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THE GABELLI
CONVERTIBLE
SECURITIES
FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2001
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THE GABELLI
CONVERTIBLE
SECURITIES
FUND, 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.
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MORNINGSTAR RATED[TRADEMARK] GABELLI
CONVERTIBLE SECURITIES FUND 4 STARS OVERALL AND FOR
THE THREE- AND TEN-YEAR PERIOD ENDED 06/30/01
AMONG 50 AND 35 CLOSED-END DOMESTIC EQUITY FUNDS, RESPECTIVELY.
THE FUND WAS RATED 3 STARS FOR THE FIVE-YEAR PERIOD ENDED 06/30/01
AMONG 50 CLOSED-END DOMESTIC EQUITY FUNDS.
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INVESTMENT OBJECTIVE:
The Gabelli Convertible Securities Fund, Inc. is a closed-end, diversified
management investment company whose primary objective is to seek a high level of
total return through a combination of current income and capital appreciation by
investing in convertible securities.
THIS REPORT IS PRINTED ON RECYCLED PAPER.
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THE GABELLI
CONVERTIBLE
SECURITIES
FUND, INC.
TO OUR SHAREHOLDERS,
As hybrid securities with equity and fixed income characteristics,
convertible security performance is impacted by stock and bond market trends. In
the second quarter of 2001, bonds were relatively flat. Stocks rallied strongly
in April and early May, but gave considerable ground in June. The Fund closed
the quarter with a respectable gain, modestly trailing the return on the
Standard & Poor's ("S&P") 500 Index.
INVESTMENT PERFORMANCE
For the second quarter ended June 30, 2001, The Gabelli Convertible
Securities Fund's (the "Fund") net asset value ("NAV") total return was up 4.34%
after adjusting for the reinvestment of the $0.20 per share distribution paid on
June 25, 2001. The S&P 500 Index and the Lipper Convertible Securities Fund
Average rose 5.85% and 3.62%, respectively, over the same period. The S&P 500
Index is an unmanaged indicator of stock market performance, while the Lipper
Average reflects the average performance of mutual funds classified in this
particular category. The Fund rose 5.90% over the trailing twelve-month period
after adjusting for the reinvestment of the $1.30 per share in distributions.
The S&P 500 Index and Lipper Convertible Securities Fund Average declined 14.82%
and 10.65%, respectively, over the same twelve-month period.
For the two-year period ended June 30, 2001, the Fund's total return
averaged 3.72% annually, including reinvestments of $2.33 per share in
distributions. The S&P 500 Index declined 4.42% annually, while the Lipper
Convertible Securities Fund Average rose 6.76% annually, over the same two-year
period. For the five-year period ended June 30, 2001, the Fund's total return
averaged 8.35% annually, including reinvestments of $5.105 per share in
distributions, versus average annual total returns of 14.48% and 10.65% for the
S&P 500 Index and Lipper Convertible Securities Fund Average, respectively.
Since inception on July 3, 1989 through June 30, 2001, the Fund had a
cumulative total return of 192.86%, including adjustments of $11.366 per share
for distributions, which equates to an average annual total return of 9.37%.
The Fund's common shares ended the second quarter at $10.75 per share on
the New York Stock Exchange, a premium to the net asset value of 3.37% and a
total return of 7.43% for the second quarter. The Fund's common shares rose
25.30% over the trailing twelve-month period after adjusting for all
distributions.
CORPORATE GOVERNANCE - GCV TRADING AT A PREMIUM!
In past reports, we have outlined several management initiatives that the
Board of Directors has taken to increase the Fund's public market price to a
level equal to or exceeding the Fund's net asset value. These initiatives
included a stock repurchase plan, a managed 8% Distribution Policy and the
issuance of preferred stock. Additionally, when the Fund converted to closed-end
status in March 1995, we expressed our intent to have the Fund's common shares
track the Fund's net asset value.
We are happy to report to you that the public market price is now at a
premium to the net asset value. As of the writing of this shareholder letter
(August 8, 2001), the Fund's shares were trading at a premium of 3.65% to the
Fund's net asset value. This is a testament to our pro-active shareholder
initiatives and the consistency of our performance over time.
OUR OBJECTIVE
Our mandate is to preserve and enhance our shareholders' wealth through a
conservative and disciplined approach to convertible securities investing. Our
goal is to generate profitable returns in strong markets and protect principal
in weak markets by taking advantage of the unique characteristics of convertible
securities.
Our Fund is managed with a goal of achieving a 600-800 basis point spread
above long-term Treasury yields. We hope to generate these returns over the
long-term. This is the type of performance that our Fund has been recognized for
and we anticipate will continue in the future. Of course, there are no
guarantees.
INVESTMENT RESULTS (a)(c)
Quarter
----------------------------------------
1st 2nd 3rd 4th Year
--- --- --- --- ----
2001: Net Asset Value ..$10.16 $10.40 -- -- --
Total Return ..... 3.4% 4.3% -- -- --
-------------------------------------------------------------------------------
2000: Net Asset Value ..$11.32 $11.16 $10.93 $10.02 $10.02
Total Return ..... 1.3% 0.6% (0.1)% (1.8)% 0.0%
-------------------------------------------------------------------------------
1999: Net Asset Value ..$11.45 $12.13 $11.67 $11.40 $11.40
Total Return ..... 1.8% 7.8% (2.0)% 1.7% 9.4%
-------------------------------------------------------------------------------
1998: Net Asset Value ..$11.87 $11.66 $10.96 $11.45 $11.45
Total Return ..... 5.3% 0.0% (4.2)% 7.4% 8.3%
-------------------------------------------------------------------------------
1997: Net Asset Value ..$11.13 $11.38 $11.81 $11.48 $11.48
Total Return ..... 1.7% 3.5% 5.0% 2.8% 13.5%
-------------------------------------------------------------------------------
1996: Net Asset Value ..$11.28 $11.33 $11.23 $11.08 $11.08
Total Return ..... 3.6% 1.6% 0.3% 2.6% 8.4%
-------------------------------------------------------------------------------
1995: Net Asset Value ..$11.14 $11.51 $11.64 $11.01 $11.01
Total Return ..... 5.1% 5.2% 3.0% 1.1% 15.0%
-------------------------------------------------------------------------------
1994: Net Asset Value ..$11.54 $11.39 $11.60 $10.60 $10.60
Total Return ..... 0.2% (1.3)% 1.8% (0.9)% (0.2)%
-------------------------------------------------------------------------------
1993: Net Asset Value ..$12.07 $12.36 $12.75 $11.52 $11.52
Total Return ..... 5.4% 2.4% 3.2% 1.5% 13.1%
-------------------------------------------------------------------------------
1992: Net Asset Value ..$11.29 $11.52 $11.90 $11.45 $11.45
Total Return ..... 3.5% 2.0% 3.3% 3.6% 13.0%
-------------------------------------------------------------------------------
1991: Net Asset Value ..$11.06 $11.27 $11.57 $10.91 $10.91
Total Return ..... 5.6% 1.9% 2.7% 1.8% 12.5%
-------------------------------------------------------------------------------
1990: Net Asset Value ..$10.56 $10.68 $10.56 $10.47 $10.47
Total Return ..... 1.5% 2.1% (1.1)% 3.8% 6.3%
-------------------------------------------------------------------------------
1989: Net Asset Value .. -- -- $10.54 $10.51 $10.51
Total Return ..... -- -- 5.4%(b) 0.8% 6.3%(b)
-------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS - JUNE 30, 2001 (A)
------------------------------------------
1 Year ......................................... 5.90%
5 Year ......................................... 8.35%
10 Year ........................................ 9.19%
Life of Fund (b) ............................... 9.37%
(a) Based on initial net asset value of $10.00. Total returns and average annual
returns reflect changes in net asset value and reinvestment of distributions and
are net of expenses. Of course, the returns noted 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.
(b) From commencement of investment operations on July 3, 1989.
(c) The Fund converted to closed-end status on March 31, 1995.
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2
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TEXT AS FOLLOWS:
EPS
PMV
MANAGEMENT
CASH FLOW
RESEARCH
WHAT WE DO
The success of momentum investing in recent years and investors' desire
for instant gratification have combined to make value investing appear dull. At
the risk of being dull, we will once again describe the "boring" value approach
that has seen us through both good and bad markets over the last 12 years at the
Fund and for over 24 years at Gabelli Asset Management Company. In past reports,
we have tried to articulate our investment philosophy and methodology. The
following graphic further illustrates the interplay among the four components of
our valuation approach.
Our focus is on free cash flow: earnings before interest, taxes,
depreciation and amortization minus the capital expenditures necessary to grow
the business. We believe free cash flow is the best barometer of a business'
value. Rising free cash flow often foreshadows net earnings improvement. We also
look at earnings per share trends. Unlike Wall Street's ubiquitous earnings
momentum players, we do not try to forecast earnings with accounting precision
and then trade stocks based on quarterly expectations and realities. We simply
try to position ourselves in front of long-term earnings uptrends. In addition,
we analyze on and off balance sheet assets and liabilities such as plant and
equipment, inventories, receivables, and legal, environmental and health care
issues. We want to know everything and anything that will add to or detract from
our private market value estimates.
Finally, we look for a catalyst: something happening in the company's
industry or indigenous to the company itself that will surface value. In the
case of the independent telephone stocks, the catalyst is a regulatory change.
In the agricultural equipment business, it is the increasing world-wide demand
for American food and feed crops. In other instances, it may be a change in
management, sale or spin-off of a division or the development of a profitable
new business.
Once we identify stocks that qualify as fundamental and conceptual
bargains, we then become patient investors. This has been a proven long-term
method for preserving and enhancing wealth in the U.S. equities market. At the
margin, our new investments are focused on businesses that are well-managed and
will benefit from sustainable long-term economic dynamics. These include macro
trends, such as the globalization of the market in filmed entertainment and
telecommunications, and micro trends, such as an increased focus on productivity
enhancing goods and services.
CONVERTIBLE SECURITIES ARE "HYBRIDS"
It is important to understand our stock selection discipline because price
movement in the underlying equity will generally have the greatest impact on
convertible securities pricing. The convertible securities market consists of
bonds, debentures, corporate notes, preferred stocks and warrants or other
similar securities which may be converted into or exchanged for a prescribed
amount of common stock or other equity security of the same or a different
issuer within a particular period of time at a specified price or formula.
Converts are "hybrid" securities that combine the capital appreciation potential
of equities with the higher yield of fixed income instruments. Our strategy
incorporates the purchase of convertible securities that are trading at a
premium above parity with the common stock but which generally provide a higher
yield and, over time, capital appreciation. We will also seek out "busted"
converts, where
3
the underlying common stock has dropped significantly and the values of both the
conversion privilege and the convert are down. Such securities will provide both
high yields and long-term capital appreciation potential.
CONVERTIBLE MARKET OVERVIEW
The convertible market, as measured by the Merrill Lynch All Convertible
Index, gained 4.4% during the second quarter, reflecting the strength in the
U.S. equity market. This compared to a 5.9% rise in the S&P 500. Year to date,
convertibles have demonstrated their defensive qualities by falling only 1.9%
versus a decline of 6.7% by the S&P 500. The average convertible now has a
conversion premium of 49% (up from 37% at the start of the year) and a current
yield of 3.8% (versus 4.5%). The higher conversion premium and lower current
yield are partly due to the recent flood of zero-coupon contingent deals coming
to the market. These transactions offer important tax and accounting benefits to
the issuer, but appeal primarily to non-taxable investors. Consequently,
zero-coupon convertibles have grown from 10% of the market at the end of 2000 to
over 30% currently.
Since the beginning of the year, the domestic convertible market has grown
from $155 billion to $188 billion. This growth has been the consequence of a
strong new issue calendar and lower redemption levels. New issuance is up 62% to
$57 billion over the comparable period last year, which is just shy of last
year's total record of $60 billion.
The best performing sector in the convertible market during the second
quarter was Healthcare (+13%), while Utilities (-12%) was the worst performing.
Year to date, the Consumer Discretionary (+19%) and Materials (+18%) sectors
standout as winners while Telecommunications (-12%) was a laggard. Meanwhile,
during the quarter, speculative grade convertibles outperformed investment grade
issues (+4.8% versus +2.4%), which were less equity sensitive; small
capitalization companies beat large capitalization names (+5.7% versus +4.7%);
and growth bested value (+6.9% versus +1.0%). Finally, balanced convertibles
were the best performing during the quarter (+7.2%), but busted convertibles are
leading the way year to date (+9.3%).
COMMENTARY
A TUG OF WAR
As evidenced by a record number of pre-announced earnings shortfalls in
the second quarter, six Federal Reserve Board ("Fed") interest rate cuts this
year totaling 275 basis points (2.75%) have yet to revive the sagging U.S.
economy. This should not come as a surprise. It takes time for Fed rate cuts to
work their magic, but the rabbit eventually emerges from the hat. The $300-$600
federal income tax rebate many Americans will be receiving in August/September
should provide a modest boost for the economy. Granted, higher utilities bills
and expensive gasoline will soak up some of this cash. However, the tax rebate
should put consumers in a better mood and provide part of the underpinning for a
consumer led economic recovery beginning in the fourth quarter. We also believe
inventory in all but telecommunications/technology will have largely worked
through the system at that point. Energy prices have abated providing further
relief.
When will the stock market begin anticipating an economic recovery? In a
sense, it already has. The April/early-May rally demonstrated that investors
were at least temporarily willing to look past poor short-term earnings
prospects and forward to better times in 2002. Unfortunately, when confronted
with second quarter earnings "confessions" and warnings that profits were not
likely to improve in the third quarter, investors abandoned the "long view" and
once again focused on the short-term earnings negatives. We may see this pattern
hold for the balance of
4
the year, as market rallies are cut short by bad earnings news. So, we think it
will be difficult for the broad market indices to make much progress this year.
Intermediate term bonds were flat in the second quarter, but long bonds
retreated, signally the market's concern that aggressive Fed easing may create
inflationary pressure over the longer term. With the Fed reducing interest rates
by 25 rather than 50 basis points at its late June meeting, the longer end of
the bond market may firm.
INVESTMENT SCORECARD
This quarter's winners came from a wide variety of industry groups
including broadcasting (Granite Broadcasting), bananas (Chiquita), industrial
cyclicals (WHX Corp.), and utilities (Northeast Utilities). Telecommunications
companies dominated our laggard's list, with Rogers Communications, United
States Cellular, and Nextel Communications retreating.
GOOD THINGS COME TO THOSE WHO WAIT
The critical element to our success in the equity and convertible
securities markets has been patience in both the selection process and in
waiting for the values of portfolio positions to be recognized. We will continue
to be patient and opportunistic in selecting converts for the Fund and will
invest in short-term instruments (including time sensitive workouts) when
appropriate. We purchased mostly short-term U.S. Treasury obligations in the
past. However, the U.S. financial system has improved significantly and we now
take advantage of other short-term alternatives. In this regard, the Fund at
times engages in risk arbitrage to generate returns. By risk arbitrage we mean
investing in "event" driven situations; primarily, but not exclusively, in
announced mergers, acquisitions, reorganizations and other "workout"
opportunities. In order to avoid overall market risk in these opportunities, the
Fund will concentrate on lower risk transactions.
Simply stated, risk arbitrage is investing in a merger or acquisition
target after the deal has been announced and pocketing the spread between the
trading price of the target company following the announcement and the deal
price upon closing. This spread is usually relatively narrow, offering a
somewhat modest nominal total return. However, since deals generally close in
much less than a year's time, this modest total return translates into a much
more attractive annualized return.
We borrow a quote from Warren Buffett to explain our occasional use of
risk arbitrage in the Fund: "Our subsidiaries sometimes engage in arbitrage as
an alternative to holding short-term cash equivalents. We prefer, of course, to
make major long-term commitments. But we often have more cash than good ideas.
At such times arbitrage sometimes promises much greater returns than Treasury
Bills and, equally important, cools any temptation we may have to relax our
standards for long-term investments."
In short, the high cash position in the Fund does not reflect any effort
on our part to time the convertible securities market. It is rather a
consequence of our value-oriented discipline. At the same time, a sampling of
our convertible securities has been called by their issuers and we either
received cash or stock. Our portfolio turnover rate reflects this activity, as
well as our investments in "event" driven situations that were consummated
during the year. We are always hard at work evaluating opportunities and
identifying fundamental bargains to progress to a more fully invested posture.
However, we will not stretch our fundamental parameters and introduce greater
market risk to the portfolio.
5
LET'S TALK CONVERTS
The following are specifics on selected holdings of our Fund. Favorable
earnings prospects do not necessarily translate into higher prices, but they do
express a positive trend that we believe will develop over time.
CITIZENS COMMUNICATIONS CO. (5.00% CV. PFD.), will soon become the country's
largest independent local exchange carrier with about 3 million access lines
once it completes several acquisitions of over 2 million lines for $6.5 billion.
Upon completion of these transactions, accompanied by divestitures of its
utilities operations, the company will reposition itself as a pure
telecommunications company. Citizens also owns 81% of a competitive carrier,
Electric Lightwave (ELIX - $1.31 - Nasdaq), with fiber optic networks covering
the Western part of the U.S.
HILTON HOTELS CORP. (HLT) (SUB. DEB. CV., 5.00%, 05/15/06), begun in 1919, owns,
manages, and/or franchises nearly 1,800 hotels with 300,000 rooms worldwide.
Hilton's portfolio of brands, in addition to Hilton, now includes Hampton Inn,
DoubleTree, Embassy Suites, Homewood Suites, Red Lion Hotels and Inns, and
Conrad International. The Company serves a variety of markets ranging from first
class luxury hotels and resorts to value-oriented lodgings, kitchen-equipped
suites, and vacation timeshare units. Well-known hotel properties include The
Waldorf-Astoria in New York and Chicago's Palmer House Hilton.
KAMAN CORP. (SUB. DEB. CV., 6.00%, 03/15/12), founded in 1945, is a pioneer in
the helicopter industry. Aircraft manufacturing remains the core of the
business. Kaman serves both commercial and governmental markets with helicopters
and aircraft components. The company also produces specialized, high-value niche
market products and services that tend to be technological leaders in their
markets. Kaman is a major, national distributor of original equipment, repair
and replacement products and value-added services to nearly every sector of
North American industry. The company also manufactures and distributes musical
instruments (Ovation guitars) and accessories to independent retailers.
ROBBINS & MYERS INC. (SUB. DEB. CV., 6.50%, 09/01/03) is an international
manufacturer of industrial mixing equipment, glass-lined vessels, industrial
pumps and corrosion resistant products serving the process industries such as:
specialty chemicals, pharmaceuticals, water treatment, oil and gas, and food and
beverage. The Energy Systems business, with a $12 million backlog along with
higher sustained crude oil and natural gas prices and increased drilling
activity, should remain strong through the balance of fiscal 2001. We think that
revenues in the Process Systems segment will be down in 2001 due to weakness in
end markets, but with a backlog of almost $86 million, the segment is well
positioned for the future. The company will continue to use its strong cash flow
to make acquisitions and develop new products enhancing its growth prospects.
SEALED AIR CORP. ($2.00 CV. PFD., SER. A) is a global manufacturer and
distributor of a wide range of protective and specialty packaging materials and
systems for industrial, food and consumer products. The company is well
positioned to benefit from case-ready packaging and electronic commerce. Sealed
Air is a strong free cash flow generator. Such cash flow will be used to pay
down debt, make niche acquisitions and buy back stock.
SEQUA CORP. ($5.00 CV. PFD.) is a diversified company with businesses in
aerospace, pre-paint metal, specialty chemical and printing and cannery
equipment. Chromalloy Gas Turbine, Sequa's aerospace business, is the largest
independent supplier of overhaul and repair to jet and industrial gas turbine
engines. We believe this business is attractive to original equipment engine
manufacturers like General Electric and Pratt & Whitney who are looking to
6
grow their replacement parts business. With roughly $800 million in revenues, we
estimate Chromalloy's private market value to be near the entire public value of
Sequa.
STANDARD MOTOR PRODUCTS INC. (SMP) (SUB. DEB. CV., 4.00%, 02/01/02),
headquartered in Long Island City, New York, supplies functional replacement
parts for the engine management, electrical and climate control systems of cars,
trucks and buses. The company services all makes and models, both new and old
cars, imported and domestic. SMP has two primary divisions--engine management
and temperature control--and believes it is the number one supplier to the North
American aftermarket in each of these lines.
WASTE MANAGEMENT INC. (SUB. DEB. CV., 4.00%, 02/01/02) merged with USA Waste in
1998, and is now the largest solid waste company in North America. The company
provides a number of services, including collection, transfer, landfill, and
recycling services for a diverse customer base, notably the municipal,
residential, commercial, and industrial markets. Services are provided
throughout the United States as well as in Canada, Mexico, and Puerto Rico.
Internationally, the company operates in Europe, the Pacific Rim, and in South
America. In addition, Waste Management is a leading developer, operator and
owner of waste-to-energy facilities in the U.S.
SHAREHOLDER MEETING - MAY 14, 2001 - FINAL RESULTS
The Annual Meeting of Shareholders was held on May 14, 2001 at the
Greenwich Public Library in Greenwich, Connecticut. At that meeting, common and
preferred shareholders voting as a single class elected Mario J. Gabelli and
Karl Otto Pohl as Directors of the Fund. A total of 6,717,921 votes and
6,695,448 votes were cast in favor of each Director and 49,804 votes and 72,087
votes were withheld for each Director, respectively. Preferred shareholders
voting as a separate class elected Felix J. Christiana as a Director of the
Fund. A total of 1,153,515 votes were cast in favor of this Director and 8,289
votes were withheld for this Director, respectively.
E. Val Cerutti, Anthony J. Colavita, Dugald A. Fletcher, Anthony R.
Pustorino, Anthonie C. van Ekris and Salvatore J. Zizza continue to serve in
their capacities as Directors of the Fund.
We thank you for your participation and appreciate your continued support.
SPECIAL NOTE
It is with deep sorrow that we report the passing of our valued friend and
Director, Felix J. Christiana. The Board of Directors acknowledges with great
appreciation the passionate contributions, guidance and friendship given by Mr.
Christiana during his long association with The Gabelli Convertible Securities
Fund. The Board of Directors and Officers of the Fund will greatly miss Mr.
Christiana.
STOCK REPURCHASE PLAN
The Fund is authorized to repurchase up to 500,000 shares of the Fund's
outstanding common shares. Pursuant to this stock repurchase plan, the Fund 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 June 30, 2001, 305,200 shares have been
repurchased in the open market under this stock repurchase plan.
7
COMMON STOCK 8% DISTRIBUTION POLICY
The Fund continues to maintain its 8% Distribution Policy whereby the Fund
pays out to common stock shareholders 8% of its average net assets each year.
Pursuant to this policy, the Fund distributed $0.20 per share on June 25, 2001.
The next distribution is scheduled for September 2001.
8.00% CUMULATIVE PREFERRED STOCK - DIVIDENDS
The Fund's 8.00% Cumulative Preferred Stock paid a cash distribution on
June 25, 2001 of $0.50 per share. For the twelve-months ended June 30, 2001,
Preferred Stock shareholders received distributions totaling $2.00, the annual
dividend rate per share of Preferred Stock. The next distribution is scheduled
for September 2001.
WWW.GABELLI.COM
Please visit us on the Internet. Our homepage at http://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 info@gabelli.com.
In our efforts to bring our shareholders more timely portfolio
information, Gabelli Fund's portfolio managers regularly participate in chat
sessions at www.gabelli.com as reflected below.
WHO WHEN
--- ----
Special Chats: Mario J. Gabelli First Monday of each month
Howard Ward First Tuesday of each month
In addition, every Wednesday will feature a different portfolio manager.
The upcoming Wednesday chat schedule is as follows:
AUGUST SEPTEMBER OCTOBER
------ --------- -------
1st Wednesday Caesar Bryan Walter Walsh Ivan Arteaga
2nd Wednesday Ivan Arteaga Caesar Bryan Tim O'Brien
3rd Wednesday Linda Caulkin Hart Woodson Susan Byrne
4th Wednesday Tim O'Brien Barbara Marcin Caesar Bryan
5th Wednesday Barbara Marcin Barbara Marcin
All chat sessions start at 4:15 ET. Please arrive early, as participation
is limited.
You may sign up for our HIGHLIGHTS email newsletter at www.gabelli.com and
receive early notice of chat sessions, closing mutual fund prices, news events
and media sightings.
IN CONCLUSION
A strong, albeit short-lived, stock market rally along with a relatively
stable bond market helped convertible securities generate respectable returns in
the second quarter of 2001. Looking ahead over the next several quarters, we
believe convertible security yields will help support prices as stocks struggle
to reconcile good news (Fed rate
8
cuts) with bad news (generally lousy earnings). When the stock market begins
recovering in 2002, convertibles should participate.
Sincerely,
/S/ MARIO J. GABELLI
MARIO J. GABELLI, CFA
Portfolio Manager and Chief Investment Officer
August 8, 2001
--------------------------------------------------------------------------------
DIVIDEND HISTORY - COMMON STOCK
---------------------------------------------------------
PAYMENT DATE RATE PER SHARE REINVESTMENT PRICE
------------ -------------- ------------------
June 25, 2001 $0.200 $10.33
March 26, 2001 $0.200 $10.10
---------------------------------------------------------
December 26, 2000 $0.700 $ 9.80
September 25, 2000 $0.200 $ 9.85
June 26, 2000 $0.200 $ 9.98
March 27, 2000 $0.200 $ 9.71
---------------------------------------------------------
December 27, 1999 $0.430 $10.38
September 27, 1999 $0.200 $10.86
June 28, 1999 $0.200 $11.38
March 29, 1999 $0.200 $11.04
---------------------------------------------------------
December 28, 1998 $0.320 $11.49
September 28, 1998 $0.200 $10.52
June 26, 1998 $0.200 $11.02
March 26, 1998 $0.200 $11.10
---------------------------------------------------------
December 26, 1997 $0.600 $10.49
September 26, 1997 $0.120 $10.44
June 27, 1997 $0.120 $ 9.96
PAYMENT DATE RATE PER SHARE REINVESTMENT PRICE
------------ -------------- ------------------
December 27, 1996 $0.375 $ 9.51
September 23, 1996 $0.120 $ 9.73
June 24, 1996 $0.120 $10.17
March 25, 1996 $0.120 $10.41
---------------------------------------------------------
December 27, 1995 $0.750 $10.95
September 27, 1995 $0.200 $11.10
June 27, 1995 $0.200 $11.21
---------------------------------------------------------
December 31, 1994 $0.900 $10.60
December 31, 1993 $1.425 $11.52
December 31, 1992 $0.876 $11.45
December 31, 1991 $0.865 $10.91
December 31, 1990 $0.490 $10.47
June 28, 1990 $0.100 $10.68
March 29, 1990 $0.100 $10.55
December 29, 1989 $0.115 $10.51
--------------------------------------------------------------------------------
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SELECTED CONVERTIBLE HOLDINGS
JUNE 30, 2001
-------------
Citizens Communications Co. (5.00% Cv. Pfd.)
Hilton Hotels Corp. (Sub. Deb. Cv., 5.00%, 05/15/06)
Kaman Corp. (Sub. Deb. Cv., 6.00%, 03/15/12)
Robbins & Myers Inc. (Sub. Deb. Cv., 6.50%, 09/01/03)
Sealed Air Corp. ($2.00 Cv. Pfd., Ser. A)
Sequa Corp. ($5.00 Cv. Pfd.)
Standard Motor Products Inc. (Sub. Deb. Cv., 6.75%, 07/15/09)
Waste Management Inc. (Sub. Deb. Cv., 4.00%, 02/01/02)
--------------------------------------------------------------------------------
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.
9
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
PORTFOLIO OF INVESTMENTS
JUNE 30, 2001 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT COST VALUE
------ ---- -----
CONVERTIBLE CORPORATE BONDS -- 40.9%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 6.2%
$ 800,000 Exide Corp., Sub. Deb. Cv.
2.90%, 12/15/05 (b) ... $ 561,492 $ 337,500
350,000 Pep Boys - Manny, Moe
& Jack, Sub. Deb. Cv.
Zero Cpn., 09/20/11 ... 203,516 230,562
9,000,000 Standard Motor Products Inc.,
Sub. Deb. Cv.
6.75%, 07/15/09 ....... 7,054,595 6,333,750
---------- ----------
7,819,603 6,901,812
---------- ----------
AVIATION: PARTS AND SERVICES -- 4.0%
4,711,000 Kaman Corp., Sub. Deb. Cv.
6.00%, 03/15/12 ....... 4,467,380 4,499,005
---------- ----------
BROADCASTING -- 0.0%
15,000 Granite Broadcasting Corp.,
Sub. Deb. Cv.
8.88%, 05/15/08 ....... 7,146 10,125
---------- ----------
BUILDING AND CONSTRUCTION -- 0.0%
10,000 Foster Wheeler Ltd.,
Sub. Deb. Cv.
6.50%, 06/01/07 (b) ... 10,000 8,225
---------- ----------
BUSINESS SERVICES -- 2.2%
900,000 BBN Corp., Sub. Deb. Cv.
6.00%, 04/01/12 (a) ... 882,014 870,750
10,000 First Data Corp.,
Sub. Deb. Cv.
2.00%, 03/01/08 ....... 9,940 10,562
1,800,000 Trans-Lux Corp.,
Sub. Deb. Cv.
7.50%, 12/01/06 ....... 1,734,924 1,516,500
---------- ----------
2,626,878 2,397,812
---------- ----------
COMPUTER SOFTWARE AND SERVICES -- 0.3%
450,000 Exodus Communications Inc.,
Sub. Deb. Cv.
5.25%, 02/15/08 ....... 301,237 100,125
350,000 QuadraMed Corp.,
Sub. Deb. Cv.
5.25%, 05/01/05 ....... 241,281 217,875
---------- ----------
542,518 318,000
---------- ----------
CONSUMER PRODUCTS -- 0.6%
1,500,000 Pillowtex Corp.,
Sub. Deb. Cv.
6.00%, 03/15/12 ....... 120,955 234
PRINCIPAL MARKET
AMOUNT COST VALUE
------ ---- -----
$ 750,000 Standard Commercial Corp.,
Sub. Deb. Cv.
7.25%, 03/31/07 ....... $ 645,952 $ 665,625
---------- ----------
766,907 665,859
---------- ----------
CONSUMER SERVICES -- 4.5%
4,000,000 CUC International Inc.,
Sub. Deb. Cv.
3.00%, 02/15/02 ....... 3,935,196 3,955,000
1,100,000 Ogden Corp., Sub. Deb. Cv.
6.00%, 06/01/02 ....... 1,044,818 1,083,500
---------- ----------
4,980,014 5,038,500
---------- ----------
ELECTRONICS -- 2.1%
ASM Lithography
Holding, Cv.
40,000(d) 2.50%, 04/09/05 .......... 24,492 21,341
10,000(d) 2.50%, 04/09/05 (b) ...... 6,123 5,335
2,300,000 Thermo Electron Corp.,
Sub. Deb. Cv.
4.25%, 01/01/03 (b) ... 2,238,522 2,254,000
---------- ----------
2,269,137 2,280,676
---------- ----------
ENERGY AND UTILITIES -- 1.1%
200,000 Devon Energy Corp.,
Sub. Deb. Cv.
4.95%, 08/15/08 ....... 193,822 201,500
200,000 Friede Goldman Halter Inc.,
Sub. Deb. Cv.
4.50%, 09/15/04 ....... 134,206 31,000
1,100,000 Moran Energy Inc.,
Sub. Deb. Cv.
8.75%, 01/15/08 ....... 778,382 1,034,000
---------- ----------
1,106,410 1,266,500
---------- ----------
ENTERTAINMENT -- 0.7%
800,000 USA Networks Inc.,
Sub. Deb. Cv.
7.00%, 07/01/03 ....... 771,527 827,000
---------- ----------
ENVIRONMENTAL SERVICES -- 6.7%
7,500,000 Waste Management Inc.,
Sub. Deb. Cv.
4.00%, 02/01/02 ....... 7,350,188 7,434,375
---------- ----------
EQUIPMENT AND SUPPLIES -- 1.9%
1,950,000 Robbins & Myers Inc.,
Sub. Deb. Cv.
6.50%, 09/01/03 ....... 1,925,364 2,152,312
---------- ----------
See accompanying notes to financial statements.
10
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2001 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT COST VALUE
------ ---- -----
CONVERTIBLE CORPORATE BONDS (CONTINUED)
FOOD AND BEVERAGE -- 0.0%
$ 110,000 Boston Chicken Inc.,
Sub. Deb. Cv.
7.75%, 05/01/04+ (e) .. $ 47,366 $ 0
150,000 Chiquita Brands
International Inc., Cv.
7.00%, 03/28/01+ (e) .. 150,000 41,250
---------- ----------
197,366 41,250
---------- ----------
HEALTH CARE -- 0.0%
10,000 Inhale Therapeutic Systems,
Sub. Deb. Cv.
6.75%, 10/13/06 (b) ... 10,380 15,588
10,000 Invitrogen Corp.,
Sub. Deb. Cv.
5.50%, 03/01/07 ....... 10,100 10,950
150,000 Sabratek Corp.,
Sub. Deb. Cv.
Zero Cpn., 04/15/05+ (e) 84,763 0
---------- ----------
105,243 26,538
---------- ----------
HOTELS AND GAMING -- 4.3%
5,330,000 Hilton Hotels Corp.,
Sub. Deb. Cv.
5.00%, 05/15/06 ....... 4,726,546 4,823,650
---------- ----------
PAPER AND FOREST PRODUCTS -- 1.4%
200,000 Riverwood International Corp.,
Sub. Deb. Cv.
6.75%, 09/15/03 ....... 199,836 230,890
1,400,000 Thermo Fibertek Inc., Cv.
4.50%, 07/15/04 (b) ... 1,235,843 1,293,250
---------- ----------
1,435,679 1,524,140
---------- ----------
PUBLISHING -- 1.1%
650,000 News America Holdings Inc.,
Sub. Deb. Cv.
Zero Cpn., 03/31/02 ... 614,297 1,044,063
200,000 Times Mirror Ltd.,
Sub. Deb. Cv.
Zero Cpn., 04/15/17 ... 104,224 124,750
50,000(c) United News & Media plc,
Sub. Deb. Cv.
6.13%, 12/03/03 ....... 84,902 69,684
---------- ----------
803,423 1,238,497
---------- ----------
RETAIL -- 0.3%
60,000 Costco Companies Inc.,
Sub. Deb. Cv.
Zero Cpn., 08/19/17 ... 43,079 59,475
PRINCIPAL MARKET
AMOUNT COST VALUE
------ ---- -----
$ 300,000 Rite Aid Corp.,
Sub. Deb Cv.
5.25%, 09/15/02 ....... $ 168,991 $ 286,875
---------- ----------
212,070 346,350
---------- ----------
SPECIALTY CHEMICALS -- 1.6%
900,000 IVAX Corp.,
Sub. Deb. Cv.
5.50%, 05/15/07 (b) ... 900,000 1,289,250
500,000 Thermo Instrument
Systems Inc.,
Sub. Deb. Cv.
4.50%, 10/15/03 (b) ... 485,302 465,000
---------- ----------
1,385,302 1,754,250
---------- ----------
TELECOMMUNICATIONS -- 0.8%
80,000 Amnex Inc., Sub. Deb. Cv.
8.50%, 09/25/02+ (b) (e) 77,029 0
90,000 Bell Atlantic Corp., Cv.
4.25%, 09/15/05 ....... 97,381 88,313
10,000 Bell Atlantic Corp., Cv.
4.25%, 09/15/05 (b) ... 10,233 9,875
900,000 NTL Inc., Sub. Deb. Cv.
5.75%, 12/15/09 ....... 455,571 299,250
500,000 Rogers Communications Inc.,
Sub. Deb. Cv.
2.00%, 11/26/05 ....... 379,415 390,625
250,000 XO Communications Inc.,
Sub. Deb. Cv.
5.75%, 01/15/09 (b) ... 154,116 50,000
---------- ----------
1,173,745 838,063
---------- ----------
WIRELESS COMMUNICATIONS -- 1.1%
100,000 Nextel Communications Inc.,
Cv. 6.00%, 06/01/11 (b) 99,007 95,750
1,000,000 Nextel Communications Inc.,
Sub. Deb. Cv.
5.25%, 01/15/10 ....... 692,645 615,000
1,000,000 United States Cellular Corp.,
Sub. Deb. Cv.
Zero Cpn., 06/15/15 ... 674,686 547,500
---------- ----------
1,466,338 1,258,250
---------- ----------
TOTAL CONVERTIBLE
CORPORATE BONDS ........ 46,148,784 45,651,189
---------- ----------
SHARES
------
CONVERTIBLE PREFERRED STOCKS -- 13.1%
AEROSPACE -- 1.3%
14,020 Northrop Grumman Corp.,
7.00% Cv. Pfd., Ser. B 1,633,610 1,500,140
---------- ----------
See accompanying notes to financial statements.
11
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2001 (UNAUDITED)
MARKET
SHARES COST VALUE
------ ---- -----
CONVERTIBLE PREFERRED STOCKS (CONTINUED)
AVIATION: PARTS AND SERVICES -- 1.8%
Coltec Capital Trust,
25,000 5.25% Cv. Pfd. ........ $1,032,875 $ 1,093,750
21,000 5.25% Cv. Pfd. (b) .... 985,500 910,875
---------- -----------
2,018,375 2,004,625
---------- -----------
CABLE -- 0.3%
1,000 MediaOne Group Inc.,
4.50% Cv. Pfd., Ser. D 26,800 25,100
UnitedGlobalCom Inc.,
2,000 7.00% Cv. Pfd. (b) .... 49,500 32,750
15,000 7.00% Cv. Pfd., Ser. C 520,850 245,625
---------- -----------
597,150 303,475
---------- -----------
DIVERSIFIED INDUSTRIAL -- 0.5%
2,000 GATX Corp.,
$2.50 Cv. Pfd. ........ 259,050 420,000
18,000 WHX Corp.,
6.50% Cv. Pfd., Ser. A 156,662 108,000
6,100 WHX Corp.,
$3.75 Cv. Pfd., Ser. B 30,881 31,110
---------- -----------
446,593 559,110
---------- -----------
ENERGY AND UTILITIES -- 0.4%
200 KCS Energy Inc.,
5.00% Cv. Pfd., Ser. A 200,000 407,000
2,000 Semco Capital Trust II,
11.00% Cv. Pfd. ....... 24,000 24,600
---------- -----------
224,000 431,600
---------- -----------
ENTERTAINMENT -- 0.1%
2,500 Metromedia International
Group Inc.,
7.25% Cv. Pfd. ........ 70,031 37,500
1,000 Six Flags Inc.,
7.25% Cv. Pfd. ........ 30,725 30,550
---------- -----------
100,756 68,050
---------- -----------
EQUIPMENT AND SUPPLIES -- 2.1%
30,000 Sequa Corp.,
$5.00 Cv. Pfd. ........ 2,314,792 2,340,000
---------- -----------
PAPER AND FOREST PRODUCTS -- 2.3%
65,000 Sealed Air Corp.,
$2.00 Cv. Pfd., Ser. A 2,471,918 2,596,750
---------- ----------
PUBLISHING -- 0.1%
5,000 Tribune Co.,
6.25% Cv. Pfd. ........ 92,750 112,750
---------- ----------
MARKET
SHARES COST VALUE
------ ---- -----
SPECIALTY CHEMICALS -- 0.0%
3,000 Merrill Lynch & Co.
(IMC Global),
6.25% Cv. Pfd. ......... $ 52,962 $ 27,563
---------- -----------
TELECOMMUNICATIONS -- 4.2%
9,000 BroadWing Inc.,
6.75% Cv. Pfd., Ser. B . 418,580 427,500
74,500 Citizens Communications Co.,
5.00% Cv. Pfd. ......... 3,724,351 3,725,000
10,000 Philippine Long Distance
Telephone Co.,
$3.50 Cv. Pfd., Ser. III 446,144 311,000
1,500 TCI Pacific
Communications Inc.,
5.00% Cv. Pfd. ......... 134,838 213,750
---------- -----------
4,723,913 4,677,250
---------- -----------
WIRELESS COMMUNICATIONS -- 0.0%
3,000 Loral Space &
Communications Ltd.,
6.00% Cv. Pfd., Ser. D . 54,750 44,250
---------- -----------
TOTAL CONVERTIBLE
PREFERRED STOCKS ........ 14,731,569 14,665,563
---------- -----------
MARKET
SHARES COST VALUE
------ ---- -----
COMMON STOCKS -- 4.2%
AVIATION: PARTS AND SERVICES -- 0.3%
18,000 Kaman Corp., Cl. A ....... 181,321 318,600
---------- ----------
BROADCASTING -- 0.1%
38,500 Granite Broadcasting Corp.+ 40,906 115,500
---------- ----------
ENERGY AND UTILITIES -- 2.4%
9,000 AGL Resources Inc. ....... 159,500 213,750
7,000 BP plc, ADR .............. 237,270 348,950
18,000 CH Energy Group Inc. ..... 648,257 791,100
10,000 Conectiv Inc. ............ 221,812 216,000
324 KCS Energy Inc. .......... 1,938 2,138
10,000 NiSource Inc.+ ........... 20,000 23,700
20,000 Northeast Utilities ...... 403,671 415,000
10,000 Progress Energy Inc. ..... 5,200 5,050
10,000 RGS Energy Group Inc. .... 364,300 375,000
2,500 SJW Corp. ................ 249,502 213,750
---------- ----------
2,311,450 2,604,438
---------- ----------
EQUIPMENT AND SUPPLIES -- 0.2%
50,000 Fedders Corp., Cl. A ..... 310,916 220,000
---------- ----------
FINANCIAL SERVICES -- 0.8%
29,000 Argonaut Group Inc. ...... 674,586 582,900
See accompanying notes to financial statements.
12
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2001 (UNAUDITED)
MARKET
SHARES COST VALUE
------ ---- -----
COMMON STOCK (CONTINUED)
FINANCIAL SERVICES (CONTINUED)
10,000 Liberty Financial
Companies Inc. ......... $ 327,200 $ 324,500
---------- -----------
1,001,786 907,400
---------- -----------
HEALTH CARE -- 0.0%
2 IVAX Corp. ............... 0 78
---------- -----------
TELECOMMUNICATIONS -- 0.2%
1,000 Philippine Long Distance
Telephone Co., ADR ..... 12,470 14,050
10,000 Sprint FON Group ......... 104,330 213,600
---------- -----------
116,800 227,650
---------- -----------
WIRELESS COMMUNICATIONS -- 0.2%
10,000 Sprint PCS Group+ ........ 99,537 241,500
49 Winstar
Communications Inc.+ ... 438 2
---------- -----------
99,975 241,502
---------- -----------
TOTAL
COMMON STOCKS ........... 4,063,154 4,635,168
---------- -----------
SHARES
------------
U.S. GOVERNMENT OBLIGATIONS -- 41.6%
$46,568,000 U.S. Treasury Bills,
3.49% to 4.13%++,
due 07/05/01 to
09/13/01 .............. 46,476,823 46,476,236
----------- ------------
TOTAL INVESTMENTS -- 99.8% ...........$111,420,330 $111,428,156
============
OTHER ASSETS, LIABILITIES AND
LIQUIDATION VALUE OF
CUMULATIVE PREFERRED STOCK -- (26.7)% ......... (29,769,815)
============
NET ASSETS - COMMON STOCK -- 73.1%
(7,855,044 common shares outstanding) ......... 81,658,341
------------
NET ASSETS - PREFERRED STOCK -- 26.9%
(1,200,000 preferred shares outstanding) ...... 30,000,000
------------
TOTAL NET ASSETS -- 100.0% ....................... $111,658,341
============
NET ASSET VALUE PER COMMON SHARE
($81,658,341 \ 7,855,044
shares outstanding) $10.40
======
MARKET
SHARES PROCEEDS VALUE
------ -------- -----
SECURITIES SOLD SHORT
30,250 IVAX Corp. .............. $(1,050,751) $(1,179,750)
50,000 KCS Energy Inc. ......... (476,483) (330,000)
------------
$ (1,509,750)
============
--------------------
For Federal tax purposes:
Aggregate cost ...................... $111,420,330
============
Gross unrealized appreciation ....... $ 3,450,150
Gross unrealized depreciation ....... (3,442,324)
------------
Net unrealized appreciation ......... $ 7,826
============
--------------------
(a) Security fair valued under procedures established by the Board of Directors.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At June 30, 2001,
the market value of Rule 144A securities amounted to $6,767,398 or 6.1% of
total net assets.
(c) Principal amount denoted in British Pounds.
(d) Principal amount denoted in Euros.
(e) Bond in default.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR - American Depositary Receipt
See accompanying notes to financial statements.
13
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2001 (UNAUDITED)
ASSETS:
Investments, at value (Cost $111,420,330) . $111,428,156
Cash ...................................... 870
Dividends and interest receivable ......... 1,069,781
Receivable for investments sold ........... 1,527,234
Receivable from Adviser ................... 61,444
Other assets .............................. 4,674
------------
TOTAL ASSETS .............................. 114,092,159
------------
LIABILITIES:
Securities sold short
(proceeds $1,527,234) ................... $ 1,509,750
Dividends payable ......................... 768,675
Accrued expenses and other payables ....... 155,393
------------
TOTAL LIABILITIES ......................... 2,433,818
------------
NET ASSETS ................................ $111,658,341
============
NET ASSETS CONSIST OF:
Cumulative Preferred Stock (8.00%,
$25.00 liquidation value, $0.001 par
value, 2,000,000 shares authorized
with 1,200,000 shares issued and
outstanding) ............................ $30,000,000
Capital stock, at par value ............... 7,855
Additional paid-in capital ................ 81,510,034
Accumulated net realized gain on investments
and foreign currency transactions ....... 115,141
Net unrealized appreciation on investments
and foreign currency transactions ....... 25,311
------------
TOTAL NET ASSETS .......................... $111,658,341
============
NET ASSET VALUE PER COMMON SHARE
($81,658,341 \ 7,855,044 shares
outstanding; 100,000,000 shares
authorized of $0.001 par value) ......... $10.40
======
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001 (UNAUDITED)
INVESTMENT INCOME:
Dividends (net of foreign
taxes of $4,347) ........................ $ 551,269
Interest .................................. 2,785,872
-----------
TOTAL INVESTMENT INCOME ................... 3,337,141
-----------
EXPENSES:
Investment advisory fees .................. 375,629
Shareholder services fees ................. 63,686
Payroll ................................... 50,458
Shareholder communications expenses ....... 37,448
Directors' fees ........................... 30,130
Legal and audit fees ...................... 29,535
Custodian fees ............................ 16,496
Miscellaneous expenses .................... 24,494
-----------
TOTAL EXPENSES ............................ 627,876
-----------
NET INVESTMENT INCOME ..................... 2,709,265
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS:
Net realized gain on investments .......... 1,742,453
Net realized loss on foreign
currency transactions .................. (1,965)
-----------
Net realized gain on investments and
foreign currency transactions ........... 1,740,488
-----------
Net change in unrealized appreciation
on investments and foreign currency
transactions ............................ 2,798,209
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS ....... 4,538,697
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ......................... $ 7,247,962
===========
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2001 DECEMBER 31,
(UNAUDITED) 2000
------------- -------------
OPERATIONS:
Net investment income ......................................................... $ 2,709,265 $ 5,649,243
Net realized gain on investments and foreign currency transactions ............ 1,740,488 7,129,769
Net change in unrealized appreciation/depreciation on investments
and foreign currency transactions ........................................... 2,798,209 (11,116,303)
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .......................... 7,247,962 1,662,709
------------- -------------
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
Net investment income ......................................................... (2,461,406) (4,434,112)
Net realized gain on investments and foreign currency transactions ............ (673,812) (5,582,443)
In excess of net realized gain on investments and
foreign currency transactions ............................................. -- (158,945)
------------- -------------
TOTAL DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS .............................. (3,135,218) (10,175,500)
------------- -------------
DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS:
Net investment income ......................................................... (406,200) (1,042,230)
Net realized gain on investments and foreign currency transactions ............ (793,800) (1,357,770)
------------- -------------
TOTAL DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS ........................... (1,200,000) (2,400,000)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Net increase in net assets from Fund share transactions ....................... 679,720 --
Shares repurchased by the Fund ................................................ -- (1,200,514)
------------- -------------
NET INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS ....................... 679,720 (1,200,514)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS ......................................... 3,592,464 (12,113,305)
NET ASSETS:
Beginning of period ........................................................... 108,065,877 120,179,182
------------- -------------
End of period (Including undistributed net investment income
of $0 and $158,341, respectively) ........................................... $ 111,658,341 $ 108,065,877
============= =============
See accompanying notes to financial statements.
14
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION. The Gabelli Convertible Securities Fund, Inc. (the "Fund") is a
closed-end diversified management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), whose investment
objective is to seek a high level of total return through a combination of
current income and capital appreciation by investing in convertible securities.
The Fund was incorporated in Maryland on December 19, 1988 as an open-end
diversified management investment company and commenced investment operations on
July 3, 1989. The Board of Directors, upon approval at a special meeting of
shareholders held on February 17, 1995, voted to approve the conversion of the
Fund to closed-end status, effective March 31, 1995.
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
Fund 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 on foreign exchanges are
valued at the last sale price on that exchange 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 except for open short positions, which are
valued at the last asked price). All other portfolio securities for which
over-the-counter 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 that day, then the security is valued at the closing bid price. 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"). 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 Directors
determine such does not reflect the securities' fair value, in which case these
securities will be valued at their fair value as determined by the Directors.
Debt instruments having a maturity greater than 60 days are valued at the
highest bid price obtained from a dealer maintaining an active market in those
securities. 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 Fund 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 Fund takes possession of an underlying debt obligation subject to an
obligation of the seller to repurchase, and the Fund to resell, the obligation
at an agreed-upon price and time, thereby determining the yield during the
Fund's holding period. The Fund will always receive and maintain securities as
collateral whose market value, including accrued interest, will be at least
equal to 100% of the dollar amount invested by the Fund in each agreement. The
Fund will make payment for such securities only upon physical delivery or upon
evidence of book entry transfer of the collateral to the account of the
custodian. To the extent that any repurchase transaction exceeds one business
day, the value of the collateral is marked-to-market on a daily basis to
maintain the adequacy of the collateral.
15
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
If the seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
FUTURES CONTRACTS. The Fund may engage in futures contracts for the
purpose of hedging against changes in the value of its portfolio securities and
in the value of securities it intends to purchase. Such investments will only be
made if they are economically appropriate to the reduction of risks involved in
the management of the Fund's investments. Upon entering into a futures contract,
the Fund is required to deposit with the broker an amount of cash or cash
equivalents equal to a certain percentage of the contract amount. This is known
as the "initial margin." Subsequent payments ("variation margin") are made or
received by the Fund each day, depending on the daily fluctuation of the value
of the contract. The daily changes in the contract are included in unrealized
appreciation/depreciation on investments and futures contracts. The Fund
recognizes a realized gain or loss when the contract is closed. At June 30,
2001, there were no open futures contracts.
There are several risks in connection with the use of futures contracts as
a hedging device. The change in value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in value of the hedged investments. In addition, there is the risk that
the Fund may not be able to enter into a closing transaction because of an
illiquid secondary market.
FORWARD FOREIGN EXCHANGE CONTRACTS. The Fund may engage in forward foreign
exchange contracts for hedging a specific transaction with respect to either the
currency in which the transaction is denominated or another currency as deemed
appropriate by the Adviser. Forward foreign exchange contracts are valued at the
forward rate and are marked-to-market daily. The change in market value is
included in unrealized appreciation/depreciation on investments and foreign
currency transactions. When the contract is closed, the Fund records a realized
gain or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed.
The use of forward foreign exchange contracts does not eliminate
fluctuations in the underlying prices of the Fund's portfolio securities, but it
does establish a rate of exchange that can be achieved in the future. Although
forward foreign exchange contracts limit the risk of loss due to a decline in
the value of the hedged currency, they also limit any potential gain/(loss) that
might result should the value of the currency increase. In addition, the Fund
could be exposed to risks if the counterparties to the contracts are unable to
meet the terms of their contracts. At June 30, 2001, the Fund held no forward
foreign exchange contracts.
SECURITIES SOLD SHORT. A short sale involves selling a security which the
Fund does not own. The proceeds received for 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 the 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.
FOREIGN CURRENCY TRANSLATION. The books and records of the Fund 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
16
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
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 Fund and the
amounts actually received. The portion of foreign currency gains and losses
related to fluctuation in exchange rates between the initial trade date and
subsequent sale trade date is included in realized gain/(loss) on investments.
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. Income distributions and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments of income and gains on various investment
securities held by the Fund, timing differences and differing characterization
of distributions made by the Fund. Distributions to shareholders of the Fund's
8.00% Cumulative Preferred Stock ("Cumulative Preferred Stock") are accrued on a
daily basis and are determined as described in Note 5.
PROVISION FOR INCOME TAXES. The Fund intends to continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended. As a result, a Federal income tax provision is not required.
3. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES. The Fund has entered into an
investment advisory agreement (the "Advisory Agreement") with the Adviser which
provides that the Fund will pay the Adviser a fee, computed daily and paid
monthly, equal on an annual basis to 1.00% of the value of the Fund's average
daily net assets. In accordance with the Advisory Agreement, the Adviser
provides a continuous investment program for the Fund's portfolio and oversees
the administration of all aspects of the Fund'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 Fund, including distributions and
advisory fee subject to reduction, does not exceed the stated dividend rate of
the Cumulative Preferred Stock. For the six months ended June 30, 2001, the
Fund'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 six months ended June 30, 2001, Gabelli & Company, Inc. and its
affiliates received $25,424 in brokerage commissions as a result of executing
agency transactions in portfolio securities on behalf of the Fund.
4. PORTFOLIO SECURITIES. Costs of purchases and proceeds from sales of
securities, other than short-term securities, for the six months ended June 30,
2001 aggregated $29,156,599 and $30,813,961, respectively.
17
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
5. CAPITAL. The Articles of Incorporation, dated December 19, 1988, permit the
Fund to issue 100,000,000 shares of common stock (par value $0.001).
Transactions in capital stock were as follows:
SIX MONTHS ENDED
JUNE 30, 2001 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2000
------------------- -------------------
Shares Amount Shares Amount
------ ------ ------ ------
Shares issued upon reinvestment
of dividends and distributions ....67,299 $679,720 -- --
Shares repurchased by the Fund ...... -- -- (124,900) $(1,200,514)
------ -------- -------- -----------
Net increase ........................67,299 $679,720 (124,900) $(1,200,514)
====== ======== ======== ===========
In addition, the Fund has been authorized to issue up to 2,000,000 shares
of Preferred Stock of which 1,200,000 shares has been designated as $0.001 par
value 8% Cumulative Preferred Stock. Dividends on shares of the Cumulative
Preferred Stock are cumulative. The Fund is required to meet certain asset
coverage tests with respect to the Cumulative Preferred Stock. If the Fund fails
to meet these requirements and does not correct such failure, the Fund 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 requirement
could restrict the Fund's ability to pay dividends to Common Shareholders and
could lead to sales of portfolio securities at inopportune times. The Preferred
Stock is callable at the redemption price at the option of the Fund after May
15, 2002. This Cumulative Preferred Stock introduced leverage into the capital
structure of the Fund. This leverage tends to magnify both the risks and
opportunities to Common Shareholders. At June 30, 2001, the 1,200,000 shares of
8% Cumulative Preferred Stock outstanding accrued dividends in the amount of
$46,667. The income received on the Fund'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.
The Fund shall not declare dividends or make other distributions on
1,200,000 shares of Common Stock or purchase any such shares if at the time of
the declaration, distribution or purchase, asset coverage with respect to the
outstanding Preferred Stock would be less than 200%.
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 the holders 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 Fund's
subclassification as a closed-end investment company or changes in its
fundamental investment restrictions.
The Adviser has been authorized to repurchase on behalf of the Fund up to
500,000 shares of Common Stock of the Fund in the open market, whenever the
shares are trading at a discount of 10% or more from the net asset value of the
shares. For the six months ended June 30, 2001, the Fund did not repurchase any
shares of Common Stock. All shares of Common Stock repurchased have been
retired.
18
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A FUND COMMON SHARE
OUTSTANDING THROUGHOUT EACH PERIOD: SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2001 ------------------------------------------------------
OPERATING PERFORMANCE: (UNAUDITED) 2000 1999 1998 1997 1996
------------ ------- ------ ------ ------ ------
Net asset value, beginning of period ...... $ 10.02 $ 11.40 $ 11.45 $ 11.48 $ 11.08 $ 11.01
-------- -------- -------- -------- -------- -------
Net investment income ..................... 0.34 0.72 0.51 0.53 0.49 0.49
Net realized and unrealized gain (loss)
on investments .......................... 0.59 (0.52) 0.77 0.65 1.23 0.31
-------- -------- -------- -------- -------- -------
Total from investment operations .......... 0.93 0.20 1.28 1.18 1.72 0.80
-------- -------- -------- -------- -------- -------
Increase in net asset value from capital share
transactions ............................ -- 0.02 -- 0.01 0.01 --
-------- -------- -------- -------- -------- -------
Offering expenses charged to additional
paid-in capital ......................... -- -- -- -- (0.18) --
-------- -------- -------- -------- -------- -------
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
Net investment income ..................... (0.31) (0.57) (0.39) (0.38) (0.40) (0.49)
In excess of net investment income ........ -- -- (0.00)(a) (0.01) -- --
Net realized gain on investments .......... (0.09) (0.71) (0.62) (0.50) (0.56) (0.24)
In excess of net realized gain on investments -- (0.02) (0.02) (0.03) -- --
DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS:
Net investment income ..................... (0.05) (0.13) (0.11) (0.13) (0.08) --
Net realized gain on investments .......... (0.10) (0.17) (0.19) (0.17) (0.11) --
-------- -------- -------- -------- -------- -------
Total distributions ....................... (0.55) (1.60) (1.33) (1.22) (1.15) (0.73)
-------- -------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD ............ $ 10.40 $ 10.02 $ 11.40 $ 11.45 $ 11.48 $ 11.08
======== ======== ======== ======== ======== =======
Net asset value total return+ ............ 7.9% 0.0% 9.4% 8.3% 13.5% 8.4%
======== ======== ======== ======== ======== =======
Market value, end of period ............... $ 10.75 $ 9.13 $ 10.56 $ 11.25 $ 10.31 $ 9.25
======== ======== ======== ======== ======== =======
Total investment return++ ................ 22.5% (1.7)% 3.2% 18.4% 22.2% (7.3)%
======== ======== ======== ======== ======== =======
RATIOS TO AVERAGE NET ASSETS AVAILABLE TO
COMMON STOCK SHAREHOLDERS AND
SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ...... $111,660 $108,066 $120,179 $120,726 $122,382 $89,659
Net assets attributable to common shares,
end of period (in 000's) ................ $ 81,660 $ 78,066 $ 90,179 $ 90,726 $ 92,382 $89,659
Ratio of net investment income to average
net assets attributable to common stock . 6.74%(e) 6.49% 4.35% 4.54% 4.23% 4.33%
Ratio of operating expenses to average
net assets attributable to common stock (b) 1.56%(e) 1.48% 1.80% 1.83% 1.68% 1.45%
Ratio of operating expenses to average
total net assets (d) .................... 1.14%(e) 1.10% 1.36% 1.38% 1.39% 1.45%
Portfolio turnover rate ................... 46% 169% 175% 149% 243% 114%
PREFERRED STOCK:
Liquidation value, end of
period (in 000's) ...................... $ 30,000 $ 30,000 $ 30,000 $ 30,000 $ 30,000 --
Total shares outstanding (in 000's) ....... 1,200 1,200 1,200 1,200 1,200 --
Asset coverage ............................ 372% 360% 401% 402% 408% --
Liquidation preference per share .......... $ 25.00 $ 25.00 $ 25.00 $ 25.00 $ 25.00 --
Average market value (c) .................. $ 25.75 $ 24.31 $ 25.36 $ 26.84 $ 25.69 --
------------------------------
+ Based on net asset value per share, adjusted for reinvestment of
distributions. Total return for the period of less than one year is not
annualized.
++ Based on market value per share, adjusted for reinvestment of distributions.
Total return for the period of less than one year is not annualized.
(a) Amount represents less than $0.005 per share.
(b) The ratio of operating expenses to average net assets attributable to common
stock for the fiscal year ended December 31, 1997 does not include a
reduction of expenses for custodian fee credits on cash balances maintained
with the custodian. Including the custodian fee credit, the ratio of
operating expenses to average net assets attributable to common stock for
the year would have been 1.67%.
(c) Based on weekly prices.
(d) Amounts are attributable to both common and preferred stock assets. Prior to
1997, there was no preferred stock outstanding.
(e) Annualized.
See accompanying notes to financial statements.
19
AUTOMATIC DIVIDEND REINVESTMENT
AND VOLUNTARY CASH PURCHASE PLAN
ENROLLMENT IN THE PLAN
It is the Policy of The Gabelli Convertible Securities Fund, Inc.
("Convertible Securities Fund") to automatically reinvest dividends. As a
"registered" shareholder you automatically become a participant in the
Convertible Securities Fund's Automatic Dividend Reinvestment Plan (the "Plan").
The Plan authorizes the Convertible Securities Fund 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 Convertible Securities Fund. Plan participants may send their stock
certificates to State Street Bank and Trust Company ("State Street") 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 Convertible Securities Fund, Inc.
c/o State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
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 or requesting a copy of the terms of the
Plan may contact State Street at 1 (800) 336-6983.
SHAREHOLDERS WISHING TO LIQUIDATE REINVESTED SHARES held at State Street Bank
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
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 Convertible Securities Fund'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 Convertible Securities Fund's Common Stock.
The valuation date is the dividend or distribution payment date or, if that date
is not a New York Stock Exchange 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 Convertible
Securities Fund valued at market price. If the Convertible Securities Fund
should declare a dividend or capital gains distribution payable only in cash,
State Street will buy Common Stock in the open market, or on the New York Stock
Exchange or elsewhere, for the participants' accounts, except that State Street
will endeavor to terminate purchases in the open market and cause the
Convertible Securities Fund 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 Convertible Securities Fund 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 State Street 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 Convertible Securities Fund. In order to
participate in the Voluntary Cash Purchase Plan, shareholders must have their
shares registered in their own name.
Participants in the Voluntary Cash Purchase Plan have the option of making
additional cash payments to State Street Bank and Trust Company for investments
in the Convertible Securities Fund shares at the then current market price.
Shareholders may send an amount from $250 to $10,000. State Street Bank and
Trust Company will use these funds to purchase shares in the open market on or
about the 1st and 15th of each month. State Street Bank and Trust Company 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 State Street Bank and Trust Company, P.O.
Box 8200, Boston, MA 02266-8200 such that State Street 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 State Street Bank and Trust Company 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 Convertible Securities Fund.
20
DIRECTORS AND OFFICERS
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
ONE CORPORATE CENTER, RYE, NY 10580-1434
DIRECTORS
Mario J. Gabelli, CFA
CHAIRMAN & CHIEF INVESTMENT OFFICER,
GABELLI ASSET MANAGEMENT INC.
E. Val Cerutti
CHIEF EXECUTIVE OFFICER,
CERUTTI CONSULTANTS, INC.
Anthony J. Colavita
ATTORNEY-AT-LAW,
ANTHONY J. COLAVITA, P.C.
Dugald A. Fletcher
PRESIDENT, FLETCHER & COMPANY, INC.
Karl Otto Pohl
FORMER PRESIDENT, DEUTSCHE BUNDESBANK
Anthony R. Pustorino
CERTIFIED PUBLIC ACCOUNTANT,
PROFESSOR EMERITUS, PACE UNIVERSITY
Anthonie C. van Ekris
MANAGING DIRECTOR,
BALMAC INTERNATIONAL, INC.
Salvatore J. Zizza
CHAIRMAN, HALLMARK ELECTRICAL SUPPLIES CORP.
OFFICERS AND PORTFOLIO MANAGERS
Mario J. Gabelli, CFA
PRESIDENT & CHIEF INVESTMENT OFFICER
Bruce N. Alpert
VICE PRESIDENT & TREASURER
Peter W. Latartara
VICE PRESIDENT
A. Hartswell Woodson, III
ASSOCIATE PORTFOLIO MANAGER
James E. McKee
SECRETARY
INVESTMENT ADVISOR
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1434
CUSTODIAN, TRANSFER AGENT AND REGISTRAR
State Street Bank and Trust Company
COUNSEL
Skadden, Arps, Slate, Meagher & Flom LLP
STOCK EXCHANGE LISTING
Common 8.00% Preferred
-------- ---------------
NYSE-Symbol: GCV GCV Pr
Shares Outstanding: 7,855,044 1,200,000
The Net Asset Value appears in the Publicly Traded Funds column, under the
heading "Convertible Securities 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 "Convertible Securities Funds."
The Net Asset Value may be obtained each day by calling (914) 921-5071.
----------------------------------------------------
For general information about the Gabelli Funds,
call 1-800-GABELLI (1-800-422-3554), fax us at
914-921-5118, visit Gabelli Funds' Internet homepage
at: HTTP://WWW.GABELLI.COM,
or e-mail us at: closedend@gabelli.com
----------------------------------------------------
--------------------------------------------------------------------------------
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that the Convertible Securities Fund may from
time to time purchase shares of its common stock in the open market when the
Convertible Securities Fund shares are trading at a discount of 10% or more from
the net asset value of the shares. The Convertible Securities Fund 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.
--------------------------------------------------------------------------------
THE GABELLI CONVERTIBLE SECURITIES FUND, INC.
ONE CORPORATE CENTER
RYE, NY 10580-1434
(914) 921-5070
HTTP://WWW.GABELLI.COM
SEMI-ANNUAL REPORT
JUNE 30, 2001
GBFCS 06/01