Gabelli Convertible and Income Securities Fund

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number            811-05715                             

The Gabelli Convertible and Income Securities Fund Inc.

 

(Exact name of registrant as specified in charter)

One Corporate Center

Rye, New York 10580-1422

 

(Address of principal executive offices) (Zip code)

Bruce N. Alpert

Gabelli Funds, LLC

One Corporate Center

Rye, New York 10580-1422

 

(Name and address of agent for service)

Registrant’s telephone number, including area code: 1-800-422-3554 

Date of fiscal year end: December 31 

Date of reporting period: March 31, 2016 

Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (§§ 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to the Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.


Item 1. Schedule of Investments.

The Schedule(s) of Investments is attached herewith.


The Gabelli Convertible and Income

Securities Fund Inc.

First Quarter Report — March 31, 2016

 

LOGO

To Our Shareholders,

For the quarter ended March 31, 2016, the net asset value (“NAV”) total return of The Gabelli Convertible and Income Securities Fund Inc. was (1.9)%, compared with a total return of 3.5% for the Barclays Government/Credit Bond Index. The total return for the Fund’s publicly traded shares was (1.2)%. The Fund’s NAV per share was $5.08, while the price of the publicly traded shares closed at $4.60 on the New York Stock Exchange (“NYSE”). See below for additional performance information.

Enclosed is the schedule of investments as of March 31, 2016.

Comparative Results

Average Annual Returns through March 31, 2016 (a) (Unaudited)   Since
     Quarter   1 Year   5 Year   10 Year   15 Year   Inception
(07/03/89)

Gabelli Convertible and Income Securities Fund

                        

  NAV Total Return (b)

       (1.85 )%       (8.51 )%       4.54 %       4.19 %       4.44 %       6.36 %

  Investment Total Return (c)

       (1.21 )       (18.20 )       1.49         1.94         3.51         4.93 (d)

Standard & Poor’s (“S&P”) 500 Index

       1.35         1.78         11.58         7.01         5.99         9.57 (e)

Barclays Government/Credit Bond Index

       3.45         1.83         4.02         4.90         4.99         N/A (f)

Lipper Convertible Securities Fund Average

       (2.00 )       (8.30 )       4.25         5.25         5.64         7.84 (e)
  (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. Current performance may be lower or higher than the performance data presented. Visit www.gabelli.com for performance information as of the most recent month end. Performance returns for periods of less than one year are not annualized. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. The S&P 500 Index is an unmanaged indicator of stock market performance. The Barclays Government/Credit Bond Index is a market value weighted index that tracks the performance of fixed rate, publicly placed, dollar denominated obligations. The Lipper Convertible Securities Fund Average reflects the average performance of open-end funds classified in this particular category. Dividends and interest income are considered reinvested. You cannot invest directly in an index.

 

 

  (b)

Total returns and average annual returns reflect changes in the NAV per share, reinvestment of distributions at NAV on the ex-dividend date, and adjustments for rights offerings and are net of expenses. Since inception return is based on an initial NAV of $10.00.

 
  (c)

Total returns and average annual returns reflect changes in closing market values on the NYSE, reinvestment of distributions, and adjustments for rights offerings. Since inception return is based on an initial offering price of $11.25 on March 31, 1995.

 
  (d)

The Fund converted to closed-end status on March 31, 1995 and had no operating history on the NYSE prior to that date.

 
  (e)

From June 30, 1989, the date closest to the Fund’s inception for which data is available.

 
  (f)

The Barclays Government/Credit Bond Index inception date is January 29, 1999.

 


The Gabelli Convertible and Income Securities Fund Inc.

Schedule of Investments — March 31, 2016 (Unaudited)

 

 

Principal
Amount
        

Market

Value

 
 

CONVERTIBLE CORPORATE BONDS — 33.9%

  

 

Aerospace — 0.2%

  

  $    100,000     

Aerojet Rocketdyne Holdings Inc., Sub. Deb.,

  
 

4.063%, 12/31/39

   $ 182,000   
    

 

 

 
 

Automotive — 1.5%

  

 

Navistar International Corp., Sub. Deb.,

  
    1,250,000     

4.500%, 10/15/18

     751,563   
  1,250,000     

4.750%, 04/15/19

     750,000   
    

 

 

 
       1,501,563   
    

 

 

 
 

Building and Construction — 1.5%

  

  200,000     

Ascent Capital Group Inc.,

  
 

4.000%, 07/15/20

     126,375   
  1,200,000     

Layne Christensen Co.,

  
 

4.250%, 11/15/18

     875,250   
  200,000     

Lennar Corp.,

  
 

2.750%, 12/15/20(a)

     435,625   
    

 

 

 
       1,437,250   
    

 

 

 
 

Communications Equipment — 1.6%

  

  1,500,000     

InterDigital, Inc.,

  
 

1.500%, 03/01/20

     1,544,063   
    

 

 

 
 

Computer Software and Services — 8.5%

  

  1,000,000     

Blucora Inc.,

  
 

4.250%, 04/01/19

     760,000   
  1,500,000     

CSG Systems International Inc.,

  
 

4.250%, 03/15/36(a)

     1,606,875   
  1,110,000     

EnerNOC Inc.,

  
 

2.250%, 08/15/19

     788,794   
  1,000,000     

MercadoLibre Inc.,

  
 

2.250%, 07/01/19

     1,128,125   
  1,000,000     

Nuance Communications Inc.,

  
 

1.500%, 11/01/35

     1,035,000   
  1,000,000     

Proofpoint Inc.,

  
 

0.750%, 06/15/20(a)

     968,750   
  1,000,000     

Synchronoss Technologies Inc.,

  
 

0.750%, 08/15/19

     968,750   
  1,250,000     

Verint Systems Inc.,

  
 

1.500%, 06/01/21

     1,107,031   
    

 

 

 
       8,363,325   
    

 

 

 
 

Consumer Products — 1.9%

  

  1,500,000     

Jarden Corp.,

  
 

1.125%, 03/15/34

     1,905,000   
    

 

 

 
 

Consumer Services — 2.8%

  

  1,000,000     

Carriage Services Inc.,

  
 

2.750%, 03/15/21

     1,100,625   
  1,500,000     

Extra Space Storage LP,

  
 

3.125%, 10/01/35(a)

     1,716,563   
    

 

 

 
           2,817,188   
    

 

 

 
Principal
Amount
        

Market

Value

 
 

Diversified Industrial — 2.4%

  

  $  2,000,000     

Griffon Corp., Sub. Deb.,

  
 

4.000%, 01/15/17(a)

   $ 2,307,500   
  100,000     

Trinity Industries Inc., Sub. Deb.,

  
 

3.875%, 06/01/36

     106,625   
    

 

 

 
       2,414,125   
    

 

 

 
 

Electronics — 1.3%

  

  800,000     

Intel Corp., Sub. Deb.,

  
 

3.250%, 08/01/39

     1,274,004   
    

 

 

 
 

Energy and Utilities — 1.5%

  

  1,500,000     

SunPower Corp.,

  
 

4.000%, 01/15/23(a)

     1,528,125   
    

 

 

 
 

Entertainment — 0.0%

  

  100,000     

THQ Inc.,

  
 

5.000%, 08/15/16†

     13,875   
    

 

 

 
 

Health Care — 4.1%

  

  500,000     

Horizon Pharma Investment Ltd.,

  
 

2.500%, 03/15/22

     428,437   
  1,000,000     

Molina Healthcare Inc.,

  
 

1.625%, 08/15/44

     1,260,000   
  750,000     

NuVasive Inc.,

  
 

2.250%, 03/15/21(a)

     806,250   
  750,000     

Teligent Inc.,

  
 

3.750%, 12/15/19

     601,875   
  1,000,000     

Vitamin Shoppe Inc.,

  
 

2.250%, 12/01/20(a)

     986,250   
    

 

 

 
       4,082,812   
    

 

 

 
 

Metals and Mining — 1.1%

  

  1,000,000     

RTI International Metals Inc.,

  
 

1.625%, 10/15/19

     1,051,250   
    

 

 

 
 

Semiconductors — 4.3%

  

  2,000,000     

Micron Technology Inc.,

  
 

3.000%, 11/15/43

     1,372,500   
  1,500,000     

NXP Semiconductors NV,

  
 

1.000%, 12/01/19

     1,666,875   
  750,000     

SanDisk Corp.,

  
 

1.500%, 08/15/17

     1,186,406   
    

 

 

 
       4,225,781   
    

 

 

 
 

Wireless Communications — 1.2%

  

  1,250,000     

CalAmp Corp.,

  
 

1.625%, 05/15/20(a)

     1,194,531   
    

 

 

 
 

TOTAL CONVERTIBLE CORPORATE BONDS

         33,534,892   
    

 

 

 
 

 

See accompanying notes to schedule of investments.

 

2


The Gabelli Convertible and Income Securities Fund Inc.

Schedule of Investments (Continued) — March 31, 2016 (Unaudited)

 

 

Shares          

Market

Value

 
  

CONVERTIBLE PREFERRED STOCKS — 19.6%

  

  

Consumer Services — 1.5%

  

        16,000      

Stericycle Inc., 5.250%

   $ 1,487,200   
     

 

 

 
  

Diversified Industrial — 0.0%

  

  1,100      

Sevcon Inc., 4.000%, Ser. A

     33,165   
     

 

 

 
  

Energy and Utilities — 3.0%

  

  6,000      

AES Trust III, 6.750%

     303,060   
  300      

El Paso Energy Capital Trust I, 4.750%

     12,837   
  20,668      

Hess Corp., 8.000%

     1,393,436   
  20,000      

NextEra Energy Inc., 6.371%

     1,221,000   
     

 

 

 
            2,930,333   
     

 

 

 
  

Food and Beverage — 2.6%

  

  7,000      

Post Holdings Inc., 3.750%

     1,065,820   
  20,000      

Tyson Foods Inc., 4.750%

     1,489,600   
     

 

 

 
        2,555,420   
     

 

 

 
  

Health Care — 5.1%

  

  2,000      

Allergan plc, 5.500%, Ser. A

     1,838,280   
  30,000      

Anthem Inc., 5.250%

     1,400,700   
  100      

Kindred Healthcare Inc., 7.500%

     64,850   
  2,000      

Teva Pharmaceutical Industries Ltd., 7.000%

     1,767,880   
     

 

 

 
        5,071,710   
     

 

 

 
  

Real Estate Investment Trusts — 3.9%

  

  15,000      

American Tower Corp., 5.500%

     1,547,250   
  10,000      

Crown Castle International Corp., 4.500%, Ser. A

     1,072,000   
  20,000      

Welltower Inc., 6.500%, Ser. I

     1,242,000   
     

 

 

 
        3,861,250   
     

 

 

 
  

Telecommunication Services — 1.3%

  

  20,000      

T-Mobile US Inc., 5.500%

     1,324,000   
     

 

 

 
  

Telecommunications — 2.2%

  

  12,000      

Cincinnati Bell Inc., 6.750%, Ser. B

     582,000   
  15,000      

Frontier Communications Corp., 11.125%, Ser. A

     1,566,000   
  100      

Iridium Communications Inc., 7.000%

     9,825   
     

 

 

 
        2,157,825   
     

 

 

 
  

TOTAL CONVERTIBLE PREFERRED STOCKS

     19,420,903   
     

 

 

 
Shares          

Market

Value

 
  

COMMON STOCKS — 38.2%

  

  

Aerospace — 2.9%

  

  295,000      

Rolls-Royce Holdings plc

   $     2,889,581   
     

 

 

 
  

Automotive: Parts and Accessories — 0.8%

  

  8,000      

Genuine Parts Co.

     794,880   
     

 

 

 
  

Computer Hardware — 0.8%

  

  5,000      

International Business Machines Corp.

     757,250   
     

 

 

 
  

Consumer Products — 1.2%

  

  35,000      

Swedish Match AB

     1,188,187   
     

 

 

 
  

Diversified Industrial — 1.3%

  

  40,000      

General Electric Co.

     1,271,600   
     

 

 

 
  

Energy and Utilities — 4.4%

  

  1,600      

Chevron Corp.

     152,640   
  28,000      

Cleco Corp.

     1,545,880   
  11,000      

Exxon Mobil Corp.

     919,490   
  8,000      

Great Plains Energy Inc.

     258,000   
  13,000      

Royal Dutch Shell plc, Cl. A, ADR

     629,850   
  28,000      

Severn Trent plc

     873,869   
     

 

 

 
        4,379,729   
     

 

 

 
  

Equipment and Supplies — 0.5%

  

  3,000      

Graco Inc.

     251,880   
  9,500      

Mueller Industries Inc.

     279,490   
     

 

 

 
        531,370   
     

 

 

 
  

Financial Services — 10.8%

  

  20,000      

American Express Co.

     1,228,000   
  11,000      

American International Group Inc.

     594,550   
  10,000      

Citigroup Inc.

     417,500   
  5,000      

GAM Holding AG

     72,279   
  8,000      

JPMorgan Chase & Co.

     473,760   
  9,000      

Julius Baer Group Ltd.

     386,563   
  16,000      

Kinnevik Investment AB, Cl. A

     472,614   
  27,000      

Morgan Stanley

     675,270   
  2,000      

Royal Bank of Canada

     115,120   
  13,000      

State Street Corp.

     760,760   
  30,000      

The Bank of New York Mellon Corp.

     1,104,900   
  20,000      

The PNC Financial Services Group Inc.

     1,691,400   
  48,000      

Wells Fargo & Co.(b)

     2,321,280   
  248,000      

Wright Investors’ Service Holdings Inc.†

     332,320   
     

 

 

 
        10,646,316   
     

 

 

 
  

Food and Beverage — 1.8%

  

  501,300      

Parmalat SpA

     1,387,287   
  2,020      

Pernod Ricard SA

     225,259   
  2,500      

Remy Cointreau SA

     189,802   
     

 

 

 
        1,802,348   
     

 

 

 
  

Health Care — 6.0%

  

  12,000      

Eli Lilly & Co.

     864,120   
    1,080,296      

Elite Pharmaceuticals Inc.†

     334,892   
 

 

See accompanying notes to schedule of investments.

 

3


The Gabelli Convertible and Income Securities Fund Inc.

Schedule of Investments (Continued) — March 31, 2016 (Unaudited)

 

 

Shares          

Market

Value

 
  

COMMON STOCKS (Continued)

  

  

Health Care (Continued)

  

  16,000      

Johnson & Johnson

   $ 1,731,200   
  8,000      

Merck & Co. Inc.

     423,280   
  38,000      

Pfizer Inc.

     1,126,320   
  48,000      

Roche Holding AG, ADR

     1,470,000   
     

 

 

 
        5,949,812   
     

 

 

 
  

Hotels and Gaming — 0.9%

  

  17,000      

Ryman Hospitality Properties Inc.

     875,160   
     

 

 

 
  

Retail — 3.0%

  

  1,363      

Costco Wholesale Corp.

     214,709   
  23,000      

CVS Health Corp.

     2,385,790   
  33,000      

Hertz Global Holdings Inc.†

     347,490   
     

 

 

 
        2,947,989   
     

 

 

 
  

Specialty Chemicals — 1.2%

  

  6,000      

Airgas Inc.

     849,840   
  3,500      

International Flavors & Fragrances Inc.

     398,195   
     

 

 

 
        1,248,035   
     

 

 

 
  

Telecommunications — 1.9%

  

  1,600      

Swisscom AG

     869,430   
  18,000      

Verizon Communications Inc.

     973,440   
     

 

 

 
        1,842,870   
     

 

 

 
  

Transportation — 0.4%

  

  8,000      

GATX Corp.

     380,000   
     

 

 

 
  

Wireless Communications — 0.3%

  

  100,000      

Cable & Wireless Communications plc

     110,663   
  5,000      

Turkcell Iletisim Hizmetleri A/S, ADR

     52,550   
  2,500      

United States Cellular Corp.†

     114,225   
     

 

 

 
        277,438   
     

 

 

 
  

TOTAL COMMON STOCKS

       37,782,565   
     

 

 

 
  

RIGHTS — 0.0%

  

  

Retail — 0.0%

  

  40,000      

Safeway Casa Ley, CVR, expire 01/30/19†

     18,000   
        40,000      

Safeway PDC, CVR, expire 01/30/17†

     1,952   
     

 

 

 
        19,952   
     

 

 

 
  

TOTAL RIGHTS

     19,952   
     

 

 

 
Principal
Amount
         

Market

Value

 
  

CORPORATE BONDS — 0.3%

  

  

Automotive — 0.2%

  

  $    300,000      

Navistar International Corp., 8.250%, 11/01/21

   $ 220,500   
     

 

 

 
  

Energy and Utilities — 0.1%

  

  1,000,000      

Texas Competitive Electric Holdings Co. LLC,

  
  

Ser. B, 10.250%, 11/01/16†

     35,000   
     

 

 

 
  

TOTAL CORPORATE BONDS

     255,500   
     

 

 

 
  

U.S. GOVERNMENT OBLIGATIONS — 8.0%

  

  7,907,000      

U.S. Treasury Bills,

  
  

0.025% to 0.451%††,

  
  

04/07/16 to 09/22/16(c)

     7,899,114   
     

 

 

 
  

TOTAL INVESTMENTS — 100.0%

  
  

(Cost $91,499,341)

   $ 98,912,926   
     

 

 

 
  

Aggregate tax cost

   $   91,869,988   
     

 

 

 
  

Gross unrealized appreciation

   $ 12,076,482   
  

Gross unrealized depreciation

     (5,033,544
     

 

 

 
  

Net unrealized appreciation/depreciation

   $ 7,042,938   
     

 

 

 

 

(a)

Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2016, the market value of Rule 144A securities amounted to $11,550,469 or 11.68% of total investments.

(b)

Security, or a portion thereof, with a value of $2,321,280 pledged for collateral with the custodian.

(c)

At March 31, 2016, $200,000 of the principal amount was pledged as collateral for equity contract for difference swap agreements.

Non-income producing security.

††

Represents annualized yield at date of purchase.

ADR

American Depositary Receipt

CVR

Contingent Value Right

 

 

See accompanying notes to schedule of investments.

 

4


The Gabelli Convertible and Income Securities Fund Inc.

Notes to Schedule of Investments (Unaudited)

 

 

As an investment company, the Fund follows the investment company accounting and reporting guidance, which is part of U.S. generally accepted accounting principles (“GAAP”) that may require the use of management estimates and assumptions in the preparation of its schedule of investments. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Fund in the preparation of its schedule of investments.

Security Valuation. Portfolio securities listed or traded on a nationally recognized securities exchange or traded in the U.S. over-the-counter market for which market quotations are readily available are valued at the last quoted sale price or a market’s official closing price as of the close of business on the day the securities are being valued. If there were no sales that day, the security is valued at the average of the closing bid and asked prices or, if there were no asked prices quoted on that day, then the security is valued at the closing bid price on that day. If no bid or asked prices are quoted on such day, the security is valued at the most recently available price or, if the Board of Directors (the “Board”) so determines, by such other method as the Board shall determine in good faith to reflect its fair market value. Portfolio securities traded on more than one national securities exchange or market are valued according to the broadest and most representative market, as determined by Gabelli Funds, LLC (the “Adviser”).

Portfolio securities primarily traded on a foreign market are generally valued at the preceding closing values of such securities on the relevant market, but may be fair valued pursuant to procedures established by the Board if market conditions change significantly after the close of the foreign market, but prior to the close of business on the day the securities are being valued. Debt instruments with remaining maturities of sixty days or less that are not credit impaired are valued at amortized cost, unless the Board determines such amount does not reflect the securities’ fair value, in which case these securities will be fair valued as determined by the Board. Debt instruments having a maturity greater than sixty days for which market quotations are readily available are valued at the average of the latest bid and asked prices. If there were no asked prices quoted on such day, the security is valued using the closing bid price. U.S. government obligations with maturities greater than sixty days are normally valued using a model that incorporates market observable data such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued principally using dealer quotations. Futures contracts are valued at the closing settlement price of the exchange or board of trade on which the applicable contract is traded.

Securities and assets for which market quotations are not readily available are fair valued as determined by the Board. Fair valuation methodologies and procedures may include, but are not limited to: analysis and review of available financial and non-financial information about the company; comparisons with the valuation and changes in valuation of similar securities, including a comparison of foreign securities with the equivalent U.S. dollar value American Depositary Receipts securities at the close of the U.S. exchange; and evaluation of any other information that could be indicative of the value of the security.

The inputs and valuation techniques used to measure fair value of the Fund’s investments are summarized into three levels as described in the hierarchy below:

 

   

Level 1  —  quoted prices in active markets for identical securities;

 

   

Level 2  —  other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.); and

 

5


The Gabelli Convertible and Income Securities Fund Inc.

Notes to Schedule of Investments (Unaudited) (Continued)

 

 

   

Level 3 — significant unobservable inputs (including the Board’s determinations as to the fair value of investments).

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input both individually and in the aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of the Fund’s investments in securities and other financial instruments by inputs used to value the Fund’s investments as of March 31, 2016 is as follows:

 

     Valuation Inputs         
     Level 1
Quoted Prices
     Level 2 Other Significant
Observable Inputs
     Level 3 Significant
Unobservable Inputs
     Total Market Value
at 3/31/16
 

INVESTMENTS IN SECURITIES:

           

ASSETS (Market Value):

           

Convertible Corporate Bonds (a)

     —           $33,521,017                     $13,875                   $33,534,892       

 

 

Convertible Preferred Stocks:

           

Diversified Industrial

     —           33,165                     —                   33,165       

Food and Beverage

     $  1,489,600           1,065,820                     —                   2,555,420       

Health Care

     5,006,860           64,850                     —                   5,071,710       

Telecommunications

     2,148,000           9,825                     —                   2,157,825       

Other Industries (a)

     9,602,783           —                     —                   9,602,783       

 

 

Total Convertible Preferred Stocks

     18,247,243           1,173,660                     —                   19,420,903       

 

 

Common Stocks:

           

Other Industries (a)

     37,782,565           —                     —                   37,782,565       

 

 

Total Common Stocks

     37,782,565           —                     —                   37,782,565       

 

 

Rights (a)

     —           —                       19,952                   19,952       

Corporate Bonds (a)

     —           255,500                     —                   255,500       

U.S. Government Obligations

     —           7,899,114                     —                   7,899,114       

 

 

TOTAL INVESTMENTS IN SECURITIES – ASSETS

     $56,029,808           $42,849,291                     $33,827                   $98,912,926       

 

 

 

(a)    

Please refer to the Schedule of Investments (“SOI”) for the industry classifications of these portfolio holdings.

The Fund did not have material transfers among Level 1, Level 2, and Level 3 during the period ended March 31, 2016. The Fund’s policy is to recognize transfers among Levels as of the beginning of the reporting period.

Additional Information to Evaluate Qualitative Information.

General. The Fund uses recognized industry pricing services – approved by the Board and unaffiliated with the Adviser – to value most of its securities, and uses broker quotes provided by market makers of securities not valued by these and other recognized pricing sources. Several different pricing feeds are received to value domestic equity securities, international equity securities, preferred equity securities, and fixed income securities. The data within these feeds is ultimately sourced from major stock exchanges and trading systems where these securities trade. The prices supplied by external sources are checked by obtaining quotations or actual transaction prices from market participants. If a price obtained from the pricing source is deemed unreliable, prices will be sought from another pricing service or from a broker/dealer that trades that security or similar securities.

Fair Valuation. Fair valued securities may be common and preferred equities, warrants, options, rights, and fixed income obligations. Where appropriate, Level 3 securities are those for which market quotations are not available, such as securities not traded for several days, or for which current bids are not available, or which are restricted as to transfer. Among the factors to be considered to fair value a security are recent prices

 

6


The Gabelli Convertible and Income Securities Fund Inc.

Notes to Schedule of Investments (Unaudited) (Continued)

 

 

of comparable securities that are publicly traded, reliable prices of securities not publicly traded, the use of valuation models, current analyst reports, valuing the income or cash flow of the issuer, or cost if the preceding factors do not apply. A significant change in the unobservable inputs could result in a lower or higher value in Level 3 securities. The circumstances of Level 3 securities are frequently monitored to determine if fair valuation measures continue to apply.

The Adviser reports quarterly to the Board the results of the application of fair valuation policies and procedures. These may include back testing the prices realized in subsequent trades of these fair valued securities to fair values previously recognized.

Derivative Financial Instruments. The Fund may engage in various portfolio investment strategies by investing in a number of derivative financial instruments for the purposes of increasing the income of the Fund, hedging against changes in the value of its portfolio securities and in the value of securities it intends to purchase, or hedging against a specific transaction with respect to either the currency in which the transaction is denominated or another currency. Investing in certain derivative financial instruments, including participation in the options, futures, or swap markets, entails certain execution, liquidity, hedging, tax, and securities, interest, credit, or currency market risks. Losses may arise if the Adviser’s prediction of movements in the direction of the securities, foreign currency, and interest rate markets is inaccurate. Losses may also arise if the counterparty does not perform its duties under a contract, or that, in the event of default, the Fund may be delayed in or prevented from obtaining payments or other contractual remedies owed to it under derivative contracts. The creditworthiness of the counterparties is closely monitored in order to minimize these risks. Participation in derivative transactions involves investment risks, transaction costs, and potential losses to which the Fund would not be subject absent the use of these strategies. The consequences of these risks, transaction costs, and losses may have a negative impact on the Fund’s ability to pay distributions.

    Swap Agreements. The Fund may enter into equity contract for difference swap transactions for the purpose of increasing the income of the Fund. The use of swaps is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio security transactions. In an equity contract for difference swap, a set of future cash flows is exchanged between two counterparties. One of these cash flow streams will typically be based on a reference interest rate combined with the performance of a notional value of shares of a stock. The other will be based on the performance of the shares of a stock. Depending on the general state of short term interest rates and the returns on the Fund’s portfolio securities at the time an equity contract for difference swap transaction reaches its scheduled termination date, there is a risk that the Fund will not be able to obtain a replacement transaction or that the terms of the replacement will not be as favorable as on the expiring transaction.

Limitations on the Purchase and Sale of Futures Contracts, Certain Options, and Swaps. Subject to the guidelines of the Board, the Fund may engage in “commodity interest” transactions (generally, transactions in futures, certain options, certain currency transactions, and certain types of swaps) only for bona fide hedging or other permissible transactions in accordance with the rules and regulations of the Commodity Futures Trading Commission (“CFTC”). Pursuant to amendments by the CFTC to Rule 4.5 under the Commodity Exchange Act (“CEA”), the Adviser has filed a notice of exemption from registration as a “commodity pool operator” with respect to the Fund. The Fund and the Adviser are therefore not subject to registration or regulation as a commodity pool operator under the CEA. In addition, certain trading restrictions are now applicable to the Fund

 

7


The Gabelli Convertible and Income Securities Fund Inc.

Notes to Schedule of Investments (Unaudited) (Continued)

 

 

as of January 1, 2013. These trading restrictions permit the Fund to engage in commodity interest transactions that include (i) “bona fide hedging” transactions, as that term is defined and interpreted by the CFTC and its staff, without regard to the percentage of the Fund’s assets committed to margin and options premiums and (ii) non-bona fide hedging transactions, provided that the Fund does not enter into such non-bona fide hedging transactions if, immediately thereafter, either (a) the sum of the amount of initial margin deposits on the Fund’s existing futures positions or swaps positions and option or swaption premiums would exceed 5% of the market value of the Fund’s liquidating value, after taking into account unrealized profits and unrealized losses on any such transactions, or (b) the aggregate net notional value of the Fund’s commodity interest transactions would not exceed 100% of the market value of the Fund’s liquidating value, after taking into account unrealized profits and unrealized losses on any such transactions. Therefore, in order to claim the Rule 4.5 exemption, the Fund is limited in its ability to invest in commodity futures, options, and certain types of swaps (including securities futures, broad based stock index futures, and financial futures contracts). As a result, in the future, the Fund will be more limited in its ability to use these instruments than in the past, and these limitations may have a negative impact on the ability of the Adviser to manage the Fund, and on the Fund’s performance.

Securities Sold Short. The Fund may enter into short sale transactions. Short selling involves selling securities that may or may not be owned and, at times, borrowing the same securities for delivery to the purchaser, with an obligation to replace such borrowed securities at a later date. The proceeds received from short sales are recorded as liabilities and the Fund records an unrealized gain or loss to the extent of the difference between the proceeds received and the value of an open short position on the day of determination. The Fund records a realized gain or loss when the short position is closed out. By entering into a short sale, the Fund bears the market risk of an unfavorable change in the price of the security sold short. Dividends on short sales are recorded as an expense by the Fund on the ex-dividend date and interest expense is recorded on the accrual basis. The broker retains collateral for the value of the open positions, which is adjusted periodically as the value of the position fluctuates. At March 31, 2016, the Fund did not hold securities sold short.

Foreign Currency Translations. The books and records of the Fund are maintained in U.S. dollars. Foreign currencies, investments, and other assets and liabilities are translated into U.S. dollars at current exchange rates. Purchases and sales of investment securities, income, and expenses are translated at the exchange rate prevailing on the respective dates of such transactions. Unrealized gains and losses that result from changes in foreign exchange rates and/or changes in market prices of securities have been included in unrealized appreciation/depreciation on investments and foreign currency translations. Net realized foreign currency gains and losses resulting from changes in exchange rates include foreign currency gains and losses between trade date and settlement date on investment securities transactions, foreign currency transactions, and the difference between the amounts of interest and dividends recorded on the books of the Fund and the amounts actually received. The portion of foreign currency gains and losses related to fluctuation in exchange rates between the initial purchase trade date and subsequent sale trade date is included in realized gain/(loss) on investments.

Foreign Securities. The Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation of currencies, the inability to repatriate funds, less complete financial information about companies, and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than securities of comparable U.S. issuers.

 

8


The Gabelli Convertible and Income Securities Fund Inc.

Notes to Schedule of Investments (Unaudited) (Continued)

 

 

Foreign Taxes. The Fund may be subject to foreign taxes on income, gains on investments, or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.

Restricted Securities. The Fund may invest up to 15% of its net assets in securities for which the markets are restricted. Restricted securities include securities whose disposition is subject to substantial legal or contractual restrictions. The sale of restricted securities often requires more time and results in higher brokerage charges or dealer discounts and other selling expenses than does the sale of securities eligible for trading on national securities exchanges or in the over-the-counter markets. Restricted securities may sell at a price lower than similar securities that are not subject to restrictions on resale. Securities freely saleable among qualified institutional investors under special rules adopted by the SEC may be treated as liquid if they satisfy liquidity standards established by the Board. The continued liquidity of such securities is not as well assured as that of publicly traded securities, and accordingly the Board will monitor their liquidity. At March 31, 2016, the Fund did not hold restricted securities.

Tax Information. The Fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended.

 

9


THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.

One Corporate Center

Rye, NY 10580-1422

Portfolio Manager Biography

Mario J. Gabelli, CFA, is Chairman, Chief Executive Officer, and Chief Investment Officer - Value Portfolios of GAMCO Investors, Inc. that he founded in 1977, and Chief Investment Officer - Value Portfolios of Gabelli Funds, LLC and GAMCO Asset Management Inc. He is also Chief Executive Officer and Chairman of the Board of Directors of Associated Capital Group, Inc. Mr. Gabelli is a summa cum laude graduate of Fordham University and holds an MBA degree from Columbia Business School and Honorary Doctorates from Fordham University and Roger Williams University.

James Dinsmore, CFA, joined Gabelli Funds, LLC in 2015. He currently serves as a portfolio manager of Gabelli Funds, LLC and manages several funds within the Gabelli/GAMCO Funds Complex. Mr. Dinsmore received a B.A. in Economics from Cornell University and an M.B.A. from Rutgers University.

Thomas H. Dinsmore, CFA, joined Gabelli Funds, LLC in 2015. He currently serves as a portfolio manager of Gabelli Funds, LLC and manages several funds within the Gabelli/GAMCO Funds Complex. From 1996 to 2015, Mr. Dinsmore was Chairman and Chief Executive Officer (“CEO”) of Dinsmore Capital Management; CEO and Portfolio Manager of Bancroft Fund Ltd; and CEO, Portfolio Manager, and co-founder of Ellsworth Growth and Income Fund Ltd. He received a B.S. in Economics from the Wharton School of Business and an M.A. in Economics from Fairleigh Dickinson University.

Jane D. O’Keeffe joined Gabelli Funds, LLC in 2015. She currently serves as a portfolio manager of Gabelli Funds, LLC and manages several funds within the Gabelli/GAMCO Funds Complex. From 1996 to 2015, Ms. O’Keeffe was President and Director of Dinsmore Capital Management where she was also a Portfolio Manager of Bancroft Fund Ltd. and Ellsworth Growth and Income Fund Ltd. Prior to joining Dinsmore Capital Management, Ms. O’Keeffe held positions of increasing responsibilities at IDS Progressive Fund, Soros Fund Management Company, Simms Capital Management, and Fiduciary Trust International. She earned a B.A. from the University of New Hampshire and attended the Lubin Graduate School of Business at Pace University.

 

We have separated the portfolio manager’s commentary from the financial statements and investment portfolio due to corporate governance regulations stipulated by the Sarbanes-Oxley Act of 2002. We have done this to ensure that the content of the portfolio manager’s commentary is unrestricted. Both the commentary and the financial statements, including the portfolio of investments, will be available on our website at www.gabelli.com.

The Net Asset Value per share appears in the Publicly Traded Funds column, under the heading “Convertible Securities Funds,” in Monday’s The Wall Street Journal. It is also listed in Barron’s Mutual Funds/Closed-End Funds section under the heading “Convertible Securities Funds.”

The Net Asset Value per share may be obtained each day by calling (914) 921-5070 or visiting www.gabelli.com.

The NASDAQ symbol for the Net Asset Value is “XGCVX.”

 

Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that the Fund may, from time to time, purchase its common shares in the open market when the Fund’s shares are trading at a discount of 10% or more from the net asset value of the shares. The Fund may also, from time to time, purchase its preferred shares in the open market when the preferred shares are trading at a discount to the liquidation value.


THE GABELLI CONVERTIBLE AND

INCOME SECURITIES FUND INC.

One Corporate Center

Rye, NY 10580-1422

 

t

800-GABELLI (800-422-3554)

 

f

914-921-5118

 

e

info@gabelli.com

 

  

GABELLI.COM

 

 

 

DIRECTORS

 

Mario J. Gabelli, CFA

Chairman &

Chief Executive Officer,

GAMCO Investors, Inc.

Chairman and

Chief Executive Officer,

Associated Capital Group, Inc.

 

E. Val Cerutti

Chief Executive Officer,

Cerutti Consultants, Inc.

 

Anthony J. Colavita

President,

Anthony J. Colavita, P.C.

 

Dugald A. Fletcher

President,

Fletcher & Company, Inc.

 

Anthony R. Pustorino

Certified Public Accountant,

Professor Emeritus,

Pace University

 

Werner J. Roeder, MD

Former Medical Director,

Lawrence Hospital

 

Anthonie C. van Ekris

Chairman,

BALMAC International, Inc.

 

Salvatore J. Zizza

Chairman,

Zizza & Associates Corp.

  

OFFICERS

 

Bruce N. Alpert

President

 

Andrea R. Mango

Secretary & Vice President

 

Agnes Mullady

Treasurer

 

Richard J. Walz

Chief Compliance Officer

 

Laurissa M. Martire

Vice President & Ombudsman

 

Wayne Pinsent

Vice President & Ombudsman

 

INVESTMENT ADVISER

 

Gabelli Funds, LLC

One Corporate Center

Rye, New York 10580-1422

 

CUSTODIAN

 

State Street Bank and Trust

Company

 

COUNSEL

 

Skadden, Arps, Slate, Meagher & Flom LLP

 

TRANSFER AGENT AND

REGISTRAR

 

Computershare Trust Company, N.A.

 

 

 

 

 

GCV Q1/2016

LOGO

 


Item 2. Controls and Procedures.

 

  (a)

The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).

 

  (b)

There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d))) that occurred during the registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 3. Exhibits.

Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

(Registrant)  

     The Gabelli Convertible and Income Securities Fund Inc.

By (Signature and Title)*  

   /s/ Bruce N. Alpert

         Bruce N. Alpert, Principal Executive Officer
Date  

    5/27/2016

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

 

By (Signature and Title)*  

   /s/ Bruce N. Alpert

         Bruce N. Alpert, Principal Executive Officer
Date  

     5/27/2016

By (Signature and Title)*  

   /s/ Agnes Mullady

         Agnes Mullady, Principal Financial Officer and Treasurer
Date  

     5/27/2016

* Print the name and title of each signing officer under his or her signature.