[PHOTO]
Mario J. Gabelli
The
Gabelli
Global
Convertible
Securities
Fund
ANNUAL REPORT
DECEMBER 31, 1996
<PAGE>
Gabelli Global Series Funds, Inc.
The Gabelli Global
Convertible Securities Fund
Annual Report - December 31, 1996
[PHOTO]
Hart Woodson
INVESTMENT RESULTS (a)
- --------------------------------------------------------------------------------
Quarter
--------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
1996: Net Asset Value ........ $11.34 $11.55 $11.41 $10.18 $10.18
Total Return ........... 5.1% 1.9% (1.2)% (0.3)% 5.5%
- --------------------------------------------------------------------------------
1995: Net Asset Value ........ $10.09 $10.64 $11.05 $10.79 $10.79
Total Return ........... 1.6% 5.5% 3.9% 1.2% 12.6%
- --------------------------------------------------------------------------------
1994: Net Asset Value ........ $10.38 $10.37 $10.64 $ 9.93 $ 9.93
Total Return ........... 3.8%(b) (0.1)% 2.6% (5.2)% 0.9%(b)
- --------------------------------------------------------------------------------
- ----------------------------------------------
Average Annual Returns - December 31, 1996 (a)
- ----------------------------------------------
1 Year ........................ 5.5%
Life of Fund (b) .............. 6.4%
- ----------------------------------------------
Dividend History
- ---------------------------------------------------------
Payment (ex) Date Rate Per Share Reinvestment Price
- ----------------- -------------- ------------------
December 31, 1996 $1.200 $10.18
December 29, 1995 $0.393 $10.79
December 30, 1994 $0.160 $ 9.93
(a) Average annual and total returns reflect changes in share price,
reinvestment of dividends 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 3, 1994.
Note: Investing in foreign securities involves risks not ordinarily associated
with investments in domestic issues, including currency fluctuation, economic
and political risks.
- --------------------------------------------------------------------------------
To Our Shareholders:
In the fourth quarter of 1996, The Gabelli Global Convertible Securities
Fund's share price decreased 0.3% from $11.41 on September 30, 1996, to an
adjusted net asset value of $10.18 on December 31, 1996 which reflects the $1.20
dividend paid on December 31, 1996. The Fund's total return was 5.5% for the
year ended December 31, 1996. Global convertible markets, measured by the
Jefferies Global Convertible Bond Index, returned 3.7% for the fourth quarter
and 12.0% for the year. Since its inception on February 3, 1994 through December
31, 1996, the Fund has achieved a 19.8% total return. This equates to an average
annual return of 6.4%. The Jefferies Index will be discontinued as of December
31, 1996. Consequently, we are considering other global convertible benchmarks
such as the Merrill Lynch Global 300 Convertible Index against which to compare
our Fund's performance
<PAGE>
henceforth. The Merrill Index better represents the capitalization and
geographic distribution of the global convertible universe. The Merrill Index
increased 0.6% in the fourth quarter and 2.7% for the year. Strong gains in most
of the world's equity markets were offset by protracted weakness in Japanese
stocks and continued strength in the U.S. dollar. For 1997, we expect
international markets to outperform the U.S. markets.
Comparison of Change in Value of a $10,000 Investment in the Gabelli Global
Convertible Securities Fund, The Jefferies Global Convertible Index and the
Lipper Analytical Services Convertible Securities Fund Index
[The following table was represented as a line graph in the printed material]
Lipper Analytical Gabelli Global
Convertible Securities Convertible Securities Jefferies Global
Fund Index Fund Convertible Index
---------- ---- -----------------
2/3/94 $10,000 $10,000 $10,000
12/31/94 $ 9,324 $10,090 $ 9,694
12/31/95 $11,262 $11,360 $10,731
12/31/96 $12,940 $11,985* $12,019
* Past performance is not predictive of future performance.
Our Investment Objective
The Fund's objective is to obtain a high rate of total return by investing
in global convertible securities. We expect to achieve an above-average rate of
return by investing primarily in coupon paying convertible securities which meet
our selective investment criteria.
Our Approach
We weigh both country-specific and company-specific factors to make our
investment decisions. Country-specific factors include political stability,
economic growth, inflation and trends in interest rates. With regard to
companies, we seek firms which are undervalued in relation to their long-term
potential value. We then look for some dynamic in the country or company which
can unlock this value. In the case of global telecommunications, the dynamic is
the privatization of state-owned monopolies. In developing countries, it is the
need to provide the infrastructure for growth. In Japan, it is the change from
an industrial to a consumer-oriented economy. In commodities, it is the pick-up
in industrial demand.
What are Global Convertible Securities?
Global convertible securities are bonds, preferred shares and warrants of
domestic or foreign issuers which may be converted into a fixed number of shares
of the underlying company. Convertibles are hybrid securities which combine the
capital appreciation potential of equities with the higher yield of fixed income
instruments. They can be thought of as a straight bond together with an embedded
call option (or warrant) on the underlying equity.
2
<PAGE>
As of January 1997, the total capitalization of the global convertible
market was $375 billion. The market contracted from about $400 billion six
months ago due to the weakness of the yen versus the dollar. The U.S.
convertible market remained effectively flat as redemptions or calls offset new
issue activity. Europe expanded with the help of increased activity from
Germany. Asia continued to show strong growth.
Commentary: 1996 and the Year Ahead
The year ahead may well be challenging for investors, not because of
threatening economic conditions, but rather because of what U.S. Federal Reserve
Chairman Alan Greenspan now so famously depicted as "irrational exuberance". We
see little risk of sharply higher interest rates or recession. Many equity
markets reached record highs in 1996, and valuations appear stretched. This is
most evident in the U.S. market where the S&P 500 Index gained 65 percent over
the last two years, far exceeding its long-term annual average. The dividend
yield, at under 2 percent, is the lowest this century. And the Tobin's Q ratio,
which measures the market value of assets relative to their replacement cost, is
the highest ever recorded. Shrinking supply and strong demand also helped propel
U.S. equity prices higher. Corporate mergers around the world surged 25 percent
last year to $1.04 trillion. Meanwhile, inflows into U.S. equity mutual funds
increased 73 percent to over $220 billion.
As long as these trends continue, financial assets should do well. The
catalyst for a correction could be stronger than expected economic growth, which
would trigger higher interest rates; increased wage rates, which would cool
corporate profit margins; or higher oil prices. In the U.S., we believe 1997
will be a stock picker's market favoring small to mid cap stocks in industries
which are in sustainable long-term earnings uptrends (e.g. aerospace) or
undergoing corporate restructurings.
Internationally, we see particular value in Latin America and Asia
ex-Japan with room for additional gains in Europe. In Latin America, GDP growth
is expected to increase to 4.1% from an estimated 3.3% in 1996. Inflation is
expected to fall from 16.2% to 10.4%. Valuations are not expensive either when
compared to history or other markets (see table below). Sectors we favor include
real estate (e.g. IRSA) and telecommunications (e.g. Nortel).
1997 P/E P/Cash P/BV
-------- ------ ----
Emerging Asia 16.5 10.7 2.4
Latin America 11.9 6.4 0.9
USA 17.4 10.6 3.4
UK 13.9 9.7 2.7
Germany 18.5 7.0 2.5
France 17.4 10.4 1.8
Source: SBC Warburg
3
<PAGE>
In Japan, the only major market to fall last year, we expect 3% GDP
growth in 1997. However, despite record low interest rates, tighter fiscal
policy may dampen a stock market recovery. We favor beneficiaries of the weaker
yen (e.g. Sony) and forthcoming cyclical recovery (e.g. Mori Seiki, Kawasaki
Heavy). In the rest of Asia, we believe interest rates are poised to fall and
that export growth will resume. This will favor property developers (e.g. Sino
Land, Metro Pacific) and financials (e.g.
Metro Bank).
Finally, Europe will continue to enjoy low interest rates in order to
offset the fiscal tightening required to achieve monetary union in 1999. The
move toward corporate restructuring and the concept of unlocking shareholder
value will add a tailwind to European equities.
THE PORTFOLIO
Global Allocation
The chart at the right represents the Fund's holdings by geographic region
on December 31, 1996. The geographic allocation will change based on current
global market conditions. Countries and/or regions represented in the chart and
below may or may not be included in the Fund's future portfolio.
[The following table was represented as a pie graph in the printed material]
HOLDINGS BY GEOGRAPHIC REGION - 12/31/96
Asia/Pacific Rim 28.6%
Europe 15.5%
Japan 10.7%
Latin America 5.8%
Other 4.6%
United States 34.8%
Let's Talk Converts
Finaxa (Sub Deb. Conv. 3.00% 01/01/01) is the holding company for French insurer
Axa S.A. Axa, after its merger with UAP, is the second-largest insurance company
in the world with diversified interests throughout Europe, North America and
Asia. Axa markets life and non-life insurance products under its own name in
Germany, Belgium, Canada, Spain, the U.K., Italy and France. In the U.S., Axa
owns 60.4% of Equitable Cos. Inc., which is the eighth-largest U.S. life insurer
and the parent company of Donaldson Lufkin & Jenrette, a leading integrated
investment bank. Axa's recent 51% acquisition of National Mutual, Australia's
second-largest life insurance company, complements the aggressive Asian
expansion plan that has been set forth by management.
The French Franc denominated bond is an attractive alternative to the
stock. At a price of $122.26 it sells at an 18% premium. At a spread of 35 basis
points over the equivalent maturity French government treasury note, the
convertible has an estimated straight bond value of $114.00, or only a 7%
downside risk from its current price.
Granite Broadcasting Company ($1.938 Conv. Pfd.) is a TV broadcaster which owns
or operates eleven network-affiliated stations. Founded in 1988, the company is
well-diversified both geographically and by affiliation, reaching 8% of U.S. TV
households. The company recently made its largest acquisition in Detroit, which
is the nation's ninth-largest television market. The company's strategy is to
excel in its local
4
<PAGE>
news operations drawing high quality audiences which are attractive to
advertisers. Selling at just over 9.5 times 1997 estimated broadcasting cash
flow of $76 million, we think the stock is about 50% undervalued when compared
to its peers.
With the stock at $10.625, the convertible preferred ($56.50) is an
attractive way to own the common. The low 6.35% premium and long call protection
until December 1998 assures strong upside participation with the common stock.
Meanwhile, the preferred enjoys a 3.45% current yield versus the dividendless
common.
International CableTel Incorporated (7.25% Conv. Sub. Notes Due 4/15/05)
develops and operates cable/telephony systems in the United Kingdom. By
acquiring National Transcommunication Limited, which owns both a TV transmission
network and a phone network, ICTL will be able to bypass fees charged by British
Telecommunications plc for carrying phone calls to and from its telephone
network, thereby improving operating margins.
With the stock at $25.25, the convertible notes ($107.75) have a current
yield of 6.73% versus the dividendless common stock. They offer strong
participation with the stock because of the low 17.6% premium and good call
protection until April 1998.
Metrobank International Finance Ltd. (Deb. Cv. 2.75% 9/10/00) is the
Philippines' biggest and fastest-growing private universal bank. Because of its
dominance, Metrobank is the institution most capable of financing the expanding
Philippine economy. Management's goal for the next five years is to make
Metrobank the biggest and most profitable bank in the Southeast Asian region.
The bank is expected to increase earnings at a compounded annual growth rate of
39% in 1996 to 1998.
The bond, currently trading at $131.00 with a 2.1% yield and a 5.73%
discount gives investors an opportunity to participate in the equity's upside
performance while receiving a 1.55% yield advantage over the common.
Minimum Initial Investment - $1,000
The minimum initial investment will be $1,000 until the Fund has grown to
over $100,000,000 in assets under management, at which time the minimum will
increase to $25,000 for new investors. There is no initial minimum investment
for accounts established through our Automatic Investment Plan. Shares of the
Fund are being offered at no load. Furthermore, The Gabelli Global Convertible
Securities Fund and many of our other Funds are available through the
no-transaction fee programs at many major discount brokerage firms.
5
<PAGE>
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 future for global convertible investing promises to be rewarding. We
appreciate your confidence in our investment abilities and promise to continue
working to find the best investment opportunities in the world.
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 GAGCX. Please call us during the
day for further information.
We thank you for your investment with us and will strive to achieve our
shared investment objective of strong risk-adjusted returns.
Sincerely,
/s/ Hart Woodson
A. Hartswell Woodson, III
Vice President and Portfolio Manager
February 3, 1997
- --------------------------------------------------------------------------------
Top Ten Holdings
December 31, 1996
Tele 2000 S.A. Metro Pacific Capital Ltd.
Liberty Property Trust Michelin France
Finaxa Far Eastern Department Stores Co.
Security Capital Pacific Trust British Airport Authority plc
International CableTel Incorporated Mahindra & Mahindra
- --------------------------------------------------------------------------------
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.
6
<PAGE>
The Gabelli Global Convertible Securities Fund
Portfolio of Investments -- December 31, 1996
================================================================================
Principal Market
Amount Cost Value
------ ---- -----
CONVERTIBLE SECURITIES -- 94.03%
CONVERTIBLE CORPORATE BONDS -- 74.92%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 3.86%
$ 250,000 Mahindra & Mahindra
5.00%, 07/09/01............. $ 250,427 $ 258,750
1,147,500(a) Michelin France Sub. Deb. Cv.
2.50%, 01/01/01............. 227,991 264,451
----------- -----------
478,418 523,201
----------- -----------
BUILDING AND CONSTRUCTION -- 4.05%
250,000 Bacnotan Consolidated Sub.
Deb. Cv.5.50%, 06/21/04..... 246,787 217,500
100,000 New World Infrastructure
Ltd. Sub. Deb. Cv.
5.00%, 07/15/01(e).......... 100,000 118,350
200,000 Tipco Asphalt Co.
2.75%, 09/19/06(e).......... 200,000 211,500
----------- -----------
546,787 547,350
----------- -----------
CABLE -- 1.99%
250,000 International CableTel Incor-
porated Sub. Deb. Cv.
7.25%, 04/15/05(e).......... 251,725 269,375
----------- -----------
CONSUMER PRODUCTS -- 5.62%
150,000 Central Garden and Pet
Company
6.00%, 11/15/03(e).......... 150,000 150,375
20,000,000(b) Matsushita Electric Industrial
Co., Ltd.Sub. Deb. Cv.
1.30%, 03/29/02............. 224,561 206,569
20,000,000(b) Matsushita Electric Work, Ltd.
Sub. Deb. Cv.
2.70%, 05/31/02............. 239,041 200,864
20,000,000(b) Sony Corporation Sub. Deb.
Cv 0.15%, 03/30/01.......... 198,627 202,939
----------- -----------
812,229 760,747
----------- -----------
DIVERSIFIED INDUSTRIAL -- 5.42%
20,000,000(b) Kawasaki Heavy Industries
Ltd. Sub. Deb. Cv. 0.80%,
09/28/01.................... 213,818 183,232
10,000,000(b) Kokusai Electric Co. Ltd.
Sub. Deb. Cv. 1.30%,
09/30/02.................... 110,072 86,863
1,134,000(a) La Rochette Deb. Cv.
5.00%, 01/01/02............. 195,117 195,954
100,000 President Enterprises
Sub. Deb. Cv. Zero Coupon,
07/22/01.................... 112,750 150,750
100,000 PT Eka Gunatama Mandiri
Sub. Deb. Cv. 4.00%,
10/04/97.................... 98,485 116,500
----------- -----------
730,242 733,299
----------- -----------
ENERGY -- 1.17%
100,000 Pennzoil Company Sub.
Deb. Cv. 6.50%, 01/15/03.... 134,332 158,000
----------- -----------
ENTERTAINMENT -- 1.77%
250,000 Speedway Motorsports
5.75% 09/30/03.............. 250,000 238,750
----------- -----------
FINANCIAL SERVICES -- 6.69%
1,328,900(a) Finaxa Sub. Deb. Cv. 3.00%,
01/01/01.................... 284,502 313,054
100,000 Metrobank International
Finance Ltd. Sub. Deb. Cv.
2.75%, 09/10/00............. 100,000 131,000
250,000 Metro Pacific Capital Ltd.
Sub. Deb. Cv. 2.50%,
04/11/03.................... 276,631 266,250
20,000,000(b) Mitsui & Co. Ltd. Sub. Deb.
Cv. 1.50%, 03/31/03......... 216,327 195,160
----------- -----------
877,460 905,464
----------- -----------
HEALTH CARE -- 1.70%
250,000 TheraTx Inc. Sub. Deb. Cv.
8.00%, 02/01/02............. 230,077 229,375
----------- -----------
INDUSTRIAL EQUIPMENT AND
SUPPLIES -- 4.50%
200,000 Alfa S.A. de C.V. Sub. Deb.
Cv. 09/15/00(e)............. 201,139 220,250
200,000 Thermo Electron Corporation
Sub. Deb. Cv. 4.25%,
01/01/03.................... 239,528 235,000
150,000 U.S. Filter Corp. Sub. Deb.
Cv. 4.50%, 12/15/01......... 150,000 153,188
----------- -----------
590,667 608,438
----------- -----------
METALS AND MINING -- 7.47%
200,000 Banpu Public Co., Ltd. Sub.
Deb. Cv. 2.75%, 04/10/03.... 204,657 200,000
300,000 Hoogovens Groep BV Sub.
Deb. Cv. 4.50%, 04/11/01.... 186,306 188,889
150,000 Inco Ltd. Sub. Deb. Cv.
5.75%, 07/01/04............. 164,504 183,188
200,000 Randgold Finance
7.00%, 10/03/01(e).......... 200,000 201,000
250,000 Stillwater Mining Ltd. Sub.
Deb. Cv. 7.00%, 05/01/03.... 250,000 237,500
----------- -----------
1,005,467 1,010,577
----------- -----------
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
The Gabelli Global Convertible Securities Fund
Portfolio of Investments (Continued) -- December 31, 1996
================================================================================
Principal Market
Amount Cost Value
------ ---- -----
CONVERTIBLE CORPORATE BONDS (continued)
PUBLISHING -- 1.55%
$ 250,000 Medya Holding Sub. Deb.
Cv. 10.00% 06/28/01......... $ 249,540 $ 210,000
----------- -----------
REAL ESTATE / DEVELOPMENT -- 10.06%
20,000,000(b) Heiwa Real Estate Sub.
Deb. Cv 2.50%, 03/29/02..... 230,121 181,158
150,000 Hemaraj Land Development
Co. Sub. Deb. Cv. 3.50%,
09/09/03.................... 151,743 152,550
250,000 IRSA 4.500%,
08/02/03(e)................. 250,000 249,063
250,000 Liberty Property Trust Sub.
Deb. Cv. 8.00%, 07/01/01.... 250,000 320,938
100,000 Paliburg International
3.50%, 02/06/01(e).......... 104,870 107,500
200,000 Sino Land Company
5.00%, 02/26/01............. 192,774 214,000
150,000 Tanayong Company Ltd. Sub.
Deb. Cv. 3.50%, 03/01/04.... 122,958 135,000
----------- -----------
1,302,466 1,360,209
----------- -----------
RETAIL -- 5.96%
100,000(c) ASDA Finance Ltd. Sub.
Deb. Cv. 10/21/05........... 155,854 223,118
250,000 Far Eastern Department Stores
Co. Sub. Deb. Cv. 3.00%,
07/06/01.................... 236,472 263,750
100,000 Federated Department Stores
Deb. Cv. 5.00%, 10/01/03.... 100,000 116,375
200,000 Robinson Department Store
Sub. Deb. Cv. 3.25%,
07/27/00.................... 210,538 203,000
----------- -----------
702,864 806,243
----------- -----------
TELECOMMUNICATIONS -- 8.51%
200,000 Scandinavian Broadcasting
System SA Sub. Deb. Cv.
7.25%, 08/01/05............. 212,602 188,000
357,000 Tele 2000 S.A. Sub. Deb. Cv.
9.75%, 04/14/97(e).......... 349,683 358,785
250,000 Tele-Communications Inter-
national, Inc. 4.50%,
02/15/06.................... 250,000 189,063
250,000 Telekom Malaysia Berhad
Sub. Deb. Cv. 4.00%,
10/03/04.................... 243,235 258,375
150,000 Total Access Communications
plc Sub. Deb. Cv. 2.00%,
05/31/06.................... 147,855 157,313
----------- -----------
1,203,375 1,151,536
----------- -----------
Principal
Amount Market
or Shares Cost Value
--------- ---- -----
TRANSPORTATION -- 4.60%
150,000(c) British Airways plc Sub.
Deb. Cv. 5.75%, 03/29/06.... $ 230,640 $ 260,804
$ 100,000 International Container
Terminal Services Sub. Deb.
Cv. 5.00%, 09/15/01......... 81,996 94,500
10,000,000(b) Nippon Yusen Kabushiki
Kaisha Sub. Deb. Cv. 2.00%,
09/29/00.................... 106,121 94,123
150,000 Yang Ming Marine Transport
Sub. Deb. Cv. 2.00%, ....... 154,500 173,250
----------- -----------
573,257 622,677
----------- -----------
TOTAL CONVERTIBLE
CORPORATE BONDS............. 9,938,906 10,135,241
----------- -----------
CONVERTIBLE PREFERRED STOCKS -- 19.11%
BROADCASTING -- 2.09%
2,000 Granite Broadcasting
Company Pfd................. 110,500 113,000
20,000 Triathlon Broadcasting Co. Pfd. 210,000 170,000
----------- -----------
320,500 283,000
----------- -----------
CABLE -- 0.83%
5,500 Cablevision Systems Corpo-
ration Pfd.................. 153,275 112,750
----------- -----------
CHEMICALS -- 0.79%
5,000 Atlantic Richfield Company... 123,750 107,500
----------- -----------
ENERGY -- 1.96%
5,000 Enron Corporation Pfd........ 120,250 120,000
2,500 Valero Energy Corp........... 117,962 144,375
----------- -----------
238,212 264,375
----------- -----------
FINANCIAL SERVICES -- 2.43%
2,500 Ahmanson (H.F.) & Co. Pfd. D. 102,650 174,375
3,000 Banco Comercial Portugues,
SA.......................... 153,150 154,875
----------- -----------
255,800 329,250
----------- -----------
INDUSTRIAL EQUIPMENT & SUPPLIES -- 2.37%
800 Case Corp. Pfd. A............ 105,400 106,928
11,000 Cooper Industries, Inc. 6%,
Cv. Pfd..................... 180,612 213,125
----------- -----------
286,012 320,053
----------- -----------
METALS AND MINING -- 1.66%
10,000 Durban Roodeport Deep,
Ltd. Pfd.................... 90,761 85,507
5,000 Freeport-McMoRan Copper &
Gold Inc. 7% Cv. Pfd........ 141,237 138,750
----------- -----------
231,998 224,257
----------- -----------
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
The Gabelli Global Convertible Securities Fund
Portfolio of Investments (Continued) -- December 31, 1996
================================================================================
Market
Shares Cost Value
------ ---- -----
CONVERTIBLE PREFERRED STOCKS (continued)
REAL ESTATE / DEVELOPMENT -- 2.04%
9,000 Security Capital Pacific Trust
Pfd. Ser. A................. $ 189,439 $ 275,625
----------- -----------
PRINTING & PUBLISHING -- 0.84%
2,000 Golden Books Financial Trust. 100,000 113,500
----------- -----------
TELECOMMUNICATIONS -- 4.10%
3,000 Globalstar Telecommuni-
cations 6.5% Cv. Pfd.(e).... 150,000 167,250
2,000 MFS Communications,
Inc. Pfd.................... 67,000 182,500
5,000 Nortel Inversora SA Pfd...... 210,000 205,000
----------- -----------
427,000 554,750
----------- -----------
TOTAL CONVERTIBLE
PREFERRED STOCKS............ 2,325,986 2,585,060
----------- -----------
COMMON STOCKS -- 2.90%
ADVERTISING -- 0.36%
700 Havas........................ 51,065 49,094
----------- -----------
REAL ESTATE DEVELOPMENT -- 0.78%
19,700 Hemaraj Land Dev Co.......... 98,215 89,860
35,000 Tanayong Co. Ltd............. 51,599 15,351
----------- -----------
149,814 105,211
----------- -----------
SPECIALTY CHEMICALS -- 0.72%
2,500 IMC Global Inc............... 96,062 97,813
----------- -----------
TELECOMMUNICATIONS -- 1.04%
5,000(d) Rogers Cantel Mobile Commun-
ications, Inc. Cl. B........ 51,883 36,830
2,000 Rogers Communications,
Inc. Cl. B.................. 14,225 14,250
13,000 Total Access Communications,
plc......................... 100,100 89,700
----------- -----------
166,208 140,780
----------- -----------
TOTAL COMMON STOCKS.......... 463,149 392,898
----------- -----------
WARRANTS -- 0.68%
DIVERSIFIED INDUSTRIAL -- 0.52%
500 Cosmo Oil Warrants+.......... 81,250 12,750
100 Fujikura Warrants+........... 42,500 36,250
100 Mori Seki Warrants+.......... 60,000 21,250
----------- -----------
183,750 70,250
----------- -----------
ENTERTAINMENT -- 0.16%
50 Shochiku Warrant+............ 53,125 21,250
----------- -----------
TOTAL WARRANTS............... 236,875 91,500
----------- -----------
Principal Market
Amount Cost Value
------ ---- -----
U.S. GOVERNMENT OBLIGATIONS -- 0.74%
$ 100,000 U.S. Treasury Bills, 4.84%
Due 02/13/97................ $ 99,422 $ 99,422
----------- -----------
TOTAL U.S. GOVERNMENT
OBLIGATIONS................. 99,422 99,422
----------- -----------
TOTAL INVESTMENTS
-- 98.35%................... $13,064,338* $13,304,121
===========
Cash and Other Assets,
less Liabilities -- 1.65%... 222,559
-----------
NET ASSETS -- 100.00%
(1,328,923 shares
outstanding)............... $13,526,680
===========
Net Asset Value and
Redemption Price
Per Share................... $10.18
===========
Number of
Contracts Cost Value
--------- ---- -----
PUT OPTIONS
50 S & P 500
January 1997-$740.00 ........ $75,150 $57,500
----------- -----------
TOTAL PUT OPTIONS ........... $75,150 $57,500
=========== ===========
Premiums
Received Value
-------- -----
PUT OPTIONS WRITTEN
50 S & P 500
January 1997-$730.00......... $58,598 $40,000
----------- -----------
TOTAL PUT OPTIONS
WRITTEN..................... $58,598 $40,000
=========== ===========
- ----------
(a) -- Principal amount denoted in French Francs.
(b) -- Principal amount denoted in Japanese Yen.
(c) -- Principal amount denoted in British Pounds.
(d) -- Principal amount denoted in Canadian Dollar.
(e) -- 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, 1996, Rule 144A securities amounted to $1,945,948 or
14.39% of net assets.
+ -- Non-income producing security.
* For Federal Income Tax purposes:
Aggregate cost ...................... $13,064,338
===========
Gross unrealized appreciation ....... $ 965,902
Gross unrealized depreciation ....... (726,119)
-----------
Net unrealized appreciation ......... $ 239,783
===========
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
The Gabelli Global Convertible Securities Fund
Statement of Assets and Liabilities
December 31, 1996
================================================================================
Assets:
Investments in securities, at value
(Cost $13,064,338) ......................................... $ 13,304,121
Options purchased, at value (Cost $75,150) ................... 57,500
Receivable for Fund shares sold .............................. 2,600
Receivable for investments sold .............................. 289,706
Dividends and interest receivable ............................ 157,059
Deferred organizational expenses ............................. 27,127
------------
Total Assets ............................................... 13,838,113
------------
Liabilities:
Payable to Advisor ........................................... 11,863
Payable to Custodian ......................................... 1,264
Payable for distribution fees ................................ 2,624
Payable for Fund shares redeemed ............................. 102,053
Dividends payable ............................................ 96,992
Options written, at value
(Premiums received: $58,598) ............................... 40,000
Other accrued expenses ....................................... 56,637
------------
Total liabilities .......................................... 311,433
------------
Net assets (applicable to 1,328,923
shares outstanding) ...................................... $ 13,526,680
============
Net asset value and redemption
price per share .......................................... $10.18
======
Net Assets Consist of:
Capital Stock, at par value .................................. $ 1,329
Additional paid-in capital ................................... 13,415,496
Distributions in excess of net investment income ............. (235,385)
Accumulated net realized gain on
investments ..................................................... 117,768
Net unrealized appreciation on
investments and assets and liabilities
denominated in foreign currencies ............................... 227,472
------------
Net Assets ................................................. $ 13,526,680
============
Statement of Operations
For the Year Ended December 31, 1996
================================================================================
Income:
Interest (net of foreign taxes of $1,957) ..................... $ 551,207
Dividends (net of foreign taxes of $267) ...................... 164,610
-----------
Total Income ................................................ 715,817
-----------
Expenses:
Investment advisory fees ...................................... 156,876
Transfer and shareholder servicing agent ...................... 61,320
Distribution expenses ......................................... 39,227
Legal and audit fees .......................................... 35,322
Printing and mailing .......................................... 19,788
Amortization of organization expenses ......................... 13,027
Custodian fees and expenses ................................... 12,272
Registration fees ............................................. 11,929
Directors' fees ............................................... 5,831
Miscellaneous ................................................. 12,561
-----------
Total Expenses .............................................. 368,153
-----------
Net investment income ......................................... 347,664
-----------
Net Realized and Unrealized Gain (Loss)
on Investments and Foreign
Currency Transactions:
Net realized gain on investments .............................. 1,105,102
Net change in unrealized appreciation ......................... (606,409)
-----------
Net gain on investments ..................................... 498,693
-----------
Net increase in net assets resulting from
operations .................................................... $ 846,357
===========
Statement of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
------------ ------------
<S> <C> <C>
Increase in Net Assets:
Net Investment Income ........................................ $ 347,664 $ 493,628
Net realized gain (loss) on investments ...................... 1,105,102 (28,739)
Net change in unrealized appreciation ........................ (606,409) 1,630,775
------------ ------------
Net increase in net assets resulting from operations.......... 846,357 2,095,664
------------ ------------
Distributions to shareholders from:
Net investment income ........................................ (347,664) (493,628)
Distributions in excess of net investment income ............. (170,846) (62,592)
Net realized gain ............................................ (928,495) --
------------ ------------
(1,447,005) (556,220)
------------ ------------
Share transactions -- net .................................... (1,614,764) (1,370,857)
------------ ------------
Net increase (decrease) in net assets ...................... (2,215,412) 168,587
Net Assets:
Beginning of period .......................................... 15,742,092 15,573,505
------------ ------------
End of period ................................................ $ 13,526,680 $ 15,742,092
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
The Gabelli Global Convertible Securities Fund
Notes to Financial Statements
================================================================================
1. Significant Accounting Policies. The objective of The Gabelli Global
Convertible Securities Fund (the "Fund") is to obtain a high rate of total
return. 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 3, 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, 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.
11
<PAGE>
The Gabelli Global Convertible Securities Fund
Notes to Financial Statements (Continued)
================================================================================
At December 31, 1996, the Fund had sold short the following forward foreign
currency contracts:
Amount/Currency Settlement Dates Value Unrealized Loss
--------------- ---------------- ---------- ---------------
3,890,750 French Franc 5/30/97; 6/11/97 $ 756,654 $ 7,515
300,000 British Pound 5/30/97 511,800 6,570
---------- ----------
$1,268,454 $ 14,085
========== ==========
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 December 31,
-----------------------------------------------
1996 1995
---------------------- ----------------------
Shares Amount Shares Amount
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Shares sold ........................................... 211,765 $ 2,394,898 464,817 $ 4,735,331
Shares issued upon reinvestment of dividends........... 132,658 1,350,457 48,399 522,244
Shares redeemed ....................................... (474,195) (5,360,119) (623,259) (6,628,434)
-------- ----------- -------- -----------
Net decrease .......................................... (129,772) $(1,614,764) (110,043) $(1,370,859)
======== =========== ======== ===========
</TABLE>
Purchases and Sales of Securities. Purchases and sales of securities for the six
months ended December 31, 1996, other than U.S. government obligations and
short-term securities, aggregated $18,814,544 and $21,027,224, respectively.
Options. The Fund may purchase or write call or put options on securities or
indices. During the year ended December 31, 1996, the Fund utilized put options
to hedge the value of the Fund's portfolio. As a writer of put options, the Fund
receives a premium at the outset and then bears the market risk of unfavorable
changes in the price of the financial instrument underlying the option. The Fund
would incur a loss if the price of the underlying financial instrument decreases
between the date the option is written and the date on which the option is
terminated. The Fund would realize a gain, to the extent of the premiums, if the
price of the financial instrument increases between those dates.
As a purchaser of put options, the Fund pays a premium for the right to sell to
the seller of the put option
12
<PAGE>
The Gabelli Global Convertible Securities Fund
Notes to Financial Statements (Continued)
================================================================================
the underlying security at a specified price. The seller of the put has the
obligation to purchase the underlying security upon exercise at the exercise
price. Transactions in written put options and purchased put options for the
year ended December 31, 1996:
<TABLE>
<CAPTION>
Written Put Options Purchased Put Options
-------------------- --------------------
Number of Number of
Contracts Premium Contracts Premium
--------- ------- --------- -------
<S> <C> <C> <C> <C>
Options outstanding at January 1, 1996 ............. 50 $ 20,099 50 $ 39,525
Options opened ..................................... 910 541,272 980 913,957
Options closed ..................................... (390) (244,341) (520) (501,640)
Options expired .................................... (520) (258,432) (460) (376,692)
---- --------- ---- ---------
Options outstanding at December 31, 1996............ 50 $ 58,598 50 $ 75,150
==== ========= ==== =========
</TABLE>
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 $39,227, 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. of $274,017, 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 $50 to Gabelli & Company, Inc.
13
<PAGE>
The Gabelli Global Convertible Securities Fund
Financial Highlights
================================================================================
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
February 3, 1994
Year Ended December 31, (Commencement of
--------------------- Operations) Through
1996 1995 December 31, 1994
------- ------- -----------------
<S> <C> <C> <C>
Operating Performance:
Net asset value, beginning of period ... $ 10.79 $ 9.93 $ 10.00
------- ------- -------
Net investment income .................. 0.43 0.39 0.16
Net realized and unrealized gain
on securities ........................ 0.16 .86 (0.07)
------- ------- -------
Total from investment operations ....... 0.59 1.25 0.09
------- ------- -------
Less Distributions:
Dividends from net investment income ... (0.43) (0.39) (0.16)
Dividends from net realized gain on
investments .......................... (0.77) -- --
------- ------- -------
Total Distributions .................... (1.20) (0.39) (0.16)
------- ------- -------
Net asset value, end of period ................. $ 10.18 $ 10.79 $ 9.93
======= ======= =======
Total Return(a) ........................ 5.5% 12.6% 0.9%
Ratios to average net assets/supplemental data:
Net assets, end of period (in thousands) $13,527 $15,742 $15,574
Ratio of operating expenses to
average net assets ................... 2.35% 2.41% 2.49%(b)
Ratio of net investment income to
average net assets ................... 2.00% 2.90% 2.80%(b)
Portfolio turnover rate ................ 126% 152% 329%
Average commission rate (c) ............ $0.0175 -- --
</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 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.
14
<PAGE>
The Gabelli Global Convertible Securities Fund
Report of Grant Thornton LLP, Independent Auditors
================================================================================
Shareholders and Board of Directors
The Gabelli Global Convertible Securities Fund
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of The Gabelli Global Convertible
Securities Fund (one of the Funds constituting Gabelli Global Series Funds,
Inc.) as of December 31, 1996, 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 Convertible Securities 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, 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, ordinary income dividends (comprised of net investment income and
short-term capital gains) totaling $0.88 per share and long-term capital gains
totaling $0.32 per share. For the year ended December 31, 1996, 16.30% of the
ordinary income dividends qualifies for the dividends received deduction
available to corporations.
U.S. Government Income:
The percentage of the ordinary income dividends paid by the Fund during 1996
which was derived from U.S. Treasury securities was 1.86%. 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 Convertible Securities Fund did not meet this strict requirement
in 1996. 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.
- --------------------------------------------------------------------------------
15
<PAGE>
The Gabelli Global Series Funds, Inc.
The Gabelli Global Convertible Securities 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
Mario J. Gabelli, CFA
President
Bruce N. Alpert
Vice President and
Treasurer
A. Hartswell Woodson, III
Vice President and
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 Convertible Securities Fund. It is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
- --------------------------------------------------------------------------------
