GABELLI GLOBAL SERIES FUNDS, INC.
The Gabelli Global Telecommunications Fund
The Gabelli Global Growth Fund
The Gabelli Global Convertible Securities Fund
The Gabelli Global Opportunity Fund
STATEMENT OF ADDITIONAL INFORMATION
March 9, 2000
This Statement of Additional Information ("SAI"), which is not a prospectus,
describes
o The Gabelli Global Telecommunications Fund (the "Global Telecommunications
Fund") o The Gabelli Global Growth Fund (the "Global Growth Fund") o The Gabelli
Global Convertible Securities Fund (the "Convertible Securities Fund") o The
Gabelli Global Opportunity Fund (the "Global Opportunity Fund")
(each a "Fund" and collectively the "Funds") which are series of the Gabelli
Global Series Funds, Inc., a Maryland corporation (the "Corporation"). This SAI
should be read in conjunction with the Funds' Prospectuses for Class A Shares,
Class B Shares and Class C Shares and Class AAA Shares, each dated March 9,
2000. For a free copy of the Prospectuses, please contact the Funds at the
address, telephone number or Internet Web Site printed below.
One Corporate Center
Rye, New York 10580-1434
Telephone: 1-800-GABELLI (1-800-422-3554)
http://www.gabelli.com
TABLE OF CONTENTS
Page
General Information....................................................... 2
Investment Strategies and Risks........................................... 2
Investment Restrictions................................................... 9
Directors and Officers....................................................10
Control Persons and Principal Shareholders................................12
Investment Advisory and Other Services....................................13
Distribution Plans........................................................16
Portfolio Transactions and Brokerage......................................18
Redemption of Shares......................................................21
Determination of Net Asset Value..........................................21
Dividends, Distributions and Taxes........................................22
Investment Performance Information........................................24
Description of Shares, Voting Rights and Liabilities......................25
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GENERAL INFORMATION
The Corporation is an open-end management investment company and was organized
as a Maryland Corporation on July 16, 1993. Each Fund or the Corporation is
non-diversified, which means each Fund has the ability to invest a large portion
of its assets in a single issuer than would be the case if it were diversified.
INVESTMENT STRATEGIES AND RISKS
The Funds' Prospectuses discuss the investment objectives of the Funds and the
principal strategies to be employed to achieve that objective. This SAI contains
supplemental information concerning certain types of securities and other
instruments which the Funds may invest, additional strategies the Funds may
utilize and certain risks associated with such investments and strategies.
Equity Securities:
Because each Fund in seeking to achieve its respective investment objective may
invest in the common stocks of both domestic and foreign issuers, an investment
in a Fund should be made with an understanding of the risks inherent in any
investment in common stocks including the risk that the financial condition of
the issuers of each Fund's portfolio securities may become impaired or that the
general condition of the stock market may worsen (both of which may contribute
directly to a decrease in the value of the securities and thus in the value of a
Fund's Shares). Additional risks include risks associated with the right to
receive payments from the issuer which is generally inferior to the rights of
creditors of, or holders of debt obligations or preferred stock issued by, the
issuer.
Moreover, common stocks do not represent an obligation of the issuer and
therefore do not offer any assurance of income or provide the degree of
protection of debt securities. The issuance of debt securities or even preferred
stock by an issuer will create prior claims for payment of principal, interest
and dividends which could adversely affect the ability and inclination of the
issuer to declare or pay dividends on its common stock or the economic interest
of holders of common stock with respect to assets of the issuer upon liquidation
or bankruptcy. Further, unlike debt securities which typically have a stated
principal amount payable at maturity (which value will be subject to market
fluctuations prior thereto), common stocks have neither a fixed principal amount
nor a maturity and have values which are subject to market fluctuations for as
long as the common stocks remain outstanding. Common stocks are especially
susceptible to general stock market movements and to volatile increases and
decreases in value as market confidence in and perceptions of the issuers
change. These perceptions are based on unpredictable factors including
expectations regarding government, economic, monetary and fiscal policies,
inflation and interest rates, economic expansion or contraction, and global or
regional political, economic or banking crises. The value of the common stocks
in each Fund's portfolio thus may be expected to fluctuate.
Preferred stocks are usually entitled to rights on liquidation which are senior
to those of common stocks. For these reasons, preferred stocks generally entail
less risk than common stocks. Such securities may pay cumulative dividends.
Because the dividend rate is pre-established, and as they are senior to common
stocks, such securities tend to have less possibility of capital appreciation.
Some of the securities in each of the Funds may be in the form of depository
receipts. Depository receipts usually represent common stock or other equity
securities of non-U.S. issuers deposited with a custodian in a depository. The
underlying securities can be withdrawn at any time by surrendering the
depository receipt. Depository receipts are usually denominated in U.S. dollars
and dividends and other payments from the issuer are converted by the custodian
into U.S. dollars before payment to receipt holders. In other respects,
depository receipts for foreign securities have the same characteristics as the
underlying securities. Depository receipts that are not sponsored by the issuer
may be less liquid and there may be less readily available public information
about the issuer.
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Nonconvertible Fixed Income Securities:
The category of fixed income securities which are not convertible or
exchangeable for common stock includes preferred stocks, bonds, debentures,
notes, asset and mortgage-backed securities and money market instruments such as
commercial paper and bankers acceptances. There is no minimum credit rating for
these securities in which each of the Funds may invest.
Up to 25% of each Fund's assets, may be invested in lower quality debt
securities although each Fund does not expect to invest more than 10% of its
assets in such securities. The foregoing limitations do not apply to the Global
Convertible Securities Fund, which may invest in lower quality securities
without limit. The market values of lower quality fixed income securities tend
to be less sensitive to changes in prevailing interest rates than higher-quality
securities but more sensitive to individual corporate developments than
higher-quality securities. Such lower-quality securities also tend to be more
sensitive to economic conditions than are higher-quality securities.
Accordingly, these lower-quality securities are considered predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation and will generally
involve more credit risk than securities in the higher-quality categories. Even
securities rated Baa or BBB by Moody's Investor Services, Inc. ("Moody's") and
Standard & Poors Rating Group ("S&P") respectively, which ratings are considered
investment grade, possess some speculative characteristics. There are risks
involved in applying credit ratings as a method for evaluating high yield
obligations in that credit ratings evaluate the safety of principal and interest
payments, not market value risk. In addition, credit rating agencies may not
change credit ratings on a timely basis to reflect changes in economic or
company conditions that affect a security's market value. Each of the Funds will
rely on Gabelli Funds, LLC's (the "Adviser") judgment, analysis and experience
in evaluating the creditworthiness of an issuer. In this evaluation, the Adviser
will take into consideration, among other things, the issuer's financial
resources and ability to cover its interest and fixed charges, factors relating
to the issuer's industry and its sensitivity to economic conditions and trends,
its operating history, the quality of the issuer's management and regulatory
matters.
The risk of loss due to default by the issuer is significantly greater for the
holders of lower quality securities because such securities are generally
unsecured and are often subordinated to other obligations of the issuer. During
an economic downturn or a sustained period of rising interest rates, highly
leveraged issuers of lower quality securities may experience financial stress
and may not have sufficient revenues to meet their interest payment obligations.
An issuer's ability to service its debt obligations may also be adversely
affected by specific corporate developments, its inability to meet specific
projected business forecasts, or the unavailability of additional financing.
Factors adversely affecting the market value of high yield and other securities
will adversely affect each Fund's net asset value ("NAV"). In addition, each
Fund may incur additional expenses to the extent it is required to seek recovery
upon a default in the payment of principal or interest on its portfolio
holdings.
From time to time, proposals have been discussed regarding new legislation
designed to limit the use of certain high yield debt securities by issuers in
connection with leveraged buy-outs, mergers and acquisitions, or to limit the
deductibility of interest payments on such securities. Such proposals, if
enacted into law, could reduce the market for such debt securities generally,
could negatively affect the financial condition of issuers of high yield
securities by removing or reducing a source of future financing, and could
negatively affect the value of specific high yield issues and the high yield
market in general. For example, under a provision of the Internal Revenue Code
enacted in 1989, a corporate issuer may be limited from deducting all of the
original issue discount on high-yield discount obligations (i.e., certain types
of debt securities issued at a significant discount to their face amount). The
likelihood of passage of any additional legislation or the effect thereof is
uncertain.
The secondary trading market for lower-quality fixed income securities is
generally not as liquid as the secondary market for higher-quality securities
and is very thin for some securities. The relative lack of an active secondary
market may have an adverse impact on market price and each Fund's ability to
dispose of particular issues when necessary to meet liquidity needs or in
response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. The relative lack of an active secondary market
for certain securities may also make it more difficult for each Fund to obtain
accurate market quotations for purposes of valuing their respective portfolios.
Market quotations are generally available on many high yield issues only from a
limited number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales. During such times, the responsibility of the
Board of Directors of the Corporation (the "Board of Directors") to value the
securities becomes more difficult and judgment plays a greater role in valuation
because there is less reliable, objective data available.
Convertible Securities:
Each of the Global Telecommunications Fund, the Global Growth Fund and the
Global Opportunity Fund may invest up to 25% of its assets in convertible
securities rated, at the time of investment, less than BBB by S&P or Baa by
Moody's or are unrated but of equivalent credit quality in the judgment of the
Adviser. The Global Convertible Securities Fund may invest in such securities
without limit. See "Lower Rated Securities."
Some of the convertible securities in each Fund's portfolio may be "Pay-In-Kind"
securities. During a designated period from original issuance, the issuer of
such a security may pay dividends or interest to the holder by issuing
additional fully paid and nonassessable shares or units of the same or another
specified security.
Sovereign Debt Securities:
Each Fund may invest in securities issued or guaranteed by any country and
denominated in any currency. Each Fund (other than the Global Convertible
Securities Fund) expects that it generally will invest in developed countries
including Australia, Canada, Finland, France, Germany, the Netherlands, Japan,
Italy, New Zealand, Norway, Spain, Sweden, the United Kingdom and the United
States. The obligations of governmental entities have various kinds of
government support and include obligations issued or guaranteed by governmental
entities with taxing power. These obligations may or may not be supported by the
full faith and credit of a government. Debt securities issued or guaranteed by
foreign governmental entities have credit characteristics similar to those of
domestic debt securities but include additional risks. These additional risks
include those resulting from devaluation of currencies, future adverse political
and economic developments and other foreign governmental laws. The Global
Convertible Securities Fund may invest in securities issued by undeveloped or
emerging market countries, such as those in Latin America, Eastern Europe and
much of Southeast Asia. These securities are generally not considered investment
grade and have risks similar to those of other debt securities rated less than
investment grade. Such securities are regarded as predominantly speculative with
respect to an issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligations and involve risk exposure to
adverse conditions.
(See "Nonconvertible Fixed Income Securities.")
Each Fund may also purchase securities issued by semi-governmental or
supranational agencies such as the Asian Development Bank, the International
Bank for Reconstruction and Development, the Export-Import Bank and the European
Investment Bank. The governmental members, or "stockholders," usually make
initial capital contributions to the supranational entity and in many cases are
committed to make additional capital contributions if the supranational entity
is unable to repay its borrowings. Each Fund will not invest more than 25% of
its assets in the securities of such supranational entities.
Securities Subject To Reorganization:
Each Fund may invest in securities for which a tender or exchange offer has been
made or announced and in securities of companies for which a merger,
consolidation, liquidation or reorganization proposal has been announced if, in
the judgment of the Adviser, there is a reasonable prospect of high total return
significantly greater than the brokerage and other transaction expenses
involved.
In general, securities which are the subject of such an offer or proposal sell
at a premium to their historic market price immediately prior to the
announcement of the offer or may also discount what the stated or appraised
value of the security would be if the contemplated transaction were approved or
consummated.
Such investments may be advantageous when the discount significantly overstates
the risk of the contingencies involved; significantly undervalues the
securities, assets or cash to be received by shareholders of the prospective
portfolio company as a result of the contemplated transaction; or fails
adequately to recognize the possibility that the offer or proposal may be
replaced or superseded by an offer or proposal of greater value. The evaluation
of such contingencies requires unusually broad knowledge and experience on the
part of the Adviser which must appraise not only the value of the issuer and its
component businesses as well as the assets or securities to be received as a
result of the contemplated transaction but also the financial resources and
business motivation of the offer and the dynamics and business climate when the
offer of the proposal is in process. Since such investments are ordinarily
short-term in nature, they will tend to increase the turnover ratio of the Funds
thereby increasing its brokerage and other transaction expenses. The Adviser
intends to select investments of the type described which, in its view, have a
reasonable prospect of capital appreciation which is significant in relation to
both risk involved and the potential of available alternate investments.
Lower Rated Securities:
Securities which are not investment grade are viewed by rating agencies as being
predominantly speculative in character and are characterized by substantial risk
concerning payments of interest and principal, sensitivity to economic
conditions and changes in interest rates, as well as by market price volatility
and/or relative lack of secondary market trading among other risks and may
involve major risk exposure to adverse conditions or be in default. However,
each Fund does not expect to invest more than 5% of its assets in securities
which are in default at the time of investment and will invest in such
securities only when the Adviser expects that the securities will appreciate in
value. There is no minimum rating of securities in which each Fund may invest.
Securities rated less than BBB by S&P or Baa by Moody's or comparable unrated
securities are typically referred to as "junk bonds."
Lower rated securities are less sensitive to interest rate changes than other
fixed income investments but are more sensitive to broad economic changes and
individual corporate developments. The high yield securities market is
relatively new and periods of economic change can be expected to result in
increased market price volatility. As lower rated securities may be traded by a
smaller number of broker-dealers, it may be more difficult for the Board of
Directors to value these securities and the Board's judgment will play a greater
role as less reliable, objective data is available.
Options:
Each Fund may purchase or sell options on individual securities as well as on
indices of securities as a means of achieving additional return or of hedging
the value of its portfolio.
A call option is a contract that gives the holder of the option the right, in
return for a premium paid, to buy from the seller the security underlying the
option at a specified exercise price at any time during the term of the option
or, in some cases, only at the end of the term of the option. The seller of the
call option has the obligation, upon exercise of the option, to deliver the
underlying security upon payment of the exercise price. A put option is a
contract that gives the holder of the option the right, in return for a premium,
to sell to the seller the underlying security at a specified price. The seller
of the put option, on the other hand, has the obligation to buy the underlying
security upon exercise at the exercise price. A Fund's transactions in options
may be subject to specific segregation requirements. See "Hedging Transactions"
below.
If a Fund has sold an option, it may terminate its obligation by effecting a
closing purchase transaction. This is accomplished by purchasing an option of
the same series as the option previously sold. There can be no assurance that a
closing purchase transaction can be effected when the Fund so desires.
The purchaser of an option risks a total loss of the premium paid for the option
if the price of the underlying security does not increase or decrease
sufficiently to justify exercise. The seller of an option, on the other hand,
will recognize the premium as income if the option expires unrecognized but
foregoes any capital appreciation in excess of the exercise price in the case of
a call option and may be required to pay a price in excess of current market
value in the case of a put option. Options purchased and sold, other than on an
exchange, in private transactions also impose on each Fund the credit risk that
the counterparty will fail to honor its obligations. A Fund will not purchase
options if, as a result, the aggregate cost of all outstanding options exceeds
5% of such Fund's assets. To the extent that puts, straddles and similar
investment strategies involve instruments regulated by the Commodity Futures
Trading Commission ("CFTC"), each Fund is limited to an investment not in excess
of 5% of its total assets.
Warrants and Rights:
Each Fund may invest up to 5% of its assets in warrants or rights (other than
those acquired in units or attached to other securities) which entitle the
holder to buy equity securities at a specific price for or at the end of a
specific period of time.
When Issued, Delayed Delivery Securities and Forward Commitments:
Each Fund may enter into forward commitments for the purchase or sale of
securities, including on a "when issued" or "delayed delivery" basis in excess
of customary settlement periods for the type of security involved. In some
cases, a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger, corporate
reorganization or debt restructuring, i.e., a when, as and if issued security.
When such transactions are negotiated, the price is fixed at the time of the
commitment, with payment and delivery taking place in the future, generally a
month or more after the date of the commitment. While a Fund will only enter
into a forward commitment with the intention of actually acquiring the security,
such Fund may sell the security before the settlement date if it is deemed
advisable.
Securities purchased under a forward commitment are subject to market
fluctuation, and no interest (or dividends) accrues to a Fund prior to the
settlement date. Each Fund will segregate with its custodian cash or liquid
securities in an aggregate amount at least equal to the amount of its
outstanding forward commitments.
Short Sales:
Each Fund may make short sales of securities. A short sale is a transaction in
which a Fund sells a security it does not own in anticipation that the market
price of that security will decline. Each Fund expects to make short sales both
to obtain capital gains from anticipated declines in securities and as a form of
hedging to offset potential declines in long positions in the same or similar
securities. The short sale of a security is considered a speculative investment
technique.
When a Fund makes a short sale, it must borrow the security sold short and
deliver it to the broker-dealer through which it made the short sale in order to
satisfy its obligation to deliver the security upon conclusion of the sale. A
Fund may have to pay a fee to borrow particular securities and are often
obligated to pay over any payments received on such borrowed securities.
A Fund's obligation to replace the borrowed security will be secured by
collateral deposited with the broker-dealer, usually cash, U.S. government
securities or other liquid securities. A Fund will also be required to deposit
similar collateral with its Custodian to the extent, if any, necessary so that
the value of both collateral deposits in the aggregate is at all times equal to
the greater of the price at which the security is sold short or 100% of the
current market value of the security sold short. Depending on arrangements made
with the broker-dealer from which it borrowed the security regarding payment of
any amount received by a Fund on such security, such Fund may not receive any
payments (including interest) on its collateral deposited with such
broker-dealer. If the price of the security sold short increases between the
time of the short sale and the time a Fund replaces the borrowed security, such
Fund will incur a loss; conversely, if the price declines, such Fund will
realize a capital gain. Any gain will be decreased, and any loss increased, by
the transaction costs described above. Although a Fund's gain is limited to the
price at which it sold the security short, its potential loss is theoretically
unlimited.
The market value of the securities sold short of any one issuer will not exceed
either 5% of each Fund's total assets or 5% of such issuer's voting securities.
A Fund will not make a short sale, if, after giving effect to such sale, the
market value of all securities sold short exceeds 25% of the value of its assets
or such Fund's aggregate short sales of a particular class of securities exceeds
25% of the outstanding securities of that class. A Fund may also make short
sales "against the box" without respect to such limitations. In this type of
short sale, at the time of the sale, such Fund owns or has the immediate and
unconditional right to acquire the identical security at no additional cost.
Restricted and Illiquid Securities:
Each Fund may invest up to a total of 15% of its net assets in securities that
are subject to legal or contractual restrictions on resale and securities the
markets for which are illiquid. The sale of illiquid securities often requires
more time and results in higher brokerage charges or dealer discounts and other
selling expenses than does the sale of securities eligible for trading on
national securities exchanges or in the over-the-counter markets. Restricted
securities may sell at a price lower than similar securities that are not
subject to restrictions on resale. Securities freely salable among qualified
institutional investors under special rules adopted by the Securities and
Exchange Commission ("SEC") or otherwise determined to be liquid may be treated
as liquid if they satisfy liquidity standards established by the Board of
Directors. Unseasoned issuers are companies (including predecessors) that have
operated less than three years. The continued liquidity of such securities is
not as well assured as that of publicly traded securities, and accordingly the
Board of Directors will monitor their liquidity. The Board of Directors will
review pertinent factors such as trading activity, reliability of price
information and trading patterns of comparable securities in determining whether
to treat any such security as liquid for purposes of the foregoing 15% test. To
the extent the Board treats such securities as liquid, temporary impairments to
trading patterns of such securities may adversely affect a Fund's liquidity.
Repurchase Agreements:
Each Fund may invest in repurchase agreements, which are agreements pursuant to
which securities are acquired by a Fund from a third party with the
understanding that they will be repurchased by the seller at a fixed price on an
agreed date. These agreements may be made with respect to any of the portfolio
securities in which a Fund is authorized to invest. Repurchase agreements may be
characterized as loans secured by the underlying securities. Each Fund may enter
into repurchase agreements with (i) member banks of the Federal Reserve System
having total assets in excess of $500 million and (ii) securities dealers,
provided that such banks or dealers meet the creditworthiness standards
established by the Adviser ("Qualified Institutions"). The Adviser will monitor
the continued creditworthiness of Qualified Institutions. The resale price
reflects the purchase price plus an agreed upon market rate of interest which is
unrelated to the coupon rate or date of maturity of the purchased security. The
collateral is marked to market daily. Such agreements permit a Fund to keep all
of its assets earning interest while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature.
The use of repurchase agreements involves certain risks. For example, if the
seller of securities under a repurchase agreement defaults on its obligation to
repurchase the underlying securities, as a result of its bankruptcy or
otherwise, a Fund will seek to dispose of such securities, which action could
involve costs or delays. If the seller becomes insolvent and subject to
liquidation or reorganization under applicable bankruptcy or other laws, such
Fund's ability to dispose of the underlying securities may be restricted.
Finally, it is possible that a Fund may not be able to substantiate its interest
in the underlying securities. To minimize this risk, the securities underlying
the repurchase agreement will be held by each Fund's custodian at all times in
an amount at least equal to the repurchase price, including accrued interest. If
the seller fails to repurchase the securities, a Fund may suffer a loss to the
extent proceeds from the sale of the underlying securities are less than the
repurchase price. Each Fund will not enter into repurchase agreements of a
duration of more than seven days if taken together with all other illiquid
securities in the Fund's portfolio, more than 15% of its net assets would be so
invested.
Loans Of Portfolio Securities:
To increase income, each Fund may lend its portfolio securities to securities
broker-dealers or financial institutions if (1) the loan is collateralized in
accordance with applicable regulatory requirements including collaterization
continuously at no less than 100% by marking to market daily, (2) the loan is
subject to termination by the Fund at any time, (3) the Fund receives reasonable
interest or fee payments on the loan, (4) the Fund is able to exercise all
voting rights with respect to the loaned securities and (5) the loan will not
cause the value of all loaned securities to exceed 33 1/3% of the value of the
Fund's assets.
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If the borrower fails to maintain the requisite amount of collateral, the loan
automatically terminates and the Fund could use the collateral to replace the
securities while holding the borrower liable for any excess of replacement cost
over the value of the collateral. As with any extension of credit, there are
risks of delay in recovery and in some cases even loss of rights in collateral
should the borrower of the securities fail financially.
Borrowing:
Each Fund may not borrow money except for (1) short-term credits from banks as
may be necessary for the clearance of portfolio transactions, and (2) borrowings
from banks for temporary or emergency purposes, including the meeting of
redemption requests, which would otherwise require the untimely disposition of
its portfolio securities. Borrowing may not, in the aggregate, exceed 15% of
assets after giving effect to the borrowing and borrowing for purposes other
than meeting redemptions may not exceed 5% of the value of each Fund's assets
after giving effect to the borrowing. Each Fund will not make additional
investments when borrowings exceed 5% of assets. Each Fund may mortgage, pledge
or hypothecate assets to secure such borrowings.
Hedging Transactions:
Futures Contracts. Each Fund may enter into futures contracts only for certain
bona fide hedging, yield enhancement and risk management purposes. Each Fund may
enter into futures contracts for the purchase or sale of debt securities, debt
instruments, or indices of prices thereof, stock index futures, other financial
indices, and U.S. Government Securities.
A "sale" of a futures contract (or a "short" futures position) means the
assumption of a contractual obligation to deliver the securities underlying the
contract at a specified price at a specified future time. A "purchase" of a
futures contract (or a "long" futures position) means the assumption of a
contractual obligation to acquire the securities underlying the contract at a
specified price at a specified future time.
Certain futures contracts are settled on a net cash payment basis rather than by
the sale and delivery of the securities underlying the futures contracts. U.S.
futures contracts have been designed by exchanges that have been designated as
"contract markets" by the CFTC and must be executed through a futures commission
merchant (i.e., a brokerage firm) which is a member of the relevant contract
market. Futures contracts trade on these contract markets and the exchange's
affiliated clearing organization guarantees performance of the contracts as
between the clearing members of the exchange.
These contracts entail certain risks, including but not limited to the
following: no assurance that futures contracts transactions can be offset at
favorable prices, possible reduction of the Fund's yield due to the use of
hedging, possible reduction in value of both the securities hedged and the
hedging instrument, possible lack of liquidity due to daily limits on price
fluctuation, imperfect correlation between the contracts and the securities
being hedged, and potential losses in excess of the amount invested in the
futures contracts themselves.
Currency Transactions. Each Fund may enter into various currency transactions,
including forward foreign currency contracts, currency swaps, foreign currency
or currency index futures contracts and put and call options on such contracts
or on currencies. A forward foreign currency contract involves an obligation to
purchase or sell a specific currency for a set price at a future date. A
currency swap is an arrangement whereby each party exchanges one currency for
another on a particular date and agrees to reverse the exchange on a later date
at a specific exchange rate. Forward foreign currency contracts and currency
swaps are established in the interbank market conducted directly between
currency traders (usually large commercial banks or other financial
institutions) on behalf of their customers. Futures contracts are similar to
forward contracts except that they are traded on an organized exchange and the
obligations thereunder may be offset by taking an equal but opposite position to
the original contract, with profit or loss determined by the relative prices
between the opening and offsetting positions. Each Fund expects to enter into
these currency contracts and swaps in primarily the following circumstances: to
"lock in" the U.S. dollar equivalent price of a security the Fund is
contemplating buying or selling which is denominated in a non-U.S. currency or
to protect against a decline against the U.S. dollar of the currency of a
particular country to which the Fund's portfolio has exposure. The Fund
anticipates seeking to achieve the same economic result by utilizing from time
to time for such hedging a currency different from the one of the given
portfolio security as long as, in the view of the Adviser, such currency is
essentially correlated to the currency of the relevant portfolio security based
on historic and expected exchange rate patterns.
The Adviser may choose to use such instruments on behalf of each Fund depending
upon market conditions prevailing and the perceived investment needs of each
Fund. Futures contracts, interest rate swaps, and options on securities, indices
and futures contracts and certain currency contracts sold by each Fund are
generally subject to segregation and coverage requirement with the result that,
if the Funds do not hold the security or futures contract underlying the
instrument, each Fund will be required to segregate on an ongoing basis with its
custodian, cash, U.S. government securities, or other liquid securities in an
amount at least equal to each Fund's obligations with respect to such
instruments. Such amounts fluctuate as the obligations increase or decrease. The
segregation requirement can result in each Fund maintaining securities positions
it would otherwise liquidate or segregating assets at a time when it might be
disadvantageous to do so.
INVESTMENT RESTRICTIONS
Each Fund's investment objective and the following investment restrictions are
fundamental and cannot be changed without the approval of the holders of a
majority of each Fund's outstanding voting securities (defined in the Investment
Company Act of 1940, amended as the "1940 Act"), being the lesser of (a) more
than 50% of the outstanding shares or (b) 67% or more of the shares represented
at a meeting at which more than 50% of the outstanding shares are represented).
All other investment policies or practices are considered by each Fund not to be
fundamental and accordingly may be changed without stockholder approval. If a
percentage restriction on investment or use of assets set forth below is adhered
to at the time a transaction is effected, later changes in percentage resulting
from changing market values or total assets of each Fund will not be considered
a deviation from policy. No Fund may:
(1) issue senior securities, except that each Fund may borrow money,
including on margin if margin securities are owned and enter into reverse
repurchase agreements in an amount up to 33 1/3% of its total assets
(including the amount of such enumerated senior securities issued but
excluding any liabilities and indebtedness not constituting senior
securities) and except that each Fund may borrow up to an additional 5%
of its total assets for temporary purposes; or pledge its assets other
than to secure such issuances or in connection with hedging transactions,
short sales, when-issued and forward commitment transactions and similar
investment strategies. Each Fund's obligations under reverse repurchase
agreements and the foregoing investment strategies are not treated as
senior securities;
(2) make loans of money or property to any person, except through loans of
portfolio securities, the purchase of fixed income securities or the
acquisition of securities subject to repurchase agreements;
(3) underwrite the securities of other issuers, except to the extent that
in connection with the disposition of portfolio securities or the sale of
its own shares a Fund may be deemed to be an underwriter;
(4) invest for the purpose of exercising control over management of any
company;
(5) purchase real estate or interests therein, including limited
partnerships that invest primarily in real estate equity interests, other
than mortgage-backed securities, publicly traded real estate investment
trusts and similar instruments; or
(6) purchase or sell commodities or commodity contracts except for certain
bona fide hedging, yield enhancement and risk management purposes or
invest in any oil, gas or mineral interests.
DIRECTORS AND OFFICERS
Under Maryland law, the Corporation's Board of Directors is responsible for
establishing the Corporation's policies and for overseeing the management of the
Fund. The Board elects the Fund's officers who conduct the daily business of the
Corporation. The Directors and Executive Officers of the Corporation, their
principal business occupations during the last five years and their
affiliations, if any with the Adviser are set forth below. Directors deemed to
be "interested persons" of the Corporation for purposes of the 1940 Act are
indicated by an asterisk.
<TABLE>
<CAPTION>
<S> <C>
Principal Occupations During Last Five Years;
Name, Position With Fund and Address Affiliations With the Adviser
Mario J. Gabelli* Chairman of the Board and President of the Funds, Chief
President, Director and Chief Executive Officer and Chief Investment Officer Gabelli
Investment Officer Asset Management Inc. (since 1999) and of Gabelli Group
One Corporate Center Capital Partners, Inc. (since 1980), Chief Investment
Rye, New York 10580 Officer of Gabelli Funds, LLC. Director or Trustee and
Age: 57 officer of various other investment companies advised by
Gabelli Funds, LLC and its
affiliates; Chairman of the
Board of Lynch Corporation, (a
diversified manufacturing
company); Chairman of the
Board and Chief Executive
Officer of Lynch Interactive
Corporation (a communications
services company); Director
and Member of the Office of
the Chairman of Spinnaker
Industries, Inc.
Felix J. Christiana Formerly Senior Vice President of Dry Dock Savings
Director Bank. Director or Trustee of other mutual funds advised
One Corporate Center by the Adviser and its affiliates.
Rye, New York 10580
Age: 75
Anthony J. Colavita President and Attorney at Law in the law firm of Anthony
Director J. Colavita, P.C. since 1961; Director or Trustee of
One Corporate Center various other mutual funds advised by Gabelli Funds, LLC
Rye, New York 10580 and its affiliates.
Age: 64
John D. Gabelli* Senior Vice President of Gabelli & Company, Inc.; Director
Director of Gabelli Advisers, Inc.; Director of other One Corporate Center
mutual funds advised by the Adviser and its affiliates.
Rye, New York 10580
Age: 55
Karl Otto Pohl* Member of the Shareholder Committee of Sal Oppenheim Jr.
Director & Cie (private investment bank); Director of Gabelli
One Corporate Center Asset Management Inc. (investment management), Zurich
Rye, New York 10580 Allied (insurance), and TrizecHahn Corp.; Former
Age: 70 President of the Deutsche Bundesbank and Chairman of its
Central Bank Council from 1980
through 1991; and Director or
Trustee of all other mutual
funds advised by Gabelli
Funds, LLC and its affiliates.
<PAGE>
Werner Roeder, M. D. Medical Director, Lawrence Hospital and practicing
Director private physician. Director of various other mutual
One Corporate Center funds advised by the Adviser and its affiliates.
Rye, New York 10580
Age: 59
Anthonie C. van Ekris Managing Director of Balmac International, Ltd.;
Director Director of Spinnaker Industries, Inc. and Stahel
One Corporate Center Mardmeyer A.Z.; and Director or Trustee of 9 other
Rye, New York 10580 mutual funds advised by Gabelli Funds, LLC and its
Age: 65 affiliates.
Bruce N. Alpert Vice President and Chief Operating Officer of the
Vice President and Treasurer Investment Advisory Division of the Adviser; officer of
One Corporate Center each mutual fund managed by the Adviser or its
Rye, New York 10580 affiliates.
Age: 48
Mr. A. Hartswell Woodson III Portfolio Manager for the Adviser since 1993. Employed
Vice President - Portfolio Manager by ABN Ambro Bank N.V. from 1988-1993.
One Corporate Center
Rye, New York 10580
Age: 41
James E. McKee Vice President and General Counsel of Gabelli Asset
Secretary management Inc. (since 1977) and of GAMCO Investors,
One Corporate Center Inc. (since 1993); Secretary of various mutual funds
Rye, New York 10580 managed by the Adviser or its affiliates; U.S. SEC, New
Age: 36 York, (Branch Chief, 1992-1993, Staff Attorney,
1989-1992).
</TABLE>
The Corporation, its investment adviser and principal underwriter have adopted a
code of ethics (the "Code of Ethics") under Rule 17j-1 of the 1940 Act. The Code
of Ethics permits personnel, subject to the Code of Ethics and their provisions,
to invest in securities, including securities that may be purchased or held by
the Corporation.
The Corporation pays each Director who is not an employee of the Adviser or an
affiliated company an annual fee of $1,500 and $500 for each meeting of the
Board of Directors attended by the Director, and reimburses Directors for
certain travel and other out-of-pocket expenses incurred by them in connection
with attending such meetings. Directors and officers of the Corporation who are
employed by the Adviser or an affiliated company receive no compensation or
expense reimbursement for serving as a director of the Corporation. The
following table sets forth certain information regarding the compensation of the
Corporation's directors and officers. Except as disclosed below, no executive
officer or person affiliated with the Corporation received compensation from the
Corporation for the calendar year ended December 31, 1999 in excess of $60,000.
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C>
Total Compensation
Aggregate Compensation From From the Fund and
Registrant For Fiscal Fund Complex Paid
Name of Person, Registrant Position Year To Directors*
Mario J. Gabelli, President, $0 $0 (17)
Director
and Chief Investment Officer
Felix J. Christiana, Director $4,000 $98,750 (11)
Anthony J. Colavita, Director $4,000 $95,375 (17)
John D. Gabelli, Director $0 $0 (6)
Karl Otto Pohl, Director $875 $25,250 (19)
Werner Roeder, M.D., Director $4,000 $32,734 (10)
Anthonie C. van Ekris, Director $3,500 $59,750 (11)
- ---------------------------
* Represents the total compensation paid to such persons during the calendar
year ended December 31, 1999. The parenthetical number represents the
number of investment companies (including the Fund) from which such person
received compensation that are considered part of the same fund complex as
the Fund because they have common or affiliated investment advisers.
</TABLE>
CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS
- --------------------------------------------------------------------------------
As of February 28, 2000, the following persons owned of record or beneficially
5% or more of the Funds' outstanding shares:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
NAME AND ADDRESS OF HOLDER OF RECORD PERCENTAGE OF FUND
GLOBAL TELECOMMUNICATIONS FUND
National Financial Service Corp
FBO Ben of Custs
Attn: Mutual Funds
150 Essex Street 9.74%
Millburn, NJ 07041-1603
Charles Schwab & Co., Inc.
Special Custody Account
FBO Ben of Custs
Attn: Mutual Funds
101 Montgomery Street 18.30%
San Francisco, CA 94104
GLOBAL GROWTH FUND
National Financial Service Corp
FBO Ben of Custs
Attn: Mutual Funds
200 Liberty Street 15.73%
New York, NY 10281-1003
Charles Schwab & Co., Inc.
Special Custody Account
FBO Ben of Custs
Attn: Mutual Funds
101 Montgomery Street 23.09%
San Francisco, Ca 94104
GLOBAL OPPORTUNITY FUND
Gabelli Group Capital Partners
One Corporate Center 10.95%
Rye, NY 10580-1442
Charles Schwab & Co., Inc.
Reinvest Account
Attn: Mutual Funds
101 Montgomery Street 11.70%
San Francisco, CA 94104
GLOBAL CONVERTIBLE SECURITIES FUND
National Investor Services Corp.
FBO Ben of Custs
55 Water Street, Fl. 32 14.24%
New York, NY 10041-3299
National Financial Service Corp.
FBO Ben of Custs
Attn: Mutual Funds
200 Liberty Street 6.33%
New York, NY 10281-1003
Charles Schwab & Co., Inc.
Special Custody Account
FBO Ben of Custs
Attn: Mutual Funds
101 Montgomery Street 24.62%
San Francisco, CA 94104-4122
</TABLE>
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As of February 28, 2000, as a group, the Directors and officers of the
Fund (other than Mr. Gabelli) owned less than 1% of the outstanding shares of
the Fund.
- ------------------------------------------------------------------------------
INVESTMENT ADVISORY AND OTHER SERVICES
- --------------------------------------------------------------------------------
Investment Adviser:
- ------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
The Adviser is a New York limited liability company which also serves as an
investment adviser to 15 other open-end investment companies, and 4 closed-end
investment companies with aggregate assets in excess of $10.6 billion as of
December 31, 1999. The Adviser is a registered investment adviser under the
Investment Advisers Act of 1940, as amended. Mr. Mario J. Gabelli may be deemed
a "controlling person" of the Adviser on the basis of his controlling interest
of the ultimate parent company of the Adviser. The Adviser has several
affiliates that provide investment advisory services: GAMCO Investors, Inc.
("GAMCO"), a wholly-owned subsidiary of the Adviser, acts as investment adviser
for individuals, pension trusts, profit-sharing trusts and endowments, and had
assets under management of approximately $9.4 billion under its management as of
December 31, 1999; Gabelli Advisers, Inc. acts as investment adviser to the
Gabelli Westwood Funds with assets under management of approximately $390
million as of December 31, 1999; Gabelli Securities, Inc. acts as investment
adviser to certain alternative investments products, consisting primarily of
risk arbitrage and merchant banking limited partnerships and offshore companies,
with assets under management of approximately $230 million as of December 31,
1999; and Gabelli Fixed Income LLC acts as investment adviser for the three
portfolios of The Treasurer's Fund and separate accounts having assets under
management of approximately $1.4 billion as of December 31, 1999.
Affiliates of the Adviser may, in the ordinary course of their business, acquire
for their own account or for the accounts of their advisory clients, significant
(and possibly controlling) positions in the securities of companies that may
also be suitable for investment by the Funds. The securities in which the Funds
might invest may thereby be limited to some extent. For instance, many companies
in the past several years have adopted so-called "poison pill" or other
defensive measures designed to discourage or prevent the completion of
non-negotiated offers for control of the company. Such defensive measures may
have the effect of limiting the shares of the company which might otherwise be
acquired by the Funds if the affiliates of the Adviser or their advisory
accounts have or acquire a significant position in the same securities. However,
the Adviser does not believe that the investment activities of its affiliates
will have a material adverse effect upon the Funds in seeking to achieve its
investment objectives. Securities purchased or sold pursuant to contemporaneous
orders entered on behalf of the investment company accounts of the Adviser or
the advisory accounts managed by its affiliates for their unaffiliated clients
are allocated pursuant to principles believed to be fair and not disadvantageous
to any such accounts. In addition, all such orders are accorded priority of
execution over orders entered on behalf of accounts in which the Adviser or its
affiliates have a substantial pecuniary interest. The Adviser may on occasion
give advice or take action with respect to other clients that differ from the
actions taken with respect to the Funds. The Funds may invest in the securities
of companies which are investment management clients of GAMCO. In addition,
portfolio companies or their officers or directors may be minority shareholders
of the Adviser or its affiliates.
Pursuant to the Investment Advisory Contracts (the "Contracts"), which were last
approved by the Trustees of the Funds at a meeting held on November 17, 1999,
the Adviser furnishes a continuous investment program for each Fund's portfolio,
makes the day-to-day investment decisions for the Funds, arranges the portfolio
transactions of the Funds and generally manages each Fund's investments in
accordance with the stated policies of each Fund, subject to the general
supervision of the Board of Trustees of the Funds. For the services it provides,
the Adviser is paid an annual fee based on the value of each Fund's average
daily net assets of 1.00%.
Under the Contracts, the Adviser also (i) provides the Funds with the services
of persons competent to perform such supervisory, administrative, and clerical
functions as are necessary to provide effective administration of the Funds,
including maintaining certain books and records and overseeing the activities of
the Funds' Custodian and Transfer Agent; (ii) oversees the performance of
administrative and professional services to the Funds by others, including the
Funds' Sub-Administrator, Custodian, Transfer Agent and Dividend Disbursing
Agent, as well as accounting, auditing and other services performed for the
Funds; (iii) provides the Funds with adequate office space and facilities; (iv)
prepares, but does not pay for, the periodic updating of the Funds' registration
statement, Prospectus and Additional Statement, including the printing of such
documents for the purpose of filings with the SEC and state securities
administrators, the Funds' tax returns, and reports to each Fund's shareholders
and the SEC; (v) calculates the net asset value of shares in each Fund; (vi)
prepares, but does not pay for, all filings under the securities or "Blue Sky"
laws of such states or countries as are designated by the Distributor, which may
be required to register or qualify, or continue the registration or
qualification, of the Funds and/or its shares under such laws; and (vii)
prepares notices and agendas for meetings of the Funds' Board of Trustees and
minutes of such meetings in all matters required by the 1940 Act to be acted
upon by the Board.
The Contracts provide that absent willful misfeasance, bad faith, gross
negligence or reckless disregard of its duty, the Adviser and its employees,
officers, directors and controlling persons are not liable to the Funds or any
of its investors for any act or omission by the Adviser or for any error of
judgment or for losses sustained by the Funds. However, the Contracts provide
that the Funds are not waiving any rights it may have with respect to any
violation of law which cannot be waived. The Contracts also provide
indemnification for the Adviser and each of these persons for any conduct for
which they are not liable to the Funds. The Contracts in no way restrict the
Adviser from acting as adviser to others. The Funds have agreed by the terms of
the Contracts that the word "Gabelli" in its name is derived from the name of
the Adviser which in turn is derived from the name of Mario J. Gabelli; that
such name is the property of the Adviser for copyright and/or other purposes;
and that, therefore, such name may freely be used by the Adviser for other
investment companies, entities or products. The Funds have further agreed that
in the event that for any reason, the Adviser ceases to be its investment
adviser, the Funds will, unless the Adviser otherwise consents in writing,
promptly take all steps necessary to change its name to one which does not
include "Gabelli."
- --------------------------------------------------------------------------------
By its terms, the Contracts will remain in effect for a period of two years and
thereafter from year to year, provided each such annual continuance is
specifically approved by the Funds' Board of Trustees or by a "majority" (as
defined in the 1940 Act) vote of its shareholders and, in either case, by a
majority vote of the Trustees who are not parties to the Contracts or interested
persons of any such party, cast in person at a meeting called specifically for
the purpose of voting on the Contracts. The Contracts are terminable without
penalty by the Funds on sixty days' written notice when authorized either by
majority vote of its outstanding voting shares or by a vote of a majority of its
Board of Trustees, or by the Adviser on sixty days' written notice, and will
automatically terminate in the event of its "assignment" as defined by the 1940
Act.
- -----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Contracts also provide that the Adviser is obligated to reimburse to each
Fund any amount up to the amount of its advisory fee by which its aggregate
expenses, including advisory fees, payable to the Adviser (but excluding
interest, taxes, Rule 12b-1 expenses, brokerage commissions, extraordinary
expenses and any other expenses not subject to any applicable expense
limitation) during the portion of any fiscal year in which the Contracts are in
effect exceed [the most restrictive expense limitation imposed by the securities
law of any jurisdiction in which shares of each Fund are registered or qualified
for sale.] For purposes of this expense limitation, each Fund's expenses are
accrued monthly and the monthly fee otherwise payable to the Adviser postponed
to the extent that each Fund's includable expenses to date exceed the
proportionate amount of such limitation to date.
ADVISORY FEES EARNED AND ADVISORY FEES WAIVED AND EXPENSES
REIMBURSED BY THE FUNDS FOR THE YEAR ENDED DECEMBER 31,
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1997
----------------------- --------------------------------- ----------------------------------------
Fees Fees Fees
Waived Waived Waived
and Expenses and Expenses and Expenses
Reimbursed Reimbursed Reimbursed
Earned Earned Earned
Global Telecommunications Fund $ 2,777,193 $ 0 $ 1,456,869 $ 0 $ 1,080,470 $ 0
Global Growth Fund $ 1,861,639 $ 0 $ 696,977 $ 0 $ 324,399 $ 0
Global Convertible $ 94,640 $ 0 $ 81,333 $ 0 $ 111,722 $ 0
Securities Fund
Global Opportunity Fund* $ 116,948 $ 110,241 $ 27,976 $ 27,976 N/A N/A
* For the fiscal year ended December 31, 1999. During the year 2000, the Adviser
voluntarily agreed to reimburse the Global Opportunity Fund's Class AAA expenses
and/or waive its management fee to maintain total annual expenses at 1.50% of
average net assets. For the fiscal year ending December 31, 2000, the Adviser
has contractually agreed to waive its investment advisory fees to the extent
necessary to maintain certain expense ratio caps for Class A, Class B and Class
C Shares until at least December 31, 2000.
</TABLE>
<PAGE>
The Sub-Administrator:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The Adviser has entered into a Sub-Administration Agreement (the
"Sub-Administration Agreement") with PFPC Inc. (formerly known as First Data
Investor Services Group, Inc.) (the "Sub-Administrator"), a majority-owned
subsidiary of PNC Bank Corp., which is located at 101 Federal Street, Boston,
Massachusetts 02110. Under the Sub-Administration Agreement, the
Sub-Administrator (a) assists in supervising all aspects of the Corporation's
operations except those performed by the Adviser under its advisory agreements
with the Funds; (b) supplies the Corporation with office facilities (which may
be in the Sub-Administrator's own offices), statistical and research data, data
processing services, clerical, accounting and bookkeeping services, including,
but not limited to, the calculation of the net asset value of shares in the
Funds, internal auditing and legal services, internal executive and
administrative services, and stationery and office supplies; (c) prepares and
distributes materials for all Corporation Board of Trustees' Meetings including
the mailing of all Board materials and collates the same materials into the
Board books and assists in the drafting of minutes of the Board Meetings; (d)
prepares reports to Fund shareholders, tax returns and reports to and filings
with the SEC and state "Blue Sky" authorities; (e) calculates the Funds' net
asset value per share, provides any equipment or services necessary for the
purpose of pricing shares or valuing the Funds' investment portfolio and, when
requested, calculates the amounts permitted for the payment of distribution
expenses under any distribution plan adopted by the Funds; (f) provides
compliance testing of all Fund activities against applicable requirements of the
1940 Act and the rules thereunder, the Code, and the Funds' investment
restrictions; (g) furnishes to the Adviser such statistical and other factual
information and information regarding economic factors and trends as the Adviser
from time to time may require; and (h) generally provides all administrative
services that may be required for the ongoing operation of the Corporation in a
manner consistent with the requirements of the 1940 Act.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For the services it provides, the Adviser pays the Sub-Administrator an annual
fee based on the value of the aggregate average daily net assets of all funds
under its administration managed by the Adviser as follows: up to $10 billion -
.0275%; over $10 billion to $15 billion - .0125%; over $15 billion - .01%. The
Sub-Administrator's fee is paid by the Adviser and will result in no additional
expenses to the Fund.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Counsel
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, New York
10036, serves as the Fund's legal counsel.
Independent Auditors
Grant Thornton LLP, independent auditors, have been selected to audit the Funds'
annual financial statements, and is located at 60 Broad Street, New York, New
York 10004-2616.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Custodian, Transfer Agent and Dividend Disbursing Agent
- --------------------------------------------------------------------------------
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, MA 02110 is the Custodian for the Fund's cash and securities. Boston
Financial Data Services, Inc. ("BFDS"), an affiliate of State Street located at
the BFDS Building, Two Heritage Drive, Quincy, Massachusetts 02171, performs the
services of transfer agent and dividend disbursing agent for the Fund. Neither
BFDS nor State Street assists in or is responsible for investment decisions
involving assets of the Fund.
- --------------------------------------------------------------------------------
Distributor
- --------------------------------------------------------------------------------
To implement the Funds' 12b-1 Plans, each Fund has entered into a Distribution
Agreement with Gabelli & Company, Inc. (the "Distributor"), a New York
corporation which is an indirect majority owned subsidiary of GAMI, having
principal offices located at One Corporate Center, Rye, New York 10580. The
Distributor acts as agent of the Fund for the continuous offering of its shares
on a best efforts basis.
DISTRIBUTION PLANS
Pursuant to separate distribution and service plans (the Class A Plan, the Class
B Plan, the Class C Plan and the Class AAA Plan, collectively, the "Plans")
adopted by each of the Funds pursuant to Rule 12b-1 under the 1940 Act and the
Distribution Agreement, the Distributor incurs expenses of distributing the
Funds' Class A, Class B, Class C and Class AAA shares. In addition, the
Distributor receives the proceeds of contingent deferred sales charges ("CDSC")
paid by investors upon certain redemptions of Class B and Class C shares. The
Plans are intended to benefit the Funds by increasing their assets and thereby
reducing each Fund's expense ratio.
The Plans continue in effect from year to year, provided that each such
continuance is approved at least annually by a vote of the Board of Directors,
including a majority vote of the Directors who are not interested persons of the
Corporation and who have no direct or indirect financial interest in the
operation of the Plans (the "Independent Directors"), cast in person at a
meeting called for the purpose of voting on such continuance. The Plans may each
be terminated at any time, without penalty, by the vote of a majority of the
Independent Directors, or by the vote of the holders of a majority of the
outstanding shares of the applicable class of the Funds on not more than 30
days' written notice to any other party to the Plans. The Plans may not be
amended to increase materially the amounts to be spent for the services
described therein without approval by the shareholders of the applicable class
(by both Class A and Class B shareholders, voting separately, in the case of
material amendments to the Class A Plan), and all material amendments must be
approved by the Board of Directors in the manner described above. Each Plan will
automatically terminate in the event of its assignment. The Funds will not be
contractually obligated to pay expenses incurred under any Plan if it is
terminated or not continued.
Pursuant to each Plan, the Board of Directors will review at least quarterly a
written report of the distribution expenses incurred on behalf of each class of
shares of the Funds by the Distributor. The report includes an itemization of
the distribution expenses and the purposes of such expenditures. In addition, as
long as the Plans remain in effect, the selection and nomination of Independent
Directors shall be committed to the Independent Directors.
Pursuant to the Distribution Agreement, the Corporation has agreed to indemnify
the Distributor to the extent permitted by applicable law against certain
liabilities under the federal securities laws.
Pursuant to rules of the NASD, the Distributor is required to limit aggregate
initial sales charges, deferred sales charges and asset-based sales charges to
6.25% of total gross sales of each class of shares. Interest charges on
unreimbursed distribution expenses equal to the prime rate plus one percent per
annum may be added to the 6.25% limitation. Additional shares resulting from the
reinvestment of dividends and distributions are not included in the calculation
of the 6.25% limitation. The annual asset-based sales charge on shares of the
Funds may not exceed .75 of 1% per class. The 6.25% limitation applies to each
class of the Fund rather than on a per shareholder basis. If aggregate sales
charges were to exceed 6.25% of total gross sales of any class, all sales
charges on shares of the class would be suspended.
During the fiscal year ended December 31, 1999, the Distributor incurred
expenses for the Class AAA of the Gabelli Global Telecommunications Fund under
the Distribution Plan of $605,100. Of this amount $14,600 was spent on
advertising, $125,600 was spent on printing, postage and stationery, $63,200 on
overhead support expenses, $239,000 on salaries of personnel of the Distributor
and $162,700 on third party brokers. Pursuant to the Distribution Plan, the Fund
paid the Distributor $694,299, or .25% of its average daily net assets.
During the fiscal year ended December 31, 1999, the Distributor incurred
expenses for the Class AAA of the Gabelli Global Growth Fund under the
Distribution Plan of $1,222,500. Of this amount $457,800 was spent on
advertising, $126,000 was spent on printing, postage and stationery, $91,600 on
overhead support expenses, $346,400 on salaries of personnel of the Distributor
and $200,700 on third party brokers. Pursuant to the Distribution Plan, the Fund
paid the Distributor $465,410, or .25% of its average daily net assets.
During the fiscal year ended December 31, 1999, the Distributor incurred
expenses for the Class AAA of the Gabelli Global Opportunity Fund under the
Distribution Plan of $113,600. Of this amount $6,100 was spent on advertising,
$37,100 was spent on printing, postage and stationery, $21,400 on overhead
support expenses, $45,200 on salaries of personnel of the Distributor and $3,800
on third party brokers. Pursuant to the Distribution Plan, the Fund paid the
Distributor $29,287, or .25% of its average daily net assets.
During the fiscal year ended December 31, 1999, the Distributor incurred
expenses for the Class AAA of the Gabelli Global Convertible Securities Fund
under the Distribution Plan of $35,700. Of this amount $5,000 was spent on
advertising, $13,300 was spent on printing, postage and stationery, $2,200 on
overhead support expenses, $9,800 on salaries of personnel of the Distributor
and $5,400 on third party brokers. Pursuant to the Distribution Plan, the Fund
paid the Distributor $23,667, or .25% of its average daily net assets.
Each Plan compensates the Distributor regardless of its expenses.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is authorized on behalf of each Fund to employ brokers to effect the
purchase or sale of portfolio securities with the objective of obtaining prompt,
efficient and reliable execution and clearance of such transactions at the most
favorable price obtainable ("best execution") at a reasonable expense.
Transactions in securities other than those for which a securities exchange is
the principal market are generally done through a principal market maker.
However, such transactions may be effected through a brokerage firm and a
commission is paid whenever it appears that the broker can obtain a more
favorable overall price. In general, there may be no stated commission in the
case of securities traded on the over-the-counter markets, but the prices of
those securities may include undisclosed commissions or markups. Options
transactions will usually be effected through a broker and a commission will be
charged. Each Fund also expects that securities will be purchased at times in
underwritten offerings where the price includes a fixed amount of compensation
generally referred to as the underwriter's concession or discount.
The Adviser currently serves as adviser to a number of investment company
clients and may in the future act as adviser to others. Affiliates of the
Adviser act as investment adviser to numerous private accounts. It is the
practice of the Adviser and its affiliates to cause purchase and sale
transactions to be allocated among each Fund and others whose assets they manage
in such manner as they deem equitable. In making such allocations among each
Fund and other client accounts, the main factors considered are the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for such investment, the size of
investment commitments generally held and the opinions of the persons
responsible for managing the portfolios of each Fund and other client accounts.
The policy of each Fund regarding purchases and sales of portfolio securities is
that primary consideration will be given to obtaining the most favorable prices
and efficient execution of transactions. In seeking to implement each Fund's
policies, the Adviser effects transactions with those brokers and dealers who
the Adviser believes provide the most favorable prices and are capable of
providing efficient executions. If the Adviser believes such price and execution
are obtainable from more than one broker or dealer, it may give consideration to
placing portfolio transactions with those brokers and dealers who also furnish
research and other services to each Fund or the Adviser of the type described in
Section 28(e) of the Securities Exchange Act of 1934. In doing so, each Fund may
also pay higher commission rates than the lowest available when the Adviser
believes it is reasonable to do so in light of the value of the brokerage and
research services provided by the broker effecting the transaction. Such
services may include, but are not limited to, any one or more of the following:
information as to the availability of securities for purchase or sale;
statistical or factual information or opinions pertaining to investment; wire
services; and appraisals or evaluations of portfolio securities.
Research services furnished by brokers or dealers through which the Fund effects
securities transactions are used by the Adviser and its advisory affiliates in
carrying out their responsibilities with respect to all of their accounts over
which they exercise investment discretion. Such investment information may be
useful only to one or more of the other accounts of the Adviser and its advisory
affiliates, and research information received for the commissions of those
particular accounts may be useful both to the Fund and one or more of such other
accounts. The purpose of this sharing of research information is to avoid
duplicative charges for research provided by brokers and dealers.
Neither the Fund nor the Adviser has any legally binding agreement with any
broker or dealer regarding any specific amount of brokerage commissions which
will be paid in recognition of such services. However, in determining the amount
of portfolio commissions directed to such brokers or dealers, the Adviser does
consider the level of services provided. Based on such determinations, the
Adviser has allocated brokerage commissions of $0 on portfolio transactions in
the principal amount of $0 during 1999, to various broker-dealers that have
provided research services to the Adviser.
The following charts show brokerage commissions paid by the Adviser on behalf of
each Fund, the amount and percentage of commissions paid by each Fund to Gabelli
& Company, Inc., an affiliate of the Adviser ("Gabelli"), and the percentage of
all transactions involving the payment of commissions to Gabelli.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
THE GABELLI GLOBAL TELECOMMUNICATIONS FUND
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
December 31, 1997 December 31, 1998 December 31, 1999
Total brokerage commissions paid by $61,219 $96,749 $195,277
the Adviser on behalf of the Fund
Total brokerage commissions paid by $7,785 $38,999 $118,939
the Fund to Gabelli & Company, Inc.
% of aggregate brokerage commissions 12.7% 40.3% 60.9%
% of principal amount of transactions 20.6% 36.8% 60.1%
involving commissions effected through
Gabelli & Company, Inc.
THE GABELLI GLOBAL GROWTH FUND
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
December 31, 1997 December 31, 1998 December 31, 1999
Total brokerage commissions paid by $106,631 $280,436 $636,477
the Adviser on behalf of the Fund
Total brokerage commissions paid by $15,255 $14,345 $9,650
the Fund to Gabelli & Company, Inc.
% of aggregate brokerage commissions 14.3% 5.1% 1.5%
% of principal amount of transactions 12.0% 5.8% 4.1%
involving commissions effected through
Gabelli & Company, Inc.
THE GABELLI GLOBAL OPPORTUNITY FUND
Fiscal Year Ended Period Ended Fiscal Year Ended
December 31, 1997 December 31, 1998 December 31, 1999
Total brokerage commissions paid by N/A $17,929 $38,775
the Adviser on behalf of the Fund
Total brokerage commissions paid by N/A $1,130 $445
the Fund to Gabelli & Company, Inc.
% of aggregate brokerage commissions N/A 6.3% 1.1%
% of principal amount of transactions N/A 10.4% 1.3%
involving commissions effected through
Gabelli & Company, Inc.
THE GABELLI GLOBAL CONVERTIBLE SECURITIES FUND
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
December 31, 1997 December 31, 1998 December 31, 1999
Total brokerage commissions paid by $9,993 $6,606 $9,756
the Adviser on behalf of the Fund
Total brokerage commissions paid by $0 $1,415 $203
the Fund to Gabelli & Company, Inc.
% of aggregate brokerage commissions 0.0% 7.89% 2.1%
% of principal amount of transactions 0.0% 5.1% 5.5%
involving commissions effected through
Gabelli & Company, Inc.
</TABLE>
The Adviser may also place orders for the purchase or sale of portfolio
securities with Gabelli, a broker-dealer member of the National Association of
Securities Dealers, Inc. when it appears that, as an introducing broker or
otherwise, Gabelli can obtain a price and execution which is at least as
favorable as that obtainable by other qualified brokers. The Adviser may also
consider sales of shares of each Fund and any other registered investment
companies managed by the Adviser and its affiliates by brokers and dealers other
than the Distributor as a factor in its selection of brokers and dealers to
execute portfolio transactions for each Fund.
As required by Rule 17e-1 under the 1940 Act, the Board of Directors of each
Fund has adopted "Procedures" which provide that the commissions paid to Gabelli
on stock exchange transactions may not exceed that which would have been charged
by another qualified broker or member firm able to effect the same or comparable
transaction at an equally favorable price. Rule 17e-1 and the Procedures contain
requirements that the Board, including independent Directors, conduct periodic
compliance reviews of such brokerage allocations and review such schedule at
least annually for its continuing compliance with the foregoing standard. The
Adviser and Gabelli are also required to furnish reports and maintain records in
connection with such reviews.
To obtain the best execution of portfolio trades on the New York Stock Exchange
("NYSE"), Gabelli controls and monitors the execution of such transactions on
the floor of the NYSE through independent "floor brokers" or through the
Designated Order Turnaround System of the NYSE. Such transactions are then
cleared, confirmed to the Fund for the account of Gabelli, and settled directly
with the Custodian of each Fund by a clearing house member firm which remits the
commission less its clearing charges to Gabelli. Gabelli may also effect
portfolio transactions on behalf of each Fund in the same manner and pursuant to
the same arrangements on other national securities exchanges which adopt direct
access rules similar to those of the NYSE.
REDEMPTION OF SHARES
Payment of the redemption price for shares redeemed may be made either in cash
or in portfolio securities (selected at the discretion of the Board of Directors
and taken at their value used in determining each Fund's NAV per share as we
described under "Determination of Net Asset Value"), or partly in cash and
partly in portfolio securities. However, payments will be made wholly in cash
unless the Board of Directors believes that economic conditions exist which
would make such a practice detrimental to the best interest of a Fund. If
payment for shares redeemed is made wholly or partly in portfolio securities,
brokerage costs may be incurred by the investor in converting the securities to
cash. A Fund will not distribute in-kind portfolio securities that are not
readily marketable. The Corporation has filed a formal election with the SEC
pursuant to which the Corporation will only effect a redemption in portfolio
securities where the particular shareholder of record is redeeming more than
$250,000 or 1.00% of a Fund's total net assets, whichever is less, during any
90-day period. In the opinion of the Corporation's management, however, the
amount of a redemption request would have to be significantly greater than
$250,000 before a redemption wholly or partly in portfolio securities would be
made.
Cancellation of purchase orders for shares of any Fund (as, for example, when
checks submitted to purchase shares are returned unpaid) cause a loss to be
incurred when the NAV of that Fund's shares on the date of cancellation is less
than on the original date of purchase. The investor is responsible for such
loss, and that Fund may reimburse shares from any account registered in that
shareholder's name, or by seeking other redress. If that Fund is unable to
recover any loss to itself, it is the position of the SEC that the Distributor
will be immediately obligated to make that Fund whole.
To minimize expenses, a Fund reserves the right to redeem, upon not less than 30
days' notice, all shares of a Fund in an account (other than an IRA) which as a
result of shareholder redemption has a value below $500 and has reserved the
ability to raise this amount to up to $10,000. However, a shareholder will be
allowed to make additional investments prior to the date fixed for redemption to
avoid liquidation of the account.
DETERMINATION OF NET ASSET VALUE
NAV is calculated separately for each class of the Corporation. The NAV of Class
B and Class C shares of the Funds will generally be lower than the NAV of Class
A or Class AAA shares as a result of the larger distribution-related fee to
which Class B and Class C shares are subject. It is expected, however, that the
NAV per share of each class will tend to converge immediately after the
recording of dividends, if any, which will differ by approximately the amount of
the distribution and/or service fee expense accrual differential among the
classes.
For purposes of determining each of the Fund's NAV per share, readily marketable
portfolio securities listed on the NYSE are valued, except as indicated below,
at the last sale price reflected at the close of the regular trading session of
the NYSE on the business day as of which such value is being determined. If
there has been no sale on such day, the securities are valued at the mean of the
closing bid and asked prices on such day. If no asked prices are quoted on such
day, then the security is valued at the closing bid price on such day. If no bid
or asked prices are quoted on such day, then the security is valued by such
method as the Board of Directors shall determine in good faith to reflect its
fair market value. Readily marketable securities not listed on the NYSE but
listed on other national securities exchanges or admitted to trading on the
National Association of Securities Dealers Automated Quotations, Inc. ("NASDAQ")
National List are valued in like manner.
Readily marketable securities traded in the over-the-counter market, including
listed securities whose primary market is believed by the Adviser to be
over-the-counter but excluding securities admitted to trading on the NASDAQ
National List, are valued at the mean of the current bid and asked prices as
reported by NASDAQ or, in the case of securities not quoted by NASDAQ, the
National Quotation Bureau or such other comparable sources as the Board of
Directors deems appropriate to reflect their fair value. If no bid or asked
prices are quoted on such day, then the security is valued by such method as the
Board of Directors shall determine in good faith to reflect its fair market
value.
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 the Adviser. Securities traded primarily on foreign exchanges are
valued at the closing price on such foreign exchange immediately prior to the
close of the NYSE.
United States Government obligations and other debt instruments having sixty
days or less remaining until maturity are stated at amortized cost. Debt
instruments having a greater remaining maturity will be valued at the highest
bid price obtained from a dealer maintaining an active market in that security
or on the basis of prices obtained from a pricing service approved as reliable
by the Board of Directors. All other investment assets, including restricted and
not readily marketable securities, are valued under procedures established by
and under the general supervision and responsibility of the Corporation's Board
of Directors designed to reflect in good faith the fair value of such
securities.
DIVIDENDS, DISTRIBUTIONS AND TAXES
General:
Each Fund has qualified and intends to qualify as a regulated investment company
under Subchapter M of the Code. If so qualified, each Fund will not be subject
to Federal income tax on its net investment income and net short-term capital
gains, if any, realized during any fiscal year in which it distributes such
income and capital gains to its shareholders.
Each Fund will determine either to distribute or to retain for reinvestment all
or part of any net long-term capital gains. If any such gains are retained by
any Fund, that Fund will be subject to a tax of 35% of such amount. In that
event, each Fund expects that it will designate the retained amount as
undistributed capital gains in a notice to its shareholders, each of whom (1)
will be required to include in income for tax purposes as long-term capital
gains, its share of undistributed amount, (2) will be entitled to credit its
proportionate share of the tax paid by that Fund against its Federal income tax
liability and to claim refunds to the extent the credit exceeds such liability,
and (3) will increase its basis in its shares of that Fund by an amount equal to
66% of the amount of undistributed capital gains included in such shareholder's
gross income.
A distribution will be treated as paid during the calendar year if it is paid
during the calendar year or declared by a Fund in October, November or December
of the year, payable to shareholders of record on a date during such month and
paid by that Fund during January of the following year. Any such distributions
paid during January of the following year will be deemed to be received on
December 31 of the year the distributions are declared, rather than when the
distributions are received.
Under the Internal Revenue Code of 1986, as amended, amounts not distributed on
a timely basis in accordance with a calendar year distribution requirement are
subject to a 4% excise tax. To avoid the tax, each Fund must distribute during
each calendar year, an amount equal to at least the sum of (1) 98% of its
ordinary income (not taking into account any capital gains or losses) for the
calendar year, (2) 98% of its capital gains in excess of its capital losses for
the twelve-month period ending on October 31 of the calendar year, (unless an
election is made by a fund with a November or December year-end to use the
Fund's fiscal year) and (3) all ordinary income and net capital gains for
previous years that were not previously distributed.
Gains or losses on the sales of securities by each Fund will be long-term
capital gains or losses if the securities have been held by the Fund for more
than twelve months. Gains or losses on the sale of securities held for twelve
months or less will be short-term capital gains or losses.
Certain options, futures contracts and options on futures contracts are "section
1256 contracts". Any gains or losses on section 1256 contracts are generally
considered 60% long-term and 40% short-term capital gains or losses ("60/40").
Also, section 1256 contracts held by each Fund at the end of each taxable year
are "marked-to-market" with the result that unrealized gains or losses are
treated as though they were realized and the resulting gain or loss is treated
as 60/40 gain or loss.
Hedging transactions undertaken by each Fund may result in "straddles" for U.S.
Federal income tax purposes. The straddle rules may affect the character of
gains (or losses) realized by each Fund. In addition, losses realized by each
Fund on positions that are part of a straddle may be deferred under the straddle
rules, rather than being taken into account in calculating the taxable income
for the taxable year in which such losses are realized. Further, each Fund may
be required to capitalize, rather than deduct currently, any interest expense on
indebtedness incurred or continued to purchase or carry any positions that are
part of a straddle. Each Fund may make one or more of the elections available
under the Code which are applicable to straddles. If a Fund makes any of the
elections, the amount, character and timing of the recognition of gains or
losses from the affected straddle positions will be determined under rules that
vary according to the election(s) made. The rules applicable under certain of
the elections accelerate the recognition of gains or losses from the affected
straddle positions. Because application of the straddle rules may affect the
character of gains or losses, defer losses and/ or accelerate the recognition of
gains or losses from the affected straddle positions, and require the
capitalization of interest expense, the amount which must be distributed to
shareholders, and which will be taxed to shareholders as ordinary income or
long-term capital gain, may be increased or decreased substantially as compared
to a fund that did not engage in such hedging transactions.
The diversification requirements applicable to each Fund's assets may limit the
extent to which a Fund will be able to engage in transactions in options,
futures contracts and options on futures contracts.
Distributions:
Distributions of investment company taxable income (which includes taxable
interest income and the excess of net short-term capital gains over long-term
capital losses) are taxable to a U.S. shareholder as ordinary income, whether
paid in cash or in additional Fund shares. Dividends paid by a Fund will qualify
for the 70% deduction for dividends received by corporations to the extent the
Fund's income consists of qualified dividends received from U.S. corporations.
Distributions of net capital gain (which consist of the excess of long-term
capital gains over net short-term capital losses), if any, are taxable as
long-term capital gain, whether paid in cash or in shares, and are not eligible
for the dividends received deduction. Shareholders receiving distributions in
the form of newly issued shares will have a basis in such shares of the Fund
equal to the fair market value of such shares on the distribution date. If the
net asset value of shares is reduced below a shareholder's cost as a result of a
distribution by the Fund, such distribution may be taxable even though it
represents a return of invested capital. The price of shares purchased at any
time may reflect the amount of a forthcoming distribution. Those purchasing
shares just prior to a distribution will receive a distribution which will be
taxable to them, even though the distribution represents in part a return of
invested capital.
Sales of Shares:
Upon a sale or exchange of shares, a shareholder will realize a taxable gain or
loss depending upon the basis in the shares. Such gain or loss will be
long-term, or short-term, generally depending upon the shareholder's holding
period for the shares. Non-corporate shareholders are subject to tax at a
maximum rate of 20% on capital gains resulting from the disposition of shares
held for more than 12 months (10% if the taxpayer is, and would be after
accounting for such gains, subject to the 15% tax bracket for ordinary income).
Any loss realized on a sale or exchange will be disallowed to the extent the
shares disposed of are replaced within a 61-day period beginning 30 days before
and ending 30 days after the date the shares are disposed of. In such case, the
basis of the shares acquired will be adjusted to reflect the disallowed loss.
Any loss realized by a shareholder on the sale of Fund shares held by the
shareholder for six months or less will be treated for tax purposes as a
long-term capital loss to the extent of any distributions of net capital gain
received by the shareholder with respect to such shares.
If a shareholder (i) incurs a sales load charge in acquiring shares in a Fund
and, by reason of incurring such charge or acquiring the shares, acquires the
right to acquire shares of one or more regulated investment companies without
the payment of a load charge or with the payment of a reduced load charge (a
"reinvestment right") and (ii) disposes of the Fund shares before the 91st day
after the date on which the shares were acquired and subsequently acquires
shares in the Fund or in another regulated investment company whereby the
otherwise applicable load charge is reduced by reason of the reinvestment right,
then the original load charge will not be taken into account for the purposes of
determining the shareholder's gain or loss on the disposition (to the extent the
original load charge does not exceed the reduction in the subsequent load
charge). To the extent such charge is not taken into account in determining the
amount of gain or loss, the charge will be treated as incurred in connection
with the subsequently acquired shares and will have a corresponding effect on
the shareholder's basis in such shares.
Backup Withholding:
The Corporation may be required to withhold Federal income tax at a rate of 31%
on all taxable distributions payable to shareholders who fail to provide their
correct taxpayer identification number or to make required certifications, or
who have been notified by the Internal Revenue Service that they are subject to
backup withholding. Backup withholding is not an additional tax. Any amounts
withheld may be credited against the shareholder's Federal income tax liability.
Foreign Withholding Taxes:
Income received by the Funds from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to determine the rate of foreign tax in
advance since the amount of the Funds' assets to be invested in various
countries is not known. Because each Fund will not have more than 50% of its
total assets invested in securities of foreign governments or corporations, the
Funds will not be entitled to "pass-through" to shareholders the amount of
foreign taxes paid by the Funds.
Corporate Matters:
The Corporation reserves the right to create and issue a number of series
shares, in which case the shares of each series would participate equally in the
earnings, dividends, and assets of the particular series and would vote
separately to approve management agreements or changes in investment policies,
but shares of all series would vote together in the election or selection of
Directors, principal underwriters and auditors and on any proposed material
amendment to the Corporation's Certificate of Incorporation.
Upon liquidation of the Corporation or any series, shareholders of the affected
series would be entitled to share pro rata in the net assets of their respective
series available for distribution to such shareholders.
INVESTMENT PERFORMANCE INFORMATION
Each Fund may furnish data about its investment performance in advertisements,
sales literature and reports to shareholders. "Total return" represents the
annual percentage change in value of $1,000 invested at the maximum public
offering price for the one year period and the life of each Fund through the
most recent calendar quarter, assuming reinvestment of all dividends and
distributions. Each Fund may also furnish total return calculations for these
and other periods, based on investments at various sales charge levels or NAV.
Any performance data which is based on each Fund's NAV per share would be
reduced if a sales charge were taken into account.
Quotations of total return will reflect only the performance of a hypothetical
investment in any Fund during the particular time period shown. Each Fund's
total return may vary from time to time depending on market conditions, the
compositions of its portfolio and operating expenses. Total return should also
be considered relative to change in the value of each Fund's shares and the
risks associated with each Fund's investment objectives and policies. At any
time in the future, total returns may be higher or lower than past total
returns; there can be no assurance that any historical return will continue.
From time to time evaluations of performance are made by independent sources
that may be used in advertisements concerning each Fund. These sources include:
Lipper Inc., Weisenberger Investment Company Service, Barron's, Business Week,
Kiplinger's Personal Finance, Financial World, Forbes, Fortune, Money, Personal
Investor, Sylvia Porter's Personal Finance, Bank Rate Monitor, Morningstar and
The Wall Street Journal.
In connection with communicating its total return to current or prospective
shareholders, each Fund may also compare these figures to the performance of
other mutual funds tracked by mutual fund rating services or to other unmanaged
indexes which may assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs.
Quotations of each Fund's total return will represent the average annual
compounded rate of return of a hypothetical investment in each Fund over periods
of 1, 5, and 10 years (or for the periods of each Fund's operations), and are
calculated pursuant to the following formula:
P (1+T)(n) = ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years, and ERV = the redeemable value at the end
of the period of a $1,000 payment made at the beginning of the period). All
total return figures will reflect the deduction of Fund expenses (net of certain
expenses reimbursed by the Adviser) on an annual basis, and will assume that all
dividends and distributions are reinvested and will deduct the maximum sales
charge, if any is imposed. The table below displays the total returns for each
Fund's Class AAA Shares for the year ended December 31, 1999 and average annual
returns since inception.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Average Annual
5 Year Average Annual Total Return Since
1999 Total Return Total Return Inception
Global Telecommunications 80.3% 32.3% 25.3%
Global Growth 116.1% 39.3% 32.9%
Global Opportunity 79.2% N/A 51.2%
Global Convertible Securities 51.1% 14.9% 12.7%
</TABLE>
As of December 31, 1999, the Funds had not commenced offering Class A, Class B
and Class C Shares to the public.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Corporation was organized as a Maryland corporation on July 16, 1993. Its
authorized capital stock consists of one billion shares of stock having a par
value of one tenth of one cent ($.001) per share. The Corporation is not
required, and does not intend, to hold regular annual shareholder meetings, but
may hold special meetings for consideration of proposals requiring shareholder
approval, such as changing fundamental policies or upon the written request of
10% of the Fund's shares to replace its Directors. The Corporation's Board of
Directors is authorized to divide the unissued shares into separate series of
stock, each series representing a separate, additional portfolio.
There are no conversion or preemptive rights in connection with any shares of
the Fund. All shares, when issued in accordance with the terms of the offering,
will be fully paid and nonassessable. Shares will be redeemed at NAV, at the
option of the shareholder.
The Corporation sends semi-annual and audited annual reports to all shareholders
which include lists of portfolio securities and each Fund's financial
statements, which shall be audited annually. Unless it is clear that a
shareholder is a nominee for the account of an unrelated person or a shareholder
otherwise specifically requests in writing, a Fund may send a single copy of
semi-annual, annual and other reports to shareholders to all accounts at the
same address and all accounts of any person at that address.
The shares of each Fund has noncumulative voting rights which means that the
holders of more than 50% of the shares can elect 100% of the Directors if the
holders choose to do so, and, in that event, the holders of the remaining shares
will not be able to elect any person or persons to the Board of Directors.
Unless specifically requested by an investor who is a shareholder of record,
each of the Funds do not issue certificates evidencing shares.
<PAGE>
