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
-------------------
The Gabelli Convertible and Income Securities Fund Inc.
---------------------------------------------------------
(Exact name of registrant as specified in charter)
One Corporate Center,
Rye, New York 10580-1422
------------------------------
(Address of principal executive offices) (Zip code)
Bruce N. Alpert
Gabelli Funds, LLC
One Corporate Center,
Rye, New York 10580-1422
------------------------------
(Name and address of agent for service)
registrant's telephone number, including area code: 1-800-422-3554
---------------------
Date of fiscal year end: December 31, 2003
-------------------------
Date of reporting period: June 30, 2003
----------------------
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.
[LOGO OMITTED]
THE GABELLI
CONVERTIBLE AND
INCOME SECURITIES
FUND INC.
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
Semi-Annual Report
June 30, 2003
TO OUR SHAREHOLDERS,
We are changing the way we provide portfolio managers' commentary to
shareholders of our Funds. Our shareholder reports have typically contained
commentary on each portfolio manager's assessment of the stock market,
individual stocks and how economic events affect their thinking in managing a
specific Fund. We have always provided details about performance and presented
returns, both good and bad, hopefully in a clear and concise fashion. These
comments have been included as part of each Fund's quarterly, semi-annual, and
annual financial statements.
The Sarbanes-Oxley Act's new corporate governance regulations now require
a Fund's principal executive and financial officers to certify the entire
contents of shareholder reports in a filing with the Securities and Exchange
Commission on form N-CSR. This certification covers the portfolio manager's
commentary and subjective opinions if they are attached to or a part of the
financial statements.
Rather than ask our portfolio managers to eliminate their opinions and/or
restrict their commentary to historical facts only, we are removing their
commentary from the financial statements and sending it to you separately. As a
result, this commentary will no longer be considered part of a Fund's financial
report and therefore will not be subject to the officers' certifications.
We trust that you understand that our approach is an unintended
consequence of the ever-increasing regulatory requirements affecting public
companies generally. We hope the specific certification requirements of these
new regulations will be modified as they relate to mutual funds, since
investment companies have different corporate structures and objectives than
other public companies.
Sincerely yours,
/S/ BRUCE N. ALPERT
Bruce N. Alpert
Chief Operating Officer
August 8, 2003 Gabelli Funds, LLC
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
PORTFOLIO OF INVESTMENTS
JUNE 30, 2003 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT COST VALUE
--------- ---- ------
CONVERTIBLE CORPORATE BONDS -- 25.7%
AUTOMOTIVE: PARTS AND ACCESSORIES -- 5.9%
$ 1,600,000 GenCorp Inc., Sub. Deb. Cv.,
5.750%, 04/15/07 ..$ 1,565,976 $ 1,502,000
400,000 Pep Boys - Manny, Moe &
Jack, Cv.,
4.250%, 06/01/07 .. 359,457 400,500
8,100,000 Standard Motor Products Inc.,
Sub. Deb. Cv.,
6.750%, 07/15/09 .. 6,444,529 7,006,500
------------ ------------
8,369,962 8,909,000
------------ ------------
AVIATION: PARTS AND SERVICES -- 2.8%
4,352,000 Kaman Corp., Sub. Deb. Cv.,
6.000%, 03/15/12 .. 4,132,442 4,194,240
------------ ------------
BUSINESS SERVICES -- 2.7%
900,000 BBN Corp., Sub. Deb. Cv.,
6.000%,
04/01/12+ (a)(c) .. 882,893 0
10,000 First Data Corp., Cv.,
2.000%, 03/01/08 .. 9,957 11,200
3,000,000 Franklin Resources Inc., Cv.,
Zero Coupon,
05/11/31 .......... 1,784,898 1,807,500
600,000 Navistar Financial Corp.,
Sub. Deb. Cv.,
4.750%, 04/01/09 .. 537,308 569,250
2,000,000 Trans-Lux Corp.,
Sub. Deb. Cv.,
7.500%, 12/01/06 .. 1,925,983 1,667,500
------------ ------------
5,141,039 4,055,450
------------ ------------
CABLE -- 1.3%
400,000 Adelphia Communications
Corp., Sub. Deb. Cv.,
3.250%,
05/01/21+ (c) ..... 127,000 77,000
2,900,000 Charter Communications
Inc., Cv.,
4.750%, 06/01/06 .. 1,860,303 1,928,500
------------ ------------
1,987,303 2,005,500
------------ ------------
COMMUNICATIONS EQUIPMENT -- 0.1%
200,000 Corning Inc., Sub. Deb. Cv.,
Zero Coupon,
11/08/15 .......... 143,339 149,500
------------ ------------
CONSUMER PRODUCTS -- 0.1%
160,000 Standard Commercial Corp.,
Sub. Deb. Cv.,
7.250%, 03/31/07 .. 144,177 161,200
------------ ------------
PRINCIPAL MARKET
AMOUNT COST VALUE
--------- ---- ------
DIVERSIFIED INDUSTRIAL -- 0.3%
$ 500,000 GATX Corp., Cv.,
7.500%,
02/01/07 (b) ......$ 500,000 $ 496,250
------------ ------------
ELECTRONICS -- 5.8%
1,900,000 Agere Systems Inc.,
Sub. Deb. Cv.,
6.500%, 12/15/09 .. 1,870,867 2,185,000
1,000,000 Cypress Semiconductor Inc.,
Sub. Deb. Cv.,
3.750%, 07/01/05 .. 918,989 1,006,250
1,000,000 Oak Industries Inc.,
Sub. Deb. Cv.,
4.875%, 03/01/08 .. 808,544 960,000
4,500,000 Thermo Electron Corp.,
Sub. Deb. Cv.,
4.000%, 01/15/05 .. 4,417,506 4,505,625
------------ ------------
8,015,906 8,656,875
------------ ------------
ENERGY AND UTILITIES -- 1.1%
388,000 Devon Energy Corp.,
Sub. Deb. Cv.,
4.950%, 08/15/08 .. 382,653 398,670
1,400,000 Mirant Corp., Sub. Deb. Cv.,
2.500%,
06/15/21+ (c) ..... 1,017,750 1,050,000
257,000 Moran Energy Inc.,
Sub. Deb. Cv.,
8.750%, 01/15/08 .. 180,929 251,539
------------ ------------
1,581,332 1,700,209
------------ ------------
EQUIPMENT AND SUPPLIES -- 0.8%
1,098,000 Robbins & Myers Inc.,
Sub. Deb. Cv.,
8.000%, 01/31/08 .. 1,130,189 1,221,525
------------ ------------
FOOD AND BEVERAGE -- 1.6%
300,000 Koninklijke Ahold NV,
Sub. Deb. Cv.,
3.000%, 09/30/03 .. 140,005 151,053
800,000 Parmalat Capital, Cv.,
1.000%, 12/31/05 .. 921,083 1,053,030
900,000 Parmalat Netherlands BV, Cv.,
0.875%, 06/30/21 .. 977,201 1,131,692
------------ ------------
2,038,289 2,335,775
------------ ------------
HEALTH CARE -- 0.8%
50,000 Apogent Technologies Inc., Cv.,
2.250%, 10/15/21 (b) 51,099 50,312
100,000 Invitrogen Corp., Sub. Deb. Cv.,
5.500%, 03/01/07 .. 99,174 100,750
See accompanying notes to financial statements.
2
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2003 (UNAUDITED)
PRINCIPAL MARKET
AMOUNT COST VALUE
--------- ---- ------
CONVERTIBLE CORPORATE BONDS (CONTINUED)
HEALTH CARE (CONTINUED)
IVAX Corp., Sub. Deb. Cv.,
$ 700,000 5.500%, 05/15/07 ..$ 614,547 $ 707,875
400,000 4.500%, 05/15/08 (b) 333,925 390,000
150,000 Sabratek Corp., Sub. Deb. Cv.,
6.000%,
04/15/05+ (c) ..... 84,763 0
------------ ------------
1,183,508 1,248,937
------------ ------------
PAPER AND FOREST PRODUCTS -- 0.1%
200,000 Riverwood International
Corp., Sub. Deb. Cv.,
6.750%, 09/15/03 .. 199,984 220,000
------------ ------------
PUBLISHING -- 0.1%
200,000 Times Mirror Co.,
Sub. Deb. Cv.,
Zero Coupon,
04/15/17 .......... 113,180 105,500
------------ ------------
RETAIL -- 0.1%
60,000 Costco Companies Inc.,
Sub. Deb. Cv.,
Zero Coupon,
08/19/17 .......... 44,879 50,325
30,000 School Specialty Inc.,
Sub. Deb. Cv.,
6.000%, 08/01/08 .. 29,958 35,400
------------ ------------
74,837 85,725
------------ ------------
TELECOMMUNICATIONS -- 0.3%
500,000 Rogers Communications Inc.,
Sub. Deb. Cv.,
2.000%, 11/26/05 .. 428,600 455,625
------------ ------------
WIRELESS COMMUNICATIONS -- 1.8%
Nextel Communications Inc., Cv.,
550,000 6.000%, 06/01/11 .. 415,154 578,188
1,500,000 5.250%, 01/15/10 .. 1,017,015 1,417,500
100,000 4.750%, 07/01/07 .. 72,528 100,250
1,300,000 United States Cellular Corp.,
Sub. Deb. Cv.,
Zero Coupon,
06/15/15 .......... 852,462 602,875
------------ ------------
2,357,159 2,698,813
------------ ------------
TOTAL CONVERTIBLE
CORPORATE BONDS .... 37,541,246 38,700,124
------------ ------------
MARKET
SHARES COST VALUE
--------- ---- ------
CONVERTIBLE PREFERRED STOCKS -- 15.4%
AEROSPACE -- 0.7%
8,500 Northrop Grumman Corp.,
7.000% Cv. Pfd.,
Ser. B ............$ 990,420 $ 1,045,500
------------ ------------
AUTOMOTIVE -- 0.5%
4,000 Ford Motor Co. Capital Trust II,
6.500% Cv. Pfd. ... 192,705 173,800
General Motors Corp.,
13,000 5.250% Cv. Pfd.,
Ser. B ............ 325,000 291,200
10,000 4.500% Cv. Pfd.,
Ser. A ............ 250,000 244,500
------------ ------------
767,705 709,500
------------ ------------
AVIATION: PARTS AND SERVICES -- 2.8%
49,000 Coltec Capital Trust,
5.250% Cv. Pfd. ... 2,032,375 1,633,160
34,000 Sequa Corp.,
$5.00 Cv. Pfd. .... 2,592,867 2,567,000
------------ ------------
4,625,242 4,200,160
------------ ------------
BROADCASTING -- 0.7%
100 Gray Television Inc.,
8.000% Cv. Pfd.,
Ser. C (a)(b) ..... 1,000,000 1,030,000
------------ ------------
BUSINESS SERVICES -- 0.9%
14,000 Interep National Radio
Sales Inc.,
4.000% Cv. Pfd.,
Ser. A+ (a)(b) .... 1,400,000 1,442,000
20,000 Key3Media Group,
5.500% Cv. Pfd. (a) 500,000 117
------------ ------------
1,900,000 1,442,117
------------ ------------
CABLE -- 0.8%
51,000 CVC Equity Securities Trust I,
6.500% Cv. Pfd. ... 1,103,243 1,190,850
------------ ------------
DIVERSIFIED INDUSTRIAL -- 0.3%
2,400 GATX Corp.,
$2.50 Cv. Pfd. .... 335,070 240,000
WHX Corp.,
28,000 6.500% Cv. Pfd.,
Ser. A+ ........... 216,762 144,200
10,000 $3.75 Cv. Pfd.,
Ser. B+ ........... 45,523 50,600
------------ ------------
597,355 434,800
------------ ------------
See accompanying notes to financial statements.
3
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2003 (UNAUDITED)
MARKET
SHARES COST VALUE
--------- ---- ------
CONVERTIBLE PREFERRED STOCKS (CONTINUED)
ENERGY AND UTILITIES -- 0.3%
3,000 AES Trust III,
6.750% Cv. Pfd. ...$ 42,830 $ 101,970
500 Cinergy Corp.,
9.500% Cv. Pfd. ... 25,025 29,620
2,500 FPL Group Inc.,
8.500% Cv. Pfd. ... 125,000 149,075
26,000 Semco Capital Trust II,
11.000% Cv. Pfd. .. 218,185 128,700
------------ ------------
411,040 409,365
------------ ------------
ENTERTAINMENT -- 1.3%
2,000 Metromedia International
Group Inc.,
7.250% Cv. Pfd.+ .. 26,611 5,000
60,000 Rainbow Equity Securities
Trust II,
6.250% Cv. Pfd. ... 1,179,555 1,416,000
24,000 Six Flags Inc.,
7.250% Cv. Pfd. ... 441,970 472,800
------------ ------------
1,648,136 1,893,800
------------ ------------
PAPER AND FOREST PRODUCTS -- 2.2%
65,500 Sealed Air Corp.,
$2.00 Cv. Pfd.,
Ser. A ............ 2,076,007 3,337,225
------------ ------------
REAL ESTATE -- 0.1%
5,000 Innkeepers USA Trust,
8.625% Cv. Pfd.,
Ser. A ............ 123,288 126,250
------------ ------------
TELECOMMUNICATIONS -- 4.7%
3,000 ALLTEL Corp.,
7.750% Cv. Pfd. ... 136,557 149,250
15,000 Cincinnati Bell Inc.,
6.750% Cv. Pfd.,
Ser. B ............ 408,702 612,750
79,800 Citizens Communications Co.,
5.000% Cv. Pfd. ... 3,944,776 4,229,400
800 Lucent Technologies
Capital Trust I,
7.750% Cv. Pfd. ... 556,750 648,904
1,000 Lucent Technologies Inc.,
8.000% Cv. Pfd. ... 862,500 1,002,500
12,000 Philippine Long Distance
Telephone Co.,
$3.50 Cv. Pfd.,
Ser. III .......... 471,755 453,000
------------ ------------
6,381,040 7,095,804
------------ ------------
MARKET
SHARES COST VALUE
--------- ---- ------
WIRELESS COMMUNICATIONS -- 0.1%
2,000 Allen Telecom Inc.,
7.750% Cv. Pfd.,
Ser. D ............$ 96,350 $ 234,000
------------ ------------
TOTAL CONVERTIBLE
PREFERRED STOCKS ... 21,719,826 23,149,371
------------ ------------
COMMON STOCKS -- 1.5%
AVIATION: PARTS AND SERVICES -- 0.1%
9,000 Kaman Corp., Cl. A .. 106,562 105,210
------------ ------------
BROADCASTING -- 0.1%
35,000 Granite Broadcasting
Corp.+ ............ 37,187 107,100
------------ ------------
CABLE -- 0.0%
10,000 UnitedGlobalCom Inc.,
Cl. A+ ............ 91,270 51,700
------------ ------------
COMPUTER SOFTWARE AND SERVICES -- 0.2%
10,000 Veridian Corp.+ ..... 347,000 348,900
------------ ------------
ENERGY AND UTILITIES -- 0.9%
2,000 AGL Resources Inc. .. 35,600 50,880
10,000 Allegheny Energy Inc. 96,600 84,500
8,000 BP plc, ADR ......... 316,479 336,160
3,000 CH Energy Group Inc. 83,900 135,000
10,000 NiSource Inc.+ ...... 20,000 22,200
25,000 Northeast Utilities . 474,141 418,500
10,000 Progress Energy
Inc., CVO+ ........ 5,200 1,050
4,000 SJW Corp. ........... 366,333 341,000
------------ ------------
1,398,253 1,389,290
------------ ------------
FINANCIAL SERVICES -- 0.2%
18,000 Argonaut Group Inc. . 383,631 221,940
------------ ------------
SATELLITE -- 0.0%
2,500 Loral Space &
Communications Ltd.+ 22,485 7,625
------------ ------------
TELECOMMUNICATIONS -- 0.0%
2,000 AT&T Corp. .......... 40,934 38,500
------------ ------------
WIRELESS COMMUNICATIONS -- 0.0%
49 Winstar Communications
Inc.+ ............. 438 0
------------ ------------
TOTAL COMMON
STOCKS ............. 2,427,760 2,270,265
------------ ------------
See accompanying notes to financial statements.
4
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2003 (UNAUDITED)
MARKET
SHARES COST VALUE
--------- ---- ------
PREFERRED STOCKS -- 1.6%
BROADCASTING -- 1.1%
2,127 Granite Broadcasting Corp.,
12.750% Pfd.+ .....$ 879,780 $ 1,722,870
------------ ------------
EQUIPMENT AND SUPPLIES -- 0.3%
15,000 Fedders Corp.,
8.600% Pfd., Ser. A 467,566 378,000
------------ ------------
PUBLISHING -- 0.2%
9,777 News Corp. Ltd.,
Pfd., ADR ......... 189,209 244,914
------------ ------------
TELECOMMUNICATIONS -- 0.0%
3,993 NTL Europe Inc.,
10.000% Pfd.,
Ser. A+ ........... 0 11,979
------------ ------------
TOTAL PREFERRED
STOCKS ............. 1,536,555 2,357,763
------------ ------------
PRINCIPAL
AMOUNT
---------
CORPORATE BONDS -- 0.1%
BROADCASTING -- 0.0%
$ 15,000 Granite Broadcasting Corp.,
Sub. Deb.,
8.875%, 05/15/08 .. 8,303 14,738
------------ ------------
CONSUMER SERVICES -- 0.0%
1,100,000 Ogden Corp., Sub. Deb.,
6.000%,
06/01/49+ (c) ..... 1,090,087 82,500
------------ ------------
TELECOMMUNICATIONS -- 0.0%
80,000 Amnex Inc., Sub. Deb.,
8.500%,
09/25/49+ (b)(c) .. 71,772 0
------------ ------------
WIRELESS COMMUNICATIONS -- 0.1%
100,000 Nextel Communications Inc.,
9.500%, 02/01/11 .. 71,329 111,250
------------ ------------
TOTAL CORPORATE
BONDS .............. 1,241,491 208,488
------------ ------------
SHARES
--------
WARRANTS -- 0.0%
BUSINESS SERVICES -- 0.0%
87,500 Interep National Radio
Sales Inc.,+ (a) .. 0 0
------------ ------------
MARKET
SHARES COST VALUE
--------- ---- ------
CONSUMER PRODUCTS -- 0.0%
4,331 Pillowtex Corp.,
expire 11/24/09+ ..$ 120,955 $ 130
------------ ------------
TOTAL WARRANTS ...... 120,955 130
------------ ------------
PRINCIPAL
AMOUNT
---------
U.S. GOVERNMENT OBLIGATIONS -- 55.7%
$83,803,000 U.S. Treasury Bills,
0.792% to 1.183%++,
07/03/03 to
11/13/03 ......... 83,733,345 83,738,172
------------ ------------
TOTAL INVESTMENTS -- 100.0% ..... $148,321,178 $150,424,313
============
OTHER LIABILITIES IN EXCESS OF ASSETS ........ (428,757)
PREFERRED STOCK
(1,001,000 preferred shares outstanding) ... (50,000,000)
------------
NET ASSETS -- COMMON STOCK
(11,270,024 common shares outstanding) ..... 99,995,556
============
NET ASSET VALUE PER COMMON SHARE
($99,995,556 (DIVIDE) 11,270,024
shares outstanding) ....................... $8.87
=====
--------------------
For Federal tax purposes:
Aggregate cost .................. $148,321,178
============
Gross unrealized appreciation ... $ 6,896,630
Gross unrealized depreciation ... (4,793,495)
------------
Net unrealized appreciation ..... $ 2,103,135
============
-------------------
(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,
2003, the market value of Rule 144A securities amounted to $3,408,562 or
2.27% of total net assets.
(c) Bond in default.
+ Non-income producing security.
++ Represents annualized yield at date of purchase.
ADR - American Depository Receipt.
CVO - Contingent Value Obligation.
See accompanying notes to financial statements.
5
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2003 (UNAUDITED)
ASSETS:
Investments, at value (cost $148,321,178) .... $ 150,424,313
Cash ......................................... 1,316
Dividends and interest receivable ............ 927,061
Receivable for investments sold .............. 289,595
-------------
TOTAL ASSETS ................................. 151,642,285
-------------
LIABILITIES:
Dividends payable ............................ 25,750
Unrealized depreciation on swap contract ..... 648,341
Payable for investment advisory fees ......... 76,588
Payable to custodian ......................... 4,111
Payable for legal and audit .................. 19,175
Payable for shareholder communications expense 20,701
Payable for payroll expenses ................. 112,772
Interest payable on swap contract ............ 35,486
Payable for offering expenses ................ 659,504
Other accrued expenses and liabilities ....... 44,301
-------------
TOTAL LIABILITIES ............................ 1,646,729
-------------
PREFERRED STOCK:
Series B Cumulative Preferred Stock
(6.00%, $25 liquidation value, $0.001 par
value, 1,995,000 shares authorized
with 1,000,000 shares issued and
outstanding) ............................... 25,000,000
Series C Cumulative Preferred Stock
(Auction Rate, $25,000 liquidation value,
$0.001 par value, 5,000 shares
authorized with 1,000 shares issued and
outstanding) ............................... 25,000,000
-------------
NET ASSETS ATTRIBUTABLE TO
COMMON STOCK SHAREHOLDERS .................. $ 99,995,556
=============
NET ASSETS ATTRIBUTABLE TO COMMON STOCK
SHAREHOLDERS CONSIST OF:
Capital stock, at par value .................. $ 11,270
Additional paid-in capital ................... 104,236,538
Accumulated distributions in excess of net
investment income .......................... (3,393,415)
Accumulated net realized loss on investments
and foreign currency transactions .......... (2,314,003)
Net unrealized appreciation on investments ... 1,455,166
-------------
TOTAL NET ASSETS ............................. $ 99,995,556
=============
NET ASSET VALUE PER COMMON SHARE
($99,995,556 / 11,270,024 shares outstanding;
100,000,000 shares authorized of $0.001
par value) ................................. $8.87
=====
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED)
INVESTMENT INCOME:
Dividends (net of foreign taxes of $2,658) ...... $ 723,900
Interest ........................................ 2,013,577
------------
TOTAL INVESTMENT INCOME ......................... 2,737,477
------------
EXPENSES:
Investment advisory fees ........................ 465,663
Interest expense on swap contract ............... 113,211
Payroll ......................................... 52,626
Shareholder services fees ....................... 42,341
Shareholder communications expenses ............. 39,840
Directors' fees ................................. 33,223
Legal and audit fees ............................ 33,016
Accounting fees ................................. 17,249
Custodian fees .................................. 16,861
Miscellaneous expenses .......................... 40,033
------------
TOTAL EXPENSES .................................. 854,063
------------
NET INVESTMENT INCOME ........................... 1,883,414
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments, securities sold
short and foreign currency transactions ....... 377,564
Net change in unrealized appreciation
on investments ................................ 9,078,786
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS ............. 9,456,350
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS ............................... 11,339,764
------------
DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS:
Net investment income ........................... (653,123)
------------
TOTAL DISTRIBUTIONS TO PREFERRED
STOCK SHAREHOLDERS ............................ (653,123)
------------
NET INCREASE IN NET ASSETS ATTRIBUTABLE TO
COMMON STOCK SHAREHOLDERS
RESULTING FROM OPERATIONS ..................... $ 10,686,641
============
See accompanying notes to financial statements.
6
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO COMMON SHAREHOLDERS
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- -----------------
OPERATIONS:
Net investment income ................................................ $ 1,883,414 $ 4,025,028
Net realized gain (loss) on investments, securities sold short
and foreign currency transactions .................................. 377,564 (485,993)
Net change in unrealized appreciation/depreciation on investments,
securities sold short and foreign currency transactions ............ 9,078,786 (5,783,094)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ...... 11,339,764 (2,244,059)
------------ ------------
DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS:
Net investment income ................................................ (653,123) (2,253,300)
------------ ------------
TOTAL DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS .................. (653,123) (2,253,300)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS ATTRIBUTABLE TO COMMON STOCK
SHAREHOLDERS RESULTING FROM OPERATIONS ............................. 10,686,641 (4,497,359)
------------ ------------
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
Net investment income ................................................ (4,461,551) (2,225,314)
Return of capital .................................................... -- (3,885,345)
------------ ------------
TOTAL DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS ..................... (4,461,551) (6,110,659)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net increase in net assets from common shares issued upon reinvestment
of dividends and distributions and rights offering in 2002 ......... 1,496,226 24,307,879
Offering costs for preferred shares charged to paid-in capital ....... (1,500,000) --
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS FROM FUND SHARE TRANSACTIONS ... (3,774) 24,307,879
------------ ------------
NET INCREASE IN NET ASSETS ATTRIBUTABLE TO COMMON STOCK SHAREHOLDERS . 6,221,316 13,699,861
NET ASSETS ATTRIBUTABLE TO COMMON STOCK SHAREHOLDERS:
Beginning of period .................................................. 93,774,240 80,074,379
------------ ------------
End of period ........................................................ $ 99,995,556 $ 93,774,240
============ ============
See accompanying notes to financial statements.
7
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, 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 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 of Directors so determines, by such other method as the Board of Directors
shall determine in good faith, to reflect its fair market value. Portfolio
securities traded on more than one national securities exchange or market are
valued according to the broadest and most representative market, as determined
by Gabelli Funds, LLC (the "Adviser"). Portfolio securities primarily traded in
foreign markets are generally valued at the preceding closing values of such
securities on their respective exchanges or markets. Securities and assets for
which market quotations are not readily available are valued at their fair value
as determined in good faith under procedures established by and under the
general supervision of the Board of Directors. Short term debt securities with
remaining maturities of 60 days or less are valued at amortized cost, unless the
Board of Directors determines such does not reflect the securities fair value,
in which case these securities will be valued at their fair value as determined
by the Board of Directors. Debt instruments having a maturity greater than 60
days for which market quotations are readily available are valued at the latest
average of the bid and asked prices. If there were no asked prices quoted on
such day, the security is valued using the closing bid price on that day.
Options are valued at the last sale price on the exchange on which they are
listed. If no sales of such options have taken place that day, they will be
valued at the mean between their closing bid and asked prices.
REPURCHASE AGREEMENTS. The 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,
8
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
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.
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,
2003, 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, 2003, 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 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
9
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
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
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.
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.
The Fund has a net capital loss carryforward for Federal income tax
purposes at December 31, 2002 of $1,343,575. The capital loss carryforward is
available to reduce future distributions of net capital gains to shareholders
through 2010.
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, 2003 are as follows:
NOTIONAL FLOATING RATE* TERMINATION UNREALIZED
AMOUNT FIXED RATE (RATE RESET MONTHLY) DATE DEPRECIATION
-------- ---------- -------------------- ----------- ------------
$25,000,000 3.145% 1.12% April 2, 2008 $(648,341)
-------------------
*Based on Libor (London Interbank Offered Rate).
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
10
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
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 of the Cumulative
Preferred Stock. On February 11, 2003, the Fund redeemed the remaining 50%
(600,000 shares) of its 8.00% Cumulative Preferred Stock. For the period from
January 1, 2003 through February 11, 2003, the Fund's total return on the net
asset value of the common shares exceeded the stated dividend rate of the
Cumulative Preferred Stock for this period. Thus, management fees were earned on
these assets. On March 18, 2003, the Fund issued additional preferred stock. For
the period from March 18, 2003 through June 30, 2003, the Fund's total return on
the net asset value of the common shares exceeded the stated dividend rate of
the preferred stock.
During the six months ended June 30, 2003, Gabelli & Company, Inc. received
$6,013 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 Investment Advisory Agreement between the Fund and the
Adviser. During the six months ended June 30, 2003, the Fund reimbursed the
Adviser $17,400 in connection with the cost of computing the Fund's net asset
value.
4. PORTFOLIO SECURITIES. Costs of purchases and proceeds from sales of
securities, other than short-term securities, for the six months ended June 30,
2003 aggregated $18,099,862 and $14,668,617, respectively.
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).
On November 14, 2002, the Fund distributed one transferable right for each
of the 8,291,884 common shares outstanding to shareholders of record on that
date. Three rights were required to purchase one additional common share at the
subscription price of $8.00 per share. The subscription period expired on
December 16, 2002. The rights offering was fully subscribed resulting in the
issuance of 2,763,961 common shares and proceeds of $22,111,688 to the Fund,
prior to the deduction of estimated expenses of $450,000. The net asset value
per share of the Fund's common shareholders was reduced by approximately $0.20
per share as a result of the issuance. Transactions in common stock were as
follows:
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
------- ---------- --------- -----------
Shares issued in rights offering .............................. -- -- 2,763,961 $21,661,688
Shares issued upon reinvestment of
dividends and distributions ................................. 156,593 $1,496,226 274,753 2,646,191
------- ---------- --------- -----------
Net increase .................................................. 156,593 $1,496,226 3,038,714 $24,307,879
======= ========== ========= ===========
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, 2003, 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 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 Cumulative
11
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED)
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 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 $23,981,250 (after
underwriting discounts of $787,500 and estimated offering expenses of $231,250)
from the public offering of 1,995,000 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, 2003 the
Fund did not repurchase any shares of 6.00% Series B Cumulative Preferred Stock.
At June 30, 2003, 1,000,000 shares of the 6.00% Series B Cumulative Preferred
Stock were outstanding at the fixed rate of 6.00% per share and accrued
dividends amounted to $20,833.
On March 18, 2003, the Fund received net proceeds of $24,518,750 (after
underwriting discounts of $250,000 and estimated offering expenses of $231,250)
from the public offering of 5,000 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.
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, 2003,
the Fund did not repurchase any shares of Series C Auction Rate Cumulative
Preferred Stock. At June 30, 2003, 1,000 shares of the Series C Auction Rate
Cumulative Preferred Stock were outstanding at the annual rate of 1.18% per
share and accrued dividends amounted to $4,917.
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. Subject to the guidance of the EITF, the Fund's Cumulative Preferred
Stock has been reclassified outside of permanent equity (net assets attributable
to common stock shareholders) in the accompanying financial statements.
12
THE GABELLI CONVERTIBLE AND INCOME SECURITIES FUND INC.
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A FUND COMMON SHARE SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
OUTSTANDING THROUGHOUT EACH PERIOD: JUNE 30, 2003 ----------------------------------------------------------
(UNAUDITED) 2002 2001 2000 1999 1998
---------------- -------- -------- ------- ------- -------
OPERATING PERFORMANCE:
Net asset value, beginning of period ............$ 8.44 $ 9.92 $ 10.02 $ 11.40 $ 11.45 $ 11.48
-------- -------- -------- -------- -------- --------
Net investment income ........................... 0.11 0.49 0.68 0.72 0.51 0.53
Net realized and unrealized gain (loss)
on investments ................................ 0.90 (0.76) 0.32 (0.52) 0.77 0.65
-------- -------- -------- -------- -------- --------
Total from investment operations ................ 1.01 (0.27) 1.00 0.20 1.28 1.18
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS TO PREFERRED STOCK SHAREHOLDERS:
Net investment income ........................... (0.06) (0.28) (0.18) (0.13) (0.11) (0.13)
Net realized gain on investments ................ -- -- (0.12) (0.17) (0.19) (0.17)
-------- -------- -------- -------- -------- --------
Total distributions to preferred
stock shareholders ............................ (0.06) (0.28) (0.30) (0.30) (0.30) (0.30)
-------- -------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSETS
ATTRIBUTABLE TO COMMON STOCK
SHAREHOLDERS RESULTING
FROM OPERATIONS ............................... 0.95 (0.55) 0.70 (0.10) 0.98 0.88
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS TO COMMON STOCK SHAREHOLDERS:
Net investment income ........................... (0.40) (0.27) (0.48) (0.57) (0.39) (0.39)
Net realized gain on investments ................ -- -- (0.33) (0.73) (0.64) (0.53)
Paid-in capital ................................. -- (0.48) -- -- -- --
-------- -------- -------- -------- -------- --------
Total distributions to common
stock shareholders ............................ (0.40) (0.75) (0.81) (1.30) (1.03) (0.92)
-------- -------- -------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS:
Increase in net asset value from
common stock share transactions ............... 0.01 0.02 0.01 0.02 -- 0.01
Decrease in net asset value from
shares issued in rights offering .............. -- (0.20) -- -- -- --
Offering costs for preferred shares
charged to paid-in capital .................... (0.13) -- -- -- -- --
-------- -------- -------- -------- -------- --------
NET ASSET VALUE ATTRIBUTABLE TO COMMON STOCK
SHAREHOLDERS, END OF PERIOD ...................$ 8.87 $ 8.44 $ 9.92 $ 10.02 $ 11.40 $ 11.45
======== ======== ======== ======== ======== ========
Net asset value total return + .................. 10.0% (7.0)% 7.0% 0.0% 9.4% 8.3%
======== ======== ======== ======== ======== ========
Market value, end of period .....................$ 10.37 $ 8.55 $ 10.90 $ 9.13 $ 10.56 $ 11.25
======== ======== ======== ======== ======== ========
Total investment return ++ ...................... 26.4% (14.2)% 29.1% (1.7)% 3.2% 18.4%
======== ======== ======== ======== ======== ========
RATIOS AND SUPPLEMENTAL DATA:
Net assets plus liquidation value
of preferred shares,
end of period (in 000's) ......................$149,996 $108,774 $110,074 $108,066 $120,179 $120,726
Net assets attributable to
common shares,
end of period (in 000's) ......................$ 99,996 $ 93,774 $ 80,074 $ 78,066 $ 90,179 $ 90,726
Ratio of net investment income to average
net assets attributable to common stock ....... 3.91%(e) 5.32% 6.58% 6.49% 4.35% 4.54%
Ratio of operating expenses to average
net assets attributable to common stock (d) ... 1.77%(e) 1.58% 1.46% 1.48% 1.80% 1.83%
Ratio of operating expenses to average
total net assets including liquidation
value of preferred shares (d) ................. 1.33%(e) 1.15% 1.07% 1.10% 1.36% 1.38%
Portfolio turnover rate ......................... 21% 56% 59% 169% 175% 149%
PREFERRED STOCK:
8.00% CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ..... -- $15,000 $30,000 $30,000 $30,000 $30,000
Total shares outstanding (in 000's) ............. -- 600 1,200 1,200 1,200 1,200
Liquidation preference per share ................ -- $25.00 $25.00 $25.00 $25.00 $25.00
Average market value (b) ........................ -- $25.83 $25.80 $24.31 $25.36 $26.84
6.00% CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ..... $25,000 -- -- -- -- --
Total shares outstanding (in 000's) ............. 1,000 -- -- -- -- --
Liquidation preference per share ................ $25.00 -- -- -- -- --
Average market value (b) ........................ $25.70 -- -- -- -- --
AUCTION RATE CUMULATIVE PREFERRED STOCK
Liquidation value, end of period (in 000's) ..... $25,000 -- -- -- -- --
Total shares outstanding (in 000's) ............. 1 -- -- -- -- --
Liquidation preference per share ................ $25,000 -- -- -- -- --
Average market value (b) ........................ $25,000 -- -- -- -- --
Asset coverage (c) .............................. 300% 725% 367% 360% 401% 402%
Asset coverage per share (c) .................... $149.85 $181.29 $91.72 $90.05 $100.15 $100.60
---------------
+ 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) The Fund incurred interest expense during the six months ended June 30,
2003.If interest expense had not been incurred, the expense ratio of
operating expenses to average net assets attributable to common stock would
be 1.37% and the expense ratio of operating expenses to average total net
assets including liquidation value of preferred shares would be 1.03%.
(e) Annualized.
See accompanying notes to financial statements.
13
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 1 (800)
336-6983.
SHAREHOLDERS WISHING TO LIQUIDATE REINVESTED SHARES held at EquiServe must do
so in writing or by telephone. Please submit your request to the above mentioned
address or telephone number. Include in your request your name, address and
account number. The cost to liquidate shares is $2.50 per transaction as well as
the brokerage commission incurred. Brokerage charges are expected to be less
than the usual brokerage charge for such transactions.
If your shares are held in the name of a broker, bank or nominee, you should
contact such institution. If such institution is not participating in the Plan,
your account will be credited with a cash dividend. In order to participate in
the Plan through such institution, it may be necessary for you to have your
shares taken out of "street name" and re-registered in your own name. Once
registered in your own name your dividends will be automatically reinvested.
Certain brokers participate in the Plan. Shareholders holding shares in "street
name" at 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 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, RI02940-3011 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.
14
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
Gus Coutsouros
VICE 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: 11,270,024 1,000,000
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 800-GABELLI
(800-422-3554), fax us at 914-921-5118, visit Gabelli Funds' Internet homepage
at: WWW.GABELLI.COM or e-mail us at: closedend@gabelli.com
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
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, 2003
GBFCS SA/03
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. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. 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 Exchange Act
(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 10. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 are attached hereto.
(b) Certifications pursuant to 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.
----------------------------------------------------------
By (Signature and Title)* /s/ Bruce N. Alpert
-----------------------------------------------
Bruce N. Alpert, Principal Executive Officer
Date 09/03/03
-----------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Bruce N. Alpert
-----------------------------------------------
Bruce N. Alpert, Principal Executive Officer
Date 09/03/03
-----------------------------------------------
By (Signature and Title)* /s/ Gus A. Coutsouros
-----------------------------------------------
Gus A. Coutsouros, Principal Financial Officer
Date 09/03/03
-----------------------------------------------
* Print the name and title of each signing officer under his or her signature.