Global
Entertainment
Media
Gabelli
Global Interactive
Couch Potato(R) Fund
ANNUAL REPORT
DECEMBER 31, 1998
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Global
Entertainment
Media
[PHOTO OMITTED]
Marc J. Gabelli
Annual Report - December 31, 1998
The Gabelli Global Interactive Couch Potato(R) Fund
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* * * * *
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Morningstar rating(TM) of the Gabelli Global
Interactive Couch Potato(R) Fund was
5 stars overall and for the three
year period ended 12/31/98
among 2802 domestic equity funds.
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#1 Global Fund!
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(as ranked by Lipper Analytical Services
based on three year performance through
12/31/98 among 147 global funds).
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To Our Shareholders,
Global media stocks put on quite a show in 1998 as evidenced by the
Gabelli Global Interactive Couch Potato(R) Fund's strong returns. Media pundit
Marshall McCluhan is famous for saying, "The media is the message." This past
year, the message was loud and clear--buy high quality, dominant market share
media companies.
Investment Performance
For the fourth quarter ended December 31, 1998, The Gabelli Global
Interactive Couch Potato Fund's (the "Fund") total return was 21.4%. The Lipper
Analytical Services Global Fund Average and Morgan Stanley Capital International
World Free Index of global equity markets had returns of 17.4% and 21.1%,
respectively over the same period. Each index is an unmanaged indicator of
investment performance. The Fund was up 28.9% for 1998. The Lipper Global Fund
Average and Morgan Stanley World Free Index rose 14.3% and 22.0%, respectively,
over the same twelve month period.
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Past performance is no guarantee of future results. Morningstar proprietary
ratings reflect historical risk adjusted performance as of December 31, 1998 and
are subject to change every month. Morningstar ratings are calculated from a
Fund's three, five and ten year average annual returns in excess of 90-day
T-Bill returns with appropriate fee adjustments and a risk factor that reflects
fund performance below 90-day T-Bill returns. The top 10% of the funds in an
investment category receive five stars, the next 22.5% receive four stars, the
next 35% receive three stars, the next 22.5% receive two stars and the bottom
10% receive one star. Lipper Analytical Services ranked The Gabelli Global
Interactive Couch Potato(R) Fund 21 among 224 global funds for the one year
period ended December 31, 1998. Lipper rankings are based upon 12 month and
three year total returns at NAV.
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Interactive Couch Potato(R)
Interactive (in' ter ak' tiv) Having the capacity for communication flow in
each direction.*
Couch (kouch) An appellation for the heavy user of television,
depicted in the metaphor as plopped before the
Potato (po ta' to) television set like a vegetable with eyes. The
term was coined in the early 1980s by a group of
(pe ta' to) Baby Boomers in the San Francisco area who
playfully glorified their addiction to the tube.
Calling themselves The Couch Potatoes, they
formed a national club and published a hilarious
newsletter in the couch potato lifestyle
containing bizarre recipes for that vital
companion to the TV set, the toaster oven. After
a burst of enlistments, the club quietly
disappeared. All that remains today is the
metaphor, and its current use tends to be more
pejorative than self-mocking or affectionate.*
* Source: NTC Mass Media Directory.
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INVESTMENT RESULTS (a)
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Quarter
--------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
1998: Net Asset Value ... $16.45 $17.39 $15.17 $16.99 $16.99
Total Return ...... 15.2% 5.7% (12.8)% 21.4% 28.9%
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1997: Net Asset Value ... $11.79 $13.72 $15.02 $14.28 $14.28
Total Return ...... 0.3% 16.4% 9.5% 10.9% 41.7%
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1996: Net Asset Value ... $12.57 $13.40 $13.22 $11.75 $11.75
Total Return ...... 7.3% 6.6% (1.3)% (0.3)% 12.5%
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1995: Net Asset Value ... $10.62 $11.28 $12.30 $11.72 $11.72
Total Return ...... 3.6% 6.2% 9.0% (1.8)% 17.9%
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1994: Net Asset Value ... $9.90 $9.97 $10.54 $10.25 $10.25
Total Return ...... (1.0)%(b) 0.7% 5.7% (2.8)% 2.5%(b)
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Average Annual Returns - December 31, 1998 (a)
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1 Year ........................................ 28.9%
3 Year ........................................ 27.1%
Life of Fund (b) .............................. 20.4%
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Dividend History
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Payment (ex) Date Rate Per Share Reinvestment Price
----------------- -------------- ------------------
December 28, 1998 $1.385 $16.56
December 31, 1997 $2.370 $14.28
December 31, 1996 $1.436 $11.75
December 29, 1995 $0.363 $11.72
(a) Total returns and average annual returns reflect changes in share price and
reinvestment of dividends and are net of expenses. The net asset value of the
Fund is reduced on the ex-dividend (payment) date by the amount of the dividend
paid. Of course, returns represent past performance and do not guarantee future
results. Investment returns and the principal value of an investment will
fluctuate. When shares are redeemed they may be worth more or less than their
original cost.
(b) From commencement of investment operations on February 7, 1994. Note:
Investing in foreign securities involves risks not ordinarily associated with
investments in domestic issues, including currency fluctuation, economic and
political risks.
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COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI GLOBAL INTERACTIVE COUCH POTATO(R) FUND,
THE LIPPER GLOBAL FUND AVERAGE AND THE MORGAN STANLEY WORLD FREE INDEX
<TABLE>
<CAPTION>
Gabelli Global Interactive Lipper Global Morgan Stanley World
Couch Potato Fund Fund Average Free Index S&P 500 Index
----------------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
2/7/94 10000 10000 10000 10000
12/94 10250 9835 9849 9810
12/95 12080 11214 11766 13499
12/96 13590 13042 13319 16604
12/97 19257 14743 15316 22141
12/98 24828 16857 18681 28504
</TABLE>
For the three year period ended December 31, 1998, the Fund's total return
averaged 27.1% annually versus average annual total returns of 14.7% and 16.7%
for the Lipper Global Fund Average and Morgan Stanley World Free Index,
respectively. Since inception on February 7, 1994 through December 31, 1998, the
Fund had a cumulative total return of 148.4%, which equates to an average annual
return of 20.4%.
Global Allocation
The accompanying chart presents the Fund's holdings by geographic region
as of December 31, 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 - 12/31/98
[GRAPHIC OMITTED]
[The following table was depicted as a pie chart in the printed material.]
United States 69.9%
Europe 17.1%
Canada 4.6%
Japan 4.6%
Asia/Pacific Rim 3.8%
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Portfolio Structure
As we have indicated in past discussions, the Interactive Couch
Potato's(R) investment premise falls within the context of two main investment
universes: 1) companies involved in creativity, as it relates to the development
of intellectual property rights (copyrights); and 2) companies involved in
distribution, as it relates to the delivery of these copyrights. Additionally,
this includes the broad scope of communications-related services such as basic
voice and data.
[GRAPHIC OMITTED]
[The following table was depicted as a pie chart in the printed material.]
Distributions 58.7%
Copyright/Creativity 41.3%
The accompanying chart depicts our equity mix of the copyright/creativity
and distribution companies in our portfolio as of December 31, 1998.
COMMENTARY
1998 Revisited
During 1998, cable television stocks made the biggest and boldest
headlines. Cablevision Systems, Time Warner, Tele-Communications Inc. and
Comcast were prominent holdings in our Top Twenty performance list.
AT&T's acquisition of Tele-Communications Inc. surfaced the value of all
those coaxial connections to American homes. Cable television is no longer just
a home entertainment business. It is now high speed Internet access and will
soon become a legitimate long distance and local telephony provider. More deals
and/or joint ventures between long distance providers and cable operators are
likely as the major players in the telecommunications and cable television
industries seek alliances that will allow them to match the full range of
services that will be offered by the new AT&T/TCI juggernaut.
Cable television ("CATV") network stocks also performed well, with
Tele-Communications Inc./Liberty Media Group and Viacom closing the year near
the top of our performance charts. The common complaint of "50 channels and
still only a few things worth watching" underscores the strong demand for
quality cable network programming. The leading players in the cable network
industry--Time Warner with TBS and TNT, Viacom with MTV and Nickelodeon,
Cablevision with its collection of regional sports networks, News Corp. with its
far flung international cable network operations and Tele-Communications
Inc./Liberty Media Group which is a CATV network holding company--all have
bright futures.
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Our broadcast holdings, including Ackerley Group, Paxson Communications
and Young Broadcasting, underperformed. Newspaper companies such as the New York
Times, Times Mirror and Tribune Co. also disappointed. Broadcasters may continue
to lose audience share to cable networks, however, in our opinion, this is more
than fully discounted in current stock prices. Broadcasting will continue to be
a viable business and we expect to see further consolidation in the broadcasting
industry, with the bigger fish swallowing some of the remaining minnows in the
year ahead. The future of the newspaper business is less clear. Leading
newspaper companies must make the transition from print to multimedia. Many
publishers have been slow to recognize this fact and at this stage, they are
playing catch up. However, they have the human resources--all of those
experienced news and information gatherers--to eventually make this transition
successfully.
Looking Ahead
This is the Information/Entertainment Age. Technology is expanding media's
global reach and the convergence of the telephone (including cable), television
and computer is accelerating. It is truly a brave new world. Of course, not
every media company will succeed and some, notably the absurdly valued Internet
stocks, will leave investors holding the bag. We continue to focus on media
companies large and small that have dominant franchises and well conceived
strategies for taking advantage of the changes in the media industry. We believe
these types of companies will continue to be drivers of our portfolio.
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, 1998.
AirTouch Communications Inc. (ATI - $72.125 - NYSE), based in San Francisco, is
the world's largest wireless communications provider. With more than 35 million
total venture customers in 13 countries, AirTouch and its partners serve more
than ten percent of the world's wireless subscribers. AirTouch will offer
satellite communications in the future through its interest in the Globalstar
satellite system. Cash flow increased by approximately 25% in 1998. In April,
1998, the company completed the acquisition of MediaOne Group's (formerly US
West Media Group) U.S. wireless interests in a deal valued at almost $6 billion.
On January 15, 1999, Vodafone Group plc (VOD - $161.125 - NYSE) and AirTouch
signed a definitive merger agreement whereby Vodafone would acquire ATI for $97
per ATI share. Vodafone's bid successfully topped Bell Atlantic's (BEL - $53.00
- -NYSE) $45 billion bid for AirTouch.
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Cablevision Systems Corp. (CVC - $50.1875 - AMEX) is one of the nation's leading
telecommunications and entertainment companies, with a portfolio of operations
that span state-of-the-art, high-speed multimedia delivery, subscription cable
television services, championship professional sports teams and national cable
television networks. Headquartered in Bethpage, NY, Cablevision serves more than
3.4 million cable customers primarily in three core markets: New York, Boston
and Cleveland. Cablevision is a leader in delivering cutting-edge technological
innovation, such as Optimum TV. Through its Rainbow Media Holdings subsidiary,
Cablevision manages and develops internationally recognized content offerings
such as the popular national television networks, American Movie Classics, Bravo
and The Independent Film Channel. Cablevision has a controlling interest in New
York City's famed Madison Square Garden which includes the arena complex, the NY
Knicks, the NY Rangers and the MSG network. Cablevision operates Radio City
Entertainment and holds a long-term lease of Radio City Music Hall, home of the
world famous Radio City Rockettes.
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 - $8.1875 -Nasdaq) and has
a significant investment in Centennial Cellular Corp. (CYCLD - $41.00 - 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.
Comcast Corp. (CMCSA - $57.4375 - Nasdaq) is principally engaged in the
operation of hybrid fiber-coaxial broadband cable networks, cellular and
personal communications systems and as the provider of content. The company's
consolidated domestic cable operations served approximately 4.4 million
subscribers as of year end 1997. Satellite-delivered video service is provided
through the company's equity interest in Primestar Partners. Comcast has agreed
to sell its wireless division to SBC Communications in a transaction valued at
$1.7 billion. Personal communications services ("PCS") are provided through the
company's investment in Sprint Spectrum Holdings Company. Content is provided
through the company's majority-owned subsidiaries: QVC, an electronic retailer,
and E! Entertainment Television, as well as other investments, including Comcast
SportsNet, The Golf Channel, The Speedvision Network and The Outdoor Life
Network. Through QVC, the company markets a wide variety of products and is
available, on a full and part time basis, to over 68 million homes in the U.S.,
over 6.5 million homes in the U.K. and over 9.5 million homes in Germany.
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MediaOne Group Inc. (UMG - $47.00 - NYSE) is one of the nation's leading
broadband services company. It provides more than five million subscribers in 17
states with basic and premium cable television services and has recently
introduced high speed Internet access, telephone services and digital television
in some of its service areas. MediaOne was created from the 1996 union of
telecommunications company MediaOne Group (formerly US West Media Group) and
Continental Cablevision. Headquartered in Englewood, Colorado, MediaOne provides
high quality cable television services. The company is conducting a national
upgrade of its hybrid fiber optic/coaxial cable ("HFC") network to broadband
technology which improves traditional cable service and enables next-generation
products and services. The Group's investment interests include 25% of Time
Warner Entertainment (which includes Warner Brothers Studio and Home Box
Office), 24% of PCS Prime Co. and almost 27% of TeleWest plc.
Rogers Cantel Mobile Communications Inc. (RCN - $12.1875 - NYSE) is Canada's
largest wireless telecom company providing cellular, digital cellular, personal
communications services ("PCS"), paging and wireless data services to over 1.5
million cellular/PCS subscribers and 250,000 paging customers. The company
maintains strategic partnerships with AT&T and Radio Shack Canada. The Canadian
wireless industry is less competitive than the U.S. due to fewer participants
licensed in each market.
Seagram Co. (VO - $38.00 - NYSE), with its 1995 purchase of an 80% interest in
MCA from Matsushita Electric Industrial Co. for $5.7 billion, operates two
global businesses: beverages and entertainment. Spirits and Wine group's major
beverage brands include Chivas Regal, Absolut, Martell, Mumm, Crown Royal and
Seagram's Gin. Seagram also distributes Tropicana and Dole fruit juices. With
its December acquisition of Polygram, Seagram has created the world's leading
music company, the Universal Music Group. Seagram's entertainment business
includes the Universal Motion Pictures Group, the Universal Studios Recreation
Group and a 46% interest in USA Networks (USAI - $33.125 - Nasdaq).
TCI Ventures Group (TCIVA - $23.5625 - Nasdaq) is a portfolio of
telecommunications investments essentially controlled by Dr. John Malone of
Tele-Communications Inc. (TCOMA - $55.3125 - Nasdaq). The company has interests
in telephony and programming businesses together with a 39% equity interest in
United Video Satellite Group (UVSGA - $23.625 - Nasdaq) and a 39% equity
interest in @Home (ATHM - $74.25 - Nasdaq). The company is slated to be part of
the transaction proposed by AT&T (T - $75.25 - NYSE) to acquire all of the TCI
group, whereupon TCIVA's shares are to be converted into Liberty Media Group.
Tele-Communications Inc. (TCOMA - $55.3125 - Nasdaq), one of the largest cable
television operators in the U.S., is guided by Dr. John 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
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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". AT&T (T - $75.25 - NYSE) has agreed to acquire Tele-Communications,
offering 0.7757 AT&T shares for each TCOMA share. In anticipation of TCOMA's
merger with AT&T, Tele-Communications has announced it will merge with TCI
Communications.
Tele-Communications Inc./Liberty Media Group (LBTYA - $46.0625 - Nasdaq) owns a
collection of interests in some of the most powerful programming entities in the
world. Liberty Media is the second largest investor in Time Warner, the world's
largest media company. Liberty Media, News Corp. and Tele-Communications Inc.
have created a global sports joint venture, Fox Sports, that offers an
integrated package of sports programming across network broadcast, national
cable, and regional cable channels. Liberty's 49%-owned Discovery Communications
is a major, advertiser-supported basic cable network that includes the flagship
Discovery Channel, The Learning Channel and developing businesses such as
Discovery Europe and Animal Planet.
Telephone & Data Systems Inc. (TDS - $44.9375 - 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 2.4 million customers
in 35 states. TDS owns 81.1% of United States Cellular Corp. (USM - $38.00 -
AMEX), the nation's seventh largest cellular telephone company. It also owns
82.4% of Aerial Communications Inc. (AERL - $5.875 - Nasdaq), TDS's PCS
subsidiary which owns the licenses to provide PCS service in six major trading
areas ("MTAs") encompassing approximately 27.6 million population equivalents.
On December 8, 1998, TDS announced its intent to spin-off its Aerial stake to
existing TDS shareholders on a tax-free basis and focus on its core wireline and
cellular operations. The transaction is expected to close in six to nine months.
Time Warner Inc. (TWX - $62.0625 - NYSE), with its 1996 acquisition of Turner
Broadcasting System, became entrenched as the global leader in media and
entertainment with interests in filmed entertainment, television production and
broadcasting, recorded music, cable television programming, magazine and book
publishing, direct marketing and cable television systems. The combined
companies have more than $24 billion in revenues and nearly $5.5 billion in
EBITDA. Time Warner controls a host of powerful brands, such as Warner Brothers,
CNN, HBO, Cinemax and Time and People magazines. Under the leadership of
Chairman Gerald Levin and Vice Chairman Ted Turner, the company is focused on
reducing its debt (now down to approximately $9 billion) and simplifying its
capital structure.
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USA Networks Inc. (USAI - $33.125 - Nasdaq), through its subsidiaries, engages
in diversified media and electronic commerce businesses that include: electronic
retailing, ticketing operations and television broadcasting. Chairman and CEO
Barry Diller has brought together under one umbrella: the USA Network, the
Sci-Fi Channel, USA Networks Studios, USA Broadcasting, The Home Shopping
Network and the Ticketmaster Group. The plan is to integrate these assets,
leveraging programming, production capabilities and electronic commerce across
this strong distribution platform.
Viacom Inc. (VIA'A - $73.5625 - AMEX; VIA'B - $74.00 - AMEX), long a major
provider of entertainment "content", has evolved into one of the world's
dominant media companies. The addition of Paramount Communications, Blockbuster
Entertainment (acquired in 1994), along with publisher Simon & Schuster, makes
Viacom one of the largest entertainment and publishing companies. Non-core
assets are being divested and debt has been reduced to approximately $8 billion.
Viacom is focusing on global expansion of its media franchises. Viacom is
particularly well-positioned in music (notably MTV) and cable networks (such as
Nickelodeon).
Vivendi (EX. PA - $259.58 - Paris Stock Exchange) is France's largest
environmental services company engaged in water purification and distribution,
energy, waste management, construction and communications. The group owns 44% of
Cegetel, France's second largest telecommunications operator. Sales at Cegetel
rose 90% in 1998 to $3.4 billion following the company's launch of long distance
service and the boom in demand for mobile services. Only five percent of sales
are generated in emerging markets. With 159 million shares outstanding, the
company has an equity market capitalization of Euro 35 billion or $40 billion.
Minimum Initial Investment - $1,000
The Fund's minimum initial investment for both regular and retirement
accounts is $1,000. There are no subsequent investment minimums. No initial
minimum is required for those establishing an Automatic Investment Plan.
Additionally, The Gabelli Global Interactive Couch Potato(R) Fund and other
Gabelli Funds are available through the no-transaction fee programs at many
major discount brokerage firms.
The Roth IRA
The Taxpayer Relief Act of 1997 included new tax incentives and more
opportunities to save for retirement and other major expenditures. The Roth IRA
is just one of these new opportunities now available at Gabelli Funds. Our
investor representatives are available at 1-800-GABELLI (1-800-422-3554) to
speak with you about the advantages of converting to a Roth IRA and to discuss
your investment choices.
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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 Asset Management 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
It has been another terrific year for media stocks. Ongoing technological
change, mergers and joint ventures between leading companies from different
sectors of the industry and the enormous potential for international expansion
should continue to make media stocks a vibrant sector of the global equity
markets.
The Fund's daily net asset value is available in the financial press and
each evening after 6:00 PM (Eastern Time) by calling 1-800-GABELLI
(1-800-422-3554). The Fund's Nasdaq symbol is GICPX. Please call us during the
business day for further information.
Sincerely,
Marc J. Gabelli
Portfolio Manager
January 29, 1999
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Top Ten Holdings
December 31, 1998
-----------------
TCI/Liberty Media Group Cablevision Systems Corp.
Viacom Inc. Vivendi
TCI Ventures Group Telephone & Data Systems Inc.
USA Networks Inc. Comcast Corp.
Tele-Communications Inc. Seagram Co.
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NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period stated in this report. The manager's views
are subject to change at any time based on market and other conditions.
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The Gabelli Global Interactive Couch Potato(R) Fund
Portfolio of Investments -- December 31, 1998
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS -- 97.7%
Broadcasting -- 9.4%
55,000 Ackerley Group Inc. ................... $ 528,733 $1,003,750
20,000 Audiofina ............................. 802,171 902,402
100,000 Flextech plc+ ......................... 776,459 1,009,926
44,000 Granada Group plc ..................... 710,602 777,826
500 NRJ SA ................................ 82,628 89,509
50,000 Paxson Communications Corp.+ .......... 481,553 459,375
48,000 Sinclair Broadcast Group Inc.+ ........ 640,502 939,001
83,000 Tokyo Broadcasting System Inc. ........ 851,731 929,363
20,000 Young Broadcasting Inc., Cl. A+ ....... 670,363 837,500
---------- ----------
5,544,742 6,948,652
---------- ----------
Business Services -- 4.3%
10,000 Berlitz International Inc.+ ........... 161,981 290,000
11,000 Vivendi ............................... 2,292,011 2,855,349
---------- ----------
2,453,992 3,145,349
---------- ----------
Cable -- 20.7%
60,000 Cablevision Systems Corp., Cl. A+ ..... 483,484 3,011,250
30,000 Comcast Corp., Cl. A .................. 688,613 1,723,125
35,000 MediaOne Group Inc.+ .................. 1,192,806 1,645,000
15,000 NTL Inc.+ ............................. 763,125 846,563
180,000 TCI Ventures Group, Cl. A+ ............ 2,537,582 4,241,249
55,000 Tele-Communications Inc., Cl. A+ ...... 1,604,080 3,042,187
40,000 United International
Holdings Inc., Cl. A+ ............... 451,715 770,000
---------- ----------
7,721,405 15,279,374
---------- ----------
Communications Equipment -- 1.0%
6,300 Mannesmann AG ......................... 692,365 722,475
---------- ----------
Entertainment -- 12.1%
123,200 Tele-Communications Inc./
Liberty Media Group, Cl. A+ ........... 2,369,723 5,674,900
100,000 USA Networks Inc.+ .................... 1,774,097 3,312,500
---------- ----------
4,143,820 8,987,400
---------- ----------
Entertainment Distribution -- 1.1%
20,000 GC Companies Inc.+ .................... 727,907 832,500
---------- ----------
Global Entertainment -- 13.0%
5,000 Canal Plus ............................ 958,058 1,365,018
130,000 EMI Group plc ......................... 768,330 916,005
45,000 Seagram Co. ........................... 1,592,001 1,710,000
20,000 Time Warner Inc. ...................... 531,990 1,241,250
40,000 Viacom Inc., Cl. A+ ................... 1,416,389 2,942,500
20,000 Viacom Inc., Cl. B+ ................... 544,082 1,480,000
---------- ----------
5,810,850 9,654,773
---------- ----------
Hotels and Gaming -- 1.0%
25,000 Gaylord Entertainment Co., Cl. A ...... 784,646 753,125
---------- ----------
Publishing -- 13.4%
63,500 Arnoldo Mondadori Editore SpA ......... 778,747 841,459
10,000 Central Newspapers Inc., Cl. A ........ 678,825 714,375
15,000 Dow Jones & Co. Inc. .................. 703,107 721,875
37,500 Independent Newspapers Ltd. ........... 114,689 153,759
162,500 Independent Newspapers plc ............ 734,815 682,678
21,000 McClatchy Newspapers Inc., Cl. A ...... 691,331 742,875
20,000 New York Times Co., Cl. A ............. 518,150 693,750
75,000 Primedia Inc.+ ........................ 846,329 881,250
10,000 Pulitzer Publishing Co. ............... 558,107 866,250
40,000 Reader's Digest Association
Inc., Cl. A ......................... 741,160 1,007,500
20,000 Scripps (E.W.) Co. .................... 906,367 995,000
15,000 Tribune Co. ........................... 883,581 990,000
50,000 United News & Media plc ............... 513,568 438,411
10,000 United News & Media plc, ADR .......... 155,765 181,250
---------- ----------
8,824,541 9,910,432
---------- ----------
Satellite -- 1.6%
150,000 APT Satellite Holdings Ltd.,
ADR+ ................................ 738,105 609,375
34,000 Asia Satellite Telecommunications
Holdings Ltd., ADR .................. 631,261 595,000
---------- ----------
1,369,366 1,204,375
---------- ----------
Telecommunications -- 12.0%
21,000 Bell Atlantic Corp. ................... 1,174,213 1,113,000
110,752 Citizens Utilities Co., Cl. B+ ........ 987,637 899,856
230 DDI Corp. ............................. 826,288 856,409
38,000 Frontier Corp. ........................ 896,369 1,292,000
115 Japan Telecom Co. Ltd. ................ 851,922 886,995
100,000 Rogers Communications Inc., Cl. B+ .... 493,475 888,706
12,000 Telecom Italia SpA, ADR ............... 904,781 1,044,000
1,275 Viag AG ............................... 684,034 747,918
51,000 Viatel Inc.+ .......................... 571,726 1,166,624
---------- ----------
7,390,445 8,895,508
---------- ----------
See accompanying notes to financial statements.
11
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Portfolio of Investments (Continued) -- December 31, 1998
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (Continued)
Wireless Communications -- 8.1%
20,000 AirTouch Communications Inc.+ ......... $ 714,250 $ 1,442,500
56,000 Cellular Communications
of Puerto Rico Inc.+ ................. 951,999 1,035,999
18 NTT Mobile Communication
Network Inc. ......................... 725,106 742,044
63,000 Rogers Cantel Mobile
Communications Inc., Cl. B+ .......... 727,781 767,813
45,000 Telephone & Data
Systems Inc. ......................... 2,122,823 2,022,188
----------- -----------
5,241,959 6,010,544
----------- -----------
TOTAL COMMON STOCKS 50,706,038 72,344,507
----------- -----------
CONVERTIBLE PREFERRED STOCKS -- 0.0%
Publishing -- 0.0%
500 Golden Books Family Entertainment
Inc. 8.75% Cv. Pfd. .................. 25,000 1,250
----------- -----------
PREFERRED STOCKS -- 2.2%
Broadcasting -- 0.5%
300,000 Village Roadshow Ltd., Pfd. ............ 580,983 375,376
----------- -----------
Publishing -- 1.7%
50,000 News Corp. Ltd., ADR
Preference Shares .................... 1,069,678 1,234,375
----------- -----------
TOTAL PREFERRED STOCKS 1,650,661 1,609,751
----------- -----------
Principal
Amount Market
or Shares Cost Value
--------- ---- -----
CONVERTIBLE CORPORATE BONDS -- 0.1%
Entertainment -- 0.1%
$ 50,000 Savoy Pictures Entertainment Inc.,
Sub. Deb. Cv. 7.00%, 07/01/03 ........ $ 42,901 $ 49,813
----------- -----------
CORPORATE BONDS -- 0.3%
Entertainment -- 0.3%
200,000 Viacom Inc., Sub. Deb. Cv.
8.00%, 07/07/06 ...................... 143,714 208,500
----------- -----------
TOTAL INVESTMENTS -- 100.3% ............ $52,568,314 74,213,821
===========
Other Assets and
Liabilities (Net) -- (0.3)% .......... (214,477)
-----------
NET ASSETS -- 100.0%
(4,355,566 shares outstanding) ....... $73,999,344
===========
NET ASSET VALUE,
Offering and Redemption
Price Per Share ...................... $16.99
======
- ----------
For Federal tax purposes:
Aggregate cost $52,775,213
===========
Gross unrealized appreciation $22,470,476
Gross unrealized depreciation (1,031,868)
-----------
Net unrealized appreciation $21,438,608
===========
- ----------
+ -- Non-income producing security.
ADR -- American Depositary Receipt.
% of
Market Market
Geographic Diversification Value Value
- --------------------- ------- -------
North America 74.5% $55,256,899
Europe 17.1% 12,727,985
Japan 4.6% 3,414,811
Asia/Pacific Rim 3.8% 2,814,126
------ -----------
100.0% $74,213,821
====== ===========
See accompanying notes to financial statements.
12
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Statement of Assets and Liabilities
December 31, 1998
================================================================================
Assets:
Investments, at value (Cost $52,568,314) ..................... $74,213,821
Foreign currency, at value (Cost $374,260) ................... 375,912
Dividends, interest and reclaims receivable .................. 31,497
Receivable for investments sold .............................. 1,710,386
Receivable for capital shares sold ........................... 29,522
-----------
Total Assets ............................................... 76,361,138
-----------
Liabilities:
Payable for investment advisory fees ......................... 58,976
Payable for distribution fees ................................ 14,743
Payable to custodian ......................................... 2,205,811
Other accrued expenses ....................................... 82,264
-----------
Total Liabilities .......................................... 2,361,794
-----------
Net Assets applicable to 4,355,566
shares outstanding ....................................... $73,999,344
===========
Net Assets consist of:
Capital stock, at par value .................................. $ 4,356
Additional paid-in capital ................................... 52,525,271
Undistributed net investment income .......................... 28,648
Accumulated distributions in excess of net
realized gain on investments, futures
contracts and foreign currency transactions ................ (206,900)
Net unrealized appreciation on investments
and foreign currency transactions .......................... 21,647,969
-----------
Total Net Assets ........................................... $73,999,344
===========
Net Asset Value, offering and redemption
price per share ($73,999,344 / 4,355,566
shares outstanding; 200,000,000 shares
authorized of $0.001 par value) .......................... $16.99
======
Statement of Operations
For the Year Ended December 31, 1998
================================================================================
Investment Income:
Dividends (net of foreign taxes of $96,814) ................. $ 1,328,912
Interest .................................................... 288,811
-----------
Total Investment Income ................................... 1,617,723
-----------
Expenses:
Investment advisory fees .................................... 696,977
Distribution fees ........................................... 174,244
Shareholder services fees ................................... 116,249
Custodian fees .............................................. 53,356
Interest expense ............................................ 20,228
Organizational expenses ..................................... 12,835
Directors' fees ............................................. 10,910
Miscellaneous expenses ...................................... 73,985
-----------
Total Expenses ............................................ 1,158,784
-----------
Net Investment Income ..................................... 458,939
-----------
Net Realized and Unrealized Gain
on Investments:
Net realized gain on investments, futures
contracts and foreign currency transactions ............... 4,964,163
Net change in unrealized appreciation
on investments and foreign currency transactions .......... 10,723,070
-----------
Net realized and unrealized gain on investments, futures
contracts and foreign currency transactions ................ 15,687,233
-----------
Net increase in net assets resulting from operations ........... $16,146,172
===========
Statement of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Operations:
Net investment income (loss) ................................ $ 458,939 $ (198,519)
Net realized gain on investments, futures contracts
and foreign currency transactions ......................... 4,964,163 6,026,722
Net change in unrealized appreciation on investments,
futures contracts and foreign currency transactions ....... 10,723,070 5,681,915
------------ ------------
Net increase in net assets resulting from operations ...... 16,146,172 11,510,118
------------ ------------
Distributions to shareholders:
Net investment income ....................................... (448,581) --
Net realized gain on investments ............................ (4,950,101) (5,839,077)
In excess of net realized gain on investments ............... (196,018) --
------------ ------------
Total distributions to shareholders ....................... (5,594,700) (5,839,077)
------------ ------------
Capital share transactions:
Net increase in net assets from capital share transactions .. 22,890,207 3,107,627
------------ ------------
Net increase in net assets ................................ 33,441,679 8,778,668
Net Assets:
Beginning of period ......................................... 40,557,665 31,778,997
------------ ------------
End of period ............................................... $ 73,999,344 $ 40,557,665
============ ============
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Notes to Financial Statements
================================================================================
1. Description. The Gabelli Global Interactive Couch Potato Fund (the "Fund"), a
series of Gabelli Global Series Funds, Inc. (the "Corporation"), was organized
on July 16, 1993 as a Maryland corporation. The Fund is a non-diversified,
open-end management investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act") and one of four separately managed
portfolios of the Corporation. The Fund's primary objective is capital
appreciation. The Fund commenced investment operations on February 7, 1994.
2. Significant Accounting Policies. The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Security Valuation. Portfolio securities listed or traded on a nationally
recognized securities exchange, quoted by the National Association of Securities
Dealers Automated Quotations, Inc. ("Nasdaq") or traded on foreign exchanges are
valued at the last sale price on that exchange as of the close of business on
the day the securities are being valued (if there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day). All other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest average of the bid and asked prices. Portfolio securities traded on more
than one national securities exchange or market are valued according to the
broadest and most representative market, as determined by Gabelli Funds, Inc.
(the "Adviser"). Securities and assets for which market quotations are not
readily available are valued at their fair value as determined in good faith
under procedures established by and under the general supervision of the Board
of Directors. Short term debt securities with remaining maturities of 60 days or
less are valued at amortized cost, unless the Directors determine such does not
reflect the securities' fair value, in which case these securities will be
valued at their fair value as determined by the Directors. Debt instruments
having a greater maturity are valued at the highest bid price obtained from a
dealer maintaining an active market in those securities. Options are valued at
the last sale price on the exchange on which they are listed. If no sales of
such options have taken place that day, they will be valued at the mean between
their closing bid and asked prices.
Repurchase Agreements. The Fund may enter into repurchase agreements with
primary government securities dealers recognized by the Federal Reserve Bank of
New York, 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
14
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Notes to Financial Statements (Continued)
================================================================================
collateral. If the seller defaults and the value of the collateral declines or
if bankruptcy proceedings are commenced with respect to the seller of the
security, realization of the collateral by the Fund may be delayed or limited.
Futures Contracts. The Fund may engage in futures contracts for the purpose of
hedging against changes in the value of its portfolio securities and in the
value of securities it intends to purchase. Upon entering into a futures
contract, the Fund is required to deposit with the broker an amount of cash or
cash equivalents equal to a certain percentage of the contract amount. This is
known as the "initial margin". Subsequent payments ("variation margin") are made
or received by the Fund each day, depending on the daily fluctuation of the
value of the contract. The daily changes in the contract are included in
unrealized gains or losses. The Fund recognizes a realized gain or loss when the
contract is closed. At December 31, 1998, there were no open futures contracts.
There are several risks in connection with the use of futures contracts as a
hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in value of the hedged investments. In addition, there is the risk that
the Fund may not be able to enter into a closing transaction because of an
illiquid secondary market.
Forward Foreign Exchange Contracts. The Fund may engage in forward foreign
exchange contracts for hedging a specific transaction with respect to either the
currency in which the transaction is denominated or another currency as deemed
appropriate by the Adviser. Forward foreign exchange contracts are valued at the
forward rate and are marked-to-market daily. The change in market value is
included in unrealized appreciation/depreciation on investments. When the
contract is closed, the Fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed.
The use of forward foreign exchange contracts does not eliminate fluctuations in
the underlying prices of the Fund's portfolio securities, but it does establish
a rate of exchange that can be achieved in the future. Although forward foreign
exchange contracts limit the risk of loss due to a decline in the value of the
hedged currency, they also limit any potential gain that might result should the
value of the currency increase. In addition, the Fund could be exposed to risks
if the counterparties to the contracts are unable to meet the terms of their
contracts.
Foreign Currency Translation. The books and records of the Fund are maintained
in United States (U.S.) dollars. Foreign currencies, investments and other
assets and liabilities are translated into U.S. dollars at the exchange rates
prevailing at the end of the period, and purchases and sales of investment
securities, income and expenses are translated at the exchange rate prevailing
on the respective dates of such transactions. Unrealized gains and losses, which
result from changes in foreign exchange rates and/or changes in market prices of
securities, have been included in unrealized appreciation/depreciation on
investments. Net realized foreign currency gains and losses resulting from
changes in exchange rates include foreign currency gains and losses between
trade date and settlement date on investment securities transactions, foreign
currency transactions and the difference between the amounts of interest and
dividends recorded on the books of the Fund and the amounts actually received.
The portion of foreign currency gains and losses related to
15
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Notes to Financial Statements (Continued)
================================================================================
fluctuation in exchange rates between the initial trade date and subsequent sale
trade date is included in realized gain/(loss) on investments.
Securities Transactions and Investment Income. Securities transactions are
accounted for on the trade date with realized gain or loss on investments
determined by using the identified cost method. Interest income (including
amortization of premium and accretion of discount) is recorded as earned.
Dividend income is recorded on the ex-dividend date.
Expenses. Certain administrative expenses are common to, and allocated among,
the Portfolios. Such allocations are made on the basis of each Portfolio's
average net assets or other criteria directly affecting the expenses as
determined by the Adviser.
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders are recorded on the ex-dividend date. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund, timing differences and
differing characterization of distributions made by the Fund.
For the year ended December 31, 1998, reclassifications were made to increase
undistributed net investment income for $12,669 and decrease accumulated
distributions in excess of net realized gain on investments, future contracts
and foreign currency transactions for $10,882 with an offsetting adjustment to
additional paid-in capital.
Provision for Income Taxes. The Fund has qualified and intends to continue to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. As a result, a Federal income tax provision is
not required.
Dividends and interest from non-U.S. sources received by the Fund are generally
subject to non-U.S. withholding taxes at rates ranging up to 30%. Such
withholding taxes may be reduced or eliminated under the terms of applicable
U.S. income tax treaties, and the Fund intends to undertake any procedural steps
required to claim the benefits of such treaties. If the value of more than 50%
of the Fund's total assets at the close of any taxable year consists of stocks
or securities of non-U.S. corporations, the Fund is permitted and may elect to
treat any non-U.S. taxes paid by it as paid by its shareholders.
3. Investment Advisory Agreement. The Fund has entered into an investment
advisory agreement (the "Advisory Agreement") with the Adviser which provides
that the Fund will pay the Adviser a fee, computed daily and paid monthly, at
the annual rate of 1.00% of the value of the Fund's average daily net assets. In
accordance with the Advisory Agreement, the Adviser provides a continuous
investment program for the Fund's portfolio, oversees the administration of all
aspects of the Fund's business and affairs and pays the compensation of all
Officers and Directors of the Fund who are its affiliates.
4. Distribution Plan. The Fund's Board of Directors has adopted a distribution
plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. For the year ended
December 31, 1998, the Fund incurred distribution costs payable to Gabelli &
Company, Inc., an indirect wholly-owned subsidiary of the Adviser, of $174,244,
or 0.25% of average daily net assets, the annual limitation under the Plan. Such
payments are accrued daily and paid monthly.
16
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Notes to Financial Statements (Continued)
================================================================================
5. Organizational Expenses. The organizational expenses of the Fund are being
amortized on a straight-line basis over a period of 60 months.
6. Portfolio Securities. Purchases and sales of securities for the year ended
December 31, 1998, other than short term securities, aggregated $100,088,024 and
$67,600,737, respectively.
7. Transactions with Affiliates. During the year ended December 31, 1998, the
Fund paid brokerage commissions of $15,457 to Gabelli & Company, Inc. and its
affiliates.
8. Bank Loan. The Fund has access to an unsecured line of credit from the
custodian for temporary borrowing 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, 1998.
The average daily amount of borrowings outstanding during the year ended
December 31, 1998 was $227,068, with a related weighted average interest rate of
6.30%. The maximum amount borrowed at any time during the year ended December
31, 1998 was $6,160,000.
9. Capital Stock Transactions. Transactions in shares of capital stock were as
follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
----------------- -----------------
Shares Amount Shares Amount
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Shares sold ................................... 7,109,075 $113,132,679 865,772 $ 12,613,053
Shares issued upon reinvestment of dividends .. 342,029 5,633,747 376,239 5,372,567
Shares redeemed ............................... (5,935,470) (95,876,219) (1,106,550) (14,877,993)
---------- ------------ ---------- ------------
Net increase ................................ 1,515,634 $ 22,890,207 135,461 $ 3,107,627
========== ============ ========== ============
</TABLE>
10. Subsequent Event. On February 9, 1999, the Adviser reorganized its
operations and corporate structure by transferring a portion of its assets and
liabilities to a successor adviser, Gabelli Funds, LLC, which is wholly owned by
Gabelli Asset Management Inc., a newly formed publicly traded company that is
80% owned by the former Adviser. Counsel to the former Adviser has concluded
that the ownership change does not constitute an assignment as defined by the
Investment Company Act of 1940, as amended.
17
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Financial Highlights
================================================================================
Selected data for a share of capital stock outstanding throughout each period:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------
1998 1997 1996 1995 1994+
---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period .............. $ 14.28 $ 11.75 $ 11.72 $ 10.25 $ 10.00
------- ------- ------- ------- -------
Net investment income (loss) ...................... 0.11 (0.07) (0.09) (0.01) (0.01)
Net realized and unrealized gain
on investments .................................. 3.98 4.97 1.56 1.84 0.26
------- ------- ------- ------- -------
Total from investment operations .................. 4.09 4.90 1.47 1.83 0.25
------- ------- ------- ------- -------
Distributions to shareholders:
Net investment income ............................. (0.11) -- -- -- --
In excess of net investment income ................ -- -- (1.44) (0.36) --
Net realized gain on investments .................. (1.23) (2.37) -- -- --
In excess of net realized gain
on investments .................................. (0.04) -- -- -- --
------- ------- ------- ------- -------
Total distributions ............................... (1.38) (2.37) (1.44) (0.36) --
------- ------- ------- ------- -------
Net asset value, end of period .................... $ 16.99 $ 14.28 $ 11.75 $ 11.72 $ 10.25
======= ======= ======= ======= =======
Total return++ .................................... 28.9% 41.7% 12.5% 17.9% 2.5%
======= ======= ======= ======= =======
Ratios to average net assets and supplemental data:
Net assets, end of period (in 000's) .............. $73,999 $40,558 $37,779 $31,439 $24,831
Ratio of net investment income (loss)
to average net assets ........................... 0.66% (0.61)% (0.70)% (0.07)% (0.13)%(a)
Ratio of operating expenses
to average net assets (b) ....................... 1.66% 1.78% 2.06% 2.47% 2.47%(a)
Portfolio turnover rate ........................... 105% 68% 47% 33% 14%
</TABLE>
- ----------
+ From commencement of operations on February 7, 1994.
++ Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the
period including reinvestment of dividends. Total return for the period of
less than one year is not annualized.
(a) Annualized.
(b) The Fund incurred interest expense during the years ended December 31,
1998 and 1997. If interest expense had not been incurred, the ratios of
operating expenses to average net assets would have been 1.63% and 1.64%,
respectively.
See accompanying notes to financial statements.
18
<PAGE>
The Gabelli Global Interactive Couch Potato(R) Fund
Report of Grant Thornton LLP, Independent Auditors
================================================================================
Shareholders and Board of Directors
The Gabelli Global Interactive Couch Potato Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of The Gabelli Global Interactive Couch Potato
Fund, (one of the series constituting Gabelli Global Series Funds, Inc.) as of
December 31, 1998, the related statement 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 based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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, 1998 by correspondence with the custodian. 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 Interactive Couch Potato Fund of Gabelli Global Series Funds, Inc. at
December 31, 1998, and the results of its operations, the changes in its net
assets and the financial highlights for the respective stated periods, in
conformity with generally accepted accounting principles.
New York, New York
February 19, 1999
/s/ Grant Thornton LLP
- --------------------------------------------------------------------------------
1998 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the year ended December 31, 1998, the Fund paid to shareholders, on December
28, 1998, an ordinary income dividend (comprised of net investment income and
short term capital gains) totaling $0.111 per share and long term capital gains
totaling $1.274 per share. For the year ended December 31, 1998, 65.15% 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 fiscal
year 1998 which was derived from U.S. Treasury securities was 11.95%. Such
income is exempt from state and local 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 Interactive Couch Potato Fund did not meet this strict
requirement in 1998. 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 specific situation.
- --------------------------------------------------------------------------------
19
<PAGE>
Gabelli Global Series Funds, Inc.
The Gabelli Global Interactive Couch Potato(R) Fund
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
fax: 1-914-921-5118
http://www.gabelli.com
e-mail: [email protected]
(Net Asset Value may be obtained daily by calling
1-800-GABELLI after 6:00 P.M.)
Board of Directors
Mario J. Gabelli, CFA Karl Otto Pohl
Chairman and Chief Former President
Investment Officer Deutsche Bundesbank
Gabelli Asset Management 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 Portfolio Manager
Investment Officer
Bruce N. Alpert James E. McKee
Vice President and Treasurer Secretary
Distributor
Gabelli & Company, Inc.
Custodian, Transfer Agent and Dividend Agent
State Street Bank and Trust Company
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom LLP
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of The
Gabelli Global Interactive Couch Potato(R) Fund. It is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
- --------------------------------------------------------------------------------
