[PHOTO OMITTED]
The
Gabelli
Global
Opportunity
Fund
THIRD QUARTER REPORT
SEPTEMBER 30, 1998
<PAGE>
[GRAPHIC OMITTED]
The
Gabelli Global Opportunity Fund
Third Quarter Report
September 30, 1998
[PHOTOS OMITTED]
Marc J. Gabelli and Caesar Bryan
Portfolio Managers
To Our Shareholders,
Welcome to the third quarter report for the newest member of the Gabelli
Family of mutual funds, The Gabelli Global Opportunity Fund. First and foremost,
we want to thank you for your investment in this exciting new Fund. We are
taking the Gabelli value investment philosophy around the globe in search of
outstanding investment opportunities.
Our cautious and conservative approach towards equity markets enabled The
Gabelli Global Opportunity Fund to avoid fully participating in the downturn of
equity markets during the third quarter of 1998. Although we were unable to
anticipate the severity of the decline in the world's equity markets, the Fund's
holdings in government bonds and cash helped to offset some of the fall in
equity prices.
Our Investment Objective
The Gabelli Global Opportunity Fund seeks to invest in common stock of
companies which have rapid growth in revenues and earnings and equities trading
at a significant discount to their intrinsic value. The Fund's primary objective
is capital appreciation. Marc Gabelli and Caesar Bryan will be responsible for
the day-to-day management of the Gabelli Global Opportunity Fund. Currently,
Marc Gabelli is Portfolio Manager for the Gabelli Global Interactive Couch
Potato(R) Fund. Caesar Bryan is Portfolio Manager of the Gabelli International
Growth and Gold Funds.
Investment Performance
For the third quarter ended September 30, 1998, The Gabelli Global
Opportunity Fund's (the "Fund") net asset value declined 5.4%. The Lipper
Analytical Services Global Fund Average and Morgan Stanley World Free Index of
global markets declined 14.7% and 12.3%, respectively, over the same period.
Each index is an unmanaged indicator of investment performance. Since inception
on May 11, 1998 through September 30, 1998, the Fund declined 3.2%. The Lipper
Global Fund Average and Morgan Stanley World Free Index declined 15.6% and
11.8%, respectively, over the same period.
<PAGE>
INVESTMENT RESULTS (a)
- --------------------------------------------------------------------------------
Quarter
--------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
1998: Net Asset Value ...... -- $10.23 $9.68 -- --
Total Return ......... -- 2.3%(b) (5.4)% -- --
- --------------------------------------------------------------------------------
(a) Total returns and average annual returns reflect changes in share price and
are net of expenses. Of course, returns represent past performance and do not
guarantee future results. Investment returns and the principal value of an
investment will fluctuate. When shares are redeemed they may be worth more or
less than their original cost. (b) From commencement of operations on May 11,
1998. Note: Investing in foreign securities involves risks not ordinarily
associated with investments in domestic issues, including currency fluctuation,
economic and political risks.
- --------------------------------------------------------------------------------
Global Allocation
The accompanying chart presents the Fund's holdings by geographic region
as of September 30, 1998. The geographic allo cation 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 - 9/30/98
United States 28.4%
Europe 22.0%
Canada 2.1%
Japan 2.0%
South Africa 1.5%
Cash 9.9%
Gov't Bonds 34.1%
COMMENTARY
The third quarter saw quite an unusual swing among equity investors from
near euphoria to despair. And all of this occurred in about two months. So what
happened? Put simply, it appears that the emerging market crisis, which had been
largely limited to very far away places, finally moved a little closer to home.
For European equity investors, that meant Russia. During the middle of August,
the Russian economic crisis became front page news as the country defaulted on
its debt and devalued the ruble. Markets were shocked because investors felt
that Russia would not be permitted to fail.
The emerging market contagion then spread to South America, with Brazil
under the spotlight. This unnerved American investors due to South America's
close economic links to the U.S. On top of this came the disclosure that Long
Term Capital Management, a very large hedge fund based in Greenwich,
Connecticut, had effectively gone bust. What shocked investors about this
disclosure was that the hedge fund was so heavily leveraged and that no less
than eight foreign government owned agencies were investors in the Fund. So far,
only the central bank of Italy has gone public and admitted to having been
involved. So much for prudent central banking. As other investment portfolios
found trouble, credit spreads between Treasuries and other fixed income
securities widened significantly.
While all of this was occurring, equity markets weakened considerably.
Very few markets or sectors were spared. In general, those markets that had
performed best recently suffered most while some of the Far East markets that
had already been very hard hit held up quite well. With investor fears focused
on recession, economically sensitive sectors did particularly poorly and, of
course, financial stocks, especially banks, fell sharply.
2
<PAGE>
The Chairman of the Federal Reserve Board, Alan Greenspan, appears to be
fully aware of the stress within the financial system and lowered the Federal
Funds rate by 25 basis points to 5.25% at the end of September. This was
followed by another reduction by the same amount in early October. Other major
countries, such as Japan and the United Kingdom, also have reduced interest
rates. During this period, bond yields in most markets have fallen significantly
as investors have sought less risky investments and inflationary expectations
have been reduced. For example, German 10 year government bond yields fell from
4.78% at the end of June to 3.83% by the end of September 1998. This represents
a major move.
One of the causes of stress among emerging markets has been the strong
dollar. However, the dollar weakened following the Federal Reserve Board's
interest rate cuts. This should help many emerging countries service their debt.
Indeed, the dollar's recent decline against the yen was as rapid as anything
most veteran currency traders had ever witnessed. The chronic weakness of the
Japanese banking system is now getting the full attention of the government
authorities who have finally put a credible plan for solving the problem in
place. Still, the Japanese economy is contracting at an annual rate of about
4.0% and further action by the government is required.
Equity market valuations should continue to be supported by historic low
bond yields. However, investors have become very concerned about corporate
earnings growth over the next year. This concern has resulted in a rise in the
equity risk premium. Our strategy is to remain focused on high quality
businesses, which are fairly valued and have financial strength. We look to
avoid companies that have little or no pricing power.
Strategic Vision
We believe companies directly involved in the telecommunications
revolution (telecom service providers, cable television operators and
communications equipment manufacturers) have good short and intermediate term
growth prospects even in this uncertain global economic environment. Modern
telecommunications systems are the most essential element for competing
effectively on the global economic stage. Capital investment in these systems is
not an option. It is a requirement for economic survival in the information age.
More economically sensitive media businesses such as broadcasting,
recorded music and publishing will have a more difficult time growing earnings
over the short term if Asian economies continue to contract, Latin American
economies prove vulnerable and U.S. and European economies slow. However, we
believe we will continue to see consolidation in these media sectors as
companies jockey for domestic and global market share.
We are not macroeconomists nor market timers. We are stock pickers with a
long term perspective. Consequently, we will continue to focus our attention on
what we believe are the best companies with the best long term growth prospects
across the media industry spectrum.
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 September 30, 1998.
3
<PAGE>
Citizens Utilities Co. (CZN - $8.125 - NYSE) provides telecommunications
services and public services to approximately 1.8 million customers in 21
states. Citizens owns 83% of Electric Lightwave (ELIX - $8.50 - Nasdaq) and has
a significant investment in Centennial Cellular Corp. (CYCL - $32.00 - Nasdaq).
In May, management authorized the separation of Citizen's telecommunications
businesses and public services businesses into two stand-alone, publicly traded
companies. Upon separation, the new company's telecommunications business will
include Citizen's stake in Electric Lightwave, as well as its interest in
Centennial Cellular, D&E Communications, Hungarian Telephone & Cable, cable
television and other telecom businesses. The company's public services
businesses, consisting of natural gas distribution, electric distribution, water
distribution and wastewater treatment facilities in 10 states, will continue to
trade as Citizens Utilities. This restructuring will be facilitated by the $215
million in cash the company should receive from its 16% stake in Centennial
Cellular Corp. when Centennial's planned sale to Welsh, Carson, Anderson & Stowe
VIII, L.P. is concluded.
Compagnie Financiere Richemont AG (RIFZ.S - $1,278.61 - Zurich Stock Exchange)
is a Swiss-based holding company which exercises financial and operational
control over companies operating primarily in the fields of tobacco and luxury
goods. Richemont's interests in the tobacco industry are held through Rothmans
International and three of the Group's trademarks: Rothmans, Dunhill and Peter
Stuyvesant are among the top fifteen cigarette brands in the world. Through its
luxury goods subsidiary, Richemont controls a portfolio of leading luxury goods
brands including Cartier, Piaget, Montblanc, Karl Lagerfeld and Alfred Dunhill.
Recently, the company sold its pay television company, Nethold, to Canal + for a
15% stake in Canal +. We believe this was an excellent transaction and shows
management's ability to create value.
Novartis AG (NOVZN.S - $1,602.96 - Zurich Stock Exchange) is one of the world's
largest pharmaceutical companies and was created by the merger of two of
Europe's dominant pharmaceutical companies, Ciba Geigy and Sandoz, both of which
were headquartered in Basel, Switzerland. Apart from pharmaceuticals, the merged
company has a strong position in agribusiness and nutrition. Ciba Specialty
Chemicals, with sales of nearly $5 billion, was recently spun-off to
shareholders as the new company concentrates on its core divisions. Novartis has
a number of new drugs in development that have excellent sales potential and we
believe management will continue to reduce costs.
Schlumberger Ltd. (SLB - $50.3125 - NYSE) is the leading provider of engineering
and technical services to the oil and gas industry. The company is the industry
leader in terms of research and development. The Oil Field Services segment
includes wireline and testing, cementing and stimulation, pumping, drill fluids,
marine and land seismic surveys, contract drilling, directional drilling and
measurement-while-drilling. The Measurement and Systems segment includes meters
and instruments and automatic test equipment. The acquisition of Camco
International in a transaction valued at $2.2 billion has been completed.
Telephone and Data Systems Inc. (TDS - $34.875 - AMEX) is a diversified
telecommunications company with established cellular and local telephone
operations and a developing personal communications services ("PCS") business.
TDS provides high quality telecommunications services to 2.8 million customers
in 35 states. 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 Corp. (USM - $29.8125 - AMEX) and 82.4% of Aerial Communications
(AERL - $3.6875 - Nasdaq), TDS's PCS subsidiary which owns the licenses to
provide PCS service in six major trading areas encompassing approximately 27.6
million population equivalents. The transfer of substantially all of the assets
of subsidiary American Paging to TSR Wireless Holdings has been completed.
4
<PAGE>
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 Opportunity Fund and other Gabelli Funds are
available through the no-transaction fee programs at many major discount
brokerage firms.
In Conclusion
As the Fund's current asset allocation indicates, we are favorably
disposed to the U.S. and European equity markets and quite wary of the Far East
including Japan. We expect continued volatility in global stock markets, but
believe this volatility will present the kind of long term investment
opportunities we seek.
The Fund's daily net asset value is available each evening after 6:00 PM
(Eastern Time) by calling 1-800-GABELLI (1-800-422-3554). Please call us during
the business day for further information. We thank you for your commitment and
as always, pledge our best efforts on your behalf.
Sincerely,
/s/ Marc J. Gabelli /s/ Caesar Bryan
Marc J. Gabelli Caesar Bryan
Portfolio Manager Portfolio Manager
October 30, 1998
- --------------------------------------------------------------------------------
Top Ten Holdings
September 30, 1998
------------------
Vivendi Nippon Telegraph & Telephone
Citizens Utilities Co. Seagram Co. Ltd.
Compagnie Financiere Richemont AG TCI/Liberty Media Group
Telephone and Data Systems Inc. Novartis AG
Schlumberger Ltd. Audiofina
- --------------------------------------------------------------------------------
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.
5
<PAGE>
The Gabelli Global Opportunity Fund
Portfolio of Investments -- September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Market
Shares Value
------ -----
COMMON STOCKS - 57.8%
Advertising - 0.8%
1,475 Young & Rubicam Inc.+ ................. $ 41,853
-----------
Automotive - 1.0%
900 General Motors Corp. .................. 49,219
-----------
Broadcasting - 6.1%
1,500 Audiofina ............................. 63,062
225 Canal Plus ............................ 54,636
1,100 Comcast Corp., Cl. A .................. 51,288
3,700 Granada Group plc ..................... 46,530
250 NRJ SA ................................ 40,590
275 Pathe SA .............................. 51,518
-----------
307,624
-----------
Business Services - 2.1%
530 Vivendi ............................... 105,531
-----------
Cable - 3.2%
1,100 MediaOne Group Inc. ................... 48,881
1,400 NTL Inc.+ ............................. 60,200
1,200 TCI Ventures Group, Cl. A+ ............ 21,525
1,500 Tele-Communications
International Inc., Cl. A+ .......... 31,125
-----------
161,731
-----------
Conglomerates - 0.4%
300 Invik & Co. AB, B Free ................ 21,635
-----------
Consumer Products - 4.9%
200 Christian Dior SA ..................... 16,058
70 Compagnie Financiere Richemont AG ..... 89,503
1,450 Fortune Brands Inc. ................... 42,956
3,400 Reckitt & Colman plc .................. 50,297
5,600 Unilever NV ........................... 47,916
-----------
246,730
-----------
Diversified Industrial - 2.2%
550 Deutsche Babcock AG + ................. 28,959
1,125 Indus Holding AG ...................... 43,079
300 Oerlikon-Buhrle Holding AG ............ 34,999
-----------
107,037
-----------
Energy - 2.8%
700 British Petroleum Co. plc, ADR ........ 61,075
1,550 Schlumberger Ltd. ..................... 77,984
-----------
139,059
-----------
Entertainment - 2.6%
1,900 Tele-Communications Inc./
Liberty Media Group, Cl. A+ ......... 69,706
3,000 USA Networks Inc. ..................... 58,313
-----------
128,019
-----------
Financial Services - 4.9%
1,000 Federal Home Loan Mortgage Corp. ...... 49,625
1,000 Mellon Bank Corp. ..................... 55,063
600 Morgan (J.P.) & Co. ................... 50,775
1,900 Pioneer Group Inc. .................... 31,350
2,000 Schroders plc ......................... 32,798
3,000 Skandinaviska Enskilda Banken, Cl. A .. 26,230
-----------
245,841
-----------
Food and Beverage - 2.8%
2,500 Seagram Co. Ltd. ...................... 71,719
25 Nestle SA ............................. 49,736
1,100 Whitman Corp. ......................... 17,531
-----------
138,986
-----------
Global Entertainment - 1.5%
4,000 EMI Group plc ......................... 24,726
900 PolyGram NV, ADR ...................... 51,075
-----------
75,801
-----------
Health Care - 1.9%
40 Novartis AG ........................... 64,118
3 Roche Holding AG ...................... 32,290
-----------
96,408
-----------
Hotels and Gaming - 1.1%
3,250 Mirage Resorts Inc. + ................. 54,438
-----------
Metals and Mining - 5.1%
1,500 Anglogold Ltd. ........................ 40,313
4,000 Freeport-McMoRan Copper & Gold Inc.,
Cl. B ............................... 47,500
8,300 Harmony Gold Mining Ltd.+ ............. 40,771
1,500 Newmont Mining Corp. .................. 36,375
2,500 Placer Dome Inc. ...................... 34,531
1,800 Stillwater Mining Co. + ............... 56,813
-----------
256,303
-----------
Publishing - 2.2%
5,200 Independent Newspapers plc ............ 18,778
600 McGraw-Hill Companies Inc. ............ 47,550
800 Times Mirror Co., Cl. A ............... 42,500
-----------
108,828
-----------
Telecommunications - 7.6%
11,900 Cable & Wireless plc, ADR ............. 51,538
2,090 Citizens Utilities Co., Cl. B+ ........ 98,232
5,500 Electric Lightwave Inc. + ............. 46,750
300 Global Crossing Ltd. + ................ 6,263
5 Japan Telecom Co. Ltd. ................ 30,120
10 Nippon Telegraph & Telephone Corp. .... 73,097
5,500 Societe Europeenne de
Communication SA .................... 26,515
4,000 Viatel Inc.+ .......................... 42,500
-----------
375,015
-----------
6
<PAGE>
The Gabelli Global Opportunity Fund
Portfolio of Investments (Continued) -- September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
Market
Shares Value
------ -----
Utilities - 0.5%
1,600 Florida Public Utilities Co. .......... $ 24,400
-----------
Wireless Communications - 4.1%
1,100 Cellular Communications International
Inc.+ ............................... 59,675
1,500 Omnipoint Corp.+ ...................... 11,156
2,300 Telephone and Data Systems Inc. ....... 80,213
2,700 Vanguard Cellular Systems Inc.,
Cl. A+ .............................. 51,300
-----------
202,344
-----------
TOTAL COMMON STOCKS ................... 2,886,802
-----------
Principal
Amount
------
U.S. GOVERNMENT OBLIGATIONS - 19.5%
$ 513,000 U.S. Treasury Bills, 4.43% to 5.01% ++,
due 10/22/98 to 12/24/98 ............ 509,579
400,000 U.S. Treasury Bonds, 6.13%,
due 11/15/27 ........................ 461,125
-----------
TOTAL U.S. GOVERNMENT OBLIGATIONS ..... 970,704
-----------
FOREIGN GOVERNMENT OBLIGATIONS - 26.0%
French Government Obligations - 4.9%
1,000,000(a) France OAT, 8.50%, due 10/25/08........ 242,935
-----------
German Government Obligations - 6.1%
475,000(b) Deutschland Republic, 4.75%,
due 07/04/08 ........................ 303,612
-----------
U.K. Government Obligations - 15.0%
375,000(c) U. K. Treasury Bonds, 5.71% to 5.93%,
due 12/07/07 ........................ 750,989
-----------
TOTAL FOREIGN GOVERNMENT
OBLIGATIONS ......................... 1,297,536
-----------
TOTAL INVESTMENTS - 103.3%
(Cost $5,422,735) ................... 5,155,042
Other Assets and
Liabilities (Net) - (3.3)% .......... (166,434)
-----------
NET ASSETS - 100.0%
(514,890 shares outstanding)......... $ 4,988,608
===========
NET ASSET VALUE,
Offering and Redemption
Price Per Share...................... $ 9.69
===========
Net Unrealized
Principal Settlement Appreciation/
Amount Date (Depreciation)
------ ---- --------------
FORWARD FOREIGN EXCHANGE CONTRACTS
2,303,061(a) Deliver French Francs in exchange for
USD 412,602.......................... 10/30/98 $1,510
208,566(d) Deliver Swedish Kronas in exchange
for USD 26,621....................... 10/01/98 $ 39
175,102(e) Deliver Swiss Francs in exchange
for USD 126,490...................... 10/01/98 $ 254
8,596,809(f) Deliver Japanese Yen
in exchange for USD 63,156........... 10/02/98 $ (135)
- ----------
(a) Principal amount denoted in French Francs.
(b) Principal amount denoted in German Marks.
(c) Principal amount denoted in British Pounds.
(d) Principal amount denoted in Swedish Kronas.
(e) Principal amount denoted in Swiss Francs.
(f) Principal amount denoted in Japanese Yen.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR -- American Depositary Receipt.
7
<PAGE>
Gabelli Global Series Funds, Inc.
The Gabelli Global Opportunity 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
Caesar Bryan Bruce N. Alpert
Portfolio Manager Vice President and Treasurer
James E. McKee
Secretary
Distributor
Gabelli & Company, Inc.
Custodian, Transfer Agent and Dividend Agent
State Street Bank and Trust Company
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom LLP
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of The
Gabelli Global Opportunity Fund. It is not authorized for distribution to
prospective investors unless preceded or accompa nied by an effective
prospectus.
- --------------------------------------------------------------------------------
