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The
Gabelli
Global
Convertible
Securities
Fund
THIRD QUARTER REPORT
SEPTEMBER 30, 1998
<PAGE>
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Gabelli Global Series Funds, Inc.
The Gabelli Global
Convertible Securities Fund
Third Quarter Report - September 30, 1998
[PHOTO OMITTED]
Hart Woodson
To Our Shareholders,
Most of the world's equity markets suffered their worst quarter in years,
driven down by concerns over slowing economies worldwide. The only markets to
advance were Costa Rica, Korea and Thailand, while some markets in Latin America
and Eastern Europe lost over one-third of their value. The catalyst that
precipitated this decline was the Russian government's default and subsequent
ruble devaluation, which led to significant losses by hedge funds and banks
worldwide. Are we now at the end of a steep "correction" or at the beginning of
a prolonged decline? We do not profess to know the answer, but we believe that
the worst may be behind us. Over the long run, investing globally in
well-managed businesses at reasonable prices through convertible securities has
proved to be a prudent approach to preserving capital and building wealth.
Investment Performance
For the third quarter ended September 30, 1998, The Gabelli Global
Convertible Securities Fund's net asset value declined 12.3%. The UBS Global
Convertible Index and Morgan Stanley Capital International World Free Index of
global equity markets declined 8.2% and 12.3%, respectively, while the Merrill
Lynch Global Bond Index rose 6.6% over the same period. Each index is an
unmanaged indicator of investment performance. Year-to-date, the Fund declined
3.2% versus returns of (0.7)%, 10.1% and 0.7% for the UBS Global Convertible
Index, Merrill Lynch Global Bond Index and Morgan Stanley Capital International
World Free Index, respectively.
The Fund declined 9.1% over the trailing twelve month period. The UBS
Global Convertible Index and Morgan Stanley Capital International World Free
Index declined 6.8% and 2.6%, respectively, while the Merrill Lynch Global Bond
Index rose 11.1% over the same twelve month period. Since inception on February
3, 1994 through September 30, 1998, the Fund had a total return of 19.3%, which
equates to an average annual return of 3.9%.
<PAGE>
INVESTMENT RESULTS (a)
- --------------------------------------------------------------------------------
Quarter
----------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
1998: Net Asset Value ............. $10.43 $10.36 $9.09 -- --
Total Return ................ 11.1% (0.7)% (12.3)% -- --
- --------------------------------------------------------------------------------
1997: Net Asset Value ............. $10.27 $10.98 $11.15 $9.39 $9.39
Total Return ................ 0.9% 6.9% 1.5% (6.1)% 2.8%
- --------------------------------------------------------------------------------
1996: Net Asset Value ............. $11.34 $11.55 $11.41 $10.18 $10.18
Total Return ................ 5.1% 1.9% (1.2)% (0.3)% 5.5%
- --------------------------------------------------------------------------------
1995: Net Asset Value ............. $10.09 $10.64 $11.05 $10.79 $10.79
Total Return ................ 1.6% 5.5% 3.9% 1.2% 12.6%
- --------------------------------------------------------------------------------
1994: Net Asset Value ............. $10.38 $10.37 $10.64 $9.93 $9.93
Total Return ................ 3.8%(b) (0.1)% 2.6% (5.2)% 0.9%(b)
- --------------------------------------------------------------------------------
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Average Annual Returns - September 30, 1998 (a)
-----------------------------------------------
1 Year ................................. (9.1)%
3 Year .................................. 2.0%
Life of Fund (b) ........................ 3.9%
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Dividend History
- --------------------------------------------------------------------------------
Payment (ex) Date Rate Per Share Reinvestment Price
- ----------------- -------------- ------------------
December 30, 1997 $1.070 $ 9.33
December 31, 1996 $1.200 $10.18
December 29, 1995 $0.393 $10.79
December 30, 1994 $0.160 $ 9.93
(a) Total returns and average annual returns reflect changes in share price and
reinvestment of dividends and are net of expenses. The net asset value of the
Fund is reduced on the ex-dividend (payment) date by the amount of the dividend
paid. Of course, returns represent past performance and do not guarantee future
results. Investment returns and the principal value of an investment will
fluctuate. When shares are redeemed they may be worth more or less than their
original cost. (b) From commencement of operations on February 3, 1994. Note:
Investing in foreign securities involves risks not ordinarily associated with
investments in domestic issues, including currency fluctuation, economic and
political risks.
- --------------------------------------------------------------------------------
Our Investment Objective
The Fund's objective is to obtain a high rate of total return by investing
in global convertible securities. We expect to achieve a competitive rate of
return by investing primarily in coupon paying convertible securities which meet
our selective investment criteria.
Our Approach
We weigh both country-specific and company-specific factors to make our
investment decisions. Country-specific factors include political stability,
economic growth, inflation and trends in interest rates. With regard to
companies, we seek firms which are undervalued in relation to their long term
potential value. We then look for some dynamic in the country or company which
can unlock this value. In the case of global telecommunications, the dynamic is
the privatization of state-owned monopolies. In
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developing countries, it is the need to provide the infrastructure for growth.
In Japan, it is the change from an industrial to a consumer-oriented economy. In
commodities, it is the increase in industrial demand.
Global Allocation
The accompanying chart represents the Fund's holdings by geographic region
as of September 30, 1998. The geographic allocation will change based on current
global market conditions. Countries and/or regions represented in the chart and
below may or may not be included in the Fund's future portfolio.
HOLDINGS BY GEOGRAPHIC REGION - 9/30/98
[THE FOLLOWING TABLES WERE DEPICTED AS PIE CHARTS IN THE PRINTED MATERIAL.]
Europe 39.9%
Japan 6.6%
Asia/Pacific Rim 6.0%
South Africa 0.6%
Cash 2.9%
United States 44.9%
What are Global Convertible Securities?
Global convertible securities are bonds, preferred shares and warrants of
domestic or foreign issuers which may be converted into a fixed number of shares
of the underlying company. Convertibles are hybrid securities which combine the
capital appreciation potential of equities with the higher yield of fixed income
instruments. They can be thought of as a straight bond together with an embedded
call option (or warrant) on the underlying equity.
What are the Benefits of Global Convertible Securities?
Reduced volatility is foremost. Investing in foreign equity markets can be
rewarding but volatile. Our goal is to earn a high, risk-adjusted rate of
return. Due to its fixed income characteristics, a convertible security will
provide more stability than its underlying common stock. In the current market
environment, the Gabelli Global Convertible Securities Fund provides an
attractive alternative by combining the capital appreciation potential of global
equity investing with the higher current income usually associated with bonds.
COMMENTARY
Global View--The United States
The Standard and Poor's ("S&P") 500 Index was down 9.9% in the third
quarter and has risen 6.0% year-to-date. The U.S. stock market is the world's
largest, with an equity market capitalization of over 11 trillion dollars, or
48% of the world's total equity value. The tenor of the U.S. market is important
for markets elsewhere. The main driver behind the U.S. economy is the consumer,
which accounts for two-thirds of Gross Domestic Product ("GDP"). Now the
question is will the consumer keep spending or will the economic turmoil abroad
spill over into the domestic economy and slow consumption. The latest economic
data confirms a gradual slowing led by the external sector. The August trade
deficit rose to a record high of $16.8 billion, or $109.9 billion year-to-date.
This represents a 52% increase over the comparable nine month period last year.
The trade deficit is expected to slow third quarter GDP by 1.0% to an annual
rate of roughly 2.0%. However, despite the slowdown in exports, the average
earnings
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estimates for the S&P 500 are expected to grow by 5.0% next year to $48.14.
Optimism for this forecast is founded in the market's expectation of a further
cut in short term interest rates. After reducing rates 50 basis points since
September, the futures market expects the Federal Reserve Board to cut rates by
an additional 75 basis points over the next twelve months to 4.25%. As long as
deflation is avoided, falling interest rates will provide equities with a pillar
of valuation support. Meanwhile, we continue to monitor other important drivers
of the bull market. Prior to August, when the Russian default occurred,
investors had been contributing a net $17.62 billion per month to mutual funds.
Despite August's record $11.2 billion net outflow, initial estimates indicate
that confidence has returned in September with only modest withdrawals.
Likewise, merger and acquisition activity which appeared to have stalled came
roaring back in October with deals announced by McKesson, Newell, Clorox and
Kroger. We believe these trends are likely to continue.
Latin America
Latin American equity markets were among the world's worst performing,
falling by 25.9% in the third quarter and 41.5% year-to-date. The U.S. economy
is more exposed to Latin America than it is to Russia or Asia. Approximately
twelve percent of U.S. corporate overseas profits come from Latin America
compared with six percent for Asia. Consequently, it is critical that Latin
America in general and Brazil in particular stabilize their economies. Brazil's
nominal GDP is $770 billion. Real GDP is expected to grow by just 0.7% in 1998
as short term interest rates have risen to over 40% in order to defend the
country's currency peg. Although inflation is low at under 2.0%, the country is
running substantial fiscal budget and current account deficits of 7.6% and 4.0%
of GNP, respectively. Capital flight has led to a $32 billion reduction in
foreign exchange reserves since August.
To stem the tide, it is essential that Brazil's President Cardosa
implement the necessary fiscal reforms to narrow the budget deficit and restore
confidence. To that end, an external support package of $30 billion is now being
arranged to fill the gap in Brazil's balance of payments. The Fund has no direct
investments in Latin America at this time. Alternatively, we have invested in
Telefonica, Spain's incumbent telecommunications provider, which has investments
in the region.
Europe
Developed European equity markets fell by 15.2% in the third quarter. This
does not include the emerging Eastern European markets which fell by twice this
amount, led by Russia's 71.1% decline. Although the economies of the European
Union will be affected by a global slowdown in activity, they are expected to
grow at over 2.0% this year and next. Interest rates and inflation remain low.
When the new single currency, the Euro, is introduced on January 1, 1999, we
expect short term interest rates to converge around 3.0%. On an aggregate basis,
earnings are expected to grow around 7.0% next year. This positive outlook for
financial assets is reinforced by the continued need for corporate restructuring
and the demographic pressure on pension funds to rebalance portfolios toward
equities.
The fund continues to emphasize Europe with a double overweight position
in the region. On an industry basis, we are focusing on domestic, franchise
businesses such as cable, media and telecommunications companies which are
partially insulated from the current economic turmoil. Specific investments
include NTLI, the U.K. cable operator; Mediaset, the Italian broadcaster; and
Mannesmann, the German conglomerate with an increasing presence in
telecommunications.
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Asia
Despite passage of a 60 trillion yen ($510 billion) banking rescue plan,
the Japanese economy remains weak. The economy is expected to continue in
recession next year, with GDP falling by over 2.0%. Bankruptcies rose 27% year
over year through the first half of fiscal 1998. Most notable was the insolvency
of Japan's tenth-largest bank, Long Term Credit Bank, with problem loans of $39
billion, which became the first bank to be nationalized since the Second World
War. The fund remains significantly underweight in Asia and will remain so until
more tangible signs of recovery become clear.
Let's Talk Converts
The following are specifics on selected holdings of our Fund. Favorable
earnings prospects do not necessarily translate into higher 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.
AES Corp. (AES.T - $56.875 - NYSE) is the world's leading global power company
with 100 power plants that serve 13 million customers in 17 countries. Revenue
in 1997 totaled $1.4 billion: 24% was generated in North America; 41% in Latin
America; 23% in Asia; and 12% in Europe. As an independent power producer
("IPP"), AES has strengthened its position in Southeast Asia, particularly in
China and Pakistan, while launching a new $120-140 million investment initiative
in Bangladesh. Consistent competitive performance in the U.S., Argentine and
Brazilian markets has resulted in 30% expected earnings per share growth in
1998. Currently, AES has $110 billion in backlog sales and is well positioned to
grow internationally and further improve its market share.
Selling at $56.875 with the stock at $37, the convertible preferred offers
upside participation with only an 11% premium and a 4.75% yield advantage over
the common stock.
AirTouch Communications Inc. (ATI.C - $81.50 - NYSE) is a wireless carrier with
holdings in the U.S. and eleven other countries including Italy, Portugal, Spain
and Sweden. The company specializes in providing cellular and paging services to
customers throughout the world. In April, the purchase of the cellular assets of
MediaOne (previously US West Media) boosted cellular subscribers by 55% making
AirTouch the largest cellular provider in the U.S. Additional domestic
investments in PrimeCo PCS helped to propel ATI's 48% EBITDA (earnings before
interest, taxes, depreciation and amortization) margins which are among the
highest in the industry. International growth continues to flourish for the
company as well. Mannesman Mobilfunk, ATI's 35%-owned operation in Germany,
added over 400,000 subscribers in April and May alone, an increase which
contributed over 200,000 proportionate subscribers to AirTouch in the quarter.
With a low premium of 3.5%, this convertible preferred shows nearly full
participation in the equity. Trading at $81.50, this preferred has a yield
advantage of 2.6% and is callable in August 2000.
Antec Corp. (Sub. Deb. Cv. 4.50%, 05/15/03) is involved in maintenance
equipment, optical transmission, construction and rebuilding for the broadband
communications industry. Antec is the largest distributor of telewire technology
and holds over a 50% market share. With 35 million shares outstanding, the
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company has an equity market capitalization of $540 million. Revenues for third
quarter 1998 totaled $150 million, 28% of which came from sales to
Tele-Communications Inc., a cable company which owns 19% of Antec. Recently,
TCl's Chairman John Malone agreed to sell TCI to AT&T for $48 billion. In 1997,
TCI slashed their capital expenditures from $1.9 billion to $571 million, which
caused TCI to lag behind other cable companies in terms of modernizing their
networks. By the year 2000, TCI plans to invest $3.1 billion to upgrade and
maintain their existing cable networks to accommodate a variety of multimedia
services. This increases capital spending which will translate into improved net
sales for Antec.
With the stock at $15.375, Antec's 4.50% convertible bonds due in May 2003
trade at $87.50. The bonds offer good balanced exposure to the stock on a 36%
premium and 5.125% current yield. Hard call protection expires in 2001.
Loral Space and Communications Ltd. (LOR.A - $44.50 - NYSE) has built an
extensive global satellite communications network that operates in satellite
design and construction, high speed satellite services, global Internet access,
mobile telephony and multimedia delivery. Capitalizing on the significant growth
potential in satellite services, Loral is actively developing its
bandwidth-on-demand systems such as the new CyberStar system. The purchase of
Mexican SatMex and a joint venture with the EuropeStar satellite systems coupled
with aggressive acquisitions to increase capacity and secure entry to high
return, value-added markets compliment the company's service focus. Loral's 1998
expected EBITDA is $126 million, up over 60% from 1997. CEO Bernard Schwartz
expects rapid growth in 1998 and an EBITDA near $1 billion in 2000.
This convertible preferred trades on a 19% premium with a current yield of
6.9% versus no dividend on the common stock.
Moevenpick (0.0%, 02/11/13) is a major international restaurant and hotel group
which operates mainly in the Swiss and German markets. Presently, restaurants
are their core business, comprising 58% of revenue, while hotels and consumer
goods make up 22% and 20%, respectively. In the first half of 1998, Moevenpick's
operating income increased 17% while net income jumped 25-fold aided by the sale
of Autogrill SpA. The company sold its 10% stake in Italy's Autogrill SpA to
Schroders for a gain of CHF 282 million ($204 million). Moevenpick plans to
expand its restaurant and hotel holdings into the Middle East, Asia, Latin
America and Africa.
With the stock at CHF 620, Moevenpick's zero percent deutsche mark
denominated convertible bond due in February 2013 trades at 68.00. With only an
11% premium, the bond is expected to offer solid upside potential. However, with
an investor's put option at 74.25 in 2003, the bond enjoys nice downside
support.
NTL Inc. (Sub. Deb. Cv. 7.00%, 06/15/08) is a large alternative
telecommunications and cable company based in New York that owns and operates
one of only five independent telecom networks in the United Kingdom. NTL bought
two British cable companies, Diamond Cable Communications and Comtel during the
first quarter of 1998. These acquisitions put 5.2 million households or 25% of
the U.K. population
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under NTL's cable telephone franchise, placing NTL at the forefront of the
British telecommunications industry. The addition of these two companies
increased quarterly revenues from $590 million to $984 million, while EBITDA
nearly doubled, rising from $55 million to $104 million.
With expected breakeven in one year, this in-the-money convertible bond
has a current yield advantage of 5.75% and a modest premium of 6%. June 1999
marks its call date.
Scandinavian Broadcasting System SA (Sub. Deb. Cv. 7.00%, 12/01/04) owns and
operates commercial television and radio broadcast stations throughout northern
Europe and anticipates net revenue of $325 million in 1998. Collaboration with
the Home Shopping Network (HSN) allowed for the recent HSN-SBS Italia venture,
which is broadcast via the Rete Mia network to 70% of Italian households. With
the award of the first license for Hungary's newly private national television
network, SBS is enjoying the success of Hungarian TV2 and its 32.5% share in
prime time viewing. Continuing in its development phase, SBS should realize
positive cash flow in 1998 and an enterprise value of $743 million in 1999. CEO
Harry Evans Sloan shows close ties to shareholder interests by his 13% ownership
interest. His strategic management has been further enhanced by the expertise of
Vice Chairman Michael Finkelstein, the former CEO of Renaissance Communications
Corp.
With the bonds at $95, SBS's 7.00% convertible bond due in December 2004
offers an attractive current yield of 7.4%. The common stock pays no dividend.
The premium is a modest 3% with call protection until December 2000.
Swiss Life (1.50%, 05/20/03). In April 1998, Swiss Life issued a 250 million
dollar 1.50% convertible bond due in May 2003 that is exchangeable into
Mannesmann common stock at a price of DM 197.5. With the stock at DM 153, the
bonds trade at 112.50 on a 32% premium and 1.3% current yield. The bonds enjoy a
premium redemption price of 110.83, thereby enhancing its defensive
characteristics. Mannesmann is Germany's fifteenth largest company with an
equity market capitalization of $34 billion. Mannesmann has a breadth of
production and services spanning machinery and engineering, automotive
engineering and telecommunications. Through majority ownership of MobilFunk and
an interest in fixed line operator Arcor, Mannesmann has moved to capture the
newly liberalized German telecom market. Allocating 40% of its investment budget
to telecommunications capital expenditures, Mannesmann predicts that 67% of 1999
earnings will come from its telecom division. Yet telecom comprised only 17% of
total sales in 1997. Subsidiary Rexroth continues to be a global leader in
hydraulic systems and components. International stakes in Italian Omnitel Pronto
Italia and French Societe Francaise du Radiotelephone (through a 10% interest in
Cegetel) evidence CEO Dr. Joachim Funk's agenda to increase shareholder value.
Volkswagen (3.00%, 01/24/02) is a German-based leader in the automotive industry
that manufactures Audi, Seat and Skoda cars for sale worldwide. Recently,
Volkswagen has actively pursued a policy of expansion into the luxury segment of
the automobile industry through the acquisition of Rolls Royce for STG 430
million (USD 700 million) and the purchase of the Italian sports car company
Lamborghini. As a result of the recent success of new models, U.S. sales are
expected to rise by 12% in 1998. Chief Executive Ferdinand Piech has set a goal
of increasing unit sales to approximately six million cars by the year 2000, a
40% increase from a previous goal of 4.3 million. Due to favorable conditions in
the U.S.
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and Europe, VW continues to experience strong EBITDA growth which is expected to
increase by over 50% to DM 12 billion (USD 6.6 billion) in 1998.
The 3.00% convertible bond due in January 2002 is rated A+ by Standard and
Poor's. Highly equity sensitive, this bond trades at $141.50 with nearly 100%
equity participation.
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 Convertible Securities 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. Ask our representatives about the advantage of converting to a Roth IRA
before 1999.
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].
Shareholders will soon be able to receive quarterly reports from Gabelli
Funds via e-mail. We anticipate that this service will be available in early
1999. If you are interested in receiving your quarterly report via e-mail,
please send an e-mail to [email protected] with your name and address and
we will provide you with the appropriate forms. Our investor representatives are
available at 1-800-GABELLI (1-800-422-3554) to assist you as well.
In Conclusion
The third quarter proved difficult for investors in almost all markets
except risk free Treasury bonds which benefited from a flight to quality. As
risk premiums rose and credit became tight, financial markets fell. Are we
poised on the verge of another depression? Gloomy pundits may think so, but we
do not. The Great Depression resulted from a series of policy failures which
included rising interest rates, higher taxes and protectionism. Today, we see a
trend of falling interest rates and lower taxes in the world's major economies.
Although cries for protectionism are being heard, especially from hard hit
sectors like the steel industry, international organizations such as the World
Trade Organization now provide a legal framework to protect free markets.
8
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Is the worst over? We do not know. But, we are beginning to see tangible
signs of a loosening of the credit crunch which has paralyzed financial markets
since the Russian default. Credit spreads, which had virtually doubled in every
market, have shown signs of abatement. The new issue corporate debt market has
reopened. In short, we do not believe the world is coming to an end. However, as
uncertainty abounds in the short run, volatility will prevail. We welcome this
opportunity to buy great businesses at attractive prices through the relative
safety of global convertible securities. We thank you for your continued support
of our investment process and promise to continue striving to generate
competitive risk-adjusted returns.
The Fund's daily net asset value is available in the financial press and
each evening after 6:00 PM (Eastern Time) by calling 1-800-GABELLI
(1-800-422-3554). The Fund's Nasdaq symbol is GAGCX. Please call us during the
business day for further information.
Sincerely,
/s/ A. Hartswell Woodson, III
A. Hartswell Woodson, III
Portfolio Manager
October 30, 1998
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Top Ten Holdings
September 30, 1998
Cablevision Systems Corp. Canal Plus / Mediaset
Houston Industries Inc./Time Warner Inc. Koninklijke Ahold NV
United News & Media plc Banco Comercial Portugues SA
Bell Atlantic/Cable & Wireless Comm. AirTouch Communications Inc.
International CableTel Inc. Nestle Holdings Inc.
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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.
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The Gabelli Global Convertible Securities Fund
Portfolio of Investments -- September 30, 1998 (Unaudited)
================================================================================
Principal Market
Amount Value
----- -----
CONVERTIBLE CORPORATE BONDS - 66.7%
Automotive - 2.1%
$ 100,000 Volkswagen International Finance
Sub. Deb. Cv
3.00%, 01/24/02 ................................... $ 142,250
----------
Broadcasting - 4.8%
1,000,000(b) Canal Plus / Mediaset Sub. Deb. Cv
3.50%, 04/01/02 239,081
100,000 Scandinavian Broadcasting
System SA Cv
7.00%, 12/01/04 ................................... 95,000
----------
334,081
----------
Building and Construction - 1.3%
250,000 Bacnotan Consolidated Industries Inc.
Sub. Deb. Cv.
5.50%, 06/21/04 ................................... 88,750
----------
Business Services - 1.3%
100,000 Interim Services Inc. Sub. Deb. Cv.
4.50%, 06/01/05 ................................... 87,000
----------
Cable - 6.9%
250,000 Bell Atlantic Financial
4.25%, 09/15/05 (a) ............................... 243,124
200,000 International CableTel Inc. Sub. Deb.
Cv. 7.00%, 06/15/08 ............................... 242,000
----------
485,124
----------
Consumer Products - 7.6%
150,000 Central Garden and Pet Co. Sub. Deb. Cv.
6.00%, 11/15/03 (a) ............................... 135,000
150,000 Nestle Holdings Inc.
3.00%, 06/17/02 ................................... 200,624
20,000,000(c) Sony Corp. Sub. Deb. Cv.
1.40%, 03/31/05 ................................... 195,416
----------
531,040
----------
Consumer Services - 2.3%
150,000 Equity Corp. International
4.50%, 12/31/04 ................................... 162,000
----------
Diversified Industrial - 4.6%
20,000,000(c) Matsushita Electric Works Ltd.
Sub. Deb. Cv.
2.70%, 05/31/02 ................................... 176,903
250,000 Vernen Neder Cv.
2.75%, 04/15/05 ................................... 142,567
----------
319,470
----------
Energy - 4.5%
125,000 Diamond Offshore Drilling Inc.
Sub. Deb. Cv.
3.75%, 02/15/07 ................................... 116,094
100,000 National Grid Co. plc
4.25%, 02/17/08(a) ................................ 197,343
----------
313,437
----------
Entertainment - 1.9%
120,000 Havas SA Cv.
3.50%, 01/01/03 ................................... 129,532
----------
Equipment and Supplies - 1.2%
100,000 Antec Corp. Sub. Deb. Cv.
4.50%, 05/15/03 ................................... 89,625
----------
Financial Services - 4.9%
100,000 Allianz Finance BV Cv.
3.00%, 02/04/03 ................................... 60,954
100,000 Berkshire Hathaway
1.00%, 12/02/01 ................................... 122,813
150,000 Cregem Finance NV Sub. Deb. Cv.
2.75%, 01/06/04 ................................... 153,750
----------
337,517
----------
Food and Beverage - 2.4%
400,000 Moevenpick Finance Ltd. Cv.
0.00%, 02/11/13 ................................... 167,529
----------
Health Care - 2.3%
100,000 Sandoz Capital Novartis Sub. Deb. Cv.
2.00%, 10/06/02 ................................... 156,500
----------
Publishing - 6.1%
250,000 Medya Holding Sub. Deb. Cv.
10.00%, 06/28/01 .................................. 168,750
150,000(d) United News & Media plc
Sub. Deb. Cv.
6.13%, 12/03/03 ................................... 252,839
----------
421,589
----------
Retail - 5.7%
100,000 Home Depot Inc. Sub. Deb. Cv.
3.25%, 10/01/01 ................................... 174,500
400,000 Koninklijke Ahold NV Cv.
3.00%, 09/03/01 ................................... 221,847
----------
396,347
----------
Telecommunications - 1.8%
100,000 Telefoncia Europe BV Sub. Deb. Cv.
2.00%, 07/15/02 ................................... 128,000
----------
Transportation - 2.1%
207,000 International Container Terminal
Services Sub. Deb. Cv.
1.75%, 03/13/04 ................................... 146,970
----------
Wireless Communications - 2.9%
175,000 Swiss Life / Mannesmann AG
Sub. Deb. Cv.
1.50%, 05/20/03 (a) ............................... 197,750
----------
TOTAL CONVERTIBLE
CORPORATE BONDS ................................... 4,634,511
----------
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The Gabelli Global Convertible Securities Fund
Portfolio of Investments (Continued) -- September 30, 1998 (Unaudited)
================================================================================
Market
Shares Value
------ -----
CONVERTIBLE PREFERRED STOCKS - 23.8%
Business Services - 1.7%
4,800 Cendant Corp.
7.50% Cv. Pfd. .................................... $ 120,000
----------
Cable - 8.2%
4,500 Cablevision Systems Corp.
8.50% Cv. Pfd., Ser. I ............................ 297,000
3,500 Houston Industries Inc./Time Warner Inc.
7.00% Cv. Pfd. .................................... 267,094
----------
564,094
----------
Energy - 4.4%
3,000 AES Trust Corp.
5.38% Cv. Pfd. .................................... 170,625
4,000 EVI Inc.
5.00% Cv. Pfd. (a) ................................ 134,500
----------
305,125
----------
Financial Services - 3.0%
2,000 Banco Comercial Portugues SA
8.00% Cv. Pfd. .................................... 209,000
----------
Telecommunications - 1.6%
3,000 Winstar Communications
7.00% Cv. Pfd. (a) ................................ 109,500
----------
Wireless Communications - 4.9%
2,500 AirTouch Communications Inc.
4.25% Cv. Pfd., Cl. C ............................. 203,750
3,100 Loral Space and Communications Ltd.
6.00% Cv. ......................................... 137,950
----------
341,700
----------
TOTAL CONVERTIBLE
PREFERRED STOCKS .................................. 1,649,419
----------
PREFERRED STOCKS - 4.2%
Consumer Products - 4.2%
1,000 McKesson Financial Trust Pfd. ....................... 124,563
3,000 Newell Financial Trust Pfd. ......................... 169,125
----------
TOTAL PREFERRED STOCKS .............................. 293,688
----------
COMMON STOCKS - 1.7%
Aviation: Parts and Services - 1.1%
10,000 Jamco Corp. ......................................... 71,261
----------
Metals and Mining - 0.5%
10,000 Durban Roodepoort Deep Ltd. + ....................... 32,738
----------
Wireless Communications - 0.1%
13,000 Total Access Communications plc+ .................... 8,645
----------
TOTAL COMMON STOCKS ................................. 112,644
----------
OPTIONS - 1.3%
20 S&P 500 Put Options ................................. 90,500
----------
WARRANTS - 0.3%
Diversified Industrial - 0.2%
100 Mori Seiki + ........................................ 13,750
----------
Entertainment - 0.0%
50 Shochiku Co. Ltd. + ................................. 1,275
----------
Metals and Mining - 0.1%
15,000 Durban Roodepoort Deep Ltd. + ....................... 5,443
----------
TOTAL WARRANTS ...................................... 20,468
----------
Principal
Amount
------ U.S. GOVERNMENT OBLIGATIONS - 1.6%
$ 112,000 U.S. Treasury Bills,
4.36%++, due 12/24/98 ............................. 110,855
----------
TOTAL INVESTMENTS - 99.6% ........................... 6,912,085
Other Assets and Liabilities (Net) - 0.4% ........... 25,736
----------
NET ASSETS - 100.0%
(763,150 shares outstanding) ...................... $6,937,821
==========
NET ASSET VALUE,
Offering and Redemption
Price Per Share ................................... $9.09
=====
FORWARD FOREIGN EXCHANGE CONTRACTS
Net Unrealized
Settlement Appreciation
Date (Depreciation)
---- --------------
56,630,000(c) Deliver Japanese Yen
in exchange for
USD 475,682 ................... 11/25/98 $ 57,581
271,276(e) Deliver Dutch Guilders
in exchange for
USD 143,707 ................... 10/01/98 200
206,148(f) Deliver Thai Baht
in excahnge for
USD 5,289 ..................... 10/02/98 67
2,045,375(g) Deliver Hong Kong Dollars
in exchange for
USD 250,000 ................... 11/26/98 (12,951)
312,305(h) Deliver Australian Dollars
in exchange for
USD 500,000 ................... 05/16/99 (22,074)
- ----------
(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
September 30, 1998, the market value of Rule 144A securities amounted to
$1,017,217 or 14.7% of net assets.
(b) Principal amount denoted in French Francs.
(c) Principal amount denoted in Japanese Yen.
(d) Principal amount denoted in British Pounds.
(e) Principal amount denoted in Dutch Guilders.
(f) Principal amount denoted in Thai Baht.
(g) Principal amount denoted in Hong Kong Dollars.
(h) Principal amount denoted in Australian Dollars.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
11
<PAGE>
Gabelli Global Series Funds, Inc.
The Gabelli Global Convertible Securities Fund
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
fax: 1-914-921-5118
http://www.gabelli.com
e-mail: [email protected]
(Net Asset Value may be obtained daily by calling
1-800-GABELLI after 6:00 P.M.)
Board of Directors
Mario J. Gabelli, Karl Otto Pohl
CFA 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 A. Hartswell Woodson, III
President and Chief Vice President and
Investment Officer Portfolio Manager
Bruce N. Alpert James E. McKee
Vice President and Secretary
Treasurer
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 Convertible Securities Fund. It is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
- --------------------------------------------------------------------------------
