[PHOTO OMITTED]
Global
Entertainment
Media
Gabelli
Global Interactive
Couch Potato(R) Fund
SEMI-ANNUAL REPORT
JUNE 30, 1998
<PAGE>
[FLAGS OMITTED]
Global
Entertainment
Media
Semi-Annual Report - June 30, 1998
The Gabelli Global Interactive Couch Potato(R) Fund [PHOTO OMITTED]
Marc J. Gabelli
#1 Global Fund!
(as ranked by Lipper Analytical Services based on one
year performance through 6/30/98 among 189 global funds).
To Our Shareholders,
In the second quarter of 1998, global entertainment and media stocks took
a bit of a breather after their exceptional performance in recent quarters.
However, the AT&T/Tele-Communications Inc. merger announcement put a lot of wind
into the group's luffing sails and we think it may be full speed ahead for the
foreseeable future.
Investment Performance
For the second quarter ended June 30, 1998, The Gabelli Global Interactive
Couch Potato(R) Fund's (the "Fund") total return was 5.7%. The Lipper Analytical
Services Global Fund Average had a return of 0.3% over the same period. The
average is an unmanaged indicator of investment performance. The Fund was up
47.8% over the trailing twelve month period. The Lipper Global Fund Average rose
14.1% over the same twelve month period. Since inception on February 7, 1994
through June 30, 1998, the Fund had a total return of 134.6%, which equates to
an average annual return of 21.4%.
- --------------------------------------------------------------------------------
Lipper Analytical Services ranked The Gabelli Global Interactive Couch
Potato(R) Fund 4 among 125 global funds for the three year period ended June 30,
1998. Lipper rankings are based upon 12 month total returns at NAV.
<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
Potato (po ta' to) vegetable with eyes. The term was coined in
the early 1980s by a group of Baby Boomers
in the San Francisco area who playfully
(pe ta' to) glorified their addiction to the tube.
Calling themselves The Couch Potatoes, they
formed a national club and published a
hilarious newsletter in the couch potato
lifestyle containing bizarre recipes for
that vital companion to the TV set, the
toaster oven. After a burst of enlistments,
the club quietly disappeared. All that
remains today is the metaphor, and its
current use tends to be more pejorative than
self-mocking or affectionate.*
* Source: NTC Mass Media Directory.
- --------------------------------------------------------------------------------
INVESTMENT RESULTS (A)
- --------------------------------------------------------------------------------
Quarter
-------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
1998: Net Asset Value .. $16.45 $17.39 -- -- --
Total Return ..... 15.2% 5.7% -- -- --
- --------------------------------------------------------------------------------
1997: Net Asset Value .. $11.79 $13.72 $15.02 $14.28 $14.28
Total Return ..... 0.3% 16.4% 9.5% 10.9% 41.7%
- --------------------------------------------------------------------------------
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, 1998 (a)
1 Year .............................................................. 47.8%
3 Year .............................................................. 27.6%
Life of Fund (b) .................................................... 21.4%
- --------------------------------------------------------------------------------
Dividend History
- --------------------------------------------------------------------------------
Payment (ex) Date Rate Per Share Reinvestment Price
- ----------------- -------------- ------------------
December 31, 1997 $2.370 $14.28
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. The net asset value of the
Fund is reduced on the ex-dividend (payment) date by the amount of the dividend
paid. 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.
- --------------------------------------------------------------------------------
2
<PAGE>
Global Allocation
The accompanying chart presents the Fund's holdings by geographic region
as of June 30, 1998. 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 CHART IN THE PRINTED MATERIAL.]
HOLDINGS BY GEOGRAPHIC REGION - 6/30/98
United States 80.0%
Europe 13.5%
Canada 3.7%
Asia/Pacific Rim 2.8%
Portfolio Structure
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 accompanying chart depicts our equity mix of the copyright/creativity
and distribution companies in our portfolio as of June 30, 1998.
[THE FOLLOWING TABLE WAS REPRESENTED AS A PIE CHART IN THE PRINTED MATERIAL.]
Distribution 57.7%
Copyright/Creativity 42.3%
COMMENTARY
Dialing Up a Big Deal - "Ma Bell" is Now Riding Motorcycles
Deregulation and technology have been driving change in the global
telecommunications industry. The need for speed is swiftly changing the "dial
tone" into the "web tone" as the telephone, computer and television converge
into one all purpose interactive information and entertainment instrument.
Convergence has just taken a leap forward with the prospective merger of AT&T
and cable television leader Tele-Communications Inc.
3
<PAGE>
Does the proposed AT&T/TCI combination make sense? We think so. The
transaction gives AT&T the digital platform to compete in the local telephone
business. It also allows them to bundle long distance, local telephony, Internet
access and entertainment programming services on one line, passing approximately
one-third of all U.S. homes.
How will this change the global telecommunications/media landscape? It
opens the door for other long distance companies to break into local telephone
monopolies and perhaps for local telephone operators to further their inroads to
the long distance business. It dramatically increases the value of the cable
television industry's millions of coaxial connections into homes worldwide. It
will push the pace in which telephone infrastructure is upgraded to match
cable's digital and high speed capacity. It puts increasing pressure on every
global telecommunications company to create business combinations that will
allow them to compete with the full range of services that AT&T/TCI would be
capable of delivering. Finally, as additional business combinations are formed,
"content and creativity" providers could continue to be viewed as appetizing
targets.
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. The share prices of foreign holdings are stated in U.S. dollar equivalent
terms as of June 30, 1998.
Cablevision Systems Corp. (CVC - $83.50 - ASE), based in Woodbury, NY, owns and
operates cable television systems in 18 states serving 2,844,000 basic service
subscribers at year end 1997. CVC's revenue per subscriber is the highest in the
cable industry. CVC has exercised its option to purchase ITT's 50% stake in MSG
(Madison Square Garden) Properties, including the NY Knicks and NY Rangers. In
March, Cablevision purchased Tele-Communications Inc.'s New York area cable
properties with 829,000 subscribers by issuing almost 24.5 million shares
(adjusted for the March 30, 1998 two-for-one stock split) and assuming $670
million of TCI's debt. These shares represent a one-third stake in CVC. The
company's new, vigorous activity includes the sale of a 40% stake in Rainbow
Sports to a News Corp./TCI joint venture with the proceeds used 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.
GTE Corp. (GTE - $55.625 - NYSE) is one of the largest, publicly held
telecommunications companies in the world. The company is the largest U.S.-based
local telephone company. GTE's domestic and international operations serve 25.9
million access lines in the United States, Canada, the Dominican Republic and
Venezuela. GTE is a leading cellular operator in the U.S. with the potential of
serving 62 million cellular and personal communications services (PCS)
customers. Outside the U.S., GTE
4
<PAGE>
operates cellular networks serving some 16.4 million POPs. GTE is also a leader
in government and defense communications systems and equipment,
aircraft-passenger telecommunications, directories and telecommunications-based
information services and systems. On July 28, 1998, GTE and Bell Atlantic (BEL -
$45.625 - NYSE) confirmed plans to merge in a $52.5 billion stock swap which
would result in a national telecommunications giant.
Havas SA (AGHP.PA - $84.85 - Paris Stock Exchange), the second largest
multimedia company in Europe, is involved in advertising, publishing and
tourism. The company has a balanced mix of cyclical and non-cyclical businesses.
With investments in Canal+, a pay television channel; EuroRSCG, Europe's leading
advertising consultancy firm; and CLT, one of Europe's largest television and
radio operators, Havas is in a position to build a powerful multimedia group.
MediaOne Group Inc. (UMG - $43.9375 - NYSE), recently split-off from US West
Media Group, is a cable distributor committed to providing multiple services
with an emphasis on high speed transmission. Following the sale of its
investment in Dex and the resale of its wireless operations, MediaOne has a
strong financial position which should allow the company to be one of the
leaders in the upgrading of cable infrastructures.
TCI Ventures Group (TCIVA - $20.0625 - Nasdaq) is a portfolio of
telecommunications investments essentially controlled by Dr. John Malone of
Tele-Communications Inc. (TCOMA - $38.4375 - Nasdaq). The company holds an 85%
equity interest in Tele-Communications International (TINTA - $20.0938 - Nasdaq)
and has interests in telephony and programming businesses together with a 39%
equity interest in United Video Satellite Group (UVSGA - $39.625 - Nasdaq) and a
39% equity interest in @Home (ATHM - $47.3125 - Nasdaq). The company is slated
to be part of the transaction proposed by AT&T (T - $57.125 - NYSE) to acquire
all of the TCI group, whereupon TCIVA's shares will be converted into Liberty
Media Group.
Tele-Communications Inc./Liberty Media Group (LBTYA - $38.8125 - 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, the world's
largest media company. Liberty Media, News Corp. and Tele-Communications
International Inc. have created a global sports joint venture, Fox Sports, that
offers 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. Liberty Media is to be
merged into AT&T as part of AT&T's acquisition of TCI. Thereafter, AT&T will
issue a "tracking stock" at a one-to-one ratio.
5
<PAGE>
Telephone and Data Systems Inc. (TDS - $39.375 - ASE) is a diversified
telecommunications company with established cellular, local telephone and radio
paging operations and a developing personal communications services (PCS)
business. TDS provides high-quality telecommunications services to 3.2 million
customers in 37 states and the District of Columbia. The company was active in
the PCS auctions and was the high bidder in markets with a combined population
of 27 million. TDS owns 81.1% of United States Cellular Corporation and 82.5% of
Aerial Communications, Inc., TDS's PCS subsidiary which owns the licenses to
provide PCS service in six major trading areas encompassing approximately 27.6
million population equivalents. TDS also owns American Paging, Inc., a provider
of wireless messaging communications services to 811,100 customers in 21 states
and the District of Columbia.
USA Networks Inc. (USAI - $25.125 - Nasdaq) is a diversified entertainment and
electronic commerce company. Chairman and CEO Barry Diller has brought together
the following assets under one umbrella: the USA Network, the Sci-Fi Channel,
USA Networks Studios, USA Broadcasting, Home Shopping Network and Ticketmaster.
Plans are to integrate these assets, leveraging programming, production
capabilities and electronic commerce across its strong distribution platform.
Viacom Inc. (VIA - $58.50 - ASE; VIA'B - $58.25 - 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 its debt of approximately $10 billion and is focusing on the global
expansion of its media franchises. The company divested its cable systems
subsidiary in a transaction with Tele-Communications Inc. which reduced Viacom's
debt by $1.7 billion and the number of common shares outstanding by about four
percent. Its radio group, Evergreen Media, is being sold for $1.1 billion in
cash. Its publishing business, Simon & Schuster, has been put up for sale.
Viacom is well-positioned in music (notably MTV) and cable networks (such as
Nickelodeon).
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.
The Roth IRA
The Taxpayer Relief Act of 1997 included new tax incentives and more
opportunities to save for retirement and other major expenditures. The Roth IRA
is just one of these new opportunities now available at Gabelli Funds. Our
investor representatives are available at 1-800-GABELLI (1-800-422-3554) to
speak with you about establishing a new Roth IRA and to discuss your investment
choices.
6
<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, IRAs, 401(k)s, quarterly reports, closing prices and other
current news. You can send us e-mail at [email protected].
In Conclusion
While we think the AT&T/TCI deal will produce a strong tailwind for global
entertainment and media companies, there will be winners and losers. We are
dedicated to identifying and investing in the former and doing our best to avoid
the latter. Looking farther ahead, we believe equities will still provide
investors with superior risk adjusted returns relative to other asset classes
and that our value discipline will enable us to provide satisfactory returns
over the long term.
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.
Sincerely,
/s/ Marc J. Gabelli
Marc J. Gabelli
Portfolio Manager
August 1, 1998
-------------------------------------------------------------
Top Ten Holdings
June 30, 1998
Cablevision Systems Corp. USA Networks Inc.
Viacom Inc. Telephone and Data Systems Inc.
TCI/Liberty Media Group Tele-Communications Inc.
TCI Ventures Group MediaOne Group Inc.
Havas SA GTE Corp.
-------------------------------------------------------------
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.
7
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Portfolio of Investments -- June 30, 1998 (Unaudited)
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS -- 97.0%
Broadcasting -- 6.7%
55,000 Ackerley Group Inc. ................ $ 528,733 $ 1,155,000
16,568 Audiofina .......................... 652,235 676,790
100,000 Flextech plc+ ...................... 776,459 921,847
500 NRJ SA ............................. 82,628 79,722
3,000 Pathe SA ........................... 523,294 587,989
100,000 Paxson Communications Corp.+ ....... 937,080 1,212,500
----------- -----------
3,500,429 4,633,848
----------- -----------
Business Services -- 2.2%
10,000 Berlitz International Inc.+ ........ 161,981 270,000
60,000 Cendant Corp.+ ..................... 1,753,636 1,252,500
----------- -----------
1,915,617 1,522,500
----------- -----------
Cable Distribution -- 22.2%
60,000 Cablevision Systems
Corp., Cl. A+ .................... 1,395,879 5,010,000
30,000 Comcast Corp., Cl. A ............... 688,613 1,192,500
40,000 MediaOne Group Inc.+ ............... 1,361,650 1,757,500
180,000 TCI Ventures Group, Cl. A+ ......... 2,537,581 3,611,250
60,000 Tele-Communications
Inc., Cl. A+ ..................... 1,696,819 2,306,250
40,000 Tele-Communications
International Inc., Cl. A+ ....... 673,432 803,750
50,000 United International
Holdings Inc., Cl. A+ ............ 656,189 800,000
----------- -----------
9,010,163 15,481,250
----------- -----------
Cable Programmers -- 6.4%
115,000 Tele-Communications Inc./
Liberty Media Group, Cl. A+ ...... 1,870,909 4,463,438
----------- -----------
Entertainment -- 4.1%
115,000 USA Networks Inc.+ ................. 1,949,215 2,889,375
----------- -----------
Entertainment Distribution -- 1.5%
20,000 GC Companies Inc.+ ................. 727,907 1,037,500
----------- -----------
Global Entertainment -- 16.9%
40,000 Havas SA ........................... 2,973,087 3,393,963
50,000 News Corp. Ltd.,
Preference Shares ADR ............ 1,069,678 1,412,500
30,000 Seagram Co. Ltd. ................... 1,028,751 1,228,125
12,500 Time Warner Inc. ................... 657,475 1,067,969
50,000 Viacom Inc., Cl. A+ ................ 1,629,731 2,925,000
30,000 Viacom Inc., Cl. B+ ................ 933,957 1,747,500
----------- -----------
8,292,679 11,775,057
----------- -----------
Hotels and Gaming -- 3.3%
100,000 Aztar Corp.+ ....................... 911,894 681,250
30,000 Gaylord Entertainment Co., Cl. A ... 968,274 967,500
30,000 Mirage Resorts Inc.+ ............... 741,554 639,375
----------- -----------
2,621,722 2,288,125
----------- -----------
Publishing -- 10.3%
75,000 Arnoldo Mondadori
Editore SpA ...................... 671,666 886,051
15,000 Dow Jones & Co. Inc. ............... 776,813 836,250
37,500 Independent Newspapers Ltd. ........ 114,689 201,379
62,500 Independent Newspapers plc ......... 380,718 336,307
10,000 Knight-Ridder Inc. ................. 408,004 550,625
9,500 McClatchy Newspapers Inc.,
Cl. A ............................ 292,518 328,938
15,000 New York Times Co., Cl. A .......... 789,344 1,188,750
10,000 Pulitzer Publishing Co. ............ 558,107 892,500
20,000 Scripps (E.W.) Co. ................. 906,366 1,096,250
9,000 Times Mirror Co., Cl. A ............ 421,680 565,875
10,000 United News & Media plc ............ 162,250 284,531
----------- -----------
5,482,155 7,167,456
----------- -----------
Satellite -- 2.0%
100,000 TCI Satellite
Entertainment Inc., Cl. A+ ....... 597,500 587,500
70,000 U.S. Broadcasting Co. .............. 653,402 818,125
----------- -----------
1,250,902 1,405,625
----------- -----------
Telecommunications -- 9.7%
30,000 BCE Inc. ........................... 698,983 1,280,625
18,200 Cable & Wireless plc, ADR+ ......... 514,335 671,125
69,250 Citizens Utilities Co., Cl. B+ ..... 642,126 666,531
30,000 Frontier Corp. ..................... 639,969 945,000
26,500 GTE Corp. .......................... 1,316,367 1,474,107
100,000 Rogers Communications Inc.,
Cl. B+ ........................... 493,475 890,828
51,000 Viatel Inc.+ ....................... 571,726 867,000
----------- -----------
4,876,981 6,795,216
----------- -----------
Wireless Communications -- 11.7%
15,000 AirTouch Communications Inc.+ ...... 409,000 876,563
15,000 Cellular Communications
International Inc.+ .............. 653,525 748,125
29,000 Centennial Cellular Corp., Cl. A+ .. 969,348 1,082,063
30,000 Omnipoint Corp.+ ................... 628,920 688,125
60,000 Telephone and Data
Systems Inc. ..................... 2,909,168 2,362,499
60,000 Vanguard Cellular
Systems Inc., Cl. A+ ............. 867,375 1,132,500
10,000 Vodafone Group plc, ADR ............ 537,455 1,260,625
----------- -----------
6,974,791 8,150,500
----------- -----------
TOTAL COMMON STOCKS ................ 48,473,470 67,609,890
----------- -----------
CONVERTIBLE PREFERRED STOCKS -- 0.0%
Publishing -- 0.0%
500 Golden Books Family
Entertainment Inc.
8.75% Cv. Pfd. ................... 25,000 11,000
----------- -----------
See accompanying notes to financial statements.
8
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Portfolio of Investments -- June 30, 1998 (Unaudited) (Continued)
================================================================================
Market
Shares Cost Value
------ ---- -----
PREFERRED STOCKS -- 0.6%
Broadcasting -- 0.6%
300,000 Village Roadshow Ltd. Pfd. ......... $ 580,983 $ 445,858
----------- -----------
Principal
Amount
------
CONVERTIBLE CORPORATE BONDS -- 0.4%
Entertaiment -- 0.4%
$ 50,000 Savoy Pictures Entertainment Inc.
Sub. Deb. Cv.
7.00%, 07/01/03 .................. 42,304 48,813
200,000 Viacom Inc. Sub. Deb. Cv.
8.00%, 07/07/06 .................. 141,645 207,000
----------- -----------
TOTAL CONVERTIBLE
CORPORATE BONDS .................... 183,949 255,813
----------- -----------
TOTAL INVESTMENTS
-- 98.0% ......................... $49,263,402 68,322,561
===========
Other Assets and
Liabilities (Net) -- 2.0% ....................... 1,396,900
-----------
NET ASSETS -- 100.0%
(4,009,051 shares outstanding) .................. $69,719,461
===========
NET ASSET VALUE,
Offering and Redemption
Price Per Share .................. $ 17.39
=======
Net
Expiration Unrealized
Date Apreciation
---------- -----------
FORWARD FOREIGN EXCHANGE CONTRACTS
5,410,393(a) Sold Belgian Francs
in exchange for
USD 145,402 ...................... 07/14/98 $0
2,322,611(b) Sold French Francs
in exchange for
USD 386,085 ...................... 07/31/98 $2,058
536,092,088(c) Sold Italian Lira
in exchange for
USD 302,850 ...................... 07/02/98 $1,259
- ----------
For Federal tax purposes:
Aggregate cost ............................. $ 49,263,402
============
Gross unrealized appreciation .............. $ 20,647,001
Gross unrealized depreciation .............. (1,587,842)
------------
Net unrealized appreciation ................ $ 19,059,159
============
- ----------
(a) Principal amount denoted in Belgian Francs.
(b) Principal amount denoted in French Francs.
(c) Principal amount denoted in Italian Lira.
+ -- Non-income producing security.
ADR -- American Depositary Receipt.
% of
Market Market
Geographic Diversification Value Value
- -------------------------- ------- ---------
North America 83.7% $57,163,874
Europe 13.5% 9,220,607
Asia/Pacific Rim 2.8% 1,938,080
------ -----------
100.0% $68,322,561
====== ===========
See accompanying notes to financial statements.
9
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Statement of Assets and Liabilities
June 30, 1998 (Unaudited)
================================================================================
Assets:
Investments, at value (Cost $49,263,402) ................. $68,322,561
Cash ..................................................... 8,479
Dividends and interest receivable ........................ 47,570
Receivable for investments sold .......................... 2,210,204
Receivable for capital shares sold ....................... 893,688
Reclaims receivable ...................................... 156,313
Deferred organizational expenses ......................... 6,017
Other assets ............................................. 5,763
-----------
Total Assets ........................................... 71,650,595
-----------
Liabilities:
Payable for investments purchased ........................ 797,828
Payable for investment advisory fees ..................... 54,940
Payable for distribution fees ............................ 13,734
Payable to custodian ..................................... 1,019,706
Other accrued expenses ................................... 44,926
-----------
Total Liabilities ...................................... 1,931,134
-----------
Net Assets applicable to 4,009,051
shares outstanding ................................... $69,719,461
===========
Net Assets consist of:
Capital stock, at par value .............................. $ 4,009
Additional paid-in capital ............................... 45,996,365
Undistributed net investment income ...................... 815,054
Accumulated net realized gain on investments,
futures contracts and foreign currency
transactions ........................................... 3,856,947
Net unrealized appreciation on investments
and foreign currency transactions ...................... 19,047,086
-----------
Total Net Assets ....................................... $69,719,461
===========
Net Asset Value, offering and redemption
price per share ($69,719,461/4,009,051
shares outstanding; 1,000,000,000
shares authorized of $0.001 par value) ............... $17.39
======
Statement of Operations
For the Six Months Ended June 30, 1998 (Unaudited)
================================================================================
Investment Income:
Dividends (net of foreign taxes of $97,719) .............. $ 1,176,208
Interest ................................................. 186,025
-----------
Total Investment Income ................................ 1,362,233
-----------
Expenses:
Investment advisory fees ................................. 354,228
Distribution fees ........................................ 88,556
Shareholder services fees ................................ 35,135
Interest expense ......................................... 19,633
Custodian fees ........................................... 16,766
Organizational expenses .................................. 6,818
Miscellaneous expenses ................................... 31,664
-----------
Total Expenses ......................................... 552,800
-----------
Net Investment Income .................................. 809,433
-----------
Net Realized and Unrealized Gain
on Investments:
Net realized gain on investments, futures
contracts and foreign currency
transactions ........................................... 3,871,009
Net change in unrealized appreciation
on investments and foreign currency
transactions ........................................... 8,122,187
-----------
Net realized and unrealized gain
on investments, futures contracts
and foreign currency transactions ...................... 11,993,196
-----------
Net increase in net assets resulting
from operations .......................................... $12,802,629
===========
Statement of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1998 December 31,
(Unaudited) 1997
---------------- --------------
<S> <C> <C>
Operations:
Net investment income (loss) ............................. $ 809,433 $ (198,519)
Net realized gain on investments, futures contracts
and foreign currency transactions ...................... 3,871,009 6,026,722
Net change in unrealized appreciation on investments
and foreign currency transactions ...................... 8,122,187 5,681,915
------------ ------------
Net increase in net assets resulting from operations ... 12,802,629 11,510,118
------------ ------------
Distributions to shareholders:
Net realized gain on investments ......................... -- (5,839,077)
------------ ------------
Capital share transactions:
Net increase in net assets from capital share transactions 16,359,167 3,107,627
------------ ------------
Net increase in net assets ............................. 29,161,796 8,778,668
Net Assets:
Beginning of period ...................................... 40,557,665 31,778,997
------------ ------------
End of period ............................................ $ 69,719,461 $ 40,557,665
============ ============
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Notes to Financial Statements (Unaudited)
================================================================================
1. Description. The Gabelli Global Interactive Couch Potato(R) Fund (the
"Fund"), a series of Gabelli Global Series Funds, Inc. (the "Corporation"), was
organized on July 16, 1993 as a Maryland corporation. The Fund is a
non-diversified, open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act") and one of four
separately managed portfolios of the Corporation, whose primary objective is
capital appreciation. The Fund commenced investment operations on February 7,
1994.
2. Significant Accounting Policies. 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 as of the close of business on
the day the securities are being valued (if there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day). All other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest average of the bid and asked prices.
Portfolio securities traded on more than one national securities exchange or
market are valued according to the broadest and most representative market, as
determined by the Adviser. 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 Board
of 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. Debt instruments
having a greater maturity are valued at the highest bid price obtained from a
dealer maintaining an active market in those securities. 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-
11
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Notes to Financial Statements (Continued) (Unaudited)
================================================================================
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. Upon entering into a futures
contract, the Fund is required to deposit with the broker an amount of cash or
cash equivalents equal to a certain percentage of the contract amount. This is
known as the "initial margin". Subsequent payments ("variation margin") are made
or received by the Fund each day, depending on the daily fluctuation of the
value of the contract. The daily changes in the contract are included in
unrealized gains or losses. The Fund recognizes a realized gain or loss when the
contract is closed. At June 30, 1998, there were no open futures contracts.
Forward Foreign Exchange 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 Adviser. Forward foreign exchange contracts are valued at the
forward rate and are marked-to-market daily. The change in market value is
included in unrealized appreciation/depreciation on investments. 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 exchange 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
exchange 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.
Foreign Currency Translation. The books and records of the Fund are maintained
in United States (U.S.) dollars. Foreign currencies, investments and other
assets and liabilities are translated into U.S. dollars at the exchange rates
prevailing at the end of the period, and purchases and sales of investment
securities, income and expenses are translated at the exchange rate prevailing
on the respective dates of such transactions. Unrealized gains and losses, which
result from changes in foreign exchange rates and/or changes in market prices of
securities, have been included in unrealized appreciation/depreciation on
investments. Net realized foreign currency gains and losses resulting from
changes in exchange rates include foreign currency gains and losses between
trade date and settlement date on investment securities transactions, foreign
currency transactions and the difference between the amounts of interest and
dividends recorded on the books of the Fund and the amounts actually received.
The portion of foreign currency gains and losses related to fluctuation in
exchange rates between the initial trade date and subsequent sale trade date is
included in realized gain/(loss) on investments.
12
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Notes to Financial Statements (Continued) (Unaudited)
================================================================================
Securities Transactions and Investment Income. Securities transactions are
accounted for on the trade date with realized gain or loss on investments
determined by using the identified cost method. Interest income (including
amortization of premium and accretion of discount) is recorded as earned.
Dividend income is 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.
For the year ended December 31, 1997, reclassifications were made to increase
accumulated net investment income for $204,140 and decrease accumulated net
realized gain on investments and foreign currency transactions for $54,685 with
an offsetting adjustment to additional paid-in-capital.
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.
3. Investment Advisory Agreement. The Fund has entered into an investment
advisory agreement (the "Advisory Agreement") with the Adviser which provides
that the Fund will pay the Adviser a fee, computed daily and paid monthly, at
the annual rate of 1.00% of the value of the Fund's average daily net assets. In
accordance with the Advisory Agreement, the Adviser 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.
4. Distribution Plan. The Fund's Board of Directors has adopted a distribution
plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. For the six months
ended June 30, 1998 the Fund incurred distribution costs payable to Gabelli &
Company, Inc., an indirect wholly-owned subsidiary of the Adviser, of $88,556,
or 0.25% of average net assets, the annual limitation under the Plan. Such
payments are accrued daily and paid monthly.
5. Organizational Expenses. The organizational expenses of the Fund are being
amortized on a straight-line basis over a period of 60 months.
13
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Notes to Financial Statements (Continued) (Unaudited)
================================================================================
6. Portfolio Securities. Purchases and sales of securities for the six months
ended June 30, 1998, other than short term securities, aggregated $53,881,060
and $37,343,015, respectively.
7. Transactions with Affiliates. During the six months ended June 30, 1998, the
Fund paid brokerage commissions of $15,297 to Gabelli & Company, Inc. and its
affiliates.
8. 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. At June
30, 1998, the outstanding borrowing balance was $450,000.
The average daily amount of borrowings outstanding during the six months ended
June 30, 1998 was $476,188, with a related weighted average interest rate of
6.39%. The maximum amount borrowed at any time during the six months ended June
30, 1998 was $6,160,000.
9. Capital Stock Transactions. Transactions in shares of capital stock were as
follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1998 December 31, 1997
---------------------------- ----------------------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold ................................ 5,060,433 $ 78,266,647 865,772 $ 12,613,053
Shares issued upon reinvestment of dividends 12,577 178,081 376,239 5,372,567
Shares redeemed ............................ (3,903,891) (62,085,561) (1,106,550) (14,877,993)
------------ ------------ ------------ ------------
Net increase ............................. 1,169,119 $ 16,359,167 135,461 $ 3,107,627
============ ============ ============ ============
</TABLE>
14
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Financial Highlights
================================================================================
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended December 31,
June 30, 1998 ----------------------------------------------
(Unaudited) 1997 1996 1995 1994+
------------ ---- ---- ---- -----
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $ 14.28 $ 11.75 $ 11.72 $ 10.25 $ 10.00
------- ------- ------- ------- -------
Net investment income (loss) ........ 0.20 (0.07) (0.09) (0.01) (0.01)
Net realized and unrealized gain
on investments .................... 2.91 4.97 1.56 1.84 0.26
------- ------- ------- ------- -------
Total from investment operations .... 3.11 4.90 1.47 1.83 0.25
------- ------- ------- ------- -------
Distributions to shareholders:
In excess of net investment income .. -- -- (1.44) (0.36) --
Net realized gain on investments .... -- (2.37) -- -- --
------- ------- ------- ------- -------
Total distributions ................. -- (2.37) (1.44) (0.36) --
------- ------- ------- ------- -------
Net asset value, end of period ...... $ 17.39 $ 14.28 $ 11.75 $ 11.72 $ 10.25
======= ======= ======= ======= =======
Total return++ ...................... 21.8% 41.7% 12.5% 17.9% 2.5%
Ratios to average net assets and
supplemental data:
Net assets, end of period (in 000's) $69,719 $40,558 $37,779 $31,439 $24,831
Ratio of net investment income (loss)
to average net assets ............. 2.28%(a) (0.61)% (0.70)% (0.07)% (0.13)%(a)
Ratio of operating expenses
to average net assets (b) ......... 1.56%(a) 1.78% 2.06% 2.47% 2.47%(a)
Portfolio turnover rate ............. 58% 68% 47% 33% 14%
</TABLE>
- ----------
+ From commencement of operations on February 7, 1994.
++ Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the
period including reinvestment of dividends. Total return for the period of
less than one year is not annualized.
(a) Annualized.
(b) The Fund incurred interest expense during the six months ended June 30,
1998 and the fiscal year ended December 31, 1997. If interest expense had
not been incurred, the ratios of operating expenses to average net assets
would have been 1.50% and 1.64%, respectively.
See accompanying notes to financial statements.
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 Vice President Lawrence Hospital
Dollar Dry Dock Savings Bank
Anthonie C. van Ekris
Anthony J. Colavita Managing Director
Attorney-at-Law BALMAC International, Inc.
Anthony J. Colavita, P.C.
John D. Gabelli
Vice President
Gabelli & Company, Inc.
Officers and Portfolio Managers
Mario J. Gabelli, CFA Marc J. Gabelli
President and Chief Portfolio Manager
Investment Officer
Bruce N. Alpert James E. McKee
Vice President and Treasurer Secretary
Distributor
Gabelli & Company, Inc.
Custodian, Transfer Agent and Dividend Agent
State Street Bank and Trust Company
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom LLP
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
