[PHOTO]
Mario J. Gabelli
The
Gabelli
Global
Interactive
Couch Potato(R)
Fund
ANNUAL REPORT
DECEMBER 31, 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
Annual Report - 1996
To Our Shareholders:
In the fourth quarter of 1996, we experienced one of the most breathtaking
rallies in stock market history. Investors saw the Clinton victory, combined
with the Republicans retaining control of Congress, as the best of all possible
worlds and poured money into equities. Blue chip stocks led the post-election
charge, with the Standard & Poor's 500 Index (S&P 500) and the Dow Jones
Industrial Average (DJIA) surging to record levels. This strong fourth quarter
capped a second great year for U.S. equities, concluding one of the best
two-year periods in history.
For the twelve months ended December 31, 1996, the Fund was up 12.5%,
compared to the 16.3% return for the Lipper Global Fund Index. The Lipper Global
Fund Index covers 30 global open-end mutual funds which may invest in a
diversified group of industry sectors. During the fourth quarter ended December
31, 1996, the Fund decreased 0.3% which compares to a return of 4.9% over the
same period for the Lipper Global Fund Index.
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 $13.22 $11.75 $11.75
Total Return ......... 7.3% 6.6% (1.3)% (0.3)% 12.5%
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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 - December 31, 1996 (a)
1 Year ............................... 12.5%
Life of Fund (b) ..................... 11.2%
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Dividend History
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Payment (ex) Date Rate Per Share Reinvestment Price
- ----------------- -------------- ------------------
December 31, 1996 $1.436 $11.75
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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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
Potato (po ta' to) metaphor as plopped before the
television set like a vegetable
(pe ta' to) with eyes. The term was coined in
the early 1980s by a group of Baby
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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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
[Two line charts depicting comparison]
[First line chart]
Gabelli Global Interactive Couch Potato(R) Fund $13,590*
The Lipper Global Fund Index $13,042
* Past performance is not predictive of future performance.
[Second line chart]
Gabelli Global Interactive Couch Potato(R) Fund $13,590*
S&P 500 Index $16,604
* Past performance is not predictive of future performance
Since inception on February 7, 1994, through December 31, 1996, the Fund
achieved a total return of 35.9%, which equates to an average annual return of
11.2%. As of December 31, 1996, the Fund's total net assets were $31.8 million.
2
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BARRON'S 1997 Roundtable
We thought we would share with you excerpts from BARRON's 1997 Roundtable
interview with our Chief Investment Officer. Discussion of individual companies
is not necessarily reflective of the Fund's entire portfolio.
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-----------------------------------
BARRON'S
ROUNDTABLE
o
MARIO GABELLI
ARCHIE MACALLASTER
JOHN NEFF
MARC PERKINS
MICHAEL PRICE
JIM ROGERS
OSCAR SCHAFER
CARLENE MURPHY ZIEGLER
FELIX ZULAUF
-----------------------------------
(the following has been excerpted:)
Playing Themes
Our panelists scour the globe for underappreciated stocks
Barron's 1997 Investment Roundtable features an avalanche of ideas - mega-cap
and micro-, foreign and domestic, straight equity and derivative - about
profitable ways to engage with the markets this year. This second of three
Roundtable installments is a distillation of the mid-section of our marathon
Jan. 6 gabfest. And it's dominated by the four panelists we put on the
stockpicking hot seat during that stretch: Felix Zulauf, Mario Gabelli, Carlene
Ziegler and Mike Price (in the order that we grilled them). But it includes,
too, considerably more than two cents' worth of (frequently contrary) opinions
from the other five stalwarts who graced the table.
The stocks Felix, Mario, Carlene and Mike came prepared to talk about range
from a play on the Polish economy (no kidding) to a little company that's
tearing up the ski slopes; from restructuring stories to consolidation dreams.
Then there's Mario's "Hall of Shame," and even one single solitary short - but
it does encompass an entire market.
So what are they? For all the juicy details, read the Q&A that follows
these brief bios of the knights of the Roundtable who take their stockpicking
turns in this issue.
- Kathryn M. Welling
Mario Gabelli: Iconoclastic, irrepressible, ingenious and indefatigable. The
erstwhile auto
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analyst from the Bronx is chairman and chief investment officer of Gamco Inc.,
the money-management firm otherwise known as Gabelli Asset Management. Mario is
also chairman of Gabelli Funds Inc., the adviser to the Gabelli family of mutual
funds.
PART 1: Outlook on the Economy and Stock Market
Q: Mario, what kind of economy do you see?
Gabelli: Oh, 1997 should be another good year, with GDP up about 2% to 3%. We
talked a year ago about seeing the early part of a global recovery in '97, but
that seems a little further off now. Still, with the currency changes taking
place, you could see a pretty decent economy in the second half in Germany and
France. Hungary, Poland, the Czech Republic are reasonably strong. Latin
America's reasonably good. Southeast Asia, ex-Japan, and the 3.5 billion new
consumers around the world, have a pretty good appetite for American goods.
Overall, the export side of the house - even with the recent strength of the
dollar vis-a-vis the yen and the mark - should be decent. The outlook for '98 is
not clear. But for '97, I'm in the 2% inflation camp, trickling up to 3% to 3
1/2% by year-end, and I see long interest rates backed up to a level of
stability around 6 3/4% to 7 1/4%.
Q: Everyone always says that.
Gabelli: No. A year ago, long rates were 6.05%, and I argued they would back up
to 6 1/2% to 6 3/4% - as they have.
Q: Mario, what's in store for the stock market?
Gabelli: I don't see the market helped by rate changes. Profits, I see up 7%,
more or less. So I don't see any gremlins there, though I watch for them.
Earnings surprises are clearly the wild card for the market. Valuations are not
outrageously high. The flow of funds is incredibly positive. The net inflow into
mutual funds in '96 was about $200 billion, compared with $100 billion net in
'95. Corporate buybacks announced were about $130 billion in '96. Only completed
about $30 billion. But even that is a big number. Corporate dividends were about
$100 billion. There are a couple of other elements. The buying of U.S. stocks by
non-U.S. holders I see accelerating. So I see the money flow into mutual funds
continuing, though it's hard to make the case that it will go up at a higher
incremental rate.
But the big number is not any of those. It is acquisitions. In 1996, we
announced $1 trillion on a global basis, $659 billion in the U.S. So whatever we
see in mutual fund inflows, dividends, buybacks, net foreign investments will be
a paltry number relative to transactions, many of which are for cash.
Q: Isn't that circular? One reason you've had this M&A boom is that the stock
market is so high. If it were to drop off for some reason, mergers would, too.
Gabelli: No. In 1995, there were $200 billion in cash deals, retiring shares and
putting cash in investors' hands. In 1996, I don't have the final number.
Counterbalancing that, last year there was about $48 billion raised in IPOs,
which take cash out of the market and put shares in. And another big chunk of
cash left the U.S. in '95 to go into foreign markets. But that is a loop. In
1997, that flow of funds is still going to be enormously powerful. Deals will be
at an all-time record. Whether, as you saw Gillette do with Duracell, paper will
be swapped for paper, or whether cash is exchanged for paper, it's all recycled.
I would guess the entire world did $1.2 trillion worth of deals in 1996. In
1997, you are going to see more Boeing/McDonnells. Megadeals like Philip Morris
buying Pepsi-Cola. American Express and someone. GTE buying British Telecom.
Q: In any event, is your point that this is going to keep the stock market going
up?
Gabelli: Let me keep going. I don't think 1997 is going to be a year in which
"three-peats" happen. The Lakers and the Celtics and the Bulls may have been
able to do it. But I don't think the market is going to make it three
championship seasons in a row. So 1997, even with its powerful flow of funds,
will not see another big uplift. However, in light of the powerful flow of funds
and all the deal activity, it's going to be a fertile year to get in front of
themes like the consolidations in certain industries.
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Q: Utilities?
Gabelli: They're one example. Banks. Brokers. Money managers. There's an
incredible consolidation going on in the money-management business!
Q: Does lightning strike twice?
Gabelli: Hit me!
Q: So it will be a terrible market year except for investors?
Gabelli: I didn't say "terrible." I am not where John is, down 15% to 20%.
Neff: I said zip, though, for the year.
Gabelli: That's where I am, as well, for the whole year. More volatility in the
market. The flow of funds is so powerful that it doesn't allow a material
downdraft from here. At the same time, the places you make money are in
spinoffs, split-ups, corporate transactions. On March 14, 1994, when GE went
after Kemper, I said that signaled a third wave of takeovers. Each year since,
we have seen progressively more, and 1997 is going to be the year of the global
behemoths. Scale economics on a global basis are at work. When you see British
Telecom buying MCI and then you see GTE thinking about buying British Telecom,
it's just phenomenal. The Boeing/McDonnell Douglas and Gillette/Duracell are
just a taste of what you will see. And when you have a stock that's up 20 points
in a day, you're going to say, "Hey, what else can I buy that's going to be
bought?" You are going to have all the speculative fervor of 1986-87, or
1968-69. Whenever Charlie Bluh-dorn was around and Jimmy Ling.
PART 2: Gabelli Talks Stocks
In the 'nineties, one of the themes is consolidation. That is, to buy a
fragmented industry, get the benefit of synergistic dynamics at work. Eliminate
overhead. Use scale economics in the financial and operating areas. We've talked
in years past about consolidations in the banks, the brokers, the broadcasters.
I added to that the defense industry, the Baby Bells and utilities a year ago.
Gabelli: I'm going to give you a bunch of stocks in discrete industries, but all
have one common characteristic: a lot of cash. The first is GC Cos., symbol GCX,
the old General Cinema. Harcourt spun it off to their shareholders. The stock
closed last week [Jan. 3] at 35. There are 7.8 million shares; fiscal year ends
October. They operate theaters, 1,159 screens in 189 locations. The company has
about $10 a share in cash, no debt. They have $50 million invested in venture
capital, where their record has been lackluster. They will sell a deal, take
writeoffs and obfuscate all of the values. EBITDA in the theater business is
about $40 million. You could probably sell those theaters today for $320
million-$480 million. The company announced a major change in direction within
the last month or so: They are going to buy back one million shares. This is a
classic value investment.
Q: The stock hasn't done much, has it?
Gabelli: No, it's traded between 28 and 40. Full disclosure: I own a million
shares and I'm nibbling at it; constantly buying.
One last company in this cash camp, which will segue into an area that you
might have an interest in. I'm going to talk about BHC Communications. Stock is
at 100, on the Amex. There are 23.9 million shares outstanding - 24 million for
Archie. That's a $2.4 billion market cap. What you get is a company with $1.3
billion in cash, no debt. A company that owns three television stations, in
L.A., New York and Portland, probably worth another $1.2 billion. Then they own
five million shares of United Television Inc., which sells at 87. So, marked to
market, that's another $500 million. Marked to model.
Q: Marked to what?
Rogers: To valuations he made up in his model.
Gabelli: Marked to my model of the value of the business, based on what would be
paid by a company that wanted to buy the entire enterprise, the company is worth
$130 million more than market.
MacAllaster: Herb Siegel [chairman and CEO] is never going to sell.
Gabelli: My point is, you get their network for free. They own a half-interest -
and Paramount Television Group owns the other - in the United Paramount Network,
UPN, which is the fifth network, or fourth or sixth, depending on who's
counting, but most likely the fifth or sixth. That
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5
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network, if it works, could have substantial value down the road. So BHC is
attractive.
Gabelli: Now, to Alan's favorite subject: cable. I want to talk about 3.5
billion new eyeballs, i.e., consumers around the world who have an insatiable
appetite for American goods and services.
Perkins: Are they interactive couch potatoes?
Gabelli: As you know that is a trademark of Gabelli & Co. and you should bow
your head when you say it.
Q: Or pay a royalty.
Gabelli: We all know about what happened to cable in 1996: Satellite bloodied
the industry. The concern that telephone was going into cable damaged it. Cable
stocks, on balance, fell 40%. But let's look at the positives. First, satellite
has four million new consumers. Anyone who has a DirecTV views it as an
exceptionally attractive product. I bought it for my house in Moose, Wyo. It
works. It's fabulous. Easy to use.
Gabelli: That four-million-user delivery system is growing probably 25%-50% a
year over the next several years. But DirecTV has to pay for programs. So if
you're an International Family Entertainment with the Family Network, they have
to pay you. And, since they don't have nearly as many subscribers as, say, TCI
[Tele-Communications Inc.], they pay you a higher-than-average rate. So Family
Entertainment is getting 20 cents per set of eyeballs as opposed to 11 cents.
Secondly, it's getting
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GABELLI'S PICKS
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Price
Company Sym. Exch. 1/6/97
GC Cos. GCX NYSE 36-1/4
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BHC Comm BHC ASE 102-3/8
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Int'l Family Ent FAM NYSE 16-5/8
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BET BTV NYSE 29-1/2
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Liberty Media LBTYA NNM 28-3/8
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HSN HSNI NNM 23
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Viacom VIA ASE 34
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Time Warner TWX NYSE 37-1/4
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=======================================================
incremental growth in eyeballs at an accelerating rate. Enlarging its
advertising base. So a Family Entertainment has a powerful uplift to its revenue
stream. Family Entertainment, symbol FAM, is run by our dear friends in
Virginia. It closed Friday [Jan. 3] up 1 3/8, to $17. And 17 times 48 million
shares is an $850 million market value. There's about $140 million of debt. The
Family Channel itself had a cash-flow run rate in the fourth quarter of $100
million. So it's selling at 8.5 times. They also own 72% of FiT TV, which is 10%
owned by Liberty, 10% by Reebok, and is cash-flow negative. They have a piece of
a cable channel in China. They gave up on the Pakistani telephone venture after
they read my comments last year in Barron's. Have a piece of an equity in Latin
America. They got out of their cable channel in the U.K., but took back a 5%
stake in the buyer, Flextech PLC, a U.K. company controlled by TCI's TCI
International unit. Bottom line: This stock, if they had nothing else, would be
worth probably $28-$30 a share. Family Channel's EBITDA margins are growing
substantially. They've started originating better programming through MTM
Entertainment, their Mary Tyler Moore production company, on Family Channel.
That's increasing its penetration. I think the company will be sold. Pat
Robinson has a problem. He doesn't want to give up the 700 Club, which has a
time slot in prime time. The buyer has to find a way to let him not give that
up. The second cable programmer I like is Black Entertainment, or BET Holdings.
I recommended it at 16. I recommended it at 23. It's 29. This wonderful niche
market, Bob Johnson dominates. He's in front of 98% of African-American
households in the U.S. He bought back three million shares from Warner. There
are 17.5 million outstanding. They had $1.20 in fiscal '96 earnings, the year
ends in July. This year they'll do about $1.40-$1.45. They have some start-up
ventures, BET On Jazz. It is going cash-flow negative by about $6 million.
The third company I want to talk about is Liberty Media, my favorite in
this area. There are 185 million shares; the stock is 28. But they've just
announced a 3-for-2 split.
Q: Where did you recommend that last year?
Gabelli: At 29, probably. FAM has also split since last year, I recommended it
at the equivalent of 13 1/2. Liberty Media has about $45 of asset values [all
figures pre-split].
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They converted their ownership of Turner into about 55 million shares of Time
Warner. They've announced plans to spin that off to the shareholders. That's
about $11 of value in Spinco. So I'm really buying the stock at $28 today minus
the $11, or for $17 a share, pre-split. There are 185 million shares, no debt,
$300 million in cash. You get 49% of the Discovery Channel, which is one of the
best in cable - travels well globally. You get a piece of QVC. A piece of
Family, of Black Entertainment. A piece of a whole series of sports networks.
The company is buying back its own stock. This is a terrific way to capture
eyeballs on a global basis.
Another company I'm going to recommend is new, HSN Inc., symbol HSNI. It's
the merger of Silver King Communications, Savoy Pictures and Home Shopping
Network, Barry Diller's vehicle for fame and success, or ignominy and defeat.
There are about 57 million shares out not including Diller's 10 million options.
He is motivated to make this succeed! The stock is trading at 24. There's a
273-page merger document out, you can read it. But there are only two pages you
need to read.
Q: You're not going to read it .
Gabelli: I've read it; you can, too.
Q: We meant here.
Gabelli: Only page 141, which has the projections, and page 171, which has the
balance sheet. There are a couple of technical issues dealing with their
ownership of TV stations. But essentially, I think Home Shopping Network becomes
a wonderful vehicle for Barry Diller. I don't have any numbers. It's a $1
billion speculation. The station licenses could have substantial value, if
something called duopoly - that is, the one-TV-station-per-market rule - is
changed. Also a lot of changes could take place in cable because of something
called "must-carry," an FCC rule that the Supreme Court is looking at. If
duopoly happens and must-carry stays, the stock triples.
Q: And if it's the other way around?
Gabelli: You will have some short-term fluctuations in the stock.
Q: Let me ask, is this going to be home shopping exclusively?
Gabelli: No. Home Shopping has been turned around. They're doing a good job on
the basics. Getting more per consumer in terms of fulfillment, cash flow. I'll
give you some numbers that are very achievable based on what he created at QVC
and what it did: EBITDA in Home Shopping Network in 1996 were estimated at $70
million on $1.1 billion of revenues. They go to $125-$165-$200-$235-$275
million. This will become much more visible when QVC, which Comcast owns, goes
public at some point. I think Barry is thinking of creating "city television,"
something that appeals to the urban viewer, because that's where his stations
are. He clearly is one of those gifted individuals who understand in a three-,
four-, five-dimensional way, what the viewer wants to see. He has done it at
Paramount, Disney, Fox. He is terrific. He's going to do it again, even if he
doesn't have scale economies.
Q: What else, dare we ask?
Gabelli: Time Warner and Viacom. Viacom at 35. I think Sumner Redstone sells a
piece of the radio stations, or all of them, sells a piece of Blockbuster,
focuses on the basic business. It's not a cable play but a cable-network play.
Time Warner, I can always talk about. With the Turner deal behind them, they
will resolve their issues with US West Media and that should work exceptionally
well.
Q: Well, thank heavens. I mean, thanks, Mario.
Reprinted by Permission.
The views expressed in this article
reflect those of the portfolio
manager as of its writing. The
manager's views are subject to
change at any time based on market
and other conditions.
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7
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THE PORTFOLIO
Global Allocation
The chart at the right represents the Fund's holdings by geographic region
as of December 31, 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.
HOLDINGS BY GEOGRAPHIC REGION - 12/31/96
[Pie chart with the following data points]
United States 69.3%
Europe 16.7%
Asia/Pacific Rim 7.0%
Canada 4.9%
Latin America 2.1%
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.
[Pie chart with the following data points]
Copyright/Creativity 53.8%
Distribution 46.2%
The chart above depicts our equity mix of the copyright/creativity and
distribution companies in our portfolio as of December 31, 1996.
Let's Talk Stocks
The following are stock specifics on selected holdings of our Fund.
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.
Cablevision Systems Corporation (CVC - $30.625 - ASE), based in Woodbury, NY, is
a major cable TV operator serving 2.7 million subscribers, including managed
systems. CVC's cable systems generate average monthly subscriber revenues among
the highest in the industry. CVC participates in a 50-50 venture that manages
Madison Square Garden and owns Rainbow Programming which has interests in cable
TV networks (Bravo, AMC, News 12 Long Island, and various sports channels).
Having already upgraded its cable systems, CVC is well-positioned to begin
offering telephony, high speed data and enhanced video services. We believe
CVC's PMV is about $90 per share.
Havas (Sub. Deb. Cv., 3.00%, 12/31/97; HAVSY - $17.125 - NASDAQ), 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.
Microsoft Corporation (MSFT - $82.625 - NASDAQ) develops, manufactures,
licenses, sells and supports a wide range of software products, including
operating system platforms for personal computers (PCs),
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workstations, and servers; business and consumer applications for productivity,
reference, education, and entertainment; and development tools. The company is
strategically positioned at the crossroads of copyright/creativity and
distribution. Its core operating system products - Windows 3."x", Windows 95,
and Windows NT - represent the lion's share of an expanding market, driven by
the growth of PCs both in the United States and internationally. Its
applications software products, especially Microsoft Office, have become
standards in corporate and consumer environments. As Bill Gates noted in his now
famous memo about the growth potential of the Internet, Microsoft is committed
to becoming the dominant Internet and Intranet software company. This
combination of product mix and distribution channels, with the additional upside
of the Internet/Intranet, makes Microsoft one of the dominant software producers
for the future.
News Corporation Ltd. (NWS - $20.875 - NYSE) is engaged in newspaper and
magazine publishing and, as the owner of 20th Century Fox and Fox Broadcasting,
in film operations and television broadcasting. The company is also engaged in
commercial printing, book publishing and distribution, air transportation,
record and cassette production and distribution. News Corp. is a global
enterprise. Satellite television operations include 64% of Star Television and
40% of British Sky Broadcasting.
Providence Journal Company (PRJ - $30.625 - NYSE) signed a definitive agreement
to be acquired by A.H. Belo Corp. (BLC - $34.875 - NYSE) for about $1.5 billion
in cash and stock, making Belo one of the nation's largest television
broadcasters and expanding its newspaper operations. The purchase will give Belo
nine television stations, making it the 10th-biggest U.S. broadcaster, reaching
12.3% of the nation's TV viewers. Belo, the publisher of the Dallas Morning
News, will also get two newspapers, including the Providence Journal-Bulletin,
and cable programming businesses. The purchase follows a string of newspaper
acquisitions by Belo in the past year. It also comes amid an acquisition frenzy
in the television industry as companies take advantage of changes in ownership
rules. Under terms of the agreement, Providence Journal shareholders will
receive $12.33 in cash and 0.5333 shares of Belo Series A common stock for each
of their shares. This values Providence Journal at $30.93 a share, based on
Belo's price of $37.875. Providence Journal shareholders also have the option of
receiving all cash or all stock for their shares subject to certain proration
mechanisms. The transaction is expected to close during the first quarter of
1997.
Pulitzer Publishing Company (PTZ - $46.375 - NYSE) is a diversified media
company whose assets include newspapers and television and radio broadcasting
operations. The company publishes two metropolitan newspapers, the St. Louis
Post-Dispatch and the Arizona Daily Star, and has recently acquired the Scripps
League Newspapers, thereby picking up 16 daily newspapers in smaller cities in
the West and Midwest. Pulitzer also has valuable TV properties in Orlando,
Florida, Greenville, South Carolina and New Orleans, Louisiana.
Telefonica de Espana (TEF - $69.25 - NYSE) is a diversified telecommunications
service provider offering services to more than 15 million lines. The company
also services a fast growing cellular subscriber base which now exceeds two
million subscribers. We consider TEF an ideal way to invest in Latin America,
with a diversified portfolio of telecommunications operators in the region. Its
portfolio of publicly-traded Latin American companies includes: Compania de
Telefonos de Chile, Telefonica de Argentina S.A. and Compania Peruana de
Telefonos. TEF also holds interests in non-public Latin American telecom
operators in Mexico, Colombia, Puerto Rico, Uruguay and Venezuela. The company's
long-term strategy is to create a Pan-American network, leveraging the
Spanish-speaking world.
Tele-Communications, Inc./Liberty Media Group (LBTYA - $28.5625 - NASDAQ) owns a
collection of interests in some of the most powerful programming entities in the
world. Liberty Media is the second largest investor in Time Warner (TWX - $37.50
- - NYSE), the world's largest media company. Liberty Media, News Corporation Ltd.
(NWS - $20.875 - NYSE), and Tele-Communications International, Inc. (TINTA -
$13.25 - NASDAQ) have created a global sports joint-venture, called Fox Sports,
that will offer an integrated package of sports programming across network
broadcast, national cable, and regional cable channels. Liberty's 49% owned
Discovery Communications is a major advertiser-supported basic cable network
that
9
<PAGE>
includes the flagship Discovery Channel, The Learning Channel, and developing
businesses such as Discovery Europe and Animal Planet. We consider Liberty Media
to be ideally positioned to benefit from expanding distribution channels,
including direct broadcast satellite ventures like DirecTV and the Internet.
Viacom Inc. (VIA - $34.50 - ASE; VIA'B - $34.875 - ASE), long a major provider
of entertainment "content", has evolved into one of the world's dominant media
companies. Following its acquisitions of Paramount Communications and
Blockbuster Entertainment, the company is now divesting non-core assets to
reduce debt and is focusing on the global expansion of its media franchises. The
company has divested its cable systems subsidiary in a transaction with
Tele-Communications, Inc. which reduced Viacom's debt by $1.7 billion and the
number of common shares outstanding by about 4%. 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.
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
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 1997.
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
February 3, 1997
10
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Portfolio of Investments -- December 31, 1996
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS -- 98.58%
COPYRIGHT/CREATIVITY COMPANIES -- 53.01%
ADVERTISING -- 0.21%
6,250 More Group ........................ $ 63,658 $ 67,021
----------- -----------
CABLE PROGRAMMERS -- 9.14%
11,000 BET Holdings, Inc.+ ............... 208,600 316,250
5,000 CANAL + Spons. ADR ................ 148,613 220,438
40,000 Flextech plc+ ..................... 264,035 464,223
15,000 Gaylord Entertainment
Company ......................... 310,739 343,125
17,850 HSN, Inc.+ ........................ 408,783 423,938
18,125 International Family
Entertainment, Inc.+ ............ 239,275 280,938
30,000 Tele-Communications, Inc./
Liberty Media Group Cl. A ....... 758,236 856,875
----------- -----------
2,338,281 2,905,787
----------- -----------
ENTERTAINMENT PRODUCTION -- 3.91%
12,695 All American
Communications, Inc.+ ........... 109,136 171,391
10,000 All American Communications,
Inc. Cl. B+ ..................... 71,585 100,000
70,000 Alliance Entertainment
Corp ............................ 301,410 131,250
6,100 Ascent Entertainment
Group Inc.+ ..................... 91,558 98,363
19,000 Cinergi Pictures
Entertainment, Inc.+ ............ 42,849 37,406
12,000 EMI Group plc ADR ................. 182,190 283,391
24,000 Golden Harvest
Entertainment Ltd. .............. 7,806 8,068
3,000 Grammy Entertainment plc .......... 29,024 34,152
70,000 Shaw Brothers
(Hong Kong) Ltd. ................ 86,605 83,269
40,000 Spelling Entertainment Inc. ....... 309,208 295,000
----------- -----------
1,231,371 1,242,290
----------- -----------
GAMING -- 2.94%
1,500 Bay Meadows Operating
Company ......................... 24,375 61,313
4,000 Churchill Downs
Incorporated .................... 175,938 144,000
7,500 ITT Corporation+ .................. 337,312 325,313
75,000 Ladbroke Group plc ................ 192,395 296,777
5,000 Mirage Resorts,
Incorporated+ ................... 47,002 108,125
----------- -----------
777,022 935,528
----------- -----------
GLOBAL MEDIA AND ENTERTAINMENT -- 12.50%
35,000 Havas ADR ......................... 683,262 612,647
25,000 News Corporation
Limited ADR ..................... 500,898 521,875
6,000 News Corporation Limited
Preference Shares ADR ........... 91,228 105,750
1,500 PolyGram NV ADR ................... 60,313 74,625
7,500 Seagram Company Ltd. .............. 252,563 290,625
1,200 Sony Corporation ADR .............. 66,299 78,750
25,000 Time Warner Inc. .................. 912,780 937,500
25,000 Viacom Inc. Cl. A+ ................ 895,562 862,500
5,000 Viacom Inc. Cl. B+ ................ 165,630 174,380
4,500 Walt Disney Company ............... 285,741 313,313
----------- -----------
3,914,276 3,971,965
----------- -----------
INFORMATION PUBLISHING -- 1.90%
8,000 Berlitz International, Inc.+ ...... 109,750 167,000
15,000 Data Broadcasting
Corporation+ .................... 92,634 105,000
3,000 Elsevier NV Spons. ADR ............ 57,250 101,250
3,000 Reuters Holdings plc ADR .......... 164,990 229,500
----------- -----------
424,624 602,750
----------- -----------
PUBLISHING -- 15.70%
1,000 AC Nielsen Corporation+ ........... 15,159 15,125
35,000 American Media Inc. Cl. A+ ........ 220,887 205,625
20,000 Arnoldo Mondadori
Editore SpA+ .................... 144,114 162,714
2,500 Belo (A.H.) Corporation ........... 79,813 87,188
3,500 Central Newspaper, Inc. Cl. A ..... 135,800 154,000
5,000 CEP Communications ................ 377,048 353,083
1,440 CEP Communications
Warrants Exp: 12/1/97 ........... 4,359 1,165
300 Filipacchi Medias ................. 37,408 66,763
17,000 Golden Books Family
Entertainment, Inc.+ ............ 181,585 189,125
8,000 Harte-Hanks
Communications Company .......... 177,933 222,000
5,000 Houghton Mifflin Company .......... 213,188 283,125
40,425 Independent
Newspapers Ltd. ................. 127,484 205,321
6,000 Knight-Ridder Inc. ................ 187,553 229,500
11,500 Lee Enterprises,
Incorporated .................... 203,962 267,375
6,000 McGraw-Hill Companies, Inc. ....... 216,287 276,750
8,000 Media General, Inc. Cl. A ......... 184,696 242,000
6,500 Meredith Corporation .............. 144,937 342,875
50,000 Nation Multimedia Group
Limited ......................... 77,769 146,199
5,000 New York Times Company
Cl. A ........................... 124,000 190,000
12,000 Pulitzer Publishing
Company ......................... 362,850 556,500
3,000 Reed International plc ADR ........ 72,250 113,250
3,000 Scripps Company ................... 87,097 105,000
200,000 South China Morning
Post Holdings ................... 128,617 165,503
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) -- December 31, 1996
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (Continued)
3,500 Times Mirror Company Cl. A ........ $ 68,373 $ 174,125
10,000 United Newspapers plc ADR ......... 162,250 233,750
----------- -----------
3,735,419 4,988,061
----------- -----------
SOFTWARE -- 6.71%
10,000 BBN Corporation ................... 207,375 225,000
6,431 CUC International, Inc. ........... 28,436 152,736
10,000 H&R Block Inc. .................... 259,121 290,000
2,500 Intel Corporation ................. 147,321 327,344
8,000 Microsoft Corporation+ ............ 338,881 661,000
25,000 Novell Inc. ....................... 261,550 236,719
37,000 NTN Communications, Inc.+ ......... 201,412 141,063
10,500 StarSight Telecast, Inc.+ ......... 51,406 98,438
----------- -----------
1,495,502 2,132,300
----------- -----------
TOTAL COPYRIGHT/
CREATIVITY COMPANIES ............ 13,980,153 16,845,702
----------- -----------
DISTRIBUTION COMPANIES -- 45.57%
BROADCASTING -- 10.62%
44,000 Ackerley
Communications, Inc. ............ 217,389 517,000
2,000 BHC Communications,
Inc. Cl. A+ ..................... 156,550 202,750
16,563 Can West Global
Communications Corp. ............ 85,596 172,758
2,500 Carlton Communications
plc ADR ......................... 72,625 111,250
4,500 Chris-Craft Industries, Inc.+ ..... 149,561 188,438
300 Europe 1 Communication ............ 80,245 63,584
2,000 Fisher Companies Inc. ............. 109,500 196,000
2,500 Heritage Media
Corporation Cl. A+ .............. 21,469 28,125
25,000 Jacor Communications,
Inc. - Warrants+ ................ 75,000 50,000
4,000 LIN Television Corporation+ ....... 113,184 169,000
1,100 Nippon Television
Broadcasting .................... 287,828 332,757
10,000 Osborn Communications
Corporation+ .................... 75,125 148,906
15,000 Paxson Communications
Corporation ..................... 112,353 118,125
50,000 Television Broadcasting Ltd. ...... 192,049 199,767
1,000 Television Francaise 1 ............ 101,298 95,568
20,000 The Providence Journal
Company+ ........................ 300,000 612,500
10,000 Tokyo Broadcasting System ......... 167,935 152,982
25,000 Video Jukebox Network Inc. ........ 31,550 16,406
----------- -----------
2,349,257 3,375,916
----------- -----------
CABLE DISTRIBUTION -- 8.92%
30,000 Cablevision Systems
Corporation Cl. A+ .............. 1,051,562 918,750
20,000 Comcast Corporation ............... 252,125 272,500
25,000 Comcast Corporation Cl. A ......... 423,263 440,625
3,474 Comcast Corporation
Special Cl. A ................... 51,668 61,881
5,000 International CableTel
Incorporated .................... 86,250 126,250
20,000 Tele-Communications,
Inc. Cl. A ...................... 251,253 261,250
20,000 Tele-Communications
International, Inc. Cl. A+ ...... 314,125 265,000
40,000 United International
Holdings Inc. Cl. A ............. 576,643 490,000
----------- -----------
3,006,889 2,836,256
----------- -----------
ENTERTAINMENT DISTRIBUTION -- 1.91%
16,000 GC Companies, Inc.+ ............... 500,444 554,000
3,000 Lodgenet Entertainment
Corporation+ .................... 27,288 53,250
----------- -----------
527,732 607,250
----------- -----------
EQUIPMENT -- 3.57%
2,200 Ericsson (L.M.) Telephone
Company ADR ..................... 25,286 66,413
10,000 Lucent Technologies, Inc. ......... 270,000 462,500
200 Nokia Corp. Spons. ADR ............ 5,717 11,525
3,000 Northern Telecom Limited .......... 122,556 185,625
12,500 Scientific-Atlanta, Inc. .......... 199,699 187,500
20,000 Trans-Lux Corporation ............. 185,125 220,000
----------- -----------
808,383 1,133,563
----------- -----------
INTERNATIONAL TELEPHONE -- 8.40%
12,500 BC TELECOM Inc. ................... 219,420 270,332
7,500 BCE Inc. .......................... 253,670 358,125
17,000 Cable & Wireless plc ADR .......... 352,262 418,625
75,000 CPT Telefonica del Peru Cl. B ..... 168,866 140,408
8 Japan Telecom Co. Ltd.+ ........... 179,248 179,084
10 Nippon Telegraph &
Telephone Corp. ................. 81,575 75,886
7,000 Telecomunicacoes
Brasileiras S.A. (Telebras)
Spons. ADR ...................... 202,793 535,500
10,000 Telefonica de Espana ADR .......... 433,683 692,500
----------- -----------
1,891,517 2,670,460
----------- -----------
SATELLITE COMMUNICATIONS-- 2.47%
22,000 COMSAT Corporation ................ 508,756 541,750
3,000 General Motors
Corporation Cl. H ............... 113,247 168,750
2,000 PanAmSat Corp.+ ................... 55,600 56,000
2,000 TCI Satellite
Entertainment, Inc.+ ............ 23,942 19,750
----------- -----------
701,545 786,250
----------- -----------
TELECOMMUNICATIONS -- 0.88%
10,667 Metromedia International
Group Inc.+........... 124,850 105,337
6,000Tel-Save Holdings, Inc.+ ........ 55,000 174,000
----------- -----------
179,850 279,337
----------- -----------
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) -- December 31, 1996
================================================================================
Principal
Amount Market
or Shares Cost Value
--------- ---- -----
COMMON STOCKS (Continued)
TELECOMMUNICATIONS: LONG DISTANCE--1.53%
50 DDI Corp .......................... $ 401,727 $ 331,029
5,000 Teleport Communications
Group Inc. Cl. A+ ............... 111,412 152,500
----------- -----------
513,139 483,529
----------- -----------
U.S. REGIONAL OPERATORS -- 0.86%
6,000 GTE Corporation ................... 204,050 273,000
----------- -----------
WIRELESS COMMUNICATIONS -- 6.41%
5,000 Advanced Information
Services Ltd .................... 74,683 42,495
5,000 AirTouch Communications,
Inc.+ ........................... 113,900 126,250
10,000 American Mobile Satellite
Corporation+ .................... 135,824 122,500
24,000 American Portable
Telecom, Inc.+ .................. 216,425 195,000
42,500 Centennial Cellular Corp. .........
Cl. A ........................... 650,682 515,313
6,000 Himachal .......................... 52,375 6,750
12,500 NEXTEL Communications,
Inc. Cl. A+ ..................... 159,289 163,281
15,000 Rogers Communications,
Inc. Cl. B+ ..................... 132,750 106,875
175,000 Telecom Italia Mobile SpA ......... 212,713 442,111
3,000 Telephone and Data
Systems, Inc. ................... 118,963 108,750
5,000 Vodafone Group plc ADR ............ 145,705 206,875
----------- -----------
2,013,309 2,036,200
----------- -----------
TOTAL DISTRIBUTION
COMPANIES ....................... 12,189,954 14,470,236
----------- -----------
TOTAL COMMON STOCKS ............... 26,175,824 31,327,463
----------- -----------
CONVERTIBLE CORPORATE BONDS -- 2.54%
CABLE PROGRAMMERS -- 1.63%
$ 500,000 HSN, Inc. Sub. Deb. Cv.
5.875%, 03/01/06 ................ 500,000 520,000
----------- -----------
ENTERTAINMENT -- 0.74%
50,000 Savoy Pictures Entertainment,
Inc. Sub. Deb. Cv.
7.00%, 07/01/03 ................. 40,706 41,000
200,000 Viacom Inc. Sub. Deb. Cv.
8.00%, 07/07/06 ................. 136,249 193,250
----------- -----------
176,955 234,250
----------- -----------
MEDIA -- 0.17%
218,750(a) Havas Sub. Deb. Cv.
3.00%, 12/31/97 ................. 41,629 54,417
----------- -----------
TOTAL CONVERTIBLE
CORPORATE BONDS ................. 718,584 808,667
----------- -----------
CONVERTIBLE PREFERRED STOCKS -- 0.09%
PUBLISHING -- 0.09%
500 Golden Books Family
Entertainment, Inc.
8.75% Cv. Pfd ................... 25,000 28,375
----------- -----------
TOTAL CONVERTIBLE
PREFERRED STOCKS ................ 25,000 28,375
----------- -----------
TOTAL
INVESTMENTS -- 101.21% .......... $26,919,408* 32,164,505
===========
Liabilities, in excess of
Other Assets -- (1.21)% .......... (385,508)
-----------
NET ASSETS -- 100.00%
(2,704,471 shares
outstanding) .................... $31,778,997
===========
Net Asset Value And
Redemption Price Per Share ...... $11.75
===========
- ----------
+ -- Non-income producing security.
ADR -- American Depositary Receipt.
GDR -- Global Depository Receipt.
(a) -- Principal amount denoted in French Francs.
* For Federal income tax purposes:
Aggregate cost ............................ $26,919,408
===========
Gross unrealized appreciation ............. 6,484,493
Gross unrealized depreciation ............. (1,239,396)
-----------
Net unrealized appreciation ............... $ 5,245,097
===========
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, 1996
================================================================================
Assets:
Investments in securities, at value
(Cost $26,919,408) .................................. $ 32,164,505
Cash .................................................. 14,942
Receivable for Fund shares sold ....................... 10,701
Receivable for investments sold ....................... 490,176
Dividends and interest receivable ..................... 53,373
Deferred organizational expenses ...................... 26,583
------------
Total Assets ........................................ 32,760,280
------------
Liabilities:
Payable to Custodian .................................. 177,930
Payable to Advisor .................................... 27,303
Payable for distribution fees ......................... 6,614
Payable for investments purchased ..................... 408,784
Payable for Fund shares redeemed ...................... 51,735
Dividend payable ...................................... 130,898
Other accrued expenses ................................ 178,019
------------
Total Liabilities ................................... 981,283
------------
Net Assets (applicable to 2,704,471
shares outstanding) ............................... $ 31,778,997
============
Net asset value and redemption
price per share ......................... $11.75
======
Net Assets Consist of:
Capital Stock, at par value ........................... $ 2,704
Additional paid-in capital ............................ 26,680,332
Distributions in excess of
net realized gain ....................................... (147,022)
Net unrealized appreciation on
investments and assets and liabilities
denominated in foreign currencies ......................... 5,242,983
------------
Net Assets .......................................... $ 31,778,997
============
Statement of Operations For the Year Ended
December 31, 1996
================================================================================
Investment Income:
Dividends (Net of foreign taxes of $33,830) ................ $ 396,977
Interest ................................................... 75,818
------------
Total income ............................................. 472,795
------------
Expenses:
Investment Advisory fee .................................... 349,604
Transfer and shareholder servicing agent ................... 111,911
Distribution expenses ...................................... 87,392
Custodian fees and expenses ................................ 51,716
Printing and mailing ....................................... 32,991
Legal and audit fees ....................................... 32,424
Registration fees .......................................... 21,929
Amortization of organization expenses ...................... 13,748
Directors' fees ............................................ 5,831
Miscellaneous .............................................. 12,700
------------
Total expenses ........................................... 720,246
------------
Net Investment Loss ............................................ (247,451)
------------
Net Realized and Unrealized Gain on
Investments :
Net realized gain on investments and
foreign currency transactions ................................ 3,431,462
Net change in unrealized appreciation ...................... 850,290
------------
Net gain on investments .................................. 4,281,752
------------
Net increase in net assets resulting from
operations ................................................. $ 4,034,301
============
Statement of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Increase in Net Assets:
Net investment loss .................................. $ (247,451) $ (21,475)
Net realized gain on investments ..................... 3,431,462 894,984
Net change in unrealized appreciation ................ 850,290 3,763,535
------------ ------------
Net increase in net assets resulting from operations 4,034,301 4,637,044
------------ ------------
Distributions from net realized gains ................ (3,479,394) (945,951)
------------ ------------
Share transactions-- net ............................. (214,945) 2,916,457
------------ ------------
Net increase in net assets ......................... 339,962 6,607,550
Net Assets:
Beginning of period .................................. 31,439,035 24,831,485
------------ ------------
End of period ........................................ $ 31,778,997 $ 31,439,035
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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 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.
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,
15
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Notes to Financial Statements (Unaudited) (Continued)
================================================================================
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, 1996, the Fund had sold short the following forward foreign
currency contract:
Settlement Unrealized
Amount/Currency Date Value Loss
--------------- ---------- ----- ----------
5,811,375 Hong Kong Dollar 8/15/97 $750,892 $892
======== ====
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>
Year Ended Year Ended
December 31, 1996 December 31, 1995
---------------------------- ----------------------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold ...................................... 978,249 $ 12,250,079 781,367 $ 8,799,009
Shares issued upon reinvestment of dividends ..... 284,978 3,348,488 77,654 910,107
Shares redeemed .................................. (1,240,740) (15,813,512) (598,521) (6,792,659)
------------ ------------ ------------ ------------
Net share transactions ......................... 22,487 (214,945) 260,500 2,916,457
Reclassification of net investment loss .......... -- (247,451) -- (21,475)
------------ ------------ ------------ ------------
Net increase (decrease) .......................... 22,487 $ (462,396) 260,500 $ 2,894,982
============ ============ ============ ============
</TABLE>
3. Purchases and Sales of Securities. Purchases and sales of securities for the
year ended December 31, 1996, other than U.S. government obligations and
short-term securities, aggregated $16,451,031 and $19,874,407, 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.
16
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Notes to Financial Statements (Unaudited) (Continued)
================================================================================
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'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 year ended December 31, 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 year ended December 31, 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 acquired on
September 30, 1993 are redeemed during the period of amortization of the Fund's
organization expenses, the redemption proceeds will be reduced by any such
unamortized organization expenses in the same proportion as the number of
initial shares being redeemed bears 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 year ended December 31, 1996, the Fund has
incurred distribution costs of $87,392, 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 $418,472, 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 during the
year ended December 31, 1996 of $8,761 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 December 31, (Commencement of Operations)
1996 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 loss ............................... (0.09) (0.01) (0.01)
Net realized and unrealized gain on securities .... 1.56 1.84 0.26
------------ ------------ ------------
Total from investment operations .................. 1.47 1.83 0.25
------------ ------------ ------------
Distributions from net realized gain on investments (1.44) (0.36) --
------------ ------------ ------------
Net asset value, end of period .............................. $ 11.75 $ 11.72 $ 10.25
============ ============ ============
Total Return(a) ................................... 12.5% 17.9% 2.5%
Ratios to average net assets/supplemental data:
Net assets, end of period (in thousands) .......... $ 37,779 $ 31,439 $ 24,831
Ratio of operating expenses to average net assets . 2.06% 2.47% 2.47%(b)
Ratio of net investment loss to average
net assets ................................................ (0.7)% (0.07)% (0.13)%(b)
Portfolio turnover rate ........................... 47% 33 % 14%
Average commission rate per share(c) .............. $ 0.0226 -- --
</TABLE>
(a) Total return is calculated assuming a purchase of shares on the first day
and a sale on the last day of each period reported and includes
reinvestment of distributions. Total return for the period of less than one
year is not annualized.
(b) Annualized.
(c) For the fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate paid per share for
purchases and sales of investment securities.
- --------------------------------------------------------------------------------
Top Ten Holdings
December 31, 1996
-----------------
Viacom Inc. Havas S.A.
Time Warner Inc. Microsoft Corporation
Cablevision Systems Corp. News Corporation Limited
TCI/Liberty Media Group The Providence Journal Company
Telefonica de Espana Pulitzer Publishing Company
- --------------------------------------------------------------------------------
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.
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 Funds constituting Gabelli Global Series Funds, Inc.), as of
December 31, 1996, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended and financial highlights for each of the periods presented.
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 audits 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, 1996 by correspondence with the custodian. 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 audits provide 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, 1996, and the results of its operations, the changes in
its net assets and the financial highlights for the respective stated periods
presented in conformity with generally accepted accounting principles.
/s/Grant Thornton LLP
New York, New York
February 27, 1997
- --------------------------------------------------------------------------------
1996 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the year ended December 31, 1996, the Fund paid to shareholders, on
December 31, 1996, $1.436 per share in long-term capital gains. None of this
distribution qualifies for the dividends received deduction available to
corporations or includes income from U.S. Treasury securities.
- --------------------------------------------------------------------------------
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
Chairman and Chief
Investment Officer
Gabelli Funds, Inc.
Felix J. Christiana
Former Senior
Vice President
Dollar Dry Dock Savings Bank
Anthony J. Colavita
Attorney-at-Law
Anthony J. Colavita, P.C.
John D. Gabelli
Vice President
Gabelli & Company,Inc.
Karl Otto Pohl
Former President
Deutsche Bundesbank
Werner J. Roeder, MD
Director of Surgery
Lawrence Hospital
Anthonie C. van Ekris
Managing Director
BALMAC International, Inc.
Officers and Portfolio Managers
Mario J. Gabelli, CFA
President
Marc J. Gabelli
Portfolio Manager
Ivan Arteaga, CPA
Associate Portfolio Manager
Bruce N. Alpert
Vice President
and Treasurer
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.
- --------------------------------------------------------------------------------
