[PICTURE]
The
Gabelli
Global
Interactive
Couch Potato(R)
Fund
ANNUAL REPORT
DECEMBER 31, 1995
<PAGE>
Gabelli Global Series Funds, Inc.
One Corporate Center
Rye, New York 10580 - 1434
The Gabelli Global Interactive Couch Potato(R) Fund
Annual Report - 1995
To Our Shareholders:
The bull market stumbled at year-end 1995 as the Administration and
Congress fought over a balanced budget agreement. However, an early Christmas
gift from the Federal Reserve in the form of a 25 basis point drop in the
federal funds rate helped stocks regain some momentum to end the year at
near-record levels. Investors continued to migrate from technology stocks to
consumer non-durables, seeking safety in the form of more predictable earnings
in 1996. Cyclical stocks staged a comeback with the recognition that the economy
still had some "legs".
Broadcast and filmed entertainment stocks retreated as excitement over
mega-mergers waned. As a group, telecommunications stocks continued to suffer
from the failure of Congress to pass a comprehensive telecommunications bill.
Investment Results (a)
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Quarter
--------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
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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Average Annual Returns - December 31, 1995 (a)
----------------------------------------------
1 Year ....................17.9%
Life of Fund (b) ..........10.5%
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Dividend History
----------------
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.
(b) From commencement of operations on February 7, 1994.
Note: Investing in foreign securities involves risks not ordinarily associated
with investments in domestic issues, including currency fluctuation, economic
and political risks.
- --------------------------------------------------------------------------------
Investment Performance
During the fourth quarter ended December 31, 1995, the Gabelli Global
Interactive Couch Potato Fund's total return decreased 1.8%. This compares to
returns of 6.0% and 0.6%, 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
<PAGE>
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Interactive Couch Potato(R)
Having the capacity for communication flow in each direction.*
Interactive (in' ter ak' tiv) An appellation for the heavy user of television,
depicted in the metaphor as plopped before the
Couch (kouch) television set like a vegetable with eyes. The
term was coined in the early 1980s by a group of
- - Baby Boomers in the San Francisco area who
Potato (po ta' to) playfully glorified their addiction to the tube.
Calling themselves The Couch Potatoes, they
- - formed a national club and published a hilarious
(pe ta' to) 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: NTC Mass Media Directory.
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group of industry sectors. For the year ended December 31, 1995, the Fund gained
17.9%, including reinvested dividends, versus 37.6% for the S&P 500 and 14.0%
for the Lipper Global Fund Index.
Since its inception on February 7, 1994, through December 31, 1995, the
Fund has achieved a total return of 20.8%, which equates to an average annual
return of 10.5%. This compares to a total return of 35.0% for the S&P 500 over
the same period, which is equivalent to an average annual return of 17.1%. Over
the same period, the Lipper Global Index increased 12.1%, which is equivalent to
an average annual return of 6.2%. As of December 31, 1995, the Fund's
shareholders numbered 7,325 and total net assets were at $31.5 million.
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.
[GRAPHIC ILLUSTRATING 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
2
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Comparison of Change in Value of a $10,000 Investment in the Gabelli Global
Interactive Couch Potato(R) Fund, The Lipper Global Fund Index and the S&P 500
Index
Gabelli Global Interactive Couch Potato(R) Fund
(The following data was illustrated in a line graph in the printed material)
Global S&P
Interactive Lipper 500
Date Couch Global Fund Index
---- ----- ----------- -----
2/7/94 $ 10,000 $ 10,000 $ 10,000
12/30/94 10,250 9,835 9,810
12/31/95 12,080 11,214 13,499
* Past performance is not predictive of future performance.
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.
Commentary
The Great Bull Market of 1995 -- A Hard Act to Follow
MODEST STRONG LOW DECLINING RISING
ECONOMIC GROWTH + CORPORATE PROFITS + INFLATION + INTEREST RATES = STOCK PRICES
This simple equation drove equity prices to record levels in 1995. Will
the same factors add up to another good year for stocks in 1996? Let's take a
fresh look at all the components of this winning formula.
3
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We are estimating growth in Gross Domestic Product (GDP) of 2.5% to 3%
this year. With lower interest rates in Great Britain, Germany and France as a
stimulant, we see European economies growing at about 2%. As a free market
system continues to evolve in China and the expansion of the middle classes in
more developed Asian countries translates into economic activity, Pacific Rim
economies should regain momentum. In short, we anticipate reasonably good
worldwide economic growth in the year ahead.
On the inflation front, we see little pressure coming from wage increases.
In fact, we are encouraged by the strong stands governments here and abroad have
taken against inflationary wage demands. Even the French, who have traditionally
been at the mercy of public worker unions, are holding the line. Rising food and
fuel prices could, however, result in more inflation than most investors expect.
Lower grain production in the U.S. last year, strong demand from the Chinese,
and crop failures in the former Soviet Union will push food prices higher.
Regarding energy, we are producing less and consuming more. This will ultimately
lead to higher pricing. The potential of political unrest in Saudi Arabia may be
a short-term catalyst for higher fuel prices. We are estimating that inflation
could run as high as 3.5% in the second half of 1996.
If this inflation forecast proves accurate, long-term interest will not
stay at the current 6% level. Herein lies the primary threat to the stock
market. The consensus is that, with a soft economy, low inflation, lower
interest rates in Europe, a balanced budget agreement, and a Federal Reserve
Chairman who is up for reappointment in an election year, interest rates are
bound to come down. At current levels, stock and bond valuations reflect this
consensus. With a soft economy coupled with a flat yield curve, we could see
short-term rates come down without long-term rates following. Be reminded that
price/earnings multiples are a function of earnings growth and longer term
interest rates. If earnings growth slows as we anticipate and long rates remain
flat or possibly trend modestly higher, stock multiples are likely to contract.
Flow of funds into the U.S. stock market should continue to be favorable.
Equity mutual funds still enjoy strong cash inflows. If deal activity matches
that of 1995 ($458 billion in the U.S. and $866 billion worldwide), investors
will end up with a pile of cash. In addition, corporate stock buybacks and
rising dividends will buttress stock prices. Some of that money finds its way
into initial public offerings. More will go into non-U.S. investments,
particularly markets which languished in 1995. But much more will be recycled
into a shrinking supply of stock.
Our conclusion from all this conjecture is a somewhat different formula
for the 1996 stock market:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
MODEST DECENT LOW SLIGHTLY HIGHER A DECENT, BUT MUCH LESS
ECONOMIC GROWTH + CORPORATE PROFITS + INFLATION + INTEREST RATES = INSPIRING STOCK MARKET
</TABLE>
The Net
Speculative bubbles are part of the free market system. In the 1960s, it
was the "nifty fifty" growth stocks. In the 1970s, it was oil, gold, silver, and
the Hong Kong stock market. In the 1980s, it was semiconductors, biotechnology,
and Japanese real estate. Today, it is the Internet. These bubbles are always
very exciting and can be profitable for a time. Unfortunately, most people who
invest in these bubbles end up taking a bath. The Internet is showing signs of
becoming a "similar" speculative frenzy.
4
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This is not to say that the Internet will not be a tremendous growth
business. But, how does the value oriented investor participate? One of the
tenets of value investing is to buy what is, as opposed to what will be. We
believe we have found a way, in the terminology of Graham & Dodd, to buy
"net/nets" on the Internet.
The cable television industry currently has more than 60 million
subscribers in the U.S. and is working feverishly to upgrade systems to offer
telephony services. It is estimated that 25 million of those subscribers also
have personal computers and that 10% of those 25 million people will be Internet
users.
How will they access the Internet? They can do it through telephone line
modems. Or, in the not-too-distant future, through cable modems that will be
more than 100 times faster, since existing cable lines going into the home will
be able to carry much more digital information than telephone lines. At a recent
investment conference, Comcast Corporation (CMCSA - $17.625 - NASDAQ) staged a
horse race between the most commonly used telephone modem and a cable modem
prototype. It was no contest. The list of telecommunications equipment
manufacturers developing cable modems represents a "Who's Who" of the industry,
including: Motorola, Inc. (MOT - $57.00 - NYSE), Hewlett-Packard Co. (HWP -
$83.75 - NYSE), Intel Corporation (INTC - $56.75 - NASDAQ), Zenith Electronics
Corp. (ZE - $6.875 - NYSE), General Instrument Corporation (GIC - $23.375 -
NYSE), and Scientific-Atlanta, Inc. (SFA - $15.00 - NYSE). Rollout of these new
modems is scheduled for mid-1996. We believe personal computer manufacturers
will respond by adapting their machines for cable modem use.
The bottom line is that those dull old cable television stocks are good
"back door" plays on the promising future of the Internet. You don't have to pay
nosebleed multiples to participate. Cable stocks are good values today based on
their existing business. If they can tack on incremental revenues of $25 per
month from those subscribers who want to "Surf the Net", they are an even
greater bargain.
The Waiting Game
As little as ten years ago, America had the best telecommunications system
in the world by far. Today, we are already behind Great Britain and France, and
in danger of losing ground to other industrialized countries. It is not as a
result of telecommunications technology, in which we remain a world leader.
Rather, it is our antiquated regulatory system which has restrained competition
and productivity in the industry.
As of this writing, the comprehensive telecommunications bill promised to
us by the Clinton Administration and Congress three years ago remains stalled in
committee. Most of the difficult issues seem to be resolved. Presently, the bill
is being held captive to political posturing over whether broadcasters should be
made to pay for high definition television spectrum or simply be given this
spectrum as the FCC had originally planned. Once this issue is resolved, one
fears another will emerge to further delay this essential legislation. The devil
may be in the details here, however, as Washington must eliminate the artificial
barriers preventing the public from getting what they want: better service and
lower prices -- and telecommunications companies from getting what they need: a
set of rules that will allow them to implement competitive strategies for the
upcoming free market free-for-all.
With this cloud of uncertainty still hanging over the telephone/cable
television/broadcast industries, investors are not fully valuing the bright
future of well-managed, financially strong companies in all of these sectors.
5
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The Broadcasters
Through the first three quarters of 1995, broadcast stocks were among the
Fund's best performing groups. The Westinghouse/CBS and GE/Outlet Communications
deals rewarded us directly. The Disney/Cap Cities and Gannet/Multimedia deals
helped call attention to other values in our portfolios. Either via the long
awaited comprehensive telecommunications bill or FCC fiat, broadcast companies
will be allowed to expand their national footprint. This foreshadows more
consolidation in the industry. In addition, broadcast company earnings, which
were relatively soft in 1995, will accelerate dramatically with the broadcast of
the Olympic Games and, more importantly, the flood of political advertising in
this national election year.
THE PORTFOLIO
Global Allocation
The chart at the right represents the Fund's holdings by geographic region
as of December 31, 1995. 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.
HOLDINGS BY GEOGRAPHIC REGION - 12/31/95
[THE FOLLOWING TABLE WAS REPPRESENTED BY A PIE CHART IN THE PRINTED DOCUMENT]
Region Holdings
United States 68.6%
Europe 13.6%
Asia/Pacific Rim 7.5%
Canada 5.7%
South America 3.4%
Other 1.2%
Let's Talk Stocks
As we have indicated in past discussions, the Interactive Couch Potato's
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 are stock specifics on selected holdings of our Fund's
investments. Favorable EBITDA (Earnings Before Interest, Taxes, Depreciation and
Amortization) prospects do not necessarily translate into higher stock prices,
but they do express a positive trend which we believe will develop over time.
AT&T Corp. (T - $64.75 - NYSE), the world's second-largest telephone company, is
a global provider of telecommunications services. AT&T, selling at a modest 7.5
times EBITDA, has announced that it will split into 3 separate companies by
spinning-off its equipment manufacturer and its computer division. This will
reposition the company to participate more dynamically in the growth of the
telecommunications industry. The strategy involves a targeted approach to take
advantage of a strong global franchise, including its brand name, broader
product offerings and an international customer base. The restructuring
represents an impressive commitment by management to enhance shareholder values.
6
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Capital Cities/ABC, Inc. (CCB - $123.375 - NYSE) is going to Disney World. The
Walt Disney Company has arranged to buy CCB for $19 billion. CCB owns and
operates ABC Television Network and ABC Radio Networks, eight TV stations,
publishes numerous newspapers and trade magazines and has investments in cable
programming such as ESPN, Lifetime and the Arts and Entertainment channel. The
company's association with Disney improves its position to exploit new
opportunities in the coming multimedia age as both a producer and distributor of
programming. Capital Cities/ABC would be a prime beneficiary of legislation
pending in Congress intended to relax regulatory barriers pertaining to the
ownership and distribution of its copyright businesses.
Meredith Corporation (MDP - $41.875 - NYSE) is a diversified media company,
operating businesses in magazine and book publishing, television broadcasting,
cable, residential real estate marketing and franchising and brand licensing.
The company is expected to sell its cable division and focus on its core
businesses of publishing and broadcasting. With valuable TV franchises in
markets including Phoenix, Orlando and Kansas City, Meredith should benefit from
the strong demand for stations which would likely result from passage of pending
telecommunications legislation.
Pulitzer Publishing Company (PTZ - $47.75 - 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. If ownership restrictions on TV and radio
stations are relaxed, the value of Pulitzer's broadcasting properties should
increase.
Time Warner Inc. (TWX - $37.875 - NYSE), in a bold and brilliant tactic, is
acquiring Turner Broadcasting System Inc. for $7.5 billion. The acquisition will
make TWX the largest diversified media and publishing company in the world and
will add a wealth of programming to a company already rich in entertainment
content. Time Warner is restructuring into two general areas: copyright and
creativity, which includes publishing, music and filmed entertainment, and
distribution, which is mostly cable. Under the aegis of Gerald M. Levin,
investors can expect significant returns over the rest of the decade.
Viacom Inc. (VIA - $45.875 - ASE; VIA'B - $47.375 - 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 selling non-core assets to reduce
debt and is focusing on the global expansion of its media franchises. Viacom is
well-positioned in music (notably MTV) and cable networks such as Nickelodeon,
USA (50% interest) and the Sci-Fi Channel.
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.
7
<PAGE>
In Conclusion
1995 was a terrific year for most equity investors. As is usually the case
during big bull markets, growth stocks delivered better returns than those in
the value sector. Looking forward to a less inspiring market in 1996, we believe
value investors will have the opportunity to excel.
We believe the Fund's portfolio is a diversified collection of solid
businesses trading at material discounts to their "real world" economic values.
In an environment in which individual stock fundamentals are likely to be more
important than market momentum in earnings returns, we are confident the Fund
will reward its shareholders.
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.
We thank you for your confidence in our investing abilities and wish you a
productive and financially rewarding 1996.
Sincerely,
/s/ Mario J. Gabelli /s/ Marc J. Gabelli
Mario J. Gabelli, CFA Marc J. Gabelli
President and Portfolio Manager Associate Portfolio Manager
/s/ Ivan Arteaga
Ivan Arteaga, CPA
Associate Portfolio Manager
January 31, 1996
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Top Ten Holdings
December 31, 1995
-----------------
Tele-Communications, Inc. Capital Cities/ABC, Inc.
Time Warner Inc. AT&T Corp.
Citicasters Inc. ViacomInc.
Outlet Communications, Inc. Meredith Corporation
Pulitzer Publishing Company Microsoft Corporation
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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.
8
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The Gabelli Global Interactive Couch Potato(R) Fund
Portfolio of Investments -- December 31, 1995
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS -- 98.53%
COPYRIGHT/CREATIVITY COMPANIES -- 66.52%
ADVERTISING -- 0.04%
100 Euro RSCG Worldwide, S.A. $ 9,563 $ 8,146
100 Publicis 6,985 5,886
-------- --------
16,548 14,032
-------- --------
BROADCASTING -- 18.20%
21,500 Ackerley Communications,
Inc.+ ........................................ 136,762 327,875
4,000 BHC Communications, Inc. Cl. A+ .............. 305,375 378,000
1,000 British Sky Broadcasting
Group ADR+ ................................... 24,425 37,625
5,000 Can West Global
Communications Corp. ......................... 85,600 90,659
5,000 Capital Cities/ABC Inc. ...................... 375,417 616,875
2,500 Carlton Communications plc
ADR .......................................... 72,625 75,937
1,000 Central European Media
Enterprises Ltd.+ ............................ 14,125 20,500
2,640 CEP Communications ........................... 240,367 218,297
1,440 CEP Communications
Warrants Exp: 12/1/97 ........................ 4,359 4,680
6,030 Chris-Craft Industries, Inc.+ ................ 209,337 260,798
33,000 Citicasters Inc.+ ............................ 326,598 779,625
1,000 Clear Channel
Communications, Inc.+ ........................ 28,244 44,125
500 Emmis Broadcasting
Corporation Cl. A+ ........................... 10,489 15,500
300 Europe 1 Communication ....................... 80,245 60,489
500 Evergreen Media Corporation
Cl. A+ ....................................... 10,736 16,000
500 EZ Communications, Inc. ...................... 7,911 9,000
1,500 Granada Group plc ............................ 15,242 14,996
9,000 Grupo Radio Centro, S.A de CV ................ 93,813 66,375
500 Heftel Broadcasting
Corporation Cl. A+ ........................... 6,500 8,750
2,000 Heritage Media Corporation
Cl. A+ ....................................... 34,725 51,250
500 Infinity Broadcasting
Corporation Cl. A+ ........................... 13,895 18,625
500 Jacor Communications, Inc.+ .................. 6,958 8,750
300 LaGardere Groupe ............................. 5,519 5,499
1,500 LIN Television Corporation+ .................. 26,657 44,625
200 Metropole TV M6 S.A .......................... $ 17,604 $ 16,782
3,000 Multi-Market Radio, Inc. Cl.A+ ............... 28,875 30,750
2,000 New World Communications
Group, Inc.+ ................................. 23,675 35,000
1,100 Nippon Television Broadcasting 287,828 294,158
12,000 Osborn Communications
Corporation+ ................................. 90,375 102,000
15,000 Outlet Communications, Inc. Cl. A ............ 152,426 708,750
800 Paxson Communications Corp. ................... 10,540 12,200
5,000 Publishing & Broadcasting Ltd. ................ 15,250 17,423
625 SAGA Communications, Inc. Cl. A+ .............. 9,712 10,156
1,200 Scandinavian Broadcasting
System SA+ ................................... 27,161 126,250
2,500 Scottish Television plc ...................... 17,800 18,348
500 SFX Broadcasting, Inc.+ ...................... 11,270 15,125
4,000 Silver King Communica-
tions, Inc.+ ................................. 41,540 139,000
22,500 Sistem Televisyen Malaysia
Bhd .......................................... 75,448 81,053
1,000 Telemundo Group Inc. Cl. A+ .................. 16,290 14,125
50,000 Television Broadcasting Ltd. ................. 192,049 178,133
1,000 Television Francaise 1 ....................... 101,298 106,925
8,000 Tokyo Broadcasting System .................... 134,279 131,770
30,000 United International Holdings
Inc. Cl. A+ .................................. 448,934 442,500
10,000 Westinghouse Electric Corp. .................. 164,000 165,000
--------- ---------
4,002,278 5,720,303
--------- ---------
CABLE TV -- 7.23%
8,500 BET Holdings, Inc.+ .......................... 139,975 194,438
20,000 Cogeco Cable Ltd. ............................ 118,268 106,227
30,000 Flextech plc+ ................................ 178,765 219,480
10,395 Gaylord Entertainment Company ................ 235,716 288,461
40,000 Home Shopping Network, Inc.+ ................. 394,797 360,000
14,500 International Family Entertainment, Inc.+ .... 239,275 237,438
21,000 Tele-Communications, Inc. /
Liberty Media Group Cl. A .................... 536,612 564,375
12,000 Tele-Communications Inter-
national, Inc. Cl. A+ ..................... 191,600 273,000
80,000 TVE Holdings Limited ......................... 35,200 24,311
1,000 Valuevision International, Inc. Cl. A+ ....... 5,125 5,563
--------- ---------
2,075,333 2,273,293
--------- ---------
The accompanying notes are an integral part of the financial statements.
9
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The Gabelli Global Interactive Couch Potato(R) Fund
Portfolio of Investments -- December 31, 1995 (Continued)
================================================================================
Market
Shares Cost Value
------ ---- -----
ENTERTAINMENT PRODUCTION -- 5.80%
5,200 All American Communications,
Inc.+ .................................... $ 35,008 $ 51,025
22,000 All American Communications,
Inc. Cl. B+ .............................. 228,018 192,500
6,000 Ascent Entertainment Group
Inc.+ .................................... 89,665 94,500
1,000 Cablemaxx, Inc.+ ........................... 5,415 7,625
5,000 Canal + Spons. ADR ......................... 148,613 187,716
1,000 Cinar Films Inc. Cl. B+ .................... 9,181 15,125
6,000 Cinergi Pictures Entertainment,
Inc.+ .................................... 31,059 15,375
2,000 Fisher Companies Inc. ...................... 109,500 150,000
1,000 Harvey Entertainment Com-
pany+ .................................... 15,843 7,500
10,000 International Cablecasting
Technologies Inc.+ ......................... 169,290 245,000
3,000 King World Productions, Inc.+ .............. 117,337 116,625
400 Matsushita Electric Industrial
Co., Ltd. ................................ 57,620 65,800
2,500 People's Choice TV
Corporation+ ............................... 54,452 47,500
2,000 Samuel Goldwyn Company+ .................... 14,850 9,250
7,500 Savoy Pictures Entertainment,
Inc.+ .................................... 50,105 47,344
145,000 Shaw Brothers (Hong Kong)
Ltd. ..................................... 258,005 159,382
14,000 Spelling Entertainment Inc. ................ 139,525 175,000
10,000 THORN EMI plc ADR .......................... 175,975 235,529
500 Tring International Group .................. 913 333
--------- ---------
1,710,374 1,823,129
--------- ---------
GAMING -- 3.17%
1,500 Bay Meadows Operating
Company .................................. 24,375 21,938
4,000 Churchill Downs Incorporated ............... 175,938 140,000
4,000 GTECH Holdings Corporation+ ................ 73,387 104,000
1,500 Hilton Hotels Corporation .................. 87,513 92,250
1,200 Hollywood Park Inc.+ ....................... 13,710 12,075
5,000 International Game Technology .............. 74,313 54,375
2,000 ITT Corporation+ ........................... 103,388 106,000
100,000 Ladbroke Group plc ......................... 260,292 227,075
4,000 Mirage Resorts, Incorporated+ .............. 76,362 138,000
500 Nelvana Limited+ ........................... 5,451 6,960
10,000 Quintel Entertainment Inc.+ ................ 50,000 47,500
3,000 Santa Anita Realty Enterprises,
Inc. ..................................... 54,738 35,625
2,000 Video Lottery Technologies
Inc.+ .................................... $ 17,602 $ 9,500
--------- ---------
1,017,069 995,298
--------- ---------
GLOBAL MEDIA AND ENTERTAINMENT-- 9.41%
15,000 Grupo Televisa S.A. GDR .................... 283,828 337,500
13,000 Havas ADR .................................. 270,013 258,185
16,000 News Corporation Limited
ADR ...................................... 308,261 342,000
6,000 News Corporation Limited
Preference Shares ADR ...................... 91,228 115,500
1,500 PolyGram NV ADR ............................ 60,313 78,750
3,000 Seagram Company Ltd. ....................... 95,119 103,875
1,200 Sony Corporation ADR ....................... 66,299 73,650
16,000 Time Warner Inc. ........................... 673,373 606,000
8,500 Turner Broadcasting System,
Inc. Cl. A ............................... 184,588 219,938
2,500 Turner Broadcasting System,
Inc. Cl. B ............................... 46,437 65,000
3,500 Viacom Inc. Cl. A+ ......................... 125,038 160,563
4,500 Viacom Inc. Cl. B+ ......................... 152,047 213,195
6,500 Walt Disney Company ........................ 285,675 383,500
--------- ---------
2,642,219 2,957,656
--------- ---------
INFORMATION PUBLISHING -- 2.09%
8,000 Berlitz International, Inc.+ ............... 109,750 132,000
15,000 Data Broadcasting Corporation+ ............. 73,884 185,625
1,500 Dun & Bradstreet Corp. ..................... 86,888 97,125
3,000 Elsevier NV Spons. ADR+ .................... 57,250 79,875
2,500 Reuters Holdings plc ADR ................... 115,977 137,813
100 Scholastic Inc. ............................ 6,218 7,775
2,000 Source Media Inc.+ ......................... 21,000 18,250
--------- ---------
470,967 658,463
--------- ---------
INTERACTIVE CONSUMER -- 0.34%
8,000 Lillian Vernon Corporation ................. 120,088 107,000
--------- ---------
PUBLISHING -- 14.72%
62,700 American Media Inc. Cl. A+ ................. 571,947 266,475
10,000 Arnoldo Mondadori Editore
SpA+ ..................................... 75,064 86,677
4,000 Belo (A.H.) Corporation .................... 127,700 139,000
1,000 Central Newspaper, Inc. Cl. A .............. 28,008 31,375
1,000 Dow Jones & Company Inc. ................... 30,925 39,875
300 Filipacchi Medias .......................... 37,408 47,902
750 Gray Communications
Systems Inc. ............................. 12,375 13,406
1,000 Harcourt General, Inc. ..................... 30,675 41,875
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Portfolio of Investments -- December 31, 1995 (Continued)
================================================================================
Market
Shares Cost Value
------ ---- -----
15,000 Harte-Hanks Communications
Company ..................................... $316,525 $296,250
3,000 Houghton Mifflin Company .................... 130,525 129,000
20,000 Independent Newspapers Ltd. ................. 96,754 123,380
4,000 K-III Corp.+ ................................ 40,000 48,500
2,000 Knight-Ridder ............................... 113,579 125,000
10,000 Lee Enterprises, Incorporated ............... 171,513 230,000
1,500 McClatchy Newspapers, Inc. Cl. A ............ 35,638 34,313
3,000 McGraw-Hill Companies, Inc. ................. 216,287 261,375
10,000 Media General, Inc. Cl. A ................... 232,621 303,750
12,000 Meredith Corporation ........................ 275,713 502,500
9,500 Mirror Group plc ............................ 19,760 25,916
50,000 Nation Publishing Group
Company Ltd. ................................ 77,769 60,540
5,000 New York Times Company
Cl. A ....................................... 118,562 148,125
120,000 Oriental Press Group ........................ 85,648 36,467
3,000 Pearson plc ................................. 28,535 29,016
2,500 Playboy Enterprises, Inc.+ .................. 19,225 21,875
1,000 Post Publishing Company ..................... 8,899 5,558
13,000 Pulitzer Publishing Company ................. 525,200 620,750
3,000 Reader's Digest Association,
Inc. Cl. B .................................. 119,667 141,750
3,000 Reed International plc ADR .................. 72,250 92,250
200,000 South China Morning Post
Holdings .................................... 119,442 122,204
1,000 Thomas Nelson Inc. .......................... 12,800 13,000
3,000 Thomson Corporation ......................... 36,566 41,758
3,500 Times Mirror Company Cl. A .................. 68,373 118,562
12,000 United Newspapers plc ADR ................... 197,000 205,500
16,000 Western Publishing Group, Inc.+ ............. 170,825 126,000
3,000 Wiley (John) & Sons, Inc. ...................
Cl. B ....................................... 63,800 97,500
--------- ---------
4,287,578 4,627,424
--------- ---------
SOFTWARE -- 5.52%
5,000 Acclaim Entertainment, Inc.+ ................ 76,268 61,875
1,600 America Online, Inc.+ ....................... 12,008 60,000
1,600 Broderbund Software, Inc.+ .................. 27,737 97,200
2,000 Electronic Arts Inc.+ ....................... 46,050 52,250
5,000 H&R Block Inc. .............................. 206,750 202,500
3,500 Intel Corporation ........................... 135,071 198,625
200 Metatec Corporation Cl. A+ .................. 2,247 2,200
5,500 Microsoft Corporation+ ...................... 405,755 482,625
100 Netscape Communications .....................
Corporation ................................. 2,800 13,900
8,000 Novell Inc. ................................. 141,278 114,000
15,000 NTN Communications, Inc.+ ................... 96,250 68,438
200 Pixar Inc. .................................. 4,400 5,775
1,000 Sega Enterprises ............................ 54,937 55,227
8,000 Sierra On-Line, Inc.+ ....................... 72,328 230,000
5,000 Spectrum HoloByte, Inc.+ .................... 48,856 32,500
12,000 StarSight Telecast, Inc. .................... 59,401 58,500
--------- ---------
1,392,136 1,735,615
--------- ---------
TOTAL COPYRIGHT/
CREATIVITY COMPANIES ...................... 17,734,590 20,912,213
---------- ----------
DISTRIBUTION COMPANIES -- 32.01%
CABLE TV -- 2.98%
1,000 Bell Cablemedia plc ADR+ .................... 17,165 16,000
6,000 Cablevision Systems Corpor-
ation Cl. A+ .............................. 296,587 325,500
13,000 Comcast Corporation Cl. A ................... 226,551 229,125
2,114 Cox Communications Inc. Cl. A+ 33,543 41,223
3,000 General Cable Corporation plc
ADR ....................................... 43,830 45,000
500 NYNEX CableComms Group plc
ADR+ ...................................... 10,905 8,688
1,000 Telewest Communications plc
ADR+ ...................................... 24,750 24,125
7,350 Tele-Communications, Inc. ...................
Cl. A+ .................................... 122,439 146,081
12,000 Videotron Groupe ............................ 103,452 87,912
1,000 Videotron Holdings plc ADR+ ................. 16,500 12,750
100 Wireless One Inc.+ .......................... 1,330 1,646
--------- ---------
897,052 938,050
--------- ---------
ENTERTAINMENT DISTRIBUTION -- 1.90%
10,000 GC Companies, Inc.+ ......................... 292,795 335,000
5,000 Lodgenet Entertainment
Corporation+ ................................ 43,952 47,500
4,000 Shaw Communications Inc. .................... 28,122 25,275
10,000 US WEST Media Group+ ........................ 192,027 190,000
--------- ---------
556,896 597,775
--------- ---------
EQUIPMENT -- 1.88%
1,000 Amphenol Corporation Cl. A+ ................. 17,125 24,250
2,200 Ericsson (L.M.) Telephone
Company ADR ................................. 25,286 42,900
2,000 General Instrument
Corporation+ ................................ 43,625 46,750
1,000 Generale Des Eaux (Cie) ..................... 106,250 99,572
1,000 Leitch Technology Corporation+ .............. 12,225 25,092
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Portfolio of Investments -- December 31, 1995 (Continued)
================================================================================
Market
Shares Cost Value
------ ---- -----
200 Motorola, Inc. .............................. 8,985 11,400
2,000 Northern Telecom Limited .................... 64,006 86,000
1,000 Scientific-Atlanta, Inc. .................... 13,188 15,000
500 Siemens AG ADR .............................. 41,650 54,846
23,000 Trans-Lux Corporation ....................... 213,025 184,000
--------- ---------
545,365 589,810
--------- ---------
INTERNATIONAL TELEPHONE-- 9.49%
20,000 BC TELECOM Inc. ............................. 356,969 366,300
10,000 BCE Inc.+ ................................... 338,013 345,000
3,000 BHI Corporation ............................. 51,200 47,250
1,000 British Telecommunications plc
ADR ....................................... 56,225 56,500
7,500 Cable & Wireless plc ADR .................... 148,438 158,438
5,000 Compania Telefonos Chile S.A
ADR ....................................... 348,674 414,375
5,000 CPT Telefonica del Peru Cl. B ............... 9,722 10,596
2,000 Empresas Telex Chile ........................ 17,938 20,750
2,000 Hong Kong Telecommunica-
tions Ltd. ................................ 36,955 35,500
4 Japan Telecom Co. Ltd.+ ..................... 104,830 76,737
1,000 PT Telekomunikasi Indonesia+ ................ 20,185 25,500
1,000 Royal PTT Nederland NV
ADR (a) ................................... 26,749 36,250
2,000 Singapore Telecommunications
Limited ................................... 4,700 4,441
6,000 STET SpA - Societa' Finanziaria
Telefonica1 ............................... 74,438R 169,818
1,500 Telecom Argentina Stet - France
Telecom S. ................................ 60,216 71,438
500 Telecom Corporation of New
Zealand Li ................................ 23,900 34,688
25,000 Telecom Italia SpA+ ......................... 34,868 38,898
7,909 Telecomunicacoes Brasileiras
S.A. (Telebras) Spons. ADR +................. 241,382 374,689
91 Telecomunicacoes Brasileiras
S.A. (Telebras) Spons.
ADR New ................................... 5,122 4,311
3,000 Telefonica de Argentina SA
ADR ....................................... 64,774 81,750
7,000 Telefonica de Espana ADR .................... 285,002 293,125
10,000 Telefonos De Mexico SA
Cl. L ADR ................................. 361,265 318,750
--------- ---------
2,771,565 2,985,104
--------- ---------
TELECOMMUNICATIONS-- 2.91%
9,000 AT&T Corp. .................................. 480,504 582,750
3,000 Frontier Corporation ........................ 49,950 90,000
7,500 General Communication, Inc.
Cl. A+ .................................... 36,388 38,438
800 Philippine Long Distance Tele-
phone Company ............................... 44,165 43,300
4,000 Tel-Save Holdings, Inc.+ .................... 55,000 55,500
3,000 WorldCom Inc.+ .............................. 56,854 105,750
--------- ---------
722,861 915,738
--------- ---------
US REGIONAL OPERATORS -- 2.20%
2,000 Bell Atlantic Corporation ................... 107,850 133,750
1,000 Cincinnati Bell Inc. ........................ 16,375 34,750
7,500 GTE Corporation ............................. 255,438 330,000
1,500 NYNEX Corporation ........................... 54,388 81,000
1,000 Southern New England Tele-
communications ............................ 32,300 39,750
2,000 US WEST Communications
Group ..................................... 55,695 71,500
--------- ---------
522,046 690,750
--------- ---------
WIRELESS COMMUNICATIONS -- 10.65%
5,000 Advanced Information
Services Ltd. ............................. 74,683 88,527
5,000 AirTouch Communications, Inc.+ 113,900 141,250
2,900 American Paging, Inc.+ ...................... 20,383 18,488
1,000 Associated Group, Inc. Cl. A+ ............... 19,214 18,875
500 Associated Group, Inc. Cl. B+ ............... 10,064 9,500
6,000 BCE Mobile Communications
Inc.+ ..................................... 162,665 202,747
8,000 Cellular Communications, Inc. ...............
Cl. A+ .................................... 370,194 398,000
24,000 Centennial Cellular Corp. Cl. A+ 395,745 411,000
5,000 Century Telephone Enterprises,
Inc. Cl. A ................................ 131,975 158,750
15,000 COMSAT Corporation .......................... 344,844 279,375
7,000 General Motors Corporation
Cl. H ..................................... 271,613 343,875
5,000 Himachal+ ................................... 46,500 31,250
12,500 NEXTEL Communications, Inc.
Cl. A+ .................................... 159,289 184,375
2,000 PanAmSat Corp.+ ............................. 30,370 44,125
14,000 Pittencrieff Communications,
Inc.+ ..................................... 79,634 53,375
600 PT Indonesia Satellite ADR .................. 20,093 21,900
5,000 Rogers Cantel Mobile
Communications Inc. Cl. B+ .................. 115,625 132,500
250,000 Telecom Italia Mobile SpA ................... 294,983 440,157
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Portfolio of Investments -- December 31, 1995 (Continued)
================================================================================
Market
Shares Cost Value
------ ---- -----
2,000 Telephone and Data Systems,
Inc. ...................................... $ 78,913 $ 79,000
2,000 United States Cellular
Corporation+ .............................. 57,725 67,500
750 Vanguard Cellular Systems, Inc.
Cl. A+ .................................... 14,713 15,188
4,000 Vodafone Group plc ADR ...................... 110,905 141,000
1,000 WinStar Communications, Inc.+ ............... 5,550 17,125
4,000 United Communication Industry ............... 59,365 51,131
--------- ---------
2,988,945 3,349,013
--------- ---------
TOTAL DISTRIBUTION
COMPANIES ................................. 9,004,730 10,066,240
--------- ----------
TOTAL COMMON
STOCKS .................................... 26,739,320 30,978,453
---------- ----------
CONVERTIBLE CORPORATE BONDS -- 1.97%
ENTERTAINMENT -- 1.79%
$100,000 All American Communications,
Inc. Sub. Deb. Cv.
6.50%, 10/01/03 (a) ....................... 78,924 88,000
50,000 Savoy Pictures Entertainment,
Inc. Sub. Deb. Cv.
7.00%, 07/01/03 ........................... 39,771 42,500
219,300 Time Warner Inc. Sub. Deb. Cv.
8.75%, 01/10/15 ........................... 212,591 227,249
200,000 Viacom Inc. Sub. Deb. Cv.
8.00%, 07/07/06 ........................... 133,213 206,000
--------- ---------
464,499 563,749
--------- ---------
MEDIA -- 0.18%
218,750(b) Havas Sub. Deb. Cv.
3.00%, 12/31/97 ........................... 43,639 54,888
--------- ---------
TOTAL CONVERTIBLE
CORPORATE BONDS ........................... 508,138 618,637
--------- ---------
CONVERTIBLE PREFERRED STOCK -- 0.54%
CABLE -- 0.35%
4,000 Cablevision Systems Corpora-
tion 8.50% Cv. Pfd. Ser. I ................ 100,000 109,000
--------- ---------
ENTERTAINMENT -- 0.19%
1,500 AMC Entertainment, Inc.
$1.75 Cv. Pfd. ............................ 37,825 61,125
--------- ---------
TOTAL CONVERTIBLE
PREFERRED STOCK ........................... 137,825 170,125
--------- ---------
PREFERRED STOCK -- 0.03%
EQUIPMENT -- 0.03%
200 Nokia Group AB Preference ................... 5,717 7,775
--------- ---------
TOTAL PREFERRED
STOCK ..................................... 5,717 7,775
--------- ---------
TOTAL INVESTMENTS --
101.07% ...................................$27,391,000 31,774,990
===========
Liabilities, in excess of
Other Assets -- (1.07)% ................... (335,955)
---------
NET ASSETS -- 100.00%
(2,681,984 shares outstanding) $31,439,035
===========
Net Asset Value And
Redemption Price
Per Share ................................. $11.72
=======
- ----------
+ -- Non-income producing security.
ADR -- American Depository 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 December 31,
1995, Rule 144A securities amounted to $124,250, or 0.4% of net assets.
(b) Principal amount denoted in French Francs.
For Federal income tax purposes:
Aggregate cost .................. $27,391,000
===========
Gross unrealized appreciation ... $ 5,733,395
Gross unrealized depreciation ... (1,349,405)
-----------
Net unrealized appreciation ..... $ 4,383,990
===========
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Statement of Assets and Liabilities
December 31, 1995
=========================================================
Assets:
Investments in securities, at value
(Cost $27,391,000) .................... $31,774,990
Cash .................................... 30,217
Receivable for investments sold ......... 66,844
Receivable for Fund shares sold ......... 10,100
Dividends receivable .................... 44,036
Accrued interest receivable ............. 15,573
Deferred organizational expenses ........ 40,331
-----------
Total assets .......................... 31,982,091
-----------
Liabilities:
Payable for investments purchased ....... 288,654
Dividend payable ........................ 35,844
Payable to Advisor ...................... 26,643
Payable for distribution fees ........... 12,853
Payable for Fund shares redeemed ........ 3,022
Other accrued expenses .................. 176,040
-----------
Total liabilities ..................... 543,056
-----------
Net assets (applicable to 2,681,984
shares outstanding) ...................... $31,439,035
===========
Net asset value and redemption
price per share .......................... $11.72
======
Net Assets Consist of:
Capital Stock, at par value ............. 2,682
Additional paid in capital .............. 27,142,750
Distribution in excess
of net realized gains ...................... (99,090)
Net unrealized appreciation on investment
and foreign currency transactions ....... 4,392,693
-----------
Net assets ............................ $31,439,035
===========
Statement of Operations
For the Year Ended December 31, 1995
=========================================================
Investment Income:
Dividends (Net of foreign tax $27,355) .. $ 534,163
Interest ................................ 160,649
-----------
Total income .......................... 694,812
-----------
Expenses:
Investment advisory fee ................. 289,830
Transfer and shareholder servicing agent. 171,141
Distribution expenses ................... 72,406
Printing and mailing .................... 47,119
Legal and audit fees .................... 38,449
Registration fees ....................... 29,940
Custodian fees and expenses ............. 30,095
Amortization of organization expenses ... 14,469
Directors' fees and expenses ............ 5,833
Miscellaneous ........................... 17,005
-----------
Total expenses ........................ 716,287
-----------
Investment loss - net ................... (21,475)
-----------
Net Realized and Unrealized Gain
on Investments:
Net realized gain on investments ........ 894,984
Net change in unrealized appreciation ... 3,763,535
-----------
Net gain on investments ............... 4,658,519
-----------
Net increase in net assets resulting from
operations .............................. $4,637,044
===========
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
===========================================================================================================================
February 7, 1994
Year Ended (Commencement of
December 31, Operations) through
1995 December 31, 1994
------------ -----------------
<S> <C> <C>
Increase in Net Assets:
Investment loss - net ....................................................... $ (21,475) $ (23,468)
Net realized gain (loss) on investments ..................................... 894,984 (48,116)
Change in unrealized appreciation-- net ..................................... 3,763,535 629,150
----------- -----------
Net increase in net assets resulting from operations ...................... 4,637,044 557,566
Distributions from net realized gains ....................................... (945,951) --
Share transactions-- net .................................................... 2,916,457 24,273,919
---------- -----------
Net increase in net assets ................................................ 6,607,550 24,831,485
Net Assets:
Beginning of period ......................................................... 24,831,485 --
----------- --
End of period ............................................................... $31,439,035 $24,831,485
=========== ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
14
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Notes to Financial Statements
================================================================================
1. Significant Accounting Policies. The primary investment objective of the
Gabelli Global Interactive Couch Potato(R) Fund (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 the 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 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.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuation
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
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.
At December 31, 1995, the Fund had the following forward foreign currency
contracts open:
Foreign Currency Settlement Unrealized
Amount Date Value Loss
------------- --------- --------- ---------
4,000,000 Sold Hong Kong Dollars 02/09/96 $ 517,205 $ (396)
4,000,584 Bought Japanese Yen 01/03/96 38,761 (156)
--------- -------
$ 555,966 $ (552)
========= =======
15
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Notes to Financial Statements (Continued)
================================================================================
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 and 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 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>
February 7, 1994
(Commencement of Operations)
Year Ended December 31, 1995 through December 31, 1994
---------------------------- ---------------------------------
` Shares Amount Shares Amount
---------- -------------- --------- -----------
<S> <C> <C> <C> <C>
Shares sold 781,367 $8,799,009 2,700,779 $27,120,985
Shares issued upon reinvestment of dividends 77,654 910,107 -- --
Shares redeemed (598,521) (6,792,659) (279,295) (2,847,066)
--------- ---------- --------- -----------
Net share transactions 260,500 2,916,457 2,421,484 24,273,919
Reclassification of net investment loss -- (21,475) -- (23,468)
--------- ---------- --------- -----------
Net increase 260,500 $2,894,982 2,421,484 $24,250,451
========= ========== ========= ===========
</TABLE>
3. Purchases and Sales of Securities. Purchases and sales of securities for the
year ended December 31, 1995, other than U.S. government obligations and
short-term securities, aggregated $13,589,459 and $9,052,022, 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 Fund 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 Fund each day, depending on the daily fluctuation of
the value of the contract. The daily changes in the contract 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.
There are several risks in connection with the use of futures contracts as a
hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in value of the hedged investments. In addition, there is the risk that
the Fund may not be able to enter into a closing transaction because of an
illiquid secondary market.
During the year ended December 31, 1995, the Fund sold short futures contracts
aggregating $4,954,700 and closed short futures contracts aggregating
$6,179,997.
16
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Notes to Financial Statements (Continued)
================================================================================
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 pay the compensation of all officers and
Directors of the Fund who are affiliated with the Advisor. 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 and 2% of the next $70 million of the Fund's
average daily net assets (excluding taxes, interest, distribution expenses and
extraordinary items). No such reimbursement was required during 1995.
5. Organization Expenses. The organization expenses of the Fund are being
amortized on a straight-line basis over a period of 60 months.
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 year ended December 31, 1995, the Fund has
incurred distribution costs of $72,406, or 0.25% of average net assets, subject
to 0.25% limitation, the annual limitation under the Plan, payable to Gabelli &
Company, Inc., an affiliate of the Advisor. The Board of Directors has approved
that Distribution costs incurred by Gabelli & Company, Inc., totaling $396,123
which are in excess of the .25% limitation may be recovered from the Fund in
future periods, subject to such limitation.
7. Transactions with Affiliates. The Fund paid brokerage commissions during the
year ended December 31, 1995 of $2,514 to Gabelli & Company, Inc. and its
affiliates.
17
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Financial Highlights
================================================================================
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
February 7, 1994
Year Ended (Commencement of Operations)
December 31, 1995 through December 31, 1994
---------------- -------------------------
<S> <C> <C>
Operating Performance:
Net asset value, beginning of period ....................... $10.25 $10.00
------ ------
Net investment loss ........................................ (0.008) (0.01)
Net realized and unrealized gain on securities ............. 1.841 0.26
------ ------
Total from investment operations ........................... 1.833 0.25
------ ------
Distributions from net realized gain on investments ........ (0.363) --
------- ------
Net asset value, end of period ...................................... $11.72 $10.25
====== ======
Total Return(a) ............................................ 17.88% 2.50%
Ratios to average net assets/supplemental data:
Net assets, end of period (in thousands) ................... $31,439 $24,831
Ratio of operating expenses to average net assets .......... 2.47% 2.47%(b)
Ratio of net investment loss to average net assets ......... (0.07)% (0.13)%(b)
Portfolio turnover rate .................................... 33% 14%
</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.
18
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Report of Grant Thornton LLP, Independent Auditors
================================================================================
Shareholders and Board of Directors
The Gabelli Global Interactive Couch Potato(R) Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of The Gabelli Global Interactive Couch Potato(R)
Fund (one of the series constituting Gabelli Global Series Funds, Inc.), as of
December 31, 1995, and the related statements of operations, changes in net
assets and financial highlights for the year then ended, and the statements of
changes in net assets and financial highlights for the period from February 7,
1994 (commencement of operations) through December 31, 1994. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Gabelli Global Interactive Couch Potato(R) Fund of Gabelli Global Series Funds,
Inc. as of December 31, 1995, and the results of its operations, the changes in
its net assets and the financial highlights for the periods indicated above, in
conformity with generally accepted accounting principles.
/s/ Grant Thornton LLP
New York, New York
February 16, 1996
- --------------------------------------------------------------------------------
1995 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the fiscal year ended December 31, 1995, the Fund paid to shareholders,
on December 29, 1995, ordinary income dividends (comprised of net investment
income and short-term capital gains) totaling $0.13 per share. Additionally,
on that date, the Fund paid $0.233 per share in long-term capital gains. For
fiscal year 1995, none of the ordinary income dividends qualifies for the
dividends received deduction available to corporations.
U.S. Government Income:
The percentage of the ordinary income dividend paid by the Fund during
fiscal 1995 which was derived from U.S. Treasury securities was 3.45%. Such
income is exempt from state and local income tax in all states. However,
many states, including New York and California, allow a tax exemption for a
portion of the income earned only if a mutual fund has invested at least 50%
of its assets at the end of each quarter of the Fund's fiscal year in U.S.
Government securities. The Gabelli Global Interactive Couch Potato(R) Fund
did not meet this strict requirement in 1995. Due to the diversity in state
and local tax law, it is recommended that you consult your personal tax
advisor for the applicability of the information provided as to your own
situation.
- --------------------------------------------------------------------------------
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.
Professor, Pace University 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
Mario J. Gabelli, CFA Bruce N. Alpert
President and Vice President
Portfolio Manager and Treasurer
Marc J. Gabelli Ivan Arteaga, CPA
Associate Portfolio Manager Associate Portfolio Manager
James E. McKee
Secretary
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.
- --------------------------------------------------------------------------------
