UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-05715
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The Gabelli Convertible and Income Securities Fund Inc.
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(Exact name of registrant as specified in charter)
One Corporate Center
Rye, New York 10580-1422
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(Address of principal executive offices) (Zip code)
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center
Rye, New York 10580-1422
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(Name and address of agent for service)
registrant's telephone number, including area code: 1-800-422-3554
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Date of fiscal year end: December 31, 2004
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Date of reporting period: June 30, 2004
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
THE GABELLI CONVERTIBLE AND
INCOME SECURITIES FUND INC.
ONE CORPORATE CENTER
RYE, NY 10580-1422
(914) 921-5070
WWW.GABELLI.COM
SEMI-ANNUAL REPORT
JUNE 30, 2004
GCV PQ2/04
[LOGO]
THE GABELLI
CONVERTIBLE AND
INCOME SECURITIES
FUND INC.
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
Semi-Annual Report
June 30, 2004
TO OUR SHAREHOLDERS,
During the second quarter of 2004, the Gabelli Convertible and Income
Securities Fund's (the "Fund") total return declined 1.1% on a net asset value
("NAV") basis while the Standard & Poor's ("S&P") 500 Index rose 1.7% and the
Lipper Convertible Securities Fund Average fell 0.9%. For the six-month period
ended June 30, 2004, the Fund's NAV total return was 0.1% versus gains of 3.4%
and 2.5% for the S&P 500 Index and the Lipper Convertible Securities Fund
Average, respectively. The Fund's market price declined 8.0% during the second
quarter and declined 1.0% during the six-month period ended June 30, 2004.
Enclosed are the financial statements and the investment portfolio as of
June 30, 2004.
COMPARATIVE RESULTS
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AVERAGE ANNUAL RETURNS THROUGH JUNE 30, 2004 (a)
------------------------------------------------
YEAR TO SINCE
QUARTER DATE 1 YEAR 3 YEAR 5 YEAR 10 YEAR INCEPTION (b)
------- ---- ------ ------ ------ ------- -------------
Gabelli Convertible and Income Securities Fund
NAV Return (c) .................................. (1.14)% 0.11% 5.06% 2.40% 2.66% 6.60% 7.68%
Investment Return (d) ........................... (7.98) (1.00) 4.84 6.20 7.39 N/A(e) 8.40(e)
S&P 500 Index ..................................... 1.72 3.44 19.10 (0.69) (2.20) 11.82 11.31
Lipper Convertible Securities Fund Average ........ (0.93) 2.45 15.33 4.73 5.27 9.53 10.00
(a) Returns represent past performance and do not guarantee future results.
Investment returns and the principal value of an investment will
fluctuate. When shares are sold, they may be worth more or less than their
original cost. The S&P 500 Index is an unmanaged indicator of stock market
performance, while the Lipper Average reflects the average performance of
open-end mutual funds classified in this particular category. Dividends
are considered reinvested. Performance for periods less than one year is
not annualized. 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. Investors should consider the
investment objectives, risks and charges and expenses of the Fund before
investing.
(b) From commencement of investment operations on July 3, 1989.
(c) Total returns and average annual returns reflect changes in net asset
value ("NAV") and reinvestment of distributions at NAV on the ex-dividend
date and adjustments for rights offerings, and are net of expenses. Since
Inception return based on initial net asset value of $10.00.
(d) Total returns and average annual returns reflect changes in closing market
values on the New York Stock Exchange and reinvestment of distributions
and adjustments for rights offerings. Since Inception return based on an
initial offering price of $11.25.
(e) The Fund converted to closed-end status on March 31, 1995 and had no
operating history on the New York Stock Exchange prior to that date.
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SHAREHOLDER MEETING -- MAY 10, 2004 -- FINAL RESULTS
The Annual Meeting of Shareholders was held on May 10, 2004 at the
Greenwich Public Library in Greenwich, Connecticut. At that meeting, common
shareholders and preferred shareholders voting as a single class elected Mario
J. Gabelli and Karl Otto Pohl as Directors of the Fund. There were 9,647,826
votes and 9,622,500 votes cast in favor of these Directors and 65,172 votes and
90,499 votes withheld for these Directors, respectively. Preferred shareholders
voting as a separate class elected Werner J. Roeder as a Director of the Fund.
There were 955,930 votes cast in favor of this Director and 7,240 votes withheld
for this Director.
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.
WWW.GABELLI.COM
Please visit us on the Internet. Our homepage at www.gabelli.com contains
information about Gabelli Asset Management Inc., the Gabelli Mutual Funds, IRAs,
401(k)s, current and historical quarterly reports, closing prices and other
current news. We welcome your comments and questions via e-mail at
closedend@gabelli.com.
You may sign up for our e-mail alerts at www.gabelli.com and receive early
notice of quarterly report availability, news events, media sightings, mutual
fund prices and performance, and access to the Gabelli & Company, Inc. research
library.
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We have separated the portfolio manager's commentary from the financial
statements and investment portfolio due to new 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. The financial
statements and investment portfolio are mailed separately. Both the commentary
and the financial statements, including the portfolio of investments, will be
available on our website at www.gabelli.com/funds.
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A description of the Fund's proxy voting policies and procedures and how the
Fund voted proxies relating to portfolio securities during the most recent
12-month period ended June 30, 2004 are available (i) without charge, upon
request, by calling 800-GABELLI (800-422-3554); (ii) by writing to The Gabelli
Funds at One Corporate Center, Rye, NY 10580-1422; and (iii) on the Securities
and Exchange Commission's website at www.sec.gov.
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2
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
PORTFOLIO OF INVESTMENTS
JUNE 30, 2004 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT COST VALUE
----------- ----------- -----------
CONVERTIBLE CORPORATE BONDS -- 26.6%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 6.1%
$ 1,600,000 GenCorp Inc., Sub. Deb. Cv.,
5.750%, 04/15/07 ....................................... $ 1,573,868 $ 1,696,000
300,000 Pep Boys - Manny, Moe
& Jack, Cv.,
4.250%, 06/01/07 ....................................... 277,942 368,250
6,900,000 Standard Motor Products Inc.,
Sub. Deb. Cv.,
6.750%, 07/15/09 ....................................... 5,426,144 6,831,000
----------- -----------
7,277,954 8,895,250
----------- -----------
AVIATION: PARTS AND SERVICES -- 2.7%
4,028,000 Kaman Corp., Sub. Deb. Cv.,
6.000%, 03/15/12 ....................................... 3,833,670 4,002,825
----------- -----------
BROADCASTING -- 0.6%
950,000 Sinclair Broadcast Group Inc.,
Sub. Deb. Cv.,
4.875%, 07/15/18 ....................................... 976,644 883,500
----------- -----------
BUSINESS SERVICES -- 4.3%
900,000 BBN Corp., Sub. Deb. Cv.,
6.000%, 04/01/12+ (a)(c) ............................... 882,893 0
3,000,000 Franklin Resources Inc., Cv.,
Zero Coupon, 05/11/31+ ................................. 1,818,481 1,845,000
500,000 Navistar Financial Corp.,
Sub. Deb. Cv.,
4.750%, 04/01/09 ....................................... 445,992 493,750
Trans-Lux Corp.,
Sub. Deb. Cv.,
2,600,000 8.250%, 03/01/12 ....................................... 2,503,758 2,509,000
1,500,000 7.500%, 12/01/06 ....................................... 1,508,158 1,520,625
----------- -----------
7,159,282 6,368,375
----------- -----------
CABLE -- 1.7%
400,000 Adelphia Communications
Corp., Sub. Deb. Cv.,
3.250%, 05/01/21+ (c) .................................. 127,000 150,000
2,500,000 Charter Communications
Inc., Cv.,
4.750%, 06/01/06 ....................................... 1,769,113 2,318,750
----------- -----------
1,896,113 2,468,750
----------- -----------
COMMUNICATIONS EQUIPMENT -- 2.6%
1,800,000 Agere Systems Inc.,
Sub. Deb. Cv.,
6.500%, 12/15/09 ....................................... 1,833,433 2,097,000
200,000 Corning Inc., Sub. Deb. Cv.,
Zero Coupon, 11/08/15+ ................................. 147,254 157,250
1,000,000 Lucent Technologies Inc.,
Sub. Deb. Cv.,
8.000%, 08/01/31 ....................................... 1,066,739 1,127,500
500,000 Nortel Networks Corp., Cv.,
4.250%, 09/01/08 ....................................... 477,540 481,250
----------- -----------
3,524,966 3,863,000
----------- -----------
CONSUMER PRODUCTS -- 0.1%
100,000 Church & Dwight Co. Inc., Cv.,
5.250%, 08/15/33 (b) ................................... 100,000 122,000
----------- -----------
DIVERSIFIED INDUSTRIAL -- 0.4%
500,000 GATX Corp., Cv.,
7.500%, 02/01/07 (b) ................................... 500,000 586,250
----------- -----------
ELECTRONICS -- 1.1%
10,000 Artesyn Technologies,
Sub. Deb. Cv.,
5.500%, 08/15/10 (b) ................................... 10,757 14,275
495,000 Cypress Semiconductor Inc.,
Sub. Deb. Cv.,
3.750%, 07/01/05 ....................................... 476,968 491,906
1,000,000 Oak Industries Inc.,
Sub. Deb. Cv.,
4.875%, 03/01/08 ....................................... 838,382 1,045,000
----------- -----------
1,326,107 1,551,181
----------- -----------
ENERGY AND UTILITIES -- 1.1%
500,000 Devon Energy Corp.,
Sub. Deb. Cv.,
4.950%, 08/15/08 ....................................... 499,766 515,000
1,500,000 Mirant Corp., Sub. Deb. Cv.,
2.500%, 06/15/21+ (c) .................................. 1,026,728 846,562
257,000 Moran Energy Inc.,
Sub. Deb. Cv.,
8.750%, 01/15/08 ....................................... 182,761 253,145
----------- -----------
1,709,255 1,614,707
----------- -----------
EQUIPMENT AND SUPPLIES -- 0.9%
1,272,000 Robbins & Myers Inc.,
Sub. Deb. Cv.,
8.000%, 01/31/08 ....................................... 1,289,129 1,346,730
----------- -----------
FOOD AND BEVERAGE -- 0.3%
700,000 Parmalat Capital, Cv.,
1.000%, 12/31/05+ (c) .................................. 806,513 160,111
800,000 Parmalat Netherlands BV, Cv.,
0.875%, 06/30/21+ (c) .................................. 869,837 265,132
----------- -----------
1,676,350 425,243
----------- -----------
HEALTH CARE -- 0.3%
Apogent Technologies Inc., Cv.,
50,000 2.250%, 10/15/21 (b) ................................... 50,263 55,625
50,000 2.250%, 10/15/21 ....................................... 50,107 55,625
400,000 IVAX Corp., Sub. Deb. Cv.,
4.500%, 05/15/08 (b) ................................... 345,344 398,000
150,000 Sabratek Corp., Sub. Deb. Cv.,
6.000%, 04/15/05+ (a)(c) ............................... 84,763 0
----------- -----------
530,477 509,250
----------- -----------
HOTELS AND GAMING -- 1.0%
1,000,000 Mandalay Resort Group, Cv.,
2.300%, 03/21/33 ....................................... 1,395,632 1,412,100
10,000 Wynn Resorts, Sub. Deb. Cv.,
6.000%, 07/15/15 (b) ................................... 10,284 18,988
----------- -----------
1,405,916 1,431,088
----------- -----------
See accompanying notes to financial statements.
3
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2004 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT COST VALUE
----------- ----------- -----------
MANUFACTURED HOUSING AND RECREATIONAL VEHICLES -- 0.1%
$ 100,000 Fleetwood Enterprises Inc., Cv.,
5.000%, 12/15/23 (b) ................................... $ 100,000 $ 151,500
----------- -----------
REAL ESTATE -- 0.9%
1,450,000 Palm Harbor Homes Inc., Cv.,
3.250%, 05/15/24 (b) ................................... 1,437,179 1,392,000
----------- -----------
RETAIL -- 0.1%
60,000 Costco Companies Inc.,
Sub. Deb. Cv.,
Zero Coupon, 08/19/17+ ................................. 45,808 56,775
100,000 School Specialty Inc.,
Sub. Deb. Cv.,
6.000%, 08/01/08 ....................................... 102,560 114,625
----------- -----------
148,368 171,400
----------- -----------
TELECOMMUNICATIONS -- 0.4%
50,000 Commonwealth Telephone
Enterprises Inc., Cv.,
3.250%, 07/15/23 (b) ................................... 49,638 51,000
500,000 Rogers Communications Inc.,
Sub. Deb. Cv.,
2.000%, 11/26/05 ....................................... 456,572 474,375
----------- -----------
506,210 525,375
----------- -----------
WIRELESS COMMUNICATIONS -- 1.9%
1,500,000 Nextel Communications Inc., Cv.,
5.250%, 01/15/10 ....................................... 1,067,626 1,466,250
2,500,000 United States Cellular Corp.,
Sub. Deb. Cv.,
Zero Coupon, 06/15/15+ ................................. 1,479,552 1,312,500
----------- -----------
2,547,178 2,778,750
----------- -----------
TOTAL CONVERTIBLE
CORPORATE BONDS ......................................... 38,010,949 39,087,174
----------- -----------
SHARES
-----------
CONVERTIBLE PREFERRED STOCKS -- 16.6%
AEROSPACE -- 0.7%
8,000 Northrop Grumman Corp.,
7.000% Cv. Pfd., Ser. B ................................ 932,160 1,052,000
----------- -----------
AUTOMOTIVE -- 0.5%
3,000 Ford Motor Co. Capital Trust II,
6.500% Cv. Pfd. ........................................ 142,705 164,280
General Motors Corp.,
13,000 5.250% Cv. Pfd., Ser. B ................................ 325,000 321,230
9,000 4.500% Cv. Pfd., Ser. A ................................ 225,000 230,040
----------- -----------
692,705 715,550
----------- -----------
AVIATION: PARTS AND SERVICES -- 3.8%
49,000 Coltec Capital Trust,
5.250% Cv. Pfd. ........................................ 2,032,375 2,336,565
33,500 Sequa Corp.,
$5.00 Cv. Pfd. ......................................... 2,545,617 3,257,875
----------- -----------
4,577,992 5,594,440
----------- -----------
MARKET
SHARES COST VALUE
----------- ----------- -----------
BROADCASTING -- 3.6%
100 Gray Television Inc.,
8.000% Cv. Pfd.,
Ser. C (a) ............................................. $ 1,000,000 $ 1,010,000
100,000 Sinclair Broadcast Group Inc.,
6.000% Cv. Pfd., Ser. D ................................ 4,681,250 4,325,000
----------- -----------
5,681,250 5,335,000
----------- -----------
BUSINESS SERVICES -- 1.0%
15,133 Interep National Radio Sales Inc.,
4.000% Cv. Pfd., Ser. A (a) ............................ 1,514,203 1,513,270
20,000 Key3Media Group,
5.500% Cv. Pfd. (a) .................................... 500,000 117
----------- -----------
2,014,203 1,513,387
----------- -----------
CABLE AND SATELLITE -- 0.8%
55,000 CVC Equity Securities Trust I,
6.500% Cv. Pfd. ........................................ 1,117,998 1,142,900
----------- -----------
DIVERSIFIED INDUSTRIAL -- 0.5%
2,500 GATX Corp.,
$2.50 Cv. Pfd. ......................................... 349,575 312,500
WHX Corp.,
52,100 $3.75 Cv. Pfd., Ser. B+ ................................ 262,338 211,005
28,000 6.500% Cv. Pfd., Ser. A+ ............................... 216,762 128,800
----------- -----------
828,675 652,305
----------- -----------
ENERGY AND UTILITIES -- 0.3%
6,000 AES Trust III,
6.750% Cv. Pfd. ........................................ 229,530 252,360
500 Cinergy Corp.,
9.500% Cv. Pfd. ........................................ 25,025 29,725
4,000 FPL Group Inc.,
8.500% Cv. Pfd. ........................................ 207,575 220,400
----------- -----------
462,130 502,485
----------- -----------
ENTERTAINMENT -- 1.8%
2,000 Metromedia International
Group Inc.,
7.250% Cv. Pfd.+ ....................................... 26,611 21,500
76,900 Rainbow Equity Securities
Trust II,
6.250% Cv. Pfd. ........................................ 1,551,693 1,691,031
39,000 Six Flags Inc.,
7.250% Cv. Pfd. ........................................ 733,580 873,600
----------- -----------
2,311,884 2,586,131
----------- -----------
TELECOMMUNICATIONS -- 3.3%
4,000 ALLTEL Corp.,
7.750% Cv. Pfd. ........................................ 185,107 200,640
15,000 Cincinnati Bell Inc.,
6.750% Cv. Pfd., Ser. B ................................ 427,662 629,700
50,000 Citizens Communications Co.,
5.000% Cv. Pfd. ........................................ 2,491,576 2,500,000
See accompanying notes to financial statements.
4
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2004 (UNAUDITED)
MARKET
SHARES COST VALUE
----------- ----------- -----------
CONVERTIBLE PREFERRED STOCKS (CONTINUED)
TELECOMMUNICATIONS (CONTINUED)
800 Lucent Technologies Capital
Trust I,
7.750% Cv. Pfd. ........................................ $ 556,750 $ 944,000
12,000 Philippine Long Distance
Telephone Co.,
$3.50 Cv. Pfd., Ser. III ............................... 471,755 549,000
----------- -----------
4,132,850 4,823,340
----------- -----------
WIRELESS COMMUNICATIONS -- 0.3%
2,000 Andrew Corp.,
7.750% Cv. Pfd., Ser. D ................................ 96,350 400,000
----------- -----------
TOTAL CONVERTIBLE
PREFERRED STOCKS ........................................ 23,178,252 24,317,538
----------- -----------
COMMON STOCKS -- 23.8%
AEROSPACE -- 1.3%
145,000 Titan Corp.+ ............................................. 3,168,569 1,882,100
----------- -----------
AUTOMOTIVE: PARTS AND ACCESSORIES -- 0.1%
3,000 Genuine Parts Co. ........................................ 98,400 119,040
----------- -----------
AVIATION: PARTS AND SERVICES -- 0.1%
5,000 Kaman Corp., Cl. A ....................................... 65,268 69,950
----------- -----------
BROADCASTING -- 0.0%
35,000 Granite Broadcasting Corp.+ .............................. 37,187 24,500
1,500 Young Broadcasting Inc.,
Cl. A+ ................................................. 21,540 19,725
----------- -----------
58,727 44,225
----------- -----------
ENERGY AND UTILITIES -- 6.3%
10,000 Allegheny Energy Inc.+ ................................... 133,000 154,100
8,000 BP plc, ADR .............................................. 316,479 428,560
3,000 CH Energy Group Inc. ..................................... 83,900 139,320
8,000 ConocoPhillips ........................................... 449,686 610,320
4,000 Consolidated Edison Inc. ................................. 158,184 159,040
50,000 Duke Energy Corp. ........................................ 922,519 1,014,500
25,000 Exxon Mobil Corp. ........................................ 912,280 1,110,250
12,000 FPL Group Inc. ........................................... 756,170 767,400
20,000 Great Plains Energy Inc. ................................. 598,719 594,000
17,000 KeySpan Corp. ............................................ 617,600 623,900
10,000 NiSource Inc. (SAILS)+ ................................... 20,000 25,200
40,000 Northeast Utilities ...................................... 722,124 778,800
10,000 Progress Energy Inc., CVO+ ............................... 5,200 3,600
10,000 Royal Dutch Petroleum Co. ................................ 453,000 516,700
20,000 SEMCO Energy Inc. ........................................ 185,643 116,400
9,000 SJW Corp. ................................................ 248,354 306,000
45,000 Unisource Energy Corp. ................................... 1,107,543 1,118,250
50,000 Xcel Energy Inc. ......................................... 854,774 835,500
----------- -----------
8,545,175 9,301,840
----------- -----------
FINANCIAL SERVICES -- 2.0%
25,000 Alliance Capital Management
Holding LP ............................................. 839,216 848,750
13,000 Argonaut Group Inc.+ ..................................... 230,178 239,590
40,000 Charter One Financial Inc. ............................... 1,758,056 1,767,600
2,000 H&R Block Inc. ........................................... 94,098 95,360
----------- -----------
2,921,548 2,951,300
----------- -----------
FOOD AND BEVERAGE -- 3.7%
2,000 Allied Domecq plc, ADR ................................... 68,640 69,380
2,000 Cadbury Schweppes
plc, ADR ............................................... 68,010 70,160
2,000 Coca-Cola Co. ............................................ 103,720 100,960
65,000 Dreyer's Grand Ice Cream
Holdings Inc., Cl. A ................................... 5,076,642 5,140,850
----------- -----------
5,317,012 5,381,350
----------- -----------
HEALTH CARE -- 2.5%
12,000 Bristol-Myers Squibb Co. ................................. 319,665 294,000
2,000 Eli Lilly & Co. .......................................... 130,600 139,820
25,000 Merck & Co. Inc. ......................................... 1,126,943 1,187,500
50,000 Pfizer Inc. .............................................. 1,696,205 1,714,000
20,000 Schering-Plough Corp. .................................... 316,285 369,600
----------- -----------
3,589,698 3,704,920
----------- -----------
HOTELS AND GAMING -- 2.9%
300,000 Hilton Group plc ......................................... 1,438,709 1,501,577
40,000 Mandalay Resort Group .................................... 2,724,000 2,745,600
----------- -----------
4,162,709 4,247,177
----------- -----------
REAL ESTATE INVESTMENT TRUSTS -- 0.3%
20,000 Keystone Property Trust .................................. 477,760 480,600
----------- -----------
RETAIL -- 0.1%
5,000 Safeway Inc.+ ............................................ 112,280 126,700
----------- -----------
SATELLITE -- 0.0%
19,500 Loral Space &
Communications Ltd.+ ................................... 3,765 2,828
----------- -----------
TELECOMMUNICATIONS -- 1.1%
10,000 AT&T Corp. ............................................... 222,661 146,300
3,000 BellSouth Corp. .......................................... 75,500 78,660
6,000 CenturyTel Inc. .......................................... 177,121 180,240
15,000 Manitoba Telecom
Services Inc. .......................................... 500,730 507,365
5,000 SBC Communications Inc. .................................. 113,100 121,250
15,000 Verizon Communications Inc. .............................. 510,837 542,850
----------- -----------
1,599,949 1,576,665
----------- -----------
WIRELESS COMMUNICATIONS -- 3.4%
350,000 AT&T Wireless Services Inc.+ ............................. 4,949,385 5,012,000
49 Winstar Communications Inc.+ ............................. 438 0
----------- -----------
4,949,823 5,012,000
----------- -----------
TOTAL COMMON
STOCKS .................................................. 35,210,036 34,900,695
----------- -----------
See accompanying notes to financial statements.
5
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2004 (UNAUDITED)
MARKET
SHARES COST VALUE
----------- ----------- -----------
PREFERRED STOCKS -- 2.1%
BROADCASTING -- 0.8%
2,127 Granite Broadcasting Corp.,
12.750% Pfd.+ .......................................... $ 879,779 $ 1,196,438
------------ ------------
EQUIPMENT AND SUPPLIES -- 1.1%
65,000 Fedders Corp.,
8.600% Pfd., Ser. A .................................... 1,537,047 1,589,250
------------ ------------
PUBLISHING -- 0.2%
9,777 News Corp. Ltd., Pfd., ADR ............................... 283,729 321,468
------------ ------------
TELECOMMUNICATIONS -- 0.0%
3,773 PTV Inc., 10.000% Pfd., Ser. A ........................... 0 28,863
------------ ------------
TOTAL PREFERRED
STOCKS .................................................. 2,700,555 3,136,019
------------ ------------
PRINCIPAL
AMOUNT
--------
CORPORATE BONDS -- 0.9%
CONSUMER SERVICES -- 0.0%
$1,100,000 Ogden Corp., Sub. Deb.,
Zero Coupon, 06/01/49+ (c) ............................. 1,090,087 0
------------ ------------
DIVERSIFIED INDUSTRIAL -- 0.9%
2,000,000 GP Strategies Corp., Sub. Deb.,
6.000%, 08/14/08 (a) ................................... 1,447,083 1,350,923
------------ ------------
TELECOMMUNICATIONS -- 0.0%
80,000 Amnex Inc., Sub. Deb.,
Zero Coupon,
09/25/49+ (b)(c) ....................................... 71,773 0
------------ ------------
TOTAL CORPORATE
BONDS ................................................... 2,608,943 1,350,923
------------ ------------
SHARES
--------
WARRANTS -- 0.4%
BUSINESS SERVICES -- 0.0%
87,500 Interep National Radio
Sales Inc.,+ ........................................... 0 0
------------ ------------
CONSUMER PRODUCTS -- 0.0%
4,331 Pillowtex Corp.,
expire 11/24/09+ ....................................... 120,955 1
------------ ------------
DIVERSIFIED INDUSTRIAL -- 0.4%
250,000 GP Strategies Corp.,
expire 08/14/08+ (a) ................................... 637,065 637,065
------------ ------------
TOTAL WARRANTS ........................................... 758,020 637,066
------------ ------------
PRINCIPAL MARKET
AMOUNT COST VALUE
----------- ----------- -----------
U.S. GOVERNMENT OBLIGATIONS -- 29.6%
$43,474,000 U.S. Treasury Bills,
0.945% to 1.297%++,
07/01/04 to 10/14/04 ................................... $ 43,438,793 $ 43,437,527
------------ ------------
TOTAL INVESTMENTS -- 100.0% ........................................... $145,369,989 146,866,942
============
OTHER ASSETS IN EXCESS OF LIABILITIES ................................. 1,306,185
------------
PREFERRED STOCK
(991,800 preferred shares outstanding) .............................. (49,770,000)
------------
NET ASSETS -- COMMON STOCK
(11,565,300 common shares outstanding) .............................. $ 98,403,127
============
NET ASSET VALUE PER COMMON SHARE
($98,403,127 / 11,565,300 shares outstanding) ...................... $8.51
=====
----------
For Federal tax purposes:
Aggregate cost ........................................... $145,905,548
============
Gross unrealized appreciation ............................ $ 7,997,007
Gross unrealized depreciation ............................ (7,035,613)
------------
Net unrealized appreciation .............................. $ 961,394
============
----------
(a) Security fair valued under procedures established by the Board of
Directors. The procedures may include reviewing available financial
information about the company and reviewing valuation of comparable
securities and other factors on a regular basis. At June 30, 2004, the
market value of fair valued securities amounted to $4,511,375 or 3.1% of
total net assets.
(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,
2004, the market value of Rule 144A securities amounted to $2,789,638 or
1.90% of total investments. For securities deemed illiquid by the Adviser,
additional details are included in the Notes to Financial Statements (Note
8).
(c) Bond in default.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR - American Depository Receipt.
CVO - Contingent Value Obligation.
SAILS - Stock Appreciation Income Linked Securities.
See accompanying notes to financial statements.
6
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2004 (UNAUDITED)
ASSETS:
Investments, at value (cost $145,369,989) .................................... $ 146,866,942
Dividends and interest receivable ............................................ 878,086
Unrealized appreciation on swap contracts .................................... 714,665
-------------
TOTAL ASSETS ................................................................. 148,459,693
-------------
LIABILITIES:
Dividends payable ............................................................ 13,323
Payable for investment advisory fees ......................................... 80,655
Payable for swap interest expense ............................................ 39,497
Payable for shareholder communications expense ............................... 23,236
Payable for payroll expenses ................................................. 22,861
Payable for legal and audit fees ............................................. 28,255
Payable to custodian ......................................................... 7,032
Payable for shareholder services fees ........................................ 10,234
Other accrued expenses and liabilities ....................................... 61,473
-------------
TOTAL LIABILITIES ............................................................ 286,566
-------------
PREFERRED STOCK:
Series B Cumulative Preferred Stock (6.00%, $25
liquidation value, $0.001 par value, 1,000,000
shares authorized with 990,800 shares issued
and outstanding) ........................................................... 24,770,000
Series C Cumulative Preferred Stock (Auction Rate,
$25,000 liquidation value, $0.001 par value,
1,000 shares authorized with 1,000 shares issued
and outstanding) ........................................................... 25,000,000
-------------
TOTAL PREFERRED STOCK ........................................................ 49,770,000
-------------
NET ASSETS ATTRIBUTABLE TO COMMON
STOCK SHAREHOLDERS ......................................................... $ 98,403,127
=============
NET ASSETS ATTRIBUTABLE TO COMMON STOCK
SHAREHOLDERS CONSIST OF:
Capital stock, at par value .................................................. $ 11,565
Additional paid-in capital ................................................... 100,647,222
Accumulated distributions in excess of net
investment income .......................................................... (3,322,225)
Accumulated net realized loss on investments, swap
contracts and foreign currency transactions ................................ (1,145,053)
Net unrealized appreciation on investments and
swap contracts ............................................................. 2,211,618
-------------
TOTAL NET ASSETS ............................................................. $ 98,403,127
=============
NET ASSET VALUE PER COMMON SHARE
($98,403,127 / 11,565,300 shares outstanding;
998,000,000 shares authorized of $0.001 par value) ........................... $8.51
=====
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2004 (UNAUDITED)
INVESTMENT INCOME:
Dividends (net of foreign taxes of $7,314) ................................... $ 1,114,161
Interest ..................................................................... 1,654,578
-----------
TOTAL INVESTMENT INCOME ...................................................... 2,768,739
-----------
EXPENSES:
Investment advisory fees ..................................................... 505,721
Payroll ...................................................................... 52,673
Shareholder communications expenses .......................................... 42,114
Auction agent fees ........................................................... 31,200
Directors' fees .............................................................. 31,039
Legal and audit fees ......................................................... 27,206
Shareholder services fees .................................................... 23,805
Custodian fees ............................................................... 19,521
Miscellaneous expenses ....................................................... 43,682
-----------
TOTAL EXPENSES ............................................................... 776,961
-----------
NET INVESTMENT INCOME ........................................................ 1,991,778
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, SWAP CONTRACTS AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments ............................................. 574,974
Net realized gain on foreign currency transactions ........................... 26,740
Net realized loss on swap contracts .......................................... (257,946)
-----------
Net realized gain on investments, swap contracts
and foreign currency transactions .......................................... 343,768
-----------
Net change in unrealized appreciation/depreciation
on investments, swap contracts and foreign
currency transactions ...................................................... (1,578,974)
-----------
NET REALIZED AND UNREALIZED LOSS ON
INVESTMENTS, SWAP CONTRACTS AND
FOREIGN CURRENCY TRANSACTIONS .............................................. (1,235,206)
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ............................................................ 756,572
-----------
Total Distributions to Preferred Stock Shareholders .......................... (879,931)
-----------
NET DECREASE IN NET ASSETS ATTRIBUTABLE TO
COMMON STOCK SHAREHOLDERS RESULTING
FROM OPERATIONS ............................................................ $ (123,359)
===========
See accompanying notes to financial statements.
7
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO COMMON SHAREHOLDERS
SIX MONTHS ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
---------------- -----------------
OPERATIONS:
Net investment income ..................................................................... $ 1,991,778 $ 3,437,267*
Net realized gain on investments and foreign currency transactions ........................ 343,768 1,908,501*
Net change in unrealized appreciation/depreciation on investments, swap contracts and
foreign currency transactions ........................................................... (1,578,974) 11,414,212
------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................................... 756,572 16,759,980
------------- -------------
DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS:
Net investment income ..................................................................... (879,931) (1,198,833)
Net realized short-term gain on investments and foreign currency transactions ............. -- (21,214)
Net realized long-term gain on investments and foreign currency transactions .............. -- (333,018)
------------- -------------
TOTAL DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS ....................................... (879,931) (1,553,065)
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO COMMON STOCK SHAREHOLDERS
RESULTING FROM OPERATIONS ............................................................... (123,359) 15,206,915
------------- -------------
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
Net investment income ..................................................................... (1,260,094) (1,939,172)
Net realized short-term gain on investments and foreign currency transactions ............. -- (21,299)
Net realized long-term gain on investments and foreign currency transactions .............. -- (319,084)
Return of capital ......................................................................... (3,322,225)** (6,705,640)
------------- -------------
TOTAL DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS .......................................... (4,582,319) (8,985,195)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Net increase in net assets from common shares issued upon reinvestment of
dividends and distributions ............................................................. 1,437,890 2,959,921
Net increase in net assets from repurchase of preferred shares ............................ 12,778 --
Offering costs for preferred shares charged to paid-in capital ............................ -- (1,297,744)
------------- -------------
NET INCREASE IN NET ASSETS FROM FUND SHARE TRANSACTIONS ................................... 1,450,668 1,662,177
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO COMMON STOCK SHAREHOLDERS ........... (3,255,010) 7,883,897
------------- -------------
NET ASSETS ATTRIBUTABLE TO COMMON STOCK SHAREHOLDERS:
Beginning of period ....................................................................... 101,658,137 93,774,240
------------- -------------
End of period ............................................................................. $ 98,403,127 $ 101,658,137
============= =============
----------
* As a result of recent changes in generally accepted accounting principles,
the Fund has reclassified periodic payments made under interest rate swap
agreements, previously included within interest income, as a component of
realized gain (loss) in the statement of operations. The effect of this
reclassification was to increase net investment income and decrease
realized gain by $371,093.
** Based on current earnings and subject to change and recharacterization at
fiscal year end.
See accompanying notes to financial statements.
8
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION. The Gabelli Convertible and Income 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 as The Gabelli Convertible Securities
Fund, Inc. The Board of Directors (the "Board"), 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.
Effective August 1, 2002, the Fund changed its name to The Gabelli
Convertible and Income Securities Fund Inc. The Fund continues to maintain its
investment objective of seeking a high level of total return through a
combination of current income and capital appreciation. Consistent with its new
name, under normal market conditions, the Fund will invest at least 80% of its
net assets in a combination of convertible securities and income producing
securities (the "80% Policy"). The Fund expects to continue its practice of
focusing on convertible securities to the extent attractive opportunities are
available.
The 80% Policy may be changed without shareholder approval. However, the
Fund has adopted a policy to provide shareholders with at least 60 days' prior
notice of the implementation of any change in the 80% Policy.
2. SIGNIFICANT ACCOUNTING POLICIES. The preparation of financial
statements in accordance with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates. The following is a summary of significant accounting
policies followed by the Fund in the preparation of its financial statements.
SECURITY VALUATION. Portfolio securities listed or traded on a nationally
recognized securities exchange or traded in the U.S. over-the-counter market for
which market quotations are readily available are valued at the last quoted sale
price or a market's official closing price as of the close of business on the
day the securities are being valued. If there were no sales that day, the
security is valued at the average of the closing bid and asked prices or, if
there were no asked prices quoted on that day, then the security is valued at
the closing bid price on that day. If no bid or asked prices are quoted on such
day, the security is valued at the most recently available price or, if the
Board 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 foreign markets are generally
valued at the preceding closing values of such securities on their respective
exchanges or if after the close, market conditions change significantly, certain
foreign securities may be fair valued pursuant to procedures established by the
Board. Debt instruments that are not credit impaired with remaining maturities
of 60 days or less are valued at amortized cost, unless the Board determines
such does not reflect the securities' fair value, in which case these securities
will be valued at their fair value as determined by the Board. Debt instruments
having a maturity greater than 60 days for which market quotations are readily
available are valued at the latest average of the bid and asked prices. If there
were no asked prices quoted on such day, the security is valued using the
closing bid price. Futures contracts are valued at the official 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 valued at their fair value as determined in good faith under
procedures established by and under the general supervision of the Board. Fair
valuation methodologies and procedures may include, but are not limited to:
analysis and review of available financial and non-financial information about
the company; comparisons to the valuation and changes in valuation of similar
securities, including a comparison of foreign securities to the equivalent U.S.
dollar value ADR securities at the close of the U.S. exchange; and evaluation of
any other information that could be indicative of the value of the security.
9
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
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 102% of the dollar amount invested by the Fund in each agreement. The
Fund will make payment for such securities only upon physical delivery or upon
evidence of book entry transfer of the collateral to the account of the
custodian. To the extent that any repurchase transaction exceeds one business
day, the value of the collateral is marked-to-market on a daily basis to
maintain the adequacy of the collateral. If the seller defaults and the value of
the collateral declines or if bankruptcy proceedings are commenced with respect
to the seller of the security, realization of the collateral by the Fund may be
delayed or limited.
SWAP AGREEMENTS. The Fund may enter into interest rate swap or cap
transactions. The use of interest rate swaps and caps is a highly specialized
activity that involves investment techniques and risks different from those
associated with ordinary portfolio security transactions. In an interest rate
swap, the Fund would agree to pay to the other party to the interest rate swap
(which is known as the "counterparty") periodically a fixed rate payment in
exchange for the counterparty agreeing to pay to the Fund periodically a
variable rate payment that is intended to approximate the Fund's variable rate
payment obligation on the Series C Preferred Stock. In an interest rate cap, the
Fund would pay a premium to the interest rate cap to the counterparty and, to
the extent that a specified variable rate index exceeds a predetermined fixed
rate, would receive from the counterparty payments of the difference based on
the notional amount of such cap. Interest rate swap and cap transactions
introduce additional risk because the Fund would remain obligated to pay
preferred stock dividends when due in accordance with the Articles Supplementary
even if the counterparty defaulted. Depending on the general state of short-term
interest rates and the returns on the Fund's portfolio securities at that point
in time, such a default could negatively affect the Fund's ability to make
dividend payments for the Series C Preferred Stock. In addition, at the time an
interest rate swap or cap 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. If this occurs, it could have a negative impact on the
Fund's ability to make dividend payments on the Series C Preferred Stock.
The Fund has entered into one interest rate swap agreement with Citibank
N.A. Under the agreement the Fund receives a floating rate of interest and pays
a respective fixed rate of interest on the nominal value of the swap. Details of
the swap at June 30, 2004 are as follows:
NOTIONAL FLOATING RATE* TERMINATION UNREALIZED
AMOUNT FIXED RATE (RATE RESET MONTHLY) DATE APPRECIATION
------ ---------- -------------------- ----------- ------------
$25,000,000 3.145% 1.12% April 2, 2008 $714,665
----------
*Based on Libor (London Interbank Offered Rate).
As a result of recent FASB Emerging Issues Task Force consensus (and
subsequent related SEC staff guidance), the Fund has reclassified periodic
payments made under interest rate swap agreement, previously included within
interest income, as a component of realized gain (loss) in the statement of
operations. For consistency, similar reclassifications have been made to amounts
appearing in the previous year's statement of changes in net assets and the per
share amounts in prior years financial highlights. Prior years net investment
income ratios in the financial highlights have also been modified accordingly.
This reclassification increased net investment income and decreased net
realized gains by $371,093 for the year ended December 31, 2003, but had no
effect on the Fund's net asset value, either in total or per share, or its total
increase (decrease) in net assets from operations during any period.
10
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
For the year ended December 31, 2003 financial highlights
reclassifications were as follows: net investment income per share increased by
$0.03, the ratio of net investment income to average net assets attributable to
common shares increased by 0.38%, the ratio of operating expenses to average net
assets attributable to common shares decreased by 0.38%, and the ratio of
operating expenses to average total net assets including liquidation value of
preferred shares decreased by 0.26%.
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,
2004, 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, 2004, the Fund held no forward
foreign exchange contracts.
FOREIGN CURRENCY TRANSACTIONS. 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 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
11
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
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 6.00% Series B Cumulative Preferred Stock and
Series C Auction Rate Cumulative Preferred Stock ("Cumulative Preferred Stock")
are accrued on a daily basis and are determined as described in Note 5.
For the year ended December 31, 2003, reclassifications were made to
increase accumulated distributions in excess of net investment income for
$11,140 and to decrease accumulated net realized loss on investments, securities
sold short and foreign currency transactions for $11,140 with an offsetting
adjustment to additional paid-in capital.
The tax character of distributions paid during the fiscal year ended
December 31, 2003 was as follows:
YEAR ENDED
DECEMBER 31, 2003
------------------------
COMMON PREFERRED
---------- ----------
DISTRIBUTIONS PAID FROM:
Ordinary income
(inclusive of short term capital gains) $1,960,471 $1,220,047
Net long term capital gains .............. 319,084 333,018
Non-taxable return of capital ............ 6,705,640 --
---------- ----------
Total distributions paid ................. $8,985,195 $1,553,065
========== ==========
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. It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its net investment company taxable income and
net capital gains. Therefore, no provision for Federal income taxes is required.
As of December 31, 2003, the components of accumulated earnings/(losses)
on a tax basis were as follows:
Net unrealized appreciation .............. $ 2,672,864
Other .................................... (222,846)
-----------
Total accumulated gain ................... $ 2,450,018
===========
Other is primarily due to dividends payable and defaulted interest.
For the year ended December 31, 2003, the Fund deducted net capital loss
carryovers from prior years against its current year net capital gains in the
amount of $1,343,575.
Differences between amounts reported on a tax basis and those reported on
a book basis are primarily due to timing of recognition of capital gains on
investments held by the Fund.
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 plus liquidation value of preferred stock. 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 or corresponding swap rate of the Cumulative Preferred Stock for
the year.
The Fund's total return on the net asset value of the common shares is
monitored on a monthly basis to assess whether the total return on the net asset
value of the common shares exceeds the stated dividend rate of the Cumulative
Preferred Stock for the period. For the six months ended June 30, 2004, the
Fund's total return on the net asset value of the common shares did not exceed
the stated dividend rates and net swap expense of all outstanding preferred
stock. Thus, management fees were reduced by $248,347 with respect to those
preferred stock assets.
12
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
During the six months ended June 30, 2004, Gabelli & Company, Inc.
received $37,419 in brokerage commissions as a result of executing agency
transactions in portfolio securities on behalf of the Fund.
The cost of calculating the Fund's net asset value per share is a Fund
expense pursuant to the Advisory Agreement. During the six months ended June 30,
2004, the Fund reimbursed the Adviser $17,400 in connection with the cost of
computing the Fund's net asset value which is included in miscellaneous expenses
in the Statement of Operations.
4. PORTFOLIO SECURITIES. Costs of purchases and proceeds from sales of
securities, other than short-term securities, for the six months ended June 30,
2004 aggregated $33,972,898 and $20,091,055, respectively.
5. CAPITAL. The charter permits the Fund to issue 998,000,000 shares of common
stock (par value $0.001).
Transactions in common stock were as follows:
SIX MONTHS ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
------- ---------- ------- ----------
Shares issued upon reinvestment of dividends
and distributions .................................... 143,653 $1,437,890 308,216 $2,959,921
------- ---------- ------- ----------
Net increase ........................................... 143,653 $1,437,890 308,216 $2,959,921
======= ========== ======= ==========
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, 2004, the Fund did not repurchase any
shares of Common Stock. All shares of Common Stock repurchased have been
retired.
In addition, the Fund has been authorized to issue up to 2,000,000 shares
of Cumulative Preferred Stock of which 1,200,000 shares have 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 as required
by the 1940 Act and by the Shares' Articles Supplementary. 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 6% Series B and Series C Auction
Rate Cumulative Preferred Stock at a redemption price of $25.00 and $25,000,
respectively, 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 was 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. On November 12, 2002, the Fund redeemed
50% (600,000 shares) of its outstanding 8% Cumulative Preferred Stock at the
redemption price of $25.00 per Preferred Share plus accumulated and unpaid
dividends through the redemption date of $0.2555 per Preferred Share. On
February 11, 2003, the Fund redeemed the remaining 50% (600,000 shares) of its
outstanding 8.00% Cumulative Preferred Stock at the redemption price of $25.25
per Preferred Share, which consisted of $25.00 per Preferred Share plus
accumulated and unpaid dividends through the redemption date of $0.25 per
Preferred Share.
On March 18, 2003, the Fund received net proceeds of $23,996,775 (after
underwriting discounts of $787,500 and offering expenses of $215,725) from the
public offering of 1,000,000 shares of 6.00% Series B Cumulative Preferred
Stock. Commencing March 19, 2008 and thereafter, the Fund, at its option, may
redeem the 6.00% Series B Cumulative Preferred Stock in whole or in part at the
redemption price. The Board of Directors has authorized the repurchase in the
open market at prices less than the $25 liquidation value of the Cumulative
Preferred Stock. During the six months ended June 30, 2004, the Fund purchased
9,200 shares of 6.00% Series B Cumulative Preferred Stock in the open market at
a cost of $217,172 and an average discount of approximately 5.55% from its
liquidation value. All repurchased shares of 6.00% Series B Cumulative Preferred
Stock have been retired. At June 30, 2004, 990,800 shares of the 6.00% Series B
Cumulative Preferred Stock were outstanding and accrued dividends amounted to
$12,385.
13
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
On March 18, 2003, the Fund received net proceeds of $24,534,275 (after
underwriting discounts of $250,000 and offering expenses of $215,725) from the
public offering 1,000 shares of Series C Auction Rate Cumulative Preferred
Stock. The dividend rate, as set by the auction process, which is generally held
every 7 days, is expected to vary with short-term interest rates. The rates of
Series C Auction Rate Cumulative Preferred Stock ranged from 1.02% to 1.45% for
the six months ended June 30, 2004. Existing shareholders may submit an order to
hold, bid or sell such shares on each auction date. Series C Auction Rate
Cumulative Preferred Stock shareholders may also trade shares in the secondary
market. The Fund, at its option, may redeem the Series C Auction Rate Cumulative
Preferred Stock in whole or in part at the redemption price at any time. During
the six months ended June 30, 2004, the Fund did not repurchase any shares of
Series C Auction Rate Cumulative Preferred Stock. At June 30, 2004, 1,000 shares
of the Series C Auction Rate Cumulative Preferred Stock were outstanding at the
annual dividend rate of 1.45% and accrued dividends amounted to $938.
The holders of Cumulative Preferred Stock have voting rights equivalent to
those of the holders of Common Stock (one vote per share) and will vote together
with holders of shares of Common Stock as a single class. In addition, the 1940
Act requires that along with approval of a majority of the holders of Common
Stock, approval of a majority of the holders of any outstanding shares of
Cumulative Preferred Stock, voting separately as a class, would be required to
(a) adopt any plan of reorganization that would adversely affect the Cumulative
Preferred Stock, and (b) take any action requiring a vote of security holders,
including, among other things, changes in the Fund's subclassification as a
closed-end investment company or changes in its fundamental investment
restrictions. 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.
Under Emerging Issues Task Force (EITF) promulgating Topic D-98,
Classification and Measurement of Redeemable Securities, which was issued on
July 19, 2001, preferred securities that are redeemable for cash or other assets
are to be classified outside of permanent equity to the extent that the
redemption is at a fixed or determinable price and at the option of the holder
or upon the occurrence of an event that is not solely within the control of the
issuer. In accordance with the guidance of the EITF, the Fund's Cumulative
Preferred Stock is classified outside of permanent equity (net assets
attributable to common stock shareholders) in the accompanying financial
statements.
6. OTHER MATTERS. On October 7, 2003, the Fund's Adviser received a subpoena
from the Attorney General of the State of New York requesting information on
mutual fund shares trading practices. The Adviser has also received requests for
information from the SEC regarding mutual fund trading practices and valuation
of portfolio securities. The Adviser has responded to the requests. The Fund
does not believe that these matters will have a material adverse effect on the
Fund's financial position or the results of its operations.
7. INDEMNIFICATIONS. The Fund enters into contracts that contain a variety of
indemnifications. The Fund's maximum exposure under these arrangements is
unknown. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
8. RESTRICTED SECURITIES. At June 30, 2004, investments in securities included
issues that are restricted or illiquid. Restricted securities are often
purchased in private placement transactions, are not registered under the
Securities Act of 1933, may have contractual restrictions on resale, and are
valued under methods approved by the Board as reflecting fair value. A security
may also be considered illiquid if it lacks a readily available market. At June
30, 2004, the Fund held investments in restricted and illiquid securities that
were valued under approved methods by the Board, as follows:
ACQUISITION
SHARES ISSUER DATE COST VALUE
------ ------ ----------- -------- --------
10,000 Artesyn Technologies, Sub. Deb. Cv., 5.500%, 08/15/10 ............. 08/15/03 $ 10,757 $ 14,275
400,000 IVAX Corp., Sub. Deb. Cv., 4.500%, 05/15/08 ....................... 09/21/01 345,344 398,000
10,000 Wynn Resorts, Sub. Deb. Cv., 6.000%, 07/15/15 ..................... 07/14/03 10,284 18,988
100,000 Fleetwood Enterprises Inc., Cv., 5.000%, 12/15/23 ................. 12/17/03 100,000 151,500
50,000 Commonwealth Telephone Enterprises Inc., Cv., 3.250%, 07/15/23 .... 07/29/03 49,638 51,000
--------
TOTAL RESTRICTED SECURITIES (0.64% OF NET ASSETS) .............................. $633,763
========
14
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
FINANCIAL HIGHLIGHTS (UNAUDITED)
SELECTED DATA FOR A FUND COMMON SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
SHARE OUTSTANDING THROUGHOUT EACH PERIOD: JUNE 30, 2004 -----------------------------------------------------
(UNAUDITED) 2003(d) 2002 2001 2000 1999
----------- ------- ------ ------ ------ ------
OPERATING PERFORMANCE:
Net asset value, beginning of period ...................... $ 8.90 $ 8.44 $ 9.92 $10.02 $11.40 $11.45
------ ------ ------ ------ ------ ------
Net investment income ..................................... 0.19 0.31 0.49 0.68 0.72 0.51
Net realized and unrealized gain (loss) on investments .... (0.12) 1.19 (0.76) 0.32 (0.52) 0.77
------ ------ ------ ------ ------ ------
Total from investment operations .......................... 0.07 1.50 (0.27) 1.00 0.20 1.28
------ ------ ------ ------ ------ ------
DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS:
Net investment income ..................................... (0.08) (0.11) (0.28) (0.18) (0.13) (0.11)
Net realized gain on investments .......................... -- (0.03) -- (0.12) (0.17) (0.19)
------ ------ ------ ------ ------ ------
Total distributions to preferred stock shareholders ....... (0.08) (0.14) (0.28) (0.30) (0.30) (0.30)
------ ------ ------ ------ ------ ------
NET INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO
COMMON STOCK SHAREHOLDERS RESULTING
FROM OPERATIONS ........................................... (0.01) 1.36 (0.55) 0.70 (0.10) 0.98
------ ------ ------ ------ ------ ------
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
Net investment income ..................................... (0.11) (0.17) (0.27) (0.48) (0.57) (0.39)
Net realized gain on investments .......................... -- (0.03) -- (0.33) (0.73) (0.64)
Return of capital ......................................... (0.29)* (0.60) (0.48) -- -- --
------ ------ ------ ------ ------ ------
Total distributions to common stock shareholders .......... (0.40) (0.80) (0.75) (0.81) (1.30) (1.03)
------ ------ ------ ------ ------ ------
CAPITAL SHARE TRANSACTIONS:
Increase in net asset value from
common stock share transactions ......................... 0.02 0.02 0.02 0.01 0.02 --
Decrease in net asset value from
shares issued in rights offering ........................ -- -- (0.20) -- -- --
Increase in net asset value from repurchase of
preferred shares ........................................ 0.00(a) -- -- -- -- --
Offering costs for preferred shares charged
to paid-in capital ...................................... -- (0.12) -- -- -- --
------ ------ ------ ------ ------ ------
Total capital share transactions .......................... 0.02 (0.10) (0.18) 0.01 0.02 --
------ ------ ------ ------ ------ ------
NET ASSET VALUE ATTRIBUTABLE TO COMMON STOCK
SHAREHOLDERS, END OF PERIOD ............................. $ 8.51 $ 8.90 $ 8.44 $ 9.92 $10.02 $11.40
====== ====== ====== ====== ====== ======
Net asset value total return + ............................ 0.11% 14.5% (7.0)% 7.0% 0.0%(a) 9.4%
====== ====== ====== ====== ====== ======
Market value, end of period ............................... $10.03 $10.54 $ 8.55 $10.90 $ 9.13 $10.56
====== ====== ====== ====== ====== ======
Total investment return ++ ................................ (1.0)% 33.9% (14.2)% 29.1% (1.7)% 3.2%
====== ====== ====== ====== ====== ======
----------
+ 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) Based on weekly prices.
(c) Asset coverage is calculated by combining all series of preferred stock.
(d) See Note 2 to Financial Statements (Swap Agreements).
(e) Annualized.
* Based on current earnings and subject to change and reclassification at
fiscal year end.
See accompanying notes to financial statements.
15
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
FINANCIAL HIGHLIGHTS (CONTINUED) (UNAUDITED)
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2004 ----------------------------------------------------
(UNAUDITED) 2003(d) 2002 2001 2000 1999
----------- -------- -------- -------- -------- --------
RATIOS AND SUPPLEMENTAL DATA:
Net assets including liquidation value of preferred
shares, end of period (in 000's) ........................ $148,173 $151,658 $108,774 $110,074 $108,066 $120,179
Net assets attributable to common shares,
end of period (in 000's) ................................ $ 98,403 $101,658 $ 93,774 $ 80,074 $ 78,066 $ 90,179
Ratio of net investment income to average
net assets attributable to common stock ................. 3.93%(e) 3.47% 5.32% 6.58% 6.49% 4.35%
Ratio of operating expenses to average
net assets attributable to common stock ................. 1.53%(e) 1.93% 1.58% 1.46% 1.48% 1.80%
Ratio of operating expenses to average total net assets
including liquidation value of preferred shares ......... 1.03%(e) 1.37% 1.15% 1.07% 1.10% 1.36%
Portfolio turnover rate ................................... 21% 39% 56% 59% 169% 175%
PREFERRED STOCK:
8.00% CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ............... -- -- $ 15,000 $ 30,000 $ 30,000 $ 30,000
Total shares outstanding (in 000's) ....................... -- -- 600 1,200 1,200 1,200
Liquidation preference per share .......................... -- -- $ 25.00 $ 25.00 $ 25.00 $ 25.00
Average market value (b) .................................. -- -- $ 25.83 $ 25.80 $ 24.31 $ 25.36
Asset coverage per share .................................. -- -- $ 181.29 $ 91.73 $ 90.06 $ 100.15
6.00% CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ............... $ 24,770 $ 25,000 -- -- -- --
Total shares outstanding (in 000's) ....................... 991 1,000 -- -- -- --
Liquidation preference per share .......................... $ 25.00 $ 25.00 -- -- -- --
Average market value (b) .................................. $ 24.83 $ 25.33 -- -- -- --
Asset coverage per share .................................. $ 74.43 $ 75.83 -- -- -- --
AUCTION RATE CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ............... $ 25,000 $ 25,000 -- -- -- --
Total shares outstanding (in 000's) ....................... 1 1 -- -- -- --
Liquidation preference per share .......................... $ 25,000 $ 25,000 -- -- -- --
Average market value (b) .................................. $ 25,000 $ 25,000 -- -- -- --
Asset coverage per share .................................. $ 74,429 $ 75,829 -- -- -- --
ASSET COVERAGE (c) ........................................ 298% 303% 725% 367% 360% 401%
----------
+ 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) Based on weekly prices.
(c) Asset coverage is calculated by combining all series of preferred stock.
(d) See Note 2 to Financial Statements (Swap Agreements).
(e) Annualized.
See accompanying notes to financial statements.
16
AUTOMATIC DIVIDEND REINVESTMENT
AND VOLUNTARY CASH PURCHASE PLAN
ENROLLMENT IN THE PLAN
It is the policy of The Gabelli Convertible and Income Securities Fund
Inc. ("Convertible and Income Securities Fund") to automatically reinvest
dividends. As a "registered" shareholder you automatically become a participant
in the Convertible and Income Securities Fund's Automatic Dividend Reinvestment
Plan (the "Plan"). The Plan authorizes the Convertible and Income 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 and Income Securities Fund. Plan
participants may send their stock certificates to EquiServe Trust Company
("EquiServe") to be held in their dividend reinvestment account. Registered
shareholders wishing to receive their distribution in cash must submit this
request in writing to:
The Gabelli Convertible and Income Securities Fund Inc.
c/o EquiServe
P.O. Box 43011
Providence, RI 02940-3011
Shareholders requesting this cash election must include the shareholder's
name and address as they appear on the share certificate. Shareholders with
additional questions regarding the Plan may contact EquiServe at (800) 336-6983.
SHAREHOLDERS WISHING TO LIQUIDATE REINVESTED SHARES held at EquiServe must
do so in writing or by telephone. Please submit your request to the above
mentioned address or telephone number. Include in your request your name,
address and account number. The cost to liquidate shares is $2.50 per
transaction as well as the brokerage commission incurred. Brokerage charges are
expected to be less than the usual brokerage charge for such transactions.
If your shares are held in the name of a broker, bank or nominee, you
should contact such institution. If such institution is not participating in the
Plan, your account will be credited with a cash dividend. In order to
participate in the Plan through such institution, it may be necessary for you to
have your shares taken out of "street name" and re-registered in your own name.
Once registered in your own name your dividends will be automatically
reinvested. Certain brokers participate in the Plan. Shareholders holding shares
in "street name" at 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 and Income 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 and
Income 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 and Income Securities Fund valued at
market price. If the Convertible and Income Securities Fund should declare a
dividend or capital gains distribution payable only in cash, EquiServe will buy
Common Stock in the open
17
market, or on the New York Stock Exchange or elsewhere, for the participants'
accounts, except that EquiServe will endeavor to terminate purchases in the open
market and cause the Convertible and Income 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 and Income 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
EquiServe on at least 90 days' written notice to participants in the Plan.
VOLUNTARY CASH PURCHASE PLAN
The Voluntary Cash Purchase Plan is yet another vehicle for our
shareholders to increase their investment in the Convertible and Income
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 EquiServe for investments in the Convertible and
Income Securities Fund's shares at the then current market price. Shareholders
may send an amount from $250 to $10,000. EquiServe will use these funds to
purchase shares in the open market on or about the 1st and 15th of each month.
EquiServe will charge each shareholder who participates $0.75, plus a pro rata
share of the brokerage commissions. Brokerage charges for such purchases are
expected to be less than the usual brokerage charge for such transactions. It is
suggested that any voluntary cash payments be sent to EquiServe, P.O. Box 43011,
Providence, RI 02940-3011 such that EquiServe receives such payments
approximately 10 days before the investment date. Funds not received at least
five days before the investment date shall be held for investment until the next
purchase date. A payment may be withdrawn without charge if notice is received
by EquiServe at least 48 hours before such payment is to be invested.
For more information regarding the Dividend Reinvestment Plan and
Voluntary Cash Purchase Plan, brochures are available by calling (914) 921-5070
or by writing directly to the Convertible and Income Securities Fund.
18
DIRECTORS AND OFFICERS
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
ONE CORPORATE CENTER, RYE, NY 10580-1422
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
Werner J. Roeder, MD
VICE PRESIDENT/MEDICAL AFFAIRS,
LAWRENCE HOSPITAL CENTER
Anthonie C. van Ekris
MANAGING DIRECTOR,
BALMAC INTERNATIONAL, INC.
Salvatore J. Zizza
CHAIRMAN, HALLMARK ELECTRICAL SUPPLIES CORP.
OFFICERS
Bruce N. Alpert
PRESIDENT & TREASURER
Peter W. Latartara
VICE PRESIDENT
A. Hartswell Woodson, III
ASSOCIATE PORTFOLIO MANAGER
James E. McKee
SECRETARY
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
EquiServe Trust Company
STOCK EXCHANGE LISTING
Common 6.00% Preferred
------ ---------------
NYSE-Symbol: GCV GCV Pr B
Shares Outstanding: 11,565,300 990,800
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.
--------------------------------------------------------------------------------
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that the Convertible and Income Securities Fund
may from time to time purchase shares of its common stock in the open market
when the Convertible and Income Securities Fund shares are trading at a discount
of 10% or more from the net asset value of the shares. The Convertible and
Income 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.
--------------------------------------------------------------------------------
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
REGISTRANT PURCHASES OF EQUITY SECURITIES
=============================================================================================================================
(D) MAXIMUM NUMBER (OR
(C) TOTAL NUMBER OF SHARES APPROXIMATE DOLLAR VALUE) OF SHARES
(A) TOTAL NUMBER (B) AVERAGE (OR UNITS) PURCHASED AS PART (OR UNITS) THAT MAY YET BE
OF SHARES (OR PRICE PAID PER OF PUBLICLY ANNOUNCED PLANS PURCHASED UNDER THE PLANS OR
PERIOD UNITS) PURCHASED SHARE (OR UNIT) OR PROGRAMS PROGRAMS
=============================================================================================================================
Month #1 Common - N/A Common - N/A Common - N/A Preferred Series B - 1,000,000
01/01/04
through 01/31/04 Preferred Series B Preferred Preferred Series B - N/A Common - 11,421,647
- N/A Series B - N/A
=============================================================================================================================
Month #2 Common - N/A Common - N/A Common - N/A Preferred Series B - 1,000,000
02/01/04
through 02/29/04 Preferred Series B Preferred Preferred Series B - N/A Common - 11,421,647
- N/A Series B - N/A
=============================================================================================================================
Month #3 Common - N/A Common - N/A Common - N/A Preferred Series B - 1,000,000
03/01/04
through 03/31/04 Preferred Series B Preferred Preferred Series B - N/A Common - 11,421,647
- N/A Series B - N/A
=============================================================================================================================
Month #4 Common - N/A Common - N/A Common - N/A Preferred Series B - 1,000,000 -
04/01/04 2,100 = 997,900
through 04/30/04 Preferred Series B Preferred Preferred Series B - 2,100
- 2,100 Series B - Common - 11,489,948
$24.2595
=============================================================================================================================
Month #5 Common - N/A Common - N/A Common - N/A Preferred Series B - 997,900 - 4,400
05/01/04 = 993,500
through 05/31/04 Preferred Series B Preferred Preferred Series B - 4,400
- 4,400 Series B - Common - 11,489,948
$22.9382
=============================================================================================================================
Month #6 Common - N/A Common - N/A Common - N/A Preferred Series B - 993,500 - 2,700
06/01/04 = 990,800
through 06/30/04 Preferred Series B Preferred Preferred Series B - 2,700
- 2,700 Series B - Common - 11,489,948
$24.1848
=============================================================================================================================
Total Common - N/A Common - N/A Common - N/A N/A
Preferred Series B Preferred Preferred Series B - 9,200
- 9,200 Series B -
$23.6057
=============================================================================================================================
a. The date each plan or program was announced - The notice of the potential
repurchase of common and preferred shares occurs quarterly in the Fund's
quarterly report in accordance with Section 23 (c) of the Investment Company Act
of 1940, as amended.
b. The dollar amount (or share or unit amount) approved - Any or all common
shares outstanding may be repurchased when the Fund's common shares are trading
at a discount of 10% or more from the net asset value of the shares.
Any or all preferred shares outstanding may be repurchased when the Fund's
preferred shares are trading at a discount to the liquidation value of $25.00.
c. The expiration date (if any) of each plan or program - The Fund's repurchase
plans are ongoing.
d. Each plan or program that has expired during the period covered by the table
- The Fund's repurchase plans are ongoing.
e. Each plan or program the registrant has determined to terminate prior to
expiration, or under which the registrant does not intend to make further
purchases. - The Fund's repurchase plans are ongoing.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's Board of Directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR
240.14a-101), or this Item.
ITEM 10. 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
half-year (the registrant's second fiscal half-year in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 11. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) The Gabelli Convertible and Income Securities Fund
Inc.
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By (Signature and Title)* /s/ BRUCE N. ALPERT
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Bruce N. Alpert, Principal Executive Officer
Date September 7, 2004
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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
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Bruce N. Alpert, Principal Executive Officer and
Principal Financial Officer
Date September 7, 2004
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* Print the name and title of each signing officer under his or her signature.