[Photo of Mario J. Gabelli]
The
Gabelli
Global
Interactive
Couch Potato(R)
Fund
SEMI-ANNUAL REPORT
JUNE 30, 1997
<PAGE>
Gabelli Global Series Funds, Inc.
One Corporate Center
Rye, New York 10580 - 1434
The Gabelli Global Interactive Couch Potato(R) Fund
Semi-Annual Report
June 30, 1997
To Our Shareholders:
In the second quarter of 1997, equities investors concluded that inflation was
just a bad dream after all and that "Captain Greenspan" was bringing the economy
in for another soft landing. Blue chip stocks remained in the limelight, but
smaller stocks participated in the surge. The Dow Jones Industrial Average
(DJIA) gained 17.1%.
Investment Performance (a)
- --------------------------------------------------------------------------------
Quarter
--------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
1997: Net Asset Value .... $11.79 $13.72 -- -- --
Total Return ....... 0.3% 16.4% -- -- --
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%
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%
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)
Average Annual Returns - June 30, 1997 (a)
- ------------------------------------------
1 Year ........................... 14.9%
3 Year ........................... 16.8%
Life of Fund (b) ................. 14.6%
Dividend History
Payment (ex) Date Rate Per Share Reinvestment Price
- ----------------- -------------- ------------------
December 31, 1996 $1.436 $11.75
December 29, 1995 $0.363 $11.72
(a) Total returns and average annual returns reflect changes in share price and
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 7, 1994. Note: Investing in foreign securities involves
risks not ordinarily associated with investments in domestic issues, including
currency fluctuation, economic and political risks.
<PAGE>
- --------------------------------------------------------------------------------
Interactive Couch Potato(R)
Interactive (in' ter ak' tiv) Having the capacity for communication flow in
each direction.*
Couch (kouch) An appellation for the heavy user of
television, depicted in the metaphor as plopped
- - before the television set like a vegetable with
Potato (po ta' to) 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
(pe ta' 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.
- --------------------------------------------------------------------------------
For the second quarter ended June 30, 1997, The Gabelli Global Interactive
Couch Potato(R) Fund's total return was 16.4%. The Lipper Analytical Services
Global Fund Index had a return of 12.2% over the same period. The index is an
unmanaged indicator of stock market performance. The Fund is up 16.8%
year-to-date. The Lipper Global Fund Index rose 12.9% over the same six month
period. Since inception on February 7, 1994 through June 30, 1997, the Fund has
a total return of 58.7%, which equates to an average annual return of 14.6%.
Global Allocation
The chart to the right presents the Fund's holdings by geographic region
as of June 30, 1997. 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.]
United States 70.7%
Europe 13.8%
Asia/
Pacific Rim 6.7%
Canada 6.3%
Latin America 1.9%
Other 0.6%
2
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Equity Mix
As we have indicated in past discussions, the Interactive Couch
Potato's(R) investment premise falls within the context of two main investment
universes: 1) companies involved in creativity, as it relates to the development
of intellectual property rights (copyrights); and 2) companies involved in
distribution, as it relates to the delivery of these copyrights. Additionally,
this includes the broad scope of communications-related services such as basic
voice and data.
[The following table was represented as a pie graph in the printed material.]
Distribution 50.5%
Copyright/Creativity 49.5%
The chart above depicts our equity mix of the copyright/creativity and
distribution companies in our portfolio as of June 30, 1997.
COMMENTARY
Cable Television: One Man's Junk is Bill Gates' Treasure
We have been analyzing the cable television (CATV) stocks for many years.
We've experienced the thrill of victory--the pricing deregulation and rampant
consolidation of the industry in the mid-eighties--and over the last few years,
the agony of defeat--re-regulation and the threat of competition from telcos and
satellite broadcasters. Through it all, we have viewed cable TV as a good
long-term investment. The business has most of the economic and financial
characteristics we favor: an identifiable franchise, high operating margins, and
strong cash flow. We are aware of the negatives: lousy service by new entrants,
high debt, the need for a second round of substantial capital investment to
technologically upgrade systems, and the prospect for increased competition.
However, we remain confident that the value of all those connections to American
homes will ultimately be recognized.
Cablevision Systems Corporation (CVC - $53.50 - ASE) best illustrates the
recent trials and tribulations of cable television operators and investors. A
great growth company in the 1980s, Cablevision built a terrific franchise in the
New York metropolitan area. They were also early to recognize the potential of
cable networks and programming by investing in American Movie Classics, Bravo,
eight regional sports networks, and 50% of MSG (Madison Square Garden, the NY
Knicks and the NY Rangers). In the process, they leveraged the company to the
hilt and were as vulnerable as anyone to potential competition from News
Corporation Limited (NWS - $19.25 - NYSE) Chairman
3
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Rupert Murdoch's plan for a national satellite broadcast system--labeled
by Wall Street as the "Death Star" for the CATV industry. In the last year,
Cablevision stock fell from the mid $50's to a low of $25 per share.
Then, things got interesting. Murdoch's Death Star was grounded.
Recognizing cable television lines were likely to continue to be the speediest
data transmission highway into the home, Microsoft Corporation's (MSFT -
$126.375 - NASDAQ) Bill Gates invested $1 billion in Comcast Corporation (CMCSA
- - $20.9375 - NASDAQ), instantly ratcheting up the value of every cable
television link in the country. Cablevision moved quickly to further consolidate
its system by swapping 33% of its stock to Tele-Communications, Inc. (TCOMA -
$14.875 - NASDAQ) in return for an additional 820,000 subscribers in the New
York metropolitan area. It then closed on the remaining 50% of MSG from its
partner ITT Corporation (ITT - $61.0625 - NYSE). Finally, in a particularly deft
move, Cablevision sold 40% of its Rainbow cable network and programming unit to
News Corp's Fox unit for $850 million, bolstering both its network/programming
assets through a planned national sports network with its new partners and its
debt heavy balance sheet. Cablevision's stock went from deep in Wall Street's
doghouse to the penthouse almost overnight. We expect a lot more from
Cablevision.
Although a much more diversified media company, Time Warner Inc. (TWX -
$48.25 - NYSE) stock has been stuck in the mud due to its substantial cable
television operations. Chairman Gerald Levin has been pressured by Wall Street
and several large institutional and corporate shareholders to reduce the
company's exposure to the business by off-loading cable systems to US West Media
Group (UMG - $20.25 - NYSE) in return for its minority stake in Time Warner
Entertainment. Believing Levin would be forced to throw in the towel on cable,
US West Media Group held out for a higher price (more cable subscribers) than
Levin was willing to part with. Perhaps US West Media has outfoxed itself. With
the escalating value of its assets, Time Warner is now in the driver's seat in
negotiating a deal. We believe Time Warner will eventually reduce its exposure
to cable and focus more on its programming and publishing assets. When they pull
the trigger on cable, they will get a much better price.
We believe the current "Let's Make a Deal" market may run as long as the
popular game show. There is tremendous liquidity in the financial system. With
modest top line revenue growth, minimal pricing flexibility, and limits to
further margin expansion through cost cutting and productivity gains, the
ability of many companies to grow earnings from existing operations is
restrained. The answer for many will be to grow via acquisitions. This will not
take the form of the re-conglomeratization of American business. Instead, we
will see larger companies buying smaller niche companies to complement their
existing businesses. This feeds nicely into our focus on smaller niche
franchises and we expect to be bidding a fond farewell to additional portfolio
holdings in the years ahead. We identified the "urge to consolidate" in previous
reports to you. We have announced and heralded this Third Wave of Mergers in all
of our letters to you since General Electric Company (GE - $65.375 - NYSE)
attempted a hostile takeover of Kemper in February 1994. A reduction in
long-term capital gains rates will fan the flames of an already raging fire.
4
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Let's Talk Stocks
The following are stock specifics on selected holdings of our Fund.
Favorable earnings 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 - $53.50 - ASE), based in Woodbury, NY, is
a major cable TV operator serving 2.9 million subscribers, including managed
systems. CVC's cable systems generate average monthly subscriber revenues among
the highest in the industry. CVC is purchasing ITT's 50% stake in MSG (Madison
Square Garden) Properties for $500 million cash, plus options that bring the
transaction's value to almost $690 million. Cablevision intends to use the
proceeds from the sale of a 40% stake in Rainbow Sports to a News Corp./TCI
joint venture to pay down a significant portion of MSG's debt. With its upgraded
cable systems, CVC is well-positioned to offer telephony, high speed data and
enhanced video services. We believe Cablevision's PMV is about $90 per share.
Cable & Wireless plc (CWP - $27.9375 - NYSE) is a United Kingdom-based company
comprised of broad global telecommunications interests. CWP has finalized plans
to merge its U.K. operations with Nynex CableComms Group plc and Bell Cable
Media plc, bolstering its presence in the increasingly competitive U.K.
communications market. The company now owns 53% of a new, publicly-traded U.K.
based company, Cable & Wireless Communications plc, which owns 100% of Mercury
Communications, the second largest provider of telecom services in Britain, and
a majority of Bell Cable Media, Nynex CableComms and Videotron Holdings plc.
Hong Kong Telecommunications Ltd. (HKT - $23.375 - NYSE), the dominant telecom
service provider in Hong Kong and 58% owned by CWP, remains the "crown jewel" of
the CWP portfolio and represents approximately $20 per CWP share. Deducting
CWP's interest in Hong Kong Telecom at its public market value, we are paying
about three times the EBITDA of CWP's other assets. CWP is attractive based on
its high rate of growth and reasonable stock market valuation.
GC Companies, Inc. (GCX - $46.00 - NYSE) is the outcome of the December 1993
spin-off of Harcourt General Inc.'s (H - $47.625 -NYSE) movie theater business
(General Cinema) in a tax-free distribution to shareholders. The result was a
pure theatrical motion picture exhibitor with 7.8 million shares outstanding, a
strong balance sheet with about $90 million in cash, and a proven wealthbuilder,
Chairman Richard Smith, owning 29% of the stock. GC is viewed as an attractive
investment on two fronts. As a pure, basic film exhibition business, it offers
high returns on investment. The critical mass of GC's theater chain increases
its bargaining power with film suppliers. The company optimizes its site
capacity by using more efficient multiplex designs.
Havas (Sub. Deb. Cv. 3.00%, 12/31/97; HAVSY - $18.034 - 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+, a 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.
5
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HSN, Inc. (HSNI - $31.25 - NYSE) is the new name for the surviving company
comprised of Silver King Communications, Home Shopping Network and Savoy
Pictures Entertainment. The combined companies are guided by a new board,
chaired by Barry Diller. In May, HSN, Inc. announced plans to acquire the 47.5%
interest in Ticketmaster Group Inc. (TKTM - $16.625 - NASDAQ) held by Paul Allen
(a co-founder of Microsoft Corporation) in a stock-to-stock transaction. Allen
would thereby receive shares representing about 11% of HSNI's equity.
News Corporation Limited (NWS - $19.25 - 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 operating mainly in the United States, United Kingdom, Australia and
the Pacific Rim. In the Asia/Pacific region, 64% owned Star-Television holds
considerable promise. News Corp.'s Fox Kids Worldwide agreed to buy
International Family Entertainment, Inc. (FAM - $34.375 - NYSE), which owns the
Family Channel.
Tele-Communications, Inc./Liberty Media Group (LBTYA - $23.75 - 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 Inc. (TWX -
$48.25 -NYSE), the world's largest media company. Liberty Media, News
Corporation Limited (NWS - $19.25 - NYSE), and Tele-Communications
International, Inc. (TINTA - $15.4375 - 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 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.
Telefonica de Espana (TEF - $86.25 - 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 telecommunication operations in the region. Its
portfolio of publicly-traded Latin American companies includes: Compania de
Telecomunicaciones de Chile S.A., Telefonica de Argentina S.A. and Compania
Peruana de Telefonos SA. TEF also holds interests in non-public Latin American
telecom operations 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. TEF jump-started this effort with its decision to form a
global alliance with British Telecom/MCI's Concert plc, which is gaining
momentum in the race to become the dominant provider of one-stop shopping for
full-service, global telecommunications products.
6
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Time Warner Inc. (TWX - $48.25 - NYSE), having completed its acquisition of
Turner Broadcasting in the fourth quarter of 1996, is the world's largest
diversified media and publishing company. The combined companies have more than
$23 billion in revenues and over $4.5 billion in EBITDA. Together they control a
host of powerful media brands, such as CNN, Warner Brothers film, HBO, Cinemax
and Time and People magazines. Under the leadership of Chairman Gerald Levin and
Vice-Chairman Ted Turner, Time Warner is now focused on reducing its almost $13
billion in debt and simplifying its capital structure. Achievement of both goals
would be greatly aided by a successful restructuring of the Time Warner
Entertainment partnership with U.S. West Media Group (UMG - $20.25 - NYSE).
Viacom Inc. (VIA - $29.4375 - ASE; VIA'B - $30.00 - 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. (TCOMA - $14.875 - NASDAQ) which reduced Viacom's debt
by $1.7 billion and the number of common shares outstanding by about 4%. Its
radio group, Evergreen Media, is being sold for $1.1 billion in cash. 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.
Additionally, The Gabelli Global Interactive Couch Potato(R) Fund and other
Gabelli 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, IRAs, 401(k)s, quarterly reports, closing prices and other
current news. You can send us e-mail at [email protected].
In Conclusion
The strength of the market is understandable considering today's favorable
economic/earnings/ interest rate backdrop and the enormous amount of money being
poured into equities mutual funds. Although high by historical standards,
current equities valuations may be justified as long as these "best of all
possible worlds" market conditions can be sustained. If something happens to
disrupt this comfortable scenario--our best guess is it may come in the form of
more widespread earnings
7
<PAGE>
disappointments as the slowing economy begins to impact corporate
profitability--the market could run into some trouble.
We are encouraged by the broadening of this bull market and some evidence
that investors are once again focusing on fundamental value instead of just
momentum. Stock pickers across the land rejoice! Ongoing merger and acquisition
activity should continue to provide a tailwind for our portfolio.
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
business day for further information.
As always, we thank you for your confidence in our investment abilities
and will work hard to preserve and enhance the assets you have entrusted to us.
Sincerely,
/s/ Marc J. Gabelli /s/ Ivan Arteaga
Marc J. Gabelli Ivan Arteaga, CPA
Portfolio Manager Associate Portfolio Manager
August 1, 1997
- --------------------------------------------------------------------------------
Top Ten Holdings
June 30, 1997
-------------
Cablevision Systems Corporation Telefonica de Espana
HSN, Inc. GC Companies, Inc.
TCI/Liberty Media Group Cable & Wireless plc
Time Warner Inc. Havas
Viacom Inc. News Corporation Limited
- --------------------------------------------------------------------------------
NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period of this report as stated on the cover. The
manager's views are subject to change at any time based on market and other
conditions.
8
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The Gabelli Global Interactive Couch Potato(R) Fund
Portfolio of Investments -- June 30, 1997 (Unaudited)
================================================================================
Market
Shares Value
------ -----
COMMON STOCKS -- 95.80%
BROADCASTING -- 8.73%
35,000 Ackerley Group, Inc........................... $ 393,750
2,000 BHC Communications, Inc., Cl. A+.............. 239,250
4,635 Chris Craft Industries, Inc.+................. 223,639
2,000 Fisher Companies Inc.......................... 260,000
40,000 Flextech plc+................................. 427,981
25,000 Jacor Communications Inc. - Warrants+......... 87,500
5,000 LIN Television Corporation+................... 220,625
250 Nippon Television Broadcasting................ 100,367
45,000 Paxson Communications Corporation+............ 573,750
50,000 Television Broadcasting Ltd................... 224,603
5,000 Tokyo Broadcasting System..................... 102,548
-----------
2,854,013
-----------
BUSINESS SERVICES -- 1.41%
8,000 Berlitz International, Inc.+.................. 199,500
20,000 Trans-Lux Corporation*........................ 262,500
-----------
462,000
-----------
CABLE DISTRIBUTION -- 11.72%
41,000 Cablevision Systems Corporation, Cl. A+....... 2,213,999
25,000 Comcast Corporation, Cl. A.................... 523,438
3,474 Comcast Corporation, Special Cl. A............ 74,257
25,000 Tele-Communications, Inc., Cl. A.............. 371,875
25,000 Tele-Communications International, Inc., Cl. A 385,938
25,000 United International Holdings, Inc., Cl. A+... 259,375
-----------
3,828,882
-----------
CABLE PROGRAMMERS -- 9.43%
12,500 BET Holdings, Inc.+........................... 409,375
5,000 Canal+, Sponsored ADR......................... 194,858
15,000 Gaylord Entertainment Company................. 345,938
18,125 International Family Entertainment, Inc.+..... 623,047
35,000 Mediaset SpA.................................. 148,807
5,000 NTL Inc.+..................................... 124,375
52,000 Tele-Communications, Inc. / Liberty Media
Group, Cl. A+ .............................. 1,234,999
-----------
3,081,399
-----------
COMMUNICATIONS EQUIPMENT -- 2.50%
2,200 Ericsson (L.M.) Telephone Company ADR......... 86,625
7,000 Lucent Technologies Inc....................... 504,438
2,500 Northern Telecom Limited...................... 227,500
-----------
818,563
-----------
COMPUTER SOFTWARE AND SERVICES -- 2.39%
5,000 Microsoft Corporation+........................ 631,875
10,000 Netcom On-Line Communication
Services Inc. .............................. 147,500
-----------
779,375
-----------
CONSUMER SERVICES -- 1.91%
20,000 HSN, Inc.+.................................... 625,000
-----------
ENTERTAINMENT -- 3.53%
10,001 All American Communications Inc.+............. 151,260
10,000 All American Communications Inc., Cl. B+...... 121,250
35,332 Ascent Entertainment Group Inc.+.............. 322,404
766 Autotote Corporation, Cl. A+.................. 910
12,000 EMI Group plc ADR............................. 217,500
118,000 Shaw Brothers Ltd............................. 132,516
30,000 Spelling Entertainment Group Inc.............. 206,250
-----------
1,152,090
-----------
ENTERTAINMENT DISTRIBUTION -- 2.24%
16,000 GC Companies, Inc.+........................... 732,000
-----------
GAMING -- 1.34%
20,000 Aztar Corporation+............................ 141,250
2,500 Churchill Downs Incorporated.................. 100,000
50,000 Ladbroke Group plc............................ 195,520
-----------
436,770
-----------
GLOBAL MEDIA AND ENTERTAINMENT -- 12.82%
35,000 Havas ADR.................................... 631,179
30,000 News Corporation Limited ADR.................. 577,500
6,000 News Corporation Limited Preference
Shares ADR.................................. 93,750
1,500 PolyGram NV ADR............................... 80,719
15,000 Seagram Company Ltd........................... 603,750
1,200 Sony Corporation ADR.......................... 105,600
25,000 Time Warner Inc............................... 1,206,249
25,000 Viacom Inc., Cl. A+........................... 742,187
5,000 Viacom Inc., Cl. B+........................... 150,005
-----------
4,190,939
-----------
INTERNATIONAL TELEPHONE -- 10.40%
18,000 BC TELECOM Inc................................ 422,303
20,000 BCE Inc....................................... 560,000
25,000 Cable & Wireless plc ADR...................... 698,438
8 Japan Telecom Company, Ltd.+.................. 153,517
10 Nippon Telegraph & Telephone Corp............. 96,003
4,000 Telecomunicacoes Brasileiras SA
(Telebras) Sponsored ADR.................... 607,000
10,000 Telefonica de Espana ADR...................... 862,499
-----------
3,399,760
-----------
PUBLISHING -- 14.61%
20,000 American Media Inc., Cl. A+................... 140,000
30,000 Arnoldo Mondadori Editore SpA................. 173,600
3,500 Central Newspapers, Inc., Cl. A............... 250,688
3,000 E. W. Scripps Company......................... 124,875
300 Filipacchi Medias............................. 63,633
10,000 Golden Books Family Entertainment, Inc.+...... 125,000
5,000 Houghton Mifflin Company...................... 333,750
37,501 Independent Newspapers Ltd.................... 218,876
6,000 Knight-Ridder, Inc............................ 294,375
10,000 Lee Enterprises, Incorporated................. 263,750
The accompanying notes are an integral part of the financial statements.
9
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The Gabelli Global Interactive Couch Potato(R) Fund
Portfolio of Investments (Continued) -- June 30, 1997 (Unaudited)
================================================================================
Market
Shares Value
------ -----
10,500 McGraw-Hill Companies, Inc.................... $ 617,531
5,000 Media General, Inc., Cl. A.................... 200,000
12,000 Meredith Corporation.......................... 348,000
50,000 Nation Multimedia Group plc................... 111,562
5,000 New York Times Company, Cl. A................. 247,500
12,000 Pulitzer Publishing Company................... 635,999
200,000 South China Morning Post Holdings............. 196,205
3,500 Times Mirror Company, Cl. A................... 193,375
10,000 United Newspapers plc ADR..................... 233,750
-----------
4,772,469
-----------
SATELLITE -- 2.42%
15,000 COMSAT Corporation............................ 357,188
7,500 General Motors Corporation, Cl. H............. 433,125
-----------
790,313
-----------
TELECOMMUNICATIONS -- 4.36%
50 DDI Corp...................................... 369,174
30,000 Frontier Corporation.......................... 598,125
6,000 GTE Corporation............................... 263,250
10,000 Rogers Communications, Inc., Cl. B............ 62,636
2,500 Sprint Corporation............................ 131,563
-----------
1,424,748
-----------
WIRELESS COMMUNICATIONS -- 5.99%
17,500 Aerial Communications Inc.+................... 148,750
22,500 AirTouch Communications Inc.+................. 615,937
30,000 Centennial Cellular Corp., Cl. A+............. 476,249
6,000 Himachal Futuristic(b)........................ 9,046
12,500 NEXTEL Communications, Inc., Cl. A............ 236,719
6,000 Telephone and Data Systems, Inc............... 228,000
5,000 Vodafone Group plc ADR........................ 242,188
-----------
1,956,889
-----------
TOTAL COMMON STOCKS........................... 31,305,210
-----------
CONVERTIBLE PREFERRED STOCKS -- 0.09%
PUBLISHING -- 0.09%
500 Golden Books Family Entertainment, Inc.
8.75% Cv. Pfd. (b).......................... 30,688
-----------
TOTAL CONVERTIBLE
PREFERRED STOCKS............................ 30,688
-----------
PREFERRED STOCKS -- 0.05%
COMMUNICATIONS EQUIPMENT -- 0.05%
200 Nokia Group AB Preference..................... 14,750
-----------
TOTAL PREFERRED STOCKS........................ 14,750
-----------
Principal
Amount
------
CONVERTIBLE CORPORATE BONDS -- 2.81%
CONSUMER SERVICES -- 1.94%
$ 500,000 HSN, Inc. Sub. Deb. Cv.
5.875%, 03/01/06(b)......................... 635,000
-----------
ENTERTAINMENT -- 0.72%
50,000 Savoy Pictures Entertainment, Inc.
7.00%, 07/01/03............................. 43,000
200,000 Viacom Inc. Sub. Deb. Cv.
8.00%, 07/07/06............................. 193,500
-----------
236,500
-----------
GLOBAL MEDIA AND ENTERTAINMENT -- 0.15%
218,750 Havas Sub. Deb. Cv.
3.00%, 12/31/97(a).......................... 47,999
-----------
TOTAL CONVERTIBLE
CORPORATE BONDS............................. 919,499
-----------
U.S. GOVERNMENT OBLIGATIONS -- 0.67%
220,000 U.S. Treasury Bills, 4.50% to 4.65%,
Due 07/03/97 to 07/24/97.................... 219,619
-----------
TOTAL U.S. GOVERNMENT
OBLIGATIONS................................. 219,619
-----------
TOTAL INVESTMENTS -- 99.42%
(Cost -- $23,959,915)....................... 32,489,766
-----------
Cash and Other Assets, in excess of
Liabilities -- 0.58%....................... 188,191
-----------
NET ASSETS -- 100.00%
(2,381,344 shares outstanding)............... $32,677,957
===========
Net Asset Value And
Redemption Price
Per Share................................... $13.72
===========
- ----------
(a) -- Principal amount denoted in French Francs.
(b) -- Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30,
1997, Rule 144A securities amounted to $674,734 or 2.1% of net assets.
* -- Security considered an affiliated holding because the Advisor owns more
than 5% of the outstanding shares.
+ -- Non-income producing security.
ADR -- American Depositary Receipt.
For Federal income tax purposes:
Aggregate cost................ $23,959,915
===========
Gross unrealized appreciation. $ 8,883,408
Gross unrealized depreciation. (353,557)
-----------
Net unrealized appreciation... $ 8,529,851
===========
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Statement of Assets and Liabilities
June 30, 1997 (Unaudited)
================================================================================
Assets:
Investments in securities, at value
(Cost $23,959,915) .................................... $ 32,489,766
Cash ................................................... 214,232
Receivable for Fund shares sold ........................ 133,288
Receivable for investments sold ........................ 676,122
Dividends and interest receivable ...................... 87,447
Deferred organizational expenses ....................... 32,581
------------
Total Assets ......................................... 33,633,436
------------
Liabilities:
Payable to Advisor ..................................... 26,323
Payable to Custodian ................................... 110,689
Payable for distribution fees .......................... 12,884
Payable for investments purchased ...................... 531,129
Payable for Fund shares redeemed ....................... 69,874
Dividend and interest payable .......................... 1,137
Other accrued expenses ................................. 203,443
------------
Total Liabilities .................................... 955,479
------------
Net Assets (applicable to 2,381,344
shares outstanding) .................................. $ 32,677,957
============
Net asset value and redemption
price per share .................................... $ 13.72
============
Net Assets Consist of:
Capital Stock, at par value ............................ $ 2,381
Additional paid-in capital ............................. 22,819,887
Accumulated net investment loss ........................ (128,264)
Accumulated net realized gain on
investments and foreign currency
transactions ......................................... 1,446,207
Net unrealized appreciation on
investments and assets and liabilities
denominated in foreign currencies .................... 8,537,746
------------
Net Assets ........................................... $ 32,677,957
============
Statement of Operations
For the Six Months Ended June 30, 1997 (Unaudited)
================================================================================
Investment Income:
Dividends (net of foreign taxes of $21,179) .............. $ 171,512
Interest ................................................. 29,174
-----------
Total Investment Income ................................ 200,686
-----------
Expenses:
Investment advisory fee .................................. 151,885
Transfer and shareholder servicing agent ................. 55,661
Distribution expenses .................................... 37,964
Interest expenses ........................................ 29,533
Legal and audit fees ..................................... 15,582
Printing and mailing ..................................... 10,754
Custodian fees and expenses .............................. 9,200
Amortization of organization expenses .................... 7,750
Registration fees ........................................ 5,132
Directors' fees and expenses ............................. 2,917
Miscellaneous ............................................ 2,572
-----------
Total expenses ......................................... 328,950
-----------
Net Investment Loss ......................................... (128,264)
-----------
Net Realized and Unrealized Gain on
Investments and Foreign Currency
Transactions:
Net realized gain on investments and
foreign currency transactions .......................... 1,593,229
Net change in unrealized appreciation .................... 3,294,763
-----------
Net gain on investments ................................ 4,887,992
-----------
Net increase in net assets resulting from
operations ............................................... $ 4,759,728
===========
Statement of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997 Year Ended
(Unaudited) December 31, 1996
------------- -----------------
<S> <C> <C>
Increase in Net Assets:
Net investment loss .............................................. $ (128,264) $ (247,451)
Net realized gain on investments and foreign currency transactions 1,593,229 3,431,462
Net change in unrealized appreciation ............................ 3,294,763 850,290
------------ ------------
Net increase in net assets resulting from operations ........... 4,759,728 4,034,301
------------ ------------
Distributions to shareholders from:
Net realized gains ............................................... -- (3,479,394)
------------ ------------
Share transactions -- net ........................................ (3,860,768) (214,945)
------------ ------------
Net increase in net assets ..................................... 898,960 339,962
Net Assets:
Beginning of period .............................................. 31,778,997 31,439,035
------------ ------------
End of period .................................................... $ 32,677,957 $ 31,778,997
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Notes to Financial Statements (Unaudited)
================================================================================
1. Significant Accounting Policies. The primary investment objective of The
Gabelli Global Interactive Couch Potato(R) Fund (the "Fund") is capital
appreciation. The Fund is a series of Gabelli Global Series Funds, Inc. (the
"Corporation"), incorporated in Maryland on July 16, 1993. The Fund is a
no-load, open-end, non-diversified management investment company and one of five
separately managed portfolios of the Corporation. The Fund commenced investment
operations on February 7, 1994. The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Security Valuation. Portfolio securities listed or traded on a nationally
recognized securities exchange, 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. If no sales of such options have taken place
that day, they will be valued at the mean between their closing bid and asked
prices.
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 credit guidelines established by the Directors. Under the terms of a
typical repurchase agreement, the Fund takes possession of an underlying debt
obligation subject to an obligation of the seller to repurchase, and the Fund to
resell, the obligation at an agreed-upon price and time, thereby determining the
yield during the Fund's holding period. 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. 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.
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, in the opinion of management, they are economically appropriate to the
reduction of risks involved in the management of the Fund. Upon entering into a
futures contract, the Fund is required to deposit with the broker an amount of
cash or cash equivalents equal to a certain percentage of the contract amount.
This is known as the "initial margin". Subsequent payments ("variation margin")
are made or received by the
12
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Notes to Financial Statements (Unaudited) (Continued)
================================================================================
Fund each day, depending on the daily fluctuation of the value of the contract.
The daily changes in value are recorded as unrealized gains or losses. The Fund
recognizes a realized gain or loss when the contract is closed. During the six
months ended June 30, 1997, the Fund did not have any outstanding futures
contracts.
Foreign Currency Transactions. The books and records of the Fund are maintained
in U.S. dollars as follows:
(i) market value of investment securities and other assets and
liabilities are recorded at the exchange rate on the valuation date.
(ii) purchases and sales of investment securities, income and expenses
are recorded at the exchange rate prevailing on the respective date
of such transactions.
Forward Foreign Currency Contracts. The Fund may engage in forward foreign
exchange contracts for hedging a specific transaction with respect to either the
currency in which the transaction is denominated or another currency as deemed
appropriate by the Advisor. Forward foreign currency contracts are valued at the
forward rate and are marked-to-market daily. The change in market value is
recorded by the Fund as an unrealized gain or loss. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed.
The use of forward foreign currency contracts does not eliminate fluctuations in
the underlying prices of the Fund's portfolio securities, but it does establish
a rate of exchange that can be achieved in the future. Although forward foreign
currency contracts limit the risk of loss due to a decline in the value of the
hedged currency, they also limit any potential gain that might result should the
value of the currency increase. In addition, the Fund could be exposed to risks
if the counterparties to the contracts are unable to meet the terms of their
contracts.
At June 30, 1997, the Fund had the following foreign currency contracts open:
Settlement Unrealized
Amount Currency Date Value Gain
- ---------- ------- --------- --------- ----------
93,635 Bought Canadian Dollar 7/1/97 $ 67,802 $ 49
93,400 Bought Canadian Dollar 7/2/97 67,632 49
13,800 Sold French Franc 7/1/97 2,362 5
1,919,463 Sold French Franc 7/7/97 326,495 724
5,811,375 Sold Hong Kong Dollar 7/1/97 326,495 222
-------- ------
$790,786 $1,049
======== ======
Securities Transactions and Investment Income. Securities transactions are
accounted for on the trade date, with realized gain or loss on investments
determined using specific identification as the cost method. Interest income
(including amortization of premium and accretion of discount) is recorded as
earned. Dividend income and dividend and capital gain distributions to
shareholders are recorded on the ex-dividend date.
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders are recorded on the ex-dividend date. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund, timing differences and
differing characterization of distributions made by the Fund.
13
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Notes to Financial Statements (Unaudited) (Continued)
================================================================================
Provision for Income Taxes. The Fund has qualified and intends to continue to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. As a result, a Federal income tax provision is
not 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 the value of more than 50%
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. Investment Advisory Agreement. The Fund has entered into an investment
advisory agreement (the "Advisory Agreement") with the Advisor which provides
that the Fund will pay the Advisor a fee, computed daily and paid monthly, at
the annual rate of 1.00 percent of the value of the Fund's average daily net
assets. In accordance with the Advisory Agreement, the Advisor provides a
continuous investment program for the Fund's portfolio, oversees the
administration of all aspects of the Fund's business and affairs, and pays the
compensation of all Officers and Directors of the Fund who are its affiliates.
The Advisor is obligated to reimburse the Fund in the event the Fund's expenses
exceed the most restrictive expense ratio limitation imposed by any state,
currently believed to be 2.5% of the first $30 million of the Fund's average
daily net assets (excluding taxes, interest, distribution expenses and
extraordinary items). No such reimbursement was required during the six months
ended June 30, 1997.
3. 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.
4. Distribution Plan. The Fund has adopted a distribution plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Pursuant to
this Plan, the Fund reimburses the Distributor, Gabelli & Company, Inc.
("Gabelli & Company"), an indirect wholly-owned subsidiary of the Advisor, for
expenses incurred by the Distributor in connection with the distribution and
activities primarily intended to result in the sale of shares of the Fund. The
distribution expenses are reimbursed at an annual rate up to 0.25 percent of the
value of the Fund's average daily net assets which accrue daily and are paid
monthly. For the six months ended June 30, 1997, the Fund incurred distribution
costs of $37,964, or 0.25% of average net assets. The Board of Directors
approved that distribution costs incurred by Gabelli & Company totaling
$397,413, which are in excess of the 0.25% limitation, may be recovered from the
Fund in future periods.
5. Portfolio Securities. Purchases and sales of securities for the six months
ended June 30, 1997, other than U.S. government obligations and short-term
securities, aggregated $8,103,073 and $13,476,869, respectively.
6. Transactions with Affiliates. During the six months ended June 30, 1997, the
Fund paid brokerage commissions of $11,170 to Gabelli & Company and its
affiliates.
14
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Notes to Financial Statements (Unaudited) (Continued)
================================================================================
7. Bank Loan. The Fund has access to an unsecured line of credit from the
Custodian for temporary purposes. Borrowings under this arrangement bear
interest at 0.75% above the Federal Funds rate on outstanding balances. There
was no outstanding loan as of June 30, 1997.
The average amount of borrowings outstanding during the six months ended June
30, 1997 was $353,409, with a related weighted average interest rate of 6.26%.
The maximum amount borrowed at any time during the six months ended June 30,
1997 was $700,000.
8. Capital Stock Transactions. Transactions in shares of common stock were as
follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1997 December 31, 1996
------------------------------ -------------------------------
Shares Amount Shares Amount
-------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Shares sold ................................ 275,025 $ 3,482,440 978,249 $ 12,250,079
Shares issued upon reinvestment of dividends -- -- 284,978 3,348,488
Shares redeemed ............................ (598,152) (7,343,208) (1,240,740) (15,813,512)
-------- ----------- ---------- ------------
Net share transactions ................... (323,127) (3,860,768) 22,487 (214,945)
Reclassification of net investment loss .... -- -- -- (247,451)
-------- ----------- ---------- ------------
Net increase (decrease) .................... (323,127) $(3,860,768) 22,487 $ (462,396)
======== =========== ========== ============
</TABLE>
Financial Highlights
================================================================================
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Six Months Ended Year Ended February 7, 1994
June 30, 1997 December 31, (Commencement of Operations)
(Unaudited) 1996 1995 through December 31, 1994
------------ ----------- ----------- -----------------------
<S> <C> <C> <C> <C>
Operating Performance:
Net asset value, beginning of period ............. $ 11.75 $ 11.72 $ 10.25 $ 10.00
---------- ---------- ---------- ----------
Net investment loss .............................. (0.05) (0.09) (0.01) (0.01)
Net realized and unrealized gain on investments .. 2.02 1.56 1.84 0.26
---------- ---------- ---------- ----------
Total from investment operations ................. 1.97 1.47 1.83 0.25
Distributions:
Dividends from net realized gain on investments .. -- (1.44) (0.36) --
---------- ---------- ---------- ----------
Net asset value, end of period ........................... $ 13.72 $ 11.75 $ 11.72 $ 10.25
========== ========== ========== ==========
Total Return(a) .................................. 16.8% 12.5% 17.9% 2.5%
Ratios to average net assets/supplemental data:
Net assets, end of period (in thousands) ......... $ 32,678 $ 37,779 $ 31,439 $ 24,831
Ratio of operating expenses to average net assets 2.16%(b) 2.06% 2.47% 2.47%(b)
Ratio of net investment loss to average net assets (0.84)%(b) (0.7)% (0.07)% (0.13)%(b)
Portfolio turnover rate .......................... 26% 47% 33% 14%
Average commission rate(c) ....................... $ 0.0394 $ 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, the SEC
requires the Fund to disclose its average commission rate paid per share
of securitiy.
15
<PAGE>
Gabelli Global Series Funds, Inc.
The Gabelli Global Interactive Couch Potato(R) Fund
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
fax: 1-914-921-5118
http://www.gabelli.com
e-mail: [email protected]
(Net Asset Value may be obtained daily by calling
1-800-GABELLI after 6:00 P.M.)
Board of Directors
Mario J. Gabelli, CFA Karl Otto Pohl
Chairman and Chief Former President
Investment Officer Deutsche Bundesbank
Gabelli Funds, Inc.
Werner J. Roeder, MD
Felix J. Christiana Director of Surgery
Former Senior Lawrence Hospital
Vice President
Dollar Dry Dock Savings Bank Anthonie C. van Ekris
Managing Director
Anthony J. Colavita BALMAC International, Inc.
Attorney-at-Law
Anthony J. Colavita, P.C.
John D. Gabelli
Vice President
Gabelli & Company,Inc.
Officers and Portfolio Managers
Mario J. Gabelli, CFA Bruce N. Alpert
President Vice President
and Treasurer
Marc J. Gabelli James E. McKee
Portfolio Manager Secretary
Ivan Arteaga, CPA
Associate Portfolio Manager
Distributor
Gabelli & Company, Inc.
Custodian, Transfer Agent and Dividend Agent
State Street Bank and Trust Company
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom L.L.P.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
