UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT 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 ----------------------------------------------------------- (Address of principal executive offices) (Zip code) Bruce N. Alpert 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, 2006 ------------------- 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. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. The Report to Shareholders is attached herewith. THE GAMCO GLOBAL CONVERTIBLE SECURITIES FUND ANNUAL REPORT DECEMBER 31, 2006 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 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 and the investment portfolio as of December 31, 2006 with a description of factors that affected the performance during the past year. PERFORMANCE DISCUSSION (UNAUDITED) During the twelve month period ended December 31, 2006, the Fund (Class AAA) generated a total rate of return of 8.39%, which includes reinvestment of its regular quarterly distributions of three cents per share. The Merrill Lynch Global 300 Convertible Index, rose 16.02% in 2006. For the year, the MSCI World Free Index rose 20.07%. The Fund participated in 62% of the return from global equity markets with less risk. The investment-grade Merrill Lynch Global Bond Index rose 2.6%, while the Global High Yield Index rose 11.8%. Our overweight position in the Japanese market earlier in the year hindered results somewhat. For the full year, our top five performers were Scottish Power's 4% bond (Scottish Power generates and supplies electricity in the U.K., and was the subject of a takeover bid by Iberdrola S.A. of Spain in November); Sanyo Chemical, a Japanese resin producer which benefited from a rally in the Japanese market earlier in the year, with its 0% convertible bond; Cincinnati Bell 6 3/4% convertible preferred (+22%), which rose thanks to better operating results from CBB's wireless and data divisions; Ashland Inc. (+19%), a crude oil and petrochemical company which performed well as oil prices rose; and Hon Hai Precision Instrument Co., the world's largest contract electronics manufacturer, whose 0% convertible bond rose. Hon Hai will be manufacturing Apple's new iPhone. Convertibles which did not perform up to expectations and were sold included Futaba 0%. Futaba manufactures automotive parts, a sector which has weakened along with U.S. automotive weakness. Tokai Carbon's (which makes carbon black for rubber) 0% bond was also weak. Omnicare's 4% convertible preferred fell 28%, as fears over its ability to maintain its pricing in a more volatile healthcare environment took their toll. Sincerely yours, /s/ Bruce N. Alpert Bruce N. Alpert President January 22, 2007 COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GAMCO GLOBAL CONVERTIBLE SECURITIES FUND CLASS AAA SHARES, THE MSCI WORLD FREE INDEX, THE LIPPER CONVERTIBLE SECURITIES FUND AVERAGE, AND THE UBS GLOBAL CONVERTIBLE INDEX [GRAPH OMITTED] PLOT POINTS FOLLOW: GAMCO Global Convertible Lipper Convertible Securities Fund Securities UBS Global MSCI World (Class AAA) Fund Average Convertible Index Free Index 2/3/94 $10,000 $10,000 $10,000 $10,000 12/31/94 10,090 9,277 9,709 9,863 12/31/95 11,363 11,316 11,146 11,910 12/31/96 11,985 13,084 11,883 13,520 12/31/97 12,323 15,511 12,057 15,632 12/31/98 13,388 16,204 14,544 19,442 12/31/99 20,229 20,889 19,734 24,268 12/31/00 17,397 21,026 17,683 21,070 12/31/01 15,093 19,542 16,633 17,526 12/31/02 14,361 17,994 16,533 14,040 12/31/03 17,446 22,817 20,595 18,688 12/31/04 19,479 24,795 22,482 21,439 12/31/05 21,037 25,524 22,496 23,474 12/31/06 22,802 28,301 26,532 28,185 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. COMPARATIVE RESULTS - -------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS THROUGH DECEMBER 31, 2006 (A) ---------------------------------------------------- Since Inception Quarter 1 Year 3 Year 5 Year 10 Year (2/3/94) ------- ------ ------ ------ ------- -------- GAMCO GLOBAL CONVERTIBLE SECURITIES FUND CLASS AAA ....................................... 3.87% 8.39% 9.33% 8.60% 6.64% 6.59% Merrill Lynch Global 300 Convertible Index ........ 6.32 16.02 7.85 9.20 7.31 N/A* UBS Global Convertible Index ...................... 6.74 17.94 8.82 9.81 8.77 8.10 MSCI World Free Index ............................. 8.37 20.07 14.68 9.97 7.62 8.35 Class A ........................................... 4.06 8.42 9.38 8.65 6.66 6.61 (1.92)(b) 2.18(b) 7.25(b) 7.38(b) 6.04(b) 6.13(b) Class B ........................................... 3.77 7.64 8.57 7.84 6.19 6.25 (1.23)(c) 2.64(c) 7.72(c) 7.55(c) 6.19(c) 6.25(c) Class C ........................................... 3.92 7.75 8.59 7.92 6.28 6.31 2.92(d) 6.75(d) 8.59 7.92 6.28 6.31 (a) RETURNS REPRESENT PAST PERFORMANCE AND DO NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURNS AND THE PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE. TOTAL RETURNS AND AVERAGE ANNUAL RETURNS REFLECT CHANGES IN SHARE PRICE AND REINVESTMENT OF DISTRIBUTIONS AND ARE NET OF EXPENSES. 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 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 MORE 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' NET ASSET VALUES ARE USED TO CALCULATE PERFORMANCE FOR THE PERIODS PRIOR TO THE ISSUANCE OF CLASS A SHARES, CLASS B SHARES, AND CLASS C SHARES ON MAY 2, 2001, MARCH 28, 2001, AND NOVEMBER 26, 2001, 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 UBS (FORMERLY WARBURG DILLON REED) GLOBAL CONVERTIBLE INDEX, THE MERRILL LYNCH GLOBAL 300 CONVERTIBLE INDEX AND THE MORGAN STANLEY CAPITAL INTERNATIONAL ("MSCI") WORLD FREE INDEX ARE UNMANAGED INDICATORS OF INVESTMENT PERFORMANCE. YOU CANNOT INVEST DIRECTLY IN AN INDEX. (b) INCLUDES THE EFFECT OF THE MAXIMUM 5.75% SALES CHARGE AT THE BEGINNING OF THE PERIOD. (c) PERFORMANCE RESULTS INCLUDE THE DEFERRED SALES CHARGES FOR THE CLASS B SHARES UPON REDEMPTION AT THE END OF THE QUARTER, ONE YEAR, THREE YEAR, FIVE YEAR, TEN YEAR, AND SINCE INCEPTION PERIODS OF 5%, 5%, 3%, 2%, 0%, AND 0%, RESPECTIVELY, OF THE FUND'S NAV AT THE TIME OF PURCHASE OR SALE, WHICHEVER IS LOWER. CLASS B SHARES ARE NOT AVAILABLE FOR NEW PURCHASES. (d) PERFORMANCE RESULTS INCLUDE THE DEFERRED SALES CHARGES FOR THE CLASS C SHARES UPON REDEMPTION AT THE END OF THE QUARTER AND ONE YEAR PERIODS OF 1% OF THE FUND'S NAV AT THE TIME OF PURCHASE OR SALE, WHICHEVER IS LOWER. * THERE IS NO DATA AVAILABLE FOR THE MERRILL LYNCH GLOBAL 300 CONVERTIBLE INDEX PRIOR TO DECEMBER 31, 1994. - -------------------------------------------------------------------------------- 2 THE GAMCO GLOBAL CONVERTIBLE SECURITIES FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) For the Six Month Period from July 1, 2006 through December 31, 2006 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, 2006. Beginning Ending Annualized Expenses Account Value Account Value Expense Paid During 07/01/06 12/31/06 Ratio Period* - -------------------------------------------------------------------------------- THE GAMCO GLOBAL CONVERTIBLE SECURITIES FUND - -------------------------------------------------------------------------------- ACTUAL FUND RETURN Class AAA $1,000.00 $1,051.80 2.18% $11.27 Class A $1,000.00 $1,052.10 2.15% $11.12 Class B $1,000.00 $1,048.10 2.89% $14.92 Class C $1,000.00 $1,049.40 2.88% $14.88 HYPOTHETICAL 5% RETURN Class AAA $1,000.00 $1,014.22 2.18% $11.07 Class A $1,000.00 $1,014.37 2.15% $10.92 Class B $1,000.00 $1,010.64 2.89% $14.65 Class C $1,000.00 $1,010.69 2.88% $14.60 * 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, then divided by 365. 3 SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED) The following table presents portfolio holdings as a percent of total net assets as of December 31, 2006: THE GAMCO GLOBAL CONVERTIBLE SECURITIES FUND Financial Services ................................ 15.0% Health Care ....................................... 13.3% Energy and Utilities .............................. 10.6% Computer Software and Services .................... 7.7% Electronics ....................................... 6.6% Consumer Products ................................. 6.5% Telecommunications ................................ 6.0% Retail ............................................ 5.9% U.S. Government Obligations ....................... 4.1% Business Services ................................. 4.0% Food and Beverage ................................. 3.8% Equipment and Supplies ............................ 3.3% Automotive: Parts and Accessories ................. 3.0% Communications Equipment .......................... 2.8% Metals and Mining ................................. 2.6% Broadcasting ...................................... 2.3% Aerospace ......................................... 2.2% Other Assets and Liabilities (Net) ................ 0.3% ------ 100.0% ====== THE FUND FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SECURITIES AND EXCHANGE COMMISSION (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, 2006. 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 12 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. 4 THE GAMCO GLOBAL CONVERTIBLE SECURITIES FUND SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2006 - -------------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT COST VALUE --------- ---- ------- CONVERTIBLE CORPORATE BONDS -- 77.5% AEROSPACE -- 2.2% $ 180,000 Lockheed Martin Corp., Cv., 5.124%, 08/15/33 (d) ........ $ 199,696 $ 239,762 ------------ ------------ AUTOMOTIVE: PARTS AND ACCESSORIES -- 3.0% 15,000,000(b) Suzuki Motor Corp., Cv., Zero Coupon, 03/29/13 ....... 145,914 155,035 20,000,000(b) Taiho Kogyo Co. Ltd., Cv., Zero Coupon, 03/31/11 ....... 189,464 175,623 ------------ ------------ 335,378 330,658 ------------ ------------ BUSINESS SERVICES -- 4.0% 100,000(c) Fugro NV, Cv., 2.375%, 04/27/10 ............ 165,320 200,970 520,000(c) Publicis Group SA, Cv., 0.750%, 07/17/08 ............ 319,736 235,058 ------------ ------------ 485,056 436,028 ------------ ------------ COMPUTER SOFTWARE AND SERVICES -- 7.7% 25,000,000(b) CSK Holdings Corp., Cv., 0.250%, 09/30/13 ............ 229,814 224,518 500,000 Midway Games Inc., Cv., 6.000%, 09/30/25 ............ 483,863 428,750 20,000,000(b) Nomura Research Institute Ltd., Cv., Zero Coupon, 03/31/14 181,577 182,681 ------------ ------------ 895,254 835,949 ------------ ------------ CONSUMER PRODUCTS -- 6.5% 200,000 Church & Dwight Co. Inc., Deb. Cv., 5.250%, 08/15/33 ............ 227,253 289,000 400,000 Eastman Kodak Co., Cv., 3.375%, 10/15/33 ............ 415,291 424,500 ------------ ------------ 642,544 713,500 ------------ ------------ ELECTRONICS -- 6.6% 400,000 Edo Corp., Sub. Deb. Cv., 4.000%, 11/15/25 ............ 399,930 387,000 411,000 Solectron Corp., Cv., Ser. B, 0.500%, 02/15/34 ............ 338,661 338,561 ------------ ------------ 738,591 725,561 ------------ ------------ ENERGY AND UTILITIES -- 10.6% 200,000(c) RWE AG, Cv., Zero Coupon, 06/22/07 ....... 286,713 281,828 200,000 Scottish Power Finance Ltd., Sub. Deb. Cv., 4.000%, 07/29/49 (d) ........ 259,872 409,000 400,000 Transocean Inc., Deb. Cv., 1.500%, 05/15/21 ............ 433,991 469,500 ------------ ------------ 980,576 1,160,328 ------------ ------------ EQUIPMENT AND SUPPLIES -- 3.3% 200,000(c) Linde Finance BV, Cv., 1.250%, 05/05/09 ............ 309,929 364,865 ------------ ------------ FINANCIAL SERVICES -- 10.1% 200,000 CompuCredit Corp., Cv., 5.875%, 11/30/35 ............ 197,018 204,250 200,000 CompuCredit Corp., Cv., 3.625%, 05/30/25 ............ 216,134 227,750 150,000 First Pacific Finance, Cv., Zero Coupon, 01/18/10 ....... 179,299 266,052 400,000 SLM Corp., Cv., 5.327%, 07/25/35 (d) ........ 402,487 401,160 ------------ ------------ 994,938 1,099,212 ------------ ------------ FOOD AND BEVERAGE -- 3.8% 400,000 Wild Oats Markets Inc., Cv. (STEP), 3.250%, 05/15/34 ............ 434,740 417,500 ------------ ------------ HEALTH CARE -- 10.7% 300,000 Allergan Inc., Cv., 1.500%, 04/01/26 (a) ........ 293,456 328,500 400,000 Edwards Lifesciences Corp., Cv., 3.875%, 05/15/33 ............ 405,865 410,000 400,000 Medtronic Inc., Cv., 1.625%, 04/15/13 (a) ........ 397,005 428,500 ------------ ------------ 1,096,326 1,167,000 ------------ ------------ PRINCIPAL MARKET AMOUNT COST VALUE --------- ---- ------- RETAIL -- 5.9% $ 300,000 Kellwood Co., Deb. Cv. (STEP), 3.500%, 06/15/34 ............ $ 270,910 $ 282,750 400,000 Pier 1 Imports Inc., Cv. (STEP), 6.375%, 02/15/36 ............ 387,562 367,000 ------------ ------------ 658,472 649,750 ------------ ------------ TELECOMMUNICATIONS -- 3.1% 400,000 XM Satellite Radio Holdings Inc., Cv., 1.750%, 12/01/09 ............ 335,101 341,500 ------------ ------------ TOTAL CONVERTIBLE CORPORATE BONDS ............. 8,106,601 8,481,613 ------------ ------------ SHARES ------- CONVERTIBLE PREFERRED STOCKS -- 18.1% BROADCASTING -- 2.3% 6,000 Emmis Communications Corp., 6.250% Cv. Pfd., Ser. A ..... 276,300 253,470 ------------ ------------ COMMUNICATIONS EQUIPMENT -- 2.8% 300 Lucent Technologies Capital Trust I, 7.750% Cv. Pfd. ............. 308,130 305,250 ------------ ------------ FINANCIAL SERVICES -- 4.9% 5,000 New York Community Capital Trust V, 6.000% Cv. Pfd. ............. 235,428 233,000 6,000 Sovereign Bancorp Inc., 4.375% Cv. Pfd. ............. 273,000 297,000 ------------ ------------ 508,428 530,000 ------------ ------------ HEALTH CARE -- 2.6% 5,000 Schering-Plough Corp., 6.000% Cv. Pfd. ............. 258,438 284,450 ------------ ------------ METALS AND MINING -- 2.6% 220 Freeport-McMoRan Copper & Gold Inc., 5.500% Cv. Pfd. ............. 221,450 287,457 ------------ ------------ TELECOMMUNICATIONS -- 2.9% 7,000 Cincinnati Bell Inc., 6.750% Cv. Pfd., Ser. B ..... 280,315 322,000 ------------ ------------ TOTAL CONVERTIBLE PREFERRED STOCKS ............ 1,853,061 1,982,627 ------------ ------------ PRINCIPAL AMOUNT --------- U.S. GOVERNMENT OBLIGATIONS -- 4.1% $454,000 U.S. Treasury Bill, 4.900%++, 03/08/07 .......... 450,123 450,094 ------------ ------------ TOTAL INVESTMENTS -- 99.7% ........ $ 10,409,785 10,914,334 ============ OTHER ASSETS AND LIABILITIES (NET) -- 0.3% 31,378 ------------ NET ASSETS -- 100.0% ....................... $ 10,945,712 ============ - ---------------- ++ Represents annualized yield at date of purchase. (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, 2006, the market value of the Rule 144A securities amounted to $757,000 or 6.92% of total net assets. These securities have been deemed by the Board of Directors to be liquid. (b) Principal amount denoted in Japanese Yen. (c) Principal amount denoted in Euros. (d) Floating rate security. The rate disclosed is that in effect at December 31, 2006. STEP Step coupon bond. The rate disclosed is that in effect at December 31, 2006. % OF MARKET MARKET GEOGRAPHIC DIVERSIFICATION VALUE VALUE - -------------------------- ----- ----- North America ......................... 76.6% $ 8,358,204 Europe ................................ 12.3 1,348,772 Japan ................................. 6.8 737,858 Latin America ......................... 4.3 469,500 ------ ----------- 100.0% $10,914,334 ====== =========== See accompanying notes to financial statements. 5 THE GAMCO GLOBAL CONVERTIBLE SECURITIES FUND STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2006 - -------------------------------------------------------------------------------- ASSETS: Investments, at value (cost $10,409,785) ............... $10,914,334 Receivable for investments sold ........................ 307,404 Dividends and interest receivable ...................... 66,687 Receivable for Fund shares sold ........................ 21,024 Prepaid expense ........................................ 1,914 ----------- TOTAL ASSETS ........................................... 11,311,363 ----------- LIABILITIES: Payable for investments purchased ...................... 212,885 Payable to custodian ................................... 84,530 Payable for legal and audit fees ....................... 22,252 Payable for shareholder ................................ communications expenses .............................. 19,645 Payable for Fund shares redeemed ....................... 8,284 Payable for investment advisory fees ................... 7,510 Payable for distribution fees .......................... 2,482 Other accrued expenses ................................. 8,063 ----------- TOTAL LIABILITIES ...................................... 365,651 ----------- NET ASSETS applicable to 1,998,809 shares outstanding ................................... $10,945,712 =========== NET ASSETS CONSIST OF: Paid-in capital, each class at $0.001 par value ........ $10,556,982 Accumulated distributions in excess of net investment income .................................... (115,922) Accumulated distributions in excess of net realized gain on investments and foreign currency transactions ................................ (44) Net unrealized appreciation on investments ............. 504,549 Net unrealized appreciation on foreign currency translations ................................ 147 ----------- NET ASSETS ............................................. $10,945,712 =========== SHARES OF CAPITAL STOCK: CLASS AAA: Net Asset Value, offering and redemption price per share ($10,690,844 / 1,950,049 shares outstanding; 75,000,000 shares authorized) ........... $5.48 ===== CLASS A: Net Asset Value and redemption price per share ($48,838 / 8,900 shares outstanding; 50,000,000 shares authorized) ........................ $5.49 ===== Maximum offering price per share (NAV / .9425, based on maximum sales charge of 5.75% of the offering price) ............................... $5.82 ===== CLASS B: Net Asset Value and offering price per share ($41,637 / 8,165 shares outstanding; 25,000,000 shares authorized) ........................ $5.10(a) ===== CLASS C: Net Asset Value and offering price per share ($164,393 / 31,695 shares outstanding; 25,000,000 shares authorized) ........................ $5.19(a) ===== - ------------------- (a) Redemption price varies based on the length of time held. STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2006 - -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends (net of foreign taxes of $1,491) ............. $ 259,292 Interest ............................................... 264,002 ----------- TOTAL INVESTMENT INCOME ................................ 523,294 ----------- EXPENSES: Investment advisory fees ............................... 161,989 Distribution fees - Class AAA .......................... 39,835 Distribution fees - Class A ............................ 173 Distribution fees - Class B ............................ 584 Distribution fees - Class C ............................ 1,375 Shareholder communications expenses .................... 37,502 Legal and audit fees ................................... 28,196 Registration expenses .................................. 25,725 Custodian fees ......................................... 25,511 Shareholder services fees .............................. 17,161 Interest expense ....................................... 3,152 Directors' fees ........................................ 1,799 Miscellaneous expenses ................................. 4,924 ----------- TOTAL EXPENSES ......................................... 347,926 Less: Expense reimbursement (see Note 3) ................... (18,221) Custodian fees credits ............................... (1,106) ----------- NET EXPENSES ........................................... 328,599 ----------- NET INVESTMENT INCOME .................................. 194,695 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain on investments ....................... 2,119,192 Net realized loss on foreign currency transactions ......................................... (57,851) ----------- Net realized gain on investments and foreign currency transactions ........................ 2,061,341 ----------- Net change in unrealized appreciation/ depreciation on investments .......................... (1,165,171) Net change in unrealized appreciation/ depreciation on foreign currency translations ......................................... (34,002) ----------- Net change in unrealized appreciation/ depreciation on investments and foreign currency translations ........................ (1,199,173) ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY .................. 862,168 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $ 1,056,863 =========== See accompanying notes to financial statements. 6 THE GAMCO GLOBAL CONVERTIBLE SECURITIES FUND STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED DECEMBER 31, 2006 DECEMBER 31, 2005 ----------------- ----------------- OPERATIONS: Net investment income ................................................. $ 194,695 $ 105,195 Net realized gain on investments and foreign currency transactions .... 2,061,341 1,536,737 Net change in unrealized appreciation/depreciation on investments and foreign currency translations ....................................... (1,199,173) (906,265) ----------- ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................. 1,056,863 735,667 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income Class AAA ........................................................... (253,454) (558,053) Class A ............................................................. (1,031) (15,235) Class B ............................................................. (967) (3,509) Class C ............................................................. (2,302) (3,372) ----------- ----------- (257,754) (580,169) ----------- ----------- Net realized gains Class AAA ........................................................... (1,907,313) (1,034,911) Class A ............................................................. (8,497) (28,253) Class B ............................................................. (7,690) (6,508) Class C ............................................................. (29,949) (6,254) ----------- ----------- (1,953,449) (1,075,926) ----------- ----------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS ................................... (2,211,203) (1,656,095) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Class AAA ........................................................... (1,967,425) (5,708,864) Class A ............................................................. (39,957) (469,690) Class B ............................................................. (26,216) (52,160) Class C ............................................................. 41,588 42,083 ----------- ----------- NET DECREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ............ (1,992,010) (6,188,631) ----------- ----------- REDEMPTION FEES ....................................................... 94 25,134 ----------- ----------- NET DECREASE IN NET ASSETS ............................................ (3,146,256) (7,083,925) NET ASSETS: Beginning of period ................................................... 14,091,968 21,175,893 ----------- ----------- End of period (including undistributed net investment of $0 and $0, respectively) ............................................... $10,945,712 $14,091,968 =========== =========== See accompanying notes to financial statements. 7 THE GAMCO GLOBAL CONVERTIBLE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. ORGANIZATION. The GAMCO Global Convertible Securities Fund (the "Fund"), formerly, The Gabelli Global Convertible Securities Fund, a series of GAMCO Global Series Funds, Inc. (the "Corporation"), formerly, Gabelli Global Series Funds, Inc., 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 preparation of financial statements in accordance with United States ("U.S.") generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. SECURITY VALUATION. Portfolio securities listed or traded on a nationally recognized securities exchange 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 60 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 60 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. 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 to the valuation and changes in valuation of similar securities, including a comparison of foreign securities to the equivalent U.S. dollar value American Depository Receipt ("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. 8 THE GAMCO GLOBAL CONVERTIBLE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- In September 2006, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") 157, Fair Value Measurements, which clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. Adoption of SFAS 157 requires the use of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. At this time, management is in the process of reviewing the requirements of SFAS 157 against its current valuation policies to determine future applicability. 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. The Fund will always receive and maintain securities as collateral whose market value, including accrued interest, will be at least equal to 102% of the dollar amount invested by the Fund in each agreement. The Fund will make payment for such securities only upon physical delivery or upon evidence of book entry transfer of the collateral to the account of the custodian. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to maintain the adequacy of the collateral. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. At December 31, 2006, there were no open repurchase agreements. 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, which 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. At December 31, 2006, there were no open futures contracts. FORWARD FOREIGN EXCHANGE CONTRACTS. The Fund may engage in forward foreign exchange contracts for hedging a specific transaction with respect to either the currency in which the transaction is denominated or another currency as deemed appropriate by the Adviser. Forward foreign exchange contracts are valued at the forward rate and are marked-to-market daily. The change in market value is included in unrealized appreciation/depreciation on investments 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. 9 THE GAMCO GLOBAL CONVERTIBLE SECURITIES FUND 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. At December 31, 2006, there were no open forward foreign exchange contracts. 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 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 ability 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 which are recorded as soon as the Fund is informed of the dividend. 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. 10 THE GAMCO GLOBAL CONVERTIBLE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 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 shown as "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 U.S. generally accepted accounting principles. 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 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. These reclassifications have no impact on the NAV of the Fund. For the fiscal year ended December 31, 2006, reclassifications were made to increase distributions in excess of net investment income by $2,833 and to decrease accumulated distributions in excess of net realized gain on investments and foreign currency transactions by $107,936, with an offsetting adjustment to paid-in capital. The tax character of distributions paid during the fiscal years ended December 31, 2006 and December 31, 2005 was as follows: YEAR ENDED YEAR ENDED DECEMBER 31, 2006 DECEMBER 31, 2005 ----------------- ----------------- DISTRIBUTIONS PAID FROM: Ordinary income (inclusive of short-term capital gains) ............................... $ 599,473 $1,232,664 Long-term capital gains ........................ 1,685,799 423,431 ---------- ---------- Total distributions paid ....................... $2,285,272 $1,656,095 ========== ========== The Fund has a fixed distribution policy. Under the policy, the Fund declares and pays distributions quarterly in the amount of $0.03 per share and identifies that portion of the distribution which is from net investment income, capital gains, and paid-in capital. The actual source of the distribution is determined after the end of the fiscal year. The Fund continues to evaluate its distribution policy in light of ongoing economic and market conditions and may change the amount of the quarterly distributions in the future. The Fund currently intends to pay $0.03 per share on a quarterly basis in March, June, September, and December. 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. 11 THE GAMCO GLOBAL CONVERTIBLE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- At December 31, 2006, the difference between book basis and tax basis unrealized appreciation was primarily due to tax adjustments for convertible bond premium and income accruals on hybrid securities. As of December 31, 2006, the components of accumulated earnings on a tax basis were as follows: Net unrealized appreciation on investments, foreign receivables and payables ............................. $388,730 ======== The following summarizes the tax cost of investments and related unrealized appreciation/(depreciation) at December 31, 2006: GROSS GROSS UNREALIZED UNREALIZED NET UNREALIZED COST APPRECIATION DEPRECIATION APPRECIATION ---- ------------ ------------ --------------- Investments ............... $10,525,751 $747,148 $(358,565) $388,583 In July 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109" ("the Interpretation"). The Interpretation establishes for all entities, including pass-through entities such as the Fund, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. The Interpretation is required to be implemented for a calendar-year open-end fund no later than its June 29, 2007 NAV, and is to be applied to all open tax years as of the date of effectiveness. Management has begun to evaluate the application of the Interpretation to the Fund, and is not in a position at this time to estimate the significance of its impact, if any, on the Fund's financial statements. 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 voluntarily agreed to waive the investment advisory fee of the Fund to the extent necessary to maintain the annualized total net operating expenses (exclusive of brokerage, interest, taxes, and extraordinary expenses) at no more than 2.00%, 2.00%, 2.75%, and 2.75% of average daily net assets for Class AAA, Class A, Class B, and Class C, respectively. For the fiscal year ended December 31, 2006, the Adviser reimbursed the Fund in the amount of $18,221. Such amount is not recoverable in future fiscal years. If total net assets of the Corporation are in excess of $100 million, the Corporation pays each Director not considered to be an affiliated person an annual retainer of $3,000 plus $500 for each Board meeting attended and they are reimbursed 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 $250 for each Board meeting attended and they are reimbursed for any out of pocket expenses incurred in attending meetings. All Board committee members receive $500 per meeting attended. Directors who are directors or employees of the Adviser or an affiliated company receive no compensation or expense reimbursement from the Fund. 4. DISTRIBUTION PLAN. The Fund's Board has adopted a distribution plan (the "Plan") for each class of shares pursuant to Rule 12b-1 under the 1940 Act. Gabelli & Company, Inc. ("Gabelli & Company"), an affiliate of the Adviser, serves as distributor of the Fund. Under the Class AAA, Class A, Class B, and Class C Share Plans, 12 THE GAMCO GLOBAL CONVERTIBLE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- payments are authorized to Gabelli & Company 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 proceeds from the sales of securities for the fiscal year ended December 31, 2006, other than short-term and U.S. Government securities, aggregated $19,269,019 and $23,262,365, respectively. 6. TRANSACTIONS WITH AFFILIATES. During the fiscal year ended December 31, 2006, the Fund paid brokerage commissions of $1,008 to Gabelli & Company. 7. LINE OF CREDIT. The Fund has access to an unsecured line of credit of up to $25,000,000 from the custodian for temporary borrowing purposes. Borrowings under this arrangement bear interest at 0.75% above the Federal Funds rate on outstanding balances. This amount, if any, would be shown as "interest expense" in the Statement of Operations. At December 31, 2006, there were no borrowing outstanding from the line of credit. The average daily amount of borrowings outstanding from the line of credit within the fiscal year ended December 31, 2006 was $48,312 with a weighted average interest rate of 6.03%. The maximum amount borrowed at any time during the fiscal year ended December 31, 2006 was $1,636,000. 8. CAPITAL STOCK TRANSACTIONS. The Fund currently offers four classes of shares - - Class AAA Shares, Class A Shares, Class B Shares, and Class C Shares. Class AAA Shares are offered only to investors who acquire them directly from Gabelli & Company, or through selected broker/dealers, or the transfer agent 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 CDSC is equal to a declining percentage 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 & Company. The Board has approved Class I Shares which have not been offered publicly. The Fund imposes a redemption fee of 2.00% on Class AAA Shares, Class A Shares, Class B Shares, and Class C Shares that are redeemed or exchanged on or before the seventh day after the date of a purchase. (Prior to June 15, 2005, the Fund imposed a redemption fee on shares that were redeemed or exchanged on or before the sixtieth 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. The redemption fees retained by the Fund during the fiscal years ended December 31, 2006 and December 31, 2005 amounted to $94 and $25,134, respectively. The redemption fee does not apply to shares purchased through programs that the Adviser determined to have appropriate short-term trading policies in place. Additionally, certain recordkeepers for qualified and non-qualified retirement plans that could not collect the redemption fee at the participant level due to systems limitations have received an extension to implement such systems. 13 THE GAMCO GLOBAL CONVERTIBLE SECURITIES FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- Transactions in shares of capital stock were as follows: YEAR ENDED YEAR ENDED DECEMBER 31, 2006 DECEMBER 31, 2005 ---------------------------- --------------------------- SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ------------ CLASS AAA CLASS AAA ---------------------------- --------------------------- Shares sold ........................................ 1,878,922 $ 12,070,875 1,258,482 $ 7,437,867 Shares issued upon reinvestment of distributions ... 353,287 1,969,894 232,662 1,356,751 Shares redeemed .................................... (2,496,862) (16,008,194) (2,527,933) (14,503,482) ---------- ------------ ---------- ------------ Net decrease ..................................... (264,653) $ (1,967,425) (1,036,789) $ (5,708,864) ========== ============ ========== ============ CLASS A CLASS A ---------------------------- --------------------------- Shares sold ........................................ 1,429 $ 8,999 14,762 $ 84,309 Shares issued upon reinvestment of distributions ... 1,606 8,860 2,003 11,680 Shares redeemed .................................... (9,066) (57,816) (97,283) (565,679) ---------- ------------ ---------- ------------ Net decrease ..................................... (6,031) $ (39,957) (80,518) $ (469,690) ========== ============ ========== ============ CLASS B CLASS B ---------------------------- --------------------------- Shares issued upon reinvestment of distributions ... 1,588 $ 8,177 636 $ 3,542 Shares redeemed .................................... (5,758) (34,393) (10,395) (55,702) ---------- ------------ ---------- ------------ Net decrease ..................................... (4,170) $ (26,216) (9,759) $ (52,160) ========== ============ ========== ============ CLASS C CLASS C ---------------------------- --------------------------- Shares sold ........................................ 7,874 $ 50,000 23,314 $ 125,405 Shares issued upon reinvestment of distributions ... 6,086 31,842 1,090 6,137 Shares redeemed .................................... (6,542) (40,254) (15,698) (89,459) ---------- ------------ ---------- ------------ Net increase ..................................... 7,418 $ 41,588 8,706 $ 42,083 ========== ============ ========== ============ 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 and expects the risk of loss to be remote. 10. OTHER MATTERS. The Adviser and/or affiliates received subpoenas from the Attorney General of the State of New York and the SEC requesting information on mutual fund share trading practices involving certain funds managed by the Adviser. GAMCO Investors, Inc. ("GAMCO"), the Adviser's parent company, responded to these requests for documents and testimony. In June 2006, GAMCO began discussions with the SEC regarding a possible resolution of their inquiry. In February 2007, the Adviser made an offer of settlement to the staff of the SEC for communication to the Commission for its consideration to resolve this matter. This offer of settlement is subject to agreement regarding the specific language of the SEC's administrative order and other settlement documents. On a separate matter, in September 2005, the Adviser was informed by the staff of the SEC that the staff may recommend to the Commission that an administrative remedy and a monetary penalty be sought from the Adviser in connection with the actions of two of seven closed-end funds managed by the Adviser relating to Section 19(a) and Rule 19a-1 of the 1940 Act. These provisions require registered investment companies to provide written statements to shareholders when a dividend is made from a source other than net investment income. While the two closed-end funds sent annual statements and provided other materials containing this information, the funds did not send written statements to shareholders with each distribution in 2002 and 2003. The Adviser believes that all of the funds are now in compliance. The Adviser believes that these matters would have no effect on the Fund or any material adverse effect on the Adviser or its ability to manage the Fund. 14 THE GAMCO GLOBAL CONVERTIBLE SECURITIES FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of capital stock outstanding throughout each period: INCOME FROM INVESTMENT OPERATIONS DISTRIBUTIONS --------------------------------------- -------------------------------------------------- Net Net Asset Net Realized and Total Net Period Value, Investment Unrealized from Net Realized Return Ended Beginning Income Gain (Loss) on Investment Investment Gain on of Total December 31, of Period (Loss)(a) Investments Operations Income Investments Capital Distributions - ------------ --------- --------- ----------- ---------- ---------- ----------- ------- ------------- CLASS AAA 2006 $6.22 $ 0.08 $ 0.44 $ 0.52 $(0.10) $(1.16) -- $(1.26) 2005 6.26 0.04 0.40 0.44 (0.17) (0.32) -- (0.49) 2004 6.77 0.07 0.62 0.69 (0.12) (0.38) $(0.70) (1.20) 2003 6.66 0.07 1.24 1.31 (0.11) -- (1.09) (1.20) 2002 8.29 0.07 (0.50) (0.43) (0.04) -- (1.16) (1.20) CLASS A 2006 $6.23 $ 0.08 $ 0.44 $ 0.52 $(0.10) $(1.16) -- $(1.26) 2005 6.26 0.04 0.41 0.45 (0.17) (0.32) -- (0.49) 2004 6.77 0.09 0.60 0.69 (0.11) (0.36) $(0.73) (1.20) 2003 6.66 0.07 1.24 1.31 (0.11) -- (1.09) (1.20) 2002 8.28 0.07 (0.49) (0.42) (0.04) -- (1.16) (1.20) CLASS B 2006 $5.91 $ 0.03 $ 0.42 $ 0.45 $(0.10) $(1.16) -- $(1.26) 2005 6.01 (0.01) 0.39 0.38 (0.17) (0.32) -- (0.49) 2004 6.59 0.03 0.59 0.62 (0.10) (0.34) $(0.76) (1.20) 2003 6.55 0.03 1.21 1.24 (0.07) -- (1.13) (1.20) 2002 8.23 0.02 (0.50) (0.48) (0.04) -- (1.16) (1.20) CLASS C 2006 $5.99 $ 0.04 $ 0.42 $ 0.46 $(0.10) $(1.16) -- $(1.26) 2005 6.09 0.00(c) 0.38 0.38 (0.17) (0.32) -- (0.49) 2004 6.66 0.03 0.60 0.63 (0.10) (0.34) $(0.76) (1.20) 2003 6.61 0.03 1.22 1.25 (0.07) -- (1.13) (1.20) 2002 8.27 0.02 (0.48) (0.46) (0.04) -- (1.16) (1.20) RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA ------------------------------------------------------------------------------ Net Asset Net Assets Net Operating Operating Period Value, End of Investment Expenses Expenses Portfolio Ended Redemption End of Total Period Income Before Net of Turnover December 31, Fees(a) Period Return+ (in 000's) (Loss) Reimbursement Reimbursement(b) Rate - ------------ --------- -------- ------- ---------- --------- ------------- ---------------- -------- CLASS AAA 2006 $0.00(c) $5.48 8.4% $10,691 1.21% 2.14% 2.03%(d) 130% 2005 0.01 6.22 8.0 13,781 0.63 2.11 2.03(d) 58 2004 0.00(c) 6.26 11.7 20,350 1.06 2.06 2.01 60 2003 0.00(c) 6.77 21.5 17,281 1.12 2.07 2.01 54 2002 -- 6.66 (4.9) 9,316 0.97 2.83 2.83 33 CLASS A 2006 $0.00(c) $5.49 8.4% $ 49 1.24% 2.14% 2.03%(d) 130% 2005 0.01 6.23 8.2 93 0.68 2.06 2.04(d) 58 2004 0.00(c) 6.26 11.6 598 1.41 2.06 2.01 60 2003 0.00(c) 6.77 21.5 86 1.12 2.07 2.01 54 2002 -- 6.66 (4.7) 2 0.97 2.83 2.83 33 CLASS B 2006 $0.00(c) $5.10 7.6% $ 42 0.47% 2.89% 2.78%(d) 130% 2005 0.01 5.91 7.3 73 (0.13) 2.84 2.78(d) 58 2004 0.00(c) 6.01 10.8 133 0.45 2.81 2.76 60 2003 0.00(c) 6.59 20.7 68 0.37 2.82 2.76 54 2002 -- 6.55 (5.6) 24 0.22 3.58 3.58 33 CLASS C 2006 $0.00(c) $5.19 7.8% $ 164 0.57% 2.90% 2.78%(d) 130% 2005 0.01 5.99 7.2 145 (0.01) 2.91 2.78(d) 58 2004 0.00(c) 6.09 10.9 95 0.44 2.81 2.76 60 2003 0.00(c) 6.66 20.7 39 0.37 2.82 2.76 54 2002 -- 6.61 (5.3) 13 0.22 3.58 3.58 33 - -------------- + 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. (a) Per share amounts have been calculated using the average shares outstanding method. (b) The Fund incurred interest expense during the fiscal years ended December 31, 2006, 2005, 2004, 2003, and 2002. If interest expense had not been incurred, the ratios of operating expenses to average net assets would have been 2.00%, 2.00%, 2.00%, 2.00%, and 2.82% (Class AAA), 2.00%, 2.00%, 2.00%, 2.00%, and 2.82% (Class A), 2.75%, 2.75%, 2.75%, 2.75%, and 3.57% (Class B) and 2.75%, 2.75%, 2.75%, 2.75%, and 3.57% (Class C), respectively. (c) Amount represents less than $0.005 per share. (d) The ratios do not include a reduction of expenses for custodian fee credits on cash balances maintained with the custodian. Including such custodian fee credits, the expense ratios for the fiscal years ended December 31, 2006 and December 31, 2005 would have been 2.02% and 2.03% (Class AAA), 2.02% and 2.03% (Class A), 2.77% and 2.78% (Class B), and 2.77% and 2.78% (Class C), respectively. See accompanying notes to financial statements. 15 THE GAMCO GLOBAL CONVERTIBLE SECURITIES FUND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- To the Shareholders and Board of 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 Convertible Securities Fund (the "Fund") (formerly The Gabelli Global Convertible Securities Fund), a series of GAMCO Global Series Funds, Inc., (formerly Gabelli Global Series Funds, Inc.) as of December 31, 2006, 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 four 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. The financial highlights for the year ended December 31, 2002 were audited by other auditors whose report dated January 31, 2003, expressed an unqualified opinion on those financial highlights. 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, 2006, by correspondence with the Fund's custodian and brokers 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 Convertible Securities Fund, a series of GAMCO Global Series Funds, Inc., at December 31, 2006, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ ERNST & YOUNG LLP Philadelphia, Pennsylvania February 16, 2007 16 THE GAMCO GLOBAL CONVERTIBLE SECURITIES FUND BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (UNAUDITED) During the six months ended December 31, 2006, 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 was in or near the top quartile for the one year and bottom quartile for three year periods and in the middle of the peer group 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 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 suggesting that 20% growth in the Fund would not produce meaningful economies of scale that the shareholders would not participate in. SHARING OF ECONOMIES OF SCALE. The Independent Board Members noted that the investment advisory 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 advisory fee, other expenses, and total expenses of the Fund to similar expense ratios of the peer group of convertible securities funds and noted that the Adviser's advisory 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 also noted that the advisory fee structure was the same as that in effect for most of the Gabelli/GAMCO funds. The Independent Board Members did not compare the advisory fee to the fee for other types of accounts managed by the Adviser. CONCLUSIONS. The Independent Board Members concluded that the Fund enjoyed highly experienced portfolio management services, good ancillary services, and a mixed performance record that was understandable in relation to the disclosure in the Fund's prospectus and periodic shareholder reports as to its purpose and the outlook of the portfolio managers. 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 advisory agreement to the full Board of Directors. 17 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 OFFICE NUMBER OF NAME, POSITION(S) AND LENGTH OF FUNDS IN FUND ADDRESS 1 TIME COMPLEX OVERSEEN PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS AND AGE SERVED 2 BY DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 4 - ---------------- ------------ ---------------- ---------------------- -------------------- INTERESTED DIRECTORS 3: - ---------------------- MARIO J. GABELLI Since 1993 24 Chairman of the Board and Chief Executive Director of Morgan Group Director and Officer of GAMCO Investors, Inc. and Holdings, Inc. (transportation Chief Investment Officer Chief Investment Officer - Value Portfolios services); Chairman of the Age: 64 of Gabelli Funds, LLC and GAMCO Asset Board of Lynch Interactive Management Inc.; Director/Trustee or Chief Corporation (multimedia and Investment Officer of other registered communication services investment companies in the Gabelli Funds company) complex; Chairman and Chief Executive Officer of GGCP, Inc. JOHN D. GABELLI Since 1993 10 Senior Vice President of Gabelli & Director of GAMCO Director Company, Inc. Investors, Inc. Age: 62 INDEPENDENT DIRECTORS 5: - ------------------------ E. VAL CERUTTI Since 2001 7 Chief Executive Officer of Cerutti Director of The LGL Group, Director Consultants, Inc.; Adviser to Iona Inc. (diversified Age: 67 College Hagan School of Business manufacturing) ANTHONY J. COLAVITA Since 1993 34 Partner in the law firm of -- Director Anthony J. Colavita, P.C. Age: 71 ARTHUR V. FERRARA Since 2001 7 Former Chairman of the Board and Chief Director of the Guardian Director Executive Officer of The Guardian Life sponsored mutual funds Age: 76 Insurance Company of America (1993 - 1995) WERNER J. ROEDER, MD Since 1993 23 Medical Director of Lawrence -- Director Hospital and practicing private physician Age: 66 ANTHONIE C. VAN EKRIS Since 1993 17 Chairman of BALMAC International, Inc. -- Director (commodities and futures trading) Age: 72 SALVATORE J. ZIZZA Since 2004 25 Chairman of Hallmark Electrical Supplies Director of Hollis-Eden Director Corp. (distribution of electrical Pharmaceuticals Age: 61 supplies) (biotechnology); Director of Earl Scheib, Inc. (automotive services) 18 THE GAMCO GLOBAL CONVERTIBLE SECURITIES FUND ADDITIONAL FUND INFORMATION (CONTINUED) (UNAUDITED) - -------------------------------------------------------------------------------- TERM OF OFFICE NAME, POSITION(S) AND LENGTH OF ADDRESS 1 TIME PRINCIPAL OCCUPATION(S) AND AGE SERVED 2 DURING PAST FIVE YEARS - ----------------- ------------ ---------------------- OFFICERS: - -------- BRUCE N. ALPERT Since 2003 Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC President since 1988 and an officer of all of the registered investment companies Age: 55 in the Gabelli Funds complex. Director and President of Gabelli Advisers, Inc. since 1998 JAMES E. MCKEE Since 1995 Vice President, General Counsel and Secretary of GAMCO Investors, Inc. Secretary since 1999 and GAMCO Asset Management Inc. since 1993; Secretary Age: 43 of all of the registered investment companies in the Gabelli Funds complex AGNES MULLADY Since 2006 Treasurer of all of the registered investment companies in the Gabelli Funds Treasurer complex; Senior Vice President of U.S. Trust Company, N.A. and Treasurer Age: 48 and Chief Financial Officer of Excelsior Funds from 2004 through 2005; Chief Financial Officer of AMIC Distribution Partners from 2002 through 2004; Controller of Reserve Management Corporation and Reserve Partners, Inc. and Treasurer of Reserve Funds from 2000 through 2002 PETER D. GOLDSTEIN Since 2004 Director of Regulatory Affairs at GAMCO Investors, Inc. since 2004; Chief Chief Compliance Officer Compliance Officer of all of the registered investment companies in the Age: 53 Gabelli Funds complex; Vice President of Goldman Sachs Asset Management from 2000 through 2004 - ----------------- 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. - -------------------------------------------------------------------------------- 2006 TAX NOTICE TO SHAREHOLDERS (Unaudited) For the fiscal year ended December 31, 2006, the Fund paid to shareholders an ordinary income dividend (comprised of net investment income and short-term capital gains) totaling $0.25, $0.25, $0.25, and $0.25 and a long-term capital gain distribution totaling $1.01, $1.01, $1.01, and $1.01 per share for Class AAA, Class A, Class B, and Class C Shares, respectively. The Fund designates a maximum of $1,685,799 of long-term capital gains as a capital gain dividend for tax reporting purposes. For the fiscal year ended December 31, 2006, 56.69% of the ordinary income dividend qualifies for the dividend received deduction available to corporations, and 50.73% of the ordinary income distribution was qualified dividend income. U.S. GOVERNMENT INCOME The percentage of the ordinary income dividend paid by the Fund during fiscal year 2006 which was derived from U.S. Treasury securities was 3.40%. 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 2006. Due to the diversity in state and local tax law, it is recommended that you consult your personal tax advisor as to the applicability of the information provided to your specific situation. - -------------------------------------------------------------------------------- 19 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 6:00 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 HALLMARK ELECTRICAL GUARDIAN LIFE INSURANCE SUPPLIES CORP. COMPANY OF AMERICA OFFICERS Bruce N. Alpert James E. McKee PRESIDENT SECRETARY Agnes Mullady Peter D. Goldstein TREASURER CHIEF COMPLIANCE OFFICER DISTRIBUTOR Gabelli & Company, Inc. CUSTODIAN, TRANSFER AGENT, AND DIVIDEND AGENT State Street Bank and Trust Company LEGAL COUNSEL Skadden, Arps, Slate, Meagher & Flom LLP - -------------------------------------------------------------------------------- This report is submitted for the general information of the shareholders of The GAMCO Global Convertible Securities Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. - -------------------------------------------------------------------------------- GAB441Q406SR GAMCO THE GAMCO GLOBAL CONVERTIBLE SECURITIES FUND ANNUAL REPORT DECEMBER 31, 2006 THE GAMCO GLOBAL GROWTH FUND ANNUAL REPORT DECEMBER 31, 2006 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 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 and the investment portfolio as of December 31, 2006 with a description of factors that affected the performance during the past year. PERFORMANCE DISCUSSION (UNAUDITED) During 2006 The GAMCO Global Growth Fund (Class AAA) returned 12.54% underperforming the MSCI AC World Free Index and the average global multi cap core fund tracked by Lipper which were up 21.53% and 17.92% respectively. The year 2006 was a year of two market environments. Equity markets were volatile during the first half of the year, as investors grappled with geopolitical tensions, rising interest rates and soaring energy and commodity prices. After rising rapidly in the first quarter, the emerging markets tumbled in the second quarter as investors moved to reduce risk levels. The investment landscape improved markedly during the summer months, as oil and most other commodity prices staged a retreat, the Fed paused (after 17 consecutive rate hikes) and the threatening rhetoric from Iran and North Korea quieted down. The result was a smart advance in share prices, which included a rebound in the emerging markets. It was another difficult year for funds with a growth and larger cap bias, which includes the Fund. Investors expressed a strong preference for higher yielding stocks (such as telecoms and utilities) as well as hard assets (commodity and real estate based securities), as the leading MSCI industry performers were Utilities, Telecommunication Services, Materials and Financials. The Fund was helped by its overweight in Materials but hurt by underweighting Utilities, Telecoms and Financials. Moreover, the Fund's overweights in Health Care and Information Technology hurt performance as these were the two worst industry sectors. Additionally, the lack of any material emerging market exposure in the first quarter of the year opened a performance gap that proved too great to close over the balance of the year, relative to the MSCI AC World Free Index, although we did establish a meaningful position in the emerging markets during the second quarter pullback. In summary, the lack of emerging market exposure in the first quarter, coupled with underweighting Utilities, Telecoms and Financials and overweighting Technology and Health Care, led to the Fund underperforming the Index. Sincerely yours, /s/ Bruce N. Alpert Bruce N. Alpert President January 22, 2007 SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED) The following table presents portfolio holdings as a percent of total net assets as of December 31, 2006: THE GAMCO GLOBAL GROWTH FUND Financial Services ................................ 18.7% Health Care ....................................... 9.6% Energy and Utilities .............................. 9.2% Food and Beverage ................................. 7.8% Computer Software and Services .................... 7.3% Exchange Traded Funds ............................. 6.3% Metals and Mining ................................. 5.8% Retail ............................................ 5.8% Diversified Industrial ............................ 4.4% Consumer Products ................................. 3.5% Aerospace ......................................... 3.2% Hotels and Gaming ................................. 3.2% Entertainment ..................................... 2.9% Business Services ................................. 2.7% Building and Construction ......................... 2.1% Telecommunications ................................ 1.8% Broadcasting ...................................... 1.3% Electronics ....................................... 1.1% Equipment and Supplies ............................ 0.9% U.S. Government Obligations ....................... 0.9% Cable and Satellite ............................... 0.5% Chemicals and Allied Products ..................... 0.3% Wireless Communications ........................... 0.3% Communications Equipment .......................... 0.3% Other Assets and Liabilities (Net) ................ 0.1% ------ 100.0% ====== THE FUND FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SECURITIES AND EXCHANGE COMMISSION (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, 2006. 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 12 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. 2 COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GAMCO GLOBAL GROWTH FUND CLASS AAA SHARES, THE LIPPER GLOBAL MULTI-CAP CORE FUND AVERAGE, AND THE MSCI AC WORLD FREE INDEX [GRAPH OMITTED] PLOT POINTS FOLLOW: Gabelli Global Lipper Global Multi- MSCI AC World Growth Fund (Class AAA) Shares Cap Core Fund Average Free Index 2/7/94 $10,000 $10,000 $10,000 12/31/94 10,250 9,482 9,849 12/31/95 12,083 11,160 11,766 12/31/96 13,594 12,875 13,319 12/31/97 19,263 15,250 15,315 12/31/98 24,836 17,281 18,680 12/31/99 53,645 22,505 23,690 12/31/00 33,534 21,495 20,387 12/31/01 25,435 18,883 17,144 12/31/02 19,130 16,421 13,890 12/31/03 27,048 21,561 18,700 12/31/04 29,598 24,484 21,645 12/31/05 33,659 26,952 24,106 12/31/06 37,880 31,782 29,296 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. COMPARATIVE RESULTS - -------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS THROUGH DECEMBER 31, 2006 (A) ---------------------------------------------------- Since Inception Quarter 1 Year 3 Year 5 Year 10 Year (2/7/94) - -------------------------------------------------------------------------------------------------------------------- GAMCO GLOBAL GROWTH FUND CLASS AAA (b)........... 8.86% 12.54% 11.88% 8.29% 10.79% 10.88% MSCI AC World Free Index ....................... 9.16 21.53 16.14 11.31 8.20 8.68 Lipper Global Multi-Cap Core Fund Average ....... 7.69 17.92 13.90 10.85 8.17 8.89 Class A ......................................... 8.87 12.54 11.88 8.29 10.81 10.89 2.61(c) 6.07(c) 9.69(c) 7.02(c) 10.15(c) 10.38(c) Class B ......................................... 8.67 11.65 11.05 7.48 10.27 10.48 3.67(d) 6.65(d) 10.23(d) 7.17(d) 10.27(d) 10.48(d) Class C ......................................... 8.70 11.70 11.05 7.46 10.24 10.45 7.70(e) 10.70(e) 11.05 7.46 10.24 10.45 (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 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 MORE INFORMATION ABOUT THIS AND OTHER MATTERS AND SHOULD BE READ CAREFULLY BEFORE INVESTING. THE CLASS AAA SHARES' NET ASSET VALUES ARE USED TO CALCULATE PERFORMANCE FOR THE PERIODS PRIOR TO THE ISSUANCE OF CLASS A SHARES, CLASS B SHARES, AND CLASS C SHARES ON MARCH 2, 2000, MAY 5, 2000, AND MARCH 12, 2000, 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. INVESTING IN FOREIGN SECURITIES INVOLVES RISKS NOT ORDINARILY ASSOCIATED WITH INVESTMENTS IN DOMESTIC ISSUES, INCLUDING CURRENCY FLUCTUATION, ECONOMIC, AND POLITICAL RISKS. THE MORGAN STANLEY CAPITAL INTERNATIONAL ALL COUNTRY WORLD FREE INDEX (THE "MSCI AC WORLD FREE INDEX") IS AN UNMANAGED INDICATOR OF STOCK MARKET PERFORMANCE, WHILE THE LIPPER GLOBAL MULTI-CAP CORE FUND AVERAGE REFLECTS THE AVERAGE PERFORMANCE OF MUTUAL FUNDS CLASSIFIED IN THIS PARTICULAR CATEGORY. DIVIDENDS ARE CONSIDERED REINVESTED. YOU CANNOT INVEST DIRECTLY IN AN INDEX. (b) EFFECTIVE FEBRUARY 15, 2007, CLASS AAA SHARES ARE ONLY OFFERED TO INVESTORS WHO ARE SHAREHOLDERS IN ONE OR MORE OF THE REGISTERED FUNDS DISTRIBUTED BY GABELLI & COMPANY, INC. PRIOR TO FEBRUARY 15, 2007. (c) INCLUDES THE EFFECT OF THE MAXIMUM 5.75% SALES CHARGE AT THE BEGINNING OF THE PERIOD. (d) PERFORMANCE RESULTS INCLUDE THE DEFERRED SALES CHARGES FOR THE CLASS B SHARES UPON REDEMPTION AT THE END OF THE QUARTER, ONE YEAR, THREE YEAR, FIVE YEAR, TEN YEAR, AND SINCE INCEPTION PERIODS OF 5%, 5%, 3%, 2%, 0%, AND 0%, RESPECTIVELY OF THE FUND'S NAV AT THE TIME OF PURCHASE OR SALE, WHICHEVER IS LOWER. CLASS B SHARES ARE NOT AVAILABLE FOR NEW PURCHASES. (e) PERFORMANCE RESULTS INCLUDE THE DEFERRED SALES CHARGES FOR THE CLASS C SHARES UPON REDEMPTION AT THE END OF THE QUARTER AND ONE YEAR PERIODS OF 1% OF THE FUND'S NAV AT THE TIME OF PURCHASE OR SALE, WHICHEVER IS LOWER. - -------------------------------------------------------------------------------- 3 THE GAMCO GLOBAL GROWTH FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) For the Six Month Period from July 1, 2006 through December 31, 2006 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, 2006. Beginning Ending Annualized Expenses Account Value Account Value Expense Paid During 07/01/06 12/31/06 Ratio Period* - -------------------------------------------------------------------------------- THE GAMCO GLOBAL GROWTH FUND - -------------------------------------------------------------------------------- ACTUAL FUND RETURN Class AAA $1,000.00 $1,087.10 1.77% $ 9.31 Class A $1,000.00 $1,086.60 1.78% $ 9.36 Class B $1,000.00 $1,082.40 2.52% $13.23 Class C $1,000.00 $1,083.20 2.52% $13.23 HYPOTHETICAL 5% RETURN Class AAA $1,000.00 $1,016.28 1.77% $ 9.00 Class A $1,000.00 $1,016.23 1.78% $ 9.05 Class B $1,000.00 $1,012.50 2.52% $12.78 Class C $1,000.00 $1,012.50 2.52% $12.78 * 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, then divided by 365. 4 THE GAMCO GLOBAL GROWTH FUND SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2006 - -------------------------------------------------------------------------------- MARKET SHARES COST VALUE -------- ---- ------- COMMON STOCKS -- 92.7% AEROSPACE -- 3.2% 5,000 General Dynamics Corp. ........ $ 345,708 $ 371,750 6,000 L-3 Communications Holdings Inc. ............... 463,245 490,680 5,000 Lockheed Martin Corp. ......... 372,928 460,350 9,000 Rockwell Collins Inc. ......... 516,913 569,610 90,000 Rolls-Royce Group plc+ ........ 751,338 789,018 1,174,400 Rolls-Royce Group plc, Cl. B .. 2,235 2,334 10,000 United Technologies Corp. ..... 491,188 625,200 ------------ ------------ 2,943,555 3,308,942 ------------ ------------ BROADCASTING -- 1.3% 7,000 Lagardere SCA ................. 399,739 563,659 5,200 Nippon Television Network Corp. ............... 771,307 771,665 ------------ ------------ 1,171,046 1,335,324 ------------ ------------ BUILDING AND CONSTRUCTION -- 2.1% 5,000 CRH plc, Dublin ............... 120,555 208,171 15,000 CRH plc, London ............... 361,664 625,305 8,000 Fomento de Construcciones y Contratas SA .............. 234,716 815,260 8,000 Technip SA .................... 266,839 549,139 ------------ ------------ 983,774 2,197,875 ------------ ------------ BUSINESS SERVICES -- 2.7% 5,000 FedEx Corp. ................... 563,470 543,100 7,000 McDermott International Inc.+ ......... 323,763 356,020 11,000 SAP AG, ADR ................... 518,887 584,100 16,000 Secom Co. Ltd. ................ 620,342 829,545 8,000 SEI Investments Co. ........... 352,228 476,480 ------------ ------------ 2,378,690 2,789,245 ------------ ------------ CABLE AND SATELLITE -- 0.5% 12,500 Comcast Corp., Cl. A+ ......... 488,626 529,125 ------------ ------------ CHEMICALS AND ALLIED PRODUCTS -- 0.3% 50,000 Tokai Carbon Co. Ltd. ......... 205,108 355,447 ------------ ------------ COMMUNICATIONS EQUIPMENT -- 0.3% 14,000 Motorola Inc. ................. 355,660 287,840 ------------ ------------ COMPUTER SOFTWARE AND SERVICES -- 7.3% 13,000 Adobe Systems Inc.+ ........... 393,518 534,560 6,000 Apple Computer Inc.+ .......... 448,011 509,040 9,000 Autodesk Inc.+ ................ 332,146 364,140 22,000 Cisco Systems Inc.+ ........... 447,460 601,260 15,000 eBay Inc.+ .................... 535,997 451,050 5,200 Google Inc., Cl. A+ ........... 1,543,104 2,394,496 44,000 Microsoft Corp. ............... 1,191,220 1,313,840 8,000 NAVTEQ Corp.+ ................. 325,060 279,760 40,000 Yahoo! Inc.+ .................. 1,438,100 1,021,600 ------------ ------------ 6,654,616 7,469,746 ------------ ------------ MARKET SHARES COST VALUE -------- ---- ------- CONSUMER PRODUCTS -- 3.5% 7,000 Christian Dior SA ............. $ 438,852 $ 746,155 15,314 Compagnie Financiere Richemont AG, Cl. A ......... 443,000 892,322 3,000 Harman International Industries Inc. ............. 261,892 299,730 12,500 Procter & Gamble Co. .......... 698,207 803,375 4,000 Swatch Group AG ............... 464,406 883,874 ------------ ------------ 2,306,357 3,625,456 ------------ ------------ DIVERSIFIED INDUSTRIAL -- 4.4% 24,000 Amano Corp. ................... 422,744 301,298 10,000 Bouygues SA ................... 343,461 641,938 16,000 Emerson Electric Co. .......... 677,600 705,440 57,000 General Electric Co. .......... 2,064,759 2,120,970 13,000 ITT Corp. ..................... 570,141 738,660 ------------ ------------ 4,078,705 4,508,306 ------------ ------------ ELECTRONICS -- 1.1% 25,000 Intel Corp. ................... 558,120 506,250 10,000 Microchip Technology Inc. ..... 287,500 327,000 10,000 Texas Instruments Inc. ........ 193,981 288,000 ------------ ------------ 1,039,601 1,121,250 ------------ ------------ ENERGY AND UTILITIES -- 9.2% 7,000 Apache Corp. .................. 466,957 465,570 6,000 BP plc, ADR ................... 349,775 402,600 7,000 Canadian Natural Resources Ltd. .............. 308,416 372,610 5,672 Devon Energy Corp. ............ 278,827 380,477 5,000 EOG Resources Inc. ............ 345,118 312,250 10,000 Halliburton Co. ............... 362,269 310,500 19,000 Hess Corp. .................... 906,737 941,830 6,900 Imperial Oil Ltd. ............. 253,504 254,013 4,500 National-Oilwell Varco Inc.+ .. 311,678 275,310 9,000 Noble Corp. ................... 652,726 685,350 15,000 Norsk Hydro ASA, ADR .......... 415,709 460,050 10,000 Occidental Petroleum Corp. .... 375,302 488,300 7,000 Petroleo Brasileiro SA, ADR ... 618,845 720,930 10,000 Saipem SpA .................... 240,421 260,577 5,200 Sasol Ltd. .................... 238,251 191,881 2,000 Sasol Ltd., ADR ............... 76,260 73,800 9,000 Schlumberger Ltd. ............. 286,097 568,440 15,000 Statoil ASA, ADR .............. 445,603 394,800 8,252 Total SA ...................... 338,493 595,303 7,000 Transocean Inc.+ .............. 361,090 566,230 6,000 Weatherford International Ltd.+ ......... 269,562 250,740 10,000 XTO Energy Inc. ............... 457,244 470,500 ------------ ------------ 8,358,884 9,442,061 ------------ ------------ See accompanying notes to financial statements. 5 THE GAMCO GLOBAL GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 2006 - -------------------------------------------------------------------------------- MARKET SHARES COST VALUE -------- ---- ------- COMMON STOCKS (Continued) ENTERTAINMENT -- 2.9% 69,500 Publishing & Broadcasting Ltd. ........... $ 375,524 $ 1,171,253 15,000 Time Warner Inc. .............. 313,950 326,700 16,300 Viacom Inc., Cl. B+ ........... 632,090 668,789 20,180 Vivendi ....................... 436,833 788,766 ------------ ------------ 1,758,397 2,955,508 ------------ ------------ EQUIPMENT AND SUPPLIES -- 0.9% 3,900 Keyence Corp. ................. 791,419 966,438 ------------ ------------ FINANCIAL SERVICES -- 18.7% 5,000 Affiliated Managers Group Inc.+ ................. 483,000 525,650 5,500 Allianz SE .................... 704,835 1,123,596 18,500 American Express Co. .......... 962,816 1,122,395 16,000 American International Group Inc. .................. 1,107,196 1,146,560 50,000 Anglo Irish Bank Corp. plc .... 117,562 1,036,895 30,000 Australia & New Zealand Banking Group Ltd. .......... 505,275 668,024 30,000 Aviva plc ..................... 320,646 482,838 29,039 Bank of Ireland, Ireland ...... 280,065 670,824 10,000 Bank of Ireland, London ....... 159,392 231,008 50,000 Barclays plc .................. 655,833 714,663 16,533 China Life Insurance Co. Ltd., ADR ............... 379,083 835,099 18,000 Citigroup Inc. ................ 869,737 1,002,600 12,000 Credit Suisse Group, ADR ...... 616,065 838,200 2,500 Goldman Sachs Group Inc. ...... 262,375 498,375 3,700 Julius Baer Holding Ltd. AG ... 353,875 407,501 4,000 Legg Mason Inc. ............... 471,533 380,200 6,895 Merrill Lynch & Co. Inc. ...... 391,748 641,924 40 Mitsubishi UFJ Financial Group Inc. .................. 486,680 494,097 45,500 Nikko Cordial Corp. ........... 494,198 521,890 8,200 Royal Bank of Canada .......... 351,545 390,259 42,700 Standard Chartered plc ........ 878,245 1,247,399 10,000 State Street Corp. ............ 479,051 674,400 10,000 T. Rowe Price Group Inc. ...... 408,771 437,700 27,000 The 77 Bank Ltd. .............. 197,165 171,295 6,250 Toronto-Dominion Bank ......... 353,908 373,665 13,000 UBS AG, New York .............. 534,928 784,290 4,000 UBS AG, Switzerland ........... 136,647 243,086 14,000 Wells Fargo & Co. ............. 506,174 497,840 44,500 Westpac Banking Corp. ......... 703,450 851,453 16,000 Yamaguchi Financial Group Inc. .................. 202,431 164,027 ------------ ------------ 14,374,229 19,177,753 ------------ ------------ MARKET SHARES COST VALUE -------- ---- ------- FOOD AND BEVERAGE -- 7.8% 53,000 Ajinomoto Co. Inc. ............ $ 602,454 $ 700,551 12,000 ARIAKE JAPAN Co. Ltd. ......... 336,640 234,444 60,000 Cadbury Schweppes plc ......... 592,403 642,022 16,996 Coca-Cola Hellenic Bottling Co. SA ............. 358,399 664,090 90,000 Davide Campari-Milano SpA ..... 418,375 892,218 70,000 Diageo plc .................... 891,438 1,374,014 6,000 Groupe Danone ................. 669,806 909,247 3,000 Nestle SA ..................... 850,228 1,066,065 7,000 PepsiCo Inc. .................. 360,029 437,850 3,763 Pernod-Ricard SA .............. 401,489 864,315 5,000 Starbucks Corp.+ .............. 145,420 177,100 ------------ ------------ 5,626,681 7,961,916 ------------ ------------ HEALTH CARE -- 9.6% 4,400 Alcon Inc. .................... 497,570 491,788 6,700 Genentech Inc.+ ............... 374,910 543,571 6,500 Genzyme Corp.+ ................ 381,592 400,270 4,900 Gilead Sciences Inc.+ ......... 316,355 318,157 20,000 GlaxoSmithKline plc ........... 423,287 526,306 23,500 Hisamitsu Pharmaceutical Co. Inc. ..... 458,023 744,464 15,000 Novartis AG ................... 615,192 864,793 10,000 Novo Nordisk A/S, ADR ......... 797,927 836,300 4,300 Roche Holding AG .............. 343,824 771,071 7,130 Sanofi-Aventis ................ 503,662 658,364 10,000 St. Jude Medical Inc.+ ........ 424,057 365,600 2,400 Straumann Holding AG .......... 504,079 581,042 9,000 Stryker Corp. ................. 424,681 495,990 4,800 Synthes Inc. .................. 398,130 572,376 10,000 Takeda Pharmaceutical Co. Ltd. ..... 445,295 686,526 11,000 Varian Medical Systems Inc.+ .. 426,121 523,270 6,500 Zimmer Holdings Inc.+ ......... 536,295 509,470 ------------ ------------ 7,871,000 9,889,358 ------------ ------------ HOTELS AND GAMING -- 3.2% 8,550 Greek Organization of Football Prognostics SA .............. 101,079 330,465 19,000 Hilton Hotels Corp. ........... 493,147 663,100 37,000 InterContinental Hotels Group plc ................... 759,700 914,260 63,303 Ladbrokes plc ................. 647,704 518,405 7,000 Marriott International Inc., Cl. A ....................... 266,140 334,040 8,000 Starwood Hotels & Resorts Worldwide Inc. .............. 480,970 500,000 ------------ ------------ 2,748,740 3,260,270 ------------ ------------ See accompanying notes to financial statements. 6 THE GAMCO GLOBAL GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 2006 - -------------------------------------------------------------------------------- MARKET SHARES COST VALUE -------- ---- ------- COMMON STOCKS (Continued) METALS AND MINING -- 5.8% 6,000 Allegheny Technologies Inc. ... $ 384,745 $ 544,080 15,000 Anglo American plc ............ 546,531 731,600 20,000 BHP Billiton plc .............. 317,858 365,947 10,500 Commercial Metals Co. ......... 235,905 270,900 8,404 Freeport-McMoRan Copper & Gold Inc., Cl. B .......... 351,453 468,355 25,026 Gold Fields Ltd., ADR ......... 307,575 472,491 9,000 Lonmin plc .................... 545,871 530,417 5,228 Peabody Energy Corp. .......... 66,790 211,264 3,000 Phelps Dodge Corp. ............ 247,290 359,160 16,000 Rio Tinto plc ................. 587,295 851,487 14,000 Titanium Metals Corp.+ ........ 434,402 413,140 14,666 Xstrata plc ................... 376,296 732,252 ------------ ------------ 4,402,011 5,951,093 ------------ ------------ RETAIL -- 5.8% 12,000 Coach Inc.+ ................... 335,245 515,520 7,000 Costco Wholesale Corp. ........ 370,362 370,090 12,150 Hennes & Mauritz AB, Cl. B .... 512,220 614,071 9,000 Kohl's Corp.+ ................. 575,984 615,870 28,000 Matsumotokiyoshi Co. Ltd. ..... 750,942 622,327 15,000 Next plc ...................... 507,851 528,655 24,000 Seven & I Holdings Co. Ltd. ... 813,032 746,187 9,000 Tiffany & Co. ................. 290,462 353,160 10,000 Walgreen Co. .................. 410,655 458,900 8,000 Whole Foods Market Inc. ....... 399,510 375,440 39,100 Woolworths Ltd. ............... 607,675 737,637 ------------ ------------ 5,573,938 5,937,857 ------------ ------------ TELECOMMUNICATIONS -- 1.8% 10,000 Corning Inc.+ ................. 247,731 187,100 85 KDDI Corp. .................... 432,573 576,404 28,000 Verizon Communications Inc. ... 935,541 1,042,720 ------------ ------------ 1,615,845 1,806,224 ------------ ------------ WIRELESS COMMUNICATIONS -- 0.3% 8,000 QUALCOMM Inc. ................. 321,360 302,320 ------------ ------------ TOTAL COMMON STOCKS ........... 76,048,242 95,179,354 ------------ ------------ EXCHANGE TRADED FUNDS -- 6.3% 35,500 iShares MSCI Emerging Markets Index ............... 3,429,238 4,053,035 31,000 Vanguard Emerging Markets VIPERS .............. 2,324,490 2,399,090 ------------ ------------ TOTAL EXCHANGE TRADED FUNDS ................ 5,753,728 6,452,125 ------------ ------------ PRINCIPAL MARKET AMOUNT COST VALUE --------- ---- ------- U.S. GOVERNMENT OBLIGATIONS -- 0.9% $961,000 U.S. Treasury Bills, 4.882% to 4.983%++, 01/04/07 to 03/22/07 ........ $ 952,206 $ 952,194 ------------ ------------ TOTAL INVESTMENTS -- 99.9% ........ $ 82,754,176 102,583,673 ============ Other Assets and Liabilities (Net) -- 0.1% 93,122 ------------ NET ASSETS -- 100.0% ....................... $102,676,795 ============ - ---------------- + Non-income producing security. ++ Represents annualized yield at date of purchase. ADR American Depository Receipt VIPERS Vanguard Index Participation Equity Receipts % OF MARKET MARKET GEOGRAPHIC DIVERSIFICATION VALUE VALUE - -------------------------- -------- -------- North America ......................... 49.0% $ 50,304,855 Europe ................................ 34.4 35,242,865 Japan ................................. 8.7 8,886,606 Asia/Pacific .......................... 4.1 4,263,465 Latin America ......................... 3.1 3,147,710 South Africa .......................... 0.7 738,172 ----- ------------ 100.0% $102,583,673 ===== ============ See accompanying notes to financial statements. 7 THE GAMCO GLOBAL GROWTH FUND STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2006 - -------------------------------------------------------------------------------- ASSETS: Investments, at value (cost $82,754,176) ............... $102,583,673 Foreign currency, at value (cost $297,155) ............. 301,344 Cash ................................................... 1,224 Dividends and interest receivable ...................... 150,374 Receivable for Fund shares sold ........................ 6,422 Prepaid expense ........................................ 5,289 ------------ TOTAL ASSETS ........................................... 103,048,326 ------------ LIABILITIES: Payable for Fund shares redeemed ....................... 111,579 Payable for investment advisory fees ................... 87,747 Payable for shareholder communications expenses .............................. 47,700 Payable for legal and audit fees ....................... 45,117 Payable for shareholder services fees .................. 35,825 Payable for distribution fees .......................... 22,248 Payable for accounting fees ............................ 7,501 Other accrued expenses ................................. 13,814 ------------ TOTAL LIABILITIES ...................................... 371,531 ------------ NET ASSETS applicable to 4,478,874 shares outstanding ................................. $102,676,795 ============ NET ASSETS CONSIST OF: Paid-in capital, each class at $0.001 par value ........ $137,074,169 Accumulated net investment income ...................... 2,669 Accumulated net realized loss on investments and foreign currency transactions .................... (54,238,459) Net unrealized appreciation on investments ............. 19,829,497 Net unrealized appreciation on foreign currency translations ................................ 8,919 ------------ NET ASSETS ............................................. $102,676,795 ============ SHARES OF CAPITAL STOCK: CLASS AAA: Net Asset Value, offering and redemption price per share ($100,882,316 / 4,399,604 shares outstanding; 75,000,000 shares authorized) ........... $22.93 ====== CLASS A: Net Asset Value and redemption price per share ($1,294,266 / 56,433 shares outstanding; 50,000,000 shares authorized) ........... $22.93 ====== Maximum offering price per share (NAV / .9425, based on maximum sales charge of 5.75% of the offering price) ............................... $24.33 ====== CLASS B: Net Asset Value and offering price per share ($225,165 / 10,261 shares outstanding; 25,000,000 shares authorized) ........................ $21.94(a) ====== CLASS C: Net Asset Value and offering price per share ($275,048 / 12,576 shares outstanding; 25,000,000 shares authorized) ........................ $21.87(a) ====== - -------------------- (a) Redemption price varies based on the length of time held. STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2006 - -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends (net of foreign taxes of $58,054) ............ $ 2,128,609 Interest ............................................... 53,025 ----------- TOTAL INVESTMENT INCOME ................................ 2,181,634 ----------- EXPENSES: Investment advisory fees ............................... 1,067,264 Distribution fees - Class AAA .......................... 262,328 Distribution fees - Class A ............................ 3,313 Distribution fees - Class B ............................ 2,109 Distribution fees - Class C ............................ 2,589 Shareholder services fees .............................. 184,290 Legal and audit fees ................................... 96,386 Shareholder communications expenses .................... 95,538 Custodian fees ......................................... 46,330 Accounting fees ........................................ 45,000 Registration expenses .................................. 39,614 Directors' fees ........................................ 11,839 Interest expense ....................................... 2,005 Miscellaneous expenses ................................. 45,309 ----------- TOTAL EXPENSES ......................................... 1,903,914 ----------- NET INVESTMENT INCOME .................................. 277,720 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain on investments ....................... 14,069,656 Net realized gain on foreign currency transactions ................................ 883 ----------- Net realized gain on investments and foreign currency transactions ................................ 14,070,539 ----------- Net change in unrealized appreciation/ depreciation on investments .......................... (1,931,252) Net change in unrealized appreciation/ depreciation on foreign currency translations ......................................... 10,451 ----------- Net change in unrealized appreciation/ depreciation on investments and foreign currency translations .................... (1,920,801) ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY .................... 12,149,738 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................................ $12,427,458 =========== See accompanying notes to financial statements. 8 THE GAMCO GLOBAL GROWTH FUND STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED DECEMBER 31, 2006 DECEMBER 31, 2005 ----------------- ----------------- OPERATIONS: Net investment income ....................................................... $ 277,720 $ 110,182 Net realized gain on investments and foreign currency transactions .......... 14,070,539 9,232,898 Net change in unrealized appreciation/depreciation on investments and foreign currency translations ............................................. (1,920,801) 4,268,855 ------------ ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................ 12,427,458 13,611,935 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Class AAA ................................................................. (272,763) (92,625) Class A ................................................................... (3,545) (2,247) ------------ ------------ TOTAL DISTRIBUTIONS TO SHAREHOLDERS ......................................... (276,308) (94,872) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Class AAA ................................................................. (19,507,826) (18,980,399) Class A ................................................................... (2,805) 576,999 Class B ................................................................... (60) (3,817) Class C ................................................................... 14,905 171,726 ------------ ------------ NET DECREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS .................. (19,495,786) (18,235,491) ------------ ------------ REDEMPTION FEES ............................................................. 148 873 ------------ ------------ NET DECREASE IN NET ASSETS .................................................. (7,344,488) (4,717,555) NET ASSETS: Beginning of period ......................................................... 110,021,283 114,738,838 ------------ ------------ End of period (including undistributed net investment income of $2,669 and $374, respectively) ............................................ $102,676,795 $110,021,283 ============ ============ NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. ORGANIZATION. The GAMCO Global Growth Fund (the "Fund"), formerly, The Gabelli Global Growth Fund, a series of GAMCO Global Series Funds, Inc. (the "Corporation"), formerly, Gabelli Global Series Funds, Inc., 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. Prior to January 13, 2000, the Fund's name was The Gabelli Global Interactive Couch Potato(R) Fund. 2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in accordance with United States ("U.S.") generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. SECURITY VALUATION. Portfolio securities listed or traded on a nationally recognized securities exchange 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"). 9 THE GAMCO GLOBAL GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 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 60 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 60 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. 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 to the valuation and changes in valuation of similar securities, including a comparison of foreign securities to 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. In September 2006, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") 157, Fair Value Measurements, which clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. Adoption of SFAS 157 requires the use of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. At this time, management is in the process of reviewing the requirements of SFAS 157 against its current valuation policies to determine future applicability. 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. The Fund will always receive and maintain securities as collateral whose market value, including accrued interest, will be at least equal to 102% of the dollar amount invested by the Fund in each agreement. The Fund will make payment for such securities only upon physical delivery or upon evidence of book entry transfer of the collateral to the account of the custodian. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to maintain the adequacy of the collateral. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. At December 31, 2006, there were no open repurchase agreements. 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, which are included in unrealized appreciation/depreciation on investments and futures contracts. The Fund recognizes a realized gain or loss when the contract is closed. 10 THE GAMCO GLOBAL GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 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. At December 31, 2006, there were no open futures contracts. 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 Fund did not hold any short positions as of December 31, 2006. FORWARD FOREIGN EXCHANGE CONTRACTS. The Fund may engage in forward foreign exchange contracts for hedging a specific transaction with respect to either the currency in which the transaction is denominated or another currency as deemed appropriate by the Adviser. Forward foreign exchange contracts are valued at the forward rate and are marked-to-market daily. The change in market value is included in unrealized appreciation/depreciation on investments 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. At December 31, 2006, there were no open forward foreign exchange contracts. 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 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 ability 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. 11 THE GAMCO GLOBAL GROWTH FUND 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 which are recorded as soon as the Fund is informed of the dividend. 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 shown as "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 U.S. generally accepted accounting principles. 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 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. These reclassifications have no impact on the NAV of the Fund. For the fiscal year ended December 31, 2006, reclassifications were made to increase accumulated net investment income by $883, to increase accumulated net realized loss on investments and foreign currency transactions by $882, with an offsetting adjustment to paid-in capital. The tax character of distributions paid during the fiscal years ended December 31, 2006 and December 31, 2005 was $276,308 and $94,872, respectively, of ordinary income. 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. 12 THE GAMCO GLOBAL GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- As of December 31, 2006, the components of accumulated earnings/(losses) on a tax basis were as follows: Undistributed ordinary income ....................... $ 2,669 Capital loss carryforwards .......................... (54,218,953) Net unrealized appreciation on investments, foreign currency, and foreign receivables and payables .... 19,818,910 ------------ Total accumulated loss .............................. $(34,397,374) ============ At December 31, 2006, the Fund has net capital loss carryforwards for Federal income tax purposes of $54,218,953, which are available to reduce future required distributions of net capital gains to shareholders. $12,969,766 is available through 2009; $39,969,419 is available through 2010; and $1,279,768 is available through 2011. For the fiscal year ended December 31, 2006, the Fund utilized capital loss carryforwards of $13,953,674. The following summarizes the tax cost of investments and the related unrealized appreciation/(depreciation) at December 31, 2006: GROSS GROSS UNREALIZED UNREALIZED NET UNREALIZED COST APPRECIATION DEPRECIATION APPRECIATION ---- ------------ ------------ ------------ Investments ....................... $82,773,682 $21,701,299 $(1,891,308) $19,809,991 At December 31, 2006, the difference between book basis and tax basis unrealized appreciation was primarily due to deferral of losses from wash sales for tax purposes. In July 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109" ("the Interpretation"). The Interpretation establishes for all entities, including pass-through entities such as the Fund, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. The Interpretation is required to be implemented for a calendar-year open-end Fund no later than its June 29, 2007 NAV, and is to be applied to all open tax years as of the date of effectiveness. Management has begun to evaluate the application of the Interpretation to the Fund, and is not in a position at this time to estimate the significance of its impact, if any, on the Fund's financial statements. 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 that is not considered to be an affiliated person an annual retainer of $3,000 plus $500 for each Board meeting attended and they are reimbursed 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 $250 for each Board meeting attended and they are reimbursed for any out of pocket expenses incurred in attending meetings. All Board committee members receive $500 per meeting attended. Directors who are directors or employees of the Adviser or an affiliated company receive no compensation or expense reimbursement from the Fund. 4. DISTRIBUTION PLAN. The Fund's Board has adopted a distribution plan (the "Plan") for each class of shares pursuant to Rule 12b-1 under the 1940 Act. Gabelli & Company, Inc. ("Gabelli & Company"), an affiliate of the Adviser, serves as distributor of the Fund. Under the Class AAA, Class A, Class B, and Class C Share Plans, 13 THE GAMCO GLOBAL GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- payments are authorized to Gabelli & Company 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 proceeds from the sales of securities for the fiscal year ended December 31, 2006, other than short-term and U.S. Government Securities, aggregated $48,188,611 and $67,695,657, respectively. 6. TRANSACTIONS WITH AFFILIATES. During the fiscal year ended December 31, 2006, the Fund paid brokerage commissions of $18,576 to Gabelli & Company. Additionally, Gabelli & Company informed the Fund that it received $1,216 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 fiscal year ended December 31, 2006, 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 has access to an unsecured line of credit of up to $25,000,000 from the custodian for temporary borrowing purposes. Borrowings under this arrangement bear interest at 0.75% above the Federal Funds rate on outstanding balances. This amount, if any, would be shown as "interest expense" in the Statement of Operations. At December 31, 2006, there were no borrowings outstanding from the line of credit. The average daily amount of borrowings outstanding from the line of credit within the fiscal year ended December 31, 2006, was $3,534 with a weighted average interest rate of 5.87%. The maximum amount borrowed at any time during the fiscal year ended December 31, 2006 was $197,000. 8. CAPITAL STOCK TRANSACTIONS. The Fund currently offers four classes of shares - - Class AAA Shares, Class A Shares, Class B Shares, and Class C Shares. Effective February 15, 2007, Class AAA Shares are offered only to investors who are shareholders prior to that date in one or more of the registered funds distributed by Gabelli & Company. Class AAA Shares are offered to these investors only through selected broker/dealers, or the transfer agent 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 CDSC is equal to a declining percentage 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 & Company. The Board has approved Class I Shares which have not been offered publicly. The Fund imposes a redemption fee of 2.00% on Class AAA Shares, Class A Shares, Class B Shares, and Class C Shares that are redeemed or exchanged on or before the seventh day after the date of a purchase. (Prior to June 15, 2005, the Fund imposed a redemption fee on shares that were redeemed or exchanged on or before the sixtieth 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. The redemption fees retained by the Fund during the fiscal years ended December 31, 2006 and December 31, 2005 amounted to $148 and $873, respectively. The redemption fee does not apply to shares purchased through programs that the Adviser determined to have appropriate short-term trading policies in place. Additionally, certain recordkeepers for qualified and non-qualified retirement plans that could not collect the redemption fee at the participant level due to systems limitations have received an extension to implement such systems. 14 THE GAMCO GLOBAL GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- Transactions in shares of capital stock were as follows: YEAR ENDED YEAR ENDED DECEMBER 31, 2006 DECEMBER 31, 2005 ---------------------------- --------------------------- SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ------------ CLASS AAA CLASS AAA ---------------------------- --------------------------- Shares sold ........................................ 263,640 $ 5,632,563 351,247 $ 6,634,577 Shares issued upon reinvestment of distributions ... 11,428 262,618 4,351 89,324 Shares redeemed .................................... (1,183,208) (25,403,007) (1,387,756) (25,704,300) ---------- ------------ ---------- ------------ Net decrease ..................................... (908,140) $(19,507,826) (1,032,158) $(18,980,399) ========== ============ ========== ============ CLASS A CLASS A ---------------------------- --------------------------- Shares sold ........................................ 8,807 $ 187,766 36,708 $ 724,402 Shares issued upon reinvestment of distributions ... 126 2,895 97 1,998 Shares redeemed .................................... (8,777) (193,466) (7,903) (149,401) ---------- ------------ ---------- ------------ Net increase (decrease) .......................... 156 $ (2,805) 28,902 $ 576,999 ========== ============ ========== ============ CLASS B CLASS B ---------------------------- --------------------------- Shares sold ........................................ -- $ -- 1,074 $ 18,953 Shares redeemed .................................... (2) (60) (1,326) (22,770) ---------- ------------ ---------- ------------ Net decrease ..................................... (2) $ (60) (252) $ (3,817) ========== ============ ========== ============ CLASS C CLASS C ---------------------------- --------------------------- Shares sold ........................................ 9,832 $ 202,102 9,486 $ 178,993 Shares redeemed .................................... (9,339) (187,197) (394) (7,267) ---------- ------------ ---------- ------------ Net increase ..................................... 493 $ 14,905 9,092 $ 171,726 ========== ============ ========== ============ 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 and expects the risk of loss to be remote. 10. OTHER MATTERS. The Adviser and/or affiliates received subpoenas from the Attorney General of the State of New York and the SEC requesting information on mutual fund share trading practices involving certain funds managed by the Adviser. GAMCO Investors, Inc. ("GAMCO"), the Adviser's parent company, responded to these requests for documents and testimony. In June 2006, GAMCO began discussions with the SEC regarding a possible resolution of their inquiry. In February 2007, the Adviser made an offer of settlement to the staff of the SEC for communication to the Commission for its consideration to resolve this matter. This offer of settlement is subject to agreement regarding the specific language of the SEC's administrative order and other settlement documents. On a separate matter, in September 2005, the Adviser was informed by the staff of the SEC that the staff may recommend to the Commission that an administrative remedy and a monetary penalty be sought from the Adviser in connection with the actions of two of seven closed-end funds managed by the Adviser relating to Section 19(a) and Rule 19a-1 of the 1940 Act. These provisions require registered investment companies to provide written statements to shareholders when a dividend is made from a source other than net investment income. While the two closed-end funds sent annual statements and provided other materials containing this information, the funds did not send written statements to shareholders with each distribution in 2002 and 2003. The Adviser believes that all of the funds are now in compliance. The Adviser believes that these matters would have no effect on the Fund or any material adverse effect on the Adviser or its ability to manage the Fund. 15 THE GAMCO GLOBAL GROWTH FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of capital stock outstanding throughout each period: INCOME FROM INVESTMENT OPERATIONS DISTRIBUTIONS ---------------------------------------- ------------------------- Net Net Asset Net Realized and Total Period Value, Investment Unrealized from Net Ended Beginning Income Gain (Loss) on Investment Investments Total December 31 of Period (Loss)(a) Investments Operations Income Distributions - ----------- --------- --------- ----------- ------------ ---------- ------------- CLASS AAA 2006 $20.43 $ 0.06 $ 2.50 $ 2.56 $(0.06) $(0.06) 2005 17.98 0.02 2.45 2.47 (0.02) (0.02) 2004 16.43 (0.05) 1.60 1.55 -- -- 2003 11.62 (0.06) 4.86 4.80 -- -- 2002 15.45 (0.08) (3.75) (3.83) -- -- CLASS A 2006 $20.43 $ 0.06 $ 2.50 $ 2.56 $(0.06) $(0.06) 2005 18.01 0.01 2.45 2.46 (0.04) (0.04) 2004 16.45 (0.05) 1.61 1.56 -- -- 2003 11.63 (0.06) 4.87 4.81 -- -- 2002 15.47 (0.08) (3.76) (3.84) -- -- CLASS B 2006 $19.65 $(0.10) $ 2.39 $ 2.29 -- -- 2005 17.41 (0.12) 2.36 2.24 -- -- 2004 16.02 (0.17) 1.56 1.39 -- -- 2003 11.42 (0.16) 4.75 4.59 -- -- 2002 15.30 (0.17) (3.71) (3.88) -- -- CLASS C 2006 $19.58 $(0.09) $ 2.38 $ 2.29 -- -- 2005 17.35 (0.16) 2.39 2.23 -- -- 2004 15.97 (0.19) 1.57 1.38 -- -- 2003 11.38 (0.16) 4.74 4.58 -- -- 2002 15.26 (0.17) (3.71) (3.88) -- -- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA ----------------------------------------------- Net Asset Net Assets Net Period Value, End of Investment Portfolio Ended Redemption End of Total Period Income Operating Turnover December 31 Fees(a) Period Return+ (in 000's) (Loss) Expenses (b) Rate - ----------- ---------- -------- ------- ---------- --------- ------------ ------- CLASS AAA 2006 $0.00(c) $22.93 12.5% $100,883 0.26% 1.78% 46% 2005 0.00(c) 20.43 13.7 108,433 0.11 1.79(d) 33 2004 0.00(c) 17.98 9.4 114,011 (0.30) 1.82 100 2003 0.01 16.43 41.4 132,886 (0.45) 1.71 63 2002 -- 11.62 (24.8) 105,034 (0.58) 1.75 82 CLASS A 2006 $0.00(c) $22.93 12.5% $ 1,294 0.28% 1.78% 46% 2005 0.00(c) 20.43 13.7 1,150 0.03 1.79(d) 33 2004 0.00(c) 18.01 9.5 493 (0.29) 1.82 100 2003 0.01 16.45 41.4 426 (0.45) 1.71 63 2002 -- 11.63 (24.8) 176 (0.58) 1.75 82 CLASS B 2006 $0.00(c) $21.94 11.7% $ 225 (0.49)% 2.53% 46% 2005 0.00(c) 19.65 12.9 202 (0.67) 2.54(d) 33 2004 0.00(c) 17.41 8.7 183 (1.05) 2.57 100 2003 0.01 16.02 40.3 211 (1.20) 2.46 63 2002 -- 11.42 (25.4) 86 (1.33) 2.50 82 CLASS C 2006 $0.00(c) $21.87 11.7% $ 275 (0.42)% 2.53% 46% 2005 0.00(c) 19.58 12.9 236 (0.90) 2.52(d) 33 2004 0.00(c) 17.35 8.6 52 (1.17) 2.57 100 2003 0.01 15.97 40.3 207 (1.20) 2.46 63 2002 -- 11.38 (25.4) 101 (1.33) 2.50 82 - ------------- + 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. (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, 2004 and 2002. If interest expense had not been incurred, the ratios of operating expenses to average net assets would have been 1.81% and 1.70% (Class AAA), 1.81% and 1.70% (Class A), 2.56% and 2.45% (Class B), and 2.56% and 2.45% (Class C), respectively. Interest expense in 2006 was immaterial. (c) Amount represents less than $0.005 per share. (d) The ratios do not include a reduction of expenses for custodian fee credits on cash balances maintained with the custodian. Including such custodian fee credits, the expense ratios for the year ended December 31, 2005 would have been 1.79%, 1.79%, 2.53%, and 2.52% for Class AAA, Class A, Class B, and Class C, respectively. See accompanying notes to financial statements. 16 THE GAMCO GLOBAL GROWTH FUND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- To the Shareholders and Board of 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 Growth Fund (the "Fund") (formerly The Gabelli Global Growth Fund), a series of GAMCO Global Series Funds, Inc., (formerly Gabelli Global Series Funds, Inc.) as of December 31, 2006, 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 four 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. The financial highlights for the year ended December 31, 2002 were audited by other auditors whose report dated January 31, 2003, expressed an unqualified opinion on those financial highlights. 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, 2006, 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 Growth Fund, a series of GAMCO Global Series Funds, Inc., at December 31, 2006, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ ERNST & YOUNG LLP Philadelphia, Pennsylvania February 16, 2007 17 THE GAMCO GLOBAL GROWTH FUND BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (UNAUDITED) During the six months ended December 31, 2006, 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 multi-cap core and global multi-cap growth funds, noting its bottom quartile performance for the one and three year periods and top third 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 suggesting that 20% growth in the Fund would not produce meaningful economies of scale that the shareholders would not participate in. SHARING OF ECONOMIES OF SCALE. The Independent Board Members noted that the investment advisory 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 advisory fee, other expenses, and total expenses of the Fund to similar expense ratios of the peer group of global multi-cap core and multi-cap growth funds and noted that the Adviser's advisory 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 also noted that the advisory fee structure was the same as that in effect for most of the Gabelli/GAMCO funds. The Independent Board Members were presented with, but did not compare, the advisory fee to the fee for other types of accounts managed by the Adviser. CONCLUSIONS. The Independent Board Members concluded that the Fund enjoyed highly experienced portfolio management services, good ancillary services, and a mixed performance record that was understandable in relation to the disclosure in the Fund's prospectus and periodic shareholder reports as to its purpose and the outlook of the portfolio managers. 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 of Directors. 18 THE GAMCO GLOBAL GROWTH 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 Growth Fund at One Corporate Center, Rye, NY 10580-1422. TERM OF OFFICE NUMBER OF NAME, POSITION(S) AND LENGTH OF FUNDS IN FUND ADDRESS 1 TIME COMPLEX OVERSEEN PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS AND AGE SERVED 2 BY DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 4 - ---------------- ------------ ---------------- ---------------------- -------------------- INTERESTED DIRECTORS 3: - ---------------------- MARIO J. GABELLI Since 1993 24 Chairman of the Board and Chief Executive Director of Morgan Director and Officer of GAMCO Investors, Inc. and Group Holdings, Inc. Chief Investment Officer Chief Investment Officer - Value Portfolios (transportation Age: 64 of Gabelli Funds, LLC and GAMCO Asset services); Chairman of Management Inc.; Director/Trustee or Chief the Board of Lynch Investment Officer of other registered Interactive Corporation investment companies in the Gabelli Funds (multimedia and complex; Chairman and Chief Executive communication services Officer of GGCP, Inc. company) JOHN D. GABELLI Since 1993 10 Senior Vice President of Gabelli & Director of GAMCO Director Company, Inc. Investors, Inc. Age: 62 INDEPENDENT DIRECTORS 5: - ----------------------- E. VAL CERUTTI Since 2001 7 Chief Executive Officer of Cerutti Director of The LGL Group, Director Consultants, Inc.; Adviser to Iona Inc. (diversified Age: 67 College Hagan School of Business manufacturing) ANTHONY J. COLAVITA Since 1993 34 Partner in the law firm of -- Director Anthony J. Colavita, P.C. Age: 71 ARTHUR V. FERRARA Since 2001 7 Former Chairman of the Board and Chief Director of the Guardian Director Executive Officer of The Guardian Life sponsored mutual funds Age: 76 Insurance Company of America (1993-1995) WERNER J. ROEDER, MD Since 1993 23 Medical Director of Lawrence -- Director Hospital and practicing private physician Age: 66 ANTHONIE C. VAN EKRIS Since 1993 17 Chairman of BALMAC International, Inc. -- Director (commodities and futures trading) Age: 72 SALVATORE J. ZIZZA Since 2004 25 Chairman of Hallmark Electrical Supplies Director of Hollis-Eden Director Corp. (distribution of electrical Pharmaceuticals (biotechnology); Age: 61 supplies) Director of Earl Scheib, Inc. (automotive services) 19 THE GAMCO GLOBAL GROWTH FUND ADDITIONAL FUND INFORMATION (CONTINUED) (UNAUDITED) - -------------------------------------------------------------------------------- TERM OF OFFICE NAME, POSITION(S) AND LENGTH OF ADDRESS 1 TIME PRINCIPAL OCCUPATION(S) AND AGE SERVED 2 DURING PAST FIVE YEARS - ----------------- ------------ ---------------------- OFFICERS: - -------- BRUCE N. ALPERT Since 2003 Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC President since 1988 and an officer of all of the registered investment companies Age: 55 in the Gabelli Funds complex. Director and President of Gabelli Advisers, Inc. since 1998 JAMES E. MCKEE Since 1995 Vice President, General Counsel and Secretary of GAMCO Investors, Inc. Secretary since 1999 and GAMCO Asset Management Inc. since 1993; Secretary Age: 43 of all of the registered investment companies in the Gabelli Funds complex AGNES MULLADY Since 2006 Treasurer of all of the registered investment companies in the Gabelli Funds Treasurer complex; Senior Vice President of U.S. Trust Company, N.A. and Treasurer Age: 48 and Chief Financial Officer of Excelsior Funds from 2004 through 2005; Chief Financial Officer of AMIC Distribution Partners from 2002 through 2004; Controller of Reserve Management Corporation and Reserve Partners, Inc. and Treasurer of Reserve Funds from 2000 through 2002 PETER D. GOLDSTEIN Since 2004 Director of Regulatory Affairs at GAMCO Investors, Inc. since 2004; Chief Chief Compliance Officer Compliance Officer of all of the registered investment companies in the Age: 53 Gabelli Funds complex; Vice President of Goldman Sachs Asset Management from 2000 through 2004 - ----------------- 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 Investment Company Act of 1940, as amended (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. - -------------------------------------------------------------------------------- 2006 TAX NOTICE TO SHAREHOLDERS (Unaudited) For the fiscal year ended December 31, 2006, the Fund paid to shareholders ordinary income dividends (comprised of net investment income) totaling $0.062 and $0.063 per share for Class AAA and Class A, respectively. For the fiscal year ended December 31, 2006, 43.03% of the distribution qualifies for the dividend received deduction available to corporations, and 100% of the ordinary income distribution was qualified dividend income. - -------------------------------------------------------------------------------- 20 - -------------------------------------------------------------------------------- GABELLI FUNDS AND YOUR PERSONAL PRIVACY ================================================================================ WHO ARE WE? The Gabelli/GAMCO and Westwood 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 and Gabelli Advisers, Inc., which are 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: o 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. o 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 web site, 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) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA 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 MARCIN, CFA 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) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA 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 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) TEAM MANAGED 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 ___________________________________ WESTWOOD MIGHTY MITES(SM) 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 market average 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 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 FREEMAN, CFA 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) TEAM MANAGED SPECIALTY EQUITY ____________________________ 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) TEAM MANAGED 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 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 world-wide 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) TEAM MANAGED 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 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 MANAGER: MARTIN WEINER, CFA COMSTOCK STRATEGY FUND The Fund emphasizes investments in debt securities, which maximize total return in light of credit risk, interest rate risk, and the risk associated with the length of maturity of debt instruments. (MULTICLASS) PORTFOLIO MANAGER: MARTIN WEINER, CFA FIXED INCOME ________________________________ 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 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) PORTFOLIO MANAGER: JUDITH A. RANERI 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 THE FUND 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 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 6:00 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 HALLMARK ELECTRICAL GUARDIAN LIFE INSURANCE SUPPLIES CORP. COMPANY OF AMERICA OFFICERS Bruce N. Alpert James E. McKee PRESIDENT SECRETARY Agnes Mullady Peter D. Goldstein TREASURER CHIEF COMPLIANCE OFFICER DISTRIBUTOR Gabelli & Company, Inc. CUSTODIAN, TRANSFER AGENT, AND DIVIDEND AGENT State Street Bank and Trust Company LEGAL COUNSEL Skadden, Arps, Slate, Meagher & Flom LLP - -------------------------------------------------------------------------------- This report is submitted for the general information of the shareholders of The GAMCO Global Growth Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. - -------------------------------------------------------------------------------- GAB442Q406SR GAMCO THE GAMCO GLOBAL GROWTH FUND ANNUAL REPORT DECEMBER 31, 2006 THE GAMCO GLOBAL OPPORTUNITY FUND ANNUAL REPORT DECEMBER 31, 2006 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 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 and the investment portfolio as of December 31, 2006 with a description of factors that affected the performance during the past year. PERFORMANCE DISCUSSION (UNAUDITED) For the twelve months ending December 31, 2006 the net asset value of the Fund (Class AAA) appreciated by 14.54% which compares with 18.15% for the average Global Multi-Cap Growth Fund monitored by Lipper and 21.23% for the MSCI AC World Free Index. Global equity markets performed well in 2006. Merger and acquisition activity has been feverish and helped global markets' performance. Europe surpassed the U.S. (which itself had the fourth largest deal volume ever) in 2006 with deal volume of $1.43 trillion, a rise of 39% from 2005. Gains made in equity investments outside the United States were further augmented by the weakness of the U.S. dollar relative to most foreign currencies. Contributors to performance were made by both domestic and international holdings. Domestic investments that appreciated by more than 40% for the year included Precision Castparts Corp., Telephone & Data Systems Inc., Lockheed Martin Corp., and United States Cellular Corp. The top performing international holdings were Petrobras (+44.5%), Saipem (+42.6%), and Antofagasta Holdings (+35.8%). Sincerely yours, /s/ Bruce N. Alpert Bruce N. Alpert President February 23, 2007 COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GAMCO GLOBAL OPPORTUNITY FUND CLASS AAA SHARES, THE LIPPER GLOBAL MULTI-CAP GROWTH FUND AVERAGE, AND THE MSCI AC WORLD FREE INDEX [GRAPH OMITTED] PLOT POINTS FOLLOW: GAMCO Global Opportunity Fund Lipper Global Multi Cap MSCI AC (Class AAA Shares) Growth Fund Average World Free Index 5/11/98 $10,000 $10,000 $10,000 12/31/98 11,010 9,922 10,613 12/31/99 19,731 13,502 13,459 12/31/00 17,069 12,115 11,583 12/31/01 12,131 10,011 9,740 12/31/02 10,738 8,056 7,892 12/31/03 14,756 10,641 10,624 12/31/04 16,823 12,194 12,298 12/31/05 19,367 13,608 13,696 12/31/06 22,183 16,077 16,645 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. COMPARATIVE RESULTS - -------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS THROUGH DECEMBER 31, 2006 (A) ---------------------------------------------------- Since Inception Quarter 1 Year 3 Year 5 Year (5/11/98) - -------------------------------------------------------------------------------------------------------------------- GAMCO GLOBAL OPPORTUNITY FUND CLASS AAA ............ 8.92% 14.54% 14.56% 12.83% 9.66% MSCI AC World Free Index ........................... 9.16 21.53 16.14 11.31 6.06 Lipper Global Multi-Cap Growth Fund Average ........ 8.99 18.15 14.77 9.52 6.97 Class A ............................................ 8.92 14.54 14.57 12.88 9.66 2.65(b) 7.96(b) 12.33(b) 11.55(b) 8.92(b) Class B ............................................ 8.70 13.69 13.71 12.03 9.09 3.70(c) 8.69(c) 12.93(c) 11.77(c) 9.09(c) Class C ............................................ 8.72 13.75 14.19 12.78 9.62 7.72(d) 12.75(d) 14.19 12.78 9.62 (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 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 MORE 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' NET ASSET VALUES ARE USED TO CALCULATE PERFORMANCE FOR THE PERIODS PRIOR TO THE ISSUANCE OF CLASS A SHARES, CLASS B SHARES, AND CLASS C SHARES ON MARCH 12, 2000, AUGUST 16, 2000, AND NOVEMBER 23, 2001, RESPECTIVELY. THE ACTUAL PERFORMANCE FOR 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. RETURNS WOULD HAVE BEEN LOWER HAD THE ADVISER NOT REIMBURSED CERTAIN EXPENSES OF THE FUND. THE MSCI AC WORLD FREE INDEX IS AN UNMANAGED INDICATOR OF STOCK MARKET PERFORMANCE, WHILE THE LIPPER AVERAGE REFLECTS THE AVERAGE PERFORMANCE OF MUTUAL FUNDS CLASSIFIED IN THIS PARTICULAR CATEGORY. DIVIDENDS ARE CONSIDERED REINVESTED. YOU CANNOT INVEST DIRECTLY IN AN INDEX. (b) INCLUDES THE EFFECT OF THE MAXIMUM 5.75% SALES CHARGE AT THE BEGINNING OF THE PERIOD. (c) PERFORMANCE RESULTS INCLUDE THE DEFERRED SALES CHARGES FOR THE CLASS B SHARES UPON REDEMPTION AT THE END OF THE QUARTER, ONE YEAR, THREE YEAR, FIVE YEAR, AND SINCE INCEPTION PERIODS OF 5%, 5%, 3%, 2%, AND 0%, RESPECTIVELY, OF THE FUND'S NAV AT THE TIME OF PURCHASE OR SALE, WHICHEVER IS LOWER. CLASS B SHARES ARE NOT AVAILABLE FOR NEW PURCHASES. (d) PERFORMANCE RESULTS INCLUDE THE DEFERRED SALES CHARGES FOR THE CLASS C SHARES UPON REDEMPTION AT THE END OF THE QUARTER AND ONE YEAR PERIODS OF 1% OF THE FUND'S NAV AT THE TIME OF PURCHASE OR SALE, WHICHEVER IS LOWER. - -------------------------------------------------------------------------------- 2 THE GAMCO GLOBAL OPPORTUNITY FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) For the Six Month Period from July 1, 2006 through December 31, 2006 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, 2006. Beginning Ending Annualized Expenses Account Value Account Value Expense Paid During 07/01/06 12/31/06 Ratio Period* - -------------------------------------------------------------------------------- THE GAMCO GLOBAL OPPORTUNITY FUND - -------------------------------------------------------------------------------- ACTUAL FUND RETURN Class AAA $1,000.00 $1,072.60 2.00% $10.45 Class A $1,000.00 $1,071.80 2.00% $10.44 Class B $1,000.00 $1,067.90 2.73% $14.23 Class C $1,000.00 $1,068.30 2.74% $14.28 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 $1,011.44 2.73% $13.84 Class C $1,000.00 $1,011.39 2.74% $13.89 * 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, then divided by 365. 3 SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED) The following table presents portfolio holdings as a percent of total net assets as of December 31, 2006: THE GAMCO GLOBAL OPPORTUNITY FUND Health Care ....................................... 13.1% Metals and Mining ................................. 12.7% Financial Services ................................ 12.1% Energy and Utilities .............................. 10.8% Consumer Products ................................. 9.8% Computer Software and Services .................... 4.2% Food and Beverage ................................. 3.9% Diversified Industrial ............................ 3.4% Retail ............................................ 3.4% Aerospace ......................................... 3.2% Telecommunications ................................ 3.0% Building and Construction ......................... 3.0% Entertainment ..................................... 3.0% Hotels and Gaming ................................. 2.7% Aviation: Parts and Services ...................... 2.4% Broadcasting ...................................... 2.4% U.S. Government Obligations ....................... 1.9% Wireless Communications ........................... 1.3% Agriculture ....................................... 1.3% Cable and Satellite ............................... 0.8% Publishing ........................................ 0.7% Electronics ....................................... 0.6% Machinery ......................................... 0.5% Closed-End Funds .................................. 0.4% Transportation .................................... 0.0% Other Assets and Liabilities (Net) ................ (0.6)% ------ 100.0% ====== THE FUND FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SECURITIES AND EXCHANGE COMMISSION (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, 2006. 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 12 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. 4 THE GAMCO GLOBAL OPPORTUNITY FUND SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2006 - -------------------------------------------------------------------------------- MARKET SHARES COST VALUE -------- ---- ------- COMMON STOCKS -- 98.7% AEROSPACE -- 3.2% 3,000 L-3 Communications Holdings Inc. ............... $ 127,720 $ 245,340 5,500 Lockheed Martin Corp. ......... 135,166 506,385 ------------ ------------ 262,886 751,725 ------------ ------------ AGRICULTURE -- 1.3% 30,000 Agricore United ............... 206,693 309,994 ------------ ------------ AVIATION: PARTS AND SERVICES -- 2.4% 7,400 Precision Castparts Corp. ..... 109,705 579,272 ------------ ------------ BROADCASTING -- 2.4% 20,000 Mediaset SpA .................. 195,380 237,344 5,000 Modern Times Group AB, Cl. B+ 176,195 328,662 ------------ ------------ 371,575 566,006 ------------ ------------ BUILDING AND CONSTRUCTION -- 3.0% 4,125 CRH plc, Dublin ............... 47,794 171,741 13,000 CRH plc, London ............... 172,929 541,931 ------------ ------------ 220,723 713,672 ------------ ------------ CABLE AND SATELLITE -- 0.8% 7,000 Cablevision Systems Corp., Cl. A+ ...................... 67,535 199,360 ------------ ------------ UNITS ----- CLOSED-END FUNDS -- 0.4% 6,000 Mullen Group Income Fund ...... 194,420 96,163 ------------ ------------ SHARES ------ COMPUTER SOFTWARE AND SERVICES -- 4.2% 700 Google Inc., Cl. A+ ........... 220,948 322,336 11,500 Microsoft Corp. ............... 301,125 343,390 100 NIWS Co. HQ Ltd. .............. 113,403 60,081 5,000 Square Enix Co. Ltd. .......... 121,466 131,087 5,000 Yahoo! Inc.+ .................. 169,373 127,700 ------------ ------------ 926,315 984,594 ------------ ------------ CONSUMER PRODUCTS -- 9.8% 5,000 Altadis SA .................... 153,235 261,699 10,000 Assa Abloy AB, Cl. B .......... 189,995 217,647 4,000 Christian Dior SA ............. 227,736 426,375 11,000 Compagnie Financiere Richemont AG, Cl. A ......... 231,884 640,952 8,500 Escada AG+ .................... 207,340 335,489 4,000 Procter & Gamble Co. .......... 221,128 257,080 3,200 UST Inc. ...................... 142,645 186,240 ------------ ------------ 1,373,963 2,325,482 ------------ ------------ DIVERSIFIED INDUSTRIAL -- 3.4% 7,000 Bouygues SA ................... 252,231 449,356 9,500 General Electric Co. .......... 320,183 353,495 ------------ ------------ 572,414 802,851 ------------ ------------ ELECTRONICS -- 0.6% 4,400 Linear Technology Corp. ....... 165,609 133,408 ------------ ------------ MARKET SHARES COST VALUE -------- ---- ------- ENERGY AND UTILITIES -- 10.8% 5,000 Connecticut Water Service Inc. $ 110,239 $ 113,750 6,600 Imperial Oil Ltd. ............. 222,619 242,968 30,000 Kanto Natural Gas Development Co. Ltd. ........ 153,608 197,891 8,000 Mueller Water Products Inc., Cl. A ....................... 126,070 118,960 3,500 Petroleo Brasileiro SA, ADR ... 105,807 360,465 10,000 Saipem SpA .................... 210,831 260,577 7,200 Schlumberger Ltd. ............. 238,374 454,752 3,000 Suncor Energy Inc. ............ 101,766 236,730 35,000 Tokai Carbon Co. Ltd. ......... 152,714 248,813 4,000 Transocean Inc.+ .............. 164,064 323,560 ------------ ------------ 1,586,092 2,558,466 ------------ ------------ ENTERTAINMENT -- 3.0% 35,000 Publishing & Broadcasting Ltd. ........... 176,587 589,840 5,000 Time Warner Inc. .............. 85,437 108,900 ------------ ------------ 262,024 698,740 ------------ ------------ FINANCIAL SERVICES -- 12.1% 15,000 Bank of Ireland ............... 92,773 346,511 7,000 Citigroup Inc. ................ 270,158 389,900 5,375 Julius Baer Holding Ltd. AG ... 380,982 591,978 1,600 Legg Mason Inc. ............... 141,880 152,080 10,000 Mediobanca SpA ................ 201,520 236,156 17,000 Nikko Cordial Corp. ........... 180,347 194,992 20,000 The Shizuoka Bank Ltd. ........ 203,072 198,479 7,000 TSX Group Inc. ................ 287,164 279,784 8,000 UBS AG ........................ 336,926 482,640 ------------ ------------ 2,094,822 2,872,520 ------------ ------------ FOOD AND BEVERAGE -- 3.9% 8,000 ARIAKE JAPAN Co. Ltd. ......... 188,030 156,296 15,000 Cadbury Schweppes plc ......... 141,899 160,505 5,000 General Mills Inc. ............ 248,004 288,000 5,000 PepsiCo Inc. .................. 261,500 312,750 ------------ ------------ 839,433 917,551 ------------ ------------ HEALTH CARE -- 13.1% 6,000 Cochlear Ltd. ................. 246,988 274,693 4,208 GlaxoSmithKline plc ........... 126,084 110,735 6,000 Novartis AG ................... 232,122 345,917 3,500 Roche Holding AG .............. 305,337 627,616 4,691 Sanofi-Aventis, ADR ........... 162,121 216,583 5,000 St. Jude Medical Inc.+ ........ 192,663 182,800 1,200 Straumann Holding AG .......... 254,333 290,521 3,000 Synthes Inc. .................. 302,959 357,735 4,200 Takeda Pharmaceutical Co. Ltd. .................... 263,783 288,341 5,000 William Demant Holding A/S+ ... 235,806 405,396 ------------ ------------ 2,322,196 3,100,337 ------------ ------------ See accompanying notes to financial statements. 5 THE GAMCO GLOBAL OPPORTUNITY FUND SCHEDULE OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 2006 - -------------------------------------------------------------------------------- MARKET SHARES COST VALUE -------- ---- ------- COMMON STOCKS (Continued) HOTELS AND GAMING -- 2.7% 7,000 Greek Organization of Football Prognostics SA .............. $ 117,837 $ 270,557 10,000 InterContinental Hotels Group plc ................... 207,348 247,097 15,000 Ladbrokes plc ................. 121,994 122,839 ------------ ------------ 447,179 640,493 ------------ ------------ MACHINERY -- 0.5% 4,500 CNH Global NV ................. 129,912 122,850 ------------ ------------ METALS AND MINING -- 12.7% 17,726 Andsberg Ltd.+ (a) ............ 8,277 15,740 73,630 Antofagasta plc ............... 88,099 733,806 48,000 Gold Fields Ltd., ADR ......... 208,304 906,240 10,000 Harmony Gold Mining Co. Ltd.+ ............ 56,555 158,557 24,000 Harmony Gold Mining Co. Ltd., ADR+ ....... 130,306 378,000 15,000 Newmont Mining Corp. .......... 349,500 677,250 3,500 Peabody Energy Corp. .......... 179,978 141,435 ------------ ------------ 1,021,019 3,011,028 ------------ ------------ PUBLISHING -- 0.7% 40,000 Independent News & Media plc ................... 98,736 158,933 ------------ ------------ RETAIL -- 3.4% 9,000 Matsumotokiyoshi Co. Ltd. ..... 232,030 200,034 6,300 Seven & I Holdings Co. Ltd. ... 218,236 195,874 6,000 Walgreen Co. .................. 233,238 275,340 2,700 Whole Foods Market Inc. ....... 136,041 126,711 ------------ ------------ 819,545 797,959 ------------ ------------ TELECOMMUNICATIONS -- 3.0% 3,000 Alltel Corp. .................. 128,045 181,440 15,675 Sprint Nextel Corp. ........... 255,701 296,101 2,300 Telephone & Data Systems Inc. ................ 45,066 124,959 2,300 Telephone & Data Systems Inc., Special ....... 41,599 114,080 ------------ ------------ 470,411 716,580 ------------ ------------ TRANSPORTATION -- 0.0% 2,941 Horizon North Logistics Inc.+ 10,722 8,978 ------------ ------------ WIRELESS COMMUNICATIONS -- 1.3% 4,500 United States Cellular Corp.+ 254,809 313,155 ------------ ------------ TOTAL COMMON STOCKS ........... 14,828,738 23,380,117 ------------ ------------ PRINCIPAL MARKET AMOUNT COST VALUE --------- ---- ------- U.S. GOVERNMENT OBLIGATIONS -- 1.9% $451,000 U.S. Treasury Bill, 4.968%++, 03/08/07 .......... $ 447,119 $ 447,120 ------------ ------------ TOTAL INVESTMENTS -- 100.6% ....... $ 15,275,857 23,827,237 ============ Other Assets and Liabilities (Net) -- (0.6)% (151,841) ------------ NET ASSETS -- 100.0% ....................... $ 23,675,396 ============ - ---------------- (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 valuation of comparable securities and other factors on a regular basis. At December 31, 2006, the market value of the fair valued security amounted to $15,740 or 0.07% of total net assets. + Non-income producing security. ++ Represents annualized yield at date of purchase. ADR American Depository Receipt % OF MARKET MARKET GEOGRAPHIC DIVERSIFICATION VALUE VALUE - -------------------------- -------- ------- North America ...................... 38.9% $ 9,273,939 Europe ............................. 38.8 9,235,304 Japan .............................. 7.9 1,871,888 South Africa ....................... 6.0 1,442,797 Latin America ...................... 4.8 1,138,777 Asia/Pacific ....................... 3.6 864,532 ----- ----------- 100.0% $23,827,237 ===== =========== See accompanying notes to financial statements. 6 THE GAMCO GLOBAL OPPORTUNITY FUND STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2006 - -------------------------------------------------------------------------------- ASSETS: Investments, at value (cost $15,275,857) ............... $23,827,237 Dividends receivable ................................... 31,005 Receivable for Fund shares sold ........................ 8,606 Prepaid expense ........................................ 2,355 ----------- TOTAL ASSETS ........................................... 23,869,203 ----------- LIABILITIES: Payable to custodian ................................... 85,305 Payable for Fund shares redeemed ....................... 27,161 Payable for investment advisory fees ................... 23,875 Payable for legal and audit fees ....................... 21,434 Payable for shareholder communications expenses .............................. 18,295 Payable for distribution fees .......................... 5,060 Other accrued expenses ................................. 12,677 ----------- TOTAL LIABILITIES ...................................... 193,807 ----------- NET ASSETS applicable to 1,299,227 shares outstanding ................................... $23,675,396 =========== NET ASSETS CONSIST OF: Paid-in capital, each class at $0.001 par value ..................................... $21,190,123 Accumulated distributions in excess of net investment income .................................... (65,260) Accumulated net realized loss on investments and foreign currency transactions .................... (6,001,471) Net unrealized appreciation on investments ............. 8,551,380 Net unrealized appreciation on foreign currency translations ................................ 624 ----------- NET ASSETS ............................................. $23,675,396 =========== SHARES OF CAPITAL STOCK: CLASS AAA: Net Asset Value, offering and redemption price per share ($23,426,328 / 1,285,482 shares outstanding; 75,000,000 shares authorized) ........... $18.22 ====== CLASS A: Net Asset Value and redemption price per share ($219,947 / 12,102 shares outstanding; 50,000,000 shares authorized) ........................ $18.17 ====== Maximum offering price per share (NAV / .9425, based on maximum sales charge of 5.75% of the offering price) ............................... $19.28 ====== CLASS B: Net Asset Value and offering price per share ($25,039 / 1,422 shares outstanding; 25,000,000 shares authorized) ........................ $17.61(a) ====== CLASS C: Net Asset Value and offering price per share ($4,082 / 221.3 shares outstanding; 25,000,000 shares authorized) ........................ $18.45(a) ====== - -------------------- (a) Redemption price varies based on the length of time held. STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2006 - -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends (net of foreign taxes of $16,951) ............ $ 352,762 Interest ............................................... 10,854 ---------- TOTAL INVESTMENT INCOME ................................ 363,616 ---------- EXPENSES: Investment advisory fees ............................... 230,631 Distribution fees - Class AAA .......................... 56,951 Distribution fees - Class A ............................ 605 Distribution fees - Class B ............................ 367 Distribution fees - Class C ............................ 39 Shareholder communications expenses .................... 31,463 Legal and audit fees ................................... 27,461 Registration expenses .................................. 27,176 Shareholder services fees .............................. 22,030 Custodian fees ......................................... 16,173 Recovery of reimbursed expenses (see Note 3) ......................................... 14,200 Interest expense ....................................... 4,831 Directors' fees ........................................ 2,518 Miscellaneous expenses ................................. 31,211 ---------- TOTAL EXPENSES ......................................... 465,656 Less: Custodian fee credits ............................ (268) ---------- NET EXPENSES ........................................... 465,388 ---------- NET INVESTMENT LOSS .................................... (101,772) ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain on investments ....................... 1,181,626 Net realized loss on foreign currency transactions ......................................... (755) ---------- Net realized gain on investments and foreign currency transactions ........................ 1,180,871 ---------- Net change in unrealized appreciation/ depreciation on investments .......................... 1,985,198 Net change in unrealized appreciation/ depreciation on foreign currency translations ......................................... 1,286 ---------- Net change in unrealized appreciation/ depreciation on investments and foreign currency translations ................................ 1,986,484 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY .................. 3,167,355 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $3,065,583 ========== See accompanying notes to financial statements. 7 THE GAMCO GLOBAL OPPORTUNITY FUND STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED DECEMBER 31, 2006 DECEMBER 31, 2005 ----------------- ----------------- OPERATIONS: Net investment income (loss) ................................................. $ (101,772) $ 19,418 Net realized gain on investments and foreign currency transactions ........... 1,180,871 856,524 Net change in unrealized appreciation/depreciation on investments and foreign currency translations .............................................. 1,986,484 2,088,178 ----------- ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ......................... 3,065,583 2,964,120 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Net investment income Class AAA .................................................................. (3,855) (30,715) Class A .................................................................... (124) (552) ----------- ----------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS .......................................... (3,979) (31,267) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Class AAA .................................................................. (1,022,036) (2,510,492) Class A .................................................................... (57,936) 112,811 Class B .................................................................... (27,495) (9,204) Class C .................................................................... -- 3,000 ----------- ----------- NET DECREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ................... (1,107,467) (2,403,885) ----------- ----------- REDEMPTION FEES .............................................................. 499 970 ----------- ----------- NET INCREASE IN NET ASSETS ................................................... 1,954,636 529,938 NET ASSETS: Beginning of period .......................................................... 21,720,760 21,190,822 ----------- ----------- End of period (including undistributed net investment income of $0 and $0, respectively) ................................................... $23,675,396 $21,720,760 =========== =========== NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. ORGANIZATION. The GAMCO Global Opportunity Fund (the "Fund"), formerly, The Gabelli Global Opportunity Fund, a series of GAMCO Global Series Funds, Inc. (the "Corporation"), formerly, Gabelli Global Series Funds, Inc., 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 preparation of financial statements in accordance with United States ("U.S.") generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. SECURITY VALUATION. Portfolio securities listed or traded on a nationally recognized securities exchange 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 8 THE GAMCO GLOBAL OPPORTUNITY FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 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 60 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 60 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. 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 to the valuation and changes in valuation of similar securities, including a comparison of foreign securities to the equivalent U.S. dollar value American Depository Receipt ("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. In September 2006, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") 157, Fair Value Measurements, which clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. Adoption of SFAS 157 requires the use of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. At this time, management is in the process of reviewing the requirements of SFAS 157 against its current valuation policies to determine future applicability. 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. The Fund will always receive and maintain securities as collateral whose market value, including accrued interest, will be at least equal to 102% of the dollar amount invested by the Fund in each agreement. The Fund will make payment for such securities only upon physical delivery or upon evidence of book entry transfer of the collateral to the account of the custodian. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to maintain the adequacy of the collateral. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. At December 31, 2006, there were no open repurchase agreements. 9 THE GAMCO GLOBAL OPPORTUNITY FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 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 Fund did not hold any short positions as of December 31, 2006. FORWARD FOREIGN EXCHANGE CONTRACTS. The Fund may engage in forward foreign exchange contracts for hedging a specific transaction with respect to either the currency in which the transaction is denominated or another currency as deemed appropriate by the Adviser. Forward foreign exchange contracts are valued at the forward rate and are marked-to-market daily. The change in market value is included in unrealized appreciation/depreciation on investments 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. At December 31, 2006, there were no open forward foreign exchange contracts. 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 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 ability 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. 10 THE GAMCO GLOBAL OPPORTUNITY FUND 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 which are recorded as soon as the Fund is informed of the dividend. 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 shown as "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 U.S. generally accepted accounting principles. 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 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. These reclassifications have no impact on the NAV of the Fund. For the fiscal year ended December 31, 2006, reclassifications were made to decrease accumulated distributions in excess of net investment income by $80,079, to decrease accumulated net realized loss on investments and foreign currency transactions by $754, with an offsetting adjustment to paid-in capital. The tax character of distributions paid during the fiscal years ended December 31, 2006 and December 31, 2005 was $3,979 and $31,267, respectively, of ordinary income. 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. 11 THE GAMCO GLOBAL OPPORTUNITY FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- At December 31, 2006, the difference between book basis and tax basis unrealized appreciation was primarily due to deferral of losses from wash sales for tax purposes. As of December 31, 2006, the components of accumulated earnings/(losses) on a tax basis were as follows: Net unrealized appreciation ........................ $ 8,551,976 Capital loss carryforwards ......................... (6,001,443) Other temporary differences .............. ......... (65,260) ----------- Total accumulated earnings ......................... $ 2,485,273 =========== At December 31, 2006, the Fund has net capital loss carryforwards for Federal income tax purposes of $6,001,443, which are available to reduce future required distributions of net capital gains to shareholders. $1,119,397 of the loss carryforward is available through 2009; $1,904,804 is available through 2010; $1,776,091 is available through 2011; and $1,201,151 is available through 2012. For the fiscal year ended December 31, 2006, the Fund utilized net tax capital loss carryforwards of $1,181,627. The following summarizes the tax cost of investments and the related unrealized appreciation/(depreciation) at December 31, 2006: GROSS GROSS UNREALIZED UNREALIZED NET UNREALIZED COST APPRECIATION DEPRECIATION APPRECIATION ---- ------------ ------------ ------------ Investments ...................... $15,275,885 $8,963,899 $(412,547) $8,551,352 In July 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109" ("the Interpretation"). The Interpretation establishes for all entities, including pass-through entities such as the Fund, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. The Interpretation is required to be implemented for a calendar year open-end fund no later than its June 29, 2007 NAV, and is to be applied to all open tax years as of the date of effectiveness. Management has begun to evaluate the application of the Interpretation to the Fund, and is not in a position at this time to estimate the significance of its impact, if any, on the Fund's financial statements. 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. Effective May 1, 2005, the Adviser has 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 (exclusive of brokerage, interest, taxes, and extraordinary expenses) at no more than 2.00%, 2.00%, 2.75%, and 2.75% (1.50%, 1.50%, 2.25%, and 2.25% prior to May 1, 2005) of the value of the Fund's average daily net assets for Class AAA, Class A, Class B, and Class C, respectively. Beginning January 1, 2005, the Fund is obliged to repay the Adviser for a period of two fiscal years following the fiscal year in which the Adviser reimbursed the Fund only to the extent that the operating expenses of the Fund fall below the applicable expense limitations. The cumulative amount which the Fund may repay the Adviser is $26,232. For the fiscal year ended December 31, 2006, the Fund repaid the Adviser $14,200. If total net assets of the Corporation are in excess of $100 million, the Corporation pays each Director that is not considered to be an affiliated person an annual retainer of $3,000 plus $500 for each Board meeting attended and they are reimbursed for any out of pocket expenses incurred in attending meetings. If total net assets of the 12 THE GAMCO GLOBAL OPPORTUNITY FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- Corporation are below $100 million, the Corporation pays each Independent Director an annual retainer of $1,500 plus $250 for each Board meeting attended and they are reimbursed for any out of pocket expenses incurred in attending meetings. All Board committee members receive $500 per meeting attended. Directors who are directors or employees of the Adviser or an affiliated company receive no compensation or expense reimbursement from the Fund. 4. DISTRIBUTION PLAN. The Fund's Board has adopted a distribution plan (the "Plan") for each class of shares pursuant to Rule 12b-1 under the 1940 Act. Gabelli & Company, Inc. ("Gabelli & Company"), 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 & Company 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 proceeds from the sales of securities for the fiscal year ended December 31, 2006, other than short-term securities, aggregated $3,524,316 and $4,759,873, respectively. 6. TRANSACTIONS WITH AFFILIATES. During the fiscal year ended December 31, 2006, the Fund paid brokerage commissions of $180 to Gabelli & Company. Additionally, Gabelli & Company informed the Fund that it received $330 from investors representing commissions (sales charges and underwriting fees) on sales and redemptions of Fund shares. 7. LINE OF CREDIT. The Fund has access to an unsecured line of credit of up to $25,000,000 from the custodian for temporary borrowing purposes. Borrowings under this arrangement bear interest at 0.75% above the Federal Funds rate on outstanding balances. This amount, if any, would be shown as "interest expense" in the Statement of Operations. At December 31, 2006, there were no borrowings outstanding from the line of credit. The average daily amount of borrowings outstanding from the line of credit within the fiscal year ended December 31, 2006 was $42,323 with a related weighted average interest rate of 6.04%. The maximum amount borrowed at any time during the fiscal year ended December 31, 2006 was $1,315,000. 8. CAPITAL STOCK TRANSACTIONS. The Fund currently offers four classes of shares - - Class AAA Shares, Class A Shares, Class B Shares, and Class C Shares. Class AAA Shares are offered only to investors who acquire them directly from Gabelli & Company, or through selected broker/dealers, or the transfer agent 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 CDSC is equal to a declining percentage 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 & Company. The Board has approved Class I Shares which have not been offered publicly. The Fund imposes a redemption fee of 2.00% on Class AAA Shares, Class A Shares, Class B Shares, and Class C Shares that are redeemed or exchanged on or before the seventh day after the date of a purchase. (Prior to June 15, 2005, the Fund imposed a redemption fee on shares that were redeemed or exchanged on or before the sixtieth 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. The redemption fees retained by the Fund during the fiscal years ended December 31, 2006 and December 31, 2005 amounted to $499 and $970, respectively. 13 THE GAMCO GLOBAL OPPORTUNITY FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- The redemption fee does not apply to shares purchased through programs that the Adviser determined to have appropriate short-term trading policies in place. Additionally, certain recordkeepers for qualified and non-qualified retirement plans that could not collect the redemption fee at the participant level due to systems limitations have received an extension to implement such systems. Transactions in shares of capital stock were as follows: YEAR ENDED YEAR ENDED DECEMBER 31, 2006 DECEMBER 31, 2005 ---------------------------- --------------------------- SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ------------ CLASS AAA CLASS AAA ---------------------------- --------------------------- Shares sold ....................................... 283,265 $ 4,840,122 343,785 $ 5,002,957 Shares issued upon reinvestment of distributions .. 206 3,759 1,830 29,087 Shares redeemed ................................... (344,742) (5,865,917) (518,825) (7,542,536) ---------- ------------ ---------- ------------ Net decrease .................................... (61,271) $ (1,022,036) (173,210) $ (2,510,492) ========== ============ ========== ============ CLASS A CLASS A ---------------------------- --------------------------- Shares sold ....................................... 3,963 $ 67,574 10,880 $ 157,398 Shares issued upon reinvestment of distributions .. 5 97 35 547 Shares redeemed ................................... (7,241) (125,607) (3,190) (45,134) ---------- ------------ ---------- ------------ Net increase (decrease) ......................... (3,273) $ (57,936) 7,725 $ 112,811 ========== ============ ========== ============ CLASS B CLASS B ---------------------------- --------------------------- Shares sold ....................................... -- -- 36 $ 500 Shares issued upon reinvestment of distributions .. -- -- -- -- Shares redeemed ................................... (1,701) $ (27,495) (727) (9,704) ---------- ------------ ---------- ------------ Net decrease .................................... (1,701) $ (27,495) (691) $ (9,204) ========== ============ ========== ============ CLASS C CLASS C ---------------------------- --------------------------- Shares sold ....................................... -- -- 211 $ 3,000 Shares issued upon reinvestment of distributions .. -- -- -- -- Shares redeemed ................................... -- -- -- -- ---------- ------------ ---------- ------------ Net increase .................................... -- -- 211 $ 3,000 ========== ============ ========== ============ 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 and expects the risk of loss to be remote. 10. OTHER MATTERS. The Adviser and/or affiliates received subpoenas from the Attorney General of the State of New York and the SEC requesting information on mutual fund share trading practices involving certain funds managed by the Adviser. GAMCO Investors, Inc. ("GAMCO"), the Adviser's parent company, responded to these requests for documents and testimony. In June 2006, GAMCO began discussions with the SEC regarding a possible resolution of their inquiry. In February 2007, the Adviser made an offer of settlement to the staff of the SEC for communication to the Commission for its consideration to resolve this matter. This offer of settlement is subject to agreement regarding the specific language of the SEC's administrative order and other settlement documents. On a separate matter, in September 2005, the Adviser was informed by the staff of the SEC that the staff may recommend to the Commission that an administrative remedy and a monetary penalty be sought from the Adviser in connection with the actions of two of seven closed-end funds managed by the Adviser relating to Section 19(a) and Rule 19a-1 of the 1940 Act. These provisions require registered investment companies to provide written statements to shareholders when a dividend is made from a source other than net investment income. While the two closed-end funds sent annual statements and provided other materials containing this information, the funds did not send written statements to shareholders with each distribution in 2002 and 2003. The Adviser believes that all of the funds are now in compliance. The Adviser believes that these matters would have no effect on the Fund or any material adverse effect on the Adviser or its ability to manage the Fund. 14 THE GAMCO GLOBAL OPPORTUNITY FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of capital stock outstanding throughout each period: INCOME FROM INVESTMENT OPERATIONS DISTRIBUTIONS --------------------------------------- -------------------------- Net Net Asset Net Realized and Total Period Value, Investment Unrealized from Net Ended Beginning Income Gain (Loss) on Investment Investment Total December 31 of Period (Loss)(a) Investments Operations Income Distributions - ----------- --------- ------- ------------- ---------- --------- ------------- CLASS AAA 2006 $15.91 $(0.08) $ 2.39 $ 2.31 $(0.00)(d) $(0.00)(d) 2005 13.84 0.01 2.08 2.09 (0.02) (0.02) 2004 12.18 0.03 1.68 1.71 (0.05) (0.05) 2003 8.87 0.00(d) 3.29 3.29 (0.01) (0.01) 2002 10.02 0.00(d) (1.15) (1.15) -- -- CLASS A 2006 $15.87 $(0.08) $ 2.39 $ 2.31 $(0.01) $(0.01) 2005 13.81 0.01 2.09 2.10 (0.04) (0.04) 2004 12.16 0.03 1.67 1.70 (0.05) (0.05) 2003 8.86 0.00(d) 3.28 3.28 (0.01) (0.01) 2002 9.99 0.00(d) (1.13) (1.13) -- -- CLASS B 2006 $15.49 $(0.19) $ 2.31 $ 2.12 -- -- 2005 13.56 (0.08) 2.01 1.93 -- -- 2004 12.00 (0.07) 1.66 1.59 $(0.03) $(0.03) 2003 8.80 (0.07) 3.24 3.17 -- -- 2002 10.00 (0.07) (1.13) (1.20) -- -- CLASS C 2006 $16.22 $(0.21) $ 2.44 $ 2.23 -- -- 2005 14.17 (0.10) 2.15 2.05 -- -- 2004 12.39 0.07 1.71 1.78 -- -- 2003 9.00 (0.07) 3.43 3.36 -- -- 2002 10.11 (0.07) (1.04) (1.11) -- -- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA ---------------------------------------------------------------- Net Asset Net Assets Net Operating Operating Period Value, End of Investment Expenses Expenses Net Portfolio Ended Redemption End of Total Period Income Before of Reimburse- Turnover December 31 Fees(a) Period Return+ (in 000's) (Loss) Reimbursement ment(b)(c) Rate - ----------- ---------- -------- ------- ---------- ------- -------------- ------------ -------- CLASS AAA 2006 $0.00(d) $18.22 14.5% $23,426 (0.44)% 2.02%(e) 2.02%(f) 15% 2005 0.00(d) 15.91 15.1 21,425 0.10 2.04 1.85(f) 26 2004 0.00(d) 13.84 14.0 21,033 0.25 2.00 1.50 35 2003 0.03 12.18 37.4 19,305 0.04 1.83 1.52 13 2002 -- 8.87 (11.5) 15,000 (0.05) 2.39 1.59 0 CLASS A 2006 $0.00(d) $18.17 14.5% $ 220 (0.45)% 2.02%(e) 2.02%(f) 15% 2005 0.00(d) 15.87 15.2 244 0.05 2.06 1.87(f) 26 2004 0.00(d) 13.81 14.0 106 0.26 2.00 1.50 35 2003 0.03 12.16 37.4 67 0.04 1.83 1.52 13 2002 -- 8.86 (11.3) 36 (0.05) 2.39 1.59 0 CLASS B 2006 $0.00(d) $17.61 13.7% $ 25 (1.14)% 2.77%(e) 2.77%(f) 15% 2005 0.00(d) 15.49 14.2 48 (0.60) 2.79 2.58(f) 26 2004 0.00(d) 13.56 13.2 52 (0.53) 2.75 2.25 35 2003 0.03 12.00 36.4 12 (0.71) 2.58 2.27 13 2002 -- 8.80 (12.0) 9 (0.80) 3.14 2.34 0 CLASS C 2006 $0.00(d) $18.45 13.8% $ 4 (1.20)% 2.77%(e) 2.77%(f) 15% 2005 0.00(d) 16.22 14.5 4 (0.66) 2.79 2.68(f) 26 2004 0.00(d) 14.17 14.4 0.1 0.58 2.75 2.25 35 2003 0.03 12.39 37.7 0.1 (0.71) 2.58 2.27 13 2002 -- 9.00 (11.0) 0.1 (0.80) 3.14 2.34 0 - ----------------------- + 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. (a) Per share data is calculated using the average shares outstanding method. (b) The Fund incurred interest expense during the fiscal years ended December 31, 2004, 2003, and 2002. If interest expense had not been incurred, the ratios of operating expenses to average net assets would have been 1.50%, 1.50%, 2.25%, and 2.25% for Class AAA, Class A, Class B, and Class C, respectively for each year. (c) The Fund incurred interest expense during the fiscal years ended December 31, 2006 and December 31, 2005. If interest expense had not been incurred, the ratios of operating expenses to average net assets would have been 2.00% and 1.84% (Class AAA), 2.00% and 1.86% (Class A), 2.75% and 2.57% (Class B), and 2.75% and 2.68% (Class C), respectively. (d) Amount represents less than $0.005 per share. (e) Under an expense deferral agreement with the Adviser, the Fund repaid the Adviser $14,200 during 2006, representing previously reimbursed expenses from the Adviser. During the fiscal year ended December 31, 2006, had such payment not been made, the expense ratios would have been 1.95%, 1.95%, 2.70%, and 2.70% for Class AAA, Class A, Class B, and Class C, respectively. (f) The ratios do not include a reduction of expenses for custodian fee credits on cash balances maintained with the custodian. Including such custodian fee credits, the expense ratios for the fiscal year ended December 31, 2005 would have been 1.84%, 1.87%, 2.58%, and 2.68% for Class AAA, Class A, Class B, and Class C, respectively. For the fiscal year ended December 31, 2006, the effect of the custodian fee credits was minimal. See accompanying notes to financial statements. 15 THE GAMCO GLOBAL OPPORTUNITY FUND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- To the Shareholders and Board of 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 Opportunity Fund (the "Fund") (formerly The Gabelli Global Opportunity Fund), a series of GAMCO Global Series Funds, Inc., (formerly Gabelli Global Series Funds, Inc.) as of December 31, 2006, 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 four 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. The financial highlights for the year ended December 31, 2002 were audited by other auditors whose report dated January 31, 2003 expressed an unqualified opinion on those financial highlights. 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, 2006, 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, 2006, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ ERNST & YOUNG LLP Philadelphia, Pennsylvania February 16, 2007 16 THE GAMCO GLOBAL OPPORTUNITY FUND BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (UNAUDITED) During the six months ended December 31, 2006, 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 and multi-cap growth funds, noting the Fund's bottom quartile for the one year period, middle of its peer group for performance for the three year period, and top quartile 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 a pro rata administrative charge and with a standalone administrative 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 suggesting that 20% growth in the Fund would not produce meaningful economies of scale that the shareholders would not participate in. SHARING OF ECONOMIES OF SCALE. The Independent Board Members noted that the investment advisory 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 advisory fee, other expenses, and total expenses of the Fund to similar expense ratios of the peer group of global multi-cap core and multi-cap growth funds and noted that the Adviser's advisory 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 also noted that the advisory fee structure before waivers was the same as that in effect for most of the Gabelli/GAMCO funds. The Independent Board Members were presented with, but did not compare, the advisory fee to the fee for other types of accounts managed by the Adviser. CONCLUSIONS. The Independent Board Members concluded that the Fund enjoyed highly experienced portfolio management services, good ancillary services, and a mixed performance record that was understandable in relation to the disclosure in the Fund's prospectus and periodic shareholder reports as to its purpose and the outlook of the portfolio managers. 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 advisory agreement to the full Board of Directors. 17 THE GAMCO GLOBAL OPPORTUNITY 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 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 NUMBER OF NAME, POSITION(S) AND LENGTH OF FUNDS IN FUND ADDRESS 1 TIME COMPLEX OVERSEEN PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS AND AGE SERVED 2 BY DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 4 - ---------------- ------------ ---------------- ---------------------- -------------------- INTERESTED DIRECTORS 3: - ---------------------- MARIO J. GABELLI Since 1993 24 Chairman of the Board and Chief Executive Director of Morgan Group Director and Officer of GAMCO Investors, Inc. and Holdings, Inc.(transportation Chief Investment Officer Chief Investment Officer - Value Portfolios services); Chairman of the Age: 64 of Gabelli Funds, LLC and GAMCO Asset Board of Lynch Interactive Management Inc.; Director/Trustee or Chief Corporation (multimedia and Investment Officer of other registered communication services investment companies in the Gabelli Funds company) complex; Chairman and Chief Executive Officer of GGCP, Inc. JOHN D. GABELLI Since 1993 10 Senior Vice President of Gabelli & Director of GAMCO Director Company, Inc. Investors, Inc. Age: 62 INDEPENDENT DIRECTORS 5: - ------------------------ E. VAL CERUTTI Since 2001 7 Chief Executive Officer of Cerutti Director of The LGL Group, Director Consultants, Inc.; Adviser to Iona Inc. (diversified Age: 67 College Hagan School of Business manufacturing) ANTHONY J. COLAVITA Since 1993 34 Partner in the law firm of -- Director Anthony J. Colavita, P.C. Age: 71 ARTHUR V. FERRARA Since 2001 7 Former Chairman of the Board and Chief Director of The Guardian Director Executive Officer of The Guardian Life sponsored mutual funds Age: 76 Insurance Company of America (1993 - 1995) WERNER J. ROEDER, MD Since 1993 23 Medical Director of Lawrence -- Director Hospital and practicing private physician Age: 66 ANTHONIE C. VAN EKRIS Since 1993 17 Chairman of BALMAC International, Inc. -- Director (commodities and futures trading) Age: 72 SALVATORE J. ZIZZA Since 2004 25 Chairman of Hallmark Electrical Supplies Director of Hollis-Eden Director Corp. (distribution of electrical Pharmaceuticals (biotechnology); Age: 61 supplies) Director of Earl Scheib, Inc. (automotive services) 18 THE GAMCO GLOBAL OPPORTUNITY FUND ADDITIONAL FUND INFORMATION (CONTINUED) (UNAUDITED) - -------------------------------------------------------------------------------- TERM OF OFFICE NAME, POSITION(S) AND LENGTH OF ADDRESS 1 TIME PRINCIPAL OCCUPATION(S) AND AGE SERVED 2 DURING PAST FIVE YEARS - ----------------- ------------ ---------------------- OFFICERS: - -------- BRUCE N. ALPERT Since 2003 Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC President since 1988 and an officer of all of the registered investment companies Age: 55 in the Gabelli Funds complex. Director and President of Gabelli Advisers, Inc. since 1998 JAMES E. MCKEE Since 1995 Vice President, General Counsel and Secretary of GAMCO Investors, Inc. Secretary since 1999 and GAMCO Asset Management Inc. since 1993; Secretary Age: 43 of all of the registered investment companies in the Gabelli Funds complex AGNES MULLADY Since 2006 Treasurer of all of the registered investment companies in the Gabelli Funds Treasurer complex; Senior Vice President of U.S. Trust Company, N.A. and Treasurer Age: 48 and Chief Financial Officer of Excelsior Funds from 2004 through 2005; Chief Financial Officer of AMIC Distribution Partners from 2002 through 2004; Controller of Reserve Management Corporation and Reserve Partners, Inc. and Treasurer of Reserve Funds from 2000 through 2002 PETER D. GOLDSTEIN Since 2004 Director of Regulatory Affairs at GAMCO Investors, Inc. since 2004; Chief Chief Compliance Officer Compliance Officer of all of the registered investment companies in the Age: 53 Gabelli Funds complex; Vice President of Goldman Sachs Asset Management from 2000 through 2004 - ----------------- 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 Investment Company Act of 1940, as amended (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. - -------------------------------------------------------------------------------- 2006 TAX NOTICE TO SHAREHOLDERS (Unaudited) For the fiscal year ended December 31, 2006, the Fund paid to shareholders, an ordinary income dividend (comprised of net investment income) totaling $0.003 and $0.008 per share for Class AAA and Class A, respectively. For the year ended December 31, 2006, 0.00% of the distribution qualifies for the dividend received deduction available to corporations, and 100% of the ordinary income distribution was qualified dividend income. U.S. GOVERNMENT INCOME: The percentage of the ordinary income dividend paid by the Fund during fiscal year 2006 which was derived from U.S. Treasury securities was 2.99%. 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 Opportunity Fund did not meet this strict requirement in 2006. Due to the diversity in state and local tax law, it is recommended that you consult your personal tax advisor as to the applicability of the information provided to your specific situation. - -------------------------------------------------------------------------------- 19 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 6:00 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 HALLMARK ELECTRICAL GUARDIAN LIFE INSURANCE SUPPLIES CORP. COMPANY OF AMERICA OFFICERS Bruce N. Alpert James E. McKee PRESIDENT SECRETARY Agnes Mullady Peter D. Goldstein TREASURER CHIEF COMPLIANCE OFFICER DISTRIBUTOR Gabelli & Company, Inc. CUSTODIAN, TRANSFER AGENT, AND DIVIDEND AGENT State Street Bank and Trust Company LEGAL COUNSEL Skadden, Arps, Slate, Meagher & Flom LLP - -------------------------------------------------------------------------------- This report is submitted for the general information of the shareholders of The GAMCO Global Opportunity Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. - -------------------------------------------------------------------------------- GAB403Q406SR GAMCO THE GAMCO GLOBAL OPPORTUNITY FUND ANNUAL REPORT DECEMBER 31, 2006 THE GAMCO GLOBAL TELECOMMUNICATIONS FUND ANNUAL REPORT DECEMBER 31, 2006 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 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 and the investment portfolio as of December 31, 2006 with a description of factors that affected the performance during the past year. PERFORMANCE DISCUSSION (UNAUDITED) The GAMCO Global Telecommunications Fund (Class AAA) gained 28.91% in 2006, underperforming the MSCI AC World Telecom Index that returned 34.36% for the year. In analyzing the performance of The GAMCO Global Telecommunications Fund, a number of our largest emerging markets holdings are of note: America Movil, the wireless operator in Mexico and Latin America, had a total 2006 return of 55.5%. In Asia, Philippine Long Distance gained 58.8% for the year. It's wireless subscriber growth and margins continue to exceed expectations and the improved balance sheet suggests the potential for higher cash returns to shareholders in 2007. Sistema Group of Russia, the holding company that controls MTS, the largest domestic wireless operator, was ahead by 36.3% in 2006. The Fund's outperformance was not, however, confined to emerging market names. United States Cellular Corp. rallied by an impressive 40.9% for 2006. In the cable and satellite sub-sectors, strong Fund contributions came from Cablevision and DIRECTV Group. The Scandinavian duo Elisa of Finland and TeliaSonera of Sweden were standout performers among the larger holdings of European national operators in the Fund. The importance of industry consolidation and corporate activity in driving both sector and The GAMCO Global Telecommunications Fund's performance in 2006 cannot, we believe, be overstated. M&A was a truly global phenomenon with AT&T/BellSouth in the U.S., Telefonica - O2 in Europe, and more recently, the anticipated actions in the emerging markets of Brazil (Brasil Telecom). In Canada, the government's decision to tax income trust distributions to unit holders effectively ended Bell Canada and TELUS's plans to adopt income trust structures. Although the ruling granted a four-year grace period to existing trusts, this was of little consolation to those companies that had been planning the move. The move led to a fall in the price of our Canadian holding, TELUS. Sincerely yours, /s/ Bruce N. Alpert Bruce N. Alpert President January 17, 2007 SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED) The following table presents portfolio holdings as a percent of total net assets as of December 31, 2006: THE GAMCO GLOBAL TELECOMMUNICATIONS FUND Diversified Telecommunications Services ................................... 47.1% Wireless Telecommunications Services .................................. 32.8% Other ........................................ 19.8% U.S. Government Obligations .................. 0.1% Other Assets and Liabilities (Net) ........... 0.2% ------ 100.0% ====== THE FUND FILES A COMPLETE SCHEDULE OF PORTFOLIO HOLDINGS WITH THE SECURITIES AND EXCHANGE COMMISSION (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, 2006. 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 12 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. 2 COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN THE GAMCO GLOBAL TELECOMMUNICATIONS FUND CLASS AAA SHARES, THE MSCI AC WORLD TELECOMMUNICATION INDEX, AND THE MSCI AC WORLD FREE INDEX [GRAPH OMITTED] PLOT POINTS FOLLOW: GAMCO Global MSCI AC World Telecommunications Fund Telecommunications MSCI AC Class AAA Shares Index World Free Index 11/1/93 $10,000 $10,000 12/31/93 10,300 9,993 12/31/94 9,921 10,496 12/31/95 11,524 12,538 12/31/96 12,560 14,193 12/31/97 16,563 16,321 12/31/98 22,319 19,907 12/31/99 40,234 25,246 12/31/00 30,546 21,727 12/31/01 24,214 $24,214 18,270 12/31/02 17,051 17,683 14,803 12/31/03 24,337 22,504 19,929 12/31/04 30,025 26,832 23,067 12/31/05 30,878 25,488 25,690 12/31/06 39,804 34,245 31,221 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. COMPARATIVE RESULTS - -------------------------------------------------------------------------------- AVERAGE ANNUAL RETURNS THROUGH DECEMBER 31, 2006 (A) ---------------------------------------------------- SINCE INCEPTION Quarter 1 Year 3 Year 5 Year 10 Year (11/1/93) ------- ------ ------ ------ ------- --------- GAMCO GLOBAL TELECOMMUNICATIONS FUND CLASS AAA ....................................... 12.37% 28.91% 17.82% 10.45% 12.23% 11.07% MSCI AC World Telecommunication Index ............. 14.42 34.36 15.04 7.18 N/A* N/A* MSCI AC World Free Index .......................... 9.16 21.53 16.14 11.31 8.20 9.03 Class A ........................................... 12.40 28.96 17.81 10.46 12.22 11.06 5.93(b) 21.54(b) 15.51(b) 9.16(b) 11.56(b) 10.56(b) Class B ........................................... 12.19 28.00 16.95 9.63 11.69 10.66 7.19(c) 23.00(c) 16.22(c) 9.35(c) 11.69(c) 10.66(c) Class C ........................................... 12.16 28.03 16.95 9.63 11.68 10.66 11.16(d) 27.03(d) 16.95 9.63 11.68 10.66 (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. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA PRESENTED. WHEN SHARES ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PERFORMANCE RETURNS FOR PERIODS 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 MORE INFORMATION ABOUT THIS AND OTHER MATTERS AND SHOULD BE READ CAREFULLY BEFORE INVESTING. THE CLASS AAA SHARES' NET ASSET VALUES ARE USED TO CALCULATE PERFORMANCE FOR THE PERIODS PRIOR TO THE ISSUANCE OF CLASS A SHARES, CLASS B SHARES, AND CLASS C SHARES ON MARCH 12, 2000, MARCH 13, 2000, AND JUNE 2, 2000, 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. INVESTING IN FOREIGN SECURITIES INVOLVES RISKS NOT ORDINARILY ASSOCIATED WITH INVESTMENTS IN DOMESTIC ISSUES, INCLUDING CURRENCY FLUCTUATION, ECONOMIC, AND POLITICAL RISKS. THE MSCI AC WORLD TELECOMMUNICATION 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) INCLUDES THE EFFECT OF THE MAXIMUM 5.75% SALES CHARGE AT THE BEGINNING OF THE PERIOD. (c) PERFORMANCE RESULTS INCLUDE THE DEFERRED SALES CHARGES FOR THE CLASS B SHARES UPON REDEMPTION AT THE END OF THE QUARTER, ONE YEAR, THREE YEAR, FIVE YEAR, TEN YEAR, AND SINCE INCEPTION PERIODS OF 5%, 5%, 3%, 2%, 0%, AND 0%, RESPECTIVELY, OF THE FUND'S NAV AT THE TIME OF PURCHASE OR SALE, WHICHEVER IS LOWER. CLASS B SHARES ARE NOT AVAILABLE FOR NEW PURCHASES. (d) PERFORMANCE RESULTS INCLUDE THE DEFERRED SALES CHARGES FOR THE CLASS C SHARES UPON REDEMPTION AT THE END OF THE QUARTER AND ONE YEAR PERIOD OF 1% OF THE FUND'S NAV AT THE TIME OF PURCHASE OR SALE, WHICHEVER IS LOWER. * INFORMATION FOR THE MSCI AC WORLD INDEX TELECOMMUNICATION INDEX IS NOT AVAILABLE WITH DIVIDENDS PRIOR TO AUGUST 2001. - -------------------------------------------------------------------------------- 3 THE GAMCO GLOBAL TELECOMMUNICATIONS FUND DISCLOSURE OF FUND EXPENSES (UNAUDITED) For the Six Month Period from July 1, 2006 through December 31, 2006 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, 2006. Beginning Ending Annualized Expenses Account Value Account Value Expense Paid During 07/01/06 12/31/06 Ratio Period* - -------------------------------------------------------------------------------- THE GAMCO GLOBAL TELECOMMUNICATIONS FUND - -------------------------------------------------------------------------------- ACTUAL FUND RETURN Class AAA $1,000.00 $1,227.50 1.51% $ 8.48 Class A $1,000.00 $1,227.90 1.51% $ 8.48 Class B $1,000.00 $1,223.50 2.24% $12.55 Class C $1,000.00 $1,223.50 2.26% $12.67 HYPOTHETICAL 5% RETURN Class AAA $1,000.00 $1,017.59 1.51% $ 7.68 Class A $1,000.00 $1,017.59 1.51% $ 7.68 Class B $1,000.00 $1,013.91 2.24% $11.37 Class C $1,000.00 $1,013.81 2.26% $11.47 * 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, then divided by 365. 4 THE GAMCO GLOBAL TELECOMMUNICATIONS FUND SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2006 - -------------------------------------------------------------------------------- MARKET SHARES COST VALUE -------- ---- ------- COMMON STOCKS -- 99.7% DIVERSIFIED TELECOMMUNICATIONS SERVICES -- 47.1% ASIA/PACIFIC -- 4.1% 1,500 Asia Satellite Telecommunications Holdings Ltd., ADR .......... $ 22,103 $ 27,450 170,000 First Pacific Co. Ltd. ........ 92,079 88,297 20,000 First Pacific Co. Ltd., ADR ... 30,144 51,946 10 Korea Thrunet Co. Ltd.+ (c) ... 5,250 0 10,000 KT Corp., ADR ................. 183,666 253,500 2,000 Pakistan Telecommunications Co. Ltd., GDR (a) ........... 155,765 145,532 100,000 PCCW Ltd. ..................... 81,405 60,810 72,000 Philippine Long Distance Telephone Co., ADR .......... 1,383,105 3,681,360 18,360 PT Telekomunikasi Indonesia, ADR .............. 165,504 837,216 874,000 Singapore Telecommunications Ltd. ..... 701,513 1,869,092 25,000 Telecom Corp. of New Zealand Ltd., ADR ........... 515,375 673,000 350,000 Telekom Malaysia Berhad ....... 1,547,135 967,262 2,400 Telstra Corp. Ltd., ADR ....... 47,304 39,312 8,075 Thai Telephone & Telecom, GDR+ (a)(b) ................. 100,542 646 1,000,000 True Corp. Public Co. Ltd.+ ... 687,194 172,779 ------------ ------------ 5,718,084 8,868,202 ------------ ------------ EUROPE -- 21.9% 39,000 BT Group plc, ADR ............. 1,474,439 2,335,710 300,000 Cable & Wireless plc .......... 544,359 926,615 8,960 Colt Telecom Group SA+ ........ 39,631 23,508 260,000 Deutsche Telekom AG, ADR ...... 3,009,522 4,732,000 180,000 Elisa Oyj ..................... 2,286,461 4,930,368 38,000 France Telecom SA, ADR ........ 1,021,948 1,052,600 17,500 Golden Telecom Inc. ........... 183,065 819,700 5,507 Hellenic Telecommunications Organization SA+ ............ 86,065 165,453 36,000 Hellenic Telecommunications Organization SA, ADR+ ....... 218,769 545,400 18,000 Hungarian Telephone & Cable Corp.+ ................ 139,278 271,800 500 Magyar Telekom Telecommunications plc, ADR+ ........................ 9,650 13,975 3,000 Maroc Telecom ................. 31,797 46,611 15,000 Metromedia International Group Inc.+ ................. 59,576 22,050 65,000 Neuf Cegetel+ ................. 1,906,725 2,308,098 20,000 Portugal Telecom SGPS SA ...... 235,355 259,785 68,000 Portugal Telecom SGPS SA, ADR ..................... 277,645 879,920 10,000 Rostelecom, ADR ............... 79,578 455,000 MARKET SHARES/UNITS COST VALUE -------------- ---- ------- 57,000 Royal KPN NV Sponsored, ADR .............. $ 472,195 $ 812,820 85,000 Sistema JSFC, GDR (a) ......... 1,563,313 2,720,000 98,000 Swisscom AG, ADR .............. 2,548,286 3,700,480 2,150,000 Telecom Italia SpA ............ 4,174,539 6,499,241 27,000 Telecom Italia SpA, ADR ....... 621,934 813,510 100,000 Telefonica SA, ADR ............ 2,634,654 6,375,000 6,361 Telefonica SA, BDR ............ 108,405 135,021 46,604 Telekom Austria AG ............ 347,582 1,248,843 650,000 TeliaSonera AB ................ 2,791,663 5,340,749 ------------ ------------ 26,866,434 47,434,257 ------------ ------------ JAPAN -- 0.8% 237 Nippon Telegraph & Telephone Corp. ............. 1,207,105 1,167,027 22,000 Nippon Telegraph & Telephone Corp., ADR ........ 622,716 545,380 ------------ ------------ 1,829,821 1,712,407 ------------ ------------ LATIN AMERICA -- 5.2% 33,250 Atlantic Tele-Network Inc. .... 112,178 974,225 12,000 Brasil Telecom Participacoes SA, ADR ....... 595,898 512,280 952 Brasil Telecom SA ............. 3 11 44,448 Brasil Telecom SA, Pfd. ....... 474 228 17,415,054 Cable & Wireless Jamaica Ltd.+ ............... 406,745 262,427 148,000 Compania de Telecomunicaciones de Chile SA, ADR ............... 2,049,285 1,188,440 25,693 Tele Norte Leste Participacoes SA, ADR ....... 357,296 383,340 210,000 Telecom Argentina SA, Cl. B, ADR+ ................. 869,186 4,202,100 57,700 Telefonica de Argentina SA, ADR+ .................... 376,367 1,042,639 92,000 Telefonos de Mexico SAB de CV, Cl. L, ADR ....... 673,142 2,599,920 3,355 Telemar Norte Leste SA ........ 148,531 76,318 ------------ ------------ 5,589,105 11,241,928 ------------ ------------ NORTH AMERICA -- 15.1% 80,000 AT&T Inc. ..................... 2,815,704 2,860,000 115,000 BCE Inc. ...................... 2,642,934 3,105,000 47,836 Bell Aliant Regional Communications Income Fund ................. 882,832 1,105,911 39,372 Bell Aliant Regional Communications Income Fund+ (a) ............ 726,616 910,269 65,000 BellSouth Corp. ............... 1,974,279 3,062,150 13,000 CenturyTel Inc. ............... 396,150 567,580 300,000 Cincinnati Bell Inc.+ ......... 2,016,086 1,371,000 See accompanying notes to financial statements. 5 THE GAMCO GLOBAL TELECOMMUNICATIONS FUND SCHEDULE OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 2006 - -------------------------------------------------------------------------------- MARKET SHARES COST VALUE -------- ---- ------- COMMON STOCKS (Continued) DIVERSIFIED TELECOMMUNICATIONS SERVICES (Continued) NORTH AMERICA (CONTINUED) 50,000 Citizens Communications Co. ......................... $ 563,742 $ 718,500 49,000 Commonwealth Telephone Enterprises Inc. ............ 1,479,530 2,051,140 6,000 Covad Communications Group Inc.+ ................. 11,761 8,280 67,060 D&E Communications Inc. ....... 841,107 848,309 10,000 E.Spire Communications Inc.+ ....................... 50,000 6 3,230 EarthLink Inc.+ ............... 45,250 22,933 22,500 Embarq Corp. .................. 593,482 1,182,600 80,000 General Communication Inc., Cl. A+ ................ 376,995 1,258,400 5,000 Manitoba Telecom Services Inc. ............... 168,270 198,945 22,422 McLeodUSA Inc., Cl. A+ ........ 78,431 110 20,000 NorthPoint Communications Group Inc.+ ................. 11,250 30 4,756 Pegasus Communications Corp., Cl. A+ ............... 23,757 10,035 120,000 Price Communications Corp. ....................... 1,858,269 2,526,000 320,000 Qwest Communications International Inc.+ ......... 1,176,740 2,678,400 11,000 Shenandoah Telecommunications Co. ...... 138,825 517,110 45,000 TELUS Corp. ................... 873,965 2,065,258 1,943 TELUS Corp., ADR .............. 34,622 86,691 33,057 TELUS Corp., Non-Voting ....... 827,048 1,474,901 6,000 Time Warner Telecom Inc., Cl. A+ ...................... 4,800 119,580 85,000 Verizon Communications Inc. ........................ 3,121,509 3,165,400 43,941 Windstream Corp. .............. 314,821 624,841 ------------ ------------ 24,048,775 32,539,379 ------------ ------------ TOTAL DIVERSIFIED TELECOMMUNICATIONS SERVICES .................... 64,052,219 101,796,173 ------------ ------------ OTHER -- 19.8% ASIA/PACIFIC -- 0.3% 38,000 ABC Communications Holdings Ltd. ............... 19,234 2,150 19,065 Austar United Communications Ltd.+ ........ 38,877 19,864 100,000 Champion Technology Holdings Ltd. ............... 87,982 16,842 MARKET SHARES COST VALUE -------- ---- ------- 70,000 CP Pokphand Co. Ltd., ADR+ ........................ $ 58,725 $ 42,525 10,000 EasyCall International Ltd.+ .. 9,532 947 26,000 Himachal Futuristic Communications Ltd., GDR+ (a)(c) ................. 141,200 53,427 50,000 Hutchison Whampoa Ltd. ........ 487,170 508,144 300,000 Time Engineering Berhad+ ...... 316,448 53,997 ------------ ------------ 1,159,168 697,896 ------------ ------------ EUROPE -- 4.1% 19,520 Alcatel-Lucent, ADR ........... 390,922 277,574 1,500 British Sky Broadcasting Group plc, ADR .............. 36,400 61,800 3,600 Carlisle Group Ltd.+ .......... 5,790 7,190 3,000 E.ON AG ....................... 126,255 407,221 98,000 GN Store Nord A/S ............. 533,809 1,448,626 59,500 Group 4 Securicor plc ......... 0 219,020 3,200 L. M. Ericsson Telephone Co., Cl. B, ADR ............. 40,907 128,736 28,000 Nokia Corp., ADR .............. 67,091 568,960 15,428 Seat Pagine Gialle SpA ........ 30,783 9,195 750 Siemens AG, ADR ............... 23,625 73,913 5,852 Telecom Italia Media SpA ...... 4,669 2,785 25,000 Telegraaf Media Groep NV ...... 541,844 655,072 8,000 ThyssenKrupp AG ............... 147,115 376,899 15,000 TNT NV, ADR ................... 198,277 646,200 1,000 Via Net.Works Inc.+ ........... 2,625 12 100,000 Vivendi ....................... 2,087,247 3,908,653 ------------ ------------ 4,237,359 8,791,856 ------------ ------------ JAPAN -- 0.2% 75,000 The Furukawa Electric Co. Ltd. .................... 381,079 471,409 ------------ ------------ LATIN AMERICA -- 0.0% 9,000 BB Holdings Ltd.+ ............. 36,940 34,020 1,400 Claxson Interactive Group Inc.+ ................. 2,240 14,084 25,693 Contax Participacoes SA, ADR ......................... 11,051 23,586 562 OneSource Services Inc.+ ...... 5,515 7,070 ------------ ------------ 55,746 78,760 ------------ ------------ NORTH AMERICA -- 15.2% 80,000 Adelphia Communications Corp., Cl. A+ ............... 74,756 800 10,000 Agere Systems Inc.+ ........... 166,400 191,700 2,000 America Online Latin America Inc., Cl. A+ ........ 840 4 1,000 Amphenol Corp., Cl. A ......... 8,184 62,080 3,000 Andrew Corp.+ ................. 8,535 30,690 500 Avaya Inc.+ ................... 4,138 6,990 See accompanying notes to financial statements. 6 THE GAMCO GLOBAL TELECOMMUNICATIONS FUND SCHEDULE OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 2006 - -------------------------------------------------------------------------------- MARKET SHARES COST VALUE -------- ---- ------- COMMON STOCKS (Continued) OTHER (Continued) NORTH AMERICA (CONTINUED) 70,000 Cablevision Systems Corp., Cl. A+ ...................... $ 1,037,320 $ 1,993,600 40,000 California Micro Devices Corp.+ ...................... 235,666 175,200 23,566 CanWest Global Communications Corp.+ ....... 322,321 222,463 35,434 CanWest Global Communications Corp., Cl. A+ ............... 407,389 337,886 20,000 Charter Communications Inc., Cl. A+ ................ 58,692 61,200 10,000 Cogeco Inc. ................... 195,069 250,911 20,000 Comcast Corp., Cl. A, Special+ .................... 159,976 837,600 25,000 Communications Systems Inc. ........................ 237,711 249,750 4,000 Convergys Corp.+ .............. 53,716 95,120 44,000 Discovery Holding Co., Cl. A+ ...................... 278,536 707,960 100,000 EchoStar Communications Corp., Cl. A+ ............... 1,863,471 3,803,000 7,000 Fisher Communications Inc.+ ....................... 353,932 309,470 410,000 Gemstar-TV Guide International Inc.+ ......... 1,878,517 1,644,100 1,000 Geoworks Corp.+ ............... 1,375 37 1,000 Google Inc., Cl. A+ ........... 346,423 460,480 4,250 Idearc Inc.+ .................. 130,063 121,762 45,000 IDT Corp.+ .................... 424,047 608,850 40,000 IDT Corp., Cl. B+ ............. 309,786 523,200 35,000 ION Media Networks Inc.+ ...... 55,250 17,500 1,250 JDS Uniphase Corp.+ ........... 45,488 20,825 1,000 L-3 Communications Holdings Inc. ............... 11,000 81,780 60,732 Liberty Global Inc., Cl. A+ 1,330,262 1,770,338 50,000 Liberty Global Inc., Cl. C+ ... 1,219,998 1,400,000 24,000 Liberty Media Corp. - Capital, Cl. A+ ............. 1,095,117 2,351,520 85,000 Liberty Media Corp. - Interactive, Cl. A+ ......... 713,146 1,833,450 1,000 Lockheed Martin Corp. ......... 22,787 92,070 20,000 Mediacom Communications Corp., Cl. A+ ............... 177,215 160,800 55,000 Motorola Inc. ................. 454,388 1,130,800 30,000 News Corp., Cl. A ............. 439,829 644,400 2,000 News Corp., Cl. B ............. 21,050 44,520 25,000 Nortel Networks Corp.+ ........ 730,036 668,250 2,524 Orbital Sciences Corp.+ ....... 16,208 46,543 4,000 R. H. Donnelley Corp. ......... 53,608 250,920 MARKET SHARES COST VALUE -------- ---- ------- 11,000 SCANA Corp. ................... $ 290,110 $ 446,820 5,000 SJW Corp. ..................... 78,585 193,800 125,000 The DIRECTV Group Inc.+ ....... 2,487,051 3,117,500 189,000 Time Warner Inc. .............. 3,285,561 4,116,420 2,000 TiVo Inc.+ .................... 11,105 10,240 816 Tut Systems Inc.+ ............. 13,135 914 1,000 Vishay Intertechnology Inc.+ .. 22,908 13,540 64,000 Yahoo! Inc.+ .................. 2,034,909 1,634,560 ------------ ------------ 23,165,609 32,742,363 ------------ ------------ TOTAL OTHER ................... 28,998,961 42,782,284 ------------ ------------ WIRELESS TELECOMMUNICATIONS SERVICES -- 32.8% ASIA/PACIFIC -- 3.4% 80,000 China Mobile Ltd., ADR ........ 1,165,904 3,457,600 75,000 China Unicom Ltd., ADR ........ 628,819 1,116,750 666 Hutchison Telecommunications International Ltd.+ ......... 519 1,678 8,000 PT Indosat Tbk, ADR ........... 78,652 308,400 90,000 SK Telecom Co. Ltd., ADR ...... 1,068,189 2,383,200 ------------ ------------ 2,942,083 7,267,628 ------------ ------------ EUROPE -- 4.4% 60,000 Bouygues SA ................... 1,680,722 3,851,627 2,000 Millicom International Cellular SA+ ................ 17,000 123,280 800 Mobile TeleSystems OJSC, ADR ................... 29,612 40,152 58,000 Vimpel-Communications, ADR+ ........................ 442,160 4,579,100 35,075 Vodafone Group plc, ADR ....... 813,443 974,383 ------------ ------------ 2,982,937 9,568,542 ------------ ------------ JAPAN -- 3.0% 600 KDDI Corp. .................... 3,016,473 4,068,737 1,600 NTT DoCoMo Inc. ............... 4,464,327 2,527,625 ------------ ------------ 7,480,800 6,596,362 ------------ ------------ LATIN AMERICA -- 4.7% 216,000 America Movil SAB de CV, Cl. L, ADR .............. 1,123,833 9,767,520 17,500 Grupo Iusacell SA de CV+ ...... 29,040 133,643 460 Tele Norte Celular Participacoes SA, ADR ....... 7,079 4,140 1,150 Telemig Celular Participacoes SA, ADR ....... 30,497 43,987 4,430 Tim Participacoes SA, ADR ......................... 54,017 153,367 3,020 Vivo Participacoes SA+ ........ 6,747 20,779 23,976 Vivo Participacoes SA, ADR .... 316,130 98,302 13,024 Vivo Participacoes SA, Pfd.+ .. 159,589 53,279 ------------ ------------ 1,726,932 10,275,017 ------------ ------------ See accompanying notes to financial statements. 7 THE GAMCO GLOBAL TELECOMMUNICATIONS FUND SCHEDULE OF INVESTMENTS (CONTINUED) -- DECEMBER 31, 2006 - -------------------------------------------------------------------------------- MARKET SHARES COST VALUE -------- ---- ------- COMMON STOCKS (Continued) WIRELESS TELECOMMUNICATIONS SERVICES (Continued) NORTH AMERICA -- 17.3% 67,000 Alltel Corp. .................. $ 2,782,629 $ 4,052,160 35,000 Centennial Communications Corp. ....................... 182,988 251,650 40,000 Dobson Communications Corp., Cl. A+ ............... 129,100 348,400 155,000 Rogers Communications Inc., Cl. B ................. 1,647,700 9,238,000 42,800 Rural Cellular Corp., Cl. A+ .. 437,823 562,392 440,000 Sprint Nextel Corp. ........... 5,808,751 8,311,600 6,000 SunCom Wireless Holdings Inc., Cl. A+ ................ 20,520 4,200 70,000 Telephone & Data Systems Inc. ................ 1,520,586 3,803,100 62,000 Telephone & Data Systems Inc., Special ....... 1,323,304 3,075,200 111,000 United States Cellular Corp.+ ...................... 5,018,635 7,724,490 ------------ ------------ 18,872,036 37,371,192 ------------ ------------ TOTAL WIRELESS TELECOMMUNICATIONS SERVICES .................... 34,004,788 71,078,741 ------------ ------------ TOTAL COMMON STOCKS ........... 127,055,968 215,657,198 ------------ ------------ RIGHTS -- 0.0% DIVERSIFIED TELECOMMUNICATIONS SERVICES -- 0.0% ASIA/PACIFIC -- 0.0% 315,789 True Corp. plc+ (c) ........... 0 3,441 ------------ ------------ TOTAL RIGHTS .................. 0 3,441 ------------ ------------ WARRANTS -- 0.0% OTHER -- 0.0% ASIA/PACIFIC -- 0.0% 20,000 Champion Technology Holdings Ltd., expire 08/03/08+ ........... 0 0 20,303 Champion Technology Holdings Ltd., expire 02/26/07+ (c) ........ 0 682 ------------ ------------ 0 682 ------------ ------------ NORTH AMERICA -- 0.0% 1,473 Lucent Technologies Inc., expire 12/10/07+ ............ 2,445 457 ------------ ------------ TOTAL WARRANTS ................ 2,445 1,139 ------------ ------------ PRINCIPAL MARKET AMOUNT COST VALUE -------- ---- ------- U.S. GOVERNMENT OBLIGATIONS -- 0.1% $148,000 U.S. Treasury Bill, 5.004%++, 03/29/07 .......... $ 146,296 $ 146,296 ------------ ------------ TOTAL INVESTMENTS -- 99.8% ........ $127,204,709 215,808,074 ============ Other Assets and Liabilities (Net) -- 0.2% 440,070 ------------ NET ASSETS -- 100.0% ....................... $216,248,144 ============ - ---------------- (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, 2006, the market value of Rule 144A securities amounted to $3,829,874 or 1.77% of total net assets. Except as noted in (b), these securities are liquid. (b) At December 31, 2006, the Fund held an investment in a restricted and illiquid security amounting to $646 or 0.00% of total net assets, which was valued under methods approved by the Board, as follows: 12/31/06 Carrying Acquisition Acquisition Acquisition Value Shares Issuer Date Cost Per Unit ------ ------ ---- ---- -------- 8,075 Thai Telephone & Telecom, GDR ................... 03/31/94 $100,542 $0.0800 (c) 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, 2006, the market value of fair valued securities amounted to $57,550 or 0.03% of total net assets. + Non-income producing security. ++ Represents annualized yield at date of purchase. ADR American Depository Receipt BDR Brazilian Depository Receipt GDR Global Depository Receipt % OF MARKET MARKET GEOGRAPHIC DIVERSIFICATION VALUE VALUE - -------------------------- ----- ----- North America .................... 47.6% $102,799,687 Europe ........................... 30.5 65,794,655 Latin America .................... 10.0 21,595,705 Asia/Pacific ..................... 7.8 16,837,849 Japan ............................ 4.1 8,780,178 ------ ------------ 100.0% $215,808,074 ====== ============ See accompanying notes to financial statements. 8 THE GAMCO GLOBAL TELECOMMUNICATIONS FUND STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2006 - ------------------------------------------------------------------------------- ASSETS: Investments at value (cost $127,204,709) ............... $215,808,074 Dividends and interest receivable ...................... 480,530 Receivable for Fund shares sold ........................ 369,653 Prepaid expense ........................................ 9,315 ------------ TOTAL ASSETS ........................................... 216,667,572 ------------ LIABILITIES: Payable to custodian ................................... 34,028 Foreign currency, at value (cost $8,052) ............... 7,962 Payable for investment advisory fees ................... 181,238 Payable for shareholder communications expenses ............................................. 51,625 Payable for distribution fees .......................... 45,708 Payable for shareholder services fees .................. 42,249 Payable for legal and audit fees ....................... 33,631 Payable for Fund shares redeemed ....................... 4,471 Payable for accounting fees ............................ 7,501 Other accrued expenses ................................. 11,015 ------------ TOTAL LIABILITIES ...................................... 419,428 ------------ NET ASSETS applicable to 9,626,925 shares outstanding ................................... $216,248,144 ============ NET ASSETS CONSIST OF: Paid-in capital, each class at $0.001 par value ............................................ $172,997,060 Accumulated distributions in excess of net investment income .................................... (253,667) Accumulated net realized loss on investments and foreign currency transactions .................... (45,101,628) Net unrealized appreciation on investments ............. 88,603,365 Net unrealized appreciation on foreign currency translations ................................ 3,014 ------------ NET ASSETS ............................................. $216,248,144 ============ SHARES OF CAPITAL STOCK: CLASS AAA: Net Asset Value, offering and redemption price per share ($214,436,049 / 9,545,350 shares outstanding; 75,000,000 shares authorized) ........... $22.46 ====== CLASS A: Net Asset Value and redemption price per share ($1,170,091 / 52,155 shares outstanding; 50,000,000 shares authorized) ........................ $22.43 ====== Maximum offering price per share (NAV / .9425, based on maximum sales charge of 5.75% of the offering price) ............................... $23.80 ====== CLASS B: Net Asset Value and offering price per share ($291,430 / 13,308 shares outstanding; 25,000,000 shares authorized) ........................ $21.90(a) ====== CLASS C: Net Asset Value and offering price per share ($350,574 / 16,112 shares outstanding; 25,000,000 shares authorized) ........................ $21.76(a) ====== - ------------------- (a) Redemption price varies based on the length of time held. STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2006 - -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends (net of foreign taxes of $383,645) ........... $ 3,987,314 Interest ............................................... 223,260 ----------- TOTAL INVESTMENT INCOME ................................ 4,210,574 ----------- EXPENSES: Investment advisory fees ............................... 1,920,590 Distribution fees - Class AAA .......................... 476,804 Distribution fees - Class A ............................ 1,947 Distribution fees - Class B ............................ 3,257 Distribution fees - Class C ............................ 2,328 Shareholder services fees .............................. 240,167 Shareholder communications expenses .................... 111,665 Custodian fees ......................................... 53,806 Legal and audit fees ................................... 50,778 Accounting fees ........................................ 45,000 Registration expenses .................................. 41,005 Directors' fees ........................................ 20,842 Interest expense ....................................... 4,742 Miscellaneous expenses ................................. 25,400 ----------- TOTAL EXPENSES ......................................... 2,998,331 Less: Custodian fee credits ............................ (1,154) ----------- NET EXPENSES ........................................... 2,997,177 ----------- NET INVESTMENT INCOME .................................. 1,213,397 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: Net realized gain on investments ....................... 16,179,853 Net realized gain on foreign currency transactions ................................ 3,769 ----------- Net realized gain on investments and foreign currency transactions ................................ 16,183,622 ----------- Net change in unrealized appreciation/ depreciation on investments .......................... 33,118,735 Net change in unrealized appreciation/ depreciation on foreign currency translations ......................................... 3,901 ----------- Net change in unrealized appreciation/ depreciation on investments and foreign currency translations ................................ 33,122,636 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY ..................... 49,306,258 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................................... $50,519,655 =========== See accompanying notes to financial statements. 9 THE GAMCO GLOBAL TELECOMMUNICATIONS FUND STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- YEAR ENDED YEAR ENDED DECEMBER 31, 2006 DECEMBER 31, 2005 ----------------- ----------------- OPERATIONS: Net investment income ..................................................... $ 1,213,397 $ 1,791,366 Net realized gain on investments and foreign currency transactions ........ 16,183,622 5,129,883 Net change in unrealized appreciation/depreciation on investments and foreign currency translations ....................................... 33,122,636 (2,147,155) ------------ ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................... 50,519,655 4,774,094 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Net investment income Class AAA ............................................................... (1,296,097) (2,003,135) Class A ................................................................. (7,802) (8,156) Class C ................................................................. (692) (117) ------------ ------------ TOTAL DISTRIBUTIONS TO SHAREHOLDERS ....................................... (1,304,591) (2,011,408) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Class AAA ............................................................... (20,313,616) (25,916,855) Class A ................................................................. 237,838 124,167 Class B ................................................................. (210,652) (435,480) Class C ................................................................. 94,168 (62,137) ------------ ------------ NET DECREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS ................ (20,192,262) (26,290,305) ------------ ------------ REDEMPTION FEES ........................................................... 589 7,745 ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS ..................................... 29,023,391 (23,519,874) NET ASSETS: Beginning of period ....................................................... 187,224,753 210,744,627 ------------ ------------ End of period (including undistributed net investment income of $0 and $0, respectively) ................................................ $216,248,144 $187,224,753 ============ ============ See accompanying notes to financial statements. 10 THE GAMCO GLOBAL TELECOMMUNICATIONS FUND NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. ORGANIZATION. The GAMCO Global Telecommunications Fund (the "Fund"), formerly, The Gabelli Global Telecommunications Fund, a series of GAMCO Global Series Funds, Inc. (the "Corporation"), formerly, Gabelli Global Series Funds, Inc., 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 preparation of financial statements in accordance with United States ("U.S.") generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. SECURITY VALUATION. Portfolio securities listed or traded on a nationally recognized securities exchange 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 60 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 60 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. 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 to the valuation and changes in valuation of similar securities, including a comparison of foreign securities to 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. In September 2006, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") 157, Fair Value Measurements, which clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. Adoption of SFAS 157 requires the use of the price that would 11 THE GAMCO GLOBAL TELECOMMUNICATIONS FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. At this time, management is in the process of reviewing the requirements of SFAS 157 against its current valuation policies to determine future applicability. 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. The Fund will always receive and maintain securities as collateral whose market value, including accrued interest, will be at least equal to 102% of the dollar amount invested by the Fund in each agreement. The Fund will make payment for such securities only upon physical delivery or upon evidence of book entry transfer of the collateral to the account of the custodian. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to maintain the adequacy of the collateral. If the seller defaults and the value of the collateral declines or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited. At December 31, 2006, there were no open repurchase agreements. 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, which 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. At December 31, 2006, there were no open futures contracts. 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 Fund did not hold any short positions as of December 31, 2006. FORWARD FOREIGN EXCHANGE CONTRACTS. The Fund may engage in forward foreign exchange contracts for hedging a specific transaction with respect to either the currency in which the transaction is denominated or 12 THE GAMCO GLOBAL TELECOMMUNICATIONS FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 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. At December 31, 2006, there were no open forward foreign exchange contracts. 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 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 ability 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. 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. 13 THE GAMCO GLOBAL TELECOMMUNICATIONS FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- CONCENTRATION RISK. 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 which are recorded as soon as the Fund is informed of the dividend. 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 shown as "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 U.S. generally accepted accounting principles. 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 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. These reclassifications have no impact on the NAV of the Fund. For the fiscal year ended December 31, 2006, reclassifications were made to decrease accumulated distributions in excess of net investment income by $78,445 and to increase accumulated net realized loss on investments and foreign currency transactions by $3,769, with an offsetting adjustment to paid-in capital. The tax character of distributions paid during the fiscal years ended December 31, 2006 and December 31, 2005 was $1,304,591 and $2,011,408, respectively, of ordinary income. 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 14 THE GAMCO GLOBAL TELECOMMUNICATIONS FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 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, 2006, the difference between book basis and tax basis unrealized appreciation was primarily due to deferral of losses from wash sales for tax purposes. As of December 31, 2006, the components of accumulated earnings/(losses) on a tax basis were as follows: Capital loss carryforwards ......................... $(38,567,402) Net unrealized appreciation on investments, foreign receivables and payables ................. 81,818,486 ------------ Total accumulated earnings ......................... $ 43,251,084 ============ At December 31, 2006, the Fund has net capital loss carryforwards for Federal income tax purposes of $38,567,402, which are available to reduce future required distributions of net capital gains to shareholders. $23,342,608 of the loss carryforward is available through 2010; $11,910,139 is available through 2011; and $3,314,655 is available through 2012. For the year ended December 31, 2006, the Fund utilized net capital loss carryforwards of $15,491,200. The following summarizes the tax cost of investments and related unrealized appreciation/(depreciation) at December 31, 2006: GROSS GROSS UNREALIZED UNREALIZED NET UNREALIZED COST APPRECIATION DEPRECIATION APPRECIATION ---- ------------ ------------ -------------- Investments .................... $133,992,602 $95,811,420 $(13,995,948) $81,815,472 In July 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109" ("the Interpretation"). The Interpretation establishes for all entities, including pass through entities such as the Fund, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. The Interpretation is required to be implemented for a calendar-year open-end fund no later than its June 29, 2007 NAV, and is to be applied to all open tax years as of the date of effectiveness. Management has begun to evaluate the application of the Interpretation to the Fund, and is not in a position at this time to estimate the significance of its impact, if any, on the Fund's financial statements. 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 that is not considered to be an affiliated person an annual retainer of $3,000 plus $500 for each Board meeting attended and they are reimbursed 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 $250 for each Board meeting attended and they are reimbursed for any out of pocket expenses incurred in attending meetings. All Board committee members receive $500 per meeting attended. Directors who are directors or employees of the Adviser or an affiliated company receive no compensation or expense reimbursement from the Fund. 15 THE GAMCO GLOBAL TELECOMMUNICATIONS FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- 4. DISTRIBUTION PLAN. The Fund's Board has adopted a distribution plan (the "Plan") for each class of shares pursuant to Rule 12b-1 under the 1940 Act. Gabelli & Company, Inc. ("Gabelli & Company"), 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 & Company 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 proceeds from the sales of securities for the fiscal year ended December 31, 2006, other than short-term and U.S. Government securities, aggregated $12,858,127 and $24,122,075, respectively. 6. TRANSACTIONS WITH AFFILIATES. During the fiscal year ended December 31, 2006, the Fund paid brokerage commissions of $30,321 to Gabelli & Company. Additionally, Gabelli & Company informed the Fund that it received $5,983 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 fiscal year ended December 31, 2006, 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 has access to an unsecured line of credit of up to $25,000,000 from the custodian for temporary borrowing purposes. Borrowings under this arrangement bear interest at 0.75% above the Federal Funds rate on outstanding balances. This amount, if any, would be shown as "interest expense" in the Statement of Operations. At December 31, 2006, there were no borrowings outstanding from the line of credit. The average daily amount of borrowings outstanding from the line of credit within the fiscal year ended December 31, 2006 was $71,899 with a weighted average interest rate of 5.18%. The maximum amount borrowed at any time during the fiscal year ended December 31, 2006 was $3,326,000. 8. CAPITAL STOCK TRANSACTIONS. The Fund currently offers four classes of shares - - Class AAA Shares, Class A Shares, Class B Shares, and Class C Shares. Class AAA Shares are offered only to investors who acquire them directly from Gabelli & Company, or through selected broker/dealers, or the transfer agent 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 CDSC is equal to a declining percentage 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 & Company. The Board has approved Class I Shares which have not been offered publicly. The Fund imposes a redemption fee of 2.00% on Class AAA Shares, Class A Shares, Class B Shares, and Class C Shares that are redeemed or exchanged on or before the seventh day after the date of a purchase. (Prior to June 15, 2005, the Fund imposed a redemption fee on shares that were redeemed or exchanged on or before the sixtieth 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. The redemption fees retained by the Fund during the fiscal years ended December 31, 2006 and December 31, 2005 amounted to $589 and $7,745, respectively. 16 THE GAMCO GLOBAL TELECOMMUNICATIONS FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------- The redemption fee does not apply to shares purchased through programs that the Adviser determined to have appropriate short-term trading policies in place. Additionally, certain recordkeepers for qualified and non-qualified retirement plans that could not collect the redemption fee at the participant level due to systems limitations have received an extension to implement such systems. Transactions in shares of capital stocks were as follows: YEAR ENDED YEAR ENDED DECEMBER 31, 2006 DECEMBER 31, 2005 ---------------------------- --------------------------- SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ------------ CLASS AAA CLASS AAA ---------------------------- --------------------------- Shares sold ....................................... 1,918,009 $ 37,710,107 947,426 $ 16,136,166 Shares issued upon reinvestment of distributions .. 55,184 1,236,136 108,341 1,901,378 Shares redeemed ................................... (3,033,740) (59,259,859) (2,579,717) (43,954,399) ---------- ------------ ---------- ------------ Net decrease .................................. (1,060,547) $(20,313,616) (1,523,950) $(25,916,855) ========== ============ ========== ============ CLASS A CLASS A ---------------------------- --------------------------- Shares sold ....................................... 22,898 $ 474,817 22,621 $ 384,773 Shares issued upon reinvestment of distributions .. 303 6,781 386 6,767 Shares redeemed ................................... (13,041) (243,760) (15,718) (267,373) ---------- ------------ ---------- ------------ Net increase .................................. 10,160 $ 237,838 7,289 $ 124,167 ========== ============ ========== ============ CLASS B CLASS B ---------------------------- --------------------------- Shares redeemed ................................... (11,513) $ (210,652) (26,153) $ (435,480) ---------- ------------ ---------- ------------ Net decrease .................................. (11,513) $ (210,652) (26,153) $ (435,480) ========== ============ ========== ============ CLASS C CLASS C ---------------------------- --------------------------- Shares sold ....................................... 8,244 $ 162,900 6,357 $ 101,796 Shares issued upon reinvestment of distributions .. 32 691 7 118 Shares redeemed ................................... (3,583) (69,423) (9,842) (164,051) ---------- ------------ ---------- ------------ Net increase (decrease) ....................... 4,693 $ 94,168 (3,478) $ (62,137) ========== ============ ========== ============ 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 and expects the risk of loss to be remote. 10. OTHER MATTERS. The Adviser and/or affiliates received subpoenas from the Attorney General of the State of New York and the SEC requesting information on mutual fund share trading practices involving certain funds managed by the Adviser. GAMCO Investors, Inc. ("GAMCO"), the Adviser's parent company, responded to these requests for documents and testimony. In June 2006, GAMCO began discussions with the SEC regarding a possible resolution of their inquiry. In February 2007, the Adviser made an offer of settlement to the staff of the SEC for communication to the Commission for its consideration to resolve this matter. This offer of settlement is subject to agreement regarding the specific language of the SEC's administrative order and other settlement documents. On a separate matter, in September 2005, the Adviser was informed by the staff of the SEC that the staff may recommend to the Commission that an administrative remedy and a monetary penalty be sought from the Adviser in connection with the actions of two of seven closed-end funds managed by the Adviser relating to Section 19(a) and Rule 19a-1 of the 1940 Act. These provisions require registered investment companies to provide written statements to shareholders when a dividend is made from a source other than net investment income. While the two closed-end funds sent annual statements and provided other materials containing this information, the funds did not send written statements to shareholders with each distribution in 2002 and 2003. The Adviser believes that all of the funds are now in compliance. The Adviser believes that these matters would have no effect on the Fund or any material adverse effect on the Adviser or its ability to manage the Fund. 17 THE GAMCO GLOBAL TELECOMMUNICATIONS FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected data for a share of capital stock outstanding throughout each period: INCOME FROM INVESTMENT OPERATIONS DISTRIBUTIONS ----------------------------------------------- ------------------------- Net Net Asset Realized and Total Period Value, Net Unrealized from Net Ended Beginning Investment Gain (Loss) on Investment Investment Total December 31, of Period Income (Loss)(a) Investments Operations Income Distributions - ------------ --------- ---------------- ------------- ---------- -------- ------------- CLASS AAA 2006 $17.53 $ 0.12 $ 4.95 $ 5.07 $(0.14) $(0.14) 2005 17.23 0.16 0.33 0.49 (0.19) (0.19) 2004 14.03 0.07 3.21 3.28 (0.08) (0.08) 2003 9.83 (0.04) 4.24 4.20 -- -- 2002 13.96 (0.01) (4.12) (4.13) -- -- CLASS A 2006 $17.51 $ 0.12 $ 4.95 $ 5.07 $(0.15) $(0.15) 2005 17.22 0.14 0.35 0.49 (0.20) (0.20) 2004 14.03 0.08 3.19 3.27 (0.08) (0.08) 2003 9.83 (0.04) 4.24 4.20 -- -- 2002 13.95 (0.00)(c) (4.12) (4.12) -- -- CLASS B 2006 $17.11 $(0.03) $ 4.82 $ 4.79 -- -- 2005 16.77 0.01 0.33 0.34 -- -- 2004 13.69 (0.04) 3.12 3.08 -- -- 2003 9.67 (0.13) 4.15 4.02 -- -- 2002 13.83 (0.08) (4.08) (4.16) -- -- CLASS C 2006 $17.03 $ 0.00(c) $ 4.77 $ 4.77 $(0.04) $(0.04) 2005 16.71 0.04 0.29 0.33 (0.01) (0.01) 2004 13.68 (0.06) 3.14 3.08 (0.05) (0.05) 2003 9.66 (0.16) 4.18 4.02 -- -- 2002 13.82 (0.08) (4.08) (4.16) -- -- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA ---------------------------------------------- Net Asset Net Assets Net Period Value, End of Investment Portfolio Ended Redemption End of Total Period Income Operating Turnover December 31, Fees(a) Period Return+ (in 000's) (Loss) Expenses(b) Rate - ------------ ----------- ------ ------- -------- ------- ----------- ------ CLASS AAA 2006 $0.00(c) $22.46 28.9% $214,436 0.63% 1.56% 7% 2005 0.00(c) 17.53 2.8 185,870 0.92 1.59 4 2004 0.00(c) 17.23 23.4 209,043 0.49 1.62 15 2003 0.00(c) 14.03 42.7 185,719 (0.38) 1.62 11 2002 -- 9.83 (29.6) 139,455 (0.05) 1.66 8 CLASS A 2006 $0.00(c) $22.43 29.0% $ 1,170 0.64% 1.56% 7% 2005 0.00(c) 17.51 2.8 735 0.83 1.59 4 2004 0.00(c) 17.22 23.3 598 0.52 1.62 15 2003 0.00(c) 14.03 42.7 421 (0.38) 1.62 11 2002 -- 9.83 (29.5) 372 (0.05) 1.66 8 CLASS B 2006 $0.00(c) $21.90 28.0% $ 291 (0.17)% 2.31% 7% 2005 0.00(c) 17.11 2.0 425 0.09 2.33 4 2004 0.00(c) 16.77 22.5 855 (0.25) 2.37 15 2003 0.00(c) 13.69 41.6 817 (1.13) 2.37 11 2002 -- 9.67 (30.1) 610 (0.80) 2.41 8 CLASS C 2006 $0.00(c) $21.76 28.0% $ 351 (0.02)% 2.31% 7% 2005 0.00(c) 17.03 2.0 195 0.26 2.34 4 2004 0.00(c) 16.71 22.5 249 (0.44) 2.37 15 2003 0.00(c) 13.68 41.6 94 (1.13) 2.37 11 2002 -- 9.66 (30.1) 252 (0.80) 2.41 8 - -------------- + 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. (a) Per share amounts have been calculated using the average shares outstanding method. (b) The Fund incurred interest expense during the fiscal years ended December 31, 2005, 2004, 2003, and 2002. If interest expense had not been incurred, the ratio of operating expenses to average net assets would have been 1.58%, 1.61%, 1.61%, and 1.64% (Class AAA), 1.59%, 1.61%, 1.61%, and 1.64% (Class A), 2.33%, 2.36%, 2.36%, and 2.39% (Class B), and 2.34%, 2.36%, 2.36%, and 2.39% (Class C), respectively. For the fiscal year ended December 31, 2006, interest expense was minimal. (c) Amount represents less than $0.005 per share. See accompanying notes to financial statements. 18 THE GAMCO GLOBAL TELECOMMUNICATIONS FUND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - -------------------------------------------------------------------------------- To the Shareholders and Board of 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") (formerly The Gabelli Global Telecommunications Fund), a series of GAMCO Global Series Funds, Inc., (formerly Gabelli Global Series Funds, Inc.) as of December 31, 2006, 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 four 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. The financial highlights for the year ended December 31, 2002 were audited by other auditors whose report dated January 31, 2003, expressed an unqualified opinion on those financial highlights. 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, 2006, 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, 2006, 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 four years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ ERNST & YOUNG LLP Philadelphia, Pennsylvania February 16, 2007 19 THE GAMCO GLOBAL TELECOMMUNICATIONS FUND BOARD CONSIDERATION AND RE-APPROVAL OF INVESTMENT ADVISORY AGREEMENT (UNAUDITED) During the six months ended December 31, 2006, 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 all telecommunications funds, noting that the Fund's performance was in the middle of its peer group for the one and three year periods and in the top third 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 suggesting that 20% growth in the Fund would not produce meaningful economies of scale that the shareholders would not participate in. SHARING OF ECONOMIES OF SCALE. The Independent Board Members noted that the investment advisory 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 advisory fee, other expenses, and total expenses of the Fund to similar expense ratios of the Lipper peer group of telecommunication funds and noted that the Adviser's advisory 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 Independent Board Members compared the advisory fee to the fee for other funds managed by the Adviser but did not compare it to the fees of other types of accounts managed by an affiliated adviser. CONCLUSIONS. The Independent Board Members concluded that the Fund enjoyed highly experienced portfolio management services, good ancillary services, and a performance record that was understandable in relation to the disclosure in the Fund's prospectus and periodic shareholder reports as to its purpose and the outlook of the portfolio managers. 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 advisory agreement to the full Board of Directors. 20 THE GAMCO GLOBAL TELECOMMUNICATIONS 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 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 OFFICE NUMBER OF NAME, POSITION(S) AND LENGTH OF FUNDS IN FUND ADDRESS 1 TIME COMPLEX OVERSEEN PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS AND AGE SERVED 2 BY DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR 4 - ---------------- ------------ ---------------- ---------------------- -------------------- INTERESTED DIRECTORS 3: - ---------------------- MARIO J. GABELLI Since 1993 24 Chairman of the Board and Chief Executive Director of Morgan Group Director and Officer of GAMCO Investors, Inc. and Holdings, Inc. (transportation Chief Investment Officer Chief Investment Officer - Value Portfolios services); Chairman of the Age: 64 of Gabelli Funds, LLC and GAMCO Asset Board of Lynch Interactive Management Inc.; Director/Trustee or Chief Corporation (multimedia and Investment Officer of other registered communication services investment companies in the Gabelli Funds company) complex; Chairman and Chief Executive Officer of GGCP, Inc. JOHN D. GABELLI Since 1993 10 Senior Vice President of Gabelli & Director of GAMCO Director Company, Inc. Investors, Inc. Age: 62 INDEPENDENT DIRECTORS 5: - ------------------------ E. VAL CERUTTI Since 2001 7 Chief Executive Officer of Cerutti Director of The LGL Group, Director Consultants, Inc.; Adviser to Iona Inc. (diversified Age: 67 College Hagan School of Business manufacturing) ANTHONY J. COLAVITA Since 1993 34 Partner in the law firm of -- Director Anthony J. Colavita, P.C. Age: 71 ARTHUR V. FERRARA Since 2001 7 Former Chairman of the Board and Chief Director of The Guardian Director Executive Officer of The Guardian Life sponsored mutual funds Age: 76 Insurance Company of America (1993 - 1995) WERNER J. ROEDER, MD Since 1993 23 Medical Director of Lawrence -- Director Hospital and practicing private physician Age: 66 ANTHONIE C. VAN EKRIS Since 1993 17 Chairman of BALMAC International, Inc. -- Director (commodities and futures trading) Age: 72 SALVATORE J. ZIZZA Since 2004 25 Chairman of Hallmark Electrical Supplies Director of Hollis-Eden Director Corp. (distribution of electrical Pharmaceuticals (biotechnology); Age: 61 supplies) Director of Earl Scheib, Inc. (automotive services) 21 THE GAMCO GLOBAL TELECOMMUNICATIONS FUND ADDITIONAL FUND INFORMATION (CONTINUED) (UNAUDITED) - -------------------------------------------------------------------------------- TERM OF OFFICE NAME, POSITION(S) AND LENGTH OF ADDRESS 1 TIME PRINCIPAL OCCUPATION(S) AND AGE SERVED 2 DURING PAST FIVE YEARS - ----------------- ------------ ---------------------- OFFICERS: - -------- BRUCE N. ALPERT Since 2003 Executive Vice President and Chief Operating Officer of Gabelli Funds, LLC President since 1988 and an officer of all of the registered investment companies Age: 55 in the Gabelli Funds complex. Director and President of Gabelli Advisers, Inc. since 1998 JAMES E. MCKEE Since 1995 Vice President, General Counsel and Secretary of GAMCO Investors, Inc. Secretary since 1999 and GAMCO Asset Management Inc. since 1993; Secretary Age: 43 of all of the registered investment companies in the Gabelli Funds complex AGNES MULLADY Since 2006 Treasurer of all of the registered investment companies in the Gabelli Funds Treasurer complex; Senior Vice President of U.S. Trust Company, N.A. and Treasurer Age: 48 and Chief Financial Officer of Excelsior Funds from 2004 through 2005; Chief Financial Officer of AMIC Distribution Partners from 2002 through 2004; Controller of Reserve Management Corporation and Reserve Partners, Inc. and Treasurer of Reserve Funds from 2000 through 2002 PETER D. GOLDSTEIN Since 2004 Director of Regulatory Affairs at GAMCO Investors, Inc. since 2004; Chief Chief Compliance Officer Compliance Officer of all of the registered investment companies in the Age: 53 Gabelli Funds complex; Vice President of Goldman Sachs Asset Management from 2000 through 2004 - ----------------- 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 (i.e. public companies) or other investment companies registered under the 1940 Act. 5 Directors who are not interested persons are considered "Independent" Directors. - -------------------------------------------------------------------------------- 2006 TAX NOTICE TO SHAREHOLDERS (Unaudited) For the fiscal year ended December 31, 2006, the Fund paid to shareholders ordinary income dividends (comprised of net investment income) totaling $0.137, $0.150, and $0.043 per share for Class AAA, Class A, and Class C, respectively. For the fiscal year ended December 31, 2006, 100% of the ordinary income dividend qualifies for the dividend received deduction available to corporations and 100% of the ordinary income distribution was qualified dividend income. U.S. GOVERNMENT INCOME: The percentage of the ordinary income dividend paid by the Fund during fiscal year 2006 which was derived from U.S. Treasury securities was 5.40%. 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 2006. Due to the diversity in state and local tax law, it is recommended that you consult your personal tax advisor as to the applicability of the information provided to your specific situation. - -------------------------------------------------------------------------------- 22 - -------------------------------------------------------------------------------- GABELLI FUNDS AND YOUR PERSONAL PRIVACY ================================================================================ WHO ARE WE? The Gabelli/GAMCO and Westwood 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 and Gabelli Advisers, Inc., which are 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: o 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. o 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 web site, 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) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA 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 MARCIN, CFA 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) PORTFOLIO MANAGER: MARIO J. GABELLI, CFA 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 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) TEAM MANAGED 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 ___________________________________ WESTWOOD MIGHTY MITES(SM) 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 market average 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 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 FREEMAN, CFA 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) TEAM MANAGED SPECIALTY EQUITY ____________________________ 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) TEAM MANAGED 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 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 world-wide 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) TEAM MANAGED 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 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 MANAGER: MARTIN WEINER, CFA COMSTOCK STRATEGY FUND The Fund emphasizes investments in debt securities, which maximize total return in light of credit risk, interest rate risk, and the risk associated with the length of maturity of debt instruments. (MULTICLASS) PORTFOLIO MANAGER: MARTIN WEINER, CFA FIXED INCOME ________________________________ 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 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) PORTFOLIO MANAGER: JUDITH A. RANERI 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 THE FUND 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 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 6:00 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 HALLMARK ELECTRICAL GUARDIAN LIFE INSURANCE SUPPLIES CORP. COMPANY OF AMERICA OFFICERS Bruce N. Alpert James E. McKee PRESIDENT SECRETARY Agnes Mullady Peter D. Goldstein TREASURER CHIEF COMPLIANCE OFFICER DISTRIBUTOR Gabelli & Company, Inc. CUSTODIAN, TRANSFER AGENT, AND DIVIDEND AGENT State Street Bank and Trust Company LEGAL COUNSEL Skadden, Arps, Slate, Meagher & Flom LLP - -------------------------------------------------------------------------------- This report is submitted for the general information of the shareholders of The GAMCO Global Telecommunications Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. - -------------------------------------------------------------------------------- GAB401Q406SR [GRAPHIC OMITTED] E P Gabelli Triangle P M MANAGEMENT S V CASH FLOW RESEARCH THE GAMCO GLOBAL TELECOMMUNICATIONS FUND ANNUAL REPORT DECEMBER 31, 2006 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 $119,700 for 2005 and $124,000 for 2006. 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 2005 and $0 for 2006. 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 $14,400 for 2005 and $0 for 2006. 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 2005 and $0 for 2006. (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) Not applicable (c) 100% (d) Not applicable (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 $111,400 for 2005 and $73,050 for 2006. (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. SCHEDULE OF INVESTMENTS. 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. 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 03/01/2007 ---------------------------------------------------------------------------- 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 03/01/2007 ---------------------------------------------------------------------------- By (Signature and Title)* /s/ Agnes Mullady ------------------------------------------------------- Agnes Mullady, Principal Financial Officer & Treasurer Date 03/01/2007 ---------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature.