The GAMCO Global Telecommunications Fund - Gabelli

Global Allocation
The accompanying chart presents the
Fund’s holdings by geographic region as of
March 31, 2012. The geographic allocation will
change based on current global market
conditions. Countries and/or regions represented
in the chart and below may or may not be
included in the Fund’s future portfolio.
HOLDINGS BY GEOGRAPHIC REGION
North America 44.7%
Europe 29.7%
Asia/Pacific 10.1%
Latin America 9.8%
Japan 4.1%
Africa/Middle East 1.6%
Industry Allocation
The accompanying chart depicts the Fund’s
holdings by industry sector as of March 31, 2012.
Industry sectors represented in the chart and
below may or may not be included in the Fund’s
future portfolio.
Performance Discussion
Diversified
Telecommunications 48.2%
The GAMCO Global Telecommunications Fund gained 6.7% in the first quarter, more than a 470 basis
point outperformance of the MSCI AC World Telecommunication Services Index, which was up by 1.8% in the
period. The solid start to 2012 for the Global Telecommunications Fund maintains the strong sequential
outperformance trend set in the fourth quarter of 2011, and provides an encouraging foundation for the year.
Once again, the pattern of the telecommunications sector underperforming broader equity markets was
evident in the first quarter. The difference this time was in the degree of underperformance: While global
markets experienced their strongest rally in nearly four years with the MSCI World Index ahead by 12.0%, the
telecoms group barely participated in the rally driven heavily by financial services and technology. Indeed, in
Euro terms, the European Telecom Index declined by 2.8% in the first quarter (unchanged in USD terms),
against the 8.0% gain for the broader European index. But as in the fourth quarter, it was again the case that
the telecom sector underperformed across all geographies, with the most substantial relative
underperformance having been recorded in Japan.
The very weak performance of the European telecom group in the first quarter should perhaps not come
as a surprise. The year-end 2011 reporting season was accompanied by dividend cuts and profit warnings from
some of the largest operators. Current returns, which had reached historically high levels relative to
government bonds at the end of 2011, were no longer acting to underpin sector valuations. Both mobile and
fixed line revenue growth deteriorated sequentially in the first quarter, resulting in year-on-year declines of 4.7%
and 4.4%, respectively. The continued pressure on top line results is owing to the combination of weak macro
conditions (particularly in southern Europe), intense regulator pressures and price competition. We would note
that even absent the regulatory impacts in the first quarter, European mobile revenue would have still seen a
1.6% decline as modest usage gains were negated by price declines, and data revenue growth was insufficient
to offset the decline in traditional revenues. Regulatory intervention, unfortunately, shows no signs of abating.
The EU continues to press for cuts in mobile termination rates and international roaming rates and has been
successful in pressing national regulators to fall in line. At the same time, the Commission is exerting pressure
on incumbent operators to rapidly deploy fiber optic networks that will support ultra-high broadband connectivity
for businesses and consumers.
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HOLDINGS BY INDUSTRY SECTOR
Wireless
Telecommunications 30.4%
Other 21.4%