[GRAPHIC OMITTED]
[PHOTOS OMITTED]
Mark J. Gabelli and Caesar Bryan
Portfolio Managers
The Gabelli Global Opportunity Fund
Annual Report
December 31, 1998
To Our Shareholders,
What caused the huge fourth quarter turnaround in world equity markets?
First, and most important, was the series of interest rate cuts made by the
Federal Reserve in the U.S., a move that was followed by many foreign central
banks. Second, sentiment was so bearish and markets so oversold that some
recovery was inevitable. Finally, with looser monetary policy and continuing
sluggish economic growth worldwide, excess money gravitated to the financial
markets.
Investment Performance
For the fourth quarter ended December 31, 1998, The Gabelli Global
Opportunity Fund's (the "Fund") total return was 13.7%. 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. Since inception on May 11, 1998 through December 31, 1998, the Fund
was up 10.1%. The Lipper Global Fund Average declined 0.8% while the Morgan
Stanley World Free Index rose 6.1% over the same period.
Our Investment Objective
The Gabelli Global Opportunity Fund seeks to invest in common stock of
companies which have rapid growth in revenues and earnings and equities trading
at a significant discount to their intrinsic value. The Fund's primary objective
is capital appreciation. Marc Gabelli and Caesar Bryan are responsible for the
day-to-day management of the Gabelli Global Opportunity Fund. Currently, Marc
Gabelli is Portfolio Manager for the Gabelli Global Interactive Couch Potato(R)
Fund. Caesar Bryan is Portfolio Manager of the Gabelli International Growth and
Gold Funds.
<PAGE>
INVESTMENT RESULTS (a)
Quarter
-----------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
1998: Net Asset Value ....... -- $10.23 $ 9.69 $10.55 $10.55
Total Return .......... -- 2.3%(b) (5.3)% 13.7% 10.1%(b)
- --------------------------------------------------------------------------------
Dividend History
- --------------------------------------------------------------------------------
Payment (ex) Date Rate Per Share Reinvestment Price
- ----------------- -------------- -------------------
December 28, 1998 $0.450 $10.34
(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 May 11, 1998.
The returns stated above cover short periods of less than one year beginning May
11, 1998 through December 31, 1998. Note: Investing in foreign securities
involves risks not ordinarily associated with investments in domestic issues,
including currency fluctuation, economic and political risks.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GABELLI GLOBAL OPPORTUNITY FUND, THE LIPPER GLOBAL FUND AVERAGE AND
THE MORGAN STANLEY WORLD FREE INDEX
[GRAPHIC OMITTED]
[The following table was represented as a line graph in the printed material.]
Gabelli Global Opportunity Fund $11,009
Morgan Stanley World Free Index $10,613
Lipper Global Fund Average $9,922
2
<PAGE>
Global Allocation
The accompanying chart presents the Fund's holdings by geographic region
as of December 31, 1998. The geographic allo cation will change based on current
global market conditions. Countries and/or regions represented in the chart and
below may or may not be included in the Fund's future portfolio.
HOLDINGS BY GEOGRAPHIC REGION - 12/31/98
[GRAPHIC OMITTED]
[The following table was represented as a pie chart in the printed material.]
United States 37.9%
Japan 7.8%
Australia 2.5%
South Africa 2.1%
Canada 1.9%
Europe 47.8%
COMMENTARY
On January 1, 1999, the euro was introduced. This was a major event as
France, Germany and nine other countries ceded monetary policy to the newly
created European Central Bank located in Frankfurt. Across Euroland there is now
a uniform short term interest rate, currently 3.0%. This European experiment is
being watched by the rest of the world as the debate over currency relationships
and management gets under way. We believe that the introduction of the euro will
be one of the catalysts that spurs further corporate consolidation within
Europe. In the space of a few days during the fourth quarter, three huge health
care mergers were announced. We expect to see more acquisitions and mergers in
1999.
Looking ahead, as always, there are a number of areas of concern. Those
that have already been well identified and therefore, probably discounted
include emerging markets, Japan and hedge funds (otherwise known as leveraged
investors). The emerging market contagion that spread from the Far East to
Russia is now hovering over South America. Brazil is now under the spotlight,
with fears surrounding China lurking in the background. Clearly, one lesson
learned is that free market capitalism cannot be glued on top of a corrupt
political system. In addition, massive capital flows can overwhelm small
national markets, giving the authorities no chance of stemming the tide. Policy
makers face an enormous challenge and some type of change is needed.
The Japanese economy remains in crisis. Even one of Japan's bright spots,
namely exports, is now beginning to weaken. Yet, in a very weak economic
environment, the Japanese currency strengthened dramatically in October as the
so-called yen carry trade was unwound. Moreover, Japanese bond prices collapsed
in December following comments from a government agency which manages Japan's
huge government employees pension assets. A strengthening currency and rising
bond yields are not typical market responses to a weak economy. Maybe Japan has
finally hit bottom.
Of course, it is the unexpected which usually upsets financial markets.
The strong U.S. economy relative to overseas economies has resulted in a
substantial rise in the trade deficit. The U.S. trade deficit is now running at
a monthly rate of nearly $15 billion and is likely to rise further. These
deficits have to be financed by foreigners, who are currently happy to purchase
U.S. dollars and American stocks and bonds.
3
<PAGE>
However, these deficits are probably unsustainable and will likely result in a
weaker dollar in the future. Americans are enjoying their role as the world's
consumer of last resort, but how long can this last?
Strategists usually attempt to value equity markets in relation to
earnings and interest rates using historical relationships. While it is
difficult to generalize, markets look inexpensive relative to interest rates,
but fully priced as compared with the level of earnings. Long term interest
rates remain very low in Europe. For example, ten year Government bond yields
were below 4.0% in both Germany and France at the end of the year. Of course,
low interest rates reflect low inflation expectations which can have an impact
on corporate earnings. The market has rewarded companies that can grow revenues
and earnings and has punished others that have less control over pricing and
have reported disappointing earnings.
1998 Revisited
Individual stock performance during the quarter varied considerably, even
within sectors, reflecting the indiscriminate selling that occurred during the
summer. The Fund's better performers included Pathe, Viatel, Granada and AXA.
All of these holdings appreciated by more than 40% over the fourth quarter. In
Europe, telecommunications, health care and selected financial stocks performed
well. As in the United States, large company stocks outperformed smaller ones.
Global media stocks put on quite a show in 1998. 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.
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.
Newspaper companies such as the Gruppo Editoriale L'Espresso, Independent
Newspapers and Schibsted disappointed. The future direction of the newspaper
business is open to debate. 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
4
<PAGE>
Internet stocks, will leave investors holding the bag. We continue to search for
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.
Invik & Co. AB (INVKb.ST - $81.43 - Stockholm Stock Exchange) is a Swedish
company involved in a number of financial activities. Three separate
subsidiaries are responsible for stock brokerage, insurance and banking. The
company also has an equity portfolio of long term holdings. The most important
equity investment is the holding in Kinnevik, which is a company listed on the
Stockholm Stock Exchange. Kinnevik is an operating group involved in three
activities, including television and media, telecommunications, and paper and
packaging. All of these businesses have solid growth potential and Invik
provides exposure to Kinnevik at a significant discount.
Novartis AG (NOVZN.S - $1,965.81 - Zurich Stock Exchange) is one of the world's
largest pharmaceutical companies and was created by the merger of two of
Europe's dominant pharmaceutical companies, Ciba Geigy and Sandoz, both of which
were headquartered in Basel, Switzerland. Apart from pharmaceuticals, the merged
company has a strong position in agribusiness and nutrition. Ciba Specialty
Chemicals, with sales of nearly $5 billion, was recently spun-off to
shareholders as the new company concentrates on its core divisions. Novartis has
a number of new drugs in development that have excellent sales potential and we
believe management will continue to reduce costs.
Roche Holding AG (ROCZg.S - $12,202.57 - Zurich Stock Exchange) is one of the
world's leading health care companies. Apart from pharmaceuticals, the company
has major positions in vitamins, diagnostics, fragrances and flavors and
orthopedics. The company has recently completed the purchase of Corange for
approximately $11 billion, which we believe will be additive to earnings. This
acquisition will make Roche the largest diagnostic company. We expect Roche to
introduce a number of new drugs during the next few years, which should result
in stronger earnings growth.
Schlumberger Ltd. (SLB - $46.125 - NYSE) is the leading provider of engineering
and technical services to the oil and gas industry. The company is the industry
leader in terms of research and development. The Oil Field Services segment
includes wireline and testing, cementing and stimulation, pumping, drill fluids,
marine and land seismic surveys, contract drilling, directional drilling and
measurement-while-drilling. The Measurement and Systems segment includes meters
and instruments and automatic test equipment. The acquisition of Camco
International in a transaction valued at $2.2 billion has been completed.
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
5
<PAGE>
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 ("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.
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.
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 Opportunity Fund and other Gabelli Funds are
available through the no-transaction fee programs at many major discount
brokerage firms.
6
<PAGE>
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.
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
In conclusion, we expect equity markets in 1999 will be supported by low
interest rates, modest economic growth aided by consumer optimism and a high
level of corporate merger and acquisition activity.
The Fund's daily net asset value is available each evening after 6:00 PM
(Eastern Time) by calling 1-800-GABELLI (1-800-422-3554). The Fund's Nasdaq
symbol is GABOX. Please call us during the business day for further information.
We thank you for your commitment and as always, pledge our best efforts on your
behalf.
Sincerely,
/s/ Marc J. Gabelli /s/ Caesar Bryan
Marc J. Gabelli Caesar Bryan
Portfolio Manager Portfolio Manager
January 29, 1999
- --------------------------------------------------------------------------------
Top Ten Holdings
December 31, 1998
-----------------
Vivendi Telecom Italia SpA
Granada Group plc Roche Holding AG
TCI/Liberty Media Group Telephone & Data Systems
Novartis AG Invik & Co. AB
Schlumberger Ltd. USA Networks 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 Opportunity Fund
Portfolio of Investments -- December 31, 1998
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS-- 91.7%
Automotive -- 1.1%
900 General Motors Corp............ $ 64,890 $ 64,406
--------- ---------
Broadcasting -- 7.5%
2,150 Audiofina...................... 89,113 97,008
7,400 Granada Group plc.............. 125,749 130,817
450 NRJ SA......................... 87,492 80,558
275 Pathe SA....................... 51,870 76,799
5,000 Tokyo Broadcasting System Inc. 53,949 55,986
--------- ---------
408,173 441,168
--------- ---------
Building and Construction -- 1.5%
3,300 CRH plc........................ 56,511 56,168
3,000 Sekisui House Ltd.............. 30,036 31,783
--------- ---------
86,547 87,951
--------- ---------
Business Services -- 3.6%
530 Vivendi........................ 112,682 137,576
2,200 Young & Rubicam Inc.+.......... 67,069 71,225
--------- ---------
179,751 208,801
--------- ---------
Cable -- 3.8%
1,100 Comcast Corp., Cl. A........... 50,094 63,181
1,100 MediaOne Group Inc.+........... 51,136 51,700
1,400 NTL Inc.+...................... 70,362 79,013
1,200 TCI Ventures Group, Cl. A+..... 20,634 28,275
--------- ---------
192,226 222,169
--------- ---------
Conglomerates -- 1.7%
1,250 Invik & Co. AB, B Free......... 95,170 101,782
--------- ---------
Consumer Products -- 6.9%
720 Christian Dior SA.............. 82,548 79,656
70 Compagnie Financiere
Richemont AG ................. 96,320 98,975
1,450 Fortune Brands Inc............. 51,701 45,856
2,000 KAO Corp....................... 40,254 45,214
3,400 Reckitt & Colman plc........... 50,353 45,029
8,200 Unilever NV.................... 79,486 91,955
--------- ---------
400,662 406,685
--------- ---------
Consumer Services -- 1.5%
5,000 Rollins Inc.................... 85,250 87,500
--------- ---------
Diversified Industrial -- 1.8%
550 Deutsche Babcock AG+........... 40,601 26,913
1,125 Indus Holding AG............... 44,372 43,568
300 Oerlikon-Buhrle Holding AG..... 57,522 35,057
--------- ---------
142,495 105,538
--------- ---------
Energy and Utilities -- 8.0%
700 British Petroleum Co. plc,
ADR. ......................... 61,963 66,500
12,181 Citizens Utilities Co., Cl. B+. 106,962 98,968
2,500 Endesa SA...................... 67,936 66,341
3,100 Florida Public Utilities Co.... 50,090 53,088
2,500 Schlumberger Ltd............... 137,822 115,313
1,200 Veba AG........................ 69,356 71,833
--------- ---------
494,129 472,043
--------- ---------
Entertainment -- 3.9%
2,770 Tele-Communications Inc./
Liberty Media Group,
Cl. A+ ...................... 98,905 127,593
3,000 USA Networks Inc.+............. 75,830 99,375
--------- ---------
174,735 226,968
--------- ---------
Equipment and Supplies -- 0.6%
2,000 Toyo Seikan Kaisha Ltd......... 35,496 34,008
--------- ---------
Financial Services -- 9.6%
1,700 Assicurazioni Generali SpA..... 70,318 71,138
500 AXA-UAP........................ 69,512 72,502
10,200 Banca Commerciale Italiana..... 69,393 70,854
1,000 Federal Home Loan Mortgage
Corp. ....................... 49,488 64,438
1,000 Mellon Bank Corp............... 62,666 68,750
600 Morgan (J.P.) & Co............. 54,171 63,038
1,900 Pioneer Group Inc.............. 52,001 37,525
3,500 Schroders plc.................. 84,012 63,882
4,900 Skandinaviska Enskilda
Banken, Cl. A ............... 74,025 51,687
--------- ---------
585,586 563,814
--------- ---------
Food and Beverage -- 5.0%
25,800 Foster's Brewing Group Ltd..... 69,207 69,945
45 Nestle SA...................... 93,042 97,962
2,500 Seagram Co..................... 91,875 95,000
1,100 Whitman Corp................... 24,599 27,913
--------- ---------
278,723 290,820
--------- ---------
Global Entertainment -- 2.2%
325 Canal Plus..................... 79,031 88,726
6,100 EMI Group plc.................. 38,690 42,982
--------- ---------
117,721 131,708
--------- ---------
Health Care -- 5.3%
60 Novartis AG.................... 106,058 117,949
9 Roche Holding AG............... 106,157 109,823
650 Schering AG.................... 83,805 81,663
--------- ---------
296,020 309,435
--------- ---------
Hotels and Gaming -- 0.8%
3,250 Mirage Resorts Inc.+........... 70,147 48,547
--------- ---------
See accompanying notes to financial statements.
8
<PAGE>
The Gabelli Global Opportunity Fund
Portfolio of Investments (Continued) -- December 31, 1998
================================================================================
Market
Shares Cost Value
------ ---- -----
COMMON STOCKS (Continued)
Metals and Mining -- 5.4%
3,000 Anglogold Ltd., ADR............ $ 67,525 $ 58,688
3,000 Barrick Gold Corp.............. 63,375 58,500
8,300 Harmony Gold Mining Ltd.+...... 37,858 41,552
2,800 Harmony Gold Mining Ltd.,
ADR+ ........................ 12,425 13,300
1,500 Newmont Mining Corp............ 35,981 27,094
3,800 Placer Dome Inc................ 51,190 43,700
1,800 Stillwater Mining Co.+......... 49,506 73,799
--------- ---------
317,860 316,633
--------- ---------
Publishing -- 5.0%
6,250 Gruppo Editoriale L'Espresso
SpA ......................... 53,681 54,961
12,000 Independent Newspapers plc..... 59,110 50,413
600 McGraw-Hill Companies Inc...... 47,936 61,125
2,500 News Corp. Ltd., ADR........... 64,656 66,094
5,000 Schibsted ASA.................. 59,154 63,002
--------- ---------
284,537 295,595
--------- ---------
Retail -- 1.2%
1,000 Ito Yokado Co. Ltd............. 65,762 70,038
--------- ---------
Telecommunications -- 12.1%
1,200 Bell Atlantic Corp............. 69,510 63,600
2,500 Cable & Wireless plc, ADR...... 88,953 91,875
18 DDI Corp....................... 61,752 67,023
5,500 Electric Lightwave Inc.+....... 64,125 45,031
2,500 Frontier Corp.................. 82,313 85,000
300 Global Crossing Ltd.+.......... 5,700 13,538
5 Japan Telecom Co. Ltd.......... 38,450 38,565
10 Nippon Telegraph &
Telephone Corp. ............. 76,103 77,307
5,500 Societe Europeenne de
Communication SA+ ........... 26,538 20,356
1,300 Telecom Italia SpA, ADR........ 109,845 113,100
4,000 Viatel Inc.+................... 52,000 91,500
--------- ---------
675,289 706,895
--------- ---------
Wireless Communications -- 3.2%
1,500 Omnipoint Corp.+............... 34,091 13,969
2,300 Telephone & Data Systems Inc... 86,666 103,356
2,700 Vanguard Cellular Systems
Inc., Cl. A+ ................ 57,614 69,694
--------- ---------
178,371 187,019
--------- ---------
TOTAL COMMON STOCKS............ 5,229,540 5,379,523
--------- ---------
TOTAL INVESTMENTS --
91.7%......................... $5,229,540 5,379,523
=========
Other Assets and
Liabilities (Net) -- 8.3%.... 486,507
---------
NET ASSETS -- 100.0%
(556,048 shares outstanding) $5,866,030
=========
NET ASSET VALUE,
Offering and Redemption
Price Per Share................. $10.55
======
For Federal tax purposes:
Aggregate cost $5,231,061
=========
Gross unrealized
appreciation $ 413,129
Gross unrealized
depreciation (264,667)
---------
Net unrealized appreciation $ 148,462
=========
Net Unrealized
Principal Settlement Appreciation/
Amount Date (Depreciation)
------ ---- --------------
FORWARD FOREIGN EXCHANGE CONTRACTS
113,456(a) Deliver Australian Dollars in
exchange for USD 69,589 01/06/99 $ 177
55,112(b) Deliver British Pounds in
exchange for USD 91,696 01/05/99 $ (728)
25,785(b) Deliver British Pounds in
exchange for USD 42,901 01/06/99 $ (237)
17,548(b) Deliver British Pounds in
exchange for USD 29,196 01/07/99 $ (333)
9,710,821(c) Deliver Spanish Pesetas in
exchange for USD 68,535 01/05/99 $ 442
551,334(d) Deliver French Francs in
exchange for USD 98,699 01/29/99 $ 412
256,079,140(e) Deliver Italian Lira in
exchange for USD 155,304 01/07/99 $1,026
452,250(f) Deliver Norwegian Kronas in
exchange for USD 59,360 01/04/99 $ 105
------
TOTAL FORWARD FOREIGN
EXCHANGE CONTRACTS $ 864
======
- ----------
(a) Principal amount denoted in Australian Dollars.
(b) Principal amount denoted in British Pounds.
(c) Principal amount denoted in Spanish Pesetas.
(d) Principal amount denoted in French Francs.
(e) Principal amount denoted in Italian Lira.
(f) Principal amount denoted in Norwegian Kronas.
+ Non-income producing security.
ADR -- American Depositary Receipt.
USD -- U.S. Dollars.
% of
Market Market
Geographic Diversification Value Value
- --------------------- ------- ----------
Europe 47.8% $2,569,412
North America 39.8% 2,140,608
Japan 7.8% 419,924
Asia/Pacific Rim 2.5% 136,039
South Africa 2.1% 113,540
------ ---------
100.0% $5,379,523
====== =========
See accompanying notes to financial statements.
9
<PAGE>
The Gabelli Global Opportunity Fund
Statement of Assets and Liabilities
December 31, 1998
================================================================================
Assets:
Investments, at value (Cost $5,229,540) ................. $ 5,379,523
Foreign currency, at value (Cost $1,317,877) ............. 1,300,593
Dividends, interest and reclaims receivable .............. 2,775
Receivable for investments sold .......................... 18,374
Receivable from adviser .................................. 105,968
Deferred organizational expenses ......................... 34,695
Net unrealized appreciation on forward
foreign exchange contracts ............................ 864
-----------
Total Assets ........................................... 6,842,792
-----------
Liabilities:
Payable for investments purchased ........................ 657,491
Payable for investment advisory fees ..................... 27,976
Payable for distribution fees ............................ 1,303
Payable to adviser ....................................... 40,000
Payable to custodian ..................................... 183,696
Other accrued expenses and liabilities ................... 66,296
-----------
Total Liabilities ...................................... 976,762
-----------
Net Assets applicable to 556,048
shares outstanding .................................... $ 5,866,030
===========
Net Assets consist of:
Capital stock, at par value .............................. $ 556
Additional paid-in capital ............................... 5,734,582
Undistributed net investment income ...................... 709
Accumulated distributions in excess of
net realized gain on investments
and foreign currency transactions ...................... (1,521)
Net unrealized appreciation on investments
and foreign currency transactions ...................... 131,704
-----------
Total Net Assets ....................................... $ 5,866,030
===========
Net Asset Value, offering and redemption
price per share ($5,866,030 / 556,048
shares outstanding; 200,000,000 shares
authorized of $0.001 par value) ...................... $ 10.55
===========
Statement of Operations
For the Period Ended December 31, 1998+
================================================================================
Investment Income:
Dividends (net of foreign taxes of $674) ................. $ 16,032
Interest ................................................. 60,259
-----------
Total Investment Income ................................ 76,291
-----------
Expenses:
Investment advisory fees ................................. 27,976
Distribution fees ........................................ 6,994
Legal and audit fees ..................................... 32,516
Shareholder report expenses .............................. 21,688
Registration fees ........................................ 15,125
Custodian fees ........................................... 11,483
Shareholder services fees ................................ 7,846
Organizational expenses .................................. 5,305
Directors' fees .......................................... 286
Miscellaneous expenses ................................... 4,730
-----------
Total Expenses ......................................... 133,949
Expense reimbursement .................................... (105,968)
-----------
Total Net Expenses ..................................... 27,981
-----------
Net Investment Income .................................. 48,310
-----------
Net Realized and Unrealized Gain
on Investments:
Net realized gain on investments
and foreign currency transactions ...................... 190,596
Net change in unrealized appreciation
on investments and foreign currency
transactions ........................................... 131,704
-----------
Net realized and unrealized gain on
investments and foreign currency
transactions ............................................ 322,300
-----------
Net increase in net assets resulting
from operations .......................................... $ 370,610
===========
Statement of Changes in Net Assets
================================================================================
Period Ended
December 31, 1998+
-----------------
Operations:
Net investment income ................................... $ 48,310
Net realized gain on investments
and foreign currency transactions ..................... 190,596
Net change in unrealized appreciation
on investments and foreign currency
transactions .......................................... 131,704
-----------
Net increase in net assets resulting from operations .. 370,610
-----------
Distributions to shareholders:
Net investment income ................................... (48,310)
In excess of net investment income ...................... (31,596)
Net realized gain on investments ........................ (159,812)
-----------
Total distributions to shareholders ................... (239,718)
-----------
Capital share transactions:
Net increase in net assets from capital
share transactions .................................... 5,735,138
-----------
Net increase in net assets ............................ 5,866,030
Net Assets:
Beginning of period ..................................... --
-----------
End of period ........................................... $ 5,866,030
===========
- ----------
+ From commencement of operations on May 11, 1998.
See accompanying notes to financial statements.
10
<PAGE>
The Gabelli Global Opportunity Fund
Notes to Financial Statements
================================================================================
1. Description. The Gabelli Global Opportunity Fund (the "Fund"), a series of
Gabelli Global Series Funds, Inc. (the "Corporation"), 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 May 11, 1998.
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 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.
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
11
<PAGE>
The Gabelli Global Opportunity Fund
Notes to Financial Statements (Continued)
================================================================================
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 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 period ended December 31, 1998, reclassifications were made to increase
undistributed net investment income for $32,305 and decrease distributions in
excess of net realized gain on investments and foreign currency transactions for
$32,305.
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
12
<PAGE>
The Gabelli Global Opportunity Fund
Notes to Financial Statements (Continued)
================================================================================
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. The Adviser
voluntarily agreed to reimburse expenses of the Fund to the extent necessary to
maintain the annualized total operating expenses of the Fund at 1.00% of the
value of the Fund's average daily net assets. For the period ended December 31,
1998, the Adviser reimbursed the Fund in the amount of $105,968.
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 period
ended December 31, 1998, the Fund incurred distribution costs payable to Gabelli
& Company, Inc., an indirect wholly-owned subsidiary of the Adviser, of $6,994,
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 are being
amortized on a straight-line basis over a period of 60 months.
6. Portfolio Securities. Purchases and sales of securities for the period ended
December 31, 1998, other than short term securities, aggregated $8,648,344 and
$3,619,215, respectively.
7. Transactions with Affiliates. During the period ended December 31, 1998, the
Fund paid brokerage com missions of $1,130 to Gabelli & Company, Inc. and its
affiliates.
8. Capital Stock Transactions. Transactions in shares of capital stock were as
follows:
Period Ended
December 31, 1998
-----------------------------
Shares Amount
----- ------
Shares sold .................................... 2,576,620 $ 26,801,277
Shares issued upon reinvestment of dividends ... 22,028 227,773
Shares redeemed ................................ (2,042,600) (21,293,912)
------------ ------------
Net increase ................................. 556,048 $ 5,735,138
============ ============
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.
13
<PAGE>
The Gabelli Global Opportunity Fund
Financial Highlights
================================================================================
Selected data for a share of capital stock outstanding throughout each period:
Period Ended
December 31, 1998+
-----------------
Operating performance:
Net asset value, beginning of period .................... $ 10.00
---------
Net investment income ................................... 0.09
Net realized and unrealized gain on investments ......... 0.91
---------
Total from investment operations ........................ 1.00
---------
Distributions to shareholders:
Net investment income ................................... (0.09)
In excess of net investment income ...................... (0.06)
Net realized gain on investments ........................ (0.30)
---------
Total distributions ..................................... (0.45)
---------
Net asset value, end of period .......................... $ 10.55
=========
Total return++ .......................................... 10.1%
=========
Ratios to average net assets and supplemental data:
Net assets, end of period (in 000's) .................... $ 5,866
Ratio of net investment income
to average net assets ................................. 1.72%(a)
Ratio of operating expenses
to average net assets before reimbursement (b) ........ 4.77%(a)
Ratio of operating expenses
to average net assets net of reimbursement ............ 1.00%(a)
Portfolio turnover rate ................................. 127%
- ----------
+ From commencement of operations on May 11, 1998.
++ 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) During the period ended December 31, 1998, the Adviser voluntarily
reimbursed certain expenses. If such expense reimbursement had not
occurred, the ratio of operating expenses to average net assets would have
been as shown.
See accompanying notes to financial statements.
14
<PAGE>
The Gabelli Global Opportunity Fund
Report of Grant Thornton LLP, Independent Auditors
================================================================================
Shareholders and Board of Directors
The Gabelli Global Opportunity Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of The Gabelli Global Opportunity Fund (one of the
series constituting Gabelli Global Series Funds, Inc.) as of December 31, 1998,
the related statement of operations for the period then ended, the statement of
changes in net assets for the period then ended and financial highlights for the
period 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
manage ment, 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 Opportunity 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
- --------------------------------------------------------------------------------
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 $0.45 per share. For the year ended December
31, 1998, 2.15% 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 64.58%. 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 Opportunity 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.
- --------------------------------------------------------------------------------
15
