dividend Agent
State Street Bank and Trust Company
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of The
Gabelli Global Interactive Couch Potato(R) Fund. It is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
- --------------------------------------------------------------------------------
