[PHOTO OMITTED]
The
Gabelli
Global
Telecommunications Fund
ANNUAL REPORT
DECEMBER 31, 1998
<PAGE>
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The Gabelli Global Telecommunications Fund
Annual Report
December 31, 1998
* * * *
Morningstar rating(TM) of The Gabelli Global Telecommunications Fund was 4
stars for the three year period ended 12/31/98 among 2802 domestic equity
funds, and 3 stars overall and for the five year period ended 12/31/98
among 2802 and 1702 domestic equity funds, respectively.
To Our Shareholders,
Telecommunications was the industry sector of choice in 1998. Despite the
generally poor performance of emerging market telecommunications companies in
Southeast Asia, Latin America and Eastern Europe, the group as a whole generated
robust returns.
Investment Performance
For the fourth quarter ended December 31, 1998, The Gabelli Global
Telecommunications Fund's (the "Fund") total return was 24.0%. The Lipper
Analytical Services Telecommunications Fund Average and Salomon Smith Barney
Global Telecommunications Index had returns of 36.6% and 24.2%, respectively,
over the same period. Each index is an unmanaged indicator of investment
performance. The Fund was up 34.8% for 1998. The Lipper Telecommunications Fund
Average and Salomon Smith Barney Global Telecommunications Index rose 40.8% and
43.8%, respectively, over the same twelve month period.
For the five year period ended December 31, 1998, the Fund's total return
averaged 16.7% annually versus average annual total returns of 17.2% and 17.7%
for the Lipper Telecommunications Fund Average and Salomon Smith Barney Global
Telecommunications Index, respectively. Since inception on November 1, 1993
through December 31, 1998, the Fund had a cumulative total return of 123.2%,
which equates to an average annual return of 16.8%.
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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.
<PAGE>
INVESTMENT RESULTS (A)
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Quarter
-------------------------------------
1st 2nd 3rd 4th Year
------ ------ ------ ------ ------
1998: Net Asset Value ... $15.91 $16.22 $14.48 $16.62 $16.62
Total Return ...... 19.4% 1.9% (10.7)% 24.0% 34.8%
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1997: Net Asset Value ... $11.29 $13.17 $14.22 $13.32 $13.32
Total Return ...... 0.1% 16.7% 7.9% 4.6% 31.9%
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1996: Net Asset Value ... $11.72 $12.16 $11.73 $11.28 $11.28
Total Return ...... 5.4% 3.8% (3.5)% 3.3% 9.0%
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1995: Net Asset Value ... $9.77 $10.29 $11.12 $11.12 $11.12
Total Return ...... 0.4% 5.3% 8.1% 1.6% 16.2%
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1994: Net Asset Value ... $9.68 $9.62 $10.38 $9.73 $9.73
Total Return ...... (5.1)% (0.6)% 7.9% (5.3)% (3.7)%
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1993: Net Asset Value ... -- -- -- $10.20 $10.20
Total Return ...... -- -- -- 3.0%(b) 3.0%(b)
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Average Annual Return - December 31, 1998 (a)
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1 Year ................................................................... 34.8%
5 Year ................................................................... 16.7%
Life of Fund (b) ......................................................... 16.8%
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Dividend History
-------------------------------------------------------------------
Payment (ex) Date Rate Per Share Reinvestment Price
----------------- -------------- ------------------
December 28, 1998 $1.310 $16.38
December 30, 1997 $1.550 $13.28
December 31, 1996 $0.840 $11.28
December 29, 1995 $0.182 $11.12
December 30, 1994 $0.095 $ 9.73
December 31, 1993 $0.102 $10.20
(a) Total returns and average annual returns reflect changes in share price and
reinvestment of dividends and are net of expenses. The net asset value of the
Fund is reduced on the ex-dividend (payment) date by the amount of the dividend
paid. Of course, returns represent past performance and do not guarantee future
results. Investment returns and the principal value of an investment will
fluctuate. When shares are redeemed they may be worth more or less than their
original cost. (b) From commencement of operations on November 1, 1993. Note:
Investing in foreign securities involves risks not ordinarily associated with
investments in domestic issues, including currency fluctuation, economic and
political risks.
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2
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COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI GLOBAL TELECOMMUNICATIONS FUND, THE SALOMON SMITH BARNEY
GLOBAL TELECOMMUNICATIONS INDEX AND THE MORGAN STANLEY WORLD FREE INDEX
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[The following table was depicted as a line chart in the printed material.]
Gabelli Global Salomon Smith Barney
Telecommunications Global Telecommunications Morgan Stanley
Fund index World Free Index
11/1/93 $10,000 $10,000 $10,000
12/98 $22,232 $21,611 $19,908
HOLDINGS BY GEOGRAPHIC REGION - 12/31/98
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[The following table was depicted as a pie chart in the printed material.]
United States 56.9%
Europe 18.8%
Canada 5.9%
Latin America 4.8%
Asia/Pacific Rim 3.8%
Japan 2.9%
Cash 6.9%
HOLDINGS BY INDUSTRY SECTOR - 12/31/98
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[The following table was depicted as a pie chart in the printed material.]
Networks 20.2%
Regional Providers 16.7%
Cable/Media 15.2%
Long Distance 6.8%
Equipment 2.7%
Alternative Providers 1.1%
Business Services 0.2%
Cash 6.9%
Wireless/Satellite 30.2%
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.
Industry Allocation
The accompanying chart depicts the Fund's holdings by industry sector as
of December 31, 1998. Industry sectors represented in the chart and below may or
may not be included in the Fund's future portfolio.
3
<PAGE>
COMMENTARY
1998 was the second consecutive year of significant gains for
telecommunications stocks in general and the Fund in particular. The story has
not changed. Technological advances, ongoing global deregulation and
consolidation continue to drive the group. All of this is underscored by our
original investment thesis--modern telecommunications systems are the most
essential element for competing effectively on the global economic stage.
Capital investment in these systems is not an option. It is a requirement for
economic survival in the information age.
The landmark event in 1998 was AT&T's planned acquisition of
Tele-Communications Inc. This deal illustrates why we have continued to hold
leading cable television stocks in the Fund. Judging by the depressed prices of
cable stocks in 1995 and 1996, Wall Street doubted that the highly leveraged
cable operators would be able to take advantage of the telecommunications
capabilities of all those coaxial connections into American homes. Wall Street
also overlooked the potential of cable modems, which relay data over one hundred
times faster than conventional telephone modems. The AT&T/TCI deal changed all
of that in a hurry and portfolio holdings such as Time Warner, which is
reportedly talking to AT&T about a joint venture, Cablevision Systems and
Comcast soared. Clearly, the combined AT&T/TCI's ability to offer its customers
a full range of services--long distance and local telephony, high speed Internet
access and home entertainment--has its competitors in all of these businesses
scrambling to build alliances that will allow them to offer the same range of
services.
Deals are reshaping the telecommunications equipment sector as well.
Portfolio holding Lucent Technologies' recently announced acquisition of Ascend
Communications fills a major hole in Lucent's product line and gives them an
established foothold in the Internet server network business previously
dominated by Cisco Systems. We are also seeing consolidation in the cellular
telephone industry--a group that Wall Street has been largely ignoring. As we
write, Vodafone appears to have won the bidding war with Bell Atlantic for
AirTouch Communications, giving Vodafone the most dominant global position in
the cellular industry, as well as, generating a substantial gain for the Fund.
We expect to see more wireless company transactions in the year ahead.
The regional Bell operating companies ("RBOCs") will have to consider
mergers and/or alliances with each other and companies in different sectors of
the telecommunications industry in order to stay competitive. Long distance
companies are end running local access charges--a very substantial source of
revenues and profits for the RBOCs and other local telephone companies--by
building their own local networks. Thus far, regulators have turned a deaf ear
to the regional and local telephone companies complaints about these tactics.
The creation of national wireless networks also threatens this traditional
source of income and profit for the regional and local telephone companies. Our
conclusion is that the RBOCs and smaller local telephone companies will have to
devise a way of gaining full entry into the long distance business or cut costs
substantially by mergers that result in greater economies of scale.
4
<PAGE>
Our Latin American telecommunications holdings fared poorly this year as
currency turmoil threatened many regional economies. Telebras (now split into
twelve different operating companies) was a stock everyone had to own last year.
Today, it is an investment pariah. We think all of the potential bad news is
already reflected in Latin American telecommunications stock prices and that our
positions in the region will ultimately rebound.
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.
Associated Group Inc. (AGRPA - $43.00 - Nasdaq; AGRPB - $42.50 - Nasdaq) is a
diversified communications company with ownership and operation of a variety of
wireless communications businesses and interests, including TruePosition; a
controlling interest in Teligent, a facilities-based wireless competitive local
exchange carrier; a controlling interest in a Mexican cellular operator and five
radio broadcasting stations in Ohio. Associated Group also has a marketable
equity securities portfolio, which includes approximately 20 million shares of
Tele-Communications Inc. common stock and 4.9 million shares of Liberty Media
Corporation, having a current market value of approximately $430 million, as
well as operation of Associated American Artists, a prominent art gallery in New
York City.
BCE Mobile Communications Inc. (BCX - $27.02 - TSE) is a full service wireless
telecommunications company operating under the Bell Mobility brand name. Through
subsidiaries, the company provides cellular, personal communications services
("PCS"), one-way and two-way paging, data, airline passenger and satellite
communications services. BCE Mobile has 1.24 million cellular and PCS
subscribers. BCE Inc. (BCE - $37.9375 - NYSE) owns nearly two-thirds of BCX's
common shares.
Cable & Wireless plc (CWP - $36.75 - NYSE), a United Kingdom-based company, is a
global telecommunications company with interests in local telephone companies.
Major subsidiaries include Hong Kong Telecommunications (HKT - $17.5625 - NYSE)
(54% owned) and the publicly traded, U.K.-based company, Cable & Wireless
Communications plc (CWZ - $45.375 - NYSE) (53% owned) - the largest cable system
operator in the U.K. CWZ owns 100% of Mercury Communications, the second largest
provider of telecom services in Britain, and is a majority stakeholder in Bell
Cable Media, Nynex CableComms and Videotron Holdings plc. Hong Kong Telecom is
the dominant telecom service provider in Hong Kong and remains the "crown jewel"
of the CWP portfolio. Cable & Wireless has dramatically expanded its global
Internet presence with its September 1998 acquisition of Internet MCI for $1.75
billion.
5
<PAGE>
Centennial Cellular Corp. (CYCLD - $41.00 - Nasdaq) provides wireless
telecommunications services to 355,000 subscribers in the U.S. and Puerto Rico.
The company's cellular licenses cover 7.1 million population equivalents
("POPs") domestically and 3.8 million POPs in Puerto Rico. On January 7, 1999, a
group of investors led by Welsh, Carson, Anderson & Stowe completed an
acquisition of a 92.9% stake in Centennial Cellular in a deal valued at $1.9
billion.
Commonwealth Telephone Enterprises Inc. (CTCO - $33.50 - Nasdaq; CTCOB - $31.50
- - Nasdaq), located in Dallas, Pennsylvania, provides local, long distance and
other telecommunications services in rural areas of Pennsylvania. CTCO was
formed as the result of a restructuring of C-Tec Corp. in 1997. The company
currently has over 300,000 access lines and is expanding into competitive local
exchange carrier ("CLEC") businesses.
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.
Telecom Italia Mobile SpA (TIM.MI - $7.38 - Milan Stock Exchange), formerly a
subsidiary of Telecom Italia (the provider of wired local and long distance
telephone service in Italy), was spun-off last July and began trading on the
Milan stock exchange as an independent company. Telecom Italia Mobile is the
leading cellular provider in Italy. The company is the largest cellular provider
in Europe with close to nine million GSM subscribers. The competitive
environment in which Telecom Italia Mobile operates remains favorable, with only
two competitors, Omnitel and Wind.
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 ("MTA's") 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.
Minimum Initial Investment - $1,000
The Fund's minimum initial investment for both regular and retirement
accounts is $1,000. There are no subsequent investment minimums. No initial
minimum is required for those establishing an Automatic Investment Plan.
Additionally, The Gabelli Global Telecommunications Fund and other Gabelli Funds
are available through the no-transaction fee programs at many major discount
brokerage firms.
6
<PAGE>
In Conclusion
It has been another great year of great performance for global
telecommunications stocks and the Fund. In the year ahead, it may be difficult
to match the gains achieved in 1997 and 1998. However, we remain confident that
the evolution and growth of the global telecommunications industry should
continue.
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 GABTX. Please call us during the
business day for further information.
Sincerely,
/s/ Mario J. Gabelli /s/ Marc J. Gabelli
Mario J. Gabelli, CFA Marc J. Gabelli
Portfolio Manager and Associate Portfolio Manager
Chief Investment Officer
January 29, 1999
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Top Ten Holdings
December 31, 1998
-----------------
Telecom Italia Mobile SpA Tele-Communications Inc.
Telephone & Data Systems Inc. AirTouch Communications Inc.
Rogers Cantel Mobile Communications BCE Mobile Communications Inc.
Cable & Wireless plc Centennial Cellular Corp.
Commonwealth Telephone Enterprises Associated Group Inc.
- --------------------------------------------------------------------------------
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.
7
<PAGE>
The Gabelli Global Telecommunications Fund
Portfolio of Investments -- December 31, 1998
================================================================================
Market
Shares Cost Value
------ ---- ------
COMMON STOCKS -- 90.3%
Alternative Telecommunications Providers -- 0.7%
4,000 Colt Telecom Group plc+ $ 31,875 $ 239,500
940 Davel Communications Group Inc.+ ............. 21,800 17,155
50,000 GST Telecommunications Inc.+ ................. 557,400 328,125
18,000 ICG Communications Inc.+ ..................... 238,475 387,000
4,000 Intermedia Communications Inc.+ .............. 27,830 69,000
3,500 McLeodUSA Inc., Cl. A+ ....................... 61,390 109,375
5,000 Startec Global Communications Corp.+ ......... 40,321 48,125
25,000 Suncom Telecommunications Inc.+ .............. 112,129 10,938
10,000 USN Communications Inc.+ ..................... 19,252 1,875
---------- ----------
1,110,472 1,211,093
---------- ----------
Business Services -- 0.2%
2,000 EarthLink Network Inc.+ ...................... 45,250 114,000
1,000 IDT Corp.+ ................................... 18,915 15,375
20,000 R. H. Donnelley Corp. ........................ 272,932 291,250
---------- ----------
337,097 420,625
---------- ----------
Cable -- 12.7%
32,000 Adelphia Communications Corp., Cl. A+ ........ 346,499 1,464,000
54,000 Cablevision Systems Corp., Cl. A+ ............ 468,675 2,710,124
70,000 Century Communications Corp., Cl. A+ ......... 590,705 2,220,313
34,000 Comcast Corp., Cl. A ......................... 536,827 1,952,875
10,000 Le Groupe Videotron ltee ..................... 125,234 149,094
1,000 Media General Inc., Cl. A .................... 23,050 53,000
60,000 MediaOne Group Inc.+ ......................... 1,042,489 2,820,000
37,231 NTL Inc.+ .................................... 924,156 2,101,225
182,900 Rogers Communications Inc., Cl. B+ ........... 1,220,252 1,623,238
82,932 TCI Ventures Group+ .......................... 762,076 1,954,085
40,000 Tele-Communications Inc., Cl. A+ ............. 552,314 2,212,500
24,136 Telewest Communications plc, ADR+ ............ 397,773 681,842
85,000 United International
Holdings Inc., Cl. A+ ...................... 1,222,585 1,636,250
---------- ----------
8,212,635 21,578,546
---------- ----------
Communications Equipment -- 2.5%
120,000 Champion Technology Holdings, ADR ............ 81,258 9,912
8,000 Ericsson (L.M.) Telephone Co., ADR ........... 55,422 191,500
5,500 Gemstar International Group Ltd.+ ............ 224,992 314,875
5,000 General Instrument Corp.+ .................... 76,830 169,688
2,500 General Semiconductor Inc.+ .................. 33,120 20,469
3,500 L - 3 Communications Holdings Inc.+ .......... 77,000 162,969
6,000 Lucent Technologies Inc. ..................... 137,806 660,000
2,500 Motorola Inc. ................................ 113,969 152,656
4,000 Nokia Corp., Cl. A, ADR ...................... 76,675 481,750
27,000 Northern Telecom Ltd. ........................ 486,674 1,353,376
12,000 Scientific - Atlanta Inc. .................... 197,408 273,750
500 Siemens AG, ADR .............................. 23,625 32,272
100,000 Time Engineering Berhad+ ..................... 264,576 23,289
15,000 TNT Post Group NV, ADR ....................... 198,278 487,499
---------- ----------
2,047,633 4,334,005
---------- ----------
Entertainment -- 1.3%
23,462 Ascent Entertainment Group Inc.+ ............. 177,530 173,032
10,000 GC Companies Inc.+ ........................... 445,506 416,250
8,000 Metromedia International Group Inc.+ ......... 74,575 43,500
27,400 Tele-Communications Inc./Liberty
Media Group, Cl. A+ ........................ 869,467 1,262,112
4,000 Time Warner Inc. ............................. 74,100 248,250
1,000 Viacom Inc., Cl. A+ .......................... 43,738 73,563
---------- ----------
1,684,916 2,216,707
---------- ----------
Equipment and Supplies -- 0.2%
4,000 AMP Inc. ..................................... 158,950 208,250
4,000 Amphenol Corp., Cl. A+ ....................... 123,378 120,750
---------- ----------
282,328 329,000
---------- ----------
Long Distance Telephone Providers -- 6.3%
28,000 AT&T Corp. ................................... 1,306,878 2,107,000
25,000 Call-Net Enterprises Inc.+ ................... 236,026 227,873
270 DDI Corp. .................................... 1,237,906 1,005,349
23,000 Embratel Participacoes SA, ADR+ .............. 476,687 320,563
4,000 Esprit Telecom Group plc+ .................... 34,330 187,000
68,000 General Communication Inc., Cl. A+ ........... 300,203 276,250
12,000 Kokusai Denshin Denwa Co. Ltd. ............... 746,942 424,481
8,975 MCI WorldCom Inc.+ ........................... 239,153 643,956
8,000 MIDCOM Communications Inc.+ .................. 6,958 41
70,000 Philippine Long Distance Telephone Co. ....... 2,169,237 1,815,625
90,000 PLD Telekom Inc.+ ............................ 498,670 163,125
5,830 Qwest Communications International Inc.+ ..... 45,262 291,500
See accompanying notes to financial statements.
8
<PAGE>
The Gabelli Global Telecommunications Fund
Portfolio of Investments (Continued) -- December 31, 1998
================================================================================
Market
Shares Cost Value
------ ---- ------
COMMON STOCKS (Continued)
Long Distance Telephone Providers (Continued)
20,000 Sprint Corp. .............................. $ 484,192 $ 1,682,500
8,000 Teleglobe Inc. ............................ 60,486 286,469
2,000 Telegroup Inc.+ ........................... 20,000 2,625
102,500 VDC Communications Inc.+ .................. 376,534 448,438
34,000 Viatel Inc.+ .............................. 406,323 777,750
---------- -----------
8,645,787 10,660,545
---------- -----------
Publishing -- 0.2%
8,000 News Corp. Ltd., ADR ...................... 179,088 211,500
100,000 Seat - Pagine Gialle SpA+ ................. 28,390 94,609
---------- -----------
207,478 306,109
---------- -----------
Regional and Local Telephone Providers -- 16.7%
60,000 Aliant Communications Inc. ................ 1,140,341 2,452,500
2,000 Allegiance Telecom Inc.+ .................. 28,500 24,250
20,000 Alltel Corp. .............................. 778,880 1,196,250
44,000 Ameritech Corp. ........................... 913,975 2,788,500
15,200 Atlantic Tele-Network Inc. ................ 129,263 137,750
10,608 Bell Atlantic Corp. ....................... 272,025 562,224
50,000 BellSouth Corp. ........................... 745,371 2,493,750
18,000 Bruncor Inc. .............................. 160,442 275,401
44,000 Cincinnati Bell Inc. ...................... 1,099,711 1,663,750
80,817 Commonwealth Telephone Enterprises
Inc.+ ................................... 1,837,313 2,707,370
40,500 Commonwealth Telephone Enterprises
Inc., Cl. B+ ............................ 494,914 1,275,750
500 Companhia Riograndense de
Telecomunicacoes+ ....................... 516 180
10,000 CoreComm Ltd.+ ............................ 85,276 157,500
7,000 E.Spire Communications Inc.+ .............. 47,813 44,625
8,000 Electric Lightwave Inc., Cl. A+ ........... 73,063 65,500
150,000 First Pacific Co. Ltd. .................... 90,040 71,640
10,000 First Pacific Co. Ltd., ADR ............... 35,875 23,880
73,000 Frontier Corp. ............................ 1,842,527 2,482,000
1,200 Global Telesystems Group Inc.+ ............ 49,009 66,900
33,000 GTE Corp. ................................. 1,106,650 2,145,000
30,000 Island Telecom Inc. ....................... 282,503 412,125
19,000 Maritime Telegraph and Telephone
Company Ltd. ............................ 330,491 436,052
300 MetroNet Communications Corp., Cl. B+ ..... 8,487 10,050
12,000 NewTel Enterprises Ltd. ................... 207,133 287,511
20,000 QuebecTel Group Inc. ...................... 153,660 224,618
94,000 RCN Corp.+ ................................ 847,658 1,662,625
65,000 SBC Communications Inc. ................... 1,296,844 3,485,625
23,000 Tele Norte Leste Participacoes SA, ADR+ ... 368,349 286,063
23,000 Telesp Participacoes SA, ADR+ ............. 851,124 508,875
10,000 Telus Corp. ............................... 129,540 211,597
4,000 US West Inc. .............................. 93,094 258,500
---------- -----------
15,500,387 28,418,361
---------- -----------
Satellite -- 3.6%
3,000 American Mobile Satellite Corp.+ .......... 38,340 15,750
500 Asia Satellite Telecommunications
Holdings Ltd. ........................... 9,753 8,750
1,000 British Sky Broadcasting Group, ADR ....... 36,400 46,375
60,000 COMSAT Corp. .............................. 1,452,809 2,159,999
6,000 Echostar Communications Corp., Cl. A+ ..... 163,040 290,250
5,000 General Motors Corp., Cl. H+ .............. 182,072 198,438
16,000 Globalstar Telecommunications+ ............ 55,725 322,000
21,500 Iridium World Communications Ltd.+ ........ 429,563 850,594
35,000 Loral Space & Communications Ltd.+ ........ 503,731 623,438
2,800 Pathe SA .................................. 566,511 781,953
10,000 PT Indonesia Satellite, ADR ............... 146,877 121,875
50,000 TCI Satellite Entertainment
Inc., Cl. A+ ............................ 421,074 71,875
40,000 U.S. Satellite Broadcasting Co.+ .......... 486,076 550,000
---------- -----------
4,491,971 6,041,297
---------- -----------
Telecommunications -- 0.4%
12,500 Great Nordic Store ........................ 215,022 441,915
4,600 Tele Centro Sul
Participacoes SA, ADR+ .................. 268,866 192,338
---------- -----------
483,888 634,253
---------- -----------
Telephone Networks -- 19.4%
87,000 BC Telecom Inc. ........................... 1,576,744 2,367,668
80,000 BCE Inc. .................................. 1,461,063 3,034,999
3,000 BHI Corp.+ ................................ 48,250 92,250
1,000 British Telecommunications plc, ADR ....... 53,925 151,688
30,000 Cable & Wireless Communications
plc, ADR+ ............................... 790,279 1,361,250
9,600,000 Cable & Wireless Jamaica Ltd. ............. 406,750 431,816
113,000 Cable & Wireless plc, ADR ................. 2,435,062 4,152,749
173,333 Citizens Utilities Co., Cl. B+ ............ 1,732,080 1,408,332
See accompanying notes to financial statements.
9
<PAGE>
The Gabelli Global Telecommunications Fund
Portfolio of Investments (Continued) -- December 31, 1998
================================================================================
Market
Shares Cost Value
------ ---- ------
COMMON STOCKS (Continued)
Telephone Networks (Continued)
65,000 Compania de Telecomunicaciones
de Chile SA .......................... $ 1,018,469 $ 1,344,688
500,000 CPT Telefonica del Peru, Cl. B ......... 722,310 628,979
1,000 CPT Telefonica del Peru,
Cl. B, ADR ........................... 20,500 12,688
16,000 Deutsche Telekom AG .................... 313,538 524,000
2,000 France Telecom SA ...................... 68,975 157,875
4,207 Hellenic Telecommunications
Organization SA ...................... 62,302 111,920
15,000 Hong Kong Telecommunications
Ltd., ADR ............................ 294,183 263,438
3,000 Hungarian Telephone & Cable Corp.+ ..... 28,607 9,750
80 Japan Telecom Co. Ltd. ................. 1,328,441 617,040
15,000 Koninklijke PTT Nederland
NV, ADR .............................. 272,243 753,750
100 Korea Telecom Corp.+ ................... 3,163 3,160
500 Matav, ADR ............................. 9,650 14,906
167 Nippon Telegraph & Telephone Corp. ..... 1,216,226 1,291,032
10,000 Nippon Telegraph & Telephone
Corp., ADR ........................... 409,638 375,000
800 Pakistan Telecommunications,
GDR (a) .............................. 98,166 27,600
12,000 Portugal Telecom SA, ADR ............... 233,785 535,500
20,000 PT Telekomunikasi Indonesia ............ 229,279 130,000
4,000 Rostelecom, ADR ........................ 38,841 16,750
30,000 Singapore Telecommunications Ltd. ...... 65,014 45,819
2,000 Swisscom AG, ADR+ ...................... 74,863 85,125
8,000 Tele Danmark A/S, ADR .................. 215,400 543,000
35,000 Telecom Argentina Stet --
France Telecom SA, ADR ............... 823,598 962,500
1,000,000 Telecom Asia Corp.+ .................... 687,194 433,479
21,000 Telecom Corporation of
New Zealand Ltd., ADR ................ 502,962 749,438
194,444 Telecom Italia SpA ..................... 457,508 1,662,728
20,500 Telecom Italia SpA, ADR ................ 458,600 1,783,500
23,000 Telecomunicacoes Brasileiras
SA (Telebras), ADR ................... 21,668 2,516
938,570 Telecomunicacoes de
Sao Paulo SA (Telesp)+ ............... 101,286 80,791
39,000 Telefonica de Argentina SA, ADR ........ 1,083,524 1,089,563
23,460 Telefonica de Espana, ADR .............. 972,637 3,175,897
32,000 Telefonos de Mexico SA,
Cl. L, ADR ........................... 1,224,350 1,558,000
300,000 Telekom Malaysia Berhad ................ 1,420,412 789,474
600 Telstra Corp. Ltd.+ .................... 47,304 55,950
8,075 Thai Telephone & Telecom, GDR+(a) ...... 100,542 3,480
3,000 Veba AG ................................ 126,255 179,583
----------- -----------
23,255,586 33,019,671
----------- -----------
Wireless Communications -- 26.1%
40,000 ABC Communications Holdings Ltd. ....... 20,301 9,759
150,000 Aerial Communications Inc.+ ............ 954,109 881,250
40,000 AirTouch Communications Inc.+ .......... 895,083 2,885,000
33,400 Associated Group Inc., Cl. A+ .......... 483,480 1,436,200
42,000 Associated Group Inc., Cl. B+ .......... 667,565 1,785,000
16,000 BCE Mobile Communications Inc.+ ........ 509,905 432,308
500 Bouygues Group ......................... 58,707 103,115
28,000 Cellular Communications
International Inc.+ .................. 317,100 1,904,000
10,000 Cellular Communications
of Puerto Rico Inc.+ ................. 108,534 185,000
80,000 Centennial Cellular Corp., Cl. A+ ...... 1,525,157 3,280,000
30,000 Century Telephone Enterprises Inc. ..... 600,000 2,025,000
2,000 Clearnet Communications
Inc., Cl. A+ ......................... 25,000 16,250
34,390 CommNet Cellular Inc.+ ................. 355,301 421,278
35,000 CP Pokphand, ADR+ ...................... 259,575 17,731
5,300 Easycall Group+ ........................ 8,992 650
31,200 Europolitan Holdings AB ................ 286,420 3,060,128
35,000 Grupo Iusacell SA, Ser. D, ADR+ ........ 422,475 220,938
26,000 Himachal Futuristic (a) ................ 141,200 21,624
24,000 Jasmine International+ ................. 117,135 6,011
25,000 Mannesmann AG .......................... 819,702 2,866,965
1,500 Metrocall Inc.+ ........................ 11,138 6,563
9,789 NEXTEL Communications
Inc., Cl. A+ ......................... 145,326 231,265
30 NTT Mobile Communication
Network Inc. ......................... 1,150,017 1,236,738
70,000 Omnipoint Corp.+ ....................... 638,714 651,875
39,062 Price Communications Corp.+ ............ 88,769 505,365
150,000 Rogers Cantel Mobile Communications
Inc., Cl. B+ ......................... 2,054,532 1,828,125
20,000 Rural Cellular Corp., Cl. A+ ........... 226,765 210,000
See accompanying notes to financial statements.
10
<PAGE>
The Gabelli Global Telecommunications Fund
Portfolio of Investments (Continued) -- December 31, 1998
================================================================================
Market
Shares Cost Value
------ ---- ------
COMMON STOCKS (Continued)
Wireless Communications (Continued)
70,000 Securicor Group plc .................... $ 183,666 $ 586,988
14,420 SK Telecom Co. Ltd., ADR ............... 154,200 146,904
5,000 SkyTel Communications Inc.+ ............ 87,075 110,625
12,000 Sprint Corp. (PCS Group)+ .............. 96,527 277,500
80,000 Technology Resources Industries ........ 309,067 41,684
2,300 Tele Celular Sul Participacoes
SA, ADR+ ............................. 37,449 40,106
7,666 Tele Centro Oeste Celular Participacoes
SA, ADR+ ............................. 22,224 22,519
460 Tele Leste Celular Participacoes
SA, ADR+ ............................. 12,153 13,053
1,150 Tele Nordeste Celular Participacoes
SA, ADR+ ............................. 16,568 21,275
460 Tele Norte Celular Participacoes
SA, ADR+ ............................. 7,079 10,379
4,600 Tele Sudeste Celular Participacoes
SA, ADR+ ............................. 140,230 95,163
500 Telecel-Comunicacaoes Pessoais SA ...... 67,584 102,210
500,000 Telecom Italia Mobile SpA .............. 703,504 3,699,453
1,150 Telemig Celular Participacoes
SA, ADR+ ............................. 30,497 24,438
151,000 Telephone & Data Systems Inc. .......... 6,429,282 6,785,563
938,570 Telesp Celular SA+ ..................... 2,665 21,169
9,200 Telesp Celular Participacoes
SA, ADR+ ............................. 284,292 161,000
4,000 Teligent Inc., Cl. A+ .................. 90,000 115,000
2,000 Thyssen AG ............................. 367,787 371,174
20,000 Total Access Communications plc+ ....... 126,250 34,400
25,000 United States Cellular Corp.+ .......... 759,016 950,000
50,000 Vanguard Cellular Systems Inc.,
Cl. A+ ............................... 1,009,085 1,290,625
6,000 Vimpel Communications+ ................. 103,863 77,625
14,000 Vodafone Group plc, ADR ................ 364,429 2,255,750
40,000 Western Wireless Corp., Cl. A+ ......... 779,850 879,999
1,500 Winstar Communications Inc.+ ........... 19,185 58,500
------------ ------------
25,094,529 44,421,240
------------ ------------
TOTAL COMMON STOCKS .................... 91,354,707 153,591,452
------------ ------------
CONVERTIBLE PREFERRED STOCKS -- 2.2%
Cable -- 1.0%
18,000 Tele-Communications Inc.,
6.00% Cv. Pfd., Ser. E ............... 1,234,246 1,685,813
------------ ------------
Entertainment -- 0.0%
1,500 Metromedia International Group Inc.,
7.25% Cv. Pfd. ....................... 61,513 39,750
------------ ------------
Long Distance Telephone Providers -- 0.6%
12,000 Sprint Corp.,
8.25% Cv. Pfd. ....................... 424,102 990,000
------------ ------------
Telephone Networks -- 0.3%
10,000 Philippine Long Distance Telephone Co.,
7.00% Cv. Pfd., Ser. III ............. 497,200 475,000
------------ ------------
Wireless Communications -- 0.3%
AirTouch Communications Inc.,
3,000 4.25% Cv. Pfd., Cl. C ................ 144,750 309,000
5,000 6.00% Cv. Pfd., Cl. B ................ 146,563 297,500
------------ ------------
291,313 606,500
------------ ------------
TOTAL CONVERTIBLE
PREFERRED STOCKS ..................... 2,508,374 3,797,063
------------ ------------
PREFERRED STOCKS -- 0.2%
Regional and Local Telephone Providers -- 0.0%
500 Telecomunicacoes do Parana ............. 164 89
------------ ------------
Telephone Networks -- 0.1%
3,355,677 Telecomunicacoes de Rio de
Janeiro SA (Telerj), Pfd. ............ 148,557 91,655
40,900 Telecomunicacoes de Sao
Paulo SA (Telesp), Pfd. .............. 9,633 5,575
------------ ------------
158,190 97,230
------------ ------------
Wireless Communications -- 0.1%
3,000 SkyTel Communications Inc.,
$2.25 Cv. Pfd ........................ 84,750 93,374
3,355,677 Telerj Celular SA, Pfd., Cl. B+ ........ 118,825 79,157
40,900 Telesp Celular SA, Pfd., Cl. B+ ........ 40,511 1,798
------------ ------------
244,086 174,329
------------ ------------
TOTAL PREFERRED
STOCKS ............................... 402,440 271,648
------------ ------------
See accompanying notes to financial statements.
11
<PAGE>
The Gabelli Global Telecommunications Fund
Portfolio of Investments (Continued) -- December 31, 1998
================================================================================
Principal Market
Amount Cost Value
------ ---- ------
CONVERTIBLE CORPORATE BONDS -- 0.5%
Telephone Networks -- 0.4%
$ 1,000,000 Telekom Malaysia Berhad, Sub. Deb.
Cv. 4.00%, 10/03/04 (a) .............. $ 1,000,108 $ 732,500
------------ ------------
Wireless Communications -- 0.1%
250,000 Technology Resources Industries, Sub.
Deb. Cv. 2.75%, 11/28/04 (a) ......... 250,000 137,500
------------ ------------
TOTAL CONVERTIBLE
CORPORATE BONDS ...................... 1,250,108 870,000
------------ ------------
U.S. GOVERNMENT OBLIGATIONS -- 6.9%
11,714,000 U.S. Treasury Bills, 4.02% to 4.47%++,
due 01/07/99 to 03/18/99 ............. 11,660,125 11,659,005
------------ ------------
TOTAL INVESTMENTS -- 100.1% ............ $107,175,754 170,189,168
============
Other Assets and
Liabilities (Net) -- (0.1)% (126,438)
------------
NET ASSETS -- 100.0%
(10,233,972 shares outstanding) $170,062,730
============
NET ASSET VALUE,
Offering and Redemption
Price Per Share ...................... $16.62
======
- -------------
For Federal tax purposes:
Aggregate cost.......................... $107,175,754
============
Gross unrealized appreciation .......... $ 70,848,228
Gross unrealized depreciation .......... (7,848,003)
------------
Net unrealized appreciation ............ $ 63,000,225
============
Principal Settlement Net Unrealized
Amount Date Depreciation
------ ---- ------------
FORWARD FOREIGN EXCHANGE CONTRACTS
3,000,000(b) Sold Hong Kong Dollars in exchange
for USD 387,154 02/26/99 $(13,206)
- -------------
(a) Security exempt from registration under Rule 144A of the Securities Act
of 1933, as amended. These securities may be resold in transactions
exempt from registration, normally to qualified institutional buyers. At
December 31, 1998, the market value of Rule 144A securities amounted to
$922,704 or 0.5% of net assets.
(b) Principal amount denoted in Hong Kong Dollars.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR -- American Depositary Receipt.
GDR -- Global Depositary Receipt.
% of
Market Market
Geographic Diversification Value Value
- -------------------------- ----- -----
North America 69.7% $118,677,363
Europe 18.8% 31,922,225
Latin America 4.8% 8,227,867
Asia/Pacific Rim 3.8% 6,412,072
Japan 2.9% 4,949,641
------ ------------
100.0% $170,189,168
====== ============
See accompanying notes to financial statements.
12
<PAGE>
Statement of Assets and Liabilities
December 31, 1998
================================================================================
Assets:
Investments, at value (Cost $107,175,754) ................. $170,189,168
Cash and foreign currency, at value
(Cost $448,689) ......................................... 454,844
Dividends, interest and reclaims receivable ............... 162,577
Receivable for investments sold ........................... 267,970
Receivable for capital shares sold ........................ 57,980
------------
Total Assets ............................................ 171,132,539
------------
Liabilities:
Payable for investments purchased ......................... 417,466
Payable for capital shares redeemed ....................... 271,052
Payable for investment advisory fees ...................... 138,329
Payable for distribution fees ............................. 34,581
Net unrealized depreciation on forward
foreign exchange contracts .............................. 13,206
Other accrued expenses .................................... 195,175
------------
Total Liabilities ....................................... 1,069,809
------------
Net Assets applicable to 10,233,972
shares outstanding .................................... $170,062,730
============
Net Assets consist of:
Capital stock, at par value ............................... $ 10,234
Additional paid-in capital ................................ 106,888,088
Accumulated net realized gain on investments
and foreign currency transactions ....................... 169,588
Net unrealized appreciation on investments
and foreign currency transactions ....................... 62,994,820
------------
Total Net Assets ........................................ $170,062,730
============
Net Asset Value, offering and redemption
price per share ($170,062,730 / 10,233,972
shares outstanding; 200,000,000 shares
authorized of $0.001 par value) ....................... $16.62
======
Statement of Operations
For the Year Ended December 31, 1998
================================================================================
Investment Income:
Dividends (net of foreign taxes of $52,790) ............... $ 1,615,419
Interest .................................................. 836,619
-----------
Total Investment Income ................................. 2,452,038
-----------
Expenses:
Investment advisory fees .................................. 1,456,869
Distribution fees ......................................... 364,216
Shareholder services fees ................................. 261,990
Custodian fees ............................................ 70,457
Shareholder report expenses ............................... 57,655
Legal and audit fees ...................................... 43,149
Registration fees ......................................... 31,695
Organizational expenses ................................... 15,617
Directors' fees ........................................... 15,415
Miscellaneous expenses .................................... 16,291
-----------
Total Expenses .......................................... 2,333,354
-----------
Net Investment Income ................................... 118,684
-----------
Net Realized and Unrealized Gain
on Investments:
Net realized gain on investments
and foreign currency transactions ....................... 12,504,671
Net change in unrealized appreciation
on investments and foreign currency
transactions ............................................ 29,961,404
-----------
Net realized and unrealized gain on
investments and foreign currency
transactions ............................................ 42,466,075
-----------
Net increase in net assets resulting
from operations ........................................... $42,584,759
===========
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 ............................................... $ 118,684 $ 13,283
Net realized gain on investments and foreign currency transactions .. 12,504,671 12,291,080
Net change in unrealized appreciation on investments
and foreign currency transactions ................................. 29,961,404 17,429,948
------------- -------------
Net increase in net assets resulting from operations .............. 42,584,759 29,734,311
------------- -------------
Distributions to shareholders:
Net investment income ............................................... (106,321) --
Net realized gain on investments .................................... (12,347,446) (12,322,997)
------------- -------------
Total distributions to shareholders ............................... (12,453,767) (12,322,997)
------------- -------------
Capital share transactions:
Net increase (decrease) in net assets from capital share transactions 22,060,115 (8,083,350)
------------- -------------
Net increase in net assets ........................................ 52,191,107 9,327,964
Net Assets:
Beginning of period ................................................. 117,871,623 108,543,659
------------- -------------
End of period ....................................................... $ 170,062,730 $ 117,871,623
============= =============
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
The Gabelli Global Telecommunications Fund
Notes to Financial Statements
================================================================================
1. Description. The Gabelli Global Telecommunications Fund (the "Fund"), a
series of Gabelli Global Series Funds, Inc. (the "Corporation"), was organized
on July 16, 1993 as a Maryland corporation. The Fund is a non-diversified,
open-end management investment company registered under the Investment Company
Act of 1940, as amended (the "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 November 1, 1993.
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
14
<PAGE>
The Gabelli Global Telecommunications Fund
Notes to Financial Statements (Continued)
================================================================================
collateral to the account of the custodian. To the extent that any repurchase
transaction exceeds one business day, the value of the collateral is
marked-to-market on a daily basis to maintain the adequacy of the collateral. If
the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
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
15
<PAGE>
The Gabelli Global Telecommunications Fund
Notes to Financial Statements (Continued)
================================================================================
prices of securities, have been included in unrealized appreciation/depreciation
on investments. Net realized foreign currency gains and losses resulting from
changes in exchange rates include foreign currency gains and losses between
trade date and settlement date on investment securities transactions, foreign
currency transactions and the difference between the amounts of interest and
dividends recorded on the books of the Fund and the amounts actually received.
The portion of foreign currency gains and losses related to fluctuation in
exchange rates between the initial trade date and subsequent sale trade date is
included in realized gain/(loss) on investments.
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 decrease
accumulated net investment income by $12,294 and increase accumulated net
realized gain on investments and foreign currency transactions by $30,928 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.
16
<PAGE>
The Gabelli Global Telecommunications Fund
Notes to Financial Statements (Continued)
================================================================================
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 $364,216,
or 0.25% of average daily net assets, the annual limitation under the Plan. Such
payments are accrued daily and paid monthly.
5. Organizational Expenses. The organizational expenses of the Fund were
amortized on a straight-line basis over a period of 60 months ending October 31,
1998.
6. Portfolio Securities. Purchases and sales of securities for the year ended
December 31, 1998, other than short term securities, aggregated $34,278,334 and
$25,789,029, respectively.
7. Transactions with Affiliates. During the year ended December 31, 1998, the
Fund paid brokerage commissions of $38,999 to Gabelli & Company, Inc. and its
affiliates.
8. 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 ................................... 9,903,141 $ 155,442,024 2,019,543 $ 24,786,732
Shares issued upon reinvestment of dividends .. 733,357 12,011,861 895,899 11,897,535
Shares redeemed ............................... (9,252,964) (145,393,770) (3,688,802) (44,767,617)
---------- ------------- ---------- ------------
Net increase (decrease) ..................... 1,383,534 $ 22,060,115 (773,360) $ (8,083,350)
========== ============= ========== ============
</TABLE>
9. 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 Telecommunications 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 ...... $ 13.32 $ 11.28 $ 11.12 $ 9.73 $ 10.20
------- ------- ------- ------- -------
Net investment income ..................... 0.01 0.00(a) 0.05 0.06 0.07
Net realized and unrealized gain (loss)
on investments .......................... 4.60 3.59 0.95 1.51 (0.44)
------- ------- ------- ------- -------
Total from investment operations .......... 4.61 3.59 1.00 1.57 (0.37)
------- ------- ------- ------- -------
Distributions to shareholders:
Net investment income ..................... (0.01) -- (0.05) (0.06) (0.07)
Net realized gain on investments .......... (1.30) (1.55) (0.79) (0.12) (0.03)
------- ------- ------- ------- -------
Total distributions ....................... (1.31) (1.55) (0.84) (0.18) (0.10)
------- ------- ------- ------- -------
Net asset value, end of period ............ $ 16.62 $ 13.32 $ 11.28 $ 11.12 $ 9.73
======= ======= ======= ======= =======
Total return+ ............................. 34.8% 31.9% 9.0% 16.2% (3.7)%
======= ======= ======= ======= =======
Ratios to average net assets and
supplemental data:
Net assets, end of period (in 000's) ...... $170,063 $117,872 $108,544 $122,845 $137,731
Ratio of net investment income
to average net assets ................... 0.08% 0.01% 0.34% 0.53% 0.74%
Ratio of operating expenses
to average net assets (b) ............... 1.60% 1.78% 1.72% 1.75% 1.80%
Portfolio turnover rate ................... 20% 9% 7% 24% 14%
</TABLE>
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+ 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.
(a) Amount represents less than $0.005 per share.
(b) The Fund incurred interest expense during the year ended December 31,
1997. If interest expense had not been incurred, the ratio of operating
expenses to average net assets would have been 1.74%.
See accompanying notes to financial statements.
18
<PAGE>
The Gabelli Global Telecommunications Fund
Report of Grant Thornton LLP, Independent Auditors
================================================================================
Shareholders and Board of Directors
The Gabelli Global Telecommunications Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of The Gabelli Global Telecommunications 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 Global Telecommunications 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.
/s/ Grant Thornton LLP
New York, New York
February 19, 1999
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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 $0.08 per share and long term capital gains
totaling $1.23 per share. For the year ended December 31, 1998, 100.00% 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 26.76%. 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 Telecommunications 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 Telecommunications Fund
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
fax: 1-914-921-5118
http://www.gabelli.com
e-mail: [email protected]
(Net Asset Value may be obtained daily by calling
1-800-GABELLI after 6:00 P.M.)
Board of Directors
Mario J. Gabelli, CFA Karl Otto Pohl
Chairman and Chief Former President
Investment Officer Deutsche Bundesbank
Gabelli 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 Associate Portfolio Manager
Investment Officer
Bruce N. Alpert James E. McKee
Vice President and Treasurer Secretary
Distributor
Gabelli & Company, Inc.
Custodian, Transfer Agent and Dividend Agent
State Street Bank and Trust Company
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom LLP
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This report is submitted for the general information of the shareholders of The
Gabelli Global Telecommunications Fund. It is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
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