[GRAPHIC OMITTED]
The
Gabelli
Global
Telecommunications
Fund
ANNUAL REPORT
DECEMBER 31, 1997
<PAGE>
Gabelli Global Series Funds, Inc.
One Corporate Center
Rye, New York 10580 - 1434
The Gabelli Global Telecommunications Fund
Annual Report
December 31, 1997
To Our Shareholders,
The Gabelli Global Telecommunications Fund's portfolio manager, Mario J.
Gabelli, was recently named the Domestic Equity Fund Manager of the Year for
1997 by Morningstar.
Global telecommunications stocks enjoyed a banner year in 1997, buoyed by
deals, after lagging broader market indices for several years. For the fourth
quarter ended December 31, 1997, The Gabelli Global Telecommunications Fund's
total return was 4.6%. The Lipper Analytical Services Telecommunications Fund
Average and Salomon Smith Barney Global Telecommunications Index had returns of
(2.1)% and 4.4%, respectively, over the same period. Each index is an unmanaged
indicator of
INVESTMENT RESULTS (a)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Quarter
-----------------------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
<S> <C> <C> <C> <C> <C>
1997: Net Asset Value .................... $11.29 $13.17 $14.22 $13.32 $13.32
Total Return ....................... 0.1% 16.7% 7.9% 4.6% 31.9%
- -------------------------------------------------------------------------------------------------------------------------
1996: Net Asset Value .................... $11.72 $12.16 $11.73 $11.28 $11.28
Total Return ....................... 5.4% 3.8% (3.5)% 3.3% 9.0%
- -------------------------------------------------------------------------------------------------------------------------
1995: Net Asset Value .................... $ 9.77 $10.29 $11.12 $11.12 $11.12
Total Return ....................... 0.4% 5.3% 8.1% 1.6% 16.2%
- -------------------------------------------------------------------------------------------------------------------------
1994: Net Asset Value .................... $ 9.68 $ 9.62 $10.38 $ 9.73 $ 9.73
Total Return ....................... (5.1)% (0.6)% 7.9% (5.3)% (3.7)%
- -------------------------------------------------------------------------------------------------------------------------
1993: Net Asset Value .................... -- -- -- $10.20 $10.20
Total Return ....................... -- -- -- 3.0%(b) 3.0%(b)
- -------------------------------------------------------------------------------------------------------------------------
Dividend History
- --------------------------------------------- ---------------------------------------------------------
Average Annual Return - December 31, 1997 (a) Payment (ex) Date Rate Per Share Reinvestment Price
- --------------------------------------------- ----------------- -------------- ------------------
1 Year............................ 31.9% December 30, 1997 $1.550 $13.28
3 Year............................ 18.6% December 31, 1996 $0.840 $11.28
Life of Fund(b)................... 12.9% December 29, 1995 $0.182 $11.12
- --------------------------------------------- December 30, 1994 $0.095 $ 9.73
December 31, 1993 $0.102 $10.20
</TABLE>
(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 November 1, 1993. Note:
Investing in foreign securities involves risks not ordinarily associated with
investments in domestic issues, including currency fluctuation, economic and
political risks.
- --------------------------------------------------------------------------------
<PAGE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI GLOBAL TELECOMMUNICATIONS FUND, SALOMON SMITH BARNEY
GLOBAL TELECOMMUNICATIONS INDEX AND THE S&P 500 INDEX
[The following table was depicted as a line chart in the printed material]
Gabelli Global Salomon Smith Barney Global
Telecommunications Fund* Telecommunications Index S&P 500 Index
------------------------ ------------------------ -------------
11/1/93 $10,000 $10,000 $10,000
12/31/93 $10,300 $10,045 $10,190
12/31/94 $ 9,919 $ 9,555 $10,322
12/31/95 $11,530 $10,794 $14,203
12/31/96 $12,568 $12,307 $17,469
12/31/97 $16,573 $15,011 $23,295
- ----------
* Past Performance is not predictive of future performance.
investment performance. The Fund was up 31.9% for 1997. The Lipper
Telecommunications Fund Average and Salomon Smith Barney Global
Telecommunications Index rose 26.9% and 22.0%, respectively, over the same
twelve month period. Since inception on November 1, 1993 through December 31,
1997, the Fund has a total return of 65.7%, which equates to an average annual
return of 12.9%.
Global Allocation
The accompanying chart presents the Fund's holdings by geographic region
as of December 31, 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 depicted as a pie chart in the printed material]
HOLDINGS BY GEOGRAPHIC REGION - 12/31/97
United States 50.0%
Canada 9.7%
Europe 19.4%
South America 8.6%
Asia/Pacific Rim 7.2%
Other 5.1%
Portfolio Structure
We remain "bottom up" focused, with roughly half the Fund's investment in
the U.S. Internationally, the trend continues to be the liberalization and
privatization of the telecommunications sector. The result is an expanding
universe of publicly traded telecom companies poised for growth. Many other
major telecom companies are expected to "go public" in the years ahead.
2
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Nearly 20% of the Fund is invested in Europe, much of that in the U.K. Key
holdings are companies with a strong global presence and attractive valuations.
Included are Cable & Wireless (CWP - $27.1875 - NYSE), the U.K.'s second largest
telecom group, and Vodafone (VOD - $72.625 - NYSE), the largest U.K. cellular
service provider with attractive wireless investments on a global basis.
Telefonica de Espana (TEF - $91.0625 - NYSE) is another key investment in light
of its strong telecom franchise and significant discount to its underlying asset
value.
Competition, consolidation and convergence are occurring globally as
companies seek economies of scale. Simply put, "bigger is better."
Telecommunications stocks are selling at large discounts to their estimated
private market values. Moreover, their stock price performances have not kept
pace with the growth in values. Major forces -- strong demand, open markets,
technology, consolidation -- should drive telecom stock prices toward their
private market values, thereby enhancing shareholder value.
COMMENTARY
The sleeping giants awake! In recent years, global telecommunications
stocks have been long on potential and relatively short on returns compared to
other market sectors. This year, telecommunications stocks have begun to live up
to expectations. We believe we are in the early stages of a bull market for
telco stocks worldwide that could extend well into the next decade.
We established the Gabelli Global Telecommunications Fund on the premise
that state-of-the-art telecommunications systems would be one of the keys to
competing on the global economic stage. We never doubted this premise, but
investors' patience has certainly been tested. Why are we now seeing the
telecommunications group gaining momentum? Because deregulation around the globe
is finally taking hold and everyone in the industry is striving to improve their
competitive position. Internally, companies are aggressively cutting costs and
improving productivity. Business restrictions are being eliminated. In the U.S.,
the long distance providers are trying to gain footholds in local markets. The
local exchange carriers are figuring out creative ways to enter the long
distance business. Geographic roadblocks are being removed. International
boundaries are dissolving as well. The industry is being privatized with
professional, profit-oriented managements replacing government bureaucrats.
Every company is looking for strategic acquisitions and/or partners. That
foreshadows extensive and prolonged global consolidation and handsome investment
returns for value oriented stock pickers.
The telecommunications world is an oyster that has just been cracked open.
It's a big juicy oyster that can feed a lot of quality companies and their
shareholders. We have a front row seat at the banquet.
"The Tigers' Currency Crisis and Six Months to the EMU"
On Wednesday, November 19, 1997 we were privileged to have the
distinguished Karl Otto Pohl, the former President of Germany's Bundesbank
and a Director of the Global Telecommunications Fund, give an address on
subjects ranging from the currency crisis in Southeast Asia to the
establishment of European Monetary Union. We would like to share Mr.
Pohl's comments with you.
3
<PAGE>
Karl Otto Pohl:
Thank you for inviting me to speak to you today. Foremost on
everyone's minds is probably the situation in Southeast Asia and its
impact on the rest of the world. I will begin by confessing that I was
surprised by the currency crisis and attendant economic problems in the
region. I suppose most economists and market observers were accustomed to
strong growth in these countries and overlooked the speculative excesses
that had built up in these economies. I was in Indonesia in July and at
that time, the consensus was that Thailand was an isolated incident and
the rest of the Asian Tigers' currencies and economies were secure. We now
know the consensus was quite wrong. The brush fire in Thailand spread
quickly throughout the region destroying currencies and threatening
economic growth in almost every Southeast Asian nation. Currency
speculators played a role in the process, but they are not the cause of
the problems. Over-capacity, over-borrowing and euphoria in the regions'
equities and real estate markets deserve much of the blame with regional
currencies' ties to the strong U.S. dollar also fanning the flames.
Is the crisis now over?
I'm not sure. I am skeptical of the long-term benefits of financial
bailouts by the International Monetary Fund like the $40 billion package
put together to rescue Indonesia, a very small economic entity on the
global stage. This strategy, which is supported by the U.S., may dampen
volatility by discouraging currency speculation and limiting immediate
economic disruption. However, in the long run, I believe problems are
better solved by letting the markets do their job. Burned fingers make
people more careful around the fire. Will the currency crisis in Southeast
Asia spread to other parts of the world? One has to be concerned by the
high current account deficit and overvalued currency in Brazil.
What happens to the Hong Kong dollar?
Generally, I question the benefit of pegging currencies to the
world's strongest. However, I believe Hong Kong may be justified in doing
everything in its power to defend its currency peg to the U.S. dollar.
Failure to preserve the peg would threaten Hong Kong's position as the
region's financial center. As much as Singapore would like to see its
rival's demise, support from mainland China and Hong Kong's substantial
U.S. dollar reserves should allow it to successfully defend the peg.
The Spillover to Japan
I am less concerned about what may happen to the economies of
smaller countries like Thailand, Indonesia, and Malaysia, than the impact
economic weakness in the Pacific Rim will have on larger economic entities
like Korea and particularly Japan. With substantial over-capacity and a
still vulnerable currency, Korea is in trouble. I have never seen the
Japanese so frustrated. The Japanese government and Japanese corporate
leaders are at a loss as to how to get out of the current economic
quagmire. At 0.5%, the discount rate is already quite low. Dropping
short-term rates even lower is not likely to accomplish much. Budget
deficits prevent the government from spending much to bolster the
economy--it is interesting to note that because of a deficit that equals
7% of GDP, Japan would not qualify for entry into the European Monetary
Union. This summer, I had lunch with the Board of Nippon Life and met with
the
4
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Chairman of Fuji Bank. They didn't seem to have any answers. Recently, a
major commercial bank was allowed to go under. Interestingly, the Japanese
stock market rallied on the news. I don't believe any of the Japanese
money center banks are in serious trouble, but I can't fully discount the
possibility. Perhaps the long-term solution for Korea and Japan is to run
companies with a view to increasing share of profits rather than just
share of markets.
For every cloud, there's . . .
The silver lining in the economic cloud hanging over Southeast Asia
and Japan is its favorable impact on inflation in the U.S. and Europe.
Over-capacity and weaker currencies in Asia will translate into more
imports and lower prices in the developed nations. U.S. Federal Reserve
Chairman Alan Greenspan has already acknowledged that the problems in
Southeast Asia will likely help eliminate inflationary pressure in the
U.S. economy. I believe Mr. Greenspan is also concerned that any increase
in U.S. rates may have a very negative effect on world-wide financial
markets. So, I doubt we will see the Fed raise short-term rates for the
foreseeable future. As I predicted, long-term U.S. bond rates are already
coming down. Supply/demand factors in the bond market are favorable and
the federal budget deficit is shrinking dramatically. I expect we will see
the 30-year Treasury Bond yield dropping below 6% relatively soon and
perhaps trending even lower over the next year. As the yield curve
flattens, the Fed may be more inclined to reduce short-term rates rather
than raise them. This, of course, will be good for U.S. stocks and bonds.
The Status on the EMU
The second subject of great interest to most economists and
investors is European Monetary Union. It is going to happen ahead of
schedule in May 1998 with 11 nations including Italy, Spain and Portugal
participating. Greece is not ready and for many reasons, the UK does not
wish to join at this time, nor will Sweden or Denmark. Part of the process
of monetary union is to establish fixed exchange rates for all European
currencies--in essence, creating one currency with many different names.
For this to work, Europe must have a single monetary policy, which will be
accomplished by the creation of an independent European central bank in
1998. For the time being, Germany's Bundesbank will fill that role. That
is why the Bundesbank is pushing up short-term rates in Germany despite an
economy that is just now gaining some momentum and an inflation rate under
2%. Concurrently, interest rates will have to come down in countries like
Italy, Spain and Ireland despite a robust economy. These changes in
short-term interest rates are being instituted solely to make monetary
union easier to effectuate.
What does European Monetary Union mean for global exchange rates? I
believe the united European currencies will prove to be an alternative to
the U.S. dollar as a strong and stable currency. If I am right, the dollar
will weaken versus the D-mark. I think the U.S. dollar will strengthen to
as much as 135-140 against the Japanese Yen. There has been a lot of
speculation that Japanese financial institutions will be forced to abandon
the U.S. bond market. This is not likely to happen. Japanese banks and
insurance companies need to generate a 5-6% return on investment to meet
their financial obligations. Right now, the U.S. bond market is the only
safe place they can get these kind of returns.
5
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Mergers & Acquisitions and the Euro
In the year ahead, I expect European economies to continue to grow,
albeit not as rapidly as consensus estimates. For example, I am seeing
projections of 3% GDP growth for Germany. With weaker Asian currencies
restraining German exports, I suspect GDP growth will come in closer to
2.5%. European Monetary Union will spawn more cross-border mergers and
acquisitions. Consolidation will benefit European companies as it has
American companies in recent years. To date, cross-border corporate
transactions have been difficult to accomplish. It will get easier and
corporate combinations that make economic sense will be realized.
I have now taken enough of your time ruminating on current events. I
hope my comments have given you some beneficial insight on global
financial markets. Now, let's go back to work.
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 December 31, 1997.
AirTouch Communications Inc. (ATI - $41.5625 - NYSE) is one of the premier
players in global wireless communications. Operating in attractive cellular
markets in the U.S. and overseas (including Germany, Portugal, Sweden, Belgium,
Italy, Spain, Japan and South Korea), the company is well-positioned to
participate in the worldwide expansion of wireless communications. Roughly half
of the company's current 8.5 million worldwide cellular customers are located in
the U.S. Annual growth is estimated at 30% to 40%. AirTouch is in the process of
strengthening its cellular position in the U.S. with the acquisition of US West
Media Group's domestic cellular operations and its stake in PrimeCo Personal
Communications.
BC Telecom Inc. (BCT - $31.14 - TSE), formerly British Columbia Telephone Co.,
is the second largest telecommunications services company in Canada. A
subsidiary of GTE owns 52% of the company. We estimate the private market value
of BCT to be $50 per share. Its basic telephone operations provide service to
more than two million telephone lines and are growing at twice the Canadian
industry average. BCT's crown jewel is a rapidly growing cellular phone company
which currently serves over 465,000 subscribers. We expect BCT to take advantage
of the deregulatory trend in Canada by entering new businesses.
BCE Inc. (BCE - $33.3125 - NYSE), the holding company for Bell Canada, is
Canada's largest telecommunications company. BCE has controlling interests in
Northern Telecom (NT - $89.00 - NYSE) and BCEMobile Communications (BCX - $25.16
- - TSE). There are substantial values in BCE. For example, "behind" each share of
BCE there are 0.2 shares of Northern Telecom. This NT interest, marked to
market, is worth over $18 per BCE share. The company is a possible candidate for
break-up. In the interim, the Canadian Radio and Television Commission is
providing a more attractive operating environment in which BCE is becoming more
competitive.
6
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Cable & Wireless plc (CWP - $27.1875 - 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 (HKT - $20.625 - NYSE), the dominant
telecom service provider in Hong Kong, is 54%-owned by CWP and remains the
"crown jewel" of the CWP portfolio. CWP is attractive based on its high rate of
growth and reasonable market valuation.
Southern New England Telecommunications Corp. (SNG - $50.3125 - NYSE) is a
holding company for Southern New England Telephone (SNET) which provides
telephone services for most of Connecticut. SNET has had success in expanding
into the long distance market in its home territory, gathering a 40% share of
the long distance market in Connecticut. SBC Communications has agreed to
acquire SNET for $4.26 billion in stock.
Tele-Communications Inc. (TCOMA - $27.9375 - Nasdaq), one of the largest cable
TV operators in the U.S., is guided by Dr. John C. Malone - one of the most
shareholder sensitive managers we have found. Regulation has historically played
an important role in the valuation of cable properties. Passage of The
Telecommunications Reform Act of 1996, combined with the current deregulatory
climate in Congress, is providing a significant catalyst for cable stocks. TCOMA
is a well-positioned industry leader, from its wireless telephony PCS venture
with Sprint, Comcast and Cox Communications to its innovative Internet access
business, dubbed "@Home", and its 80% stake in Tele-Communications International
Inc. (TINTA - $18.00 - Nasdaq). An important strategic shift for the company is
underway as some cable properties are being sold or transferred to
allianced-partners, shifting debt and strengthening the company's balance sheet.
So far, deals shaving over 3 million subscribers and shifting over $4 billion in
debt have been announced. Cost reduction programs, including overhead reduction,
are showing substantial progress and increasing operating cash flow.
Telecom Italia Mobile SpA (TIM.MI - $4.62 - Milan Stock Exchange), formerly a
subsidiary of Telecom Italia (the provider of wired local and long distance
telephone service in Italy), was spun-off last July and began trading on the
Milan stock exchange as an independent company. Telecom Italia Mobile is the
leading cellular provider in Italy. The company is the largest cellular provider
in Europe with four million subscribers. The competitive environment in which
Telecom Italia Mobile operates remains favorable, with only one new entrant in
the market. No new competitors are likely in the near future.
Telecomunicacoes Brasileiras SA (Telebras) (TBR - $116.4375 - NYSE) is the
Brazilian, government-controlled, monopoly telecommunications holding company
consisting of 28 subsidiaries serving more than 14 million telephone lines and
two million cellular customers in a country with a population of 160 million.
The penetration rate is less than 9% for telephone and 1% for cellular. The
stock is attractively priced at less than five times our estimate of 1997 cash
flow. Future opportunities include the prospects of privatization, strong line
growth and improvements in efficiency. In October, the Brazilian Ministry of
Communications announced the breakup of the company into three regional, nine
cellular and one long distance company.
7
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Telefonica de Espana (TEF - $91.0625 - 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 to be an attractive 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 SA, Telefonica de Argentina SA 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 and 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.
Telephone and Data Systems Inc. (TDS - $46.5625- ASE) is a domestic provider of
local telephone service to over 490,000 mostly rural access lines and is the
seventh largest cellular telephone company in the U.S. with a fast growing
paging business. TDS is oriented toward creating substantial shareholder value
(as opposed to focusing on near term earnings per share). Operating cash flow is
increasing, driven mainly by internal growth in cellular telephone. We expect
strong growth at TDS to result in a private market value of $160 per share by
2000. The company was active in the PCS auctions and was the high bidder in
eight markets with a combined population of 27 million. TDS has investments in
U.S. Cellular, American Portable Telephone and American Paging.
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 Telecommunications 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.
Gabelli U.S. Treasury Money Market Fund
Shareholders of any of the Gabelli Funds may invest in The Gabelli U.S.
Treasury Money Market Fund with aninitial investment of $3,000 or more. The Fund
provides checkwriting and exchange privileges. The Fund's expenses are capped at
.30% of average net assets, making it one of the most attractive U.S.
Treasury-only money market funds. With dividends that are exempt from state and
local income taxes in all states, the Fund is an excellent vehicle in which to
store idle cash. An investment in The Gabelli U.S. Treasury Money Market Fund is
neither insured nor guaranteed by the U.S. Government. There can be no assurance
that the Fund will maintain a stable $1 per share net asset value. Call us at
1-800-GABELLI (1-800-422-3554) for a prospectus which gives a more complete
description of the Fund, including management fees and expenses. Read the
prospectus carefully before you invest or send money.
8
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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
Global telecommunications companies broke out of their shells in 1997.
Though not yet complete, the global deregulation of this critical industry is
taking shape. This monumental change presents outstanding long term investment
opportunity. We hope you will stay with us as we strive to take advantage of the
numerous opportunities being presented today and in the years to come.
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 Nadaq symbol is GABTX. Please call us during the
business day for further information.
Sincerely,
Mario J. Gabelli, CFA Marc J. Gabelli
Portfolio Manager and Associate Portfolio Manager
Chief Investment Officer
February 1, 1998
- --------------------------------------------------------------------------------
Top Ten Holdings
December 31, 1997
Telephone & Data Systems Inc. Telecom Italia Mobile SpA
Tele-Communications Inc. Telecomunicacoes Brasileiras SA (Telebras)
Cable & Wireless plc BCE Inc.
BC Telecom Inc. AirTouch Communications Inc.
Telefonica de Espana Southern New England Telecom.
- --------------------------------------------------------------------------------
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.
9
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The Gabelli Global Telecommunications Fund
Portfolio of Investments -- December 31, 1997
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS -- 88.3%
ALTERNATIVE TELECOMMUNICATION
PROVIDERS -- 1.3%
7,000 American Communications
Services Inc.+ ..................... $ 47,813 $ 89,688
2,000 Brooks Fiber Properties Inc.+ ........ 34,830 110,000
1,000 Colt Telecom Group plc+ .............. 31,875 42,625
40,000 GST Telecommunications Inc.+ ......... 432,982 475,000
18,000 ICG Communications Inc.+ ............. 238,475 490,500
2,000 Intermedia Communications Inc.+ ...... 27,830 121,500
5,000 McLeodUSA Inc., Cl. A+ ............... 87,700 160,000
2,000 Startec Global
Communications Corp.+ .............. 24,000 44,750
25,000 Suncom
Telecommunications Inc.+ ........... 139,154 1,375
400 Teleport Communications
Group Inc., Cl. A+ ................. 6,400 21,950
----------- ------------
1,071,059 1,557,388
----------- ------------
BROADCASTING -- 0.2%
400 Pathe SA ............................. 93,612 77,661
5,000 Telemundo Group Inc., Cl. A+ ......... 208,019 204,375
----------- ------------
301,631 282,036
----------- ------------
CABLE -- 11.1%
40,000 Adelphia Communications Corp.,
Cl. A+ ............................. 438,499 740,000
15,000 Cable Michigan Inc.+ ................. 158,285 343,125
20,000 Cablevision Systems Corp.,
Cl. A+ ............................. 778,719 1,915,000
70,000 Century Communications Corp.,
Cl. A+ ............................. 590,705 682,500
60,000 Comcast Corp., Cl. A ................. 948,294 1,912,500
44,000 Comcast U.K ..........................
Cable Partners Ltd.+ ............... 649,750 415,250
10,000 General Cable plc, ADR+ .............. 146,775 68,750
35,000 NTL Inc.+ ............................ 554,438 975,625
30,000 Rogers Communications Inc.,
Cl. B+ ............................. 176,188 146,250
35,466 TCI Ventures Group+ .................. 563,246 1,004,131
40,000 Tele-Communications Inc.,
Cl. A+ ............................. 562,639 1,117,500
30,000 Tele-Communications
International Inc., Cl. A+ ......... 514,638 540,000
15,000 Telewest Communications plc,
ADR+ ............................... 261,550 183,750
85,000 United International Holdings Inc.,
Cl. A+ ............................. 1,264,787 977,500
70,000 US WEST Media Group+ ................. 1,250,280 2,021,250
----------- ------------
8,858,793 13,043,131
----------- ------------
COMMUNICATIONS EQUIPMENT -- 2.3%
60,000 Champion Technology Holdings,
ADR ................................ $ 80,658 $ 33,750
4,400 Ericsson (L.M.) Telephone Co.,
ADR ................................ 60,972 164,175
2,500 General Semiconductor Inc.+ .......... 33,120 28,906
4,000 Lucent Technologies Inc. ............. 182,610 319,500
2,500 Motorola Inc. ........................ 113,969 142,656
5,000 NextLevel Systems Inc.+ .............. 76,830 89,375
2,000 Nokia Corp., Cl. A, ADR .............. 76,675 140,000
18,000 Northern Telecom Ltd. ................ 639,750 1,602,001
10,000 Scientific-Atlanta Inc. .............. 169,558 167,500
500 Siemens AG, ADR ...................... 23,625 29,625
100,000 Time Engineering Berhad .............. 264,576 25,691
----------- ------------
1,722,343 2,743,179
----------- ------------
ENTERTAINMENT -- 0.4%
23,462 Ascent Entertainment
Group Inc.+ ........................ 177,530 243,418
6,000 Metromedia International
Group Inc.+ ........................ 67,475 57,000
2,000 Time Warner Inc. ..................... 74,100 124,000
2,000 Viacom Inc., Cl. A+ .................. 63,850 81,750
----------- ------------
382,955 506,168
----------- ------------
LONG DISTANCE TELEPHONE
PROVIDERS -- 6.0%
25,000 AT&T Corp. ........................... 853,276 1,531,250
25,000 Call-Net Enterprises Inc.+ ........... 236,026 392,203
215 DDI Corp. ............................ 1,103,789 570,484
4,000 Esprit Telecom Group plc+ ............ 34,330 45,000
5,000 Fonorola Inc.+ ....................... 21,782 111,459
75,000 General Communication Inc.,
Cl. A+ ............................. 333,867 496,875
6,500 Kokusai Denshin ...................... 557,052 234,962
5,000 LCI International Inc.+ .............. 45,262 153,750
10,000 MCI Communications Corp. ............. 299,245 428,125
8,000 MIDCOM Communications Inc.+ .......... 6,958 120
66,000 P.D.L. Holdings Ltd.+ ................ 420,944 358,875
51,000 Philippine Long Distance
Telephone Co. ...................... 1,727,775 1,147,500
20,000 Sprint Corp. ......................... 546,369 1,172,500
4,000 Teleglobe Inc. ....................... 60,486 84,905
2,000 Telegroup Inc.+ ...................... 20,000 25,250
10,000 WorldCom Inc.+ ....................... 124,922 302,500
----------- ------------
6,392,083 7,055,758
----------- ------------
PUBLISHING -- 0.2%
1,000 Media General Inc., Cl. A ............ 23,050 41,813
8,000 News Corp. Ltd., ADR ................. 179,088 178,500
100,000 Seat SpA+ ............................ 28,390 39,027
----------- ------------
230,528 259,340
----------- ------------
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
The Gabelli Global Telecommunications Fund
Portfolio of Investments (Continued) -- December 31, 1997
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (continued)
REGIONAL and LOCAL
TELEPHONE PROVIDERS -- 17.9%
44,000 Aliant Communications Inc. ........... $ 682,020 $ 1,380,500
20,000 ALLTEL Corp. ......................... 561,875 821,250
22,000 Ameritech Corp. ...................... 913,975 1,771,000
15,200 Atlantic Tele-Network Inc.+ .......... 129,263 165,300
5,304 Bell Atlantic Corp. .................. 272,025 482,664
27,000 BellSouth Corp. ...................... 803,645 1,520,438
9,000 Bruncor Inc. ......................... 160,442 273,581
2,000 Cincinnati Bell Inc. ................. 15,800 62,000
40,000 Commonwealth
Telephone Enterprises Inc.+ ........ 482,456 1,050,000
2,000 Electric Lightwave Inc., Cl. A+ 30,750 29,750
150,000 First Pacific Co. Ltd.+ .............. 90,040 72,597
10,000 First Pacific Co. Ltd.,
Sponsored ADR ...................... 35,875 25,313
40,000 Frontier Corp. ....................... 821,259 962,500
33,000 GTE Corp. ............................ 1,106,650 1,724,250
15,000 Island Telephone
Company Ltd. ....................... 282,503 393,077
19,000 Maritime Telegraph and
Telephone Company Ltd. ............. 330,491 451,427
12,000 NewTel Enterprises Ltd. .............. 207,133 286,369
3,000 Peoples Telephone
Company Inc.+ ...................... 19,000 11,063
10,000 Quebec-Telephone ..................... 153,660 209,641
60,000 RCN Corp.+ ........................... 1,053,848 2,054,999
8,000 SBC Communications Inc. .............. 328,846 586,000
43,000 Southern New England
Telecommunications Corp. ........... 1,524,378 2,163,437
90,000 Telephone & Data
Systems Inc. ....................... 3,873,618 4,190,624
10,000 Telus Corp. .......................... 129,540 221,520
3,000 US WEST Communications
Group ................................ 71,844 135,375
----------- ------------
14,080,936 21,044,675
----------- ------------
SATELLITE -- 3.0%
2,000 American Mobile
Satellite Corp.+ ................... 30,215 14,000
100 Asia Satellite
Telecommunications
Holdings Ltd. ...................... 2,583 1,681
1,000 British Sky Broadcasting
Group, ADR ......................... 36,400 44,500
48,000 COMSAT Corp. ......................... 1,032,046 1,163,999
8,000 Echostar Communications
Corp., Cl. A+ ...................... 221,390 134,000
5,000 General Motors Corp., Cl. H .......... 104,181 184,688
8,000 Globalstar
Telecommunications+ ................ 55,725 393,000
23,000 Iridium World
Communications Ltd.+ ............... 459,563 839,500
15,000 Loral Space &
Communications Ltd.+ ............... $ 181,875 $ 321,563
2,000 PT Indonesia Satellite,
ADR ................................ 68,225 38,625
2,812 Raytheon Co., Cl. A .................. 88,319 138,667
30,000 TCI Satellite Entertainment Inc.,
Cl. A+ ............................. 300,686 206,250
2,000 U.S. Satellite
Broadcasting Co.+ .................. 28,050 15,875
----------- ------------
2,609,258 3,496,348
----------- ------------
TELECOMMUNICATIONS -- 0.2%
12,500 Great Nordic Store ................... 215,022 209,940
----------- ------------
TELEPHONE NETWORKS -- 29.4%
100,000 BC Telecom Inc. ...................... 1,815,395 3,109,672
77,000 BCE Inc. ............................. 1,334,988 2,565,063
3,000 BHI Corp. ............................ 48,250 92,250
1,000 British Telecommunications
plc, ADR ........................... 53,925 80,313
35,800 Cable & Wireless
Communications plc, ADR+ ........... 932,380 872,625
130,000 Cable & Wireless plc,
Sponsored ADR ...................... 2,794,963 3,534,374
65,000 Compania de
Telecomunicaciones de
Chile SA, ADR ...................... 1,018,469 1,941,875
500,000 CPT Telefonica del Peru,
Cl. B .............................. 722,310 1,117,036
1,000 CPT Telefonica del Peru,
Cl. B, ADR ......................... 20,500 23,313
11,000 Deutsche Telekom AG .................. 210,163 204,875
38,000 Emerging
Communications Inc.+ ............... 227,800 304,000
2,000 France Telecom SA+ ................... 68,975 72,000
3,687 Hellenic Telecommunications
Organization SA (OTE) .............. 62,313 75,637
15,000 Hong Kong
Telecommunications Ltd.,
ADR ................................ 294,183 309,375
2,000 Hungarian Telephone &
Cable Corp.+ ....................... 24,557 19,125
60 Japan Telecom Co. Ltd. ............... 1,186,503 530,683
15,000 Koninklijke PTT Nederland NV,
ADR ................................ 470,521 622,500
500 Matav, ADR+ .......................... 9,650 13,000
167 Nippon Telegraph &
Telephone Corp. .................... 1,216,226 1,438,536
10,000 Nippon Telegraph &
Telephone Corp., ADR ............... 409,638 433,125
800 Pakistan Telecommunications,
GDR+ (a) ........................... 98,166 55,200
12,000 Portugal Telecom SA, ADR ............. 233,785 564,000
8,000 PT Telekomunikasi Indonesia .......... 155,960 88,500
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
The Gabelli Global Telecommunications Fund
Portfolio of Investments (Continued) -- December 31, 1997
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (continued)
TELEPHONE NETWORKS (continued)
20,000 Singapore
Telecommunications Ltd. ............ $ 48,208 $ 37,271
8,000 Tele Danmark A/S, ADR ................ 215,400 246,500
36,000 Telecom Argentina Stet --
France Telecom SA, ADR ............. 848,848 1,287,000
1,000,000 Telecom Asia+ ........................ 687,194 191,075
25,000 Telecom Corporation of
New Zealand Ltd., ADR+ ............. 600,312 968,750
194,444 Telecom Italia SpA ................... 457,508 1,242,772
25,000 Telecom Italia SpA, ADR .............. 553,105 1,600,000
8,000,000 Telecommunications
of Jamaica ......................... 406,750 583,217
23,500 Telecomunicacoes Brasileiras SA
(Telebras), Sponsored ADR .......... 629,094 2,736,281
938,570 Telecomunicacoes de
Sao Paulo SA (Telesp)+ ............. 141,797 213,605
41,000 Telefonica de Argentina SA,
ADR ................................ 1,142,274 1,527,250
32,000 Telefonica de Espana, ADR ............ 1,347,010 2,914,000
36,000 Telefonos de Mexico SA,
Cl. L, ADR ......................... 1,376,800 2,018,250
300,000 Telekom Malaysia Berhad .............. 1,420,412 886,350
600 Telstra Corp. Ltd., ADR+ (a) ......... 19,666 25,050
8,075 Thai Telephone & Telecom,
GDR + (a) .......................... 100,542 2,100
3,000 Veba AG .............................. 126,255 204,389
----------- ------------
23,530,795 34,750,937
----------- ------------
WIRELESS COMMUNICATIONS -- 16.3%
5,000 360(0) Communications Co.+ ........... 91,438 100,938
40,000 ABC Communications
Holdings Ltd. ...................... 20,301 7,227
115,000 Aerial
Communications Inc.+ ............... 778,540 819,375
48,000 AirTouch
Communications Inc.+ ............... 1,083,337 1,995,000
60,000 American Paging Inc.+ ................ 431,991 127,500
28,400 Associated Group Inc.,
Cl. A+ ............................. 308,905 841,350
32,000 Associated Group Inc.,
Cl. B+ ............................. 339,440 932,000
14,000 BCE Mobile
Communications Inc. ................ 461,860 352,197
500 Bouygues Group ....................... 58,707 56,683
20,000 Cellular Communications
International Inc.+ ................ 332,622 935,000
85,000 Centennial Cellular Corp.,
Cl. A+ ............................. 1,416,142 1,742,500
28,000 Century Telephone
Enterprises Inc. ................... 811,681 1,394,750
2,000 CommNet Cellular Inc.+ ............... 45,978 71,125
2,000 CoreComm Inc.+ ....................... $ 37,490 $ 20,250
30,000 CP Pokphand, Sponsored
ADR ................................ 245,000 119,063
50,000 Europolitan Holdings AB+ ............. 460,320 1,909,416
35,000 Grupo Iusacell SA,
Ser. D, ADR+ ....................... 422,475 533,750
26,000 Himachal Futuristic .................. 141,200 15,184
24,000 Jasmine International ................ 117,135 4,586
2,500 Mannesmann AG ........................ 819,702 1,255,532
5,300 Matrix
Telecommunications Ltd.+ ........... 8,992 1,899
1,500 Metrocall Inc.+ ...................... 11,138 7,406
5,000 Mobile Telecommunications
Technologies Corp.+ ................ 87,075 110,000
9,789 NEXTEL Communications Inc.,
Cl. A+ ............................. 145,326 254,514
2,000 Omnipoint Corp.+ ..................... 17,750 46,500
12,500 Price Communications Corp.+ .......... 88,770 107,031
22,000 PriCellular Corp.+ ................... 98,883 229,625
35,000 Rogers Cantel Mobile
Communications Inc.,
Cl. B+ ............................. 812,011 323,750
1,000 Rural Cellular Corp., Cl. A+ ......... 10,000 13,063
70,000 Securicor Group plc .................. 183,666 328,834
100,000 Technology Resources
Industries ........................... 384,096 59,090
600,000 Telecom Italia Mobile SpA ............ 798,598 2,770,933
6,000 Teligent Inc., Cl. A+ ................ 133,000 147,750
2,000 Thyssen AG ........................... 367,787 427,131
20,000 Total Access
Communications plc ................. 126,250 6,800
3,000 United States Cellular
Corp.+ ............................. 90,900 93,000
1,500 Vanguard Cellular
Systems Inc., Cl. A+ ............... 29,040 19,125
1,000 Vimpel Communications+ ............... 28,300 35,625
14,000 Vodafone Group plc, ADR .............. 364,429 1,015,000
----------- ------------
12,210,275 19,230,502
----------- ------------
TOTAL COMMON STOCKS .................. 71,605,678 104,179,402
----------- ------------
CONVERTIBLE PREFERRED STOCKS -- 2.7%
CABLE -- 1.4%
18,200 Tele-Communications Inc. .............
6.00% Cv. Pfd., Ser. E ............. 1,252,596 1,692,599
----------- ------------
ENTERTAINMENT -- 0.0%
1,000 Metromedia International
Group Inc.
7.25% Cv. Pfd. ..................... 51,363 45,250
----------- ------------
LONG DISTANCE TELEPHONE PROVIDERS -- 0.5%
12,000 Sprint Corp. .........................
8.25% Cv. Pfd. ..................... 424,102 537,000
----------- ------------
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
The Gabelli Global Telecommunications Fund
Portfolio of Investments (Continued) -- December 31, 1997
================================================================================
Market
Shares Cost Value
------ ---- -----
CONVERTIBLE PREFERRED STOCKS (continued)
TELEPHONE NETWORKS -- 0.4%
9,500 Philippine Long Distance
Telephone Co.
7.00% Cv. Pfd., Ser. III. .......... $ 475,000 $ 435,813
----------- ------------
WIRELESS COMMUNICATIONS -- 0.4%
3,000 AirTouch
Communications Inc. 4.25%
Cv. Pfd., Cl. C .................... 144,750 186,938
5,000 AirTouch Communications Inc.
6.00% Cv. Pfd., Cl. B ................ 146,563 178,125
3,000 Mobile Telecommunication
Technologies Corp.
$2.25 Cv. Pfd. (a) ................. 84,750 99,000
----------- ------------
376,063 464,063
----------- ------------
TOTAL CONVERTIBLE
PREFERRED STOCKS ..................... 2,579,124 3,174,725
----------- ------------
PREFERRED STOCKS -- 0.3%
TELEPHONE NETWORKS -- 0.3%
3,355,677 Telecomunicacoes de
Rio de Janeiro SA
(Telerj) Pfd. ...................... 267,381 348,792
40,900 Telecomunicacoes de
Sao Paulo SA
(Telesp) Pfd. ...................... 12,299 10,884
----------- ------------
TOTAL PREFERRED STOCKS ............... 279,680 359,676
----------- ------------
Principal
Amount
------
CONVERTIBLE CORPORATE BONDS -- 0.9%
TELEPHONE NETWORKS -- 0.7%
$1,000,000 Telekom Malaysia Berhad
Sub. Deb. Cv.
4.00%, 10/03/04 (a) ................ 1,000,237 775,000
----------- ------------
WIRELESS COMMUNICATIONS -- 0.2%
250,000 Technology Resources Industries
Sub. Deb. Cv.
2.75%, 11/28/04 (a) ................ 250,000 266,250
----------- ------------
TOTAL CONVERTIBLE
CORPORATE BONDS ...................... 1,250,237 1,041,250
----------- ------------
U.S. GOVERNMENT OBLIGATIONS -- 8.0%
9,427,000 U.S. Treasury Bills,
4.989% to 5.631%,
due 01/02/98 to 02/26/98 ........... 9,386,677 9,386,169
----------- ------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS .......................... $ 9,386,677 $ 9,386,169
----------- ------------
TOTAL
INVESTMENTS-- 100.2% ................. $85,101,396 118,141,222
===========
Other Assets and
Liabilities (Net)-- (0.2)% ......... (269,599)
NET ASSETS -- 100.0%
(8,850,438 shares outstanding) ..... $117,871,623
============
NET ASSET VALUE,
Offering and Redemption
Price Per Share .................... $13.32
============
- ----------
For Federal income tax purposes:
Aggregate cost .............................. $85,101,396
===========
Gross unrealized appreciation ............... 40,008,397
Gross unrealized depreciation ............... (6,968,571)
-----------
Net unrealized appreciation ................. $33,039,826
===========
- ----------
(a) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers. At December
31, 1997, the market value of Rule 144A securities amounted to $1,222,600
or 1.0% of net assets.
+ Non-income producing security
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
The Gabelli Global Telecommunications Fund
Statement of Assets and Liabilities
December 31, 1997
================================================================================
Assets:
Investments, at value (cost $85,101,396) ............... $ 118,141,222
Foreign cash, at value (cost $130,968) ................. 126,945
Dividends and interest receivable ...................... 224,324
Receivable for Fund shares sold ........................ 62,273
Receivable for investments sold ........................ 45,030
Deferred organizational expenses ....................... 21,531
-------------
Total Assets ......................................... 118,621,325
-------------
Liabilities:
Payable to custodian ................................... 359,230
Payable for Fund shares redeemed ....................... 48,013
Payable for investment advisory fees ................... 98,422
Payable for distribution fees .......................... 70,678
Other accrued expenses ................................. 173,359
-------------
Total Liabilities .................................... 749,702
-------------
Net Assets (applicable to 8,850,438
shares outstanding) ................................ $ 117,871,623
=============
Net Asset Value, offering and
redemption price per share ......................... $ 13.32
=============
Net Assets consist of:
Capital stock, at par value ............................ $ 88,504
Additional paid in capital ............................. 84,768,337
Distributions in excess
of net investment income ............................. (69)
Accumulated net realized loss on investments
and foreign currency transactions .................... (18,565)
Net unrealized appreciation on investments
and assets and liabilities denominated
in foreign currencies ................................ 33,033,416
-------------
Total Net Assets ..................................... $ 117,871,623
=============
Statement of Operations
For The Year Ended December 31, 1997
================================================================================
Investment Income:
Dividends (net of foreign taxes of $117,721) ............ $ 1,699,903
Interest ................................................. 219,069
-----------
Total Investment Income ................................ 1,918,972
-----------
Expenses:
Investment advisory fees ................................. 1,080,470
Distribution fees ........................................ 270,798
Shareholder services fees ................................ 320,955
Custodian fees and expenses .............................. 59,142
Shareholder report expenses .............................. 44,903
Legal and audit fees ..................................... 38,399
Registration fees ........................................ 30,853
Interest expense ......................................... 21,293
Amortization of organizational expenses .................. 15,630
Miscellaneous expenses ................................... 23,246
-----------
Total Expenses ......................................... 1,905,689
-----------
Net Investment income ........................................ 13,283
-----------
Net Realized and Unrealized Gain
on Investments:
Net realized gain on investments and
foreign currency transactions .......................... 12,291,080
Net change in unrealized appreciation
on investments and assets and liabilities
denominated in foreign currencies ...................... 17,429,948
-----------
Net realized and unrealized
gain on investments and foreign
currency transactions .................................. 29,721,028
-----------
Net increase in net assets resulting from
operations ............................................... $29,734,311
===========
Statement of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1997 1996
---- ----
<S> <C> <C>
Operations:
Net investment income ................................................. $ 13,283 $ 411,485
Net realized gain on investments and foreign currency transactions .... 12,291,080 7,081,146
Net change in unrealized appreciation on investments and assets
and liabilities denominated in foreign currencies ................... 17,429,948 2,695,936
------------- -------------
Net increase in net assets resulting from operations ................ 29,734,311 10,188,567
------------- -------------
Distributions to shareholders:
From net investment income ............................................ -- (413,426)
From net realized gain on investments ................................. (12,322,997) (7,136,096)
------------- -------------
Total distributions to shareholders ................................. (12,322,997) (7,549,522)
------------- -------------
Share transactions:
Net (decrease)in net assets from Fund share transactions .............. (8,083,350) (16,940,085)
------------- -------------
Net increase (decrease) in net assets ............................... 9,327,964 (14,301,040)
Net Assets:
Beginning of period ................................................... 108,543,659 122,844,699
------------- -------------
End of period ......................................................... $ 117,871,623 $ 108,543,659
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
The Gabelli Global Telecommunications Fund
Notes to Financial Statements
================================================================================
1. Significant Accounting Policies. The Gabelli Global Telecommunications 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 "Act"), and one of five
separately managed portfolios of the Corporation, whose primary objective is
capital appreciation. The Fund commenced operations on November 1, 1993. 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 the
bid and asked prices. When market quotations are not readily available,
portfolio securities are valued at their fair value as determined in good faith
under procedures established by and under the general supervision of the
Corporation's Directors. Short term debt securities with remaining maturities of
60 days or less are valued at amortized cost, unless the Directors determine
such does not reflect the securities' fair value, in which case these securities
will be valued at their fair value as determined by the Directors. Options are
valued at the last sale price on the exchange on which they are listed. 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.
Foreign Currency Translations. 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.
15
<PAGE>
The Gabelli Global Telecommunications Fund
Notes to Financial Statements (Continued)
================================================================================
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Forward Foreign Currency Contracts. The Fund may 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 currency contracts are valued at the
forward rate and are marked-to-market daily. The change in market value is
recorded by the Fund as an unrealized gain or loss. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The use of forward foreign currency contracts does not eliminate
fluctuations in the underlying prices of the Fund's portfolio securities, but it
does establish a rate of exchange that can be achieved in the future. Although
forward foreign currency contracts limit the risk of loss due to a decline in
the value of the hedged currency, they also limit any potential gain that might
result should the value of the currency increase. In addition, the Fund could be
exposed to risks if the counterparties to the contracts are unable to meet the
terms of their contracts.
At December 31, 1997, the Fund had open positions in the following forward
foreign currency purchase contracts:
<TABLE>
<CAPTION>
Amount/Currency Settlement Date Proceeds Value Unrealized(Loss)
--------------- --------------- -------- ----- ----------------
<S> <C> <C> <C> <C>
2,600,000 Hong Kong Dollars 02/26/98 $332,120 $334,244 $(2,124)
</TABLE>
Securities Transactions and Investment Income. Securities transactions are
accounted for on the trade date, with realized gain or loss on the sale of
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.
As of December 31, 1997, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to additional
paid-in-capital:
Distribution in Accumulated Undistributed Net
Excess of Net Realized (Loss) on Investments
Investment Income and Foreign Currency Transactions
----------------- ---------------------------------
$283 $486,839
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
16
<PAGE>
The Gabelli Global Telecommunications Fund
Notes to Financial Statements (Continued)
================================================================================
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 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.
3. Organizational Expenses. The organizational expenses of the Fund are being
amortized on a straight-line basis over a period of 60 months. The Adviser 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
organizational expenses, the redemption proceeds will be reduced by any such
unamortized organizational 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's Board of Directors has adopted a distribution
plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of
1940. For the year ended December 31, 1997, the Fund incurred distribution costs
payable to Gabelli & Company, Inc., an indirect wholly-owned subsidiary of the
Adviser, of $270,798, or 0.25% of average net assets, the annual limitation
under the Plan.
5. Portfolio Securities. Purchases and sales of securities for the year ended
December 31, 1997, other than short term securities, aggregated $9,178,890 and
$39,037,594, respectively.
6. Transactions with Affiliates. During the year ended December 31, 1997, the
Fund paid brokerage commissions of $7,785 to Gabelli & Company, Inc. and other
affiliates of the Adviser.
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
were no borrowings outstanding at December 31, 1997. The average daily amount of
borrowings outstanding during the year ended December 31, 1997 was $306,674,
with a related weighted average interest rate of 6.06%. The maximum amount
borrowed at any time during the year ended December 31, 1997 was $3,580,000.
8. Capital Stock Transactions. Transactions in shares of common stock were as
follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1997 December 31, 1996
------------------------------- -------------------------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Shares sold ...................................... 2,019,543 $ 24,786,732 2,412,958 $ 28,511,972
Shares issued upon reinvestment of dividends ..... 895,899 11,897,535 646,152 7,288,589
Shares redeemed .................................. (3,688,802) (44,767,617) (4,482,256) (52,740,646)
------------ ------------ ------------ ------------
Net (decrease) ................................. (773,360) $ (8,083,350) (1,423,146) $(16,940,085)
============ ============ ============ ============
</TABLE>
17
<PAGE>
The Gabelli Global Telecommunications Fund
Financial Highlights
================================================================================
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------
1997 1996 1995` 1994 1993+
---- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period ............. $ 11.28 $ 11.12 $ 9.73 $ 10.20 $ 10.00
-------- -------- -------- -------- --------
Net investment income ............................ 0.00(e) 0.05 0.06 0.07 0.01
Net realized and unrealized gain
(loss) on investments .......................... 3.59 0.95 1.51 (0.44) 0.29
-------- -------- -------- -------- --------
Total from investment operations ................. 3.59 1.00 1.57 (0.37) 0.30
-------- -------- -------- -------- --------
Distributions to shareholders:
From net investment income ....................... -- (0.05) (0.06) (0.07) (0.01)
From net realized gain on investments ............ (1.55) (0.79) (0.12) (0.03) (0.09)
-------- -------- -------- -------- --------
Total distributions .............................. (1.55) (0.84) (0.18) (0.10) (0.10)
-------- -------- -------- -------- --------
Net asset value, end of period ........................ $ 13.32 $ 11.28 $ 11.12 $ 9.73 10.20
======== ======== ======== ======== ========
Total return(a) .................................. 31.9% 9.0% 16.2% (3.7)% 3.0%
======== ======== ======== ======== ========
Ratios to average net assets and supplemental data:
Net assets, end of period (in 000's) ............. $117,872 $108,544 $122,845 $137,731 $ 45,290
Ratio of net investment income (loss) to
average net assets ............................. 0.01% 0.34% 0.53% 0.74% 1.28%(c)
Ratio of operating expenses to
average net assets(b) .......................... 1.78% 1.72% 1.75% 1.80% 2.54%(c)
Portfolio turnover rate .......................... 9% 7% 24% 14% --
Average commission rate per share (d) ............ $ 0.0207 $ 0.0365 -- -- --
</TABLE>
- ----------
+ From commencement of operations on November 1, 1993.
(a) Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the
period including reinvestment of dividends. Total return for the period of
less than one year is not annualized.
(b) The Fund incurred interest expense during the year ended December 31,
1997. If interest expense had not been incurred, the ratio of operating
expenses to average net assets would have been 1.74%.
(c) Annualized.
(d) For fiscal years beginning on or after September 1, 1995, the SEC requires
a fund to disclose its average commission rate paid per share.
(e) Amount represents less than $0.005 per share.
18
<PAGE>
The Gabelli Global Telecommunications Fund
Report of Grant Thornton LLP, Independent Auditors
================================================================================
Shareholders and Board of Directors
The Gabelli Global Telecommunications Fund
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments of The Gabelli Global Tele communications
Fund (one of the series constituting Gabelli Global Series Funds, Inc.), as of
December 31, 1997, the related statements of operations for the year then ended,
the statement of changes in net assets for each of the two years in the period
then ended, and financial highlights for each of the periods presented. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of The
Gabelli Global Telecommunications Fund of Gabelli Global Series Funds, Inc. at
December 31, 1997, and the results of its operations, the changes in its net
assets and the financial highlights for the respective stated periods, presented
in conformity with generally accepted accounting principles.
New York, New York /s/Grant Thornton LLP
February 26, 1998
- --------------------------------------------------------------------------------
1997 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the year ended December 31, 1997, the Fund paid to shareholders, on December
30, 1997, an ordinary income dividend (comprised of net investment income and
short-term capital gains) totaling $0.04 per share and long-term capital gains
totaling $1.51 per share. For the year ended December 31, 1997, 100% of the
ordinary income dividend qualifies for the dividend received deduction available
to corporations.
U.S. Government Income:
The percentage of the ordinary income dividend paid by the Fund during 1997
which was derived from U.S. Treasury securities was 5.63%. Such income is exempt
from state and local income tax in all states. However, many states, including
New York and California, allow a tax exemption for a portion of the income
earned only if a mutual fund has invested at least 50% of its assets at the end
of each quarter of the Fund's fiscal year in U.S. Government securities. The
Gabelli Global Telecommunications Fund did not meet this strict requirement in
1997. Due to the diversity in state and local tax law, it is recommended that
you consult your personal tax advisor for the applicability of the information
provided as to your own situation.
- --------------------------------------------------------------------------------
19
<PAGE>
Gabelli Global Series Funds, Inc.
The Gabelli Global Telecommunications 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.
Felix J. Christiana Werner J. Roeder, MD
Former Senior Vice President Director of Surgery
Dollar Dry Dock Savings Bank Lawrence Hospital
Anthony J. Colavita Anthonie C. van Ekris
Attorney-at-Law Managing Director
Anthony J. Colavita, P.C. BALMAC International, Inc.
John D. Gabelli
Vice President
Gabelli & Company,Inc.
Officers and Portfolio Managers
Mario J. Gabelli, CFA Marc J. Gabelli
President and Chief Associate 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 Telecommunications Fund. It is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
- --------------------------------------------------------------------------------
