[PHOTO]
The
Gabelli
Global
Convertible
Securities
Fund
ANNUAL REPORT
DECEMBER 31, 1998
<PAGE>
[GRAPHIC]
The Gabelli Global
Convertible Securities Fund
[PHOTO]
Annual Report - December 31, 1998
To Our Shareholders, Hart Woodson
The fourth quarter of 1998 saw a dramatic recovery from the preceding
quarter's market turmoil. The widening of credit spreads and risk premiums
caused by Russia's default were abated by an injection of liquidity. Central
banks around the globe cut interest rates. Confidence was revived and important
pillars of the equity bull market returned. Mutual fund flows recovered. Merger
and acquisition activity resumed. Nevertheless, uncertainties about the health
of the world economy remain. A profit recession may tax already strained
valuations in certain sectors, the recovery in Asia may be delayed and stability
in Latin America and Russia may be jeopardized. Consequently, individual stock
selection will be paramount. We favor investments in companies with a domestic
franchise, which are cash flow generative and enjoy pricing power such as
communications companies Cablevision, Time Warner, MediaOne and NTL. We like
companies undergoing consolidation or restructuring such as AirTouch and
Vivendi. And we seek bargains in sectors which have been over sold, such as
commodities. In each case, investing in the convertible securities of these
companies offers a prudent approach to preserving capital and building wealth.
Our investment approach flourished in 1998 as The Gabelli Global
Convertible Securities Fund had a total return of 8.6% versus the return of 4.4%
for the Lipper Convertible Securities Fund Average, placing the Fund in the top
one-third of all convertible securities funds tracked by Lipper.
Investment Performance
For the fourth quarter ended December 31, 1998, The Gabelli Global
Convertible Securities Fund's (the "Fund") total return was 12.2%. The Warburg
Dillon Read Global Convertible Index, Merrill Lynch Global Bond Index and Morgan
Stanley Capital International World Free Index of global equity markets had
returns of 16.2%, 2.5% and 21.1%, respectively, over the same period. Each index
is an unmanaged indicator of investment performance. The Fund was up 8.6% for
1998. The Warburg Dillon
<PAGE>
INVESTMENT RESULTS (a)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarter
-----------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
<S> <C> <C> <C> <C> <C>
1998: Net Asset Value...................... $10.43 $10.36 $9.09 $10.12 $10.12
Total Return......................... 11.1% (0.7)% (12.3)% 12.2% 8.6%
- --------------------------------------------------------------------------------------------------------------
1997: Net Asset Value...................... $10.27 $10.98 $11.15 $9.39 $9.39
Total Return......................... 0.9% 6.9% 1.5% (6.1)% 2.8%
- --------------------------------------------------------------------------------------------------------------
1996: Net Asset Value...................... $11.34 $11.55 $11.41 $10.18 $10.18
Total Return......................... 5.1% 1.9% (1.2)% (0.3)% 5.5%
- --------------------------------------------------------------------------------------------------------------
1995: Net Asset Value...................... $10.09 $10.64 $11.05 $10.79 $10.79
Total Return......................... 1.6% 5.5% 3.9% 1.2% 12.6%
- --------------------------------------------------------------------------------------------------------------
1994: Net Asset Value...................... $10.38 $10.37 $10.64 $9.93 $9.93
Total Return......................... 3.8%(b) (0.1)% 2.6% (5.2)% 0.9%(b)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------
Average Annual Returns - December 31, 1998 (a)
----------------------------------------------
1 Year....................................... 8.6%
3 Year....................................... 5.6%
Life of Fund (b)............................. 6.1%
--------------------------------------------------------
Dividend History
--------------------------------------------------------
Payment (ex) Date Rate Per Share Reinvestment Price
----------------- -------------- ------------------
December 28, 1998 $0.080 $ 9.96
December 30, 1997 $1.070 $ 9.33
December 31, 1996 $1.200 $10.18
December 29, 1995 $0.393 $10.79
December 30, 1994 $0.160 $ 9.93
(a) Total returns and average annual returns reflect changes in share price and
reinvestment of dividends and are net of expenses. The net asset value of the
Fund is reduced on the ex-dividend (payment) date by the amount of the dividend
paid. Of course, returns represent past performance and do not guarantee future
results. Investment returns and the principal value of an investment will
fluctuate. When shares are redeemed they may be worth more or less than their
original cost. (b) From commencement of investment operations on February 3,
1994. Note: Investing in foreign securities involves risks not ordinarily
associated with investments in domestic issues, including currency fluctuation,
economic and political risks.
- --------------------------------------------------------------------------------
Read Global Convertible Index, Merrill Lynch Global Bond Index and Morgan
Stanley World Free Index rose 20.6%, 12.8% and 22.0%, respectively, over the
same twelve month period.
For the three year period ended December 31, 1998, the Fund's total return
averaged 5.6% annually versus average annual total returns of 9.7%, 6.6% and
16.7% for the Warburg Dillon Read Global Convertible Index, Merrill Lynch Global
Bond Index and Morgan Stanley World Free Index, respectively. Since inception on
February 3, 1994 through December 31, 1998, the Fund had a cumulative total
return of 33.9%, which equates to an average annual return of 6.1%.
As a result of the merger between Union Bank of Switzerland ("UBS") and
Swiss Bank, the UBS Global Convertible Index has been renamed the Warburg Dillon
Read Global Convertible Index. Warburg Dillon Read is a subsidiary of the newly
created UBS.
2
<PAGE>
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GABELLI GLOBAL
CONVERTIBLE SECURITIES FUND, THE LIPPER CONVERTIBLE SECURITIES FUND AVERAGE AND
THE WARBURG DILLON READ GLOBAL CONVERTIBLE INDEX
[The following table was depicted as a line chart in the printed material.]
<TABLE>
<CAPTION>
Gabelli Global Lipper Convertible Warbug Dillon Read
Convertible Securities Fund Securities Fund Average Global Convertible Index
--------------------------- ----------------------- ------------------------
<S> <C> <C> <C>
2/3/94 10000 10000 10000
12/94 10090 9324 9709
12/95 11360 11262 11146
12/96 11900 12940 11883
12/97 12236 15219 12058
12/98 13293 15889 14545
</TABLE>
Our Investment Objective
The Fund's objective is to obtain a high rate of total return by investing
in global convertible securities. We expect to achieve a competitive rate of
return by investing primarily in coupon paying convertible securities which meet
our selective investment criteria.
Our Approach
We weigh both country-specific and company-specific factors to make our
investment decisions. Country-specific factors include political stability,
economic growth, inflation and trends in interest rates. With regard to
companies, we seek firms which are undervalued in relation to their long term
potential value. We then look for some dynamic in the country or company which
can unlock this value. In the case of global telecommunications, the dynamic is
the privatization of state-owned monopolies. In developing countries, it is the
need to provide the infrastructure for growth. In Japan, it is the change from
an industrial to a consumer-oriented economy. In commodities, it is the increase
in industrial demand.
Global Allocation
The accompanying chart represents the Fund's holdings by geographic region
as of 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.
[GRAPHIC OMITTED]
[The following table was depicted as a pie chart in the printed material.]
HOLDINGS BY GEOGRAPHIC REGION - 12/31/98
United States 45.4%
Europe 41.9%
Japan 8.5%
Asia/Pacific Rim 3.7%
South Africa 0.5%
3
<PAGE>
What are Global Convertible Securities?
Global convertible securities are bonds, preferred shares and warrants of
domestic or foreign issuers which may be converted into a fixed number of shares
of the underlying company. Convertibles are hybrid securities which combine the
capital appreciation potential of equities with the higher yield of fixed income
instruments. They can be thought of as a straight bond together with an embedded
call option (or warrant) on the underlying equity.
What are the Benefits of Global Convertible Securities?
Reduced volatility is foremost. Investing in foreign equity markets can be
rewarding but volatile. Our goal is to earn a high, risk-adjusted rate of
return. Due to its fixed income characteristics, a convertible security will
provide more stability than its underlying common stock. In the current market
environment, the Gabelli Global Convertible Securities Fund provides an
attractive alternative by combining the capital appreciation potential of global
equity investing with the higher current income usually associated with bonds.
COMMENTARY
Volatility
After a devastating third quarter, which left many markets in negative
territory, world equity markets gained over 20% on average in the fourth
quarter. Particularly strong were markets in the Far East, which gained 47% as
lower interest rates, stronger currencies and the hope of economic recovery
drove these illiquid markets higher. Indonesia rose over 125% in U.S. dollar
terms during the quarter but a more modest 67% when measured in local currency.
Despite this strong showing, the region finished the year down 7.3%. Japan rose
25% in the quarter in dollar terms, but only 3.0% in yen. The surprising
strength of the yen will add to the deflationary pressures hampering economic
recovery. The weak performer was Latin America, which rose only 5.9% in the
quarter and was down 38% for the year. Concern over Brazil continued to plague
the region despite agreement on a larger than expected IMF support package
totaling over $40 billion. Europe continued to perform well in anticipation of
monetary union, gaining over 17% in the quarter and 18% for the year. Countries
where interest rates had to fall the furthest to converge (i.e. Italy and Spain)
continued to outperform.
Zone Euro
It's official! Euroland is dead. The Zone Euro is born. So says the
Academie Francaise, France's language watchdog which wants to prevent the
Americanization of the term used to connote the newly formed union. It may be
too late. The euro is likely to force European businesses to become more
efficient. This process is giving rise to consolidation, restructuring and an
emphasis on shareholder value. Low interest rates and the necessary shift to an
equity culture will continue to provide a favorable backdrop for stocks. The
main risk to the Zone Euro in the coming years is likely to be political. Most
of
4
<PAGE>
Europe's center-right governments have shifted to the left over the past few
years on platforms of lowering Europe's stubbornly high unemployment rate.
Unemployment remains over 10% versus only 4.3% in the U.S. Should economic
growth slow, politicians may seek a quick fix by abandoning the prudent fiscal
policies mandated by the Maastrict Treaty.
Buy, Buy, Buy!
The IMF continues to reduce its estimate for world economic growth. The
most recent estimate of 2.5% was recently cut to 2.2%. Key to whether or not the
world economy grows will be the strength of the world's largest economy, the
U.S., and in turn the U.S. consumer. Can the U.S. consumer keep spending? So
far, the answer appears to be yes. December figures from the Conference Board
show the Consumer Confidence Index at 126.1, up from its low of 119.3 in
October. Meanwhile, home and auto sales remain strong, supported by low interest
rates. Ford, the nation's number two auto maker, will have its best year since
1978 with sales up 6.0% in December. We will continue to monitor the health of
the consumer as an important indicator of world economic growth.
Let's Talk Converts
The following are specifics on selected holdings of our Fund. Favorable
earnings prospects do not necessarily translate into higher prices, but they do
express a positive trend which we believe will develop over time. The share
prices of foreign holdings are stated in U.S. dollar equivalent terms as of
December 31, 1998.
AirTouch Communications Inc. (ATI.C - $103.00 - NYSE) provides wireless
communication services in the U.S., Europe, Asia and Egypt. With 609 million
shares outstanding, ATI has an equity market capitalization of $47 billion and
is generating over $3 billion in EBITDA. ATI has over 7.5 million subscribers in
the U.S. and over 5 million subscribers internationally. To counter competition
in the U.S. from AT&T's "One Rate", AirTouch needs a national footprint. To
solve this problem, Bell Atlantic proposed a $45 billion merger with ATI. Not to
be outdone, Vodafone, the U.K.-based cellular company, topped that offer with a
$62 billion bid of its own. This transaction will create the world's largest
wireless company with a market capitalization of approximately $110 billion, 23
million subscribers and near-complete pan-European coverage. The saga of
consolidation in the global telecommunications industry continues.
With the stock at $72.50, the AirTouch 4.25% convertible preferred trades
at $100.75 on a 1% premium and 2.1% current yield. The common stock does not pay
a dividend. The preferred will participate fully with the common on the upside
but offers little downside protection.
CSC Holdings Inc. (CVCS.A - $75.375 - AMEX) owns and operates cable television
systems under the Cablevision name with major clusters in Boston, Cleveland, and
the New York metropolitan area. Its programming assets include Madison Square
Garden (including the NY Knicks, NY Rangers, and MSG network), Radio City Music
Hall, AMC, Bravo, Romance Classics, various regional sports channels and a
5
<PAGE>
50% stake in Fox Sports Net. With 184 million fully diluted shares outstanding,
CVC has an equity market capitalization of over $9 billion and net debt of $6.5
billion. Earnings before interest, taxes, depreciation and amortization
("EBITDA") is estimated at $870 million in 1998. The company continues to deploy
new services like digital video, high speed data and telephony.
The CVC $2.125 convertible preferred is a pure equity surrogate. With the
stock at $50.125, the preferred trades at $76.50 on a 3% premium and 2.8%
current yield versus the common which pays no dividend.
Finaxa (Sub. Deb. Cv. 3.00%, 01/01/07) Chairman Claude Bebear has built Paris
based AXA-UAP into Europe's second largest insurance company and a financial
management powerhouse. With an equity market capitalization of over $50 billion,
the company provides life insurance, property/casualty insurance, reinsurance
and financial services. Life insurance activities are the most important sector,
accounting for 53% of total revenues in the first half of 1998. In the U.S.,
AXA-UAP owns 58% of The Equitable Companies, which owns 57% of investment
manager Alliance Capital and the majority of Donaldson, Lufkin & Jenrette. The
company also has major subsidiaries in the U.K., Australia and Belgium.
With the stock at Euro 123.50, the 3.00% Euro denominated convertibles of
Finaxa into AXA-UAP trade at Euro 139.00 on a 12% premium and 1.9% current
yield. The low premium assures strong participation with the equity.
Havas SA (3.50%, 01/01/03), the French media company, was acquired by Vivendi in
June 1998. Consequently, the old Havas 3.50% convertible bonds due in January
2003 became convertible into Vivendi. With Vivendi's stock at Euro 219.00, the
bonds trade at Euro 106.00. The bonds are a pure equity surrogate trading at a
slight discount to parity in anticipation of being called in early 1999.
Vivendi 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 5% 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.
MediaOne Group Inc. (UMGG.D - $95.00 - NYSE), based in Englewood, Colorado, is
the nation's fifth largest cable company with an equity market capitalization of
over $28 billion and five million subscribers. Expected to generate $950 million
in EBITDA in 1998, UMG is the least expensive stock amongst its cable company
peers. The company is taking aggressive strides to launch new products like
high-speed data and telephone services which will drive strong revenue and cash
flow growth in the years ahead. The company also has a wealth of public
investments and unconsolidated assets which may constitute
6
<PAGE>
up to two-thirds of the company's fair value. These assets include 53 million
shares of ATI, a 25.5% stake in Time Warner Entertainment, as well as cellular
investments in the U.K. and Eastern Europe.
With the stock at $47.00, UMG's 4.50% convertible preferred trades at
$95.75 on a 3% premium and 2.4% yield advantage over the common stock, which
pays no dividend. The convertible will participate on a one-to-one basis with
the stock.
Swiss Life Finance (1.50%, 05/20/03) issued a dollar denominated bond
exchangeable into Mannesmann common stock at a price of DM 197.50 (i.e. Euro
99.60) in April 1998. With the stock at Euro 98.50, the bonds trade at Euro
125.00 on a 17% premium and 1.2% current yield. The bonds enjoy an implied
credit rating of AAA.
Mannesmann AG has four main businesses: telecommunications, automotive
components, engineering and steel. Telecommunications services have become
increasingly more important since the company entered the cellular phone market
in 1992. In fact, Mannesmann MobilFunk recently overtook Deutsche Telekom as
Germany's top wireless provider with over 6 million subscribers. Although
telecommunications services account for only about 28% of total sales, they make
up nearly three-quarters of the company's cash flow. Other Mannesmann mobile
ventures include Omnitel (Italy), Telering (Austria) and Cegetel (France). With
389 million shares outstanding, Mannesmann has an equity market capitalization
of nearly Euro 39 billion or $45 billion.
Telefonica de Espana (Sub. Deb. Cv. 2.00%, 07/15/02) is the leading
telecommunications operator in the Spanish speaking world with 35.5 million
customers in Latin America and Spain. Latin America has become a key source of
revenue for the company with nearly a third of its $15.6 billion in consolidated
revenue coming from its investments in the region. Recently, Telefonica paid
$1.2 billion to gain control over the Brazilian-based CRT (Cia. Riograndense de
Telecomunicacoes SA) as an initial step to expand into the promising Brazilian
market.
The $525 million 2.00% convertible bond due in July 2002 is highly liquid
and participates fully in the equity's movements with only a 2% premium. Rated
AA- by Standard and Poor's, this convertible provides a solid alternative to the
common stock.
Toyo Information Systems Co. Ltd. (0.40%, 03/31/04) is a major system integrator
and software developer serving a wide variety of industries and government
agencies. Headquartered in Tokyo, the company was founded in 1971 as a
subsidiary of Sanwa Bank. Its first systems were financial and banking
applications. The company is a beneficiary of restructuring related demand. Toyo
has annual sales of almost $600 million and an equity market capitalization of
over $800 million.
Toyo's 0.40% yen denominated convertible bond due in March 2004 trades at
108.00 with the stock at 2,300 yen. On only an 8% premium, the bond provides
good upside participation. The bond is expected to find downside support at a
price of 88.00, or a yield to maturity of approximately 200 basis
7
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points over the equivalent maturity Japanese Government Bond ("JGB"). Further
downside support is provided by a reset option in 2001, when the conversion
price can be lowered to as much as 80% of its original price.
Yamanouchi Pharmaceutical Co. Ltd. (1.50%, 12/31/02) manufactures and markets a
wide variety of pharmaceuticals for both human and veterinary uses. With 342
million shares outstanding, Yamanouchi has an equity market capitalization of
nearly $11 billion, modest by global standards. The stock is cheap on a relative
price to earnings basis of approximately 23 times expected fiscal year 1999
earnings. The company is expected to launch several new drugs in 1999 to treat
diabetes and osteoporosis. Its European research and development efforts are
also progressing nicely as nine out of fifteen projects have entered clinical
trials. Yamanouchi has marketing and development alliances with Merck and G.D.
Searle, respectively.
Yamanouchi's 1.50% yen denominated convertible bond due in December 2002
offers a balanced investment in the stock. With the stock at 3,620 yen, the
convertible trades at 116.50 on a 16% premium and 1.3% current yield versus the
common's 0.7% yield.
Minimum Initial Investment - $1,000
The Fund's minimum initial investment for both regular and retirement
accounts is $1,000. There are no subsequent investment minimums. No initial
minimum is required for those establishing an Automatic Investment Plan.
Additionally, The Gabelli Global Convertible Securities Fund and other Gabelli
Funds are available through the no-transaction fee programs at many major
discount brokerage firms.
The Roth IRA
The Taxpayer Relief Act of 1997 included new tax incentives and more
opportunities to save for retirement and other major expenditures. The Roth IRA
is just one of these new opportunities now available at Gabelli Funds. Our
investor representatives are available at 1-800-GABELLI (1-800-422-3554) to
speak with you about 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].
8
<PAGE>
In Conclusion
Risks to the system remain. Protectionism is on the rise. Globalization
means increased volatility. Yet the underpinnings of the equity bull market are
intact. Inflation and interest rates are low. Liquidity is plentiful. Corporate
earnings continue to grow. Consumers are buying. We will diligently monitor
these factors in 1999. Geographically, we remain overweight in the U.S. and
Europe relative to Asia and emerging markets. On a sector basis, we favor
companies in the media, telecommunications and entertainment industries. In the
current market environment, we believe stock selection will be critical to
achieving superior long term results. In the year ahead, we promise to do our
utmost to select for you the world's most compelling investment opportunities.
The Fund's daily net asset value is available in the financial press and
each evening after 6:00 PM (Eastern Time) by calling 1-800-GABELLI
(1-800-422-3554). The Fund's Nasdaq symbol is GAGCX. Please call us during the
business day for further information.
Sincerely,
/s/ Hart Woodson
A. Hartswell Woodson, III
Portfolio Manager
January 29, 1999
- --------------------------------------------------------------------------------
Top Ten Holdings
December 31, 1998
Finaxa France Telecom SA
Canal Plus/Mediaset MediaOne Group Inc.
Houston Industries Inc./Time Warner Banco Comercial Portugues SA
Home Depot Inc. International CableTel Inc.
AirTouch Communications Inc. CSC Holdings 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.
9
<PAGE>
The Gabelli Global Convertible Securities Fund
Portfolio of Investments -- December 31, 1998
================================================================================
Principal Market
Amount Cost Value
------ ---- -----
CONVERTIBLE CORPORATE BONDS--66.6%
Broadcasting - 5.2%
1,000,000(b) Canal Plus / Mediaset
Sub. Deb. Cv.
3.50%, 04/01/02................... $ 183,742 $ 278,374
$ 100,000 Scandinavian Broadcasting
System SA Sub. Deb. Cv.
7.00%, 12/01/04................... 115,929 102,500
---------- ----------
299,671 380,874
---------- ----------
Building and Construction--1.2%
250,000 Bacnotan Consolidated
Industries Inc. Sub. Deb. Cv.
5.50%, 06/21/04................... 244,336 90,000
---------- ----------
Business Services--1.2%
100,000 Interim Services Inc.
Sub. Deb. Cv.
4.50%, 06/01/05................... 100,000 90,125
---------- ----------
Cable--4.5%
100,000 Bell Atlantic Financial
4.25%, 09/15/05................... 100,987 103,625
150,000 International CableTel Inc.
Sub. Deb. Cv.
7.00%, 06/15/08................... 170,000 227,250
---------- ----------
270,987 330,875
---------- ----------
Computer Software and Services--2.6%
20,000,000(c) Toyo Information
Systems Co. Ltd. Cv.
0.40%, 03/31/04 .................. 179,342 191,052
---------- ----------
Consumer Products--7.6%
150,000 Central Garden and Pet Co.
Sub. Deb. Cv.
6.00%, 11/15/03 (a)............... 150,000 127,875
150,000 Nestle Holdings Inc.
3.00%, 06/17/02................... 168,141 216,750
20,000,000(c) Sony Corp. Sub. Deb. Cv.
1.40%, 03/31/05................... 193,198 210,290
---------- ----------
511,339 554,915
---------- ----------
Consumer Services--1.6%
100,000 Equity Corp. International
4.50%, 12/31/04................... 115,789 119,875
---------- ----------
Energy and Utilities--4.4%
125,000 Diamond Offshore Drilling Inc.
Sub. Deb. Cv.
3.75%, 02/15/07................... 178,298 116,094
100,000 National Grid Co. plc
4.25%, 02/17/08 (a)............... 165,530 207,975
---------- ----------
343,828 324,069
---------- ----------
Entertainment--2.1%
120,000 Havas SA Cv.
3.50%, 01/01/03................... 122,285 153,920
---------- ----------
Equipment and Supplies--1.3%
100,000 Antec Corp. Sub. Deb. Cv.
4.50%, 05/15/03................... 100,000 96,500
---------- ----------
Financial Services--12.6%
100,000 Berkshire Hathaway
1.00%, 12/02/01................... 142,299 154,250
150,000 Cregem Finance
NV Sub. Deb. Cv.
2.75%, 01/06/04................... 166,081 182,250
180,000 Finaxa Sub. Deb. Cv.
3.00%, 01/01/07................... 242,816 293,498
100,000,000(d) Mediobanca International
3.50%, 01/02/01................... 97,680 103,630
150,000 UBS Finance NV
2.75%, 06/16/02................... 161,089 191,437
---------- ----------
809,965 925,065
---------- ----------
Health Care--5.4%
100,000 Sandoz Capital Novartis
Sub. Deb. Cv.
2.00%, 10/06/02................... 119,684 185,500
20,000,000(c) Yamanouchi Pharmaceutical
Co. Ltd.
1.50%, 12/31/02................... 203,083 206,389
---------- ----------
322,767 391,889
---------- ----------
Publishing--2.3%
250,000 Medya Holding
Sub. Deb. Cv.
10.00%, 06/28/01.................. 249,721 168,750
---------- ----------
Retail--5.4%
100,000 Home Depot Inc.
Sub. Deb. Cv.
3.25%, 10/01/01................... 121,591 264,850
200,000 Koninklijke Ahold NV Cv.
3.00%, 09/03/01................... 106,174 126,821
---------- ----------
227,765 391,671
---------- ----------
Telecommunications--5.3%
240,000 France Telecom SA Cv.
2.00%, 01/01/04................... 220,244 237,600
100,000 Telefoncia Europe
BV Sub. Deb. Cv.
2.00%, 07/15/02................... 129,930 150,500
---------- ----------
350,174 388,100
---------- ----------
Transportation--2.2%
207,000 International Container
Terminal Services
Sub. Deb. Cv.
1.75%, 03/13/04................... 196,613 158,355
---------- ----------
Wireless Communications--1.7%
100,000 Swiss Life / Mannesmann AG
Sub. Deb. Cv.
1.50%, 05/20/03 .................. 118,031 125,600
---------- ----------
TOTAL CONVERTIBLE
CORPORATE BONDS................... 4,562,613 4,881,635
---------- ----------
CONVERTIBLE PREFERRED STOCKS - 28.1%
Shares Business Services--2.2%
------
4,800 Cendant Corp.
7.50% Cv. Pfd..................... 230,078 160,200
---------- ----------
Cable--9.8%
3,000 CSC Holdings Inc.
8.50% Cv. Pfd., Ser. I............ 83,150 226,125
2,500 Houston Industries Inc./
Time Warner Inc.
7.00% Cv. Pfd..................... 135,750 265,938
See accompanying notes to financial statements.
10
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The Gabelli Global Convertible Securities Fund
Portfolio of Investments (Continued) -- December 31, 1998
================================================================================
Market
Shares Cost Value
------ ---- -----
CONVERTIBLE PREFERRED STOCKS (Continued)
Cable (Continued)
2,400 MediaOne Group Inc.
4.50% Cv. Pfd..................... $ 199,320 $ 228,000
---------- ----------
418,220 720,063
---------- ----------
Energy and Utilities--4.7%
3,000 AES Trust Corp.
5.38% Cv. Pfd..................... 183,900 208,500
4,300 EVI Inc.
5.00% Cv. Pfd.(a)................. 196,375 132,225
---------- ----------
380,275 340,725
---------- ----------
Financial Services--3.1%
2,000 Banco Comercial Portugues SA
8.00% Cv. Pfd..................... 102,100 228,000
---------- ----------
Wireless Communications--8.3%
2,500 AirTouch Communications Inc.
4.25% Cv. Pfd., Cl. C............. 149,188 257,500
3,100 Loral Space and
Communications Ltd.
6.00% Cv. Pfd..................... 240,249 163,525
4,000 Winstar Communications Inc.
7.00% Cv. Pfd..................... 173,500 189,000
---------- ----------
562,937 610,025
---------- ----------
TOTAL CONVERTIBLE
PREFERRED STOCKS.................. 1,693,610 2,059,013
---------- ----------
PREFERRED STOCKS--3.7%
Consumer Products--3.7%
1,000 McKesson Financial Trust Pfd......... 103,380 108,813
3,000 Newell Financial Trust Pfd........... 181,500 158,813
---------- ----------
TOTAL PREFERRED STOCKS............... 284,880 267,626
---------- ----------
COMMON STOCKS--0.9%
Metals and Mining--0.4%
10,000 Durban Roodepoort
Deep Ltd.+........................ 63,454 28,559
---------- ----------
Wireless Communications--0.5%
13,000 Total Access Communications
plc+.............................. 100,100 22,360
347 Winstar Communications
Inc.+............................. 5,246 13,533
---------- ----------
105,346 35,893
---------- ----------
TOTAL COMMON STOCKS.................. 168,800 64,452
---------- ----------
WARRANTS - 0.1%
Diversified Industrial--0.1%
100 Mori Seiki+.......................... 60,000 10,000
---------- ----------
Entertainment--0.0%
50 Shochiku Co. Ltd.+................... 53,125 1,275
---------- ----------
TOTAL WARRANTS....................... 113,125 11,275
---------- ----------
OPTIONS--0.1%
Metals and Mining--0.1%
10,000 Durban Roodepoort
Deep Ltd., Call, 12/31/99+ 17,223 3,910
5,000 Durban Roodepoort
Deep Ltd. Ser. B,
Call, 06/30/02+.................. 10,084 1,742
---------- ----------
TOTAL OPTIONS....................... 27,307 5,652
---------- ----------
TOTAL INVESTMENTS --
99.5% ........................... $ 6,850,335 7,289,653
===========
Other Assets and
Liabilities (Net)--0.5%.......... 36,469
----------
NET ASSETS--100.0%
(723,919 shares outstanding) $ 7,326,122
===========
NET ASSET VALUE,
Offering and Redemption
Price Per Share.................. $10.12
======
- ---------------------
For Federal tax purposes:
Aggregate cost...................... $ 6,858,304
===========
Gross unrealized appreciation....... $ 1,293,596
Gross unrealized depreciation....... (862,247)
-----------
Net unrealized appreciation......... $ 431,349
===========
Net
Principal Settlement Unrealized
Amount Date (Depreciation)
------ ---- --------------
FORWARD FOREIGN EXCHANGE CONTRACTS
312,305(e) Sold British Pounds
in exchange for
USD 519,613....................... 08/16/99 $(19,613)
- ---------------------
(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 $468,075 or
6.4% of net assets.
(b) Principal amount denoted in French Francs.
(c) Principal amount denoted in Japanese Yen.
(d) Principal amount denoted in Italian Lira.
(e) Principal amount denoted in British Pounds.
+ Non-income producing security.
USD - U.S. Dollars.
% of
Market Market
Geographic Diversification Value Value
- -------------------------- ----- -----
North America 45.4% $3,308,991
Europe 41.9% 3,056,730
Japan 8.5% 619,006
Asia/Pacific Rim 3.7% 270,715
South Africa 0.5% 34,211
------ ----------
100.0% $7,289,653
====== ==========
See accompanying notes to financial statements.
11
<PAGE>
The Gabelli Global Convertible Securities Fund
Statement of Assets and Liabilities
December 31, 1998
================================================================================
Assets:
Investments, at value (Cost $6,850,335) ..................... $7,289,653
Foreign currency, at value (Cost $39,132) ................... 37,001
Dividends, interest and reclaims receivable ................. 48,155
Receivable for investments sold ............................. 154,899
Receivable for capital shares issued ........................ 277
Deferred organizational expenses ............................ 1,074
----------
Total Assets .............................................. 7,531,059
----------
Liabilities:
Payable for investment advisory fees ........................ 6,191
Payable for distribution fees ............................... 1,541
Payable to custodian ........................................ 125,521
Net unrealized depreciation on forward
foreign exchange contracts ................................ 19,613
Other accrued expenses and liabilities ...................... 52,071
----------
Total Liabilities ......................................... 204,937
----------
Net Assets applicable to 723,919
shares outstanding ...................................... $7,326,122
==========
Net Assets consist of:
Capital stock, at par value ................................. $724
Additional paid-in capital .................................. 6,895,845
Undistributed net investment income ......................... 19,612
Accumulated distributions in excess of
net realized gain on investments
and foreign currency transactions ........................ (7,815)
Net unrealized appreciation on investments
and foreign currency transactions ........................ 417,756
----------
Total Net Assets .......................................... $7,326,122
==========
Net Asset Value, offering and redemption
price per share ($7,326,122 / 723,919
shares outstanding; 200,000,000 shares
authorized of $0.001 par value) ........................ $10.12
======
Statement of Operations
For the Year Ended December 31, 1998
================================================================================
Investment Income:
Dividends (net of foreign taxes of $2,609) .................... $114,346
Interest ...................................................... 18,138
--------
Total Investment Income ..................................... 132,484
--------
Expenses:
Investment advisory fees ...................................... 81,333
Distribution fees ............................................. 20,333
Shareholder services fees ..................................... 26,520
Legal and audit fees .......................................... 24,202
Shareholder report expenses ................................... 19,744
Organizational expenses ....................................... 13,027
Custodian fees ................................................ 10,380
Registration fees ............................................. 8,878
Directors' fees ............................................... 1,709
Miscellaneous expenses ........................................ 7,271
--------
Total Expenses .............................................. 213,397
--------
Net Investment Loss ......................................... (80,913)
--------
Net Realized and Unrealized Gain
on Investments:
Net realized gain on investments
and foreign currency transactions ........................... 74,754
Net change in unrealized appreciation
on investments and foreign currency
transactions ................................................ 744,636
--------
Net realized and unrealized gain on
investments and foreign currency
transactions ................................................ 819,390
--------
Net increase in net assets resulting
from operations ............................................... $738,477
========
Statement of Changes in Net Assets
================================================================================
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1998 1997
----------- ------------
<S> <C> <C>
Operations:
Net investment income (loss) ........................................... $ (80,913) $ 130,370
Net realized gain on investments and foreign currency transactions ..... 74,754 815,188
Net change in unrealized appreciation / (depreciation) on investments
and foreign currency transactions .................................... 744,636 (554,352)
----------- ------------
Net increase in net assets resulting from operations ................. 738,477 391,206
----------- ------------
Distributions to shareholders:
Net investment income .................................................. -- (125,474)
In excess of net investment income ..................................... (5,156) --
Net realized gain on investments ....................................... (53,777) (815,188)
In excess of net realized gain on investments .......................... -- (27,877)
----------- ------------
Total distributions to shareholders .................................. (58,933) (968,539)
----------- ------------
Capital share transactions:
Net decrease in net assets from capital transactions ................... (2,728,084) (3,574,685)
----------- ------------
Net decrease in net assets ........................................... (2,048,540) (4,152,018)
Net Assets:
Beginning of period .................................................... 9,374,662 13,526,680
----------- ------------
End of period .......................................................... $ 7,326,122 $ 9,374,662
=========== ============
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
The Gabelli Global Convertible Securities Fund
Notes to Financial Statements
================================================================================
1. Description. The Gabelli Global Convertible Securities 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 to obtain a high
rate of total return. The Fund commenced investment operations on February 3,
1994.
2. Significant Accounting Policies. The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Security Valuation. Portfolio securities listed or traded on a nationally
recognized securities exchange, quoted by the National Association of Securities
Dealers Automated Quotations, Inc. ("Nasdaq") or traded on foreign exchanges are
valued at the last sale price on that exchange as of the close of business on
the day the securities are being valued (if there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day). All other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest average of the bid and asked prices. Portfolio securities traded on more
than one national securities exchange or market are valued according to the
broadest and most representative market, as determined by Gabelli Funds, Inc.
(the "Adviser"). Securities and assets for which market quotations are not
readily available are valued at their fair value as determined in good faith
under procedures established by and under the general supervision of the Board
of Directors. Short term debt securities with remaining maturities of 60 days or
less are valued at amortized cost, unless the Directors determine such does not
reflect the securities' fair value, in which case these securities will be
valued at their fair value as determined by the Directors. Debt instruments
having a greater maturity are valued at the highest bid price obtained from a
dealer maintaining an active market in those securities. Options are valued at
the last sale price on the exchange on which they are listed. If no sales of
such options have taken place that day, they will be valued at the mean between
their closing bid and asked prices.
Repurchase Agreements. The Fund may enter into repurchase agreements with
primary government securities dealers recognized by the Federal Reserve Bank of
New York, with member banks of the Federal Reserve System or with other brokers
or dealers that meet credit guidelines established by the Directors. Under the
terms of a typical repurchase agreement, the Fund takes possession of an
underlying debt obligation subject to an obligation of the seller to repurchase,
and the Fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Fund's holding period. The Fund will always
receive and maintain securities as collateral whose market value, including
accrued interest, will be at least equal to 100% of the dollar amount invested
by the Fund in each agreement. The Fund will make payment for such securities
only upon physical delivery or upon
13
<PAGE>
The Gabelli Global Convertible Securities Fund
Notes to Financial Statements (Continued)
================================================================================
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.
Options. The Fund may purchase or write call or put options on securities or
indices. As a writer of put options, the Fund receives a premium at the outset
and then bears the risk of unfavorable changes in the price of the financial
instrument underlying the option. The Fund would incur a loss if the price of
the underlying financial instrument decreases between the date the option is
written and the date on which the option is terminated. The Fund would realize a
gain, to the extent of the premium, if the price of the financial instrument
increases between those dates.
As a purchaser of put options, the Fund pays a premium for the right to sell to
the seller of the put option the underlying security at a specified price. The
seller of the put has the obligation to purchase the underlying security upon
exercise at the exercise price. If the price of the underlying security
declines, the Fund would realize a gain upon sale or exercise. If the price of
the underlying security increases, the Fund would realize a loss upon sale or at
expiration date, but only to the extent of the premium paid.
During the year ended December 31, 1998, the Fund wrote put options to hedge the
value of the Fund's portfolio. Transactions in written options for the year
ended December 31, 1998:
Written Put Options
----------------------------
Number of
Contracts Premium
--------- ---------
Options outstanding at January 1, 1998 0 $ 0
Options opened 270 363,680
Options closed (180) (284,953)
Options expired (90) (78,727)
--------- ---------
Options outstanding at December 31, 1998 0 $ 0
========= =========
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.
14
<PAGE>
The Gabelli Global Convertible Securities Fund
Notes to Financial Statements (Continued)
================================================================================
There are several risks in connection with the use of futures contracts as a
hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in value of the hedged investments. In addition, there is the risk that
the Fund may not be able to enter into a closing transaction because of an
illiquid secondary market.
Forward Foreign Exchange Contracts. The Fund may engage in forward foreign
exchange contracts for hedging a specific transaction with respect to either the
currency in which the transaction is denominated or another currency as deemed
appropriate by the Adviser. Forward foreign exchange contracts are valued at the
forward rate and are marked-to-market daily. The change in market value is
included in unrealized appreciation/depreciation on investments. When the
contract is closed, the Fund records a realized gain or loss equal to the
difference between the value of the contract at the time it was opened and the
value at the time it was closed.
The use of forward foreign exchange contracts does not eliminate fluctuations in
the underlying prices of the Fund's portfolio securities, but it does establish
a rate of exchange that can be achieved in the future. Although forward foreign
exchange contracts limit the risk of loss due to a decline in the value of the
hedged currency, they also limit any potential gain that might result should the
value of the currency increase. In addition, the Fund could be exposed to risks
if the counterparties to the contracts are unable to meet the terms of their
contracts.
Foreign Currency Translation. The books and records of the Fund are maintained
in United States (U.S.) dollars. Foreign currencies, investments and other
assets and liabilities are translated into U.S. dollars at the exchange rates
prevailing at the end of the period, and purchases and sales of investment
securities, income and expenses are translated at the exchange rate prevailing
on the respective dates of such transactions. Unrealized gains and losses, which
result from changes in foreign exchange rates and/or changes in market prices of
securities, have been included in unrealized appreciation/depreciation on
investments. Net realized foreign currency gains and losses resulting from
changes in exchange rates include foreign currency gains and losses between
trade date and settlement date on investment securities transactions, foreign
currency transactions and the difference between the amounts of interest and
dividends recorded on the books of the Fund and the amounts actually received.
The portion of foreign currency gains and losses related to 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.
15
<PAGE>
The Gabelli Global Convertible Securities Fund
Notes to Financial Statements (Continued)
================================================================================
Dividends and Distributions to Shareholders. Dividends and distributions to
shareholders are recorded on the ex-dividend date. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments of income and gains
on various investment securities held by the Fund, timing differences and
differing characterization of distributions made by the Fund.
For the year ended December 31, 1998, reclassifications were made to increase
undistributed net investment income for $128,661 and decrease accumulated
distributions in excess of net realized gain on investments and foreign currency
transactions for $28,792 with an offsetting adjustment to additional paid-in
capital.
Provision for Income Taxes. The Fund has qualified and intends to continue to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. As a result, a Federal income tax provision is
not required.
Dividends and interest from non-U.S. sources received by the Fund are generally
subject to non-U.S. withholding taxes at rates ranging up to 30%. Such
withholding taxes may be reduced or eliminated under the terms of applicable
U.S. income tax treaties, and the Fund intends to undertake any procedural steps
required to claim the benefits of such treaties. If the value of more than 50%
of the Fund's total assets at the close of any taxable year consists of stocks
or securities of non-U.S. corporations, the Fund is permitted and may elect to
treat any non-U.S. taxes paid by it as paid by its shareholders.
3. Investment Advisory Agreement. The Fund has entered into an investment
advisory agreement (the "Advisory Agreement") with the Adviser which provides
that the Fund will pay the Adviser a fee, computed daily and paid monthly, at
the annual rate of 1.00% of the value of the Fund's average daily net assets. In
accordance with the Advisory Agreement, the Adviser provides a continuous
investment program for the Fund's portfolio, oversees the administration of all
aspects of the Fund's business and affairs and pays the compensation of all
Officers and Directors of the Fund who are its affiliates.
4. Distribution Plan. The Fund's Board of Directors has adopted a distribution
plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act. For the year ended
December 31, 1998, the Fund incurred distribution costs payable to Gabelli &
Company, Inc., an indirect wholly-owned subsidiary of the Adviser, of $20,333,
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 year ended
December 31, 1998, other than short term securities, aggregated $7,010,990 and
$9,791,971, respectively.
16
<PAGE>
The Gabelli Global Convertible Securities Fund
Notes to Financial Statements (Continued)
================================================================================
7. Bank Loan. The Fund has access to an unsecured line of credit from the
custodian for temporary borrowing purposes. Borrowings under this arrangement
bear interest at 0.75% above the Federal Funds rate on outstanding balances.
There were no borrowings outstanding at December 31, 1998.
The average daily amount of borrowings outstanding during the year ended
December 31, 1998 was $3,041, with a related weighted average interest rate of
6.37%. The maximum amount borrowed at any time during the year ended December
31, 1998 was $370,000.
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 .................................... 81,274 $ 801,016 139,305 $ 1,573,440
Shares issued upon reinvestment of dividends ... 5,590 55,681 103,239 904,417
Shares redeemed ................................ (361,093) (3,584,781) (573,320) (6,052,542)
-------- ----------- -------- -----------
Net (decrease) ............................... (274,229) $(2,728,084) (330,776) $(3,574,685)
======== =========== ======== ===========
</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 Convertible Securities 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 ..... $ 9.39 $ 10.18 $ 10.79 $ 9.93 $ 10.00
------- ------- ------- ------- -------
Net investment income (loss) ............. (0.12) 0.11 0.43 0.39 0.16
Net realized and unrealized gain (loss)
on investments ........................ 0.93 0.17 0.16 0.86 (0.07)
------- ------- ------- ------- -------
Total from investment operations ......... 0.81 0.28 0.59 1.25 0.09
------- ------- ------- ------- -------
Distributions to shareholders:
Net investment income .................... -- (0.14) (0.43) (0.39) (0.16)
In excess of net investment income ....... (0.01) -- -- -- --
Net realized gain on investments ......... (0.07) (0.90) (0.77) -- --
In excess of net realized gain
on investments ........................ -- (0.03) -- -- --
------- ------- ------- ------- -------
Total distributions ...................... (0.08) (1.07) (1.20) (0.39) (0.16)
------- ------- ------- ------- -------
Net asset value, end of period ........... $ 10.12 $ 9.39 $ 10.18 $ 10.79 $ 9.93
======= ======= ======= ======= =======
Total return++ ........................... 8.6% 2.8% 5.5% 12.6% 0.9%
======= ======= ======= ======= =======
Ratios to average net assets and
supplemental data:
Net assets, end of period (in 000's) ..... $ 7,326 $ 9,375 $13,527 $15,742 $15,574
Ratio of net investment income (loss)
to average net assets ................. (1.00)% 1.17% 2.00% 2.90% 2.80%(a)
Ratio of operating expenses
to average net assets (b) ............. 2.63% 2.48% 2.35% 2.41% 2.49%(a)
Portfolio turnover rate .................. 89% 100% 126% 152% 329%
</TABLE>
- ------------
+ From commencement of operations on February 3, 1994.
++ Total return represents aggregate total return of a hypothetical $1,000
investment at the beginning of the period and sold at the end of the
period including reinvestment of dividends. Total return for the period of
less than one year is not annualized.
(a) Annualized.
(b) The Fund incurred interest expense during the year ended December 31,
1997. If interest expense had not been incurred, the ratio of operating
expenses to average net assets would have been 2.46%. In addition, the
ratio for the year ended December 31, 1997 does not include a reduction of
expenses for custodian fee credits. Including such credits, the ratio
would have been 2.47%.
See accompanying notes to financial statements.
18
<PAGE>
The Gabelli Global Convertible Securities Fund
Report of Grant Thornton LLP, Independent Auditors
================================================================================
Shareholders and Board of Directors
The Gabelli Global Convertible Securities Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Gabelli Global Convertible Securities 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 from 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 hightlights referred to
above present fairly, in all material respects, the financial position of The
Gabelli Global Convertible Securities 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 $0.007 per share and long term capital gains
totaling $0.073 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 0.00%. 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 Convertible Securities Fund
One Corporate Center
Rye, New York 10580-1434
1-800-GABELLI
[1-800-422-3554]
fax: 1-914-921-5118
http://www.gabelli.com
e-mail: [email protected]
(Net Asset Value may be obtained daily by calling
1-800-GABELLI after 6:00 P.M.)
Board of Directors
Mario J. Gabelli, CFA
Chairman and Chief
Investment Officer
Gabelli Asset Management Inc.
Felix J. Christiana
Former Senior Vice President
Dollar Dry Dock Savings Bank
Anthony J. Colavita
Attorney-at-Law
Anthony J. Colavita, P.C.
John D. Gabelli
Vice President
Gabelli & Company, Inc.
Karl Otto Pohl
Former President
Deutsche Bundesbank
Werner J. Roeder, MD
Director of Surgery
Lawrence Hospital
Anthonie C. van Ekris
Managing DIrector
BALMAC International, Inc.
Officers and Portfolio Managers
Mario J. Gabelli, CFA
President and Chief
Investment Officer
Bruce N. Alpert
Vice President and
Treasurer
A. Hartswell Woodson, III
Vice President and
Portfolio Manager
James E. McKee
Secretary
Distributor
Gabelli & Company, Inc.
Custodian, Transfer Agent and Dividend Agent
State Street Bank and Trust Company
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom LLP
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of The
Gabelli Global Convertible Securities Fund. It is not authorized for
distribution to prospective investors unless preceded or accompanied by an
effective prospectus.
- --------------------------------------------------------------------------------
