UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANIES
Investment Company Act file number 811-07896
GAMCO Global Series Funds, Inc.
(Exact name of registrant as specified in charter)
One Corporate Center
Rye, New York 10580-1422
Rye, New York 10580-1422
(Address of principal executive offices) (Zip code)
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
(Name and address of agent for service)
registrant’s telephone number, including area code: 1-800-422-3554
Date of fiscal year end: December 31
Date of reporting period: December 31, 2010
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
The Report to Shareholders is attached herewith.
The GAMCO Global Convertible Securities Fund
Annual Report December 31, 2010 | ||||
Mario J. Gabelli, CFA |
To Our Shareholders,
The Sarbanes-Oxley Act requires a fund’s principal executive and financial officers to certify the entire contents of the semi-annual and annual shareholder reports in a filing with the Securities and Exchange Commission (“SEC”) on Form N-CSR. This certification would cover the portfolio manager’s commentary and subjective opinions if they are attached to or a part of the financial statements. Many of these comments and opinions would be difficult or impossible to certify.
Because we do not want our portfolio managers to eliminate their opinions and/or restrict their commentary to historical facts, we have separated their commentary from the financial statements and investment portfolio and have sent it to you separately. Both the commentary and the financial statements, including the portfolio of investments, will be available on our website at www.gabelli.com/funds.
Enclosed are the audited financial statements including the investment portfolio as of December 31, 2010 with a description of factors that affected the performance during the past year.
Performance Discussion (Unaudited)
The GAMCO Global Convertible Securities Fund (the “Fund”) (Class AAA) net asset value (“NAV”) per share rose 16.3% in 2010, compared with the Merrill Lynch Global 300 Convertible Index of 11.7%.
For the full year 2010, the U.S. convertibles market gained 16.8% on a total return basis. As the fourth quarter drew to a close, December’s equity market rebound helped the U.S. convertibles market to richen slightly, but reflected a decline in the average discount to theoretical value of index constituents.
Summarizing constituent performance for the full year by quality, size, and style, using component data from Bank of America’s Merrill Lynch Convertibles Index reveals the following: on a ratings basis, speculative grade convertibles outperformed investment grade convertibles by more than double (up 20.5% vs. 7.9%). By market capitalization, convertible securities of mid-cap companies had 2010 total returns of 19.1%, besting both large-caps and small-caps, which were up 16% and 14.7%, respectively. A comparison by investment style shows that growth names significantly outpaced value names (up 24.4% vs. 9.7%) in 2010.
Demand for new convertible issuance has remained strong. During the fourth quarter, Bank of America (Merrill Lynch) reported twenty-six new deals pricing for aggregate proceeds of $12.7 billion. Year to date, seventy-six new deals have been priced, with aggregate proceeds of $33.8 billion, the lowest level of proceeds in more than a decade. New issuance activity has been inconsistent this year, while redemptions have remained at elevated levels, outpacing new issuance for the year, resulting in further net supply contraction. The negative net new issuance imbalance during 2010 totaled $21.1 billion. Despite the negative net new issuance drag, the total market value of the U.S. convertible universe grew to $232 billion by year end, gaining $11 billion during the year, driven largely by rebounding equity prices and positive secondary market performance.
A selected holding that contributed positively to performance in 2010 was Bucyrus International Inc. (2.4% of net assets as of December 31, 2010). Bucyrus designs and manufactures mining equipment for the extraction of coal, copper, oil sands, iron ore, and other minerals in mining centers throughout the world. Other selected holdings that contributed positively to performance were CompuCredit Holdings Corporation, 3.625%, 5/30/25 (1.8%) and Baldor Electric Co. (1.7%). Some of our weaker performing securities during the year were Alcoa Inc. 5.25%, 3/15/14 (2.6%), GenCorp Inc. 2.25%, 11/15/24 (2.1%), a manufacturer of aerospace and defense systems with a real estate segment, and Texas Competitive Electric Holdings Co. LLC, 10.25%, 11/1/15 (1.2%).
We appreciate your confidence and trust.
Sincerely yours, | ||
Bruce N. Alpert | ||
President |
February 24, 2011
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GAMCO GLOBAL
CONVERTIBLE SECURITIES FUND CLASS AAA SHARES, THE LIPPER CONVERTIBLE SECURITIES FUND
AVERAGE, AND THE MSCI WORLD FREE INDEX (Unaudited)
CONVERTIBLE SECURITIES FUND CLASS AAA SHARES, THE LIPPER CONVERTIBLE SECURITIES FUND
AVERAGE, AND THE MSCI WORLD FREE INDEX (Unaudited)
Past performance is not predictive of future results. The performance tables and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
2
Comparative Results
Average Annual Returns through December 31, 2010 (a) (Unaudited)
Since | ||||||||||||||||||||||||
Inception | ||||||||||||||||||||||||
Quarter | 1 Year | 3 Year | 5 Year | 10 Year | (2/3/94) | |||||||||||||||||||
GAMCO Global Convertible Securities Fund Class AAA | 4.56 | % | 16.27 | % | (1.53 | )% | 1.11 | % | 2.48 | % | 4.84 | % | ||||||||||||
Merrill Lynch Global 300 Convertible Index | 5.38 | 11.73 | 3.54 | 7.17 | 5.56 | 6.06 | (e) | |||||||||||||||||
MSCI World Free Index | 8.82 | 13.21 | (3.76 | ) | 3.98 | 3.69 | 6.56 | (f) | ||||||||||||||||
Lipper Convertible Securities Fund Average | 9.00 | 18.04 | 3.48 | 6.19 | 5.16 | 7.66 | ||||||||||||||||||
Class A | 4.59 | 16.26 | (1.51 | ) | 1.13 | 2.50 | 4.85 | |||||||||||||||||
With sales charge (b) | (1.43 | ) | 9.57 | (3.44 | ) | (0.07 | ) | 1.90 | 4.49 | |||||||||||||||
Class B | 4.35 | 15.15 | (2.27 | ) | 0.35 | 1.74 | 4.39 | |||||||||||||||||
With contingent deferred sales charge (c) | (0.65 | ) | 10.15 | (3.26 | ) | (0.04 | ) | 1.74 | 4.39 | |||||||||||||||
Class C | 4.20 | 15.14 | (2.35 | ) | 0.30 | 1.78 | 4.41 | |||||||||||||||||
With contingent deferred sales charge (d) | 3.20 | 14.14 | (2.35 | ) | 0.30 | 1.78 | 4.41 | |||||||||||||||||
Class I | 4.61 | 16.19 | (1.30 | ) | 1.25 | 2.55 | 4.88 |
In the current prospectus, the gross expense ratios for Class AAA, A, B, C, and I Shares are 3.37%, 3.37%, 4.12%, 4.12%, and 3.12%, respectively. The net expense ratios in the current prospectus for these share classes are 2.04%, 2.04%, 2.79%, 2.79%, and 1.79%, respectively. See page 10 for operating expenses for the year ended December 31, 2010. Class AAA and Class I Shares do not have a sales charge. The maximum sales charge for Class A, B, and C Shares is 5.75%, 5.00%, and 1.00%, respectively.
(a) | Returns represent past performance and do not guarantee future results. Total returns and average annual returns reflect changes in share price, reinvestment of dividends and are net of expenses. Investment returns and the principal value of an investment will fluctuate. When shares are redeemed, they may be worth more or less than their original cost. Current performance may be lower or higher than the performance data presented. Returns would have been lower had the Adviser not reimbursed certain expenses of the Fund. Performance returns for periods of less than one year are not annualized. Visit www.gabelli.com for performance information as of the most recent month end. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The prospectus contains information about this and other matters and should be read carefully before investing. Investing in foreign securities involves risks not ordinarily associated with investments in domestic issues, including currency fluctuation, economic and political risks. The Class AAA Shares NAVs per share are used to calculate performance for the periods prior to the issuance of Class A Shares, Class B Shares, Class C Shares, and Class I Shares on May 2, 2001, March 28, 2001, November 26, 2001, and January 11, 2008, respectively. The actual performance of the Class B Shares and Class C Shares would have been lower due to the additional expenses associated with these classes of shares. The actual performance of the Class I Shares would have been higher due to lower expenses related to this class of shares. The Merrill Lynch Global 300 Convertible Index, and the Morgan Stanley Capital International (“MSCI”) World Free Index are unmanaged indicators of investment performance. Dividends are considered reinvested. You cannot invest directly in an index. | |
(b) | Performance results include the effect of the maximum 5.75% sales charge at the beginning of the period. | |
(c) | Assuming payment of the maximum contingent deferred sales charge (CDSC). The maximum CDSC for Class B Shares is 5% and is reduced to 0% after six years. | |
(d) | Assuming payment of the maximum CDSC. A CDSC of 1% is imposed on redemptions made within one year of purchase. | |
(e) | There is no data available for the Merrill Lynch Global 300 Convertible Index prior to December 31, 1994. | |
(f) | MSCI AC World Free Index since inception performance is as of January 31, 1994. |
3
The GAMCO Global Convertible Securities Fund
Disclosure of Fund Expenses (Unaudited)
For the Six Month Period from July 1, 2010 through December 31, 2010
Expense Table
We believe it is important for you to understand the impact of fees and expenses regarding your investment. All mutual funds have operating expenses. As a shareholder of a fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of a fund.When a fund’s expenses are expressed as a percentage of its average net assets, this figure is known as the expense ratio.The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your Fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The Expense Table below illustrates your Fund’s costs in two ways:
Actual Fund Return: This section provides information about actual account values and actual expenses. You may use this section to help you to estimate the actual expenses that you paid over the period after any fee waivers and expense reimbursements. The “Ending Account Value” shown is derived from the Fund’s actual return during the past six months, and the “Expenses Paid During Period” shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund.You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your Fund under the heading “Expenses Paid During Period” to estimate the expenses you paid during this period.
Hypothetical 5% Return: This section provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio. It assumes a hypothetical annualized return of 5% before expenses during the period shown. In this case — because the hypothetical return used is not the Fund’s actual return — the results do not apply to your investment and you cannot use the hypothetical account value and expense to estimate the actual ending account balance or expenses you paid for the period. This example is useful in making comparisons of the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads), redemption fees, or exchange fees, if any, which are described in the Prospectus. If these costs were applied to your account, your costs would be higher. Therefore, the 5% hypothetical return is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. The “Annualized Expense Ratio” represents the actual expenses for the last six months and may be different from the expense ratio in the Financial Highlights which is for the year ended December 31, 2010.
Beginning | Ending | Annualized | Expenses | |||||||||||||
Account Value | Account Value | Expense | Paid During | |||||||||||||
07/01/10 | 12/31/10 | Ratio | Period* | |||||||||||||
The GAMCO Global Convertible Securities Fund | ||||||||||||||||
Actual Fund Return | ||||||||||||||||
Class AAA | $ | 1,000.00 | $ | 1,122.00 | 2.00 | % | $ | 10.70 | ||||||||
Class A | $ | 1,000.00 | $ | 1,122.10 | 2.00 | % | $ | 10.70 | ||||||||
Class B | $ | 1,000.00 | $ | 1,117.40 | 2.75 | % | $ | 14.68 | ||||||||
Class C | $ | 1,000.00 | $ | 1,117.10 | 2.75 | % | $ | 14.67 | ||||||||
Class I | $ | 1,000.00 | $ | 1,120.00 | 1.75 | % | $ | 9.35 | ||||||||
Hypothetical 5% Return | ||||||||||||||||
Class AAA | $ | 1,000.00 | $ | 1,015.12 | 2.00 | % | $ | 10.16 | ||||||||
Class A | $ | 1,000.00 | $ | 1,015.12 | 2.00 | % | $ | 10.16 | ||||||||
Class B | $ | 1,000.00 | $ | 1,011.34 | 2.75 | % | $ | 13.94 | ||||||||
Class C | $ | 1,000.00 | $ | 1,011.34 | 2.75 | % | $ | 13.94 | ||||||||
Class I | $ | 1,000.00 | $ | 1,016.38 | 1.75 | % | $ | 8.89 |
* | Expenses are equal to the Fund’s annualized expense ratio for the last six months multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (184 days), then divided by 365. |
4
Summary of Portfolio Holdings (Unaudited)
The following table presents portfolio holdings as a percent of total net assets as of December 31, 2010:
The GAMCO Global Convertible Securities Fund
Energy and Utilities | 15.8 | % | ||
Telecommunications | 11.1 | % | ||
U.S. Government Obligations | 10.3 | % | ||
Metals and Mining | 8.8 | % | ||
Computer Hardware | 7.2 | % | ||
Health Care | 6.5 | % | ||
Diversified Industrial | 6.5 | % | ||
Financial Services | 5.9 | % | ||
Machinery | 4.1 | % | ||
Business Services | 3.6 | % | ||
Consumer Products | 3.4 | % | ||
Commercial Services | 3.2 | % | ||
Equipment and Supplies | 2.9 | % | ||
Automotive | 1.4 | % | ||
Specialty Chemicals | 1.3 | % | ||
Aviation | 1.0 | % | ||
Entertainment | 0.7 | % | ||
Electronics | 0.6 | % | ||
Food and Beverage | 0.3 | % | ||
Broadcasting | 0.0 | % | ||
Other Assets and Liabilities (Net) | 5.4 | % | ||
100.0 | % | |||
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q, the last of which was filed for the quarter ended September 30, 2010. Shareholders may obtain this information at www.gabelli.com or by calling the Fund at 800-GABELLI (800-422-3554). The Fund’s Form N-Q is available on the SEC’s website at www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Proxy Voting
The Fund files Form N-PX with its complete proxy voting record for the twelve months ended June 30th, no later than August 31st of each year. A description of the Fund’s proxy voting policies, procedures, and how the Fund voted proxies relating to portfolio securities is available without charge, upon request, by (i) calling 800-GABELLI (800-422-3554); (ii) writing to The Gabelli Funds at One Corporate Center, Rye, NY 10580-1422; or (iii) visiting the SEC’s website at www.sec.gov.
5
The GAMCO Global Convertible Securities Fund
Schedule of Investments — December 31, 2010
Schedule of Investments — December 31, 2010
Principal | Market | |||||||||||
Amount | Cost | Value | ||||||||||
CONVERTIBLE CORPORATE BONDS — 69.7% | ||||||||||||
Aviation — 1.0% | ||||||||||||
$ | 50,000 | Textron Inc., Ser. TXT, Cv., 4.500%, 05/01/13 | $ | 50,000 | $ | 95,250 | ||||||
Broadcasting — 0.0% | ||||||||||||
400,000 | Citadel Broadcasting Corp., Sub. Deb. Cv., Escrow, 4.000%, 02/11/20† (a) | 0 | 0 | |||||||||
Business Services — 2.4% | ||||||||||||
200,000 | The Interpublic Group of Companies Inc., Cv., 4.250%, 03/15/23 | 188,323 | 223,750 | |||||||||
Commercial Services — 3.2% | ||||||||||||
300,000 | The Providence Service Corp., Sub. Deb. Cv., 6.500%, 05/15/14 | 274,394 | 300,000 | |||||||||
Computer Hardware — 7.2% | ||||||||||||
700,000 | SanDisk Corp., Cv., 1.000%, 05/15/13 | 534,887 | 677,250 | |||||||||
Consumer Products — 3.4% | ||||||||||||
300,000 | Eastman Kodak Co., Cv., 7.000%, 04/01/17 | 289,037 | 314,625 | |||||||||
Diversified Industrial — 6.5% | ||||||||||||
GenCorp Inc., Sub. Deb. Cv., | ||||||||||||
200,000 | 2.250%, 11/15/24 | 172,326 | 198,500 | |||||||||
200,000 | 4.063%, 12/31/39 | 167,642 | 188,500 | |||||||||
200,000 | Griffon Corp., Sub. Deb. Cv., 4.000%, 01/15/17 (b) | 200,000 | 218,750 | |||||||||
539,968 | 605,750 | |||||||||||
Electronics — 0.6% | ||||||||||||
52,000 | Advanced Micro Devices Inc., Cv., 5.750%, 08/15/12 | 45,650 | 53,560 | |||||||||
Energy and Utilities — 12.0% | ||||||||||||
200,000 | Cameron International Corp., Cv., 2.500%, 06/15/26 | 338,524 | 291,500 | |||||||||
350,000 | Covanta Holding Corp., Cv., 3.250%, 06/01/14 | 350,000 | 418,250 | |||||||||
300,000 | JA Solar Holdings Co. Ltd., Cv., 4.500%, 05/15/13 | 290,691 | 286,875 | |||||||||
100,000 | Seadrill Ltd., Cv., 3.625%, 11/08/12 | 107,636 | 124,250 | |||||||||
1,086,851 | 1,120,875 | |||||||||||
Entertainment — 0.7% | ||||||||||||
50,000 | Take-Two Interactive Software Inc., Cv., 4.375%, 06/01/14 | 50,000 | 67,625 | |||||||||
Equipment and Supplies — 2.9% | ||||||||||||
200,000 | Danaher Corp., Cv., Zero Coupon, 01/22/21 | 239,969 | 275,000 | |||||||||
Financial Services — 5.6% | ||||||||||||
200,000 | CompuCredit Holdings Corp., Cv., 3.625%, 05/30/25 | 97,408 | 172,000 | |||||||||
300,000 | Janus Capital Group Inc., Cv., 3.250%, 07/15/14 | 300,000 | 357,000 | |||||||||
397,408 | 529,000 | |||||||||||
Health Care — 6.5% | ||||||||||||
400,000 | Chemed Corp., Cv., 1.875%, 05/15/14 | 365,452 | 401,500 | |||||||||
200,000 | Kinetic Concepts Inc., Cv., 3.250%, 04/15/15 (b) | 165,529 | 211,250 | |||||||||
530,981 | 612,750 | |||||||||||
Metals and Mining — 8.8% | ||||||||||||
100,000 | Alcoa Inc., Cv., 5.250%, 03/15/14 | 100,000 | 247,875 | |||||||||
200,000 | Kinross Gold Corp., Cv., 1.750%, 03/15/28 (b) | 202,223 | 207,250 | |||||||||
250,000 | Newmont Mining Corp., Ser. B, Cv., 1.625%, 07/15/17 | 328,515 | 364,687 | |||||||||
630,738 | 819,812 | |||||||||||
Telecommunications — 8.9% | ||||||||||||
500,000 | NII Holdings Inc., Cv., 3.125%, 06/15/12 | 488,036 | 493,125 | |||||||||
20,000,000 | (c) | Softbank Corp., Cv., 1.500%, 03/31/13 | 239,947 | 341,614 | ||||||||
727,983 | 834,739 | |||||||||||
TOTAL CONVERTIBLE CORPORATE BONDS | 5,586,189 | 6,529,986 | ||||||||||
CORPORATE BONDS — 1.2% | ||||||||||||
Energy and Utilities — 1.2% | ||||||||||||
200,000 | Texas Competitive Electric Holdings Co. LLC, Ser. B (STEP), 10.250%, 11/01/15 | 120,122 | 113,000 | |||||||||
Shares | ||||||||||||
CONVERTIBLE PREFERRED STOCKS — 1.4% | ||||||||||||
Automotive — 1.4% | ||||||||||||
2,500 | Ford Motor Co. Capital Trust II, 6.500% Cv. Pfd | 116,725 | 129,650 | |||||||||
See accompanying notes to financial statements.
6
The GAMCO Global Convertible Securities Fund
Schedule of Investments (Continued) — December 31, 2010
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS — 12.0% | ||||||||||||
Business Services — 1.2% | ||||||||||||
2,500 | Akamai Technologies Inc.† | $ | 87,831 | $ | 117,625 | |||||||
Energy and Utilities — 2.6% | ||||||||||||
6,000 | Emera Inc. | 169,120 | 189,178 | |||||||||
2,000 | Endesa SA | 50,618 | 51,568 | |||||||||
219,738 | 240,746 | |||||||||||
Financial Services — 0.3% | ||||||||||||
500 | Royal Bank of Canada | 27,160 | 26,180 | |||||||||
Food and Beverage — 0.3% | ||||||||||||
1,000 | Wimm-Bill-Dann Foods | |||||||||||
OJSC, ADR | 31,365 | 32,970 | ||||||||||
Machinery — 4.1% | ||||||||||||
2,500 | Baldor Electric Co. | 158,204 | 157,600 | |||||||||
2,500 | Bucyrus International Inc. | 224,035 | 223,500 | |||||||||
382,239 | 381,100 | |||||||||||
Specialty Chemicals — 1.3% | ||||||||||||
1,000 | Dionex Corp.† | 118,125 | 118,010 | |||||||||
Telecommunications — 2.2% | ||||||||||||
3,500 | Telekom Austria AG | 44,600 | 49,203 | |||||||||
6,000 | Vodafone Group plc, ADR | 153,470 | 158,580 | |||||||||
198,070 | 207,783 | |||||||||||
TOTAL COMMON STOCKS | 1,064,528 | 1,124,414 | ||||||||||
Principal | ||||||||||||
Amount | ||||||||||||
U.S. GOVERNMENT OBLIGATIONS — 10.3% | ||||||||||||
$ | 965,000 | U.S. Treasury Bills, 0.085% to 0.160%††, 02/03/11 to 05/12/11 | 964,688 | 964,733 | ||||||||
TOTAL INVESTMENTS — 94.6% | $ | 7,852,252 | 8,861,783 | |||||||||
Other Assets and Liabilities (Net) — 5.4% | 508,123 | |||||||||||
NET ASSETS — 100.0% | $ | 9,369,906 | ||||||||||
(a) | Security fair valued under procedures established by the Board of Directors. The procedures may include reviewing available financial information about the company and reviewing the valuation of comparable securities and other factors on a regular basis. At December 31, 2010, the fair valued security had no market value. | |
(b) | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2010, the market value of Rule 144A securities amounted to $637,250 or 6.80% of net assets. | |
(c) | Principal amount denoted in Japanese Yen. | |
† | Non-income producing security. | |
†† | Represents annualized yield at date of purchase. | |
ADR | American Depositary Receipt | |
OJSC | Open Joint Stock Company | |
STEP | Step coupon bond. The rate disclosed is that in effect at December 31, 2010. |
% of | ||||||||
Market | Market | |||||||
Geographic Diversification | Value | Value | ||||||
North America | 89.6 | % | $ | 7,940,973 | ||||
Japan | 3.9 | 341,614 | ||||||
Europe | 3.3 | 292,321 | ||||||
Latin America | 3.2 | 286,875 | ||||||
100.0 | % | $ | 8,861,783 | |||||
See accompanying notes to financial statements.
7
The GAMCO Global Convertible Securities Fund
Statement of Assets and Liabilities
December 31, 2010
December 31, 2010
Assets: | ||||
Investments, at value (cost $ 7,852,252) | $ | 8,861,783 | ||
Deposit at broker | 365,915 | |||
Cash | 12,471 | |||
Receivable for investments sold | 76,334 | |||
Receivable for Fund shares issued | 50,000 | |||
Dividends and interest receivable | 43,849 | |||
Prepaid expenses | 21,196 | |||
Other asset | 1,505 | |||
Total Assets | 9,433,053 | |||
Liabilities: | ||||
Payable for investment advisory fees | 9,777 | |||
Payable for distribution fees | 1,992 | |||
Payable for legal and audit fees | 28,181 | |||
Payable for shareholder communications expenses | 11,113 | |||
Payable for custodian fees | 6,424 | |||
Other accrued expenses | 5,660 | |||
Total Liabilities | 63,147 | |||
Net Assets (applicable to 2,274,213 shares outstanding) | $ | 9,369,906 | ||
Net Assets Consist of: | ||||
Paid-in capital | $ | 10,410,862 | ||
Accumulated distributions in excess of net investment income | (6,921 | ) | ||
Accumulated net realized loss on investments, securities sold short, and foreign currency transactions | (2,043,583 | ) | ||
Net unrealized appreciation on investments | 1,009,531 | |||
Net unrealized appreciation on foreign currency translations | 17 | |||
Net Assets | $ | 9,369,906 | ||
Shares of Capital Stock each at $0.001 par value: | ||||
Class AAA: | ||||
Net Asset Value, offering, and redemption price per share ($8,018,452 ÷ 1,943,514 shares outstanding; 75,000,000 shares authorized) | $ | 4.13 | ||
Class A: | ||||
Net Asset Value and redemption price per share ($1,114,582 ÷ 269,407 shares outstanding; 50,000,000 shares authorized) | $ | 4.14 | ||
Maximum offering price per share (NAV ÷ 0.9425, based on maximum sales charge of 5.75% of the offering price) | $ | 4.39 | ||
Class B: | ||||
Net Asset Value and offering price per share ($1,679 ÷ 455 shares outstanding; 25,000,000 shares authorized) | $ | 3.69 | (a) | |
Class C: | ||||
Net Asset Value and offering price per share ($165,668 ÷ 44,056 shares outstanding; 25,000,000 shares authorized) | $ | 3.76 | (a) | |
Class I: | ||||
Net Asset Value, offering, and redemption price per share ($69,525 ÷ 16,781 shares outstanding; 25,000,000 shares authorized) | $ | 4.14 | ||
Statement of Operations
For the Year Ended December 31, 2010
For the Year Ended December 31, 2010
Investment Income: | ||||
Dividends (net of foreign withholding taxes of $779) | $ | 24,864 | ||
Interest | 344,080 | |||
Total Investment Income | 368,944 | |||
Expenses: | ||||
Investment advisory fees | 89,486 | |||
Distribution fees — Class AAA | 20,571 | |||
Distribution fees — Class A | 1,159 | |||
Distribution fees — Class B | 15 | |||
Distribution fees — Class C | 1,889 | |||
Custodian fees | 34,966 | |||
Legal and audit fees | 31,839 | |||
Registration expenses | 26,494 | |||
Shareholder communications expenses | 22,323 | |||
Shareholder services fees | 18,517 | |||
Directors’ fees | 1,303 | |||
Interest expense | 793 | |||
Dividend expense on securities sold short | 572 | |||
Miscellaneous expenses | 7,790 | |||
Total Expenses | 257,717 | |||
Less: | ||||
Expense reimbursement (See Note 3) | (76,106 | ) | ||
Custodian fee credits | (3 | ) | ||
Total Reimbursements and Credits | (76,109 | ) | ||
Net Expenses | 181,608 | |||
Net Investment Income | 187,336 | |||
Net Realized and Unrealized Gain/(Loss) on Investments, Securities Sold Short, and Foreign Currency: | ||||
Net realized gain on investments | 3,491 | |||
Net realized gain on securities sold short | 11,209 | |||
Net realized gain on foreign currency transactions | 35,817 | |||
Net realized gain on investments, securities sold short, and foreign currency transactions | 50,517 | |||
Net change in unrealized appreciation/depreciation: | ||||
on investments | 1,082,557 | |||
on foreign currency translations | (268 | ) | ||
Net change in unrealized appreciation/ depreciation on investments and foreign currency translations | 1,082,289 | |||
Net Realized and Unrealized Gain/(Loss) on Investments, Securities Sold Short, and Foreign Currency | 1,132,806 | |||
Net Increase in Net Assets Resulting from Operations | $ | 1,320,142 | ||
(a) | Redemption price varies based on the length of time held. |
See accompanying notes to financial statements.
8
The GAMCO Global Convertible Securities Fund
Statement of Changes in Net Assets
Year Ended | Year Ended | |||||||
December 31, 2010 | December 31, 2009 | |||||||
Operations: | ||||||||
Net investment income | $ | 187,336 | $ | 271,509 | ||||
Net realized gain/(loss) on investments, securities sold short, and foreign currency transactions | 50,517 | (380,058 | ) | |||||
Net change in unrealized appreciation on investments and foreign currency translations | 1,082,289 | 2,638,873 | ||||||
Net Increase in Net Assets Resulting from Operations | 1,320,142 | 2,530,324 | ||||||
Distributions to Shareholders: | ||||||||
Net investment income | ||||||||
Class AAA | (199,211 | ) | (290,133 | ) | ||||
Class A | (17,989 | ) | (12,599 | ) | ||||
Class B | (33 | ) | (83 | ) | ||||
Class C | (3,686 | ) | (4,698 | ) | ||||
Class I | (1,777 | ) | (2,234 | ) | ||||
Total Distributions to Shareholders | (222,696 | ) | (309,747 | ) | ||||
Capital Share Transactions: | ||||||||
Class AAA | (672,695 | ) | 1,609,009 | |||||
Class A | 589,714 | 179,782 | ||||||
Class B | 33 | (3,035 | ) | |||||
Class C | (21,895 | ) | 37,198 | |||||
Class I | (5,991 | ) | 21,671 | |||||
Net Increase/(Decrease) in Net Assets from Capital Share Transactions | (110,834 | ) | 1,844,625 | |||||
Redemption Fees | — | 3,232 | ||||||
Net Increase in Net Assets | 986,612 | 4,068,434 | ||||||
Net Assets: | ||||||||
Beginning of period | 8,383,294 | 4,314,860 | ||||||
End of period (including undistributed net investment income of $0 and $0, respectively) | $ | 9,369,906 | $ | 8,383,294 | ||||
See accompanying notes to financial statements.
9
The GAMCO Global Convertible Securities Fund
Financial Highlights
Financial Highlights
Selected data for a share of capital stock outstanding throughout each year:
Income (Loss) | Ratios to Average | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
from Investment Operations | Distributions | Net Assets/Supplemental Data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | Operating | Operating | Dividend | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Asset | Net | Realized and | Total | Net | Net Asset | Net Assets | Net | Expenses | Expenses | Expense | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Period | Value, | Investment | Unrealized | from | Net | Realized | Return | Value, | End of | Investment | Before | Net of | on Securities | Portfolio | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ended | Beginning | Income | Gain (Loss) on | Investment | Investment | Gain on | of | Total | Redemption | End of | Total | Period | Income | Reimburse- | Reimburse- | Sold | Turnover | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
December 31, | of Period | (Loss)(a) | Investments | Operations | Income | Investments | Capital | Distributions | Fees(a) | Period | Return† | (in 000’s) | (Loss) | ment | ment††(b) | Short | Rate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class AAA | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 3.64 | $ | 0.08 | $ | 0.51 | $ | 0.59 | $ | (0.10 | ) | — | — | $ | (0.10 | ) | — | $ | 4.13 | 16.3 | % | $ | 8,018 | 2.11 | % | 2.87 | % | 2.02 | % | 0.01 | % | 68 | % | ||||||||||||||||||||||||||||||||||||||
2009 | 2.62 | 0.12 | 1.03 | 1.15 | (0.13 | ) | — | — | (0.13 | ) | $ | 0.00 | (c) | 3.64 | 44.7 | 7,681 | 3.87 | 3.37 | 2.04 | — | 62 | ||||||||||||||||||||||||||||||||||||||||||||||||||
2008 | 4.77 | 0.08 | (2.11 | ) | (2.03 | ) | (0.12 | ) | — | — | (0.12 | ) | 0.00 | (c) | 2.62 | (43.2 | ) | 4,000 | 1.88 | 3.38 | 2.02 | — | 110 | ||||||||||||||||||||||||||||||||||||||||||||||||
2007 | 5.48 | (0.04 | ) | 0.16 | 0.12 | (0.19 | ) | $ | (0.51 | ) | $ | (0.13 | ) | (0.83 | ) | 0.00 | (c) | 4.77 | 2.1 | 9,294 | (0.70 | ) | 2.46 | 2.12 | — | 141 | |||||||||||||||||||||||||||||||||||||||||||||
2006 | 6.22 | 0.08 | 0.44 | 0.52 | (0.10 | ) | (1.16 | ) | — | (1.26 | ) | 0.00 | (c) | 5.48 | 8.4 | 10,691 | 1.21 | 2.14 | 2.03 | — | 130 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Class A | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 3.65 | $ | 0.08 | $ | 0.51 | $ | 0.59 | $ | (0.10 | ) | — | — | $ | (0.10 | ) | — | $ | 4.14 | 16.3 | % | $ | 1,115 | 2.16 | % | 2.87 | % | 2.02 | % | 0.01 | % | 68 | % | ||||||||||||||||||||||||||||||||||||||
2009 | 2.63 | 0.12 | 1.03 | 1.15 | (0.13 | ) | — | — | (0.13 | ) | $ | 0.00 | (c) | 3.65 | 44.5 | 472 | 3.71 | 3.37 | 2.04 | — | 62 | ||||||||||||||||||||||||||||||||||||||||||||||||||
2008 | 4.78 | 0.10 | (2.13 | ) | (2.03 | ) | (0.12 | ) | — | — | (0.12 | ) | 0.00 | (c) | 2.63 | (43.1 | ) | 196 | 2.78 | 3.38 | 2.02 | — | 110 | ||||||||||||||||||||||||||||||||||||||||||||||||
2007 | 5.49 | (0.04 | ) | 0.16 | 0.12 | (0.19 | ) | $ | (0.51 | ) | $ | (0.13 | ) | (0.83 | ) | 0.00 | (c) | 4.78 | 2.1 | 57 | (0.69 | ) | 2.45 | 2.12 | — | 141 | |||||||||||||||||||||||||||||||||||||||||||||
2006 | 6.23 | 0.08 | 0.44 | 0.52 | (0.10 | ) | (1.16 | ) | — | (1.26 | ) | 0.00 | (c) | 5.49 | 8.4 | 49 | 1.24 | 2.14 | 2.03 | — | 130 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Class B | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 3.27 | $ | 0.04 | $ | 0.45 | $ | 0.49 | $ | (0.07 | ) | — | — | $ | (0.07 | ) | — | $ | 3.69 | 15.2 | % | $ | 2 | 1.29 | % | 3.62 | % | 2.77 | % | 0.01 | % | 68 | % | ||||||||||||||||||||||||||||||||||||||
2009 | 2.36 | 0.10 | 0.91 | 1.01 | (0.10 | ) | — | — | (0.10 | ) | $ | 0.00 | (c) | 3.27 | 43.7 | 1 | 3.53 | 4.12 | 2.79 | — | 62 | ||||||||||||||||||||||||||||||||||||||||||||||||||
2008 | 4.34 | 0.02 | (1.88 | ) | (1.86 | ) | (0.12 | ) | — | — | (0.12 | ) | 0.00 | (c) | 2.36 | (43.6 | ) | 4 | 0.56 | 4.13 | 2.77 | — | 110 | ||||||||||||||||||||||||||||||||||||||||||||||||
2007 | 5.10 | (0.08 | ) | 0.15 | 0.07 | (0.19 | ) | $ | (0.51 | ) | $ | (0.13 | ) | (0.83 | ) | 0.00 | (c) | 4.34 | 1.3 | 37 | (1.49 | ) | 3.21 | 2.87 | — | 141 | |||||||||||||||||||||||||||||||||||||||||||||
2006 | 5.91 | 0.03 | 0.42 | 0.45 | (0.10 | ) | (1.16 | ) | — | (1.26 | ) | 0.00 | (c) | 5.10 | 7.6 | 42 | 0.47 | 2.89 | 2.78 | — | 130 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Class C | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 3.33 | $ | 0.05 | $ | 0.45 | $ | 0.50 | $ | (0.07 | ) | — | — | $ | (0.07 | ) | — | $ | 3.76 | 15.1 | % | $ | 166 | 1.33 | % | 3.62 | % | 2.77 | % | 0.01 | % | 68 | % | ||||||||||||||||||||||||||||||||||||||
2009 | 2.41 | 0.09 | 0.94 | 1.03 | (0.11 | ) | — | — | (0.11 | ) | $ | 0.00 | (c) | 3.33 | 43.5 | 162 | 2.96 | 4.12 | 2.79 | — | 62 | ||||||||||||||||||||||||||||||||||||||||||||||||||
2008 | 4.43 | 0.04 | (1.94 | ) | (1.90 | ) | (0.12 | ) | — | — | (0.12 | ) | 0.00 | (c) | 2.41 | (43.6 | ) | 86 | 1.11 | 4.13 | 2.77 | — | 110 | ||||||||||||||||||||||||||||||||||||||||||||||||
2007 | 5.19 | (0.09 | ) | 0.16 | 0.07 | (0.19 | ) | $ | (0.51 | ) | $ | (0.13 | ) | (0.83 | ) | 0.00 | (c) | 4.43 | 1.2 | 82 | (1.65 | ) | 3.19 | 2.87 | — | 141 | |||||||||||||||||||||||||||||||||||||||||||||
2006 | 5.99 | 0.04 | 0.42 | 0.46 | (0.10 | ) | (1.16 | ) | — | (1.26 | ) | 0.00 | (c) | 5.19 | 7.8 | 164 | 0.57 | 2.90 | 2.78 | — | 130 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Class I | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 3.66 | $ | 0.09 | $ | 0.50 | $ | 0.59 | $ | (0.11 | ) | — | — | $ | (0.11 | ) | — | $ | 4.14 | 16.4 | % | $ | 69 | 2.37 | % | 2.62 | % | 1.77 | % | 0.01 | % | 68 | % | ||||||||||||||||||||||||||||||||||||||
2009 | 2.63 | 0.13 | 1.04 | 1.17 | (0.14 | ) | — | — | (0.14 | ) | $ | 0.00 | (c) | 3.66 | 45.2 | 67 | 3.97 | 3.12 | 1.79 | — | 62 | ||||||||||||||||||||||||||||||||||||||||||||||||||
2008(d) | 4.62 | 0.08 | (1.95 | ) | (1.87 | ) | (0.12 | ) | — | — | (0.12 | ) | 0.00 | (c) | 2.63 | (41.2 | ) | 29 | 2.14 | (e) | 3.13 | (e) | 1.77 | (e) | — | 110 |
† | Total return represents aggregate total return of a hypothetical $1,000 investment at the beginning of the period and sold at the end of the period including reinvestment of distributions and does not reflect the applicable sales charges. Total return for a period of less than one year is not annualized. | |
†† | The ratios do not include a reduction for custodian fee credits on cash balances maintained with the custodian (“Custodian Fee Credits”). Including such Custodian Fee Credits, the ratio for the year ended December 31, 2006 would have been 2.02% (Class AAA and Class A), 2.77% (Class B and Class C), respectively. For the years ended December 31, 2010, 2008, and 2007, the effect of Custodian Fee Credits was minimal. For the year ended December 31, 2009, there were no custodian fee credits. | |
(a) | Per share amounts have been calculated using the average shares outstanding method. | |
(b) | The Fund incurred interest expense during the years ended December 31, 2010, 2008, 2007, and 2006. If interest expense had not been incurred, the ratios of operating expenses to average net assets would have been 2.01%, 2.00%, 2.00%, and 2.00% (Class AAA and Class A), 2.76%, 2.75%, 2.75%, and 2.75% (Class B and Class C), 1.76% and 1.75% (Class I), respectively. For the year ended December 31, 2009, the effect of the interest expense was minimal. The Fund also incurred tax expense during the year ended December 31, 2009. If tax expense had not been incurred, the ratios of operating expenses to average net assets would have been 2.00% (Class AAA and Class A), 2.75% (Class B and Class C), and 1.75% (Class I), respectively. | |
(c) | Amount represents less than $0.005 per share. | |
(d) | From the commencement of offering Class I Shares on January 11, 2008 through December 31, 2008. | |
(e) | Annualized. |
See accompanying notes to financial statements.
10
The GAMCO Global Convertible Securities Fund
Notes to Financial Statements
Notes to Financial Statements
1. Organization. The GAMCO Global Convertible Securities Fund (the “Fund”), a series of GAMCO Global Series Funds, Inc. (the “Corporation”), was organized on July 16, 1993 as a Maryland corporation. The Fund is a non-diversified open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and one of four separately managed portfolios (collectively, the “Portfolios”) of the Corporation. The Fund’s primary objective is to obtain a high level of total return through a combination of income and capital appreciation. The Fund commenced investment operations on February 3, 1994.
2. Significant Accounting Policies. The Fund’s financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), which may require the use of management estimates and assumptions. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements.
Security Valuation. Portfolio securities listed or traded on a nationally recognized securities exchange or traded in the U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a market’s official closing price as of the close of business on the day the securities are being valued. If there were no sales that day, the security is valued at the average of the closing bid and asked prices or, if there were no asked prices quoted on that day, then the security is valued at the closing bid price on that day. If no bid or asked prices are quoted on such day, the security is valued at the most recently available price or, if the Board of Directors (the “Board”) so determines, by such other method as the Board 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 Gabelli Funds, LLC (the “Adviser”).
Portfolio securities primarily traded on a foreign market are generally valued at the preceding closing values of such securities on the relevant market, but may be fair valued pursuant to procedures established by the Board if market conditions change significantly after the close of the foreign market but prior to the close of business on the day the securities are being valued. Debt instruments with remaining maturities of sixty days or less that are not credit impaired are valued at amortized cost, unless the Board determines such amount does not reflect the securities’ fair value, in which case these securities will be fair valued as determined by the Board. Debt instruments having a maturity greater than sixty days for which market quotations are readily available are valued at the average of the latest bid and asked prices. If there were no asked prices quoted on such day, the security is valued using the closing bid price. U.S. government obligations with maturities greater than sixty days are normally valued using a model that incorporates market observable data such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued principally using dealer quotations. Futures contracts are valued at the closing settlement price of the exchange or board of trade on which the applicable contract is traded.
Securities and assets for which market quotations are not readily available are fair valued as determined by the Board. Fair valuation methodologies and procedures may include, but are not limited to: analysis and review of available financial and non-financial information about the company; comparisons with the valuation and changes in valuation of similar securities, including a comparison of foreign securities with the equivalent U.S. dollar value ADR securities at the close of the U.S. exchange; and evaluation of any other information that could be indicative of the value of the security.
11
The GAMCO Global Convertible Securities Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
The inputs and valuation techniques used to measure fair value of the Fund’s investments are summarized into three levels as described in the hierarchy below:
• | Level 1 — quoted prices in active markets for identical securities; | ||
• | Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.); and | ||
• | Level 3 — significant unobservable inputs (including the Fund’s determinations as to the fair value of investments). |
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input both individually and in aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of the Fund’s investments in securities by inputs used to value the Fund’s investments as of December 31, 2010 is as follows:
Valuation Inputs | ||||||||||||||||
Level 1 | Level 2 Other Significant | Level 3 Significant | Total Market Value | |||||||||||||
Quoted Prices | Observable Inputs | Unobservable Inputs | at 12/31/10 | |||||||||||||
INVESTMENTS IN SECURITIES: | ||||||||||||||||
ASSETS (Market Value): | ||||||||||||||||
Convertible Corporate Bonds | $ | 424,250 | $ | 6,105,736 | $ | 0 | $ | 6,529,986 | ||||||||
Corporate Bonds | — | 113,000 | — | 113,000 | ||||||||||||
Convertible Preferred Stocks (a) | 129,650 | — | — | 129,650 | ||||||||||||
Common Stocks (a) | 1,124,414 | — | — | 1,124,414 | ||||||||||||
U.S. Government Obligations | — | 964,733 | — | 964,733 | ||||||||||||
TOTAL INVESTMENTS IN SECURITIES — ASSETS | $ | 1,678,314 | $ | 7,183,469 | $ | 0 | $ | 8,861,783 | ||||||||
(a) | Please refer to the Schedule of Investments for the industry classifications of these portfolio holdings. |
The Fund did not have significant transfers between Level 1 and Level 2 during the year ended December 31, 2010.
12
The GAMCO Global Convertible Securities Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
The following table reconciles Level 3 investments for which significant unobservable inputs were used to determine fair value:
Net change | ||||||||||||||||||||||||||||||||||||
in unrealized | ||||||||||||||||||||||||||||||||||||
appreciation/ | ||||||||||||||||||||||||||||||||||||
depreciation | ||||||||||||||||||||||||||||||||||||
during the | ||||||||||||||||||||||||||||||||||||
period on | ||||||||||||||||||||||||||||||||||||
Change in | Level 3 | |||||||||||||||||||||||||||||||||||
Balance | Accrued | Realized | unrealized | Net | Transfers | Transfers | Balance | investments | ||||||||||||||||||||||||||||
as of | discounts/ | gain/ | appreciation/ | purchases/ | into | out of | as of | held at | ||||||||||||||||||||||||||||
12/31/09 | (premiums) | (loss) | depreciation† | (sales) | Level 3†† | Level 3†† | 12/31/10 | 12/31/10† | ||||||||||||||||||||||||||||
INVESTMENTS IN SECURITIES: | ||||||||||||||||||||||||||||||||||||
ASSETS (Market Value): | ||||||||||||||||||||||||||||||||||||
Convertible Corporate Bonds* | $ | — | $ | — | $ | (117,365 | ) | $ | 306,365 | $ | (225,000 | ) | $ | 36,000 | $ | — | $ | 0 | $ | 306,365 | ||||||||||||||||
TOTAL INVESTMENTS IN SECURITIES | $ | — | $ | — | $ | (117,365 | ) | $ | 306,365 | $ | (225,000 | ) | $ | 36,000 | $ | — | $ | 0 | $ | 306,365 | ||||||||||||||||
† | Net change in unrealized appreciation/depreciation on investments is included in the related amounts in the Statement of Operations. | |
†† | The Fund’s policy is to recognize transfers into and transfers out of Level 3 as of the beginning of the reporting period. | |
* | At December 31, 2009, Citadel Broadcasting Corp. Convertible Corporate Bond was a Level 2 investment. The issuer of the Bond filed for reorganization on June 11, 2010. As a result, the Fund received Citadel Broadcasting Corp. Escrow bonds in exchange for the old bonds. The new escrow holding was fair valued to be a Level 3 investment at the date of measurement. |
There were no Level 3 investments held at December 31, 2009.
In January 2010, the Financial Accounting Standards Board (“FASB”) issued amended guidance to improve disclosure about fair value measurements which requires additional disclosures about transfers between Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements in the reconciliation of fair value measurements using significant unobservable inputs (Level 3). FASB also clarified existing disclosure requirements relating to the levels of disaggregation of fair value measurement and inputs and valuation techniques used to measure fair value. The amended guidance is effective for financial statements for fiscal years beginning after December 15, 2009 and interim periods within those fiscal years. Management has adopted the amended guidance and determined that there was no material impact to the Fund’s financial statements except for additional disclosures made in the notes. Disclosures about purchases, sales, issuances, and settlements in the rollforward of activity in Level 3 fair value measurements are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. Management is currently evaluating the impact of the additional disclosure requirements on the Fund’s financial statements.
Derivative Financial Instruments. The Fund may engage in various portfolio investment strategies by investing in a number of derivative financial instruments for the purpose of hedging against changes in the value of its portfolio securities and in the value of securities it intends to purchase or hedging against a specific transaction with respect to either the currency in which the transaction is denominated or another currency. Investing in certain derivative financial instruments, including participation in the options, futures, or swap markets, entails certain execution, liquidity, hedging, tax, and securities, interest, credit, or currency market risks. Losses may arise if the Adviser’s prediction of movements in the direction of the securities, foreign currency, and interest rate markets is inaccurate. Losses may also arise if the counterparty does not perform its duties under a contract, or that, in the event of default, the Fund may be delayed in or prevented from obtaining payments or other contractual remedies owed to it under derivative contracts. The creditworthiness
13
The GAMCO Global Convertible Securities Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
of the counterparties is closely monitored in order to minimize these risks. Participation in derivative transactions involves investment risks, transaction costs, and potential losses to which the Fund would not be subject absent the use of these strategies. The consequences of these risks, transaction costs, and losses may have a negative impact on the Fund’s ability to pay distributions.
The Fund’s derivative contracts held at December 31, 2010, if any, are not accounted for as hedging instruments under GAAP.
Futures Contracts. The Fund may engage in futures contracts for the purpose of hedging against changes in the value of its portfolio securities and in the value of securities it intends to purchase. Upon entering into a futures contract, the Fund is required to deposit with the broker an amount of cash or cash equivalents equal to a certain percentage of the contract amount. This is known as the “initial margin.” Subsequent payments (“variation margin”) are made or received by the Fund each day, depending on the daily fluctuations in the value of the contract, and are included in unrealized appreciation/depreciation on investments and futures contracts. The Fund recognizes a realized gain or loss when the contract is closed.
There are several risks in connection with the use of futures contracts as a hedging instrument. The change in value of futures contracts primarily corresponds with the value of their underlying instruments, which may not correlate with the change in value of the hedged investments. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market. During the year ended December 31, 2010, the Fund held no investments in futures contracts.
Forward Foreign Exchange Contracts. The Fund may engage in forward foreign exchange contracts for the purpose of hedging a specific transaction with respect to either the currency in which the transaction is denominated or another currency as deemed appropriate by the Adviser. Forward foreign exchange contracts are valued at the forward rate and are marked-to-market daily. The change in market value is included in unrealized appreciation/depreciation on investments and foreign currency translations. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
The use of forward foreign exchange contracts does not eliminate fluctuations in the underlying prices of the Fund’s portfolio securities, but it does establish a rate of exchange that can be achieved in the future. Although forward foreign exchange contracts limit the risk of loss due to a decline in the value of the hedged currency, they also limit any potential gain that might result should the value of the currency increase. In addition, the Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. During the year ended December 31, 2010, the Fund held no investments in forward foreign exchange contracts.
Repurchase Agreements. The Fund may enter into repurchase agreements with primary government securities dealers recognized by the Federal Reserve Board, with member banks of the Federal Reserve System, or with other brokers or dealers that meet credit guidelines established by the Adviser and reviewed by the Board. Under the terms of a typical repurchase agreement, the Fund takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the Fund to resell, the obligation at an
14
The GAMCO Global Convertible Securities Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
agreed-upon price and time, thereby determining the yield during the Fund’s holding period. It is the policy of the Fund to receive and maintain securities as collateral whose market value is not less than their repurchase price. The Fund will make payment for such securities only upon physical delivery or upon evidence of book entry transfer of the collateral to the account of the custodian. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to maintain the adequacy of the collateral. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. At December 31, 2010, the Fund held no investments in repurchase agreements.
Securities Sold Short. The Fund may enter into short sale transactions. Short selling involves selling securities that may or may not be owned and, at times, borrowing the same securities for delivery to the purchaser, with an obligation to replace such borrowed securities at a later date. The proceeds received from short sales are recorded as liabilities and the Fund records an unrealized gain or loss to the extent of the difference between the proceeds received and the value of an open short position on the day of determination. The Fund records a realized gain or loss when the short position is closed out. By entering into a short sale, the Fund bears the market risk of an unfavorable change in the price of the security sold short. Dividends on short sales are recorded as an expense by the Fund on the ex-dividend date and interest expense is recorded on the accrual basis. The broker retains collateral for the value of the open positions, which is adjusted periodically as the value of the position fluctuates. At December 31, 2010, there were no short sales outstanding.
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Foreign currencies, investments, and other assets and liabilities are translated into U.S. dollars at the current exchange rates. Purchases and sales of investment securities, income, and expenses are translated at the exchange rate prevailing on the respective dates of such transactions. Unrealized gains and losses that result from changes in foreign exchange rates and/or changes in market prices of securities have been included in unrealized appreciation/depreciation on investments and foreign currency translations. Net realized foreign currency gains and losses resulting from changes in exchange rates include foreign currency gains and losses between trade date and settlement date on investment securities transactions, foreign currency transactions, and the difference between the amounts of interest and dividends recorded on the books of the Fund and the amounts actually received. The portion of foreign currency gains and losses related to fluctuation in exchange rates between the initial purchase trade date and subsequent sale trade date is included in realized gain/loss on investments.
Foreign Securities. The Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation of currencies, the inability to repatriate funds, less complete financial information about companies, and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. issuers.
Foreign Taxes. The Fund may be subject to foreign taxes on income, gains on investments, or currency repatriation, a portion of which may be recoverable.The Fund will accrue such taxes and recoveries as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
15
The GAMCO Global Convertible Securities Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
Securities Transactions and Investment Income. Securities transactions are accounted for on the trade date with realized gain or loss on investments determined by using the identified cost method. Interest income (including amortization of premium and accretion of discount) is recorded on the accrual basis. Premiums and discounts on debt securities are amortized using the effective yield to maturity method. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities that are recorded as soon after the ex-dividend date as the Fund becomes aware of such dividends.
Determination of Net Asset Value and Calculation of Expenses. Certain administrative expenses are common to, and allocated among, various affiliated funds. Such allocations are made on the basis of each fund’s average net assets or other criteria directly affecting the expenses as determined by the Adviser pursuant to procedures established by the Board.
In calculating the net asset value (“NAV”) per share of each class, investment income, realized and unrealized gains and losses, redemption fees, and expenses other than class specific expenses are allocated daily to each class of shares based upon the proportion of net assets of each class at the beginning of each day. Distribution expenses are borne solely by the class incurring the expense.
Custodian Fee Credits and Interest Expense. When cash balances are maintained in the custody account, the Fund receives credits which are used to offset custodian fees. The gross expenses paid under the custody arrangement are included in custodian fees in the Statement of Operations with the corresponding expense offset, if any, shown as “Custodian fee credits.” When cash balances are overdrawn, the Fund is charged an overdraft fee equal to 2.00% above the federal funds rate on outstanding balances. This amount, if any, would be included in “interest expense” in the Statement of Operations.
Distributions to Shareholders. Distributions to shareholders are recorded on the ex-dividend date. Distributions to shareholders are based on income and capital gains as determined in accordance with federal income tax regulations, which may differ from income and capital gains as determined under GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities and foreign currency transactions held by the Fund and timing differences. Distributions from net investment income for federal income tax purposes include net realized gains on foreign currency transactions. These book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent, adjustments are made to the appropriate capital accounts in the period when the differences arise. Permanent differences were primarily due to the tax treatment of currency gains and losses and conversion of premiums from securities sold. These reclassifications have no impact on the NAV of the Fund. For the year ended December 31, 2010, reclassifications were made to decrease accumulated distributions in excess of net investment income by $32,016 and increase accumulated net realized loss on investments, securities sold short, and foreign currency transactions by $31,425, with an offsetting adjustment to additional paid-in capital.
16
The GAMCO Global Convertible Securities Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
The tax character of distributions paid during the years ended December 31, 2010 and December 31, 2009 was as follows:
Year Ended | Year Ended | |||||||
December 31, 2010 | December 31, 2009 | |||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 222,696 | $ | 309,747 |
Provision for Income Taxes. The Fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). It is the policy of the Fund to comply with the requirements of the Code applicable to regulated investment companies and to distribute substantially all of its net investment company taxable income and net capital gains. Therefore, no provision for federal income taxes is required.
At December 31, 2010, the components of accumulated earnings/losses on a tax basis were as follows:
Accumulated capital loss carryforwards | $ | (2,043,559 | ) | |
Net unrealized appreciation on investments and foreign currency translations | 1,002,626 | |||
Other temporary differences* | (23 | ) | ||
Total | $ | 1,040,956 | ||
* | Other temporary differences are primarily due to basis adjustments on investments in hybrid securities. |
At December 31, 2010, the Fund had net capital loss carryforwards for federal income tax purposes of $2,043,559 which are available to reduce future required distributions of net capital gains to shareholders. $1,663,648 of the loss carryforward is available through 2016; and $379,911 is available through 2017.
During the year ended December 31, 2010, the Fund utilized capital loss carryforwards of $19,094.
At December 31, 2010, the temporary difference between book basis and tax basis net unrealized appreciation on investments was primarily due to deferral of losses from wash sales for tax purposes, adjustments on income from investments in hybrid securities, and taxable bond premiums added back for current and prior years.
The following summarizes the tax cost of investments and the related net unrealized appreciation at December 31, 2010:
Gross | Gross | |||||||||||||||
Unrealized | Unrealized | Net Unrealized | ||||||||||||||
Cost | Appreciation | Depreciation | Appreciation | |||||||||||||
Investments | $ | 7,859,174 | $ | 1,070,376 | $ | (67,767 | ) | $ | 1,002,609 |
The Fund is required to evaluate tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Income tax and related interest and penalties would be recognized by the Fund as tax expense in the Statement of Operations if the tax positions were deemed not to meet the more-likely-than-not threshold. For the year ended December 31, 2010, the Fund did not incur any income tax, interest, or penalties. As of December 31, 2010, the Adviser has reviewed all open tax years and concluded that there was no impact to the Fund’s net assets or results of operations. Tax years ended December 31, 2007 through December 31,
17
The GAMCO Global Convertible Securities Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
2010 remain subject to examination by the Internal Revenue Service and state taxing authorities. On an ongoing basis, the Adviser will monitor the Fund’s tax positions to determine if adjustments to this conclusion are necessary.
3. Investment Advisory Agreement and Other Transactions. The Fund has entered into an investment advisory agreement (the “Advisory Agreement”) with the Adviser which provides that the Fund will pay the Adviser a fee, computed daily and paid monthly, at the annual rate of 1.00% of the value of its average daily net assets. In accordance with the Advisory Agreement, the Adviser provides a continuous investment program for the Fund’s portfolio, oversees the administration of all aspects of the Fund’s business and affairs, and pays the compensation of all Officers and Directors of the Fund who are affiliated persons of the Adviser.
The Adviser has contractually agreed to waive its investment advisory fee and/or to reimburse expenses of the Fund to the extent necessary to maintain the annualized total operating expenses of the Fund (excluding brokerage, acquired fund fees and expenses, interest, taxes, and extraordinary expenses) until at least May 1, 2011, at no more than 2.00%, 2.00%, 2.75%, 2.75%, and 1.75% of the value of the Fund’s average daily net assets for Class AAA, Class A, Class B, Class C, and Class I, respectively. For the year ended December 31, 2010, the Adviser reimbursed the Fund in the amount of $76,106. In addition, the Fund has agreed, during the two year period following any waiver or reimbursement by the Adviser, to repay such amount to the extent, after giving effect to the repayment, such adjusted annualized total operating expenses of the Fund would not exceed 2.00%, 2.00%, 2.75%, 2.75%, and 1.75% of the value of the Fund’s average daily net assets for Class AAA, Class A, Class B, Class C, and Class I, respectively. The agreements are renewable annually. At December 31, 2010, the cumulative amount which the Fund may repay the Adviser is $76,106.
If total net assets of the Corporation are in excess of $100 million, the Corporation pays each Director who is not considered to be an affiliated person an annual retainer of $3,000 plus $500 for each Board meeting attended and each Director is reimbursed by the Corporation for any out of pocket expenses incurred in attending meetings. If total net assets of the Corporation are below $100 million, the Corporation pays each Independent Director an annual retainer of $1,500 plus $500 for each Board meeting attended and each Director is reimbursed by the Corporation for any out of pocket expenses incurred in attending meetings. All Board committee members receive $500 per meeting attended and the Chairman of the Audit Committee and the Lead Director each receive an annual fee of $1,000. A Director may receive a single meeting fee, allocated among the participating funds, for participation in certain meetings held on behalf of multiple funds. Directors who are directors or employees of the Adviser or an affiliated company receive no compensation or expense reimbursement from the Corporation.
4. Distribution Plan. The Fund’s Board has adopted a distribution plan (the “Plan”) for each class of shares, except for Class I Shares, pursuant to Rule 12b-1 under the 1940 Act. Gabelli & Company, Inc. (“Gabelli & Co.”), an affiliate of the Adviser, serves as Distributor of the Fund. Under the Class AAA, Class A, Class B, and Class C Share Plans, payments are authorized to Gabelli & Co. at annual rates of 0.25%, 0.25%, 1.00%, and 1.00%, respectively, of the average daily net assets of those classes, the annual limitations under each Plan. Such payments are accrued daily and paid monthly.
18
The GAMCO Global Convertible Securities Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
5. Portfolio Securities. Purchases and sales of securities for the year ended December 31, 2010, other than short-term securities and U.S. Government obligations, aggregated $5,575,966 and $6,034,269, respectively.
6. Transactions with Affiliates. During the year ended December 31, 2010, the Fund paid brokerage commissions on security trades of $2,594 to Gabelli & Co. Additionally, Gabelli & Co. informed the Fund that it retained $362 from investors representing commissions (sales charges and underwriting fees) on sales and redemptions of Fund shares.
The cost of calculating the Fund’s NAV per share is a Fund expense pursuant to the Advisory Agreement between the Fund and the Adviser. The Adviser did not seek a reimbursement during the year ended December 31, 2010.
7. Line of Credit. The Fund participates in an unsecured line of credit of up to $75,000,000 under which it may borrow up to 10% of its net assets from the custodian for temporary borrowing purposes. Borrowings under this arrangement bear interest at the higher of the sum of the overnight LIBOR plus 125 basis points or the sum of the federal funds rate plus 125 basis points at the time of borrowing. This amount, if any, would be included in “interest expense” in the Statement of Operations. At December 31, 2010, there were no borrowings outstanding under the line of credit.
The average daily amount of borrowings outstanding under the line of credit in during the year ended December 31, 2010 was $33,767 with a weighted average interest rate of 1.53%. The maximum amount borrowed at any time during the year ended December 31, 2010 was $937,000.
8. Capital Stock. The Fund offers five classes of shares — Class AAA Shares, Class A Shares, Class B Shares, Class C Shares, and Class I Shares. Class AAA Shares are offered without a front-end sales charge only to investors who acquire them directly from Gabelli & Co., through selected broker/dealers, or the transfer agent. Class I Shares are offered through Gabelli & Co. and selected broker/dealers to foundations, endowments, institutions, and employee benefit plans without a sales charge. Class A Shares are subject to a maximum front-end sales charge of 5.75%. Class B Shares are subject to a contingent deferred sales charge (“CDSC”) upon redemption within six years of purchase and automatically convert to Class A Shares approximately eight years after the original purchase. The applicable Class B CDSC is equal to a percentage declining from 5% of the lesser of the NAV per share at the date of the original purchase or at the date of redemption, based on the length of time held. Class C Shares are subject to a 1.00% CDSC for one year after purchase. Class B Shares are available only through exchange of Class B Shares of other funds distributed by Gabelli & Co.
The Fund imposes a redemption fee of 2.00% on all classes of shares that are redeemed or exchanged on or before the seventh day after the date of a purchase. The redemption fee is deducted from the proceeds otherwise payable to the redeeming shareholders and is retained by the Fund as an increase in paid-in capital. There were no redemption fees during the year ended December 31, 2010. The redemption fees retained by the Fund during the year ended December 31, 2009 amounted to $3,232. The redemption fee does not apply to redemptions of shares where (i) the shares were purchased through automatic reinvestment of distributions, (ii) the redemption was initiated by the Fund, (iii) the shares were purchased through programs that collect the redemption fee at the program level and remit them to the Fund, or (iv) the shares were purchased through programs that the Adviser determines to have appropriate anti-short-term trading policies in place or as to which the Adviser has received assurances that look-through redemption fee procedures or effective anti-short-term trading policies and procedures are in place.
19
The GAMCO Global Convertible Securities Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
Transactions in shares of capital stock were as follows:
Year Ended | Year Ended | |||||||||||||||
December 31, 2010 | December 31, 2009 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class AAA | ||||||||||||||||
Shares sold | 1,209,301 | $ | 4,645,361 | 2,392,236 | $ | 7,237,716 | ||||||||||
Shares issued upon reinvestment of distributions | 47,458 | 187,767 | 86,461 | 273,175 | ||||||||||||
Shares redeemed | (1,421,079 | ) | (5,505,823 | ) | (1,894,850 | ) | (5,901,882 | ) | ||||||||
Net increase/(decrease) | (164,320 | ) | $ | (672,695 | ) | 583,847 | $ | 1,609,009 | ||||||||
Class A | ||||||||||||||||
Shares sold | 215,094 | $ | 883,882 | 60,175 | $ | 199,839 | ||||||||||
Shares issued upon reinvestment of distributions | 1,890 | 7,577 | 1,356 | 4,456 | ||||||||||||
Shares redeemed | (76,753 | ) | (301,745 | ) | (6,909 | ) | (24,513 | ) | ||||||||
Net increase | 140,231 | $ | 589,714 | 54,622 | $ | 179,782 | ||||||||||
Class B | ||||||||||||||||
Shares issued upon reinvestment of distributions | 9 | $ | 33 | 30 | $ | 88 | ||||||||||
Shares redeemed | — | — | (1,163 | ) | (3,123 | ) | ||||||||||
Net increase/(decrease) | 9 | $ | 33 | (1,133 | ) | $ | (3,035 | ) | ||||||||
Class C | ||||||||||||||||
Shares sold | 27,328 | $ | 94,614 | 23,071 | $ | 64,512 | ||||||||||
Shares issued upon reinvestment of distributions | 759 | 2,743 | 499 | 1,483 | ||||||||||||
Shares redeemed | (32,721 | ) | (119,252 | ) | (10,579 | ) | (28,797 | ) | ||||||||
Net increase/(decrease) | (4,634 | ) | $ | (21,895 | ) | 12,991 | $ | 37,198 | ||||||||
Class I | ||||||||||||||||
Shares sold | 1,957 | $ | 7,844 | 8,794 | $ | 26,906 | ||||||||||
Shares issued upon reinvestment of distributions | 440 | 1,752 | 692 | 2,234 | ||||||||||||
Shares redeemed | (3,931 | ) | (15,587 | ) | (2,269 | ) | (7,469 | ) | ||||||||
Net increase/(decrease) | (1,534 | ) | $ | (5,991 | ) | 7,217 | $ | 21,671 | ||||||||
9. Indemnifications. The Fund enters into contracts that contain a variety of indemnifications.The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.
20
The GAMCO Global Convertible Securities Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
10. Other Matters. On April 24, 2008, the Adviser entered into a settlement with the SEC to resolve an inquiry regarding prior frequent trading activity in shares of the GAMCO Global Growth Fund (the “Global Growth Fund”) by one investor who was banned from the Global Growth Fund in August 2002. In the administrative settlement order, the SEC found that the Adviser had willfully violated Section 206(2) of the 1940 Act, Section 17(d) of the 1940 Act and Rule 17d-1 thereunder, and had willfully aided and abetted and caused violations of Section 12(d)(1)(B)(i) of the 1940 Act. Under the terms of the settlement, the Adviser, while neither admitting nor denying the SEC’s findings and allegations, paid $16 million (which included a $5 million civil monetary penalty), approximately $12.8 million of which is in the process of being paid to shareholders of the Global Growth Fund in accordance with a plan developed by an independent distribution consultant and approved by the independent directors of the Global Growth Fund and acceptable to the staff of the SEC, and agreed to cease and desist from future violations of the above referenced federal securities laws and rule. The SEC order also noted the cooperation that the Adviser had given the staff of the SEC during its inquiry. The settlement did not have a material adverse impact on the Adviser or its ability to fulfill its obligations under the Advisory Agreement. On the same day, the SEC filed a civil action against the Executive Vice President and Chief Operating Officer of the Adviser, alleging violations of certain federal securities laws arising from the same matter. The officer is also an officer of the Fund, the Global Growth Fund, and other funds in the Gabelli/GAMCO fund complex. The officer denied the allegations and is continuing in his positions with the Adviser and the funds. The court dismissed certain claims and found that the SEC was not entitled to pursue various remedies against the officer while leaving one remedy in the event the SEC were able to prove violations of law. The court subsequently dismissed without prejudice the remaining remedy against the officer, which would allow the SEC to appeal the court’s rulings. On October 29, 2010 the SEC filed its appeal with the U.S. Court of Appeals for the Second Circuit regarding the lower court’s orders.The Adviser currently expects that any resolution of the action against the officer will not have a material adverse impact on the Fund or the Adviser or its ability to fulfill its obligations under the Advisory Agreement.
11. Subsequent Events. Effective February 7, 2011, the Fund changed its name to The GAMCO Vertumnus Fund with a corresponding change in the name of each of its Classes of Shares. Coincident with the Board’s approval of these name changes, the Board also adopted a change to one of the Fund’s non-fundamental investment policies in order to give the portfolio manager enhanced investment management flexibility. Consequently, the Fund is no longer required to invest at least 40% of its total net assets in non-U.S. securities or related investments thereof, but the Fund will continue to invest in securities of issuers, or related investments thereof, located in at least three countries.
Management has evaluated the impact on the Fund of events occurring subsequent to December 31, 2010, through the date the financial statements were issued, and has determined that there were no additional subsequent events requiring recognition or disclosure in the financial statements.
21
The GAMCO Global Convertible Securities Fund
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
GAMCO Global Series Funds, Inc.
GAMCO Global Series Funds, Inc.
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of The GAMCO Global Convertible Securities Fund (the “Fund”), a series of GAMCO Global Series Funds, Inc., as of December 31, 2010, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2010, by correspondence with the Fund’s custodian. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The GAMCO Global Convertible Securities Fund, a series of GAMCO Global Series Funds, Inc., at December 31, 2010, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Philadelphia, Pennsylvania
February 28, 2011
February 28, 2011
22
The GAMCO Global Convertible Securities Fund
Board Consideration and Re-Approval of Investment Advisory Agreement (Unaudited)
During the six months ended December 31, 2010, the Board of Directors of the Corporation approved the continuation of the investment advisory agreement with the Adviser for the Fund on the basis of the recommendation by the directors (the “Independent Board Members”) who are not “interested persons” of the Fund. The following paragraphs summarize the material information and factors considered by the Independent Board Members as well as their conclusions relative to such factors.
Nature, Extent, and Quality of Services. The Independent Board Members considered information regarding the portfolio managers, the depth of the analyst pool available to the Adviser and the Fund’s portfolio managers, the scope of supervisory, administrative, shareholder, and other services supervised or provided by the Adviser and the absence of significant service problems reported to the Board. The Independent Board Members noted the experience, length of service, and reputation of the Fund’s portfolio managers.
Investment Performance. The Independent Board Members reviewed the short and medium-term performance of the Fund against a peer group of convertible securities funds, noting that the Fund’s performance for the one, three and five year periods was poor. The Independent Board Members also acknowledged the limitations of the peer group selected because there was only one other dedicated global convertible fund in the peer group.
Profitability. The Independent Board Members reviewed summary data regarding the lack of profitability of the Fund to the Adviser both with an administrative overhead charge and without such a charge. The Independent Board Members also noted that an affiliated broker of the Adviser received distribution fees and minor amounts of sales commissions.
Economies of Scale. The Independent Board Members discussed the major elements of the Adviser’s cost structure and the relationship of those elements to potential economies of scale and reviewed rudimentary data relating to the impact of 20% growth in the Fund on the Adviser’s profitability.
Sharing of Economies of Scale. The Independent Board Members noted that the investment management fee schedule for the Fund does not take into account any potential economies of scale that may develop.
Service and Cost Comparisons. The Independent Board Members compared the expense ratios of the investment management fee, other expenses, and total expenses of the Fund with similar expense ratios of the peer group of convertible securities funds and noted that the Adviser’s management fee includes substantially all administrative services of the Fund as well as investment advisory services. The Independent Board Members noted that the Fund’s expense ratios, after voluntary expense reimbursements, were significantly higher than and the Fund’s size was significantly lower than average within this group. The Independent Board Members also noted that all but one of the peer group were domestic convertible funds, thereby limiting the usefulness of peer group comparisons. The Independent Board Members compared the management fee for other funds managed by the Adviser and noted that neither the Adviser nor any of its affiliates manage other global convertible securities accounts.
Conclusions. The Independent Board Members concluded that the Fund enjoyed highly experienced portfolio management services and good ancillary services, but had a relatively poor performance record. The Independent Board Members also concluded that the Fund’s expense ratios were reasonable, particularly in light of the lack of profitability to the Adviser of managing the Fund, and that economies of scale were not a significant factor in their thinking at this time. The Independent Board Members did not view the potential profitability of ancillary services as material to their decision. On the basis of the foregoing and without assigning particular weight to any single conclusion, the Independent Board Members determined to recommend continuation of the investment management agreement to the full Board.
23
The GAMCO Global Convertible Securities Fund
Additional Fund Information (Unaudited)
The business and affairs of the Corporation are managed under the direction of the Corporation’s Board of Directors. Information pertaining to the Directors and officers of the Corporation is set forth below. The Fund’s Statement of Additional Information includes additional information about the Fund’s Directors and is available without charge, upon request, by calling 800-GABELLI (800-422-3554) or by writing to The GAMCO Global Convertible Securities Fund at One Corporate Center, Rye, NY 10580-1422.
Term of | Number of | |||||||||
Name, Position(s) | Office and | Funds in Fund | ||||||||
Address1 | Length of | Complex Overseen | Principal Occupation(s) | Other Directorships | ||||||
and Age | Time Served2 | by Director | During Past Five Years | Held by Director4 | ||||||
INTERESTED DIRECTORS3: | ||||||||||
Mario J. Gabelli Director and Chief Investment Officer Age: 68 | Since 1993 | 26 | Chairman and Chief Executive Officer of GAMCO Investors, Inc. and Chief Investment Officer — Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management Inc.; Director/Trustee or Chief Investment Officer of other registered investment companies in the Gabelli/GAMCO Funds complex; Chief Executive Officer of GGCP, Inc. | Director of Morgan Group Holdings, Inc. (holding company); Chairman of the Board and Chief Executive Officer of LICT Corp. (multimedia and communication services company); Director of CIBL, Inc. (broadcasting and wireless communications) | ||||||
John D. Gabelli Director Age: 66 | Since 1993 | 10 | Senior Vice President of Gabelli & Company, Inc. | — | ||||||
INDEPENDENT DIRECTORS5: | ||||||||||
E. Val Cerutti Director Age: 71 | Since 2001 | 7 | Chief Executive Officer of Cerutti Consultants, Inc. | Director of The LGL Group, Inc. (diversified manufacturing) (1990-2009) | ||||||
Anthony J. Colavita Director Age: 75 | Since 1993 | 34 | President of the law firm of Anthony J. Colavita, P.C. | — | ||||||
Arthur V. Ferrara Director Age: 80 | Since 2001 | 8 | Former Chairman of the Board and Chief Executive Officer of The Guardian Life Insurance Company of America (1992-1995) | — | ||||||
Werner J. Roeder, MD Director Age: 70 | Since 1993 | 22 | Medical Director of Lawrence Hospital and practicing private physician | — | ||||||
Anthonie C. van Ekris Director Age: 76 | Since 1993 | 20 | Chairman of BALMAC International, Inc. (commodities and futures trading) | Director of Aurado Energy Inc. (oil and gas operations) through 2005 | ||||||
Salvatore J. Zizza Director Age: 65 | Since 2004 | 28 | Chairman and Chief Executive Officer of Zizza & Co., Ltd. (private holding company) and Chief Executive Officer of General Employment Enterprises, Inc. | Director of Harbor BioSciences, Inc. (biotechnology) and Trans-Lux Corporation (business services); Chairman of each of BAM (manufacturing); Metropolitan Paper Recycling (recycling); Bergen Cove Realty Inc. (real estate); Bion Environmental Technologies (technology) (2005-2008); Director of Earl Scheib Inc. (automotive painting) through April 2009 |
24
The GAMCO Global Convertible Securities Fund
Additional Fund Information (Continued) (Unaudited)
Term of | ||||
Name, Position(s) | Office and | |||
Address1 | Length of | Principal Occupation(s) | ||
and Age | Time Served2 | During Past Five Years | ||
OFFICERS: | ||||
Bruce N. Alpert President and Secretary Age: 59 | Since 2003 | Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC since 1988 and an officer of all of the registered investment companies in the Gabelli/GAMCO Funds complex. Director of Teton Advisors, Inc. since 1998; Chairman of Teton Advisors, Inc. 2008 to 2010; President of Teton Advisors, Inc. 1998 through 2008; Senior Vice President of GAMCO Investors, Inc. since 2008 | ||
Agnes Mullady Treasurer Age: 52 | Since 2006 | Senior Vice President of GAMCO Investors, Inc. since 2009; Vice President of Gabelli Funds, LLC since 2007; Officer of all of the registered investment companies in the Gabelli/GAMCO Funds complex | ||
Peter D. Goldstein Chief Compliance Officer Age: 57 | Since 2004 | Director of Regulatory Affairs at GAMCO Investors, Inc. since 2004; Chief Compliance Officer of all of the registered investment companies in the Gabelli/GAMCO Funds complex |
1 | Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise noted. | |
2 | Each Director will hold office for an indefinite term until the earliest of (i) the next meeting of shareholders, if any, called for the purpose of considering the election or re-election of such Director and until the election and qualification of his or her successor, if any, elected at such meeting, or (ii) the date a Director resigns or retires, or a Director is removed by the Board of Directors or shareholders, in accordance with the Corporation’s By-Laws and Articles of Incorporation. Each officer will hold office for an indefinite term until the date he or she resigns or retires or until his or her successor is elected and qualified. | |
3 | “Interested person” of the Corporation as defined in the 1940 Act. Messrs. Gabelli are each considered an “interested person” because of their affiliation with Gabelli Funds, LLC which acts as the Corporation’s investment adviser. Mario J. Gabelli and John D. Gabelli are brothers. | |
4 | This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934, as amended, i.e., public companies, or other investment companies registered under the 1940 Act. | |
5 | Directors who are not interested persons are considered “Independent” Directors. |
25
2010 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the year ended December 31, 2010, the Fund paid to shareholders ordinary income distributions (comprised of net investment income) totaling $0.097, $0.098, $0.072, $0.071, and $0.107 per share for Class AAA, Class A, Class B, Class C, and Class I, respectively. For the year ended December 31, 2010, 5.28% of the ordinary income distribution qualifies for the dividends received deduction available to corporations. The Fund designates 9.42% of the ordinary income distribution as qualified dividend income pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Fund designates 85.39% of the ordinary income distribution as qualified interest income pursuant to the Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010.
U.S. Government Income
The percentage of the ordinary income distribution paid by the Fund during 2010 which was derived from U.S. Treasury securities was 0.21%. Such income is exempt from state and local tax in all states. However, many states, including New York and California, allow a tax exemption for a portion of the income earned only if a mutual fund has invested at least 50% of its assets at the end of each quarter of the Fund’s fiscal year in U.S. Government securities.The GAMCO Global Convertible Securities Fund did not meet this strict requirement in 2010. The percentage of U.S. Government securities held as of December 31, 2010 was 10.30%. Due to the diversity in state and local tax law, it is recommended that you consult your personal tax adviser as to the applicability of the information provided to your specific situation.
All designations are based on financial information available as of the date of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code and the regulations thereunder.
26
Gabelli/GAMCO Funds and Your Personal Privacy
Who are we?
The Gabelli/GAMCO Funds are investment companies registered with the Securities and Exchange Commission under the Investment Company Act of 1940. We are managed by Gabelli Funds, LLC, which is affiliated with GAMCO Investors, Inc. GAMCO Investors, Inc. is a publicly held company that has subsidiaries that provide investment advisory or brokerage services for a variety of clients.
What kind of non-public information do we collect about you if you become a shareholder?
If you apply to open an account directly with us, you will be giving us some non-public information about yourself. The non-public information we collect about you is:
• | Information you give us on your application form. This could include your name, address, telephone number, social security number, bank account number, and other information. | |
• | Information about your transactions with us, any transactions with our affiliates, and transactions with the entities we hire to provide services to you. This would include information about the shares that you buy or redeem. If we hire someone else to provide services—like a transfer agent—we will also have information about the transactions that you conduct through them. |
What information do we disclose and to whom do we disclose it?
We do not disclose any non-public personal information about our customers or former customers to anyone other than our affiliates, our service providers who need to know such information, and as otherwise permitted by law. If you want to find out what the law permits, you can read the privacy rules adopted by the Securities and Exchange Commission. They are in volume 17 of the Code of Federal Regulations, Part 248. The Commission often posts information about its regulations on its website, www.sec.gov.
What do we do to protect your personal information?
We restrict access to non-public personal information about you to the people who need to know that information in order to provide services to you or the Fund and to ensure that we are complying with the laws governing the securities business. We maintain physical, electronic, and procedural safeguards to keep your personal information confidential.
GAMCO Global Series Funds, Inc.
The GAMCO Global Convertible Securities Fund
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
fax: 914-921-5118
website: www.gabelli.com
e-mail: info@gabelli.com
Net Asset Value per share available daily by calling
800-GABELLI after 7:00 P.M.
The GAMCO Global Convertible Securities Fund
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
fax: 914-921-5118
website: www.gabelli.com
e-mail: info@gabelli.com
Net Asset Value per share available daily by calling
800-GABELLI after 7:00 P.M.
Board of Directors | ||
Mario J. Gabelli, CFA | John D. Gabelli | |
Chairman and Chief | Senior Vice President | |
Executive Officer | Gabelli & Company, Inc. | |
GAMCO Investors, Inc. | ||
E. Val Cerutti | Werner J. Roeder, MD | |
Chief Executive Officer | Medical Director | |
Cerutti Consultants, Inc. | Lawrence Hospital | |
Anthony J. Colavita | Anthonie C. van Ekris | |
President | Chairman | |
Anthony J. Colavita, P.C. | BALMAC International, Inc. | |
Arthur V. Ferrara | Salvatore J. Zizza | |
Former Chairman and | Chairman | |
Chief Executive Officer | Zizza & Co., Ltd. | |
Guardian Life Insurance | ||
Company of America | ||
Officers | ||
Bruce N. Alpert President and Secretary | Peter D. Goldstein Chief Compliance Officer | |
Agnes Mullady | ||
Treasurer |
Distributor
Gabelli & Company, Inc.
Gabelli & Company, Inc.
Custodian, Transfer Agent, and Dividend Agent
State Street Bank and Trust Company
State Street Bank and Trust Company
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom LLP
Skadden, Arps, Slate, Meagher & Flom LLP
This report is submitted for the general information of the shareholders of The GAMCO Global Convertible Securities Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus.
GAMCO
The GAMCO Global Convertible Securities Fund
ANNUAL REPORT
DECEMBER 31, 2010
DECEMBER 31, 2010
The GAMCO Global Growth Fund
Annual Report
December 31, 2010
December 31, 2010
Caesar Bryan
Howard F. Ward, CFA
To Our Shareholders,
The Sarbanes-Oxley Act requires a fund’s principal executive and financial officers to certify the entire contents of the semi-annual and annual shareholder reports in a filing with the Securities and Exchange Commission (“SEC”) on Form N-CSR. This certification would cover the portfolio managers’ commentary and subjective opinions if they are attached to or a part of the financial statements. Many of these comments and opinions would be difficult or impossible to certify.
Because we do not want our portfolio managers to eliminate their opinions and/or restrict their commentary to historical facts, we have separated their commentary from the financial statements and investment portfolio and have sent it to you separately. Both the commentary and the financial statements, including the portfolio of investments, will be available on our website at www.gabelli.com/funds.
Enclosed are the audited financial statements including the investment portfolio as of December 31, 2010 with a description of factors that affected the performance during the past year.
Performance Discussion (Unaudited)
The GAMCO Global Growth Fund’s (the “Fund”) (Class AAA) net asset value (“NAV”) per share rose 14.3% in 2010, compared with the Morgan Stanley Capital International (“MSCI”) All Country (“AC”) World Free Index of 12.7%.
With gross domestic product of around $15 trillion, the U.S. economy continues to dwarf all other single countries. The second and third largest economies are China and Japan, each with GDP of about $5 trillion. The European Union, (“EU”), which presently consists of twenty-seven nations and nearly 500 million people, has a GDP approximately the same size as the U.S. Bear in mind that 9% growth in China contributes $450 billion to incremental global GDP growth, about the same contribution to growth as would be generated by either the U.S. or EU if they grew at a 3.0% rate.
MSCI data (all returns in dollars) shows 19 of 24 major national indices advanced in the fourth quarter. The U.S. (+10.8%) ranked in the top quartile during the quarter as the sixth best performer. Countries posting better performance than the U.S. were Canada (+12.2%), Japan (+12.1%), Norway (+11.8%), Austria (+11.7%), and New Zealand (+11.4%). Countries posting worse performance than the U.S. were Greece (-10.2%), Spain (-8.7%), Belgium (-3.6%), Italy (-2.4%), Portugal (-0.7%), France (+1.7%), the Netherlands (+1.9%), Israel (+4.6%), Hong Kong (+4.8), Finland (+5.9%), the United Kingdom (+6.0%), Ireland (+6.4%),Singapore (+6.8%), Denmark (+7.1%), Sweden (+7.4%), Switzerland (+7.5%), Germany (+9.5%), and Australia (+9.8%). In emerging markets, 15 of 21 countries recorded positive performance in the fourth quarter. Of the four largest emerging markets, Russia (+16.5%) posted the best quarterly performance, followed by Brazil (+2.6%), India (+2.0%), and China (+0.7%).
Selected holdings that contributed positively to performance in 2010 were Apple Inc. (4.6% of net assets as of December 31, 2010), the Fund’s largest holding, Jardine Matheson Holdings Ltd. (2.5%), and Eaton Corp. (2.2%), a diversified power management company. Some of our weaker performing stocks during the year were Petroleo Brasileiro (1.6%), Southwestern Energy Co. (1.3%), and Monsanto Co. (1.2%), a provider of agricultural products for farmers.
We appreciate your confidence and trust. |
Sincerely yours, | ||||
Bruce N. Alpert | ||||
February 24, 2011 | President | |||
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE
GAMCO GLOBAL GROWTH FUND CLASS AAA SHARES, THE LIPPER GLOBAL
LARGE CAP GROWTH FUND AVERAGE, AND THE MSCI AC WORLD FREE INDEX (Unaudited)
GAMCO GLOBAL GROWTH FUND CLASS AAA SHARES, THE LIPPER GLOBAL
LARGE CAP GROWTH FUND AVERAGE, AND THE MSCI AC WORLD FREE INDEX (Unaudited)
Past performance is not predictive of future results. The performance tables and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
2
Comparative Results
Average Annual Returns through December 31, 2010 (a) (Unaudited)
Since | ||||||||||||||||||||||||
Inception | ||||||||||||||||||||||||
Quarter | 1 Year | 3 Year | 5 Year | 10 Year | (2/7/94) | |||||||||||||||||||
GAMCO Global Growth Fund Class AAA | 13.10 | % | 14.27 | % | (3.03 | )% | 3.84 | % | 1.94 | % | 8.65 | % | ||||||||||||
MSCI AC World Free Index | 8.73 | 12.67 | (4.29 | ) | 3.44 | 3.20 | N/A | |||||||||||||||||
Lipper Global Large Cap Growth Fund Average | 8.69 | 13.35 | (4.59 | ) | 3.19 | 0.78 | 2.16 | (e) | ||||||||||||||||
Class A | 13.05 | 14.27 | (3.04 | ) | 3.84 | 1.95 | 8.66 | |||||||||||||||||
With sales charge (b) | 6.55 | 7.70 | (4.93 | ) | 2.62 | 1.35 | 8.28 | |||||||||||||||||
Class B | 12.95 | 13.46 | (3.75 | ) | 3.06 | 1.19 | 8.16 | |||||||||||||||||
With contingent deferred sales charge (c) | 7.95 | 8.46 | (4.73 | ) | 2.71 | 1.19 | 8.16 | |||||||||||||||||
Class C | 12.84 | 13.40 | (3.77 | ) | 3.06 | 1.18 | 8.14 | |||||||||||||||||
With contingent deferred sales charge (d) | 11.84 | 12.40 | (3.77 | ) | 3.06 | 1.18 | 8.14 | |||||||||||||||||
Class I | 13.16 | 14.54 | (2.76 | ) | 4.02 | 2.03 | 8.71 |
In the current prospectus, the expense ratios for Class AAA, A, B, C, and I Shares are 1.97%, 1.97%, 2.72%, 2.72%, and 1.72%, respectively. See page 10 for the expense ratios for the year ended December 31, 2010. Class AAA and Class I Shares do not have a sales charge. The maximum sales charge for Class A, B, and C Shares is 5.75%, 5.00%, and 1.00%, respectively.
(a) | Returns represent past performance and do not guarantee future results. Total returns and average annual returns reflect changes in share price, reinvestment of distributions, and are net of expenses. Investment returns and the principal value of an investment will fluctuate. When shares are redeemed, they may be worth more or less than their original cost. Current performance may be lower or higher than the performance data presented. Performance returns for periods of less than one year are not annualized. Visit www.gabelli.com for performance information as of the most recent month end. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The prospectus contains information about this and other matters and should be read carefully before investing. Investing in foreign securities involves risks not ordinarily associated with investments in domestic issues, including currency fluctuation, economic, and political risks. The Class AAA Shares NAVs per share are used to calculate performance for the periods prior to the issuance of Class A Shares, Class B Shares, Class C Shares, and Class I Shares on March 2, 2000, May 5, 2000, March 12, 2000, and January 11, 2008, respectively. The actual performance of the Class B Shares and Class C Shares would have been lower for the periods starting prior to August 16, 2000 and November 23, 2001, respectively, due to the additional expenses associated with these classes of shares. The actual performance of Class I Shares would have been higher due to lower expenses related to this class of shares. The Morgan Stanley Capital International (“MSCI”) All Country (“AC”) World Free Index is an unmanaged indicator of stock market performance, while the Lipper Global Large Cap Growth Fund Average reflects the performance of mutual funds classified in this particular category. Dividends are considered reinvested. You cannot invest directly in an index. | |
(b) | Performance results include the effect of the maximum 5.75% sales charge at the beginning of the period. | |
(c) | Assuming payment of the maximum contingent deferred sales charge (CDSC). The maximum CDSC for Class B Shares is 5% and is reduced to 0% after six years. | |
(d) | Assuming payment of the maximum CDSC. A CDSC of 1% is imposed on redemptions made within one year of purchase. | |
(e) | Lipper Global Large Cap Growth Fund Average since inception performance is as of June 30, 1998. |
3
The GAMCO Global Growth Fund | ||
Disclosure of Fund Expenses (Unaudited) | ||
For the Six Month Period from July 1, 2010 through December 31, 2010 | Expense Table |
We believe it is important for you to understand the impact of fees and expenses regarding your investment. All mutual funds have operating expenses. As a shareholder of a fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of a fund. When a fund’s expenses are expressed as a percentage of its average net assets, this figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your Fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The Expense Table below illustrates your Fund’s costs in two ways:
Actual Fund Return: This section provides information about actual account values and actual expenses. You may use this section to help you to estimate the actual expenses that you paid over the period after any fee waivers and expense reimbursements. The “Ending Account Value” shown is derived from the Fund’s actual return during the past six months, and the “Expenses Paid During Period” shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your Fund under the heading “Expenses Paid During Period” to estimate the expenses you paid during this period.
Hypothetical 5% Return: This section provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio. It assumes a hypothetical annualized return of 5% before expenses during the period shown. In this case — because the hypothetical return used is not the Fund’s actual return — the results do not apply to your investment and you cannot use the hypothetical account value and expense to estimate the actual ending account balance or expenses you paid for the period. This example is useful in making comparisons of the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads), redemption fees, or exchange fees, if any, which are described in the Prospectus. If these costs were applied to your account, your costs would be higher. Therefore, the 5% hypothetical return is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. The “Annualized Expense Ratio” represents the actual expenses for the last six months and may be different from the expense ratio in the Financial Highlights which is for the year ended December 31, 2010.
Beginning | Ending | Annualized | Expenses | |||||||||||||
Account Value | Account Value | Expense | Paid During | |||||||||||||
07/01/10 | 12/31/10 | Ratio | Period* | |||||||||||||
The GAMCO Global Growth Fund | ||||||||||||||||
Actual Fund Return | ||||||||||||||||
Class AAA | $ | 1,000.00 | $ | 1,293.10 | 1.88 | % | $ | 10.87 | ||||||||
Class A | $ | 1,000.00 | $ | 1,293.10 | 1.88 | % | $ | 10.87 | ||||||||
Class B | $ | 1,000.00 | $ | 1,288.80 | 2.63 | % | $ | 15.17 | ||||||||
Class C | $ | 1,000.00 | $ | 1,288.10 | 2.63 | % | $ | 15.17 | ||||||||
Class I | $ | 1,000.00 | $ | 1,294.70 | 1.63 | % | $ | 9.43 | ||||||||
Hypothetical 5% Return | ||||||||||||||||
Class AAA | $ | 1,000.00 | $ | 1,015.73 | 1.88 | % | $ | 9.55 | ||||||||
Class A | $ | 1,000.00 | $ | 1,015.73 | 1.88 | % | $ | 9.55 | ||||||||
Class B | $ | 1,000.00 | $ | 1,011.95 | 2.63 | % | $ | 13.34 | ||||||||
Class C | $ | 1,000.00 | $ | 1,011.95 | 2.63 | % | $ | 13.34 | ||||||||
Class I | $ | 1,000.00 | $ | 1,016.99 | 1.63 | % | $ | 8.29 |
* | Expenses are equal to the Fund’s annualized expense ratio for the last six months multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (184 days), then divided by 365. |
4
Summary of Portfolio Holdings (Unaudited)
The following table presents portfolio holdings as a percent of total net assets as of December 31, 2010:
The GAMCO Global Growth Fund | ||||
Industrials | 19.0 | % | ||
Energy | 17.7 | % | ||
Materials | 15.7 | % | ||
Information Technology | 15.6 | % | ||
Consumer Staples | 10.9 | % | ||
Financials | 9.5 | % | ||
Consumer Discretionary | 7.4 | % | ||
Health Care | 4.1 | % | ||
U.S. Government Obligations | 0.4 | % | ||
Other Assets and Liabilities (Net) | (0.3 | )% | ||
100.0 | % | |||
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q, the last of which was filed for the quarter ended September 30, 2010. Shareholders may obtain this information at www.gabelli.com or by calling the Fund at 800-GABELLI (800-422-3554). The Fund’s Form N-Q is available on the SEC’s website at www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Proxy Voting
The Fund files Form N-PX with its complete proxy voting record for the twelve months ended June 30th, no later than August 31st of each year. A description of the Fund’s proxy voting policies, procedures, and how the Fund voted proxies relating to portfolio securities is available without charge, upon request, by (i) calling 800-GABELLI (800-422-3554); (ii) writing to The Gabelli Funds at One Corporate Center, Rye, NY 10580-1422; or (iii) visiting the SEC’s website at www.sec.gov.
5
The GAMCO Global Growth Fund
Schedule of Investments — December 31, 2010
Schedule of Investments — December 31, 2010
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS — 99.9% | ||||||||||||
INDUSTRIALS — 19.0% | ||||||||||||
15,000 | ABB Ltd., ADR | $ | 488,103 | $ | 336,750 | |||||||
6,500 | Cummins Inc. | 214,162 | 715,065 | |||||||||
15,000 | Eaton Corp. | 1,116,290 | 1,522,650 | |||||||||
15,000 | Emerson Electric Co. | 678,758 | 857,550 | |||||||||
3,700 | FANUC CORP. | 325,019 | 568,284 | |||||||||
6,100 | Flowserve Corp. | 470,045 | 727,242 | |||||||||
29,000 | General Electric Co. | 486,418 | 530,410 | |||||||||
10,000 | Honeywell International Inc. | 438,495 | 531,600 | |||||||||
14,000 | ITT Corp. | 661,834 | 729,540 | |||||||||
39,000 | Jardine Matheson Holdings Ltd. | 1,038,818 | 1,716,000 | |||||||||
9,100 | Joy Global Inc. | 335,088 | 789,425 | |||||||||
13,000 | Komatsu Ltd. | 409,021 | 393,411 | |||||||||
10,000 | PACCAR Inc. | 271,373 | 574,200 | |||||||||
5,100 | Precision Castparts Corp. | 606,804 | 709,971 | |||||||||
6,000 | Rockwell Collins Inc. | 308,390 | 349,560 | |||||||||
2,880,000 | Rolls-Royce Group plc., Cl. C† | 4,545 | 4,490 | |||||||||
2,800 | Schneider Electric SA | 418,033 | 419,066 | |||||||||
5,000 | Secom Co. Ltd. | 186,467 | 236,790 | |||||||||
7,300 | Siemens AG | 709,053 | 904,294 | |||||||||
1,000 | Siemens AG, ADR | 94,218 | 124,250 | |||||||||
7,000 | United Technologies Corp. | 368,682 | 551,040 | |||||||||
TOTAL INDUSTRIALS | 9,629,616 | 13,291,588 | ||||||||||
ENERGY — 17.7% | ||||||||||||
11,000 | Apache Corp. | 1,118,549 | 1,311,530 | |||||||||
34,000 | Chesapeake Energy Corp. | 784,945 | 880,940 | |||||||||
10,000 | ConocoPhillips | 595,071 | 681,000 | |||||||||
14,372 | Devon Energy Corp. | 1,157,468 | 1,128,346 | |||||||||
6,600 | EOG Resources Inc. | 599,663 | 603,306 | |||||||||
23,800 | Hess Corp. | 1,606,756 | 1,821,652 | |||||||||
11,000 | Murphy Oil Corp. | 762,950 | 820,050 | |||||||||
15,000 | Occidental Petroleum Corp. | 986,439 | 1,471,500 | |||||||||
32,000 | Petroleo Brasileiro SA, ADR | 1,330,858 | 1,093,440 | |||||||||
10,000 | Saipem SpA | 240,421 | 492,296 | |||||||||
25,000 | Southwestern Energy Co.† | 1,081,233 | 935,750 | |||||||||
23,700 | Ultra Petroleum Corp.† | 1,205,526 | 1,132,149 | |||||||||
TOTAL ENERGY | 11,469,879 | 12,371,959 | ||||||||||
MATERIALS — 15.7% | ||||||||||||
20,100 | Agnico-Eagle Mines Ltd. | 1,158,567 | 1,541,670 | |||||||||
6,950 | Anglo American plc | 272,680 | 361,424 | |||||||||
27,000 | Barrick Gold Corp. | 1,239,629 | 1,435,860 | |||||||||
6,000 | BHP Billiton plc | 95,357 | 238,634 | |||||||||
10,900 | Freeport-McMoRan Copper & Gold Inc. | 690,635 | 1,308,981 | |||||||||
10,000 | Goldcorp Inc. | 388,387 | 459,800 | |||||||||
14,666 | Lonmin plc† | 530,588 | 449,538 | |||||||||
12,500 | Monsanto Co. | 868,100 | 870,500 | |||||||||
13,300 | Newmont Mining Corp. | 679,744 | 817,019 | |||||||||
6,300 | Rio Tinto plc | 195,062 | 440,676 | |||||||||
4,800 | Rio Tinto plc, ADR | 339,640 | 343,968 | |||||||||
15,000 | The Mosaic Co. | 746,855 | 1,145,400 | |||||||||
40,000 | Tokai Carbon Co. Ltd. | 164,086 | 248,799 | |||||||||
10,200 | Vale SA, ADR | 174,758 | 352,614 | |||||||||
38,598 | Xstrata plc | 373,530 | 905,976 | |||||||||
TOTAL MATERIALS | 7,917,618 | 10,920,859 | ||||||||||
INFORMATION TECHNOLOGY — 15.6% | ||||||||||||
8,000 | Adobe Systems Inc.† | 297,832 | 246,240 | |||||||||
10,000 | Apple Inc.† | 1,684,250 | 3,225,600 | |||||||||
5,500 | Canon Inc. | 302,383 | 285,195 | |||||||||
23,000 | EMC Corp.† | 441,340 | 526,700 | |||||||||
4,300 | Google Inc., Cl. A† | 2,047,469 | 2,554,071 | |||||||||
12,000 | Intel Corp. | 251,740 | 252,360 | |||||||||
5,300 | International Business Machines Corp. | 650,697 | 777,828 | |||||||||
3,400 | Keyence Corp. | 638,916 | 984,949 | |||||||||
1,300 | MasterCard Inc., Cl. A | 203,703 | 291,343 | |||||||||
34,500 | Microsoft Corp. | 975,084 | 963,240 | |||||||||
10,000 | QUALCOMM Inc. | 445,463 | 494,900 | |||||||||
3,700 | Visa Inc., Cl. A | 241,929 | 260,406 | |||||||||
TOTAL INFORMATION TECHNOLOGY | 8,180,806 | 10,862,832 | ||||||||||
CONSUMER STAPLES — 10.9% | ||||||||||||
9,000 | Colgate-Palmolive Co. | 751,155 | 723,330 | |||||||||
5,300 | Costco Wholesale Corp. | 295,184 | 382,713 | |||||||||
10,371 | Danone | 602,640 | 651,644 | |||||||||
70,000 | Davide Campari - Milano SpA | 154,127 | 455,548 | |||||||||
27,500 | Diageo plc | 377,696 | 508,068 | |||||||||
14,400 | Nestlé SA | 569,650 | 843,208 | |||||||||
12,100 | PepsiCo Inc. | 745,638 | 790,493 | |||||||||
5,456 | Pernod-Ricard SA | 348,481 | 512,988 | |||||||||
46,000 | Tesco plc | 395,588 | 304,802 | |||||||||
20,500 | The Coca-Cola Co. | 1,145,131 | 1,348,285 | |||||||||
12,500 | The Procter & Gamble Co. | 772,437 | 804,125 | |||||||||
11,100 | Woolworths Ltd. | 182,007 | 306,192 | |||||||||
TOTAL CONSUMER STAPLES | 6,339,734 | 7,631,396 | ||||||||||
FINANCIALS — 9.5% | ||||||||||||
4,000 | BlackRock Inc. | 839,342 | 762,320 | |||||||||
64,000 | Cheung Kong (Holdings) Ltd. | 853,530 | 987,238 | |||||||||
1,533 | China Life Insurance Co. Ltd., ADR | 35,142 | 93,773 | |||||||||
10,000 | Julius Baer Group Ltd. | 325,823 | 468,449 | |||||||||
6,000 | Northern Trust Corp. | 319,587 | 332,460 | |||||||||
17,300 | Schroders plc | 253,505 | 500,335 |
See accompanying notes to financial statements.
6
The GAMCO Global Growth Fund
Schedule of Investments (Continued) — December 31, 2010
Schedule of Investments (Continued) — December 31, 2010
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS (Continued) | ||||||||||||
FINANCIALS (Continued) | ||||||||||||
40,000 | Standard Chartered plc | $ | 533,572 | $ | 1,076,083 | |||||||
6,000 | State Street Corp. | 288,308 | 278,040 | |||||||||
25,000 | Sun Hung Kai Properties Ltd. | 370,825 | 415,230 | |||||||||
70,000 | Swire Pacific Ltd., Cl. A | 751,227 | 1,150,937 | |||||||||
32,000 | The Charles Schwab Corp. | 489,437 | 547,520 | |||||||||
TOTAL FINANCIALS | 5,060,298 | 6,612,385 | ||||||||||
CONSUMER DISCRETIONARY — 7.4% | ||||||||||||
1,100 | Amazon.com Inc.† | 78,221 | 198,000 | |||||||||
25,000 | British Sky Broadcasting Group plc | 358,450 | 286,872 | |||||||||
3,400 | Christian Dior SA | 227,015 | 485,695 | |||||||||
5,500 | Coach Inc. | 219,928 | 304,205 | |||||||||
8,714 | Compagnie Financiere Richemont SA, Cl. A | 146,092 | 512,588 | |||||||||
9,300 | Hennes & Mauritz AB, Cl. B | 204,492 | 309,739 | |||||||||
23,500 | Johnson Controls Inc. | 756,627 | 897,700 | |||||||||
9,000 | Next plc | 314,889 | 277,128 | |||||||||
3,200 | NIKE Inc., Cl. B | 174,435 | 273,344 | |||||||||
13,000 | Nikon Corp. | 312,574 | 263,715 | |||||||||
3,000 | Polo Ralph Lauren Corp. | 169,224 | 332,760 | |||||||||
7,000 | The Swatch Group AG | 392,957 | 564,492 | |||||||||
7,000 | Tiffany & Co. | 256,914 | 435,890 | |||||||||
TOTAL CONSUMER DISCRETIONARY | 3,611,818 | 5,142,128 | ||||||||||
HEALTH CARE — 4.1% | ||||||||||||
4,200 | Becton, Dickinson and Co. | 308,903 | 354,984 | |||||||||
6,600 | Hisamitsu Pharmaceutical Co. Inc. | 159,368 | 278,015 | |||||||||
4,600 | Novo Nordisk A/S, Cl. B | 312,679 | 518,712 | |||||||||
2,600 | Roche Holding AG, Genusschein | 255,977 | 380,962 | |||||||||
8,700 | St. Jude Medical Inc.† | 359,759 | 371,925 | |||||||||
6,300 | Stryker Corp. | 365,724 | 338,310 | |||||||||
4,400 | Takeda Pharmaceutical Co. Ltd. | 214,043 | 216,504 | |||||||||
6,000 | Varian Medical Systems Inc.† | 304,745 | 415,680 | |||||||||
TOTAL HEALTH CARE | 2,281,198 | 2,875,092 | ||||||||||
TOTAL COMMON STOCKS | 54,490,967 | 69,708,239 | ||||||||||
Principal | Market | |||||||||||
Amount | Cost | Value | ||||||||||
U.S. GOVERNMENT OBLIGATIONS — 0.4% | ||||||||||||
$ | 295,000 | U.S. Treasury Bills, 0.120%††, 02/10/11 to 03/24/11 | $ | 294,937 | $ | 294,943 | ||||||
TOTAL INVESTMENTS — 100.3% | $ | 54,785,904 | 70,003,182 | |||||||||
Other Assets and Liabilities (Net) — (0.3)% | (191,637 | ) | ||||||||||
NET ASSETS — 100.0% | $ | 69,811,545 | ||||||||||
† | Non-income producing security. | |
†† | Represents annualized yield at date of purchase. |
ADR | American Depositary Receipt |
% of | ||||||||
Market | Market | |||||||
Geographic Diversification | Value | Value | ||||||
North America | 66.8 | % | $ | 46,733,421 | ||||
Europe | 19.5 | 13,678,675 | ||||||
Asia/Pacific | 6.7 | 4,669,370 | ||||||
Japan | 5.0 | 3,475,662 | ||||||
Latin America | 2.0 | 1,446,054 | ||||||
100.0 | % | $ | 70,003,182 | |||||
See accompanying notes to financial statements.
7
The GAMCO Global Growth Fund
Statement of Assets and Liabilities
December 31, 2010
December 31, 2010
Assets: | ||||
Investments, at value (cost $54,785,904) | $ | 70,003,182 | ||
Receivable for Fund shares issued | 1,129 | |||
Dividends receivable | 86,127 | |||
Prepaid expenses | 34,236 | |||
Total Assets | 70,124,674 | |||
Liabilities: | ||||
Payable to custodian | 81,681 | |||
Payable for Fund shares redeemed | 27,854 | |||
Payable for investment advisory fees | 58,459 | |||
Payable for distribution fees | 14,753 | |||
Payable for accounting fees | 7,500 | |||
Payable for audit fees | 46,358 | |||
Payable for shareholder communications expenses | 24,811 | |||
Payable for shareholder services fees | 16,733 | |||
Payable for legal fees | 15,929 | |||
Other accrued expenses | 19,051 | |||
Total Liabilities | 313,129 | |||
Net Assets (applicable to 2,868,637 shares outstanding) | $ | 69,811,545 | ||
Net Assets Consist of: | ||||
Paid-in capital | $ | 59,165,731 | ||
Accumulated net investment loss | (93,623 | ) | ||
Accumulated net realized loss on investments and foreign currency transactions | (4,481,586 | ) | ||
Net unrealized appreciation on investments | 15,217,278 | |||
Net unrealized appreciation on foreign currency translations | 3,745 | |||
Net Assets | $ | 69,811,545 | ||
Shares of Capital Stock each at $0.001 par value: | ||||
Class AAA: | ||||
Net Asset Value, offering, and redemption price per share ($67,782,152 ÷ 2,784,212 shares outstanding; 75,000,000 shares authorized) | $ | 24.35 | ||
Class A: | ||||
Net Asset Value and redemption price per share ($1,193,087 ÷ 48,993 shares outstanding; 50,000,000 shares authorized) | $ | 24.35 | ||
Maximum offering price per share (NAV ÷ 0.9425, based on maximum sales charge of 5.75% of the offering price) | $ | 25.84 | ||
Class B: | ||||
Net Asset Value and offering price per share ($3,300 ÷ 144.4 shares outstanding; 25,000,000 shares authorized) | $ | 22.85 | (a) | |
Class C: | ||||
Net Asset Value and offering price per share ($373,467 ÷ 16,410 shares outstanding; 25,000,000 shares authorized) | $ | 22.76 | (a) | |
Class I: | ||||
Net Asset Value, offering, and redemption price per share ($459,539 ÷ 18,878 shares outstanding; 25,000,000 shares authorized) | $ | 24.34 | ||
(a) | Redemption price varies based on the length of time held. |
Statement of Operations
For the Year Ended December 31, 2010
For the Year Ended December 31, 2010
Investment Income: | ||||
Dividends (net of foreign withholding taxes of $22,782) | $ | 944,427 | ||
Interest | 356 | |||
Total Investment Income | 944,783 | |||
Expenses: | ||||
Investment advisory fees | 651,563 | |||
Distribution fees — Class AAA | 158,261 | |||
Distribution fees — Class A | 2,639 | |||
Distribution fees — Class B | 1,062 | |||
Distribution fees — Class C | 2,661 | |||
Shareholder services fees | 96,176 | |||
Custodian fees | 59,005 | |||
Shareholder communications expenses | 57,296 | |||
Legal and audit fees | 46,218 | |||
Accounting fees | 45,000 | |||
Registration expenses | 41,331 | |||
Directors’ fees | 9,924 | |||
Interest expense | 510 | |||
Miscellaneous expenses | 47,509 | |||
Total Expenses | 1,219,155 | |||
Net Investment Loss | (274,372 | ) | ||
Net Realized and Unrealized Gain/(Loss) on Investments and Foreign Currency: | ||||
Net realized gain on investments | 679,029 | |||
Net realized loss on foreign currency transactions | (262 | ) | ||
Net realized gain on investments and foreign currency transactions | 678,767 | |||
Net change in unrealized appreciation/depreciation: | ||||
on investments | 8,301,053 | |||
on foreign currency translations | (695 | ) | ||
Net change in unrealized appreciation/depreciation on investments and foreign currency translations | 8,300,358 | |||
Net Realized and Unrealized Gain/(Loss) on Investments and Foreign Currency | 8,979,125 | |||
Net Increase in Net Assets Resulting from Operations | $ | 8,704,753 | ||
See accompanying notes to financial statements.
8
The GAMCO Global Growth Fund
Statement of Changes in Net Assets
Year Ended | Year Ended | |||||||
December 31, 2010 | December 31, 2009 | |||||||
Operations: | ||||||||
Net investment loss | $ | (274,372 | ) | $ | (176,494 | ) | ||
Net realized gain/(loss) on investments and foreign currency transactions | 678,767 | (1,975,363 | ) | |||||
Net change in unrealized appreciation on investments and foreign currency translations | 8,300,358 | 23,834,576 | ||||||
Net Increase in Net Assets Resulting from Operations | 8,704,753 | 21,682,719 | ||||||
Distributions to Shareholders: | ||||||||
Net investment income Class I | — | (47 | ) | |||||
Return of capital Class I | — | (279 | ) | |||||
Total Distributions to Shareholders | — | (326 | ) | |||||
Capital Share Transactions: | ||||||||
Class AAA | (7,971,576 | ) | (5,089,994 | ) | ||||
Class A | (61,885 | ) | (208,076 | ) | ||||
Class B | (143,585 | ) | (43 | ) | ||||
Class C | 22,263 | 73,614 | ||||||
Class I | (42,208 | ) | (604,075 | ) | ||||
Net Decrease in Net Assets from Capital Share Transactions | (8,196,991 | ) | (5,828,574 | ) | ||||
Redemption Fees | 5 | 163 | ||||||
Net Increase in Net Assets | 507,767 | 15,853,982 | ||||||
Net Assets: | ||||||||
Beginning of period | 69,303,778 | 53,449,796 | ||||||
End of period (including undistributed net investment income of $0 and $0, respectively) | $ | 69,811,545 | $ | 69,303,778 | ||||
See accompanying notes to financial statements.
9
The GAMCO Global Growth Fund
Financial Highlights
Financial Highlights
Selected data for a share of capital stock outstanding throughout each period:
Income (Loss) from | Ratios to Average Net Assets/ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Operations | Distributions | Supplemental Data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Asset | Net | Realized and | Total | Net Asset | Net Assets | Net | ||||||||||||||||||||||||||||||||||||||||||||||||||
Period | Value, | Investment | Unrealized | from | Net | Return | Value, | End of | Investment | Portfolio | ||||||||||||||||||||||||||||||||||||||||||||||
Ended | Beginning | Income | Gain (Loss) on | Investment | Investment | of | Total | Redemption | End of | Total | Period | Income | Operating | Turnover | ||||||||||||||||||||||||||||||||||||||||||
December 31 | of Period | (Loss)(a) | Investments | Operations | Income | Capital | Distributions | Fees(a)(b) | Period | Return† | (in 000’s) | (Loss) | Expenses(c) | Rate | ||||||||||||||||||||||||||||||||||||||||||
Class AAA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 21.31 | $ | (0.09 | ) | $ | 3.13 | $ | 3.04 | — | — | — | $ | 0.00 | $ | 24.35 | 14.3 | % | $ | 67,782 | (0.42 | )% | 1.87 | % | 34 | % | ||||||||||||||||||||||||||||||
2009 | 14.91 | (0.05 | ) | 6.45 | 6.40 | — | — | — | 0.00 | 21.31 | 42.9 | 67,292 | (0.29 | ) | 1.97 | 45 | ||||||||||||||||||||||||||||||||||||||||
2008 | 26.89 | (0.02 | ) | (11.86 | ) | (11.88 | ) | $ | (0.10 | ) | — | $ | (0.10 | ) | 0.00 | 14.91 | (44.2 | ) | 51,441 | (0.07 | ) | 1.80 | 67 | |||||||||||||||||||||||||||||||||
2007 | 22.93 | 0.09 | 3.96 | 4.05 | (0.09 | ) | — | (0.09 | ) | 0.00 | 26.89 | 17.7 | 104,421 | 0.37 | 1.74 | 42 | ||||||||||||||||||||||||||||||||||||||||
2006 | 20.43 | 0.06 | 2.50 | 2.56 | (0.06 | ) | — | (0.06 | ) | 0.00 | 22.93 | 12.5 | 100,883 | 0.26 | 1.78 | 46 | ||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 21.31 | $ | (0.09 | ) | $ | 3.13 | $ | 3.04 | — | — | — | $ | 0.00 | $ | 24.35 | 14.3 | % | $ | 1,193 | (0.42 | )% | 1.87 | % | 34 | % | ||||||||||||||||||||||||||||||
2009 | 14.91 | (0.06 | ) | 6.46 | 6.40 | — | — | — | 0.00 | 21.31 | 42.9 | 1,115 | (0.32 | ) | 1.97 | 45 | ||||||||||||||||||||||||||||||||||||||||
2008 | 26.88 | (0.02 | ) | (11.86 | ) | (11.88 | ) | $ | (0.09 | ) | — | $ | (0.09 | ) | 0.00 | 14.91 | (44.2 | ) | 1,006 | (0.09 | ) | 1.80 | 67 | |||||||||||||||||||||||||||||||||
2007 | 22.93 | 0.11 | 3.95 | 4.06 | (0.11 | ) | — | (0.11 | ) | 0.00 | 26.88 | 17.7 | 2,224 | 0.43 | 1.74 | 42 | ||||||||||||||||||||||||||||||||||||||||
2006 | 20.43 | 0.06 | 2.50 | 2.56 | (0.06 | ) | — | (0.06 | ) | 0.00 | 22.93 | 12.5 | 1,294 | 0.28 | 1.78 | 46 | ||||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 20.14 | $ | (0.23 | ) | $ | 2.94 | $ | 2.71 | — | — | — | $ | 0.00 | $ | 22.85 | 13.5 | % | $ | 3 | (1.15 | )% | 2.62 | % | 34 | % | ||||||||||||||||||||||||||||||
2009 | 14.19 | (0.18 | ) | 6.13 | 5.95 | — | — | — | 0.00 | 20.14 | 41.9 | 139 | (1.05 | ) | 2.72 | 45 | ||||||||||||||||||||||||||||||||||||||||
2008 | 25.63 | (0.18 | ) | (11.26 | ) | (11.44 | ) | — | — | — | 0.00 | 14.19 | (44.6 | ) | 98 | (0.83 | ) | 2.55 | 67 | |||||||||||||||||||||||||||||||||||||
2007 | 21.94 | (0.09 | ) | 3.78 | 3.69 | — | — | — | 0.00 | 25.63 | 16.8 | 270 | (0.36 | ) | 2.49 | 42 | ||||||||||||||||||||||||||||||||||||||||
2006 | 19.65 | (0.10 | ) | 2.39 | 2.29 | — | — | — | 0.00 | 21.94 | 11.7 | 225 | (0.49 | ) | 2.53 | 46 | ||||||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 20.07 | $ | (0.23 | ) | $ | 2.92 | $ | 2.69 | — | — | — | $ | 0.00 | $ | 22.76 | 13.4 | % | $ | 374 | (1.17 | )% | 2.62 | % | 34 | % | ||||||||||||||||||||||||||||||
2009 | 14.15 | (0.19 | ) | 6.11 | 5.92 | — | — | — | 0.00 | 20.07 | 41.8 | 317 | (1.11 | ) | 2.72 | 45 | ||||||||||||||||||||||||||||||||||||||||
2008 | 25.54 | (0.21 | ) | (11.18 | ) | (11.39 | ) | — | — | — | 0.00 | 14.15 | (44.6 | ) | 168 | (0.98 | ) | 2.55 | 67 | |||||||||||||||||||||||||||||||||||||
2007 | 21.87 | (0.03 | ) | 3.70 | 3.67 | — | — | — | 0.00 | 25.54 | 16.8 | 428 | (0.11 | ) | 2.49 | 42 | ||||||||||||||||||||||||||||||||||||||||
2006 | 19.58 | (0.09 | ) | 2.38 | 2.29 | — | — | — | 0.00 | 21.87 | 11.7 | 275 | (0.42 | ) | 2.53 | 46 | ||||||||||||||||||||||||||||||||||||||||
Class I | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 21.25 | $ | (0.04 | ) | $ | 3.13 | $ | 3.09 | — | — | — | $ | 0.00 | $ | 24.34 | 14.5 | % | $ | 460 | (0.17 | )% | 1.62 | % | 34 | % | ||||||||||||||||||||||||||||||
2009 | 14.83 | 0.00 | (b) | 6.44 | 6.44 | $ | (0.00 | )(b) | $ | (0.02 | ) | $ | (0.02 | ) | 0.00 | 21.25 | 43.4 | 441 | 0.02 | 1.72 | 45 | |||||||||||||||||||||||||||||||||||
2008(d) | 25.35 | 0.06 | (10.36 | ) | (10.30 | ) | (0.22 | ) | — | (0.22 | ) | 0.00 | 14.83 | (40.6 | ) | 737 | 0.28 | (e) | 1.55 | (e) | 67 |
† | Total return represents aggregate total return of a hypothetical $1,000 investment at the beginning of the period and sold at the end of the period including reinvestment of distributions and does not reflect applicable sales charges. Total return for a period of less than one year is not annualized. | |
(a) | Per share amounts have been calculated using the average shares outstanding method. | |
(b) | Amount represents less than $0.005 per share. | |
(c) | The Fund incurred interest expense during the years ended December 31, 2007. If interest expense had not been incurred, the ratios of operating expenses to average net assets would have been 1.73%, (Class AAA and Class A) and 2.48%, (Class B and Class C), respectively. For the years ended December 31, 2010, 2009, 2008, and 2006, the effect of interest expense was minimal. | |
(d) | From the commencement of offering Class I Shares on January 11, 2008 through December 31, 2008. | |
(e) | Annualized. |
See accompanying notes to financial statements.
10
The GAMCO Global Growth Fund
Notes to Financial Statements
Notes to Financial Statements
1. Organization. The GAMCO Global Growth Fund (the “Fund”), a series of GAMCO Global Series Funds, Inc. (the “Corporation”), was organized on July 16, 1993 as a Maryland corporation. The Fund is a non-diversified open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and one of four separately managed portfolios (collectively, the “Portfolios”) of the Corporation. The Fund’s primary objective is capital appreciation. The Fund commenced investment operations on February 7, 1994.
2. Significant Accounting Policies. The Fund’s financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), which may require the use of management estimates and assumptions. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements.
Security Valuation. Portfolio securities listed or traded on a nationally recognized securities exchange or traded in the U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a market’s official closing price as of the close of business on the day the securities are being valued. If there were no sales that day, the security is valued at the average of the closing bid and asked prices or, if there were no asked prices quoted on that day, then the security is valued at the closing bid price on that day. If no bid or asked prices are quoted on such day, the security is valued at the most recently available price or, if the Board of Directors (the “Board”) so determines, by such other method as the Board 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 Gabelli Funds, LLC (the “Adviser”).
Portfolio securities primarily traded on a foreign market are generally valued at the preceding closing values of such securities on the relevant market, but may be fair valued pursuant to procedures established by the Board if market conditions change significantly after the close of the foreign market but prior to the close of business on the day the securities are being valued. Debt instruments with remaining maturities of sixty days or less that are not credit impaired are valued at amortized cost, unless the Board determines such amount does not reflect the securities’ fair value, in which case these securities will be fair valued as determined by the Board. Debt instruments having a maturity greater than sixty days for which market quotations are readily available are valued at the average of the latest bid and asked prices. If there were no asked prices quoted on such day, the security is valued using the closing bid price. U.S. government obligations with maturities greater than sixty days are normally valued using a model that incorporates market observable data such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued principally using dealer quotations. Futures contracts are valued at the closing settlement price of the exchange or board of trade on which the applicable contract is traded.
Securities and assets for which market quotations are not readily available are fair valued as determined by the Board. Fair valuation methodologies and procedures may include, but are not limited to: analysis and review of available financial and non-financial information about the company; comparisons with the valuation and changes in valuation of similar securities, including a comparison of foreign securities with the equivalent U.S. dollar value ADR securities at the close of the U.S. exchange; and evaluation of any other information that could be indicative of the value of the security.
The Fund employs a fair value model to adjust prices to reflect events affecting the values of certain portfolio securities that occur between the close of trading on the principal market for such securities (foreign exchanges and over-the-counter markets) at the time at which net asset values of the Fund is determined. If the Fund’s valuation committee believes that a particular event would materially affect net asset value, further adjustment is considered.
11
The GAMCO Global Growth Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
The inputs and valuation techniques used to measure fair value of the Fund’s investments are summarized into three levels as described in the hierarchy below:
• | Level 1 — quoted prices in active markets for identical securities; | ||
• | Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.); and | ||
• | Level 3 — significant unobservable inputs (including the Fund’s determinations as to the fair value of investments). |
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input both individually and in aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of the Fund’s investments in securities by inputs used to value the Fund’s investments as of December 31, 2010 is as follows:
Valuation Inputs | ||||||||||||
Level 2 Other | ||||||||||||
Level 1 | Significant | Total Market Value | ||||||||||
Quoted Prices | Observable Inputs | at 12/31/10 | ||||||||||
INVESTMENTS IN SECURITIES: | ||||||||||||
ASSETS (Market Value): | ||||||||||||
Common Stocks: | ||||||||||||
Industrials | $ | 13,287,098 | $ | 4,490 | $ | 13,291,588 | ||||||
Energy | 12,371,959 | — | 12,371,959 | |||||||||
Materials | 10,920,859 | — | 10,920,859 | |||||||||
Information Technology | 10,862,832 | — | 10,862,832 | |||||||||
Consumer Staples | 7,631,396 | — | 7,631,396 | |||||||||
Financials | 6,612,385 | — | 6,612,385 | |||||||||
Consumer Discretionary | 5,142,128 | — | 5,142,128 | |||||||||
Health Care | 2,875,092 | — | 2,875,092 | |||||||||
Total Common Stocks | 69,703,749 | 4,490 | 69,708,239 | |||||||||
U.S. Government Obligations | — | 294,943 | 294,943 | |||||||||
TOTAL INVESTMENTS IN SECURITIES — ASSETS | $ | 69,703,749 | $ | 299,433 | $ | 70,003,182 | ||||||
At December 31, 2009, the market value of Level 2 securities was $21,081,127 or 30.2% of total investments. Foreign common stock was listed in Level 2 securities due to fair value procedures applied resulting from volatility in U.S. markets after the close of the foreign markets. The fair value procedures due to U.S. market volatility was not applied on December 31, 2010, resulting in a transfer of the foreign common stock to Level 1 securities. This transfer amounted to $17,247,625 or 24.6% of total investments.
There were no Level 3 investments held at December 31, 2010 or December 31, 2009.
In January 2010, the Financial Accounting Standards Board (“FASB”) issued amended guidance to improve disclosure about fair value measurements which requires additional disclosures about transfers between Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements in the reconciliation of fair value measurements using significant unobservable inputs (Level 3). FASB also clarified existing disclosure requirements relating to the levels of disaggregation of fair value measurement and inputs and valuation techniques used to measure fair value. The amended guidance is effective for financial statements for fiscal
12
The GAMCO Global Growth Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
years beginning after December 15, 2009 and interim periods within those fiscal years. Management has adopted the amended guidance and determined that there was no material impact to the Fund’s financial statements except for additional disclosures made in the notes. Disclosures about purchases, sales, issuances, and settlements in the rollforward of activity in Level 3 fair value measurements are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. Management is currently evaluating the impact of the additional disclosure requirements on the Fund’s financial statements.
Derivative Financial Instruments. The Fund may engage in various portfolio investment strategies by investing in a number of derivative financial instruments for the purpose of hedging against changes in the value of its portfolio securities and in the value of securities it intends to purchase or hedging against a specific transaction with respect to either the currency in which the transaction is denominated or another currency. Investing in certain derivative financial instruments, including participation in the options, futures, or swap markets, entails certain execution, liquidity, hedging, tax, and securities, interest, credit, or currency market risks. Losses may arise if the Adviser’s prediction of movements in the direction of the securities, foreign currency, and interest rate markets is inaccurate. Losses may also arise if the counterparty does not perform its duties under a contract, or that, in the event of default, the Fund may be delayed in or prevented from obtaining payments or other contractual remedies owed to it under derivative contracts. The creditworthiness of the counterparties is closely monitored in order to minimize these risks. Participation in derivative transactions involves investment risks, transaction costs, and potential losses to which the Fund would not be subject absent the use of these strategies. The consequences of these risks, transaction costs, and losses may have a negative impact on the Fund’s ability to pay distributions.
The Fund’s derivative contracts held at December 31, 2010, if any, are not accounted for as hedging instruments under GAAP.
Futures Contracts. The Fund may engage in futures contracts for the purpose of hedging against changes in the value of its portfolio securities and in the value of securities it intends to purchase. Upon entering into a futures contract, the Fund is required to deposit with the broker an amount of cash or cash equivalents equal to a certain percentage of the contract amount. This is known as the “initial margin.” Subsequent payments (“variation margin”) are made or received by the Fund each day, depending on the daily fluctuations in the value of the contract, and are included in unrealized appreciation/depreciation on investments and futures contracts. The Fund recognizes a realized gain or loss when the contract is closed.
There are several risks in connection with the use of futures contracts as a hedging instrument. The change in value of futures contracts primarily corresponds with the value of their underlying instruments, which may not correlate with the change in value of the hedged investments. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market. During the year ended December 31, 2010, the Fund held no investments in futures contracts.
Forward Foreign Exchange Contracts. The Fund may engage in forward foreign exchange contracts for the purpose of hedging a specific transaction with respect to either the currency in which the transaction is denominated or another currency as deemed appropriate by the Adviser. Forward foreign exchange contracts are valued at the forward rate and are marked-to-market daily. The change in market value is included in unrealized appreciation/depreciation on investments and foreign currency translations. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
13
The GAMCO Global Growth Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
The use of forward foreign exchange contracts does not eliminate fluctuations in the underlying prices of the Fund’s portfolio securities, but it does establish a rate of exchange that can be achieved in the future. Although forward foreign exchange contracts limit the risk of loss due to a decline in the value of the hedged currency, they also limit any potential gain that might result should the value of the currency increase. In addition, the Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. During the year ended December 31, 2010, the Fund held no investments in forward foreign exchange contracts.
Repurchase Agreements. The Fund may enter into repurchase agreements with primary government securities dealers recognized by the Federal Reserve Board, with member banks of the Federal Reserve System, or with other brokers or dealers that meet credit guidelines established by the Adviser and reviewed by the Board. Under the terms of a typical repurchase agreement, the Fund takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the Fund to resell, the obligation at an agreed-upon price and time, thereby determining the yield during the Fund’s holding period. It is the policy of the Fund to receive and maintain securities as collateral whose market value is not less than their repurchase price. The Fund will make payment for such securities only upon physical delivery or upon evidence of book entry transfer of the collateral to the account of the custodian. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to maintain the adequacy of the collateral. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. At December 31, 2010, the Fund held no investments in repurchase agreements.
Securities Sold Short. The Fund may enter into short sale transactions. Short selling involves selling securities that may or may not be owned and, at times, borrowing the same securities for delivery to the purchaser, with an obligation to replace such borrowed securities at a later date. The proceeds received from short sales are recorded as liabilities and the Fund records an unrealized gain or loss to the extent of the difference between the proceeds received and the value of an open short position on the day of determination. The Fund records a realized gain or loss when the short position is closed out. By entering into a short sale, the Fund bears the market risk of an unfavorable change in the price of the security sold short. Dividends on short sales are recorded as an expense by the Fund on the ex-dividend date and interest expense is recorded on the accrual basis. The broker retains collateral for the value of the open positions, which is adjusted periodically as the value of the position fluctuates. At December 31, 2010, there were no short sales outstanding.
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Foreign currencies, investments, and other assets and liabilities are translated into U.S. dollars at the current exchange rates. Purchases and sales of investment securities, income, and expenses are translated at the exchange rate prevailing on the respective dates of such transactions. Unrealized gains and losses that result from changes in foreign exchange rates and/or changes in market prices of securities have been included in unrealized appreciation/depreciation on investments and foreign currency translations. Net realized foreign currency gains and losses resulting from changes in exchange rates include foreign currency gains and losses between trade date and settlement date on investment securities transactions, foreign currency transactions, and the difference between the amounts of interest and dividends recorded on the books of the Fund and the amounts actually received. The portion of foreign currency gains and losses related to fluctuation in exchange rates between the initial purchase trade date and subsequent sale trade date is included in realized gain/loss on investments.
14
The GAMCO Global Growth Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
Foreign Securities. The Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation of currencies, the inability to repatriate funds, less complete financial information about companies, and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. issuers.
Foreign Taxes. The Fund may be subject to foreign taxes on income, gains on investments, or currency repatriation, a portion of which may be recoverable.The Fund will accrue such taxes and recoveries as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
Securities Transactions and Investment Income. Securities transactions are accounted for on the trade date with realized gain or loss on investments determined by using the identified cost method. Interest income (including amortization of premium and accretion of discount) is recorded on the accrual basis. Premiums and discounts on debt securities are amortized using the effective yield to maturity method. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities that are recorded as soon after the ex-dividend date as the Fund becomes aware of such dividends.
Determination of Net Asset Value and Calculation of Expenses. Certain administrative expenses are common to, and allocated among, various affiliated funds. Such allocations are made on the basis of each fund’s average net assets or other criteria directly affecting the expenses as determined by the Adviser pursuant to procedures established by the Board.
In calculating the net asset value (“NAV”) per share of each class, investment income, realized and unrealized gains and losses, redemption fees, and expenses other than class specific expenses are allocated daily to each class of shares based upon the proportion of net assets of each class at the beginning of each day. Distribution expenses are borne solely by the class incurring the expense.
Custodian Fee Credits and Interest Expense. When cash balances are maintained in the custody account, the Fund receives credits which are used to offset custodian fees. The gross expenses paid under the custody arrangement are included in custodian fees in the Statement of Operations with the corresponding expense offset, if any, shown as “Custodian fee credits.” When cash balances are overdrawn, the Fund is charged an overdraft fee equal to 2.00% above the federal funds rate on outstanding balances. This amount, if any, would be included in “interest expense” in the Statement of Operations. There were no custodian fee credits earned during the year ended December 31, 2010.
Distributions to Shareholders. Distributions to shareholders are recorded on the ex-dividend date. Distributions to shareholders are based on income and capital gains as determined in accordance with federal income tax regulations, which may differ from income and capital gains as determined under GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities and foreign currency transactions held by the Fund, timing differences, and differing characterizations of distributions made by the Fund. Distributions from net investment income for federal income tax purposes include net realized gains on foreign currency transactions. These book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent, adjustments are made to the appropriate capital accounts in the period when the differences arise. Permanent differences were primarily due to the tax treatment of currency gains and losses, a write-off of the current year net operating loss, expired capital loss carryforwards, and reclassifications of litigation income. These reclassifications have no impact on the NAV of
15
The GAMCO Global Growth Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
the Fund. For the year ended December 31, 2010, reclassifications were made to decrease accumulated net investment loss by $274,372 and decrease accumulated net realized loss on investments and foreign currency transactions by $39,230,987, with an offsetting adjustment to additional paid-in capital.
No distributions were made during the year ended December 31, 2010.
The tax character of distributions paid during the year ended December 31, 2009 was as follows:
Year Ended | ||||
December 31, 2009 | ||||
Distributions paid from: | ||||
Ordinary income | $ | 47 | ||
Return of capital | 279 | |||
Total distributions paid | $ | 326 | ||
Provision for Income Taxes. The Fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). It is the policy of the Fund to comply with the requirements of the Code applicable to regulated investment companies and to distribute substantially all of its net investment company taxable income and net capital gains. Therefore, no provision for federal income taxes is required.
At December 31, 2010, the components of accumulated earnings/losses on a tax basis were as follows:
Accumulated capital loss carryforwards | $ | (4,276,907 | ) | |
Net unrealized appreciation on investments and foreign currency translations | 14,922,721 | |||
Total | $ | 10,645,814 | ||
At December 31, 2010, the Fund had net capital loss carryforwards for federal income tax purposes of $4,276,907 which are available to reduce future required distributions of net capital gains to shareholders. $1,279,768 of the loss carryforward is available through 2011; $1,126,497 is available through 2016; and $1,870,642 is available through 2017.
During the year ended December 31, 2010, the Fund utilized capital loss carryforwards of $569,073
During the year ended December 31, 2010, $39,400,346 of the capital loss carryforwards expired.
At December 31, 2010, the temporary difference between book basis and tax basis net unrealized appreciation on investments was primarily due to deferral of losses from wash sales for tax purposes and mark-to-market adjustments on investments in passive foreign investment companies.
The following summarizes the tax cost of investments and the related net unrealized appreciation at December 31, 2010:
Gross | Gross | Net | ||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||
Cost | Appreciation | Depreciation | Appreciation | |||||||||||||
Investments | $ | 55,084,207 | $ | 16,422,882 | $ | (1,503,907 | ) | $ | 14,918,975 |
The Fund is required to evaluate tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Income tax and related interest and penalties would be recognized by the Fund as tax expense in the Statement of Operations if the tax positions were deemed not to meet the more-likely-than-not threshold. For the year ended December 31, 2010, the Fund did not incur any income tax, interest, or penalties. As of December 31, 2010, the Adviser has reviewed all open tax years and concluded that there was no impact to the Fund’s net
16
The GAMCO Global Growth Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
assets or results of operations. Tax years ended December 31, 2007 through December 31, 2010 remain subject to examination by the Internal Revenue Service and state taxing authorities. On an ongoing basis, the Adviser will monitor the Fund’s tax positions to determine if adjustments to this conclusion are necessary.
3. Investment Advisory Agreement and Other Transactions. The Fund has entered into an investment advisory agreement (the “Advisory Agreement”) with the Adviser which provides that the Fund will pay the Adviser a fee, computed daily and paid monthly, at the annual rate of 1.00% of the value of its average daily net assets. In accordance with the Advisory Agreement, the Adviser provides a continuous investment program for the Fund’s portfolio, oversees the administration of all aspects of the Fund’s business and affairs, and pays the compensation of all Officers and Directors of the Fund who are affiliated persons of the Adviser.
If total net assets of the Corporation are in excess of $100 million, the Corporation pays each Director who is not considered an affiliated person an annual retainer of $3,000 plus $500 for each Board meeting attended and each Director is reimbursed by the Corporation for any out of pocket expenses incurred in attending meetings. If total net assets of the Corporation are below $100 million, the Corporation pays each Independent Director an annual retainer of $1,500 plus $500 for each Board meeting attended and each Director is reimbursed by the Corporation for any out of pocket expenses incurred in attending meetings. All Board committee members receive $500 per meeting attended and the Chairman of the Audit Committee and the Lead Director each receive an annual fee of $1,000. A Director may receive a single meeting fee, allocated among the participating funds, for participation in certain meetings held on behalf of multiple funds. Directors who are directors or employees of the Adviser or an affiliated company receive no compensation or expense reimbursement from the Corporation.
4. Distribution Plan. The Fund’s Board has adopted a distribution plan (the “Plan”) for each class of shares, except for Class I Shares, pursuant to Rule 12b-1 under the 1940 Act. Gabelli & Company, Inc. (“Gabelli & Co.”), an affiliate of the Adviser, serves as Distributor of the Fund. Under the Class AAA, Class A, Class B, and Class C Share Plans, payments are authorized to Gabelli & Co. at annual rates of 0.25%, 0.25%, 1.00%, and 1.00%, respectively, of the average daily net assets of those classes, the annual limitations under each Plan. Such payments are accrued daily and paid monthly.
5. Portfolio Securities. Purchases and sales of securities for the year ended December 31, 2010, other than short-term securities and U.S. Government obligations, aggregated $22,080,406 and $29,909,564, respectively.
6. Transactions with Affiliates. During the year ended December 31, 2010, the Fund paid brokerage commissions on security trades of $1,953 to Gabelli & Co. Additionally, Gabelli & Co. informed the Fund that it retained $481 from investors representing commissions (sales charges and underwriting fees) on sales and redemptions of Fund shares.
The cost of calculating the Fund’s NAV per share is a Fund expense pursuant to the Advisory Agreement between the Fund and the Adviser. During the year ended December 31, 2010, the Fund paid or accrued $45,000 to the Adviser in connection with the cost of computing the Fund’s NAV.
7. Line of Credit. The Fund participates in an unsecured line of credit of up to $75,000,000 under which it may borrow up to 10% of its net assets from the custodian for temporary borrowing purposes. Borrowings under this arrangement bear interest at the higher of the sum of the overnight LIBOR plus 125 basis points or the sum of the federal funds rate plus 125 basis points at the time of borrowing. This amount, if any, would be included in “interest expense” in the Statement of Operations. At December 31, 2010, there were no borrowings outstanding under the line of credit.
17
The GAMCO Global Growth Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
The average daily amount of borrowings outstanding under the line of credit during year ended December 31, 2010 was $1,504 with a weighted average interest rate of 1.51%. The maximum amount borrowed at any time during the year ended December 31, 2010 was $420,000.
8. Capital Stock. The Fund offers five classes of shares — Class AAA Shares, Class A Shares, Class B Shares, Class C Shares, and Class I Shares. Class AAA Shares are offered without a sales charge only to investors who acquire them directly from Gabelli & Co., through selected broker/dealers, or the transfer agent. Class I Shares are offered through Gabelli & Co. and selected broker/dealers to foundations, endowments, institutions, and employee benefit plans without a sales charge. Class A Shares are subject to a maximum front-end sales charge of 5.75%. Class B Shares are subject to a contingent deferred sales charge (“CDSC”) upon redemption within six years of purchase and automatically convert to Class A Shares approximately eight years after the original purchase. The applicable Class B CDSC is equal to a percentage declining from 5% of the lesser of the NAV per share at the date of the original purchase or at the date of redemption, based on the length of time held. Class C Shares are subject to a 1.00% CDSC for one year after purchase. Class B Shares are available only through exchange of Class B Shares of other funds distributed by Gabelli & Co.
The Fund imposes a redemption fee of 2.00% on all classes of shares that are redeemed or exchanged on or before the seventh day after the date of a purchase. The redemption fee is deducted from the proceeds otherwise payable to the redeeming shareholders and is retained by the Fund as an increase in paid-in capital. The redemption fees retained by the Fund during years ended December 31, 2010 and December 31, 2009 amounted to $5 and $163, respectively. The redemption fee does not apply to redemptions of shares where (i) the shares were purchased through automatic reinvestment of distributions, (ii) the redemption was initiated by the Fund, (iii) the shares were purchased through programs that collect the redemption fee at the program level and remit them to the Fund, or (iv) the shares were purchased through programs that the Adviser determines to have appropriate anti-short-term trading policies in place or as to which the Adviser has received assurances that look-through redemption fee procedures or effective anti-short-term trading policies and procedures are in place.
Transactions in shares of capital stock were as follows:
Year Ended | Year Ended | |||||||||||||||
December 31, 2010 | December 31, 2009 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class AAA | ||||||||||||||||
Shares sold | 104,470 | $ | 2,220,670 | 134,210 | $ | 2,361,113 | ||||||||||
Shares redeemed | (478,582 | ) | (10,192,246 | ) | (426,709 | ) | (7,451,107 | ) | ||||||||
Net decrease | (374,112 | ) | $ | (7,971,576 | ) | (292,499 | ) | $ | (5,089,994 | ) | ||||||
Class A | ||||||||||||||||
Shares sold | 10,635 | $ | 241,369 | 7,710 | $ | 154,248 | ||||||||||
Shares redeemed | (13,959 | ) | (303,254 | ) | (22,874 | ) | (362,324 | ) | ||||||||
Net decrease | (3,324 | ) | $ | (61,885 | ) | (15,164 | ) | $ | (208,076 | ) | ||||||
Class B | ||||||||||||||||
Shares redeemed | (6,762 | ) | $ | (143,585 | ) | (3 | ) | $ | (43 | ) | ||||||
Net decrease | (6,762 | ) | $ | (143,585 | ) | (3 | ) | $ | (43 | ) | ||||||
Class C | ||||||||||||||||
Shares sold | 6,639 | $ | 140,999 | 8,951 | $ | 162,129 | ||||||||||
Shares redeemed | (6,035 | ) | (118,736 | ) | (5,013 | ) | (88,515 | ) | ||||||||
Net increase | 604 | $ | 22,263 | 3,938 | $ | 73,614 | ||||||||||
Class I | ||||||||||||||||
Shares sold | 3,019 | $ | 63,403 | 7,189 | $ | 128,160 | ||||||||||
Shares issued upon reinvestment of distributions | — | — | 14 | 297 | ||||||||||||
Shares redeemed | (4,883 | ) | (105,611 | ) | (36,124 | ) | (732,532 | ) | ||||||||
Net decrease | (1,864 | ) | $ | (42,208 | ) | (28,921 | ) | $ | (604,075 | ) | ||||||
18
The GAMCO Global Growth Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
9. Indemnifications. The Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.
10. Other Matters. On April 24, 2008, the Adviser entered into a settlement with the SEC to resolve an inquiry regarding prior frequent trading activity in shares of the GAMCO Global Growth Fund (the “Global Growth Fund”) by one investor who was banned from the Global Growth Fund in August 2002. In the administrative settlement order, the SEC found that the Adviser had willfully violated Section 206(2) of the 1940 Act, Section 17(d) of the 1940 Act and Rule 17d-1 thereunder, and had willfully aided and abetted and caused violations of Section 12(d)(1)(B)(i) of the 1940 Act. Under the terms of the settlement, the Adviser, while neither admitting nor denying the SEC’s findings and allegations, paid $16 million (which included a $5 million civil monetary penalty), approximately $12.8 million of which is in the process of being paid to shareholders of the Global Growth Fund in accordance with a plan developed by an independent distribution consultant and approved by the independent directors of the Global Growth Fund and acceptable to the staff of the SEC, and agreed to cease and desist from future violations of the above referenced federal securities laws and rule. The SEC order also noted the cooperation that the Adviser had given the staff of the SEC during its inquiry. The settlement did not have a material adverse impact on the Adviser or its ability to fulfill its obligations under the Advisory Agreement. On the same day, the SEC filed a civil action against the Executive Vice President and Chief Operating Officer of the Adviser, alleging violations of certain federal securities laws arising from the same matter. The officer is also an officer of the Fund, the Global Growth Fund, and other funds in the Gabelli/GAMCO fund complex. The officer denied the allegations and is continuing in his positions with the Adviser and the funds. The court dismissed certain claims and found that the SEC was not entitled to pursue various remedies against the officer while leaving one remedy in the event the SEC were able to prove violations of law. The court subsequently dismissed without prejudice the remaining remedy against the officer, which would allow the SEC to appeal the court’s rulings. On October 29, 2010 the SEC filed its appeal with the U.S. Court of Appeals for the Second Circuit regarding the lower court’s orders. The Adviser currently expects that any resolution of the action against the officer will not have a material adverse impact on the Fund or the Adviser or its ability to fulfill its obligations under the Advisory Agreement.
11. Subsequent Events. Management has evaluated the impact on the Fund of all subsequent events occurring through the date the financial statements were issued and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements.
19
The GAMCO Global Growth Fund
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
GAMCO Global Series Funds, Inc.
GAMCO Global Series Funds, Inc.
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of The GAMCO Global Growth Fund (the “Fund”), a series of GAMCO Global Series Funds, Inc., as of December 31, 2010, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2010, by correspondence with the Fund’s custodian and broker or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The GAMCO Global Growth Fund, a series of GAMCO Global Series Funds, Inc., at December 31, 2010, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Philadelphia, Pennsylvania
February 28, 2011
February 28, 2011
20
The GAMCO Global Growth Fund
Board Consideration and Re-Approval of Investment Advisory Agreement (Unaudited)
Board Consideration and Re-Approval of Investment Advisory Agreement (Unaudited)
During the six months ended December 31, 2010, the Board of Directors of the Corporation approved the continuation of the investment advisory agreement with the Adviser for the Fund on the basis of the recommendation by the directors (the “Independent Board Members”) who are not “interested persons” of the Fund. The following paragraphs summarize the material information and factors considered by the Independent Board Members as well as their conclusions relative to such factors.
Nature, Extent, and Quality of Services. The Independent Board Members considered information regarding the Fund’s portfolio managers, the depth of the analyst pool available to the Adviser and the portfolio managers, the scope of supervisory, administrative, shareholder, and other services supervised or provided by the Adviser and the absence of significant service problems reported to the Board. The Independent Board Members noted the experience, length of service, and reputation of the Fund’s portfolio managers.
Investment Performance. The Independent Board Members reviewed the short, medium, and long-term performance of the Fund against a peer group of global large cap growth funds, noting its top third performance for the one year period, top quintile performance for the three year period, and top half performance for the five year period.
Profitability. The Independent Board Members reviewed summary data regarding the profitability of the Fund to the Adviser both with a pro rata administrative overhead charge and with a standalone administrative charge. The Independent Board Members also noted an affiliated broker of the Adviser received distribution fees and minor amounts of sales commissions.
Economies of Scale. The Independent Board Members discussed the major elements of the Adviser’s cost structure and the relationship of those elements to potential economies of scale and reviewed rudimentary data relating to the impact of 20% growth in the Fund on the Adviser’s profitability.
Sharing of Economies of Scale. The Independent Board Members noted that the investment management fee schedule for the Fund does not take into account any potential economies of scale that may develop.
Service and Cost Comparisons. The Independent Board Members compared the expense ratios of the investment management fee, other expenses, and total expenses of the Fund with similar expense ratios of the peer group of global multi-cap core funds and noted that the Adviser’s management fee includes substantially all administrative services of the Fund as well as investment advisory services. The Independent Board Members noted that the Fund’s expense ratios were significantly higher than and the Fund’s size was lower than average within this group. The Independent Board Members compared the management fee with the fees for other funds managed by the Adviser and considered fees charged by an affiliated adviser for general equity institutional accounts and unregistered funds.
Conclusions. The Independent Board Members concluded that the Fund enjoyed highly experienced portfolio management services and good ancillary services and a reasonable performance record. The Independent Board Members also concluded that the Fund’s expense ratios and the profitability to the Adviser of managing the Fund were reasonable, and that economies of scale were not a significant factor in their thinking at this time. The Independent Board Members did not view the potential profitability of ancillary services as material to their decision. On the basis of the foregoing and without assigning particular weight to any single conclusion, the Independent Board Members determined to recommend continuation of the investment management agreement to the full Board.
21
The GAMCO Global Growth Fund
Additional Fund Information (Unaudited)
Additional Fund Information (Unaudited)
The business and affairs of the Corporation are managed under the direction of the Corporation’s Board of Directors. Information pertaining to the Directors and officers of the Corporation is set forth below. The Fund’s Statement of Additional Information includes additional information about the Fund’s Directors and is available without charge, upon request, by calling 800-GABELLI (800-422-3554) or by writing to The GAMCO Global Growth Fund at One Corporate Center, Rye, NY 10580-1422.
Term of | Number of | |||||||||
Name, Position(s) | Office and | Funds in Fund | ||||||||
Address1 | Length of | Complex Overseen | Principal Occupation(s) | Other Directorships | ||||||
and Age | Time Served2 | by Director | During Past Five Years | Held by Director4 | ||||||
INTERESTED DIRECTORS3: | ||||||||||
Mario J. Gabelli Director and Chief Investment Officer Age: 68 | Since 1993 | 26 | Chairman and Chief Executive Officer of GAMCO Investors, Inc. and Chief Investment Officer — Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management Inc.; Director/Trustee or Chief Investment Officer of other registered investment companies in the Gabelli/GAMCO Funds complex; Chief Executive Officer of GGCP, Inc. | Director of Morgan Group Holdings, Inc. (holding company); Chairman of the Board and Chief Executive Officer of LICT Corp. (multimedia and communication services company); Director of CIBL, Inc. (broadcasting and wireless communications) | ||||||
John D. Gabelli Director Age: 66 | Since 1993 | 10 | Senior Vice President of Gabelli & Company, Inc. | — | ||||||
INDEPENDENT DIRECTORS5: | ||||||||||
E. Val Cerutti Director Age: 71 | Since 2001 | 7 | Chief Executive Officer of Cerutti Consultants, Inc. | Director of The LGL Group, Inc. (diversified manufacturing) (1990-2009) | ||||||
Anthony J. Colavita Director Age: 75 | Since 1993 | 34 | President of the law firm of Anthony J. Colavita, P.C. | — | ||||||
Arthur V. Ferrara Director Age: 80 | Since 2001 | 8 | Former Chairman of the Board and Chief Executive Officer of The Guardian Life Insurance Company of America (1992-1995) | — | ||||||
Werner J. Roeder, MD Director Age: 70 | Since 1993 | 22 | Medical Director of Lawrence Hospital and practicing private physician | — | ||||||
Anthonie C. van Ekris Director Age: 76 | Since 1993 | 20 | Chairman of BALMAC International, Inc. (commodities and futures trading) | Director of Aurado Energy Inc. (oil and gas operations) through 2005 | ||||||
Salvatore J. Zizza Director Age: 65 | Since 2004 | 28 | Chairman and Chief Executive Officer of Zizza & Co., Ltd. (private holding company) and Chief Executive Officer of General Employment Enterprises, Inc. | Director of Harbor BioSciences, Inc. (biotechnology) and Trans-Lux Corporation (business services); Chairman of each of BAM (manufacturing); Metropolitan Paper Recycling (recycling); Bergen Cove Realty Inc. (real estate); Bion Environmental Technologies (technology) (2005-2008); Director of Earl Scheib Inc. (automotive painting) through April 2009 |
22
The GAMCO Global Growth Fund
Additional Fund Information (Continued) (Unaudited)
Additional Fund Information (Continued) (Unaudited)
Term of | ||||
Name, Position(s) | Office and | |||
Address1 | Length of | Principal Occupation(s) | ||
and Age | Time Served2 | During Past Five Years | ||
OFFICERS: | ||||
Bruce N. Alpert President and Secretary Age: 59 | Since 2003 | Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC since 1988 and an officer of all of the registered investment companies in the Gabelli/GAMCO Funds complex. Director of Teton Advisors, Inc. since 1998; Chairman of Teton Advisors, Inc. 2008 to 2010; President of Teton Advisors, Inc. 1998 through 2008; Senior Vice President of GAMCO Investors, Inc. since 2008 | ||
Agnes Mullady Treasurer Age: 52 | Since 2006 | Senior Vice President of GAMCO Investors, Inc. since 2009; Vice President of Gabelli Funds,LLC since 2007; Officer of all of the registered investment companies in the Gabelli/GAMCO Funds complex | ||
Peter D. Goldstein Chief Compliance Officer Age: 57 | Since 2004 | Director of Regulatory Affairs at GAMCO Investors, Inc. since 2004; Chief Compliance Officer of all of the registered investment companies in the Gabelli/GAMCO Funds complex |
1 | Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise noted. | |
2 | Each Director will hold office for an indefinite term until the earliest of (i) the next meeting of shareholders, if any, called for the purpose of considering the election or re-election of such Director and until the election and qualification of his or her successor, if any, elected at such meeting, or (ii) the date a Director resigns or retires, or a Director is removed by the Board of Directors or shareholders, in accordance with the Corporation’s By-Laws and Articles of Incorporation. Each officer will hold office for an indefinite term until the date he or she resigns or retires or until his or her successor is elected and qualified. | |
3 | “Interested person” of the Corporation as defined in the 1940 Act. Messrs. Gabelli are each considered an “interested person” because of their affiliation with Gabelli Funds, LLC which acts as the Corporation’s investment adviser. Mario J. Gabelli and John D. Gabelli are brothers. | |
4 | This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934, as amended, i.e., public companies, or other investment companies registered under the 1940 Act. | |
5 | Directors who are not interested persons are considered “Independent” Directors. |
23
GAMCO Global Series Funds, Inc.
The GAMCO Global Growth Fund
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
fax: 914-921-5118
website: www.gabelli.com
e-mail: info@gabelli.com
Net Asset Value per share available daily by calling
800-GABELLI after 7:00 P.M.
The GAMCO Global Growth Fund
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
fax: 914-921-5118
website: www.gabelli.com
e-mail: info@gabelli.com
Net Asset Value per share available daily by calling
800-GABELLI after 7:00 P.M.
Board of Directors | ||
Mario J. Gabelli, CFA | John D. Gabelli | |
Chairman and Chief | Senior Vice President | |
Executive Officer | Gabelli & Company, Inc. | |
GAMCO Investors, Inc. | ||
E. Val Cerutti | Werner J. Roeder, MD | |
Chief Executive Officer | Medical Director | |
Cerutti Consultants, Inc. | Lawrence Hospital | |
Anthony J. Colavita | Anthonie C. van Ekris | |
Attorney-at-Law | Chairman | |
Anthony J. Colavita, P.C. | BALMAC International, Inc. | |
Arthur V. Ferrara | Salvatore J. Zizza | |
Former Chairman and | Chairman | |
Chief Executive Officer | Zizza & Co., Ltd. | |
Guardian Life Insurance | ||
Company of America | ||
Officers | ||
Bruce N. Alpert | Peter D. Goldstein | |
President and Secretary | Chief Compliance Officer | |
Agnes Mullady | ||
Treasurer |
Distributor
Gabelli & Company, Inc.
Gabelli & Company, Inc.
Custodian, Transfer Agent, and Dividend Agent
State Street Bank and Trust Company
State Street Bank and Trust Company
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom LLP
Skadden, Arps, Slate, Meagher & Flom LLP
This report is submitted for the general information of the shareholders of The GAMCO Global Growth Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus.
GAMCO
The GAMCO Global Growth Fund
The GAMCO Global Growth Fund
ANNUAL REPORT
DECEMBER 31,2010
DECEMBER 31,2010
The GAMCO Global Opportunity Fund | ||
Annual Report — December 31, 2010 | ||
Caesar Bryan | ||
Morningstar® rated The GAMCO Global Opportunity Class AAA Shares 4 stars overall and 4 stars for the three and five year periods and 3 stars for the ten year period ended December 31, 2010 among 628, 628, 493, and 261 World Stock funds, respectively. |
To Our Shareholders,
The Sarbanes-Oxley Act requires a fund’s principal executive and financial officers to certify the entire contents of the semi-annual and annual shareholder reports in a filing with the Securities and Exchange Commission (“SEC”) on Form N-CSR. This certification would cover the portfolio manager’s commentary and subjective opinions if they are attached to or a part of the financial statements. Many of these comments and opinions would be difficult or impossible to certify.
Because we do not want our portfolio managers to eliminate their opinions and/or restrict their commentary to historical facts, we have separated their commentary from the financial statements and investment portfolio and have sent it to you separately. Both the commentary and the financial statements, including the portfolio of investments, will be available on our website at www.gabelli.com/funds.
Enclosed are the audited financial statements including the investment portfolio as of December 31, 2010 with a description of factors that affected the performance during the past year.
Performance Discussion (Unaudited)
The GAMCO Global Opportunity Fund’s (the “Fund”) (Class AAA) net asset value (“NAV”) per share rose 18.4% in 2010, compared with the Morgan Stanley Capital International (“MSCI”) All Country (“AC”) World Free Index of 12.7%.
With gross domestic product of around $15 trillion, the U.S. economy continues to dwarf all other single countries. The second and third largest economies are China and Japan, each with GDP of about $5 trillion. The European Union, (“EU”), which presently consists of twenty-seven nations and nearly 500 million people, has a GDP approximately the same size as the U.S. Bear in mind that 9% growth in China contributes $450 billion to incremental global GDP growth, about the same contribution to growth as would be generated by either the U.S. or EU if they grew at a 3.0% rate.
Morningstar Rating™ is based on risk-adjusted returns. The Overall Morningstar Rating is derived from a weighted average of the performance figures associated with a fund’s three, five, and ten year (if applicable) Morningstar Rating metrics. For funds with at least a three year history, a Morningstar Rating is based on a risk-adjusted return measure (including the effects of sales charges, loads, and redemption fees) placing more emphasis on downward variations and rewarding consistent performance. That accounts for variations in a fund’s monthly performance. The top 10% of funds in each category receive 5 stars, the next 22.5% 4 stars, the next 35% 3 stars, the next 22.5% 2 stars, and the bottom 10% 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.) Morningstar Rating is for the AAA Share class only; other classes may have different performance characteristics. Ratings reflect relative performance. Results for certain periods were negative. ©2010 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
MSCI data (all returns in dollars) shows 19 of 24 major national indices advanced in the fourth quarter. The U.S. (+10.8%) ranked in the top quartile during the quarter as the sixth best performer. Countries posting better performance than the U.S. were Canada (+12.2%), Japan (+12.1%), Norway (+11.8%), Austria (+11.7%), and New Zealand (+11.4%). Countries posting worse performance than the U.S. were Greece (-10.2%), Spain (-8.7%), Belgium (-3.6%), Italy (-2.4%), Portugal (-0.7%), France (+1.7%), the Netherlands (+1.9%), Israel (+4.6%), Hong Kong (+4.8), Finland (+5.9%), the United Kingdom (+6.0%), Ireland (+6.4%),Singapore (+6.8%), Denmark (+7.1%), Sweden (+7.4%), Switzerland (+7.5%), Germany (+9.5%), and Australia (+9.8%). In emerging markets, 15 of 21 countries recorded positive performance in the fourth quarter. Of the four largest emerging markets, Russia (+16.5%) posted the best quarterly performance, followed by Brazil (+2.6%), India (+2.0%), and China (+0.7%).
A selected holding that contributed positively to the Fund’s performance in 2010 was the Fund’s largest holding, Antofagasta plc (6.5% of net assets as of December 31, 2010). Antofagasta is a Chilean based copper mining company with interests in transport and water distribution. Other selected holdings that contributed positively to the Fund’s performance were Gold Fields Ltd. (5.1%) and Compagnie Financiere Richemont (4.3%). Some of the Fund’s weaker performing stocks during the year were Roche Holdings (2.1%), a Swiss based pharmaceuticals and diagnostics company, L-3 Communications Holdings Inc. (1.5%), and Petroleo Brasileiro (1.4%).
We appreciate your confidence and trust. | ||
Sincerely yours, | ||
Bruce N. Alpert | ||
President | ||
February 24, 2011 |
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
THE GAMCO GLOBAL OPPORTUNITY FUND CLASS AAA SHARES, THE LIPPER GLOBAL
MULTI-CAP CORE FUND AVERAGE, AND THE MSCI AC WORLD FREE INDEX (Unaudited)
THE GAMCO GLOBAL OPPORTUNITY FUND CLASS AAA SHARES, THE LIPPER GLOBAL
MULTI-CAP CORE FUND AVERAGE, AND THE MSCI AC WORLD FREE INDEX (Unaudited)
Past performance is not predictive of future results. The performance tables and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
2
Comparative Results
Average Annual Returns through December 31, 2010 (a) (Unaudited) | ||||||||||||||||||||||||
Since | ||||||||||||||||||||||||
Inception | ||||||||||||||||||||||||
Quarter | 1 Year | 3 Year | 5 Year | 10 Year | (5/11/98) | |||||||||||||||||||
GAMCO Global Opportunity Fund Class AAA | 14.31 | % | 18.39 | % | (1.23 | )% | 4.63 | % | 3.59 | % | 7.27 | % | ||||||||||||
MSCI AC World Free Index | 8.73 | 12.67 | (4.29 | ) | 3.44 | 3.20 | N/A | |||||||||||||||||
Lipper Global Large-Cap Core Fund Average | 9.50 | 11.00 | (3.91 | ) | 3.43 | 1.88 | 3.31 | |||||||||||||||||
Lipper Global Multi-Cap Core Fund Average | 9.51 | 13.70 | (1.94 | ) | 3.86 | 4.76 | 4.57 | |||||||||||||||||
Class A | 14.36 | 18.39 | (1.24 | ) | 4.64 | 3.61 | 7.28 | |||||||||||||||||
With sales charge (b) | 7.79 | 11.58 | (3.17 | ) | 3.40 | 3.00 | 6.78 | |||||||||||||||||
Class B | 14.10 | 17.49 | (1.98 | ) | 3.84 | 2.83 | 6.64 | |||||||||||||||||
With contingent deferred sales charge (c) | 9.10 | 12.49 | (2.97 | ) | 3.50 | 2.83 | 6.64 | |||||||||||||||||
Class C | 14.12 | 17.52 | (1.98 | ) | 3.81 | 3.22 | 6.97 | |||||||||||||||||
With contingent deferred sales charge (d) | 13.12 | 16.52 | (1.98 | ) | 3.81 | 3.22 | 6.97 | |||||||||||||||||
Class I | 14.41 | 18.70 | (0.96 | ) | 4.80 | 3.67 | 7.34 |
In the current prospectus, the gross expense ratios for Class AAA, A, B, C, and I Shares are 2.72%, 2.72%, 3.47%, 3.47%, and 2.47%, respectively. The net expense ratios in the current prospectus for these share classes are 2.05%, 2.05%, 2.80%, 2.80%, and 1.80%, respectively. See page 10 for expense ratios for the year ended December 31, 2010. Class AAA and Class I Shares do not have a sales charge. The maximum sales charge for Class A, B, and C Shares is 5.75%, 5.00%, and 1.00%, respectively.
(a) | Returns represent past performance and do not guarantee future results. Total returns and average annual returns reflect changes in share price and reinvestment of distributions and are net of expenses. Investment returns and the principal value of an investment will fluctuate. When shares are redeemed, they may be worth more or less than their original cost. Current performance may be lower or higher than the performance data presented. Performance returns for periods of less than one year are not annualized. Visit www.gabelli.com for performance information as of the most recent month end. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The prospectus contains information about this and other matters and should be read carefully before investing. The Class AAA Shares NAVs per share are used to calculate performance for the periods prior to the issuance of Class A Shares, Class B Shares, Class C Shares, and Class I Shares on March 12, 2000, August 16, 2000, November 23, 2001, and January 11, 2008, respectively. The actual performance of the Class B Shares and Class C Shares would have been lower for the periods starting prior to August 16, 2000 and November 23, 2001, respectively, due to the additional expenses associated with these classes of shares. The actual performance of the Class I Shares would have been higher due to lower expenses related to this class of shares. Returns would have been lower had the Adviser not reimbursed certain expenses of the Fund. The Morgan Stanley Capital International (“MSCI”) All Country (“AC”) World Free Index is an unmanaged indicator of stock market performance, while the Lipper Global Large-Cap Core Fund Average and the Lipper Global Multi-Cap Core Fund Average reflect the average performance of mutual funds classified in those particular categories. Dividends are considered reinvested. You cannot invest directly in an index. | |
(b) | Performance results include the effect of the maximum 5.75% sales charge at the beginning of the period. | |
(c) | Assuming payment of the maximum contingent deferred sales charge (CDSC). The maximum CDSC for Class B Shares is 5% and is reduced to 0% after six years. | |
(d) | Assuming payment of the maximum CDSC. A CDSC of 1% is imposed on redemptions made within one year of purchase. |
3
The GAMCO Global Opportunity Fund Disclosure of Fund Expenses (Unaudited) For the Six Month Period from July 1, 2010 through December 31, 2010 | Expense Table |
We believe it is important for you to understand the impact of fees and expenses regarding your investment. All mutual funds have operating expenses. As a shareholder of a fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of a fund. When a fund’s expenses are expressed as a percentage of its average net assets, this figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your Fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The Expense Table below illustrates your Fund’s costs in two ways:
Actual Fund Return: This section provides information about actual account values and actual expenses. You may use this section to help you to estimate the actual expenses that you paid over the period after any fee waivers and expense reimbursements. The “Ending Account Value” shown is derived from the Fund’s actual return during the past six months, and the “Expenses Paid During Period” shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund.You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your Fund under the heading “Expenses Paid During Period” to estimate the expenses you paid during this period.
Hypothetical 5% Return: This section provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio. It assumes a hypothetical annualized return of 5% before expenses during the period shown. In this case — because the hypothetical return used is not the Fund’s actual return — the results do not apply to your investment and you cannot use the hypothetical account value and expense to estimate the actual ending account balance or expenses you paid for the period.This example is useful in making comparisons of the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads), redemption fees, or exchange fees, if any, which are described in the Prospectus. If these costs were applied to your account, your costs would be higher. Therefore, the 5% hypothetical return is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. The “Annualized Expense Ratio” represents the actual expenses for the last six months and may be different from the expense ratio in the Financial Highlights which is for the year ended December 31, 2010.
Beginning | Ending | Annualized | Expenses | |||||||||||||
Account Value | Account Value | Expense | Paid During | |||||||||||||
07/01/10 | 12/31/10 | Ratio | Period* | |||||||||||||
The GAMCO Global Opportunity Fund | ||||||||||||||||
Actual Fund Return | ||||||||||||||||
Class AAA | $ | 1,000.00 | $ | 1,338.60 | 2.01 | % | $ | 11.85 | ||||||||
Class A | $ | 1,000.00 | $ | 1,339.10 | 2.01 | % | $ | 11.85 | ||||||||
Class B | $ | 1,000.00 | $ | 1,334.10 | 2.76 | % | $ | 16.24 | ||||||||
Class C | $ | 1,000.00 | $ | 1,334.30 | 2.76 | % | $ | 16.24 | ||||||||
Class I | $ | 1,000.00 | $ | 1,340.40 | 1.76 | % | $ | 10.38 | ||||||||
Hypothetical 5% Return | ||||||||||||||||
Class AAA | $ | 1,000.00 | $ | 1,015.07 | 2.01 | % | $ | 10.21 | ||||||||
Class A | $ | 1,000.00 | $ | 1,015.07 | 2.01 | % | $ | 10.21 | ||||||||
Class B | $ | 1,000.00 | $ | 1,011.29 | 2.76 | % | $ | 13.99 | ||||||||
Class C | $ | 1,000.00 | $ | 1,011.29 | 2.76 | % | $ | 13.99 | ||||||||
Class I | $ | 1,000.00 | $ | 1,016.33 | 1.76 | % | $ | 8.94 |
* | Expenses are equal to the Fund’s annualized expense ratio for the last six months multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (184 days), then divided by 365. |
4
Summary of Portfolio Holdings (Unaudited)
The following table presents portfolio holdings as a percent of total net assets as of December 31, 2010:
The GAMCO Global Opportunity Fund
Materials | 20.2 | % | ||
Consumer Staples | 17.0 | % | ||
Industrials | 13.8 | % | ||
Energy | 13.1 | % | ||
Consumer Discretionary | 8.8 | % | ||
Health Care | 8.4 | % | ||
Information Technology | 7.6 | % | ||
Financial Services | 7.4 | % | ||
Telecommunication Services | 2.4 | % | ||
Utilities | 1.4 | % | ||
Other Assets and Liabilities (Net) | (0.1 | )% | ||
100.0 | % |
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third
quarters of each fiscal year on Form N-Q, the last of which was filed for the quarter ended September 30, 2010. Shareholders may obtain this information at www.gabelli.com or by calling the Fund at 800-GABELLI (800-422-3554). The Fund’s Form N-Q is available on the SEC’s website at www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Proxy Voting
The Fund files Form N-PX with its complete proxy voting record for the twelve months ended June 30th, no later than August 31st of each year. A description of the Fund’s proxy voting policies, procedures, and how the Fund voted proxies relating to portfolio securities is available without charge, upon request, by (i) calling 800-GABELLI (800-422-3554); (ii) writing to The Gabelli Funds at One Corporate Center, Rye, NY 10580-1422; or (iii) visiting the SEC’s website at www.sec.gov.
5
The GAMCO Global Opportunity Fund
Schedule of Investments — December 31, 2010
Schedule of Investments — December 31, 2010
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS — 100.1% | ||||||||||||
MATERIALS — 20.2% | ||||||||||||
1,200 | Agnico-Eagle Mines Ltd. | $ | 74,720 | $ | 92,040 | |||||||
36,000 | Antofagasta plc | 43,075 | 904,771 | |||||||||
3,000 | BHP Billiton Ltd. | 126,333 | 138,845 | |||||||||
5,304 | CRH plc, Dublin | 60,636 | 109,852 | |||||||||
70 | CRH plc, London | 767 | 1,473 | |||||||||
39,000 | Gold Fields Ltd., ADR | 169,121 | 707,070 | |||||||||
3,000 | Impala Platinum Holdings Ltd. | 115,739 | 106,092 | |||||||||
2,500 | Monsanto Co. | 174,388 | 174,100 | |||||||||
2,000 | Newcrest Mining Ltd. | 60,284 | 82,724 | |||||||||
1,830 | Rio Tinto plc | 77,490 | 128,006 | |||||||||
400 | Syngenta AG | 114,992 | 117,005 | |||||||||
10,000 | Xstrata plc | 231,303 | 234,721 | |||||||||
TOTAL MATERIALS | 1,248,848 | 2,796,699 | ||||||||||
CONSUMER STAPLES — 17.0% | ||||||||||||
10,113 | British American Tobacco plc | 304,112 | 388,422 | |||||||||
7,000 | Constellation Brands Inc., Cl. A† | 108,808 | 155,050 | |||||||||
1,300 | Danone | 77,722 | 81,683 | |||||||||
7,000 | Diageo plc | 97,896 | 129,326 | |||||||||
2,280 | Dr Pepper Snapple Group Inc. | 54,395 | 80,165 | |||||||||
7,000 | General Mills Inc. | 173,603 | 249,130 | |||||||||
5,000 | Heineken Holding NV | 233,715 | 217,317 | |||||||||
3,000 | Mead Johnson Nutrition Co. | 129,424 | 186,750 | |||||||||
3,060 | Pernod-Ricard SA | 260,032 | 287,709 | |||||||||
2,500 | Philip Morris International Inc. | 87,133 | 146,325 | |||||||||
4,500 | Sara Lee Corp. | 58,320 | 78,795 | |||||||||
4,000 | The Procter & Gamble Co. | 221,128 | 257,320 | |||||||||
2,750 | Wesfarmers Ltd. | 79,950 | 90,006 | |||||||||
TOTAL CONSUMER STAPLES | 1,886,238 | 2,347,998 | ||||||||||
INDUSTRIALS — 13.8% | ||||||||||||
16,000 | China Merchants Holdings (International) Co. Ltd. | 53,313 | 63,195 | |||||||||
4,500 | CNH Global NV† | 129,912 | 214,830 | |||||||||
1,000 | FANUC CORP. | 101,606 | 153,590 | |||||||||
4,300 | Jardine Matheson Holdings Ltd. | 137,142 | 189,200 | |||||||||
3,600 | Komatsu Ltd. | 76,536 | 108,944 | |||||||||
3,000 | L-3 Communications Holdings Inc. | 127,721 | 211,470 | |||||||||
2,500 | Lockheed Martin Corp. | 61,439 | 174,775 | |||||||||
4,000 | Mitsui & Co. Ltd. | 86,284 | 66,067 | |||||||||
4,000 | Precision Castparts Corp. | 59,300 | 556,840 | |||||||||
1,000 | SMC Corp. | 124,202 | 171,327 | |||||||||
TOTAL INDUSTRIALS | 957,455 | 1,910,238 | ||||||||||
ENERGY — 13.1% | ||||||||||||
5,000 | Galp Energia SGPS SA, Cl. B | 120,938 | 95,813 | |||||||||
4,000 | Imperial Oil Ltd. | 134,921 | 163,251 | |||||||||
3,500 | Peabody Energy Corp. | 169,179 | 223,930 | |||||||||
5,000 | Petroleo Brasileiro SA, ADR | 37,788 | 189,200 | |||||||||
8,000 | Saipem SpA | 168,665 | 393,837 | |||||||||
6,200 | Schlumberger Ltd. | 205,349 | 517,700 | |||||||||
6,000 | Suncor Energy Inc. | 101,766 | 229,740 | |||||||||
TOTAL ENERGY | 938,606 | 1,813,471 | ||||||||||
CONSUMER DISCRETIONARY — 8.8% | ||||||||||||
6,000 | Cablevision Systems Corp., Cl. A | 45,978 | 203,040 | |||||||||
3,000 | Christian Dior SA | 180,347 | 428,554 | |||||||||
10,000 | Compagnie Financiere Richemont SA, Cl. A | 117,773 | 588,235 | |||||||||
TOTAL CONSUMER DISCRETIONARY | 344,098 | 1,219,829 | ||||||||||
HEALTH CARE — 8.4% | ||||||||||||
2,000 | Cochlear Ltd. | 76,509 | 164,487 | |||||||||
4,400 | Novartis AG | 174,161 | 258,588 | |||||||||
2,000 | Roche Holding AG, Genusschein | 160,735 | 293,048 | |||||||||
3,000 | St. Jude Medical Inc.† | 115,598 | 128,250 | |||||||||
1,250 | Synthes Inc. | 136,798 | 168,850 | |||||||||
2,200 | Takeda Pharmaceutical Co. Ltd. | 138,172 | 108,252 | |||||||||
1,200 | TSUMURA & Co. | 36,484 | 38,857 | |||||||||
TOTAL HEALTH CARE | 838,457 | 1,160,332 | ||||||||||
INFORMATION TECHNOLOGY — 7.6% | ||||||||||||
2,000 | Canon Inc. | 103,501 | 103,707 | |||||||||
800 | Google Inc., Cl. A† | 272,473 | 475,176 | |||||||||
2,800 | Hoya Corp. | 75,713 | 68,008 | |||||||||
500 | Keyence Corp. | 102,612 | 144,845 | |||||||||
9,000 | Microsoft Corp. | 236,625 | 251,280 | |||||||||
TOTAL INFORMATION TECHNOLOGY | 790,924 | 1,043,016 | ||||||||||
FINANCIAL SERVICES — 7.4% | ||||||||||||
5,000 | Cheung Kong (Holdings) Ltd. | 63,610 | 77,128 | |||||||||
16,000 | Hongkong Land Holdings Ltd. | 62,764 | 115,520 | |||||||||
5,000 | Julius Baer Group Ltd. | 141,951 | 234,225 | |||||||||
10,000 | Kinnevik Investment AB, Cl. B | 230,284 | 203,698 | |||||||||
8,000 | Schroders plc | 149,449 | 231,369 | |||||||||
10,000 | Swire Pacific Ltd., Cl. A | 112,741 | 164,420 | |||||||||
TOTAL FINANCIAL SERVICES | 760,799 | 1,026,360 | ||||||||||
See accompanying notes to financial statements.
6
The GAMCO Global Opportunity Fund
Schedule of Investments (Continued) — December 31, 2010
Schedule of Investments (Continued) — December 31, 2010
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS (Continued) | ||||||||||||
TELECOMMUNICATION SERVICES — 2.4% | ||||||||||||
2,300 | Telephone & Data Systems Inc. | $ | 45,066 | $ | 84,065 | |||||||
2,300 | Telephone & Data Systems Inc., Special | 41,599 | 72,496 | |||||||||
3,500 | United States Cellular Corp.† | 192,059 | 174,790 | |||||||||
TOTAL TELECOMMUNICATION SERVICES | 278,724 | 331,351 | ||||||||||
UTILITIES — 1.4% | ||||||||||||
7,000 | Connecticut Water Service Inc. | 158,291 | 195,160 | |||||||||
TOTAL COMMON STOCKS | 8,202,440 | 13,844,454 | ||||||||||
TOTAL INVESTMENTS — 100.1% | $ | 8,202,440 | �� | 13,844,454 | ||||||||
Other Assets and Liabilities (Net) — (0.1)% | (11,335 | ) | ||||||||||
NET ASSETS — 100.0% | $ | 13,833,119 | ||||||||||
† | Non-income producing security. | |
ADR | American Depositary Receipt |
% of | ||||||||
Market | Market | |||||||
Geographic Diversification | Value | Value | ||||||
Europe | 40.0 | % | $ | 5,542,482 | ||||
North America | 37.9 | 5,250,488 | ||||||
Asia/Pacific | 7.8 | 1,085,523 | ||||||
Japan | 7.0 | 963,599 | ||||||
South Africa | 5.9 | 813,162 | ||||||
Latin America | 1.4 | 189,200 | ||||||
100.0 | % | $ | 13,844,454 | |||||
See accompanying notes to financial statements.
7
The GAMCO Global Opportunity Fund
Statement of Assets and Liabilities
December 31, 2010
December 31, 2010
Assets: | ||||
Investments, at value (cost $8,202,440) | $ | 13,844,454 | ||
Cash | 12,945 | |||
Receivable for Fund shares issued | 1,085 | |||
Dividends receivable | 19,795 | |||
Prepaid expenses | 19,681 | |||
Total Assets | 13,897,960 | |||
Liabilities: | ||||
Payable for investment advisory fees | 3,830 | |||
Payable for distribution fees | 2,890 | |||
Payable for legal and audit fees | 26,662 | |||
Payable for shareholder communications expenses | 12,758 | |||
Payable for custodian fees | 6,176 | |||
Payable for shareholder services fees | 4,758 | |||
Other accrued expenses | 7,767 | |||
Total Liabilities | 64,841 | |||
Net Assets (applicable to 706,775 shares outstanding) | $ | 13,833,119 | ||
Net Assets Consist of: | ||||
Paid-in capital | $ | 11,948,896 | ||
Accumulated net investment loss | (1,160 | ) | ||
Accumulated net realized loss on investments and foreign currency transactions | (3,758,123 | ) | ||
Net unrealized appreciation on investments | 5,642,014 | |||
Net unrealized appreciation on foreign currency translations | 1,492 | |||
Net Assets | $ | 13,833,119 | ||
Shares of Capital Stock each at $0.001 par value: | ||||
Class AAA: | ||||
Net Asset Value, offering, and redemption price per share ($13,262,977 ÷ 677,641 shares outstanding; 75,000,000 shares authorized) | $ | 19.57 | ||
Class A: | ||||
Net Asset Value and redemption price per share ($166,054 ÷ 8,513 shares outstanding; 50,000,000 shares authorized) | $ | 19.51 | ||
Maximum offering price per share (NAV ÷ 0.9425, based on maximum sales charge of 5.75% of the offering price) | $ | 20.70 | ||
Class B: | ||||
Net Asset Value and offering price per share ($1,848 ÷ 99.3 shares outstanding; 25,000,000 shares authorized) | $ | 18.61 | (a) | |
Class C: | ||||
Net Asset Value and offering price per share ($16,199 ÷ 838.6 shares outstanding; 25,000,000 shares authorized) | $ | 19.32 | (a) | |
Class I: | ||||
Net Asset Value, offering, and redemption price per share ($386,041 ÷ 19,683 shares outstanding; 25,000,000 shares authorized) | $ | 19.61 | ||
(a) | Redemption price varies based on the length of time held. |
Statement of Operations
For the Year Ended December 31, 2010
For the Year Ended December 31, 2010
Investment Income: | ||||
Dividends (net of foreign withholding taxes of $6,118) | $ | 242,412 | ||
Interest | 9 | |||
Total Investment Income | 242,421 | |||
Expenses: | ||||
Investment advisory fees | 130,111 | |||
Distribution fees — Class AAA | 31,276 | |||
Distribution fees — Class A | 406 | |||
Distribution fees — Class B | 17 | |||
Distribution fees — Class C | 106 | |||
Custodian fees | 34,072 | |||
Registration expenses | 29,377 | |||
Legal and audit fees | 27,506 | |||
Shareholder communications expenses | 26,585 | |||
Shareholder services fees | 21,380 | |||
Directors’ fees | 1,978 | |||
Interest expense | 1,100 | |||
Miscellaneous expenses | 41,363 | |||
Total Expenses | 345,277 | |||
Less: | ||||
Expenses reimbursed by Adviser (See Note 3) | (84,674 | ) | ||
Custodian fee credits | (4 | ) | ||
Total Reimbursements and Credits | (84,678 | ) | ||
Net Expenses | 260,599 | |||
Net Investment Loss | (18,178 | ) | ||
Net Realized and Unrealized Gain on Investments, and Foreign Currency: | ||||
Net realized gain on investments | 804,006 | |||
Net realized gain on foreign currency transactions | 543 | |||
Net realized gain on investments and foreign currency transactions | 804,549 | |||
Net change in unrealized appreciation: | ||||
on investments | 1,432,561 | |||
on foreign currency translations | 142 | |||
Net change in unrealized appreciation on investments and foreign currency translations | 1,432,703 | |||
Net Realized and Unrealized Gain on Investments and Foreign Currency | 2,237,252 | |||
Net Increase in Net Assets Resulting from Operations | $ | 2,219,074 | ||
See accompanying notes to financial statements.
8
The GAMCO Global Opportunity Fund
Statement of Changes in Net Assets
Year Ended | Year Ended | |||||||
December 31, 2010 | December 31, 2009 | |||||||
Operations: | ||||||||
Net investment income/(loss) | $ | (18,178 | ) | $ | 20,089 | |||
Net realized gain/(loss) on investments and foreign currency transactions | 804,549 | (78,212 | ) | |||||
Net change in unrealized appreciation on investments and foreign currency translations | 1,432,703 | 3,886,143 | ||||||
Net Increase in Net Assets Resulting from Operations | 2,219,074 | 3,828,020 | ||||||
Distributions to Shareholders: | ||||||||
Net investment income | ||||||||
Class AAA | — | (168,297 | ) | |||||
Class A | — | (2,166 | ) | |||||
Class B | — | (12 | ) | |||||
Class C | — | (125 | ) | |||||
Class I | — | (4,708 | ) | |||||
— | (175,308 | ) | ||||||
Return of capital | ||||||||
Class AAA | — | (1,494 | ) | |||||
Class A | — | (19 | ) | |||||
Class B | — | (1 | ) | |||||
Class C | — | (2 | ) | |||||
Class I | — | (41 | ) | |||||
— | (1,557 | ) | ||||||
Total Distributions to Shareholders | — | (176,865 | ) | |||||
Capital Share Transactions: | ||||||||
Class AAA | (2,154,210 | ) | (2,027,972 | ) | ||||
Class A | (23,788 | ) | 6,891 | |||||
Class B | (727 | ) | (1,277 | ) | ||||
Class C | 3,986 | 8,834 | ||||||
Class I | 235 | (211,295 | ) | |||||
Net Decrease in Net Assets from Capital Share Transactions | (2,174,504 | ) | (2,224,819 | ) | ||||
Redemption Fees | 5 | 86 | ||||||
Net Increase in Net Assets | 44,575 | 1,426,422 | ||||||
Net Assets: | ||||||||
Beginning of period | 13,788,544 | 12,362,122 | ||||||
End of period (including undistributed net investment income of $0 and $0, respectively) | $ | 13,833,119 | $ | 13,788,544 | ||||
See accompanying notes to financial statements.
9
The GAMCO Global Opportunity Fund
Financial Highlights
Financial Highlights
Selected data for a share of capital stock outstanding throughout each period:
Income (Loss) from Investment Operations | Distributions | Ratios to Average Net Assets/Supplemental Data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Asset | Net | Realized and | Total | Net Asset | Net Assets | Net | Operating | Operating | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Period | Value, | Investment | Unrealized | from | Net | Value, | End of | Investment | Expenses | Expenses Net | Portfolio | |||||||||||||||||||||||||||||||||||||||||||||||||
Ended | Beginning | Income | Gain (Loss) on | Investment | Investment | Return of | Total | Redemption | End of | Total | Period | Income | Before | of Reimburse- | Turnover | |||||||||||||||||||||||||||||||||||||||||||||
December 31 | of Period | (Loss)(a) | Investments | Operations | Income | Capital | Distributions | Fees(a) | Period | Return† | (in 000’s) | (Loss) | Reimbursement(b) | ment(c) | Rate | |||||||||||||||||||||||||||||||||||||||||||||
Class AAA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 16.53 | $ | (0.02 | ) | $ | 3.06 | $ | 3.04 | — | — | — | $ | 0.00 | (d) | $ | 19.57 | 18.4 | % | $ | 13,263 | (0.15 | )% | 2.66 | % | 2.01 | % | 5 | % | |||||||||||||||||||||||||||||||
2009 | 12.18 | 0.02 | 4.54 | 4.56 | $ | (0.21 | ) | $ | 0.00 | (d) | $ | (0.21 | ) | 0.00 | (d) | 16.53 | 37.4 | 13,280 | 0.16 | 2.72 | 2.05 | 8 | ||||||||||||||||||||||||||||||||||||||
2008 | 20.59 | 0.14 | (8.54 | ) | (8.40 | ) | (0.01 | ) | — | (0.01 | ) | 0.00 | (d) | 12.18 | (40.8 | ) | 11,843 | 0.83 | 2.25 | 2.01 | 14 | |||||||||||||||||||||||||||||||||||||||
2007 | 18.22 | 0.17 | 2.31 | 2.48 | (0.11 | ) | 0.00 | (d) | (0.11 | ) | 0.00 | (d) | 20.59 | 13.6 | 22,507 | 0.84 | 2.03 | 2.03 | 20 | |||||||||||||||||||||||||||||||||||||||||
2006 | 15.91 | (0.08 | ) | 2.39 | 2.31 | (0.00 | )(d) | — | (0.00 | )(d) | 0.00 | (d) | 18.22 | 14.5 | 23,426 | (0.44 | ) | 2.02 | 2.02 | 15 | ||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 16.48 | $ | (0.00 | )(d) | $ | 3.03 | $ | 3.03 | — | — | — | $ | 0.00 | (d) | $ | 19.51 | 18.4 | % | $ | 166 | (0.03 | )% | 2.66 | % | 2.01 | % | 5 | % | |||||||||||||||||||||||||||||||
2009 | 12.14 | 0.01 | 4.54 | 4.55 | $ | (0.21 | ) | $ | 0.00 | (d) | $ | (0.21 | ) | 0.00 | (d) | 16.48 | 37.5 | 171 | 0.11 | 2.72 | 2.05 | 8 | ||||||||||||||||||||||||||||||||||||||
2008 | 20.54 | 0.12 | (8.51 | ) | (8.39 | ) | (0.01 | ) | — | (0.01 | ) | 0.00 | (d) | 12.14 | (40.8 | ) | 120 | 0.69 | 2.25 | 2.01 | 14 | |||||||||||||||||||||||||||||||||||||||
2007 | 18.17 | 0.18 | 2.31 | 2.49 | (0.12 | ) | 0.00 | (d) | (0.12 | ) | 0.00 | (d) | 20.54 | 13.7 | 233 | 0.91 | 2.03 | 2.03 | 20 | |||||||||||||||||||||||||||||||||||||||||
2006 | 15.87 | (0.08 | ) | 2.39 | 2.31 | (0.01 | ) | — | (0.01 | ) | 0.00 | (d) | 18.17 | 14.5 | 220 | (0.45 | ) | 2.02 | 2.02 | 15 | ||||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 15.84 | $ | (0.16 | ) | $ | 2.93 | $ | 2.77 | — | — | — | — | $ | 18.61 | 17.5 | % | $ | 2 | (0.99 | )% | 3.41 | % | 2.76 | % | 5 | % | |||||||||||||||||||||||||||||||||
2009 | 11.67 | (0.06 | ) | 4.31 | 4.25 | $ | (0.08 | ) | $ | 0.00 | (d) | $ | (0.08 | ) | $ | 0.00 | (d) | 15.84 | 36.4 | 2 | (0.50 | ) | 3.47 | 2.80 | 8 | |||||||||||||||||||||||||||||||||||
2008 | 19.86 | 0.01 | (8.20 | ) | (8.19 | ) | — | — | — | — | 11.67 | (41.2 | ) | 3 | 0.05 | 3.00 | 2.76 | 14 | ||||||||||||||||||||||||||||||||||||||||||
2007 | 17.61 | (0.08 | ) | 2.33 | 2.25 | — | — | — | 0.00 | (d) | 19.86 | 12.8 | 6 | (0.45 | ) | 2.78 | 2.78 | 20 | ||||||||||||||||||||||||||||||||||||||||||
2006 | 15.49 | (0.19 | ) | 2.31 | 2.12 | — | — | — | 0.00 | (d) | 17.61 | 13.7 | 25 | (1.14 | ) | 2.77 | 2.77 | 15 | ||||||||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 16.44 | $ | (0.16 | ) | $ | 3.04 | $ | 2.88 | — | — | — | — | $ | 19.32 | 17.5 | % | $ | 16 | (0.95 | )% | 3.41 | % | 2.76 | % | 5 | % | |||||||||||||||||||||||||||||||||
2009 | 12.20 | (0.23 | ) | 4.67 | 4.44 | $ | (0.20 | ) | $ | 0.00 | (d) | $ | (0.20 | ) | $ | 0.00 | (d) | 16.44 | 36.4 | 10 | (1.49 | ) | 3.47 | 2.80 | 8 | |||||||||||||||||||||||||||||||||||
2008 | 20.77 | (0.00 | )(d) | (8.57 | ) | (8.57 | ) | — | — | — | — | 12.20 | (41.3 | ) | 1 | (0.01 | ) | 3.00 | 2.76 | 14 | ||||||||||||||||||||||||||||||||||||||||
2007 | 18.45 | 0.03 | 2.29 | 2.32 | — | — | — | 0.00 | (d) | 20.77 | 12.6 | 4 | 0.14 | 2.78 | 2.78 | 20 | ||||||||||||||||||||||||||||||||||||||||||||
2006 | 16.22 | (0.21 | ) | 2.44 | 2.23 | — | — | — | 0.00 | (d) | 18.45 | 13.8 | 4 | (1.20 | ) | 2.77 | 2.77 | 15 | ||||||||||||||||||||||||||||||||||||||||||
Class I | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 16.52 | $ | 0.02 | $ | 3.07 | $ | 3.09 | — | — | — | $ | 0.00 | (d) | $ | 19.61 | 18.7 | % | $ | 386 | 0.09 | % | 2.41 | % | 1.76 | % | 5 | % | ||||||||||||||||||||||||||||||||
2009 | 12.17 | 0.06 | 4.54 | 4.60 | $ | (0.25 | ) | $ | 0.00 | (d) | $ | (0.25 | ) | 0.00 | (d) | 16.52 | 37.8 | 326 | 0.45 | 2.47 | 1.80 | 8 | ||||||||||||||||||||||||||||||||||||||
2008(e) | 19.75 | 0.22 | (7.74 | ) | (7.52 | ) | (0.06 | ) | — | (0.06 | ) | 0.00 | (d) | 12.17 | (38.1 | ) | 395 | 1.41 | (f) | 2.00 | (f) | 1.76 | (f) | 14 |
† | Total return represents aggregate total return of a hypothetical $1,000 investment at the beginning of the period and sold at the end of the period including reinvestment of distributions and does not reflect applicable sales charges. Total return for a period of less than one year is not annualized. | |
(a) | Per share amounts have been calculated using the average shares outstanding method. | |
(b) | Under an expense deferral agreement with the Adviser, the Fund repaid the Adviser $15,233 during 2007 and $14,200 during 2006, representing previously reimbursed expenses from the Adviser. During the years ended December 31, 2007 and 2006, had such payments not been made, the expense ratios would have been 1.96% and 1.95% (Class AAA), 1.96% and 1.95% (Class A), 2.71% and 2.70% (Class B), and 2.71% and 2.70% (Class C), respectively. | |
(c) | The Fund incurred interest expense during the years ended December 31, 2010, 2009, 2008, 2007, and 2006. If interest expense had not been incurred, the ratios of operating expenses to average net assets would have been 2.00%, 2.04%, 2.00%, 2.00%, and 2.00% (Class AAA and Class A), 2.75%, 2.79%, 2.75%, 2.75%, and 2.75% (Class B and Class C), and 1.75%, 1.79% and 1.75% (Class I), respectively. The Fund also incurred tax expense during the year ended December 31, 2009. If tax expense had not been incurred, the ratios of operating expenses to average net assets would have been 2.01% (Class AAA, and Class A), 2.76% (Class B, and Class C), and 1.76% (Class I), respectively. | |
(d) | Amount represents less than $0.005 per share. | |
(e) | From the commencement of offering Class I Shares on January 11, 2008 through December 31, 2008. | |
(f) | Annualized. |
See accompanying notes to financial statements.
10
The GAMCO Global Opportunity Fund
Notes to Financial Statements
Notes to Financial Statements
1. Organization. The GAMCO Global Opportunity Fund (the “Fund”), a series of GAMCO Global Series Funds, Inc. (the “Corporation”), was organized on July 16, 1993 as a Maryland corporation. The Fund is a non-diversified open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and one of four separately managed portfolios (collectively, the “Portfolios”) of the Corporation. The Fund’s primary objective is capital appreciation. The Fund commenced investment operations on May 11, 1998.
2. Significant Accounting Policies. The Fund’s financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), which may require the use of management estimates and assumptions. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements.
Security Valuation. Portfolio securities listed or traded on a nationally recognized securities exchange or traded in the U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a market’s official closing price as of the close of business on the day the securities are being valued. If there were no sales that day, the security is valued at the average of the closing bid and asked prices or, if there were no asked prices quoted on that day, then the security is valued at the closing bid price on that day. If no bid or asked prices are quoted on such day, the security is valued at the most recently available price or, if the Board of Directors (the “Board”) so determines, by such other method as the Board 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 Gabelli Funds, LLC (the “Adviser”).
Portfolio securities primarily traded on a foreign market are generally valued at the preceding closing values of such securities on the relevant market, but may be fair valued pursuant to procedures established by the Board if market conditions change significantly after the close of the foreign market but prior to the close of business on the day the securities are being valued. Debt instruments with remaining maturities of sixty days or less that are not credit impaired are valued at amortized cost, unless the Board determines such amount does not reflect the securities’ fair value, in which case these securities will be fair valued as determined by the Board. Debt instruments having a maturity greater than sixty days for which market quotations are readily available are valued at the average of the latest bid and asked prices. If there were no asked prices quoted on such day, the security is valued using the closing bid price. U.S. government obligations with maturities greater than sixty days are normally valued using a model that incorporates market observable data such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued principally using dealer quotations.
Securities and assets for which market quotations are not readily available are fair valued as determined by the Board. Fair valuation methodologies and procedures may include, but are not limited to: analysis and review of available financial and non-financial information about the company; comparisons with the valuation and changes in valuation of similar securities, including a comparison of foreign securities with the equivalent U.S. dollar value ADR securities at the close of the U.S. exchange; and evaluation of any other information that could be indicative of the value of the security.
11
The GAMCO Global Opportunity Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
The Fund employs a fair value model to adjust prices to reflect events affecting the values of certain portfolio securities that occur between the close of trading on the principal market for such securities (foreign exchanges and over-the-counter markets) at the time at which net asset values of the Fund is determined. If the Fund’s valuation committee believes that a particular event would materially affect net asset value, further adjustment is considered.
The inputs and valuation techniques used to measure fair value of the Fund’s investments are summarized into three levels as described in the hierarchy below:
• | Level 1 — quoted prices in active markets for identical securities; | ||
• | Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.); and | ||
• | Level 3 — significant unobservable inputs (including the Fund’s determinations as to the fair value of investments). |
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input both individually and in aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of the Fund’s investments in securities by inputs used to value the Fund’s investments as of December 31, 2010 is as follows:
Valuation Inputs | ||||||||
Level 1 | Total Market Value | |||||||
Quoted Prices | at 12/31/10 | |||||||
INVESTMENTS IN SECURITIES: | ||||||||
ASSETS (Market Value): | ||||||||
Common Stocks: | ||||||||
Materials | $ | 2,796,699 | $ | 2,796,699 | ||||
Consumer Staples | 2,347,998 | 2,347,998 | ||||||
Industrials | 1,910,238 | 1,910,238 | ||||||
Energy | 1,813,471 | 1,813,471 | ||||||
Consumer Discretionary | 1,219,829 | 1,219,829 | ||||||
Health Care | 1,160,332 | 1,160,332 | ||||||
Information Technology | 1,043,016 | 1,043,016 | ||||||
Financial Services | 1,026,360 | 1,026,360 | ||||||
Telecommunication Services | 331,351 | 331,351 | ||||||
Utilities | 195,160 | 195,160 | ||||||
Total Common Stocks | 13,844,454 | 13,844,454 | ||||||
TOTAL INVESTMENTS IN SECURITIES — ASSETS | $ | 13,844,454 | $ | 13,844,454 | ||||
At December 31, 2009, the market value of Level 2 securities was $6,823,088 or 48.9% of total investments. Foreign common stock was listed in Level 2 securities due to fair value procedures applied resulting from volatility in U.S. markets after the close of the foreign markets. The fair value procedures due to U.S. market volatility was not applied on December 31, 2010, resulting in a transfer of the foreign common stock to Level 1 securities. This transfer amounted to $6,002,763 or 43.4% of total investments.
There were no Level 3 investments held at December 31, 2010 or December 31, 2009.
12
The GAMCO Global Opportunity Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
In January 2010, the Financial Accounting Standards Board (“FASB”) issued amended guidance to improve disclosure about fair value measurements which requires additional disclosures about transfers between Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements in the reconciliation of fair value measurements using significant unobservable inputs (Level 3). FASB also clarified existing disclosure requirements relating to the levels of disaggregation of fair value measurement and inputs and valuation techniques used to measure fair value.The amended guidance is effective for financial statements for fiscal years beginning after December 15, 2009 and interim periods within those fiscal years. Management has adopted the amended guidance and determined that there was no material impact to the Fund’s financial statements except for additional disclosures made in the notes. Disclosures about purchases, sales, issuances, and settlements in the rollforward of activity in Level 3 fair value measurements are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. Management is currently evaluating the impact of the additional disclosure requirements on the Fund’s financial statements.
Derivative Financial Instruments. The Fund may engage in various portfolio investment strategies by investing in a number of derivative financial instruments for the purpose of hedging against a specific transaction with respect to either the currency in which the transaction is denominated or another currency. Investing in certain derivative financial instruments, including participation in the options, futures, or swap markets, entails certain execution, liquidity, hedging, tax, and securities, interest, credit, or currency market risks. Losses may arise if the Adviser’s prediction of movements in the direction of the securities, foreign currency, and interest rate markets is inaccurate. Losses may also arise if the counterparty does not perform its duties under a contract, or that, in the event of default, the Fund may be delayed in or prevented from obtaining payments or other contractual remedies owed to it under derivative contracts. The creditworthiness of the counterparties is closely monitored in order to minimize these risks. Participation in derivative transactions involves investment risks, transaction costs, and potential losses to which the Fund would not be subject absent the use of these strategies. The consequences of these risks, transaction costs, and losses may have a negative impact on the Fund’s ability to pay distributions.
The Fund’s derivative contracts held at December 31, 2010, if any, are not accounted for as hedging instruments under GAAP.
Forward Foreign Exchange Contracts. The Fund may engage in forward foreign exchange contracts for the purpose of hedging a specific transaction with respect to either the currency in which the transaction is denominated or another currency as deemed appropriate by the Adviser. Forward foreign exchange contracts are valued at the forward rate and are marked-to-market daily. The change in market value is included in unrealized appreciation/depreciation on investments and foreign currency translations. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
The use of forward foreign exchange contracts does not eliminate fluctuations in the underlying prices of the Fund’s portfolio securities, but it does establish a rate of exchange that can be achieved in the future. Although forward foreign exchange contracts limit the risk of loss due to a decline in the value of the hedged currency, they also limit any potential gain that might result should the value of the currency increase. In addition, the Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. During the year ended December 31, 2010, the Fund held no investments in forward foreign exchange contracts.
13
The GAMCO Global Opportunity Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
Repurchase Agreements. The Fund may enter into repurchase agreements with primary government securities dealers recognized by the Federal Reserve Board, with member banks of the Federal Reserve System, or with other brokers or dealers that meet credit guidelines established by the Adviser and reviewed by the Board. Under the terms of a typical repurchase agreement, the Fund takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the Fund to resell, the obligation at an agreed-upon price and time, thereby determining the yield during the Fund’s holding period. It is the policy of the Fund to receive and maintain securities as collateral whose market value is not less than their repurchase price. The Fund will make payment for such securities only upon physical delivery or upon evidence of book entry transfer of the collateral to the account of the custodian. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to maintain the adequacy of the collateral. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. At December 31, 2010, the Fund held no investments in repurchase agreements.
Securities Sold Short. The Fund may enter into short sale transactions. Short selling involves selling securities that may or may not be owned and, at times, borrowing the same securities for delivery to the purchaser, with an obligation to replace such borrowed securities at a later date. The proceeds received from short sales are recorded as liabilities and the Fund records an unrealized gain or loss to the extent of the difference between the proceeds received and the value of an open short position on the day of determination. The Fund records a realized gain or loss when the short position is closed out. By entering into a short sale, the Fund bears the market risk of an unfavorable change in the price of the security sold short. Dividends on short sales are recorded as an expense by the Fund on the ex-dividend date and interest expense is recorded on the accrual basis. The broker retains collateral for the value of the open positions, which is adjusted periodically as the value of the position fluctuates. At December 31, 2010, there were no short sales outstanding.
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Foreign currencies, investments, and other assets and liabilities are translated into U.S. dollars at the current exchange rates. Purchases and sales of investment securities, income, and expenses are translated at the exchange rate prevailing on the respective dates of such transactions. Unrealized gains and losses that result from changes in foreign exchange rates and/or changes in market prices of securities have been included in unrealized appreciation/depreciation on investments and foreign currency translations. Net realized foreign currency gains and losses resulting from changes in exchange rates include foreign currency gains and losses between trade date and settlement date on investment securities transactions, foreign currency transactions, and the difference between the amounts of interest and dividends recorded on the books of the Fund and the amounts actually received. The portion of foreign currency gains and losses related to fluctuation in exchange rates between the initial purchase trade date and subsequent sale trade date is included in realized gain/loss on investments.
Foreign Securities. The Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation of currencies, the inability to repatriate funds, less complete financial information about companies, and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. issuers.
14
The GAMCO Global Opportunity Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
Foreign Taxes. The Fund may be subject to foreign taxes on income, gains on investments, or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
Securities Transactions and Investment Income. Securities transactions are accounted for on the trade date with realized gain or loss on investments determined by using the identified cost method. Interest income (including amortization of premium and accretion of discount) is recorded on the accrual basis. Premiums and discounts on debt securities are amortized using the effective yield to maturity method. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities that are recorded as soon after the ex-dividend date as the Fund becomes aware of such dividends.
Determination of Net Asset Value and Calculation of Expenses. Certain administrative expenses are common to, and allocated among, various affiliated funds. Such allocations are made on the basis of each fund’s average net assets or other criteria directly affecting the expenses as determined by the Adviser pursuant to procedures established by the Board.
In calculating the net asset value (“NAV”) per share of each class, investment income, realized and unrealized gains and losses, redemption fees, and expenses other than class specific expenses are allocated daily to each class of shares based upon the proportion of net assets of each class at the beginning of each day. Distribution expenses are borne solely by the class incurring the expense.
Custodian Fee Credits and Interest Expense. When cash balances are maintained in the custody account, the Fund receives credits which are used to offset custodian fees. The gross expenses paid under the custody arrangement are included in custodian fees in the Statement of Operations with the corresponding expense offset, if any, shown as “Custodian fee credits.” When cash balances are overdrawn, the Fund is charged an overdraft fee equal to 2.00% above the federal funds rate on outstanding balances. This amount, if any, would be included in “interest expense” in the Statement of Operations.
Distributions to Shareholders. Distributions to shareholders are recorded on the ex-dividend date. Distributions to shareholders are based on income and capital gains as determined in accordance with federal income tax regulations, which may differ from income and capital gains as determined under GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities and foreign currency transactions held by the Fund, timing differences, and differing characterizations of distributions made by the Fund. Distributions from net investment income for federal income tax purposes include net realized gains on foreign currency transactions. These book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent, adjustments are made to the appropriate capital accounts in the period when the differences arise. Permanent differences were primarily due to the tax treatment of currency gains and losses and a write-off of the current year net operating loss. These reclassifications have no impact on the NAV of the Fund. For the year ended December 31, 2010, reclassifications were made to decrease accumulated net investment loss by $18,179 and increase accumulated net realized loss on investments and foreign currency transactions by $543, with an offsetting adjustment to additional paid-in capital.
No distributions were made during the year ended December 31, 2010.
15
The GAMCO Global Opportunity Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
The tax character of distributions paid during the year ended December 31, 2009 was as follows:
Year Ended | ||||
December 31, 2009 | ||||
Distributions paid from: | ||||
Ordinary income | $ | 175,308 | ||
Return of capital | 1,557 | |||
Total distributions paid | $ | 176,865 | ||
Provision for Income Taxes. The Fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). It is the policy of the Fund to comply with the requirements of the Code applicable to regulated investment companies and to distribute substantially all of its net investment company taxable income and net capital gains. Therefore, no provision for federal income taxes is required.
At December 31, 2010, the components of accumulated earnings/losses on a tax basis were as follows:
Accumulated capital loss carryforwards | $ | (3,758,096 | ) | |
Net unrealized appreciation on investments and foreign currency translations | 5,642,319 | |||
Total | $ | 1,884,223 | ||
At December 31, 2010, the Fund had net capital loss carryforwards for federal income tax purposes of $3,758,096 which are available to reduce future required distributions of net capital gains to shareholders. $1,288,891 of the loss carryforward is available through 2011; $1,201,151 is available through 2012; $1,170,048 is available through 2016; and $98,006 is available through 2017.
During the year ended December 31, 2010, the Fund utilized capital loss carryforwards of $803,989.
At December 31, 2010, the temporary difference between book basis and tax basis net unrealized appreciation on investments was primarily due to deferral of losses from wash sales for tax purposes and mark-to-market adjustments on investments in passive foreign investment companies.
The following summarizes the tax cost of investments and the related net unrealized appreciation at December 31, 2010:
Gross | Gross | ||||||||||||||||
Unrealized | Unrealized | Net Unrealized | |||||||||||||||
Cost | Appreciation | Depreciation | Appreciation | ||||||||||||||
Investments | $ | 8,203,627 | $ | 5,795,169 | $ | (154,342 | ) | $ | 5,640,827 |
The Fund is required to evaluate tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Income tax and related interest and penalties would be recognized by the Fund as tax expense in the Statement of Operations if the tax positions were deemed not to meet the more-likely-than-not threshold. For the year ended December 31, 2010, the Fund did not incur any income tax, interest, or penalties. As of December 31, 2010, the Adviser has reviewed all open tax years and concluded that there was no impact to the Fund’s net assets or results of operations. Tax years ended December 31, 2007 through December 31,
16
The GAMCO Global Opportunity Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
2010 remain subject to examination by the Internal Revenue Service and state taxing authorities. On an ongoing basis, the Adviser will monitor the Fund’s tax positions to determine if adjustments to this conclusion are necessary.
3. Investment Advisory Agreement and Other Transactions. The Fund has entered into an investment advisory agreement (the “Advisory Agreement”) with the Adviser which provides that the Fund will pay the Adviser a fee, computed daily and paid monthly, at the annual rate of 1.00% of the value of its average daily net assets. In accordance with the Advisory Agreement, the Adviser provides a continuous investment program for the Fund’s portfolio, oversees the administration of all aspects of the Fund’s business and affairs, and pays the compensation of all Officers and Directors of the Fund who are affiliated persons of the Adviser.
The Adviser has contractually agreed to waive its investment advisory fee and/or to reimburse expenses of the Fund to the extent necessary to maintain the annualized total operating expenses of the Fund (excluding brokerage, acquired fund fees and expenses, interest, taxes, and extraordinary expenses) until at least May 1, 2011, at no more than 2.00%, 2.00%, 2.75%, 2.75%, and 1.75% of the value of the Fund’s average daily net assets for Class AAA, Class A, Class B, Class C, and Class I, respectively. For the year ended December 31, 2010, the Adviser reimbursed the Fund in the amount of $84,674. In addition, the Fund has agreed, during the two year period following any waiver or reimbursement by the Adviser, to repay such amount to the extent, that after giving the effect to the repayment, such adjusted annualized total operating expenses of the Fund would not exceed 2.00%, 2.00%, 2.75%, 2.75%, and 1.75% of the value of the Fund’s average daily net assets for Class AAA, Class A, Class B, Class C, and Class I, respectively. The agreements are renewable annually. At December 31, 2010, the cumulative amount which the Fund may repay the Adviser is $167,084.
For the year ended December 31, 2009, expiring December 31. 2011 | $ | 82,410 | ||
For the year ended December 31, 2010, expiring December 31. 2012 | 84,674 | |||
$ | 167,084 | |||
If total net assets of the Corporation are in excess of $100 million, the Corporation pays each Director who is not considered to be an affiliated person an annual retainer of $3,000 plus $500 for each Board meeting attended and each Director is reimbursed by the Corporation for any out of pocket expenses incurred in attending meetings. If total net assets of the Corporation are below $100 million, the Corporation pays each Independent Director an annual retainer of $1,500 plus $500 for each Board meeting attended and each Director is reimbursed by the Corporation for any out of pocket expenses incurred in attending meetings. All Board committee members receive $500 per meeting attended and the Chairman of the Audit Committee and the Lead Director each receive an annual fee of $1,000. A Director may receive a single meeting fee, allocated among the participating funds, for participation in certain meetings held on behalf of multiple funds. Directors who are directors or employees of the Adviser or an affiliated company receive no compensation or expense reimbursement from the Corporation.
17
The GAMCO Global Opportunity Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
4. Distribution Plan. The Fund’s Board has adopted a distribution plan (the “Plan”) for each class of shares, except for Class I Shares, pursuant to Rule 12b-1 under the 1940 Act. Gabelli & Company, Inc. (“Gabelli & Co.”), an affiliate of the Adviser, serves as Distributor of the Fund. Under the Class AAA, Class A, Class B, and Class C Share Plans, payments are authorized to Gabelli & Co. at annual rates of 0.25%, 0.25%, 1.00%, and 1.00%, respectively, of the average daily net assets of those classes, the annual limitations under each Plan. Such payments are accrued daily and paid monthly.
5. Portfolio Securities. Purchases and sales of securities for the year ended December 31, 2010, other than short-term securities and U.S. Government obligations, aggregated $619,621 and $2,895,441, respectively.
6. Transactions with Affiliates. During the year ended December 31, 2010, the Fund paid brokerage commissions on security trades of $460 to Gabelli & Co. Additionally, Gabelli & Co. informed the Fund that it retained $419 from investors representing commissions (sales charges and underwriting fees) on sales and redemptions of Fund shares.
The cost of calculating the Fund’s NAV per share is a Fund expense pursuant to the Advisory Agreement between the Fund and the Adviser. The Adviser did not seek a reimbursement during the year ended December 31, 2010.
7. Line of Credit. The Fund participates in an unsecured line of credit of up to $75,000,000 under which it may borrow up to 10% of its net assets from the custodian for temporary borrowing purposes. Borrowings under this arrangement bear interest at the higher of the sum of the overnight LIBOR plus 125 basis points or the sum of the federal funds rate plus 125 basis points at the time of borrowing. This amount, if any, would be included in “interest expense” in the Statement of Operations. At December 31, 2010, there were no borrowings outstanding under the line of credit.
The average daily amount of borrowings outstanding under the line of credit during the year ended December 31, 2010 was $69,984 with a weighted average interest rate of 1.42%. The maximum amount borrowed at any time during the year ended December 31, 2010 was $488,000.
8. Capital Stock. The Fund offers five classes of shares – Class AAA Shares, Class A Shares, Class B Shares, Class C Shares, and Class I Shares. Class AAA Shares are offered without a sales charge only to investors who acquire them directly from Gabelli & Co., through selected broker/dealers, or the transfer agent. Class I Shares are offered through Gabelli & Co. and selected broker/dealers to foundations, endowments, institutions, and employee benefit plans without a sales charge. Class A Shares are subject to a maximum front-end sales charge of 5.75%. Class B Shares are subject to a contingent deferred sales charge (“CDSC”) upon redemption within six years of purchase and automatically convert to Class A Shares approximately eight years after the original purchase. The applicable Class B CDSC is equal to a percentage declining from 5% of the lesser of the NAV per share at the date of the original purchase or at the date of redemption, based on the length of time held. Class C Shares are subject to a 1.00% CDSC for one year after purchase. Class B Shares are available only through exchange of Class B Shares of other funds distributed by Gabelli & Co.
18
The GAMCO Global Opportunity Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
The Fund imposes a redemption fee of 2.00% on all classes of shares that are redeemed or exchanged on or before the seventh day after the date of a purchase.The redemption fee is deducted from the proceeds otherwise payable to the redeeming shareholders and is retained by the Fund as an increase in paid-in capital. The redemption fees retained by the Fund during the years ended December 31, 2010 and December 31, 2009 amounted to $5 and $86, respectively. The redemption fee does not apply to redemptions of shares where (i) the shares were purchased through automatic reinvestment of distributions, (ii) the redemption was initiated by the Fund, (iii) the shares were purchased through programs that collect the redemption fee at the program level and remit them to the Fund, or (iv) the shares were purchased through programs that the Adviser determines to have appropriate anti-short-term trading policies in place or as to which the Adviser has received assurances that look-through redemption fee procedures or effective anti-short-term trading policies and procedures are in place.
Transactions in shares of capital stock were as follows:
Year Ended | Year Ended | |||||||||||||||
December 31, 2010 | December 31, 2009 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class AAA | ||||||||||||||||
Shares sold | 32,736 | $ | 561,316 | 49,778 | $ | 722,814 | ||||||||||
Shares issued upon reinvestment of distributions | — | — | 9,516 | 158,056 | ||||||||||||
Shares redeemed | (158,464 | ) | (2,715,526 | ) | (228,300 | ) | (2,908,842 | ) | ||||||||
Net decrease | (125,728 | ) | $ | (2,154,210 | ) | (169,006 | ) | $ | (2,027,972 | ) | ||||||
Class A | ||||||||||||||||
Shares sold | 3,355 | $ | 56,732 | 1,729 | $ | 25,686 | ||||||||||
Shares issued upon reinvestment of distributions | — | — | 129 | 2,139 | ||||||||||||
Shares redeemed | (5,183 | ) | (80,520 | ) | (1,444 | ) | (20,934 | ) | ||||||||
Net increase/(decrease) | (1,828 | ) | $ | (23,788 | ) | 414 | $ | 6,891 | ||||||||
Class B | ||||||||||||||||
Shares issued upon reinvestment of distributions | — | — | 1 | $ | 12 | |||||||||||
Shares redeemed | (48 | ) | $ | (727 | ) | (100 | ) | (1,289 | ) | |||||||
Net decrease | (48 | ) | $ | (727 | ) | (99 | ) | $ | (1,277 | ) | ||||||
Class C | ||||||||||||||||
Shares sold | 213 | $ | 3,986 | 539 | $ | 8,710 | ||||||||||
Shares issued upon reinvestment of distributions | — | — | 7 | 124 | ||||||||||||
Net increase | 213 | $ | 3,986 | 546 | $ | 8,834 | ||||||||||
Class I | ||||||||||||||||
Shares sold | 2,089 | $ | 34,066 | 7,884 | $ | 109,626 | ||||||||||
Shares issued upon reinvestment of distributions | — | — | 258 | 4,283 | ||||||||||||
Shares redeemed | (2,095 | ) | (33,831 | ) | (20,926 | ) | (325,204 | ) | ||||||||
Net increase/(decrease) | (6 | ) | $ | 235 | (12,784 | ) | $ | (211,295 | ) | |||||||
19
The GAMCO Global Opportunity Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
9. Indemnifications. The Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.
10. Other Matters. On April 24, 2008, the Adviser entered into a settlement with the SEC to resolve an inquiry regarding prior frequent trading activity in shares of the GAMCO Global Growth Fund (the “Global Growth Fund”) by one investor who was banned from the Global Growth Fund in August 2002. In the administrative settlement order, the SEC found that the Adviser had willfully violated Section 206(2) of the 1940 Act, Section 17(d) of the 1940 Act and Rule 17d-1 thereunder, and had willfully aided and abetted and caused violations of Section 12(d)(1)(B)(i) of the 1940 Act. Under the terms of the settlement, the Adviser, while neither admitting nor denying the SEC’s findings and allegations, paid $16 million (which included a $5 million civil monetary penalty), approximately $12.8 million of which is in the process of being paid to shareholders of the Global Growth Fund in accordance with a plan developed by an independent distribution consultant and approved by the independent directors of the Global Growth Fund and acceptable to the staff of the SEC, and agreed to cease and desist from future violations of the above referenced federal securities laws and rule. The SEC order also noted the cooperation that the Adviser had given the staff of the SEC during its inquiry. The settlement did not have a material adverse impact on the Adviser or its ability to fulfill its obligations under the Advisory Agreement. On the same day, the SEC filed a civil action against the Executive Vice President and Chief Operating Officer of the Adviser, alleging violations of certain federal securities laws arising from the same matter. The officer is also an officer of the Fund, the Global Growth Fund, and other funds in the Gabelli/GAMCO fund complex. The officer denied the allegations and is continuing in his positions with the Adviser and the funds. The court dismissed certain claims and found that the SEC was not entitled to pursue various remedies against the officer while leaving one remedy in the event the SEC were able to prove violations of law. The court subsequently dismissed without prejudice the remaining remedy against the officer, which would allow the SEC to appeal the court’s rulings. On October 29, 2010 the SEC filed its appeal with the U.S. Court of Appeals for the Second Circuit regarding the lower court’s orders. The Adviser currently expects that any resolution of the action against the officer will not have a material adverse impact on the Fund or the Adviser or its ability to fulfill its obligations under the Advisory Agreement.
11. Subsequent Events. Management has evaluated the impact on the Fund of all subsequent events occurring through the date the financial statements were issued and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements.
20
The GAMCO Global Opportunity Fund
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
GAMCO Global Series Funds, Inc.
GAMCO Global Series Funds, Inc.
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of The GAMCO Global Opportunity Fund (the “Fund”), a series of GAMCO Global Series Funds, Inc., as of December 31, 2010, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2010, by correspondence with the Fund’s custodian. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The GAMCO Global Opportunity Fund, a series of GAMCO Global Series Funds, Inc., at December 31, 2010, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Philadelphia, Pennsylvania February 28, 2011 |
21
The GAMCO Global Opportunity Fund
Board Consideration and Re-Approval of Investment Advisory Agreement (Unaudited)
Board Consideration and Re-Approval of Investment Advisory Agreement (Unaudited)
During the six months ended December 31, 2010, the Board of Directors of the Corporation approved the continuation of the investment advisory agreement with the Adviser for the Fund on the basis of the recommendation by the directors (the “Independent Board Members”) who are not “interested persons” of the Fund. The following paragraphs summarize the material information and factors considered by the Independent Board Members as well as their conclusions relative to such factors.
Nature, Extent, and Quality of Services. The Independent Board Members considered information regarding the Fund’s portfolio managers, the depth of the analyst pool available to the Adviser and the portfolio managers, the scope of supervisory, administrative, shareholder, and other services supervised or provided by the Adviser and the absence of significant service problems reported to the Board. The Independent Board Members noted the experience, length of service, and reputation of the Fund’s portfolio managers.
Investment Performance. The Independent Board Members reviewed the short and medium-term performance of the Fund against a peer group of global multi-cap core funds, noting the Fund’s top quintile performance for the one year period, top third performance for the three year period, and second third performance for the five year period.
Profitability. The Independent Board Members reviewed summary data regarding the lack of profitability of the Fund to the Adviser both with and without the expense reimbursement arrangement in effect. The Independent Board Members also noted that an affiliated broker of the Adviser received distribution fees and minor amounts of sales commissions.
Economies of Scale. The Independent Board Members discussed the major elements of the Adviser’s cost structure and the relationship of those elements to potential economies of scale and reviewed rudimentary data relating to the impact of 20% growth in the Fund on the Adviser’s profitability.
Sharing of Economies of Scale. The Independent Board Members noted that the investment management fee schedule for the Fund does not take into account any potential economies of scale that may develop or any losses or diminished profitability to the Adviser in prior years.
Service and Cost Comparisons. The Independent Board Members compared the expense ratios of the investment management fee, other expenses, and total expenses of the Fund with similar expense ratios of the peer group of global multi-cap growth funds and noted that the Adviser’s management fee includes substantially all administrative services of the Fund as well as investment advisory services.The Independent Board Members noted that the Fund’s expense ratios after waivers were moderately higher than and the Fund’s size was significantly lower than average within this group and that the Adviser had been waiving substantial portions of its fees in order to make the Fund a more attractive investment. The Independent Board Members compared the management fee with the fees for other funds managed by the Adviser and considered fees charged by an affiliated adviser for general equity institutional accounts and unregistered funds.
Conclusions. The Independent Board Members concluded that the Fund enjoyed highly experienced portfolio management services, good ancillary services, and an acceptable performance record. The Independent Board Members also concluded that the Fund’s expense ratios were reasonable, particularly in light of the lack of profitability to the Adviser of managing the Fund, and that economies of scale were not a factor in their thinking at this time. The Independent Board Members did not view the potential profitability of ancillary services as material to their decision. On the basis of the foregoing and without assigning particular weight to any single conclusion, the Independent Board Members determined to recommend continuation of the investment management agreement to the full Board of Board Members.
22
The GAMCO Global Opportunity Fund
Additional Fund Information (Unaudited)
Additional Fund Information (Unaudited)
The business and affairs of the Corporation are managed under the direction of the Corporation’s Board of Directors. Information pertaining to the Directors and officers of the Company is set forth below. The Fund’s Statement of Additional Information includes additional information about the Fund’s Directors and is available without charge, upon request, by calling 800-GABELLI (800-422-3554) or by writing to The GAMCO Global Opportunity Fund at One Corporate Center, Rye, NY 10580-1422.
Term of | ||||||||||
Office and | Number of | |||||||||
Name, Position(s) | Length of | Funds in Fund | ||||||||
Address1 | Time | Complex Overseen | Principal Occupation(s) | Other Directorships | ||||||
and Age | Served2 | by Director | During Past Five Years | Held by Director4 | ||||||
INTERESTED DIRECTORS3: | ||||||||||
Mario J. Gabelli Director and Chief Investment Officer Age: 68 | Since 1993 | 26 | Chairman and Chief Executive Officer of GAMCO Investors, Inc. and Chief Investment Officer – Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management Inc.; Director/Trustee or Chief Investment Officer of other registered investment companies in the Gabelli/GAMCO Funds complex; Chief Executive Officer of GGCP, Inc. | Director of Morgan Group Holdings, Inc. (holding company); Chairman of the Board and Chief Executive Officer of LICT Corp. (multimedia and communication services company); Director of CIBL, Inc. (broadcasting and wireless communications) | ||||||
John D. Gabelli Director Age: 66 | Since 1993 | 10 | Senior Vice President of Gabelli & Company, Inc. | — | ||||||
INDEPENDENT DIRECTORS5: | ||||||||||
E. Val Cerutti Director Age: 71 | Since 2001 | 7 | Chief Executive Officer of Cerutti Consultants, Inc. | Director of The LGL Group, Inc. (diversified manufacturing) (1990-2009) | ||||||
Anthony J. Colavita Director Age: 75 | Since 1993 | 34 | President of the law firm of Anthony J. Colavita, P.C. | — | ||||||
Arthur V. Ferrara Director Age: 80 | Since 2001 | 8 | Former Chairman of the Board and Chief Executive Officer of The Guardian Life Insurance Company of America (1992-1995) | — | ||||||
Werner J. Roeder, MD Director Age: 70 | Since 1993 | 22 | Medical Director of Lawrence Hospital and practicing private physician | — | ||||||
Anthonie C. van Ekris Director Age: 76 | Since 1993 | 20 | Chairman of BALMAC International, Inc. (commodities and futures trading) | Director of Aurado Energy Inc. (oil and gas operations) through 2005 | ||||||
Salvatore J. Zizza Director Age: 65 | Since 2004 | 28 | Chairman and Chief Executive Officer of Zizza & Co., Ltd. (private holding company) and Chief Executive Officer of General Employment Enterprises, Inc. | Director of Harbor BioSciences, Inc. (biotechnology) and Trans-Lux Corporation (business services); Chairman of each of BAM (manufacturing); Metropolitan Paper Recycling (recycling); Bergen Cove Realty Inc. (real estate); Bion Environmental Technologies (technology) (2005-2008); Director of Earl Scheib Inc. (automotive painting) through April 2009 |
23
The GAMCO Global Opportunity Fund
Additional Fund Information (Continued) (Unaudited)
Additional Fund Information (Continued) (Unaudited)
Term of | ||||
Name, Position(s) | Office and | |||
Address1 | Length of | Principal Occupation(s) | ||
and Age | Time Served2 | During Past Five Years | ||
OFFICERS: | ||||
Bruce N. Alpert President and Secretary Age: 59 | Since 2003 | Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC since 1988 and an officer of all of the registered investment companies in the Gabelli/GAMCO Funds complex. Director of Teton Advisors, Inc. since 1998; Chairman of Teton Advisors, Inc. 2008 to 2010; President of Teton Advisors, Inc. 1998 through 2008; Senior Vice President of GAMCO Investors, Inc. since 2008 | ||
Agnes Mullady Treasurer Age: 52 | Since 2006 | Senior Vice President of GAMCO Investors, Inc. since 2009; Vice President of Gabelli Funds, LLC since 2007; Officer of all of the registered investment companies in the Gabelli/GAMCO Funds complex | ||
Peter D. Goldstein Chief Compliance Officer Age: 57 | Since 2004 | Director of Regulatory Affairs at GAMCO Investors, Inc. since 2004; Chief Compliance Officer of all of the registered investment companies in the Gabelli/GAMCO Funds complex |
1 | Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise noted. | |
2 | Each Director will hold office for an indefinite term until the earliest of (i) the next meeting of shareholders, if any, called for the purpose of considering the election or re-election of such Director and until the election and qualification of his or her successor, if any, elected at such meeting, or (ii) the date a Director resigns or retires, or a Director is removed by the Board of Directors or shareholders, in accordance with the Corporation’s By-Laws and Articles of Incorporation. Each officer will hold office for an indefinite term until the date he or she resigns or retires or until his or her successor is elected and qualified. | |
3 | “Interested person” of the Corporation as defined in the 1940 Act. Messrs. Gabelli are each considered an “interested person” because of their affiliation with Gabelli Funds, LLC which acts as the Corporation’s investment adviser. Mario J. Gabelli and John D. Gabelli are brothers. | |
4 | This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934, as amended, i.e., public companies, or other investment companies registered under the 1940 Act. | |
5 | Directors who are not interested persons are considered “Independent” Directors. |
24
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Gabelli/GAMCO Funds and Your Personal Privacy
Who are we?
The Gabelli/GAMCO Funds are investment companies registered with the Securities and Exchange Commission under the Investment Company Act of 1940. We are managed by Gabelli Funds, LLC, which is affiliated with GAMCO Investors, Inc. GAMCO Investors, Inc. is a publicly held company that has subsidiaries that provide investment advisory or brokerage services for a variety of clients.
What kind of non-public information do we collect about you if you become a shareholder?
If you apply to open an account directly with us, you will be giving us some non-public information about yourself. The non-public information we collect about you is:
• | Information you give us on your application form. This could include your name, address, telephone number, social security number, bank account number, and other information. | |
• | Information about your transactions with us, any transactions with our affiliates, and transactions with the entities we hire to provide services to you. This would include information about the shares that you buy or redeem. If we hire someone else to provide services—like a transfer agent—we will also have information about the transactions that you conduct through them. |
What information do we disclose and to whom do we disclose it?
We do not disclose any non-public personal information about our customers or former customers to anyone other than our affiliates, our service providers who need to know such information, and as otherwise permitted by law. If you want to find out what the law permits, you can read the privacy rules adopted by the Securities and Exchange Commission. They are in volume 17 of the Code of Federal Regulations, Part 248. The Commission often posts information about its regulations on its website, www.sec.gov.
What do we do to protect your personal information?
We restrict access to non-public personal information about you to the people who need to know that information in order to provide services to you or the Fund and to ensure that we are complying with the laws governing the securities business. We maintain physical, electronic, and procedural safeguards to keep your personal information confidential.
GABELLI FAMILY OF FUNDS
VALUE
Gabelli Asset Fund
Seeks to invest primarily in a diversified portfolio of common stocks selling at significant discounts to their private market value. The Fund’s primary objective is growth of capital. (Multiclass)
Team Managed
Gabelli Blue Chip Value Fund
Seeks long term growth of capital through investment primarily in the common stocks of established companies which are temporarily out of favor. The fund’s objective is to identify a catalyst or sequence of events that will return the company to a higher value. (Multiclass)
Portfolio Manager: Barbara G. Marcin, CFA
GAMCO Westwood Equity Fund
Seeks to invest primarily in the common stock of well seasoned companies that have recently reported positive earnings surprises and are trading below Westwood’s proprietary growth rate estimates. The Fund’s primary objective is capital appreciation. (Multiclass)
Portfolio Manager: Susan M. Byrne
FOCUSED VALUE
Gabelli Value Fund
Seeks to invest in securities of companies believed to be undervalued. The Fund’s primary objective is long-term capital appreciation. (Multiclass)
Team Managed
SMALL CAP VALUE
Gabelli Small Cap Fund
Seeks to invest primarily in common stock of smaller companies (market capitalizations at the time of investment of $2 billion or less) believed to have rapid revenue and earnings growth potential. The Fund’s primary objective is capital appreciation. (Multiclass)
Portfolio Manager: Mario J. Gabelli, CFA
GAMCO Westwood SmallCap Equity Fund
Seeks to invest primarily in smaller capitalization equity securities – market caps of $2.5 billion or less. The Fund’s primary objective is long-term capital appreciation.(Multiclass)
Portfolio Manager: Nicholas F. Galluccio
Gabelli Woodland Small Cap Value Fund
Seeks to invest primarily in the common stocks of smaller companies (market capitalizations generally less than $3.0 billion) believed to be undervalued with shareholder oriented management teams that are employing strategies to grow the company’s value. The Fund’s primary objective is capital appreciation. (Multiclass)
Portfolio Manager: Elizabeth M. Lilly, CFA
GROWTH
GAMCO Growth Fund
Seeks to invest primarily in large cap stocks believed to have favorable, yet undervalued, prospects for earnings growth. The Fund’s primary objective is capital appreciation. (Multiclass)
Portfolio Manager: Howard F. Ward, CFA
GAMCO International Growth Fund
Seeks to invest in the equity securities of foreign issuers with long-term capital appreciation potential. The Fund offers investors global diversification. (Multiclass)
Portfolio Manager: Caesar Bryan
AGGRESSIVE GROWTH
GAMCO Global Growth Fund
Seeks capital appreciation through a disciplined investment program focusing on the globalization and interactivity of the world’s marketplace. The Fund invests in companies at the forefront of accelerated growth. The Fund’s primary objective is capital appreciation. (Multiclass)
Team Managed
MICRO-CAP
GAMCO Westwood Mighty MitesSM Fund
Seeks to invest in micro-cap companies that have market capitalizations of $300 million or less. The Fund’s primary objective is long-term capital appreciation. (Multiclass)
Team Managed
EQUITY INCOME
Gabelli Equity Income Fund
Seeks to invest primarily in equity securities with above average market yields. The Fund pays monthly dividends and seeks a high level of total return with an emphasis on income. (Multiclass)
Portfolio Manager: Mario J. Gabelli, CFA
GAMCO Westwood Balanced Fund
Seeks to invest in a balanced and diversified portfolio of stocks and bonds. The Fund’s primary objective is both capital appreciation and current income. (Multiclass)
Co-Portfolio Managers: Susan M. Byrne Mark R. Freeman, CFA
GAMCO Westwood Income Fund
Seeks to provide a high level of current income as well as long-term capital appreciation by investing in income producing equity and fixed income securities. (Multiclass)
Portfolio Manager: Barbara G. Marcin, CFA
SPECIALTY EQUITY
GAMCO Vertumnus Fund (formerly GAMCO Global Convertible Securities Fund)
Seeks to invest principally in bonds and preferred stocks which are convertible into common stock of foreign and domestic companies. The Fund’s primary objective is total return through a combination of current income and capital appreciation. (Multiclass)
Portfolio Manager: Mario J. Gabelli, CFA
GAMCO Global Opportunity Fund
Seeks to invest in common stock of companies which have rapid growth in revenues and earnings and potential for above average capital appreciation or are undervalued. The Fund’s primary objective is capital appreciation. (Multiclass)
Team Managed
Gabelli SRI Green Fund
Seeks to invest in common and preferred stocks meeting guidelines for social responsibility (avoiding defense contractors and manufacturers of alcohol, abortifacients, gaming, and tobacco products) and sustainability (companies engaged in climate change, energy security and independence, natural resource shortages, organic living, and urbanization). The Fund’s primary objective is capital appreciation. (Multiclass)
Co-Portfolio Managers: Christopher C. Desmarais John M. Segrich, CFA
SECTOR
GAMCO Global Telecommunications Fund
Seeks to invest in telecommunications companies throughout the world – targeting undervalued companies with strong earnings and cash flow dynamics. The Fund’s primary objective is capital appreciation. (Multiclass)
Team Managed
GAMCO Gold Fund
Seeks to invest in a global portfolio of equity securities of gold mining and related companies. The Fund’s objective is long-term capital appreciation. Investment in gold stocks is considered speculative and is affected by a variety of worldwide economic, financial, and political factors. (Multiclass)
Portfolio Manager: Caesar Bryan
Gabelli Utilities Fund
Seeks to provide a high level of total return through a combination of capital appreciation and current income. (Multiclass)
Portfolio Manager: Mario J. Gabelli, CFA
MERGER AND ARBITRAGE
Gabelli ABC Fund
Seeks to invest in securities with attractive opportunities for appreciation or investment income. The Fund’s primary objective is total return in various market conditions without excessive risk of capital loss. (No-load)
Portfolio Manager: Mario J. Gabelli, CFA
Gabelli Enterprise Mergers and Acquisitions Fund
Seeks to invest in securities believed to be likely acquisition targets within 12–18 months or in arbitrage transactions of publicly announced mergers or other corporate reorganizations. The Fund’s primary objective is capital appreciation. (Multiclass)
Portfolio Manager: Mario J. Gabelli, CFA
CONTRARIAN
GAMCO Mathers Fund
Seeks long-term capital appreciation in various market conditions without excessive risk of capital loss. (No-load)
Portfolio Manager: Henry Van der Eb, CFA
Comstock Capital Value Fund
Seeks capital appreciation and current income. The Fund may use either long or short positions to achieve its objective. (Multiclass)
Portfolio Managers: Charles L. Minter Martin Weiner, CFA
FIXED INCOME
GAMCO Westwood Intermediate Bond Fund
Seeks to invest in a diversified portfolio of bonds with various maturities. The Fund’s primary objective is total return. (Multiclass)
Portfolio Manager: Mark R. Freeman, CFA
CASH MANAGEMENT-MONEY MARKET
Gabelli U.S. Treasury Money Market Fund
Seeks to invest exclusively in short-term U.S. Treasury securities. The Fund’s primary objective is to provide high current income consistent with the preservation of principal and liquidity. (No-load)
Co-Portfolio Managers: Judith A. Raneri Ronald S. Eaker
An investment in the above Money Market Fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
The Funds may invest in foreign securities which involve risks not ordinarily associated with investments in domestic issues, including currency fluctuation, economic, and political risks.
To receive a prospectus, call 800-GABELLI (422-3554). Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund
before investing. The prospectus contains more information about this and other matters and should be read carefully before investing.
before investing. The prospectus contains more information about this and other matters and should be read carefully before investing.
GAMCO Global Series Funds, Inc.
The GAMCO Global Opportunity Fund
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
fax: 914-921-5118
website: www.gabelli.com
e-mail: info@gabelli.com
Net Asset Value per share available daily by calling
800-GABELLI after 7:00 P.M.
The GAMCO Global Opportunity Fund
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
fax: 914-921-5118
website: www.gabelli.com
e-mail: info@gabelli.com
Net Asset Value per share available daily by calling
800-GABELLI after 7:00 P.M.
Board of Directors | ||
Mario J. Gabelli, CFA | John D. Gabelli | |
Chairman and Chief | Senior Vice President | |
Executive Officer | Gabelli & Company, Inc. | |
GAMCO Investors, Inc. | ||
E. Val Cerutti | Werner J. Roeder, MD | |
Chief Executive Officer | Medical Director | |
Cerutti Consultants, Inc. | Lawrence Hospital | |
Anthony J. Colavita | Anthonie C. van Ekris | |
President | Chairman | |
Anthony J. Colavita, P.C. | BALMAC International, Inc. | |
Arthur V. Ferrara | Salvatore J. Zizza | |
Former Chairman and | Chairman | |
Chief Executive Officer | Zizza & Co., Ltd. | |
Guardian Life Insurance | ||
Company of America | ||
Officers | ||
Bruce N. Alpert | Peter D. Goldstein | |
President and Secretary | Chief Compliance Officer | |
Agnes Mullady | ||
Treasurer |
Distributor
Gabelli & Company, Inc.
Gabelli & Company, Inc.
Custodian, Transfer Agent, and Dividend Agent
State Street Bank and Trust Company
State Street Bank and Trust Company
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom LLP
Skadden, Arps, Slate, Meagher & Flom LLP
This report is submitted for the general information of the shareholders of The GAMCO Global Opportunity Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus.
GAMCO
The GAMCO Global Opportunity Fund
Morningstar® rated The GAMCO Global Opportunity Class AAA Shares 4 stars overall and 4 stars for the
three and five year periods and 3 stars for the ten year period ended December 31, 2010 among 628,
628, 493, and 261 World Stock funds, respectively.
three and five year periods and 3 stars for the ten year period ended December 31, 2010 among 628,
628, 493, and 261 World Stock funds, respectively.
ANNUAL REPORT
DECEMBER 31, 2010
DECEMBER 31, 2010
The GAMCO Global Telecommunications Fund
Annual Report — December 31, 2010
Annual Report — December 31, 2010
Morningstar® rated The GAMCO Global Telecommunications Fund Class AAA Shares 4
stars overall and 3 stars for the three year period and 4 stars for the five and ten year
periods ended December 31, 2010 among 39, 39, 33, and 29 Communications funds, respectively.
stars overall and 3 stars for the three year period and 4 stars for the five and ten year
periods ended December 31, 2010 among 39, 39, 33, and 29 Communications funds, respectively.
Mario J. Gabelli, CFA | Sergey Dluzhevskiy, CFA | Evan Miller, CFA |
To Our Shareholders,
The Sarbanes-Oxley Act requires a fund’s principal executive and financial officers to certify the entire contents of the semi-annual and annual shareholder reports in a filing with the Securities and Exchange Commission (“SEC”) on Form N-CSR. This certification would cover the portfolio managers’ commentary and subjective opinions if they are attached to or a part of the financial statements. Many of these comments and opinions would be difficult or impossible to certify.
Because we do not want our portfolio managers to eliminate their opinions and/or restrict their commentary to historical facts, we have separated their commentary from the financial statements and investment portfolio and have sent it to you separately. Both the commentary and the financial statements, including the portfolio of investments, will be available on our website at www.gabelli.com/funds.
Enclosed are the audited financial statements including the investment portfolio as of December 31, 2010 with a description of factors that affected the performance during the past year.
Performance Discussion (Unaudited)
For the year ended December 31, 2010, The GAMCO Global Telecommunications Fund (the “Fund”) (Class AAA) net asset value (“NAV”) per share rose 11.2%, compared with increases of 11.3% and 12.7% for the MSCI AC World Telecommunication Services Index and the MSCI AC World Free Index, respectively.
Morningstar Rating™ is based on risk-adjusted returns. The Overall Morningstar Rating is derived from a weighted average of the performance figures associated with a fund’s three, five, and ten year (if applicable) Morningstar Rating metrics. For funds with at least a three year history, a Morningstar Rating is based on a risk-adjusted return measure (including the effects of sales charges, loads, and redemption fees) placing more emphasis on downward variations and rewarding consistent performance. That accounts for variations in a fund’s monthly performance. The top 10% of funds in each category receive 5 stars, the next 22.5% 4 stars, the next 35% 3 stars, the next 22.5% 2 stars, and the bottom 10% 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.) Morningstar Rating is for the AAA Share class only; other classes may have different performance characteristics. Ratings reflect relative performance. Results for certain periods were negative. ©2010 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
As we reported for the first quarter of 2010, the market’s disaffection with the telecommunications sector showed no sign of easing as telecom stocks continued to lag the broader markets. The group ranked among the worst performing sectors in the first quarter, trailing only its fellow defensive sector utilities. The second quarter marked a change in fortunes for the global telecommunications sector, as it outperformed broader indices for the first time since the depths of the financial crisis in late 2008. Again, as then, the defensive qualities of the industry came to the fore and sector rotation played a role in the relative outperformance. In the second quarter, the 6.4% decline in telecoms compared with a fall of 12.0% for the broader MSCI AC World Free Index. The strong rally in telecom stocks seen in the third quarter was not sustained to the end of the year, as investors again sought exposure to sectors promising cyclical recovery. Telecom stocks underperformed in all regions, with the exception of Latin America.
Selected holdings that contributed positively to the Fund’s performance in 2010 were Cablevision Systems Corp. (2.7% of net assets as of December 31, 2010), Telecom Argentina (2.3%), and Liberty Global Inc. (Cl. C) (1.1%), an international provider of video, voice, and broadband Internet services. Some of the Fund’s weaker performing stocks during the year were Deutsche Telekom AG (2.8%) and Cincinnati Bell, Inc. (1.1%).
We appreciate your confidence and trust. | ||
Sincerely yours, | ||
Bruce N. Alpert | ||
February 24, 2011 | President |
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GAMCO GLOBAL
TELECOMMUNICATIONS FUND CLASS AAA SHARES AND THE MSCI AC WORLD FREE INDEX (Unaudited)
TELECOMMUNICATIONS FUND CLASS AAA SHARES AND THE MSCI AC WORLD FREE INDEX (Unaudited)
Past performance is not predictive of future results. The performance tables and graph do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. |
2
Comparative Results
Average Annual Returns through December 31, 2010 (a) (Unaudited)
Since | ||||||||||||||||||||||||
Inception | ||||||||||||||||||||||||
Quarter | 1 Year | 3 Year | 5 Year | 10 Year | (11/1/93) | |||||||||||||||||||
GAMCO Global Telecommunications Fund Class AAA | 2.96 | % | 11.16 | % | (6.30 | )% | 4.64 | % | 2.40 | % | 8.21 | % | ||||||||||||
MSCI AC World Telecommunication Services Index | 3.41 | 11.27 | (5.83 | ) | 7.26 | 0.91 | N/A | |||||||||||||||||
MSCI AC World Free Index | 8.73 | 12.67 | (4.29 | ) | 3.44 | 3.20 | N/A | |||||||||||||||||
Class A | 2.96 | 11.16 | (6.29 | ) | 4.66 | 2.42 | 8.22 | |||||||||||||||||
With sales charge (b) | (2.96 | ) | 4.77 | (8.12 | ) | 3.43 | 1.81 | 7.84 | ||||||||||||||||
Class B | 2.75 | 10.25 | (7.01 | ) | 3.85 | 1.64 | 7.72 | |||||||||||||||||
With contingent deferred sales charge (c) | (2.25 | ) | 5.25 | (7.95 | ) | 3.51 | 1.64 | 7.72 | ||||||||||||||||
Class C | 2.75 | 10.30 | (7.00 | ) | 3.86 | 1.64 | 7.71 | |||||||||||||||||
With contingent deferred sales charge (d) | 1.75 | 9.30 | (7.00 | ) | 3.86 | 1.64 | 7.71 | |||||||||||||||||
Class I | 3.01 | 11.38 | (6.07 | ) | 4.80 | 2.48 | 8.26 |
In the current prospectus, the expense ratios for Class AAA, A, B, C, and I Shares are 1.69%, 1.69%, 2.44%, 2.44%, and 1.44%, respectively. See page 12 for expense ratios for the year ended December 31, 2010. Class AAA and Class I Shares do not have a sales charge. The maximum sales charge for Class A, B, and C Shares is 5.75%, 5.00%, and 1.00%, respectively.
(a) | Returns represent past performance and do not guarantee future results. Total returns and average annual returns reflect changes in share price, reinvestment of distributions, and are net of expenses. Investment returns and the principal value of an investment will fluctuate. When shares are redeemed, they may be worth more or less than their original cost. Current performance may be lower or higher than performance data presented. Performance returns for periods of less than one year are not annualized. Visit www.gabelli.com for performance information as of the most recent month end. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The prospectus contains information about this and other matters and should be read carefully before investing. Investing in foreign securities involves risks not ordinarily associated with investments in domestic issues, including currency fluctuation, economic, and political risks. The Class AAA Shares’ NAVs per share are used to calculate performance for the periods prior to the issuance of Class A Shares, Class B Shares, Class C, and Class I Shares on March 12, 2000, March 13, 2000, and June 2, 2000, and January 11, 2008, respectively. The actual performance for the Class B Shares and Class C Shares would have been lower due to the additional expenses associated with these classes of shares. The actual performance of the Class I Shares would have been higher due to lower expenses related to this class of shares.The Morgan Stanley Capital International (“MSCI”) All Country (“AC”) World Free Telecommunication Services Index and the MSCI AC World Free Index are unmanaged indicators of global stock market performance. Dividends are considered reinvested. You cannot invest directly in an index. | |
(b) | Performance results include the effect of the maximum 5.75% sales charge at the beginning of the period. | |
(c) | Assuming payment of the maximum contingent deferred sales charge (CDSC). The maximum CDSC for Class B Shares is 5% and is reduced to 0% after six years. | |
(d) | Assuming payment of the maximum CDSC. A CDSC of 1% is imposed on redemptions made within one year of purchase. |
3
The GAMCO Global Telecommunications Fund | ||
Disclosure of Fund Expenses (Unaudited) | ||
For the Six Month Period from July 1, 2010 through December 31, 2010 | Expense Table |
We believe it is important for you to understand the impact of fees and expenses regarding your investment. All mutual funds have operating expenses. As a shareholder of a fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of a fund. When a fund’s expenses are expressed as a percentage of its average net assets, this figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your Fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.
The Expense Table below illustrates your Fund’s costs in two ways:
Actual Fund Return: This section provides information about actual account values and actual expenses. You may use this section to help you to estimate the actual expenses that you paid over the period after any fee waivers and expense reimbursements. The “Ending Account Value” shown is derived from the Fund’s actual return during the past six months, and the “Expenses Paid During Period” shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period.
To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your Fund under the heading “Expenses Paid During Period” to estimate the expenses you paid during this period.
Hypothetical 5% Return: This section provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio. It assumes a hypothetical annualized return of 5% before expenses during the period shown. In this case — because the hypothetical return used is not the Fund’s actual return — the results do not apply to your investment and you cannot use the hypothetical account value and expense to estimate the actual ending account balance or expenses you paid for the period. This example is useful in making comparisons of the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as sales charges (loads), redemption fees, or exchange fees, if any, which are described in the Prospectus. If these costs were applied to your account, your costs would be higher. Therefore, the 5% hypothetical return is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. The “Annualized Expense Ratio” represents the actual expenses for the last six months and may be different from the expense ratio in the Financial Highlights which is for the year ended December 31, 2010.
Beginning | Ending | Annualized | Expenses | |||||||||||||
Account Value | Account Value | Expense | Paid During | |||||||||||||
07/01/10 | 12/31/10 | Ratio | Period* | |||||||||||||
The GAMCO Global Telecommunications Fund | ||||||||||||||||
Actual Fund Return | ||||||||||||||||
Class AAA | $ | 1,000.00 | $ | 1,189.80 | 1.61 | % | $ | 8.89 | ||||||||
Class A | $ | 1,000.00 | $ | 1,189.90 | 1.61 | % | $ | 8.89 | ||||||||
Class B | $ | 1,000.00 | $ | 1,185.10 | 2.36 | % | $ | 13.00 | ||||||||
Class C | $ | 1,000.00 | $ | 1,185.50 | 2.36 | % | $ | 13.00 | ||||||||
Class I | $ | 1,000.00 | $ | 1,190.90 | 1.36 | % | $ | 7.51 | ||||||||
Hypothetical 5% Return | ||||||||||||||||
Class AAA | $ | 1,000.00 | $ | 1,017.09 | 1.61 | % | $ | 8.19 | ||||||||
Class A | $ | 1,000.00 | $ | 1,017.09 | 1.61 | % | $ | 8.19 | ||||||||
Class B | $ | 1,000.00 | $ | 1,013.31 | 2.36 | % | $ | 11.98 | ||||||||
Class C | $ | 1,000.00 | $ | 1,013.31 | 2.36 | % | $ | 11.98 | ||||||||
Class I | $ | 1,000.00 | $ | 1,018.35 | 1.36 | % | $ | 6.92 |
* | Expenses are equal to the Fund’s annualized expense ratio for the last six months multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (184 days), then divided by 365. |
4
Summary of Portfolio Holdings (Unaudited)
The following table presents portfolio holdings as a percent of total net assets as of December 31, 2010:
The GAMCO Global Telecommunications Fund | ||||
Diversified Telecommunications Services | 47.0 | % | ||
Wireless Telecommunications Services | 34.4 | % | ||
Other | 18.5 | % | ||
Other Assets and Liabilities (Net) | 0.1 | % | ||
100.0 | % | |||
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q, the last of which was filed for the quarter ended September 30, 2010. Shareholders may obtain this information at www.gabelli.com or by calling the Fund at 800-GABELLI (800-422-3554). The Fund’s Form N-Q is available on the SEC’s website at www.sec.gov and may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Proxy Voting
The Fund files Form N-PX with its complete proxy voting record for the twelve months ended June 30th, no later than August 31st of each year. A description of the Fund’s proxy voting policies, procedures, and how the Fund voted proxies relating to portfolio securities is available without charge, upon request, by (i) calling 800-GABELLI (800-422-3554); (ii) writing to The Gabelli Funds at One Corporate Center, Rye, NY 10580-1422; or (iii) visiting the SEC’s website at www.sec.gov.
5
The GAMCO Global Telecommunications Fund
Schedule of Investments — December 31, 2010
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS — 99.1% | ||||||||||||
DIVERSIFIED TELECOMMUNICATIONS SERVICES — 47.0% | ||||||||||||
Africa/Middle East —0.5% | ||||||||||||
40,000 | Maroc Telecom | $ | 684,998 | $ | 717,331 | |||||||
2,000 | Pakistan Telecommunications Co. Ltd., GDR (a) | 155,766 | 45,350 | |||||||||
9,100 | Telkom SA Ltd. | 115,338 | 52,493 | |||||||||
956,102 | 815,174 | |||||||||||
Asia/Pacific — 4.4% | ||||||||||||
225,000 | Asia Satellite Telecommunications Holdings Ltd. | 487,155 | 390,786 | |||||||||
170,000 | First Pacific Co. Ltd. | 92,079 | 153,098 | |||||||||
20,000 | First Pacific Co. Ltd., ADR | 30,145 | 90,400 | |||||||||
10,000 | KT Corp., ADR | 183,666 | 208,000 | |||||||||
90,000 | PCCW Ltd. | 74,681 | 39,831 | |||||||||
43,600 | Philippine Long Distance Telephone Co., ADR | 687,734 | 2,540,572 | |||||||||
19,360 | PT Telekomunikasi Indonesia, ADR | 204,390 | 690,184 | |||||||||
835,000 | Singapore Telecommunications Ltd. | 631,438 | 1,984,455 | |||||||||
26,400 | Telecom Corp. of New Zealand Ltd., ADR | 290,228 | 221,760 | |||||||||
375,000 | Telekom Malaysia Berhad | 519,351 | 426,869 | |||||||||
1,800 | Telstra Corp. Ltd., ADR | 35,478 | 25,830 | |||||||||
8,075 | Thai Telephone & Telecom, GDR† (a)(b) | 100,542 | 347 | |||||||||
1,000,000 | True Corp. Public Co. Ltd.† | 687,194 | 244,651 | |||||||||
4,024,081 | 7,016,783 | |||||||||||
Europe — 22.2% | ||||||||||||
14,450 | Belgacom SA | 455,732 | 485,155 | |||||||||
19,500 | BT Group plc, ADR | 716,421 | 556,530 | |||||||||
10,000 | Colt Group SA† | 37,707 | 21,469 | |||||||||
348,000 | Deutsche Telekom AG, ADR | 5,064,847 | 4,454,400 | |||||||||
55,000 | Elisa Oyj | 431,136 | 1,195,796 | |||||||||
40,000 | Fastweb SpA† | 866,196 | 957,332 | |||||||||
28,000 | France Telecom SA, ADR | 725,455 | 590,240 | |||||||||
5,507 | Hellenic Telecommunications Organization SA | 86,065 | 45,111 | |||||||||
35,000 | Hellenic Telecommunications Organization SA, ADR | 205,919 | 140,000 | |||||||||
1,100 | Iliad SA | 112,397 | 119,653 | |||||||||
56,800 | Koninklijke KPN NV, ADR | 483,156 | 833,256 | |||||||||
500 | Magyar Telekom Telecommunications plc, ADR | 9,650 | 6,050 | |||||||||
79,500 | Portugal Telecom SGPS SA | 1,121,082 | 890,262 | |||||||||
61,500 | Portugal Telecom SGPS SA, ADR | 283,414 | 704,790 | |||||||||
9,300 | Rostelecom, ADR | 110,099 | 282,069 | |||||||||
88,000 | Sistema JSFC, GDR (c) | 1,723,007 | 2,193,840 | |||||||||
66,300 | Swisscom AG, ADR | 1,596,003 | 2,920,515 | |||||||||
955,000 | Telecom Italia SpA | 3,263,680 | 1,234,061 | |||||||||
21,000 | Telecom Italia SpA, ADR | 578,887 | 271,740 | |||||||||
93,500 | Telefonica SA, ADR | 2,583,263 | 6,397,270 | |||||||||
6,361 | Telefonica SA, BDR | 108,406 | 145,230 | |||||||||
136,000 | Telekom Austria AG | 2,320,961 | 1,911,884 | |||||||||
44,000 | Telenor ASA | 673,324 | 714,852 | |||||||||
540,000 | TeliaSonera AB | 1,816,187 | 4,279,438 | |||||||||
244,000 | VimpelCom Ltd., ADR | 589,343 | 3,669,760 | |||||||||
25,962,337 | 35,020,703 | |||||||||||
Japan — 0.7% | ||||||||||||
18,500 | Nippon Telegraph & Telephone Corp. | 874,513 | 837,388 | |||||||||
12,000 | Nippon Telegraph & Telephone Corp., ADR | 248,769 | 275,280 | |||||||||
1,123,282 | 1,112,668 | |||||||||||
Latin America — 4.1% | ||||||||||||
26,000 | Brasil Telecom SA† | 244,222 | 240,265 | |||||||||
16,034 | Brasil Telecom SA, ADR | 480,681 | 351,626 | |||||||||
6,490 | Brasil Telecom SA, Cl. C, ADR | 103,757 | 58,280 | |||||||||
44 | Brasil Telecom SA, Preference† | 474 | 318 | |||||||||
37,415,054 | Cable & Wireless Jamaica Ltd.† (d) | 499,070 | 144,875 | |||||||||
500 | Maxcom Telecomunicaciones SAB de CV, ADR† | 1,832 | 1,815 | |||||||||
13,500 | Tele Norte Leste Participacoes SA | 286,958 | 262,681 | |||||||||
20,193 | Tele Norte Leste Participacoes SA, ADR | 280,811 | 296,837 | |||||||||
148,000 | Telecom Argentina SA, ADR | 507,854 | 3,683,720 | |||||||||
14,000 | Telecomunicacoes de Sao Paulo SA | 261,624 | 331,446 | |||||||||
58,000 | Telefonos de Mexico SAB de CV, Cl. L, ADR | 279,519 | 936,120 | |||||||||
3,355 | Telemar Norte Leste SA, Preference, Cl. A† | 148,531 | 96,527 | |||||||||
3,095,333 | 6,404,510 | |||||||||||
North America — 15.1% | ||||||||||||
4,200 | AboveNet Inc. | 182,408 | 245,532 | |||||||||
121,000 | AT&T Inc. | 3,715,231 | 3,554,980 | |||||||||
30,000 | Atlantic Tele-Network Inc. | 99,861 | 1,150,200 | |||||||||
2,000 | BCE Inc. | 59,911 | 71,085 | |||||||||
26,336 | (e) | Bell Aliant Regional Communications Income Fund | 464,105 | 688,397 | ||||||||
36,000 | (e) | Bell Aliant Regional Communications Income Fund (a)(f) | 668,460 | 941,004 | ||||||||
14,000 | CenturyLink Inc. | 506,315 | 646,380 |
See accompanying notes to financial statements.
6
The GAMCO Global Telecommunications Fund
Schedule of Investments (Continued) — December 31, 2010
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS (Continued) DIVERSIFIED TELECOMMUNICATIONS SERVICES (Continued) North America (Continued) | ||||||||||||
637,000 | Cincinnati Bell Inc.† | $ | 3,383,143 | $ | 1,783,600 | |||||||
2,989 | Consolidated Communications Holdings Inc. | 56,970 | 57,687 | |||||||||
10,000 | E.Spire Communications Inc.† (f) | 50,000 | 0 | |||||||||
5,000 | EarthLink Inc. | 57,091 | 43,000 | |||||||||
2,400 | Equinix Inc.† | 182,795 | 195,024 | |||||||||
29,541 | Frontier Communications Corp. | 272,603 | 287,434 | |||||||||
57,000 | General Communication Inc., Cl. A† | 264,870 | 721,620 | |||||||||
10,800 | Manitoba Telecom Services Inc. | 413,091 | 309,565 | |||||||||
22,422 | McLeodUSA Inc., Cl. A† (f) | 78,420 | 110 | |||||||||
130,000 | McLeodUSA Inc., Cl. A, Escrow† (f) | 0 | 0 | |||||||||
27,600 | New Ulm Telecom Inc. | 335,020 | 149,040 | |||||||||
20,000 | NorthPoint Communications Group Inc.† | 11,250 | 30 | |||||||||
103,000 | Qwest Communications International Inc. | 444,485 | 783,830 | |||||||||
33,000 | Shenandoah Telecommunications Co. | 138,825 | 618,090 | |||||||||
45,000 | TELUS Corp. | 873,965 | 2,058,332 | |||||||||
2,943 | TELUS Corp., Non-Voting, New York | 153,347 | 128,197 | |||||||||
33,057 | TELUS Corp., Non-Voting, Toronto | 827,048 | 1,437,911 | |||||||||
105,000 | tw telecom inc.† | 2,049,809 | 1,790,250 | |||||||||
150,000 | Verizon Communications Inc. | 5,135,926 | 5,367,000 | |||||||||
50,000 | Windstream Corp. | 575,209 | 697,000 | |||||||||
21,000,158 | 23,725,298 | |||||||||||
TOTAL DIVERSIFIED | ||||||||||||
TELECOMMUNICATIONS SERVICES | 56,161,293 | 74,095,136 | ||||||||||
WIRELESS TELECOMMUNICATIONS SERVICES — 33.6% | ||||||||||||
Africa/Middle East — 0.8% | ||||||||||||
4,000 | Econet Wireless Zimbabwe Ltd. | 20,351 | 19,080 | |||||||||
21,000 | Mtn Group Ltd. | 328,298 | 428,512 | |||||||||
215,440 | Orascom Telecom Holding SAE, GDR† (b)(c) | 1,783,443 | 786,356 | |||||||||
2,132,092 | 1,233,948 | |||||||||||
Asia/Pacific — 4.1% | ||||||||||||
263,000 | Axiata Group Berhad† | 673,179 | 405,140 | |||||||||
61,000 | China Mobile Ltd., ADR | 744,548 | 3,026,820 | |||||||||
72,200 | China Unicom Hong Kong Ltd., ADR | 570,340 | 1,028,850 | |||||||||
666 | Hutchison Telecommunications Hong Kong Holdings Ltd. | 63 | 204 | |||||||||
5,800 | PT Indosat Tbk, ADR | 47,353 | 168,896 | |||||||||
95,000 | SK Telecom Co. Ltd., ADR | 1,293,472 | 1,769,850 | |||||||||
3,328,955 | 6,399,760 | |||||||||||
Europe — 7.3% | ||||||||||||
39,000 | Bouygues SA | 1,102,431 | 1,681,003 | |||||||||
300,000 | Cable & Wireless Communications plc | 212,300 | 226,988 | |||||||||
300,000 | Cable & Wireless Worldwide plc | 332,059 | 307,296 | |||||||||
30,300 | Millicom International Cellular SA | 2,275,779 | 2,896,680 | |||||||||
7,000 | Mobile TeleSystems OJSC, ADR | 134,379 | 146,090 | |||||||||
119,000 | Turkcell Iletisim Hizmetleri A/S, ADR | 2,494,348 | 2,038,470 | |||||||||
109,000 | Vivendi | 2,925,614 | 2,942,285 | |||||||||
48,000 | Vodafone Group plc, ADR | 1,275,641 | 1,268,640 | |||||||||
10,752,551 | 11,507,452 | |||||||||||
Japan — 2.5% | ||||||||||||
390 | KDDI Corp. | 1,673,845 | 2,252,864 | |||||||||
1,010 | NTT DoCoMo Inc. | 1,688,897 | 1,763,986 | |||||||||
3,362,742 | 4,016,850 | |||||||||||
Latin America — 5.9% | ||||||||||||
127,000 | America Movil SAB de CV, Cl. L, ADR | 903,717 | 7,282,180 | |||||||||
17,500 | Grupo Iusacell SA de CV† (f) | 29,040 | 0 | |||||||||
13,000 | NII Holdings Inc.† | 465,475 | 580,580 | |||||||||
140,000 | Tim Participacoes SA† | 563,380 | 574,337 | |||||||||
11,400 | Tim Participacoes SA, ADR | 399,180 | 389,196 | |||||||||
2,755 | Vivo Participacoes SA | 97,845 | 180,901 | |||||||||
7,914 | Vivo Participacoes SA, ADR | 334,629 | 257,917 | |||||||||
3,256 | Vivo Participacoes SA, Preference | 159,589 | 104,545 | |||||||||
2,952,855 | 9,369,656 | |||||||||||
North America — 13.0% | ||||||||||||
47,350 | Clearwire Corp., Cl. A† | 511,442 | 243,852 | |||||||||
24,000 | ICO Global Communications (Holdings) Ltd.† | 37,119 | 36,000 | |||||||||
20,000 | Internap Network Services Corp.† | 94,111 | 121,600 | |||||||||
1,200 | Leap Wireless International Inc.† | 22,014 | 14,712 | |||||||||
8,000 | MetroPCS Communications Inc.† | 180,956 | 101,040 | |||||||||
1,428 | Nextwave Wireless Inc.† | 8,659 | 999 |
See accompanying notes to financial statements.
7
The GAMCO Global Telecommunications Fund
Schedule of Investments (Continued) — December 31, 2010
Schedule of Investments (Continued) — December 31, 2010
Market | |||||||||||||
Shares | Cost | Value | |||||||||||
COMMON STOCKS (Continued) | |||||||||||||
WIRELESS TELECOMMUNICATIONS SERVICES (Continued) | |||||||||||||
North America (Continued) | |||||||||||||
182,000 | Rogers Communications Inc., Cl. B | $ | 614,098 | $ | 6,302,660 | ||||||||
660,000 | Sprint Nextel Corp.† | 5,272,145 | 2,791,800 | ||||||||||
80,000 | Telephone & Data Systems Inc. | 2,061,826 | 2,924,000 | ||||||||||
60,000 | Telephone & Data Systems Inc., Special | 1,278,136 | 1,891,200 | ||||||||||
120,000 | United States Cellular Corp.† | 5,745,390 | 5,992,800 | ||||||||||
15,825,896 | 20,420,663 | ||||||||||||
TOTAL WIRELESS TELECOMMUNICATIONS SERVICES | 38,355,091 | 52,948,329 | |||||||||||
OTHER — 18.5% | |||||||||||||
Asia/Pacific — 0.5% | |||||||||||||
19,065 | Austar United Communications Ltd.† | 34,838 | 18,622 | ||||||||||
70,000 | C.P. Pokphand Co. Ltd., ADR | 58,725 | 224,700 | ||||||||||
26,000 | Himachal Futuristic Communications Ltd., GDR† (a)(f) | 141,200 | 24,523 | ||||||||||
50,000 | Hutchison Whampoa Ltd. | 487,170 | 514,615 | ||||||||||
250,000 | Time Engineering Berhad | 152,324 | 36,485 | ||||||||||
874,257 | 818,945 | ||||||||||||
Europe — 2.3% | |||||||||||||
8,000 | Alcatel-Lucent, ADR† | 72,520 | 23,680 | ||||||||||
12,000 | BCB Holdings Ltd., London† | 23,864 | 13,658 | ||||||||||
1,000 | British Sky Broadcasting Group plc, ADR | 24,267 | 46,450 | ||||||||||
9,000 | E.ON AG | 126,255 | 275,834 | ||||||||||
59,500 | G4S plc | 0 | 236,182 | ||||||||||
96,000 | GN Store Nord A/S† | 526,185 | 875,145 | ||||||||||
1,500 | Kinnevik Investment AB, Cl. A | 24,248 | 30,465 | ||||||||||
27,500 | Kinnevik Investment AB, Cl. B | 504,308 | 560,169 | ||||||||||
6,400 | L. M. Ericsson Telephone Co., Cl. B, ADR | 40,907 | 73,792 | ||||||||||
25,000 | Nokia Oyj, ADR | 59,902 | 258,000 | ||||||||||
900 | Shellshock Ltd.† . | 521 | 702 | ||||||||||
750 | Siemens AG, ADR | 23,625 | 93,188 | ||||||||||
21,000 | Telegraaf Media Groep NV | 453,308 | 419,534 | ||||||||||
5,000 | ThyssenKrupp AG | 91,947 | 207,028 | ||||||||||
15,827 | TNT NV, ADR | 210,573 | 417,200 | ||||||||||
4,000 | Zon Multimedia Servicos de Telecomunicacoes e Multimedia SGPS SA | 39,320 | 18,120 | ||||||||||
8,000 | Zon Multimedia Servicos de Telecomunicacoes e Multimedia SGPS SA, ADR | 114,800 | 35,840 | ||||||||||
2,336,550 | 3,584,987 | ||||||||||||
Japan — 0.4% | |||||||||||||
72,000 | Furukawa Electric Co. Ltd. | 350,157 | 323,685 | ||||||||||
21,000 | Tokyo Broadcasting System Holdings Inc. | 538,827 | 298,226 | ||||||||||
888,984 | 621,911 | ||||||||||||
Latin America — 0.4% | |||||||||||||
25,693 | Contax Participacoes SA, ADR | 11,050 | 93,779 | ||||||||||
19,800 | Grupo Televisa SA, ADR† | 472,383 | 513,414 | ||||||||||
1,224 | Shellproof Ltd.† | 1,210 | 859 | ||||||||||
484,643 | 608,052 | ||||||||||||
North America — 14.9% | |||||||||||||
80,000 | Adelphia Communications Corp., Cl. A† (f) | 66,496 | 0 | ||||||||||
80,000 | Adelphia Communications Corp., Cl. A, Escrow† (f) . | 0 | 0 | ||||||||||
80,000 | Adelphia Recovery Trust† | 0 | 800 | ||||||||||
1,400 | Amphenol Corp., Cl. A | 5,729 | 73,892 | ||||||||||
2,567 | AOL Inc.† | 75,888 | 60,863 | ||||||||||
2,100 | Ascent Media Corp., Cl. A† | 27,089 | 81,396 | ||||||||||
124,500 | Cablevision Systems Corp., Cl. A | 2,528,083 | 4,213,080 | ||||||||||
11,434 | CanWest Global Communications Corp., Cl. A, Canada† (f) | 131,317 | 519 | ||||||||||
23,566 | CanWest Global Communications Corp., Cl. A, United States† (f) | 322,321 | 1,063 | ||||||||||
7,400 | Cogeco Inc. | 144,351 | 279,016 | ||||||||||
7,000 | Comcast Corp., Cl. A, Special | 134,808 | 145,670 | ||||||||||
4,000 | Convergys Corp.† | 53,716 | 52,680 | ||||||||||
157,000 | DIRECTV, Cl. A† | 3,946,896 | 6,269,010 | ||||||||||
2,500 | Discovery Communications Inc., Cl. A† | 33,420 | 104,250 | ||||||||||
8,500 | Discovery Communications Inc., Cl. C† | 58,698 | 311,865 | ||||||||||
112,000 | DISH Network Corp., Cl. A† | 1,958,736 | 2,201,920 | ||||||||||
14,400 | EchoStar Corp., Cl. A† | 319,212 | 359,568 | ||||||||||
5,000 | Fisher Communications Inc.† | 157,841 | 109,000 | ||||||||||
400 | Google Inc., Cl. A† | 149,671 | 237,588 | ||||||||||
1,000 | L-3 Communications Holdings Inc. | 11,000 | 70,490 | ||||||||||
52,000 | Liberty Global Inc., Cl. A† | 1,280,949 | 1,839,760 | ||||||||||
50,000 | Liberty Global Inc., Cl. C† | 1,219,998 | 1,694,500 |
See accompanying notes to financial statements.
8
The GAMCO Global Telecommunications Fund
Schedule of Investments (Continued) — December 31, 2010
Schedule of Investments (Continued) — December 31, 2010
Market | ||||||||||||
Shares | Cost | Value | ||||||||||
COMMON STOCKS (Continued) | ||||||||||||
OTHER (Continued) | ||||||||||||
North America (Continued) | ||||||||||||
24,000 | Liberty Media Corp. — Capital, Cl. A† | $ | 175,218 | $ | 1,501,440 | |||||||
14,000 | Liberty Media Corp. - Interactive, Cl. A† | 182,051 | 220,780 | |||||||||
1,000 | Lockheed Martin Corp. | 22,787 | 69,910 | |||||||||
48,000 | LSI Corp.† | 339,318 | 287,520 | |||||||||
24,000 | Madison Square Garden Inc., Cl. A† | 476,009 | 618,720 | |||||||||
29,900 | Mediacom Communications Corp., Cl. A† | 246,964 | 252,954 | |||||||||
20,000 | Motorola Inc.† | 166,489 | 181,400 | |||||||||
1,000 | Ncm Services Inc.† | 1,375 | 45 | |||||||||
2,000 | News Corp., Cl. B | 21,050 | 32,840 | |||||||||
2,524 | Orbital Sciences Corp.† | 16,208 | 43,236 | |||||||||
6,000 | SCANA Corp. | 158,756 | 243,600 | |||||||||
4,500 | SJW Corp. | 70,456 | 119,115 | |||||||||
3,000 | Time Warner Cable Inc. | 168,764 | 198,090 | |||||||||
22,000 | Time Warner Inc. | 783,483 | 707,740 | |||||||||
4,200 | TiVo Inc.† | 28,859 | 36,246 | |||||||||
47 | Xanadoo Co., Cl. A† | 23,394 | 17,037 | |||||||||
51,000 | Yahoo! Inc.† | 1,254,539 | 848,130 | |||||||||
16,761,939 | 23,485,733 | |||||||||||
TOTAL OTHER | 21,346,373 | 29,119,628 | ||||||||||
TOTAL COMMON STOCKS | 115,862,757 | 156,163,093 | ||||||||||
WARRANTS — 0.8% | ||||||||||||
WIRELESS TELECOMMUNICATIONS SERVICES — 0.8% | ||||||||||||
Asia/Pacific — 0.8% | ||||||||||||
160,000 | Bharti Airtel Ltd., expire 09/19/13† (a) | 1,019,856 | 1,284,152 | |||||||||
TOTAL INVESTMENTS — 99.9% | $ | 116,882,613 | 157,447,245 | |||||||||
Other Assets and Liabilities (Net) — 0.1% | 107,033 | |||||||||||
NET ASSETS — 100.0% | $ | 157,554,278 | ||||||||||
(a) | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2010, the market value of Rule 144A securities amounted to $2,295,376 or 1.46% of net assets. | |
(b) | Illiquid security. | |
(c) | Security purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. These securities cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. At December 31, 2010, the market value of Regulation S securities amounted to $2,980,196 or 1.89% of total net assets, which was valued under methods approved by the Board Directors as follows: |
12/31/10 | ||||||||||||||||
Carrying | ||||||||||||||||
Acquisition | Acquisition | Acquisition | Value | |||||||||||||
Shares | Issuer | Date | Cost | Per Unit | ||||||||||||
215,440 | Orascom Telecom Holding SAE, GDR | 04/05/07 | $ | 1,783,443 | $ | 3.6500 | ||||||||||
88,000 | Sistema JSFC, GDR | 02/09/05 | 1,723,007 | 24.9300 |
(d) | At December 31, 2010, the Fund held an investment in a restricted security amounting to $144,875 or 0.09% of net assets, which was valued under methods approved by the Board of Directors as follows: |
12/31/10 | ||||||||||||||||
Carrying | ||||||||||||||||
Acquisition | Acquisition | Acquisition | Value | |||||||||||||
Shares | Issuer | Date | Cost | Per Unit | ||||||||||||
37,415,054 | Cable & Wireless Jamaica Ltd. | 03/10/94 | $ | 499,070 | $ | 0.0039 |
(e) | Denoted in units. | |
(f) | Security fair valued under procedures established by the Board of Directors. The procedures may include reviewing available financial information about the company and reviewing valuation of comparable securities and other factors on a regular basis. At December 31, 2010, the market value of fair valued securities amounted to $967,219 or 0.61% of net assets. | |
† | Non-income producing security. | |
ADR | American Depositary Receipt | |
BDR | Brazilian Depositary Receipt | |
GDR | Global Depositary Receipt | |
OJSC | Open Joint Stock Company |
% of | ||||||||
Market | Market | |||||||
Geographic Diversification | Value | Value | ||||||
North America | 42.9 | % | $ | 67,631,694 | ||||
Europe | 31.8 | 50,113,142 | ||||||
Latin America | 10.4 | 16,382,218 | ||||||
Asia/Pacific | 9.9 | 15,519,640 | ||||||
Japan | 3.7 | 5,751,429 | ||||||
Africa/Middle East | 1.3 | 2,049,122 | ||||||
100.0 | % | $ | 157,447,245 | |||||
See accompanying notes to financial statements.
9
The GAMCO Global Telecommunications Fund
Statement of Assets and Liabilities
December 31, 2010
December 31, 2010
Assets: | ||||
Investments, at value (cost $116,882,613) | $ | 157,447,245 | ||
Receivable for investments sold | 238,417 | |||
Receivable for Fund shares issued | 94,478 | |||
Dividends receivable | 358,394 | |||
Prepaid expenses | 35,340 | |||
Total Assets | 158,173,874 | |||
Liabilities: | ||||
Payable to custodian | 9,807 | |||
Payable for Fund shares redeemed | 61,940 | |||
Payable for investment advisory fees | 132,880 | |||
Payable for distribution fees | 33,719 | |||
Payable for accounting fees | 7,500 | |||
Payable for legal and audit fees | 50,288 | |||
Payable for shareholder communications expenses | 42,682 | |||
Line of credit payable | 232,000 | |||
Other accrued expenses | 48,780 | |||
Total Liabilities | 619,596 | |||
Net Assets (applicable to 7,714,185 shares outstanding) | $ | 157,554,278 | ||
Net Assets Consist of: | ||||
Paid-in capital | $ | 139,663,110 | ||
Accumulated distributions in excess of net investment income | (253,338 | ) | ||
Accumulated net realized loss on investments and foreign currency transactions | (22,427,535 | ) | ||
Net unrealized appreciation on investments | 40,564,632 | |||
Net unrealized appreciation on foreign currency translations | 7,409 | |||
Net Assets | $ | 157,554,278 | ||
Shares of Capital Stock each at $0.001 par value: | ||||
Class AAA: | ||||
Net Asset Value, offering, and redemption price per share ($154,279,881 ÷ 7,552,551 shares outstanding; 75,000,000 shares authorized) | $ | 20.43 | ||
Class A: | ||||
Net Asset Value and redemption price per share ($1,901,430 ÷ 93,136 shares outstanding; 50,000,000 shares authorized) | $ | 20.42 | ||
Maximum offering price per share (NAV ÷ 0.9425, based on maximum sales charge of 5.75% of the offering price) | $ | 21.67 | ||
Class B: | ||||
Net Asset Value and offering price per share ($72,320 ÷ 3,607 shares outstanding; 25,000,000 shares authorized) | $ | 20.05 | (a) | |
Class C: | ||||
Net Asset Value and offering price per share ($889,592 ÷ 44,754 shares outstanding; 25,000,000 shares authorized) | $ | 19.88 | (a) | |
Class I: | ||||
Net Asset Value, offering, and redemption price per share ($411,055 ÷ 20,137 shares outstanding; 25,000,000 shares authorized) | $ | 20.41 | ||
(a) | Redemption price varies based on the length of time held. |
Statement of Operations
For the Year Ended December 31, 2010
For the Year Ended December 31, 2010
Investment Income: | ||||
Dividends (net of foreign withholding taxes of $490,854) | $ | 5,186,622 | ||
Interest | 1,134 | |||
Total Investment Income | 5,187,756 | |||
Expenses: | ||||
Investment advisory fees | 1,530,582 | |||
Distribution fees — Class AAA | 374,925 | |||
Distribution fees — Class A | 4,649 | |||
Distribution fees — Class B | 816 | |||
Distribution fees — Class C | 7,506 | |||
Shareholder services fees | 186,206 | |||
Shareholder communications expenses | 105,152 | |||
Custodian fees | 88,180 | |||
Legal and audit fees | 57,860 | |||
Accounting fees | 45,000 | |||
Registration expenses | 41,416 | |||
Directors’ fees | 23,359 | |||
Interest expense | 2,321 | |||
Miscellaneous expenses | 23,646 | |||
Total Expenses | 2,491,618 | |||
Less: | ||||
Custodian fee credits | (2 | ) | ||
Net Expenses | 2,491,616 | |||
Net Investment Income | 2,696,140 | |||
Net Realized and Unrealized Gain/(Loss) on Investments and Foreign Currency: | ||||
Net realized gain on investments | 6,670,646 | |||
Net realized loss on foreign currency transactions | (19,010 | ) | ||
Net realized gain on investments and foreign currency transactions | 6,651,636 | |||
Net change in unrealized appreciation/depreciation: | ||||
on investments | 6,766,440 | |||
on foreign currency translations | (2,754 | ) | ||
Net change in unrealized appreciation/depreciation on investments and foreign currency translations | 6,763,686 | |||
Net Realized and Unrealized Gain/(Loss) on Investments and Foreign Currency | 13,415,322 | |||
Net Increase in Net Assets Resulting from Operations | $ | 16,111,462 | ||
See accompanying notes to financial statements.
10
The GAMCO Global Telecommunications Fund
Statement of Changes in Net Assets
Year Ended | Year Ended | |||||||
December 31, 2010 | December 31, 2009 | |||||||
Operations: | ||||||||
Net investment income | $ | 2,696,140 | $ | 2,663,939 | ||||
Net realized gain/(loss) on investments and foreign currency transactions | 6,651,636 | (2,386,315 | ) | |||||
Net change in unrealized appreciation on investments and foreign currency translations | 6,763,686 | 31,569,099 | ||||||
Net Increase in Net Assets Resulting from Operations | 16,111,462 | 31,846,723 | ||||||
Distributions to Shareholders: | ||||||||
Net investment income | ||||||||
Class AAA | (2,735,566 | ) | (2,939,971 | ) | ||||
Class A | (33,548 | ) | (29,177 | ) | ||||
Class B | (684 | ) | (1,251 | ) | ||||
Class C | (11,034 | ) | (8,616 | ) | ||||
Class I | (8,256 | ) | (8,465 | ) | ||||
(2,789,088 | ) | (2,987,480 | ) | |||||
Return of capital | ||||||||
Class AAA | — | (3,705 | ) | |||||
Class A | — | (37 | ) | |||||
Class B | — | (2 | ) | |||||
Class C | — | (11 | ) | |||||
Class I | — | (10 | ) | |||||
— | (3,765 | ) | ||||||
Total Distributions to Shareholders | (2,789,088 | ) | (2,991,245 | ) | ||||
Capital Share Transactions: | ||||||||
Class AAA | (14,099,904 | ) | (12,824,415 | ) | ||||
Class A | 187,998 | 142,679 | ||||||
Class B | (33,858 | ) | (19,565 | ) | ||||
Class C | 165,685 | (14,253 | ) | |||||
Class I | (22,444 | ) | (77,528 | ) | ||||
Net Decrease in Net Assets from Capital Share Transactions | (13,802,523 | ) | (12,793,082 | ) | ||||
Redemption Fees | (131 | ) | 219 | |||||
Net Increase/(Decrease) in Net Assets | (480,280 | ) | 16,062,615 | |||||
Net Assets: | ||||||||
Beginning of period | 158,034,558 | 141,971,943 | ||||||
End of period (including undistributed net investment income of $0 and $0, respectively) | $ | 157,554,278 | $ | 158,034,558 | ||||
See accompanying notes to financial statements.
11
The GAMCO Global Telecommunications Fund
Financial Highlights
Financial Highlights
Selected data for a share of capital stock outstanding throughout each period:
Income (Loss) | Ratios to Average Net Assets/ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
from Investment Operations | Distributions | Supplemental Data | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Asset | Realized and | Total | Net Asset | Net Assets | Net | |||||||||||||||||||||||||||||||||||||||||||||||||||
Period | Value, | Net | Unrealized | from | Net | Return | Value, | End of | Investment | Portfolio | ||||||||||||||||||||||||||||||||||||||||||||||
Ended | Beginning | Investment | Gain (Loss) on | Investment | Investment | of | Total | Redemption | End of | Total | Period | Income | Operating | Turnover | ||||||||||||||||||||||||||||||||||||||||||
December 31, | of Period | Income (Loss)(a) | Investments | Operations | Income | Capital(b) | Distributions | Fees(a)(b) | Period | Return† | (in 000’s) | (Loss) | Expenses(c) | Rate†† | ||||||||||||||||||||||||||||||||||||||||||
Class AAA | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 18.71 | $ | 0.34 | $ | 1.75 | $ | 2.09 | $ | (0.37 | ) | — | $ | (0.37 | ) | $ | (0.00 | ) | $ | 20.43 | 11.2 | % | $ | 154,280 | 1.76 | % | 1.62 | % | 6 | % | ||||||||||||||||||||||||||
2009 | 15.31 | 0.30 | 3.46 | 3.76 | (0.36 | ) | $ | 0.00 | (0.36 | ) | 0.00 | 18.71 | 24.6 | 155,352 | 1.88 | 1.69 | 4 | |||||||||||||||||||||||||||||||||||||||
2008 | 26.34 | 0.32 | (11.02 | ) | (10.70 | ) | (0.33 | ) | — | (0.33 | ) | 0.00 | 15.31 | (40.6 | ) | 139,761 | 1.51 | 1.59 | 3 | |||||||||||||||||||||||||||||||||||||
2007 | 22.46 | 0.25 | 3.86 | 4.11 | (0.23 | ) | — | (0.23 | ) | 0.00 | 26.34 | 18.3 | 307,368 | 0.98 | 1.50 | 11 | ||||||||||||||||||||||||||||||||||||||||
2006 | 17.53 | 0.12 | 4.95 | 5.07 | (0.14 | ) | — | (0.14 | ) | 0.00 | 22.46 | 28.9 | 214,436 | 0.63 | 1.56 | 7 | ||||||||||||||||||||||||||||||||||||||||
Class A | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 18.70 | $ | 0.36 | $ | 1.73 | $ | 2.09 | $ | (0.37 | ) | — | $ | (0.37 | ) | $ | (0.00 | ) | $ | 20.42 | 11.2 | % | $ | 1,901 | 1.87 | % | 1.62 | % | 6 | % | ||||||||||||||||||||||||||
2009 | 15.31 | 0.29 | 3.46 | 3.75 | (0.36 | ) | $ | 0.00 | (0.36 | ) | 0.00 | 18.70 | 24.5 | 1,523 | 1.81 | 1.69 | 4 | |||||||||||||||||||||||||||||||||||||||
2008 | 26.32 | 0.32 | (11.00 | ) | (10.68 | ) | (0.33 | ) | — | (0.33 | ) | 0.00 | 15.31 | (40.6 | ) | 1,130 | 1.52 | 1.59 | 3 | |||||||||||||||||||||||||||||||||||||
2007 | 22.43 | 0.23 | 3.89 | 4.12 | (0.23 | ) | — | (0.23 | ) | 0.00 | 26.32 | 18.4 | 2,728 | 0.89 | 1.50 | 11 | ||||||||||||||||||||||||||||||||||||||||
2006 | 17.51 | 0.12 | 4.95 | 5.07 | (0.15 | ) | — | (0.15 | ) | 0.00 | 22.43 | 29.0 | 1,170 | 0.64 | 1.56 | 7 | ||||||||||||||||||||||||||||||||||||||||
Class B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 18.36 | $ | 0.19 | $ | 1.69 | $ | 1.88 | $ | (0.19 | ) | — | $ | (0.19 | ) | $ | (0.00 | ) | $ | 20.05 | 10.3 | % | $ | 72 | 1.02 | % | 2.37 | % | 6 | % | ||||||||||||||||||||||||||
2009 | 15.03 | 0.18 | 3.38 | 3.56 | (0.23 | ) | $ | 0.00 | (0.23 | ) | 0.00 | 18.36 | 23.7 | 99 | 1.13 | 2.44 | 4 | |||||||||||||||||||||||||||||||||||||||
2008 | 25.67 | 0.20 | (10.74 | ) | (10.54 | ) | (0.10 | ) | — | (0.10 | ) | 0.00 | 15.03 | (41.0 | ) | 102 | 0.95 | 2.34 | 3 | |||||||||||||||||||||||||||||||||||||
2007 | 21.90 | 0.06 | 3.75 | 3.81 | (0.04 | ) | — | (0.04 | ) | 0.00 | 25.67 | 17.4 | 297 | 0.26 | 2.25 | 11 | ||||||||||||||||||||||||||||||||||||||||
2006 | 17.11 | (0.03 | ) | 4.82 | 4.79 | — | — | — | 0.00 | 21.90 | 28.0 | 291 | (0.17 | ) | 2.31 | 7 | ||||||||||||||||||||||||||||||||||||||||
Class C | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 18.25 | $ | 0.19 | $ | 1.69 | $ | 1.88 | $ | (0.25 | ) | — | $ | (0.25 | ) | $ | (0.00 | ) | $ | 19.88 | 10.3 | % | $ | 890 | 1.04 | % | 2.37 | % | 6 | % | ||||||||||||||||||||||||||
2009 | 14.96 | 0.17 | 3.36 | 3.53 | (0.24 | ) | $ | 0.00 | (0.24 | ) | 0.00 | 18.25 | 23.6 | 659 | 1.08 | 2.44 | 4 | |||||||||||||||||||||||||||||||||||||||
2008 | 25.50 | 0.15 | (10.61 | ) | (10.46 | ) | (0.08 | ) | — | (0.08 | ) | 0.00 | 14.96 | (41.0 | ) | 563 | 0.73 | 2.34 | 3 | |||||||||||||||||||||||||||||||||||||
2007 | 21.76 | 0.05 | 3.72 | 3.77 | (0.03 | ) | — | (0.03 | ) | 0.00 | 25.50 | 17.3 | 2,122 | 0.19 | 2.25 | 11 | ||||||||||||||||||||||||||||||||||||||||
2006 | 17.03 | 0.00 | (b) | 4.77 | 4.77 | (0.04 | ) | — | (0.04 | ) | 0.00 | 21.76 | 28.0 | 351 | (0.02 | ) | 2.31 | 7 | ||||||||||||||||||||||||||||||||||||||
Class I | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2010 | $ | 18.70 | $ | 0.39 | $ | 1.74 | $ | 2.13 | $ | (0.42 | ) | — | $ | (0.42 | ) | $ | (0.00 | ) | $ | 20.41 | 11.4 | % | $ | 411 | 2.06 | % | 1.37 | % | 6 | % | ||||||||||||||||||||||||||
2009 | 15.30 | 0.35 | 3.45 | 3.80 | (0.40 | ) | $ | 0.00 | (0.40 | ) | 0.00 | 18.70 | 24.8 | 402 | 2.17 | 1.44 | 4 | |||||||||||||||||||||||||||||||||||||||
2008(d) | 25.53 | 0.35 | (10.19 | ) | (9.84 | ) | (0.39 | ) | — | (0.39 | ) | 0.00 | 15.30 | (38.5 | ) | 416 | 1.78 | (e) | 1.34 | (e) | 3 |
† | Total return represents aggregate total return of a hypothetical $1,000 investment at the beginning of the period and sold at the end of the period including reinvestment of distributions and does not reflect applicable sales charges. Total return for a period of less than one year is not annualized. | |
†† | Effective in 2008, a change in accounting policy was adopted with regard to the calculation of the portfolio turnover rate to include cash proceeds due to mergers. Had this policy been adopted retroactively, the portfolio turnover rate for the year ended December 31, 2007 would have been 25%. The portfolio turnover rate for the year ended 2006 would have been as shown. | |
(a) | Per share amounts have been calculated using the average shares outstanding method. | |
(b) | Amount represents less than $0.005 per share. | |
(c) | The Fund incurred interest expense during the year ended December 31, 2008. If interest expense had not been incurred, the ratio of operating expenses to average net assets would have been 1.57% (Class AAA), 1.57% (Class A), 2.32% (Class B), 2.32% (Class C), and 1.32% (Class I), respectively. For the years ended December 31, 2010, 2009, 2007, and 2006, the effect of interest expense was minimal. | |
(d) | From the commencement of offering Class I Shares on January 11, 2008 through December 31, 2008. | |
(e) | Annualized. |
See accompanying notes to financial statements.
12
The GAMCO Global Telecommunications Fund
Notes to Financial Statements
Notes to Financial Statements
1. Organization. The GAMCO Global Telecommunications Fund (the “Fund”), a series of GAMCO Global Series Funds, Inc. (the “Corporation”), was organized on July 16, 1993 as a Maryland corporation. The Fund is a non-diversified open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”), and one of four separately managed portfolios (collectively, the “Portfolios”) of the Corporation. The Fund’s primary objective is capital appreciation. The Fund commenced investment operations on November 1, 1993.
2. Significant Accounting Policies. The Fund’s financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), which may require the use of management estimates and assumptions. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements.
Security Valuation. Portfolio securities listed or traded on a nationally recognized securities exchange or traded in the U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a market’s official closing price as of the close of business on the day the securities are being valued. If there were no sales that day, the security is valued at the average of the closing bid and asked prices or, if there were no asked prices quoted on that day, then the security is valued at the closing bid price on that day. If no bid or asked prices are quoted on such day, the security is valued at the most recently available price or, if the Board of Directors (the “Board”) so determines, by such other method as the Board 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 Gabelli Funds, LLC (the “Adviser”).
Portfolio securities primarily traded on a foreign market are generally valued at the preceding closing values of such securities on the relevant market, but may be fair valued pursuant to procedures established by the Board if market conditions change significantly after the close of the foreign market but prior to the close of business on the day the securities are being valued. Debt instruments with remaining maturities of sixty days or less that are not credit impaired are valued at amortized cost, unless the Board determines such amount does not reflect the securities’ fair value, in which case these securities will be fair valued as determined by the Board. Debt instruments having a maturity greater than sixty days for which market quotations are readily available are valued at the average of the latest bid and asked prices. If there were no asked prices quoted on such day, the security is valued using the closing bid price. U.S. government obligations with maturities greater than sixty days are normally valued using a model that incorporates market observable data such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued principally using dealer quotations. Futures contracts are valued at the closing settlement price of the exchange or board of trade on which the applicable contract is traded.
Securities and assets for which market quotations are not readily available are fair valued as determined by the Board. Fair valuation methodologies and procedures may include, but are not limited to: analysis and review of available financial and non-financial information about the company; comparisons with the valuation and changes in valuation of similar securities, including a comparison of foreign securities with the equivalent U.S. dollar value ADR securities at the close of the U.S. exchange; and evaluation of any other information that could be indicative of the value of the security.
13
The GAMCO Global Telecommunications Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
The inputs and valuation techniques used to measure fair value of the Fund’s investments are summarized into three levels as described in the hierarchy below:
• | Level 1 — quoted prices in active markets for identical securities; | ||
• | Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.); and | ||
• | Level 3 — significant unobservable inputs (including the Fund’s determinations as to the fair value of investments). |
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input both individually and in aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of the Fund’s investments in securities by inputs used to value the Fund’s investments as of December 31, 2010 is as follows:
Valuation Inputs | ||||||||||||||||
Level 2 Other | ||||||||||||||||
Level 1 | Significant Observable | Level 3 Significant | Total Market Value | |||||||||||||
Quoted Prices | Inputs | Unobservable Inputs | at 12/31/10 | |||||||||||||
INVESTMENTS IN SECURITIES: | ||||||||||||||||
ASSETS (Market Value): | ||||||||||||||||
Common Stocks: | ||||||||||||||||
DIVERSIFIED TELECOMMUNICATIONS SERVICES | ||||||||||||||||
North America | $ | 22,635,144 | $ | 1,090,044 | $ | 110 | $ | 23,725,298 | ||||||||
Other Regions (a) | 50,369,838 | — | — | 50,369,838 | ||||||||||||
WIRELESS TELECOMMUNICATIONS SERVICES | ||||||||||||||||
Latin America | 9,369,656 | — | 0 | 9,369,656 | ||||||||||||
Other Regions (a) | 43,578,673 | — | — | 43,578,673 | ||||||||||||
OTHER | ||||||||||||||||
Asia/Pacific | $ | 794,422 | $ | 24,523 | $ | — | $ | 818,945 | ||||||||
North America | 23,484,151 | — | 1,582 | 23,485,733 | ||||||||||||
Other Regions (a) | 4,814,950 | — | — | 4,814,950 | ||||||||||||
Total Common Stocks | 155,046,834 | 1,114,567 | 1,692 | 156,163,093 | ||||||||||||
Warrants (a) | — | 1,284,152 | — | 1,284,152 | ||||||||||||
TOTAL INVESTMENTS IN SECURITIES — ASSETS | $ | 155,046,834 | $ | 2,398,719 | $ | 1,692 | $ | 157,447,245 | ||||||||
(a) | Please refer to the Schedule of Investments for the regional classifications of these portfolio holdings. |
The Fund did not have significant transfers between Level 1 and Level 2 during the year ended December 31, 2010.
14
The GAMCO Global Telecommunications Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
The following table reconciles Level 3 investments for which significant unobservable inputs were used to determine fair value:
Net change | ||||||||||||||||||||||||||||||||||||
in unrealized | ||||||||||||||||||||||||||||||||||||
appreciation/ | ||||||||||||||||||||||||||||||||||||
depreciation | ||||||||||||||||||||||||||||||||||||
during the | ||||||||||||||||||||||||||||||||||||
period on | ||||||||||||||||||||||||||||||||||||
Change in | Level 3 | |||||||||||||||||||||||||||||||||||
Balance | Accrued | Realized | unrealized | Net | Transfers | Transfers | Balance | investments | ||||||||||||||||||||||||||||
as of | discounts/ | gain/ | appreciation/ | purchases/ | into | out of | as of | held at | ||||||||||||||||||||||||||||
12/31/09 | (premiums) | (loss) | depreciation† | (sales) | Level 3†† | Level 3†† | 12/31/10 | 12/31/10† | ||||||||||||||||||||||||||||
INVESTMENTS IN SECURITIES: | ||||||||||||||||||||||||||||||||||||
ASSETS (Market Value): | ||||||||||||||||||||||||||||||||||||
Common Stocks: | ||||||||||||||||||||||||||||||||||||
DIVERSIFIED TELECOMMUNICATIONS SERVICES | ||||||||||||||||||||||||||||||||||||
North America | $ | 110 | $ | — | $ | 71,568 | $ | — | $ | (71,568 | ) | $ | — | $ | — | $ | 110 | $ | — | |||||||||||||||||
WIRELESS TELECOMMUNICATIONS SERVICES | ||||||||||||||||||||||||||||||||||||
Latin America | — | — | — | (69,307 | ) | — | 69,307 | — | 0 | (69,307 | ) | |||||||||||||||||||||||||
OTHER | ||||||||||||||||||||||||||||||||||||
North America | 4 | — | (840 | ) | 7,346 | (8,260 | ) | 3,332 | — | 1,582 | 6,510 | |||||||||||||||||||||||||
Total Common Stocks | 114 | — | 70,728 | (61,961 | ) | (79,828 | ) | 72,639 | — | 1,692 | (62,797 | ) | ||||||||||||||||||||||||
TOTAL INVESTMENTS IN SECURITIES | $ | 114 | $ | — | $ | 70,728 | $ | (61,961 | ) | $ | (79,828 | ) | $ | 72,639 | $ | — | $ | 1,692 | $ | (62,797 | ) | |||||||||||||||
† | Net change in unrealized appreciation/depreciation on investments is included in the related amounts in the Statement of Operations. | |
†† | The Fund’s policy is to recognize transfers into and transfers out of Level 3 as of the beginning of the reporting period. |
In January 2010, the Financial Accounting Standards Board (“FASB”) issued amended guidance to improve disclosure about fair value measurements which requires additional disclosures about transfers between Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements in the reconciliation of fair value measurements using significant unobservable inputs (Level 3). FASB also clarified existing disclosure requirements relating to the levels of disaggregation of fair value measurement and inputs and valuation techniques used to measure fair value. The amended guidance is effective for financial statements for fiscal years beginning after December 15, 2009 and interim periods within those fiscal years. Management has adopted the amended guidance and determined that there was no material impact to the Fund’s financial statements except for additional disclosures made in the notes. Disclosures about purchases, sales, issuances, and settlements in the rollforward of activity in Level 3 fair value measurements are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. Management is currently evaluating the impact of the additional disclosure requirements on the Fund’s financial statements.
Derivative Financial Instruments. The Fund may engage in various portfolio investment strategies by investing in a number of derivative financial instruments for the purpose of hedging against changes in the value of its portfolio securities and in the value of securities it intends to purchase or hedging against a specific transaction with respect to either the currency in which the transaction is denominated or another currency. Investing in certain derivative financial instruments, including participation in the options, futures, or swap markets, entails certain execution, liquidity, hedging, tax, and securities, interest, credit, or currency market risks. Losses may arise if the Adviser’s prediction of movements in the direction of the securities, foreign currency, and interest rate markets is inaccurate. Losses may also arise if the counterparty does not perform its duties under a contract, or
15
The GAMCO Global Telecommunications Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
that, in the event of default, the Fund may be delayed in or prevented from obtaining payments or other contractual remedies owed to it under derivative contracts. The creditworthiness of the counterparties is closely monitored in order to minimize these risks. Participation in derivative transactions involves investment risks, transaction costs, and potential losses to which the Fund would not be subject absent the use of these strategies. The consequences of these risks, transaction costs, and losses may have a negative impact on the Fund’s ability to pay distributions.
The Fund’s derivative contracts held at December 31, 2010, if any, are not accounted for as hedging instruments under GAAP.
Futures Contracts. The Fund may engage in futures contracts for the purpose of hedging against changes in the value of its portfolio securities and in the value of securities it intends to purchase. Upon entering into a futures contract, the Fund is required to deposit with the broker an amount of cash or cash equivalents equal to a certain percentage of the contract amount. This is known as the “initial margin.” Subsequent payments (“variation margin”) are made or received by the Fund each day, depending on the daily fluctuations in the value of the contract, and are included in unrealized appreciation/depreciation on futures contracts. The Fund recognizes a realized gain or loss when the contract is closed.
There are several risks in connection with the use of futures contracts as a hedging instrument. The change in value of futures contracts primarily corresponds with the value of their underlying instruments, which may not correlate with the change in value of the hedged investments. In addition, there is the risk that the Fund may not be able to enter into a closing transaction because of an illiquid secondary market. During the year ended December 31, 2010, the Fund held no investments in futures contracts.
Forward Foreign Exchange Contracts. The Fund may engage in forward foreign exchange contracts for the purpose of hedging a specific transaction with respect to either the currency in which the transaction is denominated or another currency as deemed appropriate by the Adviser. Forward foreign exchange contracts are valued at the forward rate and are marked-to-market daily. The change in market value is included in unrealized appreciation/depreciation on foreign currency translations. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
The use of forward foreign exchange contracts does not eliminate fluctuations in the underlying prices of the Fund’s portfolio securities, but it does establish a rate of exchange that can be achieved in the future. Although forward foreign exchange contracts limit the risk of loss due to a decline in the value of the hedged currency, they also limit any potential gain that might result should the value of the currency increase. In addition, the Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. During the year ended December 31, 2010, the Fund held no investments in forward foreign exchange contracts.
Repurchase Agreements. The Fund may enter into repurchase agreements with primary government securities dealers recognized by the Federal Reserve Board, with member banks of the Federal Reserve System, or with other brokers or dealers that meet credit guidelines established by the Adviser and reviewed by the Board. Under the terms of a typical repurchase agreement, the Fund takes possession of an underlying debt obligation subject to an obligation of the seller to repurchase, and the Fund to resell, the obligation at an
16
The GAMCO Global Telecommunications Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
agreed-upon price and time, thereby determining the yield during the Fund’s holding period. It is the policy of the Fund to receive and maintain securities as collateral whose market value is not less than their repurchase price. The Fund will make payment for such securities only upon physical delivery or upon evidence of book entry transfer of the collateral to the account of the custodian. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to maintain the adequacy of the collateral. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. At December 31, 2010, the Fund held no investments in repurchase agreements.
Securities Sold Short. The Fund may enter into short sale transactions. Short selling involves selling securities that may or may not be owned and, at times, borrowing the same securities for delivery to the purchaser, with an obligation to replace such borrowed securities at a later date. The proceeds received from short sales are recorded as liabilities and the Fund records an unrealized gain or loss to the extent of the difference between the proceeds received and the value of an open short position on the day of determination. The Fund records a realized gain or loss when the short position is closed out. By entering into a short sale, the Fund bears the market risk of an unfavorable change in the price of the security sold short. Dividends on short sales are recorded as an expense by the Fund on the ex-dividend date and interest expense is recorded on the accrual basis. The broker retains collateral for the value of the open positions, which is adjusted periodically as the value of the position fluctuates. At December 31, 2010, there were no short sales outstanding.
Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Foreign currencies, investments, and other assets and liabilities are translated into U.S. dollars at the current exchange rates. Purchases and sales of investment securities, income, and expenses are translated at the exchange rate prevailing on the respective dates of such transactions. Unrealized gains and losses that result from changes in foreign exchange rates and/or changes in market prices of securities have been included in unrealized appreciation/depreciation on investments and foreign currency translations. Net realized foreign currency gains and losses resulting from changes in exchange rates include foreign currency gains and losses between trade date and settlement date on investment securities transactions, foreign currency transactions, and the difference between the amounts of interest and dividends recorded on the books of the Fund and the amounts actually received. The portion of foreign currency gains and losses related to fluctuation in exchange rates between the initial purchase trade date and subsequent sale trade date is included in realized gain/loss on investments.
Foreign Securities. The Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation of currencies, the inability to repatriate funds, less complete financial information about companies, and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. issuers.
Foreign Taxes. The Fund may be subject to foreign taxes on income, gains on investments, or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
17
The GAMCO Global Telecommunications Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
Restricted and Illiquid Securities. The Fund may invest up to 15% of its net assets in securities for which the markets are illiquid. Illiquid securities include securities the disposition of which is subject to substantial legal or contractual restrictions.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 saleable among qualified institutional investors under special rules adopted by the SEC may be treated as liquid if they satisfy liquidity standards established by the Board. The continued liquidity of such securities is not as well assured as that of publicly traded securities, and accordingly the Board will monitor their liquidity. For the restricted and illiquid securities the Fund held as of December 31, 2010, refer to the Schedule of Investments.
Concentration Risks. The Fund may invest a high percentage of its assets in specific sectors of the market in order to achieve a potentially greater investment return. As a result, the Fund may be more susceptible to economic, political, and regulatory developments in a particular sector of the market, positive or negative, and may experience increased volatility to the Fund’s net asset value (“NAV”) and a magnified effect in its total return.
Securities Transactions and Investment Income. Securities transactions are accounted for on the trade date with realized gain or loss on investments determined by using the identified cost method. Interest income (including amortization of premium and accretion of discount) is recorded on the accrual basis. Premiums and discounts on debt securities are amortized using the effective yield to maturity method. Dividend income is recorded on the ex-dividend date, except for certain dividends from foreign securities that are recorded as soon after the ex-dividend date as the Fund becomes aware of such dividends.
Determination of Net Asset Value and Calculation of Expenses. Certain administrative expenses are common to, and allocated among, various affiliated funds. Such allocations are made on the basis of each fund’s average net assets or other criteria directly affecting the expenses as determined by the Adviser pursuant to procedures established by the Board.
In calculating the NAV per share of each class, investment income, realized and unrealized gains and losses, redemption fees, and expenses other than class specific expenses are allocated daily to each class of shares based upon the proportion of net assets of each class at the beginning of each day. Distribution expenses are borne solely by the class incurring the expense.
Custodian Fee Credits and Interest Expense. When cash balances are maintained in the custody account, the Fund receives credits which are used to offset custodian fees. The gross expenses paid under the custody arrangement are included in custodian fees in the Statement of Operations with the corresponding expense offset, if any, shown as “Custodian fee credits.” When cash balances are overdrawn, the Fund is charged an overdraft fee equal to 2.00% above the federal funds rate on outstanding balances. This amount, if any, would be included in “interest expense” in the Statement of Operations.
Distributions to Shareholders. Distributions to shareholders are recorded on the ex-dividend date. Distributions to shareholders are based on income and capital gains as determined in accordance with federal income tax regulations, which may differ from income and capital gains as determined under GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities and
18
The GAMCO Global Telecommunications Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
foreign currency transactions held by the Fund, timing differences, and differing characterizations of distributions made by the Fund. Distributions from net investment income include net realized gains on foreign currency transactions. These book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent, adjustments are made to the appropriate capital accounts in the period when the differences arise. Permanent differences were primarily due to the tax treatment of currency gains and losses, expired capital loss carryforwards, recharacterization of distributions, and reclassifications of litigation income. These reclassifications have no impact on the NAV of the Fund. For the year ended December 31, 2010, reclassifications were made to decrease accumulated distributions in excess of net investment income by $93,242 and decrease accumulated net realized loss on investments and foreign currency transactions by $2,221,304, with an offsetting adjustment to additional paid-in capital.
The tax character of distributions paid during the years ended December 31, 2010 and December 31, 2009 was as follows:
Year Ended | Year Ended | |||||||
December 31, 2010 | December 31, 2009 | |||||||
Distributions paid from: | ||||||||
Ordinary income | $ | 2,789,088 | $ | 2,987,480 | ||||
Return of capital | — | 3,765 | ||||||
$ | 2,789,088 | $ | 2,991,245 | |||||
Provision for Income Taxes. The Fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). It is the policy of the Fund to comply with the requirements of the Code applicable to regulated investment companies and to distribute substantially all of its net investment company taxable income and net capital gains. Therefore, no provision for federal income taxes is required.
At December 31, 2010, the components of accumulated earnings/losses on a tax basis were as follows:
Accumulated capital loss carryforwards | $ | (19,781,711 | ) | |
Net unrealized appreciation on investments and foreign currency translations | 37,672,879 | |||
Total | $ | 17,891,168 | ||
At December 31, 2010, the Fund had net capital loss carryforwards for federal income tax purposes of $19,781,711 which are available to reduce future required distributions of net capital gains to shareholders. $11,910,139 of the loss carryforward is available through 2011; $3,314,655 is available through 2012; $250,132 is available through 2016; and $4,306,785 is available through 2017.
During the year ended December 31, 2010, the Fund utilized capital loss carryforwards of $6,711,336.
During the year ended December 31, 2010, $2,265,326 of the capital loss carryforwards expired.
At December 31, 2010, the temporary difference between book basis and tax basis net unrealized appreciation on investments was primarily due to deferral of losses from wash sales for tax purposes and mark-to-market adjustments on investments in passive foreign investment companies.
19
The GAMCO Global Telecommunications Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
The following summarizes the tax cost of investments and the related net unrealized appreciation at December 31, 2010:
Gross | Gross | |||||||||||||||
Unrealized | Unrealized | Net Unrealized | ||||||||||||||
Cost | Appreciation | Depreciation | Appreciation | |||||||||||||
Investments | $ | 119,781,775 | $ | 55,328,754 | $ | (17,663,284 | ) | $ | 37,665,470 |
The Fund is required to evaluate tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Income tax and related interest and penalties would be recognized by the Fund as tax expense in the Statement of Operations if the tax positions were deemed not to meet the more-likely-than-not threshold. For the year ended December 31, 2010, the Fund did not incur any income tax, interest, or penalties. As of December 31, 2010, the Adviser has reviewed all open tax years and concluded that there was no impact to the Fund’s net assets or results of operations. Tax years ended December 31, 2007 through December 31, 2010 remain subject to examination by the Internal Revenue Service and state taxing authorities. On an ongoing basis, the Adviser will monitor the Fund’s tax positions to determine if adjustments to this conclusion are necessary.
3. Investment Advisory Agreement and Other Transactions. The Fund has entered into an investment advisory agreement (the “Advisory Agreement”) with the Adviser which provides that the Fund will pay the Adviser a fee, computed daily and paid monthly, at the annual rate of 1.00% of the value of its average daily net assets. In accordance with the Advisory Agreement, the Adviser provides a continuous investment program for the Fund’s portfolio, oversees the administration of all aspects of the Fund’s business and affairs, and pays the compensation of all Officers and Directors of the Fund who are affiliated persons of the Adviser.
If total net assets of the Corporation are in excess of $100 million, the Corporation pays each Director who is not considered an affiliated person an annual retainer of $3,000 plus $500 for each Board meeting attended and each Director is reimbursed by the Corporation for any out of pocket expenses incurred in attending meetings. If total net assets of the Corporation are below $100 million, the Corporation pays each Independent Director an annual retainer of $1,500 plus $500 for each Board meeting attended and each Director is reimbursed by the Corporation for any out of pocket expenses incurred in attending meetings. All Board committee members receive $500 per meeting attended and the Chairman of the Audit Committee and the Lead Director each receive an annual fee of $1,000. A Director may receive a single meeting fee, allocated among the participating funds, for participation in certain meetings held on behalf of multiple funds. Directors who are directors or employees of the Adviser or an affiliated company receive no compensation or expense reimbursement from the Corporation.
4. Distribution Plan. The Fund’s Board has adopted a distribution plan (the “Plan”) for each class of shares, except for Class I Shares, pursuant to Rule 12b-1 under the 1940 Act. Gabelli & Company, Inc. (“Gabelli & Co.”), an affiliate of the Adviser, serves as Distributor of the Fund. Under the Class AAA, Class A, Class B, and Class C Share Plans, payments are authorized to Gabelli & Co. at annual rates of 0.25%, 0.25%, 1.00%, and 1.00%, respectively, of the average daily net assets of those classes, the annual limitations under each Plan. Such payments are accrued daily and paid monthly.
5. Portfolio Securities. Purchases and sales of securities for the year ended December 31, 2010, other than short-term securities and U.S. Government obligations, aggregated $9,524,504 and $20,909,857, respectively.
20
The GAMCO Global Telecommunications Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
6. Transactions with Affiliates. During the year ended December 31, 2010, the Fund paid brokerage commissions on security trades of $20,717 to Gabelli & Co. Additionally, Gabelli & Co. informed the Fund that it retained $1,667 from investors representing commissions (sales charges and underwriting fees) on sales and redemptions of Fund shares.
The cost of calculating the Fund’s NAV per share is a Fund expense pursuant to the Advisory Agreement between the Fund and the Adviser. During the year ended December 31, 2010, the Fund paid or accrued $45,000 to the Adviser in connection with the cost of computing the Fund’s NAV.
7. Line of Credit. The Fund participates in an unsecured line of credit of up to $75,000,000 under which it may borrow up to 10% of its net assets from the custodian for temporary borrowing purposes. Borrowings under this arrangement bear interest at the higher of the sum of the overnight LIBOR plus 125 basis points or the sum of the federal funds rate plus 125 basis points at the time of borrowing. This amount, if any, would be included in “interest expense” in the Statement of Operations. At December 31, 2010, borrowings outstanding under the line of credit amounted to $232,000.
The average daily amount of borrowings outstanding under the line of credit during the year ended December 31, 2010 was $146,214 with a weighted average interest rate of 1.41%. The maximum amount borrowed at any time during the year ended December 31, 2010 was $1,284,000.
8. Capital Stock. The Fund offers five classes of shares — Class AAA Shares, Class A Shares, Class B Shares, Class C Shares, and Class I Shares. Class AAA Shares are offered without a sales charge only to investors who acquire them directly from Gabelli & Co., through selected broker/dealers, or the transfer agent. Class I Shares are offered through Gabelli & Co. and selected broker/dealers to foundations, endowments, institutions, and employee benefit plans without a sales charge. Class A Shares are subject to a maximum front-end sales charge of 5.75%. Class B Shares are subject to a contingent deferred sales charge (“CDSC”) upon redemption within six years of purchase and automatically convert to Class A Shares approximately eight years after the original purchase. The applicable Class B CDSC is equal to a percentage declining from 5% of the lesser of the NAV per share at the date of the original purchase or at the date of redemption, based on the length of time held. Class C Shares are subject to a 1.00% CDSC for one year after purchase. Class B Shares are available only through exchange of Class B Shares of other funds distributed by Gabelli & Co.
The Fund imposes a redemption fee of 2.00% on all classes of shares that are redeemed or exchanged on or before the seventh day after the date of a purchase. The redemption fee is deducted from the proceeds otherwise payable to the redeeming shareholders and is retained by the Fund as an increase in paid-in capital. The redemption fees retained by the Fund during the years ended December 31, 2010 and December 31, 2009 amounted to ($131) and $219, respectively. The redemption fee does not apply to redemptions of shares where (i) the shares were purchased through automatic reinvestment of distributions, (ii) the redemption was initiated by the Fund, (iii) the shares were purchased through programs that collect the redemption fee at the program level and remit them to the Fund, or (iv) the shares were purchased through programs that the Adviser determines to have appropriate anti-short-term trading policies in place or as to which the Adviser has received assurances that look-through redemption fee procedures or effective anti-short-term trading policies and procedures are in place.
21
The GAMCO Global Telecommunications Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
Transactions in shares of capital stock were as follows:
Year Ended | Year Ended | |||||||||||||||
December 31, 2010 | December 31, 2009 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Class AAA | ||||||||||||||||
Shares sold | 666,415 | $ | 12,512,680 | 724,622 | $ | 11,924,198 | ||||||||||
Shares issued upon reinvestment of distributions | 127,366 | 2,598,261 | 148,517 | 2,798,066 | ||||||||||||
Shares redeemed | (1,542,428 | ) | (29,210,845 | ) | (1,698,778 | ) | (27,546,679 | ) | ||||||||
Net decrease | (748,647 | ) | $ | (14,099,904 | ) | (825,639 | ) | $ | (12,824,415 | ) | ||||||
Class A | ||||||||||||||||
Shares sold | 44,347 | $ | 832,442 | 31,366 | $ | 527,531 | ||||||||||
Shares issued upon reinvestment of distributions | 1,192 | 24,308 | 1,026 | 19,314 | ||||||||||||
Shares redeemed | (33,811 | ) | (668,752 | ) | (24,812 | ) | (404,166 | ) | ||||||||
Net increase | 11,728 | $ | 187,998 | 7,580 | $ | 142,679 | ||||||||||
Class B | ||||||||||||||||
Shares issued upon reinvestment of distributions | 19 | $ | 370 | 40 | $ | 739 | ||||||||||
Shares redeemed | (1,827 | ) | (34,228 | ) | (1,412 | ) | (20,304 | ) | ||||||||
Net decrease | (1,808 | ) | $ | (33,858 | ) | (1,372 | ) | $ | (19,565 | ) | ||||||
Class C | ||||||||||||||||
Shares sold | 16,520 | $ | 309,349 | 9,932 | $ | 166,337 | ||||||||||
Shares issued upon reinvestment of distributions | 404 | 8,018 | 342 | 6,283 | ||||||||||||
Shares redeemed | (8,298 | ) | (151,682 | ) | (11,751 | ) | (186,873 | ) | ||||||||
Net increase/(decrease) | 8,626 | $ | 165,685 | (1,477 | ) | $ | (14,253 | ) | ||||||||
Class I | ||||||||||||||||
Shares sold | 8,880 | $ | 170,254 | 7,794 | $ | 132,046 | ||||||||||
Shares issued upon reinvestment of distributions | 405 | 8,238 | 352 | 6,634 | ||||||||||||
Shares redeemed | (10,631 | ) | (200,936 | ) | (13,861 | ) | (216,208 | ) | ||||||||
Net decrease | (1,346 | ) | $ | (22,444 | ) | (5,715 | ) | $ | (77,528 | ) | ||||||
9. Indemnifications. The Fund enters into contracts that contain a variety of indemnifications. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts. Management has reviewed the Fund’s existing contracts and expects the risk of loss to be remote.
22
The GAMCO Global Telecommunications Fund
Notes to Financial Statements (Continued)
Notes to Financial Statements (Continued)
10. Other Matters. On April 24, 2008, the Adviser entered into a settlement with the SEC to resolve an inquiry regarding prior frequent trading activity in shares of the GAMCO Global Growth Fund (the “Global Growth Fund”) by one investor who was banned from the Global Growth Fund in August 2002. In the administrative settlement order, the SEC found that the Adviser had willfully violated Section 206(2) of the 1940 Act, Section 17(d) of the 1940 Act and Rule 17d-1 thereunder, and had willfully aided and abetted and caused violations of Section 12(d)(1)(B)(i) of the 1940 Act. Under the terms of the settlement, the Adviser, while neither admitting nor denying the SEC’s findings and allegations, paid $16 million (which included a $5 million civil monetary penalty), approximately $12.8 million of which is in the process of being paid to shareholders of the Global Growth Fund in accordance with a plan developed by an independent distribution consultant and approved by the independent directors of the Global Growth Fund and acceptable to the staff of the SEC, and agreed to cease and desist from future violations of the above referenced federal securities laws and rule. The SEC order also noted the cooperation that the Adviser had given the staff of the SEC during its inquiry. The settlement did not have a material adverse impact on the Adviser or its ability to fulfill its obligations under the Advisory Agreement. On the same day, the SEC filed a civil action against the Executive Vice President and Chief Operating Officer of the Adviser, alleging violations of certain federal securities laws arising from the same matter. The officer is also an officer of the Fund, the Global Growth Fund, and other funds in the Gabelli/GAMCO fund complex. The officer denied the allegations and is continuing in his positions with the Adviser and the funds. The court dismissed certain claims and found that the SEC was not entitled to pursue various remedies against the officer while leaving one remedy in the event the SEC were able to prove violations of law. The court subsequently dismissed without prejudice the remaining remedy against the officer, which would allow the SEC to appeal the court’s rulings. On October 29, 2010 the SEC filed its appeal with the U.S. Court of Appeals for the Second Circuit regarding the lower court’s orders. The Adviser currently expects that any resolution of the action against the officer will not have a material adverse impact on the Fund or the Adviser or its ability to fulfill its obligations under the Advisory Agreement.
11. Subsequent Events. Management has evaluated the impact on the Fund of all subsequent events occurring through the date the financial statements were issued and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements.
23
The GAMCO Global Telecommunications Fund
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of
Directors of GAMCO Global Series Funds, Inc.
Directors of GAMCO Global Series Funds, Inc.
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of The GAMCO Global Telecommunications Fund (the “Fund”), a series of GAMCO Global Series Funds, Inc., as of December 31, 2010, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2010, by correspondence with the Fund’s custodian. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The GAMCO Global Telecommunications Fund, a series of GAMCO Global Series Funds, Inc., at December 31, 2010, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Philadelphia, Pennsylvania February 28, 2011 |
24
The GAMCO Global Telecommunications Fund
Board Consideration and Re-Approval of Investment Advisory Agreement (Unaudited)
During the six months ended December 31, 2010, the Board of Directors of the Corporation approved the continuation of the investment advisory agreement with the Adviser for the Fund on the basis of the recommendation by the directors (the “Independent Board Members”) who are not “interested persons” of the Fund. The following paragraphs summarize the material information and factors considered by the Independent Board Members as well as their conclusions relative to such factors.
Nature, Extent, and Quality of Services. The Independent Board Members considered information regarding the Fund’s portfolio managers, the depth of the analyst pool available to the Adviser and the Fund’s portfolio managers, the scope of supervisory, administrative, shareholder, and other services supervised or provided by the Adviser and the absence of significant service problems reported to the Board. The Independent Board Members noted the experience, length of service, and reputation of the Fund’s portfolio managers.
Investment Performance. The Independent Board Members reviewed the short, medium, and long-term performance of the Fund against a peer group of global telecommunications funds, noting that the Fund’s performance was in the third quartile in its peer group for the one year period, in the top third of its peer group for the three year period, and was above average for the five year period.
Profitability. The Independent Board Members reviewed summary data regarding the profitability of the Fund to the Adviser both with a pro rata administrative charge and with a standalone administrative charge. The Independent Board Members also noted that a substantial portion of the Fund’s portfolio transactions were executed by an affiliated broker of the Adviser and that the affiliated broker received distribution fees and minor amounts of sales commissions.
Economies of Scale. The Independent Board Members discussed the major elements of the Adviser’s cost structure and the relationship of those elements to potential economies of scale and reviewed rudimentary data relating to the impact of 20% growth in the Fund on the Adviser’s profitability.
Sharing of Economies of Scale. The Independent Board Members noted that the investment management fee schedule for the Fund does not take into account any potential economies of scale that may develop.
Service and Cost Comparisons. The Independent Board Members compared the expense ratios of the investment management fee, other expenses, and total expenses of the Fund with similar expense ratios of the Lipper peer group of telecommunication funds and noted that the Adviser’s management fee includes substantially all administrative services of the Fund as well as investment advisory services of the Adviser. The Independent Board Members noted that the Fund’s expense ratio was above average and the Fund’s size was below average within this group. The Board Members compared the management fee to the fees for other funds managed by the Adviser and considered fees charged by an affiliated adviser for general equity institutional accounts and unregistered funds.
Conclusions. The Independent Board Members concluded that the Fund enjoyed highly experienced portfolio management services, good ancillary services, and a performance record that was satisfactory. The Independent Board Members also concluded that the Fund’s expense ratios and the profitability to the Adviser of managing the Fund were reasonable, and that economies of scale were not a significant factor in their thinking at this time. The Independent Board Members did not view the potential profitability of ancillary services as material to their decision. On the basis of the foregoing and without assigning particular weight to any single conclusion, the Independent Board Members determined to recommend continuation of the investment management agreement to the full Board.
25
The GAMCO Global Telecommunications Fund
Additional Fund Information (Unaudited)
Additional Fund Information (Unaudited)
The business and affairs of the Corporation are managed under the direction of the Corporation’s Board of Directors. Information pertaining to the Directors and officers of the Corporation is set forth below. The Corporation’s Statement of Additional Information includes additional information about the Fund’s Directors and is available without charge, upon request, by calling 800-GABELLI (800-422-3554) or by writing to The GAMCO Global Telecommunications Fund at One Corporate Center, Rye, NY 10580-1422.
Term of | Number of | |||||||||
Name, Position(s) | Office and | Funds in Fund | ||||||||
Address1 | Length of | Complex Overseen | Principal Occupation(s) | Other Directorships | ||||||
and Age | Time Served2 | by Director | During Past Five Years | Held by Director4 | ||||||
INTERESTED DIRECTORS3: | ||||||||||
Mario J. Gabelli Director and Chief Investment Officer Age: 68 | Since 1993 | 26 | Chairman and Chief Executive Officer of GAMCO Investors, Inc. and Chief Investment Officer — Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management Inc.; Director/Trustee or Chief Investment Officer of other registered investment companies in the Gabelli/GAMCO Funds complex; Chief Executive Officer of GGCP, Inc. | Director of Morgan Group Holdings, Inc. (holding company); Chairman of the Board and Chief Executive Officer of LICT Corp. (multimedia and communication services company); Director of CIBL, Inc. (broadcasting and wireless communications) | ||||||
John D. Gabelli Director Age: 66 | Since 1993 | 10 | Senior Vice President of Gabelli & Company, Inc. | — | ||||||
INDEPENDENT DIRECTORS5: | ||||||||||
E. Val Cerutti Director Age: 71 | Since 2001 | 7 | Chief Executive Officer of Cerutti Consultants, Inc. | Director of The LGL Group, Inc. (diversified manufacturing) (1990-2009) | ||||||
Anthony J. Colavita Director Age: 75 | Since 1993 | 34 | President of the law firm of Anthony J. Colavita, P.C. | — | ||||||
Arthur V. Ferrara Director Age: 80 | Since 2001 | 8 | Former Chairman of the Board and Chief Executive Officer of The Guardian Life Insurance Company of America (1992-1995) | — | ||||||
Werner J. Roeder, MD Director Age: 70 | Since 1993 | 22 | Medical Director of Lawrence Hospital and practicing private physician | — | ||||||
Anthonie C. van Ekris Director Age: 76 | Since 1993 | 20 | Chairman of BALMAC International, Inc. (commodities and futures trading) | Director of Aurado Energy Inc. (oil and gas operations) through 2005 | ||||||
Salvatore J. Zizza Director Age: 65 | Since 2004 | 28 | Chairman and Chief Executive Officer of Zizza & Co., Ltd. (private holding company) and Chief Executive Officer of General Employment Enterprises, Inc. | Director of Harbor BioSciences, Inc. (biotechnology) and Trans-Lux Corporation (business services); Chairman of each of BAM (manufacturing); Metropolitan Paper Recycling (recycling); Bergen Cove Realty Inc. (real estate); Bion Environmental Technologies (technology) (2005-2008); Director of Earl Scheib Inc. (automotive painting) through April 2009 |
26
The GAMCO Global Telecommunications Fund
Additional Fund Information (Continued) (Unaudited)
Additional Fund Information (Continued) (Unaudited)
Term of | ||||
Name, Position(s) | Office and | |||
Address1 | Length of | Principal Occupation(s) | ||
and Age | Time Served2 | During Past Five Years | ||
OFFICERS: | ||||
Bruce N. Alpert President and Secretary Age: 59 | Since 2003 | Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC since 1988 and an officer of all of the registered investment companies in the Gabelli/GAMCO Funds complex. Director of Teton Advisors, Inc. since 1998; Chairman of Teton Advisors, Inc. 2008 to 2010; President of Teton Advisors, Inc. 1998 through 2008; Senior Vice President of GAMCO Investors, Inc. since 2008 | ||
Agnes Mullady Treasurer Age: 52 | Since 2006 | Senior Vice President of GAMCO Investors, Inc. since 2009; Vice President of Gabelli Funds, LLC since 2007; Officer of all of the registered investment companies in the Gabelli/GAMCO Funds complex | ||
Peter D. Goldstein Chief Compliance Officer Age: 57 | Since 2004 | Director of Regulatory Affairs at GAMCO Investors, Inc. since 2004; Chief Compliance Officer of all of the registered investment companies in the Gabelli/GAMCO Funds complex |
1 | Address: One Corporate Center, Rye, NY 10580-1422, unless otherwise noted. | |
2 | Each Director will hold office for an indefinite term until the earliest of (i) the next meeting of shareholders, if any, called for the purpose of considering the election or re-election of such Director and until the election and qualification of his or her successor, if any, elected at such meeting, or (ii) the date a Director resigns or retires, or a Director is removed by the Board of Directors or shareholders, in accordance with the Corporation’s By-Laws and Articles of Incorporation. Each officer will hold office for an indefinite term until the date he or she resigns or retires or until his or her successor is elected and qualified. | |
3 | “Interested person” of the Corporation as defined in the 1940 Act. Messrs. Gabelli are each considered an “interested person” because of their affiliation with Gabelli Funds, LLC which acts as the Corporation’s investment adviser. Mario J. Gabelli and John D. Gabelli are brothers. | |
4 | This column includes only directorships of companies required to report to the SEC under the Securities Exchange Act of 1934, as amended, i.e., public companies, or other investment companies registered under the 1940 Act. | |
5 | Directors who are not interested persons are considered “Independent” Directors. |
2010 TAX NOTICE TO SHAREHOLDERS (Unaudited)
For the year ended December 31, 2010, the Fund paid to shareholders ordinary income distributions (comprised of net investment income) totaling $0.3677, $0.3672, $0.1907, $0.2488, and $0.4180 per share for Class AAA, Class A, Class B, Class C, and Class I, respectively. For the year ended December 31, 2010, 34.21% of the ordinary income distribution qualifies for the dividends received deduction available to corporations. The Fund designates 100% of the ordinary income distribution as qualified dividend income pursuant to the Jobs and Growth Tax Relief Reconciliation Act of 2003. The Fund designates 0.02% of the ordinary income distributions as qualified interest income, pursuant to the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.
U.S. Government Income:
The percentage of the ordinary income distribution paid by the Fund during 2010 which was derived from U.S. Treasury securities was 0.02%. Such income is exempt from state and local tax in all states. However, many states, including New York and California, allow a tax exemption for a portion of the income earned only if a mutual fund has invested at least 50% of its assets at the end of each quarter of the Fund’s fiscal year in U.S. Government securities. The GAMCO Global Telecommunications Fund did not meet this strict requirement in 2010. The percentage of U.S. Government securities held as of December 31, 2010 was 0.00%. Due to the diversity in state and local tax law, it is recommended that you consult your personal tax adviser as to the applicability of the information provided to your specific situation.
All designations are based on financial information available as of the date of this annual report and, accordingly, are subject to change. For each item, it is the intention of the Fund to designate the maximum amount permitted under the Internal Revenue Code and the regulations thereunder.
27
GAMCO Global Series Funds, Inc.
The GAMCO Global Telecommunications Fund
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
fax: 914-921-5118
website: www.gabelli.com
e-mail: info@gabelli.com
Net Asset Value per share available daily by calling
800-GABELLI after 7:00 P.M.
The GAMCO Global Telecommunications Fund
One Corporate Center
Rye, New York 10580-1422
800-GABELLI
800-422-3554
fax: 914-921-5118
website: www.gabelli.com
e-mail: info@gabelli.com
Net Asset Value per share available daily by calling
800-GABELLI after 7:00 P.M.
Board of Directors | ||
Mario J. Gabelli, CFA | John D. Gabelli | |
Chairman and Chief | Senior Vice President | |
Executive Officer | Gabelli & Company, Inc. | |
GAMCO Investors, Inc. | ||
E. Val Cerutti | Werner J. Roeder, MD | |
Chief Executive Officer | Medical Director | |
Cerutti Consultants, Inc. | Lawrence Hospital | |
Anthony J. Colavita | Anthonie C. van Ekris | |
President | Chairman | |
Anthony J. Colavita, P.C. | BALMAC International, Inc. | |
Arthur V. Ferrara | Salvatore J. Zizza | |
Former Chairman and | Chairman | |
Chief Executive Officer | Zizza & Co., Ltd. | |
Guardian Life Insurance | ||
Company of America | ||
Officers | ||
Bruce N. Alpert | Peter D. Goldstein | |
President and Secretary | Chief Compliance Officer | |
Agnes Mullady | ||
Treasurer |
Distributor
Gabelli & Company, Inc.
Gabelli & Company, Inc.
Custodian, Transfer Agent, and Dividend Agent
State Street Bank and Trust Company
State Street Bank and Trust Company
Legal Counsel
Skadden, Arps, Slate, Meagher & Flom LLP
Skadden, Arps, Slate, Meagher & Flom LLP
This report is submitted for the general information of the shareholders of The GAMCO Global Telecommunications Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus.
The GAMCO Global Telecommunications Fund
Morningstar® rated The GAMCO Global Telecommunications Fund Class AAA Shares
4 stars overall and 3 stars for the three year period and 4 stars for the five and ten year periods
ended December 31, 2010 among 39, 39, 33, and 29 Communications funds, respectively.
4 stars overall and 3 stars for the three year period and 4 stars for the five and ten year periods
ended December 31, 2010 among 39, 39, 33, and 29 Communications funds, respectively.
ANNUAL REPORT
DECEMBER 31, 2010
DECEMBER 31, 2010
Item 2. | Code of Ethics. |
(a) | The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. |
(c) | There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. |
(d) | The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item’s instructions. |
Item 3. | Audit Committee Financial Expert. |
As of the end of the period covered by the report, the registrant’s Board of Directors has determined that Salvatore J. Zizza is qualified to serve as an audit committee financial expert serving on its audit committee and that he is “independent,” as defined by Item 3 of Form N-CSR.
Item 4. | Principal Accountant Fees and Services. |
Audit Fees
(a) | The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $123,100 for 2009 and $88,000 for 2010. |
Audit-Related Fees
(b) | The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item are $0 for 2009 and $0 for 2010. |
Tax Fees
(c) | The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning are $17,200 for 2009 and $12,400 for 2010. Tax fees represent tax compliance services provided in connection with the review of the Registrant’s tax returns. |
All Other Fees
(d) | The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $0 for 2009 and $0 for 2010. | ||
(e) | (1) | Disclose the audit committee’s pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. | |
Pre-Approval Policies and Procedures. The Audit Committee (“Committee”) of the registrant is responsible for pre-approving (i) all audit and permissible non-audit services to be provided by the independent registered public accounting firm to the registrant and (ii) all permissible non-audit services to be provided by the independent registered public accounting firm to the Adviser, Gabelli Funds, LLC, and any affiliate of Gabelli Funds, LLC (“Gabelli”) that provides services to the registrant (a “Covered Services Provider”) if the independent registered public accounting firm’s engagement related directly to the operations and financial reporting of the registrant. The Committee may delegate its responsibility to pre-approve any such audit and permissible non-audit services to the Chairperson of the Committee, and the Chairperson must report to the Committee, at its next regularly scheduled meeting after the Chairperson’s pre-approval of such services, his or her decision(s). The Committee may also establish detailed pre-approval policies and procedures for pre-approval of such services in accordance with applicable laws, including the delegation of some or all of the Committee’s pre-approval responsibilities to the other persons (other than Gabelli or the registrant’s officers). Pre-approval by the Committee of any permissible non-audit services is not required so long as: (i) the permissible non-audit services were not recognized by the registrant at the time of the engagement to be non-audit services; and (ii) such services are promptly brought to the attention of the Committee and approved by the Committee or Chairperson prior to the completion of the audit. | |||
(e) | (2) | The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows: |
(b) N/A
(c) 0%
(d) N/A
(f) | The percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was 0%. |
(g) | The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant was $17,200 for 2009 and $17,400 for 2010. |
(h) | The registrant’s audit committee of the board of directors has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence. |
Item 5. | Audit Committee of Listed registrants. |
Not applicable.
Item 6. | Investments. |
(a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. |
(b) | Not applicable. |
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable.
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable.
Item 10. | Submission of Matters to a Vote of Security Holders. |
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s Board of Directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. | Controls and Procedures. |
(a) | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
(b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. Exhibits.
(a) | (1) | Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. |
(a) | (2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
(a) | (3) | Not applicable. |
(b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes- Oxley Act of 2002 are attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) GAMCO Global Series Funds, Inc.
By (Signature and Title)* | /s/ Bruce N. Alpert | |||
Bruce N. Alpert, Principal Executive Officer | ||||
Date 3/9/11
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* | /s/ Bruce N. Alpert | |||
Bruce N. Alpert, Principal Executive Officer | ||||
Date 3/9/11
By (Signature and Title)* | /s/ Agnes Mullady | |||
Agnes Mullady, Principal Financial Officer and Treasurer | ||||
Date 3/9/11
* | Print the name and title of each signing officer under his or her signature. |