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THE GABELLI
GLOBAL MULTIMEDIA
TRUST INC.
ANNUAL REPORT
DECEMBER 31, 2002
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THE GABELLI
GLOBAL MULTIMEDIA
TRUST INC.
Our cover icon represents the underpinnings of Gabelli.
The Teton mountains in Wyoming represent what we believe in
in America -- that creativity, ingenuity, hard work and a global uniqueness
provide enduring values. They also stand out in an increasingly complex,
interconnected and interdependent economic world.
INVESTMENT OBJECTIVE:
The Gabelli Global Multimedia Trust Inc. is a closed-end, non-diversified
management investment company whose primary objective is long-term growth of
capital, with income as a secondary objective. The Trust seeks opportunities for
long-term growth within the context of two main investment universes: companies
involved in creativity, as it relates to the development of intellectual
property rights (copyrights); and companies involved in distribution, as it
relates to the delivery of these copyrights. Additionally, the Trust will invest
in companies participating in emerging technological advances in interactive
services and products.
THIS REPORT IS PRINTED ON RECYCLED PAPER.
TO OUR SHAREHOLDERS,
Virtually every sector of the multimedia industry (radio and television
broadcasters, cable television operators, cable TV networks, publishers,
entertainment software producers, and wired and wireless telecommunications
companies) rallied strongly in the fourth quarter. The Gabelli Global Multimedia
Trust (the "Trust") rose 16.57%, outpacing both the technology-dominated Nasdaq
Composite Index, which rose 13.95%, and the broader Standard & Poor's ("S&P")
500 Index, which rose 8.43% for the fourth quarter. This late push was not
nearly enough to prevent the Trust from closing the year with a significant
decline of 27.09%. However, we are encouraged by multimedia stocks' strong
fourth quarter performance and believe they can build on these gains in the year
ahead.
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PICTURE OF MARIO GABELLI
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THE GABELLI
GLOBAL MULTIMEDIA
TRUST INC.
COMPARATIVE RESULTS
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AVERAGE ANNUAL RETURNS THROUGH DECEMBER 31, 2002 (A)
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SINCE
QUARTER INCEPTION (B) 5 YEAR 3 YEAR 1 YEAR
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Gabelli Global Multimedia Trust:
NAV Return (c) ........................ 16.57% 9.15% 4.22% (22.21)% (27.09)%
Investment Return (d) ................. 13.88% 6.32% 3.32% (25.00)% (28.97)%
MSCI AC World Free Index ................ 7.84% 4.39% (1.94)% (16.30)% (18.98)%
Nasdaq Composite Index .................. 13.95% 7.09% (3.19)% (31.02)% (31.53)%
Lipper Global Fund Average .............. 5.97% 4.55% (1.01)% (15.09)% (19.53)%
(a) Returns represent past performance and do not guarantee future results.
Investment returns and the principal value of an investment will fluctuate.
When shares are sold, they may be worth more or less than their original
cost. The Morgan Stanley Capital International (MSCI) All Country (AC)
World Free and Nasdaq Composite Indices are unmanaged indicators of stock
market performance, while the Lipper Average reflects the average
performance of open-end mutual funds classified in this particular
category. Dividends are considered reinvested except for the Nasdaq
Composite Index. Performance for periods less than one year are not
annualized.
(b) From commencement of investment operations on November 15, 1994.
(c) Total returns and average annual returns reflect changes in net asset value
(NAV), reinvestment of distributions at NAV on the ex-dividend date,
adjustments for rights offerings, and are net of expenses. Since inception
return based on initial net asset value of $7.50.
(d) Total returns and average annual returns reflect changes in closing market
values on the New York Stock Exchange, reinvestment of distributions and
adjustments for rights offerings. Since inception return based on initial
offering price of $7.50.
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7.92% CUMULATIVE PREFERRED STOCK - 25% REDEMPTION
As authorized by the Board of Directors, the Trust redeemed 25% (308,675
Shares) of its outstanding 7.92% Cumulative Preferred Stock. The redemption date
was November 12, 2002 and the redemption price was $25.2530 per Preferred Share,
which consists of $25.00 per Preferred Share plus accumulated and unpaid
dividends through the redemption date of $0.2530 per Preferred Share.
The redemption was made pro rata from each Preferred Stock Shareholder
based on the respective number of Preferred Shares held by each such holder on
the redemption date. The Preferred Shares redeemed are no longer deemed
outstanding, dividends have ceased to accrue and all the rights of the Preferred
Shareholders with respect to the Preferred Shares redeemed have ceased, except
the right to receive the redemption price. Shareholders of record were mailed a
redemption notice and letter of transmittal. The redemption price was paid only
to shareholders of record who completed and signed the letter of transmittal and
submitted certificates for the number of Preferred Shares being redeemed. New
certificates were issued in respect of any excess Preferred Shares submitted.
In addition, the Trust has filed an initial registration statement with
the Securities and Exchange Commission for an offering of auction rate and fixed
rate preferred stock in the future. The actual amount of capital to be raised,
the dividend rate and the timing of any new offering will be determined at a
later date. Any offering will be made only by means of a prospectus. Depending
on prevailing interest rates, shareholder interest and other factors, the Board
may determine to seek to structure any such offering so as to enable
shareholders to exchange all or a portion of their Preferred Shares for such
newly issued preferred stock in that offering.
The Trust's 7.92% Cumulative Preferred Stock paid a cash distribution on
December 26, 2002 of $0.495 per share. For the twelve-months ended December 31,
2002, Preferred Stock shareholders received distributions totaling $1.98, the
annual dividend rate per share of Preferred Stock.
HOLDINGS BY GEOGRAPHIC REGION - 12/31/02
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PLOT POINTS FOLLOW:
UNITED STATES 74.5%
EUROPE 11.5%
ASIA/PACIFIC RIM 6.3%
LATIN AMERICA 4.3%
CANADA 3.4%
HOLDINGS BY CLASSIFICATION - 12/31/02
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PLOT POINTS FOLLOW:
COPYRIGHT/CREATIVITY 55.0%
DISTRIBUTION 45.0%
GLOBAL ALLOCATION
The accompanying chart presents the Multimedia Trust's holdings by
geographic region as of December 31, 2002. The geographic allocation will change
based on current global market conditions. Countries and/or regions represented
in the chart and below may or may not be included in the Trust's future
portfolio.
EQUITY MIX
The Multimedia Trust's investment premise falls within the context of two
main investment themes: 1) companies involved in creativity, as it relates to
the development of intellectual property rights (copyrights); and 2) companies
involved in distribution, as it relates to the delivery of these copyrights.
Additionally, this includes the broad scope of communications and
commerce-related services such as basic voice, data and the Internet.
The accompanying chart depicts the equity mix of the copyright/creativity
and distribution companies in the Trust's portfolio as of December 31, 2002.
COMMENTARY
THE FCC: TALKING THE TALK, BUT WILL IT WALK THE WALK?
In previous letters to shareholders, we have discussed in great detail the
many issues facing a Federal Communications Commission ("FCC") that has been a
vocal advocate of deregulation, but has not yet taken any major steps to modify
or eliminate the antiquated rules that still govern media industries. In our
third quarter shareholder letter, we noted that on September 12 the FCC
announced a notice of proposed rulemaking encompassing some of the major
regulatory issues impacting broadcasters and newspaper publishers. That was the
starting date of a 90-day review session in which the FCC will be taking
comments from media company representatives and public interest groups, and
concluding their own internal studies on the regulatory framework of the
industry. The FCC has indicated it will conclude its deliberations by the spring
of 2003 and issue new rules shortly thereafter.
2
Our hope is that the new rules will raise or eliminate the 35% national
audience cap for television broadcasters, allow ownership of more than one
television station in the same market (a duopoly), let media companies own a
newspaper and television station in the same market, and permit media
conglomerates to own more than one television network. Regulations restricting
the national footprint of broadcasters and disallowing broadcast duopolies have
already been struck down by the federal courts and remanded to the FCC. So, the
FCC will be forced to substantially modify existing regulations. We suspect the
FCC will also factor in the federal courts' posture on these two rules when
reconsidering regulations preventing ownership of a newspaper and television
station in the same market.
We would like to add something else to this wish list--an economically
sensible reallocation of radio wave spectrum. Contrary to popular belief, the
airwaves in America are not crowded. There is plenty of spectrum (and new
technologies to make the most of it) available to improve the quality of
cellular telephone transmission and spur an explosion in wireless communications
services. The problem is most of this spectrum is controlled by industries and
government entities that are not using it. The biggest hogs are television
broadcasters. They control nearly twice the amount of prime radio spectrum than
that of cellular telephone operators, who serve ten times more customers. That's
why the quality of cellular telephone service is still so poor and many new
wireless communications applications aren't more widely available. The U.S.
military, municipalities (police and fire departments) and universities also
control a lot of under-utilized spectrum.
FCC Chairman Michael Powell is on record saying that the existing spectrum
allocation model must be replaced by a market-oriented system creating greater
efficiencies. An advisory panel established by the FCC is expected to recommend
an overhaul of existing regulations. We hope the FCC and Congress respond
promptly to recommendations for reform, freeing up spectrum so that wireless
communications can live up to its full potential.
MEDIA DEALS
We believe meaningful changes in FCC regulations will set the stage for
major consolidation in the media industry. But, the curtain may not go up until
investors become more comfortable with leveraged companies, less suspicious of
growth via acquisition strategies, and more confident that media company mergers
will produce real synergies. Following the Enron, Tyco, WorldCom and Adelphia
debacles, investors have been wary of leveraged companies (regardless of how
well debt is covered by cash flow) and suspicious of growth by acquisition
strategies (regardless of how much economic sense they make). The erratic AOL
Time Warner merger has also given investors pause. We believe the stigma against
leverage and growth by acquisition strategies will wane in the year ahead and
investors will recognize that media industry consolidation makes good economic
sense.
Regarding AOL Time Warner, one of our most disappointing portfolio
holdings this year, we believe that all the bad news, and then some, is already
reflected in the company's depressed stock price. We are not sure how to value
AOL's business. But, based on our valuation of Time Warner's market dominant
media assets and the prospect of much better earnings for advertising-supported
media as the economy recovers, we believe AOL Time Warner stock is an incredible
bargain.
INVESTMENT SCORECARD
A comparison of our fourth quarter and full-year performance rankings
supports the biblical average that the last shall be first. For the first three
quarters, Penton Media, Cablevision, Sprint PCS and Western Wireless were among
our biggest portfolio disappointments. Yet, all these stocks finished near the
top of our fourth quarter performance charts. Beaten up telecom equipment stocks
such as Corning, Vodafone and Lucent also went from "worst to first" in the
fourth quarter. "Bottom fishing" clearly rewarded investors in the fourth
quarter. For the year, publishing companies Tribune, McClatchy, Media General
and Scripps also buoyed portfolio performance. Those gains were offset by poor
performance in selected media companies such as Gemstar, Crown Media and AOL
Time Warner.
3
BARRON'S 2003 ROUNDTABLE
Mario Gabelli, our Chief Investment Officer, has appeared in the
prestigious BARRON'S Roundtable discussion annually since 1980. Many of our
readers have enjoyed the inclusion of selected and edited comments from BARRON'S
Roundtable in previous reports to shareholders. As is our custom, we are
including selected comments of Mario Gabelli from BARRON'S 2003 Roundtable.
-------------------------------------
BARRON'S
ROUNDTABLE
MARIO GABELLI
CHAIRMAN AND CHIEF INVESTMENT OFFICER
GABELLI ASSET MANAGEMENT INC.
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(THE FOLLOWING HAS BEEN EXCERPTED:)
On the Money
FOUR SAVVY INVESTORS, LOTS OF STOCKS AND ONE GOLD RULE
By LAUREN B. RUBLIN
DID SOMEONE SAY "THEME PARTY"? Naw, we didn't serve fondue, or dance to the hits
of the 'Fifties, or come dressed as -- perish the thought -- our favorite
hot-shot investors. Instead, we invited some of Wall Street's best and brightest
to bring their favorite themes -- investment only, of course -- to the 35th
annual BARRON'S Roundtable, which convened Jan. 6 in lower Manhattan.
It was quite a party. The worldly Marc Faber brought plenty of doom and gloom,
along with animated talk of a boom -- in Asia's emerging markets. Abby Joseph
Cohen, the scholar-in-residence at Goldman Sachs, brought a flawless memory for
economic facts and financial figures, and a keen interpretation of same. And
Mario Gabelli, sharp as ever, probably brought dozens of stock picks, as usual,
but was kind enough to leave a few in the coatroom. After all, we had only nine
hours, on that wintry day, to grill and drill this loquacious, provocative
crowd.
BARRON'S: ALREADY, THIS NEW YEAR IS SHAPING UP DIFFERENTLY. THE PRESIDENT IS
PROPOSING A BIG TAX-CUT PACKAGE, AND WE ARE LIKELY TO GO TO WAR WITH IRAQ,
PROBABLY EARLY NEXT MONTH. MARIO, WILL IRAQ MAKE A DIFFERENCE TO THE ECONOMY,
ASIDE FROM THE OBVIOUS -- OIL PRICES?
GABELLI: Oil is like a pickpocket in Times Square. As it goes over $30 a barrel,
it robs my pocket. I am concerned about the unintended consequences of war.
Somebody gets on an airplane with smallpox. We have another anthrax attack. Do
the Iraqis dump scuds on Tel Aviv in a scorched-earth move as they're being
taken out? Yet, I say it's worth the risk, because when I was growing up in the
1940s and '50s, I remember hearing about Prague. "Let them [the Nazis] have
Prague."
4
Q: WE GAVE THEM PRAGUE.
GABELLI: Right. And then we had another seven years. There is an air pocket in
the economy right now. You basically come in with massive fiscal stimulation.
You are either in Baghdad or you're out after six weeks. If you're out, and oil
doesn't go up to $50 and stay there but comes back down to $25 or less a barrel,
then this president has done everything, will do everything to get re-elected in
2004. As a result, we're going to have an extraordinarily good economy in the
fourth quarter of 2003 and the first half of 2004, and the market will follow
suit.
Q: WHAT'S YOUR TAKE ON INTEREST RATES, MARIO?
GABELLI: If oil falls to the low $20s, consumers around the world will be helped
dramatically. The stimulation package is going to happen, too. Strong demand
from the absence of the energy pickpocket will drive rates materially higher by
the end of the year. The 10-year note will yield more than 5%.
BIGGS: I'm with Mario. I think the 10-year Treasury will yield over 5%. The
central banks of the world clearly have said they are committed to reflation.
GABELLI: If we get a 50% reduction in taxes on dividends, it's going to have an
impact on municipal bonds. [Tuesday, as part of a $674 billion economic-stimulus
plan, President Bush called for the elimination of all taxes on corporate
dividends.] Finally, interest-rate spreads will improve dramatically between
government and high-yield bonds as the economy starts to improve.
Q: OF COURSE, ELIMINATING TAXES ON DIVIDENDS IS BAD FOR THE STATES, AS IT COULD
RAISE THEIR BORROWING COSTS WHILE LOWERING THEIR REVENUES. AND IT'S BAD FOR
REAL-ESTATE INVESTMENT TRUSTS.
GABELLI: Rain is bad for the parade and great for the farmer. There are a lot of
trade-offs. There's a good opportunity here to make money on the short side in
munis.
Q: MARIO, CARE TO PREDICT THE MARKET?
GABELLI: Because the president will do all in his power to get himself
re-elected, we are going to have a very good economy in the spring of 2004. Oil
will be under $25, and we will be reflating the world. The market will be up
10%, with lots of volatility. However, if oil unexpectedly hits the $40s, the
Dow will fall to 6000-6500. But it will bounce back, because $40 oil is not
sustainable in the short run.
On a long-term basis I see a '68-'81 kind of environment, where the market moves
sideways. Earnings grow 6% a year and price-earnings multiples get bumped by
higher rates. The year will be characterized by the chase for dividends. It's
also a year in which deals come back. HSBC's deal to buy Household International
was a wake-up call. The leveraged buyout firms haven't been able to tap the debt
market, and that's starting to loosen up. Large companies want to grow. In
addition to the fiscal stimulus, specific sectors will benefit from changes in
regulatory dynamics. For example, the FCC [Federal Communications Commission] is
going to reform the telecom act, and there will be reforms in media, utility and
energy regulations. Even more interesting, we're going to have tort reform. All
these things will create an extraordinarily fertile environment for corporate
love-making.
Along similar lines, the FCC announced today that it is going to re-examine the
telecom industry in a way that would favor facilities-based companies -- namely,
the Baby Bells. [Under the FCC's plan, now in draft form, competitors such as
long-distance providers eventually would lose their discounted access to the
Bells' network switches.] This is a big boon to Verizon, SBC Communications and
the rest. So, if you want to compete in local service, you'll have to build your
own facilities.
SAMBERG: What Mario is saying is that after the government set the telecom
monster loose and let it screw up the economy, after it has killed itself on its
own, the government is going to jump on the corpse and trash it some more.
Terrific. That's a great investment theme.
GABELLI: What I'm saying is, the Verizons of the world will do better. They will
begin to spend money on Cisco and Lucent and R&D.
BARRON'S: MARIO, WHAT STOCKS HAVE YOU BROUGHT US?
GABELLI: First, I want to talk about old age, dividends and inflation. There are
approximately 200 million vehicles on the road in the United States. The average
age of a passenger car is 9.3 years, up from 8.1 years at the beginning of the
1990s. Light trucks are getting older, too. When I was growing up in the Bronx,
a car lasted for 50,000 miles. Fifteen or 20 years ago, it lasted 100,000.
Today, a new car will last 170,000 miles. In addition, years ago you used to get
a two- or three-year warranty. Now, it's five years. So cars between five and
nine years old are the sweet spot for parts consumption. Between 1996 and 2001,
cars in the sweet spot declined 2.2%, to 61 million units. In the next five
years, they are going to grow 15%, to 70 million. This is good news for GENUINE
PARTS.
Q: WE WONDERED WHERE YOU WERE GOING WITH THIS.
GABELLI: The stock sells for 31.50 or so. The company pays a dividend of $1.16 a
share, and dividends have grown for the past 30 years. The current yield is
around 4%. The payout ratio is about 50%. The balance sheet is terrific. Debt is
about $775 million. Earnings for 2002 probably will be a bit more than $2.10 a
share, rising to $2.30 in 2003 and around $2.50 in 2004. Revenues will grow
4%-5% and earnings about 7.5%-8%. Genuine Parts is a purveyor of expendable auto
components. The company is a leader in its market. If inflation picks up, parts
prices will rise, and its growth will rise more.
5
Q: WHERE IS THE STOCK HEADED?
GABELLI: If you can find 8%-10% growers with good balance sheets and predictable
earnings visibility, even with some quarterly earnings hiccups, a multiple of 20
times earnings isn't far-fetched. You could be looking at a $50 stock in a
couple of years. Plus, you get the dividend.
NEFF: There is some evidence that Detroit is building a better car. Would that
change the sweet spot any?
GABELLI: That's why the sweet spot moved from two to five years to six to 10.
BLACK: I owned Genuine Parts, but we sold it around 35 a share. The company's
growing the top line by only 3%-4%. Formerly, it had been an 8%-9% grower.
GABELLI: We expect auto-parts sales to grow by 5% a year -- and that's with
inflation of 1% -- over the next five years.
Now, to reiterate my view of the world, we're in a soft economy, but we'll get a
bunch of fiscal stimulation in the form of tax cuts for the consumer and the
business person, as well as something for the investor. We worry about higher
oil prices acting like a pickpocket in Times Square. If the price of crude falls
to under $25 a barrel, the world will reflate. Regulatory obstacles to business
will be re-examined in 2003. No. 1, the Telecommunications Act of 1996 is
re-examined. The opening salvo was launched today by the Federal Communications
Commission, echoing a commitment made by [FCC Chairman Michael] Powell in the
fall. The FCC is going to revisit the concept of unbundled networks, which would
help the regional Bell companies by allowing only full, facilities-based
competitors to enter the market. In the utilities area, the 1992 amendment to
the PUHCA, or Public Utility Holding Company Act of 1935, which created all the
opportunities for investment bankers to blow smoke up the portals of the utility
companies, is going to be re-examined.
Q: HOW WILL THE ENERGY-TRADING SCANDALS AFFECT THE INDUSTRY?
GABELLI: Companies are going back to basics. They're going to return to a
regulated monopoly business where they can earn 11%. But utility regulation is
going to change. Institutions will be allowed to own more than 10% of the shares
of any one utility. Then we're going to have an energy policy that will enable
us to address the world of $90 oil that Marc commented on. [In the first
installment of the Roundtable, Faber prophesied oil would hit $60-$90 a barrel
in the next 10-15 years, as demand from Asia surges.] We're going to produce
more, conserve more and find alternatives such as fuel cells and wind power.
Q: THERE'S BEEN A LOT OF THAT HERE TODAY.
GABELLI: We're also going to re-examine tort reform. And I want to talk about
deals, deals and more deals. In the past year or two, acquisitions have been
limited, because companies were concerned about being labeled serial acquirers
like Tyco and WorldCom. HSBC's acquisition of Household International sounds the
gong for a new wave of deals. This should benefit lots of my companies. Let's
turn to your TV set. Advertiser-supported media is going to do quite well in
2003. And in 2004 we'll have the Olympics, the election and economic
stimulation.
I'm recommending the small-television-station owners, because the FCC is going
to change several rules. They're going to raise the ownership cap, making it
possible for a given operator to own perhaps 50% of total households, versus the
current 35%, at a given time. They will permit duopoly in small markets, meaning
an operator will be able to own two TV stations. Third, they'll probably come
out with a better ruling on whether cable operators must carry digital signals.
Finally, television-station operators are finding new sources of revenues.
Q: WHICH STATION OWNERS DO YOU LIKE?
GABELLI: The first has done a pretty good job of damaging shareholder values.
It's YOUNG BROADCASTING, YBTVA. It closed Friday at 13 a share. It has an equity
market capitalization of approximately $260 million and net debt of about $600
million, for an enterprise value of $860 million. Young made an acquisition in
San Francisco, taking a TV station away from NBC. Bob Wright [chairman of NBC]
didn't forgive them, so he changed NBC's affiliation. Young paid about $750
million-$800 million for the station, and should sell it for $300 million-$400
million -- take a huge loss, sell it to NBC and apologize. That could drive the
stock from 12 to 40. Right now Young has 11 television stations, reaching 6.1%
of TV households -- six ABC affiliates, three CBS affiliates, one NBC affiliate
and an independent in San Francisco, KRON. If you took the broadcasting cash
flow of all of these stations except San Francisco, and applied it to all of the
company's debt, you'd get the San Francisco station for free.
Q: WHAT'S YOUR NEXT PICK?
GABELLI: LIBERTY, not LIBERTY MEDIA, which I'll talk about in a minute.
Liberty's symbol is LC. The stock trades on the New York Stock Exchange for 39,
and there are 19.8 million shares outstanding. The company's got a $770 million
market value, $60 million of cash, and $50 million of other assets which are
being converted to cash. Thus, you're really paying $660 million. Liberty has 15
affiliated television stations. The company has not done a good job of managing
shareholders' money, but they're generating significant cash flow. They will
generate a couple of hundred million dollars over the next three or four years.
Earnings will climb from $1.60 a share in 2002 to $2 to $3. The company is
controlled by the Hipp family in South Carolina.
6
Mario GABELLI'S PICKS
COMPANY SYMBOL 1/6/03 PRICE
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GENUINE PARTS GPC $31.88
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YOUNG BROADCASTING YBTVA 13.55
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LIBERTY CORP LC 39.31
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TRIBUNE TRB 47.79
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DQE DQE 16.50
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WESTAR ENERGY WR 10.26
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VERIZON COMM VZ 44.07
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DEL MONTE FOODS DLM 7.85
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CAMPBELL SOUP CPB 24.21
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H.J. HEINZ HNZ 33.91
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VIVENDI UNIVERSAL V 18.22
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LIBERTY MEDIA L 9.66
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AOL TIME WARNER AOL 14.09
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SOURCE: BLOOMBERG
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Q: WHAT DO YOU THINK OF LIBERTY MEDIA?
GABELLI: Be patient. Now, a kind word for TRIBUNE. The stock is 47. There are
330 million shares outstanding. Earnings of $2.20 a share are going to $3.50 a
share. Dennis FitzSimons [the current CEO] is going to succeed John Madigan.
Among utilities, I like DQE, formerly known as Duquesne. DQE has 586,000
electric customers in the Pittsburgh area and a propane business that serves
70,000 customers. The company is shedding assets. It's selling most of its
water-utility business to Philadelphia Suburban for $205 million. It's lowering
debt, which will fall to $800 million in a couple of years from a current $1.3
billion. Management got spooked by the rating agencies, so the investment
bankers convinced them to sell some stock. They sold 17 million shares last year
at $13.50 a share. We bought a basketful, and we're still nibbling.
Q: WHAT'S THE STOCK PRICE?
GABELLI: Around 15.50. The company cut its dividend in October, to a dollar a
share. As debt gets paid down, the dividend will rise. Plus, this is a
consolidation play. Somebody will take them over.
NEFF: What's the P/E?
GABELLI: DQE probably earned $1.30 a share in 2002. It was a hot summer in
Pittsburgh, so earnings may be flat in 2003, except for interest expense. The
stock trades for 12-13 times earnings. At eight times Ebitda [earnings before
interest, taxes, depreciation and amortization] I could do an LBO [leveraged
buyout] of this company, but that will not happen now. It might take a year and
a half to get a deal done. At that multiple, the stock is worth in the low $20s.
NEFF: Is this a 4%, 5%, 6% grower?
GABELLI: Yes. It's best to buy an index of utility stocks. The regulated
business will grow by 5%. Payout ratios will return to more historic levels, and
you could get a very good return on these stocks.
My next stock, WESTAR ENERGY, formerly Western Resources, is not without
controversy. Its former CEO was indicted. The new CEO, Jim Haines, is a good
chap. Westar, symbol WR, has 74 million shares outstanding. The stock trades for
10, giving the company a market value of $740 million. It pays a dividend of
$1.20 a share. Westar has $3.6 billion of debt, but Kansas's regulatory
commission has told the company to get that down to $1.8 billion. The company
owns 45 million shares of Oneok, worth $1 billion. Somehow, they have to
monetize it. They own Protection One, a protection company, which they will also
sell or otherwise deconsolidate. I would then suggest to the chairman that he
reduce the dividend to 60 cents, but pay shareholders a 60-cent stub. The
company's regulated business has a book value of $16-$18 a share, on which it
can earn 11%. The company can earn about $2 a share. Two years from now, you
could double your money and Westar will be merged with someone else.
Q: MARIO, HAVE YOU ACTUALLY SUGGESTED THIS?
GABELLI: I haven't talked to Mr. Haines at all. He'll read it when this is
published. The company doesn't have a debt problem, it has a cosmetic problem.
By cutting the dividend to 60 cents, you throw a bone to the regulators, much as
Con Edison did in New York in the 1970s. The regulators didn't like the former
CEO, but Haines is a former regulator and has credibility.
BLACK: A lot of these electric utilities make about 13%-14% on book. They're
leveraged roughly one-to-one on a debt-to-equity basis. They're making 6.5%-7%
on total capital, but they've been destroying capital for years because their
returns are below a normalized cost of capital, which is 8.5% or 9%. Maybe as
stocks they go up, but as an industry this is a lousy play and it has been
historically.
GABELLI: I don't know what you are talking about. I think you can make a lot of
money in this area. Once the PUHCA rules are amended, guys like Warren Buffett
and I are going to put tons of money into the group. And we're going to earn
20%-25% on our investment. Look, there's weakness in utilities if inflation goes
to 6%-7%, because there's a lag effect for adjusting rates. But local
distribution is still a terrific business, whether it's electric or gas.
Next, I've got a small-cap stock: VERIZON COMMUNICATIONS. It has only 2.7
billion shares, and trades for 40.50. However, the stock will be up today
[indeed, Verizon closed up 3.62, to 44.07 on Jan. 6, although it has since
backtracked]. The FCC has just proposed changes that will help the RBOCs
[regional Bell operating companies]. The competition that was fueled by Wall
Street's greed is dying, and the Bells are going to get stronger. Verizon can
earn about $2.80 a share this year. It will probably grow by 6%-7%, maybe a
little faster. The stock yields about 3.75% and sells below the S&P's
price/earnings multiple. I could also make the same case for SBC Communications
and BellSouth, but Verizon's enough for now.
7
--------------------------------------------------------------------------------
Q: THAT'S RESTRAINT.
GABELLI: Barton talked about the attractiveness of consumer staples. [Last
week's Roundtable installment featured Barton Biggs' stock picks, including
Kraft Foods, PepsiCo, Coca-Cola and Colgate-Palmolive.] I've got three more
names. DEL MONTE FOODS sells for 8. There are 210 million shares outstanding. So
that's $1.6 billion in market value. The company has $1.8 billion of debt. Del
Monte is a producer of consumables such as pet foods, tuna and vegetables.
Revenues for the year ending April 2004 will be about $3.4 billion. Earnings
will be 80 to 90 cents. The stock could trade for the same multiple as Ralcorp,
a producer of non-branded staples. If that happens, it goes to 15-16 in two
years.
CAMPBELL SOUP is another potential winner. The stock is 24, and the company has
a $10 billion market cap and $3.5 billion of debt. They are getting themselves
ready for a sale.
Q: WHAT IS GOING TO TURN THIS COMPANY AROUND?
GABELLI: It's got better management, better products. It's moving into Europe.
The chairman, George Sherman, did a pretty decent job in his former life,
running Danaher. Management is grooming Campbell for a takeover, which could
happen in the low 30s. We think it will happen a year from now.
BLACK: The company's condensed soups have been losing share for a long time.
This is a classic marketing problem.
GABELLI: It's a matter of execution. This is a terrific category, with seven or
eight companies. There's Unilever and Nestle and PepsiCo in the
$100-billion-market-cap category. There are a whole bunch of companies in the
$10 billion-$20 billion market. There is another round of consolidation
occurring. Campbell is on my list.
My next stock is ketchup -- any color, any flavor, any price. Yes, H.J. HEINZ.
The stock is 33, and the symbol is HNZ. Heinz has $4 billion of debt and a $15
billion market cap. After the spinoff of its SKF subsidiary, which was merged
into a subsidiary of Del Monte, Heinz will have earnings of about $2 a share.
That will grow by about 7%-8% a year, and cash flow is excellent. A good part of
Heinz's business is in Europe, where earnings will benefit from a declining
dollar.
Q: PLEASE TELL US ABOUT LIBERTY MEDIA.
GABELLI: There will be a lot of acquisitions and financial transactions in the
world of entertainment. Walt Disney and VIVENDI UNIVERSAL are thinking about
transactions. I'll start with Vivendi, because it is the least controversial
[general laughter]. The stock is around 17. There are 1.1 billion shares
outstanding. We think the company is worth about 35 euros a share. We like their
strategy. Vivendi has a very good business in wireless telecom in France. They
could always pick up the phone and sell it to Vodafone. Canal Plus, their cable
business in France and elsewhere in Europe, is wonderful. There's the
entertainment business in the United States, which is terrific, particularly the
sci-fi and cable-channel networks. Jean-Rene Fourtou, who succeeded Jean-Marie
Messier, is liquefying the company. We've been buying the stock.
Time for Liberty Media and John Malone [the company's chairman]. Here's the
math: 2.7 billion shares outstanding at 9 a share comes out to $25 billion in
market value. Liberty is invested in other companies whose stocks are going to
rise. Plus, it will benefit from more merger activity and more favorable
regulations. It's got a great collection of assets.
Q: WHAT HAPPENED TO MALONE? HE USED TO BE A GOOD INVESTOR.
GABELLI: Malone made the dumbest investments in the world. He invested in
telecoms and made a lot of mistakes, but let's deal with the deck we have. It's
a pretty interesting deck. Is he going to team up with Barry Diller to go after
Vivendi? Is he going to put QVC and Home Shopping Network together? Is he going
to do something with Bob Wright? Will he be in the forefront of the
re-engineering of other companies? Whatever the case, the stock is cheap at 9,
and gives you the equivalent of an active index fund in the media/entertainment
area.
BLACK: What does he do with the company's AOL holding? [Liberty Media owns 170
million AOL Time Warner shares.] I own Liberty as well, and it's got a breakup
value of $14 a share, conservatively speaking. But there's this huge holding in
AOL.
GABELLI: AOL is driven by AOL. If it were just Time Warner, the stock would sell
for a higher price. Those of us who owned Time Warner made a lot of money on
this deal [the January 2001 merger of AOL and Time Warner], because our stock
got up to 90-100, and we sold it. They marked it up, and we moved it down. We
started buying it back around 18 to 21, and the stock is around 11-12 today.
There are about 4.4 billion shares, times 12 a share, which is $50 billion in
market value. It's got another $30 billion of debt, so that's an enterprise
value of $80 billion. Looking at their non-AOL businesses, you get a value that
is higher than $80 billion. Cash flow is very good. The company is planning to
spin off Time Warner Cable. They'll buy Cablevision. You knew I would get that
in today! [Gabelli predicted at the 2002 Roundtable that Cablevision eventually
would be sold.] The question is, can they revitalize the company and maintain
AOL's subscriber base? Can they continue to create new services that are unique
at AOL? Can they get cash flow from transactions?
SAMBERG: And the answer is?
GABELLI: I don't know. I was never one pushing the AOL model.
Q: THANKS MARIO. []
8
LET'S TALK STOCKS
The following are stock specifics on selected holdings of our Trust.
Favorable earnings prospects do not necessarily translate into higher stock
prices, but they do express a positive trend that we believe will develop over
time.
CITIZENS COMMUNICATIONS CO. (CZN - $10.55 - NYSE) is one of the nation's top
three largest independent local exchange carriers with about 2.5 million access
lines after completion of a $3.4 billion acquisition of almost 1.1 million lines
from Frontier. This and several other recent acquisitions, accompanied by
divestitures of its utilities operations, have repositioned the company as a
pure telecommunications carrier. After recent completion of the tender offer for
19% of the shares that it already did not own, CZN now owns 100% of Electric
Lightwave Inc., a competitive carrier with fiber optic networks covering the
Western part of the U.S. The company is now focused on expanding profit margins
and strengthening its balance sheet by using the strong free cash flow of its
local phone operations as well as proceeds from the sale of the remaining
utility operations to pay down debt.
COMCAST CORP. (CMCSK - $22.59 - NASDAQ), run by the Roberts family, is the
largest cable operator in the U.S., controlling 22 million subscribers or almost
1 in 4 U.S. multichannel homes. The company also controls home shopping giant
QVC and a number of cable networks, including E!, Outdoor Life, The Golf
Channel, G4 and several regional sports networks.
GAYLORD ENTERTAINMENT CO. (GET - $20.60 - NYSE) is a diversified company
operating principally in two segments: hospitality and media. The company's
hospitality group consists of an interrelated group of businesses including the
Opryland Hotel Nashville, the Inn at Opryland, the General Jackson (an
entertainment showboat), and other related assets. The media group consists
primarily of the Grand Ole Opry, the Ryman Auditorium, the Wildhorse Saloon, and
three Nashville radio stations. Gaylord's management team is focusing on
unlocking shareholder value. They have recently opened a new hotel, the Gaylord
Palms, in Orlando, FL and are constructing a third in Grapevine, TX. The company
recently announced the sale of Acuff-Rose Music Publishing to Sony for $157
million and the sale of its stake in the Opry Mills mall for $30 million,
allowing Gaylord to finance the completion of the Texas hotel.
GRUPO TELEVISA SA (TV - $27.93 - NYSE), headquartered in Mexico, is Latin
America's dominant Spanish language media and broadcast company. The company has
interests in television production and broadcasting, programming for pay
television, direct-to-home (DTH) satellite services, publishing and publishing
distribution, cable television, radio broadcasting and production. The company
also produces thousands of hours of television programming annually which it
exports to over 21 countries including the United States. This large and
expanding program library is exclusively available for U.S. distribution by
Univision Communications (UVN - $24.50 - NYSE), a Spanish-language television
broadcaster in the United States in which Televisa has as a 15% fully diluted
equity stake.
LIBERTY MEDIA CORP. (L - $8.94 - NYSE), run by deal maker and media investor
John Malone, is engaged in businesses that provide programming services
(including production, acquisition and distribution through all media formats)
as well as businesses engaged in electronic retailing, direct marketing and
other services. Liberty Media holds interests in globally branded entertainment
networks such as the Discovery Channel, CourtTV, Encore and STARZ!. Liberty's
investment portfolio also includes interests in international video distribution
businesses, international telephony and domestic wireless companies, plant and
equipment manufacturers, and other businesses related to broadband services.
MCCLATCHY CO. (MNI - $56.73 - NYSE), headquartered in Sacramento, California, is
a leading newspaper publisher. The company publishes 11 daily and 13 non-daily
newspapers with daily circulation of 1.4 million and Sunday circulation of 1.9
million. McClatchy operates in four geographic clusters: California
(representing 34% of revenue), Minnesota (representing 34% of revenue), the
Carolinas (representing 16% of revenue), and the Northwest (representing 15% of
revenue). The company's publications include: The Sacramento Bee, the Star
Tribune, The News & Observer, The News Tribune, and the Anchorage Daily News.
9
MGM MIRAGE (MGG - $32.97 - NYSE) owns and/or operates fifteen hotel-casino
report properties, twelve of which are located in Nevada. Among those located on
the Las Vegas Strip are Bellagio, the MGM Grand Hotel and Casino, The Mirage,
Treasure Island, New York-New York Hotel and Casino, the Boardwalk Hotel and
Casino, and Monte Carlo, a 50-50 joint venture with Mandalay Resort Group (MBG -
$30.61 - NYSE). MGM Mirage also owns and operates hotel-casino resort properties
in Michigan, Mississippi and Australia. In November 2000, a limited liability
company, which MGG owns 50-50 with Boyd Gaming Corporation (BYD - $14.05 -
NYSE), began construction of the Borgata, a 2,000-guestroom hotel-casino resort
in Atlantic City, New Jersey, which is scheduled to open in the summer of 2003.
NEXTEL COMMUNICATIONS INC. (NXTL - $11.55 - NASDAQ) is one of two remaining
independent national wireless carriers in the U.S., servicing over 10 million
mostly high-value business subscribers and controlling wireless licenses
covering over 235 million people. Nextel is differentiating itself by offering
its unique direct-connect feature that allows instant two-way voice
communication. Since the beginning of 2002, the company has used a combination
of cash and stock to reduce its debt by over $1.8 billion while still
maintaining a healthy $2.4 billion cash balance. Nextel has submitted a proposal
to the FCC to re-allocate its spectrum portfolio at the radio frequencies also
used by the public safety organizations. The FCC decision is expected over the
next few months and, if approved, would significantly strengthen Nextel's
competitive position.
TRIBUNE CO. (TRB - $45.46 - NYSE), headquartered in Chicago, is a leading
national media company with operations in major U.S. markets. With its 2000
acquisition of The Times Mirror Company, it now has television and/or newspaper
properties in 18 of the nation's top 30 markets. It is the only media company
with television, newspaper and Internet properties in the nation's top three
markets -- New York, Los Angeles and Chicago. Flagship properties include:
WPIX-TV (New York), WGN-TV (Chicago), Newsday, Los Angeles Times, and Chicago
Tribune. Additionally, Tribune owns the Chicago Cubs and has a stake in the WB
Television Network. The company is focused on growing and strengthening its
major market cross-media positions.
VIVENDI UNIVERSAL (V - $16.07 - NYSE) owns wireless and wireline communications
companies, European cable and satellite assets, Seagram's former Universal Film,
Music, and Entertainment divisions and a varied assortment of interactive
investments. The firm has recently de-leveraged through numerous asset sales and
has appointed Jene-Rene Fourtou as replacement for ousted CEO Jean-Marie
Messier. Mr. Fourtou is known as a restructuring artist and comes from the drug
firm Aventis.
STOCK REPURCHASE PLAN
The Trust is authorized to repurchase up to 1,000,000 shares of the
Trust's outstanding shares. Pursuant to this stock repurchase plan, the Trust
may from time to time purchase shares of its capital stock in the open market
when the shares are trading at a discount of 10% or more from the net asset
value of the shares. In total, through December 31, 2002, 786,933 shares have
been repurchased in the open market under this stock repurchase plan.
WWW.GABELLI.COM
Please visit us on the Internet. Our homepage at www.gabelli.com contains
information about Gabelli Asset Management Inc., the Gabelli Mutual Funds, IRAs,
401(k)s, quarterly reports, closing prices and other current news. You can send
us e-mail at closedend@gabelli.com.
10
In our efforts to bring our shareholders more timely portfolio
information, Gabelli Fund's portfolio managers regularly participate in chat
sessions as reflected below.
FEBRUARY MARCH APRIL
-------- ----- ------
1st Tuesday Howard Ward Howard Ward Howard Ward
1st Wednesday Walter Walsh & Laura Linehan Caesar Bryan Charles Minter & Martin Weiner
2nd Wednesday Caesar Bryan Susan Byrne Susan Byrne
3rd Wednesday Elizabeth Lilly Henry Van der Eb Ivan Arteaga
4th Wednesday Barbara Marcin Barbara Marcin Walter Walsh & Laura Linehan
5th Wednesday Barbara Marcin
All chat sessions start at 4:15 PM (Eastern Time). Please arrive early, as
participation is limited.
You may sign up for our e-mail alerts at www.gabelli.com and receive early
notice of chat sessions, closing mutual fund prices, news events and media
sightings.
IN CONCLUSION
For much of the last three years, multimedia stocks under-performed the
broad market. However, in the fourth quarter, they were among the leaders in a
strong market rally. We believe two factors point to better absolute and
relative performance in the year ahead. First and foremost, the elimination of
restrictive government regulations should allow free market forces to work their
magic. Second, advertising-supported media, which is a very cyclical business,
should do much better in the year ahead as the economy continues to recover.
Sincerely,
/S/MARIO J. GABELLI
MARIO J. GABELLI, CFA
Portfolio Manager and Chief Investment Officer
February 10, 2003
--------------------------------------------------------------------------------
SELECTED HOLDINGS
DECEMBER 31, 2002
-----------------
Citizens Communications Co. McClatchy Co.
Comcast Corp. MGM Mirage
Gaylord Entertainment Co. Nextel Communications Inc.
Grupo Televisa SA Tribune Co.
Liberty Media Corp. Vivendi Universal
--------------------------------------------------------------------------------
NOTE: The views expressed in this report reflect those of the portfolio manager
only through the end of the period stated in this report. The manager's views
are subject to change at any time based on market and other conditions.
11
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2002
MARKET
SHARES COST VALUE
--------- ----- ---------
COMMON STOCKS -- 94.4%
COPYRIGHT/CREATIVITY COMPANIES -- 42.3%
BUSINESS SERVICES: ADVERTISING -- 0.5%
8,000 Donnelley (R.H.) Corp.+ $ 101,139 $ 234,480
20,000 Harte-Hanks Inc. ....... 147,611 373,400
4,200 Havas SA ............... 20,733 16,307
2,000 Publicis Groupe ........ 13,971 42,394
------------ ------------
283,454 666,581
------------ ------------
COMPUTER SOFTWARE AND SERVICES -- 2.0%
1,500 Activision Inc.+ ....... 6,415 21,885
10,000 America Online
Latin America Inc.,
Cl. A+ .............. 43,250 3,700
3,000 Atlus Co. Ltd.+ ........ 17,662 13,373
8,000 Block (H&R) Inc. ....... 162,450 321,600
9,473 CNET Networks Inc.+ .... 102,468 25,672
3,230 EarthLink Inc.+ ........ 45,250 17,604
500 Electronic Arts Inc.+ .. 5,588 24,885
40,000 EMC Corp.+ ............. 588,871 245,600
10,000 Jupitermedia Corp.+ .... 12,067 24,900
33,000 Microsoft Corp.+ ....... 1,487,798 1,706,100
2,000 Mobius Management
Systems Inc.+ ....... 12,540 4,800
1,000 Pixar Inc.+ ............ 39,153 52,990
12,000 Yahoo! Inc.+ ........... 194,054 196,200
------------ ------------
2,717,566 2,659,309
------------ ------------
CONSUMER PRODUCTS -- 0.4%
6,000 Department 56 Inc.+ .... 65,655 77,400
100 eBay Inc.+ ............. 6,163 6,782
20,000 Mattel Inc. ............ 241,358 383,000
------------ ------------
313,176 467,182
------------ ------------
ELECTRONICS -- 0.6%
46,165 Agere Systems Inc., Cl. B+ 142,676 64,631
6,000 Intel Corp. ............ 162,470 93,420
60,000 Oak Technology Inc.+ ... 217,241 159,000
3,570 Royal Philips Electronics
NV, ADR ............. 29,368 63,118
10,000 Sony Corp., ADR ........ 574,996 413,100
------------ ------------
1,126,751 793,269
------------ ------------
ENTERTAINMENT -- 14.2%
65,000 AOL Time Warner Inc.+ .. 1,013,194 851,500
481 Boston Celtics L.P.+ ... 4,267 13,227
60,000 Canal Plus, ADR ........ 10,818 56,412
25,000 Crown Media Holdings
Inc., Cl. A+ ........ 146,640 56,500
21,622 EMI Group plc .......... 89,060 48,385
30,000 EMI Group plc, ADR ..... 394,397 134,265
32,000 Fox Entertainment Group
Inc., Cl. A+ ........ 722,750 829,760
200,000 Gemstar-TV Guide
International Inc.+ . 1,734,525 650,000
70,000 GMM Grammy Public
Co. Ltd. ............ 55,457 29,072
5,282 Granada plc ........... 35,566 6,782
707,590 Liberty Media Corp.,
Cl. A+ .............. 2,546,623 6,325,855
17,000 Regal Entertainment
Group, Cl. A ........ 323,000 364,140
100,000 Shaw Brothers
(Hong Kong) Ltd. .... 145,929 102,585
70,000 Six Flags Inc.+ ........ 529,700 399,700
70,000 SMG plc ................ 205,497 108,750
MARKET
SHARES COST VALUE
--------- ----- ---------
85,000 The Walt Disney Co. .... $ 1,972,305 $ 1,386,350
141,000 Viacom Inc., Cl. A+ .... 2,121,177 5,754,210
25,000 Vivendi Universal SA ... 1,060,416 403,738
75,000 Vivendi Universal SA, ADR 2,825,297 1,205,250
4,000 World Wrestling
Entertainment Inc.+ . 58,000 32,200
------------ ------------
18,488,118 18,758,681
------------ ------------
HOTELS AND GAMING -- 6.5%
8,000 Aztar Corp.+ ........... 40,900 114,240
6,000 Churchill Downs Inc. ... 125,432 229,080
199,500 Gaylord Entertainment Co.+ 5,086,459 4,109,700
18,000 GTECH Holdings Corp.+ .. 167,644 501,480
740,000 Hilton Group plc ....... 2,809,249 1,989,535
51,000 Magna Entertainment
Corp., Cl. A+ ....... 339,150 316,200
33,000 MGM Mirage+ ............ 896,234 1,088,010
10,000 Park Place Entertainment
Corp.+ .............. 61,344 84,000
10,000 Starwood Hotels & Resorts
Worldwide Inc. ...... 309,513 237,400
------------ ------------
9,835,925 8,669,645
------------ ------------
PUBLISHING -- 18.1%
20,000 Arnoldo Mondadori
Editore SpA ......... 63,827 123,823
100,000 Belo Corp., Cl. A ...... 1,556,990 2,132,000
1,000 Dow Jones & Co. Inc. ... 46,722 43,230
20,000 EMAP plc ............... 207,970 240,844
18,000 Gannett Co. Inc. ....... 967,807 1,292,400
2,833 Golden Books Family
Entertainment Inc.+ . 0 4
2,000 Hollinger International Inc. 26,475 20,320
114,000 Independent News
& Media plc ......... 169,063 185,420
15,000 Journal Register Co.+ .. 244,399 266,700
15,000 Knight-Ridder Inc. ..... 659,380 948,750
55,000 Lee Enterprises Inc. ... 1,204,236 1,843,600
19,000 McClatchy Co., Cl. A ... 517,138 1,077,870
16,000 McGraw-Hill Companies Inc. 612,170 967,040
22,000 Media General Inc., Cl. A 972,570 1,318,900
27,000 Meredith Corp. ......... 636,668 1,109,970
100,000 Nation Multimedia Group+ 84,677 27,842
100,000 New Straits Times Press
Berhad+ ............. 296,714 108,948
20,000 News Corp. Ltd., ADR ... 396,739 525,000
150,000 Oriental Press Group Ltd. 46,315 23,274
92,000 Penton Media Inc.+ ..... 1,223,210 62,560
10,000 Playboy Enterprises
Inc., Cl. A+ ........ 97,125 91,500
97,400 Post Publishing Co. Ltd. 47,100 72,315
170,000 PRIMEDIA Inc.+ ......... 870,231 350,200
47,000 Pulitzer Inc. .......... 1,393,375 2,112,650
73,200 Reader's Digest
Association Inc. .... 1,353,116 1,105,320
1,000 Scholastic Corp.+ ...... 16,500 35,950
251,520 SCMP Group Ltd. ........ 181,457 104,822
33,000 Scripps (E.W.) Co., Cl. A 2,001,394 2,539,350
54,452 Singapore Press Holdings
Ltd. ................ 696,171 571,358
300 SPIR Communication ..... 23,329 24,555
15,000 Telegraaf Holdingsmij - CVA 285,271 243,030
48,000 Thomas Nelson Inc.+ .... 570,212 480,960
84,000 Tribune Co. ............ 3,528,623 3,818,640
See accompanying notes to financial statements.
12
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
PORTFOLIO OF INVESTMENTS (Continued)
DECEMBER 31, 2002
MARKET
SHARES COST VALUE
--------- ----- ---------
COMMON STOCKS (CONTINUED)
COPYRIGHT/CREATIVITY COMPANIES (CONTINUED)
PUBLISHING (CONTINUED)
15,000 United Business
Media plc, ADR ...... $ 147,162 $ 63,750
800 Wiley (John) & Sons
Inc., Cl. B ......... 5,692 19,096
4,000 Wolters Kluwer NV ...... 90,625 69,677
------------ ------------
21,240,453 24,021,668
------------ ------------
TOTAL COPYRIGHT/
CREATIVITY
COMPANIES ............ 54,005,443 56,036,335
------------ ------------
DISTRIBUTION COMPANIES -- 52.1%
BROADCASTING -- 16.2%
18,000 CanWest Global
Communications Corp.+ 156,991 72,720
18,000 CanWest Global
Communications Corp.,
Sub-Voting+ ......... 92,011 73,491
2,000 Carlton Communications plc,
ADR ................. 63,625 22,200
27,000 Clear Channel
Communications Inc.+ 664,696 1,006,830
8,333 Corus Entertainment Inc.,
Cl. B+ .............. 33,927 99,957
9,000 Cox Radio Inc., Cl. A+ . 55,500 205,290
1,000 Emmis Communications Corp.,
Cl. A+ .............. 10,489 20,830
28,520 Fisher Communications Inc. 1,505,735 1,503,575
67,500 Granite Broadcasting Corp.+ 400,055 138,375
100,000 Gray Television Inc. ... 1,295,437 975,000
13,125 Gray Television Inc.,
Cl. A .............. 166,990 155,531
10,000 Grupo Radio Centro,
SA de CV, ADR+ ...... 46,871 19,500
155,000 Grupo Televisa SA, ADR+ 5,215,748 4,329,150
34,000 Hearst-Argyle Television
Inc.+ ............... 341,006 819,740
4,550 Lagardere S.C.A. ....... 100,163 184,823
151,000 Liberty Corp. .......... 6,950,356 5,858,800
20,000 LIN TV Corp., Cl. A+ ... 440,000 487,000
4,000 Metropole TV M6 SA ..... 35,208 87,684
3,000 Nippon Television Network
Corp. ............... 507,941 447,459
4,650 NRJ Group .............. 22,694 70,753
1,000 NTN Communications Inc.+ 862 1,200
70,000 Paxson Communications
Corp.+ .............. 610,725 144,200
500 Radio One Inc., Cl. A+ . 5,510 7,310
1,000 Radio One Inc., Cl. D+ . 11,428 14,430
1,500 RTL Group (Brussels) ... 76,363 45,253
3,500 RTL Group (New York) ... 113,838 103,938
1,906 SAGA Communications
Inc., Cl. A+ ........ 9,709 36,214
80,000 Salem Communications
Corp., Cl. A+ ....... 1,285,175 1,997,600
2,000 SBS Broadcasting SA+ ... 42,022 29,042
30,000 Sinclair Broadcast Group Inc.,
Cl. A+ .............. 311,912 348,900
43,000 Sistem Televisyen Malaysia
Berhad+ ............. 41,566 2,659
25,000 Societe Television
Francaise 1 ......... 249,649 667,912
3,000 Spanish Broadcasting
System Inc., Cl. A+ . 47,623 21,600
MARKET
SHARES COST VALUE
--------- ----- ---------
50,000 Television Broadcasts
Ltd ................. $ 187,673 $ 157,725
50,000 Tokyo Broadcasting System
Inc. ................ 727,119 628,634
15,000 TV Azteca, SA de C.V. .. 95,250 71,850
25,000 Ulster Television plc .. 100,374 121,750
51,000 Young Broadcasting Inc.,
Cl. A+ .............. 1,475,410 671,670
------------ ------------
23,497,651 21,650,595
------------ ------------
BUSINESS SERVICES -- 0.6%
15,000 Carlisle Holdings Ltd.+ 78,754 41,250
48,000 Cendant Corp.+ ......... 593,292 503,040
500 CheckFree Corp.+ ....... 5,520 8,001
1,000 Convergys Corp.+ ....... 17,738 15,150
500 Dun and Bradstreet Corp.+ 6,320 17,245
8,000 Interactive Data Corp.+ 52,250 110,000
1,000 Moody's Corp. .......... 20,012 41,290
3,000 Princeton Video Image Inc.+ 21,000 990
100 SYNAVANT Inc.+ ......... 38 93
2,500 Traffix Inc.+ .......... 12,500 8,125
------------ ------------
807,424 745,184
------------ ------------
CABLE -- 4.1%
6,000 Austar United
Communications Ltd.+ 21,083 574
210,000 Cablevision Systems Corp.,
Cl. A+ .............. 3,491,667 3,515,400
60,000 Charter Communications Inc.,
Cl. A+ .............. 150,134 70,800
37,350 Comcast Corp., Cl. A+ .. 1,104,551 880,339
7,000 Comcast Corp., Cl. A,
Special+ ............ 53,073 158,130
12,000 Mediacom Communications
Corp.+ .............. 98,625 105,720
39,000 Shaw Communications Inc.,
Cl. B ............... 105,570 400,670
11,000 Shaw Communications Inc.,
Cl. B, Non-Voting 103,451 113,080
22,680 Telewest Communications plc+ 37,551 730
1,225 Telewest Communications plc,
ADR+ ................ 358,382 7,767
50,000 UnitedGlobalCom Inc.,
Cl. A+ .............. 275,444 120,000
------------ ------------
5,799,531 5,373,210
------------ ------------
CONSUMER SERVICES -- 2.0%
4,000 Bowlin Travel
Centers Inc.+ ....... 3,022 6,120
1,000 Hotels.com, Cl. A+ ..... 16,000 54,630
1,000 Martha Stewart Living
Omnimedia Inc., Cl. A+ 18,000 9,870
4,000 TiVo Inc.+ ............. 27,943 20,920
110,000 USA Interactive Inc.+ .. 2,642,200 2,521,200
------------ ------------
2,707,165 2,612,740
------------ ------------
DIVERSIFIED INDUSTRIAL -- 0.1%
2,000 General Electric Co. ... 19,538 48,700
7,700 Hutchison Whampoa Ltd. . 71,267 48,184
------------ ------------
90,805 96,884
------------ ------------
ENERGY AND UTILITIES -- 0.4%
45,000 El Paso Electric Co.+ .. 358,877 495,000
------------ ------------
See accompanying notes to financial statements.
13
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
PORTFOLIO OF INVESTMENTS (Continued)
DECEMBER 31, 2002
MARKET
SHARES COST VALUE
--------- ----- ---------
COMMON STOCKS (CONTINUED)
DISTRIBUTION COMPANIES (CONTINUED)
ENTERTAINMENT: DISTRIBUTION -- 1.1%
6,000 AMC Entertainment Inc.+ $ 11,737 $ 53,100
6,000 Blockbuster Inc., Cl. A 62,925 73,500
3,150 British Sky Broadcasting
Group plc, ADR+ ..... 56,080 126,189
100,000 GC Companies Inc.+ ..... 241,092 18,000
88,710 Metro-Goldwyn-Mayer Inc.+ 1,524,139 1,153,230
200 Sunland Entertainment Co.
Inc.+ ............... 2,500 100
------------ ------------
1,898,473 1,424,119
------------ ------------
EQUIPMENT -- 1.2%
34,000 Allen Telecom Inc.+ .... 240,881 321,980
1,000 Amphenol Corp., Cl. A+ . 15,588 38,000
416 Avaya Inc.+ ............ 9,761 1,019
2,000 CommScope Inc.+ ........ 29,407 15,800
90,000 Corning Inc.+ .......... 950,824 297,900
1,000 Furukawa Electric Co. Ltd. 15,169 2,099
3,000 L-3 Communications
Holdings Inc.+ ...... 33,000 134,730
80,000 Lucent Technologies Inc.+ 486,490 100,800
45,000 Motorola Inc. .......... 723,608 389,250
25,000 Nortel Networks Corp.+ . 125,000 40,250
6,000 Qualcomm Inc.+ ......... 31,219 218,340
6,000 Scientific-Atlanta Inc. 50,804 71,160
------------ ------------
2,711,751 1,631,328
------------ ------------
FOOD AND BEVERAGE -- 0.3%
50,000 Allied Domecq plc ...... 290,480 319,568
5,282 Compass Group plc ...... 37,648 28,062
800 Dreyer's Grand Ice
Cream Inc. .......... 53,834 56,768
------------ ------------
381,962 404,398
------------ ------------
SATELLITE -- 2.1%
300 Asia Satellite
Telecommunications
Holdings Ltd., ADR .. 5,693 3,417
28,000 EchoStar Communications
Corp., Cl. A+ ....... 91,970 623,280
100,000 General Motors Corp.,
Cl. H+ .............. 1,657,697 1,070,000
5,000 Liberty Satellite & Technology
Inc., Cl. A+ ........ 14,450 13,250
14,000 Lockheed Martin Corp. .. 401,069 808,500
30,008 Loral Space & Communications
Ltd.+ ............... 90,824 12,903
10,000 PanAmSat Corp.+ ........ 149,708 146,400
45,000 Pegasus Communications
Corp.+ .............. 493,902 58,950
6,000 PT Indosat Tbk, ADR .... 58,079 64,500
------------ ------------
2,963,392 2,801,200
------------ ------------
TELECOMMUNICATIONS: LOCAL -- 6.5%
4,266 Aliant Inc. ............ 39,187 68,185
3,000 Allegiance Telecom Inc.+ 28,500 2,010
7,000 ALLTEL Corp. ........... 372,121 357,000
4,557 ATX Communications Inc.+ 22,950 1,777
4,000 Brasil Telecom Participacoes
SA, ADR ............. 231,474 101,000
100,000 Broadwing Inc.+ ........ 958,563 352,000
47,000 CenturyTel Inc. ........ 1,440,777 1,380,860
2,000 Choice One Communications
Inc.+ ............... 700 320
93,000 Citizens Communications
Co.+ ................ 1,047,108 981,150
MARKET
SHARES COST VALUE
--------- ----- ---------
24,434 Commonwealth Telephone
Enterprises Inc.+ ... $ 829,449 $ 875,715
24,400 Commonwealth Telephone
Enterprises Inc.,
Cl. B+ .............. 318,107 896,700
1,000 Jazztel plc, ADR+ ...... 3,750 556
3,000 Metromedia International
Group Inc.+ (d) ..... 8,775 300
10,000 RCN Corp.+ ............. 88,016 5,300
9,655 Rogers Communications Inc.,
Cl. B+ .............. 148,207 89,596
120,345 Rogers Communications Inc.,
Cl. B, ADR+ ......... 1,077,724 1,128,836
6,000 SBC Communications Inc. 145,321 162,660
18,432 Tele Norte Leste Participacoes
SA, ADR ............. 252,380 135,475
10,000 Telecom Argentina Stet France
Telecom SA, ADR+ .... 26,440 22,500
18,172 TeliaSonera AB ......... 51,070 68,406
4,000 Time Warner Telecom Inc.,
Cl. A+ .............. 25,000 8,440
3,000 USN Communications Inc.+ 12,165 3
50,000 Verizon Communications
Inc. ................ 1,934,890 1,937,500
------------ ------------
9,062,674 8,576,289
------------ ------------
TELECOMMUNICATIONS: LONG DISTANCE -- 2.1%
22,000 AT&T Corp. ............. 721,099 574,420
10,000 BT Group plc, ADR ...... 428,060 313,300
5,000 Embratel Participacoes SA,
ADR+ ................ 4,150 5,350
13,000 Global Crossing Ltd.+ .. 21,840 234
285,646 Qwest Communications
International Inc.+ . 1,754,990 1,428,230
6,000 Rostelecom, ADR ........ 41,408 42,660
30,000 Sprint Corp. -
FON Group ........... 475,872 434,400
1,000 Startec Global
Communications Corp.+ 4,645 5
1,666 Talk America Holdings
Inc.+ ............... 2,529 9,330
60,000 WorldCom Inc. -
MCI Group ........... 15,900 10,800
------------ ------------
3,470,493 2,818,729
------------ ------------
TELECOMMUNICATIONS: NATIONAL -- 6.6%
42,000 BCE Inc. ............... 870,637 756,420
45,203 Cable & Wireless plc, ADR 775,679 105,323
30,000 Compania de
Telecomunicaciones
de Chile SA, ADR .... 522,581 287,700
172,000 Deutsche Telekom
AG, ADR ............. 2,452,472 2,184,400
30,000 Elisa Communications Oyj,
Cl. A+ .............. 340,642 180,068
3,000 France Telecom SA, ADR . 48,120 53,310
1,305 Hellenic Telecommunications
Organization SA ..... 18,163 14,379
174 Japan Telecom Holdings
Co. Ltd. ............ 266,848 539,580
500 Magyar Tavkozlesi Rt, ADR 9,650 8,900
20 Nippon Telegraph
& Telephone Corp. ... 123,433 72,638
35,000 Philippine Long Distance
Telephone Co., ADR+ . 646,419 176,050
4,320 PT Telekomunikasi
Indonesia, ADR ...... 18,513 36,677
48,000 Swisscom AG, ADR ....... 1,353,535 1,368,480
2,000 Telecom Corp.
of New Zealand
Ltd., ADR ........... 31,000 38,240
58,412 Telefonica SA, ADR+ .... 1,597,439 1,552,007
See accompanying notes to financial statements.
14
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
PORTFOLIO OF INVESTMENTS (Continued)
DECEMBER 31, 2002
MARKET
SHARES COST VALUE
--------- ----- ---------
COMMON STOCKS (CONTINUED)
DISTRIBUTION COMPANIES (CONTINUED)
TELECOMMUNICATIONS: NATIONAL (CONTINUED)
19,000 Telefonos de Mexico SA de CV,
Cl. L, ADR .......... $ 177,884 $ 607,620
2,400 Telstra Corp. Ltd., ADR 30,324 29,952
45,000 TELUS Corp. ............ 810,821 497,063
21,000 TELUS Corp., Non-Voting 456,807 214,682
------------ ------------
10,550,967 8,723,489
------------ ------------
WIRELESS COMMUNICATIONS -- 8.8%
35,000 America Movil SA de CV,
Cl. L, ADR .......... 444,579 502,600
11,450 American Tower Corp.,
Cl. A+ .............. 134,266 40,418
65,747 AT&T Wireless Services
Inc.+ ............... 1,012,912 371,471
24,000 Jasmine International
Public Co. Ltd.+ .... 5,040 1,114
80,000 Leap Wireless International
Inc.+ ............... 27,600 12,000
29,600 mm02 plc, ADR+ ......... 264,821 211,640
105,000 Nextel Communications Inc.,
Cl. A+ .............. 1,365,889 1,212,750
500 NTT DoCoMo Inc. ........ 762,806 922,727
30,000 Price Communications
Corp.+ .............. 293,906 414,900
105,600 Rogers Wireless
Communications Inc.,
Cl. B+ .............. 1,488,438 929,280
10,800 Rural Cellular Corp.,
Cl. A+ .............. 22,788 9,180
37,000 SK Telecom Co. Ltd., ADR 828,800 789,950
25,000 Sprint Corp. - PCS Group+ 267,053 109,500
1,650 Tele Celular Sul
Participacoes
SA, ADR ............. 26,380 12,969
5,500 Tele Centro Oeste Celular
Participacoes SA, ADR 16,487 22,000
330 Tele Leste Celular
Participacoes SA, ADR 8,827 2,079
825 Tele Nordeste Celular
Participacoes SA, ADR 12,175 12,622
330 Tele Norte Celular
Participacoes SA, ADR+ 5,098 1,534
380,000 Telecom Italia Mobile SpA 1,866,592 1,734,577
825 Telemig Celular
Participacoes SA, ADR 23,843 13,943
75,000 Telephone & Data
Systems Inc. ........ 5,114,984 3,526,500
6,600 Telesp Celular
Participacoes SA, ADR+ 211,036 20,130
15,000 Total Access
Communications plc+ 66,339 8,325
2,000 United States Cellular
Corp.+ .............. 113,480 50,040
6,000 Vimpel-Communications,
ADR+ ................ 103,613 192,060
12,650 Vodafone Group plc, ADR 203,637 229,218
26,000 Vodafone Libertel NV+ .. 268,172 277,742
20,000 Western Wireless Corp.,
Cl. A+ .............. 88,582 106,000
------------ ------------
15,883,098 11,737,269
------------ ------------
TOTAL DISTRIBUTION
COMPANIES ............ 80,184,263 69,090,434
------------ ------------
TOTAL COMMON
STOCKS ............... 134,189,706 125,126,769
------------ ------------
MARKET
SHARES COST VALUE
--------- ----- ---------
PREFERRED STOCKS -- 5.2%
BROADCASTING -- 1.2%
1,063 Granite Broadcasting Corp.,
12.750% Pfd. ........ $ 439,682 $ 584,650
100 Gray Television Inc.,
8.000% Cv. Pfd.,
Ser. C (c)(d) ....... 1,000,000 1,020,000
------------ ------------
1,439,682 1,604,650
------------ ------------
BUSINESS SERVICES -- 0.8%
10,000 Interep National Radio Sales Inc.,
4.000% Cv. Pfd.,
Ser. A+ (c) (d) ..... 1,000,000 1,020,000
------------ ------------
PUBLISHING -- 1.8%
103,000 News Corp. Ltd.,
Pfd., ADR ........... 2,541,580 2,332,950
------------ ------------
TELECOMMUNICATIONS: LOCAL -- 1.4%
40,000 Citizens Communications Co.,
5.000% Cv. Pfd. ..... 1,914,413 1,900,000
------------ ------------
TOTAL PREFERRED
STOCKS ............... 6,895,675 6,857,600
------------ ------------
PRINCIPAL
AMOUNT
---------
CORPORATE BONDS -- 0.4%
BUSINESS SERVICES -- 0.2%
$ 50,000 BBN Corp., Sub. Deb. Cv.,
6.000%, 04/01/12+
(a)(d) .............. 49,459 0
300,000 Trans-Lux Corp., Sub.
Deb. Cv.,
7.500%, 12/01/06 .... 288,256 240,000
------------ ------------
337,715 240,000
------------ ------------
ENTERTAINMENT -- 0.0%
20,000 Boston Celtics L.P., Sub. Deb. Cv.,
6.000%, 06/30/38 .... 12,262 16,400
------------ ------------
HOTELS AND GAMING -- 0.2%
300,000 Hilton Hotels Corp., Sub. Deb. Cv.,
5.000%, 05/15/06 .... 259,492 288,750
------------ ------------
PUBLISHING -- 0.0%
66,560 Golden Books Family
Entertainment Inc., PIK,
10.750%, 12/31/04 (a) 59,865 998
------------ ------------
TOTAL CORPORATE
BONDS ................ 669,334 546,148
------------ ------------
SHARES
------
WARRANTS -- 0.0%
BUSINESS SERVICES -- 0.0%
62,500 Interep National Radio
Sales Inc.,
05/06/2007+ (d) ..... 0 0
------------ ------------
PUBLISHING -- 0.0%
25,000 Nation Multimedia Group+ 0 1,636
------------ ------------
TOTAL WARRANTS ......... 0 1,636
------------ ------------
See accompanying notes to financial statements.
15
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
PORTFOLIO OF INVESTMENTS (Continued)
DECEMBER 31, 2002
MARKET
COST VALUE
----- ---------
TOTAL INVESTMENTS -- 100.00% ....... $138,426,260 $132,532,153
============ ============
OTHER ASSETS IN EXCESS OF LIABILITIES ............ 151,279
PREFERRED STOCK
(926,025 preferred shares outstanding) ......... (23,150,625)
------------
NET ASSETS -- COMMON STOCK
(14,284,953 common shares outstanding) .........$109,532,807
============
NET ASSET VALUE PER COMMON SHARE
(109,532,807 / 14,284,953 shares outstanding) . $7.67
=====
PRINCIPAL SETTLEMENT NET UNREALIZED
AMOUNT DATE APPRECIATION
------ ---- ------------
FORWARD FOREIGN EXCHANGE CONTRACTS
Deliver Hong Kong Dollars
in exchange for
$ 7,790,000(b) USD 998,270 ............08/01/03 $ 496
============
-------------
For Federal tax purposes:
Aggregate cost ..................... $143,430,301
============
Gross unrealized appreciation ...... $ 19,201,277
Gross unrealized depreciation ...... (30,099,425)
------------
Net unrealized depreciation ........ $(10,898,148)
============
-------------
(a) Security in default.
(b) Principal amount denoted in Hong Kong Dollars.
(c) 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, 2002, the market value of Rule 144A securities amounted to
$2,040,000 or 1.54% of total investments.
(d) Securities fair valued under procedures established by the Board of
Directors.
+ Non-income producing security.
ADR - American Depository Receipt.
PIK - Paid in Kind.
USD - United States Dollars.
% OF
MARKET MARKET
VALUE VALUE
------------ ------------
GEOGRAPHIC DIVERSIFICATION
United States ................. 74.5% 98,665,505
Europe ........................ 11.5 15,273,408
Asia/Pacific Rim .............. 6.3 8,402,103
Latin America ................. 4.3 5,706,907
Canada ........................ 3.4 4,484,230
----- ------------
Total Investments ............. 100.0% $132,532,153
===== ============
See accompanying notes to financial statements.
16
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2002
ASSETS:
Investments, at value (Cost $138,426,260) ........... $132,532,153
Cash and foreign currency, at value (Cost $242,284) . 244,066
Dividends and interest receivable ................... 183,166
Receivable for investments sold ..................... 2,187,249
Unrealized appreciation on forward foreign
exchange contract ................................. 496
------------
TOTAL ASSETS ........................................ 135,147,130
------------
LIABILITIES:
Payable for investments purchased ................... 2,106,344
Dividends payable ................................... 30,559
Payable for investment advisory fees ................ 90,096
Payable for audit and legal fees .................... 52,600
Payable for shareholder communications fees ......... 87,509
Other accrued expenses and liabilities .............. 96,590
------------
TOTAL LIABILITIES ................................... 2,463,698
------------
PREFERRED STOCK:
Cumulative Preferred Stock (7.92%, $25.00
liquidation value, $0.001 par value,
2,000,000 shares authorized with
926,025 shares issued and outstanding) ............ 23,150,625
------------
TOTAL PREFERRED STOCK ............................... 23,150,625
------------
NET ASSETS ATTRIBUTABLE TO COMMON STOCK
SHAREHOLDERS ........................................ $109,532,807
============
NET ASSETS ATTRIBUTABLE TO COMMON STOCK
SHAREHOLDERS CONSIST OF:
Capital stock, at par value ......................... 14,285
Additional paid-in capital .......................... 120,434,096
Accumulated net realized loss on investments
and foreign currency transactions ................. (5,024,961)
Net unrealized appreciation on investments
and foreign currency transactions ................. (5,890,613)
------------
TOTAL NET ASSETS .................................... $109,532,807
============
NET ASSET VALUE PER COMMON SHARE
($109,532,807 / 14,284,953 shares outstanding;
200,000,000 shares authorized of $0.001 par value) .. $7.67
======
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2002
INVESTMENT INCOME:
Dividends (net of foreign taxes of $89,018) ......... $ 1,515,435
Interest ............................................ 246,268
------------
TOTAL INVESTMENT INCOME ............................. 1,761,703
------------
EXPENSES:
Investment advisory fees ............................ 1,174,239
Shareholder communications expenses ................. 195,057
Shareholder services fees ........................... 136,800
Payroll ............................................. 75,000
Directors' fees ..................................... 63,827
Custodian fees ...................................... 49,097
Legal and audit fees ................................ 29,197
Miscellaneous expenses .............................. 84,758
------------
TOTAL EXPENSES ...................................... 1,807,975
------------
NET INVESTMENT LOSS ................................. (46,272)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments .................... 1,821,636
Net realized loss on foreign currency transactions .. (581)
------------
Net realized gain on investments and foreign
currency transactions ............................. 1,821,055
------------
Net change in net unrealized depreciation on
investments and foreign currency transactions ..... (40,300,249)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS ..... (38,479,194)
------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ................................... $(38,525,466)
------------
DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS:
Net realized long-term gains on investments and
foreign currency transactions ..................... (2,359,821)
------------
TOTAL DISTRIBUTIONS TO PREFERRED STOCK
SHAREHOLDERS ...................................... (2,359,821)
------------
NET DECREASE IN NET ASSETS ATTRIBUTABLE TO
COMMON STOCK SHAREHOLDERS
RESULTING FROM OPERATIONS ......................... $(40,885,287)
============
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
DECEMBER 31, 2002 DECEMBER 31, 2001
------------------- -------------------
OPERATIONS:
Net investment loss ................................$ (46,272) $ (300,849)
Net realized gain (loss) on investments
and foreign currency transactions ................ 1,821,055 (1,655,057)
Net change in unrealized depreciation
of investments and foreign
currency transactions ............................ (40,300,249) (18,935,914)
------------ ------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS .................................. (38,525,466) (20,891,820)
------------ ------------
DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS:
Net realized long-term gains on investments and
foreign currency transactions .................... (2,359,821) (2,444,706)
------------ ------------
TOTAL DISTRIBUTIONS TO PREFERRED
STOCK SHAREHOLDERS ............................... (2,359,821) (2,444,706)
------------ ------------
NET DECREASE IN NET ASSETS ATTRIBUTABLE
TO COMMON STOCK SHAREHOLDERS
RESULTING FROM OPERATIONS ........................ (40,885,287) (23,336,526)
------------ ------------
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
Net investment income .............................. -- (83,073)
Net realized gain on investments and
foreign currency transactions .................... -- (782,781)
------------ ------------
TOTAL DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS ... -- (865,854)
------------ ------------
TRUST SHARE TRANSACTIONS:
Net decrease from repurchase of common shares ...... (253,454) (152,030)
------------ ------------
NET DECREASE IN NET ASSETS FROM TRUST
SHARE TRANSACTIONS ............................... (253,454) (152,030)
------------ ------------
NET DECREASE IN NET ASSETS ......................... (41,138,741) (24,354,410)
------------ ------------
NET ASSETS ATTRIBUTABLE TO COMMON STOCK SHAREHOLDERS:
Beginning of period ................................ 150,671,548 175,025,958
------------ ------------
End of period ......................................$109,532,807 $150,671,548
============ ============
See accompanying notes to financial statements.
17
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION. The Gabelli Global Multimedia Trust Inc. ("Multimedia Trust")
is a closed-end, non-diversified management investment company organized as a
Maryland corporation on March 31, 1994 and registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), whose primary objective is
long-term growth of capital with income as a secondary objective. The Multimedia
Trust had no operations prior to November 15, 1994, other than the sale of
10,000 shares of common stock for $100,000 to The Gabelli Equity Trust Inc. (the
"Equity Trust"). Investment operations commenced on November 15, 1994.
Effective August 1, 2002, the Multimedia Trust modified its non-fundamental
investment policy to increase, from 65% to 80%, the portion of its assets that
it will invest, under normal market conditions, in common stock and other
securities, including convertible securities, preferred stock, options and
warrants of companies in the telecommunications, media, publishing and
entertainment industries (the "80% Policy").
The 80% Policy may be changed without shareholder approval. However, the
Multimedia Trust has adopted a policy to provide shareholders with at least 60
days' notice of the implementation of any change in the 80% Policy.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the
Multimedia Trust in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange, quoted by the National Association of Securities
Dealers Automated Quotations, Inc. ("Nasdaq") or traded in the U.S.
over-the-counter market for which market quotations are readily available are
valued at the last quoted sale price on that exchange or market 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 so determines, by such other method as the Board
of Directors shall determine in good faith, to reflect its fair market value.
Portfolio securities traded on more than one national securities exchange or
market are valued according to the broadest and most representative market, as
determined by Gabelli Funds, LLC (the "Adviser"). Portfolio securities primarily
traded in foreign markets are generally valued at the preceding closing values
of such securities on their respective exchanges or markets. Securities and
assets for which market quotations are not readily available are valued at their
fair value as determined in good faith under procedures established by and under
the general supervision of the Board of Directors. Short term debt securities
with remaining maturities of 60 days or less are valued at amortized cost,
unless the Board of Directors determines such does not reflect the securities
fair value, in which case these securities will be valued at their fair value as
determined by the Board of Directors. Debt instruments having a maturity greater
than 60 days for which market quotations are readily available are valued at the
latest average of the bid and asked prices. If there were no asked prices quoted
on such day, the security is valued using the closing bid price on that day.
Options are valued at the last sale price on the exchange on which they are
listed. If no sales of such options have taken place that day, they will be
valued at the mean between their closing bid and asked prices.
REPURCHASE AGREEMENTS. The Multimedia Trust may enter into repurchase
agreements with primary government securities dealers recognized by the Federal
Reserve Bank of New York, with member banks of the Federal Reserve System or
with other brokers or dealers that meet credit guidelines established by the
Adviser and reviewed by the Board of Directors. Under the terms of a typical
repurchase agreement, the Multimedia Trust takes possession of an underlying
debt obligation subject to an obligation of the seller to repurchase, and the
Multimedia Trust to resell, the obligation at an agreed-upon price and time,
thereby determining the yield during the Multimedia Trust's holding period. The
Multimedia Trust 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 Multimedia Trust in each agreement. The Multimedia
Trust 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 Multimedia
Trust may be delayed or limited.
SECURITIES SOLD SHORT. A short sale involves selling a security which the
Multimedia Trust does not own. The proceeds received for short sales are
recorded as liabilities and the Multimedia Trust records an unrealized gain or
loss to the extent of the difference between the proceeds received and the value
of the open short position on the day of determination. The Multimedia Trust
records a realized gain or loss when the short position is closed out. By
entering into a short sale, the Multimedia Trust 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 Multimedia Trust on the ex-dividend date
and interest expense is recorded on the accrual basis.
18
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
FORWARD FOREIGN EXCHANGE CONTRACTS. The Multimedia Trust 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 transactions. When the contract is closed, the
Multimedia Trust 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 Multimedia Trust'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/(loss) that might result should the value of the currency increase. In
addition, the Multimedia Trust could be exposed to risks if the counterparties
to the contracts are unable to meet the terms of their contracts.
FOREIGN CURRENCY TRANSLATION. The books and records of the Multimedia Trust
are maintained in United States (U.S.) dollars. Foreign currencies, investments
and other assets and liabilities are translated into U.S. dollars at the
exchange rates prevailing at the end of the period, and purchases and sales of
investment securities, income and expenses are translated at the exchange rate
prevailing on the respective dates of such transactions. Unrealized gains and
losses, which result from changes in foreign exchange rates and/or changes in
market prices of securities, have been included in unrealized
appreciation/depreciation on investments and foreign currency transactions. 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 Multimedia Trust and the amounts actually received.
The portion of foreign currency gains and losses related to fluctuation in
exchange rates between the initial trade date and subsequent sale trade date is
included in realized gain/(loss) on investments.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
accounted for as of the trade date with realized gain or loss on investments
determined by using the identified cost method. Interest income (including
amortization of premium and accretion of discount) is recorded as earned.
Dividend income is recorded on the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Distributions to shareholders
are recorded on the ex-dividend date. Distributions to shareholders of the
Multimedia Trust's 7.92% Cumulative Preferred Stock ("Cumulative Preferred
Stock") are accrued on a daily basis and are determined as described in Note 5.
Income distributions and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from accounting principles
generally accepted in the United States.
For the year ended December 31, 2002, reclassifications were made to
decrease accumulated net investment loss for $46,272 and to increase accumulated
net realized loss on investments and foreign currency transactions for $32,684,
with an offsetting adjustment to additional paid-in capital.
The tax character of distributions paid during the fiscal year ended
December 31, 2002 and December 31, 2001 were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2002 DECEMBER 31, 2001
--------------------------- ---------------------------
Common Preferred Common Preferred
---------- ---------- --------- ----------
DISTRIBUTIONS PAID FROM:
Ordinary income
(inclusive of short term
capital gain) ................... -- -- $235,110 --
Net long term capital gain ......... -- $2,359,821 630,744 $2,444,706
---------- ---------- --------- ----------
Total distributions paid ........... -- $2,359,821 $865,854 $2,444,706
========== ========== ========= ==========
PROVISION FOR INCOME TAXES. The Multimedia Trust intends to continue to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. As a result, a Federal income tax provision is
not required.
As of December 31, 2002, the components of accumulated earnings/(losses)
on a tax basis were as follows:
Undistributed long term capital gain ..................... $ 9,638
Net unrealized depreciation .............................. (10,894,653)
Other - dividends payable ................................ (30,559)
------------
Total accumulated loss ................................... $(10,915,574)
============
19
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
3. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES. The Multimedia Trust has entered
into an investment advisory agreement (the "Advisory Agreement") with the
Adviser which provides that the Multimedia Trust will pay the Adviser on the
first business day of each month a fee for the previous month equal on an annual
basis to 1.00% of the value of the Multimedia Trust's average weekly net assets
including the liquidation value of preferred stock. In accordance with the
Advisory Agreement, the Adviser provides a continuous investment program for the
Multimedia Trust's portfolio and oversees the administration of all aspects of
the Multimedia Trust's business and affairs. The Adviser has agreed to reduce
the management fee on the incremental assets attributable to the Cumulative
Preferred Stock if the total return of the net asset value of the common shares
of the Multimedia Trust, including distributions and advisory fee subject to
reduction, does not exceed the stated dividend rate of the Cumulative Preferred
Stock. For the year ended December 31, 2002, the Multimedia Trust's total return
on the net asset value of the common shares did not exceed the stated dividend
rate of the Cumulative Preferred Stock. Thus, such management fees were not
earned on the incremental assets.
During the year ended December 31, 2002, Gabelli & Company, Inc. and its
affiliates received $42,112 in brokerage commissions as a result of executing
agency transactions in portfolio securities on behalf of the Multimedia Trust.
The cost of calculating the Trust's net asset value per share is a Trust
expense pursuant to the Investment Advisory Agreement between the Trust and the
Adviser. During fiscal 2002, the Multimedia Trust reimbursed the Adviser $34,800
in connection with the cost of computing the Trust's net asset value.
4. PORTFOLIO SECURITIES. Cost of purchases and proceeds from sales of
securities, other than short-term securities, for the year ended December 31,
2002 aggregated $30,923,553 and $23,812,090, respectively.
5. CAPITAL. The Articles of Incorporation, dated March 31, 1994, permit the
Multimedia Trust to issue 200,000,000 shares of common stock (par value $0.001).
The Board of Directors of the Multimedia Trust has authorized the repurchase of
up to 1,000,000 shares of the Multimedia Trust's outstanding common stock.
During the year ended December 31, 2002, the Multimedia Trust repurchased 30,700
shares of its common stock in the open market at a cost of $253,454 and an
average discount of approximately 10.53% from its net asset value. During the
year ended December 31, 2001, the Multimedia Trust repurchased 24,200 shares of
its common stock in the open market at a cost of $152,030 and an average
discount of approximately 12.76% from its net asset value. All shares of common
stock repurchased have been retired.
Transactions in capital stock were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, 2002 DECEMBER 31, 2001
---------------------------- ------------------------
Shares Amount Shares Amount
------- --------- -------- ---------
Net decrease from repurchase of
common shares ............................. (30,700) $(253,454) (24,200) $(152,030)
------- --------- -------- ---------
Net decrease ................................. (30,700) $(253,454) (24,200) $(152,030)
======= ========= ======== =========
The Multimedia Trust's Articles of Incorporation authorize the issuance of
up to 2,000,000 shares of $0.001 par value Cumulative Preferred Stock. The
Cumulative Preferred Stock is senior to the common stock and results in the
financial leveraging of the common stock. Such leveraging tends to magnify both
the risks and opportunities to Common Shareholders. Dividends on shares of the
Cumulative Preferred Stock are cumulative. The Multimedia Trust is required to
meet certain asset coverage tests as required by the 1940 Act and by the shares'
Articles Supplementary with respect to the Cumulative Preferred Stock. If the
Multimedia Trust fails to meet these requirements and does not correct such
failure, the Multimedia Trust may be required to redeem, in part or in full, the
Cumulative Preferred Stock at a redemption price of $25.00 per share plus an
amount equal to the accumulated and unpaid dividends whether or not declared on
such shares in order to meet these requirements. Additionally, failure to meet
the foregoing asset requirements could restrict the Multimedia Trust's ability
to pay dividends to Common Shareholders and could lead to sales of portfolio
securities at inopportune times. Commencing June 1, 2002 and thereafter, the
Multimedia Trust, at its option, may redeem the Cumulative Preferred Stock in
whole or in part at the redemption price. On November 12, 2002, the Fund
redeemed 25% (308,675 shares) of its outstanding 7.92% Cumulative Preferred
Stock at the redemption price of $25.00 per Preferred Share plus accumulated and
unpaid dividends through the redemption date of $0.2530 per Preferred Share. At
December 31, 2002, 926,025 shares of the Cumulative Preferred Stock were
outstanding at the fixed dividend rate of 7.92 percent per share and accrued
dividends amounted to $30,559. The income received on the Multimedia Trust's
assets may vary in a manner unrelated to the fixed rate, which could have either
a beneficial or detrimental impact on net investment income and gains available
to Common Shareholders.
20
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
The holders of Cumulative Preferred Stock have voting rights equivalent to
those of the holders of common stock (one vote per share) and will vote together
with holders of shares of common stock as a single class. In addition, the 1940
Act requires that along with approval of a majority of the holders of common
stock, approval of a majority of the holders of any outstanding shares of
Cumulative Preferred Stock, voting separately as a class, would be required to
(a) adopt any plan of reorganization that would adversely affect the Cumulative
Preferred Stock, and (b) take any action requiring a vote of security holders,
including, among other things, changes in the Multimedia Trust's
subclassification as a closed-end investment company or changes in its
fundamental investment restrictions.
Under Emerging Issues Task Force (EITF) promulgating Topic D-98,
Classification and Measurement of Redeemable Securities, which was issued on
July 19, 2001, preferred securities that are redeemable for cash or other assets
are to be classified outside of permanent equity to the extent that the
redemption is at a fixed or determinable price and at the option of the holder
or upon the occurrence of an event that is not solely within the control of the
issuer. Subject to the guidance of the EITF, the Fund's Cumulative Preferred
Stock, which was previously classified as a component of net assets, has been
reclassified outside of permanent equity (net assets attributable to common
stock shareholders) in the accompanying financial statements. Prior year amounts
have also been reclassified to conform with this presentation. The impact of
this reclassification creates no change to the net assets available to common
shareholders.
6. INDUSTRY CONCENTRATION. Because the Multimedia Trust primarily invests in
common stocks and other securities of foreign and domestic companies in the
telecommunications, media, publishing and entertainment industries, its
portfolio may be subject to greater risk and market fluctuations than a
portfolio of securities representing a broad range of investments.
21
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A MULTIMEDIA TRUST COMMON SHARE
OUTSTANDING THROUGHOUT EACH PERIOD: YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
OPERATING PERFORMANCE: 2002 2001 2000 1999 1998
-------- -------- -------- -------- --------
Net asset value, beginning of period ........................ $ 10.52 $ 12.21 $ 19.90 $ 12.20 $ 9.91
-------- -------- -------- -------- --------
Net investment income (loss) ................................ (0.00)(a) (0.02) 0.21 (0.05) (0.03)
Net realized and unrealized gain (loss) on investments ...... (2.68) (1.44) (4.74) 11.54 3.33
-------- -------- -------- -------- --------
Total from investment operations ............................ (2.68) (1.46) (4.53) 11.49 3.30
-------- -------- -------- -------- --------
DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS:
Net investment income ....................................... -- -- (0.02) -- --
Net realized gain on investments ............................ (0.17) (0.17) (0.18) (0.23) (0.23)
-------- -------- -------- -------- --------
Total distributions to preferred stock shareholders ......... (0.17) (0.17) (0.20) (0.23) (0.23)
-------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE
TO COMMON STOCK SHAREHOLDERS RESULTING
FROM OPERATIONS ........................................... (2.85) (1.63) (4.73) 11.26 3.07
-------- -------- -------- -------- --------
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
Net investment income ....................................... -- (0.00)(a) (0.16) -- --
Net realized gain on investments ............................ -- (0.06) (1.41) (3.62) (0.80)
In excess of net investment income and/or net
realized gain on investments .............................. -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions to common stock shareholders ............ -- (0.06) (1.57) (3.62) (0.80)
-------- -------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Increase (decrease) in net asset value from
common stock share transactions ........................... 0.00(a) -- (1.35) 0.06 0.02
Offering expenses charged to capital surplus -- -- (0.04) -- --
-------- -------- -------- -------- --------
Total capital share transactions ............................ 0.00(a) -- (1.39) 0.06 0.02
-------- -------- -------- -------- --------
NET ASSET VALUE ATTRIBUTABLE TO COMMON STOCK
SHAREHOLDERS, END OF PERIOD ............................... $ 7.67 $ 10.52 $ 12.21 $ 19.90 $ 12.20
======== ======== ======== ======== ========
Net asset value total return* ............................... (27.1)% (13.3)% (24.9)% 96.6% 33.0%
======== ======== ======== ======== ========
Market value, end of period ................................. $ 6.40 $ 9.01 $ 10.31 $ 18.75 $ 10.94
======== ======== ======== ======== ========
Total investment return** ................................... (29.0)% (12.1)% (35.0)% 106.6% 35.1%
======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets including liquidation value of preferred shares,
end of period (in 000's) .................................. $132,683 $181,539 $205,893 $246,488 $163,742
Net assets attributable to common shares,
end of period (in 000's) .................................. $109,533 $150,672 $175,026 $215,238 $132,492
Ratio of net investment income (loss) to average net assets
attributable to common shares ............................. (0.04)% (0.18)% 1.36% (0.30)% (0.32)%
Ratio of operating expenses to average net assets
attributable to common shares ............................. 1.46% 1.34% 1.46% 1.56% 2.53%
Ratio of operating expenses to average total net assets
including liquidation value of preferred shares ........... 1.18% 1.13% 1.27% 1.32% 2.01%
Portfolio turnover rate ..................................... 16.6% 25.4% 29.9% 43.1% 44.6%
PREFERRED STOCK:
Liquidation value, end of period (in 000's) ................. $ 23,151 $ 30,868 $ 30,868 $ 31,250 $ 31,250
Total shares outstanding (in 000's) ......................... 926 1,235 1,235 1,250 1,250
Liquidation preference per share ............................ $ 25.00 $ 25.00 $ 25.00 $ 25.00 $ 25.00
Average market value (b) .................................... $ 25.75 $ 25.50 $ 23.54 $ 25.13 $ 25.96
Asset coverage .............................................. 573% 588% 667% 789% 524%
Asset coverage per share .................................... $ 143.28 $ 147.03 $ 166.76 $ 197.19 $ 112.97
--------------------------------------------------------------------------------
(a) Amount represents less than $0.005 per share.
(b) Based on weekly prices.
* Based on net asset value per share, adjusted for reinvestment of
distributions, including the effect of shares issued pursuant to rights
offering, assuming full subscription by shareholder.
** Based on market value per share, adjusted for reinvestment of distributions,
including the effect of shares issued pursuant to rights offering, assuming
full subscription by shareholder.
See accompanying notes to financial statements.
22
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
The Gabelli Global Multimedia Trust Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of The Gabelli Global Multimedia Trust
Inc. (the "Trust") at December 31, 2002, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 2002 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
/S/ PRICEWATERHOUSECOOPERS LLP
1177 Avenue of the Americas
New York, NY 10036
February 13, 2003
23
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
ADDITIONAL FUND INFORMATION (UNAUDITED)
The business and affairs of the Trust are managed under the direction of
the Trust's Board of Directors. Information pertaining to the Directors and
officers of the Trust is set forth below. The Trust's Statement of Additional
Information includes additional information about The Gabelli Global Multimedia
Trust Inc. Directors and is available, without charge, upon request, by calling
800-GABELLI (800-422-3554) or by writing to The Gabelli Global Multimedia Trust
Inc. at One Corporate Center, Rye, NY 10580.
TERM OF NUMBER OF
OFFICE AND FUNDS IN FUND
NAME, POSITION(S) LENGTH OF COMPLEX
ADDRESS 1 TIME OVERSEEN BY PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
AND AGE SERVED 2 DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR
---------------- -------- ------------ ---------------------- ----------------
INTERESTED DIRECTORS 3:
----------------------
MARIO J. GABELLI Since 1994** 22 Chairman of the Board and Chief Executive Director of Morgan Group
Director, President and Officer of Gabelli Asset Management Inc. and Holdings, Inc.(holding
Chief Investment Officer Chief Investment Officer of Gabelli Funds, company); Vice Chairman
Age: 60 LLC and GAMCO Investors, Inc.; of Lynch Corporation
Chairman and Chief Executive Officer of (diversified manufacturing)
Lynch Interactive Corporation (multimedia
and services)
KARL OTTO POHL Since 1994* 31 Member of the Shareholder Committee of Director of Gabelli Asset
Director Sal Oppenheim Jr. & Cie (private invest- Management Inc. (investment
Age: 73 ment bank); Former President of the management); Chairman, Incentive
Deutsche Bundesbank and Chairman of its Capital and Incentive Asset
Central Bank Council (1980-1991) Management (Zurich); Director
at Sal Oppenheim Jr. & Cie,
Zurich
NON-INTERESTED DIRECTORS:
------------------------
THOMAS E. BRATTER Since 1994** 3 Director, President and Founder, The John --
Director Dewey Academy (residential college
Age: 63 preparatory therapeutic high school)
ANTHONY J. COLAVITA 4 Since 2001** 33 President and Attorney at Law in the law firm --
Director of Anthony J. Colavita, P.C.
Age: 67
JAMES P. CONN 4 Since 1994* 11 Former Managing Director and Chief Investment Director of LaQuinta Corp.
Director Officer of Financial Security Assurance (hotels) and First Republic Bank
Age: 64 Holdings Ltd. (1992-1998)
FRANK J. FAHRENKOPF JR. Since 1999*** 3 President and Chief Executive Officer of the --
Director American Gaming Association since June
Age: 63 1995; Partner of Hogan & Hartson (law
firm); Chairman of International Trade
Practice Group; Co-Chairman of the
Commission on Presidential Debates;
Former Chairman of the Republican
National Committee
ANTHONY R. PUSTORINO Since 1994* 17 Certified Public Accountant; Professor --
Director Emeritus, Pace University
Age: 77
WERNER J. ROEDER, MD Since 1999*** 26 Vice President/Medical Affairs of Lawrence --
Director Hospital Center and practicing private physician
Age: 62
SALVATORE J. ZIZZA Since 1994*** 9 Chairman, Hallmark Electrical Supplies Corp.; Director of Hollis Eden
Director Former Executive Vice President of FMG Group Pharmaceuticals
Age: 57 (OTC), a healthcare provider; Former
President and Chief Executive Officer of the
Lehigh Group Inc., an interior construction
company, through 1997
24
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
ADDITIONAL FUND INFORMATION (UNAUDITED) (CONTINUED)
TERM OF NUMBER OF
OFFICE AND FUNDS IN FUND
NAME, POSITION(S) LENGTH OF COMPLEX
ADDRESS 1 TIME OVERSEEN BY PRINCIPAL OCCUPATION(S) OTHER DIRECTORSHIPS
AND AGE SERVED 2 DIRECTOR DURING PAST FIVE YEARS HELD BY DIRECTOR
---------------- -------- ------------ ---------------------- ----------------
------
OFFICERS:
-------
BRUCE N. ALPERT Since 1994 -- Executive Vice President and Chief Operating --
Vice President and Officer of Gabelli Funds, LLC since 1988 and
Treasurer an officer of all mutual funds advised by
Age: 51 Gabelli Funds, LLC and its affiliates
Director and President of the Gabelli
Advisors, Inc.
PETER W. LATARTARA Since 1998 -- Vice President of the Trust since 1998. --
Vice President Vice President of Gabelli & Company, Inc.
Age: 35 since 1996.
STEVEN D. LAROSA Since 2002 -- Assistant Vice President of Gabelli Funds,LLC --
Assistant Vice President since 2000. Prior to 2000, student at Boston College.
Age: 24
JAMES E. MCKEE Since 1995 -- Vice President, General Counsel and Secretary --
Secretary of Gabelli Asset Management Inc. since 1999
Age: 39 and GAMCO Investors, Inc. since 1993; Secretary
of all mutual funds advised by Gabelli Advisers,
Inc. and Gabelli Funds, LLC.
-------------------------
1 Address:One Corporate Center, Rye, NY 10580, unless otherwise noted.
2 The Trust's Board of Directors is divided into three classes, each class
having a term of three years. Each year the term of office of one class
expires and the successor or successors elected to such class serve for a
three year term. The three year term for each class expires as follows:
* - Term expires at the Trust's 2003 Annual Meeting of Shareholders and
until their successors are duly elected and qualified.
** - Term expires at the Trust's 2004 Annual Meeting of Shareholders and
until their successors are duly elected and qualified.
*** - Term expires at the Trust's 2005 Annual Meeting of Shareholders and
until their successors are duly elected and qualified.
3 "Interested person" of the Trust as defined in the Investment Company Act
of 1940. Messrs. Gabelli and Pohl are each considered an "interested
person" because of their affiliation with Gabelli Funds, LLC which acts as
the Trust's investment adviser.
4 Represents holders of the Trust's 7.92% Cumulative Preferred Stock.
25
--------------------------------------------------------------------------------
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
AND YOUR PERSONAL PRIVACY
WHO ARE WE?
The Gabelli Global Multimedia Trust Inc. (the "Trust") is a closed-end
investment company registered with the Securities and Exchange Commission
under the Investment Company Act of 1940. We are managed by Gabelli Funds
LLC, which is affiliated with Gabelli Asset Management Inc. Gabelli Asset
Management 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
GABELLI CUSTOMER?
When you purchase shares of the Trust on the New York Stock Exchange, you
have the option of registering directly with our transfer agent in order,
for example, to participate in our dividend reinvestment plan.
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. This would include
information about the shares that you buy or sell, it may also include
information about whether you sell or exercise rights that we have
issued from time to time. 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.
--------------------------------------------------------------------------------
26
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
INCOME TAX INFORMATION (UNAUDITED)
DECEMBER 31, 2002
CASH DIVIDENDS AND DISTRIBUTIONS
TOTAL AMOUNT ORDINARY LONG-TERM
PAYABLE RECORD PAID INVESTMENT CAPITAL
DATE DATE PER SHARE INCOME GAINS
-------- -------- ------- ----------- --------
PREFERRED SHARES
03/26/02 03/19/02 $0.4950 -- $0.4950
06/26/02 06/19/02 0.4950 -- 0.4950
09/26/02 09/19/02 0.4950 -- 0.4950
12/26/02 12/18/02 0.4950 -- 0.4950
------- ------ -------
$1.9800 -- $1.9800
A Form 1099-DIV has been mailed to all shareholders of record for the
distributions mentioned above, setting forth specific amounts to be included in
the 2002 tax returns. 93.40% of the long-term capital gains paid to preferred
shareholders by the Multimedia Trust in 2002 was classified as "Qualified 5-Year
Gains" and reported in box 2c of Form 1099-DIV. Capital gain distributions are
reported in box 2a of Form 1099-DIV.
NON-TAXABLE RETURN OF CAPITAL
The amount received as a non-taxable (return of capital) distribution should
be applied to reduce the tax cost of shares. There was no return of capital in
2002.
CORPORATE DIVIDENDS RECEIVED DEDUCTION AND U.S. GOVERNMENT SECURITIES INCOME
The Multimedia Trust did not pay an ordinary income dividend in 2002 to the
Common or Preferred stockholders.
HISTORICAL DISTRIBUTION SUMMARY - COMMON STOCK
SHORT- LONG-
TERM TERM NON-TAXABLE ADJUSTMENT
INVESTMENT CAPITAL CAPITAL RETURN OF TOTAL TO
INCOME GAINS(B) GAINS CAPITAL DISTRIBUTIONS COST BASIS
-------- ------- ------- ------- ------ --------
2002 ................. -- -- -- -- -- --
2001 ................. $0.0058 $0.0106 $0.0436 -- 0.0600 --
2000(a) .............. 0.1630 0.2088 1.2032 -- 1.5750 --
1999 ................. -- 1.2834 2.3366 -- 3.6200 --
1998 ................. -- 0.1995 0.6005 -- 0.8000 --
1997 ................. 0.0058 0.2682 0.5760 -- 0.8500 --
1996 ................. 0.0103 0.0790 0.2857 -- 0.3750 --
1995(c) .............. 0.0788 0.1529 0.0183 -- 0.2500 --
1994 ................. 0.0305 0.0010 0.0014 $0.0171 0.0500 $0.0171(d)
HISTORICAL DISTRIBUTION SUMMARY - PREFERRED STOCK
SHORT- LONG-
TERM TERM NON-TAXABLE ADJUSTMENT
INVESTMENT CAPITAL CAPITAL RETURN OF TOTAL TO
INCOME GAINS(B) GAINS CAPITAL DISTRIBUTIONS COST BASIS
-------- ------- ------- ------- ------ --------
2002 ................. -- -- $1.9800 -- $1.9800 --
2001 ................. -- -- 1.9800 -- 1.9800 --
2000 ................. $0.2150 $0.2390 1.5260 -- 1.9800 --
1999 ................. -- 0.7020 1.2780 -- 1.9800 --
1998 ................. -- 0.4936 1.4864 -- 1.9800 --
1997 ................. 0.0077 0.3523 0.7565 -- 1.1165 --
--------------------------
(a) On June 19, 2000, the Company also distributed Rights equivalent to $1.46
per share based upon full subscription of all issued shares.
(b) Taxable as ordinary income.
(c) On August 11, 1995, the Company also distributed Rights equivalent to $0.46
per share based upon full subscription of all issued shares.
(d) Decrease in cost basis.
27
AUTOMATIC DIVIDEND REINVESTMENT
AND VOLUNTARY CASH PURCHASE PLAN
ENROLLMENT IN THE PLAN
It is the policy of The Gabelli Global Multimedia Trust Inc. ("Multimedia
Trust") to automatically reinvest dividends. As a "registered" shareholder you
automatically become a participant in the Multimedia Trust's Automatic Dividend
Reinvestment Plan (the "Plan"). The Plan authorizes the Multimedia Trust to
issue shares to participants upon an income dividend or a capital gains
distribution regardless of whether the shares are trading at a discount or a
premium to net asset value. All distributions to shareholders whose shares are
registered in their own names will be automatically reinvested pursuant to the
Plan in additional shares of the Multimedia Trust. Plan participants may send
their stock certificates to EquiServe Trust Company ("EquiServe") to be held in
their dividend reinvestment account. Registered shareholders wishing to receive
their distribution in cash must submit this request in writing to:
The Gabelli Global Multimedia Trust Inc.
c/o EquiServe
P.O. Box 43011
Providence, RI 02940-3011
Shareholders requesting this cash election must include the shareholder's
name and address as they appear on the share certificate. Shareholders with
additional questions regarding the Plan may contact EquiServe at 1 (800)
336-6983.
SHAREHOLDERS WISHING TO LIQUIDATE REINVESTED SHARES held at EquiServe must do
so in writing or by telephone. Please submit your request to the above mentioned
address or telephone number. Include in your request your name, address and
account number. The cost to liquidate shares is $2.50 per transaction as well as
the brokerage commission incurred. Brokerage charges are expected to be less
than the usual brokerage charge for such transactions.
If your shares are held in the name of a broker, bank or nominee, you should
contact such institution. If such institution is not participating in the Plan,
your account will be credited with a cash dividend. In order to participate in
the Plan through such institution, it may be necessary for you to have your
shares taken out of "street name" and re-registered in your own name. Once
registered in your own name your dividends will be automatically reinvested.
Certain brokers participate in the Plan. Shareholders holding shares in "street
name" at such participating institutions will have dividends automatically
reinvested. Shareholders wishing a cash dividend at such institution must
contact their broker to make this change.
The number of shares of Common Stock distributed to participants in the Plan
in lieu of cash dividends is determined in the following manner. Under the Plan,
whenever the market price of the Multimedia Trust's Common Stock is equal to or
exceeds net asset value at the time shares are valued for purposes of
determining the number of shares equivalent to the cash dividends or capital
gains distribution, participants are issued shares of Common Stock valued at the
greater of (i) the net asset value as most recently determined or (ii) 95% of
the then current market price of the Multimedia Trust's Common Stock. The
valuation date is the dividend or distribution payment date or, if that date is
not a NYSE trading day, the next trading day. If the net asset value of the
Common Stock at the time of valuation exceeds the market price of the Common
Stock, participants will receive shares from the Multimedia Trust valued at
market price. If the Multimedia Trust should declare a dividend or capital gains
distribution payable only in cash, EquiServe will buy Common Stock in the open
market, or on the NYSE or elsewhere, for the participants' accounts, except that
EquiServe will endeavor to terminate purchases in the open market and cause the
Multimedia Trust to issue shares at net asset value if, following the
commencement of such purchases, the market value of the Common Stock exceeds the
then current net asset value.
The automatic reinvestment of dividends and capital gains distributions will
not relieve participants of any income tax which may be payable on such
distributions. A participant in the Plan will be treated for Federal income tax
purposes as having received, on a dividend payment date, a dividend or
distribution in an amount equal to the cash the participant could have received
instead of shares.
The Multimedia Trust reserves the right to amend or terminate the Plan as
applied to any voluntary cash payments made and any dividend or distribution
paid subsequent to written notice of the change sent to the members of the Plan
at least 90 days before the record date for such dividend or distribution. The
Plan also may be amended or terminated by EquiServe on at least 90 days' written
notice to participants in the Plan.
VOLUNTARY CASH PURCHASE PLAN
The Voluntary Cash Purchase Plan is yet another vehicle for our shareholders
to increase their investment in the Multimedia Trust. In order to participate in
the Voluntary Cash Purchase Plan, shareholders must have their shares registered
in their own name and participate in the Dividend Reinvestment Plan.
Participants in the Voluntary Cash Purchase Plan have the option of making
additional cash payments to EquiServe for investments in the Multimedia Trust's
shares at the then current market price. Shareholders may send an amount from
$250 to $10,000. EquiServe will use these funds to purchase shares in the open
market on or about the 1st and 15th of each month. EquiServe will charge each
shareholder who participates $0.75, plus a pro rata share of the brokerage
commissions. Brokerage charges for such purchases are expected to be less than
the usual brokerage charge for such transactions. It is suggested that any
voluntary cash payments be sent to EquiServe, P.O. Box 43011, Providence, RI
02940-3011 such that EquiServe receives such payments approximately 10 days
before the investment date. Funds not received at least five days before the
investment date shall be held for investment until the next purchase date. A
payment may be withdrawn without charge if notice is received by EquiServe at
least 48 hours before such payment is to be invested.
For more information regarding the Dividend Reinvestment Plan and Voluntary
Cash Purchase Plan, brochures are available by calling (914) 921-5070 or by
writing directly to the Multimedia Trust.
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The Annual Meeting of the Multimedia Trust's stockholders will be
held at 10:00 A.M. on Monday, May 12, 2003, at The Bruce Museum,
One Museum Drive in Greenwich, Connecticut.
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28
DIRECTORS AND OFFICERS
THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
ONE CORPORATE CENTER, RYE, NY 10580-1422
DIRECTORS
Mario J. Gabelli, CFA
CHAIRMAN AND CHIEF INVESTMENT OFFICER,
GABELLI ASSET MANAGEMENT INC.
Dr. Thomas E. Bratter
PRESIDENT, JOHN DEWEY ACADEMY
Anthony J. Colavita
ATTORNEY-AT-LAW,
ANTHONY J. COLAVITA, P.C.
James P. Conn
FORMER MANAGING DIRECTOR AND CHIEF INVESTMENT OFFICER,
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
Frank J. Fahrenkopf, Jr.
PRESIDENT AND CHIEF EXECUTIVE OFFICER,
AMERICAN GAMING ASSOCIATION
Karl Otto Pohl
FORMER PRESIDENT, DEUTSCHE BUNDESBANK
Anthony R. Pustorino
CERTIFIED PUBLIC ACCOUNTANT
PROFESSOR EMERITUS, PACE UNIVERSITY
Werner J. Roeder, MD
VICE PRESIDENT/MEDICAL AFFAIRS
LAWRENCE HOSPITAL CENTER
Salvatore J. Zizza
CHAIRMAN, HALLMARK ELECTRICAL SUPPLIES CORP.
OFFICERS
Mario J. Gabelli, CFA
PRESIDENT & CHIEF INVESTMENT OFFICER
Bruce N. Alpert
VICE PRESIDENT & TREASURER
Peter W. Latartara
VICE PRESIDENT
Steven D. LaRosa
ASSISTANT VICE PRESIDENT
James E. McKee
SECRETARY
INVESTMENT ADVISOR
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
CUSTODIAN, TRANSFER AGENT AND REGISTRAR
EquiServe TrustCompany
COUNSEL
Willkie Farr & Gallagher
STOCK EXCHANGE LISTING
COMMON 7.92% PREFERRED
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NYSE-Symbol: GGT GGT Pr
Shares Outstanding: 14,284,953 926,025
The Net Asset Value appears in the Publicly Traded Funds column, under the
heading "Specialized Equity Funds," in Sunday's The New York Times and in
Monday's The Wall Street Journal. It is also listed in Barron's Mutual
Funds/Closed End Funds section under the heading "Specialized Equity Funds".
The Net Asset Value may be obtained each day by calling (914) 921-5071.
------------------------------------------------
For general information about the Gabelli Funds,
call 800-GABELLI (800-422-3554), fax us at
914-921-5118, visit Gabelli Funds' Internet
homepage at: WWW.GABELLI.COM
or e-mail us at: closedend@gabelli.com
------------------------------------------------
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Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that the Multimedia Trust may from time to
time purchase shares of its common stock in the open market when the
Multimedia Trust shares are trading at a discount of 10% or more from the net
asset value of the shares. The Multimedia Trust may also, from time to time,
purchase shares of its Cumulative Preferred Stock in the open market when the
shares are trading at a discount to the Liquidation Value of $25.00.
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THE GABELLI GLOBAL MULTIMEDIA TRUST INC.
ONE CORPORATE CENTER, RYE, NY 10580-1422
PHONE: 800-GABELLI (800-422-3554)
FAX: 914-921-5118 INTERNET: WWW.GABELLI.COM
E-MAIL: CLOSEDEND@GABELLI.COM
GBFMT-AR-12/02